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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Zambeef Products Plc | LSE:ZAM | London | Ordinary Share | ZM0000000201 | ORD ZMW0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 5.75 | 5.50 | 6.00 | 5.75 | 5.75 | 5.75 | 0.00 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Poultry & Poultry Prods-whsl | 6.2B | 118.61M | 0.3946 | 0.15 | 17.28M |
From Apr 2019 to Apr 2024
TIDMZAM
RNS Number : 3460H
Zambeef Products PLC
07 June 2017
7 June 2017
Zambeef Products plc
("Zambeef" or the "Group")
Interim results for the Half Year Ended 31 March 2017
CONTINUED OPERATIONAL IMPROVEMENT AGAINST TOUGH MACRO ECONOMIC BACKDROP
Zambeef (AIM: ZAM), the fully integrated cold chain foods and retail business with operations in Zambia, Nigeria and Ghana, today announces its unaudited interim results for the six months ended 31 March 2017.
Key Financial Highlights:
Hot Features
Premium
USD ('000) USD ('000)
H1 2017 H1 2016
Revenue 118,381 98,820
Gross Profit 38,494 39,287
Admin Expenses (34,119) (28,631)
Operating Profit 4,502 10,723
Finance costs (4,600) (5,318)
Exchange Gains 688 1,375
Profit before tax 590 6,780
Tax (57) (778)
Profit from discontinued
operations - 2,960
Profit after tax 533 8,962
EBITDA 8,897 15,451
EBITDA Margin 7.51% 15.64%
Operating Profit Margin 3.80% 13.85%
Cost to income ratio 25.20% 24.56%
Performance Overview
-- Half year performance characterised by a challenging economic environment in Zambia and a major drop in soft commodity prices significantly impacting the Group's financial performance
-- Despite this, the Group has delivered a strong top line performance, driven by:
o Excellent sales and volume growth in the Retail and Cold Chain Food Products division
o Continued aggressive expansion of this retail network
o Robust operational performance from the Farming and Stock feed operations
-- Two Macro outlets opened with a further eight expected to open this year
o Aim to open 10-12 new Macro outlets each year
-- Shoprite rollout of new stores continues
o Zambia - three more expected in the second half
o Nigeria - three new stores opened
o Ghana - one new store opened in April 2017
-- Second half of the year expected to see a significant number of key projects
o Continue to grow the retail network and drive retail sales to help grow CCFP and stock feed operations
o Commission new Copperbelt distribution hub which will increase capacity and improve efficiencies in the Copperbelt and North Western Province operations
o Complete expansion of breeding farm and hatchery to increase day-old chick production from 210,000 to 310,000 birds per week
o Expand broiler processing operations to increase production by 30,000 birds per week
o Commission new stock feed plant at Mpongwe to bring additional stock feed capacity on line
-- Continue to look at ways of strengthening our balance sheet through disposal of non-core assets
Commenting on these results, Chairman Dr. Jacob Mwanza said:
"The first six months of our financial year have been impacted by the challenging economic environment in Zambia and a major drop in soft commodity prices. Together this has had a significant negative impact on our financial performance in the period.
"Rising inflation, Exchange Rate volatility and rapidly increasing interest rates resulted in the Bank of Zambia being forced to introduce strict control measures in order to stabilise the economy. These measures, which included tight control of the money supply and high interest rates, have resulted in a slowdown in consumer spending. However, as a consequence of these Government actions, inflation has reduced to single digit levels, the Kwacha has stabilised and the high interest rates we saw in the first half are starting to abate.
"As a result of these improving economic indicators, and downward price pressure on certain consumer food products, we expect the business environment and consumer demand to improve in the second six months of this financial year. Against this background, Zambeef is well placed to take advantage of the improving macroeconomic conditions.
"As reported at our 2016 Full Year results in November 2016, the principle focus of Zambeef for the foreseeable future will be on expanding our retailing and distribution footprint and on improving margins and restoring profitability. We will continue to expand the Cold Chain Food Production capacity to meet increasing consumer demand; complete the build out of the new stock feed plant at Mpongwe and continue to strengthen our balance sheet, through the disposal of non-core assets. While undoubtedly it is disappointing to report this first half performance I have full belief that the second half will see a return to more normal trading conditions and a much improved financial performance."
For further information, please contact: Zambeef Products plc Tel: +260 (0) 211 369003 Carl Irwin, Joint Chief Executive Officer Francis Grogan, Joint Chief Executive Officer Strand Hanson Limited Tel: +44 (0) 20 7409 3494 James Spinney Ritchie Balmer Frederick Twist finnCap Tel: +44 (0) 20 7220 0500 Emily Morris Powerscourt Tel: +44 (0)20 7250 1446 Nick Dibden Nick Brown
Notes to Editors
The Zambeef Group is one of the largest integrated cold chain food producers in Zambia, involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, eggs, dairy products, fish, flour and stock feed. The Group also has large cereal row cropping operations (principally maize, soya beans and wheat), with approximately 7,971 hectares of row crops under irrigation, which are planted twice a year and a further 8,623 hectares of rain-fed/dry-land crops available for planting each year. The Group is also expanding its West Africa operations in Nigeria and Ghana.
The Group employed an average of 6,000 employees in the period.
Further information can be found on www.zambeefplc.com
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CHAIRMAN'S REPORT
THE ENVIRONMENT
The first six months of Zambeef's 2017 financial year have been impacted by the challenging economic environment in Zambia.
As a result of rising inflation, Exchange Rate volatility and rapidly increasing interest rates, the Bank of Zambia was forced to introduce strict control measures, in order to stabilise the economy. These measures, which included tight control of the money supply, and high interest rates, have resulted in a slowdown in consumer spending.
It is pleasing to see that these tough short-term measures are achieving their goal. Inflation has been reduced to single-digit levels, having peaked at 18.9 per cent.; the Zambian Kwacha has stabilised at around ZMW9.66/USD at 31(st) March 2017, having started the period under review at ZMW11.6/USD, and interest rates are starting to fall significantly, having peaked at around 30 per cent.
The period has also seen a material drop in global soft commodity prices, with international soya prices touching ten-year lows. Zambian soya prices have followed international markets, dropping from around USD535/Metric Ton ("M.T"). last year, to USD360/M.T. this year.
Whist a drop in soft commodity prices will be welcomed by consumers, it poses a major challenge to the agricultural sector, which is the prime producer of such soft commodities.
As a result of improving Economic Indicators, and downward price pressure on certain consumer food products, we expect the business environment and consumer demand to improve in the second six months of this financial year.
TRADING RESULTS
Despite the challenging economic conditions mentioned above, it is pleasing to report good operational progress in all four areas of Strategic Focus that were outlined in our Annual Report for the year ended September 2016:
1. Retail and Distribution - The retail footprint comprising our concessions within Shoprite stores in Zambia, Nigeria and Ghana, and the Zambeef-owned Macro stores and Outlets across Zambia has grown during the period under review, by the opening of three Shoprite stores and two Macro Stores. A further 4 Shoprite stores and 8 Macro stores will open in the six months to 30(th) September 2017. Like for like sales in Zambeef's own stores grew by 21 per cent. in ZMW during the period, with new stores adding a further 9.9 per cent. growth in sales, as compared to last year.
2. Cold Chain Food Production - In order to meet the demand for goods to support our rapidly expanding Retail division, Cold Chain Food Production continues to receive strategic focus in terms of Capital Expenditure. This has led to good volume growth across the Cold Chain Food Production division.
3. Stock Feed - Zambeef's stock feed operation, which trades under the brand name Novatek, is recognised as the market leader in Zambia. It produces a wide range of stock feed, for sale to the end users, either direct, or through its Novatek retail outlets, as well as certain Zambeef Macro and Outlet stores. Despite the challenging macroeconomic conditions, Novatek volume sales increased by 2.7 per cent. during the period. The Novatek plant in Lusaka is currently running at full capacity, but the new mill located on Mpongwe Farm, which is due to open in June 2017, will almost double Novatek's production capacity. This will enable Zambeef to supply its own growing divisions which depend on a reliable supply of stock feed, as well as expand its sales into the Zambian and adjacent markets.
4. Arable Farming - Zambeef's cropping focus is centered on its Mpongwe estate, where the microclimate, irrigation facilities and soils allows it to consistently achieve yields comparable to the best farming areas in the world. Yields of the summer crops just harvested were ahead of budget. However, the severe drop in soft commodity prices has had a significant impact on profitability for the period.
Against a backdrop of good operational progress in all four of our areas of strategic focus, the financial results for the period under review have been disappointing, principally as a result of the drop in soft commodity prices.
The negative impact on consumer disposable income from the measures taken by the Bank of Zambia to stabilise the economy put pressure on margins of all retail businesses, including Zambeef. Whilst we have managed to maintain (and in certain areas, grow) market share, this has been at the cost of short-term profit.
Notwithstanding this, Zambeef's Retail and Cold Chain Food Production divisions have delivered a satisfactory EBITDA of ZMW 72.7m versus ZMW 81.1m in the same period last year (USD 7.4m vs USD 7.1m), generating an EBITDA margin of 8.5 per cent.
The material drop in soft commodity prices, and in particular the price of soya, has had a substantial impact on Gross Profit of the Arable Farming division. With the division producing over 40 000MT of soya in the period, the fall in soya prices resulted in a drop in Gross Profit of ZMW26m (USD2.7m) for the period. The division has also suffered a further loss of USD1.5m from a FX translation loss relating to the valuation of inventory on hand as at 31(st) March 2017. The winter wheat crop, which is grown in the next six month period, is normally the most profitable, and it is hoped that this will be reflected in improved results for the next period.
The fall in the price of soya has also had a severe short term impact on the gross profit of the Stock Feed division. All stock feed producers experienced the need to dispose of old soya stock, acquired at the higher price, before the new lower priced soya stock became available. This led to heavy price discounting of stock feed, leading to a drop in Gross Profits of ZMW41m (USD4.2m) during the period under review. The old stock has been worked through Novatek's production system, and consequently margins have recovered since the period end and are expected to normalise over the next six months.
Despite the underlying strength of performance of our Retail and Cold Chain Foods business, the impact of falling commodity prices upon Cropping and Novatek's stock feed profits have resulted in the Zambeef Group Profit After Tax (excluding discontinued operations) reducing in the period from ZMW68m to ZMW5m (USD6m to USD0.5m)
OUTLOOK
The General Election held earlier this year has shown once again that Zambia is a stable democratic state.
The recent actions taken by the Government and the Bank of Zambia to address the challenges faced by the economy bode well for the re-emergence of economic stability and growth. Against this background, Zambeef is well placed to take advantage of the improving macroeconomic conditions.
Given a tough economic backdrop leading to pricing pressures, some cost inflation, operational issues in the Milk and Eggs businesses and the impact of a material drop in agri-commodity prices, the Board anticipates that, despite the strong volume growth across Retail and Cold Chain Food Production, the financial results for the full year ending 30 September 2017 will be materially below previous market expectations.
As reported at our 2016 Full Year results in November 2016, the principle focus of Zambeef for the next six months will be on expanding our retailing and distribution footprint and onon improving margins and restoring profitability.We will continue to: expand the Cold Chain Food Production capacity to meet increasing consumer demand; complete the build out of the new stock feed plant at Mpongwe, and continue to strengthen our balance sheet, through the disposal of non-core assets.
I am extremely proud of Zambeef's entire workforce. They display a commitment, dedication and professionalism in carrying out their duties and remain key to our success.
In order to ensure continuity in the Group at all levels, we have embarked on a Succession Planning process. Linked to this will be a Development Needs and Evaluation system, which aims to identify future leaders in the business, and to ensure that staff at all levels are given the opportunity to progress in the Group, and are provided with the necessary training and development opportunities in order to do so.
I would like to touch on the changes to the composition of the Zambeef Board, which were announced on 18(th) April 2017:
Graham Clark has stepped down as non-executive director, in order to take up the full-time role of CEO of Fiji Sugar Corporation Ltd. His extensive business experience has been greatly appreciated, and I would like to thank him for his contribution.
Three new non-executive directors have been appointed, to broaden the depth of experience and diversity on the Board. They are Yollard Kachinda, a Zambian national, who is currently Director General of the National Pension Scheme Authority ("NAPSA"), Margaret Kunda Chalwe-Mudenda, a Zambian lawyer, and Enala Lyson Tembo-Mwase, a prominent Zambian Academic, and currently Deputy Vice Chancellor of the University of Zambia. I believe that they all bring relevant experience and skills to the Board, which will help support Management in growing the business in the future, and I welcome their appointments.
In conclusion, I would like to thank the Executive, all members of staff and my Board colleagues, for their valued contributions during the past period.
Dr Jacob Mwanza
Chairman
6 June 2017
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
JOINT CHIEF EXECUTIVES' REVIEW
Overview
In order to give greater clarity into the performance of the key activities of Zambeef, the results for the key business divisions are for the first time being reported to EBITDA level.
The first six months of the 2017 Financial Year have seen Zambeef continue to focus on the expansion of its Retail business which its Directors believe is the engine room that will continue to drive growth in shareholder value across the business, while also investing in its downstream Cold Chain Foods operations to ensure a secure supply for this retail expansion. It is pleasing to report that in the six month period to 31(st) March 2017, Retail sales increased by 27.4 per cent. in ZMW from ZMW643m to ZMW819m (41.7 per cent. in USD from USD57m to USD83m). Like for like sales in Zambeef Macro and Outlet stores increased by 21 per cent. but this was partially offset by a 5.2 per cent. fall in like for like sales through the Shoprite concessions reflecting increased competition in the premium retail sector from the introduction of new retail chains. This increase has been achieved against the backdrop of a challenging macro environment which has seen the Bank of Zambia reduce the money supply and increase interest rates to bring down inflation which has put pressure on margins across all retail businesses including Zambeef's. Gross profits were also impacted in the period by a combination of operational difficulties within our dairy production unit (which have now been resolved), very weak egg prices and a softening of beef prices. Notwithstanding this, Zambeef 's Retail and Cold Chain Foods business has delivered a satisfactory EBITDA of ZMW72.7m versus ZMW81.1m in the prior period (USD7.4m vs. USD7.1m) generating an EBITDA margin of 8.5 per cent., which compares very favourably with benchmark returns across the Cold Chain foods and retail sectors.
The period has also seen a material drop in global and local soft commodity prices due to rising stocks in producer countries, with international soya prices touching ten year lows. Zambian soya prices have followed international markets dropping from around USD535/M.T. last year to USD360/M.T. this year. This fall has had a significant impact on both our Cropping Division and our Stock Feed Division, Novatek. With Zambeef's cropping operations producing just over 40,000 M.T. of soya during the period, the fall in soya prices has resulted in a drop in farming gross profits of circa ZMW26m (USD2.7m) for the period despite yields being above budget. Cropping also suffered from a FX translation loss of USD1.5m.
In addition, the soya bean price has fallen from around USD600/M.T. to below USD400/M.T. for the new soya crop now being harvested. This rapid drop has resulted in competitor stock feed companies dropping margins in the last four months in order to exit high priced, old season raw material inventory and consequently putting pressure on stock feed margins in this period. In contrast, in the previous season the stock feed industry was operating in a different environment, and Novatek was in the fortunate position of bringing forward soya bean meal at under USD400/M.T. when the new season pricing was around USD600/M.T. Whilst Novatek has maintained its market share and market leadership with volumes increasing by 2.7 per cent. Operating Profit has fallen by 39.4 per cent. in ZMW from ZMW103.6m to ZMW62.8m (USD by 29.8 per cent. from USD9.1m to USD6.4m).
Despite the underlying strength of performance of our Retail and Cold Chain Foods business, the impact of falling commodity prices upon Cropping and Novatek's stock feed profits have resulted in the Zambeef Group Profit After Tax (excluding discontinued operations) reducing in the period from ZMW68m to ZMW5m (USD6m to USD0.5m).
Full details of the individual performance of each division are set out within the Financial Review.
Macroeconomic environment
The economic environment in the period has been challenging. The Bank of Zambia put in strict measures to stabilise the currency, restrict money supply and reduce inflation. These steps created short-term challenges, but are expected to set Zambia up for ongoing long-term sustainable growth.
Inflation started the financial period at 18.9 per cent. and by the 31(st) March 2017 had reduced to 6.7 per cent. The 273 day treasury bills started the period at 24.99 per cent. but with the stabilization of the currency and reduction in inflation the 273 day treasury bill rate was down to 15.25 per cent. at 31(st) March 2017. This period also saw bank interest rates escalate to around 30 per cent. but with inflation under control and the Bank of Zambia reducing interest rates and easing measures to reduce the ZMW in circulation we have seen bank interest rates starting to fall quickly. The Zambian Kwacha started the period at ZMW10.01/USD and has steadily appreciated to ZMW9.66/USD at 31(st) March 2017 and we have seen this gradual appreciation of the currency continue.
The measures implemented by Bank of Zambia, which included high interest rates and tight control on the money supply, put
operating margins under significant pressure over the last six months. It is pleasing to see that these tough short-term measures
have achieved their goals, allowing Bank of Zambia to start easing this policy. The benefits of these measures can be seen, with
Zambia returning to single digit inflation, a stable currency and reducing interest rates. As a result, and having reviewed our sales in April and May, we expect the business environment and consumer demand in the second half of the financial year to improve.
Strategic Focus
To ensure a long-term, sustainable and growing business, Zambeef will continue to be built on the four best-in-class market leading operations of the Group, namely:
-- Retail and Distribution; -- Cold Chain Food Production; -- Stock Feed; and -- Arable Farming
Retail and Distribution
As reported at our 2016 Full Year results in November 2016, the main focus of Zambeef for the foreseeable future is on expanding its retailing and distribution footprint comprising of concessions within Shoprite stores across Zambia, Ghana and Nigeria and Zambeef owned Macro Stores and Outlets across Zambia and Nigeria. Expansion of this retail network will consequently drive growth across the Zambeef Cold Chain Foods and stock feed business.
During the period two new Zambeef Macro Stores opened, and a further eight are expected to open before the end of the financial year. In addition, three new Shoprite stores opened in Nigeria, and, following the period end, a new store was opened in Ghana. In the six months to 30(th) September 2017 a further three Shoprite stores are expected to open in Zambia, and the Accra Mall upgrade in Ghana will be completed. Newly opened stores accounted for 10.1 per cent. of the growth.
It is encouraging to report like for like sales through Zambeef's own stores grew by 21 per cent. (in ZMW) with new stores contributing a further 9.9 per cent. of growth (in ZMW) compared to the same period last year. At the same time the amount of stock feed the Group is now retailing through the Macro Stores and Outlets has increased by 123 per cent. in ZMW (158 per cent. in USD). This demonstrates the success of Zambeef's focus on this part of the business, which is driving growth in the Cold Chain Food Products and stock feed operations. This will remain a key focus area of the business both in terms of investment and senior management attention.
The Zambeef retail network is not only increasing its market share but is also gaining a large share of the incremental business from a growing and rapidly urbanising population. In addition, Zambeef's border town outlets are becoming important channels for exporting informally into neighbouring countries.
Cold Chain Food Products
The strong growth in the Zambeef retail network sales has resulted in volume growth across the Cold Chain Food Production divisions, with the following volumes as compared to the same period in 2016:
H1 2017 H1 2016
(kg) (kg)
(Millions) (Millions) % Change
Beef 8.51 7.83 8.7
Chicken 5.60 5.00 12.0
Pork 5.51 4.60 19.7
Fish 1.49 0.89 66.8
------------ ------------ ---------
Total 21.11 13.72 15.2
Quantity Quantity
(Millions) (Millions) % Change
Dairy
(Litres) 9.32 6.52 42.9
Eggs 34.47 17.77 93.9
------------ ------------ ---------
This is a part of the business in which Zambeef believes it is best-in-class. In order to ensure the supply matches the increase in demand Zambeef will continue to invest in these parts of the business where the returns are most attractive. This period has seen the successful completion of the new USD1.5m rotary milking parlour at Kalundu Dairy.
The USD1.2m expansion of the egg laying operations was completed at the start of this period which increased the point-of-lays from 153,000 to 273,000, allowing for strong growth in the egg division sales.
The chicken operations will also benefit from the investment of USD1.7m in the expansion of the hatchery capacity by 46 per
cent., which became fully operational at the end of May 2017. In addition, USD0.7m is being spent on increasing broiler chicken slaughtering capacity by 20 per cent. This is expected to be in full operation by the end of June 2017, and will allow us to better service demand for whole birds and chicken portions.
Stock Feed
Zambeef's stock feed operation, which trades under the brand name Novatek, has firmly established itself as the market leader in the stock feed industry in Zambia and is expanding on the number of countries it is currently exporting to. This business ties in very closely with the chicken business and the retailing expansion of Zambeef. Despite the challenging macroeconomic environment, Novatek increased volumes by 2.7 per cent. from 71,737 M.T. to 73,679 M.T.
With the soft commodity prices reducing for the new crop being harvested, feedstock prices have come down and it is pleasing to see that Novatek's gross margins in April have normalised. This reduction in stock feed prices will benefit the whole livestock sector and is expected to positively impact the demand for stock feed. The demand for stock feed is expected to increase as a result of:
-- Reduced feed prices due to lower soft commodities/raw material prices;
-- Increased demand by the livestock sector from increases in consumption of proteins as protein prices continue to fall;
-- Increased demand from Zambeef from the expansion of the poultry operations; and -- Export demand
The Novatek plant in Lusaka is currently operating at full capacity. In order to meet the expected increase in stock feed demand, Zambeef will be commissioning a brand new state-of-the-art mill at Mpongwe Farm in June 2017. This plant will be capable of producing 12,000 M.T. of feed per month, almost doubling the existing Novatek capacity. The plant will be well positioned to service Zambia's Copperbelt and North Western provinces and the Democratic Republic of Congo demand, provide savings in distribution cost as well as secure raw materials competitively from the region. The capex to complete this plant in the current financial year is budgeted at USD2.8m, taking the total project cost to USD8.5m.
Arable Cropping
The Mpongwe arable farming operations remain world-class. The microclimate, irrigation facilities and soils make this farm a unique farming asset which achieves yields comparable with the best farming areas in the world. The directors estimate there is an additional 5,000 ha of land on the Mpongwe estate which could be bought into crop production and as part of a strategic review of all Zambeef farms they are considering how best to achieve this. The unique yields being achieved at Mpongwe have resulted in the Board considering the disposal of some of its other farmland assets to facilitate the expansion of its future farming activities at Mpongwe. Options being considered include the sale of Chiawa and or Sinazongwe farms in the southern Zambezi Valley.
This year has seen soft commodity prices drop severely which has impacted the arable cropping results. Despite yields being ahead of budget and costs being on budget, gross profits are down 213 per cent. in USD in the six month period to 31(st) March 2017, with soya prices having dropped from around USD525/M.T. in 2016 to USD360/M.T. during the period for the new crop. It is disappointing that although the operational performance of the farms has been strong, this is not reflected in the financial performance. Although this drop in soft commodities is disappointing for the farming operations and has materially affected the Zambeef results in this half year, it will be beneficial for the stock feed and livestock sectors going forward with the winter wheat crop normally the most profitable crop grown.
Outlook
Zambeef has a clear strategy which it continues to execute. This includes:
-- Consistent revenue growth through expanding the retail network and addressing supply side constraints in Cold Chain Food Product and stock feed operations;
-- Margin improvements by investing capex in high margin parts of the business while tightly controlling administration costs;
-- De-risking the business through maintaining acceptable/comfortable gearing levels; and -- Improving cash conversion from strong working capital control and tight control on capex.
As part of this strategy Zambeef will continue to explore opportunities to dispose of assets in areas where it does not consider itself best-in-class. The resulting cash will be used to reduce gearing further and will be invested in those parts of the business which can best enhance shareholder value.
Despite reporting disappointing results for the period with Profit After Tax down from ZMW65m to ZMW0.5m for the period, it is largely as a result of the significant impact from the major drop in soft commodity prices and consequently falls outside of the Company's control. Against this macro economic backdrop, the operational performance of the business has remained robust. Overheads in the business have been tightly controlled, increasing by only 1.8 per cent. in ZMW over the same period last year.
The Retail, distribution and Cold Chain Food Product operations have performed well in a challenging macroeconomic environment, although margins have been under significant pressure. In addition, the farming and stock feed operations have performed well operationally, but have been impacted by the soft commodity price movements.
With the macroeconomic environment improving and the drop in commodity prices having now been priced in, we are confident that cheaper raw material prices will benefit our stock feed and livestock divisions and lead to increased demand as well as an improvement in gross margins in these businesses in the second half of our financial year. Margins in April were encouraging. Our retail business should benefit from an uplift in consumer spending and also enjoy additional geographic sales growth in the second half of the year from the eight Zambeef and three Shoprite stores expected to open. We anticipate that margins in the dairy products and egg businesses should also improve over the next six months. As the Zambian grains market is fairly illiquid and it is not easy to hedge production through forward sales except at discounted pricing, the Cropping division second half result could be impacted by any further weakness in grain prices.
It has been a very busy period with the construction and fit out of a number of Macro stores and the opening of additional Shoprite concessions, the commissioning of the new dairy parlour, work on completing the second stock feed plant at Mpongwe and the expansion of the broiler breeder farm, hatchery and broiler operations. In addition, the flour milling, pork and beef operations have seen continued volume growth. We feel incredibly proud of the entire Zambeef workforce for the dedication and determination in making this possible. In addition, we would like to thank our Chairman, Dr. Jacob Mwanza, as well as our Board of Directors for their valuable guidance and support.
Carl Irwin/Francis Grogan
Joint CEOs
6(th) June 2017
FINANCIAL REVIEW
The first six months of the 2017 financial year have seen the Zambeef business continue to grow, but margins have remained under significant pressure. Turnover for the Group increased by 3.5 per cent. in ZMW from ZMW1,122 to ZMW1,161m (19.8 per cent. in USD), while Gross Profit margins reduced from 40 per cent. to 33 per cent., resulting in Gross Profits reducing by 15.3 per cent. in ZMW from ZMW446m to ZMW378m (2.02 per cent. in USD).. The Group has tightly controlled its overheads despite the inflation rate starting the period at 18.9 per cent., and overheads increased by only 1.8 per cent. in ZMW (17.7 per cent. in USD). EBITDA margin reduced from 14.1 per cent. to 7.3 per cent., and operating profits decreased by 64 per cent. in ZMW from ZMW122m to ZMW44m (58 per cent. in USD from USD10.7m to USD4.5m).
The ZMW73.3m (USD6.2m) fall in EBITDA is largely driven by the material drop in global and local soft commodity prices with Zambian soya prices dropping from USD535/M.T. at the end of March 2016 to USD360/M.T. at the end of March 2017. Consequently, this has had a negative impact on both the Cropping and the stock feed divisions. Zambeef produced in excess of 40,000 M.T. of soya in this period and therefore the impact of the drop in soya prices on revenue was around USD4m but a strong underlying operational performance by the cropping division has resulted in a net reduction in gross profit of ZMW25.9m (equivalent to USD2.7m). Furthermore,, stock feed margins have been adversely impacted by the fall in stock feed prices as competitors sought to liquidate high priced 2016 old crop stocks of raw materials ahead of the new crop harvest in April/May 2017. Stock feed gross profits fell from ZMW103m to ZMW62m and in USD from USD9.1m to USD6.4m. Gross margins were also impacted by operational difficulties in our Kalundu dairy unit leading which resulted in gross profits from our Dairy products reducing by ZMW10.9m (equivalent to USD1.1m).
Interest costs reduced by 25 per cent. in ZMW (13 per cent. in USD) as a result of lower debt levels although interest rates increased. As a result, Zambeef's PAT excluding discontinued operations reduced from ZMW68m to ZMW5m (USD6m to USD0.5m).
The highlight of this period was the strong 26.1 per cent. (in ZMW) sales growth in the Retail and Cold Chain Food Products division. Zambeef has firmly established itself as best-in-class in terms of its production and distribution of the Cold Chain Food Products delivering a very satisfactory EBITDA margin of 8.5 per cent. which compares favourably with benchmark returns across the cold chain foods and retail sector, in what has been a challenging macroeconomic environment.
The focus for the next six months will be on:
-- Continuing to expand the footprint and sales of the Retail network, which will drive sales of our Cold Chain Food Production business and stock feed operations. (Eight Zambeef Macros and four Shoprite stores are expected to open before the end of the financial year);
-- Commissioning the new Kitwe Cold Chain Food distribution hub which will increase capacity and improve distribution efficiencies in the Copperbelt and North Western Province operations (completion expected September 2017);
-- Completing the expansion of the broiler breeding farms and hatchery to increase day-old chick production from 210,000 birds per week to 310,000 birds per week (completion expected end of May 2017);
-- Expand the broiler processing operations to increase production by 30,000 birds per week to 160,000 birds per week (completion expected end of June 2017); and
-- Commission the new stock feed plant at Mpongwe to bring an additional 140,000 M.T. of stock feed capacity on line (completion expected July 2017).
It will be a busy period but with an improvement in the macroeconomic environment Zambeef can expect to grow the business and improve margins over the next six months.
Exchange rate movements
This period has seen a 3.5 per cent appreciation of the ZMW with the exchange rate, starting the period at 10.01 ZMW/USD and closing the period at 9.66 ZMW/USD. The table below shows the comparative exchange rates over the periods:
ZMW/USD
Closing Rate 30th September
2015 12.02
Closing Rate 31st March 2016 11.16
Closing Rate 30th September
2016 10.01
Closing Rate 31st March 2017 9.66
------------------------------ --------
Average Rate for 6 months
to 31st March 2016 11.35
Average Rate for 6 months
to 31st March 2017 9.81
Average Rate for year ended
30th September 2016 10.83
------------------------------ --------
The appreciating currency has impacted the arable farming and stock feed gross profits, as the ZMW value realised for USD priced commodities reduced as the ZMW appreciated. The brought forward commodities at the beginning of the period were:
USD'000 ZMW'000
-------- ---------
Standing Crops 6,031 60,377
Stocks (Grains) 35,617 356,529
----------------- -------- ---------
Total 41,648 416,906
-------- ---------
The 3.5 per cent ZMW currency appreciation has resulted in the value of these commodities in ZMW, reducing by ZMW14.6m (USD1.5m). This is partially offset by the realised and unrealised exchange gains of ZMW6.7m (USD0.7m) on the dollar debt.
The stabilisation of the ZMW during this period following a very volatile period in 2015 and 2016 has been welcomed, and this relative stability is expected to continue.
ADMINISTRATION AND OVERHEAD COSTS
Management has continued to place a strong emphasis on cost control in the business and it is pleasing to report that costs excluding depreciation as a percentage of turnover have again reduced, moving from 25.6 per cent. to 25.2 per cent. These overheads increased in ZMW by 1.8 per cent. (USD17.4 per cent.). This is an excellent achievement when considering:
-- Fuel prices increased by 36 per cent. at the beginning of the period and were later reduced by 6 per cent.;
-- Staff costs increased by 12 per cent.; -- We have had levy and slaughter fee increases of up to 500 per cent.; and
-- We are incurring road toll fees which were introduced at the beginning of the financial period but are increasing as more toll gates are opened and are currently running at around ZMW45,000 per day, which will have a bigger impact on the second six months.
Electricity costs have now been increased by 50 per cent. as of 15(th) May 2017, which will impact our overheads in the second six months. A further increase is expected on 1(st) September 2017. As a result, overheads will come under pressure in the second half of the year.
FINANCE COSTS
The finance costs for the Group have decreased in ZMW by 25 per cent. from ZMW60m to ZMW45m (13 per cent. in USD from USD5.3m to USD4.6m). This decrease was as a result of a large reduction in gearing over the same period in the previous year. The lower gearing was partially offset by an increase in interest rates. The table below shows the movement in the average interest rates incurred by Zambeef over the period:
Average Average
Rate Rate
(USD) (ZMW)
-------- --------
March 2015 4.0% 15.6%
September
2015 4.4% 16.7%
March 2016 6.5% 28.1%
September
2016 6.6% 27.6%
March 2017 7.0% 24.1%
------------ -------- --------
We are expecting our ZMW rates to drop below 20 per cent. again, which will materially reduce interest charges. In terms of the USD debt the increase in rates has arisen from the rise in LIBOR rate.
Gearing has reduced from 57 per cent. at H1/2016 to 32 per cent. at H1/2017.
CAPITAL EXPITURE
Total capital expenditure during the period was ZMW135.3 million (USD13.8 million) against a budgeted capital expenditure of ZMW 221m (USD21m) for the year.
The main capital expenditure during the period is as follows:
-- USD2.2m on the rollout of new Zambeef Macro outlets; -- USD1.8m on new Kalundu Dairy rotary milking parlour and upgrades to milk processing plant; -- USD1.2m on the new Mpongwe stock feed plant; -- USD1.5m on the expansion of the Zamhatch hatchery and breeder farm; -- USD0.6m for the expansion of the Zam Chick processing plant; -- USD0.4m on the new Kitwe Processing Plant -- USD0.9m for the Zampalm palm project; and -- USD2.8m for farming replacement capex.
This capex is being focused towards the expansion of the retail network as well as putting extra capacity into the Cold Chain Food Product and stock feed divisions to meet the increased demand. Capex will continue to be targeted at high return parts of the business with the view to increase margins in the business.
TERM FINANCE
In order to finance the remainder of the capital expenditure to be incurred in the year, a loan of USD15m was drawn down from DEG on 17(th) May 2017. This loan is repayable over six years with semi-annual payments of USD1.25m starting in March 2018. The interest rate is six month USD LIBOR plus 5.75 per cent.
In the first six months of the year term debt totalling USD5.8m was repaid. A further USD5.1m will be paid in the next six months. Debt servicing will then reduce to USD8.0m in 2018.
DIVISIONAL PERFORMANCE
In order to give more clarity into the performance of the key activities of Zambeef, the results for the key business divisions are now being reported to EBITDA level. The directors have elected to consolidate the reporting of the Retail and Cold Chain Food Processing activities given that in the period 94.2 per cent. (prior period 93.1 per cent.) of Cold Chain Food Processing's sales were made on an inter-company basis to the Zambeef Retail Division.
Tables 1 and 2 below provide a summary of the performance of the key business units:
Table 1: Segmental Financial summary in ZMW'000s
Gross Gross
Revenue Revenue Profit Profit Overheads Overheads EBITDA EBITDA
2017 2016 2017 2016 2017 2016 2017 2016
Division ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000
-------------- ------------------ ------------------ ------------------- ------------------- ------------------- ------------------- ---------------- ----------------
Retailing 818,963 642,885
CCFP 653,811 536,662
Less
Intra/Inter
Group (615,981) (499,849)
------------------ ------------------
Retail
& Cold
Chain
Foods 856,793 679,698 222,181 220,905 (149,392) (139,741) 72,788 81,164
Stock
Feed 324,701 364,169 62,831 103,603 (20,141) (28,269) 42,690 75,334
Cropping 201,901 129,404 79,745 105,667 (60,309) (56,597) 19,436 49,070
Others 79,009 107,364 12,868 15,737 (10,612) (9,015) 2,256 6,722
Total 1,462,404 1,280,636 377,624 445,912 (240,454) (233,622) 137,170 212,290
Less:
Intra/Inter
Group
Sales (301,086) (159,031) - - - -
less Central
Overhead - - - - (52,199) (53,951) (52,199) (53,951)
Group
Total 1,161,318 1,121,605 377,624 445,912 (292,653) (287,573) 84,971 158,339
-------------- ------------------ ------------------ ------------------- ------------------- ------------------- ------------------- ---------------- ----------------
Table 2: Segmental Financial summary in USD'000s
Gross Gross
Revenue Revenue Profit Profit Overheads Overheads EBITDA EBITDA
2017 2016 2017 2016 2017 2016 2017 2016
Division USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
-------------- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- ----------------- ----------------
Retailing 83,482 56,642
CCFP 66,647 47,283
Less
Intra/Inter
Group (62,791) (44,040)
------------------- -------------------
Retail
& Cold
Chain
Foods 87,339 59,885 22,648 19,463 (15,229) (12,004) 7,420 7,459
- - - - - -
Stock
Feed 33,099 32,085 6,405 9,128 (2,053) (2,491) 4,352 6,637
- - - - - -
Crop-Row
Crops 20,581 11,401 8,129 9,310 (6,148) (4,414) 1,981 4,896
- - - - - -
Others 8,054 9,459 1,312 1,386 (1,082) (1,675) 230 289
- - - - - -
-------------- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- ----------------- ----------------
Total 149,073 112,831 38,494 39,287 (24,511) (20,583) 13,983 18,704
- - - - - -
Less:
Intra/Inter
Group
Sales (30,692) (14,012) - - - -
less Central
Overhead - - - - (5,321) (4,753) (5,321) (4,753)
Group
Total 118,381 98,820 38,494 39,287 (29,832) (25,337) 8,662 13,951
-------------- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- ----------------- ----------------
DIVISIONAL REVIEW
Taking each of our key business areas in turn as follows:
RETAIL AND COLD CHAIN FOOD PRODUCTION
Gross Gross
Revenue Revenue Profit Profit Overheads Overheads EBITDA EBITDA
2017 2016 2017 2016 2017 2016 2017 2016
Division ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000 ZMW'000
-------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------- --------------
Retailing 818,963 642,885
CCFP 653,811 536,662
Less
Intra/Inter
Group (615,981) (499,849)
------------- -------------
Retail
& Cold
Chain
Foods 856,793 679,698 222,181 220,905 (149,392) (139,741) 72,788 81,164
-------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------- --------------
RETAIL & COLD CHAIN FOODS- SUMMARY FINANCIAL PERFORMANCE:
Following the September 2016 year end the Directors announced their decision to simplify the presentation of the financial reporting of the business and to report EBITDA for each of the Zambeef Group's key business areas. In the six month period to 31(st) March 2017, 94.2 per cent. (prior period 93.1 per cent) of Cold Chain Food Processing's sales were made on an inter-company basis to the Zambeef Retail Division and therefore the Directors have elected to consolidate the EBITDA reporting of the Retail and Cold Chain Food Processing activities.
Net Sales in the Combined Retail and Cold Chain Food Processing business increased by 26.1 per cent. in ZMW and 45.8 per cent. in USD. Gross profit grew by 0.6 per cent. in ZMW and 16.4 per cent in USD. Growth in gross profit was impacted principally because of operational difficulties within our dairy production unit, weak egg prices, a decision to grow market share leading to some margin contraction in the premium formal retail sector and a fall in beef prices. Further details are set out in the analysis of the performance of each product line.
Overhead costs increased by 6.9 per cent in ZMW and 23.7 per cent in USD mainly due to rises in transport, energy and employment costs.
EBITDA in ZMW fell 10.3 per cent. from ZMW81.1m to ZMW72.8m, whilst in USD, it increased from USD7.1m to 7.4m. The business has generated a satisfactory EBITDA margin of 8.5 per cent. (compared to prior year period of 11.9 per cent.)
RETAIL DISTRIBUTION
The Retail business has grown strongly during the period with revenue up 27.4 per cent. in ZMW and 47.4 per cent. in USD. Like for like sales in Zambeef Macro and Outlet stores increased by 21 per cent. but this was partially offset by a 5.2 per cent. fall in like for like sales through the Shoprite concessions reflecting increased competition in the premium retail sector from new retail chains. During the period two Zambeef Macro outlets were opened and three new Shoprite stores were opened in Nigeria.
The pace of our retail store roll out will accelerate over the next six months with eight Zambeef Macro outlets, three Shoprite stores in Zambia and one Shoprite store in Ghana all expected to open in this period. This expansion of the retailing operations is expected to continue to create demand for our Cold Chain Food Products and our stock feed. A total of 70.5 per cent. of Zambeef's turnover is now through its retail operations.
COLD CHAIN FOOD PRODUCTION
The Cold Chain Food Production operations include the beef, chicken, pork, fish, dairy and egg production and processing activities which primarily supply the Zambeef and Shoprite retail chains. Whilst sales across all product lines have all grown strongly during the period with turnover increasing by 21.8 per cent. in ZMW (41.0 per cent. in USD)margin fell principally as a result of operational difficulties within our dairy production unit, weak egg prices and margin contraction in the formal retail sector due to a challenging economic environment seen during the period (as described in the Joint CEOs' report).
The Cold Chain Food Product performance is analysed in more detail below.
a) Beef (Zambeef)
Beef volumes increased by 8.7 per cent and revenue by 4.2 per cent. Beef remains the largest product line within the Cold Chain Food Product operations, accounting for 36 per cent. of the turnover.
However, beef margins were squeezed with Gross Profit reducing from 22.3 per cent. to 20.5 per cent principally because of a decline in beef prices in the Zambeef retail network. This was driven by consumers looking for cheaper protein in this challenging macroeconomic period.
b) Chicken (Zam Chick and Zamhatch)
Turnover of our poultry business increased by a very satisfactory 35.2 per cent in ZMW over the prior period. The Zam Chick and Zamhatch operations account for 23 per cent. of the turnover of the Cold Chain Food Products division, making it the second biggest part of the Cold Chain Food Product operations, following beef. Margins were slightly down from 21.6 per cent. to 20.6 per cent as we maintained export volumes despite the strength of the ZMW.
Zam Chick processed volumes increased by 12 per cent. from 5 million kgs to 5.6 million kgs. Zamhtach increased volumes by 24.6 per cent. from 4.5 million day-old-chicks to 5.6 million during the period.
We have invested USD0.6m to increase our slaughter processing capacity by circa 23 per cent. from 130,000 to 160,000 birds per week. This upgrade should be commissioned by the end of June 2017. Demand for day-old chicks outstrips supply and as a result a further expansion of the Zamhatch operations will bring a further 100,000 on line from the end of May 2017 increasing total capacity to 315,000 day-old chicks per week. We expect the benefits of this additional volume to through to operating profit in the second half of the year.
c) Pork (Masterpork)
Masterpork has shown strong growth during the period with volumes increasing by 19.7 per cent., turnover by 21.8 per cent. in ZMW (41 per cent. in USD) and Gross Profits by 134 per cent. in ZMW (171 per cent. in USD).
Masterpork accounts for 19.3 per cent. of the Cold Chain Food Products turnover. making it the third largest product line within the Cold Chain Food Products division. Gross Profit margins increased from 7.6 per cent to 14.5 per cent. in this period, but this remains the second lowest margin of the Cold Chain Food Product operations and we continue to look at how to maximise returns from this product line.
d) Milk and dairy products (Zammilk)
The milk products business has shown strong growth in this period, with turnover up 34.2 per cent. Sales volumes increased by 42.9 per cent. from 6.52 million litres to 9.32 million litres. Despite this strong volume growth, operational difficulties in our Kalundu dairy unit led to a drop in milk output and a rise in the cost of goods as cows were culled and liquid milk was acquired from third parties to replace the shortfall in our own volumes. This has resulted in Gross Profits reducing by ZMW10.9m (USD1.1m) or 40.9 per cent. in ZMW versus the prior year (31.7 per cent. in USD). Following a change of management in February 2017, milk output and culling rates at Kalundu dairy have started to improve reducing Zammilk's cost of production.
e) Fish
Fish is gaining popularity as a cheaper source of protein. Volumes grew by 66.9 per cent. from 0.9 million kgs to 1.49 million kgs. Changes in product mix, resulted in a 26.2 per cent. increase in ZMW turnover but a 13 per cent. decline in gross profit contribution. Fish accounts for only 4.7 per cent. of turnover within the Cold Chain Food Products division.
f) Eggs (Zamegg)
The egg operations, trading under the brand name Zamegg, increased volumes by 94.0 per cent. However gross profit fell by ZMW2m with egg prices coming down sharply due to the difficulties in the Katanga Province of the DRC. This resulted in large volumes of eggs, which are normally exported into the DRC, being discarded in Zambia. This situation appears to have normalised and consequently, egg margins are now recovering. This is the smallest division within the Cold Chain Food Products accounting for 4.4 per cent. of turnover.
STOCK FEED (NOVATEK)
2017 2016 2017 2016
ZMW'000 ZMW'000 % Change USD'000 USD'000 % Change
---------- ---------- --------- --------- --------- ---------
Revenue 324,701 364,169 -10.8% 33,099 32,085 3.2%
--------------
Gross Profit 62,831 103,603 -39.4% 6,405 9,128 -29.8%
Overheads (20,141) (28,269) -28.8% (2,053) (2,491) 0.0%
Operating
Profit 42,690 75,334 -43.3% 4,352 6,637 -34.4%
-------------- ---------- ---------- --------- --------- --------- ---------
Novatek has maintained its market share and market leadership with volumes increasing by 2.7 per cent. from 71,737 M.T. to 73,679 M.T. This has been a good performance in a challenging macroeconomic environment with sluggish demand. However, margins have been adversely impacted by the fall in feed prices as competitors sought to liquidate high priced 2016 old crop stocks of raw materials ahead of the new crop harvest in April/May 2017. The last three months have seen Zambian soya beans move from USD535/M.T. for the old crop to well below USD400/M.T for new crop. Whilst, Operating Profit has fallen by 39.4 per cent. in ZMW from ZMW103.6m to ZMW62.8m (29.8 per cent. in USD from USD9.1m to USD6.4m), Novatek has performed well in difficult circumstances. It should be noted that margins in the comparable prior year period were enhanced by a favourable raw material forward soya book
Following the fall in raw material prices, Novateks's stock feed margins have returned to more usual levels in March and April. Lower market prices and an improving macroeconomic environment are expected to stimulate demand for stock feed.
Novatek will be commissioning a second stock feed plant at Mpongwe in June 2017. The existing Lusaka plant is currently working at capacity, and we look forward to the new Mpongwe plant providing an additional 140,000 M.T. of capacity. The Mpongwe plant is well placed to supply the Copperbelt, the North Western Province and the DRC markets, and the Group will benefit from saving in transport costs.
Novatek continues to explore new markets in the region and is now exporting to Zimbabwe, Angola, DRC, Rwanda, Kenya, Malawi and Mozambique.
With margins normalising and the second stock feed plant coming on line in June 2017, Novatek is expected to grow revenues and profitability over the next six months.
CROPPING
2017 2016 2017 2016
ZMW'000 ZMW'000 % Change USD'000 USD'000 % Change
---------- ---------- --------- --------- --------- ---------
Revenue 201,901 129,404 56.0% 20,581 11,401 80.5%
--------------
Gross Profit 79,745 105,667 -24.5% 8,129 9,310 -2.0%
Overheads (60,309) (56,597) 6.6% (6,148) (4,987) 23.3%
Operating
Profit 19,436 49,070 -60.4% 1,981 4,323 -42.2%
-------------- ---------- ---------- --------- --------- --------- ---------
This has been a tough period for our cropping division with global and local commodity prices declining following a significant build-up of stocks in most major production areas with international soya prices touching ten year lows. Furthermore, the ZMW appreciation of 3.5 per cent over the past six months has resulted in a ZMW14.6m (USD1.5m) reduction in income derived from the biological assets and inventory held at 30(th) September 2016.
The cropping division planted 12,005 Ha of soya, 2,185 Ha of maize and 500 Ha of silage for the summer season. These crops are coming off ahead of budget with over 40,000 M.T. of soya, 21,000 M.T. of maize and 24,000 M.T. of maize silage expected.
Unfortunately, the decline in soya price from USD500/M.T. the previous year to under USD400/M.T. for the current crop has resulted in a circa USD4m reduction in dollar income on the 40,000 M.T. produced in the period as the Zambian forward market is generally illiquid making hedging very difficult. However a strong underlying operational performance by the cropping division has resulted in a net reduction in gross profit of ZMW25.9m (equivalent to USD2.7m).
Cropping operations have performed operationally very well, with yields ahead of last year and variable costs on budget. Overhead costs increased by 6.6 per cent reflecting the rise in energy, repair and labour costs. The winter crop, which has just been planted, is made up of 6,374 Ha of wheat, 1,004 Ha of winter maize, 75 Ha of seed maize and 193 Ha of Lucerne. Wheat prices are expected to be similar to last year at this stage, hence we expect the cropping division to deliver a better performance in the next six months provided there is no further softening of maize or wheat prices.
OTHER BUSINESSES
2017 2016 2017 2016
ZMW'000 ZMW'000 % Change USD'000 USD'000 % Change
---------- --------- --------- --------- --------- ---------
Revenue 79,009 107,364 -26.4 8,054 9,459 -14.9
--------------
Gross Profit 12,868 15,737 -18.2 1,312 1,386 -5.4
Overheads (10,612) (9,015) +17.7 (1,082) (1,675) -5.4
Operating
Profit 2,256 6,722 --66.4 230 (289) -179.6
-------------- ---------- --------- --------- --------- --------- ---------
Flour Milling: The milling operations have performed well with flour sale volumes increasing by 23.5 per cent. as we made the decision to increase volumes by selling more flour through our retail network. This strategy has worked well with retail sales in Zambeef's own retail network increasing by 163 per cent. and representing 29 per cent. of overall flour sales (13 per cent). The aim is to increase flour sales further by continuing to drive sales through Zambeef's own retail network.
Zamleather: This division has had a difficult six months, with world hide prices dropping and the market for lower grade hides being very sluggish. The number of hides processed fell by 23.7 per cent. to 43,492 hides. In addition, shoe sales decreased by 21.3 per cent. to 30,594, with purchases from the mines being slow in the period. The next six months are not expected to see any material improvements in the leather industry.
Edible oil: Following the sale of Zambeef's edible oil operations, Zamanita Ltd, to Cargill in 2015, Zambeef has continued to retail edible oil through its retail network. These sales have reduced over the last eighteen months but the Zambeef palm project started producing crude palm oil during this period. Crude palm oil output will increase as planted areas progressively come into production. The edible oils operations are not material to Zambeef's operations.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
REPORT OF THE DIRECTORS
In compliance with Division 8.3 of the Companies Act, the Directors submit their report on the activities of the Group for the six month period ended 31 March 2017.
1. Principal activities
Zambeef Products PLC and its subsidiaries ("Group") is one of the largest agri-businesses in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed and flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with approximately 7,971 Ha of irrigated row crops and 8,623 Ha of rain-fed/dry-land crops available for planting each year. The Group is also in the process of rolling out its West Africa expansion in Nigeria and Ghana.
2. The Company
The Company is incorporated and domiciled in Zambia.
Business address Postal address
Plot 4970, Manda Road Private Bag 17
Industrial Area
Woodlands
Lusaka Lusaka
ZAMBIA ZAMBIA
3. Share capital
Details of the Company's authorised and issued share capital are as follows:
30 September
31 March 2017 2016
-------------------- --------------------
ZMW'000s USD'000s ZMW'000s USD'000s
Authorised
700,000,000 ordinary
shares of ZMW0.01
each 7,000 938 7,000 938
========= ========= ========= =========
Issued and fully paid
Ordinary shares
300,579,630 ordinary
shares of ZMW0.01
each 3,006 449 3,006 449
Preference shares
- convertible redeemable
100,057,658 of ZMW0.01
each 1,000 100 1,000 100
========= ========= ========= =========
4. Results
The Group's results are as follows:
Unaudited Audited
6 months 6 months 6 months 6 months
to to to to Year ended Year ended
31 March 31 March 31 March 31 March 30 September 30 September
2017 2017 2016 2016 2016 2016
Group ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
Revenue 1,161,318 118,381 1,121,605 98,820 2,376,148 219,404
Profit before
taxation 5,780 590 76,954 6,780 134,592 12,427
Taxation charge (556) (57) (8,827) (778) (10,798) (997)
Profit from
discontinued
operations - - 33,592 2,960 33,592 3,101
---------- ---------- ---------- --------- -------------- -------------
Group profit
for the period 5,224 533 101,719 8,962 157,386 14,531
---------- ---------- ---------- --------- -------------- -------------
Group profit
attributable
to:
Equity holders
of the parent 5,519 563 90,285 7,955 137,103 12,659
Non-controlling
interest (295) (30) 11,434 1,007 20,283 1,872
---------- ---------- ---------- --------- -------------- -------------
5,224 533 101,719 8,962 157,386 14,531
---------- ---------- ---------- --------- -------------- -------------
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
REPORT OF THE DIRECTORS (CONTINUED)
5. Dividends
There was no dividend paid or proposed for the six month period ended 31 March 2017.
6. Management
The Senior Management team comprise the following:
Francis Grogan - Joint Chief Executive Officer
Carl Irwin - Joint Chief Executive Officer
Yusuf Koya - Executive Director
Craig Harris - Chief Financial Officer
Danny Museteka - Company Secretary
Mike Lovett - General Manager Farming Division
Felix Lupindula - Corporate Affairs Manager
Pravin Abraham - Chief Internal Auditor
Ebrahim Israel - General Manager - International Retailing
Murray Moore - General Manager - Beef and Dairy
David Mynhardt - General Manager - Sinazongwe Farm
Robert Hoskins Davies - General Manager - Chiawa Farm
Francis Mondomona - General Manager - Huntley Farm
Richard Franklin - General Manager - Zamleather Limited
Walter Roodt - General Manager - Stock Feed
Harry Hayden-Payne - General Manager - Zampalm Limited
Webster Mapulanga - General Manager - Master Pork Limited
Theo de Lange - Group Technical Manager
Bartholomew Mbao - Dairy Processing Manager
Andries Van Rensburg - Piggery Manager
Samson Lungu - Flour Mill Manager
Charles Milupi - Poultry Manager
Ivor Chilufya - Group Financial Controller
Justin Rust - Commercial Manager
Basil Webber - Commercial Manager
Christiaan Engelbrecht - Commercial Manager
Niyaas Dalal - Finance Manager - Zambeef Products Limited, Zam Chick Limited
Rory Park - Finance Manager - Master Pork Limited, Zampalm Limited, Zamhatch Limited
Simon Nkhata - Finance Manager - Zambeef Retailing Limited
Baron Chisola - Financial Controller - Group Inventory
Shadreck Banda - Financial Controller - Group Suppliers
Samantha Dale - Group Head - Debtors and Credit Control
Anthony Seno - Head of IT
Guy Changole - Head of Human Resources
Mathews Mbasela - Head of Payroll Processing
EddieTembo - Chief Security Manager
Jones Kayawe - Head of Environment, Health and Safety
Field Musongole - Maintenance Manager
Justo Kopulande - CSR/PR Manager
Ernest Gondwe - Regional Manager - Shoprite & Excellent Meats
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
REPORT OF THE DIRECTORS (CONTINUED)
6. Management (continued)
Francis Mulenga - Regional Manager - Shoprite
Noel Chola - Regional Manager - Shoprite
Rodgers Chinkuli - Regional Manager - Zambeef Outlets
Deon Conradie - Managing Director - Master Meats Nigeria
Hillary Anderson - National Retail Manager - Nigeria
Lufeyo Nkhoma - General Manager - Master Meats Ghana
Clement Mulenga - General Manager - Master Meats Nigeria
7. Directors and Secretary
The directors in office during the financial period and at the date of this report were as follows:
Dr. Jacob Mwanza - Chairman
Dr. Lawrence S. Sikutwa
John Rabb
Graham Clarke (Resigned 18(th) April 2017)
David Osborne
Tim Pollock
Francis Grogan - Joint Chief Executive Officer
Dr. Carl Irwin - Joint Chief Executive Officer
Yusuf Koya - Executive Director
Danny Museteka - Company Secretary
8. Directors' interests
The directors held the following interests in the Company's ordinary shares at the reporting date:
31 March 2017 30 September
2016
----------------------- --------------
Direct Indirect Direct Indirect
Dr. Jacob Mwanza 1,100,000 - 1,100,000 -
Dr. Carl Irwin 3,763 5,406,445 3,763 5,406,445
Francis Grogan 995,000 3,591,631 995,000 3,591,631
John Rabb - 14,000,000 - 14,000,000
Graham Clark - 1,000,000 - 1,000,000
Yusuf Koya 245,482 - 245,482 -
2,344,245 23,998,076 2,344,245 23,998,076
========== =========== ============== ===========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
REPORT OF THE DIRECTORS (CONTINUED)
9. Directors' fees and remuneration
Long
Term
Air Incentive
Housing Car Fares Plan
ZMW'000 Salary Bonus Allowance Allowance Allowance Medicals 2 (Shares)
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
NON-EXECUTIVE
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Jacob 825,514 - - - - -
Mwanza
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Lawrence 359,779 - - - - -
Sikutwa
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
John Rabb 308,380 - - - - -
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Graham 359,771 - - - - -
Clark
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
EXECUTIVE
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Francis Company Company
Grogan 2,978,684 5,000 House Car 480,462 Yes 6,250,000
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Company
Carl Irwin 3,151,825 5,000 - Car 480,462 Yes 6,250,000
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Yusuf
Koya 3,371,278 5,000 - - 400,385 Yes 275,000
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
Danny
Museteka 2,368,759 257,518 - - - Yes 275,000
--------------- ---------- -------- ----------- ----------- ----------- --------- ------------
In addition to the above, all Executive Directors are also entitled to a gratuity of 10 per cent. of their gross basic salary paid over the two-year contract term, less statutory deductions for tax.
The Long Term Incentive Plan 2 ("LTIP 2") has the following key terms/conditions:
a) Structure: market value option shares ("Options");
b) Exercise price: 15 pence;
c) Maximum shares: The annual award base value (number of shares multiplied by the share price on the date of grant plus number of Options multiplied by the exercise price) may not exceed three times the Executive's base salary; and
d) Vesting period: three years from 2015 to 2018; exercisable from 1 March 2018:
e) The Options can only be exercised if Zambeef achieves the following targets:
I. If the share price reaches 40 pence, then 25 per cent. of the Options become exercisable.
II. If the share price reaches 48 pence, a further 25 per cent. of the Options become exercisable.
III. If the share price reaches 56 pence, a further 25 per cent. of the Options become exercisable.
IV. If the share price reaches 65 pence, the final 25 per cent. of the Options become exercisable.
V. Zambeef achieving a debt-to-equity (gearing) ratio of less than 35 per cent. in the audited accounts immediately prior to exercising the options.
VI. Zambeef achieving a current ratio (current assets divided by current liabilities) of 1.5 in the audited annual accounts immediately prior to the exercising of the options.
VII. Zambeef generating free cash flow.
VIII. The Zambeef share price triggers set above will be considered achieved if in the 14 days immediately prior to exercising the Options, the shares have traded continuously at not less than these prices for 14 days.
IX. The Options will be exercisable at any time for 2 years after the 3-year period from the issue of the Options have lapsed.
X. The Options can only be exercised if the relevant executives are still employed by the Company.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
REPORT OF THE DIRECTORS (CONTINUED)
10. Significant Shareholdings
As at 31 March 2017, the Company has been advised of the following notifiable interests in its ordinary share capital:
Investor Name Current Position % of Shareholding ------------------------- ----------------- ------------------ CDC Group Plc 132,648,561 34.85% ------------------------- ----------------- ------------------ M & G Recovery Fund 46,304,408 12.16% ------------------------- ----------------- ------------------ National Pension Scheme Authority (Zambia) 24,979,819 6.56% ------------------------- ----------------- ------------------ Rhodora 25,379,180 6.67% ------------------------- ----------------- ------------------ SQM Frontier Management 15,489,554 4.07% ------------------------- ----------------- ------------------ Sussex Trust 14,000,000 3.68% ------------------------- ----------------- ------------------
.
11. Employees
The Group employed an average number of employees of 6,854 (30 September 2016 - 6,253; 31 March 2016 - 6,200) and total salaries and wages were ZMW173 million (USD17.7 million) for the six month period to 31 March 2017 (30 September 2016 - ZMW307 million [USD28.3 million], 31 March 2016 - ZMW139.3 million [USD12.3 million]).
The average number of persons employed by the Group in each month of the 6 month period is as follows:
October 2016 6,754 ------------ ------ November 2016 6,900 ------------ ------ December 2016 7,023 ------------ ------ January 2017 6,826 ------------ ------ February 2017 6,756 ------------ ------ March 2017 6,864 ------------ ------
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
REPORT OF THE DIRECTORS (CONTINUED)
12. Safety, Health and Environmental issues
As part of some of the Group's term loans, the Group signed up to an Environmental and Social Action Plan ("ESAP"), which requires the Group to meet both local Zambian standards as well as international standards relating to the environment.
The Group provides healthcare services to its employees. The Group also supports various community activities in the areas that it operates from.
13. Legal matters
There are no significant or material legal or arbitration proceedings (including to the knowledge of the Directors, any such proceedings which are pending or threatened, by or against the Company or any subsidiary of the Group) which may have or have had during the 12 months immediately preceding the date of this document a significant or material effect on the financial position or profitability of the Company or any member of the Group
14. Gifts and donations
The Group made donations of ZMW1.23 million (USD0.13 million), (30 September 2016 - ZMW2.2 million [USD0.2 million], 31 March 2016 - ZMW1.27 million [USD0.11 million]) to a number of activities.
15. Export sales
The Group made exports of ZMW14 million (USD1.4 million) during the period (30 September 2016 - ZMW90.7 million [USD8.6 million], 31 March 2016 - ZMW59.3 million [USD5.2 million]).
16. Property, plant and equipment
Assets totalling ZMW126.5 million (USD12.9 million) were purchased by the Group during the period (30 September 2016 - ZMW178.8 million [USD16.5 million], 31 March 2016 - ZMW84 million [USD7.4 million]) which included expenditure on the palm plantation development during the period of ZMW8.8 million (USD0.9 million) (30 September 2016 - ZMW12.2 million [USD1.1 million], 31 March 2016 - ZMW6.5 million [USD0.57 million]).
17. Interim report
The interim report set out below has been approved by the directors.
By order of the Board
Company Secretary
Date: 6 June 2017
6 June 2017
The Directors
Zambeef Products PLC
Plot 4970, Manda Road
Industrial Area
Lusaka
Dear Sirs
INDEPENT REVIEW REPORT OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
Introduction
We have been instructed by the Directors of the Company to review the financial information set out on pages 21 to 52 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Listing Rules of the Lusaka Stock Exchange and International Accounting Standard 34 require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where changes, and reasons for them, are disclosed.
Review of work performed
We conducted our review in accordance with guidance contained in the International Standards on Auditing. A review consists principally of making enquiry of Group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as test of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On basis of our review we are not aware of any material modifications that should be made to the consolidated financial information as presented for the six month period ended 31 March 2017.
Chartered Accountants
Christopher Mulenga (AUD/ F000178)
Name of Partner signing on behalf of the Firm
Lusaka
Date: 6 June 2017
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIODED 31 MARCH 2017
Unaudited Audited
----------------------------- ------ ---------------------- ------------
Mar 2017 Mar 2016 Sept 2016
----------------------------- ------ ---------- ---------- ------------
Group Notes ZMW'000s ZMW'000s ZMW'000s
----------------------------- ------ ---------- ---------- ------------
Revenue 5(i) 1,161,318 1,121,605 2,376,148
----------------------------- ------ ---------- ---------- ------------
Net gain/ (loss)
arising from price
changes in fair
value of biological
assets 8 (91) 17,430 13,257
----------------------------- ------ ---------- ---------- ------------
Cost of sales (783,603) (693,123) (1,513,459)
----------------------------- ------ ---------- ---------- ------------
Gross profit 5(i) 377,624 445,912 875,946
----------------------------- ------ ---------- ---------- ------------
Administrative expenses (334,707) (324,966) (690,047)
----------------------------- ------ ---------- ---------- ------------
Other income 1,243 763 1,694
----------------------------- ------ ---------- ---------- ------------
Operating profit 44,160 121,709 187,593
----------------------------- ------ ---------- ---------- ------------
Exchange losses
on translating foreign
currency transactions
and balances 6,748 15,602 58,345
----------------------------- ------ ---------- ---------- ------------
Finance costs (45,128) (60,357) (111,346)
----------------------------- ------ ---------- ---------- ------------
Profit before taxation 5(i) 5,780 76,954 134,592
----------------------------- ------ ---------- ---------- ------------
Taxation charge 6(a) (556) (8,827) (10,798)
----------------------------- ------ ---------- ---------- ------------
Group profit) for
the period from
continued operations 5,224 68,127 123,794
----------------------------- ------ ---------- ---------- ------------
Profit from discontinued
operations - 33,592 33,592
----------------------------- ------ ---------- ---------- ------------
Total profit/(loss)
for the period 5,224 101,719 157,386
----------------------------- ------ ---------- ---------- ------------
Group profit/(loss)
attributable to:
----------------------------- ------ ---------- ---------- ------------
Equity holders of
the parent 5,519 90,285 137,103
----------------------------- ------ ---------- ---------- ------------
Non-controlling
interest (295) 11,434 20,283
----------------------------- ------ ---------- ---------- ------------
5,224 101,719 157,386
----------------------------- ------ ---------- ---------- ------------
Other comprehensive
income
----------------------------- ------ ---------- ---------- ------------
Exchange gains on
translating presentational
currency (10,547) (52,198) (86,511)
----------------------------- ------ ---------- ---------- ------------
Total comprehensive
income for the period (5,323) 49,521 70,875
----------------------------- ------ ---------- ---------- ------------
Total comprehensive
income/(loss) for
the period attributable
to:
----------------------------- ------ ---------- ---------- ------------
Equity holders of
the parent (4,308) 36,692 52,292
----------------------------- ------ ---------- ---------- ------------
Non-controlling
interest (1,015) 12,829 18,583
----------------------------- ------ ---------- ---------- ------------
(5,323) 49,521 70,875
----------------------------- ------ ---------- ---------- ------------
Earnings per share Ngwee Ngwee Ngwee
----------------------------- ------ ---------- ---------- ------------
Basic and diluted
earnings per share
from continued operations 7 1.84 22.86 41.38
----------------------------- ------ ---------- ---------- ------------
Basic and diluted
earnings per share
from discontinued
operations 7 - 13.55 13.42
----------------------------- ------ ---------- ---------- ------------
Total 7 1.84 36.41 54.80
----------------------------- ------ ---------- ---------- ------------
The accompanying notes form part of the financial statements.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIODED 31 MARCH 2017
Unaudited Audited
------------------------------ ------ -------------------- ----------
Mar 2017 Mar 2016 Sept 2016
------------------------------ ------ --------- --------- ----------
Group Notes USD'000s USD'000s USD'000s
------------------------------ ------ --------- --------- ----------
Revenue 5(ii) 118,381 98,820 219,404
------------------------------ ------ --------- --------- ----------
Net gain /(loss) arising
from price changes
in fair value of biological
assets 8 (9) 1,536 1,224
------------------------------ ------ --------- --------- ----------
Cost of sales (79,878) (61,069) (139,747)
------------------------------ ------ --------- --------- ----------
Gross profit 5(ii) 38,494 39,287 80,881
------------------------------ ------ --------- --------- ----------
Administrative expenses (34,119) (28,631) (63,716)
------------------------------ ------ --------- --------- ----------
Other income 127 67 156
------------------------------ ------ --------- --------- ----------
Operating profit 4,502 10,723 17,321
------------------------------ ------ --------- --------- ----------
Exchange losses on
translating foreign
currency transactions
and balances 688 1,375 5,387
------------------------------ ------ --------- --------- ----------
Finance costs (4,600) (5,318) (10,281)
------------------------------ ------ --------- --------- ----------
Profit before taxation 5(ii) 590 6,780 12,427
------------------------------ ------ --------- --------- ----------
Taxation charge 6(f) (57) (778) (997)
------------------------------ ------ --------- --------- ----------
Group profit for the
period from continued
operations 533 6,002 11,430
------------------------------ ------ --------- --------- ----------
Profit from discontinued
operations - 2,960 3,101
------------------------------ ------ --------- --------- ----------
Total profit/(loss)
for the period 533 8,962 14,531
------------------------------ ------ --------- --------- ----------
Group profit/(loss)
attributable to:
------------------------------ ------ --------- --------- ----------
Equity holders of
the parent 563 7,955 12,659
------------------------------ ------ --------- --------- ----------
Non-controlling interest (30) 1,007 1,872
------------------------------ ------ --------- --------- ----------
533 8,962 14,531
------------------------------ ------ --------- --------- ----------
Other comprehensive
income
------------------------------ ------ --------- --------- ----------
Exchange losses on
translating presentational
currency 6,617 4,973 16,909
------------------------------ ------ --------- --------- ----------
Total comprehensive
income for the period 7,150 13,935 31,440
------------------------------ ------ --------- --------- ----------
Total comprehensive
income/(loss) for
the period attributable
to:
------------------------------ ------ --------- --------- ----------
Equity holders of
the parent 7,282 12,528 29,473
------------------------------ ------ --------- --------- ----------
Non-controlling interest (132) 1,407 1,967
------------------------------ ------ --------- --------- ----------
7,150 13,935 31,440
------------------------------ ------ --------- --------- ----------
Earnings per share Cents Cents Cents
------------------------------ ------ --------- --------- ----------
Basic and diluted
earnings per share
from continued operations 7 0.19 2.02 3.82
------------------------------ ------ --------- --------- ----------
Basic and diluted
earnings per share
from discontinued
operations 7 - 1.19 1.24
------------------------------ ------ --------- --------- ----------
Total 7 0.19 3.21 5.06
------------------------------ ------ --------- --------- ----------
The accompanying notes form part of the financial statements.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
FOR THE SIX MONTH PERIODED 31 MARCH 2017
Total
Foreign attributable
Preference exchange to owners
Share Share share Revaluation translation Retained of the Non-controlling Total
capital premium capital reserve reserve earnings parent interest equity
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
At 1 October
2015 2,480 506,277 - 504,671 188,332 239,449 1,441,209 34,083 1,475,292
Profit for the
period - - - - - 90,285 90,285 11,434 101,719
Transfer of
surplus
depreciation - - - (6,278) - 6,278 - - -
Consolidation of
Zamhatch
Limited - - - - - - - 24,800 24,800
Other
comprehensive
income
Exchange gains
on
translating
presentational
currency - - - - (53,593) - (53,593) 1,395 (52,198)
--------- ---------- ------------ ------------ --------- ------------- ---------------- ----------
Total
comprehensive
income for the
period - - - (6,278) (53,593) 96,563 36,692 37,629 74,321
--------- ---------- ------------ ------------ --------- ------------- ---------------- ----------
At 31 March 2016 2,480 506,277 - 498,393 134,739 336,012 1,477,901 71,712 1,549,613
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Profit for the
period - - - - - 46,818 46,818 8,849 55,667
Transfer of
surplus
depreciation - - - (12,628) 12,628 - - -
Removal of
Zamhatch
Limited - - - - - - - (24,800) (24,800)
Other
comprehensive
income: -
Exchange
gains/(losses)
on translating
presentational
currency - - - - (31,218) - (31,218) (3,095) (34,313)
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Total
comprehensive
income for the
period - - - (12,628) (31,218) 59,446 15,600 (19,046) (3,446)
------------ ----------------
Transactions
with
owners
Non-controlling
interest
shares acquired - - - - - 22,177 22,177 (60,282) (38,105)
Shares issued 526 618,735 1,000 - - - 620,261 - 620,261
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Total
transactions
with owners 526 618,735 1,000 - - 22,177 642,438 (60,282) 582,156
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
At 30 September
2016 3,006 1,125,012 1,000 485,765 103,521 417,635 2,135,939 (7,616) 2,128,323
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Profit for the
period - - - - - 5,519 5,519 (295) 5,224
Transfer of
surplus
depreciation - - - (9,318) - 9,318 - - -
Other
comprehensive
income
Exchange gains
on
translating
presentational
currency - - - - (9,827) - (9,827) (720) (10,547)
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Total
comprehensive
income for the
period - - - (9,318) (9,827) 14,837 (4,308) (1,015) (5,323)
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
At 31 March 2017 3,006 1,125,012 1,000 476,447 93,694 432,472 2,131,631 (8,631) 2,123,000
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
FOR THE SIX MONTH PERIODED 31 MARCH 2017
Total
Foreign attributable
Preference exchange to owners
Share Share share Revaluation translation Retained of the Non-controlling Total
capital premium capital reserve reserve earnings parent Interest equity
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
At 1 October
2015 396 123,283 - 100,509 (161,712) 57,424 119,900 2,836 122,736
Profit for the
period - - - - - 7,955 7,955 1,007 8,962
Transfer of
surplus
depreciation - - - (553) - 553 - - -
Consolidation of
Zamhatch
Limited - - - - - - - 2,185 2,185
Other
comprehensive
income
Exchange losses
on translating
presentational
currency - - - - 4,573 - 4,573 400 4,973
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Total
comprehensive
income
for the period - - - (553) 4,573 8,508 12,528 3,592 16,120
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
At 31 March 2016 396 123,283 - 99,956 (157,139) 65,932 132,428 6,428 138,856
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Transactions
with owners
Profit for the
period - - - - - 4,704 4,704 865 5,569
Transfer of
surplus
depreciation - - - (1,193) - 1,193 - - -
Consolidation of
Zamhatch
Limited - - - - - - - (2,185) (2,185)
Other
comprehensive
income:
Exchange losses
on translating
presentational
currency - - - - 12,240 - 12,240 (304) 11,936
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Total
comprehensive
income
for the period - - - (1,193) 12,240 5,897 16,944 (1,624) 15,320
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Transactions
with owners
Non-controlling
interest
shares acquired - - - - - 2,047 2,047 (5,565) (3,518)
Shares issued 53 61,812 100 - - - 61,965 - 61,965
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Total
transactions
with
owners 53 61,812 100 - - 2,047 64,012 (5,565) 58,447
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
At 30 September
2016 449 185,095 100 98,763 (144,899) 73,876 213,384 (761) 212,623
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Profit for the
period - - - - - 563 563 (30) 533
Transfer of
surplus
depreciation - - - (950) - 950 - - -
Other
comprehensive
income
Exchange losses
on translating
presentational
currency - - - - 6,719 - 6,719 (102) 6,617
--------- --------- ------------ ------------ --------- ------------- ---------------- ---------
Total
comprehensive
income - - - (950) 6,719 1,513 7,282 (132) 7,150
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- -----------
At 31 March 2017 449 185,095 100 97,813 (138,180) 75,389 220,666 (893) 219,773
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION -- 31 MARCH 2017
Unaudited Audited
---------------------- ----------
31 Mar 31 Mar 30 Sept
Notes 2017 2016 2016
ZMW'000s ZMW'000s ZMW'000s
ASSETS
Non - current assets
Goodwill 166,801 15,699 157,922
Property, plant and
equipment 1,837,941 1,820,210 1,769,966
Plantation development
expenditure 100,277 87,336 94,302
Biological assets 8 51,541 34,619 48,480
Deferred tax assets 6(e) 41,013 24,569 28,366
---------- ---------- ----------
2,197,573 1,982,433 2,099,036
---------- ---------- ----------
Current assets
Biological assets 8 373,280 370,285 187,026
Inventories 372,975 277,809 544,739
Trade and other receivables 131,497 138,408 113,151
Amounts due from
related companies 2,727 5,569 10,543
Income tax recoverable 6(c) 1,569 1,467 1,759
Cash and cash equivalents 9 - - 64,806
882,048 793,538 922,024
---------- ---------- ----------
Total assets 3,079,621 2,775,971 3,021,060
========== ========== ==========
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3,006 2,480 3,006
Preference share
capital 1,000 - 1,000
Share premium 1,125,012 506,276 1,125,012
Reserves 1,002,613 969,145 1,006,921
---------- ---------- ----------
2,131,631 1,477,901 2,135,939
Non-controlling interest (8,631) 71,712 (7,616)
---------- ---------- ----------
2,123,000 1,549,613 2,128,323
---------- ---------- ----------
Non - current liabilities
Interest bearing
liabilities 10 233,589 379,957 261,734
Obligations under
finance leases 33,433 17,582 31,485
Amounts due to related
companies - 64,187 -
Deferred liability 11,037 9,366 10,442
Deferred taxation 6(e) 8,630 7,243 4,039
286,689 478,335 307,700
---------- ---------- ----------
Current liabilities
Interest bearing
liabilities 10 77,306 94,927 116,223
Collateral management
agreement 10 68,008 75,788 118,849
Obligations under
finance leases 22,422 9,222 19,697
Trade and other payables 238,757 292,930 322,133
Amounts due to related
companies - - 313
Taxation payable 6(c) 12,046 5,037 7,822
Cash and cash equivalents 9 251,393 270,119 -
---------- ----------
669,932 748,023 585,037
---------- ---------- ----------
Total equity and
liabilities 3,079,621 2,775,971 3,021,060
========== ========== ==========
The accompanying notes form part of the financial statements. The interim financial statements on pages 21 to 52 were approved by the Board of Directors on 6 June 2017 and were signed on its behalf by
)
) DIRECTORS
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION -- 31 MARCH 2016
Unaudited Audited
---------------------- ----------
31 Mar 31 Mar 30 Sept
2017 2016 2016
Notes USD '000s USD '000s USD '000s
ASSETS
Non - current assets
Goodwill 17,267 1,407 15,776
Property, plant and
equipment 190,263 163,101 176,820
Plantation development
expenditure 10,381 7,826 9,421
Biological assets 8 5,336 3,102 4,843
Deferred tax asset 6(j) 4,246 2,202 2,834
---------- ---------- ----------
227,493 177,638 209,694
---------- ---------- ----------
Current assets
Biological assets 8 38,642 33,180 18,684
Inventories 38,610 24,893 54,419
Trade and other receivables 13,613 12,402 11,304
Amounts due from related
companies 282 499 1,053
Income tax recoverable 6(h) 162 131 176
Cash and cash equivalents 9 - - 6,474
91,309 71,105 92,110
---------- ---------- ----------
Total assets 318,802 248,743 301,804
========== ========== ==========
EQUITY AND LIABILITIES
Capital and reserves
Share capital 449 396 449
Preference share capital 100 - 100
Share premium 185,095 123,283 185,095
Reserves 35,022 8,749 27,740
---------- ---------- ----------
220,666 132,428 213,384
Non-controlling interest (893) 6,428 (761)
219,773 138,856 212,623
---------- ---------- ----------
Non - current liabilities
Interest bearing liabilities 10 24,181 34,046 26,147
Obligations under
finance leases 3,461 1,575 3,145
Amounts due to related
companies - 5,752 -
Deferred liability 1,143 839 1,043
Deferred tax liability 6(j) 893 649 403
29,678 42,861 30,738
---------- ---------- ----------
Current liabilities
Interest bearing liabilities 10 8,003 8,506 11,611
Collateral management
agreement 10 7,040 6,791 11,873
Obligations under
finance leases 2,321 826 1,968
Trade and other payables 24,716 26,248 32,179
Amounts due to related
companies - - 31
Taxation payable 6(h) 1,247 451 781
Cash and cash equivalents 9 26,024 24,204 -
69,351 67,026 58,443
---------- ---------- ----------
Total equity and liabilities 318,802 248,743 301,804
========== ========== ==========
The accompanying notes form part of the financial statements. The interim financial statements on pages 21 to 52 were approved by the Board of Directors on 6 June 2017 and were signed on its behalf by
)
) DIRECTORS
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODED 31 MARCH 2017
Unaudited Audited
------------------------------------------------------------- ----------
6 months 6 months Year
to to to
31 Mar 31 Mar 30 Sept
2017 2016 2016
ZMW'000s ZMW'000s ZMW'000s
Cash inflow from operating
activities
Profit before taxation 5,780 110,546 134,592
Finance costs 45,128 60,357 111,346
Loss on disposal of property,
plant and equipment - - 1,124
Depreciation 40,810 36,630 77,784
Profit on discontinued operations - - 33,592
Fair value price adjustment 91 (17,430) (13,257)
Net unrealised foreign exchange
(gains)/losses (4,525) (14,738) (28,626)
---------- ---------- ----------
Earnings before interest,
tax, depreciation and amortisation 87,284 175,365 316,555
Increase in biological assets (189,315) (205,546) (46,308)
Decrease in inventory 171,764 124,271 (132,500)
Decrease /(increase) in
trade and other receivables (18,346) 47,830 97,078
Decrease in amount due from
related companies 7,816 - (1,650)
(Decrease)/increase in trade
and other payables (83,378) (63,694) (50,200)
Increase in amount due to
related companies (313) 11,891 (44,165)
Increase in deferred liability 595 112 1,188
Income tax paid (4,368) (2,371) (8,850)
----------
Net cash inflow from operating
activities (28,261) 87,858 131,148
---------- ---------- ----------
Investing activities
Purchase of property, plant
and equipment (117,613) (77,533) (166,513)
Expenditure on plantation
development (8,848) (6,512) (12,259)
Movement in investments (8,879) - -
Proceeds from sale of assets - 623 -
Proceeds from the issue
of shares - - 620,262
Purchase of shares - - (175,075)
Net cash (outflow)/ inflow
(on)/ from investing activities (135,340) (83,422) 266,415
---------- ---------- ----------
Net cash (outflow)/ inflow
before financing (163,601) 4,436 397,563
---------- ---------- ----------
Financing
Long term loans repaid (57,096) (56,420) (110,289)
(Repayment)/ receipt of
short term funding (47,410) (9,492) 26,997
Lease finance obtained 4,965 656 16,249
Finance costs including
discontinued operations (45,128) (60,357) (111,346)
Net cash outflow from financing (144,669) (125,613) (178,389)
---------- ---------- ----------
(Decrease)/ increase in
cash and cash equivalents (308,270) (121,177) 219,174
Cash and cash equivalents
at beginning of year 64,806 (190,648) (190,648)
Effects of exchange rate
changes on the balance of
cash held in foreign currencies (7,929) 41,706 36,280
Cash and cash equivalents
at end of year (251,393) (270,119) 64,806
========== ========== ==========
Represented by:
Cash in hand and at bank 56,416 67,740 95,747
Bank overdrafts (307,809) (337,859) (30,941)
(251,393) (270,119) 64,806
========== ========== ==========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODED 31 MARCH 2017
Unaudited Audited
-------------------- ---------
6 months 6 months Year
to to to
31 Mar 31 Mar 30 Sept
2017 2016 2016
USD'000s USD'000s USD'000s
Cash inflow from operating
activities
Loss before taxation 590 9,740 12,427
Finance costs 4,600 5,318 10,281
Loss on disposal of property,
plant and equipment - - 104
Depreciation 4,160 3,227 7,182
Profit on discontinued operations - - 3,101
Fair value price adjustment 9 (1,536) (1,224)
Net unrealised foreign (gains)/
exchange losses (461) (1,299) (2,643)
--------- --------- ---------
Earnings before interest,
tax, depreciation and amortisation 8,898 15,450 29,228
Increase in biological assets (19,298) (18,110) (4,276)
Decrease in inventory 17,509 10,949 (12,235)
Decrease /(increase) in
trade and other receivables (1,870) 4,214 8,949
Decrease in amount due from
related companies 797 - (137)
(Decrease)/ increase in
trade and other payables (8,499) (5,612) (4,636)
Increase in amount due to
related companies (32) 1,048 (4,078)
Increase in deferred liability 61 10 110
Income tax paid (445) (209) (817)
Net cash (outflow)/inflow
(on)/from operating activities (2,879) 7,740 12,108
--------- --------- ---------
Investing activities
Purchase of property, plant
and equipment (11,989) (6,831) (15,376)
Expenditure on plantation
development (902) (574) (1,132)
Movement in investments (905) - -
Proceeds from sale of assets - 55 -
Proceeds from the issue
of shares - - 57,273
Purchase of shares - - (16,166)
Net cash (outflow)/ inflow
(on)/ from investing activities (13,796) (7,350) 24,599
--------- --------- ---------
Net cash (outflow)/inflow
before financing (16,675) 390 36,707
--------- --------- ---------
Financing
Long term loans repaid (5,820) (4,971) (10,184)
(Repayment)/ receipt of
short term funding (4,833) (851) 2,493
Lease finance 506 58 1,500
Finance costs including
discontinued operations (4,600) (5,318) (10,281)
Net cash outflow from financing (14,747) (11,082) (16,472)
--------- --------- ---------
Decrease in cash and cash
equivalents (31,422) (10,692) 20,235
Cash and cash equivalents
at beginning of year 6,474 (15,861) (15,861)
Effects of exchange rate
changes on the balance of
cash held in foreign currencies (1,076) 2,349 2,100
Cash and cash equivalents
at end of year (26,024) (24,204) 6,474
========= ========= =========
Represented by:
Cash in hand and at bank 5,840 5,783 9,565
Bank overdrafts (31,864) (29,987) (3,091)
(26,024) (24,204) 6,474
========= ========= =========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017
1. The Group
Zambeef Products PLC and its subsidiaries ("Group") is one of the largest agri-businesses in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed and flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with approximately 7,971 Ha of irrigated row crops and 8,623 Ha of rain-fed/dry-land crops available for planting each year. The Group is also in the process of rolling out its West Africa expansion in Nigeria and Ghana, as well as a palm project within Zambia.
2. Principal accounting policies
The principal accounting policies applied by the Group in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
(a) Basis of consolidation
The consolidated financial statements include the financial statements of the parent Company and its subsidiary companies made up to the end of the financial year. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date of their acquisition or up to the date of their disposal. Intercompany transactions and profits are eliminated on consolidation and all income and profit figures relate to external transactions only.
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Losses incurred are allocated to the non-controlling interest in equity until this value is nil, at which point any subsequent losses are allocated against the interests of the parent.
(b) Going Concern
At the reporting date the current portion of long term loan amounts repayable amount to ZMW167.7 million (USD17.4 million) [30 September 2016: ZMW254.8 million (USD25.5 million)]. After reviewing the available information including the Group's strategic plans and continuing support from the Group's working capital funders, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. All current liabilities will be settled from the continued liquidation of stock and expected increase in income from the capital expenditure carried out.
(c) Basis of presentation
The information for the period ended 31 March 2017 and 31 March 2016 do not constitute statutory accounts. The figures for the year ended 30 September 2016 have been extracted from the 2016 statutory financial statements. The auditors' report on those financial statements was unqualified.
The financial statements are prepared in accordance with the provisions of the Companies Act and International Financial Reporting Standards (IFRS). The financial statements are presented in accordance with IAS 1 "Preparation of financial statements" (Revised 2007). The Group has elected to present the "Statement of Comprehensive income" in one statement namely the "Statement of Comprehensive Income".
The financial statements have been prepared under the historic cost convention, as modified by the revaluation of property, plant and equipment, and financial assets and liabilities at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
2. Principal accounting policies (continued)
(d) Foreign currencies
(i) Presentational and functional currency
Zambeef Products PLC as a company has ten operating branches of which nine have a historical functional currency of Zambian Kwacha (ZMW) and one (the Mpongwe Farm Branch) has a functional currency of United States Dollars (USD) being an operational branch set up during the financial year ended 30 September 2012. Management have chosen a variant on the functional currency of Mpongwe due to the following factors:
-- the majority of farm input costs (fertilizer, farming chemicals, agricultural machinery spares, etc.), which are primarily sourced from overseas, are driven by USD to ZMW exchange rate due to original prices being USD;
-- the pricing of Mpongwe's principal outputs (wheat, soya and maize) are significantly influenced by world USD denominated grain prices;
-- the capital raised attached to the acquisition of the Mpongwe assets was denominated in foreign currency;
-- the Mpongwe assets were purchased in USD;
-- upon admission and dual listing on the AIM market of the London Stock Exchange (LSE), Zambeef was required to report in USD in addition to reporting in ZMW for the LuSE listing; and
-- majority of financial liabilities associated with working capital funding and capital expenditure are sourced in USD and repayable in USD, with a substantial portion of the Company's term liabilities secured on the assets of Mpongwe.
In light of this, Mpongwe's assets and liabilities are translated to ZMW and consolidated with other branches of the Company for reporting and tax purposes in Zambia, with any differences arising out of translation posted as a capital reserve item and a non-distributable reserve.
The Group's reporting currency in Zambia is ZMW and the presentation of financial statements to Non-Zambian shareholders and for the purposes of being listed on the AIM market of the London Stock Exchange also necessitate the presentation of the financial statements in United States Dollars (USD).
(ii) Basis of translating presentational currency to USD for the purposes of supplementary information
Statement of comprehensive income items have been translated using the average exchange rate for the period as an approximation to the actual exchange rate. Assets and liabilities have been translated using the closing exchange rate. Any differences arising from this process have been recognised in other comprehensive income and accumulated in the foreign exchange reserve in equity.
Equity items have been translated at the closing exchange rate. Exchange differences arising on retranslating equity items and opening net assets have also been transferred to the foreign exchange reserve within equity.
The following exchange rates have been applied:
ZMW:USD Average Closing
exchange rate exchange rate
6 months ended 31 March 2016 11.35 11.16
Year ended 30 September 2016 10.83 10.01
6 months ended 31 March 2017 9.81 9.66
All historical financial information, except where specifically stated, is presented in Zambian Kwacha rounded to the nearest ZMW'000s and United States Dollars rounded to the nearest USD'000s.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
2. Principal accounting policies (continued)
(iii) Basis of translating transactions and balances
Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the date of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income.
Non-operating foreign exchange gains and losses mainly arise on fluctuations of the exchange rate between United States Dollars and Zambian Kwacha. Due to the instability of the exchange rate, which may result in significant variances of foreign exchange related assets and liabilities, these gains and losses have been presented below operating profit in the statement of comprehensive income.
(iv) Basis of translating foreign operations
In the consolidated financial statements the financial statements of the foreign subsidiaries originally presented in their local currency have been translated into Zambian Kwacha. Assets and liabilities have been translated into Zambian Kwacha at the exchange rates ruling at the period end. Statement of comprehensive income items have been translated at an average monthly rate for the period. Any differences arising from this procedure are taken to the foreign exchange reserve.
The following exchange rates have been applied:
Average Closing
ZMW:Nigeria Naira exchange rate exchange rate
6 months ended 31 March 2016 17.92 17.62
Year ended 30 September 2016 29.09 31.47
6 months ended 31 March 2017 31.74 32.32
Average Closing
ZMW:Ghana Cedi exchange rate exchange rate
6 months ended 31 March 2016 0.35 0.35
Year ended 30 September 2016 0.36 0.40
6 months ended 31 March 2017 0.44 0.44
(e) General information and basis of preparation
The condensed interim consolidated financial statements are for the six months ended 31 March 2017 and are presented in Zambian Kwacha and United States Dollars. They have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2016.
(f) Significant accounting policies
The interim financial statements have been prepared in accordance with the accounting policies adopted in the Group's last annual financial statements for the year ended 30 September 2016.
3. Critical accounting estimates and judgements
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
3. Critical accounting estimates and judgements (continued)
In the process of applying the Group's accounting policies, management has made judgements in determining:
(a) the classification of financial assets;
(b) whether assets are impaired;
(c) estimation of provision and accruals;
(d) recoverability of trade and other receivables; and
(e) valuation of biological assets and inventory.
4. Significant events and transactions
The Group's management believes that the Group is well positioned in an improving economy. Factors contributing to the Group's strong position are:
(a) Growth in the Zambian economy leading to higher disposable incomes. (b) Increase in the retail foot print of the Group.
(c) Increase in production facilities of the Group leading to higher volumes available for retail.
(d) Improvements in the management team across various areas of the Group leading to positive reinforcement of strong operational synergies.
Overall, the Group is in a strong position and has sufficient capital and liquidity to service its operating activities and debt. The Group's objectives and policies for managing capital credit risk and liquidity risk should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2015.
5. Segmental reporting
An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's Board of Directors ('BoD') to make decisions about the allocation of resources and assessment of performance about which discrete financial information is available. Gross margin information is sufficient for the BoD to use for such purposes. The BoD reviews information regarding the operating divisions which match the main external revenues earned by the Group, and management information regarding the operating assets and liabilities of the main business divisions within the Group.
During the six month period to 31 March 2017, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment profit or loss.
The revenues and gross profit generated by each of the Group's operating segments and segment assets are summarised as follows:
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
Period ended 31 March 2017
(i) in Zambian Kwacha
Segment Revenue Gross Profit
ZMW'000s ZMW'000s
Retailing - Zambia 731,070 61,432
Master Meats (Nigeria) 73,857 13,053
Master Meats (Ghana) 14,036 3,706
Retailing West Africa 87,893 16,759
Total Retailing 818,963 78,191
Beef 232,432 66,568
Chicken 149,472 32,562
Pork 126,417 18,584
Milk 86,378 16,859
Fish 30,482 5,737
Eggs 28,630 3,680
Total Cold Chain Food
Production 653,811 143,990
Stock Feed 324,701 62,830
Crops - row crops 201,901 79,745
Mill 59,578 10,429
Leather 13,355 3,590
Edible oils 6,076 (1,151)
Total Other 79,009 12,868
---------- -------------
Total 2,078,385 377,624
Less: intra/inter group (917,067) -
Sales
---------- -------------
Group total 1,161,318 377,624
---------- -------------
Central operating costs (333,464)
-------------
Operating profit 44,160
Foreign exchange gains 6,748
Finance costs (45,128)
Profit before tax 5,780
-------------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Zampalm Other Total
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Property plant
and equipment
and plantation
development expenditure 1,105,237 212,287 65,705 149,980 405,009 1,938,218
Biological assets
and inventories 565,505 45,835 21,651 51,541 113,264 797,796
Cash, cash equivalents
and bank overdrafts (207,229) (82,828) 4,195 432 34,037 (251,393)
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
Period ended 31 March 2017
(ii) in US Dollars
Segment Revenue Gross
Profit
USD '000s USD '000s
Retailing - Zambia 74,523 6,262
Master Meats (Nigeria) 7,529 1,331
Master Meats (Ghana) 1,431 378
Retailing West Africa 8,960 1,708
Total Retailing 83,483 7,971
Beef 23,693 6,786
Chicken 15,237 3,319
Pork 12,887 1,894
Milk 8,805 1,719
Fish 3,107 585
Eggs 2,918 375
Total Cold Chain Food
Production 66,647 14,678
Stock Feed 33,099 6,395
Crops - row crops 20,581 8,139
Mill 6,073 1,062
Leather 1,361 366
Edible oils 619 (117)
Total Other 8,053 1,311
Total 211,863 38,494
Less: intra/inter group (93,482) -
sales
----------
Group total 118,381 38,494
---------- ----------
Central operating costs (33,992)
----------
Operating profit 4,502
Foreign exchange gains 688
Finance costs (4,600)
----------
Profit before tax 590
----------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Zampalm Other Total
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Property plant
and equipment
and plantation
development expenditure 114,414 21,976 6,802 15,526 41,926 200,644
Biological assets
and inventories 58,541 4,745 2,241 5,336 11,725 82,588
Cash, cash equivalents
and bank overdrafts (21,452) (8,574) 434 45 3,523 (26,024)
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
Period ended 31 March 2016
(i) in Zambian Kwacha
Revenue Gross
Profit
Segment ZMW'000s ZMW'000s
---------------------- ---------- ----------
Beef 249,347 89,293
Chicken 118,135 36,153
Pork 109,369 19,993
Crops - Row Crops 129,404 105,667
Stock feed 364,176 104,846
Eggs 15,672 6,275
Fish 24,267 9,229
Milk and dairy 60,114 31,301
Edible oils 40,380 23,149
Mill 49,768 11,456
Leather and shoe 17,298 3,688
Master Meats Nigeria 90,894 21,736
Master Meats Ghana 17,597 4,660
---------- ----------
Total 1,286,421 467,446
Less: intra/inter
group Sales (164,816)
---------- ----------
Group total 1,121,605 467,446
---------- ----------
Central operating
costs (312,145)
----------
Operating profit 155,301
Foreign exchange
losses 15,602
Finance costs (60,357)
----------
Profit before
taxation 110,546
----------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Zampalm Other Total
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Property plant
and equipment
and plantation
development expenditure 1,235,271 182,986 48,330 134,474 306,485 1,907,546
Biological assets
and inventories 518,925 71,296 17,858 34,619 40,015 682,713
Cash, cash equivalents
and bank overdrafts (214,158) (77,747) 70 359 21,357 (270,119)
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
Period ended 31 March 2016
(ii) in US Dollars
Revenue Gross
Profit
Segment USD'000s USD'000s
------------------------- --------- ---------
Beef 21,970 7,866
Chicken 10,408 3,185
Pork 9,636 1,761
Crops - row crops 11,401 9,310
Stock feed 32,086 9,238
Eggs 1,381 553
Fish 2,138 813
Milk and dairy 5,296 2,758
Edible oils 3,558 2,041
Mill 4,385 1,009
Leather and shoe 1,524 325
Master Meats (Nigeria) 8,008 1,915
Master Meats (Ghana) 1,550 411
--------- ---------
Total 113,341 41,185
Less: intra/inter
group sales (14,521)
---------
Group total 98,820 41,185
--------- ---------
Central operating
costs (27,502)
---------
Operating profit 13,683
Foreign exchange losses 1,375
Finance costs (5,318)
---------
Profit before taxation 9,740
---------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Zampalm Other Total
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Property plant
and equipment
and plantation
development expenditure 110,687 16,397 4,331 12,049 27,463 170,927
Biological assets
and inventories 46,499 6,389 1,600 3,102 3,585 61,175
Cash, cash equivalents
and bank overdrafts (19,190) (6,967) 6 33 1,914 (24,204)
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
Year ended 30 September 2016
(i) in Zambian Kwacha
Revenue Gross
Segment Profit
ZMW'000s ZMW'000s
Beef 476,102 169,591
Chicken 245,101 51,744
Pork 223,810 43,934
Milk and dairy 126,585 65,913
Fish 48,319 18,385
Eggs 35,837 14,345
Total Cold Chain Food
Products 1,155,754 363,912
Zamhatch 54,464 32,341
Stock feed 697,572 146,291
Crops 413,391 251,860
Master Meats (Nigeria) 182,825 39,421
Master Meats (Ghana) 33,710 9,406
Total West Africa 216,535 48,827
Mill and bakery 89,243 20,571
Leather and shoes 33,037 9,216
Edible oils 92,008 2,928
Total other 214,288 32,715
Total 2,752,004 875,946
Less: intra/inter group
Sales (375,856)
Group total 2,376,148 875,946
---------- ----------
Central operating costs
and other income (688,353)
----------
Operating profit 187,593
Foreign exchange gains 58,345
Finance costs (111,346)
Profit before tax 134,592
----------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Zampalm Other Total
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Property plant
and equipment 1,161,484 192,846 62,521 46,159 306,956 1,769,966
Biological assets
and inventories 521,212 85,922 20,414 48,480 104,649 780,677
Cash, cash equivalents
and bank overdrafts 37,193 7,991 232 738 18,652 64,806
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
Year ended 30 September 2016
(ii) in US Dollars
Revenue Gross
Segment Profit
USD'000s USD'000s
Beef 43,960 15,658
Chicken 22,632 4,778
Pork 20,666 4,057
Milk and dairy 11,688 6,086
Fish 4,462 1,698
Eggs 3,309 1,325
Total Cold Chain Food
Products 106,717 33,602
Zamhatch 5,029 2,986
Stock feed 64,411 13,508
Crops 38,171 23,256
Master Meats (Nigeria) 16,881 3,640
Master Meats (Ghana) 3,113 869
Total West Africa 19,994 4,509
Mill and bakery 8,240 1,899
Leather and shoes 3,051 851
Edible oils 8,496 271
Total other 19,787 3,021
Total 254,109 80,881
Less: intra/inter group
sales (34,705)
Group total 219,404 80,881
--------- ---------
Central operating costs (63,560)
---------
Operating profit 17,321
Foreign exchange gains 5,387
Finance costs (10,281)
Profit before tax 12,427
---------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Zampalm Other Total
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Property plant
and equipment 116,032 19,265 6,246 4,612 30,665 176,820
Biological assets
and inventories 58,360 8,584 2,039 4,843 4,120 77,946
Cash, cash equivalents
and bank overdrafts 3,716 798 23 74 1,863 6,474
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
5. Segmental reporting (continued)
The Group's revenue from external customers and its geographic allocation of non-current assets may be summarised as follows:
31 Mar 2017 31 Mar 2016 30 Sept 2016
------------------------ ------------------------ ------------------------
Non-current Non-current Non-current
Revenues assets Revenues assets Revenues assets
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Zambia 1,059,419 2,178,848 953,826 1,953,114 1,977,148 2,081,055
West Africa 87,893 18,725 108,491 29,319 306,296 17,981
Rest of
world 14,006 - 59,288 - 92,704 -
1,161,318 2,197,573 1,121,605 1,982,433 2,376,148 2,099,036
---------- ------------ ---------- ------------ ---------- ------------
31 Mar 2017 31 Mar 2016 30 Sept 2016
----------------------- ----------------------- -----------------------
Non-current Non-current Non-current
Revenues assets Revenues assets Revenues assets
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Zambia 107,993 225,555 84,037 175,011 182,562 207,898
West Africa 8,960 1,938 9,559 2,627 28,282 1,796
Rest of
world 1,428 - 5,224 - 8,560 -
118,381 227,493 98,820 177,638 219,404 209,694
--------- ------------ --------- ------------ --------- ------------
6. Taxation
March March September
2017 2016 2016
Income tax expense ZMW'000s ZMW'000s ZMW'000s
(a) Tax charge
Current tax:
Tax charge 8,612 8,924 17,896
Deferred tax:
Deferred taxation
(note 6(e)) (8,056) (97) (7,098)
Tax charge/(credit)
for the period 556 8,827 10,798
========= ========= ==========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
6. Taxation (continued)
March March September
2017 2016 2016
ZMW'000s ZMW'000s ZMW'000s
Reconciliation of tax
(b) charge
Profit/(loss) before
taxation 5,780 110,546 134,592
Taxation on accounting
profit 2,243 16,389 19,210
Effects of:
Permanent differences:
Disallowable expenses 2,372 2,478 4,304
Timing differences:
Capital allowances and
depreciation (3,643) (6,223) (167)
Livestock and crop valuations
adjustment 2,166 (1,123) (3,174)
Other income (4) (701) 2,907
Unrealised exchange gains/(losses) 527 (1,102) (6,999)
Unrealised tax loss 4,951 (794) 1,815
Tax charge for the period 8,612 8,924 17,896
========= ========= ==========
(c) Movement in taxation account
Taxation payable at 1
October 6,233 (2,983) (2,983)
Charge for the period 8,612 8,924 17,896
Arising on discontinued
operation - - -
Taxation paid (4,368) (2,371) (8,850)
Taxation payable/(recoverable)
at the end of the period 10,477 3,570 6,063
========= ========= ==========
Taxation payable 12,046 5,037 7,822
Taxation recoverable (1,569) (1,467) (1,759)
Taxation payable as at
30 September 10,477 3,570 6,063
========= ========= ==========
(d) Income tax returns have been filed with the ZRA for the tax year ended 31 December 2015. Quarterly tax returns for the period were made on the due dates.
(e) Deferred taxation
March March September
2017 2016 2016
ZMW'000s ZMW'000s ZMW'000s
Represented by:
Biological valuation 14,423 8,278 9,792
Accelerated tax allowances 39,827 39,587 39,295
Provisions (4,624) (3,122) (4,580)
Tax loss (82,009) (62,069) (68,834)
(32,383) (17,326) (24,327)
========= ========= ==========
Analysis of movement:
Asset as at 1 October (24,327) (17,229) (17,229)
Charge to profit and
loss account (note
6(a)) (8,056) (97) (7,098)
(Asset)/liability as
at the end of the period (32,383) (17,326) (24,327)
========= ========= ==========
Deferred tax asset (41,013) (24,569) (28,366)
Deferred tax liability 8,630 7,243 4,039
(32,383) (17,326) (24,327)
========= ========= ==========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
6. Taxation (continued)
March March September
Income tax expense 2017 2016 2016
USD'000s USD'000s USD'000s
(f) Tax charge
Current tax:
Tax charge 878 786 1,652
Deferred tax:
Deferred taxation
(note 6(j)) (821) (8) (655)
Tax (credit)/charge
for the period 57 778 997
========= ========= ==========
Reconciliation of
(g) tax charge
Profit/(loss) before
taxation 589 9,740 12,427
Taxation on accounting
profit 229 1,444 1,774
Effects of:
Permanent differences:
Disallowable expenses 242 220 397
Timing differences:
Capital allowances
and depreciation (371) (548) (15)
Livestock and crop
valuations adjustment 219 (99) (293)
Other income - (62) 268
Unrealised exchange
(gains/losses 54 (99) (646)
Unrealised tax loss 505 (70) 167
----------
Tax charge for the
period 878 786 1,652
========= ========= ==========
Movement in taxation
(h) account
Taxation payable at
1 October 605 (248) (248)
Charge for the year 878 786 1,652
Taxation paid (445) (209) (817)
Foreign exchange 47 (9) 18
Taxation payable as
at the end of the
period 1,085 320 605
========= ========= ==========
Taxation payable 1,247 451 781
Taxation recoverable (162) (131) (176)
Taxation payable as
at 30 September 1,085 320 605
========= ========= ==========
(i) Income tax returns have been filed with the ZRA for the year 31 December 2015. Quarterly tax returns for the period were made on the due dates.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
6. Taxation (continued)
March March September
2017 2016 2016
(j) Deferred taxation USD'000s USD'000s USD'000s
Represented by:
Biological valuation 1,493 742 978
Accelerated tax allowances 4,123 3,547 3,926
Provisions (479) (280) (458)
Tax loss (8,490) (5,562) (6,877)
(3,353) (1,553) (2,431)
========= ========= ==========
Analysis of movement:
Liability as at 1 October (2,431) (1,433) (1,433)
Charge to profit and
loss account (note
6(f)) (821) (8) (655)
Foreign exchange (101) (112) (343)
(Asset)/liability as
at the end of period (3,353) (1,553) (2,431)
========= ========= ==========
Deferred tax asset (4,246) (2,202) (2,834)
Deferred tax liability 893 649 403
(3,353) (1,553) (2,431)
========= ========= ==========
7. Earnings per share
Basic and diluted earningsper share have been calculated in accordance with IAS 33 which requires that earnings should be based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.
The calculation of the basic and diluted earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.
The calculation of the basic and diluted earnings/(loss) per share is shown below:
Mar 2017 Mar 2016 Sept 2016
USD
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s '000s
Basic earnings
per share
Profit for the
period 5,519 563 90,285 7,955 137,103 12,659
Weighted average
number of ordinary
shares for the
purposes of basic
and diluted earnings
per share 300,580 300,580 247,978 247,978 250,170 250,170
========= ========= ========= ========= ========= ========
Basic and diluted
earnings per share
(Ngwee & US Cents) 1.84 0.19 36.41 3.21 54.80 5.06
From continued
operations 1.84 0.19 22.86 2.02 41.38 3.82
From discontinued
operations - - 13.55 1.19 13.42 1.24
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
8. Biological assets
(a) 31 March 2017
Biological assets comprise standing crops, feedlot and standing cattle, dairy cattle, pigs, chickens and palm oil plantation. At 31 March 2017 there were 9,255 cattle (6,865 feedlot cattle, nil standing cattle and 2,390 dairy cattle) and 618,235 chickens (343,184 layers and 275,051 broilers), and 4,668 pigs. A total of 9,307 feedlot cattle, 315 dairy cattle, 4,812 pigs and 3,463,400 chickens were culled during the period. The palm plantation is in developmental stage with current plantation size of 2,911 hectares.
(i) in Zambian Kwacha
Increase
due Gains Decrease As at
As at to Gains arising arising due to 31
1 October from fair from fair
2016 purchases value value harvest/ Mar 2017
attributable attributable
to to transferred
physical price
changes changes to inventory
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Standing
Crops 60,377 137,602 266,533 - (201,901) 262,611
Feedlot
cattle 52,871 68,858 28,648 - (114,831) 35,546
Dairy Cattle 46,103 12,670 1,570 - (16,659) 43,684
Pigs 4,034 5,029 1,440 (91) (6,570) 3,842
Chickens 23,641 141,464 7,910 - (145,418) 27,597
Palm Plantation 48,480 3,061 - - - 51,541
Total 235,506 368,684 306,101 (91) (485,379) 424,821
Less: non-current
biological
assets (48,480) (3,061) - - - (51,541)
Total 187,026 365,623 306,101 (91) (485,379) 373,280
========== ========== ============== ============= ============= =========
(ii) in US Dollars
Gains Gains
arising arising
From fair from fair Decrease
As at Increase value value due to
1 due attributable attributable to harvest/ As at
October Foreign to to physical to price transferred 31 March
2016 exchange purchases changes changes to inventory 2017
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Standing
Crops 6,031 539 14,027 27,170 - (20,581) 27,186
Feedlot
cattle 5,282 164 7,019 2,920 - (11,705) 3,680
Dairy Cattle 4,606 163 1,292 160 - (1,698) 4,523
Pigs 403 14 513 147 (9) (670) 398
Chickens 2,362 92 14,420 806 - (14,825) 2,855
Palm Plantation 4,843 180 313 - - - 5,336
Total 23,527 1,152 37,584 31,203 (9) (49,479) 43,978
Less: non-current
biological
assets (4,843) (180) (313) - - - (5,336)
Total 18,684 972 37,271 31,203 (9) (49,479) 38,642
========= ========== =========== ============== ============== ============== ==========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2016 (CONTINUED)
8. Biological assets (continued)
(b) 31 March 2016
Biological assets comprise standing crops, feedlot and standing cattle, dairy cattle, pigs, chickens and palm oil plantation. At 31 March 2016 there were 8,235 cattle (6,027 feedlot cattle, nil standing cattle and 2,208 dairy cattle) and 289,955 chickens (204,316 layers and 85,639 broilers), and 4,694 pigs. A total of 14,784 feedlot cattle, 514 dairy cattle, 4,471 pigs and 3,313,494 chickens were culled during the period. The palm plantation is in developmental stage with current plantation size of 2,623 hectares.
(i) in Zambian Kwacha
Gains
Gains/(losses) arising
arising from fair Decrease
from fair value due to
As at Increase value attributable attributable harvest/ As at
1 Oct due to to physical to price transferred 31 March
2015 purchases changes changes to inventory 2016
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
--------- ----------- -------------------- -------------- -------------- ----------
Standing
Crops 38,940 140,645 244,298 (5,596) (148,784) 269,503
Feedlot
cattle 53,189 60,761 21,868 - (104,349) 31,469
Dairy Cattle 50,361 14,010 (760) - (14,821) 48,790
Pigs 3,383 5,038 1,036 - (5,687) 3,770
Chickens 9,319 98,832 2,187 23,026 (116,611) 16,753
Palm Plantation 34,006 613 - - - 34,619
Total 189,198 319,899 268,629 17,430 (390,252) 404,904
Less: non-current
biological
assets (34,006) (613) - - - (34,619)
Total 155,192 319,286 268,629 17,430 (390,252) 370,285
========= =========== ==================== ============== ============== ==========
(ii) in US Dollars
Gains
arising
Gains/(losses) from
arising fair Decrease
from fair value due to
As at Increase value attributable attributable harvest/ As at
1 Oct Foreign due to to physical to price transferred 31 March
2015 exchange purchases changes changes to inventory 2016
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
--------- ---------- ----------- ------------------- -------------- -------------- ----------
Standing
Crops 3,239 596 12,392 21,524 (493) (13,109) 24,149
Feedlot
cattle 4,425 309 5,353 1,927 - (9,194) 2,820
Dairy
Cattle 4,190 320 1,234 (67) - (1,306) 4,372
Pigs 282 22 444 91 - (501) 338
Chickens 775 71 8,708 193 2,029 (10,274) 1,501
Palm Plantation 2,829 219 54 - - - 3,102
Total 15,740 1,537 28,185 23,668 1,536 (34,383) 36,282
Less:
non-current
biological
assets (2,829) (219) (54) - - - (3,102)
Total 12,911 1,318 28,131 23,668 1,536 (34,383) 33,180
========= ========== =========== =================== ============== ============== ==========
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
8. Biological assets (continued)
(c) 30 September 2016
Biological assets comprise standing crops, feedlot and standing cattle, dairy cattle, pigs, chickens and palm oil plantation. At 30 September 2016 there were 12,536 cattle (10,191 feedlot cattle and 2,345 dairy cattle) and 628,633 chickens (418,316 layers and 210,317 broilers), and 4,784 pigs. A total of 32,015 feedlot cattle, 679 dairy cattle, 9,065 pigs and 6,935,909 chickens were culled during the year. The palm plantation is in developmental stage with current plantation size of 2,765 hectares.
(i) in Zambian Kwacha
Increase
As at due Gains/(losses) Gains Decrease As at
1 to arising arising due to 30
October from fair from fair Sept
2015 purchases value value harvest/ 2016
attributable attributable
to to transferred
physical price
changes changes to inventory
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Standing
Crops 38,940 267,586 121,993 12,587 (380,729) 60,377
Feedlot
Cattle 53,189 166,603 45,850 - (212,771) 52,871
Dairy Cattle 50,361 29,208 (1,638) - (31,828) 46,103
Pigs 3,383 10,138 1,523 670 (11,680) 4,034
Chickens 9,319 240,274 81,741 - (307,693) 23,641
Palm oil
plantation 34,006 15,340 - - (866) 48,480
--------- ---------- --------------- ------------- ------------- ---------
Total 189,198 729,149 249,469 13,257 (945,567) 235,506
Less: Non-current
biological
assets (34,006) (15,340) - - 866 (48,480)
Total 155,192 713,809 249,469 13,257 (944,701) 187,026
========= ========== =============== ============= ============= =========
(ii) in US Dollars
Gains/ Gains
(losses) arising
arising from Decrease
from fair fair due to
value value harvest
As at Increase attributable attributable / As at
1 October Foreign due to physical to price transferred 30 September
2015 exchange to purchases changes changes to inventory 2016
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Standing
Crops 3,239 813 24,708 11,264 1,162 (35,155) 6,031
Feedlot
Cattle 4,425 886 15,383 4,234 - (19,646) 5,282
Dairy
Cattle 4,190 809 2,697 (151) - (2,939) 4,606
Pigs 282 61 936 141 62 (1,079) 403
Chickens 775 264 22,186 7,548 - (28,411) 2,362
Palm oil
plantation 2,829 678 1,416 - - (80) 4,843
Total 15,740 3,511 67,326 23,036 1,224 (87,310) 23,527
Less:
Non-current
biological
assets (2,829) (678) (1,416) - - 80 (4,843)
Total 12,911 2,833 65,910 23,036 1,224 (87,230) 18,684
=========== ========== ============== ============== ============== ============= ==============
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
9. Cash and cash equivalents
March 2017 March 2016 September
2016
--------------------- --------------------- --------------------
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
---------- --------- ---------- --------- --------- ---------
Cash in hand
and at bank 56,416 5,840 64,539 5,783 95,747 9,565
Bank overdrafts (307,809) (31,864) (334,658) (29,987) (30,941) (3,091)
(251,393) (26,024) (270,119) (24,204) 64,806 6,474
========== ========= ========== ========= ========= =========
(a) Banking facilities
The Group has overdraft facilities totalling ZMW35.137 million (2016: ZMW35.137 million) and USD5.1 million (2016: USD5.1 million) with Citibank Zambia Limited. The Citibank overdrafts bear interest rates of 2.5 per cent. above the 182 day Treasury Bill for the Kwacha facility and 1 year USD LIBOR rate plus 5.5 per cent. for the USD facility.
The Group has overdraft facilities totalling ZMW30 million (2016: ZMW30 million) and USD2 million (2016: USD2 million) with Standard Chartered Bank Zambia Plc. The Standard Chartered Bank overdrafts bear interest rates of Bank of Zambia Policy rate plus 12 per cent. on the Kwacha facilities and 1 month USD LIBOR rate plus 6 per cent on the USD facilities.
The Group has overdraft facilities totalling ZMW98.3 million (2016: ZMW98.3 million) and no USD facility (2016: USDnil million) with Zanaco Bank Plc. The Zanaco Bank overdraft bears an interest rate of Bank of Zambia Policy rate plus 11.5 per cent. on the Kwacha facility.
The Group has overdraft facilities totalling ZMW54.7 million (2016: ZMW42 million) and USD6.3 million (2016: USD6.3 million) with Stanbic Bank Zambia Limited. The Stanbic Bank overdrafts bear interest rate of Bank of Zambia Policy rate plus 13.5 per cent. on the Kwacha facility and 3 month USD LIBOR rate plus 5.92 per cent. on the USD facility.
(b) Bank overdrafts
March 2017 March 2016 September
2016
--------------------- --------------------- --------------------
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
Bank overdrafts
represented by:
Zanaco Bank PLC (85,398) (8,840) (96,032) (8,604) (14,753) (1,474)
Citibank Zambia
Limited (71,690) (7,422) (85,402) (7,653) (1,999) (200)
Stanbic Bank Zambia
Limited (100,942) (10,449) (108,120) (9,688) (14,189) (1,417)
Standard Chartered
Bank Zambia PLC (49,779) (5,153) (45,104) (4,042) - -
(307,809) (31,864) (334,658) (29,987) (30,941) (3,091)
========== ========= ========== ========= ========= =========
(i) The Zambeef Products Plc Company bank overdrafts are secured by a first floating charge/ debenture over all the assets of the Company. The floating charge/ debenture ranks pari passu between Standard Chartered Bank Zambia Plc (USD5 million), Citibank Zambia Limited (USD10 million and ZMW 8 million), Zanaco Bank Plc (USD4 million and ZMW58 million), and Stanbic Bank Zambia Limited (ZMW112.5 million).
All overdrafts are annual revolving facilities.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
10. Interest bearing liabilities
30 September
31 Mar 2017 31 Mar 2016 2016
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
---------- --------- ---------- --------- ---------- ---------
DEG - Deutsde Investitious
GUD Entwicklungsgesellschift
MBH (note (a)) 99,643 10,315 171,473 15,365 128,228 12,810
Zanaco Bank Plc (note
(b)) 26,571 2,751 33,214 2,975 33,214 3,318
International Finance
Corporation (note (d)) 184,681 19,118 256,463 22,981 216,515 21,630
Standard Chartered
Bank Zambia PLC (note
(c)) 68,008 7,040 89,522 8,022 118,849 11,873
378,903 39,224 550,672 49,343 496,806 49,631
========== ========= ========== ========= ========== =========
Less: short term portion
of long term funding
(repayable within next
12 months) (145,314) (15,043) (170,715) (15,297) (235,072) (23,484)
233,589 24,181 379,957 34,046 261,734 26,147
(a) (i) DEG Term Loan 2
The Group has a loan facility of USD1.795 million (2016: USD5.365 million and original amount of USD25 million) from DEG. Interest on the loan is 4.55 per cent. above the 6 month USD LIBOR rate per annum payable six-monthly in arrears. The principal is repayable in 14 bi-annual instalments of USD1,785,000 commencing November 2010 and expiring in May 2017.
The USD25 million DEG term loan is secured by:
-- First ranking legal mortgage over Farm No. 4906, Lot No. 18835/M and Lot No. 18836/M (Sinazongwe farm); and
-- First ranking legal mortgage over Farm No. 10097, Farm No. R/E 5063 and Lot No. 8409/M (Chiawa farm).
(ii) DEG Term Loan 3
The group obtained a loan facility of USD8.25 million (2016: USD:10 million and original amount of USD10 million). Interest on the loan is 4.25 per cent. above the 6 month USD LIBOR rate per annum payable 6 monthly in arrears. The capital is repayable in 14 biannual instalments of USD710,000 commencing May 2016 and expiring in November 2022.
The USD10 million DEG term loan is secured by:
-- Second ranking legal mortgage over Farm No. 4906, Lot No. 18835/M and Lot No. 18836/M (Sinazongwe farm); &
-- Second ranking legal mortgage over Farm No. 10097, Farm No. R/E 5063 and Lot No. 8409/M (Chiawa farm).
(b) Zanaco Bank Plc
The Group has a loan facility of ZMW33.2 million (2016: ZMW33.2 million) with Zanaco Bank Plc. Interest on the loan is 13.5 per cent. above the Bank of Zambia policy rate per annum payable monthly in arrears. The principal is repayable in 7 annual instalments of ZMW6,642,857 commencing December 2014 and expiring in December 2020.
The loan is secured by a first ranking legal mortgage over Stand No. 4970, Industrial Area, Lusaka (Head Office).
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
10. Interest bearing liabilities (continued) (c) Standard Chartered Bank Zambia Plc
The Group has structured agricultural facilities with an annual revolving limit totalling USD20 million (2016: USD15 million) with Standard Chartered Bank Zambia Plc. The purpose of the facilities is the financing of wheat, soya beans, and maize under collateral management agreements and is for 270 days. The balance on the facilities at period end was USD7.04 million (2016: USD6.79 million). Interest on the facilities is 3 month USD LIBOR rate plus 5.5 per cent. per annum calculated on the daily overdrawn balances.
(d) International Finance Corporation Loan
(i) International Finance Corporation Loan 1
The Group has a loan facility of USD2.76 million (USD0.636 million in Zambia and USD0.284 million in Nigeria) [2016: USD1.909 million in Zambia and USD0.851 million in Nigeria and original amount of USD10 million] from IFC. Interest on the loan is 4.75 per cent. above the 6 month USD LIBOR rate per annum payable six-monthly in arrears. The principal is repayable in 11 equal bi-annual instalments of USD636,364 (Zambeef) and USD283,634 (Nigeria) commencing June 2012 and expiring in June 2017.
The portion of the loan attributable to Zambia is secured through a first ranking legal mortgage over Plot 9070, 9071 and 9074, off Mumbwa Road, Lusaka, (Novatek stock feed premises) and the portion of the loan attributable to the Nigerian operations is secured by a floating charge over all assets of Master Meat and Agro Production Co of Nigeria Limited and a parental guarantee from Zambeef Products PLC.
(ii) International Finance Corporation Loan 2
The company has a loan facility of USD14.483 million and ZMW35.917 (2016: USD17.241 million in USD and ZMW42.759 million). Interest on the loan is 4.75 per cent. above the 6 month USD LIBOR rate per annum for the USD facility and 4.45 per cent. above the 91 day Treasury Bill rate plus a variable swap margin for the Kwacha facility payable quarterly in arrears. The principal is repayable in 29 equal quarterly instalments of USD689,655 and ZMW1,710,345 commencing June 2015 and expiring in June 2022.
The loan is secured through a first ranking legal mortgage over Farm No. 4450, 4451 & 5388 (Mpongwe farm).
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
11. Events subsequent to reporting date
There has not arisen since the end of the 6 months period any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect substantially the operations of the economic entity, the results of those operations or the state of affairs of the economic entity in the subsequent financial years.
12. Fair value measurement
Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
-- Level 3: unobservable inputs for the asset or liability.
The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 31 March 2017 and 30 September 2016.
Level 1 Level 2 Level 3 Total
31 March 2017 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Financial Assets
Other forwards exchange contracts inventory (CMA) - 68,008 - 68,008
Total Assets - 68,008 - 68,008
Financial Liabilities
US-dollar loans - - (245,825) (245,825)
Total Liabilities - - (245,825) (245,825)
Net fair value - 68,008 (245,825) (177,817)
Level 1 Level 2 Level 3 Total
30 September 2016 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Financial Assets
Other forwards exchange contracts inventory (CMA) - 118,849 - 118,849
Total Assets - 118,849 - 118,849
Financial Liabilities
US-dollar loans - - (377,957) (377,957)
Total Liabilities - - (377,957) (377,957)
Net fair value - 118,849 (377,957) (259,108)
Level 1 Level 2 Level 3 Total
31 March 2017 USD'000 USD'000 USD'000 USD'000
Financial Assets
Other forwards exchange contracts inventory (CMA) - 7,040 - 7,040
Total Assets - 7,040 - 7,040
Financial Liabilities
US-dollar loans - - (25,448) (25,448)
Total Liabilities - - (25,448) (25,448)
Net fair value - 7,040 (25,448) (18,408)
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
12. Fair value measurement (continued)
Level 1 Level 2 Level 3 Total
30 September 2016 USD'000 USD'000 USD'000 USD'000
Financial Assets
Other forwards exchange contracts inventory (CMA) - 11,873 - 11,873
Total Assets - 11,873 - 11,873
Financial Liabilities
US-dollar loans - - (37,758) (37,758)
Total Liabilities - - (37,758) (37,758)
Net fair value - 11,873 (37,758) (25,885)
There were no transfers between Level 1 and Level 2 in 2017 or 2016.
Measurement of fair value of financial instruments
The Group's finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values, in consultation with third party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance team reports directly to the Chief Financial Officer (CFO) and to the audit committee.
Valuation processes and fair value changes are discussed among the audit committee and the valuation team at least every year, in line with the Group's reporting dates. The valuation techniques used for instruments categorised in Levels 2 and 3 are described below:
Foreign currency forward contracts (Level 2)
The Group's foreign currency forward contracts are not traded in active markets. These have been fair valued using observable forward exchange rates and interest rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant for foreign currency forward contracts.
US-dollar loans (Level 2)
The fair values of the US-dollar loans are estimated using a discounted cash flow approach, which discounts the contractual cash flows using discount rates derived from observable market interest rates of similar loans with similar risk. The interest rate used for this calculation is 4.81% (2016: 4.81%).
Contingent consideration (Level 3)
The group did not have any contingent consideration during the year.
Fair value measurement of non-financial assets
The following table shows the Levels within the hierarchy of non-financial assets measured at fair value on a recurring basis at 31 March 2017 and 30 September 2016:
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2017 (CONTINUED)
13. Fair value measurement (Continued)
Level 1 Level 2 Level 3 Total
31 March 2017 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Property, plant and equipment:
Land held for production in Zambia - 397,316 - 397,316
Office building in Zambia - 28,091 - 28,091
Level 1 Level 2 Level 3 Total
30 September 2016 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Property, plant and equipment:
Land held for production in Zambia - 397,060 - 397,060
Office building in Zambia - 18,666 - 18,666
Level 1 Level 2 Level 3 Total
31 March 2017 USD'000 USD'000 USD'000 USD'000
Property, plant and equipment:
Land held for production in Zambia - 41,130 - 41,130
Office building in Zambia - 2,908 - 2,908
Level 1 Level 2 Level 3 Total
30 September 2016 USD'000 USD'000 USD'000 USD'000
Property, plant and equipment:
Land held for production in Zambia - 39,666 - 39,666
Office building in Zambia - 1,865 - 1,865
Fair value of the Group's main property assets is estimated based on appraisals performed by independent, professionally-qualified property valuers. Fairworld Properties Limited. The significant inputs and assumptions are developed in close consultation with management. The valuation processes and fair value changes are reviewed by the Board of Directors and audit committee at each reporting date.
Further information is set out below.
Land held for production in Zambia (Level 2)
Land has been valued using the direct comparison method. This method has been adopted as the most appropriate for the purpose of this valuation as there are enough comparisons available on the open market for land. The land was revalued on 30 September 2013.
The significant unobservable input is the adjustment for factors specific to the land in question. The extent and direction of this adjustment depends on the number and characteristics of the observable market transactions in similar properties that are used as the starting point for valuation. Although this input is a subjective judgement, management considers that the overall valuation would not be materially affected by reasonably possible alternative assumptions.
The fair values of the office buildings are estimated by using the direct comparison method. This method has been adopted as the most appropriate for the purpose of this valuation as there are enough comparisons available on the open market for buildings.
This information is provided by RNS
The company news service from the London Stock Exchange
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June 07, 2017 02:00 ET (06:00 GMT)
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