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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.25 | -4.17% | 5.75 | 5.50 | 6.00 | 5.75 | 5.625 | 5.625 | 116,084 | 09:00:12 |
| 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 : 4125Q
Zambeef Products PLC
06 June 2018
6 June 2018
Zambeef Products plc
("Zambeef" or the "Group")
Interim results for the Half Year Ended 31 March 2018
RETAIL GROWTH DRIVES IMPROVED VOLUMES AND MARGINS
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 2018.
Key Financial Highlights:
Hot Features
Premium
USD ('000) USD ('000)
H1 2018 H1 2017
Revenue 123,847 118,381
Gross Profit 46,581 38,494
Operating Profit 6,297 4,502
Profit before tax 2,758 590
Profit after tax 1,180 533
EBITDA 11,112 8,897
EBITDA Margin 8.97% 7.51%
Operating Profit Margin 5.08% 3.80%
Performance Overview
-- The Group has delivered a solid financial performance, driven by:
o Strong gross profit and volume growth in the Retail and Cold Chain Food Products division and the Stockfeed division
o Continued aggressive expansion of the retail network
o Robust operational performance from the farming operations
-- Four Macro outlets opened with a further four expected to open this year
o Target to open 10 new Macro outlets each year
-- Shoprite rollout of new stores continues
o Zambia - three more store openings expected in the second half
o Nigeria - one new store opened
o Ghana - one new store opened and one expected in H2 2018
-- Second half of the year expected to see a significant number of key projects
o Continue to grow the retail network and drive retail revenue to increase demand from the 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 344,000 to 430,000 birds per week
o Complete new stock feed plant at Mpongwe to ensure additional stock feed capacity
-- Continue to look at ways of strengthening our balance sheet through
o Disposal of non-core assets
o Continued focus on debt reduction
Commenting on these results, Chairman Dr. Jacob Mwanza said:
"The volatile economic conditions in Zambia over the previous two years, including sharp depreciation of the Kwacha against the US Dollar and relatively high inflation, presented challenges for the business. I am pleased to say that this period of uncertainty appears to be behind us. We are entering a period of relative stability in the economy, supported by tight fiscal and monetary control by Zambia's Ministry of Finance and the Bank of Zambia."
"Volume and margin growth in the Retail and Cold Chain Food products division and stockfeed division indicates that the worst of the economic hardship has dissipated."
"The Group will maintain its focus on expanding the retailing and distribution footprint and on improving margins and increasing 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."
For further information, please contact: Zambeef Products plc Tel: +260 (0) 211 369003 Francis Grogan, 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 Chris Raggett Powerscourt Tel: +44 (0)20 7250 1446 Nick Dibden Isabelle Saber
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.
Further information can be found on www.zambeefplc.com
The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No. 596/2014, and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES
CHAIRMAN'S REPORT
THE ENVIRONMENT
The volatile economic conditions in Zambia over the previous two years, including sharp depreciation of the Kwacha against the US Dollar and relatively high inflation, presented challenges for the business. I am pleased to say that this period of uncertainty appears to be behind us and we are entering a period of relative stability in the economy, supported by tight fiscal and monetary control by Zambia's Ministry of Finance and the Bank of Zambia.
Volume and margin growth in the Retail and Cold Chain Food products division and stockfeed division indicates that the worst of the economic hardship has dissipated.
GDP grew by 3.9% in 2017, compared with 3.8% in 2016, attributed to a bumper crop harvest in the previous season, rising copper prices and moderating inflation.
The Kwacha strengthened marginally during the period with the exchange rate ending the period at around ZMW9.48/USD, having started the period under review at ZMW9.67/USD. Meanwhile, annual inflation continued its general downward trend and the Bank of Zambia reduced its Monetary Policy Rate by 50 basis points, from 10.25% to 9.75% in February 2018, enabling the Group to negotiate lower interest rates on both ZMW and USD short-term finance facilities.
An outbreak of cholera during the rainy December and January months caused the temporary closure of a number of Zambeef retail stores. The financial impact on the Group was negligible and Zambeef honoured its commitment to support local communities in partnering with the Ministry of Health to mitigate the disease by donating chlorine, other disinfectants and cleaning materials.
An outbreak of Foot and Mouth Disease was announced by the Ministry of Fisheries and Livestock on the 6(th) of April 2018. The Group's Kalundu Dairy was affected by the disease resulting in the biological value of the dairy cattle reducing by approximately USD 690,000. Also, the cost of processed milk production will increase by approximately USD 200,000 in H2 of 2018 due to the need to replace approximately 10,000 litres of reduced fresh milk production per day with more expensive reconstituted milk. The total financial impact of the disease has been provided for in the March 2018 results.
TRADING RESULTS
The Group achieved a Profit After Tax (excluding discontinued operations) of ZMW23 million (USD2.3 million) versus ZMW5.2 million (USD0.5 million) in the prior period. Volumes and gross margins have also increased in our core divisions of Retail and Cold Chain Food Products (CCFP) and Stockfeed.
This performance was particularly encouraging given the significant increase in overheads during the period as a result of the Government's move to eliminate subsidies on fuel and electricity. We have also seen an increase in labour costs and costs from road tolls, licence fees and levies on livestock and crops.
Retail and Cold Chain Food Products (CCFP)
Zambeef's chain of 205 retail outlets - both own-brand and within Shoprite supermarkets - remain at the heart of the business, with demand from consumers driving supply throughout the business.
During the period, four new Zambeef Macro retail stores were successfully opened in Zambia, with a further four Macro stores opening in the second half of the year.
The Group closed nine small retail stores as part of its ongoing drive to optimise revenue and efficiencies across the division.
The Retail and Cold Chain Food Products division has delivered a very satisfactory EBITDA of ZMW98.7 million versus ZMW72.8 million in the same period last year (USD9.97 million compared with USD7.4 million), generating an EBITDA margin of 10.5% versus 8.5% last year.
The Group will continue the focus on this division and will continue to drive Cold Chain Food Products volumes through the expanding Retail stores network.
Stockfeed
The new Novatek stockfeed plant in Mpongwe has already reached 42.6% capacity, compared with a target of 30%, and is making a significant contribution to the division's profitability and overall Group performance. The Stockfeed division increased Gross Profit margins from 19.4% to 26.9% compared to the prior period, which resulted in an increase in Gross Profit from ZMW62.8 million to ZMW82.8 million (USD6.4 million to USD8.4 million).
Cropping
The Group is one of the largest cereal row cropping operations in Zambia, with approximately 7,787 hectares of row crops under irrigation, which are planted twice a year, and a further 8,694 hectares of rainfed/dry-land crops available for planting each year. The Mpongwe estate has performed well during the first six months and we expect yields for the summer crop to be ahead of budget.
Soya and maize prices have reduced from USD 430 per ton and USD 230 per ton respectively in March 2017 to USD 415 per ton and USD 165 per ton in March 2018. The soya price in particular is still well below the price achieved in March 2016 of USD 530 per ton. The reduced commodity prices in March 2018 have contributed to the gross profit in 2018 being 2.1% behind the gross profit achieved in March 2017.
Overall, the cropping division has delivered a strong EBITDA of ZMW23.9 million versus ZMW19.4 million in the same period last year (USD2.4 million compared with USD2 million). This is due largely to overheads reducing in March 2018 due to a reduction in manpower costs.
INVESTMENT
Zambeef spent USD7.5 million on capital investment for continuing operations in the first half of the year.
USD2.9 million was spent on the continued roll-out of new modern Macro retail outlets across Zambia, with four stores opened in the six months. The Company plans to open a further four Macro retail outlets in the second half of the year. Heroes Macro
is the first of these and it opened in May 2018.
Outlets in border towns have also flourished, enabling the Company to capitalise on its long-held strategy of meeting growing regional demand.
These new world-class outlets are proving popular, with like-for-like sales increasing from the prior period. Their success has accelerated our review of legacy stores with a view to phasing out poorer performing outlets to optimise marginal contribution. This approach will also help improve efficiencies in distribution and reduce some of the additional overheads mentioned earlier.
In October 2017, Zambeef welcomed the Zambian President, H.E. Edgar Chagwa Lungu, as he formally commissioned the Company's USD30 million hatchery and stockfeed mill at Mpongwe Farm on the Copperbelt. This was the largest agricultural investment in the province to date.
Zambeef completed the sale of 90% of Zambeef's shareholding in its wholly owned subsidiary Zampalm Limited, to the state-owned Industrial Development Corporation (IDC) for a cash consideration of USD16 million on 6 April 2018, in line with the Group's ongoing strategic focus on reducing Group debt. Zambeef continues to oversee the operation under a management agreement that includes a rollout of an outgrower scheme to develop further the remote rural communities of Muchinga, where the plantation is located.
Group capital expenditure in the full year is budgeted at USD16.0 million, rather than the USD14.5 million originally projected, due to the additional floor space needed at its new Kitwe beef processing plant, which is expected to open in the second half of the 2018 financial year, and several new retail Macro outlets, as set out below.
BOARD CHANGES
Finally, as we enter into a renewed period of growth for Zambeef, I would like to thank Co-founder and former Joint Chief Executive Officer Dr Carl Irwin, who retired from the Group on 31 March 2018 after 23 years of service, during which time he and Francis Grogan grew the Company to the impressive heights it has reached today.
On 24 May 2018, subsequent to the period end, Tim Pollock, Joint Chief Executive Officer announced his resignation from the Board for personal reasons. We wish to thank Tim for his contribution to the Company.
OUTLOOK
Zambia's GDP is expected to grow by 5.5% in 2018. The clearance of government arrears and continued close attention to monetary policy conditions are likely to strengthen the position of the financial sector and spur confidence in consumption and investment lending. Equally, firm international copper prices and improved domestic production from newer and recently refurbished mines are expected to support exports.
We expect this economic strengthening to continue to boost consumer demand across all sectors, with a firm trickle-down to our core target consumers in lower-income markets.
Dr Jacob Mwanza
Chairman
5 June 2018
CHIEF EXECUTIVES' REVIEW
OVERVIEW
In 2014, Zambeef set out a strategy of retail growth in order to drive cold chain food and stockfeed production. We have remained steadfast in this vertical integration approach, capitalising on the previous two years of sluggish economic growth to build a firm foundation from which to project the business on to a new level.
With signs of economic recovery now evident, we are pleased to report that this strategy has started to generate improved returns on the capital investment we have made in recent years.
The Group has achieved a Profit After Tax (excluding discontinued operations) of ZMW23 million (USD2.3 million) versus ZMW5.2 million (USD0.5 million) in the prior period. Volumes and gross margins have increased in our core divisions of Retail and Cold Chain Food Products (CCFP) and Stockfeed, and the Cropping division has performed well operationally.
The pleasing Group performance was achieved in spite of a significant increase in overheads during the period as a result of the Government's move to phase out subsidies on fuel and electricity, with overheads increasing by 18.8% in ZMW (17.7% in USD) during the period We have also seen an increase in manpower costs and costs from road tolls, license fees and levies on livestock and crops.
STRATEGIC FOCUS
Zambeef remains unwavering in its strategic focus on the core operations in which it is best-in-class: retail and cold chain food products, stockfeed and cropping.
As a result, we continued our divestment of non-core assets to reduce our debt further and generate additional cash, concluding the 90% sale of our shareholding in Zampalm Limited to the Industrial Development Corporation (IDC) for a cash consideration of USD16 million during the period, as previously announced.
Retail and Cold Chain Food Products
It is the retail demand that continues to drive Zambeef's production along the value chain, reinforcing our position linking the country's farmers with consumers.
Zambeef's retail operations are growing from strength-to-strength, with four new Macro retail stores and one Shoprite store opening in Zambia and in Nigeria in the first half of the financial year.
This growth emphasises the Group's market-driven approach, through which retail demand drives production along our value chain.
The Macro stores, which sell our full range of cold chain food products, along with Novatek stockfeed, and in some instances Zamleather's Zamshu brand footwear, are bringing world-class standards of hygiene, service, security and affordability to our traditional markets in low- and medium-density urban and peri-urban areas.
Revenue from Macro outlets grew 66% in Kwacha terms (65% in USD) compared with the previous year.
The new outlet in Nakonde is in line with our approach of also targeting border towns to tap into the growing regional demand for our products.
Our Zambeef branded outlets account for 82% of retail sales, while our operation of in store butcheries at all Shoprite supermarkets across Zambia accounts for 18% of retail turnover. This balance has remained relatively unchanged in recent years and ensures a diversification of exposure across retail segments.
The Group closed nine small retail stores during the period in its ongoing drive to optimise its real estate.
The growth in market demand, and associated development of Zambeef's retail chain, continues to drive cold chain food production as we add value and provide linkages between small-scale, emerging and commercial farmers and end consumers.
Cold chain food product volume increased by 6.7%, driven by strong performance in the chicken and beef sectors.
Beef volumes increased by 10.6% from 8.5 million kgs to 9.4 million kgs.
Chicken volumes rose by 14.3% from 5.6 million kgs to 6.4 million kgs, with some 70% of chickens supplied by outgrower farmers. Demand outstrips supply as Zambeef continues to formalise a market that remains largely driven by the informal sector, presenting significant opportunities for growth.
Dairy volumes increased by 9.3% from 9.3 million litres to 10.2 million litres.
Pork volumes declined from 5.5 million kgs to 5.3 million kgs during the period under review.
Stockfeed
Zambeef's stockfeed operation trades under the brand name Novatek. Its second stockfeed plant was commissioned at Mpongwe Farm on the Copperbelt in October 2017. It has already produced 25,584 tons (42.6% of capacity) of the total of 94,203 tons produced during the six months.
Zambeef is one of the largest buyers of soya beans and maize from local farmers. The Company bought 75,000 tons last year as inputs into the stockfeed operations. We predict that 110,000 tons will be required this year.
20% of the stockfeed production is sold through Zambeef outlets, versus 11% in 2017. The strategy of expanding the Retail infrastructure to increase demand for stockfeed is clearly working. A further 30% of the stockfeed production is consumed in the Company's Zamhatch and Zamchick divisions. The other 50% is sold to third-party distributors. Chicken feed accounts for three quarters of stockfeed production, creating an opportunity for growth linked to the chicken segment.
Cropping
Zambeef's Mpongwe Farm is the heart of the Group's farming operations, and continues to live up to its reputation as one of the best farms in the region.
The Group harvested 44,730 tons of soya beans during the period, versus 43,000 in 2017, with EBITDA increasing by 22.8%.
Zamhatch
Demand for day-old chicks from Zambeef's Zamhatch subsidiary is exceeding supply. This reinforces the fact that Zambeef is an integral part of the nation's agricultural supply chain, with more than half of our chicks sold to small-scale farmers and entrepreneurs who then serve the traditional live-bird market, which still accounts for 75 percent of poultry market share.
Zamhatch incubates 400,000 eggs a week, with an industry-standard 86 percent success rate, producing 344,000 day-old chicks. We are working on increasing capacity to 500,000 eggs per week in 2019 and then 600,000 eggs per week in 2020 in order to meet demand. The cost of this expansion will be approximately USD 2 million per year.
Outlook
Zambeef's clear long-term strategy is translating into improved results. We will remain steadfast in our plans going forward, which include:
-- Consistent revenue growth through expansion of our retail network, driving our cold chain food product and stockfeed operations;
-- Margin improvements leveraged from continued capital investment in high margin areas of the business coupled with stringent control of administration costs;
-- Cash generation through improved margins, cost control, inventory management and prudent capital expenditure;
-- De-risking the business by maintaining prudent gearing levels; and -- Divestment of non-core assets.
-- The continued execution of the above strategy, together with capital expenditure being more focused on higher returning segments of the Group, should result in operating free cash flow being generated from 2018, and the Group returning to a policy of paying dividends.
As the macro-economic environment improves, we expect volumes to continue their upward trend. The continued rollout of Macro retail stores should also continue to grow revenue and margins.
Four additional Macro stores are scheduled to open in the second half of the year, including the flagship Heroes Macro in Lusaka, which opened in May 2018. Some 14 sites have been bought and await development, keeping us on target to open 10 new Macro outlets every year.
In addition, Shoprite continues to roll-out new stores, with three expected in Zambia in the second half of 2018. One new store opened in both Nigeria and Ghana, and a further store is planned in Ghana for the second half of the year.
The Mpongwe stockfeed mill continues to perform ahead of expectation. The stockfeed division will undoubtedly continue to increase volumes and contribute materially to the Group.
The Cropping division continues to perform well operationally and is an integral part of the business.
On 6 April 2018, the Zambian Ministry of Fisheries & Livestock announced an outbreak of foot and mouth disease (FMD) on farms in the Chisamba and Chibombo districts and imposed movement restrictions upon livestock in these districts. FMD was confirmed on the Group's Kalundu dairy farm in Chisamba district and daily milk output fell sharply. We do not expect this to materially affect the business in the medium to long-term and projected losses have been provided for in the March 2018 financial results.
We have entered the second half of the financial year with a renewed sense of optimism that the difficult times of recent years are behind us. We have used that time productively to establish a solid base from which to move forward now that market conditions have started to improve.
The continued dedication of our management and staff, supported by a strong Board, remain key to this as we progress into an exciting new phase of growth.
Chief Executive Officer
5 June 2018
FINANCIAL REVIEW
The first six months of the 2018 financial year have seen the Zambeef Group continue to grow. Good revenue and strong margin growth have been the main contributors. Revenue for the Group increased by 5.6% in ZMW and 4.6% in USD, while Gross Profit margins increased from 32.5% to 37.6%, resulting in Gross Profits increasing by 22.1% in ZMW from ZMW378m to ZMW461m (21% in USD from USD38m to USD47m). Overheads increased by 18.8% in ZMW (17.7% in USD) from ZMW293m to ZMW348m (USD30m to USD35m). The strong Gross Profit performance enabled the Group to achieve Operating profits of ZMW62m versus ZMW44m (USD6.3m vs USD4.5m) which represents a 41.1% increase in ZMW and a 39.9% increase in USD.
Interest costs reduced by 9.9% in ZMW (10.7% in USD) as a result of lower interest rates, largely due to the reduction in the Bank of Zambia Policy Rate, which decreased our ZMW interest rates significantly compared with the prior period. As a result, Zambeef's PAT excluding discontinued operations increased from ZMW5.2m to ZMW23.0m (USD0.5m to USD2.3m).
The highlights of this period were the 9.9% (in ZMW) revenue growth in the Retail and Cold Chain Food Products (CCFP) division with a strong increase of 28.3% (in ZMW) in gross profits. Gross margins increased from 25.9% in 2017 to 30.3% in 2018. Zambeef continues to establish itself as best-in-class in terms of its production, distribution and retailing of the Cold Chain Food Products delivering a very satisfactory EBITDA margin of 10.5% compared to 8.5% in 2017. In addition the Stockfeed division delivered an excellent gross profit of ZMW82.8m versus ZMW62.8m in the prior period, representing a 31.8% increase.
The focus for the next six months will be on:
-- Consistent revenue growth through expanding the retail network and addressing supply constraints in the
CCFP and stockfeed operations;
-- De-risking the business through reducing gearing and dollar debt and E&S/Food Safety strategies; and
-- Improving cash conversion from strong working capital control and tight control on Capex with effective managerial responsibility.
Exchange rate movements
This period has seen a 2% appreciation of the ZMW with the exchange rate, starting the period at 9.67 ZMW/USD and closing the period at 9.48 ZMW/USD. The table below shows the comparative exchange rates over the periods:
ZMW/USD
-------------------------------------------- --------
Closing Rate 31st March 2017 9.66
Closing Rate 30th September 2017 9.67
Closing Rate 31st March 2018 9.48
--------
Average Rate for 6 months to 31st
March 2017 9.81
Average Rate for year ended 30th September
2017 9.52
Average Rate for 6 months to 31st
March 2018 9.90
--------
The appreciating currency has resulted in the Group reporting realized exchange gains of ZMW4.2m (USD0.4m) for the first 6 months.
ADMINISTRATION AND OVERHEAD COSTS
As mentioned above, overheads have increased by 18.8% (in ZMW). The following are contributing factors:
-- Fuel prices increased from ZMW10.72/l in September 2017 to ZMW11.09/l and again to ZMW12.01/l in January 2018 representing a total increase of 12%;
-- Electricity tariffs were increased by 50% in May 2017 and a further 15% in September 2017;
-- With inflation at approximately 7%, an average increase of approximately 10% was agreed for all union workers resulting in higher payroll costs;
-- Levy and slaughter fees have continued to increase during the year;
-- Road toll fees, which were introduced in the previous financial period, are increasing as more toll gates are opened; and
-- Repairs and Maintenance costs were incurred in Zambeef Outlets as a result of the outbreak of Cholera in January 2018.
CAPITAL EXPITURE
Total capital expenditure on continuing operations during the period was ZMW74.3 million (USD7.5 million) against a anticipated capital expenditure of ZMW157.3 (USD16m) for the year.
The main capital expenditure during the period included:
-- USD2.9m on rollout of new Zambeef Macro outlets -- USD1.1m on new Mpongwe stockfeed plant -- USD1.1m on expansion of Zamhatch hatchery and breeder farm -- USD0.9m for expansion of Zam Chick processing plant -- USD0.3m for farming replacement Capex -- USD0.5m on the new processing and distribution hub in Kitwe
The capex to be incurred in the second half of 2018 is being focused towards:
-- The expansion of the retail network (four Zambeef Macros and three Shoprite stores to open before the end of 2018);
-- The commissioning of the new Copperbelt processing and distribution hub which will increase capacity and
improve efficiencies in the Copperbelt and North Western Province operations;
-- Completing the expansion of the breeding farm and hatchery to increase day-old chick production from
344,000 to 430,000 birds per week; and -- Completing the new stock feed plant at Mpongwe to ensure additional stock feed capacity.
TERM FINANCE
No additional term finance was sourced during the period under review.
DIVISIONAL PERFORMANCE
Table 1: Segmental Financial summary in ZMW'000s
Division Revenue Revenue Gross Gross Overheads Overheads EBITDA EBITDA
2018 2017 Profit Profit 2018 2017 ZMW'000 2018 2017
ZMW'000 ZMW'000 2018 ZMW'000 2017 ZMW'000 ZMW'000 ZMW'000
ZMW'000
Retail &
Cold Chain
Foods 941,313 856,793 285,105 222,181 (186,401) (149,393) 98,705 72,788
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
Stock Feed 307,598 324,701 82,809 62,830 (37,867) (20,141) 44,942 42,689
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
Cropping 110,356 201,901 78,791 79,745 (54,920) (60,309) 23,871 19,436
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
Others 65,916 79,009 14,447 12,868 (8,487) (10,611) 5,960 2,257
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
Total 1,425,183 1,462,404 461,152 377,624 (287,675) (240,454) 173,478 137,170
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
Less:
Intra/Inter
Group Sales (199,100) (301,086) - - - - - -
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
less Central
Overhead - - - - (59,995) (52,199) (59,995) (52,199)
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
Group Total 1,226,083 1,161,318 461,152 377,624 (347,670) (292,653) 113,483 84,971
-------------- ------------ ----------------- ------------- ---------------- ----------------- ---------------- ----------------
DIVISIONAL PERFORMANCE
Table 2: Segmental Financial summary in USD'000s
Revenue Revenue Gross Gross Overheads Overheads EBITDA EBITDA
2018 2017 Profit Profit 2018 2017 2018 2017
Division USD'000 USD'000 2018 USD'000 2017 USD'000 USD'000 USD'000 USD'000 USD'000
Retail &
Cold Chain
Foods 95,082 87,339 28,799 22,648 (18,828) (15,229) 9,970 7,420
Stock Feed 31,071 33,099 8,365 6,405 (3,825) (2,053) 4,540 4,352
Crop-Row
Crops 11,147 20,581 7,959 8,129 (5,547) (6,148) 2,411 1,981
Others 6,658 8,054 1,459 1,312 (857) (1,081) 603 230
Total 143,958 149,073 46,582 38,494 (29,057) (24,511) 17,524 13,983
Less:
Intra/Inter
Group Sales (20,111) (30,692) - - - -
less Central
Overhead - - - - (6,060) (5,321) (6,060) (5,321)
Group Total 123,847 118,381 46,582 38,494 (35,117) (29,832) 11,464 8,662
RETAIL AND COLD CHAIN FOOD PRODUCTS
2018 ZMW'000 2017 ZMW'000 % 2018 USD'000 2017 USD'000 %
Change Change
Revenue 941 313 856 793 9.9% 95 082 87 339 8.9%
------------ ------------ ------- ------------ ------------ -------
Gross Profit 285 105 222 181 28.3% 28 799 22 648 27.2%
------------ ------------ ------- ------------ ------------ -------
Overheads (186 401) (149 393) 24.8% (18 828) (15 229) 23.6%
------------ ------------ ------- ------------ ------------ -------
EBITDA 98 705 72 788 35.6% 9 970 7 420 34.4%
------------ ------------ ------- ------------ ------------ -------
Revenue in the Retail and Cold Chain Food Products division increased by 9.9% in ZMW and 8.9% in USD. Gross profit grew by 28.3% in ZMW and 27.2% in USD.
Overhead costs increased by 24.8% in ZMW and 23.6 per cent in USD mainly due to rises in transport, energy and employment costs.
EBITDA in ZMW rose 35.6% from ZMW72.8m to ZMW98.7m, whilst in USD it increased by 34.4% from USD7.4m to USD10.0m. The business has generated a pleasing EBITDA margin of 10.5 per cent. (compared to prior year period 8.5%).
The Retail and Cold Chain Food Products division includes the beef, chicken, pork, dairy, egg and fish production and processing activities which primarily supply the Zambeef and Shoprite retail chains.
The division delivered strong volume growth of 6.7% while increasing gross profits.
Highlights:
- Good volume Growth - Strong GP Growth - Strong EBITDA growth
Challenges: An outbreak of Cholera in January 2018 led to a number of outlets being closed for a period due to their proximity to the epidemic. The epidemic had a negative effect on the sale of beef heads, bones and offal fat, but overall the financial impact on the Group was immaterial.
RETAIL EXPANSION
During the period four Zambeef Macro outlets were opened with a further four expected to open this year. Fourteen further sites have been purchased and will be developed. Zambeef plans to open 10 new Macro outlets every year.
STOCK FEED (NOVATEK)
2018 ZMW'000 2017 ZMW'000 % Change 2018 2017 % Change
USD'000 USD'000
Revenue 307 598 324 701 -5.3% 31 071 33 099 -6.1%
------------- ------------- --------- --------- --------- ---------
Gross Profit 82 809 62 830 31.8% 8 365 6 405 30.6%
------------- ------------- --------- --------- --------- ---------
Overheads (37 867) (20 141) 88.0% (3 825) (2 053) 86.3%
------------- ------------- --------- --------- --------- ---------
EBITDA 44 942 42 689 5.3% 4 540 4 352 4.3%
------------- ------------- --------- --------- --------- ---------
Volume (Tons) 94 203 73 679 27.9%
------------- ------------- --------- --------- --------- ---------
The Stockfeed division has increased its market share and market leadership with volumes increasing by 27.9% from 73,679 M.T. to 94,203 M.T. Gross profit margins have increased from 19.4% to 26.9% due mainly to low raw material prices from the 2017 crop. We expect the margins to reduce slightly in the second half as a result of the new season raw material prices increasing. However, with the Mpongwe plant continuing to perform ahead of expectation, the stockfeed division is expected to exceed its budget in H2 of 2018.
Overheads increased by 88% due mainly to the new stockfeed plant in Mpongwe.
However, the Mpongwe plant is operating well ahead of expectation and the division has delivered improved EBITDA of ZMW44.9m compared with ZMW42.7m in the prior period.
The Mpongwe plant produced 25,584 tons of 94,203 tons during the period. This represents approximately 42.6% of the capacity of the plant.
CROPPING
2018 ZMW'000 2017 ZMW'000 % Change 2018 2017 % Change
USD'000 USD'000
Revenue 110 356 201 901 -45.3% 11 147 20 581 -45.8%
------------- ------------- --------- --------- --------- ---------
Gross
Profit 78 791 79 745 -1.2% 7 959 8 129 -2.1%
------------- ------------- --------- --------- --------- ---------
Overheads (54 920) (60 309) -8.9% (5 547) (6 148) -9.8%
------------- ------------- --------- --------- --------- ---------
EBITDA 23 871 19 436 22.8% 2 411 1 981 21.7%
------------- ------------- --------- --------- --------- ---------
The Cropping division has delivered pleasing results in the first six months. Soya and maize prices have reduced from USD430/M.T. and USD230/M.T. respectively in March 2017 to USD415/M.T. and USD165/M.T. in March 2018. However, yields are predicted to be ahead of budget with over 44,500 M.T. of Soya Beans and 18,000 M.T. of Maize expected to be harvested. This has resulted in gross profit being ahead of budget and slightly behind 2017.
Overheads decreased by 8.9%, mainly as a result of reduced manpower costs. This resulted in EBITDA increasing from ZMW19.4 in 2017 to ZMW23.9 in 2018 (USD2m to USD2.4m).
The winter crop, which has recently been planted, comprises 7,296 Ha of wheat, 451 Ha of winter maize and 50 Ha of Lucerne. The wheat price has increased from USD410/M.T. in September 2017 to approximately USD430/M.T. and the maize price has increased from USD115/M.T. in September 2017 to approximately USD150/M.T.
FINANCIAL REVIEW OTHER BUSINESSES (continued operations current and prior year)
2018 ZMW'000 2017 ZMW'000 % Change 2018 2017 % Change
USD'000 USD'000
Revenue 65 916 72 933 -9.6% 6 658 7 435 -10.4%
------------- ------------- --------- --------- --------- ---------
Gross
Profit 14 447 14 019 3.1% 1 459 1 429 2.1%
------------- ------------- --------- --------- --------- ---------
Overheads (8 487) (11 062) 23.3% (857) (1 128) 24.0%
------------- ------------- --------- --------- --------- ---------
EBITDA 5 960 2 957 101.6% 602 301 100.0%
------------- ------------- --------- --------- --------- ---------
The Other divisions delivered an increase in EBITDA of 101.6% from ZMW3m to ZMW6m (USD0.3m to USD0.6m) compared to the prior period.
Flour Milling:
The mill performance was satisfactory with sale volumes stable as Zambeef continues to retail flour through its retail network.
Zamleather:
The shoe division performed well. However, there was a decrease in world-wide hide prices and the market for lower-grade hides is sluggish.
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 2018.
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:
31 Mar 2018 30 2017
-------------------- --------------------
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
300,579,590 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
6 months 6 months months 6 Year
to to to months to Year ended ended
31 March 31 March 31 March 31 March 30 September 30 September
2018 2018 2017 2017 2017 2017
Group ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
Revenue 1,226,083 123,847 1,161,318 118,381 2,435,182 255,796
Profit before
taxation 27,293 2,758 5,780 590 5,450 572
Taxation charge (4,333) (438) (556) (57) (1,049) (110)
Profit from
discontinued
operations (11,290) (1,140) - - (1,133) (119)
---------- --------- ---------- ----------- ------------- -------------
Group profit
for the period 11,670 1,180 5,224 533 3,268 343
---------- --------- ---------- ----------- ------------- -------------
Group profit
attributable
to:
Equity holders
of the parent 12,295 1,243 5,519 563 4,037 424
Non-controlling
interest (625) (63) (295) (30) (769) (81)
---------- --------- ---------- ----------- ------------- -------------
11,670 1,180 5,224 533 3,268 343
---------- --------- ---------- ----------- ------------- -------------
5. Dividends
There was no dividend paid or proposed for the six month period ended 31 March 2018.
6. Management
The Senior Management team comprise the following:
Francis Grogan Joint Chief Executive Officer
Carl Irwin Joint Chief Executive Officer (Retired on
March 31, 2018)
-----------------------------------------------
Timothy Pollock Group Managing Director (Joint Chief Executive
Officer as of April 1, 2018. Resigned on
31 May 2018)
-----------------------------------------------
Walter Roodt Deputy Managing Director
-----------------------------------------------
Craig Harris Chief Financial Officer
-----------------------------------------------
Yusuf Koya Executive Director
-----------------------------------------------
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 General Manager - Chiawa Farm
Davies
-----------------------------------------------
Francis Mondomona General Manager - Huntley Farm
-----------------------------------------------
Richard Franklin General Manager - Zamleather Limited
-----------------------------------------------
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
-----------------------------------------------
Johan Swanepoel 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
-----------------------------------------------
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
-----------------------------------------------
Yollard Kachinda
-----------------------------------------------
Prof. Enala Mwase
-----------------------------------------------
David Osborne
-----------------------------------------------
Tim Pollock Group Managing Director/Joint Chief Executive
Officer (appointed April 1, 2018 and resigned
on 31 May 2018)
-----------------------------------------------
Francis Grogan Joint Chief Executive Officer
-----------------------------------------------
Dr. Carl Irwin Joint Chief Executive Officer (Retired
on March 31, 2018)
-----------------------------------------------
Margaret Mudenda
-----------------------------------------------
Yusuf Koya
-----------------------------------------------
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 2018 30 September 2017
----------------------- ------------------
Direct Indirect Direct Indirect
DR. Jacob Mwanza 1,100,000 - 1,100,100 -
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
Tim Pollock 100,000 - - -
Yusuf Koya 245,482 - 245,482 -
2,444,245 23,003,076 2,344,245 23,003,076
========== =========== ================== ===========
9. Directors' fees and remuneration
Long
Term
Incentive
Housing Air Fares Plan
ZMW'000 Salary Bonus Allowance Car Allowance Allowance Medicals 2 (Shares)
NON-EXECUTIVE
---------- -------- ----------- -------------- ----------- --------- ------------
Jacob Mwanza 825,108 - - - - -
---------- -------- ----------- -------------- ----------- --------- ------------
Lawrence 360,922 - - - - -
Sikutwa
---------- -------- ----------- -------------- ----------- --------- ------------
John Rabb 309,360 - - - - -
---------- -------- ----------- -------------- ----------- --------- ------------
Yollard Kachinda 129,781 - - - - - -
---------- -------- ----------- -------------- ----------- --------- ------------
Enala Mwasa 129,309 - - - - - -
---------- -------- ----------- -------------- ----------- --------- ------------
Margaret 129,309 - - - - - -
Mudenda
---------- -------- ----------- -------------- ----------- --------- ------------
Jonathan 52,389 - - - - - -
Kirby
---------- -------- ----------- -------------- ----------- --------- ------------
EXECUTIVE
---------- -------- ----------- -------------- ----------- --------- ------------
Company Company
Francis Grogan 3,849,403 5,000 House Car 460,800 Yes 6,250,000
---------- -------- ----------- -------------- ----------- --------- ------------
Company
Timothy Pollock 2,320,080 - - Car 289,600 Yes -
---------- -------- ----------- -------------- ----------- --------- ------------
Company
Carl Irwin 1,618,442 5,000 - Car 460,800 Yes 6,250,000
---------- -------- ----------- -------------- ----------- --------- ------------
Yusuf Koya 3,461,651 5,000 - - 384,000 Yes 275,000
---------- -------- ----------- -------------- ----------- --------- ------------
Danny Museteka 2,434,854 318,600 - - 384,000 Yes 275,000
---------- -------- ----------- -------------- ----------- --------- ------------
In October 2016, the Board approved a retirement package for the Chairman, Dr. Jacob Mwanza of USD330,000. An advance of USD110,000 was paid about the same time, and the full payment will be paid towards the end of 2018.
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.
10. Significant Shareholdings
As at 31 March 2018, the Company has been advised of the following notifiable interests in its ordinary share capital:
Investor Name Current Position % of Shareholding
CDC Group Plc 52,601,435 17.5%
----------------- ------------------
M & G Recovery Fund 46,304,408 12.16%
----------------- ------------------
Africa Life 29,596,678 7.78%
----------------- ------------------
National Pension Scheme Authority
(Zambia) 24,979,819 6.56%
----------------- ------------------
Sussex Trust 14,000,000 3.68%
----------------- ------------------
CDC Group Plc. holds 100,057,658 convertible redeemable preference shares.
11. Employees
The Group employed an average number of employees of 7,734 (30 September 2017 - 7,068; 31 March 2017 - 6,854) and total salaries and wages were ZMW197,954 million (USD20 million) for the six month period to 31 March 2018 (30 September 2017 - ZMW357 million [USD28.3 million], 31 March 2017 - ZMW173 million [USD17.7 million]).
The average number of persons employed by the Group in each month of the 6 month period is as follows:
October 2017 7,481
November 2017 7,491
------
December 2017 7,823
------
January 2018 7,559
------
February 2018 7,863
------
March 2018 8,186
------
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 ZMW1.5 million (USD0.15 million), (30 September 2017 - ZMW2 million [USD0.2 million], 31 March 2017 - ZMW1.23 million [USD0.13 million]) to a number of activities.
15. Export sales
The Group made exports of ZMW27 million (USD2.8 million) during the period (30 September 2017 - ZMW24.5 million [USD2.6 million], 31 March 2017 - ZMW14 million [USD1.4 million]).
16. Property, plant and equipment
Assets totalling ZMW80.3 million (USD8.1 million) were purchased by the Group during the period (30 September 2017 - ZMW209.4 million [USD22 million], 31 March 2017 - ZMW126.5 million [USD12.9 million]) which included expenditure on the palm plantation development during the period of ZMW6 million (USD0.6 million) (30 September 2017 - ZMW13.8 million [USD1.5 million], 31 March 2017 - ZMW8.8 million [USD0.9 million]).
17. Interim report
The interim report set out below has been approved by the directors.
By order of the Board
Company Secretary
Date: 5 June 2018
6 June 2018
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 19 to 50 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 2018.
Chartered Accountants
Christopher Mulenga (AUD/ F000178)
Name of Partner signing on behalf of the Firm
Lusaka
Date: 5 June 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIODED 31 MARCH 2018
Unaudited Audited
31 Mar 2018 31 Mar 2017 30 Sept 2017
------ ------------ ------------ -------------
Group Notes ZMW'000s ZMW'000s ZMW'000s
------ ------------ ------------ -------------
Revenue 5(i) 1,226,083 1,161,318 2,435,182
------ ------------ ------------ -------------
Net gain/ (loss) arising
from price changes in
fair value of biological
assets 8 (4,283) (91) (3,491)
------ ------------ ------------ -------------
Cost of sales (760,648) (783,603) (1,633,060)
------ ------------ ------------ -------------
Gross profit 5(i) 461,152 377,624 798,631
------ ------------ ------------ -------------
Administrative expenses (399,546) (334,707) (714,746)
------ ------------ ------------ -------------
Other income 731 1,243 2,768
------ ------------ ------------ -------------
Operating profit 62,337 44,160 86,653
------ ------------ ------------ -------------
Exchange losses on translating
foreign currency transactions
and balances 5,619 6,748 6,701
------ ------------ ------------ -------------
Finance costs (40,663) (45,128) (87,904)
------ ------------ ------------ -------------
Profit before taxation 5(i) 27,293 5,780 5,450
------ ------------ ------------ -------------
Taxation charge 6(a) (4,333) (556) (1,049)
------ ------------ ------------ -------------
Group profit for the period
from continued operations 22,960 5,224 4,401
------ ------------ ------------ -------------
Loss from discontinued
operations 14 (11,290) - (1,133)
------ ------------ ------------ -------------
Total profit/(loss) for
the period 11,670 5,224 3,268
------ ------------ ------------ -------------
Group profit/(loss) attributable
to:
------ ------------ ------------ -------------
Equity holders of the
parent 12,295 5,519 4,037
------ ------------ ------------ -------------
Non-controlling interest (625) (295) (769)
------ ------------ ------------ -------------
11,670 5,224 3,268
------ ------------ ------------ -------------
Other comprehensive income
------ ------------ ------------ -------------
Exchange gains on translating
presentational currency (10,437) (10,547) (31,190)
------ ------------ ------------ -------------
Total comprehensive income
for the period 1,233 (5,323) (27,922)
------ ------------ ------------ -------------
Total comprehensive income/(loss)
for the period attributable
to:
------ ------------ ------------ -------------
Equity holders of the
parent 4,299 (4,308) (27,257)
------ ------------ ------------ -------------
Non-controlling interest (3,066) (1,015) (665)
------ ------------ ------------ -------------
1,233 (5,323) (27,922)
------ ------------ ------------ -------------
Earnings per share Ngwee Ngwee Ngwee
------ ------------ ------------ -------------
Basic and diluted earnings
per share from continued
operations 7 7.85 1.84 1.72
------ ------------ ------------ -------------
Basic and diluted earnings
per share from discontinued
operations 7 (3.76) - (0.38)
------ ------------ ------------ -------------
Total 7 4.09 1.84 1.34
------ ------------ ------------ -------------
The accompanying notes form part of the financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIODED 31 MARCH 2018
Unaudited Audited
31 Mar 31 Mar
2018 2017 30 Sept 2017
------ --------- --------- -------------
Group Notes USD'000s USD'000s USD'000s
------ --------- --------- -------------
Revenue 5(ii) 123,847 118,381 255,796
------ --------- --------- -------------
Net gain /(loss) arising
from price changes in fair
value of biological assets 8 (433) (9) (367)
------ --------- --------- -------------
Cost of sales (76,833) (79,878) (171,540)
------ --------- --------- -------------
Gross profit 5(ii) 46,581 38,494 83,889
------ --------- --------- -------------
Administrative expenses (40,358) (34,119) (75,078)
------ --------- --------- -------------
Other income 74 127 291
------ --------- --------- -------------
Operating profit 6,297 4,502 9,102
------ --------- --------- -------------
Exchange losses on translating
foreign currency transactions
and balances 568 688 704
------ --------- --------- -------------
Finance costs (4,107) (4,600) (9,234)
------ --------- --------- -------------
Profit before taxation 5(ii) 2,758 590 572
------ --------- --------- -------------
Taxation charge 6(f) (438) (57) (110)
------ --------- --------- -------------
Group profit for the period
from continued operations 2,320 533 462
------ --------- --------- -------------
Loss from discontinued operations 14 (1,140) - (119)
------ --------- --------- -------------
Total profit/(loss) for
the period 1,180 533 343
------ --------- --------- -------------
Group profit/(loss) attributable
to:
------ --------- --------- -------------
Equity holders of the parent 1,243 563 424
------ --------- --------- -------------
Non-controlling interest (63) (30) (81)
------ --------- --------- -------------
1,180 533 343
------ --------- --------- -------------
Other comprehensive income
------ --------- --------- -------------
Exchange losses on translating
presentational currency 4,938 6,617 4,243
------ --------- --------- -------------
Total comprehensive income
for the period 6,118 7,150 4,586
------ --------- --------- -------------
Total comprehensive income/(loss)
for the period attributable
to:
------ --------- --------- -------------
Equity holders of the parent 6,459 7,282 4,681
------ --------- --------- -------------
Non-controlling interest (341) (132) (95)
------ --------- --------- -------------
6,118 7,150 4,586
------ --------- --------- -------------
Earnings per share Cents Cents Cents
------ --------- --------- -------------
Basic and diluted earnings
per share from continued
operations 7 0.79 0.19 0.18
------ --------- --------- -------------
Basic and diluted earnings
per share from discontinued
operations 7 (0.38) - (0.04)
------ --------- --------- -------------
Total 7 0.41 0.19 0.14
------ --------- --------- -------------
The accompanying notes form part of the financial statements.
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
FOR THE SIX MONTH PERIODED 31 MARCH 2018
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
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
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Profit for the
period - - - - - (1,482) (1,482) (474) (1,956)
Transfer of
surplus
depreciation - - - (14,100) 14,100 - - -
Revaluation - - - 789,795 - - 789,795 - 789,795
Other
comprehensive
income: -
Exchange
gains/(losses)
on translating
presentational
currency - - - - (21,467) - (21,467) 824 (20,643)
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Total
comprehensive
income
for the period - - - 775,695 (21,467) 12,618 766,846 350 767,196
------------ ----------------
At 30 September
2017 3,006 1,125,012 1,000 1,252,142 72,227 445,090 2,898,477 (8,281) 2,890,196
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Profit for the
period - - - - - 12,295 12,295 (625) 11,670
Transfer of
surplus
depreciation - - - (11,700) - 11,700 - - -
Other
comprehensive
income
Exchange gains
on translating
presentational
currency - - - - (7,996) - (7,996) (2,441) (10,437)
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
Total
comprehensive
income
for the period - - - (11,700) (7,996) 23,995 4,299 (3,066) 1,233
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
At 31 March
2018 3,006 1,125,012 1,000 1,240,442 64,231 469,085 2,902,776 (11,347) 2,891,429
--------- ---------- ----------- ------------ ------------ --------- ------------- ---------------- ----------
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
FOR THE SIX MONTH PERIODED 31 MARCH 2018
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
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 for
the period - - - (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
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Transactions
with owners
Profit for the
period - - - - - (139) (139) (51) (190)
Transfer of
surplus
depreciation - - - (1,510) - 1,510 - - -
Revaluation - - - 81,675 - - 81,675 - 81,675
Other
comprehensive
income:
Exchange losses
on translating
presentational
currency - - - - (2,462) - (2,462) 88 (2,374)
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Total
comprehensive
income for
the period - - - 80,165 (2,462) 1,371 79,074 37 79,111
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
At 30 September
2017 449 185,095 100 177,978 (140,642) 76,760 299,740 (856) 298,884
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
Profit for the
period - - - - - 1,243 1,243 (63) 1,180
Transfer of
surplus
depreciation - - - (1,182) - 1,182 - - -
Other
comprehensive
income
Exchange losses
on translating
presentational
currency - - - - 5,216 - 5,216 (278) 4,938
--------- --------- ------------ ------------ --------- ------------- ---------------- ---------
Total
comprehensive
income - - - (1,182) 5,216 2,425 6,459 (341) 6,118
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- -----------
At 31 March
2018 449 185,095 100 176,796 (135,426) 79,185 306,199 (1,197) 305,002
--------- --------- ----------- ------------ ------------ --------- ------------- ---------------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION -- 31 MARCH 2018
Unaudited Audited
-------------------------- -------------
Notes 31 Mar 2018 31 Mar 2017 30 Sept 2017
ZMW'000s ZMW'000s ZMW'000s
ASSETS
Non - current assets
Goodwill 166,801 166,801 166,801
Property, plant and equipment 2,614,680 1,837,941 2,610,488
Plantation development
expenditure - 100,277 -
Biological assets 8 - 51,541 -
Deferred tax assets 6(e) 43,176 41,013 43,368
------------ ------------ -------------
2,824,657 2,197,573 2,820,657
------------ ------------ -------------
Current assets
Biological assets 8 339,358 373,280 167,857
Inventories 476,843 372,975 516,418
Trade and other receivables 116,269 131,497 90,792
Assets held for disposal 14 239,937 - 221,178
Amounts due from related
companies 18,789 2,727 11,422
Income tax recoverable 6(c) 8,719 1,569 1,376
1,199,915 882,048 1,009,043
------------ ------------ -------------
Total assets 4,024,572 3,079,621 3,829,700
============ ============ =============
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3,006 3,006 3,006
Preference share capital 1,000 1,000 1,000
Share premium 1,125,012 1,125,012 1,125,012
Reserves 1,773,758 1,002,613 1,769,459
------------ ------------ -------------
2,902,776 2,131,631 2,898,477
Non-controlling interest (11,347) (8,631) (8,281)
------------ ------------ -------------
2,891,429 2,123,000 2,890,196
------------ ------------ -------------
Non - current liabilities
Interest bearing liabilities 10 284,352 233,589 328,238
Obligations under finance
leases 24,382 33,433 27,915
Amounts due to related
companies - - -
Deferred liability 17,729 11,037 16,756
Deferred taxation 6(e) 7,318 8,630 7,212
333,781 286,689 380,121
------------ ------------ -------------
Current liabilities
Interest bearing liabilities 10 73,416 77,306 78,080
Collateral management agreement 10 136,774 68,008 60,248
Obligations under finance
leases 12,679 22,422 19,916
Trade and other payables 284,165 238,757 291,843
Assets held for disposal 14 12,092 - 1,079
Amounts due to related
companies 131 - 81
Taxation payable 6(c) 8,617 12,046 2,988
Cash and cash equivalents 9 271,488 251,393 105,148
------------ -------------
799,362 669,932 559,383
------------ ------------ -------------
Total equity and liabilities 4,024,572 3,079,621 3,829,700
============ ============ =============
The accompanying notes form part of the financial statements. The interim financial statements on pages 19 to 50 were approved by the Board of Directors on 6 June 2018 and were signed on its behalf by
)
) DIRECTORS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION -- 31 MARCH 2018
Unaudited Audited
-------------------------- ----------
30 Sept
31 Mar 2018 31 Mar 2017 2017
Notes USD '000s USD '000s USD '000s
ASSETS
Non - current assets
Goodwill 17,595 17,267 17,249
Property, plant and equipment 275,810 190,263 269,958
Plantation development expenditure - 10,381 -
Biological assets 8 - 5,336 -
Deferred tax asset 6(j) 4,554 4,246 4,485
------------ ------------ ----------
297,959 227,493 291,692
------------ ------------ ----------
Current assets
Biological assets 8 35,797 38,642 17,359
Inventories 50,300 38,610 53,404
Trade and other receivables 12,265 13,613 9,390
Assets held for disposal 25,309 22872
Amounts due from related
companies 1,982 282 1,181
Income tax recoverable 6(h) 920 162 142
126,573 91,309 104,348
------------ ------------ ----------
Total assets 424,532 318,802 396,040
============ ============ ==========
EQUITY AND LIABILITIES
Capital and reserves
Share capital 449 449 449
Preference share capital 100 100 100
Share premium 185,095 185,095 185,095
Reserves 120,555 35,022 114,096
------------ ------------ ----------
306,199 220,666 299,740
Non-controlling interest (1,197) (893) (856)
305,002 219,773 298,884
------------ ------------ ----------
Non - current liabilities
Interest bearing liabilities 10 29,995 24,181 33,944
Obligations under finance
leases 2,572 3,461 2,887
Deferred liability 1,870 1,143 1,733
Deferred tax liability 6(j) 772 893 746
35,209 29,678 39,310
------------ ------------ ----------
Current liabilities
Interest bearing liabilities 10 7,744 8,003 8,074
Collateral management agreement 10 14,428 7,040 6,230
Obligations under finance
leases 1,337 2,321 2,060
Trade and other payables 29,975 24,716 30,179
Assets held for disposal 14 1,276 111
Amounts due to related companies 14 - 9
Taxation payable 6(h) 909 1,247 309
Cash and cash equivalents 9 28,638 26,024 10,874
84,321 69,351 57,846
------------ ------------ ----------
Total equity and liabilities 424,532 318,802 396,040
============ ============ ==========
The accompanying notes form part of the financial statements. The interim financial statements on pages 19 to 50 were approved by the Board of Directors on 6 June 2018 and were signed on its behalf by
)
) DIRECTORS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODED 31 MARCH 2018
Unaudited Audited
------------------------------------------------------------------------- -------------
6 months 6 months
to to Year to
31 Mar 2018 31 Mar 2017 30 Sept 2017
ZMW'000s ZMW'000s ZMW'000s
Cash (outflow)/inflow (on)/from
operating activities
Profit before taxation 27,293 5,780 5,450
Finance costs 40,663 45,128 87,904
Profit on disposal of property,
plant and equipment (1,358) - (974)
Depreciation 51,474 40,810 83,301
Profit/(loss) on discontinued operations (11,290) - (1,133)
Fair value price adjustment 4,283 91 3,491
Net unrealised foreign exchange
(gains)/losses (1,394) (4,525) (4,410)
------------ ------------ ---------------
Earnings before interest, tax, depreciation
and amortisation 109,671 87,284 173,629
Increase in biological assets (171,501) (189,315) 19,169
Decrease in inventory 39,575 171,764 28,321
Decrease /(increase) in trade and
other receivables (25,477) (18,346) 22,503
Decrease in amount due from related
companies (7,367) 7,816 (1,158)
(Decrease)/increase in trade and
other payables (7,678) (83,378) (33,308)
Increase in amount due to related
companies 50 (313) 4,113
Increase in deferred liability 973 595 6,314
Cash outflow from assets held for
disposal (7,746) - (14,226)
Income tax paid (5,749) (4,368) (17,329)
------------
Net cash (outflow)/inflow (on)/from
operating activities (75,249) (28,261) 188,028
------------ ------------ ---------------
Investing activities
Purchase of property, plant and
equipment (74,257) (117,613) (195,610)
Expenditure on plantation development - (8,848) (13,805)
Movement in investments - (8,879) (8,879)
Proceeds from sale of assets 19,949 - -
Net cash (outflow)/ inflow (on)/
from investing activities (54,308) (135,340) (218,294)
------------ ------------ ---------------
Net cash (outflow)/ inflow before
financing (129,557) (163,601) (30,266)
------------ ------------ ---------------
Financing
Long term loans repaid (48,550) (57,096) (104,768)
Receipt of long term loans - - 140,100
(Repayment)/ receipt of short term
funding 76,526 (47,410) (55,292)
Lease finance (repaid)/ obtained (10,770) 4,965 (3,551)
Finance costs including discontinued
operations (40,663) (45,128) (87,904)
Net cash outflow from financing (23,457) (144,669) (111,415)
------------ ------------ ---------------
Decrease in cash and cash equivalents (153,014) (308,270) (141,681)
Cash and cash equivalents at beginning
of year (105,148) 64,806 64,806
Effects of exchange rate changes
on the balance of
cash held in foreign currencies (13,326) (7,929) (28,273)
Cash and cash equivalents at end
of year (271,488) (251,393) (105,148)
============ ============ ===============
Represented by:
Cash in hand and at bank (61,857) 56,416 62,518
Bank overdrafts (333,345) (307,809) (167,666)
(271,488) (251,393) (105,148)
============ ============ ===============
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODED 31 MARCH 2018
Unaudited Audited
-------------------- ---------
6 months 6 months
to to Year to
31 Mar 31 Mar 30 Sept
2018 2017 2017
USD'000s USD'000s USD'000s
Cash (outflow)/inflow (on)/from operating
activities
Loss before taxation 2,758 590 572
Finance costs 4,107 4,600 9,234
Profit on disposal of property, plant
and equipment (137) - (102)
Depreciation 5,199 4,160 8,750
Profit/(loss) on discontinued operations (1,107) - (119)
Fair value price adjustment 433 9 367
Net unrealised foreign (gains)/ exchange
losses (141) (461) (463)
--------- --------- ---------
Earnings before interest, tax, depreciation
and amortisation 11,112 8,898 18,239
Increase in biological assets (18,438) (19,298) 2,014
Decrease in inventory 3,104 17,509 2,975
Decrease /(increase) in trade and
other receivables (2,875) (1,870) 2,363
Decrease in amount due from related
companies (801) 797 (122)
(Decrease)/ increase in trade and
other payables (204) (8,499) (3,499)
Increase in amount due to related
companies 5 (32) 432
Increase in deferred liability 137 61 663
Cash outflow from assets held for
disposal (1,272) - (1,494)
Income tax paid (581) (445) (1,820)
Net cash (outflow)/inflow (on)/from
operating activities (9,813) (2,879) 19,751
--------- --------- ---------
Investing activities
Purchase of property, plant and equipment (7,501) (11,989) (20,547)
Expenditure on plantation development - (902) (1,450)
Movement in investments - (905) (933)
Proceeds from sale of assets 2,098 - -
Net cash outflow on investing activities (5,403) (13,796) (22,930)
--------- --------- ---------
Net cash outflow before financing (15,216) (16,675) (3,179)
--------- --------- ---------
Financing
Long term loans repaid (4,279) (5,820) (11,005)
Receipt of long term loans - - 15,000
(Repayment)/ receipt of short term
funding 8,198 (4,833) (5,808)
Lease finance (1,038) 506 (373)
Finance costs including discontinued
operations (4,107) (4,600) (9,234)
Net cash outflow from financing (1,226) (14,747) (11,420)
--------- --------- ---------
Decrease in cash and cash equivalents (16,442) (31,422) (14,599)
Cash and cash equivalents at beginning
of year (10,874) 6,474 6,474
Effects of exchange rate changes on
the balance of
cash held in foreign currencies (1,322) (1,076) (2,749)
Cash and cash equivalents at end of
year (28,638) (26,024) (10,874)
========= ========= =========
Represented by:
Cash in hand and at bank 6,525 5,840 6,465
Bank overdrafts (35,163) (31,864) (17,339)
(28,638) (26,024) (10,874)
========= ========= =========
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- 31 MARCH 2018
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 7,787 Ha of irrigated row crops and 8,694 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 ZMW222.9 million (USD23.5million) [30 September 2017: ZMW158.2 million (USD16.4 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 6 months period ended 31 March 2018 and 31 March 2017 do not constitute statutory accounts. The figures for the year ended 30 September 2017 have been extracted from the 2017 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.
(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 2017 9.81 9.66
Year ended 30 September 2017 9.52 9.67
6 months ended 31 March 2018 9.90 9.48
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.
(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:
ZMW: Nigeria Naira Average Closing
exchange rate exchange rate
6 months ended 31
March 2017 31.74 32.32
--------------- ---------------
Year ended 30 September
2017 36.55 36.79
--------------- ---------------
6 months ended 31
March 2018 36.09 37.66
--------------- ---------------
ZMW: Ghana Cedi Average Closing
exchange rate exchange rate
--------------- ---------------
6 months ended 31
March 2017 0.44 0.44
--------------- ---------------
Year ended 30 September
2017 0.36 0.40
--------------- ---------------
6 months ended 31
March 2018 0.45 0.47
--------------- ---------------
(e) General information and basis of preparation
The condensed interim consolidated financial statements are for the six months ended 31 March 2018 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 2017.
(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 2017.
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.
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 2017.
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 2018, 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:
Period ended 31 March 2018
(i) in Zambian Kwacha
Segment Revenue Gross Profit
ZMW'000s ZMW'000s
Retailing - Zambia 774,680 91,331
Master Meats (Nigeria) 49,410 9,165
Master Meats (Ghana) 16,289 5,116
Retailing West Africa 65,699 14,281
Total Retailing 840,379 105,612
Beef 233,937 63,402
Chicken 167,865 57,377
Pork 115,236 16,234
Milk and dairy 90,659 28,784
Fish 26,505 5,714
Eggs 31,041 7,982
Total Cold Chain Food Production 665,243 179,493
Stock Feed 307,598 82,809
Crops - row crops 110,356 78,791
Mill and bakery 48,635 9,161
Leather and shoe 17,281 5,286
Edible oils - -
Total Other 65,916 14,447
---------- -------------
Total 1,989,492 461,152
Less: intra/inter group Sales (763,409)
---------- -------------
Group total 1,226,083 461,152
---------- -------------
Central operating costs (398,815)
-------------
Operating profit 62,337
Foreign exchange gains 5,619
Finance costs (40,663)
Profit before tax 27,293
-------------
Operating assets/(liabilities)
Master
Zambeef Retailing Pork Other Total
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Property, plant and equipment 1,893,247 189,483 86,541 445,412 2,614,680
Biological assets and
inventories 581,047 56,883 25,114 153,157 816,201
Cash, cash equivalents
and bank overdrafts (181,614) (103,769) (696) 14,591 (271,488)
Period ended 31 March 2018
(ii) in US Dollars
Segment Revenue Gross Profit
USD '000s USD '000s
Retailing - Zambia 78,251 9,225
Master Meats (Nigeria) 4,991 926
Master Meats (Ghana) 1,645 517
Retailing West Africa 6,636 1,443
Total Retailing 84,887 10,668
Beef 23,630 6,404
Chicken 16,956 5,796
Pork 11,640 1,640
Milk and dairy 9,157 2,907
Fish 2,677 577
Eggs 3,135 806
Total Cold Chain Food Production 67,195 18,130
Stock Feed 31,071 8,365
Crops - row crops 11,147 7,959
Mill and bakery 4,913 925
Leather and shoe 1,746 534
Edible oils - -
Total Other 6,659 1,459
Total 200,959 46,581
Less: intra/inter group sales (77,112)
-------------
Group total 123,847 46,581
---------- -------------
Central operating costs (40,284)
-------------
Operating profit 6,297
Foreign exchange gains 568
Finance costs (4,107)
-------------
Profit before tax 2,758
-------------
Operating assets/(liabilities)
Zambeef Retailing Master Pork Other Total
USD'000s USD'000s USD'000s USD'000s USD'000s
Property, plant and equipment 188,422 19,987 9,129 58,272 275,810
Biological assets and
inventories 61,292 6,000 2,649 16,156 86,097
Cash, cash equivalents
and bank overdrafts (19,158) (10,946) (73) 1,539 (28,638)
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 and dairy 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 and bakery 59,578 10,429
Leather and shoe 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 Sales (917,067) -
---------- -------------
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 1,837,941
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)
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 1,709
Total Retailing 83,483 7,971
Beef 23,693 6,786
Chicken 15,237 3,319
Pork 12,887 1,894
Milk and dairy 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 and bakery 6,073 1,062
Leather and shoe 1,361 366
Edible oils 619 (117)
Total Other 8,053 1,311
Total 211,863 38,494
Less: intra/inter group sales (93,482) -
-------------
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)
Zambeef Retailing Master 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)
Period ended 30 September 2017
(i) in Zambian Kwacha
Segment Revenue Gross Profit
ZMW'000s ZMW'000s
Retailing - Zambia 1,440,784 164,450
Master Meats (Nigeria) 137,759 25,139
Master Meats (Ghana) 26,415 7,459
Retailing West Africa 164,174 32,598
Total Retailing 1,604,958 197,048
Beef 415,963 103,725
Chicken 297,340 65,686
Pork 243,491 36,980
Milk and dairy 172,516 49,338
Fish 55,438 10,591
Eggs 57,729 7,049
Total Cold Chain Food Production 1,242,477 273,369
Stock Feed 662,068 166,884
Crops - row crops 505,738 134,556
Mill and bakery 117,504 19,827
Leather and shoe 31,571 7,260
Edible oils 12,312 (313)
Total Other 161,387 26,774
------------ -------------
Total 4,176,628 798,631
Less: intra/inter group Sales (1,741,446) -
------------ -------------
Group total 2,435,182 798,631
------------ -------------
Central operating costs (711,978)
-------------
Operating profit 86,653
Foreign exchange gains 6,701
Finance costs (87,904)
Profit before tax 5,450
-------------
Operating assets/(liabilities)
Zambeef Retailing Master Pork Other Total
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Property, plant and equipment 1,915,758 167,854 85,779 441,097 2,610,488
Biological assets and
inventories 561,928 47,624 22,837 51,886 684,275
Cash, cash equivalents
and bank overdrafts (24,435) (96,578) 1,108 14,757 (105,148)
Period ended 30 September 2017
(i) in US Dollars
Segment Revenue Gross Profit
USD'000s USD'000s
Retailing - Zambia 151,343 17,273
Master Meats (Nigeria) 14,470 2,641
Master Meats (Ghana) 2,775 784
Retailing West Africa 17,245 3,425
Total Retailing 168,588 20,698
Beef 43,694 10,895
Chicken 31,233 6,900
Pork 25,577 3,884
Milk and dairy 18,121 5,183
Fish 5,823 1,113
Eggs 6,064 740
Total Cold Chain Food Production 130,512 28,715
Stock Feed 69,545 17,530
Crops - row crops 53,124 14,134
Mill and bakery 12,343 2,083
Leather and shoe 3,316 763
Edible oils 1,293 (33)
Total Other 16,952 2,813
---------- -------------
Total 438,721 83,890
Less: intra/inter group Sales (182,925) -
---------- -------------
Group total 255,796 83,890
---------- -------------
Central operating costs (74,788)
-------------
Operating profit 9,102
Foreign exchange gains 704
Finance costs (9,234)
Profit before tax 572
-------------
Operating assets/(liabilities)
Zambeef Retailing Master Pork Other Total
USD'000s USD'000s USD'000s USD'000s USD'000s
Property, plant and equipment 198,114 17,358 8,871 45,615 269,958
Biological assets and
inventories 58,110 4,925 2,362 5,366 70,763
Cash, cash equivalents
and bank overdrafts (2,630) (9,987) 115 1,628 (10,874)
The Group's revenue from external customers and its geographic allocation of non-current assets may be summarised as follows:
31 Mar 2018 31 Mar 2017 30 Sept 2017
------------------------ ------------------------ ------------------------
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 1,133,060 2,811,187 1,059,419 2,178,848 2,246,553 2,795,711
West Africa 65,699 13,470 87,893 18,725 164,174 24,946
Rest of
world 27,324 - 14,006 - 24,455 -
1,226,083 2,824,657 1,161,318 2,197,573 2,435,182 2,820,657
---------- ------------ ---------- ------------ ---------- ------------
31 Mar 2018 31 Mar 2017 30 Sept 2017
----------------------- ----------------------- -----------------------
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 114,451 296,538 107,993 225,555 235,983 289,112
West Africa 6,636 1,421 8,960 1,938 17,245 2,580
Rest of
world 2,760 - 1,428 - 2,568 -
123,847 297,959 118,381 227,493 255,796 291,692
--------- ------------ --------- ------------ --------- ------------
6. Taxation
31 Mar 31 Mar
2018 2017 30 Sept 2017
Income tax expense ZMW'000s ZMW'000s ZMW'000s
(a) Tax charge
Current tax:
Tax charge 4,035 8,612 12,878
Deferred tax:
Deferred taxation (note
6(e)) 298 (8,056) (11,829)
Tax charge/(credit) for
the period 4,333 556 1,049
========= ========= =============
31 Mar 31 Mar
2018 2017 30 Sept 2017
ZMW'000s ZMW'000s ZMW'000s
(b) Reconciliation of tax charge
Profit/(loss) before taxation 27,293 5,780 5,450
Taxation on accounting profit (2,998) 2,243 (6,872)
Effects of:
Permanent differences:
Disallowable expenses 1,283 2,372 1,191
Timing differences:
Capital allowances and depreciation (10,405) (3,643) 1,763
Livestock and crop valuations
adjustment (2,123) 2,166 3,283
Other income 1,045 (4) (5)
Unrealised exchange gains/(losses) 69 527 1,581
Unrealised tax loss 17,164 4,951 11,937
Tax charge for the period 4,035 8,612 12,878
========= ========= =============
(c) Movement in taxation account
Taxation payable at 1 October 1,612 6,063 6,063
Charge for the period 4,035 8,612 12,878
Under provision in prior period - 170 -
Taxation paid (5,749) (4,368) (17,329)
Taxation payable/(recoverable)
at the end of the period (102) 10,477 1,612
========= ========= =============
Taxation payable 8,617 12,046 2,988
Taxation recoverable (8,719) (1,569) (1,376)
Taxation payable as at 30 September (102) 10,477 1,612
========= ========= =============
(d) Income tax returns have been filed with the ZRA for the tax year ended 31 December 2016. Quarterly tax returns for the period were made on the due dates.
(e) Deferred taxation
31 Mar 31 Mar
2018 2017 30 Sept 2017
ZMW'000s ZMW'000s ZMW'000s
Represented by:
Biological valuation 12,099 14,423 11,005
Accelerated tax allowances 41,974 39,827 39,213
Provisions (4,140) (4,624) (6,974)
Tax loss (85,791) (82,009) (79,400)
(35,858) (32,383) (36,156)
========= ========= =============
Analysis of movement:
Asset as at 1 October (36,156) (24,327) (24,327)
Charge to profit and loss
account (note 6(a)) 298 (8,056) (11,829)
(Asset)/liability as at the
end of the period (35,858) (32,383) (36,156)
========= ========= =============
Deferred tax asset (43,176) (41,013) (43,368)
Deferred tax liability 7,318 8,630 7,212
(35,858) (32,383) (36,156)
========= ========= =============
31 Mar 31 Mar 30 Sept
Income tax expense 2018 2017 2017
USD'000s USD'000s USD'000s
(f) Tax charge
Current tax:
Tax charge 408 878 1,353
Deferred tax:
Deferred taxation (note
6(j)) 30 (821) (1,243)
Tax (credit)/charge for
the period 438 57 110
========= ========= =========
(g) Reconciliation of tax charge
Profit/(loss) before taxation 2,758 590 572
Taxation on accounting
profit (303) 229 (722)
Effects of:
Permanent differences:
Disallowable expenses 130 242 126
Timing differences:
Capital allowances and
depreciation (1,051) (371) 185
Livestock and crop valuations
adjustment (215) 219 345
Other income 106 - (1)
Unrealised exchange (gains)/losses 7 54 166
Unrealised tax loss 1,734 505 1,254
---------
Tax charge for the period 408 878 1,353
========= ========= =========
(h) Movement in taxation account
Taxation payable at 1 October 167 605 605
Charge for the year 408 878 1,353
Taxation paid (581) (445) (1,820)
Foreign exchange (5) 47 29
Taxation payable as at the
end of the period (11) 1,085 167
========= ========= =========
Taxation payable 909 1,247 309
Taxation recoverable (920) (162) (142)
Taxation payable as at 30
September (11) 1,085 167
========= ========= =========
(i) Income tax returns have been filed with the ZRA for the year 31 December 2016. Quarterly tax returns for the period were made on the due dates.
31 Mar 31 Mar
2018 2017 30 Sept 2017
(j) Deferred taxation USD'000s USD'000s USD'000s
Represented by:
Biological valuation 1,276 1,493 1,138
Accelerated tax allowances 4,429 4,123 4,055
Provisions (437) (479) (721)
Tax loss (9,050) (8,490) (8,211)
(3,782) (3,353) (3,739)
========= ========= =============
Analysis of movement:
Liability as at 1 October (3,739) (2,431) (2,431)
Charge to profit and loss
account (note 6(f)) 30 (821) (1,243)
Foreign exchange (73) (101) (65)
(Asset)/liability as at the
end of period (3,782) (3,353) (3,739)
========= ========= =============
Deferred tax asset (4,554) (4,246) (4,485)
Deferred tax liability 772 893 746
(3,782) (3,353) (3,739)
========= ========= =============
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:
31 Mar 2018 31 Mar 2017 30 Sept 2017
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD '000s
Basic earnings per share
Profit for the period 12,295 1,243 5,519 563 4,037 424
Weighted average number
of ordinary shares for
the purposes of basic
and diluted earnings
per share 300,579 300,579 300,579 300,579 300,579 300,579
========= ========= ========= ========= ========= ==========
Basic and diluted earnings
per share (Ngwee & US
Cents) 4.09 0.41 1.84 0.19 1.34 0.14
From continued operations 7.85 0.79 1.84 0.19 1.72 0.18
From discontinued operations (3.76) (0.38) - - (0.38) (0.04)
8. Biological assets
(a) 31 March 2018
Biological assets comprise standing crops, feedlot and standing cattle, dairy cattle, pigs, chickens and palm oil plantation. At 31 March 2018 there were 14,178 cattle (10,615 feedlot cattle, nil standing cattle and 3,563 dairy cattle) and 518,518 chickens (314,498 layers and 204,020 broilers), and 4,553 pigs. A total of 16,445 feedlot cattle, 586 dairy cattle, 4,083 pigs and 3,687,624 chickens were culled during the period.
(i) in Zambian Kwacha
Decrease
Gains arising Gains arising due to
from fair from fair
Increase value value harvest/
attributable attributable
As at due to to to transferred As at 31
physical
1 Oct 2017 purchases changes price changes to inventory Mar 2018
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Standing
Crops 45,796 146,682 138,126 (4,377) (112,384) 213,843
Feedlot cattle 46,507 94,975 41,436 - (127,372) 55,546
Dairy Cattle 45,074 14,363 2,593 - (21,402) 40,628
Pigs 3,688 3,723 1,755 94 (5,231) 4,029
Chickens 26,792 131,925 33,820 - (167,225) 25,312
Total 167,857 391,668 217,730 (4,283) (433,614) 339,358
=========== ========== ============== ============== ============= =========
(ii) in US Dollars
Gains arising Gains arising
From fair from fair Decrease
value value due to
Increase attributable attributable to harvest/ As at
As at 1 Foreign due to to physical to price transferred 31 Mar
Oct 2017 exchange purchases changes changes to inventory 2018
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Standing Crops 4,736 847 14,816 13,952 (442) (11,352) 22,557
Feedlot cattle 4,811 135 9,593 4,185 - (12,866) 5,858
Dairy Cattle 4,660 75 1,451 262 - (2,162) 4,286
Pigs 381 10 376 177 9 (528) 425
Chickens 2,771 49 13,326 3,416 - (16,891) 2,671
Palm Plantation 6,488 167 813 15 - (9) 7,474
---------- ---------- ----------- ---------------- ----------------- -------------- ---------
Total 17,359 1,116 39,562 21,992 (433) (43,799) 35,797
========== ========== =========== ================ ================= ============== =========
(b) 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
Gains/(losses) Gains arising
arising from from fair
fair value value Decrease
As at attributable attributable due to harvest/
1 Oct Increase to physical to price transferred As at
2016 due to purchases changes changes to inventory 31 Mar 2017
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/(losses) Gains arising
arising from from fair
fair value value Decrease
As at Increase attributable attributable due to harvest/ As at
1 Oct Foreign due to to physical to price transferred 31 Mar
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
========= ========== =========== =============== ================ ================= =========
(c) 30 September 2017
Biological assets comprise standing crops, feedlot and standing cattle, dairy cattle, pigs, chickens and palm oil plantation. At 30 September 2017 there were 13,076 cattle (10,620 feedlot cattle and 2,456 dairy cattle) and 565,666 chickens (526,403 layers and 39,263 broilers), and 4,300 pigs. A total of 22,733 feedlot cattle, 1,358 dairy cattle, 9,295 pigs and 7,425,578 chickens were culled during the year.
(i) in Zambian Kwacha
Gains/(losses) Decrease
arising Gains arising due to
from fair from fair
Increase value value harvest/
attributable attributable
As at 1 due to to to transferred As at 30
Oct 2016 purchases physical changes price changes to inventory Sept 2017
ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s ZMW'000s
Standing Crops 60,377 297,156 197,453 (3,452) (505,738) 45,796
Feedlot Cattle 52,871 257,178 141,884 - (405,426) 46,507
Dairy Cattle 46,103 60,922 110,529 - (172,480) 45,074
Pigs 4,034 9,588 2,221 (39) (12,116) 3,688
Chickens 23,641 280,441 16,011 - (293,301) 26,792
Total 187,026 905,285 468,098 (3,491) (1,389,061) 167,857
========= ========== ================= ============== ================== ==========
(ii) in US Dollars
Gains/ (losses) Gains arising
arising from from fair
fair value value Decrease
As at Increase attributable attributable due to harvest
1 Oct Foreign due to to physical to price / transferred As at 30
2016 exchange purchases changes changes to inventory Sept 2017
USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s USD'000s
Standing
Crops 6,031 237 31,214 20,741 (363) (53,124) 4,736
Feedlot
Cattle 5,282 197 27,015 14,904 - (42,587) 4,811
Dairy Cattle 4,606 163 6,399 11,610 - (18,118) 4,660
Pigs 403 15 1,007 233 (4) (1,273) 381
Chickens 2,362 78 29,458 1,682 - (30,809) 2,771
Total 18,684 690 95,093 49,170 (367) (145,911) 17,359
========= ========== =========== ================ ================= ================ ===========
9. Cash and cash equivalents
31 Mar 2018 31 Mar 2017 30 Sept 2017
--------------------- --------------------- ---------------------
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
---------- --------- ---------- --------- ---------- ---------
Cash in hand and
at bank 61,857 6,525 56,416 5,840 62,518 6,465
Bank overdrafts (333,345) (35,163) (307,809) (31,864) (167,666) (17,339)
(271,488) (28,638) (251,393) (26,024) (105,148) (10,874)
========== ========= ========== ========= ========== =========
(a) Banking facilities
The Group has overdraft facilities totalling ZMW74.6 million (2017: ZMW35.137 million) and USD5 million (2017: USD5.1 million) with Citibank Zambia Limited. The Citibank overdrafts bear interest rates of Bank of Zambia Policy rate plus 5 per cent. for the Kwacha facility and 6 month USD LIBOR rate plus 4.25 per cent. for the USD facility.
The Group has overdraft facilities totalling ZMW30 million (2017: ZMW30 million) and USD2 million (2017: USD2 million) with Standard Chartered Bank Zambia Plc. The Standard Chartered Bank overdrafts bear interest rates of Bank of Zambia Policy rate plus 5 per cent. on the Kwacha facilities and 1 month USD LIBOR rate plus 4 per cent on the USD facilities.
The Group has overdraft facilities totalling ZMW98.3 million (2017: ZMW98.3 million) with Zanaco Bank Plc. The Zanaco Bank overdraft bears an interest rate of Bank of Zambia Policy rate plus 5 per cent. on the Kwacha facility.
The Group has overdraft facilities totalling ZMW57.5 million (2017: ZMW54.7 million) and USD2 million (2017: USD6.3 million) with Stanbic Bank Zambia Limited. The Stanbic Bank overdrafts bear interest rate of Bank of Zambia Policy rate plus 5 per cent. on the Kwacha facility and 3 month USD LIBOR rate plus 4 per cent. on the USD facility.
(b) Bank overdrafts
31 Mar 2018 31 Mar 2017 30 Sept 2017
--------------------- --------------------- ------------------------
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
Bank overdrafts represented
by:
Zanaco Bank PLC (97,189) (10,252) (85,398) (8,840) (96,245) (9,953)
Citibank Zambia Limited (119,293) (12,583) (71,690) (7,422) (56,930) (5,887)
Stanbic Bank Zambia Limited (74,236) (7,831) (100,942) (10,449) (10,201) (1,055)
Standard Chartered Bank
Zambia PLC (42,627) (4,497) (49,779) (5,153) (4,290) (444)
(333,345) (35,163) (307,809) (31,864) (167,666) (17,339)
========== ========= ========== ========= ============ ==========
(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 (USD14 million and ZMW 8 million), Zanaco Bank Plc (USD4 million and ZMW98.3 million), and Stanbic Bank Zambia Limited (ZMW78.5 million).
All overdrafts are annual revolving facilities.
10. Interest bearing liabilities
31 Mar 2018 31 Mar 2017 30 Sept 2017
ZMW'000s USD'000s ZMW'000s USD'000s ZMW'000s USD'000s
---------- --------- ---------- --------- ---------- ---------
DEG - Deutsche Investitions
und Entwicklungsgesellschaft
MBH (note (a)) 197,658 20,850 99,643 10,315 220,573 22,810
Zanaco Bank Plc (note (b)) 19,929 2,102 26,571 2,751 26,571 2,748
International Finance Corporation
(note (d)) 140,181 14,787 184,681 19,118 159,174 6,230
Standard Chartered Bank Zambia
PLC (note (c)) 136,774 14,428 68,008 7,040 60,248 16,460
494,542 52,167 378,903 39,224 466,566 48,248
========== ========= ========== ========= ========== =========
Less: short term portion of
long term funding (repayable
within next 12 months) (210,190) (22,172) (145,314) (15,043) (138,328) (14,304)
284,352 29,995 233,589 24,181 328,238 33,944
========== ========= ========== ========= ========== =========
(a) (i) DEG Term Loan 2
The Group had a loan facility of USDnil (2017: USD1.795 million and original amount of USD25 million) from DEG. Interest on the loan was 4.55 per cent. above the 6 month USD LIBOR rate per annum payable six-monthly in arrears. The principal was repayable in 14 bi-annual instalments of USD1,785,000 commencing November 2010 and expired in May 2017.
The USD25 million DEG term loan was 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 has a loan facility of USD7.1 million (2017: USD:8.25 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:
-- 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).
(iii) DEG Term Loan 4
The group has a loan facility of USD13.75 million (2017: USD:nil million and original amount of USD15 million). Interest on the loan is 5.75 per cent. above the 6 month USD LIBOR rate per annum payable quarterly in arrears. The capital is repayable in 12 quarterly instalments of USD1,250,000 commencing March 2018 and expiring in March 2023.
The USD15 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); and
-- 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 ZMW19.929 million (2017: ZMW33.2 million) with Zanaco Bank Plc. Interest on the loan is 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).
(c) Standard Chartered Bank Zambia Plc
The Group has structured agricultural facilities with an annual revolving limit totalling USD20 million (2017: USD20 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 180 days. The balance on the facilities at period end was USD14.4 million (2017: USD7.04 million). Interest on the facilities is 3 month USD LIBOR rate plus 3.25 per cent. per annum calculated on the daily overdrawn balances.
(d) International Finance Corporation Loan
(i) International Finance Corporation Loan 1
The Group had a loan facility of USDnil (USDnil in Zambia and USDnil in Nigeria) [2017: USD0.636 million in Zambia and USD0.284 million in Nigeria and original amount of USD10 million] from IFC. Interest on the loan was 4.75 per cent. above the 6 month USD LIBOR rate per annum payable six-monthly in arrears. The principal was repayable in 11 equal bi-annual instalments of USD636,364 (Zambeef) and USD283,634 (Nigeria) commencing June 2012 and expired in June 2017.
The portion of the loan attributable to Zambia was secured through a first ranking legal mortgage over Plots 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 USD11.724 million and ZMW29.076 (2017: USD14.483 million in USD and ZMW35.917 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.s 4450, 4451 & 5388 (Mpongwe farm).
12. Contingent liabilities
Certain legal cases are pending against the Company in the Courts of Law. In the opinion of the Directors, and the Company lawyers, none of these cases will result in any material loss to the Company for which a provision is required.
13 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 2018 and 30 September 2017.
Level 1 Level 2 Level 3 Total
31 March 2018 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Financial Assets
---------- ---------- --------- ----------
Other forwards exchange
contracts inventory
(CMA) 136,774 136,774
---------- --------- ----------
Total Assets 136,774 136,774
---------- --------- ----------
Financial Liabilities
---------- ---------- --------- ----------
US-dollar loans (308,803) (308,803)
---------- --------- ----------
Total Liabilities (308,803) (308,803)
---------- --------- ----------
Net fair value (172,029) (172,029)
---------- --------- ----------
Level 1 Level 2 Level 3 Total
30 September 2017 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Financial Assets
---------- ---------- --------- ----------
Other forwards exchange
contracts inventory
(CMA) - 60,248 - 60,248
---------- ---------- --------- ----------
Total Assets - 60,248 - 60,248
---------- ---------- --------- ----------
Financial Liabilities
---------- ---------- --------- ----------
US-dollar loans - (347,279) - (347,279)
---------- ---------- --------- ----------
Total Liabilities - (347,279) - (347,279)
---------- ---------- --------- ----------
Net fair value - (287,031) - (287,031)
---------- ---------- --------- ----------
Level 1 Level 2 Level 3 Total
31 March 2018 USD'000 USD'000 USD'000 USD'000
Financial Assets
---------- --------- --------- ---------
Other forwards exchange
contracts inventory
(CMA) - 14,428 - 14,428
---------- --------- --------- ---------
Total Assets - 14,428 - 14,428
---------- --------- --------- ---------
Financial Liabilities
---------- --------- --------- ---------
US-dollar loans - (32,574) - (32,574)
---------- --------- --------- ---------
Total Liabilities - - - -
---------- --------- --------- ---------
Net fair value - (18,146) - (18,146)
---------- --------- --------- ---------
Level 1 Level 2 Level 3 Total
30 September 2017 USD'000 USD'000 USD'000 USD'000
Financial Assets
---------- --------- --------- ---------
Other forwards exchange
contracts inventory
(CMA) - 6,230 - 6,230
---------- --------- --------- ---------
Total Assets - 6,230 - 6,230
---------- --------- --------- ---------
Financial Liabilities
---------- --------- --------- ---------
US-dollar loans - (35,913) - (35,913)
---------- --------- --------- ---------
Total Liabilities - (35,913) - (35,913)
---------- --------- --------- ---------
Net fair value - (29,683) - (29,683)
---------- --------- --------- ---------
There were no transfers between Level 1 and Level 2 in 2018 or 2017.
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% (2017: 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 2018 and 30 September 2017:
Level 1 Level 2 Level 3 Total
31 March 2018 ZMW'000 ZMW'000 ZMW'000 ZMW'000
Property, plant and
equipment:
---------- ---------- --------- ----------
Land held for production
in Zambia - 1,185,976 - 1,185,976
---------- ---------- --------- ----------
Office building in Zambia - 39,407 - 39,407
---------- ---------- --------- ----------
Level 1 Level 2 Level 3 Total
30 September 2017 ZMW'000 ZMW'000 ZMW'000 ZMW'000
---------- ---------- --------- ----------
Property, plant and
equipment:
---------- ---------- --------- ----------
Land held for production
in Zambia - 1,178,526 - 1,178,526
---------- ---------- --------- ----------
Office building in Zambia - 39,407 - 39,407
---------- ---------- --------- ----------
Level 1 Level 2 Level 3 Total
31 March 2018 USD'000 USD'000 USD'000 USD'000
---------- ---------- --------- ----------
Property, plant and
equipment:
---------- ---------- --------- ----------
Land held for production
in Zambia - 125,103 - 125,103
---------- ---------- --------- ----------
Office building in Zambia - 4,157 - 4,157
---------- ---------- --------- ----------
Level 1 Level 2 Level 3 Total
30 September 2017 USD'000 USD'000 USD'000 USD'000
---------- ---------- --------- ----------
Property, plant and
equipment:
---------- ---------- --------- ----------
Land held for production
in Zambia - 121,874 - 121,874
---------- ---------- --------- ----------
Office building in Zambia - 4,075 - 4,075
---------- ---------- --------- ----------
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 2017.
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.
Level 3 fair value measurement
The Group did not have any financial instruments classified within level 3(30 September 2017: ZMW nil: 31 March 2017: ZMW nil) therefore no reconciliation of balances is required.
14. Assets held for sale
During the previous period management decided to sell 90% of a 100% owned subsidiary, Zampalm Limited (Zampalm). The sale was concluded on 6 April 2018. As such the assets and liabilities of Zampalm are disclosed in accordance with IFRS 5.
The income generated by assets held for sale was generated as follows:
March 2018 March 2018
ZMW'000 USD'000
Revenue 86 9
----------- -----------
Cost of sales (6,244) (631)
----------- -----------
Administration costs (4,804) (485)
----------- -----------
Operating loss (10,962) (1,107)
----------- -----------
Depreciation (328) (33)
----------- -----------
Loss from discontinued operations
before tax (11,290) (1,140)
----------- -----------
Tax (expense)/credit - -
----------- -----------
Loss for the period (11,290) (1,140)
----------- -----------
The assets and liabilities of the unit held for sale are as follows:
March 2018 March 2018
ZMW'000 USD'000
Property, plant and equipment 48,317 5,097
----------- -----------
Plantation development expenditure 115,443 12,177
----------- -----------
Biological assets 70,856 7,474
----------- -----------
Total non-current assets 234,616 24,748
----------- -----------
Inventories 4,136 436
----------- -----------
Trade and other receivables 558 59
----------- -----------
Cash and cash equivalents 627 66
----------- -----------
Total current assets 5,321 561
----------- -----------
Assets classified as held for sale 239,937 25,309
----------- -----------
Interest bearing liabilities - -
----------- -----------
Deferred liability - -
----------- -----------
Deferred income tax - -
----------- -----------
Total non-current liabilities - -
----------- -----------
Trade and other payables 12,092 1,276
----------- -----------
Total current liabilities 12,092 1,276
----------- -----------
Liabilities classified as held for
sale 12,092 1,276
----------- -----------
The cash flow effects of the unit held for sale are as follows:
March 2018 March 2018
ZMW'000 USD'000
Cash inflow from operating activities (11,290) (1,140)
----------- -----------
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.
On 6 April 2018, Zambeef completed the sale of 90% of Zambeef's shareholding in its wholly owned subsidiary Zampalm Limited, to the state-owned Industrial Development Corporation (IDC) for a cash consideration of USD16 million.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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June 06, 2018 02:00 ET (06:00 GMT)
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