KAKUZI LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1
Kakuzi Limited
Annual Report and Financial Statements
For the year ended 31 December 2014
Table of Contents
Company information
Notice of meeting
Chairman’s statement
Directors’ report
Statement of Directors’ responsibilities
Statement on corporate governance
Report of the independent auditor
Financial statements:
Consolidated statement of comprehensive income
Consolidated statement of financial position
Company statement of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Notes
Five year record
Major stockholders and distribution schedule
Form of proxy (Annual General Meeting)
Page No
1
2
3 – 4
5 – 6
7
8
9 – 10
11
12
13
14
15
16
17 – 56
57
58
59
Kakuzi Limited
Company Information
For the year ended 31 December 2014
COUNTRY OF INCORPORATION
The Company is incorporated in Kenya under the Companies Act.
DIRECTORS
The Directors who held office during the year and to the date of this report were:-
Mr. K W Tarplee* Chairman
Mr. G H Mclean*
Mr. C J Flowers* Managing Director
Mr. K R Shah
Mr. N Nganga
Mr. C J Ames*
Mr. D M Ndonye
Mr. S N Waruhiu
* British
REGISTERED OFFICE
REGISTRARS
Main Office
Punda Milia Road, Makuyu
P O Box 24
01000 THIKA
Telephone (060) 2033012
E-mail: mail@kakuzi.co.ke
Custody & Registrars Services Limited
Bruce House, 6th Floor
Standard Street
P O Box 8484
00100 NAIROBI
Telephone (020) 2230242
Facsimile (020) 2211773
SUBSIDIARY COMPANIES
AUDITOR
Estates Services Limited
Kaguru EPZ Limited
(100% holding)
(100% holding)
PricewaterhouseCoopers
PwC Tower
Waiyaki Way/Chiromo Road, Westlands
P O Box 43963
00100 NAIROBI
SECRETARY
BANKERS
John L G Maonga
Maonga Ndonye Associates
Jadala Place, Ngong Lane, Ngong Road
P. O. Box 73248
00200 NAIROBI
Telephone (020) 2149923
STOCK UNITS
Kenya Commercial Bank Limited
P O Box 30081
00100 NAIROBI
Commercial Bank of Africa Limited
P O Box 45136
00100 NAIROBI
The Company’s stock units are listed on the Nairobi Securities Exchange and the London Stock Exchange.
1
Kakuzi Limited
Notice of Annual General Meeting
NOTICE is hereby given that the Eighty Seventh Annual General Meeting of the Members of the
Company will be held at Nairobi Serena Hotel, Nairobi on Tuesday, 26 May 2015 at 12.00 noon for the
following purposes:-
1. To read the notice convening the meeting.
2. To table the proxies and confirm the presence of a quorum.
3. To approve the minutes of the Eighty Sixth Annual General Meeting held on 20 May 2014.
4. To receive, consider and adopt the Financial Statements for the year ended 31 December 2014
together with the reports of the Chairman, the Directors and the Independent Auditors thereon.
5. To declare a first and final dividend of 75% equivalent to Shs 3.75 per stock unit (2013: Shs 3.75) for
the Financial Year ended 31 December 2014.
6. To re-elect Messrs Christopher John Ames and Graham Harold Mclean, the Directors retiring by
rotation in accordance with Article 117 of the Company’s Articles of Association and, being eligible,
offer themselves for re-election.
7.
To approve the Directors’ remuneration as shown in the Financial Statements for the year ended 31
December 2014.
8.
To note that Messrs PricewaterhouseCoopers continue in office as Auditors of the Company in
accordance with the provisions of Section 159 (2) of the Companies Act (Cap 486) and to authorise
the Directors to fix their remuneration for the ensuing Financial Year.
9.
To transact any other business of an Annual General Meeting of which due notice has been received.
BY ORDER OF THE BOARD
J L G MAONGA
COMPANY SECRETARY
24 March 2015
Note:
A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote on
his/her behalf and such proxy need not be a member of the Company.
2
Kakuzi Limited
Chairman’s Statement
For the year ended 31 December 2014
RESULTS
The profit before income tax was Kshs 232.8 million which was similar to the 2013 level (Kshs 239.3
million). The net gain from biological assets within the above figure was Kshs 79.3 million being lower
than 2013 (Kshs 96.3 million). The latter figure has no effect on our cash position which remained strong.
The earning per stock unit reduced from Kshs 8.42 to Kshs 8.17 (3%). Avocados were the significant
contributor to profits mitigating the downward trend on return on tea for 2014. Other operational units
produced a positive contribution to cash.
OPERATIONS
The first half of the year was relatively dry in both Nandi Hills and Makuyu. However, this improved in
Nandi Hills during the second half of the year but Makuyu remained relatively dry. Strategic dam levels
which support the horticultural operations were at 51% capacity at the year end. Avocado production was
up by almost 40% with our own estate and outgrowers showing an encouraging improvement over 2013
levels. Selling price in both Euros and Kshs terms were down overall from last year. Market demand was
reasonable but at times we were competing with high exports from both Peru and South Africa which
dampened prices. Logistics continue to be problematic. During peak production periods our cold storage
facilities reached close to capacity before trucks arrived for collection and prompt shipping continues to be
a challenge. We now have 414 hectares of avocado planted. The improvement in outgrowers throughput
was encouraging and we continue to give emphasis to this area concentrating on quality, collection and
fair returns. On tea, although production was up by 7.5% at 1,730 tonnes, market prices were very poor
due to a high supply situation in Kenya. We barely broke even on this operation and there were months
when sales returns were below our cost of production. We are now starting to see small yields on our
macadamia plantation which now stands at 698 Hectares. We had our own nuts cracked by an outside
party but dealt with our own marketing. This resulted in a small profit accruing. On our forestry operation
as mentioned in my half year report, we continue with clearing areas of sub optimum stands. Operating
profit was thus down but continued to give a small but useful return. We now have 1,512 hectares planted
to commercial forestry, at Makuyu, of which some 480 hectares can be considered to be sub optimum
stands. This together with indigenous plantations so necessary for the conservation of our water resources
gives us cover of 2,025Has or 16.5% of our land covered to Forestry which is ahead of Government
guidelines of 10% of forest cover. Our cattle herd remain at over 4,000 heads. We are confident that this
level can be sustained given more intensive land management, even with the new arable project. Again a
positive contribution to cash flow was made. Our fresh pineapple and those from the Joint Project showed
similar returns to last year. Our arable project did not progress as planned during the year mainly due to
delays in receiving heavy machinery necessary for preparing the black cotton soil. Some 500 hectares are
cleared and 350 hectares ripped in preparation for ploughing at the year end.
DEVELOPMENT
We will continue with our Macadamia plantings up to 1,006 hectares over the next 3 years and with the
encouraging signs we are now getting from our existing plantations, we plan to start work on our cracking
facility in 2015 for completion to receive the 2016 crop. This will be a major Capital Expenditure project.
An increase in avocado development is planned over coming years and strong emphasis will continue to
be placed on encouraging smallholder production yields. We expect to have cleared and ploughed 900
hectares of land during the coming year on our arable development and planted 700 hectares. At this
stage malting barley is considered to be the most suitable crop. We continue with the acceleration of our
Corporate Social Responsibility initiatives and during the year received an International Award from the E
U African Chamber of Commerce for work to improve food security through the Kitchen Garden concept.
Kakuzi also won the prestigious Global Gap 2014 Award for work on water conservation. This was
presented in Abu Dhabi. As mentioned in previous reports our philosophy is to continue to invest in long
term agricultural projects.
3
Kakuzi Limited
Chairman’s Statement (continued)
For the year ended 31 December 2014
STAFF & DIRECTORS
As is expected in Agriculture, we continue to have to manage to the best of our ability within the
uncertainties of the weather and market forces. Staff have worked hard in this respect. We have also had
to manage the transition of our Managing Director. Graham Mclean left us for a well-deserved Board level
position within the Parent Company and Chris Flowers has managed the transition with energy and
professionalism. It is appropriate to thank Graham for his positive contribution made to the continuing
development of Kakuzi. We also tragically lost a senior level Manager, Paul Epsom, at the start of the
year and the transition to take on his role effectively has not been easy. My fellow Directors continue with
a high level of Board professionalism.
DIVIDEND
We continue to have a strong cash flow and balance sheet and with profits similar to levels of last year,
the Directors have recommended a dividend of Shs 3.75 per stock unit.
PROSPECTS
We have experienced very dry conditions in both Nandi and Makuyu since the start of this year but the
rains are at last showing signs of breaking which will be a relief particularly in Makuyu where dam levels
are very low and cattle pastures poor. Although the avocado crop was good in 2014 this was an ‘on year’
and we do not expect similar levels for 2015. Tea prices have improved due to the shortage of supply but
the lower crop negates to some extent the better prices as regards profitability.
The Union Agreements both in Nandi and Makuyu are still to be agreed. There are positive signs for the
future with lower fuel prices coupled with overall inflation being brought under control which we hope will
translate into lower operational costs. However, the markets to which we sell our main products overseas
are still somewhat in economic turmoil. This, together with the important factors of weather trends, which
are showing significant swings and, at present, the significant weakness of the Euro make it impossible to
predict our returns for 2015.
K W TARPLEE
CHAIRMAN
24 March 2015
4
Kakuzi Limited
Directors’ Report
For the year ended 31 December 2014
In accordance with section 157 of the Kenya Companies Act, the directors submit their report together with
the audited financial statements for the year ended 31 December 2014, which disclose the state of affairs
of the Group and the Company.
PRINCIPAL ACTIVITIES
The principal activities of the company comprise:
• The cultivation of tea
• Growing, packing and selling of avocados
• Livestock farming
• Growing and selling of pineapples
• Forestry and macadamia development
RESULTS AND DIVIDEND
The net profit for the year of Shs 160,205,000 (2013: Shs 165,028,000) has been added to retained
earnings. The directors recommend the approval of a first and final dividend of Shs 3.75 (2013: Shs 3.75)
per stock unit.
The results for the year are set out on pages 11 to 56 in the attached financial statements.
ANNUAL GENERAL MEETING
The Eighty Seventh Annual General Meeting of the company will be held in the Ballroom, Nairobi Serena
Hotel, Nairobi, on Tuesday 26 May 2015 at 12.00 noon.
DIRECTORS
The directors who held office during the year and to the date of this report are set out on page 1.
The directors’ interests in the share capital of the company are listed below: -
At 31 December 2014
Beneficial Non-beneficial
Stock units
Stock units
At 31 December 2013
Beneficial Non-beneficial
Stock units
Stock units
Mr. K W Tarplee
Mr. G H Mclean
Mr. C J Flowers
Mr. K R Shah
Mr. N Nganga
Mr. C J Ames
Mr. D M Ndonye
Mr. S N Waruhiu
-
100
-
200
1,000
-
-
-
-
100
-
200
1,000
-
-
-
75
-
-
-
-
300
-
-
75
-
-
-
-
300
-
-
5
Kakuzi Limited
Directors’ Report (continued)
For the year ended 31 December 2014
In accordance with Article 117 of the Company’s Articles of Association, Messrs Christopher John Ames
and Graham Harold Mclean retire at this meeting by rotation and, being eligible, offer themselves for re-
election.
AUDITOR
The Company’s auditor, PricewaterhouseCoopers, continues in office in accordance with Section 159(2) of
the Kenya Companies Act.
By order of the Board
K R Shah
Director
24 March 2015
6
Kakuzi Limited
Statement of Directors’ Responsibilities
For the year ended 31 December 2014
The Kenyan Companies Act requires the directors to prepare financial statements for each financial year
which give a true and fair view of the state of affairs of the Group and of the Company as at the end of the
financial year and of the Group’s income statement of comprehensive income. It also requires the
directors to ensure that the Company maintains proper accounting records that disclose, with reasonable
accuracy, the financial position of the Company. The directors are also responsible for safeguarding the
assets of the Company.
The directors accept responsibility for the preparation and fair presentation of financial statements that are
free from material misstatements whether due to fraud or error. They also accept responsibility for:
(i) Designing, implementing and maintaining internal control as they determine necessary to enable
the preparation of financial statements that are free from material misstatements, whether due to
fraud or error;
(ii) Selecting and applying appropriate accounting policies; and
(iii) Making accounting estimates and judgments that are reasonable in the circumstances.
The Directors are of the opinion that the financial statements give a true and fair view of the financial
position of the Company at 31 December 2014 and of the Group’s and Company’s financial performance
and cash flows for the period then ended in accordance with International Financial Reporting Standards
and the requirements of the Kenyan Companies Act.
Nothing has come to the attention of the directors to indicate that the Company will not remain a going
concern for at least the next twelve months from the date of this statement.
Approved by the board of directors on 24 March 2015 and signed on its behalf by:
K R Shah
Director
C J Flowers
Director
7
Kakuzi Limited
Statement on Corporate Governance
For the year ended 31 December 2014
The directors endorse the spirit of the Guidelines on Corporate Governance Practices by Public Listed
Companies in Kenya issued by the Capital Markets Authority.
The board currently comprises eight directors. Six are non-executive directors, of which three are
considered independent. The remaining two directors are executive directors.
The board has established the following committees:
1.
2.
The Audit and Risk committee is chaired by Mr. N Nganga. The other members of the committee
are Mr. K W Tarplee, Mr. D M Ndonye and Mr. S N Waruhiu.
The Nominating committee, constituted as a committee of the entire board, chaired by Mr. N
Nganga.
Every director, with the exception of the managing director, retires by rotation in accordance with the
Company’s Articles of Association.
In reviewing corporate governance, the directors consider it appropriate to take into account the
Company’s status as a subsidiary of Camellia Plc and the size of the Company’s operations.
The Company is compliant with the Guidelines on Corporate Governance with the exception of the
following non-prescriptive guidelines:
Rule 3.1.3 (i) The nominating committee is constituted as a committee of the entire board, and new
board appointments are considered by the full board.
Rule 3.1.4 (i) The remuneration of directors is considered by the nominating committee which
comprises the whole board.
AUDIT AND RISK COMMITTEE
During the year, the Audit and Risk committee met twice. The committee approved the annual internal
audit plan which has been monitored by monthly internal audit reports. The committee is satisfied with the
Group’s system of internal financial control. The committee also reviews the external auditors plan at the
commencement of the annual audit and receives the external auditors report at the conclusion of the
annual audit.
COMMUNICATION WITH SHAREHOLDERS
The Company is committed to equitable treatment of its shareholders including the non controlling and
foreign shareholders and ensures that all shareholders receive full and timely information about its
performance through the distribution of the annual report and financial statements and half yearly interim
financial report and through compliance with the relevant continuing obligations under the Capital Markets
Authority Act. The Company’s results are advertised in the press and released to the stock exchange
within the prescribed period at each half-year and year end.
K R Shah
24 March 2015
C J Flowers
24 March 2015
8
REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF
KAKUZI LIMITED
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Kakuzi Limited (the
Company) and its subsidiaries (together, the Group), as set out on pages 11 to 56. These financial
statements comprise the consolidated statement of financial position at 31 December 2014 and the
consolidated statement of comprehensive income, statement of changes in equity and statement of
cash flows for the year then ended, together with the statement of financial position of the Company
standing alone at 31 December 2014 and the statement of changes in equity of the Company for the
year then ended, and a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards and with the requirements of the Kenyan
Companies Act and for such internal control, as the directors determine necessary, to enable the
preparation of financial statements that are free from material misstatements, whether due to fraud or
error.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform our audit to obtain reasonable
assurance that the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Group and of the Company at 31 December 2014 and of the financial performance and
cash flows of the Group for the year then ended in accordance with International Financial Reporting
Standards and the Kenya Companies Act.
PricewaterhouseCoopers CPA. PwC Tower, Waiyaki Way/Chiromo Road, Westlands
P O Box 43963 – 00100 Nairobi, Kenya
T: +254 (20)285 5000 F: +254 (20)285 5001 www.pwc.com/ke
Partners: A Eriksson K Muchiru M Mugasa F Muriu P Ngahu A Njeru R Njoroge B Okundi K Saiti R Shah9
9
REPORT OF THE INDEPENDENT AUDITOR TO THE SHAREHOLDERS OF
KAKUZI LIMITED (CONTINUED)
Report on other legal requirements
As required by the Kenyan Companies Act we report to you, based on our audit, that:
i) we have obtained all the information and explanations which to the best of our knowledge and
belief were necessary for the purposes of our audit;
ii) in our opinion proper books of account have been kept by the Company, so far as appears from
our examination of those books;
iii) the Company’s statement of financial position and statement of comprehensive income are in
agreement with the books of account.
The engagement partner responsible for the audit resulting in this independent auditor’s report is CPA
Michael Mugasa – P/No 1478.
Certified Public Accountants
Nairobi
24 March 2015
10
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Consolidated statement of comprehensive income
Sales
Year ended 31
December
2014
Shs’000
Notes
2013
Shs’000
5
1,689,917
1,384,375
Gains arising from changes in fair value less costs to sell of biological assets 6
79,313
96,317
Cost of production
Gross profit
Other income
Distribution costs
Operating profit
Finance income
Finance cost
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
1,769,230
(1,132,563)
1,480,692
(972,421)
636,667
508,271
6,402
(487,376)
8,451
(355,387)
155,693
161,335
84,791
(7,685)
77,971
-
7
8
8
232,799
239,306
11
(72,594)
(74,278)
160,205
165,028
Items that are not classified to profit and loss:
Remeasurement of post employment benefit obligations (net of tax)
11
(6,005)
11,275
Total comprehensive income
154,200
176,303
Earnings per share (Shs):
Basic and diluted earnings per stock unit
12
8.17
8.42
The notes on pages 17 to 56 are an integral part of these financial statements
11
Kakuzi Limited
Financial Statements
As at 31 December 2014
Consolidated statement of financial position
EQUITY
Share capital
Other reserves
Retained earnings
Proposed dividend
Total equity
Non current liabilities
Deferred income tax
Post employment benefit obligations
Total equity and non current liabilities
Non current assets
Property, plant and equipment
Biological assets
Prepaid operating lease rentals
Financial assets held to maturity
Non current receivables
Current assets
Inventories
Receivables and prepayments
Cash and bank balances
Financial assets held to maturity
Current liabilities
Payables and accrued expenses
Current income tax
Post employment benefit obligations
Net current assets
Notes
31 December
2014
Shs’000
31 December
2013
Shs’000
13
12
15
16
17
6
18
20
22
21
22
24
20
23
16
98,000
3,981
2,809,247
73,500
98,000
9,986
2,722,542
73,500
2,984,728
2,904,028
637,220
58,085
695,305
623,204
43,130
666,334
3,680,033
3,570,362
559,528
2,028,499
4,399
61,538
22,405
2,676,369
62,122
129,888
973,690
15,385
544,697
1,905,821
4,404
76,923
15,043
2,546,888
77,365
173,147
904,758
15,385
1,181,085
1,170,655
150,147
16,519
10,755
177,421
129,610
7,805
9,766
147,181
1,003,664
1,023,474
3,680,033
3,570,362
The notes on pages 17 to 56 are an integral part of these financial statements
The financial statements on pages 11 to 56 were approved for issue by the board of directors on 24 March
2015 and signed on its behalf by:
K R Shah
Director
C J Flowers
Director
12
Kakuzi Limited
Financial Statements
As at 31 December 2014
Company statement of financial position
EQUITY
Share capital
Other reserves
Retained earnings
Proposed dividend
Total equity
Non current liabilities
Deferred income tax
Post employment benefit obligations
Total equity and non current liabilities
Non current assets
Property, plant and equipment
Biological assets
Prepaid operating lease rentals
Investment in subsidiaries
Financial assets held to maturity
Non current receivables
Current assets
Inventories
Receivables and prepayments
Cash and bank balances
Financial assets held to maturity
Current liabilities
Payables and accrued expenses
Current income tax
Post employment benefit obligations
Net current assets
Notes
31 December
2014
Shs’000
31 December
2013
Shs’000
13
12
15
16
17
6
18
19
20
22
21
22
24
20
23
16
98,000
3,981
2,805,106
73,500
98,000
9,986
2,718,401
73,500
2,980,587
2,899,887
637,220
58,085
695,305
623,204
43,130
666,334
3,675,892
3,566,221
559,528
2,028,499
4,399
4,295
61,538
22,405
2,680,664
62,122
129,888
973,690
15,385
544,697
1,905,821
4,404
4,295
76,923
15,043
2,551,183
77,365
173,147
904,758
15,385
1,181,085
1,170,655
158,530
16,572
10,755
185,857
137,993
7,858
9,766
155,617
995,228
1,015,038
3,675,892
3,566,221
The notes on pages 17 to 56 are an integral part of these financial statements
The financial statements on pages 11 to 56 were approved for issue by the board of directors on 24 March
2015 and signed on its behalf by:
K R Shah
Director
13
C J Flowers
Director
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Consolidated statement of changes in equity
Year ended 31 December 2014
Share
capital
Shs’000
Other
reserves
Shs’000
Retained
earnings
Shs’000
Proposed
dividend
Shs’000
Total
equity
Shs’000
At start of year
98,000
9,986 2,722,542
73,500
2,904,028
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Remeasurement of post employment benefit
obligations (net of tax) (Note 11)
Transactions with owners:
Dividends to equity owners of the company:
- Final for 2013
- Proposed for 2014
-
-
-
-
-
-
-
160,205
-
160,205
(6,005
)
-
(6,005
)
160,205
-
-
)
(6,005
154,200
-
-
-
(73,500 )
(73,500 )
73,500
(73,500 )
-
-
(73,500
)
-
)
(73,500
At end of year
98,000
3,981 2,809,247
73,500
2,984,728
Year ended 31 December 2013
At start of year
98,000
(1,289 ) 2,631,014
73,500
2,801,225
Total comprehensive income for the year:
Profit for the year
Other comprehensive income:
Remeasurement of post employment benefit
obligations (net of tax) (Note 11)
Total
Transactions with owners:
Dividends to equity owners of the company:
- Final for 2012
- Proposed for 2013
-
-
-
-
-
-
-
165,028
-
165,028
11,275
-
11,275
165,028
-
-
11,275
176,303
-
-
-
(73,500 )
(73,500 )
73,500
(73,500 )
-
-
(73,500
)
-
)
(73,500
At end of year
98,000
9,986 2,722,542
73,500
2,904,028
The notes on pages 17 to 56 are an integral part of these financial statements.
14
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Company statement of changes in equity
Year ended 31 December 2014
Share
capital
Shs’000
Other
reserves
Shs’000
Retained
earnings
Shs’000
Proposed
dividend
Shs’000
Total
equity
Shs’000
At start of year
98,000
9,986 2,718,401
73,500
2,899,887
Total comprehensive income for the
year:
Profit for the year
Other comprehensive income:
Remeasurement of post employment benefit
obligations (net of tax) (Note 11)
Transactions with owners:
Dividends:
- Final for 2013
- Proposed for 2014
-
-
-
-
-
-
-
160,205
(6,005
)
-
(6,005)
160,205
-
-
-
160,205
(6,005
)
154,200
-
-
-
-
(73,500)
(73,500)
73,500
(73,500)
-
(73,500)
-
(73,500)
At end of year
98,000
3,981 2,805,106
73,500
2,980,587
Year ended 31 December 2013
At start of year
98,000
(1,289) 2,626,873
73,500
2,797,084
Total comprehensive income for the
year:
Profit for the year
Other comprehensive income:
Remeasurement of post employment
benefit obligations (net of tax) (Note 11)
Transactions with owners:
Dividends:
- Final for 2012
- Proposed for 2013
-
-
-
-
-
-
-
165,028
-
165,028
11,275
-
11,275
165,028
-
-
11,275
176,303
-
-
-
-
(73,500)
(73,500)
73,500
(73,500)
-
(73,500)
-
(73,500)
At end of year
98,000
9,986 2,718,401
73,500
2,899,887
The notes on pages 17 to 56 are an integral part of these financial statements.
15
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Consolidated statement of cash flows
Operating activities
Cash generated from operations
Interest received
Income tax paid
Notes
Year ended 31 December
2013
Shs’000
2014
Shs’000
25
8
455,261
84,791
(47,290 )
411,132
77,043
(29,703 )
Net cash from operating activities
492,762
458,472
Investing activities
Purchase of property, plant and equipment
Purchase of biological assets and development
Purchase of held to maturity investments
Proceeds from disposal of property, plant and equipment
Repayment of financial assets held to maturity
17
6
20
20
(63,818 )
(307,321 )
-
5,424
15,385
(38,401 )
(249,444 )
(100,000 )
2,399
7,692
Net cash used in investing activities
(350,330 )
(377,754 )
Financing activities
Dividend paid
12
(73,500 )
(73,500 )
Net cash used in financing activities
(73,500 )
(73,500 )
Increase in cash and cash equivalents
68,932
7,218
Movement in cash and cash equivalents
At start of year
Increase
904,758
68,932
897,540
7,218
At end of year
24
973,690
904,758
The notes on pages 17 to 56 are an integral part of these financial statements.
16
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes
1 General information
Kakuzi Limited is incorporated in Kenya under the Kenyan Companies Act as a public limited liability
company, and is domiciled in Kenya. The address of its registered office is:
Main Office
Punda Milia Road, Makuyu
P O Box 24
01000 THIKA
Kenya
The Company’s stock units are listed on the Nairobi Securities Exchange and the London Stock
Exchange.
For Kenyan Companies Act reporting purposes, the balance sheet is represented by the statement of
financial position and the profit or loss by the statement of comprehensive income, in these financial
statements.
2
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
(a) Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS). The measurement basis applied is the historical cost basis, except where otherwise
stated in the accounting policies below. The financial statements are presented in Kenya Shillings
(Shs), rounded to the nearest thousand.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires the Directors to exercise judgement in the process of applying
the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or
where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.
Changes in accounting policy and disclosures
(i) New and amended standards adopted by the Group
The following are the significant new and amended standards that have been adopted by the Group for
the first time for the financial year beginning 1 January 2014:
Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial
liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It
must also be legally enforceable for all counterparties in the normal course of business, as well as in
the event of default,
insolvency or bankruptcy. The amendment also considers settlement
mechanisms. The amendment did not have a significant effect on the Group financial statements.
Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-
financial assets. This amendment removed certain disclosures of the recoverable amount of CGUS
(cash generating units) which had been included in IAS 36 by the issue of IFRS 13. The amendment
did not have an impact on the Group financial statements.
17
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2
Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
Changes in accounting policy and disclosures (continued)
(i) New and amended standards adopted by the Group (continued)
Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of
derivatives and the continuation of hedge accounting. This amendment considers legislative changes
to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under IAS 39
novation of derivatives to central counterparties would result in discontinuance of hedge accounting.
The amendment provides relief from discontinuing hedge accounting when novation of a hedging
instrument meets specified criteria. The amendment did not have a significant effect on the Group
financial statements.
IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the
scope of IAS 37 ‘Provisions’. The interpretation addresses what the obligating event is that gives rise
to pay a levy and when a liability should be recognised. The amendment did not have a significant
effect on the Group financial statements.
(ii) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after 1 January 2014, and have not been applied in preparing these financial
statements. None of these is expected to have a significant effect on the financial statements of the
Group, except the following set out below:
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of
financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It
replaces the guidance in IAS 39 that relates to the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortised cost, fair value through OCI and fair
value through P&L. The basis of classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset. Investments in equity instruments are
required to be measured at fair value through statement of comprehensive income with the
irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a
new expected credit losses model that replaces the incurred loss impairment model used in IAS 39.
For financial liabilities there were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive income, for liabilities designated at
fair value through income statement of comprehensive income. IFRS 9 relaxes the requirements for
hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the
same as the one management actually use for risk management purposes. Contemporaneous
documentation is still required but is different to that currently prepared under IAS 39. The standard is
effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted.
The Company is yet to assess IFRS 9’s full impact on the Group financial statements.
IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and thus has the ability
to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18
‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for
annual periods beginning on or after 1 January 2017 and earlier application is permitted. The
Company is assessing the impact of IFRS 15 to the Group financial statements.
18
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2
Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
Changes in accounting policy and disclosures (continued)
(ii) New standards and interpretations not yet adopted (continued)
Amendment to IAS 41, ‘Agriculture’, and IAS 16, Property, plant and equipment. The amendments
change the financial reporting for bearer plants, such as tea bushes, avocado plantations, fruit trees,
and flower bushes. A bearer plant is defined as a living plant that is used in the production or supply of
agricultural produce, is expected to bear produce for more than one period and has a remote
likelihood of being sold as agricultural produce, except for incidental scrap sales. Previously, bearer
plants were not defined and bearer plants related to agricultural activity were included within the
scope of IAS 41. Bearer plants are used solely to grow produce. The only significant future economic
benefits from bearer plants arise from selling the agricultural produce that they create.
Bearer plants meet the definition of property, plant and equipment in IAS 16 and their operation is
similar to that of manufacturing. Accordingly, the amendments require bearer plants to be accounted
for as property, plant and equipment and included within the scope of IAS 16, instead of IAS 41.
Biological assets that meet the definition of bearer plants will be measured either at cost or revalued
amounts, less accumulated depreciation and impairment losses. Bearer plants are measured at
accumulated costs until maturity similar to the accounting for self-constructed items of property, plant
and equipment. The produce growing on bearer plants will remain within the scope of IAS 41 and are
measured at fair value less costs to sell with changes recognised in the income statement of
comprehensive income as the produce grows.
The amendments are to be applied retrospectively and are effective for annual periods beginning on or
after 1 January 2016. Early application is permitted.
Existing IFRS preparers who measure bearer plants at fair value less cost to sell are permitted to use
fair value as deemed cost for these assets upon adoption of the amendments.
The Company is still assessing the impact of the amendments to the Group financial statements.
(b) Consolidation of subsidiaries
Subsidiaries are all entities (including structured entities) over which the group has control. The Group
controls an entity when the group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
Executive Directors, who are responsible for allocating resources and assessing performance of the
operating segments and making strategic decisions.
19
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2
Summary of significant accounting policies (continued)
(d) Revenue recognition
Revenue comprises the fair value of the consideration received and receivable for the sale of goods
and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax
(VAT), returns, rebates and discounts and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the Group and when specific criteria have been met for each
of the Group’s activities as described below. The amount of revenue is not considered to be reliably
measurable until all contingencies relating to the sale have been resolved. The Group bases its
estimates on historical results, taking into consideration the type of customer, the type of transaction
and the specifics of each arrangement.
Revenue is recognised as follows:
i.
ii.
iii.
Sales are recognised upon delivery of products to the customer, the customer has accepted
the products and collectability of the related receivables is reasonably assured.
Interest income is recognised using the effective interest method
Dividends are recognised as income in the period in which the right to receive payment is
established.
(e) Functional currency and translation of foreign currencies
(i) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The financial statements are
presented in Kenyan Shillings which is the Company’s functional currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency of the respective entity using
the exchange rates prevailing at the dates of the 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 recognised in the statement of
comprehensive income.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are
presented in the income statement of comprehensive income within ‘finance income or cost’. All other
foreign exchange gains and losses are presented in the statement of income statement of
comprehensive income within ‘other income’ or ‘other expenses’.
(f) Property, plant and equipment
All categories of property, plant and equipment are initially recorded at historical cost and subsequently
stated at cost less depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the income statement within ‘cost of production’ during the financial period in which they are incurred.
20
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2
Summary of significant accounting policies (continued)
(f) Property, plant and equipment (continued)
Freehold land is not depreciated. Depreciation on other assets is calculated using the straight line
method to write cost to their residual values over their estimated useful life as follows:
Buildings, dams and improvements 4 – 40 years
Plant and machinery 10 – 13 years
Motor vehicles, tractors, trailers and implements 4 – 10 years
Furniture, fittings and equipment 3 – 8 years
Capital work in progress is not depreciated
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
reporting date.
Property, plant and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units).
Gains and losses on disposal of property, plant and equipment are determined by reference to their
carrying amounts and are taken into account in determining operating profit.
(g) Biological assets
Biological assets comprise tea, avocado, pineapple, macadamia, timber and livestock.
Biological assets are measured on initial recognition and at each reporting date at fair value less costs
to sell. Any gains or losses arising on initial recognition of biological assets and from subsequent
changes in fair value less costs to sell are recognised in the statement of comprehensive income in
the year in which they arise.
The fair value of livestock is determined based on market prices of livestock of similar age, breed and
genetic merit. The fair value of avocado and mature macadamia is determined based on the net
present values of expected future cash flows, discounted at current market-determined pre-tax rates.
The discount rate used reflects the cost of capital, an assessment of country risk, and the risk
associated with avocado and macadamia. The fair value of other biological assets including tea is
based on market prices as valued by an external independent valuer.
Purchases and development of biological assets include cost of planting, breeding and upkeep until
they mature.
Subsequently all costs of upkeep and maintenance of mature biological assets are recognised in the
statement of comprehensive income within ‘cost of production’ under cost of production in the period
in which they are incurred.
(h) Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made or receipts under operating leases are charged or
credited to the statement of comprehensive income within ‘cost of production’ on a straight-line basis
over the period of the lease.
21
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2 Summary of significant accounting policies (continued)
(i)
Inventories
Inventories are stated at the lower of cost and net realisable value.
Agricultural produce at the point of harvest is measured at fair value less costs to sell. Any changes
arising on initial recognition of agricultural produce at fair value less costs to sell are recognised in the
statement of comprehensive income in the year in which they arise.
The cost of other inventory is determined by the weighted average method. Net realisable value is the
estimate of the selling price in the ordinary course of business, less the costs of completion and selling
expenses.
(j) Receivables
Receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating
cycle of the business if longer), they are classified as current assets. If not, they are presented as non-
current assets.
Receivables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method. A provision for impairment of receivables is established when there is
objective evidence that the Group will not be able to collect all the amounts due according to the
original terms of receivables. The amount of the provision is the difference between the carrying
amount and the present value of expected cash flows, discounted at the effective interest rate. The
amount of the provision is recognised in the statement of comprehensive income within ‘cost of
production’.
(k) Payables
Payables are obligations to pay for goods and services that have been acquired in the ordinary course
of business from suppliers. Accounts payable are classified as current liabilities if payment is due
within one year or less (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
(l) Share capital
Stock units are classified as equity.
(m) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term
highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank
overdrafts are shown within borrowings in current liabilities on the statement of financial position.
22
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2 Summary of significant accounting policies (continued)
(n) Financial assets
The Group classifies its financial assets in the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity financial assets, and available-for-sale
financial assets. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition and re-
evaluates such designation at every reporting date:
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at fair
value through profit or loss at inception. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term, or if so classifying eliminates or significantly
reduces a measurement inconsistency. Derivatives are also categorised as held for trading. Assets in
this category are classified as current assets. During the year, the Group did not hold any financial
assets in this category.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
12 months after the end of reporting date. These are classified as non-current assets.
(iii) Financial assets held-to-maturity
Financial assets held-to-maturity are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Group’s management has the positive intention and ability to
hold to maturity.
(iv) Financial assets available-for-sale
Financial assets available-for-sale are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless management
intends to dispose of the investment within 12 months of the balance sheet date.
Regular purchases and sales of financial assets are recognised on the trade date, which is the date on
which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair
value, plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets carried at fair value through profit or loss are initially recognised at fair value, and
transaction costs are expensed. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Group has transferred
substantially all risks and rewards of ownership. Available for-sale financial assets and financial assets
at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and
held-to-maturity financial assets are carried at amortised cost using the effective interest method.
Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets
at fair value through profit or loss’ category are included in the profit and loss account within other
losses/(gains) in the period in which they arise. Unrealised gains and losses arising from changes in the
fair value of non-monetary securities classified as available-for-sale are recognised in other
comprehensive income. When securities classified as available-for-sale are sold or impaired, the
accumulated fair value adjustments are included in the income statement as gains and losses from
investment securities.
23
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2 Summary of significant accounting policies (continued)
(o) Financial assets (continued)
(iv) Financial assets available-for-sale (continued)
Derivatives, which comprise solely forward foreign exchange contracts, are initially recognised at fair
value on the date the derivative contract is entered into and are subsequently measured at fair value.
The fair value is determined using forward exchange market rates at the balance sheet date. The
derivatives do not qualify for hedge accounting. Changes in the fair value of derivatives are recognised
immediately in the profit and loss account.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset
is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.
These include the use of recent arm’s length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis and option pricing models refined to reflect the
issuer’s specific circumstances. During the year, the Group did not hold any financial assets in this
category.
(p) Employee benefits
(i) Post employment benefits obligations
For unionised employees, the Group has an unfunded obligation to pay terminal gratuities under its
Collective Bargaining Agreement with the union. Employees who resign after completing at least ten
years (Nandi Hills employees) or employees who retire and have completed at least five years (Makuyu
employees) of service are entitled to twenty one days pay (Nandi Hills employees) or eighteen days
(Makuyu employees) for each completed year of service respectively. The liability recognised in the
statement of financial position in respect of this defined benefit scheme is the present value of the
defined benefit obligation at the reporting date. The obligation is estimated annually using the projected
unit credit method by independent actuaries. The present value is determined by discounting the
estimated future cash outflows using interest rates of government bonds. The currency and estimated
term of these bonds is consistent with the currency and estimated term of the post-employment benefit
obligation. The obligation relating to employees who have reached the minimum retirement age and
completed the required years of service and are still in employment are classified as payable within the
next twelve months.
Remeasurement of post employment benefit obligations arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the
period in which they arise.
The Group operates a defined contribution post-employment benefit scheme for management
employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions
into a separate entity. The Group has no legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in
the current and prior periods.
The assets of the defined contribution post-employment benefit scheme are held in a separate trustee
administered fund, which is funded by contributions from both the Group and the employees. The Group
and all its employees also contribute to the statutory National Social Security Fund, which is a defined
contribution scheme.
The Group’s contributions to both these defined contribution schemes are charged to the statement of
comprehensive income within ‘cost of production’ in the year in which they fall due.
(ii) Other entitlements
The estimated monetary liability for employees’ accrued annual leave entitlement at the reporting date is
recognised as an expense accrual.
24
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
2 Summary of significant accounting policies (continued)
(q) Current and deferred income tax
The tax expense for the period comprises current and deferred income tax. Tax is recognised in the
statement of comprehensive income except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity respectively.
(i) Current income tax
The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at
the reporting date. Directors periodically evaluate positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
(ii) Deferred income tax
Deferred income tax is recognised, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying values in the financial statements. However, if
the deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting nor
taxable income statement of comprehensive income. Deferred income tax is determined using tax rates
and laws that have been enacted or substantively enacted at the reporting date and are expected to
apply when the related deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits
will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except where the timing of the reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle the balances on a net basis.
(r) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost using the effective interest method; any differences between
proceeds (net of transaction costs) and the redemption value is recognised in the statement of
comprehensive income within ‘cost of production’ over the period of the borrowings.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting date.
(s) Dividends
Dividends on stock units are charged to equity in the period in which they are declared. Proposed
dividends are shown as a separate component of equity until declared.
25
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
3 Critical accounting estimates and judgements
The estimates and assumptions that have significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are addressed below:
Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including experience of future events that are believed to be reasonable under the
circumstances.
(a) Critical accounting estimates and assumptions
(i) Biological assets
Critical assumptions are made by the directors and the independent valuer in determining the fair values
of biological assets. The key assumptions are set out in Note 6.
(ii) Post employment benefits obligations
Critical assumptions are made by the actuary in determining the present value of the service gratuities to
non-management employees. The carrying amount of the provision and the key assumptions made in
estimating the provision are set out in Note 16.
(b) Critical judgements in applying the entity’s accounting policies
In the process of applying the Company’s accounting policies, the Directors have made judgements in
determining:
the classification of financial assets and leases
•
• whether financial and non-financial assets are impaired
•
the recoverability of tax assets.
4 Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks, including credit risk, liquidity risk, prices for
its agricultural produce, foreign currency exchange rates and interest rates. The Group’s overall risk
management programme focuses on the unpredictability of financial and agricultural markets and seeks
to minimise potential adverse effects on its financial performance, but the Group does not hedge any
risks.
Financial risk management is carried out by the finance department under policies approved by the
Board of Directors. These policies provide principles for overall risk management, as well as policies
covering specific areas such as foreign exchange risk, interest rate risk and credit risk.
Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the US dollar and Euro. Foreign exchange risk arises from future
commercial transactions, and recognised assets and liabilities.
At 31 December 2014, if the Shilling was weaker/stronger by 5% (2013: 5%) against the US dollar with
all other variables held constant, the consolidated post tax profit would have been Shs 4,855,231 (2013:
Sh112,561) higher/lower mainly as a result of US dollar deposits and trade receivables.
At 31 December 2014 if the Shilling was weaker/stronger by 5% (2013: 5%) against the Euro with all
other variables held constant, the consolidated post tax profit would have been Shs 4,941,650
higher/lower (2013: Sh493,730) mainly as a result of Euro deposits.
(ii) Price risk
The Group does not hold any financial instruments subject to price risk.
26
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
4 Financial risk management objectives and policies (continued)
Market risk (continued)
(iii) Interest rate risk
The Group has borrowings and bank overdraft facilities at variable rates, which exposes the Group to
cash flow interest rate risk. The Group regularly monitors financing options available to ensure optimum
interest rates are obtained. For the year ended 31 December 2014, an increase/decrease of 5% (2013:
5%) would have resulted in a decrease/increase in post tax profit of Shs Nil (2013: Shs Nil).
The Group has interest earning deposits, whose income would be subject to interest rate risk. An
increase/decrease in interest rates of 5% (2013: 5%) would have resulted in an increase/decrease in post
tax profit of Shs 6,653,648 (2013: Shs 5,140,279).
Credit risk
Credit risk arises from deposits with banks, as well as trade and other receivables. The Group does not
have any significant concentrations of credit risk. The Group has policies in place to ensure that sales
are made to customers with an appropriate credit history.
The amount that best represents the Group’s and company’s maximum exposure to credit risk at
31 December 2014 is the carrying value of the financial assets in the statement of financial position.
Collateral is held only for staff loans amounting to Shs 24,425,771 (2013: Shs 20,492,420) included in
other receivables. The Group does not grade the credit quality of receivables. All receivables that are
neither past due or impaired are within their approved credit limits, and no receivables have had their
terms renegotiated.
None of the assets are past due or impaired except for the following amounts (which are due within 30
days of the end of the month in which they are invoiced):
Past due but not impaired:
by up to 30 days
by 31 to 60 days
by 61 to 90 days
over 90 days
2014
Shs’000
2013
Shs’000
-
1,234
58
2,221
-
1,963
161
865
Total past due but not impaired
3,513
2,989
Individually impaired
Liquidity risk
-
-
Prudent liquidity risk management includes maintaining sufficient cash balances, and the availability of
funding from an adequate amount of committed credit facilities. Due to the dynamic nature of the
underlying businesses, the finance department maintains flexibility in funding by maintaining availability
under committed credit lines.
Directors monitor rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flow.
27
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
4
Financial risk management objectives and policies (continued)
Liquidity risk (continued)
The table below analyses the Group’s and Company’s financial liabilities that will be settled on a net
basis into relevant maturity groupings based on the remaining period at the reporting date to the
contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted
cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is
not significant.
Group
Less than 1
year
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Shs’000
Shs’000
Shs’000
Shs’000
At 31 December 2014:
- Payables and accrued expenses
- Current income tax
At 31 December 2013:
- Payables and accrued expenses
- Current income tax
145,403
16,519
129,610
7,805
-
-
-
-
-
-
Less than 1
year
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Company
Shs’000
Shs’000
Shs’000
Shs’000
At 31 December 2014:
- Payables and accrued expenses
- Current income tax
153,787
16,572
At 31 December 2013:
- Payables and accrued expenses
- Current income tax
137,993
7,858
Capital management
-
-
-
-
-
-
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and to maintain an optimal capital structure to
reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may limit the
amount of dividends paid to shareholders.
The Company ensures that funds are available for capital developments by capping the dividends
payable. The dividends paid and proposed are shown in Note 12.
28
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
4 Financial risk management objectives and policies (continued)
Fair value estimation
IFRS 13 requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).
The fair value of financial instruments that are not traded in an active market (for example, over-the-
counter derivatives) is determined by using valuation techniques. These valuation techniques maximise
the use of observable market data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in level 2.
29
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
5. Segmental reporting
Directors have determined the operating segments based on the reports reviewed by the Executive Directors to make strategic decisions.
The Group operates in two geographical areas in Kenya, Makuyu and Nandi Hills, under several operating segments. The principal operating segments currently
consist of Avocados, Tea and Forestry. Macadamia will become a reportable operating segment in future (currently under all other segments) as it is expected to
materially contribute to Group sales in the future. Other segments derive their sales from livestock, fresh pineapples and joint projects and are included under “all
other segments” as they individually fall below the threshold of 10% of Group sales.
Segment assets consist primarily of property, plant and equipment, biological assets, inventories, receivables and prepayments. Unallocated assets are property,
plant and equipment, and inventories relating to Main Office and Engineering. Segmental liabilities consist primarily of borrowings, payables and accrued expenses.
Unallocated liabilities are taxes, borrowings and non-current liabilities. The segment information for the reportable segments for the year ended 31 December 2014
and 31 December 2013 is as follows:
2014
2013
Tea
2014
Avocados
2013
2014
Forestry
2013
2014
2013
All other segments
2014
2013
Consolidated
Sales to external customers
Sales - continuing operations
Comprising
Major external customers sales
All other external customers sales
Shs’000
Shs’000
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
232,533
250,918
1,127,412
862,772 157,815
158,121
172,157
112,564 1,689,917 1,384,375
232,533
-
250,918
-
1,103,437
23,975
837,163
-
25,609 157,815
-
158,121
34,418
- 1,370,388 1,088,081
137,739 112,564 319,529 296,294
232,533
250,918
1,127,412 862,772 157,815
158,121
172,157 112,564 1,689,917 1,384,375
Geographical analysis
United Kingdom
Continental Europe
Kenya
Others
-
-
232,533
-
-
-
250,918
-
703,671
399,766
23,975
-
513,560
323,603
-
-
25,609 157,815
-
-
-
-
158,121
-
-
-
- 703,671 513,560
- 399,766 323,603
137,739 112,564 552,062 547,212
-
34,418
34,418
-
232,533
250,918
1,127,412
862,772 157,815
158,121
172,157 112,564 1,689,917 1,384,375
30
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
5. Segmental reporting (continued)
2014
2013
Tea
2014
Avocados
2013
2014
2013
2014
2013
Forestry
All other segments
2014
Consolidated
2013
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Shs’000
Shs’000
Shs’000
Shs’000 Shs’000
Profit/(loss)
Gross profit /(loss) before depreciation and
fair value changes in biological assets
Depreciation charge
Changes in fair value of biological assets
Gross profit
Distribution costs
Segment profit
Other unallocated income and expenses
Other income
Interest income
Admin expenditure (under COP)
Profit/(Loss) before income tax
Income tax expense
Profit/(Loss) for the year
6,891
(3,976 )
10,000
12,915
-
12,915
2,713
-
-
15,628
(4,873 )
10,755
44,672 736,568 540,053
(14,920 )
(15,897 )
(3,586 )
919
8,409
3,500
44,586 729,080 526,052
- (484,829 ) (355,387 )
44,586 244,251 170,665
19,864
(2,439 )
(27,073 )
(9,648 )
-
(9,648 )
-
-
-
2,646
-
-
-
-
-
47,232 244,251 170,665
(14,660 )
(52,973 )
(76,165 )
32,572 168,086 117,692
-
-
-
(9,648 )
3,009
(6,639 )
48,761
(2,959 )
38,066
83,868
-
83,868
-
-
-
83,868
(26,032 )
57,836
27,175
(22,579 )
87,977
92,573
(2,547 )
90,026
(18,799 )
(23,704 )
53,832
11,329
-
11,329
790,498
(44,891 )
79,313
824,920
(487,376 )
337,544
614,687
(45,169 )
96,317
665,835
(355,387 )
310,448
3,689
77,106
(188,253 )
(17,432 )
5,435
(11,997 )
5,805
77,971
(157,564 )
(62,459 )
19,387
(43,072 )
6,402
77,106
(188,253 )
232,799
(72,594 )
160,205
8,451
77,971
(157,564 )
239,306
(74,278 )
165,028
Assets (all located in Kenya)
Segment assets
Unallocated assets
Liabilities
Segment liabilities
Unallocated liabilities
Additions
Property, plant and equipment
Biological assets
823,996 802,618 925,778 885,455 518,134
557,307
840,954
588,578 3,108,862 2,833,958
748,592 883,585
3,857,454 3,717,543
30,817
17,470
31,191
24,687
-
-
-
-
62,008
42,157
810,718 771,358
872,726 813,515
-
-
-
2,987
-
2,987
26,208
182
26,390
12,065
3,955
16,020
6,757
15,852
22,609
2,259
9,493
11,752
30,853
78,592
109,445
21,090
68,665
89,755
63,818
94,626
38,401
82,113
158,444 120,514
31
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company
Changes in carrying amounts of biological assets comprise:
Year ended 31 December 2014
At start of year
Increase due to purchases and development
Gains arising from changes in fair value less costs to sell
Decrease due to harvest and sales
116,646
12,526
32,081
(45,328)
1,789,175
294,795
47,232
(218,628)
1,905,821
307,321
79,313
(263,956)
Livestock
Shs’000
Plantation
Shs’000
Total
Shs’000
At end of year
115,925
1,912,574
2,028,499
Year ended 31 December 2013
At start of year
Increase due to purchases and development
Gains arising from changes in fair value less costs to sell
Decrease due to harvest and sales
111,172
7,839
36,779
(39,144)
1,645,956
241,605
59,538
(157,924)
1,757,128
249,444
96,317
(197,068)
At end of year
116,646
1,789,175
1,905,821
32
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
16 Biological assets – Group and Company (continued)
Biological assets are carried at fair value less costs to sell.
Plantations comprise tea, timber, avocado, pineapple and macadamia plantings.
The fair value of avocado plantation is estimated based on the present value of expected net cash flows,
using a current market determined pre-tax rate of 17.5% per annum. The key assumptions made
concerning the future are as follows:
• projected lifespan of 25 years
•
•
•
climatic condition will remain the same
the market price will remain constant based on recent market prices
the costs to be incurred in growing the avocados and getting them to the market will remain constant
based on recent financial budgets of the company
The fair value of macadamia plantation is estimated based on the present value of expected net cash
flows, using a current market determined pre-tax rate of 17.5% per annum. The key assumptions made
concerning the future are as follows:
• projected lifespan of 30 years
•
•
•
climatic condition will remain the same
recent market price will prevail
the costs to be incurred in growing the macadamia and getting them to the market will remain
constant based on recent financial budgets of the company
The fair value of other plantations is determined by external independent valuation based on recent
market transaction prices.
The fair value of livestock is determined based on market prices of livestock of similar age, breed and
genetic merit.
33
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company (continued)
The following table presents Group’s biological assets that are measured at fair value:
Level 1
Shs’000
Level 2
Shs’000
Level 3
Shs’000
Total
Shs’000
Year ended 31 December 2014
Livestock
Avocado
Tea
Forestry
Macadamia
Pineapple
Year ended 31 December 2013
Livestock
Avocado
Tea
Forestry
Macadamia
Pineapple
-
-
-
-
-
-
-
-
-
-
-
-
-
-
115,925
-
235,000
454,249
-
63,000
-
699,404
-
-
460,921
-
115,925
699,404
235,000
454,249
460,921
63,000
868,174
1,160,325
2,028,499
116,646
-
225,000
489,770
-
54,000
-
689,719
-
-
330,686
-
116,646
689,719
225,000
489,770
330,686
54,000
885,416
1,020,405
1,905,821
There were no transfers between any levels during the year.
34
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company (continued)
The movement in the fair value of the assets within level 3 of the hierarchy is as follows:-
Avocado Macadamia
Shs’000
Shs’000
Total
Year ended 31 December 2014
At start of year
Increase due to plantings
Gain in income statement of comprehensive income arising
from biological transformation
Decrease due to harvest
689,719
158,443
330,686
91,879
1,020,405
250,322
8,409
(157,167)
48,060
(9,704)
56,469
(166,871)
699,404
460,921
1,160,325
Year ended 31 December 2013
At start of year
Increase due to plantings
Gain in income statement of comprehensive income arising
from biological transformation
Decrease due to harvest
685,457
138,212
244,499
67,893
929,956
206,105
919
(134,869)
18,294
-
19,213
(134,869)
689,719
330,686
1,020,405
35
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company (continued)
The following unobservable inputs at the respective year ends were used to measure the Company’s avocado plantations
Year ended 31 December 2014
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs–31 Dec
Relationship of
unobservable inputs to fair value
Shs’000
Avocado
Plantations
699,404 Discounted
cash flows
Yield - Kgs
per Hectare
22,000 The higher the yield, the higher the value
Price per
carton
€3.00 – €3.58
The higher the market price, the higher the fair value
Discount rate
17.50% The higher the discount rate, the lower the fair value
Year ended 31 December 2013
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs–31 Dec
Relationship of
unobservable inputs to fair value
Shs’000
Avocado
Plantations
689,719 Discounted
cash flows
Yield - Kgs
per Hectare
22,000 The higher the yield, the higher the value
Price per
carton
€2.60 – €3.52
The higher the market price, the higher the fair value
Discount rate
17.50% The higher the discount rate, the lower the fair value
36
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company (continued)
The following unobservable inputs at the year end were used to measure the Company’s macadamia plantations
Year ended 31 December 2014
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs-31 Dec
Relationship of
unobservable inputs to fair value
Macadamia
Plantations
Shs’000
460,921
Discounted
cash flows
Yield Kgs/Ha
1,000 The higher the yield, the higher the value
Kernel price
$5.40 – $7.65 The higher the market price, the higher the fair
value
Discount rate
17.50% The higher the discount rate, the lower the fair value
Year ended 31 December 2013
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs-31 Dec
Relationship of
unobservable inputs to fair value
Macadamia
Plantations
Shs’000
330,686
Discounted
cash flows
Yield Kgs/Ha
1,000 The higher the yield, the higher the value
Kernel price
$4.50 – $5.50 The higher the market price, the higher the fair
value
Discount rate
17.50% The higher the discount rate, the lower the fair value
37
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company (continued)
Areas planted with the various crops at the year end:
Tea
Timber plantations
Avocado
Pineapple
Macadamia
Cattle numbers at the year end
Output of agricultural produce during the year:
Tea (green leaf)
Avocado
Pineapple
Macadamia
Timber harvested during the year was:
2014
2013
Hectares Hectares
510
1,715
414
50
698
510
1,656
414
48
621
Head
Head
4,305
4,499
Metric
tonnes
Metric
tonnes
7,517
8,841
1,552
165
6,923
6,423
1,478
42
Cubic
metres
Cubic
metres
5,502
4,863
Agricultural produce of tea bushes is the harvested green leaf which is processed soon after harvest in
the factory to made tea. The company did not have any biological produce of green leaf (tea) at year end
(2013: Nil). Timber is included under inventory.
Financial risk management strategies
The group is exposed to financial risks arising from changes in the prices of the agricultural products it
produces.
There are no futures markets available for the majority of crops grown by the Group. The Group’s
exposure to this risk is mitigated by the geographical spread of its market and regular review of
available market data on sales and production.
The Group monitors closely the returns it achieves from its crops and considers replacing its biological
assets when yields decline with age or markets change.
Further financial risk arises from changes in market prices of key cost components. Such costs are
closely monitored.
38
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
6 Biological assets – Group and Company (continued)
Fair value of the agricultural output after deducting costs to sell:
Tea (green leaf)
Avocado
Pineapple
Others
7 Other Income
Net foreign exchange gain/(loss) other than cash and cash equivalents
Gain on disposal of property, plant and equipment
Rental Income
Sundry
8
Finance income and costs
Interest income on short term bank deposits
Net foreign exchange (loss)/gain on cash and cash equivalents
2014
Shs’000
2013
Shs’000
227,607
474,156
43,125
256,891
264,466
345,894
38,250
182,169
1,001,779
830,779
2014
Shs’000
2013
Shs’000
132
1,328
3,572
1,370
(1,103)
1,229
3,322
5,003
6,402
8,451
2014
Shs’000
2013
Shs’000
84,791
(7,685)
77,043
928
77,106
77,971
39
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
9 Expenses by nature
The following items have been charged/(credited) in arriving at profit before income tax:-
Depreciation on property, plant and equipment (Note 17)
Repairs and maintenance expenditure on property, plant and equipment
Amortisation of prepaid operating lease rentals (Note 18)
Gain arising from changes in fair value less costs to sell of biological
assets (Note 6)
Inventories expensed
Employee benefits expense (Note 10)
Auditor’s remuneration
10 Employee benefits expense
The following items are included within employee benefits expense:
Salaries and wages
Post employment benefits costs:
Post employment benefit obligations (Note 16)
Defined contribution scheme
National Social Security Fund
11
Income tax expense
Current income tax
Deferred income tax (Note 15):
- Current year charge
- Prior year under provision
Deferred income tax relating other comprehensive income
2014
Shs’000
2013
Shs’000
44,891
40,809
5
45,169
38,227
5
(79,313)
545,308
401,361
5,775
(96,317)
461,759
361,999
5,775
2014
Shs’000
2013
Shs’000
381,808
341,712
11,411
2,547
5,595
12,216
2,405
5,666
401,361
361,999
2014
Shs’000
2013
Shs’000
56,004
34,044
13,981
35
2,574
44,948
118
(4,832 )
Income tax expense
72,594
74,278
40
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
11 Income tax expense (continued)
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise
using the statutory income tax rate as follows:
2014
Shs’000
2013
Shs’000
Profit before income tax
232,799
239,306
Tax calculated at the statutory income tax rate of 30%
(2013: 30%)
Tax effect of:
Income not subject to income tax
Expenses not deductible for income tax purposes
Under provision of deferred income tax in prior years
Income tax expense
69,840
71,792
(56 )
2,775
35
(74 )
2,442
118
72,594
74,278
The Group tax (charge)/credit relating to components of other comprehensive income is as follows:
2014
Shs’000
2013
Shs’000
Remeasurement of post employment benefit obligations:
Actuarial (losses)/gains (Note 16)
Tax - credit/(charge) (Note 15)
(8,579 )
2,574
16,107
(4,832 )
Net (charge)/credit to other comprehensive income
(6,005 )
11,275
41
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
12 Earnings and dividends – Group
i) Basic and diluted earnings per stock unit
Basic and diluted earnings per stock unit is calculated on the profit attributable to the members of
Kakuzi Limited and on the 19,599,999 stock units in issue at 31 December 2014 and 31 December
2013.
The company had no potentially dilutive stock units outstanding at 31 December 2014 and 31
December 2013.
Profit attributable to equity holders of the company (Shs ‘000)
160,205
165,028
2014
2013
Number of stock units in issue (thousands)
19,600
19,600
Basic and diluted earnings per stock unit (Shs)
8.17
8.42
ii) Dividends per stock unit
At the annual general meeting to be held on 26 May 2015, the directors will recommend the payment of
a first and final dividend of 75% of par value equivalent to Shs 3.75 per stock unit (2013: Shs 3.75 per
stock unit) in respect of the year ended 31 December 2014.
13 Share capital
Number of
stock units
(Thousands)
Ordinary
shares
Shs ‘000
Authorised
At 1 January 2013, 31 December 2013 and 31 December 2014
20,000
100,000
Issued and converted into stock units
At 1 January 2013, 31 December 2013 and 31 December 2014
19,600
98,000
The par value of the stocks is Shs 5 per stock unit. In accordance with the Articles of Association, all
fully paid-up shares of the company are converted into stock units at the time of issue.
42
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
14 Borrowing facilities – Group and Company
2014
Shs’000
2013
Shs’000
The Group has the following undrawn committed borrowing facilities:
Floating rate (expiring within one year)
626,300
626,300
The facilities are annual subject to review at various dates during the year 2014.
The undrawn bank facilities of Shs 626,300,000 are secured by an undertaking, at any time if and when
required by the banks, to execute legal or other mortgages and charges including fixed or floating
charges or assigned in favour of the banks.
15 Deferred income tax – Group and Company
Deferred income tax is calculated using the enacted tax rate of 30% (2013: 30%). The movement on
the deferred income tax account is as follows:
At start of year
Charge to income statement
Charge to other comprehensive income
2014
Shs’000
2013
Shs’000
623,204
16,590
(2,574 )
578,138
40,234
4,832
At end of year
637,220
623,204
The following amounts, determined after appropriate offsetting, are shown in the statement of financial
position.
Deferred income tax assets
Deferred income tax liabilities
2014
Shs’000
2013
Shs’000
(39,184 )
676,404
(30,978 )
654,182
637,220
623,204
43
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
15 Deferred income tax (continued)
Consolidated deferred income tax assets and liabilities, and deferred income tax charge/(credit) in the
statement of comprehensive income (SCI) are attributable to the following items:
Year ended 31 December 2014 – Group and Company
Property, plant and equipment
Biological assets
Provisions for liabilities
Other temporary differences
Balance
1.1.2014
Shs’000
117,406
526,557
(20,782)
23
Charged/
(credit) to
SCI
Shs’000
Balance
31.12.2014
Shs’000
(5,894)
38,335
(16,255)
(2,170)
111,512
564,892
(37,037)
(2,147)
Net deferred income tax liability
623,204
14,016
637,220
Year ended 31 December 2013 – Group and Company
Property, plant and equipment
Biological assets
Provisions for liabilities
Other temporary differences
Balance
1.1.2013
Shs’000
120,613
482,283
(24,469)
(289)
Charged/
(credit) to
SCI
Shs’000
Balance
31.12.2013
Shs’000
(3,207)
44,274
3,687
312
117,406
526,557
(20,782)
23
Net deferred income tax liability
578,138
45,066
623,204
44
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
16 Post employment benefit obligations – Group and Company
The amounts recognised in the statement of financial position are determined as follows:
2014
Shs’000
2013
Shs’000
Present value of post employment benefit obligations
68,840
52,896
Split as follows:
Non-current portion
Current portion
58,085
10,755
43,130
9,766
The movement in present value of the post employment benefit obligations is as follows:
At start of year
Net expense recognised statement of comprehensive income
Benefits paid
At end of year
2014
Shs’000
2013
Shs’000
52,896
19,990
(4,046 )
59,661
(3,891 )
(2,874 )
68,840
52,896
The amounts recognised in the statement of comprehensive income within ‘cost of production’ for the year
are as follows:
3
Current service cost
Past service cost
Interest on obligation
2014
Shs’000
2013
Shs’000
4,254
2
7,155
4,921
-
7,295
Total included in employee benefits expenses (Note 10)
11,411
12,216
Actuarial (loss)/gain recognised in other income statement of comprehensive
income (Note 11)
)
(8,579
16,107
45
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
16 Post employment benefit obligations Group and Company (continued)
At start of year
Current service cost
Interest expense/(income)
Past service cost
Remeasurements:
(Gain)/loss from change in assumptions
Experience (gains)/losses
Benefits paid
At end of year
31 December 2014
31 December 2013
Gratuity (Nandi
Hills)
Shs’000
33,231
2,946
4,635
2
Gratuity
(Makuyu)
Shs’000
19,665
1,308
2,520
-
Total
Shs’000
Gratuity (Nandi
Hills)
Shs’000
52,896
4,254
7,155
2
37,926
3,453
4,749
-
Gratuity
(Makuyu)
Shs’000
21,960
1,468
2,546
-
Total
Shs’000
59,886
4,921
7,295
-
7,583
3,828
11,411
8,202
4,014
12,216
1,155
4,341
5,496
754
2,329
3,083
1,909
6,670
8,579
(3,992 )
(8,757 )
(12,749 )
(2,629 )
(729 )
(3,358 )
(6,621 )
(9,486 )
(16,107 )
(737)
(3,309)
(4,046 )
(148 )
(2,951 )
(3,099 )
45,571
23,267
68,840
33,231
19,665
52,896
46
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
16 Post employment benefit obligations Group and Company (continued)
The principal actuarial assumptions used are as follows:
Gratuity (Nandi Hills)
Gratuity (Makuyu)
Discount rate (% p.a.)
Future salary increases (% p.a.)
first year
second year
Thereafter
2014
13.5%
10%
-
-
2013
13.5%
8%
10%
10%
2014
13.5%
10%
-
-
2013
13.5%
8%
10%
10%
Mortality (pre-retirement)
A 1949 - 1952
A 1949 - 1952
A 1949 - 1952
A 1949 - 1952
Withdrawals
Ill-Health
At rates consistent
with similar
arrangements
At rates consistent
with similar
arrangements
At rates consistent
with similar
arrangements
At rates consistent
with similar
arrangements
At rates consistent with
similar arrangements
At rates consistent with
similar arrangements
At rates consistent
with similar
arrangements
At rates consistent
with similar
arrangements
Retirement age
55 years
55 years
55 years
55 years
The sensitivity of the defined obligation to changes in the weighted principal assumptions is:
Impact on post employment benefit obligation
Changes in
assumption
Increase/Decrease
in assumption
Discount rate
Salary growth rate
by 1%
by 1%
Shs 4,026,000
Not material
47
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
16 Post employment benefit obligations Group and Company (continued)
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes
in some of the assumptions may be correlated. When calculating the sensitivity of the post employment benefit obligation to significant actuarial assumptions the same
method (present value of the post employment benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as
when calculating the liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.
Five year summary:
Present value of post employment benefit obligations – Group and Company
Net expense recognised in the statement of comprehensive income - Group
- within ‘cost of production’
- within ‘other comprehensive income (gain)/loss
2014
Shs’000
2013
Shs’000
2012
Shs’000
2011
Shs’000
2010
Shs’000
68,840
52,896
59,661
71,868
70,297
11,411
8,579
12,216
(16,107 )
23,024
5,074
13,373
(5,702 )
12,088
4,695
Net expense recognised in the statement of comprehensive income – Company
- within ‘cost of production’
- within ‘other comprehensive income (gain)/loss
11,411
8,579
12,216
(16,107 )
14,157
5,074
8,637
(3,464 )
7,802
1,703
48
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
17 Property, plant and equipment
Group and Company
Year ended 31 December 2014
Cost
At start of year
Transfers
Additions
Disposals
At end of year
Depreciation and impairment
At start of year
Charge for the year
On disposals
At end of year
Net book amount
Buildings,
freehold land,
dams and
improvements
Shs’000
Plant &
machinery
Shs’000
Motor
vehicles,
tractors,
trailers and
implements
Shs’000
Furniture,
fittings and
equipment
Shs’000
Capital work
in progress
Shs’000
Total
Shs’000
948,872
1,926
8,537
(13,891 )
945,444
507,015
19,565
(13,380 )
141,732
-
9,691
(164 )
151,259
74,529
9,552
(164 )
150,643
-
11,295
(9,697 )
152,241
121,395
11,544
(6,297 )
49,347
-
9,661
(10,754 )
48,254
44,884
4,230
(10,569 )
513,200
83,917
126,642
38,545
1,926
(1,926 )
24,634
-
1,292,520
-
63,818
(34,506 )
24,634
1,321,832
-
-
-
-
747,823
44,891
(30,410 )
762,304
432,244
67,342
25,599
9,709
24,634
559,528
Depreciation and impairment at year end comprises:
Depreciation
Impairment
437,838
75,362
83,359
558
126,642
-
513,200
83,917
126,642
38,459
86
38,545
-
-
-
686,298
76,006
762,304
49
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
17 Property, plant and equipment
Group and Company
Year ended 31 December 2013
Cost
At start of year
Transfers
Additions
Disposals
At end of year
Depreciation and impairment
At start of year
Charge for the year
On disposals
At end of year
Net book amount
Buildings,
freehold land,
dams and
improvements
Shs’000
Plant &
machinery
Shs’000
Motor
vehicles,
tractors,
trailers and
implements
Shs’000
Furniture,
fittings and
equipment
Shs’000
Capital work
in progress
Shs’000
Total
Shs’000
923,305
11,334
15,304
(1,071 )
948,872
487,046
20,384
(415 )
134,858
1,148
5,737
(11 )
141,732
65,509
9,031
(11 )
146,016
-
12,819
(8,192 )
150,643
116,813
12,402
(7,820 )
47,684
325
2,615
(1,277 )
49,347
42,667
3,352
(1,135 )
507,015
74,529
121,395
44,884
12,807
(12,807 )
1,926
-
1,264,670
-
38,401
(10,551 )
1,926
1,292,520
-
-
-
-
712,035
45,169
(9,381 )
747,823
441,857
67,203
29,248
4,463
1,926
544,697
Depreciation and impairment at year end comprises:
Depreciation
Impairment
429,638
77,377
73,971
558
121,395
-
507,015
74,529
121,395
44,761
123
44,884
-
-
-
669,765
78,058
747,823
50
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
18 Prepaid operating lease rentals – Group and Company
At start of year
Amortization charge for the year
At end of year
19 Investment
(a) Investment in subsidiaries
2014
Shs’000
2013
Shs’000
4,404
(5)
4,409
(5)
4,399
4,404
The subsidiary companies are all incorporated in Kenya and have the same year end. Estates
Services Limited and Kaguru (EPZ) Limited are wholly owned and are dormant.
Year ended 31 December 2014
At start of year
At end of year
Year ended 31 December 2013
At start of year
At end of year
Kaguru
EPZ
Limited
Shs’000
Estates
Services
Limited
Shs’000
Total
Shs’000
1,670
2,625
4,295
1,670
2,625
4,295
Kaguru
EPZ
Limited
Shs’000
Estates
Services
Limited
Shs’000
Total
Shs’000
1,670
2,625
4,295
1,670
2,625
4,295
51
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
20 Financial assets held to maturity – Group and Company
Financial assets held to maturity are carried at their amortised cost. The movement in financial
assets held to maturity is as follows:
2014
Shs’000
2013
Shs’000
At start of year
Addition in the year
Redeemed in the year
At end of year
Non current portion
Current portion
21 Inventories – Group and Company
Inventory for sale
Consumables
92,308 -
100,000
(7,692)
(15,385)
-
76,923
92,308
61,538 76,923
15,385
15,385
76,923
92,308
-
62,122
10,887
66,478
62,122
77,365
The cost of inventories recognised as an expense and included in cost of production amounted to Shs
545,308,000 (2013: Shs 461,759,000).
22 Receivables and prepayments – Group and Company
Trade receivables
Due from related companies (Note 26(v))
Other receivables
Less non current portion
Non current receivables
Other receivables
14,299
69,769
68,225
14,997
114,018
59,175
152,293
(22,405)
188,190
(15,043)
129,888
173,147
22,405
15,043
Non current receivables are due within five years from reporting date and are secured and interest free.
None of the amounts were impaired (2013: Nil).
The carrying amounts of the current receivables approximate to their fair value.
52
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
23 Payables and accrued expenses
The carrying amounts of the current receivables approximate to their fair value.
Group
Company
2014
Shs’000
2013
Shs’000
2014
Shs’000
2013
Shs’000
Trade payables
Due to related companies (Note 26(v))
Accrued expenses
Other payables
33,632
-
16,866
99,649
54,444
-
23,524
51,642
33,632
8,383
16,866
99,649
54,444
8,383
23,524
51,642
150,147
129,610
158,530
137,993
The carrying amounts of the payables and accrued expenses approximate to their fair values.
24 Cash and bank balances – Group and Company
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:-
Cash at bank and in hand
Short term deposits
2014
Shs’000
2013
Shs’000
21,801
951,889
14,758
890,000
973,690
904,758
53
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
25 Cash generated from operations
Reconciliation of profit before income tax to cash generated from operations:
Profit before income tax
Adjustments for:
Interest income (Note 8)
Depreciation (Note 17)
Amortisation of prepaid operating lease rentals (Note 18)
Profit on sale of property, plant and equipment
Gains arising from changes in fair value less estimated point-sale costs of
biological assets (Note 6)
Decrease in the fair value of biological assets due to sales and harvest and
disposal (Note 6)
Changes in working capital
- inventories
- receivables and prepayment
- payables and accrued expenses
- post employment benefit obligations
2014
Shs’000
2013
Shs’000
232,799
239,306
(84,791 )
44,891
5
(1,328 )
(77,043 )
45,169
5
(1,229 )
)
(79,313
)
(96,317
263,956
197,068
15,243
35,897
20,537
7,365
(11,937 )
106,370
398
9,342
Cash generated from operations
455,261
411,132
54
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
26 Related party transactions – Group and Company
The group is controlled by Camellia Plc, incorporated in England. Camellia Plc is the ultimate parent of
the Group. There are other companies that are related to Kakuzi Limited through common shareholdings
or common directorships. Fellow Subsidiaries within the Camellia Plc Group act as brokers and
managing agents for certain products of the Group.
The following transactions were carried out with related parties:
2014
2013
Shs’000
Shs’000
226,753
250,273
226,753
250,273
58,241
13,459
70,740
56,733
4,818
62,702
142,440
124,253
35,659
446
31,005
317
36,105
31,322
1,500
195
1,500
148
1,695
1,648
i) Sale of goods to:
Eastern Produce Kenya Limited
ii) Purchase of goods and services from:
Linton Park Plc
Robertson Bois Dickson Anderson Limited
Eastern Produce Kenya Limited
iii) Key management compensation
Salaries and other short-term employment benefits
Post employment benefits
iv) Directors’ remuneration
Fees for services as a director
Other emoluments (included in key management
compensation above)
55
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Notes (continued)
26 Related party transactions – Group and Company (continued)
v) Outstanding balances arising from sale and purchase of goods and service
Group
Company
2014
2013
2014
Shs’000
Shs’000 Shs’000
2013
Shs’000
69,769
-
113,987
31
69,769
-
113,987
31
69,769
114,018
69,769
114,018
-
-
-
-
-
-
2,570
5,813
2,570
5,813
8,383
8,383
Due from related Companies
Eastern Produce Kenya Limited
Robertson Bois Dickson Anderson Limited
Due to related Companies
Estate Services Limited
Kaguru Limited
27 Commitments – Group and Company
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised in the financial statements is
as follows:
Property, plant and equipment
2014
2013
Shs’000 Shs’000
1,462
4,515
------------- 000 -------------
56
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Kakuzi Limited
Notes (continued)
Five year record
Turnover
1,689,917
1,384,375
2,043,332
2,376,862 2,113,774
2014
Shs'000
2013
Shs'000
2012
Shs'000
2011
Shs'000
2010
Shs’000
Profit before income tax
Income tax
232,799
(72,594)
239,306
(74,278)
567,806
(159,150)
920,093
(275,696)
558,629
(169,963)
Profit after income tax
Non controlling interest
160,205
-
165,028
-
408,656
(29,299)
644,397
(94,461)
388,666
(75,292)
Profit attributable to the members of Kakuzi
Limited
160,205
165,028
379,357
549,936
313,374
Dividends: -
Proposed final dividend - for the year
73,500
73,500
73,500
73,500
49,000
Capital and reserves: -
Called up share capital
Reserves and non controlling interest
98,000
2,882,747
98,000
2,806,028
98,000
2,703,225
98,000
98,000
2,658,765 2,112,504
Total equity
2,980,747
2,904,028
2,801,225
2,756,795 2,210,504
Basic earnings per stock unit (Shs)
8.17
8.42
19.35
28.06
15.99
Dividends per stock unit (Shs)
3.75
3.75
3.75
3.75
2.50
Dividend cover
2.18
2.25
5.16
7.48
6.40
Total equity per stock unit (Shs)
152.08
148.16
142.92
140.65
112.78
All amounts are stated in Kenya shillings thousands (shs’000) except where otherwise indicated.
57
Kakuzi Limited
Financial Statements
For the year ended 31 December 2014
Kakuzi Limited
Major stockholders and distribution schedule
Notes (continued)
MAJOR STOCKHOLDERS
The 10 major shareholders and their holdings as at 31 December 2014 were:
Stockholder name
1. Bordure Limited*
2. John Kibunga Kimani
3. Lintak Investments Limited*
4. CFC Stanbic Nominees Ltd – A/C NR1030624
5. Standard Chartered Nominees – A/C 9532
6. G H Kluge & Sons Limited
7. HBSC Global Custody Nominee (UK) Ltd
8. Kenyalogy.com Limited
9. Joe Barrage Wanjui
10. John Okuna Ogango
Number of
stock units
5,107,920
4,898,083
4,828,714
594,975
315,334
239,118
200,000
150,860
122,004
104,400
%
26.06
24.99
24.64
3.04
1,61
1.22
1.02
0.77
0.62
0.53
* Camellia Plc incorporated in England, by virtue of its interests in Bordure Limited incorporated in England
and Lintak Investments Limited incorporated in Kenya, is deemed to be interested in these stock units.
DISTRIBUTION SCHEDULE
The distribution of stock units as at 31 December 2014 was:
Stock units range
Less than 500
501 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 to 1,000,000
Over 1,000,000
Number of
stockholders
Number of
stock units
761
509
59
61
8
3
139,772
937,408
454,488
1,406,090
1,827,524
14,834,717
%
0.71
4.78
2.32
7.17
9.32
75.69
1,401
19,599,999
100.00
58
Kakuzi Limited
Form of Proxy (Annual General Meeting)
I/We
.……………………………………………….………..…………………………...………...………….…...…….……..,
of ………………………………..………………………………… being a member of the above-named Company,
hereby appoint: ……………………………………………………………………………………………………..……,
of ……..………………………………………………....,or failing him …………………………………………………,
of …………………………………………………………………..., or failing him the duly appointed Chairman of
the meeting, as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the
Company to be held on the 26th day of May 2015, and at any adjournment thereof.
As witness my hand this …………………………….. day of …………………………………………………..2015
Signed ………………………………………………………………………………………………………………………
Signed ………………………………………………………………………………………………………………………
Note:
1.
2.
3.
A member entitled to attend and vote is entitled to appoint a proxy to attend and vote in his stead and a
proxy need not be a member of the Company.
In the case of a member being a limited Company, this form must be completed under its common seal
or under the hand of an officer or attorney duly authorized in writing.
Proxies must be in the hands of the Company Secretary not less than 48 hours before the time of
holding the meeting.
59
FOLD 2
STAMP
1
D
L
O
F
Kakuzi Limited
P O Box 24
Thika 01000
Kenya
FOLD 3
INSERT FLAP INSIDE