KAKUZI LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
1
Kakuzi Limited
Annual Report and Financial Statements
For the year ended 31 December 2015
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 profit or loss and other 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 – 58
59
60
61
Kakuzi Limited
Company Information
For the year ended 31 December 2015
COUNTRY OF INCORPORATION
The Company is incorporated in Kenya under the Companies Act.
DIRECTORS
The Directors who held office during the year and at 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
Retired on 26 May 2015
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
KCB Bank Kenya 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 Eighth Annual General Meeting of the Members of the Company
will be held at Nairobi Serena Hotel, Nairobi on Tuesday, 17 May 2016 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 Seventh Annual General Meeting held on 26 May 2015.
4. To receive, consider and adopt the Financial Statements for the year ended 31 December 2015
together with the reports of the Chairman, the Directors and the Independent Auditors thereon.
5. To declare a first and final dividend of Shs.5.00 per stock unit (2014: Shs 3.75) for the Financial Year
ended 31 December 2015.
6. To re-elect Messrs Daniel Mutisya Ndonye and Stephen Njoroge Waruhiu, 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 2015.
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
16 March 2016
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 2015
RESULTS
The profit before income tax was Kshs 764.4 million compared to Kshs 232.8 million in 2014. The net
gain from biological assets within the profits was Kshs 114.2 million (2014: Kshs 79.3 million). The
earnings per stock unit increased from Kshs 8.17 to Kshs 26.92. The improved profit is considered
satisfactory and was driven to some extent by the weather conditions as well as favourable market demand
for our main export products. Avocado was dominant in returns but tea and forestry made useful
contribution to profits. The weakening Kenya Shilling also worked in our favour as well as the fact that we
could take advantage of high interest rates with our strong cash position.
OPERATIONS:
The first quarter was very dry in both Nandi and Makuyu and as a result there was concern as to levels on
our strategic dam reserves. The rains however returned in mid April and have been satisfactory for our
needs throughout the remainder of the year.
Overall this was a good year for avocado production although smallholder early fruit was quality affected by
the dry weather. In total we exported 1.9 million cartons which is some 360 container loads. This was an all
-time record for Kakuzi. Our smallholder initiatives continued to expand and we have developed a
transparent pricing mechanism for their product. Several training and outreach services have been initiated
during the year. Market demand was improved in EU countries but predominantly for larger fruit sizes.
Logistic problems still arose from time to time but were an improvement over previous years. It is essential
that we can get Avocados to the market on a timely basis and such matters as lack of availability of
shipping services, port strikes as well as road transportation delays to Mombasa could have a devastating
effect on avocado profits. We continue to concentrate on a quality product and further development of our
Smallholder initiatives. We now have 449 hectares planted to avocado.
The early season dry spell in Nandi reduced our cropping levels significantly which increased demand and
with it prices for our tea. Total production was 1,466 tonnes as compared with 1,730 tonnes in 2014
however prices were much improved giving a satisfactory return towards profits.
We continued with the clearing of sub optimum forestry plots. Demand for our product has been
reasonable giving a satisfactory return. We have now opened a sales outlet on the main Nyeri road and
this is proving to be very attractive to many timber merchants and builders. Currently 1,529 hectares of
land is under commercial forestry.
The macadamia crop was down on expectations caused mainly by pest damage. This matter has now
been aggressively addressed. We currently have 856 hectares planted and will continue with our
development up to 1,026 hectares. A start has been made on our new macadamia cracking facility and we
expect to crack our 2016 season crop ourselves. Export demand for this crop still appears good.
Our cattle operation remains cash positive but there has not been the robust demand for our good quality
beef as could be expected. Hopefully an improvement in tourism and general demand will be forthcoming.
Our stock remains at around 4,500 head. Our pineapple and Joint Project operations made small returns
which were to be expected. The new arable farming project continues with significant land and
infrastructural development. A total of 730 hectares have been cleared and some 500 hectares ploughed
and prepared. We expect our first planting early in 2016.
DEVELOPMENT
We will continue macadamia planting and the major investment in a cracking facility proceeds to plan.
Avocado planting will continue to increase to 630 Hectares in the next two years. Your Board continues to
review further development opportunities being cognisant of the rapid infrastructure development in
particular roads planned for areas close to Makuyu. Such development when complete could open up
other diversified opportunities. We continue to make an impact with our CSR activities and now have a
Corporate Affairs Manager based in Makuyu. Smallholder development on avocados as mentioned earlier
is an ongoing project with emphasis on quality.
3
Kakuzi Limited
Chairman’s Statement (continued)
For the year ended 31 December 2015
STAFF & DIRECTORS
On behalf of the Board, I would like to thank all the staff who have continued their support and commitment
to Kakuzi. In addition, there have been some very difficult and diverse pressures to deal with and these
have been resolved with patience and professionalism. I must also sincerely thank my fellow Directors who
have ensured that the shareholders’ interests of Kakuzi are met with professionalism and transparency.
Their advice and direction has been invaluable in assisting Management to progress in a positive manner
this year and indeed going forward to the future.
DIVIDEND
The Board recommends a payment of Ksh.5/- per stock unit.
PROSPECTS
We have experienced satisfactory weather conditions to date and our dam levels are now at capacity. At
this stage we look towards a reasonable Avocado Crop and much improved Macadamia out-turns. Tea
prices are down on 2015 levels with little margin to work on. As I have so often said firm predictions in
agriculture are difficult but we are hopefully going to start to see the consolidation of returns made in major
investments in particular for Avocados and Macadamia.
K W TARPLEE
CHAIRMAN
16 March 2016
4
Kakuzi Limited
Directors’ Report
For the year ended 31 December 2015
In accordance with section 157 of the Kenyan Companies Act, the directors submit their report together
with the audited financial statements for the year ended 31 December 2015, 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 527,687,000 (2014: Shs 160,205,000) has been added to retained
earnings. The directors recommend the approval of a first and final dividend of Shs 5.00 (2014: Shs 3.75)
per stock unit.
The results for the year are set out on pages 11 to 58 in the attached financial statements.
ANNUAL GENERAL MEETING
The Eighty Eighth Annual General Meeting of the Company will be held at Nairobi Serena Hotel, Nairobi,
on Tuesday 17 May 2016 at 12.00 noon.
DIRECTORS
The directors who held office during the year and at 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 2015
Beneficial Non-Beneficial
Stock units
Stock units
At 31 December 2014
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. D M Ndonye
Mr. S N Waruhiu
-
100
-
200
1,000
-
-
-
100
-
200
1,000
-
-
75
-
-
-
-
-
-
75
-
-
-
-
-
-
5
Kakuzi Limited
Directors’ Report (continued)
For the year ended 31 December 2015
In accordance with Article 117 of the Company’s Articles of Association, Messrs Daniel Mutisya Ndonye
and Stephen Njoroge Waruhiu 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
16 March 2016
6
Kakuzi Limited
Statement of Directors’ Responsibilities
For the year ended 31 December 2015
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 2015 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 16 March 2016 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 2015
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 seven directors. Five 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
16 March 2016
C J Flowers
16 March 2016
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 58. These financial
statements comprise the consolidated statement of financial position at 31 December 2015 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 2015 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 2015 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 Murage S N Ochieng’ 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
16 March 2016
10
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Consolidated statement of profit or loss and other comprehensive income
Notes
Year ended 31 December
2014
Shs’000
2015
Shs’000
Sales
Gains arising from changes in fair value less costs to sell of biological assets
Cost of sales
Gross profit
Other (expense)/income
Distribution costs
Operating profit
Finance income
Finance cost
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
5
6
7
8
2,481,844
1,689,917
114,262
79,313
2,596,106
(1,260,464)
1,769,230
(1,132,563)
1,335,642
636,667
(3,236)
(655,224)
6,402
(487,376)
677,182
155,693
88,502
(1,239)
84,791
(7,685)
764,445
232,799
11
(236,758)
(72,594)
527,687
160,205
Items that are not reclassified to profit or loss:
Remeasurement of post employment benefit obligations (net of tax)
11
4,955
(6,005)
Total comprehensive income
532,642
154,200
Earnings per share (Shs):
Basic and diluted earnings per stock unit
12
26.92
8.17
The notes on pages 17 to 58 are an integral part of these financial statements
11
Kakuzi Limited
Financial Statements
As at 31 December 2015
Consolidated statement of financial position
Notes
31 December
2015
Shs’000
31 December
2014
Shs’000
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
13
12
15
16
17
6
18
20
22
21
22
24
20
23
16
98,000
8,936
3,238,934
98,000
98,000
3,981
2,809,247
73,500
3,443,870
2,984,728
684,214
57,885
742,099
637,220
58,085
695,305
4,185,969
3,680,033
767,473
2,183,617
4,394
46,153
23,469
3,025,106
83,562
255,692
1,175,434
15,385
1,530,073
227,024
128,071
14,115
369,210
559,528
2,028,499
4,399
61,538
22,405
2,676,369
62,122
129,888
973,690
15,385
1,181,085
150,147
16,519
10,755
177,421
1,160,863
1,003,664
4,185,969
3,680,033
The notes on pages 17 to 58 are an integral part of these financial statements
The financial statements on pages 11 to 58 were approved for issue by the board of directors on 16 March
2016 and signed on its behalf by:
K R Shah
Director
C J Flowers
Director
12
Kakuzi Limited
Financial Statements
As at 31 December 2015
Company statement of financial position
Notes
31 December
2015
Shs’000
31 December
2014
Shs’000
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
13
12
15
16
17
6
18
19
20
22
21
22
24
20
23
16
98,000
8,936
3,234,793
98,000
98,000
3,981
2,805,106
73,500
3,439,729
2,980,587
684,214
57,885
742,099
637,220
58,085
695,305
4,181,828
3,675,892
767,473
2,183,617
4,394
4,295
46,153
23,469
3,029,401
83,562
255,692
1,175,434
15,385
1,530,073
235,407
128,124
14,115
377,646
559,528
2,028,499
4,399
4,295
61,538
22,405
2,680,664
62,122
129,888
973,690
15,385
1,181,085
158,530
16,572
10,755
185,857
1,152,427
995,228
4,181,828
3,675,892
The notes on pages 17 to 58 are an integral part of these financial statements
The financial statements on pages 11 to 58 were approved for issue by the board of directors on 16 March
2016 and signed on its behalf by:
K R Shah
Director
C J Flowers
Director
13
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Consolidated statement of changes in equity
Year ended 31 December 2015
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
3,981 2,809,247
73,500
2,984,728
Total comprehensive income for the year:
Profit for the year
Other comprehensive income
Transactions with owners:
Dividends to equity owners of the company:
- Final for 2014
- Proposed for 2015
-
-
-
-
-
-
-
4,955
527,687
-
4,955
527,687
-
-
-
527,687
4,955
532,642
-
-
-
(98,000 )
(73,500 )
98,000
(73,500 )
-
-
)
(98,000
24,500
)
(73,500
At end of year
98,000
8,936 3,238,934
98,000
3,443,870
Year ended 31 December 2014
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
Transactions with owners:
Dividends to equity owners of the company:
- Final for 2013
- Proposed for 2014
-
-
-
-
-
-
-
(6,005 )
160,205
-
)
(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 2,809,247
73,500
2,984,728
The notes on pages 17 to 58 are an integral part of these financial statements.
14
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Company statement of changes in equity
Year ended 31 December 2015
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
3,981 2,805,106
73,500 2,980,587
Total comprehensive income for the
year:
Profit for the year
Other comprehensive income
Transactions with owners:
Dividends:
- Final for 2014
- Proposed for 2015
-
-
-
-
-
-
-
4,955
527,687
-
4,955
527,687
-
-
-
527,687
4,955
532,642
-
-
-
-
(98,000)
(73,500)
98,000
(73,500)
-
(98,000)
24,500
(73,500)
At end of year
98,000
8,936 3,234,793
98,000 3,439,729
Year ended 31 December 2014
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
Transactions with owners:
Dividends:
- Final for 2013
- Proposed for 2014
-
-
-
-
-
-
-
(6,005)
160,205
-
(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
The notes on pages 17 to 58 are an integral part of these financial statements.
15
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Consolidated statement of cash flows
Operating activities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Notes
Year ended 31 December
2014
Shs’000
2015
Shs’000
25
8
875,440
77,432
1,239
(80,336 )
455,261
84,791
-
(47,290 )
Net cash from operating activities
873,775
492,762
Investing activities
Purchase of property, plant and equipment
Purchase of biological assets and development
Proceeds from disposal of property, plant and equipment
Repayments of financial assets held to maturity
17
6
20
(263,985 )
(353,813 )
3,882
15,385
(63,818 )
(307,321 )
5,424
15,385
Net cash used in investing activities
(598,531 )
(350,330 )
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
201,744
68,932
Movement in cash and cash equivalents
At start of year
Increase
973,690
201,744
904,758
68,932
At end of year
24
1,175,434
973,690
The notes on pages 17 to 58 are an integral part of these financial statements.
16
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 standards and amendments have been applied by the company for the first time for the
financial year beginning 1 January 2015:
Annual Improvements to IFRSs 2010-2012 and 2011-2013 cycles. The following amendments are
effective 1 July 2014:-
IFRS 2 – clarifies the definition of ‘vesting condition’ and now distinguishes between ‘performance
condition’ and ‘service condition’
IFRS 3 – clarifies that an obligation to pay contingent consideration is classified as financial liability
or equity under the principles in IAS 32 and that all non-equity contingent consideration (financial
and non-financial) is measured at fair value at each reporting date.
IFRS 3 – clarifies that IFRS 3 does not apply to the accounting for the formation of any joint
arrangement
IFRS 8 – requires disclosure of the judgements made by management in aggregating operating
segments and clarifies that a reconciliation of segment assets must only be disclosed if segment
assets are reported.
17
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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)
IFRS 13 confirms that short-term receivables and payables can continue to be measured at invoice
amounts if the impact of discounting is immaterial.
IFRS 13 – clarifies that the portfolio exception in IFRS 13 (measuring the fair value of a group of
financial assets and financial liabilities on a net basis) applies to all contracts within the scope of
IAS 39 or IFRS 9
IAS 16 and IAS 38 – clarifies how the gross carrying amount and accumulated depreciation are
treated where an entity measures its assets at revalued amounts
IAS 24 – where an entity receives management personnel services from a third party (a
management entity), the fees paid for those services must be disclosed by the reporting entity, but
not the compensation paid by the management entity to its employees or directors.
IAS 40 – clarifies that IAS 40 and IFRS 3 are not mutually exclusive when distinguishing between
investment property and owner-occupied property and determining whether the acquisition of an
investment property is a business combination.
Amendments to IAS 19,’Defined Benefit Plans: Employee Contributions’. Effective 1 July 2014. The
amendments clarify the accounting for defined benefit plans that require employees or third parties to
contribute towards the cost of the benefits. Under the previous version of IAS 19, most entities
deducted the contributions from the cost of the benefits earned in the year the contributions were paid.
However, the treatment under the 2011 revised standard was not so clear. It could be quite complex to
apply, as it requires an estimation of the future contributions receivable and an allocation over future
service periods. To provide relief, changes were made to IAS 19. These allow contributions that are
linked to service, but that do not vary with the length of employee service (eg a fixed % of salary), to be
deducted from the cost of benefits earned in the period that the service is provided. Therefore many
entities will be able to (but not be required) continue accounting for employee contributions using their
existing accounting policy.
The adoption of the improvements made in the 2012-2012 cycle has required additional disclosures in
the segment note. Other than that, the adoption of these amendments did not have any impact on the
current period or any prior period and is not likely to affect future periods.
(ii) New standards and interpretations not yet adopted by the Group
As at the date of approval of these financial statements, the following new and revised standards and
interpretations were in issue but not yet effective:
Annual Improvements to IFRSs 2012-2014 Cycle. The latest annual improvements, effective 1 January
2016, clarify:
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 trees, macadamia, and
pineapples. 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.
18
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 by the Group (continued)
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. Agricultural produce growing on bearer plants remains within the scope of IAS 41 and
is measured at fair value less costs to sell with changes recognised in profit or loss as the produce
grows. The Company has assessed the impact of these changes and it is expected to have a
significant effect on the Group financial statements. The amendment is effective for annual periods
beginning on or after 1 January 2016.
IFRS 5 – when an asset (or disposal group) is reclassified from ‘held for sale’ to ‘held for
distribution’ or vice versa, this does not constitute a change to a plan of sale or distribution and
does not have to be accounted for as such.
IFRS 7 – specific guidance for transferred financial assets to help management determine whether
the terms of a servicing arrangement constitute ‘continuing involvement’ and, therefore, whether the
asset qualifies for de recognition.
IFRS 7 – that the additional disclosures relating to the offsetting of financial assets and financial
liabilities only need to be included in interim reports if required by IAS 34.
IAS 19 – that when determining the discount rate for post-employment benefit obligations, it is the
currency that the liabilities are denominated in that is important and not the country where they
arise.
IAS 34 – what is meant by the reference in the standard to ‘information disclosed elsewhere in the
interim financial report’ and adds a requirement to cross-reference from the interim financial
statements to the location of that information.
Amendments to IAS 1, ‘Presentation of Financial Statements’: The amendments are made in the
context of the IASB’s Disclosure Initiative, which explores how financial statement disclosures can be
improved. The amendments, effective 1 January 2016, provide clarifications on a number of issues,
including:
Materiality – an entity should not aggregate or disaggregate information in a manner that obscures
useful information. Where items are material, sufficient information must be provided to explain the
impact on the financial position or performance.
Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where
this is relevant to an understanding of the entity’s financial position or performance. There is also
new guidance on the use of subtotals.
Notes – confirmation that the notes do not need to be presented in a particular order.
OCI arising from investments accounted for under the equity method – the share of OCI arising
from equity-accounted investments is grouped based on whether the items will or will not
subsequently be reclassified to profit or loss. Each group should then be presented as a single line
item in the statement of other comprehensive income.
According to the transitional provisions, the disclosures in IAS 8 regarding the adoption of new
standards/accounting policies are not required for these amendments.
As these amendments merely clarify the existing requirements, they do not affect the Company’s
accounting policies or any of the disclosures.
19
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 by the Group (continued)
IFRS 10, ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint
ventures’. These amendments address an inconsistency between the requirements in IFRS 10 and
those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate
or joint venture. The main consequence of the amendments is that a full gain or loss is recognised
when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or
loss is recognised when a transaction involves assets that do not constitute a business, even if these
assets are housed in a subsidiary. The amendments are effective for annual periods beginning on or
after 1 January 2016.
IFRS 11, 'Joint arrangements'. This amendment adds new guidance on how to account for the
acquisition of an interest in a joint operation that constitutes a business. The amendments specify the
appropriate accounting treatment for such acquisitions. The amendment is effective for annual periods
beginning on or after 1 January 2016.
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 2018 and earlier application is permitted. The
company is assessing the impact of IFRS 15.
IAS 1, ‘Presentation of financial statements’ These amendments are as part of the IASB initiative to
improve presentation and disclosure in financial reports. Effective for annual periods beginning on or
after 1 January 2016.
Annual improvements 2014. These set of amendments, effective 1 January 2016, impacts 4
standards:
IFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of
disposal.
IFRS 7, ‘Financial instruments: Disclosures’, (with consequential amendments to IFRS 1)
regarding servicing contracts.
IAS 19, ‘Employee benefits’ regarding discount rates.
IAS 34, ‘Interim financial reporting’ regarding disclosure of information.
IFRS 16 – Leases. After ten years of joint drafting by the IASB and FASB they decided that lessees
should be required to recognise assets and liabilities arising from all leases (with limited exceptions)
on the balance sheet. Lessor accounting has not substantially changed in the new standard.
20
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 by the Group (continued)
The model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a period
of time and has an obligation to pay for that right. In response to concerns expressed about the cost
and complexity to apply the requirements to large volumes of small assets, the IASB decided not to
require a lessee to recognise assets and liabilities for short-term leases (less than 12 months), and
leases for which the underlying asset is of low value (such as laptops and office furniture).
A lessee measures lease liabilities at the present value of future lease payments. A lessee measures
lease assets, initially at the same amount as lease liabilities, and also includes costs directly related to
entering into the lease. Lease assets are amortised in a similar way to other assets such as property,
plant and equipment. This approach will result in a more faithful representation of a lessee’s assets
and liabilities and, together with enhanced disclosures, will provide greater transparency of a lessee’s
financial leverage and capital employed.
One of the implications of the new standard is that there will be a change to key financial ratios
derived from a lessee’s assets and liabilities (for example, leverage and performance ratios).
IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC 4, ‘Determining whether an Arrangement contains a
Lease’, SIC 15, ‘Operating Leases – Incentives’ and SIC 27, ‘Evaluating the Substance of
Transactions Involving the Legal Form of a Lease’. The amendment is effective for annual periods
beginning on or after 1 January 2019.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to
have a material impact on the Company.
(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.
(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.
21
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
2 Summary of significant accounting policies (continued)
(d) Revenue recognition (continued)
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.
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.
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
Plant and machinery
Motor vehicles, tractors, trailers and implements
Furniture, fittings and equipments
Capital work in progress is not depreciated
20 – 50 years
10 – 13 years
4 – 10 years
3 – 8 years
22
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
2
Summary of significant accounting policies (continued)
(f) Property, plant and equipment (continued)
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.
(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.
23
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
2
Summary of significant accounting policies (continued)
(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.
(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.
24
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
2 Summary of significant accounting policies (continued)
(n) Financial assets (continued)
(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
in other
fair value of non-monetary securities classified as available-for-sale are recognised
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.
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.
25
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
2 Summary of significant accounting policies (continued)
(o) 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.
(p) 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.
26
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
2 Summary of significant accounting policies (continued)
(p) Current and deferred income tax (continued)
(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.
(q) 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.
(r) 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.
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.
27
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
3 Critical accounting estimates and judgements (continued)
(a) Critical accounting estimates and assumptions (continued)
(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 2015, if the Shilling was weaker/stronger by 5% (2014: 5%) against the US dollar with all
other variables held constant, the consolidated post tax profit would have been Shs 12,535,180 (2014:
Shs 4,855,231) higher/lower mainly as a result of US dollar deposits and trade receivables.
At 31 December 2015 if the Shilling was weaker/stronger by 5% (2014: 5%) against the Euro with all
other variables held constant, the consolidated post tax profit would have been Shs 318 higher/lower
(2014: Shs 4,941,650).
(ii) Price risk
The Group does not hold any financial instruments subject to price risk.
(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 2015, an increase/decrease of 5% (2014:
5%) would have resulted in a decrease/increase in post tax profit of Shs Nil (2014: 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% (2014: 5%) would have resulted in an increase/decrease in post
tax profit of Shs 5,734,657 (2014: Shs 6,653,648).
28
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
4 Financial risk management objectives and policies (continued)
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 2015 is the carrying value of the financial assets in the statement of financial position.
Collateral is held only for staff loans amounting to Shs 30,268,776 (2014: Shs 24,425,771) 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
2015
Shs’000
2014
Shs’000
-
1,912
1,084
3,070
-
1,234
58
2,221
Total past due but not impaired
6,066
3,513
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.
29
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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
Shs’000
Between 1
and 2 years
Shs’000
Between 2
and 5 years
Shs’000
Over 5 years
Shs’000
-
-
-
-
Shs’000
-
-
-
-
At 31 December 2015:
- Payables and accrued expenses
- Current income tax
227,024
128,071
At 31 December 2014:
- Payables and accrued expenses
- Current income tax
150,147
16,519
Company
-
-
-
-
-
-
-
-
Less than 1
year
Shs’000
Between 1
and 2 years
Shs’000
Between 2
and 5 years
Shs’000
Over 5 years
At 31 December 2015:
- Payables and accrued expenses
- Current income tax
235,407
128,124
At 31 December 2014:
- Payables and accrued expenses
- Current income tax
158,530
16,572
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.
30
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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.
31
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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. The business activities of livestock, fresh pineapples, macadamia 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 Stores. 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 2015 and
31 December 2014 is as follows:
Sales to external customers
Sales - continuing operations
295,790
232,533
1,800,467 1,127,412 169,296
157,815
216,291
172,157 2,481,844 1,689,917
Shs’000
Shs’000
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
2015
2014
Tea
2015
Avocados
2014
2015
Forestry
2014
2015
2014
All other segments
2015
2014
Consolidated
Comprising
Major external customers sales
All other external customers sales
295,790
-
232,533
-
1,767,127 1,103,437
-
23,975 169,296
-
157,815
76,791
34,418 2,139,708 1,370,388
139,500 137,739 342,136 319,529
33,340
295,790
232,533
1,800,467 1,127,412 169,296
157,815
216,291 172,157 2,481,844 1,689,917
Geographical analysis
UK & Continental Europe
Kenya
Others
-
295,790
-
-
232,533
-
1,767,127 1,103,437
33,340
-
-
23,975 169,296
-
-
-
157,815
-
-
- 1,767,127 1,103,437
139,500 137,739 637,926 552,062
34,418
76,791
34,418
76,791
295,790
232,533
1,800,467 1,127,412 169,296
157,815
216,291 172,157 2,481,844 1,689,917
32
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
5. Segmental reporting (continued)
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
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Assets (all located in Kenya)
Segment assets
Unallocated assets
Liabilities
Segment liabilities
Unallocated liabilities
Additions
Property, plant and equipment
Biological assets
2015
2014
Tea
2015
Avocados
2014
2015
2014
2015
2014
Forestry
All other segments
2015
Consolidated
2014
Shs’000 Shs’000
Shs’000 Shs’000 Shs’000
Shs’000
Shs’000
Shs’000
Shs’000 Shs’000
57,033
(3,815 )
2,000
55,218
-
55,218
6,891 1,384,199 736,568
(15,897 )
(19,050 )
(3,976 )
10,000
8,409
10,457
12,915 1,375,606 729,080
(649,800 ) (484,829 )
725,806 244,251
-
12,915
39,569
(3,349 )
43,347
79,567
-
79,567
19,864
(2,439 )
(27,073 )
(9,648 )
-
(9,648 )
(26,895 )
(28,995 )
58,458
2,568
(5,424 )
(2,856 )
27,175 1,453,906
(55,209 )
(22,579 )
87,977
114,262
92,573 1,512,959
(655,224 )
(2,547 )
857,735
90,026
790,498
(44,891 )
79,313
824,920
(487,376 )
337,544
2,857
-
-
58,075
(17,987 )
40,088
2,713
-
-
15,628
(4,873 )
10,755
-
-
-
-
-
-
725,806 244,251
(224,791 )
(76,165 )
501,015 168,086
-
-
-
79,567
(24,643 )
54,924
-
-
-
(9,648 )
3,009
(6,639 )
(6,093 )
88,502
(178,556 )
(99,003 )
30,663
(68,340 )
3,689
77,106
(188,253 )
(17,432 )
5,435
(11,997 )
(3,236 )
88,502
(178,556 )
764,445
(236,758 )
527,687
6,402
77,106
(188,253 )
232,799
(72,594 )
160,205
1,101,001 823,996 1,006,699 925,778 574,987
518,134 1,108,136
58,692
30,817
38,750
31,191
-
-
23,897
840,954 3,790,823 3,108,862
764,356 748,592
4,555,179 3,857,454
-
121,339
62,008
989,970 810,718
1,111,309 872,726
2,511
-
2,511
-
-
-
52,432
7,113
59,545
26,208
182
26,390
8,147
15,303
23,450
6,757
15,852
22,609
200,895
53,303
254,198
30,853
78,592
109,445
263,985
75,719
63,818
94,626
339,704 158,444
33
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
6 Biological assets – Group and Company
Changes in carrying amounts of biological assets comprise:
Year ended 31 December 2015
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
115,925
19,370
39,725
(46,802)
1,912,574
334,443
74,537
(266,155)
2,028,499
353,813
114,262
(312,957)
Livestock
Shs’000
Plantation
Shs’000
Total
Shs’000
At end of year
128,218
2,055,399
2,183,617
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)
At end of year
115,925
1,912,574
2,028,499
34
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
6 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.
35
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 2015
Livestock
Avocado
Tea
Forestry
Macadamia
Pineapple
Year ended 31 December 2014
Livestock
Avocado
Tea
Forestry
Macadamia
Pineapple
-
-
-
-
-
-
-
-
-
-
-
-
-
-
128,218
-
237,000
486,400
-
63,200
-
724,749
-
-
544,050
-
128,218
724,749
237,000
486,400
544,050
63,200
914,818
1,268,799
2,183,617
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
There were no transfers between any levels during the year.
36
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 2015
At start of year
Increase due to plantings
Fair value gains arising from biological transformation
Decrease due to harvest
699,404
171,171
10,457
(156,283 )
460,921
115,802
20,395
(53,068 )
1,160,325
286,973
30,852
(209,351 )
724,749
544,050
1,268,799
Year ended 31 December 2014
At start of year
Increase due to plantings
Fair value gains arising from biological transformation
Decrease due to harvest
689,719
158,443
8,409
(157,167 )
330,686
91,879
48,060
(9,704 )
1,020,405
250,322
56,469
(166,871 )
699,404
460,921
1,160,325
37
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 2015
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
724,749 Discounted
cash flows
Yield - Kgs
per Hectare
22,000 The higher the yield, the higher the value
Price per
carton
€3.05 – €3.60
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 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
38
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 2015
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
544,050
Discounted
cash flows
Yield Kgs/Ha
1,000 The higher the yield, the higher the value
Kernel price
Discount rate
The higher the market price, the higher the fair value
$9.75 –
$11.37
17.50% The higher the discount rate, the lower the fair value
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
39
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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:
2015
2014
Hectares Hectares
510
1,773
450
55
856
510
1,715
414
50
698
Head
Head
4,510
4,305
Metric
tonnes
Metric
tonnes
6,215
9,362
1,752
237
7,517
8,841
1,552
165
Cubic
metres
Cubic
metres
5,540
5,502
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
(2014: 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.
40
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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/expense
Net foreign exchange (loss)/gain other than cash and cash equivalents
Gain on disposal of property, plant and equipment
Rental Income
Sundry
8
Finance income and costs
Finance income
Interest income on short term bank deposits
Net foreign exchange gain/(loss) on cash and cash equivalents
2015
Shs’000
2014
Shs’000
294,089
951,562
49,797
308,139
227,607
474,156
43,125
256,891
1,603,587
1,001,779
2015
Shs’000
2014
Shs’000
(11,272)
3,051
3,998
987
132
1,328
3,572
1,370
(3,236)
6,402
2015
Shs’000
2014
Shs’000
77,432
11,070
84,791
-
88,502
84,791
Finance cost
Interest expense on bank borrowings, overdrafts and exchange losses
1,239
7,865
41
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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)
Cost of inventories sold/consumed
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):
Deferred income tax relating to other comprehensive income
2015
Shs’000
2014
Shs’000
55,209
49,259
5
44,891
40,809
5
(114,262)
688,270
417,554
6,225
(79,313)
545,308
401,361
5,775
2015
Shs’000
2014
Shs’000
392,316
381,808
14,359
2,954
7,925
11,411
2,547
5,595
417,554
401,361
2015
Shs’000
2014
Shs’000
191,888
46,994
(2,124 )
56,004
14,016
2,574
Income tax expense
236,758
72,594
42
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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:
2015
Shs’000
2014
Shs’000
Profit before income tax
764,445
232,799
Tax calculated at the statutory income tax rate of 30%
(2014: 30%)
Tax effect of:
Income not subject to income tax
Expenses not deductible for income tax purposes
(Under)/over provision of deferred income tax in prior years
229,334
69,840
(293 )
8,829
(1,112 )
(56 )
2,775
35
Income tax expense
236,758
72,594
The Group tax (charge)/credit relating to components of other comprehensive income is as follows:
Remeasurement of post employment benefit obligations:
Actuarial gains/(losses) (Note 16)
Tax – (charge)/credit (Note 15)
2015
Shs’000
2014
Shs’000
7,079
(2,124 )
(8,579 )
2,574
Net credit/(charge) to other comprehensive income
4,955
(6,005 )
43
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
12 Earnings and dividends – Group
i) Basic and diluted earnings per stock unit
Basic 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 2015 and 31 December 2014 as follows:-
Profit attributable to equity holders of the company (Shs ‘000)
527,687
160,205
2015
2014
Number of stock units in issue (thousands)
19,600
19,600
Basic and diluted earnings per stock unit (Shs)
26.92
8.17
The company had no potentially dilutive stock units outstanding at 31 December 2015 and 31 December
2014.
ii) Dividends per stock unit
At the annual general meeting to be held on 17 May 2016, the directors will recommend the payment of
a first and final dividend of 100% of par value equivalent to Shs 5.00 per stock unit (2014: Shs 3.75 per
stock unit) in respect of the year ended 31 December 2015.
13 Share capital
Number of
stock units
(Thousands)
Ordinary
shares
Shs ‘000
Authorised
At 1 January 2014, 31 December 2014 and 31 December 2015
20,000
100,000
Issued and converted into stock units
At 1 January 2014, 31 December 2014 and 31 December 2015
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.
44
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
14 Borrowing facilities – Group and Company
2015
Shs’000
2014
Shs’000
The Group has the following undrawn committed borrowing facilities:
Floating rate (expiring within one year)
626,300
626,300
The facilities are subject to annual review at various dates during the year 2016.
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% (2014: 30%). The movement on the
deferred income tax account is as follows:
At start of year
Charge to profit or loss
Charge to other comprehensive income
2015
Shs’000
637,220
44,870
2,124
2014
Shs’000
623,204
16,590
(2,574 )
At end of year
684,214
637,220
The following amounts, determined after appropriate offsetting, are shown in the statement of financial
position.
Deferred income tax assets
Deferred income tax liabilities
2015
Shs’000
2014
Shs’000
(61,335 )
745,549
(39,184 )
676,404
684,214
637,220
45
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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 2015 – Group and Company
Property, plant and equipment
Biological assets
Provisions for liabilities
Other temporary differences
Balance
1.1.2015
Shs’000
111,512
564,892
(37,037)
(2,147)
Charged/
(credit) to
SCI
Shs’000
Balance
31.12.2015
Shs’000
20,510
44,848
(24,298)
5,934
132,022
609,740
(61,335)
3,787
Net deferred income tax liability
637,220
46,994
684,214
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
46
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
16 Post employment benefit obligations – Group and Company
The amounts recognised in the statement of financial position are determined as follows:
2015
Shs’000
2014
Shs’000
Present value of post employment benefit obligations
72,000
68,840
Split as follows:
Non-current portion
Current portion
57,885
14,115
58,085
10,755
The movement in present value of the post employment benefit obligations is as follows:
At start of year
Net expense recognised in statement of comprehensive income
Benefits paid
At end of year
2015
Shs’000
2014
Shs’000
68,840
7,280
(4,120 )
52,896
19,990
(4,046 )
72,000
68,840
The amounts recognised in the statement of profit or loss within ‘cost of production’ for the year are as
follows:
3
Current service cost
Past service cost
Interest on obligation
2015
Shs’000
2014
Shs’000
5,006
-
9,353
4,254
2
7,155
Total included in employee benefits expenses (Note 10)
14,359
11,411
Actuarial gain/(loss) recognised in other income (Note 11)
(7,079 )
(8,579 )
47
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
16 Post employment benefit obligations Group and Company (continued)
31 December 2015
Gratuity
(Makuyu)
Shs’000
Gratuity
(Nandi Hills)
Shs’000
Total
Shs’000
31 December 2014
Gratuity
(Makuyu)
Shs’000
Gratuity
(Nandi Hills)
Shs’000
Total
Shs’000
At start of year
45,573
23,267
68,840
33,231
19,665
52,896
Current service cost
Interest expense/(income)
Past service cost
3,514
6,324
-
1,492
3,029
-
5,006
9,353
-
2,946
4,635
2
1,308
2,520
-
4,254
7,155
2
9,838
4,521
14,359
7,583
3,828
11,411
Remeasurements:
(Gain)/loss from change in assumptions
Experience (gains)/losses
(1,153 )
(5,268 )
59
(717 )
(1,094 )
(5,985 )
1,155
4,341
754
2,329
1,909
6,670
Benefits paid
At end of year
(6,421 )
(658 )
(7,079 )
5,496
3,083
8,579
(969 )
(3,151 )
(4,120 )
(737)
(3,309)
(4,046 )
48,021
23,979
72,000
45,573
23,267
68,840
48
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
16 Post employment benefit obligations Group and Company (continued)
The principal actuarial assumptions used are as follows:
Gratuity (Makuyu)
Gratuity (Nandi Hills)
Discount rate (% p.a.)
Future salary increases (% p.a.)
first year
second year
Thereafter
2015
14%
10%
10%
10%
2014
13.5%
10%
10%
10%
2015
14%
10%
10%
10%
2014
13.5%
10%
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 3,842,000
Not material
49
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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:
2015
Shs’000
2014
Shs’000
2013
Shs’000
2012
Shs’000
2011
Shs’000
Present value of post employment benefit obligations – Group and Company
72,000
68,840
52,896
59,661
71,868
Net expense recognised in the statement of comprehensive income - Group
- within ‘cost of production’
- within ‘other comprehensive income (gain)/loss
14,359
(7,079 )
11,411
8,579
12,216
(16,107 )
23,024
5,074
13,373
(5,702 )
Net expense recognised in the statement of comprehensive income –
Company
- within ‘cost of production’
- within ‘other comprehensive income (gain)/loss
14,359
(7,079 )
11,411
8,579
12,216
(16,107 )
14,157
5,074
8,637
(3,464 )
50
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
17 Property, plant and equipment
Group and Company
Year ended 31 December 2015
Cost
At start of year
Transfers
Additions
Disposals
At end of year
Depreciation and impairment
At start of year
Charge for the year
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
945,444
19,176
59,200
(69,837 )
151,259
5,458
5,074
-
152,241
-
33,117
(9,263 )
48,254
-
5,298
(1,665 )
24,634
(24,634 )
161,296
-
1,321,832
-
263,985
(80,765 )
953,983
161,791
176,095
51,887
161,296
1,505,052
513,200
22,711
(69,705 )
83,917
11,142
-
126,642
15,955
(8,564 )
38,545
5,401
(1,665 )
466,206
95,059
134,033
42,281
-
-
-
-
762,304
55,209
(79,934 )
737,579
487,777
66,732
42,062
9,606
161,296
767,473
Depreciation and impairment at year end comprises:
Depreciation
Impairment
460,535
5,671
94,501
558
134,033
-
42,195
86
466,206
95,059
134,033
42,281
-
-
-
731,264
6,315
737,579
51
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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
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 )
141,732
-
9,691
(164 )
150,643
-
11,295
(9,697 )
49,347
-
9,661
(10,754 )
1,926
(1,926 )
24,634
-
1,292,520
-
63,818
(34,506 )
945,444
151,259
152,241
48,254
24,634
1,321,832
507,015
19,565
(13,380 )
74,529
9,552
(164 )
121,395
11,544
(6,297 )
44,884
4,230
(10,569 )
513,200
83,917
126,642
38,545
-
-
-
-
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
-
38,459
86
513,200
83,917
126,642
38,545
-
-
-
686,298
76,006
762,304
52
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
18 Prepaid operating lease rentals – Group and Company
At start of year
Amortisation charge for the year
At end of year
19 Investment
(a) Investment in subsidiaries
2015
Shs’000
2014
Shs’000
4.399
(5)
4,404
(5)
4,394
4,399
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 2015
At start of year
At end of year
Year ended 31 December 2014
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
53
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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:
At start of year
Redeemed in the year
At end of year
Non current portion
Current portion
2015
Shs’000
2014
Shs’000
76,923
(15,385 )
92,308
(15,385 )
61,538
76,923
46,153
15,385
61,538
15,385
61,538
76,923
21 Inventories – Group and Company
Spare parts and consumable materials
83,562
62,122
The cost of inventories recognised as an expense and included in cost of production amounted to Shs
688,270,000 (2014: Shs 545,308,000).
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
25,807
145,642
107,712
14,299
69,769
68,225
279,161
(23,469 )
152,293
(22,405 )
255,692
129,888
23,469
22,405
Non current receivables are due within five years from reporting date and are secured and interest free.
None of the amounts were impaired (2014: Nil).
The carrying amounts of the current receivables approximate to their fair value.
54
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
23 Payables and accrued expenses
Trade payables
Due to related companies (Note 26(v))
Accrued expenses
Other payables
Group
2015
Shs’000
2014
Shs’000
31,910
-
19,595
175,519
33,632
-
16,866
99,649
Company
2015
Shs’000
31,910
8,383
19,595
175,519
2014
Shs’000
33,632
8,383
16,866
99,649
227,024
150,147
235,407
158,530
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
2015
Shs’000
2014
Shs’000
32,786
1,142,648
21,801
951,889
1,175,434
973,690
55
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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)
Interest expense
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
2015
Shs’000
2014
Shs’000
764,445
232,799
(77,432 )
(1,239 )
55,209
5
(3,051 )
(84,791 )
-
44,891
5
(1,328 )
(114,262 )
(79,313 )
312,957
263,956
(21,440 )
(126,868 )
76,877
10,239
15,243
35,897
20,537
7,365
Cash generated from operations
875,440
455,261
56
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
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:
2015
2014
Shs’000
Shs’000
276,709
226,753
276,709
226,753
51,379
25,447
78,698
58,241
13,459
70,740
155,524
142,440
42,277
477
35,659
446
42,754
36,105
3,000
258
1,500
195
3,258
1,695
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)
57
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Notes (continued)
26 Related party transactions – Group and Company (continued)
v) Outstanding balances arising from sale and purchase of goods and service
Group
Company
2015
2014
2015
2014
Shs’000
Shs’000
Shs’000
Shs’000
145,642
69,769
145,642
69,769
-
-
-
-
-
-
2,570
5,813
2,570
5,813
8,383
8,383
Due from related Companies
Eastern Produce Kenya Limited
Due to related Companies
Estate Services Limited
Kaguru EPZ 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
2015
2014
Shs’000 Shs’000
74,228
1,462
------------- 000 -------------
58
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Kakuzi Limited
Notes (continued)
Five year record
Turnover
2,481,844
1,689,917
1,384,375
2,043,332 2,376,862
2015
Shs'000
2014
Shs'000
2013
Shs'000
2012
Shs'000
2011
Shs'000
Profit before income tax
Income tax
764,445
(236,758)
232,799
(72,594)
239,306
(74,278)
567,806
(159,150)
920,093
(275,696)
Profit after income tax
Non controlling interest
527,687
-
160,205
-
165,028
-
408,656
(29,299)
644,397
(94,461)
Profit attributable to the members of Kakuzi
Limited
527,687
160,205
165,028
379,357
549,936
Dividends: -
Proposed final dividend - for the year
98,000
73,500
73,500
73,500
73,500
Capital and reserves: -
Called up share capital
Reserves and non controlling interest
98,000
3,336,934
98,000
2,882,747
98,000
2,806,028
98,000
98,000
2,703,225 2,658,765
Total equity
3,434,934
2,980,747
2,904,028
2,801,225 2,756,765
Basic earnings per stock unit (Shs)
26.92
8.17
8.42
19.35
28.06
Dividends per stock unit (Shs)
5.00
3.75
3.75
3.75
3.75
Dividend cover
5.38
2.18
2.25
5.16
7.48
Total equity per stock unit (Shs)
175.25
152.08
148.16
142.92
140.65
All amounts are stated in Kenya shillings thousands (shs’000) except where otherwise indicated.
59
Kakuzi Limited
Financial Statements
For the year ended 31 December 2015
Kakuzi Limited
Major stockholders and distribution schedule
Notes (continued)
MAJOR STOCKHOLDERS
The 10 major shareholders and their holdings at 31 December 2015 were:
Stockholder name
1. John Kibunga Kimani
2. Bordure Limited*
3. Lintak Investments Limited*
4. Standard Chartered Nominees – A/C 9532
5. G H Kluge & Sons Limited
6. Kenyalogy.com Limited
7. CFC Stanbic Nominees Ltd – A/C NR1031143
8. HBSC Global Custody Nominee (UK) Ltd
9. Joe Barrage Wanjui
10. John Okuna Ogango
Number of
stock units
5,440,098
5,107,920
4,828,714
338,334
239,118
214,710
200,383
200,000
122,004
104,400
%
27.76
26.06
24.64
1.73
1.22
1.10
1.02
1.02
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 2015 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
755
481
53
53
8
3
134,779
894,696
412,246
1,261,764
1,519,782
15,376,732
%
0.69
4.56
2.10
6.44
7.75
78.45
1,353
19,599,999
100.00
60
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 17th day of May 2016, and at any adjournment thereof.
As witness my hand this …………………………….. day of …………………………………………………..2016
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.
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Kakuzi Limited
P O Box 24
Thika 01000
Kenya
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