KAKUZI PLC
ANNUAL REPORT AND AUDITED CONSOLIDATED AND SEPARATE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Kakuzi Plc
Annual Report and Consolidated and separate Financial Statements
For the year ended 31 December 2019
Table of Contents
Company information
Notice of Annual General Meeting
Chairman’s Statement
Report of the Directors
Statement of Directors’ Responsibilities
Statement on Corporate Governance
Corporate Governance Auditor’s Report
Directors’ Remuneration Report
Independent Auditors’ Report
Financial Statements:
Consolidated and separate statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Separate statement of financial position
Consolidated statement of changes in equity
Separate statement of changes in equity
Consolidated and separate statement of cash flows
Page No
3
4
5 – 8
9 – 10
11
12 - 20
21
22
23 – 26
27
28
29
30
31
32
Notes to the consolidated and separate financial statements
33 – 80
Five year record
Major shareholders and distribution schedule
Form of proxy (Annual General Meeting)
81
82
83
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Kakuzi Plc
Company Information
For the year ended 31 December 2019
COUNTRY OF INCORPORATION
The Company is incorporated in Kenya under the Kenyan Companies Act, 2015.
DIRECTORS
The Directors who held office during the year and at the date of this report were:-
Mr. G H Mclean* Chairman
Mr. C J Flowers* Managing Director
Mr. K R Shah
Mr. K W Tarplee*
Mr. N Nganga
Mr. D M Ndonye
Mr. S N Waruhiu
Mr. A N Njoroge
* British
(Deceased 13 February 2020)
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)
Deloitte & Touche
Deloitte Place
Waiyaki Way, Muthangari
P. O. Box 40092
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
ORDINARY SHARES
KCB Bank Kenya Limited
P O Box 30081
00100 NAIROBI
NCBA Bank Kenya Plc
P O Box 44599
00100 NAIROBI
The Company’s ordinary shares are listed on the Nairobi Securities Exchange and the London Stock
Exchange.
3
Kakuzi Plc
Notice of Annual General Meeting
NOTICE is hereby given that the Ninety Second Annual General Meeting of the Members of the Company
will be held in the Ballroom at Nairobi Serena Hotel, Nairobi on Tuesday, 9th June 2020 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 Ninety First Annual General Meeting held on 14 May 2019.
4. To receive, consider and adopt the Financial Statements for the year ended 31 December 2019
together with the reports of the Chairman, the Directors and the Independent Auditors thereon.
5. To declare a first and final dividend of Shs.14.00 per ordinary share (2018: Shs 9.00) for the Financial
Year ended 31 December 2019.
6. To approve the Remuneration Policy of the Company as detailed in the Annual Report for the
Financial Year ended 31 December 2019.
7. To approve the Remuneration Report of the Board as detailed in the Annual Report for the Financial
Year ended 31 December 2019.
8. To re-elect Directors:-
i) Mr Ketan Rameshchandra Shah, a Director who retires by rotation in accordance with Article 27 of
the Company’s Articles of Association and, being eligible in accordance with Article 28 of the
Company's Articles of Association, offers himself for re-election.
ii) Mr Graham Harold Mclean, a Director who retires by rotation in accordance with Article 27 of the
Company’s Articles of Association and, being eligible in accordance with Article 28 of the
Company's Articles of Association, offers himself for re-election.
iii) Mr Daniel M Ndonye, a Director who has attained the age of seventy years, retires in accordance with
the provisions of clause 2.5 of the Code of Corporate Governance Practices for Issuers of Securities to
the Public, 2015. Special Notice having been received proposing for his re-election pursuant to
Section 287 of the Companies Act, 2015, he offers himself for re-election.
9.
In accordance with the provisions of Section 769 of the Kenyan Companies Act, 2015, the following
Directors, being members of the Board Audit & Risk Committee be re-elected to continue to serve as
members of the said Committee:-
a) Mr Daniel M Ndonye
b) Mr Stephen N Waruhiu
c) Mr Andrew N Njoroge
d) Mr Nicholas Nganga
10. To re-appoint Messrs Deloitte & Touche as Auditors of the Company in accordance with the
provisions of Section 721 (2) of the Kenyan Companies Act, 2015 and to authorise the Directors to fix
the Auditors’ remuneration for the ensuing Financial Year in accordance with the provisions of
Section 724 (1) of the Kenyan Companies Act, 2015.
11. 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
19 March 2020
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.
4
Kakuzi Plc
Chairman’s Statement
For the year ended 31 December 2019
RESULTS
An excellent set of results for 2019 showing a pre-tax profit of Shs 1,014 million against Shs 684 million of
last year as a result of firm market demand and pricing for both avocado and macadamia throughout the
year. The earning per Share increased from Shs 24.57 to Shs 36.40. Profitability within the tea operations
continued to reflect the difficult trading conditions and significant inflationary pressure on labour and other
production costs.
Kakuzi continues to develop its Core Crop Strategy in line with the Group’s long-term objectives.
DIVIDEND
Kakuzi’s cashflow and balance sheet remain strong and in a good position with which to continue its
strategic investment plans. The Directors have recommended a dividend of Shs 14.00 per share
compared with Shs 9.00 per share in 2018.
OVERVIEW
Kakuzi’s commitment to its custodial philosophy remains a prime focus as does developing its agricultural
strategy i.e. the diversification of its income stream and the continued expansion of both the avocado and
macadamia footprints. The future sustainability and improvement of its operations and water resources,
as well as the wellbeing of its employees, forms the very foundation of the Company’s daily activities. Not
least, supporting local communities through economic empowerment, health, education, environmental,
water and sanitation initiatives.
Kakuzi’s avocado smallholder empowerment programme paid out Shs 93 million (85% of the net returns)
to individual farmers and smallholder groups who supplied fruit last year.
Agriculture at Kakuzi continues to perform well in Kenya’s current business climate. Despite global political
uncertainty, climate change, and volatile commodity markets, the Company’s diverse cropping portfolio
and commitment to environment sustainability remain the basis of its commercial objectives.
The international markets within which Kakuzi operates are very uncertain as a result of the ongoing
pandemic COVID 19 and the supply and demand dynamics are unclear for 2020, making future
projections uncertain.
OPERATIONS
The dry conditions experienced at the beginning of the year seriously affected Kakuzi’s avocado crop
resulting in a decline in yield. However, a global drop in avocado volumes in comparison to 2018, meant
an undersupplied market which resulted in excellent prices for most of the season. The macadamia
market held firm as a result of lower than anticipated volumes from Australia and sustained demand from
China.
Avocado export production was down 45% on 2018 - a total of 1.56 million cartons were shipped. Market
demand in EU countries continued at unprecedented levels with excellent prices being achieved, however,
Kenya’s reputation as an origin for quality fruit remains undermined by the export of immature fruit.
Logistics improved this year with few delays and no material insurance claims. Kakuzi continues to focus
on producing quality fruit as well as its orchard expansion both in terms of size and variety.
Macadamia production was up by 37% on 2018 despite the dry conditions throughout the year. Our
products performed well in the market with this being the first year of marketing our product through Green
and Gold Macadamias (www.greenandgoldmacadamias.com) who bring with them a wealth of
macadamia marketing experience and customer access to a stable, quality supply of processed
macadamia.
5
Kakuzi Plc
Chairman’s Statement (continued)
For the year ended 31 December 2019
OPERATIONS (continued)
Market prices remained firm and in line with last year although Kakuzi’s final selling price was down about
6% as a result of a higher proportion of smaller and commercial grades sold.
Kakuzi’s forestry operations saw a slight decline in sales of treated poles although sawn timber sales were
up on the previous year on the back of firm demand. Sales from Kakuzi’s roadside shop continue to do
well.
In terms of Kakuzi’s livestock, herd numbers were maintained at an average head count of 4,400
throughout the year and considering the dry weather experienced in the first quarter, sales recovered
remarkably in the second half of the year to levels slightly above 2018.
Tea prices were under severe pressure throughout the year due to significant ‘carried forward’ stocks from
2018’s record production that remained in the market. In Nandi Hills, a final agreement was reached with
KPAWU on the outstanding CBAs between 2014 and 2019, and payments to employees were completed.
The 10 Ha blueberry operation was established on Kakuzi during the first quarter of the year and the
imported plants have grown well and produced a small crop in the last quarter; the majority of which was
sold locally. A trial export shipment of a small amount was successfully completed.
GOVERNANCE
Kakuzi is committed to ensuring that the business is run in a professional, transparent and equitable
manner so as to protect and enhance its value for all stakeholders.
Kakuzi undertook its second governance audit during the year in line with the Capital Markets Authority
requirement. The Auditor’s Report can be found on Page 21 of this Annual Report.
In keeping with good Corporate Governance compliance, a Board evaluation process and further training
sessions were conducted during the year.
We continue to note the Governance auditors’ recommendations and are pleased with their positive audit
findings.
CORPORATE SOCIAL INVESTMENT (CSI) AND SUSTAINABILITY
Kakuzi continues to work hard towards achieving its Sustainable Development Goals (SDGs) through in-
house schemes such as indigenous forest enrichment and wetland initiatives, and we remain steadfast in
our support of local communities through economic empowerment initiatives, agricultural training
programmes, environmental conservation schemes (such as tree planting), water sanitation, and with
basic health and education needs (the provision of desks and computers). The Company’s CSI
specifically works with SDGs relating to good health and wellbeing, quality education, gender equality,
clean water and sanitation, decent work and economic growth, and Climate action.
Kakuzi’s commitment to developing community avocado farming continues in earnest through its
agricultural extension services. Social media-based training programmes have been developed and
numerous training programmes with farmers took place on good agricultural practices. With the increased
level of new plantings by smallholder farmers, it is critical that we spend time and effort improving farmers’
knowledge of the market criteria for their fruit. Growing quality fruit which meet international standards is
essential to maximise the returns and to prevent this fruit from simply being ignored in weak markets.
Kakuzi continues to engage with various social partners and stakeholders and is actively involved with
government offices,
local administration, Civil Society Organisations and Non-Governmental
Organisations, in particular, the Kenya National Commission on Human Rights (KNCHR).
During 2019, Kakuzi became a signatory to the United Nations Global Compact (UNGC) and is in the final
stages of completing its application to join the United Nations Women in support of the principles of
women empowerment.
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Kakuzi Plc
Chairman’s Statement (continued)
For the year ended 31 December 2019
CORPORATE SOCIAL INVESTMENT (CSI) AND SUSTAINABILITY (continued)
Our commitment to the UNGC’s principles on Human Rights, Environment, Labour relations and Anti-
corruption is reflected in our CSI activities.
Our Sexual Harassment Awareness Reporting and Prevention (SHARP) Programme continued to have
positive impact at the workplace and has now been extended to the surrounding community. SHARP was
featured by UNGC and UNFPA (United Nations Population Fund) at the International Conference on
Population and Development (ICPD25) held in Nairobi in 2019.
An education campaign was launched through our SAASA (Stop Alcohol and Substance Abuse) program;
it is aimed at educating the youth, our employees and the general community on the dangers posed by
these products. SAASA feeds directly to Kakuzi’s mental health programme which has an additional focus
on counselling, stress and depression management as well as promoting family cohesion.
During the year we successfully underwent various socio-environmental and food safety audits including
Rainforest Alliance (RA), GLOBALG.A.P. Risk Assessment on Social Practice (GRASP), Sedex Members
Ethical Trade Audit (SMETA), GlobalGAP, Tesco Nurture, and Food Safety System Certification (FSSC).
We also maintained our Kenya Bureau of Standards certification for all of our products as well as a Halaal
certification for our livestock and Kosher certification for our macadamia.
STRATEGIC GOALS & DEVELOPMENTS
Positive progress has been made towards achieving Kakuzi’s strategic development goals, and the Group
maintains the growth and diversification of its operational base. The Board continues to review further
developments in conjunction with the Group’s strategic objectives.
Kakuzi’s development plans remain in full swing with significant additional areas of avocado being planted.
Macadamia new planting development will resume in 2023 when work will commence on planting the final
30% of the total operation. Irrigation developments are also a key part of Kakuzi’s strategy to mitigate the
rising risk of adverse weather conditions and are ongoing for all of our cropping operations.
Sales of hay and beef into the local market continue to meet good demand and play a small yet important
contribution to National food security. We hope to grow these volumes in 2020.
BOARD ANNOUNCEMENTS
It was with profound sadness that we announced the death of Mr Kenneth W Tarplee who passed away in
the United Kingdom on the 13th February 2020 after a long battle with cancer. Mr Tarplee had been a
Director of the Company for 27 years and was the Chairman of the Board for five years of this period. His
guidance and counsel will be greatly missed by the Board and his fellow colleagues. Our most sincere
condolences go to his family.
STAFF AND DIRECTORS
As the business continues to expand, we are committed to the recruitment of Kenyan management at all
levels. Management at Makuyu continue to show strong commitment to their operations under what can
be challenging circumstances and are well supported by their finance, administration and legal colleagues
in Nairobi.
LOOKING AHEAD
In a world that is undergoing constant and accelerating change, be this in politics, technology, culture or
the environment, we must always be ready to adapt to the new challenges placed by these changes on
our business. Kakuzi produces crops that are growing in global demand by a discerning population in
7
Kakuzi Plc
Chairman’s Statement
For the year ended 31 December 2019
LOOKING AHEAD (continued)
search of good quality, healthy food products. Going forward the challenge will be to continue to produce
these sustainably, in a constantly changing climate.
With ever-changing global economic, political and climatic modifications, Kakuzi looks to continually adapt
as we introduce new varieties of our already established crops, and, where appropriate, diversify the type
of crops we produce. We are also adopting new technologies in order to reduce the energy used in the
production with the aim of reducing our carbon footprint as well as mitigate against rising production costs.
Such initiatives will ensure we keep abreast of global changes as well as actively invest in crops, practices
and technologies in advance of any dramatic shifts.
As ever, commodity prices are both unpredictable and volatile. In terms of Kakuzi’s production, it remains
largely dependent on the vagaries of the weather and other new threats such as locusts which are
becoming increasingly common as a result of the very real impact of climate change.
On behalf of the Board, I would like to sincerely thank all staff for their continued commitment and hard
work throughout a year that has posed a set of unique challenges. The Kakuzi staff have approached
challenges with great dedication and professionalism which has been nothing but exemplary.
The Board of Directors have been invaluable in their assistance, direction and support of management,
enabling them to progress in a productive manner, and I have every confidence that this will continue
through next year.
G H MCLEAN
CHAIRMAN
19 March 2020
8
Kakuzi Plc
Report of the Directors
For the year ended 31 December 2019
The Directors submit their report together with the audited Financial Statements for the year ended 31
December 2019, which disclose the state of affairs of Kakuzi Plc (the “Group and the Company”). The
annual report and financial statements have been prepared in accordance with the Kenyan Companies
Act, 2015.
PRINCIPAL ACTIVITIES
The principal activities of the Group comprise:
Growing, packing and selling of avocados
Growing, cracking and selling of macadamia nuts
The cultivation and sale of tea green leaf
Forestry development & sale of forestry products
Livestock farming, animal feed and sale of beef
Blueberries development
The two subsidiary companies are dormant.
BUSINESS REVIEW
A review of the business of the Group is incorporated within the Chairman’s statement on pages 5 to 8.
PRINCIPAL RISKS AND UNCERTAINTIES
There are a number of possible risks and uncertainties that could impact the Group’s operations. The
Group regularly monitors the risks. The information on the Group’s financial risks is disclosed in Note 4 of
the Financial Statements. The following risks relating to the Group’s principal operations have been
identified:
i)
ii)
iii)
iv)
Climate change: level of rainfall affecting crop yields and in extreme cases, crop viability.
Price volatility: changes in market prices impact profitability each season.
Currency fluctuation: profit volatility arising from sales denominated in foreign currency.
Cost of labour: increased cost of production and lower profitability.
RESULTS AND DIVIDEND
The net profit for the year of Shs 713,439,000 (2018: Shs 481,594,000) has been added to retained
earnings. The Directors recommend the approval of a first and final dividend of Shs 14.00 (2018: Shs
9.00) per ordinary share.
The results for the year are set out on pages 27 to 80 in the attached Financial Statements.
ANNUAL GENERAL MEETING
The Ninety Second Annual General Meeting of the Company will be held in the Ballroom at Nairobi Serena
Hotel, Nairobi on Tuesday, 9th June 2020 at 12.00 noon.
9
Kakuzi Plc
Report of the Directors (continued)
For the year ended 31 December 2019
DIRECTORS
The Directors who held office during the year and at the date of this report are set out on page 3.
The Directors’ interests in the share capital of the company are listed below: -
At 31 December 2019
Non-
Beneficial
Ordinary
shares
Beneficial
Ordinary
shares
At 31 December 2018
Non-
beneficial
Ordinary
shares
Beneficial
Ordinary
shares
Mr. K W Tarplee (Deceased 13 February 2020)
Mr. G H Mclean
Mr. C J Flowers
Mr. K R Shah
Mr. N Nganga
Mr. D M Ndonye
Mr. S N Waruhiu
Mr. A N Njoroge
-
100
-
200
1,000
-
-
-
75
-
-
-
-
-
-
-
-
100
-
200
1,000
-
-
-
75
-
-
-
-
-
-
-
Mr Ketan Rameshchandra Shah, a Director who retires by rotation in accordance with Article 27 of the
Company’s Articles of Association and, being eligible in accordance with Article 28 of the Company's
Articles of Association, offers himself for re-election.
Mr Graham Harold Mclean, a Director who retires by rotation in accordance with Article 27 of the
Company’s Articles of Association and, being eligible in accordance with Article 28 of the Company's
Articles of Association, offers himself for re-election.
Mr Daniel M Ndonye, a Director who has attained the age of seventy years, retires in accordance with the
provisions of clause 2.5 of the Code of Corporate Governance Practices for Issuers of Securities to the
Public, 2015. Special Notice having been received proposing for his re-election pursuant to Section 287 of
the Companies Act, 2015, he offers himself for re-election.
In accordance with the provisions of Section 769 of the Kenyan Companies Act, 2015, the following
Directors, being members of the Board Audit & Risk Committee be re-elected to continue to serve as
members of the said Committee:-
a) Mr Daniel M Ndonye
b) Mr Stephen N Waruhiu
c) Mr Andrew N Njoroge
d) Mr Nicholas Nganga
DISCLOSURE OF INFORMATION TO AUDITORS
Each Director confirms that, so far as he is aware at the date of approval of this report, there is no relevant
audit information of which the Group’s and Company’s auditor is unaware and that each Director has
taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit
information and to establish that the Group’s and Company’s auditor is aware of that information.
AUDITORS
Deloitte & Touche, having expressed their willingness, continue in office in accordance with the provisions
of section 721 (2) of the Kenyan Companies Act, 2015. The Directors monitor the effectiveness,
objectivity, and independence of the auditor. The Directors also approve the annual audit engagement
contract, which sets out the terms of the auditor's appointment and the related fees.
BY ORDER OF THE BOARD
K R SHAH
DIRECTOR
19 March 2020
10
Kakuzi Plc
Statement of Directors’ Responsibilities
For the year ended 31 December 2019
The Kenyan Companies Act, 2015 requires the Directors to prepare financial statements for each financial
year which give a true and fair view of the financial position of the Group and of the Company at the end of
the financial year and of their financial performance for the year then ended. It also requires the directors
to ensure that the Company and its subsidiaries maintain proper accounting records that are sufficient to
show and explain the transactions of the Company and its subsidiaries; disclose with reasonable accuracy
the financial position of the Group and the Company; and that enables them to prepare financial
statements of the Group and the Company that comply with prescribed financial reporting standards and
the requirements of the Kenyan Companies Act, 2015. The Directors are also responsible for
safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of
fraud and error.
The Directors accept responsibility for the preparation and presentation of these Financial Statements in
accordance with International Financial Reporting Standards and in the manner required by the Kenyan
Companies Act, 2015. They also accept responsibility for:
i. Designing, implementing and maintaining such internal control as they determine necessary to
enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error;
ii. Selecting suitable accounting policies and then apply them consistently; and
iii. Making judgements and accounting estimates that are reasonable in the circumstances
In preparing the Financial Statements, the Directors have assessed the Group’s and the Company’s ability
to continue as going concerns and disclosed, as applicable, matters relating to the use of going concern
basis of preparation of the financial statements. Nothing has come to the attention of the Directors to
indicate that the Group and the Company will not remain going concerns for at least the next twelve
months from the date of this statement.
The Directors acknowledge that the independent audit of the Financial Statements does not relieve them
of their responsibilities.
Approved by the Board of Directors on 19 March 2020 and signed on its behalf by:
K R SHAH
DIRECTOR
C J FLOWERS
DIRECTOR
11
Kakuzi Plc
Statement on Corporate Governance
For the year ended 31 December 2019
The Board and Management of the Group recognise that effective corporate governance is central to the
prudent direction and operation of the Group in a manner that ultimately enhances shareholder value and
satisfies the interests of other stakeholders. This statement outlines the Group's approach toward
corporate governance policies and practices.
The Group’s corporate governance practices and policies have been developed under the stewardship of
the Board in response to evolving laws and best practices, including the guidelines issued by The Capital
Markets Authority, The Code of Corporate Governance Practices for Issuers of Securities to The Public
2015 (the Code) and other global best practices.
Following the issuance of the Code, the Board embarked on tracking the implementation of the guidelines
and recommendations therein. The Board, in order to ensure that the Group is compliant, commissioned a
Governance Audit undertaken by an auditor, accredited by the Institute of Certified Public Secretaries of
Kenya. The Governance Auditor’s opinion is on page 21 of this report.
This statement describes how the Group applies the main principles of the Code. The Group
acknowledges and continues to consider the recommendations of the Code carefully and implement as
appropriate. Areas that have yet to be implemented are highlighted in the various sections below. In
implementing the Code, the Directors have taken account of the Group’s size and structure and the fact
that there is a controlling shareholder, Camellia Plc.
Board Size, Composition and Independence
The Group is governed by a Board of Directors each of whom is, with the exception of the Managing
Director, elected by the shareholders.
The Board currently comprises of seven Directors, three of whom are independent non-executive
Directors. Of the remaining Directors, two are executive, and two are non-executive, including a non-
executive Chairman. The independent and other non-executive Directors constitute over two-thirds of the
Board. The membership of the Board remained unchanged in 2019. The Directors' abridged biographies
appear on the Group's website, and the names of the Directors are listed on page 3 of this Annual Report.
The non-executive Directors are independent of management. Their role is to advise, constructively
challenge and monitor the success of management in delivering the agreed strategy within the risk
appetite and control framework that is set by the Board.
Based on the size, complexity and governance needs of the Group, the current Board size is considered
sufficient. The size of the Board has conformed to the applicable legal and regulatory frameworks.
All the Directors, excluding the Managing Director, are subject to retirement by rotation and must seek re-
election by shareholders at least once every three years in accordance with the Articles of Association.
Any Director appointed during the year is required to retire and seek re-election at the next Annual
General Meeting.
A review of the other listed Group Directorships of the Directors indicated that all the Directors have
complied with the Code, which limits the number of Directorships in listed companies a member of the
Board holds at any given time.
12
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Board Responsibilities
Internal controls
Strategy
Acquisitions and disposals
Financial reporting and control
Approval of expenditure above specified limits
Approval of transactions and contracts above specified limits
Responsibilities for corporate governance
Board membership and committees
Approval of changes to capital structure
Debt financing
Board Diversity
The Board is well composed in terms of the range and diversity of skills, experience and technical
knowledge and has an appropriate balance of executive, non - executive and independent Directors. The
Board recognises that opportunities exist to consider diversity upon future retirements of non-executive
Directors as per the governance guidelines.
Director’s Name
Occupation
Appointment Date
Mr Graham Mclean – Chairman – Non-Executive Director
Mr Christopher Flowers – Managing Director
(Executive Director).
Mr Nicholas Nganga – Non-Executive Director
Agriculture
Engineer
01 January 2005
28 March 2013
Farmer
28 November 2002
Mr Daniel M Ndonye – Independent Director
Accountant
29 November 2012
Mr Stephen Waruhiu –Independent Director
Mr Andrew Ndegwa Njoroge –– Independent Director
Valuer and Estate
Agent
Accountant
29 November 2012
2 August 2016
Mr Kenneth W Tarplee –Non-Executive Director (Deceased) Accountant
10 February 1993
Mr Ketan Shah – Finance Director (Executive Director).
Accountant
28 August 2007
Separation of powers and duties of the Chairman and the Managing Director
The roles of the Board are separated from that of the Management. The Chairman provides overall
leadership to the Board without limiting the principles of collective responsibility for Board decisions. The
Managing Director is responsible to the Board and takes responsibility for the effective and efficient
running of the Group businesses on a day-to-day basis.
Directors’ Shareholding
None of the Directors held shares in their individual capacity of more than 1% of the Company’s total
equity as at the end of December 2019.
Board Policies
The Board is committed to ensuring that the business is run in a professional, transparent, just and
equitable manner to protect and enhance shareholder value and satisfy the interests of other
stakeholders.
13
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Board Policies (continued)
The Board has established several policies and procedures to guide the Board and Management in the
implementation of the roles and responsibilities of the Groups business. A summary of the Board policies
and related governance documents include;
Board Charter - provides the roles and responsibilities of the Board.
Remuneration Policy - provides guidelines and criteria of Board compensation, attraction and retention.
Code of Conduct and Ethics of Directors - provides guidance to directors to help them recognise and
deal with ethical issues, provide mechanisms to report unethical conduct, and help foster a culture of
honesty and accountability. The staff have a separate Code of Conduct and Ethics policy.
Conflict of Interest - the Code of Conduct and Ethics contains guidance on conflict of interest.
Corporate Social Responsibility (CSR) Policy - includes purpose, strategies, guiding principles,
partnership focus, and reporting by the Group with respect to CSR as well as the roles and
responsibilities of the Board and employees of the Group regarding CSR. The Group has published
some of its CSR activities on its website.
Procurement Policy - includes the principles for the implementation of the policy, clear guidelines and
operating instructions on all matters relating to procurement, and tender contracts within the Group as
well as a comprehensive list of all the suppliers and vendors engaged by the Group.
Insider Trading - the Code of Business Conduct provides guidelines on trading on insider information.
Information Communication Technology (ICT) Policy - provides guidelines that are aligned to the
strategic objectives of the Group.
Company Secretary
The Company Secretary, who is a member of the Institute of Certified Secretaries of Kenya and in good
standing, with the assistance of the Finance Director, provides guidance to the Board on its duties and
responsibilities and other matters of governance and monitoring and coordinating their completion. During
the year, in addition to the key responsibilities, the Company Secretary assisted the Chairman in
conducting the Board evaluation.
Board and Directors’ effectiveness
A robust support system enhances board effectiveness in its oversight and leadership role. This is
facilitated through the following:
Board Remuneration
The Director's remuneration policy and report, including details of their compensation, appear on page 22.
Board Meetings
The Board and its Committees meet regularly in accordance with business requirements. The Committee
meetings are scheduled around the Board meetings. The Agenda and supporting papers and other
appropriate information are distributed prior to each meeting to allow the Board and its Committees to
meet its duties. In 2019, four scheduled Board meetings were held.
The Chairmen of the Board Committees report to each meeting of the Board on the activities of the
Committees since the previous Board meeting. The Board receives regular reports and presentations
from the Managing Director. The Board also monitors matters arising under the Code of Conduct, the
Anti-Bribery and Corruption Policy and the Whistleblower Policy.
14
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Board Meetings (continued)
The Board met and deliberated on, amongst other issues:
Share transactions and top shareholders
Updates on the strategic plan
Managing Director’s Report which includes review reports on progress against financial objectives,
business developments, investor and external relations, the environment, performance and updates
on the strategic initiatives
Audit and Risk Committee Report
Corporate Social Responsibility
Anti-Bribery Report (Semi-Annually)
Board Evaluation Report
Training Needs report
Public Relations proposal and Implementation Report
Details of the Board and Board Committee meetings held during the Reporting Period and attendances at
those meetings are set page 20.
Directors’ external activities and Conflicts of Interest
Directors have a statutory duty to avoid situations in which they have or may have interests that conflict
with those of the Group. The conflict of interest requirements is embedded in the Code of Conduct and
Ethics policy as well as the Directors’ letters of appointment. The Board and Board Committee meetings
have a standing agenda item on the declaration of interest, where members declare actual, potential or
perceived conflicts of interest. The declared items of interest are part of the minutes and are documented
in a conflict of interest register.
Insider Trading
Internal policy and various laws, regulations and guidelines that regulate the Group’s businesses prohibit
Directors and employees from dealing in the Group's securities when they have price-sensitive information
that is not generally available to the market. Information is considered to be "nonpublic" unless it has been
publicly disclosed, and adequate time has passed for the securities markets to digest the information.
Staff are required to adhere to the Staff Code of Conduct on permissible trading activity. During the year
2019, there were no known or identified instances of insider trading by the Directors, management and
staff of the Group.
Board Committees
The Board has established Committees to assist it in discharging its responsibilities and obligations. The
Committees assist the Board in carrying out its functions and ensuring that there is independent oversight
of internal controls and risk management. These Committees have terms of reference approved by the
Board, indicating their mandate, authority, duties, composition and leadership. The appointment of the
members to these Committees draws on the skills and experience of individual Directors.
The Board has constituted its Committees in compliance with the Code. The Committees in place are the
Audit & Risk Committee and the Nomination & Remuneration Committee. In addition to the Board
committees, the Group has in place several formally established management committees that deal with
particular sets of ongoing issues. These include the Tender Committee and Training Committee, among
others.
Management and external service providers and experts attend by invitation as circumstances dictate.
Directors’ attendance of these committees is provided on page 20.
15
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Board Committees (continued)
Details of these Committees are given here below:
Nomination & Remuneration Committee
The Nomination & Remuneration Committee is chaired by Mr Nicholas Nganga, a non-executive Director.
Although the Code recommends that the Chairman of the Nominations Committee should be an
independent Director, the Board considers that Mr Nganga is the appropriate non-executive Director for
this role because of his long-standing and experience. Its other members comprise the rest of the Board
members. The principal responsibilities of the Nomination & Remuneration Committee are set out below:
Principal responsibilities
Review the balance and composition (including gender and diversity) of the Board, ensuring that they
remain appropriate
Be responsible
the
identification and assessment of potential Board candidates and making recommendations to the
Board for its approval
the Board’s succession planning requirements
for overseeing
including
Keep under review the leadership needs of, and succession planning for, the Group in relation to both
its executive and non-executive Directors and other senior executives
Board performance evaluation and development of Directors
The Committee met once during the year, as shown on page 20 and deliberated on, amongst other
issues:
Training needs for the year 2020 noted
The need to review succession planning
Audit & Risk Committee
The Audit & Risk Committee is chaired by Mr Daniel Ndonye, an independent Director. The other
members of the Committee are Mr Nicholas Nganga, Mr Kenneth Tarplee (Deceased February 2020), Mr
Stephen Waruhiu and Mr Andrew Njoroge. During 2019, the Committee met twice, as shown below on
page 20.
All the members of the Audit & Risk Management Committee have the relevant qualifications and
expertise in audit, financial management or accounting.
Principal responsibilities
To review and monitor the financial statements of the Group and the audit of those statements
To monitor compliance with relevant financial reporting requirements and legislation
To monitor the effectiveness and independence of the external auditor
To review the efficacy of the Group's internal control system - the Committee regularly reviews the
effectiveness of internal audit activities carried out by the Group’s audit function and senior
management
To review significant accounting policies and practices; and,
To review non-audit services provided by the external auditors
During the course of the year, the Committee received, reviewed, monitored, considered, approved and
guided management and made recommendations to the Board on:
Monitoring developments in accounting, financial reporting and taxation relevant to the Group
Reviewing and making recommendations to the Board for the adoption of the Group’s half-year and
annual financial statements
Approval of the scope plan and fees for the 2019 external audit
Reviewing the independence and performance of the external auditor
Reviewing Internal Audit reports and approval of the 2019 Internal Audit plan
Reviewing the External Auditors audit findings report for the year ended 2018
Review of Dividend and Press announcements
Review of the Group’s Risk Map
16
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Board and Directors Evaluation in 2019
The Nomination and Remuneration Committee is responsible for determining the process for evaluating
Board performance. In line with the provisions of the Code, the Board undertook an inaugural evaluation
of its performance as an entity in 2019. The evaluation was conducted internally by the Chairman of the
Board through the coordination of the Company Secretary. Each director completed a detailed
questionnaire designed to obtain feedback on the Board’s performance in the following areas:
Strategic objectives
Board composition and structure
Board meetings and preparation
Board interaction and support
Risk management, internal controls and compliance
Performance of governance functions; and
Performance of the Chairman,
The Directors provided consistent and positive feedback on the areas under review in the board
evaluation, and the following matters were highlighted as being in need of improvement or
implementation:
Gender balance
Formulation of a succession policy
Training program for the Directors
Interaction with senior management
For the 2019 financial year, the evaluation outcome found that the Board continues to operate effectively
and is well-positioned to address any challenges faced by the Group. A formal procedure to conduct the
evaluation of the individual Board members, Company secretary and Board Committees is being
considered.
Director Access to Management and Independent Advisors
Directors receive operating and financial reports of the Group and have access to senior management at
Board and Committee meetings. The Board have the authority to retain, terminate and determine the fees
and terms of consultants, legal counsel and other advisors to the Board as the Board may deem
appropriate in its discretion. In 2019, the Group employed the expertise of a Public Relations Consultant to
work as an intermediary between the public and the Group; and effectively disseminate and communicate
its mission, policies and goals to the public.
Board Induction and Continuous Skills Development
In 2019, the Board held a training which was conducted by the Institute of Certified Public Secretaries of
Kenya. The topics covered during the training included: Boardroom Behaviours & Procedures and Boards
of the Future: Looking Beyond Numbers and Corporate Culture and Strategy.
On completion of the Board the following areas were highlighted for future training;
Integrated reporting as well as Environment, Social and Governance Reporting
Diversity and inclusion – The legal and corporate implications for Directors
Latest trends in corporate governance policies
17
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Code of Conduct & Ethics
The Group has established a Code of Conduct and Ethics that binds both the Directors and employees.
The Group takes cognizance of the fact that its operations are closely integrated with the local
communities and, because the very nature of agriculture is long-term, it is aware that it can have an
impact on the environment. The Group policy ensures that its activities meet and exceed the social,
economic and environmental expectations of its stakeholders.
The Whistle-Blowing Policy, which is on the Group’s website, sets out the Board of Directors’,
managements’ and staff members’ commitment to upholding the highest levels of integrity and
observance of the rule of law.
The Anti-Bribery Policy is in place to foster an environment that encourages ethical behaviour and
compliance, while an internal committee is in place that meets quarterly to monitor this. Their report is
tabled in every other Board meeting.
No unethical issues were reported during the course of the year under review.
Legal Compliance Audit and Reporting
The Group has identified several local and international laws and regulations and performs regular
compliance assessment checks under the various divisions of the Group. A Compliance Register that
identifies the areas of compliance and the level of compliance by the Group is presented to the Board
regularly.
The Board is considering conducting a comprehensive and independent legal audit by an external
consultant in line with the Code’s requirements.
External Auditors
To assess the effectiveness of the external audit process, the external auditor is required to report to the
Audit & Risk Committee and confirm their independence in accordance with ethical standards and that
they had maintained appropriate internal safeguards to ensure their independence and objectivity.
In addition to the steps taken by the Board to safeguard auditor objectivity, the Committee has reviewed
the non-audit services provided by the external auditor and satisfied itself that the scale and nature of
those services were such that the external auditors’ objectivity and independence were safeguarded.
The Committee confirms that the Annual Report and Accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Group’s
performance, business model and strategy.
The External Auditors attended the two meetings of the Audit and Risk Committee, one to present their
2018 Audit findings report and the second one to present their audit service plan for the year ended 31
December 2019.
Internal Control and Risk Management Systems
The Directors acknowledge that they are responsible for maintaining a sound system of internal control.
During the year, the Audit & Risk Committee, on behalf of the Board, reviewed the effectiveness of the
framework of the Group’s system of internal control.
Accountability and delegation of authority are clearly defined with regular communication between the
Board and management.
18
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
Internal Control and Risk Management Systems (continued)
The Group has an Internal Audit Department, which is an independent function that reports directly to the
Board Audit & Risk Committee and provides independent confirmation on compliance with the Group's
business standards, policies and procedures. Where found necessary, corrective action is recommended.
The performance of each division is continually monitored centrally, including a critical review of annual
budgets, forecasts and monthly sales, profits and cash reports.
Financial results and key business statistics and variances from approved plans are carefully monitored.
The Risk Management Policies, which are reviewed by the Committee, are detailed on Note 4.
Relationship with Shareholders and other Stakeholders
The Group is committed to equitable treatment of its shareholders, including the non-controlling and
foreign shareholders. The Group ensures that all shareholders receive full and timely information about its
performance. This is achieved through the distribution of a half-yearly interim financial report and the
Annual Report and financial statements as well as through compliance with the relevant continuing
obligations under the Capital Markets Authority Act. The Group's results are advertised in the press and
released to the securities exchanges within the prescribed period at each half-year and year-end.
The published results and related investor information together with all the relevant information relating to
the Group is available on the Group’s website, www.kakuzi.co.ke/investor-relations/regulatory-news.
The Group has engaged the services of a registrar, Custody & Registrar Services, who together with the
Finance Director, regularly address issues raised by the shareholders.
A standalone policy on stakeholder relations is currently under consideration together with stakeholders
mapping in order to enhance the Groups’ relationship with its Stakeholders as per the recommendations
made during the governance audit.
Going Concern
The Board confirms the financial statements are prepared on a going concern basis, and the Directors are
satisfied that the Group has adequate resources to continue in business for the foreseeable future. In
making this assessment, the Directors have considered a wide range of information relating to present
and future conditions, including future projections of profitability, cash flows and capital resources. For this
reason, it continues to adopt the going concern basis when preparing the financial statements.
BY ORDER OF THE BOARD
K R SHAH
19 March 2020
C J FLOWERS
19 March 2020
19
Kakuzi Plc
Statement on Corporate Governance (continued)
For the year ended 31 December 2019
2019 BOARD & BOARD COMMITTEES MEMBERSHIP AND ATTENDANCE
Director
Classification
Designation
Board
Audit &
Risk
Nomination &
Remuneration
Mr
Nicholas
Nganga
Mr
Christopher
Flowers
Mr Graham
Mclean
Mr Daniel
Ndonye
Mr Stephen
Waruhiu
Mr Andrew
Njoroge
Mr Kenneth
W. Tarplee
Mr Ketan
Shah
Non-Executive Chairman of the
Nomination and
Remuneration
Committee
Executive
Managing
Director
Non-Executive Chairman of the
Board
Non-Executive Chairman of the
Audit and Risk
Committee
Membership
Attendance
4/4
2/2
Membership
Attendance
4/4
2/2
Membership
Attendance
4/4
Membership
Non-Executive
Non-Executive
Non-Executive
Executive
Attendance
4/4
Membership
4/4
Attendance
Membership
Attendance
4/4
Membership
0/4
Attendance
Finance Director Membership
4/4
Attendance
2/2
2/2
2/2
0/2
2/2
1/1
1/1
1/1
1/1
1/1
1/1
0/1
1/1
Member of the respective committee
Where a Director has missed a Board or Board Committee meeting, an acceptable apology had
been received by the Chairman well in advance of the scheduled meeting.
The Managing Director and Finance Director are not members of the Audit & Risk Committee but
attend by invitation.
20
Kakuzi Plc
Corporate Governance Auditor’s Report
For the year ended 31 December 2019
REPORT OF THE GOVERNANCE AUDITORS TO THE BOARD OF DIRECTORS OF KAKUZI PLC
INTRODUCTION
We have carried out a Governance Audit of Kakuzi Plc covering the year ended 31 December 2019 through
which we reviewed the Governance Practices, Structures and Systems put in place by the Board of Directors.
BOARD RESPONSIBILITY
The Board of Directors is responsible for putting in place governance structures and systems that support the
practice of good governance in the Group. The responsibility includes planning, designing and maintaining
governance structures through policy formulation necessary for efficient and effective management of the
Group. The Board of Directors is responsible for ensuring its proper constitution and composition; ethical
leadership and corporate citizenship; accountability, risk management and internal control; transparency and
disclosure; members’ rights and obligations; members’ relationship; compliance with laws and regulations;
sustainability; and performance management.
GOVERNANCE AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on the existence and effectiveness of governance instruments,
policies, structures, systems and practices in the Group within the legal and regulatory framework and in
accordance with best governance practices as envisaged under proper constitution and composition of the
Board of Directors; ethical leadership and corporate citizenship; accountability, risk management and internal
control; transparency and disclosure; members’ rights and obligations; members’ relationship; compliance
with laws and regulations; sustainability; and performance management, based on our audits.
We conducted our audit in accordance with the ICS Governance Audit Standards and Guidelines which
conform to global standards. These standards require that we plan and perform the governance audit to
obtain reasonable assurance on the adequacy and effectiveness of the organisations' policies, systems,
practices and processes. We believe that our governance audit provides a reasonable basis for our opinion.
OPINION
In our opinion, the Board of Directors of Kakuzi Plc has put in place effective, appropriate and adequate
governance structures within the Group which are in compliance with the legal and regulatory framework and
in line with good governance practices for the interest of stakeholders.
The Governance Auditor engaged in this assignment is Lucy Njoroge, GA/00174.
Lucy Njoroge
Nairobi, Kenya
19 March 2020
21
Kakuzi Plc
Directors’ Remuneration Report
For the year ended 31 December 2019
This report is drawn up in accordance with the Kenyan Companies Act, 2015.
Nomination & Remuneration Committee
Details of the Nomination and Remuneration Committee are set out on page 16.
Policy on Directors Remuneration
The details agreed by the Nomination & Remuneration Committee are as follows:-
To seek to provide remuneration packages that will attract, retain and motivate the right people for the
roles
So far as is practicable, to align the interests of the Executives with those of shareholders
Service Contracts
The Managing Director and the Finance Director are the only Executive Directors of the Company. They have
service contracts with fellow subsidiary companies within the Parent company, Camellia Plc Group, on rolling
service contract basis.
Following the initial appointments, non-executive Directors and the Finance Director may seek re-election by
shareholders on a rotational basis in accordance with the Company’s Articles of Association at Annual
General Meetings. Non-executive Directors do not have service agreements.
Directors’ Remuneration
The following section has been audited:
The Executive Directors’ remuneration (including value of benefits in kind) charged to the Company and
included in the Related Party transactions (Note 28 (ii)) is as follows:-
Managing Director (Mr C J Flowers)
Finance Director (Mr K R Shah)
2019
Shs’000
2018
Shs’000
10,654
15,673
26,327
8,931
14,629
23,560
Directors’ fees are payable after the occurrence of the Board Meetings. The Directors do not receive any
performance based remuneration. No pension contributions are payable on their fees.
Non-Executive
Mr G H Mclean
Mr K W Tarplee
Mr N Nganga
Mr D M Ndonye
Mr S N Waruhiu
Mr A N Njoroge
2019
2018
2019
2018
2019
2018
Directors’
Fees
Directors’
Fees
Shs’000 Shs’000
Benefits in
kind
Benefits in
kind
Shs’000 Shs’000
Total
Shs’000
Total
Shs’000
1,535
1,000
1,680
1,695
1,665
1,665
9,240
1,630
1,475
1,790
1,790
1,570
1,570
9,825
-
94
94
93
93
93
467
-
84
85
85
85
85
424
1,535
1,094
1,774
1,788
1,758
1,758
9,707
1,630
1,559
1,875
1,875
1,655
1,655
10,249
BY ORDER OF THE BOARD
K R SHAH
19 March 2020
C J FLOWERS
19 March 2020
22
Deloitte●
Independent auditors’ report
To the shareholders of Kakuzi Plc
Deloitte & Touche
Certified Public Accountants (Kenya)
Deloitte Place
Waiyaki Way, Muthangari
P.O. Box 40092 - GPO 00100
Nairobi
Kenya
(+254 20) 423 0000
(+254 20) 0719 039 000
Tel:
Cell:
Dropping Zone No. 92
Email: admin@deloitte.co.ke
www.deloitte.com
Report on the audit of the consolidated and separate financial statements
Our Opinion
We have audited the consolidated and separate financial statements of Kakuzi Plc (“the Group”) set out on
pages 27 to 80, which comprise the consolidated and separate statements of financial position at
31 December 2019 and the consolidated and separate statements of profit or loss and other comprehensive
income, consolidated and separate statements of changes in equity and consolidated and separate
statement of cash flows for the year then ended, and notes, including a summary of significant accounting
policies.
In our opinion, the consolidated and separate financial statements give a true and fair view of financial
position of the Group and the Company as at 31 December 2019 and of their financial performance and cash
flows for the year then ended in accordance with International Financial Reporting Standards and the
requirements of the Kenyan Companies Act, 2015.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor’s responsibilities for Audit of the consolidated and
separate Financial Statements section of our report.
We are independent of the Group and Company in accordance with the International Ethics Standards Board
for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with other ethical
requirements that are relevant to our audit of the financial statements in Kenya, and we have fulfilled our
ethical responsibilities in accordance with these requirements and the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the
consolidated and separate financial statements of the current period. The matter was addressed in the
context of our audit of the consolidated and separate financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on the matter.
Opinion
Basis for
Partners: D.M. Mbogho A.N. Muraya F.O. Aloo J Nyang’aya B.W. Irungu I.Karim F Okwiri F.O. Omondi F Mitambo P. Seroney D. Waweru C. Luo
Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited
23
Independent auditors’ report
To the shareholders of Kakuzi Plc (continued)
Report on the audit of the consolidated and separate financial statements (continued)
Key Audit Matter
Measurement of biological assets (in the
consolidated and separate financial
statements)
The measurement of biological assets at the
end of year involves significant judgements and
estimates by the Directors, which could have
material impact on the financial position and the
results of the Group and the Company.
At the end of year, the carrying value of the
biological assets amounted to Sh 935,355,000
(2018: Sh 872,955,000) as disclosed in Note 6
in
financial
statements.
the consolidated and separate
the
As discussed
financial
in Note 6 of
statements, biological assets comprise forestry
plantations, livestock and growing agricultural
produce on bearer plants, which are measured
at fair value less costs to sell. The fair value
models accrue the additional value related to the
biological asset as biological transformation
takes place rather than at the time of harvest.
As disclosed in Note 3 to the consolidated and
separate
key
assumptions and estimates include expected
future market prices, costs to sell and applicable
adjustments for the age and condition of the
assets. The determination of these assumptions
and estimates require careful judgment by the
Directors and any uncertainty could lead to
material adjustments to the consolidated and
separate financial statements.
statements,
financial
the
How Our Audit Addressed the Key Audit Matter
We focused our attention on the significant assumptions,
estimates and key judgments made by Directors and
Group’s management experts by performing
the
following:
We assessed the competence and objectivity of the
Group's management experts with the responsibility of
determining the valuation of the biological assets. In
addition, we discussed the scope of their work and
reviewed the fair valuation models used for consistency
and mathematical accuracy. We confirmed that the
approach and model used has been consistently applied.
We performed an analysis of the significant assumptions
made in the valuation models and tested them against
available market information. We subjected the key
assumptions to sensitivity analyses.
In addition, we tested a selection of data inputs used
financial and operational
against
information and external sources,
the
accuracy, reliability and completeness thereof.
the Directors’
to assess
We checked the consistency of application of the fair
value approaches and models over the years.
We evaluated the sufficiency and accuracy of the
disclosures in the notes of the consolidated and separate
financial statements.
We also validated the underlying data of acreage and
age of plantations used by the valuer to the Directors’
operational
including
comparison with historical trends.
independent
information,
Refer to Note 2 (h) for the accounting policy on
biological assets; Note 3 for the significant
estimates used in determining the fair values of
biological assets; and Note 6, for the disclosure
on biological assets.
Other information
We found that the models used for the valuation of the
biological assets to be appropriate and reasonable. In
addition,
the consolidated and
separate financial statements pertaining to the valuation
and measurement of biological assets were found to be
appropriate.
the disclosures
in
The Directors are responsible for the other information which comprises the Company Information, Notice of
the Annual General Meeting, Chairman’s Statement, Report of the Directors, Statement of Directors’
Responsibilities, Statement on Corporate Governance, Directors’ Remuneration Report, Corporate
Governance Auditor’s Report, five year record and major shareholders and distribution schedule which we
obtained prior to the date of this auditor’s report and the Annual Report, which is expected to be made
available to us after that date. The other information does not include the consolidated and separate financial
statements, and our auditor’s report thereon.
Our opinion on the consolidated and separate financial statements does not cover the other information and
we do not express an audit opinion or any form of assurance conclusion thereon.
N
24
Independent auditors’ report
To the shareholders of Kakuzi Plc (continued)
Report on the audit of the consolidated and separate financial statements (continued)
Other information (continued)
In connection with our audit of the consolidated and separate financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information that
we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.IN
DEPE
Responsibilities of the Directors and those charged with governance for the consolidated and
separate financial statements
The Directors are responsible for the preparation and fair presentation of the consolidated and separate
financial statements in accordance with International Financial Reporting Standards and the requirements of
the Kenyan Companies Act, 2015, and for such internal control as the Directors determine are necessary to
enable the preparation of consolidated and separate financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the Directors are responsible for assessing
the Group’s and Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the Directors either intend to
liquidate the Group and/or Company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the consolidated and separate financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated and separate financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s and the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group and company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor's report to the related disclosures in the consolidated and separate financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future events or conditions may cause the
Group and/or company to cease to continue as going concerns.
Other information
25
Independent auditors’ report
To the shareholders of Kakuzi Plc (continued)
Report on the audit of the consolidated and separate financial statements (continued)
Auditor's Responsibilities for the Audit of the consolidated and separate financial statements
(continued)
Evaluate the overall presentation, structure and content of the consolidated and separate financial
statements, including the disclosures and whether the consolidated and separate financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with the Board Audit and Risk Committee regarding, among other matters, the planned
scope and timing of the audit and significant audit findings including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Board Audit and Risk Committee with a statement that we have complied with the
relevant ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Board Audit and Risk Committee, we determine those matters that
were of most significance in the audit of the consolidated and separate financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other matters prescribed by the Kenya Companies Act, 2015
Report of the Directors
In our opinion the information given in the Report of the Directors on pages 9 to 10 is consistent with the
consolidated and separate financial statements.
Directors’ Remuneration Report
In our opinion the auditable part of the Director’s Remuneration report on page 22 has been prepared in
accordance with the Kenyan Companies Act, 2015.
Certified Public Accountants (Kenya)
Nairobi, Kenya
19 March 2020
CPA Anne Muraya, Practising certificate No. 1697.
Signing partner responsible for the independent audit
26
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Consolidated and Separate statement of profit or loss and other comprehensive
income
Year ended 31 December
Notes
2019
Shs’000
2018
Shs’000
Sales
Gains arising from changes in fair value less costs to sell of
non-current biological assets
5
2,888,662
3,152,831
6(i)
83,414
74,082
Cost of sales
Gross profit
Other income
Selling and Distribution costs
Operating profit
Interest income
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
2,972,076
(1,556,400 )
3,226,913
(1,742,270 )
1,415,676
1,484,643
7
20,576
(531,280 )
18,678
(942,568 )
904,972
560,753
8
8
117,021
(7,516 )
125,672
(2,342 )
5
1,014,477
684,083
11(a)
(301,038 )
(202,489 )
713,439
481,594
Items that are not reclassified subsequently to profit or loss:
Remeasurement of post-employment benefit obligations (net of tax)
11(c)
11,810
3,046
Total comprehensive income for the year
725,249
484,640
Earnings per share (Shs):
Basic and diluted earnings per ordinary share
12
36.40
24.57
The notes on pages 33 to 80 are an integral part of these consolidated and separate financial statements.
27
Kakuzi Plc
Consolidated and Separate Financial Statements
As at 31 December 2019
Consolidated statement of financial position
EQUITY
Share capital
Other reserves
Retained earnings
Proposed dividend
Total equity
Non current liabilities
Deferred income tax
Post employment benefit obligations
Lease obligations
Total equity and non current liabilities
Non current assets
Property, plant and equipment
Biological assets
Prepaid operating lease rentals
Right of use assets
Financial assets held at amortised cost
Non current receivables
Current assets
Biological assets – growing agricultural produce
Inventories
Receivables and prepayments
Current tax recoverable
Financial assets held at amortised cost
Cash and cash equivalents
Current liabilities
Payables and accrued expenses
Current tax payable
Lease obligations
Post employment benefit obligations
Net current assets
Notes
13
12(ii)
15
16
17
18
6(i)
19
20
22
24
6(ii)
23
24
11(d)
22
26
25
11(d)
17
16
31 December
2019
Shs’000
31 December
2018
Shs’000
98,000
31,463
4,814,462
274,400
98,000
19,653
4,375,423
176,400
5,218,325
4,669,476
932,166
74,500
381
1,007,047
813,557
68,045
-
881,602
6,225,372
5,551,078
2,913,234
715,376
-
4,781
200,000
34,624
3,868,015
219,979
401,693
275,218
-
-
1,696,130
2,593,020
181,711
35,355
31
18,566
235,663
2,705,521
684,202
4,379
-
200,000
30,023
3,624,125
188,753
169,476
360,786
81,582
15,385
1,500,935
2,316,917
362,776
-
-
27,188
389,964
2,357,357
1,926,953
6,225,372
5,551,078
The notes on pages 33 to 80 are an integral part of these consolidated and separate financial statements.
The consolidated and separate financial statements on pages 27 to 80 were approved for issue by the
board of Directors on 19 March 2020 and signed on its behalf by:
K R SHAH
DIRECTOR
C J FLOWERS
DIRECTOR
28
Kakuzi Plc
Consolidated and Separate Financial Statements
As at 31 December 2019
Separate statement of financial position
EQUITY
Share capital
Other reserves
Retained earnings
Proposed dividend
Total equity
Non current liabilities
Deferred income tax
Post employment benefit obligations
Lease obligations
Total equity and non current liabilities
Non current assets
Property, plant and equipment
Biological assets
Prepaid operating lease rentals
Right of use assets
Investment in subsidiaries
Financial assets held at amortised cost
Non current receivables
Current assets
Biological assets – growing agricultural produce
Inventories
Receivables and prepayments
Current tax recoverable
Financial assets held at amortised cost
Cash and cash equivalents
Current liabilities
Payables and accrued expenses
Current tax payable
Lease obligations
Post employment benefit obligations
Net current assets
Notes
13
12(ii)
15
16
17
18
6(i)
19
20
21
22
24
6(ii)
23
24
11(d)
22
26
25
11(d)
17
16
31 December
2019
Shs’000
31 December
2018
Shs’000
98,000
31,463
4,810,321
274,400
98,000
19,653
4,371,282
176,400
5,214,184
4,665,335
932,166
74,500
381
1,007,047
813,557
68,045
-
881,602
6,221,231
5,546,937
2,913,234
715,376
-
4,781
4,295
200,000
34,624
3,872,310
219,979
401,693
275,218
-
-
1,696,130
2,593,020
190,094
35,408
31
18,566
244,099
2,705,521
684,202
4,379
-
4,295
200,000
30,023
3,628,420
188,753
169,476
360,786
81,529
15,385
1,500,935
2,316,864
371,159
-
-
27,188
398,347
2,348,921
1,918,517
6,221,231
5,546,937
The notes on pages 33 to 80 are an integral part of these consolidated and separate financial statements.
The consolidated and separate financial statements on pages 27 to 80 were approved for issue by the
board of Directors on 19 March 2020 and signed on its behalf by:
K R SHAH
DIRECTOR
29
C J FLOWERS
DIRECTOR
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Consolidated statement of changes in equity
Year ended 31 December 2019
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
19,653
4,375,423
176,400
4,669,476
Total comprehensive income for the year:
Profit for the year
Other comprehensive income
Total
Transactions with owners:
Dividends:
- Final for 2018
- Proposed for 2019
Total
At end of year
Year ended 31 December 2018
-
-
-
-
-
-
-
11,810
713,439
-
11,810
713,439
-
-
-
713,439
11,810
725,249
-
-
-
-
(274,400 )
(176,400 )
274,400
(176,400 )
-
(274,400 )
98,000
(176,400 )
98,000
31,463
4,814,462
274,400
5,218,325
At start of year
98,000
16,607
4,070,229
137,200
4,322,036
Total comprehensive income for the year:
Profit for the year
Other comprehensive income
Total
Transactions with owners:
Dividends:
- Final for 2017
- Proposed for 2018
Total
At end of year
-
-
-
-
-
-
-
3,046
481,594
-
3,046
481,594
-
-
-
481,594
3,046
484,640
-
-
-
-
(176,400 )
(137,200 )
176,400
(137,200 )
-
(176,400 )
39,200
(137,200 )
98,000
19,653
4,375,423
176,400
4,669,476
The notes on pages 33 to 80 are an integral part of these consolidated and separate financial statements.
Other reserves relate to remeasurement of post-employment benefit obligations arising from experience
adjustments and changes in actuarial assumptions.
30
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Separate statement of changes in equity
Year ended 31 December 2019
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
19,653
4,371,282
176,400
4,665,335
Total comprehensive income for the
year:
Profit for the year
Other comprehensive income
Total
Transactions with owners:
Dividends:
- Final for 2018
- Proposed for 2019
Total
At end of year
Year ended 31 December 2018
-
-
-
-
-
-
-
11,810
713,439
-
11,810
713,439
-
-
-
713,439
11,810
725,249
-
-
-
-
(274,400 )
(176,400 )
274,400
(176,400 )
-
(274,400 )
98,000
(176,400 )
98,000
31,463
4,810,321
274,400
5,214,184
At start of year
98,000
16,607
4,066,088
137,200
4,317,895
Total comprehensive income for the
year:
Profit for the year
Other comprehensive income
Total
Transactions with owners:
Dividends:
- Final for 2017
- Proposed for 2018
Total
At end of year
-
-
-
-
-
-
-
3,046
481,594
-
3,046
481,594
-
-
-
481,594
3,046
484,640
-
-
-
-
(176,400 )
(137,200 )
176,400
(137,200 )
-
(176,400 )
39,200
(137,200 )
98,000
19,653
4,371,282
176,400
4,665,335
The notes on pages 33 to 80 are an integral part of these consolidated and separate financial statements.
Other reserves relate to remeasurement of post-employment benefit obligations arising from experience
adjustments and changes in actuarial assumptions.
31
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Consolidated and separate statement of cash flows
Operating activities
Cash generated from operations
Interest received
Interest paid on lease liabilities
Income tax paid
Notes
27
8
8
11(d)
Year ended 31 December
2018
Shs’000
2019
Shs’000
739,144
117,021
(33 )
(70,554 )
583,923
125,672
-
(348,405 )
Net cash generated from operating activities
785,578
361,190
Investing activities
Purchase of property, plant and equipment
Purchase of biological assets and development
Proceeds from disposal of property, plant and equipment
Proceeds from redemption of financial assets held at
amortised cost
18
6(i)
22
(409,466 )
(18,727 )
6,308
(469,156 )
(29,820 )
4,641
15,385
124,873
Net cash used in investing activities
(406,500 )
(369,462 )
Financing activities
Dividend paid
12(ii)
(176,400 )
(137,200 )
Net cash used in financing activities
(176,400 )
(137,200 )
Net increase/(decrease) in cash and cash equivalents
202,678
(145,472 )
Movement in cash and cash equivalents
At start of year
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate differences on cash and cash
equivalents
1,500,935
202,678
1,648,749
(145,472 )
8
)
(7,483
)
(2,342
At end of year
26
1,696,130
1,500,935
The notes on pages 33 to 80 are an integral part of these consolidated and separate financial statements.
32
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes to the Consolidated and Separate Financial Statements
1 General information
Kakuzi Plc is incorporated in Kenya under the Kenyan Companies Act, 2015 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 ordinary shares are listed on the Nairobi Securities Exchange and the London Stock
Exchange.
For Kenyan Companies Act, 2015 reporting purposes, the balance sheet is represented by the
statement of financial position and the profit or loss by the statement of profit or loss and other
comprehensive income, in these consolidated and separate financial statements.
Reference to, “the Group,” in the consolidated and separate financial statements covers the separate
Company financial statements as well. The principal activities of the Group comprise:
growing, packing and selling of avocados
growing, cracking and selling of macadamia nuts
Livestock farming and sale of beef
Blueberries development
the cultivation and sale of Tea green leaf
forestry development & sale of forestry products
2 Accounting policies
The principal accounting policies applied in the preparation of these consolidated and separate financial
statements are set out below. These policies have been consistently applied to all the years presented,
unless otherwise stated.
(a) Statement of compliance
The consolidated and separate 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 consolidated and separate
financial statements are presented in Kenya Shillings (Shs), rounded to the nearest thousand.
The preparation of the consolidated and separate 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 consolidated and
separate financial statements, are disclosed in Note 3.
(b) Application of new and revised IFRSs
(i) New and amended IFRS Standards that are effective for the current year ended 31 December
2019
Impact of initial application of IFRS 16 Leases
In the current year, the Group has applied IFRS 16 (as issued by the IASB in January 2016) that is
effective for annual periods that begin on or after 1 January 2019.
33
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2
Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(i) New and amended IFRS Standards that are effective for the current year ended 31 December
2019 (continued)
Impact of initial application of IFRS 16 Leases (continued)
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces
significant changes to lessee accounting by removing the distinction between operating and finance
lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for
all leases, except for short-term leases and leases of low value assets. In contrast to lessee
accounting, the requirements for lessor accounting have remained largely unchanged. The impact of
the adoption of IFRS 16 on the Group’s consolidated financial statements is described below.
The date of initial application of IFRS 16 for the Group is 1 January 2019.
The Group has applied IFRS 16 using the modified retrospective approach, with no restatement of
the comparative information.
(a) Impact of the new definition of a lease
The Group elected to use the transition practical expedient allowing the standard to be applied only to
contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial
application.
The Group has recognised a lease liability at the date of initial application for leases previously
classified as an operating lease applying IAS 17. The lease liability has been measured at the
present value of the remaining lease payments, discounted using the Group’s incremental borrowing
rate at the date of initial application.
The Group has recognised a right-of-use asset at the date of initial application for leases previously
classified as an operating lease applying IAS 17 by choosing, on a lease-by-lease basis, to measure
that right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the statement of financial position
immediately before the date of initial application.
(b) Impact on Lessee Accounting
(i) Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified as operating
leases under IAS 17, which were off balance sheet.
Applying IFRS 16, for all leases (except as noted below), the Group:
a) Recognises right-of-use assets and lease liabilities in the consolidated statement of financial
position, initially measured at the present value of the future lease payments;
b) Recognises depreciation of right-of-use assets and interest on lease liabilities in profit or loss;
c) Separates the total amount of cash paid into a principal portion (presented within financing
activities) and interest (presented within financing activities) in the consolidated statement of
cash flows.
34
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(i) New and amended IFRS Standards that are effective for the current year ended 31 December
2019 (continued)
Impact of initial application of IFRS 16 Leases (continued)
(b)
Impact on Lessee Accounting (continued)
(i) Former operating leases (continued)
d) Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the
right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition
of a lease incentive, amortised as a reduction of rental expenses generally on a straight-line
basis.
e) Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.
f) For short-term leases (lease term of 12 months or less) and leases of low-value assets, the
Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS
16. This expense is presented within ‘other expenses’ in profit or loss.
(ii) Former finance leases
The main differences between IFRS 16 and IAS 17 with respect to contracts formerly classified
as finance leases is the measurement of the residual value guarantees provided by the lessee to
the lessor. IFRS 16 requires that the Group recognises as part of its lease liability only the
amount expected to be payable under a residual value guarantee, rather than the maximum
amount guaranteed as required by IAS 17. This change did not have a material effect on the
Group’s consolidated financial statements.
(c)
Impact on Lessor Accounting
IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a
lessor continues to classify leases as either finance leases or operating leases and account for
those two types of leases differently. However, IFRS 16 has changed and expanded the
disclosures required, in particular with regard to how a lessor manages the risks arising from its
residual interest in leased assets.
Under IFRS 16, an intermediate lessor accounts for the head lease and the sub-lease as two
separate contracts. The intermediate lessor is required to classify the sub-lease as a finance or
operating lease by reference to the right-of-use asset arising from the head lease (and not by
reference to the underlying asset as was the case under IAS 17).
35
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(i) New and amended IFRS Standards that are effective for the current year ended 31 December
2019 (continued)
Impact of initial application of IFRS 16 Leases (continued)
(d) Financial impact of the initial application of IFRS 16
Impact on profit or loss
Increase in depreciation of right-of-use asset
Increase in finance cost
Decrease in profit for the year
2019
Shs’000
2018
Shs’000
10
33
43
-
-
-
For tax purposes, the depreciation expense in respect of the right-of-use assets has not been
treated as tax allowable deductions.
Under IFRS 16, lessees must present cash payments for the principal portion for a lease
liability, as part of financing activities. Under IAS 17, all lease payments on operating leases
were presented as part of cash flows from operating activities. There was no impact on the net
cash generated by operating activities and net cash used in financing activities.
Under IAS 17, all lease payments on operating leases were presented as part of cash flows
from operating activities.
The adoption of IFRS 16 did not have an impact on net cash flows.
In the current year, the Group has adopted a number of amendments to IFRS Standards and
Interpretations issued by the IASB that are effective for an annual period that begins on or after 1
January 2019. Their adoption has not had any material impact on the disclosures or on the amounts
reported in these financial statements.
Amendments to IFRS 9 Prepayment Features with Negative Compensation
The Group has adopted the amendments to IFRS 9 for the first time in the current year. The
amendments to IFRS 9 clarify that for the purpose of assessing whether a prepayment feature meets
the ‘solely payments of principal and interest’ (SPPI) condition, the party exercising the option may
pay or receive reasonable compensation for the prepayment irrespective of the reason for
prepayment. In other words, financial assets with prepayment features with negative compensation
do not automatically fail SPPI.
The amendments to the standard had no impact on the Group’s financial statements.
Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures
The Group has adopted the amendments to IAS 28 for the first time in the current year. The
amendment clarifies that IFRS 9, including its impairment requirements, applies to other financial
instruments in an associate or joint venture to which the equity method is not applied. These include
long-term interests that, in substance, form part of the entity’s net investment in an associate or joint
venture. The Group applies IFRS 9 to such long-term interests before it applies IAS 28. In applying
IFRS 9, the Group does not take account of any adjustments to the carrying amount of longterm
interests required by IAS 28 (i.e., adjustments to the carrying amount of longterm interests arising
from the allocation of losses of the investee or assessment of impairment in accordance with IAS 28).
The amendments to the standard had no impact on the Group’s financial statements.
36
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(i) New and amended IFRS Standards that are effective for the current year ended 31 December
2019 (continued)
Annual Improvements to IFRS Standards 2015–2017 Cycle Amendments to IFRS 3 Business
Combinations, IAS 12 Income Taxes, IAS 23 Borrowing costs, IFRS 11 Joint Arrangements
The Group has adopted the amendments included in the Annual Improvements to IFRS Standards
2015–2017 Cycle for the first time in the current year. The Annual Improvements include
amendments to four Standards and had no impact on the Group’s financial statements:
IFRS 3 Business Combination
The amendments clarify that when the Group obtains control of a business that is a joint operation,
the Group applies the requirements for a business combination achieved in stages, including
remeasuring its previously held interest (PHI) in the joint operation as fair value. The PHI to be
remeasured includes any unrecognized assets liabilities and goodwill relating to the joint operation.
IAS 12 Income Taxes
The amendments clarify that the Group should recognise the income tax consequences of dividends
in profit or loss, other comprehensive income or equity according to where the Group originally
recognised the transactions that generated the distributable profits. This is the case irrespective of
whether different tax rates apply to distributed and undistributed profits.
IAS 23 Borrowing Costs
The amendments clarify that if any specific borrowing remains outstanding after the related asset is
ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows
generally when calculating the capitalisation rate on general borrowings.
IFRS 11 Joint Arrangements
The amendments clarify that when a party that participates in, but does not have joint control of, a
joint operation that is a business obtains joint control of such a joint operation, the Group does not
remeasure its previously held interests in the joint operation.
Amendments to IAS 19 Employee Benefits Plan Amendment, Curtailment or Settlement
The Group has adopted the amendments of IAS 19 for the first time in the current year. The
amendments clarify that the past service cost (or of the gain or loss on settlement) is calculated by
measuring the defined benefit liability (asset) using updated assumptions and comparing benefits
offered and plan assets before and after the plan amendment (or curtailment or settlement) but
ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a surplus
position). IAS 19 is now clear that the change in the effect of the asset ceiling that may result from the
plan amendment (or curtailment or settlement) is determined in a second step and is recognised in
the normal manner in other comprehensive income. The paragraphs that relate to measuring the
current service cost and the net interest on the net defined benefit liability (asset) have also been
amended. The Group will now be required to use the updated assumptions from this remeasurement
to determine current service cost and net interest for the remainder of the reporting period after the
change to the plan. In the case of the net interest, the amendments make it clear that for the period
post plan amendment, the net interest is calculated by multiplying the net defined benefit liability
(asset) as remeasured under IAS 19:99 with the discount rate used in the remeasurement (also
taking into account the effect of contributions and benefit payments on the net defined benefit liability
(asset)).
The amendments to the standards had no impact on the Group’s financial statements.
37
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(i) New and amended IFRS Standards that are effective for the current year ended 31 December
2019 (continued)
IFRIC 23 Uncertainty over Income Tax Treatments
The Group has adopted IFRIC 23 for the first time in the current year. IFRIC 23 sets out how to
determine the accounting tax position when there is uncertainty over income tax treatments. The
Interpretation requires the Group to:
determine whether uncertain tax positions are assessed separately or as a Group; and
assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or
proposed to be used, by an entity in its income tax filings:
-
If yes, the Group should determine its accounting tax position consistently with the tax
treatment used or planned to be used in its income tax filings.
If no, the Group should reflect the effect of uncertainty in determining its accounting tax
position using either the most likely amount or the expected value method.
-
The amendments to the standard had no impact on the Group’s financial statements.
(ii) New and revised IFRS Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not adopted the following new
and revised IFRS Standards that have been issued but are not yet effective:
New and Amendments to standards
IFRS 17-Insurance
Effective for annual periods beginning on or after
1 January 2021, with earlier application permitted
Amendments to IFRS 10 and IAS 28 Sale or
Contribution of Assets between an investor and
its Associate or Joint Venture
Yet to be set, however earlier application permitted
Amendments to IFRS 3 Definition of a business
1 January 2020, with earlier application permitted
Amendments to IAS 1 and IAS 8- Definition of
material
1 January 2020, with earlier application permitted
Conceptual Framework: Amendments
to
References to the Conceptual Framework in
IFRS standards
1 January 2020, with earlier application permitted
38
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(ii) New and revised IFRS Standards in issue but not yet effective
The directors do not expect that the adoption of the Standards listed above will have a material impact on
the financial statements of the Group in future periods, except as noted below:
1)
IFRS 17 Insurance Contracts
IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of
insurance contracts and supersedes IFRS 4 Insurance Contracts.
IFRS 17 outlines a general model, which is modified for insurance contracts with direct participation
features, described as the variable fee approach. The general model is simplified if certain criteria are
met by measuring the liability for remaining coverage using the premium allocation approach.
The general model uses current assumptions to estimate the amount, timing and uncertainty of future
cash flows and it explicitly measures the cost of that uncertainty. It takes into account market interest
rates and the impact of policyholders’ options and guarantees.
The Standard is effective for annual reporting periods beginning on or after 1 January 2021, with early
application permitted. It is applied retrospectively unless impracticable, in which case the modified
retrospective approach or the fair value approach is applied. An exposure draft Amendments to IFRS
17 addresses concerns and implementation challenges that were identified after IFRS 17 was
published. One of the main changes proposed is the deferral of the date of initial application of IFRS
17 by one year to annual periods beginning on or after 1 January 2022.
For the purpose of the transition requirements, the date of initial application is the start if the annual
reporting period in which the entity first applies the Standard, and the transition date is the beginning
of the period immediately preceding the date of initial application.
The Directors of the Group do not anticipate that the application of the amendments in the future will
have an impact on the consolidated and separate financial statements because the group does not
have insurance contracts.
2)
IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of
assets between an investor and its associate or joint venture. Specifically, the amendments state that
gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a
transaction with an associate or a joint venture that is accounted for using the equity method, are
recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that
associate or joint venture. Similarly, gains and losses resulting from the remeasurement of
investments retained in any former subsidiary (that has become an associate or a joint venture that is
accounted for using the equity method) to fair value are recognised in the former parent’s profit or loss
only to the extent of the unrelated investors’ interests in the new associate or joint venture.
The effective date of the amendments has yet to be set by the IASB; however, earlier application of
the amendments is permitted.
The Directors of the Group anticipate that the application of these amendments may have an impact
on the Group's consolidated financial statements in future periods should such transactions arise.
39
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(ii) New and revised IFRS Standards in issue but not yet effective (continued)
3) Amendments to IFRS 3 Definition of a business
The amendments clarify that while businesses usually have outputs, outputs are not required for an
integrated set of activities and assets to qualify as a business. To be considered a business an acquired
set of activities and assets must include, at a minimum, an input and a substantive process that together
significantly contribute to the ability to create outputs.
Additional guidance is provided that helps to determine whether a substantive process has been acquired.
The amendments introduce an optional concentration test that permits a simplified assessment of whether
an acquired set of activities and assets is not a business. Under the optional concentration test, the
acquired set of activities and assets is not a business if substantially all of the fair value of the gross
assets acquired is concentrated in a single identifiable asset or group of similar assets.
The amendments are applied prospectively to all business combinations and asset acquisitions for which
the acquisition date is on or after the first annual reporting period beginning on or after 1 January 2020,
with early application permitted.
The Directors of the Group anticipate that the application of these amendments may have an impact on
the Group's consolidated financial statements in future periods should such transactions arise.
4) Amendments to IAS 1 and IAS 8 Definition of material
The amendments are intended to make the definition of material in IAS 1 easier to understand and are not
intended to alter the underlying concept of materiality in IFRS Standards. The concept of ‘obscuring’
material information with immaterial information has been included as part of the new definition.
The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could
reasonably be expected to influence’.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1.
In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of
material or refer to the term ‘material’ to ensure consistency. The amendments are applied prospectively
for annual periods beginning on or after 1 January 2020, with earlier application permitted.
5) Amendments to References to the Conceptual Framework in IFRS Standards
Together with the revised Conceptual Framework, which became effective upon publication on 29 March
2018, the IASB has also issued Amendments to References to the Conceptual Framework in IFRS
Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS
34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.
Not all amendments, however, update those pronouncements with regard to references to and quotes
from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are
only updated to indicate which version of the Framework they are referencing to (the IASC Framework
adopted by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to
indicate that definitions in the Standard have not been updated with the new definitions developed in the
revised Conceptual Framework.
The amendments, where they actually are updates, are effective for annual periods beginning on or after 1
January 2020, with early application permitted.
The Directors of the Group anticipate that the application of these amendments may have an impact on
the Group's consolidated financial statements in future periods should such transactions arise.
40
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(b) Application of new and revised IFRSs (continued)
(iii) Early adoption of standards
The Group did not early-adopt any new or amended standards in 2019.
The principal accounting policies applied in the preparation of the financial statements are set out below.
These policies have been applied consistently.
(c) Consolidation of subsidiaries
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its
subsidiaries. Control is achieved when the Company:
has power over the investee;
has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The Company reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances in
assessing whether or not the Company’s voting rights in an investee are sufficient to give it power,
including:
the size of the Company’s holding of voting rights relative to the size and dispersion of holdings
of the other vote holders;
rights arising from other contractual arrangements; and
potential voting rights held by the Company, other vote holders or other parties;
any additional facts and circumstances that indicate that the Company has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made, including
voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated statement of profit
or loss and other comprehensive income from the date the Company gains control until the date
when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
41
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(d) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
Directors as the chief operating decision makers, who are responsible for allocating resources and
assessing performance of the operating segments and making strategic decisions.
(e) Revenue recognition
The Group recognises revenue mainly from sale of agricultural produce to the export and local
markets. Revenue is shown net of value added tax (VAT), returns, rebates and discounts.
Revenue is measured based on the consideration to which the Group expects to be entitled in a
contract with a customer and excludes amounts collected on behalf of third parties. The Group
recognises revenue when it transfers control of a product or service to a customer.
For the sale of agricultural produce to the export market, revenue is recognised when control of the
agricultural produce has been transferred to the final customer by selling agents. A receivable is
recognised by the Group upon the agents confirming that the agricultural produce has been delivered
to the final customer as this represents the point at which the right to consideration becomes
unconditional.
For the sale of agricultural produce to the local market, revenue is recognised when control of the
agricultural produce has transferred, being at the point the customer purchases the goods at the
retail outlet or the agricultural produce is delivered to the customer. Payment is due immediately at
the point the customer takes control of the agricultural produce.
Under the Group’s standard contract terms, customers do not have a right to return due to the nature
of the agricultural produce.
Payment with respect to revenue from agricultural produce is typically due upon acceptance of the
products. Contracts with customers do not have a significant financing component and there are no
variable considerations.
(f) Functional currency and translation of foreign currencies
(i) Functional and presentation currency
Items included in the consolidated and separate 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 consolidated
and separate 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’.
42
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(g) 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 or Company 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.
Bearer plants are classified as immature until the produce can be commercially harvested and are
classified as capital work in progress. At that point they are reclassified to bearer plants and depreciation
commences. Immature plantations are measured at accumulated cost.
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 & implements
Furniture, fittings and equipment
Bearer plants:
- Avocado trees
- Macadamia trees
- Pineapple crop
- Tea bushes
Capital work in progress is not depreciated
Immature period
Estimated useful life
20 – 50 years
10 – 13 years
4 – 10 years
3 – 8 years
4 years
6 years
1 year
4 years
25 years
30 years
2 years
50 years
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 in the statement of profit or loss 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.
(h) Biological assets
Biological assets comprise forestry, livestock and growing agricultural produce on tea, avocado,
blueberries, and macadamia plantations.
Biological assets are measured on initial recognition at cost and subsequently at fair value less costs to
sell at each reporting date. 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 profit or loss 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.
43
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(h) Biological assets (continued)
The tea bushes, avocado and macadamia trees, and blueberries crops are bearer plants and are
therefore presented and accounted for as property, plant and equipment (see note 2(g)). However, the
produce growing on these trees is accounted for as biological assets until the point of harvest.
Harvested produce is transferred to inventory at fair value less costs to sell.
Management has assessed the fair value of growing agricultural produce on avocado, macadamia,
blueberries and tea plantations using estimated market prices less costs to sell based on the biological
transformation of the produce at the reporting date.
The fair value of timber plantations and livestock is based on market prices as valued by external
independent valuers.
Purchases and development of biological assets include cost of planting, breeding and upkeep until they
mature, which are recognised as an expense in the profit or loss.
Subsequently all costs of upkeep and maintenance of mature biological assets are recognised as an
expense through profit or loss under cost of sales in the period in which they are incurred.
(i) Leases
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group
recognises a right of use asset and a corresponding lease liability with respect to all lease arrangements
in which it is the lessee, except for short term leases (defined as leases with a lease term of 12 months
or less) and leases of low value assets. For these leases, the Group recognises the lease payments as
an operating expense on a straight line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which the economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily
determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprises of fixed lease payments
(including the substance fixed payments), less any lease incentives.
The lease liability is presented as a separate line in the statement of financial position. The lease liability
is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method and by reducing the carrying amount to reflect the lease payments
made.
The Group re-measures the lease liability (and makes a corresponding adjustment to the related right-
of-use asset) whenever:
the lease term has changed or there is a change in the assessment of exercise of a purchase option,
in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate.
the lease payments change due to changes in an index or rate or a change in expected payment
under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the
revised lease payments using the initial discount rate (unless the lease payments change is due to a
change in floating interest rate, in which case a revised discount rate is used).
44
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(i) Leases (continued)
a lease contract is modified and the lease modification is not accounted for as a separate lease, in
which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment loses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use
asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation starts at the commencement
date of the lease.
The right-of-use assets are presented as a separate line in the statement of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the ‘Property, plant and equipment’ policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease
liability and the right-of-use asset. The related payments are recognised as an expense in the period in
which the event or condition that triggers those payments occurs and are included in the statement of
the profit or loss.
(ii)
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.
Provisions for obsolete, damaged and unusable inventories are made based on inventory aged listings.
(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
Ordinary shares are classified as equity.
45
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2
Accounting policies (continued)
(m) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks and other short term
highly liquid investments with original maturities of three months or less.
(n) Financial instruments
Financial assets and financial liabilities are recognised on the consolidated and separate statement of
financial position when the Group becomes a party to the contractual provisions of the instrument.
Treasury and corporate bonds
The treasury and corporate bonds held by the Group are classified at amortised cost when they meet the
following criteria:
the financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Trade receivables
Trade 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 a 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 less provision for impairment. A provision for impairment of receivables is
established using an Expected Credit Losses (“ECL”) model in line with the requirements of IFRS 9 as
outlined in the next section below. The amount of the provision is the difference between the carrying
amount and the present value of estimated future cash flows, discounted at the effective interest rate.
The amount of the provision is charged to profit or loss.
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest income over the relevant period.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on investments in debt instruments
that are measured at amortised cost or at fair value through other comprehensive Income (“FVTOCI”),
lease receivables, trade receivables and contract assets. The amount of expected credit losses is
updated at each reporting date to reflect changes in credit risk since initial recognition of the respective
financial instrument.
The Group always recognises lifetime ECL for trade receivables, contract assets and lease receivables.
The expected credit losses on these financial assets are estimated using a provision matrix based on
the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general
economic conditions and an assessment of both the current as well as the forecast direction of
conditions at the reporting date, including time value of money where appropriate.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant
increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has
not increased significantly since initial recognition, the Company measures the loss allowance for that
financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over
the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime
ECL that is expected to result from default events on a financial instrument that are possible within 12
months after the reporting date.
46
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(n) Financial instruments (continued)
Impairment of financial assets (continued)
(i) Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial
recognition, the Group compares the risk of a default occurring on the financial instrument at the
reporting date with the risk of a default occurring on the financial instrument at the date of initial
recognition. In making this assessment, the Group considers both quantitative and qualitative
information that is reasonable and supportable, including historical experience and forward‑ looking
information that is available without undue cost or effort.
(ii) Definition of default
The Group considers the following as constituting an event of default for internal credit risk management
purposes as historical experience indicates that financial assets that meet either of the following criteria
are generally not recoverable:
when there is a breach of financial covenants by the debtor; or
information developed internally or obtained from external sources indicates that the debtor is unlikely
to pay its creditors, including the Group, in full (without taking into account any collateral held by the
Group).
Irrespective of the above analysis, the Group considers that default has occurred when a financial asset
is more than 90 days past due unless the Group has reasonable and supportable information to
demonstrate that a more lagging default criterion is more appropriate.
The Group write-offs debt only when there is objective evidence that the debt will not be recovered and
after it has exhausted its collection avenues.
(iii) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, loss given default
(i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data adjusted by forward‑ looking
information as described above.
As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying
amount at the reporting date.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash
flows that are due to the Group in accordance with the contract and all the cash flows that the Group
expects to receive, discounted at the original effective interest rate.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a
corresponding adjustment to their carrying amount through a loss allowance account.
(iv) Interest income is recognised on a time proportion basis using the effective interest method.
(v) Dividends are recognised as income in the period in which the right to receive payment is
established.
(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 Agreements 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.
47
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(o) Employee benefits (continued)
(i) Post employment benefits obligations (continued)
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 profit or loss except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity respectively.
(i) Current income tax
The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at the
reporting date. Directors periodically evaluate positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax authorities.
(ii) Deferred income tax
Deferred income tax is recognised, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying values in the financial statements. 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.
48
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
2 Accounting policies (continued)
(p) Current and deferred income tax (continued)
(ii) Deferred income tax (continued)
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) Dividends
Dividends on ordinary shares are charged to equity in the period in which they are declared. Proposed
dividends are shown as a separate component of equity until declared (i.e. proposed dividend).
(r) Operating leases (for periods ended 31 December 2018)
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 under operating leases are charged to the statement of
comprehensive income within ‘cost of production’ on a straight-line basis over the period of the lease.
3 Critical accounting estimates, judgements and assumptions
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) Bearer plants
Critical judgement has been made in determining the useful life and maturity period of the bearer
plants. The useful life of the bearer plant is based on experience and expected productivity of the
plant and the expected replanting schedules.
(ii) Biological assets
Critical assumptions are made by the Directors and the independent valuer in determining the fair
values of biological assets. The key assumptions relate to estimate of future market prices as
adjusted for age and condition of the assets.
(iii) Growing agricultural produce
Critical judgement has been made in determining the fair value of growing agricultural produce on
bearer plant. The key assumptions include the market prices and stage of growth at reporting date
based on past experience.
49
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
3 Critical accounting estimates, judgements and assumptions (continued)
(a) Critical accounting estimates and assumptions (continued)
(iv) 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) Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the
reporting period that may have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are discussed below.
(i) Income taxes
Significant judgement is required in determining the Group’s provision for income taxes. There are
many transactions and calculations for which the ultimate tax determination is uncertain during the
ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income tax
and deferred tax provisions in the period in which such determination is made.
(ii) Property, plant and equipment
Critical estimates are made by directors in determining the useful lives and residual values to
property, plant and equipment based on the intended use of the assets and the economic lives of
those assets. Subsequent changes in circumstances or prospective utilisation of the assets
concerned could result in the actual useful lives or residual values differing from initial estimates.
(iii) Leases
Judgement is required in determination of the appropriate rate to discount the lease payments and the
assessment of whether a right-of-use asset is impaired.
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.
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.
Market risk
(i) Foreign exchange risk
The Group and Company 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.
50
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
4
Financial risk management objectives and policies (continued)
Market risk (continued)
(i) Foreign exchange risk (continued)
The sensitivity analyses below have been determined based on the exposure to interest rates for
accounts receivable and cash and cash equivalents at the reporting date. A 5% increase or
decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in interest rates.
At 31 December 2019, if the Shilling was weaker/stronger by 5% (2018: 5%) against the US dollar
with all other variables held constant, the Group and Company post tax profit would have been Shs
15,132,000 (2018: Shs 3,468,000) higher/lower mainly as a result of US dollar deposits and trade
receivables.
At 31 December 2018 if the Shilling was weaker/stronger by 5% (2018: 5%) against the Euro with all
other variables held constant, the Group and Company post tax profit would have been Shs 338,000
higher/lower (2018: Shs 600,000).
(ii) Price risk
The Group and Company does not hold any financial instruments subject to price risk.
(iii) Interest rate risk
The Group and Company has interest earning deposits, whose income would be subject to interest
rate risk. An increase/ decrease in interest rates of 5% (2018: 5%) would have resulted in an
increase/ decrease in Group and Company post tax profit of Shs 993,000 (2018: Shs 979,000).
(iv) Commodity price risk
Commodity price risk in the Group primarily arises from price fluctuations and the availability of
avocado, tea and macadamia. The Group has not entered into derivative transactions to limit these
risks.
If the commodity prices had been 5% higher/(lower) as of December 2019, profit after tax would
have been Shs 155,189,000 (2018: Shs 147,591,000) higher/(lower).
Credit risk
Credit risk arises from deposits with banks, financial assets held at amortised cost as well as trade and
other receivables. The Group does not have any significant concentrations of credit risk. The Group and
Company has policies in place to ensure that sales are made to customers with an appropriate credit
history.
The amount that best represents the Group and Company’s maximum exposure to credit risk at
31 December 2019 is the carrying value of the financial assets in the statement of financial position.
The Group holds collateral amounting to Shs 44,090,000 (2018: Shs 52,220,000) in respect of staff
loans amounting to Shs 41,568,859 (2018: Shs 37,430,442) included in other receivables. The Group
and Company 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.
51
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
4
Financial risk management objectives and policies (continued)
Credit risk (continued)
The Group’s current credit risk grading framework comprises the following categories:
Category
Description
Performing
Doubtful
In default
Write off
The counterparty has a low risk of default and does
not have any past-due amounts
Amount is >30 days past due or there has been a
significant increase in credit risk since initial
recognition
Amount is >90 days past due or there is evidence
indicating the asset is credit-impaired
There is evidence indicating that the debtor is in
severe financial difficulty and the Group has no
realistic prospect of recovery
Basis
for
expected credit losses
recognising
12 – month ECL
Lifetime ECL – not credit
impaired
Lifetime ECL – credit-
impaired
Amount is written off
The tables below detail the credit quality of the Group’s financial assets, as well as the Group’s maximum
exposure to credit risk by credit risk rating grades:
31/12/2019
Note
External
credit
rating
Internal
credit
rating
12-month or
lifetime
ECL
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
24
22
Trade and
other
receivables
Financial
assets held
at amortized
cost
31/12/2018
Note
24
22
Trade and
other
receivables
Financial
assets held
at amortized
cost
Liquidity risk
N/A Performing
B2
N/A
Lifetime ECL
(simplified
approach)
12-month
ECL
Shs’000
Shs’000
Shs’000
29,555
(4,934)
24,621
200,000
-
200,000
External
credit
rating
Internal
credit
rating
12-month or
lifetime
ECL
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
N/A Performing
B2
N/A
Lifetime ECL
(simplified
approach)
12-month
ECL
Shs’000
Shs’000
Shs’000
100,485
(4,834)
95,651
218,446
(3,061)
215,385
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.
52
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
4
Financial risk management objectives and policies (continued)
Liquidity risk (continued)
The table below analyses the Group 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
At 31 December 2019:
- Trade and other payables
At 31 December 2018:
- Trade and other payables
Company
At 31 December 2019:
- Trade and other payables
At 31 December 2018:
- Trade and other payables
Capital management
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
181,711
362,776
-
-
-
-
-
-
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
190,094
371,159
-
-
-
-
-
-
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 Group ensures that funds are available for capital developments by capping the dividends payable.
The dividends paid and proposed are shown in Note 12.
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.
53
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
5 Segmental reporting - Group
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, and under several operating segments. The principal operating segments currently
consist of Avocados, Macadamia, Tea and Forestry. The business activities of livestock, joint projects and blueberries are included under “all other segments” as they
individually fall below the threshold of 10% of Group sales. There is no single customer whose revenue amounts to 10% or more of the Groups revenue.
The Group derives all revenues from contracts with customers for the transfer of goods at a point in time.
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 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 2019 and 31
December 2018 is as follows:
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Tea
Avocados*
Shs’000
Shs’000
Shs’000
Shs’000
Madacamia
Shs’000
Shs’000
Forestry
All other segments
Shs’000
Shs’000
Shs’000
Shs’000
Consolidated
Shs’000
Shs’000
Sales to external customers
Sales
Comprising
Major external customers sales
All other external customers sales
Geographical analysis
UK & Continental Europe
Kenya
Others
202,390
303,573
1,861,707 2,115,836
502,423
368,618
294,097
309,849
28,045
54,955
2,888,662
3,152,831
202,390
-
303,573
-
1,813,562 2,020,506
95,330
48,145
472,472
29,951
355,759
12,859
-
294,097
-
309,849
-
28,045
-
54,955
2,488,424
400,238
2,679,838
472,993
202,390
303,573
1,861,707
2,115,836
502,423
368,618
294,097
309,849
28,045
54,955
2,888,662
3,152,831
-
202,390
-
-
303,573
-
1,813,562 2,020,506
95,330
-
48,145
-
-
29,951
472,472
-
12,859
355,759
-
294,097
-
-
309,849
-
-
28,045
-
-
54,955
-
1,813,562
602,628
472,472
2,020,506
776,566
355,759
202,390
303,573
1,861,707 2,115,836
502,423
368,618
294,097
309,849
28,045
54,955
2,888,662
3,152,831
54
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
5 Segmental reporting - Group (continued)
2019
2018
2019
2018
2019
2018
Tea
Avocados*
Macadamia
2019
Forestry
2018
Shs’000
Shs’000
Shs’000
Shs’000
Shs’000
Shs’000
Shs’000
Shs’000
Shs’000
Shs’000
2019
2018
2019
2018
All other segments
Consolidated
Shs’000
Shs’000
Profit/(loss)
Gross profit /(loss) before depreciation
and fair value changes in non-current
biological assets
Depreciation charge
Changes in fair value of non-current
biological assets
Gross profit/(loss)
Selling and distribution costs
Segment profit
Other income
Interest income
Finance costs
Unallocated 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
125,155
(14,590 )
80,359 1,409,691 1,426,290
(77,292 )
(73,616 )
(14,356 )
326,367
(65,750 )
255,847
(58,288 )
84,082
(4,793 )
124,922
(5,422 )
(52,745 )
(38,354 )
9,243
(27,624 )
1,892,550
(197,103 )
1,896,661
(182,982 )
-
110,565
-
110,565
5,602
-
-
-
116,167
(34,472 )
81,695
-
-
-
66,003 1,336,075 1,348,998
(925,838 )
(511,772 )
423,160
824,303
-
-
-
-
-
-
-
-
423,160
824,303
(125,257 )
(244,605 )
297,903
579,698
-
66,003
3,548
-
-
-
69,551
(20,587 )
48,964
-
260,617
(19,249 )
241,368
-
-
-
-
241,368
(71,624 )
169,744
-
197,559
(16,730 )
180,829
-
-
-
-
180,829
(53,526 )
127,303
31,161
110,450
-
110,450
-
-
-
-
110,450
(32,775 )
77,675
34,374
153,874
-
153,874
-
-
-
-
153,874
(45,547 )
108,327
52,253
(38,846 )
(259 )
(39,105 )
14,974
117,021
(7,516 )
(363,185 )
(277,811 )
82,438
(195,373 )
39,708
21,327
-
21,327
15,130
125,672
(2,342 )
(303,118 )
(143,331 )
42,428
(100,903 )
83,414
1,778,861
(531,280 )
1,247,581
20,576
117,021
(7,516 )
(363,185 )
1,014,477
(301,038 )
713,439
74,082
1,787,761
(942,568 )
845,193
18,678
125,672
(2,342 )
(303,118 )
684,083
(202,489 )
481,594
610,131
674,099 1,461,554 1,188,340 1,197,630 1,070,543 1,070,039
729,416
384,585
435,719
19,259
147,058
-
-
-
-
-
-
167,627
190,860
4,723,939
1,737,096
6,461,035
4,098,117
1,842,925
5,941,042
186,886
1,055,824
1,242,710
337,918
933,648
1,271,566
246
-
246
1,042
-
1,042
232,092
-
232,092
122,947
-
122,947
134,637
-
134,637
112,303
-
112,303
1,239
18,727
19,966
1,672
17,254
18,926
41,252
-
41,252
231,192
12,566
243,758
409,466
18,727
428,193
469,156
29,820
498,976
55
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
5 Segmental reporting - Group (continued)
*Avocados
Smallholder and Outgrowers Hass Avocados
Included in the segment ‘Avocados’ above is trading with smallholders and outgrowers as follows:
Number of cartons exported
Number of cartons sold
Gross Export sales
Selling and distribution costs
Net Export sales
Local sales
Packing expenses
Closing stock
Net return
2019
185,534
182,880
Shs’000
189,585
(66,505 )
123,080
6,265
(20,806 )
1,687
110,226
2018
626,956
626,956
Shs’000
366,943
(196,060 )
170,883
41,022
(62,099 )
-
149,806
Paid to smallholders and outgrowers
(85%)
(93,548 ) (104%)
(155,256 )
Trading Profit/(loss)
Extension services expenses
Profit/(loss) before income tax
16,678
(4,386 )
12,292
(5,450 )
(3,639 )
(9,089 )
56
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
6 Biological assets – Group and Company
(i) Non current assets
Changes in carrying amounts of non-current biological assets comprise:
Livestock
Shs’000
Plantation
Shs’000
Total
Shs’000
Year ended 31 December 2019
At start of year
Increase due to purchases and development
Gains arising from changes in fair value less costs
to sell due to physical change and price changes
Decrease due to harvest and sales
128,552
-
52,253
(35,729 )
555,650
18,727
31,161
(35,238 )
684,202
18,727
83,414
(70,967 )
At end of year
145,076
570,300
715,376
Year ended 31 December 2018
At start of year
Increase due to purchases and development
Gains arising from changes in fair value less costs
to sell due to physical change and price changes
Decrease due to harvest and sales
126,933
12,566
39,708
(50,655 )
536,900
17,254
34,374
(32,878 )
663,833
29,820
74,082
(83,533 )
At end of year
128,552
555,650
684,202
There are no biological assets whose title is restricted or pledged as security for liabilities as at 31 December
2019 (2018: Nil).
There were no commitments for development or acquisition of biological assets as at 31 December 2019
(2018: Nil)
(ii) Current assets
Growing agricultural produce on bearer plants as at the reporting
date
Avocado
Macadamia
Tea
2019
Shs’000
148,366
68,932
2,681
2018
Shs’000
128,644
57,708
2,401
219,979
188,753
57
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
6 Biological assets – Group and Company (continued)
Biological assets are carried at fair value at the end of each reporting period.
Plantations comprise forestry. The fair value of forestry 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.
The fair value of growing agricultural produce is estimated using the market approach. The key
assumptions made in the determination of the fair value are:
climatic conditions will remain the same and hence productivity will be similar to prior years
the biological transformation process of the growing agricultural produce will remain consistent to prior
produce
the market price will remain constant based on estimated future market prices
the actual costs to sell will not change significantly from estimated costs
The following table presents Group’s biological assets that are measured at fair value:
Level 1
Level 2
Level 3
Total
Valuation
technique
Shs’000
Shs’000
Shs’000
Shs’000
Year ended 31 December
2019
Livestock
Avocado
Tea
Forestry
Macadamia
Market approach
Market approach
Market approach
Market approach
Market approach
Year ended 31 December
2018
Livestock
Avocado
Tea
Forestry
Macadamia
Market approach
Market approach
Market approach
Market approach
Market approach
-
-
-
-
-
-
-
-
-
-
-
-
145,076
-
2,681
570,300
-
-
148,366
-
-
68,932
145,076
148,366
2,681
570,300
68,932
718,057
217,298
935,355
128,552
-
2,401
555,650
-
-
128,644
-
-
57,708
128,552
128,644
2,401
555,650
57,708
686,603
186,352
872,955
There were no transfers between any levels during the year.
58
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
6 Biological assets – Group and Company (continued)
The following unobservable inputs at the respective year ends were used to measure the Group’s avocado growing agricultural produce classified as level 3 of fair
value hierarchy.
Year ended 31 December 2019
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs
Relationship of
unobservable inputs to fair value
Shs’000
Avocado
Produce
148,366 Market approach Yield - Kgs
per Hectare
18,060 The higher the yield, the higher the value
Net price per
carton
€4.49 – €4.80
The higher the market price, the higher the fair value
Stage of growth
12% – 15% The higher the stage of growth, the higher the fair value
Year ended 31 December 2018
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs
Relationship of
unobservable inputs to fair value
Shs’000
Avocado
Produce
128,644 Market approach Yield - Kgs
per Hectare
19,100 The higher the yield, the higher the value
Net price per
carton
€3.98 – €4.81
The higher the market price, the higher the fair value
Stage of growth
12% – 15% The higher the stage of growth, the higher the fair value
59
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
6
Biological assets – Group and Company (continued)
The following unobservable inputs at the year end were used to measure the Group’s macadamia growing agricultural produce
Year ended 31 December 2019
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs
Relationship of
unobservable inputs to fair value
Macadamia
Produce
Shs’000
68,932
Year ended 31 December 2018
Market approach Yield Kgs/Ha
643 The higher the yield, the higher the value
Net price per kg
of Saleable
Kernel
Stage of growth
USD16.76 The higher the market price, the higher the fair value
40% - 45% The higher the stage of growth, the higher the fair value
Description
Fair value at
31 December
Valuation
techniques
Unobservable
inputs
Range of
unobservable
inputs
Relationship of
unobservable inputs to fair value
Macadamia
Produce
Shs’000
57,708
Market approach Yield Kgs/Ha
615 The higher the yield, the higher the value
USD17.05 The higher the market price, the higher the fair value
40% - 45% The higher the stage of growth, the higher the fair value
Net price per kg
of Saleable
Kernel
Stage of growth
60
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
6 Biological assets – Group and Company (continued)
Areas planted at the year end:
Forestry plantations
Cattle numbers at the year end
Areas planted with various crops and
output of agricultural produce during the
year:
Tea (green leaf)
Avocado
Pineapple
Macadamia
2019
Hectares
2018
Hectares
1,834
1,813
Head
4,396
Head
4,436
2019
Hectares
2018
Hectares
Metric tonnes
Metric tonnes
510
797
-
1,032
510
717
-
1,032
5,590
7,145
-
1,248
7,195
10,819
404
830
Cubic metres
Cubic metres
Timber harvested during the year was:
7,552
7,823
Agricultural produce of tea bushes is the harvested green leaf which is processed soon after harvest in a
factory to made tea. Timber is included under inventory.
61
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
6 Biological assets – Group and Company (continued)
Fair value of the agricultural produce harvested during the year after deducting
costs to sell:
Tea (green leaf)
Avocado
Pineapple
Macadamia
Others
Other agricultural produce relates to forestry and livestock operations.
7 Other income – Group and Company
Net foreign exchange gain other than cash and cash equivalents
Gain on disposal of property, plant and equipment
Rental Income
Sundry
Sundry relates to income from sale of timber and other miscellaneous sales.
8
Interest income and finance costs -– Group and Company
Interest income
Interest income on short term bank deposits
Finance costs
Interest on lease liabilities
Net exchange losses on foreign currency cash & cash equivalents
2019
Shs’000
2018
Shs’000
202,390
1,221,452
-
483,543
278,633
303,572
977,373
12,207
352,386
306,651
2,186,018
1,952,189
2019
Shs’000
2018
Shs’000
1,232
1,658
3,890
13,796
693
4,604
3,848
9,533
20,576
18,678
2019
Shs’000
2018
Shs’000
117,021
125,672
(33 )
(7,483 )
-
(2,342 )
(7,516 )
(2,342 )
Net interest income and finance costs
109,505
123,330
62
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
9 Expenses by nature – Group and Company
The following items have been charged/ (credited) in arriving at profit before income tax:-
Depreciation on property, plant and equipment (Note 18)
Repairs and maintenance expenditure on property, plant and equipment
Depreciation of right of use assets (Note 20)
Amortisation of prepaid operating lease rentals (Note 19)
Gains arising from changes in fair value less costs to sell of non-current
biological assets (Note 6 (i))
Cost of inventories sold
Employee benefits expense (Note 10)
Auditor’s remuneration
Gain on disposal of property plant and equipment
Directors remuneration
10 Employee benefits expense – Group and Company
The following items are included within employee benefits expense:
Salaries and wages
Post employment benefits costs:
- Post employment benefit obligations (Note 16)
- Defined contribution pension scheme
- National Social Security Fund
The average number of employees during the year was as follows:
Management
Permanent unionisable employees
Other unionisable employees
2019
Shs’000
197,103
83,882
10
-
(83,414 )
1,256,499
697,437
6,395
(1,658 )
9,707
2018
Shs’000
182,982
76,035
-
5
(74,082 )
1,614,653
655,297
6,090
(4,604 )
10,249
2019
Shs’000
2018
Shs’000
659,443
621,907
19,141
6,349
12,504
17,277
4,575
11,538
697,437
655,297
2019
63
756
2,188
2018
59
778
2,102
3,007
2,939
63
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
11
Income tax – Group and Company
(a) Taxation charge
Current tax
Current tax on profit for the year
Prior year over provision
2019
Shs’000
187,491
-
2018
Shs’000
136,187
(2,174 )
Total current tax expense
187,491
134,013
Deferred income tax charge (Note 15)
113,547
68,476
Income tax expense
301,038
202,489
(b) Reconciliation of tax based on accounting profit to tax charge
The tax on the Group’s and Company’s profit before income tax differs from the theoretical amount that
would arise using the statutory income tax rate as follows:
Profit before income tax
Tax calculated at the statutory income tax rate of 30%
(2018: 30%)
Tax effect of:
Under provision of deferred tax in prior years
Income not subject to income tax
Expenses not deductible for income tax purposes
Over provision of current income tax in prior year
2019
Shs’000
2018
Shs’000
1,014,477
684,083
304,343
205,225
-
(9,305 )
6,000
-
1,962
(8,699 )
6,175
(2,174 )
Taxation charge
301,038
202,489
(c) Group and Company tax charge relating to components of other comprehensive income
Remeasurement of post-employment benefit obligations:
Actuarial gain (Note 16)
Charge to other comprehensive income (Note 15)
16,872
(5,062 )
4,352
(1,306 )
2019
Shs’000
2018
Shs’000
Net charge to other comprehensive income
11,810
3,046
64
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
11
Income tax – Group and Company (Continued)
(d) Current tax payable/ (recoverable)
Group
Company
2019
Shs’000
2018
Shs’000
2019
Shs’000
2018
Shs’000
At start of year
Taxation charge (Note 11 (a))
Paid during the year
(81,582 )
187,491
(70,554 )
132,810
134,013
(348,405 )
(81,529 )
187,491
(70,554 )
132,863
134,013
(348,405 )
At end of year
35,355
(81,582 )
35,408
(81,529 )
12 Earnings and dividends – Group
i) Basic and diluted earnings per ordinary share
Basic earnings per ordinary share is calculated on the profit attributable to the members of Kakuzi Plc
and on the 19,599,999 ordinary shares in issue at 31 December 2019 and 31 December 2018 as
follows:-
2019
2018
Profit attributable to equity holders of the Group (Shs ‘000)
713,439
481,594
Number of ordinary shares in issue (thousands)
19,600
19,600
Basic and diluted earnings per ordinary share (Shs)
36.40
24.57
The Group had no potentially dilutive ordinary shares outstanding at 31 December 2019 and 31
December 2018.
ii) Dividends per ordinary share
At the annual general meeting to be held on 19 May 2020, the Directors will recommend the payment of
a first and final dividend of 280% (2018: 180%) of par value equivalent to Shs 14.00 per ordinary share
(Shs 274,400,000 in respect of the year ended 31 December 2019 ((2018: Shs 9.00 per ordinary share)
(Shs 176,400,000))((2017: Shs 700 per ordinary shares (Shs 137,200,000)).
13 Share capital
Number of
ordinary
shares
(Thousands)
Ordinary
share capital
Shs ‘000
Authorised
At 1 January 2018, 31 December 2018 and 31 December 2019
20,000
100,000
Issued
At 1 January 2018, 31 December 2018 and 31 December 2019
19,600
98,000
The par value of the shares is Shs 5
65
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
14 Borrowing facilities – Group and Company
2019
Shs’000
2018
Shs’000
The Group has the following undrawn committed borrowing facilities:
Floating rate (expiring within one year)
426,300
626,300
The facilities are subject to annual review at various dates during the year 2020.
The undrawn bank facilities of Shs 426,300,000 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% (2018: 30%). The net deferred
taxation liability is attributable to the following items:
Property, plant and equipment
Biological assets
Other temporary differences
2019
Shs’000
742,482
237,084
(47,400 )
2018
Shs’000
672,510
223,320
(82,273 )
Net deferred income tax liability
932,166
813,557
The movement on the deferred income tax account is as follows:
At start of year
Charge to profit or loss (Note 11(a))
Charge to other comprehensive income (Note 11(c))
2019
Shs’000
813,557
113,547
5,062
2018
Shs’000
743,775
68,476
1,306
At end of year
932,166
813,557
The following amounts, determined after appropriate offsetting, are shown in the statement of financial
position.
Deferred income tax assets
Deferred income tax liabilities
66
2019
Shs’000
(47,400 )
979,566
2018
Shs’000
(82,273 )
895,830
932,166
813,557
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
16 Post employment benefit obligations – Group and Company
The amounts recognised in the statement of financial position are determined as follows:
2019
Shs’000
2018
Shs’000
Present value of post employment benefit obligations
93,066
95,233
Split as follows:
Non-current portion
Current portion
74,500
18,566
68,045
27,188
The movement in present value of the post employment benefit obligations is as follows:
At start of year
Net expense recognised in statement of profit or loss and other
comprehensive income
Benefits paid
At end of year
2019
Shs’000
2018
Shs’000
95,233
85,166
2,269
(4,436 )
12,925
(2,858 )
93,066
95,233
The amounts recognised in the statement of profit or loss within ‘cost of sales’ for the year are as
follows:
Current service cost
Past service cost
Interest on obligation
2019
Shs’000
6,230
10
12,901
2018
Shs’000
5,535
64
11,678
Total included in employee benefits expenses (Note 10)
19,141
17,277
Actuarial gain recognised in other comprehensive income (Note 11(c))
16,872
4,352
67
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
16 Post employment benefit obligations Group and Company (continued)
31 December 2019
31 December 2018
Gratuity
(Makuyu)
Shs’000
Gratuity (Nandi
Hills)
Shs’000
Total
Shs’000
Gratuity
(Makuyu)
Shs’000
Gratuity (Nandi
Hills)
Shs’000
Total
Shs’000
At start of year
67,178
28,055
95,233
58,097
27,069
85,166
Current service cost
Past service cost
Interest expense
4,520
-
9,169
1,710
10
3,732
6,230
10
12,901
3,930
64
7,929
1,605
-
3,749
5,535
64
11,678
13,689
5,452
19,141
11,923
5,354
17,277
Remeasurements:
Gain from change in assumptions
Experience (gains)/losses
(7,402 )
(506 )
(7,915 )
(1,049 )
(15,317 )
(1,555 )
(1,590 )
1,400
(4,162 )
-
(5,752 )
1,400
Benefits paid
At end of year
(7,908 )
(8,964 )
(16,872 )
(190 )
(4,162 )
(4,352 )
(2,327 )
(2,109 )
(4,436 )
(2,652 )
(206 )
(2,858 )
70,632
22,434
93,066
67,178
28,055
95,233
68
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
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
2019
13%
7.5%
7.5%
7.5%
2018
13%
10%
10%
10%
2019
13%
7.5%
7.5%
7.5%
2018
13%
10%
10%
10%
2017
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
60 years
55 years
The sensitivity of the defined obligation to changes in the weighted principal assumptions is:
Impact on post employment benefit obligation
Changes in assumption
Increase/Decrease
in assumption
Discount rate
Salary growth rate
by 1%
by 1%
Shs 4,621,000
Not material
69
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
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:
2019
Shs’000
2018
Shs’000
2017
Shs’000
2016
Shs’000
2015
Shs’000
Present value of post employment benefit obligations – Group and Company
93,066
95,233
85,166
76,492
72,000
Net expense/(income) recognised in the statement of profit or loss and other comprehensive
income – Group and Company
- within ‘cost of sales’
- within ‘other comprehensive income/(loss)
19,141
(11,810 )
17,277
(3,046 )
16,065
(1,735 )
15,116
(5,936 )
14,359
(4,955 )
70
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
17 Lease obligations – Group and Company
Undiscounted future minimum lease payment
Under operating lease at 1 January
Impact of discounting
At 1 January
The movement in the lease liabilities is as follows:
Balance at 1 January
Interest on lease liabilities
Amounts due for settlement within 12 months
Amounts due for settlement after 12 months
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
2019
Shs’000
2018
Shs’000
2,993
(2,548 )
445
445
(33 )
412
31
381
412
31
28
26
24
23
280
412
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group does not face a significant liquidity risk with regards to its lease liabilities. Lease liabilities are
monitored within the company’s treasury function. All lease obligations are denominated in Kenya Shillings.
71
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
18 Property, plant and equipment
Group and Company
Year ended 31 December 2019
Cost
At start of year
Transfers
Additions
Disposals
At end of year
Depreciation and impairment
At start of year
Charge for the year
Eliminated on disposals
At end of year
Net book amount
Depreciation and impairment at year end
comprises:
Depreciation
Impairment
Buildings,
freehold land,
dams and
improvements
Shs’000
Plant &
machinery
Shs’000
Bearer plants
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
1,318,912
100,873
-
(68,808 )
1,356,116
139,450
143,880
(20 )
1,350,977
1,639,426
301,154
66,952
(68,808 )
299,298
518,388
61,210
(20 )
579,578
1,051,679
1,059,848
299,298
-
299,298
573,907
5,671
579,578
292,347
26,156
26,497
-
345,000
160,812
24,983
-
185,795
159,205
185,237
558
185,795
308,671
1,589
34,359
(12,859 )
331,760
197,674
30,584
(8,209 )
220,049
111,223
21,880
20,770
(695 )
153,178
80,039
13,374
(695 )
92,718
576,319
(289,948 )
183,960
-
3,963,588
-
409,466
(82,382 )
470,331
4,290,672
-
-
-
-
1,258,067
197,103
(77,732 )
1,377,438
111,711
60,460
470,331
2,913,234
220,049
-
220,049
92,632
86
92,718
-
-
-
1,371,123
6,315
1,377,438
Property, plant and equipment stated at cost of Shs 412,007,183 have been fully depreciated. The notional annual depreciation charge in respect of these values would
have been Shs 65,262,957. There were no items of property, plant and equipment whose title were restricted or pledged as security for liabilities as at 31 December
2019 (2018: none).
Based on an impairment review performed by the directors at 31 December 2019, no indication of further impairment of property, plant and equipment were identified
(2018: none).
Capital work-in-progress largely relates to self-constructed assets that had not been brought into use as at year end and bearer plants that have not yet matured.
72
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
18 Property, plant and equipment (continued)
Group and Company
Year ended 31 December 2018
Cost
At start of year
Transfers
Additions
Disposals
At end of year
Depreciation and impairment
At start of year
Charge for the year
Eliminated on disposals
At end of year
Net book amount
Depreciation and impairment at year end
comprises:
Depreciation
Impairment
Buildings,
freehold land,
dams and
improvements
Shs’000
Plant &
machinery
Shs’000
Bearer plants
Shs’000
1,230,229
88,683
-
-
1,266,160
29,903
103,534
(43,481 )
1,318,912
1,356,116
233,319
67,835
-
301,154
524,401
37,468
(43,481 )
518,388
279,890
-
12,581
(124 )
292,347
138,253
22,646
(87 )
160,812
Motor
vehicles,
tractors,
trailers and
implements
Shs’000
273,826
-
49,076
(14,231 )
308,671
178,660
33,245
(14,231 )
197,674
Furniture,
fittings and
equipment
Shs’000
Capital work
in progress
Shs’000
96,355
-
22,470
(7,602 )
413,410
(118,586 )
281,495
-
Total
Shs’000
3,559,870
-
469,156
(65,438 )
111,223
576,319
3,963,588
65,853
21,788
(7,602 )
80,039
-
-
-
-
1,140,486
182,982
(65,401 )
1,258,067
1,017,758
837,728
131,535
110,997
31,184
576,319
2,705,521
301,154
-
301,154
512,717
5,671
518,388
160,254
558
160,812
197,674
-
197,674
79,953
86
80,039
-
-
-
1,251,752
6,315
1,258,067
Property, plant and equipment stated at cost of Shs 422,069,499 have been fully depreciated. The notional annual depreciation charge in respect of these values would
have been Shs 52,518,213. There were no items of property, plant and equipment whose title were restricted or pledged as security for liabilities as at 31 December
2018 (2017: none).
Based on an impairment review performed by the directors at 31 December 2018, no indication of further impairment of property, plant and equipment were identified
(2017: none).
Capital work-in-progress largely relates to self-constructed assets that had not been brought into use as at year end and bearer plants that have not yet matured.
73
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
19 Prepaid operating lease rentals – Group and Company
At start of year
Amortisation charge for the year
RReclassified to right of use asset (Note 20)
At end of year
20 Right of use assets – Group and Company
2019
Shs’000
2018
Shs’000
4,379
-
(4,379 )
4,384
(5 )
-
-
4,379
The Group has leased land for its use. Information about the leases in which the Group is a lessee is
presented below:
Cost
At start of year
Recognised on adoption of IFRS 16
Reclassified from prepaid operating lease rentals (Note 19)
At end of year
Depreciation
At start of year
Charge for the year
At end of year
Amounts recognised in profit and loss
Depreciation expense of right of use assets
Interest expenses on lease liabilities
2019
Shs’000
2018
Shs’000
-
412
4,379
4,791
-
(10 )
4,781
10
33
43
-
-
-
-
-
-
-
-
-
-
The Group is not committed to any arrangements that are short term as at year end.
All of the land leases in which the Group is the lessee contain only fixed payments.
There are no restrictions or covenants imposed by lessors and the Group did not enter into any sale and
leaseback transactions during the year (2018: Nil).
74
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
21
Investment in subsidiaries
The subsidiary companies are all wholly owned, 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 2019
At start of year
At end of year
Year ended 31 December 2018
At start of year
At end of year
Kaguru EPZ
Limited
Shs’000
Estates Services
Limited
Shs’000
1,670
1,670
2,625
2,625
Kaguru EPZ
Limited
Shs’000
Estates Services
Limited
Shs’000
1,670
1,670
2,625
2,625
Total
Shs’000
4,295
4,295
Total
Shs’000
4,295
4,295
There were no restrictions on the Groups ability to access or use assets of the subsidiaries to settle the
Groups liabilities at 31 December 2019 and 31 December 2018.
22 Financial assets held at amortised cost – Group and Company
Financial assets held at amortised cost comprises treasury and corporate bonds carried at amortised cost.
Maturity rate
Average
Interest
Rate
Maturity date
Kengen Limited
Treasury Infrastructure Bonds
12.50%
12.50%
31-Oct-19
18-Nov-24
The movement in financial assets held to maturity is as follows:
At start of year
Redeemed in the year
Impairment during the year
At end of year
Non current portion
Current portion
2019
Shs’000
-
200,000
2018
Shs’000
15,385
200,000
200,000
215,385
2019
Shs’000
215,385
(15,385 )
-
2018
Shs’000
343,319
(124,873 )
(3,061 )
200,000
215,385
200,000
-
200,000
15,385
200,000
215,385
The Directors consider that the carrying amounts of the financial assets held to maturity in the consolidated
financial statements approximate their fair values.
None of the financial assets had been pledged as collateral for liabilities or contingent liabilities as at 31
December 2019 (2018: Nil).
75
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
23
Inventories – Group and Company
Spare parts and consumable materials
Avocado
Macadamia nuts
Blueberries
Poles & timber
2019
Shs’000
141,190
108,368
92,556
72
59,507
2018
Shs’000
87,880
-
36,427
-
45,169
Total inventories
401,693
169,476
The cost of inventories recognised as an expense and included in cost of sales amounted to Shs
1,256,499,000 (2018: Shs 1,614,653,000). There were no write downs during the year (2018: Nil)
24 Receivables and prepayments – Group and Company
Trade receivables
Loss allowance
Trade receivables - net
Due from related companies (Note 28(v))
Staff debtors
Value Added Tax (VAT) Refunds receivable
Other receivables and prepayments
Less non current portion
Current receivables & prepayments
Non current receivables
2019
Shs’000
29,555
(4,934 )
24,621
37,815
41,569
107,253
98,584
309,842
(34,624 )
2018
Shs’000
100,485
(4,834 )
95,651
85,559
37,430
104,047
68,122
390,809
(30,023 )
275,218
360,786
34,624
30,023
Other receivables comprise trade deposits and a shipping rebate
As at 1 January 2018, trade receivables from contracts with customers amounted to Shs 67,169,000 (net
of loss allowance of Shs 4,528,000).
Non current receivables are due within five years from reporting date and are secured and interest free.
None of the amounts were impaired (2018: Nil).
The carrying amounts of the current receivables approximate to their fair value.
Trade Receivables
The Directors of the Company estimate the loss allowance on trade receivables at the end of the
reporting period at an amount equal to lifetime expected credit loss (“ECL”).
The expected credit losses on trade receivables are estimated using a provision matrix by reference to
past default experience of the debtor and an analysis of the debtors current financial position, adjusted
for factors that are specific to the debtors, general economic conditions of the industry in which the
debtors operate and an assessment of both the current as well as the forecast direction of conditions at
the reporting date.
The following table details the risk profile of trade receivables based on the Group’s provision matrix.
31/12/2019 & 31/12/2018
Expected credit loss rate
Trade receivables – days past due
31 - 60
Not past due
Total
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
61 - 90
<30
>90
0%
0%
====== ======
0%
======
0%
======
0%
======
0%
======
76
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
24 Receivables and prepayments – Group and Company (continued)
The following table shows the movement in lifetime ECL that has been recognised for trade receivables
in accordance with the simplified approach set out in IFRS 9.
Balance at 1 January 2018
Loss allowance charge for the year 2018
Collectively
assessed
-
-
Individually
assessed
4,528
306
Total
4,528
306
Balance as at 31 December 2018
-
4,834
4,834
Loss allowance charge for the year 2019
-
100
100
Balance as at 31 December 2019
-
4,934
4,934
25 Payables and accrued expenses
Group
2019
Shs’000
2018
Shs’000
Company
2019
Shs’000
2018
Shs’000
Trade payables
Due to related companies (Note 28(v))
Accrued expenses
Leave obligations
Other payables
73,458
8
19,379
23,727
65,139
110,312
13,948
27,368
24,181
186,967
73,458
8,391
19,379
23,727
65,139
110,312
22,331
27,368
24,181
186,967
181,711
362,776
190,094
371,159
Other payables relate to provisions and sundry payables.
Leave obligations covers the Group’s liability for accrued annual leave. The movement on the leave
obligations for Group and Company is as follows:
At start of year
Charge for the year
Paid during the year
2019
Shs’000
2018
Shs’000
2019
Shs’000
2018
Shs’000
24,181
36,418
(36,872 )
20,751
29,203
(25,773 )
24,181
36,418
(36,872 )
20,751
29,203
(25,773 )
At end of year
23,727
24,181
23,727
24,181
The carrying amounts of the payables and accrued expenses approximate to their fair values.
77
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
26 Cash and cash equivalents - 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
2019
Shs’000
2018
Shs’000
82,892
1,613,238
77,963
1,422,972
1,696,130
1,500,935
The short term deposits are denominated in Kenya Shillings (Shs) and United States Dollars (USD) and
have a maturity of three months or less from the date of acquisition or are repayable immediately with no
loss of interest. The effective interest rates on the short term deposits as at 31 December were as shown
below:
Kenya Shillings deposits
United States Dollar deposits
2019
8.63%
3.63%
2018
9.19%
3.25%
The Directors consider that the carrying amounts of cash and cash equivalents in the consolidated
financial statements approximate their fair values.
There were no amounts of cash and cash equivalents held by the Group that were not available for use
by the Group as at 31 December 2019 (2018: Nil).
27 Note to the consolidated and separate statement of cash flows
Reconciliation of profit before income tax to cash generated from operations:
Profit before income tax
Adjustments for:
Net exchange losses on foreign currency cash & cash equivalents (Note 8)
Interest expense on lease liabilities (Note 8)
Interest income (Note 8)
Depreciation (Note 18)
Amortisation of prepaid operating lease rentals (Note 19)
Depreciation of right of use assets (Note 20)
Gain on disposal of property, plant and equipment
Impairment of financial assets held at amortised cost (Note 22)
Gains arising from changes in fair value less estimated point-sale costs of
biological assets (Note 6 (i))
Decrease in the fair value of biological assets due to sales and harvest and
disposal (Note 6 (i))
Fair value movement in biological assets – growing agricultural produce
Changes in working capital:
- Increase in inventories
- Decrease/(increase) in receivables and prepayments
- Decrease in payables and accrued expenses and lease obligations
- Increase in post-employment benefit obligations
2019
Shs’000
2018
Shs’000
1,014,477
684,083
7,483
33
(117,021 )
197,103
-
10
(1,658 )
-
2,342
-
(125,672 )
182,982
5
-
(4,604 )
3,061
)
(83,414
)
(74,082
70,967
(31,226 )
83,533
6,998
(232,217 )
80,967
(181,065 )
14,705
(23,152 )
(66,427 )
(99,563 )
14,419
Cash generated from operations
739,144
583,923
78
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
28 Related party transactions – Group and Company
The group is controlled by Camellia Plc, a company incorporated in England. Camellia Plc is the
ultimate parent of the Group. There are other companies that are related to Kakuzi Plc through
common shareholdings or common Directorships. Fellow Subsidiaries within the Camellia Plc Group
act as brokers and managing agents for certain products and operations of the Group.
The following transactions were carried out with related parties:
i) Sale of goods to:
Eastern Produce Kenya Limited
ii) Purchase of goods and services from:
RBDA Kenya Branch
Eastern Produce Kenya Limited
2019
2018
Shs’000
Shs’000
113,307
220,399
104,592
65,897
102,255
71,207
170,489
173,462
The purchase of goods and services includes a charge in relation to the Executive Directors
remuneration (including value of benefits in kind) amounting to Shs 26,327,000 (2018: 23,560,000).
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
58,377
12
67,239
608
58,389
67,847
9,240
467
9,825
424
9,707
10,249
79
Kakuzi Plc
Consolidated and Separate Financial Statements
For the year ended 31 December 2019
Notes (continued)
28 Related party transactions – Group and Company (continued)
v) Outstanding balances arising from sale and purchase of goods and service
Group
2019
2018
Company
2019
2018
Shs’000
Shs’000
Shs’000
Shs’000
32,948
4,867
85,559
-
32,948
4,867
85,559
-
37,815
85,559
37,815
85,559
-
-
-
8
8
-
-
13,925
23
2,570
5,813
-
8
2,570
5,813
13,925
23
13,948
8,391
22,331
Due from related Companies
Eastern Produce Kenya Limited
RBDA Kenya Branch
Due to related Companies
Estates Services Limited
Kaguru EPZ Limited
RBDA Kenya Branch
Eastern Produce Estates South Africa (Pty) Ltd
29 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
30 Contingent liabilities
2019
Shs’000
2018
Shs’000
38,567
9,076
Various claims have been submitted against the Group in relation to different litigations. It is not practical
to estimate the potential effect of these claims but legal advice indicate that it is not probable that a
significant liability will arise. The Directors believe that the ultimate resolution of these legal proceedings
would not have a material effect on the Group’s consolidated and separate financial statements.
31 Subsequent events
There have been no significant events after the reporting date to the date of signing these accounts which
have a material financial statement impact at 31 December 2019.
------------- 000 -------------
80
Kakuzi Plc
Five year record
Turnover
2,888,662
3,152,831
2,823,926
2,651,199
2,481,844
2019
Shs'000
2018
Shs'000
2017
Shs'000
2016
Shs'000
2015
Shs'000
Profit before income tax
Income tax
1,014,477
(301,038 )
684,083
(202,489 )
849,123
(257,480 )
757,779
(195,354 )
667,341
(207,627 )
Profit after income tax
713,439
481,594
591,643
562,425
459,714
Profit attributable to the members of
Kakuzi Plc
713,439
481,594
591,643
562,425
459,714
Dividends: -
Proposed final dividend - for the year
274,400
176,400
137,200
117,600
98,000
Capital and reserves: -
Called up share capital
Reserves
98,000
5,116,184
98,000
4,567,335
98,000
4,219,895
98,000
3,748,258
98,000
3,345,870
Total equity
5,214,184
4,665,335
4,317,895
3,846,258
3,443,870
Basic earnings per ordinary share (Shs)
36.40
24.57
30.19
28.70
23.45
Dividends per ordinary share (Shs)
14.00
9.00
7.00
6.00
5.00
Dividend cover
2.60
2.73
4.31
4.78
4.69
Total equity per ordinary share (Shs)
266.03
238.03
220.30
196.24
175.71
All amounts are stated in Kenya shillings thousands (shs’000) except where otherwise indicated.
81
Kakuzi Plc
Major shareholders and distribution schedule
MAJOR SHAREHOLDERS
The 10 major shareholders and their holdings at 31 December 2019 were:
Shareholder 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 HSBC Global Custody Nominee (UK) Limited
7 Kakuzi Neighbourhoods Development Foundation
8 Joe B.Wanjui
9 John Okuna Ogango
10 Shah Chandrakant Keshavji & Shah Laxmiben Chandrakant
Keshavji
Number of
ordinary shares
6,311,199
5,107,920
4,828,714
429,134
239,118
200,000
155,500
122,004
104,400
61,698
17,559,687
%
32.20%
26.06%
24.64%
2.19%
1.22%
1.02%
0.79%
0.62%
0.53%
0.31%
89.59%
* 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 ordinary shares.
DISTRIBUTION SCHEDULE
The distribution of ordinary shares as at 31 December 2019 was:
Ordinary shares 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
shareholders
Number of
ordinary shares
794
432
46
40
6
3
1,321
124,902
788,541
350,600
837,967
1,250,156
16,247,833
19,599,999
%
0.64%
4.02%
1.79%
4.28%
6.38%
82.90%
100.00%
82
Kakuzi Plc
Form of Proxy (Annual General Meeting)
I/We
.…………………………………………….………..…………………..…………...………...………….…...…….……..,
of ………………………………..………………………………… being a member of the above-named Group, 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 Group to be
held on the 9th day of June 2020, and at any adjournment thereof.
As witness my hand this …………………………….. day of …………………………………………………..2020
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 Group.
In the case of a member being a limited Group, 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 Group Secretary not less than 48 hours before the time of holding the
meeting.
83
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1
D
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Kakuzi Plc
P O Box 24
Thika 01000
Kenya
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INSERT FLAP INSIDE