Zambeef Products
Annual Report 2020

Plain-text annual report

Feedin g T he N atio n - B eyo n d 2020 Annual Report2020 2 Zambeef Products PLC Annual Report 2020Contents Overview Zambeef at a Glance History & Key Milestones Strategic Report Chairman's Review Chief Executive Officer’s Review Key Market Indicators Divisional Perfomance Sustainability Report Corporate Governance Corporate Governance Board of Directors Report of the Directors Statement of Directors' responsibilities Financial Statements 30 September 2020 Independent auditor’s report Consolidated statement of comprehensive income Consolidated statement of changes in equity Company statement of changes in equity Consolidated statement of financial position Company statement of financial position Consolidated statement of cash flows Company statement of cash flows Notes to the financial statements Notice of AGM Proxy form 4 7 9 11 13 15 22 28 34 36 42 44 48 49 51 53 54 55 56 57 134 135 3 Zambeef Products PLC Annual Report 2020Zambeef at a Glance Zambeef Products PLC (“Zambeef”) is the largest integrated cold chain food products and agribusiness company in Zambia and one of the largest in the Southern Africa region. Zambeef is quoted on both the Lusaka Securities Exchange and the AIM market of the London Stock Exchange. It is involved in the primary production, processing, distribution and retailing of beef, chicken, pork, eggs, dairy, fish, flour, stockfeed and day-old chicks throughout Zambia and the surrounding region. It has further retail operations in Nigeria and Ghana. Zambeef also has one of the largest row cropping operations in Zambia, growing maize, soybeans and wheat. Zambeef plants nearly 23,000 hectares annually, with most of the resulting crops being used in the Zambeef animal feed and flour milling businesses. Our Purpose Zambeef’s vision is to be one of the most accessible, affordable and quality cold chain food providers in the region, delivered through our extensive retail and distribution network throughout Zambia and West Africa. Our Business Model Our vertically integrated business model provides strong foundations for growth and: § Underpins margin capture and value add; § Secures supply chain; § Reduces risk and earnings volatility. 4 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Zambeef at a Glance (continued) DIVISIONS Retail and Distribution Zambeef’s products are retailed through 236 outlets (2019: 226) directly to end-consumers, in a value- added form, either through the Zambeef concession agreement to operate Shoprite’s in-store butcheries (71 in 2020; 69 in 2019) or through Zambeef’s own retail and wholesale distribution network in Zambia (165 in 2020; 157 in 2019). § 65 Zambeef retail outlets (2019: 65) § 39 Zambeef Macros (2019: 35) § 29 Novatek retail outlets (2019: 28) § 31 Zamshu outlets (2019: 28) § § 39 Shoprite butcheries in Zambia (2019: 38) § 32 Shoprite butcheries in West Africa: 25 in Nigeria 1 Bakery (2019: 1) and 7 in Ghana (2019: 31) Zambeef also operates one of the largest transport and trucking fleets in Zambia (244 trucks), giving Zambeef control over its logistics and distribution. Cold Chain Food Production § The largest processor of beef in Zambia. § Five beef abattoirs (capacity to slaughter 230,000 head p.a.) and three feedlots located across Zambia (standing capacity 11,000 head). § § § § § Meat processing plant with a capacity to process over 100,000 cattle p.a. One of the largest chicken processors, producing fresh and frozen products (capacity 8.8m broilers p.a.) and a table egg producer (285,000 layers). The Group’s breeding and hatchery operations also supply large quantities of day-old broiler chicks (capacity 22.4m p.a.) to small- and medium-scale poultry producers. One of the largest piggeries and pork processing plants in Zambia, producing bacon, pork sausages and other meat products. (capacity to slaughter 75,000 head p.a.) Dairy farm with approximately 3,077 cows and a dairy parlour milking capacity of 2,000 cows per day. Dairy processing plant (capacity 120,000 litres/ day) to process milk, lacto and a wide range of value-added products including yoghurt, drinking yoghurt, cheese, butter and milk-based juices. 5 Zambeef Products PLC Annual Report 2020Zambeef at a Glance (continued) § § § § § § § § § § § leading stockfeed producer The in Zambia, operating two feed mills, in Lusaka and Mpongwe, with a capacity of 300,000 tonnes p.a. Novatek products are certified by the Zambia Bureau of Standards (ZS 017, ZS 018 and ZS 019) and the company is the only stockfeed producer in Zambia with ISO 22,000 Food Safety Management certification. Novatek supplies 48% of the feed produced to Zambeef livestock farming operations, and supplies 141 branded shops owned by external agents in addition to Zambeef retail outlets (2019: 132). One of the largest row cropping operations in Zambia. 7,787 ha of irrigated and 8,694 ha of rainfed, arable land. Double cropping of irrigated land means Zambeef plants 22,737 ha p.a. Crop production focuses on soybeans and maize during summer and wheat during winter. Wheat mill with a capacity to mill 26,000 MT of wheat p.a. The largest tannery in Zambia, with a processing capacity of 130,000 hides p.a. The largest shoe manufacturing plant in Zambia, with a production capacity of 200,000 pairs p.a. One bakery with the capacity to bake 1.2 million loaves of bread p.a. Stock feed Cropping Others 6 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS History & Key Milestones History & Key Milestones 1994 Zambeef Products Ltd. incorporated with 60 staff, a rented abattoir & 2 butcheries, delivering 180 beef cattle per month in 3 land rovers 1996 Acquired Huntley Farm (abattoir and feedlot) 2004 Acquired Sinazongwe Farm, Shoprite expansion into Nigeria & Ghana 2008 First equity capital raise (Acquired Masterpork, Chiawa Farm, Zamanita Soya crushing and refining plant) Entered into JV’s with RCL Foods on Zamchick & Zamhatch 2013 CDC Group PLC acquires rof ytiuqe feebmaZ %83 US$65million. Put option settled to RCL Foods for full interests in Zamchick & Zamhatch IDC Zambia acquires 90% of Zampalm ltd for US$16million 2016 2018 2011 2015 2017 2020 1995 Secured concession to operate the butcheries in all Shoprite stores in Zambia 2003 Listed on Lusaka Stock Exchange. Dr Jacob Mwanza became chairman. 2005 Sinazongwe Abattoir built 2009 Zampalm and Novatek Animal Feeds established Listed on the London Stock exchange (AIM). Acquired Mpongwe Farms Disposal of Zamanita Ltd to Cargill for US$26million Commissioning of US$30million hatchery and stockfeed mill at Mpongwe Farm Disposal of Sinazongwe Farm for US$10million 4 Zambeef Products PLC Annual Report 2019 7 Zambeef Products PLC Annual Report 2020Overview Strategic report Corporate governance Financial statements Feeding a growing region 2020 2019 2018 Zambia Zambeef Outlets Zambeef Macros Novatek Bakery Zamshu Outlets Total Zambeef Outlets Shoprites Total Zambia 65 39 29 1 31 165 39 204 65 35 28 1 28 157 38 195 67 29 24 1 19 140 34 174 Nigeria Shoprites Master Meats Outlets Total Nigeria Ghana Shoprites Total Ghana 2020 2019 2018 25 0 25 7 7 25 0 25 6 6 25 1 26 6 6 8 Total Zambeef Total Shoprites Total Retail Network 2020 165 71 236 2019 157 69 226 2018 141 65 206 Zambeef Products PLC Annual Report 2019 5 Zambeef Products PLC Annual Report 2020Overview Strategic report Corporate governance Financial statements OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Feeding a growing region Chairman's Review million (USD1.4 million) compared with a profit before tax of ZMW38.7 million (USD3.1 million) achieved in the prior financial year. The loss position is mainly attributed to a deferred impairment, higher financing and exchange losses following the depreciation of the local currency. tax asset The Board believes the key to sustainable growth, while mitigating the effects of adverse economic cycles, lies in remaining committed to achieving its strategic priorities. As such, the key focus remains on the core divisions that generate sustainable and strong cash flows, while reducing debt to release cash for reinvestment in higher returning projects. The Economic Environment The global economy experienced a deep recession in 2020 as a result of the unprecedented reduction in production output and consumer demand following the slowdown in the first half of the calendar year. This COVID-19 related slowdown took a the Zambian economy, which in turn impacted our customer base. toll on The COVID-19 pandemic, although a health crisis, had far-reaching trade and effects on global interaction. social transformed In the Zambian context, despite timely monetary proactive and and fiscal policy interventions by the government to support the economy, GDP is projected to contract by 4.2% in 2020 and rebound to growth of 1.8% in 2021. The Zambian economy, which was already battling the effects of a high debt burden, cash illiquidity investor and waning global confidence, was left vulnerable when global commodity prices dropped amidst the reduction in global trade following the onset of the pandemic. The sharp depreciation of the local currency that came about as a result of reduced foreign currency inflows had a detrimental effect on the economy. Consumer price inflation closed at 15.7%, 730 basis points above the rate recorded the prior year. sustainability As part of our programme, support to and Government efforts to contain the spread of COVID-19, Zambeef, in collaboration with partners, donated food and non-food items worth ZMW1.2 million. As a Group, we are always proud to be part of the solution to the challenges facing the communities in which we operate. continues Zambeef Debt Position to de-risk Zambeef the business by focussing on the reduction of debt to mitigate the impact of foreign currency volatility on future earnings. The net debt for the Group declined by 41% in Dollar terms and 10% in Kwacha terms during the 2020 financial year. Term debt repayments during the 2020 financial year amounted to USD8.9 million, reducing the total term debt to USD18.2 million from USD27.2 million in the previous financial year. With no new undertakings of debt, this puts the business in a less leveraged position and improves our debt service coverage ratio. However, our exposure to currency risk with our US Dollar denominated debt caused an increase in our term debt balance in Kwacha terms, due to the depreciation of the currency. 9 It is my pleasure to present to you my inaugural report as Chairman of Zambeef PLC with respect to the financial year ended 30 September 2020. year was On the back of a challenging 2019 financial year, 2020 followed suit and proved to be an even tougher year for the Zambeef Group. The 2020 characterised financial by difficult economic and market conditions that were exacerbated by the Coronavirus (COVID-19) pandemic. Despite significant growth the first half of the financial year, macro- economic headwinds, in particular those associated with the Kwacha depreciation, accumulated the second half and negatively impacted on profitability. in in The Group generated operating profit of ZMW210.5million (USD13.0 million) compared with ZMW161.2 million (USD13.1 million) in the prior financial year. Loss before tax was ZMW22.7 2020 2019 2018 Zambia Zambeef Outlets Zambeef Macros Novatek Bakery Zamshu Outlets Total Zambeef Outlets Shoprites Total Zambia 65 39 29 1 31 165 39 204 Nigeria Shoprites Master Meats Outlets Total Nigeria Ghana Shoprites Total Ghana 25 0 25 7 7 65 35 28 1 28 157 38 195 25 0 25 6 6 67 29 24 1 19 140 34 174 25 1 26 6 6 2020 2019 2018 Total Zambeef Total Shoprites Total Retail Network 2020 165 71 236 2019 157 69 226 2018 141 65 206 Zambeef Products PLC Annual Report 2019 5 Zambeef Products PLC Annual Report 2020existing retail store performance. For the year ended September 30, 2020, we rolled out four new macro outlets in strategic locations, compared to seven in 2019. We also leveraged Shoprite’s growth, opening three new in-store butcheries. Cropping revenue grew Cropping division the previous year, 37% from despite a reduction in volumes, due to a good summer crop price and translational currency effects. However, the division experienced a sharp escalation in costs resulting from the increase in electricity tariffs and US Dollar denominated costs. Load shedding caused electricity shortages that affected the winter wheat yield as optimal irrigation programmes could not be followed. Despite the challenges, the division contributed positively to Group operating profit. Disposal of Non-Core Assets The Group entered into a binding sale and purchase agreement with Chenguang Biotech (Zambia) Agri-Dev Limited for the sale of Sinazongwe Farm. The disposal was executed in March 2020 for a cash consideration of USD10 million. Our Chiawa farm remains listed for sale. Dividend As a Group, we are steadfast in our dedication to enhancing shareholder in view of the value. However, financial performance and debt levels, the Directors have elected not to pay a dividend for this financial year. Outlook We expect the macro-economic climate to remain challenging in the 2021 financial year, characterised by an increase in volatility. The country’s national debt level remains a threat to macro-economic stability in the short to medium term. anticipate We the COVID-19 pandemic will have minimal impact on our operations in 2021 as Zambia will adjust to living with the virus and resume life under the ‘new normal’. The Group is committed to continued strengthening of its earnings potential and unlocking value through reducing debt levels in the medium term. This will mitigate foreign exchange and, interest rate risk exposures and free up cash for reinvestment in higher returning projects. Acknowledgement I express my sincere gratitude to my fellow Board members for leading the Group through this challenging year. To our management and staff, I express our utmost appreciation for your dedicated efforts, for producing solid performance, and for exhibiting resilience in challenging and unusual circumstances. The leadership our staff has demonstrated in adhering to safety protocols during this period of the COVID-19 pandemic is highly commendable. As a Board we would like to express our deepest gratitude to the Chair of the Audit Committee, Dr. Lawrence Sikutwa, who will be retiring effective 31st December 2020. His leadership, strong commercial acumen and professionalism will be greatly missed. He has played a significant role in the Group and we all wish him the very best. Divisional Performance review Stockfeed Stockfeed operations performed well during the year against the backdrop of the 2018/2019 drought and operational headwinds. This division was the largest contributor to operating profit for the Group due to a combination of increased sales volumes, and robust cost management on the back of improved operational efficiencies. The division sold 242,700 tonnes of feed in 2020, compared with 218,769 tonnes in 2019. Retail and Cold Chain Food Products The combined Retail and Cold Chain Food Products division posted a marginal 1.8% growth in operating profit in Kwacha terms on the back of an 18% growth in revenue. This was despite depressed consumer spending that negatively impacted sales volumes in our retail outlets. Cost pressures due to the depreciation of the Kwacha, and continued increased electricity tariffs further eroded margins. shedding load Zambeef’s chain of 236 retail outlets - both own-brand and within Shoprite supermarkets - remain at the heart of the business, with demand from our customers driving supply. The Group’s the 2020 financial year was to optimise our focus during 10 Zambeef Products PLC Annual Report 2020 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Chief Executive Officer’s Review the electricity tariff at the beginning of the calendar year, significantly increased operational costs and eroded margins. Despite the challenges noted above, Zambeef achieved an operating profit of ZMW210 million (USD13.02 million), equating to 30.6% growth in Kwacha terms and a 0.5% reduction in US Dollar terms, compared with ZMW161.2 million (USD13.09 million) in 2019. Our revenue was ZMW3.9 billion (USD239.6 million) and we achieved a gross profit of ZMW1.22 billion (USD75.2 million), respectively 23.6% and 12.4% above the prior year in Kwacha terms, but both down by 5.8% and 14.4% in US Dollar terms, respectively. to efficiencies The Group’s strong underlying performance was driven by growth in the stockfeed, dairy and beef divisions. Management continued driving enable sustained top-line growth while looking for opportunities to optimise costs. Tight management of overhead costs resulted in strong Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA), and improved operational leverage. An increase in foreign exchange losses, particularly in the second half, resulted in an erosion of bottom-line performance. The depreciation of the Kwacha led to increased financing costs and exchange losses on our dollar denominated debt. Further, the impairment charge on a deferred tax asset of ZMW47 million resulted in the Group posting a loss after tax of ZMW135.6 million (USD8.4 million) compared with a profit of ZMW38.7 million (USD2.9 million) in the prior financial year, a 478% and 388% reduction in Kwacha and Dollar terms respectively. The Group delivered strong growth in operating profit during the first half of the year, supported by a stable macro-economic environment. The second half of the year saw the Group deliver encouraging results despite the challenging operating and economic environment, which was worsened by COVID-19 lockdowns. resilient The performance demonstrates our strengths as a diversified and vertically integrated business with competitive brands, strong customer relationships, and an experienced management team. continued driving Management efficiencies to enable sustained revenue growth while continuing to optimise costs. Our over-arching focus remains on achieving our long- term strategic objectives as they are the core principles that allowed us to achieve relative success during the financial year under review. Strategic focus Our strategic focus is to optimise our asset use and maximise returns. Proceeds from the sale of the Sinazongwe Farm and the prospective disposal of the Chiawa farm will enable us to pay down our debt further as we continue de- leveraging. We remain focused on our core businesses, in which we strive to be the best in class. 11 Overview The financial year ended 30th September 2020 was characterised by a difficult operating environment because of adverse macro-economic fundamentals, worsened by the coronavirus (COVID-19) pandemic. impacted COVID-19 negatively increased economic activity and directly which unemployment, affected the number of customers visiting our retail outlets. The Zambian Kwacha weakened 54% against the US Dollar during the financial year, resulting in high inflation and reduced customer spending. supply The Group experienced also challenges stemming from reduced electricity of continued load shedding, resulting in high diesel generator fuel expenditure and repairs and maintenance costs. This, coupled with a 49% increase in because Zambeef Products PLC Annual Report 2020delivered Stockfeed (Novatek) strong division The operating profit growth of 72.9% in Kwacha terms and 31.7% in US Dollar terms, and maintained to volume growth, margins due pricing and cost optimisation. Maize prices remained high, especially in the first half following the drought experienced in Southern Africa in the 2018/2019 farming season. This, coupled with a weak currency directly impacting input costs, necessitated upward pricing of Novatek products. The poultry sector continues to be an important source of business for Novatek, accounting for 74% of revenue during the year. Export sales volumes continued to grow and were a major contributor to revenue growth, notwithstanding that for a large part of the year only fish feeds could be exported due to a continuing feed export ban. Cropping In the cropping division, operating profit grew by a marginal 4.7% in Kwacha terms and declined 20% in US Dollar terms due to escalating input costs and insufficient electricity supply. Zambia experienced a good rainfall season and the pricing of summer commodities was favourable. The year saw total production decrease by 7% to 133,547 tonnes, mainly because of a reduction in wheat yields and the impact of the Sinazongwe farm sale. Management continued to manage the risk of disease, with the potential for an outbreak of Bacterial Leaf Streak (BLS) well contained during the winter. Outlook Zambeef management remains committed to achieving bottom line growth in line with our strategic objective of de-risking the business. However, we expect the volatility in the economy to continue impacting the spending power of our customers. any in Zambia and escalations The COVID-19 pandemic has impacted the way we do business. Although it appears to have been the contained region, could cause enforced lockdowns, which could negatively impact business. The Group remains committed to implementing and enforcing safety protocols in our outlets and places of work. its increase depressed uncertainty and Retail and Cold Chain Food Products (CCFP) surrounding The associated COVID-19 in our protocols affected footfall in stores. Despite an customer revenue, spending was evident through volume reductions across most of our product lines. The increase in revenue was mainly driven by price increases and greater sales volume of traded goods. Shoprite in-store butcheries were a source of revenue growth as Shoprite expanded its footprint with three new outlets. High feed prices in the poultry and pork divisions negatively impacted input costs and resulted in margin erosion in some of our product lines. Despite this, the Group continued to grow revenues in the Retail and Cold Chain Food Products (CCFP) division from the prior full-year period. The beef and dairy divisions performed well, aside from some challenges in the supply of product. However, retail and CCFP operating profits increased only marginally, having recorded volume declines in some product lines and cost pressures arising from the depreciation of the Kwacha and increased energy costs. 12 Zambeef Products PLC Annual Report 2020 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Key Market Indicators Reporting Period Monthly Averaged Comparatives 2020 2019 Change Economy ROE ZMW/USD TBS 364day Annual Inflation rate Copper Commodities Maize Soya Beans SE Cake Wheat Input Prices Maize Bran Broiler Grower Pig Grower Layer feed Day-old chick Selling Prices Beef Mixed cut Chicken Frozen Chicken Live Market Egg Tray ZMW % % 16.2 24.5 15.7 12.3 24.7 8.4 $/Ton 6,610 6,102 252 382 403 415 207 400 442 447 32% -1% 87% 8% 22% -5% -9% -7% $/ton $/ton $/ton $/Ton K/Ton K/50kg K/50Kg K/50kg K/DOC K/Kg K/Kg K/Chicken K/tray of 30 Eggs 1,190 1,434 -17% 310 251 231 6.8 37.7 28.2 52.0 35.6 242 200 175 5.9 36.1 28.9 38.2 28.0 28% 26% 32% 15% 4% -2% 36% 27% 13 Zambeef Products PLC Annual Report 2020 14 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Divisional Performance Table 1 (ZMW) and Table 2 (USD) below provide a summary of the consolidated performance of the key business divisions to EBIT level. Table 1: Divisional financial summary in ZMW’000 DIVISION REVENUE GROSS PROFIT OVERHEADS EBIT 2020 2019 2020 2019 2020 2019 2020 2019 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 Retailing 2,396,313 2,038,675 243,377 213,502 CCFP 1,516,371 1,388,492 401,276 367,657 Less InterCo. (1,399,926) (1,303,519) Combined Retail & CCFP 2,512,758 2,123,648 644,653 581,159 (535,095) (473,415) 109,558 107,744 Stock Feed 1,331,965 986,075 255,888 191,011 (129,539) (103,751) 126,349 73,092 Cropping 651,560 474,202 266,405 270,116 (160,618) (126,413) 105,787 101,082 Others Total Less: Intra/Inter Group Sales Central Over- head 203,609 210,348 48,676 39,261 (25,226) (21,930) 25,226 15,361 4,699,892 3,794,273 1,215,622 1,081,547 (850,478) (725,509) 366,920 297,279 (824,788) (659,306) (156,389) (136,070) (156,389) (136,070) Group Total 3,875,104 3,134,967 1,215,622 1,081,547 (1,005,091) (861,579) 210,531 161,209 15 Zambeef Products PLC Annual Report 2020Divisional Perfomance (continued) Table 2: Divisional financial summary in USD’000 DIVISION REVENUE GROSS PROFIT OVERHEADS EBIT 2020 2019 2020 2019 2020 2019 2020 2019 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Retailing 148,194 165,477 15,051 17,330 CCFP 93,777 112,703 24,817 29,843 Less InterCo. (86,576) (105,806) - Combined Retail & CCFP 155,395 172,374 39,868 47,173 (33,092) (38,427) 6,775 8,745 Stock Feed 82,373 80,039 15,824 15,503 (8,011) (9,571) 7,814 5,933 Cropping 40,294 38,490 16,476 21,925 (9,933) (13,720) 6,542 8,205 Others Total Less: Intra/ Inter Group Sales Central Overhead 12,592 17,074 3,010 3,187 (1,450) (1,940) 1,561 1,247 290,654 307,977 75,178 87,788 (52,486) (63,658) 22,692 24,130 (51,006) (53,515) - - - (9,672) (11,045) (9,672) (11,045) Group Total 239,648 254,462 75,178 87,788 (62,158) (74,703) 13,020 13,085 16 Zambeef Products PLC Annual Report 2020 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Divisional Perfomance (continued) Taking each of our key business areas performance in turn: Retail and Cold Chain Food Products Table 3 (ZMW) and Table 4 (USD) below provide each key business area performance of the combined Retail and Cold Chain Food Products divisions. Table 3: Retail and Cold Chain Food Products ZMW’000 DIVISION REVENUE GROSS PROFIT OVERHEADS EBIT 2020 2019 2020 2019 2020 2019 2020 2019 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 Retailing Zambia 2,177,555 1,853,721 Retailing West Africa 218,758 184,954 Total Retailing 2,396,313 2,038,675 CCFP 1,516,371 1,388,492 Less Interco (1,399,926) (1,303,519) Combined Retail & CCFP 2,512,758 2,123,648 644,653 581,159 (535,095) (473,415) 109,558 107,744 Table 4: Retail and Cold Chain Food Products USD’000 REVENUE GROSS PROFIT OVERHEADS EBIT DIVISION 2020 2019 2020 2019 2020 2019 2020 2019 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Retailing Zambia 134,666 150,464 Retailing West Africa 13,528 15,013 Total Retailing 148,194 165,477 CCFP 93,777 112,703 Less InterCo. (86,576) (105,806) Combined Retail & CCFP 155,395 172,374 39,868 47,172 (33,092) (38,427) 6,776 8,746 17 Zambeef Products PLC Annual Report 2020efficiencies In line with our strategic focus to fully optimise our existing infrastructure and drive through our retail network, we rolled out two new retail outlets in strategic locations across Zambia during the year, compared with seven in 2019. Shoprite, in which we operate instore butcheries, expanded by another three retail outlets in Zambia. Net sales in the combined Retail and Cold Chain Food Products (CCFP) divisions increased by 18% to ZMW2,513 million (2019: ZMW2,124 million) in Kwacha terms and decreased by 10% to USD155 million (2019: USD172 million) in US dollar terms. The gross profit margin decreased marginally for a second year in a row, to 25.7% (2019: 27.4%) despite an 11% growth in gross profit in absolute Kwacha terms, due to escalating costs of inputs amid high inflation and the depreciation of the Kwacha. Overheads increased by 14% to ZMW535 million (2019: ZMW473 million) in Kwacha terms, but fell by 14% in US dollar terms to USD33 million (2019: USD38 million). The combined Retail and CCFP divisions generated an EBIT margin of 4.4% (2019: 5.1%). The adverse macro-economic conditions and increased generator fuel costs led to the increase in input costs. Operating profit increased by 1.7% to ZMW110 million (2019: ZMW108 million) in Kwacha terms and decreased by 22.5% to USD6.8 million (2019: USD8.7 million) in US dollar terms. revenue Zambia Retail Zambia increased retail 17.5% to ZMW2,178 million (2019: ZMW1,854 million) while gross profit increased by 9.7%. However, due to the depreciation in the Kwacha relative to the US dollar, revenue decreased by 10.5% to USD135 million (2019: USD150 million) in US dollar terms. Strong revenue growth was driven by stockfeed, chicken, cooking oil and other traded goods. Difficult trading conditions and disruptions in supply channels resulted in volume declines across most product lines. However, 18 pricing adjustments helped the Retail division offset that volume related revenue decline. which positively contributed to sales volumes for Zamhatch and Novatek stockfeeds. West Africa Retail Optimising operations was the main focus in our West Africa business this past year. Revenue increased 18.3% in Kwacha terms and declined 10% in Dollar terms from ZMW185 million (USD15.0 million) in 2019 to ZMW219 million (USD13.5 million) in 2020. During the period, the overhead costs in Kwacha rose by 23%. West African retail contributes 9% to Group retail revenue, and remains profitable. The driver of profitability was mutton and pork sales, which increased, while chicken and beef sales decreased due to supply constraints. is the Beef largest contributor Beef to revenue in the CCFP division. Beef sales volumes decreased by 1.8% compared with the previous the reduced financial year, with number of cattle slaughtered owing to supply constraints following a drought in the previous year that also impacted average slaughter weights. Notwithstanding, the division posted 10% growth in revenue and 28% growth in gross profit due to a favourable sales mix and pricing. Poultry (Zamchick, Zamhatch and ZamEgg) Combined revenue from the three poultry divisions increased by 17% in 2020. Despite revenue growth, gross profit declined by 27% from ZMW126 million in 2019 to ZMW92 million in 2020, mainly due to higher feed prices. The divisions recorded a combined operating profit of ZMW2.6 million for 2020, a 95% (ZMW49 decline million) and the sharpest decline in operating performance amongst our divisions during the financial year. last year from The informal and small-scale chicken farming sector increased supply where the formal sector could not supply effectively due to operational headwinds. Increased costs and electricity supply challenges had a lower impact on the informal sector, 4% and revenue Zamchick volumes and 21% increased by respectively compared with the prior year. High stockfeed price negatively impacted margins, resulting in a 26% reduction in gross profit for the division. Operational challenges were experienced during the 2019/2020 summer rain season as the industry faced widespread dysbacteriosis, which negatively impacted broiler growth performance. egg division, which The is characterised by price elasticity, experienced a 12% reduction in volumes sold following average price increases of 22%. Despite a 6.6% increase in revenue, gross profit fell by 100% when compared to prior year. in Pork (Masterpork) Supply chain disruptions the Masterpork division stemming from high pig rearing costs led to a 12% in volumes sold. The reduction division performed better than the prior year, with revenue and gross profit growing by 13% and 38% respectively, mainly due to pricing adjustments. Management focussed on optimising the carcass quality of pigs slaughtered through advances in the grading and pricing system. Milk (ZamMilk) Milk revenue increased by 6%, and gross profit increased by 36% to ZMW92 million (2019: ZMW67 million). Sales volumes fell by 7% due to a COVID-19-related reduction in demand. Milk production at Kalundu Dairy increased by 11% from an average of 26.6 litres/cow in 2019 to 29.6 litres/cow in 2020, with a total of 1,379 cows being milked daily at the year end. The feed cost of the milking herd increased by 10% due to the price of maize ingredients (maize meal and maize silage) included in dairy feeds. Zambeef Products PLC Annual Report 2020 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Stockfeed (Novatek) REVENUE GROSS PROFIT OVERHEADS EBIT 2020 2019 2020 2019 2020 2019 2020 2019 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 1,331,965 986,075 255,888 191,011 (129,539) (117,919) 126,349 73,092 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 82,373 80,039 15,824 15,503 (8,011) (9,571) 7,814 5,933 Stockfeed performance was strong. Revenue in Kwacha terms grew by 35% (3% in US dollar terms), which translated into a growth of 73% in operating profit. The gross profit margin was maintained at 19% from the previous reporting period, as cost of sales grew at the same pace as revenue. Increased production costs due to running backup diesel generators for prolonged periods, and the increase in transport demands from the logistics fleet, led to a 10% increase in overheads. The large and growing poultry sector in Zambia consumes 74% of the feed sales generated by Zambeef. The division also recorded an impressive 45% increase in export sales despite export restrictions. The division exported to 11 other African countries, generating much-needed foreign currency revenue. 19 Zambeef Products PLC Annual Report 2020Cropping REVENUE GROSS PROFIT OVERHEADS EBIT 2020 2019 2020 2019 2020 2019 2020 2019 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 651,560 474,202 266,405 270,116 (160,618) (169,034) 105,787 101,082 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 40,294 38,490 16,476 21,925 (9,933) (13,720) 6,542 8,205 The cropping division is the foundation of Zambeef’s vertically integrated business model, providing raw material inputs for value-added processing within the Group and serving as a hedge against the depreciation of the Kwacha, due to its ability to generate US Dollar cash flow. Revenue for the year was up 37% to ZMW652 million (2019: ZMW474 million) while overheads decreased by 5% to ZMW161 million (2019: ZMW169 million). An increase in cost of sales of 89% resulted in gross profit margin erosion from 57% in 2019 to 41% in 2020. Consequently, and despite a reduction in overheads by 28% in US Dollar terms, operating profit fell by 20% in US Dollar terms. The summer harvest for soya beans totalled 37,616 tonnes versus 44,982 tonnes in 2019. Improved yields, pushed maize production to 24,065 tonnes, from 19,233 tonnes. The sale of Sinazongwe farm resulted in a reduction in the area of winter wheat planted from 7,047 hectares in 2019 to 5,485 hectares in 2020, with the harvest dropping by 22.4% to 39,077 tonnes (2019: 50,398 tonnes). The slight reduction in wheat yields by 0.4% followed erratic electricity supply. 20 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Other Businesses REVENUE GROSS PROFIT OVERHEADS EBIT 2020 2019 2020 2019 2020 2019 2020 2019 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 203,609 210,348 48,676 39,261 (23,450) (23,900) 25,226 15,361 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 12,592 17,074 3,010 3,187 (1,450) (1,940) 1,561 1,247 Total revenue from the Group’s other business units decreased by 3% from ZMW210 million in 2019, to ZMW203 million this financial year. Despite the revenue reduction, gross profit increased by 24% and EBIT increased by 64% in Kwacha terms. Flour Milling Flour sales volumes for the year declined 25% due to reduced demand following price increments. The drastic drop in maize price at half-year meant that consumers had the option to buy cheaper maize products as a substitute. Despite a 5% drop in revenue, the milling division achieved a 16% growth in operating profit partly due to overhead reductions. Zamleather Zamshu shoe sales grew by 7% compared with the previous year. Revenues were up 12% on prior year due to pricing and increased wet-blue leather exports, despite a slowdown of export channels due to the onset of the COVID-19 pandemic. The pandemic also impacted local shoe sales following the suspension of school activities across the country. Zamleather margins increased by 160 basis points as the division sold more higher-grade leather and value-added shoes. 21 Zambeef Products PLC Annual Report 2020Sustainability Report is to to its operations committed ‘triple bottom a Zambeef line’ sustainable approach in order to help deliver a positive economic, social, and environmental impact. We believe that economic sustainability is not our traditional corporate capital, but is measured in how our business impacts its economic environment. We believe that when our business strengthens the local economy, it will continue to succeed, since it contributes to the overall economic health of its support networks and community. The societal and environmental consequences of our actions play a significant role in how our business is managed. delivering We believe that we can economically a succeed whilst sound social and environmental performance. Zambeef is committed to provide a healthy and safe employees for workplace and contractors, protecting the environment and being a responsible corporate citizen in the communities its 22 where we have a presence. This commitment is enshrined in both our Environmental & Social Policy and Health, Safety & Welfare Policy. has committed to Zambeef uphold the principles set out in the International Finance Corporation (IFC) Standards (PS) on environmental and social sustainability. Performance The Board of Directors provides oversight through its Environmental and Social Committee. Through this Committee, the Board provides strategic advice and guidance regarding systemic and strategic issues. environmental and social The Committee ensures that the Company and robust systems in place for the management and monitoring of the environmental, health, safety and social performance, under applicable legislation and Good International Industry Practice. Zambeef has an environmental and social action plan (ESAP) that has been agreed on with its development finance adequate has partners to help ensure continuous improvement at an operational level. The Committee also monitors the adequacy of the resources allocated to implementing the ESAP. a in has compliance Zambeef dedicated environmental and social corporate team comprising ten employees, and to dedicated the operational improvements Divisions. Across various business entities, there are twenty- six additional employees who are dedicated to environmental and social activities at the operational level. the Environmental performance Zambeef strives toward international best practice through continuous improvement in environmental and social management practices. company submitted the year under review, During the four Environmental Project Briefs (EPB) the Zambia Environmental to Management Agency (ZEMA) as governed by Statutory Instrument Zambeef Products PLC Annual Report 2020No. 28 of 1997 ‘Environmental Impact Assessments Regulations’ the Environmental together with Management Act (EMA) No. 12 of 2011. This practice also fulfils the requirements of IFC Performance ‘Assessment and Standard 1: Management of Environmental and Social Risks and Impacts’. The projects approved by the ZEMA Board; listed below were 1. Replacement of an old wood fired incinerator at Mongu Abattoir with a 200 kg/hour whose incinerator, diesel emissions comply with EU standards. 2. Construction of two new agrochemical storage facilities at Nampamba and Chambatata Farms in the Mpongwe District of the Copperbelt Province. 3. 4. Installation of a 50,000 litre above ground diesel tank at the Zamhatch operation in Mpongwe. Installation of three 22,500 litre above ground diesel tanks at Huntley Farm in the Chibombo District of Central Province. Zambeef carried out several other upgrades in its operations, aimed at improving compliance in various areas. 1. Animal Welfare i. Construction of group housing for weaned calves at Kalundu Dairy Farm ii. Construction of for broiler chickens at Huntley Farm lairage iii. Replacement of a significant portion of the roof at the Huntley Farm cattle feedlot 2. Occupational Health and Safety i. Upgrade of the agrochemical store at Huntley Farm in order improve ventilation and to segregation 3. Employee Welfare i. New employee housing units at Kalundu Dairy Farm 4. Resource Efficiency OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS i. Bulk water flow meters were installed in order to enhance measurement and monitoring of trends in both our agricultural and industrial water consumption ii. Water yield sustainability studies at Mpongwe, Huntley and Kalundu Farms were also commissioned. Social performance Zambeef continues to align its social investments to the United Nations Sustainable Development Goals (UN SDGs). Inclusive business model: Zambeef believes in inclusivity and continues to source the bulk of its raw materials from rural communities in Zambia. 100% of the beef processed by the business is sourced from local farmers, 80% of the pork processed by Masterpork is externally sourced from farmers. Out-growers supply 70% of the broiler chickens processed by Zamchick and 85% the maize used at Novatek of Animal Feeds is externally sourced from small and medium scale rural farmers. local This strong linkage to rural based suppliers helps fight poverty in these ‘economically excluded’ communities, meeting the aspirations of UN SDG 1, of ‘ending poverty in all its forms everywhere’. otherwise Community engagement: Zambeef continues engaging with neighbouring in the areas where communities we operate. Consultations are held regularly and more specifically when developmental projects are sites. undertaken at company Zambeef fully complies with IFC PS 5 in all its land related engagements. Support to vulnerable communities/ groups through foodstuff donations: The company renders support to the vulnerable (hospices, hospitals, orphanages, care homes) through is donations of done on a weekly basis for those institutions adequate without storage facilities. There are currently institutions hosting vulnerable 21 people that the company supports through the food supply program. foodstuffs. This This gesture by the company aligns strongly with UN SDG 2, whose main aspiration is to ‘end hunger, achieve food security and improved nutrition..’ to educational and Support healthcare institutions: Zambeef continues to fund educational and healthcare institutions. This includes institutions like the Mpongwe School and Mpongwe Medical Clinic, wholly owned by the company. The teachers, teaching aids, healthcare workers, equipment and facilities are fully funded by the company. The Mpongwe School and Medical Clinic to US$170,000.00 in the year under review. amounted expenses also company supports The community and government schools and healthcare institutions in the communities where it operates. These company activities align with UN SDG 3 and 4, whose aspirations are to ‘ensure healthy lives and promote well-being for all at all ages’ and ‘ensure inclusive and equitable quality education and promote lifelong learning opportunities for all’. Zambeef also supports several traditional ceremonies and sporting activities. Economic performance Zambeef is a significant contributor to the country’s economic activities, with a gross turnover of 1.9% (USD 0.38 billion) of the country’s (GDP) Gross Domestic Product which is forecasted at 19.70 billion by the end of 2020. Employment § Zambeef continues to be one of the largest employers in the country, with 7,082 staff, 14 % of who are females. § 99% of employees are Zambian citizens. § The Group’s cropping division provides significant employment to rural communities, where poverty levels are higher than in urban areas. § Most of Zambeef’s raw material are provide employment to communities in rural areas. located and 23 Zambeef Products PLC Annual Report 2020Sustainability Report (continued) Taxes Skills development § The Group is a significant contributor to government § The Group is fully committed to developing and training its employees at all levels. § During the year, specific trainings in food safety, occupational health and safety, safe handling of hazardous materials (asbestos, chemicals) were offered to employees. § The Group’s continual in human resources has resulted in many senior positions being held by Zambians. reinvestment Food security § Zambeef plays a pivotal role in the national food security of Zambia, ensuring that the country has sufficient capacity to feed its growing population and a surplus for export to help feed neighbouring countries. The company produced over 133,547 metric tonnes of grains (39,077 MT of wheat, 37,616 MT of Soya beans and 24,065 MT of maize) in the year under review. revenues. Local capital markets § A significant percentage of the Group’s shareholding is owned by local institutional investors and pension funds, including the National Pension Scheme Authority (NAPSA), which means every working Zambian has a stake in the company. 25% of the Group’s total shares were held by Pension funds at the close of the 2020 FY. Export earnings § The Group is a member of the Zambia Development Agency’s elite Million Dollar Club of leading exporters. § For the FYE 30 September 2020, the Group recorded foreign exchange export income of over USD2.3 million, while total Group USD-denominated revenues were USD29.4 million. 24 Zambeef Products PLC Annual Report 2020SDG 1: No Poverty We work closely with small and medium scale farmers supplying beef, chicken, pork and milk to our cold chain food products businesses. We also receive soya beans and maize at our Novatek stock feed operations. SDG 2: Zero Hunger We render support to the vulnerable (hospices, hospitals orphanages and care homes) through the donation of foodstuffs Social Performance SDG 4: Quality Education SDG 3: Good Health & Wellbeing The company funds and supports public healthcare institutions and medical clinics owned wholly by the company The company supports community and government schools located within the vicinities of the various farms it owns. In some cases the company has constructed class rooms and rehabilitated public school infrastructure. 25 Zambeef Products PLC Annual Report 202026 Zambeef Products PLC Annual Report 2020Corporate Governance 27 Zambeef Products PLC Annual Report 2020Corporate Governance acknowledges his leadership role and responsibility in promoting good corporate governance for Zambeef. The Board is confident that it is applying the QCA Code across the main areas of delivering growth, maintaining a dynamic management trust. framework, and building The Company will provide annual updates on its compliance with the QCA Code in its Annual Report. BOARD OF DIRECTORS The Board is responsible for the performance and direction of Zambeef, through the establishment of strategic objectives and key policies, as well as approving major business decisions, in accordance with its charter. Board comprises The 11 Directors, of whom nine are Non- Executive Directors, and two are Executive Directors. Six Non- Executive Directors are considered independent by the Board in terms of the guidelines prescribed in the QCA Code. They are Michael Mundashi, Dr Lawrence Sikutwa, John Rabb, Margaret Kunda Chalwe Mudenda, Prof. Enala Lyson Tembo-Mwase and Jonathan Andrew Kirby. Details of the current Directors, their roles and background are available on the Company’s website at www. zambeefplc.com. The Board believes that its overall composition is appropriate, with no individual or group dominating the decision-making process, and with a good balance of knowledge, experience and independence. The role of the Chairman is separate from that of the Chief Executive Officer (CEO) and considered to be independent. transparency Zambeef Products Plc (“Zambeef” or the “Company”) values excellence in corporate governance, and the principles that enhance openness, integrity, and accountability. High ethical standards in the conduct of business, and a verifiable framework of corporate governance policies and procedures, underpin all of Zambeef’s decision- making and management. The Board of Directors believes that good corporate governance must be demonstrated and verifiable. This fosters trust and confidence in the management of our business among all our stakeholders. Corporate Governance Codes The Board has a Corporate Governance Code that complies with the Lusaka Securities Exchange Corporate Governance (LuSE) Code. Further to this, the Company has formally adopted the Quoted Companies Alliance (QCA) Corporate Governance Code (“QCA Code”) on a ‘comply or explain’ basis as required by the AIM Rules for Companies. The Chairman of the Board The role of the Chairman is to 28 provide leadership to the Board and ensure its effectiveness in all aspects of its remit, and provide leadership in corporate governance implementation and practice. The role of the CEO is to lead the strategic development of the Group, its clear communication ensure to the Board and, once approved by the Board, its implementation. In addition, the CEO oversees the management of the Group and its executive management. Interaction with stakeholders in line with QCA Code guidelines views institutional Zambeef has several shareholder through meetings, formally Annual General Meetings (AGM), Extraordinary General Meetings (EGM), where required, and informally through meetings half-yearly shareholders. with Shareholders’ are communicated in an open and frank manner, with senior management taking due note of their concerns when expressed. The Board believes that these engagements have proven successful, as shareholder views have fed into the current corporate strategy. The CEO and Chief Financial Officer (CFO) meet and conduct formal results presentations with shareholders on a half-yearly basis. all shareholder The Group publishes the outcome of resolutions immediately after each AGM or EGM. As required under the AIM Rules, Zambeef maintains all market announcements and Annual Reports on its website for the last 10 years. The Zambeef business model has the identified and underscores importance of maintaining strong working relationships with: Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS key small-scale suppliers across grains and livestock; from the UK Corporate Governance Code. • • • • • • larger commercial raw material/ input suppliers and livestock suppliers; its wide customer base across food stockfeed, cold chain products, and other products; regulators such as the Zambia Environmental Management Agency (ZEMA), Patents and Companies Registration Agency (PACRA), Water Resources Management Agency (WARMA), Lusaka Securities Exchange (LuSE), Securities and Exchange Commission (SEC), and AIM Nominated Advisor; financiers; and social responsibility partners in communities. written Their feedback is received through face-to-face meetings, the customer careline, technical advisor meetings and communication. Product improvement programmes are adopted based on customer feedback. Corporate governance advice is continually received and implemented from LuSE and AIM. CORPORATE GOVERNANCE ACTION IN Listing on exchanges in Lusaka and London requires the Company to comply with LuSE and UK specific corporate governance codes. The UK Corporate Governance Code to companies does not apply floated on the Alternative Investment Market (AIM) of the London Stock Exchange, the market on which Zambeef is listed. For the purposes of being listed on AIM, the Company has agreed to maintain standards of corporate governance. In this regard, and bearing in mind the size and scale of the operations of the Company, the Company has adopted the QCA Code and the earlier QCA guidelines as the basis of its corporate governance standards. Further and where appropriate, the Company has introduced features together practices Company’s corporate The are governance put the Corporate in Governance Handbook that was approved by the Board in September 2019. In doing this, the Company has had regard to the provisions the Articles of Association in and Investment Agreement. The Handbook will be updated from time-to-time as necessary. The Handbook contains the following aspects: - Share Dealing Code - Disclosure Policy - - - - AIM Rules Compliance Policy LuSE Listing Rules Compliance Policy Anti-Corruption and Bribery Policy Social Media Policy - Related Party Transactions Policy - Delegation of Authority - Board Charter - - - - Terms of Reference for the Remuneration and Succession Committee Terms of Reference for the Audit and Risk Committee for the Terms of Reference AIM and MARS Compliance Committee Terms of Reference and Environmental Committee for the Social - Memorandum on Inside Information and; - Group Code of Ethics Some of policies are outlined below: the above mentioned Share Dealing Code The Company has adopted a share-dealing code for dealings in shares by Directors and senior employees appropriate for an AIM- listed company. The Directors ensure that they comply with Rule 21 of the AIM rules for Companies relating to Directors’ dealings and take all reasonable steps to ensure the Company’s compliance by including employees, relevant obtaining the advice and opinion of its AIM Nominated Advisor. In compliance with the Market Abuse Regulation (MAR), the Non-Executive Director Margaret Mudenda is responsible for share dealings by the Directors, assisted by the Company Secretary as the Compliance Officer. Risk Management regular An effective Group Risk Assessment/ tool, based Risk Management recommended best practice on and from senior inputs management, is formally reviewed quarterly. Formal risk assessments are carried out at group level, and are carried out per company and division, with respective Heads of Business Units/ General Managers, every quarter. This provides the Audit and Risk Committee and directors with regular updates and mitigating action plans on all the major risks facing the Group. The Group risk assessment is used by the Board to execute and deliver strategy. For example, the Group risk assessment has highlighted foreign exchange and interest rate risks as high-impact risk areas, and this has been noted in the Company’s debt reduction and efficient cash management strategy, which forms part of the current business plan and corporate strategy. Assurance is gained from Internal Audit. Internal Audit to The dedicated and independent Internal Audit function, operating Internal Audit Charter, under an reports directly the Audit Committee of the Board, to maintain its independence and objectivity. It independently reviews and monitors governance processes, risk management framework/processes, and related mitigating action plans It implemented by management. also provides objective assurance of the operation and validity of internal control systems through its regular the 29 Zambeef Products PLC Annual Report 2020Corporate Governance (continued) compliance audit programmes, making recommendations for improvements as required. The Board requires competitive bidding for significant purchases and contracts, above determined thresholds, through a formal Board-approved Delegations of Authority policy that covers the Board and senior management. Incident Reporting, AntiBribery and Corruption, and Whistleblowing policies and procedures The Company has detailed policies and procedures covering Incident Reporting, AntiBribery and Corruption (ABC), and Whistleblowing. The Group’s ABC programme has been formulated in conjunction with CDC Group PLC (CDC), following best international practice. It is well structured, documented and rigorously monitored. There is a dedicated internal Whistleblowing Manager, managing reports and complaints. These complaints can BOARD ENGAGEMENT Attendance by the Directors during the year: be made in various forms, and anonymously, without fear of adverse consequences. This policy has active senior management encouragement and is widely communicated within the Group, with a verifiable and transparent process of handling complaints. This has resulted in valuable information being obtained for further action. Internal Audit closely monitors, reviews and reports on all of these policies to the Audit and Risk Committee of the Board. Group Code of Ethics and Conduct The Company has implemented, and widely disseminated to all stakeholders (including suppliers), a Group Code of Ethics and Conduct, in line with the LuSE Corporate Governance Code section on Organisational Integrity. This Code of Ethics covers the important principles and more detailed ethical guidelines regarding responsibility, accountability, transparency, and fairness. The Board firmly believes that a culture based on ethical Board Audit E&S Remuneration B 5 1 5 5 4 4 5 4 4 5 5 5 1 4 A - 4 - 4 - 4 - 4 4 4 4 B - 4 - 4 - 4 - 4 3 4 3 A - - 4 4 - - 4 - - 4 - 4 B - - 4 4 - - 3 - - 4 - 3 A - - 3 - 3 3 - 3 3 3 - 3 B - 3 - 2 3 - 3 3 3 - 2 NON EXECUTIVE Michael Mundashi *Dr. Jacob Mwanza. Dr. Lawrence Sikutwa John Rabb David Osborne Yollard Kachinda Margeret Mudenda Enala Mwase Frank Braeken Jonathan Kirby EXECUTIVE Walter Roodt Faith Mukutu *Francis Grogan ***Danny Museteka A 5 1 5 5 5 5 5 5 5 5 5 5 1 5 * Director left during the year ** Director joined during the year *** Company Secretary A indicates the number of meetings held during the period in which the Director was a member of the Board and/or Committee. B indicates the number of meetings attended during the period in which the Director was a member of the Board and / or Committee. 30 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Corporate Governance (continued) values and behaviour is integral to achieving Zambeef’s objectives. Without sound ethical behaviour, it would be difficult for stakeholders to keep trust in the organisation to achieve these objectives. The expected behaviours are clearly detailed in the Group Code of Ethics. The Board monitors, via its Audit and Risk Committee, that management has widely disseminated the Group Code of Ethics among all stakeholders. The Audit and Risk Committee of the Board has the remit to review any cases of ethical misconduct against Directors or senior management. Such cases may be reported through the Group’s Whistleblowing Policy, incident reporting, or direct reports to the Audit Committee or Board. Monitoring of compliance to the Code is further provided by the internal audit department’s review work on incident reports from disciplinary proceedings, management and staff conflict of interest reports, control procedures and anti-corruption and bribery matters. In the Board’s opinion there have been no significant ethical issues noted and it believes that the corporate culture is healthy. Board Evaluation The Board carries out an annual self assessment of its performance during the year, based on its Board Charter’s objectives, with the Company Secretary collating and reporting on the findings from each Board member. Areas covered in the self assessment include: • Management of Board meetings and discussions; • • • External and Internal Board relationships; Skills of Board members; Reaction to events; • Chairman; • Chairman and CEO relationships; • Attendance and contribution in meetings; • Open channels of communication; • Risk and Control frameworks; • Composition; • Terms of reference; • Committees of the Board; • Company Secretary; • • • • • Timeliness of information; Board agenda; AGM; External stakeholders; Induction and training; and • Succession planning. Board Committees The Board has three principal standing committees led by Non-Executive Chairpersons, each with written terms of reference. The terms of reference are in line with recommended best practice for AIM listed companies under the QCA Code, and also per requirements from co- operating partners. • Remuneration and Succession Committee Chairman – John Rabb Members - Yollard Kachinda, Jonathan Kirby, Margaret Mudenda and Frank Braeken Responsibilities: • • Regularly review the structure, size, knowledge, experience and diversity of the Board, as well as the sub-committees of the Board, and make recommendations to the Board with regard to changes. for and identifying, Responsible nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise. evaluating • Give full consideration to succession planning for Directors and other senior executive management, and in particular, for the key roles of Chairman and CEO of the Company. The appointment of CEO and directors can only be made following a formal, rigorous assessment by this committee and its formal recommendations being made to the Board, having also evaluated the balance of skills, knowledge, experience and diversity on the Board. • Determine and agree with the Board the framework or broad policy for the remuneration of the CEO, the Chairman of the Board , the Executive Directors, the Company Secretary, and such other members of the executive management of the Group to whom the Board has extended the remit of the committee. • Determining the remuneration policy by taking into account all factors which it deems necessary, including relevant legal and regulatory requirements, the provisions and recommendations of the QCA Code and associated guidance. The objective of such policy shall be to ensure that members of the Group executive management are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group. • The committee ensures reporting of the Remuneration Committee’s agreed fees and remuneration, for both the executive directors and non-executive 31 Zambeef Products PLC Annual Report 2020Corporate Governance (continued) directors, in the formal Report of the Directors in the Annual Report. This requires formal approval by the shareholders in an AGM. The Chairman ensures he is available to answer questions/comments put forward by the shareholders in the AGM regarding directors fees and remuneration. • Perform evaluations of the Board, Board Committees (and their constituents), and recommend training where necessary. • Audit and Risk Committee Chairman - Dr Lawrence Sikutwa Members – Margaret Mudenda, David Osborne and Jonathan Andrew Kirby Independent advisor and co-opted member - Hastings Mtine (QCA Code principle 6: He has extensive experience as a Chartered Accountant in the fields of financial reporting, external audit, internal audit, corporate governance and risk management gained in public practice and on various corporate boards. He is a former Senior Partner for KPMG Zambia. He provides a detailed review and advisory service to the Audit Committee across each of these areas.) Responsibilities: • • • The primary role of the Audit Committee is to ensure the integrity of the financial reporting and audit process, including review of the interim and annual financial statements before they are submitted to the board for final approval. To ensure that a sound risk management and internal control system is maintained and reviewing the system for monitoring compliance with applicable laws and regulations. To give due consideration and review of corporate governance matters in accordance with relevant LuSE Corporate including frameworks Governance Code and the QCA Code. the • Monitor and review the reports and function of the internal audit department, in line with its own charter, which requires systematic evaluation of the effectiveness of risk management, control, compliance and governance processes for the Group. • Monitor and review the reports of the external auditors and their performance. At least once a year, the members of the committee should meet the external auditors without the presence of any Executive Director. shareholders for approval at the Annual General the appointment and/or Meeting, as reappointment of the company’s external auditor. regards • Monitor the ethical conduct of the Company, its executives and senior officials. • Environmental and Social Committee Chairperson - Professor Enala Lyson Tembo- Mwase Members – John Rabb and David Osborne Responsibilities: • • Provide strategic advice and guidance to the Board in relation to systemic and strategic environmental and social (“E&S”) issues which affect the Company’s business model and strategy. Ensure that the Company has in place adequate and robust systems, policies and procedures for monitoring the E&S management of the Company, in accordance with applicable legislation and Good International Industry Practice (“GIIP”), defined by IFC Performance Standards. • Monitor the implementation of the Environmental and Social Action Plan and any corrective action plans that may be developed in due course. • Oversee any Company investigations relating to breaches of E&S laws, regulations and standards and/or the Company’s E&S policies, management systems and plans. • • Ensure good corporate citizenship through promotion of equality, prevention of unfair discrimination and reduction of corruption. to development of Ensure contribution the communities in which its activities are predominantly conducted, or within which its products or services are predominantly marketed. Directors’ Interests in other companies In compliance with Section 110 of the Companies Act of Zambia, all Directors are required to declare to the Board their interests in other companies, and this is taken into account if any such company enters into any contract with any Group company. The Group has a Related-Parties Transactions policy which aims to ensure transparency in related-party transactions and appropriate management of any approved transactions. Related-party transactions The committee should also consider and make recommendations to the Board, to be put to The board gives authorisation for any transactions carried out by the group with any anyone or business considered • • 32 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Corporate Governance (continued) a related party. Such transactions are evaluated as to whether the parties are treated fairly and in accordance with market conditions. For recurrent transactions carried out with clients during the Groups’s ordinary course of business under normal market conditions that are not significant, the Board gives prior authorisation for the general terms of the transaction. Directors’ shareholdings In compliance with Sections 30, 110 and 195 of the Companies Act of Zambia, all Directors are required to disclose their shareholdings in the Company and any related companies. • Promotion of Good Corporate Governance and related frameworks and standards. • Good relations and liaison with the Security and Exchange Commission (SEC), the Lusaka Securities Exchange (LuSE), and Patents and Companies Registration Agency (PACRA). • Maintenance of statutory registers. • Key liaison for investors and contact point for shareholders. • Updates on relevant statutory amendments and developments are provided. Company Secretary the Company Secretary, and The Board appoints all Directors have access to his services. If deemed necessary, the Board may seek independent professional advice on some matters. The Company Secretary ensures: • Sufficient and timeous information is provided to all the Directors prior to Board and sub-committee meetings. In 2019, the Board constituted a Search Committee, the mandate of which was to search, interview and recommend to the Board a suitable candidate to replace Dr Jacob Mwanza, who retired December 31, 2019. Mr Michael Mundashi replaced Dr Mwanza as the Board Chairman effective January 1, 2020, having been elected by the Board and confirmed at the AGM of December 2019. 33 Zambeef Products PLC Annual Report 2020 Board of Directors Francis Grogan (age 59) Retired on December 31, 2019 Nationality: Irish Michael Mundashi (age 62) Chairman Nationality: Zambian Walter Roodt (age 44) CEO Nationality: Namibian Faith Mukutu (age 40) Chief Financial Officer Nationality: Zambian Qualifications: BSc Agriculture (Ireland) Experience: Over 23 years’ experience in agriculture and meat, both in Ireland and Zambia. Co-founder of Zambeef. External appointments Other directorships include Chisamba Ranching and Cropping Ltd, Fraca Meat Company Ltd and Tractorzam Ltd. Qualifications: BSc. (Agric.) Animal Science (University of Pretoria, RSA); MSc. (Agric.) Nutrition Science (University of Pretoria, RSA); Senior Executive Programme (London Business School, UK) Qualifications: A.C.C.A. (Chartered Certified Accountant) – Zambia Centre for Accountancy Studies, Zambia; Certified Accounting Technician – Zambia Centre for Accountancy Studies, Zambia Experience: Over 16 years of experience in Agriculture in Southern Africa. External appointments: Director of City Dental Ltd. Experience: Over 16 years experience in senior finance positions of major corporates, including Zambia Sugar Plc and Zambian Breweries (part of SABMiller Group) External appointments Current directorships include: Bayport Financial Services Ltd; National Breweries Plc. Qualifications: Bachelor of Laws Degree (University of Zambia); Post Graduate qualification as an Advocate of the High Court of Zambia Experience: Over 31 years post qualification experience in both the public and private sectors. Served as Chairman of the Zambian Tax Appeals Court and as Independent Non- Executive Chairman of Standard Chartered Bank Zambia Plc. External appointments Currently serving as Chairman of Sanlam Insurance; Director of Nico General Insurance. Also, full time Managing Partner of the law firm of Mulenga Mundashi Legal Practitioners. Margaret Chalwe-Mudenda (age 48) Non-Executive Director Nationality: Zambian Prof. Enala Tembo- Mwase (age 61) Non-Executive Director Nationality: Zambian Qualifications: LLB (University of Zambia); postgraduate diploma in legislative drafting (Zambia Institute of Advanced Legal Education); LLM in Information Technology and Telecommunications (Southampton University, UK). Qualifications: BSc Biological Sciences (University of Zambia) MSc Medical Parasitology (University of London, UK) PhD in Zoology – Entomology (University of London, UK) Experience: Over 31 years’ research and teaching experience. Associate Professor at University of Zambia. A founding member of the Zambia Association of Women in Science and Technology. Has previously served on a number of boards and technical committees. Experience: Over 11 years’ legal experience including finance, banking and labour law. Over seven years’ experience in ICT and telecommunications. Former Director General of Zambia Information and Communications Authority. External appointments Currently serving on the Boards of CitiBank Zambia Limited, Liquid Telecom, Madison Financial Services Plc. Dr. Jacob Mwanza (age 84) Retired on December 31, 2019 Nationality: Zambian Qualifications: PhD (Cornell University, (USA) MA Economics (W. Germany). Experience: Over 31 years’ business management experience, both in the public and private sectors. Previously Governor of the Bank of Zambia, currently Chancellor of the University of Zambia. External appointments Has served and is currently serving on several boards, including IMF Advisory Group on Sub-Sahara African Economic and Social Affairs, Pangaea Securities, David Shepard Foundation and Kafue Sanctuary. 34 Zambeef Products PLC Annual Report 2020 John Rabb (age 77) Non-Executive Director Nationality: South African Yollard Kachinda (age 57) Non-Executive Director Nationality: Zambian Dr. Lawrence Sikutwa (age 66) Non-Executive Director Nationality: Zambian Jonathan Kirby (age 58) Non-Executive Director Nationality: South African David Osborne 52 (age 55) Non-Executive Director Nationality: British Frank Braeken (age 60) Non-Executive Director Nationality: Belgian Qualifications: BSc (Agriculture) MBA (RSA). Experience: Over 31 years’ business management experience. Formerly Managing Director of the Wooltru Group in South Africa, which was listed on the Johannesburg Stock Exchange. External appointments Has served on, and is currently serving on, several boards, including Wellspring Ltd. Qualifications: BSc (Ed.) Mathematics and Statistics (University of Zambia) MSc Social Protection Financing (Maastricht University, Netherlands) Experience: Over 26 years’ experience at the Zambian National Pension Scheme Authority (NAPSA). External appointments Director General of NAPSA. Currently serving on the Board of Directors of ZCCM-IH Qualifications: MBA FCII Post Grad Diploma in Insurance (UK). Honorary doctorate (University of Lusaka) Experience: Over 31 years’ experience in business management. Previously General Manager of Zambia State Insurance Corporation Limited. External appointments Currently Chairman of Lawrence Sikutwa Associates Ltd Group of Companies. Qualifications Cambridge University; Trinity College (Natural Sciences). Experience: Over 31 years’ investment experience in private equity and infrastructure in UK, Europe, Africa and Asia. Previously Managing Partner and Head of the Islamic Infrastructure Fund at CapAsia. External appointments Director of Direct Equity Team and Head of Portfolio Management with CDC Group PLC Qualifications Bachelor of Accounting (University of the Witwatersrand, RSA) Higher Diploma in Tax Law (Rand Afrikaans University, RSA) CA (RSA) Experience: Over 31 years’ business management and banking in London, Hong Kong, Singapore and South Africa. Previously Vice President (Finance) of AB Inbev Africa and CFO of SABMiller Africa. External appointments Currently on the board of Delta Corporation, Zimbabwe and Consol Holdings (Pty) Ltd, South Africa. Qualifications: MBA in Finance (Leuven University, Belgium) Degree in Law with major in Corporate Law (Catholic University Lueven, Belgium) Adavanced Management Program (Wharton Penn University, USA) Experience: Over 31 years of experience in the Fast-Moving Consumer Goods (FMCG) industry. Previously head of Unilever Africa and Chief Investment officer of Amatheon Agri Holding External appointments Currently serving on the boards of Buhler AG, Alliance for a Green Revolution in Africa, F.M.B BWC- LLC, Marie Stopes International and AECF Limited. 35 Zambeef Products PLC Annual Report 2020 REPORT OF THE DIRECTORS In compliance with Section 275 of the Zambian Companies Act, the Directors submit their report on the activities of the Group for the year ended 30 September 2020. 1. 2. Principal activities Zambeef Products PLC and its subsidiaries (“The Group”) is one of the largest agri-businesses in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed and flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with approximately 7,787 Ha of row crops under irrigation and 8,694 Ha of rain-fed/ dry-land crops available for planting each year. The Group also has operations in West Africa in Nigeria and Ghana. The Company The Company, Zambeef Products Plc, is a public limited company incorporated and domiciled in Zambia. Business address Plot 4970, Manda Road Industrial Area Lusaka ZAMBIA Postal address Private Bag 17 Woodlands Lusaka ZAMBIA 3. Share capital Details of the Company’s authorised and issued share capital are as follows: Authorised 700,000,000 ordinary shares of ZMW0.01 each Issued and fully paid Ordinary shares 30 September 2020 30 September 2019 ZMW’000s USD’000s ZMW’000s USD’000s 7,000 938 7,000 938 300,579,630 of ZMW0.01 each 3,006 449 3,006 449 Preference shares – Convertible Redeemable 100,057,658 of ZMW0.01 each 1,000 100 1,000 100 4. Results The Group’s results are as follows: Group Revenue (Loss)/Profit before taxation Taxation charge Profit/ (Loss) from discontinued operation Notes* 2020 2020 2019 2019 ZMW’000s USD’000s ZMW’000s USD’000s 3,875,104 239,648 3,134,967 254,462 (22,673) (112,957) (1,402) (6,986) 38,653 (2,780) 3,138 (226) 5 10 33,435 2,068 (17,379) (1,411) Group (loss) profit for the year (102,195) (6,320) 18,494 1,501 Group (loss)/profit attributable to: Equity holders of the parent Non-controlling interest *See notes to the financial statements (103,419) (6,396) 18,100 1,224 76 394 (102,195) (6,320) 18,494 1,469 32 1,501 36 Zambeef Products PLC Annual Report 2020 REPORT OF THE DIRECTORS (CONTINUED) 5. 6. Dividends There has been no dividend proposed for the year ended 30 September 2020 (2019: ZMW nil). Management The senior management team comprise the following: Walter Roodt Faith Mukutu Mike Lovett Danny Museteka Yusuf Koya Pravin Abraham Ebrahim Israel Murray Moore Robert Hoskins Davies Francis Mondomona Richard Franklin Mathews Ngosa Willem Abraham Vorster Alun Maskell Christian Engelbrecht Theo de Lange Bartholomew Mbao Lenard Mwanamumbula Muyunda Milupi Ivor Chilufya Mulwanda Sichula Nathan Chishimba Phillip Diedericks Mboo Mumba Niyaas Dalal Timothy Kunda Simon Nkhata Winston Magutswi Billy Mudenda Baron Chisola Muyoma Hapeza Shadreck Banda Chizola Daka Gbenga Ibitoye Caroline Mulaga Anthony Seno Awaren Mutaka Mathews Mbasela Chishala Malekano Eddie Tembo Jones Kayawe Devar Muzhona Field Musongole - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Chief Executive Officer Chief Financial Officer Chief Operating Officer Company Secretary Group Head – Banking & Administration Chief Internal Auditor General Manager – International Retailing General Manager – Beef and Dairy General Manager – Chiawa Farm General Manager – Huntley Farm General Manager – Zamleather Limited General Manager – Zam Chick Limited, Zamhatch Limited General Manager – Dairy General Manager – Masterpork Limited General Manager – Stock Feed Group Technical Manager Dairy Processing Manager Piggery Manager Poultry Manager Group Financial Manager Group Financial Controller Commercial Manager Retailing Commercial Manager Project Manager Finance Manager – Zambeef Products Plc Finance Manager – Novatek Animal Feeds Finance Manager – Zambeef Retailing Limited Finance Manager – Masterpork Limited Finance Manager – Zamleather Limited Finance Manager – Zampalm Limited, Group Inventory Finance Manager – Zamhatch Limited, Zam Chick Limited Financial Controller – Group Fixed Assets Financial Controller – Group Suppliers Financial Controller – West Africa Group Head – Debtors and Credit Control Head of IT Group Head – Human Resource Head of Payroll Processing Marketing Manager Chief Security Manager Head of Environment, Health and Safety Logistics Mananger Maintenance Manager 37 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 REPORT OF THE DIRECTORS (CONTINUED) 6. 7. Management (continued) Ernest Gondwe Francis Mulenga Noel Chola Rodgers Chinkuli Hillary Anderson Lufeyo Nkhoma Clement Mulenga - - - - - - - Regional Manager – Shoprite & Excellent Meats Regional Manager – Shoprite Regional Manager – Shoprite Regional Manager – Zambeef Outlets National Retail Manager - Shoprite General Manager – Master Meats Ghana General Manager – Master Meats Nigeria - - Chairman Chairman (Retired on 31 December 2019) Directors and Secretary The Directors in office during the financial period and at the date of this report were as follows: Michael Mundashi Dr. Jacob Mwanza Dr. Lawrence S. Sikutwa John Rabb Yollard Kachinda Prof. Enala Mwase David Osborne Margaret Mudenda Jonathan Kirby Frank Braeken Walter Roodt Francis Grogan Faith Mukutu Danny Museteka Chief Executive Officer Chief Executive Officer (Retired on 31 December 2019) Chief Financial Officer Company Secretary - - - - 8. Directors’ interests The Directors held the following interests in the Company’s ordinary shares at the reporting date: Jacob Mwanza (Dr)* Francis Grogan* John Rabb Frank Braeken * Retired on 31 December 2019. 30 September 2020 30 September 2019 Direct Indirect Direct Indirect - - - - - 1,399,629 - 995,000 3,596,631 14,000,000 - 14,000,000 375,000 - 375,000 - 375,000 14,000,000 2,769,629 17,596,631 38 Zambeef Products PLC Annual Report 2020 REPORT OF THE DIRECTORS (CONTINUED) 9. Directors fees and remuneration ZMW Salary Bonus Allowance Car Allowance Housing Air Fares Allowance Medicals NON-EXECUTIVE Jacob Mwanza Michael Mundashi Yollard Kachinda Margaret Mudenda Lawrence Sikutwa Enala Mwase Jonathan Kirby John Rabb Frank Braeken EXECUTIVE Francis Grogan Walter Roodt Faith Mukutu Danny Museteka 236,615 800,000 307,472 368,966 307,472 307,472 368,966 368,966 307,736 1,665,955 3,461,822 3,567,733 2,858,697 - - - - - - - - - - - - - - - - - - - - - - - - - - - Company Car Company Car Company Car - - - - - - - - - - - - - - - - - Yes Yes Yes Yes In addition to the above, all Executive Directors are entitled to a gratuity of 25 per cent of their gross basic salary paid over the two-year contract term, less statutory deductions for tax. Further, the Board co-opted Mr. Hastings Mtine into the Audit Committee as an expert advisor. Mr. Mtine’s remuneration was ZMW83,013.52 for the year under review. 39 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 REPORT OF THE DIRECTORS (CONTINUED) 10. Significant Shareholdings As at 30 September 2020, the Company has been advised of the following notable interests in its ordinary share capital: Investor Name CDC Group Plc M & G Investment Management Africa Life National Pension Scheme Authority (Zambia) Sussex Trust Eastspring Investment SBM Securities Rhodora Red Fort Partnership Current Position % of Shareholding 52,601,435 46,304,408 42,709,562 24,797,818 14,000,000 11,995,062 10,948,691 8,639,374 8,175,000 17.5% 15.4% 14.2% 8.2% 4.7% 4.0% 3.6% 2.9% 2.7% CDC Group Plc are also the holders of 100,057,658 convertible redeemable preference shares. These shares have three voting rights for every four preference shares held resulting in CDC having 34.8% of the voting rights. 11. Employees The Group employed an average of 7,082 (30 September 2019 – 7,407) employees and total salaries and wages were ZMW493.5 million (USD30.5 million) for the year ended 30 September 2020 (30 September 2019 – ZMW453.7million [USD36.8 million]). The average number of persons employed by the Group in each month of the financial year is as follows: Headcount 7,123 7,314 7,697 6,953 7,388 7,209 6,946 6,805 6,956 6,830 6,929 6,834 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 40 Zambeef Products PLC Annual Report 2020 REPORT OF THE DIRECTORS (CONTINUED) 12. Safety, Health and Environmental issues As part of some of the Group’s term loans, as well as the CDC Group PLC equity investment, the Group has signed up to an Environmental and Social Action Plan (“ESAP”), which requires the Group to meet both local Zambian standards as well as international standards relating to the environment. 13. 14. 15. 16. 17. 18. 19. 20. The Group provides education and healthcare services to its employees. The Group also supports various community activities in the areas that it operates from. Legal matters There are no significant legal or arbitration proceedings (including to the knowledge of the Directors, any such proceedings which are pending or threatened, by or against the Company or any subsidiary of the Group) which may have or have had during the 12 months immediately preceding the date of this document a significant effect on the financial position or profitability of the Company or any member of the Group. Gifts and donations The Group made donations of ZMW7.9 million (USD 0.5million) (30 September 2019: ZMW2 million [USD0.165 million]) to a number of activities. Export sales The Group made exports of ZMW37.5 million (USD2.3 million) during the period (30 September 2019: ZMW46.5 million [USD3.8 million]). Property, plant and equipment Assets totalling ZMW92.7 million (USD5.7 million) were purchased by the Group during the period (30 September 2019 – ZMW113.8 million [USD9.2 million]). Other material facts, circumstances and events The Directors are not aware of any material fact, circumstance or event which occurred between the accounting date and the date of this report which might influence an assessment of the Group’s financial position or the results of its operations. The outbreak of the COVID-19 pandemic has had a negative effect on the country’s economy. However, the consumer demand for Zambeef’s products stood up well and the current trading conditions are expected to continue in the near future. The effect on the business, in terms of sales, from the pandemic has been minimal. Events since the year end There have been no significant events affecting the Group since the year-end. Annual financial statements The annual financial statements set out on pages 48 to 132 have been approved by the directors. Auditor In accordance with the provisions of section 257(1) of the Zambian Companies Act, the auditors, Messrs Grant Thornton, will retire as auditors of the Company at the forthcoming Annual General Meeting, and having expressed their willingness to continue in office a resolution for their re-appointment will be proposed at the Annual General Meeting. By order of the Board Danny Shaba Museteka Company Secretary Date: 1st December 2020 41 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 STATEMENT OF DIRECTORS’ RESPONSIBILITIES Section 265 of the Zambian Companies Act 2017 requires the Directors to prepare financial statements for each financial year which give a true and fair view of the financial position of Zambeef Products PLC and its subsidiaries and of its financial performance and its cash flows for the year then ended. In preparing such financial statements, the Directors are responsible for: • • • • designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error; selecting appropriate accounting policies and applying them consistently; making judgements and accounting estimates that are reasonable in the circumstances; and preparing the financial statements in accordance with the applicable financial reporting framework, and on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Zambian Companies Act 2017. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors confirm that in their opinion: (a) (b) (c) the financial statements give a true and fair view of the financial position of Zambeef Products PLC and its subsidiaries as at 30 September 2020, and of its financial performance and its cash flows for the year then ended; at the date of this statement there are reasonable grounds to believe that the Group will be able to pay its debts as and when these fall due; and the financial statements are drawn up in accordance with the provisions of the second schedule to Section 164 of the Companies Act and International Financial Reporting Standards. This statement is made in accordance with a resolution of the Directors. Signed at Lusaka on 1st December 2020 Mr. Michael Mundashi Chairman Walter Roodt Chief Executive Officer 42 Zambeef Products PLC Annual Report 2020Zambeef Products PLC and its subsidiaries Financial Statements 30 September 2020 43 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020Grant Thornton 5th Floor Mukuba Pension House Dedan Kimathi Road P.O. Box 30885 Lusaka, Zambia T +260 (211) 227722-8 F +260 (211) 223774 E gtlusaka.mailbox@zm.gt.com INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Zambeef Products PLC (the ‘Company’) and its subsidiaries (the ‘Group’) for the year ended 30 September 2020, which comprise the consolidated statement of comprehensive income, the consolidated and separate statement of changes in equity, the consolidated and separate statements of financial position and the consolidated and separate statements of cash flows and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the consolidated and company financial position of Zambeef Products PLC as at 30 September 2020, and of its consolidated and company financial performance and its consolidated and company cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act and the Securities Act of Zambia. 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 the Audit of the Financial Statements section of our report. We are independent of the Group and Zambeef Products PLC in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) together with ethical requirements that are relevant to our audit of the financial statements in Zambia, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Partners Edgar Hamuwele (Managing) Christopher Mulenga Wesley Beene Rodia Musonda Chilala Banda Audit l Tax l Advisory Chartered Accountants Zambian Member of Grant Thornton International VAT reg 1001696100. Registered in Lusaka. Company number 8116 Grant Thornton Zambia and other member firms are not a worldwide partnership. GTI and each member firm is separate legal entity. Services are delivered independently by the member firms. GTI and its member firms are not agents, and do not obligate, one another and are not liable for one another's acts or omissions. www.gt.com.zm 44 Zambeef Products PLC Annual Report 2020 Grant Thornton 5th Floor Mukuba Pension House Dedan Kimathi Road P.O. Box 30885 Lusaka, Zambia T +260 (211) 227722-8 F +260 (211) 223774 E gtlusaka.mailbox@zm.gt.com OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENT INDEPENDENT AUDITOR’S REPORT (continued) TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Key Audit Matters (continued) Description of matter Valuation of biological assets How the matter was addressed in our audit The valuation of biological assets is determined through use of estimates and category of the animals. Due to the judgements required in arriving at biological asset values, the valuation of biological assets was considered a key matter. We counted the livestock at the year-end and engaged an expert to review the categorization and quality of the animals. We also measured the crop fields, checked the subsequent yields and the quality of the crop. We also analysed the valuations of biological assets. Classification, measurement and impairment of financial assets The Group applies IFRS 9 ‘Financial Instruments’ in the preparation of the consolidated financial statements. We reviewed the classification of the financial assets for compliance with the reporting standard. The Directors are required to review the classifications of assets and ensure these classifications are in accordance with the requirements of IFRS 9. The Directors also reviewed the fair valuations and impairment model. Due to the complex and subjective judgements required in estimating the timing and valuation of impairment and in estimating the fair value of assets, this was considered a key audit matter. Valuation of goodwill Goodwill amounting to K167 million (USD 8.3 million) was carried in the consolidated statement of financial position. Under IAS 36, the Company is required to test the amount of goodwill for impairment at least annually. The impairment tests were significant to our audit due to the complexity of the assessment process and judgements and assumptions involved which are affected by expected future market and economic developments. In considering the reasonableness of the impairment provision, we tested the aging of the outstanding receivables to determine those that were overdue. We further assessed their recoverability through testing of subsequent receipts. We challenged the cash flow projections included in the annual goodwill impairment tests. For our audit we furthermore assessed and tested the assumptions and methodologies used by management. Information Other than the Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises the information included in the Chairman’s report, report of the Directors, Chief Executive Officer’s review, Sustainability report and Corporate Governance Statements, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Audit l Tax l Advisory If, based on the work we have performed, 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. 45 Partners Edgar Hamuwele (Managing) Christopher Mulenga Wesley Beene Rodia Musonda Chilala Banda Chartered Accountants Zambian Member of Grant Thornton International VAT reg 1001696100. Registered in Lusaka. Company number 8116 Grant Thornton Zambia and other member firms are not a worldwide partnership. GTI and each member firm is separate legal entity. Services are delivered independently by the member firms. GTI and its member firms are not agents, and do not obligate, one another and are not liable for one another's acts or omissions. www.gt.com.zm OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020INDEPENDENT AUDITOR’S REPORT (continued) TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act and the Securities Act of Zambia and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is 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 management either intends to liquidate the Group and/or the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s and Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the 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 financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the 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 management. Conclude on the appropriateness of management’s 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’s and the 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 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 the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the 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 financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.       46 Zambeef Products PLC Annual Report 2020OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENT INDEPENDENT AUDITOR’S REPORT (continued) TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Auditor’s Responsibilities for the Audit of the Financial Statements (continued) We communicate with those charged with governance 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 those charged with governance with a statement that we have complied with 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 those charged with governance, we determine those matters that were of most significance in the audit of the consolidated 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 Legal and Regulatory Requirements In our opinion, the financial statements of Zambeef Products PLC and its subsidiaries as at 30 September 2020 have been properly prepared in accordance with the Zambian Companies Act 2017 and Securities Act of Zambia and the accounting and other records and registers have been properly kept in accordance with the Act. Chartered Accountants Christopher Mulenga (AUD/F000178) Name of Partner signing on behalf of the firm Lusaka Date: 1st December 2020 47 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2020 Group Revenue Net (loss)/gain arising from price changes in fair value of biological assets Cost of sales Gross profit Administrative expenses Other income Operating profit Share of loss from equity accounted investment Exchange gains on translating foreign currency transactions and balances Finance costs (Loss)/profit before taxation Taxation charge Note 2020 2020 2019 2019 ZMW’000s USD’000s ZMW’000s USD’000s 3,875,104 239,648 3,134,967 254,462 (14,381) (889) 10,284 835 (2,645,101) (163,581) (2,063,704) (167,509) 1,215,622 75,178 1,081,547 87,788 (1,011,968) (62,583) (920,771) (74,738) 6,877 210,531 (3,177) 425 433 13,020 161,209 (197) (3,036) 35 13,085 (246) (137,705) (8,516) (36,730) (2,981) 5 16(a) 6 7 9 (92,322) (22,673) (82,790) (6,720) (5,709) (1,402) (6,986) 38,653 (2,780) 10 (112,957) Group (loss)/income for the year from continuing operations Profit/(loss) from discontinued operations 34 Group (loss)/income for the year Group (loss)/income attributable to: Equity holders of the parent Non-controlling interest Other comprehensive income: Items that may be reclassified subsequently to profit or loss Exchange gains/(losses) on translating presentational currency Items that will not be reclassified subsequently to profit or loss Remeasurement of net defined benefit liability Remeasurement of leases Total other comprehensive income Total comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year attributable to: Equity holders of the parent Non-controlling interest (135,630) (8,388) 35,873 33,435 (102,195) 2,068 (6,320) (17,379) 18,494 (103,419) (6,396) 1,224 76 (102,195) (6,320) 18,100 394 18,494 3,138 (226) 2,912 (1,411) 1,501 1,469 32 1,501 625,042 (52,402) 106,391 (10,553) 6,229 315 385 20 631,586 (51,997) 529,391 (58,317) 8,829 - 115,220 133,714 717 - (9,836) (8,335) 525,030 (58,661) 129,935 (8,367) 4,361 344 3,779 32 529,391 (58,317) 133,714 (8,335) Earnings per share Basic earnings per share – continued operations Basic earnings per share – discontinued operations Total Basic earnings per share Diluted earnings per share Diluted earnings per share – continued operations Diluted earnings per share – discontinued operations Total Diluted earnings per share Ngwee (45.12) 11.12 (34.00) (45.12) 11.12 (34.00) Cents (2.79) 0.69 (2.10) (2.79) 0.69 (2.10) 12 12 12 12 12 12 Ngwee 11.80 (5.78) 6.02 8.86 (4.34) 4.52 Cents 0.96 (0.47) 0.49 0.72 (0.35) 0.37 48 Zambeef Products PLC Annual Report 2020CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2020 (i) In Zambian Kwacha Issued share capital Share premium Preference share capital Foreign exchange reserve Revaluation reserve Retained earnings Total attributable to owners of the parent Non- controlling interest Total equity At 1 October 2018 3,006 1,125,012 1,000 278,923 1,228,724 479,109 3,115,774 (8,660) 3,107,114 ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s Profit for the year Transfer of surplus depreciation Other comprehensive income: Exchange gain on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income - - - - - - - - - - - - - - - 18,100 18,100 394 18,494 (29,666) 29,666 - - - 103,006 - - - - 103,006 3,385 106,391 8,829 8,829 - 8,829 - - - 103,006 (29,666) 56,595 129,935 3,779 133,714 At 30 September 2019 3,006 1,125,012 1,000 381,929 1,199,058 535,704 3,245,709 (4,881) 3,240,828 Adjustment on transition to IFRS 16 - - - - - 315 315 - 315 As at 1 October 2019 3,006 1,125,012 1,000 381,929 1,199,058 536,019 3,246,024 (4,881) 3,241,143 Loss for the year Transfer of surplus depreciation Other comprehensive income: Exchange gain on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income - - - - - - - - - - - - - - - - - - - - - 621,905 - - (103,419) (103,419) 1,224 (102,195) (31,345) 31,345 - - - - - - 621,905 3,137 625,042 - - 6,229 6,229 - 6,229 - - - 621,905 (31,345) (65,845) 524,715 4,361 529,076 At 30 September 2020 3,006 1,125,012 1,000 1,003,834 1,167,713 470,174 3,770,739 (520) 3,770,219 49 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2020 (CONTINUED) (i) In US Dollars Issued share capital Share premium Preference share capital Foreign exchange reserve Revaluation reserve Retained earnings Total attributable to owners of the parent Non- controlling interest Total equity At 1 October 2018 449 100 185,095 (186,889) 175,617 80,188 254,560 (708) 253,852 USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s Profit for the year Transfer of surplus depreciation Other comprehensive income: Exchange (losses)/ gains on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income At 30 September 2019 Adjustment on transition to IFRS 16 As at 1 October 2019 Loss for the year Transfer of surplus depreciation Other comprehensive income: Exchange (losses)/ gains on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income - - - - - 449 - 449 - - - - - - - - - - 100 - 100 - - - - - - - - - - - - - - - - - - 1,469 1,469 (2,408) 2,408 - 32 - 1,501 - (10,859) - - - - (10,859) 306 (10,553) 717 717 - 717 (10,859) (2,408) 4,594 (8,673) 185,095 (197,748) 173,209 84,782 245,887 - - - 185,095 (197,748) 173,209 20 84,802 (6,396) 20 245,907 (6,396) - - - (1,938) 1,938 - 338 (370) (8,335) 245,517 - 20 (370) 245,537 76 - (6,320) - (52,670) - - - (52,670) (1,938) - (52,670) 268 (52,402) 385 385 - 385 (4,073) 80,729 (58,681) 187,226 344 (26) (58,337) 187,200 At 30 September 2020 449 100 185,095 (250,418) 171,271 50 Zambeef Products PLC Annual Report 2020COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2020 (i) In Zambian Kwacha Issued share capital Preference share capital Share premium Revaluation reserve Foreign exchange reserve Retained earnings Total equity At 1 October 2018 Profit for the year Transfer of surplus depreciation Other comprehensive income: Exchange gain on translating presentational currency Remeasurement of net defined benefits liability Total comprehensive income ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 3,006 1,000 1,125,012 890,335 268,121 502,828 2,790,302 - - - - - - - - - - - - - - - - (28,183) - - 2,764 2,764 28,183 - - - 92,385 - 92,385 - 1,461 1,461 (28,183) 92,385 32,408 96,610 At 30 September 2019 3,006 1,000 1,125,012 862,152 360,506 535,236 2,886,912 Profit for the year Other comprehensive income: Transfer of surplus depreciation Remeasurement of net defined benefits liability Exchange gain on translating presentational currency Total comprehensive income - - - - - - - - - - - - - - - - (33,614) - - - - - 26,838 26,838 33,614 - 1,836 1,836 609,324 - 609,324 (33,614) 609,324 62,288 637,998 At 30 September 2020 3,006 1,000 1,125,012 828,538 969,830 597,524 3,524,910 51 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2020 (i) In US Dollars Issued share capital Preference share capital Share premium Revaluation reserve Foreign exchange reserve Retained earnings Total equity USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s At 1 October 2018 449 100 185,095 118,696 (158,456) 82,082 227,966 Profit for the year Transfer of surplus depreciation Other comprehensive income: Exchange gain on translating presentational currency Remeasurement of net defined benefits liability Total comprehensive income - - - - - - - - - - - - - - - (2,288) - - 202 202 2,288 - - - (9,603) - (9,603) - 140 140 (2,288) (9,603) 2,630 (9,261) At 30 September 2019 449 100 185,095 116,408 (168,059) 84,712 218,705 Profit for the year Other comprehensive income: Transfer of surplus depreciation Remeasurement of net defined benefits liability Exchange gain on translating presentational currency Total comprehensive income - - - - - - - - - - - - - - - - - - - - (2,079) - - - - - - 1,661 1,661 - 2,079 - - 114 114 (45,460) - (45,460) (2,079) (45,460) 3,854 (43,685) At 30 September 2020 449 100 185,095 114,329 (213,519) 88,566 175,020 52 Zambeef Products PLC Annual Report 2020CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 SEPTEMBER 2020 ASSETS Non-current assets Goodwill Property, plant and equipment Investment in associate Deferred tax asset Current assets Biological assets Inventories Trade and other receivables Assets held for disposal Amounts due from related companies Income tax recoverable Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Preference share capital Share premium Other reserves Non-controlling interest Non-current liabilities Interest bearing liabilities Leases Deferred liability Deferred tax liability Current liabilities Interest bearing liabilities Leases Trade and other payables Provisions Amounts due to related companies Taxation payable Bank overdrafts Total equity and liabilities Note 2020 ZMW’000s 2020 USD’000s 2019 ZMW’000s 2019 USD’000s 13 14 15(e) 10(e) 16 17 18 34 19 10(c) 20 21 21 22 23 24 25 10(e) 23 24 26 27 28 10(c) 20 166,801 3,264,505 43,826 9,552 3,484,684 176,305 1,103,640 132,668 175,654 9,337 1,784 111,136 1,710,524 5,195,208 3,006 1,000 1,125,012 2,641,721 3,770,739 (520) 3,770,219 190,218 19,750 11,389 69,950 291,307 326,899 23,259 321,648 113,347 443 41 348,045 1,133,682 5,195,208 8,282 162,091 2,176 474 173,023 8,754 54,798 6,587 8,722 464 89 5,518 84,932 257,955 449 100 185,095 1,582 187,226 (26) 187,200 9,445 981 565 3,473 14,464 16,231 1,155 15,971 5,629 22 2 17,281 56,291 257,955 166,801 2,841,824 12,376 56,525 3,077,526 170,417 941,159 98,025 135,357 41,554 2,767 56,753 1,446,032 4,523,558 3,006 1,000 1,125,012 2,116,691 3,245,709 (4,881) 3,240,828 228,099 19,297 16,362 9,138 272,896 343,042 21,487 259,585 52,914 251 1,377 331,178 1,009,834 4,523,558 12,636 215,290 938 4,282 233,146 12,910 71,300 7,426 10,254 3,148 210 4,299 109,547 342,693 449 100 185,095 60,243 245,887 (370) 245,517 17,280 1,462 1,240 692 20,674 25,988 1,628 19,665 4,009 19 104 25,089 76,502 342,693 The financial statements on pages 48 to 132 were approved by the Board of Directors on 1st December 2020 and were signed on its behalf by: Michael Mundashi Chairman Walter Roodt Chief Executive Officer 53 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020COMPANY STATEMENT OF FINANCIAL POSITION 30 SEPTEMBER 2020 FOR THE YEAR ENDED 30 SEPTEMBER 2020 ASSETS Non-current assets Property, plant and equipment Investment in subsidiaries Investment in associate Current assets Biological assets Inventories Assets held for disposal Trade and other receivables Amounts due from related companies Income tax recoverable Cash and cash equivalents Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Preference share capital Share premium Other reserves Non-current liabilities Interest bearing liabilities Leases Deferred liability Deferred tax liability Current liabilities Interest bearing liabilities Leases Trade and other payables Provisions Amounts due to related companies Bank overdrafts Note 14 15(b) 15(e) 16 17 34 18 19 10(c) 20 21 21 22 2020 ZMW’000s 2020 USD’000s 2019 ZMW’000s 2019 USD’000s 2,476,394 122,959 2,060,110 245,807 43,826 12,205 2,176 245,807 12,376 156,069 18,622 938 2,766,027 137,340 2,318,293 175,629 139,501 814,081 175,654 50,555 6,927 40,421 8,722 2,510 137,215 683,600 135,357 28,153 1,320,117 65,547 1,078,745 565 12,645 2,513,118 5,279,145 28 628 1,529 11,844 124,783 2,076,443 262,123 4,394,736 157,304 332,933 3,006 1,000 1,125,012 2,395,892 3,524,910 449 100 3,006 1,000 185,095 1,125,012 (10,624) 1,757,894 175,020 2,886,912 23 24 25 10(e) 23 24 26 27 28 20 190,218 8,172 3,356 41,153 242,899 326,899 14,461 232,844 61,200 705,110 170,822 9,445 406 167 2,043 12,061 16,231 718 11,561 3,039 35,011 8,482 228,099 11,505 3,655 6,630 343,042 18,266 158,504 40,462 490,045 207,616 1,511,336 75,042 1,257,935 249,889 18,931 10,395 51,788 10,254 2,133 81,722 115 897 449 100 185,095 33,061 218,705 17,280 872 277 502 25,988 1,384 12,008 3,065 37,124 15,728 95,297 Total equity and liabilities 5,279,145 262,123 4,394,736 332,933 The financial statements on pages 48 to 132 were approved by the Board of Directors on 1st December 2020 and were signed on its behalf by: Michael Mundashi Chairman Walter Roodt Chief Executive Officer 54 Zambeef Products PLC Annual Report 2020 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2020 Note 2020 ZMW’000s 2020 USD’000s 2019 ZMW’000s 2019 USD’000s Cash inflow from operating activities (Loss)/profit before taxation Finance costs Loss / (profit) on disposal of property, plant and equipment Depreciation Charge on right of use assets Share of loss on equity accounted investment Profit/(loss) on discontinued operations Fair value price adjustment Net unrealised foreign exchange losses Earnings before interest, tax, depreciation and amortisation, fair value adjustments and net unrealised foreign exchange losses (Increase)/decrease in biological assets Increase in inventory (Increase)/decrease in trade and other receivables (Increase)/decrease in amounts due from related companies Increase/(decrease) in trade and other payables Increase in amounts due to related companies Decrease in deferred liability Income tax paid Net cash inflow/(outflow) from/(on) operating activities Investing activities Purchase of property, plant and equipment Right of use assets Proceeds from the sale of assets Proceeds from the sale of assets/investments Net cash inflow/(outflow) from /(on) investing activities Net cash inflow/ (outflow) before financing activities Financing activities Long term loans repaid Repayment short term funding Receipt of short-term funding Lease finance repayment Lease finance obtained Finance costs Net cash outflow on financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at end of the year Represented by: Cash in hand and at bank Bank overdrafts 9 14 14 16 10(c) 14 29 29 29 29 29 9 20 20 20 (22,673) 92,322 4,796 141,408 8,362 3,177 1,529 14,381 186,272 429,574 (20,269) (162,481) (34,643) (2,410) 122,496 192 (1,256) (5,525) (1,402) 5,709 297 8,745 517 196 95 889 11,495 26,541 (1,253) (10,048) (2,142) (149) 7,575 12 (102) (342) 38,653 82,790 (986) 121,921 - 3,036 (17,379) (10,284) 7,153 224,904 21,541 (301,348) 58,289 8,718 (27,028) 19 (6,249) (9,652) 3,138 6,720 (80) 9,896 - 246 (1,411) (835) 581 18,255 1,748 (24,460) 4,731 708 (2,194) 2 (507) (783) 328,190 20,296 (30,806) (2,500) (92,664) (15,425) 6,452 167,264 (5,731) (954) 399 10,344 (113,825) - 11,776 - (9,239) - 956 - 65,627 4,058 (102,049) (8,283) 393,817 24,354 (132,855) (10,783) (162,217) (623,231) 487,320 (35,478) 14,329 (92,322) (411,599) (17,782) (274,425) (10,032) (38,542) 30,137 (2,194) 886 (5,709) (25,454) (1,100) (20,790) (96,913) (215,124) 334,580 (47,007) 47,714 (82,790) (59,540) (192,395) (135,743) 55,298 (236,909) 10,127 (11,763) 53,713 (274,425) 111,136 (348,045) (236,909) 5,518 (17,281) (11,763) 56,753 (331,178) (274,425) (7,866) (17,461) 27,157 (3,816) 3,873 (6,720) (4,833) (15,616) (11,090) 5,916 (20,790) 4,299 (25,089) (20,790) 55 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2020 Note 2020 2020 2019 2019 ZMW’000s USD’000s ZMW’000s USD’000s Cash inflow from operating activities Profit before taxation Finance costs Depreciation Fair value price adjustment Loss on disposal of property, plant and equipment Share of loss on equity accounted investment Loss on discontinued operations 14 16 34,203 68,747 80,462 15,464 1,216 3,177 1,529 2,115 4,252 4,976 956 75 196 95 Net unrealised foreign exchange differences 180,954 11,193 54,334 67,371 71,049 (10,162) 1,821 3,036 (17,379) 6,223 4,389 5,469 5,767 (825) 148 246 (1,411) 505 Earnings before interest, tax, depreciation and amortisation, fair value adjustments and net unrealised foreign exchange losses (Increase)/ decrease in biological assets Increase in inventory (Increase)/decrease in trade and other receivables 385,752 23,858 176,293 14,288 (2,286) (130,482) (22,402) (141) (8,069) (1,385) 31,296 2,541 (202,281) (16,419) 63,228 5,133 Increase in amounts due from related companies (275,999) (17,069) (282,239) (22,910) Increase/ (decrease) in trade and other payables Increase in amounts due to related companies (Decrease)/ increase in deferred liability Income tax paid 10(c) 74,340 215,065 (299) (5,314) 4,597 13,300 (18) (329) (31,817) 161,412 57 (5,822) (2,583) 13,102 26 (473) Net cash inflow/(outflow) from/(on) operating activities 238,375 14,744 (89,873) (7,295) Investing activities Purchase of property, plant and equipment 14 Proceeds from disposal of investment Proceeds from sale of assets Net cash inflow/(outflow) from/(on) investing activities (35,385) 167,264 4,205 136,084 (2,188) 10,344 260 8,416 (23,743) (1,927) - 1,120 - 91 (22,623) (1,836) Net cash inflow before financing activities 374,459 23,160 (112,496) (9,131) Financing activities Long term loans repaid Short term funding repaid Short term funding obtained Lease finance repayment Lease finance obtained Interest paid 29 29 29 29 29 (162,217) (10,032) (96,913) (7,866) (623,231) (38,542) (215,124) (17,461) 487,320 (30,835) 14,329 30,137 (1,907) 334,580 (43,953) 886 47,714 (68,747) (4,252) (67,371) 27,157 (3,568) 3,873 (5,469) (3,334) Net cash outflow on financing activities (383,381) (23,710) (41,067) Decrease in cash and cash equivalents (8,922) (550) (153,563) (12,465) Cash and cash equivalents at beginning of the year (195,772) (14,381) (76,971) (6,288) Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at end of the year Represented by: Cash in hand and at bank Bank overdrafts 56 20 20 20 46,517 7,077 34,762 3,922 (158,177) (7,854) (195,772) (14,831) 12,644 628 11,844 897 (170,821) (8,482) (207,616) (15,728) (158,177) (7,854) (195,772) (14,831) Zambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 1. The Group Zambeef Products PLC and its subsidiaries (“Group”) is one of the largest agri-businesses in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed and flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with approximately 7,787 Ha of row crops under irrigation and 8,694 Ha of rain- fed/dry-land crops available for planting each year. The Group also has operations in West Africa in Nigeria and Ghana.. 2. Principal accounting policies The principal accounting policies applied by the Group in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (a) Basis of consolidation The consolidated financial statements include the financial statements of the parent Company and its subsidiary companies made up to the end of the financial year. The results of subsidiaries acquired or disposed off during the year are included in the consolidated statement of comprehensive income from the date of their acquisition or up to the date of their disposal. Intercompany transactions and profits are eliminated on consolidation and all income and profit figures relate to external transactions only. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Profit or loss and other comprehensive income of subsidiaries acquired or disposed off during the year are recognised from the effective date of acquisition or up to the effective date of disposal, as applicable. (b) Going Concern At the reporting date loans and other finance amounts repayable within twelve months amount to ZMW347.2 million (USD17.2 million) [2019: ZMW364.5 million (USD27.6 million)]. After reviewing the available information including the Group’s strategic plans and continuing support from the Group’s working capital funders, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Group will settle all current liabilities from the continued liquidation of stock and expected increase in income from the key markets in stockfeed and cropping which continue to perform well. The stocks are fast moving consumer goods. The Group also has access to bank financing facilities for working capital funding. The outbreak of the COVID-19 pandemic has had a negative effect on the country’s economy. However, the consumer demand for Zambeef’s products stood up well and the current trading conditions are expected to continue in the near future. The effect on the business, in terms of sales, from the pandemic has been minimal but has been negatively affected by the steep depreciation of the currency resulting in exchange losses. 57 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (c) Basis of presentation The financial statements are prepared in accordance with the provisions of the Zambian Companies Act 2017 and International Financial Reporting Standards (IFRS). The financial statements are presented in accordance with IAS 1 “Preparation of financial statements” (Revised 2007). The Group has elected to present the “Statement of Comprehensive Income” in one statement namely the “Statement of Comprehensive Income”. The financial statements have been prepared under the historic cost convention, as modified by the revaluation of property, plant and equipment, and financial assets and liabilities at fair value through profit or loss. Biological assets are measured at fair value less costs to sell. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Foreign currencies (i) Presentation and functional currency The Company has twelve operating branches, of which eleven have a functional currency of Zambian Kwacha (ZMW) and one (the Mpongwe Farms Branch) has a functional currency of United States Dollars (USD) being an operational branch set up during the year ended 30 September 2012. Management have chosen a variant on the functional currency of Mpongwe due to the following factors: - the majority of farm input costs (fertilizer, farming chemicals, agricultural machinery spares, etc.), which are primarily sourced from overseas, are driven by USD to ZMW exchange rate due to origin prices being USD; the pricing of Mpongwe’s principal outputs (wheat, soya and maize) are significantly influenced by world USD denominated grain prices; the capital raised attached to the acquisition of the Mpongwe assets was denominated in foreign currency; the Mpongwe assets were purchased in USD; and the majority of financial liabilities associated with working capital funding and capital expenditure are sourced in USD and repayable in USD, with a substantial portion of the Company’s term liabilities secured on the assets of Mpongwe. - - - - In light of this, Mpongwe’s assets and liabilities are translated to ZMW and consolidated with other branches of the Company for reporting and tax purposes in Zambia. As a result of using a functional currency of USD for Mpongwe, there arose an exchange difference of ZMW609.3 million (2019: ZMW92.4 million) upon translating all assets and liabilities, which has been recognised as an unrealised gain in the statement of comprehensive income of the Company. All the assets and liabilities for Mpongwe are translated from the functional currency USD to the local currency ZMW which gives rise to exchange differences. (d) 58 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (d) Foreign currencies (continued) (i) (ii) Presentation and functional currency (continued) The Group’s reporting currency is Kwacha (ZMW). The presentation of the financial statements and related disclosures in USD is supplementary information. Basis of translating presentation currency to USD for the purposes of supplementary information Income statement items have been translated using the average exchange rate for the year as an approximation to the actual exchange rate. Assets and liabilities have been translated using the closing exchange rate. Any differences arising from this process have been recognised in other comprehensive income and accumulated in the foreign exchange reserve in equity. Equity items have been translated at the closing exchange rate. Exchange differences arising on retranslating equity items and opening net assets have been transferred to the foreign exchange reserve within equity. The following exchange rates have been applied: ZMW: USD Average exchange rate Closing exchange rate Year ended 30 September 2019 Year ended 30 September 2020 12.32 16.17 13.20 20.14 All historical financial information, except where specifically stated, is presented in Zambian Kwacha rounded to the nearest ZMW’000s and United States Dollars rounded to the nearest USD’000s. (iii) Basis of translating transactions and balances Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the date of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the Statement of Comprehensive Income. Non-operating foreign exchange gains and losses mainly arise on fluctuations of the exchange rate between United States Dollars and Zambian Kwacha. Due to the instability of the exchange rate, which may result in significant unrealised variances of foreign exchange related assets and liabilities, these gains and losses have been presented below operating profit in the Statement of Comprehensive Income. 59 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (d) Foreign currencies (continued) (iv) Basis of translating foreign operations In the consolidated financial statements, the financial statements of the foreign subsidiaries originally presented in their local currency have been translated into Zambian Kwacha. Assets and liabilities have been translated into Zambian Kwacha at the exchange rates ruling at the year end. Statement of comprehensive income items have been translated at an average monthly rate for the year. Any differences arising from this procedure are taken to the foreign exchange reserve. ZMW: Nigeria Naira Average exchange rate Closing exchange rate Year ended 30 September 2019 Year ended 30 September 2020 29.21 23.10 27.25 19.00 ZMW: Ghana Cedi Average exchange rate Closing exchange rate Year ended 30 September 2019 Year ended 30 September 2020 0.42 0.35 0.41 0.29 (e) New standards adopted as at 1 October 2019 The Group has adopted the new accounting pronouncements which have become effective in 2019, and are as follows: IFRS 16 ‘Leases’ IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’). The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated. For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4. The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial application of IFRS 16, being 1 October 2019. At this date, the Group has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition. Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16. 60 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (e) New standards adopted as at 1 October 2019 (continued) IFRS 16 ‘Leases’ (continued) On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low-value assets the Group has applied the optional exemptions to not recognise right-of-use assets but to account for the lease expense on a straightline basis over the remaining lease term. For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application. On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 15.5%. The Group has benefited from the use of hindsight for determining lease term when considering options to extend and terminate leases. The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at 1 October 2019: Carrying amount at 30 September 2019 Remeasurement IFRS 16 carrying amount at 1 October 2019 Property, plant and equipment Lease liabilities Total Property, plant and equipment Lease liabilities Total ZMW’000 ZMW’000 15,425 2,857,249 (15,425) (56,209) - 2,801,040 ZMW’000 2,841,824 (40,784) 2,801,040 Carrying amount at 30 September 2019 Remeasurement US$’000 215,290 (3,090) 212,200 US$’000 766 (766) - IFRS 16 carrying amount at 1 October 2019 US$’000 216,056 (3,856) 212,200 61 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (e) New standards adopted as at 1 October 2019 (continued) IFRS 16 ‘Leases’ (continued) The following is a reconciliation of total operating lease commitments at 30 September 2019 to the lease liabilities recognised at 1 October 2019: Total operating lease commitments disclosed at 30 September 2019 15,881 1,203 ZMW’000 USD’000 Recognition exemptions: Leases of low value assets Leases with remaining life less than 12 months Operating lease liabilities before discounting Discounted using incremental borrowing rate Operating lease liabilities Finance lease obligations Total lease liabilities recognised under IFRS 16 at 1 October 2019 (1,359) (13,079) 1,443 (254) 7,063 40,784 49,036 (103) (991) 109 (19) 351 3,090 3,531 (f) Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group At the date of authorisation of these financial statements, other standards and amendments that are not yet effective and have not been adopted early by the Group include: • • • • IFRS 17 Insurance Contracts Definition of a Business (Amendments to IFRS 3) Definition of Material (Amendments to IAS 1 and IAS 8) Conceptual Framework for Financial Reporting These amendments are not expected to have a significant impact on the financial statements in the period of initial application and therefore the disclosures have not been made. 62 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (g) Business combinations On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net asset acquired is credited to the statement of comprehensive income in the period of acquisition. Changes in the Group’s ownership interest that do not result in a loss of control are accounted for as equity transactions. Purchase of non-controlling interests are recognized directly within equity being the difference between the fair value of the consideration paid and the relevant share acquired of the carrying value of the net assets to the subsidiary. Contingent and deferred consideration arising as a result of acquisitions is stated at fair value. Contingent and deferred consideration is based on management’s best estimate of the likely outcome and best estimate of fair value, which is usually, but not always, a contracted formula based on a multiple of net profit after tax. All acquisition expenses are recognised in the statement of comprehensive income. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra- group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Investments in associates are accounted for using the equity method. The carrying amount of the investment in associates is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate adjusted, where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains and losses on transactions with the Group and its associates are eliminated to the extent of the Group’s interest in those entities where the unrealised losses are eliminated. Management exercises judgement in determining the impairment of the underlying asset. (h) Discontinued operations A discontinued operation is a component of the entity that has been disposed of. A component can be distinguished operationally and for financial reporting purposes if: • • • its operating assets and liabilities can be directly attributed to it its income (gross revenue) can be directly attributed to it at least a majority of its operating expenses can be directly attributed to it. Profit or loss from discontinued operations, including prior year comparatives, is presented in a single amount in the income statement. This amount comprises the post-tax profit or loss of discontinued operations and the post-tax gain or loss resulting from the disposal of the Group’s share of the entity’s net assets. The disclosures for discontinued operations in the prior years relate to all operations that have been discontinued by the reporting date for the latest period presented. Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. Once classified as held for sale, the assets are not subject to depreciation or amortisation. Any profit or loss arising from the sale of a discontinued operation or its remeasurement to fair value less costs to sell is presented as part of a single line item, profit or loss from discontinued operations. 63 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (i) Impairment testing of goodwill and property, plant and equipment For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated (determined by the Group’s management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s (or cash-generating unit’s) carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value- in-use. To determine the value-in use, management estimates expected future cash flows from each cash- generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value of money and asset-specific risk factors. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash- generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset’s or cash- generating unit’s recoverable amount exceeds its carrying amount. (j) Revenue recognition Revenue arises mainly from the sale of cold chain food products, stock feed and cropping. To determine whether to recognise revenue, the Group follows a 5 step process: 1) 2) 3) 4) 5) identifying the contracts with a customer; identifying the performance obligations; determining the transaction price; allocating the transaction price to the performance obligations; and recognising revenue when/as performance obligations are satisfied. Revenue is recognised at the point in time when control has passed to the customer. This is when delivery of the product is made to the customers or when customers collect the product from one of the group’s locations. A liability is reconginsed for all amounts received in advance for which the performance obligation of transferring the goods to the customer has not been met. Similarly, if the Group satisfies a performance obligation before it receives consideration, the Group recognises a receivable in the statement of financial position. Cropping Revenue from cropping is from the sale of wheat, soya and maize grain. The price of the grain is agreed as per the contract with the customers and the customers are only invoiced when customer takes delivery of the grain. Revenue is recognised when performance obligations are satisfied by delivering the grain. Cold chain food products The cold food chain products are mainly beef, chicken, pork, fish, milk and dairy products. These products are sold through the group’s retailing network, most of which is through cash sales. The credit sales are only invoiced when the products are delivered to the customer or when the customer collects the products. 64 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (j) Revenue recognition (continued) Stockfeed Stockfeed is sold though the Group’s retail network and on contract to certain customers. The sales through the retail network are cash sales. The credit sales are invoiced when the customer takes delivery of the stock feed. Chicks Revenue for the sale of day-old chicks is generated through direct sales to customers through the Zambeef outlets and through agents. Customers and agents make advance payments before getting delivery of the chicks. Mill and bakery The revenue for mill and bakery is from the sale of flour mill and bread. The flour mill and bread are sold through the Group’s retail network and are mainly for cash sales. (k) Property, plant and equipment All classes of property, plant and equipment are stated at valuation except for plantation development expenditure and capital work in progress which are stated at historical cost. Capital work in progress relates to internally constructed building parts and plant and machinery and are categorised as such on completion. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss in the statement of comprehensive income during the financial year in which they are incurred. The Group has adopted a policy of revaluing all classes of property, plant and equipment, excluding capital work in progress. Revaluations are conducted at least every five years. The assets’ residual values and useful lives are reviewed at each reporting date and adjusted where appropriate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its recoverable amount. Management considers available market information at the reporting date to assess whether the asset values are appropriate. Increases in the carrying amount arising on revaluation of property, plant and equipment are recognised in other comprehensive income and accumulated in the revaluation surplus in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against the revaluation surplus in shareholders’ equity; all other decreases are charged to the statement of comprehensive income. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged to the statement of comprehensive income and depreciation based on the asset’s original cost, net of any related deferred income tax, is transferred from the revaluation surplus to retained earnings. Depreciation is calculated to write off the cost of property, plant and equipment on a straight-line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose are: Buildings Motor vehicles Aircraft Furniture & equipment Plant & machinery 2% 20% 10% 10% 10% Land and capital work in progress are not depreciated. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in the statement of comprehensive income in other income. When revalued assets are sold, the amounts included in the revaluation surplus relating to these assets are transferred to retained earnings. 65 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (l) Leased assets As described in Note 2 (e), the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information has not been restated. This means comparative information is still reported under IAS 17. Accounting policy applicable from 1 October 2019 The Group as a lessee For any new contracts entered into on or after 1 October 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:  the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract the Group has the right to direct the use of the identified asset throughout the period of use.   The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. 66 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (l) Leased assets(continued) The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities have been presented on the face of the balance sheet. Take-on values of right of use assets and liabilities have been based on future lease payments, discounted at the prevailing incremental borrowing rate to present values. The incremental borrowing rates are based on the cost of borrowing from third party financiers. Accounting policy applicable before 1 October 2019 Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the asset’s fair value, and whether the Group obtains ownership of the asset at the end of the lease term. For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair values of the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease, taking into consideration the fact that land normally has an indefinite economic life. (m) Financial instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). 67 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (m) Financial instruments (continued) Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:    amortised cost fair value through profit or loss (FVTPL) fair value through other comprehensive income (FVOCI). In the periods presented the corporation does not have any financial assets categorised as FVOCI. The classification is determined by both:   the entity’s business model for managing the financial asset the contractual cash flow characteristics of the financial asset. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Subsequent measurement of financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):  they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding  After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as listed bonds that were previously classified as held-to-maturity under IAS 39. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Financial assets at fair value through other comprehensive income (FVOCI) The Group accounts for financial assets at FVOCI if the assets meet the following conditions:  they are held under a business model whose objective it is “hold to collect” the associated cash flows and sell and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.  Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset. 68 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (m) Financial instruments (continued) Impairment of financial assets IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced IAS 39’s ‘incurred loss model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between:  financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’).  ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics, they have been grouped based on the days past due. Refer to Note 18 for a detailed analysis of how the impairment requirements of IFRS 9 are applied. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. 69 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (n) Biological assets Biological assets are valued at their fair values less estimated point of sale costs as determined by the Directors. The fair value of livestock is determined based on market prices of animals of similar age, breed and genetic merit. Standing crops are revalued to fair value at each reporting date based on the estimated market value of fully grown standing crops adjusted for the age and condition of the crops at the reporting date. Feedlot, standing and dairy cattle, chickens (broilers and layers), and pigs have been classified as current biological assets based on Directors’ expectation of their useful economic life. Upon maturity of biological assets, they are transferred to inventory through harvest and culling. Net gains and losses arising from changes in fair value less estimated point of sale costs of biological assets are recognised in profit and loss in the statement of comprehensive income. (o) Inventory Inventory is stated at the lower of cost and net realizable value. Cost is determined on a first in first out basis and includes all expenditure incurred in the normal course of business in bringing the goods to their present location and condition, including production overheads based on normal level of activity. Net realizable value takes into account all further costs directly related to marketing, selling and distribution. Biological assets are transferred to inventory at the point of harvest/slaughter at fair value in accordance with IAS 41. (p) Cash and cash equivalents Cash and cash equivalents include cash in hand, bank overdrafts, deposits held at call with banks and balances held with banks. Bank overdrafts are defined as facilities which are repayable on demand and classified as current liabilities. 70 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (q) (r) (s) Interest bearing liabilities Short term interest bearing liabilities include all amounts expected to be repayable within twelve months from the reporting date, including instalments due on loans of longer duration. Long term interest bearing liabilities represent all amounts payable more than twelve months from the reporting date. Other income Other income is income not related to the operation or management of the specific business activities of the Group, but which arises from the function of operating an agri-business. Other income comprises the fair value of the consideration received or receivable. Taxation Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in profit or loss, except where they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively. 71 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (t) Employee benefits (i) Pension obligations The Group has a plan with National Pension Scheme Authority (NAPSA) where the Group pays an amount equal to the employee’s contributions. Employees contribute 5 per cent. of their gross earnings up to the statutory cap. (ii) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits in exchange for the termination of an employee’s employment as a result of either its termination of an employee’s employment before normal retirement date or when an employee decides to accept an offer of benefits in exchange for the termination of employment. (u) Dividend distributions Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the year in which the dividends are approved by the Company’s shareholders at a general meeting. (v) Equity and reserves Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Preference shares are classified as equity if they are non-redeemable and any dividends are discretionary, or are redeemable but only at the group’s option. Dividends on preference share capital classified as equity are recognised as distributions within equity. The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment. This reserve is non-distributable. Foreign currency translation differences arising from translating to presentational currency and translating foreign operations are included in the foreign exchange reserve. These reserves are non-distributable. Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income. All transactions with owners of the parent are recorded separately within equity. 72 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 2. Principal accounting policies (continued) (w) Segmental reporting IFRS 8 requires segments to be identified on the basis of the internal reports about operating units of the Group that are regularly reviewed by the Chief Executive Officer and the Chief Financial Officer who are the Chief Operating Decision Makers (CODMs) to allocate resources and to assess their performance. The Group operates 12 main reportable divisions which match the main external revenues earned by the Group: • • • • • • • • • • • • Retailing Zambia Retailing – West Africa Beef Chicken Day-old chicks Pork Milk and dairy Eggs Stockfeed Crops Mill and Bakery Leather and shoe The business activities are grouped in these segments based on the nature of their business and in the case of Retailing - West Africa the geographical area in which they conduct their business. Due to the nature of the Group’s operations, namely that groups of assets and liabilities are each used to generate a number of the revenue streams above, balance sheet items cannot be discretely allocated to the above components, and the CODM also review management information regarding the operating assets and liabilities of the main reporting entities within the Group as follows: • • • • Zambeef Retailing Master Pork Other The ‘Other’ segment includes the foreign subsidiaries, Zamleather Limited, Zam Chick Limited and Zamhatch Limited. Foreign subsidiaries include the Group’s two majority-owned subsidiaries in Nigeria and Ghana. Inter and intra-divisional, and inter-company sales are recognised based on an internally set transfer price. The prices are reviewed periodically and aim to reflect what each business segment could achieve if it sold its output to external parties at arm’s length. (x) Provisions (Restructuring costs and legal claims) Provisions for restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. 73 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 3. Critical accounting estimates and judgements The preparation of financial statements in conformity with adopted IFRS requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent liabilities. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. Significant management judgements Recognition of deferred tax assets Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Management applies judgement in assessing whether a deferred tax asset is recognised on carried forward trading losses based on anticipated future profits. This takes into account projections made by the business and expected future market conditions. Estimation Uncertainty Information about estimates and assumptions that may have the most significant effects on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. (i) Valuation of biological assets and inventory Biological assets are measured at fair value less estimated costs to sell. In estimating fair values and costs to sell, management considers the most reliable evidence at the times the estimates are made. The most significant estimate relates to management’s assessment of anticipated yield per hectare for establishing the fair value of standing crops. This assessment considers historic yields, climate conditions and certain other key factors. Realisation of the carrying amounts of biological assets of ZMW176.3 million (USD8.7 million); ZMW14.4 million (USD0.9 million) (2019: ZMW170.4 million [USD12.9 million]; ZMW10.3 million [USD0.8 million]) is affected by price changes in different market segments, and ZMW524.4 million (USD32.4 million) (2019: ZMW613.5 million [USD49.8 million]) is affected by physical changes in different segments. Refer note to 16. Inventories are measured at the lower of cost and net realizable value. In estimating net realizable values, management considers the most reliable evidence available at the times the estimates are made. Future realization of the carrying amounts of inventory assets of ZMW1,103.6 million (USD54.8 million) (2019: ZMW941.2 million [USD71.3 million]) is affected by price changes in different market segments. 74 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 4. Management of financial risk The Group’s Board of Directors believes that the Group is well positioned in an improving economy. Factors contributing to the Group’s strong position are: (a) (b) (c) Increase in the retail foot print of the Group. Increase in production facilities of the Group, leading to higher volumes available for retail. Improvements in the management team across various areas of the Group leading to positive reinforcement of strong operational synergies. Overall, the Group is in a strong position and has sufficient capital and liquidity to service its operating activities and debt. 4.1 Financial risk The Group is exposed to a range of financial risks through its financial assets and financial liabilities. The most important components of this financial risk are cash flow risk, interest rate risk, foreign exchange risk and credit risk. These risks are exposed to general and specific market movements. The Group manages these positions with a framework that has been developed to monitor its customers and return on its investments. 4.2 Credit risk The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The area where the Group is exposed to credit risk is amounts due from customers. The Group structures the levels of credit risk it accepts by placing limits on its exposure to the level of credit given to a single customer. Such risk is subject to an annual or more frequent review. Limits on the level of credit risk by category and territory are approved annually by the Board of Directors. 4.3 Interest risk The Group has exposure to both variable and fixed interest rates on its borrowings. The area where the Group is exposed to interest risk is where the variable rate benchmark such as LIBOR, Zambian Treasury Bill rate, or the Bank of Zambia Policy rate may change. The Group structures its debt with low spreads over the variable rate benchmark and protects itself with matching fixed interest rates on its borrowings. Management periodically review economic conditions relating to such variable benchmarks and is allowed to consider alternate debt structures where the need may arise. 4.4 Capital management The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Group sets the amount of capital in proportion to its overall financing structure. The Group manages the capital structure and makes adjustments to it in the light of the economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of the dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. 75 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 4. Management of financial risk (continued) Capital structure (i) In Zambian Kwacha Cash and cash equivalents Interest bearing liabilities Equity (ii) In United States Dollars Cash and cash equivalents Interest bearing liabilities Equity 2020 ZMW’000s (236,909) (560,126) 3,770,739 2,973,704 2020 USD’000s (11,763) (27,812) 187,226 147,651 2019 ZMW’000s (274,425) (611,925) 3,245,709 2,359,359 2019 USD’000s (20,790) (46,358) 245,887 178,739 4.5 4.6 The Directors define capital as equity plus cash less borrowings and its financial strategy in the short term is to minimize the level of debt in the business whilst ensuring sufficient finances are available to continue the Group’s business activities. Foreign exchange risk The Group is exposed to foreign exchange risk arising from exchange rate fluctuations. Foreign currency denominated purchases and sales, together with foreign currency denominated borrowings, comprise the currency risk of the Group. These risks are minimised by matching the foreign currency receipts to the foreign currency payments as well as holding foreign currency bank accounts and export sales. Agricultural risk Agricultural production by its nature contains elements of significant risks and uncertainties which may adversely affect the business and operations of the Group, including but not limited to the following: (i) any future climate change with a potential shift in weather patterns leading to floods or droughts and associated crop losses; (ii) potential insect, fungal and weed infestations resulting in crop failure and reduced yields; (iii) wild and domestic animal conflicts and crop raiding; and (iv) livestock disease outbreaks. Adverse weather conditions represent a significant operating risk to the business, affecting the quality and quantity of production and the levels of farm inputs. The Group minimises these risks through a robust insurance policy on biological stock (crop and livestock) and grain inventory. 5. Segmental reporting An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s Chief Operating Decision Makers (‘CODMs’), which is the Chief Executive Officer and Chief Financial Officer, to make decisions about the allocation of resources and assessment of performance about which discrete financial information is available. Gross margins and other operating results are reviewed by the CODM and used for such purposes; some of the other costs are shared. The CODM reviews information regarding the operating divisions which match the main external revenues earned by the Group, and management information regarding the operating assets and liabilities of the main business divisions within the Group. 76 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 5. Segmental reporting (continued) Year ended 30 September 2020 The segment information for the reporting period is as follows: (i) In Zambian Kwacha Segment Retailing – Zambia Master Meats Nigeria Master Meats Ghana Retailing West Africa Total Retailing Beef Chicken Day old chicks Pork Milk and dairy Eggs Total Cold Chain Food Production Gross Combined Retail and CCFP Less: Intra/Inter Sales Combined Retail & CCFP Stock Feed Crops Mill and Bakery Leather and shoe Total Other Total Less: Intra/Inter Group Sales Group total Central operating costs and other income Operating profit Foreign exchange losses Finance costs Share of loss on equity accounted investment Loss before tax Segment Revenue Revenue Gross Profit Gross Profit ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2,177,555 188,754 37,924 16,699 164,307 39,037 53,126 53,194 91,760 (148) 34,107 14,569 164,275 54,483 522,585 300,668 128,326 285,581 218,207 61,004 173,659 29,950 218,758 2,396,313 1,516,371 3,912,684 (1,399,926) 2,512,758 1,331,965 651,560 203,609 4,699,892 (824,788) 3,875,104 54,623 243,377 401,276 644,653 644,653 255,888 266,405 48,676 1,215,622 1,215,622 (1,005,091) 210,531 (137,705) (92,322) (3,177) (22,673) Zambia Nigeria Ghana Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s Cold Chain Food Production 3,693,926 164,275 54,483 3,912,684 Stockfeed Cropping Other Sub-total 1,331,965 - - 1,331,965 651,560 - - 651,560 203,609 - - 203,609 5,881,060 164,275 54,483 6,099,818 Intra/inter group sales (2,224,714) - - (2,224,714) Total 3,656,346 164,275 54,483 3,875,104 77 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 5. Segmental reporting (continued) Year ended 30 September 2020 (i) In Zambian Kwacha Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total Property plant and equipment Biological assets and inventories Cash, cash equivalents and bank overdrafts Trade and other receivables Trade and other payables Year ended 30 September 2019 (i) In Zambian Kwacha Segment Retailing – Zambia Master Meats Nigeria Master Meats Ghana Retailing West Africa Total Retailing Beef Chicken Zamhatch Pork Milk and dairy Fish Eggs Total Cold Chain Food Production Gross Combined Retail and CCFP Less: Intra/Inter Sales Combined Retail & CCFP Stock Feed Crops Mill and Bakery Leather and shoe Total Other Total Less: Intra/Inter Group Sales Group total Central operating costs and other income Operating profit Foreign exchange losses Finance costs Share of loss on equity accounted investment Profit before tax 78 ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2,476,394 224,825 81,835 481,451 3,264,505 953,583 81,293 25,930 219,139 1,279,945 (158,177) (119,683) 5,257 35,694 (236,909) 50,555 15,436 14,121 52,556 132,668 (232,842) (33,502) (3,589) (51,715) (321,648) Revenue Revenue Gross Profit Gross Profit ZMW’000s ZMW’000s ZMW’000s ZMW’000s 1,853,721 172,031 27,381 14,090 127,946 52,405 60,310 38,642 67,409 7,180 13,765 30,517 8,744 138,732 46,222 474,941 247,580 112,665 252,952 206,531 36,612 57,211 183,520 26,828 184,954 2,038,675 1,388,492 3,427,167 (1,303,519) 2,123,648 986,075 474,202 210,348 3,794,273 (659,306) 3,134,967 41,471 213,502 367,657 581,159 581,159 191,011 270,116 39,261 1,081,547 1,081,547 (920,338) 161,209 (36,730) (82,790) (3,036) 38,653 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 5. Segmental reporting (continued) Year ended 30 September 2019 Segments Zambia Nigeria Ghana Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s Cold Chain Food Production 3,242,213 138,732 46,222 3,427,167 Stockfeed Cropping Other Sub-total 986,075 474,202 210,348 - - - - - - 986,075 474,202 210,348 4,912,838 138,732 46,222 5,097,792 Intra/inter group sales (1,962,825) - - (1,962,825) Total 2,950,013 138,732 46,222 3,134,967 Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total Property plant and equipment Biological assets and inventories Cash, cash equivalents and bank overdrafts Trade and other receivables Trade and other payables Year ended 30 September 2020 (ii) In US Dollars Segment Retailing – Zambia Master Meats Nigeria Master Meats Ghana Retail – West Africa Total Retailing Beef Chicken Day old chicks Pork Milk and dairy Eggs Total Cold Chain Food Production Gross Combined Retail and CCFP Less: Intra/Inter Sales Combined Retail & CCFP Stock Feed Crops Mill and Bakery Leather and shoe Total Other Total Less: Intra/Inter Group Sales Group total Central operating costs and other income Operating profit Foreign exchange losses Finance costs Share of loss on equity accounted investment Loss before tax ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2,060,110 209,897 777,065 70,921 84,443 19,195 487,374 2,841,824 200,645 1,067,826 (195,772) (96,500) 1,461 16,386 (274,425) 28,153 10,129 (158,504) (49,327) 11,912 (19,654) 47,831 98,025 (32,100) (259,585) Revenue USD’000s Revenue USD’000s 134,666 Gross Profit USD’000s Gross Profit USD’000s 11,673 2,345 1,033 10,161 2,414 3,285 3,291 5,675 (9) 2,109 901 10,159 3,369 32,318 18,594 7,936 17,661 13,495 3,773 10,740 1,852 13,528 148,194 93,777 241,971 (86,576) 155,395 82,373 40,294 12,592 290,654 (51,006) 239,648 3,378 15,051 24,817 39,868 - 39,868 15,824 16,476 3,010 75,178 75,178 (62,158) 13,020 (8,516) (5,709) (197) (1,402) 79 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 5. Segmental reporting (continued) Year ended 30 September 2020 (ii) In US Dollars Segment Zambia Nigeria Ghana Total USD’000s USD’000s USD’000s USD’000s Cold Chain Food Production 228,444 10,159 3,369 241,972 Stockfeed Cropping Other Sub-total 82,373 40,294 12,592 - - - - 82,373 - 40,294 - 12,592 363,703 10,159 3,369 377,231 Intra/inter group sales (137,583) - - (137,583) Total 226,120 10,159 3,369 239,648 Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total USD’000s USD’000s USD’000s USD’000s USD’000s 122,959 47,347 (7,854) 2,510 (11,561) 11,163 4,036 (5,943) 766 (1,663) 4,063 1,288 261 701 (519) 23,906 10,881 1,773 2,610 (2,228) 162,091 63,552 (11,763) 6,587 (15,971) Property plant and equipment Biological assets and inventories Cash, cash equivalents and bank overdrafts Trade and other receivables Trade and other payables Year ended 30 September 2019 (ii) In US Dollars Segment Retailing – Zambia Master Meats Nigeria Master Meats Ghana Retail – West Africa Total Retailing Beef Chicken Zamhatch Pork Milk and dairy Fish Eggs Total Cold Chain Food Production Gross Combined Retail and CCFP Less: Intra/Inter Sales Combined Retail & CCFP Stock Feed Crops Mill and Bakery Leather and shoe Edible oils Total Other Total Less: Intra/Inter Group Sales Group total Central operating costs and other income Operating profit Foreign exchange gains Finance costs Share of loss on equity accounted investment Profit before tax 80 Revenue USD’000s Revenue USD’000s 150,464 Gross Profit USD’000s Gross Profit USD’000s 13,964 2,222 1,144 10,385 4,254 4,895 3,137 5,472 583 1,117 2,477 710 - 11,261 3,752 38,550 20,096 9,145 20,532 16,764 2,972 4,644 14,896 2,178 - 15,013 165,477 112,703 278,180 (105,806) 172,374 80,039 38,490 17,074 307,977 (53,515) 254,462 3,366 17,330 29,843 47,173 47,173 15,503 21,925 3,187 87,788 87,788 (74,703) 13,085 (2,981) (6,720) (246) 3,138 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 5. Segmental reporting (continued) Year ended 30 September 2019 Segment Cold Chain Food Production Stockfeed Cropping Other Sub-total Intra/inter group sales Total Zambia USD’000s 263,166 80,039 38,490 17,074 398,769 (159,320) 239,449 Nigeria USD’000s 11,261 - - - 11,261 - 11,261 Ghana USD’000s 3,752 - - - 3,752 - 3,752 Total USD’000s 278,179 80,039 38,490 17,074 413,782 (159,320) 254,462 Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total Property plant and equipment Biological assets and inventories Cash, cash equivalents and bank overdrafts Trade and other receivables Trade and other payables USD’000s USD’000s USD’000s USD’000s USD’000s 156,069 58,867 (14,831) 2,132 (12,282) 15,901 5,373 (7,311) 767 (3,737) 6,397 1,454 111 902 36,923 15,200 1,241 3,625 215,290 80,894 (20,790) 7,426 (1,489) (2,158) (19,666) Geographical Zambia West Africa Rest of world Revenues ZMW’000s 3,618,848 218,759 37,497 3,875,104 ZMW’000s 3,236,288 28,217 - 3,264,505 2020 Non-current assets Revenues 2019 Non-current assets Non- current assets Revenues Non- current assets USD’000s USD’000s ZMW’000s ZMW’000s USD’000s USD’000s 213,538 1,752 - 215,290 2,903,553 184,954 46,460 3,134,967 2,818,694 23,130 - 2,841,824 235,679 15,013 3,770 254,462 223,794 13,529 2,325 239,648 160,690 1,401 - 162,091 Revenues 6. Other income Other income is mainly derived from rental income received by the letting out of guest houses on Mpongwe farm and from sales of scrap. 7. Operating profit Operating profit is stated after charging/(crediting): Depreciation – Owned assets – Leased assets Staff costs Legal and other professional fees Directors’ remuneration – Executive – Non-Executive Auditors’ remuneration – Audit services – Non audit services Allowance for credit losses (Loss)/profit on disposal of property, plant and equipment Rentals under leases 2020 2019 Group ZMW’000s Company ZMW’000s Group ZMW’000s Company ZMW’000s 125,150 16,258 493,484 7,568 11,555 3,374 14,929 4,825 - 4,825 6,980 74,440 6,022 255,721 7,229 11,555 3,374 14,929 4,560 - 4,560 3,937 (4,796) (1,216) 109,453 12,468 453,701 7,178 19,020 4,727 23,747 2,104 - 2,104 1,201 986 1,359 - 12,842 64,766 6,283 250,627 3,065 19,020 4,727 23,747 1,303 - 1,303 652 1,821 - 81 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 7. Operating profit (continued) Operating profit Operating profit before taxation is stated after charging/(crediting): Depreciation – Owned assets – Leased assets Staff costs Legal and other professional fees Directors’ remuneration – Executive – Non-Executive Auditors’ remuneration – Audit services – Non audit services Allowance for credit losses (Loss)/profit on disposal of property, plant and equipment Rentals under operating leases 8. Staff costs 2020 2019 Group Company Group Company USD’000s USD’000s USD’000s USD’000s 7,740 1,005 30,518 468 4,604 372 15,815 447 716 209 925 298 - 298 432 (32) 84 716 209 925 282 - 282 243 (75) - 8,884 1,012 36,826 583 1,543 384 1,927 171 - 171 97 80 1,042 5,257 510 20,346 249 1,543 384 1,927 106 - 106 53 147 - The Group employed an average of 7,082 employees during the year ended 30 September 2020 (2019: 7,407). Zambeef Products PLC, Zambeef Retailing Limited, Zam Chick Limited, Zambeef Products PLC, Zambeef Retailing Limited, Zam Chick Limited, Zamhatch Limited & Zamleather Limited Zamhatch Limited & Zamleather Limited Master Pork Limited Master Pork Limited Foreign Subsidiaries Foreign Subsidiaries Total Total 2020 2020 Number Number 2019 2019 Number Number 6,467 6,467 299299 316316 7,082 7,082 6,803 6,803 284284 320320 7,407 7,407 Employee costs for all employees of the Group, including Executive Directors, were: 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s Salaries and wages Social security costs Pension costs 449,513 21,980 21,991 493,484 27,799 1,359 1,360 30,518 436,227 12,856 4,618 453,701 2020 Francis Grogan Walter Roodt Faith Mukutu Danny Museteka 35,408 1,043 375 36,826 Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s Salaries and fees Bonus Pension contributions Airfare Allowance Employment taxes Total 1,083 2,240 2,309 1,848 7,480 - - - - 10 10 - - - 583 1,666 1,212 3,462 1,249 3,568 - 10 - 1,001 2,859 - 30 - 4,045 11,555 82 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 8. Staff costs (continued) 2019 Francis Grogan Walter Roodt Faith Mukutu Danny Museteka Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 7,562 3,558 21 730 7,149 19,020 Total Salaries and fees 3,995 1,545 201 1,821 Bonus 2,959 359 - 240 Pension contributions - 10 1 10 Airfare Allowance 365 - - 365 Employment taxes 4,236 1,244 11,555 3,158 100 302 1,569 4,005 Total 2020 Francis Grogan Walter Roodt Faith Mukutu Danny Museteka USD’000s USD’000s USD’000s USD’000s USD’000 s Salaries and fees 67 139 143 114 463 Bonus - - - Pension contributions - 1 1 Airfare Allowance - - - - 1 - - 3 - Employment taxes 36 75 77 62 250 Total 2019 103 215 221 177 716 Francis Grogan Walter Roodt Faith Mukutu Danny Museteka Total USD’000s USD’000s USD’000s USD’000s USD’000s Salaries and fees 324 125 16 148 613 Bonus 240 29 - 19 288 Pension contributions - 1 - 1 2 Airfare Allowance Employment taxes Total 30 - - 30 60 344 101 8 127 580 938 256 24 325 1,543 Details of Directors’ contracts may be found in the Directors’ Report. 9. Finance costs Interest on bank loans and overdrafts Finance lease cost Total 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 90,190 2,132 92,322 5,577 132 5,709 79,296 3,494 82,790 6,436 284 6,720 83 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 10. Taxation The Group has various tax rates applicable on the basis of individual entities being defined as agricultural entities or divisions (income tax rate of 10%) or manufacturing entities or divisions (income tax rate of 35%). The Group has further obtained tax holidays through investment incentives offered by the Zambian Government. (i) In Zambian Kwacha 2020 2019 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s (a) Tax charge Current tax: Tax charge Deferred tax: 5,172 6,277 9,222 6,803 Deferred taxation (note 10(e)) Tax charge for the year 107,785 112,957 34,523 40,800 (6,442) 2,780 27,388 34,191 (b) Reconciliation of tax charge (Loss)/profit before taxation Taxation on accounting (loss)/profit Effects of: Permanent differences: Disallowable expenses Timing differences: Livestock and crop valuations adjustment Other income Unrealised exchange losses/(gains) Other disallowable items Tax charge (c) Movement in taxation account Taxation recoverable at 1 October Charge for the year Taxation paid Taxation recoverable as at 30 September Analysed as follows: Taxation payable Taxation recoverable (22,673) (27,631) 66,109 7,390 38,653 (24,681) 55,795 6,805 27,087 17,612 3,774 533 2,328 (2,897) 7,975 (1,690) 5,172 (1,390) 5,172 (5,525) (1,743) 41 (1,784) (1,743) - (2,754) 8,106 (24,077) 6,277 (1,529) 6,278 (5,314) (565) - (565) (565) 1,924 1,342 (903) 27,766 9,222 (960) 9,222 (9,652) (1,390) 1,377 (2,767) (1,390) 1,923 4 (834) (1,628) 6,803 (2,510) 6,803 (5,822) (1,529) - (1,529) (1,529) 84 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 10. Taxation (continued) (d) (e) Tax returns for the year ended 30 September 2020 will be made on the due date. Deferred taxation Group Recognised in profit or Company Recognised in profit or 1 October loss 30 September 1 October loss 30 September ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s Year ended 30 September 2020 Temporary Differences/ Biological Valuation 14,162 4,125 18,287 13,716 1,213 14,929 Property and Equipment 58,464 47,734 106,198 60,872 2,428 63,300 Tax Loss (111,277) 56,831 (54,446) (65,175) Other Provisions (8,736) (905) (9,641) (2,783) 32,101 (1,219) (33,074) (4,002) (47,387) 107,785 60,398 6,630 34,523 41,153 Deferred Income Tax Liability Year ended 30 September 2019 Temporary Differences/ Biological Valuation Property and Equipment 13,444 38,384 718 20,080 14,162 58,464 13,012 32,733 Tax Loss (86,754) (24,523) (111,277) (64,695) Other Provisions (6,019) (2,717) (8,736) (1,808) 704 28,139 (480) (975) 13,716 60,872 (65,175) (2,783) Deferred Income Tax Liability (40,945) (6,442) (47,387) (20,758) 27,388 6,630 Summary 2020 2019 Deferred tax asset Deferred tax liability Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s (9,552) 69,950 60,398 - 41,153 41,153 (56,525) 9,138 (47,387) - 6,630 6,630 85 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 10. Taxation (continued) (ii) In US Dollars 2020 2019 Group USD’000s Company USD’000s Group USD’000s Company USD’000s (a) Tax charge Current tax: Tax charge Deferred tax: 320 388 749 553 Deferred taxation (note 10(e)) Tax charge for the year 6,666 6,986 2,135 2,523 (523) 226 2,223 2,776 (b) Reconciliation of tax charge (Loss)/profit before taxation Taxation on accounting (loss)/profit Effects of: Permanent differences: Disallowable expenses Timing differences: Livestock and crop valuations adjustment Other income Unrealised exchange losses/(gains) Other disallowable items Tax charge for the year (c) Movement in taxation account Taxation recoverable at 1 October Charge for the year Taxation paid Foreign exchange differences Taxation recoverable as at 30 September Analysed as follows: Taxation payable Taxation recoverable 2020 2019 Group USD’000s (1,402) (1,709) Company USD’000s 4,088 457 Group USD’000s 3,138 (2,003) Company USD’000s 4,529 552 1,675 1,089 306 43 144 (179) 494 (105) 320 - (170) 501 (1,489) 388 156 109 (73) 2,254 749 156 1 (67) (132) 553 2020 2019 Group Company Group Company USD’000s USD’000s USD’000s USD’000s (106) 320 (342) 41 (87) 2 (89) (87) (115) 388 (328) 27 (28) - (28) (28) (78) 749 (783) 6 (106) 104 (210) (106) (205) 553 (473) 10 (115) - (115) (115) (d) Tax returns for the year ended 30 September 2020 will be made on the due date. 86 Zambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 10. Taxation (continued) (e) Deferred taxation Group Recognised in profit or 1 October loss 30 September 1 October Company Recognised in profit or loss 30 September USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s Year ended 30 September 2020 Temporary Differences/ Biological Valuation Property and Equipment Tax Loss Other Provisions Deferred Income Tax Liability Year ended 30 September 2019 Temporary Differences/ Biological Valuation Property and Equipment Tax Loss Other Provisions Deferred Income Tax Liability 1,073 4,429 (8,430) (662) - (3,590) 1,098 3,136 (7,087) (492) - (3,345) (165) 844 5,727 183 77 6,666 (25) 1,293 (1,343) (170) (278) (523) 908 5,273 1,113 4,941 (2,703) (5,326) (479) (226) - 2,999 - 502 1,073 4,429 1,312 3,300 (8,430) (6,125) (662) (182) - - (3,590) (1,695) (190) (1,026) 2,779 (22) 594 2,135 (199) 1,641 799 (44) 26 2,223 923 3,915 (2,547) (248) - 2,043 1,113 4,941 (5,326) (226) - 502 Summary 2020 2019 Deferred tax asset Deferred tax liability Group USD’000s Company USD’000s Group USD’000s Company USD’000s (474) 3,473 2,999 - 2,043 2,043 (4,282) 692 (3,590) - 502 502 All deferred tax assets (including tax losses and other tax credits) have been recognised in the statement of financial position. 11. Dividends Dividends declared or paid - - - - There has been no dividend paid or proposed for 2020 (2019: ZMW nil). 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 87 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 12. Earnings per share Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the parent company as the numerator, i.e., no adjustments to profit were necessary in 2019 or 2020. For diluted earnings per share, the number of shares used in the calculation of EPS includes preference shares and outstanding options awarded to management. Basic earnings per share have been calculated in accordance with IAS 33 which requires that earnings should be based on the net profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period. The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Basic earnings per share (Loss)/profit for the year Weighted average number of ordinary shares for the purposes of basic earnings per share. Weighted average number of ordinary shares for the purposes of diluted earnings per share. Basic earnings per share (ZMW ngwee and US cents) – Continued operations Basic earnings per share (ZMW ngwee and US cents) – Discontinued operations Total Basic earnings per share (ZMW ngwee and US cents) Diluted earnings per share 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s (103,419) (6,396) 18,100 1,469 300,580 300,580 300,580 300,580 400,638 400,638 400,638 400,638 Ngwee US cents Ngwee US cents (45.12) (2.79) 11.80 0.96 11.12 0.69 (5.78) (0.47) (34.00) (2.10) 6.02 0.49 Diluted earnings per share – continued operations (45.12) (2.79) 8.86 0.72 Diluted earnings per share – discontinued operations Total diluted earnings per share 11.12 0.69 (4.34) (0.35) (34.00) (2.10) 4.52 0.37 88 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 13. Goodwill Cost and Net Book Value At 1 October 2018 Arising during the year Foreign exchange difference At 30 September 2019 Arising during the year Foreign exchange difference At 30 September 2020 ZMW’000s USD’000s 166,801 13,628 - - 166,801 - - 166,801 - (992) 12,636 - (4,354) 8,282 For the purpose of annual impairment testing, goodwill is allocated to the following cash-generating units, which are the units expected to benefit from the synergies of the business combinations in which the goodwill arises, as set out below, and is compared to its recoverable value: Masterpork Limited Zam Chick Limited Zamhatch Limited 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 15,699 141,786 9,316 166,801 779 7,040 463 8,282 15,699 141,786 9,316 166,801 1,189 10,741 706 12,636 The recoverable amount of each segment was determined based on value-in-use calculations, covering a detailed five-year forecast, followed by an extrapolation of expected cash flows for the remaining useful lives using a growth rate determined by management. The present value of the expected cash flows of each segment is determined by applying a discount rate which reflects the Group’s cost of borrowing and adjusted for specific risks that apply to each segment. The Group tests annually for impairment, or more frequently if there are indicators that goodwill might be impaired. The Board’s key assumptions are based on their past experience and future expectations of the market over the longer term. The Group’s cost of external borrowing adjusted for dividend payment history, currency risk and in accordance with IAS 36 ‘Impairment of Assets’ is 15%. In arriving at the individual segment discount rate, management considered risks that are specific to each unit. The discount rates used in the value in use calculation for Masterpork, Zamchick and Zamhatch are 17%, 15.5% and 15% respectively. Masterpork, Zamchick and Zamhatch are expected to achieve a minimum revenue and profitability growth rate of 10%, 9%, 6% based on past growth recorded and future expected growth, and in light of projected increase in Zambia’s population and therefore protein consumption. 89 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 13. Goodwill (continued) Due to the significant headroom within historical impairment calculations, assumptions including growth rates of cash flows and changes to selling prices and direct costs have not been sensitised. Therefore, management is not aware of any significant risk of material adjustment to the goodwill figure in the next financial year. Management’s key assumptions on the cashflow include stable increase in profit margins based on the increase in consumption in the domestic market. Recoverable amount of each operating unit is as follows: Masterpork Zamchick Zamhatch Total 2020 2020 2019 2019 ZMW’000s USD’000s ZMW’000s USD’000s 125,313 6,222 106,687 489,678 24,314 602,360 8,082 45,633 1,171,154 1,786,145 58,151 88,687 1,942,175 147,135 2,651,222 200,850 The Board is not aware of any other changes that would necessitate changes to its calculations. 14. Property, plant and equipment (i) In Zambian Kwacha (a) Group Land and buildings Aircraft Plant and machinery Motor vehicles Furniture and equipment Capital work in progress Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s Cost or valuation As at 1 October 2018 2,052,628 865 815,646 65,605 23,307 46,102 3,004,153 Exchange differences Additions Disposals Transfer to held for sale Transfers As at 30 September 2019 71,470 13,868 (2,030) (116,020) 23,136 - - - - - 20,871 15,621 (7,108) (27,547) 57,482 (194) 7,399 (2,505) (876) 7,099 61 4,948 (280) (420) 4,001 110 92,318 71,989 113,825 - (11,923) (698) (145,561) (91,718) - 2,043,052 865 874,965 76,528 31,617 25,785 3,052,812 Exchange differences 516,215 7,938 15,425 (1,153) (146,063) 11,499 - - - - - - 128,710 1,369 27,071 10,079 - - (4,875) (3,203) (48,406) (787) 28,720 11,406 820 4,551 - (55) (387) 2,061 - 647,114 43,025 92,664 - 15,425 (4,102) (13,388) - (195,643) (53,686) - 2,446,913 865 1,006,185 95,392 38,607 11,022 3,598,984 Additions Adjustment for transition to IFRS16 Disposals Transfer to held for sale Transfers As at 30 September 2020 90 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS – 30 SEPTEMBER 2020 14. Property, plant and equipment (continued) Land and Land and buildings buildings Aircraft Aircraft Plant and Plant and machinery machinery Motor Motor vehicles vehicles Furniture Furniture and and equipment equipment Capital Capital work in work in progress progress Total Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s (a) Group (continued) (a) Group (continued) Depreciation As at 1 October 2018 Exchange difference Charge for the year Disposals Transfer to held for sale As at 30 September 2019 Exchange difference Charge for the year Charge on right of use assets Disposals Transfer to held for sale As at 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 16,972 539 18,232 (77) (4,630) 31,036 (728) 19,304 8,362 - (5,044) 52,930 86 - 87 - - 66,820 (2,044) 83,340 (222) (5,255) 15,457 3 17,459 (814) (246) 173 142,639 31,859 - 86 - - - (1,897) 95,912 - (598) (14,507) 259 221,549 (982) 21,893 - (1,536) (329) 50,905 44,487 44,669 2,597 (26) 2,803 (20) (73) 5,281 (543) 4,213 - (6) (109) 8,836 - - - - - - - - - - - - 101,932 (1,528) 121,921 (1,133) (10,204) 210,988 (4,150) 141,408 8,362 (2,140) (19,989) 334,479 29,771 26,336 11,022 3,264,505 25,785 2,841,824 2,393,983 2,012,016 606 692 784,636 732,326 b) Included in the net carrying amount of property, plant and equipment are right-of-use assets as follows: Land and Land and buildings buildings Plant and Plant and Motor vehicles machinery Motor vehicles machinery Total Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s Gross carrying amount At 1 October 2019 - Adjustment on transition to IFRS 16 15,425 Additions Disposals At 30 September 2020 Depreciation and impairment At 1 October 2019 Disposals Depreciation At 30 September 2020 - - 15,425 54,801 - - - 54,801 - 8,519 - 8,362 8,362 - 6,410 14,929 1,560 - 4,020 - 5,580 366 - 963 1,329 56,361 15,425 4,020 - 75,806 8,885 - 15,735 24,620 Carrying amount 30 September 2020 7,063 39,872 4,251 51,186 91 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 14. Property, plant and equipment (continued) Land and buildings Aircraft Plant and machinery Motor vehicles Furniture and equipment Capital work in progress Total USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s (ii) In US Dollars (a) Group Cost or valuation As at 1 October 2018 Foreign translation Additions Transfer to held for sale Transfers Disposals As at 30 September 2019 Foreign translation Additions Adjustment for transition to IFRS16 Transfers Disposals 168,428 (7,701) 1,126 (8,789) 1,878 (165) 154,777 (26,534) 491 954 711 (71) Transfer to held for sale As at 30 September 2020 (9,033) 121,295 Depreciation As at 1 October 2019 Charge for the year Disposals Transfer to held for sale Foreign Translation As at 30 September 2019 Charge for the year Charge on right of use assets Disposals Transfer to held for sale Foreign Translation As at 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 (4,986) 1,480 (6) (351) 6,214 2,351 1,194 517 - (312) (1,020) 2,730 118,565 152,426 92 71 (5) - - - - 66 (23) - - - - - 67,332 (4,317) 1,267 (2,087) 4,666 (577) 66,284 5,411 (521) 601 (66) 576 (203) 5,798 (16,480) (2,144) 1,674 623 - 1,776 (301) (2,994) - 705 (198) (49) 1,934 (210) 402 (32) 325 (23) 1,869 245,045 1,739 (11,015) 5,843 9,239 (53) (11,027) (7,445) - - (968) 2,396 1,953 231,274 (861) 281 - 128 (3) (23) (104) (46,146) 2,661 5,730 - (3,320) 954 - (254) (827) - (12,099) 43 49,959 4,735 1,918 936 178,886 7 7 - - (1) 13 5 - - - (5) 13 30 53 10,895 6,764 (18) (397) (6,437) 10,807 5,931 - (37) (897) (4,623) 11,181 38,778 55,477 1,649 1,417 (66) (19) (568) 2,413 1,354 - (95) (20) (1,219) 2,433 2,302 3,385 370 228 (2) (6) (190) 400 261 - - (7) (216) 438 - - - - - - - - - - - - 7,935 9,896 (92) (773) (982) 15,984 8,745 517 (132) (1,236) (7,083) 16,795 1,480 1,996 936 162,091 1,953 215,290 Zambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 14. Property, plant and equipment (continued) (a) (b) (c) (d) (e) The Group’s property, plant and equipment situated in Zambia were revalued as at 30 September 2017 by Messrs Fairworld Properties Limited, Registered Valuation Surveyors, on the basis of market value. The surplus on valuation totalling ZMW790 million (USD82 million) was transferred to a revaluation reserve. The depreciation charge for the year includes ZMW31.3 million (USD1.9 million) (2019: ZMW29.7 million [USD2.4 million]) which relates to the surplus over the original cost of fixed assets shown at a valuation. As this amount should not be taken to reduce the Group’s distributable reserve, an equivalent amount has been transferred to distributable reserve from revaluation reserve. The capital work in progress depicts all capital expenditure items on projects that are yet to be completed. In the opinion of the Directors, the carrying values of property, plant and equipment stated above are not higher than their fair values. If the cost model had been used, the carrying amounts of the property plant and equipment would be ZMW2,096,592 thousand (2019: ZMW1,642,766 thousand). The revalued amounts include a revaluation surplus of ZMW1,167,913 thousand before tax (2019: ZMW1,199,058 thousand), which is not available for distribution to the shareholders of Zambeef Products PLC. (f) Included in the net carrying amount of property, plant and equipment are right-of-use assets as follows: Gross carrying amount At 1 October 2019 Adjustment on transition to IFRS 16 Additions Exchange differences At 30 September 2020 Depreciation and impairment At 1 October 2019 Exchange differences Depreciation At 30 September 2020 Carrying amount 30 September 2020 Land and Land and buildings buildings USD’000s USD’000s - 953 - (188) 765 Plant and Plant and Motor vehicles machinery Motor vehicles machinery USD’000s USD’000s USD’000s USD’000s 4,152 - - (1,430) 2,722 118 - 249 (90) 277 Total Total USD’000s USD’000s 4,270 953 249 (1,708) 3,764 - (102) 517 415 646 (300) 396 742 28 (21) 60 67 674 (423) 973 1,224 350 1,980 210 2,540 93 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 14. Property, plant and equipment (continued) (i) In Zambian Kwacha (b) Company Cost or valuation Land and buildings Plant and machinery Motor vehicles Furniture and equipment Capital work in progress Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s At 1 October 2018 1,629,373 511,443 23,974 12,687 38,440 2,215,917 Exchange differences Additions 70,294 2,121 20,195 2,264 Assets held for sale (116,020) (27,547) Disposals Transfers (1,675) 3,107 (1,160) 23,238 249 1,766 (876) (421) 1,984 154 1,032 (420) (118) - 16,560 90,892 23,743 (698) (145,561) - (3,374) 2,796 (31,125) - As at 30 September 2019 1,587,200 528,433 26,676 16,131 23,177 2,181,617 Exchange differences 510,532 129,184 Additions Transfers Disposals 4,926 17,291 (1,153) 17,404 4,482 (3,653) Transfer to held for sale (146,063) (48,406) 1,804 3,238 - (1,936) (787) 934 2,304 607 (55) (387) - 642,454 7,513 35,385 (22,380) - (34) (6,831) - (195,643) As at 30 September 2020 1,972,733 627,444 28,995 19,534 8,276 2,656,982 Depreciation As at 1 October 2018 Assets held for sale Charge for the year Disposals As at 30 September 2019 Charge for the year Disposals Assets held for sale As at 30 September 2020 Net book value 10,564 (4,630) 11,003 (66) 16,871 9,364 - (5,044) 21,191 45,307 (5,255) 53,302 (223) 93,131 63,374 (529) (14,507) 141,469 At 30 September 2020 1,951,542 485,975 At 30 September 2019 1,570,329 435,302 4,122 (246) 5,299 (125) 9,050 5,921 (857) (329) 13,785 15,210 17,626 1,102 (73) 1,445 (19) 2,455 1,803 (6) (109) 4,143 - - - - - - - - - 61,095 (10,204) 71,049 (433) 121,507 80,462 (1,392) (19,989) 180,588 15,391 13,676 8,276 2,476,394 23,177 2,060,110 94 Zambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 14. Property, plant and equipment (continued) (ii) In US Dollars (b) Company Cost or valuation Land and buildings USD’000s Plant and machinery USD’000s Motor vehicles USD’000s Furniture and equipment USD’000s Capital work in progress USD’000s Total USD’000s As at 1 October 2018 133,119 41,703 2,027 1,037 3,140 181,026 Exchange differences Additions 5,706 172 1,639 184 Assets held for sale (8,789) (2,087) Transfers Disposals Foreign translation As at 30 September 2019 Exchange differences Additions Transfers Disposals 252 (136) (10,081) 120,243 31,573 305 1,069 (71) 1,886 (94) (3,198) 40,033 7,989 1,076 277 (226) Assets held for sale Foreign translation (7,252) (2,403) (47,916) (15,592) 20 143 (66) 161 (34) (230) 2,021 112 200 - (120) (39) (734) As at 30 September 2020 97,951 31,154 1,440 Depreciation As at 1 October 2018 Charge for the year Assets held for sale Disposals Foreign translation As at 30 September 2019 Charge for the year Disposals Transfer to held for sale Foreign translation As at 30 September 2020 Net book value At 30 September 2020 At 30 September 2019 863 893 (351) (5) (122) 1,278 579 - (250) (555) 1,052 3,689 4,326 (397) (18) (544) 7,056 3,919 (33) (720) (3,198) 7,024 96,899 118,965 24,130 32,977 336 430 (19) (10) (52) 685 366 (53) (16) (297) 685 755 1,336 12 84 (32) 227 (10) (97) - 1,344 7,377 1,927 (53) (11,027) (2,526) - - (274) (149) (13,755) 1,221 1,756 165,274 58 142 38 (3) (19) (467) 970 90 118 (6) (2) (14) 186 112 - (5) (87) 206 - 465 (1,384) (2) - 39,732 2,188 - (422) (9,713) (424) (65,133) 411 131,926 - - - - - - - - - - - 4,978 5,767 (773) (35) (732) 9,205 4,976 (86) (991) (4,137) 8,967 764 1,035 411 122,959 1,756 156,069 (a) (b) (c) The Company’s property, plant and equipment situated in Zambia were revalued as at 30 September 2017 by Messrs Fairworld Properties Limited, Registered Valuation Surveyors, on the basis of market value. The surplus on valuation totalling ZMW651 million (USD54.1 million) was transferred to a revaluation reserve. In the opinion of the Directors, the carrying values of property, plant and equipment stated above are not higher than their fair values. If the cost model had been used, the carrying amounts of the property plant and equipment would be ZMW1,614,242 thousand (2019: ZMW1,169,775 thousand). The revalued amounts include a revaluation surplus of ZMW828,538 thousand before tax (2019: ZMW862,152 thousand), which is not available for distribution to the shareholders of Zambeef Products PLC. 95 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 15. Investments in subsidiaries, associates and minority interests The principal subsidiaries and associates of the Company, their country of incorporation, ownership of their issued, ordinary share capital and the nature of their trade are listed below: (a) Directly/partially owned: Country of incorporation Zambeef Retailing Limited Zambia Zamleather Limited Zambia Master Meat and Agro Production Co. of Nigeria Limited Nigeria Master Meat (Ghana) Limited Ghana Masterpork Limited Zampalm Limited Zam Chick Limited Zambia Zambia Zambia Zamhatch Limited Zambia Proportion of all classes of issued share capital owned by the Company 2020 Proportion of all classes of issued share capital owned by the Company 2019 Principal activity 100 100 80 90 100 10 100 100 Retailing of Zambeef products 100 Processing and sale of leather and production and sale of shoes 100 Processing and sale of meat products Processing and sale of meat products 80 90 Processing and sale of pork and processed products 100 10 Palm tree plantation Processing and sale of poultry products 100 Chicken breeding, rearing and production of stock feed 100 The proportion of voting rights held is the same as the proportion of shares held. (b) Movement at cost: At beginning of the year Foreign translation At end of the year 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 245,807 - 245,807 18,622 (6,417) 12,205 245,807 - 245,807 20,082 (1,460) 18,622 96 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 15. Investments in subsidiaries and associates (continued) (c) The Company’s interests in its subsidiaries, which are unlisted, are as follows: Name of company Zambeef Retailing Limited Zamleather Limited West Africa Operations Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2020 Zambeef Retailing Limited Zamleather Limited West Africa Operations Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2019 Name of company Zambeef Retailing Limited Zamleather Limited Country of Incorporation Assets ZMW’000s Liabilities ZMW’000s Revenues ZMW’000s Profit/(loss) ZMW’000s Zambia Zambia Nigeria & Ghana Zambia Zambia Zambia Zambia Zambia Nigeria & Ghana Zambia Zambia Zambia 1,158,827 1,399,097 2,149,113 (171,151) 101,258 76,548 29,950 (2,665) 73,344 73,545 218,759 7,595 253,585 167,145 290,584 (4,069) 1,079,335 851,278 300,668 1,189 811,454 539,538 591,707 40,384 3,477,803 3,107,151 3,580,781 (128,717) 899,371 983,478 1,853,720 (53,340) 91,242 63,868 26,828 (6,453) 21,158 68,093 184,954 2,592 234,170 142,910 252,952 (49) 854,449 633,437 247,580 23,030 654,402 444,883 420,633 57,319 2,754,792 2,336,669 2,986,667 23,099 Country of Incorporation Assets USD’000s Liabilities USD’000s Revenues USD’000s Profit/(loss) USD’000s Zambia Zambia West Africa Operations Nigeria & Ghana Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2020 Zambeef Retailing Limited Zamleather Limited Zambia Zambia Zambia Zambia Zambia West Africa Operations Nigeria & Ghana Masterpork Limited Zam Chick Limited Zamhatch Limited Zambia Zambia Zambia Total at the end of 30 September 2019 57,539 69,469 132,907 (10,584) 5,028 3,642 3,801 1,852 3,652 13,529 12,607 8,299 17,977 53,592 42,268 18,594 (165) 470 (252) 74 40,291 26,789 36,593 2,497 172,699 154,278 221,452 68,134 73,543 150,464 6,912 1,603 4,838 2,178 5,158 15,013 17,740 10,827 20,532 64,731 47,988 20,096 49,576 26,494 34,142 208,696 168,848 242,425 (7,960) (4,330) (524) 210 (4) 1,869 4,653 1,874 97 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 15. Investments in subsidiaries and associates (continued) Name of company Zambeef Retailing Limited Zamleather Limited Master Meat and Agro Production Co of Nigeria Limited Master Meat (Ghana) Limited Masterpork Limited Zam Chick Limited Zamhatch Limited 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 31 1,477 216 1,310 26,601 158,230 57,942 245,807 2 73 10 64 1,321 7,858 2,877 12,205 31 1,477 216 1,310 26,601 158,230 57,942 245,807 2 112 16 99 2,015 11,988 4,390 18,622 (d) (e) In the opinion of the Directors, the value of the company’s interests in the subsidiary companies is not less than the amounts at which they are stated in these financial statements. As at the reporting date, the Group has a 10% equity interest in Zampalm Limited. The company has significant influence over Zampalm Limited in that, it has representation on the Board of Directors, participates in policy making decisions and provides essential farming technical information. The company had a management contract which expired in September 2020 and was responsible for day to day management of Zampalm Limited. The investment is accounted for using the equity method. Zampalm Limited’s principal activity is the establishment of a palm oil plantation and processing plant and the production of crude palm oil. The company is still in the developmental stage and is expected to start generating profits in 2024. The summarised financial information for Zampalm Limited is as below; Revenue Gross Loss Loss before tax Non-current assets Current assets Total assets Capital and reserves Current liabilities Total equity and liabilities 2020 2019 ZMW’000s USD’000’s ZMW’000s USD’000s 3,868 (1,625) (31,770) 273,811 6,625 280,436 106,846 173,590 280,436 239 (100) (1,965) 13,595 329 13,924 5,305 8,619 13,924 1,339 (10,674) (30,356) 270,301 8,040 278,341 138,616 139,725 278,341 109 (866) (2,464) 20,477 609 21,086 10,501 10,585 21,086 Summarised financial information of the Group’s share in the associate is as follows: 2020 2019 ZMW’000s USD’000’s ZMW’000 USD’000 Opening balance Arising during the year Loss from continuing operation Foreign exchange difference Total comprehensive income Carrying amount of the Group’s interest 12,376 34,627 (3,177) - 31,450 43,826 938 2,141 (196) (707) 1,238 2,176 15,412 - (3,036) - (3,036) 12,376 1,259 - (246) (75) (321) 938 (i) There was no cash movement during the year. The movement shown above relates to a balance that was owed by the associate which was converted to equity during the year. 98 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 16. (a) Biological assets – Group Biological assets comprise standing crops, feedlot cattle, dairy cattle, pigs and chickens. At 30 September 2020 there were 349 hectares of standing crops, 9,774 cattle (6,697 feedlot cattle and 3,077 dairy cattle) and 731,710 chickens (106,555 breeding, 425,824 layers and 199,331 broilers), and 3,521 pigs. A total of 40,410 feedlot cattle, 771 dairy cattle, 8,568 pigs and 7,809,410 chickens were culled during the year. (i) Zambian Kwacha Gains/ (losses) arising from fair value attributable to physical changes Gains/ (losses) arising from fair value attributable to price changes Decrease due to harvest/ transferred to inventory As at 30 September As at 1 October Increase due to purchases Standing Crops Feedlot Cattle Dairy Cattle Pigs Chickens Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 27,260 42,878 49,767 4,555 341,400 229,142 76,917 12,197 45,957 393,865 401,948 (34,956) (719,026) 34,900 (7,698) 1,316 93,895 6,838 (273,106) 12,654 1,083 (69,260) (15,031) - (481,190) 16,626 40,652 62,380 4,120 52,527 170,417 1,053,521 524,361 (14,381) (1,557,613) 176,305 (ii) In US Dollars As at 1 October Foreign exchange Increase due to purchases Gains/ (losses) arising from fair value attributable to physical changes Gains arising from fair value attributable to price changes Decrease due to harvest/ transferred to inventory As at 30 September USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s Standing Crops Feedlot Cattle Dairy Cattle Pigs Chickens Total 2,066 3,247 3,771 344 3,482 12,910 (583) (1,091) (1,454) (113) (1,280) (4,521) 21,113 14,171 4,757 754 24,358 65,153 24,859 (2,162) (44,467) 2,158 (476) 81 5,807 32,429 423 783 67 - (16,890) (4,283) (930) (29,758) (889) (96,328) 826 2,018 3,098 203 2,609 8,754 99 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 16. (b) Biological assets – Company Biological assets comprise standing crops, feedlot cattle, dairy cattle, and chickens. At 30 September 2020 there were 349 hectares of standing crops, 9,774 cattle (6,697 feedlot cattle and 3,077 dairy cattle), and 304,536 chickens. A total of 40,410 feedlot cattle, 771 dairy cattle and 267,920 chickens were culled during the year. (i) Zambian Kwacha Standing Crops Feedlot Cattle Dairy Cattle Chickens Total (ii) In US Dollars Gains/(losses) arising from fair value attributable to physical changes Gains/ (losses) arising from fair value attributable to price changes Decrease due to harvest/ transferred to inventory As at 30 September As at 1 October Increase due to purchases ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 27,260 42,878 49,767 17,310 341,400 229,142 76,917 61,919 401,948 (34,956) (719,026) 34,900 (7,698) (6,698) 6,838 (273,106) 12,654 - (69,260) (52,688) 16,626 40,652 62,380 19,843 137,215 709,378 422,452 (15,464) (1,114,080) 139,501 Gains/ (losses) arising from fair value attributable to physical changes Gains/ (losses) arising from fair value attributable to price changes Decrease due to harvest/ transferred to inventory As at 30 September As at 1 October Foreign exchange Increase due to purchases USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s Standing Crops Feedlot Cattle Dairy Cattle Chickens Total 2,066 3,247 3,771 1,311 (583) (1,091) (1,454) (482) 21,113 14,171 4,757 3,829 24,858 (2,162) (44,467) 2,158 (476) (414) 423 783 - (16,890) (4,283) (3,258) 10,395 (3,610) 43,870 26,126 (956) (68,898) 825 2,018 3,098 986 6,927 100 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 17. Inventories (i) In Zambian Kwacha Trading stocks Abattoir stocks Raw materials Stock feed Consumables Raw hides and chemicals (ii) In US Dollars Trading stocks Abattoir stocks Raw materials Stock feed Consumables Raw hides and chemicals 2020 Group 2019 Company ZMW’000s Group ZMW’000s Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 595,376 1,817 325,242 23,930 151,290 5,985 516,046 1,817 187,028 8,364 100,826 - 1,103,640 814,081 406,602 345,724 - - 220,250 117,626 - 683,600 580 228,885 139,018 163,167 2,907 941,159 2019 2020 Group Company USD’000s Group USD’000s Company USD’000s USD’000s USD’000s USD’000s USD’000s 29,562 90 16,149 1,188 7,512 297 25,623 90 9,287 415 5,006 - 54,798 40,421 30,803 44 17,340 10,532 12,361 220 71,300 26,192 - - 16,685 8,911 - 51,788 A total of ZMW2,645.6 million (USD163.5 million) (2019: ZMW2,063.7 million (USD167.5 million]) was included in profit and loss as an expense within cost of sales. Inventory was turned every 152 days (2019: 127 days). Biological assets totalling ZMW1,557.6 million (USD96.3 million) (2019: ZMW1,707.4 million [USD138.6 million]) were transferred to inventories during the year. 101 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 18. Trade and other receivables (i) In Zambian Kwacha Group Company Group Company Gross trade receivables 85,386 37,518 55,758 18,820 ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2020 2019 Less: allowance for expected credit losses Trade receivables Prepayments Other receivables Less: other provisions (5,075) 80,311 25,295 32,710 (5,648) 132,668 (1,516) 36,002 18,335 - (3,782) 50,555 (4,910) 50,848 18,024 29,153 - (1,913) 16,907 11,246 - - 98,025 28,153 2020 2019 (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s Gross trade receivables Less: allowance for expected credit losses Trade receivables Prepayments Other receivables Less: other provisions 4,240 (252) 3,988 1,256 1,623 (280) 6,587 1,863 (75) 1,788 910 - (188) 2,510 4,224 (372) 3,852 1,364 2,210 - 7,426 1,426 (145) 1,281 852 - - 2,133 (a) Allowance for credit losses The trade receivables do not have a significant financing component and the simplified approach has been applied to calculate the loss allowance on life time expected credit losses. The allowance for credit losses is calculated for each business unit based on the historical loss experience and its particular customer profile with shared and specific characteristics which are influenced by the nature of their business. The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value. All of the Group’s trade and other receivables in the comparative periods have been reviewed for indicators of impairment. The impaired trade receivables are mostly due from customers in the business-to-business market that are experiencing financial difficulties. Note 29(b) includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected credit losses. Both the current and comparative impairment provisions apply the IFRS 9 expected loss model. 102 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 18. Trade and other receivables (continued) Movements on the Group’s provision for allowance for expected credit losses and other provisions are set out in the table below: (i) In Zambian Kwacha At 1 October Utilised Charge for the year At 30 September Analysed as follows: Expected credit losses Other provisions Total (ii) In US Dollars At 1 October Foreign exchange Utilised Charge for the year At 30 September Analysed as follows: Expected credit losses Other provisions Total Trade receivables have a 15 or 30 day credit period. 2020 2019 Group ZMW’000s Company ZMW’000s Group ZMW’000s Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 4,910 (1,167) 6,980 10,723 5,075 5,648 10,723 2020 Group 1,913 (552) 3,937 5,298 1,516 3,782 5,298 1,331 (70) 652 1,913 1,913 - 1,913 4,822 (1,113) 1,201 4,910 4,910 - 4,910 2019 Company USD’000s Group USD’000s Company USD’000s USD’000s USD’000s USD’000s USD’000s 372 (200) (72) 432 532 252 280 532 145 (91) (34) 243 263 75 188 263 394 (29) (90) 97 372 372 - 372 109 (11) (6) 53 145 145 - 145 103 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 18. Trade and other receivables (continued) The matrix for the calculation of the expected credit losses is as detailed below. 30 September 2020 Trade receivables days past due Current More than More than More than Total 30 days 60 days 90 days Expected credit loss rate 4.1% 3.6% Gross carrying amount - ZMW’000 70,306 11,723 7.2% 1,518 90.0% 1,839 85,386 Lifetime expected credit loss - ZMW’000 2,894 417 109 1,655 5,075 30 September 2019 Trade receivables days past due Current More than More than More than Total 30 days 60 days 90 days Expected credit loss rate 2.5% Gross carrying amount - ZMW’000 45,718 4.7% 774 17.1% 4,268 60.1% 4,998 55,758 Lifetime expected credit loss - ZMW’000 1,137 36 731 3,006 4,910 30 September 2020 Trade receivables days past due Current More than More than More than Total 30 days 60 days 90 days Expected credit loss rate 4.1% Gross carrying amount - USD’000 3,492 3.6% 582 Lifetime expected credit loss - USD’000 144 21 7.2% 90.0% 75 5 91 82 4,240 252 30 September 2019 Trade receivables days past due Current More than More than More than Total 30 days 60 days 90 days Expected credit loss rate 2.5% 4.7% 17.1% 60.1% Gross carrying amount - USD’000 3,463 Lifetime expected credit loss - USD’000 86 59 3 323 379 4,224 55 228 372 104 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 19. Amounts due from related companies (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2020 2019 Chisamba Ranching and Cropping Chisamba Ranching and Cropping Danny Museteka Danny Museteka Tractorzam Limited Tractorzam Limited Tembilo Farms Limited Tembilo Farms Limited Wellspring Limited Wellspring Limited Lillian Limbuka Lillian Limbuka Zamleather Limited Zamleather Limited Zampalm Limited Zampalm Limited Master Meat & Agro Production Co. of Master Meat & Agro Production Co. of Nigeria Limited Nigeria Limited Zam Chick Limited Zam Chick Limited Master Meat (Ghana) Limited Master Meat (Ghana) Limited Zamhatch Limited Zamhatch Limited 4,185 4,185 -- -- 459459 -- 1,049 1,049 -- 3,644 3,644 -- -- -- -- -- -- -- -- -- -- 47,704 47,704 3,229 3,229 59,974 59,974 704,526 704,526 3,318 3,318 501,366 501,366 258258 7070 -- 5959 5,624 5,624 508508 -- 35,035 35,035 -- -- -- -- 601601 7070 -- -- 5,624 5,624 -- 40,154 40,154 20,184 20,184 60,977 60,977 534,335 534,335 2,728 2,728 414,072 414,072 9,337 9,337 1,320,117 1,320,117 41,554 41,554 1,078,745 1,078,745 (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2020 2019 Chisamba Ranching and Cropping Tractorzam Limited Danny Museteka Tembilo Farms Limited Wellspring Limited Lilian Limbuka Zamleather Limited Zampalm Limited Zam Chick Limited Mastermeat & Agro Production Co. of Nigeria Limited Master Meat (Ghana) Limited Zamhatch Limited 208 - - 23 - 52 - 181 - - - - 464 - - - - - - 2,369 160 34,981 2,978 165 24,894 65,547 20 - 5 4 427 38 - 2,654 - - - - 3,148 45 - 5 - 427 - 3,042 1,529 40,479 4,619 207 31,369 81,722 The above balances relate to arm’s length transactions between the transacting parties. External parties that fall under the ‘Related Party’ disclosure are with respect to Directors who have shareholding in companies transacting with the Group. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. The amounts due from related parties have been assessed for impairment using the expected credit loss model. The expected credit loss determined is immaterial and therefore no separate disclosure has been made. 105 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 20. Cash and cash equivalents (i) In Zambian Kwacha (i) In Zambian Kwacha Group Group Company Company Group Group Company Company 20202020 20192019 Cash in hand and at bank Bank overdrafts (note (b)) ZMW’000s ZMW’000s ZMW’000s ZMW’000s 111,136 12,645 56,753 11,844 (348,045) (170,822) (331,178) (207,616) (236,909) (158,177) (274,425) (195,772) 20202020 20192019 (ii) In US Dollars (ii) In US Dollars Group Group Company Company Group Group Company Company Cash in hand and at bank Bank overdrafts (note (b)) (a) Banking facilities USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s 5,518 (17,281) (11,763) 628 (8,482) (7,854) 4,299 (25,089) (20,790) 897 (15,728) (14,831) The Group has overdraft facilities totalling ZMW193.3 million (2019: ZMW118.3 million) with Zanaco Bank Plc. The Zanaco Bank overdraft bears an interest rate of Bank of Zambia Policy rate plus 8 per cent. on the Kwacha facility. The Group has overdraft facilities totalling ZMW74.6 million (2019: ZMW74.6 million) and USD5 million (2019: USD5 million) with Citibank Zambia Limited. The Citibank overdrafts bear interest rates of Bank of Zambia Policy rate (BPR) plus 0.25% plus Liquidity Premium (182 day Treasury bill rate minus BPR) on the Kwacha facility and 3 month USD LIBOR rate plus 3.5 per cent. on the USD facility. During 2019 the Group obtained an additional headroom overdraft facility totalling USD2.3 million with Citibank Zambia Limited which bears an interest rate of 3 month USD LIBOR rate plus 5 per cent which was discharged in April 2020. The Group has overdraft facilities totalling ZMW57.5 million (2019: ZMW57.5 million) and USD2 million (2019: USD2 million) with Stanbic Bank Zambia Limited. The Stanbic Bank overdrafts bear interest rate of Bank of Zambia Policy rate plus 6 per cent. on the Kwacha facility and 3 month USD LIBOR rate plus 4 per cent. on the USD facility. The Group has overdraft facilities totalling ZMW42 million (2019: ZMW30 million) and USD3 million (2019: USD2 million) with Standard Chartered Bank Zambia Plc. The Standard Chartered Bank overdrafts bear interest rates of Bank of Zambia Policy rate plus 6 per cent. on the Kwacha facilities and 1 month USD LIBOR rate plus 4 per cent. on the USD facilities. 106 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 20. Cash and cash equivalents (continued) (b) Bank overdrafts (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2020 2019 Bank overdrafts represented by: Zanaco Bank Plc Citibank Zambia Limited Stanbic Bank Zambia Limited Standard Chartered Bank Zambia Plc (145,387) (101,446) (49,805) (51,407) (2) (114,029) - (69,615) (49,805) (51,400) (119,071) (109,538) (69,060) (29,018) (69,060) (29,018) (348,045) (170,822) (331,178) (207,616) (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2020 2019 Bank overdrafts represented by: Zanaco Bank Plc Citibank Zambia Limited Stanbic Bank Zambia Limited Standard Chartered Bank Zambia Plc (7,219) (5,037) (2,473) (2,552) (17,281) (1) (3,456) (2,473) (2,552) (8,482) (8,638) (9,021) (5,232) (2,198) - (8,298) (5,232) (2,198) (25,089) (15,728) (i) The Zambeef Products Group bank overdrafts and Short-Term Seasonal Loan facilities are secured by a floating charge/debenture over all the assets of the Group with a security cover of 125 per cent. of limits. The floating charge/debenture ranks pari passu between Standard Chartered Bank Zambia Plc, Citibank Zambia Limited, Zanaco Bank Plc and Stanbic Bank Zambia Limited. All overdrafts are annual revolving facilities. 107 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 21. Share capital (a) Ordinary share capital Authorised 700,000,000 ordinary shares of ZMW0.01 each 7,000 938 7,000 938 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s (2019: 700,000,000 ordinary shares of ZMW0.01 each) Issued and fully paid At 1 October Issued during the year At 30 September 3,006 449 3,006 449 - - - - - - - - 300,579,630 ordinary shares of ZMW0.01 each 3,006 449 3,006 449 (2019: 300,579,630 ordinary shares of ZMW0.01 each) (b) Preference share capital Issued and fully paid At 1 October Issued during the year At 30 September 100,057,658 preference shares of ZMW0.01 each (2019: 100,057,658 preference shares of ZMW0.01 each) 1,000 100 1,000 100 - - - - - - - - 1,000 100 1,000 100 The preference shares are convertible in whole or in part by CDC into ordinary shares on a one-for-one basis for the first eight years from 2016 and thereafter on a basis of 3.0833 ordinary shares for each preference share. These shares have four voting rights for every five preference shares held. Zambeef has the right to redeem all or part of the preference shares at the redemption price, which will give CDC a 12% compounded return on investment. The zero-coupon preference shares pay a dividend only if a dividend is paid to ordinary shareholders, and in such cases, the dividend per share will be the same as that for ordinary shares. 108 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 22. Share premium At 1 October Arising during the year At 30 September 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 1,125,012 185,095 1,125,012 185,095 - - - - 1,125,012 185,095 1,125,012 185,095 Proceeds received in addition to the nominal value of the shares issued have been included in share premium. 23. Interest bearing liabilities (i) In Zambian Kwacha Group Company Group Company 2020 2019 DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (note (a)) ZMW’000s ZMW’000s ZMW’000s ZMW’000s 222,547 222,547 197,604 197,604 Zanaco Bank Plc (note (b)) 6,646 6,646 13,286 13,286 Standard Chartered Bank Zambia Plc (note (c)) 149,877 149,877 212,381 212,381 IFC – International Finance Corporation (note (d)) 109,047 109,047 118,870 118,870 Stanbic Bank Zambia Limited (note (e)) 29,000 29,000 29,000 29,000 Less: Short term portion (repayable within next 12 months) 517,117 517,117 571,141 571,141 (326,899) (326,899) (343,042) (343,042) Long term portion (repayable after 12 months) 190,218 190,218 228,099 228,099 109 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 23. Interest bearing liabilities (ii) In US Dollars Group Company Group Company 2020 2019 DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (note (a)) Zanaco Bank Plc (note (b)) Standard Chartered Bank Zambia Plc (note (c)) IFC – International Finance Corporation (note (d)) Stanbic Bank Zambia Limited (note (e)) USD’000s USD’000s USD’000s USD’000s 11,050 11,050 14,970 14,970 330 7,442 5,414 1,440 330 7,442 5,414 1,440 1,006 1,006 16,089 16,089 9,006 2,197 9,006 2,197 25,676 25,676 43,268 43,268 Less: Short term portion (repayable within next 12 months) (16,231) (16,231) (25,988) (25,988) Long term portion (repayable after 12 months) 9,445 9,445 17,280 17,280 (a) (i) DEG Term Loan 3 The Group has a loan facility of USD3.55 million (2019: USD4.97 million and original amount of USD10 million) from DEG. Interest on the loan is 4.25 per cent. above the 6 month USD LIBOR rate per annum payable 6 monthly in arrears. The capital is repayable in 14 biannual instalments of USD710,000 commencing May 2016 and expiring in November 2022. The DEG term loan 3 is secured by a first ranking legal mortgage over R/E of Farm No. 4450, R/E of F/4451 and R/E of F/5388 (Mpongwe Farm), ranking pari passu with the IFC. (ii) DEG Term Loan 4 The Group has a loan facility of USD7.5 million (2019: USD10 million and the original amount of USD15 million) from DEG. Interest on the loan is 5.75 per cent. above the 6 month USD LIBOR rate per annum payable quarterly in arrears. The capital is repayable in 12 quarterly instalments of USD1,250,000 commencing March 2018 and expiring in September 2023. The DEG term loan 4 is secured by a first ranking legal mortgage over R/E of Farm No. 4450, R/E of F/4451 and R/E of F/5388 (Mpongwe Farm), ranking pari passu with the IFC. (b) Zanaco Bank Plc The Group has a loan facility of ZMW6.65 million (2018: ZMW13.3 million and original amount of ZMW46.5 million) with Zanaco Bank Plc. Interest on the loan is 4.5 per cent. above the Bank of Zambia policy rate per annum payable monthly in arrears. The principal is repayable in 7 annual instalments of ZMW6,642,857 commencing December 2014 and expiring in December 2020. The loan is secured by a first ranking legal mortgage over Stand No. 4970, Industrial Area, Lusaka (Head Office). (c) Standard Chartered Bank Zambia PLC The Group has a structured agricultural facility with an annual revolving limit totalling USD18 million (2019 – USD20 million) with Standard Chartered Bank Zambia PLC. The purpose of the facility is the financing of wheat, soya beans and maize under collateral management agreements and is for 270 days. The balance on the facilities at year end was USD7.4 million (2019: USD16.1 million). Interest on the facility is 3 month USD LIBOR plus 3.25 per cent. per annum calculated on the daily overdrawn balances. The facility is secured by a fixed and floating charge over grain stocks of wheat, soya beans and maize. 110 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 23. Interest bearing liabilities (continued) (d) International Finance Corporation Loan 2 The Group has a loan facility of USD4.8 million and ZMW11.98 million (2019: USD7.6 million and ZMW18.8 million and original amount of USD20 million and ZMW49.6 million). Interest on the loan is 4.75 per cent. above the 6 month USD LIBOR rate per annum for the USD facility and 4.45 per cent. above the 91 day Treasury Bill rate plus a variable swap margin for the Kwacha facility payable quarterly in arrears. The principal is repayable in 29 equal quarterly instalments of USD689,655 and ZMW1,710,345 commencing June 2015 and expiring in June 2022. The loan is secured through a first ranking legal mortgage over R/E of Farm No. 4450, R/E of Farm No. 4451 & R/E of Farm No. 5388 (Mpongwe farm), ranking pari passu with the DEG. (e) Stanbic Bank Zambia Limited In the year ended 30 September 2019, the Group obtained a seasonal loan facility with an annual revolving limit totalling ZMW29 million from Stanbic Bank Zambia Limited. The balance on the facility at year end was ZMW29 million (2019: ZMW29 million). Interest on the facility is 6.0 per cent. above the Bank of Zambia policy rate per annum payable monthly in arrears. This facility is secured by a floating charge/debenture over all the assets of the Company. The floating charge/debenture ranks pari passu between Standard Chartered Bank Zambia Plc, Citibank Zambia Limited and Zanaco Bank Plc. 24. Leases In Zambian Kwacha Current Non-current (ii) In US Dollar Current Non-current 2020 2019 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 23,259 19,750 43,009 14,461 8,172 22,633 21,487 19,297 40,784 18,266 11,505 29,771 2020 2019 Group Company Group Company USD’000s USD’000s USD’000s USD’000s 1,155 981 2,136 718 406 1,124 1,628 1,462 3,090 1,384 872 2,256 The Group has leases for its motor vehicles and trailers, farming equipment, land and buildings, retail outlets and production equipment. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a con- sistent manner to its property, plant and equipment. Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to purchase the underlying leased asset outright at the end of the lease, or to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over commercial premises the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts. 111 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 24. Leases (continued) The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognised on the statement of financial position: No. of right-of- use assets leased Range of remaining term Average remaining lease term No. of leases with extension options No. of leases with options to purchase No. of leases with variable payments linked to an index No. of leases with termination options 4 10 0-1 year 0.3 years 2-3 years 2 years 44 2-3 years 2 years 3 68 3-4 years 3 years 1-3 years 1.5 years 6 3-4year 3 years - - - - 68 - - - - - - - - - - - - - - - - - - - Right-of-use asset Motor vehicles Trailers Farming equipment Land & buildings Retail Outlets Production equipment The Group has leases for K43,009 thousand. The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 September 2020 were as follows: Minimum lease payments due Within 1 year 1-2 years ZMW’000 2-3 years ZMW’000 3-4 years ZMW’000 4-5 years ZMW’000 After 5 years ZMW’000 Total ZMW’000 ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 30 September 2020 Lease payments Finance charges Net present values 30 September 2019 Lease payments Finance charges Net present values 7,567 (413) 10,652 (111) 7,154 10,541 8,244 (888) 18,048 (1,903) 7,356 16,145 - - - - - - - - - - - - - - - 18,219 (524) 17,695 26,292 (2,791) 23,501 - - - - 112 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 24. Leases (continued) Leasing Current Non-Current Total 30 September 2020 30 September 2019 USD’000s USD’000s 443 652 1,095 614 1,347 1,961 Minimum lease payments Within 1 year 1-2 years 2-3 years 3-4 years 4-5years After 5 years Total USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s 30 September 2020 Lease payments Finance charges Net Present Values 30 September 2019 468 (25) 443 659 (7) 652 Lease payments 669 1,465 Finance charges (55) (118) - - - - - Net Present Values 614 1,347 - - - - - - - - - - - - - - - - - 1,127 (32) 1,095 2,134 (173) - - 1,961 Lease payments not recognised as a liability The group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight- line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. 113 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 24. Leases (continued) The expense relating to payments not included in the measurement of the lease liability is as follows: Short-term leases Leases of low value assets Variable lease payments Total 30 September 2020 30 September 2020 ZMW’000s 1,359 - - 1,359 USD’000s 84 - - 84 Included in the finance cost of ZMW92,322 thousand (US$5,709 thousand) is interest expense for leasing arrangements amounting to ZMW86,000 (US$6,000). At 30 September 2020 the Group was committed to short-term leases and the total commitment at that date was ZMW719,364 (USD 35,718). 25. Deferred liability Under the terms of employment, employees are entitled to certain terminal benefits. Provisions have been made during the year towards these benefits. This statutory entitlement, which is lost if the employee is summarily dismissed, becomes payable only when the employee retires after attaining the age of 55 years and that employee has been employed for more than ten years. Uncertainty exists over the amount of future outflows due to staff turnover levels, but are not considered material to the Group. 2020 2019 (i) In Zambian Kwacha Group Company Group Company At 1 October (Movements)/provision during the year Payments made during the year At 30 September ZMW’000s ZMW’000s ZMW’000s ZMW’000s 16,362 (3,185) (1,788) 11,389 3,655 312 (611) 3,356 22,611 (4,673) (1,576) 16,362 5,059 (836) (568) 3,655 The company engaged a professional actuary, Quantum Consultants & Actuaries, to perform an actuarial valuation of the liability arising from the employee defined benefit plan as at 30 September 2020. As of the report date, the actuary had finalised the report and the provision was adjusted to agree to the report. 114 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 25. Deferred liability (continued) (ii) In US Dollar Group Company Group Company 2020 2019 At 1 October (Movements)/provision during the year Payments made during the year Foreign translation At 30 September USD’000s USD’000s USD’000s USD’000s 1,240 (197) (111) (367) 565 277 19 (38) (91) 167 1,847 (379) (128) (100) 1,240 413 (67) (46) (23) 277 The assumptions are developed by management with the assistance of independent actuaries. Discount factors are determined close to each year-end by reference to market yields of bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation. Other assumptions are based on current actuarial benchmarks and management’s historical experience. Defined benefit obligation 1 October 16,362 1,240 22,611 1,847 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s Current service cost before deduction of beneficiary contributions Interest expense Remeasurement - actuarial losses from changes in demographic assumptions Remeasurement - actuarial losses from changes in financial assumptions Experience gains Benefits paid Translation difference Past Service cost Defined benefit obligation 30 September Unfunded Partly or wholly funded 589 2,739 36 887 72 169 3,850 313 - - - - (4,929) (1,300) (2,072) - - 11,389 11,389 - (305) (3,097) (251) (80) (5,731) (465) (128) (2,158) (175) (367) - 565 565 - - - 16,362 16,362 - (101) - 1,240 1,240 - 115 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 25. Deferred liability (continued) The significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate, the salary growth rate and the average life expectancy. The assumptions used for the valuation of the defined benefit obligation are as follows: Discount rate at date shown Salary growth rate Average life expectancies: - - - - - - 25 years of age at reporting date 30 years of age at reporting date 35 years of age at reporting date 40 years of age at reporting date 45 years of age at reporting date 50 years of age at reporting date 30 September 30 September 2020 33% 20.0% 2019 20% 14.50% Probability of reaching retirement age in service Probability of reaching retirement age in service 47% 57% 66% 72% 78% 86% 47% 57% 66% 72% 78% 86% Amounts recognised in profit or loss related to the Group’s defined benefit plan are as follows; Current service cost Past service cost Net interest expenses Total expenses recognised in profit or loss 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 589 - 2,739 3,328 36 - 169 205 887 - 3,850 4,737 72 - 313 385 Amounts recognised in other comprehensive income related to the Group’s defined benefit plan are as follows: Actuarial losses from changes in demographic assumptions Actuarial losses from changes in financial assumptions Experience (gains)/losses Return on plan assets (excluding amounts included in net interest) Total expenses recognised in other comprehensive income 20202020 20192019 ZMW’000s ZMW’000s ZMW’000s USD’000s ZMW’000s USD’000s USD’000s USD’000s (4,929) (1,300) (305) (80) - (3,098) (5,731) - (252) (465) - - - - (6,229) (385) (8,829) (717) 116 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 26. Trade and other payables (a) The table below shows the trade and other payables: Trade and other payables Trade and other payables (i) In Zambian Kwacha (i) In Zambian Kwacha Trade payables Trade payables Accruals Accruals 20202020 20192019 Group Group Company Company Group Group Company Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 290,172 290,172 31,476 31,476 321,648 321,648 226,646 226,646 6,198 6,198 232,844 232,844 233,245 233,245 26,340 26,340 259,585 259,585 152,362 152,362 6,142 6,142 158,504 158,504 Trade and other payables Trade and other payables 20202020 20192019 (ii) In US Dollars (ii) In US Dollars Group Group Company Company Group Group Company Company Trade payables Accruals USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s 14,409 1,562 15,971 11,253 308 11,561 17,670 1,995 19,665 11,543 465 12,008 The average credit period taken in 2020 was 43 days (2019: 33 days). All amounts shown under trade and other payables fall due for payment within one year. The carrying value of trade and other payables are considered to be a reasonable approximation of fair value. (b) Included in the other payables are balances relating to contract liabilities, these are as follows: Group 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s Opening Balance 75,849 5,746 17,348 1,417 Receipt from Customers 776,373 48,013 685,422 55,635 Sales to Customers Exchange Gain/Loss Closing Stock (754,550) (46,663) (626,921) (50,886) - (2,246) - (420) 97,672 4,850 75,849 5,746 Company 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s Opening Balance 71,807 5,440 15,644 1,278 Receipt from Customers 537,341 33,231 528,770 42,920 Sales to Customers Exchange Gain/Loss Closing Stock (516,872) (31,965) (472,607) (38,361) - (2,124) - (397) 92,276 4,582 71,807 5,440 Advances received from customers represent customer payments received in advance of performance (contract liability) that are expected to be recognised as revenue in 2021. The advances for supply of grain is ZMW 84,053 thousand, USD 4,173 thousand (2019: ZMW 66,000 thousand, USD 5,000 thousand), the supply of day-old chicks is ZMW 1,465 thousand, USD 73 thousand (2019: ZMW534 thousand, USD 40 thousand), the amount for the supply of stock feed is ZMW 10,608 thousand, USD 527 thousand (2019: ZMW 8,001 thousand, USD 606 thousand) and others were ZMW 1,546 thousand, USD 77 thousand (2019: ZMW 1,194 thousand, USD 90 thousand). All brought forward balances were recognized as in come the current year. 117 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS – 30 SEPTEMBER 2020 27. Provisions The table below shows the provisions Provisions Staff Others Total Staff Others Total ZMW’000s ZMW’000s ZMW’000s USD’000s USD’000s USD’000s Group Carrying amount 1 October 2019 Additional provisions Amount utilised Foreign translation Carrying amount 30 Septem- ber 2020 Company 47,591 51,709 5,323 52,914 71,127 122,836 (32,969) (29,434) (62,403) - 66,331 47,016 113,347 Carrying amount 1 October 2019 27,839 12,623 40,462 Foreign translation Additional provisions Amount utilised Carrying amount 30 Septem- ber 2020 - - - 29,865 21,181 51,046 (17,685) (12,623) (30,308) (1,094) 40,019 21,181 61,200 1,987 3,606 3,198 (2,039) (1,471) 3,294 2,109 (875) 1,847 403 4,399 (1,820) (647) 2,335 956 (433) 1,310 (781) 1,052 4,009 7,597 (3,859) (2,118) 5,629 3,065 (1,308) 3,157 (1,875) 3,039 Staff provisions relate to gratuity, leave pay and other related claims. These are paid as and when they fall but mainly in December at the end of employee contracts. Other provisions relate to suppliers claims for goods and services provided. These are paid within 3 months average of provisioning. 28. Amounts due to related companies (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2020 2019 Zambeef Retailing Limited Masterpork Limited Tractorzam Non-current Current (ii) In US Dollars Zambian Pig Genetics Zambeef Retailing Limited Masterpork Limited Zambezi Ranching and Cropping Limited Tractorzam Non-current Current - - 443 443 - 443 634,417 70,250 443 705,110 - 705,110 - - 251 251 - 251 417,832 71,962 251 490,045 - 490,045 2020 2019 Group Company Group Company USD’000s USD’000s USD’000s USD’000s - - - - 22 22 - 22 - 31,501 3,488 - 22 35,011 - 35,011 - - - - 19 19 - 19 - 31,654 5,451 19 37,124 - 37,124 The above balances relate to arm’s length transactions with the related parties. External parties that fall under the ‘Related Party’ disclosure are with respect to all common shareholding companies of the Board of Directors of the Group. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. 118 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS – 30 SEPTEMBER 2020 29. Reconciliation of liabilities arising from financing activities The changes in the Group’s liabilities arising from financing activities can be classified as follows: Long-term borrow- ings Short-term borrowings Lease liabilities Total Long-term borrowings Short-term borrowings Lease liabilities Total Group ZMW’000s ZMW’000s ZMW’000s ZMW’000s USD’000s USD’000s USD’000s USD’000s 1 October 2019 228,099 343,042 40,784 611,925 17,280 25,988 3,090 46,358 - - 7,063 7,063 - - 351 351 228,099 343,042 47,847 618,988 17,280 25,988 3,441 46,709 (162,217) (623,231) (35,478) (820,926) (10,032) (38,542) (2,194) (50,768) - - 487,320 - 487,320 - 14,329 14,329 - - 30,137 - 30,137 - 886 886 141,697 102,407 16,311 260,415 – Reclassification (17,361) 17,361 - - 30 September 2020 190,218 326,899 43,009 560,126 3,549 (1,352) 9,445 (2,704) 3 1,352 - 848 - 16,231 2,136 27,812 1 October 2018 308,312 202,460 38,411 549,183 25,189 16,541 3,138 44,868 (96,913) (215,124) (47,007) (359,044) (7,866) (17,461) (3,816) (29,143) - 334,580 - 334,580 - 27,157 - 27,157 - - 47,714 47,714 - - 3,873 3,873 Adoption of IFRS 16 Revised ‘1 October 2019 Cash-flows: – Repayment – Proceeds – Additions Non-cash: – Exchange difference Cash-flows: – Repayment – Proceeds – Additions Non-cash: – Exchange difference – Reclassification (6,413) 6,413 - - 23,113 14,713 1,666 39,492 - (43) (292) (105) (397) 43 - - 30 September 2019 228,099 343,042 40,784 611,925 17,280 25,988 3,090 46,358 119 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS – 30 SEPTEMBER 2020 29. Reconciliation of liabilities arising from financing activities (continued) Long-term borrowings Short-term borrowings Lease liabilities Total Long-term borrowings Short-term borrowings Lease liabilities Total Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s USD’000s USD’000s USD’000s USD’000s 1 October 2019 228,099 343,042 40,784 611,925 17,280 25,988 3,090 46,358 Adoption of IFRS 16 - - - - - - - - Revised ‘1 October 2019 Cash-flows: – Repayment – Proceeds – Additions Non-cash: 228,099 343,042 40,784 611,925 17,280 25,988 3,090 46,358 (162,217) (623,231) (30,835) (816,283) (10,032) (38,542) (1,907) (50,481) - 487,320 - 487,320 - 30,137 - 30,137 - - 14,329 14,329 - - 886 886 – Exchange difference 141,697 102,406 11,668 255,771 3,549 (2,704) 3 848 – Reclassification (17,361) 17,361 - - (1,352) 1,352 - - 30 September 2020 190,218 326,898 35,946 553,062 9,445 16,231 2,072 27,748 1 October 2018 308,312 202,460 24,344 535,116 25,189 16,541 1,989 43,719 Cash-flows: – Repayment – Proceeds – Additions Non-cash: (96,913) (215,124) (43,953) (355,990) (7,866) (17,461) (3,568) (28,895) - 334,580 - 334,580 - 27,157 - 27,157 - - 47,714 47,714 - - 3,873 3,873 – Exchange difference 23,113 14,713 1,666 39,492 - (292) (38) (330) – Reclassification (6,413) 6,413 - - (43) 43 - - 30 September 2019 228,099 343,042 29,771 600,912 17,280 25,988 2,256 45,524 120 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 30. Financial instruments Financial assets The Group’s principal financial assets are bank balances and cash and trade receivables. The Group maintains its bank accounts with major banks in Zambia of high credit standing. Trade receivables are stated at amounts reduced by appropriate allowances for estimated irrecoverable amounts. Financial liabilities The Group’s financial liabilities are bank overdrafts, long term loans and trade payables. Financial liabilities are classified according to the substance of the contractual arrangements entered into. Trade payables and loans are stated at their nominal value. Monetary assets and liabilities in foreign currencies The tables below show the extent to which Group companies have monetary assets and liabilities in currencies other than their local currency: (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2020 2019 Financial assets - Cash at bank - Trade receivables - Other receivables Financial liabilities 14,532 21,622 16,043 7,139 19,485 7,867 30,575 58,257 3 3,115 52,372 - - - - - Bank overdrafts (146,240) (136,999) (194,909) (71,329) Trade and other payables and provisions (198,419) (185,163) (138,151) (108,193) Bank loans Leases (319,622) (319,622) (297,660) (297,660) (30,341) (18,468) (19,423) (19,423) Net exposure (642,425) (625,761) (561,308) (441,118) 121 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 30. Financial instruments (continued) (i) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2020 2019 Financial assets - Cash at bank - Trade receivables - Other receivables Financial liabilities 722 1,074 797 354 967 391 2,316 4,413 - 236 3,968 - - - - - Bank overdrafts (7,261) (6,802) (14,766) (5,404) Trade and other payables and provisions Bank loans Leases (9,852) (9,194) (10,465) (8,197) (15,870) (15,870) (22,550) (22,550) (1,507) (917) (1,471) (1,471) Net exposure (31,897) (31,071) (42,523) (33,418) (i) In Zambian Kwacha 2020 - Group Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities - - - - Bank overdrafts Trade and other payables Bank loans Leases Net exposure US Dollar SA Rand Other Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s 13,074 21,607 8,294 (146,240) (178,027) (319,622) (30,341) (631,255) 731 15 3,880 727 - 3,869 - - (18,835) (1,557) - - - - 14,532 21,622 16,043 (146,240) (198,419) (319,622) (30,341) (14,209) 3,039 (642,425) 122 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 30. Financial instruments (continued) (i) In Zambian Kwacha - 2019 - Group US Dollar SA Rand Other Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2,578 55,191 - (80,589) 1,303 1,984 3 - 26,694 1,082 - 30,575 58,257 3 (114,320) (194,909) Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities Bank overdrafts - - - - Trade and other payables (106,330) (10,458) (21,363) (138,151) Bank loans Leases (297,660) (19,423) - - - - (297,660) (19,423) Net exposure (446,233) (7,168) (107,907) (561,308) (i) In US Dollars – Group - 2020 Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities - - - - Bank overdrafts Trade and other payables Bank loans Leases Net exposure US Dollar SA Rand Other Total USD’000s USD’000s USD’000s USD’000s 649 1,073 412 (7,261) (8,839) (15,870) (1,507) (31,343) 36 1 193 - (935) - - 36 - 192 - (77) - - 721 1,074 797 (7,261) (9,851) (15,870) (1,507) (705) 151 (31,897) 123 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 30. Financial instruments (continued) (i) In US Dollars – Group - 2020 (i) In US Dollars - Group US Dollar SA Rand Other Total USD’000s USD’000s USD’000s USD’000s 2019 Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities - - - - Bank overdrafts Trade and other payables Bank loans Finance leases Net exposure 195 4,181 - (6,105) (8,055) (22,550) (1,471) (33,805) 99 150 - - (792) - - 2,022 82 - (8,661) (1,618) - - (543) (8,175) 2,316 4,413 - (14,766) (10,465) (22,550) (1,471) (42,523) Exposure to currency exchange rates arise from the Group’s sales and purchases which are primarily denominated in US Dollar and South African Rand. It also arises from the retranslation of its foreign subsidiaries in West Africa. The Group’s activities expose it to a variety of financial risks. The main risks faced by the Group relate to foreign exchange rates, the risk of default by counter-parties to financial transactions and the availability of funds to meet business needs. These risks are managed as described below: (ii) Currency risk Some of the interest bearing borrowings are denominated in foreign currencies and therefore lead to a risk of fluctuation of value due to changes in the foreign exchange rate. This risk is partially hedged by holding United States Dollar bank balances and United States Dollar denominated exports. 124 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 30. Financial instruments (continued) The table below shows the extent to which Group companies have interest bearing liabilities in currencies other than their functional currency: DEG - Deutsche Investitions- und Entwicklungsgesellschaft mbH International Finance Corporation 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 222,547 11,050 197,604 97,075 319,622 4,820 15,870 100,056 297,660 14,970 7,580 22,550 Foreign currency risk sensitivity analysis Zambian Kwacha/United States Dollar exchange risk The following tables illustrate the sensitivity of the net result for the year and equity with regard to the Group’s foreign currency borrowings “with all other things being equal”. It assumes a +/-10 percent and 5 percent, movement in the United States Dollar/Zambian Kwacha exchange rate for the year ended 30 September 2020. If the Zambian Kwacha had weakened against the United States dollar by 10 percent (2019: 10 percent) then this would have resulted in the following impact on net profit and equity: Weakening of the Kwacha ZMW’000s USD’000s ZMW’000s USD’000s Net loss Equity (130,545) 3,740,112 (7,450) (2,443) (180) 168,823 3,215,943 221,484 2020 2019 If the Zambian Kwacha had strengthened against the United States Dollar by 5 per cent. (2019: 5 per cent) then this would have resulted in the following impact on net profit and equity: Strengthening of the Kwacha ZMW’000s USD’000s ZMW’000s USD’000s Net profit Equity (84,564) (5,505) 42,206 3,788,055 197,985 3,260,592 3,606 260,015 2020 2019 There is no material difference between the carrying value and the fair value of the Group’s financial liabilities. (iii) Interest rate risk As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest rate risk arises from overdraft facilities and long-term borrowings. Borrowings issued at variable rates expose the Group to interest rate risk. The interest rates to which the Group is exposed are set out in notes 20, 23 and 24. The risk of interest rate movements is managed through on-going monitoring of the Group’s overdrafts and long-term borrowings, the spreading of debt between a number of financial institutions and the denomination of debt in Zambian Kwacha and USD. The Group’s term facilities are medium to long term with fixed spread over LIBOR. A 0.5 percent movement in the LIBOR rate would not have a material impact on the interest expense for the Group. The following table illustrates the sensitivity of profit and equity to a reasonably possible change of interest of +/- 5%. These changes are considered to be reasonably possible based on the current market conditions that have been adversely affected by the outbreak of COVID-19. All other variables are held constant. 125 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 30. Financial instruments (continued) Changes in interest rates 30 September 2020 30 September 2019 Changes in interest rates 30 September 2020 30 September 2019 (iv) Market risk Profit +5% -5% Equity +5% -5% ZMW’000s ZMW’000s ZMW’000s ZMW’000s (34,829) (31,842) 34,829 31,842 (27,863) (25,474) Profit +5% -5% Equity +5% 22,291 20,379 -5% USD’000s USD’000s USD’000s USD’000s (2,154) (2,585) 2,154 2,585 (1,723) (2,068) 1,379 1,654 The Group is not exposed to the risk of the value of its financial assets fluctuating as a result of changes in market prices. (b) Credit risk Trade receivables The Directors believe the credit risk of trade receivables is low. The credit risk is managed by the selective granting of credit. (c) Liquidity risk Liquidity risk is the risk that the Group might be unable to meet its obligations associated with its financial liabilities. The Group monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on any undrawn borrowing facilities so that the Group does not breach limits or covenants (where applicable) on any of its borrowing facilities. The maturity of the Group’s financial liabilities with respect to borrowings is set out in notes 20, 23 and 24. 30 September 2020 Interest bearing liabilities Other bank borrowings Finance lease obligations Trade and other payables 30 September 2020 Interest bearing liabilities Other bank borrowings Finance lease obligations Trade and other payables Current Non-current Within 6 months 6 to 12 months 1 to 5 years later than 5 years ZMW’000s ZMW’000s ZMW’000s ZMW’000s 88,512 - 10,164 321,648 88,512 348,045 10,164 - 190,218 - 19,297 - - - - - Current Non-current Within 6 months 6 to 12 months 1 to 5 later than years years USD’00s0 USD’000s USD’000s 4,395 - 505 21,593 4,395 17,281 505 - 9,445 - 958 - - - - - - 126 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 31. Fair value measurement Fair value measurement of financial instruments Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:    Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability. The Group had no financial assets within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 30 September 2020, 30 September 2019, and 1 October 2018. Fair value measurement of non-financial assets The following table shows the Levels within the hierarchy of non-financial assets measured at fair value on a recur- ring basis at 30 September 2020, 30 September 2019, and 1 October 2018: 30 September 2020 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets 30 September 2019 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets 30 September 2020 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets 30 September 2020 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets 30 September 2019 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets 1 October 2018 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets Level 1 ZMW’000s - - - - Level 1 ZMW’000s - - - - Level 1 ZMW’000s - - - - Level 1 USD’000s - - - - Level 1 USD’000s - - - - Level 1 USD’000s - - - - Level 2 ZMW’000s 2,396,328 50,585 1,006,185 176,305 Level 2 ZMW’000s 1,994,196 48,856 874,965 170,417 Level 2 ZMW’000s 2,012,403 40,225 815,646 181,674 Level 2 USD’000s 118,784 2,511 49,959 8,754 Level 2 USD’000s 151,076 3,701 66,284 12,910 Level 2 USD’000s 165,142 3,286 67,332 14,843 Level 3 ZMW’000s - - - - Level 3 ZMW’000s - - - - Level 3 ZMW’000s - - - - Level 3 USD’000s - - - - Level 3 USD’000s - - - - Level 3 USD’000s - - - - Total ZMW’000s 2,396,328 50,585 1,006,185 176,305 Total ZMW’000s 1,994,196 48,856 874,965 170,417 Total ZMW’000s 2,012,403 40,225 815,646 181,674 Total USD’000s 118,784 2,511 49,959 8,754 Total USD’000s 151,076 3,701 66,284 12,910 Total USD’000s 165,142 3,286 67,332 14,843 127 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 31. Fair value measurement (continued) Fair value of the Group’s main property assets is estimated based on appraisals performed by independent, pro- fessionally-qualified property valuers, Fairworld Properties Limited. The significant inputs and assumptions are developed in close consultation with management. The valuation processes and fair value changes are reviewed by the Board of Directors and audit committee at each reporting date. Further information is set out below. Land held for production in Zambia (Level 2) Land has been valued using the direct comparison method. This method has been adopted as the most appro- priate for the purpose of this valuation as there are enough comparisons available on the open market for land. The land was revalued on 30 September 2017. Management determined that the effect of changes in fair values between the valuation and reporting date is immaterial. The significant unobservable input is the adjustment for factors specific to the land in question. The extent and direction of this adjustment depends on the number and characteristics of the observable market transactions in similar properties that are used as the starting point for valuation. Although this input is a subjective judgement, management considers that the overall valuation would not be materially affected by reasonably possible alterna- tive assumptions. Office building in Zambia (Level 2) The fair values of the office buildings are estimated by using the direct comparison method. This method has been adopted as the most appropriate for the purpose of this valuation as there are enough comparisons available on the open market for buildings. Plant and machinery (Level 2) Plant and machinery have been valued using the direct comparison method. This method has been adopted as the most appropriate for the purpose of this valuation as there are enough comparisons available on the open market for plant and machinery. The plant and machinery were revalued on 30 September 2017. Management determined that the effect of changes in fair values between the valuation and reporting date is immaterial. Biological assets (Level 2) Biological assets are valued at their fair values less estimated point of sale costs as determined by the Directors. The fair value of livestock is determined based on market prices of animals of similar age, breed and genetic merit. Standing crops are valued at fair value at each reporting date based on the estimated market value of fully grown standing crops adjusted for the age and condition of the crops at the reporting date. Biological assets are measured at fair value less estimated costs to sell. In estimating fair values and costs to sell, management considers the most reliable evidence at the times the estimates are made. The most significant estimate relates to management’s assessment of anticipated yield per hectare for establish- ing the fair value of standing crops. This assessment considers historical yields, climate conditions and other key factors. The significant input is adjustment related to the crops rate of growth and estimating of the biological transformation that comprises various processes that cause qualitative and quantitative changes in the biological asset. 32. Capital commitments 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s Capital commitments entered into at the reporting date Not contracted for at the reporting date 6,690 - 332 - 15,008 50,992 1,137 3,863 128 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 33. Related party transactions Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of the significant transactions between the Group and other related parties during the year ended 30 September 2020 are as follows: (a) The Group made the following sales to related parties: Sale of ZMW’000s USD’000s ZMW’000s USD’000s 2020 2019 Wellspring Ranch Animal feeds/bran Chisamba Ranching and Cropping Animal feeds/bran Danny Museteka Animal feeds/bran Squares Ranch Animal feeds/bran 98 - 4,568 28 4,694 6 - 282 2 290 - 1,704 563 - 2,267 - 138 46 - 184 (b) The Group made the following purchases from related parties: Purchase of ZMW’000s USD’000s ZMW’000s USD’000s 2020 2019 Wellspring Limited Cattle beef Tembilo Farms Chickens Tractorzam Limited Tractors/spares 5,553 1,301 6,176 343 80 382 - 2,054 7,205 - 167 585 Chisamba Ranching and Cropping Beef Madison Insurance Insurance Lillian Limbuka Pigs 26,495 1,638 13,814 1,121 - 4,727 44,252 - 292 8,114 5,873 659 477 2,735 37,060 3,009 (c) Sales of goods to related parties were made at the Group’s usual list prices. (d) Purchases were made at market price. (e) (f) (g) (h) The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. Expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties. The parties are related by virtue of certain Directors of the Group having a shareholding in the respective companies. Directors of the Group have shareholdings in the Company as stated in the Report of the Directors. No dividends have been paid to the Directors via their direct and indirect shareholdings. (i) Key management compensation. 129 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 33. Related party transactions (continued) The remuneration of Directors and other members of key management during the year were as follow Short-term benefits Post-employment benefits Other long-term benefits Short-term benefits Post-employment benefits Other long-term benefits 2020 2019 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 81,862 70,091 96,315 84,197 - - - - - - - - Group Company Group Company USD’000s USD’000s USD’000s USD’000s 5,062 4,335 7,818 6,834 - - - - - - - - The remuneration of Directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. (j) (k) There were no loans to related parties and key management personnel. The company made the following sales to related parties: 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s Zambeef Retailing Limited 1,071,967 66,294 989,956 Zambia Pig Genetics Limited Masterpork Limited Chick Limited Zamhatch Limited Zamleather Limited Zampalm Limited Welllspring Limited Squares Ranch Danny Museteka 32,102 193,246 116,626 211 - 98 28 4,568 1,985 11,951 7,213 13 - 6 2 282 3,478 28,182 123,200 142,402 187 7 - 563 Chisamba Ranching and Cropping - - 1,704 1,418,846 87,746 1,289,679 80,354 282 2,287 10,000 11,559 15 1 - 46 138 104,682 130 Zambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 33. Related party transactions (continued) (l) The company made the following purchases from related parties Zambeef Retailing Limited Zamleather Limited Zam Chick Limited Tractorzam Limited Masterpork Limited Squares Ranch Zamhatch Limited Chisamba Ranching and Cropping Wellspring Limited 2020 2019 ZMW’000s USD’000s ZMW’000s USD’000s 1,852 1,805 913 6,176 40,583 705 24,690 1,237 5,553 83,514 115 112 56 382 2,510 44 1,527 77 343 5,166 2,326 846 264 7,205 44,027 - 25,148 7,831 - 87,647 189 69 21 584 3,574 - 2,041 636 - 7,114 34. Assets held for sale During the year under review management decided to sell Chiawa Farm. As such the assets and liabilities of Chiawa Farm are classified as assets held for sale. Previously management decided to sell the assets of Sinazongwe Farm and the sale was concluded during the financial year ended 30 September 2020. The income generated by assets held for sale was generated as follows: Revenue Cost of sales Administration costs Operating profit/(loss) Depreciation Exchange losses Profit from disposal of Sinazongwe farm Profit/Loss from discontinued operation before tax Tax (expense)/credit Profit/(loss) for the year September 2020 September 2020 September 2019 September 2019 ZMW’000s USD’000s ZMW’000s USD’000s 67,465 (30,893) (28,422) 8,150 (6,621) - 31,906 33,435 - 33,435 4,172 (1,911) (1,757) 504 (409) (168) 2,141 2,068 - 2,068 41,003 (34,307) (24,075) (17,379) - - - 3,328 (2,785) (1,954) (1,411) - - - (17,379) (1,411) - - (17,379) (1,411) 131 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2020 34. Assets held for sale (continued) The assets and liabilities of the unit held for sale are as follows: September 2020 September 2020 September 2019 September 2019 ZMW’000 USD’000 ZMW’000 USD’000 Property, plant and equipment Total non-current assets 175,654 175,654 8,722 8,722 135,357 135,357 10,254 10,254 Biological assets Inventories Total current assets Assets classified as held for sale Total non-current liabilities Trade and other payables Cash and cash equivalents Total current liabilities - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The cash flow effects of the unit held for sale are as follows: September 2020 September 2020 September 2019 September 2019 ZMW’000 USD’000 ZMW’000 USD’000 Cash outflow from operating activities Cash outflow from investing activities Cash outflow from financing activities 1,529 167,264 - 95 (17,379) (1,411) 10,344 - - - - - Previously management decided to sell the assets of Sinazongwe Farm and the sale was concluded during the financial year ended 30 September 2020. The sale proceeds from the sale of Sinazongwe farm was K167.3 million (USD 10.3 million) after the payment of property transfer tax of K8 million (USD 498.8 thousand) and other disposal costs. A profit of K31.906 million was realised from the disposal of the property, plant and equipment which was carried at K135.36 million. r tax ofmillion (USD 498.8 thousand) and other disposal costs. Contingent liabilities Various legal claims were brought against the Group during the year. Unless recognised as a provision (see Note 27), management considers these claims to be unjustified and the probability that they will require settlement at the Group’s expense to be remote. This evaluation is consistent with external independent legal advice. Impact of COVID-19 pandemic All the divisions of the Group remained operational throughout the pandemic with only minor localised disruption of business activities. Consumer demand had however remained strong throughout the period as the country did not go into a total lockdown. Social distancing, sanitising and wearing of masks has been implemented at all work sites among employees and also at the retail outlets for the customers. Events subsequent to reporting date No item, transaction or event of a material and unusual nature has arisen since 30 September 2020, which in the opinion of the directors would substantially affect the operations of the economic entity, the results of those operations or the state of affairs of the economic entity in the subsequent financial years 35. 36. 37. 132 Zambeef Products PLC Annual Report 2020 133 OVERVIEWSTRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSZambeef Products PLC Annual Report 2020Notice of Annual General Meeting and agenda NOTICE IS HEREBY GIVEN that the 26th Annual General Meeting of Zambeef Products PLC in respect of the year ended 30th September 2020 will be held on December 2 , 2020 at 10:00hours. The Annual General Meeting proceedings will be conducted virtually. AGENDA 1. 2. 3. 4. 5. 6. 7. 8. 9. Consider any matters arising from the minutes To receive the report of the Directors, the Auditors report and the Financial Statements for the year ended September To Consider any competent business of which due notice has been given. NOTES Key Sign Up instructions (a) Sign Up Use the following link to access the platform: https://eagm.creg.co.zw/EAGM/Login.aspx Shareholder/Proxy Attendees are required to provide the necessary information to complete the sign up procedure. attendees. Once validated, login credentials will be delivered through email and sms.The validation process may take a maximum period of 48hrs. (b) Sign in Use the following link to access the platform: https://eagm.creg.co.zw/EAGM/Login.aspx Enter username Enter Password Click Login Click “Join” to begin following video and audio transmission of meeting proceedings. Click “Join with Computer Audio” to attend the live meeting Ensure that you have downloaded Google Chrome https://www.google.com/chrome/ or Microsoft Edger https:// Use of Apple devices must be done in consultation with the system Administrator, details of which are given below. If you have problems with the login, please call, the following helplines +260950968435, +260979420470 and +260979946143. A Member is entitled to appoint one or more proxies to attend, speak and vote in his or her stead. A proxy need not be a (c) (d) (e) (f) By Order of the Board Danny Museteka Company Secretary 134 Zambeef Products PLC Annual Report 2020 Proxy form I/We, .............................................................................................................................................................................. of ................................................................................................................................................................................... being a member/s of and the registered holder/s of ....................................................................................................... Zambeef shares hereby appoint ................................................................................................................................... of ....................................................................................................................................................................................... or, in his/her absence, the Chairman of the Company. As my/our proxy to vote for me/us on my/our behalf at the Annual/Extraordinary GenerMeeting of the Company at be held on the 2 In Favour of/against (please tick) In Favour Against remuneration. Signed: ............................................................................................................................................................................. Name: ............................................................................................................................................................................ Date: ............................................................................................................................................................................ Witnessed by: .............................................................................................................. Signature: .......................... Name: .............................................................................................................................................................................. Address: .......................................................................................................................................................................... ......................................................................................................................................................................... Zambeef Products PLC Annual Report 2020 135 Notes to the Proxy Form 1. 2. 3. 4. 5. 6. 7. 8. A shareholder may insert the name of a proxy or the names of two alternative proxies of his/her choice in the space provided, with or without deleting “the Chairman of the Company”. The person whose name stands first on the form of proxy and who is present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those whose names follow. Any such proxy, who need not be a shareholder of the Company, is entitled to attend, speak and vote on behalf of the shareholder. A proxy is entitled to one vote on a show of hands and, on a poll, one vote for each share held. A shareholder’s instructions to the proxy must be indicated in the appropriate spaces. If a shareholder does not indicate on this instrument that the proxy is to vote in favour of or against any resolution or to abstain from voting or gives contradictory instructions, or should any further resolution/s or any amendment/s which may be properly put before the Annual General Meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit. This form of proxy must be received by the Company secretary at the registered head office, Plot 4970, Manda Road, Industrial Area, P/B 17, Woodlands, Lusaka, by no later than 10:00 on Monday, 21st December, 2020. Documentary evidence establishing the authority of the person signing the proxy in representative capacity must be attached hereto unless previously recorded by the Company’s transfer secretaries. The completion and lodging of this form of proxy will not preclude a shareholder from attending the Annual General Meeting and speaking and voting in person there at to the exclusion of any proxy appointed in terms of this proxy form. Any alteration or correction made to this form of proxy must be initialed by the signatory/ies. The Chairman of the meeting may accept or reject any form of proxy, which is completed and/or received other than in accordance with these notes. 136 Zambeef Products PLC Annual Report 2020137 Zambeef Products PLC Annual Report 2020Private Bag 17, Woodlands Plot 4970, Manda Road Industrial Area Lusaka, Zambia Tel: +260 211 369 000 Fax: +26 211 369 050 www.zambeefplc.com 138 Zambeef Products PLC Annual Report 2020

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