Zambeef Products
Annual Report 2021

Plain-text annual report

Annual Report 2021 www.zambeefplc.com OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Contents Overview Zambeef at a Glance History and Key Milestones Strategies report Chairman’s Report Chief Executive Officer’s Report Key Market Indicators Divisional Performance Sustainability Report Corporate Governance Corporate Governance Board of Directors Report of the Directors Statement of Directors’ Responsibilities Financial Statements 30 September 2021 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 8 10 13 15 16 20 26 36 38 43 46 51 53 55 57 59 61 63 65 156 161 Zambeef Products PLC Annual Report 2021 3 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 further has 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 21,000 hectares (ha) 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 2021Zambeef at a Glance (continued) DIVISIONS Retail and Distribution Zambeef’s products are retailed through 238 outlets (2020: 235) directly to end-consumers, in a value-added form, either through the Zambeef concession agreement to operate Shoprite’s in-store butcheries (73 in 2021; 71 in 2020) or through Zambeef’s own retail and wholesale distribution network in Zambia (166 in 2021; 165 in 2020). • • • • • • • 63 Zambeef retail outlets (2020: 65) 41 Zambeef Macros (2020: 39) 30 Novatek retail outlets (2020: 29) 1 Bakery (2020: 1) 31 Zamshu outlets (2020: 31) 41 Shoprite butcheries in Zambia (2020: 39) 31 Shoprite butcheries in West Africa: 25 in Nigeria and 6 in Ghana (2020: 32) Zambeef also operates one of the largest transport and trucking fleets in Zambia, 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 heads per annum (p.a.)) and five feedlots located across Zambia (standing capacity 14,000 heads). • 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 3,100 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 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWZambeef at a Glance (continued) Stock feed (Novatek) • 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. • One of the largest row cropping operations in Zambia. • 6,099 ha of irrigated and 8,730 ha of rainfed, arable land. • Double cropping of irrigated land means Zambeef plants 20,696 ha p.a. • Crop production focuses on soyabeans and maize during summer and wheat during winter. • Wheat mill with a capacity to mill 25,000 metric tonnes (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. Cropping Other businesses 6 Zambeef Products PLC Annual Report 20217 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWHistory & Key Milestone History & Key Milestones 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 Lorem ipsum 1994 Zambeef Products Ltd. incorporated with 60 sta , 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 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 Zambeef Annual Report 2019_2_Damaged.indd 4 8 06/12/2019 17:15:07 Zambeef Products PLC Annual Report 2021Overview Strategic report Corporate governance Financial statements Feeding a growing region Zambia Zambeef Outlets Zambeef Macros Novatek Bakery Zamshu Outlets Total Zambeef Outlets Shoprites Total Zambia Nigeria Shoprites Master Meats Outlets Total Nigeria Ghana Shoprites Total Ghana 2021 2020 63 41 30 1 31 166 41 207 25 0 25 6 6 65 39 29 1 31 165 39 204 25 0 25 7 7 2021 2020 Total Zambeef Total Shoprites Total Retail Network 166 72 238 Zambeef Products PLC Annual Report 2019 165 71 236 5 9 Zambeef Annual Report 2019_2_Damaged.indd 5 06/12/2019 17:15:08 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCHAIRMAN’S REPORT in the first half and experienced a steep appreciation in the second half of the financial year. Increased consumer spending, stemming from government dismantling of domestic debt and the central bank’s Covid-19 economic stimulus package resulted in for our products. increased demand load The good rainfall season experienced during the summer increased the supply of hydroelectric power to the nation, which helped alleviate the situation, shedding thus positively impacting on the financial performance. The strength, resilience and agility of our business can be seen through the financial performance. The Group generated an operating profit, including profit from asset held for sale, of ZMW299.3 million (USD14.1 million) compared to ZMW212.1 million (USD13.1 million) in the prior financial year. The operating profit excluding profit from asset held for sale operations was ZMW267.3million (USD12.7 million) compared to ZMW210.5 million (USD13.1 million) achieved in the previous financial year. Profit before tax was ZMW203.9 million (USD9.7 million) compared to a Loss before tax of ZMW22.7 million (USD1.4 million) achieved in the prior financial year. The Group’s performance in the face of headwinds illustrates the strengths of our vertically integrated business model, the strength of our brands and a good management team. The Board believes the key to sustainable growth, while mitigating the effects of dynamic economic and climate cycles, lies in remaining committed to its strategic priorities. As such, the focus remains on the core businesses that generate Dear Shareholder, It is my pleasure to present to you the Chairman’s Report with respect to the financial year ended September 30, 2021. The unprecedented effects of the global pandemic disrupted all aspects of life around the world and our business has not been exempted. This invariably meant difficult trading conditions, balancing between safeguarding the welfare of our people and customers against ensuring the business continuing to run efficiently and effectively whilst feeding the nation. The 2021 financial year was characterised by supply challenges and rising input costs underpinned by a tough macro environment. In comparison to the previous period, the macroeconomic relatively fundamentals stable during the financial year in the context of events in the second half of 2020. The local currency depreciated at a much slower rate remained 10 sustainable and strong cashflows, while reducing our debt to release cash in higher returning projects. for reinvestment The Economic Environment The Zambian economy came under significant pressure in the first half of the financial year, stemming from the national debt burden, which was exacerbated by the impact of the coronavirus pandemic while the second half saw the country hold successful general elections which resulted in positive market sentiments and a positive economic outlook. The Zambian kwacha appreciated steeply in the last quarter, supported by foreign participation in the bond market and a higher copper price on the international commodity markets. in recovery Despite the global economy, the Zambian economic recovery shall remain gradual, given the high debt burden, high inflation and a volatile currency. and Inflationary pressures, particularly food inflation, had resulted in a significant drop in our customers’ has income disposable continued to put pressure on the consumers’ share of wallet going towards food spend. Inflation for the financial year under review closed at 22.1% compared to 15.7% for the previous financial year. Divisional Performance Review to Retail and Cold Chain Food Products focus The Group continued on revenue optimisation, asset utilisation and cost control as pillars to drive profitability in the combined retail and cold chain food products divisions. Revenue grew by 30% with an operating profit of ZMW Zambeef Products PLC Annual Report 2021 216.4 Million. Supply challenges experienced by the division and rising global food prices precipitated input costs. As a result, the division saw volumes decline across most protein categories. rising to The Poultry business remained a major source of profitable growth for the group. Management implemented measures improve production efficiencies, which contributed to improved gross profit margins. Increased demand for eggs, broilers and therefore day-old chicks allowed for revenue growth and improved profitability. Stockfeed Volumes were flat compared to prior year during the period owing to slow growth and declines on major product lines. The shortage of day-old chicks on the market limited customers buying of broiler feed while an export ban imposed by government reduced export sales. The increase in the world prices of GMO-free soya beans and imported materials negatively impacted cost of sales and therefore profitability. Cropping Zambia had a good summer rainfall season and as a result, yields for the summer crop were in line with expectations, with winter crop yields exceeding forecasts supported by better farming practices and reduced load-shedding. The country delivered a bumper maize harvest, which helped to stabilise maize prices. Outlook anticipate macro-economic We stability to continue over the medium term supported by improved investor sentiment, high copper prices and improved electricity supply. The kwacha is expected to maintain relative stability with minor volatility towards the end of the 2021 calendar year. The copper price, which is a major foreign exchange earner for the country, is expected to continue the global economy holding as to from recover continues the Covid-19 related shocks. The inflation rate is expected to reduce following an expected summer crop bumper harvest from a forecasted La Niña weather pattern, the appreciation of the kwacha and restoration of global supply stability. The Covid-19 pandemic remains a threat to the country as the country’s vaccination program continues to move at a slow pace. The group remains committed to delivering value to shareholders and is well positioned to navigate the turmoil while capitalising on opportunities. Strategy During the year, the board embarked on a five-year strategy refresh process for the Group. Although it is difficult to look ahead with any certainty, I am happy to report that we now have a strategy in place that positions the Group to tackle the challenges ahead while capitalising on the opportunities presented and therefore maximise shareholder value. The strategy 11 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCHAIRMAN’S REPORT (continued) provides clarity in terms of where we want to go and what we want to do, having set realistic targets and mapped out a journey. The five year strategy will be underpinned by the following pillars: § Focus and strengthen our core business by investing in produc- tion capacity and grow market share § Divestiture of non-core assets to free up resources § Develop a human capital strate- gy that aligns with business ob- jectives § Strengthen our strategic partner- ships Acknowledgement On behalf of the Company and the board of directors, I would like to express my sincere gratitude to Dr Lawrence Sikutwa, Margaret John Rabb, David Mudenda, Osborne and Professor Enala Mwase who resigned from the board in the first half of the year. Their dedication and contributions to the success of the business over the years will be greatly missed. who joined as group head of Legal & Company Secretary and Nyangu Kayamba who also joined as Human Resources executive. I believe it is a good addition to the dedicated team and that we have a good balance of skills and professionalism. During the year, we welcomed Katebe Monica Musonda, Pearson Gowero and Roman Frenkel to our board of directors. Their industry experience and rich diverse backgrounds will be key in driving the business into the next phase of the Groups evolution as a regional food provider. At senior management level, we said farewell to Danny Museteka who had been with the company for 22 years, his last role being company secretary. Danny played a vital role in helping to transform the company over the years, and I would like to thank him for his outstanding contribution. We welcomed Mwansa Mutimushi thank my fellow board I also members for steering the Group through this challenging period. To our management and staff, I express my gratitude to them for another solid performance, dedicated efforts and resilience in the face of challenges. I am proud of our achievements to date, and I am excited by the potential opportunities upon which we will build our future progress. Michael Mundashi SC Chairman 12 Zambeef Products PLC Annual Report 2021CHIEF EXECUTIVE OFFICER’S REPORT financial performance. The increase in raw material input costs, such as Soya and imported products, impacted on production costs. The resultant increase in food prices to our customers saw increased demand for more affordable offerings of our products as customers traded down. The load shedding situation improved towards the end of the calendar year 2020 following good regional rains because of the La Niña weather pattern, resulting in reduced generator fuel expenditure and improved production efficiencies. The Group delivered operating profit, including profit from asset held for sale, of ZMW299.3 million (USD14.1 million), equating to a growth of 42% in kwacha terms and 8% growth in US dollar terms, compared (USD13.1 with ZMW212.1 million million) in 2020. The operating profit excluding profit from asset held for sale was ZMW267.3million (USD12.6 to ZMW210.5 million) compared million (USD13.1 million) achieved in the previous financial year. Our revenue, including from asset held for sale, was ZMW5.2 billion (USD244.1 million) and we achieved a gross profit of ZMW1.54 million (USD73.1 million), respectively 30.8% and 22.8% above the prior year in kwacha terms, and 0.5% and 0.1% growth in US dollar terms, respectively. The Group’s performance was driven by growth in the poultry and retail divisions. Management continued optimising top line growth through revenue management initiatives while the continued cost control measures helped deliver good operating profit performance. The Group recorded exchange gains owing to the appreciation of the local currency. Financing costs reduced following a reduction in debt and the appreciation of the local currency. Management took steps to restructure the company’s debt profile by replacing USD debt with kwacha debt to match the debt profile to the revenue profile and thus reduce foreign exchange risk, which should help provide predictability to the bottom line going forward. The USD to ZMW debt mix now stands at 15%:85% compared to 80%:20% at the end of the previous financial year. The Group derived a significant the central bank’s benefit Covid-19 relief fund with favourable interest rates. from and diversified vertically Our integrated business with good brands, supportive partners and an experienced management team helped deliver encouraging results during a challenging year. focus remains Strategic focus to Our strategic optimise our asset utilisation and returns. We maximise remain committed to our strategy of focussing on our core businesses in which we strive to be the best in class. The continued deleveraging and divestiture of non-core assets will enable us to free up cash to invest into our core businesses and therefore maximise shareholder value. Retail and Cold Chain Food Products (CCFP) The year saw traditionally high- volume sales lines come under pressure amidst a high inflationary environment and reduced customer spending. Despite high demand in our key product lines, supply constraints negatively impacted volume growth. Revenue growth was mainly driven by pricing on traditional 13 cost efficiency operating Overview Despite the rising input costs and rising global food prices, and a environment difficult resulting from the 2020 economic and Covid-19 pandemic related uncertainties, the positive full year performance has been driven by for sustained consumer demand our products, reductions improvements and especially in the poultry business. The macroeconomic fundamentals remained relatively stable during the financial year in the context of the previous comparative year. The local currency depreciated at a much slower rate in the first half and experienced a steep appreciation in the second half of the financial year. Increased consumer spending stemming the Covid-19 economic stimulus package resulted in for our products. The good rainfall season helped alleviate load shedding and therefore positively impacted on the increased demand from Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCHIEF EXECUTIVE OFFICER’S REPORT (continued) product categories and aided by sales volume growth of traded goods and affordable alternative food categories. Shoprite in-store butcheries were a source of revenue growth as they proved relatively more resilient to inflationary pressures. Sales volumes came under pressure on the back of supply constraints due to constrained livestock pro- ducer profitability levels. Significant producer price increases were nec- essary during the period for livestock producers to increase output. The price increases that were necessary to stimulate supply resulted in cus- tomers moving towards more af- fordable protein offerings. The poul- try division was a major contributor to revenue growth due to improved efficiencies and high demand for it as a relatively affordable protein source, in the form of chicken and eggs. Despite the challenges, the Retail and Cold Chain Food Products busi- ness registered a healthy revenue growth of 30% above the prior year. Management employed a revenue optimisation strategy, responding quickly to the evolving volatile oper- ating environment. Retail and Cold Chain Food Products delivered an operating profit of ZMW 216.4 million in kwacha terms and USD10.3 million in dollar terms. Operational efficiency improvements and overhead spend discipline en- sured translation of the top line growth to the bottom-line. Reduced load shedding helped reduce fuel costs of our electricity generators, which further contributed to the in- creased profitability, particularly in the second quarter. Stockfeed Revenue for the division was 31% above prior year mainly due to price, as volumes remained flat on prior year. The demand for poultry feed reduced following a day-old chick supply shortage across the market. feed An export ban on animal from Zambia resulted in a further slowdown of production volumes. However, fish feed continued to register exponential growth following the sector specific lifting of the fish feed export ban and government’s efforts to make Zambia a regional player in the aquaculture sector. The depreciation of the kwacha to the USD and ZAR negatively impacted foreign currency denominated costs. The high soya beans prices also negatively impacted on the cost of sales. Cropping Revenue in USD terms increased by 10% due to a favourable winter crop price and sale of the soya summer crop. However, operating profit decreased in USD terms due to price increases input costs. Zambia experienced a good rainfall season and the yield of the summer crop was in line with expectations with the yield of the winter crop exceeding expectations. in Outlook The macroeconomic environment is expected to remain stable with indicators expected to adjust to a more favourable position. The successful holding of general elections on 12 August 2021 and the resultant change in government and peaceful transition has brought investor confidence and optimism. This triggered a sharp appreciation foreign direct of the kwacha as foreign interest in intensified government securities and investment prospects improved. This coupled with high copper prices, a potential IMF deal and continued low load shedding levels due to another La Niña weather pattern this summer, has improved the country’s economic outlook. We expect this to translate into a slowdown in inflation, reduced interest rates and thus increased economic activity and a restoration of macroeconomic stability. Despite the macro-economic head- winds and uncertainty caused by the Covid-19 pandemic, Zambeef’s underlying performance has been and is expected to remain resilient, improving as the economic situa- tion improves. Our brands help us maintain customer loyalty while the vertically integrated business model helps to secure both supply and a market for our products. The future recovery in the economy and strong management have positioned us well for an improved profitability in the coming years. Our deleveraging strategy and debt profile reorganisation will help relieve exchange losses and financing cost pressures to the bottom line, which will increase free cash flow to enable us to invest in the future. We remain committed to implement- ing and enforcing Covid-19 proto- cols in our outlets while driving the vaccination of all our employees. We believe that a healthy, sustainable and profitable growth trend can only be achieved when we work together with our partners, communities and customers to curb infections through the observation and implementation of safety protocols. 14 Zambeef Products PLC Annual Report 2021 Key Market Indicators Reporting Period Monthly Averaged Comparatives 2021 2020 Change Economy ROE ZMW/USD 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 % $/Ton $/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 21.1 22.1 16.2 15.7 9,041 6,610 150 400 416 440 252 382 403 415 1,690 1,190 367 317 273 11.0 44.4 34.6 80 48.8 310 251 231 6.8 37.7 28.2 52 35.6 30% 41% 37% -40% 5% 3% 6% 42% 18% 26% 18% 62% 18% 23% 54% 37% 15 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW DIVISIONAL PERFORMANCE Table 1 (ZMW) and Table 2 (USD) below provide a summary of the consolidated performance of the key business divisions reported at an operating profit level. Table 1: Divisional financial summary in ZMW’000 ZMW Division Total Revenue Gross Profit Overheads Operating Profit 2021 ZMW’000 2020 ZMW’000 2021 ZMW’000 2020 ZMW’000 2021 ZMW’000 2020 ZMW’000 2021 ZMW’000 2020 ZMW’000 Retailing 2,906,466 2,396,313 271,261 243,377 (338,901) (322,041) (67,640) (78,664) CCFP 2,054,232 1,516,371 556,186 401,276 (272,126) (213,054) 284,060 188,222 Less Interco (1,705,769) (1,399,926) Combined Retail & CCFP 3,254,929 2,512,758 827,447 644,653 (611,027) (535,095) 216,420 109,558 Stock Feed 1,747,742 1,331,965 300,436 255,888 (153,716) (129,539) 146,720 126,349 Cropping Others Total Less: Intra/ Inter Group Sales Central Overhead 754,385 343,391 651,560 272,254 266,405 (192,845) (160,618) 203,609 70,579 48,676 (31,985) (23,450) 79,409 38,594 105,787 25,226 6,100,447 4,699,892 1,470,716 1,215,622 (989,573) (848,702) 481,143 366,920 (1,126,096) (824,788) (213,813) (156,389) (213,813) (156,389) 16 Zambeef Products PLC Annual Report 2021 Divisional performance (continued) Group Total 4,974,351 Table 2: Divisional financial summary in USD’000 3,875,104 1,470,716 1,215,622 (1,203,386) (1,005,091) 267,330 210,531 USD Division Total Retailing CCFP Less Interco Combined Retail & CCFP Stock Feed Cropping Others Total Less: Intra/ Inter Group Sales Central Overhead Revenue Gross Profit Overheads Operating Profit 2021 USD’000 2020 USD’000 2021 USD’000 2020 USD’000 2021 USD’000 2020 USD’000 2021 USD’000 2020 USD’000 137,617 97,265 (80,766) 148,195 93,777 (86,576) 12,844 26,335 - 15,051 24,816 - (16,046) (12,885) - (19,916) (13,176) - (3,203) 13,450 - (4,865) 11,640 154,116 155,396 39,178 39,867 (28,931) (33,092) 10,247 6,775 82,753 35,719 16,259 82,373 40,294 12,592 288,847 290,655 14,225 12,891 3,342 69,636 15,825 16,475 3,010 (7,278) (9,131) (1,514) (8,011) (9,933) (1,450) 6,947 3,760 1,827 7,814 6,542 1,560 75,178 (46,855) (52,486) 22,781 22,691 (53,319) (51,007) (10,124) (9,672) (10,124) (9,672) Group Total 235,528 239,648 69,636 75,178 (56,979) (62,158) 12,658 13,020 17 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWDivisional performance Summary (continued) Taking the performance of each of our key business areas in turn: Retail and Cold Chain Food Products The combined Retail and Cold Chain Food Products divisions generated an EBIT margin of 6.7% which increased by 229 basis points from the previous financial year to ZMW 216.4 million (2020: ZMW 109.6 million) in kwacha terms and grew impressively by 51.2% to USD 10.3 million (2020: USD 6.7 million) in dollar terms. The performance was underpinned by revenue optimisation and cost control in Poultry products supported the increased demand given by relative affordability of Chicken and Egg as a source of protein. Cost pressure arising from supply constraints negatively impacted on the profitability in Pork, Beef and Milk. West Africa Retail Our Nigerian business was impacted by the sporadic protests related to the Shoprite announcement of the intention to pull out of the Nigeria market and the EndSARS protests. In addition, the business experienced supply challenges across its major these product challenges, revenue increased by 14% to USD 15.4 million (2020: USD 13.5 million) mainly due to pricing and exchange translational effects with dollar revenue increasing by 14%. However, operating profit declined by 52% in dollar terms due to rising costs of inputs. lines. Despite all Stockfeed Sales volumes were flat on prior year mainly due to declines on key volume categories. Shortage of day-old chicks slowed the growth of broiler feed while an export ban impacted export sales. 18 Revenue grew by 31% in kwacha terms and 0.5% in USD terms, while the operating profit grew by 16% to ZMW 146.7 million (2020: ZMW 126 million) or declined by 11% to USD 6.9 million (2020: USD 7.8 million) in dollar terms. Production costs was impacted by rising costs of inputs, particularly the Soya and imported raw materials. Cropping The Cropping business is key to Zambeef, providing raw material inputs for value added processing within the Group and serving as a currency hedge by being able to generate USD cash flow. Revenue increased by 10% in USD terms to USD 44.3 million including from asset held for sale (2020: USD 40.3 million) which translated to a 43.4% growth in revenue to ZMW 935.9 million (2020: ZMW 651.5 million) when analysed in kwacha terms. Gross profit increased by 30% to ZMW 345 million compared to the previous corresponding period (2020: ZMW 266 million) in kwacha terms despite a 1% reduction in USD terms to USD 16.3 million (2020: USD 16.5 million). The division observed an increase in overheads of 47% in kwacha terms and 12.7% in USD as a result of increments in repair and maintenance costs during the period under review. Zambia experienced a good rainfall season and the summer harvest line with to be is expected expectations. However, the price of maize is expected to be lower than the prior year following the expected bumper harvest predicted for Zambia. in Other businesses Total revenue from the Group’s other business units increased by 68.7% to ZMW 343 million (2020: ZMW 203.6 million) mainly due to growth in both the milling and leather to shoe businesses. This translated to gross profit growth of 45% in kwacha terms due to cost pressures in Milling arising from the increase in price of wheat in kwacha terms following the depreciation of the currency. leather to shoe business The turnaround strategy paid off as the division saw an increase in demand for its products, particularly school the opening of following shoes, related schools after Covid-19 closures. focus Management has been to optimise production efficiencies, control overhead costs, innovation and look for new market opportunities for its products. Walter Roodt Chief Executive Officer 30 November 2021 Zambeef Products PLC Annual Report 202119 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWSustainability Report is to committed ‘triple bottom a Zambeef line’ sustainable approach to its operations in order to help deliver a positive economic, social, and environmental impact. We believe that economic sustainability is not simply our traditional corporate capital, but is also a measure of how the business impacts on the economic environment, underpinned by our commitment to environmental and social sustainability. Zambeef is committed to provide a safe and healthy workplace for its employees and contractors, protecting the environment and being a responsible corporate citizen in the communities where we have a presence. This commitment is enshrined in our Environmental & Social and Health, Safety & Welfare Policies. to committed has Zambeef the set principles upholding International Finance the in out Performance Corporation Standards (PS) and World Bank Group Environmental, Health, and Safety Guidelines on environmental and social sustainability. (IFC) 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 has adequate and robust systems for monitoring the environmental, health & safety and and social management in accordance with performance, applicable legislation and good International Industry Practice. in place Zambeef has an environmental and social action plan (ESAP) that has been agreed on with its international development finance partners to help ensure continuous performance improvement at the corporate and operational level. 20 The Company has dedicated a separate central department, of ten employees, to environmental and social compliance and improvements in operational Divisions. In addition to the environmental and social twenty- department, nine to employees dedicated environmental and social activities at an operational level. there are Local capital markets ü A significant percentage of the Group’s shareholding (8.13%) is owned by local institutional investors and pension funds, including the National Pension Scheme Authority which means every working Zambian has a stake in the company. Economic performance Export earnings Zambeef is a significant contributor to the country’s economic activities. Employment ü The Group is a member of the Zambia Development Agency’s elite Million Dollar Club of leading exporters. ü Zambeef continues to be one of the largest employers in the country, with 6,795 staff, 14.33 % of who are females. ü Three of the five members of the Executive Team are female. ü For the FYE 30 September 2021, recorded the Group foreign exchange export income of over USD1.7 Million, while total Group USD-denominated revenues were USD 235.5 Million. ü Over 99.5% of employees are Skills development Zambian. ü The Group’s cropping division provides significant employment to rural communities, where poverty levels are higher than in urban areas. ü Most of Zambeef’s raw material suppliers are located and provide employment to communities in rural areas. Taxes The Group is a significant contributor to government revenues. In the year under review, it contributed in excess of ZMW190m in various taxes which include:- ü Value Added Tax ü Pay As You Earn ü Customs Duties ü Property Transfer Tax ü NAPSA ü Workers Compensation ü The Group is fully committed to developing and training its employees at all levels. ü Specific and specialised train- ing in food safety, occupational health and safety, safe handling of hazardous materials is offered to employees. ü The in Group’s continual reinvestment human resources and a deliberate focus on diversity and inclusion has resulted in many senior positions being held by Zambian females. Food security ü Zambeef plays a pivotal role in the national food security of Zambia, ensuring that the country has sufficient capacity to feed its growing population as well as a surplus for export feed neighbouring to help countries. company The produced over 104,743 metric tons of grains (43,318 tons of Zambeef Products PLC Annual Report 2021Social performance Zambeef continues to align its social investments to the United Nations Sustainable Development Goals. We work closely with small and medium scale farmers; • They supply in beef, chicken, pork and milk raw materials to our Cold Chain Food Divisions • They supply soya beans and maize to our stockfeed operations • We render support to the vulnerable (hospices, hospitals, orphanages and care homes) through donation of food products produced by the company • We fund and support public healthcare institutions and company owned medical clinics • The company supports community/government schools located within the communities in which it operates • The company has constructed new class room blocks and rehabilitated public- school infrastructure wheat, 36,471 tons of soya beans and 24,954 tons of maize) in the year under review. ü The company also produced 31,272 tons of maize silage and 3,790 tons of rhodes grass for its livestock. ü 8.26 million broiler chickens were processed. ü 55.60 million eggs were produced in the financial year. ü 19.22-million-day old broiler chicks were produced from the hatchery. ü 65,184 beef cattle, 35,103 goats and 462 sheep were processed during the year. ü 45,692 pigs were processed during the year. Food Quality and Safety The company continued making progress improvement of the quality and safety of foods it manufactures and offers for sale to the public. in the Customer Care Feedback: The dedicated customer phone care line and email service have been widely publicised, on product packaging trading premises. and also Giving our customers opportunities to engage with the business is an important component of our stakeholder management program. in We receive valuable feedback about our products and quality of service, and that helps us to improve both the products and services we offer. In FY19, 419 customers used these feedback platforms to contact the business; increased the number to 778 in FY20, and was at 853 by the end of FY21. This progression shows that customers are finding the engagement process a useful tool for communicating with the business. Food Safety Management System (FSMS): The FSMS ensures that the business has a continuous improvement program on the quality and safety of the food it produces 21 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWSustainability Report (continued) and offers for sale to the public. In the year under review, the Chicken Processing Plant, Dairy Processing Plant and Masterpork Factory obtained ISO 22000 certification; this was in addition to the already certified the Novatek Feeds Lusaka Plant which was certified in 2015. in Mpongwe The Novatek Plant has undergone a Stage 2 Audit and should receive certification by the second quarter of FY22. Focus in the new financial year is on the ISO 22,000 certification of the Flour Mill, Zamhatch, Beef processing operation. We continue implementation of a Hazard the Analysis Critical Control Point certification scheme in our Retailing Division. The ambition of the Group is to have the entire internal food supply chain to be fully certified in the near future. Inclusive business model: Zambeef inclusive and all- operates an embracing model, business consequently, it continues to source the bulk of its raw materials from rural communities in Zambia. 100% of the beef processed and 83% of the pork handled by Masterpork was sourced and supplied from small-scale and emerging farmers. We engaged out-growers, who supply 65% of the broiler chickens processed by Zamchick. 92% of the maize and 54% of the soya beans used at Novatek Animal Feeds were externally supplied, predominantly by small-scale rural farmers. We believe that a strong linkage to rural based suppliers helps fight poverty ‘economically in these otherwise excluded’ communities, meeting the aspirations of UN SDG 1, of ‘ending poverty in all its forms everywhere’. In the FY under review, the company bought grain and livestock from 52,930 emerging, small-scale and 22 medium-scale farmers across the country. Community engagement: Zambeef continues engaging with neighbouring communities in the areas where we operate. Consultations are held on a regular basis and every time developmental projects are initiated at company sites. Zambeef fully complies with good international industry practice in all its land related engagements. and care Support to vulnerable communities/ groups through foodstuff donations: The company renders support to the vulnerable (hospices, hospitals, orphanages homes) foodstuffs. through donations of There are currently 22 institutions hosting vulnerable people which the company supports through the food supply program. A total of US$250,000 was budgeted for this support in the FY under review. This gesture by the company aligns strongly with UN SDG 2, whose main aspiration is to ‘end hunger, achieve food security and improved nutrition’ Additional support, in response to the Covid-19 pandemic, was rendered to local authorities, public schools and communities. The support was mostly in the form of hygiene stations, sanitiser and awareness programs. neighbouring Support to educational and healthcare institutions: Zambeef continues to fund educational and healthcare institutions in addition to Mpongwe School and medical clinic, wholly owned by the company and whose teachers, teaching aids, healthcare workers, equipment and facilities are fully funded by the company. In the year under review, the Mpongwe expenses amounted to US$175,000. government The company also supports community and and healthcare institutions located in the areas where it operates. schools 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’, respectively. Zambeef also supports a number of traditional ceremonies and sporting activities across the country. Environmental performance Zambeef continues to work towards good international industry practice by implementing a process of continual improvement in environmental and social management. During the FY under review, the company submitted four Environmental Zambeef Products PLC Annual Report 2021Sustainability Report (continued) Project Briefs (EPB) to the Zambia Environmental Management Agency (ZEMA) as governed by Statutory Instrument No. 28 of 1997 ‘Environmental Impact Assessments Regulations’ read together with the Environmental Management Act (EMA) No. 12 of 2011. This practice also fulfils the requirements of IFC PS 1: ‘’Assessment and Management of Environmental and Social Risks and Impacts.” The under-listed projects were approved by the ZEMA Board; Overview 1. Establishment of a composting site at Kalundu Dairy Farm in Chisamba District, Central Province. Strategic report Corporate governance Financial statements 2. Construction of one new agro-chemical storage facility at Kampemba Farm in Mpongwe District of the Copperbelt Province. 3. 4. Installation of 25,000 litre above ground diesel tank at Kitwe Processing, Copperbelt Province. Building a nation Installation of three 22,500 litre above ground diesel tanks at Sinazongwe Feedlot in Sinazongwe District of Southern Province. BUILDING A NATION 23 Zambeef Products PLC Annual Report 2019 23 Zambeef Annual Report 2019_2_Damaged.indd 23 06/12/2019 17:15:29 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW24 Zambeef Products PLC Annual Report 2021Corporate Governance 25 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCORPORATE GOVERNANCE STATEMENT does not apply to companies floated on the 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 recommended by AIM. In this regard, and bearing in mind the size and scale of the operations of the Company, the Company has adopted the QCA Code as the basis of its corporate governance standards. On LuSE, Zambeef Products Plc. has established a formal governance framework by way of adopting the LuSE code as well as comprehensive company policies and guidelines, audit and assurance procedures which compliance with applicable laws and regulation as well as recognized codes of good practice. ensure of report an therefore aims overview to This provide the Company’s governance practices. to is comprehensive, albeit It avoid duplicity of information, the other relevant information will be contained in the other reports and financial statements that form part of the Annual Report for the year. CORPORATE GOVERNANCE IN ACTION Company’s corporate The governance practices are put together in the Corporate Governance Handbook that is subject to review by the Board from time to time. The last such review was in September 2021. The Handbook addresses the various areas of governance and covers the following aspects: § Share Dealing Code § Disclosure Policy § AIM Rules Compliance Policy § LuSE Listing Rules Compliance Policy § Anti-Corruption and Bribery Policy Incident including reporting and whistleblowing § Social Media Policy § Related Party Transactions Policy § Delegation of Authority § Board Charter § § § the Terms of Reference Remuneration and Succession Committee for Terms of Reference for the Audit and Risk Committee Terms of Reference Environmental and Committee for the Social § Memorandum on Inside Information and; § Group Code of Ethics THE BOARD OF DIRECTORS The Company has a unitary board of directors, which at the start of the year under review, comprised 11 directors but later reduced to 9, retaining a number within that required per its Articles of Association, yet balancing the requisite business acumen and skills pertinent to the business. Of the 9 Directors, 7 are Non-Executive Directors, and 2 are Executive Directors. 5 Non-Executive Directors are considered independent by the Board, in terms of the guidelines prescribed in the QCA Code and the LuSE Corporate Governance Listing Rules. The Board is responsible for the performance and direction of the Company, through the establishment of strategic objectives and key policies, as well as approving major business decisions, in accordance with its charter. 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. New appointments to the board are carried out in a transparent Zambeef Products Plc (“Zambeef” or the “Company”) remains committed to maintaining, promoting and achieving the highest standards of corporate governance and corporate citizenship by adhering to the relevant codes of best practice, and the principles of fairness, accountability, responsibility, and integrity. transparency recognising The company strives for continuous that improvement, the achievement of a long-term sustainable business is dependent on stable, well-functioning and well- governed social, economic and governance practices. environmental, The Board has developed a Corporate Governance Code that complies with the Lusaka Securities Corporate Exchange (LuSE) the Governance Code. Further, 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. FRAMEWORK As a company listed on exchanges in Lusaka and London, we are required to comply with LuSE and UK specific corporate governance codes. The UK Corporate Governance Code 26 Zambeef Products PLC Annual Report 2021Corporate Governance (continued) and manner and are made in accordance with the recommendations of the Remuneration Succession Committee and, following approval of to the board, are subject confirmation by shareholders at the Annual General Meeting. Details of the current Directors, their roles and background are available on the Company’s website at www. zambeefplc.com. RESPONSIBILITIES OF THE BOARD reviewed during The Board responsibilities are set out by a Board Charter, which requires that there is an appropriate balance of power and authority on the board. The Board Charter was the year under review, the board satisfied its responsibilities in compliance therewith. The Board is responsible for the overall stewardship of the Company. The Board’s role consists fundamental elements: of oversight. decision-making and two function The decision-making is exercised through the formulation with management of fundamental policies and strategic goals and the approval of certain significant actions. The oversight function concerns the review of management decisions, the adequacy of systems and controls and the implementation of policies. In performing its role, the Board makes major policy decisions, participates in strategic planning, delegates to management authority and responsibility for day-to-day affairs and reviews management’s performance and effectiveness. CHAIRMAN AND CEO ROLES The roles of the Chairman and CEO are performed by separate persons, with the Chairman being responsible for; • • • Providing leadership to the Board in relation to all Board Matters; Representing the views of the Board to the public; Acting as a conduit between the Board and being the primary point of contact between the Board and the Chief Executive Officer; Board Principles of good governance are embedded in the way the Board; its sub-committee and the executive committee operates their business. The integrity, principles of good governance its and accountability throughout activities and each director brings independence of character and judgment to their role. applies The Board Composition Director Michael Mundashi SC Walter Roodt Frank Braeken Roman Frenkel Pearson Gowero Yollard Kachinda Jonathan Kirby Faith Mukutu Title Chairman Executive Director (CEO) Non-Executive Director Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-executive Director Executive Director Katebe Monica Musonda Independent Non-Executive • Overseeing the Board agenda all Board conducting and meetings; • Overseeing conducting and Annual General Meeting (AGM) and other shareholder meetings and; • Keeping the Board informed of all major project proposals by way of specific reports; Date of Appointment 04/09/2019 29/03/2019 30/06/2018 01/03/2021 01/03/2021 18/04/2017 03/08/2017 04/09/2019 01/03/2021 27 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCorporate Governance (continued) As at the date of the report, the Board comprised of 9 Directors, 7 are Non-Executive Directors, and 2 are Executive Directors. The seven Directors are considered by the company to be independent in character and judgement and free from any business or other relations that could materially interfere with the exercise of their judgement. Brief curricula vitae of the directors appear on 36-37 of this report. The Board is satisfied that all the Directors have sufficient time to devote to their roles and that it is not placing undue reliance on key individuals. MEETINGS OF THE BOARD The board has four regular meetings each year and the company’s Articles of Association makes provision for decisions to be taken between meetings by way of written resolutions, when required. During the year under review, four meetings were held and attendance was as shown by table below; DIRECTORS’ NAME M Mundashi SC W Roodt F Braeken R Frenkel P Gowero Y Kachinda J Kirby M Mudenda F Mukutu K M Musonda E Mwase D Osborne J Rabb L Sikutwa BOARD MEETING (25/11/20) BOARD MEETING (15/02/2021) BOARD MEETING (9/06/2021) BOARD MEETING (15/09/21) TOTAL MEETINGS ATTENDED TOTAL MEETINGS HELD    BA BA     BA        BA BA     BA    RS        RS   RS RS RS RS        RS   RS RS RS RS 4 4 4 2 2 4 4 2 4 2 2 2 2 1 4 4 4 4 4 4 4 4 4 4 4 4 4 4 Key  X BA RS Attended Absent Before Appointment Resigned 28 Zambeef Products PLC Annual Report 2021Corporate Governance (continued) BOARD COMMITTEES in assist To responsibilities, established three committees: its the Board has exercising • • • the Audit and Risk Committee the Remuneration and Succession Committee the Environmental and Social Governance Committee. The board committees operate under approved mandates and terms of reference, which define their functions and responsibilities. Through the Company’s management committee, management meets and serves to assist the board to co-ordinate, guide and monitor the management and performance of the Company. Following each meeting, the committee chair reports to the Board on the committee’s activities, such recommendations as are deemed appropriate in the circumstances. Minutes of committee meetings are made available to all directors on a timely basis. Non-executive directors actively participate in all committees. and makes 1. Audit and Risk Committee The Board approved the membership to the Audit Committee of the long outstanding independent and advisor and co-opted member - Hastings Mtine in September 2021. (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: to ensure • The primary role of the Audit the is Committee 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 internal and management 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 in accordance with matters relevant frameworks including the LuSE Corporate Governance Code and the QCA Code. • 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 risk management, control, of 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 auditors without external the presence of any Executive Director. • The committee should also con- sider and make recommendations to the Board, to be put to share- holders for approval at the Annual General Meeting, as regards the appointment and/or reappoint- ment of the company’s external auditor. • Monitor the ethical conduct of the Company, its executives and senior officials. Committee Meeting Attendance Schedule NAME CATERGORY OF DIRECTOR Jonathan Kirby/ Lawrence Sikutwa** Chair: INED Frank Braeken Pearson Gowero Roman Frenkel NED INED NED Hastings Mtine Committee Member Margaret Mudenda David Osborne INED NED 23/11/2020 16/02/2021 08/06/2021 14/09/2021  ** BA BA BA BA     BA BA BA       BA RS RS      RS RS Key  BA ** RS Attendance Before Appointment Retired as Chairman of the Audit Committee on 31/12/2020 Resigned 29 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCorporate Governance (continued) 2. Remuneration and Succession Committee to fill Board vacancies as and when they arise. committee the provided remuneration The oversight over and compensation for senior management to retain and motivate staff to perform at the level of the quality required. The committee is chaired by an independent non- executive director. Chairman – John Rabb*/Katebe Monica Musonda** (John Rabb resigned from the Board on 28 February, 2021. Katebe Monica Musonda took over as Chair of the committee as of 1 March, 2021) Members - Yollard Kachinda, Jonathan Kirby, Margaret Mudenda* and Frank Braeken. (Margaret Mudenda resigned from the Board on 28 February, 2021) Responsibilities: • Regularly review the structure, knowledge, experience size, and diversity of the Board, as well as the sub-committees of the Board, and make recommendations to the Board with regard to changes. • Responsible identifying, for evaluating and nominating, for the approval of the Board, candidates The • Consider succession planning for Directors and other senior executive management, and in particular, for the key roles of Chairman and CEO of the Company. appointment of CEO and directors can only be made following a formal, rigorous assessment by its this committee and formal recommendations being made to the Board, having also evaluated the balance of skills, knowledge, and diversity on the Board. experience • 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 considering all factors necessary, which legal and including requirements, regulatory it deems relevant of and the provisions the recommendations QCA Code and associated guidance. The objective of such policy shall be to ensure that members of the Group executive management provided with incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group. are appropriate • The committee ensures reporting of the Remuneration Committee’s agreed fees and remuneration, for both the executive directors and non-executive 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 Committees Board Board, (and their constituents), and recommend training where necessary. Committee Meeting Attendance Schedule NAME Katebe Monica Musonda*/ John Rabb** Frank Braeken Yollard Kachinda Jonathan Kirby Margaret Mudenda CATERGORY OF DIRECTOR 23/11/2020 16/02/2021 08/06/2021 14/09/2021 Chair: INED  **  **  **  ** INED INED NED INED            RS    RS Key  BA * ** RS Attendance Before Appointment Current Chair of Committee (appointed 01/03/2021) Resigned from the Board by date of report Resigned 30 Zambeef Products PLC Annual Report 2021 Corporate Governance (continued) 3. Environmental and Social Committee Chairperson - Professor Enala Tembo- Mwase*/Pearson Gowero ** Members – John Rabb*, David Osborne*, Roman Frenkel**, Katebe Monica Musonda**, Yollard Kachinda Responsibilities: • Provide strategic advice and guidance to the Board in relation strategic to systemic environmental social (“E&S”) issues which affect the Company’s business model and strategy. and and that • Ensure the Company in place adequate and has robust systems, policies and procedures for monitoring the E&S management of the Company, in accordance with and applicable Good Industry Practice (“GIIP”), defined by IFC Performance Standards. International legislation • 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 investiga- tions relating to breaches of E&S laws, regulations and standards and/or the Company’s E&S pol- icies, management systems and plans. • Ensure good corporate citizenship through promotion of equality, prevention of unfair discrimination and reduction of corruption. • Ensure contribution to development of the communities in which its activities are predominantly conducted, or its products or within which predominantly services marketed. are Retirement and Election of Directors It is the Board’s policy that new directors are subject to confirmation at the first opportunity following their appointment. All Directors, excluding the Executive Directors are subject to retirement and re-election on a rotational basis with one-third of the board being re-elected annually. Performance Evaluation of the Board 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 relationships; Internal Board 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. The board will continue to implement necessary changes to enhance its performance. Committee Meeting Attendance Schedule NAME CATERGORY OF DIRECTOR Pearson Gowero*/Enala Mwase** Chair: INED 23/11/2020  ** 16/02/2021  ** Roman Frenkel Yollard Kachinda Katebe Monica Musonda John Rabb** David Osborne** NED INED INED INED NED BA BA BA   BA BA BA   08/06/2021  **  14/09/2021  **    RS RS   RS RS Key  BA ** RS Attendance Before Appointment Retired as Chairman of the Committee on 28/02/2021 Resigned 31 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW Corporate Governance (continued) BOARD INDUCTION AND DEVELOPMENT Newly appointed directors are taken through the Company’s Articles of Association, the Board Charter, Codes of conduct, policies, listing regulations and applicable acts such as Companies Act and Securities Act. They follow a tailored induction the programme Company Secretary which includes a scheduled trip to tour the operations. facilitated by COMPANY SECRETARY Secretary Company The is responsible for implementing and sustaining high levels of corporate governance and keeps abreast of legislation, regulations and corporate governance developments which may impact on the business. All Directors have direct access to the Company Secretary. STAFF DEVELOPMENT, TRAINING AND INFORMATION TECHNOLOGY The Company is committed to staff development and training as this is a key ingredient to continued and improved operations. The Company places emphasis on information technology as key in its strategy of delivering quality products which are the first choice of our customers and consumers. STAKEHOLDER RELATIONS ensures considerable places Zambeef importance in maintaining active investor relations through open, fair transparent communications. and timely The Company dissemination of information to its investors and other stakeholders through various media. A dedicated the shareholders unit Transfer Secretaries is responsible for active the shareholders. interaction with through The Zambeef business model has identified and understands the importance of maintaining strong working relationships with; • its key small-scale suppliers 32 across grains and livestock, business performance. • • • • • raw larger commercial its material/input suppliers and livestock suppliers, its wide customer base across food stockfeed, cold chain products, and other products, its regulators such as Zambia Environmental Management Agency (ZEMA), Patents and Companies Registration Agency (PACRA), Water Resources Management Agency (WARMA), Lusaka Securities Exchange (LuSE), Securities and Exchange Commission AIM Nominated Advisor; (SEC), its financiers; social responsibility partners in communities. views (AGM) institutional In addition, Zambeef has shareholder meetings, formally through Annual General Meetings and Extraordinary General Meetings (EGM), where required, and informally meetings through 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 (CFO) meet and conduct Officer results presentations with formal shareholders on a half-yearly basis. The Board considers the AGM key in providing shareholders with the opportunity to ask the Board and chairperson of the Audit committee questions concerning the affairs of the Company. Accordingly, all legal and regulatory requirements, notices and information are released well in advance to shareholders, regulators, stock exchange and Company websites. To this end, the Company ensures copies of the Annual Report and Accounts are made available well before the AGM as this ensures the shareholders have insight of the all shareholder The Group publishes the outcome of resolutions immediately after each AGM or EGM. Zambeef maintains all market announcements and Annual Reports on its website for the last 10 years. Internally the Board and Management consider effective communication as being critical to the success of the business. INTERNAL AUDITORS The Company has an internal audit function designed to add value to the Company and improve operations. the Company The Internal Audit function provides an independent assurance service to the Board, the Audit and Risk Committee and management. The Internal audit function is formally defined via an Internal Audit charter and assists to accomplish its objectives by bringing a systematic approach the evaluation of the effectiveness of the governance, risk management and control processes that management has put into place. The head of the internal audit function attends the Audit and Risk Committee meetings and has unrestricted access to the chairperson of the committee. in PROCUREMENT requires competitive The Board 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. EXTERNAL AUDITORS External auditors are appointed by the shareholders and are subject to reappointment at the AGM. The current external auditors of the Company are Grant Thornton (GT). The Company together with external auditors ensures that quality and independent audits are undertaken through regular and systematic audit planning and also rotation of client staff engaged on the audits. Zambeef Products PLC Annual Report 2021Corporate Governance (continued) ORGANISATIONAL INTEGRITY In its continued efforts to foster integrity within the organisation, the Company continues to enforce the Group Code of Ethics policy and encourages all employees to make a declaration of their assets and/or business involvements’ every year. Employees are also encouraged to declare all the gifts received in the course of employment by way of a gift register, maintained by the Company Secretary. INTERNAL CONTROL and ethical standards. The Company has a Code of Conduct and Business Practices, determining the minimum standards required of all staff, which is disseminated the Company. throughout implemented, The Company has and widely disseminated to all stakeholders (including suppliers), a Group Code of Ethics and Conduct. INCIDENT REPORTING, ANTI- BRIBERY AND CORRUPTION AND WHISTLEBLOWING POLICIES AND PROCEDURES safeguard and produced The control systems are designed to the Company’s assets, maintain proper accounting records and ensure the reliability financial of management information the by Company. Control systems are based on established Zambeef group policies and procedures and are implemented by trained personnel, with an appropriate segregation of duties. The effectiveness of these internal controls and systems is monitored by the internal audit department, with the aid of self-assessment audit checklists. Management is also in the transitional process of reporting Internal Controls over Financial Reporting as prescribed by the Zambian Securities and Exchange Commission. independent The external auditors, through the audit work they perform, confirm that abovementioned monitoring the procedures applied effectively. are being Nothing has come to the attention of the Directors or the independent external auditors to indicate that any material breakdown in the functioning of abovementioned internal controls and systems has occurred during the year under review. ETHICS Company’s The fundamental policy is to conduct its business with honesty and integrity and in accordance with the highest legal has Company The detailed policies and procedures covering Incident Reporting, Anti-Bribery and and Whistleblowing. Corruption (ABC) The Group’s ABC program has been formulated in conjunction with CDC Group PLC (CDC), following best is international practice. well structured, documented and rigorously monitored. It There internal is a dedicated Whistleblowing Manager, managing reports and complaints. These complaints can be made in various forms, and anonymously, without fear of adverse consequences. This policy has active senior management is widely encouragement communicated within the Group, with a verifiable and transparent process of handling complaints. This has resulted in valuable information being obtained for further action. and Internal Audit closely monitors, reviews and reports on all of these the Audit and Risk policies Committee of the Board. to LEGAL COMPLIANCE that The Board requires management to submit an annual declaration confirming the Company’s operations complied with relevant laws and regulations. In addition, the Company complies with local legislation. The Company has recourse to the group Company Secretary and external legal advice on matters of legal compliance. INSIDER TRADING Directors and officers of the Company who have access to unpublished, price sensitive information, in respect of the Company, are prohibited from dealing in the shares of the Company, during defined restricted periods, including those periods immediately prior to the announcement of interim and final financial results. These regulations are clearly stipulated in the Share Dealing Code section of the Corporate Governance manual. SHARE DEALING 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 relevant including employees, obtaining the advice of its AIM Nominated Advisor. In compliance with the Market Abuse Regulation (MAR), the Chairman of the Board is responsible for share dealings by the Directors, assisted by the Company Secretary as the Compliance Officer. Directors’ companies Interests in other 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 considered if any such company enters into any contract with any Group company. The Group has a Related-Parties Transactions policy which aims to ensure related- party transactions and appropriate management of any approved transactions. transparency in RELATED-PARTY TRANSACTIONS The Board gives authorisation for any transactions carried out by the group with any anyone or business considered a related party. Such transactions are evaluated as to 33 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCorporate Governance (continued) whether the parties are treated fairly and in accordance with market conditions. For recurrent transactions carried out with clients during the Groups’ 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. MARKET DISCLOSURE The Company prepares trading statements, interim and final results as required by the AIM, the LuSE and SEC rules and also prepares a detailed narrative statement to accompany the results. Company results are disseminated widely through the newswires and our own distribution lists. COMPLIANCE STATUS OF LuSE CORPORATE GOVERNANCE RULES ZAMBEEF COMPLIANCE SCHEDULE Applicable Non- Applicable Full Compliance Partial Compliance Non- Compliance %N/A Category General Matters Chairman and CEO* Executive and NEDs Directors’ Compensation Share & Share dealings Board meetings Board evaluations** Company Secretary Board committees Legal and compliance External audit Internal audit Risk Integrated sustainability reporting Disclosure and Stakeholder Reporting Organisation integrity Total Rules 15 5 4 9 4 4 1 4 10 2 7 12 7 7 4 6 15  4 9 4 4 1 4 10 2 7 12 7 7 4 6 101 100                 1 15  4 9 4 4  4 10 2 7 12 7 7 4 6 99                 0       1 -         1                 1 %FC 100  100 100 100 100 0 100 100 100 100 100 100 100 100 100 99 %PC %NC -                 - - -    - - -       Summary of areas that are not fully compliant or inapplicable Areas not applicable * Chairman and CEO performed by seperate persons **Board Evaluation: following the changes in the composition of the board as explained in the chairman’s statement it was not prudent to evaluate the performance of the board as a whole on accout of the new directors. 34 Zambeef Products PLC Annual Report 202135 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWBoard of Directors Walter Roodt (age 45) CEO Nationality: Namibian Faith Mukutu (age 41) Chief Financial Officer Nationality: Zambian Michael Mundashi SC (age 63) Chairman Nationality: Zambian Qualifications: Bachelor of Laws Degree (University of Zambia); Post Graduate qualification as an Advocate of the High Court of Zambia. Experience: Over 30 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. Qualifications: BSc. (Agric.) Animal Science (University of Pretoria, RSA); MSc. (Agric.) Nutrition Science (University of Pretoria, RSA); Senior Executive Programme (London Business School, UK). Experience: Over 15 years of experience in Agriculture in Southern Africa. External appointments: Director of City Dental Ltd. 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 15 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, Good Nature Agro, & Zayohub Zambia Ltd. Katebe Monica Musonda (46) Non-Executive Director Chair Remco Director Nationality: Zambian Qualifications: LL. B (UNZA); LL.M (Corporate Law & Finance - London) Executive Management Programme (Harvard Kennedy). Experience: Over 15 years PQE, Debt & Equity Capital Markets & Project Finance; 9 years in FMCG having founded Java Foods Previously worked as General Counsel to the Dangote Group. External Appointments Independent Non- Executive Chair Airtel Networks Plc & Zambian Breweries Plc Non-Executive Director Arcelor Mittal South Africa Plc, Mixta Nigeria, Dangote Cement Zambia Founder & CE Java Foods. 36 Zambeef Products PLC Annual Report 2021 Yollard Kachinda (age 58 ) Non-Executive Director Nationality: Zambian Jonathan Kirby (age 59) Non-Executive Director Nationality: South African Frank Braeken (age 61) Non-Executive Director Nationality: Belgian Roman Frenkel (age 41) Non-Executive Director Nationality: British Pearson Gowero (age 63) Non-Executive Director Nationality: Zimbabwe Qualifications: BSc (Ed.) Mathematics and Statistics (University of Zambia) MSc Social Protection Financing (Maastricht University, Netherlands). Qualifications Bachelor of Accounting (University of the Witwatersrand, RSA) Higher Diploma in Tax Law (Rand Afrikaans University, RSA) CA (RSA). Experience: Over 25 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 Plc. Experience: Over 30 years’ business management and Finance 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, Consol Holdings (Pty) Ltd, South Africa, Cavlier Food (Pty) Ltd, South Africa and McWade Productions (Pty) Ltd, South Africa. Qualifications: MBA in Finance (Leuven University, Belgium) Degree in Law with major in Corporate Law (Catholic University Lueven, Belgium) Advanced Management Program (Wharton Penn University, USA). Experience: Over 30 years of experience in the Fast- Moving Consumer Goods. 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. Qualifications Durham University MEng Mechanical Engineering; ACA (ICAEW). Qualifications: BSc (Economics) Hons (University of Zimbabwe) MBL (University of South Africa). Experience: Over 10 years’ investment experience in private equity in emerging markets. Previously Investment Director at Ethemba Capital LLP, emerging markets private equity fund based in London. Previously investment banker at Merrill Lynch in London and transaction services and audit professional at KPMG in London. External appointments Currently Director, Food & Agriculture, Direct Private Equity at CDC Group PLC in London. Experience: Nearly 40 years experience in business management including Retail and Fast- Moving Consumer Goods. Former Managing Director of Zambian Breweries PLC and recently retired as Chief Executive Officer of Delta Corporation Limited (Zimbabwe). External appointments Has previously served as a Director on several boards and is currently a Director of both SeedCo Zimbabwe Limited and SeedCo International Limited. He is a member of the National Council of the Confederation of Zimbabwe Industries. 37 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW 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 2021. 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 7,971 Ha of row crops under irrigation and 8,623 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: 30 September 2021 30 September 2020 ZMW’000s USD’000s ZMW’000s USD’000s 7,000 938 7,000 938 Authorised 700,000,000 ordinary shares of ZMW0.01 each Issued and fully paid Ordinary shares 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 Notes 2021 2021 2020 2020 Revenue Profit/(loss) before taxation Taxation charge Profit/ (loss) from discontinued operation Group profit/(loss) for the year Group profit/(loss) attributable to: Equity holders of the parent Non-controlling interest 38 5 10 ZMW’000s ZMW’000s 4,974,351 USD’000s USD’000s ZMW’000s ZMW’000s USD’000s USD’000s 235,528 3,875,104 239,648 203,971 (35,148) - 9,658 (22,673) (1,664) (112,957) - 33,435 (1,402) (6,986) 2,068 168,823 7,995 (102,195) (6,320) 167,980 843 168,823 7,955 (103,419) 40 7,995 1,224 (102,195) (6,396) 76 (6,320) Zambeef Products PLC Annual Report 2021 REPORT OF THE DIRECTORS (CONTINUED) 5. Dividends There has been no dividend proposed for the year ended 30 September 2021 (2020: ZMW nil). 6. Management The senior management team comprise the following: - Walter Roodt Faith Mukutu - Mike Lovett - - Mwansa Mutimushi - Nyangu Kayamba - Mboo Mumba - Koos Potgieter - Murray Moore - Richard Franklin - Mathews Ngosa - Alun Maskell - Wiehan Visagie Henry Kasanga - Nathan Chishimba - - Gbenga Ibitoye - Lufeyo Nkhoma - Clement Mulenga Chief Executive Officer Chief Financial Officer Chief Operating Officer Company Secretary Human Resources Executive Group Head – Banking & Administration General Manager - Farming General Manager – Beef and Dairy General Manager – Zamleather Limited General Manager – Zam Chick Limited, Zamhatch Limited General Manager – Masterpork Limited General Manager – Stock Feed General Manager - Milling Commercial Manager Retailing Financial Controller – West Africa General Manager – Master Meats Ghana General Manager – Master Meats Nigeria 7. Chairman (Retired on 31 December 2020) (Retired on 28 February 2021) (Retired on 28 February 2021) (Retired on 28 February 2021) (Retired on 28 February 2021) Directors and Secretary The Directors in office during the financial period and at the date of this report were as follows: Michael Mundashi SC - Dr. Lawrence S. Sikutwa - - John Rabb - Prof. Enala Mwase - David Osborne Margaret Mudenda - Yollard Kachinda Jonathan Kirby Frank Braeken Katebe Monica Musonda - - Pearson Gowero - Roman Frenkel - Walter Roodt - Faith Mukutu - Danny Museteka - Mwansa Mutimushi (Appointed on 1st March 2021) (Appointed on 1st March 2021) (Appointed on 1st March 2021) Chief Executive Officer Executive Director Company Secretary (Retired on 29 January 2021) Company Secretary (Appointed on 1 February 2021) 39 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW REPORT OF THE DIRECTORS (continued) 8. Directors’ interests The Directors held the following interests in the Company’s ordinary shares at the reporting date: 30 September 2021 30 September 2020 Direct Indirect Direct 14,000,000 - - - 375,000 - Indirect 14,000,000 - - John Rabb* Frank Braeken Katebe Monica Musonda - - 555 555 * Retired on 28 February 2021. 9. Directors’ fees and remuneration ZMW NON-EXECUTIVE Michael Mundashi SC Yollard Kachinda Margaret Mudenda Lawrence Sikutwa Enala Mwase Jonathan Kirby John Rabb Frank Braeken Katebe Monica Musonda Pearson Gowero EXECUTIVE Walter Roodt Faith Mukutu Danny Museteka Mwansa Mutimushi 14,000,000 375,000 14,000,000 Salary Car Allowance Medicals 860,000 463,225 120,272 100,226 100,225 533,870 120,272 463,225 338,333 338,333 - - - - 5,444,977 Company Car 4,950,015 Company Car 1,376,011 1,467,564 - - - - - - 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. Mr Frank Braeken was engaged in consultancy work at a fee of USD37,500. Further, the Board co-opted Mr. Hastings Mtine into the Audit Committee as a member. Mr. Mtine’s remuneration was ZMW232,657 for the year under review. 40 Zambeef Products PLC Annual Report 2021 REPORT OF THE DIRECTORS (continued) 10. Significant Shareholdings As at 30 September 2021, the Company has been advised of the following notable interests in its ordinary share capital: Investor Name CDC Group Plc Africa Life National Pension Scheme Authority (Zambia) M & G Investment Management SBM Securities Sussex Trust Eastspring Investment Rhodora Red Fort Partnership Current Position % of Shareholding 52,601,435 43,030,134 24,797,818 24,575,000 15,925,191 14,000,000 11,995,062 8,639,374 8,175,000 17.3% 14.1% 8.1% 8.1% 5.2% 4.6% 4.0% 2.8% 2.7% CDC Group Plc are also the holders of 100,057,658 convertible redeemable preference shares. These shares have four voting rights for every five preference shares held resulting in CDC having 34.8% of the voting rights. 11. Employees The Group employed an average of 7,029 (30 September 2020 – 7,082) employees and total salaries and wages were ZMW626.8 million (USD29.7 million) for the year ended 30 September 2021 (30 September 2020 – ZMW493.5million [USD30.5 million]). The average number of persons employed by the Group in each month of the financial year is as follows: Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Headcount 6,590 6,781 7,078 7,152 7,210 7,224 7,106 6,842 7,003 7,334 7,228 6,795 41 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW 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. The Group provides education and healthcare services to its employees. The Group also supports various community activities in the areas that it operates from. 13. Legal matters There are no significant 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. 14. Gifts and donations The Group made donations of ZMW2.5 million (USD 0.5million) (30 September 2020: ZMW7.9million [USD0.5million]) to a number of activities. 15. Export sales The Group made exports of ZMW36.6 million (USD1.7 million) during the period (30 September 2020: ZMW37.5 million [USD2.3 million]). 16. Property, plant and equipment Assets totalling ZMW116.1 million (USD5.6 million) were purchased by the Group during the period (30 September 2020 – ZMW92.7 million [USD5.7 million]). 17. 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 from the pandemic has been minimal. 18. Events since the year end There have been no significant events affecting the Group since the year-end. 19. Annual financial statements The annual financial statements set out on pages 51 to 154 have been approved by the directors. 20. Auditor In accordance with the provisions of section 257(1) of the Zambian Companies Act No. 10 of 2017, the auditors, Messrs Grant Thornton, will retire as auditors of the Company at the forthcoming Annual General Meeting. By order of the Board Mwansa Mutimushi Company Secretary Date: 30 November 2021 42 Zambeef Products PLC Annual Report 2021 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 No. 10 of 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 2021, 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 30 November 2021 Michael Mundashi SC Chairman Walter Roodt Chief Executive Officer 43 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW 44 Zambeef Products PLC Annual Report 2021Zambeef Products PLC and its subsidiaries Financial Statements 30 September 2021 45 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWGrant Thornton 5th Floor Mukuba Pension House Dedan Kimathi Road P.O. Box 30885 Lusaka, Zambia T +260 (211) 227722-8 M +260 955817011 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 ‘parent Company’) and its subsidiaries (the ‘Group’) for the year ended 30 September 2021, 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 financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 30 September 2021 and of the Group’s profit/loss and the parent Company’s profit/loss for the year then ended; the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards in conformity with the requirements of the Companies Act and the Securities Act of Zambia; the parent Company financial statements have been properly prepared in accordance with International Financial Reporting Standards in conformity with the requirements of the Companies Act and the Securities Act of Zambia and as applied in accordance with the provisions of the Companies Act 2017; and the financial statements have been prepared in accordance with the requirements of the Companies Act No. 10 of 2017. 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 46 Zambeef Products PLC Annual Report 2021 OVERVIEW STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES 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 Parent Company 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. Description of matter How the matter was addressed in our audit Valuation of biological assets 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 assets values, the valuation of biological assets was considered a key matter. Classification, measurement and impairment of financial assets The Group applies IFRS 9 ‘Financial Instruments’ in the preparation of the consolidated financial statements. to review required the The directors are these classifications of assets and ensure classifications are the requirements of IFRS 9. The directors also reviewed the fair valuations and impairment model. in accordance with 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. We physically counted the livestock at the year-end and engaged an expert to review the categorization and quality of the animals. We weighed samples of the animals in the various categories to ascertain the average weight of animals in those categories. We measured the crop fields, checked the subsequent yields based on the actual yields achieved and we checked the quality of the crop in the ground and the harvested using an the auditor expert. We also analysed the valuations of cattle included in the biological assets based on the valuation methods used which included price per weight. We assessed the classification of the financial assets for compliance with the reporting standard. In considering the reasonableness of the impairment provision, we tested the aging of all outstanding trade receivables to determine those that were overdue. We further assessed their recoverability through testing of subsequent receipts. Zambeef Products PLC Annual Report 2021 47 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Key Audit Matters (continued) Valuation of goodwill to K167 million (USD Goodwill amounting 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. 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. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement in the other information. 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. 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. 48 Zambeef Products PLC Annual Report 2021INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Auditor’s Responsibilities for the Audit of the Financial Statements (continued) 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. 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. 49 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWINDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES Auditor’s Responsibilities for the Audit of the Financial Statements (continued) From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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 The Companies Act 2017 of Zambia requires that in carrying out our audit of Zambeef Products PLC, we report on whether: i) ii) iii) as required by Section 259(3) (a), there is a relationship, interest or debt which, ourselves, as the company auditors have with the company. as required by Section 259 (3) (b), there are no breaches by the company’s directors, of corporate governance principles or practices contained in Sections 82 and 122 of part VII of the Companies Act 2017 of Zambia. in accordance with Section 250 (2), as regards loans made to a Company Officer (a director, Company Secretary or Exclusive Officer of the company). The Company states the: • Particulars of any relevant loan during the financial year to which the accounts apply including any loan which was repaid during the year or; • Amount of any relevant loan, whenever made, which remained outstanding at the end of the financial year. In respect of the foregoing requirements, we have no matter to report. Chartered Accountants Wesley M Beene (AUD/F000465) Name of Partner signing on behalf of the firm Lusaka Date: 30 November 2021 50 Zambeef Products PLC Annual Report 2021CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2021 Group Revenue Net (loss)/gain arising from price changes in fair value of biological assets Cost of sales Gross profit Administrative expenses Distribution costs Other income Operating profit Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s 5 4,974,351 235,528 3,875,104 239,648 16(a) 6,651 315 (14,381) (889) (3,510,286) (166,207) (2,645,101) (163,581) 1,470,716 69,636 1,215,622 75,178 (1,150,658) (54,482) (945,198) (58,454) (66,848) (3,165) (66,770) (4,129) 14,120 669 6,877 425 267,330 12,658 210,531 13,020 7(a) 7(b) 6 7 Share of loss from equity accounted investment Profit from asset held for sale 34 Exchange losses on translating foreign currency transactions and balances (3,358) 31,949 (160) 1,513 (3,177) - 23,332 1,105 (137,705) Finance costs 9 (115,282) (5,458) (92,322) Profit/(loss) before taxation 203,971 9,658 (22,673) Taxation charge 10 (35,148) (1,664) (112,957) (197) - (8,516) (5,709) (1,402) (6,986) Group (loss)/income for the year from continuing operations 168,823 7,995 (135,630) (8,388) Profit from discontinued operations 34 - - 33,435 2,068 Group income/(loss) for the year 168,823 7,995 (102,195) (6,320) The translated USD figures are for supplementary reporting purposes. 51 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2021 (CONTINUED) Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s 167,980 7,955 (103,419) (6,396) 843 40 1,224 76 168,823 7,995 (102,195) (6,320) Group income/(loss) 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 (286,645) 25,338 625,042 (52,402) Items that will not be reclassified subsequently to profit or loss Remeasurement of net defined benefit liability (2,813) (133) 6,229 Remeasurement of leases Revaluation of assets - - 192,403 9,110 315 - 385 20 - Total other comprehensive income/(loss) (97,055) 34,315 631,586 (51,997) Total comprehensive income/(loss) for the year 71,768 42,310 529,391 (58,317) Total comprehensive income/(loss) for the year attributable to: Equity holders of the parent Non-controlling interest 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 12 12 12 12 12 12 73,867 42,440 525,030 (58,661) (2,099) (130) 4,361 344 71,768 42,310 529,391 (58,317) Ngwee Cents Ngwee Cents 55.89 2.65 (45.12) - - 11.12 55.89 2.65 (34.00) 41.92 1.99 (45.12) - - 11.12 41.92 1.99 (34.00) (2.79) 0.69 (2.10) (2.79) 0.69 (2.10) The translated USD figures are for supplementary reporting purposes. 52 Zambeef Products PLC Annual Report 2021CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2021 (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 ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s As at 30 September 2019 Adjustment on transition to IFRS16 At 1 October 2019 Loss for the year Transfer of surplus depreciation Other comprehensive income: Exchange (loss) on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income At 30 September 2020 Profit for the year Revaluation Transfer of surplus depreciation Other comprehensive income: Exchange gain/ (loss) on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income At 30 September 2021 3,006 1,125,012 1,000 381,929 1,199,058 535,704 3,245,709 (4,881) 3,240,828 - - - - - - - - - - 315 315 - 315 (4,881) 3,240,828 381,929 1,199,058 536,019 3,246,024 (4,881) 3,241,143 - - - - - - - - - - - - - (103,419) (103,419) 1,224 (102,195) (31,345) 31,345 - - - 621,905 - - - - 621,905 3,137 625,042 6,229 6,229 - 6,229 621,905 (31,345) (65,845) 524,715 4,361 529,076 3,006 1,125,012 1,000 1,003,834 1,167,713 470,174 3,770,739 (520) 3,770,219 - - - - - - - - - - - - - - - - - - - - - 167,980 167,980 843 168,823 192,403 - 192,403 (44,377) 44,377 - - - 192,403 - (283,703) - - - - (283,703) (2,942) (286,645) (2,813) (2,813) - (2,813) (283,703) 148,026 209,544 73,867 (2,099) 71,768 3,006 1,125,012 1,000 720,131 1,315,739 679,718 3,844,606 (2,619) 3,841,987 The translated USD figures are for supplementary reporting purposes. 53 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2021 (CONTINUED) (ii) In US Dollar Issued share capital Preference share capital Share premium Foreign exchange reserve Revaluation reserve Retained earnings Total attributable to owners of the parent Non- controlling interest Total equity USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s At 1 October 2019 449 185,095 100 (197,748) 173,209 84,782 245,887 (370) 245,517 Adjustment on transition to IFRS 16 As at 1 October 2019 Loss for the year Transfer of surplus depreciation Other comprehensive income: Exchange gains on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income At 30 September 2020 Profit for the year Revaluation Transfer of surplus depreciation Other comprehensive income: Exchange gains on translating presentational currency Remeasurement of net defined benefit liability Total comprehensive income At 30 September 2021 - - - - - 20 20 - 20 449 185,095 100 (197,748) 173,209 84,802 245,907 (370) 245,537 - - - - - - - - - - - - - - - - - - (6,396) (6,396) 76 (6,320) (1,938) 1,938 - - - (52,670) - - - - (52,670) 268 (52,402) 385 385 - 385 (52,670) (1,938) (4,073) (58,681) 344 (58,337) 449 185,095 100 (250,418) 171,271 80,729 187,226 (26) 187,200 - - - - - - - - - - - - - - - - - - - - - - 7,955 9,110 - 7,955 9,110 (2,101) 2,101 - 40 - - 7,995 9,110 - 25,508 - - - - 25,508 (170) 25,338 (133) (133) - (133) 25,508 7,009 9,923 42,440 (130) 42,310 449 185,095 100 (224,910) 178,280 90,652 229,666 (156) 229,510 The translated USD figures are for supplementary reporting purposes. 54 Zambeef Products PLC Annual Report 2021COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2021 (i) In Zambian Kwacha Issued share capital Preference share capital Share premium Revaluation reserve Foreign exchange reserve Retained earnings Total equity ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s At 1 October 2019 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 At 30 September 2020 Profit for the year Other comprehensive income: Revaluation Transfer of surplus depreciation Remeasurement of net defined benefits liability Exchange gain on translating presentational currency Total comprehensive income At 30 September 2021 3,006 1,000 1,125,012 862,152 360,506 535,236 2,886,912 - - - - - - - - - - - - - - - (33,614) - - - - - 26,838 26,838 33,614 - 1,836 1,836 609,324 - 609,324 - (33,614) 609,324 62,288 637,998 3,006 1,000 1,125,012 828,538 969,830 597,524 3,524,910 - - - - - - - - - - - - - - - - - - - 40,125 (46,972) - - - - - - 131,349 131,349 - 40,125 46,972 - (1,408) (1,408) (271,935) - (271,935) (6,847) (271,935) 176,913 (101,869) 3,006 1,000 1,125,012 821,691 697,895 774,437 3,423,041 The translated USD figures are for supplementary reporting purposes. 55 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCOMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2021 (CONTINUED) (ii) In US Dollar 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 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 losses on translating presentational currency Total comprehensive income At 30 September 2020 Profit for the year Other comprehensive income: Revaluation Transfer of surplus depreciation Remeasurement of net defined benefits liability Exchange losses on translating presentational currency Total comprehensive income At 30 September 2021 - - - - - - - - - - - - - - - - (2,079) - - - - - 1,661 1,661 2,079 - 114 114 (45,460) - (45,460) (2,079) (45,460) 3,854 (43,685) 449 100 185,095 114,329 (213,519) 88,566 175,020 - - - - - - - - - - - - - - - - 1,900 (2,224) - - - - - 6,219 6,219 - 1,900 2,224 - (66) (66) 21,410 - 21,410 (324) 21,410 8,377 29,463 449 100 185,095 114,005 (192,109) 96,943 204,483 The translated USD figures are for supplementary reporting purposes. 56 Zambeef Products PLC Annual Report 2021CONSOLIDATED STATEMENT OF FINANCIAL POSITION - 30 SEPTEMBER 2021 ASSETS Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s 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 sale 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 13 14 15(e) 10(e) 16 17 18 34 19 10(c) 20 21 21 22 166,801 9,964 166,801 8,282 3,115,018 186,082 3,264,505 162,091 40,468 9,050 2,417 541 43,826 9,552 2,176 474 3,331,337 199,004 3,484,684 173,023 358,997 21,445 176,305 1,197,846 71,556 1,103,640 234,076 170,550 4,202 3,707 13,983 10,188 251 221 132,668 175,654 9,337 1,784 201,539 12,039 111,136 2,170,917 129,683 1,710,524 8,754 54,798 6,587 8,722 464 89 5,518 84,932 5,502,254 328,687 5,195,208 257,955 3,006 1,000 449 100 3,006 1,000 449 100 1,125,012 185,095 1,125,012 185,095 2,715,588 44,022 2,641,721 1,582 3,844,606 229,666 3,770,739 187,226 Non-controlling interest (2,619) (156) (520) (26) 3,841,987 229,510 3,770,219 187,200 The translated USD figures are for supplementary reporting purposes. 57 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCONSOLIDATED STATEMENT OF FINANCIAL POSITION - 30 SEPTEMBER 2021 (CONTINUED) Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s 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 195,555 11,682 190,218 9,445 23 24 25 7,253 8,891 433 531 19,750 11,389 69,950 10(e) 88,056 5,260 23 24 26 27 28 10(c) 20 299,755 17,906 291,307 210,709 12,587 326,899 12,418 464,103 169,307 - 13,771 742 23,259 27,723 10,113 - 823 321,648 113,347 443 41 490,204 29,283 348,045 1,360,512 81,271 1,133,682 981 565 3,473 14,464 16,231 1,155 15,971 5,629 22 2 17,281 56,291 Total equity and liabilities 5,502,254 328,687 5,195,208 257,955 The financial statements on pages 51 to 154 were approved by the Board of Directors on 30 November 2021 and were signed on its behalf by: Michael Mundashi SC Chairman Walter Roodt Chief Executive Officer The translated USD figures are for supplementary reporting purposes. 58 Zambeef Products PLC Annual Report 2021 COMPANY STATEMENT OF FINANCIAL POSITION - 30 SEPTEMBER 2021 ASSETS Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s Non-current assets Property, plant and equipment Investments in subsidiaries Investment in associate Current assets Biological assets Inventories Assets held for sale 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 14 15(b) 15(e) 16 17 34 18 19 10(c) 20 21 21 22 2,166,483 129,420 2,476,394 122,959 245,807 14,684 245,807 40,468 2,417 43,826 12,205 2,176 2,452,758 146,521 2,766,027 137,340 307,948 772,972 170,550 91,702 18,396 46,174 10,188 5,478 139,501 814,081 175,654 50,555 6,927 40,421 8,722 2,510 780,554 46,628 1,320,117 65,547 2,520 113,193 151 6,762 565 12,645 28 628 2,239,439 133,777 2,513,118 124,783 4,692,197 280,298 5,279,145 262,123 3,006 1,000 449 100 3,006 1,000 449 100 1,125,012 185,095 1,125,012 185,095 2,294,023 18,839 2,395,892 (10,624) 3,423,041 204,483 3,524,910 175,020 The translated USD figures are for supplementary reporting purposes. 59 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCOMPANY STATEMENT OF FINANCIAL POSITION - 30 SEPTEMBER 2021 (CONTINUED) Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s 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 23 24 25 23 24 26 27 28 20 195,555 11,682 190,218 9,445 1,873 2,124 112 127 8,172 3,356 10(e) 55,905 3,340 41,153 255,457 15,261 242,899 210,709 12,587 326,899 16,231 6,597 293,054 119,649 77,273 394 14,461 17,507 232,844 7,147 4,616 61,200 705,110 170,822 306,417 18,304 1,013,699 60,555 1,511,336 406 167 2,043 12,061 718 11,561 3,039 35,011 8,482 75,042 Total equity and liabilities 4,692,197 280,299 5,279,145 262,123 The financial statements on pages 51 to 154 were approved by the Board of Directors on 30 November 2021 and were signed on its behalf by: Michael Mundashi SC Chairman Walter Roodt Chief Executive Officer The translated USD figures are for supplementary reporting purposes. 60 Zambeef Products PLC Annual Report 2021 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2021 Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s Cash inflow from operating activities Profit/(Loss)before taxation Finance costs Loss on disposal of property, plant and equipment 9 203,971 115,282 2,260 9,658 5,458 107 Depreciation 14 160,471 7,598 141,408 Share of loss on equity accounted investment Profit on discontinued operations Fair value price adjustment Defined benefits movement Defined benefits paid Net unrealised foreign exchange losses Earnings before interest, tax, depreciation and amortisation, fair value adjustments and net unrealised foreign exchange losses Decrease/(increase) in biological assets Increase in inventory (22,673) (1,402) 92,322 4,796 3,177 1,529 14,381 (3,185) (1,788) 5,709 297 8,745 196 95 889 (197) (111) 185,438 11,468 3,358 - (6,651) 4,473 (6,971) (19,422) 16 25 159 - (315) 212 (330) (920) 456,771 (176,041) 21,627 (8,335) 415,405 (20,269) 25,689 (1,253) (94,206) (4,461) (162,481) (10,048) (Increase)/decrease in trade and other receivables (101,408) (4,802) (34,643) (2,142) Decrease/(Increase) in amounts due from related companies 5,135 243 (2,410) Increase/(decrease) in trade and other payables 198,415 9,395 122,496 Increase in amounts due to related companies Income tax paid 10(c) (443) (4,734) (21) (224) 192 (5,525) (149) 7,575 12 (342) Net cash inflow from operating activities 283,489 13,422 312,765 19,342 Investing activities Purchase of property, plant and equipment 14 (116,629) (5,522) (92,664) (5,731) Proceeds from the sale of assets Proceeds from the sale of assets/investments Net cash (outflow)/inflow (on)/ from investing activities 51 - 2 - 6,452 399 167,264 10,344 (116,578) (5,520) 81,052 5,012 The translated USD figures are for supplementary reporting purposes. 61 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2021 (CONTINUED) Net cash (outflow)/ inflow before financing activities 166,911 7,902 393,817 24,354 Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s Financing activities Long term loans repaid Receipt from term loans Repayment short term funding Receipt of short-term funding Lease finance repayment Lease finance obtained Finance costs 29 29 29 29 29 9 (262,705) (12,439) (162,217) (10,032) 220,000 10,417 - - (477,906) (22,628) (623,231) (38,542) 449,619 (32,513) 21,289 (1,539) 487,320 (35,478) - - 14,329 30,137 (2,194) 886 (115,282) (5,458) (92,322) (5,709) Net cash outflow on financing activities (218,787) (10,358) (411,599) (25,454) Decrease in cash and cash equivalents (51,876) (2,456) (17,782) (1,100) Cash and cash equivalents at beginning of the year (236,909) (11,763) (274,425) (20,790) 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 20 20 20 120 (3,025) 55,298 10,127 (288,665) (17,244) (236,909) (11,763) 201,539 12,039 111,136 5,518 (490,204) (29,283) (348,045) (17,281) (288,665) (17,244) (236,909) (11,763) The translated USD figures are for supplementary reporting purposes. 62 Zambeef Products PLC Annual Report 2021COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2021 Note 2021 2021 2020 2020 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 Defined benefit movement Defined benefits paid Profit on discontinued operations 14 16 147,144 84,981 87,466 3,323 553 3,358 2,241 6,967 4,024 4,141 157 26 159 106 (3,473) (164) - - 34,203 68,747 80,462 15,464 1,216 3,177 312 (611) 1,529 2,115 4,252 4,976 956 75 196 19 (38) 95 Net unrealised foreign exchange differences 34,065 1,613 180,954 11,193 Earnings before interest, tax, depreciation and amortisation Increase in biological assets Decrease/(increase) in inventory Increase in trade and other receivables (Increase)/decrease in amounts due from related companies 359,658 (168,448) 17,029 (7,976) 385,453 23,839 (2,286) 41,109 1,946 (130,482) (41,147) (1,948) (22,402) (141) (8,069) (1,385) 539,563 25,545 (275,999) (17,069) Increase in trade and other payables 118,659 5,618 74,340 4,597 Increase in amounts due to related companies (627,837) (29,727) 215,065 13,300 Income tax paid 10(c) (2,997) (142) (5,314) (329) Net cash inflow from operating activities 218,560 10,347 238,375 14,743 Investing activities Purchase of property, plant and equipment 14 (43,129) (2,042) (35,385) Proceeds from disposal of investment Proceeds from sale of assets Net cash (outflow)/inflow (on)/from investing activities - 233 - 11 167,264 4,205 (2,188) 10,344 260 (42,896) (2,031) 136,084 8,416 The translated USD figures are for supplementary reporting purposes. 63 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWCOMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 SEPTEMBER 2021 (CONTINUED) Net cash inflow before financing activities 175,664 8,316 374,459 23,159 Note 2021 2021 2020 2020 ZMW’000s USD’000s ZMW’000s USD’000s Financing activities Long term loans repaid Receipt from term loans Short term funding repaid Short term funding obtained Lease finance repayment Lease finance obtained Interest paid 29 29 29 29 29 29 (262,705) (12,439) (162,217) (10,032) 220,000 10,417 - - (477,906) (22,628) (623,231) (38,542) 449,619 21,289 487,320 (14,163) (671) (30,835) - - 14,329 30,137 (1,907) 886 (84,981) (4,024) (68,747) (4,252) Net cash outflow on financing activities (170,136) (8,056) (383,381) (23,710) Increase/(Decrease) in cash and cash equivalents 5,528 260 (8,922) (551) Cash and cash equivalents at beginning of the year (158,177) (7,854) (195,772) (14,381) 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 20 20 20 (40,575) (3,949) 46,517 7,078 (193,224) (11,543) (158,177) (7,854) 113,193 6,761 12,644 (306,417) (18,304) (170,821) (193,224) (11,543) (158,177) 628 (8,482) (7,854) The translated USD figures are for supplementary reporting purposes. 64 Zambeef Products PLC Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 1. 2. 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 7,971 Ha of row crops under irrigation and 8,623 Ha of rain-fed/dry-land crops available for planting each year. The Group also has operations in West Africa in Nigeria and Ghana. 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 ZMW223.1 million (USD13.3 million) [2020: ZMW350.2 million (USD17.4 million)]. After reviewing the available information including the Group’s strategic plans and continuing support from the Group’s working capital funders, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. 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. 65 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 ZMW271.9 million (2020: ZMW609.3 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) 66 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 2. Principal accounting policies (continued) (d) Foreign currencies (continued) (i) 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. (ii) 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 2020 Year ended 30 September 2021 16.17 21.12 20.14 16.74 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. 67 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2020 Year ended 30 September 2021 23.10 24.48 19.00 18.55 ZMW: Ghana Cedi Average exchange rate Closing exchange rate Year ended 30 September 2020 Year ended 30 September 2021 0.35 0.36 0.29 0.28 (e) New standards adopted at 1 October 2020 Other Standards and amendments that are effective for the first time in 2020 and could be applicable to the Group are as follows: • • • • • Definition of a Business (Amendments to IFRS 3) Definition of Material (Amendments to IAS 1 and IAS 8) Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) Amendments to Refences to the Conceptual Framework (Various Standards) COVID-19 Rent Related Concessions (Amendments to IFRS 16) The pronouncements which have become effective and have therefore, been adopted do not have a significant impact on the Group’s financial results or position. There are no new standards and amendments which have been issued and are effective in the current or future periods anticipated to have material impact. (f) Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group Other Standards and amendments that are not yet effective and have not been adopted early by the group include: • • • • References to the Conceptual Framework Proceeds before Intended Use (Amendments to IAS 16) Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9, IFRS 16, IAS 41) Classification of Liabilities as Current or Non-current (Amendments to IAS 1) • Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group’s financial statements. 68 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 off 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. 69 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 2. Principal accounting policies (continued) (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. (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. 70 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 2. Principal accounting policies (continued) (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. Stockfeed Stockfeed is sold through 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. Revenue is recognised when the customer collects the chicks and is invoiced. 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. 71 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 2. Principal accounting policies (continued) (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. Any revaluation surplus is recognised in other comprehensive income and credited to the revaluation reserve in equity. However, to the extent that any revaluation decrease or impairment loss has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase recognised in other comprehensive income. Downward revaluations of an assets are recognised upon appraisal or impairment testing, with the decrease being charged to other comprehensive income to the extent of any revaluation surplus in equity relating to this asset and any remaining decrease recognised in profit or loss. Any revaluation surplus remaining in equity on disposal of the asset is transferred 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. 72 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 2. Principal accounting policies (continued) (k) Property, plant and equipment (continued) 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. (l) Leased assets 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 less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. 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. 73 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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. (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). 74 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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) 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. 75 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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’. 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. 76 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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. 77 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 2. Principal accounting policies (continued) (q) 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. (r) 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. (s) Taxation (i) 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. (ii) 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. (iii) 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. (iv) Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. (v) 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. (vi) 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. 78 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 (i) Share capital represents the nominal value of shares that have been issued. (ii) (iii) (iv) (vi) 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. (vii) 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. 79 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 Provisions for legal disputes, employee benefits or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. 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. 80 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 considers projections made by the business and expected future market conditions. The company from which the deferred tax asset arises has projected taxable profits against which the tax losses will be utilised within the five year expiry period. 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 ZMW358.9 million (USD21.4 million); ZMW6.6 million (USD0.3 million) (2020: ZMW176.3 million [USD8.7 million]; ZMW14.4 million [USD0.9 million]) is affected by price changes in different market segments, and ZMW821.7 million (USD38.9 million) (2020: ZMW524.4 million [USD32.4 million]) is affected by physical changes in different segments. Refer to note 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 ZMW1,198 million (USD71.6 million) (2020: ZMW1,103.6 million [USD54.8 million]) is affected by price changes in different market segments. (ii) Impairment of financial assets and goodwill In assessing impairment, management estimates the recoverable amount of each asset or cash generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate (see Notes 13 and 18). (iii) Defined benefit obligation (DBO) Management’s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses amount (as analysed in Note 25). 81 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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. 82 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 4. Management of financial risk (continued) 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 adjusts 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. 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 2021 2020 ZMW’000s ZMW’000s (288,665) (425,935) 3,841,987 3,127,387 (236,909) (560,126) 3,770,739 2,973,704 2021 2020 USD’000s USD’000s (17,244) (25,444) 229,510 186,822 (11,763) (27,812) 187,226 147,651 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. 83 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 4. Management of financial risk (continued) 4.5 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. 4.6 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; potential insect, fungal and weed infestations resulting in crop failure and reduced yields; (ii) (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. 84 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2021 The segment information for the reporting period is as follows: (i) In Zambian Kwacha Segment Revenue Revenue Gross Profit Gross Profit 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 ZMW’000s ZMW’000s ZMW’000s ZMW’000s - 2,579,905 - 203,236 256,481 70,079 - - 48,805 19,220 - - - - 326,560 2,906,465 - - 68,025 271,261 630,140 436,035 224,577 396,788 278,913 87,780 - - - - - - 161,232 84,452 135,108 49,225 109,735 16,434 - - - - - - 2,054,233 4,960,698 (1,705,769) 3,254,929 1,747,742 754,385 - - - - - - 293,730 49,661 - - 44,564 26,015 - - - - - - 556,186 827,447 - 827,447 300,436 272,254 - - - - - 343,391 6,100,447 (1,126,096) - - - 70,579 1,470,716 - 85 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2021 (continued) (i) In Zambian Kwacha Segment Group total Central operating costs and other income Operating profit Foreign exchange losses Profit from asset held for sale Finance costs Share of loss on equity accounted investment Profit before tax Revenue Revenue Gross Profit Gross Profit ZMW’000s ZMW’000s ZMW’000s ZMW’000s - - - - - - - - 4,974,351 - - - - - - - - - - - - - - - 1,470,716 (1,203,386) 267,330 23,332 31,949 (115,282) (3,358) 203,971 Segment Zambia Nigeria Ghana Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s Cold Chain Food Production 4,634,138 256,481 70,079 1,747,742 754,385 343,391 - - - - - - 4,960,698 1,747,742 754,385 343,391 Stockfeed Cropping Other Sub-total 7,479,656 256,481 70,079 7,806,216 Intra/inter group sales (2,831,865) - - (2,831,865) Total 4,647,791 256,481 70,079 4,974,351 Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total Property plant and equipment 2,166,483 302,382 94,940 551,213 3,115,018 ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 1,080,919 124,393 59,560 291,971 1,556,843 Biological assets and inventories Cash, cash equivalents and bank overdrafts Trade and other receivables 91,702 26,331 (193,224) (139,704) 17,162 42,823 27,101 (288,665) 73,220 234,076 Trade and other payables (412,703) (111,754) (18,052) (90,901) (633,410) 86 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2020 The segment information for the reporting period is as follows: (i) In Zambian Kwacha Segment Revenue Revenue Gross Profit Gross Profit 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 ZMW’000s ZMW’000s ZMW’000s ZMW’000s - 2,177,555 - 188,754 164,275 54,483 - - 37,924 16,699 - - - - 218,758 2,396,313 - - 54,623 243,377 522,585 300,668 128,326 285,581 218,207 61,004 - - - - - - 164,307 39,037 53,126 53,194 91,760 (148) - - - - - - 1,516,371 3,912,684 (1,399,926) 2,512,758 1,331,965 651,560 - - - - - - 173,659 29,950 - - 34,107 14,569 - - - - -- - 401,276 644,653 - 644,653 255,888 266,405 - - - - - 203,609 4,699,892 (824,788) - - - 48,676 1,215,622 - 87 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2020 (continued) (i) In Zambian Kwacha Segment 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 Revenue Revenue Gross Profit Gross Profit ZMW’000s ZMW’000s ZMW’000s ZMW’000s - - - - - - - 3,875,104 - - - - - - - - - - - - - 1,215,622 (1,005,091) 210,531 (137,705) (92,322) (3,177) (22,673) Segment Zambia Nigeria Ghana Total Cold Chain Food Production 3,693,926 164,275 54,483 3,912,684 ZMW’000s ZMW’000s ZMW’000s ZMW’000s 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 Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total Property plant and equipment 2,476,394 224,825 81,835 481,451 3,264,505 ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s Biological assets and inventories Cash, cash equivalents and bank overdrafts 953,583 81,293 25,930 219,139 1,279,945 (158,177) (119,683) 5,257 35,694 (236,909) Trade and other receivables 50,555 15,436 14,121 52,556 132,668 Trade and other payables (232,842) (33,502) (3,589) (51,715) (321,648) 88 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2021 (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 Revenue Revenue Gross Profit Gross Profit USD’000s USD’000s USD’000s USD’000s - 122,155 12,144 3,318 - - - - 15,462 137,617 29,836 20,646 10,633 18,787 13,206 4,156 - - - - - - - - - - - - 97,264 234,881 (80,766) 154,115 82,753 35,719 - 2,311 910 - - 7,634 3,999 6,397 2,331 5,196 778 - - - - - - 13,908 2,352 - - 2,110 1,232 - - - - - 16,260 288,847 (53,319) 235,528 - - - - - - 9,623 - - 3,221 12,844 - - - - - - 26,335 39,179 - 39,179 14,224 12,891 - - 3,342 69,636 - 69,636 (56,978) 89 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2021 Segment Revenue Revenue Gross Profit Gross Profit USD’000s USD’000s USD’000s USD’000s Operating profit Foreign exchange losses Profit from asset held for sale Finance costs Share of loss on equity accounted investment Profit before tax - - - - - - - - - - - - - - - - - - 12,658 1,105 1,513 (5,458) (159) 9,658 Segment Zambia Nigeria Ghana Total Cold Chain Food Production 219,420 12,144 3,318 234,882 USD’000s USD’000s USD’000s USD’000s Stockfeed Cropping Other Sub-total 82,753 35,719 16,259 - - - - - - 82,753 35,719 16,259 354,151 12,144 3,318 369,613 Intra/inter group sales (134,085) - - (134,085) Total 220,066 12,144 3,318 235,528 Operating assets/(liabilities) Zambeef Retailing Masterpork Other Total USD’000s USD’000s USD’000s USD’000s USD’000s Property plant and equipment 129,420 18,063 Biological assets and inventories 64,571 7,431 Cash, cash equivalents and bank overdrafts (11,543) (8,346) Trade and other receivables 5,478 1,574 5,671 3,558 1,025 2,558 32,928 186,082 17,441 93,001 1,620 4,373 (17,244) 13,983 Trade and other payables (24,795) (6,769) (1,078) (5,195) (37,837) 90 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) 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 Revenue Revenue Gross Profit Gross Profit USD’000s USD’000s USD’000s USD’000s - 134,666 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 - - 2,345 1,033 - - 10,161 2,414 3,285 3,291 5,675 (9) - - - - - - 2,109 901 - - - - - 11,673 - - 3,378 15,051 - - - - - - 24,817 39,868 - 39,868 15,824 16,476 - - 3,010 75,178 - 75,178 (62,158) 91 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 5. Segmental reporting (continued) Year ended 30 September 2020 Segment Operating profit Foreign exchange losses Finance costs Share of loss on equity accounted investment Loss before tax Revenue Revenue Gross Profit Gross Profit USD’000s USD’000s USD’000s USD’000s 13,020 (8,516) (5,709) (197) (1,402) 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 Intra/inter group sales Total Operating assets/ (liabilities) Property plant and equipment Biological assets and inventories Cash, cash equivalents and bank overdrafts Trade and other receivables Trade and other payables 82,373 - - 40,294 - - 12,592 - - 82,373 40,294 12,592 363,703 10,159 3,369 377,231 (137,583) - - (137,583) 226,120 10,159 3,369 239,648 Zambeef Retailing Masterpork Other Total USD’000s USD’000s USD’000s USD’000s USD’000s 122,959 11,163 4,063 23,906 162,091 47,347 4,036 1,288 10,881 63,552 (7,854) 2,510 (11,561) 2021 (5,943) 766 (1,663) 261 701 (519) 1,773 2,610 (11,763) 6,587 (2,228) (15,971) 2020 Geographical Non- current assets Revenues USD’000s Non- current assets Revenues ZMW’000s Non-current assets Revenues Non- current assets Revenues ZMW’000s ZMW’000s USD’000s USD’000s ZMW’000s ZMW’000s USD’000s USD’000s Zambia 4,610,294 3,081,088 218,290 184,055 3,618,848 3,236,288 223,794 160,690 West Africa 326,560 33,930 15,463 2,027 218,759 28,217 13,529 1,401 Rest of world 37,497 - 1,775 - 37,497 - 2,325 - 4,974,351 3,115,018 235,528 186,082 3,875,104 3,264,505 239,648 162,091 92 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 6. Other income Other income is mainly derived from the rental income received by the letting out of guest houses on Mpongwe farm and sale of scrap. 7. Operating profit (a) Administration expenses (Zambian Kwacha ZMW) 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) on disposal of property, plant and equipment Rentals under operating leases Repairs and maintenance Water and electricity Other administration expenses Total Administration costs 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 142,974 24,787 626,772 30,124 13,238 3,437 16,675 5,700 - 5,700 11,743 - - 119,157 70,989 101,737 84,382 10,531 352,995 30,124 13,238 3,437 16,675 5,700 - 5,700 6,063 - - 58,286 42,977 30,158 1,150,658 637,891 125,150 16,258 493,484 7,568 11,555 3,374 14,929 4,825 - 4,825 6,980 (4,796) 1,359 85,941 66,078 127,422 945,198 74,440 6,022 255,721 7,229 11,555 3,374 14,929 4,560 - 4,560 3,937 (1,216) - 41,612 45,418 33,361 486,013 93 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 7. Operating profit (continued) (a) Administration costs (US Dollars USD) (continued) Depreciation – Owned assets – Leased assets Staff costs 2021 2020 Group Company Group Company USD’000s USD’000s USD’000s USD’000s - 6,790 1,174 - 3,995 499 - 7,740 1,005 - 4,604 372 29,677 16,714 30,518 15,815 Legal and other professional fees 1,426 1,426 468 447 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 Repairs and maintenance Water and electricity Other administration expenses Total Administration costs (b) Distribution costs Salaries and Wages Depreciation Repairs and Maintenance Levies and Licences Transport Boarding and Lodging Insurance Satellite Travel Other Totals 94 626 162 788 270 - 270 701 - - 626 162 788 270 - 270 362 - - 716 209 925 298 - 298 432 (32) 84 716 209 925 282 - 282 243 (75) - 5,641 3,361 4,654 2,760 2,035 1,354 5,315 4,086 7,615 2,573 2,808 2,062 54,482 30,203 58,454 30,056 2021 2020 Group Company Group Company ZMW’000 USD’000 ZMW’000 USD’000 21,771 14,527 11,641 5,985 5,680 2,709 1,730 1,262 559 984 1,031 688 551 283 269 128 82 60 26 47 21,808 13,179 15,460 6,009 3,389 2,018 2,137 798 1,308 664 1,349 815 956 372 210 125 132 49 81 40 66,848 3,165 66,770 4,129 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 8. Staff costs The Group employed an average of 7,029 employees during the year ended 30 September 2021 (2020: 7,082). Zambeef Products PLC, Zambeef Retailing Limited, Zam Chick Limited, Zamhatch Limited & Zamleather Limited Master Pork Limited Foreign Subsidiaries Total 2021 Number 2020 Number 6,444 271 314 7,029 6,467 299 316 7,082 Employee costs for all employees of the Group, including Executive Directors, were: Salaries and wages Social security costs Pension costs 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 554,341 39,518 32,913 626,772 26,247 1,871 1,558 29,676 449,513 21,980 21,991 493,484 27,799 1,359 1,360 30,518 Details of Directors’ contracts may be found in the Directors’ Report. 95 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 9. Finance costs 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s Interest on bank loans and overdrafts 113,648 Lease cost Total 1,634 115,282 5,381 77 5,458 90,190 2,132 92,322 5,577 132 5,709 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%). (i) In Zambian Kwacha 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s (a) Tax charge Current tax: Tax charge 16,541 1,042 5,172 6,277 Deferred tax: Deferred taxation (note 10(e)) Tax charge/(credit) for the year 18,607 35,148 14,753 15,795 107,785 112,957 34,523 40,800 96 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 10. Taxation (continued) 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 203,971 147,144 (22,673) 34,203 (b) Reconciliation of tax charge Profit/(loss) before taxation Applicable tax rates range from 10% to 35% depending on the activities of the entities within the group. Expected tax expense (7,870) 14,714 (34,982) 3,420 Adjustment for non-deductible expenses; Non-cash fringe benefits Telephone and internet Other non-deductible expenses* Unrecognised deferred tax asset for the year ** Tax charge for the year (c) Movement in taxation account Taxation recoverable at 1 October Charge for the year Taxation paid Taxation payable/(recoverable) as at 30 September Analysed as follows: Taxation payable Taxation recoverable 2,443 132 3,975 36,468 35,148 (1,743) 16,541 (4,734) 10,064 13,771 (3,707) 10,064 1,182 77 (178) - 14,619 335 45,015 87,970 7,475 294 29,611 - 15,795 112,957 40,800 (565) 1,042 (2,997) (2,520) - (2,520) (2,520) (1,390) 5,172 (5,525) (1,743) 41 (1,784) (1,743) (1,529) 6,278 (5,314) (565) - (565) (565) * The non-deductible expenses for 2020 included the balancing charge and contingent fees relating to the disposal of the Sinazongwe farm. ** The 2020 unrecognised deferred tax asset refers to the reversal of the prior periods deferred tax asset and the amount for 2021 is the deferred tax movement that has not been recognised. 97 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWNOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 10. Taxation (continued) (d) Tax returns for the year ended 30 September 2021 will be made on the due date. (e) Deferred taxation Year ended 30 September 2021 Temporary Differences/ Biological Valuation Group Recognised in profit or loss 1 October 30 September 1 October Company Recognised in profit or loss 30 September ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 ZMW’000 18,287 17,612 35,899 14,929 15,866 30,795 Property and Equipment 106,198 (13,672) 92,526 63,300 Tax Loss (54,446) 26,263 (28,183) (33,074) Other Provisions (9,640) (11,596) (21,236) (4,002) (6,019) 14,784 (9,878) 57,281 (18,290) (13,880) Deferred Income Tax Liability Year ended 30 September 2020 Temporary Differences/ Biological Valuation 60,399 18,607 79,006 41,153 14,753 55,906 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) 32,101 (33,074) Other Provisions (8,736) (903) (9,640) (2,783) (1,219) (4,002) Deferred Income Tax Liability (47,387) 107,787 60,399 6,630 34,523 41,153 Summary Group Company Group Company 2021 2020 Deferred tax asset Deferred tax liability ZMW’000s ZMW’000s ZMW’000s ZMW’000s (9,050) 88,056 79,006 - 55,906 55,906 (9,552) 69,952 60,400 - 41,153 41,153 (f) Movement in the tax losses within the group Opening balance at 1 October 2020 Arising during the year Utilised during the year Expired during the year Closing balance at 30 September 2021 ZMW’000s USD’000s 668,483 36,696 31,652 1,737 (271,518) (12,856) (20,170) 413,491 (955) 19,578 98 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 10. Taxation (continued) (ii) In US Dollars 2021 2020 Group Company Group Company USD’000s USD’000s USD’000s USD’000s (a) Tax charge Current tax: Tax charge Deferred tax: 783 49 320 388 Deferred taxation (note 10(e)) Tax charge/ (credit) for the year 881 1,664 699 748 6,666 6,986 2,135 2,523 (b) Reconciliation of tax charge 2021 2020 Group Company Group Company USD’000s USD’000s USD’000s USD’000s Profit/(loss) before taxation Expected tax expense Adjustment for non-deductible expenses Non-cash fringe benefits Telephone and internet Other non-deductible expenses* Unrecognised deferred tax asset for the year** Tax charge for the year 9,658 (373) 116 6 188 1,727 1,664 6,967 697 (1,402) (2,163) 56 3 (8) - 748 904 21 2,784 5,440 6,986 4,088 212 462 18 1,831 - 2,523 * The non-deductible expenses for 2020 included the balancing charge and contingent fees relating to the disposal of the Sinazongwe farm. ** The 2020 unrecognised deferred tax asset refers to the reversal of the prior periods deferred tax asset and the amount for 2021 is the deferred tax movement that has not been recognised. 99 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 10. Taxation (continued) (c) Movement in taxation account Taxation recoverable at 1 October Charge for the year Taxation paid Foreign exchange differences Taxation payable/(recoverable) as at 30 September Analysed as follows: Taxation payable Taxation recoverable 2021 2020 Group Company Group Company USD’000s (87) USD’000s (28) USD’000s (106) USD’000s (115) 783 (224) 129 601 823 (221) 601 49 (142) (30) (151) - (151) (151) 320 (342) 41 (87) 2 (89) (87) 388 (328) 27 (28) - (28) (28) (d) Tax returns for the year ended 30 September 2020 will be made on the due date. (e) Deferred taxation Group Company Recognised in profit or loss 1 October Foreign Translation 30 September 1 October Recognised in profit or loss Foreign Translation 30 September USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Year ended 30 Sept 2021 Temporary Differences/ Biological Valuation Property and Equipment Tax Loss Other Provisions Deferred Income Tax Liability Year ended 30 Sept 2020 Temporary Differences/ Biological Valuation Property and Equipment Tax Loss Other Provisions Foreign Exchange Translation Deferred Income Tax Liability 100 908 833 403 2,144 923 5,273 (2,703) (479) (647) 1,243 (548) 901 (224) (241) 5,527 3,915 (1,684) (2,547) (1,268) (248) 2,999 881 839 4,719 2,043 751 (285) 700 (467) 699 1,073 (165) 4,429 (8,430) (662) 844 5,727 183 - 77 (3,590) 6,666 - - - - - - 908 1,113 (190) 5,273 4,941 (1,026) (2,703) (5,326) (479) (226) 2,779 (22) - - 594 2,999 502 2,135 165 (208) 754 (113) 598 - - - - - - 1,840 3,422 (1,092) (830) 3,340 923 3,915 (2,547) (248) - 2,043 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 10. Taxation (continued) (e) Deferred taxation (continued) Summary Group Company Group Company 2021 2020 Deferred tax asset Deferred tax liability USD’000s USD’000s USD’000s USD’000s (541) 5,260 4,719 - 3,340 3,340 (474) 3,473 2,999 - 2,043 2,043 All deferred tax assets (including tax losses and other tax credits) have been recognised in the statement of financial position. 11. Dividends There has been no dividend paid or proposed for 2021 (2020: ZMW nil). 101 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2020 or 2021. For diluted earnings per share, the number of shares used in the calculation of EPS includes preference shares. 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 Profit/(loss) for the year Weighted average number of ordinary shares for the purposes of basic earnings per share. 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 167,980 7,955 (103,419) (6,396) 300,580 300,580 300,580 300,580 Preference shares 100,058 100,058 100,058 100,058 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 Diluted earnings per share – continued operations Diluted earnings per share – discontinued operations 400,638 400,638 400,638 400,638 Ngwee US cents Ngwee US cents 55.89 2.65 (45.12) (2.79) - - 11.12 0.69 55.89 2.65 (34.00) (2.10) 41.92 1.99 (45.12) (2.79) - - 11.12 0.69 Total diluted earnings per share 41.92 1.99 (34.00) (2.10) 102 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 13. Goodwill Cost and Net Book Value At 1 October 2019 Foreign exchange difference At 30 September 2020 Foreign exchange difference At 30 September 2021 ZMW’000s USD’000s 166,801 - 166,801 - 166,801 12,636 (4,354) 8,282 1,682 9,964 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 ZamChick Zamhatch 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 15,699 141,786 9,316 166,801 938 8,470 556 9,964 15,699 141,786 9,316 166,801 779 7,040 463 8,282 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, but not exceeding five years. 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. 103 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2021 2021 2020 2020 ZMW’000 USD’000 ZMW’000 USD’000 185,633 11,089 125,313 321,184 801,831 1,308,648 19,187 47,899 78,175 489,678 1,171,154 1,786,145 6,222 24,314 58,151 88,687 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 ZMW’000s Cost or valuation As at 1 October 2019 2,043,052 865 874,965 76,528 31,617 25,785 3,052,812 Exchange differences 516,215 Additions Adjustment for transition to IFRS16 Disposals 7,938 15,425 (1,153) Transfer to held for sale (146,063) Transfers 11,499 - - - - - - 128,710 1,369 27,071 10,079 - - (4,875) (3,203) (48,406) (787) 28,720 11,406 As at 30 September 2020 2,446,913 865 1,006,185 Exchange differences (249,093) - (40,472) 16,799 - (865) 24,739 (1,420) 95,392 (1381) 19,671 (2,106) 820 4,551 - (55) (387) 2,061 38,607 (505) 8,276 (69) - 647,114 43,025 92,664 - 15,425 (4,102) (13,388) - (195,643) (53,686) - 11,022 3,598,984 - (291,451) 47,144 116,629 - - (4,460) (294,207) 6,906 18,688 2,240,213 1,024,486 1,250,727 2,240,213 - - - - - - (277,506) (18,712) (4,895) 11,898 865 556 (32,007) - 723,424 529,199 194,225 93,729 69,225 24,504 41,970 30,857 11,113 26,159 3,125,495 26,159 1,679,925 - 1,445,570 723,424 93,729 41,970 26,159 3,121,495 Additions Disposals Revaluation Transfers As at 30 September 2021 Cost Revaluation 104 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) Land and buildings ZMW’000s Aircraft ZMW’000s Plant and machinery ZMW’000s Motor vehicles ZMW’000s Furniture and equipment ZMW’000s Capital work in progress ZMW’000s Total ZMW’000s (a) Group (continued) Depreciation As at 1 October 2019 31,036 173 142,639 31,859 Exchange difference Charge for the year Charge on right of use assets Disposals (728) 19,304 8,362 - Transfer to held for sale (5,044) - 86 - - - (1,897) 95,912 (982) 21,893 - - (598) (1,536) (14,507) (329) (109) 259 221,549 50,905 - - 4,144 104,820 (698) 24,404 (1,102) - (259) (401) As at 30 September 2020 Exchange difference Charge for the year Disposals Revaluation As at 30 September 2021 Net book value 52,930 507 26,629 (76,814) 3,252 At 30 September 2021 2,236,961 719,280 At 30 September 2020 2,393,983 606 784,636 (325,969) (71,568) (12,259) 4,144 1,941 1,098 42 10,477 - - - 5,281 (543) 4,213 - (6) 8,836 (37) 4,618 (60) - - - - - - - - - - - 210,988 (4,150) 141,408 8,362 (2,140) (19,989) 334,479 3,958 160,472 (1,822) (486,610) 91,788 44,487 40,872 26,117 3,115,018 29,771 11,022 3,264,505 105 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWfollows: Gross carrying amount At 1 October 2020 Additions Disposals NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) (b) Included in the net carrying amount of property, plant and equipment are right-of-use assets as Land and buildings Retail outlets Farm equipment Production equipment Motor vehicles and trailers Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 3,128 1,633 - 12,297 6,210 - 23,874 5,735 - 30,927 5,580 75,806 - (5,964) 24,963 - - 5,580 13,578 (5,964) 83,420 At 30 September 2021 4,761 18,507 29,609 Depreciation and impairment At 1 October 2020 1,098 7,264 5,651 9,278 1,329 24,620 Disposals Depreciation At 30 September 2021 Carrying amount 30 September 2021 Gross carrying amount At 1 October 2019 Adjustment on transition to IFRS 16 Additions Disposals 2,092 3,190 - 7,312 14,576 3,854 9,505 (1,789) 2,496 9,985 - 1,552 2,881 (1,789) 17,306 40,137 1,571 3,931 20,104 14,978 2,699 43,283 - - 23,874 30,927 1,560 56,361 3,128 12,297 - - - 15,425 - - - - 4,020 4,020 - - - - - - At 30 September 2020 3,128 12,297 23,874 30,927 5,580 75,806 Depreciation and impairment At 1 October 2019 Adjustment on transition to IFRS 16 Depreciation - - 2,334 6,185 366 8,885 1,098 - 7,264 - - - - 3,317 3,093 963 8,362 7,373 At 30 September 2020 1,098 7,264 5,651 9,278 1,329 24,620 Carrying amount 30 September 2020 2,030 5,033 18,223 21,649 4,251 51,186 106 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) (ii) In US Dollars (a) Group 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 Cost or valuation As at 1 October 2019 Foreign translation Additions Adjustment for transition to IFRS16 Transfers Disposals 491 954 711 (71) Transfer to held for sale (9,033) As at 30 September 2020 121,295 Foreign translation Additions Transfers Disposals Revaluation 10,522 795 885 - 327 As at 30 September 2021 133,824 Cost Revaluation 61,200 72,624 133,824 154,777 (26,534) 66 (23) 66,284 5,798 (16,480) (2,144) 1,674 623 2,396 (861) 281 - 128 (3) (23) - 705 (198) (49) 4,735 1,918 877 931 41 (100) (886) 5,599 4,135 1,463 5,598 406 392 26 (3) (232) 2,507 1,843 664 2,507 - - - - - 43 (2) - - (41) - - - - - - 1,776 (301) (2,994) 49,959 4,728 1,171 563 (67) (13,139) 43,215 31,613 11,603 43,215 1,953 231,274 (104) (46,146) 2,661 5,730 - (3,320) (254) 954 - (827) - (12,099) 936 (90) 178,886 16,441 2,232 5,522 (1,515) - - - (211) (13,930) 1,563 186,708 1,563 100,354 - 86,354 1,563 186,708 107 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWNOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) Depreciation As at 1 October 2019 Charge for the year Charge on right of use assets Disposals Transfer to held for sale Foreign Translation As at 30 September 2020 Charge for the year Disposals Foreign Translation Revaluation As at 30 September 2021 Net book value At 30 September 2021 At 30 September 2020 Land and buildings USD’000s Aircraft 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 2,351 1,194 517 - (312) (1,020) 2,730 1,261 - (160) (3,637) 194 133,629 118,565 13 5 - - - (5) 13 `- (12) (1) - - - 30 10,807 5,931 - (37) (897) (4,623) 11,181 4,963 (19) (443) 2,413 1,354 - (95) (20) (1,219) 2,433 1,155 (57) (32) (15,434) (3,389) 248 116 400 261 - - (7) (216) 438 219 (3) (8) (580) 65 - - - - - - - - - 3 - 3 15,984 8,745 517 (132) (1,236) (7,083) 16,795 7,598 (86) (641) (23,040) 626 42,988 38,778 5,466 2,302 2,436 1,480 1,562 936 186,082 162,091 (b) (a) The Group’s property, plant and equipment situated in Zambia were revalued as at 30 September 2021 by Messrs Fairworld Properties Limited, Registered Valuation Surveyors, on the basis of market value. The surplus on valuation totalling ZMW192.4million (USD9.1 million) was transferred to a revaluation reserve. The depreciation charge for the year includes ZMW44.4 million (USD2.1 million) (2020: ZMW31.3 million [USD1.9 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 ZMW783,131 thousand - USD46,782 thousand (2020: ZMW952,751 thousand - USD47,853). The revalued amounts include a revaluation surplus of ZMW1,336,606 thousand before tax (2020: ZMW1,167,913 thousand), which is not available for distribution to the shareholders of Zambeef Products PLC. (d) (c) (e) 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 ZMW’000s At 30 September 2021 508,127 At 30 September 2020 531,091 - - 128,300 58,691 40,869 47,144 783,131 313,557 66,755 41,327 11,021 963,751 USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s At 30 September 2021 At 30 September 2020 30,354 26,370 - - 7,664 15,569 3,506 3,315 2,441 2,052 2,816 547 46,782 47,853 108 Zambeef Products PLC Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) (f) Included in the net carrying amount of property, plant and equipment are right-of-use assets as follows: Land and buildings Retail outlets Farm equipment Production equipment Motor vehicles and trailers Total USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s Gross carrying amount At 1 October 2020 Additions Disposals Exchange differences At 30 September 2021 Depreciation and impairment At 1 October 2020 Exchange differences Depreciation Disposals At 30 September 2021 Carrying amount 30 September 2021 Gross carrying amount 155 98 - 31 284 54 12 125 - 191 611 371 - 124 1,185 344 - 241 1,106 1,770 361 73 437 - 871 281 57 230 - 568 1,536 - (356) 311 1,491 461 93 149 (107) 596 277 - - 56 333 66 13 93 - 172 3,764 813 (356) 763 4,984 1,223 248 1,034 (107) 2,398 93 235 1,202 895 161 2,586 Land and buildings Retail outlets Farm equipment Production equipment Motor vehicles and trailers Total USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s At 1 October 2019 - - 1,809 2,343 118 4,270 Adjustment on transition to IFRS 16 193 760 - - - 953 Additions Exchange differences At 30 September 2020 - - - - 249 249 (38) 155 (150) (623) (807) (90) (1,708) 610 1,186 1,536 277 3,764 Depreciation and impairment At 1 October 2019 Exchange differences Depreciation At 30 September 2020 Carrying amount 30 September 2020 - - 177 469 28 674 (14) 68 54 (88) (101) (199) (21) (423) 449 205 191 60 973 361 281 461 67 1,224 101 249 905 1,075 210 2,540 109 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) (i) In Zambian Kwacha (b) Company Cost or valuation Land and buildings ZMW’000s Plant and machinery ZMW’000s Motor vehicles ZMW’000s Furniture and equipment ZMW’000s Capital work in progress ZMW’000s Total ZMW’000s As at October 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 Exchange differences (249,603) (53,934) Additions Transfers Revaluation Disposals 1,249 17,046 12,607 5,854 - (1,385) 5,300 (223,612) (5,844) (2,860) (980) 3,261 - (505) 3,518 - (305,022) 18,055 43,129 - (18,461) - (142) 25,290 15,175 10,116 (65) 19,624 11,773 7,850 - - (227,016) (1,592) 7,870 2,166,483 7,870 887,142 - 1,279,341 As at 30 September 2021 1,742,286 371,413 Cost Revaluation 629,476 222,848 1,112,810 148,565 1,742,286 371,413 25,290 19,624 7,870 2,166,483 110 Zambeef Products PLC Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) Depreciation (i) In Zambian Kwacha (b) Company As at 1 October 2021 Charge for the year Disposals Assets held for sale As at 30 September 2020 Charge for the year Disposals Land and buildings ZMW’000s Plant and machinery ZMW’000s Motor vehicles ZMW’000s Furniture and equipment ZMW’000s Capital work in progress ZMW’000s Total ZMW’000s 16,871 9,364 - (5,044) 21,191 8,612 - 93,131 63,374 (529) (14,507) 141,469 70,039 (751) 9,050 5,921 (857) (329) 13,785 6610 (110) (329) 2,455 1,803 (6) (109) 4,143 2,205 (52) (109) - - - - - - - - - - 121,507 80,462 (1,392) (19,989) 180,588 87,466 (913) (19,989) (267,141) - Assets held for sale (5,044) (14,507) Revaluation (29,803) (210,757) (20,285) (6,296) As at 30 September 2021 - - - - Net book value At 30 September 2021 1,742,286 371,413 At 30 September 2020 1,951,542 485,975 25,290 15,210 19,624 15,391 7,870 2,166,483 8,276 2,476,394 (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 October 2019 120,243 40,033 2,021 1,221 1,756 165,274 Exchange differences Additions Transfers Disposals 31,573 305 1,069 (71) 7,989 1,076 277 (226) Assets held for sale (7,252) (2,403) Foreign translation (47,916) (15,592) As at 30 September 2020 Exchange differences Additions Transfers Disposals 97,951 5,221 59 597 - 31,154 602 807 277 (66) 112 200 - (120) (39) (734) 1,440 202 154 - (7) 58 142 38 (3) (19) (467) 970 174 167 - (3) - 465 (1,384) (2) - 39,732 2,188 - (422) (9,713) (424) (65,133) 411 78 855 (874) - 131,926 6.277 2,042 - (76) 111 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 14. Property, plant and equipment (continued) (ii) In US Dollars (b) Company Cost or valuation Revaluation Foreign translation 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 251 (10,588) (277) (135) - (10,749) As at 30 September 2021 104,079 Cost Revaluation 37,603 66,476 22,186 13,312 8,874 1,512 1,173 907 605 703 470 104,079 22,186 1,512 1,173 Depreciation As at October 2019 Charge for the year Disposals Transfer to held for sale Foreign translation As at 30 September 2020 1,278 579 - (250) (555) 1,052 7,056 3,919 (33) (720) (3,198) 7,024 Charge for the year 407 3,316 Disposals Foreign translation Revaluation - (48) (35) (326) (1,411) (9,979) As at 30 September 2021 - - 685 366 (53) (16) (297) 685 312 (5) (32) (960) - Net book value At 30 September 2021 At 30 September 2020 104,080 96,899 22,187 24,130 1,511 755 186 112 (0) (5) (87) 206 104 (1) (11) (298) - 1,172 764 470 470 - 470 - - - - - - - - - - - 129,420 52,995 76,425 129,420 9,205 4,976 (86) (991) (4,137) 8,967 4,139 (41) (417) (12,648) - 470 411 129,420 122,959 a) The Company’s property, plant and equipment situated in Zambia were revalued as at 30 September 2021 by Messrs Fairworld Properties Limited, Registered Valuation Surveyors, on the basis of market value. The surplus on valuation totalling ZMW40.1 million (USD1.9 million) was transferred to a revaluation reserve. (b) In the opinion of the Directors, the carrying values of property, plant and equipment stated above are not higher than their fair values. (c) If the cost model had been used, the carrying amounts of the property plant and equipment would be ZMW430,843 thousand (2020: ZMW452,737 thousand). The revalued amounts include a revaluation surplus of ZMW888,898 thousand before tax (2020: ZMW828,538 thousand), which is not available for distribution to the shareholders of Zambeef Products PLC. 112 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 Master Meat (Ghana) Limited Masterpork Limited Zampalm Limited Zam Chick Limited Zamhatch Limited Nigeria Ghana Zambia Zambia Zambia 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 245,807 - 245,807 12,205 2,479 14,684 245,807 - 245,807 18,622 (6,417) 12,205 113 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 15. Investments in subsidiaries and associates (continued) (c) The Company’s interests in its subsidiaries, which are unlisted, are as follows: Name of company Country of Incorporation Assets ZMW’000s Liabilities ZMW’000s Revenues ZMW’000s Profit/(loss) ZMW’000s Zambeef Retailing Limited Zambia 497,202 786,296 2,565,162 (112,548) Zamleather Limited Zambia West Africa Operations Nigeria & Ghana 87,596 74,272 Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2021 Zambia 178,345 Zambia 302,169 57,133 86,463 86,755 21,725 49,661 326,560 375,698 436,035 806 4,602 (5,865) 38,719 Zambia 604,644 165,457 726,541 111,761 1,744,228 1,203,829 4,479,657 37,475 Zambeef Retailing Limited Zambia 1,158,827 1,399,097 2,149,113 (171,151) Zamleather Limited Zambia 101,258 West Africa Operations Nigeria & Ghana 73,344 76,548 73,545 29,950 218,759 Zambia 253,585 167,145 290,584 Zambia 1,079,335 851,278 300,668 Zambia 811,454 539,538 591,707 3,477,803 3,107,151 3,580,781 (128,717) (2,665) 7,595 (4,069) 1,189 40,384 Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2020 114 Zambeef Products PLC Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 15. Investments in subsidiaries and associates (continued) Name of company Zambeef Retailing Limited Zamleather Limited Country of Incorporation Zambia Zambia West Africa Operations Nigeria & Ghana Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2021 Zambeef Retailing Limited Zamleather Limited Zambia Zambia Zambia Zambia Zambia West Africa Operations Nigeria & Ghana Masterpork Limited Zam Chick Limited Zamhatch Limited Total at the end of 30 September 2020 Zambia Zambia Zambia Assets Liabilities Revenues Profit/(loss) USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s USD’000s 29,701 47,064 121,457 (5,329) 5,233 4,437 10,654 18,051 36,120 3,413 5,172 5,182 1,298 9,884 2,351 15,462 17,789 20,646 34,401 38 218 (278) 1,833 5,292 104,196 72,013 212,106 1,774 57,539 69,469 132,907 (10,584) 5,028 3,642 12,607 53,592 40,291 3,801 3,652 8,299 42,268 26,789 1,852 13,529 17,977 18,594 36,593 (165) 470 (252) 74 2,497 172,699 154,278 221,452 (7,960) 115 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEWNOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 15. Investments in subsidiaries and associates (continued) Below are the carrying amounts for the investments in the subsidiaries. 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 31 1,477 216 1,310 26,601 158,230 57,942 2 88 13 78 1,589 9,453 3,461 31 1,477 216 1,310 26,601 158,230 57,942 2 73 10 64 1,321 7,858 2,877 245,807 14,684 245,807 12,205 (d) 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. (e) As at the reporting date, the Group has a 10% equity interest in Zampalm Limited. The company has reasonable 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 4,313 (3,788) (33,582) 270,693 31,757 302,450 111,278 191,172 302,450 204 (179) (1,590) 16,170 1,897 3,868 (1,625) (31,770) 273,811 6,625 239 (100) (1,965) 13,595 329 18,067 280,436 13,924 6,647 106,846 11,420 18,067 173,590 280,436 5,305 8,619 13,924 116 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 15. Investments in subsidiaries and associates (continued) Summarised financial information of the Group’s share in the associate is as follows: Opening balance Arising during the year (i) Loss from continuing operation Foreign exchange difference Total comprehensive income 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 43,826 2,176 - (3,358) - (3,358) (159) 400 241 12,376 34,627 (3,177) - 31,450 938 2,141 (196) (707) 1,238 Carrying amount of the Group’s interest 40,468 2,417 43,826 2,176 (i) There was no cash movement during the year. The movement shown above relates to the loss that was incurred from business activities during the year. The movement for the prior year includes a balance that was owed by the associate that was converted to equity. 16. (a) Biological assets – Group Biological assets comprise standing crops, feedlot cattle, dairy cattle, pigs and chickens. At 30 September 2021 there were 811 hectares of standing crops, 16,090 cattle (12,836 feedlot cattle and 3,254 dairy cattle) and 759,611 chickens (92,052 breeding, 387,141 layers and 280,418 broilers), and 3,744 pigs. A total of 32,591 feedlot cattle, 976 dairy cattle, 6,459 pigs and 8,225,446 chickens were culled during the year. (i) Zambian Kwacha Standing Crops Feedlot Cattle Dairy Cattle Pigs Chickens Total As at 1 October ZMW’000s Increase due to purchases ZMW’000s 16,626 40,652 62,380 4,120 52,527 518,097 324,237 102,248 13,241 474,082 176,305 1,431,905 Gains/ (losses) arising from fair value attributable to physical changes ZMW’000s Gains/ (losses) arising from fair value attributable to price changes ZMW’000s - - 3,323 3,328 434,115 71,910 39,818 7,323 268,544 821,710 Decrease due to harvest/ transferred to inventory ZMW’000s As at 30 September ZMW’000s (914,253) 54,585 (280,485) 156,314 (136,404) 71,365 (20,394) - (726,038) 7,618 69,115 6,651 (2,077,574) 358,997 117 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 16. (a) Biological assets – Group (continued) As at 1 October USD’000s Foreign exchange USD’000s Increase due to purchases USD’000s Gains/ (losses) arising from fair value attributable to physical changes USD’000s Gains arising from fair value attributable to price changes USD’000s Decrease due to harvest/ transferred to inventory USD’000s As at 30 September USD’000s 826 2,018 3,098 203 2,609 8,754 637 1,843 740 87 734 4,041 24,531 15,352 4,841 627 22,447 67,798 20,555 3,405 1,885 347 12,716 38,908 - - 157 158 - 315 (43,288) (13,281) (6,459) (966) (34,377) 3,261 9,337 4,262 456 4,129 (98,371) 21,445 (ii) In US Dollars Standing Crops Feedlot Cattle Dairy Cattle Pigs Chickens Total 16. (b) Biological assets – Company Biological assets comprise standing crops, feedlot cattle, dairy cattle, and chickens. At 30 September 2021 there were 811 hectares of standing crops, 16,090 cattle (12,836 feedlot cattle and 3,254 dairy cattle), and 282,695 chickens. A total of 32,591 feedlot cattle, 976 dairy cattle and 194,113 chickens were culled during the year. As at 1 October ZMW’000s 16,626 40,652 62,380 19,843 Increase due to purchases ZMW’000s 518,097 324,237 102,248 74,919 Gains/ (losses) arising from fair value attributable to physical changes ZMW’000s Gains/ (losses) arising from fair value attributable to price changes ZMW’000s Decrease due to harvest/ transferred to inventory ZMW’000s As at 30 September ZMW’000s 434,115 71,910 39,818 (3,823) - - (914,253) 54,585 (280,485) 156,314 3,323 (136,404) - (65,255) 71,365 25,684 139,501 1,019,501 542,020 3,323 (1,396,397) 307,948 (i) Zambian Kwacha Standing Crops Feedlot Cattle Dairy Cattle Chickens Total Gains/ (losses) arising from fair value attributable to physical changes USD’000s Gains/ (losses) arising from fair value attributable to price changes USD’000s Decrease due to harvest/ transferred to inventory USD’000s 20,555 3,406 1,887 (181) - - 157 - (43,288) (13,281) (6,459) (3,090) Increase due to purchases USD’000s 24,531 15,352 4,841 3,547 As at 30 September USD’000s 3,261 9,338 4,264 1,534 3,492 48,271 25,667 157 (66,118) 18,396 As at 1 October USD’000s Foreign exchange USD’000s 825 2,018 3,098 986 6,927 638 1,843 740 272 (ii) In US Dollars Standing Crops Feedlot Cattle Dairy Cattle Chickens Total 118 Zambeef Products PLC Annual Report 2021NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 17. Inventories (i) In Zambian Kwacha Group Company Group Company 2021 2020 Trading stocks Abattoir stocks Raw materials Stock feed Consumables Raw hides and chemicals ZMW’000s ZMW’000s ZMW’000s ZMW’000s 455,847 23,628 117,962 388,548 203,175 8,686 306,922 595,376 516,046 23,628 90,734 256,057 95,631 - 1,817 325,242 23,930 151,290 5,985 1,817 187,028 8,364 100,826 - 1,197,846 772,972 1,103,640 814,081 (ii) In US Dollars Group Company Group Company 2021 2020 Trading stocks Abattoir stocks Raw materials Stock feed Consumables Raw hides and chemicals USD’000s USD’000s USD’000s USD’000s 27,231 1,411 7,047 23,211 12,137 519 71,556 18,335 1,411 5,420 15,296 5,713 - 29,562 25,623 90 16,149 1,188 7,512 297 90 9,287 415 5,006 - 46,175 54,798 40,421 A total of ZMW3,510.3 million (USD166.2 million) (2020: ZMW2,645.6 million (USD163.5 million]) was included in profit and loss as an expense within cost of sales. Inventory was turned every 124 days (2020: 152 days). Biological assets totalling ZMW2,077.6 million (USD98.4 million) (2020: ZMW1,557.6 million [USD96.3 million]) were transferred to inventories during the year. 119 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 18. Trade and other receivables The carrying amounts of the trade receivables were as below. (i) In Zambian Kwacha Group Company Group Company 2021 2020 Gross trade receivables Less: allowance for expected credit losses Trade receivables Prepayments Other receivables Less: other provisions ZMW’000s ZMW’000s ZMW’000s ZMW’000s 166,465 (11,743) 154,722 36,515 42,839 - 95,377 (6,063) 89,314 2,388 - - 85,386 (5,075) 80,311 25,295 32,710 (5,648) 234,076 91,702 132,668 37,518 (1,516) 36,002 18,335 - (3,782) 50,555 (ii) In US Dollars Group Company Group Company 2021 2020 Gross trade receivables Less: allowance for expected credit losses Trade receivables Prepayments Other receivables Less: other provisions USD’000s USD’000s USD’000s USD’000s 9,944 (701) 9,243 2,181 2,559 - 5,698 (362) 5,336 142 - - 13,983 5,478 4,240 (252) 3,988 1,256 1,623 (280) 6,587 1,863 (75) 1,788 910 - (188) 2,510 (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 lifetime 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 30(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. 120 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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: 2021 2020 (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s At 1 October Utilised Charge for the year At 30 September Analysed as follows: Expected credit losses Other provisions Total 10,723 (2,286) 3,306 11,743 10,324 1,419 11,743 5,298 (423) 1,188 6,603 5,956 647 6,603 4,910 (1,167) 6,980 10,723 5,075 5,648 10,723 1,913 (552) 3,937 5,298 1,516 3,782 5,298 (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2021 2020 At 1 October Foreign exchange Utilised Charge for the year At 30 September Analysed as follows: Expected credit losses Other provisions Total 532 121 (109) 157 701 617 84 701 263 63 (20) 56 362 338 24 362 372 (200) (72) 432 532 252 280 532 Trade receivables have a 15 or 30 day credit period. 145 (91) (34) 243 263 75 188 263 121 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 18. Trade and other receivables (continued) The matrix for the calculation of the expected credit losses is as detailed below. 30 September 2021 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% 7.1% 90% Gross carrying amount - ZMW’000 Lifetime expected credit loss - ZMW’000 97,994 20,830 1,784 6,026 126,634 4,033 741 127 5,423 10,324 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% 7.2% 90.0% Gross carrying amount - ZMW’000 Lifetime expected credit loss - ZMW’000 70,306 11,723 1,518 1,839 85,386 2,894 417 109 1,655 5,075 30 September 2021 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% 7.2% 90.0% Gross carrying amount - USD’000 Lifetime expected credit loss - USD’000 5,854 1,244 107 360 7,565 241 44 8 324 617 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% 7.2% 90.0% Gross carrying amount - USD’000 Lifetime expected credit loss - USD’000 3,492 144 582 21 75 5 91 4,240 82 252 122 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 19. Amounts due from related companies (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2021 2020 Chisamba Ranching and Cropping Danny Museteka Tembilo Farms Limited Lillian Limbuka Zamleather Limited Zampalm Limited Master Meat & Agro Production Co. of Nigeria Limited Zam Chick Limited Master Meat (Ghana) Limited Zamhatch Limited Masterpork Limited Zambeef Retailing - 93 152 683 - 3,274 - - - - - - 4,202 - 93 - - 50,284 2,570 67,113 - 3,362 110,857 56,331 489,944 780,554 4,185 - 459 1,049 - 3,644 - - - - - - - - 47,704 3,229 59,974 704,526 3,318 501,366 9,337 1,320,117 123 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 19. Amounts due from related companies (continued) (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2021 2020 Chisamba Ranching and Cropping Danny Museteka Tembilo Farms Limited Lilian Limbuka Zamleather Limited Zampalm Limited Zam Chick Limited Mastermeat & Agro Production Co. of Nigeria Limited Master Meat (Ghana) Limited Zamhatch Limited Masterpork Limited Zambeef Retailing Limited - 6 9 41 196 - - - - 251 - 6 - - 3,004 154 - 4,009 201 6,622 3,365 29,267 46,628 208 - 23 52 - 181 - - - - - - - - 2,369 160 34,981 2,978 165 24,894 464 65,547 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. There is no interest that is charged on amounts due from related parties and there are no repayment terms attached. 124 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 20. Cash and cash equivalents 2021 2020 (i) In Zambian Kwacha Group Company Group Company Cash in hand and at bank 201,539 113,193 111,136 12,645 Bank overdrafts (note (b)) (490,204) (306,417) (348,045) (170,822) ZMW’000s ZMW’000s ZMW’000s ZMW’000s (288,665) (193,224) (236,909) (158,177) (ii) In US Dollars Group Company Group Company 2021 2020 Cash in hand and at bank Bank overdrafts (note (b)) (a) Banking facilities USD’000s USD’000s USD’000s USD’000s 12,039 (29,283) (17,244) 6,762 (18,304) (11,542) 5,518 (17,281) (11,763) 628 (8,482) (7,854) The Group has overdraft facilities totalling ZMW193.3 million (2020: ZMW193.3 million) with Zanaco Bank Plc. The Zanaco Bank overdraft bears an interest rate of Bank of Zambia Policy rate plus 6.5 per cent. on the Kwacha facility. The Group has overdraft facilities totalling ZMW74.6 million (2020: ZMW74.6 million) and USD5 million (2020: 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. The Group has overdraft facilities totalling ZMW91.3 million (2020: ZMW57.5 million) and USD0.5 million (2020: 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 ZMW74 million (2020: ZMW74 million) and USD nil (2020: USD3 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. The Group obtained overdraft facilities totalling ZMW170 million (2020: ZMW nil) during the year with First National Bank (FNB). The FNB Bank overdrafts bear interest rates of Bank of Zambia Policy rate plus 7.5 per cent. 125 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 20. Cash and cash equivalents (continued) (b) Bank overdrafts 2021 2020 (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s Zanaco Bank Plc (183,787) - (145,387) First National Bank (FNB) (161,051) (161,051) - Citibank Zambia Limited Stanbic Bank Zambia Limited Standard Chartered Bank Zambia Plc (71,664) (73,702) - (71,664) (101,446) (73,702) - (49,805) (51,407) (2) - (69,615) (49,805) (51,400) (490,204) (306,417) (348,045) (170,822) (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2021 2020 Zanaco Bank Plc First National Bank (FNB) Citibank Zambia Limited Stanbic Bank Zambia Limited Standard Chartered Bank Zambia Plc (10,979) (9,621) (4,281) (4,402) - (9,621) (4,281) (4,402) - (5,037) (2,473) (2,552) - (7,219) (1) (3,456) (2,473) (2,552) (8,482) (29,283) (18,304) (17,281) (i) The Zambeef Products Plc 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, Stanbic Bank Zambia Limited and First National Bank (FNB). All overdrafts are annual revolving facilities. 126 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 21. Share capital (a) Ordinary share capital 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 7,000 938 7,000 938 3,006 449 3,006 449 - - - - - - - - 3,006 449 3,006 449 1,000 100 1,000 100 - - - - - - - - 1,000 100 1,000 100 700,000,000 ordinary shares of ZMW0.01 each (2020: 700,000,000 ordinary shares of ZMW0.01 each) Issued and fully paid At 1 October Issued during the year At 30 September 300,579,630 ordinary shares of ZMW0.01 each (2020: 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 (2020: 100,057,658 preference shares of ZMW0.01 each) 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. 127 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 22. Share premium At 1 October Arising during the year At 30 September 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’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 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) Absa Bank Zambia Plc Less: Short term portion (repayable within next 12 months) Long term portion (repayable after 12 months) 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s - - - - 222,547 222,547 6,646 6,646 47,649 47,649 149,877 149,877 39,615 39,615 109,047 109,047 99,000 220,000 406,264 99,000 220,000 406,264 29,000 29,000 517,117 517,117 (210,709) (210,709) (326,899) (326,899) 195,555 195,555 190,218 190,218 128 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 23. Interest bearing liabilities 2021 2020 (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (note (a)) Zanaco Bank Plc (note (b)) - - - - Standard Chartered Bank Zambia Plc (note (c)) 2,846 2,846 11,050 11,050 330 7,442 330 7,442 IFC – International Finance Corporation (note (d)) Stanbic Bank Zambia Limited (note (e)) Absa Bank Zambia Plc 2,366 2,366 5,414 5,414 5,914 13,143 24,269 5,914 13,143 24,269 1,440 1,440 25,676 25,676 Less: Short term portion (repayable within next 12 months) (12,587) (12,587) (16,231) (16,231) Long term portion (repayable after 12 months) 11,682 11,682 9,445 9,445 (a) (i) DEG Term Loan 3 The Group had a loan facility of USD nil (2020: USD3.55 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 was repayable in 14 biannual instalments of USD 710,000 commencing May 2016 and expiring in November 2022. The loan was fully repaid in September 2021. The DEG term loan 3 was 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 had a loan facility of USD nil (2020: USD7.5 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 was repayable in 12 quarterly instalments of USD1,250,000 commencing March 2018 and expiring in September 2023. The loan was fully repaid in September 2021. The DEG term loan 4 was 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. 129 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 23. Interest bearing liabilities (continued) (b) Zanaco Bank Plc (c) (d) The Group has a loan facility of ZMW nil million (2020: ZMW6.65 million and original amount of ZMW46.5 million) with Zanaco Bank Plc. Interest on the loan 4.5 per cent. above the Bank of Zambia policy rate per annum payable monthly in arrears. The principal was repayable in 7 annual instalments of ZMW6,642,857 commencing December 2014 and expiring in December 2020. The loan was secured by a first ranking legal mortgage over Stand No. 4970, Industrial Area, Lusaka (Head Office). Standard Chartered Bank Zambia PLC The Group has a structured agricultural facility with an annual revolving limit totalling USD6 million (2020 – USD18 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 USD2.8 million (2020: USD7.4 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. International Finance Corporation Loan 2 The Group has a loan facility of USD2.06 million and ZMW5.1 million (2020: USD4.8 million and ZMW11.98 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 2021, the Group obtained an additional seasonal loan facility with an annual revolving limit totalling ZMW70 million from Stanbic Bank Zambia Limited bringing the total facility to K100 million. The balance on the facility at year end was ZMW99 million (2020: ZMW29 million). Interest on the facility is 8.5 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 and First National Bank (FNB). (f) Absa Bank Zambia Plc During the year ended 30 September 2021, the Company obtained a 5 year loan from Absa Bank Ltd amounting to ZMW220Million at an interest rate of Bank of Zambia policy rate plus 6.5%. 130 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 24. Leases Lease liabilities are presented in the statement of financial position as follows: Current Non-current Current Non-current 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 12,418 7,253 19,671 1,873 6,597 8,470 23,259 19,750 43,009 14,461 8,172 22,633 2021 2020 Group USD’000s Company USD’000s Group USD’000s Company USD’000s 742 433 1,175 112 394 506 1,155 981 2,136 718 406 1,124 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 consistent 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. 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 4 10 44 3 68 6 Range of remaining term Average remaining lease term 0-1 year 0.3 years 2-3 years 2-3 years 3-4 years 2 years 2 years 3 years 1-3 years 1.5 years 3-4year 3 years Right-of-use asset Motor vehicles Trailers Farming equipment Land & buildings Retail Outlets Production equipment 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 - - - - 5 - - - - - - - - - - - - - - - - - - - 131 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 24. Leases (continued) The Group has leases for K19,671 thousand. The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 September 2021 were as follows: Minimum lease payments due Within 1 year 1-2 years 2-3 years 3-4 years 4-5 years After 5 years Total ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s ZMW’000s 30 September 2021 Lease payments Finance charges Net present values 30 September 2020 13,085 (645) 12,440 5,434 (417) 5,017 Lease payments 23,821 10,103 Finance charges Net present values (562) 23,259 (508) 9,595 625 (318) 307 7,758 (380) 7,378 469 (288) 181 3,013 (236) 2,777 469 (257) 212 3,345 (1,831) 1,514 23,427 (3,756) 19,671 44,695 (1,686) 43,009 30 September 2021 30 September 2020 USD’000 USD’000 742 433 1,175 981 1,155 2,136 Within 1 year 1-2 years 2-3 years 3-4 years 4-5years After 5 years Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 782 (39) 743 1,183 (28) 1,155 325 (25) 300 502 (25) 477 37 (19) 18 385 (19) 366 28 (17) 11 150 (12) 138 28 (15) 13 - - - 200 (110) 90 1,400 (225) 1,175 - - - 2,220 (84) 2,136 Leasing Current Non-Current Total Minimum lease payments 30 September 2021 Lease payments Finance charges Net Present Values 30 September 2020 Lease payments Finance charges Net Present Values 132 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 24. Leases (continued) 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. The expense relating to payments not included in the measurement of the lease liability is as follows: 30 Sept 2021 30 Sept 2021 30 Sept 2020 30 Sept 2020 ZMW’000s USD’000s ZMW’000s USD’000s Short-term leases Leases of low value assets Variable lease payments Total 8,237 - - 8,237 492 - - 492 1,359 - - 1,359 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 2021 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. 2021 2020 (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s At 1 October (Movements)/provision during the year Payments made during the year At 30 September 11,389 4,102 (6,971) 8,891 3,356 2,241 (3,473) 2,124 16,362 (3,185) (1,788) 11,389 3,655 312 (611) 3,356 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 2021. As of the report date, the actuary had finalised the report and the provision was adjusted to agree to the report. 133 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 25. Deferred liability (continued) (ii) In US Dollar At 1 October (Movements)/provision during the year Payments made during the year Foreign translation At 30 September 2021 2020 Group USD’000s Company USD’000s Group USD’000s Company USD’000s 565 212 (330) 84 531 167 106 (164) 18 127 1,240 (197) (111) (367) 565 277 19 (38) (91) 167 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 11,389 565 16,362 1,240 2021 2020 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 Defined benefit obligation 30 September Unfunded 427 1,234 (1,594) 2,710 1,696 (6,971) - 8,891 8,891 20 58 (75) 128 80 (330) 85 531 531 589 2,739 - (4,929) (1,300) (2,072) - 11,389 11,389 36 169 - (305) (80) (128) (367) 565 565 134 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2021 27% 20% 2020 33% 20% 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 427 - 1,234 1,661 20 - 58 78 589 - 2,739 3,328 36 - 169 205 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s (1,594) 2,710 1,697 - (75) 128 80 - (4,929) (1,300) (305) (80) - - 2,813 133 (6,229) (385) 135 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 26. Trade and other payables (a) The table below shows the trade and other payables: Trade and other payables 2021 2020 (i) In Zambian Kwacha Group Company Group Company Trade payables Other payables ZMW’000s ZMW’000s ZMW’000s ZMW’000s 384,476 79,627 464,103 275,484 17,570 293,054 290,172 31,476 321,648 226,646 6,198 232,844 Trade and other payables 2021 2020 (ii) In US Dollars Group Company Group Company Trade payables Other payables USD’000s USD’000s USD’000s USD’000s 22,968 4,755 27,723 16,456 1,051 17,507 14,409 1,562 15,971 11,253 308 11,561 The average credit period taken in 2021 was 44 days (2020: 43 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: 2021 2020 Group ZMW’000s USD’000s ZMW’000s USD’000s Opening Balance Receipt from Customers 97,672 969,657 4,850 45,912 75,849 5,746 776,373 48,013 Sales to Customers (948,123) (44,892) (754,550) (46,663) Exchange Gain/Loss - 1,252 - (2,246) Closing balance 119,206 7,122 97,672 4,850 Company Company 2021 2021 2020 2020 ZMW’000s ZMW’000s USD’000s USD’000s ZMW’000s ZMW’000s USD’000s USD’000s Opening Balance Opening Balance Receipt from Customers Receipt from Customers 92,276 92,276 611,522 611,522 4,582 4,582 28,954 28,954 71,807 71,807 5,440 5,440 537,341 537,341 33,231 33,231 Sales to Customers Sales to Customers (609,313) (609,313) (28,850) (28,850) (516,872) (516,872) (31,965) (31,965) Exchange Gain/Loss Exchange Gain/Loss Closing balance Closing balance -- 94,485 94,485 (515) (515) - - (2,124) (2,124) 4,171 4,171 92,276 92,276 4,582 4,582 136 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 26. Trade and other payables (continued) Advances received from customers represent customer payments received in advance of performance (contract liability) that are expected to be recognised as revenue in 2022. The advances for supply of grain is ZMW 99,558 thousand, USD 5,947 thousand (2020: ZMW 84,053 thousand, USD 4,173 thousand), the supply of day-old chicks is ZMW 1,726 thousand, USD 103 thousand (2020: ZMW 1,465 thousand, USD 73 thousand), the amount for the supply of stock feed is ZMW 14,818 thousand, USD 885 thousand (2020: ZMW 10,608 thousand, USD 527 thousand) and others were ZMW 690 thousand, USD 41 thousand (2020: ZMW 1,546 thousand, USD 77 thousand). All brought forward balances were recognized as income in the current year. 27. Provisions Provisions Staff Others Total Staff Others Total ZMW’000 ZMW’000 ZMW’000 USD’000 USD’000 USD’000 Group Carrying amount 1 October 2020 Additional provisions Amount utilised Foreign translation Carrying amount 30 September 2021 Company Carrying amount 1 October 2020 Foreign translation Additional provisions Amount utilised Carrying amount 30 September 2021 66,331 87,608 (48,184) 47,016 25,166 (8,630) 113,347 112,774 3,294 4,148 (56,814) (2,281) 1,157 2,335 1,503 (409) 366 5,629 5,651 (2,690) 1,523 105,755 63,552 169,307 6,318 3,795 10,113 40,019 21,181 61,200 1,987 1,052 - 49,523 (25,466) - 39,461 (5,069) - 702 88,984 2,345 (30,535) (1,206) 655 1,852 (240) 3,039 1,357 4,197 (1,446) 64,076 55,573 119,649 3,828 3,319 7,147 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 legal and other claims. These are paid within 3 months average of provisioning. 137 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 28. Amounts due to related companies (i) In Zambian Kwacha Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s 2021 2020 Zambeef Retailing Limited Masterpork Limited Tractorzam Zamchick Limited Non-current Current - - - - - - - - - - 77,273 77,273 - 77,273 - - 443 - 443 - 443 634,417 70,250 443 - 705,110 - 705,110 (ii) In US Dollars Group Company Group Company USD’000s USD’000s USD’000s USD’000s 2021 2020 Zambeef Retailing Limited Masterpork Limited Tractorzam Zamchick Limited Non-current Current - - - - - - - - - - 4,616 4,616 - 4,616 - - 22 22 - 22 31,501 3,488 22 35,011 - 35,011 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. There is no interest charged on balances due to related parties and there are no repayment terms attached. 138 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 borrowings Short-term borrowings Lease liabilities Total Long-term borrowings Short-term borrowings Lease liabilities Total Group ZMW’000 ZMW’000 ZMW’000 ZMW’000 USD’000 USD’000 USD’000 USD’000 1 October 2020 190,218 326,898 43,009 560,125 9,445 16,231 2,136 27,812 Cash-flows: – Repayment – Proceeds Non-cash: – Exchange difference – Reclassification (262,705) (477,906) (32,513) (773,124) (12,439) (22,628) (1,539) (36,606) 220,000 449,619 669,619 10,417 21,289 - 31,706 48,042 (87,902) 9,175 (30,685) 4,259 (2,304) 578 2,533 30 September 2021 195,555 210,709 19,671 425,935 11,682 12,588 1,175 25,444 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: - - 7,063 7,063 - - 351 351 228,099 343,042 47,847 618,988 17,280 25,988 3,441 46,709 – Repayment (162,217) (623,231) (35,478) (820,926) (10,032) (38,542) (2,194) (50,768) – Proceeds – Addition Non-cash: – Exchange difference - - 487,320 - 487,320 - 14,329 14,329 - - 30,137 - 30,137 - 886 886 141,697 102,406 16,311 260,414 3,549 (2,704) 3 848 – Reclassification (17,361) 17,361 - - (1,352) 1,352 - - 30 September 2020 190,218 326,898 43,009 560,125 9,445 16,231 2,136 27,812 139 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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’000 ZMW’000 ZMW’000 ZMW’000 USD’000 USD’000 USD’000 USD’000 1 October 2020 190,218 326,898 35,946 553,062 9,445 16,231 2,072 27,748 Cash-flows: – Repayment – Proceeds Non-cash: (262,705) (477,906) (14,163) (754,774) (12,439) (22,628) (671) (35,738) 220,000 449,619 - 669,619 10,417 21,289 - 31,706 – Exchange difference 48,042 (87,902) (13,313) (53,173) 4,259 (2,304) (896) 1,059 – Reclassification 30 September 2021 195,555 210,709 8,470 414,734 11,682 12,588 505 24,775 1 October 2019 228,099 343,042 40,784 611,925 17,280 25,988 3,090 46,358 Cash-flows: – Repayment (162,217) (623,231) (30,835) (816,283) (10,032) (38,542) (1,907) (50,481) – Proceeds – Additions Non-cash: - 487,320 - 487,320 - - 14,329 14,329 - - 30,137 - 30,137 - 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 27,748 140 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2021 2020 Financial assets - Cash at bank - Trade receivables - Other receivables Financial liabilities 85,776 149,103 29,183 78,383 146,966 21,008 14,532 21,622 16,043 7,139 19,485 7,867 - Bank overdrafts (87,978) (78,736) (146,240) (136,999) - Trade and other payables (299,376) (286,121) (198,419) (185,163) - Bank loans - Leases (82,133) (19,050) (82,133) (319,622) (319,622) (7,176) (30,341) (18,468) Net exposure (224,475) (207,809) (642,425) (625,761) 141 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 30. Financial instruments (continued) (ii) In US Dollars Financial assets - Cash at bank - Trade receivables - Other receivables Financial liabilities - Bank overdrafts - Trade and other payables - Bank loans - Leases 2021 2020 Group USD’000s Company USD’000s Group USD’000s Company USD’000s 5,124 8,907 1,743 (5,256) (17,884) (4,906) (1,138) 4,682 8,779 1,254 (4,704) (17,092) (4,906) (429) 722 1,074 797 (7,261) (9,852) (15,870) (1,507) (31,897) 354 967 391 (6,802) (9,194) (15,870) (917) (31,071) Net exposure (13,410) (12,416) (i) In Zambian Kwacha 2021 - Group US Dollar ZMW’000s SA Rand ZMW’000s Other ZMW’000s Total ZMW’000s Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities - Bank overdrafts - Trade and other payables - Bank loans - Leases 76,631 151,559 265 (83,234) (276,122) (82,133) (12,959) 9,343 5,849 18,486 616 - 2,623 86,590 157,408 21,374 (7,051) (17,325) - (90,285) (2,470) (295,917) - - - - (82,133) (12,959) Net exposure (225,993) 9,302 769 (215,922) 142 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 30. Financial instruments (continued) (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) (ii) In US Dollars – Group - 2021 US Dollar SA Rand Other Total USD’000s USD’000s USD’000s USD’000s Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities - - - - Bank overdrafts Trade and other payables Bank loans Leases Net exposure 4,578 9,054 16 (4,972) (16,495) (4,906) (774) (13,499) 558 349 1,104 (421) (1,035) - - 555 37 - 157 - (148) - - 46 5,173 9,403 1,277 (5,393) (17,678) (4,906) (774) (12,898) 143 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 30. Financial instruments (continued) (ii) In US Dollars – Group - 2020 US Dollar SA Rand Other Total USD’000s USD’000s USD’000s USD’000s Financial Assets - Cash at bank - Trade receivables - Other receivables Financial Liabilities - - - - Bank overdrafts Trade and other payables Bank loans Leases Net exposure 649 1,073 412 (7,261) (8,839) (15,870) (1,507) (31,343) 36 1 193 - (935) - - (705) 36 - 192 - (77) - - 151 721 1,074 797 (7,261) (9,851) (15,870) (1,507) (31,897) Exposure to currency exchange rates arise from the Group’s sales and purchases which are primarily denominated in US Dollar and South African Rand. 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 counterparties to financial transactions and the availability of funds to meet business needs. These risks are managed as described below: (i) 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. 144 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s - 34,484 34,484 - 2,060 2,060 222,547 97,075 319,622 11,050 4,820 15,870 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 2021. If the Zambian Kwacha had weakened against the United States dollar by 10 percent (2020: 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 136,725 7,687 (130,545) 3,834,287 202,908 3,740,112 (7,450) 168,823 2021 2020 If the Zambian Kwacha had strengthened against the United States Dollar by 5 per cent. (2020: 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 184,668 12,021 (84,564) 3,882,230 202,908 3,788,055 (5,505) 197,985 2021 2020 There is no material difference between the carrying value and the fair value of the Group’s financial liabilities. 145 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 30. Financial instruments (continued) (ii) 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. Profit Equity Changes in interest rates +5% -5% +5% -5% ZMW’000s ZMW’000s ZMW’000s ZMW’000s 30 September 2021 30 September 2020 (55,726) (34,829) 55,726 34,829 (44,681) (27,863) 35,666 22,291 Profit Equity Changes in interest rates +5% -5% +5% -5% USD’000s ÚSD’000s USD’000s USD’000s 30 September 2021 30 September 2020 (2,638) (2,154) 2,638 2,154 (2,116) (1,723) 1,688 1,379 (iii) Market risk The Group is not exposed to the risk of the value of its financial assets fluctuating as a result of changes in market prices. 146 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 30. Financial instruments (continued) (a) Credit risk (i) Trade receivables The Directors believe the credit risk of trade receivables is low. The credit risk is managed by the selective granting of credit. (b) 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 2021 Current Non-current Within 6 months 6 to 12 months 1 to 5 years later than years ZMW’000 ZMW’000 ZMW’000 ZMW’000 Interest bearing liabilities Other bank borrowings Lease obligations Trade and other payables 113,990 - 12,174 468,444 227,980 490,204 12,174 - 178,284 - 7,497 - - - - - 30 September 2021 Current Non-current Within 6 months 6 to 12 months 1 to 5 years later than years USD’000 USD’000 USD’000 USD’000 Interest bearing liabilities Other bank borrowings Lease obligations Trade and other payables 6,809 - 363 27,983 13,619 28,283 727 - 10,650 - 448 - - - - - 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. 147 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 31. Fair value measurement (continued) 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 2021, 30 September 2020, and 1 October 2019. Fair value measurement of non-financial assets The following table shows the Levels within the hierarchy of non-financial assets measured at fair value on a recurring basis at 30 September 2021, 30 September 2020, and 1 October 2019: 30 September 2021 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 Level 1 ZMW’000 - - - - Level 1 ZMW’000 - - - - Level 2 ZMW’000 2,186,376 50,585 759,885 368,802 Level 2 ZMW’000 2,396,328 50,585 1,006,185 176,305 Level 3 ZMW’000 - - - - Level 3 ZMW’000 - - - - Total ZMW’000 2,186,376 50,585 759,885 368,802 Total ZMW’000 2,396,328 50,585 1,006,185 176,305 1 October 2019 Level 1 Level 2 Level 3 Total Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets 30 September 2021 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 1 October 2019 Land held for production in Zambia Office building in Zambia Plant and machinery Biological assets - - - - Level 1 USD’000 - - - - Level 1 USD’000 - - - - Level 1 USD’000 - - - - 1,994,196 48,856 874,965 170,417 Level 2 USD’000 130,608 3,022 45,393 22,031 Level 2 USD’000 118,784 2,511 49,959 8,754 Level 2 USD’000 151,076 3,701 66,284 12,910 - - - - Level 3 USD’000 - - - - Level 3 USD’000 - - - - Level 3 USD’000 - - - - 1,994,196 48,856 874,965 170,417 Total USD’000 130,608 3,022 45,393 22,031 Total USD’000 118,784 2,511 49,959 8,754 Total USD’000 151,076 3,701 66,284 12,910 Fair value of the Group’s main property assets is estimated based on appraisals performed by independent, professionally-qualified property valuers, Fairworld Properties Limited. The significant inputs and assumptions are developed in close consultation with management. The valuation processes and fair value changes are reviewed by the Board of Directors and audit committee at each reporting date. 148 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 31. Fair value measurement (continued) Further information is set out below. Land held for production in Zambia (Level 2) Land has been valued using the direct comparison method. This method has been adopted as the most appropriate for the purpose of this valuation as there are enough comparisons available on the open market for land. The land was revalued on 30 September 2021. 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 alternative 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 2021. 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 establishing 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 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s Capital commitments entered into at the reporting date 2,100 125 6,690 Not contracted for at the reporting date - - - 332 - 149 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2021 are as follows: (a) The Group made the following sales to related parties: Sale of ZMW’000s USD’000s ZMW’000s USD’000s 2021 2020 Wellspring Ranch Danny Museteka Squares Ranch Animal feeds/ bran Animal feeds/ bran Animal feeds/ bran - 593 - 593 - 28 - 28 98 4,568 28 4,694 6 282 2 290 (b) The Group made the following purchases from related parties: Purchase of ZMW’000s USD’000s ZMW’000s USD’000s 2021 2020 Wellspring Limited Tembilo Farms Cattle beef Chickens Tractorzam Limited Tractors/spares Chisamba Ranching and Cropping Lillian Limbuka Beef Pigs - 307 - - 7,719 8,026 - 15 - - 365 380 5,553 1,301 6,176 343 80 382 26,495 1,638 4,727 44,252 292 2,735 (c) Sales of goods to related parties were made at the Group’s usual list prices. (d) Purchases were made at market price. (e) The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No 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. (f) (g) (h) 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. Key management compensation. (i) 150 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 33. Related party transactions (continued) The remuneration of Directors and other members of key management during the year were as follows: 2021 2020 Group Company Group Company ZMW’000s ZMW’000s ZMW’000s ZMW’000s Short-term benefits 141,669 108,889 81,862 70,091 Post-employment benefits Other long-term benefits - - - - - - - - Short-term benefits Post-employment benefits Other long-term benefits Group Company Group Company USD’000s USD’000s USD’000s USD’000s 6,708 5,156 5,062 4,335 - - - - - - - - The remuneration of Directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. (j) There were no loans to related parties and key management personnel. (k) The Company made the following sales to related parties: Zambeef Retailing Limited Masterpork Limited Zam Chick Limited Zamhatch Limited Zamleather Limited Welllspring Limited Squares Ranch Danny Museteka 2021 2020 ZMW’000s USD’000s ZMW’000s USD’000s 996,507 29,430 224,118 91,840 1,799 - - 47,183 1,071,967 1,393 10,612 4,348 85 - - 32,102 193,246 116,626 211 98 28 - 1,343,694 - 63,621 4,568 1,418,846 66,294 1,985 11,951 7,213 13 6 2 282 87,746 151 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 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 2021 2020 ZMW’000 USD’000 ZMW’000 USD’000 3,810 2,239 1,958 - 19,956 - 7,086 - - 35,049 180 134 117 - 945 - 423 - - 1,799 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 34. Assets held for sale In the year 2020 management decided to sell Chiawa Farm. As such the assets and liabilities of Chiawa Farm are classified as assets held for sale. The sale is expected to materialise in the next year as investor confidence in the country’s economy has improved over the period. Chiawa Farm is a part of the cropping segment. Previously management had 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 as follows: Revenue Cost of sales Administration costs Operating profit/(loss) Depreciation Exchange losses Profit from disposal of Sinazongwe farm Profit from asset held for sale before tax Tax (expense)/credit Profit for the year September 2021 September 2021 September 2020 September 2020 ZMW’000 USD’000 ZMW’000 USD’000 181,519 (108,382) (34,292) 38,845 (6,896) - - 8,595 (5,132) (1,624) 1,839 (326) - - 67,465 (30,893) (28,422) 8,150 (6,621) - 4,172 (1,911) (1,757) 504 (409) (168) 31,906 2,141 31,949 1,513 - - - - - - 31,949 1,513 33,435 2,068 152 Zambeef Products PLC Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 34. Assets held for sale (continued) The assets and liabilities of the unit held for sale are as follows: September 2021 September 2021 September 2020 September 2020 ZMW’000 USD’000 ZMW’000 USD’000 Property, plant and equipment Total non-current assets 170,550 170,550 10,188 10,188 175,654 175,654 8,722 8,722 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: Cash outflow from operating activities Cash inflow from investing activities Cash outflow from financing activities September 2021 September 2021 September 2020 September 2020 ZMW’000 USD’000 ZMW’000 USD’000 31,949 1,513 - - - - 1,529 167,264 - 95 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. 35. 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. 36. 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. 153 Zambeef Products PLC Annual Report 2021STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOVERVIEW NOTES TO THE FINANCIAL STATEMENTS - 30 SEPTEMBER 2021 37. Comparative figures Where necessary, comparative figures have been reclassified to simplify proper assessment as follows: Distribution costs – Distribution costs of ZMW66,770 thousand have been reclassified - from administration expenses and are presented separately on the face of the statement of comprehensive income. - - Right of use assets – Non-cash and cash flows in the statement of cash flows, have been reclassified from investing activities and operating activities respectively. They are classified as cash outflow on investing activities of ZMW15,425 thousand and charge on right of use assets of ZMW8,362 thousand. Tax reconciliation – Tax reconciliation was recast to show the breakdown of non-deductible expenses amounting to ZMW6.5million in 2021 compared to ZMW59.9million in 2020. Further the unrecognised deferred tax asset of ZMW36.4million in 2021 compared to ZMW87.9million in 2020 was disclosed in the reconciliation. 38. Events subsequent to reporting date No item, transaction or event of a material and unusual nature has arisen since 30 September 2021, 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 27TH ANNUAL GENERAL MEETING 154 Zambeef Products PLC Annual Report 2021  27TH ANNUAL GENERAL MEETING Zambeef Products PLC Annual Report 2021 155 Zambeef Products PLC (“Zambeef” or the “Group”) [INCORPORATED IN THE REPUBLIC OF ZAMBIA] COMPANY REGISTRATION NUMBER: 31824 SHARE CODE: ZAMBEEF ISIN: ZM0000000201 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 27th Annual General Meeting of the members of the company will be held virtually on Tuesday, December 21 2021 at 10:00 hours; in respect of the year ended 30 September 2021. AGENDA 1. Minutes of the previous meeting To receive and note the minutes of the 26th Annual General Meeting held on 24 December, 2020 duly approved by the Chairman in accordance with the Companies Act. 2. Financial statements To receive adopt and approve the reports of the Directors, the Auditors and the Financial Statements for the year ended September 30, 2021 - (Ordinary resolution number 1) 3. Ordinary Resolutions To consider and, if deemed fit, to pass, with or without modification, the following ordinary resolutions; 3.1 Ordinary resolution number 2 – Confirmation of appointment of directors – Roman Frenkel, Pearson Gowero and Katebe Monica Musonda To confirm the appointment of Messer’s Roman Frenkel, Pearson Gowero and Ms Monica Musonda, who were appointed by the board as a director with effect from 1st March, 2021. 3.2 Ordinary resolution number 3 – Re-election of directors retiring by rotation To re-elect each of Messrs Frank Braeken, Yollard Kachinda and Michael Mundashi SC who retire by rotation in terms of Companies Act, and who, being eligible, offer themselves for re-election. The board recommends their re-election to shareholders. 3.3 Ordinary resolution number 4 – Appointment of the independent auditor Pursuant to the requirements of sections 257(1) of the Companies Act No. 10 of 2017, and as nominated by the company’s Audit Committee, to resolve that Messer’s PricewaterhouseCoopers be appointed as the company’s independent registered auditor for the financial year ending 30 September 2022 and to authorise the directors to determine their remuneration. 4. Non - Declaration of final dividend The directors recommend that no dividend be paid for the financial year-ending 30 September 2021. It is noted that in terms of company’s Articles, the company may only declare a dividend if the directors have recommended a dividend. 5. Other business To transact such other business as may be transacted at an annual general meeting of members. 156156 Zambeef Products PLC Annual Report 2021 NOTES Key Sign Up instructions a). Sign Up • • • • • • Use the following link to access the platform; https://eagm.creg.co.zw/EAGM/Login.aspx First time users are required to sign-up by clicking the “Sign Up “option. If you registered previously, you do not need to sign up again. Kindly use the same logging credentials that you used before. If you have forgotten your details, use the “Forgot Password” function on the login window to retrieve your details. Attendees are to indicate the criteria of their attendance of the provided options i.e. Shareholder/Non- Shareholder/Proxy Attendees are required to provide the necessary information to complete the sign-up procedure. Once Sign-up has been completed, the admins will validate information provided before granting access to 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 “Register” on the blue button to confirm online attendance Click “Join” to begin following video and audio transmission of meeting proceedings. Click “Join with Computer Audio” to attend the live meeting (c) Ensure that you have downloaded Google Chrome https://www.google.com/chrome/ or Microsoft Edger https:// www.microsoft.com/en-us/edge for better experience. (d) Use of Apple devices must be done in consultation with the system Administrator, details of which are given below. (e) 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 member of the Company. Proxies must be lodged at the registered office of the Company at least 48 hours before the time fixed for the meeting. Queries pertaining to shareholder relations such as change of address or bank details are to be channelled through the Transfer Secretaries, whose contact address is: Corpserve Transfer Agents Limited 6 Mwaleshi Road, Olympia Park, Lusaka, Zambia Telephone : +260 (211) 256969/70 Facsimile : +260 (211) 256975 Email: - info@corpservezambia.com.zm By Order of the Board Mwansa M Mutimushi COMPANY SECRETARY 157 157 Zambeef Products PLC Annual Report 2021December 2020 AGM Attendance Register Zambeef Products Plc 1) Proxies Name Proxy Shares Held Standard Chartered Zambia Securities Services Nominees Ltd (CDC) Michael Mundashi SC 52,601,435 National Pension Scheme Authority Saturnia Regna Pension Trust Fund Sussex Trust KCM Pension Trust Scheme Zambia Sugar Pension Trust -Scheme Stanbic Bank Pension Trust Fund Barclays Bank Staff Pension Trust Fund Zanaco Plc Dc Pension Scheme Standard Chartered Bank Pension Trust Fund Lafarge Cement Zambia Plc Pension Trust Scheme Indeni Pension Trust Scheme Picz Pension Trust-Money Purchase CEC Pension Trust Scheme Lubambe Copper Mines Pension Trust Scheme Buyantanshi Pension Trust Fund Sandvic Minning Pension Scheme Airtel Zambia Staff Pension Fund Cavmont Bank Zambia Pension Trust Scheme National Breweries Pension Trust Scheme Golden Sunset Pension Fund Rail Systems of Zambia Examinations Council of Zambia Prudential Life Assurance Zambia Limited Ecobank Zambia Limited Pension Trust Scheme SCZ International Ltd Pension Trust Finance Bank Deloitte And Touch Pension Trust Schemd Zambia National Building Society Sun International Pension Trust Scheme UTI Zambia Limited Staff Pension Trust Scheme Africa 53 Toyota Zambia Workcom Pension Trust Scheme Workcom Trust Pension Scheme Ppmz Multichoice Pension Scheme Buyantanshi Pension Trust Fund Zambezi River Authority Golden Kapopo Mumba Musunga John Rabb Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mutale Mpundu Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mumba Musunga Mutale Mpundu Mutale Mpundu Mutale Mpundu Mumba Musunga Mumba Musunga Mutale Mpundu Mumba Musunga Mutale Mpundu Mumba Musunga Mumba Musunga Mutale Mpundu Mutale Mpundu Mumba Musunga Mutale Mpundu Mutale Mpundu Mutale Mpundu Mutale Mpundu Health Sector Grant Aided Institutions Pension Scheme Mumba Musunga 158 24,797,819 17,793,214 14,000,000 6,960,906 3,288,436 2,878,354 2,477,657 1,334,161 1,108,671 1,012,190 990,224 616,160 563,950 532,763 524,155 493,562 473,966 308,678 202,112 196,544 175,160 171,877 154,460 154,259 141,503 137,931 124,994 110,266 94,913 81,709 66,689 65,808 59,199 59,198 50,334 47,393 40,600 30,000 Zambeef Products PLC Annual Report 2021Name Young And Rubicam Pension Trust Scheme Zambia Episcopal Conference (ZEC) Lusaka Trust Pension Scheme Final Salary ZRL Pension Trust Scheme Sanlam Life Insurance (Z) Ltd Game Stores Pension Trust Scheme Stockbrokers Zambia Ltd. Total 2) Attendees - Shareholders Name Mbewe Conrad Liebenthal Robert & Ompie M Namakando Namakando Patrick Ngosa Chilufya Musonda Clarence Nsama Mubanga Burnham Dennis Mhango Total Proxy Shares Held Mumba Musunga Mutale Mpundu Mutale Mpundu Mutale Mpundu Mutale Mpundu Mumba Musunga Mumba Musunga Boniface Mwamba 24,438 15,277 14,558 13,790 5,704 4,550 3,191 1,926 135,004,684 Proxy Shares Held 7,048 4,688 1,003 730 447 371 172 14,459 159 Zambeef Products PLC Annual Report 2021 3) Attendees - Non Shareholders Name Prisca Chizi James Ndhlovu Tim Harper Nyambe Mbanga Chilala Banda Christopher Mulenga Gillian Langmead Kebby Kaumbi Musopelo Mwanda Tidale Mwale - Chisunka Nenani Sichone Ernest Kando Diana Mkonda Mulolwa Nkhata Jack Kanyanga Caroline Mulaga Baron Chisola Danny Museteka Kenny Mukulo Chishala Malekano Emmanuel Chembo Mulwanda Sichula Faith Mukutu Mboo Mumba Representing Corpserve Zambia Corpserve Zambia Finncap Grant Thornton Grant Thornton Grant Thornton Langmead & Baker Ltd National Pensions Scheme Authority National Pensions Scheme Authority Pangaea Securities Pangaea Securities Prudential Life Assurance Zambia Standard Chartered Bank Standard Chartered Bank Stockbrokers Zambia Limited Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Zambeef Products Plc Count 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 160 Zambeef Products PLC Annual Report 2021ZAMBEEF PRODUCTS PLC FORM OF PROXY For the 27th Annual General Meeting I/We ______________________________________________________________________________________________________ (Name/s in block letters) of _________________________________________________________________________ (address) being a member/ member of the above-named Company hereby appoint Number of votes 1. ____________________________________ of ________________________________ or in his absence (1 share = 1 vote) 1. ____________________________________ of ________________________________ or in his absence 3. the Chairman of the meeting As my/our proxy to vote for me/us on my/our behalf at the annual meeting of the company to be held virtually on Tuesday 21 December 2021 at 10:00 hours and at any adjournment thereof as follows: Resolution No. Agenda Item Mark with X where applicable In Favour Against Abstain 1 2 To receive adopt and approve the reports of the Directors, the Auditors and the Financial Statements for the year ended September 30, 2021 Confirmation of Appointment of Directors: - i. Roman Frenkel ii. Pearson Gowero iii. Katebe Monica Musonda 3 Re-election of directors i. Frank Braeken ii. Yollard Kachinda iii. Michael Mundashi SC 4. Pursuant to Sec. 257 of the Companies Act: To appoint Messer’s PricewaterhouseCoopers as the independent auditors and authorise the directors to determine the auditor’s fees. Unless otherwise instructed, the proxy will vote as he thinks fit. Signed at ________________________ on this ___________________ day of ___________________ 2021 Signature _________________________________________________________________________________________________ Assisted by me (where applicable) (see note 3) ________________________________________________________________ Full name/s of signatory/ies if signing in a representative capacity (see note 4) _____________________________________ 161 Zambeef Products PLC Annual Report 2021 NOTES TO THE FORM OF PROXY 1. 2. 3. 4. 5. 6. 7. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend, speak and vote in his/her stead. A proxy need not be a member of the Company. If this proxy form is returned without any indication as to how the proxy should vote, the proxy will be entitled to vote or abstain from voting as he/she thinks fit. A minor must be assisted by his/her guardian. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless the Company has already recorded that authority. In order to be effective, proxy forms must reach the registered office of the Company or the transfer secretaries before the Annual General Meeting. The delivery of the duly completed proxy form shall not preclude any member or his/her duly authorised representative from attending the meeting, speaking and voting instead of such duly appointed proxy. If two or more proxies attended the meeting, then that person attending the meeting whose name appears first on the proxy form, and whose name is not deleted, shall be regarded as the validly appointed proxy. 162 162 Zambeef Products PLC Annual Report 2021 Zambeef Products PLC Annual Report 2021 164 Zambeef Products PLC Annual Report 2021

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