Notes to the Financial Statements
30 September 2003
1.The company
The company was a wholly owned subsidiary of Zambezi
Ranching and Cropping Limited, until 2 January 2003.
The
company floated on the Lusaka Stock Exchange on 14 February 2003
when it became a public listed company. The company is
incorporated and domiciled in Zambia
The group's principal activities comprise
feedlotting, poultry, dairy, cropping, slaughtering, wholesaling
and retailing of meat products, and leather processing.
2. Principal accounting policies
As in previous years, the group's financial
statements are prepared in accordance with International
Accounting Standards, including the historical cost convention
as modified by the inclusion of fixed assets at a valuation.
The following is a summary of the more important accounting
policies used by the group:
(a) Basis of consolidation
The consolidated profit and loss account
and balance sheet 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
of during the year are included in the consolidated profit and
loss account from the date of their acquisition or up to the
date of their disposal. Intergroup transactions and profits are
eliminated on consolidation and all sales and profit figures
relate to external transactions only.
(b) Fixed assets
Fixed assets are included in the balance sheet at cost or
valuation less accumulated depreciation. Revaluations are
carried out every three to five years by independent valuers and
the basis of valuation used is open market value for its
existing use.
The directors review the economic value of assets to the
business on an annual basis to ensure that carrying values have
not been impaired.
(c) Depreciation
Depreciation is calculated to write off
the cost or valuation of fixed assets, less estimated residual
values, over the expected useful lives of the assets concerned.
The principal annual rates used for this purpose, which are
consistent with those of the previous year, are:‑
(d) Short/long term loans
Short term loans include all amounts due
within twelve months of the balance sheet date including
instalments due on loans of longer duration. Long term loans
include all amounts due more than twelve months after the
balance sheet date.
(e) Biological assets
Biological assets are valued at the 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.
(f) Stocks
Stocks are stated at the lower of cost
and net realisable 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 realisable value takes into
account all further costs directly related to marketing, selling
and distribution.
(g) Foreign currencies
Assets and liabilities expressed in
foreign currencies are translated to Zambian Kwacha at the rates
of exchange ruling at the balance sheet date. Gains and losses
on translation are dealt with through the profit and loss
account in the period in which they arise.
(h) Deferred taxation
Provision is made for deferred tax
liabilities against the amounts of income taxes payable in
future periods in respect of taxable temporary differences.
(i) Revaluation reserve
The surplus arising on revaluation of fixed assets is credited
to a revaluation reserve. A transfer is made from this reserve
to the revenue reserve each year equivalent to the difference
between the actual depreciation charge for the year and the
depreciation charge based on historical values.
(j) Provisions
Provisions are recognised when the company has a present legal
and constructive obligation as a result of past events, for
which it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, and
a reliable estimate of the amount of the obligation can be made.
3. Change in accounting policy
During the year the company changed its accounting policy with
respect to the valuation of biological assets. In order to
conform with IAS 41, Agriculture, the company now measures
biological assets at their fair value less estimated point of
sale costs. The company has applied IAS 41 before the mandatory
operative date. This change in accounting policy has been
accounted for retrospectively. The comparative financial
information for 2002 has been restated to conform to the changed
policy. The effect of the change is an increase in gross profit
of K250,355,000 in 2003 and K106,056,000 in 2002. Opening
retained earnings for 2002 has been increased by K2,172,000,000
which is the amount of the adjustment relating to years prior to
2002.
4.Turnover
Turnover represents the value of goods invoiced to
customers during the year, less returns and allowances
5.Profit before taxation
|
|
2003
K'000 |
2002(Restated)
K'000 |
Profit before taxation is stated after charging:‑
Depreciation
Staff costs
Legal and professional fees
Exchange losses |
3,734,836
11,273,648
281,664
360,363 |
1,364,350
7,748,868
101,353 676,467 |
|
and
after crediting:
Change in fair value less estimated point of sale costs of biological assets
|
250,355 |
106,056 |
6. Taxation
|
Income tax at 35%/15% on taxable profit
|
2,052,426 |
1,375,281 |
|
for the year (2002 – 35%/15%)
|
1,785,008
|
30,835 |
|
Deferred taxation
|
3,837,434
|
1,406,116 |
7. Earnings per share
|
Profit for the year
|
15,558,850
|
8,991,860 |
|
Earnings per share based on 114,669,450 ordinary
shares
|
135.68
|
78.42 |
|
The weighted average number of ordinary shares is
114,669,450. |
|
|
8. Fixed assets
| |
Leasehold
Land and
Buildings |
Plant and
machinery |
Motor
Vehicles |
Furniture
and equipment |
Total |
|
(a) Group |
K’000 |
K’000 |
K’000 |
K’000 |
K’000 |
|
Cost or valuation
At 1 October 2002
Additions
Surplus on valuation
At 30 September 2003
Cost
Valuation
Depreciation
At 1 October 2002
Charge for the year
Adjustment on valuation
At 30 September 2003
Net book value
At 30 September 2003 |
6,396,4817
28,477
15,516,803
22,641,761
7,124,958
15,516,803
22,641,761
594,619
375,255
(627,299
342,575
22,299,186 |
7,117,493
6,521,862
11,620,975
25,260,330
13,639,355
11,620,975
25,260,330
2,019,705 1,954,158
(2,207,608 1,766,255
23,494,075 |
3,582,234
1,023,590
3,169,185
7,775,009
4,605,824
3,169,185
7,775,009
2,431,397 1,274,393 (2,615,591) 1,090,199
6,684,810 |
630,836
324,235
707,931
1,663,002
955,071
707,931
1,663,002
169,336 131,030 (185,436) 114,930
1,548,072 |
17,727,044
8,598,164
31,014,894
57,340,102
26,325,208 31,014,894
57,340,102
5,215,057
3,734,836
(5,635,934) 3,313,959
54,026,143 |
|
At 30 September 2002 |
5,801,862
|
5,097,788
|
1,150,837 |
461,500 |
12,511,987 |
(b) During the year the group’s fixed assets were revalued by
Knight Frank, Registered Valuation Surveyors, on the basis of open
market value for existing use for buildings and depreciated
replacement cost for other assets. Surplus on valuation and
depreciation no longer required totalling K36,650,828,000 has been
transferred to revaluation reserve.
(c) The net book value of the group’s fixed assets using the
benchmark treatment of IAS 16 would have been as follows:
|
Leasehold
Land and
Buildings |
Plant and
machinery |
Motor
Vehicles |
Furniture
and equipment |
Total |
|
K’000 |
K’000 |
K’000 |
K’000 |
K’000 |
|
6,406,264 |
10,702,635 |
1,767,750 |
721,707 |
19,598,357 |
(d) The depreciation charge for the year includes
K2,223,043,000 (2002 - K12,025,000) 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 company’s distributable
reserve, an equivalent amount has been transferred to distributable
reserve from revaluation reserve.
| e) Company |
Leasehold
Land and
Buildings |
Plant and
machinery |
Motor
Vehicles |
Furniture
and equipment |
Total |
|
|
K’000 |
K’000 |
K’000 |
K’000 |
K’000 |
|
Cost
At 1 Oct 2002
Additions
Surplus on valuation
At 30 September 2004
Cost
Valuation
Depreciation
At 1 October 2002
Charge for the year
Adjustment on valuation
At 30 September 2003
Net book Value
At 30 September 2003 |
5,157,191
450,715
13,500,977
19,108,883
5,607,906 13,500,977
19,108,883
510,251
309,741
(536,335)
283,657
18,825,226 |
5,890,557
5,779,149
6,057,753
17,727,459
11,669,706
6,057,753 17,727,459
1,599,758
1,295,867
(1,756,982)
1,138,643
16,588,816 |
3,394,764
1,003,590
2,610,601
7,008,955
4,398,354 2,610,601
7,008,955
2,285,092
1,151,633
(2,458,912)
977,813
6,031,142 |
338,271
278,151
101,431
717,853
616,422 101,431
717,853
97,894
53,882
(106,631)
45,145
672,708 |
14,780,783
7,511,605
22,270,761
44,563,150
22,292,388
22,270,761
44,563,150
4,492,995
2,811,123
(4,858,860)
2,445,258
42,117,892 |
|
At 30
September 2002 |
4,646,940 |
4,290,799 |
1,109,672
|
240,377
|
10,287,788 |
(f) During the year the company’s fixed assets were revalued
by Knight Frank, Registered Valuation Surveyors, on the basis of
open market value for existing use for buildings and depreciated
replacement costs for other assets. Surplus on valuation and
depreciation no longer required totalling K27,129,621,000 has been
transferred to revaluation reserve.
(g) The net book value of the fixed assets using the
benchmark treatment of IAS 16 would have been as follows:
Leasehold
Land and
Buildings |
Plant and
machinery |
Motor
Vehicles |
Furniture
and equipment |
Total |
|
K’000 |
K’000 |
K’000 |
K’000 |
K’000 |
|
4,998,474 |
9,360,186
|
1,722,055
|
480,251
|
16,560,967 |
(h) The depreciation charge for the year includes
K1,572,696,000 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 company’s distributable reserve, an equivalent
amount has been transferred to distributable reserve from
revaluation reserve.
9.Investments
| |
2003
K’000 |
2002
K’000 |
At cost:
At 1 October 2003 and at 30 September
2004 |
1,506,640 |
1,506,640 |
|
Shares represent equity holdings in the
following companies incorporated in
Zambia: |
Value
K’000 |
Equity Held
% |
|
Name of company
Zambeef Retailing Limited
Zamleather Limited
In the opinion of the directors, the
value of the company's interests in the
subsidiary companies are not less than
the amounts at which they are stated in
these financial statements.
|
30,000
1,476,640
1,506,640
|
100
100
|
10.
Loans to Subsidiary Companies
|
|
2004
K’000 |
2003
K’000 |
|
Zambeef Retailing Limited
Zamleather Limited |
400,000
300,000 |
-
- |
|
|
700,000 |
- |
|
The loans are interest free and have no
fixed repayment terms. |
11. Biological assets
Biological assets
comprise feedlot cattle, dairy cattle and chickens. At 30 September
2004 there were
7,130
cattle and
166,909
chickens. A total of
15,920 cattle and 11,374,214 chickens were culled in
the year.
|
|
Crops
K’000 |
Cattle
K’000 |
Chickens
K’000 |
Total
K’000 |
|
At 1 October 2002
Increases due to purchases
Gains arising from changes
in
fair value less estimated
point
of sale costs attributable
to
physical changes
Decrease due to sales |
184,000
3,181,136
(184,000) |
9,688,243
25,837,279
7,451,495
(29,324,439) |
526,296
4,142,507
13,313,151
(16,456,255) |
10,398,539
29,979,786
23,945,782
(45,964,694) |
|
At 1
September 2004 |
3,181,136
|
13,652,578 |
1,525,699
|
18,359,413 |
12. Stocks
|
|
2003 |
2002 |
|
|
Group
K’000 |
Company
K’000 |
Group
K’000 |
Company
K’000 |
|
Abattoir stocks
Stock feeds
Harvested crops Consumables
Raw hides and chemicals
|
155,391 5,658,978 1,605,760
3,675,933
1,073,398 |
155,391 5,658,978 1,605,760 2,081,199 |
276,383
2,432,364
711,993 1,333,907
561,953 |
276,383
2,432,364
711,993
504,263 |
|
|
12,169,460
|
9,501,328 |
5,316,600 |
3,925,003 |
13. Debtors and other receivables
|
|
2004 |
2003 |
|
|
Group
K’000 |
Company
K’000 |
Group
K’000 |
Company
K’000 |
|
Trade debtors
Other receivables |
6,743,693
679,829 |
2,640,536 679,829 |
3,132,885
- |
354,885
- |
|
|
7,423,522 |
3,320,365 |
3,132,885
|
354,885 |
14. Amounts due from related companies
|
|
2004 |
2003 |
|
|
Group
K’000 |
Company
K’000 |
Group
K’000 |
Company
K’000 |
|
Group Companies |
- |
14,902,155 |
- |
6,307,955 |
|
|
|
14,902,155 |
|
6,307,955 |
15. Share capital
|
|
2003
K’000 |
2002
K’000 |
|
114,669,450 ordinary shares of
K0.0872 each Authorised, issued
and fully paid
114,669,450 ordinary shares of
K0.0872 each Authorised, issued
and fully paid |
10,000
10,000 |
10,000
10,000 |
16. Share premium
|
|
2003
K’000 |
2002
K’000 |
|
At 30 September 2004 and 2003 |
3,211,510 |
3,211,510 |
|
|
2003
K’000 |
2002
K’000 |
|
Barclays Bank of Zambia
Limited (note (a))
Stanbic Bank Zambia Limited
(note (b))
Less: Short term portion
(repayable within next 12
months)
Long term portion (repayable
after 12 months) |
7,287,324
101,547
7,388,871
(1,276,267)
6,112,604 |
3,674,985
243,929
3,918,914
(1,103,239)
2,815,675 |
(a)Barclays Bank of Zambia Limited
-
The company has a loan facility of Euros 70,000 (2002
– Euros 140,000) from Barclays Bank of Zambia Limited under a
European Investment Bank line of credit. Interest on the loan is
6.5% per annum and the principal is repayable in 2 equal quarterly
instalments in December and March next year.
-
The company has a loan facility of Euros 357,143 (2002 – Euros
500,001) from Barclays Bank of Zambia Limited under a European
Investment Bank industrial line of credit. Interest on the loan is
6.5% per annum payable quarterly in arrears. The principal is
repayable in 10 equal instalments in February, May, August and
November of each year.
-
The company has a loan facility of Euros 200,000 (2002 – Euros
200,000) from Barclays Bank of Zambia Limited under a European
Investment Bank line of credit. Interest on the loan is 8.8% per
annum and the principal is repayable in 20 equal quarterly
instalments commencing 21 June 2004.
-
The company has a loan facility of Euros 700,000 (2002 – Euros Nil)
from Barclays Bank of Zambia Limited under a European Investment
Bank line of credit. Interest on the loan is 8.8% per annum payable
monthly in arrears. The principal is repayable in 20 equal quarterly
instalments commencing August 2005.
-
The loan is secured by:
i)
Debenture creating a fixed and floating charge over all the
assets of the company for Euro 1,450,000 ranking parri passu with
the Citibank debenture.
ii)
Legal mortgage over Farm No. 721 (Kalundu Farm) for
US$600,000.
iii) Keyman Insurance for US$478,000 on Carl Irwin and Francis
Grogan.
(b)
Stanbic Bank Zambia Limited
-
The company has a loan facility of Euros 18,400 (2002 – Euros
55,200) from Stanbic Bank Zambia Limited under a European Investment
Bank line of credit. Interest on the loan is 8.5% per annum payable
half yearly in arrears. The last principal payment is payable in
November 2003.
-
The loan is secured by:
i) A floating charge over the assets financed as well as the
standing crops under the centre pivot financed.
18. Deferred
Liability
Under the terms of
employment employees are
entitled to certain
terminal benefits.
Provision has 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 arises
and when an employee has
been employed for more
than ten years.
Uncertainty exists over
the amount of future
outflows due to staff
turnover levels.
|
|
Group
K’000 |
Company
K’000 |
|
At 1st October 2002
Provisions made
at 30 September 2003
|
739,536
1,791,000 |
365,739
1,696,000 |
| |
2,530,536 |
2,061,739 |
19. Deferred
taxation
|
|
GROUP |
|
2003 |
2002 |
|
Full potential
Liability
K’000 |
Provision
Made
K’000 |
Full potential
Liability
K’000 |
Provision
Made
K’000 |
|
Cattle valuation
Acceleration tax
allowance |
2,014,461
2,341,081 |
2,014,461
2,341,081 |
854,505
1,716,029 |
854,505
1,716,029 |
|
4,355,542
|
4,355,542 |
2,570,534 |
2,570,534 |
|
|
COMPANY |
|
2003 |
2002 |
|
Full potential
Liability
K’000 |
Provision
Made
K’000 |
Full potential
Liability
K’000 |
Provision
Made
K’000 |
|
Cattle valuation
Acceleration tax
allowance |
2,014,461
2,224,716 |
2,014,461
2,224,716 |
854,505
1,599,664 |
854,505
1,599,664 |
|
4,239,177
|
4,239,177
|
2,454,169
|
2,454,169 |
20. Creditors and
other payables
|
|
2003 |
2002 |
Group
K’000 |
Company
K’000 |
Group
K’000 |
Company
K’000 |
|
Trade Creditors |
4,340,046
|
3,257,743
|
1,946,791
|
1,524,500 |
|
|
4,340,046 |
3,257,743
|
1,946,791 |
1,524,500 |
21.
Amounts
due
to
related
companies
|
|
2003 |
2002 |
Group
K’000 |
Company
K’000 |
Group
K’000 |
Company
K’000 |
|
Group companies |
253,505
|
6,985,359 |
2,609,808
|
4,841,918 |
The above balance relates to arm's length transactions
between
the
two
parties.
Zambezi
Ranching
and
Cropping
Limited
supplies Zambeef Products Plc with cattle for slaughter and long
weaners for Zambeef Products Plc's feedlot on a regular basis.
Zambezi
Ranching
and
Cropping
Limited
was
the
company’s
holding
company
until
2
January
2003
22. Bank
overdrafts
The company has overdraft facilities totalling K700 million (2002 -
K700 million) and US$660,000 (2002 – US$nil), and a bank guarantee
line of US$300,000 (2002 – US$140,000) with Citibank Zambia
Limited. The overdrafts bear interest rates of base rate plus 4%
for the Kwacha facility and 8% for the United States Dollar
facility. One of the subsidiary companies has further overdraft
facilities totalling K100 million (2002 - K100 million) and a
foreign exchange line of US$100,000 (2002 – US$100,000) with
Barclays Bank of Zambia Limited.
|
|
2003 |
2002 |
Group
K’000 |
Company
K’000 |
Group
K’000 |
Company
K’000 |
|
Citibank Zambia Limited (note (b))
|
3,765,094 |
6,178,948
|
1,162,314
|
1,270,650 |
(a)
The bank overdrafts and the guarantee line are secured by a
first floating charge over all the assets of the company and the
subsidiary company.
(b) The group has a right of set off for overdraft balances with
positive bank balances at group level.
23. Financial instruments
Financial assets
The group’s principal financial assets are bank balances and cash
and trade debtors. The group maintains its bank accounts with major
banks in Zambia of high credit standing. Trade debtors are stated at
their nominal value reduced by appropriate allowances for estimated
irrecoverable amounts.
Financial liabilities
The group’s financial liabilities are long term loans and trade
creditors. Financial liabilities are classified according to the
substance of the contractual arrangements entered into. Trade
creditors and loans are stated at their nominal value.
(a) Price risk
(i)
Currency risk
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 hedged by holding United
States Dollar bank balances and trade debtors.
(ii) Interest rate risk
Financial assets are not
exposed to the risk that their value will fluctuate due to changes
in market interest rates. Details of the interest rates and maturity
of interest bearing borrowings are disclosed in note 17.
(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.
(b)Credit risk
(i)
Trade debtors
The directors believe the credit risk of trade debtors is low. The
credit risk is managed by the selective granting of credit and
credit limits.
(c)Liquidity risk
The group is not believed to be exposed to significant liquidity
risk being inability to sell financial assets quickly at close to
their fair value.
(d)Cash flow risk
The company is not exposed to the risk that future cash flows
associated with monetary financial instruments will fluctuate in
amount. It has no instruments that include a floating interest rate.
24.Contingent liability
The company has a bank guarantee facility for US$300,000. At the
year end the company had a guarantee of US$114,000 for the purchase
of fertilizer against this facility.
25.
Capital
commitments
|
Capital
commitments
entered
into at
the
balance
sheet
date: |
2003
K’000 |
2003
K’000 |
|
|
2,353,267 |
- |
26.
Operating
leases
The
total
value of
future
minimum
annual
lease
payments
under
non-
cancellable
operating
leases
is as
follows:
| |
K'000 |
Within
one year
One
to five
years
More
than
five
years
|
755,616
427,140
22,320 |
The
company's
subsidiary
company,
Zambeef
Retailing
Limited,
has
operating
leases
for its
butcheries
that are
for 12
month
periods
and
renewable
at the
request
of
either
party.
There
are no
purchase
options,
contingent
rent
payments
or
restrictions
arising
on these
leases.
26.
Related
party
transactions
Zambezi
Ranching
and
Cropping
Limited
and
Master
Pork
Limited
are
related
parties
of the
company
since
material
shareholdings
in these
companies
are
owned by
significant
shareholders
of the
company.
However
any
transactions
with
these
companies
are
conducted
on an
arm's
length
basis at
commercial
rates
similar
to
non-related
suppliers.
|
The
group
made the
following
purchases
from
these
related
parties: |
K'000 |
Zambezi
Ranching
and
Cropping
Limited
Master
Pork
Limited
|
7,680,416
1,964,882 |
| |
9,645,298 |
27.
Events
subsequent
to
balance
sheet
date
|
