Presco Plc RC Annual Report & Accounts

Transcription

1 Presco Plc RC Annual Report & Accounts 2005

2 PRESCO Plc RC Contents PRESCO PLC Producer of Specialty Fats and Oils Notice of Annual General Meeting 4 Financial Highlights 5 Presco is a fully-integrated agro-industrial establishment with oil palm plantations, a palm oil mill, a palm kernel crushing plant and a vegetable oil refining plant. It is at present the only one of its kind in West Africa. Presco specialises in the cultivation of oil palm and in the extraction, refining and fractionation of crude palm oil into finished products. Presco supplies specialty fats and oils of outstanding quality to customer specifications and assures a reliability of supply of its products year round. This is made possible by the integrated nature of the Company s production process. CONTACT INFORMATION Directors and Professional Advisers 6 Chairman s Statement 7-8 Directors of Presco Plc 9 Report of the Directors Corporate Governance Report Report of the Auditors 17 Audit Committee s Report 18 Statement of Accounting Policies 19 Profit and Loss Account 20 Balance Sheet 21 Statement of Cash Flows 22 Notes to the Accounts Statement of Value Added 33 Five Year Financial Summary 34 Graphic Illustrations 35 Notes 36 Proxy Form 37 Company Secretary s Address 38 Presco Plc Obaretin Estate Km 22 Benin / Sapele Road PO Box 7061 Benin City, Edo State, Nigeria Tel: +234 (0) Tel: +32 (0) Fax: +32 (0) info@presco-plc.com 2 3

3 Notice of Annual General Meeting Financial Highlights Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the 13th Annual General Meeting of Presco Plc will be held at The Dura Club, Obaretin Estate, Km.22, Benin/Sapele Road, Ikpoba-Okha LGA, Benin City, Edo State on Thursday 13 July 2006 at am to transact the following business: Ordinary Business 1. To lay before the meeting the Audited Accounts of the Company for the year ended 31 December 2005 together with the Reports of the Directors, Auditors and the Audit Committee thereon. 2. To declare a dividend. 3. To elect and re-elect Directors. 4. To authorise the Directors to fix the remuneration of the Auditors. 5. To elect members of the Audit Committee. Notes 1. Proxy A Member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to attend and vote instead of him. A proxy need not be a Member of the Company. A proxy form is enclosed. Executed proxy forms should be returned to the Company s office not less than 48 hours before the time of the meeting. 2. Closure of Register and Transfer Books The Register of Members and Transfer Books will be closed from Monday 3 July to Friday 7 July 2006 both days inclusive to enhance preparation for the payment of dividend. 3. Dividend If the dividend recommended by the Directors is approved, dividend cheques will be posted on Tuesday 1 August 2006 to the Shareholders whose names are on the Register of Members at the close of business on Friday 30 June Audit Committee In accordance with Section 359[5] of the Companies and Allied Matters Act, 1990 any Member may nominate a Shareholder as a member of the Audit Committee by giving notice in writing of such nomination to the Company Secretary at least 21 days before the Meeting. BY ORDER OF THE BOARD % N 000 N 000 Change Major balance sheet items Total assets 4,296,047 4,098, % Shareholders funds 2,315,582 2,274, % Share capital 250, , % Share premium 1,173,529 1,173, % Profit and loss account 892, , % Major profit and loss account items Turnover 2,347,611 2,346, % Profit before taxation 453, , % Profit after taxation 340, , % Dividend proposed 300, , % Retained profit for the year 40, , % Information per 50 kobo ordinary share Earnings per share (kobo) % Dividend per share (kobo) % Dividend cover (times) % Net assets per share (kobo) % Stock exchange quotation at 31 December (Naira) % Isaac O. Ona Esq. Company Secretary Registered Office Obaretin Estate, Km 22, Benin/Sapele Road Ikpoba-Okha Local Government Area, Benin City, Edo State. Dated this 30 th day of March

4 Directors and Professional Advisers Chairman s Statement BOARD OF DIRECTORS : Directors and Professional Advisers Chief P.I.G. Onyeobi, JP Chairman Mr. Pierre Vandebeeck Managing Director (Belgian) H.R.H. (Dr.) O. Akenzua, JP Engr. J.B. Erhuero, JP, mni Mr. J.J. Mansholt (Dutch) Resigned with effect from 30 March 2006 Mr. H.I.E. Omoragbon Mr. Osa Osunde Chief O.F.J. Oyaide Mr. Atedo N.A. Peterside, OON Appointed with effect from 16 December 2005 Mr. Olayinka O. Sanni Resigned with effect from 16 December 2005 Ir. Helena Vandebeeck (Belgian) Mr. Vince McAleer (British) Appointed with effect from 30 March 2006 COMPANY SECRETARY : REGISTERED OFFICE : REGISTRARS AND TRANSFER OFFICE : TECHNICAL PARTNERS/ MANAGING AGENTS : SOLICITORS : AUDITORS : Isaac O. Ona Esq. Obaretin Estate, Km. 22, Benin/Sapele Road, Ikpoba-Okha Local Government Area, Benin City, Edo State. First Registrars Nigeria Limited, Plot 2, Abebe Village Road, Iganmu, P.M.B , Marina, Lagos. sa Siat nv Brussels, Belgium. Abdulai Taiwo & Co., Goodwill House, 278, Ikorodu Road, Lagos. Akintola Williams Deloitte (Chartered Accountants), 235, Ikorodu Road, Ilupeju, Lagos. Chief P.I.G. Onyeobi JP Chairman Distinguished Shareholders, Fellow Directors, Ladies and Gentlemen, I am happy to welcome you all to the 13th Annual General Meeting of Presco Plc. We are here today to consider the Annual Report and Accounts of the Company for the year ended 31 December The Business Environment In general the Nigerian economy has been buoyed by continued high crude oil prices. As a result, GDP growth was 6.5%. The Naira has been steady throughout the year. Inflation improved but remained high at 12%, undermining efforts being made by Government to stabilise the business environment. On a positive note, interest rates have fallen modestly but not enough to improve the investment climate significantly. The consolidation in the banking sector that has taken place over the last two years is a welcome move. The move to fewer but stronger banks can only benefit the business community. The social environment was generally peaceful during the year; though there were national strikes over increased fuel prices, they were less disruptive than in the recent past. The Vegetable Oil Industry With a gap between aggregate national production and consumption of all oils and fats in excess of 300,000 tonnes, it is necessary that oils and fats are imported. However, it is essential that this is done with the best interests of the domestic vegetable oil industry in mind. Despite reassurances from Government, imports of vegetable oils were not well managed and illicit importation continued to distort domestic prices. Presco, as the market leader in the vegetable oil industry, continues to take an active role in the Presidential Initiative on Vegetable Oil, the Plantation Owners Forum of Nigeria and the Nigerian Economic Summit Group s Policy Commission on Agriculture to influence Government policy in the best interests of the industry. Operating Results While FFB production for the period was slightly lower than the previous year at 82,054 tonnes, total product sales of 17,903 tonnes was higher. The performance of the Company was adversely affected by the poor control of vegetable oil imports. Prices were lower than expected and as a consequence the revenue of the Company was N2.348 billion, about the same as the previous year. Except for sales prices and energy costs all other costs were well within budget projections. These factors ate deeply into our results. Profit after tax was N341 million. Expansion and Facility Improvements The Company has a long-term investment strategy made up of two parts: an increase in the productive base of the Company and an increase in the processing capacity. Increasing the productive base is being carried out by developing additional land area as well as by replanting existing, older plantings with more productive planting material. In 2005, 445 hectares were replanted. In the last three years more than 1,000 hectares have been planted or replanted. Work has started at Ologbo Estate and planting will start in Processing capacity improvements continue to be made to meet future plantation production. The most significant investment is a modern 30 tonnes per hour steam generating boiler, which will enable the Company to produce almost the entire energy requirement from factory process waste, thus making enormous savings on its energy bill. This project will be operational by the end of March Investment continues in the Company s fleet of trucks, tractors and heavy equipment and workshop facilities are under continual improvement. The enterprise resource planning (ERP) software system is largely completed and will replace all previous systems from 1 July

5 Chairman s Statement (cont d) Directors of Presco Plc Dividend The Company continues to invest heavily in the replanting of old palms, expansion of the plantation area and increasing processing capacity and efficiency, and despite the negative impact of lower prices in 2005, the Board has proposed for Shareholders approval a dividend of N300,000,000 or 60 kobo per share compared with N250,000,000 or 50 kobo per share the previous year. Community Relations Presco s host communities policy commits significant funds each year to assist in education, water, electricity provision and road maintenance. N9.5million was spent on these projects during the year. The N30 million project for the expansion of the Agbomoba School in partnership with the Edo State Government is well underway. The outgrowers scheme in Edo State continues and there has been a significant increase in interest this year, with a total of N7.3 million already committed to the scheme by the Edo State Government and Presco. Progress on a similar scheme in Delta State has, however, not been made. Our People All those who work for the Company, in whatever capacity, contribute an integral part to the progress that has been made. On behalf of the Board and Shareholders, I thank all employees for their loyalty and commitment to our Company. We also wish to thank those who have retired after many years of loyal service. Board Changes Since the last annual general meeting, Mr Yinka Sanni resigned from the Board. We thank him for his contribution and wish him well in the future. He has been replaced by Mr Atedo Peterside OON, Chief Executive Officer of IBTC Ltd, who brings a wealth of experience to the Board. Mr J.J. Mansholt also resigned from the Board recently and Mr. Vince McAleer has been appointed to replace him. I wish, on behalf of the Company, to thank Mr. Mansholt for the invaluable service he has rendered to the Company and to welcome Mr. McAleer to the Board. Corporate Governance In line with national and international requirements for greater disclosure and transparency of corporate governance this year s Annual Report contains an additional section, the Corporate Governance Report. It is expected that this will give greater confidence to our Shareholders. Appreciation The support and technical expertise of our core shareholder, nv Siat sa, is once again acknowledged. The contribution of Siat to Presco over the last fourteen years has been the foundation of the Company s success. I would also thank my colleagues on the Board for the wisdom and experience that they bring to this Board. To His Royal Majesty the Oba of Benin and to the Governments of Edo and Delta States may I express our deep gratitude for their continued support. Finally, I would like to thank all Shareholders for their commitment and support. Thank you. Chief P.I.G. Onyeobi, JP Chairman Chief P.I.G. Onyeobi, JP Chairman H.R.H. (Dr.) O. Akenzua, JP Mr. J.J. Mansholt (Resigned 30 March 2006) Mr. Osa Osunde Mr. Atedo N.A. Peterside, OON (Appointed 16 December 2005) Ir. Helena Vandebeeck Mr. Pierre Vandebeeck Managing Director Engr. J.B. Erhuero, JP, mni Mr. H.I.E Omoragbon Chief O.F.J. Oyaide Mr. Olayinka O. Sanni (Resigned 16 December 2005) Mr. Vince McAleer (Appointed 30 March 2006) 8 9

6 Report of the Directors Report of the Directors (cont d) The Directors have pleasure in submitting their report and the financial statements for the year ended 31 December Principal Activities The main activities of the Company are the development of oil palm plantation, palm oil milling, palm kernel processing and vegetable oil refining. The products of the Company are: palm olein, palm stearin, palm fatty acid distillate, refined bleached and deodorised palm oil, palm kernel (crude and refined) oil and palm kernel cake. 2. Results The Company s performance during the year under review is summarised below. Turnover increased by 0.07%, over that of last year. A net operating profit after taxation of N340,682 million was achieved compared to a profit of N606,342 million for the year ended 31 December N N 000 Turnover 2,347,611 2,346,068 Profit after taxation 340, , Dividend The Directors recommend for approval a dividend of 60 kobo on each 50 kobo ordinary share amounting to N300 million, subject to deduction of withholding tax at the appropriate rate. 4. Directors The Directors who held office during the year and as at the date of this report are: Chief P.I.G. Onyeobi, JP Chairman Mr. Pierre Vandebeeck Managing Director (Belgian) H.R.H. (Dr.) O. Akenzua, JP Engr. J.B. Erhuero, JP, mni Mr. J.J. Mansholt (Dutch) Resigned with effect from 30 March 2006 Mr. H.I.E. Omoragbon Mr. Osa Osunde Chief O.F.J. Oyaide Mr. Atedo N.A. Peterside, OON Appointed with effect from 16 December 2005 Mr. Olayinka O. Sanni Resigned with effect from 16 December 2005 Ir. Helena Vandebeeck (Belgian) Mr. Vince McAleer (British) Appointed with effect from 30 March 2006 In accordance with the Company s Articles of Association, Engr. J.B. Erhuero, and H.R.H. (Dr.) O. Akenzua, retire by rotation, and being eligible offer themselves for re-election. Mr. Atedo N.A Peterside and Mr. Vince McAleer were appointed Directors of the Company after the previous Annual General Meeting. They will retire at this Annual General Meeting and being eligible offer themselves for re-election. 5. Directors Interest in Shares The interest of Directors in the issued share capital of the Company as recorded in the Register of Members and/or notified by the Directors for the purpose of Section 275 of the Companies and Allied Matters Act, CAP C20 LFN 2004, and disclosed in accordance with the Listing Rules of the Nigerian Stock Exchange is as follows: Names of Directors As at 31 December 2005 (No. of shares) Chief P.I.G. Onyeobi, JP 376,000 H.R.H. (Dr) O. Akenzua, JP 131,000 Engr. J.B. Erhuero, JP, mni 155,000 Mr. H.I.E. Omoragbon 87,000 Chief O.F.J. Oyaide 126,250 Mr. Atedo N.A. Peterside, OON (Indirect) 39,583,843 Mr. Atedo Peterside represents IBTC Limited on the Board of Directors. There is no notification of any change in the above shareholdings as at 30 March Substantial Shareholding sa Siat nv held 60% of the issued share capital of the Company as at 31 December Share Range Analysis The range of the distribution of the shares of the company as at 31 December 2005 is as follows: Share Range Shareholders Shareholdings Number % Number % 1 1,000 2, ,099, ,001 5,000 1, ,977, ,001 10, ,359, ,001 50, ,799, , , ,864, , , ,354, ,001 1,000, ,851, ,000, ,999, ,692, TOTAL 5, ,000, Fixed Assets Significant fixed assets expenditure was as follows: N 000 Work in progress 296,703 Buildings 3,407 Motor vehicles and wheel tractors 37,264 Furniture, fittings and equipment 13, , Major Customers The Company s products are sold directly on a selective credit and cash basis to numerous customers comprising wholesalers, consumers and industrial users who are located within the country. Some of these are: 10 11

7 Report of the Directors (cont d) Corporate Governance Report 1. Nestle Nigeria Plc, Lagos 2. Niger Biscuits Limited, Lagos 3. Friesland Foods WAMCO Nigeria Plc, Lagos 4. De-United Food Industries Limited, Lagos 5. Sumal Group, Ibadan 10. Community Development Projects/Community Relations The Company s host communities development programme continued during the year ended 31 December 2005, totalling N9,510,483 (2004: N6,561,971) 11. Donations N Bus for Oba of Benin 3,100,000 Idia Renaissance Foundation 100,000 Others 93,000 3,293, Research and Development The Company uses the services of world-wide research institutions in order to take advantage of the latest developments in agricultural and agro-processing technologies. 13. Employment of Disabled Persons The Company maintains a policy of giving fair consideration to applications for employment of disabled persons having regard to their particular aptitudes and abilities. At present there are no disabled persons in the employment of the Company. 14. Health, Safety and Welfare Free medical services are provided for the Company s employees at the estate clinics. Safety devices provided for employees at work include protective clothing, goggles and boots as and where necessary. There is a fire-fighting programme, which involves all employees and the use of sophisticated equipment. Welfare facilities provided include housing for employees (or payment of allowance in lieu), and transport to and from the work place. 15. Employee Involvement and Training The Company maintains communication and consultation on a regular basis with the branch Union leaders to brief employees on matters affecting them. On-the-job training facilities are provided for all categories of employees with a view to improving their performance, job satisfaction and prospects. External training programmes are also undertaken for different categories of staff. 16. Auditors In accordance with Section 357(2) of the Companies and Allied Matters Act, CAP C20 LFN 2004, Messrs Akintola Williams Deloitte will continue in office as Auditors of the Company having indicated their willingness to do so. A resolution will be proposed at the Annual General Meeting to authorise the Directors to fix their remuneration. BY ORDER OF THE BOARD Isaac O. Ona Esq. Company Secretary 30 March 2006 Presco follows the Corporate Governance Guidelines for the Siat Group of Companies, of which it is a member. The guidelines clearly show the rules and behaviours according to which the Company is to be managed and controlled and define the relationships between the Company s management, Board, Shareholders and other stakeholders. The full guidelines can be found on the Company s website (www. presco-plc.com). The Board The Company is headed by a collegial Board. The Board consists of the Chairman, who has no executive responsibilities, seven non-executive Directors (five of whom are considered independent by the Board) and two executive Directors : the Managing Director and the Director of Operations. The primary responsibility of the Board is to ensure that Presco s business strategy is appropriate and implemented effectively. On appointment, non-executive Directors receive a comprehensive induction, including a site visit and meetings with senior management to help them to build up quickly a detailed understanding of the Company. Where appropriate, additional training is arranged by the Company and at the Company s expense. Independence Status of Directors Chief P.I.G. Onyeobi, JP Mr. Pierre Vandebeeck HRH (Dr.) O. Akenzua, JP Independent Engr. J.B. Erhuero, JP, mni Mr. J.J. Mansholt (to 30 March 2006) Mr. H.I.E. Omoragbon Independent Mr. Osa Osunde Independent 1 Chief O.F.J. Oyaide Independent Mr. Atedo N.A. Peterside OON (from 16 December 2005) Independent 2 Mr. Olayinka O. Sanni (to 16 December 2005) Independent 2 Ir. Helena Vandebeeck Mr. Vince McAleer (from 30 March 2006) Note 1. Mr. Osunde represents Fidelity Finance Ltd, which has a 5% shareholding in the Company. Note 2. Messrs Sanni and Peterside represent IBTC Ltd, which has a 7.9% shareholding in the Company. Details of each Director s experience can be found on the Company s website. Information about Directors remuneration is covered elsewhere in the Annual Report. Directors have no fixed term. However, one third of Directors retire annually by rotation and can present themselves for re-election. New Directors Mr Atedo N.A. Peterside OON, was appointed to the Board in December Mr Peterside, a highly experienced banker, is the founder and Chief Executive Officer of IBTC Ltd. He is an economist by training, having a BSc in economics from The City University, London and an MSc in economics from The London School of Economics & Political Science. As Chairman of the Committee on Corporate Governance of Public Companies in Nigeria he was responsible for the Code of Best Practices for Public Companies in Nigeria, published in He is a Director of the Nigerian Economic Summit Group and a member of the Private Sector Advisory Board of the World Bank. Mr. Vince McAleer was appointed to the Board in March He joined the Company in October 2003 as Director of Operations. He had been involved in large-scale tropical agriculture for over 20 years. Before joining Presco he held managerial positions in oil palm plantations in Papua New Guinea and Indonesia. He is British

8 Corporate Governance Report (cont d) Corporate Governance Report (cont d) Board Meetings The Audit Committee met twice during the year, as follows: The Board of Directors met four times during the year, as follows: Meeting date Main items of business Meeting date Main items of business 7 April 2005 Review and approve 2004 accounts and annual report. 14 July 2005 Review second quarter results. 27 October 2005 Review third quarter results and consider draft 2006 budget. 16 December 2005 Approve 2006 budget. The average attendance of all Directors in 2005 was 78%. Details of attendance at meetings are available for inspection at the Annual General Meeting. Conflicts of Interest All Directors and employees are expected to avoid direct or indirect conflicts of interest. Where a conflict of interest may arise in a matter to be decided by the Board of Directors a Director is expected to inform the Board and to abstain from voting. Transactions between the Company and Directors, where they arise, should take place at arm s length. There have been no transactions and other contractual relationships between the Company and its Board members and executive managers, which are not covered by its legal provisions on conflicts of interest. The Company carries out transactions with its related companies (members of the Siat Group of Companies) on an arm s length basis. The terms and conditions of transactions are covered by an agreement between Siat and Presco. These transactions are for the purchase and supply of equipment materials and services. Transactions in Shares and Compliance with Directives on Market Abuse The use of inside or unpublished information about the Company in buying or selling of Presco shares is strictly forbidden. In order to comply with legislation on insider dealing and market manipulation (market abuse) Directors and executive management are expected to declare transactions on their own account in the shares or other financial instruments of the Company. Where significant, such transactions will be disclosed to the market. There were no such transactions in the year under review. 6 April 2005 Review and recommend for approval 2004 accounts and annual report. Review auditor s management letter and management s response. Review audit fee. Review internal audit work programme. 26 October 2005 Review and approve the audit planning memorandum. Review internal audit work programme. The average attendance of all Audit Committee members in 2005 was 100%. Details of attendance at meetings are available for inspection at the annual general meeting. There is currently no Board Remuneration Committee because the full Board reviews changes to the remuneration policy, including bonuses, for all employees as part of the annual budget review exercise. There is currently no Board Business Development Committee because the full Board reviews the longterm business plan annually. There is currently no Board Corporate/Public Relations Committee because the full Board regularly reviews and evaluates aspects of the social and business environment and duly guides Executive Management. Company Secretary All Directors have access to, and the services of, the Company Secretary and may take independent professional advice at Presco s expense. The Company Secretary acts as secretary to all Board committees. The Company Secretary is also responsible for facilitating the induction and professional development of Board members as well as ensuring good information flows within the Board, its Committees and between the Non-Executive Directors and senior management. During the year under review Mr Isaac Ona was appointed Company Secretary. Board Committees Executive Management Audit Committee Engr. G. Ojariafe (Chairman) Re-elected by Shareholders on 16 July HRH (Dr.) O. Akenzua, JP Director member. Hon. J. Amowie Shareholder elected member until 16 July Mr. J. Okpala Elected by Shareholders on 16 July Mr. H.I.E. Omoragbon Director member. Engr. M.O.T.O. Tobun Elected by Shareholders on 16 July Ir. Helena Vandebeeck Director member. Managing Director Director of Operations Director of Finance & Controls Commercial Director Director of Agricultural Services Technical Director Workshop Manager Relations Manager Internal Audit Manager Mr. P. Vandebeeck Mr. V. McAleer Mr. A. Ashurst Mr. B. Kumar Mr. M. Buabeng Mr. J-P. Stynen Mr. J. Cassidy Mr. A. Uwajeh Mr. P. Onalo Under the leadership of the Managing Director, Executive Management is responsible to the Board for the implementation of the strategy and policies approved by the Board, making and implementing operational decisions and running the Company. Non-executive Directors, using their knowledge and experience, challenge, monitor and approve the strategy and policies recommended by Executive Management

9 Corporate Governance Report (cont d) Report of the Auditors Environment, Health and Safety The Company conducts its affairs in a safe and environmentally sustainable manner. The Company promotes the health of its employees, contractors, customers and host communities. The Company complies with all applicable environmental, health and safety laws and regulations and aims to improve its performance in these areas. Environmental, health and safety matters are integrated into business decision-making and training is provided to ensure that stakeholders are aware of the requirements of the Company s Corporate Governance Guidelines. Major Contracts Between the Company and Third Parties Contract No for the supply of one 30 tph steam boiler Contract with Vynke nv, Harelbeke, Belgium There are no other major contracts. Shareholder Relations The Company is committed to maintaining good relations with all Shareholders through the annual report, annual general meeting, website and Presco News. All Shareholders are able to put questions to the Board at the Company s Annual General Meeting. Directors are available to talk on an informal basis to Shareholders after the Annual General Meeting. At least 21 working days notice of the Annual General Meeting is given to Shareholders. 30 March

10 Audit Committee s Report Statement of Accounting Policies AUDIT COMMITTEE S REPORT TO THE MEMBERS OF PRESCO PLC In accordance with the provision of Section 359(6) of the Companies and Allied Matters Act, CAP C20 LFN 2004, members of the Corporate Audit Committee of Presco Plc hereby report as follows: We have exercised our statutory functions under Section 359(6) of the Companies and Allied Matters Act, CAP C20 LFN 2004 and we acknowledge the co-operation of Management and Staff in the conduct of these responsibilities. The following are the significant accounting policies, which have been adopted by the Company in the preparation of its financial statements: (a) (b) Basis of Accounting The financial statements are prepared under the historical cost convention. Turnover Turnover represents the net value of goods and services sold to third parties during the year. We confirm that: (a) The accounting and reporting policies of the Company are consistent with legal requirements and agreed ethical practice. (b) The scope and planning of the external audit are in our opinion adequate. (c) The internal control system was in order. (d) The External Auditors Management Control Report was satisfactorily dealt with by Management. We deliberated with the External Auditors who confirmed that all necessary co-operation was received from Management and that they had issued a clean report. Engr. G. Ojariafe Chairman Audit Committee Dated this 29 th day of March Members of the Committee Engr. G. Ojariafe (Chairman) H.R.H. (Dr) O. Akenzua, JP Mr. J. Okpala Mr. H.I.E. Omoragbon Engr. M.O.T.O. Tobun Ir. Helena Vandebeeck The Company Secretary, Mr Isaac O. Ona, acted as Secretary to the Committee. (c) (d) (e) (f) (g) (h) (i) Fixed Assets Fixed assets are stated at cost less accumulated depreciation. Depreciation of fixed assets is on a straight-line basis at the following rates calculated to write off the cost of the assets concerned over their estimated useful lives: % % Leasehold land 4 Utilities 10 Plantation 5 Furniture, fittings and equipment 20 Processing equipment 10 Computer equipment 33 1/3 Buildings 5 Tankers and tractors 10 Vehicles and wheel tractors 25 Motor vehicles under finance lease 25 Heavy duty equipment 20 Finance Lease Fixed Assets The capital element of assets under finance lease is capitalised along with the Company s fixed assets. The obligation to the lessor is shown as part of borrowings, appropriately classified as to maturity. Stocks Stock is stated at the lower of cost and net realisable value. Apportionment of Estate Overheads to Development Estate overheads are apportioned between agricultural investments and agricultural operating costs on the basis of the ratio of expenditure on immature plantings to expenditure on mature plantings. Deferred Taxation Deferred taxation is provided by the liability method which represents taxation at the current rate of corporate income tax on the difference between the net book value of the fixed assets qualifying for allowances and their corresponding tax written-down values. Foreign Currencies Transactions in foreign currency are recorded in Naira at the rates of exchange ruling at the date of the transactions. Assets and liabilities existing in foreign currencies are recorded in Naira at the rates of exchange applicable at the balance sheet date. Gains or losses arising there from are recognised in the profit and loss account. Employees Gratuity and Pension Liabilities for gratuity are provided for junior, senior and management staff by setting up a provision within the Company. The provision represents the estimated value of the liability for the gratuity which is calculated annually by the Company as a percentage of the current pensionable payroll and is charged to the profit and loss account so as to spread the cost over the estimated service lives of employees. Deductions are made from employee s salaries in accordance with the Pension Reform Act In addition, the Company makes a contribution for each employee in accordance with the Act. The Company s contribution is charged to the profit and loss account

11 Profit and Loss Account Balance Sheet PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2005 Note N 000 N 000 Turnover 2 2,347,611 2,346,068 Cost of sales (1,061,915) (848,264) Gross profit 1,285,696 1,497,804 Other income 6,684 3,308 1,292,380 1,501,112 Administrative expenses (574,688) (550,637) Operating profit before interest and similar charges 717, ,475 Interest and similar charges 3 (264,072) (278,233) Profit on ordinary activities before taxation 4 453, ,242 Taxation 5 (112,938) (65,900) Profit on ordinary activities after taxation 340, ,342 Proposed dividend 6 (300,000) (250,000) Profit for the year retained 40, ,342 Profit brought forward 851, ,029 BALANCE SHEET AT 31 DECEMBER 2005 Note N 000 N 000 FIXED ASSETS 7 3,328,405 3,321,375 FINANCE LEASE ASSETS 7 16,847 11,299 3,345,252 3,332,674 CURRENT ASSETS Stocks 8 462, ,001 Debtors 9 347, ,296 Bank balances and cash 140,528 95, , ,998 CREDITORS: Amount falling due within one year: Trade creditors 23, Taxation 5 144,722 63,006 Bank overdrafts 3,229 32,888 Bank loans - 227,292 Dividend payable 6 300, ,000 Obligation under finance lease 10 4,253 2,843 Other creditors , , , ,346 NET CURRENT ASSETS 372,988 79,652 TOTAL ASSETS LESS CURRENT LIABILITIES 3,718,240 3,412,326 Deferred taxation 11 (21,796) (14,531) CREDITORS: Amount falling due after more than one year Obligation under finance lease 12 (2,835) (92) Bank loans 12 (1,300,000) (1,083,333) Profit carried forward 892, ,371 Earnings per share (kobo) Dividend per share (kobo) PROVISION FOR LIABILITIES AND CHARGES Gratuity and pension 13 (78,027) (39,470) NET ASSETS 2,315,582 2,274,900 CAPITAL AND RESERVES Share capital , ,000 Share premium 1,173,529 1,173,529 Profit and loss account 892, ,371 SHAREHOLDERS FUNDS 2,315,582 2,274,900 The financial statements on pages 19 to 32 were approved by the Board of Directors on 30 March 2006 and signed on its behalf by: Director Director The accounting policies on page 19 and the notes on pages 23 to 32 form part of these financial statements. The accounting policies on page 19 and the notes on pages 23 to 32 form part of these financial statements

12 Statement of Cash Flows Notes to the Accounts STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2005 Note N 000 N 000 Cash flows from operating activities Cash receipts from customers 2,359,931 2,331,751 Cash paid to suppliers and employees (1,168,067) (1,768,974) Tax paid (23,786) (21,010) Net cash provided by operating activities 15 1,168, ,767 Cash flows from investing activities Purchase of fixed assets 7 (350,603) (454,215) Proceeds on sales of assets 6,257 40,882 Net cash provided by investing activities (344,346) (413,333) Cash flows from financing activities Dividend paid (250,000) (250,000) Term loans repaid (10,625) (10,208) Finance lease 2,743 (1,651) Interest paid (264,072) (278,233) Net cash provided by financing activities (521,954) (540,092) Net increase/(decrease) in cash and cash equivalents 301,778 (411,658) Cash and cash equivalents at the beginning of the year (194,479) 217,179 Cash and cash equivalents at the end of the year ,299 (194,479) 1, The Company 1.1 Legal form Presco Plc was incorporated as a private limited liability company on 24 December 1991 as Presco Industries Limited, Presco Plc became a public limited liability company in February 2002 with shares listed on the Nigerian Stock Exchange. sa Siat nv of Belgium owns 60% of the Company s share capital while the balance of 40% is held by Nigerians. 1.2 Principal activities The principal activities of the Company include the development of oil palm plantations, palm oil milling, palm kernel processing and vegetable oil refining. 2. Turnover N 000 N 000 Local sales 2,347,611 2,346,068 Export sales - - The Company currently sells all its products in Nigeria. 3. Interest and similar charges 2,347,611 2,346,068 Interest on loans 258, ,699 Interest on overdrafts, etc. 5,165 7, Profit on ordinary activities before taxation This is stated after charging/(crediting) the following: 264, ,233 Depreciation 324, ,538 Amortisation of finance lease 5,625 1,778 Directors remuneration 8,522 6,875 Auditors remuneration 3,000 2,000 Loss/(profit) on disposal of fixed assets 1,389 (3,308) Interest on loans, overdraft, etc. 264, ,

13 Notes to the Accounts (cont d) Notes to the Accounts (cont d) 5. Taxation N 000 N 000 Income tax 90,000 39,049 Education tax 15,673 19,585 Deferred taxation (Note 11) 7,265 7,266 As per profit and loss account 112,938 65,900 Balance brought forward 63,006 25,382 Payment during the year (23,786) (21,010) Overprovision in prior year (171) - Deferred taxation (Note 11) (7,265) (7,266) As per balance sheet 144,722 63, Dividend At 1 January 250, ,000 Proposed for the year 300, , , ,000 Payments during the year (250,000) (250,000) At 31 December 300, ,000 Dividend proposed for the year is made up as follows: From profits of the pioneer period ended 31 December ,836 From profits of the post pioneer period 300, , , , Fixed assets N 000 Finance Lease (Cars) Total Work In Progress Sub total Furniture & Fittings Vehicles & Wheel Tractors Processing Equipment Utilities Heavy Duty Equipment Leasehold Land Plantation Buildings Cost: At 1 January 2,334 1,121, ,519 97,839 1,556, , , , ,309 4,536,015 18,659 4,554,674 Transfers - 151,286 28, , (341,708) - - Additions during the year - - 3, ,115 13, , ,453 12, ,603 Disposals (2,011) (5,677) - (8,479) (1,796) - (17,964) (2,935) (20,898) At 31 December 323 1,272, ,343 97,839 1,712, , , , ,304 4,856,505 27,874 4,884,379 Depreciation: At 1 January 1, , ,980 38, ,297 68, , ,480-1,214,640 7,359 1,222,000 On disposals (1,062) (2,082) - (7,704) (449) - (11,297) (1,957) (13,253) Charge for the year 46 61,703 20,572 17, ,750 15,073 21,093 34, ,756 5, ,380 At 31 December , ,552 56, ,965 83, , ,506-1,528,099 11,028 1,539,127 Net book value: 31 December , ,791 41,805 1,004,695 76,157 68,166 43, ,304 3,328,405 16,847 3,345, December , , ,539 58,847 1,001,035 91,230 64,920 66, ,309 3,321,375 11,299 3,332,

14 Notes to the Accounts (cont d) Notes to the Accounts (cont d) 8. Stocks N 000 N 000 Raw materials 35,641 1,124 Finished products 13,659 1,424 Engineering spares 294, ,397 Fertiliser, chemicals, etc. 107,798 35,489 Goods in transit 11,318 55, , , Debtors Trade debtors 47,457 53,093 Advances to suppliers 23, Staff loans and advances 14,721 2,747 Deposit and prepayments (Note 9.1) 119, ,164 Deposit for letters of credit 30,960 33,242 Amount due from related company 104,228 19,209 Sundry debtors 7,236 36, , ,296 N 000 N Obligation under finance lease At 1 January 2,935 7,937 Additions during the year 12,150 2,201 15,085 10,138 Discharged during the year (7,997) (7,203) At 31 December 7,088 2,935 Current liability (Note 10) 4,253 2,843 Long term liability (Note 12) 2, ,088 2,935 The obligation of the Company in respect of the finance leases of motor cars has been restricted to the capital amount of the finance lease funded by the bank. Deposits paid by the Company were excluded from the balance. 9.1 Deposit and prepayments Advance payment for machinery 82,054 82,054 Syndicated loan interest prepaid 34,609 38,748 Others 2, , , Deferred taxation At 1 January 14,531 7,265 Charge for the year (Note 5) 7,265 7,266 At 31 December 21,796 14, Other creditors Commercial paper 30,000 30,000 Amount due to related company 93 - Advances from customers 2,787 9,856 Accruals 27,917 29,525 Sundry creditors 41,430 40, , ,741 Obligation under finance lease (Note 10.1) 4,253 2, , ,584 The potential liability to deferred tax of N29,061,700 at 31 December 2003 is being amortised over a period of four years in accordance with the Nigerian Accounting Standards (SAS 19) which became operative on 1 January Three-quarters of this amount (N21,796,275) has been charged to the profit and loss account over the years, while the balance of N7,265,425 will be charged in the next year. 12. Creditors: Amounts falling due after more than oneyear: Obligation under finance lease (Note 10.1) 2, Bank loans (Note 12.1) 1,300,000 1,083,333 1,302,835 1,083,

15 Notes to the Accounts (cont d) Notes to the Accounts (cont d) N 000 N Bank loans At 1 January 1,310,625 1,320,833 Payments during the year (10,625) (10,208) 13.2 Provision for pension N 000 N 000 At 1 January 3,052 - Provision for the year 10,022 3,052 At 31 December 13,074 3,052 At 31 December 1,300,000 1,310,625 Payable within one year - (227,292) Long term portion (Note 12) 1,300,000 1,083, Term of loan To support its expansion programmes, in 2003 the Company entered into a loan agreement with a consortium of banks for a term loan of N1.3 billion at an interest rate of the higher of the maximum lending rate per annum or the average of the prime lending rates of all the lenders on the interest calculated date subject to any maximum lending rate as specified by the Central Bank of Nigeria. The loan initially had a six year term with a moratorium of eighteen months and repayment was to commence on 30 June However, the loan facility was rescheduled in the 2005 accounting year and, as a result, the loan and moratorium periods were extended by 18 months. The first quarterly capital repayment will now commence on 31 December 2006 while the final repayment of the loan will be on 30 June The loan is secured on a negative pledge on the assets of the company and a letter of comfort was issued by the holding company, sa Siat nv, Belgium. 13. Gratuity and pension Provision for gratuity (Note 13.1) 64,953 36,418 Provision for pension (Note 13.2) 13,074 3,052 78,027 39, Provision for gratuity At 1 January 36,418 40,289 Provision for the year 43,238 2,852 79,656 43,141 Payments during the year (14,703) (6,723) At 31 December 64,953 36,418 Provision for staff pensions has been made in the financial statements in accordance with the Pension Reform Act Share capital Authorised, issued and fully paid: 500,000,000 ordinary shares of 50 kobo each 250, , Net cash provided by operating activities Profit after taxation 340, ,342 Adjustments: Provision for deferred taxation 7,265 7,266 Interest paid 264, ,233 Depreciation of fixed assets 330, ,316 Loss on disposal of fixed assets 1,389 (3,308) Changes in assets and liabilities: (Increase)/decrease in trade debtors 5,636 (14,317) Increase in other debtors (86,874) (177,911) Increase in stocks (58,734) (91,207) Increase/(decrease) in trade creditors 22,800 (103) Decrease in other creditors (6,104) (190,213) Increase/(decrease) in gratuity and pension 38,558 (3,871) Increase/(decrease) in long term loans 227,292 (217,084) Increase in tax payable 81,716 37, ,396 (64,575) Net cash provided by operating activities 1,168, ,

16 Notes to the Accounts (cont d) Notes to the Accounts (cont d) 16. Cash and cash equivalents N 000 N 000 Bank balances and cash 140,528 95,701 Short term loans - (227,292) Bank overdrafts (3,229) (32,888) Commercial paper (30,000) (30,000) 17. Information regarding Directors and employees: 107,299 (194,479) 17.1 Directors Directors remuneration - Fees 6,393 6,575 - Others 2, ,522 6,875 Chairman 1,200 1,200 Highest paid Director 1,458 1,788 The number of Directors with gross emoluments within the bands stated were: N N Number Number 600, , , , , , ,110,000-1,120, ,450,000-1,460, ,780,000-1,790, Employees Average number of persons employed during the year: Management staff Senior staff Junior staff Aggregate payroll costs: N 000 N 000 Wages, salaries & allowances 139, ,516 Gratuity and pension costs 56,312 5, , ,420 The table below shows the salary bands and the number of the employees of the Company, other than employees who discharged their duties wholly or mainly outside Nigeria during the year. N N Number Number 70, , , , , , , , , , , , , , , , ,001-1,000, ,000,001-1,100, ,100,001-1,200, ,200,001-1,300, ,300,001-1,400, ,400,001-1,500, ,500,001-1,600, ,600,001-1,700, ,700,001-1,800, ,800,001-1,900, ,900,001-2,000, ,000,001-3,000,

17 Notes to the Accounts (cont d) Statement of Value Added 18. Contingent liabilities The Company is a defendant in various law suits which arose in the normal course of business. There were contingent liabilities at 31 December 2005 in respect of pending litigations estimated at N1,937,500 (2004 : nil). 19. Capital Commitments Capital expenditure authorised by the Directors, but not provided for in these financial statements was nil (2004 : N74,412,800). 20. Related party transactions Siat Group, Belgium Presco Plc is a subsidiary of sa Siat nv, Belgium, which has a 60% holding. During the year, the Company had significant transactions amounting to N269.7 million, which are in the nature of supply of personnel and spare parts. Ghana Oil Palm Development Company Limited Ghana Oil Palm Development Company Limited is a related company to Presco Plc. There were no material transactions between the two companies during the year. Siat Gabon Siat Gabon is a related company to Presco Plc. There were no material transactions between the two companies during the year. 21. Comparative figures Some comparative figures have been restated to reflect a more meaningful comparison. VALUE ADDED STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 N 000 % N 000 % Turnover - Local sales 2,347,611 2,346,068 - Export sales - - Other income 6,684 3,308 2,354,295 2,349,376 Bought-in materials and services - Imported (256,951) (388,928) - Local (853,394) (434,114) Value added 1,243, ,526, Applied as follows: To pay employees: - Salaries, wages and other benefits 195, , To pay providers of capital: - Interest on loans and overdrafts, etc. 264, , Dividend 300, , To pay government: - Income tax 90, , Education tax 15, ,585 2 To provide for replacement of assets: - Depreciation and amortisation 330, , To provide for the future: - Deferred taxation 7, , , , Retained profit 1,243, ,526, Value added represents the wealth created by the efforts of the Company and its employees. This statement shows the distribution of that wealth among employees, government, providers of capital and the amount retained for future creation of wealth

18 Five Year Financial Summary Graphic Illustrations FIVE YEAR FINANCIAL SUMMARY FOR THE YEAR ENDED 31 DECEMBER 2005 BALANCE SHEET N 000 N 000 N 000 N 000 N 000 ASSETS EMPLOYED Fixed assets 3,345,252 3,332,674 3,226,349 3,159,884 2,808,654 Net current assets/(liabilities) 372,988 79,652 41,506 (663,186) (713,599) Long term liabilities (1,402,658) (1,137,426) (1,349,297) (703,333) (930,000) Net tangible assets 2,315,582 2,274,900 1,918,558 1,793,365 1,165,055 FINANCED BY Called up share capital 250, , , , ,178 Share premium 1,173,529 1,173,529 1,173,529 1,173, ,637 Profit and loss account 892, , , , ,240 Shareholders funds 2,315,582 2,274,900 1,918,558 1,793,365 1,165,055 PROFIT AND LOSS ACCOUNT Turnover 2,347,611 2,346,068 2,128,304 1,369,364 1,236,626 Profit before taxation 453, , , , ,349 Taxation (112,938) (65,900) (32,647) 22,218 (8,085) Profit after taxation 340, , , , ,264 Dividend (300,000) (250,000) (250,000) (250,000) (170,178) Per share data Earnings per share (kobo) Dividend per share (kobo) Net assets per share (kobo) Earnings per share, dividend per share and net assets per share are based on the number of 50 kobo shares in issue at the end of the relevant years

19 Notes Proxy Form I/We* the undersigned, being a member/members of Presco Plc, RC , hereby appoint **.... or failing him / her. **... as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the company to be held on Thursday 13 July 2006 and at any adjournment thereof. Unless otherwise instructed, the proxy will vote or abstain from voting as he / she thinks fit. Dated this day of Signature.. NOTES 1. This form of proxy together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must reach the Company Secretary s office at Obaretin Estate, Km 22, Benin/Sapele Road, Ikpoba-Okha Local Government Area, PO Box 7061, Benin City, Edo State, not less than 48 hours before the time of the meeting. 2. Where the appointer is a corporation, this form may be under seal or under hand of an officer or attorney duly authorised. 3. This proxy will be used in the event of a poll being directed, or demanded. 4. In the case of joint holders the signature of any one of them will suffice, but the names of all joint holders must be shown. PROXY FORM 13 TH ANNUAL GENERAL MEETING THE PROXY WILL VOTE (OR ABSTAIN FROM VOTING) AS HE / SHE THINKS FIT IN RESPECT OF ANY OTHER BUSINESS PROPOSED AT THE MEETING OF PRESCO PLC, RC , (13TH ANNUAL GENERAL MEETING), TO BE HELD AT THE DURA CLUB, OBARETIN ESTATE, KM 22, BENIN / SAPELE ROAD, IKPOBA / OKHA LGA, EDO STATE ON THURSDAY 13 JULY 2006 AT P.M. I/We desire this proxy to be used in favour of or against the resolution as indicated alongside. Strike out whichever is not desired. RESOLUTION FOR AGAINST ORDINARY 1. To declare a dividend. 2. To elect and re-elect Directors. 3. To authorise Directors to fix the remuneration of the Auditors. 4. To elect members of the Audit Committee. Name of candidate Name of candidate Name of candidate Please indicate with X in the appropriate box how you wish your vote to be cast on the resolutions set out above. Unless otherwise instructed, the proxy will vote or abstain from voting at his/her discretion. Before posting the above form, please tear off this part and retain it for admission to the meeting ADMISSION CARD PRESCO PLC, RC Number of shares held Please admit the shareholder named on this form or his/her duly appointed proxy to the company s 13 th Annual General Meeting to be held at the Dura Club, Obaretin Estate, Km 22, Benin/Sapele Road, Ikpoba-Okha LGA, Edo State on Thursday 13 July 2006 at p.m. Name of Shareholder:* Signature: Name of proxy:** Signature: A Member (Shareholder) entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member. The proxy form has been prepared to enable you to exercise your right to vote. IMPORTANT Please insert your name in BLOCK CAPITALS on both the proxy form and admission card where marked *. If a proxy is attending on your behalf, please insert the name of the person, whether a member of the Company or not, who will attend the meeting and vote on your behalf where marked **