Annual Report & Accounts

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3 CONTENTS Pages INTRODUCTION a. Financial Highlights 3 b. Notice of Annual General Meeting 4 c. Corporate Profile 6-8 d. Directors and other Corporate Information 9-10 BUSINESS REVIEW a. Chairman's Statement b. The Board of Directors' Profile c. Report of the Directors FINANCIAL STATEMENTS a. Report of the Audit Committee 43 b. Report of the Independent Auditors 44 c. Statement of Financial Position 45 d. Income Statement 46 e. Statement of Other Comprehensive Income 47 f. Statement of Changes in Equity 48 g. Statement of Cash Flows 49 h. Index to Notes to the Financial Statements 50 i. Notes to the Financial Statements j. Value Added Statement 89 k. Five Year Financial Summary 90 SHAREHOLDERS' INFORMATION a. List of Key Distributors b. Unclaimed Dividends 94 c. Share Capital History 95 d. Proxy Form 96 e. Electronic Delivery Mandate Form 98 f. Notes 1

4 2016 INTRODUCTION Financial Highlights 3 Notice of Annual General Meeting 4 Corporate Profile 6-8 Directors and other Corporate Information

5 INTRODUCTION FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED 31 MARCH, 2016 Results in thousands of Naira % Increase/ (Decrease) Revenue 50,883,780 49,057,511 4 (Loss)/profit before taxation (2,869,342) 1,434,828 (300) (Loss)/profit after taxation (3,023,852) 1,120,267 (370) Total assets 76,046,576 67,943, Shareholders' fund 16,362,599 20,315,834 (19) Total liabilities 59,683,977 47,627, Issued and fully paid share capital 3,965,099 3,965,099 - Market Capitalisation at 31 March 11,578,089 23,790,593 (51) Per 50k share data kobo kobo kobo Earnings (38.13) (52) Proposed Dividend (5) Net assets (50) Stock Exchange Information Stock Exchange quotation at 31 March (in millions of Naira) (1.54) Number of Shares Issued (in millions) Market Capitalisation as at 31 March (in millions of Naira) 7,930 7,930-11,578 23,791 (51.33) 3

6 INTRODUCTION Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Seventh Annual General Meeting of Honeywell Flour Mills Plc will hold as follows: Date: Tuesday 20 September, 2016 Venue: Time: Civic Centre Ozumba Mbadiwe Street Victoria Island Lagos. 11a.m The following will be transacted at the meeting: Ordinary Business 1 To receive the Audited Financial Statements for the year ended 31 March, 2016, together with the Reports of the Directors, Independent Auditors and Audit Committee thereon. 2 To elect Directors. 3 To authorise the Directors to fix the Auditors remuneration. 4 To elect members of the Audit Committee. Proxy Any member of the company entitled to attend and vote at this meeting is also entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a member of the company. A proxy form is enclosed herewith. A proxy form must be completed and deposited at the office of the Company's Registrar, First Registrars and Investor Services Limited, 2 Abebe Village Road, Iganmu Lagos not later than 48 hours before the time fixed for the meeting. Audit Committee Any shareholder may nominate another shareholder as a member of the Audit Committee by giving notice in writing of such nomination to the Secretary of the Company at least 21 days before the Annual General Meeting. Right of Shareholders to Ask Questions Pursuant to Rule (c) of the Nigerian Stock Exchange s Rulebook 2015, please note that it is the right of every shareholder to ask questions not only at the meeting but also in writing prior to the meeting. We urge that such questions be submitted to the Company Secretariat not later than two weeks before the date of the meeting. BY ORDER OF THE BOARD Oluwayemisi Busari (Mrs.) Company Secretary FRC/2013/NBA/

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8 INTRODUCTION CORPORATE PROFILE COMPANY HISTORY oneywell Flour Mills Plc is a leading and highly successful indigenous Company in Nigeria with Ha mission to use enterprise to make our world better. To achieve this, the Company has positioned itself to lead its market in the production, distribution, sales and marketing of superior quality products. The Company started as Gateway Honeywell Flour Mills Limited on June 21, 1983 and was incorporated for the production of flour and livestock feeds from wheat, sorghum, maize and millet. A change in the Company's ownership structure led to a change in name to Honeywell Flour Mills Limited in June Following a successful IPO and subsequent listing on the Nigerian Stock Exchange in 2009, the Company became a publicly quoted Company as In April 1993, the Company entered into a contract-milling arrangement with a Flour Mill in Ibadan to produce wheat flour under the brand name of Honeywell Superfine Flour. The brand immediately gained wide acceptability in the flour market. The construction and installation of a 200-metric tonne wheat Mill commenced in 1995 at the Tin Can Island site, Apapa, Lagos. Following the successful completion of the 200-metric tonne per day Mill, commercial production and sale of Honeywell Superfine Flour commenced on July 13, The growing demand for the product made it expedient for the Company to plan for the expansion of its production capacity. Thus, in 1999, the Company embarked on a re-modeling of its wheat Mill to a 360-tonne per day Mill. This project was satisfactorily completed in May The installation and commissioning in November 2001 of a 250-metric tonne per day Mill increased the Company's installed capacity to 610 metric tonnes per day To remain a relevant and significant player in the flour milling industry, the Company took a giant leap with the installation of two 500-metric tonne per day Mills that were brought into production in July This additional capacity brought the total installed capacity of the Company to 1,610 metric tonnes per day. The Company also launched its brand of Semolina, Honeywell Semolina in June 2006, which has been a huge success since its introduction into the market, and is today adjudged by consumers as the leading Semolina brand. To further maximize its value chain, the Company launched its own brand of noodles in 2006 (initially as O! Noodles and later re-launched with better quality seasoning and packaging as Honeywell Noodles). Honeywell Pasta (Spaghetti and Macaroni) and Honeywell Wheat Meal were all launched in All the brands have been well accepted by consumers and have grown rapidly. The addition of another state-of-the-art twin Mills of 500-metric tonnes per day each in 2012 took the capacity to 2,610 metric-tonnes per day. This latest expansion project is about 1,200% overall increase in 6

9 INTRODUCTION CORPORATE PROFILE capacity since the commencement of business. Future capacity expansion has been planned for the Company's new Sagamu project (which is on a 63 hectare land space at the Sagamu interchange along the Lagos-Ibadan expressway). The Company's goal is to support women (who are its major targets) to provide nourishing meals for their families with its consumer goods and bakers with its industrial product (flour). The Company continues to invest in new product research and development to enable her produce more varieties of food products for its teeming consumers. Future expansion projects will focus on pasta, noodles and animal feed production. New products will be introduced to meet consumer demands as we make efforts to realise our corporate goals and objectives. OUR CORE VALUES Responsibility Integrity Courage Excellence Respect QUALITY POLICY The Company is committed to the continuous achievement of business successes by maintaining its quality leadership in Nigeria s flour milling industry. This is driven by a quality management system designed to ensure that customers are always provided with quality products and services, that meet internal standards set for the purpose. Such standards are in full compliance with all statutory and regulatory requirements, and are set out in writing for adherence by all staff at all times. Honeywell Flour Mills Plc was the first flour milling company in Nigeria to be ISO-certified. All processes and procedures across the organisation are in line with international best practices to ensure that it continuously produces good quality products for the complete satisfaction of its highly esteemed customers. The Company employs state-of-the-art facilities for the production of its various brands in conjunction with its technical partners Buhler AG of Switzerland (the world s leading milling equipment manufacturer) for the installation and maintenance of its mills as well as a partnership agreement with Muhlenchemie of Germany for the supply of additives. PRODUCTS Honeywell Flour Mills produces a wide range of superior quality products for the complete satisfaction of its highly esteemed customers/consumers. These products include: Flour (Honeywell Superfine Flour, Honeywell Brown Flour and Honeywell Composite Flour): used mainly for baking. The Flour brand was launched in July 1998 and has since carved a niche for itself through 7

10 CORPORATE PROFILE INTRODUCTION consistent superior quality improvement. The company provides efficient customer service, excellent training and support for bakers across Nigeria. Honeywell Semolina: This is a wheat-based ball food that is easy to prepare, smooth to eat and enjoyed with any kind of soup. The brand has set new quality standards for semolina, which it has maintained since its introduction and this is evident in its continued increased demand and preference by consumers. The brand packaging is distinct and stands out on the shelf. Honeywell Wheat Meal: This was launched into the market in At that time, this category was largely underdeveloped and unpopular. The company has continued to invest in heavy marketing and sales support to develop and grow this category and to make it acceptable to all consumer segments. The brand goes well with any soup, is easy to prepare, hygienically packed and a healthier way to enjoy ball food. It is good for everyone irrespective of social status. The brand packaging is distinct and stands out on the shelf. Honeywell Pasta: made from the finest quality wheat semolina. The brand is well accepted by consumers for its excellent quality and it comes in very attractive packaging which stands it out on the shelf. Honeywell Noodles: This is made from fine quality flour and comes in three different variants; Chicken, Spicy Chicken and Onion Chicken. Honeywell Noodles are a consumer delight. The brand packaging is distinct and stands out on the shelf. In line with NAFDAC and SON requirements, all our brands are fortified with vitamin A and other essential minerals that are good for the body. All our brands are rated among the top three in their different categories with respect to market share, top-ofmind awareness and consumer usage. CORPORATE SOCIAL RESPONSIBILITY Honeywell Flour Mills Plc is a socially responsible Company. It engages in projects that aim at alleviating poverty, aiding learning and helping the less privileged. The Company is also the only Flour Milling Company in Nigeria that provides formal training for bakers. Most bakers in Nigeria have not had any formal training in baking as the skill is acquired more through the apprenticeship model. However, the Company has since set up a training school for bakers in furtherance of its belief that baking is both a science and an art that cannot be fully mastered through apprenticeship alone but through some formal training. 8

11 INTRODUCTION DIRECTORS AND OTHER CORPORATE INFORMATION Board of Directors Dr. Oba Otudeko, D.Sc. (Hon) CFR - Chairman Mr. Olanrewaju Bamidele Jaiyeola - Managing Director Lt. General Garba Duba (Rtd) Mr. Obafemi Otudeko Mr. Akinsoji Akintayo Mr. Theophilus Oluranti Sokunbi Dr. Nino Albert Ozara - Executive Director Mr. Rotimi Gbenga D. Fadipe - Executive Director Mr. Benson Osaretin Evbuomwan - Executive Director Mrs. Oluseye Sandey - Executive Director (with effect from 15 December, 2015) Mr. Alan Palmer (British) Dr. Teddy Ngu (Cameroonian) Mr. Andrew Smith-Maxwell (British) Mrs. Wonuola Adetayo Dr. Raymond Zoukpo (Ivorian) Secretary Mrs. Oluwayemisi Busari Tel: , Operational Offices (a) Apapa Factory 2nd Gate By-Pass Tin Can Island Port Apapa, Lagos. Website: hfml@honeywellflour.com (b) Ikeja Factory Plot YABB, Mobolaji Johnson Avenue Alausa, Ikeja, Lagos. 9

12 INTRODUCTION Registrars First Registrars and Investor Services Limited 2, Abebe Village Road, Iganmu, Lagos. Registered Office SW8/1185 Sanda Street Molete, Ibadan, Oyo. Bankers Access Bank Plc Diamond Bank Plc Ecobank Nigeria Plc Fidelity Bank Plc First Bank of Nigeria Limited Guaranty Trust Bank Plc Keystone Bank Limited Skye Bank Plc Stanbic IBTC Bank Plc Standard Chartered Bank Nigeria Limited Union Bank of Nigeria Plc United Bank for Africa Plc Zenith Bank Plc Independent Auditors BBC PROFESSIONALS (Chartered Accountants) 24, Ilupeju By-Pass Ilupeju, Lagos. 10

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14 2016 BUSINESS REVIEW CHAIRMAN S STATEMENT BOARD OF DIRECTORS PROFILE THE REPORT OF THE DIRECTORS

15 INTRODUCTION BUSINESS REVIEW CHAIRMAN S STATEMENT e a r s h a r e h o l d e r s, Ddistinguished ladies and gentlemen, I welcome you th all to the 7 Annual General Meeting (AGM) of our dear Company, On behalf of the Board of Directors, I present to you the and Financial Statements of your company for the financial year ended st 31 March, As usual, these results are presented against the backdrop of the political, economic and business environments that we operated in at both global and local levels. Dr. Oba Otudeko, CFR Chairman 13

16 INTRODUCTION BUSINESS REVIEW CHAIRMAN S STATEMENT cont d GLOBAL ECONOMIC ENVIRONMENT Throughout 2015, global economic activity remained subdued, with slow growth rates even in hitherto fast growing Emerging Markets. The International Monetary Fund (IMF) had estimated global growth rate at 3.1%, much slower than the growth rate of 3.4% recorded in This pattern of global growth has been irregular but in a declining trend for the fifth consecutive year. Three key trends have most influenced the global economic outlook. Firstly, the sharp decline in the price of crude oil and other commodities; oil prices fell by over 50%, to under $30 per barrel before rebounding to now hover around $50 per barrel. Secondly, the continuing slowdown and rebalancing of economic activities in China away from investment in manufacturing towards consumption and services; and lastly, the measured tightening of monetary policy in the United States and Europe. According to the IMF, 2016 commenced on a bright note with global output performing better than expected in the first half of the year, however the outlook for the second half of the year is dampening, following the unexpected exit vote of the United Kingdom from the European Union (EU). This impending pull out from the EU economic bloc has negatively affected investor confidence and contributed to a perception of increases in risk and uncertainty across global markets. NIGERIA ECONOMIC ENVIRONMENT Unpredictability is a major disincentive to investment and is the one factor that most businesses seek to avoid or mitigate. Over the last year, the economic environment in Nigeria has been volatile and at a macro-level, most indices have trended in the negative direction. The Nigerian economy grew at a rate of only 2.84% in 2015, well below the earlier growth forecast of 5.54%. Specifically, growth slowed in the last two quarters of 2015 and was closely linked to the sharp decline in crude oil prices which badly affected oil dependent economies like ours. The fall in crude oil prices consequently led to a shortage of foreign exchange for the Nigerian Government and although the official Central Bank of Nigeria (CBN)/Interbank exchange rate remained at N197-N199/US$, the apex bank was unable to meet demands and so began rationing supply to corporate organisations and individuals by mid This led to a widening gap between the official and parallel market rates with the latter hitting N340/US$ by the end of March Most users of forex had to turn to the parallel market for supply, leading to a situation where manufacturers and importers of goods had to increasingly price their products against parallel market rates. These series of negative factors led to increased uncertainty, rising cost pressures and mounting job losses in the Nigerian economy. According to the National Bureau of Statistics (NBS), the national inflation rate rose to 11.8% in March 2016 which, at that time, was the highest inflation rate since December of At the time of writing this report, this has risen further to 16.5%. Money supply was further tightened in March 2016 when the CBN raised the Monetary Policy Rate (MPR) by 100 basis points to 12% from 11%. Cash Reserve Ratio (CRR) on private funds held by the banks was also adjusted to 22.5% from 20%, effectively mopping up liquidity in the financial system. It is against this backdrop that your Company operated in the last financial year. OPERATING ENVIRONMENT Consumer spending progressively dropped throughout the operating period under review. Prices of most consumer goods rose sharply in response to higher input and transportation costs. This translated into intense price competition within the flour milling industry as players sought to retain market share in the midst of reduction in demands. HFMP was unable to achieve full capacity utilization due to several challenges such as the 14

17 INTRODUCTION BUSINESS REVIEW debilitating Apapa traffic gridlock in the first half of the year, and then an acute shortage of foreign exchange which severely affected our ability to maintain a steady supply of wheat and other raw materials. Lately, the erratic supply of gas and increased diesel prices has added further pressure to our business. On a positive note the cost of wheat from world markets reduced steadily in Dollar terms during the year but the supply of locally available raw materials came at constantly higher costs. Investment in Sales and Retail Distribution After an in depth strategic review and in the face of all these constraints, we embarked on a number of strategic initiatives to drive top line growth and contain costs. To drive sales, we took a novel approach to our Go-to-Market strategy by splitting our sales organisation into two distinct teams: Business-to-Consumer (B2C) and Business-to-Business (B2B). The new B2C Team focuses on selling our Semolina, Whole Wheat Meal, Spaghetti, Macaroni and Instant Noodles brands while the B2B Team focuses on selling our bread and pastry flour brands to key distributors and large corporate bakers and confectioneries. We also made further investments in deepening our retail strategy and getting closer to the final consumers of our brands. We deliberately fostered closer relationships with our key distributors and the fast increasing modern trade outlets in Nigeria and also ran regular consumer promotions to build loyalty. To penetrate further into the last mile of retail, we increased our fleet of redistribution vans to distribute our products to more supermarkets, grocery stores and neighbourhood convenience stores to ensure that our brands were fully available at all consumer points of purchase. Cost Control We embarked on several strategic projects to reduce our costs. One of the most important steps we took was to begin the process of developing local sources for our key raw material, wheat. To this end, we led other stakeholders in the Flour Millers Association of Nigeria to partner with the Federal Ministry of Agriculture, Wheat Farmers Association of Nigeria and the Lake Chad Basin Research Institute in the farming of wheat, CHAIRMAN S STATEMENT cont d locally, to meet some of our requirements and reduce the huge import burden of sourcing for limited available foreign exchange. We also commenced several projects to optimize our cost and entrench continuous improvement and innovation across the business, especially in our manufacturing and supply chain operations. Human Capital We continued to strengthen our talent pipeline and enhance the capacity of our personnel through various talent management programmes and the development of a world-class organizational structure. Towards achieving this, some senior positions were filled through external appointments. A new National Sales Manager was recruited to head our Business-to-Consumer team. Recruitment into other identified roles in the newly restructured Sales Organization will be completed within the new financial year. A new Consumer Marketing Manager was also recruited to handle our B2C brands while a new Senior Manager, Continuous Improvement also joined the business to improve efficiencies in all aspects of our manufacturing and operational activities ahead of the Company's anticipated growth and future expansion. RESULTS FOR THE YEAR Our revenue grew by 4% to N50.88 billion. However, the combined effects of lower disposable income of our consumers and progressive devaluation of the Naira induced a significant foreign exchange loss which impacted on cost of sales and consequently eroded profits. As a result, the Company recorded a loss for the first time in its 20-year history, amounting to N2.87 billion before taxes. Dear shareholders, the Board and Management Team of the Company are determined to do our best to prevent a reoccurrence of this unanticipated dip in our bottom-line numbers and steer the Company back to profitability. Total Assets rose by 12% from billion st reported in 2015 to billion as at 31 March, Asset growth in the review period was largely driven by our on-going capacity expansion projects. 15

18 INTRODUCTION BUSINESS REVIEW OUTLOOK The 2016 macro-economic forecast for Nigeria carries a pessimistic and uncertain outlook, with the IMF projecting negative real GDP growth of (1.8%) and having already entered a recession following two quarters of negative growth by the first half of However, we are focused on implementing strategies that will help us remain on the growth path and a return to profitability. Completion of New Pasta Plant By the end of the current financial year, we expect to complete the development of our stateof-the-art pasta factory at the Honeywell Foods and Agro-allied Complex in Sagamu, Ogun State. This new factory will increase our pasta production capacity by over 100% and is versatile enough to produce innovative pasta types for the delight of our consumers. Backward Integration We are working with local and international agricultural development organisations including FIIRO (Federal Institute of Industrial Research, Oshodi), ICRISAT (International Crop Research Institute for Semi-Arid Tropics), GAIN (Global Alliance for Improved Nutrition), Oxfam and USAID MARKETS (United States Agency for International Development) to develop out-grower schemes with local farmers in Nigeria to explore the use of local grains in flour production. We are committed to ensuring that we produce affordable and nutritious foods for Nigerians and to increase raw material purchases from sustainable local sources. BOARD APPOINTMENTS I am pleased to announce the appointment of Mrs. Oluseye Efunyemi Sandey to the Board of Directors of our Company. Mrs. Oluseye Sandey joined Honeywell Flour Mills Plc. as Finance & IT Director in September Her core strengths are in the areas of finance, accounting, planning, budgeting and reporting, taxation, organisation design and process optimization and risk compliance. CHAIRMAN S STATEMENT cont d Mrs. Sandey brings over 30 years of corporate experience, most of it in consumer goods to the table. We are confident that her experience will further enhance the Boards' ability to lead the Company and guide the Management team in the achievement of the Company's vision to become Africa's foremost food company with a portfolio of leading brands preferred by consumers. RETIREMENT BY ROTATION In line with the Company's Articles of Association, the following Directors namely Mr. Obafemi Otudeko, Mr. Olanrewaju Jaiyeola, Mr. Benson Evbuomwan, Mr. Rotimi Fadipe and Mr. Akinsoji Akintayo retire by rotation at this Annual General Meeting and being eligible, offer themselves for re-election. APPRECIATION Distinguished Shareholders, I cannot conclude without reiterating, on behalf of the Board, our profound appreciation for your unwavering support even at this very difficult time. Your continued confidence in the ability of the Board, Management and the entire members of staff to propel your Company to the path of sustainable profitability will continue to drive us towards delivering superior performance in the future. I would also like to thank our Consumers, Distributors, Suppliers, Staff and other stakeholders for their unalloyed support, collaboration and partnership. Once again I thank you all for your attendance and look forward to your active participation and valuable contributions, as usual, to the activities of the day. Thank you and God bless you all. Dr. Oba Otudeko CFR Chairman of the Board 16

19 BOARD of DIRECTORS cont d Dr. Oba Otudeko, D.SC. (Hon.) CFR Chairman Mr. Olanrewaju Jaiyeola Managing Director Lt. General Garba Duba (Rtd.) Non-Executive Director Mr. Alan Palmer Non-Executive Director Mr. Obafemi Otudeko Non-Executive Director Dr. Nino Albert Ozara Executive Director, Manufacturing Dr. Teddy Ngu Non-Executive Director 17

20 BOARD of DIRECTORS cont d Mr. Akinsoji Akintayo Non-Executive Director Mr. Theophilus Oluranti Sokunbi Non-Executive Director Mrs. Wonuola Adetayo Non-Executive Director Mr. Rotimi Gbenga Fadipe Executive Director, Supply Chain Mr. Benson Evbuomwan Executive Director, Marketing Dr. Raymond Zoukpo Non-Executive Director Mr. Andrew Smith-Maxwell Non-Executive Director Mrs. Oluseye Sandey Executive Director, Finance & IT 18

21 2016 INTRODUCTION of BOARD DIRECTORS cont d He was formerly the Commercial Director at the Company s Ikeja Factory. He has been in the service of the Company for over 20 years. His career and business management experience in the Company spans finance, sales management and manufacturing management. Mr. Alan Palmer Dr. Nino Albert Ozara joined Honeywell Flour Mills Plc in 1998 from Federal University of Technology, Owerri where he had risen to the position of Head of Crop Production Department. He holds a First Class Degree in Soil Science from the University of Ibadan, and a Doctorate Degree also in Soil Science from the Cranfield Institute of Technology, United Kingdom. He subsequently had his professional flour milling training at the Swiss Milling School, St. Gallen, Switzerland and the Buhler Training Centre Uzwil also in Switzerland. He currently serves as Executive Director, Manufacturing. He is also a Director of First Bank of Nigeria Limited and was formally the Second Vice President of the Nigerian Gas Association. Dr. Teddy Ngu 19

22 2016 INTRODUCTION of BOARD DIRECTORS cont d Wonuola Adetayo (Mrs) A graduate of Chemistry from the University of Ibadan, Nigeria, he obtained a Post Graduate Certificate in Management (PGCM) from University of Derby, U.K He has attended several other management courses both locally and internationally some of which include Senior Management Development programmes at Ashridge Management College and Total Quality management Courses from the Lagos Business School. Dr. Raymond Zoukpo Benson holds a Bachelors degree in Pharmacy from University of Benin and is a member of the Advertising Practitioners Council of Nigeria (APCON). Mrs Oluseye Sandey Executive Director, Finance & IT Mrs. Oluseye Sandey holds a Bsc. Degree from Aston University, UK and MBA from Heriot-Watt University, Edinburgh, UK. She is a Fellow of the Institute of Chartered Accountants of Nigeria. She started her career in 1988 with Akintola Williams Deloitte & Co. In June 1994, she joined Coca-Cola Nigeria Limited a fully owned subsidiary of The Coca-Cola Company as Budget Manager and rose to become the Finance Operations Director for Africa responsible for providing Financial Services to all Coca-Cola Business Units in Africa, Middle East and Pakistan. She held this position until August 2014 when she returned to Nigeria after 20 years of service with Coca-Cola. She brings to the Board over 30 years of experience in auditing, budgeting and reporting, business development and taxation. Her key focus areas include Strategy, Organization Design and Process, Planning, Business Partnership, Risk Compliance and People Development. Prior to her appointment to the Board on December 15, 2015, Oluseye had joined Honeywell Flour Mills Plc as Finance & IT Director in September 2015 and has responsibility for managing the Finance and IT teams. 20 Andrew Smith-Maxwell

23 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 The Directors have the pleasure in submitting to members their annual report together with the audited financial statements for the year ended 31 March, PRINCIPAL ACTIVITIES (HFM Plc.) was initially registered as GATEWAY HONEYWELL FLOUR MILLS LIMITED on 21 June, A change in the company's ownership structure led to a change of the name to HONEYWELL FLOUR MILLS LIMITED in June The company was converted to a Public Liability Company in Its shares were listed on the Nigerian Stock Exchange (NSE) in The Company is principally involved in the manufacturing and marketing of wheat based products such as flour, semolina, whole wheat meal, noodles and pasta. RESULTS FOR THE YEAR In thousands of Naira Revenue 50,883,780 49,057,511 (Loss)/Profit before taxation (2,869,342) 1,434,828 Taxation (154,510) (314,561) (Loss)/Profit after taxation (3,023,852) 1,120,267 DIVIDEND The Directors do not recommend the declaration of any dividend in view of the loss sustained during the year. PRODUCTS DISTRIBUTION The Company's products are distributed through many distributors across the country. CORPORATE GOVERNANCE The company is committed to the best practices and procedures in Corporate Governance. Its business is conducted in a fair, honest and transparent manner which conforms to the Code of Best Practices on Corporate Governance in Nigeria. Examples of the Company's compliance with these Corporate Governance requirements during the year under review are as follows: i. Board Composition The Board consists of a non-executive chairman, nine (9) non-executive Directors, and five (5) executive Directors, all possessing high levels of competence and expertise. They are professionals and entrepreneurs with vast business management experience and credible track records. The non-executive directors are independent of the management and are free from constraints which may materially affect their judgment as directors of the Company. ii. Role of the Board The Board has the responsibility of ensuring that the Company is properly managed and achieves its strategic objectives with the aim of creating sustainable long term value to the Shareholders. 21

24 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 iii. Record of Directors Attendance at Meetings Members of the Board of Directors hold periodic meetings to decide on policy matters with the aim of directing the affairs of the Company, reviewing its operations and finances and formulating growth strategies for the company. Board agenda and reports are provided ahead of meetings. Further to the provision of Section 258(2) of the Companies and Allied Matters Act, CAP C20 LFN 2004, the records of the Directors' attendance at Board meetings during the year under review are available at the Company's Corporate Head office for inspection. In line with Corporate Governance principles, details of attendance of the current Directors at the Board meetings during the year are as follows: Names of Directors No. of No. of Meetings held Meetings attended Dr. Oba Otudeko, D.Sc. (Hon.) CFR 4 4 Mr. Obafemi Otudeko 4 4 Mr. Olanrewaju Jaiyeola 4 4 Dr. Nino Albert Ozara 4 3 Lt. General Garba Duba (rtd) 4 3 Mr. Akinsoji Akintayo 4 4 Mr. Theophilus Oluranti Sokunbi 4 4 Mr. Rotimi Gbenga Fadipe 4 3 Mr. Benson Evbuomwan 4 4 Mrs. Oluseye Efunyemi Sandey 4 2 (with effect from 15 December, 2015) Mr. Alan Palmer 4 4 Dr. Teddy Ngu 4 4 Mr. Andrew Smith-Maxwell 4 4 Mrs. Wonuola Adetayo 4 4 Dr. Raymond Zoukpo 4 4 Board meetings were held on June 19, 2015, September 28, 2015, December 15, 2015 and March 8, iv. Board Changes Mrs Oluseye Sandey joined the Board on 15 December, 2015 as Executive Director, Finance & IT. She is seeking ratification of her appointment to the Board at the 7th Annual General Meeting of the Company. In line with the Company s Articles of Association, the following Directors namely, Mr. Obafemi Otudeko, Mr. Olanrewaju Jaiyeola, Mr. Benson Evbuomwan, Mr. Rotimi Fadipe and Mr. Akinsoji Akintayo shall retire by rotation at this Annual General Meeting and being eligible, offer themselves for re-election. v. Committees In conformity with the Code of Best Practice in Corporate Governance, the Company has in place the following Committees: a) Nominations Committee The Nominations Committee is empowered to bring to the board recommendations regarding the appointment of any Executive or Non-Executive Director. The Committee ensures that a review of Board candidates is undertaken in a disciplined and objective manner. Details of attendance at the Nominations Committee meetings during the year are as follows: Names of Members No. of No. of 1. Dr. Oba Otudeko, D.Sc. (Hon.) CFR Meetings held 2 Meetings attended 2 2. Lt. Gen. Garba Duba Mr. Obafemi Otudeko 2 2 Nominations Committee meetings were held on Tuesday 17 November, 2015 and Wednesday 2 December,

25 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 b) Business Development Committee The purpose of the Business Development Committee is to assist the Board in fulfilling its responsibilities in relation to assessing and managing the Company's business development strategies and activities. The Committee was formally inaugurated on 14 December, Details of attendance at the Business Development Committee meeting during the year are as follows: Names of Members No. of No. of Meetings held Meetings attended 1. Mr. Alan Palmer (Chairman) Mr. Olanrewaju Jaiyeola Dr. Nino Ozara Mr. Oluranti Sokunbi Mr. Benson Evbuomwan Mr. Rotimi Fadipe Mrs. Wonuola Adetayo Teddy Ngu 2 2 Business Development Committee meetings were held on May 26, 2015 and November 26, vi. Management The Executive Management comprises of the Executive Directors and Head of Departments of the Core Business Units of the Company. It meets on regular basis and is responsible for setting overall corporate targets, reviewing the Company s performance/operational issues and overseeing the affairs of the Company on a day-to-day basis. As at 31 March 2016, the Executive Management comprised of the following members:. Mr. Olanrewaju Bamidele Jaiyeola - Managing Director Dr. Albert Nino Ozara - Executive Director, Manufacturing Mr. Rotimi Gbenga Fadipe - Executive Director, Supply Chain Mr. Benson Evbuomwan - Executive Director, Marketing Mrs. Oluseye Sandey - Executive Director, Finance & IT Mr. Babatunde Adebayo - Human Resources Manager Mr. Oluseye Ogunwole - National Sales Manager (B2B) Mr. Narendra Nagarkar - National Sales Manager (B2C) Mrs. Oluwayemisi Busari - Company Secretary 23

26 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 vii. Directors Interest The direct and indirect interests of Directors in the Issued Share Capital of the Company as recorded in the Register of Directors Shareholdings and/or as notified by the Directors for the purposes of Sections 275 and 276 of the Companies and Allied Matters Act, CAP C20 LFN 2004 and the listing requirements of the Nigerian Stock Exchange is stated hereunder: At 31 March, 2016 At 19 June, 2015 Indirect Direct Indirect Direct Unit Holdings Unit Holdings Unit Holdings Unit Holdings Dr. Oba Otudeko, D.Sc. Hon. CFR* 1,247,264,003-1,247,264,003 - Mr. Obafemi Otudeko* 567,951, ,951,925 - Mr. Olanrewaju Bamidele Jaiyeola - 150, ,000 Dr. Nino Albert Ozara - 250, ,000 Lt. General Garba Duba (Rtd) - 4,554,030-4,554,030 Mr. Akinsoji Akintayo - 200, ,000 Mr. Oluranti Sokunbi - 208, ,000 Mr. Rotimi Gbenga Fadipe - 115, ,000 Mr. Benson Evbuomwan - 20,000-20,000 Mrs. Oluseye Sandey - 100, Mr. Alan Palmer - 75, Dr. Teddy Ngu - 100, Mr. Andrew Smith-Maxwell Mrs. Wonuola Adetayo - 50, Dr. Raymond Zoukpo * Dr. Oba Otudeko and Mr. Obafemi Otudeko have indirect holdings amounting to 1,247,264,003 and 567,951,925 respectively through Siloam Global Services Limited which is a 75% equity holder in the Company. viii. Directors Interest in Contracts None of the Directors have notified the Company for the purpose of Section 277 of the Companies and Allied Matters Act, CAP C20 LFN 2004 of any disclosable interest in contracts in which the Company was involved during the year ended 31 March, ix. Responsibilities of the Directors In accordance with the provisions of Sections 334 and 335 of the Companies and Allied Matters Act, CAP C20 LFN 2004 and Federal Reporting Council of Nigeria Act, 2011, the Directors of Honeywell Flour Mills Plc are responsible for the preparation of the financial statements which give a true and fair view of the state of affairs of the Company as at 31 March, 2016 and the results of its operations, cash flows and changes in equity for the year ended, in compliance with International Financial Reporting Standards (IFRS). 24

27 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 The responsibilities include, ensuring that: - appropriate internal controls are established to safeguard the assets of the Company and to prevent and detect fraud and other irregularities; - the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company and ensure that the financial statements comply with the requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004; - the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates, and that all applicable accounting standards have been followed; and - the financial statements are prepared on a going concern basis unless it is presumed that the Company will not continue in business. The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards (IFRS) and the requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004 and Financial Reporting Council of Nigeria Act, No. 6, The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of the financial performance during the year. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial statements, as well as adequate systems of internal control. Nothing has come to the attention of the Directors to indicate that the company will not remain a going concern for at least twelve months from the date of these financial statements. x. Performance Evaluation of the Board The Board has established a system to undertake a formal and rigorous evaluation of its own performance, that of its Committees, the Chairman and individual Directors. The evaluation system includes the criteria and key performance indicators and targets for the Board, its Committees and each individual Committee member. The Board engages the services of external consultants to facilitate the performance evaluation of the Board, its Committees and individual members. EMPLOYMENT AND EMPLOYEES Employment policy It is the policy of the Company that there should be no discrimination in considering applications for employment including those from physically challenged persons. However, there was no physically challenged person in the employment of the company during the year. 25

28 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 Training and development It is the Company's policy to equip all employees with the skills and knowledge required for the successful performance of their jobs. The Company sees the investment in its people as a major part of its strategic development and has maintained a consistent policy of training its staff, both locally and internationally to enhance their skills and competence. Health and welfare of employees The Company maintains a staff clinic with a full-time nurse and weekly attendance by a physician. It also offers free medical services through a health management services provider to all members of staff. The Company continuously strives to improve its operations to ensure a safe working environment. It also maintains a high standard of hygiene in all its premises through sanitation practices and regular fumigation exercises, as well as installation of pest and rodent control gadgets. Nutritionally balanced meals are provided in the Staff Canteen free for the Junior Staff and at highly subsidized rate for the Senior Staff. AUDIT COMMITTEE In compliance with section 359 (4) of the Companies and Allied Matters Act CAP C20 Laws o f t h e Federation of Nigeria 2004, members of the Audit Committee were elected at the Annual General Meeting held on 24 September, Members that served on the Committee during the year comprise: Mr. Adebayo Adeleke Shareholder Alhaji Lateef Ayodeji Shonubi Shareholder Mr. Gabriel Olagunju Shareholder (Up to June, 2015) Dr. Tunji Odebunmi Shareholder (with effect from 24 September, 2015) Lt. Gen. Garba Duba (Rtd) Mr. Akinsoji Akintayo Mr. Andrew Smith-Maxwell Director Director Director The Committee in the conduct of its affairs reviews the Company s overall risk management and control systems, financial reporting arrangements and standard of business conduct. Members of the Audit Committee have direct access to the Internal Audit Department and Independent Auditors. The statutory functions of the Committee are provided for in section 359(6) of the Companies and Allied Matters Act, Cap.C20, Laws of the Federation of Nigeria, 2004.The details of attendance at meetings of the Committee during the year are as follows: 26

29 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 No. of Meetings held No. of Meetings attended Mr. Adebayo Adeleke 4 4 Alhaji Lateef Ayodeji Shonubi 4 4 Mr. Gabriel Olagunju 4 - (Up to June, 2015) Dr. Tunji Odebunmi 4 2 (with effect from 24 September, 2015) Lt. Gen. Garba Duba (Rtd) 4 2 Mr. Akinsoji Akintayo 4 4 Mr. Andrew Smith-Maxwell 4 4 The Audit Committee meetings were held on June 18, 2015, September 21, 2015, December 14, 2015 and March 10, SECURITY TRADING POLICY In line with Section 14 of the Amendment to the Listing Rules of the Nigerian Stock Exchange, Honeywell Flour Mills Plc has in place a Security Trading Policy. During the financial year under review, the Directors and employees of the Company complied with the Nigerian Stock Exchange Rules relating to securities transactions and the provisions of the Honeywell Flour Mills Plc Policy on insider trading. COMPLAINTS MANAGEMENT POLICY Honeywell Flour Mills Plc has in place a Complaints Management Policy in compliance with the Investments and Securities Act (ISA) 2007 and in line with the Securities and Exchange Commission Rules relating to the Complaints Management Framework of the Nigerian Capital Market. During the financial year, all enquiries and complaints covered under the Policy were promptly resolved. WHISTLE BLOWING POLICY Under its whistle blowing mechanism, employees of Honeywell Flour Mills Plc and other stakeholders including third parties are encouraged to report anonymously or otherwise, any observed or suspected acts of fraud, corruption or other irregularities, via independent helplines by telephone or online without fear of reprisal or recrimination. The Company guarantees that the identity of the reporting individual or organisation is accorded utmost protection and the report timeously investigated and treated. This robust system has been embraced by all employees and stakeholders and it is producing good results. QUALITY POLICY The Company is committed to the continuos achievement of business success by maintaining its quality leadership in Nigeria s flour milling industry. This is driven by a quality management system designed to ensure that customers are always provided with high quality products and services that meet International Standards. Such standards are in full compliance with all statutory and regulatory requirements and are set out in writing for adherence by all staff at all times. 27

30 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 SHAREHOLDING ANALYSIS The shareholding structure of the company as at 31 March, 2016 is as stated below: Share range No % No % of holders of holders of holdings of holdings 1-1,000 10, ,054, ,001-5,000 13, ,884, ,001-10,000 2, ,610, ,001-50,000 2, ,037, , , ,828, , , ,742, ,001-1,000, ,819, ,000,001-5,000, ,359, ,000,001- Above ,496,860, , ,930,197, SUBSTANTIAL INTEREST IN SHARES According to the register of members, the following shareholders of the Company held more than 5 percent of the Issued Share Capital of the Company at 31 March, 2016: Number % Siloam Global Services Limited 5,921,363, First Bank of Nigeria Limited 400,967,

31 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 DONATIONS AND SPONSORSHIP The following donations and charitable gifts were made during the year: Lekki Conservative Centre 203,279 Odogbolu Community and Education Development 144,500 Youth Alive Community Basketball Camp 1,169,000 SOS Children Village Nigeria 150,000 Little Saints Orphanage Homes 150,000 Compassionate Orphanage Homes 100,000 Bethesda Orphanage Homes 100,000 Oyo State Economic Summit 1,000,000 Red Cross Annual Youth Leadership Training Camp 100,000 Vision Of The Child (VOTC) Project 740,000 Children s Day Programme 1,198,688 Down Syndrome Homes 100,000 Health Work Initiative 150,000 NYSC Programmes 4,772,685 Lagos State Park Children s Day Carnival 144,491 Fiesta of Flavour for Children 1,000,000 Trade Fair Kiddies Arena 342,922 Student Fortress Conference 142,209 N 11,707,774 29

32 BUSINESS REVIEW REPORT OF THE DIRECTORS FOR THE YEAR ENDED MARCH 31, 2016 PROPERTY, PLANT AND EQUIPMENT Movements in Property, Plant and Equipment during the year are shown in note 5 on page 68. In the opinion of the Directors, the market value of the Company's properties are not lower than the value shown in the financial statements. POST BALANCE SHEET EVENT There are no post-balance sheet events which could have had material effect on the financial position of the Company as at 31 March, 2016 and loss attributable to equity holders on that date. INDEPENDENT AUDITORS In accordance with section 357 (2) of the Companies and Allied Matters Act, CAP C20 LFN 2004, Messrs BBC Professionals [Chartered Accountants] have expressed their willingness to continue in office as Independent Auditors to the Company. A resolution will be passed at the Annual General Meeting to authorize the Directors to fix the remuneration of the auditors. Dated 20 June, 2016 By Order of the Board Oluwayemisi Busari (Mrs.) Company Secretary FRC/2013/NBA/

33 Your Choice High in Fibre Rich in Protein Good for Everyone Honeywell Wheat Meal...more than just a meal!

34 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL PARTNERS VISION OF THE CHILD Executive Director, Marketing, HFMP, Mr Benson Evbuomwan congratulates one of the Literary Award Winners. L-R Executive Governor of Lagos State, Mr Akinwumi Ambode, Deputy Governor of Lagos State, Mrs Oluranti Adebule, Executive Director, Logistics & Supply, HFMP, Mr Rotimi Fadipe. L-R Executive Governor of Lagos State, Mr Akinwumi Ambode, Executive Director, Marketing, HFMP, Mr Benson Evbuomwan, Executive Director, Logistics & Supply, HFMP, Deputy Governor of Lagos State, Mrs Oluranti Adebule, presenting a cheque to the 2nd place winner. Grand prize winner of Honeywell s Sisi Eko Kitchen Competition receiving the cash award. L-R Erelu of Lagos, Princess Abiola Dosunmu, Executive Director, Marketing, HFMP, Mr Benson Evbuomwan, Executive Director, Logistics & Supply, HFMP, Mr Rotimi Fadipe. 32

35 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL VISITS SCHOOLS FOR THE BLIND (BETHSEDA & PACELLI) (L-R) Executive Director, Marketing, Honeywell Flour Mills Plc, Mr Benson Evbuomwan presenting Honeywell products to representatives of the school. Trade and Marketing Manager, HFMP, Mr Dayo Adeniyi; Consumer Marketing Manager, HFMP, Mrs Esther Tontoye. (L-R) Consumer Insight Manager, HFMP, Mr Lanre Da Silva presenting company's products to Pacelli officials along with Manager, Corporate Marketing, HFMP, Mrs Ebele Oluwalana. The school's officials expressing their gratitude. 33

36 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL BAKING SCHOOL GRADUATION CEREMONY Baking School Facilitator, Mr Brega Fabusuyi (Center) in a group photograph with graduating students. One of the graduating students presenting the varieties of pastries made from Honeywell Superfine Flour to Executive Director, Supply Chain HFMP, Mr Rotimi Fadipe and Managing Director, HFMP, Mr Lanre Jaiyeola. The 2nd best graduating student, Mr Orukotan Jeremiah receiving an award from the Executive Director, Supply Chain, HFMP, Mr Rotimi Fadipe. 34

37 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL/FRSC SAFETY AWARENESS CAMPAIGN ( L - R ) 2 n d l e f t O j o t a s e c t o r c o m m a n d a n t, M r G K H a m z a t ; Executive Director Marketing, HFMP, Mr Benson Evbuomwan, in a group photograph with other HFMP and FRSC officials. Executive Director Marketing, HFMP, Mr Benson Evbuomwan, reaching out to motorists with educative fliers. An official of the FRSC addressing all attendees at the event. 35

38 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL VISITS ORPHANAGES ( LITTLE SAINTS, LAGOS STATE & SOS, IJEBU OWU, OGUN STATE) Executive Director Marketing, HFMP, Mr Benson Evbuomwan making a presentation of Honeywell products to the founder of Little Saints Orphanage, Mrs Dele George. (L-R) Trade Marketing & Sustainability Manager, HFMP, Mr Dayo Adeniyi; The founder Little Saints Orphanage, Mrs Dele George; Executive Director, Marketing, HFMP, Mr Benson Evbuomwan; Consumer marketing Manager, Mrs Esther Tontoye. ( L - R ) A s s i s t a n t Manager, Media & C o m m u n i c a t i o n s, HFMP, Mr Gbenga Akindele, Mrs Bola O g u n y i n k a, B r a n d Manager, Ball Foods, M r I n u s a - A h m a d Anthony, Family Based Care Co-ordinator and a staff of SOS orphanage, Ijebu Owu, Ogun State. 36

39 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL SUPPORTS YOUTH ALIVE BASKETBALL TOURNAMENT. Managing Director, Honeywell Flour Mills (HFMP) Plc, Mr Lanre Jaiyeola kicks off the competition in the presence of other HFMP officials and Event organizers. Managing Director, Honeywell Flour Mills (HFMP) Plc, Mr Lanre Jaiyeola making a presentation to the winning team. 37

40 CORPORATE SOCIAL RESPONSIBILITY HONEYWELL DONATES TO NIGERIAN ARMY (L-R) Executive Director, Marketing, HFMP, Mr Benson Evbuomwan and Director of Finance and IT, Mrs Oluseye Sandey making a donation to the Nigerian Army. Lt. Col Jocka of the Nigerian Army receiving the donation on behalf of the Nigerian Army. An array of Honeywell Products donated to the Nigerian Army. 38

41 CORPORATE SOCIAL RESPONSIBILITY HIGHLIGHTS OF THE 2015 ANNUAL GENERAL MEETING. L-R Mr Boniface Okezie, Ayo Ogundejo, Alhaji Monsuru, Mr T. O. Adegboye and other Shareholders casting their votes at the 2015 AGM. Mr Awosanya Adeshina and Mrs Bisi Adedigba indicating support for a motion. Mr Nona Awu sharing his thoughts at the AGM. 39

42 CORPORATE SOCIAL RESPONSIBILITY HIGHLIGHTS OF THE 2015 ANNUAL GENERAL MEETING. Cross section of Shareholders. Mrs Owolabi Abiola Aderemi, seconding a motion. Mr Femi Ogunyemi agreeing to a motion. 40

43

44 2016 FINANCIAL STATEMENTS Report of the Audit Committee 43 Report of the Independent Auditors 44 Statement of Financial Position 45 Income Statement 46 Statement of Other Comprehensive Income 47 Statement of Changes in Equity 48 Statement of Cash Flows 49 Index to Notes to the Financial Statements 50 Notes to the Financial Statements Value Added Statement 89 Five Year Financial Summary 90 42

45 FINANCIAL STATEMENTS AUDIT COMMITTEE REPORT TO MEMBERS OF HONEYWELL FLOUR MILLS PLC. FOR THE YEAR ENDED MARCH 31, 2016 In compliance with the provisions of Section 359(6) of the Companies and Allied Matters Act CAP C20 LFN 2004, we the members of the Audit Committee of Honeywell Flour Mills Plc received the Audited Financial Statements for the year ended 31 March, 2016 together with the Management Control Report from the external auditors and management response thereto at a duly convened meeting of the committee and hereby report as follows: We confirm that: (a) (b) We reviewed the scope and planning of the audit requirements; We reviewed the external auditors' Management Control Report together with Management Responses; and (c) We have ascertained that the accounting and reporting policies of the company for the year ended 31 March, 2016 are in accordance with legal requirements and agreed with ethical practices. In our opinion, the scope and planning of the audit for the year ended 31 March, 2016 were adequate and Management Responses to the auditors' findings were satisfactory. We confirm that the internal control system was consistently and effectively monitored through effective Internal Audit. The External Auditors confirm that they received full co-operation from the management during the course of the statutory audit. The Committee therefore recommended that the Audited Financial Statements for the year ended 31March, 2016 and the External Auditors' Report thereon, be presented for adoption at the Annual General Meeting. Dated 20 June, Mr. Adebayo Adeleke Chairman, Audit Committee FRC/2013/NIM/ Members of the Audit Committee Mr. Adebayo Adeleke - Chairman/Shareholder Alhaji Lateef Ayodeji Shonubi - Shareholder Dr. Tunji Odebunmi - Shareholder Lt. Gen. Garba Duba (Rtd) - Director Mr. Akinsoji Akintayo - Director Mr. Andrew Smith-Maxwell - Director 43

46 24, Ilupeju By-Pass, Ilupeju G.P.O. Box 3260 Lagos, Nigeria. Tel: (0) , bbc@bbccharter.com bbccharter@yahoo.com Website: REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF HONEYWELL FLOUR MILLS PLC We have audited the accompanying financial statements of on pages 15 to 50 which comprise the statement of financial position as at 31 March, 2016, the income statement and the statement of comprehensive income, statement of cash flows, statement of changes in equity, the summary of significant accounting policies and notes to the financial statements. DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Company's directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act, CAP C20 LFN This responsibility includes: designing, implementing and maintaining internal control relevant to the fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. AUDITORS' RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the financial statements give a true and fair view of the financial position of as at 31 March, 2016 and of its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards and the Companies and Allied Matters Act, CAP C20 LFN 2004 and the Financial Reporting Council Act No. 6, REPORT ON OTHER LEGAL REQUIREMENTS The Companies and Allied Matters Act requires that in carrying out our audit we consider and report to you on the following matters. We confirm that: (ii) in our opinion, proper books of account have been kept by the Company, so far as it appears from our examination of those books; and (iii) the Company's statement of financial position and statement of comprehensive income are in agreement with the books of account. Lagos, Nigeria 2016 James O. Obogwu FRC/2013/ICAN/ For: BBC PROFESSIONALS Chartered Accountants Partners: J.O.Obogwu E.U.Itodo A.M.Adetuyi G.C.Egwuenu BN: Other Offices in Nigeris: Abuja Akure Benin-City Ibadan Kaduna Prime An Association of Independent Accounting Firms 44

47 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED MARCH 31, 2016 Notes In thousands of Naira ASSETS Non-current assets Property, Plant and Equipment 5 53,757,796 49,282,429 Intangible Assets 6 31,131 36,846 Total Non-Current Assets 53,788,927 49,319,275 Current assets Inventories 7 5,586,084 12,546,468 Trade and other Current Receivables 8 1,169,430 2,187,332 Cash and Cash Equivalents 9 15,502,135 3,890,369 Total Current Assets 22,257,649 18,624,169 Total assets 76,046,576 67,943,444 LIABILITIES Current liabilities Trade and other Payables 10 3,117, ,490 Financial Liabilities 11 40,672,816 30,914,573 Current tax Liabilities , ,157 Total Current Liabilities 44,213,225 31,860,220 Non-current liabilities Financial Liabilities 11 10,617,246 11,214,819 Retirement Benefit Obligations 12 1,195, ,209 Deferred Income and Accruals 13 25,528 72,985 Deferred tax Liabilities ,632,078 3,517,377 Total Non-Current Liabilities 15,470,752 15,767,390 Total Liabilities 59,683,977 47,627,610 EQUITY Share Capital 19 3,965,099 3,965,099 Share Premium 6,462,041 6,462,041 Retained Earnings 5,935,459 9,888,694 Total Equity 16,362,599 20,315,834 Total liabilities and equity 76,046,576 67,943,444 The financial statements and notes on pages 45 to 87 were approved by the Board of Directors on 21 June, 2016 and signed on its behalf by: Dr. Oba Otudeko, D.Sc. Hon. CFR Olanrewaju Bamidele Jaiyeola Oluseye Efunyemi Sandey Chairman Managing Director/CEO Executive Director, Finance FRC/2013/ICAN/ FRC/2014/ICAN/ FRC/2016/ICAN/

48 FINANCIAL STATEMENTS INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2016 Notes In thousands of Naira Revenue 17 50,883,780 49,057,511 Cost of Sales (46,522,386) (41,553,977) Gross Profit 4,361,394 7,503,534 Other Income , ,804 Selling and Distribution Expenses (4,447,346) (3,695,450) Administrative Expenses (2,121,583) (1,856,363) Results from Operating Activities (2,049,565) 2,184,525 Finance Income 417, ,509 Finance Cost (1,237,548) (1,231,206) Net Finance (Cost)/Income (819,777) (749,697) (Loss)/Profit before Taxation (2,869,342) 1,434,828 Taxation 15.1 (154,510) (314,561) (Loss)/Profit for the Year (3,023,852) 1,120,267 Earnings per Share: Earnings per Share (kobo) (38.13) The notes on pages 51 to 87 form an integral part of these financial statements. 46

49 FINANCIAL STATEMENTS STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED MARCH 31, 2016 In thousands of Naira Notes (Loss)/Profit for the year recognized in the income statement (3,023,852) 1,120,267 Remeasurement of post-employment benefit obligation 12 (183,174) (61,547) Total comprehensive income (3,207,026) 1,058,720 Attributable to the owners of the Company (3,207,026) 1,058,720 Total comprehensive income for the year (3,207,026) 1,058,720 The notes on pages 51 to 87 form an integral part of these financial statements. 47

50 FINANCIAL STATEMENTS STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2016 Share Share Retained Total capital premium earnings equity In thousands of Naira At 1 April, ,965,099 6,462,041 9,888,694 20,315,834 Provision for additional tax liability - - (349,698) (349,698) Loss for the Year - - (3,023,852) (3,023,852) Dividend paid during the Year - - (396,510) (396,510) Other Comprehensive Income Actuarial Loss - - (183,174) (183,174) At 31 March, ,965,099 6,462,041 5,935,459 16,362,599 To 1 April, ,965,099 6,462,041 10,178,108 20,605,248 Profit for the Year - - 1,120,267 1,120,267 Dividend paid during the Year - - (1,348,134) (1,348,134) Other Comprehensive Income Actuarial Loss - - (61,547) (61,547) To 31 March, ,965,099 6,462,041 9,888,694 20,315,834 The notes on pages 51 to 87 form an integral part of these financial statements. 48

51 FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2016 In thousands of Naira Notes Cash Flows from Operating Activities Cash generated from operations 16 10,401,823 6,098,645 Retirement benefit paid 12 (172,157) (86,969) Tax paid 15.2 (98,025) (409,529) Net Cash Flows generated from Operating Activities 10,131,641 5,602,147 Cash Flows from Investing Activities Interest Received 417, ,509 Purchase of Intangible Assets 6 (4,383) (29,307) Purchase of Property, Plant and Equipment 5 (6,467,588) (15,202,652) Proceeds from Sales of Property, Plant and Equipment 7, Net Cash Flows from Investing Activities (6,046,484) (14,749,582) Cash Flows from Financing Activities Interest Payment (1,237,548) (1,231,206) Proceeds from Borrowings 18,328,626 7,431,762 Repayment of Borrowings (9,172,823) (2,386,403) Dividend Paid (396,510) (1,348,134) Cash Generated from Financing Activities 7,521,745 2,466,019 Net Increase/(Decrease) in Cash and Cash Equivalents 11,606,902 (6,681,416) Cash and Cash Equivalents at 1 April 3,889,387 10,570,802 Cash and Cash Equivalents at 31 March 9 15,496,289 3,889,387 The notes on pages 51 to 87 form an integral part of these financial statements. 49

52 FINANCIAL STATEMENTS INDEX TO NOTES TO THE FINANCIAL STATEMENTS Note Page Note Page 1 Reporting Entity 51 4 Risk Management 65 2 Basis of preparation 51 a. Credit Risk 65 a. Statement of compliance 51 b. Liquidity Risk 65 b. Basis of measurement 51 c. Market Risk 66 c. Functional and presentation currency 51 d. Operational Risk 66 d. Use of estimates and judgments 51 5 Property, plant and equipment Significant Accounting Policies 52 6 Intangible assets 70 a. Going concern 52 7 Inventories 70 b. Business combination 52 8 Trade and other current receivables c. Segment reporting 52 9 Cash and cash equivalent 72 d. Foreign currency translation Trade payables and other current liabilities 72 e. Property, plant and equipment Financial liabilities 73 f. Intangible assets: Retirement benefit obligations 74 (i). Computer software Deferred income and accruals 75 (ii). Amortization of intangible assets Profit before tax 75 g. Financial assets Taxation (i) Classification Statement of cash flows 78 (ii) Recognition and measurement Segment information (iii) Offsetting financial instruments Other income 80 (iv) Impairment of financial assets Share capital 80 (v) Impairment of non-financial assets Chairman and directors' emolument 80 h. Inventories Employee and related remuneration 81 i. Trade receivables Contingent liabilities 82 j. Research and development Loans and other transactions k. Cash, cash equivalents and bank overdrafts 59 favouring Directors 82 l. Borrowings Contraventions 82 m. Trade payables Comparative figures 82 n. Investments Earnings per share 82 o. Provisions 60 p. Tax: 61 (I). Current tax 61 (ii). Deferred tax 61 (iii).tax exposures 62 q. Employee benefits 62 (i). Defined benefit plan 62 (ii). Defined contribution scheme 63 (iii).short-term employee benefit 63 r. Revenue recognition: 63 (i). Sales of goods 63 (ii). Interest on income 64 s. Dividend distribution 64 t. Earnings per share 64 u. Share Capital Approval of financial statements Significant financial judgments New accounting standards issued but not yet adopted

53 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, REPORTING ENTITY Honeywell Flour Mills Plc was initially registered as Gateway Honeywell Flour Mills Limited on June 21, A change in the Company's ownership structure led to a change of name to Honeywell Flour Mills Limited in June, The Company was converted to a Public Liability Company in Its shares were listed on the Nigeria Stock Exchange (NSE) in As part of its vertical integration strategy, the Company acquired 100% ownership of Honeywell Superfine Foods Limited, manufacturers of pasta and noodles in Honeywell Flour Mills Plc is a Company domiciled in Nigeria. The Company is principally engaged in the manufacture and marketing of wheat-based products including flour, semolina, whole wheat meal, noodles and pasta. 2 BASIS OF PREPARATION (a) Statement of Compliance The Financial Statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) being Standards and Interpretations issued by the International Accounting Standards Board (IASB) in force as at 31 December, They have been prepared in line with IFRS accounting policies selected by the Company on transition to IFRS. (b) Basis of Measurement The Financial Statements have been prepared under the historical cost basis, except for items measured at fair value and the use of actuarial methods for estimating certain employee benefits. (c) Functional and Presentation Currency These financial statements are presented in the Nigerian Naira, which is the Company's functional currency. All financial information presented in Naira has been rounded to the nearest thousand. (d) Use of Estimates and Judgments The preparation of the Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected. 51

54 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes: - measurement of defined benefit obligations; and - provisions and contingencies. 3 SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing the opening IFRS statements of financial position at 1 April 2011 for the purposes of the transition to IFRS, unless otherwise indicated. (a) Going Concern The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company continues to adopt the going concern basis in preparing its financial statements. (b) Business Combination Business combinations involving entities under common control are outside the scope of IFRS 3. Management exercises its judgement to apply the pooling of interest method of accounting for business combination in accordance with IAS 8, The IAS 8 & 12 allows management to consider the most relevant conceptual framework in developing an accounting policy where IFRS has no specific requirements. Under a pooling of interests-type method, the acquirer accounts for the combination as follows: The assets and liabilities of the acquiree are recorded at book value not fair value (although adjustments should be recorded to achieve uniform accounting policies); No goodwill is recorded. The difference between the acquirer's cost of investment and the acquiree's equity is presented separately within Other Comprehensive Income Statement; Comparative amounts are restated as if the combination had taken place at the beginning of the earliest comparative period presented. (c) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. 52

55 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 The Company s business operating segments are identified by two factories located at Ikeja and Apapa. The Apapa factory manufactures flour, semolina, wheat meal and brown flour while the Ikeja factory manufactures pasta and noodles. (d) Foreign Currency Transactions Foreign currency transactions are translated into Naira using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured. 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 income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash equivalents are presented in the income statement within 'finance income or cost'. All other foreign exchange gains and losses are presented in the income statement within 'other gains / (losses) - net'. (e) Property, Plant and Equipment Land and building held for use in the production or supply of goods or services, or for administration purposes, are stated in the statement of financial position at deemed cost at the date of transition to IFRS less accumulated depreciation and any accumulated impairment losses. All other assets are stated at historical cost less accumulated depreciation and accumulated impairment losses. All other property, plant and equipment are stated at historical cost or valuation less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flows hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalized as part of the equipment. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of the replaced cost is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. 53

56 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 An item of Property, Plant and Equipment is derecognised on disposal or when no future economic benefits are expected from its use. Gains or losses on disposal or de-recognition of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment, and are recognized in income statement. Depreciation is provided on components that have homogenous useful lives by using the straight line method so as to depreciate the initial cost down to the residual value over the estimated useful lives. The useful lives are as follows: Buildings Tools, Furniture/Fittings and Equipment Vehicles Land 20 to 50 years 2 to 5 years 4 years Not depreciated Assets residual values and useful lives are reviewed and adjusted if appropriate at the end of each reporting date. Where an indication of impairment exists, an asset s carrying amount is written down immediately to its recoverable amount, if the asset s carrying amount is greater than its estimated recoverable amount. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the income statement for the period. (f) Intangible Assets (i) Computer Software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives. Costs associated with maintaining computer software programmes are recognized as expenses incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognized as intangible assets when the following criteria are met: 54

57 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 It is technically feasible to complete the software product and use or sell it; Management intends to complete the software product and use or sell it; There is an ability to use or sell the software product; It can be demonstrated how the software product will generate probable future economic benefits; Adequate technical, financial and other resources to complete the development and use or sell the software product are available; and The expenditure attributable to the software product during its development can be reliably measured. Directly attributable costs that are capitalized as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditure that do not meet these criteria are recognized as expenses incurred. Development costs previously recognized as expenses are not recognized as assets in subsequent periods. Computer software development costs recognized as assets are amortized over their estimated useful lives. (ii) Amortisation of intangible assets Intangible assets are amortized on a straight line basis in the income statement over their estimated useful lives, from the date that they are available for use. The estimated useful life of computer software for the current and comparative years is five (5) years. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted for, if appropriate. (g) Financial Assets (i) Classification The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. - Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. 55

58 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. - Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Company's loans and receivables comprise of trade and other receivables and cash and cash equivalents in the financial statement. - Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the right to receive cash flows from the investments has expired or has been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are substantially carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the income statement within other (losses) / gains - not in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of other income when the Company's right to receive payments is established. 56

59 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in other comprehensive income. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement as 'gains and losses from investment securities'. Interest on available-for-sale securities calculated using the effective interest method is recognized in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognized in the income statement as part of other income when the Company's right to receive payments is established. (iii) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. (iv) Impairment of financial assets The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flow of the financial asset or group of financial assets that can be reliably estimated. The criteria the company uses to determine that there is objective evidence of an impairment loss include: significant financial difficulty of the issuer or obligor; a breach of contract, such as a default or delinquency in interest or principal payments; the Company, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; it becomes probable that the borrower will enter bankruptcy or other financial reorganization; the disappearance of an active market for that financial asset because of financial difficulties; or observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio. 57

60 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 adverse changes in the payment status of borrowers in the portfolio; and national or local economic conditions that correlates on the assets in the portfolio. The Company first assesses whether objective evidence of impairment exists. For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flow (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As is practical and expedient, the company may measure impairment on the basis of an instrument's fair value using an observable market price. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement. (v) Impairment of non - financial assets Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready for use - are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed 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 carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are tested at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 58

61 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 (h) Inventories Inventories are stated at the lower of cost and estimated net realisable value. Costs comprise direct materials costs and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Spare parts and servicing equipment are usually carried as inventory and recognized in profit or loss as consumed. However, major spare parts and stand-by equipment qualify as property, plant and equipment when the Company expects to use them during more than one period. Similarly, if the spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment. Such classified spares are depreciated as property, plant and equipment over the useful life on a straight line basis. (i) (j) Trade Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less provision for impairment. The collectability of trade receivables is reviewed on an ongoing basis. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due, according to the original terms of the receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows. The amount of the provision is recognised in the income statement. Research and Development Research and development expenditure is charged against profits in the year in which it is incurred, unless it meets the criteria for capitalisation set out in IAS 38 'Intangible assets'. (k) Cash, Cash Equivalents and Bank Overdrafts Cash, cash equivalents and bank overdrafts include cash at bank and in hand plus short-term deposits less overdrafts. Short-term deposits have a maturity of less than three months from the date of acquisition. Bank overdrafts are repayable on demand and form an integral part of the Company's cash management. 59

62 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 (l) Borrowings Interest- bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis through the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arise. (m) Trade Payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payments are due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. (n) Investments Investments are classified as either held-to-maturity, held-for-trading, loans and receivables or available-for-sale. Held-to-maturity investments and loans and receivables are measured at amortized cost. Held-for-trading and available-for-sale investments are measured at fair value. Where securities are held-for-trading purposes, gains and losses arising from changes in fair value are included in the income statement for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the income statements for the period. (o) Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation and the amount has been reliably estimated. Provisions for restructuring costs are recognised when the Company has a detailed formal plan for the restructuring that has been communicated to affected parties. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be acquired to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 60

63 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 (p) Tax Income tax expense represents the sum of current tax expense and deferred tax expense. Current tax and deferred tax are recognised in income statement except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. (i) Current Tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates statutorily enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The Company is subject to the following types of current income tax: (ii) Deferred Tax Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: Taxable temporary differences arising on the initi al recognition of goodwill. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects at the end of the reporting period to recover or settle the carrying amounts of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted. Companies Income Tax - This relates to tax on revenue and profit generated by the Company during the year, to be taxed under the Companies Income Tax Act Cap C21, LFN 2004 as amended to date. Tertiary Education Tax - Tertiary Education tax is based on assessable income of the Company and is governed by the Tertiary Education Trust Fund (Establishment) Act LFN Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. 61

64 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised. (iii) Tax Exposures In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax postions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expenses in the period that such determination is made. (q) Employee benefits (i) Defined benefit plan The defined benefit plan defines an amount of gratuity the employee will receive on retirement, dependent on date of employment, year of service and compensation. The defined benefit plan is being accounted for using the projected unit method that considers the rate of inflation, the degree of salary increases of employees, the retirement age among other factors. The liability recognised in the balance sheet in respect of defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflow using market rates on Government Bonds. Actuarial gains and losses arising from experienced adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognised immediately in income statement. 62

65 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 (ii) Defined contribution scheme The Company operates a defined contribution plan which is funded by contributions from the Company and the employees. The Company's contribution is recognised as employee benefit expenses and charged to the income statement. The contributions of both the Company and the employees are paid on a monthly basis to a pension fund administrator. The Company has no legal or constructive obligation to pay further contributions if the pension fund administrator does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognised as employee benefit expenses when they are due. (iii) Short-term employee benefit Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit sharing plan if the Company has a present legal or constructive obligation to pay this amount as a result of past services provided by the employee, and the obligation can be estimated reliably. (r) Revenue Recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company's activities. Revenue is shown net of Value- Added Tax, returns, rebates and discounts. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Company's activities as described below: (i) Sale of Goods The Company manufactures and sells a range of products to the distributors and dealers. Sale of goods are recognised when the Company has delivered products to the customers and there is no unfulfilled obligation that could affect the customers' acceptance of the products. Delivery does not occur until the products have been shipped to the specified locations; the risks of obsolescence and loss have been transferred to the customers and either the customers have accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied. 63

66 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 The products are often sold with discounts and rebates. Sales are recorded based on the price specified on the sales invoice net of the discounts, rebates and returns at the time of sale. Sales are also recognised when the customer self-collects the product directly at the Company s premises during which the risks and rewards of ownership passes to the customer at the point of loading after the customer's delivery truck leaves the Company s premises. No element of financing is deemed present where sales are made on agreed credit terms which are consistent with the market practice. (ii) Interest Income Interest income is recognised using the effective interest rate method. When a loan and receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the investment, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognised using the original effective interest rate. (s) Dividend Distribution Dividend distribution to the Company's Shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's Shareholders. Dividends are recognised once paid. (t) Earnings per Share The Company presents earnings per share (EPS) data for its ordinary shares. EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the number of ordinary shares held at the year end. (u) Share Capital The Company has only one class of Shares - ordinary shares which are classified as equity. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium reserve. Incremental costs directly attributed to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. 64

67 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, RISK MANAGEMENT Risk management is inherent in the business operations of the Company. Management has set up processes and systems to identify, assess, monitor and control business risks including the following :- (a) Credit Risk This refers to the risk that a trade debtor will default by failing to make payments in accordance with the agreed credit terms and conditions. The possible impact of the credit risk is poor Account Receivable assets quality arising from high level of bad and doubtful debts and possible impairment of shareholders' funds. The carrying amount of financial assets represents the maximum credit exposure. Mitigating Measures Credit application follows rigorous and extensive credit review and approval processes. All credits are secured by insurance or bank bonds. Once conditions precedent to credit utilization are met by the customer, the approved credit is updated, monitored and controlled by the ERP on real times basis in accordance with credit terms. Credit utilization reports are prepared and monitored on a daily basis. (b) Liquidity Risk This refers to the risk of the company's inability to finance its operations and meet its obligations when they become due without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. Mitigating Measures Efficient and effective working capital management. Efficient Naira facility management. Efficient funds management to eliminate idle funds, meet obligations as they fall due and reduce interest expense to the minimum level. Liquidity and working capital management reports are prepared and monitored on a daily basis. The Treasury Department is well structured and equipped under the management of a very experienced and well trained team. 65

68 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 (c) Market Risk Market risk is the risk of financial loss due to the change in value of the market risk factors. The Company is faced with the following market risk factors. Interest rate risk: - The risk that interest rate will change adversely at the money market. Foreign exchange risk: - The risk that foreign exchange rates will fluctuate unfavorably at foreign exchange market. Commodity risk: - The risk that wheat prices will significantly increase at the international commodity markets. Mitigating Measures Efficient management of exchange and interest rate risks including generation of relevant risk management reports for monitoring and review on a daily and weekly basis. Monitor the money, capital and foreign exchange markets including micro and macro economic environment on a daily basis. Efficient management of the commodity risk by the Logistics and Supplies Department with a full-fledged experienced and well trained team in the area of wheat dynamics and procurement strategies. Monitoring of price dynamics and changes at the relevant Commodity Exchange Boards on a real time basis and take proactive decisions on a timely basis. The commodity risk affects the global milling industry as the wheat prices are determined at the international commodity markets. We usually increase product price in response to global volatility in wheat prices in order to recover some portion of the rise in wheat prices. (d) Operational Risk This relates to the risk of loss resulting from inadequate or failed internal processes, controls, procedures, people, and systems. Operational risk is inherent in the business activities. These include risk of inadequate haulage partners required to achieve the Company's objectives in terms of sales volume and profit; risk of wastages, downtime and other associated losses arising from inefficient plant operations; risk of breakdown of ERP and IT infrastructure or outright loss of critical operational/business data and information; risk of loss of Company assets due to unexpected disasters which may affect business operations; risk of breakdown of internal control systems and misstatement of financial statements. 66

69 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Mitigating Measures Efficient and effective maintenance culture to prevent down time and inefficient production operations. Control activities are an integral part of the Company's day to day operations and are defined at every business area. Existence of robust ERP and comprehensive computerisation of internal business processes, systems and procedures. Existence of robust IT business continuity and disaster recovery programmes. All insurable business risks are assessed, identified and adequately covered/insured. Existence of documented standard operating procedures for all business activities and operations. All key positions have a minimum of one under-study who can assume the roles immediately with minimum support, and eventually grow into the position. The Company continually trains talents to meet its future skill requirements. Continuous recruitment of qualified haulage contractors to meet corporate requirements and prevent shortage of delivery trucks. The Company also acquired and managed some of its delivery trucks e.g bulk flour loading trucks. It has a strong, active and experienced Internal Audit Team. The Internal Audit Team generates Reports highlighting control weaknesses periodically to the Management and Board Audit Committee. The Company's internal control and risk management systems ensure that material errors or inconsistencies in the financial statements are identified and corrected. Financial Statements are prepared in accordance with accounting standards and policies. Financial statements are prepared periodically on monthly and quarterly bases for the review of the Management and Board. Performance is monitored and compared with budgets. 67

70 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, PROPERTY, PLANT AND EQUIPMENT In thousands of Naira Capital Furniture work Plant and And Motor Land Building in progress machinery Equipment vehicles Total a) COST At April 1, ,660,603 8,450,077 21,753,899 18,719, , ,225 55,562,139 Of Additions - 37,953 5,605, ,836 43, ,092 6,467,588 Reclassification - 17,908 (441,180) 423, Of Disposals (72) (9,083) (9,155) At March 31, ,660,603 8,505,938 26,917,922 19,752, , ,234 62,020,572 DEPRECIATION To April 1, ,060-4,970, , ,557 6,279,710 Charge for the year - 249,914-1,552,107 50, ,881 1,990,705 On Disposals (64) (7,575) (7,639) To March 31, ,974-6,522, , ,863 8, 262,776 CARRYING AMOUNT At March 31, ,660,603 7,560,964 26,917,922 13,229,841 89, ,371 53,757,796 At March 31, ,660,603 7,755,017 21,753,899 13,748,840 96, ,668 49,282,429 Depreciation expenses of N1.768b (2015: N1.791b) has been charged in 'cost of goods sold', N78.296m (2015: N75.724m) in 'selling and marketing costs' and N m (2015: N m ) in administrative expenses'. 68

71 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 In thousands of Naira Capital Furniture work Plant and and Motor Land Building in progress machinery equipment vehicles Total b) COST At April 1, ,660,603 8,402,104 6,796,195 18,683, , ,632 40,363,503 Of additions - 47,973 14,957,704 37,597 23, ,490 15,202,652 On disposals (1,898) (221) (1,897) (4,016) At March 31, ,660,603 8,450,077 21,753,899 18,719, , ,225 55,562,139 DEPRECIATION To April 1, ,357-3,399, , ,993 4,278,053 Charge for the year - 248,703-1,572,263 53, ,261 2,005,450 On disposals (1,898) (198) (1,697) (3,793) To March 31, ,060-4,970, , ,557 6,279,710 CARRYING AMOUNT At March 31, ,660,603 7,755,017 21,753,899 13,748,840 96, ,668 49,282,429 69

72 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, INTANGIBLE ASSETS In thousands of Naira Cost At April 1, ,040 21,733 Additions 4,383 29,307 Disposals (2,494) - At March 31, ,929 51,040 Amortization and impairment At April 1, ,194 9,401 Amortization for the year 9,277 4,793 Disposals (1,673) - At March 31, ,798 14,194 Net Carrying amount 31,131 36,846 Amortization expenses of N9.277m (2015: N4.793m) has been charged in administrative expenses. 7 INVENTORIES In thousands of Naira Raw Materials and Consumables 5,351,144 7,374,822 Work-in-progress 110,470 - Finished Goods 124, ,202 Goods-in-Transit - 4,724,444 Total 5,586,084 12,546,468 The amount of write down of inventories recognised as expenses is N43.67million(2015:N355million). This expense is included in cost of sales and selling and distribution expenses. Inventory recognised as expenses during the period totaled N54.67 million (2015: N87.06). There are no inventories pledged as security for liabilities. There was an impairment provision of N365.80million on inventory written back during the year. This was as a result of crystalization of the raw material during the year. 8 TRADE AND OTHER CURRENT RECEIVABLES In thousands of Naira Gross trade receivables 744,251 1,108,763 Allowances for Impairment Losses (395,231) (409,398) Net Trade Receivables 349, ,365 Advance and Prepayments 820,410 1,487,967 1,169,430 2,187,332 There is no material difference between the fair value of receivables and their carrying amount. 70

73 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Analysis of Trade Receivables The analysis below analyses changes in the allowances for impairment losses in the year. In thousands of Naira Ageing of Trade Receivables Total Trade Receivables 744,251 1,108,763 Less: Impairment Provision for Trade Receivables (395,231) (409,398) 349, ,365 of which: Carrying amount neither past due nor impaired 217, ,702 Carrying amount past due but less than three months 64, ,125 Carrying amount past due for more than three months but less than six months 59, ,615 Carrying amount past due for more than six months but less than one year 79,405 49,636 Carrying amount past due more than one year 323, , ,251 1,108,763 Impairment for trade receivables (395,231) (409,398) 349, ,365 Impairment Provision for Trade and other Receivables In thousands of Naira At April 1 409, ,435 Charge to income statement for the period 71,636 48,963 Allowance no longer required (85,804) - At March , ,398 a. The maximum exposure to credit risk at the reporting date is the carrying value of the receivables. The Company holds insurance/bank bonds as security against default. b. Impairment allowance is made when there is objective evidence that the Company will not be able to collect the debts. The allowance raised is the amount needed to reduce the carrying value to the present value of expected future cash receipts. Bad debts are written off when identified. c. As at 31 March, 2016, trade receivables of N218 million (2015:N568 million) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. Extensive analysis of customer credit risk were performed on the customers. d. The amount of the provision for impairment was N395 million as at 31, March 2016 (2015:N409 million). The individually impaired receivables mainly relate to wholesalers, which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. Plans are in place to ensure substantial recovery of the receivables. Impairment losses are presented in the income statement with selling and marketing expenses. 71

74 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, CASH AND CASH EQUIVALENTS In thousands of Naira Bank and Cash Balances 11,864, ,294 Short Term Deposits 3,638,005 3,447,075 Balance as stated in the statement of financial position as at 31 March 15,502,135 3,890,369 Less Bank Overdrafts shown as liabilities in the statement of financial position (5,846) (982) Cash and Cash Equivalents 15,496,289 3,889,387 There is no material difference between the fair value and the carrying amount of cash equivalents. Short term deposits represent temporary excess of liquidity invested in low-risk short-term bank deposits with a maturity not exceeding 365 days TRADE AND OTHER PAYABLES In thousands of Naira Due within one year Trade payables 1,847, ,338 Accruals 1,204,515 22,500 Pension and sundry taxes 6,435 16,652 Unclaimed dividend 59,013 - Balance at March 31 3,117, ,490 Accrued liabilities represent miscellaneous contractual liabilities that relate respectively to expenses that were incurred but not paid for at the year-end. The carrying amount of trade and other payables and accrued liabilities is considered to be in line with their fair value at the reporting date. The unclaimed dividend represents amount returned by the Company s Registrars in line with the Security and Exchange Commission s directive that all unclaimed dividends in the custody of the registrars should be returned to the paying company 12 months after the date of approval of dividend at a general meeting. 72

75 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, FINANCIAL LIABILITIES In thousands of Naira Current Loans and Advances Bank Loans 16,370,008 14,960,767 Bank Overdrafts 5, Import Finance Facilities 24,296,962 15,952,824 40,672,816 30,914,573 Non-Current Loans and Advances Bank Loans 10,617,246 11,214,819 10,617,246 11,214,819 a) Weighted average cost of borrowings was 12% ( 2015:13%) annually. b) Bank loans and overdraft are secured by mortgage on property, plant and equipment while import finance facilities are secured by trade receivables. c) The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. d) The carrying amounts and fair value of the non-current borrowings are as follows. The fair values are based on cash flows discounted using rates based on the average borrowing rate of 17% (2014:17%) Carrying Amount Fai r Value In thousands of Naira Guaranty Trust Bank Plc. (CBN Intervention Fund) - 111, ,111 Skye Bank Plc. 1,825, ,219 1,825, ,219 First bank of Nigeria Limited 2,334,720 3,877,489 2,334,720 3,877,489 First bank of Nigeria Limited (CBN Intervention Fund) 850,562 1, 000, , ,456 Bank of industry Limited 5,606,667 5,800,000 5,606,667 5,735,875 10,617,246 11,214,819 10,617,246 11,149,150 The loan from Bank of Industry Limited (BOI) was granted to the Company to finance the new Pasta Factory which will be located at Sagamu. The loan has a tenor of seven (7) years inclusive of two (2) years moratorium on principal repayment beginning from date of first disbursement. Interest rate on the loan is 10%. The loan and accrued interest on the Bank of Industry s (BOI) loan was guaranteed by Skye Bank Plc. 73

76 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, RETIREMENT BENEFIT OBLIGATIONS The Company has both defined benefit and defined contribution plans. Defined contribution plan A defined contribution plan is a pension plan under which the Company pays fixed contributions to a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Defined benefit plan A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation. The Company operates unfunded defined benefit plans for qualifying employees of the company. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation less the fair value of planned assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 March, 2016 by KDA Associates. The present value of the defined benefit obligation, and the related current service cost, were measured using the Projected Unit Credit Method. The amount recognized in the statement of financial position is determined as follows: In thousands of Naira Present value of retirement benefit obligation 962, ,924 Interest cost 140, ,466 Current service cost 82,210 72,241 Benefits paid (172,157) (86,969) Actuarial (gain) / loss due to change in experience 183,174 61,547 1,195, ,209 74

77 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 RETIREMENT BENEFIT OBLIGATIONS (cont d) The principal actuarial assumptions were as follows: Actuarial Method: Projected Unit Method Discount rate: 14% Rate of Salary escalation: 15% per annum Retirement Age: 60 years Pre-retirement mortality: A67/70 Ultimate Withdrawal: Based on the average experience of other similar arrangements Expenses: No explicit allowance DEFERRED INCOME AND ACCRUALS In thousands of Naira Deferred income and accruals 25,528 72,985 Deferred income and accruals include government grants. The Company received government interest grants in respect of CBN intervention loans from Guaranty Trust Bank Plc. and First Bank of Nigeria Limited at a subsidized rate of 7% per annum. The loan from Guaranty Trust Bank had been liquidated fully during the year. The interest grants are included under non-current liabilities and are recognized in the income statement on a straight line basis over the tenure of the loans. 75

78 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, PROFIT BEFORE TAXATION In thousands of Naira The following items have been charged/credited in arriving at profit before tax: Depreciation 1,990, ,450 Allowance for bad and doubtful debts 71,636 48,963 Auditors' remuneration 15,000 15,000 Directors' emoluments: Fees 18,666 12,618 Others 35,184 33,509 Finance cost 1,237,548 1,231,206 And crediting Profit on disposal of fixed assets 6, Finance income 417, , TAXATION In thousands of Naira Income Statement Current company income tax 39, ,106 Education tax - 42,596 39, ,702 Deferred tax provision on origination and reversal of temporary differences 114, ,859 Tax charge to income statement 154, ,561.2 Current tax liabilities The movement in current tax balance is as follows: In thousands of Naira At April 1 131, ,984 Charge for the year 39, ,702 Additional liability 349, , ,686 Payment during the year (98,025) (409,529) At March , ,157 The provision for income tax is based on the provision of the Companies Income Tax Act (LFN CAP 60) as amended, while education tax is based on Education Tax Act No. 7 CAP E4 LFN,

79 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, Pioneer Status The Company was granted a Pioneer Status Certificate for the new Mills E & F production plant in the Apapa factory. The required Certificate of Production Day, from the Industrial Inspectorate Department of the Federal Ministry of Industry, Trade and Investment has been formally issued with the commencement date of April 1, 2013 for the Pioneer Status Incentive. This will enable the company to enjoy a 5-year Tax Holiday on the new plants. The ERP of the Company has been designed to ensure separate accounting for the new plant. The new plant is self-accounting in order to prepare an independent Income Statement and Statement of Financial Position for its operations. The new plant was at the peak of its installed capacity during the year. Turnover and Profit Before Tax relating to the new plant for the year ended March 31, 2016 were N26,966,204,090 (2015: 20,822,230,232) and (N1,522,595,687) (2015: 609,006,567) respectively..4 Deferred Tax In thousands of Naira Per income statement Charge to income statement for the year 114, ,859 Per statement of financial position The movement in deferred tax is as follows: Deferred tax liability: At April 1 3,517,377 3,411,518 Charge for the year 114, ,859 At March 31 3,632,078 3,517,377 77

80 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, STATEMENT OF CASH FLOWS The Statement of Cash Flows has been drawn up using the indirect method. Working capital comprises inventories, receivables and current liabilities (excluding bank overdrafts). The cash flow from investing activities relates to the net amount of investments and disposals whilst the cash position consists of cash in hand and at bank In thousands of Naira.1 Cash flows from operating activities Reconciliation of net profit to operating profit before working capital changes (Loss)/Profit before tax (2,869,342) 1,434,828 Adjustments for non-cash items: Depreciation of property, plant and equipment 1,990,705 2,005,450 Profit on disposal of property, plant and equipment (6,199) (846) Write-off of intangible assets Amortization of intangible assets 9,277 4,793 Interest income (417,771) (481,509) Interest expense 1,237,548 1,231,206 Net charge in retirement benefit obligations 222, ,707 Operating profit before working capital changes 167,713 4,375,629.2 Working capital changes Decrease/(increase) in inventories 6,960,384 (1,259,431) (Decrease)/increase in deferred income and accruals (47,457) (210,274) (Increase)/decrease in trade and other receivables 1,017,903 3,687,486 Increase/(Decrease) in trade and other payables 2,303,280 (494,766) 10,234,100 1,723,015 Cash generated from operations 10,401,823 6,098, SEGMENT REPORTING The Company's business operating segments are identified by two factories located at Ikeja and Apapa. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, is the Board of Directors. The Board reviews the Company's monthly financial and operational information in order to assess its performance and allocate resources. The chief operating decision maker assesses the performance based on operating profits for each operating segment. 78

81 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, Revenue and Result Ikeja Apapa Total Ikeja Apapa Total In thousands of Naira Revenue 9,672,845 41,210,935 50,883,780 10,308,369 38,749,142 49,057,511 Cost of sales (9,121,090) (37,401,296) (46,522,386) (9,166,903) (32,387,075) (41,553,977) Gross profit 551,755 3,809,639 4,361,394 1,141,466 6,362,067 7,503,534 Other income 52, , , ,026 65, ,804 Selling and admin expenses and net interest expenses (968,608) (5,600,321) (6,568,929) (1,208,053) (4,343,760) (5,551,813) Segment Operating (Loss)/Profit (364,741) (1,684,824) (2,049,565) 100,439 2,084,085 2,184, In thousands of Naira.2 Revenue by geographical location of customers: Domestic (within Nigeria) 50,883,780 49,057,511 Export (outside Nigeria) ,883,780 49,057,511 All sales were made within Nigeria 79

82 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, OTHER INCOME In thousands of Naira Other income comprises the following: Sale of by-products 80,703 80,232 Net gain on sale of property, plant and equipment 6, Raw wheat sales 44,108 - Allowance no longer required 14,167 - Sundry income 12, , , , SHARE CAPITAL In thousands of Naira Authorized 8,000,000,000 ordinary shares of 50k each ,000, ,000,000 Issued and fully paid 7,930,197,658 (2015: 7,930,197,658) ordinary shares of 50k each 3,965,099 3,965, CHAIRMAN'S AND DIRECTORS' EMOLUMENTS, PENSIONS AND COMPENSATION FOR LOSS OF OFFICE In thousands of Naira The remuneration paid to Directors was.1 Fees: Chairman 1,600 1,600 Other directors 17,066 11,018 18,666 12,618.2 Fees and other emoluments disclosed above include amount paid as: Fees 18,666 12,618 Other emoluments 3 5, ,509 53,850 46,127 80

83 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, Number of directors (excluding the chairman) whose emoluments were within certain ranges were: Number Number N100,000 and above Waived emoluments Number of directors who have waived their rights to receive emoluments - - Aggregate of those emoluments Pensions of directors and past directors Aggregate amount of directors' or past directors or past directors' pensions` - - Other pensions Compensation to directors for loss of office Key management comprises the directors (executive and non-executive) and the Chairman that form part of the leadership team (Chief operating officers). As directors As executives EMPLOYEES AND RELATED REMUNERATION Number of employees in receipt of emoluments excluding allowances were within the following ranges: Number Number N500,001 - N1,000, N1,000,001 - N1,500, N1,500,001 - N2,000, N2,000,001 - N2,500, N2,500,001 - N3,000, N3,000,001 - N3,500, N3,500,001 - N4,000, N4,000,001 - N4,500, N4,500,001 - N5,500, N5,500,001 - N6,000, N6,000,001 - Above Total

84 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, CONTINGENT LIABILITIES, GUARANTEES AND OTHER FINANCIAL COMMITMENTS i Charges The Company has loan facilities with First Bank of Nigeria Plc secured by All Assets Debenture. ii Financial Commitments The Directors are of the opinion that all known liabilities and commitments have been taken into account in the preparation of the financial statements under review. These liabilities are relevant in assessing the Company's state of affairs as at March 31, iii Legal Charges There is litigation against the Company as at 31 March, 2016 the outcome of which has not been determined. However, the directors, having sought legal advice of professional counsel are of the opinion that no material liabilities will arise in the ordinary course of business. No provision was made in these financial statements in that respect. 23 LOANS AND OTHER TRANSACTIONS FAVOURING DIRECTORS AND OFFICERS a) During the year, the Company guaranteed no loan in favour of its Directors and Officers. b) No loans were given to the Directors to purchase the Company's shares during the year. 24 CONTRAVENTIONS In year 2016, the Company failed to meet the deadline for the submission of its 2nd quarter return for the period ended 30 September, 2015, hence a penalty was paid for late submission. The penalty has been included as administrative expenses. 25 COMPARATIVE FIGURES Where necessary, comparative figures have been restated to conform with changes in presentation in the current year. 26 EARNINGS PER SHARE The Earnings Per Share (EPS) is calculated by dividing the profit attributable to ordinary Shareholders by the number of ordinary shares issued as at March 31,

85 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, APPROVAL OF FINANCIAL STATEMENTS These financial statements were approved by the Board of Directors of the Company on Tuesday, 21, June, SIGNIFICANT JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In preparing its financial statements, the Company has made significant judgements, estimates and assumptions that impact on the carrying value of certain assets and liabilities, income and expenses as well as other information reported in the notes. The Company periodically monitors such estimates and assumptions and makes sure that they incorporate all relevant information available at the date when financial statements are prepared. However, this does not prevent actual figures differing from the estimates. The judgements made in the process of applying the Company s accounting policies that have the most significant effect on the amounts recognised in the financial statements, and the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below: Revenue recognition The Company makes provisions for trade discounts, volume rebates and charge back for product returns allowed by the sale contracts when recognising the revenue derived from sales of its products. Such deductions represent estimates, which are subject to judgements and assumptions based on past experience as well as the Company s knowledge available at the time the estimate is made. Allowance for doubtful receivables The determination of the recoverability of the amount due from customers involves the identification of whether there is any objective evidence of impairment. In cases where that process is not feasible, a collective evaluation of impairment is performed. As a consequence, the way individual and collective evaluations are carried out and the timing relating to the identification of objective evidence of impairment require significant judgement and may materially affect the carrying amount of receivables at the reporting date. 83

86 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Asset impairment tests A financial asset or a group of financial assets, other than those categorised at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Impairment exists only when the Company ascertains that a loss event affecting the estimated future cash flows of the financial asset has occurred. It may not be possible to identify a single, discrete event that caused the impairment and moreover to determine when a loss event has occurred might involve the exercise of significant judgement. The amount of impairment loss recognised for financial assets carried at amortised cost is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Net realisable value of inventories Inventories are stated at the lower of cost and net realisable value. The cost of inventories is written down to their estimated realisable value when their cost may no longer be recoverable, such as when inventories are damaged or become wholly or partly obsolete or their selling prices have declined. In any case, the realisable value represents the best estimate of the recoverable amount, based on the most reliable evidence available at the reporting date and inherently involves estimates regarding the future expected realisable value. The benchmarks for determining the amount of write-downs to net realisable value include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires significant judgement and may materially affect the carrying amount of inventories at the reporting date. Deferred tax estimation Recognition of deferred tax assets and liabilities involves making a series of assumptions. As far as deferred tax assets are concerned, their realisation ultimately depends on taxable profits being available in the future. Deferred tax assets are recognised only when it is probable that taxable profits will be available against which the deferred tax asset can be utilised and it is probable that the entity will earn sufficient taxable profit in future periods to benefit from a reduction in tax payments. This involves the Company making assumptions within its overall tax-planning activities and periodically reassessing them in order to reflect changed circumstances as well as tax regulations. Moreover, the measurement of a deferred tax asset or liability reflects the manner in which the entity expects to recover the asset s carrying value or settle the liability. 84

87 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Actuarial assumptions on defined benefit retirement plans Accounting for defined benefit plans may be complex because actuarial assumptions are required to measure the obligation and the expense, with the posibility that actual results differ from the assumed results. These differences are known as actuarial gains and losses. Defined benefit obligations are measured using the Projected Unit Method, according to which the Company has to make a reliable estimate of the amount of benefits earned in return for services rendered in current and prior periods, using actuarial techniques. 29 NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED The following new standards, amendments and interpretations have been issued by the International Accounting Standards Board (IASB) but are not yet effective for the financial year beginning 1 April, 2015 and have not been earlier adopted by (the list does not include information about new pronouncements that affect interim financial reporting or first-time adopters of IFRS since they are not relevant to the Company). IFRS 14 Regulatory Deferral Accounts IFRS 14: Regulatory deferral Accounts permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes for regulatory deferral account balances in accordance with its previous GAAP, both on initial adoption of IFRS and subsequent financial statements. Regulatory deferral account balances and movements in them, are presented separately in the statement of financial position and statement of profit or loss and other comprehensive income, and specific disclosures are required. The objective of IFRS 14 is to specify the financial reporting requirements for regulatory deferral account balances that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulation. IFRS 14 is designed as a limited scope Standard to provide an interim, short-term solution for rateregulated entities that have not yet adopted International Financial Reporting Standards (IFRS). Its purpose is to allow rate-regulated entities adopting IFRS for the first-time to avoid changes in accounting policies in respect of regulatory deferral accounts until such time as the International Accounting Standards Board (IASB) can complete its comprehensive project on rate regulated activities. 85

88 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Where an entity elects to apply it, IFRS 14 is effective for an entity s first annual IFRS financial statements that are for a period beginning on or after 1 January, The standard can be applied earlier, but the entity must disclose when it has done so. IFRS 15: Revenue from Contracts with Customers IFRS 15 specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers. IFRS 15 was issued in May 2014 and applies to an annual reporting period beginning on or after 1 January, The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. (IFRS 15:1) Application of the standard is mandatory for annual reporting periods starting from 1 January, 2017 onwards. Earlier application is permitted. IFRS 15 Revenue from Contracts with Customers applies to all contracts with customers except for: leases within the scope of IAS 17 Leases; financial instruments and other contractual rights or obligations within the scope of IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures; insurance contracts within the scope of IFRS 4 Insurance Contracts; and non-monetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers. 86

89 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016 Amendments to IAS 16 and IAS 38: Clarification of Acceptable Method of Depreciation and Amortization The requirements of IAS 16 are amended to clarify that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriated. This is because such methods reflect a pattern of generation of economic benefits that arise from the operation of the business of which an asset is part, rather than the pattern of consumption of an asset s expected future economic benefits. The requirements of IAS 38 are amended to introduce a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate for the same reasons as in IAS 16. However, the IASB states that there are limited circumstances when the presumption can be overcome: The intangible asset is expressed as a measure of revenue (the predominant limiting factor inherent in an intangible asset is the achievement of a revenue threshold); and it can be demonstrated that the revenue and the consumption of economic benefits of the intangible asset are highly correlated and that the consumption of the intangible asset is directly linked to the revenue generated from using the asset). Guidance is introduced into both standards to explain that expected future reduction in selling prices could be indicative of a higher rate of consumption of the future economic benefits embodied in an asset. The amendments are effective for annual periods beginning on or after 1 January, Earlier application is permitted. Amendment to IFRS 7 Disclosures- Offsetting Financial Assets and Financial Liabilities The IFRS is part of the IASB s project to replace IAS 39. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. Effective for annual periods beginning on or after 1 January,

90 It s all you want

91 FINANCIAL STATEMENTS VALUE ADDED STATEMENT FOR THE YEAR ENDED MARCH 31, In thousands of Naira % % Revenue 50,883,780 49,057,511 Other revenue 157, ,804 Bought in goods 51,041,750 49,290,315 and services (49,177,687) (43,009,028) VALUE ADDED 1,864, ,281, APPLIED AS FOLLOWS: 1 To pay employees Salaries and wages, pension and social benefits 1,505, ,609, To pay providers of funds Finance expenses 1,237, ,231, To pay government Income and education taxes 39, , To provide for maintenance and expansion of assets Depreciation 1,990, ,005, Deferred tax 114, ,859 2 Retained profit (3,023,852) (162) 1,120, VALUE ADDED 1,864, ,281, Note: Value added is the wealth created by the efforts of the company and its employees and its allocation between employees, shareholders, government and re-investment for the future creation of further wealth. 89

92 FINANCIAL STATEMENTS FINANCIAL SUMMARY FOR FIVE YEAR ENDED MARCH 31, 2016 In thousands of Naira STATEMENT OF FINANCIAL POSITION Property, plant and equipment IFRS ,757,796 49,282,429 36,085,450 34,969,128 29,014,121 Intangible assets Inventories 5,586,084 12,12,546,468 12,546,468 11,287,037 11,287, ,009,275 4,931,032 Trade and other receivables 1,169,430 5,874,818 2,187,332 5,874, ,962 6,868,962 10,126,471 Cash and bank balances 15,502,135 3,890,369 10,570,802 3,890,369 10,570,802 3,574,209 3,858,456 3,574,209 3,858,456 3,962,142 Total assets 76,046,576 67,943,444 63,830,439 55,437,478 47,930,278 Current liabilities Non-current liabilities 31,131 36,846 12,332 15, (44,213,225) (31,860,220) (28,059,339) (27,503,156) (21,798,567) (15,470,752) (15,767,390) (15,165,852) (9,381,239) (9,115,697) Total net assets 16,362,599 20,315,834 20,605,248 18,553,083 17,016,014 Share capital 3,965,099 3,965,099 3,965,099 3,965,099 3,965,099 Share premium 6,462,041 6,462,041 6,462, ,041 6,462,041 6,462,041 Retained earnings 5,935,459 9,888,694 10,178,108 8,125,943 6,588,874 Capital employed 16,362,599 20,315,834 20,605,248 18,553,083 17,016,014 STATEMENT OF COMPREHENSIVE INCOME Revenue Profit before tax & after exceptional item Taxation Profit after tax Transfer to revenue reserve Profit attributable to: Equity shareholders 50,883,780 49,057,511 55,084,305 45,709,382 38,052,227 (2,869,342) 1,434,828 4,237,432 3,814,599 3,758,735 (154,510) (314,561) (885,868) (971,079) (970,960) (3,023,852) 1,120,267 3,351,564 2,843,520 2,787,775 (3,023,852) 1,120,267 3,351,564 2,843,520 2,787,775 (3,023,852) 1,120,267 3,351,564 2,843,520 2,787,775 Earnings per 50k share [k] Net assets per 50k share [k] (38.13) NOTE: Earnings and net assets per share are based on 7,930,197,658 ordinary shares of 50k each and profit after tax as at the date of these financial statements. 90

93 2016 SHAREHOLDERS INFORMATION List of Key Distributors Unclaimed Dividends 94 Share Capital History 95 Proxy Form 96 Electronic Delivery Mandate Form 98 91

94 FINANCIAL STATEMENTS KEY DISTRIBUTORS NAME REGION LOCATION NAME REGION LOCATION A K Maikwai Nigeria Ltd. North Katsina Abdulahi Salah North Sokoto Abdullahi Murtala Kano North Kano Abdullahi Yusuf North Yola Abinukolade Global Ventures Lagos Ojodu Abiola Aramide Olaoluwa Nig. Ent. West Ibadan Abubarka Arzika & Sons North Kebbi Adamu Abdullahi North Gombe Ade Distribution & Invest Co Ltd. Lagos Ijebu Ode Adebiyi Merchants Stores Lagos Agege Adejumo Nigeria Enterprises West Ilorin Ade-Ofeek Nigeria Enterprises West Ibadan Adeowo Nigeria Ltd Lagos Mushin Adeshina Alhaja Lagos Itire Adet Enterprises North Jos Adeyemo Olusola & Associates West Ibadan Adidot Nigeria Enterprises Lagos Ijebu Ode Aduwa Stores North Gusau Agozie Chibuzor George West Ondo Ahajas Nig Ltd North Gombe Alh Ali Modu Soja North Maiduguri Alh. Bello Danhaja North Sokoto Alhaji Abdulkadir Hali Maikeke & Sons North Sokoto Alhaji Adam Ibrahim North Maiduguri Alhaji Mukhtar Nayaya North Jos Ali Hassan North Maiduguri Amadu Yusuf North Gombe Amazing Wonders Nigeria Ltd. Lagos Ketu Amen'S Mart Global Ventures Lagos Akute Amudeson Nig. Enterprises East Enugu Aolat Adefunke Nig. Ltd. West Oshogbo Asalam Stores Ventures Lagos Abeokuta Atoyen Ventures Lagos Ikeja Aunty Gina Nig Enterprises East Warri Aznof Perfect Stores Ventures Lagos Ikorodu B. Zion Enterprises Lagos Sango Badamosi Yahaya North Minna Bala Yusuf Usman North Bauchi Bashir Yusuf Angale & Sons. North Kano Bekdat Ventures. North Abuja Bernard Eze & Sons East Benin Blessed Chidi Martin Chemical Coy. East Enugu Blessed Chima Umeh Enterprises East Enugu Blessed Consumables Enterprise North Abuja Blessed Obrown Ent. Nig. Ltd. North Abuja Bofik Nigeria Ltd. Lagos Agege Carbo Nig Enterprises West Ibadan Channel Of Blessing Ventures Lagos Iddo Chidex Frontline Enterprises East Aba Chijioke Ofonyelu West Akoko-Ikare Chimaco & Brothers Enterprises East Owerri Chisco Best West Ondo Christaypej Nig. Ent. Lagos Apongbon Cleason Nigeria Enterprises North Makurdi Cossy Bros Intern Ltd Lagos Agege Crunchies Fried Chicken Limited East Aba D' Abigails Nig Ltd. Lagos Yaba Daily Manna Global Ind. Ltd. East Aba Damilek Integrated Services Ltd. East Port Harcourt Danladi Muhammed North Maiduguri Dekem Trading Enterprises Ltd. North Abuja De-Tofola Nigeria Ltd. Lagos Sango Doo & Co. East Benin Duru Stainless Business Enterprises North Jos E.H. Okika Nigeria Limited North Gboko Ebenezer Dairo Enterprises. Lagos Mushin Ejiofor Ent Nig. East Benin Eleven Sixteen Ltd. Lagos Agege Executive Bread & Confectionary Nig. Ltd. North Kano Ezeh Chief East Onitsha F. Adunni Nigeria Enterprises Lagos Agege Faith Foods And Confectioneries East Port Harcourt Fantazia Fast Food Ltd. East Warri Fastizers Food & Confectionery Ltd. Lagos Igbesa Favoured Success Multibiz. North Abuja Fermadons Enterprises Lagos Idi Iroko Frandnivan Ventures. East Benin Gambo Danbala Lambu North Kano Gari Garbas North Kano Genesis Foods Nigeria Limited East Port Harcourt Geymay Ind. Ltd. East Aba Gilbest Confectionery Nig. Ltd. East Port Harcourt God'S Own Ventures West Akure Great Hope Universal Ventures Lagos Agege Habibu Goron Duma North Kano Haruna Maigishi North Birni Kebbi Haske & Sons General Inv. Nig. Ltd. North Bauchi Heron Ventures Lagos Abeokuta His Favour Commodity Stores Lagos Abeokuta Ibe God Enterprises Ltd. East Owerri Ibrahim Hamza North Gombe Ibrahim Sulu Oloje (Alhaji) West Lokoja Ibrahim Usman Enterprises North Sokoto Ici Holdings Limited East Onitsha Ifeanyichukwumeh Venture East Enugu Imperial Bakeries Nig. North Abuja Isiaku Muhammed North Kaduna J C Joseph Industries Limited East Aba J.B. General Enterprises Jibia North Katsina J.B.Oyesomi & Sons Nig.Ltd. East Benin J.C.Anugwu & Sons Nig.Ltd. East Onitsha Joachin Ikechukwu Ezebube East Benin Jonhec Nig. Ltd. North Minna Kabiru Ahmed Dokoro North Gombe Kabiru Shuaibu Dansarai North Kano Kamchizy Associate East Onitsha Kayjay Zenith Ltd. Lagos Ajah Kazmoha Investment Resources Ltd. Lagos Iddo Kubrat Sayed & Sons Nig.Ltd. West Ibadan Laji Ventures Lagos Trade Fair Lasol Nigeria Ltd. Lagos Iddo Lawali Sanni Gusau Alh. North Gusau Legacy Bakery Ltd. West Lokoja Lolly Global Stores. Lagos Mushin M. O Nnaji Industry Ltd. East Aba Mackensen Nig. Ltd. Lagos Ejigbo Mag3 Nig.Ltd. Lagos Ikeja Mario Barns Ltd. East Port Harcourt Mbonu Chief) East Onitsha Medan Nigeria Enterprises East Uyo 92

95 FINANCIAL STATEMENTS KEY DISTRIBUTORS NAME REGION LOCATION NAME REGION LOCATION Meneshad Services Ltd. East Warri Merciful Business Lagos Mushin Michelle Edmund Ventures West Ibadan Mimza General Enterprises. North Kano Muhammed Alli Magaru & Sons North Minna Muh'D Nafiu Adamu Kanulle North Maiduguri Murtala Abdullahi Trading North Kaduna Musa Muhammed Director North Kano Naizan Nigeria Limited North Gombe Namadi Inuwa Enterprises North Kano Nekvine Ventures Lagos Trade Fair New Gaskiya North Kano New Life Ventures Lagos Iddo Ngaloma General Enterprises North Maiduguri Niasee Ventures Lagos Ikorodu Nitty Dol Ventures Limited Lagos Agege Nnemelu J. C. East Onitsha Nwaudo Investment Nig. Ltd. North Makurdi Obi Okoye East Aba Odilamma Enterprises Nigeria East Owerri Ogene Concerns Limited East Onitsha Ogestan Ventures East Benin Ola Jesu Nig Ltd. Lagos Sagamu Oladejo & Sons Nigeria Ent. Lagos Alagbado Olayiwola Stores Jos North Jos Oloriegbe Nigeria Limited. West Ilorin Oluwasesan Sose Enterprises West Ibadan Oni Stores Lagos Agege Palma Seaport Ltd. East Enugu Progress Confectionery Ventures East Anambra Quad & Kay Ventures Lagos Mushin Queen Of All Hearts Ltd. Lagos Ikeja Queensmeal Foods Ltd. Lagos Ajangbadi Raji Opeyemi Industries Lagos Ikotun Rameses Nig. Ltd. Lagos Festac Rasaki Hassan Alh. Lagos Ajangbadi Rehoboth Integrated Services East Port Harcourt Royal Gate Company Limited Lagos Abeokuta S O Omilabu & Sons Ltd. Lagos Apongbon S R S Adeshina Nig Ltd. Lagos Surulere Sabo Moh'D Enterprises North Gombe Safeway Resources Int. Ltd. East Aba Salisu Maigishiri Markafi North Kaduna Salmanu Adamu North Kano Samtina Ventures West Oshogbo Santa Maria Ent. Ltd. East Abakaliki Savana Global Bakery (Flour) North Jalingo Saysuraj Enterprises North Kaduna Shagumba Ventures North Katsina Shield Ventures Lagos Sagamu Solak Industries Ltd. Lagos Agege Sopul-C Enterprises North Abuja Sundry Foods Ltd. East Port Harcourt Sylmec Ventures Ltd. North Makurdi Tadex Bakery Industry Ltd. Lagos Sagamu Timmy BakeryLagosSagamu Trusth Milk Special Bread North Gombe Tukur Sabaru Alh. North Sokoto Ugo Best Business Ass. Nig. Ltd. North Zaria Ugwu Sylvester Lagos Isolo Umar Musa Bakery North Kaduna Umaru Ladan Alh. North Bauchi Uniqueayos Ventures Lagos Mushin Usezor Integrated Services Ltd. North Abuja Uwana Ventures. Lagos Ijesha-Tedo Vincent Muoneke East Benin W. J. Onyema Supply Company Ltd. West Akoko-Ikare Wisdom Divinity Ltd. Lagos Ifo Yodbon Ventures Lagos Ogba Young Bukason Comm. Enterp. Ltd. East Onitsha Zaifa Agencies Limited East Onitsha Zamani Special Bread North Yola 93

96 SHAREHOLDERS INFORMATION UNCLAIMED DIVIDENDS Some dividend warrants have not been presented to the Bank for payment while others have been returned to the Registrar as unclaimed because the address could not be traced. The Unclaimed Dividend as at July 26, 2016 is as analysed below Unclaimed Dividend 2011 Unclaimed Dividend 2012 Unclaimed Dividend 2013 Unclaimed Dividend 2014 Unclaimed Dividend 2015 Unclaimed Dividend Dividend Range Number of Shareholders Amount N 000 Number of Shareholders Amount N 000 Number of Shareholders Amount N 000 Number of Shareholders Amount N 000 Number of Shareholders Amount N 000 Number of Shareholders Amount N 000 Above N1,000, , , , ,634 N100,000 - N1,000, , , , N50,000 - N99, , , N10,000 - N49, , , ,061 N1,000 - N9, , ,849 1,128 2,364 1,570 3,479 1,705 4, ,461 Less than N1,000 13,437 2,908 14,130 3,249 15,105 3,990 15,637 4,351 16,304 4,817 20,029 2,535 Total Total Declared Dividend in Years % of Unclaimed Dividend 13,945 5, , % 15,162 7,092 1,031, % 16,299 10,943 1,189, % 17,340 15,401 1,268, % 18,207 19,569 1,348, % 20,614 41, , % Detailed list of Unclaimed Dividends can be viewed or downloaded from the Company s website at Total Amount N ,555 9,078 4,967 8,269 14,386 21, ,104 6,106, % 94

97 SHAREHOLDERS INFORMATION SHARE CAPITAL HISTORY Year Authorized (N'000) Issued & Fully Paid-up (N'000) Increase Cumulative Increase Cumulative Consideration ,000-2 N1 each ,000-2 N1 each ,000-2 N1 each ,000-2 N1 each ,000-2 N1 each ,000 50,000 49,998 50,000 N1 each , , , ,000 N1 each ,000 1,000, ,000 1,000,000 N1 each ,000,000 2,000, ,999 1,999,999 Acquisition of Honeywell Superfine Foods Limited ,000,000-1,999,999 Share Split of N1 to N ,000,000 4,000,000 1,500,000 3,499,999 Bonus Issue of 3 to 4 shares - 4,000, ,100 3,965,099 Public N8.50 each 95

98 SHAREHOLDERS INFORMATION PROXY FORM HONEYWELL FLOUR MILLS PLC 7TH ANNUAL GENERAL MEETING TO BE HELD AT A.M ON TUESDAY SEPTEMBER AT THE CIVIC CENTRE, OZUMBA MBADIWE STREET, VICTORIA ISLAND, LAGOS. (Name of Shareholder in block letters) The undersigned, being a member/members of the above-named Company hereby appoint the Chairman of the meeting Or failing him......as my/our Proxy to vote me/us and On my/our behalf at the Annual General Meeting of the Company to be held on September 20, 2016 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.Please sign this proxy card and send it to reach the Registered office of the Company or its Registrars not less than 48 Hours before the time fixed for the meeting. 2.If executed by a corporation, the proxy card should be Sealed with the common seal. 3.This proxy card will be used both by show of hands, And in the event of a poll being directed or demanded RESOLUTION FOR AGAINST 1. To adopt the and Accounts 2a. To re-elect the following Directors: Mr. Obafemi Otudeko Mr. Olanrewaju Jaiyeola Mr. Benson Evbuomwan Mr. Rotimi Fadipe Mr. Akinsoji Akintayo 2b. To elect Mrs. Oluseye Sandey as Director 3. To authorize the Directors to fix Auditors Remuneration. 4. To appoint members of the Audit Committee Please indicate with an "X" in the appropriate section how you wish your votes to be casted on resolutions set 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 FORM HONEYWELL FLOUR MILLS PLC (RC55495) 7TH ANNUAL GENERAL MEETING TO BE HELD at Civic Center Ozumba Mbadiwe street, Victoria Island Lagos on Tuesday September 20, 2016 at ll a.m Name of Shareholder* Name of Proxy*... If you are unable to attend the meeting A member (shareholder) entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him. A Proxy need not be a member. The above proxy form has been prepared to enable you to exercise your right to vote., Important Please insert your name in BLOCK CAPITALS on both proxy and admission forms where asterisked. Insert the name of any person where a member of the Company or not, with the exception of the Company who will attend the meeting and vote on your behalf. 96

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100 SHAREHOLDERS INFORMATION ELECTRONIC DELIVERY MANDATE FORM I / We/ Chief/ Dr/ Mr/ Mrs. Title: Name: Address: hereby agree to the delivery of and other statutory documents of Honeywell Flour Mill Plc to me/us via electronic mode: The Company should forward the materials to the address stated below: address :... Signature :... The Registrar First Registrars and Investor Services Limited Plot 2, Abebe Village Road Iganmu Lagos. 98

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