Annual Report & Accounts

Transcription

1 PAGES C o n t e n t s INTRODUCTION a. Financial Highlights 3 b. Performance Indicators 4 c. Notice of Annual General Meeting 5 d. Directors and other Corporate Information 7 BUSINESS REVIEW a. Chairman's Statement 9-12 b. Chief Executive Officer's Report c. The Board of Directors Profile d. The Report of the Directors e. The Report of the Audit Committee 28 FINANCIAL STATEMENTS a. Report of the Independent Auditors 34 b. Statement of Significant Accounting Policies c. Group Balance Sheet 38 d. Group Profit and Loss Account 39 e. Statement of Cash Flows 40 f. Notes to the Financial Statement g. Value Added Statement 51 h. Financial Summary STAKEHOLDERS INFORMATION a. List of key Distributors 55 b. Share Capital History 56 C. Unclaimed Dividends 57 D. Application for E-Dividend 59 E. Proxy Form 61 Honeywell Flour Mills Plc. 1

2 Introduction Financial Highlights 3 Performance Indicators 4 Notice of Annual General Meeting 5 Directors and other Corporate Information 7 Honeywell Flour Mills Plc. 2

3 Financial Highlights Introduction % Change Results in millions of Naira Turnover 38,072 34,058 12% Profit before taxation 3,663 3,516 4% Profit after taxation 2,702 2,492 8% Proposed dividend* 1,190 1,031 15% Shareholders' funds 16,802 15,131 11% Share capital 3,965 3,965 - Total assets 44,940 29,138 54% Data per 50k Share Earnings (kobo) % Dividend* (Kobo) % Net Assets (Kobo) % Stock Exchange Information Stock Exchange Quotation as at March 31 (in Naira per Share) % Number of Shares Issued (in millions) 7,930 7,930 0% Market Capitalization as at March 31 (In millions of Naira) 17,208 38,381-55% * The Directors propose a Dividend payment of 15kobo (2011: 13kobo) per share on the Issued Share Capital of 7,930,197,658 ordinary shares of 50 kobo each, subject to the approval of the Shareholders at the Annual General Meeting. Financial Calendar Date (i) 3rd Annual General Meeting to receive the Audited Financial Statements for the year ended March 31, 2012 September 25, 2012 (ii) Payment of Dividend September 26, 2012 Honeywell Flour Mills Plc. 3

4 Performance Indicators Introduction Turnover( =N= billions) Profit before Tax( =N= billions) * Turnover growth was 12% from 2011 to 2012 * Turnover growth was 100% over the last five years * PBT growth was 4% from 2011 to 2012 * PBT growth was 311% over the last five years Profit After Tax (=N= billions) Earnings per Share (kobo) * PAT growth was 8% from 2011 to 2012 * PAT growth was 238% over the last five years * EPS growth was 8% from 2011 to 2012 * EPS growth was 231% over the last five years Total Assets(=N= billions) Shareholders' Funds (=N= billions) * Assets growth was 54% from 2011 to 2012 * Assets growth was 114% over the last five years * Shareholders' Funds growth was 11% from 2011 to 2012 * Shareholders' Funds growth was 240% over the last five years Honeywell Flour Mills Plc. 4

5 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the 3rd Annual General Meeting of Honeywell Flour Mills Plc as a publicly quoted Company will hold as follows: Introduction Date: Tuesday, 25th September, 2012 Venue: Civic Centre, Ozumba Mbadiwe Street, Victoria Island,. Time: 11a.m The following will be transacted at the meeting as ordinary business: (i) (ii) (iii) (iv) (v) (vi) To receive the Audited Financial Statements for the year ended 31 March, 2012 together with the Report of the Directors, Auditors and Audit Committee thereon. To declare a dividend. To elect Directors. To approve the remuneration of Directors. To authorise the Directors to fix the Auditors remuneration To elect members of the Audit Committee. Proxy: Any member of the Company entitled to attend and vote at the Annual General Meeting is also entitled to appoint a Proxy to attend and vote in his/her stead. A Proxy needs 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 Limited, 2 Abebe Village Road, Iganmu 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. Dividend: If the Dividend recommended by the Directors is approved by the members at the Annual General Meeting, Dividend will be paid by Wednesday, 26 September, 2012 to the Shareholders whose names appear in the Company's Register of Members at the close of business on Friday 31 August, Closure of Register and Transfer Books: The Register of Members and Transfer books will be closed from Monday 3 September, 2012 to Friday 7 September 2012, both days inclusive for the purpose of updating the Register of Members. E-Dividend: Notice is hereby given to all Shareholders to open bank accounts, stock broking accounts and CSCS accounts for the purpose of dividend. A detachable application form for e-dividend is attached to this Annual Report to enable all Shareholders to furnish particulars of their accounts to the Registrar (First Registrars Limited) as soon as possible. BY ORDER OF THE BOARD Oluwayemisi Busari (Mrs) Company Secretary Honeywell Flour Mills Plc. 5

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7 Directors and Other Corporate Information Introduction Board of Directors Dr. Oba Otudeko, D.Sc. (Hon.), CFR Chairman Folaranmi Babatunde Odunayo Executive Vice Chairman/CEO Adebisi Otudeko (Mrs) Resigned with effect from 01 July, 2011 Obafemi Otudeko Dr. Nino Albert Ozara Executive Director Lt. General Garba Duba [Rtd] David William Obray (South African) Chief Kola Jamodu, MFR Resigned with effect from 15 July, 2011 Akinsoji Akintayo Jens Mollenbach (Danish) Appointed with effect from 05 April, 2011 Theophilus Oluranti Sokunbi Appointed with effect from 17 October, 2011 Secretary Oluwayemisi Busari (Mrs) Tel: , Operational Office 2nd Gate Bye-Pass Tin Can Island Port Apapa, Website: hfml@honeywellflour.com Registrars First Registrars Nigeria Limited 2, Abebe Village Road Iganmu, Registered Office SW8/1185 Sanda Street Molete, Ibadan Bankers Access Bank Plc Keystone Bank Limited (Formerly Bank PHB Plc) Diamond Bank Plc Ecobank Nigeria Plc Fidelity Bank Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Standard Chartered Bank Nigeria Limited Union Bank of Nigeria Plc United Bank for Africa Plc Zenith Bank Plc Auditors Balogun Badejo & Co (Chartered Accountants) 24, Ilupeju Bye-Pass Ilupeju, Honeywell Flour Mills Plc. 7

8 Business Review Chairman s Statement 9-12 Chief Executive Officer s Report The Board of Directors Profile The Report of the Directors The Report of the Audit Committee 28 Honeywell Flour Mills Plc. 8

9 Chairman s Statement Business Review Fellow Shareholders, Distinguished Ladies and Gentlemen: It is with much pleasure and delight that I welcome you all to the 3rd Annual General Meeting (AGM) of your Company, Honeywell Flour Mills Plc. I appreciate the privilege to once again present to you, our Company's Annual Report and Financial Statements for the year ended March 31, Distinguished Shareholders, this is our 3rd Annual General Meeting since the landmark public listing of our Company on the Nigerian Stock Exchange (NSE) in In the period between that watershed moment and today, we have surmounted many challenges as a business and have grown, year-on-year, despite a particularly difficult operating environment. My statement to you today will enunciate the more recent accomplishments of our Company. Dr. Oba Otudeko, D.Sc. (Hon.), CFR Honeywell Flour Mills Plc. 9

10 Chairman s Statement... cont d Business Review Characteristically, I will begin my address with a brief review of the economic environment, globally and domestically, within which we operated in the last financial year and upon which our performance can be objectively assessed. Global Economic Environment The economic events of the last three quarters of 2011 and the first three months of 2012 were largely influenced by incidents of sovereign debt crises across several European countries which had resultant adverse effects on the world economy and significantly lowered global growth for the period. In its 2011 estimates for growth in world economic output, the International Monetary Fund (IMF) reported a decline of 1.4 percentage points from 5.2% in 2010 to 3.8% in This slowdown in growth was on account of the inter-relationship between the crisis of confidence generated by the emerging cracks in the Eurozone and the slowdown in both US jobs creation and manufacturing in Asia. These factors were exemplified in the massive financial bailouts arranged for Greece and Portugal and the recurring threat of defaults on repayment of government bonds by Spain and Italy. In the United Kingdom, unemployment reached a 17 year high while the United States experienced disappointing job creation rates and had its coveted AAA credit rating downgraded by the rating agency, Standard and Poor. The decline in growth in the Western World expectedly led to a reduction in demand for goods produced in the East. China experienced a deceleration in production and raised interest rates several times during the period even as it faced concerns of an overheating economy. In Africa, a nine month-long civil war in Libya was the high point of several revolutions that gripped northern Africa and contributed to keeping the international price of crude oil above the USD100 mark for most of Nigeria Economic Environment The successful outcome of the 2011 April General Elections followed by the swearing in of President Goodluck Jonathan in May 2011 triggered the commencement of real economic activities in the country. On a macro level, Nigeria's performance during the review period was in line with global trends, as economic performance was less impressive than the year before. The National Bureau of Statistics (NBS) estimated the real growth rate of Gross Domestic Product (GDP) for each consecutive quarter of our financial year to be 7.61%, 7.3%, 7.68% and 6.17% which were all lower than in the corresponding quarters in the preceding financial year. Despite the best efforts of the Central Bank of Nigeria (CBN), inflation for the period remained in double digits and peaked at 12.6% in January 2012, following the industrial strikes that greeted the announcement of a removal of fuel subsidies. In the CBN's bid to tighten fiscal policy, it increased the Monetary Policy Rate (MPR) multiple times up to 12% prevailing in March This measure led to an increase in interest rates and a resultant decline in credit growth to the real sector which had negative impact on many businesses. In November 2011, after many months of defending the national currency even in the face of dwindling external reserves, the CBN devalued the Naira by increasing the official exchange rate mid-point from N150 to N155 per USD with a plus/minus 3% band. This also had negative effects on import dependent businesses and heightened the fears of foreign investors. Crude oil output was relatively stable at above 2.2 million barrels per day and Nigeria reaped the benefits of high prices on the country's reference crude oil, Bonny Light, which sold for over USD100 per barrel for most of the period. The security situation in the northern part of the country worsened, resulting in loss of lives and properties and significantly restricting the movement of goods and personnel in the region. Honeywell Flour Mills Plc. 10

11 Chairman s Statement... cont d Business Review Our Performance Dear Shareholders, the financial year ending March 31, 2012 was a remarkable one for our Company. We posted an improved performance in spite of the various operating challenges especially the high costs of raw materials, energy and logistics. Broad sales growth was achieved across our strong food brands resulting in a 12% increase in revenue from N34 billion to N38 billion. Let me emphasize that this growth was only constrained by challenges to pass on input costs into higher prices and our running out of production capacity. Good management of our costs led to a Profit before Tax (PBT) of N3.66 billion, relative to last year's performance of N3.51 billion; a growth of 4% yearon-year. It is most heartening to further reassure you that we have a very good business and our fundamentals reinforce this assertion. Our Company's Profit after Tax (PAT), for the year in review, rose 8% to N2.7 billion from N2.49 billion achieved in Earnings Per Share (EPS) rose by the same margin of 8% to kobo while Shareholders' Funds and Total Assets increased by 11% and 54% to N17 billion and N45 billion respectively. It is a great time to be in the foods business. All the indicators point to the fact that we are at the cusp of a new era, one which will require the ability to iteratively adopt and adapt to the changing tastes and habits of consumers. And because we are well aware of this emerging reality, we are positioning your Company to be the leading Fast Moving Consumer Goods (FMCG) manufacturer in Nigeria. In the last one year, we made significant investments, not only in increasing plants and machinery capacity but also in improving human capabilities through various overseas and local technical trainings and leadership development programmes for staff to further drive innovation and growth. Dividend Having achieved good performance in the year, we re-affirm our resolve to create value for shareholders and pass on same; as such the Board of Directors has recommended a total dividend pay-out of N1.19 billion representative of a distribution of 15 kobo for every 50 kobo ordinary share held. Subject to your th approval, the dividend will be paid on 26 September, This recommendation is in line with our dividend policy of providing shareholders with steady, growing and sustainable dividends. Honeywell Superfine Foods Limited Our wholly owned subsidiary Honeywell Superfine Foods Limited a foods-focused FMCG company currently producing great tasting snacks, instant noodles and pasta products under the Honeywell brand, made considerable progress during the year in review. The Company recorded sales gains to achieve a turnover increase of 64% up to N7.8 billion while Profit after Tax (PAT) climbed 10% to reach N83 million. Our continued success in this line of business depends on our ability to anticipate customers' needs, develop appropriate products to fulfil those needs and then educate them on the benefits of choosing the Honeywell brand every time. To achieve this, we have begun supporting our brands with higher media spend and our marketing efforts are now being geared towards striking more intimate chords with our cherished customers and esteemed distributors. Our key focus over the next few months is to forge strategic partnerships with retailers across various channels to enhance product visibility and drive sales growth. The performance for the financial year ending March 31, 2013 is expected to reflect a significant improvement of the FY 2012 performance. Board Messrs. Jens Mollenbach and Oluranti Sokunbi joined the Board on April 5, 2011 and October 17, 2011 respectively as non-executive Directors. In accordance with the Company's Articles of Honeywell Flour Mills Plc. 11

12 Chairman s Statement... cont d Business Review Association, the following Directors namely, Mr. Folaranmi Babatunde Odunayo, Dr. Nino Ozara and Mr. Akinsoji Akintayo retire by rotation at this AGM and being eligible offer themselves for re-election. Also Mr. Oluranti Sokunbi retires at this AGM and being eligible, offers himself for election. Mr. Jens Mollenbach was elected at the last AGM and is not due for retirement. Distinguished Shareholders, please join me in appreciating the contribution of members of the Board to the success of our great Company. They provide robust insight and guidance to the Management of the Company and their impact is evident in the financial results presented here today. Appreciation On behalf of the Board of Directors, Shareholders and Management of Honeywell Flour Mills Plc., I wish to express our deep sense of gratitude to our loyal customers, without whose patronage these excellent results would not have been achieved. The hard work, diligence and professionalism of all staff of the Company across the country are also appreciated. The enduring attitude of growing together, embracing challenges and being accountable is very much in consonance with our shared values. profits going forward, especially if we cannot pass these increases to consumers. Last year, at this forum, I informed you all of our progress on the on-going expansion of our milling capacity from 1,610MT/day to 2,610MT/day. This 62% capacity increase is being complemented with additional investments in power generation, grains storage and finished goods warehousing facilities. These projects are due to come on stream in October 2012 and will strengthen our competitive ability and help to meet the growing demand for our high quality food products. In summary, I expect next year to also be better than this year despite the challenges we expect to face. Conclusion In concluding, I want to thank you for your investment in Honeywell Flour Mills Plc. and for your support and faith in the ability of the Board of Directors to direct the affairs of your Company. I assure you of our commitment to continue to grow shareholder value and create wealth for our dear country. I say a big 'Thank You' to all distinguished shareholders and guests here today and wish you all outstanding success in the years to come. Thank you for your kind attention and do have a pleasant Annual General Meeting. God bless you. We also appreciate the great relationships we have cultivated and continue to enjoy with our distributors, logistics service providers and suppliers. OBA OTUDEKO, CFR Chairman Future Outlook We operate in a dynamic business environment and the challenges of yesterday will be significantly different from those of tomorrow. Fellow Shareholders, the 2013 financial year will be no less challenging but we shall not be daunted by the magnitude of the obstacles ahead. Already, the drought in the US is being felt in the price hike for wheat, our key raw material. Furthermore, the impact of an upward review in import tariffs for our raw materials will also be felt and is going to affect our Honeywell Flour Mills Plc. 12

13 Business Review Chief Executive Officer s Report Distinguished Shareholders, It gives me great pleasure to welcome you to the 3rd Annual General Meeting of the Company, and to address you on some key activities of the Company during the last financial year, especially such issues as had defined the financial performance of the Company. Introduction During the financial year, we began actively to execute the Mill expansion project. As always, expansion projects involve a lot of planning and checking of engineering details often to micro levels in order to ensure that the outcome will enable us achieve the production and quality objectives that were envisaged in the first instance. I am happy to report that the painstaking effort by Management and the Project Team did not distract us from the achievement of superior earnings and profit levels in the year under review. We were faced with the challenges of rising interest rates from a tolerable 12% to 14% and then to 16% by the end of the financial year. The liquiditymoping up effort of the Central Bank of Nigeria which resulted in rising interest rates also led to a depreciation in the value of the Naira. Wheat prices remained bullish during the financial year under review and this exerted a push on input cost. Traffic gridlock around Tin Can Island Port, our operational base, was probably the greatest challenge we faced throughout the financial year. We have our customers and suppliers to thank for their abiding support despite the difficulties of coming and going, and especially for the many hours lost in the traffic gridlock in and around the Port. A lasting solution to the traffic congestion had been identified by the Federal Government since the Folaranmi Babatunde Odunayo construction of a Trailer Park for the articulated trucks which visit the Port on a daily basis for goods evacuation. The contract was awarded in year 2010, and construction works commenced in earnest. However, the project came to a standstill in early 2012 and no progress has been recorded since then. It would appear that a fundamental disagreement has developed between the Federal and the State Governments as to which of the two of them is statutorily empowered to embark on such a project. It remains our fervent hope that this will soon be resolved so that a condusive infrastructure can arise for Port users and manufacturers like ourselves that are embedded within the Tin Can Island Port environment. Despite these challenges, the Company was able to achieve improved earnings and profit. We were also able to successfully defend our quality superiority and brand leadership positions across all our product offerings. We are proud to say that our flour, semolina, and wheat meal products remained in peak demand whilst significant growth was experienced in respect of our pasta and noodles products. Honeywell Flour Mills Plc. 13

14 Chief Executive Officer s Report... cont d Business Review Business Performance We recorded modest improvements across key performance metrics during the financial year. The Company posted a turnover of N38billion, representing a growth of 12% over Profit before Tax also grew by 4% to N3.7billion, whilst Profit after Tax grew by 8% to N2.7billion. Other performance metrics worthy of mention include a growth of 54% and 11% in total assets and shareholders' funds respectively. Marketing management is at the core of our strategy to build an enduring business through the development of brand equity in our product offerings across the trade. Our brand building activities are well supported by a strong drive for consistency in product quality in respect of which our brands are already well known for. During the year, we intensified our brand advertising effort and this has greatly enhanced awareness for some of our brands. The now famous 'ipod man', also known as 'Bam Bam La La' ( our television commercial for Honeywell Noodles ) has put the brand in the consciousness of the Nigerian consumers. The advert was an instant success as it was very well accepted by consumers, young and old. The positive impact of this advertisement on earnings and profits will be significantly felt in the st financial year ending 31 March, Our Honeywell Semolina brand continues to enjoy dominance in the trade. It is the preferred brand in this category, and for this reason there exists a huge potential for further growth. Our Mills E&F expansion project which is planned for commissioning in October 2012 envisages a doubling of our Semolina production capacity from 125metric tonnes per day to 235metric tonnes per day. Our star product, Honeywell Wheat Meal will gain the potential of an increase in capacity from 70mt/24hours to 420mt/24hours when the mill expansion project is completed. This product remains customers' favourite brand in its category, as sales volume grew from 11,401mt in 2011 to st 15,578mt in the financial year ended 31 March, Customer Care A strong customer care culture supports our drive to deliver quality products and a satisfactory service to our customers. It is at the core of our strategy to sustain the loyalty of our customers through a favourable perception of the Corporate brand. We strive for consistency in product quality, and see to it that our customers have a satisfying experience during the ordering process. Our goal is prompt delivery service and the provision of a customersatisfying after-sales service. We resolved 44 customer complaints in 2012 financial year, most of which arose from poor customer product handling and storage. In the case of flour, we also carry out baking demonstrations to show bakers better baking methods and how they can maximize their yield from the use of our flour. Most of the customers we service in this manner are indirect customers, bakeries who buy our flour from dealers and sub-dealers. No matter where the complaints come from, we endeavour to reach complainants within 24hours of receiving such complaints and help them to resolve the problems. For Noodles and Pasta products, additional customer care support comes by way of experiential activities which are designed to demonstrate to customers how best to cook the products for maximum meal experience. This takes place in schools, restaurants, market places, trade fairs and other public places where consumers can be reached. Our customer care efforts are supported by other marketing activities which help to widen the demand potentials for our brands. Baking School Our Baking School, whose doors were opened in 2006, was set up to provide an intensive theoretical and practical baking training to Master Bakers who Honeywell Flour Mills Plc. 14

15 Chief Executive Officer s Report... cont d Business Review already have established themselves as bakers after undergoing informal apprenticeship training in owner-operated bakeries across the country. Such bakeries constitute 95% of the bakeries in Nigeria. Our Baking School admits these bakers and imparts on them the theoretical and scientific knowledge which underpin the baking process so that they can truly become masters of their baking operations. With the knowledge which they receive at the Baking School, many of them can now deliver higher baking yield, better quality bread and superior profits from their operations. Our Baking School is fully equipped with modern baking equipment and is manned by well qualified staff who received their training from the American Institute of Baking in Manhattan, Kansas State, USA. Our Baking School provides an essential service to Nigerian Bakers (about 250 of them have been trained so far) and they are admitted to the programme regardless of the brand of flour they use at their bakery at the time of enrollment. Whilst we see it as a Corporate Social responsibility to give back to society from which the Company has also benefitted, there is no doubt that the programme also helps us to build a strong customer loyalty as attendees get to appreciate the quality of our brands. Our Baking School graduation ceremonies are well publicized in the media. The successes and the attendant positive public perception have a beneficial effect on all our brands. Plant Expansion. Last year, we informed you of the plan to expand our milling capacity. Already in my address, I have made references to this expansion work with respect to our Whole Wheat Meal and Semolina. We are happy to inform you that the planned commissioning of Mills E&F in October 2012 will enable your Company to achieve a 62% capacity increase, from 1,610mt/24 hours to 2,610mt. Flour output will increase by 55% to 1,534mt/24 hours whilst Semolina's daily output will almost double, from 125mt to 235mt. The existing Mills as well as the new ones have been configured in such a manner as to permit us the flexibility to make changes to our production mix at any point in time so that actual production can reflect the prevailing customer needs and the attendant profitability profile. The full impact of the production capacity increase on our earnings will be felt in the financial year ending March 2014, whilst for the year ending March 2013, only the last 5 months of the financial year will be impacted. The new production facility will include 30,000mt of storage silos, and an automated palletization and stacking system in the flour warehouse. Agricultural Transformation Agenda. The new Agricultural Transformation Agenda of the Federal Government, among other objectives, seeks to promote the use of local crops in industrial food production, thus enhancing their use in the food value chain. The Federal Government's plan as regards cassava, has the following objectives; a) to achieve up to 40% substitution of cassava flour in wheat flour that is used in bread production, and a consequent increase in the market for cassava tubers of more than 800,000mt. b) create new opportunities for native and modified starch by raising production level to 280,000mt by 2015 c) to take advantage of new global market opportunities for dried chips by producing 900,000mt of cassava chips for export by d) to expand market opportunities for the use of cassava as a sweetener (High Fructose Cassava Syrup) in the soft drinks industry by producing up to 182,000mt of high fructose cassava syrup e) to take advantage of emerging market opportunities in fuel ethanol by utilizing cassava to produce up to 1.2 billion litres of ethanol, using up to11million mt of cassava. According to the Policy Agenda, these measures will generate 1.2million jobs in Nigeria. With respect to the Flour Milling industry, the Honeywell Flour Mills Plc. 15

16 Chief Executive Officer s Report... cont d Business Review implementation of the Cassava Transformation Agenda has had the unfortunate effect of increasing production cost by way of a duty levy of 15% on wheat grain, thereby raising effective duty to 20%. st This levy was introduced with effect from 1 July, Whilst this levy was introduced to encourage the use of cassava flour in the flour milling industry, the supply of high quality cassava flour remains in short supply. With other members of the Flour Milling industry, we are in dialogue with the Federal Government to express our support for the local inclusion policy and to discuss our successes and challenges on the road to the full implementation of the Cassava value chain Policy. We are happy to report that discussions have been fruitful and it is our expectation that the room for dialogue will be kept open. All Flour Mills in the world are engineered to accept a maximum of 3% return flour for reprocessing. The reprocessing route is available for the introduction of cassava flour in the Mill, and this is how we are presently able to add cassava flour to wheat flour. Fortunately, we have already engineered the new Mills, soon to be commissioned, with a cassava flour receiving and processing facility at a 10% inclusion rate. The older mills in our factory as currently engineered can only accept a maximum of 3% cassava flour, and we are in the process of reengineering them to allow the 10% inclusion rate. This rate is the maximum that can be attained in a wheat mill, given the natural characteristics of cassava flour. The process changes and reengineering in the older mills will require considerable investment and a lead time of at least 12 months. We have already embarked on this course. The attainment of 10% inclusion capability will position us for increased cassava flour usage as and when this becomes more available in the market place. The blending of up to 40% cassava flour with wheat flour, as envisaged in the Government's programme can take place only at the bakery level whilst Flour Milling plants can blend up to a maximum of 10% cassava flour. The Government may already have accepted this technical position as plans are already underway by Government to train bakers and support them with blenders and other necessary equipment. In conjunction with our technical partners, we are carrying out tests with some new enzymes on composite flour in order to be able to achieve the required 10% cassava flour inclusion rate in wheat flour, without compromising consumer acceptance of bread from the composite flour. Human Capital Development The technical and professional strength of our people remain our source of competitive advantage. We are an equal opportunity employer with a dynamic people-management practice. The Company does not discriminate in its employment policies and practices, and has consistently participated in high level career fairs to attract highly qualified professionals. In the year under review, a total of 757 employees were in the service of the Company and its Subsidiary as against 656 in the previous year. Our employees' retention strategies have also been very effective as evident in our low attrition during the year under review. We acknowledge that the Company's ability to sustain a competitive advantage over the long term is dependent on continuous development of our employees through skills empowerment. As part of our effort to ensure that the required levels of skills and competencies are regularly available, about 90% of our staff benefited from learning opportunities, locally and internationally, in the year under review. Health, Safety and Environment:- The total well-being of our employees is of priority and as such, we pay close attention to the enforcement of safety and hygiene regulations within the premises as well as off-site. Our Health Honeywell Flour Mills Plc. 16

17 Chief Executive Officer s Report... cont d Business Review and Safety Committee drives the implementation of our Health, Safety and Environment programmes for continuous elimination of risks to the health and well-being of our staff. Our employees' medical coverage which is provided by a leading Health Maintenance Organization (HMO) is consistently being challenged to deliver timely and qualitative health care to our employees. We also operate an adequately equipped, government-accredited inhouse clinic to complement the services of the Health Maintenance Organization. The clinic organizes a monthly Health Talk for staff on relevant and topical health and environment issues. International Financial Reporting Standards (IFRS) The Securities and Exchange Commission (SEC) has mandated all companies quoted on the Nigerian Stock Exchange to prepare their Financial Statements under IFRS guidelines by year It is rightly believed that it will be in the interest of the Nigerian economy for reporting entities to adopt globally accepted accounting standards. The IFRS standards which are issued by the International Accounting Standards Board aim to provide a single set of high quality, global accounting standards that require transparent and comparable information in general purpose Financial Statements. our internal business processes, systems, and procedures across functions and departments in the Company, including the implementation of a comprehensive and robust IFRS-compliant Enterprise Resource Planning (ERP). Conclusion We are well positioned to aggressively grow our business and increase our market share in an increasingly competitive environment.the expected commissioning of the new Mills E&F by October 2012 will provide the opportunity for significant improvement in earnings, profitability, assets base, and shareholders' value. On behalf of the Management and Staff of the Company, I wish to express our appreciation to the Chairman and the Board for their guidance and support during the year. I will also like to thank the Management and Staff for their loyalty and team work which has made the achievement of these financial results possible. To our suppliers, dealers and customers, I also say thank you for your steadfast support. And to the Shareholders, we say thank you for your faith in the prospects of the Company. Thank you very much for your attention. Consequently, your Company and its fully owned Subsidiary are currently at an advanced stage in the transition from the adoption of the Nigerian General Accounting Standards to that of the International Financial Reporting Standard (IFRS). The Financial Statements for the year ending March 31, 2013 will be prepared and presented on the basis of IFRS. The comparable figures for the year ended March 31, 2012 will be restated on IFRS basis in the full IFRS Financial Statements for year We have also commenced the process of embedding the IFRS into Babatunde Odunayo Executive Vice Chairman /CEO Honeywell Flour Mills Plc. 17

18 A View of Honeywell Flour Mills Plc s Expansion Project in Progress.

19 THE BOARD OF DIRECTORS Business Review 1 Dr. Oba Otudeko, D.Sc. (Hon.), CFR Chairman He is an entrepreneur with business interests spanning various sectors of the Nigerian economy Folaranmi Babatunde Odunayo Executive Vice Chairman/CEO He attended Kings College, and completed University education at the then University of Ife in Lt. General Garba Duba (Rtd.) Non-Executive Director General Duba is a retired Lieutenant-General of the Nigerian Army... Jens Erik Mollenbach Non-Executive Director Mr. Mollenbach, a Danish National, graduated in 1972, from Copenhagen University with a Masters Degree in Economics... Honeywell Flour Mills Plc. 19

20 THE BOARD OF DIRECTORS 5 6 Theophilus Oluranti Sokunbi Non- Executive Director Former Managing Director, West African Portland Cement Plc... Obafemi Otudeko Non-Executive Director He is a Chartered Accountant and an Executive Director of the Honeywell Group Dave Obray (South African) Non -Executive Director Mr. Obray, a South African, an Electrical Engineer had his academic and professional training in South Africa... Akinsoji Akintayo Non-Executive Director Mr. Akintayo had a robust career with Honeywell Flour Mills where he was initially employed in the position of Financial Controller and later Finance Director... Dr. Nino Albert Ozara Executive Director, Production Dr. Ozara graduated with a First Class Honours Degree in Soil Science at the University of Ibadan in Honeywell Flour Mills Plc. 20

21 THE BOARD OF DIRECTORS Dr. Oba Otudeko, D.Sc. (Hon.), CFR Folaranmi Babatunde Odunayo Lt. General Garba Duba (Rtd.) A Fellow of the Chartered Institute of Bankers, UK, Institute of Chartered and Corporate Accountants, UK; Institute of Chartered Accountants of Nigeria and Institute of Chartered Secretaries and Administrators of Nigeria. He is the Chairman of Honeywell Group of Companies, Fan Milk Plc and Bharti Airtel (Airtel Nigeria). He is also a Director of Khalil & Dibbo (Haulage) Limited and Sheraton Hotel. He is a former Director of Central Bank of Nigeria, Ecobank Transnational Incorporated, British American Tobacco Company Limited and Franco-Nigerian Chamber of Commerce and Industry. He is also a former Chairman of the Board of First Bank of Nigeria Plc and former President of the Nigerian Stock Exchange. He is a member of the office of Distinguished Friends of London Business School. He worked with Coopers & Lybrand, an international firm of Chartered Accountants in the Audit and Management Consulting units for nearly 10 years. Before he joined the Honeywell Group in 1992, he was the Finance Director of Hagemeyer Nigeria Plc. (now known as DN Meyer Plc). He was appointed the first Managing Director of Honeywell Flour Mills Plc in April 1997 and has led the growth of the Company from business commencement until this day. He is the Vice Chairman of the Business Advisory Council of the Faculty of Business Administration, University of, Vice Chairman, Flour Millers Association of Nigeria and a Council member of the Association of Operative Millers, Middle East and Africa. He was appointed the Executive Vice Chairman of the Company in November He is also a member of the Eko Forum of the National Electricity Regulatory Commission A Military Administrator of Sokoto State ( ), Bauchi State (1984), General Officer Commanding, 2nd Mechanized Division, Nigerian Army ( ), General Officer Commanding, 3rd Armored Division and Commandant, Nigerian Defense Academy ( ). General Duba has played several political and economic roles as Leader of the Niger State delegation to the National Political Reform Conference and Chairman, New Nigerian Development Company Ltd. He is currently the Chairman, SGI Nigeria Limited, a Director of First Bank of Nigeria Plc and has been on the board of Honeywell Flour Mills Plc since August Jens Erik Mollenbach Theophilus Oluranti Sokunbi Obafemi Otudeko His impressive career has spanned He attended several management courses At the Honeywell Group, he has primary lecturing, marketing, insurance and, both locally and internationally which responsibility for the Group's Strategy & consulting. He has held various executive included Senior Management Development Coordination, Corporate Development and management positions at BP Denmark Ltd, programmes at Ashridge Management Risk Management. He also has direct BP International Plc London and Hafnia College and Total Quality Management oversight over the Group's Portfolio Services Ltd. Between 1995 and 2006, Mr. Course from the Business School. He Investments. He joined the Honeywell Mollenbach was the Managing Director of held various management positions at West Group in 2003 as a Senior Manager in the R.T. Briscoe (Nigeria) Plc and the African Portland Cement Plc, and was the Oil and Gas projects group, responsible for Managing Director of Fan Milk Plc from Managing Director of the Company between strategy formulation and business 2006 to May He joined the Board of 2003 and He is a member of several development. Prior to joining the Honeywell Flour Mills Plc in April 05, professional bodies including Nigerian Honeywell Group, he was a Senior Institute of Management and the Nigerian Associate in the Financial Services Industry Institute of Marketing. He is presently the Practice of PricewaterhouseCoopers where Chairman of Jacobs Educational Services Ltd and Tonbol International Ltd. He joined the Board of Honeywell Flour Mills on October 17, he provided Assurance and Advisory services to clients in the private and public sectors. He has been a member of the Board of Honeywell Flour Mills since He is also a Director of First Bank Nigeria Plc Dave Obray (South African) Akinsoji Akintayo Dr. Nino Albert Ozara He has held various positions of He was Finance Director at Honeywell Flour He was a University of Ibadan and Mills Plc, and was later appointed the Group Commonwealth Scholar. Dr Ozara responsibility including that of District Chief Finance Officer of the Honeywell obtained a Doctorate Degree in Soil Engineer ( ), Resident Engineer, Group in He is a Chartered Science from Silsoe College, Cranfield Divisional Managing Director ( Accountant and a member of the Institute of Institute of Technology, United Kingdom in 1987) of Fraser and Chalmers and Project Cost and Management Accountants, U.K Manager ( ) of Babcock International both in South Africa. Mr. Obray is currently the Managing Director and the Certified General Accountants of Ontario, Canada. He was previously in the employment of Federal Express in Canada, Before joining the Honeywell Group in 1998, Dr Ozara was a University lecturer and Head of Department of Crop of Pivot Engineering Company Limited, a Consolidated Breweries Limited, Phillips Production in 1996 at the Federal Consulting and Unilever AUDIT Nigeria of University of Technology, Owerri, Nigeria. position he has held since He joined UAC of Nigeria Plc. He was appointed to the After joining the HFM Plc, he was trained the board of Honeywell Flour Mills in Board of the Company in May as a Miller at the Swiss Milling School in Switzerland. Honeywell Flour Mills Plc. 21

22 The Report of the Directors for the Year Ended 31 March, 2012 The Directors have pleasure in submitting to members their annual report together with the audited financial statements for the year ended 31 March, Business Review LEGAL STATUS Honeywell Flour Mills Plc (HFM Plc) was initially registered as GATEWAY HONEYWELL FLOUR MILLS LIMITED on 9 July, 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 2009 PRINCIPAL ACTIVITIES The Group is principally involved in the manufacturing and marketing of wheat-based products including flour, semolina, whole wheat meal, noodles and pasta. RESULTS Group Company N'000 N'000 Turnover 38,071,502 32,949,173 Profit before taxation 3,663,134 3,561,415 Taxation (960,703) (960,703) Profit after taxation 2,702,431 2,600,712 DIVIDEND The Directors are pleased to recommend to the shareholders the payment of dividend in respect of the year of N1,189,529,648.70, that is 15 kobo per share. This is subject to deduction of appropriate withholding tax. PRODUCT 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 high ethical standards. BOARD COMPOSITION The Board consists of a Non-Executive Chairman, six (6) Non-Executive Directors, and two (2) Executive Directors, all bringing high level 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 judgement as the Directors of the Company. ROLE OF THE BOARD The Board has the responsibility for ensuring that the Company is appropriately managed and achieves its strategic objectives with the aim of creating a sustainable long term value for the shareholders. BOARD MEETINGS Members of the Board of Directors hold quarterly meetings to decide on policy matters and to direct the affairs of the Company, review its operations, finances and formulate growth strategy. Board agenda and reports are provided ahead of meetings. Honeywell Flour Mills Plc. 22

23 The Report of the Directors...cont d Business Review RECORD OF DIRECTORS' ATTENDANCE AT 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 is available at the Annual General Meeting for inspection. Further, and in line with Corporate Governance principles, details of attendance of the current Directors at the Board meetings are as follows: Names of Directors Number of Number of Meetings held Meetings attended Dr. Oba Otudeko, D.Sc. Hon. CFR 5 5 Folaranmi Babatunde Odunayo 5 5 Obafemi Otudeko 5 4 Dr. Nino Albert Ozara 5 5 Lt. General Garba Duba (rtd) 5 4 David William Obray 5 3 Akinsoji Akintayo 5 4 Jens Mollenbach 5 5 Theophilus Oluranti Sokunbi* 5 2 * Appointed with effect from 17 October, BOARD CHANGES Messrs Jens Mollenbach and Theophilus Oluranti Sokunbi joined the Board on 5 April, 2011 and 17 October, 2011 respectively as Non-Executive Directors. Mrs Adebisi Otudeko and Chief Kola Jamodu also resigned on 1 July, 2011 and 15 July, 2011 respectively. In accordance with the Company s Articles of Association, the following Directors namely, Mr. Folaranmi Babatunde Odunayo, Dr. Nino Ozara, Mr. Akinsoji Akintayo retired by rotation this Annual General Meeting and being eligible, offer themselves for re-election. Also, Mr. Oluranti Sokunbi retires at this Annual General Meeting, being eligible offers himself for election. Mr. Jens Mollenbanch has already been elected at the last AGM. DIRECTORS AND DIRECTORS INTEREST The names of the current Directors are listed on page 7. 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 as stated hereunder: At 20 June, 2012 At 21 June 2011 Indirect Direct Number of Shares Number Number Dr. Oba Otudeko, D.Sc. Hon. CFR* 1,247,264,003 1,247,264,003 1,247,264,003 Folaranmi Babatunde Odunayo 200, , ,000 Obafemi Otudeko* 567,951, ,951, ,951,925 Dr. Nino Albert Ozara 250, , ,000 Lt. General Garba Duba (rtd) 537, , ,600 David William Obray 200, , ,000 Akinsoji Akintayo 200, , ,000 Jens Mollenbach 150, ,000 Oluranti Sokunbi *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 who is a 75% equity holder in the Company. Honeywell Flour Mills Plc. 23

24 The Report of the Directors...cont d Business Review DIRECTORS' INTEREST IN CONTRACTS None of the Directors have notified the Company for the purpose of Section 227 of the Companies and Allied Matters Act, CAP C20 LFN 2004 of any disclosable interest in contracts with which the Company was involved during the year ended 31 March, 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, the Directors are responsible for the preparation of annual financial statements which give a true and fair view of the state of affairs of the Group and the Company, and of the profit for the financial year. The responsibilities include ensuring that: Appropriate internal controls are established both to safeguard the assets of the Group and to prevent and detect fraud and other irregularities; The Group keeps accounting records which disclose with reasonable accuracy the financial position of the Group and ensure that the financial statements comply with the requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004 and Financial Reporting Council of Nigeria; The Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been followed; and It is appropriate for the financial statements to be prepared on a going concern basis unless it is presumed that the Company and its subsidiaries 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 judgements and estimates, in conformity with Statements of Accounting Standards and the requirements of the Companies and Allied Matters Act, CAP C20 LFN 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 Group and of the trading result for 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 Group will not remain a going concern for at least twelve months from the date of this statement. \ 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. Honeywell Flour Mills Plc. 24

25 The Report of the Directors...cont d Business Review 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. We therefore see the investment in our people as major part of our strategic development and have maintained a consistent policy of training our staff, both locally and abroad to enhance their skills and competence. Health and welfare of employees The Company maintains a staff clinic with two full-time nurses and weekly attendance by a physician. It also offers free medical services through a Health Management Organisation (HMO) provider to all members of staff. The Company continuously strives to improve its operation to ensure a safe working environment. It also maintains 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 prices for the senior staff. AUDIT COMMITTEE In compliance with section 359 (4) of the Companies and Allied Matters Act of Nigeria, members of the Audit Committee were elected at the Annual General Meeting held on September 26, Members that served on the Committee during the year comprise: Adebayo Adeleke, Alhaji Lateef Ayodeji Shonubi Gabriel Olagunju, Lt. Gen. Garba Duba (Rtd) Dave Obray, Akinsoji Akintayo Chairman/Shareholder Shareholder Shareholder Director Director Director The Committee in the conduct of its affairs review 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, Law of the Federation of Nigeria, The Committee met four times during the year under review. QUALITY POLICY The Company is committed to the continuous achievement of business success by maintaining its quality leadership in the 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. Honeywell Flour Mills Plc. 25

26 The Report of the Directors...cont d SHAREHOLDING ANALYSIS The shareholding structure of the Company as at 31 March 2012 is as stated below: Business Review Share Range No of % of No of % of q Share holders Share holders holdings holdings 1-1,000 9, ,682, ,001-5,000 13, ,563, ,001-10,000 2, ,415, ,001-50,000 1, ,729, , , ,304, , , ,803, ,001-1,000, ,400, ,000,001-5,000, ,422, ,000,001-7,930,197, ,721,871, , ,900,194, 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, Number % Siloam Global Services Limited 5,939,363, First Bank of Nigeria Plc 542,998,167 7 BGL Securities Limited JSA/ First Bank of Nigeria Plc 492,300,310 6 DONATIONS AND SPONSORSHIP The following donations and charitable gifts were made during the year: N Widows Mind Project 886,000 Nigerian Red Cross International 145,000 Manufacturers Association of Nigeria (MAN) 100,000 Nigerian Basket Ball Federation (NBBF) 1,685,000 Boxing Hall of Fame 300,000 Federal Road Safety Commission (FRSC) 265,000 The Nigeria Police Force 100,000 Kansas State University Conference 250,000 Rotary Club International 80,000 Little Saint Orphanage 50,000 SOS, Isolo 20,000 Love Home, Magodo 10,000 Total 3,891,000 FIXED ASSETS Movements in fixed assets during the year are shown in note 1 on page 41. 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. Honeywell Flour Mills Plc. 26

27 The Report of the Directors...cont d Business Review POST BALANCE SHEET EVENT There are no post balance sheet events which could have had material effect on the financial position of the Group as at 31 March 2012 and profit 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 Balogun Badejo & Co. [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. By Order of the Board Oluwayemisi Busari (Mrs) Company Secretary 2nd Gate Bye Pass, Tin-Can Island Port, Apapa,, Nigeria. Honeywell Flour Mills Plc. 27

28 The Report of the Audit Committee Business Review 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 hereby report as follows: (a). We have reviewed the scope and planning of the audit requirements; (b). We have reviewed the External Auditors' Memorandum of Recommendations on Accounting Policies and Internal Controls together with Management responses; and (c). We have ascertained that the accounting and reporting policies of the Company for the year ended 31 March 2012 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 2012 was adequate and management responses to the auditors' finding were satisfactory. Adebayo Adeleke Chairman, Audit Committee 18 June, Members of the Audit Committee Adebayo Adeleke Chairman/Shareholder Alhaji Lateef Ayodeji Shonubi Shareholder Gabriel Olagunju Shareholder Lt. Gen. Garba Duba (Rtd) Director Dave Obray Director Akinsoji Akintayo Director Honeywell Flour Mills Plc. 28

29 2nd Gate Bye-Pass, Tin Can Island Port, P. M.B. 1105, Apapa,, Nigeria. Tel: ,

30 Honeywell Flour Mills Plc Baking School Graduation Ceremony Held on the 28th of February, 2012 Events The Management staff of Honeywell Flour Mills Plc and some of the graduating student of the 18th Honeywell Baking School. One of the graduating students, Mrs. Olufunke Fafore presenting the varieties of pastries made from Honeywell Flour. The Management staff of Honeywell Flour Mills Plc and some of the graduating student of the 18th Honeywell Baking School. L-R- Mr. F.B Odunayo (EVC/CEO HFMP), Mrs Olusola Adeniran (Best Graduating Student of the 18th Honeywell Baking School). L-R- Mr. Tunde Adebayo (Human Resources Manager), Dr. Nino Ozara (Production Director), Mr. F.B Odunayo (EVC/CEO), Mr. Benson Evbuomwan (Director, Marketing), Mr. Rotimi Fadipe (Director, Logistics & Supply). L-R- Mr. Tunde Adebayo (Human Resources Manager), Mr. Seye Ogunwole (National Sales Manager), Dr. Nino Ozara (Production Director), Mr. F.B Odunayo (EVC/CEO), Mr. Benson Evbuomwan (Director, Marketing), Mr. Rotimi Fadipe (Director, Logistics & Supply). Honeywell Flour Mills Plc. 30

31 Widows Mind Project Sponsored by Honeywell Flour Mills Plc Held on the 19th of April, 2012 Events A cross-section of Participants at the Oasis empowerment programme for the Widows Mind Project held at OGS Plaza, Akute, Ogun State. L-R- President, The Oasis Association, Engineer Gladstone Longe: Director, Marketing, Mr. Benson Evbuomwan: Founder, Widows Mind Evangelism, Mrs Florence Babatunde: Company Treasurer, Honeywell Mrs. Doyin Ibrahim: and Human Resources Manager, Honeywell, Mr Tunde Adebayo at the presentation of equipment to Oasis to facilitate widows' empowerment programme, at OGS Plaza in Ogun State. A view of some of the equipments presented to the Widows at the Oasis empowerment programme, at OGS Plaza in Ogun State. L-R- Director Marketing, Honeywell Flour Mills Plc, Mr Benson Evbuomwan presenting Certificate of training to one of the participants at the Oasis empowerment programme for the Widows Mind Project held at OGS Plaza, Akute, Ogun State. Children of some of the participants offering song of thanks to Honeywell Flour Mills Plc. Honeywell Flour Mills Plc. 31

32 Honeywell Flour Mills Plc Annual Customers Forum Held on the 11th of July 2012 Events Mr. F.B Odunayo (EVC/CEO), Dr Nino Ozara (Production Director) A cross section of Dealers present at the 2012 Honeywell Customers Forum. Alhaji Opeyemi (MD/CEO Opeyemi Bakeries Ltd), Mr Lanre Jaiyeola (Commercial Director HSFL), Mr F.B Odunayo (EVC/CEO), Dr Nino Ozara (Production Director), Mr. Benson Evbuomwan (Director, Marketing), Mr. Seye Ogunwole (National Sales Manager). The management staff and dealers of Honeywell Flour Mills Plc celebrating with a cake at the Honeywell 2012 Customer Forum. A Group Photograph of Honeywell Staff and Dealers at the Honeywell Customers Forum. Mr. Ibukun Ojo (Director, Finance), Mrs. Doyin Ibrahim (Company Treasurer), Alhaji Opeyemi (MD/CEO Opeyemi Bakeries Ltd), Mr. Lanre Jaiyeola (Commercial Director HSFL), Mr. F.B Odunayo (EVC/CEO), Dr Nino Ozara (Production Director), Mr. Benson Evbuomwan (Director, Marketing). Honeywell Flour Mills Plc. 32

33 Financial Statements Report of the Independent Auditors 34 Statement of Significant Accounting Policies Group Balance Sheet 38 Group Profit and Loss Account 39 Statement of Cash Flows 40 Notes to the Financial Statement Value Added Statement 51 Financial Summary Honeywell Flour Mills Plc. 33

34 Report of the Independent Auditors INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HONEYWELL FLOUR MILLS PLC Financial Statements We have audited the accompanying consolidated Financial Statements of Honeywell Flour Mills Plc (the Company) and its subsidiary (together, the Group) on pages 35 to 53 which comprise the Balance Sheet as at 31 March 2012, the Profit and Loss Account, Statement of Cash Flows and Value Added Statement for the year then ended, the Summary of Significant Accounting Policies, Explanatory Notes and Financial Summary. DIRECTORS RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS The Company's directors are responsible for the preparation and fair presentation of these financial statements in accordance with the Statement of Accounting Standards applicable in Nigeria and in the manner required by the Companies and Allied Matters Act, CAP C20 LFN This responsibility includes: designing, implementing and maintaining internal controls 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 both Local and 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 mis-statement. 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' judgement, including the assessment of the risks of material mis-statement 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 controls. 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 Company has kept proper accounting records and the financial statements are in agreement with the records in all material respect and give in a prescribed manner, information required by the Companies and Allied Matters Act, CAP C20 LFN The financial statements give a true and fair view of the financial position of Honeywell Flour Mills Plc and the Group as at 31 March, 2012 and of its financial performance and cash flows of the Group and of the Company for the year then ended in accordance with all relevant Accounting Standards issued by the Financial Reporting Council of Nigeria., Nigeria 2012 Chartered Accountants Partners: J.O. Asaolu, J.O. Obogwu E.U. Itodo, A.M. Adetuyi G.C.Egwuenu RC: Other Offices in Nigeria: Abuja, Akure, Benin City, Ibadan, Kaduna. Honeywell Flour Mills Plc. 34

35 Statement of Significant Accounting Policies 1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS The financial statements have been prepared under the historical cost convention. Financial Statements 2. CONSOLIDATION A subsidiary is an entity controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise. The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date control ceases. Intra-group balances and transactions, and any unrealized gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. 3. GOODWILL ON BUSINESS COMBINATION Goodwill represents the excess of the purchase consideration over the fair value of the Group's share of the separate net assets of the subsidiary acquired. Goodwill arising on consolidation of subsidiaries is accounted for in line with the provisions of paragraphs 76 and 77 of the Statement of Accounting Standards 26, which states that "goodwill arising on consolidation should be recognized in the balance sheet and not amortized but tested for impairment annually or more frequently, if events or changes in circumstances indicate that it might be impaired. Impairment losses shall be recognized immediately in the profit and loss account." 4. TURNOVER Turnover represents the net invoiced value of goods sold to third parties, net of discounts and value added tax. 5. FIXED ASSETS Property, Plant and Equipment are stated at cost or valuation less accumulated depreciation. Historical cost includes expenditure directly attributable to the acquisition of the asset (cost of bringing the assets to its location and working condition). Revaluation of property, plant and equipment are carried out as the need arises. Capital Work-In-Progress represents property, plant and equipment under construction or undergoing installation, and is not depreciated. Upon completion, the attributable cost of each asset is transferred to the relevant asset category. Gains or losses on disposal of property, plant and equipment are included in the profit and loss account. Borrowing cost that are directly attributable to qualifying fixed assets are capitalised. Qualifying fixed assets are those that necessarily take a substantial period of time to construct. Capitalisation of borrowing cost continues up to the date that the assets are capable of producing. 6. DEPRECIATION Consistent with prior years, depreciation on fixed assets has been calculated on the straight line basis on cost to write off the assets at the following annual rates: Factory building 2 Plant and machinery - Pasta 6.66 Plant and machinery - Others 10 Office/household furniture and fittings 20 Office/household equipment 20 Computer equipment 25 Computer software Motor vehicles 25 Tools and safety equipment 50 % Honeywell Flour Mills Plc. 35

36 Statement of Significant Accounting Policies...cont d Financial Statements 7. STOCKS Stocks of raw materials have been valued at cost and finished products at cost of production less provision for slow-moving and obsolete stock items. 8. FOREIGN CURRENCIES Transactions denominated in foreign currencies are recorded in Naira at the rates of exchange ruling at the date of transactions. Assets and liabilities in foreign currencies are converted to Naira at the rates of exchange ruling at the balance sheet date and the resultant profit or loss on exchange is taken to the profit and loss account. 9. DEBTORS Debtors are stated net of allowance for any debts considered to be doubtful of collection. 10. TAXATION (i) Income tax Income tax payable is provided on taxable profits at the current rate of tax. (ii) Deferred tax Deferred taxation, which arises from timing differences in the recognition of items for accounting and tax purposes, is calculated using the liability method. Deferred taxation is fully provided for on timing differences, which are expected to reverse at the rate of tax likely to be in force at the time of reversal. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the associated unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that it is no longer possible that the related tax benefit will be realised. 11. LEASES (i) Finance leases All leases in which the Company transfers substantially all the risks and rewards of ownership are classified as finance leases. At the beginning of the lease term, the leased asset is measured at an amount equal to the net investment in the lease as a receivable. Initial direct costs are included in the initial measurement of the finance lease receivable and are used to reduce the amount of income recognized over the lease term. Subsequent recognition of finance income shall be based on a pattern reflecting a constant periodic rate of return on the lessor's net investment in the finance lease. The income allocation is based on a pattern reflecting a constant periodic return on the lessor's net investment in the finance lease. Lease payments relating to the period, excluding costs of services, are applied against the gross investment in the lease to reduce both the principal and the unearned finance income. (ii) Operating leases Leases which are not finance leases are classified as operating leases. Lease income from operating leases is recognised in income statement on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Honeywell Flour Mills Plc. 36

37 Statement of Significant Accounting Policies...cont d Financial Statements Initial direct cost incurred by lessors in negotiating and arranging an operating lease was added to the carrying amount of the leased asset and was recognised as an expense over the lease term on the same basis as the lease income. The depreciation policy for depreciable leased assets is consistent with our normal depreciation policy for similar assets, and depreciation shall be calculated in accordance with SAS 3 - Property, Plant and Equipment. 12. PROVISIONS A provision is recognized where, as a result of a past event, the group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 13. CASH AND CASH EQUIVALENTS For the purpose of reporting cash flows, cash and cash equivalents include cash on hand, cash balances with banks including short-term deposits and investment in money instruments. 14. EMPLOYEES RETIREMENT BENEFITS The Group operates a defined contributory pension scheme for members of staff which is independent of its finances and managed by Pension Fund Administrators. The scheme is funded by contributions from employer and employees in accordance with the provisions of the Pension Reform Act The employer's contributions are charged to the profit and loss account. 15. SEGMENT REPORTING The Company's business segments are presented by products that are subjected to similar risks and returns. The business segments consist of flour milling and pasta/noodles production. Business segment reporting from geographical location is not applicable to the Company because all the products are produced and marketed within Nigeria. 16. INTEREST Borrowing costs relating to capital expenditure are capitalized in the period in which they are incurred in accordance with the provision of the International Accounting Standard No RISK MANAGEMENT Risk is associated with any commercial venture. Risk management is a continuous process which runs throughout the Company's activities and operations. All assets are fully insured and our business continuity procedures are reviewed regularly. 18. DIVIDEND Dividend proposed by the Directors but not yet approved by members are disclosed in the notes to the financial statements, but not recorded as a liability as there is no obligation at the balance sheet date. Dividend distribution to the shareholders is recognized in the financial statements in the year in which the dividend is approved by the shareholders. 19. EARNINGS PER SHARE The Group presents basic earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Honeywell Flour Mills Plc. 37

38 BALANCE SHEET for the Year Ended 31 March, 2012 Financial Statements G r o u p C o m p any ASSETS Notes N'000 N'000 N'000 N'000 Tangible Assets 1 27,706,442 12,572,298 27,650,432 12,505,813 Investment in Subsidiary 2 999, ,999 Goodwill 3 900, ,188 28,606,630 13,472,486 28,650,431 13,505,812 Current Assets: Stocks 4 5,013,635 3,808,945 4,400,603 3,226,626 Debtors and Prepayments 5 7,259,583 8,031,989 12,114,729 12,811,286 Cash at Bank and in Hand 4,060,232 3,824,187 3,855,221 3,440,130 Less current liabilities: 16,333,450 15,665,121 20,370,553 19,478,042 Creditors 6(i) (19,621,885) (11,014,651) (24,183,810) (15,711,759) Net Current (Liabilities)/Assets (3,288,435) 4,650,470 (3,813,257) 3,766,283 Creditors: Amount falling due beyond one year 6(ii) (6,243,818) (1,358,633) (5,255,807) Provision for Liabilities and Charges 7 (2,272,139) (1,633,590) (2,196,011) (1,456,525) (8,515,957) (2,992,223) (7,451,818) (1,456,525) Total Assets Net of Liabilities 16,802,238 15,130,733 17,385,356 15,815,570 CAPITAL AND RESERVES Share Capital 8 3,965,099 3,965,099 3,965,099 3,965,099 Share Premium 9 6,462,041 6,462,041 6,462,041 6,462,041 Revenue Reserve 10 6,375,098 4,703,593 6,958,216 5,388,430 16,802,238 15,130,733 17,385,356 15,815,570 These financial statements were approved by the Board of Directors on 20 June, 2012 and signed on its behalf by: Folaranmi Babatunde Odunayo Executive Vice Chairman/CEO } Directors Dr. Oba Otudeko, D.Sc. (Hon.), CFR Chairman The accounting policies on pages 35 to 37 and the notes on pages 41 to 50 are to be read in conjunction with these financial statements. Honeywell Flour Mills Plc. 38

39 Profit And Loss Account for the Year Ended 31 March, 2012 Financial Statements G r o u p C o m p a n y Notes N'000 N'000 N'000 N'000 Turnover 11 38,071,502 34,057,624 32,949,173 29,310,102 Cost of sales (31,501,987) (26,933,416) (28,154,428) (24,081,476) Gross profit 6,569,515 7,124,208 4,794,745 5,228,626 Administration expenses (1,226,321) (1,049,976) (975,613) (822,864) Distribution expenses (1,884,965) (2,267,091) (1,170,951) (1,257,530) Interest expenses and similar charges 12 (559,101) (1,114,505) (446,475) (564,768) Other incomes , ,149 1,359, ,693 Profit before taxation 14 3,663,134 3,515,785 3,561,415 3,436,157 Taxation 15(i) (960,703) (1,023,388) (960,703) (1,023,388) Profit after taxation 10 2,702,431 2,492,397 2,600,712 2,412,769 PER 50k SHARE DATA Kobo Kobo Kobo Kobo Earnings Proposed Dividend The accounting policies on pages 35 to 37 and the notes on pages 41 to 50 are to be read in conjunction with these financial statements. Honeywell Flour Mills Plc. 39

40 Statement of Cash Flows for the Year Ended 31 March, 2012 Financial Statements G r o u p C o m p a n y Notes N'000 N'000 N'000 N'000 Cash Generated from Operations 16 2,853,917 4,609,163 2,356,044 8,497,475 Income Tax Paid 15(ii) (199,435) (794,628) (199,435) (794,628) Net cash flow from operating activities 2,654,482 3,814,535 2,156,609 7,702,847 CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets 1 (16,252,036) (792,684) (16,219,771) (6,559,535) Proceeds from Sale of Fixed Assets 319 9,609 5,259 Interest Income Received 712, , , ,929 Net cash Flow from Investing Activities (15,538,897) (13,230) (15,495,227) (5,730,347) CASH FLOW FROM FINANCING ACTIVITIES Interest Paid (577,254) (1,092,108) (464,628) (542,471) Loan Receipts 35,306,967 10,069,480 36,571,937 8,280,846 Loan Repaid (20,561,019) (11,710,128) (21,322,674) (8,844,867) Dividend Paid (1,030,926) (872,322) (1,030,926) (872,322) Share Increase Expense (17,308) Net Cash Flow from Financing Activities 13,120,460 ( 3,605,078 ) 13,753,709 (1,978,814) Net increase/(decrease) in cash and its equivalents 236, , ,091 ( 6,314 ) Cash and its Equivalent at 1 April 3,824,187 3,627,960 3,440,130 3,446,444 Cash and its Equivalent at 31 March 17 4,060,232 3,824,187 3,855,221 3,440,130 The accounting policies on pages 35 to 37 and the notes on pages 41 to 50 are to be read in conjunction with these financial statements. Honeywell Flour Mills Plc. 40

41 NOTES TO THE FINANCIAL STATEMENTS for the Year Ended 31 March, 2012 Financial Statements 1 TANGIBLE ASSETS. (i) Group Uncommi- Office/ Capital ssioned home Land and work Plant and plant and Computer furniture Motor Building in progress machinery machinery Tools equipment & equip. Vehicles Total COST N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 At 1 April, ,298, ,771 10,986,944 25,174 57, , , ,011 17,632,160 Of additions 19,379 15,902, ,596 4,391 5,023 14, ,320 16,252,036 Of transfers/adjustments 2,556,996 (5,711,679) 3,147,958 ( 6,725) Of disposals (41) (2,350) ( 2,391) At 31 March, ,875,345 10,642,348 14,277,498 25,174 61, , , ,981 33,875,080 DEPRECIATION To 1 April, ,304 3,874,487 25,174 45,820 91, , ,014 5,059,862 Charge for the year 100, ,728 6,836 8,090 22,840 75,908 1,110,870 On disposals (38) (2,056) (2,094) To 31 March, ,772 4,771,215 25,174 52,656 99, , ,866 6,168,638 NET BOOK VALUE At 31 March, ,274,574 10,642,348 9,506,282 9,318 11,327 42, ,116 27,706,442 At 31 March, ,798, ,771 7,112,457 11,763 14,394 51, ,997 12,572,298 (Ii) Company Uncommi- Office/ Capital ssioned home Land and work Plant and plant and Computer furniture Motor Building in progress machinery machinery Tools equipment & equip. vehicles Total COST N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 At 1 April, ,182, ,519 10,413,586 25,174 24,568 83, , ,232 16,660,768 Of additions 19,379 15,899, ,596 3,739 4,\975 6, ,690 16,219,771 Of transfers/adjustments 2,556,996 (5,706,429) 3,147,958 (1,475) Of disposals At 31 March, ,759,153 10,639,819 13,704,140 25,174 28,307 88, , ,922 32,879,064 DEPRECIATION To 1 April, ,534 3,298,440 25,174 21,895 73, , ,126 4,154,955 Charge for the year 100, ,728 2,953 5,594 10,880 57,055 1,073,678 Of transfers/adjustments (14,808) 14,808 On disposals To 31 March, ,194 14,808 4,195,168 25,174 24,848 79, , ,181 5,228,633 NET BOOK VALUE At 31 March, ,288,959 10,625,011 9,508,972 3,459 9,185 24, ,741 27,650,432 At 31 March ,798, ,519 7,115,146 _ 2,673 9,804 28, ,106 12,505,813 Honeywell Flour Mills Plc. 41

42 Notes to the Financial Statements...cont d Financial Statements G r o u p C o m p a n y N'000 N'000 N'000 N' INVESTMENT IN SUBSIDIARY Honeywell Superfine Foods Limited 999, ,999 This represents the Company's 100% investment in Honeywell Superfine Foods Limited. 3. GOODWILL Goodwill on Business Combination 900, , STOCKS Raw Materials and Consumables 1,649,127 1,735,700 1,157,996 1,267,362 Work in Progress 9,571 14,901 Goods in Transit 3,247,724 1,914,455 3,196,246 1,895,853 Finished Goods 107, ,889 46,361 63,411 5,013,635 3,808,945 4,400,603 3,226, DEBTORS AND PREPAYMENTS Trade Debtors 603, , , ,716 Other Debtors 764,091 3,926,343 3,374,523 3,436,456 Prepayments 2,040, , , ,742 Due from Subsidiary Company 4,045,107 5,454,924 Due from Related Companies 3,851,347 3,196,448 3,851,347 3,196,448 7,259,583 8,031,989 12,114,729 12,811, CREDITORS (i) Amount due within one year: Trade Creditors 1,021, , , ,760 Bank Overdraft 106, ,259 9,888 6,259 Current Income Taxes (Note 15.2) 225, , , ,836 Sundry Creditors and Accruals 2,863,010 3,914,221 2,330,023 3,626,719 Short-Term Loans 15,405,155 5,506,604 15,405,155 5,506,604 Due to Subsidiary Company 5,709,651 5,938,581 19,621,885 11,014,651 24,183,810 15,711,759 (ii) Amount due after one year: Bank Loans 6,243,818 1,358,633 5,255,807 Honeywell Flour Mills Plc. 42

43 Notes to the Financial Statements...cont d Financial Statements G r o u p C o m p a n y N'000 N'000 N'000 N' PROVISION FOR LIABILITIES AND CHARGES Deferred Taxation 2,196,011 1,456,525 2,196,011 1,456,525 Other Provisions 76, , ,272,139 1,633,590 2,196,011 1,456, SHARE CAPITAL Authorised 8,000,000,000 Ordinary Shares of 50k each 4,000,000 4,000,000 4,000,000 4,000,000 Issued and Fully Paid 7,930,197,658 (2011: 7,930,197,658) Ordinary Shares of 50k each At 31 March 3,965,099 3,965,099 3,965,099 3,965, SHARE PREMIUM At 31 March 6,462,041 6,462,041 6,462,041 6,462, REVENUE RESERVE At 1 April 4,703,593 3,083,518 5,388,430 3,847,983 Dividend Paid during the year (1,030,926) (872,322) (1,030,926) (872,322) Retained Profit after payment of dividend 3,672,667 2,211,196 4,357,504 2,975,661 Retained Profit for the Year after Taxation 2,702,431 2,492,397 2,600,712 2,412,769 At 31 March 6,375,098 4,703,593 6,958,216 5,388,430 At the Company's Annual General Meeting held on 26 September, 2011, the Shareholders approved the payment of 13k (N1,030,925,695.54) per share to members as at the close of business on 2 September, Honeywell Flour Mills Plc. 43

44 Notes to the Financial Statements...cont d Financial Statements G r o u p C o m p a n y N'000 N'000 N'000 N' TURNOVER Flour, Semolina and Wheat meal 30,263,298 27,559,932 32,949,173 29,310,102 Pasta and Noodles 7,808,204 6,497,692 38,071,502 34,057,624 32,949,173 29,310,102 All sales were within Nigeria. 12. INTEREST EXPENSES AND SIMILAR CHARGES Interest on Bank Loans, Overdrafts and Similar Charges 559,101 1,114, , , OTHER INCOMES Stale Wheat/Flour and Corn 28,509 14,371 28,509 14,371 Waste Noodles, Seasoning and Pasta 19,861 16,451 Profit on Sale of Fixed Assets 22 6,898 2,709 Interest Income 659, , , ,929 Hire of Storage Facilities 13,064 7,851 13,064 7,851 Lease Rental Income* 479,295 Sundries 42,671 7,733 17,237 3,833 * Lease rental income arose from the leasing of assets to Honeywell Superfine Foods Ltd under an operating lease arrangement. 764, ,149 1,359, , PROFIT BEFORE TAXATION The trading profit is arrived at after charging: Depreciation 1,110,870 1,133,797 1,073, ,801 Bad and Doubtful Debts 54,388 45,618 54,388 32,054 Auditors' Remuneration 12,466 8,200 9,466 6,050 Directors' Emoluments: Fees 4,165 4,165 4,165 4,165 Others 24,365 24,365 24,365 24,365 Interest on Loans and Overdrafts 559,101 1,114, , ,768 And crediting Profit on Disposal of Fixed Assets 22 6,898-2,709 Interest Received 659, , , ,929 Honeywell Flour Mills Plc. 44

45 Notes to the Financial Statements...cont d Financial Statements G r o u p C o m p a n y N'000 N'000 N'000 N' TAXATION (i) Income Tax Expense: Company Income Tax 132, , , ,832 Education Tax 92,702 83,005 92,702 83,005 (Over)/Under provision (4,401) 456 (4,401) , , , ,293 Deferred tax 739, , , , ,703 1,023, ,703 1,023,388. (ii) Current Income Tax Payable: At 1 April 203, , , ,171 Charge for the year 221, , , , , , , ,464 Payments during the year (199,435) (794,628) (199,435) (794,628) At 31 March 225, , , ,836 (iii) The charge for income tax is based on the provisions of the Companies Income Tax Act (LFN CAP 60) as amended to date while education tax is based on Education Tax Act No. 7 CAP E4 LFN, (iv) Honeywell Superfine Foods Limited (Subsidiary) was granted pioneer status by The Nigerian Investments Promotion Commission. Consequently, no provision has been made for income and deferred taxes in the Group financial statements for the Subsidiary. G r o u p C o m p a n y N'000 N'000 N'000 N'000. (v) Deferred Tax: i Per Profit and Loss Account: Provision for the year 739, , , ,095 ii Per Balance Sheet At 1 April 1,456, ,430 1,456, ,430 Charge for the year 739, , , ,095 At 31 March 2,196,011 1,456,525 2,196,011 1,456,525 Honeywell Flour Mills Plc. 45

46 Notes to the Financial Statements...cont d Financial Statements 16. STATEMENT OF CASH FLOWS Reconciliation of net profit after Tax to cash generated from operation G r o u p C o m p a n y N'000 N'000 N'000 N'000 Net Profit After Taxation 2,702,431 2,492,397 2,600,712 2,412,769 Taxation 960,703 1,023, ,703 1,023,388 Operating Profit 3,663,134 3,515,785 3,561,415 3,436,157 Adjustments for: Depreciation 1,110,870 1,133,797 1,073, ,801 (Profit) on Assets Disposal (22) (6,898) (2,709) Pasta Deferred Expenditure 5, Interest Expenses and Similar Charges 559,101 1,114, , ,768 Interest Income (659,879) (769,845) ( 821,604 ) (823,929) Operating Profit before Working Capital Changes 4,678,454 4,988,030 4,259,964 3,887,088 Working Capital Changes Decrease/(Increase) in Stocks (1,204,689) 38,689 (1,173,977) 58,441 Decrease/(Increase) in Debtors and Prepayments 772, , ,557 (1,676,767) (Decrease)/Increase in Creditors (1,291,317) (1,184,449) (1,426,500) 6,228,713 (Decrease)/Increase in Provision for Liabilities and Charges (100,937) 83,813 (1,824,537) (378,867) (1,903,920) 4,610,387 Cash Generated from Operations 2,853,917 4,609,163 2,356,044 8,497, CASH AND CASH EQUIVALENTS Cash and its equivalent comprises: Cash at Bank and in Hand 1,060, , , ,130 Short-Term Investment - Fixed Deposit 3,000,000 3,200,000 3,000,000 3,000,000 4,060,232 3,824,187 3,855,221 3,440,130 Honeywell Flour Mills Plc. 46

47 Notes to the Financial Statements...cont d Financial Statements 18. SEGMENT REPORTING.1 Segmental Profit and Loss Account Flour Milling Noodles/Pasta Total** Items N'000 N'000 N'000 N'000 N'000 N'000 Turnover 32,949,173 29,310,102 7,808,204 4,749,272 38,071,502 34,057,624 Depreciation 1,073, ,801 37, ,996 1,110,870 1,133,797 Profit before Tax 3,561,415 3,436,157 83,227 75,749 3,663,134 3,515,785 ** Turnover Total is arrived at after deducting the inter-segment turnover of N2,685,874,859 and N1,750,169,873 for 2012 and 2011 respectively. ** Profit Before Tax Total is arrived at after adjusting for unrealised (loss)/profit of N18,492,118 and N14,221,000 for 2012 and 2011 respectively..2 Segmental Balance Sheet Flour Milling Noodles/Pasta Total** Items N'000 N'000 N'000 N'000 N'000 N'000 Fixed Assets 21,964,745 6,567,233 5,741,697 6,005,502 27,706,442 12,572,298 Current Assets 20,370,553 19,478,042 8,513,381 4,456,224 16,333,450 15,665,121 Current Liabilities 24,183,810 15,711,759 5,192,832 3,557,816 19,621,885 11,014,651 Long Term Liabilities 5,255, ,011 1,358,633 6,243,818 1,358,633 Net Assets 17,385,356 15,815,570 2,312,421 2,229,194 16,802,238 15,130,733 ** Total for current assets, current liabilities and net assets are arrived at after adjusting for inter-segment balances. Honeywell Flour Mills Plc. 47

48 Notes to the Financial Statements...cont d Financial Statements G r o u p C o m p a n y N'000 N'000 N'000 N' CHAIRMAN'S AND DIRECTORS' EMOLUMENTS, AND COMPENSATION FOR LOSS OF OFFICE The remuneration paid to Directors was: (i) Fees: Chairman Other Directors 11,663 9,099 11,663 9,099 12,463 9,899 12,463 9,899 (ii) Fees and other emoluments disclosed above include amount paid as: Fees 12,463 9,899 12,463 9,899 Other emoluments 24,365 24,365 24,365 24,365 36,828 34,264 36,828 34,264 (iii) Number of Directors (excluding the Chairman) whose emoluments were within certain ranges were: Number Number Number Number N100,000 and above (iv) Waived Emoluments Number of Directors who have waived their rights to receive emoluments Aggregate of those emoluments (V) Compensation to Directors For loss of office As Directors As Executives Honeywell Flour Mills Plc. 48

49 Notes to the Financial Statements...cont d G r o u p C o m p a n y N'000 N'000 N'000 N'000 Financial Statements 20. EMPLOYEES AND RELATED REMUNERATION Number of employees in receipt of emoluments excluding allowances were within the following ranges: Number Number Number Number Under N500,000 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 CONTINGENT LIABILITIES, GUARANTEES AND OTHER FINANCIAL COMMITMENTS (i) Charges The Company has loan facilities with First Bank of Nigeria Plc secured by an 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 31 March, LOANS AND OTHER TRANSACTIONS FAVOURING DIRECTORS AND OFFICERS (i) During the year, the Company guaranteed no loan in favour of its Directors and Officers. (ii) No loans were made to the Directors to purchase the Company's shares during the year. 23. RELATED PARTIES TRANSACTION At the Balance Sheet date, the Company had amount receivable from a Related Company. Interests have been accrued on these amounts and recognized in the Profit and Loss account. The balances are shown below: N'000 N'000 Metropolitan Trust Limited 3,851,347 3,196,448 Honeywell Flour Mills Plc. 49

50 Notes to the Financial Statements...cont d Financial Statements 24. 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 31 March, COMPARATIVE FIGURES Certain comparative figures have been restated to reflect proper disclosure and uniformity. 26. APPROVAL OF ACCOUNTS These financial statements were approved by the Board of Directors of the Company on 20 June, Honeywell Flour Mills Plc. 50

51 Value Added Statement for the Year Ended 31 March, 2012 Financial Statements G r o u p C o m p a n y N'000 % N'000 % N'000 % N'000 % Turnover 38,071,502 34,057,624 32,949,173 29,310,102 Other Revenue 764, ,149 1,359, ,693 38,835,508 34,880,773 34,308,882 30,162,795 Bought in Goods and Services (32,619,633) (28,321,398) (28,605,946) (24,889,278) VALUE ADDED 6,215, ,559, ,702, ,273, APPLIED AS FOLLOWS: 1 Employees: Salaries and Benefits 882, , , , Providers of Funds: Interest on Loans and Overdrafts 559, ,114, , , Government: Taxation 221, , , , Replacement and Expansion of Assets: Depreciation 1,110, ,133, ,073, , Deferred Tax 739, , , , Retained Profit 2,702, ,492, ,600, ,412, VALUE ADDED 6,215, ,559, ,702, ,273, Value added is the wealth created by the efforts of the Group and its employees and its allocation between employees, shareholders, government and re-investment for the future creation of further wealth. Honeywell Flour Mills Plc. 51

52 Financial Summary for the Five-Years Ended 31 March, Financial Statements THE GROUP Balance Sheet N'000 N'000 N'000 N'000 N'000 Fixed Assets 27,706,442 12,572,298 12,916,808 14,064,994 11,241,883 Goodwill on Business Combinations 900, , , , ,188 Deferred Costs 721, ,682 Stocks 5,013,635 3,808,945 3,847,634 4,591,514 5,164,431 Debtors and Prepayments 7,259,583 8,031,989 8,715,070 2,958,363 2,349,906 Cash and Bank Balances 4,060,232 3,824,187 3,627, , ,963 Total Assets 44,940,080 29,137,607 30,007,660 23,533,049 20,730,053 Total Liabilities (25,865,703) (12,373,284) (15,766,320) (17,783,913) (15,539,573) Provision for Liabilities and Charges (2,272,139) (1,633,590) (730,682) (341,541) Total Net Assets 16,802,238 15,130,733 13,510,658 5,407,595 5,190,480 Share Capital 3,965,099 3,965,099 3,965,099 3,499,999 1,999,999 Share Premium 6,462,041 6,462,041 6,462,041 Revenue Reserve 6,375,098 4,703,593 3,083,518 1,907,596 3,190,481 Shareholders Funds 16,802,238 15,130,733 13,510,658 5,407,595 5,190,480 Profit and Loss Account Turnover 38,071,502 34,057,624 33,528,011 28,580,058 18,773,815 Profit before tax & after exceptional item 3,663,134 3,515,785 2,330, , ,950 Taxation (960,703) (1,023,388) (1,154,351) (470,037) (73,498) Profit after tax 2,702,431 2,492,397 1,175, , ,452 Transfer to Revenue Reserve 2,702,431 2,492,397 1,175, , ,452 Profit attributable to: Equity shareholders 2,702,431 2,492,397 1,175, , ,452 Earnings per 50k share [k] Net Assets per 50k share [k] 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. Honeywell Flour Mills Plc. 52

53 Financial Summary for the Five-Years Ended 31 March, Financial Statements THE COMPANY Balance Sheet N'000 N'000 N'000 N'000 N'000 Fixed Assets 27,650,432 12,505,813 6,661,628 7,024,971 6,792,355 Investment in Subsidiary 999, , , , ,999 Deferred Costs 671,109 Stocks 4,400,603 3,226,626 3,285,067 4,032,490 4,934,457 Debtors and Prepayments 12,114,729 12,666,628 11,134,520 3,215,749 2,325,018 Cash and Bank Balances 3,855,221 3,584,788 3,446, , ,514 Total Assets 49,020,984 32,983,854 25,527,658 16,162,445 15,242,343 Total Liabilities (29,439,617) (15,711,759) (10,615,105) (10,482,103) (10,051,863) Provision for Liabilities and Charges (2,196,011) (1,456,525) (637,430) (280,755) Total Net Assets 17,385,356 15,815,570 14,275,123 5,399,587 5,190,480 Share Capital 3,965,099 3,965,099 3,965,099 3,499,999 1,999,999 Share Premium 6,462,041 6,462,041 6,462,041 Revenue Reserve 6,958,216 5,388,430 3,847,983 1,899,588 3,190,481 Shareholders Funds 17,385,356 15,815,570 14,275,123 5,399,587 5,190,480 Profit and Loss Account Turnover 32,949,173 29,310,102 28,483,098 25,964,192 18,773,815 Profit before tax & after exceptional item 3,561,415 3,436,157 3,102, , ,950 Taxation (960,703) (1,023,388) (1,154,351) (470,037) (73,498) Profit after tax 2,600,712 2,412,769 1,948, , ,452 Transfer to Revenue Reserve 2,600,712 2,412,769 1,948, , ,452 Earnings per 50k share [k] Net Assets per 50k share [k] 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. Honeywell Flour Mills Plc. 53

54 Shareholders Information List of key Distributors 55 Share Capital History 56 Unclaimed Dividends 57 Application for E-Dividend 58 Proxy Form 59 Honeywell Flour Mills Plc. 54

55 List of Key Distributors Shareholders Information CUSTOMER NAME REGION Adamu Abdullahi North Ade Distribution & Invest. Co. West Ade-Owo Nig Ltd. Adeyinka Stores Adidot Nigeria Enterprises Adunni F. Nehan Aduwa Stores North Ahajas Nig Ltd North Ahmadu Yusuf North Ajani Ade Enterprises South West Akabueze & Sons East Alhaja Adeshina Alhaja Olayiwola Alhajaahmed Oshodi Alhaji Abdulkadir Hali Maikeke & Sons North Alhaji Adam Ibrahim North Alhaji Babangida Na Alh. Saleh North East Alhaji Lawali Sanni Gusau North Alhaji Maisugar Ibrahim Adam North Alhaji Mukhtar Nayaya North Alhaji Namadi Inuwa North Alhaji Rasaki Hassan Alhaji Tasiu Ilu Kura North Alhaji Tukur Sabaru North Alhaji Umaru Ladan North Ali Hassan North Amazing Wonder Enterprises Aminat Ottun Bako Alh. Kontoma & Sons North East Bekdat Ventures North Big Treat Confectioneries Ltd Blessed A. A. & Sons South East Bofik Nig Ltd Chivic Nig Ltd Cleason Nigeria Enterprises South East Cossy Bros Intern Ltd De-Tofola Nigeria Ltd Donason Commercial Enterprises South- South E. Y. Nigeria Limited South- South Ekene Enterprises Emeka Iwegbuna & Bros Ltd North East Emju Investment Company Ltd South- South Ezeh (Chief) East Faith Foods And Confectioneries East Fantazia Fast Food Ltd East Femadons Enterp Gambo Danbala Lambu North Gilbest East Haruna Salihu North Heron Ventures His Favour Commodity Stores Ibrahim Sulu Oloje West CUSTOMER NAME Ibrahim Usman Ent. Ici Holdings Limited Imperial Bakeries Nig Isiaku Muhammed J C Joseph Industries Limited Kabiru Ahmed Dokoro Kanisuru A & B Stores Kemayos Ventures Kudyunus Bislar Nig Ltd Laslop Nig Enterprises Lasol Nigeria Limited Mac-Tell Investment Ltd Magbagbeade Stores Mama Somto Merciful Business Mercy - Vic Enterprises Michelle Edmund Ventures Moboluwaduro Commodities Moh'd Adam G Ngala Mt Olives Nig Ltd Murtala Abdulahi Trading Nakowa Modern Bakery New Gaskiya Enterprises Ngaloma General Enterprises Nnemelu J.C. Obi Okoye Ogene Concerns Limited Oluwasesan Sose Enterprises Opeyemi Bakery Palma Seaport Ltd Payless Stores Q U Olumide Quad & Kay Ventures Queensmeal Foods Ltd Rarmset Ventures Retail Supermarkets Nigeria Ltd Royal Gate Company Limited Salisu Maigishiri Markafi Say-Suraj Ent Seriki Stores Nig Enter Shagumba Ventures Solohot Fuels Nig Ltd Soyinka & Son Sweetsgold Bakery Sylmec Ventures Ltd Timmy Bakery UAC Foods Ltd Umar Musa Bakery United Multidistribution Co. UTC Plc Yahuza Abdullahi & Sons Yomdok Nigeria Limited REGION North East North North East North North West West South West North West North North North North East East East West East West East North North North East East North North South East North Honeywell Flour Mills Plc. 55

56 Share Capital History Shareholders Information Year Authorised (N 000) Share Capital History Issued & Fully Paid-up (N 000) Increase Cumulative Increase Cumulative , , , , , ,000 50,000 49,998 50, , , , , ,000 1,000, ,000 1,000, ,000,000 2,000, ,999 1,999, ,000,000-1,999, ,000,000 4,000,000 1,500,000 3,499, ,000, ,100 3,965,099 Consideration N1 each N1 each N1 each N1 each N1 each N1 each N1 each N1 each Acquisition of Honeywell Superfine Foods Limited Share Split of N1 to N0.50 Bonus Issue of 3 for 4 shares Public N8.50 each Honeywell Flour Mills Plc. 56

57 Unclaimed Dividend Shareholders Information Some Dividend Warrants have not been presented to the Bank for payment while others have been returned to the Registrar as Unclaimed Dividend because the addresses could not be traced. The Unclaimed Dividend as at 31st July, 2012 is as analysed below: Dividend Range Number of Unclaimed Number of Unclaimed Shareholders Dividend Shareholders Dividend Total Unclaimed Dividend N000 N000 N000 N100,000 - N1,000, N50,000 - N99, N10,000 - N49, ,028 N1,000 - N9, ,429 1,284 2,483 Less than N1,000 14,430 3,177 15,403 3,613 Total 15, ,862 16,767 8, ,023 1,745 3,912 6,790 14,336 Total Declared Dividend in Years 872,322 1,031,000 1,903,322 % of Unclaimed Dividend 0.8% 0.8% 0.8% Honeywell Flour Mills Plc. 57

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