dairibord holdings limited annual report 2013... dairibord holdings limited 9th floor, zb life...

www.dairibord.com

Dairibord Holdings Limited9th Floor, ZB Life Towers

77 Jason Moyo Avenue/ Sam Nujoma StreetP O Box 587, Harare, Zimbabwe

Telephone : +263 4 790801-7, 731071-8Fax : +263 4 795220 2013

Annual Report

Dairibord Holdings Limited 2013 Annual Report 1

OVERVIEW

Corporate Profile 3

Vision, Mission & Values 4

Group Structure 5

Group Brand and Markets 7

Our Business Model 8

Group Performance Summary 11

GOVERNANCE, ETHICS & ENGAGEMENTS

Chairman’s Statement 12

Group Chief Executive’s Statement 14

Corporate Governance 20

Our Sustainability Approach 25

Risk Management 26

Stakeholder Engagement 28

PERFORMANCE

Sustainability Performance 32

Statement of Directors’ Responsibility 39

Report of the Directors 40

Independent Auditors’ Report 41

Annual Financial Statements 42-78

ANNEXURE

Glossary of Terms 79

GRI Index 81-82

Shareholders Analysis 83

Notice to Shareholders 84

Shareholders’ Calendar 85

Notes 86

Form of proxy Loose

Corporate Information 88

ContentsScope of this ReportWe are pleased to present the annual report for Dairibord Holdings,

a company listed on Zimbabwe Stock Exchange (ZSE) which includes

Dairibord Zimbabwe (Private) Limited, Lyons, Dairibord Malawi

Limited, Kutal Investments (Private) Limited and NFB Logistics for the

year ended 31 December 2013. We published our previous annual

report for the reporting period ended 31 December 2012.

This report is targeted at a broad range of our stakeholders with

the aim of presenting a balanced review of material issues from our

operations. The report includes our Zimbabwe and Malawi operations.

There have been very little changes in the company since our previous

reporting.

This is our second report prepared using Global Reporting Initiatives

(GRI) Sustainability Reporting Framework (G3.1) in measuring our

progress towards sustainability. This report is prepared meeting GRI

Application Level-C reporting requirements. An application level check

was carried out by the Institute for Sustainability Africa (Inśaf).

Our sustainability report is integrated with our financial statements

which were audited by Ernst & Young Chartered Accountants

(Zimbabwe). An independent auditors’ report on the financial

statements contained in this report appears on page 41.

Forward looking StatementsCertain statements in this report constitute ‘forward looking

statements’. Such statements involve known and unknown risks,

uncertainties and other factors that may cause the actual results,

performances, objectives or achievements of Dairibord Holdings to

be materially different from future results, performance, objectives or

achievements expressed or implied in forward looking statements.

The performance of Dairibord Holdings is subject to effects of

changes in the operating environment and other factors. Dairibord

Holdings undertakes no obligation to update publicly or to release any

revision of these forward looking statements to reflect the events or

circumstances after the date of publication of this report or to reflect

the occurrence of unanticipated events.

We would welcome your feedback on our reporting and any suggestions

you have in terms of what you would like to see incorporated in our

report for 2014. To do so, please email: [email protected].

Chairman Group Chief Executive

Dairibord Holdings Limited 2013 Annual Report2

Sales and Marketing Executives for DZPL and Lyons, Tatenda Napata (above, right) and Gilbert Mushunje (below, right) receiving the Marketers Association of Zimbabwe (M.A.Z) 2013 Superbrand Awards from Honourable Simon Khaya Moyo, Minister of State in the Office of the President and M.A.Z. Deputy President Tapiwa Mandimutsira respectively.


Dairibord Holdings Limited is a manufacturer and marketer of quality milk, foods and beverages. The company is listed on the

Zimbabwe Stock Exchange (ZSE). It is a prime example of successful privatisation by the Government of Zimbabwe as it was

originally a state owned enterprise established for the purposes of processing and marketing milk and milk products.

Dairibord Holdings Limited has 100% ownership in Martindale Trading (Private) Limited t/a Lyons, Lavenson Investments (Private)

Limited, NFB Logistics (Private) Limited, Kutal Investments (Private) Limited and 68.4% shareholding in Dairibord Malawi Limited.

Kutal Investments is a property holding company which leases its properties to Group companies. Lavenson Investments (Private)

Limited has a 100% ownership in Dairibord Zimbabwe (Private) Limited.

The Group produces an extensive range of products which includes liquid milks (short and long shelf life milk), foods (yoghurt, ice

creams, condiments and spreads) and beverages (cordials, ready-to-drink dairy and non-dairy, tea and mineral water) which are

marketed in both the domestic and export markets.

Dairibord Holdings Limited is one of the largest manufacturing and marketing companies in Zimbabwe with over 50 brands. The

Group has factories in Harare, Chitungwiza, Gweru and Chipinge. The operations in Malawi are located in Blantyre.

Corporate Profile

Dairibord ice cream sticks in production.


VISIONTo be the most successful foods and beverages company in Africa, commanding a position of sustainable market leadership driven by strong

brands and superior human capital.

MISSIONTo provide our customers with the best quality nutritious foods and beverages for the sustenance of good health.

VALUES• Innovation:We are committed to innovation and addressing changing customers’ needs and we will continuously develop our processes to

produce a wide variety of quality new products and services.

• Commitment:Customer satisfaction is the yardstick against which our company’s performance in all spheres will be measured. Exceeding

our customer needs and expectations will be a commitment shared by every person in the company.

• Professionalism: We will recruit and develop a well trained work force in which job competence, performance and succession stability are

the primary objectives.

• Integrity: Our integrity will be displayed in all our interactions with stakeholders while embracing environmentally friendly practices.

• Responsibility: As a corporate citizen, Dairibord Holdings Limited is committed to discharging itself responsibly in all its dealings with

stakeholders.

• Accountability:We take responsibility for our own actions.

• Sensitivity: We will provide a safe and positive working environment for our employees. Openness, two way communication, personal

development, trust and recognition of achievement will be fostered to achieve our mission. Our goal is to be responsible and accountable

to our shareholders through value creation in which sustainable profitability is a key requisite. We have developed and maintained a well-

documented management system supported by an internationally recognized up-to-date enterprise wide management system.

• Fairness: We will be fair in all our dealings.

• Zero Tolerance to Corruption:Our strategies and operations are anchored on principles of sound corporate governance. We shall not

tolerate any form of corrupt dealings with our stakeholders. We will embrace ethical relationships with suppliers, employees, government,

customers, consumers and regulatory authorities. To this end, the Group operates a zero tolerance to corruption policy.

• Teamwork: We shall nurture a spirit of team work to optimise synergies and benefit from mutual co-existence.

Vision, Mission and Values


Group Structure

Dairibord Holdings Limited

Martindale Trading (Private) Limited

Lavenson Investments

(Private) Limited

Dairibord Zimbabwe (Private) Limited

Dairibord Malawi Limited

Repsol Estates

(Private) Limited

Soilmark Farming (Private) Limited

Rosenwald Estates

(Private) Limited

Goldblum Investments

(Private) Limited

Slimline Investments

(Private) Limited

Lyons Africa (Private) Limited

Lyons Zimbabwe (Private) Limited

Abrupt Enterprises

(Private) Limited

Chatmoss Enterprises

(Private) Limited

Qualinex (Private) Limited

Westside Foods

(Private) Limited

NFB Logistics (Private) Limited

Kutal Investments

(Private) Limited

100%

100%

100% 100% 100% 100% 100% 100%

100% 100% 100% 100% 100%

100% 68.4% 100% 100%


Operating Subsidiaries


Dairibord Holdings Limited is one of the largest manufacturing and marketing companies in Zimbabwe with over 50 active product brands. The

Group has factories in Harare, Chitungwiza, Gweru, and Chipinge. The operations in Malawi are located in Blantyre.

Our main markets are Zimbabwe and Malawi.

The table below summarises Dairibord Holdings Brands.

ProductCategory ProductType Brands

DairibordZimbabwe(Private)Limited Lyons Dairibord Malawi Limited

Liquid Milks Long Shelf Life

Cultured

Short Shelf Life

Cream

Dairibord Steri MilkDairibord Chimombe

Dairibord Lacto

Dairibord Ching’ombe

Dairibord Chambiko

Dairibord Fresh Milk

Dairibord Fresh Cream

Foods Yoghurts

Ice cream Sticks

Bulk Ice Creams

Cheese

Sauces & Condiments

Dairibord YummyDairibord Froot Scoop

Nutty SquirrelSkippy ChocBigga BearSuper SplitPlus 20Monsta MouseGreen GiantMello Ice

Dairibord Real DairyDairibord Novelty

Lyons MaidQuenchSundae Cups

Lyons Maid

Rabroy Tomato SauceRabroy Salad CreamRabroy MayonnaiseMagic WhipLyons Peanut Butter

Dairibord YoghurtDairibord YogieYuphoria

Dairibord Ice Lollies

Dairibord Bulk Ice Creams

Gouda/Cheddar

Beverages Ready To Drink

Crushes & Cordials

Bottled Water

Tea

Drinking Chocolate

NutriplusFun ‘n FreshNatural Joy

Dairibord Aqualite

Cascade

QuenchXtra value

Quick Brew Tea Bags

Lyons Drinking Chocolate

Family Choice JuicesJuice Up

Family Choice

Dairibord Aquamadzi

Logistics Refrigerated Insulated Tankers Flat Deck Passenger

Group Brands and Markets


The Group’s principal activities are manufacturing, processing, marketing and distribution of milk products, foods and beverages. In line with our

mission, the portfolio is focused on providing customers with nutritious foods and beverages for the sustenance of good health.

Our StakeholdersThe Group is committed to open and honest interaction with all its stakeholders. The Group believes in inclusivity and responsiveness through

ongoing stakeholder engagement.

Ourstakeholderportfolioandtheirkeyinterests

Stakeholders Issues of interest

Our Customers and Consumers § Service delivery

§ Product quality

§ Prices

§ Payment terms

Investors § Value creation

§ Profitability

§ Sustainability

Suppliers § Prices of materials and other inputs

§ Quality and consistence of supply

§ Payment terms

GovernmentandRegulators § Indigenization and economic empowerment

§ Compliance with tax, safety, health , municipal and environmental regulations

§ Local industry support

§ Employment creation

Communities § Corporate social responsibility

§ Clean Environment

Employees § Retrenchment packages

§ Training and development

§ Conditions of service

§ Health and safety

Our Business Model


Our Business Model (continued)

Focus

Strategic priorities

Corecompetences

Opportunities

• The Group is focused uniquely at providing customers with superior quality nutritious foods and beverages

• Revenue growth• Business realignment• Developing R&D capabilities• Milk supply development• Investment in superior

technology • Managing both upside and

downside risk

• A portfolio focused on nutrition

• Unmatched distribution channels

• A strong financial position enabling the Group to leverage opportunities

• Milk demand exceeding supply• Consumers increasing nutrition

literacy• Regional markets fuelled by

economic growth• Business realignment for

efficiencies and effectiveness

OUR STRATEGY AT A GLANCE


OUR VALUE CHAIN

Stageofthevaluechain Comments

Inputs

Raw milk

Raw milk is sourced from independent farmers who sign contracts of supply with the company. The pricing of the milk is market determined with quality and volume premiums incorporated to promote better quality and volumes. Milk collection is the responsibility of the company.

Materials

Due to depressed industrial activity in Zimbabwe and Malawi, most raw materials are sourced globally exposing the business to global commodity price volatilities. Major imports are milk powders, sugar, HDPE and fruit sets.

Utilities

Availability of utilities is erratic and at high cost particularly water and electricity. The business relies on standby facilities to support operations during power and water outages.

Labour

Labour is partly contracted and partly permanent. Unionized employees bargain for wage increases annually and these negotiations are not based on productivity but much driven by the market.

Processes

• The Group undertakes value addition by converting the inputs into value added products. The Group operates 6 factories [5 in Zimbabwe and 1 in Malawi].

• The logistics business provides transport services to both Group companies and third party customers.

Outputs

OurProductportfolio:

The Group’s outputs are divided into the following portfolios:

• Liquid Milks• Foods• Beverages• Logistics

OurDistributionChannels:

• Retail: This channel is composed of large retail outlets and wholesalers.• Vending: This is a cash channel with independent vendors buying stocks for resale on a daily basis

The Group’s fast moving lines are sold through this channel mainly yoghurt, Cascade, Fun ’n Fresh, Nutriplus and Ice creams.

• Franchises: Most franchises operate from the Group’s premises formerly operated as distribution depots.

• Sales shops: These enable the Group to sell as close to the market as possible. The Group has sales shops at factories, in cities and major towns.

• Hospitality and institutions: The channel focuses on hotels, schools and similar institutions.• Exports: Trade is done mainly with customers in Zambia, Mozambique and Botswana.

Our Business Model (continued)


2013 2012 Increase/ US$ US$ (decrease) Revenue 100,051,503 106,888,635 (6%)Operating (loss)/profit (1,837,711) 9,800,079 (119%)(Loss)/profit before tax from continuing operations (2,316,633) 9,421,218 (125%)(Loss)/profit for the year from continuing operations (1,780,911) 7,187,401 (125%)(Loss)/profit for the year (1,753,264) 7,162,870 (124%)Net cashflows generated from operating activities 5,945,904 5,341,509 11%Net assets 45,565,604 49,515,576 (8%) Shareinformation No. No. Number of ordinary shares in issue at the end of period 358,000,858 357,700,858 Weighted average number of shares 357,909,191 356,819,007 Share performance (Loss) / earnings per share US cents US cents -Basic (0.50) 1.98 (125%)-Diluted (0.50) 1.98 (125%) Closing market price 15.00 21.00 (29%)Net asset value per share 12.73 13.84 (8%)

US$ US$ Market capitalisation 53,700,129 75,117,180 (29%)

Group Performance Summary


Chairman’s Statement

INTRODUCTIONIt is my pleasure to present the results for Dairibord Holdings Limited and its subsidiaries for the year ended 31 December 2013. The Group’s annual report is prepared to meet the requirements of the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines Application Level C for the second year. This is done in order to enhance communication and information dissemination to our valued stakeholders, and to demonstrate our commitment to sustainable business practices, in our operations.

OPERATING ENVIRONMENT

ZimbabweThe year under review has been characterised by deteriorating macroeconomic conditions which in turn resulted in GDP growth of 3.4% compared to the 4.4% growth witnessed in 2012. This compares unfavorably with GDP growth experienced in Sub-Saharan Africa which averaged 6%. Year on year inflation to December 2013 declined to 0.33% from 2.9% during the previous year. Year on year food and non-alcoholic beverages sector inflation, which has a direct bearing on the prospects of our business, recorded negative growth of 2.2%. The decline in GDP and inflation, points to deflation caused by the slow money supply growth. This poses serious challenges for the economy in the short to medium term.

In addition to the lower growth in GDP, the persistent trade deficit, subdued Foreign Direct Investment and even lower disposable incomes resulted in serious liquidity challenges.

MalawiThe macroeconomic environment in Malawi improved in 2013 with GDP growth rebounding to 5%. The year was not without its challenges. Foreign exchange markets deteriorated significantly, driven by the withdrawal of donor support and a widening trade deficit. Consequently, foreign currency shortages worsened, triggering further

exchange depreciation. The exchange rate deteriorated to US1:450MK from US1:342MK the previous year. The unfavorable conditions continued to worsen business competitiveness and raised the level of foreign currency risk.

GROUP PERFORMANCE OVERVIEW

RevenueandVolumesThe Group posted revenue of $100.1 million, compared to $106.9 million the previous year. The lower performance was driven by a number of factors. Chief amongst them were declining consumer purchasing power, declining consumer prices on some key brands, supply challenges and intense competition from imported products, mainly from South Africa. The weakening rand created favorable conditions for South African imports which impacted negatively on the Group’s performance.

Total Group sales volumes recorded a decline of 8%, compared to the previous year. Beverages and foods recorded a decline of 19% and 1% respectively whilst liquid milk products grew marginally by 2%. The decline in sales volumes for beverages was due to business disruptions following a strategic decision to re-organise and rationalise processing. This largely resulted in supply constraints of some product lines. Although the sales volumes of Cascade dropped as a result of unit size reduction the value per litre was enhanced.

ProfitabilityManufacturers in the fast moving consumer goods sector were caught between declining consumer prices and rising cost of doing business, propelled by increasing labour costs, utilities, depreciation, and rising costs of materials. The rising input costs resulted in thinner margins. Thus Dairibord witnessed a fall in gross profit margins to 24% in 2013, from 30% in the prior period. The company also incurred a once off business restructuring cost of $3.1 million which was fully absorbed in the year under review. It is anticipated that the benefits of this strategic initiative will put Dairibord in good stead into the future. Other impairments of $1.5 million were also incurred.

Owing to the challenges listed above and the strategic initiatives made during the year, the Group’s financial performance recorded an operating loss of $1.8 million, compared to a profit of $9.8 million the prior year. Excluding the non-recurring expenses normalized operating profit of $2.8 million would have been registered, 71% lower than the previous year.

Raw Milk IntakeTotal Group raw milk intake increased by 2% to 27.4 million litres compared to the 27.0 million litres bought in 2012. In Zimbabwe, national milk production at farm level declined by 2%, while the raw milk bought by DZPL increased by 1%. The growth in milk supplied to DZPL was mainly driven by the heifers imported in 2012. Through this initiative of dairy herd rehabilitation, 3% of milk supplied to DZPL was directly from this project which is in line with the company’s strategic plan.

Given the challenges around milk production which include cost of stock-feeds and a stagnant dairy herd, the growth in milk production in the ensuing year remains stunted. The Group will therefore pursue initiatives to grow its supply base. More resources will be directed at milk production as a critical survival strategy. To this end, an additional 90 heifers will be received in the first quarter of 2014, to give a targeted incremental raw milk supply of half a million litres per annum.

Dr. L.L. TsumbaChairman


Chairman’s Statement (continued)

RawMilkIntake(continued)Milk supply in Malawi will be buoyed by the investment in milk collection and storage facilities undertaken in 2013. During the year, the investments resulted in a 3% growth in raw milk intake.

PositivecashgenerationWhile the Group posted a loss for the year, it continued to generate healthy cash flows. Net cash generated from operating activities was $5.9 million, an 11% increase from the $5.3 million recorded in 2012. The cash generated was in part utilised to fund capital expenditure of $4.7 million.

InvestmentsThe Board remains confident that the challenges alluded to above are transitory. On that basis, the Board made investment decisions to support distribution, merchandising activities and value carrying brands to ensure sustainable growth. Capital investments made during the year were funded from internal resources.

In Malawi, the operating environment negatively affected the performance of our subsidiary which posted an operating profit of $0.2 million against $0.6 million in 2012 with positive cash generated from operating activities.

GearingThe Board remained focused on the need for prudence in managing its debt obligations. Management however continued to ensure that opportunities to create sustainable shareholder value were not missed. To that extent, borrowings grew marginally, by 1% to $7.1 million resulting in a gearing ratio of 13% (based on interest-bearing borrowings), from 12% in 2012. The company is thus in a position to harness new opportunities as they arise without jeopardising the financial position of the business.

Human CapitalThe Group’s assets are embedded in its brands and in human capital. Policies and strategies are therefore continuously reviewed to attract and retain critical talent.

During the year under review, various talent development programs were implemented, at middle management, in production, marketing and quality control.

CorporateGovernanceThe risks attendant to the business environment requires Dairibord to implement good corporate governance structures in order to enhance the Board’s oversight role and in order to mitigate contingent risks. I am pleased to report that the Group has a robust corporate governance structure in place. This governance structure is continually assessed for effectiveness.

OutlookThe economic outlook for 2014 will continue to be challenging. Concomitantly business models structured around the past paradigms will fail leading to higher unemployment and company closures.

The strategic rationalisation of our business together with the other cost reduction measures implemented by management in 2013 will strengthen the Group’s performance in 2014. It is thus anticipated that the Group will return to profitability this year.

Investments approved by the Board for implementation in 2014 are aimed at improving efficiencies, supporting value carrying brands and

Outlook(Continued)introducing new innovative products which will enhance the Group’s capacity to generate value. In addition, the Group will also look for opportunities for investment in areas that are aligned to its core business.

In Malawi, the company will invest in more resources, to support export growth as a key survival initiative.

The Group will also continue to focus on people development and productivity improvement across all levels of operations. Risk and control processes will be benchmarked against best practices.

DirectorateI advise that Ms. S.P. Bango who joined the Board on 24 February 2004 will retire at this year’s AGM to be held on 16 May 2014, and will not be standing for re-election. I take this opportunity to thank her for her contribution and wish her well in her future.

DividendIn view of the lower than expected Group results and the need to preserve cash for investments, your Directors resolved not to declare a dividend for the year ended 31 December 2013.

AppreciationI wish to express profound gratitude to our various stakeholders, to my fellow Directors, management and staff for their unwavering support and dedication during what has proved to be a most difficult business environment.

Dr. L.L. TsumbaChairman

13 March 2014


Group Chief Executive’s Statement

OPERATING ENVIRONMENT

ZimbabweGross Domestic Product (GDP) grew by 3.4% versus 4.4% in 2012 and less than 5% projected in the original 2013 national budget. This performance was lower than the Southern African Development Community (SADC) 2013 growth estimate of 4.9%. Manufacturing sector growth slowed down to 1.5% having registered 5.4% growth in 2012 while the Agricultural sector recorded a negative growth of 1.3% compared to 7.8% in the prior year.

According to the Confederation of Zimbabwe Industries (CZI) manufacturing sector survey for 2013, capacity utilisation dropped to 39.6% from 44.9% in 2012 mainly due to limited funding, supply side constraints and infrastructure challenges. Capacity utilisation in the Foods, Dairy and Beverages sector was 42% compared to 58% the previous year. Liquidity challenges resulted in low aggregate demand. The current account deficit was estimated to be $3.25 billion by year end, higher than the initially projected deficit of $2.5 billion due to a slowdown in exports and a faster growth in imports. This protracted trade deficit and the low capacity utilisation attest to Zimbabwe’s shift towards a consumer economy.

MalawiIn addition to what was alluded to in the Chairman’s statement, the withdrawal of donor support resulted in increased Government borrowings culminating in interest rates sky rocketing to 42% before softening to around 37% at the close of the year.

Although tobacco output resulted in increased foreign currency inflows, the impact was not sufficient to mitigate against foreign currency shortages. Production was intermittently disrupted by erratic power supply leading to significant product losses.

GROUP PERFORMANCE OVERVIEWThe performance of the Group was negatively affected by a decline in revenue and an increase in operating costs.

SalesVolumesandRevenuesRevenue and sales volumes were 6% and 8% below prior year respectively. Price adjustments to retain competitiveness resulted in a decline in revenue realization per litre.

The graphs below show sales volumes and revenues by portfolio.

Sales volumes for the Liquid Milks portfolio recorded a 2% growth while turnover decreased by 1% compared to the previous year. The key drivers for the growth in Milks were Chimombe, Steri Milk as well as quality improvements on Lacto which led to an increase in volume and market share gains. Potential market demand for Chimombe and Steri Milk was not met due to supply challenges. Availability of imported Chimombe was constrained by import permit restrictions. Alternative suppliers have been developed to mitigate supply challenges on imported Chimombe while the limitations on import permits have been resolved. An investment will be made in a Steri Milk plant to increase capacity during the course of 2014.

Sales volumes for the Foods portfolio decreased 1% while sales revenue was 5% below prior year due to production disruptions during the planned strategic rationalization of plant and staff and

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

Liquid Milk Food Beverages2013 25,818,069 12,555,392 27,046,807

2012 25,424,222 12,686,972 33,366,332

Portfolio Sales Volumes (Litres)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

Liquid Milk Food Beverages2013 34,634,359 34,547,179 29,708,928

2012 35,069,447 36,544,019 34,270,401

Logistics1,160,424

1,004,768

Portfolio Revenue (US$)

AnthonyMandiwanzaGroupChiefExecutive


Group Chief Executive’s Statement (continued)

price reduction for competitiveness. Beverages volumes were 19% below 2012 while turnover was 13% below the same period last year. The right-sizing of the Cascade unit from 500 ml to 400 ml led to reduced volumes whilst benefiting from enhanced value per litre. Aqualite bottled water sales were impacted by production supply side constraints.

The spread of revenue across the portfolios still reflects a healthy strategic mix of the Group’s product offering as shown below.

The change in portfolio contribution is largely attributable to the decline in sales volumes for Beverages due to factors alluded to above. Going forward, investments in Beverages will result in the restoration of the balance in the product mix.

ProfitabilityThe Group recorded an operating loss of $1.8 million (after taking into account once off costs of $4.6 million) compared to an operating profit of $9.8 million achieved in 2012. Excluding the once off expenses, the operating profit would have been $2.8 million for the full year. The decline in profitability is a manifestation of the mismatch between revenue performance and rising costs which was partly mitigated by the rationalisation programme undertaken during the year. The objective of the rationalisation exercise was to reposition the business with the intended outcome of reducing costs relating to manpower, utilities, repairs and maintenance and other overheads by consolidating operations.

Following the completion of the business restructuring in the first half, performance during the second half of the year reflected a recovery and the trajectory will improve further in 2014. To enhance profitability, the Group is focusing on measures to contain the major cost elements which include raw and packaging materials, utilities, labour and distribution.

FinancialPositionandCashflowGenerationDespite the decline in turnover and profitability, the Group has maintained a strong financial position with a gearing of 13% from 12% in 2012 reflecting a minimal increase in interest bearing borrowings. The low gearing enables the business to leverage the balance sheet to support emerging opportunities. At the end of the year, the Group secured a $6 million loan facility from the PTA Bank with tenure of 5 years at an “all in cost” of 10.3%. The loan will be partly used to finance investments lined up for 2014. The facility was signed after the reporting date. The Group’s liquidity position reflects capacity to meet its obligations going forward.

Net cash generated from operations increased to $5.9 million from $5.3 million in 2012. This was achieved on the back of prudent working capital management.

InvestmentsDuring the year, the Group invested $4.7 million in capital expenditure, funded from own resources. The cumulative investments since 2009 amount to $21.6 million. Over the years, the investments were made to improve product supply and quality, efficiencies and market competitiveness.

Major capital investments made during 2013 were as follows:

• Distribution trucks ($1.7 million) both for refrigerated and ambient products for NFB Logistics to enable it to fully service Group and third party customers.

• Depot chillers and trade refrigerators ($1.4 million). The investment has improved capacity at distribution depots and boosted merchandising capabilities in the market.

• A UHT milk packing line ($0.4 million) for Dairibord Malawi Limited to enhance quality and availability for long life liquid milk in the market

• Other items of plant and equipment ($1.2 million)

MILK SUPPLYRaw milk intake for the Group increased by 2% to 27.4 million litres, with both Zimbabwe and Malawi recording moderate growth.

Portfolio Revenue as a percentage of Total Revenue

0

20

40

60

80

100

30%

34%

35%

32%

1% 1%

34%

33%

2013 2012

Milk Food Beverages Logistics

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

National MilkProductionZimbabwe

Group RawMilk Intake

DZPL RawMilk Intake

DML RawMilk Intake

2013 54,700,000 27,424,952 21,443,725

2012 55,900,000 26,974,246 21,188,134

5,981,227

5,786,122

Milk Supply Statistics (Litres)

0

20

40

60

80

100

42%

19%

39%

47%

18%

36%

2013 2012

Portfolio Volumes as a Percentage of Total Volumes

Milk Food Beverages


ZimbabweRaw milk volumes bought by the business increased by 1% to 21.4 million litres from 21.2 million litres recorded in the prior year. The growth was against a 2% decline in national milk production from 55.9 million produced in 2012 to 54.7 million litres.

The average price paid for a litre of raw milk in 2013 was $0.64 compared to $0.61 in 2012. Milk production in Zimbabwe remains highly uncompetitive negatively impacting costs of production. In South Africa cost of raw milk ranges between $0.35 and $0.40 per litre creating a huge cost disadvantage.

The 250 heifers imported from South Africa in 2012 contributed 3% of total raw milk intake for DZPL. Thus the Heifer Importation Programme will be extended into 2014 with 90 heifers expected in the first quarter of 2014.

MalawiRaw milk intake increased by 3% to 5.9 million litres. The growth reflects the positive impact of the investments made in setting up additional milk collection centres for the convenience of the contracted small holder milk producers.

BRAND BUILDINGBrand support initiatives aimed at building endurable brands were undertaken. A new range of vegetable oil based ice creams, Dairibord Novelty, was successfully launched to complement the Dairibord real dairy ice creams range which was also re-branded in line with market trends, offering consumers wide choice.

Lyons Maid bulk ice creams, Lyons Peanut Butter and Dairibord Ching’ombe were all re-branded and re-launched to enhance brand equity.

The Research & Development function which plays a significant strategic role in building endurable brands for the Group was centralised to fully take advantage of broader opportunities that exist in the market.

HUMAN CAPITALThe most important assets of the business are its brands and human capital. To achieve growth, the business strives to attract, retain and develop the best talent. To support this:

• The Group continues to maintain harmonious industrial relations. During the staff and plant rationalisation exercise, co-operation was received from all employees.

• The Group has put together supervisory, management and executive development programmes that are meant to prepare high potential managerial staff to become more effective in their present and future roles.

• An employee wellness programme was launched to assist staff to appreciate their full potential.

• The Group uses the Balanced Score Card (BSC) performance management system to monitor and evaluate business performance.

SUSTAINABILITYFor the second year running, the Group has prepared its annual report in accordance with the Global Reporting Initiative (GRI) guidelines for sustainability reporting. The Group aims to exceed the minimum requirements and expectations in its social, environmental and economic performance. The programmes that the business is

undertaking will continue to receive support. New programmes including Safety, Health and Environmental (SHE) certification will be completed in 2014 to buttress the sustainability commitment of the Group.

The following awards were received from various reputable bodies and organisations during the year and are testimony to the commitment to excellence by the Group attesting to its corporate relevance.

• Zimbabwe Investment Authority, Investor of the Year Awards: 1st Runner-Up , Manufacturing Sector Category

• PMR Africa 2013 Golden Arrow Zimbabwe Country Survey Leaders and Achievers: 1st Overall Milk and Dairy Product Producers

• Institute of Chartered Secretaries and Administrators in Zimbabwe (CIS), Excellence in Corporate Governance Awards: 2nd Prize in the category of Best shareholder Practices and Sustainability Reporting

• Proudly Zimbabwean Foundation: BinIt Harare CBD Champion Award.

• Top awards for the Dairibord corporate brand, Rabroy and Cascade in the Marketers Association of Zimbabwe (M.A.Z) 2013 Superbrands competition

STRATEGICBUSINESSUNIT(SBU)PERFORMANCEThe Charts below show the summarised performance of the SBUs across the Group.

DAIRIBORDZIMBABWEPRIVATELIMITED(DZPL)Sales volume recorded a 3% increase while revenue declined by 3%. The increase in sales volumes was driven largely by Liquid Milks and Beverages which recorded a growth of 3% and 28% respectively, Foods decreased by 12%.

Growth in the milks category was on account of improved quality of Lacto which resulted in greater consumer acceptance as well as the 1 litre carton line extension and aggressive marketing for Chimombe and Steri Milk. Improved sales volumes for Nutriplus and Fun’n Fresh helped lift the performance for Beverages. Capacity constraints affected sales volumes for Aqualite bottled water necessitating the investments in capacity that will be made in 2014.

Average prices per litre sold declined 6% from $1.71 to $1.61.

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

DZPL Lyons DML2013 56,023,489 35,576,567 6,291,022

2012 57,095,612 42,172,178 6,616,077

NFB1,160,424

998,168

SBU Revenues Contribution (US$)



STRATEGICBUSINESSUNIT(SBU)PERFORMANCE(continued)Cost of materials increased by 9% to $32.8 million mainly on account of cost price increases on key materials including raw milk (5%), skimmed milk powder (10%), Steri HDPE (3%) and Lacto sheeting (9%). The combined effect of price adjustments to maintain competitiveness in the market and the increase in cost of materials contributed to the compression of Gross Profit margins from 31% to 25%.

Whilst prices of raw and packaging materials are based on prevailing rates on the world market, alternative procurement strategies linking directly with the manufacturers particularly for imported inputs were deployed. This strategy now enables the business to procure materials at competitive prices.

Similarly, alternative suppliers are being developed to widen the supply base and benefit from better trade terms. Ingredients contribute a significant portion of input costs, therefore, research and development of various formulae is in progress to develop alternative cost effective ingredients whilst maintaining product quality which will result in the improvement of profit margins across product portfolios. The investment in equipment for ice creams, Steri Milk, water and other products will improve efficiencies with a direct result of cost reduction. These initiatives will improve and protect margins across the product portfolios.

A major review of manufacturing facilities was undertaken at the end of 2012 which culminated in an exercise to restructure and consolidate operations. This strategic initiative resulted in closures of the Bulawayo and Mutare factories. This is a major step in right sizing the organisation with direct positive impact on overhead costs to enhance competitiveness as well as taking the opportunity to introduce appropriate technologies for the Group’s manufacturing activities.

LYONSSales revenue and volumes were 10% and 20% below prior year respectively.

Sales volumes for Foods grew by 14% while revenue was up by 8% mainly supported by increased capacity from investments in ice cream processing equipment, tomato sauce and the condiments processing and filling lines.

Beverages sales volumes were 28% below prior year driven by supply constraints and unit size reduction of Cascade. While volumes decreased by 28%, revenue decreased by a lower 19% due to the introduction of a convenient 400ml from 500ml Cascade enhancing revenue realization per litre.

To enhance performance, investments in merchandising facilities and advertising were undertaken to drive sales volumes for both Foods and Beverages. Price adjustments were effected to maintain competitiveness in the market. Distribution channels were strengthened through investing in an additional distribution depot in the Harare Central Business District (CBD), distribution through DZPL’s franchises and sales shops and aligning commission rates for vendors with the market.

Gross Profit margins recorded a marginal decline from 33% to 32% mainly mitigated by effective cost management supported by production efficiencies derived from new investments. However, operating profit margin decreased from 11% to 7% due to a high level of fixed overheads.

Cost of raw and packaging materials was managed through active supplier engagement on prices for key cost drivers. To manage labour costs, a manpower rationalisation exercise was undertaken resulting in reduction in labour costs. Going forward, research and development of alternative cost effective ingredients will be pursued to reduce costs without compromising product quality. Management will continue to interrogate the cost structure to enhance profit margins.

DAIRIBORDMALAWILIMITED(DML)Total sales volumes were flat on prior year. Sales volumes for Foods and Beverages grew by 28% and 13% respectively weighed down by Liquid Milk volumes which declined by 7%.

Growth in Foods was a result of the investment made in a yoghurt plant to increase capacity to meet growing demand. The company’s drive is towards growth of value added lines in order to improve margins. The business launched a new product, Juice Up, at the close of the year. This is a low cost beverage targeted at the low end of the market to improve volumes in the Beverages category. In addition to the above mentioned initiatives, the SBU successfully commissioned an additional UHT long life milk packing line to drive growth in exports as well as improve quality and efficiencies.



DAIRIBORDMALAWILIMITED(DML)(continued)Domestic sales account for 74% of the revenue reflecting the level of exposure to currency risk. The depreciation of the Kwacha resulted in cost push inflation that could not be matched by consumer price increases negatively impacting the profitability of domestic sales. In mitigation the business focused on growing exports to at least match the import bill and minimize exchange losses. Exports revenue rose 24% contributing 26% of the total revenue. As such, the business is on a sound position to meet its foreign currency requirements.

The business invested in cold chain facilities to improve market coverage and support growth in Foods and Beverages. The demand for yoghurts is growing propelled by the performance of drinking yoghurt and the introduction of real fruit yoghurt. Exports will remain pivotal to the preservation of the value of the business. Focus will be on penetrating new markets targeting Mozambique and Zambia.

NFBLogisticsTurnover for the business was at $7 million, 17% above prior year. The growth was buoyed by an increase in third party business and improved capacity enabling the business to provide more services to Group companies. Third party turnover growth was 16% over prior year contributing 17% to the unit’s total revenue.

Volumes (kilometers) sold grew by 14%. The growth was a result of increased capacity due to investments in additional trucks which became fully operational in the fourth quarter of 2013. Business for the new fleet is predominantly from third party customers. Increased distribution requirements from the Group companies also contributed to additional growth.

Investments targeted at increasing capacity to fully service Group and third party customers were $1.7 million. Since the investments were commissioned in the second half of 2013, the full benefits will be realised in 2014.

Improved planned maintenance coupled with the introduction of newer vehicles into the fleet resulted in a reduction in repairs and maintenance costs. Close monitoring of operational efficiencies such as vehicle utilisation and fuel consumption were also a major factor in managing operating costs.

The 2013/14 agricultural season is expected to result in a better harvest given the above normal rainfall. The company will benefit from opportunities to move agricultural outputs and improved activity in the agro-based industry, which should result in improved business.

OUTLOOKThe Group is well positioned for growth and is anticipated to return to profitability in 2014. The new structure that emerged from the strategic repositioning of the business will enable the Group to contain operating costs. In addition, investments made to support strategic value carrying brands will put the company in good stead.

To improve capacity and market competitiveness, reduce costs and give customers a wide choice, capital investments projected at $10 million are earmarked for 2014 and will be funded from a combination of own resources and borrowings. The specific investments are:• Steri Milk plant• Ice cream cones and sticks line

• Aqualite processing and filling and• New products

The Heifer Importation Programme will be up scaled in line with the Group’s milk supply development objectives.

The Group will continue to monitor the business environment and the performance of the SBU in Malawi. The strategy is to remain in Malawi as long as the SBU is making a positive contribution to the overall performance of the Group.

In spite of the anticipated serious economic challenges in 2014, management is confident that the growth pillars identified will deliver sustainable value creation.

AnthonyMandiwanzaGroupChiefExecutive

13 March 2014


DZPL invested in scooters to undertake product refills to vendors in the market.

Ms Rudo Loice Munemo (above) was one of two lucky consumers who won the two grand prizes of a vehicle each in the 2014 Cascade Consumer Promotion. Mr Innocent Chikwezvero won the other vehicle


Corporate GovernanceBoard of Directors

Dr. Leonard L. TsumbaPhD (Economics)

Chairman Non-Executive

AnthonyS.MandiwanzaDip. in Food and Dairy

Technology, MBAExecutive

Thompson MabikaDip. in Management Accounting (CIMA)

Executive

Herbert MakuwaBSc (Finance), MBA

Non-Executive

MercyR.NdoroB.Acc, MBAExecutive

SibusisiweChindoveBA, MSc (Food Science)

Non-Executive

Sibusisiwe P. BangoBBS, MBA

Non-Executive

JosphatSachikonyeB.Acc, FCMA, CGMA,

MBLNon-Executive

FungayiMungoniBAcc, CA(Z), MBA

Non-Executive

Cleton MahembeDip. in Agriculture

Non-Executive


SUBSIDIARIES BOARDS OF DIRECTORS

DAIRIBORDZIMBABWE(PRIVATE)LIMITEDBOARDOFDIRECTORSAnthony S. Mandiwanza - ChairmanDavid HasluckDavid MillsNobert ChiromoMercy R. NdoroSibusisiwe P. BangoThompson Mabika - Executive

MARTINDALETRADING(PRIVATE)LIMITED(T/ALYONS)BOARDOFDIRECTORSAnthony S. Mandiwanza - ChairmanMichael TaperaLinda MukushaAdiel KarimaMercy R. NdoroTracey Mutaviri - Executive

DAIRIBORD MALAWI LIMITED BOARD OF DIRECTORS Anthony S. Mandiwanza - Chairman Constance MsisikaDonbell MandalaChikondi Ng’ombeMaziko Sauti-PhiriMisheck EsauTheodora N. Nyamandi - ExecutiveWilfred G. Lipita

NFBLOGISTICS(PRIVATE)LIMITEDBOARDOFDIRECTORSAnthony S Mandiwanza - ChairmanDavid HasluckHerbert MakuwaMercy R. NdoroPatrick MakanzaLovemore Chokoza -Executive

Corporate Governance (continued)


CORPORATE MANAGEMENT Anthony S. Mandiwanza - Group Chief ExecutiveAnna Dhlamini - Group Information System ManagerBernard Chakeredza - Group Chief Internal AuditorCharity Magwenzi - Group Research and Development ManagerDaphne Bope - Group Human Resources ManagerDennis Dzikiti - Group Procurement ExecutiveGabriel Matanga - Group Chief EngineerGilbert Takabarasha - Group Human Resources and Administration DirectorImelda S. Shoko - Group Corporate Communications ManagerKudakwashe Bhaera - Group Finance ManagerLawrence Chikwehwa - Group Marketing ManagerMercy R. Ndoro - Group Finance Director & Company SecretaryObey Machechesa - Group Business Analyst OPERATIONS DairibordZimbabwe(Private)Limited Thompson Mabika - Managing DirectorThemba Mutsvairo - Chief Operating OfficerTinashe Mhembere - Chief Financial OfficerTatenda Napata - Sales and Marketing ExecutiveTinashe Kandare - Human Resources Manager Stanley Mandizha - General Manager - Milk Supply Development UnitTabeth Kahiya - Quality Assurance Manager NFBLogistics(Private)Limited Lovemore Chokoza - Managing DirectorLeo Gandiya - Technical Operations ManagerPeter Kiropasi - Financial ControllerGeorge Mashayahanya - Transport and Logistics Manager MartindaleTrading(Private)Limitedt/aLyons Tracey Mutaviri - Managing DirectorMaurice Karimupfumbi - Financial Controller Costa Manyika - Technical Operations ExecutuveGilbert Mushunje - Sales and Marketing ManagerTrymore Mudzi - Human Resources Manager

Dairibord Malawi Limited Theodora Nyamandi - Managing DirectorGodfree Nzuma - Financial ControllerRoblee Mkamanga - Sales and Marketing Manager

Dairibord Holdings Limited Management


Corporate GovernanceGovernanceandManagementApproachThe board of directors is responsible for the direction and control of the company, setting strategic aims, providing leadership to put them into

effect, supervising management and reporting to shareholders on their stewardship. To that end, it has established appropriate policies and

procedures to govern the conduct of the company’s business and deliberations of the Board.

The company developed a Corporate Governance Manual based on the following codes of practice; Principles of Corporate Governance in

Zimbabwe, The King II Report on Corporate Governance for South Africa – 2002, Organisation for Economic Cooperation and Development

(OECD 1999) principles of corporate governance, and Principles of Corporate Governance in the Commonwealth (CACG Guidelines 1999). This

manual is used as a reference point for the company’s corporate governance practices. The following is a broad review of the present structure

and practices.

Business EthicsThe company adopted a Zero Tolerance Approach to corruption in all business dealings with stakeholders. All cases involving corruption are

carefully investigated. Depending on the case, the company may involve experts, external auditors and the police. The company also adopted

a policy that requires the company to assess and deal with credible and certified suppliers and service providers. Where there are complains

arising from our business practices and productions, due attention is placed.

Directors’ InterestsDirectors are required to declare any dealings in the shares of the company. They must also declare any other interests that may materially affect

the company.

CommunicationwithBoardThe Company provides platforms for shareholders to communicate with the Board. Some of the platforms include annual general meeting, press

announcements of performance (Interim and year end), company website, formal meetings with shareholders and investors, presentations and

use of shareholders’ voting rights system.

Board and Directors Ethics ApproachDirectors and Management are required to declare any dealings in the shares of the company. They must also declare any other interests that

may materially affect the company and any decision that may be made by its stakeholders.

BoardStructureandExpertiseThe present Board comprises of seven non-executive directors (75%) (including the chairman) and three executive directors (25%). A non-

executive director chairs the Board. The Board meets at least quarterly. Members of the Board possess various expertise that include business,

finance, manufacturing, and human resource management.

AppointmentandRetirementofNon-ExecutiveDirectorsIn terms of the articles of association, a third of the non-executive directors retire from office by rotation at every annual general meeting and

are eligible for re-election.

ProfessionalAdviceIt is Board policy that provided the board agrees that there is a justifiable case directors shall be entitled to seek independent professional advice

at company’s expense in the furtherance of their duties.


Corporate Governance (continued)

SUB-COMMITTEES:

Committee Members MainFunction

Finance & Audit Mr. Fungai Mungoni (Chairman)Mr. Cleton MahembeMr. Herbert MakuwaMr. Michael TaperaMr. Dave Hasluck

The Committee monitors the company’s overall control procedures, investment strategies, risk management and financial reporting. It provides direct oversight and liaison on behalf of the Board with both internal and external auditors. The Committee reviews all significant Group risks, as well as risk mitigation initiatives and their effectiveness on a quarterly basis.

Remuneration Dr. Leonard L. Tsumba (Chairman)Mr. Fungai Mungoni

This committee is responsible for reviewing the company’s remuneration policies and approving remuneration packages for senior executives.

Nominations Dr. Leonard L. Tsumba (Chairman)Mr. Josphat SachikonyeMs. Sibusisiwe P. BangoMrs. Sibusisiwe Chindove

This committee searches and receives nominations, carries out background and reference checks and makes recommendations on candidates for board membership. It reviews the adequacy of the expertise, relevance and independence of the board. The Committee also co-ordinates the evaluation of the performance of the board.

ATTENDANCE TO MEETINGS DURING 2013

Name Year of Appointment Board Finance & Audit Remuneration Nomination

L.L. Tsumba 2012 4/4 1/1

A.S. Mandiwanza 1996 4/4

S.P. Bango 2004 3/4

S. Chindove 2006 4/4

T. Mabika 1997 4/4

C. Mahembe 1997 4/4 4/5

H. Makuwa 1999 3/4 4/5

F. Mungoni 2010 4/4 5/5 1/1

M. Ndoro 2009 4/4

J. Sachikonye 2009 3/4

M. Tapera 2012 - 2/5*

D. Hasluck 2012 - 5/5

* Due to approved absenteeism

Directors’DeclarationofinterestDuring the year under review, no director had any material interest that would conflict with the business objectives. Beneficial interests of

directors in the shares of the company are given in the shareholders information section.


Our Sustainability ApproachThe Group believes that operating in a socially and environmentally

friendly manner is fundamentally important to the long term success

and competitiveness of the company. The company endevours

to ensure systems are strengthened to manage and address

sustainability impacts arising from the Group’s operations. As such,

the Group adopted the Global Reporting Initiatives (GRI) Sustainability

Reporting Guidelines, a tool for measuring performance in our

sustainable business initiatives and practices. For the second year

running, the business is reporting its performance in compliance with

the GRI Level C reporting guidelines.

Our stakeholders include investors, employees, communities,

government, regulators, suppliers, customers and others. In order to

understand the concerns of these stakeholders and align the business

model accordingly, engagement is done on an ongoing basis.

In measuring our sustainability performance, key performance

indicators were identified through an assessment of our business in

relation to material concerns of our stakeholders. As such, the choice

of indicators to report on was mainly influenced by issues considered

material in the context of the operating environment.

SustainabilityperformancedataDuring the year 2013, our systems of data collection were enhanced

to improve the quality of the data and measurement reported. As

such, the variance with figures reported in the prior year reflects the

continuous development and improvement in systems of measuring

and collecting data being reported.

Our sustainability team will continue to work on our systems to

ensure appropriate and high quality data for our sustainability

reporting is collected. In 2014, the Group will carry out a holistic

systems evaluation to improve data collection and reporting.


Risk ManagementRiskManagementPhilosophyRisk is embedded in the Group’s activities and is not separable from opportunity. The management of risk across the Group is not a stand alone

activity but rather an integral part of our operations. The risks in this report are the major uncertainties in terms of likelihood and impact. The

board continues to monitor the business and the operating environment to identify and develop strategies to mitigate emerging risks.

Group Risk Management FrameworkThe Board is terminally responsible for risk governance across the Group. The Board has delegated the risk management function to the Group

Finance and Audit Committee. The composition of the Finance and Audit Committee is made up of Non-Executive Directors only. The sub-

committee is accountable to the main Board of Directors. The mandate of the Finance and Audit Committee regarding risk is to ensure that the

Group has adequate systems to identify, measure, predict, prepare for and respond adequately to any risks that the organisation may face.

OperationalStructureManagement is accountable to the Board for designing, implementing and monitoring the Group’s risk management procedures and every

manager is responsible for managing risk in their areas of responsibility.

To ensure the efficient monitoring and assessment of risk management systems, the Group Chief Internal Auditor is responsible for evaluating

the adequacy and operational effectiveness of the procedures. The Group Chief Internal Auditor reports to the Finance and Audit Committee.

MainrisksaffectingtheGroupandmitigatingmeasures

Riskcategory Specificexposures Mitigants

Socio-political

Excessive wage demands by labor unions resulting in unsustainable wage levels

• Proactive participation in wage negotiation.• Employee engagement internally to discuss their concerns.• The Dairibord Employee Share Ownership scheme enables the

employees to understand the position of the business since they are shareholders as well.

Litigation for unfair treatment during the rationalisation process

• Communication with affected employees on the benefits of the program• Legal approval was sought with the Retrenchment Board before

commencing retrenchment.

Resentment in markets where factories were closed

• Sales and distribution operations are still going on in Bulawayo and Mutare.

Legal/Regulatory

Non-compliance with tax laws • Tax health checks done annually.• Frequent engagement with authorities on tax laws and other related

developments.

Non-compliance with indigenisation and empowerment laws

• Annual certification for compliance is sought from the National Indigenisation and Economic Empowerment Board.

Product and workplace safety below standard

• Operating standards are maintained above minimum requirements.• Certification with regulators like National Social Security Authority,

Environmental Management Agency and Ministry of Agriculture is sought before commencing operations.

• ISO 9000: Quality Assurance procedures certified• ISO 22001: Food Safety Management Systems certification done for

DZPL and being rolled out to all SBUs.• Pursuing ISO 14001: Safety, Health and Environmental certification

Economic risk

Increased competition from cheaper imports due to lack of competiveness for local manufacturers and weakening of the South African Rand

• Started Importing UHT Tetra Packed Milk from South Africa in 2012.• Lobbied government to levy duty on all liquid milk imports to level the

playing field in the market.

Decline in competitiveness due to the opening up of the Global economy and the attractiveness of the US dollar

• Investing in new technology to improve on efficiencies.• Investing in research and development to keep pace with the market.

Deterioration of the operating environment in Malawi threatening viability

• Focusing on exports to preserve the value of the subsidiary in Malawi.


Riskcategory Specificexposures Mitigants

Business risk

Failure of the business model to create superior and sustainable performance

• Realigning the business model. The Group has closed Mutare and Bulawayo factories.

• Centralised the research and development function to enhance effectiveness.

• Looking for more opportunities to streamline the business for effectiveness and efficiency.

Work stoppages/operational failure due to materials non-availability, power outages and other unforeseen eventualities

• Holding safety stocks for all critical materials.• Developed more suppliers for critical materials to avoid concentration

risk.• Signed supply contracts with all dairy farmers.• The Group has invested in standby generators and bore holes to ensure

consistent supply of utilities.

Weak investment in the dairy sector leading to a decline in milk production

• Intervening through the Heifer program.• Engaging government on policies that encourage investment in the dairy

sector.

Talent risk

Loss of skilled employees • Performance based pay structure. Top performers are rewarded with both financial and non-financial incentives.

Inadequate succession planning exposing the future of the business

• 100% cover for all critical positions.• Several management development programs are underway viz. MBAs,

Graduate Trainees and Food and Dairy Technology training.

Commoditypricerisks

Negative impact on profit margins • The procurement function undertakes global procurement of materials taking advantage of lower prices during down turns in global markets.

• Supply contracts are constantly negotiated to find better terms in light of developments in the market.

Investorsentimentrisk

Negative investor sentiment on the company leading to share price decline on the Zimbabwe Stock Exchange

• The Group actively participates in investor road shows held by different securities traders to clarify on the prospects of the company.

• One on one meetings are also held with interested investors or analysts at any time during the year.

• Analysts’ presentations are held every year accompanying the publication of full year financial results.

Financial Risk Financial risk is comprehensively dealt with in the notes to the financial statements on pages 75 to 77.

Risk Management (continued)


The Group’s stakeholder engagement process is integrated with our risk management process.

The table below shows the summary of key engagements held during the year:

Stakeholder Material Issues Discussed ResultsandActionTaken

Customers and consumers

Product quality

pricing

• Due to increasing competition, pricing and product quality have become

increasingly important in the customer’s mind.

• The Group continuously reviews pricing to align with the market taking into

account the quality premium in our brands.

RegulatoryAuthorities

(ZIMRA,NSSA,SAZ,LocalAuthorities)

Regulatory compliance • Compliance with regulations.

• Tax health check done annually.

Effluent treatment and refuse disposal • Work in progress on erecting effluent treatment plants.

• Internal refuse collection points now in place.

• Recycling oils and greases to third parties.

Water outages • Water supply from local authorities will remain erratic in the short to

medium term.

• Boreholes have been drilled at all strategic locations to ensure consistent

supply of water.

Health and safety

Factory licence renewals

• The Group is embarking on preparations for SHE certification starting with

DZPL and NFB. Certification is expected in 2014.

• Routine maintenance is done to ensure that all plant and equipment at

least complies with minimum health and safety requirements.

Suppliers

Raw milk supply initiatives and pricing • Through the Milk Supply Development Unit (MSDU), farmers are

continuously engaged in providing the normal extension services.

• In the short to medium term, milk supply is not expected to improve so

the Group is engaging farmers on ways to improve milk supply particularly

through the heifer program.

• The group maintains a Quality Premium Scheme (QPS) to improve quality

as well as production volume at farm level. Discussions were held on pricing

and the QPS was maintained to sustain viability for both farmers and the

business.

Prices and quality for raw materials • Prices for major raw materials will remain high fueled mainly by global

commodity prices.

• The Group takes positions when prices are lower in the market. To ensure

quality, the business evaluates suppliers before putting orders and quality

inspection before receiving the suppliers’ deliveries

Electricity supply

• Power supply will remain erratic in the short to medium term.

• The Group has invested in standby facilities mainly generators and

borehole.

Stakeholder Engagement


Stakeholder Material Issues Discussed ResultsandActionTaken

GovernmentMinistries

Competition from imports • The Group through industry bodies has lobbied government to levy import

duty on imported milk products that are landing in Zimbabwe cheaper than

local products.

• The premise of the levy is to level the playing field between imports and

exports. The Levy will not directly result in increased milk production locally.

However, it will allow local producers time to invest and develop their

capacity to produce more.

Import permits • There has been an improvement in the availability of import permits since

January 2014. Import permits determine the amount of milk products

that the Group can import from South Africa under its toll manufacturing

arrangement.

• Lobbying for more permits with the Ministry of Agriculture will continue.

Employees

Retrenchment • The Group embarked on a staff rationalisation program to realign

manpower levels to volume of activity. The Group received cooperation

from employees during the process and the rationalisation was concluded

in the first half of 2013.

Conditions of service • Unionised employees were awarded a 6% upward wage adjustment.

• The Group’s policy is to pay above the negotiated wages in line with the

performance of the business.

Health and safety • Training was done on health and safety in preparation for the SHE

certification for DZPL and NFB. Once DZPL and NFB are certified the

program will be rolled out to all SBUs.

InvestorsandAnalysts

The company’s performance and

turnaround strategies

• The Company’s turnaround strategies are continuously communicated to

the investor community

• The investor relations team holds meetings during the year to apprise

investors of the developments in the market and in the company

Financial Institutions

Funding requirements,

tenure and interest rates

• The Group’s focus is to finance operations through competitive funding.

Stakeholder Engagement (continued)


Dairibord Holdings hosted a 2013 end of year get together function for customers and suppliers.

Zimbabwe hosted the 9th East and Southern Africa Dairy Association conference in September 2013 and 25 countries were represented. Dairibord Holdings was one of the main sponsors.


ENVIRONMENTAL PERFORMANCE

Management ApproachThe goals of the Group’s environmental management approach are to identify foreseeable hazards, evaluate associated risks and implement

measures to control them.

Environmentalmanagementpriorities• Recycling of packaging materials

• Minimising the carbon footprint

• Minimising water usage and

• Reducing all forms of pollution

PerformanceThe table below shows the material consumption of the Group in the year under review.

Material Usage

Units 2013 2012

Polyethylene Terephthalate (PET) Tons 457 465

High-density Polyethylene (HDPE) Tons 1,614 1,858

Polystyrene Tons 186 130

Oils and Grease Tons 31 33

Plastic wrappers Tons 207 246

Detergents Tons 205 209

Paper packaging Tons 1,045 811

Polypropylene Tons 209 310

The materials listed in the table above have a negative impact on the environment in the following ways:

• Non-bio-degradability

• Decreasing the aesthetic appeal of the environment

• Negative impact on flora and fauna

The decline in PET, HDPE and plastic wrappers is attributable to the decline in sales volumes. The investment made in Petricozim (a partnership

of local manufacturers using PET as packaging material) will result in increased recycling of the packaging materials once they are collected from

the environment.

To minimise the amount of materials disposed of directly into the environment, the Group sells used oils to Environmental Management Agency

(EMA) certified oil dealers. Used tyres and other scrap materials are also sold to recyclers. The table below shows the recycling statistics for 2013

against 2012:

Item %recycled

2013 2012

HDPE 5% 7%

Used oil 6% 11%

Sustainability performance


ENERGYThe Group’s energy requirements are met through the consumption of renewable and non-renewable sources of energy. Renewable sources of

energy include electricity generated from hydropower stations while non-renewable sources of energy include petrol, diesel, coal and gases.

These sources of energy have an impact on the environment both directly and indirectly. The impact is in the form of waste creation, emissions,

noise and depletion. To improve the impact of our energy consumption on the environment, the Group undertakes the following:

• Improving the energy efficiency rating of all the plant and equipment through planned maintenance, regular emission checks and purchase

of energy efficient plant and equipment

• Substituting CFC gases with HFC refrigerants gases that are environmentally friendly

• Exceeding the minimum requirements stipulated by environmental regulators.

DirectEnergyuse(ByPrimarySource)

Units 2013 2012

Direct Energy

Heavy fuels (coal) Tons 5,307 5,477

Light fuels ( diesel) “000” Litres 1,676 1,573

Light fuels (petrol) “000” Litres 75 58

Light Fuels (Gases) Tons 6 8

IndirectEnergyUsage(ByPrimarySource)

Units 2013 2012

Indirect Energy

Electricity MWh 17,251 18,160

Coal consumption went down in 2013 in response to the reduction in the number of coal powered boilers due to the closure of Mutare and

Bulawayo factories. The decline in electricity consumed is a result of the closure of factories as alluded to above.

Diesel and petrol consumption increased due to the growth in the transport fleet.

WATERAs a foods and beverages business, water is a critical resource that needs efficient management. The business is aware of the global shortage of

water as well as challenges facing local authorities in supplying adequate water. The Group’s products are largely made of water while our outputs

and processes particularly cleaning and industrial effluent go straight into the rivers. As such, the Group is determined to improve its water usage

per litre of output as well as the quality of the effluent discharged into the environment.

WaterWithdrawalsandConsumptionThe table below shows water consumption by primary source.

Units Fullyear

2013 2012

Municipal Cubic metres 312,233 335,384

Borehole Cubic metres 72,300 7,223

Total Cubic metres 384,533 342,606

The increase in borehole water usage was driven by the investments made in boreholes to support operations affected by water outages. The

decrease in municipal water usage is a result of the closure of manufacturing operations in Mutare and Bulawayo.

Sustainability performance (continued)


EMMISSIONS, EFFLUENTS, AND WASTE

Greenhouse GasEmissions into the air depend on the sources of energy used and the efficiency of the equipment that convert the sources into energy. Emissions

from the Group’s operations are shown below:

Carbon dioxide

Carbonemissions(Tons) 2013 2012

Direct energy 24,905 27,375

The figures mentioned above were arrived at by using the established CO2 Emissions/ton of materials consumed. The emissions released into the

air come from motor vehicles, boilers, refrigerants and generators.

EffluentDischargeDue to the nature of our products, effluent from the Group’s operations contains milk and milk products, Lye and Acid ions. All effluent is

discharged into the respective municipal sewer. The construction of effluent treatment plants have been deferred to 2014 due to financing

challenges.

Developments

PETrecyclingcompany(Petrecozim(Private)Limited)The Group’s Zimbabwe operations are in partnership with other industry players to create and run a PET recycling company, Petrecozim (Private)

Limited. The Group is committed to the arrangement as a way of embracing the responsible investor principle. Major developments at the

company in 2013 were:

a. Recruitment of key human resources to manage the operations

b. Acquisition of plant and equipment that has already been delivered in Zimbabwe

c. Operational modalities worked out to ensure the recycling company starts operations

The company is expected to commence operations in the first half of the year 2014. The Group contributes to the operating and capital expenditure

as well as seconding board members to the company. Contributions will cease once the entity’s operations become self-sustaining.

SignificantprogresstowardsSHEcertificationatDZPLandNFBLogisticsPreparations are at an advanced stage with a completion target of June 2014. Management is seized with finalising compliance checks before

engaging the Standards Association of Zimbabwe (SAZ) for a certification audit.

Preparatory work already done is as follows:

a. SHE policy launch

b. Appointment of a Safety Health and Environmental Quality (SHEQ) Officer and SHE management team

c. Development of SHE policy manual and procedures

d. Preliminary audits by external consultants

e. SHE training for departmental representatives

The work already done puts the two SBUs in a position to successfully get certification in 2014.



SOCIALPERFORMANCE:

Human Capital Maintenance

Management ApproachThe Group strives to attract, develop and retain the best talent. To optimise performance of the human capital, the Group provides a work

environment based on fairness, integrity, non-discrimination, equal opportunity, empowerment, mutual respect and human rights.

HumancapitalprioritiesThe Group’s human capital strategy focuses on the following priorities:

• Training and development

• Health and safety

• Medical assistance through onsite clinics and medical aid contributions

• Linking remuneration to productivity

• Respect and fair treatment of all employees

• Engaging employees in constructive dialogue

• Increasing the number of female employees up to senior management

• Non-discrimination of employees on grounds of health, race, age or gender.

Performance

WorkforcebyEmploymentType Number as at end of

2013 2012

Permanent Employees 894 930

Contract Employees 603 643

Total 1,497 1,573

The change in head count reflects the impact of the staff rationalisation process completed in June 2013. The plant and staff rationalisation

process resulted in closure of the Mutare and Bulawayo factories to realign the business resulting in the decrease in head count. Sales and

distribution operations have remained in these areas.

The Group is committed to diversity and respect for human rights. The business thrives to increase the number of women in its employ and

for the two years 2013 and 2012, the percentage of females to total workforce remained at 10%. The table below shows the breakdown of

employees by gender.

WorkforcebyGender

Number as at end of

2013 2012

Number of female employees 139 132

Number of male employees 1,358 1,541

Total 1,497 1,573



To enhance the skills base for the Group, various training programs including apprentices, graduate trainees and attachés were undertaken on

board. The statistics are shown in the table below.

Number as at end of

2013 2012

Apprentices 17 18

Graduate Trainees 3 14

Students on attachment 11 10

Health&SafetyattheworkplaceThe Group is committed to ensuring the safety of its employees, contractors and customers. As such, the Group continues to improve its health

and safety performance within its premises and where ever it conducts its business through the following:

• Provision of health and safety training for all employees at every location and function.

• Reinforcing the objective of operating with no injuries or fatalities.

• Regular review of factory designs to implement measures that improve occupational safety.

• Factory clinics at operating factories.

• Medical aid support for all employees.

• Running awareness programs for HIV and AIDS.

To further develop procedures to enhance health and safety, the Group has embarked on a SHE certification process starting with DZPL and NFB

Logistics expecting certification in 2014.

Performance

2013 2012

Safety leading indicators

Hazards for which internal STOP Notes have been issued - 1

Stoppage/Instructions issued by State - 1

Safety representative training (Frequency) 4 3

Number of fatal injuries - 1

Number of lost time injuries 94 80

Total number of injuries 94 81

Number of lost days 205 227

Health & Safety Training and Awareness Programmes

2013 2012

Number of employees on wellness programme 9 6

Number of employees on anti-retroviral therapy 5 7

Number of employees on medical aid 659 869

Number of peer educators 17 19

HIV/AIDS awareness campaigns done during the year 10 11

Number of clinics run by the company 1 1

Number of First Aid workers 37 37



PRODUCTS RESPONSIBILITYThe Group’s strategic thrust is to provide nutritious foods and beverages for the sustenance of good health. The Group works with industry

players, government bodies, customers and suppliers to understand the environmental, health and safety risks associated with its products and

find solutions to address them.

The ISO 22000:2005 Food Safety Management Systems are in place at all factories to ensure the identification, analysis, evaluation and timely

response to quality problems.

Initiatives to mitigate the social and environmental impact of our products and services are:

• Research and development to introduce products that do not have negative effects on the customers’ health in the long run.

• Ensuring that all products are certified by the Ministry of Health and the Standards association of Zimbabwe.

• Membership of the Polystyrene council of Zimbabwe which is working towards collection and recycling of Polystyrene materials.

• Working closely with other companies and EMA in clean up and awareness campaigns and environmental expos.

ECONOMIC PERFORMANCEKey Issues

• Uncertainty in the operating environment;

• High cost of securing finance

• Exchange rate variations;

• Rising cost of production.

This section provides selected economic performance of the group in 2013. More comprehensive economic performance is provided in the

financial statements section of this report.

KeyEconomicValueGenerated

Direct Economic Value 2013 2012

US$ million US$ million

Turnover 100.1 106.9

(Loss)/profit before Tax (2.3) 9.4

Cash Flow from operating activities 5.9 5.3

The loss recorded for the year 2013 was on account of increases in material costs and once off costs incurred during the plant and staff

rationalisation.

COMMUNITY INVESTMENTCommunity investment is a critical component of the business and has remained part of the Group’s ethos. The Group has always taken pride in

taking strategic approaches aimed at creating real social impact alongside business benefits.

Education:BoostSifeAs part of our contribution to the national skills pool and moulding future entrepreneurs, the Dairibord Holdings Group co-sponsored the 2013

BOOST Fellowship/Enactus Zimbabwe National competition wherein teams from various universities in the country showcased the impact of

their outreach efforts. The winning team was the University of Zimbabwe and it represented the country at the prestigious Enactus World Cup in

Cancun, Mexico in September 2013.



EducationTrustFundThe Dairibord Holdings Education Trust fund, established in 2006 is aimed at assisting Zimbabwe attain its manpower development goals and

needs whilst developing a pool of potential employees for the Group and industry as a whole. During the year under review, a total of 20 high

school and university students were on the bursary scheme. The beneficiaries are children of employees at supervisory level and below.

Thevulnerable:BreastCancersurvivorsIn an effort to make a difference in society, Dairibord Holdings partnered with the Cancer Awareness Survivors Trust (CAST) and hosted a fund-

raising dinner for breast cancer patients who were unable to meet their medical expenses. Most breast cancer survivors depend on the generosity

of the community and the corporate world for medical funding. Becoming active and committed participants will have a trickle-down effect in the

communities we operate in and the country as a whole.

Adoptedcharities• The Society of the Destitute and Aged (SODA) in Highfield, Harare and children at Rekai Tangwena orphanage in Nyanga benefited from the

monthly donations from the Group. SODA has an average of 25 inmates while Rekai Tangwena has a total of 30 orphans.

• Dairibord Malawi assisted Tiwasunge HIV/ AIDS dance group with nutritious foods and beverages every quarter.

• Dairibord Holdings also contributed significantly to charity programmes championed by the Airforce of Zimbabwe and the National

Federation of Grassroots Women’s Clubs. The contributions have had a positive impact on the living standard of the less privileged in the

country.

Sports In sport, the Group’s engagement was as follows:

• Dairibord Malawi successfully sponsored the Dairibord Ching’ombe National Cross Country Championships, a major event on the Malawi

sports calendar.

• Dairibord Holdings also co-sponsored the St George’s college football team tour of South Africa in 2013 as a way of promoting football while

at the same time moulding players for the nation.

Total spend on social investment is shown in the table below:

Support 2013 2012

US$ US$

Sports 7,000 18,000

Education 32,000 15,000

Health and social welfare 19,000 40,000

Total 58,000 73,000

FinancialSupportfromGovernmentThe Group acknowledges that in some instance government may assist companies in distressed positions due to economic factors beyond their

control through the distressed companies’ fund. As such, Dairibord Holdings did not receive any such financial assistance from government

during the year under review and prior.



Statement of Directors’ ResponsibilityThe Directors are required by the Companies Act (Chapter 24:03) to

prepare financial statements for each financial year giving a true and

fair view of the state of affairs of the company and the Group as at the

end of the financial period as well as the profit and cash flows for the

same period.

The Directors are responsible for maintaining records, which disclose

with reasonable accuracy the financial position of the company and

the Group, and which enable them to ensure that the consolidated

financial statements comply with the Companies Act (Chapter 24:03).

The Directors are also responsible for safeguarding the assets of the

Group and for preventing and detecting fraud and other irregularities.

The Directors consider that in the preparation of these financial

statements, reasonable and prudent judgments and estimates have

been made. International Financial Reporting Standards have also

been followed where applicable with suitable accounting policies

having been consistently applied.

The Directors recognize and acknowledge their responsibility for

the Group’s systems of internal control. These systems are adequate

to provide reasonable assurance that the assets of the Group are

safeguarded and that accurate records, necessary for preparation of

the financial statements, are maintained.

The Directors have satisfied themselves that the Group is in a

sound financial position, and has adequate resources to continue in

operational existence for the foreseeable future. Accordingly, your

Directors believe that the preparation of these financial statements,

on a going concern basis is appropriate.

The financial statements for the year ended 31 December 2013 have

been approved by the Board of Directors and are signed on its behalf

by the Chairman of the Board, Dr L.L. Tsumba and by the Group Chief

Executive Mr A.S. Mandiwanza.

Dr.L.L.Tsumba A.S.Mandiwanza

Chairman GroupChiefExecutive

13 March 2014


The Directors have pleasure in submitting their nineteenth annual report together with audited financial statements of the Group for the year

ended 31 December 2013.

SHARE CAPITALThe authorized share capital is 425 000 000 ordinary shares of US$0.0001 each. The number of issued ordinary shares increased to 358 000 858

by the allotment of 300 000 shares in accordance with the share option scheme.

RESERVESThe movement in the distributable reserves during the year is outlined below:

Distributablereservesatthebeginningoftheyear 23,028,510Loss for the period (1,772,011)

Dividends paid (1,610,014)

Distributablereservesattheendoftheyear 19,646,485

Movements in other reserves are shown in the Statement of Changes in Equity.

INVESTMENTSCairns Holdings Limited remained under curatorship and the Group did not receive any amount of the outstanding US$800,000 for the disposal

of M.E Charhons (Pvt) Limited done in 2012. However, the curator has identified a prospective investor and it is expected that by the end of the

first half of 2014, a scheme of arrangement would be in place for implementation, paving way for the removal of Cairns from curatorship and the

recovery of the outstanding debt by the Group.

PROPERTY PLANT AND EQUIPMENT Expenditure on property, plant, equipment during the period was US$4.683 million. Expenditure for the year January to December 2014 is

planned at US$13.4 million. This expenditure is to be financed from borrowings and the from Group’s own resources.

DIVIDENDIn view of the subdued Group results for the year ended 31 December 2013 and the need to conserve cash, the Board has not declared a dividend.

DIRECTORSIn accordance with article 100 of the company’s Articles of Association, Mr. C. Mahembe retires by rotation and being eligible, offers himself for

re-election.

Ms. S.P.Bango who has served the company as non-executive director since February 2004 is also retiring in accordance with article 100 of the

company’s Articles of Association, and is not seeking re-election.

In accordance with article 85(A) of the company’s Articles of Association, Dr L.L. Tsumba is due to retire from the Board. The company will seek

extension for the term of office of Dr L.L. Tsumba for another three years.

AUDITORSMembers will be asked to approve the remuneration of the auditors, Ernst & Young Chartered Accountants (Zimbabwe), for the year ended 31

December 2013 and their re-appointment as Auditors to the company for the ensuing year.

M. Ndoro

Company Secretary

13 March 2014

Report of the Directors

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF DAIRIBORD HOLDINGS LIMITED

We have audited the accompanying financial statements of Dairibord Holdings Limited as set out on pages 42 to 78, which comprise the statement of finan-

cial position at 31 December 2013, and the statement of comprehensive income, the statement of changes in equity and statement of cash flows for the year

then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes.

Directors’ResponsibilityfortheFinancialStatements

The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with lnternatlonal Financial

Reporting Standards (IFRS) and in the manner required by the Companies Act (Chapter 24:03), and for such internal control as the directors determine is

necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’sResponsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with international

Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on

whether the financial statements are free from material misstatement.

Basis of opinion

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected

depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

ln making those risk assessments, the auditor considers internal controls 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 management, 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.

Audit Opinion

ln our opinion, the financial statements present fairly, in all material respects, the financial position of Dairibord Holdings Limited at 31 December 2013, and

its financial performance and its cash flows for the year then ended in accordance with international Financial Reporting Standards.

ReportonOtherLegalandRegulatoryRequirements

ln our opinion, the financial statements have, in all material respects, been properly prepared in compliance with the disclosure requirements of the Companies

Act (Chapter 24:03) and the statutory instruments S133/99 and S162/96.

Ernst and Young

CHARTEREDACCOUNTANTS(ZIMBABWE)REGISTERED PUBLIC AUDITORSHarare18 March 2014

A member firm of Ernst & Young Global Limited

41


Statements of financial positionas at 31 December 2013

GROUP COMPANY 2013 2012 2013 2012 Notes US$ US$ US$ US$ Assets Non-currentassets Property, plant and equipment 12 39,292,974 40,877,522 543,962 624,294 Intangible assets 13 702,146 793,882 - - Investment in subsidiaries 14.1 - - 17,698,183 17,698,183 Long-term loans receivable 15.1 - - 3,035,543 2,988,196 Other non-current financial assets 16 881,096 1,313,021 129,369 224,750 40,876,216 42,984,425 21,407,057 21,535,423 Current assets Inventories 17 13,581,960 14,791,523 - - Amounts owed by group companies 18.1 - - 1,985,239 746,873 Prepayments 2,219,906 3,277,293 98,612 89,230 Trade and other receivables 19 7,687,376 10,417,703 430,989 127,504 Short-term loans receivable 15.2 - - 3,030,292 4,331,519 Cash and cash equivalents 20 2,455,632 2,069,529 64,176 140,730 25,944,874 30,556,048 5,609,308 5,435,856 Assets classified as held for sale 21.2 980,208 256,305 - - 26,925,082 30,812,353 5,609,308 5,435,856

Total assets 67,801,298 73,796,778 27,016,365 26,971,279 Equityandliabilities Equity Share capital 22.1 35,800 35,770 35,800 35,770 Share premium 22.2 1,379,664 1,343,364 1,379,664 1,343,364 Non - distributable reserves 22.3 23,975,176 24,373,490 17,016,597 17,027,427 Retained earnings / (Accumulated loss) 19,646,485 23,028,510 (25,487) (161,330)Equityattributabletoownersoftheparent 45,037,125 48,781,134 18,406,574 18,245,231 Non - controlling interests 528,479 734,442 - - Totalequity 45,565,604 49,515,576 18,406,574 18,245,231 Non-currentliabilities Interest - bearing borrowings 23.1 2,992,425 2,988,196 2,680,007 2,988,196 Deferred tax liability 25 3,333,882 4,381,462 67,051 55,300 6,326,307 7,369,658 2,747,058 3,043,496 Currentliabilities Trade and other payables 26 11,672,253 12,182,051 636,180 601,622 Interest - bearing borrowings 23.2 4,101,216 4,033,759 4,101,216 3,981,519 Amounts owed to group companies 18.2 - - 989,433 976,086 Income tax payable 135,918 695,734 135,904 123,325 15,909,387 16,911,544 5,862,733 5,682,552 Totalliabilities 22,235,694 24,281,202 8,609,791 8,726,048

Totalequityandliabilities 67,801,298 73,796,778 27,016,365 26,971,279 DR.L.L.TSUMBA A.S.MANDIWANZA Chairman GroupChiefExecutive

13 March 2014


Statements of comprehensive incomefor the year ended 31 December 2013

GROUP COMPANY 2013 2012 2013 2012 Notes US$ US$ US$ US$Continuingoperations Revenue 100,051,503 106,888,635 2,894,906 2,783,360 Cost of sales (75,854,282) (74,421,520) - - Grossprofit 24,197,221 32,467,115 2,894,906 2,783,360 Other operating income 3 255,050 374,798 2,243,484 2,376,255 Selling and distribution expenses (11,509,372) (10,834,785) - - Administration expenses (11,554,021) (12,179,563) (3,237,470) (3,323,639)Other operating expenses 4 (3,226,589) (27,486) (60,908) (38,472) Operating(loss)/profit 5 (1,837,711) 9,800,079 1,840,012 1,797,504 Loss on disposal of an associate 6 - - - (512,359) Finance costs 7 (751,649) (560,728) (622,823) (440,944) Finance income 8 272,727 181,867 708,310 437,211 (Loss)/profitbeforetaxationfromcontinuingoperations (2,316,633) 9,421,218 1,925,499 1,281,412 Income tax credit/(expense) 9 535,722 (2,233,817) (179,642) (188,126) (Loss)/profitfortheyearfromcontinuingoperations (1,780,911) 7,187,401 1,745,857 1,093,286 Discontinuedoperations Profit/(loss) after tax for the year from discontinued operations 21.1 27,647 (24,531) - - (Loss)/profitfortheyear (1,753,264) 7,162,870 1,745,857 1,093,286 Othercomprehensiveincome: Othercomprehensiveincometobereclassifiedtoprofitorlossinsubsequentperiods Exchange differences on translating foreign operations (566,497) (1,531,560) - - (566,497) (1,531,560) - - Othercomprehensiveincomenottobereclassifiedtoprofitorloss insubsequentperiods Revaluation of assets - 2,188,831 - - Impairment of previously revalued assets - (24,753) - - Income tax relating to components of other comprehensive income - (413,977) - - - 1,750,101 - - Other comprehensive income for the year, net of tax (566,497) 218,541 - - Totalcomprehensive(loss)/incomefortheyear (2,319,761) 7,381,411 1,745,857 1,093,286 (Loss)/profitattributableto:

Equity holders of the parent (1,772,011) 7,076,933 1,745,857 1,093,286 Non-controlling interests 18,747 85,937 - - (1,753,264) 7,162,870 1,745,857 1,093,286Total comprehensive (loss)/income attributable to: Equity holders of the parent (2,159,495) 7,550,272 1,745,857 1,093,286 Non-controlling interests (160,266) (168,861) - - (2,319,761) 7,381,411 1,745,857 1,093,286 (Loss)/earningspershare(cents) Basic (loss)/earnings for the year attributable to ordinary equity holders of the parent (0.50) 1.98 Diluted (loss)/earnings for the year attributable to ordinary equity holders of the parent (0.50) 1.98 (Loss)/earningspersharefromcontinuingoperations(cents) Basic (loss)/earnings from continuing operations attributable to ordinary equity holdersof the parent (0.50) 1.99 Diluted(loss)/earnings from continuing operations attributable to ordinary equity holders of the parent (0.50) 1.99


Statements of cashflowsfor the year ended 31 December 2013

GROUP COMPANY 2013 2012 2013 2012 Notes US$ US$ US$ US$ Operatingactivities (Loss)/profit before tax from continuing operations (2,316,633) 9,421,218 1,925,499 1,281,411 Profit/(loss) before taxation from discontinued operations 27,647 (24,531) - - (Loss)/profit before tax (2,288,986) 9,396,687 1,925,499 1,281,411 Adjusted for: Depreciation of property, plant and equipment 12 3,523,497 2,263,133 146,134 210,690 Impairment of property, plant and equipment 12 1,074,524 14,265 - - Amortisation of intangible assets 13 91,736 92,267 - - Loss/(profit) on disposal of property, plant and equipment 19,790 (213,394) (237) 22,755 Profit on disposal of assets classified as held for sale 21.1 (27,647) - - - Loss on disposal of associate - - - 512,359 Finance income (272,727) (181,867) (708,310) (437,211)Dividend received (893) (1,708) (1,261,035) (1,431,079)Profit on sale of shares (74,542) (35,999) (74,542) (35,999)Inventory written off 17 2,009,571 922,565 - - Allowances for credit losses 19 493,838 377,873 - - Unrealised exchange loss 15,014 56,843 - - Finance costs 751,649 560,728 622,823 440,944 Working capital adjustments : Increase in inventories (1,017,872) (4,555,301) - - Decrease/(increase) in trade and other receivables and prepayments 4,050,431 (2,844,685) (1,867) (16,596)(Increase)/decrease in amounts owed by group companies - - (1,238,366) 297,505 Increase in amounts owed to group companies - - 13,346 976,086 Decrease/(increase) in intercompany short term loans receivable - - 1,301,227 (4,331,519)(Decrease)/increase in trade and other payables (756,437) 2,664,845 34,558 (421,056) 7,590,946 8,516,252 759,230 (2,931,710)Interest paid (751,649) (560,728) (622,823) (440,944)Income tax paid (893,393) (2,614,015) (155,302) (72,320)Netcashflowsgeneratedfrom/(usedin)operatingactivities 5,945,904 5,341,509 (18,895) (3,444,974) Investingactivities Purchase of plant and equipment 12 (4,682,670) (6,425,795) (68,222) (76,192)Purchase of intangible assets - (52,179) - - Increase in long term loans receivable - - (47,347) (2,988,196)Decrease/(increase) in other non-current financial assets - (318,647) 95,381 (24,894)Proceeds from sale of property, plant and equipment 65,535 564,315 2,657 7,647 Proceeds from sale of assets classified as held for sale 246,620 - - - Proceeds on sale of shares 74,542 35,999 74,542 35 999Dividends received 893 1,708 950,035 1,431,079 Proceeds from sale of associate - 200,000 - 200,000 Interest received 272,727 181,867 708,310 437,211 Netcashflows(usedin)/generatedfrominvestingactivities (4,022,353) (5,812,732) 1,715,356 (977,346) Financingactivities Proceeds from borrowings 9,440,906 3,467,125 9,081,441 5,625,470 Repayment of borrowings (9,325,959) (1,881,588) (9,269,942) - Proceeds from exercise of share options 25,500 146,200 25,500 146,200 Dividends paid (1,655,711) (1,586,420) (1,610,014) (1,567,812)Netcashflows(usedin)/generatedfromfinancingactivities (1,515,264) 145,317 (1,773,015) 4,203,858 Net increase/(decrease) in cash and cash equivalents 408,287 (325,906) (76,554) (218,462)Net foreign exchange difference (22,184) 139,411 - - Cash and cash equivalents at 1 January 2,069,529 2,256,024 140,730 359,192 Cashandcashequivalentsat31December 20 2,455,632 2,069,529 64,176 140,730


Statements of changes in equityfor the year ended 31 December 2013

GROUP

COMPANY

Attributabletoequityholdersoftheparent Non- Non- Share Share distributable Retained controlling Total Capital Premium reserves earnings Total interests equity US$ US$ US$ US$ US$ US$ US$ (note22.3) Asat1January2012 35,598 1,135,244 23,962,243 17,519,389 42,652,474 921,911 43,574,385

Profit for the period - - - 7,076,933 7,076,933 85,937 7,162,870

Other comprehensive income/(loss) - - 473,339 - 473,339 (254,798) 218,541 Dividends paid - - - (1,567,812) (1,567,812) (18,608) (1,586,420) Exercise of share options 172 208,120 (62,092) - 146,200 - 146,200 As at 31 December 2012 35,770 1,343,364 24,373,490 23,028,510 48,781,134 734,442 49,515,576

(Loss)/profit for the period - - - (1,772,011) (1,772,011) 18,747 (1,753,264)

Other comprehensive loss - - (387,484) - (387,484) (179,013) (566,497) Dividend paid - - - (1,610,014) (1,610,014) (45,697) (1,655,711) Exercise of share options 30 36,300 (10,830) - 25,500 - 25,500 As at 31 December 2013 35,800 1,379,664 23,975,176 19,646,485 45,037,125 528,479 45,565,604

Retained Non earnings/ Share Share distributable (Accumulated Capital Premium reserves losses) Total US$ US$ US$ US$ US$ (note22.3) Asat1January2012 35,598 1,135,244 17,089,519 313,196 18,573,557

Profit for the period - - - 1,093,286 1,093,286 Exercise of share options 172 208,120 (62,092) - 146,200

Dividends paid - - - (1,567,812) (1,567,812)

Asat31December2012 35,770 1,343,364 17,027,427 (161,330) 18,245,231 Profit for the period - - - 1,745,857 1,745,857

Exercise of share options 30 36,300 (10,830) - 25,500

Dividends paid - - - (1,610,014) (1,610,014) Asat31December2013 35,800 1,379,664 17,016,597 (25,487) 18,406,574


1.CorporateinformationThe consolidated financial statements of Dairibord Holdings Limited

and its subsidiaries (collectively, the Group) for the year ended 31

December 2013 were authorised for issue on 13 March 2014 in

accordance with a resolution of the directors. Dairibord Holdings

Limited is a company incorporated and domiciled in Zimbabwe

whose shares are publicly traded through the Zimbabwe Stock

Exchange. The registered office is located at ZB Life Towers, 9th Floor,

77 Jason Moyo Avenue in Harare. The Group’s principal activities are

the manufacturing, processing, marketing and distribution of milk

products, foods and beverages.

2.1BasisofpreparationThe consolidated financial statements are based on the statutory

records that are maintained under the historical cost convention,

except for property and certain financial instruments that have been

measured at fair value. The consolidated financial statements are

presented in United States Dollars (US$).

Statement of complianceThe consolidated financial statements have been prepared in

accordance with International Financial Reporting Standards (IFRS)

and the International Financial Reporting Interpretations Committee

(IFRIC) interpretations, as issued by the International Accounting

Standards Board (IASB).

2.2BasisofconsolidationThe consolidated financial statements comprise the financial

statements of Dairibord Holdings Limited and its subsidiaries as at 31

December 2013. Control is achieved when the Group is exposed, or

has rights, to variable returns from its involvement with the investee

and has the ability to affect those returns through its power over the

investee. Specifically, the Group controls an investee if and only if

the Group has:

• Power over the investee (i.e. existing rights that give it the

current ability to direct the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with

the investee, and

• The ability to use its power over the investee to affect its

returns.

When the Group has less than a majority of the voting or similar

rights of an investee, the Group considers all relevant facts and

circumstances in assessing whether it has power over an investee,

including:

• The contractual arrangement with the other vote holders of the

investee.

• Rights arising from other contractual arrangements.

Notes to the financial statements

• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts

and circumstances indicate that there are changes to one or more of

the three elements of control. Consolidation of a subsidiary begins

when the Group obtains control over the subsidiary and ceases when

the Group loses control of the subsidiary. Assets, liabilities, income

and expenses of a subsidiary acquired or disposed of during the

year are included in the statement of comprehensive income and

financial position from the date the Group gains control until the

date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income

(OCI) are attributed to the equity holders of the parent of the Group

and to the non-controlling interests, even if this results in the non-

controlling interests having a deficit balance. When necessary,

adjustments are made to the financial statements of subsidiaries to

bring their accounting policies into line with the Group’s accounting

policies. All intra-group assets and liabilities, equity, income,

expenses and cash flows relating to transactions between members

of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a change

of control, is accounted for as an equity transaction. If the Group

loses control over a subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the

subsidiary.

• Derecognises the carrying amount of any non – controlling

interest.

• Derecognises the cumulative translation differences, recorded in

equity.

• Recognises the fair value of the consideration received.

• Recognises the fair value of any investment retained.

• Recognises any surplus or deficit in profit or loss.

• Reclassifies the parent’s share of components previously

recognised in other comprehensive income to profit or loss or

retained earnings, as appropriate, as would be required if the

Group had directly disposed of the related assets or liabilities.

2.3ChangesinaccountingpoliciesanddisclosuresThe accounting policies adopted are consistent with those of

the previous financial year, except for the following IFRS and

amendments to IFRS effective as of 1 January 2013:

• IAS 1 Presentation of items of other comprehensive income-

Amendments to IAS 1.

• IAS 19 Employee Benefits (Revised).

• IAS 28 Investments in Associates and Joint Ventures (as revised

in 2011).

• IFRS 7 Disclosures –Offsetting Financial Assets and Financial

Liabilities-Amendments to IFRS 7.


Notes to the financial statements (continued)

2.3Changesinaccountingpoliciesanddisclosures(continued)• IFRS 10 Consolidated Financial Statements, 1AS 27 Separate

Financial Statements.

• IFRS 11 Joint Arrangements.

• IFRS 12 Disclosure of Interests in Other Entities.

• IFRS 13 Fair Value Measurement.

The adoption of the standards is described below:

IAS1Presentationofitemsofothercomprehensiveincome(OCI)–Amendments to IAS 1The amendments to IAS 1 introduce a grouping of items presented

in OCI. Items that will be reclassified (‘recycled’) to profit or loss

at a future point in time (e.g. net loss or gain on available for sale

financial assets (AFS) have to be presented separately from items

that will not be reclassified (e.g. revaluation of land and buildings).

The amendments affect presentation only on the face of the

statement of comprehensive income and have no impact on the

Group’s financial position or performance.

IAS19EmployeeBenefits(Revised)IAS 19 (Revised 2011) changes, amongst other things, the accounting

for defined benefit plans. Key changes that are applicable to the

Group include the following:

• Termination benefits will be recognised at the earlier of when the

offer of termination cannot be withdrawn, or when the related

restructuring costs are recognised under IAS 37 – Provisions,

Contingent Liabilities and Contingent Assets.

• The distinction between short term and other long term employee

benefits will be based on expected timing of settlement rather

than the employee’s entitlement to the benefits.

The Group considered the above changes when accounting for

termination benefits and short term and long term employee benefits

and there was no significant impact on its financial statements.

IAS28InvestmentsinAssociatesandJointVentures(asrevisedin2011)As a consequence of the new IFRS 11 Joint Arrangements, and IFRS

12 Disclosure of Interests in Other Entities, IAS 28 Investments in

Associates, has been renamed IAS 28 Investments in Associates and

Joint Ventures, and describes the application of the equity method

to investments in joint ventures in addition to associates. The

revised standard did not have any impact on the Group statement of

financial position or performance as it does not have any investments

in associates or jointly controlled entities.

IFRS 7 Disclosures — Offsetting Financial Assets and FinancialLiabilities—AmendmentstoIFRS7These amendments require an entity to disclose information

about rights to set off and related arrangements (e.g. collateral

agreements). The disclosures would provide users with information

that is useful in evaluating the effect of netting arrangements on

an entity’s financial position. The new disclosures are required for

all recognised financial instruments that are set off in accordance

with IAS 32 Financial Instruments: Presentation. The disclosures

also apply to recognised financial instruments that are subject to

an enforceable master netting arrangement or similar agreement,

irrespective of whether they are set off in accordance with IAS 32.

These amendments did not impact the Group’s financial position or

performance.

IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial StatementsIFRS 10 replaces the portion of IAS 27 Consolidated and Separate

Financial Statements that addresses the accounting for consolidated

financial statements. It also addresses the issues raised in SIC-12

Consolidation — Special Purpose Entities.

IFRS 10 establishes a single control model that applies to all entities

including special purpose entities. The changes introduced by IFRS

10 will require management to exercise significant judgement to

determine which entities are controlled and therefore are required

to be consolidated by a parent, compared with the requirements

that were in IAS 27. IFRS 10 did not have any impact on the currently

held investments of the Group.

IFRS 11 Joint ArrangementsIFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-

controlled Entities — Non-monetary contributions by venturers.

IFRS 11 removes the option to account for jointly controlled entities

(JCEs) using proportionate consolidation. Instead, JCEs that meet the

definition of a joint venture must be accounted for using the equity

method.

The application of this new standard did not impact the financial

position of the Group as it does not currently have jointly controlled

entities.

IFRS12DisclosureofInterestsinOtherEntitiesIFRS 12 sets out the requirements for disclosures relating to an

entity’s interests in subsidiaries, joint arrangements, associates

and structured entities. The requirements in IFRS 12 are more

comprehensive than the previously existing disclosure requirements

for subsidiaries. Refer Note 30 for the disclosures.



2.3Changesinaccountingpoliciesanddisclosures(continued)IFRS 13 Fair Value MeasurementIFRS 13 establishes a single source of guidance under IFRS for all

fair value measurements. IFRS 13 does not change when an entity

is required to use fair value, but rather provides guidance on how to

measure fair value under IFRS. IFRS 13 defines fair value as an exit

price. As a result of the guidance in IFRS 13, the Group re-assessed

its policies for measuring fair values, in particular, its valuation inputs

such as non-performance risk for fair value measurement of liabilities.

IFRS 13 also requires additional disclosures.

Application of IFRS 13 has not materially impacted the fair value

measurements of the Group. Additional disclosures where required,

are provided in the individual notes relating to the assets and liabilities

whose fair values were determined.

2.4Significantaccountingjudgements,estimatesandassumptionsThe preparation of the consolidated financial statements requires

management to make judgements, estimates and assumptions that

affect the reported amounts of revenues, expenses, assets and

liabilities, and the disclosure of contingent liabilities. Uncertainty

about these assumptions and estimates could result in outcomes that

require a material adjustment to the carrying amount of assets or

liabilities affected in future periods.

Such estimates and assumptions are based on historical experience

and various other factors that are believed to be reasonable in the

circumstances and constitute management’s best judgement at the

date of the financial statements.

EstimatesandassumptionsThe key assumptions concerning the future and other key sources of

estimation uncertainty at the reporting date, that have a significant

risk of causing a material adjustment to the carrying amounts of assets

and liabilities within the next financial year are described below:

• The Group based its assumptions and estimates on parameters

available when the consolidated financial statements were

prepared.

• Existing circumstances and assumptions about the future

developments, however, may change due to market changes

or circumstances arising beyond the control of the Group. Such

changes are reflected in the assumptions when they occur.

i. Useful lives and residual values of property, plant and equipmentThe Group assesses useful lives and residual values of property, plant

and equipment each year taking into consideration past experience,

technology changes and the local operating environment. Residual

values were reassessed during the year and were still in line with

those determined last year.

ii.RevaluationofpropertyThe Group measures freehold land and buildings at revalued amounts

with changes in fair value being recognised in other comprehensive

income. The Group engaged independent valuation specialists to

determine fair value of freehold land and buildings as at 31 December

2012. Land and buildings were valued by reference to market-based

evidence, using comparable prices adjusted for specific market

factors such as nature, location and condition of the property.

iii. Share based paymentsThe Group measures the cost of equity – settled transactions with

employees by references to the fair value of the equity instruments

at the date at which they are granted. Estimating fair value for share

based payments requires determining the most appropriate valuation

model for a grant of equity instruments, which is dependent on the

terms and conditions of the grant. This also requires determining

the most appropriate inputs to the valuation model including the

expected life of the option, volatility and dividend yield and making

assumptions about them. The assumptions and models used for

estimating fair value for share based payments are disclosed in note

30.

iv) Impairment of non-financial assetsImpairment exists when the carrying value of an asset or cash

generating unit exceeds its recoverable amount, which is the higher

of its fair value less costs of disposal and its values in use. The fair

value less costs of disposal calculation is based on available data

from binding sales transactions, conducted at arm’s length, for

similar assets or observable market prices less incremental costs for

disposing of the asset.

v) Allowance for credit lossesThe Group estimates allowance for credit losses based on individual

receivable recoverability and the length of time the receivable has

been outstanding.

2.5Summaryofsignificantaccountingpoliciesa)BusinesscombinationsandgoodwillBusiness combinations are accounted for using the acquisition

method. The cost of an acquisition is measured as the aggregate of the

consideration transferred, measured at acquisition date fair value and

the amount of any non-controlling interest in the acquiree. For each

business combination, the acquirer measures the non-controlling

interest in the acquiree either at fair value or at the proportionate

share of the acquiree’s identifiable net assets. Acquisition costs

incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets

and liabilities assumed for appropriate classification and designation



2.5Summaryofsignificantaccountingpolicies(continued)a)Businesscombinationsandgoodwill(continued)in accordance with the contractual terms, economic circumstances

and pertinent conditions as at the acquisition date. This includes

the separation of embedded derivatives in host contracts by the

acquiree. If the business combination is achieved in stages, the fair

value of the acquirer’s previously held equity interest in the acquiree

is remeasured to fair value at the acquisition date and any resulting

gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer will be

recognised at fair value at the acquisition date. Subsequent changes

to the fair value of the contingent consideration which is deemed to

be an asset or liability will be recognised in accordance with IAS 39

either in profit or loss or as a change to other comprehensive income.

If the contingent consideration is classified as equity, it should not be

remeasured until it is finally settled within equity.

Goodwill is initially measured at cost being the excess of the aggregate

of the consideration transferred and the amount recognised for

non-controlling interest over the net identifiable assets acquired and

liabilities assumed. If this consideration is lower than the fair value of

the net assets of the subsidiary acquired, the difference is recognised

in profit or loss.

After initial recognition, goodwill is measured at cost less any

accumulated impairment losses. For the purpose of impairment

testing, goodwill acquired in a business combination is, from the

acquisition date, allocated to each of the Group’s cash-generating

units that are expected to benefit from the combination, irrespective

of whether other assets or liabilities of the acquiree are assigned to

those units.

Where goodwill forms part of a cash-generating unit and part of the

operation within that unit is disposed of, the goodwill associated

with the operation disposed of is included in the carrying amount of

the operation when determining the gain or loss on disposal of the

operation. Goodwill disposed of in this circumstance is measured

based on the relative values of the operation disposed of and the

portion of the cash generating unit retained.

b)ForeigncurrencytranslationThe consolidated financial statements are presented in United States

Dollars, which is also the parent company’s functional currency. Each

entity in the Group determines its own functional currency and items

included in the consolidated financial statements of each entity are

measured using that functional currency.

TransactionsandbalancesTransactions in foreign currencies are initially recorded by the Group

entities at their respective functional currency rates prevailing at the

date of the transaction. Monetary assets and liabilities denominated

in foreign currencies are translated at the functional currency spot

rate of exchange ruling at the reporting date.

All differences arising on settlement or translation of monetary items

are taken to profit or loss with the exception of monetary items that

are designated as part of the hedge of the Group’s net investment

in a foreign operation. These are recognised in other comprehensive

income until the disposal of the net investment, at which time, the

cumulative amount is reclassified to profit or loss. Tax charges and

credits attributable to exchange differences on those monetary items

are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in

a foreign currency are translated using the exchange rates as at the

dates of the initial transactions. Non-monetary items measured at fair

value in a foreign currency are translated using the exchange rates at

the date when the fair value is determined. The gain or loss arising on

translation of non-monetary items measured at fair value is treated

in line with the recognition of gain or loss on change in fair value of

the item (i.e. translation differences on items whose fair value gain

or loss is recognised in other comprehensive income or profit or loss

are also recognised in other comprehensive income or profit or loss,

respectively).

Group companiesOn consolidation the assets and liabilities of foreign operations are

translated into United States Dollars at the rate of exchange prevailing

at the reporting date and their statements of comprehensive

income are translated at exchange rates prevailing at the date of

the transactions. The exchange differences arising from translation

are recognised in other comprehensive income and presented in

the foreign currency translation reserve in equity. However, if the

operation is a non-wholly-owned subsidiary, then the relevant

proportionate share of the translation difference is allocated to the

non-controlling interests.

On disposal of a foreign operation, the component of other

comprehensive income relating to that particular foreign operation

is reclassified to profit or loss as part of the gain or loss on disposal.

c)RevenuerecognitionRevenue is recognised to the extent that it is probable that the

economic benefits will flow to the Group and the revenue can be

reliably measured. Revenue is measured at the fair value of the

consideration received or receivable, excluding discounts, rebates,



2.5Summaryofsignificantaccountingpolicies(continued)c)Revenuerecognition(continued)and value added tax. The Group assesses its revenue arrangements

against specific criteria in order to determine if it is acting as principal

or agent. The Group has concluded that it is acting as a principal in all

of its revenue arrangements since it is the primary obligor in all the

revenue arrangements as it has pricing latitude and is also exposed to

inventory and credit risks. The specific recognition criteria described

below must also be met before revenue is recognised:

Sale of goodsRevenue from the sale of goods is recognised when all the following

conditions have been satisfied:

a) the entity has transferred to the buyer the significant risks and

rewards of ownership of the goods, usually on delivery of the

goods;

b) the entity retains neither continuing managerial involvement

to the degree usually associated with ownership nor effective

control over the goods sold;

c) the amount of revenue can be measured reliably;

d) it is probable that the economic benefits associated with the

transaction will flow to the entity; and

e) the costs incurred or to be incurred in respect of the transaction

can be measured reliably.

Interest incomeFor all financial instruments measured at amortised cost, interest

income is recorded using the effective interest rate (EIR), which is

the rate that exactly discounts the estimated future cash payments

through the expected life of the financial instrument or a shorter

period, where appropriate, to the net carrying amount of the financial

asset or liability. Interest income is included in finance income in the

statement of comprehensive income.

DividendincomeRevenue is recognised when the Group’s right to receive payment is

established, which is generally when the shareholders approve the

dividend.

d)TaxesCurrent income taxCurrent income tax assets and liabilities for the current and prior

periods are measured at the amount expected to be received from or

paid to the tax authorities. The tax rates and tax laws used to compute

the amount are those that are enacted or substantively enacted at

the reporting date in the countries where the Group operates and

generates taxable income.

Current income tax relating to items recognised directly in equity

is recognised in equity and not in the statement of profit or loss.

Management periodically evaluates positions taken in the tax

returns with respect to situations in which applicable tax regulations

are subject to interpretation and establishes provisions where

appropriate.

Deferred taxDeferred tax is provided using the liability method on temporary

differences at the reporting date between the tax bases of assets and

liabilities and their carrying amounts for financial reporting purposes

at the reporting date. Deferred tax liabilities are recognised for all

taxable temporary differences, except:

• Where the deferred tax liability arises from the initial recognition

of goodwill or of an asset or liability in a transaction that is not a

business combination and at the time of the transaction, affects

neither the accounting profit nor taxable profit or loss ; and

• In respect of taxable temporary differences associated with

investments in subsidiaries and associates, where the timing of

the reversal of the temporary differences can be controlled and it

is probable that the temporary differences will not reverse in the

foreseeable future.

Deferred tax assets are recognised for all deductible temporary

differences, carry forward of unused tax credits and unused tax

losses, to the extent that it is probable that taxable profit will be

available against which the deductible temporary differences, and

the carry forward of unused tax credits and unused tax losses can be

utilised except:

• Where the deferred tax asset relating to the deductible temporary

difference arises from the initial recognition of an asset or liability

in a transaction that is not a business combination and, at the time

of the transaction, affects neither the accounting profit nor taxable

profit or loss.

• In respect of deductible temporary differences associated with

investments in subsidiaries and associates, deferred tax assets are

recognised only to the extent that it is probable that the temporary

differences will reverse in the foreseeable future and taxable profit

will be available against which the temporary differences can be

utilised.

The carrying amount of deferred tax assets is reviewed at each

reporting date and reduced to the extent that it is no longer probable

that sufficient taxable profit will be available to allow all or part of the

deferred tax asset to be utilised. Unrecognised deferred tax assets are

reassessed at each reporting date and are recognised to the extent

that it has become probable that future taxable profits will allow the

deferred tax asset to be recovered. Deferred tax assets and liabilities



2.5Summaryofsignificantaccountingpolicies(continued)

Deferredtax(continued)are measured at the tax rates that are expected to apply in the year

when the asset is realised or the liability is settled, based on tax rates

(and tax laws) that have been enacted or substantively enacted at the

reporting date.

Deferred tax relating to items recognised outside profit or loss is

recognised outside profit or loss in correlation to the underlying

transaction either in other comprehensive income or directly in

equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally

enforceable right exists to set off current tax assets against current

income tax liabilities and the deferred taxes relate to the same taxable

entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not

satisfying the criteria for separate recognition at that date, would

be recognised subsequently if new information about facts and

circumstances changed. The adjustment would either be treated as

a reduction to goodwill (as long as it does not exceed goodwill) if it

occurred during the measurement period or recognised in profit or

loss.

Value added taxRevenues, expenses and assets are recognised net of the amount of

value added tax except:

• Where the value added tax incurred on a purchase of assets or

services is not recoverable from the taxation authority, in which

case the value added tax is recognised as part of the cost of

acquisition of the asset or as part of the expense item as applicable

• Receivables and payables that are stated with the amount of value

added tax included.

The net amount of Value Added Tax recoverable from, or payable to,

the taxation authority is included as part of receivables or payables in

the statement of financial position.

e)Pensionsandotherpost-employmentbenefitsandterminationbenefits

Pensionsandotherpost-employmentbenefitsRetirement benefits are provided for Group employees through

independently administered defined contribution funds, including

the National Social Security Authority Scheme in Zimbabwe and

National Social Security Fund in Malawi. Contributions to the defined

contribution fund are recognised in profit or loss as they fall due. The

cost of retirement benefits applicable to the National Social Security

Authority Scheme and National Social Security Fund is determined by

the systematic recognition of legislated contributions.

Terminationbenefits

RecognitionTermination benefits are recognised as an expense immediately

when the Group is committed to termination of employment of an

employee or a group of employees before the normal retirement date

or provision of termination benefits as a result of an offer made in

order to encourage voluntary redundancy.

The Group is committed to a termination when a detailed formal plan

for the termination, which is unlikely to be withdrawn, is in place. The

detailed plan includes:

• the location, function and approximate number of employees;

• the termination benefits for each job classification or function; and

• the time at which the plan will be implemented.

MeasurementTermination benefits are measured at the amount to be paid to an

employee or a group of employees. The amount shall be discounted

using a rate that reflects the time value of money where the

termination benefits fall due more than 12 months.

f)Share-basedpaymentEmployees (including senior executives) of the Group receive

remuneration in the form of share-based payment transactions,

whereby employees render services as consideration for equity

instruments (‘equity-settled transactions’).

Equity-settledtransactionsThe cost of equity – settled transactions with employees is measured

by reference to the fair value at the date on which they are granted.

The fair value is determined by an external valuer. The cost of equity

– settled transactions is recognised together with a corresponding

increase in equity, over the period in which the performance

and/or service conditions are fulfilled, ending on the date on which

the relevant employees become fully entitled to the award ( ‘ the

vesting date’).

The cumulative expense recognised for equity – settled transactions

at each reporting date until the vesting date reflects the extent to

which the vesting period has expired and the Group’s best estimate

of the number of equity instruments that will ultimately vest. The

charge or credit recognised in profit or loss for a period represents

the movements in cumulative expense recognised as at the beginning

and end of that period.



2.5Summaryofsignificantaccountingpolicies(continued)Equity-settledtransactions(continued)No expense is recognised for awards that do not ultimately vest.

The dilutive effect of outstanding options is reflected as additional

share dilution in the computation of the earnings per share (note 10).

g)FinancialassetsInitialrecognitionFinancial assets within the scope of IAS 39 are classified as financial

assets at fair value through profit or loss, loans and receivables,

held-to-maturity investments, available-for-sale financial assets, as

appropriate. The Group determines the classification of its financial

assets at initial recognition. All financial assets are recognised initially

at fair value plus, in the case of investments not at fair value through

profit and loss, directly attributable transaction costs. Purchases or

sales of financial assets that require delivery of assets within a time

frame established by regulation or convention in the market place

(regular way trades) are recognised on the trade dates i.e. the date

that the Group commits to purchase or sell the asset.

The Group’s financial assets include cash and short term deposits,

trade and other receivables and loans receivable.

SubsequentmeasurementThe subsequent measurement of financial assets depends on their

classification as follows:

LoansandreceivablesLoans and receivables are non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. After

initial measurement such financial assets are subsequently measured

at amortised cost using the effective interest rate method (EIR), less

impairment.

Amortised cost is calculated by taking into account any discount or

premium on acquisition and fees or costs that are an integral part

of the EIR. The EIR amortisation is included in finance income in

the statement of comprehensive income. The losses arising from

impairment are recognised in the statement of comprehensive

income in finance costs for loans and in other operating expenses for

receivables.

ImpairmentoffinancialassetsThe Group assesses at each reporting date whether there is any

indication that a financial asset or group of financial assets is impaired.

A financial asset or a group of financial assets is deemed to be impaired

if, and only if, there is objective evidence of impairment as a result of

one or more events that have occurred after initial recognition of the

asset (an incurred ‘loss event’) and that the loss event has an impact

on the estimated future cash flows of the financial asset or group of

financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a

group of debtors is experiencing significant financial difficulty, default

or delinquency in interest or principal payments, the probability that

they will enter bankruptcy or other financial reorganisation and where

observable data indicates that there is a measurable decrease in the

estimated future cash flows, such as changes in arrears or economic

conditions that correlate with defaults.

FinancialassetscarriedatamortisedcostFor financial assets carried at amortised cost, the Group first assesses

whether objective evidence of impairment exists individually for

financial assets that are individually significant, or collectively for

financial assets that are not individually significant. If the Group

determines that no objective evidence of impairment exists for an

individually assessed financial asset, whether significant or not, it

includes the asset in a group of financial assets with similar credit

risk characteristics and collectively assesses them for impairment.

Assets that are individually assessed for impairment and for which an

impairment loss is, or continues to be, recognised are not included in

a collective assessment of impairment.

If there is objective evidence that an impairment loss has been

incurred, the amount of the loss is measured as the difference between

the asset’s carrying amount and the present value of estimated future

cash flows (excluding future expected credit losses that have not yet

been incurred). The present value of the estimated future cash flows

is discounted at the financial asset’s original effective interest rate. If

a loan has a variable interest rate, the discount rate for measuring any

impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an

allowance account and the amount of the loss is recognised in profit or

loss. Interest income continues to be accrued on the reduced carrying

amount and is accrued using the rate of interest used to discount

the future cash flows for the purpose of measuring the impairment

loss. The interest income is recorded as part of finance income in the


Loans together with the associated allowance are written off when

there is no realistic prospect of future recovery and all collateral has

been realised or has been transferred to the Group. If, in a subsequent

year, the amount of the estimated impairment loss increases or

decreases because of an event occurring after the impairment was



recognised, the previously recognised impairment loss is increased

2.5Summaryofsignificantaccountingpolicies(continued)Financialassetscarriedatamortisedcost(continued)or reduced by adjusting the allowance account. If a future write off

is later recovered, the recovery is credited to finance costs in the


DerecognitionoffinancialassetsA financial asset (or, where applicable a part of a financial asset or

part of a group of similar financial assets) is derecognised when:

• The rights to receive cash flows from the asset have expired.

• The Group has transferred its rights to receive cash flows from

the asset or has assumed an obligation to pay the received cash

flows in full without material delay to a third party under a ‘pass-

through’ arrangement; and either (a) the Group has transferred

substantially all the risks and rewards of the asset, or (b) the Group

has neither transferred nor retained substantially all the risks and

rewards of the asset, but has transferred control of the asset.

• When the Group has transferred its rights to receive cash flows

from an asset or has entered into a pass-through arrangement,

and has neither transferred nor retained substantially all of

the risks and rewards of the asset nor transferred control of

the asset, the asset is recognised to the extent of the Group’s

continuing involvement in the asset.

• In that case, the Group also recognises an associated liability.

The transferred asset and the associated liability are measured

on a basis that reflects the rights and obligations that the Group

has retained.

• Continuing involvement that takes the form of a guarantee over

the transferred asset is measured at the lower of the original

carrying amount of the asset and the maximum amount of

consideration that the Group could be required to repay.

h)FinancialliabilitiesInitial recognition and measurementFinancial liabilities within the scope of IAS 39 are classified as financial

liabilities at fair value through profit or loss, loans and borrowings,

or as derivatives designated as hedging instruments in an effective

hedge, as appropriate. The Group determines the classification

of its financial liabilities at initial recognition. All financial liabilities

are recognised initially at fair value and in the case of loans and

borrowings, plus directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables and

loans and borrowings.

SubsequentmeasurementThe measurement of financial liabilities depends on their classification

as follows:

Interest bearing borrowingsAfter initial recognition, interest bearing borrowings are subsequently

measured at amortised cost using the effective interest rate method.

Gains and losses are recognised in profit or loss when the liabilities are

derecognised as well as through the effective interest rate method

(EIR) amortisation process. Amortised cost is calculated by taking into

account any discount or premium on acquisition and fees or costs

that are an integral part of the EIR. The EIR amortisation is included in

finance costs in the statement of comprehensive income

TradeandotherpayablesTrade and other payables are subsequently measured at amortised

cost using the effective interest rate method. Other classifications of

financial liabilities are not applicable to the Group.

DerecognitionoffinancialliabilitiesA financial liability is derecognised when the obligation under the

liability is discharged or cancelled or expires. When an existing

financial liability is replaced by another from the same lender on

substantially different terms, or the terms of an existing liability are

substantially modified, such an exchange or modification is treated

as a derecognition of the original liability and the recognition of a

new liability, and the difference in the respective carrying amounts is

recognised in profit or loss.

OffsettingoffinancialinstrumentsFinancial assets and financial liabilities are offset and the net amount

reported in the consolidated statement of financial position if,

and only if, there is a currently enforceable legal right to offset the

recognised amounts and there is an intention to settle on a net basis,

or to realise the assets and settle the liabilities simultaneously.

i)Property,plantandequipmentProperty is measured at fair value less subsequent accumulated

depreciation and subsequent impairment losses recognised after

the date of the revaluation. Valuations are performed frequently to

ensure that the fair value of a revalued asset does not differ materially

from its carrying amount. Plant, furniture, fittings, equipment and

motor vehicles are stated at cost less accumulated depreciation and

accumulated impairment losses, if any.

A revaluation surplus is recorded in other comprehensive income

and credited to the asset revaluation reserve in equity, except to

the extent that it reverses a revaluation decrease of the same asset

previously recognised in profit or loss, in which case the increase is

recognised in profit or loss. A revaluation deficit is recognised in profit

or loss, except to the extent that it offsets an existing surplus on the

same asset recognised in the asset revaluation reserve.



2.5Summaryofsignificantaccountingpolicies(continued)i)Property,plantandequipment(continued)Cost includes the cost of replacing part of the plant and equipment

and borrowing cost for long term construction projects if the

recognition criteria are met. When significant parts of property plant

and equipment are required to be replaced at intervals, the Group

recognises such parts as individual assets with specific useful lives

and depreciates them accordingly. Likewise, when a major inspection

is performed, its cost is recognised in the carrying amount of the

plant and equipment as a replacement if the recognition criteria are

satisfied. All other repairs and maintenance costs are recognised in

profit or loss as incurred.

The Group’s policy is to depreciate property, plant and equipment

evenly over the expected life of each asset, with the exception that

no depreciation is charged on land and assets under construction and

not yet in use. The expected useful lives of the property, plant and

equipment are as follows:

Freehold Buildings 40 years

Plant 3 -10 years

Furniture, fittings and equipment 3 – 10 years

Motor vehicles

- Light 3 years

- Heavy vehicles and trailers 5 years

The carrying amounts of property, plant and equipment are reviewed

at each reporting date to assess if they are recorded in excess of

their recoverable amounts and where carrying values exceed the

estimated recoverable amounts, assets are written down to their

recoverable amounts.

An item of property, plant and equipment is derecognised upon

disposal or when no future economic benefits are expected from its

use. Any gain or loss arising on derecognition of the asset (calculated

as the difference between the net disposal proceeds and the carrying

value of the asset) is included in profit or loss in the year the asset is

derecognised.

The assets’ residual values, useful lives and depreciation methods

are reviewed and adjusted if appropriate, at each financial year

end. Adjustments are made prospectively as a change in accounting

estimate.

j)Impairmentofnon-financialassetsThe Group assesses at each reporting date whether there is an

indication that an asset may be impaired. If any indication exists, or

when an annual impairment testing for an asset is required, the Group

estimates the recoverable amount of the asset. An asset’s recoverable

amount is the higher of an asset’s or cash generating unit’s (CGU) fair

value less costs to sale and its value in use and is determined for an

individual asset, unless the asset does not generate cash inflows that

are largely independent of those from other assets or group of assets.

Where the carrying amount of an asset or CGU exceeds its recoverable

amount, the asset is considered impaired and is written down to its

recoverable amount. In assessing value in use, the estimated future

cash flows are discounted to their present values using a pre-tax

discount rate that reflects current market assessments of the time

value of money and the risks specific to the asset. In determining

fair value less costs to sell, recent market transactions are taken

into account, if available. If no such transactions can be identified,

an appropriate valuation model is used. These calculations are

corroborated, by valuation multiples, quoted public share prices for

publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and

forecast calculations, which are prepared separately for each of the

Group’s cash generating units, to which the individual assets are

allocated. These budgets and forecast calculations generally cover a

period of five years. For longer periods a long term growth rate is

calculated and applied to projected future cash flows after the fifth

year.

Impairment losses of continuing operations, including impairment

on inventories, are recognised in profit or loss in those expense

categories consistent with the functions of the impaired assets,

except for a property previously revalued where the revaluation was

taken to other comprehensive income. In this case, the impairment is

also recognised in other comprehensive income, up to the amount of

any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting

date, as to whether there is any indication that previously recognised

impairment losses may no longer exist or may have decreased. If such

indication exists, the Group estimates the asset’s or cash generating

unit’s recoverable amount. A previously recognised impairment loss

is reversed only if there has been a change in the assumptions used to

determine the asset’s recoverable amount since the last impairment

loss was recognised. The reversal is limited so that the carrying

amount of the asset does not exceed its recoverable amount, nor

exceed the carrying amount that would have been determined, net of

depreciation, had no impairment loss been recognised for the asset

in prior years.

Such reversal is recognised in profit or loss unless the asset is carried

at a revalued amount, in which case the reversal is treated as a

revaluation increase.



2.5Summaryofsignificantaccountingpolicies(continued)k)LeasesThe determination of whether an arrangement is, or contains, a lease

is based on the substance of the arrangement at inception date. The

arrangement is assessed for whether fulfilment of the arrangement is

dependent on the use of a specific asset or assets or the arrangement

conveys a right to use the asset or assets, even if that right is not

explicitly specified in an arrangement

Group as a lesseeOperating lease payments are recognised as an operating expense in

the profit or loss on a straight line basis over the lease term.

l)BorrowingcostsBorrowing costs directly attributable to the acquisition, construction

or production of an asset that necessarily takes a substantial period

of time to get ready for its intended use or sale are capitalised as part

of the cost of the respective assets. All other borrowing costs are

expensed in the period they occur. Borrowing costs consist of interest

and other costs that an entity incurs in connection with the borrowing

of funds.

m)InventoriesInventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and

conditions are accounted for as follows:

• Materials and consumables are valued at the purchase cost on a

weighted average basis.

• Finished goods and work in progress are valued at the

direct materials costs, labour and an appropriate portion of

manufacturing overheads based on normal operating capacity,

but excluding borrowings costs.

Net realisable value is the estimated selling price in the ordinary

course of business, less estimated costs of completion and estimated

costs necessary to make the sale.

n)CashandcashequivalentsCash and cash equivalents in the statement of financial position

comprise cash at banks and on hand and short-term deposits with a

maturity of three months or less.

For the purpose of the cash flow statement, the Group has included

bank overdrafts within cash and cash equivalents as they are

considered an integral part of the Group’s cash management.

n)ProvisionsProvisions are recognised when the Group has a present obligation

(legal or constructive) as a result of past events and it is probable

that an outflow of resources embodying economic benefits will be

required to settle the obligation and a reliable estimate can be made

of the amount of the obligation. Where the Group expects some or

all of a provision to be reimbursed, for example under an insurance

contract, the reimbursement is recognised as a separate asset but

only when the reimbursement is virtually certain.

The expense relating to any provision is presented in profit or loss

net of any reimbursement. If the effect of the time value of money is

material, provisions are discounted using a current pre-tax rate that

reflects, where appropriate, the risks specific to the liability. Where

discounting is used, the increase in the provision due to the passage

of time is recognised as a finance cost.

o)Non-currentassetsheldforsaleanddiscontinuedoperationsNon-current assets and disposal groups classified as held for sale are

measured at lower of their carrying amount and fair value less costs

to sell. Non-current assets and disposal groups are classified as held

for sale if their carrying amounts will be recovered principally through

a sale transaction rather than through continuing use. This condition

is regarded as met only when the sale is highly probable and the

asset or disposal group is available for immediate sale in its present

condition. Management must be committed to the sale, which should

be expected to qualify for recognition as a completed sale within one

year from the date of classification.

In the statement of comprehensive income, income and expenses

from discontinued operations are reported separately from income

and expenses from continuing operations, down to the level of profit

after taxes, even when the Group retains a non-controlling interest in

the subsidiary after that sale. The resulting profit or loss (after taxes)

is reported separately in the statement of comprehensive income.

Property, plant and equipment and intangible assets once classified

as held for sale are not depreciated or amortised.

p)IntangibleassetsIntangible assets acquired separately are measured on initial

recognition at cost. The cost of intangible assets acquired in a

business combination is their fair values as at the date of acquisition.

Following initial recognition, intangible assets are carried at cost,

less any accumulated amortisation and accumulated impairment

losses. Internally generated intangible assets, excluding capitalised

development costs, are not capitalised and expenditure is reflected

in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or

indefinite. Intangible assets with finite lives are amortised over the



useful economic life and assessed for impairment whenever there is

2.5Summaryofsignificantaccountingpolicies(continued)p)Intangibleassets(continued)an indication that the intangible asset may be impaired.

The amortisation period and the amortisation method for an

intangible asset with a finite useful life are reviewed at least at the

end of each reporting period. Changes in the expected useful lives

or the expected pattern of consumption of future economic benefits

embodied in the asset is accounted for by changing the amortisation

period or method, as appropriate, and are treated as changes in

accounting estimates. The amortisation expense on intangible assets

with finite lives is recognised in the statement of profit or loss in the

expense category that is consistent with the function of the intangible

assets.

Intangible assets with indefinite useful lives are not amortised, but

are tested for impairment annually, either individually or at the cash

generating unit level. The assessment of indefinite life is reviewed

annually to determine whether the indefinite life continues to be

supportable. If not, the change in useful life from indefinite to finite is

made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are

measured as the difference between the net disposal proceeds and

the carrying amount of the asset and are recognised in profit or loss

when the asset is de-recognised.

q)ResearchanddevelopmentcostsResearch costs are expensed as incurred. Development expenditures

on an individual project are recognised as an intangible asset when

the Group can demonstrate:

• The technical feasibility of completing the intangible asset so that

the asset will be available for use or sale.

• Its intention to complete and its ability to use or sell the asset.

• How the asset will generate future economic benefits.

• The availability of resources to complete the asset.

• The ability to measure reliably the expenditure during

development.

Following initial recognition of the development expenditure as an

asset, the asset is carried at cost, less any accumulated amortisation

and accumulated impairment losses. Amortisation of the asset begins

when development is complete and the asset is available for use. It is

amortised over the period of expected future benefit. Amortisation is

recorded in cost of sales. During the period of development, the asset

is tested for impairment annually.

r)FairvaluemeasurementThe Group measures non-financial assets such as property, at fair

value at reporting date. Also, fair values of financial instruments

measured at amortised cost are disclosed in Note 33.3.

Fair value is the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between market

participants at the measurement date. The fair value measurement

is based on the presumption that the transaction to sell the asset or

transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous

market for the asset or liability.

The principal or the most advantageous market must be accessible to

by the Group.

The fair value of an asset or a liability is measured using the assumptions

that market participants would use when pricing the asset or liability,

assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account

a market participant’s ability to generate economic benefits by using

the asset in its highest and best use or by selling it to another market

participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the

circumstances and for which sufficient data are available to measure

fair value, maximising the use of relevant observable inputs and

minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed

in the financial statements are categorised within the fair value

hierarchy, described as follows, based on the lowest level input that is

significant to the fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market prices in active markets for

identical assets or liabilities.

• Level 2 — Valuation techniques for which the lowest level input

that is significant to the fair value measurement is directly or

indirectly observable.

• Level 3 — Valuation techniques for which the lowest level input

that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements

on a recurring basis, the Group determines whether transfers

have occurred between Levels in the hierarchy by re-assessing

categorisation (based on the lowest level input that is significant to

the fair value measurement as a whole) at the end of each reporting

period.

s)Currentversusnon-currentclassificationThe Group presents assets and liabilities in statement of financial

position based on current/non-current classification.



An asset is classified as current when it is:

2.5Summaryofsignificantaccountingpolicies(continued)s)Currentversusnon-currentclassification(continued)• Expected to be realised or intended to be sold or consumed in

normal operating cycle.

• Held primarily for the purpose of trading.

• Expected to be realised within twelve months after the reporting

period, or

• Cash or cash equivalent unless restricted from being exchanged

or used to settle a liability for at least twelve months after the

reporting period.

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in normal operating cycle.

• It is held primarily for the purpose of trading.

• It is due to be settled within twelve months after the reporting

period, or

• There is no unconditional right to defer the settlement of the

liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current. Deferred tax

assets and liabilities are classified as non-current assets and liabilities.

2.6StandardsandamendmentsissuedbutnotyeteffectiveStandards issued but not yet effective up to the date of issuance of

the consolidated financial statements are listed below.

This listing is of standards and interpretations issued, which the

Group reasonably expects to be applicable at a future date. The

Group intends to adopt those standards when they become effective.

IFRS 9 Financial InstrumentsIFRS 9, as issued, reflects the first phase of the IASB’s work on the

replacement of IAS 39 and applies to classification and measurement

of financial assets and financial liabilities as defined in IAS 39. The

standard was initially effective for annual periods beginning on or

after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective

Date of IFRS 9 and Transition Disclosures, issued in December 2011,

moved the mandatory effective date to 1 January 2015. The effective

date has subsequently been removed. In subsequent phases, the IASB

is addressing hedge accounting and impairment of financial assets.

The adoption of the first phase of IFRS 9 will have an effect on the

classification and measurement of the Group’s financial assets, but

will not have an impact on classification and measurements of the

Group’s financial liabilities. Furthermore, the Group does not apply

hedge accounting. The Group will quantify the effect in conjunction

with the other phases, when the final standard including all phases

is issued.

InvestmentEntities(AmendmentstoIFRS10,IFRS12andIAS27)These amendments effective for annual periods beginning on or after

1 January 2014 provide an exception to the consolidation requirement

for entities that meet the definition of an investment entity under

IFRS 10. The exception to consolidation requires investment entities

to account for subsidiaries at fair value through profit or loss. It is not

expected that this amendment would be relevant to the Group, since

none of the entities in the Group would qualify to be an investment

entity under IFRS 10.

IFRICInterpretation21Levies(IFRIC21)IFRIC 21 clarifies that an entity recognises a liability for a levy when

the activity that triggers payment, as identified by the relevant

legislation, occurs. For a levy that is triggered upon reaching a

minimum threshold, the interpretation clarifies that no liability should

be anticipated before the specified minimum threshold is reached.

IFRIC 21 is effective for annual periods beginning on or after 1 January

2014. The Group does not expect that IFRIC 21 will have material

financial impact in future financial statements as no such levies are

charged to the Group.

IAS19-EmployeeBenefits-AccountingfordefinedbenefitplantsIAS 19 (Revised 2011) changes, amongst other things, the accounting

for defined benefit plans. Key changes that are applicable to the

Group include the following:

• Termination benefits will be recognised at the earlier of when the

offer of termination cannot be withdrawn, or when the related

restructuring costs are recognised under IAS 37 – Provisions,

Contingent Liabilities and Contingent Assets.

• The distinction between short-term and other long-term employee

benefits will be based on expected timing of settlement rather

than the employee’s entitlement to the benefits.

The Group considered the above changes when accounting for

termination benefits and short term and long term employee benefits

and there was no significant impact on its financial statements.

IAS32OffsettingFinancialAssetsandFinancialLiabilities-Amendments to IAS 32These amendments clarify the meaning of “currently has a legally

enforceable right to set-off” and the criteria for non-simultaneous

settlement mechanisms of clearing houses to qualify for offsetting.

These are effective for annual periods beginning on or after 1 January

2014. These amendments are not expected to be relevant to the



Group as no such offsetting arrangements are in place.

2.6 Standards and amendments issued but not yet effective

(continued)

IAS36ImpairmentofAssets-RecoverableAmountDisclosuresforNon-FinancialAssets-AmendmentstoIAS36.These amendments remove the unintended consequences of IFRS

13 on the disclosures required under IAS 36. In addition, these

amendments require disclosure of the recoverable amounts for

the assets or CGUs for which impairment loss has been recognised

or reversed during the period. These amendments are effective

retrospectively for annual periods beginning on or after 1 January

2014 with earlier application permitted, provided IFRS 13 is also

applied.

These amendments would continue to be considered for future

disclosures when they become effective for the Group.

IAS39NovationofDerivativesandContinuationofHedgeAccounting–AmendmentstoIAS39These amendments provide relief from discontinuing hedge

accounting when novation of a derivative designated as a hedging

instrument meets certain criteria. These amendments are effective

for annual periods beginning on or after 1 January 2014. The Group

does not have any derivatives and does not apply hedge accounting.

ImprovementstoIFRSsIn December 2013, the IASB issued two cycles of Annual Improvements

to IFRSs that contain changes to 9 standards. The changes are effective

from 1 July 2014 either prospectively or retrospectively. A summary

of each amendment is described below:

IFRS2Sharebasedpayment(AmendmentstoDefinitionsrelatingtovestingconditions)Performance conditions and service conditions are defined in order

to clarify various issues. The issues relate to performance conditions

which must contain a service condition and a performance target

which must be met while the counterparty renders service. The

amendment also clarifies that a performance target may relate to the

operations of an entity or to those of an entity in the same group. The

amendment is not expected to have a material impact on the Group

financial statements. The amendment is effective from 1 July 2014.

IFRS3BusinessCombinations-ScopeforjointventuresThe amendment clarifies that joint arrangements are outside the

scope of IFRS 3, not just joint ventures and the scope exception

applies only to the accounting in the financial statements of the

joint arrangement itself. Amendment will not affect the Group as it

is currently not part to any joint arrangements. This amendment is

effective from 1 July 2014.

IFRS3BusinessCombinations-AccountingforcontingentconsiderationinabusinesscombinationContingent consideration in a business acquisition that is not

classified as equity is subsequently measured at fair value through

profit or loss whether or not it falls within the scope of IFRS 9 Financial

Instruments. The amendment will not have a material impact on the

financial statements of the Group.

IFRS8OperatingSegments-AggregationofoperatingsegmentsandReconciliationofthetotalofthereportablesegmentassetstotheentity’stotalassetsOperating segments may be combined/aggregated if they are

consistent with the core principle of the standard, if the segments

have similar economic characteristics and if they are similar in other

qualitative respects. If they are combined, the entity must disclose

the economic characteristics (e.g. sales and gross margins) used to

assess whether the segments are ‘similar’. The amendment is not

expected to impact the Group as no operating segments are currently

aggregated.

Reconciliation of the total of the reportable segment assets to the entity’s total assetsThe reconciliation of segment assets to total assets is only required

to be disclosed if the reconciliation is reported to the chief operating

decision maker, similar to the required disclosure for segment

liabilities. The amendment is not expected to affect the Group’s

segment reporting as no reconciliations are currently presented.

IFRS13FairValueMeasurement-ShorttermreceivablesandpayablesThe IASB clarified in the Basis for Conclusions that short term

receivables and payables with no stated interest rates can be held

at invoice amounts when the effect of discounting is immaterial. This

is effective immediately. The Group has evaluated that the effect of

discounting on its short term receivables and payables is not material.

IFRS13Fairvaluemeasurement-PortfolioexceptionThe amendment clarifies that the portfolio exception in IFRS 13 can

be applied to financial assets, financial liabilities and other contracts.

The amendment is not expected to affect the Group. The amendment



is effective from 1 July 2014.

IAS16Property,plantandequipmentandIAS38Impairment-Revaluationmethod-proportionaterestatementofaccumulateddepreciation The amendment clarifies that revaluation can be performed by

adjusting the gross carrying amount of the asset to market value

or by determining the market value of the carrying amount and

adjusting the gross carrying amount proportionately so that the

resulting carrying amount equals the market value The amendment

also clarified that accumulated depreciation/amortisation is the

difference between the gross carrying amount and the carrying

amount of the asset (i.e. gross carrying amount – accumulated

depreciation/amortisation = carrying amount).

The amendment to IAS 16.35(b) and IAS 38.80(b) clarifies that the

accumulated depreciation/amortisation is eliminated so that the

gross carrying amount and carrying amount equal the market value.

The Group will need to consider the impact of the amendment when

it becomes effective as it does revalue its properties. The amendment

is effective from 1 July 2014.

IAS24Relatedpartydisclosures–Keymanagementpersonnel The amendment clarifies that a management entity – an entity that

provides key management personnel services – is a related party

subject to the related party disclosures. In addition, an entity that uses

a management entity is required to disclose the expenses incurred

for management services. Amendment will not affect the Group as it

has no management entity providing key management services to the

Group. The amendment is effective from 1 July 2014.

IAS40Investmentproperty-ClarifyingtheinterrelationshipofIFRS3andIAS40whenclassifyinginvestmentpropertyorowneroccupiedproperty-AmendmenttoIAS40. The description of ancillary services in IAS 40 differentiates between

investment property and owner occupied property. IFRS 3 is used to

determine if the transaction is the purchase of an asset or a business

combination. The amendment is not expected to affect the Group and

is effective 1 July 2014.

2.8 General disclosures The following exchange rates were used in the preparation of these

financial statements:

USD 1: Statement of Statement of

financial position comprehensive

income

Malawi Kwacha 449.82 386.27

South African Rand 10.19 -

EURO 0.71 -

2.6 Standards and amendments issued but not yet effective

(continued)



GROUP COMPANY 2013 2012 2013 2012 US$ US$ US$ US$

3 Otheroperatingincome

Royalties - - 900,000 900,000 Dividends received 893 1,708 1,261,035 1,431,079 Profit on disposal of property, plant and equipment - 236,149 237 - Profit on disposal of scrap 62,129 51,440 - - Profit on sale of shares 74,542 35,999 74,542 35,999 Sundry income 117,486 49,502 7,670 9,177 255,050 374,798 2,243,484 2,376,255 4 Otheroperatingexpenses

Loss on disposal of property, plant and equipment 19,790 22,755 - 22,755 Exchange loss on foreign currency translation 62,492 4,731 5,908 15,718 Retrenchment costs 764,053 - 55,000 - Impairment - Plant and equipment 1,074,524 - - - - Inventory 1,305,730 - - - 3,226,589 27,486 60,908 38,473

5 Operating(loss)/profitisstatedafterchargingthefollowing:

Audit fees 278,640 271,439 94,990 41,860 Depreciation of property, plant and equipment 3,523,496 2,263,133 146,133 210,690 Amortisation of intangible assets 91,736 92,267 - - Directors emoluments for services as directors 171,896 159,737 87,490 83,000 Employeebenefitsexpense

-Salaries and wages 16,169,678 16,374,416 1,567,981 2,182,453 -Pension costs 184,796 241,094 68,982 23,687 -National Social Security Authority 161,984 108,819 6,084 2,537 16,516,458 16,724,329 1,643,047 2,208,677

6 Disposal of an associate

The company disposed of the investment in Charhons on 8 May 2012 for US$1 million to Cairns Holdings Limited. Only US$200 000 has been received to

date. Cairns Holdings Limited is under judicial management and efforts to get an investor are at an advanced stage. A significant portion of the balance was impaired in the year ended 31 December 2012.

7 Finance costs

Interest on borrowings 751,649 560,728 622,823 440,944

8 Finance income

Interest received on loans and investments 272,727 181,867 708,310 437,211 9 Taxation

Current income tax: - Current income tax charge 356,305 2,002,370 135,918 133,464 - Prior year under provision - 114,634 - - Deferred tax (credit)/charge (924,010) 35,622 11,751 27,221 Withholding tax 31,983 81,191 31,973 27,441 Income tax (credit) / expense reported in the statement of comprehensive income (535,722) 2,233,817 179,642 188,126 Taxratereconciliation Standard rate (25.75%) 25.75% 25.75% 25.75% Effect of withholding tax 0.39% 0.08% 0.62% 2.14% Prior year income tax charge under provision - 0.31% - - Effect of higher tax rate in Malawi 0.12% 0.04% - - Loss on disposal of associate - - - 10.30% Disallowed donations 1.22% 0.16% 0.62% 1.14% Profit on disposal of shares - 0.10% (1.00%) 0.71% Dividends from subsidiary companies - - (18.19%) (28.72%) Depreciation on passenger motor vehicle excess cost ineligible for tax allowances 2.30% 0.73% 2.20% 3.55% Capital loss on disposed assets - (0.04%) - (0.15%) Other non-taxable/non-deductible items (1.41%) (3.42%) (0.69%) (0.04%) Effective tax rate (23.13%) 23.71% 9.31% 14.67%



10 (Loss)/earningspershare Basic (loss)/earnings per share amounts are calculated by dividing net profit/(loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted (loss)/earnings per share amounts are calculated by dividing the net profit/(loss) attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the (loss)/income and share data used in the basic and diluted (loss)/earnings per share computations:

Group 2013 2012 US$ US$ (Loss)/profit attributable to ordinary equity holders of the parent from continuing operations (1,790,921) 7,093,712 Profit/(loss) attributable to ordinary equity holders of the parent from discontinued operation 18,910 (16,779) Net(loss)/profitattributabletoordinaryequityholdersoftheparentforbasicearnings (1,772,011) 7,076,933

2013 2012

No. No.

Weighted average number of ordinary shares for basic earnings/(loss) per share* 357,909,191 356,819,007 Effect of dilution: Share options 294,176 399,318 Weightedaveragenumberofordinarysharesadjustedfortheeffectofdilution* 358,203,367 357,218,325 *The weighted average number of shares take into account the weighted average effect of changes in share transactions during the year.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of

these financial statements.

To calculate earnings / (loss) per share amounts for the discontinued operations (Note 21), the weighted average number of ordinary shares for both basic and diluted amounts is as per the table above. The following table provides the profit/(loss)amount used: Group

2013 2012 US$ US$ Netprofit/(loss)attributedtoordinaryequityholdersoftheparentfromadiscontinued operationforthebasicanddilutedearningspersharecalculations. 18,910 (16,779)

GroupandCompany

2013 2012 US$ US$ 11 Dividend

Final dividend paid for prior year 1,655,711 1,586,420

Proposed dividend per share for 2013: Nil (2012:0.45 US cents) - 1,609,654



12.1Reconciliationofopeningandclosingcarryingamounts GROUP COMPANY 2013 2012 2013 2012 US$ US$ US$ US$ Net carrying amount at 1 January 40,877,522 36,335,816 624,294 789,194 Cost 47,601,058 42,747,498 1,096,545 1,076,163 Accumulated depreciation and impairment (6,723,536) (6,411,682) (472,251) (286,969) Movement for the year: Additions 4,682,670 6,425,795 68,222 76,192 Net carrying amount of disposals (85,325) (350,921) (2,420) (30,402) Depreciation charge for the year (3,523,497) (2,263,133) (146,134) (210,690) Impairment (1,074,524) (39,018) - - Assets held for sale (note 21.2) (980,196) - - - Revaluation - 2,188,831 - - Net exchange adjustment (603,676) (1,419,848) - - Net carrying amount at 31 December 39,292,974 40,877,522 543,962 624,294 Cost 50,163,561 47,601,058 1,144,115 1,096,545 Accumulated depreciation and impairment (10,870 ,587) (6,723,536) (600,153) (472,251)

12Property,plantandequipment

GROUP COMPANY Freehold Plant and Furniture Motor Furniture Motor landand equipment and vehicles Total and vehicles Total buildings Fittings Fittings US$ US$ US$ US$ US$ US$ US$ US$ Costorvaluation

At1January2012 18,289,205 19,934,838 878,059 3,645,396 42,747,498 381,602 694,561 1,076,163 Additions 120,234 4,641,835 129,209 1,534,517 6,425,795 15,183 61,009 76,192 Disposals (300,000) - (683) (155,347) (456,030) - (55,810) (55,810) Revaluation 1,287,899 - - - 1,287,899 - - - Exchange adjustments (381,428) (1,639,509) (122,576) (260,591) (2,404,104) - - - At 31 December 2012 19,015,910 22,937,164 884,009 4,763,975 47,601,058 396,785 699,760 1,096,545 Additions - 2,861,175 64,889 1,756,606 4,682,670 6,247 61,975 68,222 Disposals - (45,867) (3,648) (130,847) (180,362) (652) (20,000) (20,652) Assets held for sale (Note 21.2) (996,360) - - - (996,360) - - - Exchange adjustments (366,086) (490,792) (24,866) (61,701) (943,445) - - - At 31 December 2013 17,653,464 25,261,680 920,384 6,328,033 50,163,561 402,380 741,735 1,144,115 Depreciationandimpairment

At1January2012 (923,992) (3,808,942) (360,902) (1,317,846) (6,411,682) (69,347) (217,622) (286,969) Depreciation charge for the year (10,791) (1,505,313) (162,932) (584,097) (2,263,133) (72,022) (138,668) (210,690) Impairment-charged in other comprehensive income - (26,753) - - (26,753) - - - - charged to profit - (12,265) - - (12,265) Revaluation 900,932 - - - 900,932 - - - Disposals - - 247 104,862 105,109 - 25,408 25,408 Exchange adjustments 33,851 662,394 108,028 179,983 984,256 - - - At31December2012 - (4,690,879) (415,559) (1,617,098) (6,723,536) (141,369) (330,882) (472,251) Depreciation charge for the year (81,342) (2,605,687) (160,995) (675,473) (3,523,497) (57,626) (88,508) (146,134) Impairment (Note 4) - (1,074,524) - - (1,074,524) - - - Disposals - 19,586 3,648 71,803 95,037 652 17,580 18,232 Assets held for sale (Note 21.2) 16,164 - - - 16,164 - - - Exchange adjustments 39,777 224,470 22,939 52,583 339,769 - - - At31December2013 (25,401) (8,127,034) (549,967) (2,168,185) (10,870,587) (198,343) (401,810) (600,153) Netcarryingamount

At 31 December 2013 17,628,063 17,134,646 370,417 4,159,848 39,292,974 204,037 339,925 543,962 At 31 December 2012 19,015,910 18,246,285 468,450 3,146,877 40,877,522 255,416 368,878 624,294



12 Property,plantandequipment(continued)

12.2Propertyrevaluation The valuation of property was performed by Directors in line with market values on 31 December 2012.

If land and buildings were measured using cost model, the carrying amount would be $9,082,036 (2012 : $9,533,261)

The revalued property consists of commercial , residential and industrial buildings in Zimbabwe and Malawi. Management determined that these constitute

one class of asset under IFRS 13, based on nature, characteristics and risks of the property.

Fair value of the properties was determined by using market comparable method. This means that valuations performed by the valuer are based on active market prices, significantly adjusted for difference in the nature, location or condition of the specific property. As at date of revaluation 31 December 2012, the properties’ fair values were based on valuations performed by CB Richard Ellis, an accredited independent valuer.

Significant unobservable data Price per square metre US$400 - US$1,250. Significant increases/(decreases) in estimated price per square metre in isolation would result in a significantly higher(lower) fair value.

12.3 Propertysecuredagainstborrowings Property with a carrying amount of $12,728,653 (2012: $14,510,517) is encumbered against interest bearing borrowings (Note 23).

12.4 Assets impaired During the first quarter of the year, management undertook a rationalisation process and closed processing factories in Mutare and Bulawayo. Assets that

were considered no longer usable or that could not be integrated into the other remaining factories were written down to their recoverable amounts. The recoverable amounts were based on fair value less costs of disposal. Fair value was estimated based on management’s judgement on what the assets could be sold for given other market transactions, the condition of the asset and the prevailing economic environment. An impairment loss of $1,074,524 was recognised. The assets belong to the manufacturing segment.

GROUP COMPANY 2013 2012 2013 2012 US$ US$ US$ US$ 13 Intangible assets Cost At 1 January 925,738 873,559 - - Additions - 52,179 - - At 31 December 925,738 925,738 - - Amortisation At 1 January (131,856) (39,589) - - Charge for the year (91,736) (92,267) - - At 31 December (223,592) (131,856) - - Netcarryingamount 702,146 793,882 - -

Reconciliationofopeningandclosingcarryingamounts

Net carrying amount at 1 January 793,882 833,970 - - Cost 925,738 873,559 - - Accumulated amortisation (131,856) (39,589) - - Movement for the year: Additions - 52,179 - - Amortisation (91,736) (92,267) - - Net carrying amount at 31 December 702,146 793,882 - - Cost 925,738 925,738 - - Accumulated amortisation (223,592) (131,856) - -

The intangible assets consist of computer software.



GROUP COMPANY 2013 2012 2013 2012 US$ US$ US$ US$14 Investments

14.1 Investmentsinsubsidiaries

Lavenson Investments (Private) Limited - - 6,259,870 6,259,870 Martindale Trading (Private) Limited t/a Lyons - - 1 1 Dairibord Malawi Limited - - 1,207,807 1,207,807 Kutal Investments (Private) Limited - - 9,153,012 9,153,012 NFB Logistics (Private) Limited - - 1,077,493 1,077,493 - - 17,698,183 17,698,183

15 Loansreceivable 15.1 Long-termloansreceivable

Dairibord Zimbabwe (Private) Limited - - 2,303,311 1,849,753 NFB Logistics (Private) Limited - - 495,554 897,335 Martindale Trading (Private) Limited t/a Lyons - - 1,631,970 1,842,627 - - 4,430,835 4,589,715 Less : Amounts falling due within one year - - (1,395,292) (1,601,519) - - 3035543 2,988,196 The long term loans receivable relate to loans that were issued to subsidiaries at an all-in cost of between 9.6% and 11% per annum and are repayable by 2014 and 2016 respectively. The holding company raises loans from banks for onlending to subsidiaries.

15.2 Short-termloansreceivable

Dairibord Zimbabwe (Private) Limited - - 1,485,000 1,895,000 NFB Logistics (Private) Limited - - 150,000 150,000 Martindale Trading (Private) Limited t/a Lyons - - - 685,000 - - 1,635,000 2,730,000 Add : Amounts falling due within one year of long term loans receivable - - 1,395,292 1,601,519 - - 3,030,292 4,331,519

Short term loans receivable were issued at an all-in cost of 9.0% per annum for a tenor of between 30 days and 180 days.

16 Othernon-currentfinancialassets

Loans receivable 881,096 1,313,021 129,369 224,750 The loans receivable represents the non-current portion of loans which were issued to staff under a motor vehicle loan scheme. The loans are repayable over 5 years from date of issue at an interest rate of 9.5% per annum. The short term portion of these loans is included in other receivables.

17 Inventories Packaging and raw materials (at cost) 9,335,016 10,661,452 - -

Spares and general consumables (at lower of cost and net realisable value) 2,804,629 2,512,555 - - Finished goods (at lower of cost and net realisable value) 1,442,315 1,617,516 - - Totalinventories 13,581,960 14,791,523 - - The amount of inventories recognised as an expense for the period was $53,481,599 (2012 : $53,822,531).

During 2013, stock losses amounting to US$2 009 571 (2012 : US$922,565) was recognised as an expense in cost of sales.



GROUP COMPANY 2013 2012 2013 2012 US$ US$ US$ US$

18 Group companies The following balances arise from normal trading activities:

18.1 Amountsowedbygroupcompanies NFB logistics (Private) Limited - - 299,436 77,693 Martindale Trading (Private) Limited t/a Lyons - - 1,493,432 522,105 Kutal Investments (Private) Limited - - 140,238 - Dairibord Malawi Limited - - 52,133 147,075 - - 1,985,239 746,873

18.2 Amounts owed to group companies

Kutal Investments (Private) Limited - - 306,296 279,502 Dairibord Zimbabwe (Private) Limited - - 683,137 696,584 - - 989,433 976,086 All group transactions are conducted on an arm’s length basis and are interest free, with no fixed repayment terms.

19 Tradeandotherreceivables

Trade receivables 6,100,796 7,143,985 - - Other receivables 1,586,580 3,273,718 430,989 127,504 7,687,376 10,417,703 430,989 127,504

As at 31 December 2013, receivables of $842,007 (2012 : $549,533) were provided for. The following is a movement in the impairment of receivables:

Opening balance 549,533 221,022 Charge for the year 493,838 377,873 Bad debts written off (167,921) -

Reversal for the year (33,443) (49,362) Closing balance 842,007 549,533

The ageing analysis of trade receivables was as follows : Neither Past due Past due past due nor but not impaired Total impaired 30-60days 60+days US$ US$ US$ US$

At 31 December 2013 6,100,795 4,848,880 1,011,457 240,458 At 31 December 2012 7,143,985 5,474,444 1,260,713 408,828 Trade credit is generally offered on 14-30 day credit terms and no interest is charged.

See note 33.1 on credit risk of trade receivables to understand how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

20 Cashandcashequivalents Cash at banks and on hand 2,455,632 2,069,529 64,176 140,730



21 Discontinuedoperationsandassetsheldforsale

21.1Discontinuedoperations The business of Mulanje Peak Foods (Private) Limited was consistently not operating profitably making it dificult for management to derive any growth from it. In November 2011, the Board of directors of Dairibord Malawi Limited resolved to dispose the company. As at 31 December 2012, the disposal was yet to be completed and was classified as held for sale. The disposal of the related assets was completed in 2013. The income statement and cashflows from the discontinued operations are shown below:

a) Theincomestatementfromdiscontinuedoperations GROUP

2013 2012 US$ US$ Revenue - - Expenses - (24,531) Operating loss - (24,531) Profit on disposal of assets 27,647 - Profit/(loss) before tax from discontinued operations 27,647 (24,531) Tax expense - - Profit/(loss) for the period from discontinued operations 27,647 (24,531) Earnings/(loss)pershare(cents): Basic earnings/(loss) for the year, from discontinued operations 0.005 (0.005) Diluted profit/(loss) for the year, from discontinued operations 0.005 (0.005) b) Thestatementofcashflowsfromdiscontinuedoperations The net cashflows incurred by Mulanje Peak Foods (Private) Limited) are as follows: Operating - (1,475) Investing 246,620 - Netcashinflow/(outflow) 246,620 (1,475) 21.2Assetsclassifiedasheldforsale

On 29 November 2013, the Board of Directors resolved to dispose of residential properties owned by the Group to selected employees and invest the funds in plant and equipment or retire expensive debt. Management has arranged a mortgage facility with a local financial institution for the buyers and reasonably expects that the disposal of the properties located in Harare will be completed by 31 December 2014. The properties have been classified as held for sale at 31 December 2013. The properties are reported in the properties segment. No impairment was recognised as the fair value less costs to sell was assessed to be higher than the carrying amount.

The major classes of assets classified as held for sale are as follows: Property (note 12) 980,208 - Plant and equipment* - 247,325 Trade and other receivables* - 8,980 980,208 256,305 *Plant and equipment and trade and other receivables These relate to Mulanje Peak Foods (Private) Limited assets classified as held for sale in November 2011, which were disposed of during the year. There were no liabilities directly associated with the assets held for sale.



GROUP AND COMPANY

22 Issuedcapitalandreserves

22.1 Share capital Authorised shares No. No. Ordinary shares of US$0.0001 each 425,000,000 425,000,000

No. US$ Ordinary shares issued and fully paid At1January2012 355,980,858 35,598 Share options exercised during the year 1,720,000 172

At 31 December 2012 357,700,858 35,770 Share options exercised during the year 300,000 30 At 31 December 2013 358,000,858 35,800 Subject to the limitations imposed by the Companies Act (Chapter 24:03) in terms of a resolution passed by the company in general meeting, the unissued shares have been placed at the disposal of the directors.

ShareoptionScheme

The directors are empowered to grant share options to certain employees of the company. The options granted are exercisable within 6 years from date of grant and they all vested in 2011.

GROUP AND COMPANY 2013 2012 US$ US$22.2 Share premium At 1 January 1,343,364 1,135,244 Share options exercised during the year 36,300 208,120 At 31 December 1,379,664 1,343,364



22.3Non-distributablereserves

Group Attributabletoequityholdersoftheparent

Foreign Foreign Share currency currency Asset Other Option translation conversion revaluation capital Total

reserve reserve reserve reserve reserves reserves US$ US$ US$ US$ US$ US$

Balanceat1January2012 89,719 (2,692,058) 18,641,370 7,805,428 117,784 23,962,243 Other comprehensive income - (1,047,587) - 1,520,926 - 473,339 Gross - (1,047,587) - 1,857,914 - 810,327 Income tax effect - - - (336,988) - (336,988) Exercise of share options (62,092) - - - - (62,092) Balanceat31December2012 27,627 (3,739,645)18,641,370 9,326,354 117,784 24,373,490 Other comprehensive income - (387,484) - - - (387,484) Gross - (387,484) - - - (387,484) Income tax effect - - - - - - Exercise of share options (10,830) - - - - (10,830) Balanceat31December2013 16,797 (4,127,129) 18,641,370 9,326,354 117,784 23,975,176

Company Foreign

Share currency Option conversion reserve reserve Total US$ US$ US$ Balanceat1January2012 89,719 16,999,800 17,089,519 Exercise of share options (62,092) - (62,092) Balance at 31 December 2012 27,627 16,999,800 17,027,427 Exercise of share options (10,830) - (10,830)

Balance at 31 December 2013 16,797 16,999,800 17,016,597 Natureandpurposeofreserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of the foreign subsidiary.

Foreign currency conversion reserve The foreign currency conversion reserve arose as a result of change in functional currency from the Zimbabwe dollar to the United States dollar. It represents the residual equity in existence as at the change over period and has been designated as non - distributable reserve.

Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decreases relate to an increase on the same asset previously recognised in equity.

Other capital reserves This relates to the profit made on the acquisition of additional interest in Dairibord Malawi Limited.



a) 38%securedloan This is made up of two loans totalling MK 140,532,913 (US$ 330,941) which were used in financing the acquisition of plant and equipment. The loans are

repayable by 30 August 2016 in monthly instalments of MK 2,988,018 (US$6,567 ). The loan is secured over assets purchased.

b) 11%PTASecured-loan This loan was utilised to purchase plant and equipment. The total loan facility amounts to $4,023,000 and is secured by immovable property of Kutal

Investment (Private) Limited with a value of $ 5,984,633 and assets purchased.

c) 9.6%securedloan This loan was used to purchase delivery trucks and to lend to farmers under the heifer importation programme. The total loan facility amounted to

US$1,500,000 and is secured by immovable property of Kutal Investments (Private) Limited with a value of $1,802,337.

d) BankLoanZimbabwe This loan was used to acquire plant and equipment at Dairibord Zimbabwe (Private) Limited. The loan is repayable in full by August 2016. It is secured over

property with a value of $4,499,490. e) 11%Debenture This loan was used to part fund the heifer importation programme. The total loan facility is US$1,500,000.

f) BankLoanZimbabwe This is made up of various short term loans secured by immovable property of Kutal Investment (Private) Limited as indicated in note (d) above. The

facility expires on 18 May 2014 and is subject to renewal. The loans were obtained by Dairibord Holdings Limited on behalf of Dairibord Zimbabwe (Private) Limited.

g) BankLoanZimbabwe-unsecured This is made up of various short term loans. The facility expires on 30 September 2014 and is subject to renewal.

h) 35%securedloan This was made up of two loans totalling MK 109,118,622 (US 768,441) which were used in financing the acquisition of plant and equipment. The loans

were repaid in full by 30 April 2013 . The loans were secured over assets purchased.

i) 37%securedloan This loan of MK4,636,760 (US$30,505) was used in financing the acquisition of plant and equipment. The loan was paid in full by 30 April 2013. j) 33% secured loan This loan of MK18,129,075 (US$109,615) was utilised to purchase plant and equipment and was secured over the assets purchased. The loan was repaid

in full in 2013.

Borrowing cost % GROUP COMPANY United States Malawi 2013 2012 2013 2012 dollar Kwacha Maturity US$ US$ US$ US$ 23 Interest bearing borrowings 23.1 Long term borrowings a) Bank loan Malawi 38% Aug 2016 312,418 - - -b) PTA Bank 11% Dec 2016 2,999,314 3,593,645 2,999,314 3,593,645c) Secured loan 9.6% May 2014 - 996,070 - 996,070d) Bank loan Zimbabwe-secured 10% Aug-Sept 2016 1,136,000 - 1,136,000 -e) Debentures -offshore (unsecured) 11% Sept 2016 100,000 - 100,000 - 4,547,732 4,589,715 4,235,314 4,589,715 Less : Amounts falling due within one year (1,555,307) (1,601,519) (1,555,307) (1,601,519) 2,992,425 2,988,196 2,680,007 2,988,196 23.2 Short term borrowings f) Bank loan Zimbabwe - secured 10% Jan -March 2014 600,000 595,000 600,000 595,000 g) Bank loan Zimbabwe - unsecured 11% Sep 2014 1,555,000 1,785,000 1,555,000 1,785,000c) 9.6% secured loan 9.6% May 2014 390,909 - 390,909 - h) Bank loan Malawi 35% - 32,808 - -I) Bank loan Malawi 37% - 1,995 - -j) Bank loan Malawi 33% - 17,437 - -

2,545,909 2,432,240 2,545,909 2,380,000 Add: Amount falling due within one year of long term loans 1,555,307 1,601,519 1,555,307 1,601,519 4,101,216 4,033,759 4,101,216 3,891,519 Total interest bearing borrowings 7,093,641 7,021,955 6,781,223 6,969,715



24 Borrowings powers The Directors may borrow any sum of money not exceeding the aggregate of twice the issued and paid up share capital of the company and the

aggregate of the amounts standing to the credit of all the reserves accounts and share premium account.

Bankingfacilities At 31 December 2013 , the banking facilities in place in Zimbabwe amounted to $13 000,000 (2012 : $13 000 000). The facilities expire

between 8 May 2014 and 31 August 2016.

In Malawi the banking facilities amounted to MK 140,532,913 (US$ 330,941). The facilities expire by August 2016. GROUP COMPANY 2013 2012 2013 2012 US$ US$ US$ US$

25 Deferredtaxation Deferred tax relates to the following: Property 466,716 580,702 - - Assets classified as held for sale 49,010 - Plant and equipment 3,605,342 3,510,674 88,322 55,300 Intangible assets 180,803 204,425 - - Inventory (22,896) - - - Accounts receivable (52,178) 1,054 - - Unrealised loss on exchange (4,503) (19,120) - - Unutilised tax loss (765,149) (25,213) - - Prepayments 32,775 128,940 - - Provisions (156,038) - (21,271) - 3,333,882 4,381,462 67,051 55,300 Reconciliationofdeferredtax Opening balance as of 1 January 4,381,462 4,265,852 55,300 28,079 Tax expense recognised in other comprehensive income - 413,977 - - Tax (credit)/expense recognised in profit or loss (924,010) 35,622 11,751 27,221 Effect of exchange rate change (123,570) (333,989) - - Closing balance as at 31 December 3,333,882 4,381,462 67,051 55,300 The Group has tax losses of US$2,949,333 (2012:US$97,915) that are available for offset against future taxable profits. 26 Tradeandotherpayables Trade payables 8,770,915 8,171,554 - - Other payables 2,901,338 4,010,497 636,180 601,622 11,672,253 12,182,051 636,180 601,622 Termsandconditionsoftheabovefinancialliabilities: Trade and other payables are non - interest bearing and are on 14 - 30 day terms.



GROUP 2013 2012 US$ US$ 27 Commitmentsandcontigencies Capitalcommitments: Authorised and contracted for 2,410,000 951,289 Authorised and not contracted for 11,010,961 9,163,462 13,420,961 10,114,751 The Group’s capital expenditure will be financed from internally generated cash and loans. Litigation The Group is a respondent in various employee claims for unfair dismissal and vendor litigations. The total estimated liability is US$354,544. On the basis of legal advice the claims are not valid and there will be no outflow of resources. Guarantees A joint and several guarantee for $7,500,000 by all active group companies in Zimbabwe exists in respect of a loan facility of $6,500,000 arranged by the holding company. Operatingleasecommitments-Groupaslessee The Group entered into a commercial lease on a commercial building. The lease is for a one year period with a renewal option included in the contract. There are no restrictions placed upon the Group in entering into the lease. Future minimum rentals payable under the operating leases as at 31 December are as follows: Withinoneyear 177,228 268,550 28 Relatedpartydisclosures 28.1 TheconsolidatedfinancialstatementsincludethefinancialstatementsofDairibordHoldingsLimited andthesubsidiarieslistedinthefollowingtable: %equityInterest Countryof Name Incorporation 2013 2012 Dairibord Malawi Limited Malawi 68.4 68.4 Martindale Trading (Private) Limited Zimbabwe 100 100 Lavenson Investments ( Private ) Limited Zimbabwe 100 100 NFB Logistics ( Private ) Limited Zimbabwe 100 100 Kutal Investments ( Private ) Limited Zimbabwe 100 100 28.2 Associate M.E Charhons (Private) Limited The company had a 40% interest in M.E Charhons (Private) Limited, which was disposed of in 2012. All transactions were carried out on terms consistent with those applied to dealings with unrelated parties. GROUP Grouptransactionswithassociatecompany 2013 2012 US$ US$ M.E. Charhons ( Private ) Limited - Sales to related party - - - Purchases from related party - 41,612 - Amounts owing to associate - 1,324

28.3 Company Management fees received from subsidiaries 2,894,906 2,783,360 Royalties received from subsidiaries 900,000 900,000 Loans issued to subsidiaries 4,603,717 7,319,715



28.4 Compensationtokeymanagementpersonnel

GROUP 2013 2012 US$ US$

Short term employee benefits 3,034,414 3,162,106 Pension contributions 43,924 35,649 Total compensation paid 3,078,338 3,197,755 Company Short term employee benefits 1,498,829 1,666,111 Pension contributions 24,985 16,377 Total compensation paid 1,523,814 1,682,488 29 Pensionandretirementplans 29.1 Definedcontributionfunds All employees of the Group are eligible to be members of defined contributions funds. 29.2 NationalSocialSecurityAuthorityScheme This is a scheme estabilished under the National Social Security Authority Act (1989) in Zimbabwe. Contribution per employee is 3.5% per month up to a maximum pensionable salary of $700, the rates having increased in July 2013. 29.3 Pensioncostschargedtotheincomestatementduringtheyear National Social Security Authority Scheme - Zimbabwe 161,984 108,819 Defined contribution funds 234,796 241,094 396,780 349,912

30 Share-basedpayments

ShareOptionscheme Under the Scheme, shares options were granted to certain employees as part of their conditions of service in 2011. They vested in 2011.

The exercise price of the share options is equal to the market price of the underlying shares on the date of grant. The following table lists the inputs to the model used to value the options in 2010:

- The exercise price of the option (US$) 0.085 - The market price of the option at grant date (US$) 0.085 - The expected volatility of the share price (%) 72.21 - The dividend yield (%) - - Risk free interest rate (%) 5 - The term of the option (years) 6 - Utility factor 1.63 - Exit rate - - Vesting period (years) 1

Model Used Hull-White The contractual life of the options is 6 years. There are no cash settlement alternatives.

Movementsduringtheyear GROUP AND COMPANY The following table illustrates the number of share options during the year : 2013 2012 No. No. Outstanding at 1 January 765,286 2,485,286 Exercised during the year (300,000) (1,720,000) Outstanding at 31 December 465,286 765,286 Exercisable at 31 December 465,286 765,286 The weighted average share price at the date of exercise of these options was 23 cents (2012:18 cents).

The weighted average remaining contractual life for the share options as at 31 December 2013 was 4 years (2012:5 years).

The exercise price of the options exercised during the year was 0.085 US cents( 2012:0.085). The exercise price for options outstanding at the end of the year is 0.085 US cents (2012:0.085 US cents).



31 Materialpartly-ownedsubsidiary

Financial information of subsidiary that has material non-controlling interests are provided below: Portion of equity interest held by non-controlling interests:

Name Countryofincorporation 2013 2012 andoperation Daribord Malawi Limited Malawi 31.6% 31.6%

US$ US$ 2013 2012

Accumulated balances of material non-controlling interest: 528,479 734,443 Profit allocated to non-controlling interest 18,747 85,937

The summarised financial information of the subsidiary is provided below. This information is based on amounts before inter-company eliminations.

DairibordMalawiLimitedsummarisedstatementofprofitorlossfor2013 2013 2012

US$ US$ Revenue 6,291,022 6,616,077 Cost of sales (4,524,050) (4,443,408) Administrative expenses (1,600,319) (1,672,408) Finance costs (100,032) (144,118) Profit before tax 66,621 356,143 Income tax (7,296) (84,190)

Profit for the year 59,325 271,953 Total comprehensive income 59,325 271,953 Attributable to non-controlling interests 18,747 85,937 Dividends paid to non-controlling interests 45,697 18,608 DairibordMalawiLimitedsummarisedstatementoffinancialpositionasat31December2013

2013 2012 US$ US$ Inventories and cash and bank balances (current) 1,207,598 1,524,399 Property, plant and equipment and other non-current financial assets (non-current) 1,883,476 2,249,018 Trade and other payables (current) (708,517) (882,981) Interest-bearing loans and borrowings (current) (104,176) (52,240) Interest-bearing loans and borrowings and deferred tax liabilities (non-current) (605,979) (514,010) Totalequity 1,672,402 2,324,186 Attributable to equity holders of parent 1,143,923 1,589,743 Non-controlling interest 528,479 734,443

Summarisedcashflowinformationfortheyearending31December2013

Operating 188,953 564,410 Investing (406,378) (114,176) Financing 66,078 (639,368) Net decrease in cash and cash equivalents (151,347) (189,134



32 Fairvaluemeasurement

The following table provides the fair value measurement hieratchy of the Group’s assets and liabilities.

Quantitativedisclosuresfairvaluemeasurementhierarchyforassetsasat31December2013:

GROUP Fairvaluemeasurementusing Quotedprices Significant Significant inactive observable unobservable Total market(level1) Inputs(level2) Inputs(Level3)

Assetsmeasuredatfairvalue Revalued property (Note 12) 17,628,063 - - 17,628,063

Assets for which fair values are disclosed

Loans and receivables - - - - Trade and other receivables(Note 33.2 and 33.3) 7,687,376 - 7,687,376 -

There have been no transfers between Level 1 and Level 2.

Quantitativedisclosuresfairvaluemeasurementhierarchyforliabilitiesasat31December2013:

Fairvaluemeasurementusing Quotedprices Significant Significant inactive observable unobservable Total market(level1) Inputs(level2) Inputs(Level3)

Liabilities measured at fair value - - - -

Liabilities for which fair values are disclosed Fixed rate borrowings (Note 33.2 and 33.3) 7,457,419 - 7,457,419 -


COMPANY

Quantitativedisclosuresfairvaluemeasurementhierarchyforassetsasat31December2013:

Fairvaluemeasurementusing Quotedprices Significant Significant inactive observable unobservable Total market(level1) Inputs(level2) Inputs(Level3) Assets measured at fair value Revalued property - - - -

Assets for which fair values are disclosed Trade and other receivables (Note 33.2 and 33.3) 430,989 - 430,989 - Amounts owed by Group companies (Note 33.2 and 33.3) 1,985,239 - 1,985,239 -


Quantitativedisclosuresfairvaluemeasurementhierarchyforliabilitiesasat31December2013:

Fairvaluemeasurementusing

Quotedprices Significant Significant inactive observable unobservable Total market(level1) Inputs(level2) Inputs(Level3)

Liabilities measured at fair value - - - - Liabilities for which fair values are disclosed

Fixed rate borrowings 7,571,421 - 7,571,421 - Amounts owed to Group companies (Note 33.2 and 33.3) 989,433 - 989,433 -




33 FinancialRiskManagementobjectivesandpolicies The Group’s principal financial liabilities comprise trade payables and interest-bearing borrowings. The main purpose of these financial instruments is to raise finance for the Groups’s operations. The Group has various financial assets such as trade receivables and cash which arise directly from its operations. The main risk arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. These risks are managed as follows :

33.1 Credit risk Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract leading to a financial loss. The Group

is exposed to credit risk from its operating activities (primarily for trade receivables and loan notes) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Tradereceivables Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk

management. Credit limits are established for all customers based on internal rating criteria. Credit quality of the customer is assessed through extensive credit verification procedures and individual credit limits are defined in accordance with this assessment. Customers with outstanding balances are regularly monitored.

The requirement for impairment is analysed at each reporting date on an individual basis for all customers. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of financial asset disclosed in note 19. The Group evaluates the concentration of credit risk as low since the balances are widely spread.

Cash balances The Group only deposits cash with financial institutions with high credit ratings. The maximum exposure to risk is equal to the carrying amount of cash and

bank balances as disclosed in note 20. 33.2Liquidityrisk The Group consistently monitors its risk to a shortage of funds. This requires that the Group considers the maturity of both its financial investments and

financial assets e.g. accounts receivables, other financial assets and projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and debentures.

The table below summaries the maturity profile of the Group and Company’s financial assets and liabilities as at 31 December 2013 based on contractual undiscounted payments :

GROUP Year ended 31 December 2013 On 0to3 3to12 1to5 +5 Total demand months months years years Liabilities US$ US$ US$ US$ US$ US$

Interest bearing borrowings - 1,290,970 3,110,399 3,655,601 - 8,056,970 Trade and other payables - 10,731,258 - - - 10,731,258 - 12,022,228 3,110,399 3,655,601 - 18,788,228

Assets Cash - 2,455,632 - - - 2,455,632 Trade and other receivables - 7,687,376 - - - 7,687,376 - 10,143,008 - - - 10,143,008 Year ended 31 December 2012

On 0to3 3to12 1to5 +5 Total demand months months years years Liabilities US$ US$ US$ US$ US$ US$

Interest bearing borrowings - 2,842,999 1,428,330 3,186,090 - 7,457,419 Trade and other payables - 11,166,883 - - - 11,166,883 - 14,009,882 1,428,330 3,186,090 - 18,624,302

Assets

Cash - 2,069,529 - - - 2,069,529 Trade and other receivables - 10,417,703 - - - 10,417,703 - 12,487,232 - - - 12,487,232


33 FinancialRiskManagementobjectivesandpolicies(continued)

33.2Liquidityrisk(continued) Company Yearended31December2013 On 0to3 3to12 1to5 +5 Total demand months months years years Liabilities US$ US$ US$ US$ US$ US$

Interest bearing borrowings - 1,234,597 2,956,993 3,379,831 - 7,571,421 Trade and other payables - 402,433 - - - 402,433 Amounts owed to group companies - 989,433 - - - 989,433 - 2,626,463 2,956,993 3,379,831 - 8,960,287

Assets Cash - 64,176 - - - 64,176 Trade and other receivables - 430,989 - - - 430,989 Amounts owed by group companies - 1,985,239 - - - 1,985,239 - 2,480,404 - - - 2,480,404

Year ended 31 December 2012 Liabilities

Interest bearing borrowings - 2,842,999 1,428,330 3,186,090 - 7,457,419 Trade and other payables - 336,019 - - - 336,019 Amounts owed to group companies - 976,086 - - - 976,086 - 4,155,104 1,428,330 3,186,090 - 8,769,524

Assets Cash - 140,730 - - - 140,730 Trade and other receivables - 127,504 - - - 127,504 Amounts owed by Group companies - 746,873 - - - 746,873 - 1,015,107 - - - 1,015,107

33.3Fairvaluesoffinancialinstruments The estimated net fair values of all financial instruments approximate the carrying amounts shown in the financial statements. Management is of the view

that the fixed interest rates on interest - bearing borrowings are not significantly different from the market rates.




33.4Foreigncurrencyrisk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenues or expenses are denominated in a different currency), and the Group’s net investment in subsidiaries. The Group limits exposure to exchange rate fluctuations by either pre-paying for purchases or retaining stock until the foreign currency to settle the related liability has been secured.

The following table demonstrates the sensitivity to a reasonable possible change in the Euro and Rand exchange rate ,

Effect Changein onprofit Effect rates beforetax onequity 2013 +10% (2,240) (1,663) -10% 2,240 1,663 2012 +10% (26,280) (19,513) -10% 26,280 19,513 Because of the investment in Malawi, the Group’s statement of financial position can be affected siginificantly by movements in the Malawi Kwacha.

The following table represents the effect on profit before tax and equity to a reasonable change in the Malawi Kwacha to United States Dollar on the

consolidation of Malawi operations: Changein Effect Effecton rates onprofit equity before tax 2013 +10% (152,038) (106,427) -10% 152,038 106,427 2012 +10% (61,974) (265,222) -10% 61,974 265,222

33.5 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The

Group manages its interest cost and risk by using fixed rate debts.

33.6 Capital management The primary objective of the company’s capital management is to ensure that the company maintains a healthy capital ratio in order to support the business

and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in the economic enviroment. To maintain or adjust the capital

structure the Group may adjust the dividend payment to shareholders, return capital to shareholders, or issue new shares. No changes were made to the objectives, policies or processes during the year ended 31 December 2013.

The Group monitors capital gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio up to a maximum of 50%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.

2013 2012 US $ US $ Interest bearing borrowings (Note 23) 7,093,641 7,021,955 Trade and other payables (Note 26) 11,672,253 12,182,051 Less cash and short-term deposits (Note 20) (2,455,632) (2,069,529) Debt 16,310,262 17,134,477 Equity 45,565,604 49,515,576 Capital and debt 61,875,866 66,650,053 Gearing ratio 26.4% 25.7%



34 SegmentInformation 34.1 For management purposes, the Group is currently primarily organised into business units based on business activity and secondly by geographical location.

The Group has four operating segments as follows:

Manufacturing - manufactures foods and beverages

Distribution - logistical services and distribution of goods

Properties - leasing of properties

Other - resource allocation Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance

assessment. Adjustmentsand Yearended31December2013 Manufacturing Logistics Properties Other eliminations Group US$ US$ US$ US$ US$ US$ Revenue External customers 98,891,078 1,160,425 - - - 100,051,503 Inter-segment 2,208,278 5,839,297 783,168 - (8,830,743) - Totalrevenue 101,099,356 6,999,722 783,168 - (8,830,743) 100,051,503 Results Depreciation (2,908,095) (395,964) (73,305) (146,133) - (3,523,497) Operating (loss)/profit (456,781) 1,033,421 705,338 1,840,013 (4,959,699) (1,837,711) Segment assets 48,216,127 5,037,371 20,186,328 27,016,365 (32,654,893) 67,801,298 Segment liabilities 25,849,699 2,310,970 421,943 8,609,799 (14,956,717) 22,235,694 Capital expenditure 2,950,364 1,664,084 - 68,222 - 4,682,670 Adjustmentsand Yearended31December2012 Manufacturing Logistics Properties Other eliminations Group US$ US$ US$ US$ US$ US$ Revenue External customers 105,883,866 998,169 6,600 - - 106,888,635 Inter-segment 1,671,430 4,978,642 706,512 - (7,356,584) - Totalrevenue 107,555,296 5,976,811 713,112 - (7,356,584) 106,888,635 Results Depreciation (1,758,371) (294,072) - (210,690) - (2,263,133) Operating profit 11,143,579 886,024 713,111 1,797,504 (4,740,139) 9,800,079 Segment assets 53,455,691 4,410,074 19,433,097 27,055,493 (30,557,577) 73,796,778 Segment liabilities 25,979,992 2,046,318 304,029 8,810,265 (12,859,402) 24,281,202 Capital expenditure 5,092,768 1,250,743 58,271 76,192 - 6,477,974 The adjustments and eliminations columns relate to inter-segments transactions and balances which are eliminated on consolidation.

34.2GeographicInformation Revenuefromexternalcustomers GROUP 2013 2012 US$ US$

Zimbabwe 93,760,480 100,272,558 Malawi 6,291,022 6,616,077

100,051,502 106,888,635

Therevenueinformationaboveisbasedonthelocationoftheoperations

Non current assets Zimbabwe 38,992,742 40,163,559

Malawi 1,883,476 1,507,845 40,876,218 41,671,404

Non current assets consist of property, plant and equipment, intangible assets and investments.

35 Eventsafterthereportingdate A loan facility for $6 million was signed with Eastern and Southern African Trade and Development Bank (PTA) on 6 February 2014.

The facility will fund Dairibord Zimbabwe Private Limited’s capital projects for 2014.


DML – Dairibord Malawi Limited

DZPL – Dairibord Zimbabwe (Private) Limited

GDP – Gross Domestic Product

IFRS – International Financial Reporting Standards

ISO – International Standards Organisation

MBA – Masters of Business Administration

NSSA – National Social Security Authority

PBT Margin – Profit before Tax Margin

SADC – Southern Africa Development Community

SAZ – Standards Association of Zimbabwe

SBU – Strategic Business Unit

SKU – Stock Keeping Unit

ZSE – Zimbabwe Stock Exchange

ZIMRA – Zimbabwe Revenue Authority

Glossary of Terms


GRI Indicator Page No.

1 STRATEGY AND ANALYSIS

1.1 Statement from the most senior decision maker of the organisation about the relevance of sustainability to the organisation and its strategy. 12

2 ORGANISATIONAL PROFILE

2.1 Name of organisation Cover

2.2 Primary brands, products, and/or services 7

2.3 Operational Structure of the organisation 5

2.4 Location of the organisation’s head office 89

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report. 3,5

2.6 Nature of ownership and legal form 5,46

2.7 Markets served including (geographic breakdown, sectors served, and types customers/beneficia-ries) 7

2.8 Scale of the reporting organisation, including:

• Number of employees

• Net sales

• Capitalisation broken down in terms of debt and equity

• Quantity of products or services provided

11,12,14,43-46

2.9 Significant Changes during the reporting period regarding size, structure or ownership including:

• The location of, or changes in operations, including facility opening, closings and expansion.

• Changes in the share capital structure and other capital formation, maintenance, and alteration

operations.

12-13

2.10 Awards received in the reporting Period 1,16

3 REPORT PARAMETERS

ReportProfile

3.1 Reporting period for information provided 2

3.2 Date of the most recent previous report 2

3.3 Reporting cycle 2

3.4 Contact point for questions regarding the report or its content 2

ReportScopeandBoundary

3.5 Process for defining report content , including:

• Determining materiality;

• Prioritizing topics within the report; and

• Identifying stakeholders the organisation expects to use the report.

25,39

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers) 2,5

3.7 Any specific limitations on the scope or boundary of the report. 2,25

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/between organisations. 46

3.9 Explanation of the effects of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g. mergers/acquisitions, change of base years/periods, nature of business, measurement methods)

N/A

3.10 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report. N/A

3.11 GRI Index (i.e. this table) N/A

GRI Index


GRI Index

4 GOVERNANCE, COMMITMENTS AND ENGAGEMENTS

Governance

4.1 Governance structure of the organisation including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight. 20-24

4.2 Whether Chair of the Board executive or non executive? 20

4.3 Organisations with unitary board structure, state the number of members of the highest governance body that are independent and/or non executive members. 23

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance board. 23

Stakeholder Engagement

4.14 List of stakeholders engaged by the organisation. 28

4.15 Basis for identification of and selection of stakeholders with who to engage. 8,28

ECONOMIC PERFORMANCE INDICATORS

Economic Performance

EC1

(Core)

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and community investments, retained earnings, and payments to capital providers and government.

41-78

EC4

(Core)

Significant financial assistance received from government.38

ENVIRONMENTAL PERFORMANCE INDICATORS

Materials

EN1

(Core)

Material used by weight or volume.32

EN2

(Core)

Percentage materials used that are recycles materials.32

Energy

EN3

(Core)

Direct energy consumption by primary energy source.33

EN4

(Core)

Indirect energy consumption by primary source.33

Water

EN8

(Core)

Total water withdrawn by source.33

Emissions,Effluents,andWaste

EN16

(Core)

Total direct and indirect greenhouse gas emissions by weight.34

SOCIAL PERFORMANCE INDICATORS

Employment

LA1

(Core)

Total workforce by employment type, employment contract, and region.35

LA7

(Core)

Rate of injury, occupational diseases, lost days, and absenteeism, and number of work related fatalities by region. 36

GRI Indicator Page No.


Shareholder Analysis 31 December 2013

Number of Issued Shareholders % Shares % Size of Shareholding 1 - 5 000 5 190 89.3% 3,894,857 1.1% 5 001 - 10 000 139 2.4% 1,027,426 0.3% 10 001 - 25 000 127 2.2% 2,176,658 0.6% 25 001 - 50 000 106 1.8% 3,914,747 1.1% 50 001 - 100 000 93 1.6% 6,527,188 1.8% 100 001 - 200 000 48 0.8% 6,763,546 1.9% 200 001 - 500 000 50 0.9% 15,670,281 4.4% 500 001 - 1 000 000 22 0.4% 16,062,635 4.5% 1 000 001 - above 38 0.7% 301,963,520 84.3% 5 813 100.00 358,000,858 100.00

Trade Classification Investment and Trust 238 4% 85,988,688 24%Local companies 190 3% 70,672,247 20%Insurance Companies 12 0% 54,060,207 15%Nominees Local 82 1% 38,248,945 11%Pension Funds 122 2% 33,886,767 9%Local individual residents 5 164 89% 33,371,696 9%Employee share trust 5 0% 10,000,000 3%New non - residents 11 0% 9,370,203 3%Nominees foreign 2 0% 5,148,550 1%Fund managers 23 0% 999,883 0%Banks 3 0% 861,776 0%Other 65 1% 15,391,896 4% 5 813 100.00 358,000,858 100.00

Top Ten Shareholders Stanbic Nominees (Private) Limited NNR 73,814,099 20.6%Old Mutual Life Assurance Co. Zim Ltd 51,491,696 14.4%Serrapin Investments (Private) Limited 48,042,780 13.4%Fed Nominees (Private) Limited 20,333,340 5.7%Mining Industry Pension Fund 17,667,266 4.9%Standard Chartered Nominnes 15,886,491 4.4%National Social Security Authority 11,123,595 3.1%Scrimpton Investments (Private) Limited 10,513,330 2.9%DZL Holdings Employee Share Trust 10,000,000 2.8%Old Mutual Zimbabwe Limited 8,289,832 2.3%Other 90,838,429 25.4% 358,000,858 100.0% Directors’ Shareholding Dr L. L. Tsumba - S. P. Bango 9,500 S. Chindove 2,637,879 T. Mabika 2,021,389 C. Mahembe 138,575 H. Makuwa 100 A. S. Mandiwanza 9,419,115 J. H. K. Sachikonye 266 M. R. Ndoro 3,165,119 F. Mungoni -


Shareholder Analysis 31 December 2012

Number of Issued Shareholders % Shares % SizeofShareholding 1 - 5 000 5 242 89.7% 3,978,728 1.1% 5 001 - 10 000 132 2.3% 971,591 0.3% 10 001 - 25 000 129 2.2% 2,215,097 0.6% 25 001 - 50 000 109 1.9% 4,047,516 1.1% 50 001 - 100 000 90 1.5% 6,378,961 1.8% 100 001 - 200 000 39 0.7% 5,737,126 1.6% 200 001 - 500 000 45 0.8% 14,350,330 4.0% 500 001 - 1 000 000 13 0.2% 9,808,222 2.7% 1 000 001 - above 43 0.7% 310,213,287 86.7% 5 842 100% 357,700,858 100% TradeClassification Foreign nominee 28 0.5% 88,893,917 24.9%Local companies 314 5.4% 74,009,241 20.7%Insurance companies 23 0.4% 55,999,386 15.7%Pension funds 199 3.4% 53,760,975 15.0%Local nominee 90 1.5% 40,054,996 11.2%Local individual resident 5 007 85.7% 20,451,186 5.7%Investments 28 0.5% 10,715,655 3.0%New non resident 26 0.4% 8,135,352 2.3%Charitable and trusts 48 0.8% 2,910,211 0.8%Banks 4 0.1% 1,819,283 0.5%Fund managers 19 0.3% 575,874 0.2%Foreign companies 4 0.1% 220,282 0.1%Deceased estates 52 0.9% 154,500 0.0% 5 842 100% 357,700,858 100% Top Ten Shareholders Old Mutual Life Assurance Co. Zimbabwe Limited 53,754,034 15.0%Serrapin Investments (Private) Limited 51,042,750 14.3%Stanbic Nominees (Private) Limited NNR 23,713,770 6.6%Fed Nominees (Private) limited 20,579,614 5.8%Stanbic Nominees (Private) Limited NNR 19,147,499 5.4%Mining industry pension fund 13,646,487 3.8%Scrimpton investments (Private) Limited 10,970,128 3.1%Standard Chartered Nominees (Private) Limited - NNR 10,950,121 3.1%Standard chartered nominees (Private) Limited - NNR 10,878,533 3.0%National Social Security Authority (NSSA NSP) 10,282,425 2.9%Other 132,735,497 37.1% 357,700,858 100.0% Directors’ Shareholding Dr L. L. Tsumba - S.P. Bango 9,500 S. Chindove 2,637,879 T. Mabika 4,491,689 C. Mahembe 138,575 H. Makuwa 100 A. S. Mandiwanza 11,090,328 J.H.K. Sachikonye 266 M.R. Ndoro 3,469,005 F. Mungoni - C. Mahembe -


Notice is hereby given that the nineteenth Annual General Meeting of members of Dairibord Holdings Limited will be held at the Meikles Hotel,

Mirabelle Room on Friday 16 May 2014 at 11:30 am.

AGENDA1. To receive and adopt the Financial Statements for the year ended 31 December 2013, together with reports of the Directors and Auditors

thereon.

2. To elect Directors of the Company

In accordance with article 100 of the company’s Articles of Association, Mr. C. Mahembe retires by rotation and being eligible, offers

himself for re-election.

Ms S.P.Bango who has served the company as non-executive director since February 2004 is also retiring in accordance with article 100 of

the company’s Articles of Association, and is not seeking re-election.

To approve the extension of the term of office for Dr. L. L. Tsumba who is due to retire from the board in terms of article 85(A) of the

Articles of Association of the Company, for three years.

3. To approve the remuneration of the auditors for the past audit and re-appoint Ernst & Young Chartered Accountants (Zimbabwe) as audi-

tors for the current year.

4. To approve the remuneration of the directors for the past year.

In terms of the Companies Act (Chapter 24:03) a member entitled to attend and vote at a meeting is entitled to appoint a proxy to attend and

vote on a poll and speak in his stead. A proxy need not be a member of the Company.

Byorderoftheboard

M. Ndoro

CompanySecretary

13 March 2014

Notice to Shareholders


Shareholders’ calendar

2013 Annual Report Published April 2014

Nineteenth Annual General Meeting 16 May 2014

Interim report for 6 months to 30 June 2014 and dividend announcement August 2014

Financial Year End 31 December 2014

Publication of the results for the 12 months ending 31 December 2014 and dividend announcement March 2015


Notes


Dairibord Holdings LimitedCompany Registration No. 2168/94

www.dairibord.com

RegisteredOfficeZB Life Towers9th Floor77 Jason Moyo Avenue

Harare

Postal AddressP O Box 587, Harare, ZimbabweTelephone Numbers: 263 4 790801-7, +263 4 731071-8

Fax Number: +263 4 795220

CompanySecretaryMercy R Ndoro

E-mail: [email protected]

AuditorsErnst & Young Chartered Accountants (Zimbabwe)Angwa CityJulius Nyerere Way/Kwame Nkrumah AveP.O Box 62 or 702

Harare

Principal BankersStandard Chartered Bank of Zimbabwe Limited

Barclays Bank of Zimbabwe Limited

Transfer SecretariesCorpserve (Private) Limited4th Floor, ZB CentreCnr 1st Street and Kwame Nkrumah AvenueHarare

Zimbabwe

SustainabilityReportingAdvisorsInstitute of Sustainability Africa (Insaf)52 Northampton Crescent EastleaHarareZimbabwe

CorporateInformation

Form of proxy Annual General Meeting of the members of Dairibord Holdings Limited to be held at the Meikles Hotel, Mirabelle Room on Friday 16 May 2014 at 11:30 am

We/ I....................................................................................................................... of.............................................................................................................................

................................................................................................................................................................................................................................................................

being a member / members of the above named Company, hereby appoint ........................................................................................................................................

of..............................................................................................................................................................................................................................................................

or failing him the Chairman of the Meeting as our/ my proxy to vote for us/ me on our/ my behalf at the Annual General Meeting of the company which will be held for the purpose of considering and if deemed fit, passing with or without modification, the resolution passed thereat and at any adjournment thereof, and / or abstain from voting in respect of the ordinary shares registered in our / my name in the following manner.

NOTESi In terms of Section 129 of the Companies Act, a member of the company is entitled to appoint one or more proxies to act in the alternative to attend, vote and speak in

his stead. A proxy need not be a member of the company.

ii Clause 77 of the Articles provides that instruments of proxy must be signed and returned to reach the registered office of the company not less than forty eight (48) hours before the time for holding meeting.

iii A shareholder may insert the names of two alternative proxies of the shareholder’s choice in the space provided, or may elect for the Chairman of the meeting to act for him/her. The person whose name appears first on the Form of Proxy, and whose name has been deleted, will be entitled to act as proxy to the exclusion of those whose names follow.

iv A shareholder’s instruction to the proxy must be indicated by the insertion of a cross in the appropriate space provided. If no cross is placed in the appropriate block(s) the proxy holder will be entitled to vote for against or abstain from voting as that proxy holder may deem fit.

v The person signing the form of proxy must sign any alteration to this Form of Proxy.

vi The completion and lodging of this form will not preclude the relevant shareholder from attending the AGM and voting thereat in person to the exclusion of any proxy appointed in terms here of, should such shareholder wish to do so.

vii The authority of the person signing the Form of Proxy: a) Under a power of attorney; or b) on behalf of a company; must be attached to the Form of Proxy unless the power of attorney has already been registered by Dairibord Holdings Limited or in the case of a company, this Form

of Proxy is sealed by it.

SIGNED THIS [ ] DAY OF [ ]

....................................................SIGNATURE OF MEMBER [ Number of shares Held = ...............................................]

The Company SecretaryDairibord Holdings LimitedP.O. Box 587HarareZimbabwe

Or hand deliver to:

Dairibord Holdings Limited9th Floor, ZB Life Towers77 Jason Moyo Avenue/ Sam Nujoma StreetHarareZimbabwe

AffixStampHere

DairibordHoldingsMore Than Just Milk

www.dairibord.com

Dairibord Holdings Limited9th Floor, ZB Life Towers

77 Jason Moyo Avenue/ Sam Nujoma StreetP O Box 587, Harare, Zimbabwe

Telephone : +263 4 790801-7, 731071-8Fax : +263 4 795220 2013

Annual Report

dairibord holdings limited annual report 2013... dairibord holdings limited 9th floor, zb life...

Documents