H
Introduction
Contents Pages
INTRODUCTION a. Financial Highlights 3 b. Notice of Annual General Meeting 4-5 c. Directors and other Corporate Information 7-8
BUSINESS REVIEW a. Chairman's Statement 10-14 b. Chief Executive Officer's Review 15-22 c. The Board of Directors' Profile 25-27 d. Report of the Directors 28-36 e. Report of the Audit Committee 37
FINANCIAL STATEMENTS a. Report of the Independent Auditors 44 b. Statement of Financial Position 45 c. Income Statement 46 d. Statement of Comprehensive Income 47 e. Statement of Changes in Equity 48 f. Statement of Cash Flows 4 9 g. Index to Notes to the Financial Statement 50 h. Notes to the Financial Statements 51-91 I. Value Added Statement 92
SHAREHOLDERS' INFORMATION a. List of Key Distributors 95-97 b. Unclaimed Dividends 98 c. Share Capital History 99 d. Application for E-Dividend 101 e. Proxy Form 102 f. Electronic Delivery Mandate Form 103
Honeywell Flour Mills Plc. 1 Introduction
Financial Highlights 3
Notice of Annual General Meeting 4-5
Directors and other Corporate Information 7-8
Honeywell Flour Mills Plc. 2 Introduction Financial Highlights for the year ended 31 March, 2013.
% 1ncrease/ Result in millions of Naira 2013 2012 ( Decrease) Revenue 45,709 38,052 20 Profit before taxation 3,815 3,665 4 Profit after taxation 2,844 2,694 6 Total assets 55,437 47,930 16 Shareholders fund 18,553 17,016 9 Issued and fully paid share capital 3,965 3,965 –
Data per 50k share kobo kobo Earnings 35.86 33.97 6 Proposed Dividend* 16.00 15.00 7 Net Assets 233.95 214.57 9
Stock Exchange Information Stock Exchange Quotation as at March 31 (in Naira per Share) 2.94 2.17 35 Number of Share Issued (in millions) 7,930 7,930 - Market Capitalization as at March 31 (in millions of Naira) 23,315 17,209 35
* The Directors propose a Dividend payment of 16 kobo (2012: 15 kobo) per share on the Issued Share Capital of 7,930,197,658 ordinary shares of 50 kobo each, subject to the approval of the Shareholders at the Annual General Meeting.
Financial Calendar Date (i) Dividend Qualification Date September 6, 2013 (ii) Closure of Register of Members September 9 to 13, 2013 (iii) 4th Annual General Meeting to receive the Audited Financial Statements for the year ended March 31, 2013 September 24, 2013 (iv) Payment of Dividend September 25, 2013
Honeywell Flour Mills Plc. 3 Introduction Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Fourth Annual General Meeting of the Company will hold as follows: Date: Tuesday September 24, 2013 Venue: Civic Centre Ozumba Mbadiwe Street Victoria Island Lagos. Time: 11a.m The following will be transacted at the meeting as ordinary business: 1 To receive the Audited Financial Statements for the year ended 31 March, 2013, together with the Report of the Directors, Auditors & Audit Committee thereon. 2 To declare a Dividend. 3 To elect Directors. 4 To approve the remuneration of Directors. 5 To authorise the Directors to fix the Auditors remuneration 6 To elect members of the Audit Committee. Proxy Any member of the Company entitled to attend and vote at this meeting is also entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a member of the Company. A proxy form is enclosed herewith. A proxy form must be completed and deposited at the office of the Company's Registrar, First Registrars Limited, 2 Abebe Village Road, Iganmu Lagos not later than 48 hours before the time fixed for the meeting. Audit Committee Any Shareholder may nominate another Shareholder as a member of the Audit Committee by giving notice in writing
Honeywell Flour Mills Plc. 4 Introduction Notice of Annual General Meeting
of such nomination to the Secretary of the Company at least 21 days before the Annual General Meeting. Dividend If the Dividend recommended by the Directors is approved by the members at the Annual General Meeting, Dividend will be paid by Wednesday, September 25, 2013 to the Shareholders whose names appear in the Company's Register of Members on the close of business on Friday September 6, 2013. Closure Of Register And Transfer Books The Register of Members and Transfer books will be closed from Monday, September 9, 2013 to Friday, September 13, 2013, both days inclusive for the purpose of updating the Register of Members. E-Dividend Notice is hereby given to all Shareholders to open bank accounts, stock broking accounts and CSCS accounts for the purpose of dividend. A detachable application form for e-dividend is attached to this Annual Report to enable all shareholders to furnish particulars of their accounts to the Registrar (First Registrars Limited) as soon as possible. E-Report In order to improve delivery of our Annual Reports, we have inserted a detachable Form to this Annual Report and hereby request Shareholders who wish to receive Annual Reports of the Company in an electronic format to complete and return the Form to the Registrars for further processing. In addition, the Annual Reports are available online for viewing and download from our website at www.honeywellflour.com
BY ORDER OF THE BOARD
Oluwayemisi Busari (Mrs.) Company Secretary
Honeywell Flour Mills Plc. 5
Introduction Directors and other Corporate Information
Board of Directors Dr. Oba Otudeko, D.Sc. (Hon) CFR – Chairman Folaranmi Babatunde Odunayo – Executive Vice Chairman / CEO Lt. General Garba Duba [Rtd] Jens Mollenbach (Danish) Obafemi Otudeko Akinsoji Akintayo David William Obray (South African) Theophilus Oluranti Sokunbi Dr. Nino Albert Ozara – Executive Director
Secretary Oluwayemisi Busari (Mrs) Tel: +234 1 731 5870, +234 1 793 2694
Operational Office (a) Apapa Factory 2nd Gate By-Pass Tin Can Island Port Apapa, Lagos. Website: www.honeywellflour.com Email: [email protected]
(b) Ikeja Factory Plot YABB, Mobolaji Johnson Avenue Alausa Ikeja, Lagos.
Registrars First Registrars Nigeria Limited 2, Abebe Village Road, Iganmu, Lagos.
Registered Office SW8/1185 Sanda Street Molete, Ibadan. Honeywell Flour Mills Plc. 7 Introduction Directors and other Corporate Information - cont’d
Bankers Access Bank Plc Diamond Bank Plc Ecobank Nigeria Plc Fidelity Bank Plc First Bank of Nigeria Limited Guaranty Trust Bank Plc Keystone Bank Limited Skye Bank Plc Standard Chartered Bank Nigeria Limited Union Bank of Nigeria Plc United Bank for Africa Plc Zenith Bank Plc
Auditors BBC PROFESSIONALS (Chartered Accountants) 24, Ilupeju By-Pass Ilupeju, Lagos.
Honeywell Flour Mills Plc. 8 Business Review
Chairman’s Statement 10 - 14
Chief Executive Officer’s Review 15 - 22
The Board of Directors Profile 25 - 27
The Report of the Directors 28 - 36
The Report of the Audit Committee 37
Honeywell Flour Mills Plc. 9 Chairman’s Statement Fellow Shareholders, my colleagues on the Board of Directors, Gentlemen of the Press, Ladies and Gentlemen, I am pleased to welcome you to the 4th Annual General Meeting of our beloved Company. It is a privilege for me to lay before you the Annual Report and Financial Statements of your Company for the year ended 31 March 2013.
Dr. Oba Otudeko, D.Sc. (Hon.) CFR Business Review Chairman’s Statement - cont’d
Since the listing of the Company on the recession in the Eurozone and the weaker Nigerian Stock Exchange (NSE), the expansion of the U.S. economy. It is anticipated performance of the Company has been on the that the recent rise in financial market volatility ascent, in spite of the challenging environment and associated yield increases will partly under which we operate. In the course of my reverse. However, if this fails, portfolio shifts, address this morning, I shall also enunciate the further yield increases and continued higher plans that are afoot to lift the performance of volatility could result in sustained capital flow the Company and create further wealth for the reversals and lower growth in emerging Shareholders economies.
Global Economic Environment Nigerian Economic Environment In 2012, a number of challenges stood in the The Nigerian economy faced numerous path of a more widespread economic growth challenges which impacted overall economic namely: the protracted Eurozone debt crisis, activity in 2012. There was a decline in the real waning demand for Chinese exports and growth rates of economic activity in both the oil reduced demand for commodities in the and non-oil sectors. Oil production was less than Asia/Pacific region. Overall, global exports expected at 2.37 million barrels per day during only witnessed a mere 1% growth in 2012. The the first half of the year while the non-oil sector slowdown in global trade was caused by export was affected by the incidents of flooding. The declines in Japan, China and Germany while manufacturing sector enjoyed a slight upturn in the growth experienced in the U.S. contracted its growth rate in the second quarter of 2012 to in the fourth quarter of 2012. The International 7.59% and the rate closed the year at 7.71%. Monetary Fund in its World Economic Outlook According to the Nigerian Bureau of Statistics has predicted a subdued global growth rate of (NBS), the economy grew at a rate of 6.61% and 3% in 2013. The forecast is driven by weaker is expected to rise to 6.75% in 2013. domestic demand and slower growth in several key emerging markets as well as a more The inflation rate showed a general downward protracted recession in the Eurozone. trend during the year, despite the economic challenges that the country witnessed. From the Global growth rate increased marginally from 12.6% recorded in January 2012, the headline 1 3 2 /2 % in the second quarter of 2012 to 2 /4 % in inflation rate reached 12.9% at the end of the first the first quarter of 2013. Global growth and second quarters of the year before slowing continued to be under-par due to the inability of to 11.3% in the third quarter. The average emerging markets to grow as anticipated, inflation rate for the year stood at 12.2%.
Honeywell Flour Mills Plc. 11 Business Review Chairman’s Statement - cont’d
The removal of fuel subsidies early in 2012, the country impeded the free movement of goods devastating flood that occurred in the and services across the country. The security Eastern/Southern parts in the third and fourth situation in the Northeast has continued to affect quarters of 2012 as well as seasonal effects also and depress the volume of trade in that part of the played major roles in driving up prices at country. various times, in addition to the major inflationary pressure of structural and Results for the Year infrastructural constraints in the country. Strong growth was achieved across our brands as reflected in a 20% increase in revenue from The Central Bank of Nigeria retained the N38 billion to N46 billion. Profit after tax grew Monetary Policy Rate (MPR) at 12% from N2.6 billion to N2.8 billion, a growth of 6% throughout the year in order to manage the over the preceding year. Shareholders' Funds inflationary trend observed in the economy. and Total Assets increased by 9% and 16% to Lending rates from the banks closed at the N19billion and N55 billion respectively. financial year at 16.16% and 22.31% for prime Earnings per share rose from 33.97kobo to and maximum lending rates respectively. The 35.86kobo in the preceding year. attractiveness of the yield on government securities and its lower risk compared to the The continued success of our brands is as a result lending to the real sector further constricted the of our dedication to quality manufacturing lending to the real sector. Manufacturers faced processes, quality of our products and the daunting challenges in raising funds to finance increased brand visibility, which is a product of their operations. our strategic marketing activities. The fundamentals of the Company get stronger year- Investors' confidence in the Capital Market is on-year through prudent management of cost gradually returning as the All-Share Index and use of strategic sales and marketing. (ASI) increased by 52% from 22,045.66 on 1 May, 2012 to 33,536.25 on 1 April, 2013. This Dividend positive upswing in the ASI is due to improved In accordance with our tradition of creating earnings, increased capital inflow and portfolio value for shareholders, the Board of Directors investments. has recommended a total dividend payout of N1.27 billion representing a distribution of 16 During 2012, the security situation in the kobo for every 50 kobo ordinary share held. Northern part of the country and the flooding Subject to your approval, the dividend will be th experience in the Eastern/Southern parts of the paid on the 25 September, 2013.
Honeywell Flour Mills Plc. 12 Business Review Chairman’s Statement - cont’d
Board health and safety of our employees is our No changes have been made to the Board primary concern and is at the heart of our Composition. However, In accordance with the operations. We shall continue to seek Company's Articles of Association, the improvements to our HSE procedures and following Directors namely, Dr. Oba Otudeko, provide regular safety training and briefings for Dsc.(Hon) CFR, Lt. General Garba Duba (Rtd) employees and contractors on safety and Mr Jens Mollenbach retire by rotation at consciousness. Safety consciousness involves this Annual General Meeting and being eligible the identification of hazards or unsafe acts, offer themselves for re-election. assessment of risks and controlling the risks associated with the work hazards that are Internal Restructuring identified. The Company carried out an internal restructuring which resulted in the merger by Completion of Mills E & F absorption of Honeywell Superfine Foods Ltd, The project to realize a 1000mt/ day increase in formerly a wholly owned subsidiary, and our milling capacity was completed around manufacturers of pasta and noodles. The key March 2013 towards the end of the financial year objective of the integration was to achieve a just ended. The modern milling facility has further extraction of value from the already taken our milling capacity to 2,610mt/day. The existing forward/vertical integration between full impact of this capacity increase on our the two businesses. The objectives of the merger Semolina, Wheat Meal and Flour sales volumes were tabled before our esteemed Shareholders will only be fully felt in the financial year ending th on February 28 , 2013 at the company's March 2014. Extraordinary General Meeting, and after your valuable contributions and approval, we were Future Outlook able to proceed to obtaining other regulatory Despite the challenging operating climate of and court approvals. The merger was completed high interest rates, heavy import duty on raw towards the end of the financial year and for this materials and high cost of doing business, we reason, its beneficial impact will only be felt in continue to seek opportunities for growth. As the financial year ending March 2014. you might be aware, the Company has exhausted its available land at the Tincan Island Port, Health, Safety and Environment Apapa while growth beckons. To overcome this Our Company operates an eco-friendly business challenge and be able to continue to build wealth model with a robust Health, Safety and for our shareholders, I am pleased to announce Environment (HSE) policy that elucidates to you that we have acquired about 64 hectares responsible environmental management. The of land along the Lagos-Ibadan Expressway
Honeywell Flour Mills Plc. 13 Business Review Chairman’s Statement - cont’d
from the Ogun State Government within the gratitude to our loyal customers whose newly created industrial zone known as continued patronage keeps us in business. Flowergate Scheme in Sagamu Local I would like the shareholders to help applaud the Government Area, Ogun State. The Company tireless commitment of members of the Board of plans to develop the Honeywell Integrated Directors; their vision, knowledge and expertise Foods Complex at the Sagamu site and locate help to make your company a pride among its several food production and processing factories peers. The Management and Staff must also be within this Foods Complex, with emphasis on commended for their dedication and devotion to the manufacture of value-added human and the cause of the Company. The hard work, animal food products. This will result in a major diligence, professionalism and leadership and significant growth for the business as we exhibited by the Management must be continually strive to meet customers' increasing commended. demand for Honeywell brand of quality food Worthy of note also is the robust relationship we products. enjoy with our logistics service providers and suppliers. We thank them all for their support. For a start, we have completed plans to situate a new pasta factory at the Flowergate Estate in Conclusion order to be able to meet the increasing demand Distinguished Shareholders, my colleagues on for our Honeywell Spaghetti and Macaroni the Board, Ladies and Gentlemen, I thank you brands. It is our expectation that we can for your continued faith in the Company and its commence construction works before the end of management. I thank you also for your presence this calendar year and deliver the works for at this year's Annual General Meeting; I look production in year 2015. forward to your full participation in the agenda The revenue earnings for the company in the of today's meeting and once again, I say financial year ending 31st March, 2014 will welcome to you all. benefit greatly from the product volumes coming out of the newly commissioned Mills E & F and with that we can also expect significantly improved earnings for the financial Dr. Oba Otudeko, D.Sc (Hon.), CFR year. Chairman of the Board
Appreciation On behalf of the Board of Directors, Management and Staff of Honeywell Flour Mills Plc, I wish to express our profound
Honeywell Flour Mills Plc. 14 Business Review Chief Executive Officer’s Review
Folaranmi Babatunde Odunayo Executive Vice Chairman/CEO
Distinguished Shareholders, Ladies and Gentlemen; it gives me much pleasure to welcome you to the 4th Annual General Meeting of Honeywell Flour Mills Plc and to advise you of some key developments and strides that your Company has made in the last 12 months. These developments have defined the performance of your Company and helped to lay the foundation for further growth in the foreseeable future
Introduction The financial year just ended has been an exciting year filled with opportunities and challenges. We made significant strides towards our goal of increasing shareholders' wealth through a combination of increased product volume availability and cost optimization. Management's commitment and painstaking effort will continue to sustain the Company's superior earnings.
High interest rate and borrowing constraints remain a major challenge. The average prime lending rate of 17% remains unattractive, as banks struggle to provide adequate funding for our growth initiatives. The liquidity tightening strategies of the Central Bank of Nigeria have continued to squeeze the capacity of banks to fund real sector growth. The new requirement for banks to keep 50% of government's fund with the Central Bank will have significant implication for liquidity, banks' capacity to lend and interest rate.
Financial Reporting and Accounting In year 2010, the Securities and Exchange Commission (SEC) had mandated all companies quoted on the Nigerian Stock Exchange to prepare their financial statements for the year ended December 2012 in
Honeywell Flour Mills Plc. 15 Business Review Chief Executive Officer’s Review - cont’d
Semolina accordance with the guidelines of the ‘Million International Financial Reporting Standards 6500 (IFRS). In pursuit of this directive, we present 6000 for the first time the Annual Financial 5500 Statements of your company, for the year ended 5000 st 31 March 2013 in accordance with the 4500 requirements of IFRS. 2013 2012
Wheat Meal Performance Review ‘Million Financial results of the company can be 2500 summarized under the following performance 2000 metrics. 1500 (i) Revenue Growth: 1000 Revenue grew by 20% to close at N46billion from N38billion achieved in the previous year. 0 2013 2012 All the products reflected growth in 2013 as indicated in the bar charts below: Semolina and Wheatmeal earnings increased by 17% and 39% respectively in FY2013. White Flour ‘Million 28000 Pasta 26000 ‘Million 24000 6000 22000 5500 20000 5000 2013 2012 4500 2013 2012 Brown Flour ‘Million ‘Million Noodles 5000 150 4000 100 3000 50 2000 1000 0 2013 2012 0 2013 2012 White and Brown Flour earnings increased by Pasta and Noodles earnings increased by 17% and 124% respectively in FY2013. 16% and 47% respectively in FY2013.
Honeywell Flour Mills Plc. 16 Business Review Chief Executive Officer’s Review - cont’d
(ii) Product Revenue Contribution Revenue Trend The comparative product revenue contribution 2013 46 profile is indicated in the charts below. 2012 38 FY 2013 2011 34 2010 33 Pasta 13% Noodle 9% Brown flour 0.2% 2009 29 Wheatmeal 5% 0 10 20 30 40 50 Semolina 14% Turnover (N billion) Flour 59%
• Revenue growth was 20% from 2012 to 2013. • Revenue growth was 59% over the last five FY 2012 years. Pasta 13% Noodle 7% • All the products of the Company have strong Brown flour 0.1% brand equity. Wheatmeal 4% Semolina 14% • High investment in advertisement and marketing activities has significantly Flour 61% contributed to the increasing revenue earnings. • White Flour's contribution reduced from 61% • Full impact of the new Mills E&Fcapacity to 59% in favor of higher margin products like expansion on revenue growth will be fully Wheat Meal and Brown Flour. felt in 2014. • Semolina and Pasta’s contribution were retained at 14% and 13% respectively, (iv) Profit after Tax while Noodles reflected an increase from 7% Profit before Tax (PBT) grew to N3.815 billion to 9%. from N3.6billion in 2013 while Profit after Tax • The new Mills E& F were commissioned (PAT) grew from N2.6 billion to N2.843 billion. towards the end of the financial year and The PAT trend over the last five years is as therefore, its impact on the product volume shown below. The figures for 2009 to 2011 are offerings will only be fully felt in 2014. based on the old Nigerian Generally Accepted Accounting Principles (GAAP). However, the (iii) Revenue Trend impact of the Nigerian GAAP on the PAT for The revenue trend in the last five years is as years 2009 to 2011 will not materially affect the shown in the chart below. indicated growth trend.
Honeywell Flour Mills Plc. 17 Business Review Chief Executive Officer’s Review - cont’d
Plant Expansion PAT Trend The plant expansion and improvement 2013 2.84 programmes that were embarked upon during 2012 2.69 the last financial year were concluded with the 2011 2.49 commissioning of the mills E and F towards the 2010 1.18 end of the financial year. The mills incorporate 2009 0.22 the state-of-the-art technology from BUHLER 0 0.5 1 1.5 2 2.5 3 AG in Switzerland, the world leading milling Profit after Tax (N billion) equipment suppliers. The mills are already running at a capacity utilization of well over . Growth of PBT and PAT were 4% and 6% 70%. from 2012 to 2013 respectively. . Growth of PAT was 1,191 % over the last five All the other ancillary facilities such as the new years. AROX automated palletizing and racking . Efficient business processes, efficient warehouse, the new special product warehouse, management of overheads, wheat the new bran bagging and warehousing facility, procurement, treasury issues, and heavy the 30,000 mt wheat storage silos, the wheat investment in marketing activities have intake pit and the newly upgraded dock-silo immensely contributed to the positive PAT wheat discharge facility have also been trend over the years. completed, and have added greatly to our operational efficiency. (v) Total Assets The Company has achieved a considerable We also carried out a restructuring of aspects of growth in total assets. the process flow in order to improve efficiency
Total Assets (Trend) in our wheat discharge, milling, storage, bagging, sale and logistics operations. Product 2013 55 storage, bagging, warehousing and loading 2012 47 operations have been physically separated 2011 20 10 20 30 40 2 50 60 according to product category in compliance Total Assets (N billion) with food safety regulations and international best practices. All flour products, semolina, • Total assets rose by 16 per cent to N55.4 billion wheat meal and wheat bran are now stored, in 2013 when compared to the N47.9 billion in packed and warehoused in physically separate 2012. This increase was significantly locations and this has brought in a lot of cost influenced by the completion of the Mills E&F savings in the area of packaging, warehousing, and other related Projects in 2013. Honeywell Flour Mills Plc. 18 Business Review Chief Executive Officer’s Review - cont’d
cleaning and fumigation because of Instant Noodles in four flavours – chicken, homogeneity and uniformity of manufacturing onion-chicken, curry and seafood, while pasta is practices. produced as spaghetti and three variants of macaroni – cornetti, cavatto and fusilli. Flour Warehousing System The AROX warehouse racking system is the Marketing first of its kind in Nigeria. It enables us to store Brand management remains at the core of our up to 100,000 bags of flour in a computerized strategy to build an enduring business through arrangement where each pallet is identified and the development of strong consumer brands. programmed to ensure that flour bags can be Our brand building activities are actively released to the trade in an orderly first-in-first- supported by a very strong drive for consistency out basis. This system is expected to reduce in product quality and superior product use loading and turnaround times for trucks, reduce experiences in respect of which our brands are drudgery, improve work process and overall already well known. efficiency of our bagged flour handling operations. Following the introduction of our highly successful television advert for Honeywell Dock-to-Silo Conveying System Noodles ('Bam Bam la la'), the brand's fortunes The dock-to-silo wheat discharge system has made a dramatic turnaround with significant been upgraded from 250 mt to 500 mt/hour. We growths in top-of-mind-awareness, trial, are now able to discharge the wheat vessels at preference, usage and market share parameters. twice the existing speed into our 70,000 mt By the end of the financial year, our Noodles capacity silos. This was achieved by replacing brand had moved from no. 5 within the Noodles the old belt conveyor with three Buhler-type category (at 4% market share) to no. 2 (at 10% chain conveyors and the addition of a VIGAN market share). Our national sales revenue for discharge equipment to support the existing one. Honeywell Noodles grew by 47% by the end of the financial year to N4.1 billion when Production Configuration compared with 2012, while the Lagos Sales All our six mills have been configured to enable Region witnessed a 129% volume growth from us produce our range of products in any 605,381 cartons to 1,387,317 cartons. We are proportion in order to be able to meet the very confident that continued investment in demand patterns of our teeming customers advertising and other sales and marketing nation-wide. Our range of products now activities will allow us to further increase our includes bread flour, confectionary/pastry flour, market share and derive greater equity from our noodle flour, pasta flour, brown flour, semolina Noodles brand. Our Noodles advert, 'Bam Bam and wheat meal. At the Ikeja factory we produce la la' won “The Best use of Music in Honeywell Flour Mills Plc. 19 Business Review Chief Executive Officer’s Review - cont’d
Advertising” Award during the year as adjudged Baking School by the Association of Advertising Agencies of Our Baking School Programme continues to Nigeria (AAAN) at the Lagos Advertising Ideas elicit great interest within the Baking Industry Festival (LAIF). throughout Nigeria. We remain the only Flour Mill that offers formal Baking education and In the Whole Wheat Meal category, we are a training to bakers. The graduation ceremonies clear market leader in all key brand performance receive adequate media coverage and graduands metrics. We have a market share of more than proudly hang the graduation plaque in their 60% in a rapidly growing category. Our share of bakery facilities. During the year, we trained the market was limited by our ability to meet over 60 bakers, but due to popular demand, customer orders during the year, but following some consideration is now being given to the the completion of the mills expansion project, expansion of facilities in order to be able to the Honeywell Wheat Meal is expected to increase the number of trainees from 15 to about witness a significant growth in volume which 30 persons per training session. will positively impact our market share. We have introduced a television advert for Corporate Social Responsibility Honeywell Wheat Meal which is growing in We carried out other Corporate Social popularity among consumers who have Responsibility initiatives during the financial nicknamed it 'Baba Wakis'. The impact of this year to aid learning and alleviate suffering. advert on our revenue earnings will be fully felt These include donation of our products to in the 2014 financial year. Orphanages and flood victims, as well as donation of books and computers to some Our Honeywell Semolina brand continues to be Primary Schools. the preferred semolina among consumers We partnered with The Rotary Club, Lekki because of its superior quality and better value Chapter to donate Books and Computers worth for money. Following the completion of the N1.2m to three schools in the Lekki area of mills expansion project, our Semolina Lagos State: production capacity has increased by about • Ogombo Community Secondary School, 170% . In the light of this, we have introduced a Ogombo Village. television advert for our Semolina in order to • Itedo Community Primary School, Lekki. create increased awareness and drive increased • Mayegun Community Primary School, trial and usage. The impact of the advert which Lekki. consumers have also nicknamed 'Husband Snatcher' will be fully felt in the 2014 financial year.
Honeywell Flour Mills Plc. 20 Business Review Chief Executive Officer’s Review - cont’d
On Valentine's day February 14, 2013 we visited Limited, and with that we now have a staff and donated company products to three strength of 679 at Apapa, and 201 at Ikeja orphanages in Lagos State: making a total of 880 persons. The business • The SOS Village Isolo. combination is working out very well in our • Little Saints Orphanage, Palm Groove. ability to streamline strategies, people and plans • The Love Home Orphanage, Magodo. in a wholesome and cost saving manner for the single organization. Logistics and Distribution Weak national infrastructure, particularly We continually strive to deploy the best Human transportation remains a source of concern for Resources practice in order to ensure that staff our business. The traffic gridlock around Apapa competence and productivity are at the cutting especially the Tin Can Island Port and the edge. During the year under review, about 80% location of our Milling Facility remains a of our staff attended training courses and significant logistical challenge. More than a few learning opportunities aimed at ensuring that hours are lost on a daily basis by customers in their skills remain relevant and appropriate for the traffic bottleneck within Apapa. We the jobs that have been assigned to them. The appreciate the continued patronage of our training courses were conducted for both Customers and logistics Partners in the face of technical and non-technical staff at both local the daunting challenge. The reconstruction and internationally reputable organizations. work by the Federal Government on the Apapa – Oshodi Expressway and the construction of the We pay a strong attention to assure a safe work Trailer Park at the Tin Can Island Port for environment. The enforcement of safety and articulated vehicles, both aimed at decongesting environmental standards helps to minimize traffic on the Port access road is a welcome occupational and health hazards. On-site clinic response to the traffic gridlock. It is hoped that service, manned by qualified industrial nurses these projects would be completed during 2014 and a visiting physician has been enhanced by so as to bring some sanity to the traffic situation the acquisition of a well-kitted ambulance to at the port complex. facilitate evacuation in the event of health and accident issues. Human Capital We are proud of our people and they remain our We are happy to report that our Human prized assets. Their technical and professional Resource and Staff welfare service is very depth is the source of our competitive edge in strong and is comparable to its peers in the the industry. The internal restructuring carried Nigerian manufacturing sector. During the year out during the year led to the merger by under review, the company was very proud to absorption of Honeywell Superfine Foods Honeywell Flour Mills Plc. 21 Business Review Chief Executive Officer’s Review - cont’d
receive the Chartered Institute of Personnel Conclusion Management of Nigeria Award for the best We strive to have an increasing share of the Human Resources Practice in the markets where we play. To achieve this and Manufacturing sector. remain relevant, we must continually innovate and deliver superior quality products at Enterprise Resource Planning (ERP) increasing volumes. Since the lands at our I am glad to report that we have commenced the present factory locations, at Apapa and Ikeja, implementation of a new Enterprise Resource have been fully developed, we have recently Planning (ERP) software across all the business acquired about 64 hectares of land along the segments and operations of the Company. Lagos-Ibadan Expressway within the newly created Flower Gate Industrial Scheme in the Shagamu Local Government area of Ogun The ERP is expected to be launched as a tool of State. We will be able to situate new business change-management and business ventures at this new location. transformation to enable us achieve integrated information flow, business processes On behalf of the Management and Staff of the standardization and integration, in line with Company, I wish to thank the Chairman and the global best practice. The benefit of this will be a Board of Directors for their guidance and faster decision making process based on real- support. I also wish to thank the Management time information for overall productivity and Staff for their diligent commitment to a enhancement in the company. The successful financial outcome through their hard functionalities of the ERP include Employee work, productivity and team spirit. Self Service, Finance, Human Resources, Production, Customers Relationship To our esteemed shareholders, you have been Management, Supply Chain Management, steadfast in your demonstration of full Logistics Management, Maintenance confidence in the prospects of the company. I Management, Projects Management, Business thank you very much for your support. Intelligence (BI), Document Management, and Workflows. In addition, as the ERP software is Thank you very much for your kind attention. IFRS compliant, it will help us to ensure that the International Financial Reporting Standards are embedded in the internal business processes across all the sectors of the organization. Folaranmi Babatunde Odunayo Executive Vice Chairman/CEO
Honeywell Flour Mills Plc. 22 The new Mills E & F
Honeywell Flour Mills Plc. 23 New Silos for Mills E & F Honeywell FlourMills Plc. 24 THE BOARD OF DIRECTORS
Dr. Oba Otudeko, D.Sc. (Hon.) CFR Chairman
Folaranmi Babatunde Odunayo Lt. General Garba Duba (Rtd.) Jens Erik Mollenbach Executive Vice Chairman/CEO Non-Executive Director Non-Executive Director
Honeywell Flour Mills Plc. 25 THE BOARD OF DIRECTORS CONT’D
Obafemi Otudeko Akinsoji Akintayo Non-Executive Director Non-Executive Director
Dave Obray (South African) Theophilus Oluranti Sokunbi Dr. Nino Albert Ozara Non -Executive Director Non -Executive Director Executive Director, Production
Honeywell Flour Mills Plc. 26 Business Review Profiles of the Directors
Dr. Oba Otudeko, D.SC. (Hon.) CFR Folaranmi Babatunde Odunayo Lt. General Garba Duba (Rtd) Chairman Executive Vice Chairman Non- Executive Director
An astute entrepreneur with business interests He is an alumnus of Kings College, Lagos and the A retired Lieutenant-General of the Nigerian spanning various sectors of the Nigerian then University of Ife. He worked with Coopers Army and Military Administrator of Sokoto State economy. A Fellow of the Chartered Institute of & Lybrand, an international firm of Chartered (1977 to 1979), Bauchi State (1984), General Bankers, UK; Institute of Chartered and Accountants in the Audit and Management Officer Commanding, 2nd Mechanized Division, Consulting units for nearly 10 years. Before he Corporate Accountants, UK; Institute of Nigerian Army (1987-88), General Officer joined the Honeywell Group in 1992, he was the Chartered Accountants of Nigeria and Institute of Commanding, 3rd Armored Division and Chartered Secretaries and Administrators of Finance Director of Hagermeyer Nigeria Plc. Nigeria. He is the Chairman of Honeywell Group (now known as DN Meyer Plc). He was Commandant, Nigerian Defense Academy (1990- of Companies, Fan Milk Plc and Bharti Airtel appointed the first Managing Director of 1992). General Duba has played several political (Airtel Nigeria). He is also Director of Khalil & Honeywell Flour Mills Plc in April 1997 and has and economic roles as Leader of the Niger State Dibbo (Haulage) Limited and Lagos Sheraton led the growth of the Company from business delegation to the National Political Reform Hotel. He is a former Director of Central Bank of commencement until this day. He is the Vice Conference and Chairman, New Nigerian Nigeria, Ecobank Transnational Incorporated, Chairman of the Business Advisory Council of Development Company Ltd. He is currently the British American Tobacco Company Limited and the Faculty of Business Administration, Chairman, SGI Nigeria Limited, a Director of First Franco-Nigerian Chamber of Commerce and University of Lagos, Vice Chairman, Flour Industry. He is also the Group Chairman, FBN Millers Association of Nigeria and a Council Bank of Nigeria Plc and has been on the board of Holdings Plc and the former President of the member of the Association of Operative Millers, Honeywell Flour Mills Plc since August 1998. Nigerian Stock Exchange. He is a member of the Middle East and Africa. He was appointed the office of Distinguished Friends of London Executive Vice Chairman of the Company in Business School. November 2008. He is also a member of the National Electricity Regulatory Commission.
Jens Erik Mollenbach Obafemi Otudeko Akinsoji Akintayo Non- Executive Director Non-Executive Director Non-Executive Director
A Danish National who graduated in 1972, from He is a Chartered Accountant by training and Mr. Akintayo had a robust career with Honeywell the Copenhagen University with a Masters in Executive Director of the Honeywell Group. At Flour Mills where he was initially employed in Economics. His impressive career has spanned the Honeywell Group, he has primary the position of Financial Controller and later lecturing, marketing, insurance and, consulting. responsibility for the Group's Strategy & Finance Director. He was later appointed the He has held various executive management Coordination, Corporate Development and Group Chief Finance Officer of the Honeywell positions at BP Denmark Ltd, BP International Risk Management. He also has direct oversight Group in 2008 and as an Executive Director of Plc London and Hafnia Services Ltd. Between over the Group's Portfolio Investments. He Honeywell Fisheries Limited. He is currently the 1995 and 2006. Mr. Mollenbach was the joined the Honeywell Group in 2003 as a Senior acting Managing Director of Pivot Engineering Managing Director of R.T. Briscoe (Nigeria) Plc Manager in the Oil and Gas projects group, Company Limited. He is a Chartered Accountant and the Managing Director of Fan Milk Plc from responsible for strategy formulation and and a member of the Institute of Cost and 2006 to May 2011. He joined the Board of business development. Prior to joining the Management Accountants, U.K and the Certified Honeywell Flour Mills Plc in April 2011. Honeywell Group, he was a Senior Associate in General Accountants of Ontario, Canada. He was the Financial Services Industry Practice of previously in the employment of Federal Express PricewaterhouseCoopers where he provided in Canada, Consolidated Breweries Limited, Assurance and Advisory services to clients in Phillips Consulting and Unilever Nigeria Plc. He the private and public sector. He has been a was appointed to the Board of the Company in member of the Board of Honeywell Flour Mills May 2009. since 2006. He is also a Director of First Bank Nigeria Plc.
Dave Obray (South African) Theophilus Oluranti Sokunbi Dr. Nino Albert Ozara Non-Executive Director Non-Executive Director Executive Director, Production
Mr. Obray, a South African and an Electrical A graduate of Chemistry from the University of Dr. Ozara graduated with a First Class Honours Engineer with academic and professional Ibadan, Nigeria, he obtained a Post Graduate Degree in Soil Science at the University of Ibadan training in South Africa held various positions of Certificate in Management (PGCM) from in 1981. He was a University of Ibadan and University of Derby, U.K. 2000. He has since responsibility including that of District Engineer Commonwealth Scholar. Dr Ozara obtained a attended several other management courses both Doctorate Degree in Soil Science from Silsoe (1973-1977), Resident Engineer, Divisional locally and internationally which included Senior College, Cranfield Institute of Technology, United Managing Director (1984-1987) of Fraser and Management Development programmes at Kingdom in 1989. Before joining the Honeywell Chalmers and Project Manager (1996-1998) of Ashridge Management College and Total Quality Group in 1998, Dr Ozara was a University lecturer Babcock International both in South Africa. He Management Course from the Lagos Business and Head of Department of Crop Production in had also served as Managing Director of Pivot School. He has held various management 1996 at the Federal University of Technology, positions at West African Portland Cement Plc Engineering Company Limited for twelve years. Owerri, Nigeria. Dr Ozara had his professional (Nigeria) where he resigned as the Managing training in milling operations at the Swiss Mill in He joined the board of the Company in 2002. Director in 2005. He is a member of several Zurich and the world-renowned Swiss Milling professional bodies including Nigerian Institute School, St. Gallen, Switzerland, Buhler Training of Management and a fellow of the Nigerian Centre, Uzwil, Switzerland and at Kurtz Muhle, Institute of Marketing. He is presently the Memmingen, Germany. He was appointed to the Chairman of Jacobs Educational Services Ltd board of Honeywell Flour Mills in 2007. and Tonbol International Ltd. He joined the Board of Honeywell Flour Mills on October 17, 2011.
Honeywell Flour Mills Plc. 27 Business Review Report of the Directors for the year ended 31 March, 2013
The Directors have pleasure in submitting to members their annual report together with the audited financial statements for the year ended 31 March, 2013.
PRINCIPAL ACTIVITIES Honeywell Flour Mills Plc (HFM Plc) was initially registered as GATEWAY HONEYWELL FLOUR MILLS LIMITED on 9 July, 1985. A change in the Company's ownership structure led to a change of the name to HONEYWELL FLOUR MILLS LIMITED in June 1995. The Company was converted to a Public Liability Company in 2008. Its shares were listed on the Nigerian Stock Exchange (NSE) in 2009.
The Company is principally involved in the manufacturing and marketing of wheat based products including flour, semolina, whole wheat meal, noodles and pasta.
RESULTS FOR THE YEAR 2013 2012 In thousands of Naira Revenue 45,709,382 38,052,227
Profit before taxation 3,814,599 3,664,935 Taxation (971,079) (970,960) Profit after taxation 2,843,520 2,693,975
DIVIDEND The Directors are pleased to recommend to the Shareholders the payment of dividend in respect of the year of N1,268,831,625 that is 16 kobo per share. This is subject to the deduction of appropriate withholding tax.
PRODUCT DISTRIBUTION The Company's products are distributed through many distributors across the country. The list of the key distributors is as shown on pages 95 to 97.
CORPORATE GOVERNANCE The Company is committed to the best practices and procedures in corporate governance. Its business is conducted in a fair, honest and transparent manner which conforms to the Code of Best Practices on Corporate Governance in Nigeria. Examples of the Company's compliance with these corporate governance requirements during the year under review are as follows: i. Board Composition The Board consists of a Non-Executive Chairman, six (6) Non-Executive Directors, and two (2) Executive Directors, all bringing high levels of competence and expertise. They are
Honeywell Flour Mills Plc. 28 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
professionals and entrepreneurs with vast business management experience and credible track records. The Non-Executive Directors are independent of the Management and are free from constraints which may materially affect their judgement as Directors of the Company. ii. Role of the Board The Board has the responsibility for ensuring that the Company is appropriately managed and achieves its strategic objectives with the aim of creating a sustainable long term value to the Shareholders. iii. Record of Directors Attendance at Meetings Members of the Board of Directors hold periodic meetings to decide on policy matters and to direct the affairs of the company, review its operations, finances and formulate growth strategy. Board agenda and reports are provided ahead of meetings.
Further to the provision of Section 258(2) of the Companies and Allied Matters Act, CAP C20 LFN 2004, the records of the Directors' attendance at Board meetings during the year under review is available at the company's Corporate Head Office for inspection. Further, and in line with Corporate Governance principles, details of attendance of the current Directors at the Board meetings during the year are as follows:
Names of Directors Number of Number of Meetings held Meetings attended
Dr. Oba Otudeko, D.Sc. (Hon.) CFR 7 7 Folaranmi Babatunde Odunayo 7 7 Obafemi Otudeko 7 7 Dr. Nino Albert Ozara 7 6 Lt. General Garba Duba (Rtd) 7 6 David William Obray 7 6 Akinsoji Akintayo 7 7 Jens Mollenbach 7 7 Theophilus Oluranti Sokunbi 7 6
Board Meetings were held on 2/5/12, 20/6/12, 19/9/12, 24/9/12, 14/12/12, 11/2/13 and 14/3/13. iv. Board Changes In accordance with the Company’s Articles of Association, the following Directors namely, Dr. Oba Otudeko, Dsc (Hon) CFR, Lt. General Duba (Rtd) and Mr Jens Mollenbach retire by rotation at the Annual General Meeting and being eligible offer themselves for re-election. Honeywell Flour Mills Plc. 29 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
v. Committees In conformity with the Code of Best Practice in Corporate Governance, the Company has in place the following Committees:
a) Nominations Committee The Nominations Committee which was formally inaugurated on 14th December, 2012 is empowered to bring to the Board recommendations regarding the appointment of any Executive or Non-Executive Director. The Committee’s mandate is to ensure that a review of Board candidates is undertaken in a disciplined and objective manner. The members of the Nominations Committee are:
1. Dr. Oba Otudeko, D.Sc. (Hon.) CFR 2. Lt. Gen. Garba Duba (Rtd) 3. Mr. Obafemi Otudeko
No meetings of the Nominations Committee were held during the year.
b) Business Development Committee The purpose of the Business Development Committee is to assist the Board in fulfilling its responsibilities in relation to assessing and managing the Company's business development strategies and activities. The Committee was formally inaugurated on December 14, 2012. The members of the constituted Business Development Committee are:
1. Mr. Folaranmi Babatunde Odunayo 2. Dr. Nino Ozara 3. Mr. Theophilus Oluranti Sokunbi 4. Mr. Jens Mollenbach
No meetings of the constituted Business Development Committee have been held since the date of inauguration of 14th December, 2012. However, an ad-hoc committee was set up before the constitution of the Business Development Committee. The details of the attendance of meetings by the ad-hoc committee are as shown below:
Names of Directors Number of Number of Meetings meetings held attended 1. Mr. Obafemi Otudeko 3 3 2. Dr. Nino Albert Ozara 3 1 3. Mr. Jens Mollenbach 3 3 4. Mr. Soji Akintayo 3 3
Ad-hoc Business Development Committee Meetings were held on 30/4/12, 30/8/12 and 12/12/12.
Honeywell Flour Mills Plc. 30 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
vi. Management The Executive Management comprises the Executive Directors and Heads of Department of the core business units of the Company. It meets on a daily basis and is responsible: for setting overall corporate targets, reviewing the Company's performance and operational issues and overseeing the affairs of the Company on a day-to-day basis. As at 31 March 2013, the Executive Management was comprised of the following members:
1. Mr. Babatunde Folaranmi Odunayo - (Executive Vice Chairman/CEO) 2. Dr. Nino Ozara - (Production Director) 3. Mr. Benson Evbuomwan - (Director, Marketing) 4. Mr. Ibukun Ojo - (Director, Finance) 5. Mr. Olanrewaju Jaiyeola - (Commercial Director) 6. Mr. Rotimi Fadipe - (Director, Logistics & Supplies) 7. Mr. Tunde Adebayo - (Human Resources Manager) 8. Engr. Abubakar Abari - (Chief Engineer) 9. Mr. Seye Ogunwole - (National Sales Manager)
vii. Directors Interest The direct and indirect interests of Directors in the issued share capital of the company as recorded in the Register of Directors Shareholdings and/or as notified by the Directors for the purposes of Sections 275 and 276 of the Companies and Allied Matters Act, CAP C20 LFN 2004 and the listing requirements of the Nigerian Stock Exchange is as stated hereunder:
At June 17, 2013 At June 20, 2012 Indirect Direct Indirect Direct Unit Holdings Unit Holdings Unit Holdings Unit Dr. Oba Otudeko, D.Sc. Hon. CFR* 1,247,264,003 – 1,247,264,003 Folaranmi Babatunde Odunayo – 200,000 200,000 Obafemi Otudeko* 567,951,925 – 567,951,925 – Dr. Nino Albert Ozara – 250,000 250,000 Lt. General Garba Duba (rtd) – 2,558,800 537,600 David William Obray – 200,000 200,000 Akinsoji Akintayo – 200,000 200,000 Jens Mollenbach – 154,340 154,340 Oluranti Sokunbi – 129,000 ––
*Dr. Oba Otudeko and Mr. Obafemi Otudeko have indirect holdings amounting to 1,247,264,003 and 567,951,925 respectively through Siloam Global Services Limited who is a 75% equity holder in the Company.
Honeywell Flour Mills Plc. 31 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
viii. Directors Interest in Contracts None of the Director has notified the company for the purpose of Section 227 of the Companies and Allied Matters Act, CAP C20 LFN 2004 of any disc losable interest in contracts with which the company was involved during the year ended 31 March, 2013. ix. Responsibilities of the Directors In accordance with the provisions of Sections 334 and 335 of the Companies and Allied Matters Act, CAP C20 LFN 2004, the Directors are responsible for the preparation of annual financial statements which give a true and fair view of the state of affairs of the Company, and of the profit for the financial year.
The responsibilities include, ensuring that: – appropriate internal controls are established both to safeguard the assets of the Company and to prevent and detect fraud and other irregularities; – the Company keeps accounting records which disclose with reasonable accuracy the financial position of the Company and ensure that the financial statements comply with the requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004; – the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been followed; and – the financial statements are prepared on a going concern basis unless it is presumed that the Company will not continue in business.
The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards (IFRS) and the requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004.
The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of the financial performance during the year. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial statements, as well as adequate systems of internal control. Nothing has come to the attention of the Directors to indicate that the company will not remain a going concern for at least twelve months from the date of these financial statements.
Honeywell Flour Mills Plc. 32 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
x. Performance Evaluation of the Board The Board has established a system to undertake a formal and rigorous annual evaluation of its own performance, that of its Committees, the Chairman and individual Directors. The evaluation system includes the criteria and key performance indicators and targets for the Board, its Committees and each individual Committee member. The Board engages the services of external consultants to facilitate the performance evaluation of the Board, its Committees and individual members.
CONTRAVENTION The Company violated the Post-Listing Requirement of the Nigeria Stock Exchange for failure to inform and obtain prior approval before publication of the Notice of the Extra-Ordinary General Meeting in respect of the Merger by Internal Restructuring between Honeywell Flour Mills Plc and Honeywell Superfine Foods Limited. The Company only notified the Exchange of the Merger by Internal Restructuring and not of the publication of the Notice of Extra- Ordinary General Meeting in the National Newspapers. Consequently, the Nigeria Stock Exchange imposed a fine of N1,260,000.00 (One Million, Two Hundred and Sixty Thousand Naira), being 50% of the company's annual listing fee.
EMPLOYMENT AND EMPLOYEES Employment policy It is the policy of the Company that there should be no discrimination in considering applications for employment including those from physically challenged persons. However, there was no physically challenged person in the employment of the company during the year.
Training and development It is the Company's policy to equip all employees with the skills and knowledge required for the successful performance of their jobs. We therefore see the investment in our people as a major part of our strategic development and have maintained a consistent policy of training our staff, both locally and internationally to enhance their skills and competence.
Health and welfare of employees The Company maintains a Staff Clinic with full-time nurses and weekly attendance by a physician. It also offers free medical services through a health management services provider to all members of staff.
The Company continuously strives to improve its operation to ensure a safe working environment. It also maintains a high standard of hygiene in all its premises through sanitation practices and regular fumigation exercises, as well as installation of pest and rodent control
Honeywell Flour Mills Plc. 33 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
gadgets. Nutritionally balanced meals are provided in the Staff Canteen on free basis for the junior Staff and at a highly subsidized rate for the senior staff.
AUDIT COMMITTEE In compliance with section 359 (4) of the Companies and Allied Matters Act CAP C20, Laws of the Federation of Nigeria 2004, members of the Audit Committee were elected at the Annual General Meeting held on September 25, 2012. Members that served on the Committee during the year comprise:
1. Adebayo Adeleke - Shareholder 2. Alhaji Lateef Ayodeji Shonubi - Shareholder 3, Gabriel Olagunju - Shareholder 4. Lt. Gen. Garba Duba (Rtd) - Director 5. Dave Obray - Director 6. Akinsoji Akintayo - Director
The Committee in the conduct of its affairs reviews the Company's overall risk management and control systems, financial reporting arrangements and standard of business conduct. Members of the Audit Committee have direct access to the Internal Audit Department and Independent Auditors.
The statutory functions of the Committee are provided for in section 359(6) of the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria, 2004. The details of attendance at Audit Committee meetings during the year are as follows:
Number of Number of meetings held meetings attended 1. Adebayo Adeleke 4 4 2. Alhaji Lateef Ayodeji Shonubi 4 4 3. Gabriel Olagunju 4 4 4. Lt. Gen. Garba Duba (Rtd) 4 2 5. Dave Obray 4 4 6. Akinsoji Akintayo 4 4
Audit Committee Meetings were held on 18/6/12, 18/9/12, 14/12/12 and 11/3/13.
Honeywell Flour Mills Plc. 34 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
QUALITY POLICY The Company is committed to the continuous achievement of business success by maintaining its quality leadership in the flour milling industry. This is driven by a quality management system designed to ensure that customers are always provided with high quality products and services that meet International Standards. Such standards are in full compliance with all statutory and regulatory requirements and are set out in writing for adherence by all Staff at all times.
SHAREHOLDING ANALYSIS The Shareholding structure of the Company as at 31 March, 2013 is as stated below: Share range Number % Number % of holders of holdings of holdings of holdings 1 - 1000 10,125 34.30 9,794,679 0.12 1001 - 5000 13,343 45.20 35,321,278 0.45 5001 - 10000 2,623 8.89 21,662,600 0.27 10001 - 50000 2,355 7.98 55,978,448 0.71 50001 - 100000 497 1.68 40,389,128 0.51 100001 - 500000 440 1.49 96,810,437 1.22 500001 - 1000000 80 0.27 61,824,319 0.78 1000001 - 5000000 32 0.11 68,368,653 0.86 5000001 - Above 24 0.08 7,540,048,116 95.08 Total 29,519 100.00 7,930,197,658 100.00
SUBSTANTIAL INTEREST IN SHARES According to the register of members, the following shareholders of the Company held more than 5 percent of the issued share capital of the Company at 31 March, 2013. 2 0 1 3 Number % Siloam Global Services Limited 5,939,363,565 75 First Bank of Nigeria Limited 400,967,024 5
PROPERTY, PLANT AND EQUIPMENT Movements in property, plant and equipment during the year are shown in note 5 on pages 68 and 69. In the opinion of the Directors, the market value of the Company's properties is not lower than the value shown in the financial statements.
POST BALANCE SHEET EVENT There are no post balance sheet events which could have had material effect on the financial position of the Company as at 31 March, 2013 and profit attributable to equity holders on that date.
Honeywell Flour Mills Plc. 35 Business Review Report of the Directors for the year ended 31 March, 2013 - cont’d
DONATIONS AND SPONSORSHIP The following donations and charitable gifts were made during the year: N Lagos Eko Summit 1,500,000 LASEPA Tree Planting Support 500,000 Nigeria Red Cross Society 200,000 Federal Road Safety Corps Support 250,000 Modupe Cole Memorial Home 100,000 Sport Alive Initiatives 250,000 Little Saints Orphanage 50,000 Love Home Orphanage 50,000 Flood Affected Victims of Bayelsa Community 560,000 SOS Children Village 50,000 Table-Tennis/Lagos Boxing Hall of Fame 467,000 Master Bakers & Caterers 50,000 Ogombo Community Secondary School 400,000 Itedo Community primary School 400,000 Mayegun Community primary School 400,000 Total 5,227,000
INDEPENDENT AUDITORS In accordance with section 357 (2) of the Companies and Allied Matters Act, CAP C20 LFN 2004, Messrs BBC Professionals [Chartered Accountants] have expressed their willingness to continue in office as Independent Auditors to the Company. A resolution will be passed at the Annual General Meeting to authorize the Directors to fix the remuneration of the auditors.
Dated June 17, 2013
By Order of the Board
Oluwayemisi Busari (Mrs) Company Secretary
Honeywell Flour Mills Plc. 36 Business Review Report of the Audit Committee for the year ended 31 March, 2013
In compliance with the provisions of Section 359(6) of the Companies and Allied Matters Act CAP C20 LFN 2004, we the members of the Audit Committee of Honeywell Flour Mills Plc hereby report as follows:
We confirm that:
(a) We have reviewed the scope and planning of the audit requirements;
(b) We have reviewed the External Auditors' Management Control Report together with Management responses; and
(c) We have ascertained the accounting and reporting policies of the Company for the year ended 31 March 2013 are in accordance with legal requirements and agreed with ethical practices.
In our opinion, the scope and planning of the audit for the year ended 31 March 2013 was adequate and management responses to the Auditors' findings were satisfactory.
Adebayo Adeleke Chairman, Audit Committee June 14, 2013.
Members of the Audit Committee Adebayo Adeleke – Chairman/Shareholder Alhaji Lateef Ayodeji Shonubi – Shareholder Gabriel Olagunju – Shareholder Lt. Gen. Garba Duba (Rtd) – Director David Obray – Director Akinsoji Akintayo – Director
Honeywell Flour Mills Plc. 37
Event Partnering with Rotarians to donate materials to Itedo Community Primary School, Lekki Held on the 3rd of July 2013
Presenting the books Mr. Babatunde Odunayo (Executive Vice Chairman/CEO, A hearty response HFMP) presents some of the donated books to Dr. Kamoru Mr. Babatunde Odunayo getting ready answers from the students. Omotosho, the Governor, district 9110 of Rotary Club for presentation to the School.
Surrounded by happy Pupils Smiles all round Mr. Babatunde Odunayo in the midst of the Pupils of Itedo Community Primary School Lekki. The happy recipients proudly display some of their new sets of computers.
Honeywell Flour Mills Plc. 39 Event Honeywell Flour Mills Plc
CORPORATE SOCIAL RESPONSIBILITY
Presentation to SOS Village: Mr. Sola Abati (Senior Brand Manager, Presentation to Little Saints Orphanage: Mr. Sola Abati (Senior Brand HFMP) and Mrs Ebele Oluwalana (Assistant Manager, Brand Activations Manager, HFMP) and Mrs Ebele Oluwalana (Assistant Manager, HFMP) presenting a Cheque and Product items to Mr. Benjamin Brand Activations, HFMP) presenting a Cheque and Product items to Buraimoh, Director of the SOS Village, Isolo, Lagos. Rev. Mrs. Dele George, Founder, Little Saints Orphanage and Mrs. Janet Orekoya Trustee, Little Saints Orphanage.
Presentation to Love Home Orphanage, Shangisha, Lagos. Mr. Sola Abati Expression of Support to the flood victims in Bayelsa. The Commercial (Senior Brand Manager, HFMP) and Mrs Ebele Oluwalana (Assistant Director HFMP, Mr. Lanre Jaiyeola and Mr. Sola Abati (Senior Brand Manager, Brand Activations, HFMP) presenting a Cheque and Product Manager HFMP) presenting our products to Group Captain Ali Balogun items to Mrs. Toke Onasanya, Head of Home and Miss Chinonso Oji, and Wing Cdr. M.S Ibrahim, both of 407 Equipment Supply Depot, Social Worker both of the Love Home Orphanage. Nigerian Air Force Base, Ikeja.
Honeywell Flour Mills Plc. 40 Event Honeywell Flour Mills Plc 22ND BAKING SCHOOL GRADUATION CEREMONY Held on the 19th of July 2013
Mrs. Adesola DOKUNU, (MD, Yomdok Nig Ltd), Mrs. Patricia OGILI, (MD, New Life The Best graduating student (Mr. Chukwanu Diribe) receiving an award from Ventures), Mr. Ibukun Ojo (Director, Finance, HFMP), Dr. Nino Ozara (Production Director, HFMP), the Executive Vice Chairman/CEO, HFMP Mr. Babatunde Odunayo (L) Mr. Babatunde Odunayo (Executive Vice Chairman/CEO, HFMP), Mr. Benson Evbuomwan accompanied by the (Customer Care Manager, HFMP) Mr. Brega Fabusuyi (Director, Marketing, HFMP) and Mr. Rotimi Fadipe (Director, Logistics & Supplies, HFMP) on the (R) at the event. high table at the 22nd Honeywell Flour Mills Baking School graduation ceremony.
The Graduands proudly displaying their Certificates. The Management Staff of HFMP and the 22nd Honeywell Baking School graduands.
Honeywell Flour Mills Plc. 41 Event Honeywell Flour Mills Plc 2013 ANNUAL CUSTOMERS' FORUM Held on the 3rd of July 2013
Some Management Staff and Dealers at the High table L-R. MR. Seye Ogunwole (National Sales Manager, HFMP) and the (Executive Vice Chairman/CEO, HFMP) Mr. Babatunde Odunayo presenting an award to the platinum price winner of the Flour category, Alhaji Adamu Abdullahi (MD Adamu Abdullahi Ltd).
L-R. Dr. Nino Ozara (Production Director, HFMP) presenting an A cross section of Dealers at the 2013 Honeywell Customers' Forum. award to the Gold price winner of the Flour Category, Alhaji Raji Opeyemi (Chairman Opeyemi Baking Industries Ltd) Also in the picture Mr. Seye Ogunwole (National Sales Manager, HFMP).
A group photograph of Honeywell Staff and Dealers The Management Staff and Dealers of HFMP cutting the cake .
Honeywell Flour Mills Plc. 42 Financial Statements
Report of the Independent Auditors 44
Statement of Financial Position 45
Income Statement 46
Statement of Comprehensive Income 47
Statement of Changes in Equity 48
Statements of Cash Flows 49
Index to Notes to the Financial Statements 51
Notes to the Financial Statements 51-91
Value Added Statement 92
Honeywell Flour Mills Plc. 43 24, Ilupeju By-Pass, Ilupeju G.P.O. Box 3260 Lagos, Nigeria. Tel: + 234 (0) 1-8981859, 7945733 E-mail: [email protected] [email protected] Website: www.bbccharter.com
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF HONEYWELL FLOUR MILLS PLC
We have audited the accompanying financial statements of Honeywell Flour Mills Plc on pages 45 to 92 which comprise the statement of financial position as at 31 March 2013, the statement of comprehensive income, statement of cash flows, statement of changes in equity, the summary of significant accounting policies and notes to the financial statements.
DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Company's directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act, CAP C20 LFN 2004. This responsibility includes: designing, implementing and maintaining internal control relevant to the fair presentation of financial statements that are free from material mis-statement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
AUDITORS' RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material mis- statement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material mis- statement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION In our opinion, the financial statements give a true and fair view of the financial position of Honeywell Flour Mills Plc as at 31 March, 2013 and of its financial performance and cash flows for the year then ended in accordance with Companies and Allied Matters Act, International Financial Reporting Standard and the Financial Reporting Council Act.
REPORT ON OTHER LEGAL REQUIREMENTS The Companies and Allied Matters Act requires that in carrying out our audit we consider and report to you on the following matters. We confirm that:
(i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; (ii) in our opinion, proper books of account have been kept by the Company, so far as it appears from our examination of those books; and (iii) the Company's statement of financial position and statement of comprehensive income are in agreement with the books of account.
Lagos, Nigeria Chartered Accountants 2013 FRC/2013/ICAN/00000002913
Partners: BN: 133294 J.O.Obogwu Other Offices in Nigeris: An Association of Independent Accounting Firms E.U.Itodo A.M.Adetuyi Abuja Akure Benin-City Prime G.C.Egwuenu Ibadan Kaduna Honeywell Flour Mills Plc. 44 Financial Statements Statement of Financial Position for the year ended 31 March 2013
Note 31 March 1 April
In thousands of Naira 2013 2012 2011 ASSETS Non-current assets Property, Plant and Equipment 5 34,969,128 29,011,441 13,962,269 Intangible Assets 6 15,904 198 395 Total Non-Current Assets 34,985,032 29,011,639 13,962,664
Current assets Inventories 7 10,009,275 4,933,712 3,778,524 Trade and other Current Receivables 8 6,868,962 10,126,471 7,801,219 Cash and Cash Equivalents 9 3,574,209 3,858,456 3,962,142 Total Current Assets 20,452,446 18,918,639 15,541,885 Total Assets 55,437,478 47,930,278 29,504,549
LIABILITIES Current Liabilities Financial Liabilities 11 25,528,100 15,428,275 6,223,470 Trade and other Payables 10 1,262,714 6,144,674 4,347,763 Current tax Liabilities 15.2 712,342 225,618 203,836 Total current liabilities 27,503,156 21,798,567 10,775,069
Non-Current Liabilities Financial Liabilities 11 5,573,050 5,841,129 870,259 Retirement Benefit Obligations 12 647,186 433,100 400,560 Deferred Income and Accruals 13 226,064 170,070 230,941 Deferred tax Liabilities 15.3 2,934,939 2,671,398 1,921,655 Total Non-Current Liabilities 9,381,239 9,115,697 3,423,415 Total Liabilities 36,884,395 30,914,264 14,198,484
EQUITY Share Capital 19 3,965,099 3,965,099 3,965,099 Share Premium 6,462,041 6,462,041 6,462,041 Retained Earnings 8,125,943 6,588,874 4,878,925 Total Equity 18,553,083 17,016,014 15,306,065 Total Liabilities and Equity 55,437,478 47,930,278 29,504,549
The financial statements and notes on pages 45 to 92 were approved by the Board of Directors on June 17, 2013 and signed on its behalf by:
Dr. Oba Otudeko, D.Sc. (Hon.) CFR Folaranmi Babatunde Odunayo Chairman Executive Vice Chairman/CEO FRC/2013/ICAN/0000002365 FRC/2013/ICAN/00000003268
Honeywell Flour Mills Plc. 45 Financial Statements Income Statement for the year ended 31 March 2013
In thousands of Naira Note 2013 2012
Revenue 17 45,709,382 38,052,227 Cost of Sales (37,788,322) (31,558,961)
Gross Profit 7,921,060 6,493,266
Other Income 18 144,066 112,082 Selling and Distribution Expenses (2,876,600) (1,805,763) Administrative Expenses (1,468,120) (1,306,832)
Results from Operating Activities 3,720,406 3,492,753 Finance Income 622,534 695,282 Finance Costs (528,340) (523,100)
Net Finance (Cost)/Income 94,194 172,182
Profit before Taxation 3,814,599 3,664,935 Taxation 15.1 (971,079) (970,960)
Profit for the Year 2,843,520 2,693,975
Earnings per Share: Earnings per Share (kobo) 35.86 33.97
The notes on pages 51 to 92 form an integral part of these financial statements.
Honeywell Flour Mills Plc. 46 Financial Statements Statement of Comprehensive Income for the year ended 31 March 2013
In thousands of Naira 2013 2012 Note Profit for the year recognised in the income statement 2,843,520 2,693,975 Actuarial (loss)/gain on post employment benefit obligation 12 (116,921) 46,900
Total comprehensive income 2,726,599 2,740,875
Attributable to the owners of the Company 2,726,599 2,740,875
Total comprehensive income for the year 2,726,599 2,740,875
The notes on pages 51 to 92 form an integral part of these financial statements.
Honeywell Flour Mills Plc. 47 Financial Statements Statement of Changes in Equity for the year ended 31 March 2013
Share Share Retained Total In thousands of Naira Capital Premium Earnings Equity
At 1 April, 2011 3,965,099 6,462,041 4,878,925 15,306,065 Profit for the Year – – 2,693,975 2,693,975 Dividend paid during the Year – – (1,030,926) (1,030,926)
Other Comprehensive Income Actuarial Gain – – 46,900 46,900
At 31 March, 2012 3,965,099 6,462,041 6,588,874 17,016,014
To 1 April, 2012 3,965,099 6,462,041 6,588,874 17,016,014 Profit for the Year – – 2,843,520 2,843,520 Dividend paid during the Year – – (1,189,530) (1,189,530)
Other Comprehensive Income Actuarial Loss – – (116,921) (116,921)
To 31 March, 2013 3,965,099 6,462,041 8,125,943 18,553,083
. The notes on pages 51 to 92 form an integral part of these financial statements.
Honeywell Flour Mills Plc. 48 Financial Statements Statements of Cash Flows for the year ended 31 march, 2013.
In thousands of Naira Note 2013 2012 Cash Flows from Operating Activities Cash generated from operations 16 ( 1,568,509) 2,934,881 Retirement benefit paid 12 (5,536) (810) Tax paid 15.2 (220,814) (199,435)
Net Cash Flows Generated From Operating Activities (1,794,859) 2,734,636
Cash Flows from Investing Activities Interest Received 622,534 695,282 Purchase of Intangible Sssets 6 (19,838) – Purchase of Property, Plant and Equipment 5 (7,210,483) (16,242,783) Proceeds from Sales of Property, Plant and Equipment 4,524 –
Net Cash Flows from Investing Activities (6,603,263) (15,547,501)
Cash Flows from Financing Activities Interest Payment (528,340) (523,100) Proceeds from Borrowing 11,858,191 14,901,694 Repayment of Borrowing (2,366,278) (638,489) Dividend Paid (1,189,530) (1,030,926)
Cash Generated from Financing Activities 7,774,043 12,709,179
Net Decrease in Cash and Cash Equivalents (624,079) (103,686) Cash and Cash Equivalents at 1 April 3,858,456 3,962,142
Cash and Cash Equivalents at 31 March 9 3,234,377 3,858,456
The notes on pages 51 to 92 form an integral part of these financial statements.
Honeywell Flour Mills Plc. 49 Financial Statements Index to Notes to the Financial Statements
Note Page Note Page 1 Reporting Entity 51 4 Risk Management 64 2 Basis of Preparation 51 a. Credit risk 64 a. Statement of Compliance 51 b. Liquidity risk 65 b. Basis of Measurement 51 c. Market risk 65 c. Functional and Presentation Currency 51 d. Operational risk 66-67 d. Use of Estimates and Judgments 52 5 Property, Plant and Equipment 68-69 3 Significant Accounting Policies 52 6 Intangible Assets 70 a. Going Concern 52 7 Inventories 70 b. Business Combination 52 8 Trade and other Current Receivables 71 c. Segment Reporting 53 9 Cash and Cash Equivalent 72 d. Foreign Currency Translation 53 10 Trade Payables and other Current Liabilities 72 e. Property, Plant and Equipment 53-54 11 Financial Liabilities 73 f. Intangible Assets 55 12 Retirement Benefit Obligations 73 (i). Computer Software 55 13 Deferred Income and Accruals 74 (ii). Amortization of Intangible Assets 55 14 Profit before Tax 75 g. Financial Assets 56 15 Taxation 75-76 (i) Classification 56 16 Statement of Cash Flows 76 (ii) Recognition and Measurement 56 17 Segment Information 77 (iii) Offsetting Financial Instruments 57 18 Other Income 79 (iv) Impairment of Financial Assets 57 19 Share Capital 79 (v) Impairment of Non-Financial Assets 58 20 Chairman and Directors' Emolument 79 h. Inventories 58 21 Employees and Related Remuneration 80 i. Trade Receivables 59 22 Related Party Transactions 81 j. Research and Development 59 23 Contingent Liabilities 81 k. Cash, Cash Equivalents and Bank Overdrafts 59 24 Loans and other Transactions Favouring l. Borrowing 59 Directors 81 m. Trade Payables 60 25 Earnings per Share 82 n. Investments 60 26 Approval of Financial Statements 82 o. Provisions 60 27 Significant Financial Judgments 82-84 p. Tax 60 28 New Accounting Standards 84-86 (i). Current Tax 60 29 Explanation of Transition to IFRS 86-87 (ii). Deferred Tax 61 30 Reconciliation of Equity 88-91 (iii).Tax Exposures 61 q. Employee Benefits 62 (i). Defined Benefit Plan 62 (ii). Defined Contribution Scheme 62 (iii).Short-term Employee Benefit 63 r. Revenue Recognition 63 (i). Sales of Goods 63 (ii). Interest Income 64 s. Dividend Distribution 64 t. Earnings per Share 64 u. Share Capital 64
Honeywell Flour Mills Plc. 50 Financial Statements Notes to the Financial statements for the year ended 31 March, 2013
1 REPORTING ENTITY Honeywell Flour Mills Plc was initially registered as Gateway Honeywell Flour Mills Limited on 9 July, 1985. A change in the Company's ownership structure led to a change of the name to Honeywell Flour Mills Limited in June, 1995. The Company was converted to a Public Liability Company in 2008. Its shares were listed on the Nigeria Stock Exchange (NSE) in 2009.
Honeywell Flour Mills Plc is a Company domiciled in Nigeria. The Company is principally engaged in the manufacture and marketing of wheat-based products including flour, semolina, whole wheat meal, noodles and pasta. As part of its vertical integration strategy, the Company acquired 100% ownership of Honeywell Superfine Foods Limited, manufacturers of pasta and noodles in 2008.
However, in March 2013, the Company carried out a business combination in the nature of an internal restructuring with Honeywell Superfine Foods Limited. The business combination was in the form of merger by absorption with Honeywell Flour Mills Plc as the surviving Company while Honeywell Superfine Foods Limited was dissolved.
2 BASIS OF PREPARATION
(a) Statement of Compliance The Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) being Standards and Interpretations isssued by the International Accounting Standards Board (IASB) in force as at 31 December, 2012. They have been prepared in line with IFRS accounting policies selected by the Company on transition to IFRS. These are the Company's first set of full IFRS Financial Statements and first-time adoption of International Financial Reporting Standards has been applied.
An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 30. The financial report should be read in conjunction with the comparative reconciliation provided in Note 30.
(b) Basis of Measurement The Financial Statements have been prepared under the historical cost basis, except for items measured at fair value and the use of actuarial methods for estimating certain employee benefits.
(c) Functional and Presentation Currency These financial statements are presented in the Nigerian Naira, which is the Company's
Honeywell Flour Mills Plc. 51 Financial Statements Notes to the Financial statements - cont’d
functional currency. All financial information presented in Naira has been rounded to the nearest thousand.
(d) Use of Estimates and Judgments The preparation of the Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumption that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future years affected.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes: - measurement of defined benefit obligations; and - provisions and contingencies.
3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements and in preparing the opening IFRS statements of financial position at 1 April 2011 for the purposes of the transition to IFRSs, unless otherwise indicated.
(a) Going Concern The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company continues to adopt the going concern basis in preparing its financial statements.
(b) Business Combination Business combinations involving entities under common control are outside the scope of IFRS 3. The merger by absorption of Honeywell Superfine Foods Limited, a wholly owned subsidiary of Honeywell Flour Mills Plc, was a business combination under common controls and there is no other specific IFRS guidance. Accordingly, management has exercised its judgement to apply the pooling of interest method of accounting for business combination in accordance with IAS 8, 10 - 12. The IAS 8, 12 allows management to consider the most relevant conceptual framework in developing an accounting policy where IFRS has no specific requirements.
Honeywell Flour Mills Plc. 52 Financial Statements Notes to the Financial statements - cont’d
Under a pooling of interests-type method, the acquirer accounts for the combination as follows: – The assets and liabilities of the acquiree are recorded at book value not fair value (although adjustments should be recorded to achieve uniform accounting policies); – No goodwill is recorded. T he difference between the acquirer's cost of investment and the acquiree's equity is presented separately within Other Comprehensive Income Statement; – Comparative amounts are restated as if the combination had taken place at the beginning of the earliest comparative period presented.
(c) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that make strategic decisions.
The Company business operating segments are identified by two factory locations at Ikeja and Apapa. The Apapa factory manufactures flour, semolina, wheat meal and brown flour while the Ikeja factory manufactures pasta and noodles.
(d)Foreign Currency Transactions Foreign currency transactions are translated into Naira using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'finance income or cost'. All other foreign exchange gains and losses are presented in the income statement within 'other gains / (losses) - net'.
(e) Property, Plant and Equipment Land and building held for use in the production or supply of goods or services, or for administration purposes, are stated in the statement of financial position at deemed cost at the date of transition to IFRS less accumulated depreciation and any accumulated impairment losses.
Honeywell Flour Mills Plc. 53 Financial Statements Notes to the Financial statements - cont’d
The Company elected to apply the optional exemption to use previous valuation as deemed cost as at 1 April, 2011, the date of transition to IFRS. All other assets are stated at historical cost less accumulated depreciation and accumulated impairment losses. All other property, plant and equipment are stated at historical cost or valuation less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flows hedges of foreign currency purchases of property, plant and equipment.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of the equipment.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. The carrying amount of the replaced cost is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incured.
An item of Property, Plant and Equipment is derecognised on disposal or when no future economic benefits are expected from its use. Gains or losses on disposal or de-recognition of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment, and are recognized in income statement.
Depreciation is provided on components that have homogenous useful lives by using the straight line method so as to depreciate the initial cost down to the residual value over the estimated useful lives. The useful lives are as follows:
Buildings 20 to 50 years Tools, Furniture/Fittings and equipment 2 to 5 years Vehicles 3 to 4 years Land Not depreciated
Assets residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting date.
Where an indication of impairment exists, an asset's carrying amount is written down immediately to its recoverable amount, if the asset's carrying amount is greater than its estimated recoverable amount. The gain or loss arising on the disposal or retirement of an
Honeywell Flour Mills Plc. 54 Financial Statements Notes to the Financial statements - cont’d
asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the income statement for the period.
(f) Intangible Assets
(i)Computer Software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives. Costs associated with maintaining computer software programmes are recognized as expenses incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognized as intangible assets when the following criteria are met:
– it is tec hnically feasible to complete the software product and use or sell it; – manag e ment intends to complete the software product and use or sell it; – there i s an ability to use or sell the software product; – it can b e demonstrated how the software product will generate probable future economic benefits; – ad eq u ate technical, financial and other resources to complete the development and use or sell the software product are available; and – the ex penditure attributable to the software product during its development can be reliably measured. Directly attributable costs that are capitalized as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditure that do not meet these criteria are recognized as expenses as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Computer software development costs recognized as assets are amortized over their estimated useful lives.
(ii)Amortisation of intangible assets Intangible assets are amortized on a straight line basis in the income statement over their estimated useful lives, from the date that they are available for use. The estimated useful life of computer software for the current and comparative years is five (5) years. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted for, if appropriate.
Honeywell Flour Mills Plc. 55 Financial Statements Notes to the Financial statements - cont’d
(g) Financial Assets
(i) Classification The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
- Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
- Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. the Company's loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement.
- Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non- current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.
(ii)Recognition and measurement – Regular purchases and sales of financial assets are recognized on the trade-date, the date on which the Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to received cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are substantially carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
Honeywell Flour Mills Plc. 56 Financial Statements Notes to the Financial statements - cont’d
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the income statement within other (losses) / gains - net in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of other income when the Company's right to receive payments is established. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in other comprehensive income. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement as 'gains and losses from investment securities'.
Interest on available-for-sale securities calculated using the effective interest method is recognized in the income statement as part of other income. Dividends on available-for- sale equity instruments are recognized in the income statement as part of other income when the Company's right to receive payments is established.
(iii) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
(iv) Impairment of financial assets The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss events (or events) has an impact on the estimated future cash flows of the financial asset or Company of financial assets that can be reliably estimated. The criteria that the company uses to determine that there is objective evidence of an impairment loss include: – significant financial difficulty of the issuer or obligor; – a breach of contract, such as a default or delinquency in interest or principal payments; – the company, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; – it becomes probable that the borrower will enter bankruptcy or other financial reorganization; – the disappearance of an active market for that financial asset because of financial difficulties; or
Honeywell Flour Mills Plc. 57 Financial Statements Notes to the Financial statements - cont’d
– observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including – adverse changes in the payment status of borrowers in the portfolio; and national or local economic conditions that correlates on the assets in the portfolio.
The Company first assesses whether objective evidence of impairment exists. For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flow (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
As a practical expedient, the company may measure impairment on the basis of an instrument's fair value using an observable market price. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognized in the income statement.
(v) Impairment of Non - Financial Assets Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready for use - are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are tested at the lowest levels for which there are separately identifiable cash flows (cash- generating units). Nonfinancial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
(h) Inventories Inventories are stated at the lower of cost and estimated net realizable value. Costs comprise direct materials costs and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is Honeywell Flour Mills Plc. 58 Financial Statements Notes to the Financial statements - cont’d
calculated using the weighted average method. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Spare parts and servicing equipment are usually carried as inventory and recognized in profit or loss as consumed. However, major spare parts and stand-by equipment qualify as property, plant and equipment when the Company expects to use them during more than one period. Similarly, if the spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment. Such classified spares are depreciated as property, plant and equipment over the useful life on a straight line basis.
(i) Trade Receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less provision for impairment. The collectability of trade receivables is reviewed on an ongoing basis. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due, according to the original terms of the receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows. The amount of the provision is recognized in the income statement.
(j) Research and Development Research and development expenditure is charged against profits in the year in which it is incurred, unless it meets the criteria for capitalisation set out in IAS 38 'Intangible assets'.
(k) Cash, Cash Equivalents and Bank Overdrafts Cash, cash equivalents and bank overdrafts includes cash at bank and in hand plus short-term deposits less overdrafts. Short-term deposits have a maturity of less than three months from the date of acquisition. Bank overdrafts are repayable on demand and form an integral part of the Company's cash management.
(l) Borrowings Interest- bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis through the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arise.
Honeywell Flour Mills Plc. 59 Financial Statements Notes to the Financial statements - cont’d
(m) Trade Payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payments are due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognise initially at fair value and subsequently measured at amortised cost using the effective interest method.
(n) Investments Investments are classified as either held-to-maturity, held-for-trading, loans and recievables or available-for-sale. Held-to maturity investments and loans and recievables are measured at amortised cost. Held-for-trading and available-for-sale investments are measured at fair value. Where securities are held-for-trading purposes, gains and losses arising from changes in fair value are included in the income statement for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the income statements for the period.
(o) Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation and the amount has been reliably estimated. Provisions for restructuring costs are recognised when the Company has a detailed formal plan for the restructuring that has been communicated to affected parties. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be acquired to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
(p) Tax Income tax expense represents the sum of current tax expense and deferred tax expense. Current tax and deferred tax are recognised in income statement except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
(i) Current Tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates statutorily enacted at the reporting date, and any adjustment to tax
Honeywell Flour Mills Plc. 60 Financial Statements Notes to the Financial statements - cont’d
payable in respect of previous years. The Company is subject to the following types of current income tax:
• Companies Income Tax - This relates to tax on revenue and profit generated by the Company during the year, to be taxed under the Companies Income Tax Act Cap C21, LFN 2004 as amended date.
• Education Tax - Education tax is based on assessable income of the Company and is governed by the Education Trust Fund (Establishment) Act LFN 2011.
(ii) Deferred Tax Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
–Taxable temporary differences arising on the initial recognition of goodw i ll.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amounts of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.
Honeywell Flour Mills Plc. 61 Financial Statements Notes to the Financial statements - cont’d
(iii) Tax Exposures In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax postions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expenses in the period that such determination is made.
(q) Employee benefits
(i) Defined benefit plan The defined benefit plan defines an amount of gratuity the employee will receive on retirement, dependent on date of employment, year of service and compensation. The defined benefit plan is being accounted for using the projected unit method that considers the rate of inflation, the degree of salary increases of employees, the retirement age among other factors.
The liability recognised in the balance sheet in respect of defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflow using market rates on Government Bonds.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognised immediately in income statement. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognised immediately in income statement.
(ii) Defined contribution scheme The Company operates a defined contribution plan which is funded by contributions from the Company and the employees. The Company's contribution is recognised as employee benefit expenses and charged to the income statement. The contributions of both the Company and the employees are paid on a monthly basis to a pension fund administrator. The Company has no legal or constructive obligation to pay further contributions if the Honeywell Flour Mills Plc. 62 Financial Statements Notes to the Financial statements - cont’d
pension fund administrator does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognised as employee benefit expenses when they are due.
(iii) Short-term employee benefit Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash bonus or profit sharing plan if the Company has a present legal or constructive obligation to pay this amount as a result of past services provided by the employee, and the obligation can be estimated reliably.
(r) Revenue Recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company's activities. Revenue is shown net of Value-Added Tax, returns, rebates and discounts.
The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Company's activities as described below:
i) Sale of Goods The Company manufactures and sells a range of products to the distributors and dealers. Sale of goods are recognised when the Company has delivered product to the customers and there is no unfulfilled obligation that could affect the customers' acceptance of the products. Delivery does not occur until the products have been shipped to the specified locations; the risks of obsolescence and loss have been transferred to the customers and either the customers have accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied.
The products are often sold with discounts and rebates. Sales are recorded based on the price specified on the sales invoice net of the discounts, rebates and returns at the time of sale.
Sales are also recognised when the customer self-collect the product directly at the Company premises during which the risks and rewards of ownership passes to the customer after the customer's loaded truck leaves the Company premises.
Honeywell Flour Mills Plc. 63 Financial Statements Notes to the Financial statements - cont’d
No element of financing is deemed present where sales are made on agreed credit terms which are consistent with the market practice.
ii) Interest Income Interest income is recognised using the effective interest rate method. When a loan and receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the investment, and continues unwinding the discount as interest income. Interest income on impaired loan and recievables are recognised using the original effective interest rate.
(s) Dividend Distribution Dividend distribution to the Company's Shareholders is recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's Shareholders. Dividends are recognised once paid.
(t) Earnings per Share The Company presents earnings per share (EPS) data for its ordinary shares. EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the number of ordinary shares outstanding during the year.
(u) Share Capital The Company has only one class of Shares - ordinary shares which are classified as equity. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium reserve.
Incremental costs directly attributed to the issue of ordinary shares are recongnised as a deduction from equity, net of any tax effects.
4 RISK MANAGEMENT Risk management is inherent in the business operations of the Company. Management has set up processes and systems to identify, assess, monitor and control business risks including the following :-
(a) Credit Risk This refers to the risk that a trade debtor will default by failing to make payments in accordance with the agreed credit terms and conditions. The possible impact of the credit risk is poor Account Receivable assets quality arising from high level of bad and doubtful debts and possible impairment of shareholders' funds. The carrying amount of financial assets represents the maximum credit exposure.
Honeywell Flour Mills Plc. 64 Financial Statements Notes to the Financial statements - cont’d
Mitigating Measures – Credit application follows rigorous and extensive credit review and approval process. – All credits are secured by insurance or bank bonds. – Once conditions precedent to credit utilization are met by the customer, the approved credit is updated, monitored and controlled by the ERP on real times basis in accordance to credit terms. – Credit utilization report are prepared and monitored on a daily basis.
b) Liquidity Risk This refers to the risk of company's inability to finance its operation and meet its obligation when they become due without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources.
Mitigating Measures – – Efficient and effective working capital management. –Efficient Naira facility management –Efficient funds management to eliminate idle funds, meet obligations as they fall due – and reduce interest expenses to the minimum level. –Liquidity and working capital management reports are prepared and monitored on daily basis. –The Treasury Department is well structured and equipped under the management of a very experienced and well trained team.
c) Market Risk Market risk is the risk of financial loss due to the change in value of the market risk factors. The Company is faced with the following market risk factors.
– Interest rate risk:- The risk that interest rate will change adversely at the money market. – Foreign exchange risk:- The risk that foreign exchange rates will fluctuate unfavorably at the foreign exchange market. – Commodity risk:- The risk that wheat prices will significantly increase at the international commodity markets.
Mitigating Measures – Efficient management of exchange and interest rate risks including generation of relevant risk management reports for monitoring and review on a daily and weekly basis. – Monitor the money, capital and foreign exchange markets including micro and macroeconomic environment on a daily basic . – Efficient management of the commodity risk by the Logistics and Supplies
Honeywell Flour Mills Plc. 65 Financial Statements Notes to the Financial statements - cont’d
–
– Department with a full-fledged experienced and well trained team in the area of wheat dynamics and procurement strategies. – We monitor price dynamics and changes at the relevant Commodity Exchange Boards on a real time basis and take proactive decisions on a timely basis. – The commodity risk affects the global milling industry as the wheat prices are determined at the international commodity markets. We usually increase product price in response to global volatility in wheat prices in order to recover some portion of the rise in wheat prices .
d) Operational Risk This relates to the risk of loss resulting from inadequate or failed internal processes, controls, procedures, people, and systems. Operational risk is inherent in the business activities. These include risk of inadequate haulage partners required to achieve the Company's objectives in terms of sales volume and profit; risk of wastages, downtime and other associated losses arising from inefficient plant operations; risk of breakdown of ERP and IT infrastructure or outright loss of critical operational/business data and information; risk of loss of Company assets due to unexpected disaster which may affect business operations; risk of breakdown of internal control systems and misstatement of financial statements.
Mitigating Measures – Efficient and effective maintenance culture to prevent down time and inefficient production operations. – Control activities are an integral part of the Company's day to day operations and are defined at every business area. – Existence of robust ERP and comprehensive computerisation of internal business processes, systems and procedures. – Existence of robust IT business continuity and disaster recovery programmes. – All insurable business risks are assessed, identified and adequately covered/insured. – Existence of documented standard operating procedures for all business activities and operations. – All key positions have a minimum of one under-study who can assume the roles immediately with minimum support, and eventually grow into the position. – We continually train talents to meet our future skill requirements. – Continuous recruitment of qualified haulage contractors to meet corporate requirements and prevent shortage of delivery trucks. We also acquired and managed some of our delivery trucks e.g bulk flour loading trucks. – We also have a strong, active and experienced Internal Audit Team. Internal Audit Reports highlighting control weaknesses are presented periodically to Management and Audit Committee of the Board. Honeywell Flour Mills Plc. 66 Financial Statements Notes to the Financial statements - cont’d
– The Company's internal control and risk management systems ensure that material errors or inconsistencies in the financial statements are identified and corrected. Financial Statements are prepared in accordance with International Financial Reporting Standards. – Financial statements are prepared periodically on monthly and quarterly bases for the review of the Management and the Board of Directors. Performance is monitored and compared with budgets.
Honeywell Flour Mills Plc. 67 Financial Statements Notes to the Financial statements - cont’d
5 PROPERTY, PLANT AND EQUIPMENT
a) As at March 31, 2013 Capital Furniture Land and Work Plant and And Motor In thousands of Naira Building in progress Machinery Equipment Vehicles Total At 1 April, 2012 8,443,148 10,639,821 10,649,550 145,187 327,346 30,205,052 Of Additions 2,051,635 3,713,439 1,263,496 60,454 121,459 7,210,483 Of Disposals - - - (45) (5,500) (5,545)
At 31 March, 2013 10,494,783 14,353,260 11,913,046 205,596 443,305 37,409,990
DEPRECIATION To 1 April, 2012 107,066 - 979,181 43,716 63,647 1,193,610 Charge for the year 121,248 - 982,429 41,450 103,906 1,249,033 On disposals - - - (30) (1,751) (1,781)
To 31 March, 2013 228,314 - 1,961,610 85,136 165,802 2,440,862
CARRYING AMOUNT At 31 March, 2013 10,266,469 14,353,260 9,951,436 120,460 277,503 34,969,128
At 31 March, 2012 8,336,082 10,639,821 9,670,369 101,471 263,699 29,011,442
Depreciation expenses of N1.074b (2012:N1.037b) has been charged in 'cost of goods sold', N74.133m (N67.501m) in 'selling and marketing costs' and N100.646m (2012:N88.934m) in administrative expenses'.
Honeywell Flour Mills Plc. 68 Financial Statements Notes to the Financial statements - cont’d
b) As at March 31, 2012 Capital Furniture Land and Work- Plant and And Motor In thousands of Naira Building in -progress Machinery Equipment Vehicles Total At 1 April, 2011 5,866,773 451,771 7,358,996 121,703 163,026 13,962,269 Of Additions 2,576,375 10,188,050 3,290,554 23,484 164,320 16,242,783
At 31 March, 2012 8,443,148 10,639,821 10,649,550 145,187 327,346 30,205,052
DEPRECIATION To 1 April, 2011 – – – – – – Charge for the year 107,066 – 979,181 43,716 63,647 1,193,610 Of transfers/adjustment ––––– – On disposals ––––– –
To 31 March, 2012 107,066 – 979,181 43,716 63,647 1,193,610
CARRYING AMOUNT At 31 March, 2012 8,336,082 10,639,821 9,670,369 101,471 263,699 29,011,442
Honeywell Flour Mills Plc. 69 Financial Statements Notes to the Financial Statements - cont’d
In thousands of Naira 2013 2012 2011 6 INTANGIBLE ASSETS
Cost At 1 April 1,895 1,895 1,895 Additions 19,838 – – Disposals – – –
Total Cost 21,733 1,895 1,895
Amortisation and impairment At 1 April 1,697 1,500 – Amortisation for the year 4,132 197 – Impairment for the year – – 1,500
At 31 March 5,829 1,697 1,500
Net Carrying amount 15,904 198 395
Intangible assets are made up of computer software and programmes. Amortisation expenses of N0.619m (2012: N0.029m) has been charged in 'cost of goods sold', N0.826m (2012: N0.039m) in 'selling and marketing costs' and N2.686m (2012: N0.128m) in 'administrative expenses'.
7 INVENTORIES
In thousands of Naira 2013 2012 2011 Raw Materials and Consumables 4,492,076 1,564,526 1,702,835 Work-in-Progress 7,577 - 15,283 Finished Goods 285,233 121,462 145,952 Goods-in-Transit 5,224,389 3,247,724 1,914,454
Total 10,009,275 4,933,712 3,778,524
There are no inventories pledged as security for liabilities.
Honeywell Flour Mills Plc. 70 Financial Statements Notes to the Financial Statements - cont’d
In thousands of Naira 2013 2012 2011 8 TRADE AND OTHER CURRENT RECEIVABLES Gross Trade Receivables 1,079,325 889,935 905,956 Allowance for Impairment Losses ( 259,663 ) ( 223,645 ) ( 215,969) Net Trade Receivables 819,662 666,290 689,987
Advances and Prepayments 1,243,720 2,511,948 4,006,057 Due from Related Parties 4,805,580 6,948,233 3,105,175
6,868,962 10,126,471 7,801,219
There is no material difference between the fair value of receivables and their carrying amount.
The fair value of loans to related parties is based on discounted cash flows from using the weighted average cost of funds of 16% (2012:12%).
Analysis of Trade Receivables The analysis below analyses changes in the allowances for impairment losses in the year.
In thousands of Naira 2013 2012 Ageing of Trade Receivables Total Trade Receivables 1,079,325 889,935 Less: Impairment Provision for Trade Receivables (259,663) (223,645) Net Total 819,662 662,290
of which: Carrying amount neither past due nor impaired 728,127 608,331 Carrying amount past due but less than three months 63,553 16,472 Carrying amount past due for more than three month but less than six months 19,218 8,813 Carrying amount past due for more than six months but less than one year 13,662 48,880 Carrying amount past due more than one year 254,766 207,439 Gross Receivables 1,079,325 889,935 Impairment for trade receivables (259,663) (223,645)
Net Total 819,662 666,290
Impairment Provision for Trade and other Receivables
In thousands of Naira
At 1 April 223,645 215,969 Charge to income statement for the period 36,018 7,676
At 31 March 259,663 223,645
Honeywell Flour Mills Plc. 71 Financial Statements Notes to the Financial Statements - cont’d
a) The maximum exposure to credit risk at the reporting date is the carrying value of the receivables. The Company holds insurance/bank bonds as security against default. b) As at 31 March, 2013, trade receivables of N70 million (2012: N94 million) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. Extensive analysis of customer credit risk analysis were performed on the customers. c) The amount of the provision for impairment was N260 million as at 31 March 2013 (2012: N224 million). The individually impaired receivables mainly relate to wholesalers, which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. d) Impairment losses are presented in the income statement as part of the selling and marketing expenses.
2013 2012 2011 In thousands of Naira 9 CASH AND CASH EQUIVALENT Bank and Cash Balances 309,579 743,826 617,484 Short Term Deposits 3,264,630 3,114,630 3,344,658
Balance as stated in the statement of financial position as at 31 March 3,574,209 3,858,456 3,962,142 Less Bank Overdrafts ( 339,832 ) – –
Cash and Cash Equivalents 3,234,377 3,858,456 3,962,142
There is no material difference between the fair value and the carrying amount of cash equivalents.
Short term deposits represent temporary excess of liquidity invested in low-risk short-term bank deposits with a maturity not exceeding 30 days.
2013 2012 2011 In thousands of Naira 10 TRADE PAYABLES AND OTHER CURRENT LIABILITIES Due within one year Trade Payables 975,676 4,421,252 1,753,673 Accruals 207,032 333,337 814,620 Pension and Sundry Taxes 80,006 1,390,085 1,779,470
Balance at 31 March 1,262,714 6,144,674 4,347,763
Accrued liabilities represent miscellaneous contractual liabilities that relate respectively to expenses that were incurred but not paid for at the year-end.
The carrying amount of trade and other payables and accrued liabilities are considered to be in line with their fair value at the reporting date.
Honeywell Flour Mills Plc. 72 Financial Statements Notes to the Financial Statements - cont’d
2013 2012 2011 In thousands of Naira 11 FINANCIAL LIABILITIES Current portion of Loans and Borrowings Bank Loans 15,676,236 10,237,282 2,796,692 Bank Overdrafts 339,832 – – Import Finance Facilities 9,512,032 5,190,993 3,426,778
25,528,100 15,428,275 6,223,470 Non-Current Portion of Loans and Borrowings Bank loans 5,573,050 5,841,129 870,259
5,573,050 5,841,129 870,259
a) Weighted Average Cost of Borrowings was 12.24% ( 2012:12.43% annually). b) Bank Loans and Overdraft are secured by Mortgage on Property, Plant and Equipment while Import Finance Facilities are secured by Trade Receivables. c) The fair value of current borrowings is not materially different the carrying amount, as the impact of discounting is not significant. d) The carrying amounts and fair value of the non-current borrrowings are as follows.
The fair values are based on cash flows discounted using rate based on the average borrowing rate of 17% (2012:18%)
Carrying Amount Fair Value
2013 2012 2013 2012 In thousands of Naira GT Bank 364,185 547,022 350,181 517,089 Keystone Bank 73,786 77,284 37,420 68,234 First Bank 5,255,807 5,255,807 5,185,449 5,255,807
5,693,778 5,880,113 5,573,050 5,841,129
12 RETIREMENT BENEFIT OBLIGATIONS The Company has both defined benefit and defined contribution plans.
Defined Contribution Plan A defined contribution plan is a pension plan under which the Company pays fixed contributions to a separate entity. The Company has no legal or constructive obligations to pay further contributions if the funds does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.
Honeywell Flour Mills Plc. 73 Financial Statements Notes to the Financial Statements - cont’d
Defined Benefit Plan A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation.
The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation less the fair value of planned assets, together with adjustments for unrecognised actuarial gains or losses and past service costs.
The amount recognised in the statement of financial position is determined as follows:
2013 2012 In thousands of Naira Present value of retirement benefit obligation 433,110 400,560 Interest cost 69,526 56,080 Current service cost 33,165 24,180 Benefits paid (5,536) (810) Actuarial (gain) / loss due to change in experience 116,921 (45,160) Actuarial (gain) / loss due to change in assumptions – (1,740)
647,186 433,110
The defined benefits obligation is calculated annually by independent actuaries. The principal actuarial assumptions were as follows:
Actuarial Method : Projected Unit Method Discount rate: 11% Rate of Salary escalation : 12% per annum Retirement Age : 60 years Pre-retirement mortality : A1949/52 Ultimate Withdrawal : Based on the average experience of other similar arrangements adjustments for the company's experience Expenses : No explicit allowance.
2013 2012 2011 In thousands of Naira 13 DEFERRED INCOME AND ACCRUALS Deferred income and accruals 226,064 170,070 230,941
Deferred income and accruals includes government grants. The Company received government interest grants in respect of CBN intervention loans from Guaranty Trust Bank Plc, and Keystone Bank Limited at subsidized rate of 7% per annum. The interest grants are included under non-current liabilities and are recognized in the income
Honeywell Flour Mills Plc. 74 Financial Statements Notes to the Financial Statements - cont’d
2013 2012 In thousands of Naira 14 PROFIT BEFORE TAXATION The following items have been charged/credited in arriving at profit before tax: Depreciation 1,249,033 1,193,610 Allowance for bad and doubtful debts 36,018 7,676 Auditors’ remuneration 13,613 12,466 Directors’ emoluments: Fees 14,955 12,463 Others 29,238 24,365 Finance Cost 528,340 523,100 And Crediting Profit on disposal of fixed assets 1,068 22 Finance income 622,534 695,282
15 TAXATION In thousands of Naira` 2013 2012 2011 a.) Income statement Current company income tax 610,955 132,916 120,832 Education tax 101,387 92,702 83,005 (Over)/under provision ( 4,804 ) (4,401) 456
Total Income Tax 707,538 221,217 204,293
Deferred tax provision on origination and reversal of temporary differences 263,541 749,743 819,095
Tax charge to income statement 971,079 970,960 1,023,388
The provision for income tax is based on the provision of the Companies Income Tax Act (LFN CAP 60) as amended to date while education tax is based on Education Tax Act No. 7 CAP E4 LFN, 2004.
b.) Current tax liabilities The movement in current tax balance is as follows: 2013 2012 2011 In thousands of Naira
At 1 April 225,618 203,836 794,171 Charge for the year 707,538 221,217 204,293
Total Tax Payable 933,156 425,053 998,464
Payment during the year ( 220,814 ) (199,435) (794,628)
Net Balance as at 31 March 712,342 225,618 203,836
Honeywell Flour Mills Plc. 75 Financial Statements Notes to the Financial Statements - cont’d
c.) Deferred tax
In thousands of Naira 2013 2012 2011
Per income statement: Charge to income statement for the year 263,541 749,743 819,095
Per statement of financial position The movement in deferred tax is as follows: Deferred tax liability: At 1 April 2,671,398 1,921,655 1,102,560 Charge for the year 263,541 749,743 819,095
At 31 March 2,934,939 2,671,398 1,921,655
16 STATEMENT OF CASH FLOWS The Statement of Cash Flows has been drawn up using the indirect method. Working capital comprises inventories, receivables and current liabilities (excluding bank overdrafts). The cash flow from investing activities relates to the net amount of investments and disposals whilst the cash position consists of cash in hand and at bank.
a.) Cash flows from operating activities
In thousands of Naira 2013 2012 Profit before tax 3,814,599 3,664,935
Adjustments for non cash items: Depreciation of property, plant and equipment 1,249,033 1,193,610 Profit on disposal of property, plant and equipment ( 1,068 ) – Amortisation of intangible assets 4,132 197 Interest income (622,534) ( 695,282) Interest expense 528,340 523,100 Net charge in retirement benefit obligations 102,691 46,900
Operating profit before working capital changes 5,075,193 4,733,460
b.) Working Capital Changes (Increase)/decrease in inventories (5,075,243 ) (1,152,508) Increase/(decrease) in deferred income and accruals 55,994 ( 60,871) (Increase)/decrease in trade and other receivables 3,257,509 (2,325,251) Increase/(decrease) in trade and other payables (4,881,962 ) 1,740,051
Net working capital changes (6,643,702 ) (1,798,579)
Cash generated from operations (1,568,509 ) 2,934,881
Honeywell Flour Mills Plc. 76 Financial Statements Notes to the Financial Statements cont’d
17 SEGMENT REPORTING The Company’s business operating segments are identified by the two factory locations at Ikeja and Apapa. The Apapa factory manufactures flour, semolina, wheat meal and brown flour while the Ikeja factory manufactures pasta and noodles.
The Chief Operating Decision Maker, who is responsible for allocating resources and accessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
The Chief Operating Decision Maker reviews Honeywell's monthly financial and operational information in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.
The Chief Operating Decision Maker assesses the performance based on operating profits for each operating segments that is reviewed.
2013 2012 Ikeja Apapa Total Ikeja Apapa Total a. Revenue and Result In thousands of Naira
Revenue 9,882,296 35,827,086 45,709,382 7,788,929 30,263,298 38,052,227 Cost of sales (8,420,368) (29,367,954) ( 37,788,322) (6,534,695) (25,024,266) (31,558,961)
Gross profit 1,461,928 6,459,132 7,921,060 1,254,234 5,239,032 6,493,266
Other income 84,578 59,488 144,066 53,311 58,771 112,082 Operating expenses (1,265,753) (3,078,967) (4,344,720) (1,012,493) (2,100,102) (3,112,595)
Segment Operating Profit 280,753 3,439,653 3,720,406 295,052 3,197,701 3,492,753
b. Revenue by products In thousands of Naira Flour – 27,114,403 27,114,403 – 23,177,684 23,177,684 Semolina – 6,261,378 6,261,378 – 5,352,340 5,352,340 Wheat Meal – 2,339,184 2,339,184 – 1,683,635 1,683,635 Brown Flour – 112,121 112,121 – 49,639 49,639 Pasta 5,762,627 – 5,762,627 4,987,040 – 4,987,040 Noodles 4,119,669 – 4,119,669 2,801,889 – 2,801,889
Total revenue 9,882,296 35,827,086 45,709,382 7,788,929 30,263,298 38,052,227
c. Revenue by geographical location of customers: 2013 2012 In thousands of Naira Domestic (within Nigeria) 45,709,382 38,052,227 Export (outside Nigeria) ––
Total revenue 45,709,382 38,052,227
All sales were within Nigeria Honeywell Flour Mills Plc. 77
Financial Statements Notes to the Financial Statements cont’d
2 0 1 3 2 0 1 2 In thousands of Naira 18 OTHER INCOME Other Income comprises the following:
Sale of by-Products 20,800 7,993 Net gain on sale of Property, Plant and Equipment 1,068 22 Raw wheat Sales 23,592 28,509 Sundry Income 98,606 75,559
Total 144,066 112,082
2 0 1 3 2 0 1 2 In thousands of Naira 19 SHARE CAPITAL Authorised 8,000,000,000 Ordinary Shares of 50k each 4,000,000 4,000,000
Issued and fully paid 7,930,197,658 (2012: 7,930,197,658) Ordinary Shares of 50k each 3,965,099 3,965,099
20 CHAIRMAN'S AND DIRECTORS' EMOLUMENTS, PENSIONS AND COMPENSATION FOR LOSS OF OFFICE 2 0 1 3 2 0 1 2 In thousands of Naira The remuneration paid to Directors was a. Fees: Chairman 1,000 800 Other Directors 13,955 11,663
Total 14,955 12,463
b. Fees and other emoluments disclosed above include amount paid as: Fees 14,955 12,463 Other emoluments 29,238 24,365 Total 44,193 36,828
Honeywell Flour Mills Plc. 79 Financial Statements Notes to the Financial Statements cont’d
2 0 1 3 2 0 1 2 c. Number of Directors (excluding the Chairman) whose emoluments were within certain ranges were: Number Number N100,000 and above 8 8
d. Waived emoluments Number of Directors who have waived their rights to receive emoluments – – Aggregate of those emoluments
e. Pensions of Directors and past Directors Aggregate amount of Directors' or past Directors or past Directors' pensions Other pensions – –
f. Compenstion to Directos for loss of office (Key management comprises the Directors and the Chairman that form part of the leadership team) (Chief operating officers).
As Directors – – As Executives – –
21 EMPLOYEES AND RELATED REMUNERATION Number of employees in receipt of emoluments excluding allowances were within the following ranges: 2013 2012 Number Number Under 500,000 – – N500,001 - N1,000,000 488 465 N1,000,001 - N1,500,000 81 76 N1,500,001 - N2,000,000 37 38 N2,000,001 - N2,500,000 75 51 N2,500,001 - N3,000,000 37 17 N3,000,001 - N3,500,000 28 16 N3,500,001 - N4,000,000 14 15 N4,000,001 - N4,500,000 10 23 N4,500,001 - N5,500,000 15 14 N5,500,001 - N6,000,000 10 10 N6,000,001 - Above 32 32 Total 827 757
Honeywell Flour Mills Plc. 80 Financial Statements Notes to the Financial Statements cont’d
22 RELATED PARTY TRANSACTIONS At the year end, the Company had amount receivable from a related company. Interests have been accrued and recognize in the income statement. The balances are shown below: 2013 2012 In thousands of Naira
Metropolitan Trust Limited 4,805,580 3,851,347
Siloam Global Services Limited, who controls 75% of the Company also controls significant holdings of Metropolitan Trust Limited.
As at 31 March, 2013, the amount due from Metropolitan Trust Limited in respect of loans was N4.8bn. Interest on the loan was charged at the ruling commercial rates at an averaged 16% per annum. The rate is subject to review in line with market conditions.
The related party balance will be settled in cash.
23 CONTINGENT LIABILITIES, GUARANTEES AND OTHER FINANCIAL COMMITMENTS a) Charges The Company has loan facilities with First Bank of Nigeria Plc secured by All Assets Debenture.
b) Financial Commitments The Directors are of the opinion that all known liabilities and commitments have been taken into account in the preparation of the financial statements under review. These liabilities are relevant in assessing the Company's state of affairs as at 31 March, 2013.
c) Legal Charges The Company has no contingent liabilities in respect of legal claims arising in the ordinary course of business. It is not anticipated that any material liabilities will arise in the ordinary course of business.
24 LOANS AND OTHER TRANSACTIONS FAVOURING DIRECTORS AND OFFICERS a) During the year, the Company guaranteed no loan in favour of its Directors and Officers.
b) No loans were given to the Directors to purchase the Company's shares during the year.
Honeywell Flour Mills Plc. 81 Financial Statements Notes to the Financial Statements cont’d
25 EARNINGS PER SHARE The Earnings Per Share (EPS) is calculated by dividing the profit attributable to ordinary Shareholders by the number of ordinary shares issued as at 31 March, 2013.
26 APPROVAL OF FINANCIAL STATEMENTS These financial statements were approved by the Board of Directors of the Company on Monday, 17 June, 2013.
27 SIGNIFICANT JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In preparing its financial statements, the Company has made significant judgements, estimates and assumptions that impact on the carrying value of certain assets and liabilities, income and expenses as well as other information reported in the notes. The Company periodically monitors such estimates and assumptions and make sure that they incorporate all relevant information available when financial statement are prepared. However, this does prevent actual figures differing from estimates.
The judgements made in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements, and the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Revenue recognition The Company makes provisions for trade discounts, volume rebates and charge back for product returns allowed by the sale contracts when recognising the revenue derived from sales of its products. Such deductions represent estimates, which are subject to judgements and assumptions based on past experience as well as the company’s knowledge available at the time the estimate is made.
Allowance for doubtful receivables The determination of the recoverability of the amount due from customers involves the identification of whether there is any objective evidence of impairment. In cases where that process is not feasible, a collective evaluation of impairment is performed. As a consequence, the way individual and collective evaluations are carried out and the timing relating to the identification of objective evidence of impairment require significant judgement and may materially affect the carrying amount of receivables at the reporting date.
Honeywell Flour Mills Plc. 82 Financial Statements Notes to the Financial Statements cont’d
Asset impairment tests A financial asset or a group of financial assets, other than those categorised at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Impairment exists only when the Company ascertains that a “loss event” affecting the estimated future cash flows of the financial asset has occurred. It may not be possible to identify a single, discrete event that caused the impairment and moreover to determine when a loss event has occurred might involve the exercise of significant judgement.
The amount of impairment loss recognised for financial assets carried at amortised cost is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.
Net realisable value of inventories Inventories are stated at the lower of cost and net realisable value. The cost of inventories is written down to their estimated realisable value when their cost may no longer be recoverable, such as when inventories are damaged or become wholly or partly obsolete or their selling prices have declined. In any case, the realisable value represents the best estimate of the recoverable amount, is based on the most reliable evidence available at the reporting date and inherently involves estimates regarding the future expected realisable value. The benchmarks for determining the amount of write-downs to net realisable value include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires significant judgement and may materially affect the carrying amount of inventories at the reporting date.
Deferred tax estimation Recognition of deferred tax assets and liabilities involves making a series of assumptions. As far as deferred tax assets are concerned, their realisation ultimately depends on taxable profits being available in the future. Deferred tax assets are recognised only when it is probable that taxable profits will be available against which the deferred tax asset can be utilised and it is probable that the entity will earn sufficient taxable profit in future periods to benefit from a reduction in tax payments. This involves the Company making assumptions within its overall tax-planning activities and periodically reassessing them in order to reflect changed circumstances as well as tax regulations. Moreover, the measurement of a deferred tax asset or liability reflects the manner in which the entity expects to recover the asset’s carrying value or settle the liability.
Honeywell Flour Mills Plc. 83 Financial Statements Notes to the Financial Statements cont’d
Actuarial assumptions on defined benefit retirement plans Accounting for defined benefit plans may be complex because actuarial assumptions are required to measure the obligation and the expense, with the posibility that actual results differ from the assumed results. These differences are known as actuarial gains and losses. Defined benefit obligations are measured using the Projected Unit Method, according to which the Company has to make a reliable estimate of the amount of benefits earned in return for services rendered in current and prior periods, using actuarial techniques.
28 NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED The following new standards, amendments and interpretations have been issued by the IASB but are not yet effective for the financial year beginning 1 April, 2012 and have not been early adopted by Honeywell Flour Mills Plc (the list does not include information about new pronouncements that affect interim financial reporting or first-time adopters of IFRS since they are not relevant to the Company.
The Directors anticipate that the new standards, amendments and interpretations will be adopted in the company’s financial statements when they become effective. The Company has assessed, where practicable, the potential impact of all these new standards, amendments and interpretations that will be effective in future periods.
a. Ammendments to IAS 1 Presentation of Items of Other Comprehensive Income: These ammendments improve the presentation of the components of other comprehensive income. Mainly the Company will be required to group items presented in Other Comprehensive Income based on whether or not they will be reclassified to profit or loss subsequently. They are effective for annual periods beginning on or after 1 July, 2012.
b. Ammendment to IAS 1 Presentation of Financial Statements: The ammendment clarifies that additional comparative information is not necessary for periods beyond the minimum required by IAS 1, however if voluntarily presented, it should be in accordance with IFRS, without tiggering a requirement to provide a complete set of financial statements. It also clarifies that, in the case of changes in accounting policies retrospectively or a retrospective restatement or reclassification which has a material effect on the information in the statement of financial position at the beginning of the proceding period, the Company should present the statement of financial position at the end of the current period and the beginning and end of the preceding period. However, other than disclosure of certain specified information, related notes will not be required to accompany the opening statement of financial position as at the beginning of the preceding period. The ammendment is effective for annual periods beginning on or after 1 January, 2013.
Honeywell Flour Mills Plc. 84 Financial Statements Notes to the Financial Statements cont’d
c. Ammendments to IAS 32 Offsetting Financial Assets and Financial Liabilities : The ammendments address inconsistencies in current practice when applying the offseting criteria in IAS 32, mainly by clarifying the meaning of currently has a legally enforeceable right of set-off and that some gross settlement systems may be considered equivalent to net settlement. They are effective for annual periods beginning on or after 1 January 2014.
d. Ammendment to IAS 32 Financial Instrument Presentation : The ammendment clarifies that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12. It is effective for annual periods beginning on or after 1 January, 2013.
e. IFRS 9 Financial Instruments: This standard introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition.
IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods.
The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Currently, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss is recognised in profit or loss.
Honeywell Flour Mills Plc. 85 Financial Statements Notes to the Financial Statements cont’d
The derecognition provisions are carried over almost unchanged from IAS 39. IFRS 9 is effective for annual periods beginning on or after 1 January, 2015. the Directors anticipate that IFRS 9 will be adopted in the Company’s financial statements when it becomes mandatory and that the application of the new Standard might have a significant impact on amounts reported in respect of the Company’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.
29 EXPLANATION OF TRANSITION TO IFRS a) Transition to IFRS As stated in note 2(a), these financial statements are Honeywell Flour Mills Plc’s {“Honeywell” or ‘the company”}first financial statements prepared in accordance with International Financial Reporting Standards (IFRS).
The accounting policies set out in Note 3 have been applied in preparing the financial statements for the year ended 31 March, 2013, the comparative information presented in these financial statements for the year ended 31 March, 2012 and in the preparation of the opening IFRS statement of financial position at 1 April, 2011.
In preparing its opening IFRS statement of financial position, Honeywell has adjusted amounts reported previously in financial statements prepared in accordances with Statements of Accounting Standards issued by the Financial Reporting Council of Nigeria (“SAS” - Nigerian GAAP). An explanation of how the transition from Nigerian GAAP to IFRS has affected the company’s financial position, financial performance and cash flows is set out in the following explanatory notes.
1) Exemptions In preparing these financial statements in accordance with IFRS 1, the company has applied the mandatory exceptions from full retrospective application of IFRS. The optional exemptions from full retrospective application selected by Honeywell are summarised below.
Optional exemptions: i) Exemptions from full retrospective application
ii) Estimates exception Estimates made under IFRS 1 at 1 April, 2011 should be consistent with estimates made for
Honeywell Flour Mills Plc. 86 Financial Statements Notes to the Financial Statements cont’d
the same date under Nigerian GAAP, unless it is established that those estimates were made in error. iii) Derecognition of financial assets and liabilities exception Financial assets and liabilities derecognised before 1 January, 2004 are not re-recognised under IFRS iv) Hedge accounting exception The exception requires the Company to apply hedge accounting only if the hedge relationship meets the entire accounting criteria under IAS 39. The Company has not applied hedge accounting under IFRS.
Mandatory exceptions: i) Classification and measurement of financial assets exception The assessment of whether Honeywell’s financial assets meet the requirements to be measured at amortised cost, as set out in IFRS 9, was performed at 1 April, 2011. ii) Business combination The Company elected not to restate business combination that occurred prior to date of transition. The only acquisition made by the Company prior to the date of transition was the acquisition of 100% ownership of Honeywell Superfine Foods Limited. However, the Company carried out internal restructuring in the nature of merger by absorption of the wholly owned subsidiary in March, 2013.
The merger was a business combination of companies under common controls which is not under the guidance of IFRS. Hence, the accounting for the business combination was carried out using the pooling of interest method as highligted under note 3b. Consequently, the comparative amounts are restated as if the combination had taken place at the beginning of the earliest comparative period as at 1 April, 2011. iii) Fair value as deemed cost This exception is applicable to any individual items of property, plant and equipment, or intangible assets that meet the recognition criteria under IFRS.
When the excemption is applied, the fair value or revalued amount is the deemed cost at the date of the revaluation for subsequent accounting under IFRS, if the revaluation was broadly comparable to fair value or cost or depreciation cost under IFRS.
Honeywell elected to apply the fair value or revalued amount as deemed cost at the date of revaluation for subsequent accounting under IFRS.
Honeywell Flour Mills Plc. 87 Financial Statements Notes to the Financial Statements cont’d
30a) RECONCILIATION OF EQUITY AS AT 1 APRIL 2011 AND 31 MARCH 2012
31 March 2012 1 April 2011
N-GAAP Adjustment IFRS N-GAAP Adjustment IFRS In thousands of Naira ASSETS Non-Current Assets Property Plant and Equipment 30(c) ii, viii 27,706,000 1,305,441 29,011,441 12,572,298 1,389,971 13,962,269 Intangible Assets 6 iii 900,188 (899,990) 198 900,188 (899,793) 395
Total Non-Current Assets 28,606,188 405,451 29,011,639 13,472,486 490,178 13,962,664 Current Assets Inventories 7 vi 5,013,000 (79,288) 4,933,712 3,808,945 (30,421) 3,778,524 Trade and other Current Receivables 7,259,000 2,867,471 10,126,471 8,031,989 (230,770) 7,801,219 Cash and Cash Equivalents 4,060,000 (201,544) 3,858,456 3,824,187 137,955 3,962,142
Total Current Assets 16,332,000 2,586,639 18,918,639 15,665,121 (123,236)15,541,885
Total Assets 44,938,188 2,992,090 47,930,278 29,137,607 366,942 29,504,549
LIABILITIES Current Liabilities Trade and other Payables 3,883,400 2,261,274 6,144,674 4,867,952 (520,189) 4,347,763 Loans and Borrowings 15,511,000 (82,725) 15,428,275 5,942,863 280,607 6,223,470 Current tax Liabilities 225,600 18 225,618 203,836 – 203,836
Total Current Liabilities 19,620,000 2,178,567 21,798,567 11,014,651 (239,582) 10,775,069
Non-Current Liabilities Loans and Borrowings 6,244,000 (402,871) 5,841,129 1,358,633 (488,374) 870,259 Retirement Benefit Obligation iv – 433,100 433,100 – 400,560 400,560 Deferred Income/Revenue v – 170,070 170,070 – 230,941 230,941 Provisions 76,000 (76,000) 177,065 (177,065) - Deferred tax Liabilities vii 2,196,000 475,398 2,671,398 1,456,525 465,130 1,921,655
Non-Current Liabilities 8,516,000 599,697 9,115,697 2,992,223 431,192 3,423,415
Total Liabilities 28,136,000 2,778,264 30,914,264 14,006,874 191,610 14,198,484
Equity Share Capital 3,965,000 99 3,965,099 3,965,099 – 3,965,099 Share Premium 6,462,000 41 6,462,041 6,462,041 – 6,462,041 Retained Earnings 6,375,188 213,686 6,588,874 4,703,593 175,332 4,878,925
Total Equity 16,802,188 213,826 17,016,014 15,130,733 175,332 15,306,065
Net equity and Liabilities 44,938,188 2,992,090 47,930,278 29,137,607 366,942 29,504,549
Honeywell Flour Mills Plc. 88 Financial Statements Notes to the Financial Statements cont’d
30b) RECONCILIATION OF COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH, 2012
N-GAAP Adjustment IFRS In thousands of Naira
Revenue 38,071,502 (19,275) 38,052,227 Cost of sales (31,501,987) (56,974) (31,558,961)
Gross profit 6,569,515 (76,249) 6,493,266 Administration expenses (1,226,321) (80,511) (1,306,832) Distribution expenses (1,884,965) 79,202 (1,805,763) Other income 764,006 (651,924) 112,082
Results from operating activities 4,222,235 (729,482) 3,492,753
Finance income – 695,282 695,282 Finance expenses (559,101) 36,001 (523,100)
Net finance (cost)/income (559,101) 731,283 172,182
Profit before taxation 3,663,134 1,801 3,664,935 Taxation (960,703) (10,257) (970,960)
Profit after taxation 2,702,431 (8,456) 2,693,975
Attributable to:
Equity holders 2,702,431 (8,456) 2,693,975
Other comprehensive income Defined benefits acturial losses – 46,900 46,900 Tax on other comprehensive income – – – Profit for the year (8,456) 2,693,975 Total comprehensive income 2,702,431 38,444 2,740,875
Attributable to: Equity holders 2,702,431 38,444 2,740,875
30c) EXPLANATORY NOTES TO THE RECONCILIATION (IFRS 1 ADJUSTMENTS) i) Business Combination The Company carried out an initial restructuring in the nature of merger by absorption of the wholly owned subsidiary in March 2013. The accounting for business combination was carried out using the pooling of interest method as highlighted under Note 3. Consequently, the comparative amounts are restated as if the combination had taken place at the beginning of the earliest comparative period as at 1 April, 2011. No goodwill was recorded. The difference between the Company's cost of investment and the wholly owned subsidiary's equity in the amount of N1.5 billion as at 1 April, 2011 was written off against other comprehensive income of the financial year end 31 March, 2012.
Honeywell Flour Mills Plc. 89 Financial Statements Notes to the Financial Statements cont’d
ii) Property, Plant and Equipment (PPE) The Company has elected to report its PPE in its opening IFRS Financial Position as at 1 April, 2011 at a deemed cost. The deemed cost was determined by revaluation of the PPE as at 31 March, 2011 at the aggregate fair value. The aggregate fair value of the PPE as at 31 March, 2011 was determined to be N13.909 billion as compared to the then carrying amount of N12.572 billion which resulted in a revaluation surplus of about N1.337 billion. Land and building contributed significantly to the revaluation surplus at about N1.068 billion.
Under IFRS, the componentization of each item of PPE was carried out and each component was depreciated separately using straight line method, based on the estimated economic useful life and residual value. The residual values and useful lives of PPE are expected to be reviewed and adjusted as appropriate, at the end of each reporting date.
The impact of the componentization and revaluation of PPE was an increase in depreciation expenses by N73 million for the period ended 31 March, 2013.
iii) Intangible Assets The Company normally classifies computer software as part of PPE under N-GAAP. Under IFRS, computer software is recognized as an intangible asset unless it can be considered to be an integral part of PPE. As a result, the Company reclassified computer software as a separate intangible asset under IFRS. The effect of this adjustment was to decrease PPE and increase intangible asset by N1.8 million for the period ended 31 March, 2012. Amortization of the intangibles was also carried out in accordance with IFRS and it resulted in a reduction of retained earnings by N1.7 million for the year ended 31 March, 2012.
iv) Post-employment Benefits The Company operates a gratuity scheme based on employee's length of service. The benefit arrangement is noncontributory and unfunded, but a provision is made in the Company accounts to meet the cost of future benefits payout under the benefit arrangement. Under IFRS, actuarial valuation of the post-employment gratuity scheme were conducted on 1 April, 2011 and 31 March, 2012 at N401 million and N433 million respectively for the Company. The impact of the adjustments relating to the actuarial valuations was to increase retained earnings by N238 million and N98 million as at 1 April, 2011 and for the year ended 31 march, 2012 respectively.
Honeywell Flour Mills Plc. 90 Financial Statements Notes to the Financial Statements cont’d
v) Government Grants The Company received government interest grants in respect of Central Bank Of Nigeria (CBN) intervention loans from Guaranty Trust Bank Plc and Keystone Bank Limited at subsidized rate of 7% per annum. The government interest for the year ended 31 March, 2013
vi) Inventory Estimates of inventory impairment were recomputed based on specific nature of the inventory items as compared to the general approach under the Nigeria GAAP. The impact of this was a reduction in retained earnings by N24 million for the year ended 31 March, 2012.
vii) Deferred Tax The deferred tax consequences in respect of the IFRS adjustments have been determined and reflected based on a tax rate of 30%. The impact of this was to increase deferred tax liability by N465 million and N10 million as at 1 April, 2011 and 31 March, 2012 and a reduction in retained earnings by N465 million and N10 million respectively.
viii) Spare Parts Spare parts are usually carried as inventory and recognized in profit or loss as consumed. Under IFRS, spare parts qualify as PPE when an entity expects to use them during more than one period. Similarly, if the spare parts can be used only in connection with an item of PPE, they are accounted for as PPE. Certain qualified spare parts were reclassified from inventory to PPE. The impact was to reduce inventory and increase PPE by N53 million. The depreciation expenses were also increased by N17 million for the year ended 31 March, 2012.
ix) Reconciliation of Financial Statements The detailed reconciliation statements of the financial position and comprehensive income statement between N-GAAP and IFRS are as shown on notes 30(a) and 30(b).
Honeywell Flour Mills Plc. 91 Financial Statements Value Added Statement for the year ended 31 March, 2013
2013 2012
In thousands of Naira Revenue 45,709,382 38,052,227 Other revenue 144,066 112,082
45,853,448 38,164,309 Bought in goods and services (39,211,063) (31,948,434)
VALUE ADDED 6,642,385 100 6,215,875 100
APPLIED AS FOLLOWS:
1 To pay employees Salaries and wages, pension and social benefits 1,050,413 16 882,770 14
2 To pay providersof funds Finance expenses 528,340 8 559,101 9
3 To pay government Income and education taxes 707,538 11 221,217 4
4 To provide for maintenance and expansion of assets
Depreciation 1,249,033 19 1,110,870 18 Deferred tax 263,541 4 739,486 12 Retained profit 2,843,520 43 2,702,431 43
VALUE ADDED 6,642,385 100 6,215,875 100
Value added is the wealth created by the efforts of the company and its employees and its allocation between employees, shareholders, government and re-investment for the future creation of further wealth.
Honeywell Flour Mills Plc. 92
Financial Statements
List of Key Distributors 95-97
Unclaimed Dividends 98
Share Capital History 99
Application for E-Dividend 101
Proxy Form 102
Electronic Delivery Mandate Form 103
Honeywell Flour Mills Plc. 94 Financial Statements Key Distributors
NAME REGION LOCATION Abdulahi Salah North Sokoto Abiola Adio Inv Ltd West Ibadan Abiola Aramide Olaoluwa Nig.Ent. West Ibadan Adamu Abdullahi North Gombe Ade Distribution & Invest. Co Lagos Ijebu Ode Ade’s Famet Nig Enterprises Lagos Ota Adeayo Integrated Services Ltd Lagos Atan - Ota Adebiyi Merchants Stores Lagos Mosafejo Ade-Owo Nig Ltd. Lagos Egbe Adidot Nigeria Enterprises Lagos Ijebu Ode Adunni F. Nehan Lagos Apongbon Aduwa Stores North Gusau Ahajas Nig Ltd North Gombe Ahmadu Yusuf North Bauchi Alh Ibrahim Dubara North Sokoto Alhaja Adeshina Lagos Itire Alhaja Olayiwola Lagos Ejigbo Alhaji Maisugar Ibrahim Adam North Maiduguri Alhaji Mukhtar Nayaya North Jos Alhaji Namadi Inuwa North kano Alhaji Tasiu Ilu Kura North kano Ali Hassan North Maiduguri Always Ventures West Okene Amazing Wonder Enterprises Lagos ketu Aminat Ottun Lagos Apongbon Amudeson Nig. Enterprises East Enugu Aolat adefunke Nig. Ltd West Osogbo Asalam Stores Ventures Lagos Abeokuta Ayo ola Investment Lagos Apongbon B.Zion Gbebol Nigeria Ltd Lagos Sango Ota Bako Alh. Kontoma & Sons North Borno Bekdat Ventures North Abuja Bello Master Investment North Nassarawa Big Treat Confectioneries Ltd Lagos Ikeja Bioreal Ltd North Abuja Blessed A.A & Sons North Oturkpo Blessed Chima Umeh Enterprises East Enugu Blessed Obrown Ent. Nig. Ltd. North Enugu Bofik Nig Ltd Lagos Oke Ado Boladale Stores Lagos Ipaja Casanthonio Nigeria Limited Lagos Kirikiri Chief Ezeh East Onitsha Chimaco & Brothers Enterprises East Owerri Chivic NIg Ltd Lagos Apongbon Cleason Nigeria Enterprises North Markurdi Cossy Bros Intern Ltd Lagos Apongbon Damilek Integrated Services Limited East Port-Harcourt De-Tofola Nigeria Ltd Lagos Oju Ore Donason Commercial Enterprises East Aba E.Y. Nigeria Limited East Calabar Ekene Enterprises Lagos Trade Fair Emamac Nigeria Limited East Calabar Emju Investment Company Ltd East Uyo Estony Ventures Lagos Agege Ewedemi & Sons Lagos Okokomaiko Eweje Stores Lagos Mushin Ewoma Enterprises East Warri Faith Foods and Confectioneries East Port-Harcourt Fantazia Fast Food Ltd East Warri Honeywell Flour Mills Plc. 95 Financial Statements Key Distributors Cont’d
NAME REGION LOCATION Favour of God Ventures. Lagos Abeokuta Femadons Enterp Lagos Sango Ota Femolysis Limited Lagos Ikorodu Fosmarch Nig.Ltd Lagos Alakuko Frandnivan Ventures East Benin Frontline Ventures Lagos Badagry G.O Ayodeji Lagos Oke Odo Gambo Dambala North kano Gilbest East Port-Harcourt God's Own Ventures West Ado-Ekiti Hamum Global Resources Ltd North Abuja Haruna Salihu North Yobe Hay Crown Global Ventures West Lokoja Heron Ventures Lagos Abeokuta His Favour Commodity stores Lagos Abeokuta Ibrahim Sulu Oloje West Lokoja Ibrahim Usman Ent North Sokoto ICI Holdings Limited East Onitsha Ideal Systems & Technical Services Ltd Lagos Egbeda Imperial Bakeries Nig North Abuja Insight Trust Links Nig. Limited Lagos Satelite Town Isiaku Muhammed North kaduna J.B.Oyesomi & Sons Nig.Ltd East Benin J.C Joseph Industries Limited East Aba J.C.Anugwu & Sons Nig.LtdJ East Onitsha ames Franklyn Investment Ltd North Suleja Joe-Best Akor Enterprise North Gboko Kabiru Ahmed Dokoro North Gombe Kabiru Shuaibu Dansarai North kano Kamchizy Associate East Onitsha Kanisuru A & B Stores Lagos Ijebu Ode Kemayos Ventures Lagos Mushin Kine - Cal International Limited Lagos Agege Kudyunus Bislar Nig Ltd North kaduna Kuli Barde Enterprises North Maiduguri Laji Ventures Lagos Ojo Laslop Nig enterprises Lagos Agege Lasol Nigeria Limited Lagos Iddo Lawali Sanni Gusau Alh North Gusau Legacy Bakery West Lokoja Lofty Stores Lagos Apongbon Mac-Tell Investment Ltd Lagos Mushin Magbagbeade Stores Lagos Abeokuta Maigudu Yusuf North Maiduguri Mama Somto Lagos Trade Fair Matwealth Ventures Lagos Panti Merciful Business Lagos Ajegunle Michelle Edmund Ventures West Ibadan Moboluwaduro Commodities Lagos Abeokuta Mofine Ventures West Anyigba MT Olives Nig Ltd West Ilorin Murtala Abdulahi Trading North kaduna Musa Mohammed North kano Nakowa Modern Bakery North katsina New Gaskiya Enterprises North kano Ngaloma general Enterprises North Maiduguri Nnemelu J.C East Onitsha Obi okoye East Aba
Honeywell Flour Mills Plc. 96 Financial Statements Key Distributors Cont’d
NAME REGION LOCATION Odilamma Enterprises Nig East Owerri Ogene Concerns Limited East Onitsha Oladejo & Sons Nigeria Ent Lagos Alakuko Olubeesak NIg Enterprises Lagos Abeokuta Oluwakemi Trading Stores Lagos Ikorodu Oluwasesan Sose Enterprises West Ibadan Oni Stores Lagos Agege Ope Investment Limited. Lagos Amukoko Opeyemi Bakery Lagos Ikotun Otolorin Ventures West Akure Palma Seaport Ltd East Nsukka Payless Stores Lagos Mile 12 Phyloleen Nigeria Ltd East Benin Platinum Stores Lagos Oshodi Prince Bakery Lagos Ikorodu Q U Olumide Lagos Apongbon Quad & Kay Ventures Lagos Apongbon R B D Ayomide Adio Lagos Itire Rarmset Ventures Lagos Oke-Arin Alhaji Rasaki Hassan Lagos Ajangbadi Raywens Nig Enterprises Lagos Ojo Razkkas Nigerian Limited Lagos Epe Rintol Ventures Lagos Oke-Arin Royal Gate Company Limited Lagos Abeokuta S O Omilabu & sons Ltd Lagos Mushin S R S Adeshina Nig Ltd Lagos Itire Salisu Maigishiri Markafi North Kaduna Samtina Ventures West Osogbo Say-Suraj Ent North kaduna Seriki stores Nig Enter Lagos Apongbon Shagumba Ventures North katsina Solak Industries Ltd Lagos Agege Solohot Fuels Nig Ltd Lagos Badagry Soyinka & son Lagos Apongbon Sylmec Ventures Ltd North Markurdi Timmy Bakery Lagos Sagamu Tolu - Bajok Nig Enter Lagos Dalemo Tukur Sabaru Alh. North Sokoto UAC Foods Ltd Lagos Ojota Umar Musa Bakery North kaduna Umaru Ladan Alh. North Bauchi United Multi Distribution Co. East Enugu UTC Plc Lagos Ilupeju Uwana Ventures Lagos Ijesha Yomdok Nigeria Limited Lagos Akute
Honeywell Flour Mills Plc. 97 Financial Statements Unclaimed Dividends
Some dividend warrants have not been presented to the Bank for payment while others have been returned to the Registrar as unclaimed because the address could not be traced.
The Unclaimed Dividend as at July 31, 2013 is as analysed below.
2010 2011 2012 Unclaimed Dividend Unclaimed Dividend Unclaimed Dividend Total Number of Number of Number of Amount Dividend Range AmountAmount Amount Amount Shareholders Shareholders Shareholders
N’000 N’000 N’000 N’000
Above N1,000,000 - - - 2 2,221 2,221
N100,000 - N1,000,000 - - - 1,010 9 1,623 2,633
N50,000 - N99,999 7 539 6 484 15 1,019 2,043
N10,000 - N49,999 33 691 7 859 102 1,911 3,461
N1,000 - N9,999 598 1,350 56 2,339 1,603 3,680 7,369
Less than N1,000 14,202 3,116 1,217 3,513 16,448 4,428 11,057
Total 14,840 5,696 15,068 8,205 18,179 14,882 28,784
Total Declared Dividend in Years 872,322 16,354 1,031,000 1,189,530 3,092,852
% of Unclaimed Dividend 0.7% 0.8% 1.3% 2.7%
Honeywell Flour Mills Plc. 98 Financial Statements Share Capital History
Year Authorised (N'000) Issued & Fully Paid-up (N'000) Consideration Increase Cumulative Increase Cumulative 1990 – 10,000 – 2 Cash @ N1 each 1991 – 10,000 – 2 Cash @ N1 each 1992 – 10,000 – 2 Cash @ N1 each 1993 – 10,000 – 2 Cash @ N1 each 1994 – 10,000 – 2 Cash @ N1 each 1995 40,000 50,000 49,998 50,000 Cash @ N1 each 2001 160,000 210,000 160,000 210,000 Cash @ N1 each 2003 790,000 1,000,000 790,000 1,000,000 Cash @ N1 each 2008 1,000,000 2,000,000 999,999 1,999,999 Acquisition of Honeywell Superfine Foods Limited 2008 – 2,000,000 – 1,999,999 Share Split of N1 to N0.50 2008 2,000,000 4,000,000 1,500,000 3,499,999 Bonus Issue of 3 to 4 shares – 4,000,000 465,100 3,965,099 Public Issue @ N8.50 each
Honeywell Flour Mills Plc. 99
Financial Statements Application For E-Dividend
Honeywell Flour Mills Plc
To: The Registrar, First Registrars Nigeria Limited, Plot 2, Abebe Village Road, Iganmu, P.M.B 12692, Marina, Lagos, Nigeria. Date:......
Important! The form should be completed in CAPITAL LETTERS using a black or dark blue ballpoint pen. Characters and numbers should be similar in style to the following:
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 0 1 2 3 4 5 6 7 8 9
Please fill in the form and return to the address above
Personal Details
Surname...... Other Names...... Address...... Mobile...... phone...... Email...... Shareholder's Signature (1)...... Second signature for joint/Company account (2)...... Company's Authorised Signatures/Seal......
Bank Account Details
Bank Name...... Bank Branch Address...... Bank Account Number...... Branch Sort Code (very important)...... Bank's Authorised Signatures & stamp...... Honeywell Flour Mills Plc. 101 Financial Statements Proxy Form
HONEYWELL FLOUR MILLS PLC 4TH ANNUAL GENERAL MEETING TO BE HELD AT 11.00 A.M ON TUESDAY SEPTEMBER 24 2013 AT THE CIVIC CENTRE, OZUMBA MBADIWE STREET, VICTORIA ISLAND, LAGOS.
(Name of Shareholder in block letters) The undersigned, being a member/members of the above-Named RESOLUTION FOR AGAINST Company hereby appoint the Chairman of the meeting Or failing him...... 1. To adopt the Annual Report and Accounts ...... as my/our Proxy to vote me/us and On my/our behalf at the 2. To declare a dividend Annual General Meeting of the Company to be held on 24 September, 3. To re-elect the following Directors: 2013 and at Adjournment thereof." Dr. Oba Otudeko, D.Sc. Hon. CFR Unless otherwise instructed, the proxy will vote or abstain from Lt. General Garba Duba (rtd) Voting as he/she thinks fit. Mr. Jens Mollenbach Dated this...... day of...... 2013 4. To approve Directors' remuneration Signature...... 5. To authorize the Directors to fix Auditors Remuneration. Notes 6. To appoint members of the Audit Committee 1.Please sign this proxy card and post it to reach the Registered office of Company not less than 48 Hours before the time fixed for the meeting.
2.If executed by a corporation, the proxy card should be Sealed with Please indicate with an "X" in the appropriate section how you which your votes to the common seal. be east on resolutions set above. Unless otherwise instructed, the proxy will vote or abstain from voting at his/her discretion. 3.This proxy card will be used both by show of hands, And in the event of a poll being directed or demanded
Before posting the above form please tear off this part and retain it for admission to the meeting ADMISSION FORM HONEYWELL FLOUR MILLS PLC (RC55495) 4TH ANNUAL GENERAL MEETING TO BE HELD at Civic Center Ozumba Mbadiwe street, Victoria Island Lagos on Tuesday September 24, 2013 at lla.m
Name of Shareholder*...... Name of Proxy*...... If you are unable to attend the meeting A member (shareholder) entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him. A Proxy need not be a member. The above proxy form has been prepared to enable you to exercise your right to vote.,
Important Please insert your name in BLOCK CAPITALS on both proxy and admission forms where asterisked. Insert the name of any person where a member of the Company or not, with the exception of the Company who will attend the meeting and vote on your behalf.
Honeywell Flour Mills Plc. 102 Financial Statements Electronic Delivery Mandate Form
I / We/ Chief/ Dr/ Mr/ Mrs.
Title:
Name:
Address:
hereby agree to the delivery of Annual Report and other statutory documents of Honeywell Flour Mill Plc to me/us via electronic mode:
The Company should forward the materials to the email address stated below:
e-mail address : ......
Signature : ......
The Registrar First Registrars Nigeria Limited Plot 2, Abebe Village Road
Honeywell Flour Mills Plc. 103
H www.chariscom.com