northern nigeria flour mills plc...northern nigeria flour mills plc annual report and accounts for...

Northern Nigeria Flour Mills Plc

Annual Report and Accounts

For the year ended 31 March 2017


Annual Report and Accounts for the year ended 31 March 2017

1

Board of Directors, Officers and Other Corporate Information

Country of incorporation and domicile Nigeria

Nature of business and principal activities

Directors

The Company's main business is milling of wheat and other

associated grains.

Alhaji (Dr,) Aminu Dantata, OFR Chairman

Mr. John G. Coumantaros (US Citizen) Vice Chairman

Alhaji Rabiu Muhammad Gwarzo,

OON

Vice Chairman

Mr. Gert Kriek (South

African)

Resigned 31 July

2016

Mr. Charl P.F. Marais (South

African)

Managing Director

Alhaji Sani Umar

Mr. Paul M. Gbededo

Alhaji Y. Olalekan A. Saliu

Mallam Mahmud Ahmed

Deputy Managing

Director

Mr. Peter Kradolfer

Dr. Jibrilla Mohammed

Sadiq A. Usman

(Swiss)

Registered office 15 Maimalari road,

Bompai Industrial Estate,

Kano.

Postal address P.O.Box 6640

Kano.

[email protected]

Holding company Flour Mills of Nigeria Plc

incorporated in Nigeria

Bankers Guaranty Trust Bank Plc

First Bank of Nigeria Plc

Access Bank Plc

Sterling Bank Plc

Union Bank of Nigeria Plc

Zenith Bank Plc

Joint Auditors Akintola Williams Deloitte

Chartered Accountants

4th floor, Bank of Industry Building,

Plot 256, Zone AO Cadastral,

Off Herbert Macaulay Way, Central Business District

Abuja, FCT.

Aminu Ibrahim & Co.

Chartered Accountants

City Plaza,

Plot 596, Ahmadu Bello Way, Garki,

FCT.



Board of Directors, Officers and Other Corporate Information

Company Secretary Miyetti Nominees Limited

26, Post Office Road, Kano.

Registrars and Transfer Office Flour Mills Registrars Limited

45, Eric Moore Road

Iganmu

(BAGCO) Building

P.O. Box 341

Apapa

Lagos State

Solicitor Messrs J.B Majiyagbe & Co.

4, Human Rights Avenue

P.O. Box 726 Kano

2



3

Index

The reports and statements set out below comprise the financial statements presented to the shareholders:

Page

Directors' Report 4

Statement of Directors' Responsibilities in Relation to the Financial Statements 8

Independent Joint Auditors' Report 9

Statement of Financial Position 13

Statement of Profit or Loss and Other Comprehensive Income 14

Statement of Changes in Equity 15

Statement of Cash Flows 16

Notes to the Financial Statements 17

Other national disclosures 52

Statement of Value Added 53

Five Year Financial Summary 54



Directors' Report

The directors present their annual report together with the financial statements and independent auditor's report on Northern

Nigeria Flour Mills Plc for the year ended 31 March 2017.

1. Legal form

The Company was incorporated as a private limited liability company on 29 October 1971. Its registered office is 15, Maimalari

road, Bompai Industrial Estate, Kano. It is a subsidiary of Flour Mills of Nigeria Plc, which holds 53.06%of the company's

equity. Flour Mills of Nigeria Plc is incorporated in Nigeria.

2. Principal activities

Northern Nigeria Flour Mills Plc was incorporated in Nigeria with interests in milling of wheat and other associated grains. The

Company operates in Kano state, Nigeria. There have been no material changes to the nature of the Company's business

from the prior year.

3. Results

The financial statements have been prepared in accordance with International Financial Reporting Standards and the

requirements of the Companies and Allied Matters Act of Nigeria, Cap C20 LFN 2004 and the Financial Reporting Council (FRC)

of Nigeria Act, 2011. The accounting policies have been applied consistently compared to the prior year except otherwise stated.

The summary of results for the year is as set out below:

31-Mar-17 31-Mar-16

N '000 N '000

Revenue 940,521 979,038

Operating profit (loss) 8,364 (280,480)

Profit (loss) before taxation 405 (233,071)

Loss for the year (16,234) (197,240)

Total comprehensive loss for the year

4. Directors and directors' interests

The directors that served in office during the year are as follows:

Directors Designation

Alhaji (Dr,) Aminu Dantata, OFR Chairman

Mr. John G. Coumantaros Vice Chairman

Alhaji Rabiu Muhammad Gwarzo, Vice Chairman OON

(11,359) (175,666)

Mr. Gert Kriek Executive

Mr. Charl P.F. Marais Managing Director

Alhaji Sani Umar Deputy Managing Director

Mr. Paul M. Gbededo Non-executive

Alhaji Y. Olalekan A. Saliu Non-executive

Mallam Mahmud Ahmed Non-executive

Mr. Peter Kradolfer Non-executive

Dr. Jibrilla Mohammed Non-executive

Sadiq A. Usman Non-executive

Resigned 31 July 2016

In accordance with Section 277 of the Companies and Allied Matters Act, Cap C.20 LFN 2004 none of the directors has notified

the Company of any declarable interests in contracts with the Company during the year.

5. Directors' interests in shares

The directors who served during the year and their respective interests in the share capital of the company as recorded in the

Register of members and/or notified for the purpose of Section 275 of the Company and Allied Matter Act, Cap C.20 LFN 2004

are as follows:

4

Interests in shares

Director 2017

Direct

2017

Indirect

2016

Direct

2016

Indirect

Alhaji (Dr,) Aminu Dantata, OFR 1,111,195 9,894,362 1,111,195 9,894,362

Mr. John G. Coumantaros - - - -

Alhaji Rabiu Muhammad Gwarzo, OON 609,598 - 609,598 -

Mr. Gert Kriek - - - -

Mr. Charl P.F. Marais - - - -

Alhaji Sani Umar 237,363 - 237,363 -

Mr. Paul M. Gbededo - - - -

Alhaji Y. Olalekan A. Saliu 97,881 - 97,881 -

Mallam Mahmud Ahmed - - - -

Mr. Peter Kradolfer - - - -

Dr. Jibrilla Mohammed - - - -

Sadiq A. Usman - - - -

2,056,037 9,894,362 2,056,037 9,894,362

6. Holding company

The company's holding company is Flour Mills of Nigeria Plc which holds 53% (2016: 53%) of the company's equity. Flour Mills

of Nigeria Plc is incorporated in Nigeria.

7. Directors' Responsibilities

In accordance with the provision of section 334 and 335 of Companies and Allied Matters Act of Nigeria, Cap C.20 LFN 2004,

the The Directors are responsible for the preparation of financial statements which give a true and fair view of the state of

affairs of the Company at the end of each financial year and of the profit or loss for that period. In doing so, they ensure that:

• proper accounting records are maintained;

• applicable accounting statements are followed;



Directors' Report

5

• suitable accounting policies are adopted and consistently applied;

• judgments and estimates made are reasonable and prudent;

• the going concern basis is used, unless it is inappropriate to presume that the Company will continue in business and;

• Internal control procedures are instituted which, as far as is reasonably possible, safeguard the assets, prevent and

detect fraud and other irregularities.

8. Corporate Governance

The Company is committed to the best practice and procedures in corporate governance. Its business is conducted in a fair and

transparent manner and efforts are made to maintain high ethical standards.

Members of the Board of Directors hold regular meetings to decide on policy matters and to direct the affairs of the Company,

review its performance, its operations, finances and formulate growth strategy. In compliance with the provisions of Section

258(2) of the Companies and Allied Matters Act, the record of Directors attendance at Board meetings will be made available

for inspection at the Annual General Meeting.

9. Corporate social responsibility

The Company did not make any donations during the year (2016: Nil).

In compliance with Section 38(2) of the Companies and Allied Matters Act of Nigeria, the Company did not make any donation

or gift to any political party, political association or for any political purpose during the current year and preceding period.



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10. Property, plant and equipment

Movements in property, plant and equipment during the year are shown in Note 17 to the financial statements.In the opinion

of the Directors, the market value of the Company's properties is not less than the value shown in the audited financial

statements.

11. Human Capital

The Company recognises its social and statutory duty to employ disabled people and follows a policy of providing, wherever

possible, the same employment opportunities for disabled people as for others. If employees become disabled every effort is

made to ensure their employment continues, with appropriate training where necessary.

Employment and Employees

The Company reviews its employment policy in line with the needs of the business. Careful recruitment is undertaken to ensure

that potential high performers are attracted and retained.

Employee Development

Local and Overseas Training and Development Programmes are organized to meet the needs of the Company’s modernization

/ automation strategy implementation.

The Company continues to place premium on its Human Capital Development arising from the fact that this would ensure

improved efficiency of the business and maintain strategic advantage over competition.

Equal Employment Opportunity and Diversity

Subject to the applicable laws, we recruit, hire, train, promote, discipline and provide other conditions of employment without

regard to a person’s race, colour, religion, sex, age, national origin, disability or other classifications protected under the law.

This includes providing reasonable accommodation for members’ disabilities or religious beliefs and practices. As at year end,

the Company had no physically challenged person in its employment (2016: Nil).

Health, Safety and Environment

The Company appreciates the value of safe work environment to business success and therefore embarks on periodic

assessment to ensure compliance and safety. Employees are continuously sensitized and talks on safe work procedures

precede the commencement of each shift in the operational areas. The Company provides Personal Protective Equipment to

employees as required by the nature of job and safety officers are on regular monitoring to ensure usage compliance.

The Company maintains fully equipped clinic at its place of operations. The Company also maintains staff canteen at its place

of operations and continue to provide nutritionally balanced meals in very conducive environment and at subsidized rates.

HIV/AIDS Policy

HIV/AIDS policy guidelines are in place and employees are encouraged to undertake voluntary counseling and testing (VCT)

in order to confirm their HIV status. Continuous interactions at workshops with known HIV positive individuals are arranged

from time to time to educate staff and eliminate discrimination and stigmatization. Regular educational programmes are

arranged to sustain the message as part of the activities to mark World’s AIDS day annually.

Performance Management/Target Setting

Performance Management/Target Setting is designed to achieve set strategic objectives for effective monitoring of performance

of the Company and employees.

12. Events after the reporting period

There were no significant developments since the reporting date which could have had a material effect on the state of affairs of

the company at 31 March, 2017 and the loss for the year ended on that date which have not been adequately provided for or

recognized.



8



10



12



14

Statement of Profit or Loss and Other Comprehensive Income

Revenue 5 940,521 979,038

Cost of sales 7 (967,784) (1,079,755)

Gross (loss) profit (27,263) (100,717)

Net operating gains and losses 8 429,984 246,552

Other gains and losses 9 (64,703) (90,330)

Selling and distribution 10 (50,086) (11,619)

Administrative expenses 11 (279,568) (324,366)

Operating profit (loss) 12 8,364 (280,480)

Investment revenue 13 23,983 47,409

Finance costs 14 (31,942) -

Profit (loss) before taxation 405

Taxation 15 (16,639)

Loss for the year (16,234)

Other comprehensive income:

Items that will not be reclassified to profit or loss:

Remeasurements on net defined benefit liability/asset

Other comprehensive income for the year net of taxation

Total comprehensive loss for the year

Earning per share (kobo)

Basic (9) (111)

Diluted (9) (111)

The notes on pages 17 to 51 and other national disclosures on pages 52 to 54 form an integral part of these financial statements.

31- Mar -17 31- Mar -16 Note(s) N '000 N '000

(233,071)

35,831

(197,240)

4,875 21,574

4,875 21,574

(11,359) (175,666)

15

Statement of Changes in Equity

Share capital Share premium Total share Retained Total equity

in equity

Note(s) 23 23 23

The notes on pages 17 to 51 and other national disclosures on pages 52 to 54 form an integral part of these financial statements.



16

6,777

(868,704)

(2,826)

(871,530)

Statement of Cash Flows 31-Mar-17 31-Mar-16

Note(s) N '000 N '000

Cash flows from operating activities

Profit (loss) before taxation

Adjustments for:

405 (233,071)

Depreciation and amortisation 17 71,117 87,230

Profit on sale of assets (820) -

Interest received (23,983) (47,409)

Finance costs 31,942 -

Movements in retirement benefit assets and liabilities 9,243 (171,910)

Movement in long service award 1,928 (27,632)

Adjustment to property, plant and equipment

Changes in working capital:

- 45,824

Inventories (971,285) 31,581

Trade and other receivables (149,639) 27,424

Prepayments (8,349) (4,752)

Trade and other payables 163,960 (15,325)

Provision - (47,126)

Advance payments by customers (147,351)

(502,517)

Tax paid (24,875)

Net cash (used in)/provided by operating activities (527,392)

Cash flows from investing activities

Purchase of property, plant and equipment 17

(1,463,517) (20,191)

Sale of property, plant and equipment 17 820 -

Interest

Income 13 23,983

Net cash (used in)/provided by investing activities

Cash flows from financing activities

Proceeds from borrowings 26 2,423,606 -

47,409

(1,438,714) 27,218



17

Dividends paid - (53,460)

Finance costs -

Net cash provided by/(used in) financing activities

The notes on pages 17 to 51 and other national disclosures on page s 52 to 54 form an

integral part of these financial statements.

Total cash movement for the year 81,420 (553,634)

Cash at the beginning of the year 388,519 942,153

Total cash at end of the year 22 469,939 388,519

(31,942)

2,391,664 (53,460)



Notes to the Financial Statements

18

1 Corporate information

Northern Nigeria Flour Mills Plc was incorporated as a private limited company on 29 October 1971. The Company was converted

to a public limited liability company in 1978 and was quoted on the Nigeria Stock Exchange in the same year. The Company's

registered office and factory is located at No 15 Maimalari Road, Bompai, Kano. Its present ownership structure is 47% owned by

individuals and institutions in Nigeria and 53% owned by Flour Mills Nigeria Plc which is the parent Company and ultimate

controlling party.

1.1 Principal activities

The Company's main business is milling of wheat, maize and other associated grains. 1.2

Registered Office

The address of its registered office is:

15 Maimalari road,, Bompai Industrial Estate,, Kano.

1.3 Composition of financial statements

The financial statements are drawn up in Nigerian Naira, the functional currency of Northern Nigeria Flour Mills Plc in accordance

with International Financial Reporting Standards (IFRS). The Company's financial statements comprise:

Statement of profit or loss and other comprehensive Income

Statement of financial position

Statement of changes in equity

Statement of cash flows

Notes to the financial statements.

Additional information provided by management in line with the requirements of the Company and Allied Matters Act (CAMA)

includes

Statement of value added

Statement of financial summary.

1.4 Financial period

These financial statements cover the financial year from 1 April 2016 to 31 March 2017 with comparatives for year ended 31

March 2016.

1.5 Going Concern

The Directors believe that there is no intention or threat from any source to curtail significantly its line of business in the foreseeable

future. Thus, these financial statements are prepared on going concern basis.



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1.6 Statement of compliance

The annual report have been prepared in accordance with International Financial Reporting Standards as issued by the

International Accounting Standard Board (IASB) and the interpretations issued by International Financial Reporting Interpretation

Committee (IFRIC) and the requirements of the Companies and Allied Matters Act of Nigeria, Cap C20 LFN 2004 and the Financial

Reporting Council (FRC) Act of Nigeria 2011.

2. Significant accounting policies

The following is the summary of principal accounting policies applied in the preparation of these financial statements.

2.1 Basis of preparation

The financial statements have been prepared on the going concern basis in accordance with, and in compliance with, International

Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations

issued and effective at the time of preparing these financial statements and the Companies and Allied Matters Act of Nigeria, Cap

C20 LFN 2004.

The financial statements have been prepared on the historic cost basis except for financial instruments that are measured at fair

values, as explained in the accounting policies below. Historical cost is generally based on fair value of the consideration given in

exchange for assets.

2.2 Segmental reporting

The Company is involved in the milling of wheat and other associated grains as well as sales of other Golden Penny products

purchased from the Parent Company. There are two business segments and operating results of the segment reported regularly

to the Chief Operating Decision Maker (the Chief Executive Officer) for purposes of resource allocation and performance

assessment.

The basis of segmental reporting has been set out in note 6

2.3 Revenue

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

Revenue from the sale of goods is recognised when all the following conditions have been satisfied:

the company has transferred to the buyer the significant risks and rewards of ownership of the goods;

the company retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the company; and

the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Deferred revenue represents the revenue collected from customers from which services is yet to be rendered. This is recognised

as a liability until the company fulfills its contractual obligation to provide the service.

Dividend and interest revenue

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established

(provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured

reliably).

Interest income is recognised when it is probable that the economic benefits will flow to the Company and the amount of revenue

can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective




20

interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the

financial asset to that asset’s net carrying amount on initial recognition.




2.4 Translation of foreign currencies

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Naira, by applying to the foreign currency amount the spot

exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period:

foreign currency monetary items are translated using the closing rate;

non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the

exchange rate at the date of the transaction; and

non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at

the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised in profit or loss in the period in which they arise.

When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any

exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain

or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit

or loss.

Cash flows arising from transactions in a foreign currency are recorded in Naira by applying to the foreign currency amount the

exchange rate between the Naira and the foreign currency at the date of the cash flow.

2.5 Employee benefits

Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation

leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service

is rendered and are not discounted.

Defined contribution plans

The Company operates a defined contribution based retirement benefit scheme for its staff, in accordance with the Pension

Reform Act of 2014 with employee and employer contributing 8% and 10% respectively of the employee’s relevant emoluments

(salary, housing and transportation allowances). Payments to defined contribution benefit plans are recognised as an expense

when employees have rendered the service entitling them to the contributions.

Defined benefit plans

The Company also operates a gratuity scheme for its qualified staff. Benefits are related to the employees' length of service and

remuneration. The cost of providing gratuity benefits is determined using the Projected Unit Credit Method, with actuarial

valuations being carried out at the end of each reporting period. The obligation is determined by an independent actuary at each

reporting period. Actuarial gains and losses (if any) are recognised fully in other comprehensive income. Also, past service cost

is recognised immediately in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.




22

Long service award

The Company operates long service award for its qualified staff. The benefits are graduated depending on the employees number

of years in service to the company. The Company's obligation in respect of the scheme is the amount of future benefits that

employees have earned in return for their service in the current and prior periods. The benefit is discounted to determine its

present value. The obligation is determined by an independent actuary at each reporting period.

Gains or losses due to remeasurement of long service awards are recognised in profit or loss.

19

2.5 Employee benefits (continued)

Termination benefits

Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and

when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the

reporting date, then they are discounted.

2.6 Taxation

Tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the

extent that the tax arises from:

a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or

a business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited

or charged, in the same or a different period, to other comprehensive income.

Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in

the same or a different period, directly in equity.

The tax currently payable is based on taxable profit for the period in accordance with the Company Income Tax Act, CAP C21,

LFN 2004 and Education Tax Act, CAP E4, LFN 2004. The Company’s liability for current tax is calculated using tax rates that

have been enacted or substantively enacted by the balance sheet date.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of

comprehensive income because of items of income or expense that are taxable or deductible in future years and items that are

never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or

substantively enacted at the reporting date.

Deferred tax assets and liabilities

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial

statements and the corresponding tax bases used in the computation of taxable profit.Deferred tax liabilities are generally

recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary

differences to the extent that it is probable that taxable profits will be available against which those deductible temporary

differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from

goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that

affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer

probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabi lity is

settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the

reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the




23

manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets

and liabilities.

Current and deferred tax are recognised in the statement of comprehensive income, except when they relate to items that are

recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised

in other comprehensive income or directly in equity respectively.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against

current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

2.7 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as

part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for

capitalisation is determined as follows:

Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary

investment of those borrowings.

Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of

obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when:

expenditures for the asset have occurred;

borrowing costs have been incurred, and

activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted.

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are

complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Finance cost includes interest expense on borrowing.

2.8 Property, plant and equipment

Property, plant and equipment are tangible assets which the company holds for its own use or for rental to others and which are

expected to be used for more than one year.

An item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated

with the item will flow to the company, and the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost. Cost includes all of the expenditure which is directly attributable to the

acquisition or construction of the asset, including the capitalisation of borrowing costs on qualifying assets.

Expenditure incurred subsequently for major services, additions to or replacements of parts of property, plant and equipment are

capitalised if it is probable that future economic benefits associated with the expenditure will flow to the company and the cost

can be measured reliably. Day to day servicing costs are included in profit or loss in the year in which they are incurred.

Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is recognised

so as to write off the cost or valuation of assets (other than land and properties under construction) less their residual values over

their useful lives, using the straight-line method, on the following basis by the company. Depreciation on property, factory

buildings, machinery, vehicles, furniture and equipment is calculated on a straight-line basis at rates deemed appropriate to write

off the cost of the assets to their residual values over their expected useful lives.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item

Buildings 50 years

Mobile plant Straight line 10 years

Plant and machinery Straight line 10-15 years

Furniture and fittings Straight line 10 years

Depreciation method Average useful life

Straight line




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Motor vehicles Straight line 5 years

Loose tools & workshop equipment Straight line 10 years

IT equipment Straight line 4 years

Trailers Straight line 5 years

Pallets Straight line 3 years

2.8 Property, plant and equipment (continued)

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. 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. Profits and losses on disposals of fixed assets are determined by comparing proceeds with the carrying

amounts. These profits and losses are included within ‘items of a capital nature’ in profit or loss. Properties in the course of

construction (capital work-in-progress) are carried at cost, less any recognised impairment losses. Cost includes professional

fees and for qualifying assets borrowing costs capitalised in accordance with the Company's accounting policy.

The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset.

Impairment tests are performed on property, plant and equipment when there is an indicator that they may be impaired. When the

carrying amount of an item of property, plant and equipment is assessed to be higher than the estimated recoverable amount, an

impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from

its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment,

determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit

or loss when the item is derecognised.

2.9 Impairment of other tangible and intangible assets

The company assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any

such indication exists, the company estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the company also tests intangible assets with an indefinite useful life

or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount.

This impairment test is performed during the annual period and at the same time every year.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not

possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which

the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable

amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit

or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for

assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of

those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed

the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is

recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.




25

2.10 Inventories

Inventories are measured at the lower of cost and net realisable value.

The Company's Inventories consist of raw materials, consumables, finished goods and spare parts.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and

the estimated costs necessary to make the sale.

2.10 Inventories (continued)

The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories

to their present location and condition.

Raw Materials which include purchase cost and other costs incurred to bring the materials to their location and condition, are

valued at First-In-First-Out (FIFO). Cost of finished goods and work-in-progress include cost of materials used in production, direct

labour and factory overheads.

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the

related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories

are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of

inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised

as an expense in the period in which the reversal occurs.

Engineering spare parts and other consumables are valued at standard cost and adjusted to reflect actual cost after making

allowance for obsolete and damaged stocks. Engineering spare parts with high value and held for commissioning of a new plant

or for infrequent maintenance of plants are capitalised and depreciated over their useful life and the useful life starts when they

are put to use. If the estimated useful life of the spare parts from installation exceeds that for the whole plant, depreciation is

limited to the remaining life of the plant.

2.11 Financial instruments

Initial recognition and measurement

Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments.

The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability

or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable,

which are measured at cost and are classified as available-for-sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement

of the instrument.

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

Classification

The company classifies financial assets and financial liabilities into the following categories:

Financial assets at fair value through profit or loss - held for trading

Financial assets at fair value through profit or loss - designated

Loans and receivables

Financial liabilities at fair value through profit or loss - held for trading

Financial liabilities at fair value through profit or loss - designated

Financial liabilities measured at amortised cost

Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial

recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair

value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

The Company financial instrumrnts include loan and receivables financial assets and liabilities measured at amortised cost

Subsequent measurement

Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated

impairment losses.

Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.







27

2.11 Financial instruments (continued)

Financial assets

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active

market. Such assets are carried at amortised cost using the effective interest method if the time value of money is significant.

Gains and losses are recognised in the statement of comprehensive income when the loans and receivables are derecognised

or impaired, as well as through the amortisation process. This category of financial assets includes trade and other receivables

and cash and cash equivalents.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the

effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when

there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will

enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered

indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s

carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial

recognition.

Trade and other receivables are classified as loans and receivables.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments generally

with maturities of three months or less from date of acquisition. They are readily convertible to a known amount of cash and are

subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

Impairment of financial assets

At each reporting date the company assesses all financial assets, other than those at fair value through profit or loss, to determine

whether there is objective evidence that a financial asset or group of financial assets has been impaired.

For amounts due to the company, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy

and default of payments are all considered indicators of impairment.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are,

in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could

include the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio

past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate

with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's

carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest

rate.

Impairment losses are recognised in profit or loss.

Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an

event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at

the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not

been recognised.

Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available-for-sale.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been

transferred and the company has transferred substantially all risks and rewards of ownership of the asset to another entity.

If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the

transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to

pay.

24

2.11 Financial instruments (continued)

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the

substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instrument

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of i ts

liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

Financial liabilities

Financial liabilities are classified as other financial liabilities measured at amortised cost.

Financial liabilities measured at amortised cost

All other financial liabilities are initially recognised at fair value. For interest-bearing loans and borrowings this is the fair value of

the proceeds received net of issue costs associated with the borrowing. After initial recognition, other financial liabilities are

subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account

any issue costs and any discount or premium on settlement. Gains and losses arising on the repurchase, settlement or

cancellation of liabilities are recognised respectively in interest and other revenues and finance costs. This category of financial

liabilities includes trade and other payables and finance debt.

Trade and other payables

Trade payables are stated at amortised cost. Payables principally comprise trade and other payables, accruals, taxes (withholding

tax and value-added tax) payablel and amounts due to related parties. Payables are only recognised if they qualify as a liability.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the

effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption

of borrowings is recognised over the term of the borrowings in accordance with the company’s accounting policy.

Derecognition of financial liabilities

The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or

they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and

payable is recognised in profit or loss.

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and

only when the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the

asset and settle the liabilities simultaneously.

2.12 Provisions and contingencies

Provisions are recognised when:

the company has a present obligation as a result of a past event;

it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation at the end of the

reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using

the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the

effect of the time value of money is material).




29

2.12 Provisions and contingencies (continued)

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the

reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity

settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement

shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 38.

2.13 Leases

At inception date an arrangement is assessed to determine whether it is, or contains, a lease. An arrangement is accounted for

as a lease where it is dependent on the use of a specific asset and it conveys the right to use that asset.

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is

classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases - lessor

The company recognises finance lease receivables in the statement of financial position.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the company’s net investment in

the finance lease.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of

the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is

included in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the .

The lease payments are apportioned between the finance charge and reduction of the outstanding liability.The finance charge is

allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.

Operating leases - lessor

Operating lease income is recognised as an income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset

and recognised as an expense over the lease term on the same basis as the lease income.

Income for leases is disclosed under revenue in profit or loss.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the

amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not

discounted.

Any contingent rents are expensed in the period they are incurred.




30

2.14 Earnings per share

The company presents basic earnings per share(EPS) for its ordinary shares. Basic earnings per share is calculated by dividing

the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares in issue

during the year.

Diluted earnings per share

Diluted earnings per share are computed by dividing adjusted net income available to shareholders of the Company by the

weighted average number of common shares outstanding during the year adjusted to include any dilutive potential common

shares. Potential dilutive common shares result from stock options and convertible bonds issued by the Company on its own

common shares.

3 Significant judgements and sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management, from time to time, to make judgements,

estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.

These estimates and associated assumptions are based on experience and various other factors that are believed to be

reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions

are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are

revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current

and future periods.

Critical judgements in applying accounting policies

The critical judgements made by management in applying accounting policies, apart from those involving estimations, that have

the most significant effect on the amounts recognised in the financial statements, are outlined as follows:

Taxation

The Company’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the

of the Company’s total tax charge necessarily involves a degree of estimation and judgment in respect of certain items whose

treatment cannot be finally determined until resolution has been reached with the relevant tax authority. Under the Nigerian tax

system, self-assessment returns are subjected to a desk review for the determination of tax due for remittance in the relevant

year of assessment. This is however not conclusive as field audits are carried out within six years of the end of the relevant year

of assessment to determine the adequacy or otherwise of sums remitted under self-assessment thus making tax positions

uncertain.

Key sources of estimation uncertainty

Trade receivables

The company assesses its trade receivables for impairment at the end of each reporting period. In determining whether an

impairment loss should be recorded in profit or loss, the company makes judgements as to whether there is observable data

indicating a measurable decrease in the estimated future cash flows from the financial asset. Based on objective evidence of

impairment, the Company makes a collective impairment allowance for doubtful debt.

Impairment testing

The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying

amount may not be recoverable. When such indicators exist, management determine the recoverable amount by performing value

in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to




31

determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating

unit to which the asset belongs.

3 Significant judgements and sources of estimation uncertainty (continued)

property, plant and equipment

Property, plant and equipment represent a significant proportion of the asset base of the Company, accounting for about 46% of

the Company’s total assets. Therefore the estimates and assumptions made to determine their carrying value and related

depreciation are critical to the Company’s financial position and performance.

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the

expected residual value at the end of its life. Increasing an asset’s expected life or it’s residual value would result in the reduced

depreciation charge in the statement of comprehensive income.

The useful lives and residual values of property, plant and equipment are determined by management based on historical

experience as well as anticipation of future events and circumstances which may impact their useful lives Provision for gratuity

The Company operates an unfunded defined benefit scheme which entitles staff who put in a minimum qualifying working period

of five years to gratuity upon leaving the employment of the Company. IAS 19 requires the application of the Projected Unit Credit

Method for actuarial valuations. Actuarial measurements involve the making of several demographic projections regarding

mortality, rates of employee turnover etc and financial projections in the area of future salaries and benefit levels, discount rate,

inflation etc.




4. New Standards and Interpretations

32

4.1 Standards and interpretations effective and adopted in the current year

In the current year, the company has adopted the following standards and interpretations that are effective for the current financial

year and that are relevant to its operations:

Amendment to IFRS 7: Financial Instruments: Disclosures: Annual Improvements project

The amendment provides additional guidance regarding transfers with continuing involvement. Specifically, it provides that cash

flows excludes cash collected which must be remitted to a transferee. It also provides that when an entity transfers a financial

asset but retains the right to service the asset for a fee, that the entity should apply the existing guidance to consider whether it

has continuing involvement in the asset.

The effective date of the company is for years beginning on or after 01 January 2016.

The company has adopted the amendment for the first time in the 2017 financial statements.

The impact of the amendment is not material.

Amendment to IAS 19: Employee Benefits: Annual Improvements project

The amendment clarifies that when a discount rate is determined for currencies where there is no deep market in high quality

corporate bonds, then market yields on government bonds in that currency should be used.




Disclosure Initiative: Amendment to IAS 1: Presentation of Financial Statements

The amendment provides new requirements when an entity presents subtotals in addition to those required by IAS 1 in its financial

statements. It also provides amended guidance concerning the order of presentation of the notes in the financial statements, as

well as guidance for identifying which accounting policies should be included. It further clarifies that an entity's share of

comprehensive income of an associate or joint venture under the equity method shall be presented separately into its share of

items that a) will not be reclassified subsequently to profit or loss and b) that will be reclassified subsequently to profit or loss.




Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

The amendment clarifies that a depreciation or amortisation method that is based on revenue that is generated by an activity that

includes the use of the asset is not an appropriate method. This requirement can be rebutted for intangible assets in very specific

circumstances as set out in the amendments to IAS 38.

The effective date of the amendment is for years beginning on or after 01 January 2016.



4.2 Standards and interpretations not yet effective

The company has chosen not to early adopt the following standards and interpretations, which have been published and are

mandatory for the company’s accounting periods beginning on or after 01 April 2017 or later periods:




4. New Standards and Interpretations (continued)

33

IFRS 16 Leases

IFRS 16 Leases is a new standard which replaces IAS 17 Leases, and introduces a single lessee accounting model. The main

changes arising from the issue of IFRS 16 which are likely to impact the company are as follows:

Company as lessee:

Lessees are required to recognise a right-of-use asset and a lease liability for all leases, except short term leases or

leases where the underlying asset has a low value, which are expensed on a straight line or other systematic basis.

The cost of the right-of-use asset includes, where appropriate, the initial amount of the lease liability; lease payments

made prior to commencement of the lease less incentives received; initial direct costs of the lessee; and an estimate

for any provision for dismantling, restoration and removal related to the underlying asset.

The lease liability takes into consideration, where appropriate, fixed and variable lease payments; residual value

guarantees to be made by the lessee; exercise price of purchase options; and payments of penalties for terminating

the lease.

The right-of-use asset is subsequently measured on the cost model at cost less accumulated depreciation and

impairment and adjusted for any re-measurement of the lease liability. However, right-of-use assets are measured at

fair value when they meet the definition of investment property and all other investment property is accounted for on

the fair value model. If a right-of-use asset relates to a class of property, plant and equipment which is measured on

the revaluation model, then that right-of-use asset may be measured on the revaluation model.

The lease liability is subsequently increased by interest, reduced by lease payments and re-measured for

reassessments or modifications.

Re-measurements of lease liabilities are affected against right-of-use assets, unless the assets have been reduced to

nil, in which case further adjustments are recognised in profit or loss.

The lease liability is re-measured by discounting revised payments at a revised rate when there is a change in the

lease term or a change in the assessment of an option to purchase the underlying asset.

The lease liability is re-measured by discounting revised lease payments at the original discount rate when there is a

change in the amounts expected to be paid in a residual value guarantee or when there is a change in future payments

because of a change in index or rate used to determine those payments.

Certain lease modifications are accounted for as separate leases. When lease modifications which decrease the scope

of the lease are not required to be accounted for as separate leases, then the lessee re-measures the lease liability by

decreasing the carrying amount of the right of lease asset to reflect the full or partial termination of the lease. Any gain

or loss relating to the full or partial termination of the lease is recognised in profit or loss. For all other lease modifications

which are not required to be accounted for as separate leases, the lessee re-measures the lease liability by making a

corresponding adjustment to the right-of-use asset.

Right-of-use assets and lease liabilities should be presented separately from other assets and liabilities. If not, then the

line item in which they are included must be disclosed. This does not apply to right-of-use assets meeting the definition

of investment property which must be presented within investment property. IFRS 16 contains different disclosure

requirements compared to IAS 17 leases.

Company as lessor:

Accounting for leases by lessors remains similar to the provisions of IAS 17 in that leases are classified as either

finance leases or operating leases. Lease classification is reassessed only if there has been a modification.

A modification is required to be accounted for as a separate lease if it both increases the scope of the lease by adding

the right to use one or more underlying assets; and the increase in consideration is commensurate to the stand alone

price of the increase in scope.

If a finance lease is modified, and the modification would not qualify as a separate lease, but the lease would have

been an operating lease if the modification was in effect from inception, then the modification is accounted for as a

separate lease. In addition, the carrying amount of the underlying asset shall be measured as the net investment in the

lease immediately before the effective date of the modification. IFRS 9 is applied to all other modifications not required

to be treated as a separate lease.

Modifications to operating leases are required to be accounted for as new leases from the effective date of the

modification. Changes have also been made to the disclosure requirements of leases in the lessor's financial

statements.

Sale and leaseback transactions:





34

In the event of a sale and leaseback transaction, the requirements of IFRS 15 are applied to consider whether a

performance obligation is satisfied to determine whether the transfer of the asset is accounted for as the sale of an

asset.

If the transfer meets the requirements to be recognised as a sale, the seller-lessee must measure the new right-ofuse

asset at the proportion of the previous carrying amount of the asset that relates to the right-of-use retained. The buyer-

lessor accounts for the purchase by applying applicable standards and for the lease by applying IFRS 16

If the fair value of consideration for the sale is not equal to the fair value of the asset, then IFRS 16 requires adjustments

to be made to the sale proceeds. When the transfer of the asset is not a sale, then the seller-lessee continues to

recognise the transferred asset and recognises a financial liability equal to the transfer proceeds. The buyer-lessor

recognises a financial asset equal to the transfer proceeds.

The effective date of the standard is for years beginning on or after 01 January 2019.

The company expects to adopt the standard for the first time in the 2020 financial statements.

The impact of this standard is currently being assessed.

Amendments to IFRS 15: Clarifications to IFRS 15 Revenue from Contracts with Customers

The amendment provides clarification and further guidance regarding certain issues in IFRS 15. These items include guidance in

assessing whether promises to transfer goods or services are separately identifiable; guidance regarding agent versus principal

considerations; and guidance regarding licenses and royalties.


The company expects to adopt the amendment for the first time in the 2019 financial statements.

The impact of this amendment is currently being assessed. IFRS

9 Financial Instruments

IFRS 9 issued in November 2009 introduced new requirements for the classification and measurements of financial assets. IFRS

9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial

liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another

revised version of IFRS 9 was issued in July 2014 mainly to include a)impairment requirements for financial assets and b) limited

amendments to the classification and measurement requirements by introducing a "fair value through other comprehensive

income" (FVTOCI) measurement category for certain simple debt instruments.

Key requirements of IFRS 9:

All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement

are required 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 outstanding principal are generally measured at amortised

cost at the end of subsequent reporting periods. Debt instruments that are held within a business model whose objective

is achieved by both collecting contractual cash flows and selling financial assets, and that have contractual terms of

the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on

outstanding principal, are measured at FVTOCI. All other debt and equity investments are measured at fair value at

the end of subsequent reporting periods. In addition, under IFRS 9, entities may make an irrevocable election to present

subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive

income with only dividend income generally recognised in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires

that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of the

liability is presented in other comprehensive income, unless the recognition of the effect of the changes of the liability's

credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Under IAS

39, the entire amount of the change in fair value of a financial liability designated as at fair value through profit or loss

is presented in profit or loss.

In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an

incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected





35

credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since

initial recognition. It is therefore no longer necessary for a credit event to have occurred before credit losses are

recognised.

The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently

available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge

accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk

components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been

replaced with the principal of an "economic relationship". Retrospective assessment of hedge effectiveness is also no

longer required. Enhanced disclosure requirements about an entity's risk management activities have also been

introduced.



The impact of this standard is currently being assessed.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15

Agreements for the construction of Real Estate; IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter

Transactions Involving Advertising Services.

The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers

in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An

entity recognises revenue in accordance with that core principle by applying the following steps:

Identify the contract(s) with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract Recognise revenue when (or as) the

entity satisfies a performance obligation.

IFRS 15 also includes extensive new disclosure requirements.



The impact of this standard is currently being assessed. Amendments

to IAS 7: Disclosure initiative

The amendment requires entities to provide additional disclosures for changes in liabilities arising from financing activities.

Specifically, entities are now required to provide disclosure of the following changes in liabilities arising from financing activities:

changes from financing cash flows;

changes arising from obtaining or losing control of subsidiaries or other businesses;

the effect of changes in foreign exchanges;

changes in fair values; and other changes.







36

The impact of this amendment is currently being assessed.

Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses

In terms of IAS 12 Income Taxes, deferred tax assets are recognised only when it is probable that taxable profits will be available

against which the deductible temporary differences can be utilised. The following amendments have been made, which may have

an impact on the company:

If tax law restricts the utilisation of losses to deductions against income of a specific type, a deductible temporary difference is

assessed in combination only with other deductible temporary differences of the appropriate type.

Additional guidelines were prescribed for evaluating whether the company will have sufficient taxable profit in future periods. The

company is required to compare the deductible temporary differences with future taxable profit that excludes tax deductions

resulting from the reversal of those deductible temporary differences. This comparison shows the extent to which the future taxable

profit is sufficient for the entity to deduct the amounts resulting from the reversal of those deductible temporary differences.

The amendment also provides that the estimate of probable future taxable profit may include the recovery of some of an entity ’s

assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this.



The impact of this amendment is currently being assessed.




37

31- Mar -17 -16 31- Mar N '000 N '000

5. Revenue

Sale of goods 940,521 979,038

The amount included in revenue arising from exchanges of goods or

services included in revenue are as follows:

Golden penny wheat flour - 140,416

Semovita - 14,669

Wheat offal - 18,425

Massa flour 382,212 249,711

Germ flour 102,143 94,571

Corn offal 34,956 39,014

GP flour confectionery - 3,210

GP rice - 7

Massavita 419,015

979,038

6. Segmental information

Information reported to the Chief Operating Decision Maker (CODM) for the purpose of resources allocation and assessment of

segment performance focuses on the types of goods or services delivered or provided. The Company's reportable segments are

milling and sale of wheat/ maize products (wheat/ maize product segment), and sale of other Golden Penny (GP) products (Other

Golden Penny (GP) products segment).

Segmental revenue and results

Segment revenue Segment loss

31-Mar-17 31-Mar-16 N

'000 N '000

31-Mar-17 31-Mar-16

N '000 N '000

Wheat/ maize products 940,521 975,821 (27,263) (100,687)

Other Golden Penny (GP) products -

- (30)

Segment loss represent the loss before tax incurred by each segments without allocation of other operating income, other gains

and losses, selling and distribution expenses, administrative expenses, investment income and other expenses. This is the

measure reported to the Chief Operating Decision Maker for the purpose of resource allocation and assessment of segment

performance.

Segment assets and liabilities

Segment assets:

Wheat/ maize products 4,337,444 1,739,760

Other Golden Penny (GP) products - -

Segment liabilities

4,337,444 1,739,760

Wheat/ maize products 3,097,866 488,823

Other Golden Penny (GP) products - -

3,217

940,521 979,038 (27,263) (100,717)

3,097,866 488,823

421,210

940,521




38

31- Mar -17 -16 31- Mar N '000 N '000

(65,703)

(89,991)

7. Cost of sales

Raw materials consumed 684,584 808,278

Manufacturing - Employee costs 92,454 84,773

Manufacturing - Depreciation and impairments 63,006 67,907

Petrol, gas and oil 91,463 61,874

Rent and Rate 2,507 2,138

Repairs and maintenance 27,179 44,330

Insurance 5,724 7,251

Other expenses 867 3,204

967,784

8. Net operating gains and losses

Provision no longer required 5,979 22,097

Rental income 1,800 1,017

Insurance income - 557

Other income 32,190 222,881

Intragroup subsidy (a) 390,015 -

429,984

(a) The company ceased the milling of wheat in May 2015 and limits its production activities to the milling of maize products. The

parent Company, Flour Mills of Nigeria Plc resolved that for the transition period of three years, the targeted sales of

Masavita and Masaflour is 4,166.7 metric tonnes/month i.e. 50,000 metric tonnes per year. The parent company pays a

subsidy per metric tonne for every metric tonne short of 50,000 metric tonnes. In the current year the parent company

approved an increase in the subsidy from N5,000 per metric tonne to N9,000 per metric tonne.

9. Other gains and losses

Profit and loss on exchange differences 180 (5,099)

Profit and loss on sale of assets and liabilities 820 -

Provisions for obsolete stock (25,288) (28,281)

Inventory write off - (19,991)

Other operating charges (a) (36,959)

(90,330)

(a) The amount is majorly made up group cost allocated to Northern Nigeria Flour Mills by the Parent Company - Flour Mills

Nigeria Plc.

10. Selling and distribution expenses

Staff cost 1,210 710

Advertisement 38,172 192

Selling expense 10,704

50,086

11. Administrative expense

The following items are included within operating expenses:

Auditors remuneration 14,500 14,500

Bad debts allowance 62,369 84,111

Bank charges 5,103 6,212

Consulting and professional fees 9,479 14,500

1,079,755

246,552

10,717

11,619




39

31- Mar -17 -16 31- Mar N '000 N '000

Depreciation, amortisation and impairments 8,111 19,323

Donations 1,675 2,782

11. Administrative expense (continued)

13. Investment revenue

Interest income 23,983 47,409

14. Finance costs

Employee costs 84,191 100,312

Director expense 29,822 19,482

Bad debt written off - 12,614

Fines and penalties 11,235 873

Insurance 2,385 5,308

Medical expenses 398 551

Printing and stationery 1,459 1,262

Repairs and maintenance 26,970 18,921

Postage and communication expenses 4,407 6,162

Travel - local 7,437 12,514

General expenses

12. Operating profit (loss)

Operating profit (loss) for the year is stated after charging/(crediting) the following:

10,027

279,568

4,939

Profit on sale of property, plant and equipment (820) -

Profit on exchange differences (180) 5,099

Amortisation on intangible assets - 1,289

Depreciation on property, plant and equipment 71,117 85,941

Employee costs 176,645 185,085

Director expense 29,822 19,482

Auditors remuneration 14,500 14,500

Interest expense 31,942 -

Net operating gains and losses 429,984 246,552

Current tax expense 13,320 10,214

Under provision of deferred tax liabilities in prior year 3,142 16,156

Deferred tax credit recognised in current year 177 (62,201)

324,366




40

31- Mar -17 -16 31- Mar N '000 N '000

Interest expense 31,942 -

15. Taxation

Per profit or loss

Income tax charged 7,375 7,330

Under provision of education tax liabilities in prior year 3,119 2,872

Under provision of capital gains tax in prior year 2,826 -

Under provision of company income tax liabilities in prior year - 12

Corporation tax is calculated at 30% (2016: 30%) of the estimated taxable profit for the year while tertiary education tax is

calculated at 2% (2016: 2%) of the estimated assessable profit for the year.

Net income tax expense as per profit or loss 16,639 (35,831)




15. Taxation (continued)

Per statement of financial position

At 1 April 7,330 21,991

Charge for the year 13,320 7,330

Under provision in prior year

Payment during the year

- 2,884

Cash (2,826) (24,875)

Witholding tax utilized - -

Current tax payable

Reconciliation of effective tax rate

Profit before tax on continuing operations (A) 405 (233,071)

Tax at the statutory corporation tax rate of 30% (2016:30%) 122 (69,921)

Effect of minimum tax provisions 7,375 7,330

Effect of expenses that are not deductible in determining taxable profit 3,506 6,382

Effect of investment allowance (3,451) 1,339

Tertiary education tax at 2% of assessable profits 3,119 -

Adjustments recognized in the current period in relation to the deferred tax of

prior periods

3,142 16,155

Adjustments recognized in the current period in relation to income, capital gains

and education tax of prior years

2,826 2,883

Income tax expense recognized in profit or loss (relating to continuing operations) (B)

Effective tax rate (B/A above) 4,108 % 15 %

The tax rate used for the 2017 and 2016 reconciliations above is based on the minimum tax rates applicable to corporate entit ies

in Nigeria under Companies Income Tax Act, CAP C21 LFN 2004 as amended.

No income tax was recognised directly in equity.

No income tax was recognised in other comprehensive income.

16. Deferred tax

Analysis of deferred tax (assets)/liabilities

2017

Deferred tax

(assets)/liabilities in

relation to:

Opening balance

N'000

Recognised in profit or loss

N'000

Recognised in

other

comprehensiv

e income N'000

Prior year

adjustment

recognised in

current year N'000

Closing balance

N'000

17,824 7,330

31- Mar -17 -16 31- Mar N '000 N '000

16,639 (35,832)




42

2,090

2,090

Property, plant and

equipment

146,953 (24,786) - - 122,167

Tax losses and unutilised

capital allowances

(75,661) 47,931 - - (27,730)

Exchange difference (24,693) (1,451) - - (26,144)

Provisions (88,723) (18,375) - (105,008)

(42,124) 3,319 - (36,715)

37

16. Deferred tax (continued)

31 March 2016

Deferred tax

(assets)/liabilities in

relation to:

Opening balance

N'000

Recognised in profit or loss

N'000

Recognised in

other

comprehensiv

e income N'000

Prior year

adjustment

recognised in

current year N'000

Closing balance

N'000

Property, plant and

equipment

135,485 (19,314) - 30,782 146,953

Tax losses and unutilised

capital allowances

- (75,661) - - (75,661)

Exchange difference (24,693) - - - (24,693)

Provisions (116,117) 32,774 9,246 (14,626) (88,723)

Gain on fair valuation of

biological assets

- - - - -

Deferred tax assets and liabilities

Opening balance 42,124 5,325

Charge for the year (3,319) 46,045

Charge/(credit) to other comprehensive income (2,090) (9,246)

36,715 42,124




17. Property, plant and equipment

Company Land and

building

Plant and Furniture and Vehicles Capital work- Total

machinery equipment in-progress

Cost N'000 N'000 N'000 N'000 N'000 N'000

Balance at 01 April 2015 111,765 1,263,853 95,862 364,992 11,769 1,848,241

Additions - - - - 20,191 20,191

Disposals - - - (33,069) - (33,069)

Transfer - 18,299 - - (18,299) -

Write-off - (52,449) (10,473) - - -

Balance at 31 March 2016

Additions

Disposal

Reclassification

Adjustment


Accumulated depreciation

111,765 1,229,703 85,389 331,923 13,661 1,772,441

- 39,409 1,500 1,200 1,421,408 1,463,517

- - - (8,973) - (8,973)

- 75,637 - - (75,637) -

- - - (18,379) - (18,379)

111,765 1,344,749 86,889 305,771 1,359,432 3,208,606

39,897 674,662 80,893 324,682 - 1,120,134

2,198 52,768 4,718 26,257 - 85,941

- - - (33,069) - (33,069)

- - - - - -

- (6,625) (10,473) - - (17,098)

42,095 720,805 75,138 317,870 - 1,155,908

2,197 54,297 3,381 11,242 - 71,117

- - - (8,973) - (8,973)

(216) 4,670 - (4,454) - -

- - - (18,379) - (18,379)

44,076 779,772 78,519 297,306 - 1,199,673

67,689 564,977 8,370 8,465 1,359,432 2,008,933

69,670 508,898 10,251 14,053 13,661 616,533




44

Balance at 01 April 2015

Charge for the year

Disposals

Transfer

Adjustments


Charge for the year

Disposals

Transfer

Adjustments


Carrying amount

Balance as at 31 March 2017


Capital work in progress relates to costs incurred on the redesign and upgrade of the D-Mill plant to enable the milling of sorghum.

The D-Mill will be commissioned and capitalized in July 2017.

Impairment losses recognised in the year

There are no indicators of impairment at the end of the reporting period (2016: Nil). Thus the directors are of the opinion that

allowance for impairment is not required. The D-Mill plant which was idle during the year has been upgraded to enable the milling

of sorghum which the Directors have projected to be a major source of revenue in the next financial year.

Contractual commitments

At 31 March 2017, the company had no contractual commitments for the acquisition of property, plant and equipment (2016: Nil).

Pledged as security

No asset of the Company was pledged as security for loans during the reporting period (2016: Nil).

39

18. Intangible assets

Computer

software

N'000

Cost

Balance at 01 April 2015 38,056

Addition -

Disposal -

Balance at 31 March 2016 38,056

Addition -

Disposal -


Accumulated amortisation

Balance at 01 April 2015 36,767

Charge for the year 1,289

Balance at 31 March 2016 38,056

Charge for the year


Carrying amount



Computer software relates to acquisition of software license and any other development costs directly attributable to the

preparation of the computer software for its intended use. Amortization of computer software is calculated based on

useful life of 3 years.

38,056

-

38,056

-

-




46

31-Mar-17 31-Mar-16 N '000 N

'000

19. Inventories

Raw materials, components 1,066,659 215,613

Finished goods 92,076 23,532

Maintenance spares and consumables 262,252 185,269

1,420,987 424,414

Inventories (write-downs) (53,569) (28,281)

1,367,418 396,133

The cost of inventories recognised as an expense during the year in respect of continuing operation was N684.6 million (2016: N

808.3 million).

20. Trade and other receivables

Trade receivables 156,719 156,726

Amount due from related companies 429,486 206,659

Staff debtors 19,088 23,977

Impairment for bad debts (178,708) (116,339)

426,585 271,023

Other receivables 10,848 16,771

437,433 287,794

Before accepting a new customer, the Company initially trades with the customer on a cash basis to assess the customer’s abil ity

and also determine the customer’s transaction volumes. This enables a reasonable credit limit to be set. Once these are

determined, the customer is then allowed to apply for a credit facility from the company through a rigorous process with several

levels of approval. Also credit customers provide bank guarantees before being accepted as credit customers of the company.

Credit sales form a small portion of overall sales. The concentration of credit risk is limited due to this fact and the large and

unrelated customer base. The company has pledged no trade receivables during the year.

Of the trade receivables balance at the end of the year, the largest customers in the company are:

N000 %

Customer A 27,010 17 %

Customer B 12,224 8 %

Customer C 10,269 7 %

Customer D 10,015 6 %

Customer E 8,277 5 %

No other customer represents more than 5% of the total balance of trade receivables.

There are no trade receivables which are past due at the reporting date for which the Company has not provided as there has not

been a significant change in the credit quality and the amounts are still considered recoverable. The Company does not hold any

collateral over these balances.

Fair value of trade and other receivables

The carrying amount of these assets approximate their fair value.

Reconciliation of provision for impairment of trade and other receivables

Opening balance 116,339 41,183




47

Allowance for impairment 62,369 75,156

178,708 116,339

31-Mar-17 31-Mar-16 N '000 N

'000

20. Trade and other receivables (continued)

In determining the recoverability of the trade receivable, company considers any change in the credit quality of the trade receivable

from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited because of the customer

base being large and unrelated and large credit risks are insured against irrecoverability. Accordingly, the directors believe that

there is no further credit provision required in excess of the allowance for doubtful debts.

The Company does not hold any collateral or other credit enhancements to cover its credit risks associated with its trade

receivables.

21. Prepayments

Bank balances 385,942

388,519

23. Share capital

Authorised

200,000,000 Ordinary shares of 50 kobo each 100,000 100,000

24. Retirement benefits

Defined benefit plan

The Company operates unfunded defined benefit plans for qualifying employees of the Company. Under the plans, the employees

are entitled to retirement benefits varying between1.25% and 2.5% of final salary on attainment of a retirement age of 60. No

other post-retirement benefits are provided to these employees.

Prepaid Expenses 2,363 1,997

Prepayments-Insurance Premium 8,019 243

Prepaid Rent & Rates 6,624 6,417

22. Cash and cash equivalents

Cash and cash equivalents consist of:

17,006 8,657

Cash on hand 334 2,577

Issued

178,200,000 Ordinary shares of 50 kobo each 89,100 89,100

Share premium 89,521 89,521

178,621 178,621

Mar 31- -17 -16 31- Mar N '000 N '000

469,605

469,939




48

The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 March 2017 by

HR Nigeria Limited (FRC registration number: 000000000738), a firm of independent actuarial consultants. The present value of

the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit

Credit Method.

24. Retirement benefits (continued)

Carrying value

1 April 90,908 293,638

Service cost 5,514 22,654

Interest cost 11,765 43,958

Transfer - (120)

Curtailment - (59,355)

Payment during the year (6,228) (214,700)

Actuarial losses (8,773) 4,833

93,186

Key assumptions used

The principal assumptions used for the purpose of the actuarial valuations were as follows:

Financial assumptions

Discount rates used 16 % 13 %

Expected increase in salaries 15 % 12 %

Average rate of inflation 12 % 9 %

Demographic assumptions

Mortality in service

The rates of mortality assumed for employees are the rates published in the A49/52 Ultimate Tables, published jointly by the

Institute and Faculty of Actuaries in the UK.

Mortality in service Sample of age Number of deaths in year out of 10,000

lives

25 7

30 7

35 9

40 14

45 26

Withdrawal from service Age band Rate (%)

</=30 2.5 %

31-39 1.5 %

40-44 1.0 %

45-50 - %

Mar 31- -17 -16 31- Mar N '000 N '000

90,908




49

Amounts recognised in statement of profit or loss and other comprehensive income in respect of these defined benefit

schemes are as follows:

Current service cost 5,514 22,654

Interest cost 11,765 43,958

Actuarial (gains) losses (8,773) 4,833

8,506 71,445




24. Retirement benefits (continued)

Defined contribution plan

The employees of the Company are members of government approved Pension scheme (Pension Reform Act, 2014) which is

managed by several private sector service providers. The Company and employees are required to contribute a specified

percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Company with respect

to the retirement benefit plan is to make the specified contributions and remit to the nominated Pension Fund Administrators.

The Company is under no obligation to cover any unfunded benefits.

The total expense recognised in the Company's statement of profit or loss of N11.58 million (2016: N 14.06 million) represents

contributions payable to these plans by the Company at rates specified in the rules of the plans. As at 31 March 2017, contributions

of N1.64 million (2016: N 0.87 million) due in respect of 31 March 2017 reporting period had not been paid over to the plans. The

amounts were paid subsequent to the end of the reporting period.

Sensitivity analysis

Accrued

Liability

N'000

Base - - 93,186

Discount rate - +1% 86,495

- -1% 100,673

Salary increase - +1% 96,082

- -1% 90,531

Mortality experience - +1 year 93,337

- -1 year 93,049

25. Long service award

The Company operates a long service awardc scheme where employees are rewarded after a specific number of years in

service. Employees are entitled to the benefits after being in service for 10, 15, 20, 25, 30 and 35 years. The amounts and

items given are based on the number of years in service.

The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at 31 March 2017

by HR Nigeria Limited, a firm of Independent Actuarial Consultants. The present value of the defined benefit obligation, and

the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The principal assumptions for the purpose of the actuarial valuations were as follows:

Valuation at

31-Mar-17 31-Mar-16

% %

Discount Rate 16 13

Salary increase 15 12

Average rate on inflation (p.a.) 12 10

At 1 April 22,638 50,270

Additional provision recognised 4,539 10,997

Payment during the year (4,419) (2,976)

Actuarial loss/(gains) 1,808 (35,653)

Mar 31- -17 -16 31- Mar N '000 N '000

24,566 22,638

Amounts recognised in the statement of profit or loss and other comprehensive income in respect of these defined benefit schemes

are as follows:

44




25. Long service award (continued)

Analysed into Current

Bank loan movement

Additions 2,194,965 -

Accrued interest 228,641 -

Closing balance 2,423,606

Details of Borrowings

During the year, the entity obtained loans from its parent company, Flour Mills of Nigeria Plc, to finance its working capital

requirements and the construction of the Sorghum Mill project. These loans were obtained as short term loans pending the

approval and disbursement of loans requested by the entity from the Bank of Industry (BOI) of Nigeria which will be used to repay

the intra-group loan.

The loans are not secured on any of the assets of the company and the rate of interest on the loan is the short term interest rate

of Zenith Bank of Nigeria Plc.

27. Trade and other payables

The average credit period on purchases is 58 days. No interest is charged on trade payables.

The Company have financial risk management policies in place to ensure that all payables

are paid within a reasonable time of the credit time frame.

28. Customers deposits

Current service cost 1,726 3,780

Interest on obligation 2,813 7,217

Actuarial loss / (gains) 1,808 (35,653)

26. Borrowings

Unsecured borrowings at amortised cost

6,347 (24,656)

Related party loan (Note a)

Secured Borrowings at amortised cost

2,423,606 -

Trade payables 157,719 54,156

VAT 1,257 1,905

Amount due to related companies 215,714 197,241

Accruals 75,790 61,244

Withholding tax 28,755 729

479,235 315,275

-

31- Mar -17 -16 31- Mar N '000 N '000

2,423,606 -

2,423,606 -

2,423,606 -

Advance payment by customers 59,449 52,672

29. Earnings per share

Basic earnings per share

Basic earnings per share is determined by dividing profit or loss attributable to the ordinary equity holders of the Company by the

weighted average number of ordinary shares outstanding during the year.

45




29. Earnings per share (continued)

Basic loss per share

From continuing operations (kobo per share) (9.11) (110.68)

Basic earnings per share was based on earnings (loss) of N (16.23) million (2016: N (197.24) million) and a weighted average

number of ordinary shares of 178,200,000 (2016: 178,200,000).

Reconciliation of profit or loss for the year to basic earnings

Profit or loss for the year attributable to equity holders of the parent

Adjusted for:

(16,234) (197,240)

After tax effect of preference dividends - -

Diluted earnings per share

Diluted loss per share

From continuing operations (kobo per share) (9.11) (110.68)

63

65

30. Employee costs

The following items are included within employee benefits expense:

Total employee costs

Direct employee costs 92,454 84,773

Indirect employee costs 84,191 100,312

Average number of persons employed during the year was:

176,645 185,085

Senior Management 2 2

Junior Management 7 7

Senior Staff 27 27

Junior Staff 27 29

31- Mar -17 -16 31- Mar N '000 N '000

(16,234) (197,240)

31. Major shareholders

According to the Register of Members, the following shareholders of the company held more than 5% of the issued share capital

of the company.

None of the Directors has notified the company for the purpose of Section 277 of the Companies and Allied Matters Act of Nigeria,

Cap C20 LFN 2004 of any declarable interest in contracts in which the company is involved as at 31 March 2017.

Shareholders Number of shares Percentage holding (%)

31-Mar-17 31-Mar-16 31-Mar-17 31-Mar-16

Flour Mills of Nigeria Plc 94,545,159 94,545,159 53.06 % 53.06 %

Northern Nigeria Investment Limited 12,955,000 12,955,000 7.27 % 7.27 %

Dantata Investment & Securities Limited 9,894,362 9,894,362 5.55 % 5.55 %

46




32. Related parties

Flour Mills of Nigeria Plc is the ultimate parent company which owns 53% (2016: 53%) of Northern Nigeria Flour Mills Plc.

Holding company Flour Mills of Nigeria Plc

Fellow subsidiaries Premier Feed Mills Company Limited

Apapa Bulk Terminal Limited

Golden Shipping Company Limited

Golden Sugar Company Limited

Kaboji Farms

Thai Farms International

Eastern Premier Feed Mills Company Limited Best

Chicken Limited

Related party balances

The Company entered into various transactions with related parties ranging from purchase and sale of goods and services to

expenses incurred by the related companies. The outstanding amounts are from the various transactions entered with the related

parties.

Amount due from related companies

Flour Mills of Nigeria Plc 419,924 183,635

Premier Feed Mills Company Limited - 13,428

Portharcourt Flour Mills Limited 9,562 9,562

Nigeria Eagle Flour Mills Limited - 34

Amount due to related companies

Flour Mills of Nigeria Plc 158,587 159,412

Golden Shipping Company Limited 14,043 14,043

Apapa Bulk Terminal Limited 33,319 23,761

Maiduguri Flour Mill Plc - 25

31- Mar -17 -16 31- Mar N '000 N '000

429,486 206,659

Northern Bag Manufacturing Company Limited -

Related party transactions

The following transactions were carried out with related parties during the year:

Purchases from related parties

Flour Mills of Nigeria Plc. 46,082 309,509

Premier Feed Mills Limited - 18,519

Apapa Bulk Terminal Limited 26,994 -

Northern Bag Manufacturing Company Limited 25,321

98,397

Sale of goods to related parties

Flour Mills of Nigeria Plc. 404,530 288,602

Premier Feed Mills Company Limited - 14,506

Eastern Premier Feed Mills Limited 75,858

378,966

The remuneration of executive management team excluding directors during the year was as follows. Fees

- Chairman 100 100

- Other Directors

Salaries, allowances and expenses

630 630

- Executive Directors 9,210 9,149

- Other Directors 16,086 16,086

26,026 25,965

47




33. Directors' emoluments

The remuneration of directors and key executives is determined by the Remuneration Committe having regard to the performance

of individuals and market trends.

Number of Directors whose emoluments were within the following ranges:

Range ( N) Number Number

1 - 5,000,000 9 9

5,000,001 - 20,000,000 2 2

- -

Emolument of highest paid director

Highest paid directors 16,086 16,086

34. Financial assets by category

The accounting policies for financial instruments have been applied to the line items below:

2017

9,765

215,714 197,241

31- Mar -17 -16 31- Mar N '000 N '000

11 11

30,272

358,300

69,368

473,898

Loans and

receivables

Total

Trade and other receivables 437,433 437,433

Cash and cash equivalents 469,939 469,939

Prepayments 17,006 17,006

2016

Trade and other receivables

Cash and cash equivalents Prepayments

35. Financial liabilities by category

The accounting policies for financial instruments have been applied to the line items below:

2017

Borrowing


2016

924,378 924,378

Loans and

receivables Total

287,794 287,794

388,519 388,519

8,657 8,657

684,970 684,970

Financial

liabilities at

amortised cost Total

2,423,606 2,423,606

479,235 479,235

2,902,841 2,902,841

Financial

liabilities at

amortised cost Total

- -

315,275 315,275

Borrowing


48




36. Risk management

57

Capital risk management

The company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order

to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the

cost of capital.

The company manages its capital to ensure that it is able to continue as a going concern while maximising the return to

shareholders through the optimisation of the debt and equity balance. The overall strategy remains unchanged from the previous

year.

The management of the Company reviews the capital structure on a frequent basis to ensure that gearing is within acceptable

limit.

The Company is not subject to any externally imposed capital requirements.

The gearing ratio at 2017 and 2016 respectively were as follows:

Total borrowings 2,423,606 -

Less: Cash and cash equivalents 22 469,939 388,519

Net debt 1,953,667 (388,519) Total equity 1,239,578 1,250,937

Total capital 3,193,245 862,418

Gearing ratio 158 % (31)%

Financial risk management

Risk management roles and responsibilities are assigned to stakeholders in the company at three levels: The board, executive

and line managers.

The Board oversight is performed by the Board of Directors through Board Risk and Ethics Committee.

The second level is performed by the Executive Management Committee (EXCOM).

The third level is performed by all line managers under EXCOM and their direct reports. They are required to comply with all risk

policies and procedures and to manage risk exposures that arise from daily operations.

The Internal Audit Department provides an independent assurance of the risk frame work. They assess compliance with

established controls and recommendations for improvement in processes are escalated to relevant management, Audit

Committee and Board of Directors.

The company monitors and manages financial risks relating to its operations through internal risk report which analyses exposures

by degree and magnitude of risks. These risks include market risk (including currency risk ), credit risk and liquidity risk.

Market risk

The company's activities expose it primarily to financial risks of changes in foreign currency exchange rates.

Market risk exposures are measured using sensitivity analysis.

There has been no change to the company's exposure to market risks or the manner in which these risks are managed and

measured.

Foreign exchange risk

The company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations

arise. The Company is mainly exposed to the US dollar, the European EUR and the UK pound.

The company does not hedge foreign exchange fluctuations.

(continued)




36. Risk management

58

The following table details the company's sensitivity to a 3%, increase and decrease in Naira against US dollar, UK pound and

European EUR currencies. Management believes that a 3% movement in either direction is reasonably possible at the balance

sheet date. The sensitivity analyses below include outstanding balances of US dollar, UK pound and European EUR denominated

assets and liabilities. A positive number indicates an increase in profit where Naira strengthens by 3% against the US dollar, UK

pound and European EUR. For a 3% weakening of Naira against the US dollar, UK pound and European EUR there would be an

equal and opposite impact on profit, and the balances below would be negative.

Naira strengthens by 3% against the US dollar 11 5

Naira weakens by 3% against the US dollar (11) (5)

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where

appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are

rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available

and, if not available, the Company uses other publicly available financial information and its own trading records to rate its major

customers. The Company's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate

value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits

that are reviewed and approved by the executive committee periodically.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing

credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance

cover is purchased.

The carrying value of the Company's’s financial assets represents its maximum exposure to credit risk. The maximum exposure

to credit risk at the reporting date was:

Collateral held as security and other credit enhancements

The company does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Liquidity risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities that are

settled by delivering cash or another financial asset.

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity

risk management framework for the management of the company’s short-, medium- and long-term funding and liquidity

management requirements. The company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve

borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial

assets and liabilities.

Maturity analysis of financial liabilities

The following tables details the company’s remaining contractual maturity for its non-derivative financial liabilities with agreed

repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the

earliest date on which the company can be required to pay. The table includes both interest and principal cash flows. To the extent

that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the balance sheet date. The

contractual maturity is based on the earliest date on which the entities may be required to pay.

(continued)

Financial instrument 2017 2016

Bank balances 469,605 385,942

Trade receivables

Other receivables

94 42,500 474,315 944,014 287,794 716,236




36. Risk management

59

At 31 March 2017 0-3 months 3-6 months 6-12 months Over 12

months

Borrowings - - 2,423,606 -

Trade and other payables 479,235 - - -

At 31 March 2016 0-3 months 3-6 months 6-12 months Over 12

months

Borrowings - - - -

Trade and other payables 315,275 - - -

37. Fair value information

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the

financial statements approximate their fair values.

38. Contingencies

The company has no contingent liability arising from pending or ongoing litigation at the year end.

39. Commitments

Financial commitments

The directors are of the opinion that all known liabilities and commitments which are relevant in assessing the company's state of

affairs have been taken into consideration in the preparation of these financial statements.

Capital commitments

There were no capital commitments entered into by the Company as at 31 March 2017 (2016: Nil).

40. Events after the reporting period

The Directors are of the opinion that there were no significant post balance sheet events which would have had any material effect

on the balance sheet and the loss for the year ended on that date, which have not been adequately provided for or disclosed in

the Company's financial statements.

Other national disclosures



Statement of Value Added

31-Mar-1731-Mar-17 31-Mar-1631-Mar-16

N '000 % N '000 %

VALUE ADDED

Turnover: Local 940,521

979,038

Export - -

Interest received 23,983 47,409

Other income 429,984 246,552

Bought - in materials and services (1,114,379)

(1,233,755)

- Local - -

- Foreign

Total Value Added

VALUE DISTRIBUTED

To Pay Employees

Salaries, wages, medical and other benefits

To Pay Providers of Capital

Finance costs

- -

280,109 100 39,244 100

176,645

185,085

176,645 63 185,085 472

31,942

-

Dividend paid

To Pay Government

Income tax

- -

31,942 11 - -

13,320

10,214

Education tax

To be retained in the business for expansion and future wealth creation:

Depreciation, amortisation and impairments

- -

13,320 5 10,214 26

71,117

87,230

Restructuring - -

Deferred tax 3,319 (46,045)

Discontinued operations - -

Profit for the year

Total Value Distributed

(16,234) (197,240)

58,202 21 (156,055) (398)

280,109 100 39,244 100

Value added represents the additional wealth which the company has been able to create by its own and employees efforts.

53



Five Year Financial Summary 31-Mar-17 31-Mar-16 31-Mar-15 31-Mar-14 31-Mar-

13

N '000 N '000 N '000 N '000 N '000

Statement of Financial Position

Assets

Non-current assets 2,045,648 658,657 734,721 689,689 857,706

Current assets

Total assets

Liabilities

Non-current liabilities

2,291,796 1,081,103 1,688,990 2,576,926 2,765,711

4,337,444 1,739,760 2,423,711 3,266,615 3,623,417

117,752 113,546 343,908 304,989 383,597

Current liabilities

Total liabilities

Equity

Share capital

2,980,114 375,277 599,740 1,187,714 1,634,103

3,097,866 488,823 943,648 1,492,703 2,017,700

89,100 89,100 89,100 89,100 89,100

Share premium 89,521 89,521 89,521 89,521 89,521

Retained income

Total equity

Total equity and liabilities

Profit and loss account

Revenue

Profit (loss) before taxation

(Loss) profit for the year

Other comprehensive income/(loss) net of taxes

Per share data

Earnings per share (Basic)

1,060,957 1,072,316 1,301,442 1,595,291 1,427,096

1,239,578 1,250,937 1,480,063 1,773,912 1,605,717

4,337,444 1,739,760 2,423,711 3,266,615 3,623,417

940,521 979,038 10,529,075 11,392,017 11,701,741

405 (233,071) (215,430) 341,800 330,377

(16,234) (197,240) (199,558) 233,545 225,145

4,875 21,574 (23,011) 5,930 27,427

(9) (111) (112) 131 126

Earnings per share (Diluted) (9) (111) (112) 131 126

Net assets per share 696 702 831 1,096 901

678 480 637 1,398 1,238

Loss/earnings per share are based on loss/profit after tax and the number of issued and fully paid ordinary shares at the end

of each financial year.

Net assets per share is based on the net assets total and the number of issued and fully paid ordinary shares at the end of

each financial year.

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