Honeywell-Annual-Report-2013.pdf - Nairametrics

H

INTRODUCTION

BUSINESS REVIEW

FINANCIAL STATEMENTS

SHAREHOLDERS' INFORMATION

a. Financial Highlights 3

b. Notice of Annual General Meeting 4-5

c. Directors and other Corporate Information 7-8

a. Chairman's Statement 10-14

b. Chief Executive Officer's Review 15-22

c. The Board of Directors' Profile 25-27

d. Report of the Directors 28-36

e. Report of the Audit Committee 37

a. Report of the Independent Auditors 44

b. Statement of Financial Position 45

c. Income Statement 46

d. Statement of Comprehensive Income 47

e. Statement of Changes in Equity 48

f. Statement of Cash Flows 4 9

g. Index to Notes to the Financial Statement 50

h. Notes to the Financial Statements 51-91

I. Value Added Statement 92

a. List of Key Distributors 95-97

b. Unclaimed Dividends 98

c. Share Capital History 99

d. Application for E-Dividend 101

e. Proxy Form 102

f. Electronic Delivery Mandate Form 103

Contents Pages

Honeywell Flour Mills Plc. 1

Introduction

Financial Highlights 3

Notice of Annual General Meeting 4-5

Directors and other Corporate Information 7-8


Introduction

Financial Highlights for the year ended 31 March, 2013.

%

1ncrease/

2013 2012 ( Decrease)

Revenue 45,709 38,052 20

Profit before taxation 3,815 3,665 4

Profit after taxation 2,844 2,694 6

Total assets 55,437 47,930 16

Shareholders fund 18,553 17,016 9

Issued and fully paid share capital 3,965 3,965 –

Data per 50k share

kobo kobo

Earnings 35.86 33.97 6

Proposed Dividend* 16.00 15.00 7

Net Assets 233.95 214.57 9

Stock Exchange Information

Stock Exchange Quotation as at

March 31 (in Naira per Share) 2.94 2.17 35

Number of Share Issued (in millions) 7,930 7,930 -

Market Capitalization as at March 31

(in millions of Naira) 23,315 17,209 35

* The Directors propose a Dividend payment of 16 kobo (2012: 15 kobo) per share on the Issued Share Capital of

7,930,197,658 ordinary shares of 50 kobo each, subject to the approval of the Shareholders at the Annual General

Meeting.

Financial Calendar

Date

(i) Dividend Qualification Date September 6, 2013

(ii) Closure of Register of Members September 9 to 13, 2013

(iii) 4th Annual General Meeting to receive the Audited

Financial Statements for the year ended March 31, 2013 September 24, 2013

(iv) Payment of Dividend September 25, 2013

Result in millions of Naira


Introduction

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Fourth Annual General Meeting of the Company will hold

as follows:

Date: Tuesday September 24, 2013

Venue: Civic Centre

Ozumba Mbadiwe Street

Victoria Island

Lagos.

Time: 11a.m

The following will be transacted at the meeting as ordinary business:

1 To receive the Audited Financial Statements for the year ended 31 March, 2013, together with

the Report of the Directors, Auditors & Audit Committee thereon.

2 To declare a Dividend.

3 To elect Directors.

4 To approve the remuneration of Directors.

5 To authorise the Directors to fix the Auditors remuneration

6 To elect members of the Audit Committee.

Proxy

Any member of the Company entitled to attend and vote at

this meeting is also entitled to appoint a proxy to attend and

vote in his/her stead. A proxy need not be a member of the

Company. A proxy form is enclosed herewith. A proxy form

must be completed and deposited at the office of the

Company's Registrar, First Registrars Limited, 2 Abebe

Village Road, Iganmu Lagos not later than 48 hours before

the time fixed for the meeting.

Audit Committee

Any Shareholder may nominate another Shareholder as a

member of the Audit Committee by giving notice in writing


Introduction

Notice of Annual General Meeting


of such nomination to the Secretary of the Company at least 21 days before the Annual General

Meeting.

Dividend

If the Dividend recommended by the Directors is approved by the members at the Annual General

Meeting, Dividend will be paid by Wednesday, September 25, 2013 to the Shareholders whose

names appear in the Company's Register of Members on the close of business on Friday September

6, 2013.

Closure Of Register And Transfer Books

The Register of Members and Transfer books will be closed from Monday, September 9, 2013 to

Friday, September 13, 2013, both days inclusive for the purpose of updating the Register of

Members.

E-Dividend

Notice is hereby given to all Shareholders to open bank accounts, stock broking accounts and CSCS

accounts for the purpose of dividend. A detachable application form for e-dividend is attached to

this Annual Report to enable all shareholders to furnish particulars of their accounts to the Registrar

(First Registrars Limited) as soon as possible.

E-Report

In order to improve delivery of our Annual Reports, we have inserted a detachable Form to this

Annual Report and hereby request Shareholders who wish to receive Annual Reports of the

Company in an electronic format to complete and return the Form to the Registrars for further

processing.

In addition, the Annual Reports are available online for viewing and download from our website at

www.honeywellflour.com

BY ORDER OF THE BOARD

Oluwayemisi Busari (Mrs.)

Company Secretary

Introduction

Directors and other Corporate Information

Board of Directors

Secretary

Operational Office

Registrars

Registered Office

Dr. Oba Otudeko, D.Sc. (Hon) CFR – Chairman

Folaranmi Babatunde Odunayo – Executive Vice Chairman / CEO

Lt. General Garba Duba [Rtd]

Jens Mollenbach (Danish)

Obafemi Otudeko

Akinsoji Akintayo

David William Obray (South African)

Theophilus Oluranti Sokunbi

Dr. Nino Albert Ozara – Executive Director

Oluwayemisi Busari (Mrs)

Tel: +234 1 731 5870, +234 1 793 2694

(a) Apapa Factory

2nd Gate By-Pass

Tin Can Island Port

Apapa,

Lagos.

Website: www.honeywellflour.com

Email: [email protected]

(b) Ikeja Factory

Plot YABB, Mobolaji Johnson Avenue

Alausa

Ikeja,

Lagos.

First Registrars Nigeria Limited

2, Abebe Village Road,

Iganmu, Lagos.

SW8/1185 Sanda Street

Molete, Ibadan.Honeywell Flour Mills Plc. 7

Introduction

Directors and other Corporate Information - cont’d

Bankers

Auditors

Access Bank Plc

Diamond Bank Plc

Ecobank Nigeria Plc

Fidelity Bank Plc

First Bank of Nigeria Limited

Guaranty Trust Bank Plc

Keystone Bank Limited

Skye Bank Plc

Standard Chartered Bank Nigeria Limited

Union Bank of Nigeria Plc

United Bank for Africa Plc

Zenith Bank Plc

BBC PROFESSIONALS

(Chartered Accountants)

24, Ilupeju By-Pass

Ilupeju,

Lagos.


Introduction


Chairman’s Statement

Chief Executive Officer’s Review

10 - 14

15 - 22

25 - 27

The Report of the Directors

The Report of the Audit Committee

The Board of Directors Profile

37

28 - 36

Business Review

Fellow Shareholders, my colleagues on the Board of Directors, Gentlemen of the Press, Ladies and Gentlemen, I am pleased to welcome you to

ththe 4 Annual General Meeting of our beloved Company. It is a privilege for me to lay before you the Annual Report and Financial Statements of your Company for the year ended 31 March 2013.

Dr. Oba Otudeko, D.Sc. (Hon.) CFR

Chairman’s StatementChairman’s Statement


Since the listing of the Company on the

Nigerian Stock Exchange (NSE), the

performance of the Company has been on the

ascent, in spite of the challenging environment

under which we operate. In the course of my

address this morning, I shall also enunciate the

plans that are afoot to lift the performance of

the Company and create further wealth for the

Shareholders

Global Economic Environment

In 2012, a number of challenges stood in the

path of a more widespread economic growth

namely: the protracted Eurozone debt crisis,

waning demand for Chinese exports and

reduced demand for commodities in the

Asia/Pacific region. Overall, global exports

only witnessed a mere 1% growth in 2012. The

slowdown in global trade was caused by export

declines in Japan, China and Germany while

the growth experienced in the U.S. contracted

in the fourth quarter of 2012. The International

Monetary Fund in its World Economic Outlook

has predicted a subdued global growth rate of

3% in 2013. The forecast is driven by weaker

domestic demand and slower growth in several

key emerging markets as well as a more

protracted recession in the Eurozone.

Global growth rate increased marginally from 1 32 / % in the second quarter of 2012 to 2 / % in 2 4

the first quarter of 2013. Global growth

continued to be under-par due to the inability of

emerging markets to grow as anticipated,

recession in the Eurozone and the weaker

expansion of the U.S. economy. It is anticipated

that the recent rise in financial market volatility

and associated yield increases will partly

reverse. However, if this fails, portfolio shifts,

further yield increases and continued higher

volatility could result in sustained capital flow

reversals and lower growth in emerging

economies.

Nigerian Economic Environment

The Nigerian economy faced numerous

challenges which impacted overall economic

activity in 2012. There was a decline in the real

growth rates of economic activity in both the oil

and non-oil sectors. Oil production was less than

expected at 2.37 million barrels per day during

the first half of the year while the non-oil sector

was affected by the incidents of flooding. The

manufacturing sector enjoyed a slight upturn in

its growth rate in the second quarter of 2012 to

7.59% and the rate closed the year at 7.71%.

According to the Nigerian Bureau of Statistics

(NBS), the economy grew at a rate of 6.61% and

is expected to rise to 6.75% in 2013.

The inflation rate showed a general downward

trend during the year, despite the economic

challenges that the country witnessed. From the

12.6% recorded in January 2012, the headline

inflation rate reached 12.9% at the end of the first

and second quarters of the year before slowing

to 11.3% in the third quarter. The average

inflation rate for the year stood at 12.2%.

Chairman’s Statement - cont’d Business Review


The removal of fuel subsidies early in 2012, the

devastating flood that occurred in the

Eastern/Southern parts in the third and fourth

quarters of 2012 as well as seasonal effects also

played major roles in driving up prices at

various times, in addition to the major

inflationary pressure of structural and

infrastructural constraints in the country.

The Central Bank of Nigeria retained the

Monetary Policy Rate (MPR) at 12%

throughout the year in order to manage the

inflationary trend observed in the economy.

Lending rates from the banks closed at the

financial year at 16.16% and 22.31% for prime

and maximum lending rates respectively. The

attractiveness of the yield on government

securities and its lower risk compared to the

lending to the real sector further constricted the

lending to the real sector. Manufacturers faced

daunting challenges in raising funds to finance

their operations.

Investors' confidence in the Capital Market is

gradually returning as the All-Share Index

(ASI) increased by 52% from 22,045.66 on 1

May, 2012 to 33,536.25 on 1 April, 2013. This

positive upswing in the ASI is due to improved

earnings, increased capital inflow and portfolio

investments.

During 2012, the security situation in the

Northern part of the country and the flooding

experience in the Eastern/Southern parts of the

country impeded the free movement of goods

and services across the country. The security

situation in the Northeast has continued to affect

and depress the volume of trade in that part of the

country.

Results for the Year

Strong growth was achieved across our brands

as reflected in a 20% increase in revenue from

N38 billion to N46 billion. Profit after tax grew

from N2.6 billion to N2.8 billion, a growth of 6%

over the preceding year. Shareholders' Funds

and Total Assets increased by 9% and 16% to

N19billion and N55 billion respectively.

Earnings per share rose from 33.97kobo to

35.86kobo in the preceding year.

The continued success of our brands is as a result

of our dedication to quality manufacturing

processes, quality of our products and the

increased brand visibility, which is a product of

our strategic marketing activities. The

fundamentals of the Company get stronger year-

on-year through prudent management of cost

and use of strategic sales and marketing.

Dividend

In accordance with our tradition of creating

value for shareholders, the Board of Directors

has recommended a total dividend payout of

N1.27 billion representing a distribution of 16

kobo for every 50 kobo ordinary share held.

Subject to your approval, the dividend will be thpaid on the 25 September, 2013.

Chairman’s Statement - cont’d Business Review


Board

No changes have been made to the Board

Composition. However, In accordance with the

Company's Articles of Association, the

following Directors namely, Dr. Oba Otudeko,

Dsc.(Hon) CFR, Lt. General Garba Duba (Rtd)

and Mr Jens Mollenbach retire by rotation at

this Annual General Meeting and being eligible

offer themselves for re-election.

Internal Restructuring

The Company carried out an internal

restructuring which resulted in the merger by

absorption of Honeywell Superfine Foods Ltd,

formerly a wholly owned subsidiary, and

manufacturers of pasta and noodles. The key

objective of the integration was to achieve a

further extraction of value from the already

existing forward/vertical integration between

the two businesses. The objectives of the merger

were tabled before our esteemed Shareholders thon February 28 , 2013 at the company's

Extraordinary General Meeting, and after your

valuable contributions and approval, we were

able to proceed to obtaining other regulatory

and court approvals. The merger was completed

towards the end of the financial year and for this

reason, its beneficial impact will only be felt in

the financial year ending March 2014.

Health, Safety and Environment

Our Company operates an eco-friendly business

model with a robust Health, Safety and

Environment (HSE) policy that elucidates

responsible environmental management. The

health and safety of our employees is our

primary concern and is at the heart of our

operations. We shall continue to seek

improvements to our HSE procedures and

provide regular safety training and briefings for

employees and contractors on safety

consciousness. Safety consciousness involves

the identification of hazards or unsafe acts,

assessment of risks and controlling the risks

associated with the work hazards that are

identified.

Completion of Mills E & F

The project to realize a 1000mt/ day increase in

our milling capacity was completed around

March 2013 towards the end of the financial year

just ended. The modern milling facility has

taken our milling capacity to 2,610mt/day. The

full impact of this capacity increase on our

Semolina, Wheat Meal and Flour sales volumes

will only be fully felt in the financial year ending

March 2014.

Chairman’s Statement - cont’d

Future Outlook

Despite the challenging operating climate of

high interest rates, heavy import duty on raw

materials and high cost of doing business, we

continue to seek opportunities for growth. As

you might be aware, the Company has exhausted

its available land at the Tincan Island Port,

Apapa while growth beckons. To overcome this

challenge and be able to continue to build wealth

for our shareholders, I am pleased to announce

to you that we have acquired about 64 hectares

of land along the Lagos-Ibadan Expressway

Business Review


Chairman’s Statement - cont’d

from the Ogun State Government within the

newly created industrial zone known as

Flowergate Scheme in Sagamu Local

Government Area, Ogun State. The Company

plans to develop the Honeywell Integrated

Foods Complex at the Sagamu site and locate

several food production and processing factories

within this Foods Complex, with emphasis on

the manufacture of value-added human and

animal food products. This will result in a major

and significant growth for the business as we

continually strive to meet customers' increasing

demand for Honeywell brand of quality food

products.

For a start, we have completed plans to situate a

new pasta factory at the Flowergate Estate in

order to be able to meet the increasing demand

for our Honeywell Spaghetti and Macaroni

brands. It is our expectation that we can

commence construction works before the end of

this calendar year and deliver the works for

production in year 2015.

The revenue earnings for the company in the stfinancial year ending 31 March, 2014 will

benefit greatly from the product volumes

coming out of the newly commissioned Mills E

& F and with that we can also expect

significantly improved earnings for the financial

year.

Appreciation

On behalf of the Board of Directors,

Management and Staff of Honeywell Flour

Mills Plc, I wish to express our profound

gratitude to our loyal customers whose

continued patronage keeps us in business.

I would like the shareholders to help applaud the

tireless commitment of members of the Board of

Directors; their vision, knowledge and expertise

help to make your company a pride among its

peers. The Management and Staff must also be

commended for their dedication and devotion to

the cause of the Company. The hard work,

diligence, professionalism and leadership

exhibited by the Management must be

commended.

Worthy of note also is the robust relationship we

enjoy with our logistics service providers and

suppliers. We thank them all for their support.

Conclusion

Distinguished Shareholders, my colleagues on

the Board, Ladies and Gentlemen, I thank you

for your continued faith in the Company and its

management. I thank you also for your presence

at this year's Annual General Meeting; I look

forward to your full participation in the agenda

of today's meeting and once again, I say

welcome to you all.

Dr. Oba Otudeko, D.Sc (Hon.), CFR

Chairman of the Board

Business Review

Chief Executive Officer’s Review

thDistinguished Shareholders, Ladies and Gentlemen; it gives me much pleasure to welcome you to the 4

Annual General Meeting of Honeywell Flour Mills Plc and to advise you of some key developments and

strides that your Company has made in the last 12 months. These developments have defined the

performance of your Company and helped to lay the foundation for further growth in the foreseeable future

Introduction

The financial year just ended has been an exciting year filled with opportunities and challenges. We made

significant strides towards our goal of increasing shareholders' wealth through a combination of increased

product volume availability and cost optimization. Management's commitment and painstaking effort will

continue to sustain the Company's superior earnings.

High interest rate and borrowing constraints remain a major challenge. The average prime lending rate of

17% remains unattractive, as banks struggle to provide adequate funding for our growth initiatives. The

liquidity tightening strategies of the Central Bank of Nigeria have continued to squeeze the capacity of

banks to fund real sector growth. The new requirement for banks to keep 50% of government's fund with

the Central Bank will have significant implication for liquidity, banks' capacity to lend and interest rate.

Financial Reporting and Accounting

In year 2010, the Securities and Exchange Commission (SEC) had mandated all companies quoted on the

Nigerian Stock Exchange to prepare their financial statements for the year ended December 2012 in


Folaranmi Babatunde OdunayoExecutive Vice Chairman/CEO

Business Review


Chief Executive Officer’s Review - cont’d

accordance with the guidelines of the

International Financial Reporting Standards

(IFRS). In pursuit of this directive, we present

for the first time the Annual Financial

Statements of your company, for the year ended st31 March 2013 in accordance with the

requirements of IFRS.

Performance Review

Financial results of the company can be

summarized under the following performance

metrics.

(i) Revenue Growth:

Revenue grew by 20% to close at N46billion

from N38billion achieved in the previous year.

All the products reflected growth in 2013 as

indicated in the bar charts below:

White Flour

2013 2012

‘Million

28000

26000

24000

22000

20000

150

100

50

02013 2012

‘Million

Brown Flour

White and Brown Flour earnings increased by

17% and 124% respectively in FY2013.

Semolina

2013 2012

‘Million

6500

6000

5500

5000

4500

Wheat Meal

2013 2012

‘Million

2500

2000

1500

1000

0

Semolina and Wheatmeal earnings increased

by 17% and 39% respectively in FY2013.

6000

5500

5000

4500

Pasta

2013 2012

5000

4000

3000

2000

1000

0

Noodles

2013 2012

‘Million

‘Million

Pasta and Noodles earnings increased by

16% and 47% respectively in FY2013.

Business Review



(ii) Product Revenue Contribution

The comparative product revenue contribution

profile is indicated in the charts below.

• White Flour's contribution reduced from 61%

to 59% in favor of higher margin products like

Wheat Meal and Brown Flour.

• Semolina and Pasta’s contribution were

retained at 14% and 13% respectively,

while Noodles reflected an increase from 7%

to 9%.

• The new Mills E& F were commissioned

towards the end of the financial year and

therefore, its impact on the product volume

offerings will only be fully felt in 2014.

(iii) Revenue Trend

The revenue trend in the last five years is as

shown in the chart below.

FY 2013

Noodle 9%

Semolina 14%

Wheatmeal 5%

Brown flour 0.2%

Flour 59%

Pasta 13%

FY 2012

Noodle 7%

Semolina 14%

Wheatmeal 4%

Brown flour 0.1%

Flour 61%

Pasta 13%

•

•

•

•

•

(iv) Profit after Tax

Profit before Tax (PBT) grew to N3.815 billion

from N3.6billion in 2013 while Profit after Tax

(PAT) grew from N2.6 billion to N2.843 billion.

The PAT trend over the last five years is as

shown below. The figures for 2009 to 2011 are

based on the old Nigerian Generally Accepted

Accounting Principles (GAAP). However, the

impact of the Nigerian GAAP on the PAT for

years 2009 to 2011 will not materially affect the

indicated growth trend.

Revenue growth was 20% from 2012 to 2013.

Revenue growth was 59% over the last five

years.

All the products of the Company have strong

brand equity.

High investment in advertisement and

marketing activities has significantly

contributed to the increasing revenue

earnings.

Full impact of the new Mills E&Fcapacity

expansion on revenue growth will be fully

felt in 2014.

10

46

20 30 40 500

2013

2012

2011

2010

2009

38

34

33

29

Revenue Trend

Turnover (N billion)

Business Review



. Growth of PBT and PAT were 4% and 6%

from 2012 to 2013 respectively.

. Growth of PAT was 1,191 % over the last five

years.

. Efficient business processes, efficient

management o f overheads , whea t

procurement, treasury issues, and heavy

investment in marketing activities have

immensely contributed to the positive PAT

trend over the years.

(v) Total Assets

The Company has achieved a considerable

growth in total assets.

• Total assets rose by 16 per cent to N55.4 billion

in 2013 when compared to the N47.9 billion in

2012. This increase was significantly

influenced by the completion of the Mills E&F

and other related Projects in 2013.

2.84 2013

2012

2011

2010

2009

PAT Trend

Profit after Tax (N billion)

2.69

2.49

1.18

0.22

0 0.5 1 1.5 2 2.5 3

2013

2012

2011

10 20 30 40 2 50 60

55

47

20

Total Assets (Trend)

Total Assets (N billion)

Plant Expansion

The plant expansion and improvement

programmes that were embarked upon during

the last financial year were concluded with the

commissioning of the mills E and F towards the

end of the financial year. The mills incorporate

the state-of-the-art technology from BUHLER

AG in Switzerland, the world leading milling

equipment suppliers. The mills are already

running at a capacity utilization of well over

70%.

All the other ancillary facilities such as the new

AROX automated palletizing and racking

warehouse, the new special product warehouse,

the new bran bagging and warehousing facility,

the 30,000 mt wheat storage silos, the wheat

intake pit and the newly upgraded dock-silo

wheat discharge facility have also been

completed, and have added greatly to our

operational efficiency.

We also carried out a restructuring of aspects of

the process flow in order to improve efficiency

in our wheat discharge, milling, storage,

bagging, sale and logistics operations. Product

storage, bagging, warehousing and loading

operations have been physically separated

according to product category in compliance

with food safety regulations and international

best practices. All flour products, semolina,

wheat meal and wheat bran are now stored,

packed and warehoused in physically separate

locations and this has brought in a lot of cost

savings in the area of packaging, warehousing,

Business Review



cleaning and fumigation because of

homogeneity and uniformity of manufacturing

practices.

Flour Warehousing System

The AROX warehouse racking system is the

first of its kind in Nigeria. It enables us to store

up to 100,000 bags of flour in a computerized

arrangement where each pallet is identified and

programmed to ensure that flour bags can be

released to the trade in an orderly first-in-first-

out basis. This system is expected to reduce

loading and turnaround times for trucks, reduce

drudgery, improve work process and overall

efficiency of our bagged flour handling

operations.

Dock-to-Silo Conveying System

The dock-to-silo wheat discharge system has

been upgraded from 250 mt to 500 mt/hour. We

are now able to discharge the wheat vessels at

twice the existing speed into our 70,000 mt

capacity silos. This was achieved by replacing

the old belt conveyor with three Buhler-type

chain conveyors and the addition of a VIGAN

discharge equipment to support the existing one.

Production Configuration

All our six mills have been configured to enable

us produce our range of products in any

proportion in order to be able to meet the

demand patterns of our teeming customers

nation-wide. Our range of products now

includes bread flour, confectionary/pastry flour,

noodle flour, pasta flour, brown flour, semolina

and wheat meal. At the Ikeja factory we produce

Instant Noodles in four flavours – chicken,

onion-chicken, curry and seafood, while pasta is

produced as spaghetti and three variants of

macaroni – cornetti, cavatto and fusilli.

Marketing

Brand management remains at the core of our

strategy to build an enduring business through

the development of strong consumer brands.

Our brand building activities are actively

supported by a very strong drive for consistency

in product quality and superior product use

experiences in respect of which our brands are

already well known.

Following the introduction of our highly

successful television advert for Honeywell

Noodles ('Bam Bam la la'), the brand's fortunes

made a dramatic turnaround with significant

growths in top-of-mind-awareness, trial,

preference, usage and market share parameters.

By the end of the financial year, our Noodles

brand had moved from no. 5 within the Noodles

category (at 4% market share) to no. 2 (at 10%

market share). Our national sales revenue for

Honeywell Noodles grew by 47% by the end of

the financial year to N4.1 billion when

compared with 2012, while the Lagos Sales

Region witnessed a 129% volume growth from

605,381 cartons to 1,387,317 cartons. We are

very confident that continued investment in

advertising and other sales and marketing

activities will allow us to further increase our

market share and derive greater equity from our

Noodles brand. Our Noodles advert, 'Bam Bam

la la' won “The Best use of Music in

Business Review



Advertising” Award during the year as adjudged

by the Association of Advertising Agencies of

Nigeria (AAAN) at the Lagos Advertising Ideas

Festival (LAIF).

In the Whole Wheat Meal category, we are a

clear market leader in all key brand performance

metrics. We have a market share of more than

60% in a rapidly growing category. Our share of

the market was limited by our ability to meet

customer orders during the year, but following

the completion of the mills expansion project,

the Honeywell Wheat Meal is expected to

witness a significant growth in volume which

will positively impact our market share. We

have introduced a television advert for

Honeywell Wheat Meal which is growing in

popularity among consumers who have

nicknamed it 'Baba Wakis'. The impact of this

advert on our revenue earnings will be fully felt

in the 2014 financial year.

Our Honeywell Semolina brand continues to be

the preferred semolina among consumers

because of its superior quality and better value

for money. Following the completion of the

mills expansion project, our Semolina

production capacity has increased by about

170% . In the light of this, we have introduced a

television advert for our Semolina in order to

create increased awareness and drive increased

trial and usage. The impact of the advert which

consumers have also nicknamed 'Husband

Snatcher' will be fully felt in the 2014 financial

year.

Baking School

Our Baking School Programme continues to

elicit great interest within the Baking Industry

throughout Nigeria. We remain the only Flour

Mill that offers formal Baking education and

training to bakers. The graduation ceremonies

receive adequate media coverage and graduands

proudly hang the graduation plaque in their

bakery facilities. During the year, we trained

over 60 bakers, but due to popular demand,

some consideration is now being given to the

expansion of facilities in order to be able to

increase the number of trainees from 15 to about

30 persons per training session.

Corporate Social Responsibility

We carried out other Corporate Social

Responsibility initiatives during the financial

year to aid learning and alleviate suffering.

These include donation of our products to

Orphanages and flood victims, as well as

donation of books and computers to some

Primary Schools.

We partnered with The Rotary Club, Lekki

Chapter to donate Books and Computers worth

N1.2m to three schools in the Lekki area of

Lagos State:

• Ogombo Community Secondary School,

Ogombo Village.

• Itedo Community Primary School, Lekki.

• Mayegun Community Primary School,

Lekki.

Business Review


Business Review Chief Executive Officer’s Review - cont’d

On Valentine's day February 14, 2013 we visited

and donated company products to three

orphanages in Lagos State:

• The SOS Village Isolo.

• Little Saints Orphanage, Palm Groove.

• The Love Home Orphanage, Magodo.

Logistics and Distribution

Weak national infrastructure, particularly

transportation remains a source of concern for

our business. The traffic gridlock around Apapa

especially the Tin Can Island Port and the

location of our Milling Facility remains a

significant logistical challenge. More than a few

hours are lost on a daily basis by customers in

the traffic bottleneck within Apapa. We

appreciate the continued patronage of our

Customers and logistics Partners in the face of

the daunting challenge. The reconstruction

work by the Federal Government on the Apapa –

Oshodi Expressway and the construction of the

Trailer Park at the Tin Can Island Port for

articulated vehicles, both aimed at decongesting

traffic on the Port access road is a welcome

response to the traffic gridlock. It is hoped that

these projects would be completed during 2014

so as to bring some sanity to the traffic situation

at the port complex.

Human Capital

We are proud of our people and they remain our

prized assets. Their technical and professional

depth is the source of our competitive edge in

the industry. The internal restructuring carried

out during the year led to the merger by

absorption of Honeywell Superfine Foods

Limited, and with that we now have a staff

strength of 679 at Apapa, and 201 at Ikeja

making a total of 880 persons. The business

combination is working out very well in our

ability to streamline strategies, people and plans

in a wholesome and cost saving manner for the

single organization.

We continually strive to deploy the best Human

Resources practice in order to ensure that staff

competence and productivity are at the cutting

edge. During the year under review, about 80%

of our staff attended training courses and

learning opportunities aimed at ensuring that

their skills remain relevant and appropriate for

the jobs that have been assigned to them. The

training courses were conducted for both

technical and non-technical staff at both local

and internationally reputable organizations.

We pay a strong attention to assure a safe work

environment. The enforcement of safety and

environmental standards helps to minimize

occupational and health hazards. On-site clinic

service, manned by qualified industrial nurses

and a visiting physician has been enhanced by

the acquisition of a well-kitted ambulance to

facilitate evacuation in the event of health and

accident issues.

We are happy to report that our Human

Resource and Staff welfare service is very

strong and is comparable to its peers in the

Nigerian manufacturing sector. During the year

under review, the company was very proud to



receive the Chartered Institute of Personnel

Management of Nigeria Award for the best

H u m a n R e s o u r c e s P r a c t i c e i n t h e

Manufacturing sector.

Enterprise Resource Planning (ERP)

I am glad to report that we have commenced the

implementation of a new Enterprise Resource

Planning (ERP) software across all the business

segments and operations of the Company.

The ERP is expected to be launched as a tool of

c h a n g e - m a n a g e m e n t a n d b u s i n e s s

transformation to enable us achieve integrated

information flow, business processes

standardization and integration, in line with

global best practice. The benefit of this will be a

faster decision making process based on real-

time information for overall productivity

enhancement in the company. The

functionalities of the ERP include Employee

Self Service, Finance, Human Resources,

Product ion , Cus tomers Rela t ionship

Management, Supply Chain Management,

Logis t ics Management , Maintenance

Management, Projects Management, Business

Intelligence (BI), Document Management, and

Workflows. In addition, as the ERP software is

IFRS compliant, it will help us to ensure that the

International Financial Reporting Standards are

embedded in the internal business processes

across all the sectors of the organization.

Conclusion

We strive to have an increasing share of the

markets where we play. To achieve this and

remain relevant, we must continually innovate

and deliver superior quality products at

increasing volumes. Since the lands at our

present factory locations, at Apapa and Ikeja,

have been fully developed, we have recently

acquired about 64 hectares of land along the

Lagos-Ibadan Expressway within the newly

created Flower Gate Industrial Scheme in the

Shagamu Local Government area of Ogun

State. We will be able to situate new business

ventures at this new location.

On behalf of the Management and Staff of the

Company, I wish to thank the Chairman and the

Board of Directors for their guidance and

support. I also wish to thank the Management

and Staff for their diligent commitment to a

successful financial outcome through their hard

work, productivity and team spirit.

To our esteemed shareholders, you have been

steadfast in your demonstration of full

confidence in the prospects of the company. I

thank you very much for your support.

Thank you very much for your kind attention.

Folaranmi Babatunde Odunayo

Executive Vice Chairman/CEO

Business Review


The

new

Mil

ls E

& F

New

Sil

os f

or M

ills

E &

F



THE BOARD OF

DIRECTORS

Dr. Oba Otudeko, D.Sc. (Hon.) CFRChairman

Lt. General Garba Duba (Rtd.)Non-Executive Director

Jens Erik Mollenbach Non-Executive Director

Folaranmi Babatunde OdunayoExecutive Vice Chairman/CEO

THE BOARD OF

DIRECTORS


CONT’D

Dave Obray (South African)Non -Executive Director

Akinsoji AkintayoNon-Executive Director

Dr. Nino Albert OzaraExecutive Director, Production

Obafemi OtudekoNon-Executive Director

Theophilus Oluranti SokunbiNon -Executive Director

Report of the Directors for the year ended 31 March, 2013


The Directors have pleasure in submitting to members their annual report together with the audited

financial statements for the year ended 31 March, 2013.

PRINCIPAL ACTIVITIES

Honeywell Flour Mills Plc (HFM Plc) was initially registered as GATEWAY HONEYWELL

FLOUR MILLS LIMITED on 9 July, 1985. A change in the Company's ownership structure led to a

change of the name to HONEYWELL FLOUR MILLS LIMITED in June 1995. The Company was

converted to a Public Liability Company in 2008. Its shares were listed on the Nigerian Stock

Exchange (NSE) in 2009.

The Company is principally involved in the manufacturing and marketing of wheat based products

including flour, semolina, whole wheat meal, noodles and pasta.

RESULTS FOR THE YEAR

2013 2012

In thousands of Naira

Revenue 45,709,382 38,052,227

Profit before taxation 3,814,599 3,664,935

Taxation (971,079) (970,960)

Profit after taxation 2,843,520 2,693,975

DIVIDEND

The Directors are pleased to recommend to the Shareholders the payment of dividend in respect of

the year of N1,268,831,625 that is 16 kobo per share. This is subject to the deduction of appropriate

withholding tax.

PRODUCT DISTRIBUTION

The Company's products are distributed through many distributors across the country. The list of the

key distributors is as shown on pages 95 to 97.

CORPORATE GOVERNANCE

The Company is committed to the best practices and procedures in corporate governance. Its

business is conducted in a fair, honest and transparent manner which conforms to the Code of Best

Practices on Corporate Governance in Nigeria. Examples of the Company's compliance with these

corporate governance requirements during the year under review are as follows:

i. Board Composition

The Board consists of a Non-Executive Chairman, six (6) Non-Executive Directors, and two (2)

Executive Directors, all bringing high levels of competence and expertise. They are

Business Review


professionals and entrepreneurs with vast business management experience and credible track

records. The Non-Executive Directors are independent of the Management and are free from

constraints which may materially affect their judgement as Directors of the Company.

ii. Role of the Board

The Board has the responsibility for ensuring that the Company is appropriately managed and

achieves its strategic objectives with the aim of creating a sustainable long term value to the

Shareholders.

iii. Record of Directors Attendance at Meetings

Members of the Board of Directors hold periodic meetings to decide on policy matters and to

direct the affairs of the company, review its operations, finances and formulate growth strategy.

Board agenda and reports are provided ahead of meetings.

Further to the provision of Section 258(2) of the Companies and Allied Matters Act, CAP C20

LFN 2004, the records of the Directors' attendance at Board meetings during the year under

review is available at the company's Corporate Head Office for inspection. Further, and in line

with Corporate Governance principles, details of attendance of the current Directors at the

Board meetings during the year are as follows:

Names of Directors Number of Number of

Meetings held Meetings attended

Dr. Oba Otudeko, D.Sc. (Hon.) CFR 7 7

Folaranmi Babatunde Odunayo 7 7

Obafemi Otudeko 7 7

Dr. Nino Albert Ozara 7 6

Lt. General Garba Duba (Rtd) 7 6

David William Obray 7 6

Akinsoji Akintayo 7 7

Jens Mollenbach 7 7

Theophilus Oluranti Sokunbi 7 6

Board Meetings were held on 2/5/12, 20/6/12, 19/9/12, 24/9/12, 14/12/12, 11/2/13 and 14/3/13.

iv. Board Changes

In accordance with the Company’s Articles of Association, the following Directors namely, Dr.

Oba Otudeko, Dsc (Hon) CFR, Lt. General Duba (Rtd) and Mr Jens Mollenbach retire by

rotation at the Annual General Meeting and being eligible offer themselves for re-election.

Report of the Directors for the year ended 31 March, 2013 - cont’d

Business Review



In conformity with the Code of Best Practice in Corporate Governance, the Company has in place the

following Committees:

a) Nominations Committee

The Nominations Committee which was formally inaugurated on 14th December, 2012 is empowered to

bring to the Board recommendations regarding the appointment of any Executive or Non-Executive

Director. The Committee’s mandate is to ensure that a review of Board candidates is undertaken in a

disciplined and objective manner. The members of the Nominations Committee are:

1. Dr. Oba Otudeko, D.Sc. (Hon.) CFR

2. Lt. Gen. Garba Duba (Rtd)

3. Mr. Obafemi Otudeko

No meetings of the Nominations Committee were held during the year.

b) Business Development Committee

The purpose of the Business Development Committee is to assist the Board in fulfilling its responsibilities

in relation to assessing and managing the Company's business development strategies and activities. The

Committee was formally inaugurated on December 14, 2012. The members of the constituted Business

Development Committee are:

1. Mr. Folaranmi Babatunde Odunayo2. Dr. Nino Ozara3. Mr. Theophilus Oluranti Sokunbi

4. Mr. Jens Mollenbach

No meetings of the constituted Business Development Committee have been held since the date of

inauguration of 14th December, 2012. However, an ad-hoc committee was set up before the constitution

of the Business Development Committee. The details of the attendance of meetings by the ad-hoc

committee are as shown below:

Names of Directors Number of Number of

Meetings meetingsheld attended

1. Mr. Obafemi Otudeko 3 32. Dr. Nino Albert Ozara 3 13. Mr. Jens Mollenbach 3 34. Mr. Soji Akintayo 3 3

Ad-hoc Business Development Committee Meetings were held on 30/4/12, 30/8/12 and 12/12/12.

v. Committees

Business Review



vi. Management

The Executive Management comprises the Executive Directors and Heads of Department of the core business

units of the Company. It meets on a daily basis and is responsible: for setting overall corporate targets,

reviewing the Company's performance and operational issues and overseeing the affairs of the Company on a

day-to-day basis. As at 31 March 2013, the Executive Management was comprised of the following members:

1. Mr. Babatunde Folaranmi Odunayo - (Executive Vice Chairman/CEO)

2. Dr. Nino Ozara - (Production Director)

3. Mr. Benson Evbuomwan - (Director, Marketing)

4. Mr. Ibukun Ojo - (Director, Finance)

5. Mr. Olanrewaju Jaiyeola - (Commercial Director)

6. Mr. Rotimi Fadipe - (Director, Logistics & Supplies)

7. Mr. Tunde Adebayo - (Human Resources Manager)

8. Engr. Abubakar Abari - (Chief Engineer)

9. Mr. Seye Ogunwole - (National Sales Manager)

vii. Directors Interest

The direct and indirect interests of Directors in the issued share capital of the company as recorded in the

Register of Directors Shareholdings and/or as notified by the Directors for the purposes of Sections 275

and 276 of the Companies and Allied Matters Act, CAP C20 LFN 2004 and the listing requirements of the

Nigerian Stock Exchange is as stated hereunder:

At June 17, 2013 At June 20, 2012

Indirect Direct Indirect Direct

Unit Holdings Unit Holdings Unit Holdings Unit

Dr. Oba Otudeko, D.Sc. Hon. CFR* 1,247,264,003 – 1,247,264,003

Folaranmi Babatunde Odunayo – 200,000 200,000

Obafemi Otudeko* 567,951,925 – 567,951,925 –

Dr. Nino Albert Ozara – 250,000 250,000

Lt. General Garba Duba (rtd) – 2,558,800 537,600

David William Obray – 200,000 200,000

Akinsoji Akintayo – 200,000 200,000

Jens Mollenbach – 154,340 154,340

Oluranti Sokunbi – 129,000 – –

*Dr. Oba Otudeko and Mr. Obafemi Otudeko have indirect holdings amounting to 1,247,264,003 and

567,951,925 respectively through Siloam Global Services Limited who is a 75% equity holder in the

Company.

Business Review



viii. Directors Interest in Contracts

None of the Director has notified the company for the purpose of Section 227 of the Companies

and Allied Matters Act, CAP C20 LFN 2004 of any disc losable interest in contracts with which

the company was involved during the year ended 31 March, 2013.

ix. Responsibilities of the Directors

In accordance with the provisions of Sections 334 and 335 of the Companies and Allied Matters

Act, CAP C20 LFN 2004, the Directors are responsible for the preparation of annual financial

statements which give a true and fair view of the state of affairs of the Company, and of the

profit for the financial year.

The responsibilities include, ensuring that:

– appropriate internal controls are established both to safeguard the assets of the Company

and to prevent and detect fraud and other irregularities;

– the Company keeps accounting records which disclose with reasonable accuracy the

financial position of the Company and ensure that the financial statements comply with the

requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004;

– the Company has used appropriate accounting policies, consistently applied and supported

by reasonable and prudent judgements and estimates, and that all applicable accounting

standards have been followed; and

– the financial statements are prepared on a going concern basis unless it is presumed that the

Company will not continue in business.

The Directors accept responsibility for the annual financial statements, which have been

prepared using appropriate accounting policies supported by reasonable and prudent

judgements and estimates, in conformity with International Financial Reporting Standards

(IFRS) and the requirements of the Companies and Allied Matters Act, CAP C20 LFN 2004.

The Directors are of the opinion that the financial statements give a true and fair view of the

state of the financial affairs of the Company and of the financial performance during the year.

The Directors further accept responsibility for the maintenance of accounting records that may

be relied upon in the preparation of the financial statements, as well as adequate systems of

internal control.

Nothing has come to the attention of the Directors to indicate that the company will not remain a

going concern for at least twelve months from the date of these financial statements.

Business Review



x. Performance Evaluation of the Board

The Board has established a system to undertake a formal and rigorous annual evaluation of its

own performance, that of its Committees, the Chairman and individual Directors. The

evaluation system includes the criteria and key performance indicators and targets for the

Board, its Committees and each individual Committee member. The Board engages the

services of external consultants to facilitate the performance evaluation of the Board, its

Committees and individual members.

CONTRAVENTION

The Company violated the Post-Listing Requirement of the Nigeria Stock Exchange for failure

to inform and obtain prior approval before publication of the Notice of the Extra-Ordinary

General Meeting in respect of the Merger by Internal Restructuring between Honeywell Flour

Mills Plc and Honeywell Superfine Foods Limited. The Company only notified the Exchange

of the Merger by Internal Restructuring and not of the publication of the Notice of Extra-

Ordinary General Meeting in the National Newspapers. Consequently, the Nigeria Stock

Exchange imposed a fine of N1,260,000.00 (One Million, Two Hundred and Sixty Thousand

Naira), being 50% of the company's annual listing fee.

EMPLOYMENT AND EMPLOYEES

Employment policy

It is the policy of the Company that there should be no discrimination in considering

applications for employment including those from physically challenged persons. However,

there was no physically challenged person in the employment of the company during the year.

Training and development

It is the Company's policy to equip all employees with the skills and knowledge required for the

successful performance of their jobs. We therefore see the investment in our people as a major

part of our strategic development and have maintained a consistent policy of training our staff,

both locally and internationally to enhance their skills and competence.

Health and welfare of employees

The Company maintains a Staff Clinic with full-time nurses and weekly attendance by a

physician. It also offers free medical services through a health management services provider

to all members of staff.

The Company continuously strives to improve its operation to ensure a safe working

environment. It also maintains a high standard of hygiene in all its premises through sanitation

practices and regular fumigation exercises, as well as installation of pest and rodent control

Business Review



gadgets. Nutritionally balanced meals are provided in the Staff Canteen on free basis for the

junior Staff and at a highly subsidized rate for the senior staff.

AUDIT COMMITTEE

In compliance with section 359 (4) of the Companies and Allied Matters Act CAP C20, Laws of

the Federation of Nigeria 2004, members of the Audit Committee were elected at the Annual

General Meeting held on September 25, 2012. Members that served on the Committee during

the year comprise:

1. Adebayo Adeleke - Shareholder

2. Alhaji Lateef Ayodeji Shonubi - Shareholder

3, Gabriel Olagunju - Shareholder

4. Lt. Gen. Garba Duba (Rtd) - Director

5. Dave Obray - Director

6. Akinsoji Akintayo - Director

The Committee in the conduct of its affairs reviews the Company's overall risk management

and control systems, financial reporting arrangements and standard of business conduct.

Members of the Audit Committee have direct access to the Internal Audit Department and

Independent Auditors.

The statutory functions of the Committee are provided for in section 359(6) of the Companies

and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria, 2004. The details of

attendance at Audit Committee meetings during the year are as follows:

Number of Number of

meetings held meetings attended

1. Adebayo Adeleke 4 4

2. Alhaji Lateef Ayodeji Shonubi 4 4

3. Gabriel Olagunju 4 4

4. Lt. Gen. Garba Duba (Rtd) 4 2

5. Dave Obray 4 4

6. Akinsoji Akintayo 4 4

Audit Committee Meetings were held on 18/6/12, 18/9/12, 14/12/12 and 11/3/13.

Business Review



QUALITY POLICY

The Company is committed to the continuous achievement of business success by maintaining

its quality leadership in the flour milling industry.

This is driven by a quality management system designed to ensure that customers are always

provided with high quality products and services that meet International Standards. Such

standards are in full compliance with all statutory and regulatory requirements and are set out

in writing for adherence by all Staff at all times.

SHAREHOLDING ANALYSIS

The Shareholding structure of the Company as at 31 March, 2013 is as stated below:Share range Number % Number

of holders of holdings of holdings of holdings

1 - 1000 10,125 34.30 9,794,679 0.12

1001 - 5000 13,343 45.20 35,321,278 0.45

5001 - 10000 2,623 8.89 21,662,600 0.27

10001 - 50000 2,355 7.98 55,978,448 0.71

50001 - 100000 497 1.68 40,389,128 0.51

100001 - 500000 440 1.49 96,810,437 1.22

500001 - 1000000 80 0.27 61,824,319 0.78

1000001 - 5000000 32 0.11 68,368,653 0.86

5000001 - Above 24 0.08 7,540,048,116 95.08

Total 29,519 100.00 7,930,197,658 100.00

SUBSTANTIAL INTEREST IN SHARES

According to the register of members, the following shareholders of the Company held more

than 5 percent of the issued share capital of the Company at 31 March, 2013. 2 0 1 3

Number %

Siloam Global Services Limited 5,939,363,565 75

First Bank of Nigeria Limited 400,967,024 5

PROPERTY, PLANT AND EQUIPMENT

Movements in property, plant and equipment during the year are shown in note 5 on pages 68

and 69. In the opinion of the Directors, the market value of the Company's properties is not lower

than the value shown in the financial statements.

POST BALANCE SHEET EVENT

There are no post balance sheet events which could have had material effect on the financial

position of the Company as at 31 March, 2013 and profit attributable to equity holders on that

date.

%

Business Review



DONATIONS AND SPONSORSHIP

The following donations and charitable gifts were made during the year:N

Lagos Eko Summit 1,500,000

LASEPA Tree Planting Support 500,000

Nigeria Red Cross Society 200,000

Federal Road Safety Corps Support 250,000

Modupe Cole Memorial Home 100,000

Sport Alive Initiatives 250,000

Little Saints Orphanage 50,000

Love Home Orphanage 50,000

Flood Affected Victims of Bayelsa Community 560,000

SOS Children Village 50,000

Table-Tennis/Lagos Boxing Hall of Fame 467,000

Master Bakers & Caterers 50,000

Ogombo Community Secondary School 400,000

Itedo Community primary School 400,000

Mayegun Community primary School 400,000

Total 5,227,000

INDEPENDENT AUDITORS

In accordance with section 357 (2) of the Companies and Allied Matters Act, CAP C20 LFN

2004, Messrs BBC Professionals [Chartered Accountants] have expressed their willingness to

continue in office as Independent Auditors to the Company. A resolution will be passed at the

Annual General Meeting to authorize the Directors to fix the remuneration of the auditors.

Dated June 17, 2013

By Order of the Board

Oluwayemisi Busari (Mrs)

Company Secretary

Business Review


In compliance with the provisions of Section 359(6) of the Companies and Allied Matters Act CAP

C20 LFN 2004, we the members of the Audit Committee of Honeywell Flour Mills Plc hereby

report as follows:

We confirm that:

(a) We have reviewed the scope and planning of the audit requirements;

(b) We have reviewed the External Auditors' Management Control Report together with

Management responses; and

(c) We have ascertained the accounting and reporting policies of the Company for the year ended

31 March 2013 are in accordance with legal requirements and agreed with ethical practices.

In our opinion, the scope and planning of the audit for the year ended 31 March 2013 was

adequate and management responses to the Auditors' findings were satisfactory.

Adebayo Adeleke

Chairman, Audit Committee

June 14, 2013.

Members of the Audit Committee

Adebayo Adeleke – Chairman/Shareholder

Alhaji Lateef Ayodeji Shonubi – Shareholder

Gabriel Olagunju – Shareholder

Lt. Gen. Garba Duba (Rtd) – Director

David Obray – Director

Akinsoji Akintayo – Director

Report of the Audit Committee for the year ended 31 March, 2013

Business Review


Partnering with Rotarians to donate materials to

Itedo Community Primary School, Lekki rdHeld on the 3 of July 2013

Presenting the booksMr. Babatunde Odunayo (Executive Vice Chairman/CEO, HFMP) presents some of the donated books to Dr. Kamoru Omotosho, the Governor, district 9110 of Rotary Club for presentation to the School.

A hearty responseMr. Babatunde Odunayo getting ready answers from the students.

Surrounded by happy Pupils Mr. Babatunde Odunayo in the midst of the Pupils of Itedo Community Primary School Lekki.

Smiles all roundThe happy recipients proudly display some of their new sets of computers.

Event


Mrs. Adesola DOKUNU, (MD, Yomdok Nig Ltd), Mrs. Patricia OGILI, (MD, New Life

Ventures), Mr. Ibukun Ojo (Director, Finance, HFMP), Dr. Nino Ozara (Production Director, HFMP),

Mr. Babatunde Odunayo (Executive Vice Chairman/CEO, HFMP), Mr. Benson Evbuomwan

(Director, Marketing, HFMP) and Mr. Rotimi Fadipe (Director, Logistics & Supplies, HFMP) on thend high table at the 22 Honeywell Flour Mills Baking School graduation ceremony.

Honeywell Flour Mills Plc ND22 BAKING SCHOOL GRADUATION CEREMONY

thHeld on the 19 of July 2013

The Best graduating student (Mr. Chukwanu Diribe) receiving an award from the Executive Vice Chairman/CEO, HFMP Mr. Babatunde Odunayo (L) accompanied by the (Customer Care Manager, HFMP) Mr. Brega Fabusuyi (R) at the event.

The Graduands proudly displaying their Certificates.

Event

The Management Staff of HFMP and the 22nd Honeywell Baking School graduands.


Honeywell Flour Mills Plc 2013 ANNUAL CUSTOMERS' FORUM

rdHeld on the 3 of July 2013

L-R. Dr. Nino Ozara (Production Director, HFMP) presenting an award to the Gold price winner of the Flour Category, Alhaji RajiOpeyemi (Chairman Opeyemi Baking Industries Ltd) Also in the picture Mr. Seye Ogunwole (National Sales Manager, HFMP).

Some Management Staff and Dealers at the High table

The Management Staff and Dealers of HFMP cutting the cake .A group photograph of Honeywell Staff and Dealers

L-R. MR. Seye Ogunwole (National Sales Manager, HFMP) and the(Executive Vice Chairman/CEO, HFMP) Mr. Babatunde Odunayopresenting an award to the platinum price winner of the Flour category,Alhaji Adamu Abdullahi (MD Adamu Abdullahi Ltd).

A cross section of Dealers at the 2013 Honeywell Customers' Forum.

Event

Report of the Independent Auditors 44

Statement of Financial Position 45

Income Statement 46

Statement of Comprehensive Income 47

Statement of Changes in Equity 48

Statements of Cash Flows 49

Index to Notes to the Financial Statements 51

Notes to the Financial Statements 51-91

Value Added Statement 92


Financial Statements


REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF

HONEYWELL FLOUR MILLS PLC

We have audited the accompanying financial statements of Honeywell Flour Mills Plc on pages 45 to 92 which comprise the

statement of financial position as at 31 March 2013, the statement of comprehensive income, statement of cash flows,

statement of changes in equity, the summary of significant accounting policies and notes to the financial statements.

DIRECTORS' RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company's directors are responsible for the preparation and fair presentation of these financial statements in accordance

with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act, CAP

C20 LFN 2004. This responsibility includes: designing, implementing and maintaining internal control relevant to the fair

presentation of financial statements that are free from material mis-statement, whether due to fraud or error; selecting and

applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITORS' RESPONSIBILITY

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

accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material mis-

statement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material mis-

statement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider

internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of

the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial

statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the financial statements give a true and fair view of the financial position of Honeywell Flour Mills Plc as at

31 March, 2013 and of its financial performance and cash flows for the year then ended in accordance with Companies and

Allied Matters Act, International Financial Reporting Standard and the Financial Reporting Council Act.

REPORT ON OTHER LEGAL REQUIREMENTS

The Companies and Allied Matters Act requires that in carrying out our audit we consider and report to you on the following

matters. We confirm that:

(i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary

for the purpose of our audit;

(ii) in our opinion, proper books of account have been kept by the Company, so far as it appears from our examination of

those books; and

(iii) the Company's statement of financial position and statement of comprehensive income are in agreement with the

books of account.

Lagos, Nigeria

Chartered Accountants

2013 FRC/2013/ICAN/00000002913

24, Ilupeju By-Pass, IlupejuG.P.O. Box 3260 Lagos, Nigeria.Tel: + 234 (0) 1-8981859, 7945733E-mail: [email protected]

[email protected]: www.bbccharter.com

Partners:J.O.ObogwuE.U.Itodo A.M.AdetuyiG.C.Egwuenu

BN: 133294Other Offices in Nigeris:Abuja Akure Benin-CityIbadan Kaduna

Prime An Association ofIndependent Accounting Firms


Statement of Financial Position for the year ended 31 March 2013

Note 31 March 1 April

In thousands of Naira 2013 2012 2011

ASSETS

Non-current assets

Property, Plant and Equipment 5 34,969,128 29,011,441 13,962,269

Intangible Assets 6 15,904 198 395

Total Non-Current Assets 34,985,032 29,011,639 13,962,664

Current assets

Inventories 7 10,009,275 4,933,712 3,778,524

Trade and other Current Receivables 8 6,868,962 10,126,471 7,801,219

Cash and Cash Equivalents 9 3,574,209 3,858,456 3,962,142

Total Current Assets 20,452,446 18,918,639 15,541,885

Total Assets 55,437,478 47,930,278 29,504,549

LIABILITIES

Current Liabilities

Financial Liabilities 11 25,528,100 15,428,275 6,223,470

Trade and other Payables 10 1,262,714 6,144,674 4,347,763

Current tax Liabilities 15.2 712,342 225,618 203,836

Total current liabilities 27,503,156 21,798,567 10,775,069

Non-Current Liabilities

Financial Liabilities 11 5,573,050 5,841,129 870,259

Retirement Benefit Obligations 12 647,186 433,100 400,560

Deferred Income and Accruals 13 226,064 170,070 230,941

Deferred tax Liabilities 15.3 2,934,939 2,671,398 1,921,655

Total Non-Current Liabilities 9,381,239 9,115,697 3,423,415

Total Liabilities 36,884,395 30,914,264 14,198,484

EQUITY

Share Capital 19 3,965,099 3,965,099 3,965,099

Share Premium 6,462,041 6,462,041 6,462,041

Retained Earnings 8,125,943 6,588,874 4,878,925

Total Equity 18,553,083 17,016,014 15,306,065

Total Liabilities and Equity 55,437,478 47,930,278 29,504,549

The financial statements and notes on pages 45 to 92 were approved by the Board of Directors on

June 17, 2013 and signed on its behalf by:

Dr. Oba Otudeko, D.Sc. (Hon.) CFR

Chairman

FRC/2013/ICAN/0000002365

Folaranmi Babatunde Odunayo

Executive Vice Chairman/CEO

FRC/2013/ICAN/00000003268



In thousands of Naira Note 2013 2012

Revenue 17 45,709,382 38,052,227

Cost of Sales (37,788,322) (31,558,961)

Gross Profit 7,921,060 6,493,266

Other Income 18 144,066 112,082

Selling and Distribution Expenses (2,876,600) (1,805,763)

Administrative Expenses (1,468,120) (1,306,832)

Results from Operating Activities 3,720,406 3,492,753

Finance Income 622,534 695,282

Finance Costs (528,340) (523,100)

Net Finance (Cost)/Income 94,194 172,182

Profit before Taxation 3,814,599 3,664,935

Taxation 15.1 (971,079) (970,960)

Profit for the Year 2,843,520 2,693,975

Earnings per Share:

Earnings per Share (kobo) 35.86 33.97

The notes on pages 51 to 92 form an integral part of these financial statements.

Income Statement for the year ended 31 March 2013



Statement of Comprehensive Income for the year ended 31 March 2013

In thousands of Naira 2012

Note

Profit for the year recognised in the income 2,843,520 2,693,975

Actuarial (loss)/gain on post employment benefit obligation 12 (116,921) 46,900

Total comprehensive income 2,726,599 2,740,875

Attributable to the owners of the Company 2,726,599 2,740,875

Total comprehensive income for the year 2,726,599 2,740,875


2013

statement



In thousands of Naira Capital Premium Earnings Equity

At 1 April, 2011 3,965,099 6,462,041 4,878,925 15,306,065

Profit for the Year – – 2,693,975 2,693,975

Dividend paid during the Year – – (1,030,926) (1,030,926)

Other Comprehensive Income

Actuarial Gain – – 46,900 46,900

At 31 March, 2012 3,965,099 6,462,041 6,588,874 17,016,014

To 1 April, 2012 3,965,099 6,462,041 6,588,874 17,016,014

Profit for the Year – – 2,843,520 2,843,520

Dividend paid during the Year – – (1,189,530) (1,189,530)

Other Comprehensive Income

Actuarial Loss – – (116,921) (116,921)

To 31 March, 2013 3,965,099 6,462,041 8,125,943 18,553,083

.


Share Share Retained Total

Statement of Changes in Equity for the year ended 31 March 2013



In thousands of Naira Note 2013 2012

Cash Flows from Operating Activities

Cash generated from operations 16 ( 1,568,509) 2,934,881

Retirement benefit paid 12 (5,536) (810)

Tax paid 15.2 (220,814) (199,435)

Net Cash Flows Generated From Operating Activities (1,794,859) 2,734,636

Cash Flows from Investing Activities

Interest Received 622,534 695,282

Purchase of Intangible Sssets 6 (19,838) –

Purchase of Property, Plant and Equipment 5 (7,210,483) (16,242,783)

Proceeds from Sales of Property, Plant and Equipment 4,524 –

Net Cash Flows from Investing Activities (6,603,263) (15,547,501)

Cash Flows from Financing Activities

Interest Payment (528,340) (523,100)

Proceeds from Borrowing 11,858,191 14,901,694

Repayment of Borrowing (2,366,278) (638,489)

Dividend Paid (1,189,530) (1,030,926)

Cash Generated from Financing Activities 7,774,043 12,709,179

Net Decrease in Cash and Cash Equivalents (624,079) (103,686)

Cash and Cash Equivalents at 1 April 3,858,456 3,962,142

Cash and Cash Equivalents at 31 March 9 3,234,377 3,858,456


Statements of Cash Flows for the year ended 31 march, 2013.



Note Page Note Page

1 Reporting Entity 51 4 Risk Management 64

2 Basis of Preparation 51 a. Credit risk 64

a. Statement of Compliance 51 b. Liquidity risk 65

b. Basis of Measurement 51 c. Market risk 65

c. Functional and Presentation Currency 51 d. Operational risk 66-67

d. Use of Estimates and Judgments 52 5 Property, Plant and Equipment 68-69

3 Significant Accounting Policies 52 6 Intangible Assets 70

a. Going Concern 52 7 Inventories 70

b. Business Combination 52 8 Trade and other Current Receivables 71

c. Segment Reporting 53 9 Cash and Cash Equivalent 72

d. Foreign Currency Translation 53 10 Trade Payables and other Current Liabilities 72

e. Property, Plant and Equipment 53-54 11 Financial Liabilities 73

f. Intangible Assets 55 12 Retirement Benefit Obligations 73

(i). Computer Software 55 13 Deferred Income and Accruals 74

(ii). Amortization of Intangible Assets 55 14 Profit before Tax 75

g. Financial Assets 56 15 Taxation 75-76

(i) Classification 56 16 Statement of Cash Flows 76

(ii) Recognition and Measurement 56 17 Segment Information 77

(iii) Offsetting Financial Instruments 57 18 Other Income 79

(iv) Impairment of Financial Assets 57 19 Share Capital 79

(v) Impairment of Non-Financial Assets 58 20 Chairman and Directors' Emolument 79

h. Inventories 58 21 Employees and Related Remuneration 80

i. Trade Receivables 59 22 Related Party Transactions 81

j. Research and Development 59 23 Contingent Liabilities 81

k. Cash, Cash Equivalents and Bank Overdrafts 59 24 Loans and other Transactions Favouring

l. Borrowing 59 Directors 81

m. Trade Payables 60 25 Earnings per Share 82

n. Investments 60 26 Approval of Financial Statements 82

o. Provisions 60 27 Significant Financial Judgments 82-84

p. Tax 60 28 New Accounting Standards 84-86

(i). Current Tax 60 29 Explanation of Transition to IFRS 86-87

(ii). Deferred Tax 61 30 Reconciliation of Equity 88-91

(iii).Tax Exposures 61

q. Employee Benefits 62

(i). Defined Benefit Plan 62

(ii). Defined Contribution Scheme 62

(iii).Short-term Employee Benefit 63

r. Revenue Recognition 63

(i). Sales of Goods 63

(ii). Interest Income 64

s. Dividend Distribution 64

t. Earnings per Share 64

u. Share Capital 64

Index to Notes to the Financial StatementsFinancial

Statements


1 REPORTING ENTITY

Honeywell Flour Mills Plc was initially registered as Gateway Honeywell Flour Mills Limited

on 9 July, 1985. A change in the Company's ownership structure led to a change of the name to

Honeywell Flour Mills Limited in June, 1995. The Company was converted to a Public

Liability Company in 2008. Its shares were listed on the Nigeria Stock Exchange (NSE) in

2009.

Honeywell Flour Mills Plc is a Company domiciled in Nigeria. The Company is principally

engaged in the manufacture and marketing of wheat-based products including flour,

semolina, whole wheat meal, noodles and pasta. As part of its vertical integration strategy, the

Company acquired 100% ownership of Honeywell Superfine Foods Limited, manufacturers of

pasta and noodles in 2008.

However, in March 2013, the Company carried out a business combination in the nature of an

internal restructuring with Honeywell Superfine Foods Limited. The business combination was

in the form of merger by absorption with Honeywell Flour Mills Plc as the surviving Company

while Honeywell Superfine Foods Limited was dissolved.

2 BASIS OF PREPARATION

(a) Statement of Compliance

The Financial Statements have been prepared in accordance with International Financial

Reporting Standards (IFRS) being Standards and Interpretations isssued by the

International Accounting Standards Board (IASB) in force as at 31 December, 2012. They

have been prepared in line with IFRS accounting policies selected by the Company on

transition to IFRS. These are the Company's first set of full IFRS Financial Statements and

first-time adoption of International Financial Reporting Standards has been applied.

An explanation of how the transition to IFRS has affected the reported financial position,

financial performance and cash flows of the Company is provided in Note 30. The financial

report should be read in conjunction with the comparative reconciliation provided in Note

30.

(b) Basis of Measurement

The Financial Statements have been prepared under the historical cost basis, except for

items measured at fair value and the use of actuarial methods for estimating certain

employee benefits.

(c) Functional and Presentation Currency

These financial statements are presented in the Nigerian Naira, which is the Company's

Notes to the Financial statements for the year ended 31 March, 2013



functional currency. All financial information presented in Naira has been rounded to the

nearest thousand.

(d) Use of Estimates and Judgments

The preparation of the Financial Statements in conformity with IFRS requires management

to make judgements, estimates and assumption that affect the application of accounting

policies and reported amounts of assets, liabilities, income and expenses. Actual results may

differ from these estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to

accounting estimates are recognized in the year in which the estimates are revised and in any

future years affected.

Information about critical judgments in applying accounting policies that have the most

significant effect on the amounts recognized in the financial statements is included in the

following notes:

- measurement of defined benefit obligations; and

- provisions and contingencies.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in

these financial statements and in preparing the opening IFRS statements of financial position at

1 April 2011 for the purposes of the transition to IFRSs, unless otherwise indicated.

(a) Going Concern

The Directors have a reasonable expectation that the Company has adequate resources to

continue in operational existence for the foreseeable future. The Company continues to

adopt the going concern basis in preparing its financial statements.

(b) Business Combination

Business combinations involving entities under common control are outside the scope of

IFRS 3. The merger by absorption of Honeywell Superfine Foods Limited, a wholly owned

subsidiary of Honeywell Flour Mills Plc, was a business combination under common

controls and there is no other specific IFRS guidance. Accordingly, management has

exercised its judgement to apply the pooling of interest method of accounting for business

combination in accordance with IAS 8, 10 - 12. The IAS 8, 12 allows management to

consider the most relevant conceptual framework in developing an accounting policy where

IFRS has no specific requirements.

Notes to the Financial statements - cont’d



Under a pooling of interests-type method, the acquirer accounts for the combination as follows:

– The assets and liabilities of the acquiree are recorded at book value not fair value

(although adjustments should be recorded to achieve uniform accounting policies);

– No goodwill is recorded. T he difference between the acquirer's cost of investment

and the acquiree's equity is presented separately within Other Comprehensive Income

Statement;

–Comparative amounts are restated as if the combination had taken place at the

beginning of the earliest comparative period presented.

(c) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided

to the Chief Operating Decision Maker. The Chief Operating Decision Maker, who is

responsible for allocating resources and assessing performance of the operating segments,

has been identified as the Board of Directors that make strategic decisions.

The Company business operating segments are identified by two factory locations at Ikeja

and Apapa. The Apapa factory manufactures flour, semolina, wheat meal and brown flour

while the Ikeja factory manufactures pasta and noodles.

(d)Foreign Currency Transactions

Foreign currency transactions are translated into Naira using the exchange rates prevailing at

the dates of the transactions or valuations where items are re-measured. Foreign exchange

gains and losses resulting from the settlement of such transactions and from the translation at

year-end exchange rates of monetary assets and liabilities denominated in foreign currencies

are recognized in the income statement, except when deferred in other comprehensive

income as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents

are presented in the income statement within 'finance income or cost'. All other foreign

exchange gains and losses are presented in the income statement within 'other gains / (losses)

- net'.

(e) Property, Plant and Equipment

Land and building held for use in the production or supply of goods or services, or for

administration purposes, are stated in the statement of financial position at deemed cost at the

date of transition to IFRS less accumulated depreciation and any accumulated impairment

losses.




The Company elected to apply the optional exemption to use previous valuation as deemed

cost as at 1 April, 2011, the date of transition to IFRS.

All other assets are stated at historical cost less accumulated depreciation and accumulated

impairment losses. All other property, plant and equipment are stated at historical cost or

valuation less accumulated depreciation and impairment losses. Historical cost includes

expenditure that is directly attributable to the acquisition of the items. Cost may also include

transfers from equity of any gains/losses on qualifying cash flows hedges of foreign currency

purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalized

as part of the equipment.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the item

will flow to the Company and the cost can be measured reliably. The carrying amount of the

replaced cost is derecognized. All other repairs and maintenance are charged to the income

statement during the financial period in which they are incured.

An item of Property, Plant and Equipment is derecognised on disposal or when no future

economic benefits are expected from its use. Gains or losses on disposal or de-recognition of

an item of Property, Plant and Equipment are determined by comparing the proceeds from

disposal with the carrying amount of Property, Plant and Equipment, and are recognized in

income statement.

Depreciation is provided on components that have homogenous useful lives by using the

straight line method so as to depreciate the initial cost down to the residual value over the

estimated useful lives.

The useful lives are as follows:

Buildings 20 to 50 years

Tools, Furniture/Fittings and equipment 2 to 5 years

Vehicles 3 to 4 years

Land Not depreciated

Assets residual values and useful lives are reviewed and adjusted if appropriate, at the end of

each reporting date.

Where an indication of impairment exists, an asset's carrying amount is written down

immediately to its recoverable amount, if the asset's carrying amount is greater than its

estimated recoverable amount. The gain or loss arising on the disposal or retirement of an




asset is determined as the difference between the sales proceeds and the carrying amount of

the asset and is recognized in the income statement for the period.

(f) Intangible Assets

(i)Computer Software

Acquired computer software licenses are capitalized on the basis of the costs incurred to

acquire and bring to use the specific software. These costs are amortized over their

estimated useful lives. Costs associated with maintaining computer software

programmes are recognized as expenses incurred. Development costs that are directly

attributable to the design and testing of identifiable and unique software products

controlled by the Company are recognized as intangible assets when the following criteria

are met:

– it is tec hnically feasible to complete the software product and use or sell it;

– manag e ment intends to complete the software product and use or sell it;

– there i s an ability to use or sell the software product;

– it can b e demonstrated how the software product will generate probable future

economic benefits;

– ad eq u ate technical, financial and other resources to complete the

development and use or sell the software product are available; and

– the ex penditure attributable to the software product during its development can

be reliably measured.

Directly attributable costs that are capitalized as part of the software product include the

software development employee costs and an appropriate portion of relevant overheads.

Other development expenditure that do not meet these criteria are recognized as expenses

as incurred. Development costs previously recognized as an expense are not recognized

as an asset in a subsequent period.

Computer software development costs recognized as assets are amortized over their

estimated useful lives.

(ii)Amortisation of intangible assets

Intangible assets are amortized on a straight line basis in the income statement over their

estimated useful lives, from the date that they are available for use. The estimated useful

life of computer software for the current and comparative years is five (5) years.

Amortization methods, useful lives and residual values are reviewed at each reporting

date and adjusted for, if appropriate.




(g) Financial Assets

(i) Classification

The Company classifies its financial assets in the following categories: at fair value

through profit or loss, loans and receivables, and available for sale. The classification

depends on the purpose for which the financial assets were acquired. Management

determines the classification of its financial assets at initial recognition.

- Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading.

A financial asset is classified in this category if acquired principally for the purpose of

selling in the short term. Derivatives are also categorized as held for trading unless they

are designated as hedges. Assets in this category are classified as current assets if

expected to be settled within 12 months; otherwise, they are classified as non-current.

- Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. They are included in current assets,

except for maturities greater than 12 months after the end of the reporting period.

These are classified as non-current assets. the Company's loans and receivables

comprise trade and other receivables and cash and cash equivalents in the statement.

- Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this

category or not classified in any of the other categories. They are included in non-

current assets unless the investment matures or management intends to dispose of it

within 12 months of the end of the reporting period.

(ii)Recognition and measurement

– Regular purchases and sales of financial assets are recognized on the trade-date, the date

on which the Company commits to purchase or sell the asset. Investments are initially

recognized at fair value plus transaction costs for all financial assets not carried at fair

value through profit or loss. Financial assets carried at fair value through profit or loss are

initially recognized at fair value, and transaction costs are expensed in the income

statement. Financial assets are derecognized when the rights to received cash flows from

the investments have expired or have been transferred and the Company has transferred

substantially all risks and rewards of ownership. Available-for-sale financial assets and

financial assets at fair value through profit or loss are substantially carried at fair value.

Loans and receivables are subsequently carried at amortized cost using the effective

interest method.




Gains or losses arising from changes in the fair value of the financial assets at fair value

through profit or loss category are presented in the income statement within other (losses)

/ gains - net in the period in which they arise. Dividend income from financial assets at fair

value through profit or loss is recognized in the income statement as part of other income

when the Company's right to receive payments is established. Changes in the fair value of

monetary and non-monetary securities classified as available for sale are recognized in

other comprehensive income. When securities classified as available for sale are sold or

impaired, the accumulated fair value adjustments recognized in equity are included in the

income statement as 'gains and losses from investment securities'.

Interest on available-for-sale securities calculated using the effective interest method is

recognized in the income statement as part of other income. Dividends on available-for-

sale equity instruments are recognized in the income statement as part of other income

when the Company's right to receive payments is established.

(iii) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of

financial position when there is a legally enforceable right to offset the recognized

amounts and there is an intention to settle on a net basis or realize the asset and settle the

liability simultaneously.

(iv) Impairment of financial assets

The Company assesses at the end of each reporting period whether there is objective

evidence that a financial asset or group of financial assets is impaired. A financial asset or

a group of financial assets is impaired and impairment losses are incurred only if there is

objective evidence of impairment as a result of one or more events that occurred after the

initial recognition of the asset (a 'loss event') and that loss events (or events) has an impact

on the estimated future cash flows of the financial asset or Company of financial assets

that can be reliably estimated. The criteria that the company uses to determine that there is

objective evidence of an impairment loss include:

– significant financial difficulty of the issuer or obligor;

– a breach of contract, such as a default or delinquency in interest or principal

payments;

– the company, for economic or legal reasons relating to the borrower's financial

difficulty, granting to the borrower a concession that the lender would not

otherwise consider;

– it becomes probable that the borrower will enter bankruptcy or other financial

reorganization;

– the disappearance of an active market for that financial asset because of

financial difficulties; or





– observable data indicating that there is a measurable decrease in the estimated

future cash flows from a portfolio of financial assets since the initial recognition

of those assets, although the decrease cannot yet be identified with the

individual financial assets in the portfolio, including

– adverse changes in the payment status of borrowers in the portfolio; and

national or local economic conditions that correlates on the assets in the

portfolio.

The Company first assesses whether objective evidence of impairment exists. For loans

and receivables category, the amount of the loss is measured as the difference between the

asset's carrying amount and the present value of estimated future cash flow (excluding

future credit losses that have not been incurred) discounted at the financial asset's original

effective interest rate. The carrying amount of the asset is reduced and the amount of the

loss is recognised in the income statement. If a loan or held-to-maturity investment has a

variable interest rate, the discount rate for measuring any impairment loss is the current

effective interest rate determined under the contract.

As a practical expedient, the company may measure impairment on the basis of an

instrument's fair value using an observable market price. If in a subsequent period, the

amount of the impairment loss decreases and the decrease can be related objectively to an

event occurring after the impairment was recognised (such as an improvement in the

debtor's credit rating), the reversal of the previously recognised impairment loss is

recognized in the income statement.

(v) Impairment of Non - Financial Assets

Assets that have an indefinite useful life - for example, goodwill or intangible assets not

ready for use - are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortization are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset's carrying amount

exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair

value less costs to sell and value in use. For the purposes of assessing impairment, assets

are tested at the lowest levels for which there are separately identifiable cash flows (cash-

generating units). Nonfinancial assets other than goodwill that suffered impairment are

reviewed for possible reversal of the impairment at each reporting date.

(h) Inventories

Inventories are stated at the lower of cost and estimated net realizable value. Costs comprise

direct materials costs and where applicable, direct labour costs and those overheads that have

been incurred in bringing the inventories to their present location and condition. Cost is



selling price less all estimated costs of completion and costs to be incurred in marketing,

selling and distribution.

Spare parts and servicing equipment are usually carried as inventory and recognized in profit

or loss as consumed. However, major spare parts and stand-by equipment qualify as property,

plant and equipment when the Company expects to use them during more than one period.

Similarly, if the spare parts and servicing equipment can be used only in connection with an

item of property, plant and equipment, they are accounted for as property, plant and

equipment. Such classified spares are depreciated as property, plant and equipment over the

useful life on a straight line basis.

(i) Trade Receivables

Trade receivables are recognized initially at fair value and subsequently measured at

amortized cost using the effective interest rate method, less provision for impairment. The

collectability of trade receivables is reviewed on an ongoing basis. A provision for

impairment of trade receivables is established when there is objective evidence that the

Company will not be able to collect all amounts due, according to the original terms of the

receivables. The amount of the provision is the difference between the asset's carrying

amount and the present value of estimated future cash flows. The amount of the provision is

recognized in the income statement.

(j) Research and Development

Research and development expenditure is charged against profits in the year in which it is

incurred, unless it meets the criteria for capitalisation set out in IAS 38 'Intangible assets'.

(k) Cash, Cash Equivalents and Bank Overdrafts

Cash, cash equivalents and bank overdrafts includes cash at bank and in hand plus short-term

deposits less overdrafts. Short-term deposits have a maturity of less than three months from

the date of acquisition. Bank overdrafts are repayable on demand and form an integral part of

the Company's cash management.

(l) Borrowings

Interest- bearing bank loans and overdrafts are recorded at the proceeds received, net of

direct issue costs. Finance charges, including premiums payable on settlement or redemption

and direct issue costs, are accounted for on an accruals basis through the income statement

using the effective interest method and are added to the carrying amount of the instrument to

the extent they are not settled in the period in which they arise.

calculated using the weighted average method. Net realizable value represents the estimated




(m) Trade Payables

Trade payables are obligations to pay for goods or services that have been acquired in the

ordinary course of business from suppliers. Accounts payable are classified as current

liabilities if payments are due within one year or less. If not, they are presented as non-current

liabilities. Trade payables are recognise initially at fair value and subsequently measured at

amortised cost using the effective interest method.

(n) Investments

Investments are classified as either held-to-maturity, held-for-trading, loans and recievables

or available-for-sale. Held-to maturity investments and loans and recievables are measured

at amortised cost. Held-for-trading and available-for-sale investments are measured at fair

value. Where securities are held-for-trading purposes, gains and losses arising from changes

in fair value are included in the income statement for the period. For available-for-sale

investments, gains and losses arising from changes in fair value are recognised directly in

equity, until the security is disposed of or is determined to be impaired, at which time the

cumulative gain or loss previously recognised in equity is included in the income statements

for the period.

(o) Provisions

Provisions are recognised when the Company has a present legal or constructive obligation

as a result of a past event, and it is probable that the Company will be required to settle that

obligation and the amount has been reliably estimated. Provisions for restructuring costs are

recognised when the Company has a detailed formal plan for the restructuring that has been

communicated to affected parties. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be acquired to

settle the obligation using a pre-tax rate that reflects current market assessments of the time

value of money and risks specific to the obligation. The increase in the provision due to

passage of time is recognised as interest expense.

(p) Tax

Income tax expense represents the sum of current tax expense and deferred tax expense.

Current tax and deferred tax are recognised in income statement except to the extent that it

relates to a business combination, or items recognised directly in equity or in other

comprehensive income.

(i) Current Tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the

year, using tax rates statutorily enacted at the reporting date, and any adjustment to tax




payable in respect of previous years. The Company is subject to the following types of

current income tax:

(ii) Deferred Tax

Deferred tax is recognised in respect of temporary differences between the carrying

amount of assets and liabilities for financial reporting purposes and the amounts used for

taxation purposes. Deferred tax is not recognised for:

–Taxable temporary differences arising on the initial recognition of goodw i ll.


The measurement of deferred tax reflects the tax consequences that would

manner in which the Company expects, at the end of the reporting period, to recover or

settle the carrying amounts of its assets and liabilities. For investment property that is

measured at fair value, the presumption that the carrying amount of the investment

property will be recovered through sale has not been rebutted.

follow the

• Companies Income Tax - This relates to tax on revenue and profit generated by the Company during the year, to be taxed under the Companies Income Tax Act Cap C21, LFN 2004 as amended date.

• Education Tax - Education tax is based on assessable income of the Company and is governed by the Education Trust Fund (Establishment) Act LFN 2011.

Deferred tax is measured at the tax rates that are expected to be applied to temporary

differences when they reverse, using tax rates enacted or substantively enacted at the

reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset

current tax liabilities and assets, and they relate to taxes levied by the same tax authority

on the same taxable entity, or on different tax entities, but they intend to settle current tax

liabilities and assets on a net basis or their tax assets and liabilities will be realized

simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible

temporary differences to the extent that it is probable that future taxable profits will be

available against which they can be utilised. Deferred tax assets are reviewed at each

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

benefits will be realized.



(iii) Tax Exposures

In determining the amount of current and deferred tax, the Company takes into account

the impact of uncertain tax postions and whether additional taxes and interest may be due.

This assessment relies on estimates and assumptions and may involve a series of

judgements about future events. New information may become available that causes the

Company to change its judgement regarding the adequacy of existing tax liabilities; such

changes to tax liabilities will impact tax expenses in the period that such determination is

made.

(q) Employee benefits

(i) Defined benefit plan

The defined benefit plan defines an amount of gratuity the employee will receive on

retirement, dependent on date of employment, year of service and compensation. The

defined benefit plan is being accounted for using the projected unit method that considers

the rate of inflation, the degree of salary increases of employees, the retirement age

among other factors.

The liability recognised in the balance sheet in respect of defined benefit pension plan is

the present value of the defined benefit obligation at the end of the reporting period less

the fair value of plan assets, together with adjustments for unrecognised past service

costs. The defined benefit obligation is calculated annually by independent actuaries

using the projected unit credit method. The present value of the defined benefit obligation

is determined by discounting the estimated future cash outflow using market rates on

Government Bonds.

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions are charged or credited to equity in other comprehensive income in the

period in which they arise. Past service costs are recognised immediately in income

statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions are charged or credited to equity in other comprehensive income in the

period in which they arise. Past service costs are recognised immediately in income

statement.

(ii) Defined contribution scheme

The Company operates a defined contribution plan which is funded by contributions from

the Company and the employees. The Company's contribution is recognised as employee

benefit expenses and charged to the income statement. The contributions of both the

Company and the employees are paid on a monthly basis to a pension fund administrator.

The Company has no legal or constructive obligation to pay further contributions if the




pension fund administrator does not hold sufficient assets to pay all employees the benefits

relating to employee service in the current and prior periods. The contributions are

recognised as employee benefit expenses when they are due.

(iii) Short-term employee benefit

Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus

or profit sharing plan if the Company has a present legal or constructive obligation to pay

this amount as a result of past services provided by the employee, and the obligation can

be estimated reliably.

(r) Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale

of goods and services in the ordinary course of the Company's activities. Revenue is

shown net of Value-Added Tax, returns, rebates and discounts.

The Company recognises revenue when the amount of revenue can be reliably measured,

it is probable that future economic benefits will flow to the entity and specific criteria

have been met for each of the Company's activities as described below:

i) Sale of Goods

The Company manufactures and sells a range of products to the distributors and dealers.

Sale of goods are recognised when the Company has delivered product to the customers

and there is no unfulfilled obligation that could affect the customers' acceptance of the

products. Delivery does not occur until the products have been shipped to the specified

locations; the risks of obsolescence and loss have been transferred to the customers and

either the customers have accepted the products in accordance with the sales contract, or

the Company has objective evidence that all criteria for acceptance have been satisfied.

The products are often sold with discounts and rebates. Sales are recorded based on the

price specified on the sales invoice net of the discounts, rebates and returns at the time of

sale.

Sales are also recognised when the customer self-collect the product directly at the

Company premises during which the risks and rewards of ownership passes to the

customer after the customer's loaded truck leaves the Company premises.




No element of financing is deemed present where sales are made on agreed credit terms

which are consistent with the market practice.

ii) Interest Income

Interest income is recognised using the effective interest rate method. When a loan and

receivable is impaired, the Company reduces the carrying amount to its recoverable

amount, being the estimated future cash flow discounted at the original effective interest

rate of the investment, and continues unwinding the discount as interest income. Interest

income on impaired loan and recievables are recognised using the original effective

interest rate.

(s) Dividend Distribution

Dividend distribution to the Company's Shareholders is recognised as a liability in the

Company's financial statements in the period in which the dividends are approved by the

Company's Shareholders. Dividends are recognised once paid.

(t) Earnings per Share

The Company presents earnings per share (EPS) data for its ordinary shares. EPS is

calculated by dividing the profit or loss attributable to ordinary shareholders of the Company

by the number of ordinary shares outstanding during the year.

(u) Share Capital

The Company has only one class of Shares - ordinary shares which are classified as equity.

When new shares are issued, they are recorded in share capital at their par value. The excess

of the issue price over the par value is recorded in the share premium reserve.

Incremental costs directly attributed to the issue of ordinary shares are recongnised as a

deduction from equity, net of any tax effects.

4 RISK MANAGEMENT

Risk management is inherent in the business operations of the Company. Management has set up

processes and systems to identify, assess, monitor and control business risks including the

following :-

(a) Credit Risk

This refers to the risk that a trade debtor will default by failing to make payments in

accordance with the agreed credit terms and conditions. The possible impact of the credit

risk is poor Account Receivable assets quality arising from high level of bad and doubtful

debts and possible impairment of shareholders' funds. The carrying amount of financial

assets represents the maximum credit exposure.





b) Liquidity Risk

This refers to the risk of company's inability to finance its operation and meet its obligation

when they become due without incurring unacceptable losses. Liquidity risk includes the

inability to manage unplanned decreases or changes in funding sources.

Mitigating Measures

– Credit application follows rigorous and extensive credit review and approval process.

– All credits are secured by insurance or bank bonds.

– Once conditions precedent to credit utilization are met by the customer, the approved

credit is updated, monitored and controlled by the ERP on real times basis in accordance to

credit terms.

– Credit utilization report are prepared and monitored on a daily basis.

Mitigating Measures

–Efficient and effective working capital management.

–Efficient Naira facility management

–Efficient funds management to eliminate idle funds, meet obligations as they fall due

and reduce interest expenses to the minimum level.

–Liquidity and working capital management reports are prepared and monitored on

daily basis.

–

–

–The Treasury Department is well structured and equipped under the management of a

very experienced and well trained team.

c) Market Risk

Market risk is the risk of financial loss due to the change in value of the market risk factors.

The Company is faced with the following market risk factors.

– Interest rate risk:- The risk that interest rate will change adversely at the money

market.

– Foreign exchange risk:- The risk that foreign exchange rates will fluctuate

unfavorably at the foreign exchange market.

– Commodity risk:- The risk that wheat prices will significantly increase at the

international commodity markets.

Mitigating Measures

– Efficient management of exchange and interest rate risks including generation of

relevant risk management reports for monitoring and review on a daily and weekly basis.

– Monitor the money, capital and foreign exchange markets including micro and

macroeconomic environment on a daily basic .

– Efficient management of the commodity risk by the Logistics and Supplies




–

– Department with a full-fledged experienced and well trained team in the area of wheat

dynamics and procurement strategies.

– We monitor price dynamics and changes at the relevant Commodity Exchange Boards on

a real time basis and take proactive decisions on a timely basis.

– The commodity risk affects the global milling industry as the wheat prices are determined

at the international commodity markets. We usually increase product price in response to

global volatility in wheat prices in order to recover some portion of the rise in wheat

prices .

d) Operational Risk

This relates to the risk of loss resulting from inadequate or failed internal processes, controls,

procedures, people, and systems. Operational risk is inherent in the business activities. These

include risk of inadequate haulage partners required to achieve the Company's objectives in

terms of sales volume and profit; risk of wastages, downtime and other associated losses

arising from inefficient plant operations; risk of breakdown of ERP and IT infrastructure or

outright loss of critical operational/business data and information; risk of loss of Company

assets due to unexpected disaster which may affect business operations; risk of breakdown of

internal control systems and misstatement of financial statements.

Mitigating Measures

– Efficient and effective maintenance culture to prevent down time and inefficient

production operations.

– Control activities are an integral part of the Company's day to day operations and are

defined at every business area.

– Existence of robust ERP and comprehensive computerisation of internal business

processes, systems and procedures.

– Existence of robust IT business continuity and disaster recovery programmes.

– All insurable business risks are assessed, identified and adequately covered/insured.

– Existence of documented standard operating procedures for all business activities and

operations.

– All key positions have a minimum of one under-study who can assume the roles

immediately with minimum support, and eventually grow into the position.

– We continually train talents to meet our future skill requirements.

– Continuous recruitment of qualified haulage contractors to meet corporate requirements

and prevent shortage of delivery trucks. We also acquired and managed some of our

delivery trucks e.g bulk flour loading trucks.

– We also have a strong, active and experienced Internal Audit Team. Internal Audit Reports

highlighting control weaknesses are presented periodically to Management and Audit

Committee of the Board.




– The Company's internal control and risk management systems ensure that material errors

or inconsistencies in the financial statements are identified and corrected. Financial

Statements are prepared in accordance with International Financial Reporting Standards.

– Financial statements are prepared periodically on monthly and quarterly bases for the

review of the Management and the Board of Directors. Performance is monitored and

compared with budgets.




5 PROPERTY, PLANT AND EQUIPMENT

a) As at March 31, 2013 Capital Furniture

Land and Work Plant and And Motor

Building in progress Machinery Equipment Vehicles Total

At 1 April, 2012 8,443,148 10,639,821 10,649,550 145,187 327,346 30,205,052

Of Additions 2,051,635 3,713,439 1,263,496 60,454 121,459 7,210,483

Of Disposals - - - (45) (5,500) (5,545)

At 31 March, 2013 10,494,783 14,353,260 11,913,046 205,596 443,305 37,409,990

DEPRECIATION

To 1 April, 2012 107,066 - 979,181 43,716 63,647 1,193,610

Charge for the year 121,248 - 982,429 41,450 103,906 1,249,033

On disposals - - - (30) (1,751) (1,781)

To 31 March, 2013 228,314 - 1,961,610 85,136 165,802 2,440,862

CARRYING AMOUNT

At 31 March, 2013 10,266,469 14,353,260 9,951,436 120,460 277,503 34,969,128

At 31 March, 2012 8,336,082 10,639,821 9,670,369 101,471 263,699 29,011,442

Depreciation expenses of N1.074b (2012:N1.037b) has been charged in 'cost of goods sold', N74.133m (N67.501m) in 'selling and marketing costs' and N100.646m (2012:N88.934m) in administrative expenses'.





b) As at March 31, 2012 Capital Furniture

Land and Work- Plant and And Motor

In thousands of Naira Building in -progress Machinery Equipment Vehicles Total

At 1 April, 2011 5,866,773 451,771 7,358,996 121,703 163,026 13,962,269

Of Additions 2,576,375 10,188,050 3,290,554 23,484 164,320 16,242,783

At 31 March, 2012 8,443,148 10,639,821 10,649,550 145,187 327,346 30,205,052

DEPRECIATION

To 1 April, 2011 – – – – – –

Charge for the year 107,066 – 979,181 43,716 63,647 1,193,610

Of transfers/adjustment – – – – – –

On disposals – – – – – –

To 31 March, 2012 107,066 – 979,181 43,716 63,647 1,193,610

CARRYING AMOUNT

At 31 March, 2012 8,336,082 10,639,821 9,670,369 101,471 263,699 29,011,442




6 INTANGIBLE ASSETS

Cost

At 1 April 1,895 1,895 1,895

Additions 19,838 – –

Disposals – – –

Total Cost 21,733 1,895 1,895

Amortisation and impairment

At 1 April 1,697 1,500 –

Amortisation for the year 4,132 197 –

Impairment for the year – – 1,500

At 31 March 5,829 1,697 1,500

Net Carrying amount 15,904 198 395

Intangible assets are made up of computer software and programmes.

Amortisation expenses of N0.619m (2012: N0.029m) has been charged in 'cost of goods sold',

N0.826m (2012: N0.039m) in 'selling and marketing costs' and N2.686m (2012: N0.128m) in

'administrative expenses'.

7 INVENTORIES


Raw Materials and Consumables 4,492,076 1,564,526 1,702,835

Work-in-Progress 7,577 - 15,283

Finished Goods 285,233 121,462 145,952

Goods-in-Transit 5,224,389 3,247,724 1,914,454

Total 10,009,275 4,933,712 3,778,524

There are no inventories pledged as security for liabilities.

Notes to the Financial Statements - cont’d




8 TRADE AND OTHER CURRENT

Gross Trade Receivables 1,079,325 889,935 905,956

Allowance for Impairment Losses ( 259,663 ) ( 223,645 ) ( 215,969)

Net Trade Receivables 819,662 666,290 689,987

Advances and Prepayments 1,243,720 2,511,948 4,006,057

Due from Related Parties 4,805,580 6,948,233 3,105,175

6,868,962 10,126,471 7,801,219

There is no material difference between the fair value of receivables and their carrying amount.

The fair value of loans to related parties is based on discounted cash flows from using the weighted average cost of

funds of 16% (2012:12%).

Analysis of Trade Receivables

The analysis below analyses changes in the allowances for impairment losses in the year.

In thousands of Naira 2013 2012

Ageing of Trade Receivables

Total Trade Receivables 1,079,325 889,935

Less: Impairment Provision for Trade Receivables (259,663) (223,645)

Net Total 819,662 662,290

of which:

Carrying amount neither past due nor impaired 728,127 608,331

Carrying amount past due but less than three months 63,553 16,472

Carrying amount past due for more than three month but less than six months 19,218 8,813

Carrying amount past due for more than six months but less than one year 13,662 48,880

Carrying amount past due more than one year 254,766 207,439

Gross Receivables 1,079,325 889,935

Impairment for trade receivables (259,663) (223,645)

Net Total 819,662 666,290

Impairment Provision for Trade and other Receivables


At 1 April 223,645 215,969

Charge to income statement for the period 36,018 7,676

At 31 March 259,663 223,645

RECEIVABLES




a) The maximum exposure to credit risk at the reporting date is the carrying value of the receivables. The Company

holds insurance/bank bonds as security against default.

b) As at 31 March, 2013, trade receivables of N70 million (2012: N94 million) were past due but not impaired. These

relate to a number of independent customers for whom there is no recent history of default. Extensive analysis of

customer credit risk analysis were performed on the customers.

c) The amount of the provision for impairment was N260 million as at 31 March 2013 (2012: N224 million). The

individually impaired receivables mainly relate to wholesalers, which are in unexpectedly difficult economic

situations. It was assessed that a portion of the receivables is expected to be recovered.

d) Impairment losses are presented in the income statement as part of the selling and marketing expenses.


2013 2012 2011


9 CASH AND CASH EQUIVALENT

Bank and Cash Balances 309,579 743,826 617,484

Short Term Deposits 3,264,630 3,114,630 3,344,658

Balance as stated in the statement of financial position as at 31 March 3,574,209 3,858,456 3,962,142

Less Bank Overdrafts ( 339,832 ) – –

Cash and Cash Equivalents 3,234,377 3,858,456 3,962,142

There is no material difference between the fair value and the carrying amount of cash equivalents.

Short term deposits represent temporary excess of liquidity invested in low-risk short-term bank deposits with a

maturity not exceeding 30 days.

2013 2012 2011


10 TRADE PAYABLES AND OTHER CURRENT LIABILITIES

Due within one year

Trade Payables 975,676 4,421,252 1,753,673

Accruals 207,032 333,337 814,620

Pension and Sundry Taxes 80,006 1,390,085 1,779,470

Balance at 31 March 1,262,714 6,144,674 4,347,763

Accrued liabilities represent miscellaneous contractual liabilities that relate respectively to expenses that were

incurred but not paid for at the year-end.

The carrying amount of trade and other payables and accrued liabilities are considered to be in line with their fair

value at the reporting date.



2013 2012 2011


11 FINANCIAL LIABILITIES

Current portion of Loans and Borrowings

Bank Loans 15,676,236 10,237,282 2,796,692

Bank Overdrafts 339,832 – –

Import Finance Facilities 9,512,032 5,190,993 3,426,778

25,528,100 15,428,275 6,223,470

Non-Current Portion of Loans and Borrowings

Bank loans 5,573,050 5,841,129 870,259

5,573,050 5,841,129 870,259

a) Weighted Average Cost of Borrowings was 12.24% ( 2012:12.43% annually).

b) Bank Loans and Overdraft are secured by Mortgage on Property, Plant and Equipment while Import Finance

Facilities are secured by Trade Receivables.

c) The fair value of current borrowings is not materially different the carrying amount, as the impact of discounting

is not significant.

d) The carrying amounts and fair value of the non-current borrrowings are as follows.

The fair values are based on cash flows discounted using rate based on the average borrowing rate of 17%

(2012:18%)

Carrying Amount Fair Value

2013 2012 2013 2012


GT Bank 364,185 547,022 350,181 517,089

Keystone Bank 73,786 77,284 37,420 68,234

First Bank 5,255,807 5,255,807 5,185,449 5,255,807

5,693,778 5,880,113 5,573,050 5,841,129

12 RETIREMENT BENEFIT OBLIGATIONS

The Company has both defined benefit and defined contribution plans.

Defined Contribution Plan

A defined contribution plan is a pension plan under which the Company pays fixed contributions to a separate entity.

The Company has no legal or constructive obligations to pay further contributions if the funds does not hold sufficient

assets to pay all employees the benefits relating to employee service in the current and prior periods.

The Company pays contributions to publicly or privately administered pension insurance plans on a mandatory,

contractual or voluntary basis. The Company has no further payment obligations once the contributions have been

paid. The contributions are recognised as employee benefit expense when they are due.




Defined Benefit Plan

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on

retirement, usually dependent on one or more factors, such as age, years of service and compensation.

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the

present value of the defined benefit obligation less the fair value of planned assets, together with adjustments for

unrecognised actuarial gains or losses and past service costs.

The amount recognised in the statement of financial position is determined as follows:

2013 2012


Present value of retirement benefit obligation 433,110 400,560

Interest cost 69,526 56,080

Current service cost 33,165 24,180

Benefits paid (5,536) (810)

Actuarial (gain) / loss due to change in experience 116,921 (45,160)

Actuarial (gain) / loss due to change in assumptions – (1,740)

647,186 433,110

The defined benefits obligation is calculated annually by independent actuaries.

The principal actuarial assumptions were as follows:

Actuarial Method : Projected Unit Method

Discount rate: 11%

Rate of Salary escalation : 12% per annum

Retirement Age : 60 years

Pre-retirement mortality : A1949/52 Ultimate

Withdrawal : Based on the average experience of other similar arrangements adjustments for the company's

experience

Expenses :

No explicit allowance.

2013 2012 2011


13 DEFERRED INCOME AND ACCRUALS

Deferred income and accruals 226,064 170,070 230,941

Deferred income and accruals includes government grants. The Company received government interest grants in

respect of CBN intervention loans from Guaranty Trust Bank Plc, and Keystone Bank Limited at subsidized rate

of 7% per annum. The interest grants are included under non-current liabilities and are recognized in the income





2013 2012


14 PROFIT BEFORE TAXATION

The following items have been

charged/credited in arriving at

profit before tax:

Depreciation 1,249,033 1,193,610

Allowance for bad and doubtful debts 36,018 7,676

Auditors’ remuneration 13,613 12,466

Directors’ emoluments:

Fees 14,955 12,463

Others 29,238 24,365

Finance Cost 528,340 523,100

And Crediting

Profit on disposal of fixed assets 1,068 22

Finance income 622,534 695,282

15 TAXATION

In thousands of Naira` 2013 2012 2011

a.) Income statement

Current company income tax 610,955 132,916 120,832

Education tax 101,387 92,702 83,005

(Over)/under provision ( 4,804 ) (4,401) 456

Total Income Tax 707,538 221,217 204,293

Deferred tax provision on origination and

reversal of temporary differences 263,541 749,743 819,095

Tax charge to income statement 971,079 970,960 1,023,388

The provision for income tax is based on the provision of the Companies Income Tax Act (LFN CAP 60) as

amended to date while education tax is based on Education Tax Act No. 7 CAP E4 LFN, 2004.

b.) Current tax liabilities

The movement in current tax balance is as follows: 2013 2012 2011


At 1 April 225,618 203,836 794,171

Charge for the year 707,538 221,217 204,293

Total Tax Payable 933,156 425,053 998,464

Payment during the year ( 220,814 ) (199,435) (794,628)

Net Balance as at 31 March 712,342 225,618 203,836




16 STATEMENT OF CASH FLOWS

The Statement of Cash Flows has been drawn up using the indirect method. Working capital comprises

inventories, receivables and current liabilities (excluding bank overdrafts). The cash flow from investing

activities relates to the net amount of investments and disposals whilst the cash position consists of cash in hand

and at bank.

a.) Cash flows from operating activities

In thousands of Naira 2013 2012

Profit before tax 3,814,599 3,664,935

Adjustments for non cash items:

Depreciation of property, plant and equipment 1,249,033 1,193,610

Profit on disposal of property, plant and equipment ( 1,068 ) –

Amortisation of intangible assets 4,132 197

Interest income (622,534) ( 695,282)

Interest expense 528,340 523,100

Net charge in retirement benefit obligations 102,691 46,900

Operating profit before working capital changes 5,075,193 4,733,460

b.) Working Capital Changes

(Increase)/decrease in inventories (5,075,243 ) (1,152,508)

Increase/(decrease) in deferred income and accruals 55,994 ( 60,871)

(Increase)/decrease in trade and other receivables 3,257,509 (2,325,251)

Increase/(decrease) in trade and other payables (4,881,962 ) 1,740,051

Net working capital changes (6,643,702 ) (1,798,579)

Cash generated from operations (1,568,509 ) 2,934,881


c.) Deferred tax


Per income statement:

Charge to income statement for the year 263,541 749,743 819,095

Per statement of financial position

The movement in deferred tax is as follows:

Deferred tax liability:

At 1 April 2,671,398 1,921,655 1,102,560

Charge for the year 263,541 749,743 819,095

At 31 March 2,934,939 2,671,398 1,921,655


Notes to the Financial Statements cont’d

2013 2012

Ikeja Apapa Total Ikeja Apapa Total

a. Revenue and Result


Revenue 9,882,296 35,827,086 45,709,382 7,788,929 30,263,298 38,052,227

Cost of sales (8,420,368) (29,367,954) ( 37,788,322) (6,534,695) (25,024,266) (31,558,961)

Gross profit 1,461,928 6,459,132 7,921,060 1,254,234 5,239,032 6,493,266

Other income 84,578 59,488 144,066 53,311 58,771 112,082

Operating expenses (1,265,753) (3,078,967) (4,344,720) (1,012,493) (2,100,102) (3,112,595)

Segment Operating Profit 280,753 3,439,653 3,720,406 295,052 3,197,701 3,492,753

b. Revenue by products


Flour – 27,114,403 27,114,403 – 23,177,684 23,177,684

Semolina – 6,261,378 6,261,378 – 5,352,340 5,352,340

Wheat Meal – 2,339,184 2,339,184 – 1,683,635 1,683,635

Brown Flour – 112,121 112,121 – 49,639 49,639

Pasta 5,762,627 – 5,762,627 4,987,040 – 4,987,040

Noodles 4,119,669 – 4,119,669 2,801,889 – 2,801,889

Total revenue 9,882,296 35,827,086 45,709,382 7,788,929 30,263,298 38,052,227

c. Revenue by geographical location of customers: 2013 2012


Domestic (within Nigeria) 45,709,382 38,052,227

Export (outside Nigeria) – –

Total revenue 45,709,382 38,052,227

All sales were within Nigeria

17 SEGMENT REPORTING

The Company’s business operating segments are identified by the two factory locations at Ikeja and Apapa. The

Apapa factory manufactures flour, semolina, wheat meal and brown flour while the Ikeja factory manufactures

pasta and noodles.

The Chief Operating Decision Maker, who is responsible for allocating resources and accessing performance of

the operating segments, has been identified as the Board of Directors that makes strategic decisions.

The Chief Operating Decision Maker reviews Honeywell's monthly financial and operational information in

order to assess performance and allocate resources. Management has determined the operating segments based on

these reports.

The Chief Operating Decision Maker assesses the performance based on operating profits for each operating

segments that is reviewed.

FinancialStatements


2 0 1 3 2 0 1 2


18 OTHER INCOME

Other Income comprises the following:

Sale of by-Products 20,800 7,993

Net gain on sale of Property, Plant and Equipment 1,068 22

Raw wheat Sales 23,592 28,509

Sundry Income 98,606 75,559

Total 144,066 112,082

2 0 1 3 2 0 1 2


19 SHARE CAPITAL

Authorised

8,000,000,000 Ordinary Shares of 50k each 4,000,000 4,000,000

Issued and fully paid

7,930,197,658 (2012: 7,930,197,658) Ordinary Shares of 50k each 3,965,099 3,965,099

20 CHAIRMAN'S AND DIRECTORS' EMOLUMENTS,

PENSIONS AND COMPENSATION FOR

LOSS OF OFFICE 2 0 1 3 2 0 1 2


The remuneration paid to Directors was

a. Fees:

Chairman 1,000 800

Other Directors 13,955 11,663

Total 14,955 12,463

b. Fees and other emoluments disclosed above

include amount paid as:

Fees 14,955 12,463

Other emoluments 29,238 24,365

Total 44,193 36,828

Notes to the Financial Statements cont’dFinancial

Statements


21 EMPLOYEES AND RELATED REMUNERATION

Number of employees in receipt of emoluments excluding

allowances were within the following ranges:

2013 2012

Number Number

Under 500,000 – –

N500,001 - N1,000,000 488 465

N1,000,001 - N1,500,000 81 76

N1,500,001 - N2,000,000 37 38

N2,000,001 - N2,500,000 75 51

N2,500,001 - N3,000,000 37 17

N3,000,001 - N3,500,000 28 16

N3,500,001 - N4,000,000 14 15

N4,000,001 - N4,500,000 10 23

N4,500,001 - N5,500,000 15 14

N5,500,001 - N6,000,000 10 10

N6,000,001 - Above 32 32

Total 827 757

2 0 1 3 2 0 1 2

c. Number of Directors (excluding the Chairman) whose

emoluments were within certain ranges were: Number Number

N100,000 and above 8 8

d. Waived emoluments

Number of Directors who have waived their rights

to receive emoluments – –

Aggregate of those emoluments

e. Pensions of Directors and past Directors Aggregate amount

of Directors' or past Directors or past Directors' pensions

Other pensions – –

f. Compenstion to Directos for loss of office

(Key management comprises the Directors

and the Chairman that form part of the leadership team)

(Chief operating officers).

As Directors – –

As Executives – –


FinancialStatements



22 RELATED PARTY TRANSACTIONS

At the year end, the Company had amount receivable from a related company. Interests have

been accrued and recognize in the income statement. The balances are shown below:2013 2012


Metropolitan Trust Limited 4,805,580 3,851,347

Siloam Global Services Limited, who controls 75% of the Company also controls significant

holdings of Metropolitan Trust Limited.

As at 31 March, 2013, the amount due from Metropolitan Trust Limited in respect of loans was

N4.8bn.

Interest on the loan was charged at the ruling commercial rates at an averaged 16% per annum.

The rate is subject to review in line with market conditions.

The related party balance will be settled in cash.

23 CONTINGENT LIABILITIES, GUARANTEES AND OTHER FINANCIAL

COMMITMENTS

a) Charges

The Company has loan facilities with First Bank of Nigeria Plc secured by All Assets

Debenture.

b) Financial Commitments

The Directors are of the opinion that all known liabilities and commitments have been taken

into account in the preparation of the financial statements under review. These liabilities are

relevant in assessing the Company's state of affairs as at 31 March, 2013.

c) Legal Charges

The Company has no contingent liabilities in respect of legal claims arising in the ordinary

course of business. It is not anticipated that any material liabilities will arise in the ordinary

course of business.

24 LOANS AND OTHER TRANSACTIONS FAVOURING

DIRECTORS AND OFFICERS

a) During the year, the Company guaranteed no loan in favour of its Directors and Officers.

b) No loans were given to the Directors to purchase the Company's shares during the year.

FinancialStatements



25 EARNINGS PER SHARE

The Earnings Per Share (EPS) is calculated by dividing the profit attributable to ordinary

Shareholders by the number of ordinary shares issued as at 31 March, 2013.

26 APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved by the Board of Directors of the Company on

Monday, 17 June, 2013.

27 SIGNIFICANT JUDGEMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In preparing its financial statements, the Company has made significant judgements, estimates

and assumptions that impact on the carrying value of certain assets and liabilities, income and

expenses as well as other information reported in the notes. The Company periodically

monitors such estimates and assumptions and make sure that they incorporate all relevant

information available when financial statement are prepared. However, this does prevent actual

figures differing from estimates.

The judgements made in the process of applying the Company’s accounting policies that have

the most significant effect on the amounts recognised in the financial statements, and the

estimates and assumptions that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year are addressed below.

Revenue recognition

The Company makes provisions for trade discounts, volume rebates and charge back for

product returns allowed by the sale contracts when recognising the revenue derived from sales

of its products. Such deductions represent estimates, which are subject to judgements and

assumptions based on past experience as well as the company’s knowledge available at the time

the estimate is made.

Allowance for doubtful receivables

The determination of the recoverability of the amount due from customers involves the

identification of whether there is any objective evidence of impairment. In cases where that

process is not feasible, a collective evaluation of impairment is performed. As a consequence,

the way individual and collective evaluations are carried out and the timing relating to the

identification of objective evidence of impairment require significant judgement and may

materially affect the carrying amount of receivables at the reporting date.

FinancialStatements



Asset impairment tests

A financial asset or a group of financial assets, other than those categorised at fair value through

profit or loss, are assessed for indicators of impairment at the end of each reporting period.

Impairment exists only when the Company ascertains that a “loss event” affecting the estimated

future cash flows of the financial asset has occurred. It may not be possible to identify a single,

discrete event that caused the impairment and moreover to determine when a loss event has

occurred might involve the exercise of significant judgement.

The amount of impairment loss recognised for financial assets carried at amortised cost is the

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

flows, discounted at the effective interest rate.

Net realisable value of inventories

Inventories are stated at the lower of cost and net realisable value. The cost of inventories is

written down to their estimated realisable value when their cost may no longer be recoverable,

such as when inventories are damaged or become wholly or partly obsolete or their selling

prices have declined. In any case, the realisable value represents the best estimate of the

recoverable amount, is based on the most reliable evidence available at the reporting date and

inherently involves estimates regarding the future expected realisable value. The benchmarks

for determining the amount of write-downs to net realisable value include ageing analysis,

technical assessment and subsequent events. In general, such an evaluation process requires

significant judgement and may materially affect the carrying amount of inventories at the

reporting date.

Deferred tax estimation

Recognition of deferred tax assets and liabilities involves making a series of assumptions. As

far as deferred tax assets are concerned, their realisation ultimately depends on taxable profits

being available in the future. Deferred tax assets are recognised only when it is probable that

taxable profits will be available against which the deferred tax asset can be utilised and it is

probable that the entity will earn sufficient taxable profit in future periods to benefit from a

reduction in tax payments. This involves the Company making assumptions within its overall

tax-planning activities and periodically reassessing them in order to reflect changed

circumstances as well as tax regulations. Moreover, the measurement of a deferred tax asset or

liability reflects the manner in which the entity expects to recover the asset’s carrying value or

settle the liability.

FinancialStatements



Actuarial assumptions on defined benefit retirement plans

Accounting for defined benefit plans may be complex because actuarial assumptions are

required to measure the obligation and the expense, with the posibility that actual results differ

from the assumed results. These differences are known as actuarial gains and losses. Defined

benefit obligations are measured using the Projected Unit Method, according to which the

Company has to make a reliable estimate of the amount of benefits earned in return for services

rendered in current and prior periods, using actuarial techniques.

28 NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

The following new standards, amendments and interpretations have been issued by the IASB

but are not yet effective for the financial year beginning 1 April, 2012 and have not been early

adopted by Honeywell Flour Mills Plc (the list does not include information about new

pronouncements that affect interim financial reporting or first-time adopters of IFRS since they

are not relevant to the Company.

The Directors anticipate that the new standards, amendments and interpretations will be

adopted in the company’s financial statements when they become effective. The Company has

assessed, where practicable, the potential impact of all these new standards, amendments and

interpretations that will be effective in future periods.

a. Ammendments to IAS 1 Presentation of Items of Other Comprehensive Income:

These ammendments improve the presentation of the components of other comprehensive

income. Mainly the Company will be required to group items presented in Other

Comprehensive Income based on whether or not they will be reclassified to profit or loss

subsequently. They are effective for annual periods beginning on or after 1 July, 2012.

b. Ammendment to IAS 1 Presentation of Financial Statements:

The ammendment clarifies that additional comparative information is not necessary for

periods beyond the minimum required by IAS 1, however if voluntarily presented, it should

be in accordance with IFRS, without tiggering a requirement to provide a complete set of

financial statements. It also clarifies that, in the case of changes in accounting policies

retrospectively or a retrospective restatement or reclassification which has a material effect

on the information in the statement of financial position at the beginning of the proceding

period, the Company should present the statement of financial position at the end of the

current period and the beginning and end of the preceding period. However, other than

disclosure of certain specified information, related notes will not be required to accompany

the opening statement of financial position as at the beginning of the preceding period. The

ammendment is effective for annual periods beginning on or after 1 January, 2013.

FinancialStatements



c. Ammendments to IAS 32 Offsetting Financial Assets and Financial Liabilities :

The ammendments address inconsistencies in current practice when applying the offseting

criteria in IAS 32, mainly by clarifying the meaning of currently has a legally enforeceable

right of set-off and that some gross settlement systems may be considered equivalent to net

settlement. They are effective for annual periods beginning on or after 1 January 2014.

d. Ammendment to IAS 32 Financial Instrument Presentation :

The ammendment clarifies that income tax relating to distributions to holders of an equity

instrument and to transaction costs of an equity transaction should be accounted for in

accordance with IAS 12. It is effective for annual periods beginning on or after 1 January,

2013.

e. IFRS 9 Financial Instruments:

This standard introduces new requirements for the classification and measurement of

financial assets and financial liabilities and for derecognition.

IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial

Instruments: Recognition and Measurement to be subsequently measured at amortised cost

or fair value. Specifically, debt investments that are held within a business model whose

objective is to collect the contractual cash flows and that have contractual cash flows that are

solely payments of principal and interest on the principal outstanding are generally

measured at amortised cost at the end of subsequent accounting periods. All other debt

investments and equity investments are measured at their fair value at the end of subsequent

accounting periods.

The most significant effect of IFRS 9 regarding the classification and measurement of

financial liabilities relates to the accounting for changes in fair value of a financial liability

(designated as fair value through profit or loss) attributable to changes in the credit risk of

that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair

value through profit or loss, the amount of change in the fair value of the financial liability

that is attributable to changes in the credit risk of that liability is recognised in other

comprehensive income, unless the recognition of the effects of changes in the liability’s

credit risk in other comprehensive income would create or enlarge an accounting mismatch

in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not

subsequently reclassified to profit or loss. Currently, under IAS 39, the entire amount of the

change in the fair value of the financial liability designated as at fair value through profit or

loss is recognised in profit or loss.

FinancialStatements



The derecognition provisions are carried over almost unchanged from IAS 39.

IFRS 9 is effective for annual periods beginning on or after 1 January, 2015. the Directors

anticipate that IFRS 9 will be adopted in the Company’s financial statements when it

becomes mandatory and that the application of the new Standard might have a significant

impact on amounts reported in respect of the Company’s financial assets and financial

liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a

detailed review has been completed.

29 EXPLANATION OF TRANSITION TO IFRS

a) Transition to IFRS

As stated in note 2(a), these financial statements are Honeywell Flour Mills Plc’s

{“Honeywell” or ‘the company”}first financial statements prepared in accordance with

International Financial Reporting Standards (IFRS).

The accounting policies set out in Note 3 have been applied in preparing the financial

statements for the year ended 31 March, 2013, the comparative information presented in

these financial statements for the year ended 31 March, 2012 and in the preparation of the

opening IFRS statement of financial position at 1 April, 2011.

In preparing its opening IFRS statement of financial position, Honeywell has adjusted

amounts reported previously in financial statements prepared in accordances with

Statements of Accounting Standards issued by the Financial Reporting Council of Nigeria

(“SAS” - Nigerian GAAP). An explanation of how the transition from Nigerian GAAP to

IFRS has affected the company’s financial position, financial performance and cash flows is

set out in the following explanatory notes.

1) Exemptions

In preparing these financial statements in accordance with IFRS 1, the company has applied

the mandatory exceptions from full retrospective application of IFRS. The optional

exemptions from full retrospective application selected by Honeywell are summarised

below.

Optional exemptions:

i) Exemptions from full retrospective application

ii) Estimates exception

Estimates made under IFRS 1 at 1 April, 2011 should be consistent with estimates made for

FinancialStatements



the same date under Nigerian GAAP, unless it is established that those estimates were made in

error.

iii) Derecognition of financial assets and liabilities exception

Financial assets and liabilities derecognised before 1 January, 2004 are not re-recognised

under IFRS

iv) Hedge accounting exception

The exception requires the Company to apply hedge accounting only if the hedge

relationship meets the entire accounting criteria under IAS 39. The Company has not

applied hedge accounting under IFRS.

Mandatory exceptions:

i) Classification and measurement of financial assets exception

The assessment of whether Honeywell’s financial assets meet the requirements to be

measured at amortised cost, as set out in IFRS 9, was performed at 1 April, 2011.

ii) Business combination

The Company elected not to restate business combination that occurred prior to date of

transition. The only acquisition made by the Company prior to the date of transition was the

acquisition of 100% ownership of Honeywell Superfine Foods Limited. However, the

Company carried out internal restructuring in the nature of merger by absorption of the

wholly owned subsidiary in March, 2013.

The merger was a business combination of companies under common controls which is not

under the guidance of IFRS. Hence, the accounting for the business combination was carried

out using the pooling of interest method as highligted under note 3b. Consequently, the

comparative amounts are restated as if the combination had taken place at the beginning of

the earliest comparative period as at 1 April, 2011.

iii) Fair value as deemed cost

This exception is applicable to any individual items of property, plant and equipment, or

intangible assets that meet the recognition criteria under IFRS.

When the excemption is applied, the fair value or revalued amount is the deemed cost at the

date of the revaluation for subsequent accounting under IFRS, if the revaluation was broadly

comparable to fair value or cost or depreciation cost under IFRS.

Honeywell elected to apply the fair value or revalued amount as deemed cost at the date of

revaluation for subsequent accounting under IFRS.

FinancialStatements


30a) RECONCILIATION OF EQUITY AS AT 1 APRIL 2011 AND 31 MARCH 2012

31 March 2012 1 April 2011

N-GAAP Adjustment IFRS N-GAAP Adjustment IFRS


ASSETS

Non-Current Assets

Property Plant and Equipment 30(c) ii, viii 27,706,000 1,305,441 29,011,441 12,572,298 1,389,971 13,962,269

Intangible Assets 6 iii 900,188 (899,990) 198 900,188 (899,793) 395

Total Non-Current Assets 28,606,188 405,451 29,011,639 13,472,486 490,178 13,962,664

Current Assets

Inventories 7 vi 5,013,000 (79,288) 4,933,712 3,808,945 (30,421) 3,778,524

Trade and other Current Receivables 7,259,000 2,867,471 10,126,471 8,031,989 (230,770) 7,801,219

Cash and Cash Equivalents 4,060,000 (201,544) 3,858,456 3,824,187 137,955 3,962,142

Total Current Assets 16,332,000 2,586,639 18,918,639 15,665,121 (123,236)15,541,885

Total Assets 44,938,188 2,992,090 47,930,278 29,137,607 366,942 29,504,549

LIABILITIES

Current Liabilities

Trade and other Payables 3,883,400 2,261,274 6,144,674 4,867,952 (520,189) 4,347,763

Loans and Borrowings 15,511,000 (82,725) 15,428,275 5,942,863 280,607 6,223,470

Current tax Liabilities 225,600 18 225,618 203,836 – 203,836

Total Current Liabilities 19,620,000 2,178,567 21,798,567 11,014,651 (239,582) 10,775,069

Non-Current Liabilities

Loans and Borrowings 6,244,000 (402,871) 5,841,129 1,358,633 (488,374) 870,259

Retirement Benefit Obligation iv – 433,100 433,100 – 400,560 400,560

Deferred Income/Revenue v – 170,070 170,070 – 230,941 230,941

Provisions 76,000 (76,000) 177,065 (177,065) -

Deferred tax Liabilities vii 2,196,000 475,398 2,671,398 1,456,525 465,130 1,921,655

Non-Current Liabilities 8,516,000 599,697 9,115,697 2,992,223 431,192 3,423,415

Total Liabilities 28,136,000 2,778,264 30,914,264 14,006,874 191,610 14,198,484

Equity

Share Capital 3,965,000 99 3,965,099 3,965,099 – 3,965,099

Share Premium 6,462,000 41 6,462,041 6,462,041 – 6,462,041

Retained Earnings 6,375,188 213,686 6,588,874 4,703,593 175,332 4,878,925

Total Equity 16,802,188 213,826 17,016,014 15,130,733 175,332 15,306,065

Net equity and Liabilities 44,938,188 2,992,090 47,930,278 29,137,607 366,942 29,504,549


FinancialStatements

30b) RECONCILIATION OF COMPREHENSIVE INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH, 2012

N-GAAP Adjustment IFRS


Revenue 38,071,502 (19,275) 38,052,227

Cost of sales (31,501,987) (56,974) (31,558,961)

Gross profit 6,569,515 (76,249) 6,493,266

Administration expenses (1,226,321) (80,511) (1,306,832)

Distribution expenses (1,884,965) 79,202 (1,805,763)

Other income 764,006 (651,924) 112,082

Results from operating activities 4,222,235 (729,482) 3,492,753

Finance income – 695,282 695,282

Finance expenses (559,101) 36,001 (523,100)

Net finance (cost)/income (559,101) 731,283 172,182

Profit before taxation 3,663,134 1,801 3,664,935

Taxation (960,703) (10,257) (970,960)

Profit after taxation 2,702,431 (8,456) 2,693,975

Attributable to:

Equity holders 2,702,431 (8,456) 2,693,975

Other comprehensive income

Defined benefits acturial losses – 46,900 46,900

Tax on other comprehensive income – – –

Profit for the year (8,456) 2,693,975

Total comprehensive income 2,702,431 38,444 2,740,875

Attributable to:

Equity holders 2,702,431 38,444 2,740,875

30c) EXPLANATORY NOTES TO THE RECONCILIATION (IFRS 1 ADJUSTMENTS)

i) Business Combination

The Company carried out an initial restructuring in the nature of merger by absorption of

the wholly owned subsidiary in March 2013. The accounting for business combination was

carried out using the pooling of interest method as highlighted under Note 3. Consequently,

the comparative amounts are restated as if the combination had taken place at the beginning

of the earliest comparative period as at 1 April, 2011. No goodwill was recorded. The

difference between the Company's cost of investment and the wholly owned subsidiary's

equity in the amount of N1.5 billion as at 1 April, 2011 was written off against other

comprehensive income of the financial year end 31 March, 2012.



FinancialStatements


ii) Property, Plant and Equipment (PPE)

The Company has elected to report its PPE in its opening IFRS Financial Position as at 1

April, 2011 at a deemed cost. The deemed cost was determined by revaluation of the PPE as

at 31 March, 2011 at the aggregate fair value. The aggregate fair value of the PPE as at 31

March, 2011 was determined to be N13.909 billion as compared to the then carrying

amount of N12.572 billion which resulted in a revaluation surplus of about N1.337 billion.

Land and building contributed significantly to the revaluation surplus at about N1.068

billion.

Under IFRS, the componentization of each item of PPE was carried out and each

component was depreciated separately using straight line method, based on the estimated

economic useful life and residual value. The residual values and useful lives of PPE are

expected to be reviewed and adjusted as appropriate, at the end of each reporting date.

The impact of the componentization and revaluation of PPE was an increase in

depreciation expenses by N73 million for the period ended 31 March, 2013.

iii) Intangible Assets

The Company normally classifies computer software as part of PPE under N-GAAP. Under

IFRS, computer software is recognized as an intangible asset unless it can be considered to

be an integral part of PPE. As a result, the Company reclassified computer software as a

separate intangible asset under IFRS. The effect of this adjustment was to decrease PPE

and increase intangible asset by N1.8 million for the period ended 31 March, 2012.

Amortization of the intangibles was also carried out in accordance with IFRS and it

resulted in a reduction of retained earnings by N1.7 million for the year ended 31 March,

2012.

iv) Post-employment Benefits

The Company operates a gratuity scheme based on employee's length of service. The

benefit arrangement is noncontributory and unfunded, but a provision is made in the

Company accounts to meet the cost of future benefits payout under the benefit

arrangement. Under IFRS, actuarial valuation of the post-employment gratuity scheme

were conducted on 1 April, 2011 and 31 March, 2012 at N401 million and N433 million

respectively for the Company. The impact of the adjustments relating to the actuarial

valuations was to increase retained earnings by N238 million and N98 million as at 1 April,

2011 and for the year ended 31 march, 2012 respectively.


FinancialStatements

Honeywell Flour Mills Plc.

v) Government Grants

The Company received government interest grants in respect of Central Bank Of Nigeria

(CBN) intervention loans from Guaranty Trust Bank Plc and Keystone Bank Limited at

subsidized rate of 7% per annum. The government interest for the year ended 31 March,

2013

vi) Inventory

Estimates of inventory impairment were recomputed based on specific nature of the

inventory items as compared to the general approach under the Nigeria GAAP. The impact

of this was a reduction in retained earnings by N24 million for the year ended 31 March,

2012.

vii) Deferred Tax

The deferred tax consequences in respect of the IFRS adjustments have been determined

and reflected based on a tax rate of 30%. The impact of this was to increase deferred tax

liability by N465 million and N10 million as at 1 April, 2011 and 31 March, 2012 and a

reduction in retained earnings by N465 million and N10 million respectively.

viii) Spare Parts

Spare parts are usually carried as inventory and recognized in profit or loss as consumed.

Under IFRS, spare parts qualify as PPE when an entity expects to use them during more

than one period. Similarly, if the spare parts can be used only in connection with an item of

PPE, they are accounted for as PPE. Certain qualified spare parts were reclassified from

inventory to PPE. The impact was to reduce inventory and increase PPE by N53 million.

The depreciation expenses were also increased by N17 million for the year ended 31

March, 2012.

ix) Reconciliation of Financial Statements

The detailed reconciliation statements of the financial position and comprehensive income

statement between N-GAAP and IFRS are as shown on notes 30(a) and 30(b).


91

FinancialStatements


Value Added Statement for the year ended 31 March, 2013

2013 2012


Revenue 45,709,382 38,052,227

Other revenue 144,066 112,082

45,853,448 38,164,309

Bought in goods

and services (39,211,063) (31,948,434)

VALUE ADDED 6,642,385 100 6,215,875 100

APPLIED AS FOLLOWS:

1 To pay employees

Salaries and wages, pension

and social benefits 1,050,413 16 882,770 14

2 To pay providersof funds

Finance expenses 528,340 8 559,101 9

3 To pay government

Income and education taxes 707,538 11 221,217 4

4 To provide for maintenance and

expansion of assets

Depreciation 1,249,033 19 1,110,870 18

Deferred tax 263,541 4 739,486 12

Retained profit 2,843,520 43 2,702,431 43

VALUE ADDED 6,642,385 100 6,215,875 100

Value added is the wealth created by the efforts of the company and its employees and its

allocation between employees, shareholders, government and re-investment for the future

creation of further wealth.

92

FinancialStatements

List of Key Distributors 95-97

Unclaimed Dividends 98

Share Capital History 99

Application for E-Dividend 101

Proxy Form 102

Electronic Delivery Mandate Form 103




Key Distributors

Abdulahi Salah Abiola Adio Inv Ltd Abiola Aramide Olaoluwa Nig.Ent.Adamu AbdullahiAde Distribution & Invest. CoAde’s Famet Nig EnterprisesAdeayo Integrated Services LtdAdebiyi Merchants StoresAde-Owo Nig Ltd.Adidot Nigeria EnterprisesAdunni F. NehanAduwa StoresAhajas Nig LtdAhmadu Yusuf Alh Ibrahim DubaraAlhaja AdeshinaAlhaja OlayiwolaAlhaji Maisugar Ibrahim Adam Alhaji Mukhtar NayayaAlhaji Namadi Inuwa Alhaji Tasiu Ilu Kura Ali HassanAlways Ventures Amazing Wonder EnterprisesAminat Ottun Amudeson Nig. Enterprises Aolat adefunke Nig. LtdAsalam Stores VenturesAyo ola Investment B.Zion Gbebol Nigeria LtdBako Alh. Kontoma & SonsBekdat VenturesBello Master InvestmentBig Treat Confectioneries LtdBioreal LtdBlessed A.A & SonsBlessed Chima Umeh EnterprisesBlessed Obrown Ent. Nig. Ltd. Bofik Nig LtdBoladale StoresCasanthonio Nigeria LimitedChief Ezeh Chimaco & Brothers Enterprises Chivic NIg LtdCleason Nigeria EnterprisesCossy Bros Intern LtdDamilek Integrated Services LimitedDe-Tofola Nigeria Ltd Donason Commercial EnterprisesE.Y. Nigeria LimitedEkene EnterprisesEmamac Nigeria LimitedEmju Investment Company LtdEstony VenturesEwedemi & SonsEweje StoresEwoma EnterprisesFaith Foods and ConfectioneriesFantazia Fast Food Ltd

NorthWestWestNorthLagosLagosLagosLagosLagosLagosLagosNorthNorthNorthNorthLagosLagosNorthNorthNorthNorthNorthWestLagosLagosEastWestLagosLagosLagosNorthNorthNorthLagosNorthNorthEastNorthLagosLagosLagosEastEastLagosNorthLagosEastLagosEastEastLagosEastEastLagosLagosLagosEastEastEast

SokotoIbadanIbadanGombeIjebu OdeOtaAtan - OtaMosafejoEgbeIjebu OdeApongbonGusauGombeBauchiSokotoItireEjigboMaiduguriJoskanokanoMaiduguriOkeneketuApongbonEnuguOsogboAbeokutaApongbonSango Ota Borno AbujaNassarawaIkejaAbujaOturkpoEnuguEnuguOke AdoIpajaKirikiriOnitshaOwerriApongbonMarkurdiApongbonPort-HarcourtOju OreAbaCalabarTrade FairCalabarUyoAgegeOkokomaikoMushinWarriPort-HarcourtWarri

NAME REGION LOCATION

FinancialStatements


Favour of God Ventures.Femadons EnterpFemolysis LimitedFosmarch Nig.LtdFrandnivan VenturesFrontline VenturesG.O AyodejiGambo DambalaGilbest God's Own VenturesHamum Global Resources LtdHaruna SalihuHay Crown Global VenturesHeron VenturesHis Favour Commodity storesIbrahim Sulu OlojeIbrahim Usman EntICI Holdings LimitedIdeal Systems & Technical Services LtdImperial Bakeries Nig Insight Trust Links Nig. LimitedIsiaku Muhammed J.B.Oyesomi & Sons Nig.LtdJ.C Joseph Industries LimitedJ.C.Anugwu & Sons Nig.LtdJames Franklyn Investment Ltd Joe-Best Akor EnterpriseKabiru Ahmed DokoroKabiru Shuaibu DansaraiKamchizy AssociateKanisuru A & B Stores Kemayos VenturesKine - Cal International Limited Kudyunus Bislar Nig Ltd Kuli Barde EnterprisesLaji VenturesLaslop Nig enterprises Lasol Nigeria LimitedLawali Sanni Gusau AlhLegacy BakeryLofty StoresMac-Tell Investment Ltd Magbagbeade StoresMaigudu YusufMama Somto Matwealth VenturesMerciful BusinessMichelle Edmund VenturesMoboluwaduro CommoditiesMofine VenturesMT Olives Nig LtdMurtala Abdulahi Trading Musa MohammedNakowa Modern BakeryNew Gaskiya EnterprisesNgaloma general EnterprisesNnemelu J.CObi okoye

LagosLagosLagosLagosEastLagosLagosNorthEastWestNorthNorthWestLagosLagosWestNorthEastLagosNorthLagosNorthEastEastEastNorthNorthNorthNorthEastLagosLagosLagos North NorthLagosLagosLagosNorthWestLagosLagosLagosNorthLagosLagosLagosWestLagosWestWestNorthNorthNorthNorthNorthEastEast

AbeokutaSango OtaIkoroduAlakukoBeninBadagryOke OdokanoPort-HarcourtAdo-EkitiAbujaYobeLokojaAbeokutaAbeokutaLokojaSokotoOnitshaEgbedaAbujaSatelite TownkadunaBeninAbaOnitshaSulejaGbokoGombekanoOnitshaIjebu OdeMushinAgegekadunaMaiduguriOjoAgegeIddoGusauLokojaApongbonMushinAbeokutaMaiduguriTrade FairPantiAjegunleIbadanAbeokutaAnyigbaIlorinkadunakanokatsinakanoMaiduguriOnitshaAba

NAME REGION LOCATION

Key Distributors Cont’dFinancial

Statements


NAME REGION LOCATIONOdilamma Enterprises NigOgene Concerns LimitedOladejo & Sons Nigeria EntOlubeesak NIg EnterprisesOluwakemi Trading StoresOluwasesan Sose EnterprisesOni Stores Ope Investment Limited.Opeyemi BakeryOtolorin VenturesPalma Seaport LtdPayless StoresPhyloleen Nigeria LtdPlatinum StoresPrince BakeryQ U OlumideQuad & Kay Ventures R B D Ayomide Adio Rarmset VenturesAlhaji Rasaki Hassan Raywens Nig EnterprisesRazkkas Nigerian LimitedRintol VenturesRoyal Gate Company LimitedS O Omilabu & sons LtdS R S Adeshina Nig LtdSalisu Maigishiri MarkafiSamtina VenturesSay-Suraj Ent Seriki stores Nig EnterShagumba VenturesSolak Industries LtdSolohot Fuels Nig LtdSoyinka & son Sylmec Ventures Ltd Timmy BakeryTolu - Bajok Nig EnterTukur Sabaru Alh. UAC Foods LtdUmar Musa BakeryUmaru Ladan Alh.United Multi Distribution Co.UTC PlcUwana VenturesYomdok Nigeria Limited

EastEastLagosLagosLagosWestLagosLagosLagosWestEastLagosEastLagosLagosLagosLagosLagosLagosLagosLagosLagosLagosLagosLagosLagosNorthWestNorthLagosNorthLagosLagosLagosNorthLagosLagosNorthLagosNorthNorthEastLagosLagosLagos

OwerriOnitshaAlakukoAbeokutaIkoroduIbadanAgegeAmukokoIkotunAkureNsukkaMile 12BeninOshodiIkoroduApongbonApongbonItireOke-ArinAjangbadiOjoEpeOke-ArinAbeokutaMushinItireKadunaOsogbokadunaApongbonkatsinaAgegeBadagryApongbonMarkurdiSagamuDalemoSokotoOjotakadunaBauchiEnuguIlupejuIjeshaAkute

Key Distributors Cont’dFinancial

Statements


Unclaimed Dividends

Some dividend warrants have not been presented to the Bank for payment while others have been returned to the Registrar as unclaimed because the address could not be traced.

The Unclaimed Dividend as at July 31, 2013 is as analysed below.

Above N1,000,000

N100,000 - N1,000,000

N50,000 - N99,999

N10,000 - N49,999

N1,000 - N9,999

Less than N1,000

Total

Total Declared Dividend in Years

% of Unclaimed Dividend

Amount

N’000

-

1,010

484

859

2,339

3,513

8,205

1,031,000

0.8%

2

9

15

102

1,603

16,448

18,179

N’000

2,221

1,623

1,019

1,911

3,680

4,428

14,882

1,189,530

1.3%

N’000

-

-

539

691

1,350

3,116

5,696

872,322

0.7%

-

6

7

56

1,217

15,068

16,354

-

-

7

33

598

14,202

14,840

N’000

2,221

2,633

2,043

3,461

7,369

11,057

28,784

3,092,852

2.7%

2010 Unclaimed Dividend Total

Amount Dividend Range Number of

Shareholders

2011 Unclaimed Dividend

2012 Unclaimed Dividend

Amount Number of

ShareholdersAmount

Number of Shareholders

Amount

FinancialStatements


Year Authorised (N'000) Issued & Fully Paid-up (N'000) Consideration

Increase Cumulative Increase Cumulative

1990 – 10,000 2 Cash @ N1 each

1991 – 10,000 – 2 Cash @ N1 each

1992 – 10,000 – 2 Cash @ N1 each

1993 – 10,000 – 2 Cash @ N1 each

1994 – 10,000 – 2 Cash @ N1 each

1995 40,000 50,000 49,998 50,000 Cash @ N1 each

2001 160,000 210,000 160,000 210,000 Cash @ N1 each

2003 790,000 1,000,000 790,000 1,000,000 Cash @ N1 each

2008 1,000,000 2,000,000 999,999 1,999,999 Acquisition of Honeywell

Superfine Foods Limited

2008 – 2,000,000 – 1,999,999 Share Split of N1 to N0.50

2008 2,000,000 4,000,000 1,500,000 3,499,999 Bonus Issue of 3 to 4 shares

– 4,000,000 465,100 3,965,099 Public Issue @ N8.50 each

–

Share Capital HistoryFinancial

Statements


Application For E-Dividend

Honeywell Flour Mills Plc

To: The Registrar,

First Registrars Nigeria Limited,

Plot 2, Abebe Village Road,

Iganmu, P.M.B 12692,

Marina, Lagos, Nigeria. Date:........................................................

Important! The form should be completed in CAPITAL LETTERS using a black or dark blue ballpoint pen.

Characters and numbers should be similar in style to the following:

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 0 1 2 3 4 5 6 7 8 9

Please fill in the form and return to the address above

Personal Details

Surname.......................................................................................................................................................................

Other Names...............................................................................................................................................................

Address.......................................................................................................................................................................

Mobile........................................................................................................................................................................

phone..........................................................................................................................................................................

Email..........................................................................................................................................................................

Shareholder's Signature

(1).................................................................................................................................................................

Second signature for joint/Company account

(2).................................................................................................................................................................

Company's Authorised Signatures/Seal......................................................................................................................

Bank Account Details

Bank Name..................................................................................................................................................................

Bank Branch Address.................................................................................................................................................

Bank Account Number................................................................................................................................................

Branch Sort Code (very important).............................................................................................................................

Bank's Authorised Signatures & stamp.......................................................................................................................

FinancialStatements


Proxy Form

HONEYWELL FLOUR MILLS PLC4TH ANNUAL GENERAL MEETING TO BEHELD AT 11.00 A.MON TUESDAY SEPTEMBER 24 2013AT THE CIVIC CENTRE,OZUMBA MBADIWE STREET,VICTORIA ISLAND, LAGOS.

(Name of Shareholder in block letters)

The undersigned, being a member/members of the above-Named

Company hereby appoint the Chairman of the meeting Or failing

him.......................................................................................................

..............as my/our Proxy to vote me/us and On my/our behalf at the

Annual General Meeting of the Company to be held on 24 September,

2013 and at Adjournment thereof."

Unless otherwise instructed, the proxy will vote or abstain from

Voting as he/she thinks fit.

Dated this..............................day of.............................................2013

Signature............................................................................................

Notes

1.Please sign this proxy card and post it to reach the Registered office

of Company not less than 48 Hours before the time fixed for the

meeting.

2.If executed by a corporation, the proxy card should be Sealed with

the common seal.

3.This proxy card will be used both by show of hands,

And in the event of a poll being directed or demanded

Please indicate with an "X" in the appropriate section how you which your votes to

be east on resolutions set above. Unless otherwise instructed, the proxy will vote

or abstain from voting at his/her discretion.

Before posting the above form please tear off this part and retain it for admission to the meeting

ADMISSION FORM

HONEYWELL FLOUR MILLS PLC (RC55495)4TH ANNUAL GENERAL MEETING TO BE HELD at Civic Center Ozumba Mbadiwe street, Victoria Island Lagos on Tuesday September 24, 2013 at lla.m

Name of Shareholder*................................................................................................................................................

Name of Proxy*......................................................................... .................................................................................................

If you are unable to attend the meeting

A member (shareholder) entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him. A

Proxy need not be a member. The above proxy form has been prepared to enable you to exercise your right to vote.,

Important

Please insert your name in BLOCK CAPITALS on both proxy and admission forms where asterisked. Insert the name of any person

where a member of the Company or not, with the exception of the Company who will attend the meeting and vote on your behalf.

1. To adopt the Annual Report and Accounts

2. To declare a dividend

3. To re-elect the following Directors:

Dr. Oba Otudeko, D.Sc. Hon. CFR

Lt. General Garba Duba (rtd)

Mr. Jens Mollenbach

4. To approve Directors' remuneration

5. To authorize the Directors to fix Auditors

Remuneration.

6. To appoint members of the Audit Committee

RESOLUTION FOR AGAINST

FinancialStatements


Electronic Delivery Mandate Form

I / We/ Chief/ Dr/ Mr/ Mrs.

Title:

Name:

Address:

hereby agree to the delivery of Annual Report and other statutory documents of

Honeywell Flour Mill Plc to me/us via electronic mode:

The Company should forward the materials to the email address stated below:

e-mail address : ...............................................................................................

Signature : ...............................................................................................

The Registrar First Registrars Nigeria LimitedPlot 2, Abebe Village Road

103

FinancialStatements

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Honeywell-Annual-Report-2013.pdf - Nairametrics

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