Zambeef Prod. Regulatory News (ZAM)

For Immediate Release 10 June 2015

Zambeef Products plc

("Zambeef" or the "Group")

Unaudited Results for the Six Months Ended 31 March 2015

Zambeef (AIM: ZAM), the fully integrated agri-business with operations in Zambia, Nigeria and Ghana, is pleased to announce its results for the six month period ended 31 March 2015.

Key Financial Highlights

* adjusted to exclude unrealised foreign exchange differences

Note: Key financial highlights include the results of Zamanita to enable comparisons with the prior period on a like-for-like basis. The sale of the Group's interest in Zamanita was completed on the 1st June 2015.

Key Points

· Overall, financial performance for the Group improved on the same period in the previous financial year, with gross profits up 9.2% to USD50m.

· Gross margins increased from 32.7 per cent. for March 2014 to 38.3 per cent. for March 2015.

· EBITDA increased by 36.3% to USD12m (excluding Zamanita) and by 67.3% to USD14m (including Zamanita).

· Net cash inflow from operating activities increased by 131% to USD26m; and net cash inflow before financing increased by 139% to USD9.6m.

· Gross profits from core cold chain food product divisions increased by 28.7% to USD21.3m.

· Administrative expenses continued to be tightly controlled with administrative costs (including depreciation) increasing by 7% in ZMW and decreasing by 6% in USD terms.

· Zambian Kwacha depreciated by 21.5% against the US Dollar, resulting in exchange losses of ZMW51.6m (USD8.0m); and also adversely impacting divisions with USD denominated inputs.

· Zamanita disposal completed on 1 June 2015, for USD26.4m (with third party debt of USD11.1m remaining in Zamanita), allowing the Group to unlock value/capital gain and reduce gearing.

Commenting on the results, Chairman Dr. Jacob Mwanza, said:

"We are pleased to announce that the financial performance for the first half of 2015 is up on 2014. In addition, the completion of the Zamanita disposal on 1 June 2015 has allowed Zambeef to unlock value, capital gains and reduce gearing for the Group.

"Operating in some of the fastest growing parts of the world, where both populations are increasing and real incomes growing rapidly, Zambeef has a clear intention to be an important player in meeting this increased demand for food products. Our strong platform now enables Zambeef to focus on driving the core business, the retailing of cold chain meat and dairy products delivered through the Group's extensive processing, distribution and retail network."

For further information, please contact:

Zambeef Products plc

Carl Irwin, Joint CEO Tel: +260 (0) 211 369003

Francis Grogan, Joint CEO

Strand Hanson Limited Tel: +44 (0) 20 7409 3494

Angela Hallett

James Spinney

Panmure Gordon Tel: +44 (0) 20 7886 2500

Hugh Morgan

Tom Salvesen

Peter Steel

finncap

Raymond Greaves Tel: +44 (0) 20 7220 0553

Simon Johnson

Joanna Weaving

Buchanan

Mark Edwards Tel: +44 (0) 20 7466 5000

Vicky Watkins

Robbie Ceiriog-Hughes

www.buchanan.uk.com

Notes to Editors

Information on Zambeef

The Zambeef Group is one of the largest integrated agri-businesses in Zambia, involved in the primary production, processing, distribution and retailing of beef, chicken, pork, milk, eggs, dairy products, flour and stock feed, throughout Zambia, as well as Nigeria and Ghana. The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 8,120 hectares of irrigated and approximately 8,480 hectares of rain-fed, arable, developed land available for planting each year.

The Group has approximately 6,200 employees.

Further information can be found on www.zambeefplc.com

This publication is in line with standard practice for London Stock Exchange AIM listed Companies.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CHAIRMAN'S REPORT

Overview

I am pleased to report that, in the six month period ended 31 March 2015, Zambeef has taken a number of large steps forward. The financial performance is significantly up on the first half of 2014 while on 1 June 2015, Zambeef also concluded the sale of its subsidiary company, Zamanita Ltd, in line with the strategic aim of unlocking value and capital gains from within the Group and reducing the dollar gearing of the business. Some of the highlights of the financial performance include the following:

· The business was strongly cash generating with net cash inflow before financing increasing by 171 per cent. (USD 139 per cent.) to ZMW61 million (USD10 million);

· EBITDA, excluding Zamanita' increased by 56 per cent. (USD 36 per cent) to ZMW75 million (USD12 million) and by 92 per cent. (USD 67 per cent.) to ZMW92 million (USD14 million) including Zamanita's results;

· Administrative expenses continued to be tightly controlled, with administrative costs, including depreciation increasing by 7 per cent. In ZMK and decreasing by 6 per cent. In USD.

Despite these positive results, the 22 per cent. Depreciation of the Kwacha during the period resulted in exchange losses of ZMW52 million (USD8 million) and a Group loss of ZMW22 million (USD3 million).

During the period, Zambia enjoyed another peaceful election with the election of our 6th President. In addition Zambia was ranked under the Global Peace Index as the most peaceful country in Africa, while the Economist ranked Zambia as the twelfth fastest growing economy in the world in 2014. As a result Zambia remains an exciting place in which to do business, This also applies to West Africa, where our operations in Nigeria and Ghana are entering a period of rapid growth, driven by Shoprite's plan to increase their stores from the current 16 stores to 31 by the end of 2016.

Strategic Priorities

Zambeef's aim is to be a major food provider for the African continent. In relation to this some key strategic priorities are as follows:

1. Expanding the production, processing, distribution and retailing of meat and dairy products in Zambia

This remains the core business of Zambeef and is a key focus area of management. Zambeef will be building a new processing and distribution hub in the Copperbelt while continuing to expand and upgrade its retailing and distribution network. At the same time capex will be directed to ensure bottlenecks are avoided in the production and processing of these products. It is pleasing to note that during the period gross profits from the beef, chicken, pork, milk, eggs and fish operations increased by 48 per cent. In Kwacha terms and 29 per cent. In US Dollar terms.

2. Unlocking value and capital gains from within the Group and reduce dollar debt and gearing

In order to reduce earnings volatility from any rapid exchange rate movements, the unlocking of value from within the business and reducing US Dollar debt is a key priority. In relation to this it is pleasing to report the completion of the disposal of Zamanita Ltd to Cargill Holdings B.V. on 1 June 2015. The final consideration paid to Zambeef was USD26.4 million while USD11.1m of debt was left in Zamanita. The Group will continue to explore other opportunities to reduce debt and unlock value.

3. Forging strategic alliances and partnerships with acknowledged industry leaders

In order to continue to grow our business in Zambia, the Southern Africa Development Community (SADC) and West Africa, we will continue to explore opportunities to develop alliances and partnerships with industry leaders in the areas in which we operate. We are pleased to report that our joint venture with RCL Foods Ltd is progressing well, with our new hatchery and stock feed plant due to be in production before the end of the financial year. This will provide strong growth for our poultry operations, while complementing our stock feed operations by allowing the sale of day old chicks together with stock feed to third parties and the small scale farming sector in Zambia. We are pleased to have attracted a company with Cargill's profile to acquire Zamanita and hope to establish a good working relationship with Cargill going forward. Our relationship with Shoprite, both in Zambia and West Africa, continues to work well and allows Zambeef to benefit from the continued expansion of Shoprite in these parts of Africa.

4. Developing the business into a regional food supplier

Zambeef continues to look to put a wider range of its products into the SADC region and to develop its Zambian production base into an efficient production base which is efficient in supplying the wider SADC region. This period has seen Zambeef expand its cold chain food products exports into the region and continued focus will be paid to this going forward.

Conclusion and Outlook

With Zambeef operating in some of the fastest growing parts of the world where both populations are increasing and real incomes growing, the demand for food will continue to increase. Zambeef has a clear intention to be an important player in meeting this increased demand for food products. With the disposal of Zamanita, we are pleased that management will be able to pay increased focus on driving the core business of Zambeef, which is the production, processing, distribution and retailing of cold chain meat and dairy products delivered through the Group's extensive retail network. In addition the disposal of Zamanita will reduce US Dollar gearing and hence make our earnings less susceptible to rapid exchange rate movements.

Finally I would like to thank the entire Zambeef's Board and all of its employees for their hard work towards achieving our goal of being a major food producer for Africa.

Dr Jacob Mwanza

Chairman

8 June 2015

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

JOINT CHIEF EXECUTIVES' REVIEW

Overview

It is pleasing to report that the first six months of the 2015 financial year have seen a significant improvement in the performance over the same period last year and the trading momentum generated in the second six months of the last financial year has continued. Gross profits increased by 25.3 per cent. (USD 9.2 per cent.) from ZMW258 million (USD46 million) to ZMW323 million (USD50 million) while EBITDA increased by 56.4 per cent. (USD 36.3 per cent.) from ZMW48 million (USD 8.5m) to ZMW75 million, (USD 11.6m) excluding Zamanita for 2015. Cash generated from operations increased by 165 per cent. (USD 131 per cent.) from ZMW63 million (USD11 million) to ZMW168 million (USD26 million) while net free cash flow increased by 171 per cent. (USD 139 per cent.) from ZMW23 million (USD4 million) to ZMW61 million (USD10 million).

These excellent underlying results were however impacted by the depreciation of the Zambian Kwacha during this six month period by 22 per cent. from ZMW6.27/USD at 30 September 2014 to ZMW7.62/USD at 31 March 2015. This resulted in exchange losses of ZMW52 million (USD8 million), with a loss after tax for the half year of ZMW22 million (USD3 million). These exchange losses fully vindicate the strategic decision taken by Zambeef to reduce US Dollar denominated debt in the group which will result in Zambeef being less vulnerable to rapid exchange rate fluctuations in the future. In line with this strategy it is pleasing to report the completion of the sale of Zamanita to Cargill on 1 June 2015.

Disposal of Zamanita

The disposal of Zamanita Ltd was completed on 1 June 2015, with Zambeef being paid USD26.43 million for 100 per cent. of the issued share capital of Zamanita Ltd. In addition the debt retained in Zamanita was USD11.1 million on completion. This disposal will allow Zambeef to focus on growing its core business, which is the retailing of cold chain meat and dairy products, delivered through the Group's extensive processing, distribution and retail network. Furthermore, the disposal will allow Zambeef to unlock value, via a reduction in overall gearing (particularly US Dollar denominated debt) and, in so doing, reduce exchange rate exposure and interest costs.

Cold Chain Food Products Business

Increased focus on Zambeef's core business, which is the processing, distribution and retailing of cold chain meat and dairy products, has seen strong growth in these business units. The combined gross profit of beef, chicken, pork, milk, eggs and fish has increased by 48 per cent. (USD 29 per cent.). This part of the business will remain a priority in terms of capital expenditure and management focus. New projects being worked on include a new processing and distribution hub in Kitwe as well as wholesale depots in Solwezi, Mongu and Lusaka.

New Hatchery and Stock Feed Plant

The new hatchery, breeder farm and stock feed plant being built at Mpongwe Farm, as a joint venture with RCL Foods Ltd of South Africa, is progressing well. The first day old chicks will come on line in September 2015, with an initial capacity of 220,000 chicks per week, increasing to 320,000 chicks per week over the following 12 months. The new stock feed plant should be operational before the end of the financial year. This project will take Zambeef's chicken operations to a new level and the benefits from this will start flowing through during the 2016 financial year.

OPERATIONAL REVIEW

The two tables below provide a summary of the segmental and divisional performance.

Table 1: Segmental and Divisional Turnover

 Table 2: Segmental and Divisional Gross profit

Capital expenditure

During the period, we invested ZMW131 million (USD20 million) of capital in the business. This capital expenditure has primarily been on the Zamhatch Ltd breeder farm, hatchery and stock feed project (ZMW90 million/USD14 million). Other large capital expenditure items include farm equipment in the cropping division (ZMW15 million/USD2 million), upgrading and expanding of the retail network and distribution fleet (ZMW12 million/USD2 million), increasing capacity at the Zam Chick processing plant and increasing the production capacity for broiler chickens (ZMW4 million/USD1 million) and the palm project (ZMW9 million/USD1 million).

DIVISIONAL REVIEW

Taking each of our business areas in turn as follows:

Cropping

The cropping division has been the strongest performing division during this period with gross profits strongly up in both US Dollar and Kwacha terms. Despite heavy late rains that delayed combining and resulted in soya yields reducing, this division continues to go from strength to strength. During this period a total of 16,124 Ha (2014 - 15,791 Ha) were planted. This was made up of 11,778 Ha (2014 - 11,360 Ha) of soyas, 636 Ha (2014 - 300 Ha) of maize silage, 2,428 Ha (2014 - 2,786 Ha) of commercial maize and 1,283 Ha (2014 - 1,345 Ha) of Green crops consisting of Rhodes grass, Sun hemp and Pearl Millet.

The farms are fully mechanized, utilising the latest precision farming techniques. Zambia's abundance of water has enabled Zambeef to develop the irrigation potential of its farms and reduce the weather risk. Mpongwe farm continues to produce yields comparable with any part of the world. This has resulted in the decision to locate the new chicken expansion and stock feed plant at Mpongwe farm, in order to add value to the cropping offtake from this highly efficient farm, and create a Zambian poultry operation that can be competitive into the region. The challenge will be for the cropping division to keep pace with this increased demand.

Chiawa has a comparative advantage in accessing the Zimbabwean market as a result of its location, just 15km from the Zimbabwe border. This division can look forward to the future with confidence.

Beef

The beef division has had a strong six months with gross profits up in 54 per cent in Kwacha terms and 34 per cent in US Dollar terms. The period saw an increase in choice beef slaughters from 9,694 cattle to 9,890 cattle, while standard beef slaughters reduced from 21,670 to 17,582. This division is a key focus of management in terms of driving real growth. The supply of beef remains strong and Zambeef is looking to increase sales both within Zambia and into the region.

With Zambeef planning a new processing and distribution hub in the Copperbelt to become operational next year and with further expansion and upgrade of its retail network and exports growing into the SADC region, this division is expected to grow further.

Stock feed (Novatek)

Novatek has continued to grow and increase its market share through providing top quality stock feed at competitive prices. The period has seen strong growth in turnover in both Kwacha and US Dollar terms while gross profits have increased in Kwacha but remained broadly constant in US Dollar terms. This is a commendable performance during a period of rapid devaluation of the Kwacha. With a large proportion of inputs being US Dollar denominated, this division will always have its margins squeezed in periods of rapid devaluation.

With the new stock feed plant and hatchery due to open in September, allowing Novatek to sell stock feed and day old chicks together, this division is expected to continue to generate strong growth. In response, Zambeef is expanding its retail footprint for its stock feed operations as well with all new wholesale depots having sections for stock feed and day old chick sales. In addition with the Kwacha having stabilized and a period of greater stability in the currency expected, margins should normalize.

Edible oils

Zamanita has had a difficult six months. These operations tend to be negatively impacted by rapid exchange rate depreciation, as the input costs are largely US Dollar denominated. As a result it is difficult to pass on the increased costs in times of rapid devaluation. As a result both turnover and gross profits were well down on the same period last year.

For the six months to 31 March 2015, Zamanita produced 23,466 tons of soya cake, compared to 31,443 tons for the same period last year. Oil sales were also down from 10,686 tons to 7,472 tons.

A lot of work has gone into bringing the Zamanita facilities and operations to the standard they are at today and developing a market for the Zamanita production both in Zambia and the wider region.

Chicken & Egg

Demand for chicken has been strong and this period has seen an increase in gross profits in both Kwacha and US Dollar terms. Chicken slaughters increased by 16 per cent. from 2,784,934 birds to 3,295,251 birds. Zam Chick is looking to invest further in expanding its chicken slaughtering and processing facilities as well as increase its broiler production ability. Strong growth is expected to continue in this division.

The egg division's sales volumes remained at 21 million eggs during the period. Demand remains good and consideration will be given to expanding the egg production base to fulfil this increased demand.

The breeder farm and hatchery project proceeds well and Zamhatch expects to begin producing day old chicks during September 2015, starting at 220,000 per week and increasing to 320,000 per week over the following 12 months. The benefits of this project will be seen in 2016 but this is an important development, which will have a material impact on the chicken operations.

Milk and Dairy

The milk division had another excellent six months with strong growth in turnover and gross profits in both Kwacha and US Dollar terms. Milk production has increased through increased cow numbers and improved yields, while demand has continued to grow. Total milk products sold increased by 17 per cent. from 6.3 million litres to 7.5 million litres over the same period last year. Demand continues to be strong and this period has seen the start of exports into the SADC region.

The capacity in the milk processing plant has been increased from 35,000 litres per day to 100,000 litres per day. Ongoing capital expenditure will be incurred in increasing the milk production as well as relieving bottle necks in the factory to catch up with demand. This division can look confidently forward and is expected to continue to show strong growth.

West Africa

Zambeef's West Africa operations continue to grow in line with Shoprite's increasing footprint in the region, as the West African operations continue to be driven largely by the roll out of Shoprite stores. Shoprite currently has 11 stores in Nigeria and five stores in Ghana with a further 14 stores in Nigeria and one store in Ghana due to open before the end of 2016. As a result the West Africa operation is expected to grow significantly for the next two years.

The last six months have been a difficult period in Nigeria with Presidential elections, fuel prices dropping significantly affecting the whole Nigerian economy and the Naira depreciating by 22.7 per cent. against the US Dollar between 31 March 2014 and 31 March 2015. The Ghanaian Cedi has performed even worse, depreciating by 36.7 per cent. over the same period. As a result trading conditions have been difficult with gross profits up in Kwacha but down in US Dollars. With elections over it is hoped that a more stable period will follow enabling positive growth in both profitability and turnover for the West African operations.

Pork

Masterpork has had an excellent six months period with both turnover and gross profits showing strong growth in both Kwacha and US Dollar terms. Masterpork has increased sales in volume terms by 44 per cent., increasing from 2,623 tons to 3,782 tons. A real effort has been made to increase the pork range in Zambeef's retail network and, with pork being competitively priced, demand has increased strongly.

During this period Masterpork brought on line new equipment to keep up with demand. Further capex will be required to bring in more capacity. Strong growth can be expected from Masterpork going forward and it is pleasing that exports into the SADC region started during this period.

Other Divisions (Fish & Leather)

Fish:

Turnover and gross profits increased strongly during this period with gross profits up 60 per cent. (USD 78 per cent.). Zambeef has worked hard to obtain a secure and reliable supply base and fish continues to be an attractive protein. This division is expected to grow and Zambeef will continue to work closely to strengthen its supply base.

Zamleather:

Zamleather continues to grow with volumes processed increasing by 4 per cent. from 47,024 hides to 48,999, while shoe sales increased by 13 per cent. from 37,264 pairs to 42,022 pairs. This division has grown in both turnover and gross profits in Kwacha and US Dollars. The division continues to explore opportunities to sell more value-added leather products both in Zambia and the region. However it is getting close to capacity and further capex will be required if this division is to continue to grow.

Mill

Strong early wheat prices resulted in Zambeef selling wheat immediately after combining and reducing its third party flour sales. This resulted in less wheat being available for milling in the wheat mill and as a result both turnover and gross profit reduced significantly in this division.

Zampalm 

The palm project continues to make good progress. Zampalm currently has 2,612 Ha planted with a further 200 Ha due to be planted at the end of this year. The mill has been erected and the first 168 Ha of palms planted in 2011 is expected to start yielding fruit for processing later in the year.

Conclusion and outlook

Zambeef can be pleased that the business is once again generating strong net cash inflows from operations and free cash flow. Management's strong focus on the core business, namely the processing, distribution and retailing of cold chain meat and dairy products has shown real benefits with the beef, chicken, pork, milk, eggs and fish divisions increasing gross profits by 48 per cent. (USD 29 per cent.) over the same period in 2014. The cropping operations continue to go from strength to strength and are now the largest contributor to Zambeef's gross profits (17 per cent.). These farming assets take full advantage of Zambia's fertile soils and abundant water resources. West Africa is expected to embark on a period of fast growth, with Shoprite looking to double its retail network in the region before the end of 2016. In addition the new breeder farm and hatchery will commence operations before the end of the financial year, which is expected to generate further strong growth for the business. Despite the rapid depreciation in the Kwacha during the period resulting in large exchange losses, Zambeef has made real progress on its intention to reduce gearing (particularly US Dollar debt) with the disposal of Zamanita, which will reduce the earnings volatility from rapid movements in exchange rates.

Zambeef will continue to target investment in the high margin parts of the business and look for opportunities to unlock value and capital from within the Group to further reduce debt and gearing. Zambeef can look forward to the future with confidence and will continue to strive to be one of the leading food suppliers to the SADC/COMESA region.

Carl Irwin Francis Grogan

Joint Chief Executive Officer Joint Chief Executive Officer

Date: 8 June 2015

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS PERIOD ENDED 31 MARCH 2015

The accompanying notes form part of the financial statements.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY

FOR THE SIX MONTHS PERIOD ENDED 31 MARCH 2015

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ‑ 31 MARCH 2015

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS PERIOD ENDED 31 MARCH 2015

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS ‑ 31 MARCH 2015

1. The Group

Zambeef Products PLC and its subsidiaries ("Group") is one of the largest agri-businesses in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed and flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with approximately 8,120 Ha of irrigated row crops and 8,480 Ha of rain-fed/dry-land crops available for planting each year. The Group is also in the process of rolling out its West Africa expansion in Nigeria and Ghana, as well as a palm project within Zambia.

2. Principal accounting policies

The principal accounting policies applied by the Group in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of consolidation

The consolidated financial statements include the financial statements of the parent Company and its subsidiary companies made up to the end of the financial year. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date of their acquisition or up to the date of their disposal. Intercompany transactions and profits are eliminated on consolidation and all income and profit figures relate to external transactions only.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Losses incurred are allocated to the non-controlling interest in equity until this value is nil, at which point any subsequent losses are allocated against the interests of the parent.

(b) Going Concern

At the reporting date the current portion of long term loan amounts repayable amount to ZMW207.3 million (USD27.2 million) [30 September 2014: ZMW227.1 million (USD36.2 million)]. After reviewing the available information including the Group's strategic plans and continuing support from the Group's working capital funders, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. All current liabilities will be settled from the continued liquidation of stock and expected increase in income from the capital expenditure carried out.

(c) Basis of presentation

The information for the period ended 31 March 2015 and 31 March 2014 do not constitute statutory accounts. The figures for the year ended 30 September 2014 have been extracted from the 2014 statutory financial statements. The auditors' report on those financial statements was unqualified.

The financial statements are prepared in accordance with the provisions of the Companies Act and International Financial Reporting Standards (IFRS). The financial statements are presented in accordance with IAS 1 "Preparation of financial statements" (Revised 2007). The Group has elected to present the "Statement of Comprehensive income" in one statement namely the "Statement of Comprehensive Income".

The financial statements have been prepared under the historic cost convention, as modified by the revaluation of property, plant and equipment, and financial assets and liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

 (d) Foreign currencies

(i) Presentational and functional currency

Zambeef Products PLC as a company has ten operating branches of which nine have a historical functional currency of Zambian Kwacha (ZMW) and one (the Mpongwe Farm Branch) has a functional currency of United States Dollars (USD) being an operational branch set up during the financial year ended 30 September 2012. Management have chosen a variant on the functional currency of Mpongwe due to the following factors:

§ the majority of farm input costs (fertilizer, farming chemicals, agricultural machinery spares, etc.), which are primarily sourced from overseas, are driven by USD to ZMW exchange rate due to origin prices being USD;

§ the pricing of Mpongwe's principal outputs (wheat, soya and maize) are significantly influenced by world USD denominated grain prices;

§ the capital raised attached to the acquisition of the Mpongwe assets was denominated in foreign currency;

§ the Mpongwe assets were purchased in USD;

§ upon admission and dual listing on the AIM market of the London Stock Exchange (LSE), Zambeef was required to report in USD in addition to reporting in ZMW for the LuSE listing; and

§ majority of financial liabilities associated with working capital funding and capital expenditure are sourced in USD and repayable in USD, with a substantial portion of the Company's term liabilities secured on the assets of Mpongwe.

In light of this, Mpongwe's assets and liabilities are translated to ZMW and consolidated with other branches of the Company for reporting and tax purposes in Zambia, with any differences arising out of translation posted as a capital reserve item and a non-distributable reserve.

The Group's reporting currency in Zambia is ZMW and the presentation of financial statements to Non-Zambian shareholders and for the purposes of being listed on the AIM market of the London Stock Exchange also necessitate the presentation of the financial statements in United States Dollars (USD).

(ii) Basis of translating presentational currency to USD for the purposes of supplementary information

Statement of comprehensive income items have been translated using the average exchange rate for the period as an approximation to the actual exchange rate. Assets and liabilities have been translated using the closing exchange rate. Any differences arising from this process have been recognised in other comprehensive income and accumulated in the foreign exchange reserve in equity.

Equity items have been translated at the closing exchange rate. Exchange differences arising on retranslating equity items and opening net assets have also been transferred to the foreign exchange reserve within equity.

The following exchange rates have been applied:

All historical financial information, except where specifically stated, is presented in Zambian Kwacha rounded to the nearest ZMW'000s and United States Dollars rounded to the nearest USD'000s.

(iii) Basis of translating transactions and balances

Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the date of transactions. 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 statement of comprehensive income.

Non-operating foreign exchange gains and losses mainly arise on fluctuations of the exchange rate between United States Dollars and Zambian Kwacha. Due to the instability of the exchange rate, which may result in significant variances of foreign exchange related assets and liabilities, these gains and losses have been presented below operating profit in the statement of comprehensive income.

(iv) Basis of translating foreign operations

In the consolidated financial statements the financial statements of the foreign subsidiaries originally presented in their local currency have been translated into Zambian Kwacha. Assets and liabilities have been translated into Zambian Kwacha at the exchange rates ruling at the period end. Statement of comprehensive income items have been translated at an average monthly rate for the period. Any differences arising from this procedure are taken to the foreign exchange reserve.

The following exchange rates have been applied:

(e) General information and basis of preparation

The condensed interim consolidated financial statements are for the six months ended 31 March 2015 and are presented in Zambian Kwacha and United States Dollars. They have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2014.

(f) Significant accounting policies

The interim financial statements have been prepared in accordance with the accounting policies adopted in the Group's last annual financial statements for the year ended 30 September 2014.

3. Critical accounting estimates and judgements

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In the process of applying the Group's accounting policies, management has made judgements in determining:

(a) the classification of financial assets;

(b) whether assets are impaired;

(c) estimation of provision and accruals;

(d) recoverability of trade and other receivables; and

(e) valuation of biological assets and inventory.

4. Significant events and transactions

The Group's management believes that the Group is well positioned in an improving economy. Factors contributing to the Group's strong position are:

(a) Growth in the Zambian economy leading to higher disposable incomes.

(b) High copper prices leading to higher inflow of foreign exchange and trickle-down effect to end consumers.

(c) Increase in the retail foot print of the Group.

(d) Increase in production facilities of the Group leading to higher volumes available for retail.

(e) Improvements in the management team across various areas of the Group leading to positive reinforcement of strong operational synergies.

Overall, the Group is in a strong position and has sufficient capital and liquidity to service its operating activities and debt. The Group's objectives and policies for managing capital credit risk and liquidity risk should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2014.

5. Segmental reporting

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's Board of Directors ('BoD') to make decisions about the allocation of resources and assessment of performance about which discrete financial information is available. Gross margin information is sufficient for the BoD to use for such purposes. The BoD reviews information regarding the operating divisions which match the main external revenues earned by the Group, and management information regarding the operating assets and liabilities of the main business divisions within the Group.

During the six month period to 31 March 2015, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment profit or loss.

The revenues and gross profit generated by each of the Group's operating segments and segment assets are summarised as follows:

Period ended 31 March 2015

(i) in US Dollars

Period ended 31 March 2014

(i) in US Dollars

Year ended 30 September 2014

(i) in US Dollars

The Group's revenue from external customers and its geographic allocation of non-current assets may be summarised as follows:

6. Taxation

(d) Income tax assessments have been agreed with the Zambia Revenue Authority (ZRA) up to and including the year ended 30 September 2006. Income tax returns have been filed with the ZRA for the years ended 30 September 2012. Quarterly tax returns for the year ended 30 September 2013 were made on the due dates during the period.

(e) Deferred taxation