Zambeef Prod. Regulatory News (ZAM)

7 June 2017

Zambeef Products plc

("Zambeef" or the "Group")

Interim results for the Half Year Ended 31 March 2017

CONTINUED OPERATIONAL IMPROVEMENT AGAINST TOUGH MACRO ECONOMIC BACKDROP

Zambeef (AIM: ZAM), the fully integrated cold chain foods and retail business with operations in Zambia, Nigeria and Ghana, today announces its unaudited interim results for the six months ended 31 March 2017.

Key Financial Highlights:

Performance Overview

· Half year performance characterised by a challenging economic environment in Zambia and a major drop in soft commodity prices significantly impacting the Group's financial performance

· Despite this, the Group has delivered a strong top line performance, driven by:

o Excellent sales and volume growth in the Retail and Cold Chain Food Products division

o Continued aggressive expansion of this retail network

o Robust operational performance from the Farming and Stock feed operations

· Two Macro outlets opened with a further eight expected to open this year

o Aim to open 10-12 new Macro outlets each year

· Shoprite rollout of new stores continues

o Zambia - three more expected in the second half

o Nigeria - three new stores opened

o Ghana - one new store opened in April 2017

· Second half of the year expected to see a significant number of key projects

o Continue to grow the retail network and drive retail sales to help grow CCFP and stock feed operations

o Commission new Copperbelt distribution hub which will increase capacity and improve efficiencies in the Copperbelt and North Western Province operations

o Complete expansion of breeding farm and hatchery to increase day-old chick production from 210,000 to 310,000 birds per week

o Expand broiler processing operations to increase production by 30,000 birds per week

o Commission new stock feed plant at Mpongwe to bring additional stock feed capacity on line

· Continue to look at ways of strengthening our balance sheet through disposal of non-core assets

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

"The first six months of our financial year have been impacted by the challenging economic environment in Zambia and a major drop in soft commodity prices. Together this has had a significant negative impact on our financial performance in the period.

"Rising inflation, Exchange Rate volatility and rapidly increasing interest rates resulted in the Bank of Zambia being forced to introduce strict control measures in order to stabilise the economy. These measures, which included tight control of the money supply and high interest rates, have resulted in a slowdown in consumer spending. However, as a consequence of these Government actions, inflation has reduced to single digit levels, the Kwacha has stabilised and the high interest rates we saw in the first half are starting to abate.

"As a result of these improving economic indicators, and downward price pressure on certain consumer food products, we expect the business environment and consumer demand to improve in the second six months of this financial year. Against this background, Zambeef is well placed to take advantage of the improving macroeconomic conditions.

"As reported at our 2016 Full Year results in November 2016, the principle focus of Zambeef for the foreseeable future will be on expanding our retailing and distribution footprint and on improving margins and restoring profitability. We will continue to expand the Cold Chain Food Production capacity to meet increasing consumer demand; complete the build out of the new stock feed plant at Mpongwe and continue to strengthen our balance sheet, through the disposal of non-core assets. While undoubtedly it is disappointing to report this first half performance I have full belief that the second half will see a return to more normal trading conditions and a much improved financial performance."

Notes to Editors

The Zambeef Group is one of the largest integrated cold chain food producers in Zambia, involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, eggs, dairy products, fish, flour and stock feed. The Group also has large cereal row cropping operations (principally maize, soya beans and wheat), with approximately 7,971 hectares of row crops under irrigation, which are planted twice a year and a further 8,623 hectares of rain-fed/dry-land crops available for planting each year. The Group is also expanding its West Africa operations in Nigeria and Ghana.

The Group employed an average of 6,000 employees in the period.

Further information can be found on www.zambeefplc.com

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CHAIRMAN'S REPORT

THE ENVIRONMENT

The first six months of Zambeef's 2017 financial year have been impacted by the challenging economic environment in Zambia.

As a result of rising inflation, Exchange Rate volatility and rapidly increasing interest rates, the Bank of Zambia was forced to introduce strict control measures, in order to stabilise the economy. These measures, which included tight control of the money supply, and high interest rates, have resulted in a slowdown in consumer spending.

It is pleasing to see that these tough short-term measures are achieving their goal. Inflation has been reduced to single-digit levels, having peaked at 18.9 per cent.; the Zambian Kwacha has stabilised at around ZMW9.66/USD at 31st March 2017, having started the period under review at ZMW11.6/USD, and interest rates are starting to fall significantly, having peaked at around 30 per cent.

The period has also seen a material drop in global soft commodity prices, with international soya prices touching ten-year lows. Zambian soya prices have followed international markets, dropping from around USD535/Metric Ton ("M.T"). last year, to USD360/M.T. this year.

Whist a drop in soft commodity prices will be welcomed by consumers, it poses a major challenge to the agricultural sector, which is the prime producer of such soft commodities.

As a result of improving Economic Indicators, and downward price pressure on certain consumer food products, we expect the business environment and consumer demand to improve in the second six months of this financial year.

TRADING RESULTS

Despite the challenging economic conditions mentioned above, it is pleasing to report good operational progress in all four areas of Strategic Focus that were outlined in our Annual Report for the year ended September 2016:

1. Retail and Distribution - The retail footprint comprising our concessions within Shoprite stores in Zambia, Nigeria and Ghana, and the Zambeef-owned Macro stores and Outlets across Zambia has grown during the period under review, by the opening of three Shoprite stores and two Macro Stores. A further 4 Shoprite stores and 8 Macro stores will open in the six months to 30th September 2017. Like for like sales in Zambeef's own stores grew by 21 per cent. in ZMW during the period, with new stores adding a further 9.9 per cent. growth in sales, as compared to last year.

2. Cold Chain Food Production - In order to meet the demand for goods to support our rapidly expanding Retail division, Cold Chain Food Production continues to receive strategic focus in terms of Capital Expenditure. This has led to good volume growth across the Cold Chain Food Production division.

3. Stock Feed - Zambeef's stock feed operation, which trades under the brand name Novatek, is recognised as the market leader in Zambia. It produces a wide range of stock feed, for sale to the end users, either direct, or through its Novatek retail outlets, as well as certain Zambeef Macro and Outlet stores. Despite the challenging macroeconomic conditions, Novatek volume sales increased by 2.7 per cent. during the period. The Novatek plant in Lusaka is currently running at full capacity, but the new mill located on Mpongwe Farm, which is due to open in June 2017, will almost double Novatek's production capacity. This will enable Zambeef to supply its own growing divisions which depend on a reliable supply of stock feed, as well as expand its sales into the Zambian and adjacent markets.

4. Arable Farming - Zambeef's cropping focus is centered on its Mpongwe estate, where the microclimate, irrigation facilities and soils allows it to consistently achieve yields comparable to the best farming areas in the world. Yields of the summer crops just harvested were ahead of budget. However, the severe drop in soft commodity prices has had a significant impact on profitability for the period.

Against a backdrop of good operational progress in all four of our areas of strategic focus, the financial results for the period under review have been disappointing, principally as a result of the drop in soft commodity prices.

The negative impact on consumer disposable income from the measures taken by the Bank of Zambia to stabilise the economy put pressure on margins of all retail businesses, including Zambeef. Whilst we have managed to maintain (and in certain areas, grow) market share, this has been at the cost of short-term profit.

Notwithstanding this, Zambeef's Retail and Cold Chain Food Production divisions have delivered a satisfactory EBITDA of ZMW 72.7m versus ZMW 81.1m in the same period last year (USD 7.4m vs USD 7.1m), generating an EBITDA margin of 8.5 per cent.

The material drop in soft commodity prices, and in particular the price of soya, has had a substantial impact on Gross Profit of the Arable Farming division. With the division producing over 40 000MT of soya in the period, the fall in soya prices resulted in a drop in Gross Profit of ZMW26m (USD2.7m) for the period. The division has also suffered a further loss of USD1.5m from a FX translation loss relating to the valuation of inventory on hand as at 31st March 2017. The winter wheat crop, which is grown in the next six month period, is normally the most profitable, and it is hoped that this will be reflected in improved results for the next period.

The fall in the price of soya has also had a severe short term impact on the gross profit of the Stock Feed division. All stock feed producers experienced the need to dispose of old soya stock, acquired at the higher price, before the new lower priced soya stock became available. This led to heavy price discounting of stock feed, leading to a drop in Gross Profits of ZMW41m (USD4.2m) during the period under review. The old stock has been worked through Novatek's production system, and consequently margins have recovered since the period end and are expected to normalise over the next six months.

Despite the underlying strength of performance of our Retail and Cold Chain Foods business, the impact of falling commodity prices upon Cropping and Novatek's stock feed profits have resulted in the Zambeef Group Profit After Tax (excluding discontinued operations) reducing in the period from ZMW68m to ZMW5m (USD6m to USD0.5m)

OUTLOOK

The General Election held earlier this year has shown once again that Zambia is a stable democratic state.

The recent actions taken by the Government and the Bank of Zambia to address the challenges faced by the economy bode well for the re-emergence of economic stability and growth. Against this background, Zambeef is well placed to take advantage of the improving macroeconomic conditions.

Given a tough economic backdrop leading to pricing pressures, some cost inflation, operational issues in the Milk and Eggs businesses and the impact of a material drop in agri-commodity prices, the Board anticipates that, despite the strong volume growth across Retail and Cold Chain Food Production, the financial results for the full year ending 30 September 2017 will be materially below previous market expectations.

As reported at our 2016 Full Year results in November 2016, the principle focus of Zambeef for the next six months will be on expanding our retailing and distribution footprint and onon improving margins and restoring profitability.We will continue to: expand the Cold Chain Food Production capacity to meet increasing consumer demand; complete the build out of the new stock feed plant at Mpongwe, and continue to strengthen our balance sheet, through the disposal of non-core assets.

I am extremely proud of Zambeef's entire workforce. They display a commitment, dedication and professionalism in carrying out their duties and remain key to our success.

In order to ensure continuity in the Group at all levels, we have embarked on a Succession Planning process. Linked to this will be a Development Needs and Evaluation system, which aims to identify future leaders in the business, and to ensure that staff at all levels are given the opportunity to progress in the Group, and are provided with the necessary training and development opportunities in order to do so.

I would like to touch on the changes to the composition of the Zambeef Board, which were announced on 18th April 2017:

Graham Clark has stepped down as non-executive director, in order to take up the full-time role of CEO of Fiji Sugar Corporation Ltd. His extensive business experience has been greatly appreciated, and I would like to thank him for his contribution.

Three new non-executive directors have been appointed, to broaden the depth of experience and diversity on the Board. They are Yollard Kachinda, a Zambian national, who is currently Director General of the National Pension Scheme Authority ("NAPSA"), Margaret Kunda Chalwe-Mudenda, a Zambian lawyer, and Enala Lyson Tembo-Mwase, a prominent Zambian Academic, and currently Deputy Vice Chancellor of the University of Zambia. I believe that they all bring relevant experience and skills to the Board, which will help support Management in growing the business in the future, and I welcome their appointments.

In conclusion, I would like to thank the Executive, all members of staff and my Board colleagues, for their valued contributions during the past period.

Dr Jacob Mwanza

Chairman

6 June 2017

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

JOINT CHIEF EXECUTIVES' REVIEW

Overview

In order to give greater clarity into the performance of the key activities of Zambeef, the results for the key business divisions are for the first time being reported to EBITDA level.

The first six months of the 2017 Financial Year have seen Zambeef continue to focus on the expansion of its Retail business which its Directors believe is the engine room that will continue to drive growth in shareholder value across the business, while also investing in its downstream Cold Chain Foods operations to ensure a secure supply for this retail expansion. It is pleasing to report that in the six month period to 31st March 2017, Retail sales increased by 27.4 per cent. in ZMW from ZMW643m to ZMW819m (41.7 per cent. in USD from USD57m to USD83m). Like for like sales in Zambeef Macro and Outlet stores increased by 21 per cent. but this was partially offset by a 5.2 per cent. fall in like for like sales through the Shoprite concessions reflecting increased competition in the premium retail sector from the introduction of new retail chains. This increase has been achieved against the backdrop of a challenging macro environment which has seen the Bank of Zambia reduce the money supply and increase interest rates to bring down inflation which has put pressure on margins across all retail businesses including Zambeef's. Gross profits were also impacted in the period by a combination of operational difficulties within our dairy production unit (which have now been resolved), very weak egg prices and a softening of beef prices. Notwithstanding this, Zambeef 's Retail and Cold Chain Foods business has delivered a satisfactory EBITDA of ZMW72.7m versus ZMW81.1m in the prior period (USD7.4m vs. USD7.1m) generating an EBITDA margin of 8.5 per cent., which compares very favourably with benchmark returns across the Cold Chain foods and retail sectors.

The period has also seen a material drop in global and local soft commodity prices due to rising stocks in producer countries, with international soya prices touching ten year lows. Zambian soya prices have followed international markets dropping from around USD535/M.T. last year to USD360/M.T. this year. This fall has had a significant impact on both our Cropping Division and our Stock Feed Division, Novatek. With Zambeef's cropping operations producing just over 40,000 M.T. of soya during the period, the fall in soya prices has resulted in a drop in farming gross profits of circa ZMW26m (USD2.7m) for the period despite yields being above budget. Cropping also suffered from a FX translation loss of USD1.5m.

In addition, the soya bean price has fallen from around USD600/M.T. to below USD400/M.T. for the new soya crop now being harvested. This rapid drop has resulted in competitor stock feed companies dropping margins in the last four months in order to exit high priced, old season raw material inventory and consequently putting pressure on stock feed margins in this period. In contrast, in the previous season the stock feed industry was operating in a different environment, and Novatek was in the fortunate position of bringing forward soya bean meal at under USD400/M.T. when the new season pricing was around USD600/M.T. Whilst Novatek has maintained its market share and market leadership with volumes increasing by 2.7 per cent. Operating Profit has fallen by 39.4 per cent. in ZMW from ZMW103.6m to ZMW62.8m (USD by 29.8 per cent. from USD9.1m to USD6.4m).

Despite the underlying strength of performance of our Retail and Cold Chain Foods business, the impact of falling commodity prices upon Cropping and Novatek's stock feed profits have resulted in the Zambeef Group Profit After Tax (excluding discontinued operations) reducing in the period from ZMW68m to ZMW5m (USD6m to USD0.5m).

Full details of the individual performance of each division are set out within the Financial Review.

Macroeconomic environment

The economic environment in the period has been challenging. The Bank of Zambia put in strict measures to stabilise the currency, restrict money supply and reduce inflation. These steps created short-term challenges, but are expected to set Zambia up for ongoing long-term sustainable growth.

Inflation started the financial period at 18.9 per cent. and by the 31st March 2017 had reduced to 6.7 per cent. The 273 day treasury bills started the period at 24.99 per cent. but with the stabilization of the currency and reduction in inflation the 273 day treasury bill rate was down to 15.25 per cent. at 31st March 2017. This period also saw bank interest rates escalate to around 30 per cent. but with inflation under control and the Bank of Zambia reducing interest rates and easing measures to reduce the ZMW in circulation we have seen bank interest rates starting to fall quickly. The Zambian Kwacha started the period at ZMW10.01/USD and has steadily appreciated to ZMW9.66/USD at 31st March 2017 and we have seen this gradual appreciation of the currency continue.

The measures implemented by Bank of Zambia, which included high interest rates and tight control on the money supply, put

operating margins under significant pressure over the last six months. It is pleasing to see that these tough short-term measures

have achieved their goals, allowing Bank of Zambia to start easing this policy. The benefits of these measures can be seen, with

Zambia returning to single digit inflation, a stable currency and reducing interest rates. As a result, and having reviewed our sales in April and May, we expect the business environment and consumer demand in the second half of the financial year to improve.

Strategic Focus

To ensure a long-term, sustainable and growing business, Zambeef will continue to be built on the four best-in-class market leading operations of the Group, namely:

· Retail and Distribution;

· Cold Chain Food Production;

· Stock Feed; and

· Arable Farming

Retail and Distribution

As reported at our 2016 Full Year results in November 2016, the main focus of Zambeef for the foreseeable future is on expanding its retailing and distribution footprint comprising of concessions within Shoprite stores across Zambia, Ghana and Nigeria and Zambeef owned Macro Stores and Outlets across Zambia and Nigeria. Expansion of this retail network will consequently drive growth across the Zambeef Cold Chain Foods and stock feed business.

During the period two new Zambeef Macro Stores opened, and a further eight are expected to open before the end of the financial year. In addition, three new Shoprite stores opened in Nigeria, and, following the period end, a new store was opened in Ghana. In the six months to 30th September 2017 a further three Shoprite stores are expected to open in Zambia, and the Accra Mall upgrade in Ghana will be completed. Newly opened stores accounted for 10.1 per cent. of the growth.

It is encouraging to report like for like sales through Zambeef's own stores grew by 21 per cent. (in ZMW) with new stores contributing a further 9.9 per cent. of growth (in ZMW) compared to the same period last year. At the same time the amount of stock feed the Group is now retailing through the Macro Stores and Outlets has increased by 123 per cent. in ZMW (158 per cent. in USD). This demonstrates the success of Zambeef's focus on this part of the business, which is driving growth in the Cold Chain Food Products and stock feed operations. This will remain a key focus area of the business both in terms of investment and senior management attention.

The Zambeef retail network is not only increasing its market share but is also gaining a large share of the incremental business from a growing and rapidly urbanising population. In addition, Zambeef's border town outlets are becoming important channels for exporting informally into neighbouring countries.

Cold Chain Food Products

The strong growth in the Zambeef retail network sales has resulted in volume growth across the Cold Chain Food Production divisions, with the following volumes as compared to the same period in 2016:

This is a part of the business in which Zambeef believes it is best-in-class. In order to ensure the supply matches the increase in demand Zambeef will continue to invest in these parts of the business where the returns are most attractive. This period has seen the successful completion of the new USD1.5m rotary milking parlour at Kalundu Dairy.

The USD1.2m expansion of the egg laying operations was completed at the start of this period which increased the point-of-lays from 153,000 to 273,000, allowing for strong growth in the egg division sales.

The chicken operations will also benefit from the investment of USD1.7m in the expansion of the hatchery capacity by 46 per

cent., which became fully operational at the end of May 2017. In addition, USD0.7m is being spent on increasing broiler chicken slaughtering capacity by 20 per cent. This is expected to be in full operation by the end of June 2017, and will allow us to better service demand for whole birds and chicken portions.

Stock Feed

Zambeef's stock feed operation, which trades under the brand name Novatek, has firmly established itself as the market leader in the stock feed industry in Zambia and is expanding on the number of countries it is currently exporting to. This business ties in very closely with the chicken business and the retailing expansion of Zambeef. Despite the challenging macroeconomic environment, Novatek increased volumes by 2.7 per cent. from 71,737 M.T. to 73,679 M.T.

With the soft commodity prices reducing for the new crop being harvested, feedstock prices have come down and it is pleasing to see that Novatek's gross margins in April have normalised. This reduction in stock feed prices will benefit the whole livestock sector and is expected to positively impact the demand for stock feed. The demand for stock feed is expected to increase as a result of:

· Reduced feed prices due to lower soft commodities/raw material prices;

· Increased demand by the livestock sector from increases in consumption of proteins as protein prices continue to fall;

· Increased demand from Zambeef from the expansion of the poultry operations; and

· Export demand

The Novatek plant in Lusaka is currently operating at full capacity. In order to meet the expected increase in stock feed demand, Zambeef will be commissioning a brand new state-of-the-art mill at Mpongwe Farm in June 2017. This plant will be capable of producing 12,000 M.T. of feed per month, almost doubling the existing Novatek capacity. The plant will be well positioned to service Zambia's Copperbelt and North Western provinces and the Democratic Republic of Congo demand, provide savings in distribution cost as well as secure raw materials competitively from the region. The capex to complete this plant in the current financial year is budgeted at USD2.8m, taking the total project cost to USD8.5m.

Arable Cropping

The Mpongwe arable farming operations remain world-class. The microclimate, irrigation facilities and soils make this farm a unique farming asset which achieves yields comparable with the best farming areas in the world. The directors estimate there is an additional 5,000 ha of land on the Mpongwe estate which could be bought into crop production and as part of a strategic review of all Zambeef farms they are considering how best to achieve this. The unique yields being achieved at Mpongwe have resulted in the Board considering the disposal of some of its other farmland assets to facilitate the expansion of its future farming activities at Mpongwe. Options being considered include the sale of Chiawa and or Sinazongwe farms in the southern Zambezi Valley.

This year has seen soft commodity prices drop severely which has impacted the arable cropping results. Despite yields being ahead of budget and costs being on budget, gross profits are down 213 per cent. in USD in the six month period to 31st March 2017, with soya prices having dropped from around USD525/M.T. in 2016 to USD360/M.T. during the period for the new crop. It is disappointing that although the operational performance of the farms has been strong, this is not reflected in the financial performance. Although this drop in soft commodities is disappointing for the farming operations and has materially affected the Zambeef results in this half year, it will be beneficial for the stock feed and livestock sectors going forward with the winter wheat crop normally the most profitable crop grown.

Outlook

Zambeef has a clear strategy which it continues to execute. This includes:

· Consistent revenue growth through expanding the retail network and addressing supply side constraints in Cold Chain Food Product and stock feed operations;

· Margin improvements by investing capex in high margin parts of the business while tightly controlling administration costs;

· De-risking the business through maintaining acceptable/comfortable gearing levels; and

· Improving cash conversion from strong working capital control and tight control on capex.

As part of this strategy Zambeef will continue to explore opportunities to dispose of assets in areas where it does not consider itself best-in-class. The resulting cash will be used to reduce gearing further and will be invested in those parts of the business which can best enhance shareholder value.

Despite reporting disappointing results for the period with Profit After Tax down from ZMW65m to ZMW0.5m for the period, it is largely as a result of the significant impact from the major drop in soft commodity prices and consequently falls outside of the Company's control. Against this macro economic backdrop, the operational performance of the business has remained robust. Overheads in the business have been tightly controlled, increasing by only 1.8 per cent. in ZMW over the same period last year.

The Retail, distribution and Cold Chain Food Product operations have performed well in a challenging macroeconomic environment, although margins have been under significant pressure. In addition, the farming and stock feed operations have performed well operationally, but have been impacted by the soft commodity price movements.

With the macroeconomic environment improving and the drop in commodity prices having now been priced in, we are confident that cheaper raw material prices will benefit our stock feed and livestock divisions and lead to increased demand as well as an improvement in gross margins in these businesses in the second half of our financial year. Margins in April were encouraging. Our retail business should benefit from an uplift in consumer spending and also enjoy additional geographic sales growth in the second half of the year from the eight Zambeef and three Shoprite stores expected to open. We anticipate that margins in the dairy products and egg businesses should also improve over the next six months. As the Zambian grains market is fairly illiquid and it is not easy to hedge production through forward sales except at discounted pricing, the Cropping division second half result could be impacted by any further weakness in grain prices.

It has been a very busy period with the construction and fit out of a number of Macro stores and the opening of additional Shoprite concessions, the commissioning of the new dairy parlour, work on completing the second stock feed plant at Mpongwe and the expansion of the broiler breeder farm, hatchery and broiler operations. In addition, the flour milling, pork and beef operations have seen continued volume growth. We feel incredibly proud of the entire Zambeef workforce for the dedication and determination in making this possible. In addition, we would like to thank our Chairman, Dr. Jacob Mwanza, as well as our Board of Directors for their valuable guidance and support.

Carl Irwin/Francis Grogan

Joint CEOs

6th June 2017

FINANCIAL REVIEW

The first six months of the 2017 financial year have seen the Zambeef business continue to grow, but margins have remained under significant pressure. Turnover for the Group increased by 3.5 per cent. in ZMW from ZMW1,122 to ZMW1,161m (19.8 per cent. in USD), while Gross Profit margins reduced from 40 per cent. to 33 per cent., resulting in Gross Profits reducing by 15.3 per cent. in ZMW from ZMW446m to ZMW378m (2.02 per cent. in USD).. The Group has tightly controlled its overheads despite the inflation rate starting the period at 18.9 per cent., and overheads increased by only 1.8 per cent. in ZMW (17.7 per cent. in USD). EBITDA margin reduced from 14.1 per cent. to 7.3 per cent., and operating profits decreased by 64 per cent. in ZMW from ZMW122m to ZMW44m (58 per cent. in USD from USD10.7m to USD4.5m).

The ZMW73.3m (USD6.2m) fall in EBITDA is largely driven by the material drop in global and local soft commodity prices with Zambian soya prices dropping from USD535/M.T. at the end of March 2016 to USD360/M.T. at the end of March 2017. Consequently, this has had a negative impact on both the Cropping and the stock feed divisions. Zambeef produced in excess of 40,000 M.T. of soya in this period and therefore the impact of the drop in soya prices on revenue was around USD4m but a strong underlying operational performance by the cropping division has resulted in a net reduction in gross profit of ZMW25.9m (equivalent to USD2.7m). Furthermore,, stock feed margins have been adversely impacted by the fall in stock feed prices as competitors sought to liquidate high priced 2016 old crop stocks of raw materials ahead of the new crop harvest in April/May 2017. Stock feed gross profits fell from ZMW103m to ZMW62m and in USD from USD9.1m to USD6.4m. Gross margins were also impacted by operational difficulties in our Kalundu dairy unit leading which resulted in gross profits from our Dairy products reducing by ZMW10.9m (equivalent to USD1.1m).

Interest costs reduced by 25 per cent. in ZMW (13 per cent. in USD) as a result of lower debt levels although interest rates increased. As a result, Zambeef's PAT excluding discontinued operations reduced from ZMW68m to ZMW5m (USD6m to USD0.5m).

The highlight of this period was the strong 26.1 per cent. (in ZMW) sales growth in the Retail and Cold Chain Food Products division. Zambeef has firmly established itself as best-in-class in terms of its production and distribution of the Cold Chain Food Products delivering a very satisfactory EBITDA margin of 8.5 per cent. which compares favourably with benchmark returns across the cold chain foods and retail sector, in what has been a challenging macroeconomic environment.

The focus for the next six months will be on:

· Continuing to expand the footprint and sales of the Retail network, which will drive sales of our Cold Chain Food Production business and stock feed operations. (Eight Zambeef Macros and four Shoprite stores are expected to open before the end of the financial year);

· Commissioning the new Kitwe Cold Chain Food distribution hub which will increase capacity and improve distribution efficiencies in the Copperbelt and North Western Province operations (completion expected September 2017);

· Completing the expansion of the broiler breeding farms and hatchery to increase day-old chick production from 210,000 birds per week to 310,000 birds per week (completion expected end of May 2017);

· Expand the broiler processing operations to increase production by 30,000 birds per week to 160,000 birds per week (completion expected end of June 2017); and

· Commission the new stock feed plant at Mpongwe to bring an additional 140,000 M.T. of stock feed capacity on line (completion expected July 2017).

It will be a busy period but with an improvement in the macroeconomic environment Zambeef can expect to grow the business and improve margins over the next six months.

Exchange rate movements

This period has seen a 3.5 per cent appreciation of the ZMW with the exchange rate, starting the period at 10.01 ZMW/USD and closing the period at 9.66 ZMW/USD. The table below shows the comparative exchange rates over the periods:

The appreciating currency has impacted the arable farming and stock feed gross profits, as the ZMW value realised for USD priced commodities reduced as the ZMW appreciated. The brought forward commodities at the beginning of the period were:

The 3.5 per cent ZMW currency appreciation has resulted in the value of these commodities in ZMW, reducing by ZMW14.6m (USD1.5m). This is partially offset by the realised and unrealised exchange gains of ZMW6.7m (USD0.7m) on the dollar debt.

The stabilisation of the ZMW during this period following a very volatile period in 2015 and 2016 has been welcomed, and this relative stability is expected to continue.

ADMINISTRATION AND OVERHEAD COSTS

Management has continued to place a strong emphasis on cost control in the business and it is pleasing to report that costs excluding depreciation as a percentage of turnover have again reduced, moving from 25.6 per cent. to 25.2 per cent. These overheads increased in ZMW by 1.8 per cent. (USD17.4 per cent.). This is an excellent achievement when considering:

· Fuel prices increased by 36 per cent. at the beginning of the period and were later reduced by 6 per cent.;

· Staff costs increased by 12 per cent.;

· We have had levy and slaughter fee increases of up to 500 per cent.; and

· We are incurring road toll fees which were introduced at the beginning of the financial period but are increasing as more toll gates are opened and are currently running at around ZMW45,000 per day, which will have a bigger impact on the second six months.

Electricity costs have now been increased by 50 per cent. as of 15th May 2017, which will impact our overheads in the second six months. A further increase is expected on 1st September 2017. As a result, overheads will come under pressure in the second half of the year.

FINANCE COSTS

The finance costs for the Group have decreased in ZMW by 25 per cent. from ZMW60m to ZMW45m (13 per cent. in USD from USD5.3m to USD4.6m). This decrease was as a result of a large reduction in gearing over the same period in the previous year. The lower gearing was partially offset by an increase in interest rates. The table below shows the movement in the average interest rates incurred by Zambeef over the period:

We are expecting our ZMW rates to drop below 20 per cent. again, which will materially reduce interest charges. In terms of the USD debt the increase in rates has arisen from the rise in LIBOR rate.

Gearing has reduced from 57 per cent. at H1/2016 to 32 per cent. at H1/2017.

CAPITAL EXPENDITURE

Total capital expenditure during the period was ZMW135.3 million (USD13.8 million) against a budgeted capital expenditure of ZMW 221m (USD21m) for the year.

The main capital expenditure during the period is as follows:

· USD2.2m on the rollout of new Zambeef Macro outlets;

· USD1.8m on new Kalundu Dairy rotary milking parlour and upgrades to milk processing plant;

· USD1.2m on the new Mpongwe stock feed plant;

· USD1.5m on the expansion of the Zamhatch hatchery and breeder farm;

· USD0.6m for the expansion of the Zam Chick processing plant;

· USD0.4m on the new Kitwe Processing Plant

· USD0.9m for the Zampalm palm project; and

· USD2.8m for farming replacement capex.

This capex is being focused towards the expansion of the retail network as well as putting extra capacity into the Cold Chain Food Product and stock feed divisions to meet the increased demand. Capex will continue to be targeted at high return parts of the business with the view to increase margins in the business.

TERM FINANCE

In order to finance the remainder of the capital expenditure to be incurred in the year, a loan of USD15m was drawn down from DEG on 17th May 2017. This loan is repayable over six years with semi-annual payments of USD1.25m starting in March 2018. The interest rate is six month USD LIBOR plus 5.75 per cent.

In the first six months of the year term debt totalling USD5.8m was repaid. A further USD5.1m will be paid in the next six months. Debt servicing will then reduce to USD8.0m in 2018.

DIVISIONAL PERFORMANCE

In order to give more clarity into the performance of the key activities of Zambeef, the results for the key business divisions are now being reported to EBITDA level. The directors have elected to consolidate the reporting of the Retail and Cold Chain Food Processing activities given that in the period 94.2 per cent. (prior period 93.1 per cent.) of Cold Chain Food Processing's sales were made on an inter-company basis to the Zambeef Retail Division.

Tables 1 and 2 below provide a summary of the performance of the key business units:

Table 1: Segmental Financial summary in ZMW'000s

Table 2: Segmental Financial summary in USD'000s

DIVISIONAL REVIEW

Taking each of our key business areas in turn as follows:

RETAIL AND COLD CHAIN FOOD PRODUCTION

RETAIL & COLD CHAIN FOODS- SUMMARY FINANCIAL PERFORMANCE:

Following the September 2016 year end the Directors announced their decision to simplify the presentation of the financial reporting of the business and to report EBITDA for each of the Zambeef Group's key business areas. In the six month period to 31st March 2017, 94.2 per cent. (prior period 93.1 per cent) of Cold Chain Food Processing's sales were made on an inter-company basis to the Zambeef Retail Division and therefore the Directors have elected to consolidate the EBITDA reporting of the Retail and Cold Chain Food Processing activities.

Net Sales in the Combined Retail and Cold Chain Food Processing business increased by 26.1 per cent. in ZMW and 45.8 per cent. in USD. Gross profit grew by 0.6 per cent. in ZMW and 16.4 per cent in USD. Growth in gross profit was impacted principally because of operational difficulties within our dairy production unit, weak egg prices, a decision to grow market share leading to some margin contraction in the premium formal retail sector and a fall in beef prices. Further details are set out in the analysis of the performance of each product line.

Overhead costs increased by 6.9 per cent in ZMW and 23.7 per cent in USD mainly due to rises in transport, energy and employment costs.

EBITDA in ZMW fell 10.3 per cent. from ZMW81.1m to ZMW72.8m, whilst in USD, it increased from USD7.1m to 7.4m. The business has generated a satisfactory EBITDA margin of 8.5 per cent. (compared to prior year period of 11.9 per cent.)

RETAIL DISTRIBUTION

The Retail business has grown strongly during the period with revenue up 27.4 per cent. in ZMW and 47.4 per cent. in USD. Like for like sales in Zambeef Macro and Outlet stores increased by 21 per cent. but this was partially offset by a 5.2 per cent. fall in like for like sales through the Shoprite concessions reflecting increased competition in the premium retail sector from new retail chains. During the period two Zambeef Macro outlets were opened and three new Shoprite stores were opened in Nigeria.

The pace of our retail store roll out will accelerate over the next six months with eight Zambeef Macro outlets, three Shoprite stores in Zambia and one Shoprite store in Ghana all expected to open in this period. This expansion of the retailing operations is expected to continue to create demand for our Cold Chain Food Products and our stock feed. A total of 70.5 per cent. of Zambeef's turnover is now through its retail operations.

COLD CHAIN FOOD PRODUCTION

The Cold Chain Food Production operations include the beef, chicken, pork, fish, dairy and egg production and processing activities which primarily supply the Zambeef and Shoprite retail chains. Whilst sales across all product lines have all grown strongly during the period with turnover increasing by 21.8 per cent. in ZMW (41.0 per cent. in USD)margin fell principally as a result of operational difficulties within our dairy production unit, weak egg prices and margin contraction in the formal retail sector due to a challenging economic environment seen during the period (as described in the Joint CEOs' report).

The Cold Chain Food Product performance is analysed in more detail below.

a) Beef (Zambeef)

Beef volumes increased by 8.7 per cent and revenue by 4.2 per cent. Beef remains the largest product line within the Cold Chain Food Product operations, accounting for 36 per cent. of the turnover.

However, beef margins were squeezed with Gross Profit reducing from 22.3 per cent. to 20.5 per cent principally because of a decline in beef prices in the Zambeef retail network. This was driven by consumers looking for cheaper protein in this challenging macroeconomic period. 

b) Chicken (Zam Chick and Zamhatch)

Turnover of our poultry business increased by a very satisfactory 35.2 per cent in ZMW over the prior period. The Zam Chick and Zamhatch operations account for 23 per cent. of the turnover of the Cold Chain Food Products division, making it the second biggest part of the Cold Chain Food Product operations, following beef. Margins were slightly down from 21.6 per cent. to 20.6 per cent as we maintained export volumes despite the strength of the ZMW.

Zam Chick processed volumes increased by 12 per cent. from 5 million kgs to 5.6 million kgs. Zamhtach increased volumes by 24.6 per cent. from 4.5 million day-old-chicks to 5.6 million during the period.

We have invested USD0.6m to increase our slaughter processing capacity by circa 23 per cent. from 130,000 to 160,000 birds per week. This upgrade should be commissioned by the end of June 2017. Demand for day-old chicks outstrips supply and as a result a further expansion of the Zamhatch operations will bring a further 100,000 on line from the end of May 2017 increasing total capacity to 315,000 day-old chicks per week. We expect the benefits of this additional volume to through to operating profit in the second half of the year.

c) Pork (Masterpork)

Masterpork has shown strong growth during the period with volumes increasing by 19.7 per cent., turnover by 21.8 per cent. in ZMW (41 per cent. in USD) and Gross Profits by 134 per cent. in ZMW (171 per cent. in USD).

Masterpork accounts for 19.3 per cent. of the Cold Chain Food Products turnover. making it the third largest product line within the Cold Chain Food Products division. Gross Profit margins increased from 7.6 per cent to 14.5 per cent. in this period, but this remains the second lowest margin of the Cold Chain Food Product operations and we continue to look at how to maximise returns from this product line.

d) Milk and dairy products (Zammilk)

The milk products business has shown strong growth in this period, with turnover up 34.2 per cent. Sales volumes increased by 42.9 per cent. from 6.52 million litres to 9.32 million litres. Despite this strong volume growth, operational difficulties in our Kalundu dairy unit led to a drop in milk output and a rise in the cost of goods as cows were culled and liquid milk was acquired from third parties to replace the shortfall in our own volumes. This has resulted in Gross Profits reducing by ZMW10.9m (USD1.1m) or 40.9 per cent. in ZMW versus the prior year (31.7 per cent. in USD). Following a change of management in February 2017, milk output and culling rates at Kalundu dairy have started to improve reducing Zammilk's cost of production.

e) Fish

Fish is gaining popularity as a cheaper source of protein. Volumes grew by 66.9 per cent. from 0.9 million kgs to 1.49 million kgs. Changes in product mix, resulted in a 26.2 per cent. increase in ZMW turnover but a 13 per cent. decline in gross profit contribution. Fish accounts for only 4.7 per cent. of turnover within the Cold Chain Food Products division.

f) Eggs (Zamegg)

The egg operations, trading under the brand name Zamegg, increased volumes by 94.0 per cent. However gross profit fell by ZMW2m with egg prices coming down sharply due to the difficulties in the Katanga Province of the DRC. This resulted in large volumes of eggs, which are normally exported into the DRC, being discarded in Zambia. This situation appears to have normalised and consequently, egg margins are now recovering. This is the smallest division within the Cold Chain Food Products accounting for 4.4 per cent. of turnover.

STOCK FEED (NOVATEK)

Novatek has maintained its market share and market leadership with volumes increasing by 2.7 per cent. from 71,737 M.T. to 73,679 M.T. This has been a good performance in a challenging macroeconomic environment with sluggish demand. However, margins have been adversely impacted by the fall in feed prices as competitors sought to liquidate high priced 2016 old crop stocks of raw materials ahead of the new crop harvest in April/May 2017. The last three months have seen Zambian soya beans move from USD535/M.T. for the old crop to well below USD400/M.T for new crop. Whilst, Operating Profit has fallen by 39.4 per cent. in ZMW from ZMW103.6m to ZMW62.8m (29.8 per cent. in USD from USD9.1m to USD6.4m), Novatek has performed well in difficult circumstances. It should be noted that margins in the comparable prior year period were enhanced by a favourable raw material forward soya book

Following the fall in raw material prices, Novateks's stock feed margins have returned to more usual levels in March and April. Lower market prices and an improving macroeconomic environment are expected to stimulate demand for stock feed.

Novatek will be commissioning a second stock feed plant at Mpongwe in June 2017. The existing Lusaka plant is currently working at capacity, and we look forward to the new Mpongwe plant providing an additional 140,000 M.T. of capacity. The Mpongwe plant is well placed to supply the Copperbelt, the North Western Province and the DRC markets, and the Group will benefit from saving in transport costs.

Novatek continues to explore new markets in the region and is now exporting to Zimbabwe, Angola, DRC, Rwanda, Kenya, Malawi and Mozambique.

With margins normalising and the second stock feed plant coming on line in June 2017, Novatek is expected to grow revenues and profitability over the next six months.

CROPPING

This has been a tough period for our cropping division with global and local commodity prices declining following a significant build-up of stocks in most major production areas with international soya prices touching ten year lows. Furthermore, the ZMW appreciation of 3.5 per cent over the past six months has resulted in a ZMW14.6m (USD1.5m) reduction in income derived from the biological assets and inventory held at 30th September 2016.

The cropping division planted 12,005 Ha of soya, 2,185 Ha of maize and 500 Ha of silage for the summer season. These crops are coming off ahead of budget with over 40,000 M.T. of soya, 21,000 M.T. of maize and 24,000 M.T. of maize silage expected.

Unfortunately, the decline in soya price from USD500/M.T. the previous year to under USD400/M.T. for the current crop has resulted in a circa USD4m reduction in dollar income on the 40,000 M.T. produced in the period as the Zambian forward market is generally illiquid making hedging very difficult. However a strong underlying operational performance by the cropping division has resulted in a net reduction in gross profit of ZMW25.9m (equivalent to USD2.7m). 

Cropping operations have performed operationally very well, with yields ahead of last year and variable costs on budget. Overhead costs increased by 6.6 per cent reflecting the rise in energy, repair and labour costs. The winter crop, which has just been planted, is made up of 6,374 Ha of wheat, 1,004 Ha of winter maize, 75 Ha of seed maize and 193 Ha of Lucerne. Wheat prices are expected to be similar to last year at this stage, hence we expect the cropping division to deliver a better performance in the next six months provided there is no further softening of maize or wheat prices.

OTHER BUSINESSES

Flour Milling: The milling operations have performed well with flour sale volumes increasing by 23.5 per cent. as we made the decision to increase volumes by selling more flour through our retail network. This strategy has worked well with retail sales in Zambeef's own retail network increasing by 163 per cent. and representing 29 per cent. of overall flour sales (13 per cent). The aim is to increase flour sales further by continuing to drive sales through Zambeef's own retail network.

Zamleather: This division has had a difficult six months, with world hide prices dropping and the market for lower grade hides being very sluggish. The number of hides processed fell by 23.7 per cent. to 43,492 hides. In addition, shoe sales decreased by 21.3 per cent. to 30,594, with purchases from the mines being slow in the period. The next six months are not expected to see any material improvements in the leather industry.

Edible oil: Following the sale of Zambeef's edible oil operations, Zamanita Ltd, to Cargill in 2015, Zambeef has continued to retail edible oil through its retail network. These sales have reduced over the last eighteen months but the Zambeef palm project started producing crude palm oil during this period. Crude palm oil output will increase as planted areas progressively come into production. The edible oils operations are not material to Zambeef's operations.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS

In compliance with Division 8.3 of the Companies Act, the Directors submit their report on the activities of the Group for the six month period ended 31 March 2017.

1. Principal activities

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 7,971 Ha of irrigated row crops and 8,623 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.

2. The Company

The Company is incorporated and domiciled in Zambia.

Business address Postal address

Plot 4970, Manda Road Private Bag 17

Industrial Area Woodlands

Lusaka Lusaka

ZAMBIA ZAMBIA

3. Share capital

Details of the Company's authorised and issued share capital are as follows:

4. Results

The Group's results are as follows:

Unaudited Audited

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS (CONTINUED)

5. Dividends

There was no dividend paid or proposed for the six month period ended 31 March 2017.

6. Management

The Senior Management team comprise the following:

Francis Grogan - Joint Chief Executive Officer

Carl Irwin - Joint Chief Executive Officer

Yusuf Koya - Executive Director

Craig Harris - Chief Financial Officer

Danny Museteka - Company Secretary

Mike Lovett - General Manager Farming Division

Felix Lupindula - Corporate Affairs Manager

Pravin Abraham - Chief Internal Auditor

Ebrahim Israel - General Manager - International Retailing

Murray Moore - General Manager - Beef and Dairy

David Mynhardt - General Manager - Sinazongwe Farm

Robert Hoskins Davies - General Manager - Chiawa Farm

Francis Mondomona - General Manager - Huntley Farm

Richard Franklin - General Manager - Zamleather Limited

Walter Roodt - General Manager - Stock Feed

Harry Hayden-Payne - General Manager - Zampalm Limited

Webster Mapulanga - General Manager - Master Pork Limited

Theo de Lange - Group Technical Manager

Bartholomew Mbao - Dairy Processing Manager

Andries Van Rensburg - Piggery Manager

Samson Lungu - Flour Mill Manager

Charles Milupi - Poultry Manager

Ivor Chilufya - Group Financial Controller

Justin Rust - Commercial Manager

Basil Webber - Commercial Manager

Christiaan Engelbrecht - Commercial Manager

Niyaas Dalal - Finance Manager - Zambeef Products Limited, Zam Chick Limited

Rory Park - Finance Manager - Master Pork Limited, Zampalm Limited, Zamhatch Limited

Simon Nkhata - Finance Manager - Zambeef Retailing Limited

Baron Chisola - Financial Controller - Group Inventory

Shadreck Banda - Financial Controller - Group Suppliers

Samantha Dale - Group Head - Debtors and Credit Control

Anthony Seno - Head of IT

Guy Changole - Head of Human Resources

Mathews Mbasela - Head of Payroll Processing

EddieTembo - Chief Security Manager

Jones Kayawe - Head of Environment, Health and Safety

Field Musongole - Maintenance Manager

Justo Kopulande - CSR/PR Manager

Ernest Gondwe - Regional Manager - Shoprite & Excellent Meats

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS (CONTINUED)

6. Management (continued)

Francis Mulenga - Regional Manager - Shoprite

Noel Chola - Regional Manager - Shoprite

Rodgers Chinkuli - Regional Manager - Zambeef Outlets

Deon Conradie - Managing Director - Master Meats Nigeria

Hillary Anderson - National Retail Manager - Nigeria

Lufeyo Nkhoma - General Manager - Master Meats Ghana

Clement Mulenga - General Manager - Master Meats Nigeria

7. Directors and Secretary

The directors in office during the financial period and at the date of this report were as follows:

Dr. Jacob Mwanza - Chairman

Dr. Lawrence S. Sikutwa

John Rabb

Graham Clarke (Resigned 18th April 2017)

David Osborne

Tim Pollock

Francis Grogan - Joint Chief Executive Officer

Dr. Carl Irwin - Joint Chief Executive Officer

Yusuf Koya - Executive Director

Danny Museteka - Company Secretary

8. Directors' interests

The directors held the following interests in the Company's ordinary shares at the reporting date:

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS (CONTINUED)

9. Directors' fees and remuneration

In addition to the above, all Executive Directors are also entitled to a gratuity of 10 per cent. of their gross basic salary paid over the two-year contract term, less statutory deductions for tax.

The Long Term Incentive Plan 2 ("LTIP 2") has the following key terms/conditions:

a) Structure: market value option shares ("Options");

b) Exercise price: 15 pence;

c) Maximum shares: The annual award base value (number of shares multiplied by the share price on the date of grant plus number of Options multiplied by the exercise price) may not exceed three times the Executive's base salary; and

d) Vesting period: three years from 2015 to 2018; exercisable from 1 March 2018:

e) The Options can only be exercised if Zambeef achieves the following targets:

I. If the share price reaches 40 pence, then 25 per cent. of the Options become exercisable.

II. If the share price reaches 48 pence, a further 25 per cent. of the Options become exercisable.

III. If the share price reaches 56 pence, a further 25 per cent. of the Options become exercisable.

IV. If the share price reaches 65 pence, the final 25 per cent. of the Options become exercisable.

V. Zambeef achieving a debt-to-equity (gearing) ratio of less than 35 per cent. in the audited accounts immediately prior to exercising the options.

VI. Zambeef achieving a current ratio (current assets divided by current liabilities) of 1.5 in the audited annual accounts immediately prior to the exercising of the options.

VII. Zambeef generating free cash flow.

VIII. The Zambeef share price triggers set above will be considered achieved if in the 14 days immediately prior to exercising the Options, the shares have traded continuously at not less than these prices for 14 days.

IX. The Options will be exercisable at any time for 2 years after the 3-year period from the issue of the Options have lapsed.

X. The Options can only be exercised if the relevant executives are still employed by the Company.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS (CONTINUED)

10. Significant Shareholdings

As at 31 March 2017, the Company has been advised of the following notifiable interests in its ordinary share capital:

.

11. Employees

The Group employed an average number of employees of 6,854 (30 September 2016 - 6,253; 31 March 2016 - 6,200) and total salaries and wages were ZMW173 million (USD17.7 million) for the six month period to 31 March 2017 (30 September 2016 - ZMW307 million [USD28.3 million], 31 March 2016 - ZMW139.3 million [USD12.3 million]).

The average number of persons employed by the Group in each month of the 6 month period is as follows:

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS (CONTINUED)

12. Safety, Health and Environmental issues

As part of some of the Group's term loans, the Group signed up to an Environmental and Social Action Plan ("ESAP"), which requires the Group to meet both local Zambian standards as well as international standards relating to the environment.

The Group provides healthcare services to its employees. The Group also supports various community activities in the areas that it operates from.

13. Legal matters

There are no significant or material legal or arbitration proceedings (including to the knowledge of the Directors, any such proceedings which are pending or threatened, by or against the Company or any subsidiary of the Group) which may have or have had during the 12 months immediately preceding the date of this document a significant or material effect on the financial position or profitability of the Company or any member of the Group

14. Gifts and donations

The Group made donations of ZMW1.23 million (USD0.13 million), (30 September 2016 - ZMW2.2 million [USD0.2 million], 31 March 2016 - ZMW1.27 million [USD0.11 million]) to a number of activities.

15. Export sales

The Group made exports of ZMW14 million (USD1.4 million) during the period (30 September 2016 - ZMW90.7 million [USD8.6 million], 31 March 2016 - ZMW59.3 million [USD5.2 million]).

16. Property, plant and equipment

Assets totalling ZMW126.5 million (USD12.9 million) were purchased by the Group during the period (30 September 2016 - ZMW178.8 million [USD16.5 million], 31 March 2016 - ZMW84 million [USD7.4 million]) which included expenditure on the palm plantation development during the period of ZMW8.8 million (USD0.9 million) (30 September 2016 - ZMW12.2 million [USD1.1 million], 31 March 2016 - ZMW6.5 million [USD0.57 million]).

17. Interim report

The interim report set out below has been approved by the directors.

By order of the Board

Company Secretary

Date: 6 June 2017

6 June 2017

The Directors

Zambeef Products PLC

Plot 4970, Manda Road

Industrial Area

Lusaka

Dear Sirs

INDEPENDENT REVIEW REPORT OF ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

Introduction

We have been instructed by the Directors of the Company to review the financial information set out on pages 21 to 52 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Listing Rules of the Lusaka Stock Exchange and International Accounting Standard 34 require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where changes, and reasons for them, are disclosed.

Review of work performed

We conducted our review in accordance with guidance contained in the International Standards on Auditing. A review consists principally of making enquiry of Group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as test of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.

Review conclusion

On basis of our review we are not aware of any material modifications that should be made to the consolidated financial information as presented for the six month period ended 31 March 2017.

Chartered Accountants

Christopher Mulenga (AUD/ F000178)

Name of Partner signing on behalf of the Firm

Lusaka

Date: 6 June 2017

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2017

The accompanying notes form part of the financial statements.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2017

The accompanying notes form part of the financial statements.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2017

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2017