Zambeef Prod. Regulatory News (ZAM)

13 June 2019 

Zambeef Products plc

("Zambeef" or the "Group")

Interim results for the Half Year Ended 31 March 2019

Zambeef (AIM: ZAM), the 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 2019.

Key Financial Highlights:

Performance Overview

· In a challenging environment, the group has delivered the following financial highlights:

o Revenue for the Group increased by 15.5% in Kwacha terms (down 4% in USD terms)

o Executed on the Group's strategic focus on stepping up the roll out of new stores across Zambia

o Improved margins and continued revenue growth since 31 March 2019

· The Group's Retailing and Cold Chain Food Products business now consists of 216 retail outlets, both own-branded and within Shoprite supermarkets

o Revenue in the period was supported by an increase of sales in stock feed, edible oil and flour

o Masterpork Limited has continued to be profitable

o The Group has reported a return to profitability of Master Meats Nigeria and Master Meats Ghana

· Revenue growth and increased production from the Group's wheat mill

o Strong first half of revenue growth which resulted in EBITDA increasing from ZMW7.6m to ZMW10.4m

o Produced 8,618 tonnes of flour in the period, ahead of budget

o The new Kitwe Processing Plant in the Copperbelt is now operational

o USD450,000 investment has been made in the production at Zamleathers' Zamshu brand to double capacity from 500 to 1000 pairs of shoes per day 

o Consistent revenue growth through the retail network and stock feed operations with a strong focus on customer care

o Improving cash conversion from strong working capital and tight control on Capex

o Strategic focus on cost saving measures

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

"Significant fiscal pressures on the Zambian economy during the period have presented challenges for the market and impacted the disposable income of Zambeef's customers. Exchange rate movements have not favoured the Group in the period and the depreciation of the currency has led to the Group reporting realized exchange losses.

"Despite the tough trading conditions, the management team have continued to deliver on the Group's key strategic initiatives throughout the period and the second half of the year is expected to see an improvement in both revenue and margin performance.

"The Group's strategic focus on the continued roll out of new Macro outlets across Zambia contributed to revenue growth in the period and its retail footprint increased to 216 retail outlets."

Notes to the editors

Information on Zambeef

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.

Further information can be found on www.zambeefplc.com

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

-Ends-

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CHAIRMAN'S REPORT

The Economic Environment

During the first six months of the financial year the Group faced a challenging economic environment as a result of significant fiscal pressures on the Zambian economy combined with the broader global economic shocks. This has resulted in less disposable income for Zambeef's core customers.

The Kwacha, having depreciated significantly from about 10.15 at the beginning of September 2018, ended the period under review at ZMW12.19/USD and has since depreciated further.

Annual inflation declined to an average of 7.7 per cent. in the first quarter of 2019, from 8 per cent. in the fourth quarter of 2018. This was attributed to improved supply of some food items and a reduction in fuel prices.

Trading Results

Zambeef Group reported a Loss After Tax of ZMW31.8 million (USD2.7 million) compared to a Profit After Tax (before discontinued operations) of ZMW23 million (USD2.3 million) in the previous period. Group revenue increased by 15.5 per cent. in Kwacha terms to ZMW1.42 billion in the six months to March 31, 2019, compared with the same period for the previous year. In US Dollar terms revenue fell 4 per cent. to USD118.8 million, largely due to the average rate of exchange rising to ZMW11.92/USD from ZMW9.90/USD in the previous period.

Pressure on retailing, cold chain food production and stockfeed margins dampened gross profit resulting in the Group reporting a gross profit of ZMW470.6 million (USD39.5 million) for the period, an increase of 2 per cent. in Kwacha terms and down 15.3 per cent. in US Dollars. 

Operating profit fell by 81.8 per cent. to ZMW 11.4 million (85 per cent. to USD954,000), due in part to lower margins being achieved in Zambeef's Retailing and Cold Chain Food Products. The Group's overheads were higher than expected during the period.

Since 31 March 2019 Zambeef has seen improving margins and continued revenue growth. In addition, the efficiency measures that were taken in the first half of the year are expected to flow through to an improved operating performance in the second half.

Retailing and Cold Chain Food Products (CCFP)

Zambeef's chain of 216 retail outlets - both own-branded and within Shoprite supermarkets - remain at the heart of the business.

Zambeef reported a 14.9 per cent. increase in revenue from its core Zambian Retailing operations to ZMW882 million (2018: ZMW768 million), bolstered mainly by increased sales of stockfeed, edible oil and flour.

Gross profit was down by 8 per cent. to ZMW84 million (2018: ZMW91.3 million). This was due to a change in sales mix, where disproportionate sales of lower margin products grew at higher rates than our higher margin products. Zamhatch margins were also lower due to low day old chick selling prices.

Masterpork Limited has continued to be profitable during the period and the Group is pleased to report a return to profitability of Master Meats Nigeria and Master Meats Ghana.

Stockfeed

Zambeef's stockfeed operations continued to grow during the period under review, recording revenue growth of 34.1 per cent. vs the prior period (ZMW412.3 million vs ZMW307.6 million; 98,936 tons vs 95,245 tons). However, the higher revenue was at lower margins than the previous period due to higher input costs and strong competition. The stockfeed division Gross Profit margin reduced from 26.9 per cent. to 18.8 per cent. compared to the prior period. This resulted in a reduction in Gross Profit from ZMW82.8 million to ZMW77.5 million. Since 31 March 2019, the stockfeed division has seen improving margins.

Cropping

The Cropping division finished the first half ahead of the prior period, despite a decrease in soya bean prices from circaUSD430/t in the previous period to USD390/t during the period under review. The cropping division Gross Profit increased from ZMW78.8 million to ZMW93.3 million which resulted in EBITDA increasing from ZMW23.9 million to ZMW36.8 million.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

Other

Zambeef's wheat mill produced revenue growth of 71.1 per cent. resulting in revenue of ZMW83.2 million, up from ZMW48.6 million in the previous period. This resulted in an EBITDA of ZMW10.4 million compared with ZMW7.6 million in the prior period. Volumes produced by the wheat mill increased by 59.5 per cent. from 5,405 tons to 8,618 tons.

The Zamleather division continues to be loss making due to the wet blue market global downturn. The increased capacity in shoe production is expected to come online in the second six months which will improve Zamleather's outlook.

Investment

The Group invested ZMW54.6 million (USD4.6 million) in capital projects during the six months, including the continued roll out of its successful Macro outlets concept countrywide which saw Macro store revenue up by 30.8 per cent. compared with the prior period.

The new Kitwe Processing Plant in the Copperbelt is now operational. This has enabled the Group to decentralise some distribution logistics, improving efficiencies in serving the Northern parts of the country.

USD450,000 of the 2019 Group capital expenditure budget has been allocated to expanding the Zamleather shoe plant.

Leadership succession/Board changes

As previously announced, leadership of the Group will transition to a new management team by 31st December 2019, with the retirement of the Chief Executive Officer, Francis Grogan effective from that date.

Francis, assisted by the Board's Remuneration and Succession Committee, is actively managing this transition process. Deputy Managing Director, Walter Roodt, who was appointed to the Board as an Executive Director in March 2019, will succeed Francis, and is working closely with him to ensure a successful and smooth transition.

Walter joined Zambeef in July, 2008, in the role of Nutritionist for the stockfeed division, trading as Novatek. A year later, he was appointed General Manager of the division, a position he held until he was appointed Deputy Managing Director of the Group. Under his leadership, the stockfeed division grew into the Group's best performing division and has become Zambia's leading stockfeed manufacturer.

Francis is also working closely with Mike Lovett, the Group's Chief Operating Officer, who is taken over his operational responsibilities.

In February 2019, Yusuf Koya, who joined Zambeef in 2005 and was appointed to the Board in 2006, resigned from the Board. Yusuf will continue to remain a senior employee/manager in the Group.

Also, in February 2019, Craig Harris resigned as Chief Financial Officer. Interim measures have been put in place under which senior managers will report to the Board through the CEO until his replacement has been appointed.

Outlook

After a relatively stable first half, the Zambian Kwacha depreciated significantly in April and May 2019, falling by around 15 per cent. to around ZMW14.00 to the US Dollar at one stage, amid concerns over a decline in the Zambia's gross international reserves.

Accordingly, on May 22, the Bank of Zambia increased its Policy Rate by 50 basis points to 10.25 per cent. to stem pressure on the Kwacha. The macro-economic climate is anticipated to remain challenging. However, I am confident that the Group will perform well in the second six months to September 2019, with continued growth in revenue and Gross Profit margins.

Dr Jacob Mwanza

Chairman

12 June 2019

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

Zambeef celebrates its Silver Jubilee in June 2019. It marks 25 years of growth, from the small entrepreneurial start-up founded by the former joint CEO, Dr Carl Irwin, and myself, to the established flagship integrated retail agri-business that defines the Group today.

It has been a tumultuous journey, but one that highlights the importance of our long-term strategic approach that has balanced out the peaks and troughs of what can often be a volatile economic environment.

The first six months to March 31, 2019, resulted in the Group producing a loss in very tough trading conditions but also one in which the vast experience of the management team has come to the fore to enable us to innovate and refine operations that will take the Group forward and improve margins in the second half of the financial year

Strategic focus

Zambeef's strategic focus on the roll out of new Macro stores across Zambia has continued to contribute to revenue growth, with Macro stores accounting for 29 per cent. of retail revenue, compared with 25.5 per cent. in the previous year. Novatek Macros have also grown strongly, and now account for 12.8 per cent. of retail revenue compared with 8.2 per cent. last year. Combining the two they now account for 41.9 per cent. of retail revenue compared with 33.7 per cent. last year.

Zambeef continues to pursue the divestment of non-core assets to reduce debt and generate additional cash flow. 

Retail and Cold Chain Food Products (CCFP)

It is pleasing to report that the Group continued to grow revenue in its Retailing and Cold Chain Food Production division. However, it is disappointing to report that volumes were similar to the prior period, and margins have come under pressure in difficult market conditions, coupled with higher input costs, which we could not pass on to the consumer in the first six months due to the lack of disposable income.

Our milk operations performed well, with strong growth in both revenue and gross profit.

Our West Africa retail business also performed well, with revenue up 41 per cent.and gross profit up 53.7 per cent. in Kwacha terms.

Stockfeed

Zambeef stockfeed division had good revenue growth of 34.1 per cent. but Gross Profit margins came under pressure due to rising input costs and strong competition which resulted in decreased Gross Profit of ZMW77.5 million, down from ZMW82.8 million in the prior period. Zambeef's Mpongwe feed mill produced 31,961 tonnes of stockfeed during the period, a pleasing contribution to overall animal feed production, with a total increase in production of 3.9 per cent. compared with the same period of last year.

Cropping

The Group is one of the largest cereal row cropping operations in Zambia, with approximately 7,971 hectares of row crops under irrigation, and a further 8,623 hectares of rainfed/dry-land crops available for planting each year.

The cropping division Gross Profit increased from ZMW78.8 million to ZMW93.3 million which resulted in EBITDA increasing from ZMW23.9 million to ZMW36.8 million. This was a pleasing result for our soya bean season, and we expect strong results in the upcoming wheat season.

Other

After a fair performance for the first six months Zamhatch is increasing production of its Cobb500 chicks to 500,000 a week from the current level of 345,000.

Close to 50 percent of the chicks are sold on the open market through Zambeef Macro outlets and the remainder feed into the Zam Chick broiler operation. Zambia has recorded some of the fastest growth rates in the regional poultry sector owing in part to our investment.

Zambeef's wheat mill produced 8,618 tonnes of flour in the six month period, ahead of budget.

A USD450,000 capital investment in production at Zamleather's Zamshu brand will double capacity from 500 to 1000 pairs per day, the majority of which will be sold through Zambeef retail stores and Shoprite

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

Outlook

We anticipate the macro-economic climate to remain challenging in the second half of the financial year.

The depreciation of the Kwacha in May 2019, and continued concerns in some quarters over Zambian government debt repayments, is likely to place renewed pressure on market sentiment, investment and ultimately consumer spending, and we expect this to impact on our retail business in the coming year.

These difficult times place a renewed emphasis on the ability of Zambeef's management and staff to work strategically, think long-term and develop innovative solutions that address market conditions.

This is one of Zambeef's strengths that has stood it in good stead as it celebrates its Silver Jubilee in 2019.

Francis Grogan

Chief Executive Officer

12 June 2019

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

FINANCIAL REVIEW

The first six months of the 2019 financial year have seen the Zambeef Group continue to grow. Good revenue was achieved through our retail channels, stockfeed division and wheat mill. Revenue for the Group increased by 15.5 per cent. in ZMW and decreased by 4 per cent. in USD, while Gross Profit margins decreased from 37.6 per cent. to 33.2 per cent. resulting in Gross Profits increasing by 2 per cent. in ZMW from ZMW461.1m to ZMW470.6m (decreased by 15.3 per cent. in USD from USD46.6m to USD39.5m). Overheads increased by 15.2 per cent. in ZMW (decreased by 4.3 per cent.in USD) from ZMW347.7m to ZMW400.5m (USD35.1m to USD33.6m). The weakening of the achieved Gross Profit percentage resulted in the Group delivering Operating profits of ZMW11.4m versus ZMW62.3m (USD1m vs USD6.3m) which represents an 81.8 per cent. decrease in ZMW and an 84.8 per cent. decrease in USD. 

Interest costs reduced by 10.6 per cent. in ZMW (25.7 per cent. in USD) as a result of lower debt levels. As a result, Zambeef reported a loss after tax of ZMW31.8m vs a profit after tax (excluding discontinued operations) of ZMW23m (loss of USD2.7m vs a profit of USD2.3m).

The highlights of this period were the 14.9 per cent. in ZMW increase (USD decrease 5.1 per cent. in revenue in from its core Zambian Retailing operations to ZMW882m from ZMW768m (USD74m from USD78m). Other highlights were the strong revenue growth in both our stockfeed operations and our wheat mill.

The focus for the next six months will be on:

· Maintaining consistent revenue growth through the retail network and stockfeed operations with strong focus on customer care;

· Improving cash conversion from strong working capital control and tight control on Capex;

· Strategic focus on cost saving measures.

Exchange rate movements

This period has seen a 28.6 per cent. depreciation of the ZMW against the US Dollar, starting the period at 9.48 ZMW/USD and closing the period at 12.19 ZMW/USD. The table below shows the comparative exchange rates over the periods:

The depreciation of the currency has resulted in the Group reporting realized exchange losses of ZMW4.4m (USD0.4m) for the first six months of the financial year.

ADMINISTRATION AND OVERHEAD COSTS

As mentioned above, overheads have increased by 15.2 per cent. (in ZMW). The following are contributing factors:

· Fuel prices increased from ZMW12.01 per litre in October 2018 to ZMW14.65 per litre then dropped slightly to ZMW13.43/l in February 2019. For most of the period under review, fuel prices were up by 22 per cent.

· Inflationary payroll increases across the board resulting in higher payroll costs;

· Levy and slaughter fees have continued to increase during the period;

· Road toll fees, which were introduced in the previous financial period, are increasing as more toll gates are opened; and

· Heavy transport costs were incurred due to the requirement to use third party contractors to keep pace with the rapid expansion in Novatek. Zambeef has since secured additional trucks to meet its needs.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CAPITAL EXPENDITURE

Total capital expenditure during the period was ZMW54.6m (USD4.6m) against anticipated capital expenditure of ZMW90m (USD9m) for the year.

The main capital expenditure during the period included:

· USD1.4m on rollout of new Zambeef Macro outlets and transport fleet

· USD0.4m on stockfeed operations

· USD1.2m on expansion of Zamhatch hatchery and breeder farm

· USD0.2m for Zam Chick

· USD0.7m for farming replacement Capex

· USD0.1m on expansion of Zam Shu

TERM FINANCE

No additional term finance was sourced during the period under review.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

DIVISIONAL PERFORMANCE

Table 1: Segmental Financial summary in ZMW'000s

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

FINANCIAL REVIEW

DIVISIONAL PERFORMANCE

Table 2: Segmental Financial summary in USD'000s

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

FINANCIAL REVIEW

DIVISIONAL REVIEW

RETAIL AND COLD CHAIN FOOD PRODUCTS (CCFP)

The first six months of the financial year were challenging for Retail and CCFP with disposable income of our customers coming under severe pressure. We noticed a large shift with customers purchasing more edible oils, stockfeed and flour as opposed to our core cold chain products which attract higher margins for the division.

Revenue in the Retail and Cold Chain Food Products division increased by 7.2 per cent. in ZMW and decreased by 11 per cent. in USD. Gross profit fell by 1 per cent. in ZMW and 17.8 per cent. in USD.

Overhead costs increased by 12.9 per cent. in ZMW and reduced by 6.3 per cent. in USD mainly due to rises in transport, energy and employment costs.

EBITDA in ZMW fell 27.1 per cent. from ZMW98.7m to ZMW71.9m and fell by 39.5 per cent. in USD from USD10m to USD6m.

The Retail and Cold Chain Food Products division includes the beef, chicken, pork, dairy, egg, oil, stockfeed, flour and fish production, processing and retailing activities which primarily supply the Zambeef and Shoprite retail chains.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

FINANCIAL REVIEW

STOCK FEED (NOVATEK)

The stockfeed division produced good revenue growth of 34.1 per cent. with volumes increasing by 3.9 per cent. from 95,245 M.T. to 98,936 M.T. When the Kwacha depreciated in September 2018, Novatek's raw material prices increased by about 20 per cent. which Novatek attempted to pass on to the consumer through price increases. This has taken time, due to price sensitivity in the market.

Overheads increased by 23.9 per cent. due mainly to the expanding stockfeed plant in Mpongwe and the use of external transporters while waiting for additional trucks to arrive in the second quarter.

The abovementioned factors have led to a disappointing first half with EBITDA falling by 31.8 per cent. Novatek is now starting to benefit from lower soya bean input prices and margins are recovering which should lead to a stronger performance in the second half of the year.

CROPPING

The Cropping division has delivered pleasing results in the first six months despite below average rains and reduced Soya bean prices. The combined cropping division delivered about 2 per cent. higher yields on the soya bean crop.

Overheads have been managed well. This, together with the strong Gross Profit achieved resulted in EBITDA increasing from ZMW23.9m in 2018 to ZMW36.8m in 2019 (USD2.4m to USD3.1m).

The winter crop, which has recently been planted, comprises 7,160 Ha of wheat, 500 Ha of winter maize. The wheat and maize price are expected to be fairly higher than the previous year and, if maintained, should result in a profitable second half for the division.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

FINANCIAL REVIEW OTHER BUSINESSES

The Other divisions delivered an increase in Gross Profit of 20.6 per cent. from ZMW14.4m to ZMW17.4m (USD1.5m to USD1.5m) compared to the prior period.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

Milling:

Our milling division had a very good first half with good revenue growth (71.1 per cent.) which resulted in EBITDA increasing from ZMW7.6m to ZMW10.4m.

Zamleather: 

The shoe division performed well. However, the decrease in world-wide hide prices and the market for lower-grade hides is still very challenging.

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS

In compliance with Section 275 of the Companies Act, the Directors submit their report on the activities of the Group for the six month period ended 31 March 2019.

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 also has operations in West Africa 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

5. Dividends

There was no dividend paid or proposed for the six month period ended 31 March 2019.

6. Management

The Senior Management team comprise the following:

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

7. Directors and Secretary

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

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

9. Directors' fees and remuneration

In October 2016, the Board approved a retirement package for the Chairman, Dr. Jacob Mwanza of USD330,000. An advance of USD110,000 was paid about the same time, and the full payment was paid during the period.

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;

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

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

10. Significant Shareholdings

As at 31 March 2019, the Company has been advised of the following notifiable interests in its ordinary share capital:

CDC Group Plc are also the holders of 100,057,658 convertible redeemable preference shares. These shares have three voting rights for every four preference shares held resulting in CDC having 34.8% of the voting rights.

11. Employees

The Group employed an average number of employees of 7,215 (30 September 2018 - 7,555; 31 March 2018 - 7,734) and total salaries and wages were ZMW237.6 million (USD19.9 million) for the six month period to 31 March 2019 (30 September 2018 - ZMW420.8 million [USD42.4 million], 31 March 2018 - ZMW198 million [USD20 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

12. Safety, Health and Environmental issues

As part of some of the Group's term loans, as well as the recent CDC Group PLC equity investment, the Group has 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 education and 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 ZMW1.2 million (USD0.1 million), (30 September 2018 - ZMW2.6 million [USD0.259 million], 31 March 2018 - ZMW1.5 million [USD0.15 million]) to a number of activities.

15. Export sales

The Group made exports of ZMW24 million (USD2 million) during the period (30 September 2018 - ZMW48.5 million [USD4.9 million], 31 March 2018 - ZMW27 million [USD2.8 million]).

16. Property, plant and equipment

Assets totalling ZMW54.6 million (USD4.6 million) were purchased by the Group during the period (30 September 2018 - ZMW150.1 million [USD15.1 million], 31 March 2018 - ZMW80.3 million [USD8.1 million]) which included expenditure on the palm plantation development during the period of ZMWNil (USDNil) (30 September 2018 - ZMW6 million [USD0.6 million], 31 March 2018 - ZMW6 million [USD0.6 million]).

17. Interim report

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

By order of the Board

 Company Secretary

Date: 12 June 2019

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 19 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 2019.

Chartered Accountants

Christopher Mulenga (AUD/ F000178)

Name of Partner signing on behalf of the Firm

Lusaka

Date: 12 June 2019

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2019

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 2019

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 2019

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2019

ZAMBEEF PRODUCTS PLC AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ‑ 31 MARCH 2019