” When first appointed members had been of the view that the dismissed Board members were familiar with their fiduciary duties in terms of the law and in terms of the articles of the company (NOTE: no mention of the Zimbabwe Code on Corporate Governance), regrettably it has turned out that they were not fully conversant with the above resulting in uninformed decisions for the detriment of all shareholders”

Where is the Institute of Directors when you need it? Where’s oversight from the shareholders about the capabilities of their board. In the 21st century there is actually no excuse for this sort of failure. It seems that the authors of this notice, “the members”, have shot themselves in the foot. Members are responsible for appointing directors (or ratifying the appointment) so they should put in place measures to ensure that educated and honest members are appointed to the Board. Its always someone else’s fault isn’t it. It’s just like dealing with teenage kids.

“Comply” or “explain” Mervyn King recommends in his approach to applying corporate governance vs the alternative of legislating compliance. Corporate governance is not about “checklists” he says. Its about the integrity of directors. Well, what should one do when there is little shareholder oversight (or activism) of their Board? When legislation is not prescriptive enough? Well this is where African corporate governance is not understood. Generally the absence of critical mass in investor numbers, in regulation, in shareholder education, in all stakeholders being informed about shareholder rights etc. is a recipe for ensuring that something different needs to be done.

The difference needed is to “create lists”. Lists of clear corporate governance deliverables making it mandatory for listed company executives and the Board to sign them off in public in front of shareholders. Every year at the AGM. Hold all directors accountable for the performance of all directors, not come up with excuses like “they did not know what their fiduciary duties were”.

The wishy washy corporate governance codes language is NOT appropriate for governance in African markets. It’s not that Africans are more dishonest than others. Its just that the environment we find ourselves in is more conducive to no-one paying attention to corporate governance – the levels of oversight on all levels are not as high so abuse can slip in. And it does.

The solution is so simple. Create a list, tell the directors to swear on their mothers death that they carried out an appraisal of the things in the list and disclose the results. Ticking off things on a list will create the basis upon which directors can become more aware of what integrity means because they will be reminded of it. What is this “list” you may ask?  Well, one form is the Institute of Directors South Africa’s Governance Assessment Instrument – this is what their website says….

As part of our efforts the Centre for Corporate Governance has established the Governance Assessment Instrument (GAI), a web-based tool with modules catering for all business sectors, including listed companies, SMEs, state-owned entities, medical funds, pension funds, NPOs, etc.

The GAI facilitates the implementation of good governance structures and practices. It also serves as a rating mechanism of governance.

To login or to view the GAI click here

You probably find that there are not more than 12 statements that need to be read out to directors at an AGM that cover everything that shareholders need to know about how their board is responsible for their own behaviour. Jointly. If the Board fails in part, the whole Board should go. Mix “lists” with the “comply or explain” mantra and we will be one step ahead of where we are now.

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How come its so important for one of the most advanced securities markets in the world to carry out this sort of research, but its not on the agenda for African markets? Drop me a line if you know why.

SEC Seeks Public Comment for Financial Literacy Study Mandated by Dodd-Frank Act

The Securities and Exchange Commission today published on its website a request for public comment on financial literacy and investor disclosure issues that it is studying as part of a review mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Section 917 of the Dodd-Frank Act directs the SEC to conduct a study of retail investors’ financial literacy and submit its findings to Congress by July 21, 2012.  The SEC is using qualitative and quantitative research, including investor testing, to help inform the study. To supplement its research, the SEC also is seeking public comment on financial literacy and investor disclosure issues.

Consistent with the Dodd-Frank Act’s specifications for the study, the SEC is seeking comment on methods to improve the timing, content, and format of disclosures to investors regarding financial intermediaries, investment products, and investment services.  It also requests comment on information that retail investors need to make informed financial decisions on hiring a financial intermediary or purchasing an investment product or service typically sold to retail investors, including mutual funds.  In addition, the SEC seeks comment on how to make investment expenses and conflicts of interest in investment transactions more transparent to investors.

“Many of the issues that the Dodd-Frank Act identified for Commission study directly affect individual investors.  As a result, we are especially interested in receiving comments from individual retail investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.

The public comment period will remain open for 60 days, following publication of the request in the Federal Register. (Press Rel. 2012-12)

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My review was cursory as I wanted to get a general feel for whether certain aspects of social media were being adopted by Africa’s stock exchanges. The spider diagram above summarises the % incidence of basic interactivity & social media indicators on stock exchange websites. The long and the short of this quick review is that social media is not seriously on any agenda of African stock exchanges. This, when Africa’s new Facebook statistics show a total of 37.7m users as at 31 December 2011. This, when the African Stock Exchanges Association is theoretically lacking strategic direction and when it’s raison d’etre is being eroded by regional stock exchange associations. There is ample scope for these organisations to seriously consider the extent of the opportunity offered by social media and other online platforms, especially in coal-face investor education initiatives.

Here are the various country scores representing how many of the 10 main indicators above appeared on African stock exchange websites – 100% is all of them appeared, 10% is only one appeared:-

Interestingly the Stock Exchange of Mauritius does not score highly but the exchange does have a very comprehensive website – just little interactivity. Zimbabwe’s website is currently being re-developed and it will be interesting to see where this emerging exchange fits into the overall ratings above.

Traditional capital markets regulators will argue that it is not the role of regulators to engage directly with investors. This may have been applicable in the past and certainly the prospect of African stock exchanges doing so now is scary given the absence of resources in this area. The fact is the conversation about these sorts of things needs to start happening now and a framework set out for the future.

There is no better platform than one to one communication to educate investors and an educated investor is a protected investor – and a protected investor is what African stock exchanges should be developing by the thousands, every day. But its not happening. OK the sky is not going to fall because of it, but there may be long term downsides to not engaging retail investors in African markets even if its just to provide them with corporate actions, annual reports and price sheets everyday.

My message is that these media are sitting ducks for someone to do something progressive for a change rather than lag behind the rest of the world.

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CFI is a Zimbabwean vertically integrated conglomerate predominantly involved in poultry, agro-industrial processing, irrigation, retailing, and property management and development.

CFI Holdings’ investor relations section and IR initiatives is not a world trendsetter – it does not have to be – the company offer the basics to their shareholders (and customers) as required by good corporate governance practices. Merging investor relations initiatives with being more competitive in the commercial space online just builds overall corporate reputation. It’s a fact that is lost on many corporate executives: except those at CFI of course – and a handful of others.

CFI is an interesting investment opportunity given its asset base and vertically integrated structure and the group has struggled post “dollarisation” in Zimbabwe as have all companies. For international investors looking at Zimbabwean listed companies it’s tempting to dismiss the efforts of small listed companies (as measured by market capitalisation). But when measured by the efforts these companies are making to engage shareholders directly and to showcase brand online they ARE leaders in Africa – just look at how other corporate websites fair in African markets – particularly listed companies. Now appreciate a company like CFI.

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This listing process “enhances brand”, gives “a higher profile”, provides a “better rating” with the banks. The key thing for the founding shareholders is that they don’t have to give away control. They raise money from retail shareholders who participate to make a “quick buck”, irrespective of the IPO price. The expectation of a “quick buck” breeds the expectation of a “quick buck” and so stagging inevitably occurs to the ultimate detriment of the retail shareholder. Count how many IPO share prices in African markets are actually higher now, after the event.

After the IPO the egotistical founding shareholder then slips back into his old ways.  Illiquidity in the share slowly results in its share price being undervalued compared to the company’s asset value and peers. Dealing with retail shareholders and their rights, is a hassle at the best of times but more so when there are few shareholders accounting for a relatively small percentage of the issued share capital. This in turn results in low trading values, both as a percentage of issued shares and in nominal terms. Its easy to lose interest, for all of us.

Generally speaking there are no efforts by egotistical shareholders to engage their company’s shareholder base as potential customers of the business post IPO. Except, of course, when the annual report is delivered – or “if” the annual report is delivered to the minority shareholder. Some markets such as Kenya have dropped the requirement to deliver annual reports to shareholders.

Over time, as the share price declines as a result of illiquidity, and in order “grow shareholder” value, the company then embarks on a share buy back scheme whereby the company buys-out the same shareholders it sold shares to. Take this to the logical conclusion a listed company then systematically reverses the IPO process to the point where the company has to, or it “makes sense” to de-list.

The moral of the story is that directives of listed companies and potential listed companies and indeed regulators, do not provide enough strategic thought about why their companies should list and what the benefits are. “Building brand”, “better reputation” and all those cliches stand for nought unless the listing is used actively post IPO and this is where African listed company directors have their head in the sand (this is the polite version).

African capital market players need to look at what small listed companies or indeed companies that have small free floats are actually achieving by listing. A review of most African stock exchange listed companies’ websites show that the answer is “not a lot”.

Its so exciting looking at African markets’ potential until you actually see how many companies are actually “investable” – very few. This illiquidity paradox is serious.

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Conversely commercial banks are in a particularly strong position to benefit from an online investor and stakeholder relations function for a number of reasons:-

• Brand outreach is key because of the competitive nature of the banking industry
• Customer / stakeholder communities are large and widely spread around the World
• Communications corporate governance and reporting complements prudential governance compliance
• Market confidence is critical – a good website adds to corporate reputation. For banks “Online Corporate Reputation” or OCR is a growth area enabling differentiation from peers
• The diverse nature of banking operations provides opportunity to cross sell products and services

A bank is a provider of diverse set of products and services to many, many thousands of customers and stakeholders. How can a website landing page or indeed a website in its entirety capture everything that a bank can do?

The fact is it can’t.

So management of African banks have to prioritise.

The most obvious place for them to start is the 5 year strategic plan presented to the Board. The look to the financial statements: where are the majority of revenues generated? Which aspect of the business has the most potential and which deserves to be given the most exposure or the highest quality of exposure? It is this process of prioritisation and familiarisation that takes time. It’s worth it because the creation at the end of the day that crystallises this, is a website that is going to work for the bank’s brand for 5 years or more. Return on investment will be high. Peer competitive rankings will be high. Customer ratings will be high.

Take time to view a few African bank websites and the majority of them do not know about the advice I have above. The evidence: the poor quality of their websites. This is lost opportunity.

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In order to survive companies had to break the law and not communicate this to the market. This was to “protect shareholder value”. Many executives could not handle it and left. Post-dollarisation (post the chaos of hyperinflation) the Zimbabwean economy is now strewn with under-capitalised businesses that now have to deal with the Government’s objective to “empower the people”.

It’s complex, its political. It is again challenging executives. Get it out of the way and opportunity awaits you.

One company that has overcome this threshold before others is Meikles – check out an extract of their latest interim statement below.

Access full information on this dual-listed company on www.meiklesinvestor.com and their latest statement here.

MEIKLES releases 2011 interim results

The Meikles Limited Board of Directors is pleased to announce the release of the 2011 interim results for the six months ended 30 September 2011. Below are a few extracts from the Chairman’s review.

Group review

Indigenisation
After meeting the various requirements set by the Ministry of Youth Development, Indigenisation and Empowerment, the Company was accorded its indigenous status and is now in compliance with the Empowerment Act…

Pick n Pay investment into TM Supermarkets
Save for the Competition and Tariff Commission, the regulatory authorities have now approved the Pick n Pay investment into TM Supermarkets…

Disposal of the Cape Grace
The disposal of the Cape Grace Group is expected to be completed in the second half of our financial year.

Employee Share Trust (“Trust”)
As stakeholders will remember, on 18 August 2011 the shareholders approved the allocation of 24 million Meikles shares into the Meikles Limited Employee Share Trust…

Executive share scheme
The Group executives together with an indigenous consortium have set up a special purpose vehicle to acquire shares in the Company through the Zimbabwe Stock Exchange…

Ex-Cotton Printers equipment
Following the conclusion of the liquidation of Cotton Printers, the spinning and weaving equipment remained unsold. The Company subsequently entered into an agreement to dispose of this equipment to the former workers of Cotton Printers…

Funds held at the Reserve Bank of Zimbabwe
Negotiations with the RBZ for the repayment of our deposit of US$37 million are still continuing. We remain confident that the deposit, that is accruing interest, will be repaid. Shareholders are advised that there are no further outstanding issues with the RBZ.

Group results
The Group has continued to make progress under very difficult conditions, with high borrowing costs and inadequate capitalisation. Revenues from continuing operations increased by 39% compared to the same period in 2010…

TM Supermarkets (“TM”)
Revenues increased by 36.4% to $136.6 million (2010: $100.2 million). The EBIDTA for the 6 months ended 30 September 2011 was $3.5 million (2010: $2.1 million)…

Thomas Meikle Stores
The revenues increased by 114.9% to $12.2 million (2010: $5.7 million). The gross margin was 32% (2010: 33%). The EBIDTA for the 6 months ended 30 September 2011 was $234,000 (2010: loss of $579,000)…

Tanganda Tea Company
The peak season for tea remains November to March in any given year and is heavily influenced by the rainy season. Therefore, in the 6 months ended 30 September 2011, the company’s main focus was plantation development and diversification into other crops…

Meikles Hospitality
The tourism sector in Zimbabwe continues to recover due to the relative political and economic stability. The tourist arrivals have increased by around 16% this year according to the Zimbabwe Tourism Authority…

Directorships
The Company announced the resignation of the then Group CEO Mr. B Beaumont with effect from 30 September 2011. The Group has reorganised its management structures to cover the gap left by Mr. Beaumont who will not be replaced in the short to medium term. The Meikles Limited board which is made up of 4 indigenous and 2 non indigenous members is in compliance with the empowerment laws of the country.

Outlook
The success achieved in obtaining most of the requisite approvals for the PnP investment into TM Supermarkets and of the company being accorded its indigenous recognition all augur well for the future. These recently acquired approvals have had no impact on the results for the first half of the financial year…

For and on behalf of the Board

J R T Moxon
Executive Chairman
24 November 2011

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Here is the text of the Fund Managers Review below:-

• Download the NITL annual report here
• Visit the NITL website here

Review of the Year

The Malawi equity market remained stubbornly bearish throughout the period under review. As anticipated, foreign investment sentiment remains negative, largely on the basis of perceived macroeconomic risk. It was, however, more disappointing that the enactment of compulsory pension legislation did not see any appreciable demand for equities from the growing pool of domestic investment capital, particularly when viewed against the background of a sharp decline in money market yields.

A persistent foreign exchange shortage has led to a significant increase in domestic liquidity from an ever increasing pipeline of funds awaiting remittance. The resultant downward pressure on money market yields outweighed the pull effect of an increased Government domestic borrowing requirement. Accordingly, the benchmark 91 day treasury bill yield fell sharply from 7.14% to 5.09% over the course of the year.

Our portfolio showed marginal capital growth with an overall net fair value gain of K30million representing 1.2% of the opening portfolio valuation, broadly in line with the movement in the MSE domestic share index over the same period.

Individual portfolio company performance was mixed but portfolio diversification mitigated individual company risk with the overall outcome that the dividend income returned by the portfolio continues to grow, increasing by 19% over the prior year. Dividend yield of 6.92% when measured against the closing portfolio valuation is well above the 30 September 2011 MSE domestic weighted average yield of 5.48%.

Our financial sector investments enjoyed varying fortunes, with Standard Bank and National Bank, not achieving the remarkable 74% growth in profits reported by NBS Bank. Nevertheless National Bank maintained its level of dividend and Standard Bank dividends increased by 50% due to a higher payout ratio. Dividends received from NBS Bank doubled over the previous year. NBS Bank was also the main driver of growth in group profit of its holding company NICO which also achieved satisfactory growth in its general and life insurance businesses.

Press Corporation reported a 62% increase in net profit attributed to its ordinary shareholders with most companies in this diversified group registering significant earnings growth despite challenges posed by erratic fuel supplies and shortage of foreign exchange.

Unseasonable wet weather conditions impacted negatively on both cane sucrose content and factory operational efficiency of Illovo with a consequent 10% drop in profit after tax and dividends.

Both our property investments, MPICO and Kang’ombe saw significant capital appreciation in the value of their investment properties but the economic downturn led to a marked increase in the collection period for rental debtors and dividend payments were reduced or deferred due to cash flow constraints.

A major oversupply of Malawi tobacco and resultant drop in prices was key among the many issues affecting the tobacco industry which led to a 43% drop in profits of the Auction Holdings group. However, dividend levels were maintained and dividend cover remains healthy at above two times, though group liquidity is heavily burdened with the financing of carryover tobacco stocks.

Dairibord facing challenges of low raw milk supplies and declining consumer disposable incomes achieved modest growth but continues to struggle to turn around its loss making subsidiary Mulanje Peak Foods Limited.

Telekom Networks enjoyed a 38% growth in subscriber numbers translating into a 4% market share increase but its average revenue per subscriber declined as penetration takes place into the lower income market segment.

During the year our shareholding in Packaging Industries was acquired by its majority shareholder in a scheme of arrangement approved by shareholders and sanctioned by the courts. This company subsequently delisted from the MSE.

With interest income, despite declining yields, remaining at the same level as prior years and the overall increase in expenditure of 3.7% being contained well below the national inflation rate, the 19% increase in dividend income translated into a 22% increase in NITL’s distributable profit for the year. This is reflected in a significant increase from 45 tambala to 65 tambala in the proposed final dividend recommended by the directors.

Outlook
The future direction of the equity market will depend to a great degree on government policy responses to the country’s current macroeconomic difficulties. Acute pressure on the value of the local currency coupled with prevailing increasingly negative real interest rates should see a shift in investor focus to real assets including equities, particularly equities of companies with an inbuilt currency/inflation hedge.

However, foreign investors may well adopt a cautious approach until certain that all major macroeconomic adjustments are through. Likewise, domestic investors, having endured a three year bear market, remain extremely averse to the risks attached to equity investment in Malawi.

There are myriad permutations of possible outcomes, too numerous to elaborate. On balance, it is hoped that the coming year should see some firming in the equity market though a number of counters may be relatively more exposed to external economic shocks.

First Merchant Bank Limited
10 November 2011

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African website vendors are probably unable to replicate the quality of the Q4 products (perhaps they (we) can!) but for most African listed companies the 80: 20 rule applies. 80% of the benefits of going online are enjoyed from 20% of the effort. Examples? Timely info. Comprehensive info, push technology, alerts – get the basics sorted and then sit back and watch the benefits. Q4 is at the forefront of world class communications solutions and their best practice is there for us to learn from and to aspire to.

So the message to listed companies and regulators of African capital markets is: LOOK and see and digest what is happening elsewhere in the World! Lets take those best practices, apply them in our markets and actually put into place tools for enabling efficient and informed investor relationships and decisions instead of harping on with rhetorical cliches about Africa being the “last frontier” and full of potential. We’ve heard this for the past 25 years and to be honest its boring.

Lets hear about the African awards for best online websites! Not awards that are self serving but awards that are independently determined. Perhaps the African Stock Exchanges Association can pick this up……..

I suspect not.

This article below was released by Q4, a leading provider of online investor relations solutions including newsrooms, corporate and investor websites and strategic consulting. I have no financial interest in Q4, but what they highlight in their Q4blog triggers an awareness to investors and listed companies across the globe of the power of the Internet.

We’re pleased to announce that our long-term client, Agnico-Eagle Mines, has been awarded first prize in the electronic disclosure category of the 2011 Canadian Institute of Chartered Accountants (CICA) Corporate Reporting Awards (CRA) for their investor website: agnico-eagle.com.

This is the second year in a row, that Agnico-Eagle has been recognized at the CRA for their best practice IR website, securing an Honorable Mention in the electronic disclosure category in 2010 – with first place awarded to Potash Corp., a winner in the electronic disclosure category multiple times.

Companies eligible for the electronic disclosure award were judged on specific content relevant to investors, navigation and usability, innovation, overall effectiveness and IR website best practices. This year, companies were also evaluated on how well they integrated social media into their sites.

Agnico’s long-standing commitment to continually improve the investor experience on their IR website is focused on achieving a global standard in best practices. An additional goal is to limit the effort required to update site content.

The strategy for the site evolved from a comprehensive IR website best practice audit of the Agnico site conducted by Q4 and provided to both the client and their design firm, The Works. This document detailed key recommendations, which were adapted in the redesign. A strong collaboration between Q4, The Works and Agnico-Eagle throughout the design and development of the site helped ensure that all key communications objectives were met.

What follows are some of the features that make Agnico’s site exemplar of best practices:

The Design

The talented team at The Works created a clean, progressive design that provides numerous ways for investors to easily navigate the site to not only find the information they are looking for, but to also ensure that they encounter the information Agnico wants them to see. For example, right from the home page the rotating images in the masthead highlight key content and events, and the drop-down main navigation prominently singles out one specific piece of content in addition to providing links to all sub-section information. The navigation also makes it easy for users to see where they are, where they want to go and how to make their way back. The site also brings key content forward by prominently displaying frequently sought information such as news releases and presentations, as well as providing lots of quick links:

Integrated Social Media Galleries

Agnico was interested in making their information more interactive and easily accessible – not just on their site, but in alternate channels as well. The multimedia galleries offer an extensive collection of Vimeo videos and Flickr photos, which Q4’s platform automatically pulls in from the social channels and integrates into their site. Some of these assets are also displayed elsewhere on the site in context with specific information:

Follow Us Page

The ‘Follow Us’ page on the site provides a number of ways to stay connected to the company such as email alerts, RSS feeds, Facebook, Twitter and Vimeo. In today’s multi-channel world, public companies must ’be where their investors are’ to stay connected. Prominently featuring ‘Follow Us’ as a universal link in the site header makes it easy for investors to find this information:

Quarterly Report Summary Page

Agnico’s quarterly summary page provides an aggregate view of all quarterly related materials in a single page. It includes the press release, conference call, webcast, report and financials. Agnico also provides a brief video of their CEO, Sean Boyd who provides commentary on the quarter. (Much of the information in this video is scripted in advance of the earnings call and Agnico’s video production company Silverpoint is able to shoot and produce the video to ensure that this information is on the site on the day of their earnings call.) The right rail in this section is entirely driven by tags. So each time the company reports their quarterly results, the tag on this page (for example Q22011) is updated to the next quarter i.e. Q32011. To address Agnico’s goal of minimizing manual updates, Agnico touches the content once and the information automatically aggregates on the quarterly page (and other pages, such as the Investor Briefcase, Presentations etc.).

Interactive Financial Data

The interactive financial data also called the ‘operational database’ on the Agnico site, is an innovative investor service that gives analysts a full set of interactive quarterly financials and fundamentals. Provided by our partner, Virtua Research the financial database permits customized charts, excel downloads and the ability to share content from the model through email and social networks:

This award underscores the commitment and effort Agnico puts into continually making their IR website an integral part of communicating their story to investors. Congratulations from the team at Q4 to everyone involved!

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“Strong performance aided by the growth of the Zambian economy”

Zambeef (AIM: ZAM), the fully integrated agri-business with operations in Zambia, Nigeria and Ghana, is pleased to announce its results for the year ended 30 September 2011.

In June of this year, the Group raised approximately US$54.97 million by way of both a rights issue of new ordinary shares to existing investors via the Lusaka Stock Exchange (“LuSE”) (the “Rights Issue”), at K2,975 per share and a placing of new ordinary shares to institutional investors on admission to AIM (the “Placing”) at 38.06p per share.

Financial Highlights

Operational Highlights

• Growth in revenue of 28 per cent. across the business
• Gross margins improved from 31.4% (2010) to 34.1% (2011)
• Profit after tax up 125% to US$9.4 million
• Acquisition of Mpongwe farms in Zambia for US$4 6million consisting of 46,876 Ha (of which 2,994 Ha is irrigated and 7,667 Ha is rainfed land))
  • Increases capacity to produce soya beans in a soya bean deficient region for throughput to the growing and high margin edible oils division, Zamanita Ltd.
  • Zambeef now owns total hectarage of 8,000 Ha of irrigated and 9,000 Ha of rainfed arable, developed land
• Dramatic turnaround in performance of Zamanita Ltd. with gross profit increasing 73 per cent. to US$13.1million
• Expansion and upgrade of Zambian retail network; seven new retail outlets opened, eight existing retail outlets refurbished and first two wholesale stores established
• Continued expansion in West Africa in partnership with Shoprite with gross profits of West African operations increasing by 54 per cent. to US$2.4million
  • Further development of our leased land in Nigeria to supply Shoprite’s increasing footprint in the area
  • Currently 4 Zambeef own stores in Nigeria
  • Currently 3 outlets in Shoprite stores in Nigeria; 2 in Ghana
  • Commencement of stock feed exports to Zimbabwe which, during the year, totaled over 3,000 MT

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

“We are delighted to report a strong performance of our business, aided by continued growth of the Zambian economy, a higher level of disposable income among our customers, stability of the Zambian Kwacha and single digit inflation. We have a strong infrastructure in place and we believe that, combined with our vertically integrated business model, this will enable us to realise our objective of becoming the leading food provider in both Zambia and the surrounding region.”

For further information, please contact:

Notes to Editors
The Zambeef Group is one of the largest integrated agri-businesses in Zambia, involved in the primary production, processing, distribution and retailing of beef, chickens, pork, milk, eggs, dairy products, fish, flour, bread, edible oils and stock feed, throughout Zambia and the surrounding region, as well as Nigeria and Ghana. The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 8,000 Ha of irrigated land and approximately 9,000 Ha of dry land, available for planting each year. The Group has approximately 4,750 employees.

Further information can be found on www.zambeefplc.com.

Chairman’s Report

Performance Review
I am pleased to report that the financial year ended 30 September 2011 has seen the Zambeef Group report a strong operating performance aided by continued growth of the Zambian economy, higher disposable income among its customers, stability of the Zambian Kwacha, single digit inflation, stable commodity prices, and continued synergies being achieved within the Group.

Trading conditions over the financial year have continued to improve, with demand for all product lines increasing and most divisions of the Group showing higher figures both in turnover and gross profitability. This has enabled us to open seven new retail outlets and two wholesale depots, as well as refurbishing another eight retail outlets in Zambia; all of which are performing very well.

Zambia also saw a peaceful transition of power and president during the September 2011 national elections which is a proud testament to Zambia’s political stability and maturing multi-party democracy.

Turnover increased by 28 per cent. to ZMK983 billion (USD207 million) and Group profit for the year increased by 132 per cent. to ZMK45 billion (USD9.4 million).

The Group continues its cash generating trend, with EBITDA significantly up by 44 per cent. to ZMK88 billion (USD18.6 million).

Despite the above, the global economy continues to be volatile with minimal growth in the USA and European economies leading to volatility in share indices and potential volatility in commodity prices, which could present the Group with challenges in the future.

Purchase of the Mpongwe Farm Assets

During the year, we successfully completed the purchase of the Mpongwe Farms. This is an extremely exciting opportunity for us to harness Mpongwe’s vast cropping operations for cereal row crop production.

This acquisition is in line with Zambeef’s objective of growing, expanding and diversifying the business with the aim of becoming the leading food provider in Zambia and the surrounding region.

AIM IPO and Placing and LuSE Rights Issue

During the year, the Company undertook a rights issue on the LuSE and a placing and admission to the AIM Market of the London Stock Exchange. Having successfully concluded the rights issue and placing, a total of approximately USD54.97 million was raised with the issued share capital increasing from 158,706,045 ordinary shares to 247,978,195 ordinary shares and a market capitalisation of approximately ZMK772 billion (USD160.9 million) as at 30 September 2011.

The funds raised were utilised to complete the acquisition of the Mpongwe assets, to pay for costs related to the fundraising, and to commence the expansion and upgrade of the Mpongwe assets.

The dual listing will aid in facilitating future fundraises for further development and growth, assist in maintaining the high standards of transparency and corporate governance, as well as enhancing the Group’s reputation, profile and financial standing with its key partners, suppliers and potential vendors of attractive assets. I am delighted by the warm reception that our admission to AIM received and the keen investor interest in Zambeef and believe that this will complement our existing listing in Lusaka.

Human Capital
The Group continues to be a large employer in Zambia, employing an average of 4,367 employees per month with a monthly wage bill of approximately ZMK9 billion (USD1.9 million). Zambeef continues to attract and retain its workforce through good staff welfare and working conditions while maintaining strong relationships and communication with the Labour Union.

Board of Directors
As part of the continued evolution of the Group and listing on AIM, we are pleased with our current Board of Directors which is composed of six Non-Executive Directors and four Executive Directors. Rodney Clyde-Anderson and Hilary Duckworth have retired from their positions and I would like to take this opportunity to extend my appreciation and gratitude to them for their excellent contribution and support during their time with the Company.

As the Chairman, I would also like to take this opportunity to express my gratitude for the strategic support I have continued to receive from my co-directors and senior management during a year when Zambeef continued to make great progress in its mission to become a leading food provider.

Dividend and Outlook
The Board of Directors is recommending a final dividend of ZMK21.40 (0.45 cents) per ordinary share, in addition to the interim dividend paid out of ZMK15 (0.32 cents) per ordinary share, to be paid on or before 29 February 2012.

Growth in our core areas is expected to be in line with the continued growth of the Zambian economy. Following a positive turnaround in Zamanita’s performance, our edible oils division, we expect this division to continue to be one of our key growth drivers, buoyed by additional throughput of soya beans from the increased farming area of the Mpongwe Farm and proposed upgrade work thatis detailed in the Operational Report. Our West African expansion is expected to gather momentum with additional Shoprite stores due to open in Nigeria and Ghana, and we continue to expand our domestic retail network.

We believe we have a strong infrastructure and business model in place which should enable us to realise our objective of becoming the leading food provider in both Zambia and the surrounding region.

Dr. Jacob Mwanza

Chairman
November 2011

Chief Executive Officer’s Report

Introduction
On the back of an improving Zambian economy, I am pleased to report on a year that saw Zambeef make positive operational and financial progress. We produce, process, distribute and retail beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed, flour and bread. During the year we have shown increased turnover and gross profitability for the majority of our divisions, by an average of 28 per cent. and 38 per cent. respectively. Trading conditions in Zambia continue to improve, supported by growth in the economy at a steady 7 per cent., single digit inflation, stability of the Zambian Kwacha relative to the US Dollar, stable commodity prices and a higher level of disposable income among our customers.

During the year we completed a successful IPO, a placing on AIM and a successful rights issue on the LuSE, raising in aggregate ZMK263 billion (USD54.97 million). The majority of the proceeds were used to expand our primary production cropping operations through the purchase of the Mpongwe Farms. This is in line with our objective of becoming the leading protein provider in the region, which we will achieve through a vertically integrated model (“farm to fork”). This strategy significantly reduces the Group’s risk profile, by allowing it to supply its own processing divisions with the required raw materials, and to sell the finished products directly to the end consumer through its extensive retail network.

The purchase of the Mpongwe Farms, which consist of 46,876 Ha, increased our farming area by 2,994 Ha of irrigated land and 7,667 Ha of rain-fed available to plant, taking the Group’s total owned farming land to 8,000 Ha of irrigated land and 9,000 Ha of rain-fed land. The Board considers the the Mpongwe Farms to be some of the best farming lands in Zambia, ownership of which will enable us to increase our production of soya beans for throughput to Zamanita (our edible oils division), and wheat for throughput to our milling and bakery division, as well as for external sale. The entire region is currently deficient in soya beans, and this acquisition seeks to address the Group’s exposure to that deficiency. Crushing soya beans produces oil, which is sold at a higher margin than the sale of imported palm oil, whilst also producing feedcake to supply both our internal stock feed division, and external third parties. With a sufficient supply of soya beans we expect Zamanita, which increased turnover by 17 per cent. this year, to become even more important to the Group.

The additional irrigation will allow us to obtain higher yields of soya and additional wheat crop. All of our livestock divisions have increased their revenues over the year, and the quality of our livestock is improving with the quality of our stock feed. The new stock feed plant, commissioned during 2010, has allowed us to become one of the leading stock feed suppliers in Zambia, and also to commence exports to Zimbabwe.

Our protein divisions have performed well, as the national average of disposable income has grown together with demand for protein. Despite supply issues in the beef sector (due to a scarcity of standard cattle), with eight beef abattoirs strategically located around the country, we are in a unique position to gain access to cattle suppliers. As a result of this shortage, we expect consumer demand for chicken to continue growing, and have constructed additional poultry houses in anticipation of this. Demand for cheaper sources of protein, such as eggs and fish, continues to increase, and we have improved revenues in both areas. Demand for pork has also increased significantly, and improvements to our piggery during the year resulted in an increased number of births as well as fewer premature mortalities. This division has reported excellent growth. In the current economic climate there is low demand for leather products, nevertheless our tannery and shoe plant division has increased its contribution to Group profitability.

Our retailing operations continue to expand, and we started 2011 with a strong commitment to increasing our distribution and retail network, in order to gain further market penetration. We are delighted to have opened seven new retail outlets, refurbished a further eight self-operated outlets and established our first wholesale stores in Lusaka and Kitwe (taking our total number of outlets to 117). We continue to partner with Shoprite, Africa’s largest food retailer, and we are operating in 20 Shoprite stores across Zambia.

West Africa continues to be an exciting growth prospect, and we have grown our presence in West Africa during the year in partnership with Shoprite, operating additional butcheries in Enugu, (Nigeria), and through increasing our self-operated stores. In Ghana we operate two Shoprite stores. In Nigeria we operate four self-operated stores, and three Shoprite stores and supply Shoprite and our outlets from our feedlot operations in Abeokuta and our processing operations in Lagos. Shoprite is planning to increase its footprint in Nigeria and Ghana with a planned opening of five new additional stores over the next twenty four months.

Our People
Zambeef is one of the most vertically integrated operations in Zambia. With this comes the requirement to ensure that we have appropriate staffing in all divisions and to achieve seamless movement of primary commodity to processing, distribution and retail of edible food. Our staff add exceptional value and are a proud testament to Zambeef being one of the leading enterprises in Zambia.

As such, I would like to take this opportunity to sincerely thank all staff working for the Zambeef Group in Zambia, Nigeria and Ghana, for their continued dedication to the business and for their contribution to Zambeef’s success during the year. The Board of Directors and I will strive to ensure that all employees enjoy continuing staff welfare and that we become one of the leading employers in the region.

Outlook
New projects approved by the Board, which are to be undertaken over the next two to three years, include the upgrade and expansion of the Mpongwe Farms, the renewal of some of the farming infrastructure, the continued upgrade and expansion of Zamanita’s processing facilities, the upgrade of Master Pork’s processing facilities, the expansion of our stock feed capacity and product lines, the upgrade and expansion of our dairy plant and additional layer and broiler operations, the upgrade and expansion of the chicken abattoir, the establishment of a new pig abattoir in the Copperbelt province, and the continued expansion of our retail infrastructure across Zambia and West Africa and the provision of capital to Zampalm to complete the pilot phase of 4,000 Ha of palm plantation.

I am excited about Zambeef’s future. We have achieved a number of milestones this year which include the successful domestic rights issue, the dual listing on AIM, and the acquisition of the Mpongwe Farms. We have made great improvements to the majority of our core activities. We have expanded our retail network and further extended our activities in West Africa. Shoprite’s anticipated rollout of stores in West Africa over the coming 18-24 months is an exciting prospect and we look forward to harnessing further growth in this region.

It is expected that Africa will continue to contribute more to global agricultural output. I believe Zambeef has a bright future and it is a privilege to be Zambeef’s Chief Executive. I believe we have a balanced business with a strong asset portfolio, high quality employees, and a sound balance sheet. Our integrated business model and strategy puts us in a unique position to take advantage of the growing demand for food in Zambia and the surrounding region.

Francis Grogan
Chief Executive Officer
November 2011

Operating Review

This year has seen most segments within the Zambeef Group exhibiting good growth and improved margins. These segments are discussed in more detail below:

ZAMBEEF

Beef
The beef division is one of the largest divisions in Zambeef contributing 23 per cent. of Group turnover and 24 per cent. of gross profitability.

Turnover of this division increased by 38 per cent. and gross profitability increased by 26 per cent., while gross margins declined from 31 per cent. in 2010 to 29 per cent. in 2011.

The beef division has had supply problems due to a scarcity of standard cattle in the market. Due to the continued bumper harvests of maize, small scale farmers, whom are the main source of standard cattle, have been reluctant sellers. As a result, the total amount of standard cattle sourced during the year has reduced by over 7,000 head of cattle.

The demand for choice cattle (premium beef) continues to grow. As such, the Group purchased over 17,000 animals from commercial farmers (2010:15,500). We will continue sourcing more choice cattle for supply to the market. During the year, we improved our feedlotting operations by opening a third feedlot in Mongu allowing us to source additional animals. We also opened a new abattoir in Mumbwa, allowing us to obtain a new avenue for animals.

Due to the lack of supply in the market, and the continuing increase in demand for beef products, the price of beef has increased by 22 per cent. In spite of the volume reduction of locally sourced cattle, the Group has sustained market growth in demand, aiding turnover growth through importations of key value items such as liver and kidney.

Although we expect the beef sector to continue to have supply issues in the short to medium term, Zambeef remains in a unique position within the beef industry with eight abattoirs and three feedlots strategically located around the country in order to gain access to cattle.

ZAMCHICK and ZAMCHICK EGG

Chicken
This division contributed nine per cent. of Group turnover and eight per cent. of gross profitability.

Both turnover and gross profitability have increased by 27 per cent. while maintaining margins at 25 per cent.
Margins in the chicken segment have been affected by increased feed prices and higher costs of purchase from an increased external supply of chickens due to demand from consumers increasing and insufficient supply from within Zambeef broiler houses. Additional poultry houses have been set up which will provide us with 360,000 additional broilers.

The total volume of chickens produced for sale increased by 21 per cent., internal chicken production increased by 46 per cent., and external supply of chickens increased by 11 per cent. In line with increased demand, the Group increased prices by six per cent.

With standard beef supply remaining an issue nationally, it is expected that chickens will be in high demand as a substitute protein. As a result the Group will be increasing its broiler houses in anticipation of this increase in demand.

Eggs

This division contributed two per cent. of Group turnover and three per cent. of gross profitability.
Turnover of this division increased by 58 per cent. and gross profitability has remained constant. Gross margins have declined from 49 per cent. in 2010 to 47 per cent. in 2011.

The volume of eggs produced increased by six per cent., in line with recent year on year trends. This has been achieved by increasing the production per layer bird, through an improved variety of birds, which have resulted in a lower requirement for birds to meet production demands. In 2011, the Group had an average number of 131,244 layer birds (2010: 145,169).

However, egg prices declined during the year. Zambia’s total production of eggs is thought to generate a surplus versus domestic demand, which leads to a large volume of exports to neighbouring countries such as the Democratic Republic of the Congo and Tanzania. This year Zambia experienced lower exports to these markets which led to an increased supply of eggs in the local market resulting in reduced prices.

Supply issues have now been normalised with export markets reopening and there is currently a shortage of egg supply within Zambia. As a result, the Group will be increasing its layer houses to cater for this demand growth.

MASTER PORK

Pork
This division contributes seven per cent. of Group turnover and eight per cent. of gross profitability.

Turnover of this division increased by 31 per cent. and gross profitability has increased by 29 per cent. while gross margins have remained consistent at 31 per cent.

Demand for pork has risen dramatically during the year and the pork division has had another excellent year.

The piggery continues to improve its performance with increased number of births and fewer mortalities, due to improved animal husbandry and increased number of pigs supplied. This has led to the total number of animals increasing during the year to 4,302 (2010: 3,691).

We have expanded production space at Master Pork in order to house additional processing machinery (purchased during the year for a cost of ZMK 5 billion (USD 1.1 million)) enabling us to increase production volumes and efficiency.

With pork becoming an increasingly important protein product in Zambia, and demand for processed meat products increasing, it is vital to continue the expansion of our facilities. We are introducing the Hirschpro 400 plant, a unique automated processed meat manufacturing unit capable of increasing production capacity and efficiency significantly, the first of its kind in Africa outside South Africa.

ZAMMILK

Dairy
This division contributes four per cent. of Group turnover and 10 per cent. of gross profitability.
Turnover of this division increased by 22 per cent. and gross profitability has increased by 19 per cent. while gross margins have marginally declined from 65 per cent. in 2010 to 64 per cent. in 2011.

One of the leading contributors to increased turnover and contribution was the sales mix of milk (47 per cent.) to non-milk, (53 per cent.) (2010: 54 per cent. to 46 per cent.) products, a such as yogurt and milk based juices, the latter being high value products. However, the margins have declined during the year due to increased external party purchases at a higher cost than internally produced milk, which has been necessary to meet demand.

Total milk processed during the year increased by nine per cent. as a result of increased output from the Group’s dairy farm and increase in external purchases.

This division continues to be the highest gross margin earner. With increased demand from the consumers, there are approved plans to upgrade and expand the production capacity at the milk processing plant.

ZAMBEEF FARMING

Cropping
This division contributes nine per cent. of Group turnover and 12 per cent. of gross profitability.
Zambeef’s row cropping operations (maize, soya beans and wheat) have had a satisfactory year with turnover up 79 per cent. and gross profits up 28 per cent., but with gross margins declining from 39 per cent. in 2010 to 28 per cent. in 2011. This excludes the performance of the recently acquired Mpongwe Farm in June 2011.

With Mpongwe Farm included, this division recorded an increase in turnover of 94 per cent., an increase in gross profitability of 86 per cent., and a gross margin of 37 per cent.

Zambeef’s 2011 summer crop was soya bean intensive in order to provide Zamanita, the Group’s edible oils division, with increased throughput. However, soya bean yields were affected due to poor germination of seed and adverse weather conditions. As a result gross profit margin was affected, although the high market price of soya in 2011 led to increased turnover.

Summer maize was only planted at Huntley Farm as, at current prices, this crop is not profitable. As such, maize was only planted for crop rotation purposes.

The winter crop was made up of predominantly wheatgerm. Improved management and better farming practices have led to improved wheat yields. With current wheat prices we expect winter cropping to be the most profitable segment of our farming division going forward. Wheat production is forecast to generate a surplus to the Group’s internal requirements and approximately 25,000 MT should be available for sale to third parties.

Mpongwe Farm
During the year, Zambeef acquired Mpongwe Farm. The Directors believe that with the well drained soils, abundant water supply in the area, and consistent climatic conditions, which has resulted in the farm achieving historically high yields, there is opportunity to significantly increase Zambeef’s production of row crops.

Critical to Zamanita, our edible oils and animal feedcake division, is the availability of soya beans, which are crushed to produce edible oil and the by-product, feedcake, is used to produce animal feedstock. Prior to the acquisition of Mpongwe, the Group only had capacity to produce up to 10,000 MT of soya beans and relied on the open market for the supply of the balance of 40,000 MT.

This has been challenging as the region is soya bean deficient. With the Mpongwe Farm included within Zambeef’s portfolio, the Group will now have capacity to internally produce up to 40,000 MT of soya beans and will be less reliant on external supply. It is expected that this will make the Group significantly less exposed to commodity price fluctuations with regard to inputs, whilst allowing the Group to benefit from any price increases when it comes to sell its finished products.

2012 will see the full benefit of the acquisition of Mpongwe Farm with soya beans and maize production during the summer cropping season, and wheat production during the winter cropping season.

Palm
Zambeef has title to 20,000 Ha of land for development of its palm plantation. The pilot phase of 4,000 Ha is underway with ZMK12.3 billion (USD2.6 million) spent in the financial year.

Zambia and the region remain a major importer of vegetable oils and the Group is currently a large importer of palm oil from the Far East for its edible oils division. Once yields of palm fruit commence, it will allow us to substitute imported palm oil, thereby improving margins through an extension of primary commodity production and processing.

NOVATEK

Stock Feed
This division contributes 11 per cent. of Group turnover and eight per cent. of gross profitability. Turnover of this division increased by 65 per cent. and gross profitability has increased by 67 per cent. while gross margins have marginally increased from 21 per cent. in 2010 to 22 per cent. in 2011.

Zambeef’s new stock feed plant commenced operations in 2010. The stock feed plant was commissioned not only to supply Zambeef’s internal animal feed requirements but also to generate third party sales both in Zambia as well as providing expert opportunities to markets such as Zimbabwe. On an average monthly basis, Zambeef’s internal requirements have risen by over 14 per cent. versus 2010, external sales excluding exports have increased by over 76 per cent., while exports have risen by over 120 per cent. over the same period. The latter includes exports to Zimbabwe, which have increased to over 3,000 MT (2010: 60 MT). Zambeef’s internal consumption of total stock feed produced was 38 per cent. during the year.

The stock feed plant is currently running at close to full capacity and with increased third party sales, Zambeef has become one of the leading stock feed suppliers in Zambia. Management is reviewing the upgrade and expansion of the stock feed operations in order to increase capacity and profitability of this division going forward.

ZAMFLOUR & ZAMLOAF

Milling & Bakery
This division contributed six per cent. of Group turnover and three per cent. of gross profitability.

This division has had a challenging year. Whilst turnover increased by 48 per cent., gross profit decreased by 16 per cent. and gross margin has declined from 23 per cent. in 2010 to 13 per cent. in 2011. This has been as a direct result of increased wheat prices. Therefore, despite increasing volumes of flour production by 49 per cent. and price increases of eight per cent., the increased price of wheat by 31 per cent. has reduced the total gross margin and gross profitability of the division. With a growing middle class, the domestic demand for flour and bread continues to rise, and we anticipate benefiting from this consumer demand.

ZAMLEATHER & ZAMSHU

Tannery and Shoe Manufacturing
This division contributed one per cent. of Group turnover and one per cent. of gross profitability. Turnover of this division increased by 12 per cent. and gross profitability has decreased by eight per cent. while gross margins have decreased from 35 per cent. in 2010 to 29 per cent. in 2011.

In spite of a five per cent. reduction in the total number of hides processed during 2011 versus 2010, turnover has increased during the year. This was achieved through an increase in the sales price per square foot.

The global leather industry continues to suffer from low demand with leather being a luxury item. There has been limited recovery in wet blue exports. As a result the Group refocused its efforts more on finished leather and shoe production for sale in the domestic and regional markets. This resulted in an increase in the volume of finished leather sales by 12 per cent. However, due to competitiveness in the region, prices were reduced by five per cent. in order to gain a larger market share. Similarly shoe sales increased by 23 per cent. in volume, but prices were reduced by nine per cent.

Fish is a small part of Zambeef’s operations, but this division presents an exciting opportunity to increase the Group’s protein footprint as fish continues to be one of the cheaper sources of protein.
It is expected that the demand for leather products will continue to remain stagnant as global economic issues persist.

ZAMANITA

Edible Oils and Animal Feed Cake
This division contributed 23 per cent. of Group turnover and 19 per cent. of gross profitability. Zamanita, our edible oils and animal feed cake division, has achieved greatly improved performance. Turnover has increased by 17 per cent. and gross profitability has increased by 73 per cent. while gross margins have significantly improved from 15 per cent. in 2010 to 22 per cent. in 2011.

Zamanita, the largest edible oil producer in Zambia, sells palm, soya and cottonseed oils, as well as animal feed cake (a by-product of oil seed crushing that is a key ingredient in animal stock feed). Zamanita currently imports palm oil, processes it, packages it and distributes it through Zambeef’s retail network and other retailers and wholesalers, including Shoprite. The crushing of soya beans and cotton seeds attract significantly higher margins than the importation and distribution of palm oil.

Zamanita’s performance has been erratic since its purchase in 2008. Performance has been affected by expensive stock, forward contracts, volatile commodity prices, inefficiencies in production, and tax legislation. These issues have now been addressed and new management installed to ensure operating efficiency, and to oversee a refocus of the business which includes a redevelopment of the plant.

On acquiring Zamanita, the product mix was 75 per cent. palm oil and 25 per cent. seed crushing. We have since changed the business model with less emphasis on the importation of low margin palm oil and to increased focus on the high margin oil seed crushing. This decision, combined with an increase in pricing of edible oil and feed cake in line with increasing commodity prices, increased blending of soya oil with palm oil and increased crushing efficiencies, have resulted in the gross margin increasing.

During the year Zamanita crushed 23 per cent. more soya beans and 152 per cent. more cotton seed, leading to an increase in cake production of 27 per cent.

Critical to Zamanita is the availability of soya beans. However, domestic and regional demand for soya beans far outweighs supply and Zamanita has not been able to capitalise on its potential for soya bean crushing due to insufficient supply. Following the acquisition of Mpongwe Farm the Group will now have capacity to internally produce up to 40,000 MT of soya beans and will be less reliant on external supply.

Once Zampalm commences production of crude palm oil, Zamanita will also stand to benefit through the refining and selling of palm oil at a lower cost than current importation.

Through an investment of over USD6 million to upgrade and expand the plant, Zamanita will increase its crushing capacity and production efficiencies. This investment should increase the crushing capacity to 100,000 MT per annum, increase the percentage extraction of crude oil from the crushing by one per cent., and reduce the cost of production through reduced quantities of hexane and coal consumption. The investment will also provide for improvements in the crude oil refinery.

Zamanita’s plant will close between December 2011 and June 2012 in order to carry out this significant upgrade. However, it is expected that with the plant’s increased capacity and production efficiencies, Zamanita will achieve similar crushing tonnage in 2012 as in 2011, with the full benefit of the upgrade and expansion being seen in 2013.

The anticipated increase in the Group’s soya beans output is the key driver for margin improvement at Zamanita. With sufficient internal and external supply of soya beans we anticipate Zamanita becoming even more important to the Group.

Fish
This division contributed one per cent. of Group turnover and one per cent. of gross profitability.
Turnover of this division increased by 68 per cent. and gross profitability has increased by 45 per cent while gross margins have decreased from 26 per cent. in 2010 to 22 per cent. in 2011.

RETAILING NETWORK

Zambeef Stores
The vast majority of Zambeef’s food products as well as 45 per cent. of Zamanita’s edible oil output is sold through Zambeef’s extensive retail networks.

Zambeef currently operates 31 retail outlets in Lusaka, 33 retail outlets in Copperbelt, and 22 retail outlets across the rest of Zambia, all operating under the Zambeef banner, along with one new wholesale centre in Lusaka and one in Copperbelt.

During 2011, we have opened seven new retail outlets, and refurbished a further eight outlets; all of which are performing well. We have also established Zambeef’s first wholesaling stores in Lusaka and Kitwe. Wholesale provides the Group with access to the large and untapped informal sector, commercial customers and large scale consumers such as hotels, lodges, restaurant and other similar operations. Our strategy is to ensure that all of our stores are segmented with a perishable goods area (meat, poultry, eggs, dairy, etc.), a dry goods area (flour, maize meal, packed oil) and bulk edible oil at the point of sale.

Average monthly turnover growth from new outlets has been ZMK500 million (USD0.1 million). Average monthly turnover from the two wholesale centres has been ZMK2, 600 million (USD0.5 million) and average increase in turnover from refurbished stores has been 29 per cent.

Turnover from existing outlets has increased by nine per cent. in Lusaka, 25 per cent. in Copperbelt, and 18 per cent in the other areas of Zambia. Overall, including new outlets, turnover generated from retail operations has increased by 32 per cent. to ZMK392 billion (USD82.5 million) (2010: ZMK297billion (USD62.4 million)).

Shoprite
Zambeef continues to partner with Shoprite. Shoprite is Africa’s largest food retailer with 1,246 stores and 274 franchise outlets in 16 countries across Africa and the Indian Ocean Islands. Zambeef currently operates all of Shoprite’s 20 in-house butcheries in Zambia, as well as being one of the key suppliers of other perishable and nonperishable merchandise to Shoprite.

Fast Food Outlets
Zambeef operates seven fast food outlets which trade under the brand ‘Zamchick Inn’. In 2011 Zambeef will also launch ‘Zambeef Express’, installing freezer and display units in convenience stores across the country. A pilot phase will initiate ‘Zambeef Express’ in ten stores, with the opportunity to expand depending on market uptake.

Our large retail network is key to the Zambeef model. It allows the Group to be close to, and understand its end user, the customer. The Group is able to add maximum value to its primary and secondary production facilities while engaging its brand power to drive customer loyalty and the average spend per customer. Management will continue to focus on the retail operations. This will benefit all Zambeef divisions and contribute to volume and margin increases across Zambeef’s product range.

WEST AFRICA

Nigeria & Ghana
In 2011, this division contributed three per cent. of Group turnover and three per cent. of gross profitability.

Turnover has increased by 26 per cent. and gross profits have increased by 54 per cent. while gross margins have increased from 24 per cent. in 2010 to 30 per cent. in 2011.

West Africa is an exciting growth division within the Group. Shoprite, Africa’s largest food retailer, currently owns and operates three stores in Nigeria and two stores in Ghana. We continue to expand our presence in West Africa by partnering with Shoprite and currently operate all of their in-house butcheries. 2011 saw the roll out of one additional Shoprite store in Enugu (Nigeria). Shoprite are committed to increasing their footprint in West Africa and expect to increase their infrastructure in Nigeria and Ghana over the next twenty four with an additional five stores lined to open.

The increased supply to external parties, other than Shoprite, at higher prices have led to gross margins increasing during the year. Margins have also increased from the commencement of feedlotting operations.

In Ghana we have opened a processing plant in Accra, which allows for higher value and higher margin product supply.

We are confident that West Africa will play a key part in the Group’s future strategy.

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 SEPTEMBER 2011

The accompanying notes form part of the financial statements.

Consolidated Statement of Financial Position – 30 September 2011

The accompanying notes form part of the financial statements. The financial statements on pages 66 to 127 were approved by the Board of Directors on 23 November 2011 and were signed on its behalf by:

Company Statement of Financial Position – 30 September 2011

The accompanying notes form part of the financial statements. The financial statements on pages 66 to 127 were approved by the Board of Directors on 23 November 2011 and were signed on its behalf by:

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 30 SEPTEMBER 2011

Company Cash Flow Statement

FOR THE YEAR ENDED 30 SEPTEMBER 2011

The notes can be read via the following link which is the full annual report.

• Download Zambeef Products PLC 2011 annual report

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