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MAY & BAKER NIGERIA PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

31 DECEMBER 2012

May & Baker Nigeria Plc. Consolidated Financial Statements.

31 December 2012

Content

Page

Corporate Information i Report of the directors ii

Report of the independent auditors 1

Consolidated and separate statement of profit or loss and other comprehensive income 2

Consolidated and separate statement of financial position 3

Consolidated statement of changes in equity 4

Separate statement of changes in equity 5

Consolidated and Separate Statement of Cash Flows 6

Notes to the Consolidated Financial Statements 7

Statement of Value Added 62

Financial Summary - Group 63

Financial Summary - Company 64

i

CORPORATE INFORMATION BOARD OF DIRECTORS: Lt. Gen. T.Y. Danjuma (Rtd.) GCON - Chairman

Mr. N.N. Okafor - Managing Director Mrs. V.I.P. Alozie - Executive Director

(retired 1/10/2012) Prof. D. Femi-Pearse - Non-Executive (retired 24/5/2012) Mr. A.A. Adeleke - Non-Executive Mr. I. Dankaro - Non-Executive Mr. E.O. Ibidapo - Executive Director Mrs. G.I. Odumodu - Executive Director Dr. E. Abebe - Non-Executive (appointed 4/3/2013)

SECRETARIES: Marina Nominees Limited 233 Ikorodu Road,

Ilupeju, Lagos. REGISTRATION NO.: 558 REGISTERED OFFICE: 3/5 Sapara Street, Ikeja. REGISTRAR: Zenith Registrars Limited

Plot 89 Ajose Adeogun Street Victoria Island Extension Lagos, Nigeria

AUDITORS: Akintola Williams Deloitte (Chartered Accountants) 235 Ikorodu Road,

Ilupeju, Lagos. SOLICITORS: Nnenna Ejekam Associates BANKERS: Access Bank Limited

Bank of Industry Ecobank Nigeria Plc First City Monument Bank Plc Fidelity Bank Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Standard Chartered Bank Limited Union Bank of Nigeria Plc Zenith Bank Plc

ii

REPORT OF THE DIRECTORS

FOR THE YEAR ENDED 31 DECEMBER, 2012

1. ACCOUNTS The Directors submit their report together with the audited financial statements of the Company for the year ended 31 December, 2012.

2. RESULT

2012 2011 N’000 N’000 The group profit for the year after taxation was 75,943 222,172

3. LEGAL STATUS

The Company commenced operations in Nigeria in 1944 after it was incorporated as a private limited liability Company and was converted to a public company in 1979. The Company was listed on The Nigerian Stock Exchange on 10

th November, 1994.

4. PRINCIPAL ACTIVITIES

The Company manufactures and distributes pharmaceutical products, diagnostic equipment, reagents, consumer products and human vaccines. The Company has three subsidiaries, Osworth Nigeria Limited and Tydipacks Nigeria Limited and Servisure Nigeria Limited with their principal activities stated as follows:-

Subsidiary

Principal Activities

Date of Incorporation

Percentage Holding

Tydipacks Nigeria Limited Osworth Nigeria Limited Servisure Nigeria Limited

Healthcare and Industrial Packaging. Distribution and sales of personal care and pharmaceutical products. Distribution and sales of pharmaceutical products.

14 Dec, 2009 01 Sep, 2008 21 March 2011

100%

100%

100%

The financial results of all the subsidiaries have been consolidated in these financial statements.

5. REVIEW OF BUSNESS DEVELOPMENT

In the year under Review, the Board approved a five year strategic plan to develop the Company into a top Conglomerate.

6. DIVIDEND

The directors have recommended no dividend for the year. 7. UNCLAIMED SHARE CERTIFICATES

A list of shareholders who have unclaimed share certificates have been compiled and are attached hereto. The shareholders concerned should contact the Registrars.

iii

Report of the Directors (Contd.) 8. DIRECTORS AND DIRECTORS’ INTERESTS

The names of the Directors of the Company are listed on page i. 1. In accordance with the Company’s Articles of Association and section 249(2) of Companies and

Allied Matters Act, CAP C20 LFN 2004, Mr. E.O. Ibidapo and Mrs. G.I. Odumodu retire by rotation and being eligible, offer themselves for re-election.

2. In compliance with Section 258(2) of the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria, 2004, the Record of Directors’ attendance at Board Meetings is exhibited for inspection at this meeting.

3. Mrs. Rahila Ilegbodu served as an alternate to Mr. Ishaya Dankaro during the year. 4. Interests of the directors in the shares of the Company are:

22nd

March 2013

31st

December 2012

31st

December 2011

Number Number Number Lt-Gen. T. Y. Danjuma (rtd) (Direct) 238,928,169 238,928,169 238,928,169 N. N. Okafor 6,610,494 6,610,494 5,607,237 Mr. A. A. Adeleke 5,348 5,348 5,348 Mr. I. Dankaro 56,023,695 56,023,695 56,023,695 Mr. E. O. Ibidapo 140,000 140,000 140,000 Mrs. G. I. Odumodu (Direct & Indirect) 57,752,156 57,752,156 57,752,156 Dr. E. Abebe - - -

None of the Directors have notified the Company for the purposes of section 277 of the Companies and Allied Matters Act, CAP C20 LFN 2004 of any disclosable interest in contracts in which the Company was involved as at 31

st December, 2012. However the Company secured a loan of N2 billion from TY Holdings at

a favourable interest rate of 11% during the year. 9. SHARE CAPITAL AND SHARE HOLDING 1. The Company did not purchase its own shares during the year.

2. the Authorised share capital of the Company is N1,000,000,000 divided into 2,000,000,000 ordinary shares of 50kobo each.

3. The issued and paid up share capital of the Company currently is N490,000,000 divided into 980,000,000 ordinary shares of 50kobo each.

10. SUBSTANTIAL INTEREST IN SHARES

List of shareholding of 5% and above (Section 95 of CAMA)

22nd

March

2013

31st

December 2012

31st

December 2011

Number % Number % Number %

Lt-Gen. T. Y. Danjuma (rtd) (Direct) 238,928,169 24.38 238,928,169 24.38 238,928,169 24.38 J. I. Odumodu (Direct & Indirect) 57,742,156 5.89 57,742,156 5.89 57,219,555 5.89 David Dankaro 56,023,695 5.72 56,023,695 5.72 56,023,695 5.72

No individual shareholder other than as stated above held more than 5% of the issued share capital of the Company as at 31

st December, 2012.

iv

Report of the Directors (Contd.) 11. SHARE RANGE ANALYSIS AS AT DECEBER 31, 2012

Share Range No. of

Shareholders % of

Shareholders No. of Units

held % of

Shareholding

1 - 1000 3,138 6.91 1,520,110 0.16 1001 – 10,000 35,456 78.08 105,608,280 10.78 10,001 – 50,000 5,414 11.92 107,105,388 10.93 50,001 – 100,000 647 1.42 44,802,471 4.57 100,001 – 500,000 626 1.38 123,266,013 12.58 500,001 – 1,000,000 65 0.14 46,976,592 4.79 1,000,001 – 5,000,000 52 0.11 103,535,529 10.56 5,000,001 – 10,000,000 5 0.01 31,256,852 3.19 10,000,001 – 100,000,000 6 0.01 177,000,596 18.06 100,000,001 – 1,000,000,000 1 0.00 238,928,169 24.38

12. FIXED ASSETS Movements in fixed assets during the year are shown in Note 17 on page 34. In the opinion of the directors, the market values of the Company’s properties are not less than the values shown in the accounts.

13. DONATIONS AND CSR INITIATIVES

The Company was alive to its Corporate Social Responsibility during the year. Donations to charitable organizations during the year amounted to N1,930,000 (2011 - N 3,059,500). The details are:

N Manufacturers Association of Nigeria 50,000 PGM-MAN 130000 Society for Orphanage 50,000 Health writer support 200,000 PANS Uniport. 120,000 Nigeria Employee support 300,000 Institute of Directors 200,000 CAMPEF 50,000 M and B NUCFRLAMPE 130,000 Others 700,000

1,930,000

In accordance with section 38(2) of the Companies and Allied Matters Act, Cap C20 Law of the Federation of Nigeria 2004, the Company did not make any donation or gift to any political party, political association or for any political purpose in the course of the year under review.

14. RESEARCH AND DEVELOPMENT

In order to maintain and enhance its skills and abilities, the Company’s policy of continuously researching into new products and services was maintained. The Company incurred N15,403,332 (2011 – N 16,907,208) on various research projects during the year.

15. COMPANY’S DISTRIBUTORS

The Company’s major distributors are: SKYLARK PHARM & CHEM CO. LTD, ABUJA M.A. OKORO NIG. LTD, CALABAR MOODY DRUG CO LTD, LAGOS EUNIPAT ENTERPRISES, LAGOS TANIMOLA PHARMACY, IBADAN LASOL NIGERIA LTD OSBUD-K PHARMACY LIMITED, KADUNA DERRIES VENTURES, EKET

v

Report of the Directors (Contd.) 16. SUPPLIERS

The Company’s suppliers are both local and foreign. Some of the Company’s major suppliers are:

Local Foreign Drugs & Healthcare Limited IPCA Laboratories Limited (India) National Salt Company Aurobindo Pharm Limited (India) Dangote Flour Mills Plc Surya Engineers (India) Flour Mills Nigeria Plc Caffrey Saunders Int. Limited (UK) Primal Nigeria Limited Belco Pharma (India) Chellarams Plc

17. EMPLOYMENT AND EMPLOYEES .1 Employment of disabled persons

It is the policy of the Company that there is no discrimination in considering applications for employment including those from disabled persons. All employees whether or not disabled are given equal opportunities to develop their experience and knowledge and to qualify for promotion in furtherance of their careers. As at 31 December 2011 there was no disabled person in the employment of the Company.

.2 Health, safety at work and welfare of employees

Health and safety regulation are in force within the premises of the Company. The Company provides subsidy in transportation, housing, meal and medical expenses to all employees.

.3 Employee involvement and training

The Company is committed to keeping employees fully informed regarding its performance and progress and seeking their views wherever practicable on matters which particularly affect them as employees.

Management, professional and technical expertise are the Company’s major assets and investment to develop such skills, continues. The Company’s expanding skill’s base has been extended by the provision of training which has broadened opportunities for career development within the organization. Incentive schemes designed to meet the circumstances of each individual are implemented wherever appropriate.

18. AUDIT COMMITTEE

The members of the statutory Audit Committee appointed at the Annual General Meeting held on 24th May,

2012 in accordance with Section 359(3) of CAMA were:- Designation

Sir G.O. Adewumi Chairman Miss Christie Vincent Member Mr. B.O. Adeleke Member Mr. I. Dankaro Member Mrs. G.I. Odumodu Member Mrs. V.I.P. Alozie (retired 1/10/2012) Member Mrs. V.I.P. Alozie retired from the Company and consequently, the Audit Committee with effect from 1

st October, 2012.

19. COMPLIANCE WITH REGULATORY REQUIREMENTS

The Directors confirm to the best of their knowledge that the Company have substantially complied with the provision of the Code and other regulatory requirements. The Directors further confirm that the Company had adopted the IFRS and had complied substantially with the provisions thereof.

vi

Report of the Directors (Contd.)

20. EFFECTIVENESS OF INTERNAL CONTROL SYSTEM As the Company operates in a dynamic environment, it continuously monitors its internal controls system to ensure its continued effectiveness. In doing this, the Company employs both high level and preventive controls which will ensure maximum opportunity for prevention of misleading or inaccurate financial statement, properly safeguard its assets and ensure achievement of its corporate goals while complying with relevant laws and regulations.

21. POST BALANCE SHEET EVENTS

There were no post balance sheet events that would have had an effect on these financial statements. 22. HUMAN CAPITAL MANAGEMENT

Employee relations were stable and cordial in the year under review. 23. AUDITORS

Messrs. Akintola Williams Deloitte have indicated their willingness to continue in office as the Company’s auditors in accordance with Section 357(2) of the Companies and Allied Matters Act CAP C20 LFN 2004. A resolution will be proposed authorising the Directors to fix their remuneration.

BY ORDER OF THE BOARD

MARINA NOMINEES LIMITED Secretaries

LAGOS NIGERIA …………………….., 2013

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF

MAY & BAKER NIGERIA PLC

Report on the Financial Statements We have audited the accompanying consolidated financial statements of May & Baker Nigeria Plc and its subsidiaries which comprise the consolidated statements of financial position as at 31 December 2012, 31 December, 2011 and 1 January 2011, the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity, cash flow statement for the years ended 31 December 2012 and 31 December 2011, a summary of significant accounting policies and other explanatory information set out on pages 2 to 62.

Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No 6, 2011, the International Financial Reporting Standards and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of May & Baker Nigeria Plc and its subsidiaries as at 31 December 2012 and 31 December 2011 and 1 January 2011 and the financial performance and cash flows for the years ended 31 December 2012 and 31 December 2011 in accordance with the Companies and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act No 6, 2011 and the International Financial Reporting Standards.

Chartered Accountants Lagos, Nigeria 8 May 2013 FRC number: FRC/2013/ICAN/00000001364


31 December 2012

2

Consolidated and separate statement of profit or loss and other comprehensive income For the year ended 31 December 2012

The Group

The Company

31/12/2012

31/12/2011

31/12/2012

31/12/2011

Note

N'000

N'000

Continuing operations Revenue 6

5,668,449

4,837,569

5,484,925

4,749,617

Cost of sales

(3,598,756)

(2,864,134)

(3,455,499)

(2,808,205)

Gross profit

2,069,693

1,973,435

2,029,426

1,941,412 Other income 8

11,960

6,976

11,960

6,976

Distribution, sales and marketing expense

(1,260,231)

(1,072,620)

(1,260,231)

(1,012,774) Administrative expenses

(588,476)

(433,080)

(543,718)

(466,109)

Operating profit

232,946

474,711

237,437

469,505

Investment income 9

2,447

1,443

2,447

1,443 Other gains and losses 10

278,759

93,598

278,759

93,598

Finance costs

11

(469,630)

(242,533)

(468,467)

(242,533)

Profit before tax

12

44,522

327,219

50,176

322,013

Tax expense

14

31,421

(105,047)

32,106

(100,974)

Profit for the year

75,943

222,172

82,282

221,039

Total comprehensive income for the year

75,943 222,172 82,282 221,039

Earnings per share

15

Basic earnings per share(kobo per share)

0.08

0.23

0.08

0.23

All the profit of the Group is attributable to Owners of the Parent as there are no non-controlling interests.

The accompanying notes on pages 7 to 59 and non IFRS statements on pages 60 to 62 form an integral part of these consolidated and separate financial statements.


31 December 2012

3

Consolidated and separate statement of financial position At 31 December, 2012

The Group

The Company

Assets

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

Note N'000

N'000

N'000

N'000

N'000

N'000

Non-current assets Intangible assets

16 67,296

67,296

67,296

67,296 67,296

67,296

Property, plant and equipment 17 4,670,433

4,724,084

3,846,403

4,653,119 4,723,581

3,846,403 Deposit for investment 18 245,325

245,325

245,325

245,325 245,325 245,325

Investment in subsidiaries 19 -

-

-

3,000 1,000 -

Total non-current assets

4,983,054

5,036,705

4,159,024

4,968,740

5,037,202

4,159,024

Current assets Inventories

21 1,313,857

900,544

1,259,167

1,251,137

862,768

1,259,167

Trade and other receivables 22 1,424,267

789,957

890,912

1,523,599

866,838

890,912 Cash and bank balances 23 237,418

215,085

208,235

217,564

198,119

208,235

Other assets

24 66,517

94,975

295,109

66,517

68,738

295,109 Asset held for sale 20 44,293

-

-

44,293

-

Total current assets 3,086,352

2,000,561

2,653,423

3,103,110

1,996,463

2,653,423

Total assets

8,069,406

7,037,266

6,812,447

8,071,850

7,033,665

6,812,447

Equity and Liabilities

Equity Share capital 25 490,000

490,000

490,000

490,000 490,000 490,000

Share premium 26 1,626,094

1,626,094

1,626,094

1,626,094 1,626,094 1,626,094 Retained earnings 27 1,016,202

1,038,259

816,087

1,021,408 1,037,126 816,087

Total equity

3,132,296

3,154,353

2,932,181

3,137,502

3,153,220

2,932,181

Non-current liabilities

Borrowings

28 2,039,602

746,899

815,195

2,039,602

746,899

815,195 Deferred tax liabilities 14 126,257

193,043

244,648

126,203

192,989

244,648

Total non-current liabities

2,165,859

939,942

1,059,843

2,165,805

939,888

1,059,843

Current liabilities

Trade and other payables 29 965,815

853,992

1,084,491

965,069

853,664

1,084,491 Current tax liabilities 14 39,866

137,986

104,895

37,904

135,900

104,895

Borrowings

28 1,619,973

1,894,769

1,579,692

1,619,973

1,894,769

1,579,692 Other liabilities

30 145,597

56,224

51,345

145,597

56,224

51,345

Total current liabilities

2,771,251

2,942,971

2,820,423

2,768,543

2,940,557

2,820,423

Total liabilities

4,937,110

3,882,913

3,880,266

4,934,348

3,880,445

3,880,266

Total equity and liabilities

8,069,406

7,037,266

6,812,447

8,071,850

7,033,665

6,812,447

The financial statements were approved by the board of directors and authorised for issue on 8 May, 2013. They were signed on its behalf by:

Adeleke Adebayo Adetunji

Nnamdi Okafor

Godslove Okorie Director

ManagingDirector

Acting CFO

FRC No: FRC/2013/NIM/00000002317 FRC No: FRC/2013/PSNIG/00000002118

FRC No: FRC/2013/ICAN/00000001869

The accompanying notes on pages 7 to 59 and non IFRS statements on pages 60 to 62 form an integral part of these consolidated and separate financial statements.


31 December 2012

4

Consolidated statement of changes in equity For the year ended 31 December, 2012

Equity attributable to equity holders of the Group

Share Capital

Share Premium

Retained Earnings

Total

N'000 N'000 N'000 N'000

Balance at 1 January 2011 490,000

1,626,094

767,290

2,883,384

IFRS 1 adjustments (see note 5) -

-

48,797

48,797

Restated balance

490,000

1,626,094

816,087

2,932,181

-

Profit for the period -

-

222,172

222,172

Other comprehensive income (net of tax)for the period -

-

-

-

Total comprehensive income for the period -

-

222,172

222,172

Dividends -

-

-

-

Balance at 31 December 2011

490,000

1,626,094

1,038,259

3,154,353


-

75,943

75,943

Other comprehensive income (net of tax)for the period -

-

-

-


-

75,943

75,943

(98,000) Dividends -

-

(98,000)


490,000

1,626,094

1,116,202

3,132,296


31 December 2012

5

Separate statement of changes in equity For the year ended 31 December, 2012

Equity attributable to equity holders of the Company

Share Capital

Share Premium

Retained Earnings

Total

N'000

N'000

N'000

N'000

Balance at 1 January 2011 490,000

1,626,094

767,290

2,883,384

IFRS 1 adjustments (see note 5) -

-

48,797

48,797

Restated balance

490,000

1,626,094

816,087

2,932,181

-


-

221,039

221,039

Other comprehensive income (net of tax) for the period -

-

-

-


-

221,039

221,039

Dividends -

-

-

-


490,000

1,626,094

1,037,126

3,153,220


-

82,282

82,282

Other comprehensive income (net of tax) for the period -

-

-

-


-

82,282

82,282

Dividends -

-

(98,000)

(98,000)


490,000

1,626,094

1,021,408

3,137,502


31 December 2012

6

Consolidated and Separate Statement of Cash Flows For the year ended 31 December 2012

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

Note

N'000

Cash from operating activities

Cash received from customers

5,080,229

4,974,184

5,007,312

4,991,313 Cash paid to suppliers and employees

(5,240,426)

(3,810,182)

(5,188,676)

(3,845,832)

Value added tax (net)

-

(33,708)

-

(33,708) Taxes paid

14 (133,485)

(123,561)

(132,676)

(121,628)

-

-

Net cash (used in)/generated by operating activities

32

(293,682)

1,006,733

(314,040)

990,145

Cash flows from Investing activities

Investment in subsidiary

-

-

(2,000)

(1,000)

Proceeds from sale of Property, plant and Equipment 5,703

83,399

5,703

83,399

Interest received

2,247

1,113

2,247

1,113

Purchase of Property, plant and equipment

(417,828)

(1,127,257)

(399,521)

(1,126,635)

Net cash used in investing activities

(409,878)

(1,042,745)

(393,571)

(1,043,123)

Financing activities

Dividends paid

(98,000)

(494)

(98,000)

(494) Unclaimed dividends returned

-

39,108

-

39,108

Term loans obtained

3,659,281

505,026

3,659,281

505,026 Loans repaid

(2,195,505)

(508,920)

(2,195,505)

(508,920)

Interest paid

(396,710)

(242,894)

(395,547)

(242,894)

Net cash generated by/(used in) financing activities

969,066

(208,174)

970,229

(208,174)

Net increase/(decrease) in cash and cash equivalents

265,506

(244,186)

262,618

(261,152)

Cash and cash equivalents at beginning of year (1,006,040)

(761,854)

(1,023,006)

(761,854)

Cash and cash equivalents at end of year

(740,534)

(1,006,040)

(760,388)

(1,023,006)

Reconciliation of cash and bank balances to cash and cash equivalents

Cash and bank balance (note 23)

237,418

215,085

217,564

198,119 Bank overdrafts and commercial papers (note 28) (977,952)

(1,221,125)

(977,952)

(1,221,125)

(740,534)

(1,006,040)

(760,388)

(1,023,006)


31 December 2012

7

Notes to the Consolidated Financial Statements For the year ended 31 December 2012

1 General information 1.1 Description of business

"MAY & BAKER NIGERIA PLC was incorporated as a private limited liability Company in NIgeria on September 4, 1944 and commenced business on the same date. It was listed on the Nigerian Stock exchange in 1994. The Company is involved in the manufacture, sale and distribution of human pharmaceuticals, human vaccines and consumer products. Registered business address is 3/ 5 Sapara Street, Industrial Estate, Ikeja , Lagos, Nigeria"

1.2 Composition of Financial Statements These financial statements comprise statement of financial position, statement of profit and loss and other comprehensive income, statement of changes in equity and statement of cash flow and the notes to the financial statement as at 31 December 2012 and 31 December 2011 and where applicable 1 January, 2011 for both the Group and the Company.

1.3 Accounting convention

The financial statements have been prepared using the historical cost convention, as modified by the revaluation of certain items, as stated in the accounting policies.

1.4 Statement of Compliance These consolidated and seperate financial statements have been prepared in accordance with International Financial reporting Standards. These are the Group’s first IFRS financial statement and IFRS 1 First time adoption of International financial Reporting standards have been applied. An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Group has been provided in the notes.

2 Adoption of new and revised standards 2.1 Accounting standards and interpretations issued but not yet effective

Below are the new International Financial Reporting Standards and International Accounting Standards which have not been early adopted by the Group and that might affect future reporting periods, on the assumption that the Group will continue with its current activities.

a IFRS 7 Financial instruments: Disclosures effective 1 Jan 2013.

Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations.

b IFRS 9 Financial instruments "IFRS 9 introduces new requirements for classifying and measuring financial assets. At the IASB's July 2011 meeting, the IASB decided to postpone the mandatory application of IFRS 9 to annual periods beginning on or after 1 January 2015 with early application still permitted

c IFRS 10 Consolidated financial statements effective 1 Jan 2013 New standard that replaces the consolidation requirements in SIC-12 Consolidation—Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. Standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess.

d IFRS 11 Joint arrangements IFRS 11 provides clarification on how interests in jointly controlled entities should be accounted for and

focuses on the rights and obligations of the arrangement rather than its legal form.


31 December 2012

8

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 e IFRS 12 Disclosure of interests in other entities

The objective of IFRS 12 is to require the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities the effects of those interests on its financial position, financial performance and cash flows. IFRS 12 is applicable to annual reporting periods beginning on or after 1 January 2013. Early application is permitted.

f IFRS 13 Fair value measurement

IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), IFRS 13 is applicable to annual reporting periods beginning on or after 1 January 2013. An entity may apply IFRS 13 to an earlier accounting period, but if doing so it must disclose the fact.

g IAS 1 Presentation of financial statements effective 1 January 2013

Annual Improvements 2009–2011 Cycle: Amendments clarifying the requirements for comparative information including minimum and additional comparative information required.

h IAS 16 Property, plant and equipment effective 1 Jan 2013

Annual Improvements 2009–2011 Cycle: Amendments to the recognition and classification of servicing equipment.

i IAS 19: Employee benefits This standard, amended in June 2011 will affect Post-Employment Benefits and Termination Benefits projects and will enhance disclosures about defined benefit plans. Its efective January, 2013 but earlier application is permitted with disclosures.

j IAS 27 Consolidated and separate financial statements effective 1 Jan 2013 Consequential amendments resulting from the issue of IFRS 10,11 and 12. k IAS 32 Financial instruments: Presentation effective 1 Jan 2013

Annual Improvements 2009–2011 Cycle: Amendments to clarify the tax effect of distribution to holders of equity instruments.

l IAS 34 Interim financial reporting effective 1 Jan 2013

Annual Improvements 2009–2011 Cycle: Amendments to improve the disclosures for interim financial reporting and segment information for total assets and liabilities

2.2 Early adoption of standards and interpretations The Group has early adopted IFRS 1 ( revised 2012) .

The amendments provide relief to first-time adopters of IFRSs by amending IFRS 1 to allow prospective application of IAS 39 or IFRS 9 and paragraph 10A of IAS 20 to government loans outstanding at the date of transition to IFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013, with early application permitted.

No other standard has been early adopted.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3. Significant accounting policies The principal accounting policies adopted are set out below. 3.1 Foreign currency translation

Foreign currency transactions are booked in the functional currency of the Group ( naira) at the exchange rate ruling on the date of transaction. Foreign currency monetary assets and liabilities are retranslated into the functional currency at rates of exchange ruling at the reporting period. Exchange differences are included in the Statement of profit or loss and other comprehensive income. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

3.2 Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of any subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

3.3 Business combinations

Acquisitions of subsidiaries are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired entity are re-measured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3(2008) are recognised at their fair value at the acquisition date, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.4 Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

3.4a Sale of goods

Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

i. the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

ii. the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

iii. the amount of revenue can be measured reliably; iv. it is probable that the economic benefits associated with the transaction will flow to the Group and v. the costs incurred or to be incurred in respect of the transaction can be measured reliably.

vi. the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

3.4b Interest income Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition."

3.4c Rental income Refer to the leasing policy in note 3.10 3.5 Expenditure

Expenditure is recognised in respect of goods and services received when supplied in accordance with contractual terms. Provision is made when an obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably estimated. Manufacturing start-up costs between validation and the achievement of normal production are expensed as incurred. Advertising and promotion expenditure is charged to profit or loss as incurred. Shipment costs on inter-company transfers are charged to cost of sales; distribution costs on sales to customers are included in distribution expenditure.

3.6 Intangible assets Intangible assets acquired seperately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.6 Intangible assets (continued)

Internally generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

3.7 Legal and other dispute Provision is made for the anticipated settlement costs of legal or other disputes against the Group where an outflow of resources is considered probable and a reliable estimate can be made of the likely outcome. In addition, provision is made for legal or other expenses arising from claims received or other disputes. In respect of product liability claims related to certain products, there is sufficient history of claims made and settlements to enable management to make a reliable estimate of the provision required to cover un-asserted claims. The Group may become involved in legal proceedings, in respect of which it is not possible to make a reliable estimate of the expected financial effect, if any, that could result from ultimate resolution of the proceedings. In these cases, appropriate disclosure about such cases would be included but no provision would be made. Costs associated with claims made by the Group against third parties are charged to profit or loss as they are incurred. When the group is virtually certain of receiving reimbursement from a third party (in the form of insurance, a shared liability agreement etc.) to compensate for any lost financial benefit from such disputes, they should recognise a receivable as an asset.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.8 Pensions and other post-employment benefits Defined Contribution scheme

The Group operates a defined contribution based retirement benefit scheme for its staff, in accordance with the Pension Reform Act of 2004 with employee and employer contributing 6% and 10% each respectively of the employee’s relevant emoluments. Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. In addition to the pension scheme, the Company operates a gratuity scheme payable to employees that have served a minimum of five years of service. The benefits are calculated based on employees salary for each qualifying year. The Company discharges its obligation to employees once payment is made to the fund managers

3.9 Property plant and equipment

Property, plant and equipment is carried in the consolidated statement of financial position at cost less accumulated depreciation and accumulated impairment. The cost of acquisition comprises the acquisition price plus ancillary and subsequent acquisition costs, less any reduction received on the acquisition price. The cost of self-constructed property, plant and equipment comprises the direct cost of materials, direct manufacturing expenses, and appropriate allocations of material and manufacturing overheads. Where an obligation exists to dismantle or remove an asset or restore a site to its former condition at the end of its useful life, the present value of the related future payments is capitalized along with the cost of acquisition or construction upon completion and a corresponding liability is recognized.

If the construction phase of property, plant or equipment extends over a long period, the interest incurred on borrowed capital up to the date of completion is capitalized as part of the cost of acquisition or construction in accordance with IAS 23 (Borrowing Costs).

Expenses for the repair of property, plant and equipment, such as on-going maintenance costs, are normally recognized in profit or loss. The cost of acquisition or construction is capitalized if a repair (such as a complete overhaul of technical equipment) will result in future economic benefits. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. Freehold land is not depreciated. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The following depreciation periods, based on the estimated useful lives of the respective assets, are applied throughout the Group:

Classes

Useful lives (range)

Buildings 33.33 years

Plant, machinery and fittings

10-20 years

Office equipment and furniture

3-10 years

Trucks and motor vehicles

3-8 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.10 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases

Group as lessor

Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

Group as lessee Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

3.11 Impairment of tangible and non-tangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.11 Impairment of tangible and non-tangible assets (continued)

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

3.12 Financial assets The Group's financial assets include: Cash and cash equivalents Fixed deposits Other investments 3.12a Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, current balances with banks and similar institutions and highly liquid investments with maturities of three months or less when acquired and held for meeting short-term cash commitments and not for investment or other purposes. They are readily convertible into known amounts of cash and are held at amortised cost.

3.12b Fixed deposits Fixed deposits, comprising principally funds held with banks and other financial institutions, are initially measured at fair value, plus direct transaction costs, and are subsequently remeasured to amortised cost using the effective interest rate method at each reporting date. Changes in carrying value are recognised in profit or loss.

3.12c Other investments Held to maturity

Investments with fixed or determinable payment and fixed maturity dates that management has the intent and ability to hold to maturity are classified as held to maturity and are initially measured at fair value and subsequently at amortized cost using the effective interest method less any impairment.

Available for sale Liquid investments and other investments are classified as available for- sale investments and are initially recorded at fair value plus transaction costs and then re-measured at subsequent reporting dates to fair value. Unrealised gains and losses on available-for-sale investments are recognised directly in other comprehensive income. Impairments arising from the significant or prolonged decline in fair value of an equity investment reduce the carrying amount of the asset directly and are charged to profit or loss. On disposal or impairment of the investments, any gains and losses that have been deferred in other comprehensive income are reclassified to profit or loss. Dividends on available for sale (AFS) equity instruments are recognised in profit or loss when the Group's right to receive the dividends is established. Available for sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including [trade and other receivables, bank balances and cash are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Held for trading Investments that are acquired principally for the purpose of generating a profit from short term fluctuations in price are classified as held for trading and included in current assets. These are initially measured at fair value and at subsequent reporting dates, these investments are remeasured at their fair values with realized and unrealized gains and losses arising from changes in fair value included in profit or loss for the period in which they arise. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.13 Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include: • significant financial difficulty of the issuer or counterparty; or • breach of contract, such as a default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or • the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period. For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.


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Notes to the Consolidated Financial Statements For the year ended 31 December 2012 3.14 Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss. On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

3.15 Financial liabilities Financial liabilities are recognised when the Group becomes party to the contractual provisions of an instrument and are initially recognised at fair value adding transaction costs. Financial liabilities ( including borrowings and trade payables) are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss

3.16 Other receivables and liabilities Accrued items and other non-financial assets and liabilities are carried at cost. They are charged/credited to profit or loss according to performance of the underlying transaction.

3.17 Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates. Government grants relating to property, plant and equipment are treated as deferred revenue and released to profit or loss over the expected useful lives of the assets concerned.


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3.18 Inventories

In accordance with IAS 2 (Inventories), inventories encompass assets held for sale in the ordinary course of business (finished goods and goods purchased for resale), in the process of production for such sale (work in process) or in the form of materials or supplies to be consumed in the production process or in the rendering of services (raw materials and supplies). Inventories are stated at the lower of cost and net realizable value. The net realizable value is the achievable sale proceeds under normal business conditions less estimated cost to complete and selling expenses. Costs of inventories are determined on a first-in-first-out basis.

3.19 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax 3.19.1 Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

3.19.2 Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. For any temporary differences arising on business combinations where the Group can control the reversal of the temporary difference and it is not expected to reverse in the near future, the deferred tax aset/liability is not recognised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3.19.3 Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

3.20 Discounting

Where the effect of the time value of money is material, balances are discounted to present values using appropriate rates of interest. The unwinding of the discounts is recorded in finance income and finance costs.

3.21 Noncurrent asset held for sale

Non-current assets are classified as assets held for sale and stated at the lower of their previous carrying amount and fair value less costs to sell if their carrying value is to be recovered principally through a sale transaction rather than through continuing use. The condition of being recovered through sale is only met when: "the sale is highly probable, the non-current asset is available for immediate sale in its present condition, management is committed to the sale and the sale is expected to qualify for recognition as a completed sale within one year from the date of classification."


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3.22 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

3.23 Dividends Dividends are recognised as a liability in the financial statement in the year in which the dividend is approved by the shareholders.

3.24 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

3.25 Earnings per share Earnings per share are calculated by dividing profit for the year by the number of ordinary shares outstanding during the period. Diluted earnings per share are calculated by dividing profit for the year by the fully-diluted number of ordinary shares outstanding during the period.

4 Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

4.1 Critical accounting judgement The following are the critical judgements and estimates that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in financial statements.

4.1.1 Revenue recognition In the application of the Group's policy that states that revenues are recognized when significant risks and rewards has been transferred to the buyer, Management has ensured that revenues are recognised when goods are delivered to Customers. When goods remain in the Company's facility as a result of delayed transportation arrangement by the Customer, the Customers are aware based on practice and signed contract notes that the risks and reward of such goods remain with them.

4.1.2 Recoverability of deposit for investment The Company has deposited the sum of N245 million as part payment for 51 % interest in a Company - Biovaccines Limited. Although the business has not started operations however a firm commitment has been given by the Goverment for the Company to start operations. The deposit has been assessed for impairment and has not suffered impairment loss

4.1.3 Indefinite useful life of Intangible assets During the year, the directors reconsidered the recoverability of the Group's intangible asset ( trade mark) and assessed if the useful life is still indefinite,the trademark conveys an irrevocable right of use to the Company. Management's assessment for recoverability includes active sales from the products, competition and current market share of the products, it is believed that the asset is fully recoverable.


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4.2 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

4.2.1 Useful life of Property, plant and Equipment Property plant and equipment represent the most significant proportion of the asset base of the Company, accounting for over 60 % of the Company’s total assets. Therefore the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Company’s financial position and performance and have been properly done. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or it’s residual value would result in the reduced depreciation charge in the profit or loss The useful lives and residual values of the of property, plant and equipment are determined by management based on historical experience with similar assets, current usage and manufacturer's specifications.

4.2.2 Allowance for doubtful receivables

Judgment is exercised to make allowance for trade receivables doubtful of recovery by reference to the financial and other circumstances of the debtor in question. Based on the credit terms and historical experience regarding trade receivables, the Company makes both individual and collective impairment allowance for doubtful debt.

4.2.2 Allowance for obsolete inventory

Management continously assesses inventory items for obsolescence based on the standard operating practice of the Company.

4.2.3 Fair valuation of loan

To obtain the fair value of a loan obtained at below market interest rate, the Group used a valuation technique that include inputs that are based on observable market data Management believes that the key assumptions used in the determination of the fair value are appropriate.


31 December 2012

20

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 5 IFRS 1 adjustments

5.1 Reconciliation of the consolidated statement of financial position

The Group

12/31/2011 1/1/2011

Nigerian GAAP

Effect of transition to IFRSs

IFRS

statement of

financial position

Nigerian GAAP

Effect of transition to

IFRSs

Opening IFRS

statement of

financial position

Note N'000

N'000

N'000 N'000

N'000

N'000

Non-current assets

Intangible assets

67,296

-

67,296 67,296

-

67,296

Property, plant and equipment

a 4,723,322

762

4,724,084 3,845,787

616

3,846,403

Deposit for investment

245,325

-

245,325 245,325

-

245,325


5,035,943

762

5,036,705

4,158,408

616

4,159,024

Current assets

Inventories

900,544

900,544 1,259,167

-

1,259,167

Trade debtors

b 650,076

(650,076)

- 816,580

(816,580)

-

Other debtors and prepayments b 201,386

(201,386)

- 158,131

(158,131)

-

Due from related companies b 9,515

(9,515)

- 5,085

(5,085)

-

Trade and other receivables b

789,957

789,957 -

890,912

890,912

Deposit for letters of credit c 33,109

(33,109)

- 211,310

(211,310)

-

Cash and bank balance

215,085

-

215,085 208,235

208,235

Other assets

c

94,975

94,975 -

295,109

295,109

Total current assets

2,009,715

(9,154)

2,000,561

2,658,508

(5,085)

2,653,423

Total assets

7,045,658

(8,392)

7,037,266 6,816,916

(4,469)

6,812,447

Equity and liabilities

Equity

Share capital

490,000

-

490,000 490,000

-

490,000

Share premium account

1,626,094

-

1,626,094 1,626,094

-

1,626,094

Retained earnings d 1,022,762

15,497

1,038,259 767,290

48,747

816,087

Total equity

3,138,856

15,497

3,154,353

2,883,384

48,747

2,932,181


Borrowings

e 746,899

-

746,899 846,023

(30,828)

815,195

Staff gratuity

f 101,011

(101,011)

- 86,928

(86,928)

-

Deferred tax liabilities

240,468

(47,425)

193,043 307,454

(62,806)

244,648

Total non-current liabilities

1,088,378

(148,436)

939, 942

1,240,405

(180,562)

1,059,843

Current liabilities

Bank overdrafts and commercial paper e 1,221,125

(1,221,125)

- 970,089

(970,089)

-

Term loans

e 664,465

(664,465)

- 569,235

(569,235)

-

Borrowings

e -

1,894,769

1,894,769 -

1,579,692

1,579,692

Trade creditors

g 329,880

(329,880)

- 336,796

(336,796)

-

Other creditors and accruals h 314,807

(314,807)

- 589,159

(589,159)

-

Due to related company

i 55,207

(55,207)

- 60,949

(60,949)

-

Trade and other payables j -

853,992

853,992 -

1,084,491

1,084,491

Current tax liabilities

132,322

5,664

137,986 104,895

-

104,895

Other liabilities

k -

56,224

56,224 -

51,345

51,345

Dividend payable

j 100,618

(100,618)

- 62,004

(62,004)

-


2,818,424

124,547

2,942,971

2,693,127

127,296

2,820,423

Total liabilities

3,906,802

(23,889)

3,882,913 3,933,532

(53,266)

3,880,266

Total equity and liabilities

7,045,658

(8,392)

7,037,266 6,816,916

(4,469)

6,812,447


31 December 2012

21

Notes to the Consolidated Financial Statements

For the year ended 31 December 2012

5.2 Reconciliation of the separate statement of financial position

The Company

As at 31 December, 2011

As at 1 January, 2011

Nigerian GAAP

Effect of transition to

IFRSs

IFRS

statement of financial

position

Nigerian GAAP

Effect of transition to IFRSs

Opening IFRS

statement of financial position

Note

N'000

N'000

N'000

N'000

N'000

N'000

Non-current assets

Intangible assets

67,296

67,296

67,296

67,296

Property, plant and equipment a

4,722,819

762

4,723,581

3,845,787

616

3,846,403


245,325

245,325

245,325

245,325

Investment in subsidiary

1,000

1,000


5,036,440

762

5,037,202

4,158,408

616

4,159,024

Current assets

Inventories

862,768

862,768

1,259,167

-

1,259,167

Trade debtors

b

636,042

(636,042)

-

816,580

(816,580)

Other debtors and prepayments b

201,386

(201,386)

-

158,131

(158,131)

-

Due from related companies

b

100,430

(100,430)

-

5,085

(5,085)

-

Trade and other receivables

b

866,838

866,838

-

890,912

890,912

Deposit for letters of credit c

6,872

(6,872)

-

211,310

(211,310)

-


198,119

198,119

208,235

208,235

Other assets

c

68,738

68,738

-

295,109

295,109

Total current assets

2,005,617

(9,154)

1,996,463

2,658,508

(5,085)

2,653,423

Total assets

7,042,057

(8,392)

7,033,665

6,816,916

(4,469)

6,812,447

Equity and liabilities

Equity

Share capital

490,000

-

490,000

490,000

-

490,000

Share premium account 1,626,094

-

1,626,094

1,626,094

-

1,626,094

Retained earnings

d 1,020,352

16,774

1,037,126

767,290

48,797

816,087

Total equity

3,136,446

16,774

3,153,220

2,883,384

48,797

2,932,181


Borrowings e

746,899

-

746,899

846,023

(30,828)

815,195

Staff gratuity f

101,011

(101,011)

-

86,928

(86,928)

-


240,414

(47,425)

192,989

307,454

(62,806)

244,648

Total non-current liabilities 1,088,324

(148,436)

939,888

1,240,405

(180,562)

1,059,843

Current liabilities

Bank overdrafts and commercial paper e

1,221,125

(1,221,125)

-

970,089

(970,089)

-

Term loans e

664,465

(664,465)

-

569,235

(569,235)

-

Borrowings

e

-

1,894,769

1,894,769

-

1,579,692

1,579,692

Trade creditors

g

329,880

(329,880)

-

336,796

(336,796)

-

Other creditors and accruals

h

314,479

(314,479)

-

589,159

(589,159)

-

Due to related company i

55,207

(55,207)

-

60,949

(60,949)

-

Dividend payable

j

100,618

(100,618)

-

62,004

(62,004)

-

Trade and other payables j

-

853,664

853,664

1,084,491

1,084,491

Other liabilities

k

-

56,224

56,224

51,345

51,345


131,513

4,387

135,900

104,895

-

104,895


2,817,287

123,270

2,940,557

2,693,127 127,296 2,820,423

Total liabilities

3,905,611

(25,166)

3,880,445

3,933,532 (53,266) 3,880,266

Total equity and liabilties

7,042,057

(8,392)

7,033,665

6,816,916 (4,469) 6,812,447


31 December 2012

22


For the year ended 31 December 2012 5.3 Effect of IFRS adoption

Consolidated and separate statement of profit and loss and other comprehensive income

For the year ended 31 December, 2011

The Group

The Company

Note Previous

Effect of transition

Previous

Effect of transition

GAAP

to IFRSs

IFRSs

GAAP

to IFRSs

IFRSs

N'000

N'000

N'000

N'000

N'000

N'000

Revenue

4,837,569

-

4,837,569

4,749,617

-

4,749,617

Cost of sales

(2,864,134)

-

(2,864,134)

(2,808,205)

-

(2,808,205)

Gross profit

1,973,435

-

1,973,435

1,941,412

-

1,941,412

Other operating income l 102,017

(95,041)

6,976

102,017

(95,041)

6,976

Distribution, sales and marketing expenses (1,072,620)

(1,072,620)

(1,012,774)

(1,012,774)

Administrative expenses (420,464)

(12,616)

(433,080)

(453,493)

(12,616)

(466,109)

Operating profit

582,368

(107,657)

474,711

577,162

(107,657)

469,505

Investment income l -

1,443

1,443

-

1,443

1,443

Other gains and losses l -

93,598

93,598

-

93,598

93,598

Finance costs m (242,894)

361

(242,533)

(242,894)

361

(242,533)

Profit before tax

339,474 (12,255) 327,219

334,268 (12,255) 322,013

Taxation

(84,002) (21,045) (105,047)

(81,206) (19,768) (100,974)

Profit for the year

255,472

(33,300)

222,172

253,062

(32,023) 221,039

Note: No statement of comprehensive income was produced under previous GAAP. Also, under IFRS, there is no transaction given rise to other comprehensive income.

5.4 Reconciliation of Equity

Note

The Group

The Company

12/31/2011 1/1/2011

12/31/2011 1/1/2011

N'000 N'000

N'000 N'000

Total equity under previous GAAP

3,138,856 2,883,384

3,136,446 2,883,384

Reversal of accumulated depreciation on land a

762 616

762 616

Accrued interest on loan e

(9,179) (9,540)

(9,179) (9,540)

Elimination of preincorporation expense bii

(9,154) (5,085)

(9,154) (5,085)

Overprovision of deferred tax 47,425 62,806 44,817 66,806 Overprovision of income tax (5,664) - (4,387) - Interest expense (8,693) - (8,693) - - - - -

Total adjustment to equity

15,497 48,797 - 16,774 48,797

Total equity under IFRSs

3,154,353 2,932,181

3,153,220 2,932,181

5.5 Effect of IFRS adoption for the consolidated and separate statement of cash flows

The adoption of IFRS did not have a material impact on the statement of cashflows


31 December 2012

23


For the year ended 31 December 2012 5.6 First Time Adoption of International Financial Reporting Standards

Until 1 January 2011, the Group prepared its consolidated financial statement in accordance with Nigerian GAAP. The Group's transition date to IFRS reporting is 1 January 2011. As at that date, the Group followed the provisions of IFRS 1 “First Time Adoption of IFRS” in preparing an Opening statement of financial position. Certain of the Group’s IFRS accounting policies used for this opening statement of financial position differed from Nigerian GAAP accounting policies applied at the same date. The resulting adjustments have been recognized directly through retained earnings as of 1 January 2011.

There are some exemptions permitted by IFRS 1. The Group’s first time adoption decisions regarding these exemptions are detailed below. Other options available under IFRS 1, which are not discussed here, are not material / applicable to the Group’s business.

Accounting policy Exemptions Decision taken

Accounting for investments in subsidiaries, jointly controlled entities and associates in separate financial statements

When a first-time adopter elects to account for investments in subsidiaries, jointly controlled entities and associates at cost in its separate financial statements, it may measure investments in such entities either at cost determined by IAS 27, Consolidated and Separate Financial Statements, or at deemed cost, which would be either the fair value (in accordance with IAS 39, Financial Instruments: Recognition and Measurement) at the entity’s date of transition to IFRS, or the carrying amount under previous GAAP.

To use Nigerian GAAP carrying values

Borrowing Costs

Allows an entity to apply the transitional provisions of IAS 23 in lieu of full retrospective application. The effective date in this instance is considered to be the later of January 1, 2009 and the date of transition.

To apply the transitional provisions from the date of transition

Fair value or revaluation as deemed cost

A first-time adopter may elect to measure an item of property, plant and equipment at the date of transition to IFRS at its fair value and use that fair value as its deemed cost at that date. A first-time adopter may also elect to use a previous GAAP revaluation at, or before, the date of transition to IFRS as deemed cost at the date of revaluation if the revaluation was broadly comparable to fair value or cost or depreciated cost in accordance with IFRS.

To retrospectively apply IAS 16 which does not differ significantly from Nigerian GAAP values and as a such should be the same under IFRS.

Government loans A first-time adopter of IFRS is permitted to apply paragraph 10A of IAS 20 only to new loans entered into after the date of transition. Paragraph 10A of IAS 20 requires the benefit of government loans advanced either at interest free or at a below-market rate of interest to be treated as a government grant and to be measured as the difference between the initial carrying amounts of the loan determined in accordance with IAS 39 or IFRS 9 and the proceeds received.

The Company has elected to early adopt (effective January 1, 2013) this provision and apply this exemption.

Fair value measurement of financial assets or financial liabilities at initial recognition

A first-time adopter can apply IAS 39’s (or IFRS 9) day one gain or loss provisions prospectively to transactions occurring on or after the date of transition to IFRS.

Election taken.


31 December 2012

24


For the year ended 31 December 2012 5.7 Notes to the Reconciliation statement a Property, plant and equipment

Under IFRS, Land should not be subject to depreciation. (IAS 16:58 ), the accumulated depreciation charge on land under Nigerian GAAP is reversed. The accumulated depreciation charge to January 1, 2011 (IFRS transition date) of N616,000 and N146,000 charge included in administrative expense on 31/12/2011 have been adjusted against retained earnings and profit ( for the year ended 31/12/2011) respectively.

b Trade and other receivables Trade receivables

i Under Nigerian GAAP, Trade debtors is a line item on the statement of financial position. Under IFRS, trade debtors (less allowance for doubtful debts) of Group: N650.076 million Company: N636.042 million (1/1/2011: N816.58 milllion) is presented as component trade and other receivables.

ii Other debtors and prepayments

Under Nigerian GAAP, other debtors and prepayments of N201.386 million (1/1/2011: N158.131 million) includes receivables that do not qualify as financial assets. Under IFRS, receivables( Prepayments and advances) that do not qualify as financial assets are presented as other assets to ensure better understanding of the nature of line items hence N61.866million (1/1/2011: N83.799 million) has been reclassified from other debtors and prepayments to other assets. The remaining balance of N139.52 million (1/1/2011: N74.332 million) are presented as trade and other receivables.

iii Due from related companies

Under Nigerian GAAP, due from related companies of N9.515million (Group: 1/1/2011: N5.085 million; Company: 1/1/2011: N100.430 million) includes N9.154million (Group & Company: 1/1/2011: N5.085 million) that are pre-incorporation expenses. Under IFRS, this do not qualify for recognition as assets and have been adjusted against retained earnings. The remaining due from related companies of N0.361million (1/1/2011: N90.515 million) are presented as other receivables.

c Other assets Under IFRS, receivables that do not qualify as financial assets a seperately presented on the statement of financial position for better presentation and understanding of line items. Other assets of Group: N94.975 million, Company N66.738 million (1/1/2011 :N295.109 million) represents represents prepayments and advances reclassified from other debtors and prepayments and deposit for letter of credit of Group: N6.872million, Company N33.109 million (1/1/2011: N211.310 million) that was presented as a line item under Nigerian GAAP.

d Retained earnings

Under IFRS, retained earnings is adjusted by N20.083million (1/1/2011: N48.797million) representing reversal of depreciation charge N0.762million (1/1/2011: N0.616 million) accrued interest on loan of N9.179million (1/1/2011: N9.540 million), receivable from related company of N9.154million (1/1/2011: N5.085million), underprovision of income tax of N4.4 million and overprovision of deferred tax of N47.4 million (1/1/2011: N62.8 million).

e Borrowings(current) Correction of error

Under Nigerian GAAP, interest on loan of N9.179 million(1/1/2011: N9.540 million) was not accrued for, this was discovered and corrected by adjusting the amounts against retained earnings as at 1/1/2011 and finance cost for the year 31/12/2011. There was also an adjustment of N30.828 million on 1/1/2011 to adjust a classification error between current and non-current borrowings

Presentation difference

Bank overdrafts and commercial papers and term loans that were line items under Nigerian GAAP is presented as borrowings under IFRS.


31 December 2012

25


For the year ended 31 December 2012 f Staff gratuity

Under Nigerian GAAP, staff gratuities was presented as a separate line item of the statement of financial position. Under IFRS, they are reclassified as components of trade and other payables because they represent unremitted balances due to fund Managers for the staff retirement benefits including interest.

g Trade Creditors Under Nigerian GAAP, Trade creditors of N329.880 million (1/1/2011: N336.796 milllion) is a seperate line item on the statement of financial position. Under IFRS, it a component of trade and other payables which is a line item on the statement of financial position. Trade and other payables represents monetary payable items.

h Other creditors and accruals To ensure that trade and other payables represents items that qualify as financial liabilities based on IAS 39, other creditors an accruals balance was reduced by the reclassification of non-financial libilities of N56.224 million (1/1/2011: N51.345million) representing deferred income and customer deposits to other liabilities, while the remaining balance of other creditors and accruals have been reclassified as Trade and other payables.

i Due to related parties

Under Nigerian GAAP, due to related parties of Group: N55.207, Company: N100.618 million(1/1/2011: N60.949million) were line items on the statement of financial position. Under IFRS, this amounts have been reclassified to trade and other payables as they are trade related and represent monetary payables.

j Trade and other payables Under IFRS, trade and other payables of Group: N845.299million: Company N844.971 million (1/1/2011: N1.084 billion) consists of staff gratuity, other creditors and accruals, due to related company, dividend payable that were seperate line items under Nigerian GAAP. Other creditors and accruals excludes non-monetary items that have been reclassified as "other liabilities". This is to align with the presentation requirement of IFRS.

k Other liabilities

Non financial liabilities were included in other creditors and accruals under Nigerian GAAP. Under IFRS non-financial liabilities are reclassified as other liabilities. Other liabilities of N56.224 million (1/1/2011: 51.345 million) represents deferred income and customer deposits amount reclassified from other other creditors and accruals.

l Other operating income

The line item 'other income' in the Nigerian GAAP financial statement of N102million includes profit on disposal of property, plant and equipment (N93.598 million)which is presented as "other gains and losses " under IFRS. Also,included in other income are profit on contract manufacturing: N1.374million and gains on sale of scrap: N5.602million which are presented as a seperate line item 'Other operating income". Rental income of N0.33million and 1.130million interest income are presented as investment income under IFRS. This is to ensure better presentation of line items.

m Correction of error- finance costs

Under Nigerian GAAP,finance cost of N242.894 million recognized were overstated by N0.361 million representing the net impact of not accruing interest on loan at of N9.179 million (1/1/2011: N9.540 million)

n Administrative expenses Under IFRS, administrative expenses is adjusted by N9.369 million representing reversal of depreciation charged on land of N146,000 and elimination of capitalised preincorporation expenses on an entity the Company newly formed of N4.069 million.


31 December 2012

26



The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

6 Revenue

N'000

N'000

N'000

N'000

An analysis of the Group’s revenue is as follows:

Sale of Goods

5,668,449

4,837,569

5,484,925

4,749,617

5,668,449

4,837,569

5,484,925 4,749,617

7 Segment information 7.1 Product and services from which reportable segments derive their revenue

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on both the types of goods or services delivered or provided. The Group's reportable segments under IFRS 8 are therefore as follows.

i Foods This segment is involved in the production of packaged foods including noodles ii Pharmaceuticals -This segment is involved in the production and sale of human pharmaceuticals and

human vaccines. iii Beverage - This segment is involved in the production of beverage drinks including bottled water

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

7.2 Segment revenue

Pharmaceuticals

4,589,847

3,771,244

4,406,323

3,683,292

Beverage

59,651

58,783

59,651

58,783

Foods

1,018,951

1,007,542

1,018,951

1,007,542

Total segment revenue

5,668,449

4,837,569

5,484,925

4,749,617

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current year.

7.3 Segment Profit The Segments are assessed by the Chief Operating decision maker based on their respective gross profits as shown below:

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

Pharmaceuticals

1,915,490

1,862,347

1,875,223

1,830,324

Beverage

16,155

(18,174)

16,155

(18,174)

Foods

138,048

129,262

138,048

129,262

Total segment profit

2,069,693

1,973,435 2,029,426

1,941,412

Other operating income

11,960

6,976 11,960

6,976

Investment income

2,447

1,443 2,447

1,443

Other gains and losses

278,759

93,598 278,759

93,598

Central administration costs and directors' salaries (1,848,707)

(1,505,700) (1,803,949)

(1,478,883)

Finance costs

(469,630)

(242,533) (468,467)

(242,533)

Profit before tax

44,522

327,219 50,176 322,013


31 December 2012

27


For the year ended 31 December 2012 7.4 Segment accounting policies

The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 3. Segment profit represents the gross profit earned by each segment without allocation of central administration costs and directors' salaries, other operating income, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

7.5 Segment assets and liabilities

The Chief Executive Officer does not assess segment performance based on reports on segment assets and liabilities.

7.6 Information about major customers There are no customers that represent more than 10 % of the total revenue of any of the reported segments.

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000

8 Other operating income

Income on contract manufacturing

5,116

1,374

5,116

1,374

Sale of scrap

6,844

5,602

6,844

5,602

11,960

6,976

11,960

6,976

9 Investment income

Rent income

200

330

200

330

Interest income

2,247

1,113

2,247

1,113

2,447

1,443

2,447

1,443

The interest income is earned on short term investments (fixed deposits) with various commercial banks in Nigeria. Fixed deposits are classified as loans and receivables and are carried at amortised cost using the effective interest rate method.

The Group The Company 12/31/2012 12/31/2011 12/31/2012 12/31/2011 10 Other gains and losses

N'000

N'000

N'000

N'000

Profit on disposal of property, plant and equipment -

93,598

-

93,598

Gain on fair value of loan (10.1)

275,616

-

275,616

-

Foreign exchange gain

3,143

-

3,143

-

278,759

93,598

278,759

93,598

10.1 Gain on fair value of loan

This amount represents a day one gain on initial recognition of the fair value of a loan of N2 billion obtained from TY holdings at below market interest rate of 11%. The fair value of the loan is N1.724 billion based on market interest of 16.93% resulting in a gain of N276 million for the company.


31 December 2012

28


For the year ended 31 December 2012 The Group The Company

12/31/2012 12/31/2011 12/31/2012 12/31/2011

N'000 N'000 N'000 N'000

11 Finance cost

Interest on bank overdraft and loans

396,844

309,907

395,681

309,907

Interest on loans from related parties

72,786

-

72,786

-

Total interest expense 469,630

309,907

468,467

309,907

Less: interest cost included in qualifying assets -

(67,374)

-

(67,374)

469,630

242,533

468,467

242,533

During 2012, the Group did not capitalise borrowing costs. No financial liability is classified as fair value through profit or loss

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

12 Profit for the year is attributable to:

N'000

N'000

N'000

N'000

Owners of the Company

75,943

222,172

82,282

221,039

75,943 222,172 82,282 221,039

All profit is attributable to owners of the Parent as all the subidiaries are wholly owned.

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

Profit for the year has been arrived at after charging (crediting):

N'000

N'000

N'000

N'000

Depreciation of property, plant and equipment 421,483

205,923

419,987

205,804

Cost of inventories recognised as expense 3,598,756

2,864,134

3,455,499

2,808,205

Gain on disposal of property, plant and equipment -

93,598

-

93,598

Auditor's remuneration

12,600

7,800

12,000

7,500

Staff costs (see note 13)

561,417

446,332

542,842

435,848

Director's remuneration and fees

Fees

1,200

1,215

1,200

1,215

Salaries and allowance

70,658

70,424

70,658

70,424

Interest on loans and overdrafts ( note 11) 469,630

242,894

468,467

242,894

13 Staff costs

The aggregate employee remuneration is as follows:

Short term benefit

488,369

385,749

470,820

375,265

Retirement Benefit Plan

73,048

60,583

72,022

60,583

561,417

446,332

542,842

435,848


31 December 2012

29


For the year ended 31 December 2012 13.1 Employees remunerated at higher rates

The number of employees excluding Directors in respect of emoluments excluding provident fund contributions and allowances

N

Number

Number

Number

Number

250,001 - 300,000

34

39

34

39

300,001 - 350,000

69

67

63

67

350,001 - 400,000

22

21

22

21

400,001 - 450,000

22

23

22

23

450,001 - 500,000

108

110

108

110

500,001 - 550,000

-

2

-

2

550,001 - 600,000

-

-

-

-

600,001 - 650,000

47

46

47

40

650,001 - 700,000

-

-

-

-

700,000 and above

57

54

54

52

359

362

350 354

The average number of persons employed in the financial year are as follows

12/31/2012

12/31/2011

12/31/2012

12/31/2011

Number

Number

Number

Number

Managerial

17

53

15

52

Senior staff

193

159

192

158

Junior staff

149

150

143

144

359

362

350

354

The Group

The Company

14 Taxation

12/31/2012

12/31/2011

12/31/2012

12/31/2011

14.1 Income tax recognised in profit or loss

N'000

N'000

N'000

N'000

Income tax

23,552

123,869

22,950

121,304

Education tax

11,813

11,455

11,730

11,372

Capital gains tax

-

4,595

-

3,224

Under provision in previous years

-

16,733

-

16,733

35,365

156,652

34,680

152,633

Deferred tax

Deferred tax recognised in the current year

(66,786)

(51,605)

(66,786)

(51,659)

(31,421)

105,047

(32,106)

100,974


31 December 2012

30



The Group

The Company

2012

2011

2012

2011

N'000

N'000

N'000

N'000

14.2 The income tax expense for the year can be reconciled to the accounting profit as follows:

Profit before tax

44,522

327,219 50,176

322,013

Income tax expense calculated at 30%

13,356

98,166 15,053

96,604

Education tax at 2% of assessable profits

11,813

11,372 11,730

11,372

Effect of income that is exempt from taxation 602

- -

-

Effect of expenses that are not deductible in determining taxable profit

-

- -

-

Effect of unused tax losses and tax offsets not recognized as deferred tax assets

-

- -

-

Effect of previously unrecognized and unused tax losses and deductible temporary differences now recognized as deferred tax assets

-

- -

-

Effect of minimum tax computed on a different basis 1,697

2,511 -

-

Effect of Capital gains tax

-

3,224 -

3,224

Other

15

(26,228) 15

(26,228)

Investment allowance

(58,904)

(731) (58,904)

(731)

Adjustments recognized in the current period in relation to the deferred tax of prior periods

-

16,733 -

16,733

Income tax expense recognised in profit or loss

(31,421)

105,047

(32,106)

100,974

The charge for taxation in these financial statements was based on the provisions of the Companies Income Tax Act, CAP C21, LFN 2004 as amended and the Education Tax Act, CAPE 4, LFN 2004.

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000


At 1 January

137,986

104,895

82,964

135,900

104,895

82,964

Charge for the year 35,365

156,652

104,895

34,680

152,633

104,895

173,351

261,547

187,859

170,580

257,528

187,859

Paid during the year (133,485)

(123,561)

(82,964)

(132,676)

(121,628)

(82,964)

At 31 December

39,866

137,986

104,895

37,904

135,900

104,895

14.3 Deferred Taxation

At 1 January

193,043

244,648

307,773

192,989

244,648

307,773

Charge for the year (66,786)

(51,605)

(63,125)

(66,786)

(51,659)

(63,125)

At 31 December

126,257

193,043

244,648

126,203

192,989

244,648

The following is the analysis of deferred tax (assets)/liabilities presented in the statement of financial position:

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Deferred tax liabilities 314,689

285,737

307,773

314,635

285,683

307,773

Deferred tax asset (188,432) (92,694) (63,125) (188,432)

(92,694)

(63,125)

126,257

193,043

244,648

126,203

192,989

244,648

Deferred tax assets and liabilities are offset where the Company has a legally enforcable right to offset current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income levied by the same taxation authority on the same taxable entity.


31 December 2012

31


For the year ended 31 December 2012 14.4 Deferred tax asset/ liability

The following are the major deferred tax (assets)/liabilities recognised by the Group and movements thereon.

The Group

Deferred tax liabilities/(assets) in relation to:

Recognised

Opening

in profit or

Recognised

Acquisitions

Closing

balance

loss

in equity

or disposals

balance

N'000

N'000

N'000

N'000

N'000

2012


285,683

(35,189)

-

-

250,494

Provisions

(87,024)

(98,062)

-

-

(185,086)

Accrued interest from loans

(5,616)

5,616

-

-

-

Fair valuation of loan

-

60,849

-

-

60,849

193,043

(66,786)

-

-

126,257

2011


307,773

(22,090)

-

-

285,683

Provisions

(60,263)

(26,761)

-

-

(87,024)


(2,862)

(2,754)

-

-

(5,616)

244,648

(51,605)

-

-

193,043

2010


-

307,773

-

-

307,773

Provisions

-

(60,263)

-

-

(60,263)


-

(2,862)

-

-

(2,862)

-

244,648

-

-

244,648

The Company

Opening balance

Recognised

Recognised

Acquisitions

Closing

in profit or

in equity

or disposals

balance

loss

N'000

N'000

N'000

N'000

N'000

2012

Property, plant and equipment 285,683

(35,189)

-

-

250,494

Provisions

(87,078)

(98,062)

-

-

(185,140)

Accrued interest from loans (5,616)

5,616

-

-

-

Fair valuation of loan

-

60,849

-

-

60,849

192,989

(66,786)

-

-

126,203

2011

Property, plant and equipment 307,773

(22,090)

-

-

285,683

Provisions

(60,263)

(26,815)

-

-

(87,078)

Accrued interest from loans (2,862)

(2,754)

-

-

(5,616)

244,648

(51,659)

-

-

192,989

2010

Property, plant and equipment -

307,773

-

-

307,773

Provisions

-

(60,263)

-

-

(60,263)


-

(2,862)

-

-

(2,862)

-

244,648

-

-

244,648

The Group

The Company

Movement at a glance 2012

2011

2010

2012

2011

2010

N'000

N'000

N'000

N'000

N'000

N'000

Deferred tax (liabilities)/assets

Opening balance 193,043

244,648

-

192,989

244,648

-

Recognised in profit or loss (66,786)

(51,605)

244,648

(66,786)

(51,659)

244,648

Closing balance 126,257

193,043

244,648

126,203

192,989

244,648


31 December 2012

32


For the year ended 31 December 2012 15 Earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows.

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

Earnings

N'000

N'000

N'000

N'000

Earnings for the purpose of basic earnings and diluted earnings per share being net profit attributable to equity holders of the Company

75,943 222,172

82,282

221,039

Number of shares

Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share

980,000

980,000

980,000

980,000

Earnings per 50k share (kobo) - basic and diluted 0.08

0.23

0.08

0.23

See related party (note 31.6)

16 Intangible assets The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Trademarks

67,296

67,296

67,296

67,296

67,296

67,296

The trademarks represents the cost of acquisition of the trademarks of Thalazole, Sulphatriad and Thiazamide products from May and Baker Limited, England. No impairment loss has been recognised with respect to the the trademarks as the recoverable amount from the products exceeds the carrying value. There is increasing revenue generation from the products. As at the reporting date, management considers the trademark to have an indefinite useful life given the strength and durability of the products and the level of marketing support. The products are in a relatively stable and profitable market sector. The Company is not aware of any material legal, regulatory, contractual, competitive, economic or other factor which could limit their useful lives.


31 December 2012

33



17 Property, plant and equipment

The Group

Leasehold land

Buildings


Office equipment

and furniture

Trucks & Motor

vehicles

Capital work in

progress

Total

N'000

N'000

N'000

N'000

N'000

N'000

N'000

Cost

At 1 January 2011 13,111

509,896

1,299,011

184,992

351,460

2,496,879

4,855,349

Additions -

11,790

11,099

15,430

74,025

1,014,913

1,127,257

Disposals -

(44,834)

-

(12,296)

(43,231)

-

(100,361)

At 31 December 2011 13,111

476,852

1,310,110

188,126

382,254

3,511,792

5,882,245

Additions 458

17,421

71,618

19,485

109,679

199,167

417,828

Disposals -

-

(11,641)

(4,608)

(30,648)

-

(46,897)

Transfers 169,996

1,424,009

1,856,284

61,503

-

(3,511,792)

-

Reclassified to asset held for sale

(97,995)

(1,138)

-

-

(99,133)

At 31 December 2012 183,565

1,918,282

3,128,376

263,368

461,285

199,167

6,154,043

Accumulated depreciation and impairment

At 1 January 2011

-

83,615

566,644

153,567

205,120

-

1,008,946

Charge for the year

-

15,303

112,615

15,138

62,867

-

205,923

On disposals

-

(13,151)

-

(10,492)

(33,065)

-

(56,708)

At 31 December 2011 -

85,767

679,259

158,213

234,922

-

1,158,161

Charge for the year

-

54,380

280,494

25,678

60,931

-

421,483

On disposals

-

-

(7,274)

(4,608)

(29,312)

-

(41,194)

Reclassified to assets held for sale -

-

(53,783)

(1,057)

-

-

(54,840)


140,147

898,696

178,226

266,541

-

1,483,610

Carrying amount

At 31 December, 2012

183,565

1,778,135

2,229,680

85,142

194,744

199,167

4,670,433


13,111

391,085

630,851

29,913

147,332

3,511,792

4,724,084

At 1 January, 2011

13,111

426,281

732,367

31,425

146,340

2,496,879

3,846,403


31 December 2012

34



17 Property, plant and equipment(continued)

The Company

Leasehold land

Buildings


Office equipment and

furniture

Trucks & Motor

vehicles

Capital work in

progress

Total

N'000

N'000

N'000

N'000

N'000

N'000

N'000

Cost

At 1 January 2011 13,111

509,896

1,299,011

184,992

351,460

2,496,879

4,855,349

Additions -

11,790

11,099

14,808

74,025

1,014,913

1,126,635

Disposals -

(44,834)

-

(12,296)

(43,231)

-

(100,361)

At 31 December 2011 13,111

476,852

1,310,110

187,504

382,254

3,511,792

5,881,623

Additions 458

17,421

71,776

19,485

97,214

199,167

399,521

Disposals -

-

(11,641)

(4,608)

(30,648)

-

(46,897)

Transfers 169,996

1,424,009

1,856,284

61,503

-

(3,511,792)

-

Reclassified to asset held for sale -

-

(97,995)

(1,138)

-

-

(99,133)

At 31 December 2012 183,565

1,918,282

3,122,534

262,746

448,820

199,167

6,135,114

Accumulated depreciation and impairment

At 1 January 2011

-

83,615

566,644

153,567

205,120

-

1,008,946

Charge for the year

-

15,303

112,615

15,019

62,867

-

205,804

On disposals

-

(13,151)

-

(10,492)

(33,065)

-

(56,708)


85,767

679,259

158,094

234,922

-

1,158,042

Charge for the year

-

54,380

279,910

25,616

60,081

-

419,987

On disposals

-

-

(7,274)

(4,608)

(29,312)

-

(41,194)

Reclassified to asset held for sale -

-

(53,783)

(1,057)

-

-

(54,840)


140,147

898,112

178,045

266,691

-

1,481,995

Carrying amount


183,565

1,778,135

2,224,422

84,701

183,129

199,167

4,653,119


13,111

391,085

630,851

29,410

147,332

3,511,792

4,723,581

At 1 January, 2011

13,111

426,281

732,367

31,425

146,340

2,496,879

3,846,403


31 December 2012

35


For the year ended 31 December 2012 17.1 The following depreciation rates were used in the computation of depreciation charge during the year

Class

Useful lives (range)

Buildings

33.33 years

Plant, Machinery and Fittings

10-20 years

Office equipment and furniture

3-10 years

Trucks and Motor vehicles

3-8 years

17.2 The Group has not pledged any of its items of property, plant and equipment as security for liabilities.

17.3 Impairment of property, plant and equipment

There are no indicators of impairment at the end of the reporting period. Thus, the directors are of the opinion that allowance for impairment is not required.

17.5 Depreciation charged for the year is included in:

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000

Cost of sales

333,205

124,875

332,022

124,729

Administrative expenses

32,189

25,369

32,075

25,369

Distribution, sales and marketing expenses

56,089

55,825

55,890

55,706

421,483

206,069

419,987

205,804

18 Deposits for investments

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Carrying amount 245,325

245,325

245,325

245,325

245,325

245,325

This represents the deposit the Company made in Biovaccines Limited, a Company incorporated as a result of the joint Venture agreement entered into with the federal government of Nigeria in April, 2007 to engage in the business of production , sale and distribution of human vaccines. Under the arrangement, May & Baker is to have 51% interest in the Company by injecting N520. 4million in the entity while the federal government of Nigeria is to have 49%. As at the reporting date, the Company has only injected the amount above representing 47% of the total investment cost due from them, as government has not approved the commencement of the Biovaccines operations.

Impairment assessment

As at the reporting date, the Company does not have control over Biovaccines and the deposit is carried at cost. The investment has been assessed for impairment by comparing the recoverable amount of the investment to its carrying value, the Directors are of the opinion that the carrying value is not lower than the recoverable amount.


31 December 2012

36



19 Investment in subsidiaries

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N’000 N’000 N’000 N’000 N’000 N’000

Carrying amount (at cost) -

-

-

3,000

1,000

-

Name of subsidiary

Proportion of ownership interest and voting power

held by the Group

Place of incorporation and

operation

Principal Activity

Osworth Nigeria Limited 100%

Nigeria

Distribution and sales of healthcare and

pharamaceutical products.

Tydipack Nigeria Limited 100%

Nigeria

Healthcare and industrial packaging

Servisure Nigeria Limited

100%

Nigeria

Distribution and sales of pharamaceutical products

The Company has control over the three subsidiaries and has consolidated them in the current year. The investment is represented by one million ordinary shares of N1 each in Osworth Nigeria Limited, Tydipack Nigeria Limited and Servisure Nigeria Limited. The investment is carried at cost.

20 Assets held for sale

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N’000 N’000 N’000 N’000 N’000 N’000


44,212

44,212

Office furniture and equipment

81

-

-

81

-

-

44,293

-

-

44,293

-

-

The Group intends to dispose of some of the assets that are no longer useful to its operations in the next 12 months. There is an active search for buyers as the items to be sold have been advertised in a nation-wide newspaper . No impairment loss was recognised on these assets as a reclassification to held for sale. Some of the assets have been fully depreciated.

21 Inventories

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Raw materials 407,644

353,408

436,384

393,827

353,408

436,384

Work-in-progress 259,810

96,672

191,680

258,524

96,672

191,680

Finished goods 346,297

223,508

280,153

298,680

214,507

280,153

Spare parts

217,853

104,623

90,408

217,853

104,623

90,408

Goods in transit

82,253

122,333

260,542

82,253

93,558

260,542

1,313,857

900,544

1,259,167

1,251,137

862,768

1,259,167

21.1 There are no inventories pledged as security for liabilities. 21.2 The amount charged to profit or loss in respect of write down of inventory to net realisable value is Nil (31/12/2011:

N2.12million)

21.3 Goods in transit comprises of raw materials.


31 December 2012

37



22 Trade and other receivables The Group The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

Trade receivables

1,746,129

830,632

930,527

1,619,746

816,598

930,527

Less: allowance for doubtful debts

(492,530)

(180,556)

(113,947)

(490,788)

(180,556)

(113,947)

1,253,599

650,076

816,580

1,128,958

636,042

816,580

Other receivables

Receivable from Novartis Limited

56,052

-

-

56,052

-

-

Staff loans

9,204

10,397

16,393

9,204

10,397

16,393

Staff advance

30,205

34,889

31,689

30,205

34,889

31,689

Other debtor

71,229

72,667

7,460

71,229

72,667

7,460

Withholding tax recoverable

37,423

37,425

34,287

37,423

37,425

34,287

Due from related companies (note 31)

-

-

-

223,973

90,915

-

204,113

155,378

89,829

428,086

246,293

89,829

Less: allowance for doubtful debt

(33,445)

(15,497)

(15,497)

(33,445)

(15,497)

(15,497)

170,668

139,881

74,332

394,641

230,796

74,332

Total trade and other receivables 1,424,267

789,957

890,912

1,523,599

866,838

890,912

Trade and other receivables disclosed above are carried at amortised cost less allowance for doubtful debts. The average credit period taken on sales of goods is between 30-45 days. No interest is charged on the overdue receivables. The Group has recognised an allowance for doubtful debts of 100% against all receivables over 360 days because historical experience has been that receivables that are past due beyond 360 days may be doubtful of recovery. In most cases these debts are recovered. Allowances against doubtful debts are recognised against trade receivables outstanding for more than 360 days based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty. As at 2012, the Group recognized an allowance against all receivables that are overdue by 90 days because the credit rating of the customers dropped significantly and the payment pattern on those receivables fluctuated outside the normal payment pattern. Before accepting any new credit customer, the Group uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. The internal credit scoring system is constantly reviewed. Of the trade receivables balance at the end of the year, none is due from a single customer who represent more than 10 per cent of the total balance of trade receivables. Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the reporting date but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral or other credit enhancements over these balances. On a case by case basis the group creates a legal right of offset against any amount owed by the group to the counter party.


31 December 2012

38



22 Trade and other receivables (continued)

Ageing of past due but not impaired receivables

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000

0-30 Days

738,559

260,134

665,127

246,100

31-60 Days

267,423

117,429

240,834

117,429

61-90 Days

150,193

53,254

135,260

53,254

91-360 Days

97,424

219,259

87,737

219,259

Total

1,253,599

650,076

1,128,958

636,042

Ageing of impaired trade receivables

60-90 days

27,513

-

27,416

-

91-120 days

85,483

-

85,181

-

121-360 days

147,055

-

146,535

-

Over 360 days

232,479

180,556

231,656

180,556

Total

492,530

180,556

490,788

180,556

In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade

receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated.

Movement in the allowance for doubtful debts

Balance at the beginning of the period 180,556

113,947

180,556

113,947

Impairment losses recognised 311,974

66,609

310,232

66,609

Balance at the end of the period 492,530

180,556

490,788

180,556

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

23 Cash and bank balances

The Group

The Company

12/31/2012 12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Cash on hand

45 5,541

7,431

45

5,541

7,431

Cash at bank

168,843 142,369

173,219

148,989

125,403

173,219

Short term deposits 68,530 67,175

27,585

68,530

67,175

27,585

237,418

215,085

208,235

217,564

198,119

208,235

Restricted cash

The short term deposits above represents unclaimed dividend balance that has been invested in a fixed deposit account. The maturity period is not more than 3 months.

Reconciliation of cash and balance to Cash and cash equivalents

For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdraft and commercial acceptances. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows:


31 December 2012

39



23 Cash and bank balances

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000


237,418

215,085

217,564

198,119

Bank overdrafts and commercial papers (note 28) (977,952)

(1,221,125)

(977,952)

(1,221,125)

(740,534)

(1,006,040)

(760,388)

(1,023,006)

The Group

The Company

24 Other assets

12/31/2012 12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000 N'000

N'000

N'000

N'000

N'000

Advance payment to suppliers 38,814 52,007

4,050

38,814

52,007

4,050

Prepayments

27,144 9,859

79,749

27,144

9,859

79,749

Deposits for letter of credit 559 33,109

211,310

559

6,872

211,310

66,517

94,975

295,109

66,517

68,738

295,109

Deposit for letter of credit are the balances that are yet to be remitted to suppliers for imported products.

25 Share capital

The Group

The Company

Authorised

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000

2 billion ordinary shares at 50 kobo each

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

Issued and fully paid shares

980 million ordinary shares of 50 kobo each

At 1 January

490,000

490,000

490,000

490,000

Closing balance

490,000

490,000

490,000

490,000

Issued and fully paid ordinary shares have a par value of 50 kobo each, carry one vote per share and a right to dividends

26 Share premium

Balance at beginning

1,626,094

1,626,094

1,626,094

1,626,094

Balance at end

1,626,094

1,626,094

1,626,094 1,626,094

27 Retained earnings

Balance at the beginning

1,038,259

816,087

1,037,126

816,087

Profit for the year

75,943

222,172

82,282

221,039

Dividend paid

(98,000)

-

(98,000)

-

Balance at end

1,016,202

1,038,259

1,021,408

1,037,126


31 December 2012

40



28 Borrowings

12/31/2012

12/31/2011

1/1/2011

Borrowing at amortised cost N'000

N'000

N'000

Bank overdrafts (a) 864,684

1,221,125

948,497

Commercial papers and Bankers acceptance (a)

113,268

-

21,592

Total bank overdraft and commercial papers

977,952

1,221,125

970,089

Revolving Facility -CBN Intervention fund (b)

220,000

220,000

220,000

Term loan- CBN Intervention fund (b)

569,577

639,179

709,540

Term loan- Bank of industry' (c)

-

189,127

366,023

Term loan- Access bank (d)

-

239,261

129,235

Term loan- Ecobank ( 'e')

-

132,976

-

Term loan- FCMbank plc (f)

36,806

-

-

Term loan- Gtbank plc (g)

58,333

-

-

Term loan- TY Holdings Ltd (h)

1,796,907

-

-

Total borrowings 3,659,575

2,641,668

2,394,887

Analysis of loan balance to current and non-current portion.

Bank overdraft

864,684

1,221,125

948,497

Commercial papers and Bankers acceptance

113,268

-

21,592

Term loan- CBN Intervention fund

79,412

79,179

79,540

Revolving facility- CBN Intervention fund

220,000

220,000

220,000

Term loan- Bank of industry

-

189,127

180,828

Term loan- Access bank

-

128,560

129,235

Term loan- Ecobank

-

56,778

-

Term loan- FCMbank plc

13,093

-

-

Term loan- Gtbank plc

58,333

-

-

Term loan- TY Holdings Ltd

271,183

-

-

Current Portion

1,619,973

1,894,769

1,579,692

Term loan- CBN Intervention fund

490,165

560,000

630,000

Term loan- Bank of industry

-

-

185,195

Term loan- Access bank

-

110,701

-

Term loan- Ecobank

-

76,198

-

Term loan- FCMbank plc

23,713

-

-

Term loan- TY Holdings Ltd

1,525,724

-

-

Non-current Portion 2,039,602

746,899

815,195

All the borrowings were obtained in Naira, the functional currency of the Group. The principal features of the Group's borrowings are described below:

a Bank Overdrafts and Commercial Papers The Bank overdrafts and commercial papers are secured by a negative pledge on the Group's assets and their interest rate range from 15% and 20%. Bank overdrafts are repayable on demand.

b CBN Intervention Fund

A Central Bank of Nigeria (CBN) Intervention fund to Manufacturers in the sum of N920 million was received in October 2010 at 7 percent interest per annum. The CBN facility is in two parts with N700 million repayable in 40 equal quarterly installments from January 2011 and N220 million working capital renewable half yearly. The facilities are covered by a negative pledge on the assets of the Company.


31 December 2012

41


For the year ended 31 December 2012 28 Borrowings (continued) c Bank of Industry Facility

Bank of Industry granted the Company a medium term facility of N594.73 million on 18 May 2007 with initial drawdown on 11 January 2009. The loan facility is for a 5 year period (inclusive of one year moratorium and subsequently extended by 9 months) to be disbursed towards the acquisition of ultra modern pharmaceutical equipment at an interest rate of 10% per annum payable monthly in arrears. The loan is repayable in 34 equal and consecutive instalments commencing from 31 January 2010 and is secured on bank guarantee from Guaranty Trust Bank Plc.

d Access bank Facility

The facility is a combination of N200 million construction loans and N200 million equipment import loan with N64.26 million drawn down. The construction loan is repayable in 24 equal installments with effect from October 2011 at an interest rate of 18.5% per annum. The equipment import loan is repayable in 18 equal installments with effect from May 2012 at an interest rate of 18.5% per annum. The facilities are covered by negative pledge on the assets of the Company.

e Eco Bank Facility

A term loan in the sum of N150 million obtained to facilitate the completion of the construction of Ota pharma centre. The facility is repayable in 30 instalments with effect from September 2011 at an interest rate of 18 % per annum. The facility is covered by a negative pledge on the Company's assets.

f FCMB Facility This facility was obtained during the year in the sum of N39.2 million to finance the purchase of motor vehicles for Company's sales team. The tenor is 3 years with 30 days moratorium period. Interest rate is 19.5% per annum. The facility is secured on the motor vehicles

g GTBank Facility

A term loan obtained during the year in the sum of N100 million to finance purchase of motor vehicle for distribution of pharmaceutical products. The facility is repayable in 12 equal monthly instalments. Interest payable is 16% per annum. The facility is covered by a negative pledge on the Company's assets.

h TY Holdings Facility

The sum of N2 billion was obtained during the year (9th July, 2012) to finance existing loans and working capital facilities. The facility was obtained from a related entity to the Company (see related party note). Interest rate is 11 % per annum. The loan and accruing interest is to be repaid over a 36 month period commencing 12 months after the date of disbursement of the loan. The fair value of the loan using applicable market interest rate of 16.93% is N1.724 billion, the difference of N276million between the gross proceeds and the fair value of the loan has been recognised as day 1 profit included in profit or loss. (see note 10).

This is a related party loan (see note 31.6 for details) Breach of loan agreement

There has been no breach of agreement in respect of any of the facilities during the year.


31 December 2012

42



29 Trade and other payables The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Trade payables (see note 29.1) 393,419

329,880

336,796

393,419

329,880

336,796

Other payables:

Accruals 98,548

89,179

387,276

97,802

88,851

387,276

Social security 43,693

48,705

26,467

43,693

48,705

26,467

Witholding tax payable 107,342

101,950

104,730

107,342

101,950

104,730

Dividend payable (see note 29.2) 100,745

100,618

62,004

100,745

100,618

62,004

Due to related companies (see note 31.3) 45,041

55,207

60,949

45,041

55,207

60,949

Employee benefit payable (see note 29.3) 137,317

109,704

86,928

137,317 109,704 86,928

Others 39,710

18,749

19,341

39,710

18,749

19,341

572,396

524,112

747,695

571,650

523,784

747,695

Trade and other payables 965,815

853,992

1,084,491

965,069

853,664

1,084,491

29.1 Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is

40 days. No interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. The directors consider that the carrying amount of trade payables approximates to their fair value.

The Group The Company

12/31/2012 12/31/2011 1/1/2011 12/31/2012 12/31/2011 1/1/2011

N'000 N'000 N'000 N'000 N'000 N'000

29.2 Dividend Payable

Balance at the beginning

100,618

62,004

70,747

100,618

62,004

70,747

Unclaimed returned during the year 127

39,108

127

39,108

-

Dividend claimed during the year -

(494)

(8,743)

-

(494)

(8,743)

Balance at end

100,745

100,618

62,004

100,745

100,618

62,004

The balance at year end represents the amount that are yet to be received by shareholders.


31 December 2012

43



The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

29.3 Employee benefit payable

At beginning of the period

109,704

86,928

85,222

109,704

86,928

85,222

Charge for the year

30,710

26,151

16,519

30,710

26,151

16,519

Payment during the year

(14,067)

(12,068)

(14,813)

(14,067)

(12,068)

(14,813)

Interest cost

10,970

8,693

-

10,970

8,693

-

137,317

109,704

86,928

137,317

109,704

86,928

The Employee benefit payable relates to the gratuity scheme operated for its employees. The scheme requires the Company to calculate the gratuity entitlements of the employees each year based on the salary as at 31st December of each year using the the scale of entitlements applicable to the staff and pay the amount calculated to the Fund Managers. Upon payment of the calculated amount, it is discharged of all liabilities. The Group remains liable to the employees to the tune of the amounts disclosed as it has not remitted these amounts to the fund managers.

30 Other Liabilities

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Deferred income

82,663

13,884

13,612

82,663

13,884

13,612

Customer deposits

62,934

42,340

37,733

62,934

42,340

37,733

145,597

56,224

51,345

145,597

56,224

51,345

Other liabilities represent non-financial liabilities.

May & Baker Nigeria Plc. Annual Report and Financial Statements.

31 December 2012

44


For the year ended 31 December 2012 31 Related party Information 31.1 Identity of related parties The related parties to the Company include :

Osworth Nigeria Limited - An wholly owned subsidiary of the Company involved in the distribution of pharmaceutical products. Tydipacks Nigeria Limited- An wholly owned subsidiary of the Company involved in healthcare and industrial packaging. Servisure Nigeria Limited- An wholly owned subsidiary of the Company involved in the distribution of pharmaceutical products.

Ty Holdings Limited- A Company owned by the Chairman, Board of Directors. Biovaccines Limited -(see note 17)

Key Management personnel

The Key management personnels of the Group include its directors ( both executive and non-executive) and other identified key management staff.

Lt - Gen T.Y Danjuma (rtd) Non-executive Director Mr Nnamdi N Okafor Executive Director Mr. E.O Ibidapo Executive Director

Mr. I . Dankaro Non-executive Director Mr. A. Adeleke Non-executive Director Mrs. G. I. Odumodu Non-executive Director 31.2 Related Party Transactions

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Sales of goods to related parties were made at the Group's usual price list. Purchases were made at market price discounted to reflect the quantity of goods purchased and the relationships between the parties.

The amounts due from and to related companies arose from sale and purchase of goods and services.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the current or prior years for bad or doubtful debts in respect of the amounts owed by related parties. The ex Managing Director, Mr Odumodu is owing the Company N16.8million and the wife is a member of audit committee and a non-executive Director There were no significant transactions with other related companies.


31 December 2012

45


For the year ended 31 December 2012 31.3 Outstanding balances due to related parties

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

Biovaccines Nigeria Limited 45,041

55,207

60,949

45,041

55,207

60,949

45,041

55,207

60,949

45,041

55,207

60,949

31.4 Outstanding balances due from related parties

The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012

12/31/2011

1/1/2011

N'000

N'000

N'000

N'000

N'000

N'000

-

-

-

-

-

-

Servisure Nigeria Limited -

-

-

88,081

-

-

Tydipacks Nigeria Limited -

-

-

12,845

-

-

Osworth Nigeria Limited -

-

-

123,047

90,915

-

-

-

-

223,973

90,915

-

31.5 Loans to related parties During the period under review no loan was granted to any related entity or key management personnel or entities controlled by them.


31 December 2012

46


For the year ended 31 December 2012 31.6 Loans from related parties

On 9th July, 2012 the Company obtained a term loan of N2 billion from TY Holdings Limited, a Company controlled by TY Danjuma, the Chairman of the Company who currently holds 24.38% of the issued share capital of the Company. The facility was obtained at a below market interest rate of 11 % per annum and payable over a 36 months period after an initial moratorium period of 12 months.

Default clause Where the Company defaults in the repayment of the principal and or interest 120 days after the payment of any instalment falls due, the lending shareholder may, at anytime thereafter by written notice to the Company, elect to convert some or all of the outstanding loan sum plus interest to ordinary share capital of the company (which shares shall rank pari passu with the existing ordinary shares in the capital of the Company). The conversion price shall be the prevailing price that the Borrower's shares traded in the Nigerian Stock Exchange at the date the loan was first disbursed.

31.6.1 Computation of diluted earnings per share

The condition for a contingent issue of shares (i.e default) had not been met as at year end. The dilutive impact of any such issue on default has therefore not been factored into the diluted earnings per share on note 15.

31.7 Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the Company, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.


31 December 2012

47



The Group

The Company

12/31/2012

12/31/2011

1/1/2011

12/31/2012 12/31/2011 1/1/2011

N'000

N'000

N'000

N'000 N'000 N'000

Short term benefits

Director's fees 1,200

1,215

1,350

1,200 1,215 1,350

Director's salaries and allowances 70,658

70,424

52,538

70,658 70,424 52,538

71,858

71,639

53,888

71,858 71,639 53,888

The short term benefit is broken down to:

Chairman 4,901

4,901

950

4,901 4,901 950

Other Directors 66,957

66,738

52,938

66,951 66,738 52,938

71,858

71,639

53,888

71,858 71,639 53,888

31.8 Substantial interest in shares

List of shareholding 5% and more:

31-Dec-12

12/31/2011

Number

% Number %

Lt- Gen T.Y. Danjuma (Rtd) (TY Holdings)

238,928,169

24.38% 238,928,169 24.38%

Joseph Odumodu

57,742,156

5.89% 57,742,156 5.89%

David Dankaro

56,023,695

5.72% 56,023,695 5.72%

No individual shareholder other than as stated above held more than 5% of the issued share capital of the Company as at 31 December, 2012.


31 December 2012

48



32 Reconciliation of net profit to net cash provided by operating activities

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000

Profit after taxation

75,943

222,172

82,282

221,039

Adjustment to reconcile net cash provided:

Depreciation of property, plant and equipment (see note 17) 421,483

205,923

419,987

205,804

(Profit) on disposal of Property, plant and equipment

-

(93,598)

(93,598)

Finance cost

469,630

242,533

468,467

242,533

Interest received

(2,247)

(1,113)

(2,247)

(1,113)

Gain on fair value on loan

(275,616)

-

(275,616)

-

Proceeds on PPE disposal receivable

-

61,852

-

61,852

Accrued asset disposal expenses

-

(8,000)

-

(8,000)

Change in assets and liabilities:

Decrease (Increase) in inventories

(413,313)

358,623

(388,369)

396,399

(Increase) decrease in trade and other receivables

(634,310)

100,955

(656,761)

24,074

Decrease in other assets

28,458

200,134

2,221

226,371

Decrease (Increase) in trade and other payables

111,823

(269,113)

111,405

(269,441)

Increase in other liabilities

89,373

4,879

89,373

4,879

Increase in provisions

Increase (Decrease) in current tax

(98,120)

33,091

(97,996)

31,005

Decrease in deferred tax

(66,786)

(51,605)

(66,786)

(51,659)

Total adjustments

(369,625)

784,561

(396,322)

769,106

Net cash generated by operating activities (293,682)

1,006,733

(314,040)

990,145

May & Baker Nigeria Plc. Consolidated Financial Statements

31 December 2012

49

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33 Financial Instruments 33.1 Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of its capital structure The capital structure of the Group is made up of debts ( bank overdrafts, commercial papers and term loans) and equity comprising issued capital, retained earnings and share premium.

The Group is not subject to any externally imposed capital requirements.

The Group's risk management team reviews the capital structure periodically. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The risk management team monitors the gearing ratio to ensure its within the Group's targeted level. The current gearing ratio of the Group and Company is as below:

Gearing ratio

The gearing ratio is as follows:

31-Dec-12

31-Dec-11

1-Jan-11

Net Debt

N'000

N'000

N'000

Debt

3,659,575

2,641,668

2,394,887

Cash and cash equivalents

(237,418)

(215,085)

(208,235)

3,422,157

2,426,583

2,186,652

Net Debt

Equity

Ordinary shares

490,000

490,000

490,000

Share premium

1,626,094

1,626,094

1,626,094

Retained earnings

1,016,202

1,038,259

816,087

3,132,296

3,154,353

2,932,181

Net debt to equity ratio

1.09

1.16

1.08

i Debt is defined as current- and non current borrowings ( as described in note 28) ii Equity includes all capital and reserves of the Group that are managed as capital. 33.2 Categories of financial instruments The Group's financial assets and financial liabilities as at the reporting date is tabulated below:

Group

Loans and receivables

Non financial assets

Total

Assets

N'000

N'000

N'000

Intangible assets

-

67,296

67,296


-

4,670,433

4,670,433


245,325

-

245,325

Inventories

-

1,313,857

1,313,857


1,424,267

-

1,424,267

Cash and bank balances

237,418

-

237,418

Other assets

-

66,517

66,517

Asset held for sale

-

44,293

44,293

1,907,010

6,162,396 8,069,406


31 December 2012

50

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33.2 Categories of financial instruments

The Group's financial assets and financial liabilities as at the reporting date is tabulated below:

Group

12/31/2012

Amortised cost

Non-financial liabilities

Total

Liabilities

N'000

N'000

N'000

Borrowings

3,659,575

-

3,659,575


-

126,257

126,257

Other liabilities

-

145,597

145,597

Trade and other payables

965,815

-

965,815


-

39,866

39,866

4,625,390

311,720

4,937,110

12/31/2011

Group



Total

Assets

N'000

N'000

N'000

Intangible assets

-

67,296

67,296


-

4,724,084

4,724,084


245,325

-

245,325

Inventories

-

900,544

900,544


789,957

-

789,957


215,085

-

215,085

Other assets

-

94,975

94,975

1,250,367

5,786,899

7,037,266

Amortised cost


Total

Liabilities

N'000

N'000

N'000

Borrowings

2,641,668

2,641,668


-

193,043

193,043

Other liabilities

-

56,224

56,224


853,992

-

853,992


137,986

-

137,986

Provisions

-

-

-

3,633,646

249,267

3,882,913


31 December 2012

51

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33 Financial Instruments

33.2 Categories of financial instruments

The Group's financial assets and financial liabilities as at the reporting date is tabulated below:

Group

1/1/2011


Available for sale

Non

financial assets

Total

Assets

N'000

N'000

N'000

N'000

Intangible assets -

-

67,296

67,296

Property, plant and equipment -

-

3,846,403

3,846,403

Deposit for investment -

245,325

-

245,325

Inventories

-

-

1,259,167

1,259,167

Trade and other receivables 890,912

-

-

890,912

Cash and bank balances 208,235

-

-

208,235

Other assets

-

295,109

295,109

1,099,147

245,325

5,467,975

6,812,447

Amortised cost


Total

Liabilities

N'000

N'000

N'000

Borrowings

2,394,887

-

2,394,887


-

244,648

244,648

Other liabilities

-

51,345

51,345


1,084,491

-

1,084,491


-

104,895

104,895

3,479,378

400,888

3,880,266


31 December 2012

52



The Company's financial assets and financial liabilities as at the reporting date is tabulated below:

Company

12/31/2012



Total

Assets

N'000

N'000

N'000

Intangible assets

-

67,296

67,296


-

4,653,119

4,653,119


245,325

-

245,325

Inventories

-

1,251,137

1,251,137


1,523,599

-

1,523,599


217,564

-

217,564

Other assets

-

66,517

66,517

Asset held for sale

-

44,293

44,293

1,986,488

6,082,362

8,068,850

Amortised cost


Total

Liabilities

N'000

N'000

N'000

Borrowings

3,659,575

-

3,659,575


-

126,203

126,203

Other liabilities

-

145,597

145,597


965,069

-

965,069


-

37,904

37,904

4,624,644

309,704

4,934,348


31 December 2012

53




Company

12/31/2011



Total

Assets

N'000

N'000

N'000

Intangible assets

-

67,296

67,296


-

4,723,581

4,723,581


245,325

-

245,325

Inventories

-

862,768

862,768


866,838

-

866,838


198,119

-

198,119

Other assets

-

68,738

68,738

1,310,282

5,722,383

7,032,665

Amortised

cost


Total

Liabilities

N'000

N'000

N'000

Borrowings

2,641,668

-

2,641,668


-

192,989

192,989

Other liabilities

-

56,224

56,224


853,664

853,664


-

135,900

135,900

3,495,332

385,113

3,880,445


Company

1/1/2011



Total

Assets

N'000

N'000

N'000

Intangible assets

-

67,296

67,296


-

3,846,403

3,846,403


245,325

-

245,325

Inventories

-

1,259,167

1,259,167


890,912

-

890,912


208,235

-

208,235

Other assets

-

295,109

295,109

1,344,472

5,467,975

6,812,447

Amortised cost

Non-

financial liabilities

Total

Liabilities

N'000

N'000

N'000

Borrowings

2,394,887

-

2,394,887


-

244,648

244,648

Other liabilities

-

51,345

51,345


1,084,491

-

1,084,491


-

104,895

104,895

3,479,378

400,888

3,880,266


31 December 2012

54

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33 Financial Instruments (continued) 33.3 Financial risk management

The Group is exposed to market risk, credit risk and liquidity risks. The Group's senior mangement team is responsible for monitoring the Group's exposure to each of the mentioned risks.

33.3.1 Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices is affected by interest rate risk and foreign exchange currency risk. Financial instruments affected by market risk include loans and borrowings and deposits.

Market risks exposures are measured using sensitivity analysis. 33.3.1.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk because it borrows funds at both fixed and floating interest rates(See note 26 ) .The sensitivity analyses below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. 200 basis points increase or decrease are used as it represents management’s assessment of the reasonably possible change in interest rates. The Group minimises its exposure to interest rate risk by maintaining an appropriate mixe between fixed and floating rate borrowings. If NIBOR had been 200 basis points higher and all other variables were held constant, the Group and Company's profit or loss will be affected as follows:

The Group

The Company

12/31/2012

12/31/2011

12/31/2012

12/31/2011

N'000

N'000

N'000

N'000

Impact on reported profit

(9,393) (4,851)

(9,369)

(4,851)

An equal opposite impact will be reported if it Nibor was 200 basis points lower. 33.3.1.2 Foreign currency risk management

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates is minimal as the Group's borrowing activities are in local currency and trade customers are billed in Naira. Exposure to foreign exchange risk only relates to purchase of operating materials (eg raw materials and specialised products) abroad, this is minimised by restricting imports to circumstance where no local alternative exist. The Group makes use of letter of credit facilities to transact with foreign suppliers and

Exposure to foreign currency

31/12/2012

31/12/2011

1/1/2011

Bank account

N'000

N'000

N'000

In US Dollars

14,986

(1,406)

2,547

In Euros

1,489

-

-

In GBP

20

(163)

(1,959)

16,495

(1,569)

588

The Group is not materially exposed to foreign currency changes as most of trading transactions and borrowing activities are denominated in Naira.


31 December 2012

55

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33 Financial Instruments (continued) 33.3.2 Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions.

The Group

The Company

Exposure to credit risk 31/12/2012

31/12/2011

31/12/2012

31/12/2011

Trade receivables 1,746,129

830,632

1,619,746

816,598

Other receivables 204,113

155,378

428,086

246,293

Bank balances 237,418

215,085

217,564

198,119

2,187,660

1,201,095

2,265,396

1,261,010

33.3.2.1 Trade receivables

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. A sales representative is attached to each customer and outstanding customer receivables are regularly monitored by the representative. The requirement for an impairment is analysed at each reporting date on an individual basis for major customers, additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. .

Collateral and other credit enhancements The Group does not hold any collateral or other credit enhancements from customers. On a case by case basis the group creates a legal right of offset against any amount owed by the group to the counter party.

Concetration risk The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets There are no customers during the current reporting period that represents more than 5% of the total trade receivables.

33.3.2.2 Other receivables

This is mainly from due from related companies. The Group's financial controller continously monitors and reviews the receivables

33.3.2.3 Deposits with banks and other financial institutions

Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Surplus funds are spread amongst reputable commercial banks and funds must be within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s financial controller periodically and may be updated throughout the year subject to approval of the Group's Chief Exceutive Officer. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure. The Group’s maximum exposure to credit risk for the components of the statement of financial position is its carrying amount.


31 December 2012

56

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33.3.3 Liquidity risk management

The Group monitors its risk to a shortage of funds by maintaining a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities. It also ensures that short term funds are used strictly for working capital purposes while capital projects are funded from long tenored borrowings. Access to sources of funding is sufficiently available.

Maturity analysis of financial instruments The maturity profile of the Group's recognized financial instruments is detailed below:

12/31/2012

Group 0-6 months

6 months to 1 year

1 to 2 years

Over 2 years

Total

N'000

N'000

Financial assets Trade receivables 1,269,171

244,479

232,479

-

1,746,129


-

-

-

204,113 Cash and bank balances 237,418

-

-

-

237,418

-

1,710,702

244,479

232,479

-

2,187,660

Financial liabilities Trade payables 393,419

-

-

-

393,419

Other payables 572,396

-

-

-

572,396

Term loans -

-

542,396

2,139,227

2,681,623

Bank overdrafts and commercial papers 113,268

864,684

977,952

1,079,083

864,684

542,396

2,139,227

4,625,390

12/31/2011

0-6 months

6 months to 1 year

1 to 2 years

Over 2 years

Total

N'000

N'000

N'000

N'000

N'000

Financial assets Trade receivables 430,817

219,259

180,556

-

830,632


-

-

-

155,378


-

-

-

215,085

-

801,280

219,259

180,556

-

1,201,095

Financial liabilities Trade payables 329,880

-

-

-

329,880


-

-

-

524,112

Term loans 220,000

463,184

-

737,359

1,420,543

Bank overdrafts and commercial papers -

1,221,125

-

-

1,221,125

1,073,992

1,684,309

-

737,359

3,495,332


31 December 2012

57

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 33 Financial Instruments (continued)

Maturity analysis of financial instruments

1/1/2011

0-6 months

6 months to 1 year

1 to 2 years

Over 2 years

Total

N'000

N'000

N'000

N'000

N'000

Financial assets

Trade receivables 930,527

-

-

-

930,527


-

-

-

89,829


-

-

-

208,235

-

1,228,591

-

-

-

1,228,591

Financial liabilities

Trade payables 336,796

-

-

-

336,796


-

-

-

747,695

Term loans 220,000

389,603

-

815,195

1,424,798


948,497

-

-

970,089

1,326,083

1,338,100

-

815,195

3,479,378

Company

0-6 months

6 months to 1 year

1 to 2 years

Over 2 years

Total

N'000

N'000

Financial assets

Trade receivables 1,153,818

234,272

231,656

-

1,619,746


-

-

-

428,086


-

-

-

217,564

1,799,468

234,272

231,656

-

2,265,396

Trade payables

393,419

-

-

-

393,419

Term loan- Ty Holdings loan 571,650

-

-

-

571,650

Term loans

-

-

542,396

2,139,227

2,681,623


864,684

-

-

977,952

1,078,337

864,684

542,396

2,139,227

4,624,644

12/31/2011

Company

0-6 months

6 months to 1 year

1 to 2 years

Over 2 years

Total

N'000

N'000

Financial assets


219,259

180,556

-

816,598


-

-

-

246,293


-

-

-

198,119

861,195

219,259

180,556

-

1,261,010


Trade payables

329,880

-

-

-

329,880

Other payables

523,784

-

-

-

523,784

Term loans

220,000

463,184

-

737,359 1,420,543

Bank overdrafts and commercial papers -

1,221,125

-

- 1,221,125

1,073,664

1,684,309

-

737,359

3,495,332


31 December 2012

58

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 Maturity analysis of financial instruments

The maturity profile of the Company's recognized financial instruments is detailed below:

1/1/2011

Company

0-6 months

6 months to 1 year

1 to 2 years

Over 2 years

Total

N'000

N'000

Financial assets


-

-

-

930,527


-

-

-

89,829


-

-

-

208,235

1,228,591

-

-

-

1,228,591


Trade payables

336,796

-

-

-

336,796

Other payables

747,695

-

-

-

747,695

Term loans

220,000

389,603

-

815,195 1,424,798


948,497

-

- 970,089

1,326,083

1,338,100

-

815,195

3,479,378

33.4 Fair value of financial instruments carried at amortised cost

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

Book Value

Fair value

31/12/2012

31/12/2011

1/1/2011

31/12/2012

31/12/2011

1/1/2011

Financial Assets

Trade and other receivables 1,424,267

789,957

890,912

1,424,267

789,957

890,912


215,085

208,235

237,418

215,085

208,235

1,661,685

1,005,042

1,099,147

1,661,685

1,005,042

1,099,147

Finacial Liabilities

Trade and other payables 965,815

853,992

1,084,491

965,815

853,992

1,084,491

Term loan -CBN

569,577

639,179

709,540

405,784

444,892

482,569

Other term loans

95,139

561,364

495,258

95,139

561,364

495,258

Term loan- Ty Holdings loan 1,796,907

-

-

1,796,907

-

-

Bank Overdrafts

1,084,684

1,441,125

1,168,497

1,084,684

1,441,125

1,168,497

Commercial Papers 113,268

-

21,592

113,268

-

21,592

4,625,390

3,495,660

3,479,378

4,461,597

3,301,373

3,252,407


31 December 2012

59

Notes to the Consolidated Financial Statements For the year ended 31 December 2012 34 Guarantees and other Financial Commitments Charges on assets

The bank loans and overdrafts are secured by a negative pledge on the Group's assets.There is a bank guarantee of N594 million with Guaranty Trust Bank Plc.

Capital expenditure Capital expenditure authorised by the Directors but not contracted was nil ( 31/12/2011: nil)

The Directors are of the opinion that all known liabilities and commitments have been taken into account in the preparation of the financial statement. These liabilities have relevance in assessing the Group's state of affairs.

35 Contingent asset and liabilities There were no contingent assets and liabilities resulting from litigations at 31 December 2012. 36 Major suppliers The Group's suppliers are both local and foreign. Some of the Group's major suppliers include: Local Drugs & Healthcare Limited National Salt Company Dangote Flour Mills Plc Primal Nigeria Limited Chellarams Flour Mills of Nigeria Plc. Presco Plc. Foreign IPCA Laboratories Limited (india) Aurobindo Pharm Limited (india) Surya Engineers (India) Caffry Sanders International Limited (UK) Belco Pharma ( India) The Group is not related to any of its suppliers. 37 Events after the reporting date

The Directors are of the opinion that there were no significant events after the reporting date which would have had a material effect on the accounts which have not been adequately provided for or disclosed in the financial statements.


31 December 2012

60

Statement of Value Added For the year ended 31 December 2012

The Group

The Company

31/12/2012

31/12/2011

31/12/2012

31/12/2011

N'000 %

N'000 %

N'000 %

N'000 %

Continuing operations Revenue 5,668,449

4,837,569

5,484,925

4,749,617

Other income 11,960

6,976

11,960

6,976 Investment income 2,447

1,443

2,447

1,443

Other gains and losses 278,759

93,598

278,759

93,598

5,961,615

4,939,586

5,778,091

4,851,634

Bought-in-materials and services: - Imported

(699,535)

(343,045)

(699,535)

(342,323)

- Local

(3,765,028)

(3,374,388)

(3,597,084)

(3,303,113)

Value added

1,497,052 100

1,222,153 100

1,481,472 100

1,206,198 100

Applied as follows:

-

-

-

-

To pay employees: Salaries, wages and other benefits 561,417 38

446,332 36

542,842 37

435,848 36

To pay Government:

Taxation 35,365 2

156,652 13

34,680 2

152,633 13

To pay providers of capital:

Finance charges 469,630 31

242,533 20

468,467 32

242,533 20

To provide for maintenance of fixed assets: - Depreciation

421,483 28

206,069 17

419,987 28

205,804 17

- Deferred taxation

(66,786) (4)

(51,605) (4)

(66,786) (5)

(51,659) (4) - Profit and loss account

75,943 5

222,172 18

82,282 6

221,039 18

1,497,052 100

1,222,153 100

1,481,472 100

1,206,198 100

Value added represents the additional wealth which the Company has been able to create by its own and its employees' efforts. The statement shows the allocation of that wealth to employees, government, providers of finance and shareholders, and that retained for future creation of more wealth.


31 December 2012

61

Two-Year Financial Summary Group

IFRS

IFRS

2012

2011

ASSETS / LIABILITIES

N'000

N'000

Intangible assets

67,296

67,296 Property, plant and equipment

4,670,433

4,724,084


245,325

245,325 Investment in subsidiary

-

-

Asset held for sale

44,293

- Net current assets/(liabilities)

315,101

(942,410)

Borrowings

(2,039,602)

(746,899) Deferred tax liabilities

(126,257)

(193,043)

NET ASSETS

3,132,296

3,154,353

CAPITAL AND RESERVES Share capital

490,000

490,000 Share premium

1,626,094

1,626,094

Retained earnings

1,016,202

1,038,259

3,132,296

3,154,353

PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Turnover

5,668,449

4,837,569

Profit before taxation

44,522

327,219 Taxation

(31,421)

105,047


75,943

222,172

Per share data (Kobo): Earnings - Basic

0.08

0.23 Net assets

3.20

3.22


31 December 2012

62

Five-Year Financial Summary Company

IFRS

IFRS

IFRS

NGAAP

NGAAP

2012

2011

2010

2009

2008

ASSETS / LIABILITIES

N'000

N'000

N'000

N'000

N'000

Intangible assets

67,296

67,296

67,296

67,296

67,296 Property, plant and equipment

4,653,119

4,723,581

3,846,403

3,193,755

1,987,750


245,325

245,325

245,325

245,325

245,325 Investment in subsidiary

3,000

1,000

-

-

-

Net current assets/(liabilities)

334,567

(944,094)

(167,000)

(75,650)

1,106,106 Borrowings

(2,039,602)

(746,899)

(815,195)

(427,483)

(374,920)


(126,203)

(192,989)

(244,648)

(297,536)

(277,931)

NET ASSETS

3,137,502

3,153,220

2,932,181

2,705,707

2,753,626

CAPITAL AND RESERVES Share capital

490,000

490,000

490,000

350,000

350,000 Share premium

1,626,094

1,626,094

1,626,094

1,641,394

1,641,394

Retained earnings

1,021,408

1,037,126

816,087

714,313

762,232

3,137,502

3,153,220

2,932,181

2,705,707

2,753,626

PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Turnover

5,484,925

4,749,617

4,639,202

4,604,458

5,439,910

Profit before taxation

50,176

322,013

307,790

344,162

422,632

Taxation

32,106

(100,974)

(114,813)

(112,081)

(290,350)


82,282

221,039

192,977

232,081

132,282

Per share data (Kobo):

Earnings - Basic

0.08

0.23

0.20

0.33

0.19 Net assets

3.25

3.22

2.99

3.87

3.93

NOTES

Earnings per share are based on the profit after taxation and the number of issued and fully paid ordinary shares at the end of each financial year. Net assets per share are based on the net assets and the number of issued and fully paid ordinary shares at the end of each financial year.

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