Seven‐Up Bottling Company PLC
Annual Report
31 March 2017
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
ContentsPage
Directors and other corporate information 1
Results at a glance 2
Directors’ report 3
Statement of directors’ responsibilities in relation to the financial statements 12
Report of the Audit committee 13
Independent Auditor's Report 14
Statement of financial position 18
Statement of profit or loss and other comprehensive income 19
Statement of changes in equity 20
Statement of cash flows 21
Notes to the financial statements 22
Other national disclosures 68
Value Added Statement 69
Five Year Financial Summary 70
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Directors and other corporate information
Board of Directors: Mr. Faysal El‐Khalil, O.O.N (Lebanese) ‐ Chairman
Mr. Sunil Sawhney (Indian) ‐ Vice Chairman with effect from 1 April 2017
Mr. Ziad Maalouf (Lebanese) ‐ Managing Director/ CEO with effect from 1 April 2017
Chief Farid El‐khalil (Lebanese)
Otunba (Dr) A. Ojora O.F.R., C.O.N.
(Alternate) ‐ Mrs. Oluwatoyin Ojora Saraki
Chief Emmanuel N. Nwokoro
Mallam Mohammed Hayatu‐Deen O.O.N.
Mr. Ziad A. El‐Khalil (Lebanese)
Mr. Femi MokikanMr. Georges Kolakez (Lebanese)
Company Secretaries: Equity Services Limited162 Ikorodu Road (2nd floor)Onipanu, Lagos
Registered Office: 247 Moshood Abiola WayIjoraLagos
Registrars: GTL Registrars Limited 2 Burma RoadApapa, Lagos
KPMG Professional ServicesKPMG TowerBishop Aboyade Cole StreetVictoria Island, Lagos
Principal Bankers: Access Bank PLC.
Citibank Nigeria Limited
Diamond Bank PLC.
Ecobank Nigeria PLC.
Fidelity Bank PLC.
First Bank of Nigeria Limited
First City Monument Bank Limited
FSDH Merchant Bank Limited
Guaranty Trust Bank PLC.
Heritage Bank Limited
Jaiz Bank PLC.
Rand Merchant Bank Nigeria Limited
Skye Bank PLC.
Sterling Bank PLC.Stanbic IBTC Bank PLC.
Standard Chartered Bank Nigeria Limited
Union Bank of Nigeria PLC.
United Bank for Africa PLC.
Zenith Bank PLC.
Independent Auditor:
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Results at a glanceIncrease
2017 2016 %
Financial information ‐ (in thousands of naira)
Revenue 108,277,000 85,634,679 26
(Loss)/profit before taxation (11,228,438) 3,757,390 (399)
(Loss)/profit for the year (10,776,712) 3,347,463 (422)
Share capital 320,295 320,295 ‐
Total equity 13,225,471 24,779,594 (47)
Data per 50k share ‐ (in naira )
Basic earnings per share (16.82) 5.23 (422)
Diluted earnings per share (16.82) 5.23 (422)
Declared dividend* 1.60 2.75 (42)
Net assets 20.65 38.68 (47)
Dividend proposed** NIL 1.60 ‐
Stock exchange quotation at 31 March
in Naira per share 109.40 155.00 (29)
Number of shares issued (‘000) 640,590 640,590 ‐
Market capitalization at 31 March (N '000) 70,080,546 99,291,506 (29)
Stock Exchange Information
* Declared dividend represents the final dividend proposed for the preceding year but declared
during the current year.
** In current year, no dividend was proposed by the directors (2016:dividend proposed amounting
to N1,024,944,581 representing N1.60 per share on the issued share capital of 640,590,363
ordinary shares of 50 kobo each).
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Directors’ ReportFor the year ended 31 March 2017
1 Legal Form
2 Principal Activities
3 Operating Results
The highlights of the Company’s operating results are as follows:
2017 2016
In thousands of naira
Revenue 108,277,000 85,634,679
Results from operating activities (7,208,085) 6,961,343
Loss/profit before taxation (11,228,438) 3,757,390
Loss/profit for the year (10,776,712) 3,347,463
Total comprehensive (loss)/ income for the year (10,562,376) 2,598,854
4 Dividend
5 Board of Directors
The Directors have pleasure in presenting their report on the affairs of Seven‐Up Bottling Company PLC
(“the Company”) together with the Company’s audited financial statements for the year ended 31 March
2017.
The Company was incorporated as a private limited liability company on 25th June, 1959 under the
name Seven‐Up Limited. On 16th May, 1960, the name was changed to Seven‐Up Bottling Company
Limited and in 1978 it became a public company. The name “Seven‐Up Bottling Company PLC” was
adopted on 26th November, 1991 in compliance with the provisions of the Companies and Allied
Matters Act 1990. Currently, the Company’s shares are quoted on the floor of the Nigerian Stock
Exchange.
The Company continued to be engaged in the bottling and marketing of a wide range of soft drinks
and Aquafina table water.
In current year, no dividend was proposed by the directors (2016:dividend proposed amounting to
N1,024,944,581 representing N1.60 per share on the issued share capital of 640,590,363 ordinary
shares of 50 kobo each).
The names of the Directors who held office during the year under review are as listed in Note6(a) of
this report.
Mr. Sunil Sawhney joined the company as Chief Operating Officer in 2001 and was appointed
Managing Director/Chief Executive Officer in May 2009. He was subsequently elevated to the
position of Vice Chairman with effect from 1st April 2017.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
6 Directors and their Interests
(a)
Name 2017 2016
Otunba (Dr.) A. Ojora O.F.R, C.O.N 2,252,635 2,252,635
Chief Emmanuel N. Nwokoro 600,300 672,643
Mr. Femi Mokikan 33,116 33,116
Mr. Faysal El‐Khalil ** ‐ ‐
Mr. Sunil Sawhney * ‐ ‐
Chief Farid El‐Khalil ** ‐ ‐
Mallam Mohammed Hayatu‐Deen O.O.N ‐ ‐
Mr. Ziad A. El‐Khalil ** ‐ ‐
Mr. Georges Kolakez ** ‐ ‐
* Indian
** Lebanese
(b)
(c)
Mr. Ziad Maalouf was appointed Managing Director/Chief Executive Officer after the last AGM
effective from 1st April 2017. In compliance with the Companies and Allied Matters, Act CAP C20
Laws of the Federation of Nigeria 2004 (hereinafter referred to as “CAMA”), he will retire at the next
following AGM and being eligible, he offers himself for re‐election.
As stipulated in Article 90 of the company’s Articles of Association, Mr. Faysal El‐Khalil and Mr. Ziad
El‐Khalil are the directors who are retiring by rotation. Being eligible, they offer themselves for re‐
election at the forthcoming AGM. With regard to Chief Emmanuel N. Nwokoro, Special Notice has
been received by the company, pursuant to section 256 of CAMA, of the intention to propose the
following resolution as an ordinary resolution:
“That Chief Emmanuel N. Nwokoro who has attained the age of 76 years, be and is hereby re‐elected
a Director of the company.”
The names of the Directors who held office during the year under review are as listed in Note 6(a) of
the Directors' report. Subsequent to the last Annual General Meeting (AGM), Alhaji Ahmadu Yaro
resigned as Director of the Company with effect from 22nd September, 2015.In accordance with Article 90 of the Company’s Articles of Association, Mr. Georges Kolakez, Otunba
(Dr.) Adekunle Ojora and Mallam Mohammed Hayatu‐deen are the Directors retiring by rotation at
this AGM and being eligible, they offer themselves for re‐election. Pursuant to section 258(2) of the
Companies and Allied Matters Act, CAP C20 LFN 2004, a record of the Directors’ attendances at
board meetings during the year under consideration will be made available for inspection by any
member.
The Directors who served during the year and their interests in the issued and paid up share
capital of the Company as recorded in the Register of Members for the purpose of section 275 of
the Companies and Allied Matters Act, CAP C20 LFN, 2004 were as follows:
Shareholdings as at
None of the Directors has notified the Company of any declarable interest in any contract or
proposed contract to which the Company was a party to during the year ended 31 March 2017
for the purpose of section 277 of the Companies and Allied Matters Act, Cap C20, Laws of the
Federation of Nigeria, 2004.
No share options were granted to the directors by Seven Up Bottling Company PLC.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
7 Analysis of ShareholdingsNumber of Number of
Shareholding Between shareholders % shares %
1 ‐ 1,000 19,492 60.51 9,208,386 1.44
1,001 ‐ 5,000 10,277 31.90 21,154,189 3.30
5,001 ‐ 10,000 1,380 4.29 9,749,507 1.52
10,001 ‐ 50,000 822 2.55 15,999,515 2.50
50,001 ‐ 100,000 100 0.31 6,920,015 1.08
100,001 ‐ 500,000 106 0.33 22,482,582 3.51
500,001 ‐ 1,000,000 14 0.04 9,923,486 1.55
1,000,001 and above 23 0.07 545,152,683 85.10
32,214 100 640,590,363 100
8 Substantial Shareholders
9 Donations
2017 2016
In thousands of naira
Lagos State Security Trust Fund ‐ 2,000
AFBTE Secretariat ‐ 3,000
Co‐sponsor Financial Reporting Council of Nigeria ‐ 1,000
2016 Nigeria Stock Market (Pearl Awards) ‐ 125
GCE Forms for 20 Abete Community Children 297 297
Nigeria Red Cross Babies Home 20 ‐
Entrepreneurship support for 2016 ‐ Fate Foundation Nigeria 90 ‐
URJA Foundation ‐Support for three kids 400 ‐
Scholarship for 3 Courage Education Foundation Students 610 ‐
Scholarship support to Bethesda Child Support Agency 450 ‐
Scholarship to UmuolaEgbelu Community 600 ‐
Nigeria Army Officers Mess ‐ Ikeja 100 ‐
Computer Centre Project for UmuolaEgbelu Youth 488 ‐
Anthony Akpati Annual Tribute 311 282
Privilege and Orphanage Home 150 ‐
Lady of the Rosary Church ‐ 600
3,516 7,304
In accordance with section 38(2) of the Companies and Allied Matters Act, Cap.20, Laws 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 during the year.
As contained in the Register of Members, AFFELKA S.A. held 469,047,789 ordinary shares of 50k each
in the capital of the Company representing 73.22% of the issued capital as at 31st March, 2017. No
other shareholder held 5% or more of the share capital of the Company as at that date.
In the year under review, the Company made donations to charitable institutions, bodies and
individuals amounting to N3,515,500 (2016: N7,304,000). The beneficiaries were as follows:
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
10 Local Sourcing of Raw Materials
11 Suppliers
12 Product Distribution
13 Acquisition of Own Shares
The Company did not acquire any of its own shares during the year under review.
14 Property, plant and equipment
15 Events after the reporting date
16 Employment and Employees
(a) Employment of physically challenged persons:
(b) Health and Safety at Work and Welfare of Employees:
The Company continues to maintain its policy of non‐discrimination on recruitment and selection
when considering applications for employment, including those received from physically
challenged persons. In the event of any employee becoming disabled in the line of duty through
industrial accident, the Company ensures continuity of employment by arranging suitable
training for such employees who are subsequently redeployed to jobs compatible with their
capability. Presently, the Company has seventeen (2016: seventeen) physically challenged
persons on its payroll.
Information relating to changes in property, plant and equipment is given in Note 11 to the financial
statements.
There were no events after the reporting date which could have had a material effect on the
financial position of the Company as at 31 March 2017 and its operating results for the year ended
which have not been adequately provided for in these financial statements.
The Company gives priority attention to health, safety and welfare of its employees, and ensures
that its Smoke Area Policy is observed in all its facilities. The health and ailment status of its
workforce are regularly monitored.
On a continuing basis, the Company explores the use of local raw materials in its production
processes and has successfully introduced the use of locally produced items such as sugar, crown
corks and chemicals in a number of its products.
The Company procures all of its raw materials on a commercial basis from overseas and local
suppliers including Bua Sugar Refinery, Golden Penny Sugar, Aristocrat, Prima Corporation and
Indorama.
The Company distributes its products directly nationwide. The Company motivates key dealers to
expand the existing distribution network by establishing mini depots.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(c) Employee Involvement and Training:
17 Corporate Governance
Name of Directors
No. of
meetings
held
No. of
meetings
attended
Mr. Faysal El‐Khalil, O.O.N 5 5
Mr. Sunil Sawhney 5 4
Otunba (Dr.) A. Ojora, O.F.R, C.O.N 5 5
Chief Farid EL‐Khalil 5 2
Chief Emmanuel N. Nwokoro 5 4
Mallam Mohammed Hayatu‐deen, O.O.N 5 1
Mr. Ziad A. EL‐Khalil 5 4
Mr. Femi Mokikan 5 5
Mr. Georges Kolakez 5 4
The Board of Directors met five (5) times during the financial year ended 31 March 2017 and a
record of their attendance is as shown below:
The meetings were held on 22nd June 2016, 28th September 2016, 1st December 2016 , 8th
February 2017 and 8th March 2017
The Company is committed to providing employees information regarding issues that affect the
Company’s performance and plans as well as seeking their views, where practicable, on matters
that affect their interests. Towards this end, management holds meetings with employees,
through their representatives, at formal and informal sessions while circulars are published
regularly to brief them about significant corporate issues.
To improve the efficiency and productivity level, employees undergo on‐the‐job training in
addition to being reimbursed all expenses incurred in acquiring professional qualifications.
The Board comprises eight Non‐Executive Directors including the chairman and one Executive
Director. In line with global best practice in corporate governance, the positions of the Chairman
and Chief Executive Officer are separate with two Directors acting in both capacities.
The Board has overall responsibility for supervising the Company’s business, maintaining adequate
and effective internal control system, adding value to shareholders and protecting the interests of
other stakeholders.
The Company’s premises are certified by the Fire Service for emergency preparedness with fire
fighting equipment strategically located within the premises. Fire drills are organised occasionally
to sensitize the employees on the dangers of fire accident in order to prepare them against any
eventuality.
The Company subsidizes housing, transportation and meals and provides free health care
services to employees and their nuclear families. Additionally, it operates a contributory Pension
Scheme and provides a comprehensive National Health Insurance Plan for its employees.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Corporate Governance/Remuneration Committee
Name of Directors
No. of
meetings
held
No. of
meetings
attended
Otunba (Dr.) A. Ojora, O.F.R, C.O.N Chairman 3 3
Chief E.N Nwokoro Member 3 3
Mallam M. Hayatu‐deen Member 3 0
Mr. Femi Mokikan Member 3 3
Risk Management Committee
No. of
meetings
held
No. of
meetings
attended
Mr. Sunil Sawhney Chairman 3 2
Chief Farid EL‐Khalil Member 3 1
Mr. Georges Kolakez Member 3 3
Mr. Ziad El‐Khalil Member 3 3
Management Committee
The Management Committee is made up of two members: Messrs. Sunil Sawhney and Ziad El‐Khalil,
and has responsibility for recommending strategic initiatives to the Board of Directors and
supervising the implementation of board policies.
The committee met 36 times during the year under review and the members' attendance record is
as shown below:
The Risk Management Committee has the objective of advising the board on, among other things,
the company’s appetite for risk and its risk management policy, oversight function regarding
management’s process for the identification of significant risk across the company and the adequacy
of prevention, detection and reporting mechanisms as well as reviewing the adequacy and
effectiveness of risk management and controls.
The committee met on 22nd June 2016, 28th September 2016 and 1st December, 2016 during the
financial year ended 31st March 2017. The record of attendance of members is set out below:
The Committee comprises four Non‐Executive Directors with the responsibility of ensuring the
company’s compliance with good governance practice, nominating for board’s approval candidates
to fill board vacancies, considering and making recommendations on succession planning of the
company for the positions of chairman, managing director, executive director, and other senior
executives. Additionally, it ensures that an appropriate remuneration policy for all directors and
staff is in place and also oversees major changes in employees benefits structure.
The committee meetings were held on 22nd June 2016, 28th September 2016 and 1st December
2016 and the members’ record of attendance is as follows:
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
No. of
meetings
held
No. of
meetings
attendedMr. Sunil Sawhney 36 36
Mr. Ziad A.EL‐Khalil 36 36
18 Securities Trading Policy
19 Complaints Management Policy
OR
20 Audit Committee
The Company has securities trading policy applicable and circulated to directors, insiders, external
advisers and all employees that may at any time possess any inside or material information about
our company.
The Company has adopted a code of conduct regarding securities transaction by the directors on
terms no less exacting than the required standard set out in the Listing Rules of the Nigerian Stock
Exchange.
The Company made specific enquiry of all directors whether they have complied with the required
standard set out in the listing rules and the Company’s code of conduct regarding securities
transactions by directors and the company is unaware of any non‐compliance.
Pursuant to section 359(3) of the Companies and Allied Matters Act, CAP C20 LFN 2004, the
Company has an Audit Committee in place whose functions are as stated in section 359(6) of the Act.
The Committee consists of three (3) Directors and three (3) shareholders’ representatives, including
the chairman. The Committee members met four (4) times in the year under review and their
attendance record is as shown below:
All complaints should be directed to:
GTL Registrars Limited
274, Muritala Muhammed Way
Alagomeji, Yaba, Lagos
P.M.B. 12717
Lagos, Nigeria
Telephone: +234 12793161, +234 18131925
E‐mail: [email protected]
Website: www.gtlregistrars.com
Equity Services Limited
162, Ikorodu Road
Onipanu, Lagos
P.O. Box 7625
Lagos, Nigeria
Telephone: 08188811779
E‐mail:
In accordance with the Securities and Exchange Commission’s Rule Relating to the Complaints
Management Framework of the Nigerian Capital Market which became effective in February 2015,
Seven‐UP Bottling Company PLC has put in place a Complaints Management Policy for the effective
and efficient handling of shareholders’ complaints arising from issues covered under the Investments
and Securities Act, 2007 in a fair, impartial and timely manner.
The complaints management procedure will be posted on the Company’s website:
www.sevenup.org.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
No. of
meetings
held
No. of
meetings
attendedShareholders’ Representative 4 4
Mr Obarinde I. Obatosho Shareholders’ '' 4 4
Mr Kenneth N. Nwosu Shareholders’ '' 4 4
Mr Femi Mokikan Directors’ '' 4 3
Otunba (Dr.) A. Ojora, C.O.N, O.F.R Directors’ '' 4 4
Mr. Georges Kolakez Directors’ '' 4 4
21 Disclosures
(a) Borrowings and maturity dates
(b) Risk Management and Compliance System
(c) Related Party Transactions
22 Report on Social, Ethical, Safety, Health and Environmental Policies and Practices
Corporate Social Responsibility
Evang. Peter Akinola Soares‐ Chairman
The meetings were held on 20th June 2016, 28th November 2016, 6th February 2017 and 10th
February 2017.
The details of the borrowings and maturity dates are stated in Note 22 to the financial
statements.
The Directors are responsible for the total process of risk management as well as expressing their
opinion on the effectiveness of the process. The risk management framework is integrated into
the day‐to‐day operations of the business and provides guidelines and standards for
administering the acceptance and on‐going management of key risks such as operational,
reputational, financial, market, technology and compliance risk. The directors are of the view that
effective internal audit function exists in the Company.
The Company has contractual relationship with related companies in the ordinary course of
business. The details of the value of the transactions and outstanding balances arising from
related party transactions are stated in Note 29 to these financial statements.
Seven‐Up Bottling Company PLC continued its collaboration with the Lagos State Ministry of Youth
and Social Development on Corporate Apprentice Scheme aimed at equipping the youths with
relevant skills for self‐employment and creation of jobs for other people. The Company continued its
sponsorship of one Nigerian graduate each year to do an MBA programme at the Harvard Business
School with all expenses paid. Additionally, the Company has several local projects by which students
at secondary and tertiary levels are given scholarship.
On sports, the company has established the Pepsi Football Academy to give young and talented
players in Nigeria a platform where they can showcase their skills and actualize their dream of
becoming world’s best footballers, in addition to providing them with qualitative education that will
make them well rounded individuals.
The Company sponsors the Aquafina Elite Model competition which aims at promoting fashion and
lifestyle in addition to co‐sponsoring the annual COPA beach soccer in Lagos.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Statement of profit or loss and other comprehensive incomeFor the year ended 31 March
In thousands of naira
Note 2017 2016
Revenue 4 108,277,000 85,634,679
Cost of sales 5(a) (95,349,880) (60,622,243)
Gross profit 12,927,120 25,012,436
Other income 5(b) 427,036 317,434
Selling and distribution expenses 5(a) (13,910,747) (11,801,831)
Administrative expenses 5(a) (6,651,494) (6,566,696)
Results from operating activities (7,208,085) 6,961,343
Finance income 6(a) 424,008 41,571
Finance costs 6(b) (4,444,361) (3,245,524)
Net finance costs (4,020,353) (3,203,953)
(Loss)/Profit before taxation 7 (11,228,438) 3,757,390
Income tax credit/(expense) 9(a) 451,726 (409,927)
(Loss)/Profit for the year (10,776,712) 3,347,463
Other comprehensive income
Items that will never be reclassified to profit or loss:
Remeasurement of defined benefit asset/(liability) 23(a) 315,200 (1,069,442)
Related tax 15(b) (100,864) 320,833
Other comprehensive income/(loss) for the year, net of tax 214,336 (748,609)
Total comprehensive (loss)/ income for the year (10,562,376) 2,598,854
Equity holders of the Company (10,776,712) 3,347,463
Equity holders of the Company (10,562,376) 2,598,854
Earnings per share
Basic and diluted earnings per share (kobo) 10(a) (1,682) 523
Total comprehensive (loss)/ income for the year is
attributable to:
(Loss)/profit for the year is attributable to:
The accompanying notes and significant accounting policies on pages 22 to 67 form an integral part of
these financial statements.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Statement of changes in equityFor the year ended 31 March
In thousands of naira Note Share capital Share premium Retained earnings Total equity
Balance, 1 April 2015 320,295 299,140 23,314,198 23,933,633
Total comprehensive income
Profit for the year ‐ ‐ 3,347,463 3,347,463 Other Comprehensive loss ‐ ‐ (748,609) (748,609)Total comprehensive income ‐ ‐ 2,598,854 2,598,854
Transactions with owners of the Company
Contribution and distribution
Dividend to equity holders 10(b) ‐ ‐ (1,761,623) (1,761,623)Unclaimed dividend written back 24(c) ‐ ‐ 8,730 8,730 Total transactions with owners of the Company ‐ ‐ (1,752,893) (1,752,893)
Balance, 31 March 2016 320,295 299,140 24,160,159 24,779,594
Balance, 1 April 2016 320,295 299,140 24,160,159 24,779,594 Total comprehensive income Loss for the year ‐ ‐ (10,776,712) (10,776,712)Other comprehensive income ‐ ‐ 214,336 214,336
Total comprehensive income ‐ ‐ (10,562,376) (10,562,376)
Transactions with owners of the Company
Contribution and distribution
Dividend to equity holders 10(b) ‐ ‐ (1,024,943) (1,024,943)
Unclaimed dividend written back 24(c) ‐ ‐ 33,196 33,196 Total transactions with owners of the Company ‐ ‐ (991,747) (991,747)
Balance, 31 March 2017 320,295 299,140 12,606,036 13,225,471
The accompanying notes and significant accounting policies on pages 22 to 67 form an integral part of these financial statements.
20
Seven-Up Bottling Company PLC
Annual Report
31 March 2017
Statement of cash flowsFor the year ended 31 MarchIn thousands of naira
Note 2017 2016
Cash flows from operating activities
(Loss)/Profit for the year (10,776,712) 3,347,463
Adjustments for:
Depreciation of property plant and equipment 11(a) 9,487,448 9,325,971
Amortization of intangible assets 12 25,219 35,237
Finance income 6(a) (424,008) (41,571)
Finance costs 6(b) 4,444,361 3,245,524
Employee benefit charge 23(c) 752,221 1,142,434
Impairment loss on trade receivables 12,599 63,306
(Gain)/loss on sale of property, plant and equipment (174,973) 4,109
Bad debt written off 145,276 -
Income tax expense 9(a) (451,726) 409,927
3,039,705 17,532,400
Change in inventories (10,950,017) (1,926,393)
Change in trade and other receivables* (11,540,391) (1,222,739)
Change in investment (42,000) -
Change in prepayments 76,820 177,142
Change in deposit for imports 1,005,917 4,957,800
Change in trade and other payables (excluding dividend payable)** 9,811,283 1,577,023
Cash (used in)/generated from operating activities (8,598,683) 21,095,233
Value Added Tax (VAT) paid ** (1,378,957) (1,812,611)
Income tax paid 9(c) (953,617) (974,853)
Employee benefit paid (1,156,731) (1,323,426)
Net cash (used in)/generated from operating activities (12,087,988) 16,984,343
Cash flow from investing activities
Finance income received 6(d) 40,076 31,455
Proceeds from sale of property, plant and equipment 201,341 93,396
Acquisition of property, plant and equipment 11(a) (7,318,097) (7,321,118)
Acquisition of Intangible assets 12 (905) (62,908)
Net cash used in investing activities (7,077,585) (7,259,175)
Cash flow from financing activities
Proceeds from loans and borrowings 22(a)(ii) 153,550,872 70,326,373
Repayment of loans and borrowings 22(a)(ii) (138,938,617) (67,812,771)
Interest paid 6(c) (3,888,396) (3,015,927)
Dividend paid 24(c) (410,980) (1,643,748)
10,312,879 (2,146,073)
Net (decrease)/increase in cash and cash equivalents (8,852,694) 7,579,095
Cash and cash equivalents at the beginning of the year 4,780,270 (2,798,981)
Effect of exchange rate fluctuations on cash held 56,836 156
Cash and cash equivalents at the end of the year 20 (4,015,588) 4,780,270
Net cash generated from /(used in) financing activities
*Change in trade and other receivables has been adjusted for the effect of impairment loss on trade receivables, bad
debt written off and the effect of exchange rate fluctuations on cash held.
**Change in trade and other payables has been adjusted for the effect of Value Added Tax (VAT) paid shown
separately on the statement of cash flows as well as the portion of property plant and equipment unpaid as at year
end and net gain on foreign exchange transactions.
The accompanying notes and significant accounting policies on pages 22 to 67 form an integral part of these financial
statements.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Notes to the financial statementsFor the year ended 31 March 2017
Page Page
1 Reporting entity 23 16 Inventories 47
2 Basis of preparation 23 17 Investment 47
3 Significant accounting policies 24 18 Derivative 47
4 Revenue 38 19 Trade and other receivables 47
5 Analysis of expenses and other income 38 20 Cash and cash equivalents 48
6 Finance income and finance cost 39 21 Capital and reserves 48
7 Profit before taxation 39 22 Loans and borrowings 49
8 Personnel expenses 40 23 Employee benefits 51
9 Taxation 4224 Trade and other payables 53
10 Earnings and declared dividend per share 43
25 Financial instruments‐ Fair values
and risk management
54
11 Property, plant and equipment 44 26 Capital management 63
12 Intangible assets 45 27 Operating leases 63
13 Prepayments and other receivables 46 28 Contingencies 64
14 Deposit for import 46 29 Related parties 64
15 Deferred taxation 46 30 Subsequent events 67
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Notes to the financial statementsFor the year ended 31 March 2017
1 Reporting Entity
2 Basis of Preparation
(a) Statement of compliance
(b) Basis of measurement
(c) Functional and presentation currency
(d) Use of judgment and estimates
Judgments
Note 27 Leases: whether an arrangement is an operating or finance lease;
Note 9(d) Split of financial results into Pioneer and Non‐ Pioneer
Derivative financial
instruments
Measurement BasisItem
Fair Value
Defined Benefit Liability
Seven‐Up Bottling Company PLC (“the Company”) is a company domiciled in Nigeria. The Company
was incorporated in Nigeria as a private limited liability Company on 25th June, 1959 under the
name Seven‐Up Limited. On 16th May 1960, the name was changed to Seven‐Up Bottling Company
Limited and thereafter to “Seven‐Up Bottling Company PLC” on 26th November 1991 in compliance
with the provisions of the Companies and Allied matters Act 1990. Currently, the Company’s shares
are quoted on the floor of the Nigerian Stock Exchange. The majority shareholder of the Company is
AFFELKA S.A, having 73.22% interest in the equity of Seven‐Up Bottling Company PLC. The address
of the Company’s registered office is 247, Moshood Abiola Way, Ijora, Lagos.The Company is primarily involved in the business of bottling and marketing of a wide range of soft
drinks and Aquafina premium table water across Africa.
The financial statements have been prepared in accordance with the International Financial
Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters
Act, Cap C.20, Laws of the Federation of Nigeria, 2004 and the Financial Reporting Council of
Nigeria Act, 2011. These financial statements were authorized for issue by the Company's Board
of Directors on 28th June 2017.
The financial statements have been prepared on the historical cost basis except for the following
items, which are measured on an alternative basis on each reporting date.
These financial statements are presented in Naira, which is the Company’s functional currency.
All amounts have been rounded to the nearest thousand unless otherwise indicated.
In preparing these financial statements, management has made judgements, estimates and
assumptions that affect the application of the Company's accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
estimates are recognised prospectively.
Information about judgements made in applying accounting policies that have the most
significant effects on the amounts recognised in the consolidated financial statements is
included in the following notes:
Present value of the defined benefit obligation
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Assumptions and estimation uncertainties
Note 23 Measurement of defined benefit obligation: key actuarial assumption
Note 28
Note 24 Liability for returnable packaging material
(e) Measurement of fair values
(f)
3 Significant accounting policies
(a) Foreign currency
Foreign currency transactions
The accounting policies set out below have been applied consistently to all years presented in these
financial statements.
Transactions denominated in foreign currencies are translated and recorded in Naira at the
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency at the exchange rate at the
reporting date. Non‐monetary assets and liabilities that are measured at fair value in a foreign
currency are translated into the functional currency at the exchange rate when the fair value
was determined. Non‐monetary items that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date of the transaction. Foreign currency
differences are generally recognised in profit or loss.
Information about assumptions and estimation uncertainties that have a significant risk of
resulting in a material adjustment in the year ending 31 March 2017 is included in the following
notes:
During the year, the Company reviewed the estimated useful life of its leasehold land as
unlimited on the bias that it is reasonably certain that the Government will usually renew the
leases upon expiration and that the substance of the lease is that the Company has ownership
of the Land, not a right to use the land for a predefined period. This change in accounting
estimate was applied prospectively in accordance with IAS 8 ‐ Accounting Policies, Changes in
Accounting Estimates and Errors.
A number of the Company’s accounting policies and disclosures require the measurement of fair
values, for both financial and non‐financial assets and liabilities.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the
fair value hierarchy, then the fair value measurement is categorised in its entirety in the same
level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the
reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the
following notes:
• Note 25 ‐ Financial instruments‐ Fair values and risk management
Change in accounting estimate
Contingencies: key assumptions about the likelihood and magnitude of
an outflow of resources
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Seven-Up Bottling Company PLCAnnual Report
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(b) Financial instruments
I. Non‐derivative financial assets‐recognition and measurement
Loans and receivables
Cash and cash equivalents
II. Non‐derivative financial liabilities‐recognition and measurement
Loans and receivables are financial assets with fixed or determinable payments that are not
quoted in an active market. Such assets are recognized initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, loans and receivables are
measured at amortized cost using the effective interest method, less any impairment losses.
An impairment loss is recognized if the carrying amount exceeds the estimated recoverable
amount. Loans and receivables comprise trade and other receivables.
Cash and cash equivalents comprise cash on hand, cash balances with banks and call
deposits with original maturities of three months or less. Bank overdrafts that are repayable
on demand and form an integral part of the Company’s cash management are included as a
component of cash and cash equivalents for the purpose of the statement of cash flows.
The Company’s non‐derivative financial assets are classified as loans and receivables and
cash and cash equivalents.
The Company initially recognizes loans and receivables and deposits on the date that they
are originated. All other financial assets are recognized initially on the trade date at which
the Company becomes a party to the contractual provisions of the instrument.
The Company derecognizes a financial asset when the contractual rights to the cash flows
from the asset expire, or it transfers the rights to receive the contractual cash flows on the
financial asset in a transaction in which substantially all the risks and rewards of ownership
of the financial asset are transferred. Any interest in transferred financial assets that is
created or retained by the Company is recognized as a separate asset or liability.
All financial liabilities are recognized initially on the trade date at which the Company
becomes a party to the contractual provisions of the instrument.
The Company derecognizes a financial liability when its contractual obligations are
discharged or cancelled or expire.
The Company has the following non‐derivative financial liabilities: loans and borrowings,
bank overdrafts, trade and other payables. Such financial liabilities are recognized initially at
fair value less any directly attributable transaction costs. Subsequent to initial recognition
these financial liabilities are measured at amortized cost using the effective interest method.
Financial assets and financial liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the Company has a legally enforceable
right to offset the amounts and intends either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
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Seven-Up Bottling Company PLCAnnual Report
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III. Derivative financial instruments
IV. Share capital
(c) Property, plant and equipment
I. Recognition and measurement
II . Subsequent costs
The Company holds derivative financial instruments to hedge its foreign currency
exposures. Embedded derivatives are separated from the host contract and accounted for
separately if certain criteria are met.
Derivatives are initially measured at fair value; any directly attributable transaction costs are
recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are generally recognised in profit or loss.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of ordinary shares and share options are recognized as a deduction from equity, net of any
tax effects.
Cost includes expenditure that is directly attributable to the acquisition of the asset. Items of
property, plant and equipment under construction are disclosed as capital work‐in‐progress.
The cost of construction recognized includes the cost of materials and direct labour, the
costs of dismantling and removing the items and restoring the site on which they are
located, and borrowing costs on qualifying assets and any other costs directly attributable to
bringing the assets to the location and condition necessary for it to be capable of operating
in the manner intended by management. Engineering spare parts and stand‐by equipment
are capitalised as property, plant and equipment when the Company expects to use them
for more than one year.
The cost of replacing a part of an item of property, plant and equipment is recognized in the
carrying amount of the item if it is probable that the future economic benefits embodied
within the part will flow to the Company and its cost can be measured reliably. The carrying
amount of the replaced part is derecognized. The costs of the day‐to‐day servicing of
property, plant and equipment are recognized in profit or loss as incurred.
Items of property, plant and equipment are measured at cost less accumulated depreciation
and any accumulated impairment losses and residual value.
Purchased software that is integral to the functionality of the related equipment is
capitalized as part of the equipment.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
The carrying amount of an item of property, plant and equipment is derecognized on
disposal or when no future economic benefits are expected from its use or disposal. The
gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and are recognized net within other income in profit or loss.
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Seven-Up Bottling Company PLCAnnual Report
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III. Depreciation
The estimated useful lives for the current and comparative periods are as follows:
• Buildings 20 years
• Plant and machinery
‐ moulds 3 years
‐ Other plant and machinery 7 years
• Motor vehicle 5 years
• Office equipment
‐ Furniture and fittings 10 years
‐ IT equipment 4 years
• Returnable packaging materials
‐ Bottles 5 years
‐ Crates 7 years
(d) Intangible assets
I. Software
II. Subsequent expenditure
Depreciation is calculated to write off the cost of items of property, plant and equipment
less their estimated residual values using a straight‐line basis over their estimated useful
lives. Depreciation is generally recognized in profit or loss, unless the amount is included in
the carrying amount of another asset. Leased assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably certain that the Company will obtain
ownership by the end of the lease term in which case the assets are depreciated over the
useful life.
Depreciation methods, useful lives and residual values are reviewed at each financial year
end and adjusted if appropriate. As disclosed in Note (2f), the Company reassessed the
useful life of leasehold land from the lease period (99 years) to unlimited. Consequently, the
Company discontinued the depreciation of leasehold land.
Capital work‐in‐progress is not depreciated. The attributable cost of each asset is transferred
to the relevant asset category immediately the asset is available for use and depreciated
accordingly.
Purchased software with finite useful life is measured at cost less accumulated amortization
and accumulated impairment losses.
Subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure, is recognized in
profit or loss as incurred.
Items of property, plant and equipment are depreciated from the date they are available for
use or, in respect of capital‐work‐in‐progress, from the date that the asset is completed and
ready for use.
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III. Derecognition
IV. Amortization
• Computer software 4 years
(e) Leases
I. Determining whether an arrangement contains a lease
● the arrangement contains a right to use the asset(s).
II. Leased assets
At inception of an arrangement, the Company determines whether such an arrangement is
or contains a lease. This will be the case if the following two criteria are met:
At inception or on reassessment of the arrangement, the Company separates payments and
other consideration required by such an arrangement into those for the lease and those for
other elements on the basis of their relative fair values. If the Company concludes for a
finance lease that it is impracticable to separate the payments reliably, then an asset and a
liability are recognised at an amount equal to the fair value of the underlying asset.
Subsequently the liability is reduced as payments are made and an imputed finance cost on
the liability is recognised using the Company’s incremental borrowing rate.
● the fulfillment of the arrangement is dependent on the use of a specific asset or assets;
and
Amortization is calculated over the cost of the asset, or other amount substituted for cost,
less its residual value.
An item of intangible asset is derecognized on disposal or when no future economic benefits
are expected from its use or disposal. The gain or loss arising from the derecognition of an
intangible assets are determined by comparing the net proceeds (if any) from disposal with
the carrying amount of the intangible assets and are recognized net within other income in
profit or loss.
Amortization is recognized in profit or loss on a straight‐line basis over the estimated useful
lives of intangible assets, from the date that they are available for use, since this most closely
reflects the expected pattern of consumption of the future economic benefits embodied in
the asset. The estimated useful life for the current and comparative periods is as follows:
Amortization methods, useful lives and residual values are reviewed at each financial year‐
end and adjusted if appropriate.
Assets held by the Company under leases for which the Company assumes substantially all
the risks and rewards of ownership are classified as finance leases. Upon initial recognition
the leased asset is measured at an amount equal to the lower of its fair value and the
present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.
Assets held under other leases are operating leases and the leased assets are not recognized
in the Company’s statement of financial position.
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Seven-Up Bottling Company PLCAnnual Report
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III. Lease payments
(f) Inventories
Engineering spares:
Goods‐in‐transit: purchase cost incurred to date
Allowance is made for obsolete, slow moving or defective items where appropriate.
Raw and non‐returnable packaging materials
Products‐ in‐ process and manufactured finished
goods
purchase cost on a weighted
average cost basis, including
transportation and clearing costs
purchase cost on a first‐ in, first ‐ out
basis including transportation and
clearing costs
weighted average cost of direct
materials and labour plus a
reasonable proportion of
manufacturing overheads based on
normal levels of activity
Inventories are measured at the lower of cost and net realizable value. The cost of inventories
includes expenditure incurred in acquiring the inventories, production or conversion costs and
other costs incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work‐in‐progress, cost includes an appropriate share of
production overheads based on normal operating capacity. Cost incurred in bringing each
product to its present location and condition is based on:
Payments made under operating leases are recognized in profit or loss on a straight‐line
basis over the term of the lease. Lease incentives received are recognized as an integral part
of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance
expense and the reduction of the outstanding liability. The finance expense is allocated to
each period during the lease term so as to produce a constant periodic rate of interest on
the remaining balance of the liability.
Weighted average cost is reviewed periodically to ensure it consistently approximates historical
cost.
Net realizable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
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Seven-Up Bottling Company PLCAnnual Report
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(g) Impairment
I. Non‐derivative financial assets
II. Non‐financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting
date to determine whether there is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has occurred after the initial
recognition of the asset, and that the loss event had a negative effect on the estimated
future cash flows of that asset that can be reliably estimated.
Objective evidence that financial assets are impaired can include; default or delinquency by
a debtor, restructuring of an amount due to the Company on terms that the Company would
not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the
disappearance of an active market for a security. In addition, for an investment in an equity
security, a significant or prolonged decline in its fair value below its cost is objective evidence
of impairment.
The Company considers evidence of impairment for receivables at both a specific asset and
collective level. All individually significant receivables are assessed for specific impairment.
All individually significant receivables found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet identified.
Receivables that are not individually significant are collectively assessed for impairment by
grouping together receivables with similar risk characteristics.
In assessing collective impairment, the Company uses historical trends of the probability of
default, timing of recoveries and the amount of loss incurred, adjusted for management’s
judgment as to whether current economic and credit conditions are such that the actual
losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as
the difference between its carrying amount and the present value of the estimated future
cash flows discounted at the asset’s original effective interest rate. Losses are recognized in
profit or loss and recognized in an allowance account against receivables. Interest on the
impaired asset continues to be recognized through the unwinding of the discount. When a
subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, if no impairment loss had been recognized.
The carrying amounts of the Company’s non‐financial assets, other than inventories are
reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For intangible assets that have indefinite useful lives or that are not yet available for use, the
recoverable amount is estimated each year at the same time.
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Seven-Up Bottling Company PLCAnnual Report
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(h) Employee benefits
I. Defined contribution plans
The recoverable amount of an asset or cash‐generating unit is the greater of its value in use
and its fair value less costs to sell. 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 the
purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or groups of assets (the
“cash‐generating unit, or CGU”).
The Company’s corporate assets do not generate separate cash inflows. If there is an
indication that a corporate asset may be impaired, then the recoverable amount is
determined for the CGU to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its
estimated recoverable amount. Impairment losses are recognized in profit or loss.
Impairment losses recognized in respect of CGUs are allocated to reduce the carrying
amounts of the other assets in the unit (group of units) on a pro rata basis.
In respect of other assets, impairment losses recognized in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had been recognized.
A defined contribution plan is a post‐employment benefit plan under which an entity pays
fixed contributions into a separate entity and has no legal or constructive obligation to pay
further amounts in respect of all employee benefits relating to employee service in current
and prior periods.
In line with the provisions of the Pension Reform Act 2014, the Company has instituted a
defined contribution pension scheme for their permanent staff. Staff contributions to the
scheme are funded through payroll deductions. Obligations for contributions to the defined
contribution plan are recognized as employee benefit expense in profit or loss in the periods
which related services are rendered by employees. The Company and its employees each
contribute 10% and 8% respectively of the employees' basic salaries, transport & housing
allowances to the fund on a monthly basis.
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Seven-Up Bottling Company PLCAnnual Report
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II. Defined benefit plans
III. Other long term employee benefits
IV. Termination benefits
The discount rate is the yield at the reporting date on Federal Government of Nigeria issued
bonds that have maturity dates approximating the term of the Company’s obligation. The
calculation is performed using the Projected Unit Credit method. Any remeasurements are
recognized in the profit or loss.
Termination benefits are recognized as an expense when the Company is committed
demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either
terminate employment before the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy. Termination
benefits for voluntary redundancies are recognized as an expense if the Company has made
an offer of voluntary redundancy, it is probable that the offer will be accepted, and the
number of acceptances can be estimated reliably. If benefits are payable more than 12
months after the reporting period, then they are discounted to their present value.
The Company’s other long‐term employee benefits represent Long Service Awards scheme
instituted for all permanent employees. The Company’s obligation in respect of the Long
Service Awards scheme is the amount of future benefits that employees have earned in
return for their service in the current and prior periods. The benefit is discounted to
determine its present value.
A defined benefit plan is a post‐employment benefit plan other than a defined contribution
plan. The Company’s net obligation in respect of defined benefit gratuity scheme is
calculated by estimating the amount of future benefit that employees have earned in return
for their service in the current and prior years and that benefit is discounted to determine its
present value. In determining the liability for employee benefits under the defined benefit
scheme, consideration is given to future increases in salary rates and the Company's
experience with staff turnover.
The Company's liability with respect to this scheme is determined by an independent
actuarial valuation every year using the projected unit credit method. Remeasurements
arising from differences between the actual and expected outcome in the valuation of the
obligation are recognized in other comprehensive income. When the benefits of a plan are
changed or when a plan is curtailed, the resulting change in benefit that relates to past
service or the gain or loss on curtailment is recognised immediately in profit or loss. The
Company recognises gains and losses on the settlement of a defined benefit plan when the
settlement occurs The discount rate is the yield on Federal Government of Nigeria issued
bonds that have maturity dates approximating the terms of the company’s obligation.
Although the scheme is not funded, the Company ensures that adequate arrangements are
in place to meet its obligations under the scheme
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Seven-Up Bottling Company PLCAnnual Report
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V. Short‐term employee benefits
(i) Provisions
(j) Contingent liabilities
(k) Revenue
Revenue is recognized when persuasive evidence exists that the significant risks and rewards of
ownership have been transferred to the buyer, recovery of the consideration is probable and
there is no continuing management involvement with the goods, and the amount of revenue
can be measured reliably. If it is probable that discount will be granted and the amount can be
measured reliably, then the discount is recognized as a reduction of revenue as the sales are
recognized.
Short‐term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided.
A liability is recognized for the amount expected to be paid under short‐term cash bonus or
profit sharing plans if the Company has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee, and the obligation can be
estimated reliably.
A provision is recognized if, as a result of a past event, the Company has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre‐tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of
the discount is recognized as finance cost.
A contingent liability is a possible obligation that arises from past events and whose existence
will be confirmed only by the occurrence or non‐occurrence of one or more uncertain future
events not wholly within the control of the Company, or a present obligation that arises from
past events but is not recognized because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation; or the amount of the
obligation cannot be measured with sufficient reliability.
Contingent liabilities are only disclosed and not recognized as liabilities in the statement of
financial position. If the likelihood of an outflow of resources is remote, the possible obligation is
neither a provision nor a contingent liability and no disclosure is made.
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value
of the consideration received or receivable, net of value added tax, sales returns, trade
discounts and volume rebates.
Transfer of significant risk and rewards of ownership is determined to be transferred to the
buyer at the point of delivery to the buyer.
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Seven-Up Bottling Company PLCAnnual Report
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(l) Finance income and finance costs
(m) Income tax
I. Current tax
II. Deferred tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the
year, using tax rates statutorily enacted at the reporting date, and any adjustment to tax
payable in respect of previous years. The Company is subject to the following types of
current income tax;
• Company Income Tax‐ This relates to tax on revenue and profit generated by the Company
during the year, to be taxed under the Companies Income Tax Act Cap C21, LFN 2004 as
amended to date.
• Tertiary Education Tax‐ This is based on the assessable income of the Company and is
governed by the Tertiary Education Trust Fund (Establishment) Act LFN 2011.
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognized for:
• temporary differences on the initial recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither accounting nor taxable profit or loss;
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realised. Such reductions are reversed when the probability of future taxable profits
impairs. Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or substantively enacted
at the reporting date.
Finance income comprises gain on derivative financial instruments and interest income on funds
invested. Interest income is recognized as it accrues in profit or loss, using the effective interest
method.Finance costs comprise interest expense on borrowings, loss on derivative financial instruments
and impairment losses recognized on financial assets (other than trade receivables).
Borrowing cost that are not directly attributable to the acquisition, construction or production
of a qualifying asset are recognized in profit or loss.
Foreign currency gains and losses are recognised in profit or loss and presented on a net basis as
either finance income or finance cost.
In 2013, the Company was granted a 5 year pioneer tax relief (i.e. tax exemption) for Can and
Pet products in 3 of its plant locations. The financial results for the non‐pioneer products and
pioneer products is determined based on the revenue and the expenses from the pioneer and
non‐pioneer products. Income tax expense represents the sum of current tax expense and
deferred tax expense.
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Seven-Up Bottling Company PLCAnnual Report
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(n) Deposit for Returnable Packaging Material
(o) Earnings per share
(p) Dividends
Dividends are recognized as a liability in the period they are declared.
(q) Related parties
The Securities and Exchange Commission (SEC) published a circular in 2015 directing Capital
Market Registrars to return all unclaimed dividend which has been in their custody for fifteen
(15) months and above to the paying companies. These unclaimed dividends are included as a
liability to the shareholders until they become statute barred in accordance with the provisions
of Section 385 of CAMA.
Deferred tax are recognized in profit or loss except to the extent that it relates to a business
combination, or items recognized directly in equity or in other comprehensive income.
The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares outstanding during the period,
adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares
outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary
shares.
Dividends which remained unclaimed for a period exceeding twelve (12) years from the date of
declaration and which are no longer actionable by shareholders in accordance with Section 385
of Companies and Allied Matters Act of Nigeria are written back to retained earnings.
Related parties include the holding company and other group entities. Directors, their close
family members and any employee who is able to exert a significant influence on the operating
policies of the Company are also considered to be related parties. Key management personnel
are also regarded as related parties. Key management personnel are those persons having
authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any director (whether executive or otherwise) of that entity.
Deferred tax assets and liabilities are offset only if certain criteria are met.
The Company collects deposits for returnable packaging materials (i.e. bottles and crates) from
customers. A liability is then recognized in the financial statements with respect to these
deposits. The deposit is refunded to the customer when the customer returns the packaging
material.Each year an amount is written into the Income statement. This amount represents the
breakages in trade of which the customers would not come back to collect deposit made on the
bottles or crates. Factors such as bottle turnover, bottle additions, bottle refill rate, amount of
bottles with distributors, market trend and market loss rates are considered in the
determination of the amount to be written back into the income statement on a yearly basis.
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Seven-Up Bottling Company PLCAnnual Report
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(r) Segment reporting
(s) Standards and interpretations not yet adopted
(i)
(ii) IFRS 9 Financial Instruments effective for annual periods beginning 1 January 2018
IFRS 15 Revenue from contracts with customers effective for annual periods beginning 1
January 2018
This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer
Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18
Transfer of Assets from Customers and SIC‐31 Revenue – Barter of Transactions Involving
Advertising Services.
On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which
replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39
Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on
the classification and measurement of financial instruments, a new expected credit loss
model for calculating impairment on financial assets, and new general hedge accounting
requirements. It also carries forward the guidance on recognition and derecognition of
financial instruments from IAS 39. The Company is yet to carry‐out an assessment to
determine the impact that the initial application of IFRS 9 could have on its business;
however, the Company will adopt the standard for the year ending 31 March 2019.
All of the Company’s products have similar risks and returns thus management does not use
operating segments’ operating results to make decisions about resources to be allocated to the
segment and assess its performance.
A number of new standards, amendments to standards and interpretations are effective for
annual periods beginning after 1st April 2016, and have not been applied in preparing these
financial statements. Those which may be relevant to the Company are set out below. The
extent of the impact of these standards is yet to be determined. The Company does not plan to
adopt these standards early. These will be adopted in the period that they become mandatory
unless otherwise indicated
An operating segment is a distinguishable component of the Company that earns revenue and
incurs expenditure from providing related products or services (business segment), or providing
products or services within a particular economic environment (geographical segment), and
which is subject to risks and returns that are different from those of other segments.
The standard contains a single model that applies to contracts with customers and two
approaches to recognising revenue: at a point in time or over time. The model features a
contract‐based five‐step analysis of transactions to determine whether, how much and
when revenue is recognised.This new standard will most likely have a significant impact on
the Company, which will include a possible change in the timing of when revenue is
recognised and the amount of revenue recognised. The Company is yet to carry‐out an
assessment to determine the impact that the initial application of IFRS 15 could have on its
business; however, Company will adopt the standard for the year ending 31 March 2019.
36
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(iii)
(iv)
Amendments to IAS 7 Disclosure Initiative effective for annual periods beginning 1 January
2017
The amendments provide for disclosures that enable users of financial statements to
evaluate changes in liabilities arising from financing activities, including both changes arising
from cash flow and non‐cash changes. This includes providing a reconciliation between the
opening and closing balances arising from financing activities. The Company will adopt the
amendments for the year ending 31 March 2018.
IFRS 16‐ Leases effective for annual periods beginning 1 January 2019
IFRS 16 replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC‐15 Operating Leases – Incentives and SIC‐27 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases for both parties to a
contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 eliminates the
classification of leases as operating leases or finance leases as required by IAS 17 and
introduces a single lessee accounting model. Applying that model, a lessee is required to
recognise:
a. assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of low value; and
b. depreciation of lease assets separately from interest on lease liabilities in the profit or
loss.
For the lessor, IFRS 16 substantially carries forward the lessor accounting requirements in
IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance
leases, and to account for those two types of leases differently.
The Company is yet to carry out an assessment to determine the impact that the initial
application of IFRS 16 could have on its business; however, the Company will adopt the
standard for the year ending 31 March 2020.
37
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
4 Revenue
Revenue for the year comprises:
In thousands of naira 2017 2016
Sale of goods:
Local 108,002,978 85,616,691
Export 274,022 17,988
Total Revenue 108,277,000 85,634,679
5 Analysis of expenses and other income
(a) Analysis of expenses by nature
In thousands of naira 2017 2016
Raw materials and consumables 85,626,440 48,058,473
Advertising and sales promotion 2,410,149 3,352,822
Depreciation (Note 11(a)) 9,487,448 9,325,971
Auditors' remuneration 41,000 39,000
Professional fees (i) 83,767 89,924
Amortization (Note 12) 25,219 35,237
Personnel expenses (Note 8(a)) 10,045,983 10,872,213
Transportation 2,126,620 2,360,438
Repairs and maintenance 5,523,144 4,350,490
Management fees (ii) 112,722 ‐
Lease and rentals 429,629 506,202
115,912,121 78,990,770
Total cost of sales, selling & distribution and administrative expenses is made up of:
In thousands of naira 2017 2016
Cost of sales 95,349,880 60,622,243
Selling and distribution expenses 13,910,747 11,801,831
Administrative expenses 6,651,494 6,566,696
115,912,121 78,990,770
(i)
(ii)
(b) Other income represents income from the sale of scrap.
Tax and advisory services amounting to N15 million (2016:N25 million) were provided by
KPMG Professional Services. The balance of professional fees amounting to N68 million
(2016: N64million) represent expenses for professional services provided by companies and
firms other than the external audit firm.
Total cost of sales, selling & distribution and administrative
expenses
This represents 2016 financial year Management fees which is now recognised following the
receipt of NOTAP approval in current year. See details on Note 29(d))vi).
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
6 Finance income and finance cost
(a) Finance income comprises:
In thousands of naira 2017 2016
Interest income on bank deposit 40,076 31,455
Net gain on foreign exchange transactions 252,084 10,116
Derivative gain 131,848 ‐
424,008 41,571
(b) Finance costs comprises:
In thousands of naira 2017 2016
Interest on overdraft (746,604) (429,096)
(3,390,977) (2,816,428)
Derivative loss (306,780) ‐
(4,444,361) (3,245,524)
Net finance costs recognized in profit or loss (4,020,353) (3,203,953)
(c) Finance costs in the cash flow
In thousands of naira 2017 2016
Finance costs per profit or loss 4,444,361 3,245,524
Interest accrual (249,185) (229,597)
Derivative loss (306,780) ‐Interest paid per statement of cash flows 3,888,396 3,015,927
(d) Finance income in the cash flow
In thousands of naira 2017 2016
Finance income in the statement of profit or loss / cash flows (424,008) (41,571)
Gain on foreign exchange transactions* 252,084 10,116
Derivative gain 131,848 ‐ Finance income received per statement of cash flows (40,076) (31,455)
7 (Loss)/profit before taxation
(Loss)/profit before taxation is stated after charging/(crediting):
In thousands of naira 2017 2016
Depreciation of property, plant and equipment (Note 11 (a)) 9,487,448 9,325,971
Amortization of intangible assets (Note 12) 25,219 35,237
Auditor’s remuneration 41,000 39,000
Directors’ remuneration (Note 8 (c)) 11,567 18,695
Personnel expenses (Note 8 (a)) 10,045,983 10,872,213
(Gain)/loss on sale of property, plant and equipment (174,973) 4,109
Gain on foreign exchange transactions (Note 6(d)) 252,084 (10,116)
Operating lease cost (Note 27) 429,629 462,253
Management service fee (29(d)(vi)) 112,722 ‐
*The effect of the gain in foreign exchange transactions in the statement of cash flows has been
adjusted for in the change in trade and other payables.
Financial liabilities measured at amortized cost‐
interest expense (Note 22 (a)(ii))
39
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
8 Personnel expenses
(a) Personnel expenses for the year comprise the following:
In thousands of naira 2017 2016
Salaries, wages and allowances 7,737,790 7,878,078
Expenses related to other employee benefits (Note 23(c)) 752,221 1,142,434
Expenses related to defined contribution plans (Note 24(b)) 413,258 465,598
Other personnel expenses 1,142,714 1,386,103
10,045,983 10,872,213
(b)
2017 2016
N N Number Number
600,001 ‐ 650,000 ‐ 1
650,001 ‐ 700,000 ‐ 2
700,001 ‐ 800,000 2 18
800,001 ‐ 1,000,000 408 1,144
1,000,001 ‐ 1,200,000 614 393
1,200,001 ‐ 1,400,000 208 153
1,400,001 ‐ 1,600,000 116 159
1,600,001 ‐ 1,800,000 113 177
1,800,001 ‐ 2,000,000 111 150
2,000,001 ‐ 2,500,000 229 208
2,500,001 ‐ 3,000,000 124 102
3,000,001 ‐ 3,500,000 82 77
3,500,001 ‐ 4,000,000 59 54
4,000,001 ‐ 4,500,000 36 32
4,500,001 ‐ 5,000,000 20 16
5,000,001 ‐ 7,000,000 31 36
7,000,001 and above 40 37
2,193 2,759
Employees of the Company, whose duties were wholly or mainly discharged in Nigeria, received
remuneration (excluding pension costs and certain benefits) in the following ranges:
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
The number of full‐time persons employed per function as at 31 March was as follows:
2017 2016
Number Number
Manufacturing 1,206 1,169
Distribution 633 1,102
Finance 156 163
Human Resources/ Administration 170 297
Information Technology 28 28 2,193 2,759
(c) Directors' remuneration
Remuneration paid to directors of the Company was as follows:
In thousands of naira 2017 2016
Fees paid to non‐executive directors 700 700
Remuneration paid to the chairman 4,809 4,212
Remuneration paid to executive directors 6,058 13,783
11,567 18,695
The executive directors’ remuneration shown above includes:
In thousands of naira 2017 2016
Highest paid director 6,058 5,370
2017 2016
N N Number Number
0 ‐ 3,000,000 7 8
3,000,001 ‐ 4,500,000 ‐ ‐
7 8
The number of other directors (excluding the Chairman and highest paid director) who received
emoluments excluding pension contributions and certain benefits were within the following
41
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
9 Taxation
(a) Income tax expense
In thousands of naira 2017 2016
Current tax expense
Current year income tax 1,433,009 871,705
Tertiary education tax 217,901 156,314 Capital gains tax ‐ 5,400
1,650,910 1,033,419
Deferred tax expense
Origination and reversal of temporary differences (2,102,636) (623,492)
Total income tax (credit)/expense (451,726) 409,927
(b) Income tax recognized directly in other comprehensive income
In thousands of naira 2017 2016
Remeasurement of defined benefit asset/ (liability) (Note 23(a)) 315,200 (1,069,442)
Related tax (Note 15(b)) (100,864) 320,833 Defined benefit plan actuarial gain/(loss), net of tax 214,336 (748,609)
(c) Movement in current tax liabilities
Movement in tax payable account during the year was as follows
In thousands of naira 2017 2016
Balance, beginning of the year 1,398,371 1,339,805
Payments in the year (953,617) (974,853)
Charge for the year 1,650,910 1,033,419
Balance, end of the year 2,095,664 1,398,371
The tax charge for the year has been computed after adjusting for certain items of expenditure
and income, which are not deductible or chargeable for tax purposes, and comprises:
42
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(d)
i Can products produced at the Company's Lagos Plant
ii
(e) Reconciliation of effective tax rate
2017 2016
In thousands of naira
(Loss)/profit for the year (10,776,712) 3,347,463
Taxation 451,726 409,927
Profit before tax (11,228,438) 3,757,390
30.0% (3,368,531) 30.0% 1,127,217
Impact of Tertiary education tax 2.0% (224,568.76) 4.2% 156,314
Impact of Capital gains tax 0.0% ‐ 0% 5,400
Non‐deductible expenses ‐1.3% 145,038 2.0% 76,585
Tax exempt income 3.1% (337,204) ‐1.9% (75,044)
Effect of pioneer charges/(gains) ‐10.8% 1,210,034 ‐23.4% (880,545)
‐18.9% 2,123,506 0.0% ‐
Tax expense 4.1% (451,726) 11.0% 409,927
10 Earnings and declared dividend per share
(a)
(b)
Income tax using the Company’s
domestic tax rate
Declared dividend per share of 160 kobo (2016: 275 kobo) is based on the dividend declared
on 28 September 2016 of N1,024,942,585 (2016: N1,761,623,498) on 640,590,363 ordinary
shares of 50 kobo each (2016: 640,590,363 ordinary shares of 50 kobo each), being the
number of ordinary shares in issue during the year.
Basic and diluted earnings per share of (1,682)kobo (2016: 523 kobo) was calculated based on
loss attributable to the owners of the Company for the year of N10,776,712,000 (2016:Profit
of N3,347,463,000) and on 640,590,363 ordinary shares of 50 kobo each (2016: 640,590,363
ordinary shares of 50 kobo each), being the number of ordinary shares in issue during the year
and at the end of the year.
In 2013, the Nigerian Investment Promotion Council (NIPC) granted the Company a pioneer
status for a five year period with respect to the following production activities of the
Company.
PET products produced at the Lagos, Enugu and Abuja plant locations, with a retroactive
commencement production date of 1 September 2011.
The effective commencement production date was certified by the Industrial Inspectorate
Department of the Federal Ministry of Commerce and Industry on 23 November 2013. In
accordance with the provision of the Industrial Development (Income Tax Relief) Act, the
Company's profit attributable to the pioneer line of business is therefore not liable to income
taxes for the duration of the pioneer period. In current year, the Company's pioneer status
expired hence the pioneer period was for only five (5) months.
Tax effect of changes in pioneer status
43
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
11 Property, plant and equipment (PPE)
(a) The movement on these accounts during the year was as follows:
In thousands of naira
Cost
Balance at 1 April 2015 87,027 15,491,568 38,386,199 9,400,938 6,178,542 14,634,493 2,038,915 86,217,682
Additions 15,500 24,789 52,500 230,166 54,720 4,200,368 2,886,950 7,464,993
Transfers from capital work in progress ‐ 1,110,397 3,017,308 171,916 248,193 ‐ (4,547,814) ‐
Reclassification*** ‐ ‐ ‐ ‐ ‐ ‐ 53,924 53,924
Disposals ‐ ‐ (24,199) (454,677) (3,156) (1,678,267) ‐ (2,160,299)
Balance at 31 March 2016 102,527 16,626,754 41,431,808 9,348,343 6,478,299 17,156,594 431,975 91,576,300
Balance at 1 April 2016 102,527 16,626,754 41,431,808 9,348,343 6,478,299 17,156,594 431,975 91,576,300
Additions ‐ ‐ 85,500 96,600 46,528 4,332,985 2,756,484 7,318,097
Transfers from capital work in progress ‐ 69,691 1,583,468 ‐ 85,718 ‐ (1,738,877) ‐
Disposals ‐ ‐ ‐ (408,249) ‐ (1,850,095) ‐ (2,258,344)
Balance at 31 March 2017 102,527 16,696,445 43,100,776 9,036,694 6,610,545 19,639,484 1,449,582 96,636,053
Depreciation and impairment
Balance at 1 April 2015 8,401 3,453,745 19,835,220 7,842,160 4,232,439 6,405,042 ‐ 41,777,007
Depreciation for the year 1,404 791,662 4,185,194 724,945 717,425 2,905,341 ‐ 9,325,971
Disposals ‐ ‐ (23,993) (445,354) (1,479) (1,591,968) ‐ (2,062,794)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Balance at 31 March 2016 9,805 4,245,407 23,996,421 8,121,751 4,948,385 7,718,415 ‐ 49,040,184
Balance at 1 April 2016 9,805 4,245,407 23,996,421 8,121,751 4,948,385 7,718,415 ‐ 49,040,184
Depreciation for the year ‐ 824,372 4,274,397 480,585 564,991 3,343,103 ‐ 9,487,448
Disposals ‐ ‐ ‐ (381,881) ‐ (1,850,095) ‐ (2,231,976) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Balance at 31 March 2017 9,805 5,069,779 28,270,818 8,220,455 5,513,376 9,211,423 ‐ 56,295,656
Carrying amounts
At 1 April 2015 78,626 12,037,823 18,550,979 1,558,778 1,946,103 8,229,451 2,038,915 44,440,675
At 31 March 2016 92,722 12,381,347 17,435,387 1,226,592 1,529,914 9,438,179 431,975 42,536,116
At 1 April 2016 92,722 12,381,347 17,435,387 1,226,592 1,529,914 9,438,179 431,975 42,536,116
At 31 March 2017 92,722 11,626,666 14,829,958 816,239 1,097,169 10,428,061 1,449,582 40,340,397
*** Amount represents reclassification of qualifying spares from inventory.
Returnable
packaging
PPE Under
ConstructionTotal Leasehold land Buildings
Plant and
MachineryMotor Vehicles
Office
Equipment
44
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(b) Property, plant and equipment under construction
Capital work in progress at the year is analyzed as follows:
In thousands of naira 2017 2016
Plant and machinery 300,665 163,271
Land and buildings 1,148,917 265,516
Furniture equipment ‐ 3,188
1,449,582 431,975
No borrowing costs were capitalized in current year (2016: Nil).
(c) Capital commitments
2017 2016
Approved and contracted 18,757,015 748,419,830 Approved but not contracted ‐ 195,847,440
18,757,015 944,267,270
(d) Additions in cash flow statement
2017 2016
Additions per Note 11 (a) 7,318,097 7,464,993
Reclassification of qualifying spares from inventories ‐ 53,924
Accrued additions to property, plant and equipment ‐ (197,799)
Acquisition of PPE per statement of cash flows 7,318,097 7,321,118
12 Intangible assets
The movement in this account during the year was as follows:
In thousands of naira
Cost 2017 2016
Balance beginning of the year 178,037 115,129
Additions 905 62,908
Balance end of year 178,942 178,037
Amortization
Balance beginning of the year 122,668 87,431
Amortization for the year 25,219 35,237
Balance end of year 147,887 122,668
Carrying amounts
Balance beginning of the year 55,369 27,698 Balance end of year 31,055 55,369
Capital expenditure commitments at the year‐end authorized by the Board of Directors comprise:
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
13 Prepayments and other receivables
(a) Prepayments represent current and non‐current portions of prepaid rent.
(b)
14 Deposit for imports
15 Deferred taxation
Recognized deferred tax liabilities
(a) Deferred tax liabilities are attributable to the following:
In thousands of naira 31‐Mar‐17 31‐Mar‐16 31‐Mar‐17 31‐Mar‐16 31‐Mar‐17 31‐Mar‐16Property, plant and equipment ‐ ‐ 3,015,311 3,528,304 3,015,311 3,528,304
Employee benefits (1,228,171) (1,248,874) ‐ ‐ (1,228,171) (1,248,874)
Unrealized exchange gain (65,853) ‐ ‐ 3,034 (65,853) 3,034 Derivative gain (42,191) ‐ ‐ ‐ (42,191) ‐ Derivative loss ‐ ‐ 98,170 98,170 ‐ Unrelieved losses (1,496,575) ‐ ‐ ‐ (1,496,575) ‐
Tax (asset)/liabilities (2,832,790) (1,248,874) 3,113,481 3,531,338 280,691 2,282,464
Set off of tax 2,832,790 1,248,874 (2,832,790) (1,248,874) ‐ ‐ Net tax liabilities ‐ ‐ 280,691 2,282,464 280,691 2,282,464
(b) Movement in temporary differences during the year
In thousands of naira
Balance 31
March 2015
Recognized
in profit or
loss
Recognized in
other
comprehensive
income
Balance 31
March 2016
Recognized
in profit or
loss
Recognized in
other
comprehensive
income
Balance 31
March 2017
Property, plant and equipmen 4,178,687 (650,383) ‐ 3,528,304 (512,993) ‐ 3,015,311
Employee benefits (964,421) 36,380 (320,833) (1,248,874) (80,161) 100,864 (1,228,171)
Unrelived losses ‐ ‐ ‐ ‐ (1,496,575) ‐ (1,496,575)
Unrealized exchange gain 12,523 (9,489) ‐ 3,034 (68,886) ‐ (65,853)
Derivative gain ‐ ‐ ‐ ‐ (42,191) ‐ (42,191)
Derivative loss ‐ ‐ ‐ ‐ 98,170 ‐ 98,170
3,226,789 (623,492) (320,833) 2,282,464 (2,102,636) 100,864 280,691
Net Liabilities Assets
Non‐current other receivables represent non interest bearing loans granted to the Company’s employees, which are secured by the
employees’ retirement benefit obligations.
Deposit for imports represent funds placed with banks for the purpose of funding letters of credit in respect of imported raw materials and
items of property plant and equipment.
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
16 Inventories
In thousands of naira 2017 2016
12,431,921 4,785,266
Work in progress 382,584 216,103
Finished products 1,275,545 688,380
Engineering spares 2,513,327 2,188,774
Goods in transit 5,841,502 3,616,339
22,444,879 11,494,862
17
18
In thousands of naira 2017 2016
(a) Derivative financial loss
Forward exchange contracts 306,780 ‐
(b) Derivative financial asset
Future exchange contracts 131,848 ‐
19 Trade and other receivables
In thousands of naira 2017 2016
Trade receivables 619,541 455,875
Staff loans and advances 1,850,389 565,112
Due from related parties (Note 29 (d)(ii)) 6,138,481 3,892,995
Other receivables 8,322,587 677,087
Deposit with Company's registrars for dividend 107,641 70,515
17,038,639 5,661,584
The value of raw materials, non‐returnable packaging materials, spare parts, changes in finished
products and products in process recognized in cost of sales during the year amounted to N89 billion
(2016: N57.2 billion).
The Company’s exposure to credit and currency risks, and impairment losses related to trade and
other receivables are disclosed in Note 25.
Raw materials, consumables and non‐returnable
packaging materials
Included in other receivables is an amount of N8.2 billion (2016:Nil) receivable from the bank which
constitutes margin deposit for forward and future contracts.
Investment
Investment represents a portion of unclaimed dividend which the Company had invested with an
investment manager. This amount is restricted from use by the Company.
Derivative
Derivative comprise of:
The Company’s exposure to credit and market risks, and fair value measurement is included in Note
25.
47
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
20 Cash and cash equivalents
In thousands of naira 2017 2016
Cash and cash equivalents in statement of financial position 6,009,919 5,856,658
Bank overdrafts used for cash management purposes (10,025,507) (1,076,388)Cash and cash equivalents in the statement of cash flows (4,015,588) 4,780,270
21 Capital and reserves
(a) Ordinary shares
(i) Authorized ordinary shares of 50k each
In number of shares 2017 2016
640,590,363 640,590,363
(ii) Issued and fully paid ordinary shares of 50k each
In number of shares 2017 2016
640,590,363 640,590,363
The Company’s exposure to credit risk, currency risk and a sensitivity analysis for cash and cash
equivalents is disclosed in Note 25.
Included in cash and cash equivalents are unclaimed dividend amounting to N504 million (2016:
N635 million) held in a separate bank account in accordance with the guidelines issued by the
Securities and Exchange Commission. This amount is restricted from use by the Company.
Included in cash and cash equivalents is also an amount of N194 million held in lien with a bank. This
amount is restricted for use as it is the margin deposit for the forward contract.
The total overdraft facilities available to the Company as at year end amounted to N11 billion with a
negative pledge on the total assets of the Company. The interest rate on the overdraft facilities
during the year ranged between 16% and 22%.
48
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
22 Loans and borrowings
(a)
(i) Loans and borrowing as at 31 March is as follows:
In thousands of naira 2017 2016
Non‐ current liabilities:Secured bank loans 12,675,925 1,520,205
Current liabilities:
Secured bank loans 20,395,015 16,689,294
33,070,940 18,209,499
(ii) Movement in the loans and borrowings
Secured bank loans
2017 2016
Balance beginning of year 18,209,499 15,466,300
Increase in borrowings 153,550,872 70,326,373
Interest charged (Note 6(b)) 3,390,977 2,816,428
Interest repayment (3,141,791) (2,586,831) Principal repayment (138,938,617) (67,812,771) Balance end of year 33,070,940 18,209,499
This note provides information about the contractual terms of the Company’s interest‐bearing
loans and borrowings, which are measured at amortized cost. For more information about the
Company’s exposure to interest rate, foreign currency and liquidity risks, see Note 25.
49
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Terms and debt repayment schedule
(b) Terms and conditions of outstanding loans were as follows:
In thousands of naira
Citibank Nigeria Limited $11,682,644 USD libor+3.5% 2017 3,702,841 3,702,841 3,702,841 ‐ ‐ ‐ Citibank Nigeria Limited $3,181,362 USD Libor + 5% 2016 ‐ ‐ ‐ 628,319 628,319 628,319 Fidelity Bank € 243,857 EUR Libor+12% 2017 82,062 82,062 82,062 ‐ ‐ ‐ First City Monument Bank $692,406 USD Libor+8% 2017 217,845 217,845 217,845 ‐ ‐ ‐ Guaranty Trust Bank N500,000 NGN 19% 2017 500,000 505,726 505,726 ‐ ‐ ‐ Guaranty Trust Bank N6,000,000 NGN 13% 2016 ‐ ‐ ‐ 4,000,000 4,146,393 4,146,393 Guaranty Trust Bank $927,252 USD Libor+7% 2017 305,344 305,344 305,344 ‐ ‐ ‐ Rand Merchant Bank N1,000,000 NGN 22% 2017 1,000,000 1,017,534 1,017,534 ‐ ‐ ‐ Rand Merchant Bank $546,374 USD Libor+4% 2017 171,900 171,900 171,900 ‐ ‐ ‐ Stanbic IBTC N10,000,000 NGN 19% 2019 10,000,000 10,061,062 10,048,323 ‐ ‐ Standard Chartered $3,000,060 USD Libor + 7% 2016 ‐ ‐ ‐ 592,512 592,512 592,512 Standard Chartered N1,200,031 NGN 13% 2016 ‐ ‐ ‐ 1,200,031 1,217,399 1,217,399 Standard Chartered Bank € 414,701 EUR Libor+7% 2017 139,554 139,554 139,554 ‐ ‐ ‐ Standard Chartered Bank $14,255,390 USD Libor+7% 2017 4,508,140 4,508,140 4,508,140 ‐ ‐ ‐ Union Bank of Nigeria $416,881 USD Libor+9% 2017 131,943 131,943 131,943 ‐ ‐ ‐ United Bank for Africa N2,500,000 NGN 20% 2019 2,500,000 2,614,863 2,613,634 ‐ ‐ United Bank for Africa € 468,028 EUR Libor+10% 2017 157,500 157,500 157,500 ‐ ‐ ‐ United Bank for Africa $3,407,288 USD Libor+10% 2017 1,072,001 1,072,001 1,072,001 ‐ ‐ ‐
Zenith Bank $2,852,244 USD Libor + 9% 2016 ‐ ‐ ‐ 559,040 559,040 559,040
Zenith Bank N1,500,000 NGN 17% 2018 ‐ ‐ ‐ 1,500,000 1,520,205 1,526,444
Zenith Bank N3,000,000 NGN 16% 2016 ‐ ‐ ‐ 3,000,000 3,043,500 3,043,500
Zenith Bank N5,000,000 NGN 23% 2017 5,000,000 5,000,000 5,000,000 ‐ ‐ ‐
Zenith Bank N7,500,000 NGN 13% 2016 ‐ ‐ ‐ 6,500,000 6,502,131 6,502,131
Zenith Bank € 351,136 EUR Libor+11% 2017 118,163 118,163 118,163 ‐ ‐ ‐
Zenith Bank $10,387,153 USD Libor+11% 2017 3,264,462 3,264,462 3,264,462 ‐ ‐ ‐
Total Interest bearing liabilities 32,871,755 33,070,940 33,056,972 17,979,902 18,209,499 18,215,738
The bank loans are secured by a negative pledge on the Company’s assets in line with their relative exposures.
31 March 2017 31 March 2016
Nominal
interest
rate
Year of
maturity
Carrying
amount
Carrying
amount
Facility
amount
Curr
ency
Fair valueFace Value Face Value Fair value
50
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
23 Employee benefits
In thousands of naira 2017 2016
Present value of unfunded obligation for gratuity (Note (a)) 3,094,529 3,738,175
Long service awards benefit plan (Note (b)) 743,506 819,570 Total employee benefit liabilities 3,838,035 4,557,745
(a) Movement in present value of unfunded obligation for gratuity
In thousands of naira 2017 2016
Balance, beginning of the year 3,738,175 2,939,619
Included in profit or loss
Current service costs 185,014 181,710
Interest costs on obligation 506,085 511,497
Past service cost 12,179 268,197
703,278 961,404
Included in OCI
(315,200) 1,069,442
Benefit paid by the plan (1,031,724) (1,232,290)
Balance, end of the year 3,094,529 3,738,175
(b) Movement in long service award benefit plan
In thousands of naira 2017 2016
Balance, beginning of the year 819,570 729,676
Included in profit or loss
Current service costs 70,712 60,612
Interest costs on obligation 109,290 131,071
Past service cost (139,607) ‐
Actuarial loss/(gain) 8,548 (10,653) 48,943 181,030
Benefit paid by the plan (125,007) (91,136)
Balance, end of the year 743,506 819,570
(c) Amount recognized in the profit or loss
In thousands of naira 2017 2016
Unfunded obligation for gratuity 703,278 961,404
Long service award benefit plan 48,943 181,030 752,221 1,142,434
The Company operates an unfunded annualized defined benefit gratuity scheme for its employees.
The benefits under which are related to the employees' length of service and remuneration. Under
the annualized defined benefit plan, gratuity is calculated on an annual basis using the salaries for
each year to determine the benefits using projected unit credit method. Lump sum benefit payable
upon retirement or resignation of employment are fully accrued over the service lives of the
employees. Gratuity and other long term employee benefit provisions are based upon independent
actuarial valuation by HR Nigeria Limited with FRC number FRC/2012/NAS/00000000738.
Employee benefit expense shown above are recognized in administrative expenses and cost of
sales in the statement of profit or loss as follows.
Actuarial (gain)/loss
Total expenses recognised in profit or loss (Note (8a))
51
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
2017 2016
In thousands of Naira
Cost of sales 75,222 114,243
Administrative expense 676,999 1,028,191
752,221 1,142,434
(d) Actuarial assumptions
Financial Assumptions
2017 2016
Long term average discount rate (p.a.)
Gratuity 16.0% 13.3%
Long service awards 16.0% 13.3%
Average Pay Increase (p.a.) 13% 10%
Weighted average duration of the plan (years) 7 8
Mortality in service
Sample age Number of deaths in year out of 10,000 lives
2017 2016
25 7 7
30 7 7
35 9 9
40 14 14
45 26 26
(e) Sensitivity Analysis
In thousands of Naira
rate Gratuity Long service
awards
1% (165,865) (37,702)
‐1% 184,712 41,456
1% 90,113 24,094
‐1% (82,620) (22,236)
+1 year 1,861 (1,941)
‐1 year (1,674) 1,739
Assumptions regarding future mortality are based on published statistics and mortality tables.
Mortality rate
Principal actuarial assumptions at the reporting date (expressed as weighted averages) fall under
two broad categories. These assumptions depict management’s estimate of the likely future
experience of the Company.
The rates of mortality assumed for employees are the rates published in the A67/70 Ultimate
Tables, published jointly by the Institute and Faculty of Actuaries in the UK. This is due to
unavailability of published reliable demographic data in Nigeria.
Below is the sensitivity analysis of the principal actuarial assumptions adopted in determining the
employee benefit liabilities:
Discount rate
Salary increase rate
52
Seven-Up Bottling Company PLC
Annual Report
31 March 2017
24 Trade and other payables
In thousands of naira 2017 2016
Trade payables 7,179,610 5,359,902
Other payables and accrued expenses (Note (a)) 2,332,838 2,632,345
Amount due to related parties (Note 29(d)(ii)) 4,444,263 182,062
Advance from customer 2,904,971 790,496
Pension payable (Note (b)) 197,150 180,219
Dividend payable (Note (c)) 1,287,108 706,341
Liability for returnable packaging material 5,907,619 5,641,185
24,253,559 15,492,550
(a)
(b)
In thousands of Naira 2017 2016
Balance, beginning of the year 180,219 207,600
Employer's Contributions during the year (Note 8(a)) 413,258 465,598
Employee's Contributions during the year 316,737 351,240
Payments (713,064) (844,219)
Balance, end of the year 197,150 180,219
(c) Movement in dividend payable
In thousands of naira 2017 2016
Balance, beginning of the year 706,341 597,196
Declared dividend (Note 10(b)) 1,024,943 1,761,623
Unclaimed dividend written back (33,196) (8,730)
Dividend paid (410,980) (1,643,748)
Balance, end of the year 1,287,108 706,341
Other payables and accrued expenses represents payroll related accruals, non-Company Income
Tax as well as general accruals as at year end.
Pension payable represents pension contributions yet to be remitted to the pension fund
administrators at the year end. The movement on the pension payable account during the year
was as follows:
The Company’s exposure to currency and liquidity risk related to trade and other payables is
disclosed in Note 25.
As at 31 March 2017, an amount of N108 million (2016: N71 million) of the total dividend payable
was held with the Company’s registrar, GTL Registrars Limited while an amount of N504 million
(2016: N635 million) represents unclaimed dividends, which have been returned to the Company
by the Registrar. The remaining amount of N675million (2016: Nil) represents outstanding
dividened to be paid to Affleka the major shareholder of the Company included in note 29(a).
In current year, no dividend was proposed by the directors (2016:dividend proposed amounting
to N1,024,944,581 representing N1.60 per share on the issued share capital of 640,590,363
ordinary shares of 50 kobo each).
53
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
25 Financial Instruments‐ Fair values and risk management
A Financial risk management
∙ Credit risk
∙ Liquidity risk
∙ Market risk
Risk management framework
(i) Credit risk
Exposure to credit risk
In thousands of naira Note 2017 2016
Other receivables (non‐current) 13(b) 43,813 95,188
Trade and other receivables 19 17,038,639 5,661,584
Cash and cash equivalents 20 6,009,919 5,856,658
Investment 17 42,000 ‐
Derivative financial asset 18(b) 131,848 ‐
23,266,219 11,613,430
The Company has exposure to the following risks from its use of financial instruments:
This note presents information about the Company’s exposure to each of the above risks, the
Company’s objectives, policies and processes for measuring and managing risk, and the Company’s
management of capital. Further quantitative disclosures are included throughout these financial
statements.
The Board of Directors' have overall responsibility for the establishment and oversight of the
Company’s risk management framework. The Board has established a Management Committee,
which is responsible for developing and monitoring the Company’s risk management policies. The
committee reports regularly to the Board of Directors on its activities. The Committee is assisted in
its oversight role by Internal Audit.
The Company’s risk management policies are established to identify and analyze the risks faced by
the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed regularly by the Management Committee
to reflect changes in market conditions and the Company’s activities.
Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a
financial instrument fails to meet its contractual obligations and arises principally from the
Company's receivable from customers or investment in securities.
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
Carrying amount
The Company’s Audit Committee oversees how management monitors compliance with the
Company’s risk management policies and procedures, and reviews the adequacy of the risk
management framework in relation to the risks faced by the Company. Internal Audit undertakes
both regular and ad hoc reviews of compliance with established controls and procedures, the results
of which are reported to Senior Management of the Company at Management meetings.
54
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Trade and other receivables
The Company’s most significant customer accounts for N184 million of the loans and receivables
carrying amount at 31 March 2017 (2016: N65 million).
Management has credit policies in place and the exposure to credit risk is monitored on an
ongoing basis. Under the credit policies all customers requiring credit over a certain amount are
reviewed and new customers analyzed individually for creditworthiness before the Company’s
standard payment and delivery terms and conditions are offered. The Company’s credit
assessment process includes specified cash deposits by new customers. Credit limits are
established for qualifying customers and these limits are reviewed regularly by the Credit control
unit. Customers that fail to meet the Company’s benchmark creditworthiness may transact with
the Company only on a prepayment basis.
The Credit control unit is charged with the review of each customer’s credit limit in line with the
customer's performance and perceived risk factor assigned to the customer.
In monitoring customer credit risk, customers are grouped according to their credit
characteristics, including whether they are an individual or legal entity, whether they are a key
distributor or retail distributor, geographic location, and existence of previous financial
difficulties. Trade and other receivables relate mainly to the Company’s wholesale customers.
Customers with no trading activities for a period of up to one year are placed on a dormant
customer list, and future sales are made on a prepayment basis only with approval of
management.
Amount due from related parties as at year end represents advance to the Company's key
suppliers’ with respect to purchases of packaging materials and funds required to boost their
working capital requirements.
Other receivables represent unclaimed dividends with the registrars, staff advances and
receivables.
The Company establishes an allowance for impairment that represents its estimate of incurred
losses in respect of trade and other receivables. The main components of this allowance are a
specific loss component that relates to individually significant exposures, customers with
outstanding amounts but have not placed orders/traded for a prolonged period of time (usually
one year) and a collective loss component established for groups of similar assets in respect of
losses that have been incurred but not yet identified. The collective loss allowance is determined
based on historical data of payment statistics.
55
Seven-Up Bottling Company PLC
Annual Report
31 March 2017
In thousands of naira Note 2017 2016
Key customers 601,698 639,814
Other customers 17,843 148,805
Trade receivables 619,541 788,619
Other receivables and advances 10,376,624 1,303,719
10,996,165 2,092,338
Impairment (203,648) (394,264)
10,792,517 1,698,074
Due from related parties (Note 29(d)(i)) 6,138,481 3,892,995
Deposit with the Company's registrars 107,641 70,515
17,038,639 5,661,584
Impairment losses
The ageing of trade receivables at the reporting date was:
Gross Impairment Gross Impairment
In thousands of naira 2017 2017 2016 2016
Not pass due 0-30 days 2,621,116 - 865,772 -
Past due 31-90 days 7,156,853 (37,313) 942,216 (109,914)
Past due 91-180 days 409,105 (9,283) 87,443 (87,443)
Past due 181-365 days 809,091 (157,052) 196,907 (196,907)
More than 365 days - - - -
10,996,165 (203,648) 2,092,338 (394,264)
Carrying amount
The maximum exposure to credit risk for trade and other receivables at the reporting date by
type of counterparty was:
56
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
In thousands of Naira 2017 2016
Balance, beginning of the year 394,264 330,958
Impairment loss recognized during the year 12,599 63,306
Amount received (57,939) ‐
Amounts written off (145,276) ‐ Balance, end of the year 203,648 394,264
The ageing of amount due from related parties at the reporting date was:
Gross Impairment Gross Impairment
In thousands of naira 2017 2017 2016 2016
Neither past due nor impaired 4,931,238 ‐ 2,281,114 ‐
Past due 31‐90 days 1,207,243 ‐ 1,611,881 ‐
Past due 91‐180 days ‐ ‐ ‐ ‐
Past due 181‐365 days ‐ ‐ ‐ ‐
More than 365 days ‐ ‐ ‐ ‐
6,138,481 ‐ 3,892,995 ‐
Cash and cash equivalents
Derivative financial asset
The movement in the allowance for impairment in respect of loans and receivables during the year
was as follows:
The impairment loss as at 31 March 2017 relates to several customers that are not expected to be
able to pay their outstanding balances, mainly due to economic circumstances. The Company
believes that the unimpaired amounts that are past due are still collectible, based on historical
payment behaviour and extensive analysis of the underlying customers’ credit ratings.
Based on historic default rates, the Company believes that, apart from the above, no impairment
allowance is necessary in respect of trade receivables not past due by up to 30 days.
The Company believes that the unimpaired amounts that are past due by more than 30 days are
still collectible in full, based on historic payment behaviour and extensive analysis of customer
credit risk.
The Company held cash and cash equivalents of N6 billion at 31 March 2017 (2016: N5.9 billion)
which represents its maximum credit exposure on these assets. The cash and cash equivalents are
held with bank and financial institution counterparties, which are reputable and have a sound
financial position.
The Company's derivatives balances of N131million as at 31 March 2017 (2016: Nil) represents its
maximum credit exposure on these assets. The Company mitigates its exposure to derivatives by
selecting reputable banks with good credit ratings and history of strong financial performance.
57
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(ii) Liquidity risk
In addition, the Company maintains the various lines of credits as listed in note 22(b).
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled by delivering cash or another financial asset.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company uses weighted average cost to cost its products, which assist it in monitoring cash
flow requirements and optimizing its cash return on investments. The Company aims to maintain
the level of cash and cash equivalents at an amount in excess of expected cash outflows on financial
liabilities (other than trade payables) over the succeeding 60 days. The Company also monitors the
level of expected cash inflows on trade and other receivables together with expected cash outflows
on trade and other payables. At 31 March 2017, the expected cash flows from trade and other
receivables maturing within two months were N10billion (2016: N2 billion). This excludes potential
impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
58
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Exposure to liquidity risk
31 March 2017
In thousands of naira
Non‐derivative financial
liabilities
Loans and borrowings 33,070,940 36,340,992 (20,395,015) ‐ ‐ (15,945,977) ‐
Trade and other payables* 12,287,869 12,287,869 (12,287,869) ‐ ‐ ‐ ‐
Bank overdraft 10,025,507 10,025,507 (10,025,507) ‐ ‐ ‐ ‐
55,384,316 58,654,368 (42,708,391) ‐ ‐ (15,945,977) ‐
Derivative financial liabilities
Forward exchange contracts 306,780 8,267,494 (8,267,494) ‐ ‐ ‐ ‐
31 March 2016
In thousands of naira
Non‐derivative financial
liabilities
Loans and borrowings 18,209,499 18,743,013 (17,094,903) (126,452) (1,521,658) ‐ ‐
Trade and other payables* 7,947,696 7,947,696 (7,947,696) ‐ ‐ ‐ ‐
Bank overdraft 1,076,388 1,076,388 (1,076,388) ‐ ‐ ‐ ‐
27,233,583 27,767,097 (26,118,987) (126,452) (1,521,658) ‐ ‐
Derivative financial liabilitiesForward exchange contracts ‐ ‐ ‐ ‐ ‐ ‐ ‐
Carrying
amount
Contractual
cash flows
6 months or
less6‐12 months 1‐2 years 2‐5years
More than
5 years
*Trade and other payables excludes statutory deductions such as Value Added Tax payable, Witholding Tax Payable, PAYE payable,
Pension Payable, other non ‐ income payables and deposit for returnable packaging material.
6 months or
less6‐12 months 1‐2 years 2‐5years
The forward exchange contracts disclosed in the above table represent the contractual undiscounted cashflows relating to derivative
financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity.
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different
amounts.
More than
5 years
Carrying
amount
Contractual
cash flows
59
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(iii) Market risk
a. Currency risk
Amounts in thousands Euro USD Euro USD
Cash and cash equivalent 12 480 12 832
Trade and other receivables 33 24,357 ‐ 592
Trade and other payables (455) (14,119) (108) (943)
Bank Loan (1,478) (42,315) ‐ (6,181)
Net exposure (1,888) (31,597) (96) (5,700)
The following significant exchange rates applied during the year;
2017 2016 2017 2016
Euro 314 220 337 225
United States Dollar (USD) 294 199 315 199
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest
rates will affect the Company’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimizing the return.
31 March 2016
Year end spot rateAverage rate
Exposure to currency risk
The Company is exposed to currency risk on sales and purchases and borrowings that are
denominated in a currency other than the functional currency of the Company, primarily the
Naira. The currencies in which these transactions primarily are denominated are Euro and
US Dollars (USD). The currency risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate due to the changes in foreign exchange rates. Currency
risk related to the banks loans taken out by Euro and US Dollars (USD) have been hedged
using forward and future contracts that mature on the same dates as the loans are due for
repayment.
In respect of monetary assets and liabilities denominated in foreign currencies, the
Company's policy is to ensure that its net exposure are kept to an acceptable level by
buying or selling foreign currencies at spot rates when necessary to address short term
imbalances.
The summary quantitative data about the Company’s exposure to currency risk as reported
to the Management of the Company based on its risk management policy was as follows:
31 March 2017
60
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Sensitivity analysis
Effect in thousands of Naira
31 March 2017
USD (20% strengthening) 1,988,191
USD (20% weakening) (1,988,191)
Euro (20% strengthening) 127,062
Euro (20% weakening) (127,062)
31 March 2016
USD (20% strengthening) 226,860
USD (20% weakening) (226,860)
Euro (20% strengthening) 4,320
Euro (20% weakening) (4,320)
b. Interest rate risk
In thousands of Naira 2017 2016
Fixed rate instruments
Financial assets 631,257 1,053,785
Financial liabilities (19,199,185) (16,429,628)
(18,567,928) (15,375,843)
Variable rate instruments
Financial liabilities (13,871,755) (1,779,871)
(13,871,755) (1,779,871)
Fair value sensitivity analysis for fixed rate instruments
Carrying Amount
In managing interest rate risk, the Company aims to reduce the impact of short‐term fluctuations
in earnings. Dividend pay‐out practices seek a balance between giving good returns to
shareholders on one hand and maintaining a solid debt/equity ratio on the other hand.
At the reporting date the interest rate profile of the Company’s interest‐bearing financial
instruments was:
A strengthening of the naira, as indicated below, against the USD would have affected the
measurement of financial instruments denominated in foreign currency and increased profit
or loss by the amounts shown below. This analysis is based on foreign currency exchange
rate variances that the Company considered to be reasonably possible at the end of the
reporting period. The analysis assumes that all other variables, in particular interest and
inflation rates, remain constant and ignores any impact of forecast sales and purchases.
The Company does not account for any fixed financial assets and liabilities at fair value through
profit or loss. Therefore a change in interest rates at the reporting date would not affect profit or
loss.
Increase/(decrease) in profit or
loss
61
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
B Accounting classification and fair values
In thousands of Naira
Financial assets measured at fair valueFuture exchange contracts 131,848 131,848
131,848 ‐ ‐ ‐ 131,848 ‐ Financial assets not measured at fair value
Other receivables (non‐current) ‐ 43,813 ‐ ‐ ‐ ‐
Trade and other receivables ‐ 17,038,639 ‐ ‐ ‐ ‐
Cash and cash equivalents ‐ 6,009,919 ‐ ‐ ‐ ‐
‐ 23,092,371 ‐ ‐ ‐ ‐
Financial liabilities measured at fair value
306,780 306,780
306,780 ‐ ‐ ‐ 306,780 ‐
Financial liabilities not measured at fair value
Loans and borrowings‐non current ‐ ‐ 12,675,925 ‐ 12,661,669 ‐
Loans and borrowings‐current ‐ ‐ 20,395,015 ‐ ‐ ‐
Trade and other payables* ‐ ‐ 12,287,869 ‐ ‐ ‐
Bank overdraft ‐ ‐ 10,025,507 ‐ ‐ ‐
‐ ‐ 55,384,316 ‐ 12,661,669 ‐
Financial assets not measured at fair value
Other receivables (non‐current) ‐ 95,188 ‐ ‐ ‐ ‐
Trade and other receivables ‐ 5,661,584 ‐ ‐ ‐ ‐
Cash and cash equivalents ‐ 5,856,658 ‐ ‐ ‐ ‐ ‐ 11,613,430 ‐ ‐ ‐ ‐
Financial liabilities not measured at fair valueLoans and borrowings‐non current ‐ ‐ 1,520,205 ‐ 1,526,444 ‐
Loans and borrowings‐current ‐ ‐ 16,689,294 ‐ ‐ ‐
Trade and other payables* ‐ ‐ 7,947,696 ‐ ‐ ‐
Bank overdraft ‐ ‐ 1,076,388 ‐ ‐ ‐
‐ ‐ 27,233,583 ‐ 1,526,444 ‐
*Trade and other payables excludes statutory deductions such as Value Added Tax payable, Witholding Tax Payable, PAYE payable, Pension Payable, other non ‐
income payables and deposit for returnable packaging material.
Other
financial
liabilities
Fair ValueCarrying amount
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does
not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of
fair value.
31 March 2016
Level 3Level 2
Fair value ‐
hedging
instruments
Level 1
31 March 2017
Loans and
Receivable
Forward exchange contracts
62
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
C Measurment of fair values
‐ Forward and Future exchange contracts
‐ Other financial liabilities
26 Capital management
In thousands of Naira 2017 2016
Total liabilities 73,871,176 43,017,017
Less: cash and cash equivalents (6,009,919) (5,856,658)
Net debt 67,861,257 37,160,359
Total equity 13,225,471 24,779,594
Net debt to equity ratio 5.13 1.50
27 Operating leases
The fair value is determined using quoted forward exchange rates at the reporting date and
present value calculations based on high credit quality yield curves in the respective currencies.
There are no significant unobservable inputs.
Fair value, which is determined for disclosure purposes, is calculated based on the present value
of future principal and interest cash flows, discounted at the market rate of interest at the
reporting date.
The Head office, Ibadan and Ilorin land leases were entered into many years ago. The Company
determined that the land elements of these warehouse and office leases are operating leases. The
rent paid to the landlord is increased to market rate at regular intervals. As a result, it was
determined that substantially all the risks and rewards of the land and buildings are with the
landlord.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Management monitors the net debt
to equity ratio, which the Company defines as net debt divided by total equity. Management also
monitors the level of dividends to all shareholders.
The Company’s debt to adjusted capital ratio at the end of the reporting period was as follows:
The Company leases equipment, offices, warehouse and accommodation facilities under operating
leases. The leases typically run for a period of one to five years, with an option to renew the lease
after that date. Lease payments are usually increased at the expiration of the lease term and
consequent renewal to reflect market rentals. Lease rentals are paid upfront and included in
prepayments, which are amortized to the profit and loss over the life of the lease on a straight line
basis and therefore there are no future lease payment payable in relation to these lease. Lease
rental payment in current year amounted to N293 million (2016: N376 million).
During the year ended 31 March 2017, an amount of N429 million (2016: N462 million) was
recognized as an expense in profit or loss in respect of operating leases.
63
Seven-Up Bottling Company PLC
Annual Report
31 March 2017
28 Contingencies
(a) Pending litigation and claims
(b) Financial commitments
29 Related parties
(a) Parent and ultimate controlling party
(b)
Loans to key management personnel
(c) Key management personnel compensation
Key management personnel compensation comprised:
In thousands of naira 2017 2016
Short-term employee benefits 230,116 225,162
Contribution to compulsory pension fund scheme 10,016 9,498
Long-term employee benefits 111,034 195,918
351,166 430,578
(d) Other related party transactions
Transactions with key management personnel
The Company is engaged in lawsuits that have arisen in the normal course of business. The
contingent liabilities in respect of pending litigation and other possible claims amounted to
N517 million as at 31 March 2017 (2016: N932 billion). In the opinion of the directors, and
based on independent legal advice, the Company is not expected to suffer any material loss
arising from these claims. Thus no provision has been made in these financial statements.
The directors are of the opinion that all known liabilities and commitments, which are relevant
in assessing the financial position of the Company, have been taken into consideration in the
preparation of these financial statements.
Related parties include the parent company, AFFELKA, S.A and other Seven-Up entities and
entities under common control with Seven-Up. Directors, their close family members and any
employee who is able to exert a significant influence on the operating policies of the Company
are considered as related parties. Key management personnel are also regarded as related
parties. Key management personnel are those persons having authority and responsibility for
planning, directing and controlling the activities of the entity, directly or indirectly, including any
director (whether executive or otherwise) of that entity.
The major shareholder of the Company is AFFELKA S.A with 73.22 % shareholding. The ultimate
controlling party of the Group is MAK Holdings Ltd (Bermuda).
There were no unsecured loans with key management personnel as at year end (2016:
Nil).
In addition to their salaries, the Company also provides non-cash benefits to directors and
executive officers, and contributes to a post-employment defined contribution plan on their
behalf. In accordance with the terms of the plan, directors and executive officers are entitled to
access the fund when they retire.Executive officers also participate in the Company’s long service awards programme. This
programme awards a certain sum of cash benefit which accrues to the recipient on graduated
periods of uninterrupted service.
64
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(i) Amounts due from related parties
In thousands of naira
Related Party 2017 2016 2017 2016
Sunglass Limited iii
Advance
payment/
supply of glass
900,979 8,662,902 4,100,729 3,133,563
iv
Advance
payment/
supply of corks
1,112,203 10,171,303 1,962,502 663,045
viiSale of
finished goods116,508 17,988 71,240 96,387
viiiSale of
finished goods11,573 ‐ 4,010 ‐
2,141,263 18,852,193 6,138,481 3,892,995
(ii) Amounts due to related parties
In thousands of naira
Related Party 2017 2016 2017 2016
vCash advance/
Services8,623 967 192,634 182,062
vi
Good and
services/Mana
gement fee
39,674,425 17,680,902 4,251,629 ‐
39,683,048 17,681,869 4,444,263 182,062
Balance outstanding as at
31 March
Transaction value year
ended 31 March
SBC Beverages Ghana
Limited
SBC Tanzania Limited
Nature of
transaction
Green Eagle, Cork
Seal Nigeria Limited
Nature of
transaction
Balance outstanding as at
31 March
M. El Kalil Properties
Limited
Transaction value year
ended 31 March
Continental
Beverages SAL
(Offshore)
A number of key management personnel, or their related parties, hold positions in other
entities that result in them having control or significant influence over the financial or operating
policies of the entities. During the year, a number of these entities transacted with the
Company. The total amounts due to/from related parties by nature of their transaction are
shown below.
65
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(iii) Sunglass Limited:
(iv) Green Eagle, Cork Seal Nigeria Limited (Green Eagle):
(v) M. El Kalil Properties Limited:
(vi) Continental Beverages SAL (Offshore):
(vii) SBC Beverages Ghana Limited
SBC Beverages Ghana Limited is related to the Company through common shareholding. SBC
Beverages Ghana Limited purchases finished products from Seven‐Up Bottling Company PLC for
resale in Ghana.
Sunglass Limited whose principal activity is the manufacturing of glass and glass wares is a major
supplier of bottles to Seven‐Up bottling Company PLC "the Company". Sunglass is related to the
Company through common shareholding, as the majority shareholders in Seven‐Up also have
majority shares in Sunglass limited.
The Company advances money to Sunglass Limited to boost their working capital and assist them in
the procurement of materials required for production. These advances are subsequently recovered
from future transactions from the supply of bottles.
Green Eagle, Cork Seal Nigeria Limited whose principal activity is the manufacturing and marketing
of Corks, Seals and Crates for bottling companies and breweries, is a major supplier of crowns and
crates to Seven‐Up Bottling Company PLC. Green Eagle, Cork Seal Nigeria Limited is related to the
Company through common shareholding.
The Company also advances money to Green Eagles to boost their working capital and assist them
in the procurement of materials required for production. These advances are subsequently
recovered from future transactions with the company for the supply of corks and crates.
The Company occupies properties owned by M. El‐Kalil & Sons (Properties) Limited. M. El‐Kalil &
Sons (Properties) Limited is related to the Company through common shareholding. Seven‐Up
Bottling Company also provides management services (mainly legal advice) to M.El Kalil.
Continental Beverages SAL (Offshore) sells goods and provides management services to Seven‐up
Bottling Company PLC. A consideration of 3% of profit before tax (but not exceeding
N639,382,650 from 1 April 2015 to 31 March 2018), is paid as management service fees to
Continental Beverages. This agreement is backed up with a National Office for Technology
Acquisition and Promotion (NOTAP) agreement with file number NOTAP/AG/MN/1159/4/98.
All outstanding balances with these related parties are expected to be settled within twelve months
of the reporting date. None of the balances is secured or bears interest.
Management fees payable to Continental Beverages for the year ended 31 March 2017 amounted
to N112 million (2016: Nil).
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Seven-Up Bottling Company PLCAnnual Report
31 March 2017
(viii) SBC Tanzania Limited
30 Subsequent events
SBC Tanzania Limited is related to the Company through common shareholding. SBC Tanzania
Limited purchases finished products from Seven‐Up Bottling Company PLC for resale in Tanzania.
There are no events after the reporting date which could have had a material effect on the financial
position of the Company as at 31 March 2017 and its operating results for the year then ended that
have not been adequately provided for or disclosed in these financial statements.
67
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Other National Disclosures
68
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Other National Disclosures
Value Added StatementFor the year ended 31 March
2017 % 2016 %
In thousands of naira
Revenue 108,277,000 85,634,679
Brought in materials and services
‐ Local (63,593,291) (39,021,969)
‐ Imported (32,760,180) (19,735,380)
11,923,529 26,877,330
Other income 427,036 317,434
Finance income 424,008 41,571
Value Added 12,774,573 100 27,236,335 100
Distribution of Value Added:
To Government as:
Taxes and duties
‐ Government as taxes (451,726) (4) 409,927 2
To Employees:
‐ Employees as wages and salaries
and end of service benefits 10,045,983 79 10,872,213 40
To Providers of Finance:
‐ Finance costs 4,444,361 35 3,245,524 12
Retained in the business:
To maintain and replace
‐ Property, plant and equipment 9,487,448.00 74 9,325,971 34
‐ Intangible assets 25,219.00 ‐ 35,237 ‐
To (delete)/ augment reserves (10,776,712.00) (84) 3,347,463 12
Value added 12,774,573 100 27,236,335 100
69
Seven-Up Bottling Company PLCAnnual Report
31 March 2017
Other National Disclosures
Five ‐ Year Financial Summary
Statement of profit or loss and other
comprehensive income2017 2016 2015 2014 2013 2012
In thousands of naira
Revenue 108,277,000 85,634,679 82,450,505 77,888,548 64,088,879 59,864,385
Results from operating activities (7,208,085) 6,961,343 11186832 9,130,834 5,526,734 4,802,379
(Loss)/profit before taxation (11,228,438) 3,757,390 8,749,101 7,616,444 3,262,719 2,558,644
(Loss)/profit for the year (10,776,712) 3,347,463 7,125,788 6,434,601 2,856,504 1,678,471 Total Comprehensive (loss)/income for the
year (10,562,376) 2,598,854 8,189,312 6,160,014 2,928,875 1,678,471
Ratios
Per 50k share data:
Basic/ diluted earnings per share (1,682) 523 1,112 1,004 446 262
Declared dividend per share (kobo) NIL 275 250 220 200 200
Share price at year end (Naira) 109 155 156 90 49 42
Net assets per share 21 39 37 27 20 16
Statement of financial position
2017 2016 2015 2014 2013 2012
In thousands of naira
Employment of Funds
Share capital 320,295 320,295 320,295 320,295 320,295 320,295
Share premium 299,140 299,140 299,140 299,140 299,140 299,140
Retained earnings 12,606,036 24,160,159 23,314,198 16,709,260 11,958,545 9,688,160
Shareholder's fund 13,225,471 24,779,594 23,933,633 17,328,695 12,577,980 10,307,595
Current liabilities 57,076,525 34,656,603 34,656,603 29,867,824 27,862,495 29,670,126
Non current liabilities 16,794,651 8,360,414 8,360,414 8,666,690 10,929,695 8,507,941
87,096,647 67,796,611 66,950,650 55,863,209 51,370,170 48,485,662
Asset Employed
Non current assets 40,457,022 42,771,624 44,702,571 38,238,065 35,873,744 33,480,167
Current assets 46,639,625 25,024,987 22,984,268 17,625,144 15,496,426 15,005,495
87,096,647 67,796,611 67,686,839 55,863,209 51,370,170 48,485,662
70