Vitafoam Nigeria Plc. - Nigerian Stock...

Vitafoam Nigeria Plc.

Consolidated and Separate financial statements

Year ended 30 September 2014

Vitafoam Nigeria Plc Consolidated and Separate financial statements

For the year ended 30 September 2014

Table of Contents

Statement of Directors’ Responsibilities ..................................................................................... i

Report of the independent auditors .......................................................................................... 1

Group & Company Statement of Profit or Loss and other Comprehensive Income ................. 2

Group & Company Statement of Financial Position ................................................................. 3

Company Statement of Changes in Equity ............................................................................... 4

Group Statement of Changes in Equity .................................................................................... 5

Group & Company Statement of Cash flows ............................................................................ 6

Notes to the Financial Statements ........................................................................................... 7

Consolidated statement of value added ................................................................................. 50

Five-year financial summary .................................................................................................. 51



2

Group & Company Statement of Profit or Loss and other Comprehensive Income

Group Company

Restated Restated

Note 2014 2013 2014 2013

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

Revenue 7 16,712,922 16,808,851 15,519,856 15,592,358 Cost of sales 9 (11,316,938) (11,690,186) (10,547,522) (10,676,540)

Gross profit

5,395,984 5,118,665 4,972,334 4,915,818 Other gains and losses 8 256,380 167,492 254,317 134,205 Distribution cost 9 (939,622) (967,588) (858,643) (952,522) Administrative expenses 9 (3,202,240) (3,027,253) (2,730,411) (2,817,444)

Operating profit

1,510,503 1,291,316 1,637,598 1,280,057 Finance income 10 4,052 2,908 4,052 2,908 Finance costs 10 (804,833) (678,970) (715,338) (668,803)

Profit before income tax

709,722 615,254 926,312 614,162 Income tax expense 11 (274,127) (225,879) (266,421) (219,472)

Profit for the year

435,595 389,375 659,891 394,690

Other comprehensive income: Items that will not be reclassified to profit or loss Remeasurement of retirement benefit obligations 23 68,431 (405) 68,432 (405)

Items that may be subsequently reclassified to profit or loss Change in fair values of available-for-sale financial assets 17 (2,932) 1,261 (2,932) 1,261 Currency translation differences 27 28,040 - - -

Total comprehensive income for the year, net of tax

529,135 390,231 725,391 395,546

Profit for the year Attributable to: – Owners of the parent 518,820 417,155 659,891 394,690 – Non-controlling interests (83,225) (27,780) - -

Total profit for the year

435,595 389,375 659,891 394,690

Total comprehensive income for the year Attributable to: – Owners of the parent 612,360 418,011 725,391 395,546 – Non-controlling interests (83,225) (27,780) - -

Total comprehensive income for the year

529,135 390,231 725,391 395,546

Earnings per share: Basic and diluted - Naira 29 0.63 0.51 0.81 0.48

The notes on pages 7 to 49 are an integral part of these financial statements.



4

Company Statement of Changes in Equity

Attributable to equity holders

Share capital Share

premium Retained earnings

Available-for-sale reserves Total equity

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

Balance as at 1 October 2012

409,500 3 2,743,341 (35,377) 3,117,467

Profit for the year

- - 394,690 - 394,690

Other comprehensive income Change in available-for-sale financial asset - - - 1,261 1,261 Remeasurements of retirement benefit obligations - - (405) - (405)

Total comprehensive income

- - 394,285 1,261 395,546

Transaction with owners: Dividend paid - - (245,700) - (245,700)

Total Transactions with owners - - (245,700) - (245,700)

Balance as at 30 September 2013 409,500 3 2,891,926 (34,116) 3,267,313

Balance as at 1 October 2013 409,500 3 2,891,926 (34,116) 3,267,313 Profit for the year 659,891 659,891

Other comprehensive income Change in available for sale financial asset - - - (2,932) (2,932) Remeasurements of retirement benefit obligations - - 68,432 - 68,432

Total comprehensive income

- - 728,323 (2,932) 725,391

Transaction with owners: Dividend paid - - (245,700) - (245,700)

Total Transactions with owners

- - (245,700) - (245,700)

Balance as at 30 September 2014 409,500 3 3,374,549 (37,048) 3,747,004



5

Group Statement of Changes in Equity

Notes Share capital

Share premium

Retained earnings

Available-for-sale

reserves

Currency translation

reserves

Non-controlling

interests Total

equity

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

Balance as at 1 October 2012 409,500 3 2,569,131 (35,377) - (31,518) 2,911,739

Effect of change in accounting policy 39 - - (338,289) - - (44,339) Restated balance as at 1 October 2012 409,500 3 2,230,842 (35,377) - (75,857) 2,529,111

Profit or (loss) for the year

- - 417,155 - - (27,780) 389,375 Other comprehensive income: Change in available for sale financial assets - - - 1,261 - - 1,261 Remeasurements of retirement benefit obligations - - (405) - - - (405)

Total comprehensive income/(loss)

- - 416,750 1,261 (27,780) 390,231

Transaction with owners: Other reserves 46,586 - - - 46,586 Transfer of interest to non-controlling interest - - 4,000 - - (6,569) (2,570) Other dividend paid - - (11,200) - - - (11,200) Dividends paid - - (245,700) - - - (245,700)

Total transactions with owners

- - (206,315) - - (6,569) (212,884)

Balance as at 30 September 2013 409,500 3 2,441,277 (34,116) - (110,206) 2,706,458

Balance as at 1 October 2013 409,500 3 2,441,277 (34,116) - (110,206) 2,706,458 Profit or loss for the year 518,820 - (83,225) 435,595 Other comprehensive income: Change in available for sale financial assets - - - (2,932) - - (2,932) Remeasurements of retirement benefit obligations - - 68,431 - - - 68,431 Currency translation differences - - - - 28,040 - 28,040

Total comprehensive income or loss

- - 587,251 (2,932) 28,040 (83,225) 529,135

Transaction with owners: Transfer of interest to non-controlling interest - - 24,445 - - 14,730 39,175 Dividends paid (245,700) (245,700)

Total transactions with owners

- - (221,255) - 14,730 (206,525)

Balance as at 30 September 2014 409,500 3 2,807,274 (37,048) 28,040 (178,701) 3,029,068



6

Group & Company Statement of Cash flows

Group Company

Note 2014 2013 2014 2013 N '000 N '000 N '000 N '000

Net cashflows from operating activities

31 2,310,142 1,847,237 2,490,085 1,578,376 Tax paid (237,710) (288,560) (237,710) (288,560)

Net cashflows from operating activities

2,072,432 1,558,677 2,252,375 1,289,816

Cash flows from investing activities Acquisition of investments in subsidiaries - - (40,736) (8,000) Acquisition of property, plant and equipment and intangible assets (587,045) (842,017) (297,643) (425,152) Proceeds from sale of property, plant and equipment 89,093 13,619 117,014 9,920 Proceeds from sale of investment - 8,000 - 8,700 Additions to intangible assets (5,131) (34,930) (4,685) (33,963) Loan repayment - 42,000 - 42,000 Interest received 4,052 2,908 4,052 2,908 Dividend received - 1,350 30,150

Net cash used in investing activities

(499,031) (809,071) (221,998) (373,437)

Cash flows from financing activities Dividends paid (245,700) (245,700) (245,700) (245,700) Proceeds from borrowings 221,076 579,083 - 350,000 Repayment of borrowings (289,020) (180,841) (241,657) (133,162) Interest repaid (949,954) (678,969) (1,233,431) (649,795)

Net cash used in financing activities

(1,263,598) (526,427) (1,720,788) (678,657)

Net (decrease) /increase in cash and cash equivalents 309,804 223,180 309,589 237,722 Cash and cash equivalents at start of year (2,499,638) (2,723,959) (2,553,066) (2,791,647) Exchange gains on cash and cash equivalents - 1,141 - 859

Cash and cash equivalents at end of year 20

(2,189,835) (2,499,638) (2,243,476) (2,553,066)



7

Notes to the Financial Statements

1.0 General information

The consolidated financial statements incorporate the financial statements of Vitafoam Nigeria Plc. and entities controlled by Vitafoam Nigeria Plc. (its subsidiaries), collectively called ""the Group"" made up to 30 September each year. The ultimate controlling party of the Group is the parent , Vitafoam Nigeria Plc.

Stand alone financial statements for Vitafoam Nigeria (the Company) have also been presented. The same accounting policies are used by both the Group and Company."

The financial statements were authorised for issue by the Board of Directors on 22 April 2015. 1.1 Restatement of prior year information

The comparative information for 2013 financial year and where applicable, 2012 financial year have been restated to reflect the recognition of Vitafoam’s control of Vono Products Plc as prescribed by IAS 8. Under IFRS 10, entities are required to re-assess the control of an entity when facts and circumstances change. Vitafoam Nigeria Plc. carried out a control re-assessment and concluded that it has control of Vono Products Plc. even though Vitafoam holds only 47% of equity shares in Vono Products Plc. In line with IFRS 10, Vono products has been consolidated during the period and in line with IAS 8, the consolidation has been retrospectively applied for the year ended September 2013.

2.0 Basis of preparation and adoption of IFRSs

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) effective for the year ended 30 September 2014. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. The Directors believe that the underlying assumptions are appropriate and that these financial statements present the financial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5.

The financial statements have been prepared under the going concern assumption and historical cost convention as modified by the valuation of available-for-sale financial assets. The financial statements are presented in Nigeria Naira and all values are rounded to the nearest thousand Naira (NGN'000), except where otherwise indicated.

The financial statements were authorised for issue by the board of directors on 22 April 2015. 3.0 New standards, amendments and interpretations adopted by the Group

The following standards have been adopted by the Group for the first time for the financial year beginning 1 October 2013 and have had a material impact on the Group:

i. IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the concept of control

as the determining factor in whether an entity should be included within the consolidated financial statements of the parent Company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. See note 39 for the impact on the financial statements.

ii. IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. The disclosure requirements are included in note 39.

iii. Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to Group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

Other standards, amendments and interpretations which are effective for the financial year beginning on or after 1 October 2013 have not had any material effect on the Group.



8

Notes to the Financial Statements 3.1 New standards and interpretations issued but not yet effective and not early adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these financial statements. These include:

i. IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes

principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service.

The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The Group is yet to assess the impact of IFRS 15."

ii. IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial

assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group is yet to assess IFRS 9’s full impact.

iii. Amendment to IAS 36, ‘Impairment of assets’ to align the disclosure requirements in IAS 36 in line with

IFRS 13 Fair Value Measurement disclosures, to require the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The amendment also requires additional information about the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal, consistently with the disclosure requirements for impaired assets in US GAAP. The amendment is effective for financial periods beginning on or after 1 January 2014. The Group is yet to assess the impact of this amendment.

iv. Amendments to IFRS 10, IFRS 12 and IAS 27: Investment Entities.

The amendment provides an exception to the consolidation requirement for entities that meet the definition of an investment entity. The IASB uses the term 'Investment Entity' to refer to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. An investment entity must also evaluate the performance of its investments on a fair value basis. Such entities could include; private equity organizations, venture capital organizations, pension funds, sovereign wealth funds and other investment funds. The amendment is effective for financial periods beginning on or after 1 January 2014. This amendment will not have an impact on the Group as the Group does not have investment entities. "

v. Amendments to IAS 32 ""Financial Instrument: Presentation"", on asset and liability offsetting.

The amendment clarifies the meaning of the entity currently having a legally enforceable right to set off financial assets and financial liabilities as well as the application of IAS 32 offsetting criteria to settlement systems. The amendment is effective for financial periods beginning on or after 1 January 2014. The amendment will not have an impact on the Group. "



9

Notes to the Financial Statements 3.1 New standards and interpretations issued but not yet effective and not early adopted (cont’d)

vi. Amendments to IAS 27 on equity method in ''Separate Financial Statements' The amendment allows an option to use the equity method in separate financial statements. The changes will need to be applied retrospectively and there is no relief for first-time adopted. The amendment is effective for annual periods beginning on or after 1 January 2016. The Group is yet to assess the impact of this amendment.

vii. Amendment to IAS 16, 'Property, plant and equipment' and IAS 38,'Intangible assets', on

depreciation and amortisation IASB has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. The amendment is effective for annual periods beginning on or after 1 January 2016. The Group is yet to assess the impact of this amendment.

viii. Amendment to IAS 19 regarding defined benefit plans These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. This amendment is effective for annual periods beginning on or after 1 July 2014. The Group is yet to assess the impact of this amendment.

ix. Annual improvement to IFRS- 2010 to 2012 cycle.

These amendments include changes from the 2010-12 cycle of the annual improvements project,that affect 7 standards:

• IFRS 2, ‘Share-based payment’

• IFRS 3, ‘Business Combinations’

• IFRS 8, ‘Operating segments

• IFRS 13, ‘Fair value measurement’

• IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’

• Consequential amendments to IFRS 9, ‘Financial instruments’,

• IAS 37, ‘Provisions, contingent liabilities and contingent assets’, and

• IAS 39, Financial instruments – Recognition and measurement

These amendments are effective for annual periods beginning on or after 1 July 2014. The Group is yet to assess the impact of this amendment. "

x. Annual improvement to IFRS- 2011 to 2013 cycle.

These amendments include changes from the 2011-2-13 cycle of the annual improvements project that affect 4 standards:

• IFRS 1, ‘First time adoption’

• IFRS 3, ‘Business combinations

• IFRS 13, ‘Fair value measurement’ and

• IAS 40, ‘Investment property

These amendments are effective for annual periods beginning on or after 1 July 2014. The Group is yet to assess the impact of this amendment. "



10

Notes to the Financial Statements 4.0 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

4.1 Consolidation The financial statements of the subsidiaries used to prepare the consolidated financial statements were prepared as of the parent Company’s reporting date.

4.1.1 Subsidiaries

"Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group.

They are deconsolidated from the date that control ceases.

The Company's subsidiaries' are listed below: Vitafoam Ghana Limited Vitafoam Sierra Leone Limited Vitapur Nigeria Limited Vitablom Nigeria Limited Vitavisco Nigeria Limited Vono Products Plc. Vitagreen Nigeria Limited

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. Inter-Company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-Company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group."



11

Notes to the Financial Statements 4.1.2 Changes in ownership interests in subsidiaries without change in control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

4.1.3 Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in the carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for retained interest in as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are re-classified to profit or loss.

4.2 Foreign currency translation 4.2.1 Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘Naira’, which is the Group’s presentation currency.

4.2.2 Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘finance income or cost’. All other foreign exchange gains and losses are presented in profit or loss within ‘other income or expenses’.

4.2.3 Foreign operations

Assets and liabilities for each period presented are translated at the closing rate at the date of that period. Income and expenses for each income statement are translated at average exchange rates. Where Group companies have a functional currency different from the Group's presentation currency, the exchange differences arising on translation of these operations are recognized in other comprehensive income, otherwise, in the profit or loss.

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

a) assets and liabilities for each period presented are translated at the closing rate as at the end of that

period; b) income and expenses for each income statement are translated at average exchange rates (unless this

average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

c) all resulting exchange differences are recognised in other comprehensive income and accumulated in a currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.



12

Notes to the Financial Statements 4.3 Trade receivables

Trade receivables are amounts due from customers for sale of foam products or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. "

4.4 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied to third parties in the normal course of business, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Company’s activities, as described below. The Group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

4.5 Cash and cash equivalents

In the statement of cash flows, cash and cash equivalents includes cash in hand, cash balances with banks, other short term highly liquid investments with original maturity of three months or less and bank overdrafts. In the statement of financial position, bank overdrafts are shown within borrowings in current liabilities.

4.6 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method (product & packaging materials, work-in-progress, ) and the weighted average cost basis. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less any applicable selling expenses. Allowance is made for defective and slow moving items as appropriate. If carrying value exceeds net realizable amount, a write down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused it no longer exist.

4.7 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

4.8 Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.



13

Notes to the Financial Statements 4.9 Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably. Repairs and maintenance costs are charged to the profit or loss in the period they are incurred. The Group allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. The carrying amount of a replaced part is derecognized when replaced. Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other income’ in the profit or loss.

The major categories of property, plant and equipment are depreciated on a straight-line basis as follows: Asset category Useful lives (years) Buildings 33 Plant and machinery 5 Motor vehicle 4 Furniture, fittings and equipment 5 Land is not depreciated. The Company currently does not have PPE in work in progress.

In the case where an asset’s carrying amount is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference (impairment loss) is recorded as expense in profit or loss.

4.10 Impairment of assets 4.10.1 Impairment of non-financial assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

4.10.2 Impairment of financial assets

a. Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset is impaired. A financial asset is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

• significant financial difficulty of the issuer or obligor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• the Company, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

• it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• the disappearance of an active market for that financial asset because of financial difficulties; or

• observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

1. adverse changes in the payment status of borrowers in the portfolio; and 2. national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists.



14

Notes to the Financial Statements 4.10.2 Impairment of financial assets (cont’d)

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtors credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

(b) Assets carried as available for sale

The Group assesses at the end of each reporting period whether there is an objective evidence that a financial asset is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below cost is also evidence that the asset is impaired. If such evidence exists for available for sale financial assets, the cumulative loss -measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss-is removed from equity and recognized in profit or loss. Impairment losses recognized in the consolidated income statement on equity instruments are not reversed through the consolidated profit or loss.

4.11 "Financial instruments

Classification The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Classification

The Company classifies its financial assets in the following categories: loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.



15

Notes to the Financial Statements 4.11.1 Financial assets

The Group classifies its financial assets into the following categories: Loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition.

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group’s loans and receivables comprise trade receivables, staff debtors, Intercompany receivables and cash and cash equivalents, and are included in current assets due to their short-term nature. Loans and receivables are initially recognized at the amount expected to be received, less, when material, a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are carried at amortised cost less any impairment.

(b) Available-for-sale investments

Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any of the other categories. The Group’s available-for sale assets comprise investments in equity securities . Available-for-sale investments are recognized initially at fair value plus transaction costs and are subsequently carried at fair value. Gains or losses arising from remeasurement are recognized in other comprehensive income .

When an available-for-sale investment is sold or impaired, the accumulated gains or losses are moved from accumulated other comprehensive income to the statement of comprehensive income and are included in “other gains and losses (net)”. Available-for-sale investments are classified as non-current, unless an investment matures within twelve months, or management expects to dispose of it within twelve months. Dividends on available-for-sale equity instruments are recognized in the statement of income as dividend income when the Company’s right to receive payment is established.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair values cannot be reasonably estimated are carried at cost.

4.11.2 Financial liabilities

Financial liabilities are classified as financial liabilities at amortised cost. There are no financial liabilities at fair value through profit or loss (FVTPL). Financial liabilities are recognised initially at fair value and, in the case of financial liabilities at amortised cost, inclusive of directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification as follows:

(a) Financial liabilities at amortised cost

These include trade payables and bank borrowings. Trade payables are initially recognized at the amount required to be paid, less, when material, a discount to reduce the payables to fair value. Subsequently, trade payables are measured at amortised cost using the effective interest method. Bank borrowings are recognised initially at fair value, net of any transaction costs incurred, and subsequently at amortised cost using the effective interest method. These are classified as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities.

4.11.3 Offsetting financial Instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

4.11.4 De-recognition

All financial instruments are initially measured at fair value. Financial assets and liabilities are derecognised when the rights to receive cash flows from the investments or settle obligations have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.



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Notes to the Financial Statements 4.12 Taxation (a) Current income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted as at each reporting period end in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(b) Deferred income tax

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at each report period end and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

4.13 Employee benefits 4.13.1 Pension obligations

The Company operates a pension scheme which is generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Company operates a defined contribution plan. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.

The Group has both defined benefit and defined contributory schemes. a) Defined Contributory scheme

In Nigeria, the Group, in line with the provisions of the Pension Reform Act 2014, operates a defined contribution pension scheme under which the Group contributes 10% and its employees each contribute 8% of the employees’ monthly basic salary, housing and transport allowances to the fund. In Sierra Leone and Ghana. the Group also operates defined contribution schemes in accordance with the relevant local laws. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. The staff contributions to the scheme are funded through payroll deductions while the Group's contributions are accrued and charged fully to the profit or loss account. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.



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Notes to the Financial Statements 4.13.1 Pension obligations (cont’d) b) Defined Benefits scheme

A defined benefit plan is a retirement benefit plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses are recognized in full in the period in which they occurred, in other comprehensive income and cumulated in other reserves without recycling to profit or loss in subsequent periods. The current service cost of the defined benefit plan, recognised in the income statement in employee benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes curtailments and settlements. Past-service costs are recognised immediately in income.

4.13.2 Other Long term benefits

Other long term benefits - Long Service awards are paid to qualifying staff when earned. The Group's liability to staff is measured annually by independent actuaries using the projected credit unit method.

4.13.3 Termination Benefits Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.

4.14 Share Capital The Company has only one class of shares, ordinary shares. Ordinary shares are classified as equity. When new shares are issued, they are recorded as share capital at their par value. The excess of the issue price over the par value is recorded in the share premium reserve.

4.15 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Unclaimed dividends which remain 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 the Companies and Allied Matters Acts of Nigeria are written back to retained earnings.

4.16 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease. The Group leases certain land and buildings. Leases of land and buildings where the Group has substantially all the risks and rewards of ownership are classified as finance leases otherwise, they are operating leases.

Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. For finance leases, each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant & equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.



18


4.17 Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to property, plant and equipment are deferred and credited to the profit or loss on a straight- line basis over the expected useful lives of the related assets.

4.18 Segment reporting An Operating segment is a component of an entity

a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);

b) whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and

c) for which discrete financial information is available. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Managing director of Vitafoam Nigeria Plc.

4.19 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method.

4.20 Borrowing costs

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

4.21 Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Group is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property. Land held under operating leases is classified and accounted for by the Company as investment property when the definition of investment property would otherwise be met. The operating lease is accounted for as if it were a finance lease. Investment property is measured initially at its cost, including related transaction costs and (where applicable) borrowing costs. After initial recognition, investment property is carried at cost. Recognition of investment properties takes place only when it is probable that the future economic benefits that are associated with the investment property will flow to the Group and the cost can be reliably measured. This is usually when all risks are transferred. Rental income represents income received from letting of properties. Income is recognised on an accrual basis and credited to the profit or loss.



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Notes to the Financial Statements 4.22 Intangible assets

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met:

• it is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

• the expenditure attributable to the software product during its development can be reliably measured.

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of five years." Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

4.23 Comparatives Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. Where IAS 8 applies, comparative figures have been adjusted to conform to changes in presentation in the current year.

5.0 Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed herein. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

5.1 Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

5.1.1 Pension Obligations

The present value of the employee benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for these benefits include the discount rate. Any changes in these assumptions will impact the carrying amount of employee benefit obligations. The Group's actuaries determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the employee benefit obligations. In determining the appropriate discount rate, the actuaries considers the interest rates of high-quality corporate bonds (except where there is no deep market in such bonds, in which case the discount rate should be based on market yields on Government bonds) that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related employee benefit obligation. Other key assumptions for employee benefit obligations are based in part on current market conditions. Additional information is disclosed in note 23. Were the discount rate used as at 30 September 2014, to differ by 1% from management's estimates, the carrying amount of pension obligation would be an estimated N73 million higher or N62 million lower.



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Notes to the Financial Statements 5.1.2 Income Taxes

Taxes are paid by Companies under a number of different regulations and laws, which are subject to varying interpretations. In this environment, it is possible for the tax authorities to review transactions and activities that have not been reviewed in the past and scrutinize these in greater detail, with additional taxes being assessed based on new interpretations of the applicable tax law and regulations. Accordingly, management’s interpretation of the applicable tax law and regulations as applied to the transactions and activities of the Companies within the Group may be challenged by the relevant taxation authorities. The Group’s management believes that its interpretation of the relevant tax law and regulations is appropriate and that the tax position included in these financial statements will be sustained.

5.1.3 Impairment of available-for-sale equity investments

The Group follows the guidance of IAS 39 to determine when an available-for-sale equity investment is impaired. This determination requires significant judgement. In making this judgement, the group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. If all of the declines in fair value below cost were considered significant or prolonged, the Group would suffer an additional loss of N2.5 million in its 2014 financial statements, being the transfer of the accumulated fair value adjustments recognised in equity on the impaired available-for-sale financial assets to the income statement.

5.1.4 Useful lives and residual values

Useful lives and residual values are reviewed annually in line with IAS 16 requirements.In performing this review,management considers the present conditions of the assets and the scrap values realizable on these assets at the time of disposal. No revisions were made to useful lives and residual values in current period as management deems these estimates appropriate.

5.2 Critical judgements in applying the entity's accounting policy

Key judgements applied to the Group's accounting policies during the periods included in these financial statements:

5.2.1 Impairment of Non-financial assets

IAS 36 requires an assessment of indicators of impairment at least at each period end. Where no indicators exist as at review date, the standard precludes the need for any further impairment testing's. The Directors reviewed all indicators as at each period and conclude that no non-financial assets (e.g. property plant and equipment) were impaired.

5.2.2 Consolidation of Vono Products Plc.

Under IFRS 10, entities are required to re-assess the control of an entity when facts and circumstances change. Vitafoam Nigeria Plc. carried out a control re-assessment and concluded that it has control of Vono Products Plc. even though Vitafoam holds only 47% of equity shares in Vono Products Plc. In line with IFRS 10, Vono products has been consolidated during the period and in line with IAS 8, the consolidation has been retrospectively applied for the year ended September 2013. Additional information is disclosed in note 39.

5.2.3 Investment in subsidiary - Vitapur Nigeria Limited

Even though Vitafoam holds only 40% of equity shares in Vitapur Nigeria Limited, the Directors believe that Vitafoam has "more than "significant influence and controls the financial and operating policies of Vitapur Nigeria Limited. This key judgement forms the basis for the consolidation of the Vitapur's financial statements.



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Notes to the Financial Statements 5.2.4 Functional currency of Vitafoam Sierra Leone

"IAS 21 requires that the functional currency of an entity should reflect the underlying transactions, events and conditions that are relevant to the entity. Prior to June 2014, the functional currency of Vitafoam Sierra Leone was the Nigerian Naira.

From July 2014, there was a change in the underlying events and conditions that was relevant to the subsidiary. Following this event, the functional currency changed to the Sierra Leonean 'Leone'. The effect of this change has been reflected prospectively from the date of change in these financial statements in line with IAS 21. "

5.2.5 Impairment of financial assets

The Group reviews its impairment of financial assets for possible impairment if there are events or changes in circumstances that indicate that the carrying values of the assets may not be recoverable, or at least at the reporting date, when there is an indication that the asset might be impaired.

6.0 Financial risk management 6.1 Overview of the Group's Risk Management

The Group’s business activities expose it to a variety of financial risks: market risk (including foreign exchange, interest rate, and price), credit risk and liquidity risk.

Risk management is the responsibility of the finance director who aims to effectively manage the financial risk of Vitafoam Nigeria Plc., according to the policies approved by the Board of Directors. The finance director identifies and monitors financial risk.

6.2 Market risk (i) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the group’s functional currency (The Naira).The Group is exposed to foreign exchange risks from some of its commercial transactions and current assets. The Group buys and imports some of the raw materials used for production, the payments for which are made in US Dollars. Receipts for sales of finished goods in Nigeria are in Naira whilst receipts for sales of finished goods to countries such as Sierra Leone and Ghana are in US Dollars. The Group makes payments and collects receipts primarily in Nigerian Naira. Periodically however, receipts and payments are made in other currencies, mostly in the US dollar.

Management’s approach to managing foreign exchange risk is to hold foreign currency bank accounts which act as a natural hedge for these transactions. Currency exposure arising from assets and liabilities denominated in foreign currencies is also managed primarily by setting limits on the percentage of net assets that may be invested in such deposits.

Sensitivity

The sensitivity analysis for currency rate risk shows how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates at the reporting date. The foreign currency denominated balance that the group is exposed to fluctuations is cash and cash equivalents. The group is primarily exposed to the US Dollar.

A 1% increase/decrease in foreign exchange rate at the reporting dates would have increased/decreased

profit or loss and total equity by the following amounts. This analysis is based on foreign currency exchange rate variances that the group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables remain constant:

Group Company As at 30 September 2014 2013 2014 2013

N'000 N'000 N'000 N'000 US Dollar - 1% Increase 1,246 1,100 156 93 US Dollar - 1% Decrease (1,246) (1,100) (156) (93)



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Notes to the Financial Statements 6.2 Market risk (cont’d) (ii) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will be affected by changes in market interest rates. The group's exposure to interest rate risk relates primarily to long term borrowings which were issued at floating interest rates. The Group can also be exposed to cash flow interest rate risk on short term deposits and short term bank borrowings to the extent that the significant reductions in market interest rates would result in a decrease in the interest earned or paid by the Group. The Group's borrowings are denominated in Nigerian naira and to manage this risk, the Group's policy is to negotiate favourable terms with the banks to reduce the impact of exposure to this risk and to obtain competitive rates for loans and for deposits.

Sensitivity analysis for interest rate risk

The sensitivity analysis for interest rate risk shows how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates at the reporting date. The variable interest balances that the group is exposed relate to bank borrowings.

The sensitivity of the Group's earnings to fluctuations in interest rates is reflected by increasing or decreasing interest rates by 1% as shown below:

Group Company As at 30 September 2014 2013 2014 2013

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

1% increase in interest rates 8,048 8,175 7,153 5,884 1% decrease in interest rates (8,048) (8,175) (7,153) (5,884)

iii Price risk

The group's equity instruments are classified as Available for sale and are investments in Nigerian entities. Management monitors the movement in prices of these instruments on monthly basis by comparing price movements on same or similar equities on the stock exchange.

Sensitivity analysis for Price risk

The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity securities will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual equity issuer, or factors affecting all similar equity securities traded in the market. The group's exposure to equity price risk is not material as the group holds a small portfolio of equity instruments. An increase or decrease of 100 basis points on the Nigeria Stock exchange (NSE) All Share Index would have increased or decrease Available for sale reserves in equity/other Comprehensive income by (+ or -) N19,000 (2013 : N244,000).

6.3 Credit risk

Credit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligations under a contract. It arises principally from trading activities with customers. The group has dedicated policies and procedures to control and monitor all such risks. The group limits its exposure to any one party by creating security accounts for all of its Vita shop distributors and all its key distributors such that a one percent of the revenue from these distributors are credited to this security account in form of a collateral in the event of a default. The Group also sets credit limits and monitors customer activities to ensures that these limits are adhered to. Individual customer limits are set taking into consideration past experiences, trading performances and other factors. Where counterparties are unable to meet obligations under existing terms, the Group identifies such customers and restructures facilities to encourage performance and reduce losses.

The Group's credit portfolio is materially concentrated in South west Nigeria. The Group's maximum exposure to credit risk as at the reporting date is the carrying value of the financial assets in the statement of financial position. The carrying value of these financial assets approximates the fair value. The tables below analyse financial assets into the relevant past due groupings as at each reporting date.



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Notes to the Financial Statements 6.3 Credit risk (cont’d)

Group 30 September 2014

Financial assets:

Neither Past due

nor impaired 90-120days Above 120 days Total

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

Cash and bank balances 753,182 - - 753,182 Trade receivables (Gross) 1,397,744 64,441 441,816 1,904,001 Receivables from related party companies 396,259 - - 396,259 Staff advances 7,734 - - 7,734 Other receivables 523,414 - - 523,414

Total 3,078,333 64,441 441,816 3,584,590

30 September 2013

Financial assets:

Neither Past due


N'000 N'000 N'000 N'000 Cash and bank balances 268,211 - - 268,211 Trade receivables (Gross) 234,280 41,075 403,740 679,095 Receivables from related party companies 806,759 - - 806,759 Staff advances 6,340 - - 6,340 Other receivables 246,698 - - 246,698

Total 1,562,288 41,075 403,740 2,007,103

Company 30 September 2014

Financial assets:

Neither Past due


N'000 N'000 N'000 N'000 Cash and bank balances 572,681 - - 572,681 Trade receivables (Gross) 1,134,469 64,441 441,816 1,640,726 Receivables from related party companies 2,177,866 - - 2,177,866 Staff advances - - - - Other receivables 189,180 - - 189,180 Total 4,074,196 64,441 441,816 4,580,453

30 September 2013

Financial assets:

Neither Past due


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

Cash and bank balances 119,565 - - 119,565 Trade receivables (Gross) 367,602 41,075 403,740 812,417 Receivables from related party companies 1,882,515 - - 1,882,515 Staff advances 6,017 - - 6,017 Other receivables 132,942 - - 132,942

Total 2,508,641 41,075 403,740 2,953,456



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Notes to the Financial Statements 6.3 Credit risk (cont’d)

Prepayments are not financial assets and thus not included as part of credit risk assessment for financial assets.

All receivables that are neither past due nor impaired are within approved credit limits, management does not expect any losses from non-performance by these parties. Receivables aged between 90- 120 days are past due but not impaired and relate to a number of customers for which there is no history of default. A provision for impairment is generally recorded for trade receivable balances outstanding for more than 120 days. Other factors considered in making the impairment provisions include evidence of financial difficulty of the debtor. The Group's policy on credit is such that the security account kept for distributors is used in the event of a default i.e. the group is able to recover its monies from these accounts. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The amounts held in the security accounts as at each year end are as follows:

Group & Company

2014 2013 N'000 N'000

Collateral (Dealer's security account balances)- note 24

131,273 141,319

No other collateral is held on these balances.

An analysis of impaired receivables (above 120days) and the related provisions for impairment loss is as follows:

Group Company

2014 2013 2014 2013 N'000 N'000 N'000 N'000

Carrying amount before provision(Gross)

441,816 403,740 441,816 403,740 Provisions for impairment loss (392,824) (395,440) (392,824) (388,705)

Net carrying amount

48,992 8,300 48,992 15,035

An analysis of the long term credit ratings of counterparties where cash and cash equivalents are held is as follows:

Group

2014 2013 Credit rating N'000 N'000

AA 205,804 (1,867,861) A - 82,968 B - (756,468) B+ - 36,596

205,804 (2,504,765)

Company

2014 2013 Credit rating N'000 N'000

AA - (1,916,162) A - 82,968 B - (756,468) B+ - 36,596

- (2,553,066)

These ratings are based on Fitch national long-term rating.



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Notes to the Financial Statements 6.4 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by ensuring that sufficient funds are available to meet its commitments as they fall due. The Group uses both long term and short term cash flow projections to monitor funding requirements for activities and to ensure there are sufficient cash resources to meet operational needs. Cash flow forecasting is performed by the finance department. Cash flow projections take into consideration the Group’s debt financing plans and covenant compliance.

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date.

Group 30 September 2014 Financial liabilities: Within Between 1 Between 2 Total

1 year and 2 years and 5 years

N'000 N'000 N'000 N'000 Trade and other payables (Note 24) 4,142,122 - - 4,142,122 Borrowings - Term loans 331,788 303,995 131,342 767,125 Borrowings (Bank overdrafts & commercial papers) 2,943,017 - 2,943,017 7,416,928 303,995 131,342 7,852,264

30 September 2013 Financial liabilities: Within Between 1 Between 2 Total


N'000 N'000 N'000 N'000 Trade and other payables (Note 24) 2,857,553 - - 2,857,553 Borrowings - Term loans 263,573 338,426 274,845 876,844 Borrowings (Bank overdrafts & commercial papers) 2,767,850 - - 2,767,850 5,888,976 338,426 274,845 6,502,247

Company 30 September 2014

Within Between 1 Between 2 Total


Financial liabilities: N'000 N'000 N'000 N'000

Trade and other payables (Note 24) 3,357,918 - - 3,357,918 Borrowings - Term loans 331,788 126,389 - 458,177 Borrowings (Bank overdrafts & commercial papers) 2,816,157 - - 2,816,157 6,505,864 126,389 - 6,632,253

30 September 2013 Financial liabilities: Within Between 1 Between 2 Total


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

Trade and other payables (Note 24) 2,021,599 - - 2,021,599 Borrowings - Term loans 240,984 277,395 69,993 588,372 Borrowings (Bank overdrafts & commercial papers) 2,672,631 - - 2,672,631

4,935,214 277,395 69,993 5,282,602

The amounts disclosed in the tables above are the contractual undiscounted cash flows of the liabilities. The Group's exposure to liquidity risk is minimal as at 30 September 2014.



26

Notes to the Financial Statements 6.5 Fair value estimation

Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction (not a forced sale) between market participants (market-based view) at the measurement date (current price)

The table below analyses financial instruments carried at fair value, by valuation method. The different levels that are required to be disclosed are defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

• The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ requires significant judgement by the group. The group considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. There are no liabilities at fair value."

The following table presents assets that are measured at fair value at 30 September 2014 for both group and company:

Level 1 Level 2 (N'000) Level 3 (N'000)

Assets Available-for-sale financial assets -Equity Securities 6,880 - - Total Assets

6,880 - -

The following table presents assets that are measured at fair value at 30 September 2013 for both group and company: Level 1 Level 2 (N'000) Level 3 (N'000)

Assets Available-for-sale financial assets -Equity Securities 9,805 - - Total Assets

9,805 - -

The fair value of financial instruments traded in active markets is based on quoted market prices as at each reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market prices used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. There are no Level 2 or Level 3 financial instruments. Financial instruments that are not traded in an active market are carried at cost (unquoted equity).

Quoted market prices were used to value financial at fair value. No level 2 or level 3 financial instruments are held by the Group.



27

Notes to the Financial Statements 6.6 Capital risk management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. The Group's net funds/net debt ratio is summarised as follows:

Group Company

2014 2013 2014 2013 N'000 N'000 N'000 N'000 Total borrowings (Note 21) 3,987,558 3,684,636 3,156,070 3,261,003 Less: cash and cash equivalents excluding borrowings (note 20) (753,182) (268,211) (572,681) (119,565) Net debt 3,234,376 3,416,425 2,583,389 3,141,438

Total equity 3,029,068 2,706,458 3,747,004 3,267,313 Gearing ratio (%) 107% 126% 69% 96%

6.7 Financial instruments by category The Group's financial instruments are categorised as follows:

30 September 2014 Group Company

Financial assets Category N'000 N'000 Trade receivables Loans and receivables 1,530,871 934,713 Other receivables Loans and receivables 927,407 2,367,046 Cash and cash equivalents Loans and receivables 753,182 572,681 Available-for-sale equity instruments Available for Sale 14,226 14,226

3,225,686 3,888,666 Financial liabilities Borrowings (current) Other liabilities 3,068,796 2,932,824 Trade and other payables Other liabilities 4,142,122 3,357,918 Borrowings (non-current) Other liabilities 918,762 223,246

5,060,884 3,581,164

The Group's financial instruments are categorised as follows:

30 September 2013

Group Company Financial assets N'000 N'000 Trade receivables Loans and receivables 283,655 812,417 Other receivables Loans and receivables 1,220,757 2,177,657 Cash and cash equivalents Loans and receivables 268,211 119,565 Available-for-sale equity instruments Available for Sale 19,905 19,905

1,792,528 3,129,544 Financial liabilities Borrowings (current) Other liabilities 3,031,423 2,913,615 Trade and other payables Other liabilities 2,857,553 2,021,599 Borrowings (non-current) Other liabilities 653,212 347,388

6,542,188 5,282,602 The Group's financial instruments are categorised as follows:

Trade receivables are stated net of impairments. Other receivables excludes prepayments. Trade and other payables excludes deferred income and provisions.



28


Group Company

7 Revenue 2014 2013 2014 2013 N'000 N'000 N'000 N'000

Analysis by geographical area: Within Nigeria 16,657,346 16,644,633 15,519,856 15,592,358 Outside Nigeria 55,576 164,218 - -

16,712,922 16,808,851 15,519,856 15,592,358

8 Other gains and losses

N'000 N'000 N'000 N'000 Sales of scrap items 77,627 125,605 77,627 95,597 Rental income 2,250 3,217 2,250 3,217 Investment/dividend income 27,087 1,350 27,087 30,150 Exchange gain 2,330 1,141 2,330 859 Profit on disposal of assets 85,491 - 114,520 - Profit on disposal of investments - 4,000 24,445 4,000 Provision no longer required 6,058 25,871 6,058 - Other income from subsidiaries 55,538 6,308 - 382

256,380 167,492 254,317 134,205

9 Expenses by nature 2014 2013 2014 2013 N'000 N'000 N'000 N'000

Raw materials and consumables charged to cost of sales 10,978,392 11,282,481 10,260,070 10,306,056 Labour cost charged to cost of sales 207,168 199,062 156,074 161,841 Depreciation charges -cost of sales 131,378 208,643 131,378 208,643

Cost of sales

11,316,938 11,690,186 10,547,522 10,676,540

Transportation costs

939,622 967,588 858,643 952,522

Distribution Expenses

939,622 967,588 858,643 952,522

Employee benefit expense

889,570 814,583 671,376 681,733 Depreciation charges -admininstrative expenses 264,937 270,446 130,164 138,668 Advertising costs 584,536 616,975 480,657 613,025 Other Administrative Expenses 1,463,197 1,325,249 1,448,214 1,384,018

Administrative expenses

3,202,240 3,027,253 2,730,411 2,817,444

Total cost of sales, distribution & administrative expenses

15,458,799 15,685,027 14,136,575 14,446,506



29


2014 2013 2014 2013 N'000 N'000 N'000 N'000 10 Finance costs

Interest on loan and overdraft 318,474 205,729 318,475 187,404 Interest on commercial papers 486,359 473,241 396,863 481,399

804,833 678,970 715,338 668,803

Finance income Interest on deposit 4,052 2,908 4,052 2,908 Interest income on planned assets - -

4,052 2,908 4,052 2,908

11 Income tax expense

Income tax 309,241 221,787 309,241 215,380 Education tax 33,084 22,330 25,378 22,330

342,325 244,117 334,619 237,710 Deferred tax provision/(write back) (68,198) (18,238) (68,198) (18,238)

Tax expense 274,127 225,879 266,421 219,472

The current tax charge has been computed at the applicable rate of 30% (30 September 2013: 30%) plus education levy of 2% (30 September 2013:2%) on the profit for the year after adjusting for certain items of expenditure and income which are not deductible or chargeable for tax purposes. Non-deductible expenses include items such as donations and subscriptions, legal expenses, depreciation, amortisation and certain provisions which are not allowed as a deduction by the tax authorities. Tax exempt income include income such as unrealised exchange difference and profit on disposal of fixed asset which are not taxable.

11.1 Reconciliation of income tax expense for the year to the accounting profit as per profit or loss:

GROUP COMPANY

30/09/2014 30/09/2013 30/09/2014 30/09/2013

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

Profit before tax from continuing operations 709,722 615,254 926,312 614,162

Income tax expenses calculated at 30% of profit before tax (2013: 30%)

212,917 184,576 277,894 184,249

Effect of Income exempted from taxation (26,129) (10,360) (26,129) (10,360) Effect of non-deductible expenses in determining taxable profit 228,239 41,078 163,362 43,774 Effect of disposal of Property plant and equipment (34,356) - (34,356) - Effect of other allowances (71,430) (2,405) (71,430) (2,405) Effect of education tax 33,084 22,330 25,378 22,330 Effect of IFRS adjustment - 8,898 - 122

342,325 244,117 334,619 237,710



30

Notes to the Financial Statements 12 Intangible assets

Group Company 2014 2013 2014 2013

N'000 N'000 N'000 N'000 Carrying Amounts of: Software (Work-in-progress) 41,293 36,326 38,648 33,963

41,293 36,326 38,648 33,963

2014 2013 2014 2013

Cost (Computer software) N'000 N'000 N'000 N'000 Balance at start of year 36,956 2,026 33,963 0 Additions 5,131 34,930 4,685 33,963 Balance at year end 42,088 36,956 38,648 33,963

Accumulated amortisation Balance at start of year (630) (518) - -

Amortisation charge (165) (112)

Balance at year end (795) (630) - -

Net book value

41,293 36,326 38,648 33,963

For the Company, intangible assets represents the cost of development and implementation of Enterprise risk management systems.

No amortisation has been charged as project is yet to be completed. No impairment charges as asset is not impaired.

For the Group, amortisation charges have been included in administrative expenses.



31


13 Property, plant and equipment Group

Free- hold Land Buildings

Plant & Machinery

Motor Vehicles

Furniture fittings &

Equipment Total N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 30 September 2012 120,983 2,872,700 1,625,722 436,234 214,800 5,270,439

Additions 571,612 180,863 65,885 23,657 842,017 Adjustments - (7,318) (8,472) (10,471) (390) (26,651) Disposals - - (9,925) (61,975) (1,317) (73,217)

At 30 September 2013 120,983 3,436,994 1,788,188 429,673 236,750 6,012,588

Additions - 275,915 142,501 105,863 62,765 587,045 Transfers - - 2,100 6,865 75 9,040 Reclasses (90,000) 90,000 - - - - Disposals - (36,905) (31,129) (32,973) - (101,007)

At 30 September 2014 30,983 3,766,004 1,901,660 509,428 299,590 6,507,666

Accumulated depreciation

At 30 September 2012 - 187,401 1,015,274 266,647 146,310 1,615,632

Charge for the year - 109,584 246,868 91,777 30,860 479,089 Disposal - - (5,862) (40,781) (524) (47,167)

At 30 September 2013 - 296,985 1,256,280 317,643 176,646 2,047,554

Charge for the year - 119,965 189,751 63,864 22,734 396,314 Transfers - (1,865) (26,928) 20,025 (3,878) (12,646) Disposals - (21,761) (48,948) (26,696) - (97,405)

At 30 September 2014 - 393,324 1,370,155 374,835 195,502 2,333,817

Net book value

At 30 September 2012 120,983 2,685,299 610,448 169,587 68,490 3,654,807

At 30 September 2013 120,983 3,140,009 531,908 112,030 60,104 3,965,034

At 30 September 2014 30,983 3,372,680 531,505 134,593 104,088 4,173,849

Company

Free- hold

Land Buildings Plant &

Machinery Motor

Vehicles

Furniture fittings &

Equipment Total N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 30 September 2012 101,733 2,033,218 1,364,726 370,574 168,526 4,038,777

Additions - 295,601 88,644 28,708 12,199 425,152 Transfer to Subsidiaries - - (8,472) - - (8,472) Disposal - - (6,451) (53,305) (1,131) (60,887)

At 30 September 2013 101,733 2,328,819 1,438,447 345,977 179,594 4,394,570

Additions - 103,973 49,259 89,797 54,614 297,643 Transfer in - - 2,100 6,865 75 9,040 Reclassifications (90,000) 90,000 - - - - Disposal - (26,363) (29,029) (29,383) - (84,775)

At 30 September 2014 11,733 2,496,429 1,460,777 413,256 234,283 4,616,478

Accumulated depreciation

At 30 September 2012 - 190,310 945,683 238,452 128,341 1,502,786

Charge for the year - 55,266 208,846 59,993 22,556 346,661 Adjustment - - 19,007 - - 19,007 Disposal - - (2,846) (34,222) (445) (37,513)

At 30 September 2013 - 245,576 1,170,690 264,223 150,452 1,830,941

Charge for the year - 65,009 130,076 46,519 19,938 261,542 Adjustments (1,865) (76,999) 13,160 (3,878) (69,582) Transfers 20 875 2,145 3,040 Disposal - (11,138) (48,037) (23,106) - (82,281)

At 30 September 2014 - 297,602 1,176,605 302,941 166,512 1,943,660

Net book value

At 30 September 2012 101,733 1,842,908 419,043 132,122 40,185 2,535,991

At 30 September 2013 101,733 2,083,243 267,757 81,754 29,142 2,563,629

At 30 September 2014 11,733 2,198,827 284,172 110,315 67,771 2,672,818



32

Notes to the Financial Statements 13 Property, plant and equipment (cont’d)

Included in the cost of buildings is N416 million relating to construction work in progress as at 30 September 2014 (2013: Nil). Construction work in progress is not depreciated.

During the year, the group capitalized borrowing costs (see note 14) amounting to N37 m on qualifying assets(2013: N59m). Borrowing costs were capitalized at the specific costs incurred on specific borrowings used to finance the acquisition of qualifying asset. Included in the Group's plant and machinery are assets amounting to nil balance in the current year (2013 :N33.4m) that were part financed through a grant from the UNDP. In line with the Group's accounting policy, the assets are stated at full costs whilst the related grant income is deferred and amortized over the useful life of the asset. There were no unfulfilled conditions and contingencies attached to grants received and deferred. Adjustments relates to erroneous computation of depreciation charges in the prior year that were corrected during the year under review Transfer represents Motor Vehicle, Computer Equipment and Plant and Machinery transferred from Vitablom Nigeria Limited and Vono Products PLC to Vitafoam Nigeria PLC

14 Borrowing Costs 2014 2013

N'000 N'000 Incurred during the year 37,367 60,205 Accretion of Interest (4,829) (1,171)

End of the year 32,538 59,034

Borrowing costs represent finance cost incurred on specific loan (N450m) obtained to finance construction of warehouse facility in 2011. In line with IAS 23 revised, amounts capitalised include the accretion of interest computed using the effective interest rates. The totals as at year end represent amount included in cost of buildings at each period end.

15 Investment property

Group & Company

N'000 Cost

At 30 September 2012

21,673

Additions

- Disposals -


21,673

Additions

- Disposals -


21,673

Accumulated Depreciation At 30 September 2012 9,031 Charge for the year 650


9,681

Charge for the year

650


10,331

Net book Value


12,642


11,992


11,342

The investment property relate to twin duplexes located at Marwa gardens in Lagos state. The Group earns rental income on these property. The fair value as at 30 September 2014 is N210m (2013: N210m). The fair values were determined by professional valuers. The buildings are depreciated on a straight line basis at 3% per annum. The sales comparison approach was the valuation technique used to value the property which consisted of significant observable inputs. The fair value measurement is classified as Level 2.



33

Notes to the Financial Statements 15 Investment property (cont’d)

Valuation processes The Group’s investment property was valued at 31 December 2014 by independent professionally qualified valuers who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment property valued. For all investment properties, their current use equates to the highest and best use. The Group's finance department includes a team that review the valuations performed by the independent valuers for financial reporting purposes. This team reports directly to the chief financial officer (CFO) and the audit committee (AC). Discussions of valuation processes and results are held between the CFO, AC, the valuation team and the independent valuers at least once every quarter, in line with the Group's quarterly reporting dates. At each financial year end the finance department: verifies all major inputs to the independent valuation report; assesses property valuation movements when compared to the prior year valuation report; and holds discussions with the independent valuer.

16 Investment in subsidiaries (at cost)

All subsidiaries have the same year end as the parent. The investments represents cost of shares in subsidiaries. It excludes loans to subsidiaries as these are to be repaid and do not represent an increase in the parent's net investment in the subsidiaries.

Country of incorporation and place of business

Nature of business

Proportion of ordinary shares directly held by parent

Proportion of ordinary shares held by non-controlling interests 2014 2013

N'000 N'000

Vitafoam Ghana Limited Ghana

Manufacture of foam and allied products 90% 10%

38,243

38,250

Vitafoam Sierra Leone Limited Sierra Leone

Manufacture of foam and allied products manufacturing 99% 1%

69,580

68,884

Vitapur Nigeria Limited Nigeria

Manufacture of insulations products 40% 60%

40,000

40,000

Vitablom Nigeria Limited (Note 28) Nigeria

Fibre processing and soft furnishing company 60% 40%

55,670

70,400

Vitavisco Nigeria Limited Nigeria

Production and sales of Visco elastic foam and Latex products 80% 20%

8,000

8,000

Vono Products Plc. Nigeria Manufacture of furniture products 47% 53%

595,819

398,181

Vitagreen Nigeria Limited Nigeria Yet to commence operation 60% 40%

6,000

-

Non controlling interest (minority holding) in subsidiary - -

661,189 623,715

Provision for diminution in value of investment in Vitapur and Vono Products Plc (238,366) (89,505)

574,946 534,210

All subsidiary undertakings are included in the consolidation except for Vitagreen Nigeria Limited which has not started operations. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held.

The total non-controlling interest for the period is a loss of N216m of which a loss of N245m is for Vitapur Nigeria Ltd, a loss of N2.4m is attributed to Vono Products Plc. The non-controlling interest in respect of the other subsidiaries are not material. The investments in subsidiaries were assessed for impairment and the directors concluded that except for investment in Vitapur and Vono Products, no other investments were impaired.

Summarised financial information on subsidiaries with material non-controlling interests

Set out below are the summarised financial information for each subsidiary that has non-controlling interests that are material to the Group.



34

Notes to the Financial Statements 16 Investment in subsidiaries (at cost) (cont’d) Summarised Statement of Financial Statement

Vono Products Plc.

Vitapur Nigeria Ltd

As at 30 September

2014

As at 30 September

2013 As at 30

September 2014 As at 30

September 2013 N'000 N'000 N'000 N'000

Current Assets 381,120 329,253 421,295 517,240 Liabilities (848,036) (734,992) (751,979) (827,055)

Total current net assets

(466,916) (405,739) (330,684) (309,815)

Non-current Assets 553,731 610,669 76,087 105,287 Liabilities (173,935) (293,789) (153,804) (8,535)

Total non-current net assets

379,796 316,880 (77,717) 96,752

Net assets

(87,120) (88,859) (408,401) (213,063)

Summarised Statement of Profit or Loss For period ended 30

September 2014

For period ended 30

September 2013

For period ended 30 September

2014

For period ended 30

September 2013 N'000 N'000 N'000 N'000

Revenue

889,666 841,414 401,933 429,670 (Loss)/profit before income tax (5,159) 1,523 (195,340) (104,637) Income tax expense - (6,407) - - Post-tax profit (5,159) (4,884) (195,340) (104,637)

Total (loss)/income

(5,159) (4,884) (195,340) (104,637)

Total income allocated to non-controlling interests

(2,724) (2,579) (117,204) (62,782) Dividends paid to non-controlling interests - - - -

Summarised Statement of Cash Flows For period ended 30

September 2014

For period ended 30

September 2013

For period ended 30 September

2014

For period ended 30

September 2013 N'000 N'000 N'000 N'000

Cash flows from operating activities Cash generated from operations (20,155) 15,476 (688) (20,377) Interest paid - (15,907) (34,492) (11,353) Income tax paid (4,793) - - -

Net cash generated from operating activities (24,948) (431) (35,180) (31,730)

Net cash used in investing activities (15,357) (8,713) (433) (37,582)

Net cash used in financing activities 32,476 (10,398) 143,975 -

Net increase in cash and cash equivalents and bank overdrafts (7,829) (19,542) 108,362 (69,312) Cash, cash equivalents and bank overdrafts at beginning of year

1,108 20,650 (94,045) (24,733)

Exchange gains/(losses) on cash and cash equivalents - - - -

Cash and cash equivalents and bank overdrafts at end of year (6,721) 1,108 14,317 (94,045)

The information above is the amount before inter-company eliminations.



35


17 Available-for-sale financial assets Available-for-sale financial assets include the following:

Group Company 2014 2013 2012 2014 2013 2012

N'000 N'000 N'000 N'000 N'000 Quoted equity shares 6,880 9,805 8,544 6,880 9,805 8,544 Unquoted equity shares 7,346 10,100 10,100 7,346 10,100 10,100

Total

14,226 19,905 18,644 14,226 19,905 18,644

The movement in available-for-sale financial assets is as follows: N'000

At 1 October 2012 18,644 Additions - Disposals - Net gains / (losses) transfer from equity - Net gains transfer to equity 1,261


19,905

At 1 October 2013 19,905 Additions - Impairment loss (5,679) Net gains / (losses) transfer from equity 2,932 Net gains transfer to equity


17,158

Available-for-sale financial assets are denominated in the following currencies: Group & Company

2014 2013 N'000 N'000

USD 1,607 1,607 Naira 12,619 18,298

14,226 19,905

Foreign currency denominated equity instrument relates to 100,000 ordinary and 42,800 preference shares of Eco Transnational Incorporated at 0.025 per share.

Unquoted equity shares relate to investments in UNICO pensions which is carried at cost.

No impairment losses have been recognized on these assets. Fair value changes are recognized in Other comprehensive income/Available for Sale reserve in equity.

18 Inventories Group Company

2014 2013 2012 2014 2013 2012

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

Finished goods - cost 667,042 637,598 729,646 501,329 360,357 411,828 Raw materials - cost 3,472,670 3,234,992 3,925,959 2,698,106 2,638,042 3,536,410 Work in progress - cost 456,947 209,568 290,099 355,686 256,852 280,190 Spare parts and consumables - cost 175,104 161,469 26,226 163,938 146,440 26,226

4,771,763 4,243,627 4,971,930 3,719,059 3,401,691 4,254,654 Goods in transit - cost - 89,901 199,746 - 89,901 198,476

4,771,763 4,333,528 5,171,676 3,719,059 3,491,592 4,453,130

Analysis of value of inventories charged to profit or loss is as follows: Group Company

2014 2013 2014 2013 N'000 N'000 N'000 N'000

Cost of inventories included in cost of sales 10,978,392 11,282,481 10,260,070 10,306,056



36


19 Trade and other receivables Group Company 2014 2013 2012 2014 2013 2012

N'000 N'000 N'000 N'000 N'000 N'000 Trade receivables 2,007,088 679,095 839,159 1,410,930 812,417 674,980 Prepayments 145,721 160,960 185,890 126,652 156,183 155,677 Other receivables 523,414 246,698 291,708 189,180 132,942 259,898 Staff advances 7,734 6,340 12,168 - 6,017 11,949 Receivables from related parties 396,259 806,759 398,896 2,177,866 1,882,515 1,478,067 Provision for Trade receivable (476,217) (395,440) (388,867) (476,217) (388,705) (388,867)

2,215,294 1,504,412 1,338,954 3,428,411 2,601,369 2,191,704

Trade receivables are presented net of related impairment provisions. An analysis of gross receivables and impairment is presented as follows:

Group Company 2014 2013 2012 2014 2013 2012

N'000 N'000 N'000 N'000 N'000 N'000 Gross trade receivables 2,007,088 679,095 839,159 1,410,930 812,417 674,980 Allowance for impairment (476,217) (395,440) (388,867) (476,217) (388,705) (388,867)

Net trade receivables

1,530,871 283,655 450,292 934,713 423,712 286,113

Movements on the provision for impairment of trade receivables are as follows:

Group Company 2014 2013 2014 2013

N'000 N'000 N'000 N'000 At Start of Year (395,440) (388,867) (388,705) (388,867) Provision in the year (87,512) (6,735) (87,512) - Unused amounts reversed 6,735 162 - 162

At end of Year (476,217) (395,440) (476,217) (388,705)

The creation and release of provision for impaired receivables have been included in ‘other expenses’ in the income statement. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The other classes within the trade and other receivables do not contain impaired assets. The carrying amounts of the trade and other receivables are denominated in naira.

20 Cash and bank

Group Company 2014 2013 2012 2014 2013 2012

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

Cash at bank - 166,907 298,900 226,198 23,840 235,114 Cash on hand 447,045 64,708 60,826 40,345 59,129 54,801 Fixed deposit 306,138 36,596 33,681 306,138 36,596 33,681 Cash and bank 753,182 268,211 393,407 572,681 119,565 323,596

Cash at bank includes restricted cash of N265m (2013 : N90.8m) which represent deposit held with banks in respect of letters of credit. Cash and cash equivalents include the following for the purposes of the statement of cashflows:

Group Company

2014 2013 2014 2013

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

Cash and bank balances 753,182 268,211 572,681 119,565

Short term borrowings (overdrafts and commercial papers) (2,943,017) (2,767,850) (2,816,158) (2,672,631)

Cash and cash equivalents (2,189,835) (2,499,639) (2,243,477) (2,553,066)



37


21 Borrowings

Group Company 2014 2013 2012 2014 2013 2012

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

Non Current Finance lease liabilities 6,898 - - - - - Government grants 18,408 28,230 26,920 - - - Bank borrowings - Long term loans 893,456 624,982 221,759 223,246 347,388 243,384

Total

918,762 653,212 248,679 223,246 347,388 243,384

Current Finance lease liabilities 4,201 - - - - - Government grants 4,911 - 3,597 - - - Bank Overdraft 1,078,622 784,407 979,353 1,067,633 689,188 979,353 Commercial papers 1,864,395 1,983,443 2,135,890 1,748,525 1,983,443 2,135,890 Bank borrowings - short-term loans 116,667 263,573 252,362 116,667 240,984 128,150

3,068,796 3,031,423 3,371,202 2,932,824 2,913,615 3,243,393

Total borrowings 3,987,558 3,684,636 3,619,881 3,156,070 3,261,003 3,486,777

(a) Bank borrowings

The term loans represent the outstanding balances on two facilities - 4-year term loan of N450 million and 3 -year term loan of N350 million granted to the parent by a commercial bank in 2011 and 2013 respectively. Both loans are secured by a negative pledge on the parent's fixed and floating assets and are carried at fair values based on cash flows discounted using effective interest rates of 16% - 22%. The Group also received a loan from the International Finance Corporation to finance capital construction at the Sierra Leone Subsidiary in 2013. Bank overdrafts and commercial papers are not discounted as the fair value equals carrying amounts. Except for the International Finance Corporation (IFC) loan, all borrowings are denominated in naira. The Group does not have undrawn balances on these borrowings as at 30 September 2014.

The carrying amounts and fair value of the non-current borrowings are as follows:

Group

Carrying amount

Fair value

2014 2013 2014 2013 Bank borrowings 893,456 624,982 850,911 595,221 Finance lease liabilities 6,898 - 6,570 -

Total

900,354 624,982 857,480 595,221

The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values are within level 2 of the fair value hierarchy.

(b) Finance lease liabilities

The Group has finance lease for equipment. This lease has purchase options. Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

Group 2014

N'000

Gross finance lease liabilities - minimum lease payments: No later than 1 year 5,713 Later than 1 year and no later than 5 years 7,998

13,711 Future finance charges on finance lease liabilities (2,612)

Present value of finance lease liabilities 11,099

The present value of finance lease liabilities is as follows: No later than 1 year 4,201 Later than 1 year and no later than 5 years 6,898

11,099 ('c) Government grants

Government grants have been recognised on the loans (Wema Bank and Zenith Bank) received under the CBN/Bank intervention fund for a subsidiary of the Group, Vono Products Plc. When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant. The company government grant was presented in the statement of financial position by setting up a deferred income (named government grant).



38


22 Deferred taxation

The following are the major deferred tax assets and liabilities recognised by the company and movements thereon during the current

and prior reporting periods.

GROUP

30 September 2014

Deferred tax assets/liabilities in relation to: Bal b/f P/L charge Balance c/f N'000 N'000 N'000

Property, plant & Equipment 473,354 (29,560)

443,794 Provisions (226,163) (39,333) (265,496) Exchange difference 258 698 956

247,449 (68,195) 179,254

30 September 2013


Property, plant & Equipment 464,129 9,225 473,354 Provisions (198,442) (27,721) (226,163) Exchange difference - 258 258

265,687 (18,238) 247,449

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of

the deferred tax assets(liabilities) after offset presented in the Statement of Financial Position:

30/09/2014 30/09/2013 N'000 N'000

Deferred tax assets (265,496) (226,163) Deferred tax liabilities 444,750 473,612

179,254 247,449



39

Notes to the Financial Statements 22 Deferred taxation (cont’d)

COMPANY

30 September 2014


Property, plant & Equipment 473,354 (29,563)

443,791 Provisions (226,163) (39,333) (265,496) Exchange difference 258 698 956

247,449 (68,198) 179,251

30 September 2013


Property, plant & Equipment 464,129 9,225 473,354 Provisions (198,442) (27,721) (226,163) Exchange difference - 258 258

265,687 (18,238) 247,449

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of

the deferred tax assets(liabilities) after offset presented in the Statement of Financial Position:

30/09/2014 30/09/2013 N'000 N'000

Deferred tax assets (265,496) (226,163) Deferred tax liabilities 444,750 473,612

179,254 247,449



40

Notes to the Financial Statements 23a Retirement benefits obligation The group operates a defined benefit staff gratuity plan where qualifying employees receive a lump sum payment based on the number of years

served after an initial qualifying period on date of retirement. The plan is partly funded and plan assets are managed externally by Nigeria Life and Pensions. The amounts recognised in the statement of financial position are determined as follows:

Group Company 2014 2013 2014 2013

N'000 N'000 N'000 N'000 Present value of retirement benefits obligations 538,182 524,626 522,537 521,245 Fair value of plan assets (388,032) (301,208) (388,032) (301,208)

Net defined benefit obligation

150,150 223,418 134,505 220,037

The movement in the present value of retirement benefits obligation over the year is as follows:

2014 2013 2014 2013 N'000 N'000 N'000 N'000

Opening 533,159 434,438 521,245 431,534 Current service cost 66,609 69,395 66,609 60,385 Interest cost 66,601 54,790 66,601 54,790 Actuarial (gains)/losses (58,777) 7,291 (58,777) 7,291 Benefits paid (73,141) (32,755) (73,141) (32,755)

Closing

534,451 533,159 522,537 521,245

The movement in the fair value of the plan asset over the year is as follows:

2014 2013 2014 2013 N'000 N'000 N'000 N'000

Opening 301,208 227,311 301,208 227,311 Expected return on plan assets 42,325 32,166 42,325 32,166 Employer contributions 107,986 67,600 107,986 67,600 Benefits paid by fund (73,141) (32,755) (73,141) (32,755) Actuarial gain/(loss) on plan asset 9,654 6,886 9,654 6,886

Closing

388,032 301,208 388,032 301,208

Plan assets for both the Group and Company comprise the following: Group & Company 2014 2013

N'000 N'000 Equity instruments (quoted) 70,159 59,085 Money market (bank deposits) 297,873 224,334 FGN 2014 Bonds 20,000 16,192 Other assets - 1,597

388,032 301,208

The amounts recognised in profit or loss are as follows: Group Company

2014 2013 2014 2013 N'000 N'000 N'000 N'000

Service cost 70,340 69,395 66,609 60,385 Interest cost 66,601 54,790 66,601 54,790 Expected return on plan assets (42,325) (32,166) (42,325) (32,166)

Total included in staff costs 94,616 92,019 90,885 83,009

The total charge to profit or loss is included within employee benefits expense in administrative expenses. The actual return on plan assets was N50m (2013 :N40.44m).

Group Company 2014 2013 2014 2013

N'000 N'000 N'000 N'000 Re-measurement of the defined benefit obligation -Actuarial (gains) or losses arising from experience adjustments (58,777) 7,291 (58,777) 7,291 -Actuarial (gains) or losses on plan assets during the year (9,654) (6,886) (9,654) (6,886)

Components of retirement benefits costs recognised in other comprehensive income (68,431) 405 (68,431) 405

Impact on total comprehensive income 26,185 92,424 22,454 83,414

The principal actuarial assumptions were as follows: Group Company

2014 2013 2014 2013 Discount rate (p.a) 13% 13% 13% 13% Rate of salary increases (p.a) 12% 12% 12% 12% Rate of Inflation (p.a) 9% 10% 9% 10% Expected return on plan assets 13% 13% 13% 13%



41

Notes to the Financial Statements 23a Retirement benefits obligation (cont’d)

Assumptions regarding future mortality experience are based on rates published in the A67/70 Ultimate tables, published jointly by the Institute and Faculty of Actuaries in the UK. These have been rated down by one to more accurately reflect mortality rate in Nigeria thus:

Mortality in service

Number of deaths in year out of 10,000 lives

Sample age 2014 2013 25 7 7 30 7 7 35 9 9 40 14 14 45 26 26

Withdrawal from service Age Band Rate Rate Less than or equal to 30 3% 3% 31-39 3% 3% 40-44 2% 2% 45-55 1% 1% 56-60 0% 0% These tables translate into an average life expectancy in years for a pensioner retiring at age 60.

23b Long service award The Group provides employees with a Long Service Award Benefit – a cash award expressed as a proportion of Basic Salary together based on year of service. The group’s mandatory retirement age is 60years for all staff. The Scheme is unfunded.

Liability in the statement of financial position The movement in the present value of Long service awards obligations over the year for both group and company is as follows:

Group & Company 2014 2013

N'000 N'000 At 1 October 81,943 68,383 Current service cost 11,682 10,721 Interest cost 10,375 8,650 Actuarial (gains)/losses (11,868) (2,171) Benefits paid (8,539) (3,640)

Closing 83,593 81,943

23c Sensitivity analysis The sensitivities of the retirement benefit obligation to the principal assumptions adopted in the determining the liabilities are as follows:

Base

Change in assumption

Impact on retirement benefit obligation as at 30 September 2014

Discount rate +1% Decrease by 11%

-1% Increase by 13%

Salary Increases +1% Increase by 14%

-1% Decrease by12%

Mortality experience Age rated up by 1 year

Age rated down by 1

year

23d The group expects N60 million to be paid in respect of its defined benefit obligation in 2015. The weighted average duration of the defined benefit obligation is 13 years.

23e Historical Information on experience adjustments - retirement benefit obligations Group &

Company 2014

Experience adjustments on plan liabilities (58,777)

Experience adjustments on plan assets (9,654)



42


24 Trade and other payables

Group Company 2014 2013 2012 2014 2013 2012

N'000 N'000 N'000 N'000 N'000 N'000 Trade payables 2,546,398 1,901,800 2,520,968 2,231,127 1,327,575 1,761,120 Dealers' security deposit 131,273 141,319 100,402 131,273 141,318 94,169 Dividends unclaimed 230,098 162,808 149,411 223,865 156,575 149,411 Advertising payables 28,668 33,019 118,088 28,668 33,019 118,088 Other credit balances 712,983 1,577 327,056 320,528 - 306,240 Value Added Tax payables 74,811 53,466 159,911 65,374 37,959 123,242 Accruals 190,210 164,841 142,186 106,088 91,877 76,862 Sundry creditors 93,479 395,966 16,822 - 202,659 16,822 Import duty handling - 2,757 - - 2,757 - Due to related companies - - - 116,793 27,860 - Intracompany balances 24.1 134,204 134,204 - - Deferred income - 33,365 17,575 - - -

4,142,122 2,890,918 3,552,419 3,357,918 2,021,599 2,645,954

All trade payables are due within twelve (12) months. 24.1 Intracompany balances relate to net credit balances arising from transactions raised by one Strategic Business Unit (SBU) within the company but

awaiting counterparty entries from another SBU that will classify them to the appropriate creditors accounts. The clearance of these balances will be completed upon finalization of the on-going systems migration process (from accounting to an Enterprise Resource Planning (ERP) software).

25 Tax payable 2014 2013 2014 2013

N'000 N'000 N'000 N'000 The movement in tax payable is as follows: At 1 October 304,587 349,030 276,881 327,731 Based on profit for the year 342,325 244,117 334,619 237,710 Payment during the year (237,710) (288,560) (237,710) (288,560)

409,202 304,587 373,790 276,881

26 Share capital

Group Company 2014 2013 2012 2014 2013 2012

N'000 N'000 N'000 N'000 N'000 N'000 Authorised 2,400,000,000 Ordinary shares of 50 kobo each 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000

Issued and fully paid 819,000,000 ordinary shares of 50 kobo each 409,500 409,500 409,500 409,500 409,500 409,500

27 Reserves Group Company

2014 2013 2012 2014 2013 2012 N'000 N'000 N'000 N'000 N'000 N'000

Share premium 3 3 3 3 3 3

Retained profit 2,807,274 2,441,277 2,230,842 3,374,549 2,891,926 2,743,341 Available for sale reserve (37,048) (34,116) (35,377) (37,048) (34,116) (35,377) Currency translation differences 28,040 - - - - -

2,798,266 2,407,161 2,195,465 3,337,501 2,857,810 2,707,964

A description of each reserve type is included as follows: Share premium Premiums from the issue of shares are reported in share premium. Retained profit Retained earnings comprise the undistributed profits from previous years, which have not been reclassified to other reserves. Available for sale reserve

The fair value reserve shows the effects from the fair value measurement of financial instruments of the category available for sale after deduction of deferred taxes. Any gains or losses are not recognised in the income statement until the asset has been sold or is impaired.

Currency translation differences The currency translation differences reserves shows the effects from the translation of the functional currencies of Ghana and Sierra Leone subsidiaries into the group's functional and presentation currency. Gains or losses are recognised in other comprehensive income.



43


28 Non-controlling interests

Group 2014 2013

N'000 N'000 At 1 October (110,206) (75,857)

Share capital and reserves - (6,569) Increase in NCI equity 14,730 -

Transfer from profit or loss (83,225) (27,780)

At 30 September (178,701) (110,206)

Non-controlling interests relate to the group's consolidated financial statements only.

(i) Disposal of interest in a subsidiary without loss of control During the year, Vitafoam Nigeria Plc. disposed of 31,339,800 units (15.7%) of its shares in Vitablom Nigeria Limited at the rate of N1.25.

Thus reducing its holding to 59.3% (118,660,200 units). This resulted in an increase in the non-controlling interest to 40.7%. This transaction was recorded within equity in the consolidated statement of changes in equity.

The effect of changes in the ownership interest of Vitablom Nigeria Limited on the equity attributable to owners of the company during the year is summarised as follows:

2014 2013 N'000 N'000

Carrying amount of non-controlling interest disposed off (15,670) (4,700) Consideration of non-controlling interest disposed off 39,175 8,700

Increase in equity attributable to owners of parent 23,505 4,000

In 2013, Vitafoam sold 5% of its holding in Vitablom (a subsidiary) to NCI. Until the sale, Vitafoam’s holding was 80% and NCI, 20%.The carrying amount of the 5% sold was N4.7million. The shares were sold for N8.7m, and profit on sale of N4.0m was recognized directly in equity and shown in the consolidated statement of changes in equity.

29 Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.

2014 2013 2014 2013 Net profit attributable to shareholders (N'000) 518,820 417,155 659,891 394,690

Number of ordinary shares in issue as at year end (000) 819,000 819,000 819,000 819,000

Basis earnings per share (kobo) 0.63 0.51 0.81 0.48

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion

of all dilutive potential ordinary shares. There were no potentially dilutive ordinary shares during the year.

30 Dividends paid Dividends of N246 million (N 0.30 per share) which relates to year ended September 2013 and 2012 were paid in arrears in years 2014

and 2013 respectively. A dividend in respect of the year ended 30 September 2014 of N0.30 per share, amounting to a total dividend of N246 million issue and a bonus of ratio 1:5, is to be proposed at the annual general meeting on 4 June 2015. These financial statements do not reflect this dividend payable.



44


31 Reconciliation of profit before tax to cash generated from operations

Group Company

Note 2014 2013 2014 2013 N '000 N '000 N '000 N '000

Profit before income taxes 709,722 615,254 926,312 614,162 Adjustments for: Depreciation for property, plant and equipment 396,314 479,089 261,542 346,661 Amortisation 165 112 - - Depreciation for investment property 650 650 650 650 Adjustment for property, plant & equipment transferred to subsidiaries (12,646) 26,651 - 8,472 Profit on disposal of investment (24,445) (4,000) - (4,000) Loss/(profit) on disposal of assets (85,491) 14,990 (114,520) 13,452 Dividend income on available-for-sale - (1,350) (30,150) Loss/(Gains) on revaluation of available for sale (2,932) (1,261) (2,932) (1,261) Interest paid 804,833 678,970 715,338 668,803 Interest received (4,052) (2,908) (4,052) (2,908) Provision for gratuity 115,912 29,851 115,912 29,374 Provision for diminution in investment 310,025 - 310,025 50,300

Changes in working capital:

Decrease/(increase) in inventories (438,235) 838,148 (227,467) 961,538 (Increase)/decrease in trade and other receivables (710,882) (165,458) (827,042) (452,362) Increase/(decrease) in trade and other payables 1,251,204 (661,501) 1,336,319 (624,355)

Net cashflows from operating activities 2,310,142 1,847,237 2,490,085 1,578,376

32 Contingent Liabilities The directors are not aware of any material contingent liability that may alter the financial statements significantly. 33 Commitments and guarantees a. Capital expenditure authorised by the directors but not contracted was nil (2013: Nil) b. Capital expenditure contracted but not provided for in the financial statements was nil (2013: Nil) 34 Directors and employees 33.1 Directors' emoluments Remuneration paid to the directors was:

Group Company N'000 N'000 2014 2013 2014 2013

Directors' Fees 1,650 1,050 1,650 1,050 Other emoluments 98,130 97,475 98,130 97,475

99,780 98,525 99,780 98,525

2014 2013 2014 2013

Chairman 7,944 7,819 7,944 7,819

Emoluments of the highest paid director 22,794 20,496 22,794 20,496

The number of directors excluding the chairman whose emoluments were within the following ranges were: Number Number

2014 2013 2014 2013

N1,000,000 - N1,200,000 - - - - N2,500,000 - N3,600,000 5 5 5 5 N12,300,001 - N20,800,000 4 4 4 4

9 9 9 9

33.2 Employees The average number of persons employed by the Group and Company during the period were as follows:

Group Company 2014 2013 2014 2013

Management 139 139 112 112 Non-management 614 532 431 426

753 671 543 538 Staff cost relating to the above were:

2014 2013 2014 2013

Wages and salaries 605,587 544,225 Pension fund contributions 48,289 41,409 Gratuity provisions for the year 117,498 108,489

- 771,375 - 694,124



45

Notes to the Financial Statements 33.2 Employees (cont’d)

Employees remunerated at higher rates excluding allowances and pension costs were:

Number Number N 2014 2013 2014 2013

100,001 - 200,000 44 1 - 1 200,001 - 300,000 56 8 - - 300,001 - 400,000 260 57 236 - 400,001 - 500,000 164 230 124 230 500,001 - 600,000 57 160 48 127 600,001 - 700,000 26 56 21 53 700,001 - 800,000 25 14 21 12 800,001 - 900,000 10 11 8 11 900,001 - 1,000,000 17 6 11 6 1,000,001 - 1,100,000 7 4 5 4 1,100,001 - 1,200,000 12 18 11 18 1,200,001 - 1,300,000 4 13 4 13 1,300,001 - 1,400,000 3 5 2 5 1,400,001 - 1,500,000 12 5 7 5 1,500,001 - 2,000,000 5 16 5 12 2,000,001 - 2,500,000 10 23 5 18 2,500,001 - 3,000,000 6 7 6 3 3,000,001 - 3,500,000 4 7 4 6 3,500,001 - 4,000,000 7 4 6 4 4,000,000 - 4,500,000 7 2 4 2 4,500,001 - 5,000,000 6 1 5 - 5,000,001 - 5,500,000 2 2 2 2 6,000,001 - 6,500,000 1 9 1 5 7,000,001 - 8,000,000 3 9 2 8 8,000,001 - 8,500,000 3 1 3 1 9,000,001 - 11,000,000 - - - - Above 11,000,000 2 3 2 3

753 672 543 549

35 Related party disclosures 35.1 The parent company of the Group is Vitafoam Nigeria Plc. The following are related parties of the Company: a) Related Companies i Vitafoam Ghana Co. Limited (Subsidiary) ii Vitafoam SL Limited (Subsidiary) iii Vitapur Nigeria Limited (Subsidiary) iv Vitablom Nigeria Limited (Subsidiary) v Vitavisco Nigeria Limited (Subsidiary) vi Vitagreen Nigeria Limited (Subsidiary) vii Vono Products Plc. (Subsidiary) 35.2 During the year the Group entered into transactions with its related parties. The transactions were in the ordinary course of business.

Transactions with subsidiaries and associates were at arm's length. Transactions with subsidiaries are eliminated in the Group consolidated accounts. The following transactions were carried out with related parties:

Company 2014 2013

N'000 N'000 a) Sales of goods and services

Vitafoam Ghana Limited 48,529 61,415 Vitafoam SL Limited 7,047 8,595

55,576 70,010

Company 2014 2013

b) Purchase of goods and services: N'000 N'000 Vitablom Nigeria Limited 588,650 465,247 Vitavisco Nigeria Limited 62,984 58,569 Vono products Plc. 326,858 -

978,492 523,816



46

Notes to the Financial Statements 35 Related party disclosures (cont’d) c) Key management compensation

Key management includes directors (executive and non-executive), members of the Executive Committee, the Company Secretary and the Head of Internal Audit.

The compensation paid or payable to key management personnel for employee service is shown below:

Company 2014 2013

N'000 N'000 Salaries and other short-term employee benefits 130,379 98,525 Post-employment benefits 58,486 15,871

Total 188,865 114,396

Company 2014 2013

N'000 N'000 35.3 Outstanding balances from sale/purchase of goods and services and other transactions

Receivable: Vitafoam Ghana Co. Limited - 192,261 Vitafoam (SL) Limited - 342,062 Vitapur Nigeria Limited 592,771 524,208 Vitablom Nigeria Limited 281,793 146,198 Vitavisco Nigeria Limited 171,574 159,999 Vono Products Plc. 146,347 517,787 Vitagreen Nigeria Ltd 89,478 -

1,281,963 1,882,515

The receivables from related parties arise mainly from sale transactions and bear no interest. No provisions are held against receivables from related parties (2013: Nil). There are no outstanding payables in respect of transactions with related parties as at each reported period end. The loan to Vono Products Plc. is an interest free loan repayable on demand. An impairment loss has been recognised for this loan receivable as at 30 September 2014. There are no loans to key management personnel (2013: Nil) The parent provided a financial guarantee to one of its subsidiaries - Vitafoam (SL) Limited in respect of a loan obtained from the International Finance Corporation (IFC) in 2013. The carrying amount of this USD denominated loan as at year end was N395m (2013: N229).

36 Segment information

IFRS 8 'Operating segments requires operating segments to be determined based on the group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Managing Director of the parent Company. The Managing Director has the responsibility for planning and controlling the activities of the Group. The group's operating segment information is presented on a product basis. The CODM receives operating and financial information on a monthly basis which is based on the product groupings. The group's has two major product segments -Foam products and Furniture/other products. The foam products include flexible and rigid foam based products, as well as the group's latest innovation - memory foams. Furniture and other products include wood and metal based furnitures, fibres and others. Transactions between segments are at same range of prices available to the group's key distributors. All segments have the same accounting policies as the Group. The Managing Director assesses the performance of the operating segments based on operating profits. No information on segment assets or liabilities is reviewed by the CODM, therefore information on segment assets/liabilities have not been presented.

Group 2014 2013

N'000 N'000 Operating profit Foam products 1,498,419 1,280,986 Furniture/Other products 12,084 10,331

1,510,503 1,291,316

Revenue is generated from local and international sales. An analysis based on customer location is set out below: Group

2014 2013 N'000 N'000

Within Nigeria 16,657,346 16,644,633 Outside Nigeria (Ghana and Sierra Leone) 55,576 164,218

Total revenues 16,712,922 16,808,851



47

Notes to the Financial Statements 36 Segment information (cont’d)

Included in revenues arising from foam based products are revenues of approximately N1.1 billion (2013: N1.06 billion) which arose from sales to the group's largest customer. There are no customers contributing 10% or more of the group's total revenues (2013: Nil). Non-current assets which for the purpose of segment disclosures include property plant and equipment, investment property, intangible assets and equity investments are allocated between geographical areas as follows:

Group

Non-current assets (excluding deferred tax) 2014 2013 N'000 N'000

Within Nigeria 3,596,260 3,611,180 Outside Nigeria (Ghana and Sierra Leone) 644,450 422,077

Total 4,240,710 4,033,257

37 Compliance with regulatory bodies

The Group paid fines to the Securities & Exchange Commission and Nigerian Stock Exchange during the financial year for late submission of its 2013 financial statements and other statutory returns.

38 Events after statement of financial position date There are no events that occurred after the reporting date that are deemed to have an adjusting effect on the financial statements. 39 Contingent liabilities and contingent assets

The contingent liabilities arising from pending litigations at year ended 30 September 2014 amounted to N20.5 million (2013: Nil). Based

on the Solicitor's advice, the Directors are of the opinion that they have good defense against the actions, and that there is little

likelihood of any loss arising therefrom.

40 Changes in accounting policies

Vitafoam Nigeria Plc. adopted IFRS 10, ‘Consolidated financial statements’, and IFRS 12, ‘Disclosure of interests in other entities’, on 1 October 2013. The new accounting policies have had the following impact on the financial statements.

(a) Consolidation of entities in which the group holds less than 50%

The Group is the largest shareholder of Vono Products Plc. with a 47% equity interest, while all other shareholders individually own less than 5% of its equity shares. There is no history of other shareholders forming a group to exercise their votes collectively. Based on the absolute size of the group’s shareholding and the relative size of the other shareholdings, management has concluded that the group has sufficiently dominant voting interest to have the power to direct the relevant activities of the entity. As a result the entity has been fully consolidated into these financial statements in line with the transition guidelines of IFRS 10 and the consolidation was applied retrospectively. Previously Vono Products Plc. was classified as an associate of the Group and accounted for using the equity method.



48

Notes to the Financial Statements 40 Changes in accounting policies (cont’d) (i) Impact of change in accounting policy on consolidated statement of financial position

Consolidated Statement of Financial Position

Vono

Impact of change in

policy Vono

Restated Group

Impact of change in

policy Consolidated Sep-13 Sep-13

ASSETS Sep-13 Sep-13

Non Current Assets Property, plant and equipment - Cost 1,823,086 (1,079,696) 743,390 3,375,736 4,119,126

Property, plant and equipment - Acc Dep (293,527) 158,443 (135,084) -

135,084 Intangible Assets 2,363 2,363 33,963 36,326 Investment property - - 11,992 11,992 Investment in subsidiaries - - - - Investment in associate - - 295,700 (295,700) - Available for sale financial assets - - 19,905 19,905

1,531,922 (921,253) 610,669 3,737,296 (295,700) 4,052,265

Current assets Inventory 201,708 201,708 4,131,820 4,333,528 Trade and other receivables 122,419 122,419 1,828,837 (446,844) 1,504,412 Cash and Bank 5,126 5,126 263,085 268,211

329,253 - 329,253 6,223,742 (446,844) 6,106,151

Total assets 1,861,175 (921,253) 939,922 9,961,038 (742,544) 10,158,416

Non-current liabilities Borrowings 269,156 269,156 547,982 (192,156) 624,982 Government grant 24,633 24,633 - 24,633 Deferred tax liability - 0 247,449 247,449 Employee Benefits Obligations - 0 305,361 305,361

293,789 - 293,789 1,100,792 (192,156) 1,202,425

Current liabilities Trade and other payables 526,480 526,480 2,452,759 (94,555) 2,884,684 Unclaimed dividend 6,233 6,233 - 6,233 Current Income tax liabilities 27,706 27,706 276,881 304,587 Borrowings 170,976 170,976 3,020,580 (160,133) 3,031,423 Government grant 3,597 3,597 3,597

734,992 - 734,992 5,750,220 (254,688) 6,230,524

Total liabilities 1,028,781 - 1,028,781 6,851,012 (446,844) 7,432,949

Equity attributable to shareholders Share capital 281,826 - 281,826 409,500 - 409,500 Share premium 518,135 - 518,135 3 - 3 Reserves/revaluation reserve 1,756,354 (1,756,354) - - - - Accumulated loss (1,723,921) 835,101 (888,820) 2,797,926 532,170 2,441,277 Available for sale reserves - - - (34,116) - (34,116) Non -controlling interest - - - (63,288) (46,918) (110,205) Total equity 832,394 (921,253) (88,859) 3,110,026 485,253 2,706,458

Total equity and liabilities 1,861,175 (921,253) 939,922 9,961,038 38,409 10,139,408



49

Notes to the Financial Statements 40 Changes in accounting policies (cont’d)

(i) Impact of change in accounting policy on consolidated income statement

Group Vono DR-

Elimination CR-

Elimination Consolidated Sep-13 Sep-13 Sep-13 Sep-13 Sep-13

Revenue 16,338,823 841,414 (371,386) - 16,808,851 Cost of Sales (10,870,143) (611,400) - - (11,481,543)

Gross Profit 5,468,680 230,014 -

371,386 - 5,327,308 Other Income 165,274 5,126 - - 170,400 Distribution Cost (955,826) (14,340) - - (970,166) Administrative Expenses (3,384,745) (203,530) 357,910 (2,953) (3,233,318)

Operating Profit 1,293,383 17,270 -

13,476 -

2,953 1,294,224 Finance Costs (660,645) (18,325) - - (678,970) Share of loss of associate (2,953) - - 2,953 -

Profit before income tax 629,785 (1,055) -

13,476.18 0 615,254 Income tax expense (219,472) (6,407) - - (225,879)

Profit for the year 410,313 (7,462) -

13,476.18 0 389,375

Other Comprehensive Income: Remeasurements of retirement benefit obligations (405) - - - (405)

Items that may be subsequently reclassified to profit or loss - Change in fair values of available for sale financial instruments 1,261 - - - 1,261 Currency translation differences - - - - -

Total comprehensive income for the year 411,169 (7,462) (13,476) - 390,231

Profit for the year Attributable to: – Owners of the parent 435,514 (3,522) (13,476) 418,516 – Non-controlling interests (25,201) (3,940) (29,141) Total profit for the year 410,313 - (7,462) (13,476) 389,375

Total Comprehensive income for the year Attributable to: – Owners of the parent 436,370 - (3,522) (13,476) 419,372 – Non-controlling interests (25,201) - (3,940) - (29,141) Total comprehensive income for the year 411,169 - (7,462) (13,476) 390,231

Earnings per share:

Basic 0.50 - -

0.01 -

0.02 0.48



50

Consolidated statement of value added

Group

Company

2014 % 2013 % 2014 % 2013 % N'000 N'000 N’000 N’000

Turnover 16,712,922 16,808,851 15,519,856 15,592,358 Other operating income 256,380 170,400 254,317 137,113

16,969,302 16,979,251 15,774,173 15,729,471

Bought in materials and services - Imported (5,809,234) (5,952,397) (5,411,839) (5,477,213) - Local (8,359,629) (8,565,644) (7,787,767) (7,908,850)

Value added 2,800,439 100 2,461,210 100 2,574,567 100 2,343,408 100

Applied as follows:

To pay employees: Salaries, wages, pension and social benefits 889,570 32 771,375 31 671,376 26 694,124 30

To pay providers of capital: Interest on borrowings 804,833 29 660,645 27 715,338 28 668,803 28

To pay government: Income tax 342,325 11 244,117 10 334,619 13 237,710 10

To provide for replacement and development: Depreciation 396,314 14 392,998 16 261,542 10 347,311 15 Deferred tax (68,198) (2) (18,238) (1) (68,198) (3) (18,238) (1) Retained profit 435,595 16 410,313 17 659,891 26 413,698 18

2,800,439 100 2,461,210 100 2,574,567 100 2,343,408 100

Value added represents the additional wealth which the group has been able to create by its own and its employees' efforts. This statement shows the allocation of that wealth between employees, providers of capital, government and that retained for the future creation of wealth.



51

Five-year financial summary

Company

30 SEPTEMBER IFRS IFRS IFRS NGAAP NGAAP NGAAP 2014 2013 2012 2011 2010 2009

N'000 N'000 N'000 N'000 N'000 N'000 BALANCE SHEET Property ,plant and equipment 2,672,818 2,563,629 2,535,991 2,376,079 1,686,509 1,643,608 Investment in subsidiaries

574,946 534,210 580,515 413,120 201,360 81,766

Investment Property 11,342 11,992 12,642 - - - Other long term assets 38,648 33,963 - 556,000 - - Available for sales assets 14,226 19,905 18,644 - - - Net current assets/(liabilities) 1,055,619 1,000,431 751,352 414,801 1,125,398 993,476 Long term borrowings (223,246) (347,388) (243,384) (300,000) (22,771) (132,851) Deferred tax liability (179,251) (247,449) (265,687) (243,673) (203,349) (161,898) Employee Benefits Obligation (218,098) (301,980) (272,606) (289,322) (287,466) (246,329)

Net asset 3,747,004 3,267,313 3,117,467 2,927,005 2,499,681 2,177,772

Share capital 409,500 409,500 409,500 409,500 409,500 409,500 Reserve 3,337,504 2,857,813 2,707,967 2,271,805 1,844,481 1,563,522 Proposed dividend - - - 245,700 245,700 204,750

Shareholders' funds 3,747,004 3,267,313 3,117,467 2,927,005 2,499,681 2,177,772

Turnover and Profit

Turnover 15,519,856 15,519,856 14,126,527 13,979,353 10,538,440 9,739,916

Profit before taxation 926,312 614,162 873,485 970,248 836,784 798,477 Taxation (266,421) (219,472) (311,135) (297,224) (310,125) (270,139)

Retained profit 659,891 394,690 562,350 673,024 526,659 528,338

Dividend per share - Naira - - - 30 30 25

Earnings per share - Naira 0.81 0.48 0.69 0.82 0.64 0.65

5 4 4 4 3 3

NOTE:

1 Basic earnings per share are based on the profit after taxation and the number of ordinary shares in issue at the end of each financial

year.

2 Net assets per share are based on the net assets of the company and the number of ordinary shares in issue at the end of each

financial year.



52

Five-year financial summary

Group

IFRS IFRS IFRS NGAAP NGAAP NGAAP 30 SEPTEMBER 2014 2013 2012 2011 2010 2009

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

Property ,plant and equipment 4,173,849 3,965,034 3,654,807 2,568,898 1,692,426 1,651,125 Investments 11,342 11,992 12,642 209,551 158,860 39,266 Other long term assets 41,293 36,326 1,508 556,000 Available for sales assets 14,226 19,905 18,644 - - - Net current assets 120,119 (120,777) (368,614) 309,865 1,130,543 1,010,897 Long term borrowings (918,762) (653,212) (248,679) (300,000) (22,771) (132,851) Deferred tax liability (179,254) (247,449) (265,687) (243,673) (203,349) (161,898) Employee benefit obligation (233,743) (305,361) (275,510) (294,139) (287,466) (246,329)

3,029,070 2,706,458 2,529,111 2,806,502 2,468,243 2,160,210

CAPITAL AND RESERVES Share capital 409,500 409,500 409,500 409,500 409,500 409,500 Reserves 2,798,269 2,407,164 2,195,468 2,137,422 1,816,186 1,547,716 Non-controlling interest (178,701) (110,206) (75,857) 13,880 (3,143) (1,756) Proposed dividend - - - 245,700 245,700 204,750

Shareholders' funds 3,029,068 2,706,458 2,529,111 2,806,502 2,468,243 2,160,210

- - - TURNOVER AND PROFIT

Turnover 16,712,922 16,808,851 14,479,781 14,520,780 10,624,462 9,758,542

Profit before taxation 709,722 615,254 812,729 823,566 823,252 780,915 Taxation (274,127) (225,879) (311,135) (304,716) (310,469) (270,139)

Profit after taxation 435,595 389,375 539,817 518,850 512,783 510,776 Other comprehensive income

93,539 856 856

Non-Controlling Interest 83,225 27,780 65,257 48,086 1,387 1,756

Profit attributable to owners of the parent retained 612,360 418,011 605,930 566,936 514,170 512,532

Earnings Per share - kobo 0.75 0.51 0.74 0.69 0.63 0.63

Net Asset per share - kobo 4 3 3 3 3 3

NOTE:

1 Earnings per share are based on the profit after taxation and the number of ordinary shares in issue at the end of each financial year.

2 Net assets per share are based on the net assets of the company and the number of ordinary shares in issue at the end of each

financial year.

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