Copperbelt University

Directorate of Distance Education and Open Learning

Term Project II

Anthony Singogo

SIN: 22900601

Master’s in business administration (General)

GBS 621: Corporate Finance

Dr. Izidin El Kalak

2023-12-05
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Performance of Zambeef PLC
Introduction

Zambeef Plc is a leading agribusiness company in Zambia, specializing in the

production, processing, and distribution of beef, poultry, pork, dairy, and fish products.

The company has a strong presence in the Zambian market and has also expanded its

operations to other African countries.

Background information

Zambeef started as a small butcher shop in Lusaka, the capital of Zambia, in 1991.

Despite having limited capital at the beginning, the company grew steadily over the years.

In February 2003, Zambeef became a publicly traded company on the Lusaka Stock

Exchange. By April 2005, it moved to the listed tier. Since its establishment, Zambeef has

experienced significant growth in its shareholding base. Initially, it had 70 shareholders

when it was first listed, but by September 2006, the number had increased to 310. The

company's market capitalization reached US $200 million. Currently, Zambeef is one of

the largest agro-businesses in Zambia. It engages in various activities, including

slaughtering over 60,000 cattle, 26,000 pigs, and 3.5 million chickens annually.

Additionally, it produces 8.5 million liters of milk and harvests 50,000 tonnes of crops each

year. The company operates one of the largest cropping operations in Africa, with 3,660

hectares under irrigation and an additional 1,500 hectares for dry land crops. Zambeef

has a significant presence in the market, with 93 butcheries located throughout Zambia,

Nigeria, and Ghana. It also operates eight abattoirs in Zambia and has a transport fleet

of over 200 units. Furthermore, Zambeef is the largest feedlotter of quality beef in Zambia,

feeding 12,000 grain-fed cattle annually. The company has a wholly owned subsidiary
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Performance of Zambeef PLC
called Zamleather Limited, which is involved in the tanning of hides for export to the Far

East and Europe. Zamleather also produces finished leather, shoes, and industrial

footwear, primarily for the domestic and regional markets (IDE-Jetro).

Corporate Governance Analysis

The principles primarily focus on publicly traded companies, both in the financialand

non-financial sectors. They can also be beneficial in improving corporate governance in

companies that are not publicly traded. While some principles may be more suitable for

larger companies, policymakers should promote good corporate governance for all

companies, including smaller and unlisted ones. Corporate governance involves the

relationships between a company's management, board, shareholders, and other

stakeholders. It also establishes the framework for setting objectives, determining the

means to achieve them, and monitoring performance. The principles do not aim to

question the business judgment of individuals, board members, or company officials.

What works for one company or group of investors may not be universally applicable or

of significant economic importance (OECD 2015).

According to (Davoren), Effective corporate governance is essential if a business

wants to set and meet its strategic goals. A corporate governance framework integrates

regulations, principles, and protocols that steer the organization towards its goals while

also addressing the requirements of stakeholders. Typically, a corporate governance

framework comprises a blend of different mechanisms (Davoren).

The Board of Zam beef Plc believes that its composition is appropriate, with no

individual or group dominating the decision-making process. It maintains a good balance

between knowledge, experience, and independence. The Chairman's role is separate

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Performance of Zambeef PLC
from that of the Chief Executive Officer and is considered independent (Zambeef plc

home page)

The Chairman leads the Board and ensures its effectiveness in all areas of

responsibility, including corporate governance implementation and practice.

The Chief Executive Officer of Zam beef is responsible for the strategic development

of the Group and effectively communicating it to the Board. Once approved, the CEO

implements the strategy and oversees the management of the Group and its executive

team. Board holds regular meetings to discuss the Company's strategic direction. Any

significant deviation or change will be promptly highlighted (Zambeef plc home page)

The Board of Directors holds accountability to the shareholders for the performance

and direction of Zambeef. This responsibility involves establishing strategic objectives,

formulating key policies, and approving significant business decisions in accordance with

the charter. Currently, the Board comprises two Executive Directors and nine non-

executive directors, six of whom are deemed independent by the Board according to QCA

guidelines (qca-code 2021).

The roles of the Chairman and the Chief Executive Officer are distinct, with the

Chairman considered independent (Zambeef plc home page)

The Chairman provides leadership to the Board, ensuring its effectiveness across all

aspects of its remit and guiding corporate governance implementation.

The Chief Executive Officer is responsible for the strategic development of the Group,

communicating it to the Board, and, upon approval, implementing it. The CEO oversees
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Performance of Zambeef PLC
the Group's management and executive team. The Board maintains a balanced

composition, avoiding dominance by any individual or group, with a mix of knowledge,

experience, and independence (Zambeef plc home page).

All Directors have access to management, including the Company Secretary, and

necessary information for fulfilling their duties effectively. Director’s stay informed about

the Group's business through interactions with senior management. Further, the company

has independent committees in place like audit committee, Remuneration committee and

environmental and social committee to ensure compliance and principles of good

corporate governance are met (Zambeef plc home page).

Stockholder Analysis

Overall, a Stockholder Analysis provides valuable information for investors, analysts,

and company management to understand the ownership structure of a company and

make informed decisions based on the insights gained from the analysis.

according to the trading statement issued on 4th December 2023, “The expected Total

Basic Earnings per Share for the financial year ending on September 30, 2023, is

projected to be 306% higher in Kwacha and 272% higher in US Dollar terms compared

to the previous financial year that ended on September 30, 2022. This information aligns

with the guidance provided in the Company's previous Trading Update on November 7,

2023. The Trading Update stated that the Group's financial trading performance for the

year ending on September 30, 2023, is anticipated to surpass market expectations, with

revenue, gross profit, and adjusted EBITDA expected to be 5-15% higher than market

expectations. Additionally, the reported profit before tax is estimated to be approximately

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Performance of Zambeef PLC
30% higher than current market expectations. However, due to an expected increase in

taxation, the reported profit after tax is projected to be below current market expectations

but still higher than the previous financial year” (trading statement).

Zambeef Products Plc is the main company that owns several subsidiaries in

Zambia. These subsidiaries include Zam Chick Limited (ZCL), Zamhatch Limited (ZHL),

Master Pork Limited (MPL), Zamleather Limited (ZLL), and Zambeef Retailing Limited

(ZRL) (group restructuring).

The Group’s notable shareholding and beneficial ownership is represented as follows:

Name of shareholder Number of shares % of shareholding
British International Investment Plc 52,601,435 17.5%
Africa Life 43,030,134 14.3%
National Pension Scheme Authority (Zambia) 24,797,818 8.2%
M & G Investment Management 18,700,000 6.2%
Krohne Capital 17,979,408 6.0%
SBM Securities 15,925,191 5.3%
Sussex Trust 14,000,000 4.7%
Eastspring Investment 11,995,062 4.0%
Rhodora 8,639,374 2.9%

Source: Annual Report 2022.

Risk and Return

First, it’s important to define risk and return since they are interrelated to appreciate

the risk profile of Zam beef. A return is a profit that emerges from uncertainty during a

defined period, typically a year. This profit takes the form of dividends, interest, and the

increase in market values, after an initial allocation of resources like money. Investors

generally can anticipate the anticipated gain or income. Nevertheless, this risk doesn't
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Performance of Zambeef PLC
consistently produce the expected outcomes and may result in an investment loss in

certain instances.

The Group recorded a pre-tax profit of ZMW55 million (USD3 million), indicating a

decrease of 68% in Kwacha (61% in US dollar terms) compared to the prior year's

ZMW172 million (USD8 million). The reported figures include the recognition of a

ZMW142 million (USD8.3 million) goodwill impairment on the fair value of Zamchick

Limited assets. Adjusting for this non-cash impairment, the Group achieved a pre-tax

profit of ZMW197 million (USD11.5 million), reflecting a growth of 15%.

The Group generated revenue totaling ZMW5.4 billion (USD314 million) and attained

a gross profit of ZMW1.6 billion (USD95 million), marking an 8% and 11% increase over

the previous year in Kwacha terms and a 33% and 37% increase in US dollars,

respectively. The positive results were attributed to the diversified and vertically integrated

nature of our business, strengthened by robust brands, supportive partnerships, and an

experienced management team.

These achievements are the result of the time and resources invested in research and

development during the Covid-19 outbreak. Further, the outbreak of Contagious Bovine

Pleuropneumonia (CBPP), a disease affecting cattle negatively affected our Beef

business; with a cost to Company of K20.7 million. Overall the performance of Zam beef

is awesome and risk taken to diversify is worth the returns (Annual Report, 2022)

Capital Structure Choices

Net debt reconciliation

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Performance of Zambeef PLC
This section sets out an analysis of net debt and the movements in net debt for each of

the periods presented.

Group Company

2022 2021 2022 2021

K’000 K’000 K’000 K’000

Cash and cash equivalents (Note 19) 223,973 201,539 136,149 113,193

Bank loans (Note 24) (599,866) (406,264) (599,866)

(406,264)

Bank overdrafts (Note 24) (351,681) (490,204) (164,025)

(306,417) Lease liabilities (Note 12(b)) (17,643) (19,671) (10,232)

(8,470)

Net debt (745,217) (714,600) (637,974) (607,958)

Source: Annual report p92, 2022

Share capital and share premium.

2022 2021 2022 2021

Shares Shares K’000 K’000

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Performance of Zambeef PLC
Ordinary shares Authorised 700,000,000 700,000,000 7,000,000 7,000,000

Issued and fully paid 300,579,630 300,579,630 3,006 3,006

Share premium 1,125,012 1,125,012 1,125,012 1,125,012

Preference shares

Authorised and issued -fully paid 100,057,658 100,057,658 1,000 1,000

Analyzing the figures above, Zam beef is an equity owned company with less than

50% of debt.

Stability: The authorized shares for both ordinary and preference shares have remained

constant, suggesting a stable capital structure.

Share Premium Stability: The constant share premium implies that the company has not

issued any new shares at a premium during the specified period.

Consistency in Issued and Fully Paid Shares: The number of issued and fully paid

ordinary and preference shares has not changed, indicating a consistent financial

structure in terms of the number of shares outstanding.

Nominal Value Stability: The constant nominal values for ordinary and preference shares

suggest that there hasn't been any change in the nominal value per share.

In summary, the company's share capital structure appears to be stable and there haven't

been significant changes in the number of authorized, issued, and fully paid shares, as

well as in the share premium over the specified period (Annual reports 2022)

Dividend Policy

Some companies opt to compensate their common stock shareholders by

distributing dividends. Dividends are regularly paid out and typically constitute a portion
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Performance of Zambeef PLC
of the company's earnings. This arrangement provides shareholders with a consistent

income stream, making dividend-paying stocks a popular choice among certain investors.

However, Zam beef seems to be using residual dividend policy where a pay out is done

after capital expenditure and working capital (Chen, 2023).

the company did not declare the pay out in 2022, this could be mainly due to decline on

profit for the year k31.6 million 2022 from k168.8 million for 2021.

Stock Price Monitoring

The current share value for Zam beef stands at GBP 6.25 against the price of GBP 8.50

in December 2022. percentage decrease or the percentage change in the share price. It

is calculated using the following formula:

Mean Decrease (%)=(Initial Price−Current PriceInitial Price)×100Mean Decrease (%)=(I

nitial PriceInitial Price−Current Price)×100

In this case, for Zambeef:

Mean Decrease (%)=(8.50−6.258.50)×100Mean Decrease (%)=(8.508.50−6.25)×100

Mean Decrease (%)=(2.258.50)×100Mean Decrease (%)=(8.502.25)×100

Mean Decrease (%)≈26.47%Mean Decrease (%)≈26.47%

So, the mean decrease in the share price for Zambeef is approximately 26.47%. This

indicates the percentage decrease from the initial price of GBP 8.50 to the current price

of GBP 6.25.
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Performance of Zambeef PLC

Valuation

The company experienced an increase in revenue and gross profit of 8.5% and 11%

respectively in Kwacha. The growth in revenue was mainly due to volume pressures in

the Retail and cold chain food Products sectors.

The Group's profit before tax declined by 68% in Kwacha (61% in US dollar terms),

amounting to ZMW55 million (USD3 million), compared to ZMW172 million (USD8 million)

in the previous year. This decline is attributed to the recognition of a goodwill impairment

of ZMW141.8 million on the fair value of Zamchick Limited's asset. However, when

adjusting for this non-cash impairment, the Group's profit before tax grew by 15%,

reaching ZMW197 million (USD11.5 million).

Due to higher tax expense and the goodwill impairment loss, the company's profit after

tax decreased to K31.5 million 2021.

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Performance of Zambeef PLC
Conclusion

One of the key factors contributing to Zambeef Plc's performance is its vertically

integrated business model. The company controls the entire value chain, from rearing

livestock to processing and distributing the final products. This integration allows Zambeef

Plc to have better control over quality, costs, and supply chain efficiency.

Furthermore, Zambeef Plc has invested in modern infrastructure and technology to

enhance its production and processing capabilities. This has enabled the company to

meet the growing demand for its products and maintain high standards of quality.

In addition to its financial performance, Zambeef Plc is also committed to sustainable

practices and social responsibility. The company has implemented various initiatives to

support local communities, promote environmental conservation, and ensure the welfare

of its employees.

Overall, the performance of Zambeef Plc reflects its strong market position, effective

management, and commitment to sustainable growth.

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Performance of Zambeef PLC
References

Chen. J. (2023). Investopedia. Dividend policy

https://www.investopedia.com/terms/d/dividendpolicy.asp

Davoren. J. Types of Corporate Governance mechansm

Three Types of Corporate Governance Mechanisms (chron.com)

Ehrhardt, M. (2017). Corporate finance: A focused approach (6th Ed.). Boston, MA:

Cengage Learning. ISBN 9781305637108.

IDE-JETRO. Data Africa

https://www.ide.go.jp/English/Data/Africa_file/Company/zambia01.html

OECD (2015). Principles of Corporate governance

https://www.oecd.org/daf/ca/Corporate-Governance-Principles-ENG.pdf
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Performance of Zambeef PLC

Zam beef (2022). Annual report

https://zambeefplc.com/annual-reports/

Zenovagroup. (2021).

https://zenovagroup.com/wp-content/uploads/2021/07/qca-code.pdf