FINANCIAL STATEMENTS ANNUAL REPORT & 2014 Kenol.pdf · 2017-03-14 · Ecobank Limited Kenya Commercial Bank Limited Bank of Africa Limited Sociéte Géneralé ... Nairobi, Kenya on

Together, forging forward to a better future

ANNUAL REPORT & FINANCIAL STATEMENTS 2014

Vision

To be the leading brand in every market we operate in, and a major player in Africa.

Mission

To develop, improve and increase quality and total value of our products and services;

To become a market leader through continuous innovation,-customer focus and to provide the highest quality products and services;

To maintain a highly motivated, well trained human resource base;

To deliver the highest shareholder value

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Value Statements

1ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Directorate & Administration 2

Notice of Annual General Meeting 3

Chairman’s Report 4-5

Group Managing Director’s Report 6-7

Board of Directors 8

Group Management Team 9

Corporate Governance 10

Corporate Social Responsibility 11

Directors’ Report 13

Statement of the Directors’ Responsibilities 14

Report of the Independent Auditor 15

Financial Statements:

Consolidated Income Statement 16

Consolidated Statement of Comprehensive Income 17

Consolidated Statement of Financial Position 18

Company Statement of Financial Position 19

Consolidated Statement of Changes in Equity 20

Company Statement of Changes in Equity 21

Consolidated Statement of Cash Flows 22

Notes to the Financial Statements 23-65

Principal Shareholders and Share Distribution 66

Proxy Form

Contents

2 ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Directorate & Administration

BOARD OF DIRECTORS

J Mathenge Chairman (Appointed 23 May 2013) Non-Executive Director (Appointed on 01 December 2008

D Ohana Group Managing Director (Appointed on 4 July 2013)

D Oyatsi Appointed on 10 August 2007

T M Davidson Appointed on 01 January 2011

D Ndonye Appointed on 06 April 2011

P Lai Appointed on 03 February 2006

SECRETARY

Ms W Jumba Appointed Secretary on 01 January 2011 Livingstone AssociatesDeloitte Place,Wayaki Way, MuthangariP O Box 30029, GPO 00100Nairobi

REGISTERED OFFICE

ICEA BuildingKenyatta avenueP O Box 44202, GPO 00100Nairobi, Kenya

BANKERS

Major bankers include:CfC Stanbic Bank LimitedNIC BankEcobank LimitedKenya Commercial Bank LimitedBank of Africa LimitedSociéte Géneralé – GenevaRabobank – NetherlandsMauritius Commercial Bank - MauritiusBNP Paribas – Paris

AUDITOR

PricewaterhouseCoopersCertified Public AccountantsThe Rahimtulla TowerUpper Hill RoadP O Box 43963, 00100Nairobi


Notice of Annual General Meeting

NOTICE is hereby given that the 56th Annual General Meeting of the Company will be held at the Intercontinental Hotel, Nairobi, Kenya on 6th May 2015 at 11.00 a.m.

AGENDA

ORDINARY BUSINESS

1. To table the proxies and note the presence of a quorum.

2. To read the notice convening the meeting.

3. To receive, consider and adopt the audited Financial Statements for the year ended 31 December 2014 together with the reports of the Chairman and Group Managing Director, Directors’ and Auditor’s thereon.

4. Dividend

To consider and approve a first and final dividend of Kshs 0.20 per share for the year ended 31 December 2014 payable on or about 5th June 2015 to the shareholders on the Register of Members at the close of business on 7th May 2015 and to approve the closure of the Register of Members from the close of business on 7h May 2015 to the close of business on 8th May 2015 (both days inclusive) for the purpose of processing the dividend.

5. To approve the Directors’ remuneration as indicated in the Financial Statements for the year ended 31 December 2014.

6. Re-election of directors:

To re-elect Ms Pat Lai, a Director retiring by rotation in accordance with Article 96 of the Company’s Articles of Association and the Capital Markets Authority Guidelines on Corporate Governance Practices by Public Listed Companies in Kenya and, being eligible, offers herself for re-election.

7. To note that PricewaterhouseCoopers continue in office as Auditors by virtue of Section 159 (2) of the Companies Act (Cap. 486) and to authorize the Directors to fix their remuneration for the ensuing financial year.

BY ORDER OF THE BOARD

WINNIEFRED JUMBACOMPANY SECRETARY

24th March 2015

Note:

1. In accordance with Section 136 (2) of the Companies Act (Cap 486), every member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote on his or her behalf and a proxy need not be a member of the Company. A form of proxy may be obtained from the Company’s website www.kenolkobil.com or from the Registered Office of the Company, ICEA Building, 10th Floor, Kenyatta Avenue, Nairobi.

In the case of a member being a limited Company, the proxy form must be completed under its Common Seal or under the hand of an officer or attorney duly authorised in writing.

2. All proxies must be duly completed by the member and must be lodged with the Company Secretary, Livingstone Associates, P O Box 30029, 00100 Nairobi, or posted in time to reach not later than 11.00 am on 5th May 2015. Alternatively, duly signed proxies can be scanned and emailed to [email protected] in PDF format.

3. In accordance with Article 134 of the Companies Articles of Association a copy of the entire Annual Report and Accounts may be viewed on and obtained from the Company’s website www.kenolkobil.com or from the Registered Office of the Company, ICEA Building, 10th Floor, Kenyatta Avenue, Nairobi. An abridged set of the Statement of Financial Position, Comprehensive Income Statement, Statement of Changes in Equity and Cashflow Statement for year ended 31st December 2014 have been published in two daily newspapers with nationwide circulation.


Cha i rman’s Repo r t

Going forward the Board of Directors is confident that prospects remain positive. The strategies and initiatives being pursued by Management will enhance and optimize opportunities and continue to improve the Group performance.

Chairman’s Report


It is with pleasure that I welcome you to the 56th Annual General Meeting of KenolKobil Limited and to present to you the Annual Report and financial statements for the company and the Group for the year ended 31st December 2014.

The operating environment was challenging with international oil prices characterized by strong backwardation requiring management to navigate the delicate balance between inventory management and market supply requirements. In addition the currencies in the countries where we operate, showed significant depreciating trends against the United States Dollar, resulting in forex losses and constrained dollar availability in some countries outside of Kenya.

The change management and other business turnaround initiatives launched in 2013 continued to be implemented in 2014 with sharp focus on the key areas of corporate structure, financing costs, operating costs, human resources and enterprise risk management. I applaud management and staff who remained resilient and steadfast in their commitment to deliver business recovery and turnaround strategies based on a culture of high performance throughout the group.

The initiatives provided a stronger, integrated structure within all the entities in the group and enabled optimization of synergies that resulted in unprecedented financial and operational efficiencies. As a result the Group realized Ksh 1.1 billion profit after tax from the Ksh 558 million in the comparable period in 2013 – a significant achievement from the loss after tax in 2012 of Ksh 6,2 billion. The improvement in operational efficiency generated better margins which, coupled with cost reduction, enabled the company to improve cash flows. The statement of financial position improved with significant reduction in net borrowings of Ksh 4.2 billion. The cash generated from operating activities of Ksh 5.4 billion in 2014 enabled the company to reduce borrowings and thereby reduce financing costs, a key area of focus.

Going forward the Board of Directors is confident that prospects remain positive. The strategies and initiatives being pursued by management will enhance and optimize opportunities and continue to improve the Group performance.

Following the commendable performance, the Board of Directors recommends for consideration and approval by the shareholders at the Annual General Meeting a first and final dividend of Ksh 0.20 per share for the year ended 31 December 2014.

We extend our appreciation to customers, banks, suppliers and all other business partners for their continued support. On behalf of the Board, I would also like to express our appreciation to management and the staff in the Group for their commitment to duty and contribution towards this commendable performance. I thank my colleagues on the Board for their dedication, support and leadership that have made the Group remain a major player in the market. Finally but most importantly, our thanks go to the shareholders for their continued confidence in our ability to maximize the value of their investment in the Company.

James G MathengeChairman

24th March 2015

Chairman’s Report


Cha i rman’s Repo r t

Management is confident in the Group’s strength to continue significant improvement in 2015, with the first quarter already delivering expected strong results with significantly lower net borrowings.

Group Managing Director’s Report


The Board is proud to present the financial results for the KenolKobil Group of Companies (the “Group”) for the full year 2014. The Group achieved profit after tax of Kshs 1.1 billion for the year ended December 2014, compared to Kshs 558 million for the year 2013, representing a 95% increase year on year. This reflects the continuation of the turnaround and recovery strategies of the Group’s performance reported since 2012. To achieve these results, the Group has focused its concentration on five major areas, namely - corporate structure, financing costs, operating costs, human resources and enterprise risk management. This has enabled the Group to rebuild a strong business platform and a reinvigorated work culture that has enabled it to improve performance and realize better results in a challenging and competitive business environment. Management is satisfied that the focus and drive in these areas have resulted in the desired positive outcomes in all aspects of the business. During the period, management put in place various initiatives in all its subsidiaries to strengthen management and to re-organize structures and systems in its operations to position the entities to achieve expected growth and to generate improved profitability.

The global economic environment and in particular the dynamics in the oil industry remained unpredictable and challenging. In spite of this, effective inventory management and focus on high margin business segments has enabled the Group to realize gross profit of Kshs 5.1 billion, an 18% increase above the 2013 gross profit of Kshs 4.3 billion. The gross margin to sales improved to 5.5% in 2014 from 3.9% in 2013.

The operating costs reduced by 25% with Kshs 1.9 billion incurred in 2014, from Kshs 2.5 billion in 2013. Notably, the 2013 costs had already reduced by 52% compared to 2012. This trend in cost reduction has been achieved by consistent and effective cost management focusing on the five key areas as mentioned above.

In 2014, the Group incurred net financing costs of Kshs 1.3 billion, a reduction of 22% from Kshs1.6 billion in 2013. This was achieved through reductions of net borrowings as well as negotiating lower borrowing rates, while introducing new financial institutions offering more competitive structured financing facilities. The lower international oil prices during the last quarter of the 2014 year contributed to lower borrowing levels as well.

Significant progress has been achieved with a reduction of net borrowings by Kshs 4.2 billion which closed at Kshs 9.4 billion at the end of 2014, from Kshs 13.6 billion at the end of 2013, reflecting a 31% reduction. Further reduction of net borrowings of Kshs 2.4 billion during the first quarter of 2015 should result in closing net borrowings of approximately Kshs 7 billion at the end of the first quarter 2015.

The above operating improvements resulted in an improved EBITDA of Kshs 3.8 billion representing 24% growth over the comparable 2013 figure of Kshs 3.0 billion. Cash

generated from operating activities improved substantially to Kshs 5.4 billion compared to Kshs 1.3 billion in 2013, representing a 320% improvement.

Shareholder’s funds of Kshs 7.3 billion at end of 2014 increased by Kshs 664 million from Ksh 6.7 billion in 2013 and, with the reduced net borrowings, the gearing ratio at the end of 2014 was 56% compared to 67% in 2013 with further improvement expected at end of the first quarter 2015 to below 50%. OutlookGoing forward, the organization is well placed to generate continued strong performance. This is supported by the organic growth initiatives taken in Kenya and subsidiaries which resulted from takeovers of 37 new petrol service stations during 2014 which augurs well for the growth path of the Group.

With the view that international oil prices will continue to remain relatively low during 2015, positive opportunities are anticipated to generate improved margins and to support the Group to continue its key focus on lowering financing costs and reducing net borrowings to deliver stronger results in 2015. The restructuring and streamlining initiatives of human resources and staff in 2013 and 2014 has given the Group a new impetus and motivation in projecting the company to new heights. The group embarked on training and developing young, talented employees to take up challenges and emerging opportunities in the Group. This has delivered encouraging results in 2014 with increased productivity delivered as motivated employees are maturing into the various positions and adding value to the organization.

Management is confident in the Group’s strength to continue significant improvement in 2015, with the first quarter already delivering strong expected results with significantly lower net borrowings.

Annual General MeetingThe 56th Annual General Meeting of KenolKobil Ltd is to be held on 6th May 2015 at 11h00 at the Intercontinental Hotel in Nairobi, Kenya.

Proposed DividendThe directors are recommending for approval at the Annual General Meeting to be held on 6th May 2015 a first and final dividend of Ksh 0.20 per share for the year ended 31 December 2014, subject to Withholding Tax where applicable.

By Order of the Board

David OhanaGroup Managing Director

24th March 2015

Group Managing Director’s Report


“We extend our appreciation to customers, banks, suppliers and all other business partners for their continued support. We would also like to express our appreciation to Management and the staff in the Group for their commitment to duty and contribution towards the commendable performance.”

Board of Directors

Mr. D. OhanaGroup Managing Director

Mr. J. Mathenge Chairman

Ms. P. LaiGroup Finance Director

Mr. D. Oyatsi Non-Executive Director

Mr. T.M. Davidson Non-Executive Director

Mr. D. Ndonye Non-Executive Director


David Ohana

Group Managing Director

Pat Lai

Group Finance Director

Patrick Kondo

Group Export Mergers & Acquisitions

and Regional Support Manager

Antony Gatandi

Marketing and Operations Manager, Kobil Uganda Ltd

Andrew Mochache

Marketing Manager, Kobil Tanzania Ltd

Asaf Marsiano

Country Manager, Kobil Zambia Ltd

Patrick Ngugi

Country Manager, Kobil Petroleum Rwanda SARL

Amit Spector

Country Manager, Kobil Ethiopia Ltd

Francis Mwangi

Country Manager, Kobil Burundi SA

Group Management Team


The KenolKobil Board of Directors has continued to be committed to high corporate governance standards and business values and ethics within the organization to abide by the laws governing in the countries where it operates.

Compliance and maintenance of high standards is core to organization’s performance and maximizing shareholders’ value.

The Group’s general practice is one of not stating views on either national or international political matters, and continues to abstain from participation in politics, and interference in political matters. Further, the Company and all its subsidiaries, all its stakeholders and employees, are guided by the Group’s Code of Conduct approved by the Board and Management. The Code of Conduct stipulates the business values and the acceptable behavior standards for all stakeholders regarding the company’s business procedures, systems and core ethics.

Board of Directors The Board consists of 4 Non-Executive Directors and 2 Executive Directors. The Directors all possess qualification and a wide range of expertise and experience to enable them to contribute in their capacities as directors to the Group.

Duties: The Board gives direction on the Company’s strategy, objectives, and values and ensures procedures and practices are in place to implement governance and effective control over the company’s assets and operations.

The Board is able to discharge its responsibilities and authorities with regular reports from management, monthly management accounts, reports from each Board Committee, specific proposals for major capital expenditure and reviews in depth, any strategic opportunities for mergers and acquisitions. The Board of Directors meets quarterly or as required to continually review and monitor the Company’s progress with respect to strategic direction and operational effectiveness.

Board CommitteesTwo Board Committees, with written terms of reference, facilitate effective assistance to the Board to enable efficient

decision making in executing their duties and responsibilities. Delegation of authority to the Board Committees or Management does not mitigate or discharge the Board of its duties and responsibilities.

Audit and Risk Committee This committee comprises of 4 Non-Executive Directors, and by invitation, 2 Executive Directors; the external auditor’s representatives and the Group Internal Audit Manager representative.

The duties and responsibilities are to review, advice and make recommendations on financial information, budgets, risk management, policies and audit issues.

It reviews auditors’ independence, internal controls and compliance with the Code of Conduct and Ethics. It also reviews adherence to statutory and regulatory requirements.

This committee held 4 meetings during the year.

Nominations, Remuneration and Human Resources Committee This committee comprises of 3 Non-Executive Directors and 1 Executive Director.

The duties are to review, advice and make recommendations on • Remuneration issues in the Group including senior

management appointments and matters on the Employee Share Ownership Plan (ESOP scheme).

• BoardnominationsandresignationsintheGroup.

The committee held 4 meetings during the year.

ComplianceThe company complies with statutory and regulatory requirements, including stock exchange requirements, code of conduct.

Directors’ remuneration Following the Government guidelines on directors’ remuneration, Non-Executive Directors are paid an annual fee and sitting allowance for meetings attended. Approval of the fees is to be tabled at the Annual General Meeting.

Corporate Governance


As has been the KenolKobil culture, we have continued to give back to society through different initiatives, with the aim of transforming lives in the countries where we have a presence. This year we especially focused in areas of education and social development.

The KenolKobil Education Scholarship Fund established in Kenya in 2002 continued to educate bright and underprivileged children from various communities countrywide. In 2014, we had 13 students sitting for the Kenya Certificate of Secondary Education (KCSE) and majority of them had excellent results. Those who progress to University will continue under the scholarship scheme.

Since its inception, the fund has helped uplift the level of education of members of the society as well as offer opportunities such as mentorship and employment in a bid to reduce levels of poverty in various parts of the country.

So far, the fund has seen over 90 students receive scholarships for their secondary and university education. Some of the beneficiaries have successfully graduated from university and into employment and will therefore, be able to change the lives of their families and generations to come.

Kobil Rwanda continues to partner with Profermme Twese Hamwe – an organization that deals with the advancement of women, peace and development post – genocide to uphold women’s rights through sustainable Human Development, promoting social justice and fighting gender-based violence.

Kobil Zambia also continued in its partnership with the Chilenje Transit Home by facilitating their travel through a monthly fuel allocation.

Established in 1989, the home houses abandoned and lost children from diverse backgrounds who have faced different challenges in life such as sexual and physical abuse, rejection by parents/guardians, and loss of parents due to AIDS and other causes.

The Kobil Zambia facility aids the home in making trips to the clinic, schools and aids commuting needs for other general activities. By supporting the home, we have contributed significantly to the wellbeing of these needy children and the community at large.

Corporate Social Responsibility Corporate Social Responsibility

KenolKobil is committed to providing quality products and services that cater for all our customers.


The directors submit their report together with the audited financial statements for the year ended 31 December 2014, in accordance with Section 157 of the Kenyan Companies Act, which discloses the state of affairs of KenolKobil Limited (the Company) and its subsidiaries (together, the Group).

PRINCIPAL ACTIVITIES

The principal activities of the Group continue to be the importation of refined and other petroleum products for storage and distribution.

RESULTS AND DIVIDEND

The net profit for the year of Shs 1,091,284,000 (2013: 558,419,000) has been added to retained earnings. During the year, no interim dividend was paid (2013: nil). The directors recommend the approval of a final dividend of Shs 294,352,240 (2013: Shs 147,176,120).

DIRECTORS

The directors who held office during the year and to the date of this report were:

J Mathenge - Chairman D Ohana - Group Managing DirectorP Lai - Group Finance DirectorD Oyatsi T M Davidson D Ndonye

AUDITOR

The Company’s auditor, PricewaterhouseCoopers, continues in office in accordance with Section 159(2) of the Kenyan Companies Act.

APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors on 24th March 2015.

By order of the Board

SECRETARY

24th March 2015

Directors’ Report


The Kenyan Companies Act requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and Company as at the end of the financial year and of its profit or loss for that year. It also requires the directors to ensure that the Group and Company keep proper accounting records that disclose, with reasonable accuracy, the financial position of the company. The directors are also responsible for safeguarding the assets of the company.

The directors accept responsibility for the preparation and fair presentation of financial statements that are free from material misstatements whether due to fraud or error. They also accept responsibility for:

(i) Designing, implementing and maintaining internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

(ii) Selecting and applying appropriate accounting policies;(iii) Making accounting estimates and judgements that are reasonable in the circumstances.

The directors are of the opinion that the financial statements give a true and fair view of the financial position of the Group and Company as at 31 December 2014 and of the Group and Company’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act.

Nothing has come to the attention of the directors to indicate that the Group will not remain a going concern for at least the next twelve months from the date of this statement.

_______________________ _______________________ Director Director

24 March 2015

Statement of Directors’ Responsibilities


Report on the financial statements

We have audited the accompanying consolidated financial statements of KenoiKobil Limited (the Company) and its subsidiaries (together, the Group), as set out on pages 16 to 65. These financial statements comprise the consolidated statement of financial position at 31 December 2014 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, together with the statement of financial position of the Company standing alone as at 31 December 2014 and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ responsibility for the financial statements

The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Kenyan Companies Act and for such internal control, as the directors determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion the accompanying financial statements give a true and fair view of the state of the financial affairs of the Group and of the Company at 31 December 2014 and of the profit and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards and the Kenyan Companies Act.

Report on other legal requirements

As required by the Kenyan Companies Act we report to you, based on our audit, that:i) we have obtained all the information and explanations

which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii) in our opinion proper books of account have been kept by the company, so far as appears from our examination of those books; and

iii) the company’s statement of financial position and statement of comprehensive income are in agreement with the books of account.

The engagement partner responsible for the audit resulting in this independent auditor’s report is CPA Peter Ngahu- P/1458.

Certified Public AccountantsNairobi

24 March 2015

Report of the Independent Auditorto the Members Of KenolKobil Limited


Notes 2014 2013 Shs’000 Shs’000 Sales 5 91,315,702 109,687,453Cost of sales (86,263,995) (105,422,286) Gross profit 5,051,707 4,265,167 Other income 6 963,265 1,402,931Administrative expenses (2,854,339 ) (3,369,232)Finance cost 9 (1,707,116 ) (1,777,106)Finance income 9 69,244 43,932Share of loss in associate 23 (1,941 ) (1,774) Profit before income tax 1,520,820 563,918 Income tax expense 10 (429,536 ) (5,499) Profit for the year (of which Shs 825,927,000 (2013: Shs 36,015,000) of has been dealt with in the accounts of the Company 1,091,284 558,419 Attributable to: Equity holders ot the Company 1,091,284 558,419Non controlling interest - Total 1,091,284 558,419 Earnings per share - Basic (Shs per share) 11 0.74 0.38- Diluted (Shs per share) 11 0.74 0.38

The notes on pages 23 to 65 are an integral part of these consolidated financial statements.

For the year ended 31 December 2014

Consolidated Income Statement


Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2014

Notes 2014 2013 Shs’000 Shs’000 Profit for the year net of tax 1,091,284 558,419 Other comprehensive income: Items that may be subsequently reclassified to profit or loss Currency translation differences 14 (224,444 ) (80,410) Other comprehensive income for the year, net of tax (224,444 ) (80,410) Total comprehensive income for the year 866,840 478,009 Attributable to: Equity Holders of the company 866,840 478,009 Non controlling Interest - - 866,840 478,009




Consolidated Statement of Financial Position

Notes 2014 2013 Shs’000 Shs’000

EQUITY AND LIABILITIES

EQUITY Share capital 13 73,588 73,588Share premium 13 5,166,350 5,166,350Retained earnings 2,067,743 1,270,811Other reserves 14 (271,537 ) 8,369Proposed Dividends 294,352 147,176

Total equity 7,330,496 6,666,294 Non-current liabilities Deferred income tax 17 197,360 194,073Borrowings 15 88,388 522,552

Total non-current liabilities 285,748 716,625 Current liabilities Payables and accrued expenses 27 5,633,064 5,591,360Current income tax 196,541 189,751Borrowings 15 10,409,840 14,854,274Dividends payable 12 59,477 103,369

Total current liabilities 16,298,922 20,738,754 TOTAL EQUITY AND LIABILITIES 23,915,166 28,121,673 ASSETS Non-current assets Property, plant and equipment 19 4,648,477 4,667,999Prepaid operating lease rentals 18 734,754 600,648Intangible assets 20 850,086 858,722Deferred tax asset 17 2,179,594 2,595,040Available for sale investment 22 2,235 2,249Investment in associate 23 12,001 15,346

Total non-current assets 8,427,147 8,740,004 Current assets Inventories 24 4,141,183 6,528,533Receivables and prepayments 25 9,725,617 10,756,595Current income tax 569,755 321,483Cash and cash equivalents 26 1,051,464 1,775,058

Total current assets 15,488,019 19,381,669 TOTAL ASSETS 23,915,166 28,121,673 The notes on pages 23 to 65 are an integral part of these consolidated financial statements.The financial statements on pages 16 to 65 were approved for issue by the board of directors on 24 March 2015 and signed on its behalf by:

___________________ ___________________Director Director


Company Statement of Financial PositionFor the year ended 31 December 2014

Notes 2014 2013 Shs’000 Shs’000

EQUITY AND LIABILITIES EQUITY Share capital 13 73,588 73,588 Share premium 5,166,350 5,166,350 Retained earnings (395,263 ) (926,838 )Other reserves 14 520,070 575,532Proposed Divindeds 294,352 147,176

Total equity 5,659,097 5,035,808 Current liabilities Payables and accrued expenses 27 12,362,276 13,772,500 Borrowings 15 9,571,371 13,651,233 Dividends payable 59,477 103,369

Total current liabilities 21,993,124 27,527,102 TOTAL EQUITY AND LIABILITIES 27,652,221 32,562,910 ASSETS Non-current assets Prepaid operating lease rentals 18 108,787 115,478 Property, plant and equipment 19 440,514 422,827 Deferred tax asset 17 1,970,354 2,321,658 Intangible asset 20 9 6,401 Investment in subsidiaries 21 6,401,528 6,137,032 Loan due to related parties 29 167,154 362,143 Total non-current assets 9,088,346 9,365,539 Current assets Inventories 24 2,439,593 4,951,058 Receivables and prepayments 25 7,666,797 8,490,391 Loans and receivables from related parties 29 7,888,776 8,210,299 Tax recoverable 266,315 293,282 Cash and cash equivalents 26 302,394 1,252,341

Total current assets 18,563,875 23,197,371 TOTAL ASSETS 27,652,221 32,562,910 The notes on pages 23 to 65 are an integral part of these consolidated financial statements.The financial statements on pages 16 to 65 were approved for issue by the board of directors on 24 March 2015 and signed on its behalf by:

___________________ ___________________Director Director


Attributable to equity holders of the company

Share Share Other Retained Proposed Total capital premium reserves earnings dividends equity Notes Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Year ended 31 December 2013 Balance at 1 January 2013 73,588 5,166,350 346,219 859,568 - 6,445,725 Profit for the year - - - 558,419 - 558,419Other comprehensive income, net of tax: Currency translation differences 14 - - (80,410) - - (80,410) Total comprehensive income - - (80,410) 558,419 - 478,009 Transactions with owners: Movement in ESOP reserve 14 - - (257,440) - - (257,440)Proposed Dividends 12 - - - (147,176) 147,176 - Total transactions with owners - - (257,440) - - (257,440) Balance at 31 December 2013 73,588 5,166,350 8,369 1,270,811 147,176 6,666,296

Year ended 31 December 2014 Balance at 1 January 2014 73,588 5,166,350 8,369 1,270,811 147,176 6,666,296 Profit for the year - - - 1,091,284 - 1,091,284Other comprehensive income, net of tax: Currency translation differences 14 - - (224,444) - - (224,444) Total comprehensive income - - (224,444) 1,091,284 - 866,840 Transactions with owners: Movement in ESOP reserve 14 - - (55,462) - - (55,462)Dividends paid for 2013 - - - - (147,176) (147,176)Proposed dividends for 2014 - - - (294,352) 294,352 - Total transactions with owners - - (55,462) (294,352) 147,176 (202,638) Balance at 31 December 2014 73,588 5,166,350 (271,537) 2,067,743 294,352 7,330,496



Consolidated Statement of Changes in Equity


Company Statement of Changes in EquityFor the year ended 31 December 2014

Attributable to equity holders of the company

Share Share Other Retained Proposed Total capital premium reserves earnings dividends equity Notes Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Year ended 31 December 2013

Balance at 1 January 2013 73,588 5,166,350 832,972 (815,677) - 5,257,233 Profit and total comprehensive income for the year - - - 36,015 - 36,015 Total comprehensive income - - - 36,015 - 36,015 Transactions with owners: Movement in ESOP reserve 14 - - (257,440) - - (257,440)Proposed Dividends 12 - - - (147,176) 147,176 - Total transactions with owners - - (257,440) (147,176) 147,176 (257,440) Balance at 31 December 2013 73,588 5,166,350 575,532 (926,838) 147,176 5,035,808

Year ended 31 December 2014

Balance at 1 January 2014 73,588 5,166,350 575,532 (926,838) 147,176 5,035,808 Profit and total comprehensive income for the year - - - 825,927 - 825,927 Total comprehensive income - - - 825,927 - 825,927 Transactions with owners: Movement in ESOP reserve 14 - - (55,462) - - (55,462)Dividend for 2013 - - - - (147,176) (147,176)Proposed 2014 - - - (294,352) 294,352 - Total transactions with owners - - (55,462) (294,352) 147,176 (202,638) Balance at 31 December 2014 73,588 5,166,350 520,070 (395,263) 294,352 5,659,097




Consolidated Statement of Cash Flows

Notes 2014 2013 Shs’000 Shs’000

Cash flows from operating activities Cash generated from operations 28 6,977,504 3,122,960Interest received 9 69,244 43,932Interest paid 9 (1,339,503) (1,671,759)Income tax paid (252,285) (197,793) Net cash generated from operating activities 5,454,960 1,297,340

Cash flows from investing activities Prepayment for operating lease rentals 18 (817,307) (561,458)Purchases of property, plant and equipment 19 (428,798) (789,715)Purchases of intangible asset 20 (609) -Proceeds from disposal of property, plant and equipment 260,098 880,898Proceeeds from disposal of prepaid operating lease - 313 Net cash used in investing activities (986,616) (470,275)

Cash flows from financing activities Net repayments of borrowings (4,878,598) (1,237,945)Dividends paid (191,068) (8,667) Net cash used in financing activities (5,069,666) (1,246,612) Net decrease in cash and cash equivalents (601,322) (419,547) Cash and cash equivalents and bank overdrafts atbeginning of the year 26 1,775,058 2,191,005Exchange gains on cash and cash equivalents (122,272) 3,600 Cash and cash equivalents at end of the year 26 1,051,464 1,775,058


294,352

Notes to the Consolidated Financial StatementsFor the year ended 31 December 2014


1 General information KenolKobil Limited is a public limited company, which is listed in the Nairobi Securities Exchange, is incorporated in Kenya under the Companies Act as a public limited liability company, and is domiciled in Kenya. The address of its registered office is: ICEA Building10th FloorP.O. Box 44202 - 00100NAIROBI, KENYA The Company’s shares are listed on the Nairobi Securities Exchange.

For Kenyan Companies Act reporting purposes, the balance sheet is represented by the statement of financial position and the profit and loss account by the income statement, in these financial statements.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) Basis of preparation The consolidated financial statements of KenolKobil Limited have been prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets at fair value through profit or loss.

The financial statements are presented in Kenyan Shillings (Shs), rounded to the nearest thousand.

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 group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. Changes in accounting policy and disclosures (i) New and amended standards adopted by the group

The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2014 and have a material impact on the Group:Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Group financial statements.


Notes to the Consolidated Financial Statements


Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13. Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under IAS 39 novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument meets specified criteria. The Group has applied the amendment and there has been no significant impact on the Group financial statements as a result. IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 ‘Provisions’. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material.Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 are not material to the Group.

(ii) New standards and interpretations not yet 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 statement. None of these is expected to have a significant effect on the financial statements of the Group, except the following set out below:

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. 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 assessing the impact of IFRS 15.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

2 Summary of significant accounting policies (Continued)

(a) Basis of preparation (Continued)

(i) New and amended standards adopted by the group(Continued)



(b) Consolidation (i) Subsidiaries Subsidiaries are all entities (including structured and special purpose 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 Group applies the acquisition method of accounting 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 recognised 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 re-measured, and its subsequent settlement is accounted for within equity. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.

(ii) Changes in ownership interests in subsidiaries without change of 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 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 interest are also recorded in equity.

(iii) Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest 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 reclassified to profit or loss





(iv) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investments are initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit of loss of the investee after the date of acquisition. The Group’s investments in associates include goodwill identified on acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss as appropriate.

The Group’s share of post-acquisition profit or loss is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income, with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of associates in the income statement. Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group

Dilution gains and losses arising from investments in associates are recognised in the income statement.

(v) Separate financial statements In the separate financial statements, investments in subsidiaries and associates are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment

Dividend income is recognised when the right to receive payment is established (c) Foreign currency translation (i) 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 financial statements are presented in ‘Kenyan Shillings (Kshs), which is the Group’s presentation currency.


(b) Consolidation (Continued)



(ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation 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, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘finance income or costs’. All other foreign exchange gains and losses are presented in profit or loss within ‘other income’ or ‘other expenses’.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income

Translation differences on non-monetary financial assets, such as equities classified as available-for-sale financial assets, are included in other comprehensive income and cumulated in ‘available-for-sale financial assets reserve’. (iii) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of

that balance sheet;(ii) 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 dates of the transactions); and

(iii) all resulting exchange differences are recognised in other comprehensive income and accumulated in ‘transaction reserve’ in equity.

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

(d) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Management Board.

(e) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns, value added taxes and after eliminating sales within the group entities. 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 group’s activities, as described


(c) Foreign currency translation (Continued)




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.

(i) Sale of goods - wholesale

Sales of goods are recognised in the period in which the entity has delivered products to the ‘wholesaler’, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss transferred have been to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed or the entity has objective evidence that all criteria for acceptance have been satisfied.

(ii) Sale of goods – retail

The Group operates a chain of retail outlets for selling fuel and lubricant products. Sales of goods are recognised when the entity sells a product to the customer for cash or by credit card. (iii) Sale of services

Revenue is recognised in the period in which the services are rendered, by reference to the stage of completion of the specific transaction and assessed on the basis of the actual service provided as a proportion of the total services to be provided

(f) Property, plant and equipment

All categories of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Freehold land is not depreciated. Depreciation on other assets is calculated using the straight line method to write down their cost to their residual values over their estimated useful lives, as follows: - Buildings on freehold land 40 years - Buildings on leasehold land shorter of 40 years or the period of the lease - Motor vehicles 5 years - Plant and machinery 15 years - Furniture and equipment 10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its estimated recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are included in the income statement.


(e) Revenue recognition (Continued)



(g) Intangible assets

(i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

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 Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. (ii) Computer software Acquired computer software licences 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 (three to five years).

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 Group, are recognised as intangible assets, when the following criteria have been met:• It is technically feasible to complete the software product for it to 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.

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. Computer software development costs recognised as assets are amortised over their estimated useful lives, not exceeding five years.

(h) Impairment of non-financial assets

Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use- are not subject to amortisation and are tested annually for impairment. 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 impairment are reviewed for possible reversal of the impairment at each reporting date. (i) Financial assets (i) Classification

The Group and Company classify 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. The directors determine the classification of the financial assets at initial recognition. Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading. Assets in this category are classified as current assets if expected to be realised within 12 months; otherwise, they are classified as non-current

Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or the directors intend to dispose of the investment within 12 months of the end of the reporting period. (ii) Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade date, which is the date on which the entity commits to purchase or sell the asset. Investments are initially recognised at fair value, plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets, carried at fair value through profit or loss, are initially recognised at fair value, and transaction costs are expensed.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the entity has transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. (iii) 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 recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously


(h) Impairment of non-financial assets (Continued)



(iv) Impairment of financial assets Assets carried at amortised cost

The Group and Company assess at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets 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 or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Assets classified as available-for-sale The Group and Company assess at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets 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 its cost is also evidence that the assets are impaired. If any 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 recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss. Gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in profit or loss in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss as part of other income when the entity’s right to receive payments is established. (j) Derivative financial instruments Derivatives, which comprise solely forward foreign exchange contracts, are initially recognised at fair value on the date the derivative contract is entered into and are subsequently re-measured at their fair value. The derivatives do not qualify for hedge accounting. Changes in the fair value of derivatives are recognised immediately in profit or loss. These derivatives are trading derivatives and are classified as a current asset or liability. (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost of crude oil and refined products is determined by weighted average costing method (taking into account the cost of purchase plus incidental costs incurred to bring the inventory to present location). Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.


(i) Financial assets (Continued)




(l) Trade receivables Trade receivables are amounts due from customers for merchandise sold 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 provision for impairment (note 2 (i)). (m) Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

(n) Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable 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. (o) Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognized 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 at the balance sheet date in the countries where the company and its subsidiaries operate and generate 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. Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date 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 liabilities are provided on taxable temporary differences arising from investments in subsidiaries,




associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the group is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the group the ability to control the reveral of the temporary difference not recognised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference 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. The current income tax rate applicable in the period was 30% (2013: 30%). (p) 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 income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(q) 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.


(o) Current and deferred income tax (Continued)




(r) 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. 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.

(s) Share Capital Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares is classified as ‘share premium’ in equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(t) Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the shareholders. Proposed dividends are shown as a separate component of equity until declared. (u) Share based payment The Group has an Employee Share Ownership Plan (ESOP) under which, subject to the vesting conditions, eligible employees are entitled to acquire units in a separately administered Trust, each unit in the trust representing one share in KenolKobil Limited. The Group also operates a scheme under which senior management and the executive directors are entitled to acquire a predetermined number of shares at a predetermined price, subject to fulfilment of the vesting conditions.

The direct cost to the Group of fulfilling its obligations under the above schemes is charged to the income statement when incurred.

The cost of issued share options is recognised in the income statement over the vesting period, measured at the fair value of the option. On allocation of shares to the trust, appropriate adjustments are made to increase share capital and the corresponding adjustments are made to the trust account. On vesting, the trust allocates the shares to the eligible individuals with adjustments made to the ESOP reserve. When the options are exercised, the entity issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.




(v) Employee benefits (i) Pension obligations

The Group and Company have defined contribution plan for its employees. The Group and Company and all its employees also contribute to the appropriate National Social Security Fund, which are defined contribution schemes.

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group 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.

For defined contribution plans, the Group and Company pay contributions to publicly or privately administered plans on a mandatory, contractual or voluntary basis. The entity has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

(ii) Termination benefits

Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits at the earlier of the following dates: (a) when the group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value. (w) Accounting for 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 are charged to profit or loss on a straight-line basis over the period of the lease.

The Group and Company lease certain property, plant and equipment. Leases of property, plant and equipment where the Group and Company have substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised 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.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in non-current liabilities. The interest element of the finance cost is charged to profit or loss 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 and equipment acquired under finance leases are depreciated over the shorter of the assets useful life and the lease term. (x) Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.





3 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including experience of future events that are believed to be reasonable under the circumstances. (i) 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. (a) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2(g). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. The carrying amount of the goodwill and the key assumptions made are set out in Note 20. (b) Other receivables Critical estimate has been made by management regarding other receivable balances under Note 25. The Directors believe that the asset value is recoverable therefore no impairment charge or provision has been made in the consolidated financial statements. (c) Income taxes

The group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the group provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. (d) Provisions for obligations and use of estimates

Provisions for obligations and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. (e) Fair value of derivatives and other financial instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

Most of the group’s borrowings are current and are not subject to significant fair value estimation.

(ii) Critical judgements in applying the entity’s accounting policies In the process of applying the Group’s accounting policies, management has also made judgements in determining whether assets are impaired and provisions and contingent liabilities.



4 Financial risk management

Financial risk factors The group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance.

Risk management is carried out by the treasury department under policies approved by the board of directors. Treasury identifies, evaluates and hedges financial risks. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the group use forward contracts. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.

At 31 December 2014, if the US dollar had weakened/strengthened by 5% against the respective functional currencies of Group companies with all other variables held constant, consolidated post tax profit for the year would have been Shs 344,725,000 (2013: Shs 368,720,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated trade receivables, bank balances and foreign exchange losses/gains on translation of US dollar-denominated borrowings.

Profit is less sensitive to movement in Shs/US dollar exchange rates in 2014 than 2013 because of the decreased amount of US dollar-denominated borrowings and hedges. (ii) Price risk

The group is not exposed to commodity price risk.

(iii) Cash flow and fair value interest rate risk

The group’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the group to fair value interest rate risk. The Group regularly monitors financing options available to ensure optimum interest rates are




Group Company

obtained. During 2014 and 2013, the group’s borrowings at variable rate were denominated in the Kshs and the US Dollar.

At 31 December 2014, an increase/decrease of 0.5% would have resulted in an decrease/increase in consolidated post tax profit of Shs 4,723,382 (2013: Shs 5,851,156 ), mainly as a result of higher/lower interest charges on variable rate borrowings (b) Credit risk

Credit risk is managed on group basis, except for credit risk relating to accounts receivable balances. Each local entity is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, and deposits with banks, as well as credit exposures to wholesale and retail customers, including outstanding receivables. The group assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using the company issued K-Card.

No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties.

The amount that best represents the Group’s and Company’s maximum exposure to credit risk at 31 December 2014 and 2013 is made up as follows:

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Cash equivalents 1,051,464 1,775,058 302,394 1,252,341Trade receivables 6,635,192 5,802,432 4,876,221 4,342,526Loans to related parties - - 8,055,930 8,572,442Other receivables 2,435,190 4,191,679 2,155,744 3,536,179 10,121,846 11,769,169 15,390,289 17,703,488 Some collateral is held for some of the above assets. All receivables that are neither past due nor impaired are within their approved credit limits, and no receivables have had their terms renegotiated. None of the above assets are either past due or impaired except for the following amounts in trade receivables (which are due within 30 days of the end of the month in which they are invoiced).

4 Financial risk management (Continued)

(a) Market risk (Continued)(iii) Cash flow and fair value interest rate risk (Continued)



2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000

Past due but not impaired: - by up to 30 days 2,541,577 1,223,300 1,552,478 736,069 - by 31 to 90 days 852,512 853,059 655,442 657,126 Total past due but not impaired 3,394,089 2,076,359 2,207,920 1,393,195 Impaired and fully provided for (623,329) (704,751) (359,041) (397,227)

Some collateral is held for some of the above assets. All receivables that are neither past due nor impaired are within their approved credit limits, and no receivables have had their terms renegotiated. None of the above assets are either past due or impaired except for the following amounts in trade receivables (which are due within 30 days of the end of the month in which they are invoiced).

All receivables past due by more than 90 days are considered to be impaired, and are carried at their estimated recoverable value.

(c) Liquidity risk

Cash flow forecasting is performed in the operating entities of the group in and aggregated by group finance. Group finance monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (note 15) at all times so that the group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the group’s debt financing plans and covenant compliance. Treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. The table below analyses the Group’s and the Company’s financial liabilities that will be settled on a net basis into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.

Group Company


(b) Credit risk (Continued)




(a) Group Less than Between Over 2 Total 1 year 1 and 2 years years Shs’000 Shs’000 Shs’000 Shs’000

At 31 December 2014: - borrowings (excluding finance leases) 10,405,194 50,763 - 10,455,957 - finance leases 4,646 37,625 - 42,271 - trade and other payables 5,633,064 - - 5,633,064 - current income tax 196,541 - - 196,541 - dividend payable 59,477 - - 59,477 16,298,922 88,388 - 16,387,310At 31 December 2013: - borrowings (excluding finance leases) 14,850,291 484,657 - 15,334,948 - finance leases 3,983 17,617 20,278 41,878 - trade and other payables 5,591,360 - - 5,591,360 - current income tax 181,761 - - 181,761 - dividend payable 103,369 - - 103,369 20,730,764 502,274 20,278 21,253,316

(b) Company At 31 December 2014 - borrowings (excluding finance leases) 9,571,371 - - 9,571,371 - trade and other payables 12,362,276 - - 12,362,276 - dividends payable 59,477 - - 59,477

21,993,124 - - 13,569,679

At 31 December 2013: - borrowings (excluding finance leases) 13,651,233 - - 13,651,233 - trade and other payables 13,772,500 - - 13,772,500 - dividends payable 103,369 - - 103,369 27,527,102 - - 27,527,102

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders 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, issue new capital or sell assets to reduce debt.

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.


(c) Liquidity risk (Continued)



Group Company


(c) Liquidity risk (Continued)

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. The gearing level is managed on an ongoing basis to ensure it is within acceptable levels as determined by the board. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity plus net debt.

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Total borrowings 10,498,228 15,376,825 9,571,371 13,651,233Less: cash and cash equivalents (1,051,464) (1,775,058) (302,394) (1,252,341) Net debt 9,446,764 13,601,767 9,268,977 12,398,892 Total equity 7,330,495 6,666,624 5,659,098 5,035,808 Total capital 16,777,259 20,268,391 14,928,075 17,434,700 Gearing ratio 56% 67% 62% 71%




5 Segment information The Group Management Team is the group’s chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Group Management Team for the purposes of allocating resources, assessing performance and making strategic decisions. The Group Management Team considers the business from a line of business perspective. The reportable operating segments derive their revenue primarily from the importation of, trading in,, storage and distribution of refined and other petroleum products. The Group Management Team assesses the performance of the operating segments based on a measure of adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event.

The segment information provided to the Group Management Team for the reportable segments for the year ended 31 December 2013 is as follows:

Inland Export, Niche Market Trading, Business Total Aviation Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Total segment revenue 65,498,593 40,270,461 3,918,399 109,687,453 Gross profit 3,025,998 645,519 593,651 4,265,168 Other income 1,171,178 - 231,753 1,402,931 Administrative expenses (3,145,942) (106,261) (117,030) (3,369,233)Finance (cost)/income (1,082,345) (590,322) (60,508) (1,733,175)Income tax expense (10,220) 4,355 367 (5,498 Share of (loss)profit from associates (1,774) (1,774) Profit / (loss) after tax (41,331) (46,709 ) 646,459 558,419



The segment information provided to the Group Management Team for the reportable segments for the year ended 31 December 2014 is as follows:

Inland Export, Niche Market Trading, Business Total Aviation Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Total segment revenue 61,296,006 25,873,469 4,146,227 91,315,702 Gross profit 3,461,946 901,875 687,886 5,051,707Other income 711,757 6,743 244,765 963,265Administrative expenses (2,518,894) (192,969) (142,476) (2,854,339)Finance (cost)/income (1,016,595) (519,718) (101,559) (1,637,872)Income tax expense (200,297) (53,380) (175,859) (429,536)Share of (loss)profit from associates (1,929) (4) (8) (1,941) Profit after tax 435,988 142,547 512,749 1,091,284

The Group’s assets structures, comprising of the depot terminals, asset set ups at customer locations and the service stations network combined, supports the revenue generated from the various business segments.

The business segments in the Group are essentially integrated with synergies between them, supported by the asset base. There is thus no suitable basis of allocating the assets and related liabilities to specific business segments that will be of significant added value.

There is no single customer that accounts for more than 10% of revenue and geographical information is unavailable as the cost to develop it would be excessive.

6 Other income 2014 2013 Shs’000 Shs’000 Gain on disposal of property, plant and equipment 216,384 830,093Rental income 357,652 337,138Facility fees 137,186 131,771 Non-fuel and other income 252,043 103,929 963,265 1,402,931

5 Segment information (Continued)

Group




7 Expenses by nature The following items have been charged/ (credited) in arriving at profit before income tax: 2014 2013 Group Shs’000 Shs’000 Employee benefits expense (Note 8) 571,162 892,497Amortization of operating lease rentals (Note 18) 670,093 578,342Depreciation of property, plant and equipment (Note 19) 317,189 264,175Receivables – provision for impairment losses (Note 25) (75,595) 162,905Provisions for impaired inventory and receivables 124,571 510,000Repairs and maintenance of property, plant and equipment 216,689 347,059Auditors’ remuneration - Company 13,670 13,670- Group (including Company) 23,967 24,652

8 Employee benefits expense 2014 2013 Shs’000 Shs’000

The following items are included within employee benefits expense: Salaries and wages 567,696 672,575Retirement benefits costs: - Defined contribution scheme 27,614 38,033- National Social Security Funds 12,414 15,141Employee Share Ownership Plan (ESOP) costs (46,409) 153,602Other staff costs 9,847 13,146 571,162 892,497

9 Finance income and costs

2014 2013 Shs’000 Shs’000

Finance costs: Interest expense (1,339,503) (1,671,759)Net foreign exchange losses on financing activities (367,613) (105,347) (1,707,116) (1,777,106) Finance income: Interest income 69,244 43,932

Net finance costs (1,637,872) (1,733,174)



10 Income tax expense

2014 2013 Shs’000 Shs’000

Current income tax 10,803 278,180Movement in deferred income tax (Note 17) 418,733 (272,681) Income tax expense 429,536 5,499 The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows: 2014 2013 Shs’000 Shs’000 Profit before income tax 1,520,820 563,918Tax calculated at a tax rate of 30% (2013: 30%) 456,246 169,175Effect of different tax rates in Kobil Zambia and Kobil Petroleum Limited (Kenya) (35%) and (37.5%) respectively 7,267 44,187Prior year under provision of current income tax - 11,179Prior year (over) / under provision of deferred income tax 28,215 (16,327)Expenses not deductible for tax purposes 57,009 83,241Income not subject to tax (119,201) (285,956) Income tax expense 429,536 5,499

11 Earnings per share 2014 2013 Shs’000 Shs’000 Profit attributable to equity holders of the Company (Shs ‘000) 1,091,284 558,419 Number of ordinary shares in issue 1,471,761,200 1,471,761,200 Basic earnings / (loss) per share (Shs) 0.74 0.38 For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares.




11 Earnings per share (continued)

2014 2013 Shs’000 Shs’000 Profit attributable to equity holders of the Company (Shs‘000) 1,091,284 558,419 Number of ordinary shares in issue 1,471,761,200 1,471,761,200 Adjustment for Group employee share ownership plan 113,575 988,123 Weighted average number of ordinary shares for diluted earnings per share 1,471,874,775 1,472,749,323 Diluted earnings per share (Shs) 0.74 0.38 This computation does not take into account gains/losses recognised directly in equity.

12 Dividends

During the year, no interim dividend was paid (2013: Nil). The directors recommend the approval of a final dividend of Shs 294,352,240 (2013: 147,176,120)

Proposed dividends are accounted for as a separate component of equity until they have been ratified at an annual general meeting.

Dividend payments are subject to withholding tax at the rate of 0%, 5% or 10% depending on the residence of the individual shareholder.

Dividends 2014 2013 Shs’000 Shs’000 At start of year 103,369 112,036Declared dividend 147,176 -Paid dividend (191,068) (8,667) At end of year 59,477 103,369 13 Share capital

Issued Share Capital Number of Ordinary Share ordinary share Premium

shares capital Shs’000 Shs’000

Balance at 1 January 2013, 2014 1,471,761,200 73,588 5,166,350 Balance at 31 December 2013 and 2014 1,471,761,200 73,588 5,166,350 The total authorised number of ordinary shares is 2,000,000,000 with a par value of Shs 0.05 per share. All issued shares are fully paid.



14 Other reserves

(a) Group ESOP Fair value Translation reserve reserve reserve Total

Year ended 31 December 2013 At start of year 749,803 85,445 (489,029) (346,219) Currency translation differences - - (80,410) (80,410)Movement in the ESOP reserve (257,440) - - (257,440) Net loss recognised (257,440) - (80,410) (337,850) At end of year 492,363 85,445 (569,439) 8,369 Year ended 31 December 2014 At start of year 492,363 85,445 (569,439) 8,369 Currency translation differences - - (224,444) (224,444)Movement in the ESOP reserve (55,462) - - (55,462) Net loss recognised (55,462) - (224,444) (279,906) At end of year 436,901 85,445 (793,883) (271,537)




14 Other reserves (Continued)

(b) Company ESOP Fair value reserve reserve Total

Year ended 31 December 2013 At start of year 747,527 85,445 832,972 Movement in the ESOP reserve (257,440) - (257,440) Net loss recognised (257,440) - (257,440) At end of year 490,087 85,445 575,532 Year ended 31 December 2014 At start of year 490,087 85,445 575,532 Movement in the ESOP reserve (55,462) - (55,462) Net loss recognised (55,462) - (55,462) At end of year 434,625 85,445 520,070

Fair value reserve arose from the fair value adjustment of Kobil Petroleum Limited assets during acquisition by KenolKobil Limited in 2008. It is net of deferred income tax and is non distributable.



Group Company

15 Borrowings

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000

Non-current Bank borrowings 50,763 484,657 - -Finance leases 37,625 37,895 - -

Total Non-current 88,388 522,552 - - Current Bank borrowings - borrowings in KShs 4,402,882 4,056,480 4,402,882 4,056,480- borrowings in US$ 4,634,879 7,770,942 4,634,879 7,770,942- borrowings in TShs 733,434 741,371 - -- borrowings in Ushs 74,044 193,696 - -- borrowings in Ebirr 26,345 49,454 - -- borrowings in Zkw - 204,367 - -- borrowings in Rwf - 10,170 - -Commercial paper 533,610 1,823,811 533,610 1,823,811Finance leases 4,646 3,983 - - Total current 10,409,840 14,854,274 9,571,371 13,651,233 Total borrowings 10,498,228 15,376,826 9,571,371 13,651,233 The bank borrowings are secured by certain land and buildings of the Group with a value in excess of Shs 682 million (2013: Shs 645 million). Finance leases are effectively secured as the rights to the leased asset revert to the lessor in the event of default. The carrying amounts of short-term borrowings and lease obligations approximate to their fair value. Fair values are based on discounted cash flows using a discount rate based upon the borrowing rate that directors expect would be available to the Group at the statement of financial position date.

It is impracticable to assign fair values to the Group’s long term borrowings due to inability to forecast interest rate and foreign exchange rate changes.

Letter of credit (LC) facilities available to the Group are US$ 237 Million (2013: US$ 143 Million)Unutilised LC facilities at year end amount to US$ 218 Million (2013: US$ 79.8 Million)




Group Company

The exposure of the group’s borrowings to interest rate changes and the contractual re-pricing dates at the end of the reporting period are as follows:

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Between 1 and 2 years 50,763 484,657 - -

Finance lease liabilities – minimum lease payments Group

2014 2013 Shs’000 Shs’000 Not later than 1 year 4,646 3,983Later than 1 year and not later than 5 years 13,939 17,617Later than 5 years 23,686 20,278 42,271 41,878 16 Employees’ Share Ownership Plan (ESOP) As at 31 December 2014, the Group had the following share-based compensation plans: (i) Employee Share Ownership Scheme All employees are entitled to participate under this scheme. The grant is made based on merit which is at the sole discretion of the Board of Directors. For an employee to receive a grant, he / she must among other conditions:• be above 19 years of age• have been in continuous service for at least 12 month, for a full time basis; The vesting period under this scheme is 3 years from the date of the grant. (ii) Executive Option Scheme This scheme is open to all permanent employees holding a managerial position in the Company or any subsidiary who the Board may from time to time decide is eligible to participate. Entitlement is based on merit which is at the sole discretion of the Board of Directors. The vesting period is 3 years from the date of the grant after which the options must be exercised within a period of 5 years. The number of units in respect of which options may be granted (including units issued under the employee share ownership scheme) on any day shall not exceed 10% of shares in issue immediately prior to that day..

15 Borrowings (Continued)



16 Employees’ Share Ownership Plan (ESOP) (continued)

The company has an options agreement with the former CEO under which he is entitled to receive options for units amounting to 4% of the company’s shares in respect of the financial years 2011 to 2014 that was issued on 1 May 2012. The former CEO options are priced at the ruling subscription price at the end of 2009.

The same terms are applicable as the other options issued under the executive option scheme.

A summary of the status of all schemes as at 31 December 2014 and 31 December 2013 and changes during the years ended on these dates is presented below:

Employee Share Ownership Scheme 2014 2013 Number Number of units of units Outstanding at 1 January 988,123 2,076,348Granted - -Exercised / vested (769,763) (832,880)Forfeited (104,785) (255,345) Outstanding at 31 December 113,575 988,123 Executive Option Scheme 2014 2014 2013 2013 Number weighted Number weighted of options average of options average exercise exercise price price Shs Shs At 1 January 133,450,378 6.73 134,196,530 6.74Granted - - - -Exercised - - - -Forfeited (1,315,000) 11.58 (746,152) 8.58 At 31 December 132,135,378 6.68 133,450,378 6.73 Exercisable at 31 December 132,135,378 133,450,378

The options outstanding at 31 December 2014 had a weighted average exercise price of Shs 6.68 (2013: Shs 6.73) and a weighted average remaining contractual life of 8 years (2013: 9 years).

Under the employee schemes, market price of the shares at the year end has been taken to be the fair value, while under the executive scheme, the probability of the each employee exercising the option and the price of shares as at 31 December has been used to estimate the fair value. The financial results of the ESOP trust have not been consolidated on the basis that they are not material to the Group.




Group Company

17 Deferred income tax

Deferred income tax is calculated using the enacted income tax range rates of between 30% and 37.5% (2013 30% and 37.5%). The movement on the deferred income tax account is as follows:

2014 2013 2014 2013 Shs’00 Shs’000 Shs’000 Shs’000 At start of year

Deferred tax asset (2,595,040) (2,358,359) (2,321,658) (2,090,428)

Deferred tax liability 194,073 230,073 - -

(2,400,967) (2,128,286) (2,321,658) (2,090,428)

Charge to profit and loss account (Note 10) 418,733 (272,681) 351,304 (231,230)

At end of year (1,982,234) (2,400,967) (1,970,354) (2,321,658)

At end of year Deferred tax asset (2,179,594) (2,595,040) (1,970,354) (2,321,658) Deferred tax liability 197,360 194,073 - -

(1,982,234) (2,400,967) (1,970,354) (2,321,658)

Consolidated deferred income tax assets and liabilities, deferred income tax charge/(credit) in the profit and loss account, and deferred income tax charge/(credit) in equity are attributable to the following items:

Group2014 At 1 Charged/ Credited At 31 January (credited) to equity December 2014 to income 2014 statement Shs’000 Shs’000 Shs’000 Shs’000

Deferred income tax liabilitiesProperty, plant and equipment: - on historical cost basis 109,321 (45,582) - 63,739 Unrealised exchange differences and hedge losses (124,762) 77,314 - (47,448) (15,441) 31,732 - 16,291 Deferred income tax assets Provisions (284,282) 43,566 - (240,716) Tax losses (2,101,244) 343,435 - (1,757,809) (2,385,526) 387,001 - (1,998,525) Net deferred income tax liability/(asset) (2,400,967) 418,733 - (1,982,234)



17 Deferred income tax (continued)Group (continued)

2013 At 1 Charged/ Credited At 31 January (credited) to equity December 2013 to income 2013 statement Shs’000 Shs’000 Shs’000 Shs’000

Deferred income tax Property, plant and equipment: - on historical cost basis 129,843 (20,522) - 109,321Unrealised exchange differences and hedge losses (224,845) 100,083 - (124,762) (95,002) 79,561 - (15,441) Deferred income tax assets Provisions (450,085) 165,805 - (284,280)Tax losses (1,583,197) (518,047) - (2,101,244) (2,033,282) (352,242) - (2,473,224)

Net deferred income tax asset (2,128,284) (272,681) - (2,400,965)

Company

2014 At 1 Charged/ Credited At 31 January (credited) to equity December 2014 to income 2014 statement Shs’000 Shs’000 Shs’000 Shs’000

Deferred income tax liabilities Property, plant and equipment: - on historical cost basis (10,914) (5,070) - (15,984) Provisions (274,574) 82,516 - (192,058) Unrealised exchange differences and hedge losses (130,719) - - (130,719) Tax losses (1,905,451) 273,858 - (1,631,593) Net deferred tax liability/(asset) (2,321,658) 351,304 - 1,970,354




17 Deferred income tax (continued)

Company (continued)

2013 At 1 Charged/ Credited At 31 January (credited) to equity December 2013 to income 2013 statement Shs’000 Shs’000 Shs’000 Shs’000 Deferred income tax liabilities Property, plant and equipment: - on historical cost basis (17,008) 6,094 - (10,914)Provisions (257,013) (17,561) - (274,574)Unrealised exchange differences and hedge losses (199,395) 68,676 - (130,719)Tax losses (1,617,012) (288,439) - (1,905,451) Net deferred tax asset (2,090,428) (231,230) - (2,321,658)

18 Prepaid operating lease rentals (a) Prepaid operating lease rentals

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 At start of year 600,648 608,859 115,478 120,145Additions 817,307 561,771 228,482 202,496Disposals (7,154) (313) (313) Amortisation for the year (670,093) (578,342) (235,173) (206,850) Currency translation differences (5,954) (8,673) - - At end of year 734,754 600,648 108,787 115,478

(b) Operating lease commitments

Not later than 1 year 413,311 223,859 145,693 131,115Later than 1 year and not later than 5 years 1,361,607 627,925 336,820 303,137Later than 5 years 3,396,722 859,105 650,344 585,310 5,171,640 1,710,889 1,132,857 1,019,562

Group Company



19 Property, plant and equipment (a) Group

Freehold Buildings Motor Plant& Furniture land vehicles equipment & office equipment Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 At 1 January 2013 Cost or valuation 370,387 3,517,861 92,491 1,733,791 179,889 5,894,419Accumulated depreciation - (792,644) (61,297) (633,121) (122,948) (1,610,010) Net book amount 370,387 2,725,217 31,194 1,100,670 56,941 4,284,409

Year ended 31 December 2013 Opening net book amount 370,387 2,725,217 31,194 1,100,670 56,941 4,284,409Additions 10 614,488 11,183 149,948 14,086 789,715Transfers (58,949) 78,380 2,782 (9,733) (12,480) -Disposals (6,075) (39,881) (4,099) (719) (31) (50,805)Currency translation differences (2,857) (27,357) (4,497) (53,585) (2,849) (91,145) Charge for the year - (169,126) (9,987) (69,781) (15,281) (264,175) Closing net book amount 302,516 3,181,721 26,576 1,116,800 40,386 4,667,999 At 31 December 2013 Cost or valuation 302,516 4,101,325 87,360 1,877,822 179,716 6,548,739Accumulated depreciation - (919,604) (60,784) (761,022) (139,330) (1,880,740) Net book amount 302,516 3,181,721 26,576 1,116,800 40,386 4,667,999 Year ended 31 December 2014 Opening net book amount 302,516 3,181,721 26,576 1,116,800 40,386 4,667,999Additions 70,412 212,647 6,719 133,171 5,850 428,799Transfers - (310,966) - 310,683 283 -Disposals - (19,664) (1,825) (14,835) (239) (36,563)Currency translation differences 706 (58,850) (1,029) (35,811) 415 (94,568)Charge for the year (1,096) (136,158) (8,344) (152,997) (18,594) (317,189) Closing net book amount 372,538 2,868,730 22,097 1,357,011 28,101 4,648,477

At 31 December 2014 Cost or valuation 372,538 3,875,968 75,770 2,215,146 189,921 6,729,343Accumulated depreciation - (1,007,238) (53,673) (858,135) (161,820) (2,080,866) Net book amount 372,538 2,868,730 22,097 1,357,011 28,101 4,648,477




19 Property, plant and equipment (continued) (b) Company

Freehold Buildings Motor Plant& Furniture land vehicles equipment & office equipment Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 At 1 January 2013 Cost 6,159 484,854 21,632 116,450 53,694 682,789Accumulated depreciation - (164,709) (16,366) (44,479) (23,041) (248,595) Net book amount 6,159 320,145 5,266 71,971 30,653 434,194 Year ended 31 December 2013 Opening net book amount 6,159 320,145 5,266 71,971 30,653 434,194Additions - 26,444 9,957 53,023 1,303 90,727Reclassification - (75,399) - 11,838 - (63,561)Disposals (6,000) - - - - (6,000)Charge for the year - (5,270) (604) (8,515) (18,144) (32,533) Closing net book amount 159 265,920 14,619 128,317 13,812 422,827 At 31 December 2013 Cost or valuation 159 435,899 31,589 181,311 54,997 703,955Accumulated depreciation - (169,979) (16,970) (52,994) (41,185) (281,128) Net book amount 159 265,920 14,619 128,317 13,812 422,827 Year ended 31 December 2014 Opening net book amount 159 265,920 14,619 128,317 13,812 422,827Additions - (5,183) 285 61,202 3,196 59,500Reclassification - (3,045) - (552) 552 (3,045)Disposals - (3) (1,700) (1,266) (114) (3,920)Transfers - (7,779) - 8,049 (270) -Charge for the year - 11,930 4,017 10,624 9,113 34,848 Closing net book amount 159 237,979 9,187 185,126 8,603 440,514 At 31 December 2014 Cost or valuation 159 419,052 22,864 246,266 56,989 745,330Accumulated depreciation - (181,073) (13,677) (61,140) (48,926) (304,816) Net book amount 159 237,979 9,187 185,126 8,603 440,514



20 Intangible assets

(a) Group Goodwill Computer Total software Shs’000 Shs’000 Shs’000 Year ended 31 December 2013 Opening net book amount 847,942 23,671 871,613 Amortisation - (12,528 ) (12,528 )Currency translation differences - (363 ) (363 ) Closing net book amount 847,942 10,780 858,722 At 31 December 2013 Cost 847,942 115,805 963,747 Accumulated amortisation and impairment - (105,025 ) (105,025 ) Net book amount 847,942 10,780 858,722 Year ended 31 December 2014 Opening net book amount 847,942 10,780 858,722 Amortisation - (9,016 ) (9,016 )Currency translation differences - (229 ) (229 )Additions - 609 609 Closing net book amount 847,942 2,144 850,086 At 31 December 2014 Cost 847,942 116,184 964,126 Accumulated amortisation and impairment - (114,040 ) (114,040 ) Net book amount 847,942 2,144 850,086

Impairment tests for goodwill Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to country of operationA CGU summary of the goodwill allocation is presented below:

2014 2013 Shs’000 Shs’000 Cost - Kobil Uganda Limited 26,098 26,098Cost - Kobil Petroleum Limited 808,936 808,936Cost - Kobil Burundi SA 12,908 12,908 847,942 847,942

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial projections approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates stated below. The growth rates do not exceed the long-term average growth rates for the respective businesses in which the CGUs operate.




Kenya Uganda Burundi EBITDA margin1 4% 5% 5% Growth rate2 4% 3% 3% Discount rate3 15% 15% 15% 1 Budgeted EBITDA margin2 Weighted average growth rate used to extrapolate cash flows beyond the projected period.3 Pre-tax discount rate applied to the cash flow projections. These assumptions have been used for the analysis of each CGU within the business segment. Management determined budgeted EBITDA margin based on past performance and its expectations for the market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.

Based on the annual impairment test for goodwill in accordance with the above allocation to the CGU, there is no impairment of goodwill at 31 December 2014 and 2013.

(b) Company 2014 2013 Shs’000 Shs’000

Computer software Year ended 31 December Opening net book amount 6,401 15,031Additions - -Amortisation (6,392 ) (8,900) Closing net book amount 9 6,401 At 31 December Cost 101,832 101,832Accumulated amortisation and impairment (101,823 ) (95,431) Net book amount 9 6,401

20 Intangible assets (continued)



21 Investment in subsidiaries (at cost) The Company’s interest in its subsidiaries, all of which are unlisted and all of which have the same year end as the Company, were as follows:

Company

Country of % interest 2014 2013 incorporation Shs’000 Shs’000 Kobil Petroleum Ltd USA 100 5,172,440 5,172,440Kobil Uganda Limited Uganda 100 347,816 82,526Kobil Tanzania Limited Tanzania 100 129,564 129,564Kobil Zambia Limited Zambia 100 - -Kobil Rwanda SARL Rwanda 100 - 794Kobil Petroleum Rwanda Limited Rwanda 100 - -Kobil Ethiopia Limited Ethiopia 100 498,852 498,871Kobil Burundi SA Burundi 100 252,856 252,837Kobil Mozambique Mozambique 100 - - 6,401,528 6,137,032

22 Available-for-sale investment

Group

2014 2013 Shs’000 Shs’000 At start of year 2,249 2,344Translation and fair value loss (14) (95) At end of year 2,235 2,249 Available for sale investment in represents an investment in government bonds by Kobil Ethiopia.

23 Investment in associates

Group

2014 2013 Shs’000 Shs’000 At start of year 15,346 18,203Share of loss (1,941) (1,774)Exchange differences (1,404) (1,083) At end of year 12,001 15,346




23 Investment in associates (continued)

The investment in associate represents the investment of 25.5% of the ordinary shares of Lublend Limited made by Kobil Zambia Limited. Lublend Limited effectively became an associate entity on 17 December 2011. Investments in associates at 31 December 2014 include goodwill of Shs 12,191,000.

Lublend Limited is a private company and there is no quoted market price available for its shares. Lublend’s place of business and country of incorporation is Zambia.

There are no contingent liabilities relating to the group’s interest in the associate.

Set out below is the summarised financial information for Lublend Limited as at 31 December 2014 which is accounted for using the equity method;

Year ended 31 December Country of Interest Assets Liabilities Revenues incorporation held Shs ‘000 Shs ‘000 Shs ‘000 2013 Zambia 25.5% 44,021 44,889 77,914 2014 Zambia 25.5% 34,348 49,325 74,455 The information above reflects the amounts presented in the financial statements of the associate (and not KenolKobil Limited’s share of those amounts) adjusted for differences in accounting policies between the group and the associate.

24 Inventories 2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Refined products on hand 4,141,183 6,528,533 2,439,593 4,951,058 All inventories are stated at the lower of cost and net realisable value.



25 Receivables and prepayments 2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Trade receivables 7,258,521 6,507,183 5,235,262 4,739,753Less: provision for impairment losses (623,329) (704,751) (359,041) (397,227) Trade receivables - net 6,635,192 5,802,432 4,876,221 4,342,526Prepayments 655,235 762,484 634,832 611,686Other receivables 2,435,190 4,191,679 2,155,743 3,536,179 9,725,617 10,756,595 7,666,797 8,490,391 Provision for impairment losses movement At start of year (704,751) (1,016,651) (397,226) (859,443)Charged to income statement 75,595 (162,905) 38,186 (15,077)Amounts recovered (4,474) 116 - -Provisions utilised (1,083) 476,921 - 477,294Currency translation differences 11,384 (2,232) - - At end of year (623,329) (704,751) (359,040) (397,226) The creation and release of provision for impaired receivables have been included in ‘other expenses’ in the income statement. Amounts charged to the provision account are generally written off, when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group and Company does not hold any collateral as security. The fair value of trade and other receivables approximates their carrying value.

Group Company




26 Cash and cash equivalents 2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Cash at bank and in hand 1,051,464 1,775,058 302,394 1,252,341 For the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand and deposits held at call with banks

27 Payable and accrued expenses

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Trade payables 4,669,651 4,256,813 1,720,722 2,838,327Payables to related companies (Note 29) - - 10,031,767 9,999,584Other payables and accrued expenses 963,413 1,334,547 609,787 934,589

5,633,064 5,591,360 12,362,276 13,772,500

28 Cash generated from operations Reconciliation of profit before income tax to cash generated from operations Group

2014 2013 Shs’000 Shs’000 Profit before income tax 1,520,820 563,918 Adjustments for:Interest income (Note 9) (69,244) (43,932)Interest expense (Note 9) 1,339,503 1,671,759Depreciation (Note 19) 317,189 264,175Amortisation of prepaid operating lease rentals (Note 18) 670,093 578,342Amortisation of intangible assets (Note 20) 9,016 12,528Gain on sale of property, plant and equipment (Note 6) (216,384) (830,093)Share of loss in associate (Note 23) 1,941 1,774ESOP reserve movement recognised through the income statement (Note 14) (55,462) (257,440)Changes in working capital − receivables and prepayments 1,030,978 2,328,291 − inventories 2,387,350 2,355,533− payables and accrued expenses 41,704 (3,521,895)

Cash generated from operations 6,977,504 3,122,960

Group Company

Group Company



29 Related parties and related parties transactions The Group has shareholding by various companies as shown on page 56. There are various other companies that are related to the Group through common shareholdings and/or common directorships. In January 1986, certain operations of KenolKobil Limited (formerly Kenol) were integrated with those of Kobil Petroleum Limited-Kenya Branch (Kobil). Under the joint operation, the Head Office departments of the two entities were integrated and depot operations combined.

Effectively from January 2008 Kobil Petroleum Limited - Kenya Branch (Kobil) became a subsidiary of KenolKobil Limited. Since then, operations are primarily carried out under KenolKobil Limited.

The following transactions were carried out with related parties: (i) Sales of goods 2014 2013 Shs’000 Shs’000 Kobil Uganda Limited 2,289,910 2,004,244Kobil Tanzania Limited 731,758 2,637,072Kobil Petroleum Rwanda SARL 3,923,046 2,824,863Kobil Zambia Limited 2,358 -Kobil Burundi SA 2,486,134 2,081,234 Total 9,433,206 9,547,413

(ii) Key management compensation (Group and Company)

Salaries and other short term employment benefits 169,024 187,924 (iii) Loans and receivables from related parties Due from Kobil Petroleum Limited – Kenya Branch 5,821,775 5,784,286Kobil Uganda Limited 590,891 758,350Kobil Tanzania Limited 399,310 911,621Kobil Ethiopia Limited 5,667 32,328Kobil Burundi Limited 580,288 596,673Kobil Rwanda Limited 649,671 344,042Kobil Zambia Limited 8,328 145,143 Total 8,050,930 8,572,443

Company

Company




29 Related parties and related parties transactions (continued)

(iii) Loans and receivables from related parties(continued)

Company 2014 2013 Shs’000 Shs’000 Non-current receivables from related parties 167,154 362,143Current receivables from related parties 7,888,776 8,210,299 Total 8,055,930 8,572,442 The amounts due from Kobil Petroleum Limited – Kenya Branch are interest free and unsecured. The balance is denominated in Kenya Shillings and are payable on demand.

The receivables from related parties arise mainly from sale transactions. The loans to the subsidiaries are denominated in US dollars. They are unsecured in nature and are interest bearing. No provisions are held against lances from related parties (2013: nil). The loan granted is in accordance with Company’s housing scheme, is unsecured and denominated in Kenya Shillings. (iv) Directors’ remuneration (Group and Company)

2014 2013 Shs’000 Shs’000 Fees for services as a director 9,664 11,188Other emoluments (included under key management compensation above) 62,614 62,761 Total remuneration of directors of the Group 72,278 73,949 During the year, the Company undertook transactions with entities connected to directors as follows: 2014 2013 Shs’000 Shs’000

Shapley Barret 10,039 11,917



31 Contingent liabilities The Group is a defendant in various legal actions. In the opinion of the directors, after taking appropriate legal advice, the outcome of such actions will not give rise to any significant loss. The Company has also provided corporate guarantees in favour of subsidiaries and other entities to a maximum of US$ 21.9 million (2013: US $ 27.2 million).

In addition, at year end, the Company had transit bonds and performance guarantees totalling Shs 831 million (2013: Shs 864 million).

At every year end, the directors carry out an assessment to ensure that the Company has accounted for all its obligations (both legal and constructive) in accordance with the requirements of IAS 37 (Provisions, Contingent Liabilities and Contingent Assets). Based on the facts available at the time, a provision is recognised if it is deemed to be probable that a payment will be required to be made to settle the obligation.

32 Commitments

(a) Capital commitments Capital expenditure contracted for at the reporting date but not recognised in the financial statements as follows:

2014 2013 2014 2013 Shs’000 Shs’000 Shs’000 Shs’000 Property, plant and equipment 77,755 386,024 10,456 - (b) Operating lease commitments

Not later than 1 year 413,311 223,859 145,693 131,115Later than 1 year and not later than 5 years 1,361,607 627,925 336,820 303,137Later than 5 years 3,396,722 859,105 650,344 585,310 5,171,640 1,710,889 1,132,857 1,019,562


Principal shareholders and share distribution


The ten major shareholdings in the Company and the respective number of shares held at 27 February 2015 as follows: Number % Name of shareholder of shares Shareholding 1. Wells Petroleum Holdings Limited 366,614,280 24.91%2. Petro Holdings Limited 254,381,380 17.28%3. Energy Resources Capital Limited 88,185,720 5.99%4. Standard Chartered Nominees A/c KE14861 82,413,439 5.60%5. SCB A/C Pan African Unit Linked FD) 51,292,500 3.49%6. CFC STANBIC Nominees Limited 45,105,500 3.06%7. Standard Chartered Nominees ltd A/c KE002105 33,237,504 2.26%8. Standard Chartered Nominees A/c 9389 15,096,630 1.03%9. SCB A/C Pan African Deposit admin FD 13,495,200 0.92%10. Investment & Mortgages Nominees ltd a/c 028950 13,473,940 0.92%

Distribution of shareholders

Number of Number of % shares shareholders Shareholding Less than 500 shares 549,030 2,051 0.04500 – 1,000 shares 1,168,590 1,295 0.081,001 – 10,000 shares 15,259,943 3,555 1.0410,001 – 100,000 shares 55,262,841 1,634 3.75100,001 – 1,000,000 shares 133,067,280 451 9.04Over 1,000,000 shares 1,266,453,516 114 86.05 Total 1,471,761,200 9,100 100

I/We ________________________________________________________________________________________

of __________________________________________________________________________________________

Being a member of KenolKobil Limited hereby appoint ________________________________________________

____________________________________________________________________________________________

of __________________________________________________________________________________________

____________________________________________________________________________________________

whom failing, the Chairman of the Meeting of the Company as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on Wednesday, 6 May 2015 and at any adjournment thereof.

Signed/Sealed this……………………………… day of ………………………………….2015

_________________________________

Important Notes:

1. If you are unable to attend this meeting personally, this Form of Proxy should be completed and returned to: The Company Secretary, Livingstone Associates, Deloitte Place, Waiyaki Way, Muthangari, P O Box 30029, 00100 Nairobi to reach not later than 11.00 am on 4 May 2015. Alternatively, duly signed proxies can be scanned and emailed to [email protected] in PDF format.

2. Any person appointed to act as proxy need not be a member of the Company.

3. If the appointer is a corporation, the Form of Proxy must be under Seal, witnessed by two directors or one director and the Company Secretary or under the hand of any officer or attorney duly authorised in writing.

PROXY FORM

Livingstone Associates Deloitte Place,

Waiyaki Way, Muthangari P. O. Box 30029, 00100

Nairobi

KenolKobil is committed to availing quality products that cater for all our customers.

www.kenolkobil.com

Kenya - Head OfficeKenolKobil LimitedI.C.E.A. Building, Kenyatta AvenueP.O. Box 44202 or 3032200100 GPO, Nairobi, KenyaTel: +254 (0) 20 2755000 / 2249333Fax: +254 (0) 20 2230967 / 2218274 / 2221614E-mail: [email protected]: www.kenolkobil.com

Uganda - SubsidiaryKobil Uganda LimitedPlot No. 4 Wankulukuku RoadNalukolongo, Industrial Area,P.O. Box 27478, Kampala, UgandaTel: (+256 312) 502200, (+256 414) 271425 / 272765 / 272974Fax: +256 414 270153/272950E-mail: [email protected]: www.kenolkobil.com

Tanzania - SubsidiaryKobil Tanzania LimitedP.O. Box 2238 Dares Salaam, TanzaniaKigamboni, Vijibweni AreaPlot No. 37/38 Sido Tiper RoadTel: +255 22 2829491-3Fax: +255 22 2820494-6E-mail:[email protected]:www.kenolkobil.com

Rwanda - SubsidiaryKobil Petroleum Rwanda LtdByumba Road, Gatsata B.P. 6074, Kigali, RwandaTel: (+250) 78818341Kobil Petroleum Rwanda Ltde-mail: [email protected] : www.kenolkobil.com

Burundi - SubsidiaryKobil Burundi S.A.Head OfficeQuartier lndustriel205, Av. RuvyironzaTel. : +257 22 243592+257 22 244946Fax: +257 22 243593B.P. 466 Bujumbura-BURUNDI

Zambia - SubsidiaryKobil Zambia LimitedHead OfficePlot No.1630, Malambo RoadP. 0. Box 320089, Lusaka, ZambiaTel:+ 260 211 246646 (nine lines)Fax: + 260 211 246644/9E-mail: [email protected]

NdolaP.O. Box 71719.Munali Road,Bwana MkubwaTel:+ 260 212 655291/282 Fax:+ 260 212 655438E-mail: kobilzm@zm. kenolkobil.com

Ethiopia - SubsidiaryKobil Ethiopia Limited (Plc)Debre- zeit RoadP.O.Box 2868 Code 1250Tel. : (+251-11) 467 4500(+251-11) 467 4505 I 06(+251-11) 467 4507 I 08Fax: (+251-11) 467 3581E-mail: kobil@et. kenolkobil.comWebsite: www.kenolkobil.com

Documents

FINANCIAL STATEMENTS ANNUAL REPORT & 2014 Kenol.pdf · 2017-03-14 · Ecobank Limited Kenya Commercial Bank Limited Bank of Africa Limited Sociéte Géneralé ... Nairobi, Kenya on