Pursuing Sustainable Growth - KenolKobil€¦ · Notice of Annual General Meeting 3 Chairman’s Report 4-5 Group Managing Director’s Report 6-7 ... well equipped garages and tyre

ANNUAL REPORT & FINANCIAL STATEMENTS - 2016 1

2016 Annual Report & Financial Statements

Pursuing Sustainable Growth

ANNUAL REPORT & FINANCIAL STATEMENTS - 2016

V a l u e S t a t e m e n t s

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.


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

Corporate Governance 9

Corporate Social Responsibility 10

Directors’ Report 11

Statement of the Directors’ Responsibilities 12

Report of the Independent Auditor 13-16

FINANCIAL STATEMENTS:

Consolidated Statement of Profit or Loss 18

Consolidated Statement of Profit or Loss and other Comprehensive Income 19

Consolidated Statement of Financial Position 20

Company Statement of Financial Position 21

Consolidated Statement of Changes in Equity 22

Company Statement of Changes in Equity 23

Consolidated Statement of Cash Flows 24

Notes to the Financial Statements 25-71

Principal Shareholders and Share Distribution 72

Proxy Form 73

C o n t e n t s


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 04 July 2013) T M Davidson Appointed on 01 January 2011D Ndonye Appointed on 06 April 2011

SECRETARY

Lawrence Kibet Appointed Secretary on 11 January 2016 IMAGE REGISTRARS LIMITEDSECURITIES REGISTRARS & TRUSTEES5th Floor Barclays Plaza Loita Street Nairobi P.O. Box 9287-00100, Nairobi. Telephone: 020-2212065, 2230330, 2246449 FAX: 020-2212120Mobile: 0724 699 667, 0735 565 666

REGISTERED OFFICE

Avenue 5 Building, Rose Avenue, KilimaniP.O.Box 44202 or 30322, 00100 GPO, Nairobi, Kenya

AUDITOR

Deloitte & ToucheCertified Public Accountants Deloitte PlaceWaiyaki Way, MuthangariP.O Box 40092 – 00100Nairobi, Kenya


Notice of Annual General Meeting

NOTICE is hereby given that the 58th Annual General Meeting of the Company will be held at the Hilton Hotel, Nairobi, Kenya on 11th May 2017 at 11.00 a.m.

AGENDA

ORDINARY BUSINESS

1. To table the proxies and confirm 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 2016 together with the reports of the Chairman and Group Managing Director, Directors’ and Auditor’s thereon.

4. Dividend

To confirm an interim dividend of Ksh 0.15 per share which was paid during the year in respect of the financial year ended 31 December 2016 and to consider and approve a final dividend of Ksh 0.30 per share for the year ended 31 December 2016 payable on or about 16th June 2017 to the shareholders on the Register of Members at the close of business on 11th May 2017.

5. To approve the Directors’ remuneration as indicated in the Financial Statements for the year ended 31 December 2016

6. In accordance with the provisions of section 769 of the Companies Act 2015, the following directors, being members of the Audit Committee of the Board, be elected to continue to serve as members of the said Committee:

(i) Mr. Daniel Ndonye(ii) Mr. Terence Davison(iii) Mr. James Mathenge

7. Re-election of directors:

(i) To re-elect Mr Daniel Ndonye, 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 himself for re-election.

(ii) To note the resignation of Mr Desterio Oyatsi as a Director of the Company on 26th July 2016

8. To note that Messrs Deloitte & Touche continue in office as Auditors by virtue of Section 721 (2) of the Companies Act, 2015 and to authorize the Directors to fix the Auditor’s remuneration for the ensuing financial year.

SPECIAL BUSINESS

Special Resolution9. To consider and if found fit, to pass the following

resolution as a special resolutions:-

“That the name of the Company be and is hereby changed from “KenolKobil Limited” to “ KenolKobil PLC” with effect from the date set out in the Certificate of Change of Name issued in that regard by the Registrar of Companies.

10. Any other business of which due notice has been given.

BY ORDER OF THE BOARD

LAWRENCE KIBETCOMPANY SECRETARY

Date: 7th March 2017

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, Avenue 5, Rose Avenue, Kilimani, 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, Image Registrars, P O Box 9287, 00100 Nairobi, or posted in time to reach not later than 11.00 am on 9th May 2017. Alternatively, duly signed proxies can be scanned and emailed to [email protected] in PDF format.

In accordance with Article 134 of the Company’s 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, Avenue 5, Rose Avenue, Kilimani, 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 2016 have been published in two daily newspapers with nationwide circulation.


Chairman’s Report

We as a Board will continue to proactively engage the different stakeholders and investors to ensure that the future of our company remains upbeat and promising.“


Chairman’s Report

I am pleased to report that KenolKobil delivered a good set of financial results for the year 2016. Through focused strategy execution, sheer hard work and strong work ethic, the KenolKobil Group, achieved strong growth in revenue, profit and cash. For the first time in several years, the company also achieved overall market share leadership in the industry for the full year 2016.

As the Chairman of the Board I can assure you that our disciplined approach to cost control and focus on working capital management shall see us continue delivering stellar results and enviable profitability for years to come. It is my pleasure together with the Board to present to you our significantly improved profits of Kshs. 2.4 billion after tax for the year ended December 31, 2016.

The results that we present to you could not have been achieved without the great team effort of the KenolKobil Group management under the leadership of the Group Managing Director, Mr. David Ohana, given the tough market conditions experienced globally and others challenges facing the oil industry today. Although our return to profitability within a relatively short period of time is unprecedented, we are still very aware of the huge losses that we saw in 2012. We learnt our lessons and, as a result, the Board has continued to craft and refine sustainable growth strategies for the Group. This has entailed the comprehensive review of all business sectors including marketing, product lines, the evolving competitor strategies and enterprise risks management in the light of the dynamic and rapidly changing operating environment. The deployment of performance-based and other talent management policies has enabled us to attract and retain a motivated, young and energized human resource base.

The board will continue to provide strategic leadership and direction to the management team that, coupled with our premium product brands and strong financial discipline, shall ensure that KenolKobil Group is well positioned to realize sustainable, long-term growth. I really must commend the efforts of all our staff and management teams for flawlessly executing the Board’s strategies. We are keeping a keen eye on the development changes being offered by Government through the Kenya Pipeline Company including the revival of KPRL and expansion of the pipeline network as stated in their vision 2025 strategy in order that we may position ourselves accordingly and remain competitive.

As part of its corporate governance commitment, the Board has and shall continue to play a critical role in closely monitoring the performance of the Group through its various Board committees. We will continue to actively engage senior management and other stakeholders by tracking progress

of our key objectives and priorities. We as a Group are committed to effectively managing our costs and participate in high equity tenders or projects that increase our cash flows and allow us to invest in the retail network which has continued to grow in the year 2016. We have a strategy to manage and upgrade our existing assets and retail networks as you may have noted in the recent facelifts of Kobil South B, Kobil South C, Kenol Makutano and so on. As the market leaders, it is enshrined in our strategy to develop strong partnerships with leading like-minded partners in different sectors such as food chains, well equipped garages and tyre centers, choice pharmacies and quick stop shops to attract more consumers into our stations.

Our passion is to give back to the community that we serve through our CSR activities .We, for example actively seek and promote the growth of young smart individuals through our internship programs. The Board believes in equal opportunities for all in order to create a gender balanced environment in the organization. We are committed to continue our focus in the development and empowerment of youth and women. Ultimately we shall achieve a gender balance of 50% in our organization as well as work on retaining our employees. They are a dedicated team and we highly value their immense contribution to the enterprise. Our signature scholarship program under which the company provides financial support to young and bright students across the entire country has been highly successful and will continue to be rolled out. Under this initiative we also provide employment opportunities to deserving graduates of this program whenever opportunities arise in any of our group companies.

As I have stated above, the exceptional performance for the year 2016 was achieved by focused and determined teamwork of staff and management teams under the leadership of David Ohana. We as a Board will continue to proactively engage the different stakeholders and investors to ensure that the future of our company remains upbeat and promising. I take this opportunity to thank our shareholders for entrusting the stewardship of this company to the Board and all our employees and management teams for working with dedication and going the extra mile. KenolKobil has a clear vision to maximize shareholder value through sustainable growth.

Thank you.

James G MathengeChairman


Group Managing Director’s Report

The management has been quite aggressive and focused to solidify the company’s position in the markets we operate in so as to guarantee the shareholders good returns in future.“


Group Managing Director’s Report

The Board of Directors of KenolKobil Limited is pleased to announce the results for the financial year ending December 31, 2016.

In this year just ended, the group realized a growth of 20% in profitability to post a net profit after tax of Kes 2.41 billion up from Kes 2 billion reported in the previous year.

In the same period, the company recorded volume growth in all the sectors which resulted in total volume growth by 30% as compared to 2015. Similarly, the sales revenue grew by 20% above 2015 in line with growth in volume as well as the effect of the oil prices changes.

The management has been quite aggressive and focused to solidify the company’s position in the markets we operate in so as to guarantee the shareholders good returns in future. The group added a total of 30 retail network stations in the year.

The year started with low oil prices of below USD 30/Barrel for Murban Crude which thereafter rose sharply to hover around mid-40 USD/Barrel in the second and third quarter of the year, and subsequently jumped to trade at over USD 50/Barrel in the last quarter of the year.

The management remained focused while monitoring the international oil prices to implement strategies which are advantageous to the company in view of the international oil market.

The group realized an improved gross margin of 7.1% in 2016 as compared to 6.7% in the previous year. The impressive growth in margins was realized across all the sectors in spite of the cut-throat competition in all the markets. The management puts emphasis on protecting the margins by investing in areas where the returns are justifiable.

The administrative and other operating overheads increased by 19% attributable to the growth across all the sectors coupled with inflationary pressure.

Over the year, the group focused on reducing the financing costs to safeguard the interest of the shareholders. This saw the group realize a massive reduction in net financing costs by 54% in comparison with previous year results.

The net debt levels remained subdued across the year despite the increase in international oil prices. This also partly contributed to the drop in financing costs. The gearing ratio in 2016 further improved to 26% down from 31.3% in the previous year. Similarly, the current ratio improved from 1.24 as at December 2015 to 1.26 as at December 2016.

The group realized a net forex gain of Kes 2.5 million which is a significant improvement from a forex loss of Kes. 232 million realized in 2015. For the better part of 2016, the Kenya shilling was relatively stable against the US dollar with weakening seen in the last quarter of 2016. The Zambian Kwacha was the most erratic in the markets we operate in and the management put in place a strategy which realized a net gain to the group and mitigated against losses realized in other markets.

The impressive performance in 2016 resulted in a jump of 13% in EBITDA to Kes. 4.77 billion, up from Kes 4.2 billion in the previous year. As the company continues to be profitable, the share-holders funds increased to Kes 9.9 billion up from Kes 8.55 billion in the previous year.

The KenolKobil Group continues with its focus of developing its human resource base which will steer the company to the next level of success. The group embarked in developing young managers who are holding crucial positions across the group and are key to the success of the group in the past. As part of the group human resources policy, the management remains committed to maintaining gender parity in the company.

Future outlookThe management is optimistic that the good performance will be sustained in the foreseeable future and will remain focused in pursuing sustainable growth in all the markets the group operates in.

The governance structures put in place guarantees that the company will continue generating value to the shareholders.

Annual General Meeting The 58th KenolKobil Annual General Meeting (AGM) is to be held on May 11, 2017 at 11h00 at the Hilton Hotel, Nairobi.

Proposed DividendThe Board of Directors has recommended a final dividend of Kshs. 0.30 per share to the AGM to be held on May 11, 2017. The final dividend together with the interim dividend already paid (0.15 per share), will total to Kshs. 0.45 per share compared to Kshs. 0.35 per share paid in 2016, an increase of 29%. The dividend, if approved by the shareholders, will be subjected to withholding tax as applicable.By Order of the Board

David OhanaGroup Managing DirectorMarch 07, 2017


Board of Directors

Mr. D. Ndonye Non-Executive Director

Mr. J. Mathenge Chairman

Mr. D. OhanaGroup Managing Director

Mr. T.M. Davidson Non-Executive Director

“The governance structures put in place guarantees that the company will continue generating value to the shareholders.”


Corporate Governance

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 3 Non-Executive Directors and 1 Executive Director. 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 3 Non-Executive Directors, and by invitation, 1 Executive Director, the external auditor’s representatives and the Group Internal Audit 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).

• Board nominations and resignations in the Group.

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 Social Responsibility

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 our 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 2015, we had 11 students sitting for the Kenya Certificate of Secondary Education (KCSE) and majority of them did well. 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 awardees 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.

Beneficiaries of the KenolKobil Education fund at a past event


Report of the Directors

The directors submit their report together with the audited financial statements for the year ended 31 December 2016, in accordance with Section 653 and 654 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 and distribution for sale of refined and other petroleum products.

RESULTS AND DIVIDEND

The net profit for the year of Shs 2,413,207,000 (2015: Shs 2,014,974,000) has been added to retained earnings. An interim dividend of Shs 220,765,000 was paid during the year (2015: 147,176,120). The directors recommend a final dividend of Shs 441,528,000 (2015: Shs 367,940,000).

DIRECTORS

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

J Mathenge - Chairman D Ohana - Group Managing Director D Oyatsi - Resigned 26 July 2016P. Lai - Resigned 12 May 2016T M Davidson D Ndonye

AUDITORDeloitte & Touche, having expressed their willingness, continue in office in accordance with the provisions of the Kenyan Companies Act

APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors on 7 March 2017.

By order of the Board

Lawrence KibetCOMPANY SECRETARY 7 March 2017


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 of the company as at the end of the financial year and of Group operating results for that year. It also requires the directors to ensure that the company and its subsidiaries keep proper accounting records which disclose with reasonable accuracy at any time their financial position. They are also responsible for safeguarding the assets of the Group.

The directors are responsible for the preparation of financial statements that give a true and fair view of the company and its subsidiaries in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act, and for such internal controls as directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Group and of the company and of their operating results. The directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.

Nothing has come to the attention of the directors to indicate that the company and its subsidiaries will not remain going concerns for at least the next twelve months from the date of this statement.

James Mathenge David Ohana

_______________________ _______________________ Director Director

7 March 2017

Statement of Directors’ Responsibilities


Independent Auditors’ Report to the Members of KenolKobil Limited

Report on the consolidated financial statements and company statement of financial position

Opinion

Consolidated financial statements

We have audited the consolidated financial statements of Kenolkobil Limited (the company) and its subsidiaries (the Group) as set out on pages 18 to 20, 22 and 24 to 71 which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial state-ments, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) and the requirements of the Kenyan Companies Act.

Company statement of financial position

We have audited the Company’s statement of financial position of Kenolkobil Limited as at 31 December 2016 set out on page 21, and company’s statement of changes in equity on page 14 and notes to the statements, including a summary of significant accounting policies on pages 25 to 71 (together “the Company financial statements”).

In our opinion, the Company financial statements give a true and fair view of the financial position of the Company as at 31 De-cember 2016 in accordance with the company’s accounting policies which are in line with the recognition and measurement criteria of International Financial Reporting Standards (“IFRSs”) and the requirements of the Kenyan Companies Act.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those stan-dards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group and the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consoli-dated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the Key audit matter

Carrying value of goodwill (Consolidated)

KenolKobil Group has goodwill of Ksh 847 million contained within various cash generating units (“CGUs”). With changing trading conditions continuing, the Group’s performance and prospects could be impacted; increasing the risk that goodwill is impaired. For the CGUs that contain goodwill, the determination of recoverable amount, being the higher of fair value less costs to sell and value-in-use, requires judgement on the part of the Directors in both identifying and then valuing the relevant CGUs.

We evaluated the appropriateness of the Directors’ identification of the Group’s CGUs and the continued satisfactory operation of the Group’s controls over the impairment assessment process.

Our audit procedures included challenging the Directors on the suitability of the impairment model and reasonableness of the assumptions through performing the following audit procedures:• benchmarking KenolKobil’s key market-related assumptions

in the Directors’ valuation models with the industry and with assumptions made in the prior years;


Independent Auditors’ Report to the Members of KenolKobil Limited (Continued)

Key Audit Matters (continued)

Key audit matter How our audit addressed the Key audit matter

Carrying value of goodwill (Consolidated) Continued

Recoverable amounts are based on the Directors’ assumptions of variables such as:

• future average revenue from the business units;• the discount rate; and• future net profit margin.

Accordingly, the determination of the carrying value of goodwill require significant judgement by the Directors and therefore is considered a key audit matter.

Refer to note 3 of the financial statements for critical accounting judgements and key sources of estimation uncertainty and note 22(a) of the consolidated financial statements for goodwill impairment disclosure.

• reviewing the discount rate for reasonableness;• testing the mathematical accuracy of the cash flow models; • assessing the reliability of the Directors’ forecast through a

review of actual performance against previous forecasts; and• assessing the effect on the carrying value of the goodwill for

possible change in the key assumptions.

We validated the appropriateness of the related disclosures in note 3 and note 22 of the consolidated financial statements. Based on our procedures, we consider the Directors’ key assumptions to be within a reasonable range and the disclosure to be appropriate.

Recognition and recoverability of deferred tax assets (Consolidated)

Significant judgement, mainly in relation to expected future profitability of the group to be able to utilise the tax losses carried forward, is required in relation to the recognition and recoverability of deferred tax assets, particularly in respect of prior years’ tax losses in Kenya. Accordingly, the recognition and recoverability of deferred tax assets are considered key audit matters. During the current year, Ksh 585 million of deferred tax assets have been utilised. Refer to note 3 of the financial statements for critical accounting judgements and key sources of estimation uncertainty and note 17 of the consolidated financial statement for deferred taxation disclosure.

We assessed the design and implementation of the key controls in respect of provisioning for the recognition and recoverability of deferred tax assets. We assessed the recognition and recoverability of losses from a tax perspective through performing the following audit procedures:

• assessing the profit forecasts and budgets against previous performance and previous forecasts;

• assessing any restrictions on the future use of tax losses carried forward;

• considering the impact of recent regulatory developments, as applicable; and

• determining whether any of the tax losses will expire.

In addition, we assessed the application of IAS 12: Income Taxes including the understanding of the triggers for recognition and derecognition of the deferred tax assets.

Based on the procedures above, we determined that the carry-ing value of the deferred tax assets at 31 December 2016 was supported by the Director’s plans. We validated the appropri-ateness of the related disclosures in note 3 and note 17 of the consolidated financial statements and the disclosure is appro-priate.

Other Information

The Directors are responsible for the other information. The other information comprises the Directors Report as required by the Companies Act which we obtained prior to the date of this auditor’s report. The other information does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance con-clusion thereon.


Other Information (continued)

Independent Auditors’ Report to the Members of KenolKobil Limited (Continued)

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, con-sider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Directors and Those Charged with Governance for the Financial Statements

The Directors are responsible for the preparation and fair presentation of the consolidated financial statements and company statement of financial position in accordance with IFRSs and the requirements of the Kenyan Companies Act, and for such inter-nal control as Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or Company or to cease operations, or have no realistic al-ternative but to do so. Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and Company Statement of Financial Position

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism through-out the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Group and Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related dis-closures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclo-sures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and / or the Company to cease to continue as a going concern.


• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the board audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the board audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the board audit committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circum-stances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

As required by section 162 of 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 of account; and

iii) the company’s statement of financial position is in agreement with the books of account.

The engagement partner on the audit resulting in this independent auditor’s report is CPA Fred Aloo – P/No 1537.

Certified Public Accountants (Kenya)Nairobi, Kenya

7 March 2017


The UltimateTravel Companion


Notes 2016 2015 KShs’000 KShs’000 Continuing Operations

Sales 103,493,925 86,557,936Cost of sales (96,110,370) (80,720,486) Gross profit 7,383,555 5,837,450 Other income 6(a) 464,353 830,391Administrative and operating costs (3,451,163) (2,940,441)Impairment provision for KPRL yield shift receivable 7 (600,000) (146,694)Finance costs 10 (352,165) (883,408)Finance income 10 92,461 83,909Share of profit in associate 25 1,215 1,214 Profit before income tax 3,538,256 2,782,421 Income tax expense 11(a) (1,125,049) (884,491) Profit for the year from continuing operation 2,413,207 1,897,930 Discontinued operations Profit for the year from discontinued operations 12 - 117,044 PROFIT FOR THE YEAR 2,413,207 2,014,974

Attributable to: Equity holders of the Company 2,413,207 2,014,974

Earnings per share - From continuing and discontinued operations - Diluted (Shs per share) 13 1.64 1.37- Basic (Shs per share) 13 1.64 1.37 - From continuing operations - Basic (Shs per share) 13 1.64 1.29- Diluted (Shs per share) 13 1.64 1.29

Consolidated Statement of Profit or Loss For the year ended 31 December 2016


Notes 2016 2015 KShs’000 KShs’000 Profit for the year 2,413,207 2,014,974

Other comprehensive income: Items that may be subsequently reclassified to profit or loss Currency translation differences 15(a) (128,842) (297,559) Other comprehensive income for the year, net of tax (128,842) (297,559) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,284,365 1,717,415 Attributable to: Equity Holders of the company 2,284,365 1,717,415

The notes on pages 25 to 71 are an integral part of these consolidated financial statements.

Consolidated Statement of Profit or Loss and other Comprehensive IncomeFor the year ended 31 December 2016


Notes 2016 2015 KShs’000 KShs’000 TOTAL EQUITY AND LIABILITIES

EQUITY Share capital 14 73,588 73,588Share premium 14 5,166,350 5,166,350Retained earnings 5,318,524 3,567,610Other reserves 15(a) (1,134,839) (619,849)Proposed dividends 441,528 367,940 Total equity 9,865,151 8,555,639Non-current liabilities Deferred income tax 17 275,929 210,797Borrowings 18 36,325 - Total non-current liabilities 312,254 210,797

Current liabilities Payables and accrued expenses 19 6,393,652 3,695,586Current income tax 11(c) 268,288 229,672Borrowings 18 7,330,234 4,662,431Dividends payable 16 32,126 22,978 Total current liabilities 14,024,300 8,610,667 TOTAL EQUITY AND LIABILITIES 24,201,705 17,377,103 ASSETS Non-current assets Property, plant and equipment 20(a) 3,887,525 3,544,414Prepaid operating lease rentals 21 910,704 887,127Intangible assets 22(a) 924,769 865,428Deferred tax asset 17 834,840 1,419,893Available for sale investment 24 2,235 2,235Investment in associate 25 4,412 3,197 Total non-current assets 6,564,485 6,722,294

Current assets Inventories 26 5,828,398 3,095,900Receivables and prepayments 27 7,773,875 6,524,544Current income tax 11(c) 148,615 272,270Cash and cash equivalents 28 3,886,332 762,095 Total current assets 17,637,220 10,654,809 TOTAL ASSETS 24,201,705 17,377,103


The financial statements on pages 18 to 71 were approved for issue by the board of directors on 7 March 2017 and signed on its behalf by:

James Mathenge David Ohana

__________________ ___________________Director Director

Consolidated Statement of Financial PositionAt 31 December 2016


Notes 2016 2015 KShs’000 KShs’000 TOTAL EQUITY AND LIABILITIES

EQUITY Share capital 14 73,588 73,588Share premium 14 5,166,350 5,166,350Retained earnings 431,291 (288,136)Other reserves 15(b) 85,445 469,317Proposed dividend 441,528 367,940 Total equity 6,198,202 5,789,059 Current liabilities Payables and accrued expenses 19 3,972,022 2,676,353Borrowings 18 7,013,213 4,464,496Due to related parties 30 (iv) 10,200,308 10,014,911Dividends payable 16 32,126 22,978 Total current liabilities 21,217,669 17,178,738 TOTAL EQUITY AND LIABILITIES 27,415,871 22,967,797

ASSETS Non-current assets Property, plant and equipment 20(b) 694,149 611,153Prepaid operating lease rentals 21 490,875 366,247Deferred tax asset 17 703,773 1,288,502Intangible asset 22(b) 62,950 15,673Investment in subsidiaries 23 6,281,293 6,281,293 Total non-current assets 8,233,040 8,562,868 Current assets Inventories 26 4,743,296 2,425,850Receivables and prepayments 27 5,685,904 5,531,768Loans and receivables due from related parties 30 6,232,098 6,060,441Current income tax 11(c) 134,844 254,814Cash and cash equivalents 28 2,386,689 132,056 19,182,831 14,404,929

Total current assets TOTAL ASSETS 27,415,871 22,967,797

The notes on pages 25 to 71 are an integral part of these consolidated financial statements. The financial statements on pages 18 to 71 were approved for issue by the board of directors on 7 March 2017 and signed on its behalf by:

___________________ ___________________Director Director

COMPANY STATEMENT OF FINANCIAL POSITIONAt 31 December 2016


Consolidated Statement of Changes in Equity For the year ended 31 December 2016

Attributable to equity holders of the company

Share Share Other Retained Proposed Total capital premium reserves earnings dividends equity Notes KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 Year ended 31 December 2015

Balance at 1 January 2015 73,588 5,166,350 (271,537) 2,067,743 294,352 7,330,496 Profit for the year - - - 2,014,974 - 2,014,974Other comprehensive income, net of tax: Currency translation differences 15(a) - - (297,559) - - (297,559) Total comprehensive income - - (297,559) 2,014,974 - 1,717,415

Transactions with owners: Movement in ESOP reserve 15(a) - - (50,753) - - (50,753)Dividend paid for 2014 - - - (294,352) (294,352)Interim dividend paid for 2015 - - - (147,167) - (147,167)Final dividend proposed for 2015 16 - - - (367,940) 367,940 - Total transactions with owners - - (50,753) (515,107) 73,588 (492,272) Balance at 31 December 2015 73,588 5,166,350 (619,849) 3,567,610 367,940 8,555,639 Year ended 31 December 2016 Balance at 1 January 2016 73,588 5,166,350 (619,849) 3,567,610 367,940 8,555,639 Profit for the year - - - 2,413,207 - 2,413,207Other comprehensive income, netof tax: Currency translation differences 15(a) - - (128,842) - - (128,842) Total comprehensive income - - (128,842) 2,413,207 - 2,284,365 Transactions with owners: Movement in ESOP reserve 15(a) - - (386,148) - - (386,148)Dividend paid for 2015 - - - - (367,940) (367,940)Interim dividend paid for 2016 - - - (220,765) - (220,765)Final dividend proposed for 2016 16 - - - (441,528) 441,528 - Total transactions with owners - - (386,148) (662,293) 73,588 (974,853) Balance at 31 December 2016 73,588 5,166,350 (1,134,839) 5,318,524 441,528 9,865,151



Attributable to equity holders of the company

Share Share Other Retained Proposed Total capital premium reserves earnings dividends equity Notes KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 Year ended 31 December 2015 Balance at 1 January 2015 73,588 5,166,350 520,070 (395,263) 294,352 5,659,097 Profit and total comprehensive income for the year - - - 622,234 - 622,234 Total comprehensive income - - - 622,234 - 622,234

Transactions with owners: Movement in ESOP reserve 15(b) - - (50,753) - - (50,753)Dividend paid for 2014 - - - - (294,352) (294,352 )Interim dividend paid for 2015 - - - (147,167) - (147,167)Proposed final dividend for 2015 - - - (367,940) 367,940 - Total transactions with owners - - (50,753) (515,107) 73,588 (492,272) Balance at 31 December 2015 73,588 5,166,350 469,317 (288,136) 367,940 5,789,059

Year ended 31 December 2016 Balance at 1 January 2016 73,588 5,166,350 469,317 (288,136) 367,940 5,789,059

Profit and total comprehensive income for the year - - - 1,381,720 - 1,381,720 Total comprehensive income - - - 1,381,720 - 1,381,720 Transactions with owners: Movement in ESOP reserve 15(b) - - (383,872) - - (383,872)Dividend paid for 2015 - - - - (367,940) (367,940)Interim dividend paid for 2016 - - - (220,765) (220,765)Final dividend proposed for 2016 - - - (441,528) 441,528 - Total transactions with owners (383,872) (662,293) 73,588 (972,577) Balance at 31 December 2016 73,588 5,166,350 85,445 431,291 441,528 6,198,202


Company Statement of Changes In EquityFor the year ended 31 December 2016


Notes 2016 2015 KShs’000 KShs’000 Cash flows from operating activities Cash generated from operations 29 3,086,964 5,694,773Interest received 10 92,461 83,909Interest paid 10 (354,690) (651,344)Income tax paid (314,477) (59,837) Net cash generated from operating activities 2,510,258 5,067,501

Cash flows from investing activities Prepayment for operating lease rentals 21 (645,688) (773,364)Purchases of property, plant and equipment 20 (586,064) (395,661)Purchases of intangible asset 22 (83,159) (17,089)Proceeds on disposal of property, plant and equipment 30,688 370,895Proceeds on disposal of subsidiary 6(c) - 1,641,096 Net cash (used in)/generated from investing activities (1,284,223) 825,877 Cash flows from financing activities Receipts from borrowings 18 16,629,202 3,732,003Repayments from borrowings 18 (13,925,074) (9,567,800)Dividends paid (579,557) (478,018) Net cash generated from / (used in) financing activities 2,124,571 (6,313,815) Net increase/(decrease) in cash and cash equivalents 3,350,606 (420,437) At start of year 28 762,095 1,051,464Effects of exchange rate changes on cash and cash equivalents (226,369) 131,068 Cash and cash equivalents at end of the year 28 3,886,332 762,095


Consolidated Statement of Cash FlowsFor the year ended 31 December 2016


Notes to the Financial Statements For the year ended 31 December 2016

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:

Avenue 5 BuildingRose Avenue (Off Lenana road)5th FloorP O Box 44202 00100NAIROBI

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 and company statement of financial position 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) and the requirements of the Kenyan Companies Act. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets.

The Company statement of financial position has been presented in line with the requirements of the Kenyan Companies Act.

The financial statements are presented in Kenyan Shillings (Kshs), 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 judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

Adoption of new and revised International Financial Reporting Standards

i) Relevant new and revised standards and amendments to published standards effective for the year ended 31 December 2016

The following new and revised IFRSs were effective in the current year and had no material impact on the amounts reported in these financial statements.

IAS 1 Disclosure Initiative

The amendments clarify that an entity need not provide a specific disclosure required by an IFRS if the information resulting from that disclosure is not material, and give guidance on the bases of aggregating and disaggregating information for disclosure purposes. However, the amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users of financial statements to understand the impact of particular transactions, events and conditions on the entity’s financial position and financial performance.

In addition, the amendments clarify that an entity’s share of the other comprehensive income of associates and joint ventures accounted for using the equity method should be presented separately from those arising from the Company, and should be separated into the share of items that, in accordance with other IFRSs: (i) will not be reclassified subsequently to profit or loss; and (ii) will be reclassified subsequently to profit or loss when specific conditions are met.



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(a) Basis of preparation (Continued)

Adoption of new and revised International Financial Reporting Standards (Continued)

i) Relevant new standards and amendments to published standards effective for the year ended 31 December 2016 (Continued)

IAS 1 Disclosure Initiative

As regards the structure of the financial statements, the amendments provide examples of systematic ordering or grouping of the notes.

The application of these amendments has not resulted in any impact on the financial performance or financial position of the Group.

IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment.The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only be rebutted in the following two limited circumstances:

a) when the intangible asset is expressed as a measure of revenue; orb) when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly

correlated.

As the Group already uses the straight-line method for depreciation and amortisation for its property, plant and equipment, and intangible assets respectively, the application of these amendments has had no impact on the Group’s financial statements. Annual Improvements to IFRSs 2012-2014 Cycle The Annual Improvements to IFRSs 2012-2014 Cycle include a number of amendments to various IFRSs, which are summarised below:

• IFRS 5 - The amendments introduce specific guidance in IFRS 5 for when an entity reclassifies an asset or disposal group) from held for sale to held for distribution to owners (or vice versa). The amendments clarify that such a change should be considered as a continuation of the original plan of disposal and hence requirements set out in IFRS 5 regarding the change of sale plan do not apply. The amendments also clarifies the guidance for when held-for- distribution accounting is discontinued.

• IFRS 7 - The amendments provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets.

• IAS 19 - The amendments clarify that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high quality corporate bonds should be at the currency level (i.e. the same currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead.

The application of these amendments has had no effect on the Group’s financial statements.





Adoption of new and revised International Financial Reporting Standards (IFRS) (Continued)

ii) New and amended standards in issue but not yet effective in the year ended 31 December 2016

New standards and Amendments to standards Effective for annual periods beginning on or after

IFRS 16 Leases 1 January 2019

IFRS 9 Financial Instruments 1 January 2018

IFRS 15 Revenue from contracts with customers 1 January 2018

Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions 1 January 2018

Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017

Amendments to IAS 7 1 January 2017

iii) Impact of new and amended standards on the financial statements for the year ended 31 December 2016 and future annual periods

IFRS 9 Financial Instruments

IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9:

• All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss.

The directors of the Company are assessing the impact of the application of IFRS 9 in the future. It is not practical to provide a reasonable estimate of this effect until a detailed review has been completed.






iii) Impact of new and amended standards on the financial statements for the year ended 31 December 2016 and future annual periods (Continued)

IFRS 15 Revenue from Contracts with Customers

In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Specifically, the Standard introduces a 5-step approach to revenue recognition:

Step 1: Identify the contract(s) with a customerStep 2: Identify the performance obligations in the contractStep 3: Determine the transaction priceStep 4: Allocate the transaction price to the performance obligations in the contractStep 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until a detailed review has been completed.

IFRS 16 Leases

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

It is not practical to provide a reasonable estimate of the effect of IFRS 16 until a detailed review has been completed.

Amendments to IAS 7 Disclosure Initiative

The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.

The amendments apply prospectively for annual periods beginning on or after 1 January 2017 with earlier application permitted. The directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s financial statements.






iii) Impact of new and amended standards on the financial statements for the year ended 31 December 2016 and future annual periods (Continued)

Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses

The amendments to IAS 12 Income Taxes clarify the following aspects:

• Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use.

• The carrying amount of an asset does not limit the estimation of probable future taxable profits. • Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. • An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation

of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

The directors of the Company do not anticipate that the application of the amendments in IAS 12 in the future will have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practical to provide a reasonable estimate of the effect of IAS 12 until a detailed review has been completed.

(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.




b) Consolidation (Continued)

(i) Subsidiaries (continued)

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.




(b) Consolidation (Continued)

(iv) Associates (continued) 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 associ-ates 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) Company statements of financial position In the company statements of financial position, investments in subsidiaries and associates are accounted for at cost less im-pairment. 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 eco-nomic 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.

(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 equiva-lents 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’. 2 (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 the that balance sheet;




(c) Foreign currency translation (Continued)

(iii) Group companies (continued)

(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-mak-er (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 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) Sales of goods – retail

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

(iii) Sales 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. 2




(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- Vertical tanks 40 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. (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 identi-fiable 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 com-prehensive 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).




(g) Intangible assets (Continued)

(ii) Computer software (continued) 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.




(i) Financial assets (Continued)

(i) Classification (continued)

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)). 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 (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.




(i) Financial assets (Continued)

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) Financial liabilities

Financial liabilities are recognised initially at cost, and subsequently measured at amortised cost. Specific accounting policies adopted by the group in accounting for financial liabilities outstanding at year end are summarised below: 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 oper-ating 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. 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.

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.




(k) 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. (l) 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. (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) 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% (2015: 30%).




(o) 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. (p) 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. (q) 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. (r) 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 prede-termined 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 in-curred.

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.



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (s) 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.

(t) 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 cap-italised 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. (u) 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 receivable 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.

(f) Deferred income tax Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies (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 2016, 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 26,999,000 (2015: Shs 48,621,000 ) 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. (ii) Price risk

The group is not exposed to commodity price risk. 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 obtained. During 2016 and 2015, the group’s borrowings at variable rate were denominated in the Kshs and the US Dollar.

At 31 December 2016, an increase/decrease of 5% would have resulted in an decrease/increase in consolidated post tax profit of Shs 36,832,975 (2015: Shs 23,312,155), mainly as a result of higher/lower interest charges on variable rate borrowings



4 FINANCIAL RISK MANAGEMENT (Continued)

Financial risk factors (Continued)

(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 2016 and 2015 is made up as follows:

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Cash equivalents 3,886,332 762,095 2,386,689 132,056

Trade receivables 6,416,957 4,121,269 4,606,505 3,187,443

Due from related parties - - 6,232,098 6,060,441

Other receivables 1,316,695 1,858,454 1,041,584 1,797,975

11,619,984 6,741,818 14,266,876 11,177,915

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).

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Past due but not impaired:

- by up to 30 days 2,485,967 1,008,676 790,197 494,080

- by 31 to 90 days 867,286 731,275 595,399 504,984

Total past due but not impaired 3,353,253 1,739,951 1,385,596 999,064

Impaired and fully provided for (221,102) (499,358) (123,672) (364,528) 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 18) 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 Less than 1 year

Between 1 and 2 years

Over 2 years

Total

Shs’000 Shs’000 Shs’000 Shs’000

At 31 December 2016:

- borrowings (excluding finance leases) 7,330,234 36,325 - 7,366,559

- trade and other payables 6,393,652 - - 6,393,652

- current income tax 268,288 - - 268,288

- dividend payable 32,126 - - 32,126

14,024,300 36,325 - 14,060,625


- borrowings (excluding finance leases) 4,662,431 - - 4,662,431


- current income tax 229,672 - - 229,672

- dividend payable 22,978 - - 22,978

8,610,667 - - 8,610,667





(c) Liquidity risk (Continued)

Company Less than 1 year

Between 1 and 2 years

Over 2 years

Total

Shs’000 Shs’000 Shs’000 Shs’000

At 31 December 2016

- borrowings (excluding finance leases) 7,013,213 - - 7,013,213


- due to related parties 10,200,308 - - 10,200,308

- dividends payable 32,126 - - 32,126

21,217,669 - - 21,217,669


- borrowings (excluding finance leases) 4,464,496 - 4,464,496

- trade and other payables 2,676,353 - 2,676,353

- due to related parties 10,014,911 - - 10,014,911

- dividends payable 22,978 - 22,978

17,178,738 - 17,178,738

(d) 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.

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.





(d) Capital risk management (Continued)

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Total borrowings 7,366,559 4,662,431 7,013,213 4,464,496

Less: cash and cash equivalents (3,886,332) (762,095) (2,386,689) (132,056)

Net debt 3,480,227 3,900,336 4,626,524 4,332,440

Total equity 9,865,151 8,555,639 6,198,202 5,789,059

Total capital 13,345,378 12,455,975 10,824,726 10,121,499

Gearing ratio 26% 31% 43% 43%

(e) Fair values of financial assets and liabilities

The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values. Comparison by class of the carrying amounts and fair values of the financial instruments is as set out below.

Group

Carrying amount

Fair value

2016 2015 2016 2015

KShs’000 KShs’000 KShs’000 KShs’000

Financial assets

Amortised cost

Trade and other receivables 7,773,875 6,524,544 7,773,875 6,524,544

Bank and cash balances 3,886,332 762,095 3,886,332 762,095

Financial liabilities

Amortised cost

Borrowings 7,366,559 4,662,431 7,366,559 4,662,431

Trade and other payables 6,393,652 3,695,586 6,393,652 3,695,586



(e) Fair values of financial assets and liabilities (Continued)

Company

Carrying amount

Fair value

2016 2015 2016 2015

KShs’000 KShs’000 KShs’000 KShs’000

Financial assets

Amortised cost

Trade and other receivables 5,685,904 5,531,768 5,685,904 5,531,768

Bank and cash balances 2,386,689 132,056 2,386,689 132,056

Financial liabilities

Amortised cost

Borrowings 7,013,213 4,464,496 7,013,213 4,464,496

Trade and other payables 3,972,022 2,676,353 3,972,022 2,676,353

Trade and other receivables are evaluated regularly to assess the likelihood of impairment. Based on this evaluation, allowances are taken to account for the expected losses on these receivables. As at 31 December 2016, the carrying amounts of such receivables, net of allowances, approximates their fair value.The fair values of bank and cash balances,bank overdraft and trade and other payables approximates their carrying amounts largely due to the short term maturities of these instruments.

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 business lines are organised primarily based on the target market.

For the purposes of this disclosure, operating segments have been aggregated based on similarity in geographical factors, product type and target market. Retail, Commercial, Reseller & Fuel oil operating segments have been aggregated under Inland market segment as their main target market is local. Export, Trading and Aviation operating segments have been aggregated under one segment as they mainly deal in bulk products and Exports. Lubricants, LPG and Non fuel operating segments have been aggregated under Niche business as the segments cater to niche markets.

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.



5 SEGMENT INFORMATION (Continued)

The segment information provided to the Group Management Team for the reportable segments for the year ended 31 December 2015 is as follows:

Inland Market

Export, Trading, Aviation

Niche Business Total

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Total segment revenue 44,783,775 37,951,635 3,822,526 86,557,936

Revenue from external customers 44,783,775 37, 951,635 3,822,526 86,557,936

Gross profit 3,838,859 1,083,446 915,145 5,837,450

Other income 400,922 78,132 351,337 830,391

Administrative expenses (2,604,601) (203,680) (132,160) (2,940,441)

Impairment provision for KPRL yield shift receivable

(129,237) (13,203) (4,254) (146,694)

Finance cost (524,318) (293,412) (49,825) (867,555)

Finance income 49,801 17,205 1,050 68,056

Income tax expense (234,517) (260,819) (389,155) (884,491)

Share of profit from associates - - 1,214 1,214

Profit after tax from continuing operation 796,909 407,669 693,352 1,897,930

The segment information provided to the Group Management Team for the reportable segments for the year ended 31 December 2016 is as follows:

Inland Market Export, Trading, Aviation

Niche Business Total

Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000

Total segment revenue 56,279,214 42,726,643 4,488,067 103,493,924

Revenue from external customers 56,279,214 42,726,643 4,488,067 103,493,924

Gross profit 5,020,552 1,378,866 984,137 7,383,555

Other income 178,411 11,367 274,575 464,353

Administrative expenses (3,038,377) (262,973) (149,813) (3,451,163)

Impairment provision for KPRL yield shift receivable

(528,600) (54,000) (17,400) (600,000)

Finance cost (154,680) (174,762) (22,723) (352,165)

Finance income 40,611 45,884 5,966 92,461

Income tax expense (492,884) (295,948) (336,217) (1,125,049)

Share of profit from associates - - 1,215 1,215

Profit after tax 1,025,033 648,434 739,740 2,413,207



5 SEGMENT INFORMATION (Continued)

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 (a) OTHER INCOME

Group

2016 2015

Shs’000 Shs’000

Gain/(Loss) on disposal of property, plant and equipment 12,281 147,626

Rental income 304,294 289,300

Facility fees 96,343 91,187

Non-fuel and other income 51,435 302,278

464,353 830,391

6 (b) ASSETS AND LIABILITIES OVER WHICH CONTROL WAS LOST IN 2015

NET ASSETS TANZANIA CONGO TOTAL

Current assets

Shs’000

878,035

Shs’000

17,056

Shs’000

895,091

Non-current assets 394,224 413,955 808,179

Current liabilities (74,065) (456,310) (530,375)

Net assets disposed of 1,198,194 (25,299) 1,172,895



6 (c) GAIN ON DISPOSAL OF OPERATIONS IN 2015

2016 2015

Shs’000 Shs’000

Consideration received in cash and cash equivalent - 1,641,096

Deferred sales proceeds - 153,450

Total consideration received - 1,794,546

Net assets disposed off - (1,172,895)

Cumulative exchange loss in respect of net assets of the subsidiary reclassified from equity to profit or loss on loss of control - (40,050)

Gain on disposal - 581,601

The gain on disposal is included in the profit for the year from discontinued operations (see note 11).

7 Impairment provision for KPRL yield shift receivable

The provision relates to additional impairment expense recognised on an amount due from the Kenya Petroleum Refineries Limited. The balance arose from losses incurred by the company due to inefficiencies in the processing of crude oil at the refinery. The matter is the subject of discussions between oil marketing companies and the government and the impairment has been as a result of delays in the recovery of the balance. The directors assessed the balance for impairment based on the estimated recovery period and discounted the outstanding amount by Shs 600 million (2015: Shs146 million) to arrive at the net present value of the future cash flows using a discount rate of 10%. The asset belongs to all reportable segments.

8 EXPENSES BY NATURE The following items have been charged in arriving at profit before income tax:

2016 2015

Group Shs’000 Shs’000

Employee benefits expense (Note 9) 230,822 544,988

Amortisation of operating lease rentals (Note 21) 585,686 493,329

Depreciation of property, plant and equipment (Note 20) 360,369 258,808

Receivables – provision for impairment losses (Note 27) (17,645) 69,673

Impairement Provision for KPRL yield shift receivable 600,000 146,694

Repairs and maintenance of property, plant and equipment 300,140 233,744

Auditors’ remuneration

- Company 10,642 14,653

- Group (including Company) 15,170 27,202



9 EMPLOYEE BENEFITS EXPENSE

2016Shs’000

2015Shs’000

Salaries and wages 574,619 544,991

Retirement benefits costs:

- Defined contribution scheme 24,584 27,847

- National Social Security Funds 8,880 11,655

Employee Share Ownership Plan (ESOP) movement in provision (386,148) (50,753)

Other staff costs 8,887 11,248

230,822 544,988

10 FINANCE INCOME AND COSTS

2016Shs’000

2015Shs’000

Finance costs:

Interest expense (354,690) (651,344)

Net foreign exchange gain/(losses) on financing activities 2,525 (232,064)

(352,165) (883,408)

Finance income:

Interest income 92,461 83,909

Net finance costs (259,704) (799,499)

11 TAXATION

(a) Group

2016Shs’000

2015Shs’000

Current tax charge

- Charge for the year 474,864 102,718

- Prior year under provision - 8,635

474,864 111,353

Deferred tax charge

- Charge for the year (Note 17) 652,650 654,266

- Prior year under provision (Note 17) (2,465) 118,872

- Write-off of discontinued operations (Note 12) - -

650,185 773,138

Income tax charge for the year 1,125,049 884,491



11 TAXATION (Continued)

(a) Group (Continued)

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:

2016Shs’000

2015Shs’000

Profit before income tax 3,538,256 2,782,421

Tax calculated at a tax rate of 30% (2015: 30%) 935,248 834,726

Effect of different tax rates in Kobil Zambia and Kobil Petroleum Limited (Kenya) (35%) and (37.5%) respectively 146,471 3,183

Prior year under provision of current income tax - (8,635)

Prior year under provision of deferred income tax (Note 17) (2,465) 118,872

Excess pension contribution 18,558 17,735

Depreciation on non qualifying assets 5,864 3,839

Fixed car cost 6,072 5,570

Loss on disposal of non qualifying assets - 235,249

Other expenses not deductible for tax purposes 22,679 53,036

Income not subject to tax (5,642) (374,551)

Translation differences (1,736) (4,533)

Income tax charge 1,125,049 884,491

(b) Company

2016Shs’000

2015Shs’000

Current tax charge

- Charge for the year 32,805 17,990

Deferred tax charge

- Charge for the year (Note 17) 589,077 586,563

- Prior year (over)/under provision (Note 17) (4,348) 95,289

584,729 681,852

Income tax charge for the year 617,534 699,842

Profit before income tax 2,000,256 1,317,021

Tax calculated at a tax rate of 30% (2015: 30%) 600,076 395,106

Prior year (over) / under provision of deferred income tax (4,347) 95,289

Excess pension contribution 5,621 5,372

Depreciation on non qualifying assets 5,864 3,839

Fixed car cost 6,072 5,570

Other expenses not deductible for tax purposes 4,248 8,050

Loss on disposal of non qualifying assets - 235,249

Income not subject to tax - (48,633)

Income tax charge 617,534 699,842



11 TAXATION (Continued)

(c) Income tax movement

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

At 1 January- Income tax recoverable (272,270) (569,755) (254,814) (266,315)

- Income tax payable 229,672 196,541 - -

(42,598) (373,214) (254,814) (266,315)

Chargefor the year 474,864 111,353 32,805 17,990

Reallocaocation to Kobil - 87,466

Derecognised on discontinued operations - 276,038 - -

Paid during the year (314,477) (59,837) (301) (6,489)

Exchange difference 1,884 3,062 - -

119,673 (42,598) (134,844) (254,814)

At 31 December- Income tax recoverable (148,615) (272,270) (134,844) (254,814)

- Income tax payable 268,288 229,672 - -

119,673 (42,598) (134,844) (254,814) 12 PROFIT FROM DISCONTINUED OPERATIONS

The combined results of the discontinued operations included in the profit for the prior year are set out below.

2016 2015

Shs’000 Shs’000

Loss - (38,068)

Other income - 64,641

26,573

Expenses - (491,130)

Loss before tax - (464,557)

Attributable income tax - -

(464,557)

Gain on disposal of discontinued operations (Note 6(b)) - 581,601

Profit/(loss) for the year from discontinued operations - 117,044



13 EARNINGS PER SHARE

2016 2015

Profit attributable to equity holders of the Company (Shs ‘000):

From continuing and discontinued operations 2,413,207 2,014,974

From continuing operations 2,413,207 1,897,930

Number of ordinary shares in issue (Note 13) 1,471,761,200 1,471,761,200

Basic earnings per share (Shs):

From continuing and discontinued operations 1.64 1.37

From continuing operations 1.64 1.29

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.

2016 2015

Profit attributable to equity holders of the Company 2,413,207 2,014,974

Number of ordinary shares in issue 1,471,761,200 1,471,761,200

Weighted average number of ordinary shares for diluted earnings per share 1,471,761,200 1,471,761,200

Diluted earnings per share (Shs) 1.64 1.37

This computation does not take into account gains/losses recognised directly in equity.

14 SHARE CAPITAL

Number of ordinary shares

Ordinary share capital

Shs’000

Share Premium

Shs’000

Balance at 1 January 2015, 2016 1,471,761,200 73,588 5,166,350

Balance at 31 December 2015 and 2016 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.



15 OTHER RESERVES

(a) Group ESOP reserve

Fair value reserve

Translationreserve Total

Year ended 31 December 2015

At start of year 436,901 85,445 (793,883) (271,537)

Currency translation differences - - (297,559) (297,559)

Movement in the ESOP reserve (50,753) - - (50,753)

Net movement (50,753) - (297,559) (348,312)

At end of year 386,148 85,445 (1,091,442) (619,849)


At start of year 386,148 85,445 (1,091,442) (619,849)

Currency translation differences (128,842) (128,842)

Movement in the ESOP reserve (386,148) - - (386,148)

Net movement (386,148) - (128,841) (514,990)

At end of year - 85,445 (1,220,283) (1,134,839)

Translation reserve arises from the gains/losses on translation of results from foreign operations. It is non-distributable.

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.

(b) Company ESOP reserve

Fair value reserve Total

Year ended 31 December 2015 Shs’000 Shs’000 Shs’000

At start of year 434,625 85,445 520,070

Movement in the ESOP reserve (50,753) - (50,753)

Net movement (50,753) - (50,753)

At end of year 383,872 85,445 469,317


At start of year 383,872 85,445 469,317

Movement in the ESOP reserve (383,872) - (383,872)

Net movement

At end of year - 85,445 85,445



15 OTHER RESERVES (Continued)

(c) Employees’ Share Ownership Plan (ESOP) As at 31 December 2016, 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; and• 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 no later than the fourth anniversary of the letter of grant. 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.

16 DIVIDENDS

During the year, an interim dividend of Shs 220,765,000 was paid (2015:147,176,120). The directors recommend a final dividend of Shs 441,528,000 (2015: 367,940,300). 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 2016Shs’000

2015Shs’000

At start of year 22,978 59,477

Declared dividend 588,704 441,519

Paid dividend (579,556) (478,018)

At end of year 32,126 22,978



17 DEFERRED TAX

Deferred income tax is calculated using the enacted income tax range rates of between 30% and 37.5% (2015 30% and 37.5%). The movement on the deferred income tax account is as follows:

Group Company

2016 2015 2016 2015

Shs’00 Shs’000 Shs’000 Shs’000

At start of year

Deferred tax assets (1,419,893) (2,179,594) (1,288,502) (1,970,354)

Deferred tax liability 210,797 197,360 - -

(1,209,096) (1,982,234) (1,288,502) (1,970,354)

Charge to profit and loss account (Note 11) 652,650 654,266 589,077 586,563

Under provision in prior year deferred tax (Note 10)

(2,465) 118,872 (4,348) 95,289

At end of year 558,911 (1,209,096) (703,773) (1,288,502)

At end of year

Deferred tax assets (834,840) (1,419,893) (703,773) (1,288,502)

Deferred tax liability 275,929 210,797 - -

558,911 (1,209,096) (703,773) (1,288,502)

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:

Group 2016

At 1 January 2016

Chargedto income statement

At 31 December

2016

Deferred income tax liabilities Shs’000 Shs’000 Shs’000

Property, plant and equipment:

- on historical cost basis 128,320 8,627 136,947

Unrealised exchange differences 82,477 56,505 138,982

210,797 65,132 275,929

Deferred income tax assets

Provisions (368,163) 20,789 (347,374)

Tax losses (1,051,730) 564,264 (487,466)

(1,419,893) 585,053 (834,840)

Net deferred income tax asset (1,209,096) 650,185 (558,911)



17 DEFERRED TAX (Continued)

Group 2015 At 1 January 2016


At 31 December 2016



- on historical cost basis 163,739 (35,419) 128,320

Unrealised exchange differences 10,910 71,567 82,477

174,649 36,148 210,797

Deferred income tax assets

Provisions (240,716) (127,447) (368,163)

Tax losses (1,916,167) 864,437 (1,051,730)

(2,156,883) 736,990 (1,419,893)

Net deferred income tax asset (1,982,234) 773,138 (1,209,096)

Company 2016At 1 January

2016Charged

to income statement

At 31 December 2016



- on historical cost basis 8,751 2,238 10,989

Provisions (350,222) 132,326 (217,896)

Unrealised exchange differences 18,733 (28,133) (9,400)

Tax losses (965,764) 478,298 (487,466)

Net deferred income tax asset (1,288,502) 584,729 (703,773)

2015At 1

January 2016


Chargedto equity

At 31 December 2016

Shs’000 Shs’000 Shs’000 Shs’000

Deferred income tax liabilities


- on historical cost basis (15,984) 24,735 - 8,751

Provisions (192,058) (158,164) - (350,222)

Unrealised exchange differences and hedge losses

(130,719) 149,452 - 18,733

Tax losses (1,631,593) 665,829 - (965,764)

Net deferred tax asset (1,970,354) 681,852 - (1,288,502)



17 DEFERRED TAX (Continued)

As at 31 December 2016, the Group had accumulated tax losses amounting to Sh 1,624,888,137 (2015 – Sh 3,219,213,681) avail-able for carry forward and set off against future taxable profit. In 2015, the Kenyan Tax law was revised to allow the companies carry forward tax losses to a maximum period of 10 years with effect from 1 January 2015. Consequently, the directors having reviewed the cash flow projections, are of the opinion that the tax losses will be utilized within the relief period. Therefore the deferred tax asset attributable to tax losses has been recognized in the statement of financial position as at 31 December 2016.

18 BORROWINGS The borrowings are made up as follows:

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Non-current

Bank borrowings - -

Finance leases 36,325 - - -

Total Non-current 36,325 - - -

- borrowings in KShs 953,756 407,595 953,756 407,595

- borrowings in US$ 6,059,457 4,030,949 6,059,457 4,030,949

- borrowings in Ushs 132,361 95,892 - -

- borrowings in Ebirr 158,434 102,043 - -

- borrowings in Zkw 26,226 - -

Commercial paper - 25,952 - 25,952

Total current 7,330,234 4,662,431 7,013,213 4,464,496

Total borrowings 7,366,559 4,662,431 7,013,213 4,464,496

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Movement in borrowings:

At 1 January 4,662,431 10,498,228 4,464,496 9,571,371

Borrowing/(repayment) in the year 2,704,128 (5,835,797) 2,548,717 (5,106,875)

At 31 December 7,366,559 4,662,431 7,013,213 4,464,496

The bank borrowings are secured by certain land and buildings of the Group with a value in excess of Shs 535 million (2015: Shs 571 million). Finance leases are effectively secured as the rights to the leased asset revert to the lessor in the event of default.



18 BORROWINGS (Continued)

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$ 301.2 Million (2015: US$ 280.8 Million)Unutilised LC facilities at year end amount to US$ 270.5 Million (2015: US$ 273.8 Million) 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:

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Between 1 and 2 years 36,325 - - -

19 PAYABLE AND ACCRUED EXPENSES

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Trade payables 5,268,066 2,616,223 3,123,731 1,876,997

Other payables & Accrued expenses 1,125,586 1,079,363 848,291 799,356

6,393,652 3,695,586 3,792,022 2,676,353



20 PROPERTY, PLANT AND EQUIPMENT

(a) Group

Freehold land Buildings

Motor vehicles

Plant&

equipment

Furniture& office

equipment Total

Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

At 1 January 2015

Cost or valuation 372,538 3,875,968 75,770 2,215,146 189,921 6,729,343

Accumulated 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


Opening net book amount 372,538 2,868,730 22,097 1,357,011 28,101 4,648,477

Discontinued operations write-off 35 (734,838) (5,012) (54,441) 9,029 (785,227)

Additions 362 166,545 26,308 129,677 72,769 395,661

Transfers - (47,327) 2,920 44,407 - -

Adjustments (158,821) - 66,073 - (92,748)

Disposals (54,989) (55,256) (7,521) (22,877) (2,528) (143,171)

Currency translation differences 4,367 (38,020) (5,513) (182,031) 1,427 (219,770)

Charge for the year - (97,627) (4,746) (141,880) (14,555) (258,808)

Closing net book amount 322,313 1,903,386 28,533 1,195,939 94,243 3,544,414

At 31 Dec 2015

Cost 322,313 2,930,537 86,686 2,081,031 222,446 5,643,013

Accumulated depreciation (1,027,151) (58,153) (885,092) (128,203) (2,098,599)

Net book amount 322,313 1,903,386 28,533 1,195,939 94,243 3,544,414



20 PROPERTY, PLANT AND EQUIPMENT (Continued)

(a) Group (Continued)


Motor vehi-cles

Plant&

Equipment

Furniture& office

equipment Total



Opening net book amount 322,313 1,903,386 28,533 1,195,939 94,243 3,544,414

Additions 23,360 319,124 16,152 195,247 32,181 586,064

Transfers - 116,179 - (130,855) 14,676 -

Disposals - (2,197) (2,437) (5,830) (62) (10,526)

Currency translation differences 20 (13,295) 3,119 135,157 2,940 127,942


Closing net book amount 345,694 2,215,102 38,067 1,190,145 98,517 3,887,525

At 31 December 2016

Cost 345,694 3,296,074 90,059 2,164,009 267,861 6,163,696

Accumulated depreciation - (1,080,972) (51,992) (973,864) (169,344) (2,276,172)

Net book amount 345,694 2,215,102 38,067 1,190,145 98,517 3,887,525

(b) Company

At 1 January 2015

Cost 159 419,052 22,864 246,266 56,989 745,330

Accumulated depreciation - (181,073) (13,677) (61,140) (48,926) (304,816)

Net book amount 159 237,979 9,187 185,126 8,063 440,514


Opening net book amount 159 237,979 9,187 185,126 8,063 440,514

Additions - 52,870 9197 73,425 70,784 206,276

Disposals - (135) - (547) (1,932) (2,614)

Transfers - 2,232 2,920 (5,152) - -


Closing net book amount 159 286,513 16,497 242,156 65,828 611,153

At 31 Dec 2016

Cost 159 473,275 34,687 299,362 96,122 903,605


Net book amount 159 285,513 16,497 242,156 65,828 611,153



20 PROPERTY, PLANT AND EQUIPMENT (Continued)

(b) Company (Continued)


Motor vehicles

Plant&

equipment

Furniture& office

equipment Total



Opening net book amount 159 286,513 16,497 242,156 65,828 611,153

Additions - 21,843 15,233 119,199 11,952 168,227

Disposals (2,437) (3,978) (62) (6,477)

Charge for the year (9,776) (6,599) (34,116) (28,263) (78,754)

Closing net book amount 159 298,580 22,694 323,261 49,455 694,149

At 31 December 2016

Cost 159 493,405 41,046 403,880 107,958 1,046,448


Net book amount 159 298,580 22,694 323,261 49,455 694,149

21 PREPAID OPERATING LEASE RENTALS

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

At start of year 887,127 734,754 366,206 108,787

Additions 645,688 773,364 439,246 510,830

Disposals (7,881) (79,641) -

Amortisation for the year (585,686) (493,329) (314,577) (253,370)

Currency translation differences (28,544) (48,021) -

At end of year 910,704 887,127 490,875 366,247



22 INTANGIBLE ASSETS

(a) Group

GoodwillComputer

software Total

Shs’000 Shs’000 Shs’000


Opening net book amount 847,942 2,144 850,086

Amortisation - (1,768) (1,768)

Currency translation differences - 21 21

Additions - 17,089 17,089

Closing net book amount 847,942 17,486 865,428

At 31 December 2015

Cost 847,942 133,295 981,237

Accumulated amortisation and impairment - (115,809) (115,809)

Net book amount 847,942 17,486 865,428


Opening net book amount 847,942 17,486 865,428

Amortisation - (23,832) (23,832)

Currency translation differences - 14 14

Additions - 83,159 83,159

Closing net book amount 847,942 76,827 924,769

At 31 December 2016

Cost 847,942 216,454 1,064,396

Accumulated amortisation and impairment - (139,627) (139,627)

Net book amount 847,942 76,827 924,769

Based on the annual impairment test for goodwill, there is no impairment of goodwill at 31 December 2016 and 31 December 2015.

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to the following cash generating units.- Kobil Uganda Limited- Kobil Burundi SA- Aviation business unit- Retail business unit- LPG Business unit



22 INTANGIBLE ASSETS (Continued)

Before recognition of impairment losses, the carrying amount of goodwill was allocated to cash-generating units as follows:

2016 2015

Shs’000 Shs’000

- Kobil Uganda Limited 26,098 26,098

- Kobil Burudi SA 12,908 12,908

- Aviation Business unit 289,617 289,617

- Retail Business unit 479,495 479,495

– LPG Business unit 39,824 39,824

847,942 847,942

Allocation of goodwill to cash-generating units (Continued)

The recoverable amount of the cash-generating units is determined based on value in use calculations which use cash flow projections based on financial budgets approved by the directors covering a five-year period, and a discount rate of 10% per annum (2015: 15% per annum).

Cash flow projections during the budget period are based on the same expected gross margins and price inflation throughout the budget period. The cash flows beyond that five-year period have been extrapolated using a steady 1% (2015: 4%) per annum growth rate which is the projected long-term average growth rate for the CGUs. The directors believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.

(b) Company

Computer software

Year ended 31 December 2016 2015

Shs’000 Shs’000

Opening net book amount 15,673 9

Amortisation (23,151) (1,425)

Additions 70,428 17,089

Closing net book amount 62,950 15,673

At 31 December

Cost 189,349 118,921

Accumulated amortisation and impairment (126,399) (103,248)

Net book amount 62,950 15,673



23 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 2016 2015

incorporation incorporation Shs’000 Shs’000

Kobil Petroleum Ltd USA 100 5,172,440 5,172,440

Kobil Uganda Limited Uganda 100 347,816 347,816

Kobil Zambia Limited Zambia 100 - -

Kobil Petroleum Rwanda Limited Rwanda 100 - -

Kobil Ethiopia Limited Ethiopia 100 498,852 498,852

Kobil Burundi SA Burundi 100 262,185 262,185

6,281,293 6,281,293

24 AVAILABLE-FOR-SALE INVESTMENT

Group

2016 2015

Shs’000 Shs’000

At start and end of year 2,235 2,235 Available for sale investment in represents an investment in government bonds by Kobil Ethiopia.

They are classified under Level 1 fair value hierarchy. Level 1 fair value hierarchy is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

25 INVESTMENT IN ASSOCIATES

Group

2016 2015

Shs’000 Shs’000

At start of year 3,197 12,001

Share of profit 1,215 1,214

Exchange differences - (3,032)

Goodwill impairment - (6,986)

At end of year 4,412 3,197



25 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 2016 was Shs 4,412,000

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 2016 which is accounted for using the equity method;

Year ended 31 December Country of incorporation

Interest held AssetsShs ‘000

LiabilitiesShs ‘000

RevenuesShs ‘000

2015 Zambia 25.5% 22,618 32,481 90,443

2016 Zambia 25.5% 26,711 33,003 75,560 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.

26 INVENTORIES

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Refined products on hand 5,828,398 3,095,900 4,743,296 2,425,850 All inventories are stated at the lower of cost and net realisable value.



27 RECEIVABLES AND PREPAYMENTS

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Trade receivables 6,638,059 4,620,627 4,730,177 3,551,971

Less: provision for impairment losses (221,102) (499,358) (123,672) (364,528)

Trade receivables – net 6,416,957 4,121,269 4,606,505 3,187,443

Prepayments 40,223 544,821 37,815 546,350

Other receivables 1,316,695 1,858,454 1,041,584 1,797,975

Total receivables and prepayments 7,773,875 6,524,544 5,685,904 5,531,768

Provision for impairment losses movement

At start of year (499,358) (623,329) (364,528) (359,040)

(Credited)/charged to income statement 17,645 (69,673) 24,734 (5,488)

Amounts recovered 44,172 21,284 - -

Provisions utilised 216,123 157,949 216,122 -

Currency translation differences 317 14,411 - -

At end of year (221,102) (499,358) (123,672) (364,528)

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.

28 CASH AND CASH EQUIVALENTS

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Cash at bank and in hand 3,886,332 762,095 2,386,689 132,056

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand and deposits held at call with banks



29 CASH GENERATED FROM OPERATIONS

Reconciliation of profit before income tax to cash generated from operations

2016 2015

Shs’000 Shs’000

Profit before income tax

- Continuing operations 3,538,256 3,364,022

- Discontinued operations - (464,557)

Adjustments for:

Interest income (Note 9) (92,461) (83,909)

Interest expense (Note 9) 354,690 651,344

Depreciation (Note 19) 360,369 258,808

Zambia Lubeland goodwill impairment - 6,986

Amortisation of prepaid operating lease rentals (Note 20) 585,686 493,329

Amortisation of intangible assets (Note 21) 23,832 1,768

Gain on sale of property, plant and equipment (12,281) (147,626)

Gain on disposal of subsidiary - (581,601)

Write-off of property, plant and equipment - 92,748

Share of (profit)/loss in associate (Note 24) (1,215) (1,214)

ESOP reserve movement recognised through P&L (386,149) (50,753)

Changes in working capital

- receivables and prepayments (1,249,331) 3,047,622

- inventories (2,732,498) 1,045,283

- payables and accrued expenses 2,698,066 (1,937,477)

Cash generated from operations 3,086,964 5,694,773

30 RELATED PARTIES AND RELATED PARTIES TRANSACTIONS The Group has shareholding by various companies. 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.



30 RELATED PARTIES AND RELATED PARTIES TRANSACTIONS (Continued)

The following transactions were carried out with related parties:

(i) Sales of goods (Company)

2016 2015

Shs’000 Shs’000

Kobil Uganda Limited 1,744,618 1,504,815

Kobil Tanzania Limited - 93,467

Kobil Petroleum Rwanda SARL 1,199,534 1,896,918

Kobil Zambia Limited 26,584 12,827

Kobil Burundi SA 341,949 1,189,522

Total 3,312,685 4,697,549

(ii) Key management compensation (Group)

Salaries and other short term employment benefits 187,675 173,316

Company Pension contribution 4,642 3,870

Total 192,317 177,186

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

Due from Kobil Petroleum Limited – Kenya Branch 5,784,286 5,784,286

Kobil Uganda Limited 237,471 130,549

Kobil Ethiopia Limited 18,144 11,986

Kobil Burundi Limited 599,628 122,392

Kobil Rwanda Limited (408,763) -

Kobil Zambia Limited 1,332 11,228

Total 6,232,098 6,060,441

Non-current receivables from related parties - -

Current receivables from related parties 6,232,098 6,060,441

Total 6,232,098 6,060,441 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 balances from related parties (2015: nil).



30 RELATED PARTIES AND RELATED PARTIES TRANSACTIONS (Continued)

(iv) Payables to related companies 2016 2015

Shs’000 Shs’000

Due to Kobil Petroleum Limited 9,791,545 9,989,566

Due to Kobil Rwanda Limited 408,763 25,345

10,200,308 10,014,911

(v) Directors’ remuneration (Group and Company)

2016Shs’000

2015Shs’000

Fees for services as a director 9,786 9,904

Other emoluments (included under key managementcompensation above) 79,324 74,252

Total remuneration of directors of the Group 89,110 84,156 During the year, the Company undertook transactions with entities connected to directors as follows:

2016Shs’000

2015Shs’000

Sharpley Barret 54,872 -

*Related to the company by virtue of common directorship

(vi) Terms of the related party transaction

Transactions with related parties are made at arm’s length.

31 CONTINGENT LIABILITIES The Group is a defendant in various legal actions. In the opinion of the directors, after taking appropriate legal advice, the out-come 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$ 11.7 million (2015: US $ 12.5 million).

In addition, at year end, the Company had transit bonds and performance guarantees totalling Shs 1.3 Billion (2015: Shs 1.1 Billion).

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:

Group Company

2016 2015 2016 2015

Shs’000 Shs’000 Shs’000 Shs’000

Property, plant and equipment 243,876 267,679 227,694 200,470

(b) Operating lease commitments

Not later than 1 year 100,279 177,250 66,181 131,237

Later than 1 year and not later than 5 years560,683 592,807 197,604 269,456

Later than 5 years 266,947 785,114 30,948 520,275

927,909 1,555,171 294,733 920,968

33 POST BALANCE SHEET EVENTS REVIEW

No material events or circumstances have arisen between the reporting date and the date of this report.

34 CURRENCY

The financial statements are presented in thousands of Kenya Shillings (Sh’000).



The ten major shareholdings in the Company and the respective number of shares held at 28 February 2017 as follows:

Name of shareholder Number of shares

% Shareholding

1. WELLS PETROLEUM HOLDINGS LTD 302,579,818 20.56%

2. PETRO HOLDINGS LIMITED 255,219,280 17.34%

3 STANBIC NOMINEES LIMITED 105,622,571 7.18%

4 STANDARD CHARTERED NOMINEE ACCOUNT KE14861 91,591,617 6.22%

5 ENERGY RESOURCES CAPITAL LTD 88,185,720 5.99%

6 SCB A/C PAN AFRICAN UNIT LINKED FD 49,406,700 3.36%

7 STANBIC NOMINEES LIMITED 48,091,600 3.27%

8 STANDARD CHARTERED KENYA NOMINEES LTD A/C KE002012 37,216,672 2.53%

9 AUNALI FIDAHUSSEIN RAJABALI AND SAJJAD FIDAHUSSEIN RAJABALI 30,270,200 2.06%

10 STANBIC NOMINEES LTD A/C NR1031144 22,710,600 1.54%

Shares held by top 10 Shareholders 1,030,894,778 70.04%

Shares held by other Shareholders 440,866,422 29.96%

Total Issued Shares 1,471,761,200 100.00%

Distribution of shareholders

Numberof shares

Number of shareholders

% Shareholding

1. 1 than 500 shares 2,139 548,850 0.04

2. 501 – 1,000 shares 1,169 1,0586,583 0.07

3. 1,001 – 5,000 shares 2,047 5,005.083 0.38

4. 5,001 – 10,000 shares 784 6,384,260 0.43

5. 10,001 – 50,000 shares 942 22,510,973 1.43

6. 50,001 – 100,000 shares 244 17,792,369 1.21

7. 100,001 – 500,000 shares 307 73,770,010 5.01

8. 500,001 – 1,000,0000 shares 56 40,387,954 2.74

9. Over 1,000,000 shares 93 1,303,715,148 88.58

Total 1,471,761,200 7,781 100



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 Thursday, 11 May 2017 and at any adjournment thereof.

Signed/Sealed this……………………………… day of ………………………………….2017

_________________________________

Important Notes:

1. If you are unable to attend this meeting personally, this Form of Proxy should be completed and returned to: Company Secretary, IMAGE REGISTRARS LIMITED| SECURITIES REGISTRARS & TRUSTEES, 5th Floor Barclays Plaza Loita Street P.O. Box 9287-00100, Nairobi to reach not later than 11.00 am on 4 May 2017. 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

IMAGE REGISTRARS LIMITEDSECURITIES REGISTRARS & TRUSTEES

5th Floor Barclays Plaza Loita Street Nairobi P.O. Box 9287-00100, Nairobi.

Telephone: 020-2212065, 2230330, 2246449 FAX: 020-2212120

Mobile: 0724 699 667, 0735 565 666Email: [email protected]

NOTES

NOTES


www.kenolkobil.com

Kenya - Head OfficeAvenue 5 Building, Rose Avenue, KilimaniP.O.Box 44202 or 30322, 00100 GPO, Nairobi, KenyaOffice Cell: +254 703 022000E-mail: [email protected]

Uganda - Subsidiary

Kobil Uganda LimitedPlot No. 4 Wankulukuku RoadNalukolongo, Industrial Area,P.O. Box 27478, Kampala, UgandaTel: (+256 312) 502200, (+256 414) 271425 / 272765 /

272974

Fax: +256 414 270153/272950E-mail: [email protected]: www.kenolkobil.com

Ethiopia - Subsidiary

Kobil 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

Zambia - Subsidiary

Kobil 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

Rwanda - Subsidiary

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

Burundi - Subsidiary

Kobil Burundi S.A.Head OfficeQuartier lndustriel08,Av. RivageTel. : +257 22 243592+257 22 244946Fax: +257 22 243593B.P. 466 Bujumbura-BURUNDI

Documents

Pursuing Sustainable Growth - KenolKobil€¦ · Notice of Annual General Meeting 3 Chairman’s Report 4-5 Group Managing Director’s Report 6-7 ... well equipped garages and tyre