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Investor Presentaiton

ANNUAL REPORT 2020 94 Notes to the Financial Statements For the year ended 31 December 2020 (f) Capital Management The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Company defines as result from operating activities divided by total shareholders' equity. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Company's debt to capital ratio at the end of the reporting period was as follows: In thousands of naira Total liabilities Cash and cash equivalents Net debt Total equity Debt to capital ratio at December 31 2019 29 Related Parties (a) Parent and Ultimate Controlling Party The parent and ultimate controlling party of the Company is Friesland International Beheer B.V., incorporated in The Netherlands, with a 67.81% (2019: 67.81%) shareholding. (b) Key Management Personnel Compensation In addition to their salaries, the Company also provides non-cash benefits to key management personnel, and contributes to a post-employment defined contribution plan on their behalf. In accordance with the terms of the plan, key management personnel are entitled to access the fund when they retire. Key management personnel also participate in the Company's long service award and terminal milk benefit programmes. These programmes award certain sums of cash benefit which accrue to the recipient on graduated periods of uninterrupted service. 2020 180,371,725 (88,702,534) 91,669,191 82,326,993 (7,857,211) Key management personnel compensation comprised: 74,469,782 In thousands of naira 26,290,913 3.49 24,234,981 3.07 2020 2019 There were no changes in the Company's approach to capital management during the year. The Company is not subject to externally imposed capital requirements. 27 Operating Leases The Company has operating leases for business premises and accommodation for certain employees. The leases typically run for a period of one to two years. The full lease rental is paid in advance at the commencement of lease. Refer to note 7 for amounts expensed in respect of the these leases and Note 16 for prepayments at year-end. Short-term employee benefits Contribution to compulsory pension fund scheme Long-term employee benefits 424,507 396,351 20,776 17,440 10,388 8,720 455,671 422,511 The directors of the Company have also been identified as related parties and their remuneration has been disclosed in note 9 (c). At year-end, the directors held 0.41 percent (2019: 0.41 percent of the company's issued share capital). (c) 28 Contingencies (a) Guarantees Other Related Party Transactions (i) Payables, purchases and royalty expense Nature of transaction Transaction value for the year Balance outstanding at year-end (Note 23) There are contingent liabilities for guarantees to a bank in respect of: In thousands of naira In thousands of naira Related Party 2020 2019 2020 2019 2020 2019 Staff car loans 3,015 Friesland Brands B.V., Netherlands FrieslandCampina B.V., Netherlands Koninklijke FrieslandCampina N.V., Netherlands Royalty expense (Note (e)(i)) Purchases (Note (e)(ii)) 4,559,415 112,053,935 4,423,295 82,338,172 4,580,723 72,210,382 3,513,054 36,381,352 Loans Staff housing loans 65,305 74,222 101,061,713 217,675,063 86,761,467 69,287,101 146,078,206 39,894,406 The Company's exposure to contingent liabilities arising from staff car and housing loans is limited as these loans are secured by employee retirement benefits. (ii) Receivables and sales Nature of transaction (b) Pending Litigations Transaction value for the year Balance outstanding as at year-end (Note 17) There are fifteen lawsuits pending against the Company in courts of law and a claim against the Company which are being handled by external legal counsel. At year-end, the contingent liability in respect of these amounted to #1.32 billion (2019: #1.48 billion). In the opinion of the Directors and based on independent legal advice, no material losses are expected to arise from these claims. Hence, no provision has been made in these financial statements. In thousands of naira Related Party 2020 2019 2020 2019 Friesland Export West Africa, Netherlands Sales (Note (e) (iii)) 360,903 732,584 360,903 290,667 290,667 287,076 732,584 287,076 All outstanding balances with these related parties are to be settled in cash within six months of the reporting date. FrieslandCampina WAMCO Nigeria PLC FrieslandCampina WAMCO Nigeria PLC 95
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