Annualreport 2014 B

ANNUAL REPORT &
FINANCIAL STATEMENTS
2014
Together, forging forward to a better future
Va 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
ANNUAL REPORT & FINANCIAL STATEMENTS - 2014
Contents
Directorate & Administration
Notice of Annual General Meeting
Chairmans Report
4-5
Group Managing Directors Report
6-7
Board of Directors
Group Management Team
Corporate Governance
10
Corporate Social Responsibility
11
Directors Report
13
Statement of the Directors Responsibilities
14
Report of the Independent Auditor
15
Financial Statements:
Consolidated Income Statement
16
Consolidated Statement of Comprehensive Income
17
Consolidated Statement of Financial Position
18
Company Statement of Financial Position
19
Consolidated Statement of Changes in Equity
20
Company Statement of Changes in Equity
21
Consolidated Statement of Cash Flows
22
Notes to the Financial Statements

Principal Shareholders and Share Distribution
23-65
66
Proxy Form
Directorate & Administration

BOARD OF DIRECTORS
J Mathenge

Chairman (Appointed 23 May 2013)

Non-Executive Director (Appointed on 01 December 2008
D Ohana
Group Managing Director (Appointed on 4 July 2013)
D Oyatsi
Appointed on 10 August 2007
T M Davidson
Appointed on 01 January 2011
D Ndonye
Appointed on 06 April 2011
P Lai
Appointed on 03 February 2006
SECRETARY
Ms W Jumba
Livingstone Associates
Deloitte Place,
Wayaki Way, Muthangari
P O Box 30029, GPO 00100
Nairobi
Appointed Secretary on 01 January 2011
REGISTERED OFFICE
ICEA Building
Kenyatta avenue
P O Box 44202, GPO 00100
Nairobi, Kenya
BANKERS
Major bankers include:
CfC Stanbic Bank Limited
NIC Bank
Ecobank Limited
Kenya Commercial Bank Limited
Bank of Africa Limited
Socite Gneral Geneva
Rabobank Netherlands
Mauritius Commercial Bank - Mauritius
BNP Paribas Paris
AUDITOR
PricewaterhouseCoopers
Certified Public Accountants
The Rahimtulla Tower
Upper Hill Road
P O Box 43963, 00100
Nairobi
Notice of Annual General Meeting

NOTICE is hereby given that the 56th Annual General
Meeting of the Company will be held at the Intercontinental
Hotel, Nairobi, Kenya on 6th May 2015 at 11.00 a.m.
AGENDA
ORDINARY BUSINESS
1. To table the proxies and note the presence of a
quorum.
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 Companys website
www.kenolkobil.com or from the Registered Office
of the Company, ICEA Building, 10th Floor, Kenyatta
Avenue, Nairobi.
2. To read the notice convening the meeting.

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

To consider and approve a first and final dividend of

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

in the Financial Statements for the year ended 31
December 2014.
6. Re-election of directors:

In the case of a member being a limited Company,

the proxy form must be completed under its Common
Seal or under the hand of an officer or attorney duly
authorised in writing.
2. All proxies must be duly completed by the member

and must be lodged with the Company Secretary,
Livingstone Associates, P O Box 30029, 00100 Nairobi,
or posted in time to reach not later than 11.00 am on
5th May 2015. Alternatively, duly signed proxies can be
scanned and emailed to wjumba@deloitte.com in PDF
format.
3. In accordance with Article 134 of the Companies
Articles of Association a copy of the entire Annual
Report and Accounts may be viewed on and obtained
from the Companys website www.kenolkobil.com
or from the Registered Office of the Company, ICEA
Building, 10th Floor, Kenyatta Avenue, Nairobi. An
abridged set of the Statement of Financial Position,
Comprehensive Income Statement, Statement of
Changes in Equity and Cashflow Statement for year
ended 31st December 2014 have been published in
two daily newspapers with nationwide circulation.
To re-elect Ms Pat Lai, a Director retiring by rotation in

accordance with Article 96 of the Companys Articles
of Association and the Capital Markets Authority
Guidelines on Corporate Governance Practices by
Public Listed Companies in Kenya and, being eligible,
offers herself for re-election.
7. To note that PricewaterhouseCoopers continue

in office as Auditors by virtue of Section 159 (2) of
the Companies Act (Cap. 486) and to authorize the
Directors to fix their remuneration for the ensuing
financial year.
BY ORDER OF THE BOARD
WINNIEFRED JUMBA
COMPANY SECRETARY
24th March 2015
Report
CChairmans
h a i r m a n s
Report
Going forward the Board of Directors is confident

that prospects remain positive. The strategies and
initiatives being pursued by Management will enhance
and optimize opportunities and continue to improve the
Group performance.
Chairmans Report
It is with pleasure that I welcome you to the 56th
Annual General Meeting of KenolKobil Limited and
to present to you the Annual Report and financial
statements for the company and the Group for the
year ended 31st December 2014.
Going forward the Board of Directors is confident

that prospects remain positive. The strategies
and initiatives being pursued by management will
enhance and optimize opportunities and continue to
improve the Group performance.
The operating environment was challenging with

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

of Directors recommends for consideration and
approval by the shareholders at the Annual General
Meeting a first and final dividend of Ksh 0.20 per
share for the year ended 31 December 2014.
The change management and other business

turnaround initiatives launched in 2013 continued
to be implemented in 2014 with sharp focus on the
key areas of corporate structure, financing costs,
operating costs, human resources and enterprise risk
management. I applaud management and staff who
remained resilient and steadfast in their commitment
to deliver business recovery and turnaround
strategies based on a culture of high performance
throughout the group.
The initiatives provided a stronger, integrated
structure within all the entities in the group and
enabled optimization of synergies that resulted in
unprecedented financial and operational efficiencies.
As a result the Group realized Ksh 1.1 billion profit
after tax from the Ksh 558 million in the comparable
period in 2013 a significant achievement from the
loss after tax in 2012 of Ksh 6,2 billion.
We extend our appreciation to customers, banks,

suppliers and all other business partners for their
continued support. On behalf of the Board, I would
also like to express our appreciation to management
and the staff in the Group for their commitment to
duty and contribution towards this commendable
performance. I thank my colleagues on the Board
for their dedication, support and leadership that
have made the Group remain a major player in the
market. Finally but most importantly, our thanks go
to the shareholders for their continued confidence in
our ability to maximize the value of their investment
in the Company.
James G Mathenge
Chairman
24th March 2015
The improvement in operational efficiency generated

better margins which, coupled with cost reduction,
enabled the company to improve cash flows. The
statement of financial position improved with
significant reduction in net borrowings of Ksh 4.2
billion. The cash generated from operating activities
of Ksh 5.4 billion in 2014 enabled the company to
reduce borrowings and thereby reduce financing
costs, a key area of focus.
Managing
CGroup
hairm
a n s R eDirectors
p o r t Report
Management is confident in the Groups

strength to continue significant improvement in
2015, with the first quarter already delivering
strong expected results with significantly lower
net borrowings.
Group Managing Directors Report

The Board is proud to present the financial results for the
KenolKobil Group of Companies (the Group) for the full
year 2014. The Group achieved profit after tax of Kshs
1.1 billion for the year ended December 2014, compared
to Kshs 558 million for the year 2013, representing a 95%
increase year on year. This reflects the continuation of
the turnaround and recovery strategies of the Groups
performance reported since 2012.
To achieve these results, the Group has focused its
concentration on five major areas, namely - corporate
structure, financing costs, operating costs, human
resources and enterprise risk management. This has
enabled the Group to rebuild a strong business platform and
a reinvigorated work culture that has enabled it to improve
performance and realize better results in a challenging
and competitive business environment. Management
is satisfied that the focus and drive in these areas have
resulted in the desired positive outcomes in all aspects
of the business. During the period, management put in
place various initiatives in all its subsidiaries to strengthen
management and to re-organize structures and systems in
its operations to position the entities to achieve expected
growth and to generate improved profitability.
The global economic environment and in particular the
dynamics in the oil industry remained unpredictable
and challenging. In spite of this, effective inventory
management and focus on high margin business segments
has enabled the Group to realize gross profit of Kshs 5.1
billion, an 18% increase above the 2013 gross profit of Kshs
4.3 billion. The gross margin to sales improved to 5.5% in
2014 from 3.9% in 2013.
The operating costs reduced by 25% with Kshs 1.9 billion
incurred in 2014, from Kshs 2.5 billion in 2013. Notably,
the 2013 costs had already reduced by 52% compared to
2012. This trend in cost reduction has been achieved by
consistent and effective cost management focusing on the
five key areas as mentioned above.
In 2014, the Group incurred net financing costs of Kshs 1.3
billion, a reduction of 22% from Kshs1.6 billion in 2013. This
was achieved through reductions of net borrowings as well
as negotiating lower borrowing rates, while introducing
new financial institutions offering more competitive
structured financing facilities. The lower international oil
prices during the last quarter of the 2014 year contributed
to lower borrowing levels as well.
Significant progress has been achieved with a reduction
of net borrowings by Kshs 4.2 billion which closed at Kshs
9.4 billion at the end of 2014, from Kshs 13.6 billion at the
end of 2013, reflecting a 31% reduction. Further reduction
of net borrowings of Kshs 2.4 billion during the first
quarter of 2015 should result in closing net borrowings of
approximately Kshs 7 billion at the end of the first quarter
2015.
The above operating improvements resulted in an improved
EBITDA of Kshs 3.8 billion representing 24% growth over
the comparable 2013 figure of Kshs 3.0 billion. Cash
generated from operating activities improved substantially

to Kshs 5.4 billion compared to Kshs 1.3 billion in 2013,
representing a 320% improvement.
Shareholders funds of Kshs 7.3 billion at end of 2014
increased by Kshs 664 million from Ksh 6.7 billion in 2013
and, with the reduced net borrowings, the gearing ratio at
the end of 2014 was 56% compared to 67% in 2013 with
further improvement expected at end of the first quarter
2015 to below 50%.
Outlook
Going forward, the organization is well placed to generate
continued strong performance. This is supported by the
organic growth initiatives taken in Kenya and subsidiaries
which resulted from takeovers of 37 new petrol service
stations during 2014 which augurs well for the growth path
of the Group.
With the view that international oil prices will continue to
remain relatively low during 2015, positive opportunities
are anticipated to generate improved margins and to
support the Group to continue its key focus on lowering
financing costs and reducing net borrowings to deliver
stronger results in 2015.
The restructuring and streamlining initiatives of human
resources and staff in 2013 and 2014 has given the
Group a new impetus and motivation in projecting the
company to new heights. The group embarked on training
and developing young, talented employees to take up
challenges and emerging opportunities in the Group. This
has delivered encouraging results in 2014 with increased
productivity delivered as motivated employees are
maturing into the various positions and adding value to the
organization.
Management is confident in the Groups strength to
continue significant improvement in 2015, with the first
quarter already delivering strong expected results with
significantly lower net borrowings.
Annual General Meeting
The 56th Annual General Meeting of KenolKobil Ltd is to be
held on 6th May 2015 at 11h00 at the Intercontinental Hotel
in Nairobi, Kenya.
Proposed Dividend
The directors are recommending for approval at the
Annual General Meeting to be held on 6th May 2015 a first
and final dividend of Ksh 0.20 per share for the year ended
31 December 2014, subject to Withholding Tax where
applicable.
By Order of the Board
David Ohana
Group Managing Director
24th March 2015
Board of Directors
Mr. J. Mathenge
Chairman
Mr. D. Ohana
Ms. P. Lai
Group Finance Director
Mr. T.M. Davidson

Non-Executive Director
Mr. D. Ndonye
Mr. D. Oyatsi
We extend our appreciation to customers, banks,

suppliers and all other business partners for their
continued support. We would also like to express our
appreciation to Management and the staff in the Group
for their commitment to duty and contribution towards
the commendable performance.
Group Management Team
David Ohana
Pat Lai
Patrick Kondo
Group Export Mergers & Acquisitions
and Regional Support Manager
Antony Gatandi
Marketing and Operations Manager, Kobil Uganda Ltd
Andrew Mochache
Marketing Manager, Kobil Tanzania Ltd
Asaf Marsiano
Country Manager, Kobil Zambia Ltd
Patrick Ngugi
Country Manager, Kobil Petroleum Rwanda SARL
Amit Spector
Country Manager, Kobil Ethiopia Ltd
Francis Mwangi
Country Manager, Kobil Burundi SA
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.
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.
Compliance and maintenance of high standards is core to

organizations performance and maximizing shareholders
value.
Audit and Risk Committee

This committee comprises of 4 Non-Executive Directors, and
by invitation, 2 Executive Directors; the external auditors
representatives and the Group Internal Audit Manager
representative.
The Groups 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 Groups
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 companys business procedures, systems and core ethics.
It reviews auditors independence, internal controls and

compliance with the Code of Conduct and Ethics. It also reviews
adherence to statutory and regulatory requirements.
Board of Directors
The Board consists of 4 Non-Executive Directors and 2 Executive
Directors. The Directors all possess qualification and a wide
range of expertise and experience to enable them to contribute
in their capacities as directors to the Group.
This committee held 4 meetings during the year.
Duties:
The Board gives direction on the Companys strategy, objectives,
and values and ensures procedures and practices are in place to
implement governance and effective control over the companys
assets and operations.
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 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 Companys progress with
respect to strategic direction and operational effectiveness.
The committee held 4 meetings during the year.
Board Committees
Two Board Committees, with written terms of reference,
facilitate effective assistance to the Board to enable efficient
10
The duties and responsibilities are to review, advice and make

recommendations on financial information, budgets, risk
management, policies and audit issues.
Nominations, Remuneration and Human Resources Committee

This committee comprises of 3 Non-Executive Directors and 1
Executive Director.
Compliance
The 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.

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 2014, we had 13 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.
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.
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 partners with Profermme
Twese Hamwe an organization that deals with the
advancement of women, peace and development post
genocide to uphold womens rights through sustainable
Human Development, promoting social justice and
fighting gender-based violence.
11
KenolKobil is committed to
providing quality products and
services that cater for all our
customers.
Directors Report
The directors submit their report together with the audited financial statements for the year ended 31 December 2014, in
accordance with Section 157 of the Kenyan Companies Act, which discloses the state of affairs of KenolKobil Limited (the
Company) and its subsidiaries (together, the Group).
PRINCIPAL ACTIVITIES
The principal activities of the Group continue to be the importation of refined and other petroleum products for storage and
distribution.
RESULTS AND DIVIDEND
The net profit for the year of Shs 1,091,284,000 (2013: 558,419,000) has been added to retained earnings. During the year, no
interim dividend was paid (2013: nil). The directors recommend the approval of a final dividend of Shs 294,352,240
(2013: Shs 147,176,120).
DIRECTORS
The directors who held office during the year and to the date of this report were:
-
J Mathenge
D Ohana
-
-
P Lai
D Oyatsi
T M Davidson
D Ndonye
Chairman
AUDITOR
The Companys auditor, PricewaterhouseCoopers, continues in office in accordance with Section 159(2) of the Kenyan
Companies Act.
APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of Directors on 24th March 2015.
By order of the Board
SECRETARY
24th March 2015
13
Statement of Directors Responsibilities

The Kenyan Companies Act requires the directors to prepare financial statements for each financial year which
give a true and fair view of the state of affairs of the Group and Company as at the end of the financial year and
of its profit or loss for that year. It also requires the directors to ensure that the Group and Company keep proper
accounting records that disclose, with reasonable accuracy, the financial position of the company. The directors
are also responsible for safeguarding the assets of the company.
The directors accept responsibility for the preparation and fair presentation of financial statements that are free
from material misstatements whether due to fraud or error. They also accept responsibility for:
(i) Designing, implementing and maintaining internal control as they determine necessary to enable the
preparation of financial statements that are free from material misstatements, whether due to fraud or error.
(ii) Selecting and applying appropriate accounting policies;
(iii) Making accounting estimates and judgements that are reasonable in the circumstances.
The directors are of the opinion that the financial statements give a true and fair view of the financial position
of the Group and Company as at 31 December 2014 and of the Group and Companys financial performance
and cash flows for the year then ended in accordance with International Financial Reporting Standards and the
requirements of the Kenyan Companies Act.
Nothing has come to the attention of the directors to indicate that the Group will not remain a going concern for at
least the next twelve months from the date of this statement.
_______________________
Director

_______________________
Director
24 March 2015
14
Report of the Independent Auditor

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

The directors are responsible for the preparation and fair
presentation of these financial statements in accordance
with International Financial Reporting Standards and with
the requirements of the Kenyan Companies Act and for
such internal control, as the directors determine necessary
to enable the preparation of financial statements that are
free from material misstatements, whether due to fraud
or error.
Auditors responsibility
Our responsibility is to express an opinion on the financial
statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing.
Those standards require that we comply with ethical
requirements and plan and perform our audit to obtain
reasonable assurance that the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial statements. The procedures selected depend
on the auditors judgement, including the assessment
of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control
relevant to the entitys preparation and fair presentation
of the financial statements in order to design audit
procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the entitys internal control. An audit also

includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Opinion
In our opinion the accompanying financial statements
give a true and fair view of the state of the financial affairs
of the Group and of the Company at 31 December 2014
and of the profit and cash flows of the Group for the year
then ended in accordance with International Financial
Reporting Standards and the Kenyan Companies Act.
Report on other legal requirements

As required by the Kenyan Companies Act we report to
you, based on our audit, that:
i) we have obtained all the information and explanations
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
ii) in our opinion proper books of account have been
kept by the company, so far as appears from our
examination of those books; and
iii) the companys statement of financial position and
statement of comprehensive income are in agreement
with the books of account.
The engagement partner responsible for the audit
resulting in this independent auditors report is CPA Peter
Ngahu- P/1458.
Certified Public Accountants

Nairobi
24 March 2015
15
Consolidated Income Statement

For the year ended 31 December 2014
Notes
2014
2013
Shs000
Shs000

Sales 5
91,315,702
109,687,453

Cost of sales
(86,263,995)
(105,422,286)

Gross profit
5,051,707
4,265,167

Other income 6
963,265
1,402,931
Administrative expenses
(2,854,339 )
(3,369,232)
Finance Cost 9
(1,707,116 )
(1,777,106)
Finance income 9
69,244
43,932
Share of loss in associate 23
(1,941 )
(1,774)

Profit before income tax
1,520,820
563,918

Income tax expense 10
(429,536 )
(5,499)

Profit for the year (of which Shs 825,927,000 (2013: Shs 36,015,000)
of has been dealt with in the accounts of the Company
1,091,284
558,419

Attributable to:
Equity holders ot the Company
1,091,284
558,419
-
Non controlling interest

Total
1,091,284
558,419

Earnings per share
- Basic (Shs per share) 11
0.74
0.38
- Diluted (Shs per share) 11
0.74
0.38
The notes on pages 23 to 65 are an integral part of these consolidated financial statements.
16
Consolidated Statement of Comprehensive Income

Notes
2014
2013

Shs000
Shs000

Profit for the year net of tax
1,091,284
558,419

Other comprehensive income:

Items that may be subsequently reclassified to profit or loss
Currency translation differences 14
(224,444 )
(80,410)

Other comprehensive income for the year, net of tax
(224,444 )
(80,410)

Total comprehensive income for the year
866,840
478,009

Attributable to:

Equity Holders of the company
866,840
478,009
Non controlling Interest
-

866,840
478,009

17
Consolidated Statement of Financial Position

Notes
2014
2013
Shs000
Shs000

EQUITY
Share capital 13
73,588
73,588
Share premium 13
5,166,350
5,166,350
Retained earnings
2,067,743
1,270,811
Other reserves 14
(271,537 )
8,369
Proposed Dividends
294,352
147,176
Total equity
7,330,496
6,666,294

Non-current liabilities
Deferred income tax 17
197,360
194,073
Borrowings 15
88,388
522,552
Total non-current liabilities
285,748
716,625

Current liabilities
Payables and accrued expenses 27
5,633,064
5,591,360
Current income tax
196,541
189,751
Borrowings 15
10,409,840
14,854,274
Dividends payable 12
59,477
103,369
16,298,922
20,738,754
Total current liabilities

TOTAL EQUITY AND LIABILITIES
23,915,166
28,121,673

ASSETS
Non-current assets
Property, plant and equipment 19
4,648,477
4,667,999
Prepaid operating lease rentals 18
734,754
600,648
Intangible assets 20
850,086
858,722
2,179,594
2,595,040
Deferred tax asset 17
Available for sale investment 22
2,235
2,249
Investment in associate 23
12,001
15,346
Total non-current assets
8,427,147
8,740,004

Current assets
Inventories 24
4,141,183
6,528,533
Receivables and prepayments 25
9,725,617
10,756,595
Current income tax
569,755
321,483
Cash and cash equivalents 26
1,051,464
1,775,058
Total current assets
15,488,019
19,381,669

TOTAL ASSETS
23,915,166
28,121,673

The financial statements on pages 16 to 65 were approved for issue by the board of directors on 24 March 2015 and
signed on its behalf by:
__________________ ___________________
Director Director
18
Company Statement of Financial Position

Notes
2014
2013
Shs000
Shs000

EQUITY

Share capital 13
73,588
73,588
Share premium
5,166,350
5,166,350
Retained earnings
(395,263 )
(926,838 )
Other reserves 14
520,070
575,532
Proposed Divindeds
294,352
147,176
5,659,097
5,035,808
Total equity

Current liabilities

Payables and accrued expenses 27
12,362,276
13,772,500
Borrowings 15
9,571,371
13,651,233
Dividends payable
59,477
103,369
Total current liabilities
21,993,124
27,527,102

TOTAL EQUITY AND LIABILITIES
27,652,221
32,562,910

ASSETS
Non-current assets
Prepaid operating lease rentals 18
108,787
115,478
Property, plant and equipment 19
440,514
422,827
Deferred tax asset 17
1,970,354
2,321,658
Intangible asset 20
9
6,401
Investment in subsidiaries 21
6,401,528
6,137,032
Loan due to related parties 29
167,154
362,143

Total non-current assets
9,088,346
9,365,539

Current assets
Inventories 24
2,439,593
4,951,058
Receivables and prepayments 25
7,666,797
8,490,391
Loans and receivables from related parties 29
7,888,776
8,210,299
Tax recoverable
266,315
293,282
Cash and cash equivalents 26
302,394
1,252,341
Total current assets
18,563,875
23,197,371

TOTAL ASSETS
27,652,221
32,562,910

T
he notes on pages 23 to 65 are an integral part of these consolidated financial statements.
The financial statements on pages 16 to 65 were approved for issue by the board of directors on 24 March 2015 and
signed on its behalf by:
___________________ ___________________
Director Director
19
Consolidated Statement of Changes in Equity

Attributable to equity holders of the company

Share
Share
Other Retained Proposed
Total
capital premium reserves earnings dividends
equity
Notes Shs000 Shs000 Shs000 Shs000 Shs000 Shs000

Year ended 31 December 2013

Balance at 1 January 2013
73,588 5,166,350 346,219 859,568
- 6,445,725

Profit for the year
-
-
- 558,419
- 558,419
Other comprehensive income, net of tax:

Currency translation differences
14
-
-
(80,410)
-
-
(80,410)

Total comprehensive income
-
- (80,410) 558,419
- 478,009

Transactions with owners:

Movement in ESOP reserve
14
-
- (257,440)
-
- (257,440)
Proposed Dividends
12
-
-
- (147,176) 147,176

Total transactions with owners
-
- (257,440)
-
- (257,440)

Balance at 31 December 2013 73,588 5,166,350
8,369 1,270,811 147,176 6,666,296


73,588 5,166,350
8,369 1,270,811 147,176 6,666,296

Profit for the year
-
-
- 1,091,284
- 1,091,284
Other comprehensive income, net of tax:

14
-
- (224,444)
-
- (224,444)

-
- (224,444) 1,091,284
- 866,840


14
-
-
(55,462)
-
-
(55,462)
Dividends paid for 2013
-
-
-
- (147,176) (147,176)
Proposed dividends for 2014
-
-
- (294,352) 294,352
-

-
- (55,462) (294,352) 147,176 (202,638)

Balance at 31 December 2014 73,588 5,166,350 (271,537) 2,067,743 294,352 7,330,496

20
Company Statement of Changes in Equity

Attributable to equity holders of the company

Share
Share
Other Retained Proposed
Total
capital premium reserves earnings dividends
equity
Notes Shs000 Shs000 Shs000 Shs000 Shs000 Shs000


73,588 5,166,350 832,972 (815,677)
- 5,257,233

Profit and total comprehensive
-
-
-
36,015
-
36,015
income for the year

-
-
-
36,015
-
36,015


14
-
- (257,440)
-
- (257,440)
Proposed Dividends
12 - - -
(147,176)
147,176 -

-
- (257,440) (147,176) 147,176 (257,440)

Balance at 31 December 2013 73,588 5,166,350 575,532 (926,838) 147,176 5,035,808


Balance at 1 January 2014 73,588 5,166,350 575,532 (926,838) 147,176 5,035,808

Profit and total comprehensive
income for the year
-
-
- 825,927
- 825,927

-
-
- 825,927
- 825,927

14
-
-
(55,462)
-
-
(55,462)
Dividend for 2013
-
-
-
- (147,176) (147,176)
Proposed 2014 - - -
(294,352)
294,352 -

-
- (55,462) (294,352) 147,176 (202,638)

Balance at 31 December 2014 73,588 5,166,350 520,070 (395,263) 294,352 5,659,097

21
Consolidated Statement of Cash Flows


Notes
2014 2013
Shs000 Shs000
Cash flows from operating activities

Cash generated from operations
28
6,977,504 3,122,960
9
69,244
43,932
Interest received
Interest paid
9
(1,339,503) (1,671,759)
(252,285) (197,793)
Income tax paid

Net cash generated from operating activities 5,454,960 1,297,340

Cash flows from investing activities

Prepayment for operating lease rentals
18
Purchases of property, plant and equipment
19
Purchases of intangible asset
20
Proceeds from disposal of property, plant and equipment
Proceeeds from disposal of prepaid operating lease

Net cash used in investing activities

(817,307)
(428,798)
(609)
260,098
-
(561,458)
(789,715)
880,898
313
(986,616)
(470,275)
Cash flows from financing activities

Net repayments of borrowings (4,878,598) (1,237,945)
Dividends paid
(191,068)
(8,667)

Net cash used in financing activities (5,069,666) (1,246,612)

Net decrease in cash and cash equivalents
(601,322) (419,547)

Cash and cash equivalents and bank overdrafts at
beginning of the year
26
1,775,058 2,191,005
Exchange gains on cash and cash equivalents
(122,272)
3,600

Cash and cash equivalents at end of the year
26
1,051,464 1,775,058
22
Notes to the Consolidated Financial Statements

1
General information

KenolKobil Limited is a public limited company, which is listed in the Nairobi Securities Exchange, is incorporated in Kenya
under the Companies Act as a public limited liability company, and is domiciled in Kenya. The address of its registered
office is:

ICEA Building
10th Floor
P.O. Box 44202 - 00100
NAIROBI, KENYA

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

(a) Basis of preparation

The consolidated financial statements of KenolKobil Limited have been prepared in accordance with International Financial
Reporting Standards (IFRS). The consolidated financial statements have been prepared under the historical cost convention,
as modified by the revaluation of available-for-sale financial assets at fair value through profit or loss.
The financial statements are presented in Kenyan Shillings (Shs), rounded to the nearest thousand.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying the groups accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 3.

Changes in accounting policy and disclosures

(i) New and amended standards adopted by the group

The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1
January 2014 and have a material impact on the Group:
Amendment to IAS 32, Financial instruments: Presentation on offsetting financial assets and financial liabilities. This
amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable
for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The
amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Group financial
statements.
23

2
Summary of significant accounting policies (Continued)
(a) Basis of preparation (Continued)

(i) New and amended standards adopted by the group(Continued)
Amendments to IAS 36, Impairment of assets, on the recoverable amount disclosures for non-financial assets. This
amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue
of IFRS 13. Amendment to IAS 39, Financial instruments: Recognition and measurement on the novation of derivatives and
the continuation of hedge accounting. This amendment considers legislative changes to over-the-counter derivatives and
the establishment of central counterparties. Under IAS 39 novation of derivatives to central counterparties would result in
discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation
of a hedging instrument meets specified criteria. The Group has applied the amendment and there has been no significant
impact on the Group financial statements as a result.

IFRIC 21, Levies, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37
Provisions. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should
be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material.
Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014
are not material to the Group.
(ii) New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning
after 1 January 2014, and have not been applied in preparing these financial statement. None of these is expected to have a
significant effect on the financial statements of the Group, except the following set out below:
IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial
liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the
classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model
and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and
fair value through P&L. The basis of classification depends on the entitys business model and the contractual cash flow
characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a
new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities
there were no changes to classification and measurement except for the recognition of changes in own credit risk in other
comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for
hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the
hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk
management purposes. Contemporaneous documentation is still required but is different to that currently prepared under
IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted.
The Group is yet to assess IFRS 9s full impact.

IFRS 15, Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting
useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entitys contracts with customers. Revenue is recognised when a customer obtains control of a good or
service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS
18 Revenue and IAS 11 Construction contracts and related interpretations. The standard is effective for annual periods
beginning on or after 1 January 2017 and earlier application is permitted. The Group is assessing the impact of IFRS 15.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact
on the Company.
24

2
(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 interests proportionate share of the recognised amounts of acquirees 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 acquirers previously held
equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance
with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified
as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.
Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform
with the groups 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
25

2
(b) Consolidation (Continued)

(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 investors share of the profit of loss of the investee after the date of acquisition.
The Groups 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 Groups 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 Groups share of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred
legal or constructive obligations or made payments on behalf of the associate.
The group determines at each reporting date whether there is any objective evidence that the investment in the associate
is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value and recognises the amount adjacent to share of profit/(loss) of associates in
the income statement.

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised
in the Groups financial statements only to the extent of unrelated investors interests in the associates. Unrealised losses
are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted by the Group
Dilution gains and losses arising from investments in associates are recognised in the income statement.
(v)
Separate financial statements

In the separate financial statements, investments in subsidiaries and associates are accounted for at cost less impairment.
Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes
direct attributable costs of investment
Dividend income is recognised when the right to receive payment is established

(c) Foreign currency translation

(i)
Functional and presentation currency

Items included in the financial statements of each of the Groups entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The financial statements are presented in
Kenyan Shillings (Kshs), which is the Groups presentation currency.
26

2
(c) Foreign currency translation (Continued)

(ii)
Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss, except when deferred in other comprehensive income
as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to
borrowings and cash and cash equivalents are presented in profit or loss within finance income or costs. All other foreign
exchange gains and losses are presented in profit or loss within other income or other expenses.
Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed
between translation differences resulting from changes in the amortised cost of the security and other changes in the
carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss,
and other changes in carrying amount are recognised in other comprehensive income
Translation differences on non-monetary financial assets, such as equities classified as available-for-sale financial assets,
are included in other comprehensive income and cumulated in available-for-sale financial assets reserve.

(iii)
Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of
that balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not
a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income and accumulated in transaction
reserve in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive
income
(d) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decisionmaker (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 groups activities, as described
27

2
(e) Revenue recognition (Continued)

below. The group bases its estimate of return on historical results, taking into consideration the type of customer, the type
of transaction and the specifics of each arrangement.
(i) Sale of goods - wholesale

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

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

(iii) Sale of services

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

All categories of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in
which they are incurred.
Freehold land is not depreciated. Depreciation on other assets is calculated using the straight line method to write down
their cost to their residual values over their estimated useful lives, as follows:

- Buildings on freehold land
40 years

- Buildings on leasehold land
shorter of 40 years or the period of the lease

- Motor vehicles
5 years

- Plant and machinery
15 years

- Furniture and equipment
10 years
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An assets carrying amount is written down immediately to its estimated recoverable amount if the assets 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.
28

2
(g) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Groups share of the net identifiable
assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is tested
annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive
income

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cashgenerating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose identified according to operating segment.

(ii)
Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their estimated useful lives (three to five years).
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development
costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the
Group, are recognised as intangible assets, when the following criteria have been met:
It is technically feasible to complete the software product for it to be available for use;
Management intends to complete the software product and use or sell it;
There is an ability to use or sell the software product;
It can be demonstrated how the software product will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the software product
are available; and
The expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee
costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Computer
software development costs recognised as assets are amortised over their estimated useful lives, not exceeding five years.
(h) Impairment of non-financial assets

Assets that have an indefinite useful life for example, goodwill or intangible assets not ready to use- are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an assets fair value less costs to sell and value in use.
29

2
(h) Impairment of non-financial assets (Continued)

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.

(i) Financial assets

(i) Classification
The Group and Company classify financial assets in the following categories: at fair value through profit or loss, loans and
receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired.
The directors determine the classification of the financial assets at initial recognition.

Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for
trading. Assets in this category are classified as current assets if expected to be realised within 12 months; otherwise, they
are classified as non-current
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for maturities greater than 12 months after the end of the
reporting period. These are classified as non-current assets.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any
of the other categories. They are included in non-current assets unless the investment matures or the directors intend to
dispose of the investment within 12 months of the end of the reporting period.

(ii)
Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date, which is the date on which the entity
commits to purchase or sell the asset. Investments are initially recognised at fair value, plus transaction costs for all
financial assets not carried at fair value through profit or loss. Financial assets, carried at fair value through profit or loss,
are initially recognised at fair value, and transaction costs are expensed.
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been
transferred and the entity has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair
value. Loans and receivables are carried at amortised cost using the effective interest method.

(iii) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is
a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the
asset and settle the liability simultaneously
30

2
(i) Financial assets (Continued)

(iv) Impairment of financial assets

Assets carried at amortised cost
The Group and Company assess at the end of each reporting period whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial
recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of
the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future
cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Assets classified as available-for-sale

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

Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss category
are included in profit or loss in the period in which they arise. Dividend income from financial assets at fair value through
profit or loss is recognised in profit or loss as part of other income when the entitys right to receive payments is established.

(j) Derivative financial instruments

Derivatives, which comprise solely forward foreign exchange contracts, are initially recognised at fair value on the date the
derivative contract is entered into and are subsequently re-measured at their fair value. The derivatives do not qualify for
hedge accounting. Changes in the fair value of derivatives are recognised immediately in profit or loss. These derivatives
are trading derivatives and are classified as a current asset or liability.

(k) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost of crude oil and refined products is determined
by weighted average costing method (taking into account the cost of purchase plus incidental costs incurred to bring the
inventory to present location). Net realisable value is the estimated selling price in the ordinary course of business, less
applicable variable selling expenses.

31

2
(l) Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of
business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are
classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment (note 2 (i)).

(m) Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In
the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.
(n) Trade payables

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

(o) Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance
sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries,
32

2
(o) Current and deferred income tax (Continued)

associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary
difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable
future. Generally the group is unable to control the reversal of the temporary difference for associates. Only where there
is an agreement in place that gives the group the ability to control the reveral of the temporary difference not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries,
associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future
and there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle
the balances on a net basis.

The current income tax rate applicable in the period was 30% (2013: 30%).

(p) Borrowings

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

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To
the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as
a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for
at least 12 months after the reporting date.
(q) Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
33

2
(r) Provisions

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

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
The increase in the provision due to passage of time is recognised as interest expense.
(s) Share Capital

Ordinary shares are classified as share capital in equity. Any premium received over and above the par value of the shares
is classified as share premium in equity.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Where any group company purchases the Companys equity share capital (treasury shares), the consideration paid, including
any directly attributable incremental costs is deducted from equity attributable to the Companys 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 Companys equity holders.
(t) Dividend distribution

Dividend distribution to the Companys shareholders is recognised as a liability in the financial statements in the period in
which the dividends are approved by the shareholders. Proposed dividends are shown as a separate component of equity
until declared.

(u) Share based payment

The Group has an Employee Share Ownership Plan (ESOP) under which, subject to the vesting conditions, eligible employees
are entitled to acquire units in a separately administered Trust, each unit in the trust representing one share in KenolKobil
Limited. The Group also operates a scheme under which senior management and the executive directors are entitled to
acquire a predetermined number of shares at a predetermined price, subject to fulfilment of the vesting conditions.
The direct cost to the Group of fulfilling its obligations under the above schemes is charged to the income statement when
incurred.
The cost of issued share options is recognised in the income statement over the vesting period, measured at the fair
value of the option. On allocation of shares to the trust, appropriate adjustments are made to increase share capital and
the corresponding adjustments are made to the trust account. On vesting, the trust allocates the shares to the eligible
individuals with adjustments made to the ESOP reserve.

When the options are exercised, the entity issues new shares. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
34

2
(v) Employee benefits

(i) Pension obligations

The Group and Company have defined contribution plan for its employees. The Group and Company and all its employees
also contribute to the appropriate National Social Security Fund, which are defined contribution schemes.
A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The
group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension
plan that is not a defined contribution plan.
For defined contribution plans, the Group and Company pay contributions to publicly or privately administered plans on a
mandatory, contractual or voluntary basis. The entity has no further payment obligations once the contributions have been
paid. The contributions are recognised as an employee benefit expense when they are due.
(ii) Termination benefits

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

(w) Accounting for leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the
period of the lease.
The Group and Company lease certain property, plant and equipment. Leases of property, plant and equipment where the
Group and Company have substantially all the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalised at the leases commencement at the lower of the fair value of the leased property and the present
value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in non-current liabilities. The interest element of the finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the assets useful
life and the lease term.

(x) Comparatives

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
35

3
Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
experience of future events that are believed to be reasonable under the circumstances.

(i)
Critical accounting estimates and assumptions

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

(a) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated
in Note 2(g). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of estimates. The carrying amount of the goodwill and the key assumptions made are
set out in Note 20.

(b) Other receivables

Critical estimate has been made by management regarding other receivable balances under Note 25. The Directors believe
that the asset value is recoverable therefore no impairment charge or provision has been made in the consolidated financial
statements.

(c) Income taxes

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

(d) Provisions for obligations and use of estimates

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

(e) Fair value of derivatives and other financial instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
The group uses its judgment to select a variety of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting period.
Most of the groups borrowings are current and are not subject to significant fair value estimation.
(ii)
Critical judgements in applying the entitys accounting policies

In the process of applying the Groups accounting policies, management has also made judgements in determining whether
assets are impaired and provisions and contingent liabilities.
36

4
Financial risk management
Financial risk factors

The groups 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 groups overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the groups 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 entitys functional currency.
The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
Currency exposure arising from the net assets of foreign operations is managed primarily through borrowings denominated
in the relevant foreign currencies.
At 31 December 2014, if the US dollar had weakened/strengthened by 5% against the respective functional currencies of
Group companies with all other variables held constant, consolidated post tax profit for the year would have been
Shs 344,725 (2013: Shs 368,720 ) 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 dollardenominated borrowings.
Profit is less sensitive to movement in Shs/US dollar exchange rates in 2014 than 2013 because of the decreased amount of
US dollar-denominated borrowings and hedges.

(ii) Price risk

The group is not exposed to commodity price risk.
(iii) Cash flow and fair value interest rate risk
The groups 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
37

4
Financial risk management (Continued)
(a) Market risk (Continued)

(iii) Cash flow and fair value interest rate risk (Continued)
obtained. During 2014 and 2013, the groups borrowings at variable rate were denominated in the Kshs and the US Dollar.
At 31 December 2014, an increase/decrease of 0.5% would have resulted in an decrease/increase in consolidated post tax
profit of Shs 4,723,382 (2013: Shs 5,851,156 ), mainly as a result of higher/lower interest charges on variable rate borrowings

(b) Credit risk

Credit risk is managed on group basis, except for credit risk relating to accounts receivable balances. Each local entity is
responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery
terms and conditions are offered. Credit risk arises from cash and cash equivalents, and deposits with banks, as well
as credit exposures to wholesale and retail customers, including outstanding receivables. The group assesses the credit
quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits
are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is
regularly monitored. Sales to retail customers are settled in cash or using the company issued K-Card.
No credit limits were exceeded during the reporting period, and management does not expect any losses from nonperformance by these counterparties.
The amount that best represents the Groups and Companys maximum exposure to credit risk at 31 December 2014 and
2013 is made up as follows:

Group
Company

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

Cash equivalents
1,051,464
1,775,058
302,394 1,252,341
Trade receivables
6,635,192
5,802,432
4,876,221 4,342,526
Loans to related parties
-
-
7,888,762 8,210,299
Other receivables
2,435,190
4,191,679
2,155,744 3,536,179

10,121,846 11,769,169 15,223,121 17,341,345

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).
38

4
(b) Credit risk (Continued)

2014
Shs000
Group
2013
Shs000
Company
2014
Shs000
2013
Shs000
Past due but not impaired:

- by up to 30 days
2,541,577
1,223,300
1,552,478
736,069
- by 31 to 90 days
852,512
853,059
655,442
657,126

Total past due but not impaired
3,394,089
2,076,359
2,207,920 1,393,195

Impaired and fully provided for
(623,329)
(704,751)
(359,041) (397,227)
Some collateral is held for some of the above assets. All receivables that are neither past due nor impaired are within their
approved credit limits, and no receivables have had their terms renegotiated. None of the above assets are either past due
or impaired except for the following amounts in trade receivables (which are due within 30 days of the end of the month in
which they are invoiced).
All receivables past due by more than 90 days are considered to be impaired, and are carried at their estimated recoverable
value.
(c) Liquidity risk

Cash flow forecasting is performed in the operating entities of the group in and aggregated by group finance. Group finance
monitors rolling forecasts of the groups liquidity requirements to ensure it has sufficient cash to meet operational needs
while maintaining sufficient headroom on its undrawn committed borrowing facilities (note 15) at all times so that the group
does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes
into consideration the groups 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 Groups and the Companys 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.
39

(c) Liquidity risk (Continued)
(a) Group

Less than
1 year
Shs000
Between
1 and 2 years
Shs000
Over 2
years
Shs000
At 31 December 2014:
- borrowings (excluding finance leases)
10,405,194
50,763
-
- finance leases
4,646
37,625
-
- trade and other payables
5,633,064
-
-
- current income tax
196,541
-
-
- dividend payable
59,477
-
-

16,298,922
88,388
-
14,850,291
484,657
-
- finance leases
3,983
17,617
20,278
5,591,360
-
-
- current income tax
181,761
-
-
- dividend payable
103,369
-
-

20,730,764
502,274
20,278
Total
Shs000
10,455,957
42,271
5,633,064
196,541
59,477
16,387,310
15,334,948
41,878
5,591,360
181,761
103,369
21,253,316
(b) Company

At 31 December 2014
9,571,371
-
-
12,362,276
-
-
- dividends payable
59,477
-
-
9,571,371
12,362,276
59,477
13,569,679
21,993,124
13,651,233
-
-
13,772,500
-
-
- dividends payable
103,369
-
-

27,527,102
-
-
13,651,233
13,772,500
103,369
27,527,102
Capital risk management

The Groups objectives when managing capital are to safeguard the Groups 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.
I n order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.

40

4
(c) Liquidity risk (Continued)

onsistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. The gearing level is
C
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.

Group
Company

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

Total borrowings
10,498,228 15,376,825
9,571,371 13,651,233
Less: cash and cash equivalents
(1,051,464) (1,775,058)
(302,394) (1,252,341)

Net debt
9,446,764 13,601,767
9,268,977 12,398,892

Total equity
7,330,495
6,666,624
5,659,098 5,035,808

Total capital
16,777,259 20,268,391 14,928,075 17,434,700

Gearing ratio
56%
67%
62%
71%
41

5
Segment information

The Group Management Team is the groups chief operating decision-maker. Management has determined the operating
segments based on the information reviewed by the Group Management Team for the purposes of allocating resources,
assessing performance and making strategic decisions.

The Group Management Team considers the business from a line of business perspective.

The reportable operating segments derive their revenue primarily from the importation of, trading in,, storage and
distribution of refined and other petroleum products.

The Group Management Team assesses the performance of the operating segments based on a measure of adjusted
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). This measurement basis excludes the effects of nonrecurring 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.
he segment information provided to the Group Management Team for the reportable segments for the year ended 31
T
December 2013 is as follows:

Inland
Export,
Niche

Market
Trading,
Business
Total

Aviation

Shs 000
Shs 000
Shs 000
Shs 000

Total segment revenue
65,498,593
40,270,461
3,918,399
109,687,453

Gross profit
3,025,998
645,519
593,651
4,265,168

Other income
1,171,178
-
231,753
1,402,931
(3,145,942)
(106,261)
(117,030)
(3,369,233)
Finance (cost)/income
(1,082,345)
(590,322)
(60,508)
(1,733,175)
Income tax expense
(10,220)
4,355
367
(5,498
Share of (loss)profit from associates
(1,774)
(1,774)

Profit / (loss) after tax
(41,331)
(46,709 )
646,459
558,419
42

5
Segment information (Continued)
The segment information provided to the Group Management Team for the reportable segments for the year ended 31
December 2014 is as follows:

Inland
Export,
Niche

Market
Trading,
Business
Total

Aviation
Shs 000
Shs 000
Shs 000
Shs 000

Total segment revenue
61,296,006
25,873,469
4,146,227
91,315,702

Gross profit
3,461,946
901,875
687,886
5,051,707
Other income
711,757
6,743
244,765
963,265
(2,518,894)
(192,969)
(142,476)
(2,854,339)
Finance (cost)/income
(1,016,595)
(519,718)
(101,559)
(1,637,872)
Income tax expense
(200,297)
(53,380)
(175,859)
(429,536)
Share of (loss)profit from associates
(1,929)
(4)
(8)
(1,941)

Profit after tax
435,988
142,547
512,749
1,091,284
The Groups assets structures, comprising of the depot terminals, asset set ups at customer locations and the service
stations network combined, supports the revenue generated from the various business segments.
The business segments in the Group are essentially integrated with synergies between them, supported by the asset base.
There is thus no suitable basis of allocating the assets and related liabilities to specific business segments that will be of
significant added value.
There is no single customer that accounts for more than 10% of revenue and geographical information is unavailable as the
cost to develop it would be excessive.
6 Other income
Group

2014
2013

Shs000
Shs000

Gain on disposal of property, plant and equipment
216,384
830,093
Rental income
357,652
337,138
Facility fees
137,186
131,771
Non-fuel and other income
252,043
103,929

963,265
1,402,931
43

7
Expenses by nature

The following items have been charged/ (credited) in arriving at profit before income tax:

2014
2013
Group
Shs000 Shs000

Employee benefits expense (Note 8)
571,162
892,497
Amortization of operating lease rentals (Note 18)
670,093
578,342
Depreciation of property, plant and equipment (Note 19)
317,189
264,175
Receivables provision for impairment losses (Note 25)
(75,595) 162,905
Provisions for impaired inventory and receivables
124,571
510,000
Repairs and maintenance of property, plant and equipment
216,689
347,059
Auditors remuneration
- Company
13,670
13,670
- Group (including Company)
23,967
24,652
Employee benefits expense

2014
Shs000
2013
Shs000
The following items are included within employee benefits expense:

Salaries and wages
567,696
672,575
Retirement benefits costs:
- Defined contribution scheme
27,614
38,033
- National Social Security Funds
12,414
15,141
Employee Share Ownership Plan (ESOP) costs
(46,409) 153,602
Other staff costs
9,847
13,146

571,162 892,497
Finance income and costs

2014
Shs000
2013
Shs000
Finance costs:
Interest expense
(1,339,503) (1,671,759)
Net foreign exchange losses on financing activities
(367,613) (105,347)

(1,707,116) (1,777,106)

Finance income:
Interest income
69,244
43,932
Net finance costs
44
(1,637,872) (1,733,174)

10 Income tax expense

2014
Shs000
2013
Shs000
Current income tax

10,803
278,180
Movement in deferred income tax (Note 17)
418,733
(272,681)

Income tax expense
429,536
5,499

The tax on the Groups profit before income tax differs from the theoretical amount that would arise using the statutory
income tax rate as follows:

2014
2013

Shs000
Shs000

1,520,820
563,918
Tax calculated at a tax rate of 30% (2013: 30%)
456,246
169,175
Effect of different tax rates in Kobil Zambia and Kobil
7,267
44,187
Petroleum Limited (Kenya) (35%) and (37.5%) respectively
Prior year under provision of current income tax
-
11,179
Prior year (over) / under provision of deferred income tax
28,215
(16,327)
Expenses not deductible for tax purposes
57,009
83,241
Income not subject to tax
(119,201)
(285,956)

Income tax expense
429,536
5,499
11 Earnings per share

2014
2013

Shs000
Shs000

Profit attributable to equity holders of the Company (Shs 000)
1,091,284
558,419

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

Basic earnings / (loss) per share (Shs)
0.74
0.38

For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all potential dilutive ordinary shares.
45

11 Earnings per share (continued)

2014
2013

Shs000 Shs000

Profit attributable to equity holders of the Company (Shs000)
1,091,284
558,419

Number of ordinary shares in issue
1,471,761,200 1,471,761,200
Adjustment for Group employee share ownership plan
113,575
988,123

Weighted average number of ordinary shares for diluted
earnings per share
1,471,874,775 1,472,749,323

Diluted earnings per share (Shs)
0.74
0.38

This computation does not take into account gains/losses recognised directly in equity.
12 Dividends
During the year, no interim dividend was paid (2013: Nil). The directors recommend the approval of a final dividend of
Shs 294,352,240 (2013: 147,176,120)
Proposed dividends are accounted for as a separate component of equity until they have been ratified at an annual general
meeting.
Dividend payments are subject to withholding tax at the rate of 0%, 5% or 10% depending on the residence of the individual
shareholder.
Dividends
2014
2013

Shs000 Shs000

At start of year
103,369
112,036
Declared dividend
147,176
Paid dividend
(191,068)
(8,667)

At end of year
59,477 103,369

13 Share capital
Issued Share Capital
Number of Ordinary
Share

ordinary
share Premium

shares
capital
Shs000 Shs000
Balance at 1 January 2013, 2014
1,471,761,200
73,588 5,166,350

Balance at 31 December 2013 and 2014
1,471,761,200
73,588 5,166,350

The total authorised number of ordinary shares is 2,000,000,000 with a par value of Shs 0.05 per share. All issued shares
are fully paid.
46

14 Other reserves
(a) Group

ESOP Fair value Translation

reserve
reserve
reserve
Total

At start of year
749,803
85,445
(489,029) (346,219)

-
-
(80,410) (80,410)
Movement in the ESOP reserve
(257,440)
-
- (257,440)

Net loss recognised
(257,440)
-
(80,410) (337,850)

At end of year
492,363
85,445
(569,439)
8,369


At start of year
492,363
85,445
(569,439)
8,369

-
-
(224,444) (224,444)
(55,462)
-
-
(55,462)

Net loss recognised
(55,462)
-
(224,444) (279,906)

At end of year
436,901
85,445
(793,883) (271,537)
47

14 Other reserves (Continued)
(b) Company

ESOP Fair value

reserve
reserve
Total

At start of year
747,527
85,445
832,972

(257,440)
- (257,440)

Net loss recognised
(257,440)
- (257,440)

At end of year
490,087
85,445 575,532


At start of year
490,087
85,445
575,532

(55,462)
-
(55,462)

Net loss recognised
(55,462)
-
(55,462)

At end of year
434,625
85,445 520,070
Fair value reserve arose from the fair value adjustment of Kobil Petroleum Limited assets during acquisition by KenolKobil
Limited in 2008. It is net of deferred income tax and is non distributable.
48

15 Borrowings
2014
Shs000
Group
2013
Shs000
Company
2014
Shs000
2013
Shs000
Non-current
Bank borrowings
50,763
484,657
-
Finance leases
37,625
37,895
-
Total Non-current
88,388
522,552
-

Current
Bank borrowings
- borrowings in KShs
4,402,882
4,056,480
4,402,882 4,056,480
- borrowings in US$
4,634,879
7,770,942
4,634,879 7,770,942
- borrowings in TShs
733,434
741,371
-
- borrowings in Ushs
74,044
193,696
-
- borrowings in Ebirr
26,345
49,454
-
- borrowings in Zkw
-
204,367
-
- borrowings in Rwf
-
10,170
-
Commercial paper
533,610
1,823,811
533,610 1,823,811
Finance leases
4,646
3,983
-

Total current
10,409,840 14,854,274
9,571,371 13,651,233

Total borrowings
10,498,228 15,376,826
9,571,371 13,651,233

T
he bank borrowings are secured by certain land and buildings of the Group with a value in excess of Shs 682 million (2013:
Shs 645 million).

Finance leases are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

The carrying amounts of short-term borrowings and lease obligations approximate to their fair value. Fair values are based
on discounted cash flows using a discount rate based upon the borrowing rate that directors expect would be available to
the Group at the statement of financial position date.
It is impracticable to assign fair values to the Groups long term borrowings due to inability to forecast interest rate and
foreign exchange rate changes.
Letter of credit (LC) facilities available to the Group are US$ 237 Million (2013: US$ 143 Million)
Unutilised LC facilities at year end amount to US$ 218 Million (2013: US$ 79.8 Million)
49

15 Borrowings (Continued)
he exposure of the groups borrowings to interest rate changes and the contractual re-pricing dates at the end of the
T
reporting period are as follows:

Group
Company

2014
2013
2014

Shs000
Shs000
Shs000

Between 1 and 2 years
50,763
484,657
-

Finance lease liabilities minimum lease payments
2013
Shs000
-
Group

2014

Shs000

Not later than 1 year
4,646
Later than 1 year and not later than 5 years
13,939
Later than 5 years
23,686

42,271

2013
Shs000
3,983
17,617
20,278
41,878
16 Employees Share Ownership Plan (ESOP)

As at 31 December 2014, the Group had the following share-based compensation plans:

(i) Employee Share Ownership Scheme

All employees are entitled to participate under this scheme. The grant is made based on merit which is at the sole discretion
of the Board of Directors. For an employee to receive a grant, he / she must among other conditions:
be above 19 years of age
have been in continuous service for at least 12 month, for a full time basis;

The vesting period under this scheme is 3 years from the date of the grant.

(ii) Executive Option Scheme

This scheme is open to all permanent employees holding a managerial position in the Company or any subsidiary who the
Board may from time to time decide is eligible to participate. Entitlement is based on merit which is at the sole discretion of
the Board of Directors.

The vesting period is 3 years from the date of the grant after which the options must be exercised within a period of 5 years.

The number of units in respect of which options may be granted (including units issued under the employee share ownership
scheme) on any day shall not exceed 10% of shares in issue immediately prior to that day..
50

16 Employees Share Ownership Plan (ESOP) (continued)
The company has an options agreement with the former CEO under which he is entitled to receive options for units amounting
to 4% of the companys shares in respect of the financial years 2011 to 2014 that was issued on 1 May 2012. The former CEO
options are priced at the ruling subscription price at the end of 2009.
The same terms are applicable as the other options issued under the executive option scheme.
A summary of the status of all schemes as at 31 December 2014 and 31 December 2013 and changes during the years ended
on these dates is presented below:
Employee Share Ownership Scheme
2014
2013

Number Number
of units of units

Outstanding at 1 January
988,123 2,076,348
Granted
-
Exercised / vested
(769,763) (832,880)
Forfeited
(104,785) (255,345)

Outstanding at 31 December
113,575
988,123

Executive Option Scheme
2014
2014
2013
2013

Number
weighted
Number weighted

of options
average
of options average

exercise exercise

price
price

Shs
Shs

At 1 January
133,450,378
6.73 134,196,530
6.74
Granted
-
-
-
Exercised
-
-
-
Forfeited
(1,315,000)
11.58
(746,152)
8.58

At 31 December
132,135,378
6.68 133,450,378
6.73

Exercisable at 31 December
132,135,378 133,450,378
The options outstanding at 31 December 2014 had a weighted average exercise price of Shs 6.68 (2013: Shs 6.73) and a
weighted average remaining contractual life of 8 years (2013: 9 years).
Under the employee schemes, market price of the shares at the year end has been taken to be the fair value, while under
the executive scheme, the probability of the each employee exercising the option and the price of shares as at 31 December
has been used to estimate the fair value.

The financial results of the ESOP trust have not been consolidated on the basis that they are not material to the Group.
51

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

Group
Company

2014
2013
2014
2013

Shs00
Shs000
Shs000 Shs000

At start of year
Deferred tax asset
Deferred tax liability

Charge to profit and loss account (Note 10)
(2,595,040)
(2,358,359)
194,073
230,073
(2,400,967)
(2,128,286)
418,733
(272,681)
(2,321,658) (2,090,428)
-
(2,321,658) (2,090,428)
351,304
(231,230)
At end of year
(1,982,234)
(2,400,967)
(1,970,354) (2,321,658)
At end of year
Deferred tax asset
Deferred tax liability
(2,179,594)
197,360
(2,595,040)
194,073
(1,970,354) (2,321,658)
-
-
(1,982,234)
(2,400,967)
(1,970,354) (2,321,658)
Consolidated deferred income tax assets and liabilities, deferred income tax charge/(credit) in the profit and loss account,
and deferred income tax charge/(credit) in equity are attributable to the following items:
Group
At 1
2014
January

2014

Shs000

Charged/
Credited
At 31
(credited)
to equity December
to income
2014
statement
Shs000
Shs000 Shs000
Deferred income tax liabilities

Property, plant and equipment:
- on historical cost basis
109,321
(45,582)
-
63,739
Unrealised exchange differences and hedge losses
(124,762)
77,314
-
(47,448)

(15,441)
31,732
-
16,291

Deferred income tax assets
Provisions
(284,282)
43,566
- (240,716)
Tax losses
(2,101,244)
343,435
- (1,757,809)

(2,385,526)
387,001
- (1,998,525)

Net deferred income tax liability/(asset)
(2,400,967)
418,733
- (1,982,234)

52

17 Deferred income tax (continued)
Group (continued)
2013

At 1
January
2013
Shs000
Charged/
Credited
At 31
(credited)
to equity December
to income
2013
statement
Shs000
Shs000 Shs000
Deferred income tax

129,843
(20,522)
-
109,321
(224,845)
100,083
- (124,762)

(95,002)
79,561
-
(15,441)

Deferred income tax assets
Provisions
(450,085)
165,805
- (284,280)
Tax losses
(1,583,197)
(518,047)
- (2,101,244)

(2,033,282)
(352,242)
- (2,473,224)

Net deferred income tax asset
(2,128,284)
(272,681)
- (2,400,965)
Company
2014

At 1
January
2014
Shs000
Charged/
Credited
At 31
(credited)
to equity December
to income
2014
statement
Shs000
Shs000 Shs000

(10,914)
(5,070)
-
(15,984)
Provisions
(274,574)
82,516
- (192,058)
(130,719)
-
- (130,719)
Tax losses
(1,905,451)
273,858
- (1,631,593)

Net deferred tax liability/(asset)
(2,321,658)
351,304
- 1,970,354

53

17 Deferred income tax (continued)
Company (continued)
2013
At 1
Charged/
Credited
At 31

January
(credited)
to equity December

2013
to income
2013

statement

Shs000
Shs000
Shs000 Shs000

(17,008)
6,094
-
(10,914)
Provisions
(257,013)
(17,561)
- (274,574)
(199,395)
68,676
- (130,719)
Tax losses
(1,617,012)
(288,439)
- (1,905,451)

Net deferred tax asset
(2,090,428)
(231,230)
- (2,321,658)

18 Prepaid operating lease rentals

(a) Prepaid operating lease rentals

Group
Company

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

At start of year
600,648
608,859
115,478
120,145
Additions
817,307
561,771
228,482
202,496
Disposals
(7,154)
(313)
(313)
Amortisation for the year
(670,093)
(578,342)
(235,173) (206,850)
(5,954)
(8,673)
-

At end of year
734,754
600,648
108,787 115,478
(b) Operating lease commitments

Later than 5 years

54
413,311
1,361,607
3,396,722
223,859
627,925
859,105
5,171,640
1,710,889
145,693
336,820
650,344
131,115
303,137
585,310
1,132,857 1,019,562

19 Property, plant and equipment

(a) Group
Freehold Buildings
Motor
Plant&
Furniture

land
vehicles equipment
& office
equipment
Total

Shs000
Shs000
Shs000
Shs000
Shs000 Shs000

At 1 January 2013

Cost or valuation
370,387
3,517,861
92,491
1,733,791
179,889 5,894,419
-
(792,644)
(61,297)
(633,121)
(122,948) (1,610,010)
Accumulated depreciation

Net book amount
370,387 2,725,217
31,194
1,100,670
56,941 4,284,409

Opening net book amount
370,387
2,725,217
31,194
1,100,670
56,941 4,284,409
Additions
10
614,488
11,183
149,948
14,086
789,715
(58,949)
78,380
2,782
(9,733)
(12,480)
Transfers
Disposals
(6,075)
(39,881)
(4,099)
(719)
(31) (50,805)
(2,857)
(27,357)
(4,497)
(53,585)
(2,849) (91,145)
Charge for the year
-
(169,126)
(9,987)
(69,781)
(15,281) (264,175)

Closing net book amount
302,516 3,181,721
26,576
1,116,800
40,386 4,667,999

At 31 December 2013

Cost or valuation
302,516
4,101,325
87,360
1,877,822
179,716 6,548,739
-
(919,604)
(60,784)
(761,022)
(139,330) (1,880,740)

Net book amount
302,516 3,181,721
26,576
1,116,800
40,386 4,667,999


302,516
3,181,721
26,576
1,116,800
40,386 4,667,999
Additions
70,412
212,647
6,719
133,171
5,850
428,799
Transfers
-
(310,966)
-
310,683
283
Disposals
-
(19,664)
(1,825)
(14,835)
(239) (36,563)
706
(58,850)
(1,029)
(35,811)
415
(94,568)
Charge for the year
(1,096)
(136,158)
(8,344)
(152,997)
(18,594) (317,189)

372,538 2,868,730
22,097
1,357,011
28,101 4,648,477
At 31 December 2014

Cost or valuation
372,538
3,875,968
75,770
2,215,146
189,921 6,729,343
- (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
55

19 Property, plant and equipment (continued)

(b) Company
Freehold Buildings
Motor
Plant&
Furniture

land
vehicles equipment
& office
equipment
Total

Shs000
Shs000
Shs000
Shs000
Shs000 Shs000

At 1 January 2013

Cost
6,159
484,854
21,632
116,450
53,694
682,789
-
(164,709)
(16,366)
(44,479)
(23,041) (248,595)

Net book amount
6,159
320,145 5,266 71,971 30,653
434,194


6,159
320,145
5,266
71,971
30,653
434,194
Additions
-
26,444
9,957
53,023
1,303
90,727
Reclassification
-
(75,399)
-
11,838
-
(63,561)
Disposals
(6,000)
-
-
-
-
(6,000)
Charge for the year
-
(5,270)
(604)
(8,515)
(18,144) (32,533)

159
265,920
14,619
128,317
13,812 422,827

At 31 December 2013

Cost or valuation
159
435,899
31,589
181,311
54,997
703,955
-
(169,979)
(16,970)
(52,994)
(41,185) (281,128)

Net book amount
159
265,920
14,619
128,317
13,812 422,827


159
265,920
14,619
128,317
13,812
422,827
Additions
-
(5,183)
285
61,202
3,196
59,500
Reclassification
-
(3,045)
-
(552)
552
(3,045)
-
(3)
(1,700)
(1,266)
(114)
(3,920)
Disposals
Transfers
-
(7,779)
-
8,049
(270)
-
11,930
4,017
10,624
9,113
34,848
Charge for the year

159
237,979
9,187
185,126
8,603 440,514

At 31 December 2014

Cost or valuation
159
419,052
22,864
246,266
56,989
745,330
-
(181,073)
(13,677)
(61,140)
(48,926) (304,816)

Net book amount
159
237,979
9,187
185,126
8,603 440,514
56

20 Intangible assets
(a) Group

Goodwill Computer
Total

software

Shs000
Shs000
Shs000

847,942
23,671
871,613
Amortisation
-
(12,528 )
(12,528 )
-
(363 )
(363 )

847,942
10,780
858,722

At 31 December 2013
Cost
847,942
115,805
963,747
Accumulated amortisation and impairment
-
(105,025 )
(105,025 )

Net book amount
847,942
10,780
858,722

847,942
10,780
858,722
Amortisation
-
(9,016 )
(9,016 )
-
(229 )
(229 )
-
609
609
Additions

847,942
2,144
850,086

At 31 December 2014
Cost
847,942
116,184
964,126
-
(114,040 )
(114,040 )

Net book amount
847,942
2,144
850,086
Impairment tests for goodwill

Goodwill is allocated to the Groups cash-generating units (CGUs) identified according to country of operation
A CGU summary of the goodwill allocation is presented below:

2014
Shs000

Cost - Kobil Uganda Limited
26,098
Cost - Kobil Petroleum Limited
808,936
Cost - Kobil Burundi SA
12,908

847,942

2013
Shs000
26,098
808,936
12,908
847,942
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow
projections based on financial projections approved by management covering a five-year period. Cash flows beyond the
five-year period are extrapolated using estimated growth rates stated below. The growth rates do not exceed the long-term
average growth rates for the respective businesses in which the CGUs operate.
57

20 Intangible assets (continued)

EBITDA margin1
Growth rate2
Discount rate3
Kenya
4%
4%
15%
Uganda
5%
3%
15%
Burundi
5%
3%
15%
Budgeted EBITDA margin

Weighted average growth rate used to extrapolate cash flows beyond the projected period.
3
Pre-tax discount rate applied to the cash flow projections.

These assumptions have been used for the analysis of each CGU within the business segment. Management determined
budgeted EBITDA margin based on past performance and its expectations for the market development. The weighted
average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pretax and reflect specific risks relating to the relevant segments.
1
2
Based on the annual impairment test for goodwill in accordance with the above allocation to the CGU, there is no impairment
of goodwill at 31 December 2014 and 2013.
(b) Company

2014

Shs000
2013
Shs000
Computer software
Year ended 31 December

6,401
15,031
Additions
-
Amortisation
(6,392 )
(8,900)

9
6,401

At 31 December
Cost
101,832
101,832
(101,823 )
(95,431)

Net book amount
9
6,401
58

21 Investment in subsidiaries (at cost)

The Companys interest in its subsidiaries, all of which are unlisted and all of which have the same year end as the Company,
were as follows:

Company

Country of % interest
2014
2013

incorporation
Shs000 Shs000

Kobil Petroleum Ltd
USA
100
5,172,440 5,172,440
Kobil Uganda Limited
Uganda
100
347,816
82,526
Kobil Tanzania Limited
Tanzania
100
129,564
129,564
Kobil Zambia Limited
Zambia
100
-
Kobil Rwanda SARL
Rwanda
100
-
794
Rwanda
100
-
Kobil Petroleum Rwanda Limited
Kobil Ethiopia Limited
Ethiopia
100
498,852
498,871
Kobil Burundi SA
Burundi
100
252,856
252,837
Kobil Mozambique
Mozambique
100
-

6,401,528 6,137,032

22 Available-for-sale investment

Group

2014
2013

Shs000
Shs000

At start of year
2,249
2,344
Translation and fair value loss
(14)
(95)

At end of year
2,235
2,249

Available for sale investment in represents an investment in government bonds by Kobil Ethiopia.
23 Investment in associates

Group

2014
2013

Shs000
Shs000

At start of year
15,346
18,203
Share of loss
(1,941)
(1,774)
Exchange differences
(1,404)
(1,083)

At end of year
12,001
15,346
59

23 Investment in associates (continued)
The investment in associate represents the investment of 25.5% of the ordinary shares of Lublend Limited made by Kobil
Zambia Limited. Lublend Limited effectively became an associate entity on 17 December 2011. Investments in associates at
31 December 2014 include goodwill of Shs 12,191,000.
Lublend Limited is a private company and there is no quoted market price available for its shares. Lublends place of
business and country of incorporation is Zambia.
There are no contingent liabilities relating to the groups interest in the associate.
et out below is the summarised financial information for Lublend Limited as at 31 December 2014 which is accounted for
S
using the equity method;
Country of Interest
Assets Liabilities
Revenues
Year ended 31 December
incorporation
held
Shs 000 Shs 000
Shs 000

2013
Zambia
25.5% 44,021
44,889
77,914

2014
Zambia
25.5% 34,348
49,325
74,455

T
he information above reflects the amounts presented in the financial statements of the associate (and not KenolKobil
Limiteds share of those amounts) adjusted for differences in accounting policies between the group and the associate.
24 Inventories

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

Refined products on hand
4,141,183
6,528,533
2,439,593 4,951,058

All inventories are stated at the lower of cost and net realisable value.
60

25 Receivables and prepayments

Group
Company

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

Trade receivables
7,258,521
6,507,183
5,235,262 4,739,753
Less: provision for impairment losses
(623,329)
(704,751)
(359,041) (397,227)

Trade receivables - net
6,635,192
5,802,432
4,876,221 4,342,526
Prepayments
655,235
762,484
634,832
611,686
Other receivables
2,435,190
4,191,679
2,155,743 3,536,179

9,725,617 10,756,595
7,666,797 8,490,391

Provision for impairment losses movement

At start of year
(704,751) (1,016,651)
(397,226) (859,443)
Charged to income statement
75,595
(162,905)
38,186
(15,077)
Amounts recovered
(4,474)
116
-
Provisions utilised
(1,083)
476,921
-
477,294
11,384
(2,232)
-

At end of year
(623,329)
(704,751)
(359,040) (397,226)

The creation and release of provision for impaired receivables have been included in other expenses in the income
statement. Amounts charged to the provision account are generally written off, when there is no expectation of recovering
additional cash. The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
The Group and Company does not hold any collateral as security. The fair value of trade and other receivables approximates
their carrying value.
61

26 Cash and cash equivalents

Group
Company

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

Cash at bank and in hand
1,051,464
1,775,058
302,394 1,252,341

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

Group
Company

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

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

5,633,064
5,591,360
12,362,276 13,772,500
28 Cash generated from operations

Reconciliation of profit before income tax to cash generated from operations

Group

2014
2013

Shs000 Shs000

1,520,820
563,918

Adjustments for:
Interest income (Note 9)
(69,244) (43,932)
Interest expense (Note 9)
1,339,503 1,671,759
Depreciation (Note 19)
317,189
264,175
670,093
578,342
Amortisation of prepaid operating lease rentals (Note 18)
Amortisation of intangible assets (Note 20)
9,016
12,528
Gain on sale of property, plant and equipment (Note 6)
(216,384) (830,093)
Share of loss in associate (Note 23)
1,941
1,774
ESOP reserve movement recognised through the income statement (Note 14)
(55,462) (257,440)
Changes in working capital
receivables and prepayments
1,030,978 2,328,291
inventories
2,387,350 2,355,533
payables and accrued expenses
41,704 (3,521,895)
Cash generated from operations
62
6,977,504 3,122,960

29 Related parties and related parties transactions

The Group has shareholding by various companies as shown on page 56. There are various other companies that are related
to the Group through common shareholdings and/or common directorships.

In January 1986, certain operations of KenolKobil Limited (formerly Kenol) were integrated with those of Kobil Petroleum
Limited-Kenya Branch (Kobil). Under the joint operation, the Head Office departments of the two entities were integrated
and depot operations combined.
ffectively from January 2008 Kobil Petroleum Limited - Kenya Branch (Kobil) became a subsidiary of KenolKobil Limited.
E
Since then, operations are primarily carried out under KenolKobil Limited.
The following transactions were carried out with related parties:

Company
(i) Sales of goods

2014
2013

Shs000 Shs000

2,289,910 2,004,244
731,758 2,637,072
Kobil Petroleum Rwanda SARL
3,923,046 2,824,863
2,358
Kobil Burundi SA
2,486,134 2,081,234

Total
9,433,206 9,547,413
(ii) Key management compensation (Group and Company)
Salaries and other short term employment benefits

169,024
187,924

Company
(iii) Loans and receivables from related parties

Due from Kobil Petroleum Limited Kenya Branch
5,821,775 5,784,286
590,891
758,350
399,310
911,621
Kobil Ethiopia Limited
5,667
32,328
Kobil Burundi Limited
580,288
596,673
Kobil Rwanda Limited
649,671
344,042
8,328
145,143

Total
8,050,930 8,572,443

63

29 Related parties and related parties transactions (continued)
(iii) Loans and receivables from related parties(continued)

Company

2014
2013

Shs000 Shs000

Non-current receivables from related parties
167,154
362,143
Current receivables from related parties

7,888,776 8,210,299

Total
8,055,930 8,572,442

The amounts due from Kobil Petroleum Limited Kenya Branch are interest free and unsecured. The balance is denominated
in Kenya Shillings and are payable on demand.
The receivables from related parties arise mainly from sale transactions. The loans to the subsidiaries are denominated
in US dollars. They are unsecured in nature and are interest bearing. No provisions are held against lances from related
parties (2013: nil).

The loan granted is in accordance with Companys housing scheme, is unsecured and denominated in Kenya Shillings.

(iv) Directors remuneration (Group and Company)

2014

Shs000

Fees for services as a director
9,664
Other emoluments (included under key management compensation above)
62,614

Total remuneration of directors of the Group
72,278

During the year, the Company undertook transactions with entities connected to directors as follows:

2014

Shs000
2013
Shs000
Shapley Barret
10,039

11,917
64
11,188
62,761
73,949
2013
Shs000

31 Contingent liabilities

The Group is a defendant in various legal actions. In the opinion of the directors, after taking appropriate legal advice, the
outcome of such actions will not give rise to any significant loss.

The Company has also provided corporate guarantees in favour of subsidiaries and other entities to a maximum of US$ 21.9
million (2013: US $ 27.2 million).
In addition, at year end, the Company had transit bonds and performance guarantees totalling Shs 831 million (2013: Shs
864 million).
At every year end, the directors carry out an assessment to ensure that the Company has accounted for all its obligations
(both legal and constructive) in accordance with the requirements of IAS 37 (Provisions, Contingent Liabilities and Contingent
Assets). Based on the facts available at the time, a provision is recognised if it is deemed to be probable that a payment will
be required to be made to settle the obligation.
32 Commitments
(a) Capital commitments

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

2014
2013
2014
2013

Shs000
Shs000
Shs000 Shs000

Property, plant and equipment
77,755
386,024
10,456

(b) Operating lease commitments
413,311
223,859
145,693
131,115
1,361,607
627,925
336,820
303,137
Later than 5 years
3,396,722
859,105
650,344
585,310

5,171,640
1,710,889
1,132,857 1,019,562

65
Principal shareholders and share distribution

The ten major shareholdings in the Company and the respective number of shares held at
27 February 2015 as follows:

Number
%
Name of shareholder
of shares Shareholding

1. Wells Petroleum Holdings Limited 366,614,280
24.91%
2. Petro Holdings Limited 254,381,380
17.28%
3. Energy Resources Capital Limited 88,185,720
5.99%
5.60%
4. Standard Chartered Nominees A/c KE14861 82,413,439
5. SCB A/C Pan African Unit Linked FD) 51,292,500
3.49%
6. CFC STANBIC Nominees Limited 45,105,500
3.06%
7. Standard Chartered Nominees ltd A/c KE002105 33,237,504
2.26%
8. Standard Chartered Nominees A/c 9389 15,096,630
1.03%
9. SCB A/C Pan African Deposit admin FD 13,495,200
0.92%
10. Investment & Mortgages Nominees ltd a/c 028950 13,473,940
0.92%

Distribution of shareholders

Number of
Number of
%
shares shareholders Shareholding

Less than 500 shares
549,030
2,051
0.04
500 1,000 shares
1,168,590
1,295
0.08
1,001 10,000 shares
15,259,943
3,555
1.04
10,001 100,000 shares
55,262,841
1,634
3.75
100,001 1,000,000 shares
133,067,280
451
9.04
Over 1,000,000 shares
1,266,453,516
114
86.05

Total
1,471,761,200
9,100
100

66
PROXY FORM
I/We ________________________________________________________________________________________

of __________________________________________________________________________________________

Being a member of KenolKobil Limited hereby appoint ________________________________________________
____________________________________________________________________________________________
of __________________________________________________________________________________________
____________________________________________________________________________________________
whom failing, the Chairman of the Meeting of the Company as my/our proxy to vote for me/us on my/our behalf
at the Annual General Meeting of the Company to be held on Wednesday, 6 May 2015 and at any adjournment
thereof.
Signed/Sealed this day of .2015
_________________________________
Important Notes:
1. If you are unable to attend this meeting personally, this Form of Proxy should be completed and returned to:
The Company Secretary, Livingstone Associates, Deloitte Place, Waiyaki Way, Muthangari, P O Box 30029,
00100 Nairobi to reach not later than 11.00 am on 4 May 2015. Alternatively, duly signed proxies can be
scanned and emailed to wjumba@deloitte.com 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.
Livingstone Associates
Deloitte Place,
Waiyaki Way, Muthangari
P. O. Box 30029, 00100
Nairobi
KenolKobil is committed to
availing quality products that
cater for all our customers.
Kenya - Head Office
KenolKobil Limited
I.C.E.A. Building, Kenyatta Avenue
P.O. Box 44202 or 30322
00100 GPO, Nairobi, Kenya
Tel: +254 (0) 20 2755000 / 2249333
Fax: +254 (0) 20 2230967 / 2218274 /
2221614
E-mail: info@ke.kenolkobil.com
Website: www.kenolkobil.com
Uganda - Subsidiary

Plot No. 4 Wankulukuku Road
Nalukolongo, Industrial Area,
P.O. Box 27478, Kampala, Uganda
Tel: (+256 312) 502200,
(+256 414) 271425 / 272765 / 272974
Fax: +256 414 270153/272950
E-mail: kobilug@ug.kenolkobil.com
Tanzania - Subsidiary
Burundi - Subsidiary
Rwanda - Subsidiary
Zambia - Subsidiary

P.O. Box 2238 Dares Salaam, Tanzania
Kigamboni, Vijibweni Area
Plot No. 37/38 Sido Tiper Road
Tel: +255 22 2829491-3
Fax: +255 22 2820494-6
E-mail:kobil@kobil.co.tz
Website:www.kenolkobil.com
Kobil Petroleum Rwanda Ltd

Byumba Road, Gatsata
B.P. 6074, Kigali, Rwanda
Tel: (+250) 78818341
Kobil Petroleum Rwanda Ltd
e-mail: kobilrw@rw.kenolkobil.com
Website : www.kenolkobil.com
Kobil Burundi S.A.

Head Office
Quartier lndustriel
205, Av. Ruvyironza
Tel. : +257 22 243592
+257 22 244946
Fax: +257 22 243593
B.P. 466 Bujumbura-BURUNDI

Head Office
Plot No.1630, Malambo Road
P. 0. Box 320089, Lusaka, Zambia
Tel:+ 260 211 246646 (nine lines)
Fax: + 260 211 246644/9
E-mail: kobllzm@zm.kenolkobil.com
Ndola
P.O. Box 71719.Munali Road,
Bwana Mkubwa
Tel:+ 260 212 655291/282 Fax:+ 260
212 655438
E-mail: kobilzm@zm. kenolkobil.com
www.kenolkobil.com
Ethiopia - Subsidiary
Kobil Ethiopia Limited (Plc)

Debre- zeit Road
P.O.Box 2868 Code 1250
Tel. : (+251-11) 467 4500
(+251-11) 467 4505 I 06
(+251-11) 467 4507 I 08
Fax: (+251-11) 467 3581
E-mail: kobil@et. kenolkobil.com

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ANNUAL REPORT &

Together, forging forward to a better future

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Directorate & Administration

Notice of Annual General Meeting

Group Managing Directors Report

Group Management Team

Corporate Social Responsibility

Statement of the Directors Responsibilities

Report of the Independent Auditor

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Company Statement of Financial Position

Consolidated Statement of Changes in Equity

Company Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Directorate & Administration

Chairman (Appointed 23 May 2013)

Group Managing Director (Appointed on 4 July 2013)

Appointed on 10 August 2007

Appointed on 01 January 2011

Appointed on 06 April 2011

Appointed on 03 February 2006

Appointed Secretary on 01 January 2011

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Notice of Annual General Meeting

2. To read the notice convening the meeting.

To consider and approve a first and final dividend of

5. To approve the Directors remuneration as indicated

In the case of a member being a limited Company,

2. All proxies must be duly completed by the member

To re-elect Ms Pat Lai, a Director retiring by rotation in

7. To note that PricewaterhouseCoopers continue

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Going forward the Board of Directors is confident

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Going forward the Board of Directors is confident

The operating environment was challenging with

Following the commendable performance, the Board

The change management and other business

We extend our appreciation to customers, banks,

The improvement in operational efficiency generated

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Management is confident in the Groups

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Group Managing Directors Report

generated from operating activities improved substantially

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Mr. T.M. Davidson

We extend our appreciation to customers, banks,

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

Group Management Team

ANNUAL REPORT & FINANCIAL STATEMENTS - 2014

The KenolKobil Board of Directors has continued to be committed

decision making in executing their duties and responsibilities.

Compliance and maintenance of high standards is core to

Audit and Risk Committee

The Groups general practice is one of not stating views on

It reviews auditors independence, internal controls and

This committee held 4 meetings during the year.