TIDMMORT
RNS Number : 8071L
Mortice Limited
24 July 2017
Mortice Limited
("Mortice" or the "Company" or the "Group")
Final Results
Strong growth continues to exceed expectations
Mortice Limited (AIM: MORT), the AIM listed security and
facilities management company, announces its audited results for
the year ended 31 March 2017. In terms of both revenue and
profitability the Company is slightly ahead of already upgraded
market expectations.
Financial Results Highlights
-- Revenues up 36.7% to $181.01m (FY 2016: $133.04m)
o Security services sales up 29% to $98.2m (FY 2016: $76.2m) -
54% of Group revenues (FY 2016: 57%)
o Facilities Management revenues up 45% to $82.5m (FY 2016:
$56.8m) - 46% of Group revenues (FY 2016: 43%)
o Geographical revenue mix :
-- India 64% (FY 2016: 75%)
-- UK 31% (FY 2016: 23%)
-- Singapore 5% (FY 2016: 2%)
-- EBITDA up 114 % to $10.3 m (FY 2016: $4.8m)
o EBITDA margin of 5.7% (FY 2016: 3.6%) driven by increased
revenues, synergies and cost control
-- PBT up 232 % to $5.4m (FY 2016: $1.6m)
-- Placing in December 2016 raised GBP2.3m
o Reduced indebtedness and provided balance sheet flexibility to
pursue growth opportunities
-- Net debt of $13.5m (FY 2016: $14.5m)
Operational Highlights
-- New clients added during the period, including: J&K Bank,
Amazon and Kotak Mahindra Bank in India and Amey, CBRE and the
University of Arts London in the UK.
-- More than 90% of income generated from repeat business
-- Appointment of two new non-executive directors
-- Cost optimisation programme undertaken with Office &
General ("O&G") and Frontline Security Pte. Ltd ("Frontline")
fully integrated and rebranded
-- Growing global footprint
Post Period End Highlights
-- GBP4.5m acquisition of Manchester-based Elite Cleaning &
Environmental Services Ltd ("Elite") on a cash-free, debt-free
basis
o Acquisition brings further growth in UK operations,
opportunity to build on existing blue-chip client base and is
earnings enhancing
Commenting, Manjit Rajain, Executive Chairman of Mortice, said:
"The Company expects to build on the strong performance achieved
during the period. Having fully integrated O&G and Frontline we
have a strong international presence and as such are being asked to
tender for an increasing number of global contracts. Furthermore,
the current year has started well with high levels of organic
growth as well as the first contributions from Elite, which was
acquired in April 2017.
"Importantly, the large proportion of repeat business provides a
strong foundation for growth and ensures high levels of visibility
and confidence regarding future performance. The Company has come a
long way in the last few years and has a model in place that looks
set to underpin continued growth. Margins have already improved
significantly, which is a testament to our cost control and our
ability to bid for and win profitable underlying work. With still
further margin improvement expected from streamlined operations, a
strong and growing list of blue chip clients and increasing demand
across both the security and facilities management parts of the
business, we are extremely excited about our growth prospects."
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
Enquiries:
Mortice Limited www.morticegroup.com
Manjit Rajain, Executive Tel: +91 981 800 0011
Chairman
finnCap Ltd Tel: 020 7220 0500
Adrian Hargrave / Giles Rolls
/ Alex Price (Corporate Finance)
Tony Quirke (Corporate
Broking)
Walbrook PR Tel: 020 7933 8780 or mortice@walbrookpr.com
Paul McManus/ Sam Allen/ Mob: 07980 541 893 / 07884
Nick Rome 664 686/ 07748325236
About Mortice Limited
Mortice (AIM: MORT), is an AIM listed security and facilities
management company, incorporated in Singapore and based in India
with additional operations in Singapore and the UK.
Mortice operates under two brands, in India:
-- Peregrine - provision of guarding and security services to a
wide range of clients from blue-chip companies, smaller businesses,
commercial and private properties, and individuals.
-- Tenon - provision of a full range of facilities management
services to corporate occupiers, owners and developers of real
estate. Clients include respected blue-chip and home-grown
companies. Within the Tenon group of companies Mortice also offers
security surveillance services through its subsidiary Soteria and
mechanical and engineering services via Rotopower.
The business is growing and profitable and is focused on
expanding its geographical footprint and growing through targeted
acquisitions, as well as organically.
In 2015, the Company established Tenon UK and through this
wholly owned subsidiary acquired UK based Office & General
Group Limited, an independent property service company specialising
in cleaning and providing support services such as environmental
solutions and built fabric maintenance in the UK. Office &
General Group Limited has been fully integrated and re-branded as
Tenon FM Ltd. For more information see:
www.tenon-fm.com/what-we-do
In April 2017, Tenon UK completed the acquisition of
Manchester-based Elite Cleaning & Environmental Services Ltd
("Elite"). Elite has a strong blue-chip client base, which is
complementary to the Company's existing UK portfolio.
In November 2015, the Company acquired a 51% majority stake in
Singapore-based security company Frontline Security Pte. Ltd, and
has an option to acquire an additional 25% within three years.
Learn more about Mortice through this video interview with
Manjit Rajain, Executive Chairman of Mortice:
www.brrmedia.co.uk/broadcasts/57c94e8cd6c09fd74b0ae623/mortice-unlocking-potential
Chairman's Statement
Overview
This was another period of strong growth across all parts of the
business as Mortice expanded operations in India, Singapore and the
UK. Having fully bedded in O&G and Frontline, the Company
benefited from a streamlined operations platform as it focused on
winning and servicing new clients. Building on a robust first half,
the Company's strong performance during the second half of the year
was pleasing, reflecting the benefits of the expanded global
reach.
As well as servicing existing long-term contracts Mortice
continued to win new business, benefiting from its growing
international reach and offering. As such, India accounted for 64%
of revenues (2016: 75%) with the relative decline in percentage
terms in line with management's expectations. India continues to
provide strong growth opportunities with the securities market
expected to grow in excess of 20% per year with a shift towards
'compliant' security services and outsourced facilities management
underpinning continued growth opportunities.
It is worth noting that the biggest tax Reform in India - The
Goods and Service Tax was implemented on 01 July 2017. This will
bring in some positive changes in the industry - namely higher GDP
growth, lower inflation and a simple tax structure, resulting in
increased transparency and we expect a positive knock-on effect for
our operations.
The internationalisation of the Company's operations meant that
it benefited from growing levels of cross selling to existing
clients with global operations while also tendering for an
increasing number of facilities management and security contracts
outside of India.
The Company continued to trade strongly in the UK having fully
integrated and rebranded O&G, which added several new contracts
and further grew its blue-chip customer base. O&G continued to
strengthen its relationships with universities, following up last
year's GBP55m contract with the University of Herefordshire with
the appointment to London Universities' GBP60m framework during the
period under review while also strengthening its relationship with
the University of Arts London.
Results
Revenues grew 36% to $181.01.5m (FY 2016: $133.04m) during the
period with profits before tax of $5.4m (FY 2016: $1.6m), as the
Company continued to benefit from margin growth having rebranded
operations and rebased its capital structure. All parts of the
business benefited from growing demand from existing and new
clients as the Company continued to increase its international
presence as well as cross-selling capabilities. Furthermore, the
like-for-like performance of operations in India was strong with
sales growing to $115.4m.
Approximately $66m of sales were from outside of India with
UK-based property service company O&G contributing $55.5m,
compared to $30.9m for the seven months trading post acquisition
last year. Singapore-based Frontline contributed $10.2m compared to
$2.9m for the five months trading post acquisition last year.
EBITDA was $10.3m compared to $4.8m the previous year, This
reflected an increased EBITDA margin of 5.7% (FY 2016: 3.6%) driven
by synergies, cost control and revenue growth. PBT for the period
under review was $5.4m, compared to $1.6m the previous year.
During the financial year, the Company raised GBP2.3m via a
placing in order to reduce net debt, which was $13.5m as at 31
March 2017 (FY 2016: $14.5m), while providing it with additional
balance sheet flexibility to pursue various growth
opportunities.
Cash generated from operations was $3.1m compared to $4.3m the
previous year This year included the repayment of $2.8m of
regulatory statutory dues.
India
Currency fluctuations impacted revenue growth in dollar terms
from India. Sales grew 19% from INR 6.5 Bn to INR 7.7 Bn, however
once converted to dollars the increase was 16.2%, growing from
$99.29m to $115.4m during the period.
PBT grew 47% from INR 45.9m to INR 307.8 m , however once
converted to dollars the increase was 44%, growing from $3.9 m to $
4.6 m during the period.
The robust growth in India was due to the repeat business from
the existing clients, addition of new clients and incremental
statutory minimum wages. Client retention ratio is more than
90%.
*Conversion rate 1 INR: $67.09
Rest of World
O&G continued to build on the momentum achieved since being
acquired in 2015 and has now been fully integrated and re-branded
as Tenon FM Ltd. Trading continued to be robust during the
period.
Sales grew 107% from GBP20.5m to GBP42.4m, however once
converted to dollars the increase was 80%, growing from $30.8m to
$55.5m during the period.
As previously stated, the Company sees plenty of scope for
organic and acquisitive growth in the UK and post the period end
completed the GBP4.5m acquisition of Manchester-based Elite
Cleaning & Environmental Services Ltd ("Elite"), which is
already having a positive impact on performance as highlighted by
the $3.5m contribution to sales during the first quarter of the
current year. The Company believes further acquisition
opportunities exist, where targets will benefit from Mortice's
infrastructure and global scale, driving improved performance from
the acquired businesses, as demonstrated with both its UK
acquisitions to date.
Frontline in Singapore also performed well during the period
under review. Revenues for the period grew by 252% to $10.2m (FY
2016: $2.9m) with PBT Margin for the period increasing 6% to 18%
(FY 2016: 12%). During the year, Frontline won a number of new
contracts, increasing visibility and confidence in its growth
prospects.
The security industry in Singapore is very progressive and
margins are relatively high when compared with the UK and India.
Furthermore, Government grants to security service providers who
are providing services in Singapore are benefiting our operations
and top-line.
Soteria
Soteria, which offers managed remote surveillance services using
an IBM platform, gained further momentum during the period, winning
a major contract with IDFC Bank. The focus remains on large
contracts and improving both the top-line and bottom-line with
Soteria well placed to grow its market presence as it progresses
towards profitability.
Strengthened Team
In May 2016, the Company appointed Pallavi Bakhru and Richard
Gubbins as Non-Executive Directors. Their appointments help
strengthen the Board as it continues its growth strategy,
particularly in an international context, given both of their
experience in cross-border enterprises.
The Company also appointed Mr Sandeep Kumar Gupta as Group CFO
in January 2017 with a view to assisting the growth of Mortice,
particularly in evaluating and undertaking acquisition, investment
and strategic opportunities.
Outlook
The Company expects to build on the strong performance achieved
during the period. Having fully integrated O&G and Frontline we
have a strong international presence and as such are being asked to
tender for an increasing number of global contracts. Furthermore,
the current year has started well with high levels of organic
growth as well as the first contributions from Elite, which was
acquired in April 2017.
Importantly, the large proportion of repeat business provides a
strong foundation for growth and ensures high levels of visibility
and confidence regarding future performance. The Company has come a
long way in the last few years and has a model in place that looks
set to underpin continued growth. Margins have already improved
significantly, which is a testament to our cost control and our
ability to bid for and win profitable underlying work. With still
further margin improvement expected from streamlined operations, a
strong and growing list of blue chip clients and increasing demand
across both the security and facilities management parts of the
business, we are extremely excited about our growth prospects.
Manjit Rajain
Chairman
21 July 2017
Extracts from the audited financial statements are provided,
below, and the full version of the audited financial statements
will be available on the Company's website: www.morticegroup.com.
The Annual Report for the year-ended 31 March 2017 will be posted
to shareholders in due course.
Consolidated statement of financial position
as at 31 March 2017
2017 2016
Note US$ US$
ASSETS
Non-current assets
Goodwill 4 9,720,662 10,778,246
Other intangible assets 5 6,411,934 8,359,658
Property, plant and
equipment 6 3,563,495 3,450,121
Long-term financial
assets 7 1,337,279 834,012
Deferred tax assets 8 2,598,885 2,149,001
Other non-current assets 9 283,396 261,256
------------------------------ ---------- ---------- ------------------------------
23,915,651 25,832,294
Current assets
Inventories 10 438,262 400,441
Trade and other receivables 11 41,088,797 35,634,965
Current tax assets 3,188,355 2,899,652
Cash and cash equivalents 12 3,559,410 1,610,019
------------------------------ ---------- ---------- ------------------------------
48,274,824 40,545,077
------------------------------ ---------- ---------- ------------------------------
Total assets 72,190,475 66,377,371
------------------------------ ---------- ---------- ------------------------------
EQUITY AND LIABILITIES
Equity
Issued capital 13 15,740,501 13,068,612
Reserves 14 3,825,281 1,135,160
------------------------------ ---------- ---------- ------------------------------
Equity attributable
to owner of parent 19,565,782 14,203,772
Non-controlling interests 2,706,558 1,908,608
------------------------------ ---------- ---------- ------------------------------
Total equity 22,272,340 16,112,380
Non-current liabilities
Employee benefit obligations 15 1,965,728 1,371,442
Deferred tax liabilities 8 1,308,997 1,533,965
Borrowings 16 3,684,822 5,883,873
6,959,547 8,789,280
Current liabilities
Trade and other payables 17 28,866,402 30,557,794
Employee benefit obligations 15 750,108 `666,625
Borrowings 16 13,342,078 10,251,292
------------------------------ ---------- ---------- ------------------------------
42,958,588 41,475,711
------------------------------ ---------- ---------- ------------------------------
Total liabilities 49,918,135 50,264,991
------------------------------ ---------- ---------- ------------------------------
Total equity and liabilities 72,190,475 66,377,371
------------------------------ ---------- ---------- ------------------------------
The annexed notes form an integral part of and should be read in
conjunction with these financial statements.
Consolidated statement of profit or loss and
other comprehensive income for the financial year ended 31 March
2017
2017 2016
Note US$ US$
Income
Service revenue 181,011,783 133,041,250
Other income 18 1,479,799 492,768
Total income 182,491,582 133,534,018
Expenses
Staff and related costs 154,323,800 114,259,349
Materials consumed 7,259,821 6,625,629
Other operating expenses 10,563,674 7,813,503
Depreciation and amortization 2,257,034 1,384,771
Finance costs 19 2,734,778 1,839,132
Total expenses 177,139,107 131,922,384
Profit before taxation 5,352,475 1,611,634
Taxation 20 (1,943,228) (744,069)
Profit for the year 3,409,247 867,565
Other comprehensive income
net of tax:
- Items that will not
be reclassified subsequently
to profit or loss
Re-measurement in net
defined benefit liability (59,493) (151,816)
- Items that may be reclassified subsequently to profit or
loss
Currency translation
differences 138,317 (502,280)
-------------------------------- --------- ---------
Total comprehensive
income for the year 3,488,071 213,469
-------------------------------- --------- ---------
Profit attributable
to:
- Owners of the parent 2,629,329 698,832
- Non-controlling interests 779,918 168,733
--- --------------------------- --------- ---------
3,409,247 867,565
------------------------------- --------- ---------
Total comprehensive
income attributable
to:
- Owners of the parent 2,690,121 171,951
- Non-controlling interests 797,950 41,518
--- --------------------------- --------- ---------
3,488,071 213,469
------------------------------- --------- ---------
Earnings per share
Basic and diluted 21 0.05 0.01
The annexed notes form an integral part of and should be read in
conjunction with these financial statements.
Consolidated statement of changes in equity
for the financial year ended 31 March 2017
Total
attributable
Exchange to owners Non-
Equity Translation Retained of controlling Total
Capital Reserve earnings the parent interests equity
US$ US$ US$ US$ US$ US$
---------- ------------ --------- ------------- ------------ ----------
Balance at 1
April 2015 9,555,312 (3,193,804) 4,157,013 10,518,521 29,121 10,547,642
Transaction with
owners
Issue of new
equity 3,513,300 3,513,300 - 3,513,300
Business acquisition
of Frontline
Security Pte.
Limited 1,837,969 1,837,969
Profit for the
year - - 698,832 698,832 168,733 867,565
Other comprehensive
income
Exchange differences
on translating
foreign operations - (404,592) - (404,592) (97,688) (502,280)
Re-measurement
of net defined
benefit liability - - (122,289) (122,289) (29,527) (151,816)
--------------------- ---------- ------------ --------- ------------- ------------ ----------
Total comprehensive
income - (404,592) 576,543 171,951 41,518 213,469
--------------------- ---------- ------------ --------- ------------- ------------ ----------
Balance at 31
March 2016 13,068,612 (3,598,396) 4,733,556 14,203,772 1,908,608 16,112,380
--------------------- ---------- ------------ --------- ------------- ------------ ----------
Balance at 1
April 2016 13,068,612 (3,598,396) 4,733,556 14,203,772 1,908,608 16,112,380
Transaction with
owners
Issue of new
equity 2,671,889 2,671,889 2,671,889
Business acquisition
of Frontline
Security Pte.
Limited
Profit for the
year - 2,629,329 2,629,329 779,918 3,409,247
Other comprehensive
income
Re-measurement
of net defined
benefit liability - - (59,187) (59,187) (306) (59,493)
Exchange differences
on
translating foreign
operation 119,979 119,979 18,338 138,317
Total comprehensive
income - 119,979 2,570,142 2,690,121 797,950 3,488,071
--------------------- ---------- ------------ --------- ------------- ------------ ----------
Balance at 31
March 2017 15,740,501 (3,478,417) 7,303,698 19,565,782 2,706,558 22,272,340
--------------------- ---------- ------------ --------- ------------- ------------ ----------
The annexed notes form an integral part of and should be read in
conjunction with these financial statements.
Consolidated statement of cash flow
for the financial year ended 31 March 2017
2017 2016
Note US$ US$
Cash flows from operating
activities
Profit before taxation 5,352,475 1,611,634
Adjustments for non-cash
item:
Depreciation and amortization 2,257,035 1,384,771
Interest expense 19 2,734,777 1,839,132
Interest income 18 (235,281) (161,511)
(Gain)/loss on disposal of
property, plant and equipment 14,923 33,192
Impairment of trade receivables 585,839 619,478
Foreign exchange gain 1,508,760 (17,061)
Operating profit before working
capital changes 12,218,528 5,309,635
(Increase)/decrease in inventories (33,098) 35,135
Increase in trade and other
receivables (5,290,148) (4,729,091)
Increase in trade and other
payables (1,440,384) 5,470,136
------------------------------------- --------- ----------- ------------
Cash generated from operations 5,454,898 6,085,815
Income taxes paid (2,309,059) (1,811,753)
------------------------------------- --------- ----------- ------------
Net cash generated from/(used
in) operating activities 3,145,839 4,274,062
Cash flows from investing
activities
Acquisition of other intangible
assets 5 (226,806) (193,437)
Acquisition of property,
plant and equipment 6 (858,940) (863,594)
Acquisition of subsidiaries
net of cash - ( 4,992,822)
Deposit for purchase of property (15,566) (61,547)
Advances to/(repayment by)
related parties - -
Proceeds from disposal of
property, plant and equipment 8,004 30,523
Interest received 817,266 814,588
------------------------------------- --------- ----------- ------------
Net cash used in investing
activities (276,042) (5,266,289)
Cash flows from financing
activities
Repayment of finance lease
obligations (649,196) (664,367)
Placement of pledged fixed
deposit (459,961) (817,271)
Withdrawal of pledged fixed
deposit - 918,071
Proceeds from/ (Repayment)
of short-term demand loans
from banks (2,998,041) 4,071,330
Proceeds from other bank
borrowings 3,702,392 1,000,000
Proceeds from issue of share
capital 2,671,889 -
Repayment of other bank
borrowings - (177,511)
Interest paid (3,310,765) (2,335,888)
------------------------------------- --------- ----------- ------------
Net cash (used in)/generated
from financing activities (1,043,682) 1,994,364
Net increase/(decrease) in
cash and cash equivalents 1,826,115 1,002,137
Cash and cash equivalents
at beginning 1,610,019 539,204
Exchange differences on translation 123,276 68,678
------------------------------------- --------- ----------- ------------
Cash and cash equivalents
at end 12 3,559,410 1,610,019
------------------------------------- --------- ----------- ------------
The annexed notes form an
integral part of and should
be read in conjunction with
these financial statements.
Notes to the financial statements for the financial year ended
31 March 2017
1 Introduction
Mortice Limited ('the Company' or 'Mortice') was incorporated on
9 January 2008 as a public limited company in Singapore. The
Company's registered office is situated at 38 Beach Road, #29-11
South Beach Tower, Singapore 189767.
The financial statements of the Company and of the Group for the
year ended 31 March 2017 were authorised for issue in accordance
with a resolution of the directors on the date of the Statement by
Directors.
The Company is listed on the Alternative Investment Market (AIM)
of the London Stock Exchange since 15 May 2008. The principal
activities of the Company consist of investment holding. The
Group's operations are spread across India, United Kingdom,
Singapore and Sri Lanka. The various entities comprising the Group
have been defined below:
Name of subsidiaries Country Effective
of incorporation group shareholding
(%)
Held by Mortice Limited
Tenon Facility Management India
Private Limited
(formally Tenon Property Services
Private Limited) India 99.48
Tenon Facility Management UK United
Limited Kingdom 100
Tenon Facility Management Singapore
Pte Limited Singapore 100
Tenon Property Services Lanka
Private Limited Sri Lanka 100
Held by Tenon Facility Management
India Private Limited
(formally Tenon Property Services
Private Limited)
Peregrine Guarding Private Limited
('PGPL') India 100
Tenon Support Services Private
Limited ('Tenon Support') India 100
Tenon Project Services Private
Limited ('Tenon Project') India 100
Roto Power Projects Private Limited
('Roto') India 99.95
Soteria Command Centre Private
Limited ('Soteria') India 100
Held by Tenon Facility Management
UK Limited
United
Office and General Group Limited Kingdom 100
Held by Tenon Facility Management
Singapore Pte Limited
Frontline Securities Pte Limited Singapore 51
These audited consolidated financial statements were approved by
the Board of Director on 21(st) July 2017.
The immediate and ultimate holding company is Mancom Singapore
PTE LTD., a Company incorporated in Singapore. (In the previous
year Mancom Holding Limited was a Ultimate holding company)
2 Basis of preparation
2.1 General information and statement of compliance with IFRS
The Consolidated financial statements for the year ended 31
March 2017 have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU)
The significant accounting policies that have been used in the
preparation of these consolidated financial statements are
summarised below. The consolidated financial statements have been
prepared under the historical cost convention on a going concern
basis.
The financial statements are presented in United States Dollars
which is the Company's functional currency. All the financial
information is presented in United States Dollars ("US$"), unless
otherwise stated.
The preparation of the financial statements in conformity with
IFRS requires the use of judgements, estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the financial year. Although these estimates are
based on management's best knowledge of current events and actions,
actual results may differ from those estimates.
The critical accounting estimates and assumptions used and areas
involving a high degree of judgement are described below.
Significant accounting estimates and judgements
The preparation of the financial statements in conformity with
IFRS requires the use of judgements, estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the financial year. Although these estimates are
based on management's best knowledge of current events and actions,
actual results may differ from those estimates.
The critical accounting estimates and assumptions used and areas
involving a high degree of judgement are described below.
2.2 Significant judgments in applying accounting policies
Income tax (Note 20)
The Group has exposure to income taxes in numerous
jurisdictions. Significant judgments are required in determining
the group-wide provision for income taxes. There are certain
transactions and computations for which the ultimate tax
determination is uncertain during the ordinary course of business.
The Group recognises liabilities for expected tax 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 recognised, such differences will impact the income
tax and deferred tax provisions in the period in which such
determination is made.
The Group's income tax expense is based on the income and
statutory tax rate imposed in the tax jurisdictions in which the
subsidiaries conduct operations.
Deferred tax assets (Note 8)
The Group recognizes deferred tax assets on carried forward tax
losses to the extent that it is probable that the underlying tax
loss or deductible temporary difference will be utilised against
future taxable income and that the Group is able to satisfy the
continuing ownership test. This is assessed based on the Group's
forecast of future operating results, adjusted for significant
non-taxable income and expenses and specific limits on the use of
any unused tax loss or credit. The carrying amount of deferred tax
assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered. The taxes rules in India, United Kingdom, Sri Lanka and
Singapore, in which, the Group operate are also carefully taken
into consideration. If a positive forecast of taxable income
indicates the probable use of a deferred tax asset, especially when
it can be utilized without a time limit, that deferred tax asset is
usually recognized in full. The recognition of deferred tax assets
that are subject to certain legal or economic limits or
uncertainties is assessed individually by management based on the
specific facts and circumstances.
During the year, the Group recognised shareholdings of certain
group entities, for which a deferred tax asset (net of deferred tax
liabilities) amounting to US$ 1,289,888 (2016 - US$ 615,036) was
recognised based on the anticipated future use of deferred tax
asset carried forward by those entities. If the tax authority
regards the group entities as not satisfying the continuing
ownership test, the deferred tax asset will have to be written off
as income tax expense.
Critical accounting estimates and assumptions used in applying
accounting policies
Impairment tests for cash-generating units containing goodwill
(Note 4)
Goodwill is allocated to the Group's cash-generating unit
("CGU") identified according to business segments as follows:
2017 2016
US$ US$
--------- ---------
Mechanical and engineering
maintenance services
- Roto Power Projects Private
Limited 782,961 811,079
- Office & General Environment 6,655,764 7,602,981
Guarding services
- Frontline Securities Pte
Ltd 2,281,937 2,364,186
========= =========
The recoverable amount of a CGU was determined based on
value-in-use calculations. These calculations use cash flow
projections based on financial budgets approved by management
covering a five-year period. Cash flows beyond the five-year period
were extrapolated using the estimate rates stated in Note 4 to the
financial statements:
The key assumptions for the value-in-use calculations are those
regarding the discount rates, growth rates and expected changes to
selling prices and direct costs during the period. Management
estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks
specific to the CGU. The growth rates are based on industry growth
forecasts. Changes in selling prices and direct costs are based on
past practices and expectations of future changes in the
market.
These assumptions have been used for the analysis of the CGU.
Management determines the budgeted gross margin based on past
performance and its expectations for market developments. The
weighted average growth rates used were consistent with industry
reports. The discount rates used pre-tax and reflect specific risks
relating to the relevant segments.
The carrying amount as at 31 March 2017 was disclosed in Note 4
to the financial statements.
Depreciation of property, plant and equipment (Note 6)
Property, plant and equipment are depreciated on a straight line
basis over their estimated useful lives. Management estimates the
useful lives of property, plant and equipment to be within 3 to 5
years. The carrying amount of the Group's property, plant and
equipment as at 31 March 2017 is US$3,563,509 (2016 -
US$3,450,121). Changes in the expected level of usage and
technological developments could impact the economic lives and
residual value of these assets, therefore depreciation charges
could be revised.
Impairment of trade and other receivables (Note 11)
The Group assesses at the end of each reporting period whether
there is any objective evidence that a financial asset is impaired.
To determine whether there is objective evidence of impairment, the
Group considers factors such as the probability of insolvency or
significant financial difficulties of the debtor and default or
significant delay in payments.
Where there is objective evidence of impairment, the amount and
timing of future cash flows are estimated based on historical loss
experience for assets with similar credit risk characteristics. The
carrying amount of the Group's trade and other receivables at the
end of the reporting period is disclosed in Note 11 to the
financial statements.
Valuation of gratuity benefits and long term compensated
absences (Note 15)
The present value of the post-employment gratuity benefits
depends on a number of factors that are determined on an actuarial
basis using a number of assumptions. The assumptions used in
determining the net cost for gratuity benefits include the standard
rates of inflation and salary increase. Any changes in these
assumptions will impact the carrying amount of gratuity
benefits.
The Group determines the appropriate discount rate at the end of
each year. This is the interest rate that should be used to
determine the present value of estimated future cash outflows
expected to be required to settle the gratuity benefits. In
determining the appropriate discount rate, the Group considers the
interest rates of high quality corporate bonds that are denominated
in the currency in which the benefits will be paid and that have
terms to maturity approximating to the terms of the related
gratuity benefits.
Please refer to Note 15 for details on actuarial assumptions
used to estimate the Group's defined benefit obligations and the
sensitivity analysis of the assumptions. The carrying amount as at
31 March 2017 was disclosed in Note 15 to the financial
statements.
2.3 New and revised standards that are effective for annual
periods beginning on or after 1 April 2016
A number of new and revised standards are effective for annual
periods beginning on or after 1 April 2016. Information on these
new standards is presented below.
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations
This amendment is applied prospectively. Assets (or disposal
Groups) are generally disposed of either through sale or
distribution to owners. The amendment clarifies that changing from
one of these disposal methods to the other would not be considered
a new plan of disposal, rather it is a continuation of the original
plan. There is, therefore, no interruption of the application of
the requirements in IFRS 5. This amendment is effective for annual
periods beginning on or after 1 January 2016. This amendment is not
relevant to the Group, since none of the entities within the Group
has disposed of either through sale or distribution to owners.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible
Assets
The amendment is applied retrospectively and clarifies in IAS 16
and IAS 38 that the asset may be revalued by reference to
observable data by either adjusting the gross carrying amount of
the asset to market value or by determining the market value of the
carrying value and adjusting the gross carrying amount
proportionately so that the resulting carrying amount equals the
market value. In addition, the accumulated depreciation or
amortisation is the difference between the gross and carrying
amounts of the asset. This amendment is effective for annual
periods beginning on or after 1 January 2016. This amendment does
not impact the Group financial statements as the Company has not
revalued its tangible assets and intangible assets.
IFRS 7 Financial Instruments: Disclosures
a) Servicing contracts
-- The amendment clarifies that a servicing contract that
includes a fee can constitute continuing involvement in a financial
asset. An entity must assess the nature of the fee and the
arrangement against the guidance for continuing involvement in IFRS
7.B30 and IFRS 7.42C in order to assess whether the disclosures are
required.
-- The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendment.
-- This amendment is effective for annual periods beginning on or after 1 January 2016.
b) Applicability of the offsetting disclosures to condensed interim financial statements
The amendment must be applied retrospectively. The amendment
clarifies that the offsetting disclosure requirements do not apply
to condensed interim financial statements, unless such disclosures
provide a significant update to the information reported in the
most recent annual report. This amendment is effective for annual
periods beginning on or after 1 January 2016. Since Group is
preparing annual financial statement, thus this amendment is not
applicable to the Group.
Investment Entities: Applying the Consolidation Exception -
Amendments to IFRS 10, IFRS 12 and IAS 28
The amendments address three issues that have arisen in applying
the investment entities exception under IFRS 10 Consolidated
Financial Statements. The amendments to IFRS 10 clarify that the
exemption in paragraph 4 of IFRS 10 from presenting consolidated
financial statements applies to a parent entity that is a
subsidiary of an investment entity, when the investment entity
measures its subsidiaries at fair value. Furthermore, the
amendments to IFRS 10 clarify that only a subsidiary of an
investment entity that is not an investment entity itself and that
provides support services to the investment entity is consolidated.
All other subsidiaries of an investment entity are measured at fair
value. The amendments to IAS 28 Investments in Associates and Joint
Ventures allow the investor, when applying the equity method, to
retain the fair value measurement applied by the investment entity
associate or joint venture to its interests in subsidiaries. This
amendment is effective for annual periods beginning on or after 1
January 2016. This amendment is not applicable on the Group.
IFRS 11 Accounting for Acquisitions of Interests in Joint
Operations - Amendments to IFRS 11
The amendments require an entity acquiring an interest in a
joint operation, in which the activity of the joint operation
constitutes a business, to apply, to the extent of its share, all
of the principles in IFRS 3 and other IFRSs that do not conflict
with the requirements of IFRS 11 Joint Arrangements.
Furthermore, entities are required to disclose the information
required by IFRS 3 and other IFRSs for business combinations. This
amendment is effective for annual periods beginning on or after 1
January 2016. The Group has not entered into any joint
arrangements, hence this is not applicable.
IAS 1 Presentation of Financial Statements
The amendments to IAS 1 include narrow-focus improvements in the
following five areas:
-- Materiality - The amendments re-emphasise that, when a
standard requires a specific disclosure, the information must be
assessed to determine whether it is material and, consequently,
whether presentation or disclosure of that information is
warranted.
-- Disaggregation and subtotals - The amendments clarify that
specific line items in the statement(s) of profit or loss and other
comprehensive income and the statement of financial position may be
disaggregated. For additional subtotals presented in the
statement(s) of profit or loss and other comprehensive income, an
entity must also present the line items that reconcile any such
subtotals with the subtotals or totals currently required in IFRS
for such statement(s).
-- Notes structure - The amendments clarify that entities have
flexibility as to the order in which they present the notes to
financial statements, but also emphasise that understandability and
comparability should be considered by an entity when deciding on
that order.
-- Disclosure of accounting policies - The amendments remove the
examples of significant accounting policies in the Standard, i.e.,
the income taxes accounting policy and the foreign currency
accounting policy, as these were considered unhelpful in
illustrating what significant accounting policies could be.
-- Presentation of items of other comprehensive income arising
from equity accounted investments - The amendments also clarify
that the share of other comprehensive income of associates and
joint ventures accounted for using the equity method must be
presented in aggregate as a single line item, classified between
those items that will or will not be subsequently reclassified to
profit or loss.
The management does not anticipate a material impact on the
Group's consolidated financial statements from application of this
amendment.
2.4 Standards that are not yet effective and have not been adopted by the Group
Summarized in the paragraphs below are standards that have been
issued prior to the date of approval of these consolidated
financial statements and will be applicable for transactions in the
Group but are not yet effective. These have not been adopted early
by the Group and accordingly, have not been considered in the
preparation of the consolidated financial statements of the
Group.
Management anticipates that all of these pronouncements will be
adopted by the Group in the first accounting period beginning after
the effective date of each of the pronouncements. Information on
the new standards, interpretations and amendments that are expected
to be relevant to the Group's consolidated financial statements is
provided below.
IAS 7 Statement of cash flows
Applicable for annual periods beginning on or after 1 January
2017
This amendment requires the entities to provide disclosures that
enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both
changes arising from cash flows and non-cash changes, suggesting
inclusion of a reconciliation between the opening and closing
balances in the balance sheet for liabilities arising from
financing activities, to meet the disclosure requirement. The
Company is currently evaluating the impact that this new standard
will have on its consolidated financial statements.
IFRS 2 Share based payment
Applicable for annual periods beginning on or after 1 January
2018
This amendment provides specific guidance to measurement of
cash-settled awards, modification of cash-settled awards and awards
that include a net settlement feature in respect of withholding
taxes. The Group is currently evaluating the impact that these new
standards will have on its consolidated financial statements.
IFRS 15 'Revenue from Contracts with Customers'
Applicable for annual periods beginning on or after 1 January
2018
IFRS 15 was issued in May 2014 and establishes a new five-step
model that will apply to revenue arising from contracts with
customers. Under IFRS 15 revenue is recognised at an amount that
reflects the consideration to which an entity expects to be
entitled in exchange for transferring goods or services to a
customer. The principles in IFRS 15 provide a more structured
approach to measuring and recognising revenue. The new revenue
standard is applicable to all entities and will supersede all
current revenue recognition requirements under IFRS. Either a full
or modified retrospective application is required for annual
periods beginning on or after 1 January 2018 with early
adoption
permitted. The Group is currently evaluating the impact that
this new standard will have on its consolidated financial
statements.
IFRS 16 'Leases'
Applicable for annual periods beginning on or after 1 January
2019
IFRS 16 was issued in January 2016 and specifies how an IFRS
reporter will recognise, measure, present and disclose leases. The
standard provides a single lessee accounting model, requiring
lessees to recognise assets and liabilities for all leases unless
the lease term is 12 months or less or the underlying asset has a
low value. Lessors continue to classify leases as operating or
finance, with IFRS 16's approach to lessor accounting substantially
unchanged from its predecessor, IAS 17. A lessee shall either apply
IFRS 16 with full retrospective effect or alternatively not restate
comparative information but recognise the cumulative effect of
initially applying IFRS 16 as an adjustment to opening equity at
the date of initial application. A lessee applies IFRS 16 for
annual reporting periods beginning on or after 1 January 2019.
Earlier application is permitted if IFRS 15 'Revenue from Contracts
with Customers' has also been applied. The Group is currently
assessing the impact of IFRS 16 and plans to adopt the new standard
on the required effective date.
2.5 Significant accounting policies
Overall considerations
The financial accounting policies that have been used in the
preparation of these consolidated financial statements are
summarised below. The consolidated financial statements have been
prepared on a going concern basis. The measurement bases are
described in the accounting policies below.
Consolidation
The financial statements of the Group include the financial
statements of the Company and its subsidiaries made up to the end
of the financial year. Information on its subsidiaries is given in
Note 1 to the financial statements.
Subsidiaries are all 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 on which control ceases.
In preparing the consolidated financial statements,
transactions, balances and unrealised gains on transactions between
group entities are eliminated. Unrealised losses are also
eliminated but are considered an impairment indicator of the asset
transferred. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by
the Group.
Profit or loss and other comprehensive income of subsidiaries
acquired or disposed of during the year are recognised from the
effective date of acquisition, or up to the effective date of
disposal, as applicable.
Non-controlling interests comprise the portion of a subsidiary's
net results of operations and its net assets, which is attributable
to the interests that are not owned directly or indirectly by the
equity holders of the Company. They are shown separately in the
consolidated statement of profit or loss and other comprehensive
income, statement of changes in equity and statement of financial
position. Total comprehensive income is attributed to the
non-controlling interests based on their respective interests in a
subsidiary, even if this results in the non-controlling interests
having a deficit balance.
Business combinations
The Group applies the acquisition method in accounting for
business combinations. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the
acquisition-date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Group, which
includes the fair value of any asset or liability arising from a
contingent consideration arrangement. Acquisition costs are
expensed as incurred. Assets acquired and liabilities assumed are
generally measured at their acquisition-date fair values.
Any contingent consideration to be transferred by the acquirer
will be recognized at fair value at the acquisition date.
Contingent consideration classified as an asset or liability that
is an instrument and within the scope of IAS 39 Financial
Instrument: Recognition and Measurement, is measured at fair value
with the changes in fair value recognised in the statement of
profit or loss.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any
non-controlling interest in the acquiree at the date of acquisition
either at fair value or at the non-controlling interest's
proportionate share of the acquiree's net identifiable assets.
The excess of (a) the consideration transferred, the amount of
any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the
acquiree over the (b) fair value of the identifiable net assets
acquired is recorded as goodwill.
Disposals
When a change in the Group's ownership interest in a subsidiary
results in a loss of control over the subsidiary, the assets and
liabilities of the subsidiary including any goodwill are
derecognised. Amounts previously recognised in other comprehensive
income in respect of that entity are also reclassified to profit or
loss or transferred directly to retained earnings if required by a
specific Standard.
Any retained equity interest in the entity is remeasured at fair
value. The difference between the carrying amount of the retained
interest at the date when control is lost and its fair value is
recognised in profit or loss.
Transactions with non-controlling interests
Changes in the Company's ownership interest in a subsidiary that
do not result in a loss of control over the subsidiary are
accounted for as transactions with equity owners of the Group. Any
difference between the change in the carrying amounts of the
non-controlling interest and the fair value of the consideration
paid or received is recognised in a separate reserve within equity
attributable to the equity holders of the Company.
Goodwill
Goodwill on acquisitions of subsidiaries on or after 1 January
2010 represents the excess of the consideration transferred, the
amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the
acquiree over the fair value of the net identifiable assets
acquired.
Goodwill on acquisition of subsidiaries prior to 1 January 2010
represents the excess of the cost of the acquisition over the fair
value of the Group's share of the net identifiable assets
acquired.
Goodwill on subsidiaries is recognised separately as intangible
assets and carried at cost less accumulated impairment losses.
Gains and losses on the disposal of subsidiaries include the
carrying amount of goodwill relating to the entity sold, except for
goodwill arising from acquisitions prior to 1 January 2010. Such
goodwill was adjusted against retained profits in the year of
acquisition and is not recognised in profit or loss on
disposal.
Functional currencies
Items included in the financial statements of each entity in the
Group are measured using the currency of the primary economic
environment in which the entity operates ("functional currency").
The functional currency of all the subsidiaries within the Group
located in India, United Kingdom, Singapore and Sri Lanka is Indian
Rupees (INR), Great Britain Pounds, Singapore Dollars and Sri
Lankan Rupees respectively.
For the purpose of consolidation, management has chosen to
present the consolidated financial information in US$, which is the
functional currency of the Company.
Conversion of foreign currencies
Transactions and balances
Transactions in a currency other than the functional currency
("foreign currency") are translated into the functional currency
using the exchange rates at the dates of the transactions. Currency
translation differences resulting from the settlement of such
transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at the closing rates
at the reporting date are recognised in profit or loss. However, in
the consolidated financial statements, currency translation
differences arising from borrowings in foreign currencies and other
currency instruments designated and qualifying as net investment
hedges and net investment in foreign operations, are recognised in
other comprehensive income and accumulated in the currency
translation reserve.
When a foreign operation is disposed of or any borrowings
forming part of the net investment of the foreign operation are
repaid, a proportionate share of the accumulated translation
differences is reclassified to profit or loss, as part of the gain
or loss on disposal.
Foreign exchange gains and losses that relate to borrowings are
presented in the income statement within "finance cost". Foreign
currency gains and losses are reported on a net basis as either
other income or other operating expense depending on whether
foreign currency movements are in a net gain or net loss
position.
Non-monetary items measured at fair values in foreign currencies
are translated using the exchange rates at the date when the fair
values are determined.
Group entities
The results and financial position of all the Group entities
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
(i) Assets and liabilities are translated at the closing
exchange rates at the end of reporting period of that statement of
financial position;
(ii) Income and expenses for each statement presenting profit or
loss and other comprehensive income (i.e. including comparatives)
shall be translated at exchange rates at the dates of the
transactions; and
(iii) All resulting currency translation differences are
recognised in other comprehensive income and accumulated in the
exchange translation reserve.
Other intangible assets
The Group's other intangible assets include licence, externally
acquired customer relationships, brands and which are further
described in Note 5 to the financial statements.
License
licenses acquired are initially recognised at cost and are
subsequently carried at cost less accumulated amortization and
accumulated impairment losses. License is amortized on a straight
line basis over 10 years, which is considered the useful life of
the asset.
Customer relationships
The customer relationships have been acquired as part of a
business combination and thus have been recognised at the fair
value at the date of acquisition.
These relationships have been amortised on a straight line basis
over ten years, which is considered the useful life of the
asset.
Brands
The brand was acquired as part of the business combination and
thus has been recognised at the fair value at the date of
acquisition.
Management considers the life of the brand generated at the time
of acquisition of Roto Power Projects Private Limited to be
indefinite. The brand will not be amortised until its useful life
is determined to be finite. It is tested for impairment annually
and whenever there is an indication that it may be impaired.
Management considers the life of the brand generated at the time
of acquisition of Office and General Group Limited and Frontline
Securities Pte Limited to be five years.
Internally developed software
Expenditure on the research phase of projects to develop new
customised software is recognised as an expense as incurred. Costs
that are directly attributable to a project's development phase are
recognised as intangible assets, provided they meet the following
recognition requirements:
(i) the development costs can be measured reliably
(ii) the project is technically and commercially feasible
(iii) the Group intends to and has sufficient resources to complete the project
(iv) the Group has the ability to use or sell the software
(v) the software will generate probable future economic benefits.
Development costs not meeting these criteria for capitalisation
are expensed as incurred. Directly attributable costs include
employee costs incurred on software development along with an
appropriate portion of relevant overheads and borrowing costs
This software will be amortised on a straight line basis over
five years, which is considered the useful life of the asset.
Any capitalised internally developed software that is not yet
complete is not amortised but is subject to impairment testing.
Subsequent expenditure on the maintenance of computer software is
expensed as incurred.
When an intangible asset is disposed of, the gain or loss on
disposal is determined as the difference between the proceeds and
the carrying amount of the asset, and is recognised in profit or
loss within other income or other expenses.
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any.
Depreciation is calculated using the straight-line method to
allocate their depreciable amount over their useful lives as
follows:
Computers 3 years
Office equipment 5 years
Plant and machinery 5 years
Furniture and fixtures 5 years
Vehicles 5 years
Leasehold improvements 3 years
The cost of property, plant and equipment includes expenditure
that is directly attributable to the acquisition of the items.
Dismantlement, removal or restoration costs are included as part of
the cost of property, plant and equipment if the obligation for
dismantlement, removal or restoration is incurred as a consequence
of acquiring or using the asset. Cost may also include transfers
from equity of any gains/losses on qualifying cash flow hedges of
foreign currency purchases of property, plant and equipment.
Capital work-in-progress is not depreciated until the assets are
completed and ready for intended use.
Subsequent expenditure relating to property, plant and equipment
that have been recognised is added to the carrying amount of the
asset when it is probable that future economic benefits, in excess
of the standard of performance of the asset before the expenditure
was made, will flow to the Group and the cost can be reliably
measured. Other subsequent expenditure is recognised as an expense
during the financial year in which it is incurred.
For acquisitions and disposals during the financial year,
depreciation is provided from the day of acquisition to the day
before disposal respectively. Fully depreciated property, plant and
equipment are retained in the books of accounts until they are no
longer in use.
Depreciation methods, useful lives and residual values are
reviewed, and adjusted as appropriate at each reporting date as a
change in estimates.
Financial assets
Financial assets, other than hedging instruments, can be divided
into the following categories: financial assets at fair value
through profit or loss, held-to-maturity investments, loans and
receivables and available-for-sale financial assets. Financial
assets are assigned to the different categories by management on
initial recognition, depending on the purpose for which the assets
were acquired. The designation of financial assets is re-evaluated
and classification may be changed at the reporting date with the
exception that the designation of financial assets at fair value
through profit or loss is not revocable.
All financial assets are recognised on their trade date - the
date on which the Company and the Group commit to purchase or sell
the asset. Financial assets are initially recognised at fair value,
plus directly attributable transaction costs except for financial
assets at fair value through profit or loss, which are recognised
at fair value.
Derecognition of financial instruments occurs when the rights to
receive cash flows from the investments expire or are transferred
and substantially all of the risks and rewards of ownership have
been transferred. An assessment for impairment is undertaken at
least at the end of each reporting period whether or not there is
objective evidence that a financial asset or a group of financial
assets is impaired.
Financial assets and financial liabilities are offset and the
net amount presented in the statement of financial position when,
and only when, the Company and the Group currently has a legally
enforceable right to set off the recognised amounts; and intends
either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Non-compounding interest and other cash flows resulting from
holding financial assets are recognised in profit or loss when
received, regardless of how the related carrying amount of
financial assets is measured.
As at 31 March 2017, the Group has loans and receivables on the
statements of financial position. The Group does not designate any
financial assets as held-to-maturity investments, financial assets
at fair value through profit or loss and available-for-sale
financial assets.
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 arise when the Group and the Company provide money,
goods or services directly to a debtor with no intention of trading
the receivables. 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.
Loans and receivables include cash and bank balances, trade and
other receivables, long-term and short-term financial assets. They
are subsequently measured at amortised cost using the effective
interest method, less provision for impairment. If there is
objective evidence that the asset has been impaired, the financial
asset is measured at the present value of the estimated future cash
flows discounted at the original effective interest rate.
Impairment losses are reversed in subsequent periods when an
increase in the asset's recoverable amount can be related
objectively to an event occurring after the impairment was
recognised, subject to a restriction that the carrying amount of
the asset at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been
recognised. The impairment or write back is recognised in profit or
loss.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is determined on a first-in, first-out basis, and
includes all costs in bringing the inventories to their present
location and condition.
Provision is made of obsolete, slow-moving and defective
inventories in arriving at the net realisable value.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs necessary to
make the sale.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, in current
accounts and deposits accounts with an original maturity of three
months or less that are readily convertible into known amounts of
cash and which are subject to an insignificant risk of changes in
value.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents are presented net of any pledged bank
deposits.
Equity capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issuance of new ordinary shares are
deducted against the equity capital account.
Financial liabilities
The Group's and the Company's financial liabilities include bank
borrowings, employee benefit obligations, trade and other
payables.
Financial liabilities are recognised when the Group and the
Company become a party to the contractual agreements of the
instrument. All interest-related charges are recognised as an
expense in "finance cost" in the profit or loss. Financial
liabilities are derecognised if the Group's obligations specified
in the contract expire or are discharged or cancelled.
Borrowings are recognised initially at the fair value less
attributable transaction costs, if any. Borrowings are subsequently
stated at amortised cost which is the initial fair value less any
principal repayments. Any difference between the proceeds (net of
transaction costs) and the redemption value is taken to the profit
or loss over the period of the borrowings using the effective
interest method. The interest expense is chargeable on the
amortised cost over the period of the borrowings using the
effective interest method.
Gains and losses are recognised in profit or loss when the
liabilities are derecognised as well as through the amortisation
process.
Borrowings which are due to be settled within 12 months after
the end of reporting date are included in current borrowings in the
statement of financial position. Even though the original term was
for a period longer than 12 months, an agreement to refinance, or
to reschedule payments, on a long-term basis is completed after the
end of reporting date. Borrowings to be settled within the Group's
operating cycle are classified as current. Other borrowings due to
be settled more than 12 months after the end of reporting date are
included in non-current borrowings in the statement of financial
position.
Trade and other payables
Payables, which represent the consideration for goods and
services received, whether or not billed to the Group and the
Company, are initially measured at fair value plus transaction
costs, and subsequently measured at amortised cost, using the
effective interest method. Payables include trade and the other
payables in the statement of financial position.
Leases
Where the Group is the lessee,
Finance leases
Where assets are financed by lease agreements that transfers
risks and rewards incidental to ownership, the assets are
capitalised as if they had been purchased outright at values
equivalent to the lower of the fair value of the leased assets and
the present value of the total minimum lease payments determined at
the inception of the lease. The corresponding lease commitments are
included under liabilities except for any initial direct costs of
the lessee that are added to the amount recognised as an asset. The
excess of lease payments over the recorded lease obligations are
treated as finance charges which are amortised over each lease term
to give a constant effective rate of charge on the remaining
balance of the obligation.
The leased assets are depreciated on a straight-line basis over
their estimated useful lives as detailed in the accounting policy
on "Property, plant and equipment".
Finance lease liabilities are measured at initial value less the
capital element of lease repayments (see policy on finance
leases).
Operating leases
Leases of assets in which a significant portion of the risks and
rewards of ownership are retained by the lessor are classified as
operating leases. Rentals on operating lease are charged to profit
or loss on a straight-line basis over the lease term. Lease
incentives, if any, are recognised as an integral part of the net
consideration agreed for the use of the leased asset. Penalty
payments on early termination, if any, are recognised in the profit
or loss when incurred.
Income taxes
Current income tax for the current and prior periods is
recognised at the amount expected to be paid to or recovered from
the tax authorities, using the tax rates and tax laws that have
been enacted or substantively enacted by the end of reporting
date.
Deferred tax is recognised for all temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the financial statements except when the deferred income
tax arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and
affects neither accounting or taxable profit or loss at the time of
the transaction.
A deferred tax liability is recognised on temporary differences
arising on investments in subsidiaries, except where the Group is
able to control the timing of the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profit will be available against which
the deductible temporary differences and tax losses can be
utilised.
Deferred tax is measured:
(i) at the tax rates that are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted by the date of the financial
position; and
(ii) based on the tax consequence that will follow from the
manner in which the Group expects, at the date of the financial
position, to recover or settle the carrying amounts of its assets
and liabilities.
Current and deferred income taxes are recognised as income or
expense in the profit or loss, except to the extent that the tax
arises from a business combination or a transaction which is
recognised either in other comprehensive income or directly in
equity. Deferred tax arising from a business combination affects
goodwill on acquisition.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current income tax assets
against current income tax liabilities and when the deferred income
taxes relate to the same fiscal authority.
Employee benefits
The Company and the Group participates in the defined
contribution plan as provided by the laws of the countries in which
it has operations and defined benefit plan.
Defined contribution plan
A defined contribution plan is a plan under which the Group pays
fixed contributions into an independent fund administered by the
government. The Group has no legal or constructive obligations to
pay further contributions after its payment of the fixed
contribution. The Group contributes to a state-run provident fund
according to eligibility of the individual employees. The
contributions recognised in respect of defined contribution plans
are expensed as they fall due.
Defined benefit plan
The defined benefit plans sponsored by the Group defines the
amount of the benefit that an employee will receive on completion
of services by reference to length of service and last drawn
salary. The legal obligation for any benefits remains with the
Group. The Group's defined benefit plans include amounts provided
for gratuity obligations.
The liability recognised in the statement of financial position
of a defined benefit plans is the present value of the defined
benefit obligation (DBO) at the reporting date less the fair value
of plan assets, together with adjustments for unrecognised
actuarial gains or losses and past service costs.
Management estimates the present value of the DBO annually
through valuations by an independent actuary using the projected
unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash
outflows based on management's assumptions.
The estimate of its post-retirement benefit obligations is based
on standard rates of inflation and mortality. Discount rate is
based upon the market yield available on high quality corporate
bonds at the reporting date with a term that matches that of the
liabilities and the salary increase taking into account inflation,
seniority, promotion and other relevant factors.
Service cost and interest expense on the net defined benefit
liability is included in employee benefits expense.
Re-measurement recognised in other comprehensive income is
reflected immediately in retained earnings and will not be
reclassified to profit or loss.
Short term employee benefits
Short term benefits comprising of employee costs such as
salaries, bonuses, and paid annual leave and sick leave are accrued
in the year in which the associated services are rendered by
employees of the Group.
The liability in respect of compensated absences becoming due or
expected to be available within one year from the reporting period
are considered short term benefits and are recognised on the basis
of undiscounted value of estimated amount required to be paid or
estimated value of benefit expected to be available to the
employees.
Long term employee benefits
The liability for employee's compensated absences which become
due or expected to be available after more than one year from the
reporting date are considered long term benefits and are recognised
through valuation by an independent actuary using the projected
unit credit method at each reporting date. Actuarial gains and
losses are recognized immediately in the statement of financial
position with a corresponding debit or credit to retained earnings
through statement of profit and loss in the period in which they
occur.
Key management personnel
Key management personnel are those persons having the authority
and responsibility for planning, directing and controlling the
activities of the entity. Directors of the Company and certain
directors of subsidiaries are considered key management
personnel.
Impairment of non-financial assets
The carrying amounts of the Company's and the Group's
non-financial assets subject to impairment are reviewed at the end
of each reporting period to determine whether there is any
indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated.
If it is not possible to estimate the recoverable amount of the
individual asset, then the recoverable amount of the
cash-generating unit to which the assets belong will be
identified.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are largely independent cash
inflows (cash-generating units). As a result, some assets are
tested individually for impairment and some are tested at
cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies
of the related business combination and represent the lowest level
within the Group at which management monitors goodwill.
Individual assets or cash-generating units that include goodwill
and other intangible assets with an indefinite useful life or those
not available for us are tested for impairment at least annually.
All other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount, which is the higher of fair value, reflecting
market conditions less costs to sell and value-in-use. To determine
the value-in-use, management estimates expected future cash flows
from each cash-generating unit and determines a suitable interest
rate in order to calculate the present value of those cash flows.
The data used for impairment testing procedures are directly linked
to the Group's latest approved budget, adjusted as necessary to
exclude the effects of future reorganisations and asset
enhancements. Discount factors are determined individually for each
cash-generating unit and reflect their respective risk profiles as
assessed by management.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro
rata to the other assets in the cash-generating unit. With the
exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no
longer exist.
Any impairment loss is charged to profit or loss unless it
reverses a previous revaluation in which case it is charged to
equity.
With the exception of goodwill,
-- An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount or when
there is an indication that the impairment loss recognised for the
asset no longer exists or decreases.
-- An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined if no impairment loss had been
recognised.
-- A reversal of an impairment loss on a revalued asset is
credited directly to equity under the heading revaluation surplus.
However, to the extent that an impairment loss on the same revalued
asset was previously recognised as an expense in the profit or
loss, a reversal of that impairment loss is recognised as income in
the profit or loss.
An impairment loss in respect of goodwill is not reversed, even
if it relates to impairment loss recognised in an interim period
that would have been reduced or avoided had the impairment
assessment been made at a subsequent reporting or end of reporting
period.
Related party
A related party is defined as follows:
a) A person or a close member of that person's family is related
to the Group and Company if that person:
i) has control or joint control over the Company;
ii) has significant influence over the Company; or
iii) is a member of the key management personnel of the Group or
Company or of a parent of the Company.
b) An entity is related to the Group and the Company if any of the following conditions applies:
i) the entity and the Company are members of the same group
(which means that each parent, subsidiary and fellow subsidiary is
related to the others).
ii) one entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a group of
which the other entity is a member).
iii) both entities are joint ventures of the same third
party.
iv) one entity is a joint venture of a third entity and the
other entity is an associate of the third entity.
v) the entity is a post-employment benefit plan for the benefit
of employees of either the Company or an entity related to the
Company. If the Company is itself such a plan, the sponsoring
employers are also related to the Company;
vi) the entity is controlled or jointly controlled by a person
identified in (a);
vii) a person identified in (a) (i) has significant influence
over the entity or is a member of the key management personnel of
the entity (or of a parent of the entity).
Related parties may be individuals or corporate entities.
The Group's related parties include subsidiaries, key
management, and entities over which the key management are able to
exercise significant influence. Unless otherwise stated, none of
the transactions incorporate special terms and conditions and no
guarantees were given or received. Outstanding balances are usually
settled in cash.
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and rendering of services in
the ordinary course of the Group's activities. Revenue is
recognised when the significant risks and rewards of ownership have
been transferred to the buyer. Revenue excludes goods and services
taxes and is arrived at after deduction of trade discounts, and
after eliminating sales within the Group. No revenue is recognised
if there are significant uncertainties regarding recovery of the
consideration due, associated costs or the possible return of
goods.
The Group recognises revenue when the specific criteria for each
of the Group's activities are met as follows:
Rendering of services
Revenue from guarding and provision of facility management and
other manpower services is recorded net of trade discounts, rebates
and applicable taxes and is recognised upon performance of services
and when there is a reasonable certainty regarding collection at
the fair value of the consideration received or receivable.
Revenue from contracts with customers
In respect of installation projects which overlap two reporting
periods, revenue is recognised based on the percentage of project
completion method. Percentage completion of the project is
determined by comparing actual cost incurred till reporting date to
the estimate of total cost for completion of the project.
Sale of goods
Revenue from sale of goods is recognised when all the
significant risks and rewards of ownership are transferred to the
buyer and the Company retains no effective control of the goods
transferred to a degree usually associated with ownership; and no
significant uncertainty exists regarding the amount of the
consideration that will be derived from sale of goods.
No revenue is recognised if there are significant uncertainties
regarding recovery of the consideration due, associated costs or
the possible return of goods.
Interest income
Interest income is recognised on a time-apportioned basis using
the effective interest method.
Operating segments
In identifying its operating segments, management follows the
Group's service lines, which represent the main products and
services provided by the Group, as reported to the Group Chief
Executive.
The activities undertaken by the Guarding segment includes the
provision of guarding services. Facility management services are
undertaken by the Facility Management segment. The activities
undertaken in respect sale and installation of safety equipment do
not meet the quantitative thresholds under IFRS 8 and thus have
been disclosed under the segment 'Others'.
Each of these operating segments is managed separately as each
of these service lines requires different technologies and other
resources as well as marketing approaches. All inter-segment
transfers are carried out at arm's length prices.
The measurement policies the Group uses for segment reporting
under IFRS 8 are the same as those used in its financial
statements. Corporate assets which are not directly attributable to
the business activities of any operating segment are not allocated
to a segment.
Acquisitions in 2015-16
Office and General Group Ltd (O&G)
On 7 September 2015, Tenon Facility Management UK Limited, a
wholly-owned subsidiary of Mortice, group acquired the 100% voting
interest in Office and General Group Ltd (O&G) a London-based
property services company. The business acquisition was conducted
by entering into a share purchase agreement for a cash
consideration of GBP 2,838,000 (equivalent USD 4,296,733) and
3,000,000 new ordinary shares of Mortice Limited (initial
consideration shares) issued to the vendor at guaranteed price of
GBP 1. The contingent consideration is estimated to be 500,000 new
ordinary shares of Mortice Limited to be issued at guaranteed price
of GBP 1 on the second anniversary of the completion of the
acquisition subject to meeting the conditions including settlement
of future tax or other liabilities specified in the share purchase
agreement.
The vendor shall be entitled to sell, transfer or otherwise
dispose up to 50 percent of the initial consideration shares at any
time before the second anniversary provided that such shares are
first offered to such person as the buyer nominates at the same
price and same terms as that may have
been offered to any proposed buyer or transferee. The vendor
shall be entitled to sell 66.67 percent of the initial
consideration shares (less shares sold before the second
anniversary) on completion of the second anniversary and the
remaining initial consideration shares on completion of the third
anniversary at a price of GBP 1.
Frontline Security Pte Limited
On 9 November 2015, Tenon Facility Management Singapore Pte.
Limited, a wholly-owned subsidiary of Mortice, group acquired the
51% voting interest in Frontline Security Pte. Limited, a Singapore
based securities and product company for a consideration of SGD
3,287,210 (equivalent USD 2,310,013) in cash. The group has elected
to measure the non-controlling interest at fair value.
Assets acquired and liabilities assumed
Office and Frontline Total
General Group Security
Limited (O&G) Pte. Limited.
Limited
--------------------------------- ---------------------------- --------------------
Assets Acquired US$ US$ US$
Property, plant
and equipment 1,256,825 57,250 1,314,075
Intangible assets 6,828,141 1,725,909 8,554,050
Inventories 249,861 - 249,861
Trade and other
receivables 7,604,694 1,000,757 8,605,451
Cash and cash
equivalents 115,939 90,180 206,119
Other Assets 349,507 253,472 602,979
Total assets 16,404,967 3,127,568 19,532,535
Liabilities assumed
Borrowings 1,741,100 - 1,741,100
Deferred tax liabilities 1,365,628 293,405 1,659,033
Other liabilities 7,649,945 435,304 8,085,249
Trade and other
payables 4,148,647 615,063 4,763,710
Total liabilities 14,905,320 1,343,772 16,249,092
Identifiable net
assets at fair
value 1,499,647 1,783,796 3,283,443
Goodwill on acquisition 7,903,869 2,364,186 10,268,055
Non-controlling
interest at fair
value - (1,837,969) (1,837,969)
Purchase consideration
transferred 9,403,516 2,310,013 11,713,529
================================= ============================ ====================
Purchase Consideration
Consideration
transferred settled
in cash 4,296,733 902,208 5,198,941
Shares issued
at fair value 3,513,300 - 3,513,300
Fair value of
contingent consideration 444,457 - 444,457
Deferred consideration - 1,407,805 1,407,805
Financial liability
measured at fair
value 1,149,026 - 1,149,026
Total consideration 9,403,516 2,310,013 11,713,529
================================= ============================ ====================
Analysis of cash flow on acquisitions
Office and Frontline Total
General Group Security (US$)
Limited Pte. Limited.
(US$) Limited
(US$)
------------------------ --------------- --------------- --------
Transaction cost
of acquisition
(included in
cash flow from
operating activities) 590,412 101,235 691,646
Net cash acquired
from subsidiaries
(Included in
cash flow from
investing activities) 115,939 90,180 206,119
------------------------ --------------- --------------- --------
The fair value of trade receivables amounted to $ 8,954,958.
None of the trade receivables have been impaired and it is expected
that the full contractual amount can be collected.
Deferred tax liabilities have been recognized on the acquired
intangible assets.
The goodwill of $10,268,055 comprised of value of expected
synergies arising from acquisition which was not separately
recognized. The goodwill of $7,903,869 accounted on acquisition
Office and General Group Limited was entirely allocated to facility
management and goodwill of $2,364,186 accounted on acquisition of
Frontline Security Pte. Limited was entirely allocated to guarding
services. None of the goodwill recognised on acquisition is
expected to be deductible for tax purposes.
The fair value measurement was based on significant input that
is not observable in the market. The fair value estimate based
on;
-- Annual discount rate in the range of 8% to 10%.
-- Terminal value based on the long term sustainable growth rate for the industry is 2%.
On acquisition of Frontline Securities Pte Limited, the fair
value of non-controlling interest has been estimated using the
discounting techniques.
From the date of acquisition Office and General Group Limited
contributed $30,860,219 of revenue and profit before tax $158,522
for the year ended 31 March 2016. If the combination had taken
place at 1 April 2015 revenue from continuing operations would have
been $55,859,824 and the profit after tax for the year ended 31
March 2016 would have been $ 113,356.
From the date of acquisition office and Frontline Securities
Pte. Limited contributed $2,886,660 of revenue and profit after tax
$357,231 for the year ended 31 March 2016. If the combination had
taken place at 1 April 2015 revenue from continuing operations
would have been $ 6,545,177 and the profit after tax for the year
ended 31 March 2016 would have been $ 897,818.
4 Goodwill
The movements in the net carrying amount of goodwill are as
follows:
2017 2016
---------------------- ----------------------
Gross carrying amount US $ US $
Balance 1 April 10,778,246 765,323
Acquired through business combination - 10,313,811
Net exchange difference (1,057,584) (300,888)
---------------------- ----------------------
Balance 31 March 9,720,662 10,778,246
Accumulated impairment - -
---------------------- ----------------------
Carrying amount at 31 March 9,720,662 10,778,246
---------------------- ----------------------
Impairment testing of goodwill
For the purpose of annual impairment testing, goodwill is
allocated to the operating segments expected to benefit from the
synergies of the business combinations in which the goodwill
arises, as follows:
2017 2016
US $ US $
----------------- -----------------
Guarding Services 2,281,939 2,364,186
Facilities Management 7,438,723 8,414,060
----------------- -----------------
9,720,662 10,778,246
----------------- -----------------
The recoverable amount of each segment was determined based on
value-in-use calculations, covering a detailed five-year forecast,
followed by an extrapolation of expected cash flows for the
remaining useful lives using a declining growth rate determined by
management. The recoverable amount of each operating segment is set
out below:
2017 2016
US $ US $
Guarding Services 14,492,229 8,771,808
Facilities Management 35,975,530 32,771,689
----------------------- ----------- -----------
Key assumptions used for value-in-use calculations: (Year
2017)
Office and General Group Frontline Security Roto Power Projects Privat
Limited (O&G) Services Pte. Limited Limited
Segment Facilities Management Guarding Services Facilities Management
---------------------------- ---------------------------- --------------------------- -----------------------------
2017 2017 2017
Net margin (1) 2%-3% 12%-14% 5%-7%
Annual Growth rate (2) 9%-10% 4%-5% 6%-10%
Long term Growth rate (2) 2% 2% 5%
Discount rate (3) 10% 12% 20%
---------------------------- ---------------------------- --------------------------- --------------------- ------
Key assumptions used for value-in-use calculations: (Year
2016)
Office and General Group Frontline Security Roto Power Projects Privat
Limited (O&G) Services Pte. Limited Limited
Segment Facilities Management Guarding Services Facilities Management
---------------------------- ---------------------------- --------------------------- -----------------------------
2016 2016 2016
Net margin (1) 2%-4% 7%-11% 3%-8%
Annual Growth rate (2) 6%-15% 6%-15% 5%-11%
Long term Growth rate (2) 2% 2% 5%
Discount rate (3) 11% 8% 21%
---------------------------- ---------------------------- --------------------------- --------------------- ------
(1) Budgeted net margin based on past experience in the
market.
(2) Forecasted growth rate based on management estimation
derived from past experience and external source of information
available.
(3) Pre-tax discount rate applied to the pre-tax cash flow
projections based on management's estimates of the risks specific
to the business.
These assumptions were used for the analysis of the CGU within
the operating segment. Management determined budgeted net margin
based on past performance and its expectations of the market
developments. The weighted average growth rates used were
consistent with the forecasts included in industry reports. The
discount rates used were pre-tax and reflected specific risks
relating to the relevant segments.
As at 31 March 2017, goodwill in respect of the acquisition of
Roto Power Projects Private Limited, Office and General Group
Limited and Frontline Securities Pte Limited was not impaired
5 Other intangible assets
Intangible assets
under
Brands Customer Relationships License Software development Total
US$ US$ US$ US$ US$ US$
--------- ---------------------- ----------- -------- ----------------- -----------
Cost
Balance as at 1 April
2015 46,546 66,481 82,414 - 143,791 339,232
Addition during the
year - - 8,579 - 184,858 193,437
Acquisition through
business combination 3,210,153 5,343,897 - - - 8,554,050
Translation adjustment (2,626) (3,749) (4,762) - (10,541) (21,678)
--------- ---------------------- ----------- -------- ----------------- -----------
Balance as at 31 March
2016 and
1 April 2016 3,254,073 5,406,629 86,231 - 318,108 9,065,041
Addition during the
year - - 386 544,529 226,420 771,335
Disposals/Transfers - - - - (544,529) (544,529)
Translation adjustment (439,320) (717,375) 1,988 7,331 1 (1,147,375)
--------- ---------------------- ----------- -------- ----------------- -----------
Balance as at 31 March
2017 2,814,753 4,689,254 88,605 551,860 - 8,144,472
--------- ---------------------- ----------- -------- ----------------- -----------
Accumulated
amortization
Balance as at 1 April
2015 - 66,481 6,041 - - 72,522
Amortisation during the
year 344,084 285,159 7,811 - - 637,054
Translation adjustment - (3,750) (443) - - (4,193)
--------- ---------------------- ----------- -------- ----------------- -----------
Balance as at 31 March
2016 and
1 April 2016 344,084 347,890 13,409 - 705,383
Amortisation during the
year 575,751 480,434 8,263 52,788 - 1,117,236
Translation adjustment (50,828) (40,148) 388 507 - (90,081)
--------- ---------------------- ----------- -------- ----------------- -----------
Balance as at 31 March
2017 869,007 788,176 22,060 53,295 - 1,732,538
--------- ---------------------- ----------- -------- ----------------- -----------
Carrying value
--------- ---------------------- ----------- -------- ----------------- -----------
At 31 March 2016 2,909,989 5,058,739 72,822 318,108 - 8,359,658
At 31 March 2017 1,945,746 3,901,078 66,545 498,565 - 6,411,934
========= ====================== =========== ======== ================= ===========
Customer relationships are determined to have a finite life and
are amortized on a straight-line basis over their estimated useful
lives and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The estimated useful
life of customer relationships is 5 years.
Intangible asset under development for the year ended 31 March
2016 included customized software ("Ramco) which has been
capitalized during the year on 1 December 2016.
Management considers the life of the brand generated at the time
of acquisition of Roto Power Projects Private Limited to be
indefinite. The brand will not be amortised until its useful life
is determined to be indefinite. It is tested for impairment
annually and whenever there is an indication that it may be
impaired. The carrying value of brand is US$ 44,932 (2016 - US$
46,508).
Management considers the life of the brand generated at the time
of acquisition of Office and General Group Limited and Frontline
Securities Pte Limited to be five years. The carrying value of
brand is US$ 1,900,814 (2016 - US$ 2,863,481).
The recoverable amount of brands is assessed together with the
recoverable amount of goodwill in Note 3 as they relate to the same
CGU. As at 31 March 2017, the carrying amount of brands is not
impaired.
Amortisation and impairment charge, if any are included in the
statement of profit or loss.
6 Property, plant and equipment
Office Plant and Furniture Leasehold Capital work-
Computers Equipment Machinery and fixtures Improvements *Vehicles in-progress Total
Cost US$ US$ US$ US$ US$ US$ US$ US$
--------- --------- --------- ------------ ------------ --------- ------------- ---------
At 1 April 2015 485,404 157,360 1,227,570 565,464 156,882 1,218,174 394,998 4,205,852
Acquisition
through
business
combination 36,321 1,076,444 1,287,787 151,779 1,942,886 4,495,417
Addition during
the year 267,828 144,406 343,433 49,774 - 222,041 92,624 1,120,106
Disposals - - (1,020) - (245,896) - (246,916)
Translation
adjustment (28,800) (73,897) (137,183) (41,533) (8,850) (183,602) (23,501) (497,366)
----------------- --------- --------- --------- ------------ ------------ --------- ------------- ---------
At 31 March 2016
and
1 April 2016 760,753 1,304,513 2,721,607 724,464 148,032 2,953,603 464,121 9,077,093
Addition during
the year 46,225 154,525 484,746 27,351 30,600 525,905 130,434 1,399,786
Disposals - - - - (120,660) - (120,660)
Translation
adjustment 16,314 (133,135) (137,402) 22,028 4,477 (219,012) 15,220 (431,510)
----------------- --------- --------- --------- ------------ ------------ --------- ------------- ---------
At 31 March 2017 823,292 1,325,903 3,068,951 773,843 183,109 3,139,836 609,775 9,924,709
----------------- --------- --------- --------- ------------ ------------ --------- ------------- ---------
Accumulated
depreciation and
Impairment
At 1 April 2015 304,640 106,489 644,416 351,180 87,338 697,738 - 2,191,802
Acquisition
through
business
combination 33,387 993,184 1,013,340 73,990 1,067,441 3,181,342
Charge for the
year 104,725 (87,464) 271,571 106,398 20,656 331,831 - 747,717
Disposals - - - (1,020) - (182,181) - (183,200)
Translation
adjustment (16,700) (57,760) (95,876) (27,392) (5,199) (107,762) - (310,689)
----------------- --------- --------- --------- ------------ ------------ --------- ------------- ---------
At 31 March 2016
and
1 April 2016 426,052 954,449 1,833,451 503,156 102,795 1,807,069 - 5,626,972
Charge for the
year 156,254 121,262 356,567 67,259 19,871 418,585 - 1,139,798
Disposals - - - - - (97,733) - (97,733)
Translation
adjustment 13,264 (105,984) (107,949) 19,752 3,060 (129,966) - (307,823)
----------------- --------- --------- --------- ------------ ------------ --------- ------------- ---------
At 31 March 2017 595,570 969,727 2,082,069 590,167 125,726 1,997,955 - 6,361,214
----------------- --------- --------- --------- ------------ ------------ --------- ------------- ---------
Net book value
At 31 March 2016 334,701 350,064 888,156 221,308 45,237 1,146,534 464,121 3,450,121
At 31 March 2017 227,722 356,176 986,882 183,676 57,383 1,141,881 609,775 3,563,495
=================
* The net book value of motor vehicles acquired under finance
leases for the Group amounted to US$ 453,100 (2016 - US$
1,165,975). Bank borrowings are secured on property, plant and
equipment of the Group with carrying amounts of US$ 409,796 (2016 -
US$514,465) (Note 16.2).
7 Long-term financial assets
2017 2016
US$ US$
----------------- -----------------
Restricted cash
- Due not later than one year 1,331,110 827,982
- Due later than one year 6,169 6,030
----------------- -----------------
1,337,279 834,012
================= =================
Restricted cash represents fixed deposits held with banks to
secure bank guarantees in favour of customers with respect to the
Group's activities for continuing contracts. The weighted average
effective interest rate of long-term financial assets is 7.48%
(2016 - 8.15%) per annum.
The carrying amount of restricted cash due not later than one
year approximates its fair value. The carrying amount of restricted
cash due later than one year in prior year approximated its fair
values because the directors expected the market interest rate
available to the Group for restricted cash as at 31 March 2017 to
be similar. The restricted cash is in the nature of long term
financial assets since these are margin money with the customer and
bank which are related to the performance obligation.
8 Deferred tax assets (net)
Deferred tax assets and liabilities are offsetted when there is
a legally enforceable right to offset current income tax assets
against current income tax liabilities and when the deferred income
taxes relate to the same fiscal authority. The amounts, determined
after appropriate offsetting, are shown on the balance sheet as
follows:
2017 2016
US$ US$
Movements in deferred income tax account are as follows:
Balance at beginning 615,026 1,901,826
Transfer from
- Profit or loss 572,636 535,115
- Exchange adjustment 102,226 (162,872)
-Deferred tax acquired in business combination - (1,659,033)
Balance at end 1,289,888 615,036
------------ ------------
Deferred tax assets 2,598,885 2,149,001
Deferred tax liabilities (1,308,997) (1,533,965)
------------ ------------
1,289,888 615,036
------------ ------------
Deferred taxes arising from temporary differences and unused tax losses can be summarized
as follows:
Recognised in Recognised in
business other
Recognised in combination comprehensive Deferred tax at 31
At 1 April 2016 profit or loss income March 2017
US$ US$ US$ US$ US$
--------------- ---------------- --------------- --------------- ---- ---------------
Deferred tax
asset
Excess of net
book value over
tax written
down value of
property, plant
and equipment 207,418 43,395 - - 250,813
Retirement
benefits and
other employee
benefits 551,759 3,30,993 - 48,002 930,754
Unutilised tax
losses 468,491 (158,782) - - 309,709
Unutilised tax
credits 178,672 6,336 - - 185,008
Others 742,661 179,940 - - 922,601
2,149,001 401,882 - 48,002 2,598,885
--------------- ---------------- --------------- --------------- ---- ---------------
Deferred tax
liabilities
Deficit of net
book value over
tax written
down value of
intangible
assets (1,533,965) 224,968 - - (1,308,997)
--------------- ---------------- --------------- --------------- ---- ---------------
(1,533,965) 224,968 - (1,308,997)
--------------- ---------------- --------------- --------------- ---- ---------------
Recognised in Recognised in
business other
Recognised in combination comprehensive Deferred tax at
At 1 April 2015 profit or loss income 31 March 2016
Deferred tax US$
assets US$ US$ US$ US$
--------------- ---------------- --------------- --------------- ---- ---------------
Excess of net
book value over
tax written down
value of
qualifying
property, plant
and
Equipment 220,552 (13,135) - - 207,417
Retirement
benefits and
other employee
benefits 482,614 (11,252) - 80,398 551,760
Unutilised tax
losses 445,939 22,552 - 468,491
Unutilised tax
credits 192,306 (13,634) - 178,672
Others 560,416 182,245 - 742,661
--------------- ---------------- --------------- --------------- ---- ---------------
1,901,827 166,776 - 80,398 2,149,001
--------------- ---------------- --------------- --------------- ---- ---------------
Deferred tax
liabilities
--------------- ---------------- --------------- --------------- ---- ---------------
Deficit of net
book value over
written down
value of
intangible
assets - 125,068 (1,659,033) - - (1,533,965)
--------------- ---------------- --------------- --------------- ---- ---------------
125,068 (1,659,033) - - (1,533,965)
--------------- ---------------- --------------- --------------- ---- ---------------
Deferred income tax asset on unutilised tax lossed is recognised
to the extent that it is probable that future taxable profit will
be available against which the tax losses can be utilised.
Unutilised tax credits pertains to minimum alternate tax credit
entitlement which is a new tax credit scheme where minimum tax
computed and paid can be carried forward to offset against regular
tax payable in subsequent year, subject to certain conditions.
Others pertain mainly to provision of doubtful debts.
Deferred tax assets have not been recognised in respect of the
following items:
2017 2016
US$ US$
------- -------
Tax losses 290,781 279,201
Deferred tax assets in respect
of tax losses 89,851 86,273
------- -------
The tax losses are subject to agreement by the tax authorities
and compliance with tax regulations in the respective countries in
which the entities operate. The deductible temporary differences do
not expire under current tax legislation. Deferred tax assets have
not been recognised in respect of tax losses because it is not
probable that future taxable profit will be available against which
the Group can utilise the benefits.
Unrecognised taxable temporary differences associated with
investments in subsidiaries
Deferred tax liabilities of US$ 1,801,642 (2016 - US$ 1,385,343)
have not been recognised for withholding and other taxes that will
be payable on the earnings of the overseas subsidiaries. The Group
is able to controls the timing of the reversal and it is probable
that the temporary difference will not reverse in the foreseeable
future.
9 Other non-current assets
2017 2016
US$ US$
---------- ----------
Advance for property under development 283,396 261,256
---------- ----------
This represents advance paid for construction of apartment under
development in Gurgaon. The amount will be capitalised as part of
property, plant and equipment upon completion of the
transaction.
10 Inventories
--------------- ---------------
2017 2016
US$ US$
--------------- ---------------
Consumables 438,262 400,441
--------------- ---------------
Consumables represent uniforms, material and equipment such as
tools used under installation at customer sites. No inventory write
downs or reversals are recognized in the periods reported
above.
11 Trade and other receivables
2017 2016
US$ US$
Trade receivables 32,484,046 28,698,149
Less impairment of
trade receivables:
Balance at beginning 1,572,997 1,268,776
Charge for the year 585,839 601,071
Translation adjustment 36,252 (296,850)
------------------ ----------
Balance at end 2,195,088 1,572,997
----------------------------- ---------------------------- ------------------ ----------
Net trade receivables (i) 30,288,958 27,125,152
----------------------------- ---------------------------- ------------------ ----------
Other receivables/assets
Unbilled billings 7,439,943 5,126,525
Advances to related
parties - 134,445
Advances to third
parties 1,093,561 898,046
Staff loans 303,349 329,893
Deposits 647,400 522,541
Prepayments 1,028,495 539,169
Others 287,091 959,194
----------------------------------------------------------- ------------------ ----------
(ii) 10,799,839 8,509,813
--------------------------------------------------------- ------------------ ----------
(i) +
(ii) 41,088,797 35,634,965
--------------------------------------------------------- ------------------ ----------
The advances to related parties are interest-free, unsecured and
receivable on demand. The advances to third parties mainly pertain
to advances paid on rent, construction work-in-progress and
suppliers of petrol. Included in prepayments are advances to
vendors and prepaid insurance. The deposits pertain to security
deposits recoverable from customers.
Unbilled billings represent the contract revenue for services
rendered but not yet invoiced due to the timing of the accounting
invoicing cycle.
Trade receivables are usually due within 30 to 90 days and do
not bear any effective interest rate.
All trade receivables are subject to credit risk exposure.
However, the Group does not identify specific concentrations of
credit risk with regards to trade and other receivables, as the
amounts recognised resemble a large number of receivables from
various customers. Impairment of trade receivables is made when
certain debtors are identified to be irrecoverable.
The credit risk for trade and other receivables based on the
information provided by key management is as follows:
2017 2016
US$ US$
---------- ----------
By geographical area
India 31,750,640 28,094,016
Sri Lanka 839 869
United Kingdom 7,796,569 6,155,185
Singapore 1,540,749 1,384,895
41,088,797 35,634,965
========== ==========
(i) Financial assets that are past due but not impaired
The ageing analysis of trade receivables past due but not
impaired is as follows:
2017 2016
US$ US$
-------------- --------------
Not past due 11,614,008 11,139,546
Past due 0 to 3 months 13,302,517 11,435,685
Past due 3 to 6 months 2,192,755 1,934,271
Past due over 6 months 3,179,678 2,615,650
-------------- --------------
30,288,958 27,125,152
============== ==============
Based on historical default rates, the Group believes that no
impairment allowance is necessary in respect of trade and other
receivables not past due or past due but not impaired. These
receivables are mainly arising by customers that have a good credit
record with the Group.
ii) Trade receivables that are past due and/or impaired
The carrying amount of trade receivables individually determined
to be impaired is as follow:
2017 2016
The Group US$ US$
-------------------- --------------
Gross amount 2,195,088 1,572,997
Provision for impairment losses (2,195,088) (1,572,997)
-------------------- --------------
- -
==================== ==============
The impaired trade receivables arises mainly from specific debts
for which the directors of the Group are of the opinion that the
debts are not recoverable.
31 Mar 2017
Ageing analysis of other receivables
Past due
Not past due Past due 0 to3months 3 to 6 months Past due over6months
US$ US$ US$ US$
Unbilled billings 7,439,943 - - -
Advances to related parties - - - -
Advances to third parties - 1,093,561 - -
Staff loans - 303,349 - -
Deposits 324,055 - 323,346 -
Prepayments - 342,156 349,664 336,675
Others - 287,091 - -
----------------------------- ------------ -------------------- -------------- --------------------
31 Mar 2016
Ageing analysis of other receivables
Past due
Not past due Past due 0 to3months 3 to 6 months Past due over6months
US$ US$ US$ US$
Unbilled billings 5,126,525 - - -
Advances to related parties - - 134,445 -
Advances to third parties - 898,046 - -
Staff loans - 329,893 - -
Deposits 214,214 - 308,327 -
Prepayments - 54,277 358,662 126,230
Others - 959,195 - -
----------------------------- ------------ -------------------- -------------- --------------------
12 Cash and cash equivalents
2017 2016
US$ US$
Cash at banks 3,477,444 1,485,791
Cash on hand 81,966 124,228
3,559,410 1,610,019
13 Equity capital
No. of ordinary shares Amount
2017 2016 2017 2016
US$ US$
Issued and fully paid, with no par value
Balance at beginning of year 50,700,001 47,700,001 13,068,612 9,555,312
Addition 3,072,206 3,000,000 2,671,889 3,513,300
Balance at end of year 53,772,207 50,700,001 15,740,501 13,068,612
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All shares rank equally with
regard to the Company's residual assets.
14 Reserves
2017 2016
US$ US$
Currency translation reserve (3,478,417) (3,598,396)
Retained earnings 7,303,698 4,733,556
3,825,281 1,135,160
Currency translation reserve arises from the translation of the
financial statements of foreign entities whose functional
currencies are different from the functional currency of the
Company.
15 Employee benefit obligations
Long term employee benefit obligations comprise the gratuity and
long-term compensated absences. These are summarised as under:
2017 2016
US$ US$
---------
Gratuity benefit plan (Note 15.1) 1,981,570 1,472,119
Long term compensated absences (Note 15.2) 734,266 565,948
2,715,836 2,038,067
Non-current 1,965,728 1,371,442
Current 750,108 666,625
2,715,836 2,038,067
The estimate of its defined benefit liabilities at 31 March
2017, 2016, 2015, 2014 and 2013 are US$ 2,715,836, US$ 2,038,067
US$ 1,381,446, US$ 943,786 and US$ 735,948 respectively and are
based on standard rates of inflation and mortality.
15.1 Gratuity benefit plan
In accordance with applicable Indian laws, the Group provides
for gratuity, a defined benefit retirement plan ("the Gratuity
Plan") covering eligible employees. The Gratuity Plan provides for
a lump sum payment to vested employees on retirement, death,
incapacitation or termination of employment of amounts that are
based on last drawn salary and tenure of employment. Liabilities
with regard to the Gratuity Plan are determined by actuarial
valuation by each of the companies. The Group does not have an
obligation to fund under the gratuity benefit plan.
The plan exposes the Group to actuarial risks such as interest
rate risk, inflation risk and change in compensation level.
Interest rate risk
The present value of the defined benefit liability is calculated
using a discount rate determined by reference to market yields of
high quality corporate bonds. The estimated term of the bonds is
consistent with the estimated term of the defined benefit
obligation and it is denominated in Indian Rupees. A decrease in
market yield on high quality corporate bonds will increase the
Group's defined benefit liability.
Inflation risk
A significant proportion of the defined benefit liability is
linked to inflation. An increase in the inflation rate will
increase the Group's liability.
Compensation level
The Group is required to provide benefits upon retirement or
resignation of its members after completing a service of 5 years
with the Group. The benefits are computed based on the last drawn
salary of the members. Increase in compensation level will increase
the defined benefit liability.
The expense for the year and the liability as at year end in
respect of the Group on account of the above plan is given
below:
Reconciliation of gratuity benefit plan
2017 2016
US$ US$
A. Change in benefit obligation
Actuarial value of projected benefit obligation (PBO) (Opening balance) 1,472,119 1,090,431
Interest cost 116,351 88,516
Service cost 426,109 187,938
Benefits paid (190,386) (60,056)
Re-measurement- actuarial loss 107,495 232,214
Translation adjustment 49,882 (66,924)
PBO at the end of year (Closing balance) 1,981,570 1,472,119
2017 2016
US$ US$
B. Amounts recognised in profit or loss
Current service cost 426,109 187,938
Interest cost 116,351 88,516
Expense recognised in profit or loss 542,460 276,454
2017 2016
US$ US$
C. Amounts recognised in other comprehensive income
Actuarial gain from changes in demographic assumptions - (228,610)
Actuarial gain from changes in financial assumptions 25,212 (22,636)
Experience adjustment 82,283 483,460
107,495 232,214
Taxation (Note 8) 48,002 80,398
Total income recognised in other comprehensive income net of tax 59,493 151,816
All the expenses summarised above were included within items
that will not be reclassified subsequently to profit or loss in
other comprehensive income.
The significant actuarial assumptions were as follows:
2017 2016
US$ US$
(i) Financial assumptions
- Discount rate (per annum) 8% 8%
- Rate of increase in compensation levels (per annum) 4.5%-5% 5%
(ii) Demographic assumptions
- Retirement age 58 years 58 years
- Mortality percentage
20 years - 50 years 0.09%-0.49% 0.09%-0.49%
50 years - 58 years 0.49%-1.15% 0.49%-1.15%
These assumptions were developed by management with the
assistance of independent actuaries. Discount factors are
determined close to each year-end by reference to market yields of
high quality corporate bonds that are denominated in the currency
in which the benefits will be paid and that have terms to maturity
approximating to the terms of the related pension obligation. Other
assumptions are based on current actuarial benchmarks and
management's historical experience.
The present value of the defined benefit obligation was measured
using the projected unit credit method.
(iii) The sensitivity of the gratuity benefit plan to changes in
the weighted principal assumptions is:
Impact on defined benefit liability
Change in Increase in Decrease in
assumption Assumption Assumption
US$ US$
Discount rate 0.50% (16,786) 17,197
Compensation level 0.50% 21,540 (21,170)
The above sensitivity analysis is based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some
assumptions may be correlated. When calculating the sensitivity of
the gratuity benefit plan to significant actuarial assumptions, the
same method (present value of the gratuity on retirement calculated
with the projected unit credit method at the end of the reporting
period) has been applied as when calculating the gratuity benefit
liability recognised within the statements of financial position.
The methods and types of assumptions used in preparing the
sensitivity analysis did not change compared to the previous
period.
Based on historical data, the Group expected payout is US$
523,759 in 2017-18 (US$ 214,382 in 2016-17).
15.2 Long term compensated absences
The entities within the Group have either accumulating or
non-accumulating compensated absences policies for employees
working under the guarding and facilities management services. The
cost of non-accumulating absences is charged to profit or loss. The
Group measures the expected cost of accumulating compensated
absences as the additional amount expected to be paid as a result
of the unused entitlement that has accumulated at the statement of
financial position. The defined benefit obligation is calculated
annually by an independent actuary using the projected unit credit
method, where the present value of the defined benefit obligation
is determined by discounting the estimated future cash outflows
based on assumptions developed by the management. The discount rate
is based upon the market yield available on high quality corporate
bonds at the end of reporting period, which have a term that
matches that of the liabilities. Other assumptions used in the
valuation include an estimate of the salary increases, which takes
into account inflation, seniority, promotion and other relevant
factors. The liability with respect to long term employee benefits
in respect of compensated absences for the year ended 31 March 2017
is US$ 734,266 (2016- US$ 565,948).
15.3 Provident fund benefit
Apart from being covered under the Gratuity Plan described
earlier, employees of the Group also participate in a provident
fund plan. The Provident Fund is a defined contribution scheme
whereby the Group deposits an amount determined as a fixed
percentage of basic pay to the fund every month. The benefit vests
upon commencement of employment. The Group does not have any
further obligation in the plan beyond making such contributions.
Upon retirement or separation, an employee becomes entitled for
this lump sum benefit, which is paid directly to the concerned
employee by the fund. The Group contributed US$ 6,398,926 and US$
5,373,062 to the provident fund plan, during the year ended 31
March 2017 and 31 March 2016, respectively.
The contribution to the provident fund is included as part of
the staff and related costs as shown in the face of the
consolidated statement of profit or loss and other comprehensive
income.
16 Borrowings
2017 2016
US$ US$
Non-current
Obligations under finance leases (Note 16.1) 407,480 400,008
Bank loan (Note 16.2) 3,277,342 5,483,865
3,684,822 5,883,873
Current
Obligations under finance leases (Note 16.1) 578,515 488,629
Current portion of bank loan (Note 16.2) 378,354 452,400
Demand loans from bank (Note 16.2) 3,490,076 4,564,769
Other bank borrowings (Note 16.2) 8,895,133 4,745,494
13,342,078 10,251,292
Total borrowings 17,026,900 16,135,165
16.1 Obligations under finance leases
2017 2016
US$ US$
Minimum lease payments payable:
Due not later than one year 605,419 510,981
Due later than one year and not later than five years 421,776 423,838
Due later than five years 22,428 -
1,049,623 934,819
Less:
Finance charges allocated to future periods (63,629) (46,182))
Present value of minimum lease payments 985,994 888,637
Represented by:
2017 2016
US$ US$
-------
Present value of minimum lease payments:
Due not later than one year 578,515 488,629
Due later than one year and not later than five years 386,530 400,008
Due later than five years 20,949 -
-------
Present value of minimum lease payments 985,994 888,637
-------
The interest rate ranges from 4% to 11.75% (2016 - 4% to 12.79%)
per annum.
16.2 Bank borrowings
2017 2016
US$ US$
Non-current:
Bank loan
Amounts repayable after one year 3,277,342 5,483,865
Current:
Other bank borrowings
Current portion of bank loans 378,354 452,400
Demand loans 3,490,076 4,564,769
Bank overdraft/cash credit payable on demand- secured 8,895,133 4,745,494
Amounts repayable within one year 12,763,563 9,762,663
Total 16,040,905 15,246,528
(i) The weighted average effective interest rate for the bank
loan are within range 3.75% to 10.40% (2016 - 3.75% to 11.75%) per
annum.
The interest rate for bank overdraft/cash credit and demand
loans are within the range of 11.00% to 11.10% (2016 - 11.70% to
13.75%) per annum. Interests are repriced on an annual basis.
The exposure of the bank borrowings of the Group to interest
rate changes is as follows:
2017 2016
US$ US$
At fixed rates 5,151,573 6,429,706
At floating rates 10,889,332 8,816,822
16,040,905 15,246,528
(ii) The bank overdrafts/cash credit payable on demand and
demand loans are repayable over the next one to five year.
- Exclusive charge on all the current assets amounting to US$
35,051,406 (2016 - US$ 26,814,909) and movable fixed assets
amounting to US$ 409,796 (2016 - US$ 514,465) both present and
future.
- Unconditional and irrevocable personal guarantee of Manjit Rajain - Key managerial person
(iii) The non-current bank loan is secured against the apartment
under development in Gurgaon. (Note 9).
16.3 Carrying amounts and fair values
(a) Fair values of borrowings
The carrying amounts of current borrowings approximate their
fair value. The carrying amounts and fair values of non-current
borrowings are as follows:
Carrying Fair
amounts Values
US$ US$
2017
Obligations under finance leases 407,480 407,480
Bank loan 3,277,342 3,277,342
2016
Obligations under finance leases 400,008 400,008
Bank loan 5,483,865 5,483,865
The fair values above are determined from the discounted cash
flow analysis, discounted at market borrowing rates (per annum) of
an equivalent instrument at the end of reporting period which the
directors expect to be available to the Group as follows:
2017 2016
US$ US$
Obligations under finance leases 4%-11.75% 4%-12.79%
Bank loan 3.75% to 10.40% 3.75%-11.75%
(b) The amount repayable within one year is included under
current liabilities whilst the amount repayable after one year is
included under non-current liabilities.
17 Trade and other payables
2017 2016
US$ US$
Trade payables
Third parties 6,396,900 5,415,656
Accruals 2,580,937 2,153,013
8,977,837 7,568,669
Other payables
Salaries payable 12,567,111 10,519,626
Advances from customers 1,312,330 1,789,444
Statutory dues payables 4,124,746 6,911,174
Tax payable 847,311 458,389
Advances from related parties 12,174 456,116
Contingent consideration 692,648 482,016
Deferred consideration - 1,223,334
Financial liability measured at fair value 332,245 1,149,026
28,866,402 30,557,794
The fair value of trade and other payables have not been
disclosed as, due to their short duration, management considers the
carrying amounts recognised in the statements of financial position
to be reasonable approximation of their fair values.
Related parties include key management and their spouse and
entities over which key management are able to exercise control.
Advances from related parties are unsecured and repayable on
demand. Interest rate for advances from related parties is 12.75%
(2016 - 12.75%) per annum.
Statutory dues payables consist mainly of provident funds,
employee state insurance, services tax and miscellaneous business
related tax.
Further details of liquidity risks on trade and other payables
are disclosed in Note 25.2 to the financial statements.
18 Other income
2017 2016
US$ US$
----------------
Interest income 235,282 161,511
Foreign exchange gain - 17,130
Vehicle hire charges 99,183 66,247
Gain from reinstatement of financial liability 696,455
Miscellaneous income 448,879 247,880
1,479,799 492,768
19 Finance costs
2017 2016
US$ US$
----------------
Interest on bank overdrafts and cash credit payable 744,834 636,313
Interest on bank loan and demand loan 277,155 489,160
Interest on finance leases 31,301 29,054
Other finance charges 296,415 89,622
Interest on delayed payment 1,385,073 594,983
2,734,778 1,839,132
Further details of interest rate are disclosed in Note 16.1 and
Note 16.2 to the financial statements.
20 Taxation
2017 2016
US$ US$
Current taxation 2,515,864 1,198,786
Deferred taxation (572,636) (454,717)
1,943,228 744,069
The major components of tax expense and the reconciliation of
the expected tax expense based on the tax rates as applicable in
the respective tax jurisdictions and the reported tax expense in
profit or loss are as follows:
2017 2016
US$ US$
Profit before taxation 5,352,475 1,611,634
Tax at domestic rates as applicable in the countries concerned 1,659,501 598,219
Tax effect on non-deductible expenses 99,211 176,886
Change in tax rate (929) (4,897)
(Over)/Under provision of current tax and deferred tax of earlier years 51,472 (139,088)
Deferred tax assets not recognized on account of losses in subsidiaries 86,836 113,986
Tax effect of exempt income - (18,452)
Others 47,137 17,415
1,943,228 744,069
20 Taxation (cont'd)
Income tax is based on the tax rate applicable in various
jurisdictions in which the Group operates. The effective tax at the
domestic rates applicable to profits in the country concerned as
shown in the reconciliation above have been computed by multiplying
the accounting profit with the effective tax rate in each
jurisdiction in which the Group operates. The individual entity
amounts have been aggregated for the consolidated financial
statements. The effective tax rate applied in each individual
entity has not been disclosed in the tax reconciliation above as
the amounts aggregated for individual group entities would not be a
meaningful number. The details of statutory tax rates:
Country Rate
Singapore 17.00% (previous year - 17%)
India 34.608% (previous year - 34.608%)
Sri Lanka 28% (previous year - 28%)
United Kingdom 20% (previous year - 20%)
21 Earnings per share
Both the basic and diluted earnings per share is calculated by
dividing the net profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue
of 53,772,207 (2016 - 50,700,001) shares during the financial
year.
2017 2016
US$ US$
Net profit attributable to equity holders (US$) 2,629,329 698,832
Opening number of ordinary shares 50,700,001 47,700,001
Weighted average number of ordinary shares for the purposes of basic and diluted
earnings
per share 51,474,365 49,450,001
Closing number of ordinary shares 53,772,207 50,700,001
Basic and diluted earnings per share (US$ per share) 0.05 0.01
For the purpose of calculating diluted earnings per share,
profit attributable to owners of the parent of the Company and the
weighted average number of ordinary shares outstanding are adjusted
for the effects of all dilutive potential shares. As there are no
dilutive potential ordinary shares that were outstanding during the
year, the basic earnings per share are the same as the diluted
earnings per share.
22 Related party transactions
In addition to the related party information disclosed elsewhere
in the financial statements, the followings significant
transactions between the Group and related parties took place at
terms agreed between the parties during the financial years ended
31 March 2017 and 31 March 2016.:
2017 2016
US$ US$
Key management personnel and their relatives
Office rental paid to key management personnel 253,506 155,268
Advance rent paid to key management personnel 995 -
Deposits given to key management personnel 64,776 63,317
Sponsorship fees paid to relative of key management personnel 128,225 135,002
Office rental paid to relatives of managerial personnel 71,546 18,332
Receivable from key management personnel 64,776 63,317
Entities over which key management are able to exercise control:
Deposits given to related party 18,407 23,533
Operating expenses paid on behalf of related party (1,003) 43,364
Recovery of advances from related party 5,478 187,579
Office rental paid to related party 38,754 30,553
Commission paid to related party 34,283 35,135
Receivable from related party 153,936 144,523
Transactions with key management:
Particulars 2017 2016
US$ US$
Remuneration - short-term benefits 694,304 643,623
Remuneration - post-employment benefits 16,076 15,714
The outstanding balance payable to related parties under the
category of key management as at 31 March 2017 and 31 March 2016 is
US$ 59,728 and US$ 211,597 respectively. These have been included
under salaries payable under Note 17 to the financial
statements.
In addition to the above, the key management personnel
participate in the gratuity plan of the Group.
23 Commitments
23.1 Capital commitments
2017 2016
US$ US$
Capital expenditure contracted for purchase of property, plant
and equipment 184,804 322,618
Capital expenditure contracted for purchase of other intangible assets - 55,781
23.2 Contractual commitment
The Group has a contractual commitment to pay US$ 26,123 (2016-
US$ 26,123) in future years, for the purpose of purchase of a
property (Note 9).
23.3 Operating lease commitment - Company as lessee
The Company has entered into commercial leases on certain items
of machinery. These leases have an average life of five years, with
no renewal option included in the contracts. The Company's lease of
land and building are subject to rent review at various intervals
specified in the leases.
Future minimum rentals payable under non-cancellable operating
leases as at 31 March 2017 are, as follows:
2017 2016
Land and buildings: USD$ USD$
---------
Within one year - 42,000
After one year but not more than five year - -
More than five year - -
Other
Within one year 81,113 72,557
After one year but not more than five year 243,339 179,625
More than five year - -
24 Operating segments
For management purposes, the Group is organised into the
following reportable operating segments as follows:
(1) The facility management segment relates to the provision of
facility management services.
(2) The guarding service segment relates to the provision of
guarding services.
(3) The others segment include sale and installation of safety
equipment which do not meet the quantitative thresholds under IFRS
8.
There are no operating segments that have been aggregated to
form the above reportable operating segments.
The Group Chief Executive monitors the operating results of its
operating segments for the purpose of making decisions about
resource allocation and performance assessment. Segment performance
is evaluated based on operating profit or loss which in certain
respects, as set out below, is measured differently from operating
profit and loss in the consolidated financial statements.
Corporate assets which are not directly attributable to the
business activities of any operating segment are not allocated to a
segment. Group financing and income taxes are managed on a group
basis and are not allocated to operating segments.
Sales and transfers between operating segments are carried out
at arm's length.
Revenues are attributed to geographic areas based on the
location of the assets producing the revenues.
The following tables present revenue and profit information
regarding industry segments for the years ended 31 March 2017 and
2016, and certain assets and liabilities information regarding
industry segments as at 31 March 2017 and 2016.
Facility management Guarding service Others Total
2017 2016 2017 2016 2017 2016 2017 2016
US$ US$ US$ US$ US$ US$ US$ US$
Segment revenue 82,528,969 56,785,549 98,195,558 76,170,859 287,256 84,842 181,011,783 133,041,250
Depreciation and
Amortisation 1,516,652 894,196 668,773 443,315 71,609 47,260 2,257,034 1,384,771
Materials
consumed 6,088,130 6,412,356 963,575 166,077 208,116 47,196 7,259,821 6,625,629
Staff and related
costs 68,588,808 45,717,987 85,223,388 67,968,642 (8392) 96,057 153,803,804 113,782,686
Other operating
Expenses 3,415,542 3,203,804 5,706,609 3,712,034 147,650 76,471 9,269,801 6,992,309
Finance costs 699,541 660,456 1,548,486 1,010,420 4,098 958 2,252,125 1,671,834
Segment operating
(loss)/profit
before
Tax 2,220,296 (103,250) 4,084,727 2,870,371 (135,825) (183,100) 6,169,198 2,584,021
Taxation (827,299) (97,883) (1,137,633) (734,748) 108,481 193,929 (1,856,451) (638,702)
Segment net
(loss)/profit 1,392,997 (2,01,133) 2,947,094 2,135,623 (27,344) 10,829 4,312,747 1,945,319
Segment assets 19,416,238 17,800,150 33,441,085 28,870,916 943,826 782,164 53,801,149 47,453,230
Segment
liabilities 19,282,989 18,486,931 24,613,570 16,517,061 1,885,521 1,505,759 45,782,080 41,929,890
Other segment
information:
Capital
expenditure
property, plant
and
Equipment 824,441 1,650,984 550,745 661,290 24,600 121,907 1,399,786 2,434,181
Other intangible
assets 226,420 - - 386 - 226,806 193,437
Depreciation of
property, plant
and equipment 703,467 7894,196 276,508 443,315 63,548 47,260 1043,523 1,384,771
Amortisation of
other
intangible assets 813,210 - 295,964 - 8,061 - 1,117,236 9,587
The totals presented for the Group's operating segments
reconcile to the Group's key financial figures as presented in its
consolidated financial statements are as follows:
2017 2016
US$ US$
Segment operating profit before tax 6,169,198 2,584,021
Reconciling items:
Other income not allocated 1,479,799 492,768
Other expenses not allocated (2,296,522) (1,465,155)
Group profit before tax 5,352,475 1,611,634
Group profit before tax 5,352,475 1,611,634
Reconciling items:
Tax unallocated (86,777) (105,367)
Tax allocated (1,856,451) (638,702)
Group profit after tax 3,409,247 867,565
Segment assets 53,801,149 47,453,230
Reconciling items:
Other assets unallocated 18,389,326 18,924,141
Total assets 72,190,475 66,377,371
Segment liabilities 45,782,080 41,929,890
Reconciling items:
Other liabilities unallocated 4,136,055 8,335,101
Total liabilities 49,918,135 50,264,991
24.1 Geographical segments
Revenue and non-current assets of information based on
geographical location of customers and assets respectively are as
follows:
2017 2016
US$ US$
Revenue
India 115,382,199 99,288,651
Sri Lanka - 5,720
United Kingdom 55,465,159 30,860,219
Singapore 10,164,425 2,886,660
181,011,783 133,041,250
Non-current assets
India 5,248,769 4,528,644
Sri Lanka 660 1,326
United Kingdom 12,275,066 15,099,478
Singapore 3,792,271 4,053,845
21,316,766 23,683,293
All segment revenue and expense is directly attributable to the
segments. There is no revenue from transactions with a single
external customer that amounts to 10 per cent or more of the
Group's revenues.
Revenues from external customers have been identified on the
basis of the customer's geographical location. Non-current assets
are allocated based on their physical location.
25 Financial risk management objectives and policies
The Company and the Group financial risk management policies set
out the Company's and the Group's overall business strategies and
its risk management philosophy. The Company and the Group are
exposed to financial risks arising from its operations and the use
of financial instruments. The key financial risks included credit
risk, liquidity risk, interest rate risk and foreign currency risk.
The Company's and the Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimize adverse effects from the unpredictability of financial
markets on the Company's and the Group's financial performance. The
Company and the Group do not hold or issue derivative financial
instruments for trading purposes or to hedge against fluctuations,
if any, in interest rates and foreign exchange.
Risk management is carried out by the Finance Division under
policies approved by the Board of Directors. The Finance Division
identifies, evaluates and hedges financial risks in close
co-operation with the Company's and the Group's operating units.
The Board provides principles for overall risk management, as well
as policies covering specific areas, such as foreign exchange risk,
interest rate risk, credit risk, use of derivative and
non-derivative financial instruments and investing excess
liquidity.
There has been no change to the Company's and the Group's
exposure to these financial risks or the manner in which it manages
and measures the risk. Market risk exposures are measured using
sensitivity analysis indicated below.
25.1 Credit risk
Credit risk is the risk that one party to a financial instrument
will fail to discharge an obligation and cause the Company or the
Group to incur a financial loss. The Company's and the Group's
exposure to credit risk arises primarily from trade and other
receivables and bank deposits.
The Company's and the Group's objective is to seek continual
growth while minimising losses incurred due to increased credit
risk exposure.
Exposure to credit risk
As the Company and the Group do not hold any collateral, the
maximum exposure to credit risk for each class of financial
instruments is the carrying amount of that class of financial
instruments presented on the statement of financial position.
For trade receivables, the Company and the Group adopt the
policy of dealing only with customers of appropriate credit
history, and credit control to mitigate credit risk. For other
financial assets, the Company and the Group adopt the policy of
dealing only with high credit quality counterparties. Cash is held
with reputable financial institutions.
As at the end of reporting period, the Group has concentration
of credit risk in 5 customers amounting US$ 3,180,857 (2016 - US$
2,108,360) representing approximately 10.50% (2016 - 7%) of the
total trade receivables of US$ 30,288,958 (2016 - US$
28,674,036).
The Group establishes an allowance that represents its estimates
of incurred losses in respect of trade and other receivables. The
main components of the allowance are a specific loss component that
relates to individually significant exposures, and a collective
loss component established for groups of
similar assets in respect of losses that have been incurred but
not yet identified. The collective loss allowance is determined
based on historical data of payment statistics for similar
financial assets.
The allowance account in respect of trade and other receivables
is used to record impairment losses unless the Group is satisfied
that no recovery of the amount owing is possible. At that point,
the financial assets are considered irrecoverable and the amount
charged to the allowance account is written off against the
carrying amount of the impaired financial assets.
Further details of credit risks on trade and other receivables
are disclosed in Note 11.
25.2 Liquidity risk
Liquidity risk is the risk that the Company or the Group will
encounter difficulty in raising funds to meet commitments
associated with financial instruments that are settled by
delivering cash or another financial asset. Liquidity risk may
result from an inability to sell a financial asset quickly at close
to its fair value.
The Company's and the Group's exposure to liquidity risk arises
primarily from mismatches of the maturities of financial assets and
liabilities. The Company's and the Group's objective is to maintain
a balance between continuity of funding and flexibility through the
use of stand-by credit facilities.
The table below analyses non-derivative financial liabilities of
the Company and the Group into relevant maturity groupings based on
the remaining period from the date of statement of financial
position to the contractual maturity date. The amounts disclosed in
the table are the contractual undiscounted cash flows. Balances due
within 12 months equal their carrying amounts as the impact of
discounting is not significant.
Less than Between 2 Over
1 year and 5 years 5 years Total
US$ US$ US$ US$
-------
At 31 March 2017
Trade and other payables 23,894,346 - - 2,3894,346
Borrowings 13,342,077 3,666,256 20,949 17,029,282
-------
37,236,423 3,666,256 20,949 40,923,628
-------
At 31 March 2016
Trade and other payables 23,188,231 - - 23,188,231
Borrowings 6,184,285 10,038,778 - 16,223,063
-------
29,372,516 10,038,778 - 39,411,294
-------
The Group manages the liquidity risk by ensuring that there are
sufficient cash to meet all their normal operating commitments in a
timely and cost-effective manner and having adequate amount of
credit facilities.
The Company manages the liquidity risk as discussed in Note
2(a).
25.3 Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of the Company's and the Group's financial instruments
will fluctuate because of changes in market interest rates.
The Group's exposure to interest rate risk arises primarily form
their bank overdraft on which there is floating rates of interest,
determined from time to time. All of the Group's financial assets
and liabilities at floating rates are contractually repriced at
intervals of less than 12 months (2016: less than 12 months) from
the end of reporting period.
Sensitivity analysis for interest rate risk
Based on the volatility in interest rates in respect of the bank
overdraft facility for the previous 12 months, the management
estimates a range of 65 basis points to be appropriate. A decrease
in market interest rate by 65 basis points, will lead to a decrease
in finance cost by US$ 57,818 (2016 - US$ 44,084) resulting in an
increase in profit and equity for the year ended 31 March 2017 and
an equal and opposite effect in the case of an increase in the
interest rates.
All other loans have a fixed rate of interest.
25.4 Foreign currency risk
Currency risk is the risk that the value of a financial
instrument will fluctuate due to changes in foreign exchange rates.
Currency risk arises when transactions are denominated in foreign
currencies.
The Group operates and sells its products/services in several
countries with very minimal foreign currency transactions. As a
result the Group is not exposed to movements in foreign currency
exchange rates arising from normal trading transactions.
However, the Group does not use any financial derivatives such
as foreign currency forward contracts, foreign currency options or
swaps for hedging purposes.
Sensitivity analysis for foreign currency risk
The financial assets and liabilities are denominated in the
following currencies:
2017 2016
INR LKR GBP US$ INR LKR GBP US$
Long-term
financial
assets 1,337,279 834,012 - - -
Trade and
other
receivables 31,750,640 839 7,796,569 12,072 28,094,017 869 6,155,185 12,073
Cash and cash
equivalents 868,465 4,871 1,117,050 105,069 885,044 5,044 205,416 65,832
33,956,384 5,710 8,913,619 117,141 29,813,073 5,913 6,360,601 77,905
Borrowings (11,136,147) (5,890,752) (6,859,527) (8,127,251) (1,000,000)
Trade and
other
payables 16,525,296 2,134 10,656,252 777,245 (18,622,721) (2,135) (8,024,261) (1,475,654)
39,345,533 7,844 13,679,119 894,386 4,330,825 3,778 (9,790,911) (2,397,749)
If the INR, GBP and LKR all strengthened against the US$ by 5%
(2016 - 5%) with all other variables including tax rate being held
constant, the effects arising from the net financial
liability/asset position will be as follows:
--------------- Increase/(Decrease) ---------------------
2017 2016
Profit Profit
net of tax Equity net of tax Equity
US$ US$ US$ US$
INR 20,056 20,056 26,086 26,086
LKR (681) (681) 719 719
GBP (206,935) (206,935) (228,436) (228,436)
SGD (109,799) (109,799)
If the INR, GBP and LKR weakened against the US$ by 5% (2016 -
5%) with all other variables including tax rate being held
constant, it would have had the equal opposite effect on the
amounts shown above, on the basis that all other variables
remaining constant.
25.5 Market price risk
Price risk is the risk that the value of a financial instrument
will fluctuate due to changes in market prices.
The Group does not hold any quoted or marketable financial
instruments, hence, is not exposed to any movement in market
prices.
26 Capital management
The Group's objectives when managing capital are:
(a) To safeguard the Group's ability to continue as a going concern;
(b) To support the Group's stability and growth;
(c) To provide capital for the purpose of strengthening the
Company's risk management capability;
(d) To provide an adequate return to shareholders; and
(e) To ensure that all externally imposed capital requirements are complied with.
The funding requirements are met through a mixture of equity and
other long-term/short-term borrowings. The Group actively and
regularly reviews and manages its capital structure to ensure
optimal capital structure and shareholder returns, taking into
consideration the future capital requirements of the Group and
capital efficiency, prevailing and projected profitability,
projected operating cash flows, projected capital expenditures and
projected strategic investment opportunities.
The Group monitors capital on the basis of the carrying amount
of equity plus adjusted debts as presented in the statement of
financial position. Adjusted debts are defined as total borrowings
(excluding trade and other payables) less cash and cash
equivalents.
The Group's goal in capital management is to maintain a
capital-to-overall financing ratio of 1:2.
Gearing has a significant influence on the Company's and the
Group's capital structure and the Company and the Group monitor
capital using a gearing ratio. The Group monitors gearing closely
but has not set a definite ratio as it depends on the operational
and investments requirement of the Group. The gearing ratio is
calculated as adjusted debts divided by total capital.
2017 2016
US$ US$
Total equity 22,272,340 16,112,380
Adjusted debts 13,465,106 14,525,146
Total capital 35,737,446 30,637,526
Gearing ratio 0.37 0.47
In order to maintain or adjust the capital structure, the
Company and the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares, buy
back issued shares, obtain new borrowings or sell assets to reduce
debt.
There were no changes in the Group's approach to capital
management during the year.
27 Financial instruments
Accounting classifications of financial assets and financial
liabilities
2017 2016
US$ US$
Non-current assets
Loans and receivables
Long-term financial assets - restricted cash 1,337,279 834,012
Current assets
Loans and receivables
Trade receivables 30,288,958 28,674,036
Other current assets 9,771,344 6,287,316
Related party receivables - 134,445
Cash and bank balances 3,559,410 1,610,019
Total loans and receivables 44,956,991 37,539,828
Non-current Liabilities
Carrying amount at amortised cost
Borrowings 3,684,822 5,883,873
Current liabilities
Carrying amount at amortised cost
Trade payables and other payables 22,582,016 21,398,787
Borrowings 13,342,078 10,251,292
Total financial liabilities 39,608,916 37,533,952
Fair values
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In
estimating the fair value of an asset or a liability, the Group
takes into account the characteristics of the asset or liability
which market participants would take into account when pricing the
asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for
leasing transactions that are within the scope of IAS 17 Leases,
and measurements that have some similarities to fair value but are
not fair value, such as net realisable value in IAS 2 Inventories
or value in use in IAS 36 Impairment of Assets.
The carrying amount of financial assets and financial
liabilities with a maturity of less than one year is assumed to
approximate their fair values.
However, the Group and the Company do not anticipate that the
carrying amounts recorded at financial position date would be
significantly different from the values that would eventually be
received or settled.
The Group's finance team performs valuations of financial items
for financial reporting purposes, including Level 3 fair values.
Valuation techniques are selected based on the characteristics of
each instrument, with the overall objective of maximizing the use
of market-based information. The finance team reports directly to
the chief financial officer (CFO) and to the audit committee.
Valuation processes and fair value changes are discussed among the
audit committee and the Group Finance team at least every year, in
line with the Group's reporting dates.
When measuring the fair value of an asset or liability, the
group uses market observable data as far as possible. Fair values
are categorized into different level in fair value hierarchy based
on the inputs used in the valuation techniques as follows.
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: input other than quoted prices included in level1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices)
-- Level 3: inputs for the asset or liability that are not based
on the observable market data (unobservable inputs).
The following table shows the Levels within the hierarchy of
financial assets and liabilities measured at fair value on a
recurring basis at 31 March 2017
Observable input Level 1 Level 2 Level 3
Financial liability measured at fair value - 332,245 -
Contingent consideration - - 692,648
The following table provides information about the sensitivity
of the fair value measurement to changes in the most significant
inputs:
Sensitivity of the fair value
Observable input Estimate of input measurement to input Method
Probability of meeting target for A decrease to 90% would decrease/
contingent consideration 100% (increase) fair value by US$ 69,264 Net present value
An increase/ decrease by 10% would
increase/ decrease fair value by US$ Black-Scholes model
Volatility of market price of share 10% 33,224
Contingent consideration (Level 3)
The fair value of contingent consideration related to the
acquisition of Office and General Group Limited (see Note 3) is
estimated using a present value technique. The fair value is
estimated by probability weighting the estimated future cash
outflows, adjusting for risk and discounting at 11.3%.. The
discount rate used is based on the Group's weighted average cost of
capital at the reporting date. The effects on the fair value of
risk and uncertainty in the future cash flows are dealt with by
adjusting the estimated cash flows rather than adjusting the
discount rate.
The reconciliation of the carrying amounts of financial
instruments classified within Level 3 is as follows:
Observable input Contingent consideration
2017 2016
Balance as at 1 April 2016 482,016 -
Acquired through business combination - 444,457
Amount recognised in profit and loss account 199,523 37,559
Translation Adjustment 11,109
Balance as at 31 March 2017 692,648 482,016
28. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the 31 March 2017 reporting date and the date of
authorisation.
--
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUCAMUPMGAG
(END) Dow Jones Newswires
July 24, 2017 02:00 ET (06:00 GMT)
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