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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mortice Limited | LSE:MORT | London | Ordinary Share | SG9999005326 | ORD NPV (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 14.00 | 13.00 | 15.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMORT
RNS Number : 3583I
Mortice Limited
30 August 2016
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)
Mortice Limited
("Mortice", the "Group" or the "Company")
Final Results for the Year ended 31 March 2016
Mortice Limited (AIM: MORT), the AIM listed security and facilities management company, announces its audited results for the financial year ended 31 March 2016.
Financial results highlights:
-- Revenues $133.5m (FY 2015: $88.4m)
o Including $34m contribution from Office & General ("O&G") and Frontline Security Pte. Ltd. ("Frontline")
o Security services revenue increased 19.8% to $76.2m (FY 2015: $63.6m)
-- Accounting for 57% of Group revenues (FY 2015: 72%)
o Facilities Management services revenue increased 133.6% to $56.8m (FY 2015: $24.4m).
-- Key client wins including JP Morgan, Cummins, Cairn India, Cheil
-- Adjusted EBITDA(1) of $5.4m (FY 2015: $4.1m) -- Adjusted profit before tax(1) of $2.4m (FY 2015: $2.2m) -- Statutory Profit before taxation $1.6m (FY 2015: $2.2m)
o Increased financing costs to $1.8m (FY 2015: $1.3m)
-- $4.2m net cash generated from business (FY 2015: $2.08m)
Operational highlights:
-- Approximately 300 new clients added during the period including Cheil, British School and Clariant Chemical
-- More than 85% of income generated from repeat business
-- Acquisition of the entire issued share capital of UK based property service company O&G for a total consideration of up to GBP6.3m in cash and shares
-- Acquisition of 51% stake of Frontline, a company incorporated in Singapore for a maximum consideration of GBP1.89m in cash
Post Period End:
-- Appointment of two new Non-executive Directors
-- GBP55m contract for provision of facilities services for University of Hertfordshire for a 10 year period
Major Manjit Rajain, Executive Chairman of Mortice Limited, said:
"This was a transformational period for the Company with strong underlying year-on-year growth, which was further enhanced by the acquisitions of O&G and Frontline. We have laid the foundations for continued growth and have a healthy pipeline in place. Furthermore, we are extremely pleased by our growing presence in the UK and the strong performance of O&G.
"Underpinned by increasing levels of visibility and repeat business, the Company is well positioned to further scale up its operations and build on the momentum achieved. We very much look forward to updating the market with further developments in due course."
Mortice Limited www.morticegroup.com Manjit Rajain, Executive Chairman Tel: +91 981 800 0011 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 666 686
(1) Adjusted EBITDA & PBT include add-back of $0.75m (FY 15: $0.0m) relating to acquisition-related costs
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 some of the world's most 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. In addition, 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.
Chairman's Statement
Overview
This was another year of rapid development for the Company with the focus on further widening its geographic reach and growing its client base while also bedding in recent acquisitions. We were delighted by the strength of our second half performance as the Company benefitted from the efforts made during the first half and with the benefits of the Frontline and O&G acquisitions flowing through also. As such, underlying profitability achieved during the second half was significantly ahead of the first half of the year and ahead of the performance for the same period last year. Given the performance and momentum achieved, the Company is now extremely well placed to build on the strong pipeline in place over the coming months.
While profitability was impacted by one-off costs associated with the acquisitions during the period, the strong underlying performance was achieved across both the security and facilities management divisions.
India remains a strong cornerstone for the business, accounting for 65% of sales, with favourable conditions for continued growth. Peregrine Guarding ("Peregrine") continues to perform well and Tenon Facility Management ("Tenon") also gained momentum during the period. In order to take advantage of growth opportunities, the Company strengthened its operations in India by appointing new managing directors of both Peregrine and Tenon.
Results
Revenues grew 51% to $133.5m (FY 2015: $88.4m) during the period with profits of $1.6m (FY 2015: $2.2m), reflecting the impact of one-off acquisition costs totalling $0.75m. The underlying performance remained strong with growth across all parts of the business.
Approximately $34m of sales was from acquisitions with seven months trading from O&G contributing $30.8m and five months from Frontline contributing $2.9m.
The adjusted EBITDA of the group post the acquisitions was $5.4m compared to $4.1m the previous year, adjusted PBT for the current year was $2.4m, compared to $2.2m the previous year. The Company is confident about its prospects for the financial year ending 31 March 2017 as the Group benefits from business synergies and consolidation of acquired businesses.
During the financial year, the Company increased its borrowings by $8.7m. This reflected the financing of the O&G and Frontline acquisitions, together with additional working capital requirements as the Group expanded.
Cash generated from operations was $4.2m compared to $2.08m the previous year.
Currency fluctuations dampened revenue growth in dollar terms from India. Sales grew 20.7% from INR 5.3 Bn to 6.5 INR Bn, however once converted the increase was 12.7%, growing from $88.05m to $99.29m during the period.
This year Indian operations had to support the acquisition costs to the tune of INR 50m ($0.75m), the adjusted EBITDA was INR 306m ($4.67m)* compared to INR 246m ($4.02m) the previous year.
The adjusted PBT was INR 187m ($2.85m) and adjusted PAT was INR 145m ($2.21m) compared to INR 143.5m ($2.34m) and INR 91.62m ($1.49m) respectively, from the previous financial year.
Sales from our guarding services division, Peregrine Services, grew 15% to $73.3m (FY 2015: $63.6m), accounting of 55% of group revenues. Key client wins included Delhivery.
Sales from Tenon, our facilities management business grew 9% to $26.5m (FY 2015: $24.3m) including Cheil India and American Embassy School.
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 85%.
Our Facility Management Business continued to experience slight headwinds though there are signs of improvement.
*Conversion rate 1 INR: $0.015
International Growth
The acquisitions of Frontline and O&G significantly broadened our geographic reach while also providing foundations for us to build on and develop existing relationships they had in place - as highlighted by the GBP55m contract win with the University of Hertfordshire, worth GBP5.3m a year, providing a strong reference point for the capabilities of the enlarged Group.
O&G provides exposure to the UK market and contributed revenues of $30.8m representing 23% of total group revenues during the period, while adding 119 new customers post acquisition. It benefited from significant increases in revenues from the defence sector helping to underpin the strong performance while long-term orders continue to ensure high levels of visibility.
Singapore-based Frontline also contributed positively with revenues of $2.9m. The growth in Singapore was better than expected with revenue increasing 78% from SGD 4.2m to 7.5m. The focus here remains on finding innovative ways of generating business and increasing profit.
Soteria
Soteria providing state of art sensor-based solution gained momentum, winning contracts from Bharti, IDFC Bank and Tata Consultancy Services. We are seeing increased client interest and many institutional clients have visited our command centre.
Our trading for the current year continues to be robust and, with increased government focus on infrastructure and manufacturing, the demand for our services is well placed to increase.
Board Appointments
In May 2016 the Company appointed Pallavi Bakhru and Richard Gubbins as Non-executive Directors. Their appointments help strengthen the Board as it continues its growth strategy, particularly in an international context, given both of their experience in cross-border enterprises.
Outlook
This was a transformational period for the Company with strong underlying year-on-year growth, which was further enhanced by the acquisitions of O&G and Frontline. We have laid the foundations for continued growth and have a healthy pipeline in place. Furthermore, we are extremely pleased by our growing presence in the UK and the strong performance of O&G.
Underpinned by increasing levels of visibility and repeat business, the Company is well placed to further scale up its operations and build on the momentum achieved. We very much look forward to updating the market with further developments in due course.
Manjit Rajain
Chairman
30 August 2016
Extracts from the audited financial statements are provided, below, and the full version of the audited financial statements [will be] available on the Company's website: www.morticegroup.com. The Annual Report for the year-ended 31 March 2016 will be posted to shareholders in due course.
Consolidated statement of financial position
as at 31 March 2016
Hot Features
Premium
2016 2015
Note US$ US$
ASSETS
Non-Current Assets
Goodwill 4 10,778,246 811,079
Other intangible assets 5 8,359,658 266,710
Property, plant and equipment 6 3,450,121 2,014,050
Long-term financial assets 7 834,012 1,066,390
Deferred tax assets 8 2,149,001 1,901,826
Other non-current assets 9 261,256 212,508
------------------------------- ---------- ---------- ----------
25,832,294 6,272,563
Current Assets
Inventories 10 400,441 195,526
Trade and other receivables 11 35,634,965 24,127,503
Current tax assets 2,899,652 2,156,476
Cash and cash equivalents 12 1,610,019 539,204
------------------------------- ---------- ---------- ----------
40,545,077 27,018,709
------------------------------- ---------- ---------- ----------
Total assets 66,377,371 33,291,272
------------------------------- ---------- ---------- ----------
EQUITY AND LIABILITIES
Equity
Issued capital 13 13,068,612 9,555,312
Reserves 14 1,135,160 963,209
------------------------------- ---------- ---------- ----------
Equity attributable to owner
of parent 14,203,772 10,518,521
Non-controlling interests 1,908,608 29,121
------------------------------- ---------- ---------- ----------
Total equity 16,112,380 10,547,642
Non-current Liabilities
Employee benefit obligations 15 1,371,442 657,150
Deferred tax liabilities 8 1,533,965 -
Borrowings 16 5,883,873 364,179
8,789,280 1,021,329
Current Liabilities
Trade and other payables 17 30,557,794 13,901,054
Employee benefit obligations 15 666,625 724,296
Borrowings 16 10,251,292 7,096,951
------------------------------- ---------- ---------- ----------
41,475,711 21,722,301
------------------------------- ---------- ---------- ----------
Total liabilities 50,264,991 22,743,630
------------------------------- ---------- ---------- ----------
Total equity and liabilities 66,377,371 33,291,272
------------------------------- ---------- ---------- ----------
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 2016
2016 2015
Note US$ US$
Income
Service revenue 133,041,250 88,066,142
Other income 18 492,768 301,867
------------------------------------------ ------------------------ ----------- ----------
Total income 133,534,018 88,368,009
Expenses
Staff and related costs 114,259,349 79,165,444
Materials consumed 6,625,629 870,044
Other operating expenses 7,813,503 4,197,489
Depreciation and amortization 1,384,771 554,539
Finance costs 19 1,839,132 1,359,426
------------------------------------------ ------------------------ ----------- ----------
Total expenses 131,922,384 86,146,942
------------------------------------------ ------------------------ ----------- ----------
Profit before taxation 1,611,634 2,221,067
Taxation 20 (744,069) (853,504)
------------------------------------------ ------------------------ ----------- ----------
Profit for the year 867,565 1,367,563
Other comprehensive income net
of tax:
- Items that will not be reclassified
subsequently
to profit or loss
Re-measurement in net defined
benefit liability 15.1 (151,816) 44,708
- Items that may be reclassified
subsequently to profit or loss
------------------------------------------ ------------------------ ----------- ----------
Currency translation differences (502,280) (430,730)
------------------------------------------ ------------------------ ----------- ----------
Total comprehensive income
for the year 213,469 981,541
------------------------------------------ ------------------------ ----------- ----------
Profit attributable to:
- Owners of the parent 698,832 1,358,949
- Non-controlling interests 168,733 8,614
----- ----------------------------------- ------------------------ ----------- ----------
867,565 1,367,563
----------------------------------------- ------------------------ ----------- ----------
Total comprehensive income
attributable to:
- Owners of the parent 171,951 975,347
- Non-controlling interests 41,518 6,194
----- ----------------------------------- ------------------------ ----------- ----------
213,469 981,541
----------------------------------------- ------------------------ ----------- ----------
Earnings per share
Basic and diluted 21 0.01 0.03
Consolidated statement of changes in equity
for the financial year ended 31 March 2016
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
2014 9,555,312 (2,765,788) 2,753,650 9,543,174 22,927 9,566,101
Profit for the year - - 1,358,949 1,358,949 8,614 1,367,563
Other comprehensive
income
Exchange differences
on translating foreign
operations - (428,016) - (428,016) (2,714) (430,730)
Re-measurement of net
defined benefit liability - - 44,414 44,414 294 44,708
--------------------------- --------------- ------------- --------- ------------- ------------ ----------
Total comprehensive
income - (428,016) 1,403,363 975,347 6,194 981,541
--------------------------- --------------- ------------- --------- ------------- ------------ ----------
Balance at 31 March
2015 9,555,312 (3,193,804) 4,157,013 10,518,521 29,121 10,547,642
--------------------------- --------------- ------------- --------- ------------- ------------ ---------- 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 --------------------------- --------------- ------------- --------- ------------- ------------ ----------
Consolidated statement of cash flows
for the financial year ended 31 March 2016
2016 2015
Note US$ US$
Cash flows from operating activities
Profit before taxation 1,611,634 2,221,067
Adjustments for non-cash item:
Depreciation and amortization 1,384,771 554,539
Interest expense 19 1,839,132 1,359,426
Interest income 18 (161,511) (72,536)
(Gain)/loss on disposal of property,
plant and equipment 33,192 (7,041)
Impairment of trade receivables 619,478 262,673
Foreign exchange gain (17,061) (11,301)
Operating profit before working capital
changes 5,309,635 4,306,827
(Increase)/decrease in inventories 35,135 (49,730)
Increase in trade and other receivables (4,729,091) (3,714,020)
Increase in trade and other payables 5,470,136 3,417,218
--------------------------------------------- --------- ------------ ------------------
Cash generated from operations 6,085,815 3,960,295
Income taxes paid (1,811,753) (1,878,246)
--------------------------------------------- --------- ------------ ------------------
Net cash generated from/(used in) operating
activities 4,274,062 2,082,049
Cash flows from investing activities
Acquisition of other intangible assets 5 (193,437) (231,547)
Acquisition of property, plant and
equipment 6 (863,594) (897,446)
Acquisition of subsidiaries net of
cash (4,992,822) -
Deposit for purchase of property (61,547) (40,959)
Advances to/(repayment by) related
parties - (64,310)
Proceeds from disposal of property,
plant and equipment 30,523 7,392
Interest received 814,588 99,895
--------------------------------------------- --------- ------------ ------------------
Net cash used in investing activities (5,266,289) (1,126,975)
Cash flows from financing activities
Repayment of finance lease obligations (664,367) (185,813)
Placement of pledged fixed deposit (817,271) (84,755)
Withdrawal of pledged fixed deposit 918,071 873,010
Proceeds from/ (Repayment) of short-term
demand loans from banks 4,071,330 (136,575)
Proceeds from other bank borrowings 1,000,000 -
Repayment of other bank borrowings (177,511) (556,795)
Interest paid (2,335,888) (1,364,095)
--------------------------------------------- --------- ------------ ------------------
Net cash (used in)/generated from
financing activities 1,994,364 (1,455,023)
Net increase/(decrease) in cash and
cash equivalents 1,002,137 (499,949)
Cash and cash equivalents at beginning 539,204 1,064,942
Exchange differences on translation 68,678 (25,789)
--------------------------------------------- --------- ------------ ------------------
Cash and cash equivalents at end 12 1,610,019 539,204
--------------------------------------------- --------- ------------ ------------------
Notes to the financial statements for the financial year ended 31 March 2016
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 2016 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 Limited United 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
Office and General Group Limited United 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 29 August 2016.
The immediate and ultimate holding company is Mancom Holdings Limited, a Company incorporated in British Virgin Islands.
2 Basis of preparation 2.1 General information and statement of compliance with IFRS
The Consolidated financial statements for the year ended 31 March 2016 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 recognises 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 recognised 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$ 615,036 (2015 - US$ 1,901,826) 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:
2016 2015
US$ US$
--------- -------
Mechanical and engineering maintenance
services
- Roto Power Projects Private Limited 811,079 811,079
- Office & General Environment 7,602,981 -
Guarding services
- Frontline Securities Pte Ltd 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 2016 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 2016 is US$3,450,121 (2015 - US$2,014,050). 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 2016 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 2015
A number of new and revised standards are effective for annual periods beginning on or after 1 April 2015. Information on these new standards is presented below.
-- Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
-- Annual Improvements Cycle - 2010-2012
-- Annual Improvements Cycle - 2011-2013
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after 1 February 2015. This amendment is not relevant to the Group, since none of the entities within the Group has defined benefit plans with contributions from employees or third parties.
Annual Improvements 2010-2012 Cycle
With the exception of the improvement relating to IFRS 2 Share-based Payment applied to share-based payment transactions with a grant date on or after 1 February 2015, all other improvements are effective for accounting periods beginning on or after 1 February 2015. They include:
IFRS 2 Share-based Payment
This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions. The clarifications are consistent with how the Group has identified any performance and service conditions which are vesting conditions in previous periods. In addition, the Group had not granted any awards during the second half of 2014 and 2015. The Group does not have a policy of offering employee stock options or share based payment plans, thus this amendment is not applicable to the Group.
IFRS 3 Business Combinations
The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IAS 39. The Group has during the current year acquired two companies namely O&G in UK and Frontline in Singapore which has contingent consideration arrangements and the same are valued at fair value through profit and loss
IFRS 8 Operating Segments
The amendments are applied retrospectively and clarify that:
-- An entity must disclose the judgements made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are 'similar'
-- The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities. The Group has not applied the aggregation criteria in IFRS 8.12.
The Group has presented the reconciliation of segment assets to total assets in previous periods and continues to disclose the same in Note 24 to the consolidated financial statements as the reconciliation is reported to the chief operating decision maker for the purpose of her decision making.
IAS 24 Related Party Disclosures
The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. This amendment is not relevant for the Group as it does not receive any management services from other entities.
Annual Improvements 2011-2013 Cycle
These improvements are effective from 1 January 2015 and they include:
IFRS 3 Business Combinations
The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:
-- Joint arrangements, not just joint ventures, are outside the scope of IFRS 3
-- This scope exception applies only to the accounting in the financial statements of the joint arrangement itself.
Mortice Limited is not a joint arrangement, and thus this amendment is not relevant for the Group and its subsidiaries.
IFRS 13 Fair Value Measurement
The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IAS 39. The Group does not apply the portfolio exception in IFRS 13.
IAS 40 Investment Property
The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or a business combination. In previous periods, the Group has relied on IFRS 3, not IAS 40, in determining whether an acquisition is of an asset or is a business acquisition. Thus, this amendment did not impact the accounting policy of the Group.
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.
Annual improvements cycle - 2012-2014
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
Applicable for annual periods beginning on or after 1 January 2016
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
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets
Applicable for annual periods beginning on or after 1 January 2016
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 does not impact the Group financial statements as the Company has not revalued its tangible assets
2.4 Standards that are not yet effective and have not been adopted by the Group (Cont'd)
IFRS 7 Financial Instruments: Disclosures
Applicable for annual periods beginning on or after 1 January 2016
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. 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.
The Company is currently evaluating the impact that this new standard will have on its consolidated financial statements.
IFRS 9 Financial Instruments Classification and Measurement
Not yet adopted by European Union Earlier application is permitted. The Company is currently evaluating the impact that this new standard will have on its consolidated financial statements.
Investment Entities: Applying the Consolidation Exception - Amendments to IFRS 10, IF RS 12 and IAS 28
Applicable for annual periods beginning on or after 1 January 2016
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 not applicable on the Group.
IFRS 11 Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11
Applicable for annual periods beginning on or after 1 January 2016
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. The Group has not entered into any joint arrangements, hence this is not applicable.
IFRS 15 'Revenue from Contracts with Customers'
Not yet adopted by European Union
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue',IAS 11 'Construction Contracts', and several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities. The Company is currently evaluating the impact that this new standard will have on its consolidated financial statements.
IAS 1 Presentation of Financial Statements
Applicable for annual periods beginning on or after 1 January 2016
The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, the existing IAS 1 requirements. The amendments clarify:
-- The materiality requirements in IAS 1
-- That specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated
-- That entities have flexibility as to the order in which they present the notes to financial statements
-- That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss. Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI
The Company is currently evaluating the impact that this new standard will have on its consolidated financial statements.
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 recogised 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 five to 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 2016, 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.
3 Acquisitions
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 General Frontline Security Total
Group Limited Pte. Limited.
(O&G) 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 General Frontline Security Total (US$)
Group Limited Pte. Limited.
(US$) 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 amounts 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 comprises of value of expected synergies arising from acquisition which is not separately recognized. The goodwill of $7,903,869 accounted on acquisition Office and General Group Limited is entirely allocated to facility management and goodwill of $2,364,186 accounted on acquisition of Frontline Security Pte. Limited is entirely allocated to guarding services. None of the goodwill recognise on acquisition is expected to be deductible for tax purposes.
The fair value measurement is 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. If the combination had taken place at the beginning of the year revenue from continuing operations would have been $55,859,824 and the profit after tax 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. If the combination had taken place at the beginning of the year revenue from continuing operations would have been $ 6,545,177 and the profit after tax would have been $ 897,818.
Fair values measured on a provisional basis.
The fair value of Office and General Group Limited (O&G) and Frontline Securities Pte. Limited (customer relationship and brand) has been measured provisionally, pending completion of an independent valuation.
If new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments to the amounts, or any additional provisions that existed at the date of acquisition, then the accounting for the acquisition will be revised.
4 Goodwill
The movements in the net carrying amount of goodwill are as follows:
2016 2015
---------------------- -----------------
Gross carrying amount US $ US $
Balance 1 April 811,079 844,697
Acquired through business combination 10,268,055 -
Net exchange difference (300,888) (33,618)
---------------------- -----------------
Balance 31 March 10,778,246 811,079
Accumulated impairment - -
---------------------- -----------------
Carrying amount at 31 March 10,778,246 811,079
---------------------- -----------------
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:
2016 2015
US $ US $
----------------- -----------------
Guarding Services 2,364,186 -
Facilities Management 8,414,060 811,079
----------------- -----------------
10,778,246 811,079
----------------- -----------------
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:
2016 2015
US $ US $
Guarding Services 4,147,982 -
Facilities Management 18,216,888 8,875,483
----------------------- ----------- ----------
Key assumptions used for value-in-use calculations:
Office and General Frontline Security Roto Power Projects Private Limited
Group Limited (O&G) Services Pte. Limited
Segment Facilities Management Guarding Services Facilities Management
---------------------------- ----------------------- ----------------------- --------------------------------------
2016 2016 2016 2015
Net margin (1) 1.8%-4.3% 7%-11% 3%-8% 3%-8
Annual Growth rate (2) 6%-15% 6%-15% 5%-11% 5%-11%
Long term Growth rate (2) 2% 2% 5% 5%
Discount rate (3) 11.30% 8.20% 21.5% 21.5%
---------------------------- ----------------------- ----------------------- ------------------ ------------------
(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 2016, 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 Licence development Total
US$ US$ US$ US$ US$
--------- ---------------------- ------- --------------------------- ---------
Cost
Balance as at 1 April 2014 48,477 69,235 - - 117,712
Addition during the year - - 84,361 147,186 231,547
Translation adjustment (1,931) (2,754) (1,947) (3,395) (10,027)
--------- ---------------------- ------- --------------------------- ---------
Balance as at 31 March 2015
and
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 3,254,073 5,406,629 86,231 318,108 9,065,041
--------- ---------------------- ------- --------------------------- ---------
Accumulated amortization
Balance as at 1 April 2014 - 65,775 - - 65,775
Amortisation during the
year - 3,403 6,184 - 9,587
Translation adjustment - (2,697) (143) - (2,840)
--------- ---------------------- ------- --------------------------- ---------
Balance as at 31 March 2015
and
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 344,084 347,890 13,409 - 705,383
--------- ---------------------- ------- --------------------------- ---------
Carrying value
--------- ---------------------- ------- --------------------------- ---------
At 31 March 2015 46,546 - 76,373 143,791 266,710
At 31 March 2016 2,909,989 5,058,739 72,822 318,108 8,359,658
========= ====================== ======= =========================== =========
Cash flow reconciliation of acquisition of other intangible assets is as follows:
2016 2015
------- -------
US$ US$
Acquisition during the year 193,437 231,547
Net cash flow used in acquisition of other intangible assets 193,437 231,547
------- -------
Customer relationships are determined to have a finite life and are amortised 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 includes customised software which is under development as at 31 March 2016. During the year, the Group entered into an agreement to acquire enterprise resource planning software ("RAMCO"), to support the planning and administration of the Group's operations.
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$ 46,508 (2015 - US$ 46,546).
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$ 2,863,481 (2015 - US$ Nil).
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 2016, 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 2014 451,068 139,571 993,681 502,276 99,664 1,183,175 - 3,369,435
Addition during
the year 53,500 23,880 280,690 85,133 62,629 134,008 404,324 1,044,164
Disposals - - (798) - - (49,983) - (50,781)
Translation
adjustment (19,164) (6,091) (46,003) (21,945) (5,411) (49,026) (9,326) (156,966)
----------------- --------- --------- --------- ------------ ------------ --------- ------------- --------- At 31 March 2015 and 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 760,753 1,304,513 2,721,607 724,464 148,032 2,953,603 464,121 9,077,093 ----------------- --------- --------- --------- ------------ ------------ --------- ------------- --------- Accumulated depreciation and Impairment At 1 April 2014 250,792 88,662 488,024 309,686 72,021 570,323 - 1,779,508 Charge for the year 65,344 21,860 180,404 55,089 18,613 203,641 - 544,951 Disposals - - (447) - - (49,983) - (50,430) Translation adjustment (11,496) (4,033) (23,565) (13,595) (3,296) (26,242) - (82,227) ----------------- --------- --------- --------- ------------ ------------ --------- ------------- --------- At 31 March 2015 and 1 April 2015 304,640 106,489 644,416 351,180 87,338 697,739 - 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) - (182,180) - (183,200) Translation adjustment (16,700) (57,760) (95,876) (27,392) (5,199) (107,762) - (310,689) ----------------- --------- --------- --------- ------------ ------------ --------- ------------- --------- At 31 March 2016 426,052 954,449 1,833,451 503,156 102,795 1,807,069 - 5,626,972 ----------------- --------- --------- --------- ------------ ------------ --------- ------------- --------- Net book value At 31 March 2015 180,764 50,871 583,154 214,284 69,544 520,435 394,998 2,014,050 At 31 March 2016 334,701 350,064 888,156 221,308 45,237 1,146,534 464,121 3,450,121 =================
* The net book value of motor vehicles acquired under finance leases for the Group amounted to US$ 1,165,975 (2015 - US$ 484,423). Bank borrowings are secured on property, plant and equipment of the Group with carrying amounts of US$ 514,465 (2015 - US$475,051) (Note 16.2).
Cash flow reconciliation of acquisition of property, plant and equipment is as follows:
2016 2015
US$ US$
---------- ---------
Acquisition during the year 1,120,106 1,044,164
Assets acquired through finance leases (256,512) (146,718)
---------- ---------
Net cash flow used in acquisition of property, plant and equipment 863,594 897,446
========== =========
7 Long-term financial assets
2016 2015
US$ US$
------- ---------
Restricted cash
- Due not later than one year 827,982 1,066,390
- Due later than one year 6,030 -
------- ---------
834,012 1,066,390
======= =========
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 8.15% (2015 - 8.08%) 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 2016 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:
2016 2015
US$ US$
Movements in deferred income tax account are as follows:
Balance at beginning 1,901,826 1,532,578
Transfer from
- Profit or loss 535,115 440,411
- Exchange adjustment (162,872) (71,173)
-Deferred tax acquired in business combination (1,659,033) -
Balance at end 615,036 1,901,826
----------- ---------
Deferred tax assets 2,149,001 1,901,826
Deferred tax liabilities (1,533,965) -
----------- ---------
615,036 1,901,826
----------- ---------
Deferred taxes arising from temporary differences and unused tax losses can be summarised
as follows:
Recognised in Recognised in
business other
Recognised in combination comprehensive Deferred tax at
At 1 April 2015 profit or loss income 31 March 2016
US$ US$ US$ US$ US$
--------------- ---------------- ---------------- ---------------- ----------------
Deferred tax
asset
Excess of net
book value over
tax written down
value of
property, plant
and equipment 220,552 (13,134) - - 207,418
Retirement
benefits and
other employee
benefits 482,613 (11,252) - 80,398 551,759
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
1,901,826 166,777 - 80,398 2,149,001
--------------- ---------------- ---------------- ---------------- ----------------
Deferred tax
liabilities
Deficit of net
book value over
tax written down
value of
Intangible
assets - 125,068 (1,659,033) - (1,533,965)
--------------- ---------------- ---------------- ---------------- ----------------
- 125,068 (1,659,033) (1,533,965)
--------------- ---------------- ---------------- ---------------- ----------------
Recognised in Recognised in
business other
Recognised in combination comprehensive Deferred tax at
At 1 April 2014 profit or loss income 31 March 2015
Deferred tax US$
assets US$ US$ US$ US$
--------------- ---------------- ---------------- ---------------- ----------------
Excess of net
book value over
tax written down
value of
qualifying
property, plant
and
Equipment 194,990 25,562 - - 220,552
Retirement
benefits and
other employee
benefits 519,226 (15,139) - (21,474) 482,613
Unutilised tax
losses 329,872 116,067 - 445,939
Unutilised tax
credits 136,415 55,891 - 192,306
Others 352,075 208,341 - 560,416
--------------- ---------------- ---------------- ---------------- ----------------
1,532,578 390,722 - 21,474 1,901,826
--------------- ---------------- ---------------- ---------------- ----------------
Deferred income tax asset on unutilised tax losses 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:
2016 2015
US$ US$
------- -------
Tax losses 279,201 748,313
Deferred tax assets in respect of tax losses 86,273 229,536
------- -------
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$ 1,385,343 (2015 - US$ 1,025,083) 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
2016 2015
US$ US$
---------- ----------
Advance for property under development 261,256 212,508
---------- ----------
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
------- -------
2016 2015
US$ US$
------- -------
Consumables 400,441 195,526
------- -------
Consumables represent uniforms, material and equipment such as tools used under installation at customer sites. No inventory write downs or reversals are recognised in the periods reported above.
11 Trade and other receivables
2016 2015
US$ US$
Trade receivables 30,247,033 22,654,686
Less impairment of trade
receivables:
Balance at beginning 1,268,776 1,072,727
Charge for the year 601,071 238,743
Translation adjustment (296,850) (42,694)
---------- ----------
Balance at end 1,572,997 1,268,776
------------------------------ ---------------------------- ---------- ----------
Net trade receivables (i) 28,674,036 21,385,910
------------------------------ ---------------------------- ---------- ----------
Other receivables/assets
Unbilled billings 3,577,641 382,519
Advances to related parties 134,445 138,515
Advances to third parties 898,046 1,054,268
Staff loans 329,893 268,161
Deposits 522,541 747,149
Prepayments 539,169 60,428
Others 959,194 90,553
------------------------------------------------------------ ---------- ----------
(ii) 6,960,929 2,741,593
---------------------------------------------------------- ---------- ----------
(i) +
(ii) 35,634,965 24,127,503
---------------------------------------------------------- ---------- ----------
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:
2016 2015
US$ US$
---------- ----------
By geographical area
India 28,094,016 24,112,014
Sri Lanka 869 9,064
United Kingdom 6,155,185 -
Singapore 1,384,895 -
Others - 6,425
---------- ----------
35,634,965 24,127,503
========== ==========
(i) Financial assets that are past due but not impaired
The ageing analysis of trade receivables past due but not impaired is as follows:
2016 2015
US$ US$
-------------- --------------
Not past due 12,688,430 15,159,215
Past due 0 to 3 months 11,435,685 3,976,349
Past due 3 to 6 months 1,934,271 962,265
Past due over 6 months 2,615,650 1,288,081
-------------- --------------
28,674,036 21,385,910
============== ==============
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.
(iii) Trade receivables that are past due and/or impaired
The carrying amount of trade receivables individually determined to be impaired is as follow:
2016 2015
The Group US$ US$
-------------- --------------
Gross amount 1,572,997 1,268,776
Provision for impairment losses (1,572,997) (1,268,776)
-------------- --------------
- -
============== ==============
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.
12 Cash and cash equivalents
2016 2015
US$ US$
--------- -------
Cash at banks 1,485,791 463,315
Cash on hand 124,228 75,889
--------- -------
1,610,019 539,204
========= =======
13 Equity capital
No. of ordinary shares Amount
2016 2015 2016 2015
US$ US$
Issued and fully paid,
with no par value
Balance at beginning
of year 47,700,001 47,700,001 9,555,312 9,555,312
Addition 3,000,000 - 3,513,300 -
Balance at end of year 50,700,001 47,700,001 13,068,612 9,555,312
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
2016 2015
US$ US$
Currency translation reserve (3,598,396) (3,193,804)
Retained earnings/ (accumulated losses) 4,733,556 4,157,013
1,135,160 963,209
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:
2016 2015
US$ US$
---------
Gratuity benefit plan (Note 15.1) 1,472,119 1,090,431
Long term compensated absences (Note
15.2) 565,948 291,015
2,038,067 1,381,446
Non-current 1,371,442 657,150
Current 666,625 724,296
2,038,067 1,381,446
The estimate of its defined benefit liabilities at 31 March 2016, 2015, 2014, 2013, 2012 and 2011 are US$ 2,038,067, US$ 1,381,446, US$ 943,786, US$ 735,948, US$ 624,776 and US$ 494,790 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
2016 2015
US$ US$
A. Change in benefit obligation
Actuarial value of projected benefit obligation
(PBO) (Opening balance) 1,090,431 858,939
Interest cost 88,516 71,633
Service cost 187,938 281,822
Benefits paid (60,056) (15,326)
Re-measurement- actuarial loss/(gain) 232,214 (66,182)
Translation adjustment (66,924) (40,455)
PBO at the end of year (Closing balance) 1,472,119 1,090,431
2016 2015
US$ US$
B. Amounts recognised in profit or loss
Current service cost 187,938 281,822
Interest cost 88,516 71,633
Expense recognised in profit or loss 276,454 353,455
2016 2015
US$ US$
Amounts recognised in other comprehensive
C. income
Actuarial gain from changes in demographic
assumptions (228,610) (207,466)
Actuarial gain from changes in financial
assumptions (22,636) -
Experience adjustment 483,460 141,284
232,214 (66,182)
Taxation (Note 8) 80,398 21,474
Total income recognised in other comprehensive
income net of tax 151,816 (44,708)
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:
2016 2015
US$ US$
(i) Financial assumptions
- Discount rate (per annum) 8% 8.5%
- Rate of increase in compensation
levels (per annum) 5% 5.5%
(ii) Demographic assumptions
- Retirement age 58 years 58 years
- Mortality percentage
20 years - 50 years 0.09%-0.49% 0.10%- 0.52%
50 years - 58 years 0.49%-1.15% 0.58%- 1.10%
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
Increase Decrease
Change in in in
assumption Assumption assumption
US$ US$
Discount rate 0.50% (16,495) 16,936
Compensation level 0.50% 17,392 (17,088)
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$ 214,382 in 2016-17 (US$ 427,622 in 2015-16).
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 2016 is US$ 565,948 (2015- US$ 291,015).
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 (being administered by a trust) 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$ 5,373,062 and US$ 4,545,305 to the provident fund plan, during the year ended 31 March 2016 and 31 March 2015, 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
2016 2015
US$ US$
Non-current
Obligations under finance leases
(Note 16.1) 400,008 198,640
Bank loan (Note 16.2) 5,483,865 165,539
5,883,873 364,179
Current
Obligations under finance leases
(Note 16.1) 488,629 156,595
Current portion of bank loan (Note
16.2) 452,400 -
Demand loans from bank (Note 16.2) 4,564,769 1,725,493
Other bank borrowings (Note 16.2) 4,745,494 5,214,863
10,251,292 7,096,951
Total borrowings 16,135,165 7,461,130
16.1 Obligations under finance leases
2016 2015
US$ US$
Minimum lease payments payable:
Due not later than one year 510,981 184,941
Due later than one year and not later
than five years 423,838 232,543
Due later than five years - 2,018
934,819 419,502
Less:
Finance charges allocated to future
periods (46,182) (64,267)
Present value of minimum lease payments 888,637 355,235
Represented by:
2016 2015
US$ US$
-------
Present value of minimum lease payments:
Due not later than one year 488,629 156,595
Due later than one year and not later
than five years 400,008 196,673
Due later than five years - 1,967
-------
Present value of minimum lease payments 888,637 355,235
------------------------------------------ -------
The interest rate ranges from 4% to 12.79% (2015 - 8% to 12.79%) per annum.
16.2 Bank borrowings
2016 2015
US$ US$
Non-current:
Bank loan
Amounts repayable after one year 5,483,865 165,539
Current:
Other bank borrowings
Current portion of bank loans 452,400 -
Demand loans 4,564,769 1,725,493
Bank overdraft/cash credit payable
on demand- secured 4,745,494 5,214,863
Amounts repayable within one year 9,762,663 6,940,356
Total 15,246,528 7,958,536
(i) The weighted average effective interest rate for the bank loan are within range 3.75% to 11.75% (2015 - 10.75%) per annum.
The interest rate for bank overdraft/cash credit and demand loans are within the range of 11.70% to 13.75% (2015 - 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:
2016 2015
US$ US$
At fixed rates 6,429,706 1,891,032
At floating rates 8,816,822 5,214,863
15,246,528 7,105,895
(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$ 26,814,909 (2015 - US$ 26,326,726) and movable fixed assets amounting to US$ 514,465 (2015 - US$ 475,051) 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$
2016
Obligations under finance leases 400,008 400,008
Bank loan 5,483,865 5,483,865
2015
Obligations under finance leases 198,640 198,640
Bank loan 165,539 165,539
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:
2016 2015
US$ US$
Obligations under finance leases 3%-12.79% 8%-12.79%
Bank loan 3.75% to 11.75% 10.75%
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
2016 2015
US$ US$
Trade payables
Third parties 5,415,656 1,909,873
Accruals 2,153,013 685,953
7,568,669 2,595,826
Other payables
Salaries payable 10,519,626 5,664,896
Advances from customers 1,789,444 1,982,534
Statutory dues payables 6,911,174 3,640,532
Tax payable 458,389 6,795
Advances from related parties 456,116 10,471
Contingent consideration 482,016 -
Deferred consideration 1,223,334 -
Financial liability measured at fair value 1,149,026 -
30,557,794 13,901,054
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% (2015 - 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
2016 2015
US$ US$
Interest income 161,511 72,536
Foreign exchange gain 17,130 11,301
Vehicle hire charges 66,247 48,285
Miscellaneous income 247,880 169,745
492,768 301,867
19 Finance costs
2016 2015
US$ US$
Interest on bank overdrafts and cash credit payable 636,313 646,655
Interest on bank loan and demand loan 489,160 245,082
Interest on finance leases 29,054 43,355
Other finance charges 89,622 88,378
Interest on delayed payment 594,983 335,956
1,839,132 1,359,426
Further details of interest rate are disclosed in Note 16.1 and Note 16.2 to the financial statements.
20 Taxation
2016 2015
US$ US$
Current taxation 1,198,786 1,315,387
Deferred taxation (454,717) (461,883)
744,069 853,504
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:
2016 2015
US$ US$
Profit before taxation 1,611,634 2,221,067
Tax at domestic rates as applicable
in the countries concerned 598,219 755,640
Tax effect on non-deductible expenses 176,886 16,681
Change in tax rate (4,897)
(Over)/Under provision of current
tax and deferred tax of earlier
years (139,088) (78,939)
Deferred tax assets not recognized
on account of losses in subsidiaries 113,986 142,535
Tax effect of exempt income (18,452)
Others 17,415 17,587
744,069 853,504
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 -
32.445%)
Sri Lanka 28% (previous year - 28%)
United Kingdom 20% (previous year - Not
Applicable)
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 50,700,001 (2015 - 47,700,001) shares during the financial year.
2016 2015
US$ US$
Net profit attributable to equity holders
(US$) 698,832 1,358,949
Opening number of ordinary shares 47,700,001 47,700,001
Weighted average number of ordinary shares
for the purposes of basic and diluted earnings
per share 49,450,001 47,700,001
Closing number of ordinary shares 50,700,001 47,700,001
Basic and diluted earnings per share (US$
per share) 0.01 0.03
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 2016 and 31 March 2015:
2016 2015
US$ US$
Key management personnel and their relatives
Office rental paid to key management personnel 155,268 166,222
Deposits given to key management personnel 63,317 67,103
Sponsorship fees paid to relative of key management personnel 135,002 -
Receivable from key management personnel 63,317 67,103
Entities over which key management are able to exercise control:
Deposits given to related party 23,533 221,120
Operating expenses paid on behalf of related party 43,364 10,953
Recovery of advances from related party 187,579 14,983
Office rental paid to related party 30,553 23,746
Commission paid to related party 35,135 37,614
Receivable from related party 144,523 382,192
Transactions with key management:
Particulars 2016 2015
US$ US$
Remuneration - short-term benefits 643,623 547,470
Remuneration - post-employment benefits 15,714 18,430
The outstanding balance payable to related parties under the category of key management as at 31 March 2016 and 31 March 2015 is US$ 211,597 and US$ 34,738 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
2016 2015
US$ US$
Capital expenditure contracted for purchase of property, plant
and equipment 322,618 45,362
Capital expenditure contracted for purchase of other intangible assets 55,781 87,872
23.2 Contractual commitment
The Group has a contractual commitment to pay US$ 26,123 (2015- US$ 79,698) 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 2016 are, as follows:
2016 2015
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 72,557 -
After one year but not more than five year 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 2016 and 2015, and certain assets and liabilities information regarding industry segments as at 31 March 2016 and 2015.
Facility management Guarding service Others Total
2016 2015 2016 2015 2016 2015 2016 2015
US$ US$ US$ US$ US$ US$ US$ US$
Segment revenue 56,785,549 24,304,769 76,170,859 63,585,205 84,842 176,168 133,041,250 88,066,142
Depreciation
and
Amortisation 894,196 180,797 443,315 330,124 47,260 43,618 1,384,771 554,539
Materials consumed 6,412,356 587,616 166,077 159,760 47,196 122,668 6,625,629 870,044
Staff and related
costs 45,717,987 22,665,877 67,968,642 56,289,332 96,057 210,235 113,782,686 79,165,444
Other operating
Expenses 3,203,804 1,042,531 3,712,034 2,811,780 76,471 119,410 6,992,309 3,973,721
Finance costs 660,456 395,877 1,010,420 926,820 958 34,842 1,671,834 1,357,539
Segment operating
(loss)/profit
before
Tax (103,250) (567,929) 2,870,371 3,067,389 (183,100) (354,605) 2,584,021 2,144,855
Taxation (97,883) 238,057 (734,748) (1,075,766) 193,929 (11,713) (638,702) (849,422)
Segment net
(loss)/profit (201,133) (329,872) 2,135,623 1,991,623 10,829 (366,317) 1,945,319 1,295,434
Segment assets 17,800,150 9,973,435 28,870,916 22,784,395 782,164 467,476 47,453,230 33,225,306
Segment liabilities 18,486,931 6,057,946 21,937,200 16,517,061 1,505,759 84,823 41,929,890 22,659,830
Other segment
information:
Capital expenditure
property, plant
and
Equipment 1,650,984 220,844 661,290 741,398 121,907 81,922 2,434,181 1,044,164
Other intangible
assets - - - - - - 193,437 231,547
Depreciation
of
property, plant
and equipment 894,196 177,395 443,315 330,124 47,260 37,433 1,384,771 544,952
Amortisation
of other
intangible
assets - - - - - - 9,587 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:
2016 2015
US$ US$
Segment operating profit before tax 2,584,021 2,144,855
Reconciling items:
Other income not allocated 492,768 301,867
Other expenses not allocated (1,465,155) (225,655)
Group profit before tax 1,611,634 2,221,067
Group profit before tax 1,611,634 2,221,067
Reconciling items:
Tax unallocated (105,367) (4,082)
Tax allocated (638,702) (849,422)
Group profit after tax 867,565 1,367,563
Segment assets 47,453,230 33,225,306
Reconciling items:
Other assets unallocated 18,924,141 65,966
Total assets 66,377,371 33,291,272
Segment liabilities 41,929,890 22,659,830
Reconciling items:
Other liabilities unallocated 8,335,101 83,800
Total liabilities 50,264,991 22,743,630
24.1 Geographical segments
Revenue and non-current assets of information based on geographical location of customers and assets respectively are as follows:
2016 2015
US$ US$
Revenue
India 99,288,651 88,049,640
Sri Lanka 5,720 16,502
United Kingdom 30,860,219 -
Singapore 2,886,660 -
133,041,250 88,066,142
Non-current assets
India 4,528,644 3,302,401
Sri Lanka 1,326 1,946
United Kingdom 15,099,478 -
Singapore 4,053,845 -
23,683,293 3,304,347
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 obtaining sufficient security where appropriate 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$ 2,108,360 (2015 - US$ 1,749,248) representing approximately 7% (2015 - 8%) of the total trade receivables of US$ 28,674,036 (2015 - US$ 21,385,910).
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 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
At 31 March 2015
Trade and other payables 10,253,727 - - 10,253,727
Borrowings 7,198,631 411,251 2,018 7,611,900
17,452,358 411,251 2,018 17,865,627
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 (2015: 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 50 basis points to be appropriate. A decrease in market interest rate by 50 basis points, will lead to a decrease in finance cost by US$ 44,084 (2015 - US$ 34,702) resulting in an increase in profit and equity for the year ended 31 March 2016 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 other than Singapore and transacted in foreign currencies. As a result the Group is exposed to movements in foreign currency exchange rates arising from normal trading transactions, primarily with respect to Indian Rupee.
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:
2016 2015
INR LKR GBP US$ INR LKR GBP US$
Long-term
financial
assets 834,012 - - - 1,066,390 - -
Trade and
other receivables 28,094,017 869 6,155,185 12,073 24,051,586 9,064 6,425
Cash and cash
equivalents 885,044 5,044 205,416 65,832 479,290 373 59,541
29,813,073 5,913 6,360,601 77,905 25,597266 9,437 - 65,966
Borrowings (6,859,527) (8,127,251) (1,000,000) (7,461,130) - -
Trade and
other payables (18,622,721) (2,135) (8,024,261) (1,475,654) (10,166,875) (10,720) (76,132)
4,330,825 3,778 (9,790,911) (2,397,749) 7,969,261 (1,283) (10,166)
If the INR, GBP and LKR all strengthened against the US$ by 5% (2015 - 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) ---------------------
2016 2015
Profit Profit
net of tax Equity net of tax Equity
US$ US$ US$ US$
INR 26,086 26,086 269,182 269,182
LKR 719 719 (46) (46)
GBP (228,436) (228,436) - -
If the INR, GBP and LKR weakened against the US$ by 5% (2015 - 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.
2016 2015
US$ US$
Total equity 16,112,380 10,547,642
Adjusted debts 14,525,146 6,921,926
Total capital 30,637,526 17,469,568
Gearing ratio 0.47 0.40
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
2016 2015
US$ US$
Non-current assets
Loans and receivables
Long-term financial assets -
restricted cash 834,012 1,066,390
Current assets
Loans and receivables
Trade receivables 28,674,036 21,385,910
Other current assets 6,287,316 2,542,650
Related party receivables 134,445 138,515
Cash and bank balances 1,610,019 539,204
Total loans and receivables 37,539,828 25,672,669
Non-current Liabilities
Carrying amount at amortised
cost
Borrowings 5,483,865 165,539
Current liabilities
Carrying amount at amortised
cost
Trade payables and other payables 21,398,787 8,271,193
Borrowings 9,762,663 6,940,356
Total financial liabilities 36,645,315 15,377,088
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 2016
Observable input Level 1 Level 2 Level 3 Financial liability measured at fair value - 1,149,026 - Contingent consideration - - 4,82,016
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 An decrease to 90% would decrease/
contingent consideration 100% (increase) fair value by US$ 75,000 Net present value
An increase/ decrease by 10% would
increase/ decrease fair value by US$ Black-Scholes model
Volatility of market price of share 20% 125,000
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
2016 2015
Balance as at 1 April 2015 - -
Acquired through business combination 444,457 -
Amount recognised in profit and loss account 37,559 -
Balance as at 31 March 2016 482,016 -
28. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the 31 March 2016 reporting date and the date of authorisation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUWURUPQGMB
(END) Dow Jones Newswires
August 30, 2016 02:01 ET (06:01 GMT)
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