Source - RNS
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 EBITDA1 of $5.4m (FY 2015: $4.1m)

·     Adjusted profit before tax1 of $2.4m (FY 2015: $2.2m)

·     Statutory Profit before taxation $1.6m (FY 2015: $2.2m)

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 £6.3m in cash and shares

·     Acquisition of 51% stake of Frontline, a company incorporated in Singapore for a maximum consideration of £1.89m in cash

 

Post Period End:

·     Appointment of two new Non-executive Directors

·     £55m 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 [email protected]

 

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 £55m contract win with the University of Hertfordshire, worth £5.3m 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

 

 

 

 

 

 

 

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

 

 

 

 

Equity

Capital

US$

Exchange

Translation

Reserve

US$

Retained

earnings

US$

Total

attributable

to owners of

the parent

US$

Non-

controlling

interests

US$

Total

equity

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 of incorporation

Effective 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 Group Limited (O&G)

Frontline Security Pte. Limited. Limited

Total

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 Group Limited

(US$)

Frontline Security Pte. Limited. Limited (US$)

Total (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 Group Limited (O&G)

Frontline Security Services Pte. Limited

Roto Power Projects Private 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)

Long term Growth rate (2)

6%-15%

2%

6%-15%

2%

5%-11%

5%

5%-11%

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

 

 

Brands

Customer Relationships

Licence

Intangible assets under 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:

 

 

At 1 April 2015

Recognised in profit or loss

Recognised in business combination

Recognised in other comprehensive income

Deferred tax at 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)

 

 

 

 

 

 

 

 

At 1 April 2014

Recognised in profit or loss

Recognised in business combination

Recognised in other comprehensive income

 

Deferred tax at 31 March 2015

Deferred tax assets

US$

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$

 

C.

Amounts recognised in other comprehensive 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

US$

2015

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

 

Change in

Increase in

Decrease 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$

 

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

US$

2015

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

16,502

United Kingdom

-

Singapore

2,886,660

-

 

133,041,250

88,066,142

Non-current assets

 

 

India

4,528,644

3,302,401

Sri Lanka

1,946

United Kingdom

-

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:

Observable input

Estimate of input

Sensitivity of the fair value measurement to input

 

Method

Probability of meeting target for contingent consideration

100%

An decrease to 90% would decrease/ (increase) fair value by US$ 75,000

 

Net present value

Volatility of market price of share

20%

An increase/ decrease by 10% would increase/ decrease fair value by US$ 125,000

 

Black-Scholes model

 

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
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