Source - RNS
RNS Number : 2588K
PureCircle Limited
20 September 2016
 

PURECIRCLE LIMITED

("PureCircle" or "the Company")

FY16 Results Statement

PureCircle (LSE: PURE), the world's leading producer and marketer of high purity stevia ingredients, today provides a Results Statement for its financial year ended 30 June 2016 ("FY16").

HIGHLIGHTS FOR THE YEAR

·     Strong sales growth and margin expansion

·     Potential for stevia market materially enhanced:

-      Stevia approved in Brazil and India

-      Sugar taxes being imposed in major markets

·     Important new PureCircle innovations launched

·     H2 sales lower than anticipated due to delayed customers launches and US Customs and Border Protection (CBP) actions

·     PureCircle well positioned to capture long term market expansion

 

A summary of the financials for FY16 with FY15 comparatives is set out below:


FY16


  FY15

%






Financial year ended 30 June

USD' m


USD' m

+ / (-)






Sales

138.6


127.3

9%

Gross margin*

57.0


40.3

41%

Operating profit*

32.4


17.0

90%

Adjusted EBITDA*

37.7


22.2

70%

Net profit after tax

14.6


4.1

257%

Earnings per share (US$ cents)

8.49


2.48

242%

Fully diluted earnings per share (US$ cents)

8.37


2.42

246%

Operating cash flow before working capital changes

31.9


23.8

34%






Net debt

(52.9)


(45.4)

(17%)

Net assets

203.8


190.5

7%






*Gross margin, operating profit and Adjusted EBITDA are alternative performance measures which the directors believe are helpful in understanding the performance of the business. Refer to Note 29 for definitions of non-GAAP measures.

Commenting on the Results Statement the CEO Magomet Malsagov said "Despite challenging market conditions in FY16, I am delighted with the progress PureCircle has made, with strong growth in both revenue and profit.  The market for PureCircle Stevia has continued to develop strongly with favourable regulatory developments and continued roll-out of ever larger Food and Beverage (F&B) brands using stevia. Significant milestones in the year include the approval of high purity stevia in India and Brazil, Reb M approval in Europe and the launch of our Zeta family of new ingredients, closing the taste gap for low or no calorie applications and opening up new F&B categories adoption of stevia. These developments underpin our confidence in the long term prospects for our business and support the investments we are making to increase production capacity and further product innovation.

Prospects for the business over the next 4 to 5 years are strong, and we are confident that as our sales continue to increase, we will report improved profitability. Nevertheless, we caution that there will be inevitable volatility in the growth trajectory as we move towards our longer term goals.

KEY FINANCIAL COMMENTARIES

Sales: FY16 sales increased $11.3m (9%) to $138.6m.

In FY16 sales revenues increased driven by accelerating market adoption of stevia, enabled by PureCircle innovation and the unique breadth of our in market product portfolio. FY16 growth reflects an improved sales mix with FY16 seeing a higher proportion of sales of our recently launched innovation products than in FY15. With a strong future product pipeline the Company is confident further sales mix improvements will be evident in future years. 

However, FY16 sales growth was further adversely impacted by both the delayed timing of a number of customer launches and by the CBP intervention.

Both recent Mintel data and our project pipeline give us confidence that considerable future growth is sustainable.  

Gross Margin: FY16 gross margin increased by $16.7m (+41%) to $57m. FY16 gross margin was 41%, an increase of 9 percentage points over FY15's 32%. The gross margin percentage improvement principally reflects the improved sales mix described above.          

Operating Profit: FY16 Operating profit increased $15.4m (+90%) to $32.4m. The strong increase in operating profit relative to revenue growth demonstrates the positive operational leverage of the Group's business model. Going forward we expect growth in sales coupled with continued benefits of product innovation to sustain these high levels of operating profit.

Adjusted EBITDA: is defined as Group Operating profit with depreciation and amortisation and share of results in joint venture added back. FY16 adjusted EBITDA increased $15.5m (+70%) to $37.7m in line with the strong increase in operating profit referred to earlier.

Net profit: FY16 net profit of $14.6m represented a $10.5m (+256%) increase over the $4.1m net profit reported in FY15.  

Operating cashflow before working capital changes: Improved in FY16 by $8.1m (+34%) to $31.9m (FY15 $23.8m). This improvement reflects the increase in net profit of $10.5m.

Net debt / headroom: The Group ended FY16 with cash and facility headroom of $76.3m (FY15 $87.9m) and net debt of $52.9m (FY15 $45.4m). The $7.6m increase in net debt reflects $19.0m cash generated from operations offset by $24.2m cash invested in production capacity expansion and leaf and innovation development, both to support expected future revenue growth.

The Group is well funded to finance its current and future plans.

USA Customs and Border Protection matter ("CBP")

Based on an allegation of non-compliance with the Trade Facilitation and Trade Enforcement Act ("TFTEA"), on May 20, 2016, US Customs and Border Protection issued a Withhold Release Order ("WRO") No. 29/China that was used to initially detain two PureCircle shipments of stevia, and subsequently all PureCircle shipments of stevia.  The allegations are that PureCircle was importing "Stevia and its derivatives" from the Inner Mongolia Hengzheng Group Baoanzhao Agricultural and Trade LLC ("Baoanzhao") where there allegedly have been occurrences of forced prison labour.  On June 1, 2016, CBP issued a press release focusing on CBP's detention of PureCircle products, but which also stated that "importers of detained shipments are provided an opportunity to demonstrate that the merchandise was not produced with forced labour."

CBP did not notify PureCircle of any allegation or investigation of its labour practices and did not provide PureCircle with an opportunity to respond to the allegations before CBP acted.  We became aware of the WRO only after our shipment was detained by CBP on May 27, 2016.

Starting on June 1, 2016, PureCircle provided to CBP the Certificates of Origin and Consignee Statement and detailed leaf traceability information, for the detained shipments, including the names and locations of each farmer from whom PureCircle purchased stevia leaf to be made into the products that are currently under detention. 

We have demonstrated that all of the stevia leaf used to make the detained products is compliant with the TFTEA and none of our imported products are or will be produced with forced labour.  To ensure the independence of the information we sent to the CBP, we had all our traceability information corroborated in audits of our supply chain conducted by third party Bureau Veritas.  These audit reports have also been provided to CBP, confirming that no forced labour is used in our supply chain.

Based on the traceability information and the audit reports, two of our detained shipments were released by CBP on June 24, 2016.  Another shipment of one of our customers was also released.  Despite the first three shipments being released from detention by CBP, PureCircle still remains named on CBP's WRO.

At present, a number of our shipments remain in detention, despite CBP already having received the same documents, the same level of traceability information, and the same audit reports for these shipments as PureCircle and its customer provided to CBP for the three released shipments. CBP has neither requested further information from us, nor given us a formal timetable for its decision.

We continue to actively work with the CBP to address the matter and have our name removed from the WRO.

We are actively working with our US customers to ensure ongoing supply until this matter is resolved. Outside of the US, our business continues as usual. PureCircle remains committed to human rights and fair use of labour.  As we expand our vertically integrated supply chain, we remain committed to traceability and transparency as we verify compliance with our Global Labour Policy and Supplier Code of Conduct and remain confident that this matter will be resolved in due course.

Stevia Market Developments

All macro market trends continue to develop in favour of the Company and our products. In November 2014 the McKinsey Global Institute (MGI) issued a discussion paper titled "Overcoming Obesity: an initial economic analysis" which highlighted Obesity as one of the top three social burdens generated by human beings with an estimated global economic impact of US$ 2 trillion, equivalent to 2.8% of global GDP.

Although there are a number of causes of obesity and diabetes such as genetics and lifestyles including levels of exercise undertaken, increasing scrutiny is being undertaken on calorific content of food and beverages; and within this on the levels of sugars being added to food and beverage products.

 

Regulatory action to reduce calorific loading of Food and Beverage products

In FY16 there were significant regulatory steps taken to reduce the levels of calories and in particular added sugars in food and beverage products. For example:

-      In the UK the government announced legislation that will tax carbonated soft drinks that have added sugars with effect from 2018;

-      In Mexico the government has stated that it is reviewing the effectiveness of the so called soda tax that was introduced in 2013 with a view to increasing the levels of taxation;

-      In the USA a number of influential State Governments and some cities have introduced legislation to impose taxes on calorific Carbonated Soft Drinks. including San Francisco (CA) and Philadelphia (PA);   

-      Other countries proposing legislation are: Columbia, Brazil, Portugal, South Africa, India, Indonesia, Malaysia, Thailand, Philippines, Australia, Saudi Arabia and Egypt.

Consumer preferences for natural ingredients

Consumers increasingly are demanding natural and sustainable sources for their food and beverage ingredients.

Stevia as a natural sustainable sweetener offers consumers the option of lower calorific loading combined with the natural sustainability that consumers rightly demand.

Material further regulatory approvals for stevia in FY16

During FY16, there were a number of important regulatory approvals for stevia. These included:

-      India approved the use of high purity stevia as an ingredient thereby opening up a market of more than 1 billion new consumers to products sweetened with stevia;

-      Brazil approved by Presidential decree the use of stevia with sugar as an ingredient. Given that more than 90% of food and beverages launched so far using stevia use stevia in combination with sugar this change in regulation effectively opened up the mainstream Brazilian market to stevia for the first time;

-      Reb M in Australia, New Zealand and Canada; and

-      PureCircle Flavours in China and Indonesia.

These approvals have the effect of opening up food and beverage categories that require deeper calorie reductions than have so far been possible.

With our commitment to innovation and investment in plant and supply chain, taken together, the various developments in the stevia market during FY16 give management further confidence in the long term growth prospects for the stevia market.

Market assessment at end FY16

The Company is building a long term business intended to be substantial in size and sustainable over many decades. The total global sweetener and flavour markets continue to grow and the depth of penetration within the category by stevia is increasing, with more products and larger brands adopting stevia. Further, given the timing of many recent product launches, only a small proportion have yet secured large or full retail distribution meaning that there is considerable latent growth still to emerge from the more than 10,000 products already in market.

Stevia is gaining momentum in major categories as a large scale solution of choice. PureCircle is well positioned as a solution provider in the fight against obesity and diabetes. As more and more food and beverage companies face sugar taxes, PureCircle provides natural, low calorie, great tasting ingredient solutions.

A review of alternative sweeteners to stevia suggests that there are no large scale natural low calorie alternatives.

PCL INNOVATION

The growth in stevia usage and development of high purity stevia as a mainstream ingredient of choice has largely being enabled by PureCircle's innovation. During FY16 there were further successful developments in our product innovation.

During the year the Group launched both our Sigma product family and our portfolio of Matrix solutions. These provide category specific solutions enabling deeper calorie reductions delivering great taste. Particular success is being seen by clients in the dairy and tea categories as well as accelerating adoption in new categories such as ketchups and confectionery. PureCircle continues to invest heavily in innovation in order to offer its customers further enhanced high quality flavours and sweeteners.

SUPPLY CHAIN

Construction of our new production facility is progressing well, and expected to be completed in early 2017.

The Group's strategy to diversify and increase leaf supply globally continues to ramp up as planned. PureCircle's strategy to invest in leaf development in order to identify and commercialise strains of stevia that have higher concentrations of particular molecules that have optimum commercial potential.   

During FY16 the Group restructured our leaf supply chain infrastructure with more focus placed on larger farmer partners, defined as farmers with individual potential to commit in excess of 100 Hectares to stevia. By the end of FY16 the Company had secured trials in Africa and South America.   Whilst actual FY16 supply from these sources was relatively small, the potential in the future is significant.

MANAGEMENT & ORGANISATION

PureCircle has ambitious long term growth plans. These require continual investment in management and information systems to ensure the Group organisation has the capacity, skills and experience to match our growth. The Company is committed to making these investments and further significant steps were again made in FY16.

Disclaimer
This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and operating profit, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is based on information available to PureCircle as of the date of the statement. All written or oral forward-looking statements attributable to PureCircle are qualified by this caution. PureCircle does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances.

Enquiries:






Magomet Malsagov, CEO

+603 2166 2066

Rakesh Sinha, CFO

+601 2326 0005 /

+44 7900 624783



 

NOTES TO EDITORS

 

PureCircle Limited is the world's leading producer of high-purity stevia ingredients for the global food and beverage industry. Its mission is to encourage healthier diets around the world through the supply of natural ingredients to the global food and beverage industry. Its vision is to lead the global expansion of stevia as the next mass volume, natural-origin sweetener. PureCircle has offices around the world with the global headquarters in Kuala Lumpur, Malaysia. The Business was founded in 2002. PureCircle's shares are listed on the main market of London Stock Exchange and trades under the ticker symbol PURE.  For more information, visit: www.purecircle.com.

 

Chairman's Statement

At PureCircle we are seeking to build a large global business designed to help address the world's growing need for moderation in calories in food and beverage products using naturally sourced and sustainable ingredients. We intend to achieve this by leveraging our rich heritage of bio-technology research and development. Our ambitions are significant and long term. We intend over time to be recognised as a true leader in our fields and as a "blue chip" company in everything we do.

Some 14 years after incorporation in 2002, the Group has made some progress towards realising its long term objectives, as the performance data in the CEO section following makes clear. Our progress to-date has been based on our first mover advantage in the stevia industry supported by a strong entrepreneurial culture based on nimble, fast decision making and an above average market risk appetite with continued investment in our bio-technology heritage. As a Board we are ever more confident about the future prospects of the Company in the long term. Our continued investment in development and in expanding production capacity is evidence that we are putting money behind this belief.   

However as of today PureCircle is still a relatively small company, particularly given the global scope of our operations; our sales are below $200 million and we employ just 1,000 personnel. We live in uncertain times with political, economic and social volatility impacting all our markets, customers and stakeholders. So we are clear that our future progress will neither be easy or be secured in a "straight line".  There will be volatility along the journey.

FY16 has been a microcosm of this. Undeniably there was continued progress across a number of KPI, be they for example further market regulatory approvals in India and Brazil or our Corporate move to the Main Market. At the same time there has been considerable volatility, notably the totally unexpected US Customs Border Protection ("US CBP") process that has diverted considerable resource and management attention away from our core business activities. 

Despite the volatility we end FY16 ahead of where we were a year ago. Our intention is to continue to achieve further progress annually for many years to come.

 

Chief Executive Officer's Strategic Review

Progress since incorporation

The business strategy of PureCircle is simple and has not changed since we started the business in 2002; it is to build a large long term natural ingredients business based on stevia providing sustainable moderated calorie solutions to the world's food and beverage companies and consumers. Our strategy is underpinned by our strong bio-technology heritage that enabled us to secure first mover advantage in our industry and into which we will continue to invest so as to preserve our market leadership.

In the 14 years since incorporation we have made some progress towards our goals:

-      Between 2002 and 2009 we demonstrated that large scale high purity stevia production and commercialisation was indeed possible: this period of our development culminated in the end 2008 FDA and WHO approvals of stevia as a food ingredient and the effective opening up of some of our markets.

-      Between 2009 and 2015 we have successfully scaled up our business and led the global expansion of the stevia industry, culminating in late 2015 with India and Brazil approvals meaning that more than 5 billion consumers now have access to stevia as a tool to moderate their calorific food load.

Looking at the Group's key indicators we have made clear progress:

-      Sales have grown by $93.2m (205%) in the 5 years since FY12

-      Adjusted EBITDA and net profit have each improved  $53.5m and $37.9m respectively across the same period

-      Operating cashflow before working capital has also improved by $49m from negative $16.6m in FY12 to positive $31.9m in FY16

-      We now have 20 products in market all derived from the same stevia leaf, all helping widen the applications of stevia to new food categories and ever deeper calorie reductions and all enabled by our unique integrated supply chain

-      The improvement in profit and operating cashflow across the last 5 years and our ability to mine the wonderful stevia leaf for ever more ingredient solutions has confirmed fully the operational leverage in our business model and the appropriateness of our mass balance approach.

However we still have a great deal to do. Relative to our long term ambitions we are still early on our journey. For example the global stevia market is currently only $200-250m of B2B revenues a year, representing less than 1% of the global sweetener market.

The key priorities and challenges

As CEO I consider that our primary challenges and priorities are:

-      Managing growth:

It is well known that growth brings new challenges. PureCircle is no different to other companies in this respect. Management's key priority is to ensure successful sustainable execution in everything we do; this touches all activities of our business and will remain our primary challenge for many years to come.

-      Coping with volatility:

We need to ensure that our business has the flexibility, capacity and robustness to cope with global market volatility, in whatever form that takes.  

We manage these two challenges by continued investment in people and systems and by ensuring that our capital structure has continued headroom and flexibility to support our growth aspirations.

-      Competition:

Our bio-technology heritage gave us first mover advantage in developing the new stevia industry. Our role now is to stay ahead of the competition so as to preserve our leadership position for as long as possible.

 

We recognise that for stevia to develop into the large scale industry that we believe it will do, the market and our customers will require the development of a well-diversified supplier base. As such we see competitor developments as important further validation of the stevia industry potential.

In FY16 there was investment into stevia by a number of well-known ingredient and soft commodity companies. However, to date none of these companies have made investments into integrated supply chains back to stevia leaf plantations. They rely on smaller extraction and refining companies, principally based in China, to provide supply of a very limited range of steviol glycoside products. As they do not control source back to the stevia leaf they are not able to provide the range of innovative solutions that the market needs and can access from PureCircle.

Our strategy is to remain ahead of the competition by continuing to invest in innovation underpinned by our unique integrated supply chain so as to bring more cost effective solutions to our clients across more food categories.

FY16 Performance

FY16 has been a challenging year. We have seen progress in the development of all our markets, notably India and Brazil, and in the commercialisation of further innovation including our Sigma and Matrix ingredients, which are already helping customers deliver great tasting products with deeper calorie reductions.

At the same time we have had to address the considerable external shock of the CBP process. I will not go into more detail on the process here, except to say that it has placed the Company and its management under sustained pressure for many months now and has undoubtedly adversely impacted our ability to progress the Company's objectives significantly.  

So, whilst performance as measured by revenues was some way below our plans at the start of the year, our ability to grow revenues and almost quadruple profits during a difficult year does provide further evidence of the robustness of our business model and with it some indication of the true potential of this business.

Looking ahead

Looking ahead, and particularly across the next 5 or so years, I would summarise our plans as more of the same. We do not anticipate changes in strategy. We are committed:

-      to continued growth in our business in all regions of the world,

-      to continued penetration of stevia into all major food and beverage categories

-      to continued expansion of our production capacity to support demand

-      to continued diversification of leaf supply outside of China

-      to continued investment in our people, our systems and our organisation

If we are successful in our plans for the next 5 years then I believe we will be closer to our long term ambition of building the blue chip business that Paul referred to above. But I too emphasise: our development will not be a straight line. There will be volatility along the way.

 

 

GROUP FINANCIAL REVIEW

 

The Group's FY16 financial year covers the year from 1 July 2015 to 30 June 2016. FY15 comparatives are for the year from 1 July 2014 to 30 June 2015.

 

Set out below is an extract from the audited FY16 financial statements. The complete  financial  statement and its accompanying notes are in the Appendix.

 


FY16

FY15

%


USD'000

USD'000

+ / (-)

Trading








Revenue

138,641

127,349

9%

Cost of sales

(81,634)

(87,070)

6%

Gross margin

57,007

40,279

42%





Gross margin %

41%

32%


 

Other income

 

328

 

760

 

(57%)

Administrative expenses

(24,947)

(24,024)

(4%)

Operating profit

32,388

17,015

90%





Main Market Listing costs

(1,808)

-

-

Other expenses

(8,396)

(7,117)

(18%)

Foreign exchange gain/(loss)

1,358

(757)

279%

Finance costs

(5,315)

(7,275)

27%

Share of loss of joint ventures

(332)

(818)

59%

Taxation

(3,295)

3,043

(208%)

Profit for the financial year

14,600

4,091

257%

Earnings Per Share (US$ cents per share)

Fully diluted Earnings Per Share (US$ cents per share)

 

8.49

8.37

2.48

2.42

  242%

246%

Operating cash flow before working capital changes

31,870

23,784

34%

Working capital changes

(12,860)

(10,016)

(28%)

Operating cash flow after working capital changes

19,010

13,768

38%





Net debt and funding headroom




Gross debt

113,929

109,646

(4%)

Gross cash

(61,002)

(64,276)

(5%)

Net debt

52,927

45,370

(17%)





Funding headroom

76,271

87,937

(13%)

Adjusted EBITDA

    37,729

22,182

70%





 

Segmental reporting: The Group operates as a single operating segment comprising of the integrated production and marketing of PureCircle Stevia 3.0 TM products.

 

Sales: FY16 sales increased $11.3m (+9%) to $138.6m. This was driven by improved portfolio mix backed by strong innovations. Our "Value Added"category doubled in size which includes our Sigma product family which was launched in the year.

 

Geographically, EMEA and Latin America delivered strong double-digit growth. North America suffered as a result of delayed customer launches and CBP action, whilst Asia represents a significant growth opportunity moving forward.

 

Our key customer base also grew double digit helping us to increase our footprint in the marketplace.

 

Accelerating market adoption of stevia has been enabled by our Stevia 3.0 TM range of proprietary ingredients and customizable ingredient combinations. In 2016. PureCircle continues to lead the growth of this market and our project pipeline gives us confidence that future sales growth at these rates is sustainable.

 

Gross margin: In FY16, the gross margin was $57.0m (FY15 $40.3m), reflecting the better portfolio mix driven by innovations and moderating leaf prices.

 

The FY16 gross margin percentage of 41% was 9 percentage points higher than FY15. As disclosed in last year's RNS, gross margin in FY15 was impacted by high leaf cost in China.

 

Operating profit FY16 Operating profit of US$32.4m almost doubled from FY16, primarily due to higher gross profit and offset by marginal increase in general & administration cost

 

Other expenses: FY16 other expenses principally comprise non cash costs of the Group's LTIP scheme and STIP.

 

Finance costs: In FY16 finance costs were $5.3m (FY15 $7.3m). This reflects the full year impact of lower interest cost from the restructured banking facilities during FY15.

 

Net profit after tax: The Group recorded a $14.6m net profit in FY16, a $10.5m (+256%) improvement on FY15.

 

Financing and funding headroom: The Group ended FY16 with net debt of US$52.9m (FY15 US$45.4m) and cash and facility headroom of US$76.3m (FY15 US$87.9m). Net debt increased mainly due to higher capital expenditure.

 

RISKS AND UNCERTAINTIES

 

Current risk assessment

The Group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity. Within this the principal risks and uncertainties which may affect the business activities of the Group are summarised below. A new risk related to the failure to resolve impoundment of goods by US CBP has been included.

·        Continued growth in the Stevia Market

The Group has pioneered the development of the high purity stevia market and is focused on the further development of that market. Additionally the Group has an operationally geared business model in which profitability is sensitive to volumes. This makes the Group's future profitability sensitive to the continued growth in the Stevia Market.

Management mitigate this risk with an active programme of new stevia product innovation to support further consumer adoption of stevia and to enable future food and beverage formulation projects. Further the Group invests to protect and promote the natural credentials of stevia. These activities coupled with external evidence, such as Mintel data, shows continued strong growth in F&B product launches using stevia which provides confidence in there being sustainable stevia market growth over the long term.

·        Competition: over time more competitors may enter the stevia market with the potential to reduce the Group's share of that market

As pioneers in the development of the stevia market, the Group is believed currently to have a majority share of the Global stevia market. There is a risk that as stevia becomes established as a large volume mainstream F&B ingredient, that more competitors may enter the stevia market with the potential to reduce the Group's share of that market.

This risk is mitigated by the significant potential growth in the total size of the stevia market. The global sweetener and flavour markets have an annual ingredient sales value in excess of $90 billion. By contrast the CY2015 global stevia market size is estimated at just $0.2 billion. This means there remains considerable growth potential for the stevia market and with it scope for the Group to grow revenues significantly even with reduced market share. Further there is limited scope for any new technologies to be labelled as naturally sourced, which is likely to significantly limit their acceptance by consumers.

·        Leaf costs: the Group's financial performance can be impacted by material changes in the input costs of its primary raw material, the stevia leaf

Dried leaf from the stevia plant is the Group's primary raw material and it constitutes the majority of the Group's variable costs of production. It follows that the Group's financial performance can be impacted by material changes in the input costs of the stevia leaf.

Over the long term stevia is a highly efficient source of natural sweetness with excellent sustainability and agro-economic properties which will underpin a well-balanced sustainable global supply that will substantially mitigate this risk.

 

In the medium term, the Group is managing this risk by developing large scale diversified supply. To achieve this PureCircle continues to lead the diversification of leaf supply into new geographic regions centred on our leaf development hubs in Africa, South America and India. Further the Group is making progress working with larger commercial agricultural partners who have the potential to scale supply more quickly than traditional smallholders.    

 

·        Failure to resolve impoundment of goods by US CBP

Whilst we fully expect a positive resolution to the CBP situation, the longer the impoundment of our shipments and our name remains on the WRO, the more impact it has on our route to market in the US.

We are actively working with our US customers to ensure ongoing supply until this matter is resolved. Outside of the US, our business continues as usual and our expansion plans in the rest of the world is being accelerated, somewhat mitigating the US impact.

We continue to actively work with the CBP to address the matter and have our name removed from the WRO.

 

·        Working capital funding to support large growth plans

The Group currently controls its supply chain 100% from leaf supply through extraction, purification to end customer sales relationships. This 100% control critically provides the Group with its innovation leadership. At the same time it requires the Group to fund the working capital from leaf purchases through to end sales receivables and including appropriate inventory holdings. Given the Group's growth plans, working capital funding requirements may increase. There is always a risk that capital market conditions may make funding of such working capital hard to source.

The Group manages its working capital growth risk actively through a suite of ongoing policies. These include operational policies to ensure balance between supply purchases, inventory holdings and forecast sales cashflows; that maintains appropriate gross cash and facility headroom availability at all times; and that works actively to build and maintain bank and equity relationships.       

·        Concentrated production capacity

As pioneers in the development of the stevia industry it is inevitable that for a certain period in its development the Group's production capacity will be concentrated into specific facilities. This situation will continue until such time as demand volumes warrant the construction of more diversified production capacity. During this period the Group is at risk of catastrophic event impacting either of its production facilities.

The Group manages this risk actively through a variety of policies and practices. The Group has a policy of holding high levels of finished goods specifically and inventory generally relative to sales levels; and management work closely with larger customers to ensure that their inventory holdings are appropriate; the production facilities are designed on a modular basis so as to reduce the likelihood of any one event impacting more than a proportion of the total facility.   

·        Management: As pioneers in the development of the stevia industry, the Group is reliant upon the performance of highly skilled personnel including its senior management team

Stevia is a relatively new industry, in consequence the talent pool of management with the skills and experience of working in the stevia market is smaller than that in other more established industries.

The Group manages this risk by ongoing investment in senior management retention programmes for all key managers, including the Group's Long Term Incentive Programme (LTIP).

·        Managing growth: the Group has significant growth plans, which will require more complex execution skills and processes

The Group has grown significantly (by over 205%) across the last five years and has plans to continue to do so. With such levels of growth comes the challenges of managing a more complex business including a diverse customer base and an expanded product portfolio.

The Group manages these risks by investing heavily in appropriately skilled senior management and in global management information systems including the roll out of Oracle's JD Edwards global Enterprise Resource Planning (ERP) management information system. 

·        Managing health and safety

The Group operates in the food ingredient industry and operates a food grade supply chain, including large production facilities. As a result health and safety considerations are a significant operating factor for the Group's business.

The Group manages its health and safety requirements actively through a combination of strategy, design, policy and process management. The Group's strategy is to be in full compliance with all health and safety requirements at all times across the Group; our supply chain, including production configuration, is designed to support this strategy and operating policies and processes are structured to re-inforce compliance on an ongoing basis.

 

Directors' responsibility statement


The responsibility statement below has been prepared in connection with the company's full Annual Report for the year ended 30 June 2016. Certain parts thereof are not included within this announcement. We confirm to the best of our knowledge:

 

·              the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group respectively; and

 

·              the Directors' Report and the Strategic Report include a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that they face. This responsibility statement was approved by the Board of Directors on 20 September 2016 and is signed on its behalf by:

 

 

Magomet Malsagov, CEO

 

Rakesh Sinha, CFO

 

APPENDIX


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016












 


Group


Note



2016

 

2015





 USD'000


 USD'000

ASSETS














NON-CURRENT ASSETS














Investment in joint venture

7



                 -


                 -

Intangible assets

8



        48,547


        37,790

Property, plant and equipment

9



        65,662


        59,724

Biological assets

10



                 -


          3,570

Prepaid land lease payments

11



          2,537


          2,914

Deferred tax assets

12



          7,388


          8,900

Trade receivables

14



             523


          1,856

Other receivables, deposits







  and prepayments

15



             885


          2,121





       125,542


       116,875

CURRENT ASSETS




























Inventories

13



        84,604


 62,790

Trade receivables

14



        62,743


        62,530

Other receivables, deposits







  and prepayments

15



        11,654


          7,490

Tax recoverable




             259


             347

Restricted cash

17



             255


          5,095

Cash and cash equivalents

17



        60,747


        59,181





       220,262


       197,433

TOTAL ASSETS




       345,804


       314,308








EQUITY AND LIABILITIES














EQUITY














Share capital

18



        17,211


        17,006

Share premium

19



       214,723


       208,310

Foreign exchange







  translation reserve

20



       (17,501)


       (10,990)

Share-based payment reserve

21



          9,776


        11,185

Accumulated losses




       (20,419)


       (35,019)

TOTAL EQUITY




       203,790


       190,492








 

 





                                 Group


Note



2016

 

2016





 USD'000


 USD'000








NON-CURRENT LIABILITIES












Long-term borrowings

22



84,885


83,965

Other payables and accruals

24



1,245


490





86,130


84,455








CURRENT LIABILITIES












Short-term borrowings

22



29,044


25,681

Trade payables

23



5,543


3,134

Other payables and accruals

24



19,977


10,546

Income tax liabilities



1,320


                 -












55,884


39,361

TOTAL LIABILITIES



142,014


123,816

TOTAL EQUITY AND LIABILITIES

345,804


314,308









The annexed notes form an integral part of these financial statements.








 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016





                                 Group


Note



2016

2016





 USD'000

 USD'000







Revenue




138,641

  127,349

Cost of sales



(80,797)

(87,016)

Gross profit



57,844 

    40,333

Administrative expenses


(32,695)

(30,643)

Other income



1,594

        703

Other expenses



(2,456)

    (1,255)

Finance income



92

          57

Finance costs



(5,315)

    (7,275)

Share of loss in joint ventures


(1,169)

       (872)

Profit before taxation

26



17,895

     1,048

Taxation

25



(3,295)

     3,043

Profit for the financial year


14,600

     4,091

Other comprehensive income




  (net of tax):











Items that may be reclassified




  subsequently to profit or loss:










Exchange differences arising on




  translation of foreign operations

    (6,510)

(11,717)

Share of other comprehensive




  income of joint ventures


           (1)

       (101)

Total comprehensive income/(loss)



  for the financial year (net of tax)

     8,089

    (7,727)

Profit for the financial year




Attributable to:





  Owners of the company


    14,600

     4,158

  Non-controlling interest


            -

         (67)





    14,600

     4,091




Total comprehensive income/(loss)



  Attributable to:





  Owners of the company


     8,089

    (7,662)

  Non-controlling interest


            -

         (65)





     8,089

    (7,727)





Earnings per share (US cents)




- Basic

27



8.49

2.48

- Diluted

27



8.37

2.42


The annexed notes form an integral part of these financial statements.







 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY





FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016















Attributable to owners of the Company






Foreign









exchange

Share-based



Non-



Share

Share

translation

payment

(Accumulated


controlling

Total


capital

premium

     reserve

         reserve

          losses)

Sub-total

  interests

equity


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

The Group


















Balance at 01.07.2015

17,006

208,310

 (10,990)

11,185

  (35,019)

    190,492

               -

  190,492









Profit for the financial year

             -

              -

              -

               -

      14,600

      14,600

               -

    14,600










Other comprehensive income









Exchange difference arising on









  translation of foreign operations

              -

              -

      (6,511)

              -

               -

     (6,511)

               -

    (6,511)










Total comprehensive income









  for the financial year

              -

              -

      (6,511)

               -

      14,600

        8,089

               -

      8,089










Transactions with owners:









  Share awards scheme compensation









    expense for the financial year

              -

              -

               -

5,209

               -

        5,209

               -

      5,209

  Exercise of share awards

         205

      6,413

               -

(6,618)

               -

               -

               -

              -


         205

      6,413

              -

(1,409)

               -

        5,209

               -

      5,209

Balance at 30.06.2016

    17,211

  214,723

  (17,501)

 9,776

     (20,419)

    203,790

               -

  203,790










The annexed notes form an integral part of these financial statements.






 

 


Attributable to owners of the Company






Foreign









exchange

Share-based



Non-



Share

Share

translation

payment

(Accumulated


controlling

Total


capital

premium

     reserve

   reserve

           losses)

Sub-total

   interests

equity


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000










The Group


















Balance at 01.07.2014

    16,472

  163,240

   920

     5,076

   (38,203)

  147,505

        722

  148,227









Profit for the financial year

            -

            -

            -

            -

     4,158

     4,158

         (67)

     4,091










Other comprehensive income









Exchange difference arising on









  translation of foreign operations

            -

            -

   (11,820)

            -

            -

   (11,820)

            2

   (11,818)










Total comprehensive income









  for the financial year

            -

            -

   (11,820)

            -

     4,158

    (7,662)

         (65)

    (7,727)










Transactions with owners:









  Share awards scheme compensation









    expense for the financial year

            -

            -

            -

     6,412

            -

     6,412

            -

     6,412

  Placement of shares

        500

    42,963

            -

            -

            -

    43,463

            -

    43,463

  Exercise of share awards

          10

        410

            -

(303)

            -

        117

            -

        117

  Acquisition of non-controlling









  interest

          24

     1,697

         (90)

            -

       (974)

        657

       (657)

            -


        534

    45,070

         (90)

     6,109

       (974)

    50,649

       (657)

    49,992

Balance at 30.06.2015

    17,006

  208,310

   (10,990)

11,185

   (35,019)

  190,492

            -

  190,492










The annexed notes form an integral part of these financial statements.





 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016





                                 Group


Note



2016

2015





USD'000

USD'000

CASH FLOWS FROM






  OPERATING ACTIVITIES












Profit before taxation




    17,895

     1,048







Adjustments for:






  Amortisation of prepaid land






    lease payments




        135

        143

  Amortisation of deferred income



         (96)

         (76)

  Amortisation of intangible assets



          77

        180

  Depreciation of property,






    plant and equipment




     5,557

     5,738

  Interest expense




     5,315

     7,275

  Interest income




         (92)

         (57)

  Loss/(gain) on disposal of property,





    plant and equipment




          75

         (11)

  Loss on disposal of joint venture



            -

        120

  Share-based payment expense



     5,209

     6,412

  Intangible assets written off




            -

          45

  Inventories (written back)/written off



         (68)

          14

  Unrealised foreign exchange (gain)/loss


    (3,261)

     2,081

  Share of loss in joint ventures



     1,169

        872

  Bad debts written-off




         (45)

            -

Operating cash flow before working





  capital changes




    31,870

    23,784







(Increase)/Decrease in inventories



   (22,424)

    23,768

Increase in trade and other receivables



    (2,528)

   (30,361)

Increase/(Decrease) in trade and





  other payables




    12,092

    (3,423)







NET CASH FROM OPERATIONS



    19,010

    13,768







Interest received




          92

          57

Interest paid




    (5,315)

    (7,275)

Tax paid




       (688)

       (132)

NET CASH GENERATED FROM





  OPERATING ACTIVITIES




    13,099

     6,418

 

CASH FLOWS FROM INVESTING ACTIVITIES









Increase in investment in joint






  venture

7



(274)

(342)

Addition of intangible assets

8



    (8,865)

(3,865)

Purchase of property, plant






  and equipment

9



   (15,404)

(6,651)

Prepayment of land lease payment

11



            -

(50)

Proceeds from disposal






  of property, plant and equipment



        113

14

NET CASH USED IN INVESTING ACTIVITIES


   (24,430)

 (10,894)







CASH FLOWS FROM FINANCING ACTIVITIES










Drawdown of borrowings




111,456

  151,800

Repayment of borrowings




(101,443)

 (171,369)

Repayment of hire purchase




         (27)

         (35)

Proceeds from placement of shares



            -

    43,463

Proceeds from share awards exercised



            -

        117

Decrease in restricted cash




     4,840

     2,756

NET CASH GENERATED FROM





  FINANCING ACTIVITIES




    14,826

    26,732

NET INCREASE IN CASH AND





  CASH EQUIVALENTS




     3,495

    22,256







Effects of foreign exchange rate changes





  on cash and cash equivalents



    (1,929)

    (1,089)







CASH AND CASH EQUIVALENTS




  AT BEGINNING OF THE






  FINANCIAL YEAR




    59,181

    38,014

CASH AND CASH EQUIVALENTS




  AT END OF THE FINANCIAL YEAR

17



    60,747

    59,181







Non-cash item:






In 2015, the Company issued 240,000 units of equity shares of the Company amounting to USD 1,721,000 to acquire non-controlling interest in a subsidiary.







The annexed notes form an integral part of these financial statements.







 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

 

 

1              GENERAL INFORMATION

 

The Company was incorporated and registered as a private limited company in Bermuda, under the Companies (Bermuda) Law 1981. The registered office and principal place of business are as follows:-

 

Registered office                             :       Clarendon House, 2 Church Street,

                                                                        Hamilton HM 11, Bermuda.

 

Principal place of business          :       Level 12, West Wing, Rohas PureCircle

                                                                        No. 9, Jalan P. Ramalee

                                                                        50250 Kuala Lumpur, Malaysia                              

 

 

The Company's shares are publicly traded on the Main Market of the London Stock Exchange.

 

In the financial statement, "Company" refers to PureCircle Ltd. and "Group" refers to PureCircle Ltd and its subsidiaries.

 

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors dated 20 September 2016.

 

 

2              PRINCIPAL ACTIVITIES

 

The Company is engaged principally in the business of investment holding whilst the principal activities of the rest of the Group are the production, marketing and distribution of natural ingredient including sweeteners and flavours.

 

There have been no significant changes in the nature of these activities during the financial year. The principal activities of the subsidiaries and joint venture are set out in Notes 7 and 8 to the financial statements.

 

 

3              BASIS OF PREPARATION

 

The consolidated financial statements included in this preliminary announcement have been extracted from the Annual Report, including the audited financial statements for the year ended 30 June 2016. The report of the auditor on those Group Financial Statements was unqualified and did not contain an emphasis of matter paragraph. The Annual Report and Group Financial Statements for 2016 will be filed with the Registrar in due course. These consolidated financial statements do not constitute statutory accounts within the meaning of the Companies (Bermuda) Law 1981.


The Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations. The accounting policies applied are consistent with those described in the Annual Report and Group Financial Statements 2015.  


The Group has, at the date of this announcement, sufficient existing financing available for its estimated requirements for at least the next 12 months. After reviewing the Group's annual budget, plans and financing arrangements for the next five years, the Directors consider that the Group has adequate resources to continue operating and that it is therefore appropriate to continue to adopt the going concern basis in preparing the consolidated financial information.

 

(a)          The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Group and Company's financial year beginning on or after 1 July 2015 are as follows:

 

· Amendments to IAS 36 'Recoverable Amount Disclosures for Non-Financial Assets'

· Amendments to IAS 39 'Novation of Derivatives and Continuation of Hedge Accounting'

· Amendments to IFRS 10, IFRS 12 and IAS 27 'Investment Entities'

· Amendment to IAS 19 'Employee Benefits'

· IC Interpretation 21 'Levies'

· Annual Improvement 2010 - 2012

· Annual Improvement 2011 - 2013

 

The adoption of these standards did not have any material effect on the financial performance or position of the Group and the Company.

 

(b)          Standards, amendments and interpretations that have been issued and are applicable to the Group but are not yet effective

 

The Group will apply the new standards, amendments to standards and interpretations in the following period:

 

(i)           Financial year beginning on 1 July 2016

 

·           Amendments to IFRS 11 "Joint Arrangements" require an investor to apply the principles of IFRS 3 "Business Combination" when it acquires an interest in a joint operation that constitutes a business. The amendments are applicable to both the acquisition of the initial interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a previously held interest is not re-measured when the acquisition of an additional interest in the same joint operation results in retaining joint control. It is not expected to have significant financial impact on the financial statements of the Group.

 

·           Amendments to IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets" clarify that the use of revenue-based methods to calculate the depreciation and amortisation of an item of property, plant and equipment and intangible are not appropriate. This is because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.

 

The amendments to IAS 38 also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption can be overcome only in the limited circumstances where the intangible asset is expressed as a measure of revenue or where it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. It is not expected to have significant financial impact on the financial statements of the Group.

 

·           Amendments to IFRS 10 and IFRS 28 IAS 28 regarding sale or contribution of assets between an investor and its associate or joint venture resolve a current inconsistency between IFRS 10 and IFRS 28 IAS 28. The accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitute a "business". Full gain or loss shall be recognised by the investor where the non-monetary assets constitute "business". If the assets do not meet the definition of a business, the gain or loss is recognised by the investor to the extent of the other investors' interests. The amendments will only apply when an investor sells or contributes assets to its associate or joint venture. They are not intended to address accounting for the sale or contribution of assets by an investor in a joint operation. It is not expected to have significant financial impact on the financial statements of the Group.

 

(ii)          Financial year beginning on 1 July 2018

 

·           IFRS 15 'Revenue from Contracts with Customers' - An entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer has the ability to direct the use of and obtain the benefits from the goods or services.

 

Transfer of control is not the same as transfer of risks and rewards as currently considered for revenue recognition. A company would recognise revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer).

 

The Group is currently assessing its impact to its financial statement.

 

·           IFRS 9 'Financial Instruments' will replace IAS 39 "Financial Instruments: Recognition and Measurement". IFRS 9 retains but simplifies the mixed measurement model in IAS 39 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ("OCI"). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest.

 

For liabilities, the standard retains most of the IFRS 139 and IAS 39requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

 

The Group is currently assessing its impact to its financial statements.

 

(iii)         Financial year beginning on 1 July 2019

 

·           IFRS 16 'Leases' supersedes IAS17 'Leases' and the related interpretations.

 

Under IFRS 16, a lease is a contract (or part of a contract) that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

IFRS 16 eliminates the classification of leases by the lessee as either finance leases (on balance sheet) or operating leases (off balance sheet). IFRS 16 requires a lessee to recognise a "right-of-use" of the underlying asset and a lease liability reflecting future lease payments for most leases.

 

The right-of-use asset is depreciated in accordance with the principle in IAS 16 'Property, Plant and Equipment' and the lease liability is accreted over time with interest expense recognised in the income statement.

 

For lessors, IFRS 16 retains most of the requirements in IAS 17. Lessors continue to classify all leases as either operating leases or finance leases and account for them differently.

 

The Group is currently assessing its impact to its financial statements.

 

 

4              FINANCIAL RISK MANAGEMENT

 

The Group's activities are exposed to a variety of financial risks including foreign currency risk, interest rate risk, credit risk, liquidity and cash flow risk, and capital risk management. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

 

(a)          Financial risk management policies

 

(i)           Foreign currency risk

 

The Group operates internationally and is exposed to foreign exchange risk when the Company and its subsidiaries enter into transactions that are not denominated in their functional currencies. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations.

 

The Group manages its foreign exchange exposure by taking advantage of any natural offsets of the Group's foreign exchange revenue and expenses and from time to time enters into foreign exchange forward contracts for a portion of the remaining exposure relating to these forecast transactions when deemed appropriate.

 

The following table demonstrates the sensitivity to a reasonably possible change in the United States Dollar, Renminbi, Euro and Sterling Pound exchange rates, with all other variables held constant of the Group's results:

 




Effect on


Changes in


profit/loss


exchange rate


after taxation




USD'000

2016








Ringgit Malaysia against United States Dollar

10%


1,805

Chinese Renminbi against United States Dollar

10%


10

Sterling Pound against United States Dollar

10%


1,512

Euro against United States Dollar

10%


211

Mexican Peso against United States Dollar

10%


1,018

Sterling Pound against Euro

10%


579









2015








Ringgit Malaysia against United States Dollar

10%


1,106

Chinese Renminbi against United States Dollar

10%


484

Sterling Pound against United States Dollar

10%


970

Euro against United States Dollar

10%


94

Mexican Peso against United States Dollar

10%


764

Sterling Pound against Euro

10%


4





The above represents favourable effects on the results of the Group should the respective currencies strengthen against the functional currencies of the entities within the Group, whilst weakening of the above currencies would have an equal but opposite effect to the amount shown above, on the basis that all other variables remain constant.

 

 

The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the Group at the reporting date was as follows:

 


                                                                        30 June 2016

                                                                           30 June 2015


United States

Dollars

Ringgit

Malaysia

Chinese

Renminbi

Euro

Pound

Sterling

United States

Dollars

Ringgit

Malaysia

Chinese

Renminbi

Euro

Pound

Sterling


USD

MYR

RMB

EUR

GBP

USD

MYR

RMB

EUR

GBP


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

The Group

 











Cash and cash equivalents

12,060

58

10

818

107

3,731

167

4,832

228

319

Trade receivables

26,001

-

-

6,222

-

24,174

-

-

879

-

Trade payables

37

-

-

-

-

150





Other receivables, deposits

  And prepayments

2,138

1,029

-

371

27

365

104

-

10

37

Other payables and accruals

109

2,231

186

1,499

240

75

146

-

1,015

9

Borrowings

9,744

-

-

-

-

7,311

-

-

-

-


══════

══════

══════

══════

══════

══════

══════

══════

══════

══════

 

 

(ii)          Interest rate risk

 

Interest rate risk is the risk that the future cash flows of the Group's financial instruments will fluctuate because of changes in market interest rates.

 

The Group's exposure to interest rate risk arises mainly from interest-bearing borrowings at floating rates. The Group's interest rate profile is set out below:

 


2016

2015

2016

2015


Effective interest rate (%)

USD'000

USD'000






Term loans

4.3

4.6

113,929

109,497

 

Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable rates. The Group actively reviews its debt portfolio to mitigate the impact of interest risk. The Group does not utilise interest swap contracts or other derivative instruments for trading or speculation purposes.

 

As at balance sheet date, if interest rates on borrowings are 1% higher/lower for a year with all other variables held constant post-tax profit for the year would be
USD1,140,000 lower/higher (2015: post-tax loss for the year would be USD1,095,000 higher/lower), mainly as a result of higher/lower interest expense on floating rate borrowing.

 

(iii)         Credit risk

 

The Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, the payment profile of the customers and credit exposure are monitored on an ongoing basis with the result that the Group's exposure to bad debt is not significant. The Group also establishes an allowance account for impairment that represents its estimate of losses in respect of trade and other receivables. The Group's maximum exposure is the carrying amount as disclosed in Notes 15, 16 and 17 to the financial statements.

 

At 30 June 2016, 2 customers (2015: 2) comprised more than 30% of total receivables and 7 customers (2015: 16) comprise 75% of total receivables. See Note 15 for ageing of trade receivables that are past due but not impaired.

 

The Group's cash and cash equivalents and short-term deposits are placed with creditworthy financial institutions and the risks arising thereof are minimised in view of the financial strength of these financial institutions.

 

The Group and Company consider that the credit risk relating to amounts due from joint ventures and subsidiaries respectively to be low. Both the joint ventures and subsidiaries are expected to repay fully the amounts owed to the Group and Company respectively as these related entities are expected to continue on a going concern basis.  At year end, the Group believes there is no credit risk provision required for these receivables.

 

                (iv)         Liquidity and cash flow risks

 

Liquidity and cash flow risks arise mainly from general funding and business activities. The Group's cash flow is reviewed regularly to ensure commitments are settled when they fall due.

 

Cash flow forecasting is performed both in the operating entities and on a Group consolidated basis. The Group monitors rolling forecasts of its liquidity requirements including projected sales revenues, inventory and capital expenditure requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or financial covenants on any of its borrowing facilities. The Group invest surplus cash into financial interest bearing accounts and money market deposits. 

 

The following tables detail the remaining contractual maturities at the reporting date of the Group's non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the reporting date) and the earliest date the Group can be required to pay:

 





More

More




Total


than 1

than 2




contractual

Within

year but

years but



Carrying

undiscounted

1 year or

less than

less than

More than


  amount

      cash flow

on demand

    2 years

    5 years

     5 years


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

The Group














2016







At 30 June 2016







Financial liabilities:







  Trade and other







    payables

26,542

26,542

26,542

  -

  -

  -

  Borrowings

113,929

        124,405

33,327

32,540

58,538

  -








2015







At 30 June 2015







Financial liabilities:







  Trade and other







    payables

13,851

          13,851

13,851

  -

  -

  -

  Borrowings

109,646

        122,940

30,509

24,642

67,789

  -








 

Coupled with projected operating cash-flows, the new facility is expected to provide the Group with sufficient liquidity to fund repayment of existing loans as they fall due and support expected sales growth.

 

(b)          Capital risk management

 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.

 

The capital structure of the Group consists of debts, which include the borrowings disclosed in Note 24, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, share premium, reserves and retained earnings.

 

The Group's policy is to maintain a strong capital base by having low to moderate gearing. The Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total equity.

 

The gearing ratio at the financial year end was as follows:

 


                                 Group


2016


2015


USD'000


USD'000





Debts (i)

113,929


109,646

Less: Gross cash (ii)

(61,002)


(64,276)

Net debt (iii)

       52,927


45,370





Equity (iv)

     203,790


     190,492





Net debt to equity ratio

26%


24%

 

(i)           Debts relate to borrowings disclosed in Note 24 to the financial statements.

 

(ii)          Gross cash includes restricted cash and cash and cash equivalents.

 

(iii)         Net debt is calculated as total borrowings (including "current and non-current borrowings") as shown in the consolidated statement of financial position less gross cash.

 

(iv)         Equity includes all capital and reserves of the Group attributable to the equity holders of the Company.

 

(c)           Fair value estimation

 

Fair value is defined as the amount at which the assets/liabilities could be exchanged in a current transaction between knowledgeable willing parties in an arm's length transaction, other than in a forced sale or liquidation.

 

The fair value measurement hierarchy for assets/liabilities stated in the balance sheet is as follows:

 

·           Level 1: Quoted price (unadjusted) in active markets for identical assets or liabilities.

·           Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

·           Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

 

There are no significant fair value estimates at level 2 or 3 made for the financial instruments measured at fair value for the Group as at the reporting date.

 

5              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

(a)          Financial assets - loan and receivable

 

Trade and other receivables are recognised initially at fair value and subsequently measured  at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

 

(b)          Financial liabilities

 

(i)           Payables

 

                Liabilities for trade and other payables and accruals, including amounts owing to related parties, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

(ii)          Interest-bearing loans and borrowings

 

                All loans and borrowings are recognised initially at fair value of the consideration received, net of directly attributable transaction cost incurred, and are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction cost) and the redemption value is recognised in the profit or loss over the period of the loans and borrowings using the effective interest method.

 

(c)           Foreign currency translation

 

(i)           Functional and presentation currency

 

The functional currency of each of the Group's entities is measured using the currency of the primary economic environment in which the entities operates.

 

The functional and presentation currency of the Company is United States Dollar ("USD"). The consolidated financial statements are presented in United States Dollar ("USD") which is the Company's presentation currency.

 

(ii)          Transactions and balances

 

Transactions of the Company in foreign currency are converted into USD at the approximate rates of exchange ruling at the transaction dates.

 

Transactions in foreign currency are measured in the respective functional currencies of the Group's entities and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates.

 

Monetary assets and liabilities at the reporting date are translated at the rates ruling as of that date. Exchange differences arising from the translation of monetary assets and liabilities are recognised in the profit or loss.

 

Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined.

 

(iii)         Foreign operations

 

The results and financial position of the subsidiaries are translated into the presentation currency as follows:-

 

(a)          assets and liabilities, including goodwill and fair value adjustments arising on the acquisition of foreign operations, for each statement of financial position presented are translated at the closing rate at the reporting date; and

 

(b)          income and expenses for each profit or loss are translated at the average exchange rates for the year; and

 

(c)           all resulting exchange differences are recognised as a separate component of equity; and

 

(d)          on disposal, accumulated translation differences are recognised in the profit or loss as part of the gain or loss on sale of the foreign operation.

 

(d)          Basis of consolidation

 

The consolidated financial statements include the financial statements of the Company and its subsidiaries.

 

(i)           Subsidiaries

 

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are 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 either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

 

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 Group's share of the identifiable net assets acquired is recorded as goodwill. If, after reassessment, the Group's interest in the fair values of the identifiable net assets of the subsidiaries exceeds the cost of the business combinations, the excess is recognised immediately in the profit or loss.

 

Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

(ii)          Transactions with non-controlling interests

 

                The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

 

(iii)         Disposal of subsidiaries

 

When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss.  The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

 

(iv)         Joint ventures

 

The Group's interest in a joint venture is accounted for in the financial statements using the equity method of accounting. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group's share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint ventures), the Group recognise the further losses to the extent of its incurred obligations.

 

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

(e)          Goodwill on consolidation

 

Goodwill that arises upon acquisition of subsidiaries is included in intangible assets. The carrying value of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. Impairment losses on goodwill are recognised immediately in the profit or loss. An impairment loss recognised for goodwill is not reversed in a subsequent year. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

 

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

 

Acquisition of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transaction.

 

(f)           Investments in subsidiaries and joint ventures

 

Investments in subsidiaries and joint ventures are stated at cost in the statement of financial position of the Company, and are reviewed for impairment at the end of the financial year if events or changes in circumstances indicate that their carrying values may not be recoverable.

 

On the disposal of the investments in subsidiaries and joint ventures, the difference between the net disposal proceeds and the carrying amount of the investments is taken to the profit or loss.

 

(g)          Intangible assets (other than goodwill)

 

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets with finite useful lives are carried at cost less any accumulated amortisation and any accumulated impairment losses.

 

(i)           Intellectual property

 

The intellectual property consists of the internal investment and external acquisition costs of the patents, trademarks, technological processes and all intellectual and industrial property rights ("intellectual property rights") in connection therewith on the production of natural sweeteners, pharmaceutical products and chemical derivatives of bio-organic and physiologically active compounds. The acquisition cost is capitalised as an intangible asset as it is able to generate future economic benefits to the Group.

 

The useful life of these intellectual property rights, other than patented development costs is considered to be indefinite based on the Directors' annual reassessment of the useful life; there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. Intellectual property rights are stated at cost less impairment losses. They are not amortised but tested for impairment annually or more frequently when indicators of impairment are identified. The intellectual property rights are assessed to have an indefinite useful life because the Group's natural sweeteners and flavours are expected to become mass volume ingredients in all foods and beverage categories. Similar to the sugar market, there is no expected end to the useful life of the natural sweeteners and flavours such as stevia. Accordingly, the Directors believe the useful life for intellectual property rights is indefinite. The Directors will continue to reassess the basis of that useful life of the intellectual property rights on an annual basis.

 

Patented development costs are subject to estimated useful life of no more than 20 years and amortised starting from the financial year when the product are first viable for commercial use.

 

(ii)          Development costs

 

                All research costs are recognised in the profit or loss as incurred.

 

                Development costs consist of expenditure incurred on product development and leaf development projects.

 

                Expenditure incurred on these projects are capitalised as intangible assets only when the Group can demonstrate the technical feasibility of completing the intangible assets so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resource to complete the project and the ability to measure reliably the expenditure during the developments. Expenditures which do not meet these criteria are recognised in the profit or loss when incurred.

 

Product development costs are amortised on a straight line basis over their estimated useful life of no more than 20 years starting from the financial year when the product are first viable for commercial use.

 

                Leaf development costs are only amortised when Stevia plant demonstrates capability of producing high yielding strains of Stevia leaf at reasonable consistency on a volume production basis. As at 30 June 2016, these development projects remain on-going as the development targets have not been fully met and no amortisation has been charged.

 

(h)          Property, plant and equipment

 

Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and impairment losses, if any. Freehold land is stated at cost less impairment losses, if any, and is not depreciated. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.

 

Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-

 

Buildings

2% - 5%

Extraction and refinery plant

2% - 20%

Office equipment, furniture and fittings and motor vehicles

20%

 

The depreciation method, useful life and residual values are reviewed, and adjusted if appropriate, at each reporting date.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

 

Capital work-in-progress represents assets under construction, and which are not ready for commercial use at the reporting date. Capital work-in-progress is stated at cost, and will be transferred to the relevant category of long-term assets and depreciated accordingly when the assets are completed and ready for commercial use.

 

(i)           Impairment of non-financial assets

 

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation but are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

 

(j)           Biological assets

 

Biological assets comprise stevia plants in the Group's controlled nurseries (nursery plants) that are used to mass produce seedlings for third party farmers.

 

Seedlings produced from the nursery plants are deducted from the biological asset at fair value less cost to sell. Seedlings harvested from nursery plants are carried at their deemed cost under IAS 2 as inventories, which are then stated at lower of this deemed cost and net realisable value subject to any impairment loss.

 

During the year, biological assets have been transferred to product development within intangible assets reflecting the changed nature of the Group's nursery operations. The Group's leaf nurseries are now focused on improving leaf strains and similar leaf development intellectual property activity as opposed to their historic role in the production and supply of seedlings.

 

(k)          Inventories

 

                Inventories are stated at the lower of cost and net realisable value.

 

                Cost incurred in bringing the inventories to their present location and condition are accounted for as follows:

 

                Raw materials comprise of auxiliary materials: purchase cost on weighted average basis

                Finished goods and work-in-progress: cost of materials, labour and production overheads

 

                Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.

 

                Where necessary, due allowance is made for all damaged, obsolete and slow-moving items.

 

(l)           Income taxes

 

Income taxes for the year comprise current and deferred tax.

 

Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the applicable tax rates that have been enacted or substantively enacted at the reporting date in each of the jurisdictions in which the Group operates.

 

Deferred tax is provided in full, using the liability method, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

 

Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

 

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to be applicable in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the reporting date.

 

Deferred tax is recognised in the profit or loss, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the business combination costs. The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.

 

(m)         Equity instruments

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.

 

Dividends on ordinary shares are recognised as liabilities when approved for appropriation.

 

(n)          Restricted cash

 

Restricted cash comprise cash balances held in an account solely for the purpose of utilising trade finance facility and credit card facility provided by a licensed financial institution.

 

(o)          Cash and cash equivalents

 

Cash and cash equivalents comprise cash in hand, deposits held at call with banks, short-term deposits with licensed banks with maturities of three month or less, and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents exclude restricted cash.

 

(p)          Employee benefits

 

                (i)           Short-term benefits

 

                Wages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group.

 

                (ii)          Defined contribution plans

 

The Group's contributions to defined contribution plans are charged to the profit or loss in the period to which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans. The Group has no defined benefit plan.

 

(q)          Share-based payment

 

The Group operates a long term incentive programme which is an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (share awards) of the Company. The fair value of the employee services received in exchange for the grant of the share awards is recognised as an expense over the vesting period. The total amount to be expensed is determined by reference to the fair value of the shares granted excluding the impact of any non-market vesting conditions and the number of shares expected to vest. Non-market vesting conditions are included in assumptions about the number of share awards that are expected to become exercisable.

 

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

 

The grant by the Company of share awards over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution in the subsidiary. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

 

(r)           Provisions

 

A provision is recognised if, as a result of past event, the Group has a present legal and constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

 

(s)           Leases

 

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.

 

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place.

 

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownerships are classified as finance leases.  Finance leases are capitalised at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges.

 

The corresponding rental obligations, net of finance charges, are included as borrowings. The interest element of the finance charge is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

Plant and equipment acquired under a finance lease is depreciated over the shorter of the estimated useful life of the asset and the lease term.

 

The prepaid land lease payments represent the Group's right to use the land for 20 years. Accordingly, the amortisation of the prepaid land lease payments is on a straight line basis over 20 years.

 

(t)           Segmental information

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (i.e. the Chief Executive Officer ("CEO")). The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

 

(u)          Revenue recognition

 

                (i)           Sale of goods

 

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of sales taxes, returns and trade discounts. The group recognises revenue when the amount of revenue can be reliably measured and when it is probable that future economic benefits will flow to the entity.

 

In practice, this means that sales of stevia products are recognised once the contractual terms, typically Free On Board or Ex-Works, have been met and the stevia product has been delivered to a specified location (usually the carrier of the port of departure) or leaves the refinery.

 

(ii)          Interest income

 

                Interest income is recognised on an accrual basis, based on the effective yield on the investment.

 

(v)          Government grants

 

Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for the cost of an asset are recognised in profit or loss on a systematic basis over the useful life of the asset.

 

6              CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

Estimates and judgements are continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group's accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below.

 

(i)           Goodwill and other assets carrying values

 

                (a)          Key assumptions for value-in-use calculations

 

                The recoverable amount of a cash generating unit ("CGU") is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a 5-year period including a terminal value as required by IAS 36 'Impairment of Assets'. The key assumptions used in the CGU's value-in-use computation are:

 

(i)           Growth rate

 

                                The average sales growth rate used is based on planned capacity and forecasted demands. The short to medium term growth rates used are not more than 25% per annum (2015: 25% to 30%). The long term growth rate used is 2% (2015: 2.0%) per annum, based on sweetener industry's long term growth rate ranging from 2% to 4% (2015: 2% to 4%) per annum.

 

                (ii)          Gross margin

 

Changes in selling price and direct costs are based on past results and expectations of future changes in the market.

 

(iii)         Discount rate

 

The discount rate used is 10% per annum.

 

(b)          Sensitivity to changes in assumptions

 

The Directors believes that a reasonable change in any of the above key assumptions would not cause the carrying value of the intangible assets to be impaired.

 

(ii)          Indefinite useful life of intellectual property rights

 

The intellectual property rights are assessed to have indefinite useful lives because over the long term, the Group's natural sweeteners and flavours are expected to become mass volume ingredients in all foods and beverage categories. Similar to the sugar market, there is no expected end to the useful life of the natural sweeteners and flavours such as stevia. Accordingly, the Directors believe the useful life for intellectual property rights is indefinite. The Directors will continue to reassess the basis of that useful life of the intellectual property rights on an annual basis.

 

(iii)         Useful life of product development costs

 

The product development cost is amortised on a straight line basis over their estimated useful life of no more than 20 years which consistent with useful life of intellectual property.

 

 

7              INVESTMENT IN JOINT VENTURES

 

Details of joint ventures are as follows:-

 


Country of

Effective Equity Interest


Name of Company

Incorporation

2016

2015

Principal Activities






 

NP Sweet AS ("NPS")

Denmark

50%

50%

Production, marketing and distribution of natural

sweeteners.

 

 

Tereos PureCircle

  Solutions ("TPCS")

France

-

-

Production, marketing and

  distribution of natural

  sweeteners.

 

 

As part of the restructuring of its Joint Ventures, Tereos purchased the Company's shares in TPCS in 2015 and continues to service the Group's Regional Key Accounts in the TPCS region.

 


                       The Group

 


2016


2015


USD'000


USD'000





At 1 July

 (200)


(1,463)

Share of loss

 (332)


 (818)

Unrealised profit

 (837)


 (54)

Disposal

                   -


1,894

Additional investment

274


342

Exchange differences

 (1)


 (101)

At 30 June

 (1,096)


 (200)





Analysed as follows:








Other payables (non-current)

 (1,096)


 (200)

At 30 June

 (1,096)


 (200)





The Group's share of the results of the joint ventures, none of which is individually material to the Group, are shown in aggregate as follows:

 





 


2016


2015

 


USD'000


USD'000

 





 

Share of loss in joint ventures (before elimination of unrealised profit)

 (332)


 (818)

 

Shares of other comprehensive income of joint ventures

 (1)


 (101)

 

Share of total comprehensive loss

 (333)


 (919)

 





 

Set out below are the summarised financial information for Joint Ventures which are accounted for using the equity method:

 





 

Summarised statements of financial position



 


2016


2015

 


USD'000


USD'000

 





 

Current




 

Cash and cash equivalents 

34


128

 

Other current assets (excluding cash) 

5,911


3,440

 

Total current assets

5,945


3,568

 





 





 

Financial liabilities (excluding trade payables)

 (404)


 (292)

 

Other current liabilities (including trade payables)

 (6,020)


 (3,670)

 

Total current liabilities

 (6,424)


 (3,962)

 





 

Non-current




 

Assets

555


588

 

Financial Liabilities

                   -


                   -

 

Net assets

76


194

 





 

Summarised statements of comprehensive income



 


2016


2015

 


USD'000


USD'000

 





 

Revenue 

3,562


6,922

 

Depreciation and amortisation

                   -


 (78)

 

Interest (expense)/ income

 (7)


562

 

Loss before taxation

 (664)


 (1,540)

 

Income tax

                   -


 (96)

 

Loss after taxation

 (664)


 (1,636)

 

Other comprehensive income

 (2)


 (202)

 

Total comprehensive loss

 (666)


 (1,838)

 





 

Reconciliation of summarised financial information



 


2016


2015

 


USD'000


USD'000

 





 

Opening net liabilities - 1 July

194


 (2,440)

 

Loss for the year

(664)


 (1,636)

 

Other comprehensive income

(2)


 (202)

 

Disposal

                   -


3,788

 

Additional investment

548


684

 

Closing net assets- 30 June

76


194

 





 

Interest in joint venture

50%


50%

 

Share of net assets

38


97

 

Goodwill

                   -


                   -

 

Cumulative unrealised profit

 (1,134)


 (297)

 

Carrying value

 (1,096)


 (200)

 

 

 

8              INTANGIBLE ASSETS

 


Intellectual





property

Development



The Group

        rights

            costs

Goodwill

Total


USD'000

USD'000

USD'000

USD'000

Cost










At 1 July 2015

13,963

          22,836

           1,806

          38,605

Additions

              422

           8,443

                  -

           8,865

Transfer

-

           4,055

                  -

           4,055

Foreign exchange





  translation difference

 (812)

 (1,322)

                  -

          (2,134)

At 30 June 2016

      13,573

          34,012

           1,806

          49,391






Accumulated amortisation










At 1 July 2015

418

              397

                  -

              815

Charge for the financial year

 6

                71

                  -

                77

Foreign exchange





  translation difference

          (26)

             (22)

                  -

               (48)

At 30 June 2016

              398

              446

                  -

              844






Net carrying amount





At 30 June 2016

13,175

          33,566

           1,806

          48,547












Intellectual





property

Development



The Group

        rights

           costs

Goodwill

Total


USD'000

USD'000

USD'000

USD'000

Cost










At 1 July 2014

      14,355

          22,618

           1,806

          38,779

Additions

          359

           3,506

                  -

           3,865

Written off during the financial year

               -

             (45)

                  -

               (45)

Foreign exchange





  translation difference

             (751)

          (3,243)

                  -

          (3,994)

At 30 June 2015

     13,963

          22,836

           1,806

          38,605






Accumulated amortisation










At 1 July 2014

          483

              273

                  -

              756

Charge for the financial year

              8

              172

                  -

              180

Foreign exchange





  translation difference

         (73)

             (48)

                  -

             (121)

At 30 June 2015

          418

              397

                  -

              815






Net carrying amount










At 30 June 2015

     13,545

          22,439

           1,806

          37,790

 

 

Intellectual property rights comprise the patents, trade mark technology process and all intellectual and industrial property rights in connection therewith on the production of natural sweetener, pharmaceutical products and derivatives of bio-organic and physiologically active compounds.

 

As at 30 June 2016, the carrying value of indefinite life intangible assets is USD10,613,032 (2015: USD11,312,000). The change in value was due to foreign currency translation differences.

 

Goodwill is allocated to the Group's single CGU identified according to its only operating segment. See Note 6(i) for key assumptions used in the value-in-use calculations.

 

 

9              PROPERTY, PLANT AND EQUIPMENT

 





Office







equipment,






Extraction

furniture






and

and fittings

Capital



Freehold


refinery

and motor

work-in



        land

Buildings

       plants

    vehicles

progress

Total


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

The Group














Cost







At 1 July 2015

     1,615

      20,608

     60,303

       7,186

       4,976

      94,688

Additions

              -

            61

       1,213

       1,096

     13,034

     15,404

Disposals/write-offs

              -

              -

     (1,783)

        (476)

             -

    (2,259)

Transfer

             -

         (24)

      2,605

          863

     (3,444)

              -

Foreign exchange







  translation reserve

        (80)

    (1,265)

    (3,889)

        (452)

       (356)

    (6,042)

At 30 June 2016

      1,535

   19,380

     58,449

       8,217

    14,210

  101,791








Accumulated







  depreciation














At 1 July 2015

             -

      4,417

     26,868

     3,679

            -

     34,964

Charge for the financial year

              -

       1,034

       3,461

        1,062

              -

       5,557

Disposals/write-offs

             -

             -

    (1,666)

       (405)

             -

     (2,071)

Foreign exchange







  translation reserve

             -

       (369)

    (1,748)

        (204)

             -

     (2,321)

At 30 June 2016

             -

      5,082

     26,915

       4,132

              -

     36,129








Net carrying amount







At 30 June 2016

      1,535

     14,298

     31,541

       4,078

     14,210

     65,662



















Office







equipment,






Extraction

furniture






and

and fittings

Capital



Freehold


refinery

and motor

work-in



        land

Buildings

       plants

      vehicles

progress

Total


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000








The Group














Cost







At 1 July 2014

  1,820

20,592

     65,514

      5,321

      2,062

     95,309

Additions

             -

            38

          560

       2,429

      3,624

     6,651

Disposals/write-offs

              -

              -

             -

           (76)

-

 (76)

Transfer

-

46

44

108

 (198)

-

Foreign exchange







  translation reserve

 (205)

 (68)

 (5,815)

 (596)

 (512)

 (7,196)

At 30 June 2015

1,615

20,608

60,303

7,186

4,976

94,688








Accumulated







  depreciation







At 1 July 2014

-

3,413

25,070

3,111

-

31,594

Charge for the financial







  year

-

1,131

3,689

918

-

5,738

Disposals/write-offs

-

-

-

 (73)

-

 (73)

Foreign exchange







  translation reserve

-

 (127)

 (1,891)

 (277)

-

 (2,295)

At 30 June 2015

-

4,417

26,868

3,679

-

34,964








Net carrying amount







At 30 June 2015

1,615

16,191

33,435

3,507

4,976

59,724








 

The carrying values of property, plant and equipment charged to financial institutions to secure banking facilities granted to the Group are as follows:

 


                                 Group


2016


2015


USD'000


USD'000





Freehold land

     1,000


     1,256

Building

    11,599


    13,929

Extraction and refinery plants

    31,131


    40,269

Office equipment, furniture and fittings

     2,101


        913

Capital work in-progress

    13,944


     1,960


    59,775


    58,327

 

 

The carrying values of plant and equipment acquired under hire purchase terms are as follows:

 


                                 Group


2016


2015


USD'000


USD'000





Motor vehicles

            -


            6

 

 

10           BIOLOGICAL ASSETS

 

Nursery plants with a book value of USD3,377,000 (2015: USD3,570,000) previously reported as biological assets have been transferred to product development within intangible assets reflecting the changed nature of the Group's nursery operations. The Group's leaf nurseries are now focused on improving leaf strains and similar leaf development intellectual property activity as opposed to their historic role in the production and supply of seedlings.  

 

 

11           PREPAID LAND LEASE PAYMENTS

 


                          Group


2016


2016


USD'000


USD'000





At 1 July

     2,914


     2,999

Additions

            -


          50

Amortisation for the financial year

       (135)


       (143)

Foreign exchange translation reserve

       (242)


            8

At 30 June

     2,537


     2,914





Cost

     3,526


     3,526

Accumulated amortisation

       (929)


       (794)

Foreign exchange translation reserve

         (60)


        182

At 30 June

     2,537


     2,914

 

 

The prepaid land lease payments have been pledged as security for banking facilities granted to the Group.

 

12           DEFERRED TAX

 

 




 The Group


2016


2015


USD'000


USD'000





Deferred tax assets












At 1 July

9,429


5,876

(Charge)/Credit to profit or loss (Note 25)

(125)


3,960

Foreign exchange translation reserve

(314)


(407)

At 30 June

8,990


9,429





Deferred tax liabilities








At 1 July

529


-

Charge to profit or loss (Note 25)

1,073


529

Foreign exchange translation reserve

-


-

At 30 June

1,602


529





Represented by:








Deferred tax assets








  Tax losses

8,850


   Others

140


92






8,990


9,429

Offsetting

(1,602)


(529)


7,388


8,900





Deferred tax liabilities




  Property, plant and equipment

1,602


529

Offsetting

(1,602)


(529)


-


-





 

 

Deferred tax assets are recognised for tax losses carry-forward to the extent that the realisation of the related tax benefit through future tax profit is probable based on projections and forecasts prepared by management and taking into consideration the expiry dates of carry forward losses. The Group did not recognise deferred tax assets of USD74,000 (2015: USD385,000) in respect of losses amounting to USD 598,000(2015: USD1,940,000) that can be carried forward against future taxable income.

 

 




The Group


2016


2015


USD'000


USD'000

Deferred tax assets








Deferred tax assets to be




  recovered within 12 months

                  140


       1,002

Deferred tax assets to be recovered




  after more than 12 months

               8,850


       8,427


               8,990


       9,429





Deferred tax liabilities








Deferred tax liabilities to be




  recovered within 12 months

 -


 -

Deferred tax liabilities to be recovered




  after more than 12 months

              (1,602)


         (529)


              (1,602)


         (529)





An analysis of tax losses with expiry dates for which deferred tax assets have been recognised is as follows:

 




 The Group


2016


2015


USD'000


USD'000





FY2017

 -


              115

FY2018

                    70


              192

FY2019

 -


               763

FY2021

                  208


 -

FY2023

 -


            1,677

FY2029 to FY2036

               4,834


            2,994

Indefinite

               3,738


           3,596

Total

               8,850


           9,337

 

13           INVENTORIES

 




The Group


2016


2015


USD'000


USD'000





Raw materials

              11,422


            5,523

Work-in-progress

              41,785


         11,716

Finished goods

              31,397


          45,551


              84,604


         62,790





 

There is no provision of obsolete inventories recognised during the year (2015: Nil)

 

 

14           TRADE RECEIVABLES

 




The Group


2016


2015


USD'000


USD'000





Non-current








Third party trade receivables

                  523


            1,856





Current








Third party trade receivables

              57,627


          59,149

Joint ventures

               5,116


            3,381


              62,743


          62,530





 

 

The Group's normal trade credit terms range from 30 to 60 days (2015: 30 to 60 days). Terms for joint ventures are 30 days after consumption or onward sales of products. Other credit terms are assessed on a case-by-case basis.

 

In line with all businesses, management reviews the credit terms and collectability of all balances on an on-going basis and exercises judgement in assessing the recoverability of amounts due.

 

As of 30 June 2016, trade receivables amounting to USD5,645,000 (2015: USD6,622,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing of the trade receivables that are past due but not impaired is as follows:

 




                                 The Group


2016


2015


USD'000


USD'000





Past due but not impaired:




Up to 3 months

     3,828


       5,948

3 to 6 months

     553


         412

6 months and above

    1,395


         262


     5,776


       6,622





 

15           OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

 




Group


2016


2015


USD'000


USD'000





Non-current








Other receivables

        885


       2,121





Current








Other receivables

      5,592


      3,038

Prepayments

      5,448


       3,967

Deposits

         614


          485

As at 30 June

    11,654


      7,490





 

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. These amounts are not past due.

 

 

16           FINANCIAL INSTRUMENTS BY CATEGORY

 





Group


Note

2016


2015



USD'000


USD'000

Receivables










Trade receivables

14

      63,266


      64,386

Other receivables and deposits





(excluding prepayments)

15

        7,091


        5,644

Cash and bank balances

17

     61,002


      64,276



    131,359


    134,306

Other financial liabilities










Borrowings

22

    113,929


    109,646

Trade payables

24

        5,543


        3,134

Other payables and accruals





(excluding deferred income)

24

    20,999


     10,717



   140,471


    123,497






 

 

17           CASH AND CASH EQUIVALENTS

 




Group


2016


2015


USD'000


USD'000





Short term deposits with




  licensed banks

         32,047


     32,280

Cash at bank and on hand

         28,955


     31,996

Deposits, cash and bank balances

         61,002


     64,276

Restricted cash

            (255)


      (5,095)

Cash and cash equivalents

         60,747


     59,181





                                                                                                     

 

Cash deposits of USD255,000 (2015: USD5,095,000) are pledged as security for banking facilities.

 

The weighted average interest rates of the short-term deposits at the reporting date was 0.38% (2015: 0.40%) per annum. The short-term deposits have weighted maturity period of 40 days (2015: 104 days).

 

 

18           SHARE CAPITAL

 

The movements in the authorised and paid-up share capital are as follows:

 


The Group/Company





2016



Number




Par value

of shares


USD


USD

('000)


('000)

Authorised





At 1 July/30 June

            0.10

     250,000


         25,000






Issued and fully paid-up





At 1 July

            0.10

      170,062


         17,006

Exercise of share awards

            0.10

          2,050


             205

Placement of shares

            0.10

 -


 -

Issuance of shares

            0.10

 -


 -

At 30 June

            0.10

      172,112


         17,211






 

 

19           SHARE PREMIUM

               




 The Group


2016


2015


USD'000


USD'000





At 1 July

      208,310


      163,240

Exercise of share awards

          6,413


            410

Placement of shares

 -


       42,963

Issuance of shares

 -


         1,697

At 30 June

      214,723


      208,310

 

20           FOREIGN EXCHANGE TRANSLATION RESERVE

 

The foreign exchange translation reserve arose from the translation of the financial statements of the foreign operations into the Group's presentation currency of USD.

 

During financial year end 2016, the fluctuations are due to MYR and RMB weakening against USD.

 

21           SHARE-BASED PAYMENT RESERVE

 

The expense arising from equity-settled share-based payment transaction recognised for employee services received during the year is as shown below:

 




 The Group


2016


2015


USD'000


USD'000





Expense arising from




  equity-settled share-based




  payment transactions

           5,209


         6,412





                                                                                                     

 




 The Group


2016


2015


USD'000


USD'000





At 1 July

         11,185


5,076

Share awards scheme compensation expense

5,209


6,412


16,394


11,488

Transfer to share capital and share premium upon




  exercise of share awards

(6,618)


(303)

At 30 June

9,776


11,185





 

The Company maintains a Long-Term Incentive Plan ("LTIP"), the principal terms include a restriction on the Company issuing (or granting rights to issue) no more than 10 per cent of its issued ordinary share capital under the LTIP (and any other employee share plan) in any ten calendar year periodIt is currently intended that, other than in exceptional circumstances, such as senior executive recruitment, all awards will be subject to performance conditions and that, the performance conditions will be linked principally to the Group's sales growth. The awards are conditional on employment service requirements.

 

The LTIP recognises the fast growth and changing nature of the Company and the need to recruit and retain executives in different employment markets around the world. Accordingly, the LTIP allows for the Remuneration Committee to exercise significant discretion in exceptional cases where the Committee considers executives will bring particular value to shareholders.

 

The fair value of share awards granted is estimated at the date of the grant, taking into account the terms and conditions upon which the LTIPs were granted.

 


 30.6.2016


30.6.2015










Weighted




Weighted




average




average




exercise


Number


exercise


Number


price per


of


price per


of


     share


LTIPs


     share


LTIPs




('000)




('000)









At 1 July

 -


        3,912


 -


         7,523

Granted

 -


         1,881


 -


            344

Exercised

 -


       (2,050)


 -


          (153)

Lapsed

 -


      (1,433)


 -


       (3,802)

At 30 June

 -


        2,310


 -


         3,912









 

 

Details of share awards granted that are outstanding as at 30 June 2016 are as follows:

 

 

 

 

 

 

 

Grant-vest

 

 

Number of

LTIPs

outstanding

'000

Weighted

 average

 fair value

 at grant

        date

(Sterling

 pound)

 

 

Exercise

price per

     share

 

 

 

 

Vesting requirements






Award 1

8 October 2013 - 12 July 2016

 

1,394

 

3.54

 

Nil

Sales target and three years' service






Award 2

14 March 2013 - 13 April 2017

 

116

2.53 - 6.13

 

Nil

 

Three years' service






Award 3

4 July 2014 - 27 July 2017

 

118

4.94 - 6.08

 

Nil

 

Three years' service






Award 4

7 July 2015 - 1 July 2017

 

577

 

3.95

 

Nil

Sales target and three years' service






Award 5

22 September 2015-

22 September 2018

 

57

 

4.05

 

Nil

 

Three years' service






Award 6

4 March 2016 - 30 August 2018

 

8

 

3.46

 

Nil

 

Three years' service






Award 7

23 May 2016 - 25 April 2019

 

40

 

3.83

 

Nil

 

Three years' service

Total

2,310





 

The number of exercisable share awards as at the reporting date was Nil (2015: Nil).

 

The related weighted average share price at the time of exercise was Nil (2015: GBP4.90) per share.

 

 

22           BORROWINGS

 




The Group


2016


2015


USD'000


USD'000





Current portion:




- Term loans (a)

         29,044


         25,668

- Hire purchase (b)

 -


                13


         29,044


         25,681





Non-current portion:




- Term loans (a)

         84,885


         83,948

- Hire purchase (b)

 -


                17

Total non-current portion

         84,885


         83,965


       113,929


        109,646

 

(a)          Term loans

 

The term loans bore a weighted average effective interest rate of 4.30% (2015: 4.60%) per annum at the reporting date.  These term loans bear floating rates (base rate plus a margin as imposed by respective lenders) that fluctuate because of changes in market interest rates. 

 




The Group


2016


2015


USD'000


USD'000

Current portion:








Unsecured:




- Term loan 1

 -


             205





Secured:




- Term loan 2

             306


          1,546

- Term loan 3

             542


 -

- Term loan 4

           4,460


 -

- Term loan 5

         23,736


         23,917

Total current portion

         29,044


         25,668

Non-current portion:




Secured:




- Term loan 2

 -


             275

- Term loan 3

           2,092


 -

- Term loan 4

         53,766


         62,223

- Term loan 6

         29,027


        21,450

Total non-current portion

         84,885


        83,948


       113,929


      109,616





 

Term loan 1 is unsecured.

 

Term loans 2 to 4 are secured by way of:-

 

(i)           a fixed and floating charge over present and future assets and the freehold property of a subsidiary; and

(ii)          corporate guarantee by the Company; and

(iii)         legal charge over landed property of a subsidiary.

 

Term loan 5 is secured as follows:-

 

(i)           a legal charge over certain assets of a subsidiary; and

(ii)          a legal charge over the prepaid land lease payments of a subsidiary.

 

Term loans 6 are trade receivables financing secured via receivable balances.

 

(b)          Hire purchase

 

The Group leases motor vehicles under finance leases with lease terms of 5 to 9 years (2015: 5 to 9 years). At the end of the lease term, title to the assets will be transferred to the Group upon full payment being made. In 2016, the Group has settled all its obligations under finance lease.

 




The Group


2016


2015


USD'000


USD'000

Analysis of hire purchase:




- No later than one year

 -


               17

- Later than 1 year and no later than 5 years

 -


               21


 -


               38

Less: Future finance charges

 -


        (8)

Present value

 -


               30





The present value of hire purchase is as follows:




- No later than one year

 -


               13

- Later than 1 year and no later than 5 years

 -


               17


 -


               30





 

The hire purchases liabilities are fully repaid during the financial year. The hire purchases were secured by the rights to the leased motor vehicles which revert to the lessor in the event of defaults. The hire purchase bore a weighted average effective interest rate of 0% (2015: 3.65%) per annum at the reporting date.

 

23           TRADE PAYABLES

 

The normal trade credit terms granted to the Group range from 0 to 90 days (2015: 0 to 90 days).

 

The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the trade payables at the reporting date was as follows:

 




The Group


2016


2015


USD'000


USD'000





United States Dollar

               37


             150





 

 

 

 

 

24           OTHER PAYABLES AND ACCRUALS

 




The Group


2016


2015


USD'000


USD'000

Non-current








Other payables

          1,096


          200

Deferred income

             149


          290


           1,245


          490

Current




Other payables

         11,962


       7,265

Deferred income

                74


            29

Accruals

           7,941


       3,252


         19,977


     10,546





                                                                                                     

 

Deferred income as at the reporting date represents a form of regional government financial assistance for the purchase of high technology plant equipment. The deferred income will be amortised over the useful life of 20 years.

 

 

25           TAXATION




The Group


2016


2015


USD'000


USD'000

Current tax:




Current tax on profits for the year

       (2,124)


         (408)

Over accruals in respect of prior years

             27


      20


       (2,097)


         (388)





Deferred tax:




Origination and reversal of temporary differences

       (1,198)


       3,431


       (3,295)


       3,043





 

 

The Company was granted a tax assurance certificate dated 1 February 2012 under the Exempted Undertakings Tax Protection Act, 1966 pursuant to which it is exempted from any Bermuda taxes (other than local property taxes) until 31 March 2035.

 

The subsidiary, PCSB, has been granted the Bio-Nexus Status by the Malaysian Biotechnology Corporation Sdn Bhd in which PCSB is entitled to a 100% income tax exemption for a period of 10 years on its first statutory income commencing in year of assessment (YA) 2008. Upon the expiry of the 10-year incentive period, PCSB will be entitled to a concessionary tax rate of 20% on income derived from qualifying activities for a further period of 10 years.

 

The subsidiary, PCT has been granted the Principal Hub Status by the Malaysian Investment Development Authority in which PCT is entitled to a 100% income tax exemption for a period of 10 years on its statutory income commencing from YA 2017.

 

A reconciliation of income tax expense applicable to the profit before taxation at the applicable tax rate to income tax expense at the effective tax rate of the Group is as follows:-

 




The Group


2016


2015


USD'000


USD'000





Profit before taxation

17,895


1,048





Tax at the applicable tax rates in the respective countries

6,542


289





Tax effects of:




Non-deductible expenses

251


204

Non-taxable income

(4,039)


   (2,309)

Under/(over) provision of taxation

756


(20)

Previously unrecognised tax losses

    (215)


(1,207)

Income tax expense/(credit)

3,295


(3,043)





 

26           PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION

 

Included in the profit from ordinary activities before taxation are the following charges and credits:

 





The Group



2016


2015



USD'000


USD'000

Charges:





Depreciation and amortisation


5,769


6,061

Directors' remuneration


1,578


1,432

Share-based payment expense


5,209


6,412

Interest expenses


5,315


7,275

Cost of inventories expensed


49,440


61,203

Wages and salaries


14,881


15,461

Defined contribution retirement plan


1,841


1,322

Operating lease


625


507
















Credits:





Realised exchange gain


4,619


1,324

Amortisation of deferred income


96


76

Interest income


92


57






                               

27           EARNINGS PER SHARE

 

The basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Company by the weighted average number of ordinary shares in issue:

 




The Group


2016


2015

Earnings attributable to equity holders of the Company (USD'000)

14,600


4,158

Weighted average number of ordinary shares in issue (thousands)

172,035


167,906

Impact of share awards outstanding (thousands)

2,310


3,965

Diluted weighted average number of ordinary shares (thousands)

174,345


171,871

Basic profit per share (US Cents)

8.49


2.48

Diluted profit per share (US Cents)

8.37


2.42

 

28           SIGNIFICANT RELATED PARTY TRANSACTIONS

 

(a)          Identities of related parties

 

                The Group and/the Company have related party relationships with:-

 

                (i)           its subsidiaries and joint ventures; and

 

                (ii)          the Directors who are the key management personnel

 

(c)   In addition to the information detailed elsewhere in the financial statements, details of the Group's transactions and balances with related parties during the financial year are set out below:

 

 

(i)          




The Group


2016


2015


USD'000


USD'000





Related parties 








Gross sales of goods to joint ventures

5,304


6,954





 

 

(ii)          Key management personnel compensation

 

Key management personnel are executive directors of the Company. The compensation paid or payable to key management for employee services is shown as below:

 




The Group


2016

2015


USD'000

USD'000




Remuneration 

998

1,025

Share-based payment expense

177

785


1,175


1,810





 

 

29           SEGMENTAL REPORTING

 

Management determines the Group's operating segments based on the criteria used by the Chief Executive Officer (CEO) for making strategic decisions. Management considers the Group to be a single operating segment whose activities are the production, marketing and distribution of natural sweeteners and flavours.

 

From a geographical perspective, the Group is a multinational with operations located on all continents, but managed as one unified global organisation.  The Group's markets and its supply chain are based in the Americas, EMEA (Europe, Middle East and Africa) and Asia Pacific.

 


2016


2015


 USD'000


 USD'000

Trading




Revenue

         138,641


         127,349

Cost of sales

          (81,634)


          (87,070)

Gross margin

           57,007


           40,279





Gross margin %

41%


32%





Other income

               328


               760

Administrative expenses

          (24,947)


          (24,024)

Operating profit

           32,388


           17,015





Main Market Listing costs

            (1,808)


 -

Other expenses

            (8,396)


            (7,117)

Foreign exchange gain/(loss)

             1,358


              (757)

Finance costs

            (5,315)


            (7,275)

Share of loss in joint ventures*

              (332)


              (818)

Taxation

            (3,295)


             3,043

Earnings for the financial year

           14,600


             4,091





Adjusted EBITDA

           37,729


           22,182





Reconciliation of Adjusted EBITDA to operating profit:








Adjusted EBITDA

           37,729


           22,182

Depreciation and amortisation

            (5,673)


            (5,985)

Share of loss in joint venture

               332


               818

Operating profit

           32,388


           17,015






2016


2015


 USD'000


 USD'000

Gross cash

           61,002


           64,276

Gross debt

         113,929


         109,646

Net debt

           52,927


           45,370





Gross cash

           61,002


           64,276

Unutilised facilities

           15,269


           23,661

Headroom

           76,271


           87,937

Earnings per share (US cents)




  - Basic

8.49


2.48

  - Diluted

8.37


2.42

 

 

*      Under segmental reporting, revenues of approximately USD70 million (2015: USD65 million) are derived from 5 external customers. These revenues are attributable to the Americas customers.

 

 

Geographical information

 



Asia

Europe*

Americas

Goodwill

Total

30 June 2016


USD'000

USD'000

USD'000

USD'000

USD'000








External revenue


18,105

32,207

88,329

-

138,641

Non-current assets

 

113,496

1,454

9,830

1,806

125,542


 

════════

════════

════════

════════

════════








30 June 2015







External revenue


23,588

15,484

88,277

-

127,349

Non-current assets

 

100,720

1,352

12,997

1,806

116,875


 

════════

════════

════════

════════

════════

 

Basis of attributing sales by geographical region is based on location of sales.

 

The primary performance indicators used by the Group are revenues, gross margin %, adjusted EBITDA, net cash from operations, gross cash and borrowings.

 

Adjusted EBITDA is defined as EBITDA with other expenses (principally the charge of the Group's LTIP scheme, STIP, foreign exchange and share of gain/(loss) in joint venture) added back.

 

The net assets per share is calculated based on the net assets book value at the reporting date of USD203,700,000 (2015: USD190,492,000) divided by the number of ordinary shares in issue at the reporting date of 172,112,000 (2015: 170,062,000).

 

The entity is domiciled in Bermuda. The entity's non-current assets are located in countries other than Bermuda. There is no revenue from Bermuda.

 

*The Europe segment includes results and sales to the Group's European joint venture.

 

30           COMMITMENTS

 

                (a)          Capital commitments

 

Capital expenditure at the reporting date is as follows:

 

 

 


             Group


2016


2015


USD'000


USD'000


 

 

 

Authorised capital expenditure contracted for


 

 

- Property, plant and equipment

24,109


1,138





Authorised capital expenditure not contracted for

12,232


20,500


════════


════════





 

                (b)          Operating lease commitments

 

The Group also leases corporate office under non-cancellable operating lease agreements. The lease expenditure charged to the profit or loss during the year is disclosed in Note 28.

 

The future aggregate minimum lease payments under non-cancellable operating lease are as follows:

 

 

 


             Group


2016


2015


USD'000


USD'000


 

 

 

The present value of operating lease is as follows:


 

 

- No later than one year

570


535

- Later than 1 year and no later than 5 years

1,257


1,412

- More than 5 years

982


1,293


────────


────────


2,809


    3,240


════════


════════





 

 

31           EVENTS AFTER THE REPORTING PERIOD

 

Events after the period end comprise:

 

(a)          Banking Facility

 

                On 2 August 2016, the company has entered into an Amendment Agreement relating to Term Loan 6 to increase the drawdown limit from USD 38 million to USD 50 million.

 

(b)          Incorporation of subsidiary after the financial year

 

On 26 August 2016, a wholly owned subsidiary, PureCircle Natural Ingredient India Private Limited was incorporated and its principle activities are supply and development of stevia agronomy sales and production, distribution and sales of natural sweeteners and flavours.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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