ANNUAL REPORT 2017 - Harel Mallac Group · ANNUAL REPORT 2017 Dear Shareholder, The Board of...
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2017 ANNUAL REPORT
Transcript of ANNUAL REPORT 2017 - Harel Mallac Group · ANNUAL REPORT 2017 Dear Shareholder, The Board of...
2017
ANNUAL REPORT
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Dear Shareholder,
The Board of Directors of Harel Mallac & Co. Ltd is pleased to present the Annual Report for the year ended 31 December 2017, the contents of which are listed on page 3.
This report was approved by the Board of Directors on 15 May 2018.
Antoine L. HarelChairman
Charles HarelChief Executive Officer
Foster SustainableGrowth
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Welcome to theHarel Mallac & Co. LtdAnnual Report
Committed to Making a Difference for the Better
Harel Mallac is one of the oldest trading companies in Mauritius, where it pioneered important sectors of the economy. Today, it remains deeply committed to continue supporting the development of its home country in three segments: Manufacturing and Trading, Business Services and Asset Management.
With operations that have expanded to the African continent, in Burundi, Madagascar, Rwanda, Tanzania and Zambia, the Harel Mallac Group employs over 1,200 people.
As an engaged corporate citizen, the Group strives to make a sustainable difference for its stakeholders by bringing to Mauritius and Africa the best that the planet has to offer in terms of products and services, while monitoring its impact on the natural environment and surrounding communities.
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Message to Shareholder
Welcome Note
Corporate Information
Purpose, Commitments and Guiding Principles
Group Overview
Chairman’s Statement
CEO’s Report
Business Review
Delivering on our Commitments
Board of Directors
Leadership Team
Directors of Subsidiary Companies
Corporate Governance Report
Statutory Disclosures
Statement of Directors’ Responsibilities
Secretary’s Certificate and Statement of Compliance
Value Added Statement
Independent Auditor’s Report
Statements of Financial Position
Statements of Profit or Loss
Statements of Profit or Loss and Other Comprehensive Income
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
REGISTERED OFFICE18, Edith Cavell streetPort Louis
WEBSITEharelmallac.com
BUSINESS REGISTRATION NUMBERC07000952
SECRETARYHM Secretaries Ltd18, Edith Cavell streetPort Louis
AUDITORSBDO & Co
BANKERSABC Banking Corporation LtdBarclays Bank PLCThe Mauritius Commercial Bank LimitedState Bank of Mauritius Ltd
REGISTRYHarel Mallac Corporate Services Ltd.18, Edith Cavell streetPort Louis
Table ofContents
Corporate Information
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Commitments
For the better of our people, we make it our business to unlock their potential by stimulating individual initiatives and promoting the entrepreneurial spirit within the Group.
For the better of our performance, we make it our business to do the right thing, with commitment and passion to achieve sustainable economic growth.
For the better of our consumers, we make it our business to understand their needs and source the very best products, brands and solutions to make a difference in their operations and lives.
For the better of our planet, we make it our business to improve quality of life and care for the world in which we live and evolve. Together we can tackle today’s issues to build a better tomorrow.
Purpose, Commitments and Guiding Principles
Perform withAgility
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Guiding principles
Because better begins with each of us, our commitment is fuelled by fundamental guiding principles that define how we do business. They guide our actions and behaviour. They influence the way we work with each other and the way we serve our various stakeholders.
Agility and determination in achieving
Our agility enables us to seize and create the opportunity. We believe in the power of ambition and it is only by taking determined initiatives and by moving quickly that we can serve our clients with excellence, generate sustainable value for our people and our shareholders, and contribute to our broader community.
Care and engagement in what we do
We believe that one has to care for what they do to do it well, fuelled by the passion and enthusiasm that is put in every action undertaken. We operate in a spirit of cooperation and respect, by embracing each individual’s talents and we commit to creating a forward-thinking environment driven by how we are engaged in improving what we leave behind.
Trust and responsibility in our relationships
We lead by example and take ownership of our individual responsibility. This means doing the right thing at all times and conducting our business with the highest standards of professional behaviour and ethics, by being transparent and honest in all our interactions with employees, consumers, partners and the public at large.
Make a Difference for the Better
Purpose
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MANUFACTURING AND TRADING
BUSINESS SERVICES
EQUIPMENT AND SYSTEMS %
Climapro Ltée 100.00
EO Solutions Ltd. 100.00 *
Harel Mallac Trading Ltd 100.00
Linxia Ltd 100.00 *
Novengi Ltd 100.00
Harel Mallac Distribution SARL** 100.00 *
Harel Mallac Healthcare Ltd** 100.00 *
TECHNOLOGY %
Harel Mallac Technologies Ltd 100.00
Harel Mallac Technologies Burundi SA
100.00 *
Harel Mallac Technologies Madagascar
100.00 *
Harel Mallac Technologies Rwanda Ltd
100.00 *
FINANCIAL AND CORPORATE SERVICES
%
Harel Mallac Corporate Services Ltd
100.00
Harel Mallac Global Ltd 85.00
The Professional Learning Centre Ltd
100.00
Harel Mallac Advisory Ltd 85.00
CHEMICALS, FERTILISERS AND HYGIENE
%
Archemics Ltd 100.00
Bychemex Limited 44.91
Chemco Limited 59.28 *
Coolkote Entreprises Ltd 70.41 *
Harel Mallac Export Ltd 70.41 *
Harel Mallac (Tanzania) Ltd 100.00 *
Logima Reunion SAS 70.41 *
M.C.F.I. (Freeport) Ltd 70.41 *
MCFI International & Co. Ltd 70.41 *
MCFI International (Zambia) Ltd 70.41 *
Reunifert SAS 70.41 *
Suchem Ltd 100.00
The Mauritius Chemical and Fertilizer Industry Limited
70.41
DIGITAL AGENCY %
Activeline Ltd 100.00
TRAVEL %
Harel Mallac Aviation Ltd 100.00 *
Itineris Ltd 100.00
Group Overviewat 31 December 2017
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ASSET MANAGEMENT
PROPERTY %
Harel Mallac International Ltd 100.00
Société Sicarex 100.00
Société Gare du Nord 100.00
Standard Continuous Stationery Limited
100.00
ASSOCIATES & JOINT VENTURES %
Held by holding company
Attitude Hospitality Management Ltd
20.00
Emineo Holding Limited 25.00
Imatech Ltd 33.33
Maritim (Mauritius) Ltd 22.86
Société Oneo 25.00
Solar Field Ltd 51.00
Total Mauritius Limited 20.00
Touristic United Enterprise Ltd 22.50
Water Sport Village Limited 24.50
Zilwa Resort Ltd 24.00
Held by group
Biofert Co. Ltd 23.47
Compostage Du Sud Ltée 35.00
Rehm Grinaker Construction Co Ltd
15.14
Rehm Grinaker Properties Co Ltd 15.14
* includes indirect holdings** discontinued operations
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Chairman’s Statement
Dear Shareholder,
It is my pleasure to present to you the Annual Report of the Harel Mallac Group for the financial year ended 31 December 2017. This year marks a turnaround in terms of the profitability of the Group, following a substantial rethinking and strategic reorganisation of the Group’s activities.
The macro-economic context
On the macro-economic environment, we note a GDP growth rate for Mauritius of 3.8% for both 2017 and 2016. The domestic growth in 2017 has been driven by good performance in all major sectors of the Mauritian economy, except for the sugar industry, which experienced a 7.9% decline in sugar production. After a difficult year, the textile sector more or less stagnated in 2017. With regard to the manufacturing sector, a growth rate of 1.4% was noted in 2017.
The tourism sector continued to thrive with a growth rate of 5.2% in tourist arrivals, with tourist earnings amounting to Rs 60 billion in 2017. The construction sector rebounded by registering a growth rate of 7.5% in 2017, from nil growth in 2016.
Looking forward, the Mauritian economy is expected to achieve a GDP growth rate of around 3.9% in 2018. This forecast reflects the expected significant investments in infrastructure, as well as expected growth in the retail trade sector.
Rs 15.82EARNINGS PER SHARE
Rs 1.80DIVIDEND PER SHARE
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Financial performance
As regards Harel Mallac, our strength continues to be our diversified portfolio of activities, including associated companies. The challenge remains to look further afield through a renewed emphasis on regional expansion, with a particular focus on the renewable energy and business services sectors.
For the year under review, the Group’s revenue from continuing operations increased by 7.2% to reach Rs 4 billion. The bottom line results are encouraging, with a profit after tax at Rs 115 million compared to losses of Rs 78 million in 2016. Our overall performance is mainly the result of the excellent performance of our associates, and the successful repositioning of the Group’s activities, with the performance of our subsidiaries more or less reflecting the prevailing sectoral macroeconomic dynamics
The disposal of our investment in Compagnie des Magasins Populaires Limitée (CMPL) which operated the Monoprix franchise, generated a group profit on disposal of Rs 105 million. It has freed up significant resources, enabling the Group to concentrate on the smooth rollout of its growth strategies. The acquisition of Baines Trust is in line with our services-oriented strategy and bodes well for the future. I am also very pleased to state that our 2MW power plant in the north of the island generated positive results in its first full year of operations and we are endeavouring to reinforce our activities in this sector.
The earnings per share from continuing operations increased from Rs 6.20 to Rs 15.82.
The Board decided to maintain its dividend pay-out at Rs 1.80 for the year ending 31 December 2017.
Our share price was at Rs 83.00 at the end of the financial year – an increase of 23% compared to the previous year and giving a dividend yield of 2% as of 31 December 2017.
Corporate social and environmental responsibility
In accordance with our mission to create a better future for our planet, the Group continues to support community development via our dedicated CSR vehicle, the Fondation Harel Mallac. In 2017, besides the financial support to four NGOs working with vulnerable children, the foundation launched ‘J’aime ma Terre’, an educational programme on the environment and waste management in five schools.
Acknowledgements
I would like to pay my respects to late Michel Rivalland, G.O.S.K., who passed away on 12 August 2017. Michel joined the Board of Harel Mallac in 2006 and sat on the boards of many of our subsidiaries and associate companies. During his mandate he provided the CEO, the Board and his colleagues with unflinching support. Michel was a man of great intellect and humanity, a sound advisor, a resourceful problem solver and was, above all, a trusted friend. He is greatly missed.
Pascal Boris C.B.E. was appointed to the Board on 4 October 2017. Pascal comes to us with extensive expertise in international banking and financial services. Finally, on behalf of the Board of Directors, I would like to express my sincere appreciation and gratitude to our customers, suppliers, partners and shareholders for their continued trust in our organisation. In my personal capacity, I would also want to thank my fellow Directors for their guidance and wise counsel, the CEO and his Leadership Team for their dedication and commitment to the cause, as well as each of the Group’s employees for their hard work and contribution to the Group’s success. Our biggest asset remains our people.
Antoine L. HarelChairman
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Dear Shareholder,
2017 was a year of consolidation for the Harel Mallac Group, with the challenge to achieve the Group’s Purpose to ‘Make a Difference for the Better’, while building on the new organisational structure (announced at the end of 2016). This Purpose and its related Commitments were embedded in a Culture Development Programme rolled out over 22 working sessions, involving all its employees, in the first half of 2017. This programme, coupled with bold strategic initiatives taken to restore the financial solidity of Harel Mallac, build the foundation for the Harel Mallac of tomorrow.
For the financial year 2017, Harel Mallac reported revenue of Rs 4bn, a return to growth in the top-line after a lacklustre 2016, where revenues on continuing operations only totalled Rs 3.7bn. This 7.2% growth rate stands at nearly twice the GDP growth rate. The bottom-line picture was also clearly positive, with the Group delivering an overall good performance, returning to profitability with a profit after tax of Rs 115m, compared to the loss of Rs 78m reported in the comparative period.
However, operational challenges remain, as can be seen in the drop of the Group’s Profit before Finance Costs (PBFC). Harel Mallac remains determined to pursue its strategic restructuring and investment plan in 2018, with difficult decisions to be taken where necessary, in order to secure future growth and deliver shareholder value.
CEO’s Report
Rs 4.0bnREVENUE
Rs 115mPROFIT AFTER TAX
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Living our Commitments
As announced during our strategic repositioning exercise, we have started walking the talk on our commitments towards our Performance, our People, our Consumer and the Planet.
Key initiatives pursued for the Better of our Performance in 2017 included:
• The disposal of our listed subsidiary, Compagnie des Magasins Populaires (CMPL), after having strengthened its operations through an ambitious refurbishment and expansion programme of its stores. The Group recorded a profit on disposal of Rs 105m, while safeguarding the interests of our former staff, who maintained all their employment and past rights in the transaction.
• The implementation of the exit plan from Harel Mallac Distribution’s operations in Madagascar, where we incurred loss after tax of Rs 9m, albeit significantly lower than in 2016, and the decision to separate from The Professional Learning Centre which lost Rs 6m after tax, as a non-core business of the Group.
• Investment in the strategic Business Services cluster with Rs 7m injected to expand both the range of services and the geographic footprint covered by our Financial Services division through the acquisition of Baines Trust and Corporate Services and its related company, Baines Advisory Services. This resulted in a more than 50% increase in divisional turnover to Rs 25m, despite the integration only being completed in the second half of 2017.
• The implementation of our operational reorganisation in the Chemical, Hygiene and Fertilisers division, geared to extract the maximum synergies from overlapping consumers, products and competencies. The first steps, aligning of the holding company’s chemical trading operations in Africa under The Mauritius Chemical and Fertilizer Industry Limited (MCFI) ownership and management, show promising results.
For the Better of our People, following our ‘Employee Engagement Survey 2016’, we launched Edith, an intranet collaborative and social platform, as well as an Employee Privilege Card for our 1,200 employees.
In order to improve our delivery to the Consumer, we assembled a team of ten in-house professionals to take a fresh new look at our service delivery, aiming at excellence in all our consumer interactions.
Our commitment towards the Planet covered the publication of our Code of Ethics, the sensitisation campaign “J’aime ma Terre”, along with the continuation of our Foundation’s work and of our waste management initiative.
Review of Financial Performance
The continuing businesses of the Group registered growth in revenue year-on-year in all its major divisions. Key contributors to our return to profitability included:
• The impact of exceptional items for a Rs 105m gain relating to the disposal profit from CMPL.
• The better returns from our associates and joint ventures, which increased from Rs 50m to Rs 132m.
Operational performance at the PBFC level flags the continuing challenges facing the Group, with the divisions broadly on par with 2016 results despite the revenue growth, reflecting the competitive environment in which Harel Mallac operates, except for the following material items:
• Chemicals, Fertilisers and Hygiene down by Rs 22m to Rs 79m in 2017 – good results from other subsidiaries in the division were unfortunately overshadowed by a Rs 42m hit to the MCFI Group with declining margins and cost overruns as well as a Rs 9m drop in the PBFC reported by Chemco due to both declining revenues and margins. A number of initiatives focused on operational efficiencies were earmarked to address the issue.
• Technology underwent a review of its processes as part of an overhaul of its operations in 2017, with management significantly amending the parameters of its accounting and expensing additional costs previously on the balance sheet for Rs 15m. This one-off item, together with higher charges (staff-related mainly) and deteriorating performance in Rwanda, led the divisional PBFC to decline from Rs 30m to Rs 6m.
Corporate entities suffered from a weaker property market - where fair value gains from investment property (including those rented out to group companies) decreased by Rs 20m compared to 2016 - as well as the costs of ongoing corporate restructuring.
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CEO’s Report(Cont’d)
Statement of Financial Position
The net debt position of the Group has improved by Rs 208m from 2016 to a 2017 total of Rs 762m. This improved gearing is the result of a continuing focus on managing the Group’s liquidity position and contributes to restoring the financial flexibility of Harel Mallac to fund new projects and capex needs of the business.
Working capital management improvements remain one of the key levers of the group to generate additional cash. In 2017, net current assets employed by the group increased by Rs 83m to Rs 277m – this deterioration reflects the changing mix of the business (CMPL operated with negative working capital) but also highlights the areas of further improvements that are available to the group.
Group non-current assets decreased by Rs 258m driven primarily by: • The disposal of CMPL with about Rs 310m in non-
current assets, of which Rs 305m was Property, Plant and Equipment
• Rs 60m of increases in associates and joint ventures, fuelled principally by Rs 77m of retained profits from associates which was only partially offset by a goodwill impairment of Rs18m for a specific investment in the hospitality sector
• Rs 5m additional investments in listed securities on the Development & Enterprise Market
Outlook
The pillars on which the strategy of Harel Mallac is built remain operational improvements, with lateral growth (geographically and within related sectors) for the dominant ‘Manufacturing and Trading’ cluster and expansion of our ‘Business Services’ activities. The overall objective is to achieve a more balanced contribution from each of our chosen segments and markets. Over the coming year, we will continue to commit significant time and energy to rationalise our long-standing businesses in Mauritius so that we are in a position to scale up our presence in our chosen areas as and when investment opportunities arise.
We have reviewed the strategic orientation of our divisions and believe that there is scope to benefit from the continuing improvements forecast for the Mauritian economy in 2018 and to leverage our core competencies to focus on developing new markets in the region.
Acknowledgements
2017 has been another challenging year of change but the decisions made are anchored in the Purpose and Commitments of Harel Mallac ‘for the better’ of all its stakeholders. I would like to thank the Leadership Team and each and every one of our employees for their discipline and support in this journey to transform the Group into one ready to seize the business opportunities of tomorrow.
In particular, I would like to remember the contribution of the late Jean-Alain Bigara, Managing Director of Novengi, and express my deepest sympathy to his bereaved family.
I would also express my gratitude to the Board and the Chairman for their valuable support and advice.
Charles HarelChief Executive Officer
Cluster RevenueProfit/(loss) Before
Finance Costs (PBFC)
2017 2016 2017 2016Rs’m Rs’m Rs’m Rs’m
Manufacturing & Trading 3,335 3,055 119 137Business Services 726 650 (2) 29Corporate, Investment & Property 228 228 (34) 8Consolidation adjustments (296) (209) (37) (47)Group 3,993 3,724 46 127Discontinued operations 647 924 (56) (145)Total 4,640 4,648 (10) (18)
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Promote Creativity
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Business review
The Harel Mallac Manufacturing and Trading cluster comprises a multi-disciplinary group of businesses with the flagship subsidiaries broken into:
• Equipment & Systems - Novengi, Linxia and EO
EO and Linxia are mainly engaged in the distribution of information technology and consumer electronic products, the provision of workplace solutions including digital printing, cash processing, integrated mailing systems and related after-sales support, while Novengi operates in the supply, installation and maintenance of industrial equipment in heating, ventilation, air conditioning, refrigeration, material handling and renewable energy amongst others.
2017 was the first financial year in which the subsidiaries were operated as one division and indicators are positive: revenue at these main entities was up by Rs 79m to Rs 1.2bn while profit before finance costs (PBFC) increased by Rs 4m (to Rs 46m). The macroeconomic context remained generally weak in 2017, with the wholesale/retail trade reporting marginal growth of around 3% (in line with 2016) but higher inflation at 4% (vs. 1% in the previous year). The construction industry rebounded in 2017 with growth at 8% but increasingly competitive markets mitigated the benefits for Novengi, which reported a marginal operational loss of Rs 1m.
Achievements for the year include:- EO’s capabilities were again rewarded by Xerox with the
Top Selling Distributor and Best Performance awards.- Linxia increased its market share in the Smart TV segment
with unit sales increasing by 36% in 2017.- Novengi extended its scope of offerings of photovoltaic
energy solutions to companies and individuals through two CEB schemes, the Medium Scale Distributed Generation and the Small Scale Distributed Generation schemes.
Management is confident that with the increasing portfolio of smart solutions and continuous operational improvements, the Technology Equipment sector will continue to expand in the regional as well as the local markets. In the Industrial Equipment sector, 2018 is full of opportunities with major projects announced covering Smart Cities, developments in the port and other public/private infrastructure developments.
• Chemicals, Hygiene & Fertilisers - Archemics, Suchem, MCFI Group, Chemco and Bychemex
This division covers the manufacture and distribution of a wide range of chemicals. These include products for the agricultural sector (e.g. fertilisers from MCFI and agrochemicals from Suchem), for industrial needs (e.g. detergents and textile-related products at Chemco and Bychemex) and consumer products (e.g. FMCG household detergents and cosmetics by Archemics), as well as services such as waterproofing contracting (done through Coolkote within MCFI Group).
The subsidiaries are exposed to volatile market conditions, with the sugarcane agricultural sector contracting by 7.9% and textile manufacturing reporting marginal growth of 1%, while construction was up 7% and consumer spending growth remained positive at 3% despite higher inflation. For 2017, revenues were up by Rs 129m to Rs 2.3bn while PBFC declined by Rs 22m to Rs 79m, mainly due to lower volumes and margins in MCFI.
Management focus continues to remain on:
- Efficiency gains to offset the difficult market conditions, including through operational excellence initiatives as well as financial management (involving leaner working capital flows and ongoing renegotiation of existing contracts).- Market development with double-digit revenue growth in some regional markets (a special mention for Tanzania that had an excellent year), new product launches for detergents, cosmetics and vegetable seeds, as well as marketing and on-the-ground presence with customers on existing products.
The outlook for agricultural and industrial chemicals remains challenging, as there is a structural decline of the agricultural and textile sectors locally. The division’s strategy is to further consolidate the operations to minimise costs (e.g. through competitive sourcing) and to renew the product and service range while increasing its reach in the Mauritian territory and in the wider region.
Manufacturing & Trading
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2016
Profit before finance costs
Technology Equipment
Technology Equipment
Industrial Equipment
Industrial Equipment
Chemicals and Fertilisers
Chemicals and Fertilisers
Chemicals and Hygiene
Chemicals and Hygiene
Others and Consolidation
Others and Consolidation
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3,000
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Business reviewBusiness Services
The Harel Mallac Business Services cluster consists of the following main activities:
• Technology – Harel Mallac Technologies and its overseas subsidiaries in Madagascar, Burundi and Rwanda
Harel Mallac Technologies is organised around three core activities: - Advanced Infrastructure Services, which provides cost-
effective infrastructure solutions to business needs;- Business Automation Services, which has the expertise
to streamline business processes and operations for efficiency; and
- Cloud capabilities to deliver managed services in hosting and connectivity.
The ICT sector continued to slow down locally, declining marginally from the 6% growth experienced 2016. Divisional revenue grew by 8% to Rs 675m in 2017 while PBFC declined from Rs 30m to Rs 6m. This decline follows the negative impact from the continued overhaul of the division’s operations, which led to a significant write-off of costs previously on the balance sheet for Rs 15m, and investments in development of new talents at home and overseas to strengthen its market leadership.
Demand for ICT products and services was driven by public sector initiatives and automation projects in the financial sector, with highlights for the year being:- The successful deployment of the Mauritius National
Assembly Live Broadcast system.- A number of innovation awards at the international
level, recognising the competencies of Harel Mallac Technologies.
The strategic objective for 2018 remains market development in existing countries and exploring new selected territories in Africa while continuing to improve our value propositions for the different markets.
• Financial & Corporate Services – Harel Mallac Global, Harel Mallac Corporate Services and Harel Mallac Advisory
Harel Mallac Global is a management company providing administrative services to international businesses, trusts and individuals. The major focus during 2017 was the acquisition of Baines Trust and Corporate Services and of Baines Advisory Services (rebranded Harel Mallac Advisory); all fully integrated in Q3 2017, hence adding corporate advisory to the portfolio of the division. Harel Mallac Corporate Services provides predominantly share registry services on both an in-house and outsourced systems basis. Sectoral growth of financial and insurance services in Mauritius weakened slightly in 2017 to 6% compared to 2016 – confronted by the continued lag of India-bound
business and weaknesses in African markets – while the consolidation of management companies continued, including foreign acquisition of major players. The division contributed Rs 25m in revenues (2016: Rs 16m) and almost broke even at an operational PBFC level.
Highlights from 2017 include:- Revenue almost doubled at Harel Mallac Global to Rs 17m
and losses before finance costs declined by 75%.- Harel Mallac Corporate Services managed to achieve 7%
growth despite increasing competition by the major banks and certain management companies and in spite of weak business flows dependent upon volumes of new listings on the Stock Exchange of Mauritius.
The priority in 2018 remains new client acquisition in both global and corporate services whilst continuing to expand the range of services to achieve an enhanced value chain for clients. Strong new business inflows in November and December bodes well for 2018.
• Travel – Itineris and Harel Mallac Aviation
Itineris operates in the travel and tourism field, with a focus on outbound travel as well as the cargo General Sales Agent activity (the company represents Leisure Cargo, a German-based cargo management company). Harel Mallac Aviation acts as a passenger General Sales Agent for Condor, Germany’s number one leisure carrier, and India’s flag carrier, Air India. 2017 continued to be favourable for the passenger travel business with an increase in capacity to and from Mauritius, with new airlines and increased frequencies contributing to the rise of 9% in the number of Mauritian travellers in 2017. However, regarding cargo, this increased capacity has placed severe pressure on the market and has accordingly been driving extreme competition. Moreover, this department of our company has been impacted by changes at the parent supplier in Germany after Air Berlin’s liquidation.
Revenue registered marginal growth in 2017 to Rs 26m while PBFC remained more or less static at Rs 1m. During 2017, emphasis was placed on:- Strengthening our new brand, Itineris, and implementing our digital strategy to reinforce market penetration into the Leisure segment. - Reinforcing our corporate segment presence through the Carlson Wagon Lit Travel (worldwide leader in corporate travel) representation and bringing in best industry practices.
2018 will further see investments in systems to improve productivity but also to develop new business avenues in the travel sector, including the inbound tourist avenue, to ensure business diversification and resilience.
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• Digital agency – Activeline
Activeline underwent a strategic review in 2017 to develop more synergies with the Technology division and consolidate services like payroll and other managed services that both divisions were carrying in their portfolio. The digital agency, CZAM, is now repositioning itself as an innovative partner for the development of its customers’ marketing strategies by leveraging on the capabilities of digital technologies.
The wider administrative and support services sector showed marginally weaker growth of 6% compared to 2016 but the restructuring meant a drop in its top-line revenues to Rs 35m (2016: Rs 43m) and operational losses of Rs 8m (vs. Rs 5m in the previous year). With the new market positioning and projects in the pipeline, management is confident that 2018 will bring better results.
Revenue Profit before finance costs
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20
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-
-
(Rs’m) (Rs’m)
Technology
Digital Agency
Financial Services
Travel
Others and Consolidation
2017 20172016 2016
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Business review
The Harel Mallac Asset Management cluster comprises investments in:
• Associates – Attitude Hospitality Management, Biofert, Emineo Holding, Imatech, Maritim (Mauritius), Rehm Grinaker Construction, Rehm Grinaker Properties, Société Oneo, Total Mauritius, Touristic United Enterprise, Water Sport Village and Zilwa Resort
Harel Mallac holds investments in hospitality, engineering, construction, commodities and printing. It aims at participating and holding investments in promising ventures and ambitions to add value through its experience and network in the business community.
The performance in 2017 is notable for the following factors:- Continued growth in the contribution of the hospitality
investments, with all our hospitality-related activities performing better than in the prior year and gaining in value. However, the crystallisation of a contingent consideration liability that was lower than initially anticipated provided a clear indicator of goodwill impairment of Rs18m on the investment because of weaker profitability than assumed at acquisition, which was offset by the gain on the contingent consideration.
- The engineering and construction associates remain cyclical investments, with Emineo swinging back into losses of Rs 5m after being profitable in 2016 at Rs 2m, while Rehm Grinaker benefited from the pick-up in the construction sector in Mauritius to return to marginal profitability compared to a Rs 36m loss in 2016.
- Total Mauritius continued its steady progress within our investment portfolio, contributing Rs 35m to the share of profits consolidated by Harel Mallac compared to Rs 29m in 2016.
• Joint venture – Solar Field
Harel Mallac jointly controls Solar Field, a photovoltaic farm providing green electricity to the national grid. It had its first full year of production in 2017 and it contributed Rs 4m to the Group’s profitability, with the performance ratios of the photovoltaic farm being in line with industry standards.
• Property
Harel Mallac holding companies manage a portfolio of investment properties, located mainly in and around the Port Louis area. The moderate economic growth as well as the oversupply of rental space in Port Louis, compounded by the planned development of smart cities, represent challenges to be managed.
The portfolio recorded a marginal decline in fair value from 2016 but yielded better net rental income. Management continues to review all opportunities to extract value from what remains a significant asset of the Group.
Asset Management
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Profit contribution to the Group Value of investments
0
-
0
-
-
80
-
-20
20
-
100
300
200
400
-
-
-
-
900
1100
1000
1200
-
-
-
-
500
700
600
800
-
-
-
-
1300
1400
-
-
-
-40
120
-
40
-
-
-
-
-
100
-
130
140
150
160
60
(Rs’m)
(Rs’m)
2017
2017
2016
2016
Tourism and Hospitality
Energy
Engineering and Construction
Investment Properties
Others
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Delivering on our Commitments
For the Better of OUR PERFORMANCE
2017 was a year of change, as announced during the strategic brand repositioning of 2016. To gear itself for the future, Harel Mallac reviewed its organisational structure and re-aligned its governance and decision-making processes with this new structure in the first part of 2017 in order to ensure efficiency and coherence.
On the operations side, in line with its ambition to make business services become its core business over the medium term, Harel Mallac disengaged from the retail industry, where it had been a pioneer with Monoprix. Almost concurrently, Harel Mallac Global Services merged with Baines Trust to create Harel Mallac Global, a more sizeable management company, with a focus on Africa and wealth management, and representative offices in Dubai and Kenya.
Harel Mallac believes that clean energies are a key component of our country’s future. Environment should therefore be considered as a key component in our new business developments. After the launch of operations of our Solar Field photovoltaic farm, Novengi engaged in the provision of photovoltaic schemes and of environment-friendly and health-friendly cleaning solutions. MCFI, for its part, is completing the project it is working on regarding organic fertilisers.
Harel Mallac invested extensively in IT tools and solutions to support the Group’s transformation: open Wi-Fi and a modern telephony system were rolled out in 2017, and Group staff have access to a more dynamic, social and collaborative intranet platform (Edith). The IT transformation is driven by a transversal IT Steering Committee set up in September 2017.
For the last three years, the Group has invested considerably in the training and development of its employees at all levels in view of developing their skills and competencies to meet the growing business needs. The Leadership Team participated in a leadership development programme for both in May and December with Thomas More Partners. In November 2017, over twenty employees of the finance and accounts team attended a workshop on Financial Reporting Standards at Deloitte institute.
For the Better of OUR CONSUMER
Our business units are regularly consulting their customers through satisfaction surveys, in order to keep abreast of their expectations, adjust to the latter and improve the consumer experience.
In order to ensure a standardised and optimal service throughout its business units, Harel Mallac has given an ambitious mandate to a transversal team of ten professionals, whose fundamental purpose is to identify and drive the implementation of optimal solutions to exceed delivery on our commitments towards the consumer, through quick wins and long-term change.
The foundation also initiated a sensitisation programme on the protection of the environment and solid waste, in five schools located in the vicinity of some of the company’s sites. The ‘J’aime ma Terre’ programme ran for three months and involved 42 staff-volunteers, as well as the collaboration of Mission Verte and Mouvement pour l’Autosuffisance Alimentaire (MAA).
On the environmental side, the Group has also continued its Go Green Initiative, in partnership with Mission Verte. In 2017, the NGO collected 1,560kgs of paper and 165kgs of cardboard from our Port Louis offices, for recycling purposes.
For the Better of OUR PLANET
Following the launch of Harel Mallac’s new Code of Ethics, all employees attended plays by ‘La Comédie Mauricienne’ on the topic of ‘integrity at work’. The plays were organised on the various work sites of our business units, namely Bois Marchand, Pailles, Fort George, Port Louis and Phoenix.
The Fondation Harel Mallac continued its support to non-governmental organisations (NGOs) working for the benefit of vulnerable children and in education. In 2017, it has contributed to four NGOs:
SOS Children’s Villages (Bambous).
Collège Technique Saint Gabriel (Tranquebar).
ANFEN (nation-wide) on the Future Kids IT Literacy programme in the network’s schools.
Association d’Alphabétisation de Fatima (Triolet) for part of teaching staff costs.
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For the Better of OUR PEOPLE
We strongly believe that it is essential to create and nurture a conducive work environment where our people feel valued, inspired, engaged, empowered and recognised for their effort and performance.
We believe that no strategic repositioning can be successful only if understood and endorsed by the employees, who are, after all, the main ambassadors of a brand. Harel Mallac launched its culture development programme, CHORUS, in March 2017, aimed at explaining the new Harel Mallac culture to everyone and instilling it in them. All employees participated and brought our principles and commitments to life through games, films and songs. The best films, best actor, best actress and the best song were rewarded during the end of year event in December 2017.
The group also embarked on Let’s ACT, a three-month internal campaign on Agility, Care and Trust (ACT) from September to November 2017. Every week was devoted to a model-behaviour related to ACT, with activities on our intranet, through collaborative games, competitions and posters illustrating the different behaviours. Over 450 employees participated in our activities organised during the campaign.
Harel Mallac worked with AON Hewitt for the Employee Engagement Survey, conducted in October, with a positive participation rate of 81%. The overall engagement rate for the group was 48%. Although the engagement score is below our expectations, it is worth noting that eight business units recorded an increase in their employee engagement score.
The survey provided valuable insights and feedback from our employees. The results were presented in all business units, which in turn organised focus groups and set up employee engagement committees early 2018. These committees now develop initiatives with a view to improving our level of engagement across business units and in the Group.
In terms of welfare, the annual Funlympics event was held in August and various sports and fun activities took place, including football, volleyball, badminton, domino, dart, table tennis, carrom, ‘pétanque’, playing cards and others. The activities were a combination of fun, amusement, interaction between colleagues and team spirit in a friendly atmosphere. Business units also organised at their own level various welfare activities. The Harel Mallac Employee Privilege Card was launched in December. The card gives access to numerous privileges and discounts in our companies as well as in other stores around Mauritius.
Despite operating in a very challenging economic environment, the Group continues to develop all its activities by considering the health and safety aspect. The Group aims at providing and maintaining a healthy, safe and positive work environment for all employees.
Risk assessments, control systems and preventive measures against occupational disease and hazards in compliance with OSHA 2005 were set up and closely monitored within the Group. In the same line, various training sessions on health and safety were organised throughout the Group, namely hazard identification and risk assessment, working at height, scaffold safety, fire warden and first aid.
The annual safety week was organised in June. Awareness sessions on breast and cervical cancer, nutrition and non-communicable diseases were organised. The Group also sponsored preventive influenza vaccination for all employees. In addition, employees were also encouraged to donate blood. It is worth noting that with respect to safety performance, neither fatality nor major work-related incident was recorded in 2017.
Going forward, the Group will focus on implementing a cohesive Talent Management Framework. The main strategic objectives will be:
Core HR Services - enable effective operations of our business units by delivering excellent core HR services across the Group.
Performance driven culture - position Harel Mallac as an employer of choice, improve our performance management system in place and identify, attract and retain high performing talents.
Employee engagement - improve our level of engagement by creating a culture of engagement where employees feel committed and passionate about their jobs.
Leadership transformation - define and develop a vision, values and culture for leadership, for all leaders to be role models in leadership excellence.
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Board of Directors
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From left to right:Anwar Moollan S.C., Charles Harel, Pascal Boris C.B.E., Anne Christine Lévigne-Fletcher C.S.K., Antoine L. Harel, Jérôme de Chasteauneuf, Paul Clarenc, Dean Ah Chuen
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Board of Directors(Cont’d)
Antoine L. Harel (60)Chairman - Non-Executive Director
Antoine L. Harel is a Fellow Member of the Institute of Chartered Accountants in England and Wales. He holds a BA (Hons) degree in Accounting and Computing. He joined Harel Mallac & Co. Ltd in 1987 and launched the Company’s Information Technology Division. On joining the Board in 1990, he was appointed Executive Director with responsibility for the Information and Communication Technology and the Distribution and Retail Divisions. In 1997, he was appointed Group CEO and has been the Chairman of the Board since April 2005. He was President of the Mauritius Chamber of Commerce & Industry from 1992 to 1993.
Other Directorships (listed Companies):The Mauritius Chemical and Fertilizer Industry Limited (Chairman), Bychemex Limited (Chairman), Chemco Limited (Chairman) and Les Gaz Industriels Ltd (Chairman).
Charles Harel (50)Chief Executive Officer - Executive Director
Charles Harel holds a National Diploma in Management and Finance from the Cape Technikon, South Africa, as well as an MBA from the University of Birmingham, UK. He joined the Harel Mallac Group in 1998 as the General Manager of the Tourism and Retail Cluster. He has, over the years, held various positions across the Group before being nominated as the CEO Designate of the Harel Mallac Group in 2013 and CEO from 1 January 2014. He was appointed to the Board of Directors in June 2006.
Other Directorships (listed Companies):The Mauritius Chemical and Fertilizer Industry Limited, Bychemex Limited and Chemco Limited.
Dean Ah Chuen (53)Independent Director
Mr. Dean Ah-Chuen holds a BA degree in Computer Science, Economics and Mathematics from the University of Sydney (Australia) and holds an MBA in International Business from the University of Western Sydney.
Dean worked for Westpac Banking Corporation (Australia) in the IT Division and for Toyota before returning to Mauritius in 1994 where he joined ABC Motors Company Limited as Business Development Manager. Today, he is the Executive Director of ABC Motors Company Limited, now listed on DEM with overall responsibility for the Automobile Division of the ABC Group. He is currently a Board member of Lovebridge Ltd (a joint private / public project to assist poor income families). He is also a member of the Board of Directors of the Trust Fund for Excellence in Sports, and a member of the Board of Directors of Club Maurice, both organisations being set up by the Government of Mauritius. Previously, he was a director of the Mauritius Post & Co-operative Bank Ltd. He was appointed to the Board of Directors in June 2012.
Other Directorship (listed Company): ABC Motors Co. Ltd.
Pascal Boris C.B.E. (68) Non-Executive Director Appointed on 4 October 2017
Pascal Boris C.B.E. (Non-Executive Director) graduated from Ecole des Hautes Etudes Commerciales (HEC) Paris, the New York University Stern Institute and the London Business School. He is a former international bank CEO. After a rich 40-year career in international banking, namely with The Chase Manhattan Bank, Paribas and BNP Paribas, he became a business angel for young entrepreneurs.Pascal Boris C.B.E. is the joint founding President of Le Cercle d’outre-Manche and the honorary President of the French Chamber of Great Britain.
Other Directorships (listed Companies): None.
Jérôme de Chasteauneuf (51)Independent Director
Jérôme de Chasteauneuf qualified as Chartered Accountant of England and Wales in 1992 and holds a BSc (Hons) degree in Economics from the London School of Economics and Political Science. He joined the CIEL Group in 1993, became Head of Finance in 2000 and serves as Executive Director since January 2014. He was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May 2010.
Other Directorships (listed Companies):CIEL Limited, Alteo Limited and Sun Resort Limited.
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Paul Clarenc (73)Independent Director
Paul Clarenc holds a Diploma in Production Management (Delft, Holland) and a Bachelor of Science (Hons) degree from Cape Town University. He was the Managing Director of Mauritius Oil Refineries Limited from 1986 to 2014. He is a Founder Member of the Association of Mauritian Manufacturers. He has also been, from 1995 to 2000, a member of the Council and in 1998, President of the Mauritius Chamber of Commerce and Industry. Paul Clarenc was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May 2004.
Other Directorships (listed Companies):Plastic Industry (Mauritius) Ltd. and Mauritius Oil Refineries Ltd.
Anne Christine Lévigne-Fletcher C.S.K. (63) Chevalier de l’Ordre National du Mérite
Independent Director
Anne Christine Lévigne-Fletcher C.S.K. holds a Diplôme de l’Institut d’Etudes Politiques de Paris/Sciences Po, a Licence en Droit from Assas University and a Licence en Littérature Anglaise from Université de Nanterre. She was, from 1976 to 1981, the Managing Director/Designer of Mistra, an international company based in Paris operating in the design industry. She has been the Managing Director of Les Ateliers Créatifs de l’Océan Indien Ltée/Caléage Ltd - Hémisphère Sud since 1981. Anne Christine Lévigne-Fletcher C.S.K. was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May 2011.
Other Directorships (listed Companies): None
Anwar Moollan S.C. (50)Independent Director
After reading for a degree in Mechanical Engineering in France, Anwar Moollan S.C. studied Law at Downing College, Cambridge and the Université de Paris Panthéon-Sorbonne. He joined the Chambers of Sir Hamid Moollan, QC in 1995, and practices as a barrister. Anwar Moollan S.C. joined the Board of Directors of Harel Mallac & Co. Ltd as an Independent Director in June 2003.
Other Directorships (listed Companies): Compagnie Immobilière Limitée.
Michel Rivalland G.O.S.K. (64) Executive DirectorDeceased on 12 August 2017
Michel Rivalland G.O.S.K. was a Fellow Member of the Chartered Association of Certified Accountants. He was appointed to the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited on 1 June 2006 and Managing Director in October 2006. He was an Executive Director of Harel Mallac & Co. Ltd. Michel Rivalland G.O.S.K. was appointed to the Board of Directors of Harel Mallac & Co. Ltd in May 2006.
Other Directorships (listed Companies) on 12 August 2017:Compagnie des Magasins Populaires Limitée, The Mauritius Chemical and Fertilizer Industry Limited, Bychemex Limited and Chemco Limited.
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Leadership Team
1. Charles HARELChief Executive Officer
Charles Harel holds an MBA from the University of Birmingham, UK, as well as a National Diploma in Management and Finance from Cape Technikon, South Africa. He joined the Harel Mallac Group in 1993. He has held various senior management positions within the Group and was appointed Chief Executive Officer of the Harel Mallac Group in January 2014.
2. Shemboosingh CHEEKHOOREEManaging Director – MCFI, Chemco, Bychemex
Holder of a Bachelor’s degree in Chemical Engineering from the North East London Polytechnic, UK, Shemboosingh Cheekhooree worked at Tate and Lyle Process Technology in the UK, in 1983. Before joining Harel Mallac Export Ltd as Managing Director in 2012, he was the General Manager of FM Denim Co. Ltd. Since October 2014 he is the Managing Director of Harel Mallac Export Ltd, Harel Mallac (Tanzania) Limited and MCFI Group of Companies.
3. Anthony COOMBESManaging Director - Archemics
Holder of a Bachelor’s degree in Mechanical Engineering (Imperial College, University of London) and a French Masters Degree ‘3ème cycle de Gestion’ - with specialisation in International Business Strategy – Marketing - from the Institut Supérieur de Gestion (Paris), Anthony Coombes has 18 years of experience in the FMCG industry at a senior management level. He was Executive Director at Scott & Co., in charge of the Hospitality, Corporate and Export channels and the Nespresso business, before joining Harel Mallac as Managing Director of Archemics in June 2017.
4. André NAIRACGeneral Manager – Itineris & Harel Mallac Aviation
André Nairac started his career in the aviation industry in 1989 when he joined the sales and marketing department of South African Airways (SAA) in Mauritius. He subsequently held the position of SAA’s Country Manager in Côte d’Ivoire. He took employment with Harel Mallac as General Manager of the Travel and Leisure business in 2005.
5. Christine NGUYEN THAC LAMChief Operating Officer – Equipment & Systems Division
Christine Nguyen Thac Lam graduated from the French business school H.E.C. (Hautes Etudes Commerciales de Paris), and holds a C.E.M.S. Master from the Community of European Management Schools. She worked for more than 20 years with multinational corporations such as ExxonMobil, Procter & Gamble, and Rio Tinto Alcan, leading business and finance controlling. From June 2014 to January 2017, she served as General Manager Finance of the Food & Beverages cluster of the Currimjee Group in Mauritius. Christine joined Harel Mallac in February 2017.
6. Shateeaum SEWPAULGeneral Manager – Harel Mallac Technologies
Shateeaum Sewpaul holds an MBA and a Postgraduate diploma in Business Administration from the Heriot-Watt University, Scotland. He also holds distinctive certificates in Computer Science and Administrative Management from the City and Guilds of London Institute (UK) and from the Institute of Administrative Management (UK) respectively. He started his career in ICT in 1996 with Harel Mallac, where he has held different senior sales and management positions until 2001. He was also General Manager of a leading South African IT brand (Distributor) from 2001 to 2004, before joining Harel Mallac again in 2004. He was appointed General Manager of Harel Mallac Technologies in April 2016.
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7. Sophie DESVAUX DE MARIGNYGroup Head of Communications and CSR
Sophie Desvaux de Marigny holds a Maîtrise in Geopolitics and a Magistère in International Relations and Diplomacy (both from Sorbonne University, Paris) as well as an Executive MBA from Dauphine University. After working for the United Nations in New York, she came back to Mauritius in 2003 and joined the European Commission Delegation as Assistant to the Economic Adviser for three years. She then spent ten years in Medine Group as Head of Corporate Communications and Sustainability. Sophie joined Harel Mallac in March 2016.
8. Gajanand GOPALLAGroup Financial Controller
Holder of a BA and MA in Economics from the University of Cambridge and a member of the Institute of Chartered Accountants of Scotland, Gajanand Gopalla (an ex-laureate) worked in London as Audit Executive at Ernst & Young LLP and Finance Manager at Close Brothers Group plc. He returned to Mauritius in 2011 to be Partner at Nexia Baker & Arenson, Chartered Accountants and subsequently Group Finance Director at Apavou. He joined Harel Mallac in March 2016.
9. Vanessa HIPPERTGroup Head of Corporate Services
Vanessa Hippert holds a Master’s degree in Banking and Finance and a Licence in Economics from the Université de Paris Panthéon-Sorbonne. Prior to joining Harel Mallac as Head of Business Risks and Operational Efficiency in October 2014, she has held various management position within Société Générale Investment Banking in New York and Paris between 2004 and 2014.
10. Jeanique PAUL-GOPALGroup Head of Human Resources
Jeanique Paul-Gopal holds a Diploma in Human Resources Management from the Mauritius Employers’ Federation, and an MSc in Psychology of Work from the University of Leicester (England). She is also accredited in Psychometric Assessments at Work, namely for personality profiling and ability assessment. She is a member of the British Psychological Society and of the European Federation of Psychologists. She spent six years as Human resources officer at Panagora Marketing (Eclosia group), and two years as Group HR Manager at VFS management Services, before becoming HR Operations Manager of ENL Corporate Services (ENL group) from 2009 to 2017. Jeanique joined Harel Mallac in October 2017.
11. Anshi SAMINADENGroup Head of Legal Affairs
Anshi Saminaden is a Barrister at Law, who was called to the Bar of England and Wales in 2005 and to the Mauritian Bar in 2006. She read law both at the University of Surrey, England and the Université René Descartes, Paris V, France and graduated with an LLB Honours Law & French in 2004. She completed her Bar Vocational Course at the Manchester Metropolitan University in 2005 and is a member of Lincoln’s Inn of Court. Following her pupillage in Mauritius, in the Chambers of Mr. Patrice Doger de Spéville, Senior Counsel and the Office of Mr. Thierry Koenig, Senior Attorney, she was a Consultant at the law firm De Comarmond & Koenig, before joining the Medine Group as In-House Legal Adviser and Legal Coordinator (2007-2017). Anshi joined Harel Mallac in October 2017.
12. Christian YONG KIANG YOUNGGeneral Manager – Projects and Investment
Christian Yong Kiang Young is a member of the Institute of Chartered Accountants in England and Wales (ICAEW) and holds a Bachelor of Science degree from the London School of Economics, UK. He was Director – international Accounting & Reporting at MoneyGram from September 2009 to September 2015 and Audit Manager at KPMG from September 2002 to July 2009. In October 2015, he joined Harel Mallac as Group Financial Controller and accepted the challenge of managing the Group’s projects and investments portfolio in August 2016.
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�Director during the year ended 31 December 2017 � Resigned during the year ended 31 December 2017 £ President
¾ Gérant Statutaire � Alternate Director �Ceased to act as Director during the year ended 31 December 2017
Directors of Subsidiary Companies
AH KINE S S Hock Meen � � � � � � � � � � �
AH SUE M Alain � � � � � �
BADAT Osman � �
BOULLÉ François Louis � �
CHEEKHOOREE Shemboosingh � � � � � � � �
COOMBES Anthony �
CRAMBADE Olivier Philippe �
DOGER DE SPEVILLE Allain �
ECHEVIN Hélène Marie � �
ESPOSITO ERDOZAIN Phillipe Michel �
FON SING Sandra �
FRANCIS Alfred L �
GASAATURA Kamau Philip �
GOPALLA Gajanand � � � � � � � � � �
HAREL Antoine L � � � � � � � � � � � � � �
HAREL Charles � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � ¾ � � � � � � ¾ � � � � � � �
HAREL Guy � � � �
HAREL MALLAC & CO. LTD. � �
HEBERDEN Edward Vaughan � � � �
HIPPERT Vanessa � �
JODHUN Hurrydeosingh ¾ ¾ ¾
LABAT Vincent � � �
LECLEZIO Gaëtan �
MUNUSAMI ThiagarajanMUSHI Sirili Ileti �
NG KWING KING Harold �
NGUYEN THAC Christine � � � � �
PILOT Michel � �
RIVALLAND G.O.S.K. Michel � � � � � � � � � � � � � � � � � � � � �SALLUSTRO Jean Luc �
SEWPAUL Shateeaum � �
THOMAS Appalsamy � �
TYACK Fréderic � � �
UDHIN Muhamud Junaid �
VARJANGBHAY Ashok �
VENKATASAMY Ravi �
VERIEN Philippe � � �
YONG KIANG YOUNG Christian Pierre � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �
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AH KINE S S Hock Meen � � � � � � � � � � �
AH SUE M Alain � � � � � �
BADAT Osman � �
BOULLÉ François Louis � �
CHEEKHOOREE Shemboosingh � � � � � � � �
COOMBES Anthony �
CRAMBADE Olivier Philippe �
DOGER DE SPEVILLE Allain �
ECHEVIN Hélène Marie � �
ESPOSITO ERDOZAIN Phillipe Michel �
FON SING Sandra �
FRANCIS Alfred L �
GASAATURA Kamau Philip �
GOPALLA Gajanand � � � � � � � � � �
HAREL Antoine L � � � � � � � � � � � � � �
HAREL Charles � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � ¾ � � � � � � ¾ � � � � � � �
HAREL Guy � � � �
HAREL MALLAC & CO. LTD. � �
HEBERDEN Edward Vaughan � � � �
HIPPERT Vanessa � �
JODHUN Hurrydeosingh ¾ ¾ ¾
LABAT Vincent � � �
LECLEZIO Gaëtan �
MUNUSAMI ThiagarajanMUSHI Sirili Ileti �
NG KWING KING Harold �
NGUYEN THAC Christine � � � � �
PILOT Michel � �
RIVALLAND G.O.S.K. Michel � � � � � � � � � � � � � � � � � � � � �SALLUSTRO Jean Luc �
SEWPAUL Shateeaum � �
THOMAS Appalsamy � �
TYACK Fréderic � � �
UDHIN Muhamud Junaid �
VARJANGBHAY Ashok �
VENKATASAMY Ravi �
VERIEN Philippe � � �
YONG KIANG YOUNG Christian Pierre � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �
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Believe in the Power of Ambition
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Harel Mallac & Co. Ltd is committed to the highest standards of business integrity, transparency and professionalism in all its endeavours in order to ensure that the activities within the Company and the Group are managed ethically and responsibly to enhance business value for all stakeholders. The Company is fully committed to the highest principles of corporate governance.
THE BOARD OF DIRECTORS
The Board exercises leadership, entrepreneurship, integrity and sound judgement in directing the Company, so as to achieve continuing prosperity for the organisation while embracing both performance and compliance. The Board also ensures that the activities of the Company comply with all legal and regulatory requirements as well as with its constitution, from which the Board derives its authority to act.
The Board inter alia oversees the development and implementation of the Company’s corporate strategy and reviews performance objectives. It provides for succession plans for key individuals, ensures effective communication with the Company’s stakeholders, promotes the Company’s Code of Ethics and oversees financial management and capital management. As such, it reviews and approves quarterly and annual financial reports, monitors financial results and approves major capital expenditure, major acquisitions, divestitures and material commitments. Finally, the Board oversees compliance and risk management.
The roles of the Chief Executive Officer and the Chairman are separated. Non-executive Directors have access to members of the leadership team, with whom they can meet freely without the executive Directors.
All Directors have access to the Company Secretary and newly appointed Directors follow an induction programme.
Board Committees, as described below, have been set up to assist the Board and its Directors in discharging their duties and responsibilities through comprehensive evaluation of specific issues, followed by carefully considered recommendations to the Board.
The Board Committees meet regularly under the terms of reference set by the Board. The Board entrusts the operating decisions of the Company to the CEO and Leadership Team, who meet regularly to ensure the smooth running of the organisation. With a view to enhancing the Board’s effectiveness, a Board performance review is carried out yearly to assess the Directors’ appreciation of the Board’s performance, its procedures and practices. The results of the assessment are discussed at the Corporate Governance Committee. This Committee makes recommendations to the Board on any remedial action that may be required.
The Directors of the Company hold office for one year but are eligible for re-appointment. Directors are elected or re-elected yearly by separate resolutions.
The composition of the Board of Directors, the Directors’ profiles and their other directorships in listed companies are provided on pages 22 to 25.
BOARD MEETINGS
The Board meets regularly during the year. For the period under review the Board met ten times. Board meetings are conducted in accordance with the Company’s constitution and the Companies Act. Board meetings are organised in such a way that Directors receive all relevant information pertaining to the agenda of the Board meeting so that they may participate meaningfully in the decision-making process and fully make their contribution as Directors.
The Board may invite management or external consultants to attend Board meetings when required.
BOARD COMMITTEES
Corporate Governance Committee
At 31 December 2017, the Corporate Governance Committee consisted of Messrs Antoine L. Harel (Chairman), Paul Clarenc, Anwar Moollan S.C. and Dean Ah Chuen. The Company Secretary acts as Secretary to the Committee.
The Committee’s terms of reference cover the key areas that are the remit of a nomination and remuneration committee as contained in its formal terms of reference approved by the Board. Its main responsibilities include establishing formal and transparent procedures for developing policy on executive and senior management remuneration, as well as determining specific remuneration packages for executive Directors of the Company. This Committee fixes the fees of the Company’s non-executive and independent non-executive Directors. It oversees the process regarding recommendations of potential Directors, and ensures that proposed candidates are fit and proper to act as Directors. It monitors the balance and effectiveness of the Board. It also makes recommendations to the Board on the nomination and remuneration of the Company’s representatives on the Board of subsidiary companies.
The Corporate Governance Committee has assessed the Board and made recommendations for the election of Directors at the next Annual Meeting of Shareholders.
Corporate GovernanceReport
Believe in the Power of Ambition
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Corporate GovernanceReport (Cont’d)BOARD COMMITTEES (CONT’D)
Audit Committee
The Audit Committee consists of Messrs Jérôme de Chasteauneuf (Chairman), Anwar Moollan S.C. and Mrs Anne Christine Lévigne-Fletcher C.S.K. Late Michel Rivalland G.O.S.K. sat on the Committee up to 12 August 2017. The Company Secretary acts as Secretary to the Committee.
The Committee fulfilled its responsibilities for the year under review, in accordance with its formal terms of reference approved by the Board. The role and responsibility of the Audit Committee is to assist the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems and control processes, and the preparation of accurate financial reports and statements, in compliance with all applicable legal requirements and accounting standards. The Committee also caters for issues within the ambit of a risk management committee and as such provides a forum for discussing business risks and control issues and for formulating relevant recommendations for consideration by the Board.
The Board is satisfied that the Audit Committee has the required skills, knowledge and financial experience to discharge its duties effectively.
Strategic Committee
The Strategic Committee is chaired by Mr Antoine L. Harel and its member is Mr Charles Harel. Late Michel Rivalland G.O.S.K.
sat on the Committee up to 12 August 2017. The Company Secretary acts as Secretary to the Committee.
This Committee monitors the implementation of plans and policies decided by the Board, advises executives in the interim period between Board meetings, and evaluates strategic plans, budgets, acquisitions and proposals by executives for presentation to the Board. This Committee also validates small-sized projects that are in line with the Company’s strategic plan as determined by the Board.
COMPOSITION OF SUBSIDIARY COMPANIES’ BOARDS
The composition of the Boards of subsidiary companies is given on pages 28 and 29.
DIRECTORS’ FEES
Non-executive Directors are paid Directors’ fees commensurate with their responsibilities on the Board. Those serving on Board Committees receive additional fees. The Company’s executive and non-executive Directors sitting on the Boards of subsidiary companies may also receive Directors’ fees from such subsidiaries. The fees paid are in line with market practices.
ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS IN 2017
Board of Directors
Corporate Governance Committee
Audit Committee
Strategic Committee
AH CHUEN Dean 8/10 3/4 - -BORIS Pascal C.B.E. 2/2 - - -CLARENC Paul 9/10 2/4 - -DE CHASTEAUNEUF Jérôme 8/10 - 4/4 -HAREL Antoine L. 10/10 4/4 - 7/7HAREL Charles 10/10 - - 7/7LEVIGNE FLETCHER C.S.K. Anne Christine 9/10 - 4/4 -MOOLLAN Anwar S.C. 3/10 1/4 1/4 -RIVALLAND G.O.S.K. Michel 6/10 - 3/3 3/3
DIRECTORS’ REMUNERATION
Directors’ remuneration is given on page 38. It has been disclosed globally due to the commercial sensitivity of the information.
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Corporate GovernanceReport (Cont’d)REMUNERATION POLICY
The Company’s remuneration policy recommends that the Company provides competitive rewards for its senior executives and other senior management staff, taking into account the Company’s performance and external market data from independent sources and in particular, regarding the latter, salary levels for similar positions in comparable companies. The remuneration package consists of base salary, fringe benefits and individual and collective performance bonuses.
The remuneration package is determined by the Board of Directors upon recommendations from the Corporate Governance Committee.
SHAREHOLDERS’ AGREEMENT AFFECTING THE GOVERNANCE OF THE COMPANY BY THE BOARD
The Company is not aware of any such agreement during the year under review.
THIRD PARTY MANAGEMENT AGREEMENT
There was no agreement between third parties and the Company or its subsidiaries during the year under review.
LEADERSHIP TEAM PROFILE
The profile of the Leadership Team is given on pages 26 and 27.
RELATED PARTY TRANSACTIONS
Related party transactions are detailed on page 114 and 115.
RISK MANAGEMENT
Risk management refers to the process used by the Company to monitor and mitigate its exposure to risk. The Board regularly addresses and evaluates physical, human resources, technology, financial, business, operational, reputational as well as regulatory and compliance risks.
Although the Board is ultimately responsible for the process of risk management, the Company’s management is accountable to the Board for the design, implementation and detailed monitoring of the risk management process.
The Board has delegated to the Audit Committee the responsibility to supervise the monitoring and mitigation of risk exposure. The Audit Committee has overseen a risk review in collaboration with management. Internal and external risks facing the organisation have thus been identified and the management is implementing the mitigation of such risks.
In 2010, a risk management framework was adopted, followed by the implementation of a continuous and dynamic system of risk assessment through compliance checks and discussions with management for enhanced risk mitigation strategies. A risk register has been elaborated for better safeguard of the Company’s interests and assets.
Among the risk areas identified and control procedures put in place are the following:
Physical risks
Among the physical risks identified are unavoidable events such as riots, cyclones and other natural calamities. Mitigating actions such as the adoption of cyclone and fire procedures, subscription to a relevant insurance cover, and the identification of a business continuity plan and disaster recovery plan have been taken.
To limit the occurrence of on-site accidents, health and safety as well as security procedures have been implemented.
The Company also draws upon the expertise of both an occupational physician consultant and a full-time health and safety officer.
The Company’s control procedures ensure mitigation of risks relating to fraud and theft.
Human resources risks
Loss of key personnel has been identified as a major risk factor. In view of mitigating this risk, retention policies have been adopted and a formal performance assessment and reward system has been implemented within the Company. Furthermore, a Code of Ethics has been adopted, so as to limit reputational risks. Health surveillance is performed at regular intervals on employees in high-risk jobs in line with the Company’s health and safety policy.
Technology risks
Cyber-attacks are rampant and pose a real threat to digital business processes and data. To mitigate those risks, end-user cybersecurity awareness is raised through regular communication about handling of suspicious emails, attachments and password management. Vulnerability assessments are run on publicly-exposed interfaces such as firewalls and those are reviewed to address any identified issues. The Group IT policies have been reviewed and are being enforced through action plans and end-user training to ensure proper IT governance.
Financial risks
Information on financial risks management is given in note 3 to the Financial Statements on pages 60 to 63.
Internal control
Internal control is a process designed to provide reasonable assurance regarding the achievement of the Group’s objectives in respect of effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. It is carried out by the Board of Directors, the management and other personnel. It is applicable to and is built into, the various business processes so as to cover all significant enterprise areas.
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RISK MANAGEMENT (CONT’D)
Internal control (Cont’d)
Systems and processes have been implemented within the Group and are regularly controlled by the internal audit function to ensure that they are being adhered to and that they are effective. The Internal Audit performed twelve audit reviews during the year. Reports are reviewed by the Audit Committee, which makes its recommendations for modifications and/or upgrading of audit systems and processes, as and when necessary, to enhance their effectiveness. Though internal control mechanisms cover subsidiaries, they do not include associate companies.
INTERNAL AUDIT
Internal audit is a function responsible for providing assurance to the Board regarding the implementation, operation and effectiveness of internal control and risk management systems within the Group. It reports to the Audit Committee and to the Board of Directors. It assists in the maintenance and improvement of the process by which risks are identified and managed, and in the strengthening of the internal control framework.
The Group Internal Audit has examined the current control systems to check their suitability and to ensure that they are being adhered to. The Internal Audit department conducts its assignments based on a yearly plan that is validated by the Audit Committee. The Group Internal audit has unrestricted access to the Company’s records, management and employees. Systems reviewed in 2017 at the Company’s and subsidiaries’ levels include fixed assets, procurement and accounts payable, work-in-progress management, expenses control cycles, sales and accounts receivables, cash receipts, banking procedures, stock cycles, payroll, compliance of our FSC Licensed companies with the requirements of the Financial Services Commission and other regulatory bodies. The review also covers all significant areas of the Company’s and its subsidiaries’ internal control.
The reports produced by the Group Internal Audit were regularly submitted to the Audit Committee for discussion and follow-up of the implementation of recommended actions.
COMPANY’S CONSTITUTION
The constitution of the Company does not provide any ownership restrictions or pre-emption rights. It is in agreement with the Companies Act 2001 and the listing rules of the Stock Exchange of Mauritius and does not contain any material clause that needs to be disclosed.
GROUP STRUCTURE
The Directors recognise that the parent entity is Société de Lerca, which holds 50.52 percent of the voting rights of Harel Mallac & Co. Ltd and that the ultimate parent entity is Société Pronema. The Director common to the above entities is Mr Antoine L. Harel who is gérant of Société de Lerca and of Société Pronema.
SHAREHOLDINGS OF MORE THAN 5 PERCENT AS AT 22 MARCH 2018
Shareholdings of more than 5 percent as at 22 March 2018 are detailed on page 39.
PROFILE OF THE COMPANY’S SHAREHOLDERS AS AT 22 MARCH 2018
The profile of the Company’s shareholders as at 22 March 2018 is detailed on pages 36 and 37.
DIRECTORS’ AND OFFICERS’ INTERESTS IN SHARES
The direct and indirect interests of Directors and officers in the ordinary shares of the Company and its subsidiaries are to be found on page 38.
DIRECTORS’ DEALING IN SHARES OF THE COMPANY
The Directors follow the Model Code for Securities Transactions as detailed in Appendix 6 of the Stock Exchange of Mauritius Listing Rules whenever they deal in the shares of the Company.
EMPLOYEE SHARE OPTION PLAN
No employee share option plan is available.
DIVIDEND POLICY
The Company’s dividend policy provides that the dividend payable to the Company’s shareholders would represent some 50 percent of the after-tax profit for the relevant period, before exceptional items. However, due consideration is given by the Board to the need to avoid major fluctuations from one year to the next.
During the year under review the Board declared a dividend of Rs 1.80 per ordinary share.
Corporate GovernanceReport (Cont’d)
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Corporate GovernanceReport (Cont’d)
Year Dividend per share Dividend Cover Dividend yield(Rs) (Times) (%)
2012 3.00 1.07 2.652013 3.00 0.71 2.782014 2.50 3.37 2.282015 1.80 0.14 1.902016 1.80 0 2.672017 1.80 1.03 2.17
SHARE PRICE INFORMATION
Daily share price from January 2016 to February 2018
CODE OF ETHICS
As a leading operator in the Mauritian market, the Harel Mallac Group has a responsibility to conduct its business with the highest ethical standards. With the support of Transparency Mauritius, a transversal team has rewritten our group Code of Ethics, which was adopted by the Board of Directors in December 2017. It was shared with all employees in paper and electronic copies, as well as through an e-learning module, and is available on the Group’s website and intranet.
100
90
80
70
60
50
40
Jan-
16
Feb
-16
Jan-
18
Feb
-18
HA
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(RS
)
SE
MD
EX
PERIOD
Mar
-16
Ap
r-16
May
-16
Jun-
16
Jul-
16
Aug
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Sep
-16
Oct
-16
Nov
-16
Dec
-16
Jan-
17
Feb
-17
Mar
-17
Ap
r-17
May
-17
Jun-
17
Jul-
17
Aug
-17
Sep
-17
Oct
-17
Nov
-17
Dec
-17
30
20
10
0 1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
HAREL MALLAC
SEMDEX
DIVIDEND POLICY (CONT’D)
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SOCIAL, HEALTH AND SAFETY
During the year 2017, Harel Mallac group launched a Culture development programme, CHORUS. Employees were provided with the opportunity to understand and adhere to our Purpose and guiding principles. The programme focused on both promoting key behaviours in coherence with our commitments and on developing an understanding of the way we do business in Harel Mallac:
Agility and determination in achieving.
Care and engagement in what we do.
Trust and responsibility in our relationships.
From a health and safety perspective, a consistent follow-up on the health and safety aspect within the group has been effected. Ongoing training on key health and safety aspects was also organised namely for working at height, scaffolding, fire safety and first aid. Neither fatality nor major work-related incident has been recorded in 2017. Various measures were implemented in line with our commitment in providing and maintaining a healthy, safe and positive work environment. Emphasis has also been put on health awareness where a health and safety week for the Group was organised. Briefing sessions on breast and cervical cancer, nutrition and non-communicable diseases were organised. In line with our social commitment to the community, employees were moreover encouraged to participate in a blood donation campaign.
The Company also ensures that its recruitment and promotion policies are fair and that procedures adopted are both transparent as well as competency-based and merit-based. We furthermore promote honest and transparent business practices.
CORPORATE, SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
All the subsidiaries entrust their CSR fund to the Fondation Harel Mallac (FHM), which focuses on education, and support to vulnerable children. In 2017, the FHM has supported four non-governmental organisations (NGOs): Collège Technique Saint Gabriel, ANFEN, SOS Children’s Villages and Association d’Alphabétisation de Fatima.
To complement this community action, and in line with its commitment to the better of our planet, Harel Mallac initiated ‘J’aime ma Terre’, a Group-wide sensitisation project on waste management and the 4Rs (Reduce, Reuse, Recycle, Rots), which was rolled out in five schools located in our vicinity: Port Louis, Sainte Croix and Pailles. It also sustained its partnership with the NGO Mission Verte: in 2017, Mission Verte collected 165kgs of cardboard and 1,560kgs of paper from our Port Louis offices.
PROFILE OF COMPANY’S SHAREHOLDERS AS AT 22 MARCH 2018
Corporate GovernanceReport (Cont’d)
Size of shareholdingNumber of
ShareholdersNumber of
shares owned % holding
1 - 500 432 38,285 0.34501-1,000 30 25,100 0.221,001-2,500 28 42,719 0.382,501-5,000 8 28,080 0.255,001-10,000 15 106,889 0.9510,001-25,000 26 429,449 3.8125,001-50,000 15 590,811 5.2450,001-100,000 7 420,922 3.74101,000-250,000 1 114,734 1.01250,001-500,000 2 756,902 6.72500,001-750,000 2 1,129,400 10.03750,001-1,000,000 0 0 01,000,001-2,000,000 1 1,888,377 16.77Over 2,000,000 1 5,687,720 50.51Total 568 11,259,388 100.00
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SUMMARY BY SHAREHOLDING CATEGORY AS AT 22 MARCH 2018
SHAREHOLDERS’ PRACTICAL GUIDE
Corporate GovernanceReport (Cont’d)
Category of ShareholdersNumber of
ShareholdersNumber of
shares owned % holding
Individual 464 577,190 5.13Insurance and assurance companies 5 31,465 0.28Pension and provident funds 23 205,041 1.82Investment and trust companies 4 19,507 0.17Other corporate bodies 72 10,426,185 92.60Total 568 11,259,388 100.00
FORTHCOMING ANNUAL MEETING
A proxy form is enclosed for those shareholders unable to attend. Shareholders are requested to bring their National Identity Card or passport to the meeting, as these are required for registration.
SCHEDULE OF EVENTS
Publication of condensed audited results for previous year March 2018Annual Meeting April/May 2018Publication of condensed results for 1st quarter May 2018Publication of condensed results for 2nd quarter August 2018Publication of condensed results for 3rd quarter November 2018Dividend declaration and payment December 2018/January 2019
Issues Actions
Change of address Contact the Company’s secretariatIf shares are deposited with CDS Contact the personal brokerChange of name Contact the Company’s secretariatAcquisition or disposal of shares Contact the personal brokerShare transfers Contact the Company’s secretariatLost share certificate Contact the Company’s secretariatDirect dividend credit Forward the relevant form to the Company’s
secretariat Shareholders’ loan to Company Terms and conditions as well as application
forms for shareholders’ loan to the Company are available from the Company Secretary
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Statutory Disclosures
PRINCIPAL ACTIVITIES
Following Harel Mallac’s strategic repositioning exercise, the Group’s activities have been organised into three distinct clusters of operations, namely Manufacturing and Trading, Business Services and Asset Management.
DIRECTORS
The Directors of the Company are listed on pages 22 to 25. In addition, a list of the Directors of subsidiary companies is found on pages 28 and 29.
DIRECTORS’ SERVICE CONTRACTS
None of the Directors of the Company and its subsidiaries have service contracts that need to be disclosed under Section 221 (2) of the Companies Act 2001.
DIRECTORS’ REMUNERATION AND BENEFITS
Remuneration and benefits received, or due and receivable from Harel Mallac & Co. Ltd and its subsidiaries were as follows:
THE COMPANY THE SUBSIDIARIESThe Company 2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000Executive DirectorFull-time 8,059 9,671 - -Part-time - - - -Non-executive Directors 3,519 3,267 3,034 1,910
11,578 12,938 3,034 1,910
Directors of subsidiary companies 2017 2016Rs’000 Rs’000
Executive DirectorsFull-time 12,204 11,744Part-time - -Non-executive Directors 3,335 3,826
15,539 15,570
One director has waived emoluments received by him from the Company since his nomination in 2003.
DIRECTORS’ AND SENIOR OFFICERS’ INTERESTS IN SHARES
The interests of the Directors and senior officers in the securities of the Company and of the Group as at 31 December 2017 are as follows:
None of the Directors hold direct or indirect interest in the shares of the company or its subsidiaries.
None of the other senior officers of the Company has direct or indirect holding in the shares of the Company or its subsidiaries.
THE COMPANY THE SUBSIDIARIES
DirectorsDirect
InterestIndirect Interest
Direct Interest
Indirect Interest
HAREL Antoine L. - 557,347 - 1,128,142HAREL Charles P. L. 10 544,390 - 1,105,362
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Statutory Disclosures(Cont’d)CONTRACTS OF SIGNIFICANCE
There was no contract of significance to which the Company or any of its subsidiaries have been a party and in which a Director of the Company was materially interested, be it directly or indirectly.
SHAREHOLDERS
Major shareholders
At 22 March 2018, the following shareholders were directly or indirectly interested in more than 5% of the ordinary share capital of the Company.
ShareholdersNumber of
shares owned Interest %
Société de Lerca 5,687,720 50.51Terra Mauricia Ltd 1,888,377 16.77Société Deshenri 570,600 5.06
Except for the above, no person has reported any material interest of 5 percent or more of the equity share capital of the company.
CORPORATE SOCIAL RESPONSIBILITY
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000Donations made during the year:PoliticalRecipients for the Group and the Company 2017: nil (2016:nil) - - - -
OthersRecipients for the Group 2017:40 (2016:33) 469 659 - -Recipients for the Company 2017:5 (2016:4) - - 124 544
Corporate Social Responsibility 2,506 1,861 - -
AUDITOR’S FEES
The fees payable to the auditors, for audit and other services were:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000Audit Fees payable to:- BDO & Co 5,323 6,652 788 760- Other firms 1,355 859 - -
Fees payable for the other services provided by- BDO & Co 487 - - -- Other firms 1,507 77 225 -
Other services provided by auditors in 2017 relate to advisory services on taxation and advisory services in respect of amalgamation of two subsidiary companies and in 2016 to advisory services on taxation.
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Statement of Directors’ Responsibilities
The Directors acknowledge their responsibilities for:
(i) adequate accounting records and maintenance of effective internal control systems;
(ii) the preparation of financial statements which fairly present the state of affairs of the Company as at the end of the financial year and the results of its operations and cash flows for that year and which comply with International Financial Reporting Standards (IFRS); and
(iii) the selection of appropriate accounting policies supported by reasonable and prudent judgment.
The external auditors are responsible for reporting on whether the financial statements are fairly presented.
The Directors report that:
(i) adequate accounting records and an effective system of internal controls and risk management have been maintained;
(ii) appropriate accounting policies supported by reasonable and prudent judgments and estimates have been used consistently;
(iii) applicable accounting standards have been adhered to. Any departure in the interest of fair presentation has been disclosed, explained and quantified; and
(iv) the Code of Corporate Governance has been adhered to. Reasons have been provided where there has been non-compliance.
Signed on behalf of the Board of Directors on 22 March 2018.
Antoine L. HarelChairman
Charles HarelChief Executive Officer
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Secretary’sCertificate
Statement of Compliance
We certify that, to the best of our knowledge and belief, the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Companies Act 2001.
Antoine L. HarelChairman
22 March 2018
Charles HarelChief Executive Officer
For HM Secretaries Ltd.Secretary
22 March 2018
Name of PIE: HAREL MALLAC & CO. LTD
Reporting Period: Year ended 31 December 2017
We, the Directors of Harel Mallac & Co. Ltd, confirm that to the best of our knowledge, the PIE has not complied with Section 2.8.2 of the Code. It has been disclosed globally due to the sensitivity of the information.
(Section 75 (3) of the Financial Reporting Act)
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Value Added Statement2017 2016
Rs’000 Rs’000
Revenue 4,640,371 4,648,741
Paid to suppliers for materials and services 3,841,349 3,839,749
Value added 799,022 808,992
Income from investment in associates & Joint Ventures 154,046 63,299 Profit on disposal of investments 104,506 - Net impairment of investment, receivables & goodwill (25,856) (17,746)Total wealth created 1,031,718 100% 854,545 100%
Distributed as follows:
Employees Remuneration and service benefits 680,717 66% 692,868 81%
Providers of capital
Dividends to shareholders 20,267 20,267 Interest paid on borrowings 73,827 84,518 Minority interests 1,109 (43,851)
95,203 9% 60,934 7%
Government taxes on earnings
Taxation 47,664 5% 45,157 5%
Retained in the group to ensure future growthDepreciation and amortisation 114,213 109,546 Retained profit/(loss) 93,921 (53,960)
208,134 20% 55,586 7%
Total wealth distributed and retained 1,031,718 100% 854,545 100%
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Enhance Performance
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This report is made solely to the members of Harel Mallac & Co. Ltd (the “Company”), as a body, in accordance with Section 205 of the Companies Act 2001. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Report on the audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Harel Mallac & Co. Ltd and its subsidiaries (the Group), and the Company’s separate financial statements on pages 47 to 117 which comprise the statements of financial position as at December 31, 2017, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements on pages 47 to 117 give a true and fair view of the financial position of the Group and of the Company as at December 31, 2017, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act 2001.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group and of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Mauritius, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
1. The Company - Valuation/Impairment of investments in subsidiaries, associates, joint ventures and others
Key Audit Matter The Company carries its investments in subsidiaries, associates, joint ventures and other investments in financial assets at fair value. At 31 December 2017, total investments amounted to Rs.1.8bn. The amount is significant to the financial statements. We therefore consider investment to be a significant key audit matter.
Moreover, the fair value exercise involves the use of estimates and judgements. The identification of impairment events and the determination of an impairment charge also require the application of significant judgement by management, in particular with respect to the timing, quantity and estimation of future cash flows.
Amount impaired during the year in respect of investments in subsidiaries and associates is Rs.49.4m.
Related Disclosures Refer to notes 8, 9, 10 and 11 of the accompanying financial statements. Audit Response In our audit approach, we reviewed the valuation methods used and discussed with management regarding the reasonableness of the basis and assumptions used.
Our audit response also consisted of analysing the possible indications of impairment and discussed them with management. We discussed assumptions to the forecasted results of the subsidiaries with management.
2. The Group and the Company - Valuation of investment properties
Key Audit Matter The Group and the Company revalue its investment properties annually and carry them at fair value. Valuations are performed by independent professional valuers. The valuation exercise involves significant accounting estimate and a range of judgmental assumptions and therefore valuation of investment properties is considered as a significant key audit matter.
Related Disclosures Refer to note 6 of the accompanying financial statements.
Audit Response We have reviewed the valuation report issued by Professional Valuers Co Ltd. We also held discussion with the independent valuer regarding the valuation methods and challenged the key assumptions used in the valuation techniques.
We confirmed that the adjustments arising from the valuation were correctly accounted for and disclosed in the financial statements. The results of these procedures did not identify any issues with the valuation of land and buildings and investment properties in the financial statements.
3. The Group - Assessment of net realizable value of inventories Key Audit Matter Inventory is carried in the financial statements at the lower of cost and net realisable value. The net carrying value of inventory at 31 December 2017 was Rs.763m. The exercise for the assessment of the net realisable value involves the use of judgement and assumptions. In view of the significance of the amount, inventories is considered as a key audit matter.
Audit Response
Our audit procedures were designed to challenge the basis used for assessing the net realisable value of inventory and included:
Examining the subsidiaries’ historical trading patterns of inventory sold at full price and inventory sold below full price, together with the related margins achieved for each product lines in order to gain comfort that stock has not been sold below cost; and
Assessing the appropriateness of the percentages applied to arrive at the net realisable value by challenging the assumptions made by the Directors on the extent to which older inventory can be sold.
Independent Auditor’s ReportTo the Shareholders of Harel Mallac & Co. Ltd
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Independent Auditor’s ReportTo the Shareholders of Harel Mallac & Co. Ltd (Cont’d)
4. The Group - Trade debtors recoverability Key Audit Matter The recoverability of trade receivables and the level of provisions for impairment of receivables are considered to be a significant risk due to the pervasive nature of these balances to the financial statements, and the importance of cash collection with reference to the working capital management of the business. At 31 December 2017, trade receivables amounted to Rs.1bn, net of provision of Rs.137m.
Related Disclosures Refer to note 15 of the accompanying financial statements.
Audit Response We have:– assessed the design and implementation of key controls around the
monitoring of recoverability;– challenged management regarding the level and ageing of trade
receivables, along with the consistency and appropriateness of receivables provisioning by assessing recoverability with reference to cash received in respect of debtors. In addition we have considered the Group’s previous experience of bad debt exposure and the individual counter-party credit risk;
– critically assessed the recoverability of overdue unprovided debt with reference to the historical levels of bad debt expense and credit profile of the counter-parties;
– tested these balances on a sample basis through agreement to post period end invoicing and cash receipt; and
– considered the consistency of judgments regarding the recoverability of trade receivables made year on year to consider whether there is evidence of management bias through discussion with management on their rationale and obtaining evidence to support judgement areas.
5. The Group - Assessment of impairment of goodwill Key Audit Matter Goodwill arising on acquisition of associates amounted to Rs.292.9m at 31 December 2017. Goodwill is tested annually for impairment. These calculations require the use of estimates and is therefore considered as a key audit matter.
An impairment of goodwill of Rs.18.3m was recorded during the year.
Related Disclosures Refer to note 9 of the accompanying financial statements. Audit Response The assessment of impairment of goodwill was based on the fair value of the related investment determined at 31 December 2017 as well as on the discounted cash flows of the cash generating unit to which the goodwill is related.
6. The Group and the Company - Revenue recognition Key Audit Matter Revenue is an important measure used to evaluate the performance of the Group and the Company. There is a risk that the revenue is presented for amounts higher than what has been actually generated by the Group and the Company. Consequently, we considered revenue recognition to be a significant key audit matter. The Group’s and the Company’s revenue is recognised when the significant risks and rewards of ownership of the goods have been passed to the buyer and/or services have been rendered.
Related Disclosures Refer to note 2(t) (accounting policy note) and note 25 (financial statement disclosures) Audit Response Our audit procedures to address the risk of material misstatement relating to revenue recognition include:
• Testing of design, existence and operating effectiveness of internal control procedures implemented as well as test of details to ensure accurate processing of revenue transactions.
• The accuracy and completeness of revenue was verified through Computer Assisted Audit Techniques, cut-off test and analytical reviews.
Other Information Directors are responsible for the other information. The other information comprises of the following reports (but does not include the financial statements and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report:
- Board of Directors - Corporate Governance Report - Statement of Compliance - Secretary’s Certificate - Statement of Directors’ Responsibilities
Other information also comprise of the reports listed below,which is expected to be made available to us after that date.
- Group Structure- Chairman’s Report- CEO’s Report- Business Review- Human Resources- Health and Safety- Statutory Disclosures- Value Added Statement- Corporate Social Responsibility- Leadership Team- Profile of company’s shareholders- Directors’ remunerations and benefits- Contracts of significance- Code of ethics Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read other information received after the date of our auditor’s report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
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Independent Auditor’s ReportTo the Shareholders of Harel Mallac & Co. Ltd (Cont’d)
Responsibilities of Directors and Those Charged with Governance for the Financial Statements
The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group and the Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group and the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by directors.
• Conclude on the appropriateness of directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Companies Act 2001We have no relationship with, or interests in, the Company or any of its subsidiaries, other than in our capacity as auditors, business advisers and dealings in the ordinary course of business. We have obtained all information and explanations we have required. In our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those records. Financial Reporting Act 2004The Directors are responsible for preparing the corporate governance report. Our responsibility is to report the extent of compliance with the Code of Corporate Governance as disclosed in the annual report and on whether the disclosure is consistent with the requirements of the Code. In our opinion, the disclosure in the annual report is consistent with the requirements of the Code.
BDO & CO Rookaya Ghanty, F.C.C.A.Chartered Accountants Licensed by FRC
Port LouisMauritius.22 March 2018
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Statements of Financial PositionAt 31 December 2017
THE GROUP THE COMPANYNotes 2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
ASSETSNon current assetsProperty, plant and equipment 5 817,444 1,116,432 273,725 273,658 Investment properties 6 360,289 361,665 381,912 367,299 Intangible assets 7 99,859 95,269 684 485 Investments in subsidiaries 8 - - 912,879 1,025,807 Investments in associates 9 1,063,088 1,007,509 818,529 915,342 Investments in financial assets 10 32,571 27,338 27,737 22,493 Investments in joint ventures 11 18,349 14,175 21,573 21,573 Non-current receivables 12 4,135 28,841 5,640 30,163 Deferred tax assets 19 36,610 38,651 - -
2,432,345 2,689,880 2,442,679 2,656,820
Current assetsInventories 13 762,859 680,494 - - Contracts - work in progress 14 1,439 1,986 - - Trade and other receivables 15 1,214,791 1,153,325 176,193 112,270 Cash and cash equivalents 215,255 201,729 68,203 129,764
2,194,344 2,037,534 244,396 242,034
TOTAL ASSETS 4,626,689 4,727,414 2,687,075 2,898,854
EQUITY AND LIABILITIESCapital and reservesShare capital 16 112,594 112,594 112,594 112,594 Revaluation and other reserves 17 458,793 571,969 346,573 346,573 Fair value reserves (3,176) (5,642) 465,900 558,240 Actuarial losses (95,336) (80,727) (40,726) (32,284)Retained earnings 1,300,707 1,113,789 543,594 542,963 Owners’ interests 1,773,582 1,711,983 1,427,935 1,528,086 Non controlling interests 296,680 276,315 - - Total equity 2,070,262 1,988,298 1,427,935 1,528,086
Non current liabilitiesBorrowings 18 346,330 619,689 611,377 743,355 Deferred tax liabilities 19 91,553 93,779 30,789 32,020 Retirement benefit obligations 20 201,477 182,318 57,142 50,439
639,360 895,786 699,308 825,814
Current liabilitiesTrade and other payables 21 1,258,645 1,209,755 65,904 39,690 Current tax liabilities 6,808 17,329 - - Borrowings 18 631,347 552,180 473,661 441,198 Proposed dividend 31 20,267 20,267 20,267 20,267 Provision for other liabilities and charges 22 - 43,799 - 43,799
1,917,067 1,843,330 559,832 544,954
TOTAL EQUITY & LIABILITIES 4,626,689 4,727,414 2,687,075 2,898,854
These financial statements have been approved for issue by the Board of Directors on 22 March 2018.
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
Antoine L. HarelChairman
Charles HarelChief Executive Officer
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Statements of Profit or LossYear ended 31 December 2017
THE GROUP THE COMPANYNotes 2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Revenue 25 3,993,082 3,724,344 227,874 224,911
Continuing operationsProfit before finance costs 26 45,568 126,703 77,464 107,142 Finance costs 27 (49,933) (45,651) (65,929) (73,307)
(4,365) 81,052 11,535 33,835 Net share of results of associates and joint ventures 132,001 50,019 - - Release of deferred consideration - - 35,046 -
127,636 131,071 46,581 33,835
Net profit on disposal of investments 104,506 - 34,178 10 Impairment (21,982) (16,192) (59,602) (183,078)
82,524 (16,192) (25,424) (183,068)
Profit/(loss) before taxation 28 210,160 114,879 21,157 (149,233)
Income tax 23 (25,567) (35,190) (259) (3,669)Profit/(loss) for the year from continuing operations 184,593 79,689 20,898 (152,902)
Discontinued operations
Post tax loss from discontinued operations 24 (69,296) (157,233) - - Profit/(loss) for the year 115,297 (77,544) 20,898 (152,902)
Attributable to:Owners of the parent 114,188 (33,693) 20,898 (152,902)Non controlling interests 1,109 (43,851) - -
115,297 (77,544) 20,898 (152,902)
Earnings/(loss) per share from continuing operations (Rs/cents) 32(a) 15.82 6.20 1.86 (13.58)
Loss per share from discontinued operations (Rs/cents) 32(b) (5.68) (9.19) - -
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
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THE GROUP THE COMPANYNotes 2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Profit/(loss) for the year 115,297 (77,544) 20,898 (152,902)
Other comprehensive incomeItems that will not be reclassified to profit or lossGains on revaluation of land and building - 144,552 - 38,515 Movement in actuarial reserve net of deferred tax (17,639) (28,856) (8,442) (9,063)Deferred tax on revaluation surplus on property - (17,913) - (3,261)
Items that may be reclassified subsequently to profit or lossChange in value of available for sale investments 1,801 156 (92,340) (149,275)Movement in associate reserves (3,522) 18,828 - - Currency translation differences 11,287 9,347 - - Other comprehensive (loss)/income for the year, net of tax 30 (8,073) 126,114 (100,782) (123,084)
Total comprehensive income/(loss) for the year 107,224 48,570 (79,884) (275,986)
Total comprehensive income/(loss) attributable to:Owners of the parent 106,335 63,539 (79,884) (275,986)Non controlling interests 889 (14,969) - -
107,224 48,570 (79,884) (275,986)
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
Statements of Profit or Loss and Other Comprehensive IncomeYear ended 31 December 2017
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Statements of Changes in EquityYear ended 31 December 2017
(Attributable to owners of the parent)
NotesShare Capital
Revaluation and Other Reserves
Fair Value
ReservesActuarial Losses
Retained Earnings Total
Non controlling Interests Total
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000THE GROUPBalance at 1 January 2017 112,594 571,969 (5,642) (80,727) 1,113,789 1,711,983 276,315 1,988,298 Profit for the year - - - - 114,188 114,188 1,109 115,297 Other comprehensive income/(loss) for the year - 6,295 1,394 (15,542) - (7,853) (220) (8,073)Total comprehensive income/(loss) for the year - 6,295 1,394 (15,542) 114,188 106,335 889 107,224
Non-controlling interests arising on business combination - - - - - - 79 79 Movement in reserve - - - - 13 13 2 15 Disposal of subsidiary - (119,471) 1,072 933 117,466 - (28) (28)Other movement - - - - (29,870) (29,870) 29,870 - Change in ownership interest in subsidiaries that does not result in loss of control - - - - 5,388 5,388 (2,388) 3,000 Dividends 31 - - - - (20,267) (20,267) - (20,267)Dividends payable to non-controlling shareholders - - - - - - (8,059) (8,059)
- (119,471) 1,072 933 72,730 (44,736) 19,476 (25,260)
Balance at 31 December 2017 112,594 458,793 (3,176) (95,336) 1,300,707 1,773,582 296,680 2,070,262
Balance at 1 January 2016 112,594 373,424 (5,834) (51,545) 1,267,979 1,696,618 270,574 1,967,192 Loss for the year - - - - (33,693) (33,693) (43,851) (77,544)Other comprehensive income/(loss) for the year - 126,222 192 (29,182) - 97,232 28,882 126,114 Total comprehensive income/(loss) for the year - 126,222 192 (29,182) (33,693) 63,539 (14,969) 48,570
Issue of shares to non-controlling shareholders - - - - - - 231 231 Movement in reserve - (1,714) - - 1,714 - - - Change in ownership interest in subsidiary that does not result in loss of control - 74,037 - - (101,944) (27,907) 27,907 - Dividends 31 - - - - (20,267) (20,267) - (20,267)Dividends payable to non-controlling shareholders - - - - - - (7,428) (7,428)
- 72,323 - - (120,497) (48,174) 20,710 (27,464)
Balance at 31 December 2016 112,594 571,969 (5,642) (80,727) 1,113,789 1,711,983 276,315 1,988,298
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
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(Attributable to owners of the parent)
NotesShare Capital
Revaluation and Other Reserves
Fair Value
ReservesActuarial Losses
Retained Earnings Total
Non controlling Interests Total
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000THE GROUPBalance at 1 January 2017 112,594 571,969 (5,642) (80,727) 1,113,789 1,711,983 276,315 1,988,298 Profit for the year - - - - 114,188 114,188 1,109 115,297 Other comprehensive income/(loss) for the year - 6,295 1,394 (15,542) - (7,853) (220) (8,073)Total comprehensive income/(loss) for the year - 6,295 1,394 (15,542) 114,188 106,335 889 107,224
Non-controlling interests arising on business combination - - - - - - 79 79 Movement in reserve - - - - 13 13 2 15 Disposal of subsidiary - (119,471) 1,072 933 117,466 - (28) (28)Other movement - - - - (29,870) (29,870) 29,870 - Change in ownership interest in subsidiaries that does not result in loss of control - - - - 5,388 5,388 (2,388) 3,000 Dividends 31 - - - - (20,267) (20,267) - (20,267)Dividends payable to non-controlling shareholders - - - - - - (8,059) (8,059)
- (119,471) 1,072 933 72,730 (44,736) 19,476 (25,260)
Balance at 31 December 2017 112,594 458,793 (3,176) (95,336) 1,300,707 1,773,582 296,680 2,070,262
Balance at 1 January 2016 112,594 373,424 (5,834) (51,545) 1,267,979 1,696,618 270,574 1,967,192 Loss for the year - - - - (33,693) (33,693) (43,851) (77,544)Other comprehensive income/(loss) for the year - 126,222 192 (29,182) - 97,232 28,882 126,114 Total comprehensive income/(loss) for the year - 126,222 192 (29,182) (33,693) 63,539 (14,969) 48,570
Issue of shares to non-controlling shareholders - - - - - - 231 231 Movement in reserve - (1,714) - - 1,714 - - - Change in ownership interest in subsidiary that does not result in loss of control - 74,037 - - (101,944) (27,907) 27,907 - Dividends 31 - - - - (20,267) (20,267) - (20,267)Dividends payable to non-controlling shareholders - - - - - - (7,428) (7,428)
- 72,323 - - (120,497) (48,174) 20,710 (27,464)
Balance at 31 December 2016 112,594 571,969 (5,642) (80,727) 1,113,789 1,711,983 276,315 1,988,298
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
NotesShare Capital
Revaluation and Other Reserves
Fair Value Reserves
Actuarial Losses
Retained Earnings Total
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000THE COMPANYBalance at 1 January 2017 112,594 346,573 558,240 (32,284) 542,963 1,528,086
Profit for the year - - - - 20,898 20,898 Other comprehensive loss for the year - - (92,340) (8,442) - (100,782)Total comprehensive (loss)/income for the year - - (92,340) (8,442) 20,898 (79,884)
Dividends 31 - - - - (20,267) (20,267)
Balance at 31 December 2017 112,594 346,573 465,900 (40,726) 543,594 1,427,935
Balance at 1 January 2016 112,594 311,319 707,515 (23,221) 716,132 1,824,339
Loss for the year - - - - (152,902) (152,902)Other comprehensive income/(loss) for the year - 35,254 (149,275) (9,063) - (123,084)Total comprehensive income/(loss) for the year - 35,254 (149,275) (9,063) (152,902) (275,986)
Dividends 31 - - - - (20,267) (20,267)
Balance at 31 December 2016 112,594 346,573 558,240 (32,284) 542,963 1,528,086
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
Statements of Changes in EquityYear ended 31 December 2017
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Statements of Cash FlowsYear ended 31 December 2017
THE GROUP THE COMPANYNotes 2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Cash flows from operating activitiesCash generated from/(absorbed in) operations from continuing operations 33(a) 87,820 202,808 (68,198) (46,135)Cash generated from operations from discontinued operations 30,559 155,980 - - Interest paid (54,843) (80,946) (66,363) (73,493)Income tax paid (31,981) (12,877) - - Net cash generated from/(absorbed in) operating activities from continuing operations 996 108,985 (134,561) (119,628)Net cash generated from operating activities from discontinued operations 20,652 145,075 - -
Cash flows from investing activitiesPurchase of property, plant and equipment (92,000) (63,642) (8,442) (3,499)Purchase/improvements of investment property (9,444) (916) (9,444) (916)Net expenditure on intangible assets (2,336) (5,644) (481) - Investments in subsidiaries - - (6,698) (140,769)Investments in associates - (43,044) - - Investments in financial assets (5,047) - (5,047) - Proceeds on sale of property, plant and equipment 2,593 10,041 550 - Repayment of deferred consideration (8,753) - (8,753) - Proceeds on sale of investment properties 9,299 - - - Proceeds on sale of investments in subsidiaries 122,803 - 140,845 - Net cash ouflow on acquisition of subsidiaries (6,451) - - - Long term loans granted - - (400) - Long term loans recovered 24,579 - 24,922 - Interest received 2,567 377 7,361 17,652 Dividends received 34,644 35,001 58,368 77,536 Net cash generated from/(absorbed in) investing activities from continuing operations 72,454 (67,827) 192,781 (49,996)Net cash absorbed in investing activities from discontinued operations (4,174) (102,673) - -
Cash flows from financing activitiesProceeds from borrowings 290,606 181,858 219,300 129,000 Movement in non-current receivables - - - 347 Issue of share to non-controlling interests - 231 - - Payments on borrowings and finance leases (350,655) (212,210) (294,284) (107,201)Dividends paid (20,267) (20,267) (20,267) (20,267)Dividends paid by subsidiaries to non-controlling shareholders (7,428) (7,483) - - Net cash (absorbed in)/generated from financing activities from continuing operations (87,744) (57,871) (95,251) 1,879 Net cash generated from financing activities from discontinued operations 4,889 28,613 - -
Net decrease in cash and cash equivalents from continuing operations (14,294) (16,713) (37,031) (167,745)Net increase in cash and cash equivalents from discontinued operations 21,367 71,015 - -
Movement in cash and cash equivalentsAt 1 January, 36,438 (33,290) (25,251) 142,477 Increase/(decrease) 7,073 54,302 (37,031) (167,745)Effect of foreign exchange rate changes 11,063 15,426 1 17 At 31 December, 33(b) 54,574 36,438 (62,281) (25,251)
The notes on pages 53 to 117 form an integral part of these financial statements.Auditor’s report on pages 44 to 46.
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Notes to the Financial StatementsYear ended 31 December 2017
1. CORPORATE INFORMATION
Harel Mallac & Co. Ltd (“ the Company”) is a limited liability company incorporated and domiciled in Mauritius. The address of its registered office is 18, Edith Cavell Street, Port Louis, Mauritius. The directors consider that the parent entity is Société de Lerca and the ultimate parent entity is Société Pronema, both registered in Mauritius.
These financial statements will be submitted for consideration and approval at the forthcoming Annual Meeting of shareholders of the Company.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Amounts in the financial statements are stated in Mauritian Rupees, which is the Company’s functional and presentation currency.
(a) Basis of preparation
The financial statements of Harel Mallac & Co. Ltd comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (IFRS).
The financial statements are prepared on a going concern basis and include the consolidated financial statements of the holding Company and its subsidiaries (The Group) and the separate financial statements of the holding Company ( the Company).
The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities and disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Where necessary comparative figures have been amended to conform to change in presentation in the current year.
The Group’s critical accounting estimates and judgements in the preparation of financial statements in confirmity with IFRS as determined by management, are detailed in note 4. These involve a higher degree of judgement or complexity and are areas where assumptions and estimates are significant to the financial statements. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period; they are recognised in the period of the revision and future periods if the revision affects both current and future periods.
The financial statements are prepared under the historical cost convention, except that:
(i) land and buildings are carried at revalued amounts; (ii) investment properties are stated at their fair value; (iii) available-for-sale financial assets are stated at fair value; and (iv) relevant financial assets and financial liabilities are stated at fair
value.
Amendments to published Standards effective in the reporting period
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12). The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. The amendment has no impact on the Group’s financial statements.
Disclosure Initiative (Amendments to IAS 7). The amendments require the entity to explain changes in its liabilities arising from financing activities. This includes changes arising from cash flows (eg drawdowns and repayments of borrowings) and non-cash changes such as acquisitions, disposals, accretion of interest and unrealised exchange differences. A reconciliation of the opening and closing carrying amounts for each item for which cash flows have been or would be classified as financial activities is presented in note 33.
Annual Improvements to IFRSs 2014–2016 Cycle
IFRS 12 Disclosure of Interests in Other Entities. The amendments clarify that entities are not exempt from all of the disclosure requirements in IFRS 12 when entities have been classified as held for sale or as discontinued operations. The amendment has no impact on the Group’s financial statements.
Standards, Amendments to published Standards and Interpretations issued but not yet effective
Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periods beginning on or after 1 January 2018 or later periods, but which the Group has not early adopted.
At the reporting date of these financial statements, the following were in issue but not yet effective:
IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with CustomersSale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)IFRS 16 LeasesClarifications to IFRS 15 Revenue from Contracts with CustomersClassification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendments to IFRS 4)Annual Improvements to IFRSs 2014–2016 CycleIFRIC 22 Foreign Currency Transactions and Advance ConsiderationTransfers of Investment Property (Amendments to IAS 40)IFRS 17 Insurance ContractsIFRIC 23 Uncertainty over Income Tax TreatmentsPrepayment Features with negative compensation (Amendments to IFRS 9)Long- term Interests in Associates and Joint Ventures (Amendments to IAS 28)Annual Improvements to IFRSs 2015–2017 Cycle
Where relevant, the Group is still evaluating the effect of these Standards, Amendments to published Standards and Interpretations issued but not yet effective, on the presentation of its financial statements.
(b) Property, plant and equipment
All property, plant and equipment is initially recorded at cost. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets’ carrying amount or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Land and buildings are subsequently shown at market value, based on valuations by external independent valuers, less subsequent depreciation for buildings. All other property, plant and equipment is stated at historical cost/deemed cost less accumulated depreciation and impairment.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(b) Property, plant and equipment (Cont’d)
Increases in the carrying amount arising on revaluation are credited to revaluation reserves in other comprehensive income and shown in revaluation and other reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against the revaluation reserve in other comprehensive income; all other decreases are charged to profit or loss.
Depreciation is calculated on a straight line method to write off the cost or the revalued amounts of the assets to their residual values over their estimated useful lives as follows:
No depreciation is charged on freehold land.
The assets’ residual values and useful lives are reviewed and adjusted prospectively, if appropriate, at the end of each reporting date.
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Gains and losses on disposals of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in profit or loss. On disposal of revalued assets, amounts in revaluation reserves relating to that asset are transferred to retained earnings.
(c) Investment properties
Investment properties held to earn rentals or for capital appreciation or both and not occupied by the Group, are carried at fair value, representing open-market value determined by external valuers. Changes in fair values are included in profit or loss.
(d) Intangible assets
Intangible assets include goodwill on consolidation, operating licences and computer software. Intangible assets, other than goodwill on consolidation, are initially recorded at cost and amortised using the straight-line method over their estimated useful lives.
The estimated useful lives of the intangible assets are:
The carrying amount of each intangible asset is reviewed annually and adjusted for permanent impairment where it is considered necessary.
(i) Goodwill
Goodwill arises on the acquisition of subsidiaries and associates and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill on acquisitions of joint ventures is included in investments in joint ventures.
Goodwill is tested annually for impairment and carried at cost as established at the date of acquisition less accumulated impairment losses. On disposal of a subsidiary , associate or joint venture, the attributable amount of goodwill is included in the determination of the gains and losses on disposal.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill also includes client portfolio on acquisition of a subsidiary and is amortised over 5 years.
(ii) Operating licences
Operating licences are shown at historical cost, have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over their estimated useful lives (5 years).
(iii) Computer software
Computer software is capitalised on the basis of costs incurred to acquire and bring to use the specific software and is amortised using the straight-line method over its estimated useful life (3-5 years).
(e) Investments in subsidiaries
Separate financial statements of the investor
In the separate financial statements of the investor, investments in subsidiary companies are carried at fair value. The carrying amount is reduced to recognise any impairment in the value of individual investments.
Consolidated financial statements
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 de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred 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 interests in the acquiree at the non-controlling interests’ proportionate share of the acquiree’s net assets.
Subsequent to acquisition, the carrying amount of non controlling interests is the amount of those interest at initial recognition plus the non controlling interests’ share of subsequent change in equity. Total comprehensive income is attributed to non controlling interests even if this results in the non controlling interests having a deficit balance.
The excess of, the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree, over the fair value of the identifiable net assets acquired, is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss as a bargain purchase gain.
Years
Freehold Buildings 22.2 - 50 Buildings on leasehold land 5 - 50Plant and Machinery 5 - 10Motor Vehicles 5Furniture, Fittings and Office Equipment 3 - 15Rental equipment 3 - 5Other Tools and Equipment 5
Years
Operating licences 5Computer software 3 - 5
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(e) Investments in subsidiaries (Cont’d)
Consolidated financial statements (Cont’d)
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
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.
Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the equity is remeasured to its fair value, with the change in the carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purpose of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amount 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.
(f) Investments in associates and joint ventures
Separate financial statements of the investor
Investments in associates and joint ventures are carried at fair value. The carrying amount is reduced to recognise any impairment in the value of individual investments.
Consolidated financial statements
An associate is an entity over which the Group has significant influence but not control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when the decisions about the relevant activities require the unanimous consent of the parties sharing control. Investments in associates and joint ventures are accounted for using the equity method. Investments in associates and joint ventures are initially recognised at cost as adjusted by post acquisition changes in the Group’s share of the net assets of the associate and joint venture less any impairment in the value of individual investments.
Any excess of the cost of acquisition and the Group’s share of the net fair value of the associate’s and joint venture’s identifiable assets and liabilities recognised at the date of acquisition is recognised as goodwill which is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of identifiable assets and liabilities over the cost of acquisition, after assessment, is included as income in the determination of the Group’s share of the associate’s and joint venture’s profit or loss.
When the Group’s share of losses exceeds its interest in an associate or joint venture, the Group discontinues recognising further losses, unless it has incurred legal or constructive obligation or made payments on behalf of the associate or joint venture.Unrealised profits and losses are eliminated to the extent of the Group’s
interest in the associate and joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Where necessary, appropriate adjustments are made to the financial statements of associates and joint ventures to bring the accounting policies used in line with those adopted by the Group.
If the ownership interest in an associate and joint venture is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in the other comprehensive income are reclassified to profit or loss where appropriate.
Dilution gains and losses in investments in associates and joint ventures are recognised in profit or loss.
(g) Current and deferred income tax
The tax expense for the year comprises of current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
Current tax
The current income tax charge is based on taxable income for the year calculated on the basis of tax laws enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred income tax is provided in full, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. If the deferred income tax arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.
Deferred income tax is determined using tax rates that have been enacted or substantially enacted at the reporting date and are expected to apply in the period when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which deductible temporary differences can be utilised.
For the purpose of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.
(h) Retirement benefit obligations
(i) Defined benefit plans
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised on the statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets. The defined benefit obligation is calculated annually by independant actuaries using the projected unit credit method.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(i) Defined benefit plans (Cont’d)
Remeasurement of the net benefit liability, which comprise actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, the return on the plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), is recognised immediately in other comprehensive income in the period in which they occur. Remeasurements recognised in other comprehensive income shall not be reclassified to profit or loss in subsequent period.
The Group determines the net interest expense/(income) on the net defined benefit liability/(assets) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(assets), taking into account any changes in the net defined liability/(assets) during the period as a result of contributions and benefit payment. Net interest expense/(income) is recognised in profit or loss.
Service costs comprising current service cost, past service cost, as well as gains and losses on curtailments and settlement are recognised immediately in profit or loss.
(ii) Defined contribution plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The Group operates a defined contribution retirement benefit plan for all qualifying employees (and their dependents). Payments to defined contribution retirement plans are charged as an expense when employees have rendered services that entitle then to the contribution.
(iii) Retirement gratuity
For certain employees where the statutory gratuity is insufficiently covered or who are not covered by the above pension plans, the net present value of retirement gratuity payable under the Employment Rights Act is calculated by a qualified actuary and provided for. The obligations arising under this item are not funded.
(iv) Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration profitability of the Group after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(v) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(i) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis. The cost of finished goods and work in progress comprises of purchase cost of raw materials, direct labour, other direct costs and related production
overheads, but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.
(j) Contracts
Contract costs are recognised when incurred.
When the outcome of a contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.
When the outcome of a contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
The Group uses the ‘percentage of completion method’ to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to completion of a physical proportion of the contract work.
Costs incurred in the year in connection with future activity on a contract are presented as contract work-in-progress, prepayments or other assets, depending on their nature.
The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings. Progress billings not yet paid by customers and retention are included within ‘trade and other receivables’.
The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).
(k) Foreign currencies
(i) Functional and presentation currency
Items included in the financial statements are measured using Mauritian rupees, the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated financial statements are presented in Mauritian rupees, which is the Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date the fair value was determined.
Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity.
Foreign exchange gains and losses that relate to borrowings and cash equivalents are presented in profit or loss within finance income or costs. All other foreign exchange gains and losses are presented in profit or loss within other gains/(losses) net.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(k) Foreign currencies (Cont’d)
(iii) Group companies
On consolidation, the assets and liabilities of the Group’s overseas entities are translated at exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period. All resulting exchange differences are recognised in other comprehensive income.
When a foreign entity is sold, such translation differences are recognised in profit or loss as part of the gain or loss on sale in the period in which the entity is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
(l) Alternative Minimum Tax (AMT)
Alternative Minimum Tax (AMT) is provided for, where the Company, which has a tax liability of less than 7.5% of its book profit, pays a dividend. AMT is calculated as the lower of 10% of the dividend paid and 7.5% of book profit.
(m) Impairment of non financial assets
At the end of each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units).
(n) Leases
Leases are classified as finance lease where the terms of the lease transfer substantially all risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Payments made under operating leases (net of incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charge so as to achieve a constant rate of interest on the remaining balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance lease is charged to profit or loss over the lease period. Property, plant and equipment acquired under finance lease contracts are depreciated over the useful life of the asset.
Assets leased out under operating leases are included in property, plant and equipment on the statement of financial position. They are depreciated over their expected useful lives on a basis consistent with similar fixed assets. Rental income is recognised on a straight line basis over the lease term.
(o) Financial assets
Categories of financial assetsThe Group classifies its financial assets in the following categories: loans and receivables and available-for-sale financial assets.
The classification depends on the purpose for which the investments were acquired. Management determines the classification of its financial assets at initial recognition.
(i) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any other categories. They are included in non-current assets unless management intends to dispose of the investment within twelve months of the end of the reporting period.
Initial measurement
Purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially measured at fair value plus transaction costs.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Subsequent measurement
Available-for-sale financial assets are subsequently carried at their fair values.
The fair values of quoted investments are based on current bid prices. If the market for the financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, capitalised earnings method, net asset value and dividend yield method.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are reflected at cost.
Unrealised gains and losses arising from changes in the fair value of financial assets classified as available-for-sale are recognised in other comprehensive income in the period in which they arise. When financial assets classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in profit or loss as gains and losses on financial assets.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss-measured as the difference between acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss for an equity instrument classified as available-for-sale are not reversed through profit or loss. If the fair value of a previously impaired debt security classified as available-for-sale increases and the increase can be objectively related to an event occuring after the impairment loss was recognised, the impairment loss is reversed and the reversal recognised in profit or loss.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(o) Financial assets (Cont’d)
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or derminable payments that are not quoted in an active market. They are recognised initially at fair value plus any directly attributable transaction costs.
Loans and receivables are subsequently measured at amortised cost less provision for impairment. The carrying amount of the asset is reduced by the difference between the asset’s carrying amount and the present value of estimated discounted cash flows. The amount of the loss is recognised in profit or loss.
(iii) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. A provision for impairment of trade 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 receivables.
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future discounted cash flows. The amount of provision is recognised in profit or loss.
(iv) Cash and cash equivalents
Cash and cash equivalents include cash in hand, loans at call, cash at banks and bank overdrafts. Bank overdrafts and loans at call payable are shown within borrowings in current liabilities on the statement of financial position.
(p) Derivative financial instruments
Certain subsidiaries enter into derivative financial instruments to manage their exposure to foreign exchange risk. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured at their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. A derivative presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within twelve months. Other derivatives are presented as current assets or current liabilities.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable at the hedged risk.
(q) Borrowings
Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period.
(r) Trade and other payables
Trade and other payables are stated at fair value and subsequently measured at amortised cost using the effective interest method.
(s) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as deduction, net of tax, from proceeds.
(t) Revenue recognition
Revenue is measured at fair value of the consideration received or receivable on the sale of goods and services, net of value added tax, rebates and discounts and after eliminating sales within the Group.
(a) Sales of goods
Sales of goods are recognised when the goods are delivered and title has passed at which time all of the following conditions are satisfied:
- the Group has transferred to the buyer the significant risk and rewards of ownership;
- the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
- the amount of revenue can be measured reliably;- it is probable that the economic benefit associated with the
transaction will flow to the Group;- the costs incurred or to be incurred in respect of the transaction can
be measured reliably.
(b) Rendering of services
Revenue from rendering of services are recognised in the accounting year in which the services are rendered (by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided).
(c) Other revenues earned by the Group are recognised as follows:
- Rental income - on an accrual basis in accordance with the substance of the relevant agreement;
- Interest income - on a time-proportion basis using the effective interest method. When a receivable is impaired the Group reduces the carrying amount to its recoverable amount being the estimated future cash flow discounted at original effective interest rate;
- Dividend income - when the shareholder’s right to receive payment is established;
- Contract revenue - on a ‘percentage of completion’ method; and- Commission - on an accrual basis.
(u) Deferred income
Gain on sale and leaseback of equipment is not immediately recognised. The gain is deferred and amortised over the lease period. Gain amortised during the year is shown net against depreciation charge.
(v) Borrowing costs
Borrowings costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised until such time as the assets are substantially ready for their intended use or sale. Other borrowing costs are expensed.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(w) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events which will probably result in an outflow of economic benefits that can be reasonably estimated.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risk and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligations, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Provision for restructuring costs are recognised when the Group has a detailed formal plan for the restructuring which has been notified to affected parties.
A provision for warranties is recognised upon the sale of a product or the rendering of a service based on historical experience.
(x) Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are declared.
(y) Segment reporting
Segment information presented relate to operating segments that engage in business activities for which revenues are earned and expenses incurred.
(z) Non-current assets classified as held for sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
3. FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks, as follows:• Market risk (including currency risk, price risk and cash flow and fair value interest risk);• Credit risk; and• Liquidity risk
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 description of the significant risk factors is given below together with the risk management policies applicable.
(a) Market risk
(i) Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to Euro, Ariary, Tanzanian Shilling, Zambian Kwacha and US Dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The foreign exchange risk is managed based on a defined policy whereby fluctuation in exchange rates are monitored and best rates are negotiated with banking institutions.
The Group has a number of investments in foreign subsidiaries, whose net assets are exposed to currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
At 31 December 2017, if the Rupee had weakened/strengthened by 5% against the Euro/Ariary/Tanzanian Shilling/ Zambian Kwacha and US Dollar with all other variables held constant, group post-tax profit for the year would have been Rs13.1 million (2016: Rs13.4 million) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollar/Euro denominated trade receivables, trade payables, borrowings and cash balances.
(ii) Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated statement of financial position as investments in financial assets and which are valued at current bid prices.
Sensitivity analysisThe table below summarises the impact of increases/decreases in the fair value of the investments on the Group’s equity. The analysis is based on the assumption that the fair value had increased/decreased by 5%.
Impact on EquityTHE GROUP THE COMPANY
Categories of investments: 2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Investments in financial assets 1,148 957 1,148 897
To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
3. FINANCIAL RISK MANAGEMENT (CONT’D)
3.1 Financial risk factors (cont’d)
(a) Market risk (cont’d)
(iii) Cash flow and fair value interest riskThe Group’s and the Company’s interest rate risk arises from its borrowings.
Cash flow interest riskAt 31 December 2017, if interest rates on borrowings denominated in Mauritian rupees had been 50 basis points higher/lower with all other variables held constant post-tax profit for the year would have been lower/higher as shown in the table below, mainly as a result of higher/lower interest expense on floating rate borrowings as shown below:
Fair value interest riskAt 31 December 2017, if interest rates on borrowings denominated in Mauritian rupees had been 50 basis points higher/lower with all other variables held constant post-tax profit for the year would have been lower/higher as shown in the table below, mainly as a result of higher/lower interest expense on fixed rate borrowings as shown below:
Other currencies denominated borrowingsIf interest rates on borrowings denominated in USD and Ariary had been 50 basis points higher/lower, with all other variables held constant, the effect on post-tax loss would not have been significant.
The risk is managed by maintaining an appropriate mix between fixed and floating interest charges on borrowings.
(b) Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s trade and loan receivables. The amounts presented on the statement of financial position are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and the current economic environment. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers except for some subsidiaries where credit risk is concentrated within some clients amounting to Rs292 million (2016: Rs235million). Management does not foresee losses from non performance by these clients. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history.
THE GROUP THE COMPANYRupee-denominated borrowings 2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Effect higher/lower interest rate on post tax profit 3,468 2,242 3,612 2,311
THE GROUPRupee-denominated borrowings 2017 2016
Rs’000 Rs’000
Effect higher/lower interest rate on post tax profit 220 316
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
3. FINANCIAL RISK MANAGEMENT (CONT’D)
3.1 Financial risk factors (cont’d)
(c) Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in meeting the obligation associated with its financial liabilities that are settled by delivery of cash or another financial asset.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. The Group aims at maintaining flexibility in funding by keeping committed credit lines available.
Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flow.
Management also considers external opportunities for growth and appropriate funding is reviewed.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date.
The Group Less than Between 1 Between 2 Between 3 Over1 year and 2 years and 3 years and 5 years 5 yearsRs’000 Rs’000 Rs’000 Rs’000 Rs’000
At 31 December 2017Obligation under finance leases 35,074 22,103 7,337 5,799 428 Bank overdraft 160,681 - - - - Bank loans 187,736 88,456 82,781 153,098 26,068 Unsecured loans 282,024 - - - - Trade and other payables 1,258,645 - - - -
At 31 December 2016Obligation under finance leases 59,461 40,286 17,086 5,397 139 Bank overdraft 165,291 - - - - Bank loans 167,460 112,961 107,913 211,942 268,382 Unsecured loans 213,809 - - - - Trade and other payables 1,209,755 - - - -
The Company
At 31 December 2017Bank overdraft 336 - - - - Bank loans 93,646 74,571 70,532 150,375 26,068 Loan at call 130,148 - - - - Unsecured loans at call 282,024 358,764 - - - Trade and other payables 65,904 - - - -
At 31 December 2016Bank overdraft 1,007 - - - - Bank loans 109,466 90,903 87,341 169,880 132,967 Loan at call 154,008 - - - - Unsecured loans at call 213,809 359,011 - - - Trade and other payables 39,690 - - - -
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
3. FINANCIAL RISK MANAGEMENT (CONT’D)
3.2 Fair value estimation
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions at an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily of quoted equity investments classified as available for sale.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
- Quoted market prices or dealer quotes for similar instruments; and- Other techniques such as capitalised earnings method, dividend yield method, discounted cash flow and net asset basis are used to determine
fair value for the remaining financial instruments.
The carrying amount of the Group’s financial assets would be an estimated Rs1.0 million (2016: Rs0.8 million) and Rs0.5 million (2016:Rs0.5 million) lower/ higher for the Group and the Company respectively where the fair value differs by 10% from management estimates.
3.3 Capital risk management
The Group’s objectives when managing capital are:
• to safeguard the entities’ ability to continue as going concerns, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt to adjusted capital. Net debt is calculated as total debt (as shown on the statement of financial position) less cash and cash equivalents. Adjusted capital comprises all components of equity (i.e. share capital, share premium, non-controlling interests, retained earnings and revaluation and other reserves).
The debt-to-adjusted capital ratios at 31 December 2017 and at 31 December 2016 were as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Total debt 977,677 1,171,869 1,085,038 1,184,553 Less: cash and cash equivalents (215,255) (201,729) (68,203) (129,764)Net debt 762,422 970,140 1,016,835 1,054,789
Total equity 2,070,262 1,988,298 1,427,935 1,528,086
Debt-to-adjusted capital ratio 0.37:1 0.49:1 0.71:1 0.69:1
There were no changes in the Group’s approach to capital risk management during the year.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2(d)(i). These calculations require the use of estimates.
(b) Impairment of available-for-sale financial assets
The Group follows the guidance of IAS 39 on determining when an investment is other-than-temporarily impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost, and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.
(c) Pension benefits
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost/(income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.
Other key assumptions for pension obligations are based on past and current market conditions. Additional information is disclosed in note 20.
(d) Revaluation of property, plant and equipment and investment properties
The Group carries its investment properties at fair value, with changes in fair value being recognised in profit or loss. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The Group engages independent valuation specialists to determine fair value of property and investment properties. For the property, plant and equipment, the valuer used comparable market data, sales comparison and depreciated replacement cost. For the investment properties, the valuer used the sales comparison approach.
(e) Depreciation policies - Asset lives and residual values
Property, plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation,and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.
The directors make estimates based on historical experience and use best judgement to assess the useful lives of assets and to forecast the expected residual values of the assets at the end of their expected useful lives.
(f) Fair value of securities not quoted in an active market
The fair value of securities not quoted in an active market may be determined by the Group using valuation techniques including third party transaction values, earnings, net asset value or discounted cash flows, whichever is considered to be appropriate. The Group would execise judgement and estimates on the quantity and quality of pricing sources used. Changes in assumption about these factors could affect the reported fair value of financial instruments.
(g) Limitation of sensitivity analysis Sensitivity analysis in respect of market risk demonstrates the effect of a change in a key assumption while other assumptions remains unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be noted that these sensitivities are non linear and larger or smaller impacts should not be interpolated or extrapolated from these results.
Sensitivity analysis does not take into consideration that the Group assets and liabilities are managed. Other limitations include the use of hypothetical market movements to demonstrate potential risk that only represent the Group view of possible near term market changes that cannot be predicted with any certainty.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
(h) Deferred tax on investment properties
For the purpose of measuring deferred tax liabilities or deferred tax assets arising from investment properties,the directors believe that investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. As a result, the Group has recognised deferred tax on changes in fair value of investment properties.
(i) Impairment of assets
Goodwill is considered for impairment at least annually. Property, plant and equipment and intangible assets are considered for impairment if there is a reason to believe that impairment may be necessary. Factors taken into consideration in reaching such a decision include the economic viability of the asset itself and where it is a component of a larger economic unit, the viability of that unit itself.
Future cash flows expected to be generated by the assets or cash-generating units are projected, taking into account market conditions and the expected useful lives of the assets. The present value of these cash flows, determined using the appropriate discount rate, is compared to the current net asset value and, if lower, the assets are impaired to the present value. The impairment loss is first allocated to goodwill and then to the other assets of a cash-generating units.
Cash flows which are utilised in these assessments are extracted from the latest management forecasts. The Group utilises the valuation model to determine asset and cash-generating unit values supplemented, where appropriate, by discounted cash flow and other valuation techniques.
(j) Revenue recognition
The percentage of completion method is utilised to recognise revenue on contracts. Management excercises judgement in assessing whether significant risk and reward have been transferred to the customer to permit revenue to be recognised .
In case where there is a buy-back, management considers whether the buy-back is set at a level which makes the buy-back substantive. If so, management uses the guidance from IAS 18 with regard to the transfer of risk and reward for the purpose of revenue recognition. If the buy-back is not considered to be substantive, then it is ignored for the purpose of revenue recognition. If revenue is recognised on a transaction which include a buy-back, then provision is made on the basis set out in repurchase commitments as and when such provision is required.
5. PROPERTY, PLANT AND EQUIPMENT
THE GROUP
(a) 2017
Freehold Land and Buildings
Buildings on
Leasehold Land
Plant and Machinery
Motor Vehicles
Furniture, Fittings
and Office Equipment
Rental Equipment
Other Tools and Equipment
Assets in Progress Total
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
COST/DEEMED COST AND VALUATION
At 1 January 2017 768,948 38,774 521,099 185,688 319,435 138,003 58,300 - 2,030,247 Additions 14,136 3,264 35,306 16,696 36,072 - 3,342 15,264 124,080 Disposals - - (4,025) (13,878) (12,072) - - - (29,975)Adjustment on disposal of subsidiary (note 34(c)) (239,156) (20,899) (187,467) (6,409) (49,189) - - - (503,120)Exchange difference 42 (58) 33 (292) 285 - - - 10 Assets written off (2,575) - (639) (1,995) (31,714) - - - (36,923)At 31 December 2017 541,395 21,081 364,307 179,810 262,817 138,003 61,642 15,264 1,584,319
DEPRECIATIONAt 1 January 2017 56,247 4,439 360,358 145,273 228,431 73,177 45,890 - 913,815 Charge for the year 23,119 1,527 42,555 19,695 27,676 - 3,009 - 117,581 Disposal adjustments - - (2,539) (13,566) (12,676) - - - (28,781)Adjustment on disposal of subsidiary (note 34(c)) (54,838) (4,201) (101,266) (3,535) (34,597) - - - (198,437)Exchange difference 8 (41) (376) 127 (98) - - - (380)Assets written off (2,575) - (639) (1,995) (31,714) - - - (36,923)At 31 December 2017 21,961 1,724 298,093 145,999 177,022 73,177 48,899 - 766,875
NET BOOK VALUEAt 31 December 2017 519,434 19,357 66,214 33,811 85,795 64,826 12,743 15,264 817,444
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
THE GROUP
(b) 2016
Freehold Land and Buildings
Buildings on
Leasehold Land
Plant and Machinery
Motor Vehicles
Furniture, Fittings
and Office Equipment
Rental Equipment
Other Tools and Equipment
Assets in Progress Total
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
COST/DEEMED COST AND VALUATION
At 1 January 2016 741,668 37,864 437,578 190,369 306,716 138,003 71,435 3,147 1,926,780 Additions 51,019 1,153 84,423 9,084 52,943 - 3,515 - 202,137 Disposals (2,699) - (6,063) (14,041) (41,216) - (60) - (64,079)Transfer between assets - - - - 3,147 - - (3,147) - Transfer from inventories - - 9,794 - - - - - 9,794 Exchange difference - - (9) 285 104 - - - 380 Adjustment on revaluation (21,040) (243) - - - - - - (21,283)Assets written off - - (4,624) (9) (2,259) - (16,590) - (23,482)At 31 December 2016 768,948 38,774 521,099 185,688 319,435 138,003 58,300 - 2,030,247
DEPRECIATIONAt 1 January 2016 206,284 5,103 327,868 134,709 242,248 73,177 59,599 - 1,048,988 Charge for the year 15,013 2,048 42,885 23,939 19,585 - 2,893 - 106,363 Disposal adjustments (1,927) - (5,687) (13,704) (31,514) - (12) - (52,844)Exchange difference - - (84) 336 75 - - - 327 Adjustment arising on revaluation (163,123) (2,712) - - - - - - (165,835)Assets written off - - (4,624) (7) (1,963) - (16,590) - (23,184)At 31 December 2016 56,247 4,439 360,358 145,273 228,431 73,177 45,890 - 913,815
NET BOOK VALUEAt 31 December 2016 712,701 34,335 160,741 40,415 91,004 64,826 12,410 - 1,116,432
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
THE COMPANY
(c) 2017
Freehold Land and Buildings
Plant and Machinery
Motor Vehicles
Furniture, Fittings
and Office Equipment Total
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
COST AND VALUATION At 1 January 2017 269,223 11,872 5,769 42,130 328,994 Additions 1,109 - 1,738 5,595 8,442 Disposals - - (2,008) - (2,008)At 31 December 2017 270,332 11,872 5,499 47,725 335,428
DEPRECIATION At 1 January 2017 - 11,872 5,514 37,950 55,336 Charge for the year 4,492 - 574 3,309 8,375 Disposals - - (2,008) - (2,008)At 31 December 2017 4,492 11,872 4,080 41,259 61,703
NET BOOK VALUE At 31 December 2017 265,840 - 1,419 6,466 273,725
THE COMPANY
Freehold Land and Buildings
Buildings on Leasehold
LandPlant and Machinery
Motor Vehicles
Furniture, Fittings
and Office Equipment Total
(d) 2016 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
COST AND VALUATION At 1 January 2016 287,069 4,946 11,852 5,769 38,885 348,521 Additions 234 - 20 - 3,245 3,499 Transfer to investment properties (39,357) (4,830) - - - (44,187)Adjustment on revaluation 21,277 (116) - - - 21,161 At 31 December 2016 269,223 - 11,872 5,769 42,130 328,994
DEPRECIATION At 1 January 2016 9,731 2,588 11,461 4,810 37,120 65,710 Charge for the year 4,911 124 411 704 830 6,980 Adjustment arising on revaluation (14,642) (2,712) - - - (17,354)At 31 December 2016 - - 11,872 5,514 37,950 55,336
NET BOOK VALUE At 31 December 2016 269,223 - - 255 4,180 273,658
THE GROUP2017 2016
(e) Depreciation charge is analysed as follows: Rs’000 Rs’000
Cost of sales 20,253 24,341 Marketing and selling expenses 17,897 22,482 Administrative expenses 79,431 59,540
117,581 106,363 Depreciation charge for the Company is recorded in administrative expenses.
(f) Additions include Rs27.6 million (2016: Rs32.5 million) of assets leased under finance lease.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
(g) Leased assets included above comprise of the following:
THE GROUP THE COMPANYPlant and Machinery Motor vehicles Office Equipment Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Cost - capitalised finance leases 76,871 153,176 95,959 112,408 17,290 25,047 190,120 290,631 - - Accumulated depreciation (52,574) (90,638) (67,910) (67,170) (5,156) (8,546) (125,640) (166,354) - - Net book value 24,297 62,538 28,049 45,238 12,134 16,501 64,480 124,277 - -
(h) In 2016, land and buildings were revalued by the Group on the basis of revaluation exercise carried out by Professional Valuers Co. Ltd, Chartered Valuation Surveyors and 70% of the value was booked in the financial statements. Valuation was made on a depreciated replacement cost approach and a sales comparison approach. The depreciated replacement cost approach estimates the value by computing the current cost of replacing a property and as adjusted for one or more factors such as physical deterioration, functional and external obsolescence. The sales comparison approach estimates the value of a property by comparing it to similar properties recently sold on the open market as adjusted for differences in key attributes such as property size, accesibility amongst others. This method was mainly used for valuing vacant land and homogeneous properties.
2016Range
Significant unobservable valuations inputPrice per toise Rs 6,322 to Rs 321,075
Significant movements in estimated price per ‘toise’ in isolation would result in a significantly higher/(lower) fair value.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
5. PROPERTY, PLANT AND EQUIPMENT (CONT’D)
The fair value of the buildings was determined using the depreciated replacement cost approach that reflects the cost of a market participant to construct assets of comparable utility and age, adjusted for obsolescence.
Details of the freehold land and building measured at fair value and information about the fair value hierachy are as follows:
THE GROUP2017 2016
Level 2Rs’000 Rs’000
Freehold land 276,255 381,255 Buildings 243,179 232,395 Total 519,434 613,650
THE GROUP2017 2016
Level 3Rs’000 Rs’000
Buildings - 99,051
THE COMPANY2017 2016
Level 2Rs’000 Rs’000
Freehold land 96,530 96,530 Buildings 169,310 172,693 Total 265,840 269,223
(i) If the land and buildings were stated on the historical cost basis, the amounts would have been as follows:
Land and Buildings2017 2016
(i) THE GROUP Rs’000 Rs’000
Cost 148,946 183,735 Accumulated depreciation (44,153) (44,954)Net book value 104,793 138,781
(ii) THE COMPANY Land and Buildings2017 2016
Rs’000 Rs’000
Cost 103,026 101,917 Accumulated depreciation (36,588) (34,690)Net book value 66,438 67,227
(j) Bank borrowings are secured by floating charges on the assets of the Group, including property, plant and equipment.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
6. INVESTMENT PROPERTIES
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 361,665 360,912 367,299 300,420 Additions 9,444 916 9,444 916 Transfer from property, plant and equipment - - - 44,187 Disposals (9,745) - - - Exchange difference (644) 1,063 - - (Decrease)/increase in fair value (431) (1,226) 5,169 21,776 At 31 December, 360,289 361,665 381,912 367,299
In 2017, the properties were revalued by Professional Valuers Co. Ltd, Chartered Valuation Surveyors. Valuation was made on a sales comparison approach. The sales comparison approach estimates the value of a property by comparing it to similar properties recently sold on the open market. This method was used for valuing vacant land and homogeneous properties.
Details of the investment properties and information about fair value hierachy as at December 31, 2017 are as follows:
THE GROUP2017 2016
Level 2Rs’000 Rs’000
Buildings 114,339 119,295 Land 245,950 242,370 Total 360,289 361,665
THE COMPANY2017 2016
Level 2Rs’000 Rs’000
Buildings 135,812 135,100 Land 246,100 232,199 Total 381,912 367,299
Bank borrowings are secured by floating charges on the assets of the Group, including investment properties.
The following amounts have been recognised in profit or loss:THE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Rental income 21,090 14,047 12,545 9,701 Direct operating expenses arising on investment properties that generate investment income 571 202 337 28 Direct operating expenses arising on investment properties that did not generate investment income 657 220 - -
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
7. INTANGIBLE ASSETS
(a) THE GROUP GoodwillComputer Software
Operating Licence Total
Rs’000 Rs’000 Rs’000 Rs’000
COSTAt 1 January 2017 185,649 46,975 5,241 237,865 Additions 9,852 2,336 - 12,188 Adjustment on disposal of subsidiary (note 34(c)) - (6,915) - (6,915)Exchange difference on retranslation - - 3 3 Asset written off - (323) - (323)At 31 December 2017 195,501 42,073 5,244 242,818
AMORTISATIONAt 1 January 2017 98,983 38,661 4,952 142,596 Charge for the year 1,665 3,157 - 4,822 Adjustment on disposal of subsidiary (note 34(c)) - (4,424) - (4,424)Exchange difference on retranslation - - 3 3 Asset written off - (38) - (38)At 31 December 2017 100,648 37,356 4,955 142,959
NET BOOK VALUEAt 31 December 2017 94,853 4,717 289 99,859
(b) THE GROUP GoodwillComputer Software
Operating Licence Total
Rs’000 Rs’000 Rs’000 Rs’000
COSTAt 1 January 2016 196,080 47,319 4,925 248,324 Additions 2,340 3,272 316 5,928 Goodwill written off (12,771) - - (12,771)Asset written off - (3,616) - (3,616)At 31 December 2016 185,649 46,975 5,241 237,865
AMORTISATIONAt 1 January 2016 98,659 36,019 4,874 139,552 Charge for the year 324 2,781 78 3,183 Asset written off - (139) - (139)At 31 December 2016 98,983 38,661 4,952 142,596
NET BOOK VALUEAt 31 December 2016 86,666 8,314 289 95,269
Amortisation charge of Rs4.8 million (2016: Rs3.2 million) has been accounted for in administrative expenses.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
7. INTANGIBLE ASSETS (CONT’D)
(c) THE COMPANYComputer SoftwareRs’000
COSTAt 1 January 2017 7,363 Additions 481 At 31 December 2017 7,844
AMORTISATIONAt 1 January 2017 6,878 Charge for the year 282 At 31 December 2017 7,160
NET BOOK VALUEAt 31 December 2017 684
(d) THE COMPANYComputer SoftwareRs’000
COSTAt 1 January 2016 10,610 Asset written off (3,247)At 31 December 2016 7,363
AMORTISATIONAt 1 January 2016 6,663 Charge for the year 215 At 31 December 2016 6,878
NET BOOK VALUEAt 31 December 2016 485
(e) Goodwill acquired through business combinations have indefinite useful lives and have been allocated to cash-generating units for impairment testing as follows:
THE GROUP2017 2016
Rs’000 Rs’000
Manufacturing & Trading 31,264 32,607 Business Services 63,589 54,059
94,853 86,666
The recoverable amounts of these cash-generating units have been determined based on their value in use calculation using cash flow projections derived from financial budgets established by managements covering a three-year period and using a terminal growth rate of 5%. The pre-tax discount rates (WACC) applied to cash flow projections vary between 15% to 20%.
Following this exercise, an impairment was recognised in the financial statements.
8. INVESTMENTS IN SUBSIDIARIES2017 2016
Rs’000 Rs’000
THE COMPANYAt 1 January, 1,025,807 960,056 Additions 9,698 142,782 Disposals (77,552) - Transfer from investment in joint venture - 13 Impairment loss (43,998) (110,890)Fair value (loss)/gain (1,076) 33,846 At 31 December, 912,879 1,025,807
Investments in subsidiaries comprise listed and unquoted securities.
The impairment losses arising during the year result from the declining performance of particular subsidiaries.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(a) The financial statements of the following subsidiaries have been included in the consolidated financial statements:
YEAR 2017
Name of Company
Class of shares held
Year ended
Stated capital
Direct percentage
holding and voting power %
Indirect percentage
holding and voting power %
Proportion of ownership interest held
by non-controlling interest %
Country of operation &
incorporationMain
business
Activeline Ltd Ordinary 31 December Rs7,235,158 100.00 - - Mauritius Business process outsourcing
Archemics Ltd Ordinary 31 December Rs400,000 100.00 - - Mauritius Chemicals
Bychemex Ltd (Note 1) Ordinary 31 December Rs5,000,000 44.91 - 55.09 Mauritius Chemicals
Chemco Limited Ordinary 31 December Rs6,208,722 54.68 4.60 40.72 MauritiusTrading of chemicals, fertilizers and general goods
Climapro Ltée (Note 3) Ordinary 31 December Rs1,500,000 - 100.00 - Mauritius
Air conditioning and fire protection
Cyberyder Ltd Ordinary 31 December Rs500,000 100.00 - - Mauritius Dormant
Coolkote Entreprises Ltd Ordinary 31 December Rs25,000 - 70.41 29.59 Mauritius Waterproofing activities
Distrisoft Ltd Ordinary 31 December Rs500,000 100.00 - - Mauritius Dormant
EO Solutions Ltd Ordinary 31 December Rs38,000,000 - 100.00 - Mauritius Office equipment products
Fertco Ltd Ordinary 30 June Rs5,000 - 70.41 29.59 Mauritius Dealer in chemicals
H. M.Communications Ltd Ordinary 31 December Rs2,500,000 100.00 - - Mauritius Dormant
HM Freeport Ordinary 31 December Rs25,000 100.00 - - Mauritius
Activities of holding/management/ investment companies(with/without managing)
Hamac Export Services Limited Ordinary 31 December Rs25,000 100.00 - - Mauritius Dormant
Harel Mallac Aviation Ltd (Note 4) Ordinary 31 December Rs1,010,000 - 100.00 - Mauritius General sale agent
Harel Mallac Distribution SARL (Note 5) Ordinary 31 December MGA1,821,940,000 99.00 1.00 - Madagascar
Distributor of consumer goods and IT products
Harel Mallac Export Ltd (Note 6) Ordinary 31 December Rs20,025,000 - 100.00 - Mauritius Freeport activity
Harel Mallac Healthcare Ltd (Note 7) Ordinary 31 December Rs15,025,000 - 100.00 - Mauritius
Retail sale of medical and orthopaedic goods in stores
Harel Mallac International Ltd Ordinary 31 December Rs124,870,862 100.00 - - Mauritius Investment company
Harel Mallac Leasing Ltd Ordinary 31 December Rs10,000 100.00 - - Mauritius Services
Harel Mallac Technologies Ltd (Note 8) Ordinary 31 December Rs31,945,296 100.00 - - Mauritius
Markets computer hardware and IT solutions
Harel Mallac (Tanzania) Limited Ordinary 31 December TSHI5,877,641,000 93.94 6.06 - Tanzania
Trading of chemicals and general goods
Harel Mallac Advisory Ltd (Note 9) Ordinary 31 December Rs2,000 85.00 - 15.00 Mauritius
Professional and management consultancy services
HM Corporate Services Ltd Ordinary 31 December Rs10,000 100.00 - - Mauritius Share registry
HM Electronics Ltd Ordinary 31 December Rs500,000 100.00 - - Mauritius Dormant
HM Global Ltd (Note 10) Ordinary 31 December Rs10,000,000 85.00 - 15.00 Mauritius
Professional and management consultancy services
HM Secretaries Ltd Ordinary 31 December Rs2,500,000 100.00 - - Mauritius
Professional consultancy services
Harel Mallac Trading Ltd Ordinary 31 December Rs91,600,670 100.00 - - Mauritius Investment holding
Indialley Ltd Ordinary 31 December Rs1,075,000 100.00 - - Mauritius Dormant
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8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(a) The financial statements of the following subsidiaries have been included in the consolidated financial statements - (cont’d):
YEAR 2017
Name of Company
Class of shares held
Year ended
Stated capital
Direct percentage
holding and voting power %
Indirect percentage
holding and voting power %
Proportion of ownership interest held
by non-controlling interest %
Country of operation &
incorporationMain
business
Informatics Business Solutions Ltd Ordinary 31 December Rs25,000 100.00 - - Mauritius
Markets computer hardware and IT solutions
HMT Madagascar (Note 11) Ordinary 31 December MGA362,260,000 - 100.00 - Madagascar
Markets computer hardware and IT solutions
Itineris Ltd Ordinary 31 December Rs10,000,000 100.00 - - Mauritius Travel agent
Linxia Ltd Ordinary 31 December Rs36,160,000 - 100.00 - MauritiusMarkets computer hardware and IT solutions
Logima Ltée Ordinary 31 December Rs55,050,000 - 100.00 - MauritiusTrading in Fast Moving Consumer Goods(FMCG)
Logima Reunion SAS Ordinary 31 December EUR1,000 - 70.41 29.59
Reunion Island
Trading in Fast Moving Consumer Goods(FMCG)
MCFI (Freeport) Ltd Ordinary 31 December Rs10,000,000 - 70.41 29.59 Mauritius Trading freeport companyMCFI International & Co Ltd Ordinary 31 December EUR451,431 - 70.41 29.59 Mauritius Trading companyMCFI International (Zambia) Pty Ordinary 31 December ZMW10,000 - 70.41 29.59 Zambia
Trading of chemicals and general goods
Milna Directors Ltd Ordinary 31 December Rs10,000 - 100.00 - Mauritius
Professional and management consultancy services
Milna Nominee Ltd Ordinary 31 December Rs10,000 - 100.00 - Mauritius
Professional and management consultancy services
Novengi Ltd (Note 12) Ordinary 31 December Rs30,000,000 - 100.00 - Mauritius
Agro industrial, engineering, refrigeration and electrical products
Orinux (Rwanda) Sarl (Note 13) Ordinary 31 December RWF5,000,000 - 100.00 - Rwanda
Audit Software Development, Administration and Maintenance
Orinux Burundi SA (Note 14) Ordinary 31 December BIF24,190,200 0.12 99.88 - Burundi
Audit Software Development, Administration and Maintenance
People Prime Ltd Ordinary 31 December Rs25,000 100.00 - - MauritiusHuman capital consulting and service provider
Pharmallac SARL Ordinary 31 December MGA140,220,000 98.60 1.40 - MadagascarSales and distribution of pharmaceutical products
Photovoltaic Farm Ltd Ordinary 31 December Rs11,000 100.00 - - Mauritius Investment companyPortus Ltd Ordinary 31 December Rs1,000,000 100.00 - - Mauritius Dormant
Reunifert Ordinary 30 June EUR3,000 - 70.41 29.59 Reunion Island Trading of chemicals
Société Gare du Nord Ordinary 31 December Rs14,999,900 100.00 - - Mauritius Investment companySociété Sicarex Ordinary 31 December Rs14,999,900 100.00 - - Mauritius Property company
Solar PV Farm Ordinary 31 December Rs1,000 100.00 - - Mauritius
Manufacture of electricity, distribution and control apparatus
Standard Continuous Stationery Limited Ordinary 31 December Rs10,000 100.00 - - Mauritius Investment companySuchem Ltd Ordinary 31 December Rs17,725,000 100.00 - - Mauritius Sales of chemical productsTechno City Ltd Ordinary 31 December Rs25,000 - 100.00 - Mauritius DormantThe Mauritius Chemical and Fertilizer Industry Limited Ordinary 31 December Rs220,064,180 70.41 - 29.59 Mauritius
Blending and trading of fertilizers
The Professional Learning Centre Ltd Ordinary 31 December Rs9,000,000 100.00 - - Mauritius Training centre
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(a) The financial statements of the following subsidiaries have been included in the consolidated financial statements - (cont’d):
Note 1 - In respect of Bychemex Ltd, although Harel Mallac & Co. Ltd does not own more than half of the voting power, this company is accounted for as a subsidiary since control is exercised through board representation.
Note 2 - In 2017, Harel Mallac & Co. Ltd disposed all of its shareholdings in Compagnie des Magasins Populaires Limitée, CMPL (Cascavelle) Limitée and CMPL (Bagatelle) Limitée to Winhold Limited.
Note 3 - In 2017, Harel Mallac & Co. Ltd transferred all of its shareholdings in Climapro Ltée to Harel Mallac Trading Ltd.
Note 4 - In 2017, Harel Mallac & Co. Ltd transferred all of its shareholdings in Harel Mallac Aviation Ltd to Itineris Ltd.
Note 5 - The operations of Harel Mallac Distribution SARL will be discontinued during the financial year 2018.
Note 6 - In 2017, Harel Mallac & Co. Ltd transferred all of its shareholdings in Harel Mallac Export Ltd to MCFI International & Co Ltd.
Note 7 - The operations of Harel Mallac Healthcare Ltd will be discontinued during the financial year 2018.
Note 8 - Effecive 1 January 2017, Orinux (Mauritius) Ltd amalgamated with Harel Mallac Technologies Ltd, and Harel Mallac Technologies remains as the surviving company.
Effecive 1 April 2017, Mauritius Computing Services Limited amalgamated with Harel Mallac Technologies Ltd, and Harel Mallac Technologies remains as the surviving company.
Note 9 - In 2017, Harel Mallac & Co. Ltd acquired a stake of 85% in Harel Mallac Advisory Ltd.
Note 10 - In 2017, Harel Mallac & Co. Ltd disposed 15% of its shareholdings in HM Global Ltd. During the year, HM Global Ltd amalgamated with Baines Trust and Corporate Services Ltd with HM Global Ltd remaining as the surviving entity. In 2017, HM Global Services Ltd changed its name to HM Global Ltd.
Note 11 - In 2017, Infosystems Business Technologies SARL changed its name to HMT Madagascar.
Note 12 - In 2017, Harel Mallac & Co. Ltd transferred all of its shareholdings in Novengi Ltd to Harel Mallac Trading Ltd.
Note 13 - In 2017, Orinux (Rwanda) SARL changed its name to HMT Rwanda.
Note 14 - In 2017, Orinux Burundi SA changed its name to HMT Burundi.
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8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(b) The financial statements of the following subsidiaries have been included in the consolidated financial statements:
YEAR 2016
Name of Company
Class of shares held
Year ended
Stated capital
Direct percentage
holding and voting power %
Indirect percentage
holding and voting power %
Proportion of ownership interest held
by non-controlling interest %
Country of operation &
incorporationMain
business
Activeline Ltd Ordinary 31 December Rs7,235,158 100.00 - - Mauritius Business process outsourcingArchemics Ltd Ordinary 31 December Rs400,000 100.00 - - Mauritius ChemicalsBychemex Ltd (Note 1) Ordinary 31 December Rs5,000,000 44.91 - 55.09 Mauritius ChemicalsCompagnie des Magasins Populaires Limitée (Note 2) Ordinary 31 December Rs162,935,000 90.96 - 9.04 Mauritius Retailer of consumer goods CMPL (Cascavelle) Limitée (Note 2) Ordinary 31 December Rs15,000,000 - 90.96 9.04 Mauritius Retailer of consumer goods CMPL (Bagatelle) Limitée (Note 2) Ordinary 31 December Rs15,000,000 - 90.96 9.04 Mauritius Retailer of consumer goods Chemco Limited Ordinary 31 December Rs6,208,722 54.68 4.60 40.72 Mauritius
Trading of chemicals, fertiliz-ers and general goods
Climapro Ltée Ordinary 31 December Rs1,500,000 100.00 - - MauritiusAir conditioning and fire protection
Cyberyder Ltd Ordinary 31 December Rs500,000 100.00 - - Mauritius DormantCoolkote Entreprises Ltd Ordinary 31 December Rs25,000 - 70.41 29.59 Mauritius Waterproofing activitiesDistrisoft Ltd Ordinary 31 December Rs500,000 100.00 - - Mauritius DormantEO Solutions Ltd (Note 3) Ordinary 31 December Rs38,000,000 - 100.00 - Mauritius Office equipment productsFertco Ltd Ordinary 30 June Rs5,000 - 70.41 29.59 Mauritius Dealer in chemicalsH. M. Communications Ltd Ordinary 31 December Rs2,500,000 100.00 - - Mauritius Dormant
HM Freeport (Note 13) Ordinary 31 December Rs25,000 100.00 - - Mauritius
Activities of holding/management / investment companies (with/without managing)
Hamac Export Services Limited Ordinary 31 December Rs25,000 100.00 - - Mauritius DormantHarel Mallac Aviation Ltd (Note 4) Ordinary 31 December Rs1,010,000 - 100.00 - Mauritius General sale agentHarel Mallac Distribution SARL (Note 5) Ordinary 31 December MGA1,821,940,000 99.00 1.00 - Madagascar
Distributor of consumer goods and IT products
Novengi Ltd (Note 6) Ordinary 31 December Rs30,000,000 100.00 - - Mauritius
Agro industrial, engineering, refrigeration and electrical products
Harel Mallac Export Ltd Ordinary 31 December Rs20,025,000 100.00 - - Mauritius Freeport activityHarel Mallac Healthcare Ltd (Note 7) Ordinary 31 December Rs15,025,000 - 100.00 - Mauritius
Retail sale of medical and orthopaedic goods in stores
Harel Mallac International Ltd Ordinary 31 December Rs124,870,862 100.00 - - Mauritius Investment companyHarel Mallac Leasing Ltd Ordinary 31 December Rs10,000 100.00 - - Mauritius ServicesHarel Mallac Technologies Ltd Ordinary 31 December Rs31,945,296 100.00 - - Mauritius
Markets computer hardware and IT solutions
Harel Mallac (Tanzania) Limited Ordinary 31 December TSHI5,877,641,000 93.94 6.06 - Tanzania
Trading of chemicals and general goods
HM Corporate Services Ltd Ordinary 31 December Rs10,000 100.00 - - Mauritius Share registryHM Electronics Ltd Ordinary 31 December Rs500,000 100.00 - - Mauritius Dormant
HM Global Ltd Ordinary 31 December Rs10,000,000 100.00 - - Mauritius
Professional and management consultancy services
HM Secretaries Ltd Ordinary 31 December Rs2,500,000 100.00 - - Mauritius
Professional consultancy services
Harel Mallac Trading Ltd (Note 8) Ordinary 31 December Rs91,600,670 100.00 - - Mauritius Investment holdingIndialley Ltd Ordinary 31 December Rs1,075,000 100.00 - - Mauritius Dormant
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(b) The financial statements of the following subsidiaries have been included in the consolidated financial statements - (cont’d):
YEAR 2016
Name of Company
Class of shares held
Year ended
Stated capital
Direct percentage
holding and voting power %
Indirect percentage
holding and voting power %
Proportion of ownership interest held
by non-controlling interest %
Country of operation &
incorporationMain
business
Informatics Business Solutions Ltd Ordinary 31 December Rs25,000 100.00 - - Mauritius
Markets computer hardware and IT solutions
Infosystems Business Technologies SARL (Note 9) Ordinary 31 December MGA362,260,000 - 100.00 - Madagascar
Markets computer hardware and IT solutions
Itineris Ltd (Note 10) Ordinary 31 December Rs10,000,000 100.00 - - Mauritius Travel agentLinxia Ltd (Note 11) Ordinary 31 December Rs36,160,000 - 100.00 - Mauritius
Markets computer hardware and IT solutions
Logima Ltée Ordinary 31 December Rs55,050,000 - 100.00 - MauritiusTrading in Fast Moving Consumer Goods (FMCG)
Logima Reunion SAS Ordinary 31 December EUR1,000 - 70.41 29.59
Reunion Island
Trading in Fast Moving Consumer Goods (FMCG)
Mauritius Computing Services Limited (Note 12) Ordinary 31 December Rs13,265,942 - 100.00 - Mauritius
Application service provider and outsourcing
MCFI (Freeport) Ltd Ordinary 31 December Rs10,000,000 - 70.41 29.59 Mauritius Trading freeport companyMCFI International & Co Ltd Ordinary 31 December EUR451,431 - 70.41 29.59 Mauritius Trading companyMCFI International (Zambia) Pty Ordinary 31 December ZMW10,000 - 70.41 29.59 Zambia
Trading of chemicals and general goods
Milna Directors Ltd Ordinary 31 December Rs10,000 - 100.00 - Mauritius
Professional and management consultancy services
Milna Nominee Ltd Ordinary 31 December Rs10,000 - 100.00 - Mauritius
Professional and management consultancy services
Orinux (Mauritius) Ltd (Note 14) Ordinary 31 December Rs10,000 100.00 - - Mauritius
Audit Software Development, Administration and Maintenance
Orinux (Rwanda) Sarl Ordinary 31 December RWF5,000,000 - 100.00 - Rwanda
Audit Software Development, Administration and Maintenance
Orinux Burundi SA Ordinary 31 December BIF24,190,200 0.12 99.88 - Burundi
Audit Software Development, Administration and Maintenance
People Prime Ltd Ordinary 31 December Rs25,000 100.00 - - Mauritius
Human capital consulting and service provider
Pharmallac SARL Ordinary 31 December MGA140,220,000 98.60 1.40 - Madagascar
Sales and distribution of pharmaceutical products
Photovoltaic Farm Ltd Ordinary 31 December Rs11,000 100.00 - - Mauritius Investment companyPortus Ltd Ordinary 31 December Rs1,000,000 100.00 - - Mauritius Dormant
Reunifert Ordinary 30 June EUR3,000 - 70.41 29.59 Reunion Island Trading of chemicals
Société Gare du Nord Ordinary 31 December Rs14,999,900 100.00 - - Mauritius Investment companySociété Sicarex Ordinary 31 December Rs14,999,900 100.00 - - Mauritius Property company
Solar PV Farm (Note 13) Ordinary 31 December Rs1,000 100.00 - - Mauritius
Manufacture of electricity, distribution and control apparatus
Standard Continuous Stationery Limited Ordinary 31 December Rs10,000 100.00 - - Mauritius Investment companySuchem Ltd Ordinary 31 December Rs17,725,000 100.00 - - Mauritius Sales of chemical productsTechno City Ltd Ordinary 31 December Rs25,000 - 100.00 - Mauritius DormantThe Mauritius Chemical and Fertilizer Industry Limited Ordinary 31 December Rs220,064,180 70.41 - 29.59 Mauritius
Blending and trading of fertilizers
The Professional Learning Centre Ltd Ordinary 31 December Rs9,000,000 100.00 - - Mauritius Training centre
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8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(b) The financial statements of the following subsidiaries have been included in the consolidated financial statements - (cont’d):
Note 1 - In respect of Bychemex Ltd, although Harel Mallac & Co. Ltd does not own more than half of the voting power, this company is accounted for as a subsidiary since control is exercised through board representation.
Note 2 - In 2016, Harel Mallac & Co. Ltd acquired addional stake in Compagnie des Magasins Populaires Limitée by way of a right issue. This had the effect of bringing its shareholding to 90.96%.
Note 3 - During the financial year 2016, Harel Mallac Bureautique Ltd changed its name to EO Solutions Ltd. Harel Mallac & Co. Ltd transferred all of its shareholdings in EO Solutions Ltd to Harel Mallac Trading Ltd, a company incorporated in 2016.
Note 4 - In 2016, Harel Mallac & Co. Ltd disposed all of its shareholdings in Harel Mallac Aviation Ltd to Itineris (Formerly known as Harel Mallac Travel and Leisure Limited).
Note 5 - The operations of Harel Mallac Distribution SARL will be discontinued during the financial year 2017.
Note 6 - In 2016, Harel Mallac Engineering Ltd changed its name to Novengi Ltd.
Note 7 - During the financial year 2016, Harel Mallac & Co. Ltd transferred all of its shareholdings in Harel Mallac Healthcare Ltd to Harel Mallac Trading Ltd. The operations of Harel Mallac Healthcare Ltd will be discontinued during the financial year 2017.
Note 8 - Harel Mallac Trading Ltd has been newly incorporated in 2016.
Note 9 - In 2016, Harel Mallac & Co. Ltd transferred all of its shareholdings in Infosystems Business Technologies SARL to Harel Mallac Technologies Ltd.
Note 10 - In 2016, Harel Mallac Travel and Leisure Limited changed its name to Itineris Ltd.
Note 11 - In 2016, Harel Mallac & Co. Ltd transferred all of its shareholdings in Linxia Ltd to Harel Mallac Trading Ltd.
Note 12 - In 2016, Harel Mallac & Co. Ltd transferred all of its shareholdings in Mauritius Computing Services Limited to Harel Mallac Technologies Ltd.
Note 13 - HM Freeport and Solar PV Farm have been classified as subsidiary companies for the year ended December 31, 2016.
Note 14 - Effecive 1 January 2017, Orinux (Mauritius) Ltd amalgamated with Harel Mallac Technologies Ltd, and Harel Mallac Technologies remains as the surviving company.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(c) Subsidiaries with material non-controlling interests
Details for subsidiaries that have non-controlling interests that are material to the entity:
Name
Profit allocated to non-controlling interests during
the period
Accumulated non-controlling interests at 31
December 2017Rs’000 Rs’000
2017Chemco Limited 2,832 42,565Bychemex Ltd 592 17,256The Mauritius Chemical and Fertilizer Industry Limited 3,083 235,809
Name
Profit allocated to non-controlling interests during
the period
Accumulated non-controlling interests at 31
December 2016Rs’000 Rs’000
2016Chemco Limited 6,304 42,784Bychemex Ltd 64 17,022The Mauritius Chemical and Fertilizer Industry Limited 3,539 240,078
The aggregate accumulated figure of non-significant non-controlling interest amounted to Rs 1m.
(d) Summarised financial information on subsidiaries with material non-controlling interests
(i) Summarised statement of financial position and statement of profit or loss and other comprehensive income:
NameCurrent assets
Non-current assets
Current liabilities
Non- current liabilities Revenue
Profit for the year
Other Comprehensive
Income
Dividend paid to non- controlling
shareholdersRs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
2017Chemco Limited 161,109 15,438 62,746 9,403 280,621 6,947 (1,274) 2,531 Bychemex Ltd 41,595 5,555 14,009 1,818 67,479 1,075 (119) 441 The Mauritius Chemical and Fertilizers Industry Limited 851,135 590,525 598,816 46,393 1,030,703 10,418 (596) 5,209
2016Chemco Limited 165,306 17,064 70,360 7,074 281,741 15,463 535 2,785 Bychemex Ltd 38,086 6,467 11,059 2,326 59,229 116 2,128 220 The Mauritius Chemical and Fertilizers Industry Limited 595,277 601,938 342,088 41,633 926,323 11,959 100,427 4,558
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(d) Summarised financial information on subsidiaries with material non controlling interest (cont’d)
(ii) Summarised cash flow information:
NameOperating activities
Investing activities
Financing activities
Net (decrease)/ increase in
cash and cash equivalent
Rs’000 Rs’000 Rs’000 Rs’000
2017Chemco Limited (5,544) (593) (7,150) (13,287)Bychemex Ltd (3,391) (353) (544) (4,288)The Mauritius Chemical and Fertilizer Industry Limited (90,205) 17,286 (18,521) (91,440)
2016Chemco Limited 41,354 (9,759) (7,034) 24,561 Bychemex Ltd (1,462) (201) (634) (2,297)The Mauritius Chemical and Fertilizer Industry Limited 70,323 (29,696) (16,124) 24,503
The summarised financial information disclosed above is before intra-group eliminations.
(e) Investment in subsidiariesTHE COMPANY
2017 2016(i) Investment in subsidiaries include the following: Rs’000 Rs’000
Equity securities at fair value:- Official market 302,926 353,124 - DEM listed 74,764 68,274 - Unquoted 535,189 604,409
912,879 1,025,807
(ii) THE COMPANY Level 1 Level 2 Level 3 TotalRs’000 Rs’000 Rs’000 Rs’000
At 31 December 2017Available for sale financial assets 377,690 - 535,189 912,879
At 31 December 2016Available for sale financial assets 348,733 - 677,074 1,025,807
Instruments included in level 1 comprise primarily of quoted equity investments and other investments valued at available market price.
If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Investment in level 3, has been based on the marketable earning, discounted cash flow and net asset basis.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
8. INVESTMENTS IN SUBSIDIARIES (CONT’D)
(iii) The table below shows the changes in level 3 instruments.THE COMPANY
Level 32017 2016
Rs’000 Rs’000
At 1 January, 677,074 569,869 Additions 9,698 2,026 Disposals (77,552) - Impairment (43,998) (25,634)Transfer - 72,665 Fair value (loss)/gain (30,033) 58,148 At 31 December, 535,189 677,074
In 2016, there has been a transfer from level 1 to level 3 since there has been a change in valuation method for one of its subsidiary.
9. INVESTMENTS IN ASSOCIATES2017 2016
Rs’000 Rs’000
(a) THE GROUPAt 1 January, 1,007,509 913,754 Additions - 43,044 Transfer from non-current receivables - 17,490 Share of retained profit 77,360 14,393 Impairment (18,259) - Other movement (3,522) 18,828 At 31 December, 1,063,088 1,007,509
Made up as follows:Share of net assets 770,229 696,391 Goodwill on acquisition 292,859 311,118
1,063,088 1,007,509
Assessment for impairment of goodwill was based on the fair value of the underlying investments. The fair value was determined on a mix of capitalisation of earnings, use of recent transaction value and net assets.
2017 2016Rs’000 Rs’000
(b) THE COMPANYAt 1 January, 915,342 1,112,253 Transfer from non-current receivable - 17,490 Impairment loss (5,352) (30,990)Fair value loss (91,461) (183,411)At 31 December, 818,529 915,342
Investments in associated companies comprise unquoted securities. The fair value of unquoted securities are based on maintainable earnings and cost as appropriate.
Investment in associated companies are classified in level 3.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
9. INVESTMENTS IN ASSOCIATES (CONT’D)
(c) The Group’s interest in its principal associates are:
Name of Company
Country of incorporation and operation Year ended
Nature of business
Held by holding
company % Holding
Held by group
% Holding
YEAR 2017Attitude Hospitality Management Ltd Mauritius 30 June Hotel management 20.00 - Biofert Co. Ltd Mauritius 30 June Manufacture of bio fertilizers - 23.47 Elcon System Technick (Mtius) Ltd Mauritius 30 June Trading - 35.21 Emineo Holding Limited Mauritius 30 June Investment holding company 25.00 - EXL Link SAS France 31 December Training centre 30.00 - Imatech Ltd Mauritius 31 December Printing services 33.33 - Maritim (Mauritius) Ltd Mauritius 31 December Hotel operation 22.86 - Rehm Grinaker Construction Co Ltd Mauritius 30 June Building and civil engineering contractor - 15.14 Rehm Grinaker Properties Co Ltd Mauritius 30 June Property holding - 15.14 Societe Oneo Mauritius 30 June Investment holding company 25.00 -
Total Mauritius Limited Mauritius 31 DecemberStorage and wholesaling of petroleum products 20.00 -
Touristic United Enterprise Ltd Mauritius 30 June Investment holding company 22.50 - Water Sport Village Limited Mauritius 30 September Hotel operation 24.50 - Zilwa Resort Ltd Mauritius 30 June Hotel management 24.00 -
YEAR 2016Attitude Hospitality Management Ltd Mauritius 30 June Hotel management 20.00 - Biofert Co. Ltd Mauritius 30 June Manufacture of bio fertilizers - 23.47 Elcon System Technick (Mtius) Ltd Mauritius 30 June Trading - 35.21 Emineo Holding Limited Mauritius 30 June Investment holding company 25.00 - EXL Link SAS France 31 December Training centre 30.00 - Imatech Ltd Mauritius 31 December Printing services 33.33 - Maritim (Mauritius) Ltd Mauritius 31 December Hotel operation 22.86 - Rehm Grinaker Construction Co Ltd Mauritius 30 June Building and civil engineering contractor - 15.14 Rehm Grinaker Properties Co Ltd Mauritius 30 June Property holding - 15.14 Societe Oneo Mauritius 30 June Investment holding company 25.00 -
Total Mauritius Limited Mauritius 31 DecemberStorage and wholesaling of petroleum products 20.00 -
Touristic United Enterprise Ltd Mauritius 30 June Investment holding company 22.50 - Water Sport Village Limited Mauritius 30 September Hotel operation 24.50 - Zilwa Resort Ltd Mauritius 30 June Hotel management 24.00 -
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
9. INVESTMENTS IN ASSOCIATES (CONT’D)
(d) Summarised financial information
Summarised financial information in respect of each associate is set out below.
NameCurrent assets
Non-current assets
Current liabilities
Non- current
liabilities Revenue
Profit/(loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Dividends received during
the year
2017 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Attitude Hospitality Management Ltd 140,849 5,689 45,498 1,066 160,187 39,776 8,754 48,530 -
Biofert Co Ltd 3,345 5,036 2,622 - 1,313 (858) - (858) -
Emineo Holding Limited 103,007 55,015 31,632 9,228 105,296 (21,407) - (21,407) -
Imatech Ltd 3,921 14,677 3,917 6,640 23,391 830 - 830 -
Maritim (Mauritius) Ltd - - - - 657,431 146,013 - 146,013 7,200
Rehm Grinaker Construction Co Ltd 1,095,309 12,541 1,071,128 18,763 907,112 1,514 (3,549) (2,035) -
Rehm Grinaker Properties Co Ltd 2,491 167,184 11,262 85,940 14,284 6,108 - 6,108 -
Societe Oneo 260,000 - - - - - - - -
Total Mauritius Limited 1,505,820 1,543,355 1,973,793 94,056 6,579,453 173,777 (19,320) 154,457 20,000
Touristic United Enterprise Ltd 5,230 247,933 6,592 107,958 24,500 10,335 - 10,335 -
Water Sport Village Limited 33,433 261,407 33,515 981 267,930 46,677 4,181 50,858 -
Zilwa Resort Ltd 125,630 1,019,157 89,392 452,668 569,006 103,817 (6,977) 96,840 6,480
2016
Attitude Hospitality Management Ltd 82,492 8,308 37,868 1,489 138,751 20,835 - 20,835 -
Biofert Co Ltd 2,065 5,735 840 343 563 (330) - (330) -
Emineo Holding Limited 127,696 49,124 26,248 5,547 30,876 6,150 34,600 40,750 4,325
Imatech Ltd 4,604 14,649 5,499 6,543 25,511 2,350 - 2,350 -
Maritim (Mauritius) Ltd 157,891 1,503,294 135,408 487,861 648,833 69,501 43,591 113,092 9,600
Rehm Grinaker Construction Co Ltd 1,188,708 55,995 1,185,804 38,928 1,951,992 (170,417) (9,701) (180,118) -
Rehm Grinaker Properties Co Ltd 3,142 167,184 9,818 94,142 14,467 3,609 - 3,609 -
Societe Oneo 260,000 - - - - - - - -
Total Mauritius Limited 1,052,307 1,502,993 1,552,678 93,718 5,841,740 144,498 - 144,498 20,000
Touristic United Enterprise Ltd 52,990 209,748 42,346 92,113 22,050 24,429 - 24,429 -
Water Sport Village Limited 47,463 265,218 36,289 66,906 248,438 49,698 5,680 55,378 6,860
Zilwa Resort Ltd 121,150 1,024,218 66,290 546,193 535,817 92,621 3,785 96,406 -
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
9. INVESTMENTS IN ASSOCIATES (CONT’D)
(e) Reconciliation of summarised financial information
Reconciliation of the above summarised financial information to the carrying amount recognised in the financial statements:
Name
Opening net assets January 1
Profit/ (loss) for the year
Other comprehensive income/ (loss)
for the year Dividend Closing
net assets Ownership
interest Interest in associates Goodwill
Carrying value
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 % Rs’000 Rs’000 Rs’000
2017
Attitude Hospitality Management Ltd 51,443 39,776 8,754 - 99,973 20.00 19,995 44,410 64,405
Biofert Co Ltd 6,617 (858) - - 5,759 33.33 1,919 - 1,919
Elcon System Technick (Mtius) Ltd 1,596 - - - 1,596 50.00 798 - 798
Emineo Holding Limited (123,961) (21,407) - - (145,368) 25.00 (36,342) - (36,342)
Imatech Ltd 7,202 830 - - 8,032 33.33 2,677 - 2,677
Maritim (Mauritius) Ltd 1,026,585 146,013 - (31,500) 1,141,098 22.86 260,855 35,413 296,268
Rehm Grinaker Construction Co Ltd 19,971 1,514 (3,549) - 17,936 21.50 3,856 - 3,856
Rehm Grinaker Properties Co Ltd 66,367 6,108 - - 72,475 21.50 15,582 - 15,582
Societe Oneo 260,000 - - - 260,000 25.00 65,000 - 65,000
Total Mauritius Limited 926,869 173,777 (19,320) (100,000) 981,326 20.00 196,265 73,379 269,644
Touristic United Enterprise Ltd 128,268 10,335 - - 138,603 22.50 31,186 - 31,186
Water Sport Village Limited 209,483 46,677 4,181 - 260,341 24.50 63,784 84,371 148,155
Zilwa Resort Ltd 532,884 103,817 (6,977) (27,000) 602,724 24.00 144,654 55,286 199,940
Total 3,113,324 506,582 (16,911) (158,500) 3,444,495 770,229 292,859 1,063,088
Name
Opening net assets January 1
Profit/ (loss) for the year
Other comprehensive income/ (loss)
for the year Dividend Addition
Closing net
assetsOwnership
interest Interest in associates Goodwill
Carrying value
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 % Rs’000 Rs’000 Rs’000
2016
Attitude Hospitality Management Ltd 30,608 20,835 - - - 51,443 20.00 10,289 62,669 72,958
Biofert Co Ltd 6,947 (330) - - - 6,617 33.33 2,205 - 2,205
Elcon System Technick (Mtius) Ltd 1,596 - - - - 1,596 50.00 798 - 798
Emineo Holding Limited (147,411) 6,150 34,600 (17,300) - (123,961) 25.00 (30,990) - (30,990)
Imatech Ltd 4,852 2,350 - - - 7,202 33.33 2,400 - 2,400
Maritim (Mauritius) Ltd 955,493 69,501 43,591 (42,000) - 1,026,585 22.86 234,677 35,413 270,090
Rehm Grinaker Construction Co Ltd - (170,417) (9,701) - 200,089 19,971 21.50 4,294 - 4,294
Rehm Grinaker Properties Co Ltd 62,758 3,609 - - - 66,367 21.50 14,269 - 14,269
Societe Oneo 260,000 - - - - 260,000 25.00 65,000 - 65,000
Total Mauritius Limited 882,373 144,498 - (100,002) - 926,869 20.00 185,374 73,379 258,753
Touristic United Enterprise Ltd 26,106 24,429 - - 77,733 128,268 22.50 28,860 - 28,860
Water Sport Village Limited 182,105 49,698 5,680 (28,000) - 209,483 24.50 51,323 84,371 135,694
Zilwa Resort Ltd 436,478 92,621 3,785 - - 532,884 24.00 127,892 55,286 183,178
Total 2,701,905 242,944 77,955 (187,302) 277,822 3,113,324 696,391 311,118 1,007,509
(f) For companies with non co-terminous year end, management accounts for the year ended 31 December 2017 have been included in the consolidated financial statements.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
10. INVESTMENTS IN FINANCIAL ASSETS 2017 2016
Rs’000 Rs’000
(a) THE GROUPAt 1 January, 27,338 27,182 Additions 5,047 - Adjustment on disposal of subsidiary (note 34(c)) (1,515) - Impairment (100) - Fair value gain 1,801 156 At 31 December, 32,571 27,338
2017 2016Rs’000 Rs’000
(b) THE COMPANYAt 1 January, 22,493 22,203 Addition 5,047 - Fair value gain 197 290 At 31 December, 27,737 22,493
(c) Available for sale financial assetsTHE GROUP THE COMPANY
2017 2016 2017 2016Available for sale financial assets include the following: Rs’000 Rs’000 Rs’000 Rs’000
Equity securities at fair value:- Official market 11,101 13,093 11,095 11,909 - DEM listed 5,091 14 5,091 14 - Unquoted 16,379 14,231 11,551 10,570
32,571 27,338 27,737 22,493
(d) THE GROUP Level 1 Level 2 Level 3 TotalRs’000 Rs’000 Rs’000 Rs’000
At 31 December 2017Available for sale financial assets 22,971 - 9,600 32,571
At 31 December 2016Available for sale financial assets 19,145 - 8,193 27,338
(e) THE COMPANY Level 1 Level 2 Level 3 TotalRs’000 Rs’000 Rs’000 Rs’000
At 31 December 2017Available for sale financial assets 22,965 - 4,772 27,737
At 31 December 2016Available for sale financial assets 17,955 - 4,538 22,493
Instruments included in level 1 comprise primarily quoted equity investments and other investments valued at available market price.
If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Further information is presented in note 3.2.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
10. INVESTMENTS IN FINANCIAL ASSETS (CONT’D)
(f) The table below shows the changes in level 3 instruments.THE GROUP THE COMPANY
Available for saleequity securities
Available for saleequity securities
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 8,193 8,097 4,538 4,313 Impairment (100) - - - Fair value gain 1,507 96 234 225 At 31 December, 9,600 8,193 4,772 4,538
(g) Investments in financial assets are denominated in the Mauritian rupees.
11. INVESTMENTS IN JOINT VENTURESTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 14,175 19,334 21,573 21,586 Transfer to investment in subsidiaries - - - (13)Share of profit/(loss) 4,174 (5,159) - - At 31 December, 18,349 14,175 21,573 21,573
The cost of investment in joint venture in the Company’s financial statements approximates its fair value.
Information in respect of the joint ventures is as follows:
Name of company
Country of incorporation and operation
Class of share
held Year end
Proportion of interest and voting
rights Principal activity
Solar Field Ltd Mauritius Ordinary December 31, 51%Manufacture of electricity, distribution and control apparatus
Compostage Du Sud Ltée Mauritius Ordinary December 31, 35% Manufacture of mineral organic fertilizers
Summarised financial information in respect of the Group’s material joint venture is set out below.
The summarised financial information below represents amounts shown in the joint venture’s financial statements prepared in accordance with IFRS.
Summarised statement of financial position of Solar Field Ltd: 2017 2016Rs’000 Rs’000
Current assets 29,053 61,521 Non-current assets 182,392 182,180 Current liabilities 31,714 62,537 Non-current liabilities 142,677 152,914
The above amounts of assets include the following:Cash and cash equivalents 19,498 29,212
Summarised statement of profit or loss and other comprehensive income of Solar Field Ltd: 2017 2016Rs’000 Rs’000
Total comprehensive income/(loss) for the year 8,804 (9,635)
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
12. NON-CURRENT RECEIVABLESTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Loans to subsidiaries (unsecured with 7.75% interest rate and repayable in five years) - - 2,000 2,122 Other non-current receivables (unsecured, part of which is interest free and part bears interest at MCB PLR rate) 4,135 28,841 3,640 28,041
4,135 28,841 5,640 30,163
The carrying amount of non current receivables approximate their fair values. Non current receivables are denominated in Mauritian rupees and are neither past due nor impaired.
13. INVENTORIESTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Raw materials 149,998 61,631 - - Finished goods 428,067 505,917 - - Goods in transit 151,187 81,032 - - Consumables 33,607 31,914 - -
762,859 680,494 - -
Bank borrowings are secured by floating charges on the assets of the Group including inventories. The cost of inventories recognised as expense and included in cost of sales amounted to Rs2.9 billion (2016: Rs2.5 billion).
14. CONTRACTS - WORK IN PROGRESSTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Contracts in progress at the end of the reporting date:At 1 January, 1,986 376 - - Contract costs incurred plus recognised profits less recognised losses 57,551 67,124 - - Less progress billings (58,098) (65,514) - - At 31 December, 1,439 1,986 - -
Advances received on contracts 26,968 190 - - Contracts retention 1,038 1,863 - -
15. TRADE AND OTHER RECEIVABLESTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Trade receivables 1,171,640 1,044,631 15,551 3,025 Less provision for impairment (136,881) (131,680) - -
1,034,759 912,951 15,551 3,025 Prepayments and other receivables 167,150 225,555 46,084 12,990 Amount due from customers for contract work 12,882 14,819 - - Receivables from group companies - - 114,558 96,255
1,214,791 1,153,325 176,193 112,270
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
15. TRADE AND OTHER RECEIVABLES (CONT’D)
As at 31 December 2017, trade receivables as shown below were impaired. The amount of the provision for impairment was Rs136.9 million as of 31 December 2017 (2016:Rs131.7 million) for the Group and RsNil (2016:RsNil) for the Company. The individually impaired receivables mainly relate to receivables with overdue balances. It was assessed that a proportion of the receivables is expected to be recovered. The ageing of these receivables is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
3 to 6 months 5,480 7,868 - - Over 6 months 136,424 130,477 - -
141,904 138,345 - -
As at 31 December 2017, trade receivables of Rs228.7 million (2016: Rs176.4 million) for the Group and Rs12.7 million (2016: Rs0.9 million) for the Company 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 analysis of these receivables is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
3 to 6 months 90,349 80,763 1,576 417 Over 6 months 138,310 95,669 11,165 508
228,659 176,432 12,741 925
Trade and other receivables are denominated in the following currencies.THE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Rupee 745,476 874,514 176,193 112,270 US Dollar 227,826 62,892 - - Euro 161,428 90,567 - - Other currencies 80,061 125,352 - -
1,214,791 1,153,325 176,193 112,270
Movement on the provision for impairment of trade receivables are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 131,680 133,543 - - Provision for receivable impairment 24,578 17,092 - - Receivables written off during the year as uncollectible (4,593) (6,010) - - Unused amounts reversed (14,784) (12,945) - - At 31 December, 136,881 131,680 - -
The other classes within trade and other receivables do not contain impaired assets for the Group. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security.
The carrying amount of trade and other receivables approximate their fair value.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
16. SHARE CAPITALTHE GROUP AND THE COMPANY
2017 2016Rs’000 Rs’000
Authorised12,500,000 ordinary shares of Rs10 each 125,000 125,000
Issued and fully paid11,259,388 ordinary shares of Rs10 each 112,594 112,594
17. REVALUATION AND OTHER RESERVES THE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Revaluation reserve on property, plant and equipment (see note (a) below) 445,295 564,766 331,919 331,919 Capital reserves 7,007 7,007 4,957 4,957 Translation reserve (see note (b) below) (17,280) (26,872) - - Associate reserves (see note (c) below) 14,074 17,371 - - Investment reserve 4,176 4,176 4,176 4,176 General reserve 5,521 5,521 5,521 5,521
458,793 571,969 346,573 346,573
(a) Movement in revaluation on property, plant and equipment THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 564,766 392,043 331,919 296,665 Revaluation of property, plant and equipment - 113,779 - 38,515 Deferred tax on revaluation surplus on property - (13,379) - (3,261)Adjustment on disposal of subsidiary (119,471) - - - Transfer on acquisition of non-controlling interests - 74,037 - - Other movements - (1,714) - - At 31 December, 445,295 564,766 331,919 331,919
(b) Translation reserve THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, (26,872) (33,248) - - Movement during the year 9,592 6,376 - - At 31 December, (17,280) (26,872) - -
(c) Associate reserves THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 17,371 (2,075) - - Movement in associate reserve (3,297) 19,446 - -
At 31 December, 14,074 17,371 - -
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18. BORROWINGSTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
CurrentBank overdraft 160,681 165,291 336 1,007 Bank loans 167,893 129,583 72,000 82,023 Loan at call - - 130,148 154,008 Unsecured loans at 4% interest (2016: 4.5%) 271,177 204,160 271,177 204,160 Obligation under finance leases (see note (d) below) 31,596 53,146 - -
631,347 552,180 473,661 441,198
Non-currentBank loans (see note (e) below) 313,178 561,367 276,083 408,061 Unsecured loans at 7%-7.50% interest - - 335,294 335,294 Obligation under finance leases (see note (d) below) 33,152 58,322 - -
346,330 619,689 611,377 743,355
Total borrowings 977,677 1,171,869 1,085,038 1,184,553
(a) The borrowings include secured liabilities (overdrafts, loans and leases amounting to Rs707 million (2016: Rs968 million) and Rs348 million (2016: Rs491 million) for the Group and the Company respectively. The bank borrowings are secured over certain land and buildings and investment properties of the Group and over inventories and current assets. The rates of interest on these facilities vary between 3.9% and 16.3%. Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.
(b) The exposure of the Company’s borrowings to interest-rate changes and the contractual repricing dates are as follows:
THE GROUP 1 year 1 - 5 years Over 5 years TotalRs’000 Rs’000 Rs’000 Rs’000
At December 31, 2017Total borrowings (excluding finance lease) 599,751 287,595 25,583 912,929
At December 31, 2016Total borrowings (excluding finance lease) 499,034 332,851 228,516 1,060,401
THE COMPANY 1 year 1 - 5 years Over 5 years TotalRs’000 Rs’000 Rs’000 Rs’000
At December 31, 2017Total borrowings (excluding finance lease) 473,661 585,794 25,583 1,085,038
At December 31, 2016Total borrowings (excluding finance lease) 441,198 616,042 127,313 1,184,553
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
18. BORROWINGS (CONT’D)
(c) The maturity of non-current borrowings is as follows: THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
After 1 year and before 2 years 93,223 114,731 392,294 402,658 After 2 years and before 3 years 78,173 94,912 57,000 68,575 After 3 years and before 5 years 148,931 181,394 136,500 144,809 After 5 years 26,003 228,652 25,583 127,313
346,330 619,689 611,377 743,355
(d) Finance lease liabilities - minimum lease payments: THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Not later than 1 year 35,074 59,461 - - Later than 1 year and not later than 2 years 22,103 40,286 - - Later than 2 years and not later than 3 years 7,337 17,086 - - Later than 3 years and not later than 5 years 5,799 5,397 - - Later than 5 years 428 139 - -
70,741 122,369 - - Future finance charges on finance leases (5,993) (10,901) - - Present value of finance lease liabilities 64,748 111,468 - -
The present value of finance lease liabilities may be analysed as follows:Not later than 1 year 31,596 53,146 - - Later than 1 year and not later than 2 years 20,804 36,962 - - Later than 2 year and not later than 3 years 6,439 16,437 - - Later than 3 years and not later than 5 years 5,489 4,787 - - Later than 5 years 420 136 - -
64,748 111,468 - -
The Group leases plant and machinery, motor vehicles and equipment under finance leases. The leases have varying terms and purchase options. There are no restrictions imposed on the Group by lease arrangements other than in respect of the specific assets being leased.
(e) Non current bank loans can be analysed as follows: THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
After 1 year and before 2 years 72,419 77,768 57,000 67,364 After 2 years and before 3 years 71,734 78,476 57,000 68,575 After 3 years and before 5 years 143,442 176,607 136,500 144,809 After 5 years 25,583 228,516 25,583 127,313
313,178 561,367 276,083 408,061
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
18. BORROWINGS (CONT’D)
(f) The effective interest rates at the end of the reporting date were as follows:
2017 2016USD Rs Ariary USD Rs Ariary
THE GROUP % % % % % %
Bank overdrafts - 5.75%-16.25% - - 6.25% - 10% 13.95%Bank loans 6.85% 3.85%-8.50% - 5.00% 6.25% - 8.5% 14.83%Finance lease liabilities - 6.50%-8.50% - - 7% - 9.25% -
2017 2016THE COMPANY % %
Bank overdrafts 6.50% 7.00%Bank loans 5.75%-5.85% 6.25%Loans at call 5.75%-6.25% 7%-7.5%
(g) Borrowings are denominated in the following currencies: THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Mauritian Rupees 972,510 1,161,610 1,085,038 1,184,553 Kwacha - 28 - - US Dollar 5,167 5,075 - - Malagasy Ariary - 5,156 - -
977,677 1,171,869 1,085,038 1,184,553
(h) The carrying amount of borrowings are not materially different from the fair value.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
19. DEFERRED TAXES
Deferred tax is calculated on all temporary differences under the liability method at 15% (2016: 15%).
Deferred tax assets and liabilities are offset when the deferred taxes relate to the same fiscal authority. The following amounts are shown on the statement of financial position.
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Deferred tax assets (36,610) (38,651) - - Deferred tax liabilities 91,553 93,779 30,789 32,020
54,943 55,128 30,789 32,020
The movement in deferred tax is as follows: THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 55,128 37,609 32,020 26,689 Charged to profit or loss (note 23(a)) 4,088 2,133 259 3,669 Adjustment on disposal of subsidiary (note 34(c)) 945 - - - (Credited)/charged to other comprehensive income (5,218) 15,386 (1,490) 1,662 At 31 December, 54,943 55,128 30,789 32,020
Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable. The Group has tax losses of Rs239.2 million (2016: Rs282.6 million) to carry forward against future taxable income. The Company has tax losses of Rs110 million (2016: Rs59 million) to carry forward against future taxable income. A deferred tax asset has been recognised in respect of Rs48.5 million (2016: Rs53.7 million) for the Group and Rs9.1 million (2016: Rs9.1 million) for the Company in respect of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses due to uncertainty of their recoverability.
Deferred tax liabilities and assets and deferred tax charge/(credit) in profit or loss and equity are attributable to the following items:
THE GROUPAt 1
January 2017
Adjustment on disposal of
subsidiary
(Credited)/ charged to
profit or loss
(Credited)/ charged to
other comprehensive
income
At 31 December
2017Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Deferred tax liabilitiesAsset revaluations 70,718 (3,005) (166) (2,211) 65,336 Accelerated tax depreciation 18,319 357 3,991 - 22,667 Retirement benefit asset (3,051) (6,440) - 53 (9,438)Others 7,793 - 3 - 7,796
93,779 (9,088) 3,828 (2,158) 86,361 Deferred tax assetsTax losses (8,055) 947 (168) - (7,276)Retirement benefit obligations (22,531) 841 (1,518) (3,060) (26,268)Accelerated tax depreciation (8,065) 8,245 1,946 - 2,126
(38,651) 10,033 260 (3,060) (31,418)
Net deferred incometax liabilities 55,128 945 4,088 (5,218) 54,943
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
19. DEFERRED TAXES (CONT’D)
THE GROUPAt 1
January 2016
Charged/ (credited) to profit or or
loss
Charged/ (credited) to
other comprehensive
income
At 31 December
2016Rs’000 Rs’000 Rs’000 Rs’000
Deferred tax liabilitiesAsset revaluations 45,979 6,826 17,913 70,718 Accelerated tax depreciation 19,735 (1,416) - 18,319 Retirement benefit asset (878) (147) (2,026) (3,051)Others 5,903 (108) 1,998 7,793
70,739 5,155 17,885 93,779 Deferred tax assetsTax losses (6,407) (1,648) - (8,055)Retirement benefit obligations (19,444) (594) (2,493) (22,531)Accelerated tax depreciation (7,279) (780) (6) (8,065)
(33,130) (3,022) (2,499) (38,651)
Net deferred incometax liabilities 37,609 2,133 15,386 55,128
THE COMPANYAt 1
January 2017
(Credited)/ charged to
profit or loss
Credited to other
comprehensive income
At 31 December
2017Rs’000 Rs’000 Rs’000 Rs’000
Deferred tax liabilitiesAccelerated tax depreciation 285 (60) - 225 Asset revaluations 40,668 (166) - 40,502
40,953 (226) - 40,727 Deferred tax assetsTax losses (1,366) - - (1,366)Retirement benefit obligations (7,567) 485 (1,490) (8,572)
(8,933) 485 (1,490) (9,938)
Net deferred income tax liabilities 32,020 259 (1,490) 30,789
THE COMPANY
As restated At 1 January
2016
(Credited)/ charged to
profit or loss
Charged/ (credited) to
other comprehensive
income
At 31 December
2016Rs’000 Rs’000 Rs’000 Rs’000
Deferred tax liabilitiesAccelerated tax depreciation 532 (247) - 285 Asset revaluations 33,385 4,022 3,261 40,668
33,917 3,775 3,261 40,953 Deferred tax assetsTax losses (1,366) - - (1,366)Retirement benefit obligations (5,862) (106) (1,599) (7,567)
(7,228) (106) (1,599) (8,933)
Net deferred income tax liabilities 26,689 3,669 1,662 32,020
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONSTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Amounts recognised on the statement of financial position:Made up as follows:Retirement benefit obligation 201,477 182,318 57,142 50,439
Pension benefits (note (a)(ii)) 103,598 99,443 28,804 23,834 Other post retirement benefits:- Former employees (note (b)(i)) 22,699 22,546 22,699 22,546 - Retirement gratuity (note (c)(i)) 75,180 60,329 5,639 4,059
97,879 82,875 28,338 26,605 201,477 182,318 57,142 50,439
Analysed as follows:Non-current liabilities 201,477 182,318 57,142 50,439
201,477 182,318 57,142 50,439 Amount charged to profit or loss:Pension benefits (note (a)(vi)) 18,301 14,239 3,720 2,425 Other post retirement benefits:- Former employees (note (b)(iv)) 1,255 1,463 1,255 1,463 - Retirement gratuity (note (c)(ii)) 11,112 4,319 895 558
12,367 5,782 2,150 2,021 30,668 20,021 5,870 4,446
Amount (credited)/charged to other comprehensive incomePension benefits (note (a)(vii)) (1,801) 33,904 3,582 8,934 Other post retirement benefits:- Former employees (note (b)(v)) 2,188 1,851 2,188 1,851 - Retirement gratuity (note (c)(v)) 20,359 (2,380) 4,163 (123)
22,547 (529) 6,351 1,728 20,746 33,375 9,933 10,662
(a) Pension benefits
(i) The assets of the fund are held independently and administered by an insurance company.
(ii) The amounts recognised on the statement of financial position are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Present value of funded obligations 264,322 261,189 55,512 49,217 Fair value of plan assets (160,724) (161,746) (26,708) (25,383)Liability on the statement of financial position 103,598 99,443 28,804 23,834
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(a) Pension benefits (cont’d)
(iii) The reconciliation of the opening balances to the closing balances for the net benefit defined liability is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 99,443 59,792 23,834 12,476 Charged to profit or loss 18,301 14,239 3,720 2,424 (Credited)/charged to other comprehensive income (1,801) 33,904 3,582 8,934 Adjustment on disposal of subsidiary (2,894) - - - Contributions paid (9,451) (8,492) (2,332) - At 31 December, 103,598 99,443 28,804 23,834
(iv) The movement in the defined benefit obligation over the year is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 261,189 249,596 49,217 38,030 Current service cost 10,298 8,132 1,991 1,308 Interest cost 15,432 16,365 3,005 2,705 Actuarial (gain)/loss (2,843) 30,509 3,507 8,566 Adjustment on disposal of subsidiary (5,885) - - - Benefit paid (13,869) (43,413) (2,208) (1,392)At 31 December, 264,322 261,189 55,512 49,217
(v) The movement in the fair value of plan assets over the year is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, (161,746) (189,804) (25,383) (25,554)Interest income (9,106) (11,761) (1,521) (1,742)Scheme expenses 386 364 89 20 Cost of insuring risk benefits 1,291 1,139 156 133 Actuarial loss 1,042 3,395 75 368 Employers’ contributions (9,451) (8,492) (2,332) - Effect of business combination 2,991 - - - Benefits paid 13,869 43,413 2,208 1,392 At 31 December, (160,724) (161,746) (26,708) (25,383)
(vi) The amounts recognised in profit or loss are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Current service cost 10,298 8,132 1,991 1,308 Interest cost 6,326 4,604 1,484 964 Scheme expenses 386 364 89 20 Cost of insuring risk benefits 1,291 1,139 156 133 Total included in employee benefit expense (note 29) 18,301 14,239 3,720 2,425
The total charge of Rs18.3 million for the Group (2016: Rs14.2 million) and Rs3.7 million for the Company (2016: Rs2.4 million) were included in employee benefit expenses.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(a) Pension benefits (cont’d)THE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Actual return on plan assets 8,064 8,366 1,447 1,373
(vii) The amounts recognised in other comprehensive income are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Remeasurement on the net defined benefit liability:Liability experience (gains)/ losses (8,527) (8,558) 2,912 1,060 Loss on pension scheme asset 1,042 3,395 75 368 Changes in assumptions underlying present value of scheme 5,684 39,067 595 7,506 Actuarial (gains)/losses (1,801) 33,904 3,582 8,934
(viii) The assets of the plan are invested in the Deposit Administration Policy underwritten by Swan Life Ltd. The Deposit Administration Policy is a pooled insurance product for Group Pension Schemes. It is a long-term investment policy which aims to provide a smooth progression of returns from one year to the next without regular fluctuations associated with asset-linked investments such as Equity Funds. Moreover, the Deposit Administration Policy offers a minimum guaranteed return of 4% p.a.
(ix) Amounts for the current and previous four years are as follows:
THE GROUP2017 2016 2015 2014 2013
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Present value of defined benefit obligation 264,322 261,189 249,596 226,076 201,198 Fair value of plan assets (160,724) (161,746) (189,804) (168,750) (156,884)Deficit 103,598 99,443 59,792 57,326 44,314
Experience adjustments on plan liabilities (2,847) 22,311 (6,183) (9,204) 2,630 Experience adjustments on plan assets 1,042 3,395 (2,224) (3,146) (3,685)
(ix) Amounts for the current and previous four years are as follows:
THE COMPANY2017 2016 2015 2014 2013
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Present value of defined benefit obligation 55,512 49,217 38,030 33,207 32,962 Fair value of plan assets (26,708) (25,383) (25,554) (22,745) (25,404)Surplus 28,804 23,834 12,476 10,462 7,558
Experience adjustments on plan liabilities (2,912) (1,060) (3,299) (719) (3,774)Experience adjustments on plan assets (75) (368) (249) (461) (493)
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(a) Pension benefits (cont’d)
(x) The principal actuarial assumptions used for accounting purposes were:THE GROUP AND THE COMPANY
2017 2016% %
Discount rate 5.00 6.00 Expected return on plan assets 5.00 6.00 Future salary increases 3.00 4.00
Note: Defined benefit assets have not been recognised for some subsidiaries on the basis that in future, contributions are not expected to be reduced.
(b) Other post retirement benefits
Other post retirement benefits comprise of obligation for former employees and retirement gratuity payable under the Employment Rights Act.
(i) The movement in the retirement benefit obligations for former employees obligation over the year is as follows:
THE GROUP AND THE COMPANY
2017 2016Rs’000 Rs’000
At 1 January, 22,546 22,582 Total expense charged in profit or loss (note (b)(iv)) 1,255 1,463 Acturial losses recognised in other comprehensive income (note (b)(v)) 2,188 1,851 Benefits paid (3,290) (3,350)At 31 December, 22,699 22,546
(ii) The amounts recognised on the statement of financial position are as follows:THE GROUP AND THE COMPANY
2017 2016Rs’000 Rs’000
Present value of unfunded obligations 22,699 22,546 Liability on the statement of financial position 22,699 22,546
(iii) The movement in the defined benefit obligation over the year is as follows:THE GROUP AND THE COMPANY
2017 2016Rs’000 Rs’000
At 1 January, 22,546 22,582 Interest cost 1,255 1,463 Actuarial losses 2,188 1,851 Benefits paid (3,290) (3,350)At 31 December, 22,699 22,546
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(b) Other post retirement benefits (cont’d)
(iv) The amounts recognised in profit or loss are as follows:
THE GROUP AND THE COMPANY
2017 2016Rs’000 Rs’000
Interest cost 1,255 1,463 Total, included in employee benefit expense 1,255 1,463
(v) The amounts recognised in other comprehensive income are as follows:THE GROUP AND THE COMPANY
2017 2016Remeasurement on the net defined benefit liability: Rs’000 Rs’000
Liability experience losses 783 718 Actuarial losses arising from changes in financial assumptions 1,405 1,133 Actuarial losses 2,188 1,851
(vi) Amounts for the current and previous years are as follows:
THE GROUP AND THE COMPANY2017 2016 2015 2014 2013
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Present value of defined benefit obligation 22,699 22,546 22,582 27,300 28,923
Experience adjustments on plan liabilities (782) (718) 2,413 (723) (3,193)
(vii) The principal actuarial assumptions used for accounting purposes were:THE GROUP AND THE COMPANY
2017 2016% %
Discount rate 5.00 6.00 Future pension increases 3.00 3.00
(c) Retirement gratuity
(i) The amounts recognised on the statement of financial position are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Present value of unfunded obligations 75,180 60,329 5,639 4,059 Liability on the statement of financial position 75,180 60,329 5,639 4,059
(ii) The amounts recognised in profit or loss are as follows:THE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Current service cost 6,198 (35) 713 272 Interest cost 4,914 4,229 182 286 Past service cost recognised - 125 - - Total included in employee benefit expense 11,112 4,319 895 558
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(c) Retirement gratuity (cont’d)
(iii) The movement in the retirement benefit obligations over the year is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 60,329 59,945 4,059 4,015 Actuarial losses/(gains) 20,359 (2,380) 4,163 (123)Total expense (note (c)(ii)) 11,112 4,319 895 558 Adjustment on disposal of subsidiary (10,495) - - - Benefits paid (6,125) (1,555) (3,478) (391)At 31 December, 75,180 60,329 5,639 4,059
(iv) The movement in the defined benefit obligation over the year is as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
At 1 January, 60,329 59,945 4,059 4,015 Current service cost 6,191 (35) 713 272 Interest cost 4,921 4,229 182 286 Past service cost - 125 - - Actuarial losses/(gains) 20,359 (2,380) 4,163 (123)Adjustment on disposal of subsidiary (10,495) - - - Benefits paid (6,125) (1,555) (3,478) (391)At 31 December, 75,180 60,329 5,639 4,059
(v) The amounts recognised in other comprehensive income are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Remeasurement on the net defined benefit liability:Liability experience losses/(gains) 21,263 (2,928) 4,163 (559)Changes in assumptions underlying present value of scheme (904) 548 - 436 Actuarial losses/(gains) 20,359 (2,380) 4,163 (123)
(vi) Amounts for the current and previous years are as follows:
THE GROUP2017 2016 2015 2014 2013
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Present value of defined benefit obligation 75,180 60,329 59,945 48,886 36,210
Experience adjustments on plan liabilities (20,359) 2,928 (297) (6,020) 270
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(d) Sensitivity analysis on defined benefit obligations at end of the reporting date:
Pension benefits Increase Decrease
December 31, 2017 Rs’000 Rs’000
Decrease in Defined Benefit Obligation due to 1% increase in Discount Rate - 21,110 Increase in Defined Benefit Obligation due to 1% increase in Future long-term Salary assumption 24,602 -
December 31, 2016
Decrease in Defined Benefit Obligation due to 1% increase in Discount Rate - 17,826 Increase in Defined Benefit Obligation due to 1% increase in Future long-term Salary assumption 21,692 -
Other post retirement benefitsDecember 31, 2017
Decrease in Defined Benefit Obligation due to 1% increase in Discount Rate - 1,218
December 31, 2016
Decrease in Defined Benefit Obligation due to 1% increase in Discount Rate - 1,133
Retirement gratuityDecember 31, 2017
Decrease in Defined Benefit Obligation due to 1% increase in Discount Rate - 10,624 Increase in Defined Benefit Obligation due to 1% increase in Future long-term Salary assumption 11,713 -
December 31, 2016
Decrease in Defined Benefit Obligation due to 1% increase in Discount Rate - 9,685 Increase in Defined Benefit Obligation due to 1% increase in Future long-term Salary assumption 10,374 -
An increase/decrease of 1% in other principal actuarial assumptions would not have a material impact on defined benefit obligations at the end of the reporting period.
The sensitivity above have been determined based on a method that extrapolates the impact on net defined obligations as a result of reasonable changes in key assumptions occuring at the end of the reporting period. The present value of the defined benefit obligation has been calculated using the projected unit credit method.
The sensitivity analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
The was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
20. RETIREMENT BENEFIT OBLIGATIONS (CONT’D)
(e) The defined benefit pension plan exposes the Group/Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.
(f) The funding requirements are based on the pension fund’s actuarial measurement framework set out in the funding policies of the plan.
(g) The weighted average duration of the defined benefit obligation is: Years 2017 2016
Pension benefits 1-20 3-19Other post retirement benefits 6 5Retirement gratuity 7-20 5-20
(h) The asset of the plan are invested in Swan Life Ltd Deposit Administration Fund. The latter is expected to produce a smooth progression of return from one year to the next, the long term expected return on asset assumption has been based on historical performance of the fund. Expected return on equities has been based on equity risk premium above a risk free rate. The risk free rate has been measured in accordance to the yields on government bonds at the measurement date. The fixed interest portfolio includes government bonds, debentures, mortgages and cash. The expected return for this asset class has been based on yields of government bonds at the measurement date. There is no available benchmark for the expected return on properties. This has been based on a subjective judgement of the property market.
(i) Expected contributions to the pension plan for the year ending 31 December 2018 are Rs14.2 million for the Group and Rs2 million for the Company.
21. TRADE AND OTHER PAYABLESTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Trade payables 892,561 787,421 2,114 2,375 Accruals and other payables 365,366 422,334 52,819 31,003 Forward foreign exchange contracts (note (a)) 718 - - - Amounts due to group companies - - 10,971 6,312
1,258,645 1,209,755 65,904 39,690
(a) The Group utilises foreign currency forward contracts to manage its exchange rate exposures. The notional principal amount of these outstanding forward contracts amounted to Rs.80.4million as at 31 December 2017 (2016: Rs.Nil) and the fair value of the liabilities amounted to Rs.0.7million as at 31 December 2017 (2016: Rs.Nil).
The following table details the fair values of liabilities with regards to outstanding forward contract as at the reporting date.
THE GROUP Fair values liabilities 2017 2016
Outstanding forward contracts Rs’000 Rs’000
USD 718 -
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
22. PROVISION FOR OTHER LIABILITIES AND CHARGES THE GROUP AND THE COMPANY
Deferred consideration on acquisition of associate 2017 2016Rs’000 Rs’000
Current liabilities - 43,799
23. CURRENT TAX LIABILITIES THE GROUP THE COMPANY
2017 2016 2017 2016(a) Charged/(credited) to profit or loss: Rs’000 Rs’000 Rs’000 Rs’000
Current tax on the adjusted profit for the year at 15% (2016: 15%): - Continuing operations 23,781 32,616 - - - Discontinued operations 52 (3,313) - - Income tax at 3% on exports 5 - - - (Over)/under provision in previous year (1,771) 441 - - Tax provision for previous years assessment (536) - - - Deferred tax (Note 19) 4,088 2,133 259 3,669 Tax charge 25,619 31,877 259 3,669
(b) The tax on the Group’s and Company’s profit/(loss) before tax differs from the theoretical amount that would arise using the basic tax rate of the Group and Company as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Profit/(loss) before taxation- attributed to continuing operations 210,160 114,879 21,157 (149,233)Loss before taxation- attributed to discontinued operations (69,244) (160,546) - - Less net share of result of associates and joint ventures (132,001) (50,019) - -
8,915 (95,686) 21,157 (149,233)
Tax calculated at a rate of 15% (2016: 15%) 1,337 (14,353) 3,174 (22,385)Effect of different tax rate (1,633) 4,432 - - (Over)/under provision in previous year (1,771) 328 - - Income not subject to tax (36,256) (634) (34,061) (16,658)Expenses not deductible for tax purposes 34,379 23,995 23,697 34,967 Tax credit (1,068) (752) - - Adjustments for non-qualifying assets (16) 54 - - Tax provision for previous years assessment (510) - - - Impact of exports now at 3% (5) - - - Reversal of deferred tax for the year 2,743 - - - Share of adjusted tax profit of societe (39) - - - Effect of disposal of subsidiary 9,058 - - - Temporary differences not provided for 3,743 - - - Deferred tax not provided for in previous year - 1,144 - - Unrecognised tax losses 18,907 17,522 7,449 7,745 Utilisation of tax losses (311) (575) - - Other adjustments (2,939) 2,101 - - Effect of consolidation adjustments - (1,385) - - Taxation charge/(credit) 25,619 31,877 259 3,669
Further information about deferred tax is presented in Note 19.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
24. DISCONTINUED OPERATIONSTHE GROUP
2017 2016Rs’000 Rs’000
Revenue 647,289 924,397
Changes in finished goods and work in progress (12,154) (35,267)Raw materials, consumables and purchases of finished goods (505,125) (765,597)Employee benefit expense (53,821) (91,021)Depreciation and amortisation (22,124) (25,272)Other (losses)/gains (1,488) 2,301 Other operating expense (108,773) (154,702)
(703,485) (1,069,558)
Loss before finance costs (56,196) (145,161)Finance costs (9,174) (13,831)
(65,370) (158,992)
Net impairment of investments and receivables (3,874) (1,554)
Loss before taxation (69,244) (160,546)
Income tax (expense)/credit (52) 3,313 Loss for the year from discontinued operations (69,296) (157,233)
25. REVENUETHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Revenue is made up of:Sales of goods 3,553,865 3,280,669 - - Sales of services 398,837 386,711 - -
3,952,702 3,667,380 - -
Commission 4,010 7,172 384 3,230 Other operating income 14,221 34,535 116,085 109,566 Rent 17,680 9,528 9,133 9,528
35,911 51,235 125,602 122,324
Investment income - Listed 461 338 16,611 15,098 - Unquoted 503 1,078 78,646 69,845 Interest income 3,505 4,313 7,015 17,644
4,469 5,729 102,272 102,587 3,993,082 3,724,344 227,874 224,911
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
26. PROFIT BEFORE FINANCE COSTSTHE GROUP THE COMPANY
Notes 2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Revenue 25 3,993,082 3,724,344 227,874 224,911 Changes in finished goods and work in progress 60,685 (74,577) - - Raw materials, consumables and purchases of finished goods (2,882,376) (2,467,902) - - Employee benefit expense 29 (626,896) (601,847) (79,326) (73,616)Depreciation and amortisation expense (92,089) (84,274) (8,657) (7,195)Other gains 27(a) 21,026 8,242 - - Net (decrease)/increase in fair value of investment properties 6 (431) (1,226) 5,169 21,776 Other operating expenses (427,433) (376,057) (67,596) (58,734)
45,568 126,703 77,464 107,142
27. FINANCE COSTSTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Bank overdrafts 10,623 17,180 1,269 1,979 Bank loans repayable by instalments 30,277 32,915 25,506 27,473 Other loans not repayable by instalments 17,448 13,924 39,247 44,170 Finance leases 6,305 6,713 - -
64,653 70,732 66,022 73,622 Net foreign exchange transaction gains (see note 27(a)) (14,720) (25,081) (93) (315)
49,933 45,651 65,929 73,307
(a) Net foreign exchange gains THE GROUP THE COMPANY2017 2016 2017 2016
The exchange differences credited to profit or loss are as follows: Rs’000 Rs’000 Rs’000 Rs’000
Other gains (21,026) (8,242) - - Finance costs (14,720) (25,081) (93) (315)
28. PROFIT/(LOSS) BEFORE TAXATIONTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
The profit/(loss) before taxation is arrived at after:
Crediting:Profit on disposal of property, plant and equipment 2,203 2,627 550 - Bargain purchase 280 - - - Release of deferred consideration 35,046 - 35,046 - Profit on disposal of investments 104,952 - 34,178 10
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
28. PROFIT/(LOSS) BEFORE TAXATION (CONT’D)THE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
and charging:Depreciation- owned assets 71,888 62,943 8,375 6,980 - leased assets 24,417 18,880 - - Amortisation of intangible assets 3,974 2,451 282 215 Amortisation of deferred income - 27,592 - - Loss on disposal of investment properties 446 - - - Impairment of investments 100 - 49,350 141,881 Impairment of receivables 21,270 2,807 10,252 7,333 Impairment of inventories 13,113 - - - Impairment of loan at call receivable - - - 30,619 Impairment of intangible assets - 3,263 - 3,247 Impairment of goodwill - 12,772 - - Employee benefit expense (note 29) 626,896 601,847 79,326 73,616
29. EMPLOYEE BENEFIT EXPENSETHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Wages and salaries, including termination benefits 556,685 544,399 69,065 65,232 Social security costs 26,639 27,157 4,391 4,329 Pension costs - defined contribution plans 12,904 12,949 - - - defined benefit plans (note 20) 30,668 17,342 5,870 4,055
626,896 601,847 79,326 73,616
30. OTHER COMPREHENSIVE INCOME
THE GROUP
Revaluation and other reserves
Fair value reserves
Actuarial loss Total
2017 Rs’000 Rs’000 Rs’000 Rs’000
Increase in fair value of available for sale investments - 1,801 - 1,801 Movement in actuarial reserve - - (17,639) (17,639)Movement in associate reserves (3,522) - - (3,522)Currency translation differences 11,287 - - 11,287 Other comprehensive income/(loss) for the year 7,765 1,801 (17,639) (8,073)
THE GROUP
Revaluation and other reserves
Fair value reserves
Actuarial loss Total
2016 Rs’000 Rs’000 Rs’000 Rs’000
Increase in fair value of available for sale investments - 156 - 156 Movement in actuarial reserve - - (28,856) (28,856)Gain on revaluation surplus on property, plant and equipment, net of deferred tax 126,639 - - 126,639 Movement in associate reserves 18,828 - - 18,828 Currency translation differences 9,347 - - 9,347 Other comprehensive income/(loss) for the year 154,814 156 (28,856) 126,114
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
30. OTHER COMPREHENSIVE INCOME (CONT’D)
THE COMPANY
Revaluation and other reserves
Fair value reserves
Actuarial loss Total
2017 Rs’000 Rs’000 Rs’000 Rs’000
Movement in actuarial reserve - - (8,442) (8,442)Decrease in fair value of available for sale investments - (92,340) - (92,340)Other comprehensive loss for the year - (92,340) (8,442) (100,782)
2016Movement in actuarial reserve - - (9,063) (9,063)Gain on revaluation surplus on property, plant and equipment, net of deferred tax 35,254 - - 35,254 Decrease in fair value of available for sale investments - (149,275) - (149,275)Other comprehensive income/(loss) for the year 35,254 (149,275) (9,063) (123,084)
31. DIVIDENDS2017 2016
Rs’000 Rs’000
Ordinary dividend of Rs1.80 per share was declared on 11 December 2017 and not yet paid at year end (2016 : Rs1.80 per share declared on 28 December 2016 and paid in 2017) 20,267 20,267
32. EARNINGS/(LOSS) PER SHARETHE GROUP THE COMPANY
2017 2016 2017 2016
(a) From continuing operationsBasic earnings/(loss) per shareNet profit/(loss) attributable to shareholders (Rs’000) 178,086 69,781 20,898 (152,902)Number of ordinary shares in issue (thousands) 11,259 11,259 11,259 11,259Basic earnings/(loss) per share (Rs/cents) 15.82 6.20 1.86 (13.58)
(b) From discontinued operationsBasic loss per shareNet loss attributable to shareholders (Rs’000) (63,898) (103,474) - - Number of ordinary shares in issue (thousands) 11,259 11,259 11,259 11,259Basic loss per share (Rs/cents) (5.68) (9.19) N/A N/A
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
33. NOTES TO STATEMENTS OF CASH FLOWSTHE GROUP THE COMPANY
2017 2016 2017 2016(a) Cash generated from/(absorbed in) operations Rs’000 Rs’000 Rs’000 Rs’000
Profit/(loss) before taxation attributable to continuing operations 210,160 114,879 21,157 (149,233)Loss before taxation attributable to discontinued operations (69,244) (160,546) - - Depreciation and amortisation 100,279 84,275 8,657 7,195 Net share of results of associated companies (127,827) (55,179) - - Share of results of joint ventures (4,174) 5,160 - - Retirement benefit obligations 10,687 5,120 (3,230) 704 Profit on disposal of property, plant and equipment (2,138) (2,623) (550) - Loss on disposal of investment properties 446 - - - Release of deferred consideration - - (35,046) -Profit on disposal of investments in subsidiaries (104,952) - (34,178) (10)Bargain purchase (280) - - - Impairment of investments 100 - 49,350 141,881 Impairment of receivables 20,492 14,185 10,252 7,333 Impairment of inventories 13,113 - - - Goodwill impaired - 12,772 - - Asset written off 264 3,775 - 3,247 Loss/(gain) on exchange 1,210 (7,055) (1) (17)Investment income (964) (1,416) (95,257) (84,943)Interest income (2,567) (1,130) (7,015) (17,644)Interest expense 55,482 68,737 66,022 73,622 Decrease/(increase) in fair value of investment property 431 1,226 (5,169) (21,776)Changes in working capital:- inventories (220,217) 9,639 - - - trade and other receivables (129,213) 8,884 (31,632) (20,212)- trade and other payables 267,488 (58,441) (11,558) 13,718 Cash generated from/(absorbed in) operations from continuing operations 87,820 202,808 (68,198) (46,135)Cash generated from operations from discontinued operations 30,559 155,980 - -
(b) Cash and cash equivalentsTHE GROUP THE COMPANY
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Bank and cash balances 215,255 201,729 23,462 41,096 Loan receivable at call - - 44,741 88,668 Bank overdrafts (160,681) (165,291) (336) (1,007)Loan payable at call - - (130,148) (154,008)
54,574 36,438 (62,281) (25,251)
(c) Non cash transactions:The principal non cash transaction is:Part disposal of investment in subsidiary for Rs.3 million for the Company was a non-cash transaction during the year ended 31 December 2017.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
33. NOTES TO STATEMENTS OF CASH FLOWS (CONT’D)
(d) Reconciliation of liabilities arising from financing activities
THE GROUPNon-cash changes
2016 Cash flows
Adjustment on disposal of
subsidiary Acquisition
Foreign exchange movement 2017
Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Long-term borrowings 561,367 (131,189) (117,000) - - 313,178 Short-term borrowings 301,058 95,206 - - - 396,264 Lease liabilities 111,468 (34,187) (40,861) 25,756 2,572 64,748 Import loans 32,685 10,121 - - - 42,806 Total 1,006,578 (60,049) (157,861) 25,756 2,572 816,996
THE COMPANY 2016 Cash flows 2017Rs’000 Rs’000 Rs’000
Long-term borrowings 743,355 (131,977) 611,378 Short-term borrowings 286,183 56,993 343,176 Total 1,029,538 (74,984) 954,554
34. BUSINESS COMBINATIONS
(a) Acquisition of subsidiaries
Principal activity
Date of acquisition
Proportion of voting equity
interests acquired
%
2017
Harel Mallac Advisory Ltd (Previously known as Baines Advisory Services Ltd)Consultancy
services 30 June 2017 85
Baines Trust and Corporate Services Ltd Management
company 18 May 2017 70
Baines Trust and Corporate Services Ltd was acquired by HM Global Services Ltd. On 30 June 2017, both companies were amalgamated, with HM Global Services Ltd remaining as the surviving entity.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
34. BUSINESS COMBINATIONS (CONT’D)
(a) Acquisition of subsidiaries (cont’d)
Baines Trust and Corporate Services Ltd
Recognised amounts of identifiable assets acquired and liabilities assumed2017
Rs’000
Current assetsProperty, plant and equipment 25 Trade and other receivables 2,789 Cash and cash equivalents 561
Current liabilitiesTrade and other payables 2,067 Borrowings 1,108 Total identifiable net assets 200 Non-controlling interest (3,052)Goodwill 9,852
7,000
Net cash outflow on acquisition of subsidiary 2017Rs’000
Consideration paid in cash 7,000 Less: Cash and cash equivalent balances acquired (561)
6,439
Harel Mallac Advisory Ltd
Recognised amounts of identifiable assets acquired and liabilities assumed 2017Rs’000
Current assetsTrade and other receivables 815 Cash and cash equivalents 158
Current liabilitiesTrade and other payables 122 Shareholder’s loan 322 Total identifiable net assets 529 Non-controlling interest (79)Bargain purchase (280)
170
Net cash outflow on acquisition of subsidiary 2017Rs’000
Consideration paid in cash 170 Less: Cash and cash equivalent balances acquired (158)
12
Impact of acquisition on the results of the GroupAs from the acquisition date, Harel Mallac Advisory Ltd’s revenue of Rs. 0.2 million and loss of Rs. 0.2 million have been included in the consolidated statement of profit or loss and other comprehensive income for the reporting period.
If the acquisition were to have occurred on 01 January 2017, the Group’s revenue and loss for the year would have increased by Rs. 0.3million and Rs. 0.006 million respectively. The directors consider these ‘pro-forma’numbers to represent an approximate measure of the performance of the combined group on an annualised basis to provide a reference point for comparison in future periods.
(b) Disposal of interest in a subsidiary without loss of controlDuring the year, the Group disposed of 15% of its interest in HM Global Services Ltd, reducing its continuing interest to 85%. The proceeds on disposal amounting to Rs 3 million was a non-cash transaction.
An amount of Rs 0.2 million (being the proportionate share of the carrying amount of the net assets of HM Global Services Ltd) has been transferred to non-controlling interests. The difference of Rs 2.8 million between the increase in non-controlling interests and the consideration received has been credited to retained earnings.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
34. BUSINESS COMBINATIONS (CONT’D)
(c) Disposal of subsidiaryIn August 2017, the Group disposed all of its shareholdings in Compagnie des Magasins Populaires Limitée, CMPL (Cascavelle) Limitée and CMPL (Bagatelle) Limitée, together referred as “CMPL Group”.
2017Rs’000
Consideration received in cash and cash equivalents 140,345 Total consideration received 140,345
Analysis of assets and liabilities over which control was lost: 2017Rs’000
Current assetsInventories 104,300 Trade and other receivables 134,340 Cash and cash equivalents 17,542
Non-current assetsProperty, plant and equipment 304,683 Intangible assets 2,491 Investment in other securities 1,515 Deferred tax assets 945
Current liabilitiesTrade and other payables (334,802)Borrowings (72,021)
Non-current liabilitiesRetirement benefit obligations (13,388)Borrowings (145,299)Net assets disposed of 306
Gain on disposal of subsidiary 2017Rs’000
Consideration received 140,345 Net assets disposed of (306)Non-controlling interests 28 Associated costs (35,115)Gain on disposal 104,952
Net cash inflow on disposal of subsidiary 2017Rs’000
Consideration received in cash and cash equivalents 140,345 Less: cash and cash equivalents disposed of (17,542)Total consideration received 122,803
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
35. SEGMENT INFORMATION - THE GROUP
The Group’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. The Group’s segments are: Investment, Corporate & Property, Business Services and Manufacturing & Trading.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Group evaluates performance on the basis of profit or loss from operations after tax expense.
Intersegment sales and transfers are made at current market prices.
Investment, Corporate &
PropertyBusiness Services
Manufacturing & Trading
Consolidation adjustments Total
Year ended 31 December 2017 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Total segment revenues 229,662 760,708 3,448,293 - 4,438,663 Inter-segment sales (12,600) (35,285) (138,954) (262,247) (449,086)Revenues from external customers 217,062 725,423 3,309,339 (262,247) 3,989,577
Total interest revenue 11,600 464 25,333 (33,892) 3,505
Net segment results (33,767) (2,273) 119,071 (37,463) 45,568 Share of result of associates and joint ventures 132,001 - - - 132,001 Impairment (21,982) - - - (21,982)Net profit on disposal of investments 104,506 - - - 104,506
180,758 (2,273) 119,071 (37,463) 260,093 Total finance costs (65,929) 2,225 (20,121) 33,892 (49,933)Profit/(loss) before tax from continuing operations 114,829 (48) 98,950 (3,571) 210,160 Income tax expense (5,198) (3,692) (16,677) - (25,567)Profit/(loss) after tax from continuing operations 109,631 (3,740) 82,273 (3,571) 184,593
Loss after tax from discontinued operations - - (72,867) 3,571 (69,296)Profit/(loss) for the year 109,631 (3,740) 9,406 - 115,297
Investment, Corporate &
PropertyBusiness Services
Manufacturing & Trading Total
Rs’000 Rs’000 Rs’000 Rs’000
Segment assets 794,420 389,793 2,361,039 3,545,252 Investments in associates and joint ventures 1,059,277 - 22,160 1,081,437 Consolidated total assets 4,626,689
Segment liabilities 890,843 282,881 1,382,703 2,556,427
Capital expenditure 8,442 45,513 70,125 124,080 Depreciation and amortisation 9,921 15,691 96,791 122,403
There were no other material items of income and expense.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
35. SEGMENT INFORMATION - THE GROUP (CONT’D)
The Group’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. The Group’s segments are: Investment, Corporate & Property, Business Services and Manufacturing & Trading.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Group evaluates performance on the basis of profit or loss from operations after tax expense.
Intersegment sales and transfers are made at current market prices.
Investment, Corporate &
PropertyBusiness Services
Manufacturing & Trading
Consolidation adjustments Total
Year ended 31 December 2016 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Total segment revenues 209,875 710,519 3,243,332 - 4,163,726 Inter-segment sales (2,500) (61,241) (221,589) (158,365) (443,695)Revenues from external customers 207,375 649,278 3,021,743 (158,365) 3,720,031
Total interest revenue 21,614 696 32,893 (50,890) 4,313
Net segment results 7,601 28,812 136,882 (46,592) 126,703 Share of result of associates and joint ventures 50,019 - - - 50,019 Impairment (16,019) (8,216) (13,199) 21,242 (16,192)Profit on disposal of investments 10 - - (10) -
41,611 20,596 123,683 (25,360) 160,530 Total finance costs (75,903) (3,938) (16,700) 50,890 (45,651)(Loss)/profit before tax from continuing operations (34,292) 16,658 106,983 25,530 114,879 Income tax (expense)/credit (3,742) 323 (31,771) - (35,190)(Loss)/profit after tax from continuing operations (38,034) 16,981 75,212 25,530 79,689
Loss after tax from discontinued operations - (4,982) (152,251) - (157,233)(Loss)/profit for the year (38,034) 11,999 (77,039) 25,530 (77,544)
Investment, Corporate &
PropertyBusiness Services
Manufacturing & Trading Total
Rs’000 Rs’000 Rs’000 Rs’000
Segment assets 844,424 340,010 2,521,296 3,705,730 Investments in associates and joint ventures 1,021,684 - - 1,021,684 Consolidated total assets 4,727,414
Segment liabilities 979,164 241,114 1,518,838 2,739,116
Capital expenditure 3,499 32,978 165,660 202,137 Depreciation and amortisation 7,297 16,719 85,530 109,546
There were no other material items of income and expense.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
35. SEGMENTAL INFORMATION - THE GROUP (CONT’D)
Geographical informationAlthough the Group’s four business segments are managed in Mauritius, they operate in the following main geographical areas.
Revenue from external customers Non-current assets
2017 2016 2017 2016Rs’000 Rs’000 Rs’000 Rs’000
Mauritius 3,161,951 3,041,627 2,412,951 2,670,136 Madagascar 92,965 52,813 1,629 2,636 Reunion 136,933 161,413 1,650 1,484 Africa 601,233 468,491 16,115 15,624 Total 3,993,082 3,724,344 2,432,345 2,689,880
The Group’s customer base is highly diversified, with no individually significant customer.
36. CONTINGENT LIABILITIES
At 31 December 2017, there is a claim amounting to USD6 million made by a supplier during 2012 to a subsidiary in respect of goods shipped to a company based in Reunion Island whereby the subsidiary acted as agent for the supplier. Based on a legal opinion, no provision has been made in the accounts of that subsidiary. in respect of this claim. The claim is still being disputed by both parties, the outcome of which is uncertain at the date of signature of the accounts.
At 31 December 2017, the Company had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of the business from which it is anticipated that no material liabilities would arise.
At 31 December 2017, no guarantee were given by the Group and the Company other than in the normal course of business.
37. RELATED PARTY TRANSACTIONS
(a) THE GROUP
Interest received
Interest paid
Purchase of goods
and services
Sales of goods
and services
Management services and
fees receivable
Loan to related party
Loan from
related party
Amount owed by related party
Amount owed to related party
(i) Year 2017 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Associated companies 1,319 2,666 35,256 31,494 - 3,641 54,000 18,164 3,924 Directors and key management personnel - 4 5,000 50 1,500 - 67 - - Enterprises in which directors/key management personnel (and close families) have significant/ substantial interest - - 5,243 - - - 23,636 - - Shareholders - 5,701 - - - - 186,415 - -
(ii) Year 2016 Associated companies 2,751 5,408 26,454 26,410 - 28,041 84,000 28,725 7,213 Directors and key management personnel - - 34 3,239 6,613 - - 1,523 3 Enterprises in which directors/key management personnel (and close families) have significant/ substantial interest - - 5,134 1,616 - - - - - Shareholders - 6,272 - - - - 115,016 - -
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
37. RELATED PARTY TRANSACTIONS (CONT’D)
(b) THE COMPANY
Interest received
Interest paid
Purchase of goods
and services
Management services and fees (payable)/ receivable
Service charge
Loan to related party
Loan from
related party
Amount owed by related party
Amount owed to related party
(i) Year 2017 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000
Subsidiaries 4,500 27,720 11,985 53,172 29,151 44,741 465,442 114,558 10,971 Associated companies 1,333 3,705 2,627 - - 3,641 61 141 - Directors and key management personnel - - - - - - - - -Enterprises in which directors/key management personnel (and close families) have significant/substantial interest - 4 3,857 - - - 23,636 - - Shareholders - 6,316 - - - - 186,415 - -
(ii) Year 2016 Subsidiaries 14,893 31,331 9,166 50,524 28,685 88,668 489,302 96,255 6,312 Associated companies 1,613 5,408 2,311 - - 28,041 84,000 8,117 - Directors and key management personnel - - - - - - - - -Enterprises in which directors/key management personnel (and close families) have significant/ substantial interest - 8 3,748 - - - 5,006 - - Shareholders - 6,272 - - - - 115,016 - -
Remuneration and benefits2017 2016
THE GROUP Rs’000 Rs’000
Key management personnel compensationSalaries and short-term employee benefits 14,613 14,848 Post-employment benefits 962 968
15,575 15,816
THE COMPANY
Key management personnel compensationSalaries and short-term employee benefits 11,579 12,938 Post-employment benefits 962 968
12,541 13,906
The sales to and purchases from related parties are made in the normal course of business. Outstanding trade balances at the year-end are unsecured, interest free (with the exception of loans and advances) and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2017, the Company has recorded Rs10 million impairment of receivables relating to amounts owed by related parties (2016:Rs38 million). Assessment for impairment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
38. CAPITAL COMMITMENTS
There is no capital expenditure contracted for by the Group and the Company at the end of the reporting period but not yet incurred (2016: Nil).
39. EVENTS AFTER THE REPORTING PERIOD
There is no event after the reporting period that the directors consider may materially affect the financial statements for the year ended 31 December 2017.
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
40. THREE YEAR SUMMARY - THE GROUP2017 2016 2015
Rs’000 Rs’000 Rs’000
STATEMENT OF PROFIT OR LOSSRevenue 3,993,082 3,724,344 3,793,102
(Loss)/profit after finance cost (4,365) 81,052 18,543 Net share of result of associates and joint ventures 132,001 50,019 65,640
127,636 131,071 84,183 Net profit on disposal of investments 104,506 - 6,435 Impairment (21,982) (16,192) (38,502)
Profit before taxation 210,160 114,879 52,116 Taxation (25,567) (35,190) (16,225)
Profit for the year from continuing operations 184,593 79,689 35,891 Loss for the year from discontinued operations (69,296) (157,233) (94,694)Profit/(loss) for the year 115,297 (77,544) (58,803)
2017 2016 2015Rs’000 Rs’000 Rs’000
Attributable to: Owners of the parent 114,188 (33,693) (4,562) Non controlling interests 1,109 (43,851) (54,241)
115,297 (77,544) (58,803)
Other comprehensive income (8,073) 126,114 1,860 Total comprehensive income/(loss) for the year 107,224 48,570 (56,943)
Attributable to: Owners of the parent 106,335 63,539 (32,144) Non controlling interests 889 (14,969) (24,799)
107,224 48,570 (56,943)
Dividend per share 1.80 1.80 1.80 Earnings per share from continuing operations(Rs/cents) 15.82 6.20 0.57 Loss per share from discontinued operations (Rs/cents) (5.68) (9.19) (3.42)
STATEMENTS OF FINANCIAL POSITION 2017 2016 2015Rs’000 Rs’000 Rs’000
Non-current assets 2,432,345 2,689,880 2,387,200
Current assets 2,194,344 2,037,534 2,111,570 Total assets 4,626,689 4,727,414 4,498,770
Capital and reserves 1,773,582 1,711,983 1,696,618 Non controlling interests 296,680 276,315 270,574 Non-current liabilities 639,360 895,786 843,743 Current liabilities 1,917,067 1,843,330 1,687,835 Total equity and liabilities 4,626,689 4,727,414 4,498,770
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Notes to the Financial Statements (Cont’d)Year ended 31 December 2017
41. OPERATING LEASE COMMITMENTS
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
THE GROUP THE COMPANY2017 2016 2017 2016
Rs’000 Rs’000 Rs’000 Rs’000
Not later than one year 14,103 19,326 2,170 2,170 Later than one year and not later than 5 years 58,198 86,471 9,331 9,331 Later than five years 203,295 249,020 134,882 137,052
275,596 354,817 146,383 148,553
The Company has a lease agreement expiring on 30 September 2069. The annual rent is adjusted every three years based on the cumulative inflation rate during the three-year period.
Two group companies have lease agreements expiring in 2018 and 2030.
One of the subsidiary leases land from the Mauritius Ports Authority which has expired on 15 December 2015. The subsidiary is negotiating with the Mauritius Ports Authority for the renewal of the lease. No official renewable agreement has been signed up to now between the Mauritius Ports Authority and the subsidiary.
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Harel Mallac & Co. Ltd.18, Edith Cavell Street, PO Box 36,Port Louis 11302, Mauritius
t (230) 207 3000 f (230) 207 3030e [email protected] harelmallac.com
