MARGARINE INDUSTRIES LIMITED

NOTICE OF ANNUAL MEETINGPage 2 of 20
CORPORATE INFORMATION
Directors of the Company Chairman Mr. Bashirally A Currimjee, G.O.S.K - Also alternate to Mr. Anil C Currimjee Executive Mr. Azim F Currimjee - Director-Also alternate to Mr. Currimjee J Currimjee Mr. Raffi Currimjee - Managing Director Non-Executive Mr. Fakhruddin J Currimjee, G.O.S.K Mr. Mustanshir A Currimjee - Also alternate to Mr. Ashraf M Currimjee Mr. Currimjee J Currimjee, G.O.S.K - Also alternate to Messrs. Azim F Currimjee &
Fakhruddin J Currimjee Mr. Anil C Currimjee - Also alternate to Mr. Bashirally A Currimjee Mr. Ashraf M Currimjee - Also alternate to Mr. Mustanshir A Currimjee Mr. Mazahir F E Adamjee - Also alternate to Mr. Raffi Currimjee Mr. Saliah Mohamed Sait - Also alternate to Mr. Mazahir F E Adamjee Independent Non-Executive Mr. Hassam Vayid, G.O.S.K Mr. Uday K Gujadhur Directors of the Company’s Subsidiary Central Distributors Company Limited
(‘CDCO’) Mr. Currimjee J Currimjee √ Mr Mustanshir A Currimjee √ Mr Azim F Currimjee √ Mr Raffi Currimjee √ Mr Ashraf M Currimjee Alternate to Mr. Mustanshir A Currimjee The Company Secretary Currimjee Limited 6, Sir William Newton Street, Port-Louis Mauritius Registered Office 6, Sir William Newton Street, Port-Louis Mauritius Registry Currimjee Limited 6, Sir William Newton Street Port Louis Mauritius
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Margarine Industries Limited – Corporate information
Principal Place of Business New Trunk Road, Trianon - Mauritius Auditors Deloitte 7th Floor, Raffles Tower 19, Cybercity Ebene Mauritius Bankers
• The Mauritius Commercial Bank Ltd.
• State Bank of Mauritius Ltd
• Barclays Bank Plc • Afrasia Bank Limited
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REPORT FROM THE BOARD OF DIRECTORS
Dear Shareholder
The Board of Directors is pleased to present the Annual Report of MARGARINE INDUSTRIES LIMITED (the “Company”) for the year ended 31 December 2012.
LEGAL FORM AND PRINCIPAL ACTIVITY
The Company was incorporated on 20th April 1966 as a private company and was converted into a
public company on 29th June 1982. The Company was admitted to the Development & Enterprise
Market of the Stock Exchange of Mauritius in August 2006.
Its principal activity consists of manufacturing and sale of margarine and has remained unchanged
during the year.
The wholly-owned subsidiary of the Company, Central Distributors Company Limited [“CDCO”], is
engaged in the trading of consumer goods and its activity has also remained unchanged during the
year.
RESULTS Year on year, Group turnover increased by 3.3%. Operating profit remained constant at Rs 43M;
however, Profit after tax in the year decreased from Rs 30.3M to Rs 27.8M, prinicipally due to higher
financial charges.
In the prevailing competitive environment and with the rising commodity prices, 2013 will be a
challenging year. However, the Company expects the results to be sustained given various measures
undertaken.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
Company law requires the Directors to prepare financial statements for each financial year, which
present fairly the financial positions, financial performances and cash flows of the Company. In
preparing those financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
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• state whether applicable Accounting Standards have been followed and complied with, subject to
any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the financial
statements.
The Directors are responsible for keeping proper accounting records, which disclose with reasonable
accuracy at any time, the financial position of the Company and to enable them to ensure that the
financial statements comply with the Companies Act 2001. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
(Rs) 2011 (Rs)
Political donations 20,000 Nil Nil Nil Non-political / charitable donations 27,525 32,500 Nil Nil TOTAL 47,525 32,500 Nil Nil
AUDITORS The Auditors, Messrs. Deloitte have expressed their willingness to continue in the office and a
resolution proposing their re-appointment will be submitted to the Annual Meeting.
The fees paid to the Auditors were:
The Company The Group 2012
Rs. 2011 Rs.
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Margarine Industries Limited – Corporate Governance Report
Corporate Governance Report The Company is committed to high standards of Corporate Governance and the Board has established
procedures to ensure compliance with the provisions of the Mauritius Code of Corporate Governance.
The Holding Structure
The holding structure of the Company as at 31 December 2012 is as follows:
Substantial Shareholding
With the exception of CIND, no other Shareholder holds more than 5% of the share capital of the
Company.
Board of Directors
For the year under review, the Board consisted of twelve Directors with a mix of two Executives, eight
Non-Executives and two Independent Directors.
Fakhary Limited (“FL”)
100%
25.0%
75.0%
100%
The Independent and Non-Executive Directors bring a wide range of experience and skills to the Board.
Independent Directors are free from any business or other relationships which would materially affect
their ability to exercise independence of mind and judgement.
Where necessary in the discharge of their duties, Directors may seek independent professional advice
at the Company’s expense.
Directors’ Profiles
The profile of each member of the Board of Directors is set out hereafter:
Mr. Bashirally A Currimjee G.O.S.K - Chairman Mr. Bashirally A Currimjee is the Chairman of the Company since 1 January 2011. He is also the
Chairman and Managing Director of Currimjee Jeewanjee and Company Limited and the Chariman of
the following Development Enterprise Market (DEM) listed companies:
- Compagnie Immobilière Limitée, Soap & Allied Industries Limited, Quality Beverages Limited and
Vital Water Bottling Co Ltd.
He is presently a Director of Fincorp Limited, a company listed on the Official Market of the Stock
Exchange of Mauritius (“SEM”).
Mr. Azim F Currimjee Mr. Azim F Currimjee was appointed Director of the Company in September 2001. He is also a Director
of the following DEM listed companies:
- Compagnie Immobilière Limitée, Quality Beverages Limited, Soap & Allied Industries Limited, and
Mr. Raffi Currimjee Mr. Raffi Currimjee was appointed as Executive Director of the Company in August 2008. In September
2012 he was appointed as Managing Director of the Company. He is also a Director of the following
DEM listed companies:
- Compagnie Immobilière Limitée, Quality Beverages Limited and Vital Water Bottling Co Ltd.
Mr. Fakhruddin J Currimjee G.O.S.K Mr. Fakhruddin J Currimjee was appointed Director of the Company in April 1966. He is also a Director
of the following DEM listed companies:
- Quality Beverages Limited and Vital Water Bottling Co Ltd.
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Mr. Mustanshir A Currimjee Mr. Mustanshir A Currimjee was appointed Director of the Company in August 1976. He is also a
Director of the following DEM listed companies:
- Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.
Mr. Currimjee J Currimjee G.O.S.K Mr. Currimjee J Currimjee has acted as Chairman of the Company from 15 November 1978 to 31
December 2010. He is also a Director of the following DEM listed companies:
Mr. Anil C Currimjee Mr. Anil C Currimjee was appointed Director of the Company in July 2005. He is presently a Director of
the following DEM listed companies:
- Compagnie Immobilière Limitée, Quality Beverages Limited, Soap & Allied Industries Limited and
Mr. Ashraf M Currimjee Mr. Ashraf M Currimjee was appointed Director of the Company in June 2007 and is a Director of the
following DEM listed companies:
He is also a Director of Mauritius Oil Refineries Limited, a company listed on the Official Market of the
SEM.
Mr. Mazahir F E Adamjee Mr. Mazahir F E Adamjee was appointed Director of the Company in July 2005. He is a Director of the
following listed companies:
He also a Director of National Investment Trust Ltd, a company listed on the Official Market of the SEM.
Mr. Saliah Mohamed Sait Mr. Saliah Mohamed Sait was appointed as Director of the Company in June 2006. He is also a
Director of the following DEM listed companies:
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Mr. Hassam Vayid Mr. Hassam Vayid was appointed as an Independent Director of the Company in July 2005. He is the
Chairman of Bramer Banking Corporation Ltd and a Director of the following DEM listed companies:
Mr. Uday K Gujadhur Mr Uday K Gujadhur was appointed as an Independent Director and Chairman of the Company’s Audit
Committee in July 2010. He is a Director of the following DEM listed companies:
- Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd. Board Meeting
The Board of Directors meets every quarter to review performance, conformance and the overall
management of the Company as well as approves its long term objectives and strategy. Decisions are
also taken by way of resolutions in writing, assented and signed by all Directors.
The Board of Directors met five times during the year under review.
Board Committees
In line with Corporate Governance best practices, the Board has established the following sub-
committees to assist it in the decision-making process and in the performance of its duties and
responsibilities:
• Audit Committee.
In addition, committees are also convened as and when necessary to review major investments and
new projects.
Corporate Governance Committee
The Corporate Governance Committee is chaired by Mr Hassam Vayid, an Independent Director, and
the other members as at 31 December 2012 were Messrs Bashirally A Currimjee, Ashraf M Currimjee,
Azim F Currimjee and Mazahir Adamjee.
The Committee operates under a Committee Charter approved by the Board and its main attribution is
to make recommendations to the Board of Directors on all corporate governance provisions to be
adopted so that the Board remains effective and complies with prevailing corporate governance
principles.
The Committee met once during the year under review.
Audit Committee
The Audit Committee is chaired by Mr Uday Kumar Gujadhur, an independent Director. Mr Uday K
Gujadhur is a Fellow Member of the Association of Chartered Certified Accountants, United Kingdom.
The other members of the Audit Committee as at 31 December 2012 were Messrs Saliah Mohamed
Sait, Ashraf M Currimjee and Hassam Vayid.
The Audit Committee operates under the Terms of Reference set by the Board of Directors and a
formally approved Audit Committee Charter.
The role of the Audit Committee has continually been pre-dominant in assisting the Board in carrying
out its responsibilities relating to accounting policies, internal control procedures, financial reporting
practices and audit process.
The Audit Committee oversees the financial reporting process and in particular, it reviews the annual
and quarterly financial statements before being submitted to the Board of Directors for approval. It also
reviews and monitors the following:
• the effectiveness of the internal audit function;
• the qualifications, assessment of external auditors independence, performance and remuneration;
and
• the compliance of the Company with laws and regulations.
The Audit Committee met four times for the year under review.
Currimjee Limited acts as Secretary to all the above Committees.
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Board and Committee Attendance
The following table gives the records of attendance at meetings of the Company’s Board and its
Committees for the year under review:
Directors Board Meeting
Corporate Governance Committee
Mr Bashirally A Currimjee 5/5 n/a 1/1 Mr Azim F Currimjee 5/5 n/a 1/1 Mr Raffi Currimjee 5/5 n/a n/a Mr Fakhruddin J Currimjee 3/5 n/a n/a Mr Mustanshir A Currimjee 4/5 n/a n/a Mr Currimjee J Currimjee 1/5 n/a n/a Mr Anil C Currimjee 4/5 n/a n/a Mr Ashraf M Currimjee 4/5 2/4 1/1 Mr Mazahir F E Adamjee 5/5 n/a 1/1 Mr Saliah Mohamed Sait 5/5 4/4 n/a Mr Hassam Vayid 5/5 4/4 1/1 Mr Uday K Gujadhur 5/5 4/4 n/a
Common Directors within the Holding Structure
Company Fakhary Limited
Mr Currimjee J Currimjee √ √ √ √
Mr Anil C Currimjee √ √
Mr Mazahir F E Adamjee √ √ √
Mr Hassam Vayid √ √
Internal control
The Board is responsible for the maintenance of an internal control system. The Board of Directors is
conscious of its role of upholding the highest standard of corporate governance and has established a
sensible framework of valuable controls which enables risks to be assessed and managed. The Board
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regularly reviews processes and procedures to ensure effectiveness of the Company’s internal control
systems. In that respect reliance is also placed on the work undertaken by Internal Audit in line with the
approved Internal Audit Plan.
The Internal Audit Service for the Company is outsourced to Currimjee Jeewanjee and Company
Limited who delivers the service through its Internal Audit Department with clear reporting structure
between the Internal Auditor and the Company. The Internal Auditor reports to the Audit Committee.
The Internal Auditor has unrestricted access to the Company’s accounting records, to management and
employees.
Senior Management assumes responsibility for identifying and monitoring the risks as appropriate to
their position in the organisation. The objective of risk management is to reduce risk to an acceptable
level.
The Board is, nevertheless responsible for the total process of risk management, including the
identification and evaluation of risks and putting in place appropriate systems and controls to mitigate
the impact of risks.
Statement of the Company’s remuneration philosophy
The Nomination and Remuneration Committee is set up at the level of Currimjee Limited and is chaired
by Mr Carrim A Currimjee. The other members as at 31 December 2012 were Messrs Bashirally A
Currimjee and Fakhruddin J Currimjee. Sir Hamid Moollan Q.C. and Mr Jean Paul de Chazal have
been nominated as co-opted Members on the Committee for their independent expert advice.
The Committee’s main responsibility is for making recommendations to the Board for determining,
developing and agreeing the Company’s general policy on remuneration for Directors and pension for
Retired Directors and on the appointment of new Directors.
All decision taken at the Nomination and Remuneration Committee level are submitted for approval to
the Board of the Company.
The Company’s remuneration philosophy concerning Directors follow the guidelines proposed by the
Nomination and Remuneration Committee, which solicits the expert advice of a Consultant to assist in
determining the remuneration of Executive Directors.
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Independent Directors who are Members of the Board’s sub-committees are paid committee fees, in
addition to their Directors’ fees.
The Company’s policy for determining remuneration for Management and Staff follow the guidelines
below:
• Ensure that remuneration is commensurate with qualifications, skills and experience;
• Ensure that pay levels are internally consistent and align with market rates;
• Provide a remuneration package that attracts, retains and motivates staff; and
• Reward managers according to their performance and their responsibilities.
As approved by the Board, remuneration and benefits received by Directors during the financial year
were as follows:
From the Company
TOTAL 1,006,480
Directors did not receive any remuneration and benefits from the Company’s subsidiaries for the year
under review. Remuneration of Directors has not been disclosed on an individual basis due to commercial sensitivity.
Directors and Officers Liability Insurance
The Company has subscribed to a Directors and Officers Liability Insurance Cover, as provided for
under the Companies Act 2001.
Directors’ service contracts
Non of the Directors hold a service contract with the Company.
Directors’ Interest and Dealings in Shares
The Directors are aware of the principles of the model code on securities transactions by Directors as
detailed in Appendix 6 of the Mauritius Stock Exchange Listing rules.
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The Company Secretary maintains a Register of Interests, which is updated with every transaction
entered into by the Directors and their closely related parties. All new Directors are required to notify in
writing to the Company Secretary their holdings in the Company’s shares as well as those in related
companies.
None of the Directors traded in the Company’s shares throughout the year under review.
The following table details the interests of the Directors in the share capital of the Company as at
31 December 2012:
Interests in the Company’s shares as at 31 December 2012
Number of shares
Mr Azim F Currimjee 500 2,000
Mr Raffi Currimjee 1,556 -
Mr Mustanshir A Currimjee 4,482 -
Mr Currimjee J Currimjee 5, 608 -
Mr Anil C Currimjee - -
Mr Ashraf M Currimjee - -
Mr Saliah Mohamed Sait - -
The main highlights of the Constitution are as follows:
• The Board of Directors shall consist of not less than six Directors;
• The quorum for a Board meeting is three Directors;
• The Shareholders can freely transfer fully paid up shares of the Company; and
• The quorum for a Shareholders’ meeting is three Shareholders present or represented by proxy.
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Shareholders’ Agreement
To the knowledge of the Company, there was no such agreement with any of its Shareholders for the
year under review.
Share Registry and Transfer Office
The share registry is managed by Currimjee Limited and as at 31 December 2012, the Company had
136 registered Shareholders.
Shareholding Profile
The share ownership and the category of Shareholders as at 31 December 2012 are set out below:
Number of Shareholders
% of Total Issued Shares
- 50,001-100,000 shares - -
- 250,001-500,000 shares - -
% of Total Shares Issued
130 Individuals 58,126 19.36
136 Total 300,239 100%
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Share Price Information The share of the Company has a nominal value of Rs 100 and the Company’s share price evolution for
the year 2012 was as follows:
0 100 200 300 400 500 600 700 800 900
1000
Shareholders’ Communication and Calendar of Events
The Board of Directors of the Company understands that communication to Shareholders about
matters pertaining to the Company is of great importance and ensures that information is delivered in
an open, transparent and meaningful manner. Press communiqués, disclosures in the Annual Report
and the Annual Meeting of Shareholders are means availed by the Board in keeping the communication
line with Shareholders open.
The calendar of key events is as follows:
Publication of Abridged Audited Accounts for the year ended 31 December March
Publication of 1st Quarter Results May
Annual Report to Shareholders June
Annual Meeting of Shareholders June
Publication of 2nd Quarter Results August
Publication of 3rd Quarter Results November
Projection for Declaration/Payment of Final Dividend November/December
Financial Year End December
Employee Share Scheme
There is no Employee Share Option Plan in place at Company or Group level.
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Dividend Policy
Payment of dividends is subject to the profitability of the Company, its cash flow and its capital-
expenditure requirements. For the year under review, the Company declared a dividend of Rs 70.00
per share [2011: Rs 60.00 per share].
The trend in dividend declaration or the previous 10 years is illustrated below:
0 10 20 30 40 50 60 70 80
2003 2005
2007 2009
Final Dividend % on Nominal Value of Ordinary Shares
Senior Management’s Profiles Salim Rafic Sulliman – General Manager Salim Holds an Advance General Management certificate from National University of Singapore. He
joined the Company in 1990.
Sivapragassen Rengasamy – Factory Manager Sivapragassen is a qualified Technician Engineer from City and Guilds. He is responsible for the
production, maintenance and technical operations of the Company. He joined the Company in May
1972.
Zabeer Abbas – Accounts Manager Zabeer is an affiliate of the Association of Chartered Certified Accountants; he is responsible for the
financial management of the business, including production of financial reports, periodic review packs
and forecasts. He joined the Company in August 2010.
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Zeenat Mungloo Peyrye – Production and R & D Manager Zeenat holds a BSc (Hons) Food Science and Technology from the University of Mauritius and she is
responsible for day to day management of Production department and for product improvement and
development. She joined the Company on 1st August 2008.
Choaib Moreea – Operations Manager Choaib holds holds a BSc (Hons) Management from the University of Mauritius. He is the Operations
Manager in the Commercial Division. He joined the Company on 1st November 2009.
Senior Management’s Interests in Shares
The following table details the interests of Senior Management in the share capital of the Company as
at 31 December 2012
Number of shares
Number of shares in the Company as at 31st December 2012
Direct Indirect
Sivapragassen Rengasamy 100 -
Related Party Transactions
All the transactions of the Company are carried out at arm’s length.
Please refer to note 27 of the accounts for related party transactions and balances.
Secretarial Service Agreement and the Company Secretary
All the Directors have access to the services of the Company Secretary, Currimjee Limited. The
Company Secretary administers, attend and prepares minutes of all Boards, Board Committees and
Shareholders meetings.
It also ensures that the Company complies with its constitution and all relevant statutory and regulatory
requirements. It plays a key role in the application of corporate governance and is a central source of
guidance and advice to the Board on matters of ethics and good governance.
A Secretariat Service Agreement between Currimjee Limited and the Company have been signed in
that respect.
2012 2011 2012 2011 Note Rs Rs Rs Rs
Revenue 19 374,639,781 362,754,756 304,509,023 296,298,091
Cost of sales (256,207,355) (255,177,918) (200,288,747) (202,636,095)
Gross profit 118,432,426 107,576,838 104,220,276 93,661,996
Other income 20 2,760,322 1,266,709 4,727,889 3,270,300
Selling and distribution expenses (21,255,609) (17,179,032) (13,052,453) (10,708,231)
Marketing expenses (14,818,288) (12,589,876) (14,818,288) (12,589,876)
Administrative expenses (41,169,242) (35,554,445) (40,194,493) (33,954,419)
Finance costs 21 (9,574,374) (7,522,884) (8,005,411) (6,163,410)
Profit before taxation 34,375,235 35,997,310 32,877,520 33,516,358
Taxation 15(b) (6,489,979) (5,693,681) (6,303,270) (5,693,681)
Profit for the year 22 27,885,256 30,303,629 26,574,250 27,822,677
Other comprehensive income
Fair value (loss)/gain on cash flow hedges (5,737,041) 1,461,903 (5,737,041) 1,461,903 Gain on revaluation of land and buildings and plant and machinery 5 - 30,407,712 - 30,407,712 Deferred tax on revaluation of land and buildings and plant and machinery - 826,177 - 826,177
Other comprehensive (loss)/income for the year (5,737,041) 32,695,792 (5,737,041) 32,695,792
Total comprehensive income for the year Rs 22,148,215 62,999,421 20,837,210 60,518,469
Profit attributable to:
Owners of the company Rs 27,885,256 30,303,629 26,574,250 27,822,677
Total comprehensive income attributable to owners of the company Rs 22,148,215 62,999,421 20,837,210 60,518,469
Earnings per share 23 Rs 92.88 100.93
THE COMPANYTHE GROUP
25 MARGARINE INDUSTRIES LIMITED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2012
THE GROUP
Stated Revaluation Other Retained Note capital reserves reserves earnings Total
Rs Rs Rs Rs Rs
At 1 January 2011 30,023,900 44,547,933 3,229,620 29,307,391 107,108,844
Profit for the year - - - 30,303,629 30,303,629 Other comprehensive income - 31,233,889 1,461,903 - 32,695,792
Total comprehensive income for the year - 31,233,889 1,461,903 30,303,629 62,999,421 Dividend 26 - - - (18,014,340) (18,014,340)
At 31 December 2011 30,023,900 75,781,822 4,691,523 41,596,680 152,093,925
Profit for the year - - - 27,885,256 27,885,256 Other comprehensive income - - (5,737,041) - (5,737,041)
Total comprehensive income for the year - - (5,737,041) 27,885,256 22,148,215 Revaluation surplus realised on depreciation - (1,841,455) - 1,841,455 - Dividend 26 - - - (21,016,730) (21,016,730)
At 31 December 2012 Rs 30,023,900 73,940,367 (1,045,518) 50,306,661 153,225,410
THE COMPANY
Stated Revaluation Other Retained Note capital reserves reserves earnings Total
Rs Rs Rs Rs Rs
At 1 January 2011 30,023,900 44,547,933 3,229,620 32,931,562 110,733,015
Profit for the year - - - 27,822,677 27,822,677 Other comprehensive income - 31,233,889 1,461,903 - 32,695,792
Total comprehensive income for the year - 31,233,889 1,461,903 27,822,677 60,518,469 Dividend payable 26 - - - (18,014,340) (18,014,340)
At 31 December 2011 30,023,900 75,781,822 4,691,523 42,739,899 153,237,144
Profit for the year - - - 26,574,250 26,574,250 Other comprehensive income - - (5,737,041) - (5,737,041)
Total comprehensive income for the year - - (5,737,041) 26,574,250 20,837,209 Revaluation surplus realised on depreciation - (1,841,454) - 1,841,454 - Dividend 26 - - - (21,016,730) (21,016,730)
At 31 December 2012 Rs 30,023,900 73,940,367 (1,045,518) 50,138,874 153,057,623
Attributable to owners of the company
MARGARINE INDUSTRIES LIMITED 26 STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011 2012 2011 Note Rs Rs Rs Rs
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 34,375,235 35,997,310 32,877,520 33,516,358
Adjustments for:- Depreciation and amortisation 13,372,658 8,382,254 13,372,658 8,382,254 Loss on disposal of property, plant and equipment 20 300,646 - 300,646 - Retirement benefit obligations 1,936,747 1,170,500 1,649,797 779,000 Interest income 20 (463,785) (472,017) (631,352) (675,607) Interest expense 21 9,574,374 7,522,884 8,005,411 6,163,410 OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 59,095,875 52,600,930 55,574,680 48,165,415
Increase in inventories (9,807,633) (30,960,113) (11,310,565) (26,004,904) Increase in trade and other receivables (4,382,766) (13,225,563) (1,481,805) (9,591,886) Increase in trade and other payables 20,716,531 7,823,872 16,420,132 3,077,726
6,526,132 (36,361,803) 3,627,762 (32,519,064)
NET CASH GENERATED FROM OPERATING ACTIVITIES 50,979,690 2,422,266 46,204,250 3,188,964
CASH FLOWS FROM INVESTING ACTIVITIES Interest received 463,785 472,017 631,352 675,607 Purchase of property, plant and equipment 25 (9,114,753) (3,421,018) (9,114,753) (3,421,018) Purchase of intangible assets 6 - (2,656,533) - (2,656,533) Proceeds from sale of property, plant and equipment 750,000 - 750,000 -
NET CASH USED IN INVESTING ACTIVITIES (7,900,968) (5,605,534) (7,733,401) (5,401,944)
CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid (39,031,070) - (39,031,070) - Loans received 6,265,314 44,460,119 597,200 35,000,000 Repayment of loans - (19,000,000) - (14,000,000) Repayment of finance leases (12,604,157) (8,199,842) (12,604,156) (8,199,842)
NET CASH (USED IN)/GENERATED FROM FINANCING ACTIVITIES (45,369,913) 17,260,277 (51,038,026) 12,800,158
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,291,191) 14,077,009 (12,567,177) 10,587,178
CASH AND CASH EQUIVALENTS AT 1 JANUARY 24 Rs 5,968,785 (8,108,224) 10,937,208 350,030
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 24 Rs 3,677,594 5,968,785 (1,629,969) 10,937,208
27 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012
1. GENERAL INFORMATION
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
New and revised IFRS applied with no material effect on the financial statements
IAS 12 Income Taxes - Limited scope amendment (recovery of underlying assets)
IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets.
New and revised IFRS in issue but not yet applied
IAS 1 Presentation of Financial Statements - Amendments to revise the way other comprehensive income is presented (effective 1 July 2012)
IAS 1 Presentation of Financial Statements -Amendments resulting from Annual Improvements (effective 1 January 2013)
IAS 16 Property, Plant and Equipment -Amendments resulting from Annual Improvements (effective from 1 January 2013)
IAS 19 Employee Benefits-Amended standard resulting from the Post Employment Benefits and Termination Benefits Projects. (effective 1 January 13)
IAS 27 Consolidated and Separate Financial Statements - Reissued as IAS 27 Separate Financial Statements (as amended in 2011) (effective 1 January 2013)
IAS 27 Separate Financial Statements - Amendments for investment entities (effective 1 January 2014) IAS 32 Financial Intruments-presentation and amendments to application guidance on the offsetting of financial
assets and financial liabilities (effective 1 January 2014) IAS 32 Financial Instruments -Amendments resulting from Annual Improvements (effective 1 January 2013)
IAS 34 Amendments resulting from Annual Improvements (interim reporting of segment assets) ( effective 1 January 2013)
IFRS 7 Financial Instruments: Disclosures - Amendments about offsetting financial assets and financial liabilities (effective 1 January 2013)
IFRS 7 Financial Instruments: Disclosures - Amendments requiring the disclosures about the initial application of IFRS 9 (effective 1 January 2015)
IFRS 9 Financial Instruments - Classification and Measurement (effective 1 January 2015) IFRS 9 Financial Instruments - accounting for financial liabilities and de-recognition (effective 1 January 2015)
IFRS 9 Financial Instruments - Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures (effective 1 January 2015)
IFRS 10 Consolidated Financial Statements - Original issue (effective 01 January 2013)
IFRS 10 Consolidated Financial Statements - Amendments to transitional guidance (effective 1 January 2013)
IFRS 10 Consolidated Financial Statements - Amendments for investment entities (effective 1 January 2014)
At the date of authorisation of these financial statements, the following relevant standards and Interpretations were in issue but effective on annual periods beginning on or after the respective dates as indicated.
The Company is a public company incorporated in Mauritius with its registered office at 6, Sir William Newton Street, Port Louis and principal place of business at Trianon. It is listed on the Development and Enterprise Market (DEM) of the Stock Exchange of Mauritius. Its main activities are the manufacture and sale of margarine and its related products while the subsidiary is a private company which trades in consumer goods.
The following relevant new and revised Standards and Interpretations have been adopted in these financial statements. Their application has not had any material impact on the amounts reported for the current and prior years but may impact the accounting for future transactions or arrangements.
In the current year, the group and the Company have applied all of the new and revised standard and interpretations issued by the International Accounting Standards Board (the "IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 January 2012.
28 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2012
2.
IFRS 12 Disclosures of Interests in Other Entities - Original issue (effective 1 January 2013) IFRS 12 Disclosures of Interests in Other Entities - Amendments to transitional guidance (effective 1
January 2013) IFRS 12 Disclosures of Interests in Other Entities - Amendments for investment entities (effective 1
January 2013) IFRS 13 Fair Value Measurement (effective 1 January 2013)
a)
b)
c)
3. ACCOUNTING POLICIES
The principal accounting policies adopted by the group and the Company are as follows:-
(a) Basis of preparation
(b) Basis of consolidation
immediate recognition of past service costs in profit or loss and an increase in the net pension asset; and
reversal of the difference between the gain arising from the expected rate of return on pension plan assets and the discount rate through other comprehensive income.
The financial statements are prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment and financial instruments and in accordance with International Financial Reporting Standards (IFRS).
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)(CONT'D)
The directors anticipate that these IFRSs will be applied on their effective dates in the company`s financial statements in future periods. Except for IAS 19 which is detailed below, the directors have not yet assessed the potential impact of the application of these amendments.
IAS 19 Employee benefits
The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligation and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a ‘net-interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset.
The amendments to IAS 19 require retrospective application. Based on the directors’ preliminary assessment, when the group and the company applies the amendments to IAS 19 for the first time for the year ending 31 December 2013, there will be no impact on the profit after income tax for the year ended 31 December 2012 while other comprehensive income after income tax for the said year would be decreased by Rs 6,055,400 for the group and Rs 6,300,200 for the company and (1 January 2012: increase in retained earnings of Rs Rs 15,929,850 for the group and increase of Rs 13,495,450 for the company) with the corresponding adjustments being recognised in the retirement benefit asset. This net effect reflects a number of adjustments, including their income tax effects:
full recognition of actuarial gains through other comprehensive income and increase in the net pension asset;
3. ACCOUNTING POLICIES (CONT'D)
(c) Investment in subsidiary
Other income
- - Management fee is recognised on an accrual basis. - Sundry income is recognised on an accrual basis
(e) Property, plant and equipment - depreciation
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the group.
Plant and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses.
In the Company's financial statements, investment in subsidiary is stated at cost, unless in the opinion of the directors, there has been a permanent diminution in value, in which event they are written down to the net asset value.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business net of Value Added Tax, discounts, allowances and returns. Sale of goods are recognised when goods are delivered and title has passed.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable.
Depreciation is not provided for on freehold land. On other items of fixed assets, it is calculated to write off the cost or revalued amount of assets over the expected useful lives of such assets.
Plant and machinery are stated at their revalued amounts being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluation adjustments are recognised on the same basis as for land and buildings.
Freehold land and buildings are stated at their revalued amounts being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed such that the carrying amount does not differ materially from that which would be determined using fair values at the reporting date. Revaluation of land and buildings is being done every three years by an independent valuer.
Any revaluation increase arising on the revaluation of such land and buildings is credited in equity to the properties revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in statement of comprehensive income, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of such land and buildings is charged to statement of comprehensive income to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings.
The annual depreciation rates used are as follows:
Plant and machinery - 6.5% - 12% p.a. straight line Factory building - 2% p.a. straight line Motor vehicles - 10% - 14.28% p.a. straight line Computer equipment - 20% - 33% p.a. straight line Office furniture and equipment - 12.5% - 50% p.a. straight line
(f) Grants
(i) Inventories
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets.
Expenditure incurred on the development of new computer software programmes is recognised as asset and is amortised at 25% p.a on a straight line basis over their estimated useful lives.
Grants received on the implementation of the ERP software have been amortised and recognised in profit or loss over a period of 4 years, consistent with the useful life of the software.
Inventories are valued at the lower of cost and net realisable value. Cost is determined on Average Cost (AVCO) method. Cost is based on the invoiced value of materials plus in the case of finished goods, a proportion of labour and factory overheads, based on a normal level of production. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Cost associated with maintaining computer software programmes are recognised as an expense as incurred.
Transactions is foreign currencies are converted at the exchange rate at the date of the transactions. Monetary assets and liabilities in foreign currencies outstanding at year end are translated to Mauritian Rupees at the rates of exchange ruling at end of the reporting period. Exchange differences arising on translation of monetary assets and liabilities are dealt with in the statement of comprehensive income.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in statement of comprehensive income.
Each year, the difference, net of the impact of deferred tax, between the depreciation based on the revalued carrying amount of the asset ( the depreciation charged to the Statement of comprehensive income) and the depreciation based on the asset's original cost is transferred from revaluation reserves to retained earnings.
(k)
(l)
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.
Cash and cash equivalents
Cash comprises cash at bank and in hand and demand deposits net of bank overdrafts. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
Leased assets
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs.
3.
(m)
(i) Defined benefit obligation
The present value of funded obligation is recognised in the statement of financial position as a non-current liability after adjusting for the fair value of plan assets, any unrecognised actuarial gains and losses and any unrecognised past service cost. A firm of actuaries carries out the valuation of the funded obligation triennially. The current service cost and any recognised past service cost are included as an expense together with the associated interest cost, net of expected return on plan assets.
A portion of the actuarial gains and losses is recognised as income or expense if the net cumulative unrecognised actuarial gains and losses at the end of the previous accounting period exceeded at that date:
- 10% of the present value of defined benefit obligation at that date; and
- 10% of the fair values of plan assets at that date.
(ii)
The present value of other retirement benefits as provided under the Employment Rights Act 2008 is recognised in the statement of financial position as a non-current liability.
The Company is a party to a contractual arrangement with related companies with respect to an unfunded pension plan. When there is a contractual arrangement or stated policy for charging the net benefit costs for the plan as a whole measured in accordance with IAS 19 to related companies, each related company recognised in its individual financial statements, the net defined benefit so charged.
The present value of the unfunded obligation is recognised in the statement of financial position as a non- current liability based on the the valuation carried out by a firm of actuaries annually. If there is a contractual agreement or stated policy for charging the net defined benefit cost for the plan as a whole measured in accordance with IAS 19 to related companies, each related company recognises in its individual financial statements, the net defined benefit cost so charged.
(iii) State plan
Contributions to the National Pension Scheme are expensed to the statement of comprehensive income in the period in which they fall due.
(n) Financial instruments
(i) Accounts receivable
(ii) Loans receivable from related companies
Loans receivable from related companies are stated at their principal value.
ACCOUNTING POLICIES (CONT'D)
Other retirement benefits
Retirement benefits
Financial assets and liabilities are recognised on the statement of financial position when the Company has become party to the contractual provisions of the financial instruments.
Financial instruments are initially measured at cost, which includes transaction costs. Subsequent to initial recognition these instruments are measured as set out below:-
Accounts receivable originated by the Company are stated at cost less provision for doubtful debts. An estimate of doubtful debts is made based on a review of all outstanding amounts at the reporting date. Debts are written off during the period in which they are identified.
(iv)
(v)
(p) Impairment
(q) Provision
Provisions are recognised when the group and the company have a present obligation as a result of a past event, and it is probable that the group and the company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Accounts payable
Accounts payable are stated at amortised cost.
Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at the reporting date.
An impairment loss is recognised as an expense in the statement of comprehensive income immediately, unless the asset is carried at revalued amount in which case the impairment loss is recognised against the fair value reserve for the asset to the extent that the impairment loss does not exceed the amount held in the fair value reserve for that same asset. Any excess is recognised immediately in the statement of comprehensive income.
Borrowings
Interest bearing loans and bank overdrafts are initially recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instalment to the extent that they are not settled in the period in which they arise. Borrowings are subsequently measured at amortised cost.
For the purposes of these financial statements, parties are considered to be related to the group if they have the ability, directly or indirectly, to control the group or exercise significant influence over the group in making financial and operating decisions, or vice versa, or if they and the group are subject to common control. Related parties may be individuals or other entities.
At each reporting date, the group and the company review the carrying amounts of its 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 higher of an asset's net selling price and value in use, that is the present value of estimated future cash flows expected to arise from continuing to use the asset and from its disposal at the end of its useful life. For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows.
Key sources of estimation uncertainty
(i) Impairment of assets
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the fair value of the group's share of the Net identifiable assets of the acquired subsidiary/Associate at the date of acquisition. Goodwill on acquisition of subsidies is shown in a separate line in the statement of financial position. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairement loss. Gain and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allotted to CGU for the purpose of impairment testing. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the limit. An impairment less recognised for goodwill is not reversed in a subsequent period.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, 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.
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based on the higher of its fair value less cost to sell and value in use, calculated on the basis of management' s assumptions and estimates. Changing the key assumptions, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the value-in-use calculations.
The preparation of financial statements in accordance with IFRS requires the directors and management to exercise judgement in the process of applying the accounting policies. It also requires the use of accounting estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Judgements and estimates are continuously evaluated and are based on historical experience and other factors, including expectations and assumptions concerning future events that are believed to be reasonable under the circumstances. The actual results could, by definition therefore, often differ from the related accounting estimates.
Where applicable, the notes to the financial statements set out areas where management has applied a higher degree of judgement that have a significant effect on the amounts recognised in the financial statements, or estimations 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.
The Group enters into forward contracts to purchase raw materials to cover specific requirements and these are accounted for as cash flow hedges.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of other reserves. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'other income' line item.
4. ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONT'D)
(ii) Property valuation
(iv) Deferred tax assets
(v) Pension obligations
Other key assumptions for pension obligations are based in part on current market conditions.
(vi) Allowances for bad debts
In arriving at the fair value of the properties, which is determined by on an open market value basis, the independent valuers have to make assumptions that are mainly based on market conditions existing at the reporting date. Should these assumptions and estimates change, or not be met, the valuation as adopted in the financial statements will be affected.
Freehold land and buildings, and the building component of owner-occupied leasehold properties are valued every three years by independent valuers. In the intervening years the group reviews the carrying values and adjustment is made where there has been a material change. In arriving at the valuation of land and buildings, assumptions and economic estimates have to be made.
Management determines the estimated useful lives and related depreciation charges for the group's property, plant and machinery and equipment. Management will revise the depreciation charge where useful lives are different to previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management's expectation of future taxable profit that will be available against which the tax losses can be utilized. The outcome of their actual utilization may be different.
Allowances for bad debts for the group and the company is determined using a combination of factors to ensure that the trade receivables are not overstated due to non-recoverability. The allowance for bad debts for all customers is based on a variety of factors, including the overall quality and ageing of the receivables, continuing credit evaluation of the customer's financial conditions. Also, specific provisions for individual accounts are recorded when the group and the company become aware of the customer's inability to meet its financial obligations such as in the case of deterioration in the customer's operating results or financial position.
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 expected long-term rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.
The expected return on plan assets assumption is determined on a uniform basis, taking into consideration long-term historical returns, asset allocation and future estimates of long-term investment returns.
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 have terms to maturity approximating the terms of the related pension liability.
5. PROPERTY, PLANT AND EQUIPMENT Office
THE GROUP Freehold Factory Plant and Motor Computer furniture and land building machinery vehicles equipment equipment Total Rs Rs Rs Rs Rs Rs Rs
COST OR VALUATION
At 31 December 2012 Rs 36,500,000 52,505,925 86,032,298 38,425,386 13,954,483 14,233,678 241,651,771
DEPRECIATION
At 1 January 2011 - - 79,585,002 10,493,080 9,839,670 10,768,922 110,686,674 Charge for the year - 1,014,078 4,776,848 1,398,417 473,517 280,218 7,943,078 Write off - - (12,953,668) - - - (12,953,668) Revaluation adjustments - - (71,408,182) - - - (71,408,182)
At 31 December 2011 - 1,014,078 - 11,891,498 10,313,187 11,049,140 34,267,903 Charge for the year - 1,036,256 7,149,011 2,887,162 539,246 365,413 11,977,088 Disposals - - - (1,374,354) - - (1,374,354)
At 31 December 2012 Rs - 2,050,334 7,149,011 13,404,305 10,852,434 11,414,553 44,870,637
NET BOOK VALUE
At 31 December 2012 Rs 36,500,000 50,455,591 78,883,287 25,021,081 3,102,050 2,819,125 196,781,135
At 31 December 2011 Rs 36,500,000 48,985,922 82,312,854 18,893,058 1,242,130 863,207 188,797,171
5. PROPERTY, PLANT AND EQUIPMENT (CONT'D) Office
THE COMPANY Freehold Factory Plant and Motor Computer furniture and land building machinery vehicles equipment equipment Total Rs Rs Rs Rs Rs Rs Rs
COST OR VALUATION
At 31 December 2012 Rs 36,500,000 52,505,925 86,032,298 38,425,387 13,954,482 12,473,240 239,891,332
DEPRECIATION
At 1 January 2011 - - 79,585,002 10,493,080 9,839,669 9,008,484 108,926,235 Charge for the year - 1,014,078 4,776,848 1,398,417 473,517 280,218 7,943,078 Write off - - (12,953,668) - - - (12,953,668) Revaluation adjustments - - (71,408,182) - - - (71,408,182)
At 31 December 2011 - 1,014,078 - 11,891,498 10,313,186 9,288,702 32,507,464 Charge for the year - 1,036,256 7,149,011 2,887,162 539,246 365,413 11,977,088 Disposals - - - (1,374,354) - - (1,374,354)
At 31 December 2012 Rs - 2,050,334 7,149,011 13,404,305 10,852,432 9,654,115 43,110,197
NET BOOK VALUE
At 31 December 2012 Rs 36,500,000 50,455,591 78,883,287 25,021,082 3,102,050 2,819,125 196,781,135
At 31 December 2011 Rs 36,500,000 48,985,922 82,312,854 18,893,058 1,242,130 863,207 188,797,171
5. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
(a) Property, plant and equipment include the following assets held under finance lease:
THE GROUP AND THE COMPANY
Net book Net book Cost value Cost value Rs Rs Rs Rs
Plant and machinery 50,570,000 47,840,486 52,030,919 44,299,592 Motor vehicles 32,765,176 25,078,919 15,899,755 14,273,162
Rs 83,335,176 72,919,405 67,930,674 58,572,754
(b)
(c)
2012
THE GROUP AND THE COMPANY Plant and Freehold Machinery land Buildings Total
Rs Rs Rs Rs
Net book value Rs 41,529,900 83,491 19,552,034 61,165,427
2011
THE GROUP AND THE COMPANY Plant and Freehold Machinery land Buildings Total
Rs Rs Rs Rs
Net book value Rs 46,168,772 83,491 17,549,046 63,801,309
The company's freehold land and buildings were revalued by Alan Tinkler, Ramlackhan & Co., Chartered Valuation Surveyors in accordance with the RICS Red Book and the International Valuation Standards. The land and buildings have been valued on the basis of its market value, being the estimated amount for which the property could be exchanged between knowledgeable willing parties in an arm's length transaction. The revaluation surplus was credited to revaluation reserves. The directors have assessed the fair value of the land and buildings at 31 December 2011 and have estimated the fair value to approximate the carrying value as at that date.
2012 2011
The group's and the company's obligations under finance leases are secured by the lessors title to the leased assets.
The group and the company have pledged all their property, plant and equipment having a carrying amount of Rs 123,861,730 (2011: Rs130,224,417) to secure banking facilities granted to them. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.
If property, plant and equipment were stated at historical cost basis, their carrying amounts at 31 December would be as follows:
31 December 2011 Depreciated Replacement Cost
Date Basis of valuation
6. INTANGIBLE ASSETS
Software costs 2012 2011 Rs Rs
COST
At 31 December Rs 5,458,676 5,458,676
AMORTISATION
At 1 January 439,175 - Charge for the year 1,395,571 439,175
At 31 December Rs 1,834,746 439,175
CARRYING AMOUNT
COST
IMPAIRMENT
CARRYING AMOUNT
At 31 December Rs 651,218
The goodwill arose from the full acquisition of the minority shares in Central Distributors Co. Ltd which is a wholly owned subsidiary. Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that busines combinations. Before recognition of impairment losses, the carrying amount of goodwill has been allocated wholly to the trading of consumer goods.
The group assesses the recoverable amount of goodwill annually or more frequently if there are indications of any impairment. The directors are of the opinion that no impairment has occured during the year.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
The directors consider that the carrying amount of the intangible assets approximate its fair value.
8. INVESTMENT IN SUBSIDIARY
At cost Rs
9. RETIREMENT BENEFIT PLAN
Present value of funded obligations 55,178,000 46,388,000 54,199,000 44,780,000 Fair value of plan assets (84,375,000) (80,871,000) (77,558,000) (74,181,000)
Surplus on funded assets (29,197,000) (34,483,000) (23,359,000) (29,401,000) Present value of unfunded assets - - Unrecognised actuarial gains 11,617,000 18,741,000 8,465,000 15,877,000
Net asset in statement of financial position Rs (17,580,000) (15,742,000) (14,894,000) (13,524,000)
Current service cost 2,086,000 2,419,000 1,955,000 2,103,000 Contributions by employees - - - - Interest on obligation 4,415,000 4,155,000 4,290,000 3,925,000 Expected return on plan assets (7,863,000) (8,101,000) (7,230,000) (7,347,000) Net actuarial gains recognised in period (476,000) (1,067,000) (385,000) (905,000)
Total, included in "employee benefits expense" Rs (1,838,000) (2,594,000) (1,370,000) (2,224,000)
Amounts recognised in statement of comprehensive income:
The Company holds 100% (2011: 100%) of the issued share capital of Central Distributors Co Ltd, a company incorporated in Mauritius, which trades in consumer goods.
The directors have valued the unquoted investment at cost which in their opinion reflects fairly the value of the investments.
Retirement benefit asset
The pension plan is a final salary defined contribution plan for employees and is wholly funded. The assets of the plan are held and administered independently by The Mauritius Business and Management Limited.
The plan provides for a pension at retirement and a benefit in death or disablement in service before retirement.
THE GROUP THE COMPANY
9. RETIREMENT BENEFIT PLAN (CONT'D)
(a)
Movements in Asset recognised in statement of financial position: At 01 January (15,742,752) (13,105,752) (13,524,752) (11,257,752) Net expense recognised in the statement of comprehensive income (1,838,000) (2,594,000) (1,370,000) (2,224,000) Contributions and benefits paid - (43,000) - (43,000)
At 31 December Rs (17,580,752) (15,742,752) (14,894,752) (13,524,752)
Actual return on plan assets Rs 8,094,000 3,297,000 7,236,000 2,933,000
Movement in the Present Value of the Defined Benefit Obligations were as follows:
At 01 January 46,388,000 42,565,000 44,780,000 41,392,000 Interest cost 4,415,000 4,155,000 4,290,000 3,925,000 Current service cost 2,086,000 2,419,000 1,955,000 2,103,000 Past service cost - - - - Benefits paid (4,590,000) (4,471,000) (3,859,000) (4,379,000) Curtailment/settlement (gain)/loss on obligation Actuarial (gain)/loss on obligation 6,879,000 1,720,000 7,033,000 1,739,000
At 31 December Rs 55,178,000 46,388,000 54,199,000 44,780,000
Movement in the Fair Value of the Plan Assets were as follows: At 01 January 80,871,000 82,002,000 74,181,000 75,584,000 Expected return on plan assets 7,863,000 8,101,000 7,230,000 7,347,000 Contributions to plan assets - 43,000 - 43,000 Benefits paid out of plant assets (4,590,000) (4,471,000) (3,859,000) (4,379,000) Actuarial gain/(loss) on plan assets (balancing figure) 231,000 (4,804,000) 6,000 (4,414,000)
At 31 December Rs 84,375,000 80,871,000 77,558,000 74,181,000
The major Asset Categories as Percentage of Plan Assets were as follows:
- Equities - Overseas 4% 4% 4% 4% - Equities - Local 59% 54% 59% 54% - Fixed interest securities - Overseas 0% 0% 0% 0% - Fixed interest securities - Local 2% 0% 2% 0% - Property 17% 28% 17% 28% - Loans & Fixed deposits 7% 13% 7% 13% - Cash & Other 11% 1% 11% 1%
Total 100% 100% 100% 100%
The principal actuarial assumptions at end of year were as follows: Discount rate 9.0% 10.0% 9.0% 10.0% Expected rate of return on plan assets 9.0% 10.0% 9.0% 10.0% Future salary increases 7.5% 8.0% 7.5% 8.0% Future pensions increases 3.0% 3.0% 3.0% 3.0% Actuarial table for employee mortality A1967/70(2) A1967/70(2)
Retirement benefit asset (cont'd) THE GROUP THE COMPANY
(a)
2012 2011 2012 2011
The expected rate of return on plan assets at end of year were as follows: Equities - Overseas 10.0% 11.0% 10.0% 11.0% Equities - Local 10.0% 11.0% 10.0% 11.0% Fixed interest securities - Overseas 9.0% 10.0% 9.0% 10.0% Fixed interest securities - Local 9.0% 10.0% 9.0% 10.0% Property 9.5% 10.5% 9.5% 10.5% Loan & Fixed deposits 9.0% 10.0% 9.0% 10.0% Cash & other 4.5% 5.5% 4.5% 5.5%
Additional disclosure on assets issued or used by reporting entity
Percentage of assets at end of year
Assets held in the entity's own financial 0.0% 0.0% 0.0% 0.0% Property occupied by the entity 0.0% 0.0% 0.0% 0.0% Other assets used by the entity 0.0% 0.0% 0.0% 0.0%
History of obligations, assets and experience adjustments:
2012 2011 2010 2009 2008 THE GROUP
Present value of defined benefit obligations 84,375,000 80,871,000 82,002,000 71,272,216 62,015,044 Fair value of plan assets (55,178,000) (46,388,000) (42,565,000) (37,249,151) (40,758,621)
Surplus Rs 29,197,000 34,483,000 39,437,000 34,023,065 21,256,423
Experience adjustments on: Plan liabilities (defined benefit obligations) (1,180,000) (1,720,000) 1,883,000 1,908,422 (7,542,947) Plan assets 231,000 (4,804,000) 5,380,000 3,897,161 (9,064,583)
THE COMPANY
Surplus Rs 23,359,000 29,401,000 34,192,000 29,140,171 17,933,138
Experience adjustments on: Plan liabilities (defined benefit obligations) (1,463,000) (1,739,000) 1,863,000 1,304,000 (7,167,382) Plan assets 6,000 (4,414,000) 5,162,000 3,587,000 (8,307,028)
Expected employer contributions were Nil for 2013 and Rs 46,000 for 2012.
Retirement benefit asset (cont'd)
MARGARINE INDUSTRIES LIMITED 43 NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2012
State pension plan
National Pension Scheme contribution expensed. Rs 1,117,848 891,747 967,347 671,495
10. INVENTORIES, AT COST
Rs 98,347,902 88,540,269 76,094,233 64,783,668
The inventories have been pledged for banking facilities.
11. TRADE AND OTHER RECEIVABLES
2012 2011 2012 2011 Rs Rs Rs Rs
57,909,117 53,445,897 39,997,434 39,583,477 Allowance for doubtful debts (469,129) (1,065,430) (398,969) (700,145)
57,439,988 52,380,467 39,598,465 38,883,332 12,253,606 17,921,964 8,720,508 12,386,636
- - 6,523,239 7,082,042 5,518,765 5,218,685 5,518,765 5,218,685
Rs 75,212,359 75,521,116 60,360,977 63,570,695
Raw materials
Trade receivables
Other receivables and prepayments Amount due by subsidiary
44 MARGARINE INDUSTRIES LIMITED FOR THE YEAR ENDED 31 DECEMBER 2012
11. TRADE AND OTHER RECEIVABLES (CONT'D)
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
Ageing of past due but not impaired
2012 2011 2012 2011 Rs Rs Rs Rs
60-90 days 6,726,952 4,548,309 4,293,262 3,163,988 90 days - 180 days 1,598,618 2,442,720 1,385,375 1,882,125
Rs 8,325,570 6,991,029 5,678,637 5,046,113
Allowance for doubtful debts
2012 2011 2012 2011 Rs Rs Rs Rs
At 1 January 1,065,430 1,303,682 700,145 515,791 Impairment losses recognised on receivables 251,226 741,519 181,067 535,891 Impairment losses written off as uncollectible (847,527) (979,771) (482,243) (351,537)
At 31 December Rs 469,129 1,065,430 398,969 700,145
12. STATED CAPITAL THE GROUP AND THE COMPANY
2012 2011 Rs Rs
Issued and fully paid 300,239 Ordinary shares of Rs100 each Rs 30,023,900 30,023,900
(a) The right to vote on poll for every share held at a meeting of the Company on any resolution; (b) The right to an equal share in dividend authorised by the Board; (c) The right to an equal share in the distribution of the surplus assets of the Company, on winding up.
Trade receivables of the group include Rs15,316,897 (2011: Rs11,985,952) which have been financed by a factoring company with recourse after 90 days if the debts have not been recovered.
THE COMPANY
Each of the above share confer to its holder the following rights:
Included in the group's and the Company's trade receivable balance are debtors with a carrying amount of Rs 8,325,570 (2011: Rs 6,991,029 ) for the group and Rs 5,678,637 (2011: Rs 5,046,113) for the Company, which are past due at the reporting date for which the group and the Company have not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The average age of these receivables is 75 days.
Before accepting any new customer, the group and the Company assess the potential customer’s credit quality and defines credit limits by customer and these are reviewed on a regular basis.
The average credit period on sales of goods and services is 73 days (2011: 69 days) for the group and 74 days (2011: 72 days) for the Company. The group and the Company have recognised allowance for doubtful debts against trade receivables above 180 days by reference to past default experience.
In determining the recoverability of a trade receivable, the group and the Company consider any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
THE GROUP
13. REVALUATION RESERVES THE GROUP
AND THE COMPANY
At 31 December 2011 75,781,822 Movement to retained earnings (1,841,454)
At 31 December 2012 Rs 73,940,368
14. LOANS
Unsecured loans 4,000,000 1,000,000 - - Secured bank loans 66,209,499 62,944,185 45,597,200 45,000,000
Rs 70,209,499 63,944,185 45,597,200 45,000,000 Repayable as follows: Repayable within one year 69,612,299 63,944,185 45,000,000 45,000,000
597,200 - 597,200 -
15. TAXATION
At 1 January 703,496 2,371,053 703,496 2,371,053 (Overprovision)/Underprovision in income tax in previous year (63,225) 132,776 (63,225) 132,776 Tax deducted at source (18,602) - (18,602) - Paid during the year (5,067,943) (6,293,977) (4,992,782) (6,293,977) Provision for the year 5,055,166 3,983,674 4,868,457 3,983,674 Corporate Social Responsibility 531,156 509,970 531,156 509,970 At 31 December Rs 1,140,048 703,496 1,028,500 703,496
The bank loans are secured by floating charges on the property, plant and equipment and inventories of the group and the Company and bear interest at Prime Lending Rate PLR-0.25% and PLR+0.75% p.a. The current weighted average effective interest rate on the bank loans is 7.80% p.a. (2011: 7.93%).
Between two and five years
Income tax is calculated at the rate of 15% (2011: 15%) for the group and the company on the profit for the year as adjusted for income tax purposes.
The group has entered into an agreement with a factoring company to finance the trade receivables with recourse to the group in the event the debts are not recovered within 90 days. The group is charged a commission of 0.75% on invoices transferred to the factoring company and interest rate of PLR + 0.75% p.a.
15. TAXATION (CONT'D)
(b) Tax charge
Provision for the year 5,055,166 3,983,673 4,868,457 3,983,673 income tax in previous year (63,225) 132,776 (63,225) 132,776 Tax deducted at source (18,602) - (18,602) - Corporate Social Responsibility 531,156 509,970 531,156 509,970 Deferred tax movement 985,483 1,067,262 985,483 1,067,262
Tax charge Rs 6,489,979 5,693,681 6,303,270 5,693,681
(c) Tax reconciliation
2012 2011 2012 2011 Rs Rs Rs Rs
Profit before tax Rs 34,375,235 35,997,310 32,877,520 33,516,358
Tax at 15% 5,156,285 5,399,596 4,931,628 5,027,454 Effect of: Net tax effect of non-taxable and other items 971,029 208,682 903,711 23,481
(63,225) 132,776 (63,225) 132,776 Deferred tax not recognised (105,266) (557,344) - - Corporate Social Responsibility 531,156 509,970 531,156 509,970
Tax charge Rs 6,489,979 5,693,680 6,303,270 5,693,681
(d) Deferred tax
Deferred tax is calculated on all temporary differences under the liability method at the rate of 15% (2011:15%).
THE GROUP AND THE COMPANY 2012 2011 Rs Rs
At 1 January 17,504,884 17,263,800 Charge to profit or loss 985,484 1,067,261 Charge to Other Comprehensive Income - (826,177)
At 31 December Rs 18,490,368 17,504,884
15. TAXATION (CONT'D)
Deferred tax liabilities/(assets) arise from the following:
At 1 Charge Charge to other At 31 Charge Charge to other At 31 January to profit or comprehensive December to profit or comprehensive December
2011 loss income 2011 loss income 2012 Rs Rs Rs Rs Rs Rs Rs
Deferred tax liabilities
Deferred tax assets
Net deferred tax liabilities Rs 17,263,800 1,067,262 (826,177) 17,504,885 985,483 - 18,490,368
THE GROUP AND THE COMPANY
16. RETIREMENT BENEFIT OBLIGATIONS
Proportion of the unfunded post retirement obligations Rs 18,491,496 14,716,750 14,789,447 11,769,650
Charge to the statement of comprehensive income Rs 3,774,747 3,807,500 3,019,797 3,046,000
Amount recognised in the statement of financial position: 2012 2011
Present value of unfunded obligation 139,929,000 128,415,000 Unrecognised actuarial (loss)/gain (3,101,000) 3,214,000
Rs 136,828,000 131,629,000 Amount recognised in the statement of comprehensive income:
2012 2011
Rs 15,099,000 15,230,000
Movement in liability recognised in the statement of financial 2012 2011
At 1 January 108,082,200 108,157,200 Total expense as above 15,094,000 15,230,000 Contributions paid (9,900,000) (9,213,000)
At 31 December Rs 113,276,200 114,174,200
Movement in the present value of the defined benefit obligations were as follows: 2012 2011
At 1 January 128,415,000 129,652,000 Current service cost 2,741,000 2,714,000 Interest cost 12,358,000 12,516,000 Benefits paid (9,900,000) (9,213,000) Liability (gain)/loss 6,315,000 (7,254,000)
Rs 139,929,000 128,415,000
Movement in the present value of the plan assets were as follows:- 2012 2011
At 1 January - - Employer contributions 9,900,000 9,213,000 Benefits paid (9,900,000) (9,213,000)
At 31 December Rs - -
Quality Beverages Limited ('QBL') a related company operates an unfunded defined benefit plan for some of the directors which provides for a pension at retirement. The company is a party to a contractual arrangement with ('QBL') whereby it bears a proportion of the retirement benefit obligations in respect of common directors/officers.
The retirement benefit obligations information for the QBL plan as a whole as required by IAS 19 are as follows:
16. RETIREMENT BENEFIT PLANS (CONT'D)
The history of experience adjustments is as follows:- 2012 2011 2010 2009 2008
Rs Rs Rs Rs Rs
Present value of defined benefit obligation (139,929,000) (128,415,000) (129,652,000) (104,693,000) (89,901,000) Fair value of plan assets - - - - -
Deficit Rs (139,929,000) (128,415,000) (129,652,000) (104,693,00

MARGARINE INDUSTRIES LIMITED

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