TIDMPURE
RNS Number : 2588K
PureCircle Limited
20 September 2016
PURECIRCLE LIMITED
("PureCircle" or "the Company")
FY16 Results Statement
PureCircle (LSE: PURE), the world's leading producer and
marketer of high purity stevia ingredients, today provides a
Results Statement for its financial year ended 30 June 2016
("FY16").
HIGHLIGHTS FOR THE YEAR
-- Strong sales growth and margin expansion
-- Potential for stevia market materially enhanced:
- Stevia approved in Brazil and India
- Sugar taxes being imposed in major markets
-- Important new PureCircle innovations launched
-- H2 sales lower than anticipated due to delayed customers
launches and US Customs and Border Protection (CBP) actions
-- PureCircle well positioned to capture long term market expansion
A summary of the financials for FY16 with FY15 comparatives is
set out below:
FY16 FY15 %
Financial year ended 30 June USD' USD' +
m m /
(-)
Sales 138.6 127.3 9%
Gross margin* 57.0 40.3 41%
Operating profit* 32.4 17.0 90%
Adjusted EBITDA* 37.7 22.2 70%
Net profit after tax 14.6 4.1 257%
Earnings per share (US$ cents) 8.49 2.48 242%
Fully diluted earnings per
share (US$ cents) 8.37 2.42 246%
Operating cash flow before
working capital changes 31.9 23.8 34%
Net debt (52.9) (45.4) (17%)
Net assets 203.8 190.5 7%
*Gross margin, operating profit and Adjusted EBITDA are
alternative performance measures which the directors believe are
helpful in understanding the performance of the business. Refer to
Note 29 for definitions of non-GAAP measures.
Commenting on the Results Statement the CEO Magomet Malsagov
said "Despite challenging market conditions in FY16, I am delighted
with the progress PureCircle has made, with strong growth in both
revenue and profit. The market for PureCircle Stevia has continued
to develop strongly with favourable regulatory developments and
continued roll-out of ever larger Food and Beverage (F&B)
brands using stevia. Significant milestones in the year include the
approval of high purity stevia in India and Brazil, Reb M approval
in Europe and the launch of our Zeta family of new ingredients,
closing the taste gap for low or no calorie applications and
opening up new F&B categories adoption of stevia. These
developments underpin our confidence in the long term prospects for
our business and support the investments we are making to increase
production capacity and further product innovation.
Prospects for the business over the next 4 to 5 years are
strong, and we are confident that as our sales continue to
increase, we will report improved profitability. Nevertheless, we
caution that there will be inevitable volatility in the growth
trajectory as we move towards our longer term goals.
KEY FINANCIAL COMMENTARIES
Sales: FY16 sales increased $11.3m (9%) to $138.6m.
In FY16 sales revenues increased driven by accelerating market
adoption of stevia, enabled by PureCircle innovation and the unique
breadth of our in market product portfolio. FY16 growth reflects an
improved sales mix with FY16 seeing a higher proportion of sales of
our recently launched innovation products than in FY15. With a
strong future product pipeline the Company is confident further
sales mix improvements will be evident in future years.
However, FY16 sales growth was further adversely impacted by
both the delayed timing of a number of customer launches and by the
CBP intervention.
Both recent Mintel data and our project pipeline give us
confidence that considerable future growth is sustainable.
Gross Margin: FY16 gross margin increased by $16.7m (+41%) to
$57m. FY16 gross margin was 41%, an increase of 9 percentage points
over FY15's 32%. The gross margin percentage improvement
principally reflects the improved sales mix described above.
Operating Profit: FY16 Operating profit increased $15.4m (+90%)
to $32.4m. The strong increase in operating profit relative to
revenue growth demonstrates the positive operational leverage of
the Group's business model. Going forward we expect growth in sales
coupled with continued benefits of product innovation to sustain
these high levels of operating profit.
Adjusted EBITDA: is defined as Group Operating profit with
depreciation and amortisation and share of results in joint venture
added back. FY16 adjusted EBITDA increased $15.5m (+70%) to $37.7m
in line with the strong increase in operating profit referred to
earlier.
Net profit: FY16 net profit of $14.6m represented a $10.5m
(+256%) increase over the $4.1m net profit reported in FY15.
Operating cashflow before working capital changes: Improved in
FY16 by $8.1m (+34%) to $31.9m (FY15 $23.8m). This improvement
reflects the increase in net profit of $10.5m.
Net debt / headroom: The Group ended FY16 with cash and facility
headroom of $76.3m (FY15 $87.9m) and net debt of $52.9m (FY15
$45.4m). The $7.6m increase in net debt reflects $19.0m cash
generated from operations offset by $24.2m cash invested in
production capacity expansion and leaf and innovation development,
both to support expected future revenue growth.
The Group is well funded to finance its current and future
plans.
USA Customs and Border Protection matter ("CBP")
Based on an allegation of non-compliance with the Trade
Facilitation and Trade Enforcement Act ("TFTEA"), on May 20, 2016,
US Customs and Border Protection issued a Withhold Release Order
("WRO") No. 29/China that was used to initially detain two
PureCircle shipments of stevia, and subsequently all PureCircle
shipments of stevia. The allegations are that PureCircle was
importing "Stevia and its derivatives" from the Inner Mongolia
Hengzheng Group Baoanzhao Agricultural and Trade LLC ("Baoanzhao")
where there allegedly have been occurrences of forced prison
labour. On June 1, 2016, CBP issued a press release focusing on
CBP's detention of PureCircle products, but which also stated that
"importers of detained shipments are provided an opportunity to
demonstrate that the merchandise was not produced with forced
labour."
CBP did not notify PureCircle of any allegation or investigation
of its labour practices and did not provide PureCircle with an
opportunity to respond to the allegations before CBP acted. We
became aware of the WRO only after our shipment was detained by CBP
on May 27, 2016.
Starting on June 1, 2016, PureCircle provided to CBP the
Certificates of Origin and Consignee Statement and detailed leaf
traceability information, for the detained shipments, including the
names and locations of each farmer from whom PureCircle purchased
stevia leaf to be made into the products that are currently under
detention.
We have demonstrated that all of the stevia leaf used to make
the detained products is compliant with the TFTEA and none of our
imported products are or will be produced with forced labour. To
ensure the independence of the information we sent to the CBP, we
had all our traceability information corroborated in audits of our
supply chain conducted by third party Bureau Veritas. These audit
reports have also been provided to CBP, confirming that no forced
labour is used in our supply chain.
Based on the traceability information and the audit reports, two
of our detained shipments were released by CBP on June 24, 2016.
Another shipment of one of our customers was also released. Despite
the first three shipments being released from detention by CBP,
PureCircle still remains named on CBP's WRO.
At present, a number of our shipments remain in detention,
despite CBP already having received the same documents, the same
level of traceability information, and the same audit reports for
these shipments as PureCircle and its customer provided to CBP for
the three released shipments. CBP has neither requested further
information from us, nor given us a formal timetable for its
decision.
We continue to actively work with the CBP to address the matter
and have our name removed from the WRO.
We are actively working with our US customers to ensure ongoing
supply until this matter is resolved. Outside of the US, our
business continues as usual. PureCircle remains committed to human
rights and fair use of labour. As we expand our vertically
integrated supply chain, we remain committed to traceability and
transparency as we verify compliance with our Global Labour Policy
and Supplier Code of Conduct and remain confident that this matter
will be resolved in due course.
Stevia Market Developments
All macro market trends continue to develop in favour of the
Company and our products. In November 2014 the McKinsey Global
Institute (MGI) issued a discussion paper titled "Overcoming
Obesity: an initial economic analysis" which highlighted Obesity as
one of the top three social burdens generated by human beings with
an estimated global economic impact of US$ 2 trillion, equivalent
to 2.8% of global GDP.
Although there are a number of causes of obesity and diabetes
such as genetics and lifestyles including levels of exercise
undertaken, increasing scrutiny is being undertaken on calorific
content of food and beverages; and within this on the levels of
sugars being added to food and beverage products.
Regulatory action to reduce calorific loading of Food and
Beverage products
In FY16 there were significant regulatory steps taken to reduce
the levels of calories and in particular added sugars in food and
beverage products. For example:
- In the UK the government announced legislation that will tax
carbonated soft drinks that have added sugars with effect from
2018;
- In Mexico the government has stated that it is reviewing the
effectiveness of the so called soda tax that was introduced in 2013
with a view to increasing the levels of taxation;
- In the USA a number of influential State Governments and some
cities have introduced legislation to impose taxes on calorific
Carbonated Soft Drinks. including San Francisco (CA) and
Philadelphia (PA);
- Other countries proposing legislation are: Columbia, Brazil,
Portugal, South Africa, India, Indonesia, Malaysia, Thailand,
Philippines, Australia, Saudi Arabia and Egypt.
Consumer preferences for natural ingredients
Consumers increasingly are demanding natural and sustainable
sources for their food and beverage ingredients.
Stevia as a natural sustainable sweetener offers consumers the
option of lower calorific loading combined with the natural
sustainability that consumers rightly demand.
Material further regulatory approvals for stevia in FY16
During FY16, there were a number of important regulatory
approvals for stevia. These included:
- India approved the use of high purity stevia as an ingredient
thereby opening up a market of more than 1 billion new consumers to
products sweetened with stevia;
- Brazil approved by Presidential decree the use of stevia with
sugar as an ingredient. Given that more than 90% of food and
beverages launched so far using stevia use stevia in combination
with sugar this change in regulation effectively opened up the
mainstream Brazilian market to stevia for the first time;
- Reb M in Australia, New Zealand and Canada; and
- PureCircle Flavours in China and Indonesia.
These approvals have the effect of opening up food and beverage
categories that require deeper calorie reductions than have so far
been possible.
With our commitment to innovation and investment in plant and
supply chain, taken together, the various developments in the
stevia market during FY16 give management further confidence in the
long term growth prospects for the stevia market.
Market assessment at end FY16
The Company is building a long term business intended to be
substantial in size and sustainable over many decades. The total
global sweetener and flavour markets continue to grow and the depth
of penetration within the category by stevia is increasing, with
more products and larger brands adopting stevia. Further, given the
timing of many recent product launches, only a small proportion
have yet secured large or full retail distribution meaning that
there is considerable latent growth still to emerge from the more
than 10,000 products already in market.
Stevia is gaining momentum in major categories as a large scale
solution of choice. PureCircle is well positioned as a solution
provider in the fight against obesity and diabetes. As more and
more food and beverage companies face sugar taxes, PureCircle
provides natural, low calorie, great tasting ingredient
solutions.
A review of alternative sweeteners to stevia suggests that there
are no large scale natural low calorie alternatives.
PCL INNOVATION
The growth in stevia usage and development of high purity stevia
as a mainstream ingredient of choice has largely being enabled by
PureCircle's innovation. During FY16 there were further successful
developments in our product innovation.
During the year the Group launched both our Sigma product family
and our portfolio of Matrix solutions. These provide category
specific solutions enabling deeper calorie reductions delivering
great taste. Particular success is being seen by clients in the
dairy and tea categories as well as accelerating adoption in new
categories such as ketchups and confectionery. PureCircle continues
to invest heavily in innovation in order to offer its customers
further enhanced high quality flavours and sweeteners.
SUPPLY CHAIN
Construction of our new production facility is progressing well,
and expected to be completed in early 2017.
The Group's strategy to diversify and increase leaf supply
globally continues to ramp up as planned. PureCircle's strategy to
invest in leaf development in order to identify and commercialise
strains of stevia that have higher concentrations of particular
molecules that have optimum commercial potential.
During FY16 the Group restructured our leaf supply chain
infrastructure with more focus placed on larger farmer partners,
defined as farmers with individual potential to commit in excess of
100 Hectares to stevia. By the end of FY16 the Company had secured
trials in Africa and South America. Whilst actual FY16 supply from
these sources was relatively small, the potential in the future is
significant.
MANAGEMENT & ORGANISATION
PureCircle has ambitious long term growth plans. These require
continual investment in management and information systems to
ensure the Group organisation has the capacity, skills and
experience to match our growth. The Company is committed to making
these investments and further significant steps were again made in
FY16.
Disclaimer
This document may contain forward-looking statements that may or
may not prove accurate. For example, statements regarding expected
revenue growth and operating profit, market trends and our product
pipeline are forward-looking statements. Phrases such as "aim",
"plan", "intend", "anticipate", "well-placed", "believe",
"estimate", "expect", "target", "consider" and similar expressions
are generally intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual
results to differ materially from what is expressed or implied by
the statements. Any forward-looking statement is based on
information available to PureCircle as of the date of the
statement. All written or oral forward-looking statements
attributable to PureCircle are qualified by this caution.
PureCircle does not undertake any obligation to update or revise
any forward-looking statement to reflect any change in
circumstances.
Enquiries:
Magomet Malsagov, CEO +603 2166 2066
+601 2326 0005
/
Rakesh Sinha, CFO +44 7900 624783
NOTES TO EDITORS
PureCircle Limited is the world's leading producer of
high-purity stevia ingredients for the global food and beverage
industry. Its mission is to encourage healthier diets around the
world through the supply of natural ingredients to the global food
and beverage industry. Its vision is to lead the global expansion
of stevia as the next mass volume, natural-origin sweetener.
PureCircle has offices around the world with the global
headquarters in Kuala Lumpur, Malaysia. The Business was founded in
2002. PureCircle's shares are listed on the main market of London
Stock Exchange and trades under the ticker symbol PURE. For more
information, visit: www.purecircle.com.
Chairman's Statement
At PureCircle we are seeking to build a large global business
designed to help address the world's growing need for moderation in
calories in food and beverage products using naturally sourced and
sustainable ingredients. We intend to achieve this by leveraging
our rich heritage of bio-technology research and development. Our
ambitions are significant and long term. We intend over time to be
recognised as a true leader in our fields and as a "blue chip"
company in everything we do.
Some 14 years after incorporation in 2002, the Group has made
some progress towards realising its long term objectives, as the
performance data in the CEO section following makes clear. Our
progress to-date has been based on our first mover advantage in the
stevia industry supported by a strong entrepreneurial culture based
on nimble, fast decision making and an above average market risk
appetite with continued investment in our bio-technology heritage.
As a Board we are ever more confident about the future prospects of
the Company in the long term. Our continued investment in
development and in expanding production capacity is evidence that
we are putting money behind this belief.
However as of today PureCircle is still a relatively small
company, particularly given the global scope of our operations; our
sales are below $200 million and we employ just 1,000 personnel. We
live in uncertain times with political, economic and social
volatility impacting all our markets, customers and stakeholders.
So we are clear that our future progress will neither be easy or be
secured in a "straight line". There will be volatility along the
journey.
FY16 has been a microcosm of this. Undeniably there was
continued progress across a number of KPI, be they for example
further market regulatory approvals in India and Brazil or our
Corporate move to the Main Market. At the same time there has been
considerable volatility, notably the totally unexpected US Customs
Border Protection ("US CBP") process that has diverted considerable
resource and management attention away from our core business
activities.
Despite the volatility we end FY16 ahead of where we were a year
ago. Our intention is to continue to achieve further progress
annually for many years to come.
Chief Executive Officer's Strategic Review
Progress since incorporation
The business strategy of PureCircle is simple and has not
changed since we started the business in 2002; it is to build a
large long term natural ingredients business based on stevia
providing sustainable moderated calorie solutions to the world's
food and beverage companies and consumers. Our strategy is
underpinned by our strong bio-technology heritage that enabled us
to secure first mover advantage in our industry and into which we
will continue to invest so as to preserve our market
leadership.
In the 14 years since incorporation we have made some progress
towards our goals:
- Between 2002 and 2009 we demonstrated that large scale high purity stevia production and commercialisation was indeed possible: this period of our development culminated in the end 2008 FDA and WHO approvals of stevia as a food ingredient and the effective opening up of some of our markets.
- Between 2009 and 2015 we have successfully scaled up our
business and led the global expansion of the stevia industry,
culminating in late 2015 with India and Brazil approvals meaning
that more than 5 billion consumers now have access to stevia as a
tool to moderate their calorific food load.
Looking at the Group's key indicators we have made clear
progress:
- Sales have grown by $93.2m (205%) in the 5 years since FY12
- Adjusted EBITDA and net profit have each improved $53.5m and
$37.9m respectively across the same period
- Operating cashflow before working capital has also improved by
$49m from negative $16.6m in FY12 to positive $31.9m in FY16
- We now have 20 products in market all derived from the same
stevia leaf, all helping widen the applications of stevia to new
food categories and ever deeper calorie reductions and all enabled
by our unique integrated supply chain
- The improvement in profit and operating cashflow across the
last 5 years and our ability to mine the wonderful stevia leaf for
ever more ingredient solutions has confirmed fully the operational
leverage in our business model and the appropriateness of our mass
balance approach.
However we still have a great deal to do. Relative to our long
term ambitions we are still early on our journey. For example the
global stevia market is currently only $200-250m of B2B revenues a
year, representing less than 1% of the global sweetener market.
The key priorities and challenges
As CEO I consider that our primary challenges and priorities
are:
- Managing growth:
It is well known that growth brings new challenges. PureCircle
is no different to other companies in this respect. Management's
key priority is to ensure successful sustainable execution in
everything we do; this touches all activities of our business and
will remain our primary challenge for many years to come.
- Coping with volatility:
We need to ensure that our business has the flexibility,
capacity and robustness to cope with global market volatility, in
whatever form that takes.
We manage these two challenges by continued investment in people
and systems and by ensuring that our capital structure has
continued headroom and flexibility to support our growth
aspirations.
- Competition:
Our bio-technology heritage gave us first mover advantage in
developing the new stevia industry. Our role now is to stay ahead
of the competition so as to preserve our leadership position for as
long as possible.
We recognise that for stevia to develop into the large scale
industry that we believe it will do, the market and our customers
will require the development of a well-diversified supplier base.
As such we see competitor developments as important further
validation of the stevia industry potential.
In FY16 there was investment into stevia by a number of
well-known ingredient and soft commodity companies. However, to
date none of these companies have made investments into integrated
supply chains back to stevia leaf plantations. They rely on smaller
extraction and refining companies, principally based in China, to
provide supply of a very limited range of steviol glycoside
products. As they do not control source back to the stevia leaf
they are not able to provide the range of innovative solutions that
the market needs and can access from PureCircle.
Our strategy is to remain ahead of the competition by continuing
to invest in innovation underpinned by our unique integrated supply
chain so as to bring more cost effective solutions to our clients
across more food categories.
FY16 Performance
FY16 has been a challenging year. We have seen progress in the
development of all our markets, notably India and Brazil, and in
the commercialisation of further innovation including our Sigma and
Matrix ingredients, which are already helping customers deliver
great tasting products with deeper calorie reductions.
At the same time we have had to address the considerable
external shock of the CBP process. I will not go into more detail
on the process here, except to say that it has placed the Company
and its management under sustained pressure for many months now and
has undoubtedly adversely impacted our ability to progress the
Company's objectives significantly.
So, whilst performance as measured by revenues was some way
below our plans at the start of the year, our ability to grow
revenues and almost quadruple profits during a difficult year does
provide further evidence of the robustness of our business model
and with it some indication of the true potential of this
business.
Looking ahead
Looking ahead, and particularly across the next 5 or so years, I
would summarise our plans as more of the same. We do not anticipate
changes in strategy. We are committed:
- to continued growth in our business in all regions of the world,
- to continued penetration of stevia into all major food and beverage categories
- to continued expansion of our production capacity to support demand
- to continued diversification of leaf supply outside of China
- to continued investment in our people, our systems and our organisation
If we are successful in our plans for the next 5 years then I
believe we will be closer to our long term ambition of building the
blue chip business that Paul referred to above. But I too
emphasise: our development will not be a straight line. There will
be volatility along the way.
GROUP FINANCIAL REVIEW
The Group's FY16 financial year covers the year from 1 July 2015
to 30 June 2016. FY15 comparatives are for the year from 1 July
2014 to 30 June 2015.
Set out below is an extract from the audited FY16 financial
statements. The complete financial statement and its accompanying
notes are in the Appendix.
FY16 FY15 %
USD'000 USD'000 + /
(-)
Trading
Revenue 138,641 127,349 9%
Cost of sales (81,634) (87,070) 6%
---------- --------- --------
Gross margin 57,007 40,279 42%
---------- --------- --------
Gross margin % 41% 32%
Other income 328 760 (57%)
Administrative expenses (24,947) (24,024) (4%)
---------- --------- --------
Operating profit 32,388 17,015 90%
Main Market Listing costs (1,808) - -
Other expenses (8,396) (7,117) (18%)
Foreign exchange gain/(loss) 1,358 (757) 279%
Finance costs (5,315) (7,275) 27%
Share of loss of joint
ventures (332) (818) 59%
Taxation (3,295) 3,043 (208%)
---------- --------- --------
Profit for the financial
year 14,600 4,091 257%
---------- --------- --------
Earnings Per Share (US$
cents per share) 8.49 2.48 242%
Fully diluted Earnings
Per Share (US$ cents per
share) 8.37 2.42 246%
Operating cash flow before
working capital changes 31,870 23,784 34%
Working capital changes (12,860) (10,016) (28%)
---------- --------- --------
Operating cash flow after
working capital changes 19,010 13,768 38%
---------- --------- --------
Net debt and funding headroom
Gross debt 113,929 109,646 (4%)
Gross cash (61,002) (64,276) (5%)
---------- --------- --------
Net debt 52,927 45,370 (17%)
---------- --------- --------
Funding headroom 76,271 87,937 (13%)
Adjusted EBITDA 37,729 22,182 70%
Segmental reporting: The Group operates as a single operating
segment comprising of the integrated production and marketing of
PureCircle Stevia 3.0 TM products.
Sales: FY16 sales increased $11.3m (+9%) to $138.6m. This was
driven by improved portfolio mix backed by strong innovations. Our
"Value Added"category doubled in size which includes our Sigma
product family which was launched in the year.
Geographically, EMEA and Latin America delivered strong
double-digit growth. North America suffered as a result of delayed
customer launches and CBP action, whilst Asia represents a
significant growth opportunity moving forward.
Our key customer base also grew double digit helping us to
increase our footprint in the marketplace.
Accelerating market adoption of stevia has been enabled by our
Stevia 3.0 TM range of proprietary ingredients and customizable
ingredient combinations. In 2016. PureCircle continues to lead the
growth of this market and our project pipeline gives us confidence
that future sales growth at these rates is sustainable.
Gross margin: In FY16, the gross margin was $57.0m (FY15
$40.3m), reflecting the better portfolio mix driven by innovations
and moderating leaf prices.
The FY16 gross margin percentage of 41% was 9 percentage points
higher than FY15. As disclosed in last year's RNS, gross margin in
FY15 was impacted by high leaf cost in China.
Operating profit FY16 Operating profit of US$32.4m almost
doubled from FY16, primarily due to higher gross profit and offset
by marginal increase in general & administration cost
Other expenses: FY16 other expenses principally comprise non
cash costs of the Group's LTIP scheme and STIP.
Finance costs: In FY16 finance costs were $5.3m (FY15 $7.3m).
This reflects the full year impact of lower interest cost from the
restructured banking facilities during FY15.
Net profit after tax: The Group recorded a $14.6m net profit in
FY16, a $10.5m (+256%) improvement on FY15.
Financing and funding headroom: The Group ended FY16 with net
debt of US$52.9m (FY15 US$45.4m) and cash and facility headroom of
US$76.3m (FY15 US$87.9m). Net debt increased mainly due to higher
capital expenditure.
RISKS AND UNCERTAINTIES
Current risk assessment
The Group operates a structured risk management process, which
identifies and evaluates risks and uncertainties and reviews
mitigation activity. Within this the principal risks and
uncertainties which may affect the business activities of the Group
are summarised below. A new risk related to the failure to resolve
impoundment of goods by US CBP has been included.
-- Continued growth in the Stevia Market
The Group has pioneered the development of the high purity
stevia market and is focused on the further development of that
market. Additionally the Group has an operationally geared business
model in which profitability is sensitive to volumes. This makes
the Group's future profitability sensitive to the continued growth
in the Stevia Market.
Management mitigate this risk with an active programme of new
stevia product innovation to support further consumer adoption of
stevia and to enable future food and beverage formulation projects.
Further the Group invests to protect and promote the natural
credentials of stevia. These activities coupled with external
evidence, such as Mintel data, shows continued strong growth in
F&B product launches using stevia which provides confidence in
there being sustainable stevia market growth over the long
term.
-- Competition: over time more competitors may enter the stevia
market with the potential to reduce the Group's share of that
market
As pioneers in the development of the stevia market, the Group
is believed currently to have a majority share of the Global stevia
market. There is a risk that as stevia becomes established as a
large volume mainstream F&B ingredient, that more competitors
may enter the stevia market with the potential to reduce the
Group's share of that market.
This risk is mitigated by the significant potential growth in
the total size of the stevia market. The global sweetener and
flavour markets have an annual ingredient sales value in excess of
$90 billion. By contrast the CY2015 global stevia market size is
estimated at just $0.2 billion. This means there remains
considerable growth potential for the stevia market and with it
scope for the Group to grow revenues significantly even with
reduced market share. Further there is limited scope for any new
technologies to be labelled as naturally sourced, which is likely
to significantly limit their acceptance by consumers.
-- Leaf costs: the Group's financial performance can be impacted
by material changes in the input costs of its primary raw material,
the stevia leaf
Dried leaf from the stevia plant is the Group's primary raw
material and it constitutes the majority of the Group's variable
costs of production. It follows that the Group's financial
performance can be impacted by material changes in the input costs
of the stevia leaf.
Over the long term stevia is a highly efficient source of
natural sweetness with excellent sustainability and agro-economic
properties which will underpin a well-balanced sustainable global
supply that will substantially mitigate this risk.
In the medium term, the Group is managing this risk by
developing large scale diversified supply. To achieve this
PureCircle continues to lead the diversification of leaf supply
into new geographic regions centred on our leaf development hubs in
Africa, South America and India. Further the Group is making
progress working with larger commercial agricultural partners who
have the potential to scale supply more quickly than traditional
smallholders.
-- Failure to resolve impoundment of goods by US CBP
Whilst we fully expect a positive resolution to the CBP
situation, the longer the impoundment of our shipments and our name
remains on the WRO, the more impact it has on our route to market
in the US.
We are actively working with our US customers to ensure ongoing
supply until this matter is resolved. Outside of the US, our
business continues as usual and our expansion plans in the rest of
the world is being accelerated, somewhat mitigating the US
impact.
We continue to actively work with the CBP to address the matter
and have our name removed from the WRO.
-- Working capital funding to support large growth plans
The Group currently controls its supply chain 100% from leaf
supply through extraction, purification to end customer sales
relationships. This 100% control critically provides the Group with
its innovation leadership. At the same time it requires the Group
to fund the working capital from leaf purchases through to end
sales receivables and including appropriate inventory holdings.
Given the Group's growth plans, working capital funding
requirements may increase. There is always a risk that capital
market conditions may make funding of such working capital hard to
source.
The Group manages its working capital growth risk actively
through a suite of ongoing policies. These include operational
policies to ensure balance between supply purchases, inventory
holdings and forecast sales cashflows; that maintains appropriate
gross cash and facility headroom availability at all times; and
that works actively to build and maintain bank and equity
relationships.
-- Concentrated production capacity
As pioneers in the development of the stevia industry it is
inevitable that for a certain period in its development the Group's
production capacity will be concentrated into specific facilities.
This situation will continue until such time as demand volumes
warrant the construction of more diversified production capacity.
During this period the Group is at risk of catastrophic event
impacting either of its production facilities.
The Group manages this risk actively through a variety of
policies and practices. The Group has a policy of holding high
levels of finished goods specifically and inventory generally
relative to sales levels; and management work closely with larger
customers to ensure that their inventory holdings are appropriate;
the production facilities are designed on a modular basis so as to
reduce the likelihood of any one event impacting more than a
proportion of the total facility.
-- Management: As pioneers in the development of the stevia
industry, the Group is reliant upon the performance of highly
skilled personnel including its senior management team
Stevia is a relatively new industry, in consequence the talent
pool of management with the skills and experience of working in the
stevia market is smaller than that in other more established
industries.
The Group manages this risk by ongoing investment in senior
management retention programmes for all key managers, including the
Group's Long Term Incentive Programme (LTIP).
-- Managing growth: the Group has significant growth plans,
which will require more complex execution skills and processes
The Group has grown significantly (by over 205%) across the last
five years and has plans to continue to do so. With such levels of
growth comes the challenges of managing a more complex business
including a diverse customer base and an expanded product
portfolio.
The Group manages these risks by investing heavily in
appropriately skilled senior management and in global management
information systems including the roll out of Oracle's JD Edwards
global Enterprise Resource Planning (ERP) management information
system.
-- Managing health and safety
The Group operates in the food ingredient industry and operates
a food grade supply chain, including large production facilities.
As a result health and safety considerations are a significant
operating factor for the Group's business.
The Group manages its health and safety requirements actively
through a combination of strategy, design, policy and process
management. The Group's strategy is to be in full compliance with
all health and safety requirements at all times across the Group;
our supply chain, including production configuration, is designed
to support this strategy and operating policies and processes are
structured to re-inforce compliance on an ongoing basis.
Directors' responsibility statement
The responsibility statement below has been prepared in
connection with the company's full Annual Report for the year ended
30 June 2016. Certain parts thereof are not included within this
announcement. We confirm to the best of our knowledge:
-- the financial statements, prepared in accordance with IFRS,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the Group
respectively; and
-- the Directors' Report and the Strategic Report include a fair
review of the development and performance of the business and the
position of the Group and the Company, together with a description
of the principal risks and uncertainties that they face. This
responsibility statement was approved by the Board of Directors on
20 September 2016 and is signed on its behalf by:
Magomet Malsagov, Rakesh Sinha, CFO
CEO
APPIX
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS
AT 30 JUNE 2016
Group
Note 2016 2015
USD'000 USD'000
ASSETS
NON-CURRENT ASSETS
Investment in joint 7 - -
venture
Intangible assets 8 48,547 37,790
Property, plant and
equipment 9 65,662 59,724
Biological assets 10 - 3,570
Prepaid land lease
payments 11 2,537 2,914
Deferred tax assets 12 7,388 8,900
Trade receivables 14 523 1,856
Other receivables,
deposits
and prepayments 15 885 2,121
------------------ ------------------
125,542 116,875
CURRENT ASSETS
Inventories 13 84,604 62,790
Trade receivables 14 62,743 62,530
Other receivables,
deposits
and prepayments 15 11,654 7,490
Tax recoverable 259 347
Restricted cash 17 255 5,095
Cash and cash equivalents 17 60,747 59,181
------------------ ------------------
220,262 197,433
TOTAL ASSETS 345,804 314,308
================== ==================
EQUITY AND LIABILITIES
EQUITY
Share capital 18 17,211 17,006
Share premium 19 214,723 208,310
Foreign exchange
translation reserve 20 (17,501) (10,990)
Share-based payment
reserve 21 9,776 11,185
Accumulated losses (20,419) (35,019)
TOTAL EQUITY 203,790 190,492
------------------ ------------------
Group
Note 2016 2016
USD'000 USD'000
NON-CURRENT LIABILITIES
Long-term borrowings 22 84,885 83,965
Other payables and
accruals 24 1,245 490
------------- -------------------------
86,130 84,455
CURRENT LIABILITIES
Short-term borrowings 22 29,044 25,681
Trade payables 23 5,543 3,134
Other payables and
accruals 24 19,977 10,546
Income tax liabilities 1,320 -
------------- -------------------------
55,884 39,361
------------- -------------------------
TOTAL LIABILITIES 142,014 123,816
TOTAL EQUITY AND LIABILITIES 345,804 314,308
============= =========================
The annexed notes form an integral part
of these financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEARED 30 JUNE 2016
Group
Note 2016 2016
USD'000 USD'000
Revenue 138,641 127,349
Cost of sales (80,797) (87,016)
-------------------- ------------------
Gross profit 57,844 40,333
Administrative expenses (32,695) (30,643)
Other income 1,594 703
Other expenses (2,456) (1,255)
Finance income 92 57
Finance costs (5,315) (7,275)
Share of loss in joint ventures (1,169) (872)
-------------------- ------------------
Profit before taxation 26 17,895 1,048
Taxation 25 (3,295) 3,043
-------------------- ------------------
Profit for the financial
year 14,600 4,091
Other comprehensive income
(net of tax):
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences arising
on
translation of foreign operations (6,510) (11,717)
Share of other comprehensive
income of joint ventures (1) (101)
-------------------- ------------------
Total comprehensive income/(loss)
for the financial year (net of
tax) 8,089 (7,727)
==================== ==================
Profit for the financial
year
Attributable to:
Owners of the company 14,600 4,158
Non-controlling interest - (67)
14,600 4,091
==================== ==================
Total comprehensive income/(loss)
Attributable to:
Owners of the company 8,089 (7,662)
Non-controlling interest - (65)
8,089 (7,727)
==================== ==================
Earnings per share (US cents)
- Basic 27 8.49 2.48
- Diluted 27 8.37 2.42
The annexed notes form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEARED 30 JUNE 2016
Attributable to owners of the Company
Foreign
exchange Share-based Non-
Share Share translation payment (Accumulated controlling Total
capital premium reserve reserve losses) Sub-total interests equity
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
The Group
Balance at
01.07.2015 17,006 208,310 (10,990) 11,185 (35,019) 190,492 - 190,492
Profit for the
financial
year - - - - 14,600 14,600 - 14,600
Other
comprehensive
income
Exchange
difference
arising on
translation
of foreign
operations - - (6,511) - - (6,511) - (6,511)
--------------- --------------- ---------------- ---------------- ----------------- ---------------- ---------------- ---------------
Total
comprehensive
income
for the
financial
year - - (6,511) - 14,600 8,089 - 8,089
Transactions
with
owners:
Share awards
scheme
compensation
expense for
the
financial
year - - - 5,209 - 5,209 - 5,209
Exercise of
share
awards 205 6,413 - (6,618) - - - -
--------------- --------------- ---------------- ---------------- ----------------- ---------------- ---------------- ---------------
205 6,413 - (1,409) - 5,209 - 5,209
Balance at
30.06.2016 17,211 214,723 (17,501) 9,776 (20,419) 203,790 - 203,790
=============== =============== ================ ================ ================= ================ ================ ===============
The annexed notes form an integral part
of these financial statements.
Attributable to owners of the Company
Foreign
exchange Share-based Non-
Share Share translation payment (Accumulated controlling Total
capital premium reserve reserve losses) Sub-total interests equity
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
The Group
Balance at
01.07.2014 16,472 163,240 920 5,076 (38,203) 147,505 722 148,227
Profit for the
financial
year - - - - 4,158 4,158 (67) 4,091
Other
comprehensive
income
Exchange
difference
arising on
translation of
foreign
operations - - (11,820) - - (11,820) 2 (11,818)
------------- ------------- ------------- ------------- ------------------ ----------- ------------- -------------
Total
comprehensive
income
for the
financial
year - - (11,820) - 4,158 (7,662) (65) (7,727)
Transactions with
owners:
Share awards
scheme
compensation
------------- ------------- ------------- ------------- ------------------ ----------- ------------- -------------
expense for
the
financial
year - - - 6,412 - 6,412 - 6,412
Placement of
shares 500 42,963 - - - 43,463 - 43,463
Exercise of
share
awards 10 410 - (303) - 117 - 117
Acquisition of
non-controlling
interest 24 1,697 (90) - (974) 657 (657) -
------------- ------------- ------------- ------------- ------------------ ----------- ------------- -------------
534 45,070 (90) 6,109 (974) 50,649 (657) 49,992
Balance at
30.06.2015 17,006 208,310 (10,990) 11,185 (35,019) 190,492 - 190,492
============= ============= ============= ============= ================== =========== ============= =============
The annexed notes form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEARED 30 JUNE 2016
Group
Note 2016 2015
USD'000 USD'000
CASH FLOWS FROM
OPERATING ACTIVITIES
Profit before taxation 17,895 1,048
Adjustments for:
Amortisation of prepaid
land
lease payments 135 143
Amortisation of deferred income (96) (76)
Amortisation of intangible
assets 77 180
Depreciation of property,
plant and equipment 5,557 5,738
Interest expense 5,315 7,275
Interest income (92) (57)
Loss/(gain) on disposal of
property,
plant and equipment 75 (11)
Loss on disposal of joint
venture - 120
Share-based payment expense 5,209 6,412
Intangible assets written
off - 45
Inventories (written back)/written
off (68) 14
Unrealised foreign exchange
(gain)/loss (3,261) 2,081
Share of loss in joint ventures 1,169 872
Bad debts written-off (45) -
------------------- -------------------
Operating cash flow before
working
capital changes 31,870 23,784
(Increase)/Decrease in inventories (22,424) 23,768
Increase in trade and other
receivables (2,528) (30,361)
Increase/(Decrease) in trade
and
other payables 12,092 (3,423)
------------------- -------------------
NET CASH FROM OPERATIONS 19,010 13,768
Interest received 92 57
Interest paid (5,315) (7,275)
Tax paid (688) (132)
------------------- -------------------
NET CASH GENERATED FROM
OPERATING ACTIVITIES 13,099 6,418
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investment
in joint
venture 7 (274) (342)
Addition of intangible
assets 8 (8,865) (3,865)
Purchase of property, plant
and equipment 9 (15,404) (6,651)
Prepayment of land lease
payment 11 - (50)
Proceeds from disposal
of property, plant and equipment 113 14
NET CASH USED IN INVESTING ACTIVITIES (24,430) (10,894)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 111,456 151,800
Repayment of borrowings (101,443) (171,369)
Repayment of hire purchase (27) (35)
Proceeds from placement of
shares - 43,463
Proceeds from share awards
exercised - 117
Decrease in restricted
cash 4,840 2,756
------------- -------------
NET CASH GENERATED FROM
FINANCING ACTIVITIES 14,826 26,732
------------- -------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,495 22,256
Effects of foreign exchange
rate changes
on cash and cash equivalents (1,929) (1,089)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE
FINANCIAL YEAR 59,181 38,014
CASH AND CASH EQUIVALENTS
AT OF THE FINANCIAL
YEAR 17 60,747 59,181
============= =============
Non-cash item:
In 2015, the Company issued 240,000 units of equity
shares of the Company amounting to USD 1,721,000
to acquire non-controlling interest in a subsidiary.
The annexed notes form an integral part of these
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEARED 30 JUNE 2016
1 GENERAL INFORMATION
The Company was incorporated and registered as a private limited
company in Bermuda, under the Companies (Bermuda) Law 1981. The
registered office and principal place of business are as
follows:-
Registered office : Clarendon House, 2 Church Street,
Hamilton HM 11, Bermuda.
Principal place of business : Level 12, West Wing, Rohas PureCircle
No. 9, Jalan P. Ramalee
50250 Kuala Lumpur, Malaysia
The Company's shares are publicly traded on the Main Market of
the London Stock Exchange.
In the financial statement, "Company" refers to PureCircle Ltd.
and "Group" refers to PureCircle Ltd and its subsidiaries.
The financial statements were authorised for issue by the Board
of Directors in accordance with a resolution of the Directors dated
20 September 2016.
2 PRINCIPAL ACTIVITIES
The Company is engaged principally in the business of investment
holding whilst the principal activities of the rest of the Group
are the production, marketing and distribution of natural
ingredient including sweeteners and flavours.
There have been no significant changes in the nature of these
activities during the financial year. The principal activities of
the subsidiaries and joint venture are set out in Notes 7 and 8 to
the financial statements.
3 BASIS OF PREPARATION
The consolidated financial statements included in this
preliminary announcement have been extracted from the Annual
Report, including the audited financial statements for the year
ended 30 June 2016. The report of the auditor on those Group
Financial Statements was unqualified and did not contain an
emphasis of matter paragraph. The Annual Report and Group Financial
Statements for 2016 will be filed with the Registrar in due course.
These consolidated financial statements do not constitute statutory
accounts within the meaning of the Companies (Bermuda) Law
1981.
The Group has prepared its consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS)
and IFRIC interpretations. The accounting policies applied are
consistent with those described in the Annual Report and Group
Financial Statements 2015.
The Group has, at the date of this announcement, sufficient
existing financing available for its estimated requirements for at
least the next 12 months. After reviewing the Group's annual
budget, plans and financing arrangements for the next five years,
the Directors consider that the Group has adequate resources to
continue operating and that it is therefore appropriate to continue
to adopt the going concern basis in preparing the consolidated
financial information.
(a) The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Group and Company's financial year beginning on or after 1 July 2015 are as follows:
-- Amendments to IAS 36 'Recoverable Amount Disclosures for
Non-Financial Assets'
-- Amendments to IAS 39 'Novation of Derivatives and
Continuation of Hedge Accounting'
-- Amendments to IFRS 10, IFRS 12 and IAS 27 'Investment
Entities'
-- Amendment to IAS 19 'Employee Benefits'
-- IC Interpretation 21 'Levies'
-- Annual Improvement 2010 - 2012
-- Annual Improvement 2011 - 2013
The adoption of these standards did not have any material effect
on the financial performance or position of the Group and the
Company.
(b) Standards, amendments and interpretations that have been
issued and are applicable to the Group but are not yet
effective
The Group will apply the new standards, amendments to standards
and interpretations in the following period:
(i) Financial year beginning on 1 July 2016
-- Amendments to IFRS 11 "Joint Arrangements" require an
investor to apply the principles of IFRS 3 "Business Combination"
when it acquires an interest in a joint operation that constitutes
a business. The amendments are applicable to both the acquisition
of the initial interest in a joint operation and the acquisition of
additional interest in the same joint operation. However, a
previously held interest is not re-measured when the acquisition of
an additional interest in the same joint operation results in
retaining joint control. It is not expected to have significant
financial impact on the financial statements of the Group.
-- Amendments to IAS 16 "Property, Plant and Equipment" and IAS
38 "Intangible Assets" clarify that the use of revenue-based
methods to calculate the depreciation and amortisation of an item
of property, plant and equipment and intangible are not
appropriate. This is because revenue generated by an activity that
includes the use of an asset generally reflects factors other than
the consumption of the economic benefits embodied in the asset.
The amendments to IAS 38 also clarify that revenue is generally
presumed to be an inappropriate basis for measuring the consumption
of the economic benefits embodied in an intangible asset. This
presumption can be overcome only in the limited circumstances where
the intangible asset is expressed as a measure of revenue or where
it can be demonstrated that revenue and the consumption of the
economic benefits of the intangible asset are highly correlated. It
is not expected to have significant financial impact on the
financial statements of the Group.
-- Amendments to IFRS 10 and IFRS 28 IAS 28 regarding sale or
contribution of assets between an investor and its associate or
joint venture resolve a current inconsistency between IFRS 10 and
IFRS 28 IAS 28. The accounting treatment depends on whether the
non-monetary assets sold or contributed to an associate or joint
venture constitute a "business". Full gain or loss shall be
recognised by the investor where the non-monetary assets constitute
"business". If the assets do not meet the definition of a business,
the gain or loss is recognised by the investor to the extent of the
other investors' interests. The amendments will only apply when an
investor sells or contributes assets to its associate or joint
venture. They are not intended to address accounting for the sale
or contribution of assets by an investor in a joint operation. It
is not expected to have significant financial impact on the
financial statements of the Group.
(ii) Financial year beginning on 1 July 2018
-- IFRS 15 'Revenue from Contracts with Customers' - An entity
recognises revenue to depict the transfer of promised goods or
services to the customer in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. Revenue is recognised when a
customer obtains control of goods or services, i.e. when the
customer has the ability to direct the use of and obtain the
benefits from the goods or services.
Transfer of control is not the same as transfer of risks and
rewards as currently considered for revenue recognition. A company
would recognise revenue when (or as) it satisfies a performance
obligation by transferring a promised good or service to a customer
(which is when the customer obtains control of that good or
service). A performance obligation may be satisfied at a point in
time (typically for promises to transfer goods to a customer) or
over time (typically for promises to transfer services to a
customer).
The Group is currently assessing its impact to its financial
statement.
-- IFRS 9 'Financial Instruments' will replace IAS 39 "Financial
Instruments: Recognition and Measurement". IFRS 9 retains but
simplifies the mixed measurement model in IAS 39 and establishes
three primary measurement categories for financial assets:
amortised cost, fair value through profit or loss and fair value
through other comprehensive income ("OCI"). The basis of
classification depends on the entity's business model and the
contractual cash flow characteristics of the financial asset.
Investments in equity instruments are always measured at fair value
through profit or loss with a irrevocable option at inception to
present changes in fair value in OCI (provided the instrument is
not held for trading). A debt instrument is measured at amortised
cost only if the entity is holding it to collect contractual cash
flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the IFRS 139 and
IAS 39requirements. These include amortised cost accounting for
most financial liabilities, with bifurcation of embedded
derivatives. The main change is that, in cases where the fair value
option is taken for financial liabilities, the part of a fair value
change due to an entity's own credit risk is recorded in other
comprehensive income rather than the income statement, unless this
creates an accounting mismatch.
The Group is currently assessing its impact to its financial
statements.
(iii) Financial year beginning on 1 July 2019
-- IFRS 16 'Leases' supersedes IAS17 'Leases' and the related interpretations.
Under IFRS 16, a lease is a contract (or part of a contract)
that conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.
IFRS 16 eliminates the classification of leases by the lessee as
either finance leases (on balance sheet) or operating leases (off
balance sheet). IFRS 16 requires a lessee to recognise a
"right-of-use" of the underlying asset and a lease liability
reflecting future lease payments for most leases.
The right-of-use asset is depreciated in accordance with the
principle in IAS 16 'Property, Plant and Equipment' and the lease
liability is accreted over time with interest expense recognised in
the income statement.
For lessors, IFRS 16 retains most of the requirements in IAS 17.
Lessors continue to classify all leases as either operating leases
or finance leases and account for them differently.
The Group is currently assessing its impact to its financial
statements.
4 FINANCIAL RISK MANAGEMENT
The Group's activities are exposed to a variety of financial
risks including foreign currency risk, interest rate risk, credit
risk, liquidity and cash flow risk, and capital risk management.
The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
(a) Financial risk management policies
(i) Foreign currency risk
The Group operates internationally and is exposed to foreign
exchange risk when the Company and its subsidiaries enter into
transactions that are not denominated in their functional
currencies. Foreign exchange risk arises from commercial
transactions, recognised assets and liabilities and net investments
in foreign operations.
The Group manages its foreign exchange exposure by taking
advantage of any natural offsets of the Group's foreign exchange
revenue and expenses and from time to time enters into foreign
exchange forward contracts for a portion of the remaining exposure
relating to these forecast transactions when deemed
appropriate.
The following table demonstrates the sensitivity to a reasonably
possible change in the United States Dollar, Renminbi, Euro and
Sterling Pound exchange rates, with all other variables held
constant of the Group's results:
Effect
on
Changes
in profit/loss
exchange after
rate taxation
USD'000
2016
Ringgit Malaysia against
United States Dollar 10% 1,805
Chinese Renminbi against
United States Dollar 10% 10
Sterling Pound against
United States Dollar 10% 1,512
Euro against United States
Dollar 10% 211
Mexican Peso against
United States Dollar 10% 1,018
Sterling Pound against
Euro 10% 579
========= ============
2015
Ringgit Malaysia against
United States Dollar 10% 1,106
Chinese Renminbi against
United States Dollar 10% 484
Sterling Pound against
United States Dollar 10% 970
Euro against United States
Dollar 10% 94
Mexican Peso against
United States Dollar 10% 764
Sterling Pound against
Euro 10% 4
========= ============
The above represents favourable effects on the results of the
Group should the respective currencies strengthen against the
functional currencies of the entities within the Group, whilst
weakening of the above currencies would have an equal but opposite
effect to the amount shown above, on the basis that all other
variables remain constant.
The foreign currency exposure profile represents the carrying
amounts arising from currencies other than the functional currency
of the respective entities in the Group. The foreign currency
exposure profile of the Group at the reporting date was as
follows:
30 June 2016 30 June 2015
United United
States Ringgit Chinese Pound States Ringgit Chinese Pound
Dollars Malaysia Renminbi Euro Sterling Dollars Malaysia Renminbi Euro Sterling
USD MYR RMB EUR GBP USD MYR RMB EUR GBP
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
The Group
Cash and cash
equivalents 12,060 58 10 818 107 3,731 167 4,832 228 319
Trade
receivables 26,001 - - 6,222 - 24,174 - - 879 -
Trade
payables 37 - - - - 150
Other
receivables,
deposits
And
prepayments 2,138 1,029 - 371 27 365 104 - 10 37
Other
payables and
accruals 109 2,231 186 1,499 240 75 146 - 1,015 9
Borrowings 9,744 - - - - 7,311 - - - -
(ii) Interest rate risk
Interest rate risk is the risk that the future cash flows of the
Group's financial instruments will fluctuate because of changes in
market interest rates.
The Group's exposure to interest rate risk arises mainly from
interest-bearing borrowings at floating rates. The Group's interest
rate profile is set out below:
2016 2015 2016 2015
Effective interest USD'000 USD'000
rate (%)
Term loans 4.3 4.6 113,929 109,497
========== ========= ======== ========
Borrowings issued at variable rates expose the Group to cash
flow interest rate risk which is partially offset by cash held at
variable rates. The Group actively reviews its debt portfolio to
mitigate the impact of interest risk. The Group does not utilise
interest swap contracts or other derivative instruments for trading
or speculation purposes.
As at balance sheet date, if interest rates on borrowings are 1%
higher/lower for a year with all other variables held constant
post-tax profit for the year would be
USD1,140,000 lower/higher (2015: post-tax loss for the year
would be USD1,095,000 higher/lower), mainly as a result of
higher/lower interest expense on floating rate borrowing.
(iii) Credit risk
The Group trades only with recognised, creditworthy third
parties. It is the Group's policy that all customers who wish to
trade on credit terms are subject to credit verification
procedures. In addition, the payment profile of the customers and
credit exposure are monitored on an ongoing basis with the result
that the Group's exposure to bad debt is not significant. The Group
also establishes an allowance account for impairment that
represents its estimate of losses in respect of trade and other
receivables. The Group's maximum exposure is the carrying amount as
disclosed in Notes 15, 16 and 17 to the financial statements.
At 30 June 2016, 2 customers (2015: 2) comprised more than 30%
of total receivables and 7 customers (2015: 16) comprise 75% of
total receivables. See Note 15 for ageing of trade receivables that
are past due but not impaired.
The Group's cash and cash equivalents and short-term deposits
are placed with creditworthy financial institutions and the risks
arising thereof are minimised in view of the financial strength of
these financial institutions.
The Group and Company consider that the credit risk relating to
amounts due from joint ventures and subsidiaries respectively to be
low. Both the joint ventures and subsidiaries are expected to repay
fully the amounts owed to the Group and Company respectively as
these related entities are expected to continue on a going concern
basis. At year end, the Group believes there is no credit risk
provision required for these receivables.
(iv) Liquidity and cash flow risks
Liquidity and cash flow risks arise mainly from general funding
and business activities. The Group's cash flow is reviewed
regularly to ensure commitments are settled when they fall due.
Cash flow forecasting is performed both in the operating
entities and on a Group consolidated basis. The Group monitors
rolling forecasts of its liquidity requirements including projected
sales revenues, inventory and capital expenditure requirements to
ensure it has sufficient cash to meet operational needs while
maintaining sufficient headroom on its undrawn committed borrowing
facilities at all times so that the Group does not breach borrowing
limits or financial covenants on any of its borrowing facilities.
The Group invest surplus cash into financial interest bearing
accounts and money market deposits.
The following tables detail the remaining contractual maturities
at the reporting date of the Group's non-derivative financial
liabilities, which are based on contractual undiscounted cash flows
(including interest payments computed using contractual rates or,
if floating, based on rates current at the reporting date) and the
earliest date the Group can be required to pay:
More More
Total than than
1 2
contractual Within year years
but but
Carrying undiscounted 1 year less less More
or than than than
amount cash on demand 2 years 5 years 5 years
flow
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
The Group
2016
At 30 June
2016
Financial
liabilities:
Trade and
other
payables 26,542 26,542 26,542 - - -
Borrowings 113,929 124,405 33,327 32,540 58,538 -
========= ================ ========== =========== =========== ============
2015
At 30 June
2015
Financial
liabilities:
Trade and
other
payables 13,851 13,851 13,851 - - -
Borrowings 109,646 122,940 30,509 24,642 67,789 -
========= ================ ========== =========== =========== ============
Coupled with projected operating cash-flows, the new facility is
expected to provide the Group with sufficient liquidity to fund
repayment of existing loans as they fall due and support expected
sales growth.
(b) Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to shareholders through the optimisation of the debt and
equity balance.
The capital structure of the Group consists of debts, which
include the borrowings disclosed in Note 24, cash and cash
equivalents and equity attributable to equity holders of the
parent, comprising issued capital, share premium, reserves and
retained earnings.
The Group's policy is to maintain a strong capital base by
having low to moderate gearing. The Group monitors capital on the
basis of the gearing ratio. The ratio is calculated as net debt
divided by total equity.
The gearing ratio at the financial year end was as follows:
Group
2016 2015
USD'000 USD'000
Debts (i) 113,929 109,646
Less: Gross cash (ii) (61,002) (64,276)
Net debt (iii) 52,927 45,370
==================== ==================
Equity (iv) 203,790 190,492
==================== ==================
Net debt to equity ratio 26% 24%
==================== ==================
(i) Debts relate to borrowings disclosed in Note 24 to the financial statements.
(ii) Gross cash includes restricted cash and cash and cash equivalents.
(iii) Net debt is calculated as total borrowings (including
"current and non-current borrowings") as shown in the consolidated
statement of financial position less gross cash.
(iv) Equity includes all capital and reserves of the Group
attributable to the equity holders of the Company.
(c) Fair value estimation
Fair value is defined as the amount at which the
assets/liabilities could be exchanged in a current transaction
between knowledgeable willing parties in an arm's length
transaction, other than in a forced sale or liquidation.
The fair value measurement hierarchy for assets/liabilities
stated in the balance sheet is as follows:
-- Level 1: Quoted price (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable for the asset and liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices).
-- Level 3: Inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs).
There are no significant fair value estimates at level 2 or 3
made for the financial instruments measured at fair value for the
Group as at the reporting date.
5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
(a) Financial assets - loan and receivable
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less allowance for impairment. An
allowance for impairment of receivables is established when there
is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of the
receivables.
(b) Financial liabilities
(i) Payables
Liabilities for trade and other payables and accruals, including
amounts owing to related parties, are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method.
(ii) Interest-bearing loans and borrowings
All loans and borrowings are recognised initially at fair value
of the consideration received, net of directly attributable
transaction cost incurred, and are subsequently stated at amortised
cost. Any difference between the proceeds (net of transaction cost)
and the redemption value is recognised in the profit or loss over
the period of the loans and borrowings using the effective interest
method.
(c) Foreign currency translation
(i) Functional and presentation currency
The functional currency of each of the Group's entities is
measured using the currency of the primary economic environment in
which the entities operates.
The functional and presentation currency of the Company is
United States Dollar ("USD"). The consolidated financial statements
are presented in United States Dollar ("USD") which is the
Company's presentation currency.
(ii) Transactions and balances
Transactions of the Company in foreign currency are converted
into USD at the approximate rates of exchange ruling at the
transaction dates.
Transactions in foreign currency are measured in the respective
functional currencies of the Group's entities and are recorded on
initial recognition in the functional currencies at exchange rates
approximating those ruling at the transaction dates.
Monetary assets and liabilities at the reporting date are
translated at the rates ruling as of that date. Exchange
differences arising from the translation of monetary assets and
liabilities are recognised in the profit or loss.
Non-monetary assets and liabilities are translated using
exchange rates that existed when the values were determined.
(iii) Foreign operations
The results and financial position of the subsidiaries are
translated into the presentation currency as follows:-
(a) assets and liabilities, including goodwill and fair value
adjustments arising on the acquisition of foreign operations, for
each statement of financial position presented are translated at
the closing rate at the reporting date; and
(b) income and expenses for each profit or loss are translated
at the average exchange rates for the year; and
(c) all resulting exchange differences are recognised as a
separate component of equity; and
(d) on disposal, accumulated translation differences are
recognised in the profit or loss as part of the gain or loss on
sale of the foreign operation.
(d) Basis of consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries.
(i) Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control
ceases.
The Group uses the acquisition method of accounting to account
for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred to the former owners of the
acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair
values at the acquisition date. On an acquisition-by-acquisition
basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest's
proportionate share of the acquiree's net assets. Investments in
subsidiaries are accounted for at cost less impairment. Cost is
adjusted to reflect changes in consideration arising from
contingent consideration amendments. Cost also includes direct
attributable costs of investment.
The excess of the consideration transferred the amount of any
non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the
fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If, after reassessment, the
Group's interest in the fair values of the identifiable net assets
of the subsidiaries exceeds the cost of the business combinations,
the excess is recognised immediately in the profit or loss.
Inter-company transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the
Group.
(ii) Transactions with non-controlling interests
The Group treats transactions with non-controlling interests as
transactions with equity owners of the Group. For purchases from
non-controlling interests, the difference between any consideration
paid and the relevant share acquired of the carrying value of net
assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in
equity.
(iii) Disposal of subsidiaries
When the Group ceases to have control or significant influence,
any retained interest in the entity is re-measured to its fair
value, with the change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount for the
purposes of subsequently accounting for the retained interest as an
associate, joint venture or financial asset. In addition, any
amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive
income are reclassified to profit or loss.
(iv) Joint ventures
The Group's interest in a joint venture is accounted for in the
financial statements using the equity method of accounting. Under
the equity method of accounting, interests in joint ventures are
initially recognised at cost and adjusted thereafter to recognise
the Group's share of the post-acquisition profits or losses and
movements in other comprehensive income. When the Group's share of
losses in a joint venture equals or exceeds its interests in the
joint ventures (which includes any long-term interests that, in
substance, form part of the Group's net investment in the joint
ventures), the Group recognise the further losses to the extent of
its incurred obligations.
Unrealised gains on transactions between the Group and its joint
ventures are eliminated to the extent of the Group's interest in
the joint ventures. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of the joint ventures have been
changed where necessary to ensure consistency with the policies
adopted by the Group.
(e) Goodwill on consolidation
Goodwill that arises upon acquisition of subsidiaries is
included in intangible assets. The carrying value of goodwill is
reviewed for impairment annually or more frequently if events or
changes in circumstances indicate a potential impairment.
Impairment losses on goodwill are recognised immediately in the
profit or loss. An impairment loss recognised for goodwill is not
reversed in a subsequent year. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose identified according to operating segment.
Acquisition of non-controlling interests are accounted for as
transactions with equity holders in their capacity as equity
holders and therefore no goodwill is recognised as a result of such
transaction.
(f) Investments in subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are stated at
cost in the statement of financial position of the Company, and are
reviewed for impairment at the end of the financial year if events
or changes in circumstances indicate that their carrying values may
not be recoverable.
On the disposal of the investments in subsidiaries and joint
ventures, the difference between the net disposal proceeds and the
carrying amount of the investments is taken to the profit or
loss.
(g) Intangible assets (other than goodwill)
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their fair values as at the date of
acquisition. Following initial recognition, intangible assets with
finite useful lives are carried at cost less any accumulated
amortisation and any accumulated impairment losses.
(i) Intellectual property
The intellectual property consists of the internal investment
and external acquisition costs of the patents, trademarks,
technological processes and all intellectual and industrial
property rights ("intellectual property rights") in connection
therewith on the production of natural sweeteners, pharmaceutical
products and chemical derivatives of bio-organic and
physiologically active compounds. The acquisition cost is
capitalised as an intangible asset as it is able to generate future
economic benefits to the Group.
The useful life of these intellectual property rights, other
than patented development costs is considered to be indefinite
based on the Directors' annual reassessment of the useful life;
there is no foreseeable limit to the period over which the asset is
expected to generate net cash inflows for the Group. Intellectual
property rights are stated at cost less impairment losses. They are
not amortised but tested for impairment annually or more frequently
when indicators of impairment are identified. The intellectual
property rights are assessed to have an indefinite useful life
because the Group's natural sweeteners and flavours are expected to
become mass volume ingredients in all foods and beverage
categories. Similar to the sugar market, there is no expected end
to the useful life of the natural sweeteners and flavours such as
stevia. Accordingly, the Directors believe the useful life for
intellectual property rights is indefinite. The Directors will
continue to reassess the basis of that useful life of the
intellectual property rights on an annual basis.
Patented development costs are subject to estimated useful life
of no more than 20 years and amortised starting from the financial
year when the product are first viable for commercial use.
(ii) Development costs
All research costs are recognised in the profit or loss as
incurred.
Development costs consist of expenditure incurred on product
development and leaf development projects.
Expenditure incurred on these projects are capitalised as
intangible assets only when the Group can demonstrate the technical
feasibility of completing the intangible assets so that it will be
available for use or sale, its intention to complete and its
ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resource to complete
the project and the ability to measure reliably the expenditure
during the developments. Expenditures which do not meet these
criteria are recognised in the profit or loss when incurred.
Product development costs are amortised on a straight line basis
over their estimated useful life of no more than 20 years starting
from the financial year when the product are first viable for
commercial use.
Leaf development costs are only amortised when Stevia plant
demonstrates capability of producing high yielding strains of
Stevia leaf at reasonable consistency on a volume production basis.
As at 30 June 2016, these development projects remain on-going as
the development targets have not been fully met and no amortisation
has been charged.
(h) Property, plant and equipment
Property, plant and equipment, other than freehold land, are
stated at cost less accumulated depreciation and impairment losses,
if any. Freehold land is stated at cost less impairment losses, if
any, and is not depreciated. Cost includes expenditure that is
directly attributable to the acquisition of the items. The cost of
self-constructed assets includes the cost of materials and direct
labour, any other costs directly attributable to bringing the
assets to working condition for its intended use, and the costs of
dismantling and removing the items and restoring the site on which
they are located.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is derecognised.
All other repairs and maintenance are charged to the profit or loss
during the financial period in which they are incurred.
Depreciation is calculated under the straight-line method to
write off the depreciable amount of the assets over their estimated
useful lives. Depreciation of an asset does not cease when the
asset becomes idle or is retired from active use unless the asset
is fully depreciated. The principal annual rates used for this
purpose are:-
Buildings 2% - 5%
Extraction and refinery plant 2% - 20%
Office equipment, furniture and
fittings and motor vehicles 20%
The depreciation method, useful life and residual values are
reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use. Any gain or loss arising from derecognition of the asset is
included in the profit or loss in the year the asset is
derecognised.
Capital work-in-progress represents assets under construction,
and which are not ready for commercial use at the reporting date.
Capital work-in-progress is stated at cost, and will be transferred
to the relevant category of long-term assets and depreciated
accordingly when the assets are completed and ready for commercial
use.
(i) Impairment of non-financial assets
Assets that have an indefinite useful life, for example
goodwill, are not subject to amortisation but are tested annually
for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that suffered impairment are reviewed
for possible reversal of the impairment at each reporting date.
(j) Biological assets
Biological assets comprise stevia plants in the Group's
controlled nurseries (nursery plants) that are used to mass produce
seedlings for third party farmers.
Seedlings produced from the nursery plants are deducted from the
biological asset at fair value less cost to sell. Seedlings
harvested from nursery plants are carried at their deemed cost
under IAS 2 as inventories, which are then stated at lower of this
deemed cost and net realisable value subject to any impairment
loss.
During the year, biological assets have been transferred to
product development within intangible assets reflecting the changed
nature of the Group's nursery operations. The Group's leaf
nurseries are now focused on improving leaf strains and similar
leaf development intellectual property activity as opposed to their
historic role in the production and supply of seedlings.
(k) Inventories
Inventories are stated at the lower of cost and net realisable
value.
Cost incurred in bringing the inventories to their present
location and condition are accounted for as follows:
Raw materials comprise of auxiliary materials: purchase cost on
weighted average basis
Finished goods and work-in-progress: cost of materials, labour
and production overheads
Net realisable value represents the estimated selling price less
the estimated costs of completion and the estimated costs necessary
to make the sale.
Where necessary, due allowance is made for all damaged, obsolete
and slow-moving items.
(l) Income taxes
Income taxes for the year comprise current and deferred tax.
Current tax is the expected amount of income taxes payable in
respect of the taxable profit for the year and is measured using
the applicable tax rates that have been enacted or substantively
enacted at the reporting date in each of the jurisdictions in which
the Group operates.
Deferred tax is provided in full, using the liability method, on
the temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements.
Deferred tax liabilities are recognised for all taxable
temporary differences other than those that arise from goodwill or
excess of the acquirer's interest in the net fair value of the
acquiree's identifiable assets, liabilities and contingent
liabilities over the business combination costs or from the initial
recognition of an asset or liability in a transaction which is not
a business combination and at the time of the transaction, affects
neither accounting profit nor taxable profit.
Deferred tax assets are recognised for all deductible temporary
differences, unused tax losses and unused tax credits to the extent
that it is probable that future taxable profits will be available
against which the deductible temporary differences, unused tax
losses and unused tax credits can be utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to be applicable in the period when the
asset is realised or the liability is settled, based on the tax
rates that have been enacted or substantively enacted at the
reporting date.
Deferred tax is recognised in the profit or loss, except when it
arises from a transaction which is recognised directly in equity,
in which case the deferred tax is also charged or credited directly
to equity, or when it arises from a business combination that is an
acquisition, in which case the deferred tax is included in the
resulting goodwill or excess of the acquirer's interest in the net
fair value of the acquiree's identifiable assets, liabilities and
contingent liabilities over the business combination costs. The
carrying amounts of deferred tax assets are reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient future taxable profits will be available
to allow all or part of the deferred tax assets to be utilised.
(m) Equity instruments
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from proceeds.
Dividends on ordinary shares are recognised as liabilities when
approved for appropriation.
(n) Restricted cash
Restricted cash comprise cash balances held in an account solely
for the purpose of utilising trade finance facility and credit card
facility provided by a licensed financial institution.
(o) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held
at call with banks, short-term deposits with licensed banks with
maturities of three month or less, and highly liquid investments
that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. Cash and cash
equivalents exclude restricted cash.
(p) Employee benefits
(i) Short-term benefits
Wages, salaries, paid annual leave, bonuses and non-monetary
benefits are accrued in the period in which the associated services
are rendered by employees of the Group.
(ii) Defined contribution plans
The Group's contributions to defined contribution plans are
charged to the profit or loss in the period to which they relate.
Once the contributions have been paid, the Group has no further
liability in respect of the defined contribution plans. The Group
has no defined benefit plan.
(q) Share-based payment
The Group operates a long term incentive programme which is an
equity-settled, share-based compensation plan, under which the
entity receives services from employees as consideration for equity
instruments (share awards) of the Company. The fair value of the
employee services received in exchange for the grant of the share
awards is recognised as an expense over the vesting period. The
total amount to be expensed is determined by reference to the fair
value of the shares granted excluding the impact of any non-market
vesting conditions and the number of shares expected to vest.
Non-market vesting conditions are included in assumptions about the
number of share awards that are expected to become exercisable.
When the share awards are exercised, the Company issues new
shares. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and
share premium when the share awards are exercised.
The grant by the Company of share awards over its equity
instruments to the employees of subsidiary undertakings in the
Group is treated as a capital contribution in the subsidiary. The
fair value of employee services received, measured by reference to
the grant date fair value, is recognised over the vesting period as
an increase to investment in subsidiary undertakings, with a
corresponding credit to equity.
(r) Provisions
A provision is recognised if, as a result of past event, the
Group has a present legal and constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The
unwinding of the discount is recognised as a finance cost.
(s) Leases
Leases where a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to profit
or loss on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period
has expired, any payment required to be made to the lessor by way
of penalty is recognised as an expense in the period in which the
termination takes place.
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownerships are
classified as finance leases. Finance leases are capitalised at the
inception of the lease at the lower of the fair value and the
present value of the minimum lease payments. Each lease payment is
allocated between the liability and finance charges.
The corresponding rental obligations, net of finance charges,
are included as borrowings. The interest element of the finance
charge is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Plant and equipment acquired under a finance lease is
depreciated over the shorter of the estimated useful life of the
asset and the lease term.
The prepaid land lease payments represent the Group's right to
use the land for 20 years. Accordingly, the amortisation of the
prepaid land lease payments is on a straight line basis over 20
years.
(t) Segmental information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker
(i.e. the Chief Executive Officer ("CEO")). The chief operating
decision-maker is responsible for allocating resources and
assessing performance of the operating segments.
(u) Revenue recognition
(i) Sale of goods
Revenue is measured at the fair value of the consideration
received or receivable, and represents amounts receivable for goods
supplied, stated net of sales taxes, returns and trade discounts.
The group recognises revenue when the amount of revenue can be
reliably measured and when it is probable that future economic
benefits will flow to the entity.
In practice, this means that sales of stevia products are
recognised once the contractual terms, typically Free On Board or
Ex-Works, have been met and the stevia product has been delivered
to a specified location (usually the carrier of the port of
departure) or leaves the refinery.
(ii) Interest income
Interest income is recognised on an accrual basis, based on the
effective yield on the investment.
(v) Government grants
Government grants are recognised initially as deferred income at
fair value when there is reasonable assurance that they will be
received and the Group will comply with the conditions associated
with the grant. Grants that compensate the Group for the cost of an
asset are recognised in profit or loss on a systematic basis over
the useful life of the asset.
6 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the
Directors and management and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The estimates
and judgements that affect the application of the Group's
accounting policies and disclosures, and have a significant risk of
causing a material adjustment to the carrying amounts of assets,
liabilities, income and expenses are discussed below.
(i) Goodwill and other assets carrying values
(a) Key assumptions for value-in-use calculations
The recoverable amount of a cash generating unit ("CGU") is
determined based on value-in-use calculations using cash flow
projections based on financial budgets approved by management
covering a 5-year period including a terminal value as required by
IAS 36 'Impairment of Assets'. The key assumptions used in the
CGU's value-in-use computation are:
(i) Growth rate
The average sales growth rate used is based on planned capacity
and forecasted demands. The short to medium term growth rates used
are not more than 25% per annum (2015: 25% to 30%). The long term
growth rate used is 2% (2015: 2.0%) per annum, based on sweetener
industry's long term growth rate ranging from 2% to 4% (2015: 2% to
4%) per annum.
(ii) Gross margin
Changes in selling price and direct costs are based on past
results and expectations of future changes in the market.
(iii) Discount rate
The discount rate used is 10% per annum.
(b) Sensitivity to changes in assumptions
The Directors believes that a reasonable change in any of the
above key assumptions would not cause the carrying value of the
intangible assets to be impaired.
(ii) Indefinite useful life of intellectual property rights
The intellectual property rights are assessed to have indefinite
useful lives because over the long term, the Group's natural
sweeteners and flavours are expected to become mass volume
ingredients in all foods and beverage categories. Similar to the
sugar market, there is no expected end to the useful life of the
natural sweeteners and flavours such as stevia. Accordingly, the
Directors believe the useful life for intellectual property rights
is indefinite. The Directors will continue to reassess the basis of
that useful life of the intellectual property rights on an annual
basis.
(iii) Useful life of product development costs
The product development cost is amortised on a straight line
basis over their estimated useful life of no more than 20 years
which consistent with useful life of intellectual property.
7 INVESTMENT IN JOINT VENTURES
Details of joint ventures are as follows:-
Country Effective
of Equity Interest
Name of Company Incorporation 2016 2015 Principal Activities
Production,
marketing and
distribution
NP Sweet of natural
AS ("NPS") Denmark 50% 50% sweeteners.
Tereos PureCircle France - - Production,
Solutions marketing and
("TPCS") distribution
of natural
sweeteners.
As part of the restructuring of its Joint Ventures, Tereos
purchased the Company's shares in TPCS in 2015 and continues to
service the Group's Regional Key Accounts in the TPCS region.
The Group
2016 2015
USD'000 USD'000
At 1 July (200) (1,463)
Share of loss (332) (818)
Unrealised profit (837) (54)
Disposal - 1,894
Additional investment 274 342
Exchange differences (1) (101)
At 30 June (1,096) (200)
================================ ======================
Analysed as follows:
Other payables (non-current) (1,096) (200)
At 30 June (1,096) (200)
================================ ======================
The Group's share of the results of the joint
ventures, none of which is individually material
to the Group, are shown in aggregate as follows:
2016 2015
USD'000 USD'000
Share of loss in joint ventures
(before elimination of unrealised
profit) (332) (818)
Shares of other comprehensive
income of joint ventures (1) (101)
Share of total comprehensive
loss (333) (919)
================================ =====================
Set out below are the summarised financial information
for Joint Ventures which are accounted for using
the equity method:
Summarised statements of financial
position
2016 2015
USD'000 USD'000
Current
Cash and cash equivalents 34 128
Other current assets (excluding
cash) 5,911 3,440
Total current assets 5,945 3,568
-------------------------------- ---------------------
Financial liabilities (excluding
trade payables) (404) (292)
Other current liabilities
(including trade payables) (6,020) (3,670)
Total current liabilities (6,424) (3,962)
-------------------------------- ---------------------
Non-current
Assets 555 588
Financial Liabilities - -
Net assets 76 194
================================ =====================
Summarised statements of comprehensive
income
2016 2015
USD'000 USD'000
Revenue 3,562 6,922
Depreciation and amortisation - (78)
Interest (expense)/ income (7) 562
Loss before taxation (664) (1,540)
Income tax - (96)
-------------------------------- ---------------------
Loss after taxation (664) (1,636)
Other comprehensive income (2) (202)
Total comprehensive loss (666) (1,838)
================================ =====================
Reconciliation of summarised financial
information
2016 2015
USD'000 USD'000
Opening net liabilities -
1 July 194 (2,440)
Loss for the year (664) (1,636)
Other comprehensive income (2) (202)
Disposal - 3,788
Additional investment 548 684
-------------------------------- ---------------------
Closing net assets- 30 June 76 194
Interest in joint venture 50% 50%
-------------------------------- ---------------------
Share of net assets 38 97
Goodwill - -
Cumulative unrealised profit (1,134) (297)
Carrying value (1,096) (200)
================================ =====================
8 INTANGIBLE ASSETS
Intellectual
property Development
The Group rights costs Goodwill Total
USD'000 USD'000 USD'000 USD'000
Cost
At 1 July 2015 13,963 22,836 1,806 38,605
Additions 422 8,443 - 8,865
Transfer - 4,055 - 4,055
Foreign exchange
translation difference (812) (1,322) - (2,134)
At 30 June 2016 13,573 34,012 1,806 49,391
------------------ ------------------ ------------------- -------------------
Accumulated amortisation
At 1 July 2015 418 397 - 815
Charge for the financial
year 6 71 - 77
Foreign exchange
translation difference (26) (22) - (48)
At 30 June 2016 398 446 - 844
------------------ ------------------ ------------------- -------------------
Net carrying amount
At 30 June 2016 13,175 33,566 1,806 48,547
================== ================== =================== ===================
Intellectual
property Development
The Group rights costs Goodwill Total
USD'000 USD'000 USD'000 USD'000
Cost
At 1 July 2014 14,355 22,618 1,806 38,779
Additions 359 3,506 - 3,865
Written off during
the financial year - (45) - (45)
Foreign exchange
translation difference (751) (3,243) - (3,994)
At 30 June 2015 13,963 22,836 1,806 38,605
------------------ ------------------ ------------------- -------------------
Accumulated amortisation
At 1 July 2014 483 273 - 756
Charge for the financial
year 8 172 - 180
Foreign exchange
translation difference (73) (48) - (121)
At 30 June 2015 418 397 - 815
------------------ ------------------ ------------------- -------------------
Net carrying amount
At 30 June 2015 13,545 22,439 1,806 37,790
================== ================== =================== ===================
Intellectual property rights comprise the patents, trade mark
technology process and all intellectual and industrial property
rights in connection therewith on the production of natural
sweetener, pharmaceutical products and derivatives of bio-organic
and physiologically active compounds.
As at 30 June 2016, the carrying value of indefinite life
intangible assets is USD10,613,032 (2015: USD11,312,000). The
change in value was due to foreign currency translation
differences.
Goodwill is allocated to the Group's single CGU identified
according to its only operating segment. See Note 6(i) for key
assumptions used in the value-in-use calculations.
9 PROPERTY, PLANT AND EQUIPMENT
Office
equipment,
Extraction furniture
and and fittings Capital
Freehold refinery and motor work-in
land Buildings plants vehicles progress Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
The Group
Cost
At 1 July 2015 1,615 20,608 60,303 7,186 4,976 94,688
Additions - 61 1,213 1,096 13,034 15,404
Disposals/write-offs - - (1,783) (476) - (2,259)
Transfer - (24) 2,605 863 (3,444) -
Foreign exchange
translation
reserve (80) (1,265) (3,889) (452) (356) (6,042)
At 30 June
2016 1,535 19,380 58,449 8,217 14,210 101,791
--------------- --------------- -------------- --------------- --------------- ---------------
Accumulated
depreciation
At 1 July 2015 - 4,417 26,868 3,679 - 34,964
Charge for
the financial
year - 1,034 3,461 1,062 - 5,557
Disposals/write-offs - - (1,666) (405) - (2,071)
Foreign exchange
translation
reserve - (369) (1,748) (204) - (2,321)
At 30 June
2016 - 5,082 26,915 4,132 - 36,129
--------------- --------------- -------------- --------------- --------------- ---------------
Net carrying
amount
At 30 June
2016 1,535 14,298 31,541 4,078 14,210 65,662
=============== =============== ============== =============== =============== ===============
Office
equipment,
Extraction furniture
and and fittings Capital
Freehold refinery and motor work-in
land Buildings plants vehicles progress Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
The Group
Cost
At 1 July 2014 1,820 20,592 65,514 5,321 2,062 95,309
Additions - 38 560 2,429 3,624 6,651
Disposals/write-offs - - - (76) - (76)
Transfer - 46 44 108 (198) -
Foreign exchange
translation
reserve (205) (68) (5,815) (596) (512) (7,196)
At 30 June
2015 1,615 20,608 60,303 7,186 4,976 94,688
--------------- --------------- -------------- --------------- --------------- ---------------
Accumulated
depreciation
At 1 July 2014 - 3,413 25,070 3,111 - 31,594
Charge for
the financial
year - 1,131 3,689 918 - 5,738
Disposals/write-offs - - - (73) - (73)
Foreign exchange
translation
reserve - (127) (1,891) (277) - (2,295)
At 30 June
2015 - 4,417 26,868 3,679 - 34,964
--------------- --------------- -------------- --------------- --------------- ---------------
Net carrying
amount
At 30 June
2015 1,615 16,191 33,435 3,507 4,976 59,724
=============== =============== ============== =============== =============== ===============
The carrying values of property, plant and equipment charged to
financial institutions to secure banking facilities granted to the
Group are as follows:
Group
2016 2015
USD'000 USD'000
Freehold land 1,000 1,256
Building 11,599 13,929
Extraction and refinery plants 31,131 40,269
Office equipment, furniture and
fittings 2,101 913
Capital work in-progress 13,944 1,960
59,775 58,327
=================== ===================
The carrying values of plant and equipment acquired under hire
purchase terms are as follows:
Group
2016 2015
USD'000 USD'000
Motor vehicles - 6
===================== ===================
10 BIOLOGICAL ASSETS
Nursery plants with a book value of USD3,377,000 (2015:
USD3,570,000) previously reported as biological assets have been
transferred to product development within intangible assets
reflecting the changed nature of the Group's nursery operations.
The Group's leaf nurseries are now focused on improving leaf
strains and similar leaf development intellectual property activity
as opposed to their historic role in the production and supply of
seedlings.
11 PREPAID LAND LEASE PAYMENTS
Group
2016 2016
USD'000 USD'000
At 1 July 2,914 2,999
Additions - 50
Amortisation for the financial
year (135) (143)
Foreign exchange translation
reserve (242) 8
At 30 June 2,537 2,914
================ ===============
Cost 3,526 3,526
Accumulated amortisation (929) (794)
Foreign exchange translation
reserve (60) 182
At 30 June 2,537 2,914
================ ===============
The prepaid land lease payments have been pledged as security
for banking facilities granted to the Group.
12 DEFERRED TAX
The
Group
2016 2015
USD'000 USD'000
Deferred tax assets
At 1 July 9,429 5,876
(Charge)/Credit to profit or
loss (Note 25) (125) 3,960
Foreign exchange translation
reserve (314) (407)
At 30 June 8,990 9,429
======== ========
Deferred tax liabilities
At 1 July 529 -
Charge to profit or loss (Note
25) 1,073 529
Foreign exchange translation - -
reserve
At 30 June 1,602 529
======== ========
Represented by:
Deferred tax assets
Tax losses 8,850 9,337
Others 140 92
-------- --------
8,990 9,429
Offsetting (1,602) (529)
7,388 8,900
======== ========
Deferred tax liabilities
Property, plant and equipment 1,602 529
Offsetting (1,602) (529)
- -
======== ========
Deferred tax assets are recognised for tax losses carry-forward
to the extent that the realisation of the related tax benefit
through future tax profit is probable based on projections and
forecasts prepared by management and taking into consideration the
expiry dates of carry forward losses. The Group did not recognise
deferred tax assets of USD74,000 (2015: USD385,000) in respect of
losses amounting to USD 598,000(2015: USD1,940,000) that can be
carried forward against future taxable income.
The Group
2016 2015
USD'000 USD'000
Deferred tax assets
Deferred tax assets to be
recovered within 12 months 140 1,002
Deferred tax assets to be
recovered
after more than 12 months 8,850 8,427
8,990 9,429
===================== ==============
Deferred tax liabilities
Deferred tax liabilities
to be
recovered within 12 months - -
Deferred tax liabilities
to be recovered
after more than 12 months (1,602) (529)
(1,602) (529)
===================== ==============
An analysis of tax losses with expiry dates for which deferred
tax assets have been recognised is as follows:
The
Group
2016 2015
USD'000 USD'000
FY2017 - 115
FY2018 70 192
FY2019 - 763
FY2021 208 -
FY2023 - 1,677
FY2029 to FY2036 4,834 2,994
Indefinite 3,738 3,596
Total 8,850 9,337
====================== ==================
13 INVENTORIES
The Group
2016 2015
USD'000 USD'000
Raw materials 11,422 5,523
Work-in-progress 41,785 11,716
Finished goods 31,397 45,551
84,604 62,790
==================== =================
There is no provision of obsolete inventories recognised during
the year (2015: Nil)
14 TRADE RECEIVABLES
The Group
2016 2015
USD'000 USD'000
Non-current
Third party trade receivables 523 1,856
===================== =================
Current
Third party trade receivables 57,627 59,149
Joint ventures 5,116 3,381
62,743 62,530
===================== =================
The Group's normal trade credit terms range from 30 to 60 days
(2015: 30 to 60 days). Terms for joint ventures are 30 days after
consumption or onward sales of products. Other credit terms are
assessed on a case-by-case basis.
In line with all businesses, management reviews the credit terms
and collectability of all balances on an on-going basis and
exercises judgement in assessing the recoverability of amounts
due.
As of 30 June 2016, trade receivables amounting to USD5,645,000
(2015: USD6,622,000) were past due but not impaired. These relate
to a number of independent customers for whom there is no recent
history of default. The ageing of the trade receivables that are
past due but not impaired is as follows:
The Group
2016 2015
USD'000 USD'000
Past due but not impaired:
Up to 3 months 3,828 5,948
3 to 6 months 553 412
6 months and above 1,395 262
5,776 6,622
========== ==========================================
15 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
Group
2016 2015
USD'000 USD'000
Non-current
Other receivables 885 2,121
============ =============
Current
Other receivables 5,592 3,038
Prepayments 5,448 3,967
Deposits 614 485
As at 30 June 11,654 7,490
============ =============
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivables mentioned above. These
amounts are not past due.
16 FINANCIAL INSTRUMENTS BY CATEGORY
Group
Note 2016 2015
USD'000 USD'000
Receivables
Trade receivables 14 63,266 64,386
Other receivables and
deposits
(excluding prepayments) 15 7,091 5,644
Cash and bank balances 17 61,002 64,276
131,359 134,306
============= =============
Other financial liabilities
Borrowings 22 113,929 109,646
Trade payables 24 5,543 3,134
Other payables and accruals
(excluding deferred income) 24 20,999 10,717
140,471 123,497
============= =============
17 CASH AND CASH EQUIVALENTS
Group
2016 2015
USD'000 USD'000
Short term deposits with
licensed banks 32,047 32,280
Cash at bank and on hand 28,955 31,996
Deposits, cash and bank balances 61,002 64,276
Restricted cash (255) (5,095)
Cash and cash equivalents 60,747 59,181
================= =============
Cash deposits of USD255,000 (2015: USD5,095,000) are pledged as
security for banking facilities.
The weighted average interest rates of the short-term deposits
at the reporting date was 0.38% (2015: 0.40%) per annum. The
short-term deposits have weighted maturity period of 40 days (2015:
104 days).
18 SHARE CAPITAL
The movements in the authorised and paid-up share capital are as
follows:
The Group/Company
2016
Number
Par value of shares USD
USD ('000) ('000)
Authorised
At 1 July/30 June 0.10 250,000 25,000
=============== ================
Issued and fully
paid-up
At 1 July 0.10 170,062 17,006
Exercise of share
awards 0.10 2,050 205
Placement of shares 0.10 - -
Issuance of shares 0.10 - -
At 30 June 0.10 172,112 17,211
=============== ================
19 SHARE PREMIUM
The Group
2016 2015
USD'000 USD'000
At 1 July 208,310 163,240
Exercise of share awards 6,413 410
Placement of shares - 42,963
Issuance of shares - 1,697
At 30 June 214,723 208,310
=============== ===============
20 FOREIGN EXCHANGE TRANSLATION RESERVE
The foreign exchange translation reserve arose from the
translation of the financial statements of the foreign operations
into the Group's presentation currency of USD.
During financial year end 2016, the fluctuations are due to MYR
and RMB weakening against USD.
21 SHARE-BASED PAYMENT RESERVE
The expense arising from equity-settled share-based payment
transaction recognised for employee services received during the
year is as shown below:
The Group
2016 2015
USD'000 USD'000
Expense arising from
equity-settled share-based
payment transactions 5,209 6,412
================ ==============
The Group
2016 2015
USD'000 USD'000
At 1 July 11,185 5,076
Share awards scheme compensation
expense 5,209 6,412
16,394 11,488
Transfer to share capital
and share premium upon
exercise of share awards (6,618) (303)
At 30 June 9,776 11,185
=============== ===========
The Company maintains a Long-Term Incentive Plan ("LTIP"), the
principal terms include a restriction on the Company issuing (or
granting rights to issue) no more than 10 per cent of its issued
ordinary share capital under the LTIP (and any other employee share
plan) in any ten calendar year period. It is currently intended
that, other than in exceptional circumstances, such as senior
executive recruitment, all awards will be subject to performance
conditions and that, the performance conditions will be linked
principally to the Group's sales growth. The awards are conditional
on employment service requirements.
The LTIP recognises the fast growth and changing nature of the
Company and the need to recruit and retain executives in different
employment markets around the world. Accordingly, the LTIP allows
for the Remuneration Committee to exercise significant discretion
in exceptional cases where the Committee considers executives will
bring particular value to shareholders.
The fair value of share awards granted is estimated at the date
of the grant, taking into account the terms and conditions upon
which the LTIPs were granted.
30.6.2016 30.6.2015
---------------------------- ---------------------------
Weighted Weighted
average average
exercise Number exercise Number
price of price per of
per
share LTIPs share LTIPs
('000) ('000)
At 1 July - 3,912 - 7,523
Granted - 1,881 - 344
Exercised - (2,050) - (153)
Lapsed - (1,433) - (3,802)
At 30 June - 2,310 - 3,912
============ ============== ========== ===============
Details of share awards granted that are outstanding as at 30
June 2016 are as follows:
Weighted
average
Number fair Exercise
of value price
LTIPs at per Vesting requirements
outstanding grant share
Grant-vest '000 date
(Sterling
pound)
Sales target
and three years'
Award 1 service
8 October 2013
- 12 July 2016 1,394 3.54 Nil
Award 2
14 March 2013 - 2.53 Three years'
13 April 2017 116 - 6.13 Nil service
Award 3
4 July 2014 - 27 4.94 Three years'
July 2017 118 - 6.08 Nil service
Sales target
and three years'
Award 4 service
7 July 2015 - 1
July 2017 577 3.95 Nil
Award 5
Three years'
22 September 2015- 57 4.05 Nil service
22 September 2018
Award 6
4 March 2016 - Three years'
30 August 2018 8 3.46 Nil service
Award 7
23 May 2016 - 25 Three years'
April 2019 40 3.83 Nil service
--------------
Total 2,310
==============
The number of exercisable share awards as at the reporting date
was Nil (2015: Nil).
The related weighted average share price at the time of exercise
was Nil (2015: GBP4.90) per share.
22 BORROWINGS
The Group
2016 2015
USD'000 USD'000
Current portion:
- Term loans (a) 29,044 25,668
- Hire purchase (b) - 13
29,044 25,681
Non-current portion:
- Term loans (a) 84,885 83,948
- Hire purchase (b) - 17
Total non-current portion 84,885 83,965
113,929 109,646
=============== ==================
(a) Term loans
The term loans bore a weighted average effective interest rate
of 4.30% (2015: 4.60%) per annum at the reporting date. These term
loans bear floating rates (base rate plus a margin as imposed by
respective lenders) that fluctuate because of changes in market
interest rates.
The Group
2016 2015
USD'000 USD'000
Current portion:
Unsecured:
- Term loan 1 - 205
Secured:
- Term loan 2 306 1,546
- Term loan 3 542 -
- Term loan 4 4,460 -
- Term loan 5 23,736 23,917
Total current portion 29,044 25,668
---------------- ----------------
Non-current portion:
Secured:
- Term loan 2 - 275
- Term loan 3 2,092 -
- Term loan 4 53,766 62,223
- Term loan 6 29,027 21,450
Total non-current portion 84,885 83,948
---------------- ----------------
113,929 109,616
================ ================
Term loan 1 is unsecured.
Term loans 2 to 4 are secured by way of:-
(i) a fixed and floating charge over present and future assets
and the freehold property of a subsidiary; and
(ii) corporate guarantee by the Company; and
(iii) legal charge over landed property of a subsidiary.
Term loan 5 is secured as follows:-
(i) a legal charge over certain assets of a subsidiary; and
(ii) a legal charge over the prepaid land lease payments of a subsidiary.
Term loans 6 are trade receivables financing secured via
receivable balances.
(b) Hire purchase
The Group leases motor vehicles under finance leases with lease
terms of 5 to 9 years (2015: 5 to 9 years). At the end of the lease
term, title to the assets will be transferred to the Group upon
full payment being made. In 2016, the Group has settled all its
obligations under finance lease.
The Group
2016 2015
USD'000 USD'000
Analysis of hire purchase:
- No later than one year - 17
- Later than 1 year and
no later than 5 years - 21
---------- -----------------
- 38
Less: Future finance charges - (8)
Present value - 30
========== =================
The present value of hire
purchase is as follows:
- No later than one year - 13
- Later than 1 year and
no later than 5 years - 17
- 30
========== =================
The hire purchases liabilities are fully repaid during the
financial year. The hire purchases were secured by the rights to
the leased motor vehicles which revert to the lessor in the event
of defaults. The hire purchase bore a weighted average effective
interest rate of 0% (2015: 3.65%) per annum at the reporting
date.
23 TRADE PAYABLES
The normal trade credit terms granted to the Group range from 0
to 90 days (2015: 0 to 90 days).
The foreign currency exposure profile represents the carrying
amounts arising from currencies other than the functional currency
of the respective entities in the Group. The foreign currency
exposure profile of the trade payables at the reporting date was as
follows:
The Group
2016 2015
USD'000 USD'000
United States Dollar 37 150
================= ================
24 OTHER PAYABLES AND ACCRUALS
The Group
2016 2015
USD'000 USD'000
Non-current
Other payables 1,096 200
Deferred income 149 290
1,245 490
================== ==============
Current
Other payables 11,962 7,265
Deferred income 74 29
Accruals 7,941 3,252
19,977 10,546
================== ==============
Deferred income as at the reporting date represents a form of
regional government financial assistance for the purchase of high
technology plant equipment. The deferred income will be amortised
over the useful life of 20 years.
25 TAXATION
The Group
2016 2015
USD'000 USD'000
Current tax:
Current tax on profits for
the year (2,124) (408)
Over accruals in respect
of prior years 27 20
(2,097) (388)
Deferred tax:
Origination and reversal
of temporary differences (1,198) 3,431
(3,295) 3,043
=============== ==============
The Company was granted a tax assurance certificate dated 1
February 2012 under the Exempted Undertakings Tax Protection Act,
1966 pursuant to which it is exempted from any Bermuda taxes (other
than local property taxes) until 31 March 2035.
The subsidiary, PCSB, has been granted the Bio-Nexus Status by
the Malaysian Biotechnology Corporation Sdn Bhd in which PCSB is
entitled to a 100% income tax exemption for a period of 10 years on
its first statutory income commencing in year of assessment (YA)
2008. Upon the expiry of the 10-year incentive period, PCSB will be
entitled to a concessionary tax rate of 20% on income derived from
qualifying activities for a further period of 10 years.
The subsidiary, PCT has been granted the Principal Hub Status by
the Malaysian Investment Development Authority in which PCT is
entitled to a 100% income tax exemption for a period of 10 years on
its statutory income commencing from YA 2017.
A reconciliation of income tax expense applicable to the profit
before taxation at the applicable tax rate to income tax expense at
the effective tax rate of the Group is as follows:-
The Group
2016 2015
USD'000 USD'000
Profit before taxation 17,895 1,048
========= ==========
Tax at the applicable tax
rates in the respective countries 6,542 289
Tax effects of:
Non-deductible expenses 251 204
Non-taxable income (4,039) (2,309)
Under/(over) provision of
taxation 756 (20)
Previously unrecognised tax
losses (215) (1,207)
Income tax expense/(credit) 3,295 (3,043)
========= ==========
26 PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION
Included in the profit from ordinary activities before taxation
are the following charges and credits:
The Group
2016 2015
USD'000 USD'000
Charges:
Depreciation and amortisation 5,769 6,061
Directors' remuneration 1,578 1,432
Share-based payment
expense 5,209 6,412
Interest expenses 5,315 7,275
Cost of inventories
expensed 49,440 61,203
Wages and salaries 14,881 15,461
Defined contribution
retirement plan 1,841 1,322
Operating lease 625 507
Credits:
Realised exchange
gain 4,619 1,324
Amortisation of deferred
income 96 76
Interest income 92 57
======== ==========
27 EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the
earnings attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue:
The Group
2016 2015
Earnings attributable to
equity holders of the Company
(USD'000) 14,600 4,158
Weighted average number of
ordinary shares in issue
(thousands) 172,035 167,906
Impact of share awards outstanding
(thousands) 2,310 3,965
-------- ----------
Diluted weighted average
number of ordinary shares
(thousands) 174,345 171,871
======== ==========
Basic profit per share (US
Cents) 8.49 2.48
Diluted profit per share
(US Cents) 8.37 2.42
======== ==========
28 SIGNIFICANT RELATED PARTY TRANSACTIONS
(a) Identities of related parties
The Group and/the Company have related party relationships
with:-
(i) its subsidiaries and joint ventures; and
(ii) the Directors who are the key management personnel
(c) In addition to the information detailed elsewhere in the
financial statements, details of the Group's transactions and
balances with related parties during the financial year are set out
below:
(i)
The Group
2016 2015
USD'000 USD'000
Related parties
Gross sales of goods
to joint ventures 5,304 6,954
======== ==========
(ii) Key management personnel compensation
Key management personnel are executive directors of the Company.
The compensation paid or payable to key management for employee
services is shown as below:
The Group
2016 2015
USD'000 USD'000
Remuneration 998 1,025
Share-based payment
expense 177 785
1,175 1,810
======== ==========
29 SEGMENTAL REPORTING
Management determines the Group's operating segments based on
the criteria used by the Chief Executive Officer (CEO) for making
strategic decisions. Management considers the Group to be a single
operating segment whose activities are the production, marketing
and distribution of natural sweeteners and flavours.
From a geographical perspective, the Group is a multinational
with operations located on all continents, but managed as one
unified global organisation. The Group's markets and its supply
chain are based in the Americas, EMEA (Europe, Middle East and
Africa) and Asia Pacific.
2016 2015
USD'000 USD'000
Trading
Revenue 138,641 127,349
Cost of sales (81,634) (87,070)
Gross margin 57,007 40,279
Gross margin % 41% 32%
Other income 328 760
Administrative expenses (24,947) (24,024)
------------------- -------------------
Operating profit 32,388 17,015
Main Market Listing costs (1,808) -
Other expenses (8,396) (7,117)
Foreign exchange gain/(loss) 1,358 (757)
Finance costs (5,315) (7,275)
Share of loss in joint ventures* (332) (818)
Taxation (3,295) 3,043
Earnings for the financial
year 14,600 4,091
Adjusted EBITDA 37,729 22,182
Reconciliation of Adjusted
EBITDA to operating profit:
Adjusted EBITDA 37,729 22,182
Depreciation and amortisation (5,673) (5,985)
Share of loss in joint venture 332 818
Operating profit 32,388 17,015
2016 2015
USD'000 USD'000
Gross cash 61,002 64,276
Gross debt 113,929 109,646
Net debt 52,927 45,370
Gross cash 61,002 64,276
Unutilised facilities 15,269 23,661
Headroom 76,271 87,937
Earnings per share (US cents)
- Basic 8.49 2.48
- Diluted 8.37 2.42
* Under segmental reporting, revenues of approximately USD70
million (2015: USD65 million) are derived from 5 external
customers. These revenues are attributable to the Americas
customers.
Geographical information
Asia Europe* Americas Goodwill Total
-------------------- -------- -------- --------- --------- --------
30 June 2016 USD'000 USD'000 USD'000 USD'000 USD'000
-------------------- -------- -------- --------- --------- --------
External revenue 18,105 32,207 88,329 - 138,641
--------------------- -------- -------- --------- --------- --------
Non-current assets 113,496 1,454 9,830 1,806 125,542
--------------------- -------- -------- --------- --------- --------
30 June 2015
-------------------- -------- -------- --------- --------- --------
External revenue 23,588 15,484 88,277 - 127,349
--------------------- -------- -------- --------- --------- --------
Non-current assets 100,720 1,352 12,997 1,806 116,875
--------------------- -------- -------- --------- --------- --------
Basis of attributing sales by geographical region is based on
location of sales.
The primary performance indicators used by the Group are
revenues, gross margin %, adjusted EBITDA, net cash from
operations, gross cash and borrowings.
Adjusted EBITDA is defined as EBITDA with other expenses
(principally the charge of the Group's LTIP scheme, STIP, foreign
exchange and share of gain/(loss) in joint venture) added back.
The net assets per share is calculated based on the net assets
book value at the reporting date of USD203,700,000 (2015:
USD190,492,000) divided by the number of ordinary shares in issue
at the reporting date of 172,112,000 (2015: 170,062,000).
The entity is domiciled in Bermuda. The entity's non-current
assets are located in countries other than Bermuda. There is no
revenue from Bermuda.
*The Europe segment includes results and sales to the Group's
European joint venture.
30 COMMITMENTS
(a) Capital commitments
Capital expenditure at the reporting date is as follows:
Group
--------------------------------- -------- ------------------
2016 2015
--------------------------------- -------- ------------------
USD'000 USD'000
--------------------------------- -------- ------------------
Authorised capital expenditure
contracted for
--------------------------------- -------- ------------------
- Property, plant and equipment 24,109 1,138
--------------------------------- -------- ------------------
Authorised capital expenditure
not contracted for 12,232 20,500
--------------------------------- -------- ------------------
(b) Operating lease commitments
The Group also leases corporate office under non-cancellable
operating lease agreements. The lease expenditure charged to the
profit or loss during the year is disclosed in Note 28.
The future aggregate minimum lease payments under
non-cancellable operating lease are as follows:
Group
----------------------------------------------------- ----------------- ------------------
2016 2015
----------------------------------------------------- ----------------- ------------------
USD'000 USD'000
----------------------------------------------------- ----------------- ------------------
The present value of operating lease is as follows:
----------------------------------------------------- ----------------- ------------------
- No later than one year 570 535
----------------------------------------------------- ----------------- ------------------
- Later than 1 year and no later than 5 years 1,257 1,412
----------------------------------------------------- ----------------- ------------------
- More than 5 years 982 1,293
----------------------------------------------------- ----------------- ------------------
---------------- ----------------
----------------------------------------------------- ----------------- ------------------
2,809 3,240
----------------------------------------------------- ----------------- ------------------
31 EVENTS AFTER THE REPORTING PERIOD
Events after the period end comprise:
(a) Banking Facility
On 2 August 2016, the company has entered into an Amendment
Agreement relating to Term Loan 6 to increase the drawdown limit
from USD 38 million to USD 50 million.
(b) Incorporation of subsidiary after the financial year
On 26 August 2016, a wholly owned subsidiary, PureCircle Natural
Ingredient India Private Limited was incorporated and its principle
activities are supply and development of stevia agronomy sales and
production, distribution and sales of natural sweeteners and
flavours.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKOKRNKAKAAR
(END) Dow Jones Newswires
September 20, 2016 02:01 ET (06:01 GMT)
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