Final Results

RNS Number : 2343S

Mortice Limited

06 September 2010

 

06 September 2010

Mortice Limited

FINAL RESULTS

 

Mortice Limited (AIM:MORT, "Mortice" or the "Company"), the AIM listed security and facilities management company based in India, today announces its final results for the year ended 31 March 2010.

 

Operational highlights:

 

·; Group revenues increased to US $ 31.6 million (+34.7%)

·; Acquisition of Rotopower Projects in June 2009

·; Revenue from newly started Facilities Management business grew by 368% year on year. Inorganic growth contributes approximately 62% to overall FM growth.

·; Operating loss reduced to US $0.71 million (2009: US $3.2 million)

Commenting today, Manjit Rajain, Executive Chairman of Mortice Limited said:

 

"We are happy with our performance in a year which saw us successfully battling a global recession. Against severe headwinds we were able to grow our revenue significantly and improve our bottom line performance as well, by considerably reducing losses through cost optimisations. From the last quarter of this financial year, we have witnessed a change in the market for the better with a number of customer enquiries and orders coming in. This matches well with the macro-economic scenario where the Government of India expects 8.5% GDP growth in 2010-11 and expects the same to continue in 2011-12 as well, with a 9.0% GDP growth rate projection. With this growth in the Indian economy, the director's of the Company believe services demand is likely to increase and that Mortice is very well positioned to leverage on this growth.'

 

Further, the Company notes that as a part of the audit process, the statement of financial position as at 1 April 2008 has been re-presented due to reclassification of certain comparative figures.

 

·; The reclassified item is current tax assets which have been presented at the face of statement of financial position which was grouped under other receivable in prior year.

·; In addition, the Company has adopted the presentation of statement of comprehensive income by nature of expense method. The affected items are disclosed in note 29 accompanying the financial statements for the year ended 31 March 2010.The Company notes that these presentational changes do not have an impact on the originally stated profit, earnings per share or net asset figures] Extracts from the audited financial statements are attached below and the full version of the audited financial statements will be available on the Company website www.morticegroup.com. The Annual Report for the year ended 31 March 2010 will be posted to shareholders and made available on the company website in due course.

For further information please contact:

 

Mortice Limited
Manjit Rajain, Executive Chairman		Tel: +91 981 800 0011
Vaibhav Dayal, Chief Executive Officer		Tel: +91 981 867 0003
Grant Thornton Corporate Finance (NOMAD)
Fiona Owen / Robert Beenstock		Tel: +44 207 383 5100
Seymour & Pierce Limited (Broker)
Nandita Sahgal / Jeremy Stephenson		Tel: +44 207 107 8000

 

Statement by the Executive Chairman, Mr Manjit Rajain

The key elements to our growth over the financial year have been client focused operations, the continuing trust of our customers, training and development of our employees, delivery of an enhanced service and, above all, total transparency! The directors believe that we will be able to further strengthen our business in the Facilities Management and Guarding industries and benefit from the overall size and scale of our operations.

 

At Mortice, we are dedicated to the pursuit of growth and excellence in our people, as they are the major asset for a Facilities Management and Guarding service provider. We will continue to evolve our people management practices to make Mortice a preferred workplace.

 

Our ability to give working solutions to our clients in our chosen areas of business is well appreciated by the market and gets us their continued support and co-operation, leading to the growth of our business.

 

Peregrine, the Company's security services subsidiary, has now been operating for 15 years in the security industry in India. Today, the directors believe that the Company is one of the largest security providers in India. We are confident that we will be able to maintain and enhance this position through our successful client relationships and repeat business contracts.

 

The Company acquired Rotopower in June 2009 and it has now been successfully integrated within Tenon. The Directors are confident that this acquisition will continue to show fruitful results in the future. Tenon, the Company's facilities management arm has continued to provide high level services to its customers across India, including remote locations, and this has resulted in increased contracts wins, which, in turn has led to growth in the business.

 

The platform we have now established is a result of a significant team effort under challenging market conditions. The Indian economy continues along its growth path and is expected to record 8.5% GDP growth in 2010-2011, but in financial year 2011-2012, it is estimated that India's GDP may grow at 9% with further growth to follow.

 

While the majority of the past financial year continued to witness the global economic downturn, we started to see the beginning of market recovery towards the last quarter of the financial year. The Directors are, therefore, confident that markets will continue to recover in India and that Mortice will be able to achieve growth in the coming year.

 

 

 

Statement by the Group Chief Executive Officer, Mr Vaibhav Dayal

 

Growing our Business

 

At the start of the financial year the Company had set a single primary objective, to focus on growing the business. We sought to achieve this through the following initiatives:

 

·; Expanding the relationship with our clients - we aimed to strengthen and deepen our relationship with our existing clients by securing additional business from them. We have established a platform which has enabled us to penetrate our existing clients more effectively.

·; Expanding our areas of coverage - developed an India-wide presence, enhancing our capability to deliver our facilities management services to our customers.

·; Acquisitions - we successfully completed the acquisition of Rotopower and the integration of the business into the Group has progressed smoothly. We have additionally been able to grow the business while retaining Rotopower's existing clients and the entire key management team.

The markets were relatively sluggish for the better part of the financial year ended 31 March 2010. However, we felt that there were notable improvements over the course of the last quarter. We are confident that these improvements will continue into the financial year ahead.

 

We have made considerable progress during the year towards the achievement of the above strategic objectives. The Company has reduced its cost base significantly in comparison to the previous year. We have secured, as key customers, several leading Indian and multinational corporations. The directors believe that the Company is progressing well to become one of the leading Facilities Management and Guarding service providers in India. We believe our people are key to the success of the business and we are focused on retaining our employees in what has traditionally been a high turnover industry. In this regard, we are seeking to implement several employee oriented initiatives, focusing on making Mortice a preferred place to work.

 

The directors feel that Mortice has moved to build up a solid platform for growth and believe that the Group can leverage the strengths built in the last financial year to create value for our shareholders.

 

 

Statements of financial position

as at 31 March 2010

 

 

		The Group			The Company
		2010	2009	2008	2010	2009	2008
	Notes	US$	US$	US$	US$	US$	US$
Assets
Non-Current
Goodwill	4	1,456,936	-	-	-	-	-
Other intangible assets	5	142,895	-	-	-	-	-
Plant and equipment	6	983,524	677,163	609,147	-	-	-
Subsidiaries	7	-	-		7,675,465	6,849,675	394,675
Long-term financial assets	8	274,173	200,830	453,918	-	-	-
Deferred tax assets	9	1,193,545	618,853	165,870	-	-	-
		4,051,073	1,496,846	1,228,935	7,675,465	6,849,675	394675
Current
Inventories	10	90,232	67,262	20,481	-	-	-
Trade and other receivables	11	8,337,955	5,890,694	4,520,318	11,882	8,532	551,215
Current tax assets		1,010,468	357,829	-	-	-	-
Cash and bank balances	12	697,408	3,253,140	390,420	53,615	1,294,212	5,028
		10,136,063	9,568,925	4,931,219	65,497	1,302,744	556,243
Total assets		14,187,136	11,065,771	6,160,154	7,740,962	8,152,419	950,918
Equity
Capital and reserves
Share capital	13	9,555,312	9,555,312	400,001	9,555,312	9,555,312	400,001
Reserves	14	(3,259,028)	(3,370,590)	617,361	(2,179,898)	(1,789,858)	(17,625)
		6,296,284	6,184,722	1,017,362	7,375,414	7,765,454	382,376
Minority interests		94	-	2,494	-	-	-
Total equity		6,296,378	6,184,722	1,019,856	7,375,414	7,765,454	382,376
Liabilities
Non Current
Employee benefit obligations	15	321,234	124,958	92,916	-	-	-
Borrowings	16	138,952	230,632	335,154	-	-	-
		460,186	355,590	428,070	-	-	-
Current
Trade and other payables	17	6,125,033	3,133,030	4,099,758	365,548	386,965	568,542
Borrowings	16	1,305,539	1,392,429	612,470	-	-	-
		7,430,572	4,525,459	4,712,228	365,548	386,965	568,542
Total liabilities		7,890,758	4,881,049	5,140,298	365,548	386,965	568,542
Total equity and liabilities		14,187,136	11,065,771	6,160,154	7,740,962	8,152,419	950,918

 

 

 

The annexed notes form an integral part of and should be read in conjunction with these financial statements.

 

 

Consolidated statement of comprehensive income

for the financial year ended 31 March 2010

 

 

		2010	2009
	Notes	US$	US$
Revenue
Service income		31,491,418	23,156,372
Other income	18	110,135	300,747
		31,601,553	23,457,119
Expenses
Staff and related costs		28,654,354	21,561,058
Materials consumed		637,054	444,611
Other operating expenses		2,305,488	4,125,778
Depreciation and amortisation of non-financial assets		305,378	161,653
Finance costs	19	415,119	407,880
Loss before taxation	20	(715,840)	(3,243,861)
Tax credit	21	159,420	314,384
Loss for the year		(556,420)	(2,929,477)
Other comprehensive income:
Exchange differences on translating foreign operations		668,076	(1,060,968)
Total comprehensive income/(expense) for the year		111,656	(3,990,445)
Loss attributable to:
- Equity holders of the Company		(556,514)	(2,926,983)
- Minority interests		94	(2,494)
		(556,420)	(2,929,477)
Total comprehensive income/(expense) attributable to:
- Equity holders of the Company		111,562	(3,987,951)
- Minority interests		94	(2,494)
		111,656	(3,990,445)
Loss per share:
Basic and diluted	22	(0.01)	(0.06)

 

Certain line items in the prior year have been reclassified. There is no change to the loss for the year (Note 29).

 

 

Consolidated statement of changes in equity

for the financial year ended 31 March 2010

 

 

	Share capital	Exchange translation reserve	(Accumulated losses)/ retained earnings	Total attributable to equity holders of Company	Minority interests	Total equity
	US$	US$	US$	US$	US$	US$
Balance at 1 April 2008	400,001	(15,281)	632,642	1,017,362	2,494	1,019,856
Issue of share capital	9,730,120	-	-	9,730,120	-	9,730,120
Share issuance expense	(574,809)	-	-	(574,809)	-	(574,809)
Transactions with owners	9,155,311	-	-	9,155,311	-	9,155,311
Total comprehensive expense for the year	-	(1,060,968)	(2,926,983)	(3,987,951)	(2,494)	(3,990,445)
Balance at 31 March 2009	9,555,312	(1,076,249)	(2,294,341)	6,184,722	-	6,184,722
Balance at 1 April 2009	9,555,312	(1,076,249)	(2,294,341)	6,184,722	-	6,184,722
Total comprehensive income /(expense) for the year	-	668,076	(556,514)	111,562	94	111,656
Balance at 31 March 2010	9,555,312	(408,173)	(2,850,855)	6,296,284	94	6,296,378

 

 

 

Consolidated statement of cash flows

for the financial year ended 31 March 2010

 

	2010	2009
	US$	US$
Cash Flows from Operating Activities
Loss before taxation	(715,840)	(3,243,861)
Adjustments for:
Depreciation and amortisation of non-financial assets	305,378	161,653
Interest expense	415,119	407,880
Interest income	(32,664)	(94,160)
Impairment of trade receivables	345,070	164,862
Operating profit/(loss) before working capital changes	317,063	(2,603,626)
Changes in operating assets and liabilities
Working capital changes:
Trade and other receivables	(2,447,261)	(843,897)
Inventories	(22,970)	(46,781)
Trade and other payables	2,798,253	(1,681,769)
Cash generated from/(used in) operations	645,085	(5,176,073)
Income tax paid	(929,023)	(668,180)
Interest paid	(415,761)	(408,355)
Net cash used in operating activities	(699,699)	(6,252,608)
Cash Flows from Investing Activities
Net cash outflow on purchase of a subsidiary (Note 3)	(1,694,330)	-
Acquisition of plant and equipment (Note 6)	(29,045)	(184,889)
Proceeds from disposal of plant and equipment	13,389	27,203
Interest received	60,216	66,733
Net cash used in investing activities	(1,649,770)	(90,953)
Cash Flows from Financing Activities
Issuance of share capital	-	9,730,120
Payment for share issue expenses	-	(574,809)
Repayment of finance lease obligation	(56,292)	(36,273)
Repayment of bank loans and bank overdraft	(267,949)	(192,771)
Withdrawal of security deposit	11,139	350,432
Placement of pledged fixed deposit	(84,482)	(97,344)
Bank overdraft obtained	-	1,041,062
Net cash (used in)/generated from financing activities	(397,584)	10,220,417
Net (decrease)/increase in cash and cash equivalents	(2,747,053)	3,876,856
Cash and cash equivalents at beginning of year	3,253,140	390,420
Effect of change in exchange rate on cash and cash equivalents	191,321	(1,014,136)
Cash and cash equivalents at end of year (Note 12)	697,408	3,253,140

 

 

Notes to the financial statements

for the financial year ended 31 March 2010

 

1 Introduction

 

Mortice Limited ('the Company' or 'Mortice') was incorporated on 9 January 2008 as a public limited company in Singapore. The Company's registered office is situated at 36 Robinson Road #17-01, City House, Singapore 068877.

 

The Company was listed on the Alternative Investment Market (AIM) of the London Stock Exchange on 15 May 2008. The Company along with its subsidiaries (hereinafter, together referred to as 'the Group') is engaged in providing guarding services, facilities management services, mechanical and engineering maintenance services and sale of safety equipment and their installation. The Group's operations are spread across India. The various entities comprising the Group have been defined below.

 

Name of subsidiaries	Country of incorporation	Effective group shareholding (%)
Tenon Property Services Private Limited ('Tenon Property')	India	99.48
Peregrine Guarding Private Limited ('PGPL')	India	99.48
Tenon Support Services Private Limited ('Tenon Support')	India	99.48
Tenon Project Services Private Limited ('Tenon Project')	India	99.48
Peregrine Protection Services Private Limited ('Peregrine Protection')	India	99.48
Roto Power Projects Private Limited ('Roto')	India	99.43

 

One new entity, Roto Power Projects Private Limited, was acquired by the Group during the year ended 31 March 2010. Details of the business combination have been specified in Note 3.

 

These audited consolidated financial statements were approved by the Board of Directors on 6 September, 2010.

 

The immediate and ultimate holding company is Mancom Holdings Limited, a company incorporated in British Virgin Islands.

 

2 Basis of preparation

 

The consolidated financial statements of the Group and that of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). In addition to the presentation requirements prescribed under IFRS, the consolidated financial statements also includes information on the standalone statement of financial position of the Company as required under by the Singapore Companies Act, Cap. 50 in order for the financial statements show a true and fair view.

 

2.1 Significant accounting estimates and judgements

When preparing the consolidated financial statements management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. Information about significant judgments, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below.

 

The critical accounting estimates and assumptions used and areas involving a high degree of judgement are described below:

 

(a) Depreciation of plant and equipment

 

The cost of property, plant and equipment is depreciated on a straight line basis over their useful lives. At each statement of financial position date, judgement is used to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Changes in the expected level of usage and technological developments could impact the economic lives and residual value of these assets, therefore depreciation charges could be revised. When considering impairment indicators, the Group considers both internal and external sources. These carrying amounts of the assets are included in note 6.

 

(b) Valuation of Assets and Liabilities in a Purchase Price Allocation "PPA"

 

On initial recognition, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their fair values. In measuring fair value, management uses estimates about future cash flows and discount rates. However, the actual results may vary.

 

(c) Impairment of investment in subsidiaries and goodwill

 

Determining whether investment in subsidiaries and goodwill is impaired requires an estimation of the value-in-use of that investment. The value-in-use calculation requires the Group to estimate the future cash flows expected from the cash-generating units and an appropriate discount rate in order to calculate the present value of the future cash flows. Management has evaluated the recoverability of the investment based on such estimates.

 

(d) Income tax

 

Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income tax. There are also claims for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Company recognise liabilities for expected tax issues based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

 

The Group's income tax expense is based on the income and statutory tax rate imposed in the tax jurisdictions in which the subsidiaries conduct operations.

 

 (e) Valuation of gratuity benefit and compensated absences

 

Management estimates the defined benefit liability and liabilities for accumulating compensating absences annually through valuations by an independent actuary. However, the actual outcome may vary due to estimation uncertainties. The estimate of its defined benefit liability and liability in respect of accumulating compensated absences as at 31 March 2010 of USD 321,234 (2009: USD 124,958) is based on standard rates of inflation and mortality. It also takes into account the Group's specific anticipation of future salary increases. Discount factors are determined close to each year-end by reference to high quality corporate/government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. Estimation uncertainties exist with regard to anticipation of future salary increases which may vary significantly in future appraisals of the Group's defined benefit obligations (refer to note 15 for details on actuarial assumptions used in determining defined benefit liabilities).

 

(f) Deferred tax on losses

 

The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group's latest approved budgets, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in India and Singapore, in which, the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

 

(h) Impairment of bad and doubtful debts

The Group and the Company make allowances for bad and doubtful debts based on an assessment of the recoverability of trade and other receivables. Allowances are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgement and estimates. Where the expected outcome is different from the original estimate, such difference will impact carrying value of trade and other receivables and doubtful debts expenses in the year in which such estimate has been changed.

 

(i) Allowance for inventory obsolescence

 

Inventories are stated at the lower of cost and net realisable value. In determining the net realisable value, the directors estimate the future selling price in the ordinary course of business, less the estimated costs of selling expenses. The carrying amounts of inventories at the end of the reporting date are disclosed in Note 10 to the financial statements.

 

2.2 Changes in accounting policies

 

The Group had adopted the following new interpretations, revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's financial statements for the annual period beginning on or after 1 January 2009:

 

Presentation of financial statements

In September 2007, the IASB issued amendments to IAS 1 (Presentation of Financial Statements). These include proposals for renaming certain sections of the financial statements, the requirement to publish an opening statement of financial position for the previous financial year in certain circumstances, separate presentation of changes in equity arising from transactions with owners and with non-owners, separate disclosure by component of amounts removed from stockholders' equity and recognised in income, and disclosure of the related income tax effect by component in the statement of recognised income and expense. Accordingly the Group has applied this standard for annual periods beginning on or after 1 January 2009 and has also provided comparative information of previous period. The adoption of the standard does not affect the financial position but gives rise to additional disclosures. The Group has elected to present the 'Statement of comprehensive income' in a single statement.. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged. However, some items that were recognised directly in equity are now being recognised in other comprehensive income, for example, exchange differences on translation of foreign operations.

 

Amendments to IFRS 7 Financial Instruments:

Disclosures - improving disclosures about financial instruments

The amendments require additional disclosures for financial instruments that are measured at fair value in the statement of financial position. These fair value measurements are categorised into a three-level fair value hierarchy, which reflects the extent to which they are based on observable market data. A separate quantitative maturity analysis must be presented for derivative financial liabilities that shows the remaining contractual maturities, where these are essential for an understanding of the timing of cash flows. The Group has taken advantage of the transitional provisions in the amendments and has not provided comparative information in respect of the new requirements.

 

Determination and presentation of operating segments

The adoption of IFRS 8 has not affected the identified operating segments for the Group. Reported segment results are now based on internal management reporting information that is regularly reviewed by the chief operating decision makers i.e. Group's Chief Executive Officer and Chairman. In the previous annual financial statements, segments were identified by reference to the dominant source and nature of the Group's risks and returns.

 

2.3 Standards issued but not yet effective

 

Summarised in the paragraphs below are standards, interpretations or amendments that have been issued till the date of approval of these consolidated financial statements and will be applicable for transactions in the Group but are not yet effective. These have not been adopted early by the Group and accordingly have not been considered in the preparation of the consolidated financial statements of the Group.

 

Management anticipates that all of these pronouncements will be adopted by the Group in the first accounting period beginning after the effective date of each of the pronouncements. Based on the Group's current business model and accounting policies, management does not expect material changes to the recognition and measurement principles on the Group's consolidated financial statements when these Standards/Interpretations become effective. Information on the new standards, amendments and interpretations that are expected to be relevant to the Group's consolidated financial statements is provided below.

 

IFRS 3 Business Combinations (Revised 2008) (effective from 1 July 2009)

The standard is applicable for business combinations occurring in reporting periods beginning on or after 1 July 2009 and will be applied prospectively. The new standard introduces changes to the accounting requirements for business combinations, using the acquisition method, and will have a significant effect on business combinations occurring in future reporting periods.

 

IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective from 1 July 2009)

The revised standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the Group's interest in subsidiaries. These changes will be applied prospectively in accordance with the transitional provisions and so do not have an immediate effect on the Group's financial statements.

 

IFRS 9 Financial Instruments (Issued November 2009) (effective from 1 January 2013)

The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety by the end of 2010, with the replacement standard to be effective for annual periods beginning 1 January 2013. IFRS 9 is the first part of Phase 1 of this project.

 

The main phases are:

 

Phase 1: Classification and Measurement

Phase 2: Impairment methodology

Phase 3: Hedge accounting

 

In addition, a separate project is dealing with de-recognition. Management has yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of the IAS 39 replacement have been published and they can comprehensively assess the impact of all changes.

 

IAS 24 Related party disclosures (Issued November 2009) (effective from 1 January 2011)

The IASB published a revised version of IAS 24 to provide exemption from IAS 24's disclosures for transactions with a) a government that has control, joint control or significant influence over the reporting entity and b) 'government-related entities' (entities controlled, jointly controlled or significantly influenced by that same government). The revised version also amended the definition of related party to remove inconsistencies and depict the intended meaning.

 

Though the standard is applicable to the Group, the amendments from the previous version would not have any impact on the consolidated financial statements. 

 

Annual Improvements (effective at various dates, earliest being 1 July 2010)

The Improvements to IFRS's makes minor amendments to nine International Financial Reporting Standards (IFRS). The annual improvements process has been developed to address non-urgent, but necessary, minor amendments to IFRS's.

 

Some of the applicable standards which are affected are summarised as under:

 

IFRS 7: Clarifies the disclosure requirements of the standard to remove inconsistencies, duplicative disclosure requirements and specific disclosures that may be misleading.

 

Annual Improvements (effective at various dates, earliest being 1 July 2010)(cont'd)

IAS 1: Presentation of Financial Statements:

Clarification of statement of changes in equity: Clarifies that entities may present the required reconciliations for each component of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements.

 

The above changes would not have a significant impact of the presentation disclosure of the consolidated financial statements when these are adopted.

 

2.4 Summary of significant accounting policies

 

Overall considerations

The financial accounting policies that have been used in the preparation of these consolidated financial statements are summarised below. The consolidated financial statements have been prepared on a going concern basis. The measurement bases are described in the accounting policies below.

 

Basis of consolidation

The financial year of the Company and all subsidiaries in the Group ends on 31 March.

 

The financial statements of the Group include the financial statements of the Company and its subsidiaries, made up to the end of the financial year. All inter-company balances and significant inter-company transactions and resulting unrealised profits or losses are eliminated on consolidation and the consolidated financial statements reflect external transactions and balances only. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which the Group ceases to have control of the subsidiaries. Acquisitions of subsidiaries are accounted for using the purchase method of accounting.

 

Where accounting policies of a subsidiary do not conform to those of the Company, adjustments are made on consolidation when the amounts involved are considered significant to the Group.

 

Minority interests represent the portion of statement of comprehensive income and net assets in subsidiaries not held by the Group. They are presented in the consolidated statement of financial position within equity, separately from the parent shareholders' equity, and are separately disclosed in the consolidated statement of comprehensive income.

 

Business combinations

Business combinations are accounted for using the purchase method. The purchase method involves the recognition of the acquiree's identifiable assets and liabilities, including contingent liabilities, regardless of whether they were recorded in the financial statements prior to acquisition. On initial recognition, the assets and liabilities of the acquired subsidiary are included in the consolidated statement of financial position at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group's accounting policies. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquiree at the date of acquisition. Any excess of identifiable net assets over acquisition cost is recognised in statement of comprehensive income immediately after acquisition.

 

Subsidiaries

For consolidation purposes, a subsidiary is an entity controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether there is control.

 

Shares in subsidiaries are stated at cost less allowance for any impairment losses on an individual subsidiary basis. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of minority interest.

 

Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combinations over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill is tested for impairment on an annual basis and any impairment is charged to the statement of comprehensive income.

 

Foreign currency translation

The functional currency of the entities within the Group (other than the Company) is Indian Rupees (INR). The Company has a functional currency of United States Dollars ('USD'). Management has chosen to present the consolidated financial information in USD, the functional currency of the Company.

 

A currency other than the functional currency of entities within the Group is a foreign currency. Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in statement of comprehensive income. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated).

 

Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.

 

In the Group's consolidated financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than USD (the Group's presentation currency) are translated into USD upon consolidation. The functional currency of the entities in the Group has remained unchanged during the reporting period.

 

On consolidation, assets and liabilities have been translated into USD at the closing rate at the reporting date. Income and expenses have been translated into the Group's presentation currency at the average rate over the reporting period. Exchange differences are recognised in the "Exchange translation reserve" in equity.

 

Other intangible assets

The Group's other intangible assets include externally acquired customer relationships and brand as part of the business combination further described in Note 5.

 

Customer relationships

The customer relationships have been acquired as part of a business combination and thus have been recognised at the fair value at the date of acquisition.

 

These relationships have been amortised on a straight line basis over five years, which is considered as the useful life of the asset.

 

Brand

Brand was acquired as part of the business combination and thus has been recognised at the fair value at the date of acquisition.

 

Management considers the life of the brand to be indefinite. The brand will not be amortised until its useful life is determined to be finite. It would be tested for impairment annually and whenever there is an indication that it may be impaired.

 

Plant and equipment and depreciation

Plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and repairs are charged to the statement of comprehensive income. 

 

Subsequent expenditure relating to plant and equipment that have been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred.

 

Depreciation is computed utilising the straight-line method to write off the cost of these assets over their estimated useful lives.

 

Computers and computer software	3 years
Office equipment	5 years
Plant and machinery	5 years
Furniture and fixtures	5 years
Vehicles	5 years

 

The cost of leasehold improvements is charged to statement of comprehensive income on a straight line basis over the period of lease or three years, being the useful life of leasehold improvements, whichever is shorter.

 

Construction-in-progress is not depreciated until the assets are completed and ready for use.

 

For acquisitions and disposals during the financial year, depreciation is provided from the day of acquisition to the day before disposal respectively. Depreciation methods, useful lives and residual values are reviewed at end of each reporting date and changes, if any, are accounted for prospectively.

 

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.

 

Fully depreciated plant and equipment are retained in the books of accounts until they are no longer in use.

 

The carrying amounts of plant and equipment are reviewed yearly in order to assess whether their carrying amounts need to be written down to recoverable amounts. Recoverable amount is defined as the higher of value in use and net selling price.

 

Financial assets

The Group and the Company classify its financial assets, other than hedging instruments, into "loans and receivables"

 

All financial assets are recognised on their trade date - the date on which the Group and the Company commit to purchase or sell the asset. Financial assets are initially recognised at fair value, plus directly attributable transaction costs except for financial assets at fair value through statement of comprehensive income, which are recognised at fair value.

 

Derecognition of financial instruments occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at each balance sheet date whether or not there is objective evidence that a financial asset or a group of financial assets is impaired.

 

The Group and the Company carry on its statement of financial position the following category of financial assets as at end of the reporting date.

 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group and the Company provide money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.

 

Loans and receivables are subsequently measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in statement of comprehensive income. Any reversal shall not result in a carrying amount that exceeds what the amortised cost would have been had any impairment loss not been recognised at the date the impairment is reversed. Any reversal is recognised in the statement of comprehensive income.

 

Receivables are provided against when objective evidence is received that the Group and the Company will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

 

The Group's cash and bank balances, trade and other receivables fall into this category of financial instruments.

 

Long-term financial assets

Restricted cash balance

Restricted cash represents deposits that have been pledged with banks or created as security to meet contractual obligations towards other parties and which are not freely available for use by the Group. The restricted cash balance is accounted as financial assets under the category of loans and receivables, the recognition and measurement principles for which are explained above.

 

Security deposits

Security deposits mentioned above are interest free and have maturity period ranging between 1 to 2 years. Since the impact of discounting is not significant on such security deposits, amount paid is also considered to be equivalent to their fair value on initial measurement.

 

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes all cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Costs of ordinarily interchangeable items are assigned using the first in, first out cost method. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Work-in-progress represents material equipment under installation which are stated at cost. Cost includes all direct expenditure and all appropriate overheads.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash and balances, short-term and long-term fixed deposits.

 

Other provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, 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, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as other finance expense

 

In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the statement of financial position.

 

Financial liabilities

The Group's and the Company's financial liabilities include bank borrowings, finance lease liabilities and payables.

 

Financial liabilities are recognised when the Group and the Company become a party to the contractual agreements of the instrument. All interest-related charges are recognised as expenses in "finance costs" in the statement of comprehensive income.

 

Borrowings are recognised initially at fair value of proceeds received less attributable transaction costs, if any. Borrowings are subsequently stated at amortised cost which is the initial fair value less any principal repayments. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to the statement of comprehensive income over the period of the borrowings using the effective interest method.

 

Borrowings which are due to be settled within 12 months after the end of reporting date are included in current liabilities in the statement of financial position even though the original terms was for a period longer than 12 months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the end of reporting date and before the financial statements are authorised for issue. Borrowings to be settled within the Group's normal operating cycle are classified as current. Other borrowings due to be settled more than 12 months after the end of reporting date are included in non-current liabilities in the statement of financial position.

 

Payables, which represent the consideration for goods and services received, whether or not billed to the Group and the Company, are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest method. Payables include trade and the other payables in the statement of financial position.

 

Finance lease liabilities are measured at initial value less the capital element of lease repayments (see policy on finance leases).

 

Leases

Finance leases

Where assets are financed by lease agreements that give rights approximating to ownership, the assets are capitalised as if they had been purchased outright at values equivalent to the present value of the total rental payable during the periods of the leases and the corresponding lease commitments are included under liabilities. The excess of the lease payments over the recorded lease obligations is treated as finance charges which are amortised over each lease term to give a constant effective rate of charge on the remaining balance of the obligation.

 

Operating leases

Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

 

Rentals on operating lease are charged to the statement of comprehensive income on a straight-line basis over the lease term. Lease incentives, if any, are recognised as an integral part of the net consideration agreed for the use of the leased asset. Penalty payments on early termination, if any, are recognised in the statement of comprehensive income when incurred.

 

Income taxes

Tax expense recognised in statement of comprehensive income comprises the sum of deferred tax and current tax.

 

Current tax

Calculation of current tax is based on tax rates applicable for the respective years in respective tax jurisdictions. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid/un-recovered at the reporting date. Current tax is payable on taxable profit, which differs from the statement of comprehensive income in the financial statements.

 

Deferred tax

Deferred income taxes are calculated, without discounting using the balance sheet liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases using the tax laws that have been enacted or substantively enacted by the reporting date. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Tax losses available to be carried forward and other income tax credits available to the Group are assessed for recognition as deferred tax assets.

 

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilized against future taxable income.

 

Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority.

 

Employee benefits

The Group provides post employment benefits through defined contribution plans as well as defined benefit plans.

 

Defined contribution plan

A defined contribution plan is a plan under which the Group pays fixed contributions into an independent fund administered by the government. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. The Group contributes to state-run provident fund according to eligibility of the individual employees. The contributions recognised in respect of defined contribution plans are expensed as they fall due.

 

Defined benefit plan

The defined benefit plans sponsored by the Group defines the amount of the benefit that an employee will receive on completion of services by reference to length of service and last drawn salary. The legal obligation for any benefits remains with the Group. The Group's defined benefit plans include amounts provided for gratuity obligations.

 

The liability recognised in the statement of financial position for defined benefit plans is the present value of the defined benefit obligation (DBO) at the reporting date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs.

 

Management estimates the present value of the DBO annually through valuations by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows based on management's assumptions.

 

The estimate of its post-retirement benefit obligations is based on standard rates of inflation and mortality. Discount rate is based upon the market yield available on government bonds at the reporting date with a term that matches that of the liabilities and the salary increase taking into account inflation, seniority, promotion and other relevant factors. Actuarial gains and losses are included in the statement of comprehensive income of the year.

 

Short-term employee benefits

Short term benefits comprising of employee costs such as salaries, bonuses, and paid annual leave and sick leave are accrued in the year in which the associated services are rendered by employees of the Group.

 

The liability for employee's compensated absences becoming due or expected to be availed within one year from the reporting date are considered as short term benefits and are recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees.

 

Long-term employee benefits

The liability for employee's compensated absences which become due or expected to be availed after more than one year from the reporting date are considered as long term benefits and are recognised through valuation by an independent actuary using the projected unit credit method at each reporting date. Actuarial gains and losses are included in the statement of comprehensive income of the year.

 

Key management personnel

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. The Executive Director of the Company and certain directors of subsidiaries are considered key management personnel.

 

Impairment of non-financial assets

The carrying amounts of the Group's and Company's non-financial assets subject to impairment are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. 

 

If it is not possible to estimate the recoverable amount of the individual asset, then the recoverable amount of the cash-generating unit to which the asset belongs will be identified.

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

 

All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions,less costs to sell and value in use, based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

 

Any impairment loss is charged to the statement of comprehensive income.

 

Except for goodwill where impairment losses are not reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount or when there is an indication that the impairment loss recognised for the asset no longer exists or decreases.

 

A reversal of an impairment loss is credited as income in the income statement.

 

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.

 

Related party transactions

The Group's related parties include subsidiaries, key management, and entities over which the key management are able to exercise significant influence.

 

Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash.

Revenue recognition

Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer and the amount of revenue and the costs of the transaction can be measured reliably.

 

Revenue from guarding and provision of facility management and other manpower services is recorded net of trade discounts, rebates and applicable taxes and is recognised upon performance of services and when there is a reasonable certainty regarding collection at the fair value of the consideration received or receivable.

 

In respect of installation projects which overlap two reporting periods, revenue is recognised based on the percentage of project completion method. Percentage completion of the project is determined by comparing actual cost incurred till reporting date to the estimate of total cost for completion of the project.

 

Interest income is recognised as interest accrues using effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the asset.

 

Segment reporting

In identifying its operating segments, management generally follows the Group's service lines, which represent the main products and services provided by the Group.

 

The activities undertaken by the Guarding segment includes the provision of guarding services. Facility management services are undertaken by the Facility Management segment. The activities undertaken in respect sale and installation of safety equipment do not meet the quantitative thresholds under IFRS 8 and thus have been disclosed under the segment 'Others'.

 

Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches. All inter-segment transfers are carried out at arm's length prices.

 

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements, except that:

 

- post-employment benefit expenses;

- management overheads

 

are not included in arriving at the operating profit of the operating segments. In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment.

 

3 Acquisition of Roto Power Projects Pvt. Ltd.

 

On 30 June, 2009, through one of its entities, Tenon Property Management Services Private Limited acquired 99.99% of the issued share capital of Roto Power Projects Private Limited (Roto), a private limited company incorporated in India. Roto is engaged in providing mechanical and engineering maintenance services in India.

 

The Group has acquired Roto for a consideration of US$ 2.09 million. As consideration for the Roto acquisition, Tenon Property has made an upfront payment of US$ 1.78 million and there is balance consideration of US$0.26 million payable on 30 June 2011.

 

Total cost of acquisition includes the components stated below:

	2010
	US$
Purchase price, settled in cash	1,778,171
Deferred consideration (due in June 2011)	256,464
Other incidental expenses	59,460
Total cost of acquisition	2,094,095

 

	Recognised at acquisition date*
	US$
Net assets acquired
Intangible asset	149,030
Property, plant and equipment	49,912
Cash and bank balances	143,301
Trade receivables	1,035,484
Other assets	166,933
Total assets	1,544,660
Trade payables	571,927
Employee benefit obligations	215,041
Deferred tax liability	49,022
Total liabilities	835,990
Net identifiable assets	708,670
Goodwill on acquisition	1,385,425
Total cost of acquisition	2,094,095
Cost of acquisition (net of deferred consideration)	1,837,631
Cash and bank balances acquired	(143,301)
Net cash outflow on acquired subsidiary	1,694,330

 

The above figures are relevant on the date of acquisition of Roto.

 

* Disclosure of the carrying amounts of the acquiree's assets and liabilities and the revenue and the profit and loss up to the date of acquisition immediately before the combination in accordance with IFRS was impracticable. Roto had not applied IFRS prior to its acquisition as at 30 June 2009. Therefore, essential data needed for pro-forma IFRS accounts of Roto prior to the date of acquisition was not available.

 

Roto Power Projects Private Limited generated a profit of USD 188,738 from the date of acquisition up to 31 March 2010.

 

The goodwill that arose on the combination can be attributed to the synergies expected to be derived from the combination and the value of the workforce of Roto Power Projects Private Limited which cannot be recognised as an intangible asset under IAS 38 Intangible Assets. As per the purchase price allocation, no other intangible asset, other than customer relationships and brand, qualified for separate recognition. These circumstances contributed to the entire excess amount of consideration over net assets acquired, to be classified as goodwill.

 

 

4 Goodwill

 

A reconciliation of the goodwill is shown as under:

 

	2010	2009
The Group	US$	US$
Gross carrying amount:
Balance as at the beginning of year	-	-
Acquired as part of business combination (Note 3)	1,385,425	-
Translation adjustment	71,511	-
Balance as at the end of year	1,456,936	-

 

Impairment testing of goodwill

 

The recoverable amounts of the cash-generating units were determined based on value-in-use calculations estimated by management to determine expected cash flows for the unit's remaining useful life. As at 31 March 2010, the management estimated the value of the goodwill in respect of the acquisition of Roto not impaired.

 

The recoverable amounts are determined based on value in the calculations using cash flow projections from financial budgets approved by management causing five year period. The pre-tax discount rate applied to the cash flow projections and the forecasted growth rates used to extrapolate cash flows beyond the five year period are as follows:

 

	2010
Growth rates	25%
Pre-tax discount rates	20%

 

The calculations of value in use are most sensitive to the following assumptions:

 

a) Growth rates - The forecasted growth rates are based on management estimation derived from past experience and external sources of information available.

 

b) Pre-tax discount rates - Discount rates reflect management's estimates of the risks specific to the business.

 

 

5 Other intangible assets

A summary of other intangible assets is shown below:

	Brand	Customer relationships	Total
	US$	US$	US$
Cost
Balance as at 1 April 2008/31 March 2009	-	-	-
Acquisitions through business combination	61,442	87,758	149,200
Translation adjustment	3,098	4,425	7,523
Balance as at 31 March 2010	64,540	92,183	156,723
Accumulated amortization
Balance as at 1 April 2008/ 31 March 2009	-	-	-
Amortisation on acquisition through business combination	-	13,164	13,164
Translation adjustment		664	664
Balance as at 31 March 2010	-	13,828	13,828
Carrying value
At 31 March 2009	-	-	-
At 31 March 2010	64,540	78,355	142,895

 

Customer relationships are determined to have a finite life and is amortised on a straight-line basis over its estimated economic useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. These have a useful life of approximately 5 years as at 31 March 2010.

 

Management has determined that the brand would be treated as having an indefinite useful life because it is expected to contribute to net cash inflows to the Group indefinitely. As at 31 March 2010, the brand was not impaired.

 

6 Plant and equipment

 

	Computer and computer software*	Office equipment	Plant and machinery***	Furniture and fixtures	Leasehold improvements	Vehicles **	Capital work-in-progress	Total
The Group	US$	US$	US$	US$	US$	US$	US$	US$
Cost
At 1 April 2008	56,560	18,849	44,759	327,188	-	193,860	15,996	657,212
Acquisitions	101,014	18,864	80,021	23,951	32,195	124,433	(8,309)	372,169
Disposals/transfers	(510)	(377)	-	-	-	(26,316)	-	(27,203)
Translation adjustment	(12,169)	(4,062)	(9,646)	(70,510)	-	(41,779)	(3,447)	(141,613)
At 31 March 2009	144,895	33,274	115,134	280,629	32,195	250,198	4,240	860,565
Acquisitions	32,498	21,898	112,247	29,076	27,076	236,660	-	459,455
Acquisitions through business combination	30,245	6,683	52,703	8,893	-	17,576	-	116,100
Disposals/transfers	(1,325)			(975)		(16,482)		(18,782)
Translation adjustment	21,745	5,725	23,137	37,983	5,509	44,192	546	138,837
At 31 March 2010	228,058	67,580	303,221	355,606	64,780	532,144	4,786	1,556,175
Accumulated depreciation
At 1 April 2008	10,616	3,523	6,888	20,458	-	6,580	-	48,065
Depreciation charge for the year	34,062	5,290	16,691	59,455	1,421	44,734	-	161,653
Translation adjustment	(5,634)	(1,283)	(3,133)	(10,286)	(140)	(5,840)	-	(26,316)
At 31 March 2009	39,044	7,530	20,446	69,627	1,281	45,474	-	183,402
Depreciation charge for the year	65,175	11,713	46,330	64,272	7,913	96,812	-	292,215
Depreciation on acquisitions through business combination	17,716	2,719	32,960	2,772	-	5,386	-	61,553
Disposals	-	-	-	(364)	-	(5,359)	-	(5,723)
Translation adjustment	9,204	1,697	6,630	12,373	564	10,736	-	41,204
At 31 March 2010	131,139	23,659	106,366	148,680	9,758	153,049	-	572,651
Net book value
At 31 March 2009	105,851	25,744	94,688	211,002	30,914	204,724	4,240	677,163
At 31 March 2010	96,919	43,921	196,855	206,926	55,022	379,095	4,786	983,524

 

 

* The Group's computer and computer software as at 31 March 2010 include assets under finance lease disclosed under Note 16.1 with net book value of US$46,941 (2009 - NIL).

 

 

** The Group's vehicles as at 31 March 2010 include motor vehicles of US$369,092 (2009 - US$187,280) which have been pledged as security under finance lease as disclosed under Note 16.1.

 

 

*** The Group's plant and machinery as at 31 March 2010 include equipment of US$14,377 (2009 - US$Nil) which have been pledged as security under finance lease as disclosed under Note 16.1.

 

 

Cash flow reconciliation of acquisition of plant and equipment is as follows:

 

	2010	2009
The Group	US$	US$
Acquisition during the year	459,455	372,169
Assets acquired through finance lease	(430,410)	(187,280)
Net cash flow used in acquisitions of plant and equipment	29,045	184,889

 

7 Subsidiaries

 

	2010	2009
The Company	US$	US$
Unquoted shares, at cost	7,675,465	6,849,675

 

 

The subsidiaries are:

 

Name	Country of incorporation/ principal place of business	Cost of investments		Percentage of equity held		Principal activities
		2010	2009	2010	2009
		US$	US$	%	%
Held directly
Tenon Properly Services Pvt Ltd	India	7,675,465	6,849,675	99.48%	99.48%	Facilities and property management services
Held by Tenon Property Services Pvt Ltd
Peregrine Guarding Pvt Ltd	India	-	-	100%	100%	Guarding, safety and security services
Tenon Support Services Pvt Lt	India	-	-	100%	100%	Facilities and property management services
Tenon Project Services Pvt Ltd	India	-	-	100%	100%	Sale and installation of safety equipment
Roto Power Projects Pvt Ltd	India	-	-	99.95%	-	Mechanical and engineering maintenance services
Held by Peregrine Guarding Pvt Ltd
Peregrine Protection Services Pvt Ltd	India	-	-	100%	100%	Dormant

 

8 Long-term financial assets

 

	2010	2009
The Group	US$	US$
Security deposit	77,758	88,897
Restricted cash	196,415	111,933
	274,173	200,830

 

Security deposits are interest-free and have maturity periods ranging between 1 to 2 years. The fair values of these amounts are not considered as materially different from their carrying amounts.

 

Restricted cash represent fixed deposits held with banks to secure bank guarantees in favour of customers with respect to the Group's activities.

 

The security deposits and the restricted cash are considered to approximate their fair values and denominated in Indian Rupees.

 

 

9 Deferred tax assets

 

	2010	2009
The Group	US$	US$
Balance at beginning	618,853	165,870
Transfer from statement of comprehensive income (Note 21)	471,276	549,157
Exchange adjustment	103,416	(96,174)
Balance at end	1,193,545	618,853

 

Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows:

 

Deferred tax assets/(liabilities)

	At 1 April 2009	Recognised  in comprehensive income	Recognised in business combination	At 31 March 2010
	US$	US$	US$	US$
Plant and equipment	(4,104)	24,662	-	20,558
Retirement benefits and other employee benefits	56,591	82,627	-	139,218
Unutilised tax losses	541,397	358,068	-	899,465
Others	24969	153,618	(44,283)	134,304
	618,853	618,975	(44,283)	1,193,545

 

Deferred tax assets have not been recognised in respect of the following items:

 

	2010	2009
The Group	US$	US$
Tax losses	390,041	1,794,000
Capital allowances	-	29,000
Tax losses	390,041	1,823,000

 

The tax losses are subject to agreement by the tax authorities and compliance with tax regulations in the respective countries in which the entities operate. The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits.

10 Inventories

 

	2010	2009
The Group	US$	US$
Work-in-progress	85,220	13,137
Consumables	5,012	54,125
	90,232	67,262

 

Work-in-progress represents material and equipment under installation at customer sites.

 

The balance includes inventories amounted to US$74,944 (2009 - US$62,837) which was pledged to secure bank overdraft facility (Note 16.3)

 

 

11 Trade and other receivables

The Group The Company

	2010	2009	2008	2010	2009	2008
	US$	US$	US$	US$	US$	US$
Trade receivables
- third parties	7,284,747	4,810,145	3,704,615	-	-	-
Allowances for impairment of trade receivables:
Balance at beginning	179,148	14,286	-	-	-	-
Charge for the year	345,070	164,862	14,286	-	-	-
Balance at end	524,218	179,148	14,286	-	-	-
Net trade receivables	6,760,529	4,630,997	3,690,329	-	-	-
Other receivables
Unbilled revenue	511,572	65,670	-	-	-	-
Advances to related parties	649,550	667,152	62,070	-	-	-
Advances to third parties	46,488	48,901	33,512	-	-	-
Staff loans	97,087	91,715	50,692	-	-	-
Deposits	204,301	229,531	98,661	5,685	5,685
Prepayments	23,416	72,591	567,359	2,122	2,451	551,215
Others	45,012	84,137	17,695	4,075	396	-
	1,577,426	1,259,697	829,989	11,882	8,532	551,215
	8,337,955	5,890,694	4,520,318	11,882	8,532	551,215

 

The balance includes trade receivables amounted to US$4,347,532 (2009 - US$4,196,871) which was pledged to secure bank overdraft facility (Note 16.3)

 

Related parties are entities over which key management are able to exercise control.

 

The advances to related parties are interest-free, unsecured and receivable on demand.

 

The ageing analysis of trade receivables due, but not impaired is as follows:

 

The Group The Company

	2010	2009	2010	2009
	US$	US$	US$	US$
Not past due	3,693,044	2,232,866	-	-
Past due 0 to 3 months	2,411,387	1,746,080	-	-
Past due 3 to 6 months	211,501	285,808	-	-
Past due over 6 months	444,597	366,243	-	-
	6,760,529	4,630,997	-	-

 

 

The credit risk for trade receivables based on the information provided by key management, by geographical area, is located in India.

 

12 Cash and bank balances

The Group The Company

	2010	2009	2010	2009
	US$	US$	US$	US$
Fixed deposit	-	1,163,886	-	-
Cash at bank	618,914	1,956,316	53,615	1,294,212
Cash on hand	78,494	132,938	-	-
	697,408	3,253,140	53,615	1,294,212

 

Cash and bank balances are denominated in the following currencies:

The Group The Company

	2010	2009	2010	2009
	US$	US$	US$	US$
United States Dollars	53,615	1,294,212	53,615	1,294,212
Indian Rupees	643,793	1,958,928	-	-
	697,408	3,253,140	53,615	1,294,212

 

The fixed deposits have an average maturity of 12 months (2009 - 12 months) from the end of the financial year with the weighted average effective interest rates of 6.56% (2009 - 7.49%) per annum.

 

13 Share capital

 

	No. of ordinary shares		Amount
The Group and The Company	2010	2009	2010	2009
			US$	US$
Issued and fully paid, with no par value
Balance at beginning of year	47,700,001	40,000,001	9,555,312	400,001
Issue of ordinary shares	-	7,700,000	-	9,730,120
Share issue expenses	-	-	-	(574,809)
Balance at end of year	47,700,001	47,700,001	9,555,312	9,555,312

 

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.

 

14 Reserves

The Group The Company

	2010	2009	2010	2009
	US$	US$	US$	US$
Exchange translation reserve	(408,173)	(1,076,249)		-
Accumulated losses	(2,850,855)	(2,294,341)	(2,179,898)	(1,789,858)
	(3,259,028)	(3,370,590)	(2,179,898)	(1,789,858)
Represented by:
Distributable	(3,259,028)	(3,370,590)	(2,179,898)	(1,789,858)
Non-distributable	-	-	-	-
	(3,259,028)	(3,370,590)	(2,179,898)	(1,789,858)

 

Exchange fluctuation reserve arises from the translation of the financial statements of foreign entities whose functional currencies are different from the presentation currency.

 

15 Employee benefit obligations

 

Long term employee benefit obligations comprise of the gratuity and long term compensated absences. These are summarised as under:

 

		2010	2009
The Group		US$	US$
Gratuity benefit plan (Note 15.1)		264,837	124,958
Long term compensated absences (Note 15.2)		56,397	-
		321,234	124,958

 

15.1 Gratuity benefit plan

 

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment of amounts that are based on last drawn salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation by each of the Companies. The Group does not have an obligation to fund under the gratuity benefit plan.

 

The expense for the year and the liability as at year end in respect of the Group on account of the above plan is given below:

 

	2010		2009
	US$		US$
Reconciliation of gratuity plan
A. Change in benefit obligation
Actuarial value of projected benefit obligation (PBO) (Opening balance)	124,958		92,916
Liability acquired in business combination	103,220	-	-
Interest cost	3,880		5,662
Service cost	69,415		78,100
Past Service cost	7,054		-
Benefits paid	(12,661)		-
Actuarial gain	(60,749)		(28,173)
Translation adjustment	29,720		(23,547)
PBO at the end year (Note 15)	264,837		124,958
B. Amounts recognised in statement of comprehensive income
Current service cost	69,415		78,100
Interest cost	3,880		5,662
Past Service Cost	7,054		-
Total actuarial gain recognised in the year	(60,749)		(28,173)
Expense recognised in statement of comprehensive income	19,600		55,589
C. Total Actuarial Gain and Loss
Actuarial gain	(60,749)		(28,173)

 

For determination of the gratuity liability, the following actuarial assumptions were used:

 

	2010	2009
Discount Rate	8%	7%
Rate of increase in compensation levels	5%	8%
Demographic Assumptions
Retirement Age	58 years	58 years
Mortality table	LIC(94-96) duly modified

 

15.2 Compensated absences

 

The entities within the Group have either accumulating or non-accumulating compensated absences policy. The cost of non-accumulating absences is charged to statement of comprehensive income. The Group measures the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the balance sheet. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method, where the present value of the defined benefit obligation is determined by discounting the estimated future cash outflows based on assumptions developed by the management. The discount rate is based upon the market yield available on government bonds/ high quality corporate bonds at the balance sheet dates, which have a term that matches that of the liabilities. Other assumptions used in the valuation include an estimate of the salary increases, which takes into account inflation, seniority, promotion and other relevant factors. The liability with respect to long term employee benefits in respect of compensated absences for the year ended 31 March 2010 is US$ 56,397 (2009: US$ NIL)

 

15.3 Provident fund benefit

 

Apart from being covered under the Gratuity Plan described earlier, employees of the Group also participate in a provident fund plan. The Provident Fund (being administered by a trust) is a defined contribution scheme whereby the Group deposits an amount determined as a fixed percentage of basic pay to the fund every month. The benefit vests upon commencement of employment. The Group does not have any further obligation in the plan beyond making such contributions. Upon retirement or separation, an employee becomes entitled for this lump sum benefit, which is paid directly to the concerned employee by the fund. The Group contributed US$1,543,837 and US$1,163,442 to the provident fund plan, during the year ended 31 March 2010 and 31 March 2009, respectively.

 

16 Borrowings

	2010	2009
	US$	US$
Non-current
Obligations under finance leases (Note 16.1)	122,394	78,812
Bank loans (Note 16.2)	16,558	151,820
	138,952	230,632
Current
Obligations under finance leases (Note 16.1)	106,558	60,760
Bank loans (Note 16.2)	100,771	90,218
Other bank borrowing (Note 16.3)	1,098,210	1,241,451
	1,305,539	1,392,429

 

16.1 Obligations under finance leases

	2010	2009
The Group	US$	US$
Minimum lease payments payable:
Due not later than one year	129,987	76,233
Due later than one year and not later than five years	145,254	86,330
Due later than five years	-	-
	275,241	162,563
Less:
Finance charges allocated to future periods	(46,289)	(22,991)
Present value of minimum lease payments	228,952	139,572

Represented by:

	2010	2009
The Group	US$	US$
Present value of minimum lease payments:
Due not later than one year (Note 16)	106,558	60,760
Due later than one year and not later than five years (Note 16)	122,394	78,812
Due later than five years	-	-
Present value of minimum lease payments	228,952	139,572

 

The average interest rate is at 13.26% (2009 - 13.33%) per annum.

 

The Group leases motor vehicles, computers and plant and equipment from non-related parties under finance leases. The finance lease obligations are secured by the underlying assets (Note 6).

 

 

16.2 Bank loans

	2010	2009
The Group	US$	US$
Loans - unsecured	117,329	242,038
Amount repayable within one year (Note 16)	(100,771)	(90,218)
Amount repayable after one year (Note 16)	16,558	151,820

 

The average interest rate is 18% (2009 - 21.00%) per annum.

 

The amount repayable within one year is included under current liabilities whilst the amount repayable after one year is included under non-current liabilities.

 

All the loans are fully repayable within next financial year, except a bank loan which is repayable by January 2012.

 

16.3 Other bank borrowings

	2010	2009
The Group	US$	US$
Bank overdraft - secured (Note 16)	1,098,210	1,241,451

 

The bank overdraft bears interest of 13 % (2009 - 12 %) per annum. The bank overdraft is secured by a pledge of certain inventories (Note 10) and trade receivables (Note 11).

 

The borrowings are denominated in Indian Rupees.

 

17 Trade and other payables

The Group The Company

	2010	2009	2010	2009
	US$	US$	US$	US$
Trade payables
Third parties	629,761	413,741	1,970	14,114
Accruals	273,370	32,890	19,524	32,890
	903,131	446,631	21,494	47,004
Other payables
Deferred consideration	332,300	-	-	-
Salaries payable	2,815,159	1,262,466	3,993	-
Advances from customers	213,475	27,357	-	-
Statutory dues payables	1,849,738	1,345,132	-	-
Advances from related parties	11,230	51,444	10,471	10,471
Amount due to subsidiaries	-	-	329,590	329,490
	6,125,033	3,133,030	365,548	386,965

 

Related parties includes key management and their spouse and entities over which key management are able to exercise control.

 

Both the advances, from related parties and amounts due to subsidiaries are interest-free, unsecured and repayable on demand.

 

 

18 Other income

			2010	2009
The Group			US$	US$
Exchange gain			-	199,662
Interest income			32,664	94,160
Others			77,471	6,925
			110,135	300,747

 

 

19 Finance costs

			2010	2009
The Group			US$	US$
Interest on bank overdraft			222,443	13,872
Interest on bank loans			38,255	47,562
Interest on finance lease			21,168	20,216
Interest allocated from a related party			26,250	247,829
Others			107,003	78,401
			415,119	407,880

 

Interest allocated from a related party represents unsecured borrowings provided by the related party during the year ended 31 March 2009 and March 31 2010. The loans include an overdraft facility, finance leases in respect of motor vehicles and other banks loans transferred to a subsidiary (Note 23). This interest carries no margin and is back to back in nature. The effective interest rates range from 13% to18% (2009 - 12% to 21%)

 

Related party is an entity over which key management are able to exercise control.

 

20 Loss before taxation

 

		2010	2009
The Group		US$	US$
Loss before taxation has been arrived at
after charging:
Impairment of trade and other receivables:
- charge for the year		345,070	164,862
Legal and professional fees		311,692	376,115
Operating lease rentals - office		344,351	397490
Initial public offering expenses		-	1,436,253
Staff costs:
Other than key management personnel
- Salaries, wages and other related costs		26,437,917	19,523,578
- Provident fund contributions		1,543,837	1,163,442

 

 

21 Taxation

	2010	2009
The Group	US$	US$
Current taxation	311,856	234,773
Deferred taxation (Note 9)	(471,276)	(549,157)
	(159,420)	(314,384)

 

The tax expense on the results of the financial year varies from the amount of income tax determined by applying the India statutory rate of income tax on profits as a result of the following:

 

	2010	2009
The Group	US$	US$
Loss before taxation	(715,840)	(3,243,861)
Tax at statutory rate	(177,036)	(801,486)
Tax effect on non-deductible expenses	16,768	155,078
Tax effect on non-taxable income	(29,624)	-
Change in tax rate	(35,835)	-
Deferred tax asset not recognised	66,307	384,667
Accelerated tax depreciation	-	4,662
Others	-	(57,305)
	(159,420)	(314,384)

 

Income tax is based on tax rate applicable on statement of comprehensive income in various jurisdictions in which the Group operates. The effective tax at the domestic rates applicable to profits in the country concerned as shown in the reconciliation below have been computed by multiplying the accounting profit with effective tax rate in each jurisdiction in which the Group operates. The individual entity amounts have been then aggregated for the consolidated financial statements. The effective tax rate applied in each individual entity has not been disclosed in the tax reconciliation above as the amounts aggregated for individual group entities would not be a meaningful number.

 

Note 9 provides information on the entity's deferred tax assets and liabilities.

 

22 Loss per share

 

Both the basic and diluted loss per share have been calculated using the profit attributable to shareholders of Mortice Limited as the numerator.

 

Calculations of basic and diluted loss per share are as follows:

 

	2010	2009
The Group	US$	US$
Loss attributable to equity holders (in US$)	(556,514)	(2,926,983)
Weighted average number of ordinary shares outstanding for basic and diluted loss per share	47,700,001	46,771,782
Basic and diluted loss per share (US$ per share)	(0.01)	(0.06)

 

23 Related party transactions

 

Related parties include subsidiaries, key management and entities in which the key management has interest or control.

 

Significant related party transactions, other than those disclosed elsewhere in the financial statements, are as follows:

 

Transactions with key management:

 

Particulars	2010	2009
	US$	US$
Remuneration - short-term benefits	672,600	874,038

 

The outstanding balance payable to related parties under the category of key management as at 31 March 2010 and 31 March 2009 is USD 16,374 and USD 21,202 respectively. These have been included under salaries payable under Note 17.

 

In addition to the above, the key management personnel participate in the gratuity plan of the Group

 

	2010	2009
The Group	US$	US$
Entities over which key management are able to exercise control:
Overdraft facility utilised by a subsidiary (Note 19)	-	(1,544,842)
Inventories transferred to a subsidiary	-	(26,136)
Operating expenses paid on behalf of a subsidiary	388	2,289,781
Repayment of advances from a subsidiary	(69,729)	(2,593,420)
Transfer of motor vehicle to a subsidiary	141,635	-
Allocation of interest to a subsidiary	-	(237,796)
Non-trade amount received on behalf of a subsidiary	(150,663)	(120,998)
Hire charges paid on behalf of a subsidiary	26,506	192,481
Office rental paid by a subsidiary	(126,539)	(119,789)
Management consultancy services rendered by a subsidiary	(32)	(58,687)

 

24 Commitments

 

Operating lease commitments (non-cancellable)

 

At the financial position date, the Group and the Company were committed to making the following rental payments in respect of non-cancellable operating leases of office premises with an original term of more than one year:

 

The Group

	2010	2009
	US$	US$
Not later than one year	184,044	188,232
Later than one year and not later than five years	-	65,308
Later than five years	-	-
	184,044	253,540

 

 

25 Operating segments

 

Segment accounting policies are the same as the policies described in Note 2. The Company generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices.

 

Revenues are attributed to geographic areas based on the location of the assets producing the revenues.

 

The following tables present revenue and profit information regarding industry segments for the years ended 31 March 2010 and 2009, and certain assets and liabilities information regarding industry segments as at 31 March 2010 and 2009.