Final Results

Mortice Limited

FINAL RESULTS

Mortice Limited (AIM:MORT, "Mortice" or the "Company"), the AIM listed Security and Facilities Management company with India focused operations, today announces its final results for the year ended 31 March 2011.

Operational highlights:

·; Revenue grew by 52% per cent

·; The group has turned profitable compared to the loss posted in previous years

·; Profit before Tax is US$1.28 million against loss of US$ (0.71 ) million in FY 09-10

Commenting on the results, Manjit Rajain, Executive Chairman of Mortice Limited said:

The past year has been a truly momentous one for my company. Not only have we grown significantly at 52%, we have also turned profitable. We believe that we have improved our leadership in the Indian market and created a strong platform for continued growth.

The Gross Domestic Product (GDP) in India grew by 7.80 percent in the first quarter of 2011 year on year (YoY). From 2004 until 2010, India's average quarterly GDP Growth was 8.40 percent reaching an historical high of 10.10 percent in September of 2006. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one third of its labour force. With this growth in the Indian economy, the directors of the Company believe services demand is likely to increase and that Mortice is very well positioned to leverage on this growth.' (Source :www.rbi.org.in)

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 2011 will be posted to shareholders and made available on the company website in due course.

For further information please contact:

 Statement by the Executive Chairman, Mr. Manjit Rajain

In a year that had considerable competitive activity, your Company performed with great resolve and forbearance. Our resilience, coupled with smart strategies and strong execution ability across business units, saw us meet and exceed many milestones which includes turning our Company profitable, as compared to running in loss last year, and also breaking even.

Major reasons for our growth over the financial year have been our concentrated approach for client's satisfaction, determined operations, relationship with our customers and development of our employees. The directors believe that we will be able to further fortify our business in the Facilities Management and Guarding industries and benefit from the sheer presence in all states of India and volume of our operations. We are positive about our future growth and expansion because of following reasons:

·; We can use our strong base of customers, where we have long and loyal relations, to cross sell our Group' services

·; All India presence in all states of India gives us advantage to become preferred service provider with clients who have multi state presence

·; Considering that our Facility Management business generated US$ 12.4 million of revenue, now we are recognized as "Integrated Facility Management Service Provider".

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 integrated and practical 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 16 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 Group acquired Rotopower Projects Pvt Ltd in June 2009 and it has now been successfully integrated within Tenon. The Directors are satisfied with the way Rotopower revenue has grown by 84% percent over previous year on a consolidated basis. After adjusting the performance for the twelve month period for the FY 0910 the growth stands at 42 %. 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 revenue growth of 83% in current year.

Statements of financial position as at 31 March 2011

Consolidated statement of comprehensive income for the financial year ended 31 March 2011

Consolidated statement of changes in equity for the financial year ended 31 March 2011

Consolidated statement of cash flows for the financial year ended 31 March 2011

Notes to the financial statements for the financial year ended 31 March 2011

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 together with its subsidiaries (hereinafter, together referred to as 'the Group') is engaged in providing services such as guarding services, facilities management services, mechanical and engineering maintenance services, installation of safety equipment and sale of such equipment. The Group's operations are spread across India. The various entities comprising the Group have been defined below.

Details of the business combination for the year 31 March 2010 have been specified in Note 3.

These audited consolidated financial statements were approved by the Board of Directors on 1 August 2011.

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

In the preparation of the 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 judgements, 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 the end of each reporting period, 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 and intangibles

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. Please refer note 4 for assumptions.

(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 benefits and compensated absences

Management estimates the defined benefit liability and liabilities for compensated 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 2011of US$ 494,790 (2010: US$ 321,234) 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 note 15 for details on actuarial assumptions used to estimate the group's defined benefit obligations).

(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 operate 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 the 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

Overall considerations

The Group has adopted the following 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 1 April 2010:

• IFRS 3 Business Combinations (Revised 2008)

• IAS 27 Consolidated and Separate Financial Statements (Revised 2008)

• Improvements to IFRSs 2009

Significant effects on current, prior or future periods arising from the first-time application of these new requirements in respect of presentation, recognition and measurement are described below. An overview of standards, amendments and interpretations to IFRSs issued but not yet effective is given in note 2.3.

Adoption of IFRS 3 Business Combinations (Revised 2008)

The revised standard on business combinations (IFRS 3R) introduced major changes to the accounting requirements for business combinations. It retains the major features of the purchase method of accounting, now referred to as the acquisition method. The most significant changes in IFRS 3R that had an impact on the Group's are as follows:

• acquisition-related costs of the combination are recorded as an expense in the profit or loss. Previously, these costs would have been accounted for as part of the cost of the acquisition

• any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration arrangement gives rise to a financial liability, any subsequent changes are generally recognised in profit or loss. Previously, contingent consideration was recognised only once its payment was probable and changes were recognised as an adjustment to goodwill

• the measurement of assets acquired and liabilities assumed at their acquisition-date fair values is retained. However, IFRS 3R includes certain exceptions and provides specific measurement rules.

IFRS 3R has been applied prospectively to business combinations for which the acquisition date is on or after 1 April 2010. For the year ended 31 March 2011, the adoption of IFRS 3R has not affected the accounting for the Group as there was no acquisition taken place during the year.

Business combinations for which the acquisition date is before 1 April 2010 have not been restated.

Adoption of IAS 27 Consolidated and Separate Financial Statements (Revised 2008)

The adoption of IFRS 3R requires that the revised IAS 27 (IAS 27R) is adopted at the same time. IAS 27R introduced changes to the accounting requirements for transactions with non-controlling (formerly called 'minority') interests and the loss of control of a subsidiary. These changes are applied prospectively. During the current period, the Group had no transactions with non-controlling interests.

Adoption of Improvements to IFRSs 2009 (Issued in April 2009)

The Improvements to IFRSs 2009 made several minor amendments to IFRSs. The adoption of these improvements did not result in substantial changes to the Group's accounting policies nor significant impact on these financial statements.

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 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.

Amendment (issued 28 October 2010) (Effective from 1 January 2013)

In October 2010, the IASB amended IFRS 9 to incorporate requirements for classifying and measuring financial liabilities and derecognising financial assets and financial liabilities. Most of IAS 39's requirements have been carried forward unchanged to IFRS 9. Changes have however been made to address issues related to own credit risk where an entity takes the option to measure financial liabilities at fair value.

IAS 24 Related party disclosure (Issued November 2009) (Effective from 1 January 2011)

The IASB published 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.

IFRS 7 Disclosures - Transfers of Financial Assets (issued 7 October 2010) (Effective from 1 July 2011)

The fair value hierarchy is intended to indicate the 'observability' of companies' financial instrument fair values and consists of the following three levels:

a. quoted prices (unadjusted) in active markets for identical assets or liabilities

b. inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

c. inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The amendments to IFRS 7 are intended to explain more clearly how entities determine the fair value of their financial instruments and improve the disclosure of liquidity risk.

IFRS 10 Consolidated financial statements (Issued May 2011) (Effective from 1 January 2013)

IFRS 10 introduces a revised definition of control together with accompanying guidance on how to apply it. In contrast to IAS 27 and SIC-12, which resulted in different criteria for determining control being applied to special purpose vehicles, IFRS 10's requirements will apply to all types of potential subsidiaries.

Though the standard is applicable to the Group, the management is yet to assess the impact of the new standard on the consolidated financial statements.

IFRS 11 Joint Arrangements (Issued May 2011) (Effective from 1 January 2013)

IFRS 11 supersedes IAS 31 'Interest in Joint Ventures'. The new standard eliminates the option of using proportionate consolidation for joint ventures and IAS 31's 'jointly controlled operations' and 'jointly controlled assets' categories. Most of the arrangements that would have been classified under those categories will fall into newly defined category 'joint operation'.

IFRS 12 Disclosure of Interests in Other Entities (Issued May 2011) (Effective from 1 January 2013)

The new standard integrates and makes consistent the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. The new standard is intended to provide transparency about the risks to which a reporting entity is exposed from its involvement with structured entities.

IFRS 13 Fair Value Measurement (Issued May 2011) (Effective from 1 January 2013)

The new IFRS does not affect which items are required to be 'fair-valued', but specifies how an entity should measure fair value and disclose fair value information. IFRS 13 has been developed to remedy this problem, by establishing a single source of guidance for all fair value measurements, clarifying the definition of fair value and related guidance and enhancing disclosures about fair value measurements (new disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value).

Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard, but most are effective 1 January 2011

IAS 27(Revised) Separate Financial Statements (Issued May 2011) (Effective from 1 January 2013)

The new standard is consequential charges arising from publication of the new IFRSs. The IAS 27 will now solely address separate financial statements, requirement for which are substantially unchanged.

Amendments to IAS 19 Employee benefits (Issued June 2011) (Effective from 1 January 2013)

The IASB has issued an amended version of IAS 19 'Employee Benefits' which changes the way defined benefit plans are accounted for. The amendments that have been made are intended to improve the recognition, presentation and disclosure of defined benefit plans however.

Though the amendment is applicable to the Group, the management is yet to assess the impact of the new standard on the consolidated financial statements.

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 Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 31 March 2011. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 31 March.

All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.

Business combinations

For business combinations occurring since 1 April 2010, the requirements of IFRS 3R have been applied (see note 2.2). The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

Prior to 1 April 2010, business combinations were accounted under the previous version of IFRS 3 (see note 2.2 for the summary of the significant changes).

Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Company's separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

Goodwill

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment losses.

Transaction with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the parent, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the parent.

Changes in the parent owners' ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent

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 profit or loss. 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 in each statement presenting profit or loss and other comprehensive income are 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

The 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 profit or loss.

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.

Plant and equipment and depreciation (cont'd)

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

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 intended 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 of reporting 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 reporting period which are classified as non-current assets.

Loans and receivables are subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. Any change in their value is recognised in profit or loss. 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 profit or loss.

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 such security deposits, amount paid is also considered to be equivalent to their fair value on initial measurement. The security deposits are accounted for under the category of loan and receivables.

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 formula. 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 bank balances.

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 income statement 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 costs.

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, deferred consideration, 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 profit or loss.

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 income statement over the period of the borrowings using the effective interest rate 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 rate 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.

Operating lease rentals are charged to the profit or loss 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 profit or loss when incurred.

Income taxes

Tax expense recognised in profit or loss 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 profit or loss in the financial statements.

Deferred tax

Deferred income taxes are calculated, without discounting using the 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 profit or loss for 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 in respect of 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 profit or loss 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. Directors of the Company and certain directors of subsidiaries are considered key management personnel.

Impairment testing of goodwill, other intangible assets and plant and equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other 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, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management.

Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit's recoverable amount exceeds its carrying amount.

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.

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. 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 subsidaries, Tenon Property 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 Power Projects Private Limited is engaged in providing mechanical and engineering maintenance services in India.

The Group had acquired Roto Power Projects Private Limited for a consideration of US$2.09 million.

Total cost of acquisition includes the components stated below:

The above figures are relevant on the date of acquisition.

* 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 acquisitionimmediately 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.

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:

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 2011, goodwill in respect of the acquisition of Roto Power Projects Private Limited was not impaired.

The recoverable amounts are determined based on value in the calculations using cash flow projections from financial budgets approved by management covering 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:

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:

Customer relationships are determined to have a finite life and is amortised on a straight-line basis over its estimated useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life of customer relationship is 5 years.

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 2011, the other intangible assets were not impaired.

6 Plant and equipment

* The Group's computers as at 31 March 2011 include assets under finance lease disclosed under Note 16.1 with net book value of US$Nil (2010 - US$46,941).

** The Group's vehicles as at 31 March 2011 include motor vehicles of US$562,460 (2010 - US$369,092) 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 2011 include equipment of US$Nil (2010 - US$14,377) 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:

7 Subsidiaries

The subsidiaries are:

8 Long-term financial assets

Security deposits are interest-free and have maturity periods ranging between 1 to 2 years.

Restricted cash represent fixed deposits held with banks to secure bank guarantees in favour of customers with respect to the Group's activities for year on year continuing contracts. The fixed deposits have an average maturity of 12 months (2010 - 12 months) from the end of the financial year with the weighted average effective interest rates of 7.28% (2010 - 6.56%) per annum

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

9 Deferred tax assets

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

Deferred tax assets/(liabilities)

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

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. 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

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

The balance includes inventories amounting to US$117,148 (2010 - US$74,944) which was pledged to secure bank overdraft facility (Note 16.3).

11 Trade and other receivables

The Group The Company

The balance includes trade receivables amounted to US$7,346,042 (2010 - US$4,347,532) 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

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

12 Cash and bank balances (cont'd)

Cash and bank balances are denominated in the following currencies:

The Group The Company

13 Share capital

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

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 the gratuity and long-term compensated absences. These are summarised as under:

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:

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

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 profit or loss. 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 statement of financial position. 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 end of reporting period, 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 2011 is US$53,148 (2010 - US$56,397).

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$2,283,192 and US$1,543,837 to the provident fund plan, during the year ended 31 March 2011 and 31 March 2010, respectively.

16 Borrowings

 16.1 Obligations under finance leases

Represented by:

The average interest rate is at 10.93% (2010 - 13.26%) 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

The average interest rate is 19.13% (2010 - 18%) 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.

16.3 Other bank borrowings

The bank overdraft bears interest of 13.5% (2010-13%) 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

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

19 Finance costs

Interest allocated from a related party represents unsecured borrowings provided by the related party during the year ended 31 March 2010.This interest carries no margin and is back to back in nature. The effective interest rate for the year 2010 was 13% to18%.

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

20 Profit/(loss) before taxation

21 Taxation

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 of 33.99% on profits as a result of the following: