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THIS LEAF IS STEVIA
EVERYTHINGSTEVIA
Since incorporation, PureCircle has pioneered and continues to lead the development of the high purity stevia industry globally.
PureCircle’s vision is to create a global mass volume natural ingredient market based on stevia, within this PureCircle is working towards being a long-term solutions partner for the global F&B companies as they seek to better meet consumers growing demand for natural sustainable products with reduced or no calories.
Working with partners, customers and suppliers, we are focused on what is needed to make this vision a reality: delivering great taste, ensuring consumer acceptance, fostering ingredient advocacy and delivering scaled supply chain in a responsible manner. We encapsulate all these activities as “Everything Stevia”.
IT’S A SMALL LEAF WITH THEPOWER TO MOVE THE WORLD
THIS LEAF TEACHES SUSTAINABLE FARMING TECHNIQUES
We lead the industry on all key measures of leaf supply – controlled supply hectares, quality improvements, geographical diversification and expansion, next generation research and nursery and agricultural management. To ensure the highest quality leaf, we have agronomists that partner with farmers at the local level to equip them with the skills and knowledge they need to grow stevia according to our sustainable farming practices -- everything from how best to re-use land, to teaching the optimal amount of fertilizers for the most successful crops, as well as the most efficient way to build an irrigation system.
THIS LEAF SAVES ENOUGH WATER TO BATHE 5.5 MILLION PEOPLE
In 2012, PureCircle completed the industry’s first farm-to-gate water footprint. The results showed that our footprint is up to 96% lower than that of traditional mainstream natural sweeteners. PureCircle’s patented extraction process is estimated to use 1/3 less water process versus other stevia extraction processes.We continue to work on even better ways to conserve water in our extraction facilities.
THIS LEAF IMPROVES THE LIVES OF 25,000 FARMERS
Some of our most valuable relationships are the ones we have created with our farmers across the globe. We supply our farmers with the seedlings and tools to grow the highest quality stevia. In many regions, we guarantee incomes for farmers or help secure loans to invest and grow their stevia business to improve their standard of living. Many farmers that work with PureCircle talk about their ability to keep their family together, send their children to school, and even provide jobs for others in their communities.
THIS LEAF REDUCES 500 BILLION CALORIES WORLDWIDE
Did you know that stevia is 200-350x sweeter than sugar? That’s a lot of calories that can be reduced with just a little stevia in place of caloric sweeteners. With over 6,500 food & beverage products with stevia available around the world, this little leaf saves an estimated 500 billion calories in just one year.
THIS LEAF IS POWERFUL
EXTRACTION Producing our own extract to ensure quality standards
are met
PLANT BREEDINGBreeding proprietary Stevia varieties with higher sweet
glycoside content
HARVESTING Cultivating best
sustainability practices and providing training
and materials to ensure success with local farmers
across four continents
1 2 3
FINISHED PRODUCT Providing our customers
with a level of transparency that is superior to any other
stevia manufacturer
APPLICATION Providing formulation expertise to deliver
great-tasting products
PURIFICATION Purifying steviol glycosides with an unmatched scale
and consistency
PURECIRCLE’S INTEGRATED SUPPLY CHAINFROM SEEDLING TO SWEETENER
4 5 6
CONTENTS
OUR BUSINESS AND STRATEGY 23
Vision and Strategy 23
Our Market 25
OUR PERFORMANCE 26
Highlight for the Year 26
Chairman’s Statement 27
CEO Review 27
OUR GOVERNANCE 38
Corporate Governance Report 38
Report of the Remuneration Committee 41
Board of Directors 44
OUR FINANCIALS 46
Director’s Report 47
Independent Auditors Report 49
Statements of Financial Position 50
Consolidated Statement of Comprehensive Income 52
Consolidated Statement of Changes in Equity 53
Company Statement of Changes in Equity 55
Consolidated Statement of Cash Flows 56
Notes to the Financial Statements 58
SHAREHOLDER’S INFORMATION 101
2121
PureCircle is a leading international producer and marketer of speciality natural ingredients based on high purity stevia.
Stevia is derived from the naturally occurring stevia leaf and is the first mass volume natural sweetener and flavour ingredients that can moderate calories.
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The Company’s vision is to create a global mass volume natural ingredient market based on stevia.
Stevia occupies a unique position in the world of sweet as it is the first large volume sweetener and flavour that is natural and sustainable and so addresses consumer concerns facing artificial high intensity sweeteners (“HIS”). It can also moderate calories, thereby helping to address the calories related issues of the other large volume natural sweeteners, corn and sugar.
Working with partners, customers and suppliers the Company is focused on what is needed to make this vision a reality: delivering great taste, ensuring consumer acceptance, fostering ingredient advocacy and delivering scaled supply chain in a responsible manner. Within this the Company is working towards being a long term solutions partner for the global F&B companies as they seek to better meet consumers’ growing demand for natural sustainable products with reduced or no calories.
In line with its vision, the Group to date has successfully commercialised a portfolio of ingredients that include natural sweeteners and flavours based on high purity stevia. This portfolio has already established the Company as a strong presence in the world sweetener and flavour industries.
The Group is expanding this portfolio into wider complementary speciality natural ingredients that have proven to work well with stevia based natural sweeteners and flavours. The portfolio expansion is on a step by step basis, starting with ingredients that the Company has already begun to use in product formulations with stevia.
Underpinning the Company’s vision is a commitment to research and development as a core competency across all activities.
The Company’s strategy since incorporation has been the pioneering of the development of the high purity stevia industry. To do this it has had to demonstrate that stevia fully met the four criteria required to be used as a mass volume natural sweetener: namely that stevia has great taste, that supply could be scaled, that supply was sustainable and that stevia cost in use was comparable to sugar and high fructose corn syrup (“HFCS”).
With high purity stevia increasingly being used in mainstream products, the Group strategy is focused on providing total solutions that include complementary natural ingredients to stevia. To do this successfully the Group maintain strategic focus in the following areas:
• GROW THE STEVIA MARKET AS FAST AS POSSIBLE In order to grow the market quickly it is essential for the Group to help customers accelerate their internal development and commercialisation process. For the largest brands in the world, meeting taste hurdles is critical and launching with the right concept is essential. The Company has built services across global markets, allowing it to closely partner with its customers and help them get to winning solutions faster. The Company conducts training and education with its customers on topics from formulation development to consumer insights. Given the Group’s high touch solution selling approach it carefully segments markets to prioritise its services to the highest priority opportunities.
• UNLOCK / BREAK DOWN BARRIERS As pioneers in developing a mainstream solution for the F&B industry, the Group recognised early on that it would be required to unlock the market and break down a range of barriers that it would face. The Group has made great strides tailoring services and innovation to achieve this goal. For example, when faced with unique challenges of addressing taste solutions across different F&B categories, the Group launched a new product line “PureCircle Matrix Solutions” with specifically tailored products for such categories as dairy and tea. Early on the Group identified that major companies wanted assurances that the reputation of stevia would be protected before they would use it in their most trusted brands. To address this need the Company drove the development of the Global Stevia Institute, a network of globally recognised health professionals to support the science and safety of the stevia industry.
• SECURE AND RETAIN HIGH MARKET SHARE Early on the Group recognised that driving mainstream development of the stevia industry, meant supplying the world’s largest F&B companies. The Group has been successful in taking the position of the supplier to many of the leading F&B companies. The Group has done this by providing differentiated, value added products and services. The position is supported by the confidence the Group can provide its customers as well through its leading position as
OUR BUSINESS AND STRATEGY
VISION STRATEGY
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the largest global purchaser of stevia leaf and the ability to scale with their needs with its industry leading capacity (1 to 1.25 million tonnes capacity, sugar equivalent).
• FIRST MOVER ADVANTAGE – KEEP MOVING FAST The Group is structured to move fast, with first movers having sizable advantages in the industry new ingredients become integral to customers’ new launches. The Group’s rapid pace of innovation is at the heart of its first mover advantage. Just as the Group was a pioneer with large scale Reb A, its expanded portfolio is leading the direction of the industry with each new launch. These new products solve real customer challenges and in turn the Group’s proprietary solutions help it to capture additional value. As a result, the Group has developed a broad patent portfolio with 64 granted and over 150 patents applied for and pending.
• ROUTES TO MARKET The stevia industry is developing across global markets. As such the Group has rapidly and strategically grown its commercial foot print to address a range of geographic demands. Today the Group has developed five core sales, marketing and technical offices across North America, EMEA, Latin America and Asia. These core locations serve as regional hubs for technical support. The offices are further reinforced with sales bases across priority markets. From these hubs the Company is able to take a direct and active role in working with the world’s largest F&B companies. While the Group is structured for global coverage, it remains focused on the largest regions, F&B categories and customers for growth.
Further, the Group recognises that it must use other routes to market to address smaller customers through key appointed distributors. For large opportunities the Group has developed strategic partnerships to supplement the Group’s capabilities and reach. For example, the Group has worked extensively with the flavour industry on a route to market for its natural flavour portfolio beyond key reserve accounts. The Group has also developed partnerships with leading companies in the sugar industry to drive penetration of the Group’s portfolio with important regional customers.
• SOLUTION SELLING At the heart of the Group’s sales approach is an understanding that the Group’s customers are looking for solutions. The Group has developed a strong sales force and support service that helps customers take advantage of integrated solutions for their business. This specialist support means that the Group will often propose new concepts for development, help formulate products, and work with its customers on marketing communication tools that the Group has itself created that can support their launch. It is this proactive approach that helps to ensure the Group can drive
usage of the Group’s differentiated set of ingredients rather than rely on less differentiated products that the rest of the industry offers. Further, by engaging with the Group’s customers across a variety of touch points through-out the process the Group is establishing a deeper customer intimacy which eventually leads to long term relationships and contracts.
• PRICING To promote the mainstream use of stevia, it is critical that the Group provides ingredients with acceptable cost in use. The Group is clear that its ingredients command a premium in the market. The Group does not position its offerings as the lowest cost in the market. However, the Group is focused on ensuring that its products are viable for launch in the world’s largest brands. On a cost in use, sweetness equivalent basis the Group is able to provide a product range that meets a variety of price points, depending on formulation targets.
STRATEGY GOING FORWARDIn line with its vision, the Group to date has successfully commercialised a portfolio of ingredients that include natural sweeteners and flavours based on high purity stevia. This portfolio has already established for the Company a strong presence in the world sweetener and flavour industries for the Group.
The Group is expanding this portfolio into wider complementary speciality natural ingredients that have proven to work well with stevia based natural sweeteners and flavours. The portfolio expansion is on a step by step basis, starting with ingredients that the Group has already began to use in product formulations with stevia.
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THE GLOBAL SWEETENER AND FLAVOUR MARKETS
THE GLOBAL SWEETENER MARKETThe global sweetener market is estimated at US$70 billion annually and the flavour industry US$23 billion annually, providing the Company with a target market in excess of US$90 billion annually.
The sweetener market comprises: • US$60 billion sugar; • US$7 billion corn, such as high fructose corn syrup (“HFCS”); and• US$3 billion HIS, like aspartame, sucralose and saccharine.
Within this the market has historically been split US$67 billion (95 per cent) natural but calorific mass volume sweeteners (sugar and HFCS) and US$3 billion (5 per cent) low calorie but non-natural occurring sweeteners (HIS).
Historically volumes in the global sweetener market have grown steadily over the long term because, as disposable incomes increase, so has the penetration of sweeteners in the diet. This trend is expected to continue with the long term growth in incomes in both developed and emerging economies.
However the global sweetener market faces a number of challenges:
• The calorific sweetener market is under both regulatory and consumer pressure to moderate calories to help combat the global obesity and diabetes epidemics.
• On a global basis, 600 million people are currently deemed to be obese (up 50 per cent since 2005), whilst it is estimated that nearly 600 million people will suffer from diabetes by 2035 (up 50 per cent from nearly 400 million in 2013).
• The McKinsey Global Institute (MGI) have recently issued a discussion paper (Overcoming Obesity: An Initial economic analysis) highlighting Obesity as one of the top three social burdens generated by human beings with an estimated annual global economic impact of roughly US$2 trillion or equivalent to 2.8 per cent of global GDP.
• The regulatory pressures also have diverse implications, from increased taxation on CSDs through to the UK’s ‘traffic light’ labelling system.
• The artificial sweeteners are under consumer pressure as consumers increasingly seek natural sustainable sources for their F&B consumption.
In addition consumers are seeking sustainable sources of sweetness. Stevia brings solutions that require lower land and water usage and an overall lower impact on the environment than calorific options.
THE GLOBAL FLAVOUR INDUSTRYThe global flavour industry is valued at about US$23 billion a year. The industry is growing but faces the same regulatory and consumer issues as the sweetener market as F&B customers look for natural, sustainable ingredients with low or no calories.
STEVIA MARKETSince initial regulatory approvals for the use of stevia as a F&B ingredient were secured in 2008, usage of stevia by the world’s leading F&B companies has grown progressively, with a number of large global brand product launches using stevia across 2013 and 2014 in particular. The high purity stevia market was estimated at US$200 million globally as at the end of 2014 and is projected to grow steadily across the next 10 to 20 years into a multi-billion dollar industry.
On a like for like weight basis, stevia is much sweeter than sugar (depending on formulation typically 200 to 400 times sweeter) and requires moderate watering and husbandry. As a result, when properly scaled, stevia is highly efficient relative to sugar and offers significant land, water and sustainability benefits.
Stevia is the first sweetener and flavour that can help address the issues facing sweeteners and flavours: it is natural and sustainable so addresses consumer concerns facing the artificial HIS, and it can also moderate calories, thereby helping to address the calorie related issues of corn and sugar.
Since first being approved for use as a food ingredient in 2008, high purity stevia has shown strong growth and increased F&B adoption.
However, despite the growth achieved to date, stevia currently represents only a very small part of the total sweetener and flavour markets (less than 0.002 per cent of the global market) which suggests there is scope for significant further growth.
OUR MARKET
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FINANCIAL HIGHLIGHTSA summary of the financials for FY15 with FY14 comparatives is set out below.
SUMMARY FINANCIALS
FY15USD’m
FY14USD’m
%+ / (-)Financial year ended 30 June
Sales 127.4 101.0 26%
Gross margin* 39.4 36.6 8%
Operating margin* 16.1 17.2 (6%)
EBITDA* 23.1 22.5 2%
Net profit after tax 4.1 2.3 78%
Earnings per share (US cents) 2.48 1.41 76%
Fully diluted earnings per share 2.42 1.37 77%
Operating cash flow before working capital changes 23.9 22.7 5%
Working capital changes (10.1) (7.2) (40%)
Net debt (45.3) (79.9) 43%
Net assets 190.5 147.5 29%
* Gross margin, operating profit and EBITDA are as per management segmental reporting in the Group Financial Review note set out below. The full consolidated statement of income is set out in page 33.
OUR PERFOMANCE
SALES: FY15 sales increased US$26.4m (26%) to US$127.4m.
In FY15, sales volume increased 33%; there has been growth in sales across all geographic regions driven by accelerating market adoption of stevia, enabled by our Stevia 3.0™ range of proprietary ingredients and customizable ingredient combinations. Growth was fastest from those ingredients in our portfolio launched within the last four years.
FY15 sales were adversely impacted by the weakening of certain sales’ currencies (eg Mexican Peso, Euro) relative to the US$. On a constant FY14 US$ exchange rate basis, FY15 sales would have increased 31% to US$ 132 million. GROSS MARGIN: In FY15 gross margin increased US$3m to US$39.4m (FY14 US$36.6m), reflecting increased sales revenues, partly offset by lower gross margin %.
The FY15 gross margin percentage of 31% was 5 percentage points lower than in FY14 reflecting US$3m adverse foreign exchange movements and a US$10m impact of higher leaf cost in China. The company is actively addressing this with increased investments in South America and Africa leaf development to better balance its future leaf supply.
OPERATING MARGIN: FY15 Operating margin of US$16.1m was US$1.1m lower than FY14 reflecting US$3m higher gross margin described above, offset by US$4m increased SG&A costs. These reflected additional investment in the Group’s global customer service infrastructure and Operating management, particularly the new COO and Operating Committee structure. Both investments have been made to support expected future sales growth.
EBITDA: FY15 EBITDA was US$23.1m (FY14 US$22.5m) reflecting US$1m lower operating profit offset by improved joint venture profitability and realised foreign exchange gains. Within EBITDA, in FY15 the Group’s share of JV results moved to a US$0.1m profit (FY14 loss US$0.5m) reflecting strong sales growth in the EU region.
NET PROFIT AFTER TAX: The Group recorded a US$4.1m net profit in FY15, a US$1.8m (78%) improvement on FY14.
OPERATING CASH FLOW BEFORE WORKING CAPITAL: Operating cash flow before working capital was US$23m (FY14 US$22m), in line with EBITDA.
WORKING CAPITAL MOVEMENT: In FY15 working capital increased US$10.1m (FY14 US$7.2m) reflecting US$30m higher receivables partly offset by US$24m lower inventories. Higher receivables reflected later phasing of sales in FY15 than in FY14.
SHARE PLACEMENT: In November 2014 the Group raised US$43.5m through the issue of five million new ordinary shares at GBP 5.50 per share to fund expansion of its production capacity.
NET DEBT AND FUNDING HEADROOM: The Group ended FY15 with net debt of US$45m (FY14 US$80m) and cash and facility headroom of US$88m (FY14 US$60m). The lower net debt reflects US$43.5m November 2014 placement proceeds, US$6.4m operating cash flow after working capital and interest and US$11m capital expenditure.
HIGHLIGHTS FOR THE YEAR
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CHAIRMAN’S STATEMENTFY15 has again seen strong evidence of stevia becoming established as a sustainable mainstream ingredient of choice for the world’s leading Food and Beverage brands. The heightened pressures to moderate calorific content in F&B products and the truly global range of categories and regions using stevia suggest adoption will continue to grow.
At a Company level our proprietary innovation continues to unlock additional markets which underpins future sustainable sales growth. We remain confident about the long term future of the high purity stevia market and of the opportunity for PureCircle to play the leading role in it.
Sustainable mainstream usage of PureCircle stevia will lead to increased sales which, when realised, will drive future profitability.
In anticipation of future sales growth, in FY15 we started expansion of our production capacity which is expected to come on stream in FY17.
We announce today our Intention to apply for a listing of the Company’s ordinary shares (“Ordinary Shares”) on the premium segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc’s main market for listed securities (the ‘Main Market’). With increased evidence in our markets of the large long term potential for stevia, the Directors believe that, after seven successful years on the AIM market of the London Stock Exchange plc (“AIM”), the Group has now reached a size and stage of maturity at which the Main Market will provide a more appropriate platform for the next phases in the Group’s long term growth plans. The Directors believe that the proposed move to the Main Market will further raise the Group’s investor profile and provide PureCircle with access to a broader spectrum of investors leading to improved liquidity in its Ordinary Shares.
Such a move to the Main Market will be through an introduction of the Company’s existing Ordinary Shares. The Company will not be issuing new Ordinary Shares in conjunction with the proposed move to the Main Market, and has no current intention to raise capital through the issue of new shares.
Pursuant to Rule 41 of the AIM Rules for Companies, the Company hereby gives notice of the intended cancellation of trading of its Ordinary Shares on AIM. It is expected that the cancellation of trading in the Ordinary Shares on AIM will take place at the same time as the Ordinary Shares are admitted to the Official List and begin trading on the Main Market, which is expected to occur in Q4 CY 2015 but no earlier than 26 October 2015, subject to the receipt of the necessary approvals from the UK Listing Authority and the London Stock Exchange plc.
We also announce today that on 30 September 2016 William Mitchell, the Company’s CFO, will be stepping down from the Board and retiring from the business. Since his appointment in 2008 William has played an important role in the Company’s
development through to the proposed Main Market listing. We thank him for his contribution and wish him well in his future ventures. We are delighted that William will be with us for up to twelve months to ensure an orderly handover and smooth transition to his successor, and the Company will update the market in due course.
CHIEF EXECUTIVE’S REVIEWOVERVIEWHealth and regulatory pressures to moderate calorific intakes continue to increase with high profile media discussion on the issues of obesity and diabetes becoming more widespread. Market adoption of high purity stevia as part of the solution to moderate calories and address obesity continues to grow across all Food and Beverage (“F&B”) categories and all regions of the world, enabled by our range of proprietary ingredients and customisable ingredient combinations.
At a product level Mintel has reported that in CY2014 there were more than 6,500 products launched using stevia, an increase of more than 1,500 compared to CY2013 and with more than 4,500 (70%) launched within the last two years (2013 and 2014). Further the profile of brands and categories adopting stevia continues to increase such that stevia usage is becoming ever more mainstream. For example the last twelve months has witnessed launches of dairy products, baked beans and ketchups to name but a few new categories, as well as continued roll-outs in the important Carbonated Soft Drink category.
PureCircle continues to lead the growth of this market underpinned by our continued product innovation and application support. We now have 17 products in market and recent launches such as our Sigma D and Sigma T products again confirm that our innovation can assist customers unlock new segments. We have significant future innovation in the pipeline.
PureCircle’s business model is designed to service mass volumes and our current project pipeline gives us confidence that future sales growth at rates similar to those seen in FY15 is sustainable.
MARKETThe macro trends continue to develop favourably towards stevia with more F&B producers and consumers seeking natural solutions to help moderate calories. On a global basis 600 million people are currently deemed to be obese (up 50% since 2005) whilst it is estimated that nearly 600 million will suffer from diabetes by 2035 (up from 400 million in 2013). The McKinsey Global Institute (MGI) have recently issued a discussion paper (Overcoming Obesity: An Initial economic analysis) highlighting Obesity as one of the top three social burdens generated by human beings with an estimated annual global economic impact of roughly US$2 trillion or equivalent to 2.8% of global GDP.
FY15 has witnessed further regulatory and increased media pressures on F&B producers to reduce the calorific content of their products.
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In addition consumers continue to seek natural sustainable sources for their sweetness as opposed to using artificial low calorie sweeteners, such as aspartame.
We believe these trends will only get stronger in the coming years.
In FY15 the stevia market continued to grow. Mintel data shows that there are now more than 6,500 products in market using stevia. Further this data, which counts products on a SKU basis, probably understates the true growth in usage as it does not take account of the larger size of categories and brands now adopting, nor does it capture products using stevia as a flavour enhancer. Within this overall growth, the FY15 developments in the important Carbonated Soft Drinks category again warrant specific note.
CARBONATED SOFT DRINKS (“CSDS”)CSD is the largest single F&B category user of sweeteners. FY15 has again seen important developments in CSD adoption of stevia. Our internal estimates indicate that by June 2015 stevia was being used in 86 Cola CSD products across 27 countries (up from 4 products in 3 countries in 2010) and in 25 Lemon Lime CSD products across 16 countries (up from 1 product in 1 country in 2010). Further adoption is clearly being led by the world’s largest CSD brands.
In FY15 Coca-Cola Life has been rolled out into a series of major markets including USA, Mexico, Germany, Japan and the UK, with the green Life branding established as a core part of marketing across Europe. Reformulations of Fanta and Sprite using Stevia to reduce calories, are now in market in Europe, Latin America and Asia.
Pepsi continue to roll-out Pepsi True and Pepsi Next with FY15 launches including USA, Canada and Australia while a core CSD brand in the USA, Sierra Mist, was reformulated using stevia to reduce calories.
Dr Pepper Snapple Group has expanded the number of US markets where its range of Natural Carbonated Soft Drinks is sold and has started using stevia in some of its core brands in Mexico.
OTHER F&B CATEGORY ADOPTIONSAs with CSDs, market adoption of stevia in other F&B categories continues to grow strongly. Taking as examples Ready To Drink (RTD) teas and yogurts as a couple of important non CSD categories, our internal estimates indicate that at 30 June 2015 there were 392 RTD tea products across 43 countries using stevia (up from 19 products in 4 countries in 2010) and 420 yogurt products across 32 countries (up from 19 products across 3 countries in 2010).
Our project pipeline indicates that substantial future penetration of these categories is anticipated.
PURECIRCLE PRODUCT PORTFOLIOIn FY15 the Group further extended the breadth of its product portfolio and then in July 2015 launched Sigma D and Sigma T, the first products in our PureCircle Matrix Solutions range
designed to deliver category specific enhanced formulation attributes. With these launches the Group now has 17 products in market, substantially all of them proprietary to PureCircle.
Additionally in FY15 the Group has started to add complementary natural ingredients to its portfolio to better meet wider formulation requirements around stevia (for example natural bulking agents), but always building on the core benefits stevia brings to our F&B customers.
APPLICATION FORMULATION AND TECHNICAL SUPPORTThe Group has in-market application laboratories in North America, Latin America, Europe and Asia, with FY15 benefitting from the first full year activity in our Mexico and Malaysia laboratories. Our application laboratories and technical support are accelerating adoption of stevia in a number of different ways. They unlock specific customer project formulation needs, hence bringing our clients’ F&B products to market quicker; they highlight areas where further PureCircle innovation will be successful in unlocking future adoption, as evidenced by the successful development of our new Sigma Matrix Solutions launched in July 2015; and they help us add in the optimum complementary natural ingredients to better meet wider formulation requirements.
Our application laboratory approach to market has represented a significant investment for the Group over the past few years, but there is no doubt that it is growing the market and helping secure a large proportion of that growth for PureCircle. Our application project pipeline suggests that this trend will continue.
MARKETING AND STEVIA ADVOCACYPureCircle’s Everything Stevia marketing strategy is to offer our customers a unique combination of consumer insights, stevia advocacy support to complement our practical in-region application formulation support and ongoing unparalleled innovation.
The PureCircle Consumer Insights Group continued to strengthen its global expertise with industry-leading market and consumer research on the sweeteners category and again expanded our proprietary database of research to include new markets.
The Global Stevia Institute (“GSI”) (www.globalsteviainstitute.com), already recognised as the leader in stevia advocacy, was strengthened with additional Advisory Board members. Customer collaboration with the GSI increased again with launch support events again increasing year on year. Traffic on the GSI website trebled during FY15 and it was ranked number one SEO in all key markets.
SUSTAINABILITYPureCircle believes that core to consumers’ growing preference for natural ingredients in their F&B products of choice is sustainability. We seek to provide a positive net benefit to the people and communities in which we operate; we seek to minimise our impact on the environment throughout the supply chain; and our development of a mass volume natural ingredient
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business is providing consumers with better access to reduced calorie F&B options.
Additionally the Group has now engaged in the implementation of the Grower Management Module within our Oracle JD Edwards systems which will provide enhanced “leaf traceability to the farm”, among other key sustainable agricultural capabilities.
PureCircle was the first stevia company to set sustainability goals and in FY15 the first to follow these up with an in depth sustainability report. The Group believes that the Group’s sustainability focus is being recognised by customers as part of the deeper solution service that the Group offers them with material and support from the Group’s sustainability programme being used by F&B customers in support of their own stevia related product launches.
R&D We further strengthened our position as the stevia industry innovation leader in FY15. Having successfully sequenced the entire stevia genome in 2014, the PureCircle Leaf Scientists are accelerating the development of naturally sourced, superior-tasting stevia leaf extracts through PureCircle’s traditional plant breeding program.
In addition our dedicated Global Innovation Group is currently evaluating over 140 new innovation items. Whilst not all will be commercially viable, our experience indicates that a number of them will incrementally add distinct technical advantages and customer application benefits to our portfolio of offerings. We are also expanding our pipeline of innovation projects to include more fundamental glycoside research and focused research against still largely untapped segments of the global food and beverage market such as flavour enhancement and geographic specific opportunities.
In FY15 we have expanded our research into complementary natural ingredients that can support F&B formulations based on stevia.
JOINT VENTURESSales and sales pipelines of the Group’s joint ventures grew strongly in FY15, reflecting significant progress in the important EU market. As a consequence the Group’s net share of income moved to profit. With the joint ventures now having secured market leadership position in their respective regional markets, we are restructuring the joint ventures to reduce administrative complexity. While each partner will continue to be the Group’s route to market for all of Continental Europe Regional Key Accounts, the Group will service directly the Global Key Accounts. We have established deep relationships with both our joint venture partners and we will continue to provide supply and stevia knowhow. The new structure will deliver the same in market presence and leadership at a lower operating cost.
SUPPLY CHAIN & PRODUCTION CAPACITYIn FY15 our supply chain produced and distributed record volumes of a larger range of finished products to more customer locations than ever before, in the process increasing our capacity utilization. This provides further confirmation of the scalable nature of the Group’s business model.
In FY15, in anticipation of future sales growth we started expansion of our production capacity. This is expected to come on stream in FY17 and will enable the Group to support sales volumes equivalent to annual revenues of US$400-500m. The capacity expansion is expected to cost US$42m which is fully funded from the proceeds of the November 2014 equity placement.
LEAF SUPPLYIn FY15 demand for stevia leaf in China tightened relative to supply leading to higher prices which we estimate impacted FY15 earnings by US$10m on a like for like basis versus FY14.
The price increase was unexpected after ten years of relative stability. Early indications are that the 2015 harvest will be substantially larger than that of 2014 and that leaf prices are moderating.
Within China we continue to diversify and expand leaf cultivation and supply into new regions in Southern China closer to our manufacturing base and with far more controllable plantations. In the 2015 season we shall be sourcing from 8 different provinces in China, up from just 3 a few years ago.
The Group continues to invest in building large scale commercial supply of leaf outside China. In FY15 we have made progress securing trials and early stage production with large farming partners who have the ambition and resources to build volume supply across a wide range of countries. The Group has signed supply agreements with partners growing stevia for PureCircle in Ecuador, Mexico, India, Romania, Turkey, Paraguay, Kenya, Tanzania, Zambia, Malawi, Mozambique, Rwanda and the Central Africa Republic. Additionally we have improved agricultural practices and reinforced management at our two agriculture subsidiaries in Kenya and Paraguay.
The size of the agricultural land and resources currently being developed outside China, has the potential to scale rapidly in the next 3 to 5 years to 50% of our anticipated total leaf supply needs.
ORGANISATIONWe have again further strengthened our Board and senior management team. In July 2015 Guy Wollaert and Mitch Adamek joined the Board as Non-Executive Directors, each bringing with them considerable experience and insights into our markets.
FY15 was the first year of our new operating committee structure led by Chief Operating Officer, Jordi Ferre. This has brought deeper shared understanding of our business which in turn is enhancing decision making as we grow. We have supported the management structure with investment in information systems.
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During FY15 we implemented the first phases of Oracle’s JD Edwards ERP system, which is enabling faster analytic support for management.
The Group will continue to invest in management to support growth effectively in a sustained manner.
COMMENTING ON THE FY15 AUDITED RESULTS, THE CHAIRMAN PAUL SELWAY-SWIFT SAID:
“Mainstream market adoption of stevia continues to develop as consumers and F&B producers seek great tasting
sustainable natural solutions to help moderate calories in their product consumption.
Our strategy of introducing new customizable ingredient combinations to meet growing market needs continues
to win business for PureCircle. We are generating revenues from a well-balanced range of natural sweetener and flavour products and from a wide range of customers and regions directly and through our business partners.
We remain confident in the future growth of the PureCircle Stevia 3.0™ enabled market and that it will generate
sustained sales growth for our business. We have therefore started to expand our production capacity to come on stream in FY17. And today we announce our intention to seek admission to the Premium Listing of the London Stock Exchange Main Market.”
Dated 21 September 2015
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The Group’s FY15 financial year covers the year from 1 July 2014 to 30 June 2015. FY14 comparatives are for the year from 1 July 2013 to 30 June 2014.
Set out below is an extract from the audited FY15 financial statements. The full consolidated statement of comprehensive income, statement of financial position and statement of cash flows follow in pages 33 to 37.
FY15USD’000
FY14USD’000
%+ / (-)
TRADING
Revenue 127,349 101,045 26%
Cost of sales (87,951) (64,403) (37%)
GROSS MARGIN 39,398 36,642 8%
Gross margin % 31% 36%
Other income 760 434 75%
Administrative expenses (24,024) (19,860) (21%)
Operating margin 16,134 17,216 (6%)
Other expenses (7,117) (6,140) (16%)
Foreign exchange (loss)/gain (757) 1,265 (160%)
Finance costs (7,275) (9,253) 21%
Share of profit /(loss) of joint ventures* 63 (503) 113%
Taxation 3,043 (265) 1,248%
PROFIT FOR THE FINANCIAL YEAR 4,091 2,320 76%
Earnings Per Share US$ cents per share 2.48 1.41 76%
Fully diluted Earnings Per Share US$ cents per share 2.42 1.37 77%
Operating cash flow before working capital changes 23,909 22,677 5%
Working capital changes (10,141) (7,208) (41%)
OPERATING CASH FLOW AFTER WORKING CAPITAL CHANGES 13,768 15,469 (11%)
Net debt and funding headroom
Gross debt 109,646 125,850 13%
Gross cash (64,276) (45,865) 40%
NET DEBT 45,370 79,985 43%
Financing and funding headroom 88,000 60,000 60%
EBITDA** 23,108 22,454 3%
* Share of profit / (loss) in joint ventures includes group margin on sales by Joint Ventures to external parties.
** EBITDA is defined as EBITDA with other expenses added back.
SEGMENTAL REPORTING: The Group operates as a single operating segment comprising of the integrated production and marketing of PureCircle Stevia 3.0™ products.
SALES: FY15 sales increased $26.4m (26%) to $127.4m.
FY15 sales have been adversely impacted by the weakening of certain sales’ currencies (eg Mexican Peso, Euro) relative to the US$. On a constant FY2014 US$ exchange rate basis, FY15 sales would have increased 31% to US$ 132 million.
In FY15, sales volume increased 33%; there has been growth in sales across all geographic regions driven by accelerating market adoption of stevia, enabled by our Stevia 3.0™ range of proprietary ingredients and customizable ingredient combinations. Mintel has reported 627 new products launched using stevia in the quarter to 31 March 2015, which represents a 28% increase over the
GROUP FINANCIAL REVIEW
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number launched in the same quarter in 2014. PureCircle continues to lead the growth of this market and our project pipeline gives us confidence that future sales growth at these rates is sustainable.
GROSS MARGIN: In FY15, the gross margin was $39.4m (FY14 $36.6m), reflecting increased sales revenues, partly offset by lower gross margin %.
The FY15 gross margin percentage of 31% was 5 percentage points lower than in FY14 reflecting the impact of higher leaf cost in China and adverse foreign exchange movements. There has been a tightening of leaf supply in China which had a $10m impact on our FY15 margins. The Company is actively addressing this with increased investments in South America and Africa leaf development to better balance its future leaf supply.
In addition our FY15 gross margin has been reduced by foreign exchange. The US$5 million sales impact was only partly offset by weaker cost of sales currencies giving a net US$3 million adverse gross margin impact.
OPERATING MARGIN: FY15 Operating profit of US$16.1m was $1.1m lower than FY14 reflecting $3m higher gross margin described above, offset by $4m increased SG&A costs. These reflected additional investment in the Group’s global customer service infrastructure and the additional investment in management, particularly the new COO and Operating Committee structure. Both investments have been made to support expected sales growth.
OTHER EXPENSES: FY15 other expenses principally comprise non cash costs of the Group’s LTIP scheme and similar discretionary remuneration.
SHARE OF PROFIT / (LOSS) OF JOINT VENTURES: In FY15 the Group’s share of JV results moved to profit, reflecting strong sales growth in the EU market. The JV share of results include reflect the Group’s full gross margin realised on sales by the JVs to third parties and increased investment in in-market application support made during the year.
With the EU market now growing well and with strong relationships established with our JV partners, the Group is restructuring its EU operations so that going forward PCL will sell directly to Global Key Account customers in the region and each of our partners will sell PCL sourced stevia to the Regional Key Accounts. This will enable us to better service the market with less administrative complexity and lower cost base.
FINANCE COSTS: In FY15 finance costs were $7.2m (FY14 $9.2m). In FY15 the Group restructured two of its banking facilities covering a total of US$100m of debt onto new terms at an average of 3% lower interest rates. The Group’s principal US$62m Malaysia based debt facility was extended through to September 2019.
TAXATION: $3.0m credit (FY14 $0.3m charge). With improved profitability, in FY15 the Group has recognized deferred tax assets.
NET PROFIT AFTER TAX: The Group recorded a $4.1m net profit in FY15, a $1.8m (78%) improvement on FY14.
SHARE PLACEMENT: In November 2014 the Group raised $43.5m through the issue of five million new ordinary shares at GBP 5.50 per share to fund expansion of its production capacity.
FINANCING AND FUNDING HEADROOM: The Group ended FY15 with cash and facility headroom of $88m (FY14 $60m) and net debt of $45m (FY14 $80m). The lower net debt reflects $43.5m November 2014 placement proceeds, $6.4m operating cash flow before capital expenditure, partly offset by capital expenditure of $11m.
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AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2015USD’000
2014USD’000
Revenue 127,349 101,045
Cost of sales (87,016) (63,570)
GROSS PROFIT 40,333 37,475
Administrative expenses (30,643) (24,461)
Other income 703 1,426
Other expenses (1,255) (1,539)
Finance income 57 273
Finance costs (7,275) (9,253)
Share of loss in joint ventures (872) (1,336)
Profit before taxation 1,048 2,585
Income tax 3,043 (265)
Profit for the financial year 4,091 2,320
Other comprehensive income (net of tax)
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations (11,717) (514)
Share of other comprehensive (loss)/income of Joint Ventures (101) 5
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE FINANCIAL YEAR (NET OF TAX) (7,727) 1,811
Profit for the financial year
Attributable to:
Owners of the company 4,158 2,316
Non-controlling interest (67) 4
4,091 2,320
Total comprehensive (loss)/income
Attributable to:
Owners of the company (7,662) 1,804
Non-controlling interest (65) 7
(7,727) 1,811
PROFIT PER SHARE (US CENTS)
- Basic 2.48 1.41
- Diluted 2.42 1.37
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AUDITED STATEMENT OF FINANCIAL POSITION
2015USD’000
2014 USD’000
ASSETS
NON-CURRENT ASSETS
Investment in joint ventures - 149
Intangible assets 37,790 38,023
Property, plant and equipment 59,724 63,715
Biological assets 3,570 4,237
Prepaid land lease payments 2,914 2,999
Deferred tax assets 8,900 5,876
Trade receivables 1,856 1,950
Other receivables, deposits and prepayments 2,121 553
116,875 117,502
CURRENT ASSETS
Inventories 62,790 86,519
Trade receivables 62,530 37,362
Other receivables, deposits and prepayments 7,490 4,962
Tax recoverable 347 581
Cash and cash equivalents 59,181 38,014
Restricted cash 5,095 7,851
197,433 175,289
TOTAL ASSETS 314,308 292,791
EQUITY AND LIABILITIES
EQUITY
Share capital 17,006 16,472
Share premium 208,310 163,240
Foreign exchange translation reserve (10,990) 920
Share option reserve 11,185 5,076
Accumulated losses (35,019) (38,203)
EQUITY ATTRIBUTABLE TO
OWNERS OF THE COMPANY 190,492 147,505
NON-CONTROLLING INTEREST - 722
TOTAL EQUITY 190,492 148,227
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AUDITED STATEMENT OF FINANCIAL POSITION (CONT’D)
2015USD’000
2014 USD’000
NON-CURRENT LIABILITIES
Long-term borrowings 83,965 2,169
Deferred income 290 360
Other payables and accruals 200 2,111
84,455 4,640
CURRENT LIABILITIES
Trade payables 3,134 5,879
Other payables and accruals 10,546 10,364
Short-term borrowings 25,681 123,681
39,361 139,924
TOTAL LIABILITIES 123,816 144,564
TOTAL EQUITY AND LIABILITIES 314,308 292,791
NET ASSETS PER SHARE (USD) 1.12 0.90
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AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
2015USD’000
2014USD’000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 1,048 2,585
Adjustments for:
Amortisation of prepaid land lease payments 143 140
Amortisation of deferred income (76) (105)
Amortisation of intangible assets 180 168
Provision for doubtful debts 112 -
Depreciation of property, plant and equipment 5,738 6,016
Interest expense 7,275 9,253
Interest income (57) (273)
(Gain)/Loss on disposal of plant and equipment (11) 14
(Gain)/Loss on disposal of joint venture 120 -
Share based payment expense 6,412 3,768
Intangible assets written off 45 105
Inventories written off 14 78
Bad debts written off 13 -
Unrealised exchange loss/(gain) 2,081 (408)
Share of loss in joint ventures 872 1,336
Operating cash flow before working capital changes 23,909 22,677
Decrease in inventories 23,768 121
Increase in trade and other receivables (30,486) (4,423)
Decrease in trade and other payables (3,423) (2,906)
NET CASH FROM OPERATIONS 13,768 15,469
Interest received 57 273
Interest paid (7,275) (9,253)
Tax paid (132) (1,248)
NET CASH (USED IN)/FROM OPERATING ACTIVITIES 6,418 5,241
CASH FLOWS FROM INVESTING ACTIVITIES
Addition of intangible assets (3,865) (6,200)
Addition of property, plant and equipment (6,651) (4,495)
Addition of prepaid land lease payment (50) -
Proceeds from disposal of property, plant and equipment 14 30
Increase in investment in joint ventures (342) (684)
NET CASH USED IN INVESTING ACTIVITIES (10,894) (11,349)
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AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (CONT’D)
2015USD’000
2014USD’000
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 151,800 34,648
Repayment of borrowings (171,369) (31,521)
Repayment of hire purchase (35) (45)
Proceeds from private placement 43,463 -
Proceeds from share options exercised 117 133
Decrease/(Increase in) restricted cash 2,756 (5,537)
NET CASH FROM/(USED IN) FINANCING ACTIVITIES 26,732 (2,322)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 22,256 (8,430)
Effects of foreign exchange rate changes on cash and cash equivalents (1,089) (161)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 38,014 46,605
CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 59,181 38,014
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PureCircle was throughout the period qualified on AIM and incorporated in Bermuda and therefore is not required to comply with Section 7 of the Disclosure and Transparency Rules. However, the Board is committed to the highest standards of corporate governance and to maintaining a sound framework for the control and management of the Group.
The following section sets out how PureCircle applies the principles and provisions of the UK Corporate Governance Code in the running of the Board.
THE BOARDBOARD COMPOSITION AND BOARD INDEPENDENCEThe Board comprises a Non-Executive Chairman, two Executive Directors and five other Non-Executive Directors. Collectively, they have a diverse range of knowledge and commercial experience and serve the function of bringing objective judgement on the development, performance and risk management of the Group through their contributions in board meetings.
At the date of this report, the Company regards all of the Non-Executive Directors, apart from Guy Wollaert, as “independent non-executive directors” within the meaning of the UK Corporate Governance Code, free from any business or other relationship that could materially interfere with the exercise of their independent judgment.
The roles of the Chairman and Chief Executive are separate and clearly defined.
BOARD CHANGESThe following changes to members of the Board took place after the end of financial year 2015 but before the signing of these audited accounts:-
• Appointment of Mitch Adamek and Guy Wollaert as Non-Executive Directors in July 2015
THE ROLE OF THE BOARDThe Board is responsible for leading and controlling the Group and has overall authority for the management and conduct of the Group’s business, strategy and development. The Board is also responsible for ensuring the maintenance of a sound system of internal controls and risk management and for reviewing the overall effectiveness of systems in place as well as for the approval of any changes to the capital, corporate and/or management structure of the Group. The Company has an agreed list of matters which are reserved for decision by the whole Board, and has procedures in place for the Directors to take independent professional advice.
MEETING ATTENDANCEThe table below shows the number of board meetings held during the year and the attendance of individual Directors.
OUR GOVERNANCE
NUMBER OF BOARD MEETINGS HELD IN FY2015 6
Paul Selway-Swift 6
Magomet Malsagov 6
William Mitchell 6
Olivier Maes 5
Peter Lai Hock Meng 6
Christopher Pratt 5
Mitch Adamek* n/a
Guy Wollaert* n/a
* Appointed as a Non-Executive Director on 14 July 2015
In addition to these meetings, the Board met in July and September 2015 after the FY15 year end and before signing of these audited accounts.
CHAIRMAN AND CHIEF EXECUTIVE OFFICERPaul Selway-Swift who is the Chairman of PureCircle Limited also chairs the Nomination Committee.
As recommended by the UK Corporate Governance Code, the Board believes that there should be a clear division of responsibilities between the Chairman, who has primary responsibility for running the Board and the strategic direction of the Group’s business, and the Chief Executive Officer, who has primary responsibility for running the Group’s business and ensuring delivery of the Group’s strategy. Procedures have been put in place to ensure this strict division of responsibilities is implemented in practice.
SENIOR INDEPENDENT NON-EXECUTIVE DIRECTORThe UK Corporate Governance Code recommends that the board of directors should appoint one of the non-executive directors to be the senior independent director to provide a sounding board for the Chairman and to serve as an intermediary for the other Directors when necessary. The Senior Independent Non-Executive Director has an important role on the Board in leading the Non-Executive Directors in monitoring and evaluating the performance of the Chairman, leading on corporate governance issues and being available to Shareholders if they have concerns which contact through the normal channels of the Chairman, Chief Executive Officer or other Executive Directors has failed to resolve or for which such contact is inappropriate.
Christopher Pratt was appointed as the Company’s Senior Independent Non-Executive Director on 15 September 2015.
BOARD PROCESSESThe Board is scheduled to meet on a quarterly basis, and in any event no less than four times a year. The Board will meet at least once a year to review the strategic direction of the Group. In addition to normal scheduled meetings, the Board will convene as required.
CORPORATE GOVERNANCE REPORT
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All Directors have access to and may, in furtherance of their duties, seek independent professional advice at the Company’s expense.
The Chairman and Non-Executive Directors meet annually without the Executive Directors present. In accordance with the Company’s Bye-Law, one-third of the Board is required to retire by rotation each year, but if any Director has, at the start of the AGM, been in office for three years or more since his last appointment or re-appointment, he shall retire at the AGM. In addition, any Director appointed during the year is subject to election at the AGM after their appointment.
The Non-Executive Chairman was appointed in December 2007 for a term up to 30 September 2017 and is subject to re-election at the AGM as provided in the Company’s Bye-Laws. Whereas, the Non-Executive Directors are appointed for an initial period of 3 years commencing on the date of their first appointment and is renewable for two further terms of three year each, however is subject to re-election at the AGM as provided in the Company’s Bye-Laws. Both the Non-Executive Chairman and Non-Executive Directors contracts are terminable by one month’s notice from either the Company or the Director.
BOARD PERFORMANCE AND EVALUATION The Board is committed to evaluating its own performance and that of its committees and individual directors. This is an ongoing process led by the Chairman and the Independent Directors.
BOARD COMMITTEESAs envisaged by the UK Corporate Governance Code, the Board has established the following committees: an Audit Committee, a Remuneration Committee and a Nomination Committee, each of which is described in further detail below.
The Board has also established a Disclosure Committee and a Treasury Committee.
AUDIT COMMITTEE
NUMBER OF MEETINGS HELD IN FY2015 3
Peter Lai (Chairman) 3
Olivier Maes 2
Christopher Pratt 3
In addition the Audit Committee met in July and September 2015 after the FY15 year end and before signing of these accounts.
The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external and internal controls, including reviewing and monitoring the integrity of the Group’s annual and interim financial statements, reviewing and monitoring the extent of the non-audit work undertaken by the Group’s external auditors, advising on the appointment of such external auditors, overseeing the Group’s relationship with its external auditors, reviewing the effectiveness of the external audit process, and reviewing the effectiveness of the Group’s
internal control and review function. The ultimate responsibility for reviewing and approving the annual report and accounts and the half-yearly reports remains with the Board.
The UK Corporate Governance Code, as it applies to the Company, recommends that an audit committee should comprise at least three members who are independent non-executive directors and that at least one member should have recent and relevant financial experience. The Audit Committee is chaired by Peter Lai Hock Meng, and its other members are Olivier Maes and Christopher Pratt. The Directors consider that Peter Lai Hock Meng has recent and relevant financial experience. The Audit Committee meets not less than two times a year.
Appointments to the Audit Committee are made by the Board, on recommendation by the Nomination Committee. Appointments to the Audit Committee are for a period of up to three years and may be extended for no more than two further periods of up to three years, provided the Director whose appointment is being considered still meets the criteria for membership.
When appropriate, the Audit Committee meets with the external auditor, the Chief Financial Officer and others in attendance. The Audit Committee also meets separately at least once a year with the Group’s external and internal auditors without management present.
NOMINATION COMMITTEE
NUMBER OF MEETINGS HELD IN FY2015 2
Paul Selway-Swift (Chairman) 2
Magomet Malsagov 2
Olivier Maes¹ 1
Christopher Pratt² 1
¹ Retired as member on 13 March 2015
² Appointed as member on 13 March 2015
In addition the Nomination Committee met in September 2015 after the FY15 year end and before signing of these accounts.
The function of the Nomination Committee is to provide a formal, rigorous and transparent procedure for the appointment of new directors to the Board. In carrying out its duties, the Nomination Committee is primarily responsible for identifying and nominating candidates to fill board vacancies; evaluating the structure and composition of the Board with regard to the balance of skills, board diversity, knowledge and experience and making recommendations accordingly; giving full consideration to succession planning; and reviewing the leadership of the Group.
The UK Corporate Governance Code, provides that a nomination committee should comprise a majority of members who are independent non-executive directors. The Nomination Committee is chaired by Paul Selway-Swift, and its other members are Magomet Malsagov and Olivier Maes. Christopher Pratt has been appointed as a member of the Nomination Committee in March
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2015 to replace Olivier Maes. The Nomination Committee meets not less than once a year.
Appointments to the Nomination Committee are made by the Board. Appointments to the Nomination Committee are made for a period of up to three years, which may be extended for further periods of up to three years, provided the Director whose appointment is being considered still meets the criteria for membership.
REMUNERATION COMMITTEE
Number of meetings held in FY2015 3
Olivier Maes (Chairman) 3
Paul Selway-Swift 3
Christopher Pratt 3
In addition the Remuneration Committee met in September 2015 after the FY15 year end and before signing of these accounts.
The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on executive remuneration and determining the individual remuneration and benefits packages of each of the Executive Directors.
The UK Corporate Governance Code, provides that a remuneration committee should comprise at least three members all of whom are independent non-executive directors. The Remuneration Committee was chaired by Olivier Maes until his resignation on 10 July 2015 and was replaced by Christopher Pratt. Its other members are Paul Selway-Swift and Mitch Adamek, who was appointed to the Remuneration Committee on 10 July 2015. The Remuneration Committee meets not less than twice a year.
Appointments to the Remuneration Committee are made by the Board, on recommendation by the Nomination Committee. Appointments to the Remuneration Committee are made for a period of up to three years, which may be extended for no more than two further periods of up to three years, provided the Director whose appointment is being considered still meets the criteria for membership.
The Report of the Remuneration Committee can be found on pages 41 to 43 of the Report.
TREASURY COMMITTEEThe Treasury Committee has delegated authority in relation to the banking and treasury activities of the Group. The members of the Treasury Committee are the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer and the Vice President, Group Operations Finance, the Vice President Group Controller and the Group Treasury Manager. All decisions made by the Treasury Committee must be approved by at least one Executive Director who is a member of the committee and a meeting of the Treasury Committee shall not be quorate unless at least one Executive Director is present.
DISCLOSURE COMMITTEEThe Disclosure Committee was established on 15 September 2015. The primary role of the Disclosure Committee is to evaluate whether information communicated to it from within the Group is inside information and for determining whether the selective disclosure of inside information is permitted. It is also responsible for a number of further tasks, including approving announcements for release to the market; monitoring analysts’ expectations as to the performance of the Group; reviewing the Group’s procedures for communicating with the market; monitoring the Company’s share price; monitoring on-going developments in the business of the Group and the industry in which it operates. The members of the committee are the Chairman, the Chief Executive Officer and the Chief Financial Officer.
INTERNAL CONTROL AND RISK MANAGEMENT The Board is responsible for establishing, reviewing and maintaining the Group’s internal financial controls and internal control and risk management, systems and ensuring that these systems are adequate and effective for managing the business risk within the Group.
The Group annually reviews the effectiveness of the Group’s internal financial controls and internal control and risk management systems to safeguard shareholders’ investments and the Group’s assets whilst ensuring that proper accounting records are maintained.
THE COMPANY AND ITS SHAREHOLDERSThe Board is committed to a continuing dialogue with its shareholders.
Following the announcement and presentation of the year-end results, there are a series of formal meetings with shareholders. These meetings are a two-way dialogue whereby the Executive Directors can apprise the investors of the Group’s business and future plans and the shareholders can communicate any concerns they may have. The Non-Executive Directors and Chairman are available to attend these meetings if requested. The Company’s brokers provide feedback from the shareholder and analyst meetings and present the results to the Board.
The Group’s investor relations section on its website contains information on the Group’s financial results, its corporate policies, its press releases and announcements as well as analysts’ presentations.
The Group holds a series of meetings with institutional investors whereas the principal methods of communicating with private investors are by way of the Annual Report and Accounts, press releases and announcements, the Annual General Meeting and the Group’s corporate website (www.purecircle.com).
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The Company’s Remuneration Committee is chaired by Olivier Maes with Paul Selway-Swift and Christopher Pratt as members. The Remuneration Committee meets at least once a year, twice a year with effect from October 2015, and is tasked to advise on remuneration policy for the Executive Directors and senior management. It also reviews and approves long-term incentives for eligible employees.
Subsequent to the FY2015 financial year end, on 10 July 2015, Olivier Maes stepped down as chairman and member of Remuneration Committee and was replaced by Christopher Pratt while Mitch Adamek was appointed as a member of the Remuneration Committee.
REMUNERATION POLICYThe Remuneration Committee sets the overall remuneration policy designed in line with the Company’s long-term business goals. Individual remuneration packages are determined by the Remuneration Committee within the framework of the remuneration policy.
The Executive Directors’ remuneration packages comprise the following components:-
a) Annual salary – the actual salary for each of the Executive Director, is that reflects the experience and performance of each individual and taking into account market competitiveness;
b) Annual incentive payment – the Executive Directors may be awarded annual bonuses that relate to performance of the Company and other internal targets; and
c) Share awards or options under the Long-Term Incentive Plan (“LTIP”) that are approved by the Remuneration Committee.
The aggregate amount of emoluments received by the Directors of the Company during the financial year were as follows:
FY15USD’000
FY14USD’000
REMUNERATION
EXECUTIVE DIRECTORS
Magomet Malsagov 624 377
William Mitchell 401 315
NON-EXECUTIVE DIRECTORS
Paul Selway-Swift 167 88
John Slosar (resigned w.e.f 31 March 2014) - 21
Olivier Maes 79 34
Peter Lai Hock Meng 84 50
Christopher Pratt (appointed w.e.f 18 March 2014) 81 -
SHARE BASED PAYMENT EXPENSE
EXECUTIVE DIRECTORS
Magomet Malsagov 394 307
William Mitchell 391 311
2,221 1,503
REPORT OF THE REMUNERATION COMMITTEE
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DIRECTORS’ INTERESTS IN SHARE OPTIONS / SHARE AWARDSDirectors’ interests in share options / share awards of the Company as at 30 June 2015 were as follows:
1 JULY 2014 GRANTED EXERCISED LAPSED 30 JUNE 2015EXERCISE
PRICEDATE FROM WHICH
EXERCISABLE/ISSUED NOTE
Magomet Malsagov 30,000 - (30,000) - - 158p 16 Apr 2010 1
215,000 - - (215,000) - Nil 30 Nov 2013 2
211,000 - - (211,000) - Nil 20 Sept 2014 2
128,520 - - 128,520 Nil 30 Jun 2015 3
102,120 5,336 - 107,456 Nil 30 Jun 2016 4
686,640 5,336 (30,000) (426,000) 235,976
William Mitchell 215,000 - - (215,000) - Nil 30 Nov 2013 2
66,000 - - (66,000) - Nil 20 Sept 2014 2
35,000 - - - 35,000 Nil 7 Jul 2015 5
123,420 - - 123,420 Nil 30 Jun 2015 3
89,750 4,689 - - 94,439 Nil 30 Jun 2016 4
529,170 4,689 - (281,000) 252,859
NON-EXECUTIVE DIRECTORS
Olivier Maes 2,900 8,960 (7,010) - 4,850 Nil 7 July 2015 6
Peter Lai Hock Meng 3,200 9,500 (7,560) - 5,140 Nil 7 July 2015 6
Christopher Pratt - 3,280 (3,280) - -
6,100 21,740 (17,850) - 9,990
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Share awards or options to Executive Directors are awarded by the Remuneration Committee under the Company’s Long-Term Incentive Plan. The following notes provide details of each option or award referred to above:-
1. These options were granted on 15 April 2008 and were exercised on 10 April 2015.
2. These awards were lapsed on 30 June 2015 due to non-fulfilment of Performance Conditions.
3. The awards granted only become exercisable if certain Group Sales Turnover targets (performance condition) are satisfied.
If the Group’s actual Sales Turnover is below the lower band, then the awards shall not vest and shall lapse at the end of the awards’ life.If the Group’s actual Sales Turnover is at the lower band, then the awards shall be exercisable as to 100%. If the Group’s actual Sales Turnover is at the upper band, then the awards shall be exercisable as to 200%. If the Group’s actual Sales Turnover is between the upper and lower band, a percentage above 100% and up to 200% of the awards shall vest.
Subsequent to the FY2015 financial year-end and prior to the signing of the audited accounts, all of these awards had vested and 1,551,420 shares in aggregate (including employees) were issued. These shares vest at 102% as the Group’s actual Sales Turnover were between the upper and lower bands.
4. Similiar to Note 3 above, the awards granted only become exercisable if certain Group Sales Turnover targets (perfomance condition) are satisfied.
If the Group’s actual Sales Turnover is below the lower band, then the awards shall not vest and shall lapse at the end of the awards’ life. If the Group’s actual Sales Turnover is at the lower band, then the awards shall be exercisable as to 100%. If the Group’s actual Sales Turnover is at the budget, then the awards shall be exerciable as to 200%. If the Group’s actual Sales Turnover is between the upper band and budget, a percentage above 100% and up to 200% of the awards shall vest.
5. This award was granted on 10 July 2013. Subsequent to the FY2015 financial year-end and prior to the signing of the audited accounts, this award vested and 35,000 shares were issued.
6. The Non-Executive Directors were awarded shares in lieu of fees for the period from 1 January to 30 June 2015. The number of shares was calculated using the 20-day volume weighted average price(“VWAP”) to 31 December 2014 of GBP5.53 (US$8.65) per share.
Subsequent to the FY2015 financial year-end and prior to signing of the audited accounts, on 7 July 2015, these shares were issued to the Non-Executive Directors. A further 13,110 shares will be issued to Olivier Maes (6,350) and Peter Lai Hock Meng (6,760) in lieu of fees for the period from 1 July to 31 December 2015 at 20-day VWAP of GBP3.94 per share.
The Company’s Remuneration Committee is responsible for administering the Long-Term Incentive Plan (‘LTIP’) approved by the Board in June 2008. The LTIP is a 10-year discretionary benefit offered by the Company to eligible employees, including the Executive Directors. The principal terms of the LTIP include:-
• A restriction on the Company issuing (or granting rights to issue) more than 10 per cent of its issued ordinary share capital under the LTIP (and any other employee share plan) in any ten calendar year period; and
• Lapsed awards (due to unmet performance conditions) do not count in calculating the total number of awards or options issued under the LTIP.
Please refer to Note 23 Share Option Reserve of the Notes to the Financial Statements.
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BOARD OF DIRECTORS
WILLIAM MITCHELL CHIEF FINANCIAL OFFICER
Mr Mitchell joined the Company in June 2008 as Chief Financial Officer. He is a Fellow Chartered Accountant who trained with PricewaterhouseCoopers, London where he advised major international F&B businesses and private equity firms on mergers and acquisitions and post-acquisition integrations. Mr Mitchell was part of the management buy-in team that acquired Tetley Tea, the number two global tea brand, from Allied Domecq. As Chief Financial Officer, he supports the Chief Executive Officer and his responsibilities include financial planning and reporting, group treasury and investor relations.
PAUL SELWAY-SWIFTNON-EXECUTIVE CHAIRMAN
Mr Selway-Swift was appointed Chairman of the Company in December 2007 and also chairs the Nomination Committee. He worked with the HSBC Group for 30 years. He was a director of The Hongkong & Shanghai Banking Corporation from 1992 to 1996 and of HSBC Investment Bank plc from 1996 to 1998. He is currently a director of Li & Fung Ltd and Global Brands Group Ltd.
MAGOMET MALSAGOV CHIEF EXECUTIVE OFFICER
Mr Malsagov has held the position of Chief Executive Officer since founding the business in 2002. He is responsible for the executive management of the Group and also has the responsibility to recommend and to implement the Group’s strategic objectives.
CHRISTOPHER PRATT SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr Pratt was formerly the Chairman of Swire Pacific Limited, John Swire & Sons (H.K.) Limited, Cathay Pacific Airways Limited, Hong Kong Aircraft Engineering Company Limited and Swire Properties Limited. He was also a director of The Hongkong and Shanghai Banking Corporation Limited and Air China Limited. He joined the Swire Group in 1978 and has worked with the group in Hong Kong, China, Australia and Papua New Guinea. Mr. Pratt received a CBE (Commander of the Order of the British Empire) in 2000. Mr. Pratt was appointed as a Non-Executive Director of PureCircle in March 2014 and is the Senior Independent Non-Executive Director. Mr Pratt chairs the Remuneration Committee.
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PETER LAI HOCK MENG NON-EXECUTIVE DIRECTOR
Mr Lai Hock Meng has more than 30 years of experience in financial services industry including central banking, investment banking, private banking, stock broking, venture capital, asset management, treasury management and private equity investments. He manages his own boutique corporate advisory firm based in Singapore and sits on the board of several other companies listed on the Singapore Exchange and the Hong Kong Stock Exchange as an independent director. Mr Lai Hock Meng is a CFA charter holder from the CFA Institute, USA. He joined the Company in June 2008 and is the chairman of the Audit Committee.
MITCH ADAMEK NON-EXECUTIVE DIRECTOR
Mr Adamek retired from PepsiCo Inc. in 2011 after a 22 years career in both a procurement and human resources role. His last role at PepsiCo was as Chief Procurement Officer. Prior to PepsiCo Inc., he spent six years in human resources leadership positions at USG Corporation. Mr. Adamek is currently a non-executive director of Wayne Farms LLC and sits on its compensation committee. He joined the Company as a Non-executive Director in July 2015 and sits on the Remuneration Committee.
GUY WOLLAERT NON-EXECUTIVE DIRECTOR
Guy Wollaert, has recently stepped down as a Senior Vice President and Chief Technical and Innovation Officer of The CocaCola Company after a 23 year career. Mr Wollaert previously served as General Manager of the Global Juice Center, where he was responsible for leading various functions including business development and supply chain for its global juice and juice drink operations. He joined the Company in July 2015.
OLIVIER MAES NON-EXECUTIVE DIRECTOR
Mr Maes is a French national who joined PureCircle in November 2006. He has more than 25 years of experience in fast moving consumer goods markets and formerly held CEO positions of various companies in Europe and Asia for Campofrio Food Group, Danone Group and Kraft Group.
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OUR FINANCIALS
FINANCIAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
CONTENTS DIRECTORS’ REPORT 47 - 48INDEPENDENT AUDITORS’ REPORT 49STATEMENTS OF FINANCIAL POSITION 50 - 51CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 52CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 53 - 54COMPANY STATEMENT OF CHANGES IN EQUITY 55CONSOLIDATED STATEMENT OF CASH FLOWS 56 - 57NOTES TO THE FINANCIAL STATEMENTS 58 - 100
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DIRECTORS’ REPORT
The Directors are pleased to present their report and the audited financial statements of the Group and the statement of financial position and summary of significant accounting policies and other explanatory notes of the Company for the financial year ended 30 June 2015.
PRINCIPAL ACTIVITIESThe Company is engaged principally in the business of investment holding whilst the principal activities of the rest of the Group are the production, marketing and distribution of natural sweeteners and flavours. There have been no significant changes in the nature of these activities during the financial year.
BUSINESS REVIEW AND FUTURE DEVELOPMENTSThe financial results of the Group and the financial position of the Group and of the Company for the financial year are shown in the annexed financial statements.
RESULTS AND DIVIDENDSPureCircle Group’s turnover for the financial year ended 30 June 2015 was USD127 million. The PureCircle Group’s profit attributable to the owners of the Company was USD4 million, equivalent to a profit per share of USD2.95 cents.
The Group ended the year with net assets of USD190 million, gross assets of USD314 million and gross cash balances of USD64 million.
The Directors do not recommend payment of a dividend in respect of the year ended 30 June 2015.
DIRECTORS AND THEIR INTERESTSThe interests (all of which are beneficial interests save as otherwise stated) of the Directors and of the persons connected with them as at 30 June 2015 are as follows:
DIRECTORSNUMBER OF
SHARESNUMBER OF
OPTIONS
Paul Selway-Swift 210,800¹ -
Magomet Malsagov 14,896,912² 235,976¹
Peter Lai Hock Meng 204,460¹ 5,140¹
Christopher Pratt (appointed as at 18 March 2015) 695,696³ -
Olivier Phillipe Marie Maes 422,620¹ 4,850¹
William Mitchell 930,5404 252,859¹
¹ Held directly.
² 14,885,612 held directly and 11,300 held indirectly by his wife
³ 695,696 held indirectly by The CDP 2014 Trust.4 925,070 held directly and 5,470 held indirectly by his wife.
SIGNIFICANT SHAREHOLDERSAt 30 June 2015, the Company had been notified of the following interests of 3% or more in its ordinary shares.
BENEFICIAL SHAREHOLDERSINTEREST IN
ISSUED SHARES INTEREST
Wang Tak Company Limited 44,185,890 26.0%
Olam International Limited 30,544,609 18.0%
Magomet Malsagov 14,896,812 8.8%
Halfmoon Bay Capital Limited 13,268,724 7.8%
Asian Investment Management Services Limited 9,559,314 5.6%
47
STATEMENT OF DIRECTORS’ RESPONSIBILITIESThe Directors are responsible for the preparation of the financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group at the end of the year and of the results of the Group for the year in preparing those financial statements, the Directors are required to: -
(a) select suitable accounting policies and then apply them consistently;
(b) make judgements and estimates that are reasonable and prudent;
(c) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Group financial statements, Company statement of financial position and the summary of significant accounting policies and other explanatory notes; and
(d) prepare the Group financial statements, Company statement of financial position and the summary of significant accounting policies and other explanatory notes on the going concern basis unless it is inappropriate to assume that the Group will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and Company and to enable them to ensure that the financial statements comply with International Financial Reporting Standards. The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud or other irregularities.
The Directors are responsible for information contained in the Directors’ report and other information contained in the accounts.
AUDITORSThe auditors, Messrs. PricewaterhouseCoopers, have expressed their willingness to continue in office.
In accordance with a resolution of the Board of Directors dated 21 September 2015.
MAGOMET MALSAGOV WILLIAM MITCHELLCHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
DIRECTORS’ REPORT (continued)
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INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF PURECIRCLE LIMITED(Incorporated in Bermuda)Registration No: 40431
We have audited:• the consolidated financial statements of PureCircle Limited
and its subsidiaries (“the Group”) which comprise the consolidated statement of financial position as of 30 June 2015, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, and
• the statement of financial position, the statement of changes in equity of PureCircle Limited (“the Company”) as of 30 June 2015, and a summary of significant accounting policies and other explanatory notes
set out on pages 50 to 100 (collectively referred to as the “Financial Information”).
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION
The Directors of the Company are responsible for the preparation and fair presentation of the Financial Information in accordance with International Financial Reporting Standards, and for such internal control as the Directors determine is necessary to enable the preparation of Financial Information that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on the Financial Information based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the Financial Information are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Information. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Financial Information, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Financial Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the Financial Information.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINIONIn our opinion, the Financial Information give a true and fair view of the financial position of the Group and of the Company as of 30 June 2015, and of the Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.
OTHER MATTERSThis report, including the opinion, has been prepared for and only for you, as a body and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
PRICEWATERHOUSECOOPERS(No. AF: 1146)Chartered Accountants
Kuala Lumpur21 September 2015
INDEPENDENT AUDITORS’ REPORT
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GROUP COMPANY
NOTE2015
USD’0002014
USD’0002015
USD’0002014
USD’000
ASSETS
NON-CURRENT ASSETS
Investment in subsidiaries 7 - - 140,583 143,207
Investment in joint ventures 8 - 149 - 70
Intangible assets 9 37,790 38,023 473 472
Property, plant and equipment 10 59,724 63,715 659 278
Biological assets 11 3,570 4,237 - -
Prepaid land lease payments 12 2,914 2,999 - -
Deferred tax assets 13 8,900 5,876 - -
Trade receivables 15 1,856 1,950 - -
Other receivables, deposits and prepayments 16 2,121 553 - -
116,875 117,502 141,715 144,027
CURRENT ASSETS
Inventories 14 62,790 86,519 - -
Trade receivables 15 62,530 37,362 - -
Other receivables, deposits and prepayments 16 7,490 4,962 544 774
Tax recoverable 347 581 - -
Amount owing by subsidiaries 17 - - 19,349 4,866
Restricted cash 19 5,095 7,851 4,831 -
Cash and cash equivalents 19 59,181 38,014 35,058 13,752
197,433 175,289 59,782 19,392
TOTAL ASSETS 314,308 292,791 201,497 163,419
EQUITY AND LIABILITIES
EQUITY
Share capital 20 17,006 16,472 17,006 16,472
Share premium 21 208,310 163,240 208,310 163,240
Foreign exchange translation reserve 22 (10,990) 920 - -
Share option reserve 23 11,185 5,076 11,185 5,076
Accumulated losses (35,019) (38,203) (37,267) (23,163)
EQUITY ATTRIBUTABLE TO
OWNERS OF THE COMPANY 190,492 147,505 199,234 161,625
NON-CONTROLLING INTEREST - 722 - -
TOTAL EQUITY 190,492 148,227 199,234 161,625
The annexed notes form an integral part of these financial statements.
STATEMENTS OF FINANCIAL POSITION AT 30 JUNE 2015
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GROUP COMPANY
NOTE2015
USD’0002014
USD’0002015
USD’0002014
USD’000
NON-CURRENT LIABILITIES
Long-term borrowings 24 83,965 2,169 - -
Deferred income 26 290 360 - -
Other payables and accruals 26 200 2,111 - -
84,455 4,640 - -
CURRENT LIABILITIES
Trade payables 25 3,134 5,879 - -
Other payables and accruals 26 10,546 10,364 2,263 1,794
Short-term borrowings 24 25,681 123,681 - -
39,361 139,924 2,263 1,794
TOTAL LIABILITIES 123,816 144,564 2,263 1,794
TOTAL EQUITY AND LIABILITIES 314,308 292,791 201,497 163,419
NET ASSETS PER SHARE (USD) 27 1.12 0.90
Approved and authorised for issue by the Board of Directors on 21 September 2015.
MAGOMET MALSAGOV WILLIAM MITCHELLCHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
The annexed notes form an integral part of these financial statements.
STATEMENTS OF FINANCIAL POSITION AT 30 JUNE 2015 (continued)
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THE GROUP
NOTE2015
USD’0002014
USD’000
Revenue 28 127,349 101,045
Cost of sales (87,016) (63,570)
Gross profit 40,333 37,475
Administrative expenses (30,643) (24,461)
Other income 703 1,426
Other expenses (1,255) (1,539)
Finance income 57 273
Finance costs (7,275) (9,253)
Share of loss in joint ventures (872) (1,336)
Profit before taxation 30 1,048 2,585
Income tax credit/(expense) 29 3,043 (265)
PROFIT FOR THE FINANCIAL YEAR 4,091 2,320
OTHER COMPREHENSIVE (LOSS)/INCOME (NET OF TAX):
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Exchange differences arising on translation of foreign operations (11,717) (514)
Share of other comprehensive income of joint ventures (101) 5
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE FINANCIAL YEAR (NET OF TAX) (7,727) 1,811
PROFIT FOR THE FINANCIAL YEAR
Attributable to:
Owners of the company 4,158 2,316
Non-controlling interest (67) 4
4,091 2,320
Total comprehensive (loss)/income
Attributable to:
Owners of the company (7,662) 1,804
Non-controlling interest (65) 7
(7,727) 1,811
Profit per share (US cents)
- Basic 31 2.48 1.41
- Diluted 31 2.42 1.37
The annexed notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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ATTRIBUTABLE TO OWNERS OF THE COMPANY
SHARECAPITALUSD’000
SHAREPREMIUMUSD’000
FOREIGNCURRENCY
TRANSLATIONRESERVEUSD’000
SHAREOPTION
RESERVEUSD’000
(ACCUMULATED LOSSES)
USD’000SUB-TOTAL
USD’000
NON-CONTROLLING
INTERESTSUSD’000
TOTALEQUITY
USD’000
THE GROUP
Balance at 01.07.2014 16,472 163,240 920 5,076 (38,203) 147,505 722 148,227
Profit for the financial year - - - - 4,158 4,158 (67) 4,091
Other comprehensive income
Exchange difference arising on translation of foreign operations - - (11,820) - - (11,820) 2 (11,818)
Total comprehensive income for the financial year - - (11,820) - 4,158 (7,662) (65) (7,727)
Transactions with owners:
Share option scheme compensation expense for the financial year - - - 6,412 - 6,412 - 6,412
Placement of shares 500 42,963 - - - 43,463 - 43,463
Exercise of share options 10 410 - (303) - 117 - 117
Acquisition of non-controlling interest 24 1,697 (90) - (974) 657 (657) -
534 45,070 (90) 6,109 (974) 50,649 (657) 49,992
Balance at 30.06.2015 17,006 208,310 (10,990) 11,185 (35,019) 190,492 - 190,492
The annexed notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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ATTRIBUTABLE TO OWNERS OF THE COMPANY
SHARECAPITALUSD’000
SHAREPREMIUMUSD’000
FOREIGNCURRENCY
TRANSLATIONRESERVEUSD’000
SHAREOPTION
RESERVEUSD’000
(ACCUMULATEDLOSSES)
USD’000SUB-TOTAL
USD’000
NON-CONTROLLING
INTERESTSUSD’000
TOTALEQUITY
USD’000
THE GROUP
Balance at 01.07.2013 16,460 162,898 1,432 1,530 (40,519) 141,801 715 142,516
Profit for the financial year - - - - 2,316 2,316 4 2,320
Other comprehensive income
Exchange difference arising on translation of foreign operations - - (512) - - (512) 3 (509)
Total comprehensive income for the financial year - - (512) - 2,316 1,804 7 1,811
Transactions with owners:
Share option scheme compensation expense for the financial year - - - 3,768 - 3,768 - 3,768
Exercise of share options 12 342 - (222) - 132 - 132
12 342 - 3,546 - 3,900 - 3,900
Balance at 30.06.2014 16,472 163,240 920 5,076 (38,203) 147,505 722 148,227
The annexed notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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ATTRIBUTABLE TO OWNERS OF THE COMPANY
SHARECAPITALUSD’000
SHAREPREMIUMUSD’000
SHAREOPTION
RESERVEUSD’000
ACCUMULATEDLOSSES
USD’000TOTAL
USD’000
THE COMPANY
Balance at 01.07.2014 16,472 163,240 5,076 (23,163) 161,625
Loss for the financial year - - - (14,104) (14,104)
Transactions with owners:
Share option scheme compensation expense for the financial year - - 6,412 - 6,412
Placement of shares 500 42,963 - - 43,463
Exercise of share options 10 410 (303) - 117
Acquisition of non-controlling interest 24 1,697 - - 1,721
534 45,070 6,109 - 51,713
Balance at 30.06.2015 17,006 208,310 11,185 (37,267) 199,234
THE COMPANY
Balance at 01.07.2013 16,460 162,898 1,530 (18,929) 161,959
Loss for the financial year - - - (4,234) (4,234)
Transactions with owners:
Share option scheme compensation expense for the financial year - - 3,768 - 3,768
Exercise of share options 12 342 (222) - 132
12 342 3,546 - 3,900
Balance at 30.06.2014 16,472 163,240 5,076 (23,163) 161,625
The annexed notes form an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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THE GROUP
NOTE2015
USD’0002014
USD’000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation 1,048 2,585
Adjustments for:
Amortisation of prepaid land lease payments 143 140
Amortisation of deferred income (76) (105)
Amortisation of intangible assets 180 168
Provision for doubtful debts 112 -
Depreciation of property, plant and equipment 5,738 6,016
Interest expense 7,275 9,253
Interest income (57) (273)
(Gain)/Loss on disposal of property, plant and equipment (11) 14
(Gain)/Loss on disposal of joint venture 120 -
Share based payment expense 6,412 3,768
Intangible assets written off 45 105
Inventories written off 14 78
Bad debts written off 13 -
Unrealised foreign exchange (loss)/gain 2,081 (408)
Share of loss in joint ventures 872 1,336
Operating cash flow before working capital changes 23,909 22,677
Decrease in inventories 23,768 121
Increase in trade and other receivables (30,486) (4,423)
Decrease in trade and other payables (3,423) (2,906)
NET CASH FROM OPERATIONS 13,768 15,469
Interest received 57 273
Interest paid (7,275) (9,253)
Tax paid (132) (1,248)
NET CASH GENERATED FROM OPERATING ACTIVITIES 6,418 5,241
CASH FLOWS FROM INVESTING ACTIVITIES
Addition of intangible assets 9 (3,865) (6,200)
Addition of property, plant and equipment 10 (6,651) (4,495)
Addition of prepaid land lease payment 12 (50) -
Proceeds from disposal of property, plant and equipment 14 30
Increase in investment in joint ventures 8 (342) (684)
NET CASH USED IN INVESTING ACTIVITIES (10,894) (11,349)
The annexed notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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THE GROUP
NOTE 2015USD’000
2014USD’000
CASH FLOWS FROM FINANCING ACTIVITIES
Drawdown of borrowings 151,800 34,649
Repayment of borrowings (171,369) (31,521)
Repayment of hire purchase (35) (45)
Proceeds from placement of shares 43,463 -
Proceeds from share options exercised 117 132
Decrease/(Increase) in restricted cash 2,756 (5,537)
NET CASH FROM/(USED IN) FINANCING ACTIVITIES 26,732 (2,322)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 22,256 (8,430)
Effects of foreign exchange rate changes on cash and cash equivalents (1,089) (161)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 38,014 46,605
CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 19 59,181 38,014
Non-cash item:Principle non-cash transaction during the year is the issuance of 240,000 units of equity shares of the Company amounting to USD 1,721,000 to acquire non-controlling interest in a subsidiary.
The annexed notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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1 GENERAL INFORMATIONThe Company was incorporated and registered as a private limited company in Bermuda, under the Companies (Bermuda) Law 1981. The registered office and principal place of business are as follows:-
REGISTERED OFFICE:Clarendon House, 2 Church Street,Hamilton HM 11, Bermuda.
PRINCIPAL PLACE OF BUSINESS:PT23419, Lengkuk Teknologi,Techpark @ Enstek, 71760, Bandar Enstek,Negeri Sembilan, Malaysia
The Company’s shares are publicly traded on the Alternative Investment Market (“AIM”) division of the London Stock Exchange.
The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors dated 21 September 2015.
2 PRINCIPAL ACTIVITIESThe Company is engaged principally in the business of investment holding whilst the principal activities of the rest of the Group are the production, marketing and distribution of natural ingredient including sweeteners and flavours.
There have been no significant changes in the nature of these activities during the financial year. The principal activities of the subsidiaries and joint ventures are set out in Notes 7 and 8 to the financial statements.
3 BASIS OF PREPARATIONThe financial statements of the Group and Company have been prepared under the historical cost convention unless otherwise indicated in the significant accounting policies, and in compliance with International Financial Reporting Standards (“IFRSs”) and IFRIC Interpretations.
(a) The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Group and Company’s financial year beginning on or after 1 July 2014 are as follows:
• Amendments to IAS 36 ‘Recoverable Amount Disclosures for Non-Financial Assets’
• Amendments to IAS 39 ‘Novation of Derivatives and Continuation of Hedge Accounting’
• Amendments to IFRS 10, IFRS 12 and IAS 27 ‘Investment Entities’• Amendment to IAS 19 ‘Employee Benefits’• IC Interpretation 21 ‘Levies’ • Annual Improvement 2010 – 2012• Annual Improvement 2011 – 2013
The adoptions of these standards do not have any material effect on the financial performance or position of the Group and the Company.
(b) Standards, amendments and interpretations that have been issued and are applicable to the Group but are not yet effective
The Group will apply the new standards, amendments to standards and interpretations in the following period:
(i) Financial year beginning on 1 July 2016• Amendments to IFRS 11 “Joint Arrangements” require
an investor to apply the principles of IFRS 3 “Business Combination” when it acquires an interest in a joint operation that constitutes a business. The amendments are applicable to both the acquisition of the initial interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a previously held interest is not re-measured when the acquisition of an additional interest in the same joint operation results in retaining joint control. It is not expected to have significant financial impact on the financial statements of the Group.
• Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” clarify that the use of revenue-based methods to calculate the depreciation and amortisation of an item of property, plant and equipment and intangible are not appropriate. This is because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.
The amendments to IAS 38 also clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption can be overcome only in the limited circumstances where the intangible asset is expressed as a measure of revenue or where it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. It is not expected to have significant financial impact on the financial statements of the Group.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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3 BASIS OF PREPARATION (continued)
(b) Standards, amendments and interpretations that have been issued and are applicable to the Group but are not yet effective (continued)
The Group will apply the new standards, amendments to standards and interpretations in the following period: (continued)
(i) Financial year beginning on 1 July 2016 (continued)
• Amendments to IFRS 10 and IFRS 28 regarding sale or contribution of assets between an investor and its associate or joint venture resolve a current inconsistency between IFRS 10 and IFRS 28. The accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitute a “business”. Full gain or loss shall be recognised by the investor where the non-monetary assets constitute “business”. If the assets do not meet the definition of a business, the gain or loss is recognised by the investor to the extent of the other investors’ interests. The amendments will only apply when an investor sells or contributes assets to its associate or joint venture. They are not intended to address accounting for the sale or contribution of assets by an investor in a joint operation. It is not expected to have significant financial impact on the financial statements of the Group.
• Amendments to IAS 16 and IAS 41 ‘Agriculture: Bearer Plants’ are to be applied retrospectively and introduce a new category of biological asset, i.e. the bearer plants. A bearer plant is a living plant that is used in the production and supply of agricultural produce, is expected to bear produce for more than one period, and has remote likelihood of being sold as agricultural produce (except for incidental scrap sales).
Bearer plants are seen as similar to an item of machinery in a manufacturing plant, and therefore are treated the same way under IAS 16. Therefore, bearer plants are measured either at cost or revalued amounts, less accumulated depreciation and impairment losses. Before reaching maturity, bearer plants are measured at accumulated costs, similar to accounting for a self-constructed item of property, plant and equipment.
Agricultural produce growing on bearer plants continue to be measured at fair value less costs to sell under IAS 41, with fair value changes recognised in profit or loss as the produce grows. The Group is currently assessing the impact of the amendments to its financial statements.
(ii) Financial year beginning on 1 July 2018• IFRS 15 ‘Revenue from Contracts with Customers’ -
An entity recognises revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognised when a customer obtains control of goods or services, i.e. when the customer has the ability to direct the use of and obtain the benefits from the goods or services.
Transfer of control is not the same as transfer of risks and rewards as currently considered for revenue recognition. A company would recognise revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). It is not expected to have a material impact on the Group’s and the Company’s financial statements.
• IFRS 9 ‘Financial Instruments’ will replace IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 retains but simplifies the mixed measurement model in IAS 39 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the IFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
The Group is currently assessing its impact to its financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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4 FINANCIAL RISK MANAGEMENTThe Group’s activities are exposed to a variety of financial risks including foreign currency risk, interest rate risk, credit risk, liquidity and cash flow risk, and capital risk management. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
(a) Financial risk management policies
(i) Foreign currency riskThe Group operates internationally and is exposed to foreign exchange risk when the Company and its subsidiaries enter into transactions that are not denominated in their functional currencies. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations.
The Group manages its foreign exchange exposure by taking advantage of any natural offsets of the Group’s foreign exchange revenue and expenses and from time to time enters into foreign exchange forward contracts for a portion of the remaining exposure relating to these forecast transactions when deemed appropriate.
The following table demonstrates the sensitivity to a reasonably possible change in the United States Dollar, Renminbi, Euro and Sterling Pound exchange rates, with all other variables held constant of the Group’s results:
CHANGES INEXCHANGE RATE
EFFECT ONPROFIT/LOSS
AFTER TAXATIONUSD’000
2015
United States Dollar against Ringgit Malaysia 20% 2,129
Chinese Renminbi against United States Dollar 3% 330
Sterling Pound against United States Dollar 17% 62
Euro against United States Dollar 30% 377
2014
United States Dollar against Ringgit Malaysia 7% 909
Chinese Renminbi against United States Dollar 8% 588
Sterling Pound against United States Dollar 15% 129
Euro against United States Dollar 8% 695
The above represents favourable effects on the results of the Group should the respective currencies strengthen against the functional currencies of the entities within the Group, whilst weakening of the above currencies would have an equal but opposite effect to the amount shown above, on the basis that all other variables remain constant.
Management considered the current economic environment in arriving at the reasonable possible change in the above exchange rates.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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4 FINANCIAL RISK MANAGEMENT (continued)
(a) Financial risk management policies (continued)
(ii) Interest rate riskInterest rate risk is the risk that the future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s exposure to interest rate risk arises mainly from interest-bearing borrowings at floating rates. The Group’s interest rate profile is set out below:
2015 2014 2015 2014
Effective interest rate (%) USD’000 USD’000
Term loans 4.60 7.35 109,497 125,782
Borrowings issued at variables rates expose the Group to cash flow interest rate risk which is partially offset by cash held at variable rates. The Group actively reviews its debt portfolio to mitigate the impact of interest risk. The Group does not utilise interest swap contracts or other derivative instruments for trading or speculation purposes.
As at balance sheet date, if interest rates on borrowings are 1% higher/lower for a year with all other variables held constant post-tax profit for the year would be USD1,095,000 lower/higher (2014: post-tax loss for the year would be USD1,258,000 higher/lower), mainly as a result of higher/lower interest expense on floating rate borrowing.
(iii) Credit riskThe Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, the payment profile of the customers and credit exposure are monitored on an ongoing basis with the result that the Group’s exposure to bad debt is not significant. The Group also establishes an allowance account for impairment that represents its estimate of losses in respect of trade and other receivables. The Group and the Company’s maximum exposure is the carrying amount as disclosed in Notes 15, 16 and 17 to the financial statements.
At 30 June 2015, 2 (2014: 3) customers comprised more than 30% of total receivables and it took 16 customers (2014: 14) to comprise 75% of total receivables. See Note 15 for ageing of trade receivables that are past due but not impaired.
The Group’s cash and cash equivalents and short-term deposits are placed with creditworthy financial institutions and the risks arising thereof are minimised in view of the financial strength of these financial institutions.
The Group and Company consider that the credit risk relating to amounts due from joint ventures and subsidiaries respectively to be low. Both the joint ventures and subsidiaries are expected to repay fully the amounts owed to the Group and Company respectively as these related entities are expected to continue on a going concern basis. At year end, the Group believes there is no credit risk provision required for these receivables.
(iv) Liquidity and cash flow risksLiquidity and cash flow risks arise mainly from general funding and business activities. The Group’s cash flow is reviewed regularly to ensure commitments are settled when they fall due.
Cash flow forecasting is performed both in the operating entities and on a Group consolidated basis. The Group monitors rolling forecasts of its liquidity requirements including projected sales revenues, inventory and capital expenditure requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or financial covenants on any of its borrowing facilities. The Group invest surplus cash into financial interest bearing accounts and money market deposits.
The following tables detail the remaining contractual maturities at the reporting date of the Group’s and the Company’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the reporting date) and the earliest date the Group and the Company can be required to pay:
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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4 FINANCIAL RISK MANAGEMENT (continued)
(a) Financial risk management policies (continued)
(iv) Liquidity and cash flow risks (continued)
CARRYING AMOUNTUSD’000
TOTALCONTRACTUAL
UNDISCOUNTED CASH FLOW
USD’000
WITHIN1 YEAR OR
ON DEMANDUSD’000
MORETHAN 1
YEAR BUTLESS THAN 2 YEARSUSD’000
MORETHAN 2
YEARS BUTLESS THAN 5 YEARSUSD’000
MORE THAN 5 YEARS
USD’000
THE GROUP
2015
At 30 June 2015
Financial liabilities:
Trade and other payables 13,851 13,851 13,851 - - -
Borrowings 109,646 122,940 30,509 24,642 67,789 -
2014
At 30 June 2014
Financial liabilities:
Trade and other payables 18,316 18,316 16,205 2,111 - -
Borrowings 125,850 133,753 131,337 2,046 370 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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4 FINANCIAL RISK MANAGEMENT (continued)
(a) Financial risk management policies (continued)
(iv) Liquidity and cash flow risks (continued)
CARRYING AMOUNTUSD’000
TOTALCONTRACTUAL
UNDISCOUNTED CASH FLOW
USD’000
WITHIN1 YEAR OR
ON DEMANDUSD’000
MORETHAN 1
YEAR BUTLESS THAN 2 YEARSUSD’000
MORE THAN 2
YEARS BUTLESS THAN 5 YEARSUSD’000
THE COMPANY
2015
At 30 June 2015
Other payables and accruals 2,263 2,263 2,263 - -
2014
At 30 June 2014
Other payables and accruals 1,794 1,794 1,794 - -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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4 FINANCIAL RISK MANAGEMENT (continued)
(b) Capital risk management The Group manages its capital to ensure that entities in
the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debts, which include the borrowings disclosed in Note 24, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, share premium, reserves and retained earnings.
The Group’s policy is to maintain a strong capital base by having low to moderate gearing. The Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total equity.
The gearing ratio at the financial year end was as follows:THE GROUP
2015USD’000
2014USD’000
Debts (i) 109,646 125,850
Less: Gross cash (64,276) (45,955)
Net debt (ii) 45,370 79,895
Equity (iii) 190,492 147,505
Net debt to equity ratio 24% 54%
(i) Debts relate to borrowings disclosed in Note 24 to the financial statements.
(ii) Net debt is calculated as total borrowings (including “current and non-current borrowings”) as shown in the consolidated statement of financial position less gross cash.
(iii) Equity includes all capital and reserves of the Group attributable to the equity holders of the Company.
(c) Fair value estimation There are no significant fair value estimates to be made for
the financial instruments measured at fair value for the Group and the Company as at the reporting date.
Fair value is defined as the amount at which the assets/liabilities could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced sale or liquidation.
The fair value measurement hierarchy for assets/liabilities stated in the balance sheets is as follows:
• Level 1: Quoted price (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
• Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The Group measures its biological assets at fair values, as disclosed in Note 5(j). However, as these biological assets are subject to insignificant biological transformation, the fair value approximates cost. The fair values of biological assets would have been determined based on the inputs for the asset that are not based on observable market data as the prices of the stevia plants are not traded on an active market. These assets are classified as Level 3 financial instruments in accordance with IFRS 13.
5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Financial assets
(i) ReceivablesTrade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
(ii) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
(b) Financial liabilities
(i) PayablesLiabilities for trade and other payables, including amounts owing to related parties, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
(ii) Interest-bearing loans and borrowingsAll loans and borrowings are recognised initially at fair value of the consideration received, net of directly attributable transaction cost incurred, and are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction cost) and the redemption value is recognised in the profit or loss over the period of the loans and borrowings using the effective interest method.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Foreign currency translation
(i) Functional and presentation currencyThe functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which the entities operates.
The functional and presentation currency of the Company is United States Dollar (“USD”). The consolidated financial statements are presented in United States Dollar (“USD”) which is the Company’s presentation currency.
(ii) Transactions and balancesTransactions of the Company in foreign currency are converted into USD at the approximate rates of exchange ruling at the transaction dates.
Transactions in foreign currency are measured in the respective functional currencies of the Group’s entities and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates.
Monetary assets and liabilities at the reporting date are translated at the rates ruling as of that date. Exchange differences arising from the translation of monetary assets and liabilities are recognised in the profit or loss.
Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined.
(iii) Foreign operationsThe results and financial position of the subsidiaries are translated into the presentation currency as follows:-(a) assets and liabilities, including goodwill and fair value adjustments arising on the acquisition of foreign operations, for each statement of financial position presented are translated at the closing rate at the reporting date; and
(b) income and expenses for each profit or loss are translated at the average exchange rates for the year; and
(c) all resulting exchange differences are recognised as a separate component of equity; and
(d) on disposal, accumulated translation differences are recognised in the profit or loss as part of the gain or loss on sale of the foreign operation.
(d)Basis of consolidation The consolidated financial statements include the financial
statements of the Company and its subsidiaries.
(i) SubsidiariesSubsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If, after reassessment, the Group’s interest in the fair values of the identifiable net assets of the subsidiaries exceeds the cost of the business combinations, the excess is recognised immediately in the profit or loss.
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d)Basis of consolidation (continued)
(ii) Transactions with non-controlling interestsThe Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(iii) Disposal of subsidiariesWhen the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
(iv) Joint venturesThe Group’s interest in a joint venture is accounted for in the financial statements using the equity method of accounting. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group recognise the further losses to the extent of its incurred obligations.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
(e)Goodwill on consolidation Goodwill that arises upon acquisition of subsidiaries is
included in intangible assets. The carrying value of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate a potential impairment. Impairment losses on goodwill are recognised immediately
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
in the profit or loss. An impairment loss recognised for goodwill is not reversed in a subsequent year. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.
Acquisition of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transaction.
(f)Investments in subsidiaries and joint ventures Investments in subsidiaries and joint ventures are
stated at cost in the statement of financial position of the Company, and are reviewed for impairment at the end of the financial year if events or changes in circumstances indicate that their carrying values may not be recoverable.
On the disposal of the investments in subsidiaries and joint ventures, the difference between the net disposal proceeds and the carrying amount of the investments is taken to the profit or loss.
(g)Intangible assets (other than goodwill) Intangible assets acquired separately are measured on
initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets with finite useful lives are carried at cost less any accumulated amortisation and any accumulated impairment losses.
(i) Intellectual propertyThe intellectual property consists of the internal investment and external acquisition costs of the patents, trademarks, technological processes and all intellectual and industrial property rights (“intellectual property rights”) in connection therewith on the production of natural sweeteners, pharmaceutical products and chemical derivatives of bio-organic and physiologically active compounds. The acquisition cost is capitalised as an intangible asset as it is able to generate future economic benefits to the Group.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g)Intangible assets (other than goodwill) (continued)
(i) Intellectual property (continued)The useful life of these intellectual property rights, other than patented development costs is considered to be indefinite based on the Directors’ annual reassessment of the useful life; there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. Intellectual property rights are stated at cost less impairment losses. They are not amortised but tested for impairment annually or more frequently when indicators of impairment are identified. The intellectual property rights are assessed to have an indefinite useful life because the Group’s natural sweeteners and flavours are expected to become mass volume ingredients in all foods and beverage categories. Similar to the sugar market, there is no expected end to the useful life of the natural sweeteners and flavours such as stevia. Accordingly, the Directors believe the useful life for intellectual property rights is indefinite. The Directors will continue to reassess the basis of that useful life of the intellectual property rights on an annual basis.
Patented development costs are subject to estimated useful life of no more than 20 years and amortised starting from the financial year when the product are first viable for commercial use.
(ii) Development costsAll research costs are recognised in the profit or loss as incurred.
Development costs consist of expenditure incurred on product development and leaf development projects.
Expenditure incurred on these projects are capitalised as intangible assets only when the Group can demonstrate the technical feasibility of completing the intangible assets so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resource to complete the project and the ability to measure reliably the expenditure during the developments. Expenditures which do not meet these criteria are recognised in the profit or loss when incurred.
Product development costs are amortised on a straight line basis over their estimated useful life of no more than 20 years starting from the financial year when the product are first viable for commercial use.
Leaf development costs are amortised when Stevia plant demonstrates capability of producing high yielding strains of Stevia leaf at reasonable consistency on a mass volume basis. As at 30 June 2015,
these development projects remain on-going as the development targets have not been fully met.
(h)Property, plant and equipment Property, plant and equipment, other than freehold land, are
stated at cost less accumulated depreciation and impairment losses, if any. Freehold land is stated at cost less impairment losses, if any, and is not depreciated. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.
Depreciation is calculated under the straight-line method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are:-
Buildings 2% - 5%
Extraction and refinery plant and machinery
2% - 20%
Office equipment, furniture and fittings and motor vehicles
20%
The depreciation method, useful life and residual values are reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from derecognition of the asset is included in the profit or loss in the year the asset is derecognised.
Capital work-in-progress represents assets under construction, and which are not ready for commercial use at the reporting date. Capital work-in-progress is stated at cost, and will be transferred to the relevant category of long-term assets and depreciated accordingly when the assets are completed and ready for commercial use.
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5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)Impairment of non-financial assets Assets that have an indefinite useful life, for example
goodwill, are not subject to amortisation but are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
(j) Biological assets Biological assets comprise stevia plants in the Group’s
controlled nurseries (nursery plants) that are used to mass produce seedlings for third party farmers.
Seedlings produced from the nursery plants are deducted from the biological asset at fair value less cost to sell. Seedlings harvested from nursery plants are carried at their deemed cost under IAS 2 as inventories, which are then stated at lower of this deemed cost and net realisable value subject to any impairment loss.
Biological assets are stated at fair value less cost to sell. Fair value gains or losses on biological assets are recognised in the profit or loss.
Where little biological transformation has taken place since initial cost incurrences, or the impact of the biological transformation on price is not expected to be material, the cost of the biological assets is considered by management to approximate fair value.
(k)Inventories Inventories are stated at the lower of cost and net realisable
value. Cost is determined on the weighted average basis, and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition. Cost of finished goods and work-in-progress includes the cost of materials, labour and production overheads.
Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated costs necessary to make the sale.
Where necessary, due allowance is made for all damaged, obsolete and slow-moving items.
(l) Income taxes Income taxes for the year comprise current and deferred tax.
Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the applicable tax rates that have been enacted or substantively enacted at the reporting date in each of the jurisdictions in which the Group operates.
Deferred tax is provided in full, using the liability method, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applicable in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the reporting date.
Deferred tax is recognised in the profit or loss, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business combination costs. The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.
(m)Equity instruments Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.
Dividends on ordinary shares are recognised as liabilities when approved for appropriation.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)Cash and cash equivalents Cash and cash equivalents comprise cash in hand, deposits
held at call with banks, short-term deposits with licensed banks with maturities of three month or less, and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents exclude restricted cash.
Restricted cash comprise cash balances held in an account solely for the purpose of utilising trade finance facility and credit card facility provided by a licensed financial institution.
(o)Employee benefits
(i) Short-term benefitsWages, salaries, paid annual leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group.
(ii) Defined contribution plansThe Group’s contributions to defined contribution plans are charged to the profit or loss in the period to which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans. The Group has no defined benefit plan.
(p) Share-based payment The Group operates a long term incentive programme
which is an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options or shares is recognised as an expense over the vesting period. The total amount to be expensed is determined by reference to the fair value of the options or shares granted excluding the impact of any non-market vesting conditions and the number of shares expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution in the subsidiary. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.
(q) Provisions A provision is recognised if, as a result of past event, the
Group has a present legal and constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
(r) Leases Leases where a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place.
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownerships are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges.
The corresponding rental obligations, net of finance charges, are included as borrowings. The interest element of the finance charge is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Plant and equipment acquired under a finance lease is depreciated over the shorter of the estimated useful life of the asset and the lease term.
The prepaid land lease payments represent the Group’s right to use the land for 20 years. Accordingly, the amortisation of the prepaid land lease payments is on a straight line basis over 20 years.
(s) Segmental information Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision-maker (i.e. the Chief Executive Officer (“CEO”)). The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t) Revenue recognition
(i) Sale of goods Revenue from the sale of stevia products is recognised when the significant risks and rewards of ownership of the stevia products have passed to the buyer and upon customers’ acceptance and where applicable, net of sales tax, returns and trade discounts.
(ii) Interest income Interest income is recognised on an accrual basis, based on the effective yield on the investment.
(u) Government grants Government grants are recognised initially as deferred
income at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for the cost of an asset are recognised in profit or loss on a systematic basis over the useful life of the asset.
6 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group’s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below.
(i)Goodwill and other assets carrying values
(a) Key assumptions for value-in-use calculations The recoverable amount of a cash generating unit (“CGU”)
is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a 5-year period including a terminal value as required by IAS 36 ‘Impairment of Assets’. The key assumptions used in the CGU’s value-in-use computation are:
(i) Growth rateThe average sales growth rate used is based on planned capacity and forecasted demands. The short to medium term growth rates used are in the range of 25% per annum (2014: 25% to 30%). The long term growth rate used is 2% (2014: 2.0%) per annum, based on sweetener industry’s long term growth rate ranging from 2% to 4% (2014: 2% to 4%) per annum.
(ii) Gross marginChanges in selling price and direct costs are based on past results and expectations of future changes in the market.
(iii) Discount rateThe discount rate used is 12% (2014: 12%) per annum.
(b) Sensitivity to changes in assumptions The Directors believes that a reasonable change in any of
the above key assumptions would not cause the carrying value of the intangible assets to be impaired.
(ii) Indefinite useful life of intellectual property rights The intellectual property rights are assessed to have indefinite
useful lives because over the long term, the Group’s natural sweeteners and flavours are expected to become mass volume ingredients in all foods and beverage categories. Similar to the sugar market, there is no expected end to the useful life of the natural sweeteners and flavours such as stevia. Accordingly, the Directors believe the useful life for intellectual property rights is indefinite. The Directors will continue to reassess the basis of that useful life of the intellectual property rights on an annual basis.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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7 INVESTMENT IN SUBSIDIARIESTHE COMPANY
2015USD’000
2014USD’000
At 1 July 143,207 107,299
Settlement during the financial year (2,624) -
Addition during the financial year - 16,628
Advances to subsidiaries treated as quasi-investment - 19,280
AT 30 JUNE 140,583 143,207
The advances to subsidiaries are treated as an extension of its investments in subsidiaries.
Details of the subsidiaries are as follows:-
NAME OF COMPANYCOUNTRY OF INCORPORATION
EFFECTIVE EQUITY INTEREST PRINCIPAL ACTIVITIES
2015 2014
HELD DIRECTLY BY PURECIRCLE LIMITED “PCL”
PureCircle Sdn. Bhd. (“PCSB”) Malaysia 100% 100% Production and distribution of natural
sweeteners and flavours.
PureCircle Mexico Inc. (“PCMEX”)* Mexico 100% 100% Sales and marketing of natural sweeteners
and flavours.
PureCircle S.A. Switzerland 100% 100% Investment holding and sales and marketing
of natural sweeteners and flavours.
PureCircle Australia Pty. Ltd. Australia 100% 100% Sales and marketing of natural sweeteners
and flavours.
PureCircle USA
Holdings Inc.(“PCUSAH)
United States of
America (“USA”)
100% 100% Investment holding
PureCircle (UK) Limited (“PCUK”) England and Wales 100% 100% Sales and marketing of natural sweeteners
and flavours.
PureCircle Kenya Limited (“PCK”) Kenya 100% 100% Supply and development of stevia agronomy.
PureCircle South America
Sociedad Anonima (“PCSAM”)
Paraguay 100% 100% Supply and development of stevia agronomy.
PureCircle (China) Limited (“PCC”) Hong Kong 100% 100% Investment holding
PureCircle USA Inc. (“PCUSA”) United States of
America (“USA”)
100% 100% Sales and marketing of natural sweeteners and flavours.
PureCircle (S.E.A) Sdn. Bhd. (formerly
known as PureCircle Stevia Sdn. Bhd.)
Malaysia 100% 100% Sales and marketing of natural sweeteners and flavours.
PureCircle Brazil Brazil 100% 100% Sales and marketing of natural sweeteners and flavours.
PureCircle Trading Sdn Bhd Malaysia 100% - Sales, marketing and distribution of natural sweeteners and flavours. (Note 7(i))
PCM PureCircle De Mexico
S.A. de C.V. **
Mexico 100% 100% Sales and marketing of natural sweeteners and flavours.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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7 INVESTMENT IN SUBSIDIARIES (continued)
NAME OF COMPANYCOUNTRY OF INCORPORATION
EFFECTIVE EQUITY INTEREST PRINCIPAL ACTIVITIES
2015 2014
HELD BY PCUSA
PureCircle Company LLC United States of America (“USA”)
100% 100% Sales and marketing of natural sweeteners and flavours.
HELD BY PCUK
PureCircle Company UK Ltd England and Wales 100% 100% Sales and marketing of natural sweeteners and flavours.
HELD BY PCSB
PureCircle (Jiangxi) Co. Ltd. (“PCJX”) The People’s Republic of China (“The PRC”)
100% 98.62% Supply chain, production and distribution of natural sweeteners and flavours.(Note 7(ii))
PureCircle (Shanghai) Co. Ltd. The People’s Republic of China (“The PRC”)
100% 100% Sales and marketing of natural sweeteners and flavours.
PureCircle Servicios Inc. Mexico 100% 100% Dormant
HELD BY PCC
PureCircle China Agriculture
Development Co. Ltd
The People’s Republic of China (“The PRC”)
100% 100% Supply and development of stevia agronomy.
During the financial year:-(i) the Company acquired a wholly-owned subsidiary, PureCircle Trading Sdn Bhd at a cash consideration of USD 0.55 for sales,
marketing and distribution of natural sweeteners and flavours; and
(ii) PCSB acquired the remaining 1.38% stake in PCJX from non-controlling interest to become a fully owned subsidiary of PCSB. The consideration for the acquisition was satisfied via the issue of 240,000 new ordinary shares of the Company (See Notes 20 and 21)
* - 99% held directly by the Company and 1% held through PCUSAH** - 99% held directly by the Company and 1% held through PCMEX
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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8 JOINT VENTURESDetails of joint ventures are as follows:-
NAME OF COMPANY COUNTRY OF INCORPORATION EFFECTIVE EQUITY INTEREST PRINCIPAL ACTIVITIES
2015 2014
Tereos PureCircle Solutions (“TPCS”)
France - 50% Production, marketing and distribution of natural sweeteners.
NP Sweet AS (“NPS”) Denmark 50% 50% Production, marketing and distribution of natural sweeteners.
As part of the restructuring of its Joint Ventures, Tereos purchased the Company’s shares in TPCS and continues to service the Group’s Regional Key Accounts in the TPCS region.
THE GROUP
2015USD’000
2014USD’000
At 1 July (1,463) (816)
Share of loss (872) (1,336)
Disposal 1,894 -
Additional investment 342 684
Exchange differences (101) 5
AT 30 JUNE (200) (1,463)
Analysed as follows:
Investment in joint ventures - 149
Other payables (non-current) (200) (1,612)
AT 30 JUNE (200) (1,463)
The Group’s share of the results of the joint ventures, none of which is individually material to the Group, are shown in aggregate as follows:
2015USD’000
2014USD’000
Share of loss in joint ventures (before elimination of unrealised profit) (818) (1,093)
Shares of other comprehensive income of joint ventures (101) 5
SHARE OF TOTAL COMPREHENSIVE LOSS (919) (1,088)
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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8 JOINT VENTURES (continued)Set out below are the summarised financial information for Joint Ventures which are accounted for using the equity method:
SUMMARISED STATEMENTS OF FINANCIAL POSITION
2015USD’000
2014USD’000
CURRENT
Cash and cash equivalents 128 100
Other current assets (excluding cash) 3,440 13,994
TOTAL CURRENT ASSETS 3,568 14,094
Financial liabilities (excluding trade payables) (292) (374)
Other current liabilities (including trade payables) (3,670) (13,006)
TOTAL CURRENT LIABILITIES (3,962) (13,380)
NON-CURRENT
Assets 588 1,294
Financial Liabilities - (4,448)
NET ASSETS 194 (2,440)
SUMMARISED STATEMENTS OF COMPREHENSIVE INCOME
2015USD’000
2014USD’000
Revenue 6,922 5,810
Depreciation and amortisation (78) (90)
Interest income/(expense) 562 (30)
Loss before taxation (1,540) (2,474)
Income tax (96) 288
Loss after taxation (1,636) (2,186)
Other comprehensive income (202) 10
TOTAL COMPREHENSIVE LOSS (1,838) (2,176)
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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8 JOINT VENTURES (continued)
RECONCILIATION OF SUMMARISED FINANCIAL INFORMATION
2015USD’000
2014USD’000
Opening net liabilities – 1 July (2,440) (1,632)
Loss for the year (1,636) (2,186)
Other comprehensive income (202) 10
Disposal 3,788 -
Additional investment 684 1,368
Closing net assets/(liabilities) – 30 June 194 (2,440)
Interest in joint venture 50% 50%
Share of net assets/(liabilities) 97 (1,220)
Goodwill - -
Cumulative unrealised profit (297) (243)
CARRYING VALUE (200) (1,463)
9 INTANGIBLE ASSETS
INTELLECTUALPROPERTY
RIGHTSUSD’000
DEVELOPMENTCOSTS
USD’000GOODWILL
USD’000TOTAL
USD’000
THE GROUP
COST
At 1 July 2014 14,355 22,618 1,806 38,779
Additions 359 3,506 - 3,865
Written off during the financial year - (45) - (45)
Foreign exchange translation difference (751) (3,243) - (3,994)
AT 30 JUNE 2015 13,963 22,836 1,806 38,605
ACCUMULATED AMORTISATION
At 1 July 2014 483 273 - 756
Charge for the financial year 8 172 - 180
Foreign exchange translation difference (73) (48) - (121)
AT 30 JUNE 2015 418 397 - 815
NET CARRYING AMOUNT
AT 30 JUNE 2015 13,545 22,439 1,806 37,790
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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9 INTANGIBLE ASSETS (continued)
INTELLECTUALPROPERTY
RIGHTSUSD’000
DEVELOPMENTCOSTS
USD’000GOODWILL
USD’000TOTAL
USD’000
THE GROUP
COST
At 1 July 2013 13,910 17,158 1,806 32,874
Additions 648 5,552 - 6,200
Written off during the financial year (53) (52) - (105)
Foreign exchange translation difference (150) (40) - (190)
AT 30 JUNE 2014 14,355 22,618 1,806 38,779
ACCUMULATED AMORTISATION
At 1 July 2013 481 113 - 594
Charge for the financial year 8 160 - 168
Foreign exchange translation difference (6) - - (6)
AT 30 JUNE 2014 483 273 - 756
NET CARRYING AMOUNT
AT 30 JUNE 2014 13,872 22,345 1,806 38,023
INTELLECTUALPROPERTY
RIGHTSUSD’000
DEVELOPMENTCOSTS
USD’000TOTAL
USD’000
THE COMPANY
COST
At 1 July 2014 472 - 472
Additions during the financial year 1 - 1
AT 30 JUNE 2015 473 - 473
At 1 July 2013 472 693 1,165
Additions during the financial year - 134 134
Transfer during the financial year - (827) (827)
AT 30 JUNE 2014 472 - 472
Intellectual property rights comprise the patents, trade mark technology process and all intellectual and industrial property rights in connection therewith on the production of natural sweetener, pharmaceutical products and derivatives of bio-organic and physiologically active compounds. As at 30 June 2015, the carrying value of indefinite life intangible assets is USD11,312,000 (2014: USD11,027,000).
Goodwill is allocated to the Group’s single CGU identified according to its only operating segment. See Note 6(i) for key assumptions used in the value-in-use calculations.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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10 PROPERTY, PLANT AND EQUIPMENT
FREEHOLDLAND
USD’000BUILDINGS
USD’000
EXTRACTIONAND
REFINERYPLANTS
USD’000
OFFICEEQUIPMENT,FURNITURE
AND FITTINGSAND MOTOR
VEHICLESUSD’000
CAPITALWORK-IN
PROGRESSUSD’000
TOTALUSD’000
THE GROUP
COST
At 1 July 2014 1,820 20,592 65,514 5,321 2,062 95,309
Additions - 38 560 2,429 3,624 6,651
Disposals/write-offs - - - (76) - (76)
Reclassification - 46 44 108 (198) -
Foreign exchange translation reserve (205) (68) (5,815) (596) (512) (7,196)
AT 30 JUNE 2015 1,615 20,608 60,303 7,186 4,976 94,688
ACCUMULATED DEPRECIATION
At 1 July 2014 - 3,413 25,070 3,111 - 31,594
Charge for the financial year - 1,131 3,689 918 - 5,738
Disposals/write-offs - - - (73) - (73)
Foreign exchange translation reserve - (127) (1,891) (277) - (2,295)
AT 30 JUNE 2015 - 4,417 26,868 3,679 - 34,964
NET CARRYING AMOUNT
AT 30 JUNE 2015 1,615 16,191 33,435 3,507 4,976 59,724
FREEHOLDLAND
USD’000BUILDINGS
USD’000
EXTRACTIONAND
REFINERYPLANTS
USD’000
OFFICEEQUIPMENT,FURNITURE
AND FITTINGSAND MOTOR
VEHICLESUSD’000
CAPITALWORK-IN
PROGRESSUSD’000
TOTALUSD’000
THE GROUP
COST
At 1 July 2013 1,169 20,723 63,877 4,156 1,991 91,916
Additions - 63 1,894 1,116 1,422 4,495
Disposals/write-offs - (6) (57) (137) - (200)
Reclassification 653 (26) 522 180 (1,329) -
Foreign exchange translation reserve (2) (162) (722) 6 (22) (902)
AT 30 JUNE 2014 1,820 20,592 65,514 5,321 2,062 95,309
ACCUMULATED DEPRECIATION
At 1 July 2013 - 2,355 21,266 2,406 - 26,027
Charge for the financial year - 1,114 4,074 828 - 6,016
Disposals/write-offs - (3) (31) (122) - (156)
Reclassification - (9) - 9 - -
Foreign exchange translation reserve - (44) (239) (10) - (293)
AT 30 JUNE 2014 - 3,413 25,070 3,111 - 31,594
NET CARRYING AMOUNT
AT 30 JUNE 2014 1,820 17,179 40,444 2,210 2,062 63,715
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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10 PROPERTY, PLANT AND EQUIPMENT (continued)
OFFICEEQUIPMENT,FURNITURE
AND FITTINGSAND MOTOR
VEHICLESUSD’000
CAPITALWORK-IN
PROGRESSUSD’000
TOTALUSD’000
THE COMPANY
COST
At 1 July 2014 382 - 382
Additions 29 433 462
AT 30 JUNE 2015 411 433 844
ACCUMULATED DEPRECIATION
At 1 July 2014 104 - 104
Charge for the financial year 81 - 81
AT 30 JUNE 2015 185 - 185
NET CARRYING AMOUNT
AT 30 JUNE 2015 226 433 659
OFFICEEQUIPMENT,FURNITURE
AND FITTINGSAND MOTOR
VEHICLESUSD’000
CAPITALWORK-IN
PROGRESSUSD’000
TOTALUSD’000
THE COMPANY
COST
At 1 July 2013 225 - 225
Additions 157 - 157
AT 30 JUNE 2014 382 - 382
ACCUMULATED DEPRECIATION
At 1 July 2013 41 - 41
Charge for the financial year 63 - 63
AT 30 JUNE 2014 104 - 104
NET CARRYING AMOUNT
AT 30 JUNE 2014 278 - 278
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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10 PROPERTY, PLANT AND EQUIPMENT (continued) The carrying values of property, plant and equipment charged to financial institutions to secure banking facilities granted to the Group are as follows:
THE GROUP
2015USD’000
2014USD’000
Freehold land 1,256 1,256
Building 13,929 17,122
Extraction and refinery plants 40,269 40,269
Office equipment, furniture and fittings 913 748
Capital work in-progress 1,960 1,960
58,327 61,355
The carrying values of plant and equipment acquired under hire purchase terms are as follows:
THE GROUP
2015USD’000
2014USD’000
Motor vehicles 6 28
11 BIOLOGICAL ASSETSAs at 30 June 2015, total biological assets of USD 3,570,000 (2014: USD 4,237,000) represent 4.9 million nursery plants (2014: 5.2 million). Nursery plants are carried at cost as it is deemed to have limited biological transformation. Seedlings from nursery plants are sold to farmers and are carried at actual cost.
12 PREPAID LAND LEASE PAYMENTS
THE GROUP
2015USD’000
2014USD’000
At 1 July 2,999 3,181
Additions 50 -
Amortisation for the financial year (143) (140)
Foreign exchange translation reserve 8 (42)
AT 30 JUNE 2,914 2,999
Cost 3,526 3,476
Accumulated amortisation (794) (651)
Foreign exchange translation reserve 182 174
AT 30 JUNE 2,914 2,999
The prepaid land lease payments have been pledged as security for banking facilities granted to the Group.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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13 DEFERRED TAX THE GROUP
2015USD’000
2014USD’000
DEFERRED TAX ASSETS
At 1 July 5,876 5,661
Credit to profit or loss (Note 29) 3,960 144
Foreign exchange translation reserve (407) 71
AT 30 JUNE 9,429 5,876
DEFERRED TAX LIABILITIES
At 1 July - 59
Debit/(Credit) to profit or loss (Note 29) 529 (59)
Foreign exchange translation reserve - -
AT 30 JUNE 529 -
REPRESENTED BY:
DEFERRED TAX ASSETS
Tax losses 9,337 5,777
Others 92 99
Offsetting (529) -
8,900 5,876
DEFERRED TAX LIABILITIES
Property, plant and equipment 529 -
Offsetting (529) -
- -
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future tax profit is probable based on projections and forecasts prepared by management and taking into consideration the expiry dates of carry forward losses. The Group did not recognise deferred tax assets of USD385,000 (2014: USD4,536,000) in respect of losses amounting to USD1,940,000 (2014: USD18,151,000) that can be carried forward against future taxable income.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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13 DEFERRED TAX (continued)An analysis of tax losses with expiry dates for which deferred tax assets have been recognised is as follows:
THE GROUP
2015USD’000
2014USD’000
FY2017 115 164
FY2018 192 494
FY2019 763 122
FY2020 - -
FY2021 - -
FY2022 - -
FY2023 1,677 1,677
FY2024 and above 2,994 2,820
Indefinite 3,596 500
TOTAL 9,337 5,777
14 INVENTORIES
THE GROUP
2015USD’000
2014USD’000
Raw materials 5,523 14,422Work-in-progress 11,716 11,898Finished goods 45,551 60,199
62,790 86,519
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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15 TRADE RECEIVABLES
THE GROUP
2015USD’000
2014USD’000
NON-CURRENT
Third party trade receivables 1,856 -
Joint ventures - 1,950
CURRENT
Third party trade receivables 59,149 29,107
Joint ventures 3,381 8,255
62,530 37,362
The Group’s normal trade credit terms range from 30 to 60 days (2014: 30 to 60 days). Terms for joint ventures are 30 days after consumption or onward sales of products. Other credit terms are assessed on a case-by-case basis.
In line with all businesses, management reviews the credit terms and collectability of all balances on an on-going basis and exercises judgement in assessing the recoverability of amounts due.
As of 30 June 2015, trade receivables amounting to USD6,622,000 (2014: USD5,771,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing of the trade receivables that are past due but not impaired is as follows:
THE GROUP
2015USD’000
2014USD’000
Past due but not impaired:
Up to 3 months 5,948 5,554
3 to 6 months 412 203
6 months and above 262 14
6,622 5,771
The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the trade receivables at the reporting date was as follows:
THE GROUP
2015USD’000
2014USD’000
United States Dollar 23,977 9,834
Euro 879 4,526
Chinese Renminbi - 51
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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16 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
NON-CURRENT
Other receivables 2,121 553 - -
CURRENT
Other receivables 3,038 2,992 7 11
Prepayments 3,967 1,678 428 720
Deposits 485 292 109 43
AS AT 30 JUNE 7,490 4,962 544 774
Other receivables include amounts due from farmers for planting material which have a different credit risk profile from the Group’s core trade customer base and are assessed by the Group’s local agricultural management at an individual debtor level. Other amounts include VAT recoverable and other similar miscellaneous amounts due to the Group and are assessed on a specific balance by balance basis.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above.
The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the other receivables at the reporting date was as follows:
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
Australian Dollar 32 19 32 19
United States Dollar 365 135 - -
Euro 10 620 4 605
Ringgit Malaysia 104 70 104 70
Sterling Pound 37 630 37 630
Singapore Dollar 3 - 3 -
17 AMOUNT OWING BY SUBSIDIARIES The amounts owing by subsidiaries are unsecured, repayable on demand and are denominated in United States Dollar.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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18 FINANCIAL INSTRUMENTS BY CATEGORY
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
LOANS AND RECEIVABLES AT AMORTISED COST
Trade receivables 64,386 39,312 - -
Other receivables and deposits 5,644 3,837 116 54
Amount owing by subsidiaries - - 19,349 4,866
Cash and bank balances 64,276 45,865 39,889 13,752
134,306 89,014 59,354 18,672
OTHER FINANCIAL LIABILITIES AT AMORTISED COST
Trade payables 3,134 5,879 - -
Other payables and accruals 10,717 12,437 2,263 1,794
Borrowings 109,646 125,850 - -
123,497 144,166 2,263 1,794
19 CASH AND CASH EQUIVALENTS
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
Short term deposits with licensed banks (a) 32,280 10,718 32,017 2,002
Cash at bank and on hand (b) 31,996 35,147 7,872 11,750
Deposits, cash and bank balances 64,276 45,865 39,889 13,752
Restricted cash (5,095) (7,851) (4,831) -
CASH AND CASH EQUIVALENTS 59,181 38,014 35,058 13,752
The Group’s cash deposit of USD5,095,000 (2014: USD7,851,000) is pledged as security for banking facilities. The restricted cash of USD4,831,000 was subsequently released in July 2015.
(a) Short term deposits with licensed banks
The weighted average interest rates of the short-term deposits at the reporting date was 0.40% (2014: 2.11%) per annum. The short-term deposits have weighted maturity period of 104 days (2014: 73 days).
The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the short-term deposits with licensed banks at reporting date was as follows:
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
Ringgit Malaysia - 2 - 2
Chinese Renminbi 4,832 6,528 4,832 -
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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19 CASH AND CASH EQUIVALENTS (b) Cash at bank and on hand
The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the cash at bank and on hand at reporting date was as follows:
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
United States Dollar 3,731 7,297 - -
Euro 228 593 186 357
Sterling Pound 319 176 305 151
Ringgit Malaysia 167 43 167 43
Chinese Renminbi 1,262 705 - -
20 SHARE CAPITAL The movements in the authorised and paid-up share capital are as follows:
THE GROUP/COMPANY30.6.2015
THE GROUP/COMPANY30.6.2014
PARVALUE
USD
NUMBEROF SHARES
(’000)USD
(’000)
NUMBEROF SHARES
(’000)USD
(’000)
AUTHORISED
At 1 July/30 June 0.10 250,000 25,000 250,000 25,000
ISSUED AND FULLY PAID-UP
At 1 July 0.10 164,722 16,472 164,602 16,460
Exercise of share options 0.10 100 10 120 12
Placement of shares 0.10 5,000 500 - -
Issuance of shares 0.10 240 24
AT 30 JUNE 0.10 170,062 17,006 164,722 16,472
On 21 October 2014, the Company placed 2,500,000 new ordinary shares at a price of GBP 5.50 per share. On 4 November 2014, the placement was extended to a further 2,500,000 new ordinary shares at the same price of GBP 5.50 per share, giving a total placement consideration of $43,695,109, with transaction cost of USD 232,000.
On 24 April 2015, the Company issued 240,000 new ordinary shares to satisfy the purchase consideration for the acquisition of the remaining 1.38% equity interest in PCJX.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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21 SHARE PREMIUM
THE GROUP/COMPANY
2015USD’000
2014USD’000
At 1 July 163,240 162,898
Exercise of share options 410 342
Placement of shares 42,963 -
Issuance of shares 1,697 -
AT 30 JUNE 208,310 163,240
22 FOREIGN EXCHANGE TRANSLATION RESERVEThe foreign exchange translation reserve arose from the translation of the financial statements of the foreign operations into the Group’s presentation currency of USD.
THE GROUPUSD’000
At 1 July 2013 1,432
Exchange differences arising on translation of foreign operations for the financial year ended 30 June 2014
(512)
AT 30 JUNE 2014 920
Exchange differences arising on translation of foreign
operations for the financial year ended 30 June 2015 (11,910)
AT 30 JUNE 2015 (10,990)
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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23 SHARE OPTION RESERVEThe expense arising from equity-settled share-based payment transaction recognised for employee services received during the year is as shown below:
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
Expense arising from equity-settled share-based payment transactions
6,412 3,768 6,412 3,768
THE GROUP/COMPANY
2015USD’000
2014USD’000
At 1 July 5,076 1,530
Share option scheme compensation expense 6,412 3,768
11,488 5,298
Transfer to share capital and share premium upon exercise of share options (303) (222)
AT 30 JUNE 11,185 5,076
The Company maintains a Long-Term Incentive Plan (LTIP), the principal terms include a restriction on the Company issuing (or granting rights to issue) no more than 10 per cent of its issued ordinary share capital under the LTIP (and any other employee share plan) in any ten calendar year period. It is currently intended that, other than in exceptional circumstances, such as senior executive recruitment, all awards will be subject to performance conditions and that, the performance conditions will be linked principally to the Group’s sales growth. The awards are conditional on employment service requirements.
The LTIP recognises the fast growth and changing nature of the Company and the need to recruit and retain executives in different employment markets around the world. Accordingly, the LTIP allows for the Remuneration Committee to exercise significant discretion in exceptional cases where the Committee considers executives will bring particular value to shareholders.
The fair value of share options granted is estimated at the date of the grant, taking into account the terms and conditions upon which the options were granted.
30.6.2015 30.6.2014
WEIGHTEDAVERAGE
EXERCISE PRICEPER SHARE
NUMBER OFOPTIONS (’000)
WEIGHTEDAVERAGE
EXERCISE PRICEPER SHARE
NUMBER OFOPTIONS (’000)
At 1 July 0.01 7,523 0.05 6,356
Granted - 344 - 1,865
Exercised - (100) - (112)
Lapsed - (3,802) - (586)
AT 30 JUNE - 3,965 0.01 7,523
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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23 SHARE OPTION RESERVE (continued)Details of share options granted that are outstanding as at 30 June 2015 are as follows:
NUMBER OFOPTIONS
OUTSTANDING’000
WEIGHTEDAVERAGE
FAIR VALUEAT GRANT DATE
(STERLING POUND)EXERCISE PRICE
PER SHAREVESTING
REQUIREMENTS EXPIRY
GRANT-VEST
AWARD 114 March 2013-14 September 2015
206 2.53 – 3.84 NilThree years’
service-NA-
AWARD 27 June 2012-7 June 2015
302 1.36 NilThree years’
service-NA-
AWARD 31 July 2012-7 June 2015
35 1.46 NilServices
rendered-NA-
AWARD 41 August 2012-31 July 2015
25 2.01 NilThree years’
service-NA-
AWARD 53 October 2012-4 July 2015
1,605 2.10 NilSales target and
three years’service
-NA-
AWARD 68 October 2013-8 October 2016
1,460 3.54 NilSales target and
three years’service
-NA-
AWARD 74 July 2014-30 June 2017
243 4.94 - 6.08 NilThree years’
service-NA-
AWARD 84 July 2014-30 June 2017
79 6.08 NilThree years’
service-NA-
AWARD 914 January 2015-1 July 2015
10 5.53 NilServices
rendered-NA-
TOTAL 3,965
The number of exercisable options as at the reporting date was Nil (2014: 82,500).
The related weighted average share price at the time of exercise was GBP4.90 (2014: GBP6.06) per share.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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24 BORROWINGS
THE GROUP
2015USD’000
2014USD’000
CURRENT PORTION:
- Term loans (a) 25,668 123,649
- Hire purchase (b) 13 32
25,681 123,681
NON-CURRENT PORTION:
- Term loans (a) 83,948 2,133
- Hire purchase (b) 17 36
TOTAL NON-CURRENT PORTION 83,965 2,169
109,646 125,850
There is no foreign currency exposure in relation to the borrowings of the Group from 2012 to 2015.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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24 BORROWINGS (continued)
(a) TERM LOANS The term loans bore a weighted average effective interest rate of 4.60% (2014: 7.35%) per annum at the reporting date.
THE GROUP
2015USD’000
2014USD’000
CURRENT PORTION:
Unsecured:
- Term loan 1 205 -
Secured:
- Term loan 2 1,546 1,676
- Term loan 3 - 92,108
- Term loan 5 23,917 12,910
- Term loan 6 - 16,955
TOTAL CURRENT PORTION 25,668 123,649
NON-CURRENT PORTION:
Secured:
- Term loan 2 275 2,133
- Term loan 4 62,223 -
- Term loan 7 21,450 -
TOTAL NON-CURRENT PORTION 83,948 2,133
109,616 125,782
Term loan 1 is unsecured.
Term loans 2 to 4 are secured by way of:-(i) a fixed and floating charge over present and future assets and the freehold property of a subsidiary; and(ii) corporate guarantee by the Company; and(iii) legal charge over landed property of a subsidiary.
Term loan 5 is secured as follows:-(i) a legal charge over certain assets of a subsidiary; and(ii) a legal charge over the prepaid land lease payments of a subsidiary.
Term loans 6 and 7 are secured through trade receivables financing.
Term loan 7 has a 15 month rolling renewal clause at the Group’s discretion.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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24 BORROWINGS (continued)
(b) HIRE PURCHASE The Group leases motor vehicles under finance leases with lease terms of 5 to 9 years (2014: 5 to 9 years). At the end of the lease term, title to the assets will be transferred to the Group upon full payment being made.
THE GROUP
2015USD’000
2014USD’000
ANALYSIS OF HIRE PURCHASE:
- No later than one year 17 40
- Later than 1 year and no later than 5 years 21 45
38 85
Less: Future finance charges (8) (17)
PRESENT VALUE 30 68
THE PRESENT VALUE OF HIRE PURCHASE IS AS FOLLOWS:
- No later than one year 13 32
- Later than 1 year and no later than 5 years 17 36
30 68
The hire purchases are secured by the rights to the leased motor vehicles which revert to the lessor in the event of defaults. The hire purchase bore a weighted average effective interest rate of 3.65% (2014: 3.34%) per annum at the reporting date.
25 TRADE PAYABLESThe normal trade credit terms granted to the Group range from 0 to 90 days (2014: 0 to 90 days)
The foreign currency exposure profile represents the carrying amounts arising from currencies other than the functional currency of the respective entities in the Group. The foreign currency exposure profile of the trade payables at the reporting date was as follows:
THE GROUP
2015USD’000
2014USD’000
United States Dollar 150 126
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
91
26 OTHER PAYABLES, ACCRUALS AND DEFERRED INCOME
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
NON-CURRENT
Other payables 200 2,111 - -
Deferred income 290 360 - -
490 2,471 - -
CURRENT
Other payables 7,265 4,287 1,684 1,283
Deferred income 29 38 - -
Accruals 3,252 6,039 579 511
10,546 10,364 2,263 1,794
Deferred income as at the reporting date represents a form of regional government financial assistance for the purchase of high technology plant equipment. The deferred income will be amortised over the useful life of 20 years.
The foreign currency exposure profile of the other payables at the reporting date was as follows:
GROUP COMPANY
2015USD’000
2014USD’000
2015USD’000
2014USD’000
United States Dollar 75 531 - -
Euro 1,015 959 714 605
Sterling Pound 9 55 9 55
Australian Dollar 15 19 15 19
Ringgit Malaysia 146 21 146 21
27 NET ASSETS PER SHAREThe net assets per share is calculated based on the net assets book value at the reporting date of USD190,492,000 (2014: USD147,505,000) divided by the number of ordinary shares in issue at the reporting date of 170,062,000 (2014: 164,722,000).
28 REVENUE Revenue represents the invoiced value of products sold less sales tax, returns and trade discounts.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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29 INCOME TAX
THE GROUP
2015USD’000
2014USD’000
CURRENT TAX:
Current tax on profits for the year (408) (393)
Over/(Under) accruals in respect of prior years 20 (75)
(388) (468)
DEFERRED TAX:
Origination and reversal of temporary differences 3,431 203
3,043 (265)
The Company was granted a tax assurance certificate dated 18 August 2007 under the Exempted Undertakings Tax Protection Act, 1966 pursuant to which it is exempted from any Bermuda taxes (other than local property taxes) until 28 March 2016.
The subsidiary, PCSB, has been granted the Bio-Nexus Status by the Malaysian Biotechnology Corporation Sdn Bhd in which PCSB is entitled to a 100% income tax exemption for a period of 10 years on its first statutory income commencing in 2009. Upon the expiry of the 10-year incentive period, PCSB will be entitled to a concessionary tax rate of 20% on income derived from qualifying activities for a further period of 10 years.
A reconciliation of income tax expense applicable to the profit before taxation at the applicable tax rate to income tax expense at the effective tax rate of the Group is as follows:-
THE GROUP
2015USD’000
2014USD’000
PROFIT BEFORE TAXATION 1,048 2,585
TAX AT THE APPLICABLE TAX RATES IN THE RESPECTIVE COUNTRIES 289 2,052
TAX EFFECTS OF:
Non-deductible expenses 204 404
Non-taxable income (2,309) (2,266)
(Over)/Under provision of taxation (20) 75
Tax losses recognised (1,207) -
INCOME TAX (3,043) 265
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
93
30 PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATIONIncluded in the profit/loss from ordinary activities before taxation are the following charges and credits:
THE GROUP
2015USD’000
2014USD’000
CHARGES:
Depreciation and amortisation 6,061 6,324
Directors’ remuneration 1,436 885
Share based payment expense 6,412 3,768
Interest expenses 7,275 9,253
Cost of inventories expensed 61,203 61,425
Wages and salaries 15,461 13,057
Defined contribution retirement plan 1,322 1,115
Operating lease 91 91
Foreign exchange loss 757 -
CREDITS:
Amortisation of deferred income 76 105
Foreign exchange (loss)/gain - 1,265
Interest income 57 273
31 PROFIT PER SHAREThe basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue:
THE GROUP
2015 2014
Profit attributable to equity holders of the Company (USD’000) 4,158 2,316
Weighted average number of ordinary shares in issue (thousands) 167,906 164,638
Basic profit per share (US Cents) 2.48 1.41
Diluted profit per share (US Cents) 2.42 1.37
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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32 SIGNIFICANT RELATED PARTY TRANSACTIONS(a) Identities of related parties
The Group has related party relationships with:-(i) its subsidiaries as disclosed in Note 7 to the financial statements; and(ii) its joint ventures as disclosed in Note 8 to the financial statements; and(iii) the Directors who are the key management personnel
(b) In addition to the information detailed elsewhere in the financial statements, details of the Group’s transactions and balances with related parties during the financial year are set out below:
(i) Related parties
THE GROUP
2015USD’000
2014USD’000
RELATED PARTIES
Gross sales of goods to joint ventures 6,954 4,689
(ii) Key management personnel compensationKey management includes executive and non-executive directors. The compensation paid or payable to key management for employee services is shown as below:
THE GROUP
2015USD’000
2014USD’000
REMUNERATION
Paul Selway-Swift 167 88
Magomet Malsagov 624 377
William Mitchell 401 315
Olivier Phillipe Marie Maes 79 34
Peter Lai Hock Meng 84 50
Christopher Pratt (appointed w.e.f 18 March 2014) 81 -
John Robert Slosar (resigned w.e.f 31 March 2014) - 21
SHARE BASED PAYMENT EXPENSE
Magomet Malsagov 394 307
William Mitchell 391 311
2,221 1,503
THE GROUP
2015USD’000
2014USD’000
Remuneration 1,436 885
Share based payment expense 785 618
2,221 1,503
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
95
32 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued)(b) In addition to the information detailed elsewhere in the financial statements, details of the Group’s transactions and balances with related parties during the financial year are set out below (continued):
(ii) Key management personnel (continued)
The interests of the Directors as at 30 June 2015 are as follows:
NUMBER OF ORDINARY SHARE OF USD0.10 EACH
AT 1.7.2014BOUGHT/ OPTIONS
EXERCISED SOLD/ TRANSFER AT 30.6.2015
THE COMPANY
DIRECT INTERESTS
Paul Selway-Swift 202,300 8,500 - 210,800
Magomet Malsagov 14,855,612 41,300 - 14,896,912
Christopher Pratt 686,916 8,780 - 695,696
Peter Lai Hock Meng 191,400 13,060 - 204,460
William Mitchell 910,890 19,650 - 930,540
Olivier Phillipe Marie Maes 408,410 14,210 - 422,620
The interests of the Directors as at 30 June 2015 are as follows (continued):
NUMBER OF OPTION OVER ORDINARY SHARE OF USD0.10 EACH
AT 1.7.2014 AWARD EXERCISED LAPSED AT 30.6.2015
THE COMPANY
DIRECT INTERESTS
Magomet Malsagov 686,640 5,336 (30,000) (426,000) 235,976
Christopher Pratt - 3,280 (3,280) - -
Peter Lai Hock Meng 3,200 9,500 (7,560) - 5,140
William Mitchell 529,170 4,689 - (281,000) 252,859
Olivier Phillipe Marie Maes 2,900 8,960 (7,010) - 4,850
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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33 SEGMENTAL REPORTINGManagement determines the Group’s operating segments based on the criteria used by the Chief Executive Officer (CEO) for making strategic decisions. Management considers the Group to be a single operating segment whose activities are the production, marketing and distribution of natural sweeteners and flavours.
From a geographical perspective, the Group is a multinational with operations located on all continents, but managed as one unified global organisation. The Group’s markets and its supply chain are based in the Americas, EMEA (Europe, Middle East and Africa) and Asia Pacific.
2015USD’000
2014USD’000
TRADING
Revenue 127,349 101,045
Cost of sales (87,951) (64,403)
GROSS MARGIN 39,398 36,642
Gross margin % 31% 36%
Other income 760 434
Administrative expenses (24,024) (19,860)
OPERATING MARGIN 16,134 17,216
Other expenses (7,117) (6,140)
Foreign exchange (loss)/gain (757) 1,265
Finance costs (7,275) (9,253)
Share of profit/(loss) in joint ventures* 63 (503)
Tax credit/(expense) 3,043 (265)
PROFIT FOR THE FINANCIAL YEAR 4,091 2,320
EBITDA 23,108 22,454
Reconciliation of profit for the financial year to EBITDA:
Profit for the financial year 4,091 2,320
Share based payment 6,412 3,768
Unrealised foreign exchange 2,081 (408)
Other 231 932
Finance costs 7,275 9,253
Tax (credit)/expense (3,043) 265
Depreciation and amortisation 6,061 6,324
EBITDA 23,108 22,454
* Under segmental reporting, share of loss in joint venture includes Group’s realised profit amounting to USD0.9 million (2014: USD0.8 million), arising from its
sales to the joint ventures. Under the statement of comprehensive income, the profit is included within the gross profit line.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
97
33 SEGMENTAL REPORTING (continued)
2015USD’000
2014USD’000
CASH FLOW
Operating cash flow before working capital changes 23,909 22,677
Decrease in inventories 23,768 121
Increase in receivables (30,486) (4,423)
Decrease in payables (3,423) (2,906)
Net cash from operations 13,768 15,469
Net cash from financing activities 26,732 (2,322)
Gross cash at end of the financial year 64,276 45,865
STATEMENT OF FINANCIAL POSITION
Property, plant and equipment 59,724 63,715
Inventories 62,790 86,519
Third party trade receivables 61,005 29,107
Receivables from joint ventures 3,381 10,205
Cash and bank balances 64,276 45,865
Total assets 314,308 292,791
Borrowings 109,646 125,850
Net debts 45,370 79,985
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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33 SEGMENTAL REPORTING (continued)
GEOGRAPHICAL INFORMATION
BERMUDAUSD’000
ASIAUSD’000
EUROPE*USD’000
AMERICASUSD’000
GOODWILLUSD’000
TOTALUSD’000
30 JUNE 2015
External revenue - 23,588 15,484 88,277 - 127,349
Non-current assets 1,132 99,588 1,352 12,997 1,806 116,875
30 JUNE 2014
External revenue - 15,518 10,540 74,987 - 101,045
Non-current assets 1,577 100,894 1,624 11,601 1,806 117,502
Basis of attributing sales by geographical region is based on location of sales.
The primary performance indicators used by the Group are revenues, gross margin %, adjusted EBITDA, net cash from operations, gross cash and borrowings.
EBITDA is calculated as net profit for the year reported on the face of the profit and loss account, adjusted for interest, taxation, depreciation and amortisation.
Adjusted EBITDA is defined as EBITDA with other expenses (principally the charge of the Group’s LTIP scheme, unrealised foreign exchange and share of gain/(loss) in joint ventures) added back.
The entity is domiciled in Bermuda. The entity’s non-current assets are located in countries other than Bermuda. There is no revenue from Bermuda.
*The Europe segment includes results and sales to the Group’s European joint ventures - see Note 32.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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34 COMMITMENTS(a) CAPITAL COMMITMENTS
Capital expenditure at the reporting date is as follows:
THE GROUP
2015USD’000
2014USD’000
Authorised capital expenditure contracted for - Property, plant and equipment
1,138 1,736
Authorised capital expenditure not contracted for 20,500 -
(b) OPERATING LEASE COMMITMENTS The Group also leases corporate office under non-cancellable operating lease agreements. The lease expenditure charged to the profit or loss during the year is disclosed in Note 30.
The future aggregate minimum lease payments under non-cancellable operating lease are as follows:
GROUP AND COMPANY
2015USD’000
2014USD’000
The present value of operating lease is as follows:
- No later than one year 231 91
- Later than 1 year and no later than 5 years 955 217
- More than 5 years 246 -
1,432 308
35 EVENTS AFTER THE REPORTING PERIODEvents after the period end comprise:
(a) LONG-TERM INCENTIVE PLAN (LTIP) OPTIONS – NEW OPTIONS GRANTED TO DIRECTORSThe Board of the Company had on 7th July 2015 granted options under the Group’s Long-Term Incentive Plan (LTIP) to certain Non-Executive Directors in lieu of their fees covering six months period from 1 July 2015 to 31 December 2015 amounting to 13,110 shares. These options have an exercise price of GBP3.94 per share (USD6.14 per share), calculated based on 20 days volume weighted average price (“VWAP”) to 30 June 2015 and shall vest on 1 January 2016.
(b) BANKING FACILITYThe Group had on 4 September 2015, entered into a multi-currency trade loan facility of USD 42 million.
NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015 (continued)
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INTERNET
PureCircle Group operates these websites which are updated regularly to cater for different information needs:
Investors and corporate stakeholdersWWW.PURECIRCLE.COM
Health professionals, customers, policy makers, consumersWWW.GLOBALSTEVIAINSTITUTE.COM
INVESTOR RELATIONSRequest for further copies of the annual report or other investor relations matters should be addressed to PureCircle’s office.
ANNUAL GENERAL MEETINGThe Annual General Meeting (AGM) will be held on 2 December 2015, a formal notice of AGM will be sent to shareholders together with the annual report for financial year 2015.
2016 FINANCIAL YEAR AND CORPORATE CALENDARHalf year end 31 December 2015Interim results February 2016Year end 30 June 2016Final results September 2016
PURECIRCLE OFFICES
REGISTERED OFFICE Clarendon House 2 Church Street Hamilton HM 11 Bermuda.
CORPORATE HEADQUARTERS
MALAYSIA12th Floor, West WingRohas PureCircle No. 9 Jalan P. Ramlee 50250 Kuala Lumpur, Malaysia.T +603 2166 2206F +603 2166 2207
SALES & MARKETING HEAD OFFICE
USA915 Harger Road, Suite 250Oak Brook, IL 60523, USA.T +630 361 0374F +630 361 0384
REGIONAL SALES
Contact details:
US or Canada : [email protected]
Latin America : [email protected]
Europe, Middle East or Africa : [email protected]
Asia Pacific : [email protected]
AUDITORS
PRICEWATERHOUSECOOPERS (AF1146)Level 10, 1 Sentral, Jalan RakyatKuala Lumpur SentralP.O. Box 1019250706 Kuala Lumpur, Malaysia.
BROKERS
MIRABAUD SECURITIES LIMITED 33 Grosvenor Place London SW1X 7HY
LIBERUM CAPITAL LIMITED Ropemaker Place, Level 1225 Ropemaker Street London EC2Y 9LY.
MACQUARIE CAPITAL (EUROPE) LIMITEDRopemaker Place28 Ropemaker StreetLondon EC2Y 9HD.
SHARE REGISTRAR
IN JERSEY (SHARES)COMPUTERSHARE INVESTOR SERVICES (CHANNEL ISLANDS) LIMITEDPO Box 83, Ordnance House31 Pier Road, St HelierJersey JE4 8PWChannel Islands.
IN THE UK (DEPOSITARY INTERESTS)COMPUTERSHARE INVESTOR SERVICES PLCThe PavilionsBridgewater RoadBristol BS13 8AE
SHAREHOLDER’S INFORMATION
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