Consolidated Statement of Changes in Equity - Leal · PDF fileAnnual Report nance Report...

About us

Corporate Data

Chairman’s Statement

Annual Report

Corporate Governance Report

Statement of Compliance

Directors’ Statement of Responsibilities

Certificate from the Secretary

Independent Auditors’ Report

Consolidated Statement of Financial Position

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

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Contents

LEAL & CO. LTD ANNUAL REPORT 2013 1

About UsThe Leal Group is a diverse group of companies contributing to the economic development of Mauritius.

During the last nine decades, the Leal Group has expanded into a wide range of industries including medical, consumer goods, automotive, information technology, engineering, tourism and renewable energy.

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Corporate DataDirectors: Date Appointed

Michael Joseph Clency Leal, C.B.E(Chairman)

29 January 1976

Eric Georges Michel Leal(Chief Executive Officer)(Alternate to Michael Joseph Clency Leal)

01 July 1998

Joseph Jacques Vivian Collet Serret (Deputy Chief Executive Officer)

20 October 1995

Bernard Aimé Jacques Rochecouste Collet 27 November 1995Gérald Edgar Raymond Joseph Lincoln 30 December 1997Virrsing Ramdeny 30 December 1997Marie Louis Désiré René France Ducasse(Alternate to Jean Marie Eugène Grégoire)

31 January 2007

Louis Désiré Christian Ferrière 31 January 2007Jean Marie Eugène Grégoire 04 May 2007Clency Michael Arnaud Leal(Alternate to Eric Georges Michel Leal)

08 January 2008

Senior management team: Position

Eric Leal Chief Executive OfficerVivian Serret Deputy Chief Executive OfficerYousouf Rehmally Chief Finance OfficerNoel Marion COO - Car RentalMichael Carey COO - BMW SalesChristian Ferrière COO - After Sales ServiceLouis - Philippe Guého COO - Renault SalesFrancois Gellé COO - Parts and DistributionYousouf Elahee Doomun CIO - Chief Information OfficerVirginie Quevauvilliers COO - MarketingSuresh Seegobin COO - Véhicules D’occasion (VO)Didier Jauffret Executive DirectorNeemalen Gopal IT Cluster DirectorPhilippe-Alexandre Rebboah General Manager of Leal Reunion

Internal auditor:

Jean Marc Augustin

Company secretary:

Navitas Corporate Services Ltd13, St Clément StreetCurepipeRepublic of Mauritius

Registered office:

Motorway M1PaillesRepublic of Mauritius

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Corporate DataLegal advisers:

Me Gavin Glover Etude Mungroo6, River Court 3rd Floor, 304 Sterling HouseSt Denis Street Lislet Geoffroy StreetPort Louis Port LouisRepublic of Mauritius Republic of Mauritius

Me Maxime Sauzier Me Jaykar Gujadhur5th Floor, Chancery House Attorney at LawLislet Geoffroy Street 504, Chancery HousePort Louis Lislet Geoffroy StreetRepublic of Mauritius Port Louis

Republic of Mauritius

Me Danielle LagesseChancery HouseLislet Geoffroy StreetPort LouisRepublic of Mauritius

Auditors:

Grant ThorntonEbene Tower52 Cybercity EbèneRepublic of Mauritius

Bankers:

The Mauritius Commercial Bank LimitedThe State Bank of Mauritius LimitedBarclays Bank PlcBank One LtdAfrAsia Bank LimitedThe Mauritius Post and Cooperative Bank LtdBank of Baroda (Mauritius Branch)



Dear Shareholders,

The financial year 2012/2013 has again shown positive figures for the Group.

Group turnover has grown by almost 8% thanks to our strong performance in the automotive sector and total assets by a little over 6%. On the other hand, Group net profit before tax fell by about 7% as some of the non-automotive subsidiaries suffered from a reduced profitability.

Our focus remains on growing in our core activities, while ensuring increased competitiveness. In this regards we have invested heavily in the year in improving our building infrastructure and in developing regional business.

% contribution of each sector in Leal Group turnover

Overview of our Automobile Sector Activities

The growth of 16.83% of the new vehicle market in the calendar year 2012 resulted in new record sales of 9,096 units.

Our Group retained the leadership in the passenger vehicle segment with a market share of 24.30%. We also retained our leadership in the overall market (including minibuses) with a market share of 20.46%

The strong growth of BMW and KIA sales enabled our total sales of cars to reach a peak of 1,596 units, thus growing by almost 22%.

Despite the best efforts of our team at Motor City – Forbach, the workshop sales at this outlet were below expectations. On the other hand, sales of new vehicles reached a good level. It is expected that workshop turnover will grow steadily as sales rises.

Group turnover has grown by almost 8% thanks to our strong performance in the automotive sector and total assets by a little over 6%

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Overview of our Automobile Sector Activities (cont’d)

Sales of Passenger Cars by Dealer - Calendar year 2012

Sales of Passenger Cars by Brand - Calendar year 2012

2011 (units)

2012(units)

1 LEAL GROUP 1,312 1,5962 CFAO GROUP 992 1,1583 ABC GROUP 735 8784 IFRAMAC GROUP 758 8275 AXESS 698 8036 TOYOTA MTIUS 308 5107 RAOUF DUSMOHAMUD 168 2858 EAL MAN HIN & SONS LTD 264 276

UNITS

1 KIA 9522 NISSAN 8073 HYUNDAI 7974 TOYOTA 5175 BMW 4426 MERCEDES 3567 CHEVROLET 3168 SUZUKI / MARUTI 3009 PROTON 27610 HONDA 25111 PEUGEOT 25612 FORD 22713 CITROEN 21214 MITSUBISHI 15815 RENAULT 12916 VOLKSWAGEN 11517 AUDI 8618 GWM 4719 OPEL 3620 MAZDA 32


Chairman’s StatementOverview of our Automobile Sector Activities (cont’d)

Sales of Passenger Cars & Goods Vehicle by Brand - Calendar year 2012

Sales of Passenger Cars & Goods Vehicle by Group - January to August

UNITS

1 TOYOTA 1,3482 NISSAN 1,2913 KIA 1,0164 HYUNDAI 8355 FORD 4766 BMW 4427 MITSUBISHI 3798 MERCEDES 3589 CHEVROLET 31610 PEUGEOT 31611 SUZUKI / MARUTI 30012 PROTON 27613 HONDA 27614 GWM 25115 CITROEN 22716 JMC 13117 RENAULT 16018 VOLKSWAGEN 11519 AUDI 8620 CHEVROLET / ISUZU 74

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Chairman’s StatementBMW - high growth at the top and bottom of the range

The new BMW 3 Series has been very successful thanks to the new Twinpower Turbo 1.6 and 2.0 lt engines. With more than 305 sales, it has become one of our best sellers ever.

The top of the range 6 Series at more than Rs 6M has also been a strong performer and a great brand shaper.

As a result overall BMW sales have increased by almost twenty percent.

The range will further be extended by the 4 Series Coupe and Convertible, the beginning of a new model range that will be of great importance to BMW.

Renault-preparing for the future

Renault sales remained fairly stable with 141 units. The confirmed arrival of Clio, Duster and Captur for calendar year 2013 should give us an opportunity to grow sales to a level that is profitable.

GWM

The combined effect of higher specification and pricing of GWM Pick ups and the rising US Dollar have put a damper on sales growth. At the same time the sharp fall of the Japanese Yen has made our competitors more competitive.

Kia - Best-selling passenger car

The opening of our KIA Red Cube flagship showroom matched nicely with the confirmation that KIA became in 2012 and still is in 2013, the leader in the passenger car segment. The Kia Rio remains the number one selling model in Mauritius, and the new Cerato is fighting hard in 2013 for the second spot. KIA sales have grown by about 50% in the last year.

The new Cerato Sedan and Hatchback, and the seven seat Carens will help us maintain our leadership in 2013.

Report on IT Cluster

The revenue generated during financial year by the IT Cluster has increased by about five percent.

Increased pressure on margins due to the continued slowdown of growth in Mauritius, has sharply affected profitability in LCI activities.

We have merged two shops at Caudan (Ishop and eshop) in November 2012 into one larger Ishop to provide more space for Apple customers visiting us at the Caudan outlet. In May 2013, we moved our Ishop from Phoenix Les Halles to Jumbo Commercial Center in Phoenix. Ishop Phoenix offers a 120sq m showroom space along with a training facility for Apple users.

We are continuing the change process initiated since last year to make LCI more of a turnkey ICT solution provider with a key focus on ICT Services rather than a purely ICT Infrastructure equipment provider. The outsourcing of the Driving License Counterpart by Government to us, has enabled us to showcase our ICT Services.


Chairman’s StatementReport on IT Cluster (cont’d)

DistriPc Ltd has had a challenging year too. The drop in the turnover is mainly explained by the significant reduction in our Microsoft business in the French Pacific region following decision of Microsoft in 2012 to designate a sub-distributor for that region. This drop in turnover was partially compensated by improved figures for both Microsoft and Symantec in Mauritius and Madagascar.

On the other hand our remarkable effort to achieve targets set by both Symantec and Microsoft, earned DistriPC Ltd some Rs 3M more in rebates compared to the previous financial year.

The hardware business at Distripc Ltd also suffered the full impact of the absence of Inkjet printers from Lexmark since the latter decided to stop its Inkjet line of activity in January 2012. Meanwhile DistriPC has secured the distribution of Epson for Mauritius. The first batch of Epson products ordered by DistriPC has reached us and will impact on figures for the next financial year. The market share of the Samsung range of Laptop products is steadily improving. We have also noticed a further reduction in the parts business (HDDs, processors, monitors, etc.) with the shift of the market from Desktop to Laptop computers.

We are pleased to announce that the change initiated in 2010 at SOLINFO to concentrate our activity around Apple products has proved to be successful. Our market share of Apple CPUs has steadily increased to exceed 35% in a stable Reunion market. Our turnover has grown by twenty percent to reach Euros 5.069M and the Company is back to profitability.

We have brought some major changes at the level of CISOLVE INTERNATIONAL LTD. Following a restructuring of the capital structure of the company at the beginning of 2013, the Leal Group has become the majority shareholder of CISOLVE INTERNATIONAL LTD. To turnaround this company, it has been relocated to the LCI building at Pailles and the management team has been rationalised under the control of the Leal ICT Cluster Director.

Overview of our Engineering Cluster

In Mauritius, Leal Equipements Cie Ltee faced a new challenge with a sudden drop in demand from the construction equipment sector. On the other hand the transport sector remained stable.

The high level of stock of new equipment at local dealers during the year had a very negative impact on our results, with very strong competition all around. Solutions were found to face this situation and to limit our financial risks. A clear strategy to reduce the level of our stock in order to consistently improve the cash-flow situation of the company is well on track.

We have launched our new workshop, dedicated to Renault Trucks, since July 2013 to sustain the growth of our activities in the transport sector and to improve our after-sales service.

On the regional markets, the activities are very slow as international companies are postponing their deadlines for the replacement of machines. This new situation is delaying our expected sales mainly in the mining sector of Madagascar.

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Chairman’s StatementPharmacie Nouvelle Ltd

The implementation of our Long Term Strategy centered on operational excellence in order to better serve our partners and stakeholders has been our key focus during the past year.

The segmentation of our portfolio of Brands and Products coupled with a more focused Route to Market strategy has brought about the expected in-market benefit as we have consolidated and even gained/improved our market share position in some of the key categories .

Despite continuous pressure on margins and the difficult economic conditions prevailing, Pharmacie Nouvelle Group turnover increased by 5% to Rs 1,207M but the Group profit before tax fell to Rs 33.7M.

Tourism Cluster

Conditions continued to be difficult in the Tourism sector, but Europcar was able to achieve its budget in spite of a morose situation in the sector.

During this financial year a strong emphasis on improved management via a better use of technology and IT will certainly allow Europcar to improve its financial efficiency and productivity.

Our Human Capital

Training and development

As part of the Group’s commitment and effort towards the ongoing development of its Human Capital so as to strengthen its overall institutional capacity, in keeping with the Group’s vision and strategy as well as constantly changing work methodologies and technological advancements, much emphasis has been laid on the identification of training needs at both corporate and individual levels. The Group strongly believes that investing in Training and Development is the basis of a continuous improvement in the quality of service given to its customers, a way to mitigate various risks which may arise from a poorly knowledgeable workforce, and a driving force in the career growth and personal development of its employees; a belief which is illustrated in its investment in training for the year ended June 2013 which was around 5% of the total basic salary. There have been several key and targeted training programs during the year, some of which are:-

1. Intensive online courses and in-house training, more specifically on Information Technology, product knowledge, and technical innovation.

2. Academic Qualifications and Managerial courses as part of the Talent Management program.

3. Association with Caritas (Centre of Learning) to provide alphabetization and language courses to several employees for both their personal growth as well as improved productivity.

4. Customer service courses for most of our frontline staffs.


Chairman’s StatementOur Human Capital (cont’d)

Training Breakdown

Group Strategy

Focus on our core activities will remain the main motivator of our strategy. Partnerships, service and products of high quality will remain the core strength of our Group. By steadily and reliably increasing these core strengths we believe our Group will continue having a strong image locally, regionally and with our suppliers.

We thank the directors of the Group for all the support and guidance across the years. The strong support of our shareholders is a good sign of trust in our staff and management; we are very thankful for this.

We will always strive to remain a successful business administered by competent staff and management. Our final thanks thus go to all the people working in the Group. Please continue to make our pride.

Clency LEAL, C.B.E.Group Chairman

3 December 2013

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Annual ReportThe Board of Directors of Leal & Co. Ltd, the “Company”, is pleased to present the annual report together with the consolidated financial statements of the Company and its subsidiaries, together referred to as the “Group”, for the year ended 30 June 2013.

Incorporation

The Company was incorporated in the Republic of Mauritius on 29 January 1976 as a private company with liability limited by shares. The status of the Company was subsequently changed to a public company with liability limited by shares on 14 April 1981.

Principal activities

The principal activities of the Group are:

1. to deal in motor vehicles, spare parts, rental of cars and bonded warehouse;2. to import, export, trade and deal in all kinds of mechanical engineering and agricultural equipment and spares; 3. to provide mechanical and hydraulic after sales services;4. to deal in commercial and industrial equipment and accessories and electronic appliances;5. to import computer components, systems and peripherals and assemble of computers;6. to implement and support network in various institutions;7. to design and implement high tech solutions in green and renewable energy fields using solar/wind/micro-hydro

technologies;8. to deal in the import and export of equipment;9. to act as a job contractor and a wholesale dealer;10. to provide services in the formation and communication technologies sector;11. to deal in computer accessories and IT products;12. to engage in the distribution of pharmaceutical products, consumer goods and products for the textile industry;13. to manufacture cosmetics;14. to engage in the manufacture and general retailing business; and15. to hold investments.

Results and dividends

The results for the year are as shown on page 42.

The directors have recommended the payment of a dividend of Rs 41,296,672 for the year under review (2012: Rs 38,475,084).

Directors

The present membership of the Board is set out on page 4.

Statement of directors’ responsibilities in respect of the consolidated financial statements

Company law requires the directors to prepare consolidated financial statements for each financial year, which present fairly the financial position, financial performance and cash flows of the Group and the Company. In preparing those consolidated financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;· make judgements and estimates that are reasonable and prudent; · state whether applicable accounting standards have been followed, subject to any material departures disclosed and

explained in the consolidated financial statements; and· prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the

Group and the Company will continue in business. The directors have confirmed that they have complied with the above requirements in preparing the consolidated financial statements.

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 consolidated financial statements comply with the Mauritius Companies Act 2001 and the Financial Reporting Act 2004. They are also responsible for safeguarding the assets of the Group and then Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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Annual ReportStatement of directors’ responsibilities in respect of the consolidated financial statements (cont’d)

Internal Control

The directors are responsible for the Group’s systems of internal control. The systems have been designed to provide the directors with reasonable assurance that assets are safeguarded, that transactions are authorised and properly recorded and that there are no material errors and irregularities. An internal audit system is in place to assist management in the effective discharge of its responsibilities, and it is independent of management and reports to the Audit Committee.

Risk Management

The Board of Directors has overall responsibility for risk management. Through the Audit Committee, the directors are made aware of the risk areas which affect the Group and ensure that management has taken appropriate measures to mitigate these risks.

Contracts of significance

There were no contract of significance to which the Company or its subsidiaries was a party and in which a director had a material interest either directly or indirectly.

Directors’ service contracts

The full-time executive directors’ service contracts are provided in the Corporate Governance Report.

Directors’ share interests

The directors’ direct and indirect interests in the share capital of the Company or its subsidiaries are provided in the Corporate Governance Report.

Directors’ remuneration

Total emoluments and other benefits paid to the directors were as follows:

2013 2012Rs Rs

Full-time executive directors - Company 32,946,112 34,888,682

- Group 47,485,569 56,031,084

Non-executive directors- Company 8,402,758 6,054,600

- Group 14,527,641 12,564,456

Donations

Donations made by the Company for the years ended 30 June 2013 and 2012 were as follows:

Category 2013 (Rs) 2012 (Rs)

Charitable 956,150 1,332,478Non-Charitable* 3,622,515 1,459,636

*including Rs 2,050,000 to political parties (2012: Rs 700,000)

Contribution to the Corporate Social Responsiblity Fund amounted to Rs 956,150 (2012: Rs 1,332,478) are included in charitable donations.


Annual ReportAuditors

The auditors, Grant Thornton, have indicated their willingness to continue in office and a resolution concerning their re-appointment will be proposed at the Annual Meeting. The fees payable to the auditors are for:

The Group The Company2013 2012 2013 2012Rs Rs Rs Rs

- Audit services (VAT exclusive) 3,266,000 2,745,000 750,000 580,000

On behalf of the Board of Directors

M.G. Eric Leal J.J. Vivian Collet Serret Virrsingh RamdenyChief Executive Officer Deputy Chief Executive Officer Chairman of Audit Committee

3 December 2013

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Corporate Governance ReportStatement of compliance

The Board of Directors (the “Board”) of Leal & Co. Ltd, the “Company”, considers good governance practices to be essential in developing and sustaining any successful business. The Board also ensures the proper running of the Company and at the same time enhances the interaction with senior management, shareholders and stakeholders at large.

For the year under review, the Board is of the view that the Company has complied with the principles of the Code of Corporate Governance for Mauritius, the “Code”. Regarding areas of non-compliance with the Code, reasons for non-compliance or alternate practice which have been adopted, have been disclosed.

Substantial shareholders as at 30 June 2013

The share capital of the Company as at 30 June 2013 consisted of 2,581,042 ordinary shares of par value Rs 100 each held by forty-eight shareholders. As at 30 June 2013, the following shareholders held more than 5% of the share capital of the Company:

Shareholders agreement affecting the governance of the company by the board

The Board of the Company has no knowledge of any such agreement.

Cascade holding structure

Cisolve: Cisolve International Ltd Comex: Compagnie Mauricienne d’Exportation Limited Comanu: Compagnie Manufacturière de Produits Cosmétiques LimitéeDistrimed: Distrimed Ltée Distripc: Distripc Ltd (Elytis) EI Ltd: Exclusive Island Ltd EPSCO: Equipment Provider Solutions Company Ltd FD: Flexidrive LtdHDM: Heavy Duty Motors Ltd [formerly known as Supreme Refinement (EU) Ltd (Halcyon Days)] LCI: Leal Communications & Informatics LtdLEC: Leal Equipments Compagnie Ltd LEC Seychelles: Leal Equipments Compagnie (Seychelles) Ltd Luxury Cars: Luxury Cars & Co LtdLA Co Ltd: Luxury Automobiles Co Ltd Leal Logistics: Leal Logistics & Shipping Ltd OID: Océan Indien Distribution (Ile Maurice) Ltée PNL: Pharmacie Nouvelle LimitedSETL: Solar-Ernte-Technik Ltd UML: United Motors Limited Solinfo: Sarl Solinfo SCPL: Société Clency & Patrick Leal

Name of shareholder No. of ordinary shares % Holding

The Anglo-Mauritius Assurance Society Limited 130,993 5.08Valorous Holdings Ltd 287,690 11.15Michael Leal Ltd 251,806 9.76Eric Michel Georges LEAL 511,690 19.83Société Clency Leal 1,240,504 48.06

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Corporate Governance ReportDividend Policy

The Company has adopted a formal policy for the declaration and payment of dividend whereby dividends declared and payable annually to shareholders would amount to a minimum of 10% of the par value of the shares payable in 2 installments (i.e. in 30 June and 31 December). Payment of dividends is approved by the Board. The aim of the Board is to provide to its shareholders a fair return on their investment.

In line with sound management principles, dividend declaration is subject to positive results and solvency test as defined by the Mauritius Companies Act 2001. For the year under review, the Company declared an interim dividend of 7% per share for shareholders of the Company registered at the close of business on 29 November 2012 and a final dividend of 9% per share for shareholders of the Company registered as at 22 May 2013.

Constitution

Section 14 of the Company’s Constitution provides for a detailed procedure regarding transfer of shares. A copy of the Company’s constitution is available upon request in writing to the Company Secretary at the registered office of the Company at Motorway M1, Pailles, Mauritius.

The board of directors

The Company is headed by a unitary Board which comprises of ten directors under the Chairmanship of Mr. Michael Joseph Clency Leal, C.B.E, who has no executive responsibilities. Four board members are executive, six are non-executive out of which five board members are independent non-executive. The names of all directors, their profile and their category as well as their directorships in listed companies are set out in this corporate governance report.

There is a clear separation of the roles and functions of (i) the Group Chairman and (ii) the Group Chief Executive Officer and the Deputy Chief Executive Officer. The Group Chairman leads the Board whereas the Group Chief Executive Officer and the Deputy Chief Executive Officer have the day-to-day management responsibility of the Group’s operations, implementing the strategies and policies approved by the Board. The position of the Group Chief Executive Officer and the Deputy Chief Executive Officer are held by two executive directors.

The Board is of the view that its composition is adequately balanced and that current directors have the range of skills, expertise and experience to carry out their duties properly.

Directors who have attained the age of 70 years are re-elected by separate resolution at the Annual Meeting of the Company. As per Section 23.6 of the Company’s Constitution, one third of the non-executive directors also stand for re-election at the Annual Meeting of the Company.

An induction program is in place for newly appointed directors. The induction program meets the specific needs of both the Company and the newly appointed director and enables any new director to make the maximum contribution as quickly as possible.

Board meetings

The Board meetings are held at least once each quarter. For the year under review the Board met five times. The Board meetings are conducted in accordance with the Company’s Constitution and the Mauritius Companies Act 2001. Decisions were also taken by written resolutions.

Board meetings are organised in such a way that directors receive all the information important to their understanding of the business to be conducted at the meeting. Furthermore, the directors have the right to request independent professional advice where appropriate at the expense of the Company.

Assessment of directors

For the year under review, no evaluation of the Board or its committees was carried out. The directors forming part of the Board, especially those who are members of Board committees, have been appointed in the light of their wide range of skills and competence acquired through several years of working experience.


Group company secretary

Directors have direct access to the advice and services of the company acting as Group Company Secretary, namely Navitas Corporate Services Ltd, represented by qualified company secretaries.

The Group Company Secretary is responsible for the proper coordination and conduct of the Board and Shareholders Meetings and the recording of proceedings. The Group Company Secretary also advises the Board on corporate governance policies and practices, compliance with the Mauritius Companies Act 2001 and other legal requirements.

External auditors

Grant Thornton are the external auditors and they perform their duties in accordance with the Mauritius Companies Act 2001 and the Financial Reporting Act 2004.

Director’s service contract

Executive directors of the Company and of its subsidiaries have a service contract in the form of an employment contract with the Company or with its subsidiaries, as per employment legislation.

Board attendance

As a result of the Company controlling 56.02 % of the shares of PNL, a Leal Group Corporate Governance Committee and a Leal Group Audit & Risk Committee were established as from the 1 January 2013 following the dissolution of the Corporate Governance Committee and the Audit & Risk Committee of PNL. The following table gives the record of attendance at Board meetings and at meetings of Board committees for the year under review.

Leal Group Committees

Directors CategoryBoard

meetings

Audit & Risk

Committee

Corporate Governance Committee

Michael Joseph Clency LEAL, C.B.E (Group Chairman)

NED 4/5 N/A 2/3

Eric Michel Georges LEAL (Group Chief Executive Officer and alternate to Michael Joseph Clency LEAL)

ED 5/5 N/A N/A

Joseph Jacques Vivian COLLET-SERRET(Deputy Chief Executive Officer)

ED 5/5 N/A N/A

Louis Désiré Christian FERRIERE(Chief Operating Officer, After Sales Department)

ED 4/5 N/A N/A

Clency Michel Arnaud LEAL(Market & Product Research Manager and alternate to Eric Michel Georges LEAL)

ED 5/5 N/A N/A

Virrsing RAMDENY(Chairman of the Leal Group Audit & Risk Committee)

INED 5/5 4/4 N/A

Bernard Aimé Jacques ROCHECOUSTE COLLET(Director & Alternate to Marie Louis Désiré René France DUCASSE)

INED 5/5 N/A N/A

Jean-Marie Eugène GREGOIRE(Chairman of the Leal Group Corporate Governance Committee)

INED 4/5 4/4 3/3

Marie Louis Désiré René France DUCASSE(Director & Alternate to Bernard Aimé Jacques ROCHECOUSTE COLLET)

INED 4/5 2/4 2/3

Gérald Edgar Raymond Joseph LINCOLN(Director & Alternate to Jean-Marie Eugène GREGOIRE)

INED 5/5 N/A 3/3

Marie Joseph Jean Paul CHASTEAU DE BALYON(appointed as additional Leal Group Corporate Governance Committee member on 19 December 2012)

INED of PNL N/A N/A 1/1

Desiré Pierre Ariste Maxime REY(appointed as additional Leal Group Audit & Risk Committee member on 19 December 2012)

INED of PNL N/A 3/3 N/A

ED: Executive Director NED: Non-Executive Director INED: Independent Non-Executive Director


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Directors of the company’s subsidiaries

The directors of the Company’s subsidiaries for the year under review are as follows:

Directors Distripc LCI LECLeal

Logistics SETL HDM PNL

Michael Joseph Clency LEAL, CBE (Group Chairman)

N/A N/A N/A

Eric Michel Georges LEAL* (Group Chief Executive Officer)

Joseph Jacques Vivian COLLET-SERRET (Deputy Chief Executive Officer)

N/A

Bernard Aimé Jacques ROCHECOUSTE COLLET N/A N/A N/A N/A N/A N/A

Jean-Marie Eugène GREGOIRE N/A N/A N/A

Gérald Edgar Raymond Joseph LINCOLN** N/A N/A N/ADr. Ashveen Kumar KISSOONAH*** N/A N/A N/A N/A N/ANeemalen GOPAL N/A N/A N/A N/A N/AKemraz MOHEE N/A N/A N/A N/A N/A N/AJoseph Alexandre Didier Jauffret N/A N/A N/A N/A N/A N/AMohamed Yousouf REHMALLY, FCCA (Group Chief Finance Officer)

N/A N/A N/A N/A N/A

Marie Noel MARION (Chief Operation Officer, Car Hire [Europcar])

N/A N/A N/A N/A N/A N/A

Himmunt Kumar JUGDUTH N/A N/A N/A N/A N/A N/ADevendra MAULLOO (up to12 June 2013)


Dr. Mukund Krishna OOLUN N/A N/A N/A N/A N/A N/ANaraindath RAMNAWAZ N/A N/A N/A N/A N/A N/ADaniel de LABAUVE d’ARIFAT (Deputy Chief Executive Officer of PNL)


Georges LEUNG SHING N/A N/A N/A N/A N/A N/A

Marie Joseph Jean Paul CHASTEAU DE BALYON N/A N/A N/A N/A N/A N/A

Virrsing RAMDENY N/A N/A N/A N/A N/A N/A

Marie Louis Désiré René France DUCASSE N/A N/A N/A N/A N/A N/A

Gilbert Patrick Stephane LEAL N/A N/A N/A N/A N/A N/A

Marie Octave Regis NICOLIN N/A N/A N/A N/A N/A N/A

Desiré Pierre Ariste Maxime REY (appointed on 16 July 2012)




Directors of the company’s subsidiaries (cont’d)

Directors UML Cisolve Solinfo Leal Reunion SCPL


N/A N/A N/A N/A

Eric Michel Georges LEAL (Group Chief Executive Officer)

N/A N/A N/A


N/A N/A N/A

Bernard Aimé Jacques ROCHECOUSTE COLLET N/A N/A N/A N/AJean-Marie Eugène GREGOIRE N/A N/A N/A N/ANeemalen GOPAL N/A N/A N/AAntoine Halim KAREH N/A N/A N/A N/AMohamed Yousouf REHMALLY, FCCA (Alternate to Eric Michel Georges LEAL, Joseph Jacques Vivian COLLET-SERRET and Neemalen GOPAL)

N/A N/A N/A N/A

* Eric Michel Georges LEAL is the alternate director of Michael Joseph Clency Leal, C.B.E on EPSCO, LCI, LEC, HDM, PNL and UML.

* Eric Michel Georges Leal is the Chairman of SETL, SETL Outremer Ltd and SETL Meeco Ltd.** Gérald Edgar Raymond Joseph Lincoln is the alternate director of Jean-Marie Eugène Grégoire on UML.*** Dr. Ashveen Kumar Kissoonah is the Chairman of Distripc Ltd [Elytis].


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Directors’ Profile

BOARD OFDirectors

1 092009 Annual Report

Mr Clency Leal C.B.E - Chairman

Mr Virrsingh Ramdeny

Mr Bernard Rochecouste Collet

Mr Gérald Lincoln

Mr Eric Leal

1. Mr Clency Leal C.B.E - Chairman2. Mr Eric Leal3. Mr Vivian Collet Serret4. Mr Christian Ferrière5. Mr Arnaud Leal

6. Mr Virrsingh Ramdeny 7. Mr Bernard Rochecouste Collet 8. Mr Jean-Marie Grégoire 9. Mr France Ducasse10. Mr Gérald Lincoln

10

5

9

4

8

3

7

2

6

1


24

Michael Joseph Clency LEAL (C.B.E)Group Chairman

Michael Joseph Clency LEAL holds an MBA from Harvard Business School, U.S.A. He started his career as Assistant Pharmacist at PNL in 1957. In 1977, he founded Leal & Co. Ltd and founded COMANU Ltee in 1982. He also co-founded United Motors Limited in 1985. He was decorated as Commander of the British Empire – C.B.E. by her majesty, Queen Elizabeth II. He is also the Chairman of the PNL Group.

Eric Michel Georges LEAL Group Chief Executive Officer and alternate to Michael Joseph Clency LEAL

Eric Michel Georges LEAL holds a bachelor degree in Arts & Science from the Boston College, U.S.A, where he specialised in Business Administration. He started his career as Service Director at Leal & Co. Ltd in 1993 and is also the Chief Executive Officer of the PNL Group.

Joseph Jacques Vivian COLLET-SERRETDeputy Chief Executive Officer

Joseph Jacques Vivian COLLET-SERRET joined the Mauritius Commercial Bank Ltd in 1977 and pursued banking studies with the London Institute of Bankers. He joined the Beachcomber group as Financial Controller of the Paradis Hotel in 1988 and joined the Leal Group as Deputy Chief Executive Officer in 1995 to date. Louis Désiré Christian FERRIEREChief Operating Officer - After Sales Department

Louis Désiré Christian FERRIERE is a fellow member of the Mauritius Institute of Directors. He has accumulated 21 years experience in management position and has followed training courses in motors and electrics as well as in management and marketing. He was appointed as director of the parts department of Leal & Co. Ltd in 1996 and as Chief Operating Officer of the after sales department of Leal & Co. Ltd in 2000.

Clency Michel Arnaud LEALGeneral Manager

Clency Michel Arnaud LEAL holds a degree in Business and E-Commerce from the International University of Monaco. He has been employed as new projects manager for PNL and thereafter as manager for Ocean Indien Distribution Ltee before joining Leal & Co. Ltd as Market & Product Research Manager since June 2010.

Virrsing RAMDENYIndependent Non-Executive Director, Chairman of the Leal Group Audit & Risk Committee

Virrsing RAMDENY is a Fellow of the Chartered Association of Certified Accountants, Member of the Institute of Chartered Accountants of England and Wales and holder of a Master’s Degree in Management. He has more than 25 years post qualification experience and is presently the Managing Partner of De Chazal & Associates, a firm of Chartered Accountants and Business Advisers. Mr Virrsing RAMDENY has also worked for the Mauritius Tax Authorities occupying various senior positions and the Mauritius Ports Authority as Finance Manager.

Bernard Aimé Jacques ROCHECOUSTE COLLET Independent Non-Executive Director

Bernard Aimé Jacques ROCHECOUSTE COLLET has joined Leal & Co. Ltd in 1972. He occupied the position of Sales Director of Leal & Co. Ltd until his retirement. He has also assisted in the setting-up of United Motors Limited. He is presently one of the directors of Leal & Co. Ltd, United Motors Limited and PNL. He is also the owner and Director of Zazou Ltée and Albazazou Ltée.

Jean-Marie Eugène GREGOIREIndependent Non-Executive Director, Chairman of the Leal Group Corporate Governance Committee

Jean-Marie Eugène GREGOIRE followed a marketing course at La Chambre de Commerce de Paris and a technical one at L’Ecole des Arts et Métiers Paris. He has accumulated 30 years experience as director of various companies in France and in other countries. He has also provided consultancy services during 5 years to companies specialized in hydrocarbures.

Marie Louis Désiré René France DUCASSEIndependent Non-Executive Director

Marie Louis Désiré France DUCASSE joined PNL at the age of 20 and has been working for several departments before retiring as Deputy Managing Director after 40 years of service in 2000. He was then appointed as independent director on the Board of PNL and also as member of the Leal Group Corporate Governance Committee and Leal Group Audit & Risk Committee.

Gérald Edgar Raymond Joseph LINCOLN Independent Non-Executive Director

Gérald Edgar Raymond Joseph LINCOLN joined The Anglo-Mauritius Assurance Society Limited in December 1971 after having worked in the sugar industry for 12 years as accountant/secretary. On retirement, he held the post of Executive Manager. In 2002, he was appointed as Consultant for the Group Chief Executive of the Swan Group up to the end of 2007. He is also a Director of a number of companies involved in various economic activities and quoted on the D.E.M market.

Directorship in listed companies: Mauritius Freeport Development Company Ltd, Medine Ltd, Excelsior United Development Companies Limited.



3

4

5

6

7

12


26

10

1112 13

8

9

1. Mr Yousuf Elahee Doomun2. Mr François Gellé3. Mr Suresh Seegobin 4. Mr Eric Leal5. Mr Yousouf Rehmally6. Mr Didier Jauffret7. Mrs Virginie Quevauvilliers

8. Mr Michael Carey 9. Mr Louis-Philippe Guého 10. Mr Vivian Collet Serret11. Mr Noël Marion12. Mr Christian Ferrière13. Mr Neemalen Gopal

Profile of senior management team


Profile of senior management team (cont’d)

The profile of Eric Michel Georges Leal, Joseph Jacques Vivian Collet-Serret and Louis Désiré Christian Ferriere appears in the Directors’ profile section.

Neemalen GOPALIT Cluster Director

Neemalen GOPAL holds a Diplôme Etudes Approfondies (DEA) Informatique from the University of Grenoble, France and a MaÎtrise Informatique Appliquée Gestion (MIAG). He has accumulated 24 years working experience in the Information Technology field. He has worked as Adviser in ICT to the Minister of Finance -Government of Mauritius from November 89 to August 1996 before joining the Leal Group.

He is the IT Cluster director of Leal Group since July 2008.

Didier JAUFFRET Executive Director of LEC

Didier JAUFFRET followed a BTS Action Commerciale course from the University of Reunion and has accumulated 22 years working experience in the BTP sector (Batiments Travaux Publics). He has been appointed as Director of LEC since 2003.

Mohamed Yousouf REHMALLY (FCCA)Group Chief Finance Officer

M. Yousouf REHMALLY is a Fellow of the Chartered Association of Certified Accountants. He is also a member of the Certified Accounting Technician of the Association of Chartered Certified Accountant and has more than 20 years working experience. He joined Leal & Co. Ltd in 1998 as Finance Manager and is presently occupying the post of Group Chief Finance Officer.

Michael CAREYChief Operating Officer, Sales BMW/Mini

Michael CAREY has more than 26 years of experience in the automobile sector. He joined Leal & Co. Ltd in 1987 as Sales Manager (BMW-Daihatsu-Iveco-Piaggio). He was promoted as Sales Director (BMW) in 1995 and thereafter as Chief Operating Officer BMW/MINI in 2007. He holds an Advance Certificate in Business Management. Louis-Philippe GUÉHOChief Operating Officer, Renault Sales

Louis-Philippe GUÉHO has accumulated 22 years experience in the automobile sector. In 1995, he was nominated as sales representative for Renault trucks and was promoted as Sales Manager for Renault and Renault trucks in December 1998. In September 2004, he was promoted as Sales Director of Renault at Leal & Co. Ltd and since August 2008 as Chief Operating Officer of United Motors Limited sales.

François GELLÉChief Operating Officer, Parts and Distribution

François GELLÉ holds a degree in Business Administration / Marketing / Finance from the University of Natal Durban South

Africa and followed various training courses in vehicle mechanics and in service/parts administration. He was promoted as Parts Manager of Leal & Co. Ltd in 1994, then as Chief Operating Officer of the Parts and Distribution Department since 2000, and as Chief Operating Officer of the Parts Department of United Motors Limited since 2008.

Yousuf ELAHEE DOOMUNChief Information Officer

Mr. Yousuf ELAHEE DOOMUN holds a Maîtrise en Informatique from The University of Bordeaux. He also holds the ITIL V3 Foundation Certificate. He joined Leal & Co. Ltd in 1987 and has more than 21 years working experience in Information Technology, ranging from networking to ERP implementations. He is currently occupying the post of Chief Information Officer, overseeing IT operations and delivering technology resources to development projects.

Virginie QUEVAUVILLIERSChief Operating Officer, Marketing Department

Virginie QUEVAUVILLIERS holds a licence de lettres Modernes from University of Sorbonne, Paris, a Diploma de l’ Ecole Sup de Pub (Groupe Inseec) and a Master in Advertising and Marketing. She was employed as Marketing Manager in 1994 for Leal & Co. Ltd and then promoted to Chief Operations Officer of the Marketing department in 2009.

Suresh SEEGOBINChief Operating Officer, Vehicule D’occasion

After occupying various posts in marketing and sales in two international airlines, he joined Air Mauritius in 1979 as Assistant to Chairman and Managing Director and became Commercial Director of the National Airline in 1983. Retired in 2001, he served as director on several boards and was also Chairman of the Mauritius Tourism Promotion Agency. He joined Leal & Co. Ltd in November 2007.

Marie Noël MARIONChief Operation Officer, Car Hire [Europcar]

Marie Noel MARION followed a tourism management course at the Centre D’Etudes de promotion du Tourisme, Paris, France. He has accumulated 37 years service in the Car Hire department (Europcar) of Leal & Co. Ltd and has been promoted as Chief Operation Officer since 2007.

Philippe-Alexandre REBBOAH General Manager of Leal Réunion as from 1 October 2013

Philippe-Alexandre Rebboah has followed various courses among which a diploma in ‘Contrat de Qualification Professionnelle de Conseiller Commercial Automobile’ from the ‘Académie des ventes BMW’ and has also followed a course of ‘Responsable de Gestion’ from ESSEC Executive Education. He has accumulated many years of experience in the commercial field. He occupied the position of ‘Directeur Commercial/ Marketing et Services BMW/ Mini/ Chevrolet’ up to April 2012 before holding the position of ‘Directeurs des operations’ of Leal Reunion.


28

Interest of directors in the shares of the company

The following table gives the direct and indirect interests of the Directors in the shares of the Company as well as details of other directorship in listed companies for the year under review:

DirectorsDirect Interest

%*Indirect Interest

%*No. of other directorship

in listed Companies


N/A 1.61 N/A

Eric Michel Georges LEAL (Group Chief Executive Officer and alternate to Michael Joseph Clency LEAL)

19.83 14.02 N/A


0.29 N/A N/A

Louis. Désiré Christian FERRIERE (Chief Operating Officer, After Sales Department)

N/A 14.09 N/A

Clency Michel Arnaud LEAL (Market & Product Research Manager and alternate to Eric Michel Georges LEAL )

0.11 14.02 N/A

Virrsing RAMDENY (Chairman of the Leal Group Audit & Risk Committee)

N/A 3.45 N/A

Bernard Aimé Jacques ROCHECOUSTE COLLET 0.15 0.03 N/AJean-Marie Eugène GREGOIRE (Chairman of the Leal Group Corporate Governance Committee)

0.48 N/A N/A

Marie Louis Désiré René France DUCASSE (Alternate to Jean-Marie Eugène GREGOIRE)

0.16 N/A N/A

Gérald Edgar Raymond Joseph LINCOLN N/A N/A 3

*Percentages rounded to 2 decimal places.

Board committees

1. Board Committees

In accordance with the Code, the Board had set up two committees to assist it in the execution of its responsibilities, namely the Corporate Governance Committee and the Audit & Risk Committee. As a result of the Company controlling 56.02 % of the shares of PNL, a Leal Group Corporate Governance Committee and a Group Audit & Risk Committee were established as from the 1 January 2013 following the dissolution of the Corporate Governance Committee and the Audit and Risk Committee of PNL. The two Leal Group Committees cover all the subsidiaries of Leal and are hence each composed of one Board member of PNL.

The 2 Board committees have access to expert advice at the expense of the Company as and when required.

2. The Leal Group Corporate Governance Committee

Chairman - Jean-Marie Eugène GREGOIRE Members - Michael Joseph Clency LEAL,C.B.E, Marie Louis Désiré René France DUCASSE, Gérald Edgar Raymond Joseph

LINCOLN and Marie Joseph Jean Paul CHASTEAU DE BALYON (appointed as additional Leal Group Corporate Governance Committee member on 19 December 2012)

The Leal Group Corporate Governance Committee is chaired by an Independent Non-Executive director and is composed of one Non-Executive director, two Independent Non-Executive directors and one Independent Non-Executive director of PNL. The Corporate Governance committee met three times during the financial year under review. The Leal Group Corporate Governance Committee members are subject to re-appointment at each financial year end.

The Board will shortly ratify a new Corporate Governance Charter which is being recommended to it by the Leal Group Corporate Governance Committee effective as from 1 January 2013. The Leal Group Corporate Governance Committee is responsible for providing guidance to the Board on aspects of corporate governance and recommending the adoption of policies and best practices as appropriate for the Company.

The Leal Group Corporate Governance Committee also performs the duties of a Nomination and Remuneration Committee.



Board committees (cont’d)

2. The Leal Group Corporate Governance Committee (cont’d)

Profile of Leal Group Corporate Governance Committee members

The profile of Messrs. Jean-Marie Eugène GREGOIRE, Michael Joseph Clency LEAL,C.B.E, Marie Louis Désiré René France DUCASSE and Gérald Edgar Raymond Joseph LINCOLN appear in the director’s profile section.

Marie Joseph Jean Paul CHASTEAU DE BALYON (appointed as additional Leal Group Corporate Governance Committee member on 19 December 2012)

Marie Joseph Jean Paul CHASTEAU DE BALYON is a member of the Chartered Insurance Institute (C.I.I.), U.K, of the Association of Company Secretaries of Mauritius and a Fellow member of Mauritius Institute of Directors (MIoD). He joined Swan Insurance in 1969 and was a Director and Company Secretary of Swan Group Corporate Services Limited until his retirement in June 2012. Until that date, he was a Council member of the Mauritius Chamber of Commerce and Industry (Member of its Nomination and Remuneration Committee), member of the Stock Exchange of Mauritius Consultative Committee, as well as the Chairperson of the sub-committee of the Insurer’s Association on issues linked to the World Trade Organisation (WTO). He still acts as director of a number of companies in the commercial and tourism sectors and as a member of the Board of Governors of the MCCI Business School.

3. The Leal Group Audit & Risk Committee

Chairman - Virrsing RAMDENYMembers - Jean-Marie Eugène GREGOIRE, Marie Louis Désiré René France DUCASSE and Desiré Pierre Ariste Maxime REY

(appointed as additional Committee member on 19 December 2012)

The Leal Group Audit & Risk Committee is chaired by an Independent Non-Executive director and is composed of two Independent Non- Executive directors and one Independent Non-Executive director of PNL. Mr. Virrsing Ramdeny is a member of the Institute of Chartered Accountants of England and Wales and a Fellow of the Association of Chartered Certified Accountants and has substantial accounting and financial experience and background. The Leal Group Audit & Risk Committee members are subject to re-appointment at each financial year end. The Board will shortly ratify a new Audit Charter which is being recommended to it by the Leal Group Corporate Governance Committee effective as from 1 January 2013. The Leal Group Audit & Risk Committee is responsible for the review and assessment of the internal and external audit work and for the appointment of external auditors. The Leal Group Audit & Risk Committee met four times during the financial year under review.

Profile of Leal Group Audit & Risk Committee

The profile of Virrsing RAMDENY, Jean-Marie Eugène GREGOIRE and Marie Louis Désiré René France DUCASSE appear in the director’s profile section.

Desiré Pierre Ariste Maxime REY (appointed as additional Committee member on 19 December 2012)

Desiré Pierre Ariste Maxime REY started an accounting career in 1973 in Mauritius, first in Auditing (Kemp Chatteris/Touche Ross & DCDM/Coopers & Lybrand), and then in the Sugar Industry (Deep River Beau Champ S.E.). Immigrating to South Africa in 1981, he worked for Kuehne and Nagel (Pty) Ltd, the South African arm of a leading global provider of innovative and fully integrated supply chain solutions. He was appointed Group Financial Controller in 1989 and Director in 1992. Back in Mauritius in 1993, he joined the Swan Group, one of the market leaders in the Insurance sector in Mauritius, where he is presently holding the position of Senior Manager - Group Finance, also heading the Loans and Legal Departments of the Group. He serves as Director of a number of Companies in the Commercial, Financial and Tourism sectors, and is a member of various Audit Committees.

Director’s fees

The Group Chief Executive Officer is wholly paid by the Company and a management fee is paid by Pharmacie Nouvelle Limited to the Company.

All Non-Executive and Independent Non-Executive Directors receive a Board remuneration consisting of a fixed fee, as well as an additional fee for each Board attended and the Leal Group Committee members receive a fixed fee.

The Board is of the opinion that the individual remuneration of its directors is a sensitive information and has resolved not to disclose such information in the annual report.


30

Remuneration philosophy

The Board is responsible for the remuneration philosophy of the Company and duties are delegated to the Leal Group Corporate Governance Committee.

Remuneration is reviewed regularly after taking cognizance of market norms and practices as well as additional responsibilities placed on directors. The remuneration package of Executive Directors consists of base salary, fringe benefits and performance bonuses. There is no formal policy for Executive Directors approaching retirement since the remuneration for the Executive Directors approaching retirement is at the discretion of the Board.

However the Board believes that it is a prerequisite that the Executive Directors and all other staff members be regularly assessed on their performance and deliverables, that salaries and pay packages be in line with best practices and be encouraging enough to promote total dedication. Also the Board follows closely the career path of top management and ensures planning of future retirements and replacements. Share option

The Group has no share option plan.

Related party transactions

Please refer to Note 31 to the financial statements.

Corporate social responsibility (CSR)

The Group has continued its valuable contribution to the National E-Inclusion Foundation in line with its philosophy of bringing empowerment, education and training to the more vulnerable groups in Mauritius. The project is to enhance the development of pre–primary schoolchildren in deprived regions and in areas of poverty by promoting education and training. It constitues in providing to each school in deprived regions and in areas of poverty with 2 PC per school coupled by appropriate training.

In addition to its contribution to the Foundation, the Company has also provided financing to many NGO’s engaged in education namely Anfen and Loreto Institutes. Again the main objectives of the Group’s donations are not to finance only an NGO but mostly contribute in depth to the education and training of people.

The Group strongly believes that education is the key to success.

Internal audit function

Internal Control and Risk Management

The Board recognises that a risk management programme integrated across the Group and embedded in its culture is not just a protective tool but is capable of creating a competitive edge in a dynamic environment. The management of risk is therefore vital to the Group’s strategy and to achieving its long-term goal. The Board is responsible for the establishment and oversight of the Group’s risks management programme which incorporates internal control and risks management procedures. The Board has delegated to the Leal Group Audit & Risk Committee (AC) its overall responsibility to translate its vision on risks management. The AC is reviewing the risks philosophy, strategy and policies recommended by management. Compliance with policies and procedures is constantly monitored, and processes and procedures are regularly updated as and wherever applicable. Management is accountable to the Board for establishishing processes and procedures for identifying, evaluating and managing the significant risks faced by the Group. The Group Chief Executive Officer is responsible to report such risks as and when identified. Internal Control

The system of internal control is primarily designed to manage rather than eliminate the risk of failure in the achievement of business objectives. Internal control can provide only reasonable assurance against material misstatement or loss. A hierarchical reporting has been established to provide a documented and auditable trail of accountability. An independent and objective opinion is provided to AC and management to ensure that appropriate procedures and control are in place to protect the Group’s income and assets.



Internal audit function (cont’d)

The Group internal audit department operates within the framework of the Charter of AC and in line with its approved audit plan, and all departments and subsidiaries are audited at least once annually. Given its commitment to enhance value, the Group internal audit department aims at providing a high quality audit service by adopting up to date audit and business international standards. A follow up mechanism is in place so as to ensure that all the international standards are adopted in a pragmatic way and within a reasonable time frame.

Every month the Leal Group Audit & Risk Committee is provided with detailed audit reports together with follow up actions.

Risk Management

The Group has clearly identified its risks areas and has decided to put in place a clear framework geared at achieving the Group’s risk controls which are classified in four categories namely operational, financial, customer, people and system. It is the responsibility of management to assess the full array of risks and capture them in the business risks register with mitigating actions, ownership and completion dates. These registers are tabled at the Board of each respective company of the Group and the key risks reported to the AC .

Risks are managed within the following framework:

- Internal Audit independently reviews, monitors and tests business units compliance with policies and procedures, as well as Quality Standards; and

- AC operates within a formal charter and is chaired by an independent non-executive director. The current economic and financial crisis has created a significant decline in the country’s economic activities. The businesses within the Group are not immune to the prevailing economic climate and some key revenue sectors have been affected. The Group has reviewed the risks in line with its strategic objectives through control assessment workshops in order to better absorb exogenous shocks and to seize opportunities.

Management monitors risks in the day-to-day operations and the most important ones are listed hereunder: Financial risks

The Group is exposed to various risks namely cash liquidity, interest rate, obsolescence, credit, and foreign exchange. Operational risks

The Group is continuously updating its policies and control procedures to minimise its exposure to operational risks. Such risks materialise into losses when, for instance, internal processes are inadequate or fail, or when external events cause damage or disruption to the business. Those risks are mitigated by ensuring that clear guidelines are provided through documented policies and procedures, which have been communicated, distributed and assessed by the Group Internal Auditor.

The Group’s procedures, processes and job descriptions are fully accessible to all the Group’s personnel via the Group’s Intranet. Information systems and information security

The Group’s businesses may be severely impacted by a failure in the confidentiality, integrity or availability of the information system resulting from an intentional or accidental event. A code of conduct concerning the handling of information has been enforced and priority is placed on maintaining a high level of security. Appropriate firewalls, security guidelines and extensive back up facilities are in place to counter potential threats. The IT procedural manual is accessible via the Group’s Intranet. A special IT audit has been conducted during the year by Price Waterhouse Coopers and actions recommended shall be presented to AC. Human capital

The risk that personnel will not be sufficiently capable and professionnally geared to attain the organisation’s objectives are real. Specific risks are contained by providing adequate training to a quality and competent personnel.

Donations

Details of donations are disclosed in the annual report.


32

Ethics

The Board, which is in the process of adopting a Code of Ethics, is mindful of the interest of other stakeholders such as suppliers, clients and the public at large when running the business and is committed to high standards of integrity and ethical conduct in dealing with them.

Furthermore, the Group and its employees must, at all times, comply with all applicable laws and regulations. The Group will not condone the activities of employees who achieve results through violation of the law or unethical business dealings. The Group does not permit any activity that fails to stand the closest possible public scrutiny.

All business conduct should be above the minimum standards required by law. Accordingly, employees must ensure that their actions cannot be interpreted as being, in any way, in contravention of the laws and regulations governing the Group’s operations. Employees uncertain about the application or interpretation of any legal requirements should refer the matter to their superior, who, if necessary, should seek the advice of someone at the highest level of the Company’s hierarchy.

Safety, health and environment

The Group aims to act as a good employer in all matters pertaining to health and safety at work in line with the Occupational Safety and Health Act and accepts responsibility for making sure that the way it carries out business does not harm the health and safety of its own people or anyone else affected by its activities.

The Group has set out to secure a culture whereby health and safety are of equal importance as productivity and quality and that this culture is implemented consistently throughout its business by having an accident-free company and ensuring employee safety by reducing risks in the working environment, providing and maintaining safe working practices and equipment which undergo regular inspections in compliance with the law.

The Group recognizes that it cannot achieve these aims and responsibilities by management actions alone. Therefore regular consultations with employee and employer representatives through health and safety committees have been conducted throughout the year.

During the year, several training programs were devised for employees, namely Fire Fighting Awareness & Fire Drill, First Aid, Conducting Risk Assessment, Safe Work Practices, Hygiene courses for food handlers. Furthermore, an overview of safety and health procedures within the Group is provided to newly recruited employees.

A risk assessment for various activities, including interventions off-sites, was undertaken and updated where so required with the participation of both the Management Team and the employees.

Safety & health procedures were established and/or updated during the year, namely Injury at Work / Outside Work, Job Hazard Analysis for Personal Protective Equipment, and Hazard Reporting.

A health surveillance was conducted during the year for employees exposed to hazardous materials and the in-house Group Medical Doctor is readily available for consultation by the employees.

Sustainability reporting

Management believes that growth should not be at the expense of the environment. The Group’s sustainable development approach includes areas like protecting the environment, trade in energy efficient products, promoting the concept of green enterprise and supporting the development aspirations of communities of deprived region.

Shareholder relations

Our website is continuously updated to provide maximum information both to our business partners as well as our shareholders.

Timetable of important forthcoming events

Month Event

December 2013 Interim dividend for financial year 2013/2014December 2013 Annual MeetingJune 2014 Financial year endJune 2014 Final dividend for financial year 2013/2014

Navitas Corporate Services LtdCompany Secretary

3 December 2013



Statement of Compliance (Section 75 (3) of the Financial Reporting Act 2004)

Name of Public Interest Entity (‘PIE’): Leal & Co. Ltd

Reporting Period: Financial year ended 30 June 2013

We, the undersigned being the Directors of Leal & Co. Ltd (the “Company”), confirm that to the best of our knowledge the Company has complied with all of its obligations and requirements under the Code of Corporate Governance (the “Code”) except for the following sections:

1. Section 2.8: Remuneration of Directors / Remuneration Philosophy2. Section 2.10: Board and Director Appraisal3. Section 7.3: Code of Ethics4. Section 9.4: Election/ Re-Election of Directors

The reasons of non-compliance with the above Sections of the Code are provided in the Corporate Governance Report as follows:

Page Number

1. Remuneration of Directors / Remuneration Philosophy 26 (under Director’s fees and Remuneration Philosophy)2. Board and Director Appraisal 17 (under Assessment of directors)3. Code of Ethics 29 (under Ethics)4. Election/ Re-Election of Directors 17 (under Board of directors)

M.G. Eric Leal J.J. Vivian Collet Serret Chief Executive Officer Deputy Chief Executive Officer

3 December 2013

34

Directors’ statement of responsibilities

The Directors acknowledge their responsibilities for:

(i) adequate accounting records and maintenance of effective internal control systems;(ii) the preparation of consolidated financial statements which fairly present the state of affairs of the Company as at the end of

the financial year and the results of their operations and cash flows for the year then ended which comply with International Financial Reporting Standards (IFRS) and the Mauritius Companies Act 2001;

(iii) the selection of appropriate accounting policies supported by reasonable and prudent judgments.

The external auditors are responsible for reporting on whether the financial statements are fairly presented.

The Directors report that:· adequate accounting records and an effective system of internal controls and risk management have been maintained;· appropriate accounting policies supported by reasonable and prudent judgments and estimates have been used

consistently;· International Financial Reporting Standards and the Mauritius Companies Act 2001 have been adhered to. Any departure

in the interest in fair presentation has been disclosed, explained and quantified; and· the Code of Corporate Governance has been adhered to.

Approved by the Board of Directors on 3 December 2013 and signed on its behalf by:

M.G. Eric Leal J.J. Vivian Collet Serret Chief Executive Officer Deputy Chief Executive Officer

3 December 2013


Certificate from the Secretary to the members of Leal & Co. Ltd

We certify, to the best of our knowledge and belief, that we have filed with the Registrar of Companies all such returns as are required of Leal & Co. Ltd, under the Mauritius Companies Act 2001, in terms of Section 166 (d), during the financial year ended 30 June 2013.

Navitas Corporate Services LtdSecretary

Registered office:

13, St Clément StreetCurepipeRepublic of Mauritius

3 December 2013

36

Consolidated Financial Statements for the year ended

30 June 2013LEAL & CO. LTD ANNUAL REPORT 2013 37

Independent Auditors’ Report to the Members of Leal & Co. LtdReport on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Leal & Co. Ltd, the “Company”, and its subsidiaries, together referred to as the “Group”, which comprise the consolidated statement of financial position as at 30 June 2013, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information.

Directors’ Responsibilities for the Consolidated Financial Statements

The directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Mauritius Companies Act 2001 and the Financial Reporting Act 2004, and for such control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements 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 about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements on pages 40 to 97 give a true and fair view of the financial position of the Group and the Company as at 30 June 2013, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Mauritius Companies Act 2001 and the Financial Reporting Act 2004.

Report on Other Legal and Regulatory Requirements

(a) Mauritius Companies Act 2001

In accordance with the requirements of Mauritius Companies Act 2001, we report as follows:

• we have no relationship with, or any interests in, the Company and its subsidiaries other than in our capacity as auditors;• we have obtained all the information and explanations that we have required; and• in our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those

records.

(b) Financial Reporting Act 2004

The Directors are responsible for preparing the Corporate Governance Report (“the Report”). Our responsibility is to report on the extent of compliance with the Code of Corporate Governance (“the Code”) as disclosed in the Report and on whether the disclosure is consistent with the requirements of the Code.

In our opinion, the disclosure in the Report is consistent with the requirements of the Code.

38

Independent Auditors’ Report to the Members of Leal & Co. LtdOther Matters

This report is made solely to the members of the Company as a body, in accordance with Section 205 of the Mauritius Companies Act 2001. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinion we have formed.

Grant Thornton Y NUBEE, FCCAChartered Accountants Licensed by FRC

3 December 2013

Ebène, Republic of Mauritius


Consolidated Statement of Financial Position as at 30 June 2013

The Group The CompanyNotes 2013 2012 2013 2012

RestatedRs Rs Rs Rs

AssetsNon-current Goodwill 8 8,086,759 245,853 - -Intangible assets 9 9,629,694 10,753,409 1,328,326 2,138,833Property, plant and equipment 10 1,080,064,312 988,488,555 503,190,621 508,961,527Investment property 11 - - 127,814,527 118,527,630Investments in subsidiaries 12 - - 166,808,212 151,883,097Investments in associates 13 1,950,041 2,217,590 3,125,000 9,125,000Available-for-sale investments 14 1,742,438 1,706,738 160,500 139,500Loan 15 1,446,376 2,159,696 - -Deferred tax assets 28 15,178,830 12,358,006 - -Non-current assets 1,118,098,450 1,017,929,847 802,427,186 790,775,587

Current Inventories 16 930,245,295 933,751,559 312,061,563 276,009,678Trade and other receivables 17 893,379,599 801,337,026 285,840,562 251,147,626Current tax assets 28 880,937 361,966 - -Cash and cash equivalents 18 54,460,976 67,128,428 15,795,282 8,643,568Current assets 1,878,966,807 1,802,578,979 613,697,407 535,800,872

Total assets 2,997,065,257 2,820,508,826 1,416,124,593 1,326,576,459

Equity and liabilitiesEquityShare capital 19 258,104,200 258,104,200 258,104,200 258,104,200Share premium 19 21,719,820 21,719,820 21,719,820 21,719,820Other components of equity 19 217,111,315 194,099,005 72,054,602 72,033,602Retained earnings 345,906,695 287,417,435 315,604,972 261,045,526Equity attributable to owners of the parent 842,842,030 761,340,460 667,483,594 612,903,148Non-controlling interest 150,510,124 135,511,090 - -Total equity 993,352,154 896,851,550 667,483,594 612,903,148

LiabilitiesNon-current Retirement benefit obligations 20 49,433,154 44,265,123 29,604,775 25,296,429Borrowings 21 294,892,495 203,893,653 198,980,375 150,082,546Deferred tax liabilities 28 21,132,363 16,994,804 14,611,048 12,306,206Non-current liabilities 365,458,012 265,153,580 243,196,198 187,685,181

The notes on pages 47 to 97 form an integral part of these consolidated financial statements.

40

Consolidated Statement of Financial Position as at 30 June 2013


Approved by the Board of Directors on 3 December 2013 and signed on its behalf by:

M.G. Eric Leal J.J. Vivian Collet Serret Virrsingh RamdenyChief Executive Officer Deputy Chief Executive Officer Chairman of Audit Committee


RestatedRs Rs Rs Rs

Current Trade and other payables 22 892,493,372 890,211,525 356,073,309 353,577,694Borrowings 21 733,030,138 751,547,599 147,755,187 170,849,088Current tax liabilities 28 4,212,069 8,834,572 1,616,305 1,561,348Dividends 23 8,519,512 7,910,000 - -Current liabilities 1,638,255,091 1,658,503,696 505,444,801 525,988,130

Total liabilities 2,003,713,103 1,923,657,276 748,640,999 713,673,311Total equity and liabilities 2,997,065,257 2,820,508,826 1,416,124,593 1,326,576,459


Consolidated Statement of Comprehensive Income for the year ended 30 June 2013


Rs Rs Rs Rs

Revenue 24 5,131,725,127 4,773,731,621 1,678,034,209 1,371,236,273Cost of sales 25 (4,212,063,064) (3,867,531,037) (1,354,415,798) (1,088,298,993)Gross profit 919,662,063 906,200,584 323,618,411 282,937,280Other income 26 100,566,327 91,785,018 77,385,790 112,449,467Selling expenses 25 (186,774,485) (190,477,325) (60,902,108) (62,018,827)Administrative expenses 25 (631,168,462) (600,910,962) (206,348,003) (195,478,245)Impairment loss 12 - - (2,828,842) (12,600,000)Operating profit 202,285,443 206,597,315 130,925,248 125,289,675Net foreign exchange gains 40,797,631 57,003,680 14,604,635 20,888,666Finance income 27.1 781,307 1,414,352 83,793 763,527Finance costs 27.2 (104,490,498) (106,308,018) (36,103,242) (34,989,524)Share of loss of associates 13 (267,549) (2,011,228) - -Profit on derecognition of investment in associate

136,000,000 - - -

Profit before tax 25 145,106,334 156,696,101 109,510,434 111,952,344Tax expense 28 (29,290,721) (33,384,300) (13,654,316) (11,666,585)Profit for the year 115,815,613 123,311,801 95,856,118 100,285,759

Other comprehensive income:Items that will not be reclassified subsequently to profit or lossGain on revaluation of land and buildings 10 26,871,506 4,499,402 - -Items that will be reclassified subsequently to profit or lossAvailable-for-sale investments - Current year gains 14 35,700 126,650 21,000 74,500Retranslation of foreign operations 104,815 (66,975) - -Other comprehensive income for the year, net of tax 27,012,021 4,559,077 21,000 74,500

Total comprehensive income for the year 142,827,634 127,870,878 95,877,118 100,360,259

Profit for the year attributable to:Owners of the parent 99,685,003 123,291,350 95,856,118 100,285,759Non-controlling interest 16,130,610 20,451 - -

115,815,613 123,311,801 95,856,118 100,285,759Total comprehensive income for the year attributable to:Owners of the parent 121,992,606 127,853,960 95,877,118 100,360,259Non-controlling interest 20,835,028 16,918 - -

142,827,634 127,870,878 95,877,118 100,360,259

Earnings per share 29 38.62 52.67 37.14 42.85


42

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The CompanyShare capital

Share premium

Share application

monies

Other components

of equityRetained earnings Total

Rs Rs Rs Rs Rs Rs

At 01 July 2012 258,104,200 21,719,820 - 72,033,602 261,045,526 612,903,148

Dividends (Note 23) - - - - (41,296,672) (41,296,672)Transactions with the shareholders - - - - (41,296,672) (41,296,672)

Profit for the year - - - - 95,856,118 95,856,118Other comprehensive income for the year - - - 21,000 - 21,000Total comprehensive income for the year - - - 21,000 95,856,118 95,877,118At 30 June 2013 258,104,200 21,719,820 - 72,054,602 315,604,972 667,483,594

At 01 July 2011 227,739,000 12,610,260 22,271,650 71,959,102 199,234,851 533,814,863

Issue of shares 30,365,200 9,109,560 (22,271,650) - - 17,203,110Dividends (Note 23) - - - - (38,475,084) (38,475,084)Transactions with the shareholders 30,365,200 9,109,560 (22,271,650) - (38,475,084) (21,271,974)

Profit for the year - - - - 100,285,759 100,285,759Other comprehensive income for the year - - - 74,500 - 74,500Total comprehensive income for the year - - - 74,500 100,285,759 100,360,259At 30 June 2012 258,104,200 21,719,820 - 72,033,602 261,045,526 612,903,148

Consolidated Statement of Changes in Equity for the year ended 30 June 2013


44



Operating activitiesProfit before tax 145,106,334 156,696,101 109,510,434 111,952,344

Adjustment for:Depreciation 98,203,760 91,597,822 56,644,525 55,675,061Amortisation 1,396,904 2,259,531 810,507 810,507Profit on disposal of property, plant and equipment (1,387,378) (2,881,792) (1,286,251) (3,645,782)Impairment losses - 182,070 2,828,842 12,600,000Building written off - 2,504,008 - -Share of loss of associates 267,549 2,011,228 - -Exchange differences 447,129 369,760 - -Profit on derecognition of investment in associate (6,000,000) - - -Provisions - 780,000 - -Dividend income (95,700) (5,100) (36,732,034) (77,049,943)Interest expense 95,922,681 97,975,529 33,985,102 33,139,498Interest income (781,307) (1,414,352) (83,793) (763,527)Movement in retirement benefit obligations 5,168,031 4,725,189 4,308,346 3,814,174Total adjustments 193,141,669 198,103,893 60,475,244 24,579,988

Net changes in working capital:Changes in inventories 3,506,264 (128,914,557) (36,051,885) (17,374,279)Changes in trade and other receivables (82,302,629) (45,633,110) (41,601,787) (35,031,631)Changes in trade and other payables (6,003,406) 130,101,003 52,507,093 5,443,038Total changes in working capital (84,799,771) (44,446,664) (25,146,579) (46,962,872)

Tax paid (29,985,069) (34,594,302) (11,294,517) (9,081,852)Net cash from operating activities 223,463,163 275,759,028 133,544,582 80,487,608

Investing activitiesPurchase of property, plant and equipment (134,313,919) (103,146,650) (29,967,351) (26,390,597)Purchase of investments (1,282,944) (10,068,024) (4,541,115) (30,068,025)Purchase of intangible assets (16,066) (3,625,789) - -Proceeds from disposal of property, plant and equipment 22,202,841 45,988,757 17,688,860 27,548,955Purchase of investment property - (772,025) (59,298,375) (20,760,548)Dividends received 95,700 5,100 36,428,037 84,044,943Interest received 781,307 1,414,352 83,793 21,023Net cash (used in)/from investing activities (112,533,081) (70,204,279) (39,606,151) 34,395,751

Consolidated Statement of Cash Flows for the year ended 30 June 2013


Consolidated Statement of Cash Flows for the year ended 30 June 2013


Financing activitiesProceeds from loans from financial institutions 226,785,663 173,971,833 161,250,000 94,972,000Repayment of loans from financial institutions (101,589,898) (95,029,860) (118,800,575) (82,958,044)Repayment of finance leases (75,290,254) (83,450,648) (52,014,207) (56,995,256)Proceeds from issue of shares - 17,203,110 - 17,203,110Interest paid (95,922,681) (97,975,529) (33,985,102) (33,139,498)Dividends paid (49,609,014) (50,558,013) (41,296,672) (38,475,084)Net cash used in financing activities (95,626,184) (135,839,107) (84,846,556) (99,392,772)

Net change in cash and cash equivalents 15,303,898 69,715,642 9,091,875 15,490,587

Movement in cash and cash equivalents:At 01 July (209,211,558) (278,927,200) 1,170,756 (14,319,831)Cash and cash equivalent acquired through business combination 621,373 - - -Net change in cash and cash equivalents 15,303,898 69,715,642 9,091,875 15,490,587At 30 June (193,286,287) (209,211,558) 10,262,631 1,170,756

(a) Cash and cash equivalents made up of:Cash in hand and at bank (Note 18) 54,460,976 67,128,428 15,795,282 8,643,568Bank overdrafts (Note 21) (247,747,263) (276,339,986) (5,532,651) (7,472,812)

(193,286,287) (209,211,558) 10,262,631 1,170,756

(b) Acquisition of subsidiaryNet assets:-Share capital 22,029,122 - - -Retained earnings (19,430,367) - - -

2,598,755 - - -

% of net assets acquired (55%) 1,429,316 - - -


46

Notes to the Consolidated Financial Statements for the year ended 30 June 20131. General information and statement of compliance with IFRS

Leal & Co. Ltd, the “Company”, was incorporated in the Republic of Mauritius on 29 January 1976 as a private company with liability limited by shares. The status of the Company was subsequently changed to a public company with liability limited by shares on 14 April 1981. The Company’s registered office is Motorway M1, Les Pailles, Republic of Mauritius.

The Company and its subsidiaries are together referred to as “the Group”.

The principal activities of the Group are:

(i) to deal in motor vehicles, spare parts and rental of cars and bonded warehouse;(ii) to import, export, trade and deal in all kinds of mechanical engineering and agricultural equipment and spares; (iii) to provide mechanical and hydraulic after sales services;(iv) to deal in commercial and industrial equipment and accessories and electronic appliances;(v) to import computer components, systems and peripherals and assemble of computers;(vi) to implement and support network in various institutions;(vii) to design and implement high tech solutions in green and renewable energy fields using solar/wind/micro-hydro technologies;(viii) to deal in the import and export of equipment;(ix) to act as a job contractor and a wholesale dealer;(x) to provide services in the formation and communication technologies sector;(xi) to deal in computer accessories and IT products;(xii) to engage in the distribution of pharmaceutical products, consumer goods and products for the textile industry;(xiii) to manufacture cosmetics;(xiv) to engage in the manufacture and general retailing business; and(xv) to hold investments.

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB).

2. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group

At the date of authorisation of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below. Certain other new standards, amendments and interpretations have been issued but are not expected to have a material impact on the Group’s financial statements.

IFRS 13 Fair Value MeasurementIFRS 12 Disclosure of Interests in Other EntitiesIFRS 11 Joint ArrangementsIFRS 10 Consolidated Financial Statements IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)IAS 27 Separate Financial Statements IAS 28 Investments in Associates and Joint Ventures (Revised 2011)IAS 19 Employee Benefits (Revised 2011)IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)IFRS 9 Financial InstrumentsIFRS 1 Government Loans (Amendments to IFRS 1) IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)IFRS 10, 12 Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)and IAS 27 IFRS 10, 11 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interest in Otherand 12 Entities: Transition GuidanceIFRIC 21 Levies

Management have yet to assess the impact of the above standards, amendments and interpretations of the consolidated financial statements of the Group.


48

Notes to the Consolidated Financial Statements for the year ended 30 June 20133. Summary of accounting policies

3.1 Overall considerations

The consolidated financial statements have been prepared using the significant accounting policies and measurement bases summarised below.

3.2 Basis of consolidation

The Group financial statements consolidate those of the parent company and of its subsidiaries as of 30 June 2013. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The Group obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting date of 30 June.

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

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

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

3.3 Business combinations

The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

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

3.4 Investments in subsidiaries

Investments in subsidiaries are shown at cost less impairment losses in the separate financial statements. Where the carrying amount of the investment is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount and the difference is charged to the statement of comprehensive income. On disposal of the investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of comprehensive income.

3.5 Investments in associates

Associates are those entities over which the Group is able to exert significant influence but which are neither subsidiaries nor joint ventures.

Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Any goodwill or fair value adjustment attributable to the Group’s share in the associate is not recognised separately and is included in the amount recognised as investment in associates.

The carrying amount of the investments in associates are increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group.


Notes to the Consolidated Financial Statements for the year ended 30 June 20133. Summary of accounting policies (cont’d)

3.5 Investments in associates (cont’d)

However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognised.

Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

3.6 Goodwill

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See note 3.3 for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses. 3.7 Foreign currency

Functional and presentation currency

The consolidated financial statements are presented in currency MUR, which is also the functional currency of the parent company.

Transactions and balances

Foreign currency transactions are translated into the functional currency of the Group, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

Foreign operations

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

On consolidation, assets and liabilities have been translated into MUR at the closing rate at the reporting date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into MUR at the closing rate. Income and expenses have been translated into MUR at the average rate over the reporting rate. Exchange differences are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

The average exchange rates for the year ended 30 June 2013 were as follows:

Rs

EURO/MUR 39.62SCR/MUR 2.15

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3.8 Revenue

Revenue arises from the sale of goods and the rendering of services. It is measured at the fair value of consideration received or receivable, excluding value added tax, rebates, and trade discounts.

Revenue is recognised when the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Group, the costs incurred can be measured reliably and the Group has transferred to the buyer the significant risks and rewards of ownership. In determining risks and rewards of ownership, the Group also considers ‘Bill and hold sales’, in which delivery is delayed at the buyer’s request but the buyer takes title and accepts billing. Interest income is reported on an accrual basis using effective interest method.

Rental income is recognised on a straight-line basis over the term of the lease.

Dividend income is recognised when the right to receive payment is established.

Management fees and commission earned are recognised on an accrual basis.

3.9 Operating expenses

Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred. Expenditure for warranties is recognised and charged against the associated provision when the related goods are sold or services provided.

3.10 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs.

3.11 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average cost method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads, but exclude interest expenses. Net realisable value is the estimate of the selling price in the ordinary course of business less any applicable selling expenses. Provision for obsolete and slow moving inventories is made for inventories over 3 years, where necessary.

3.12 Property, plant and equipment

Land and buildings

Freehold land and buildings are shown at market value, based on periodic valuations by external independent valuers, less subsequent depreciation for buildings. Market value is the fair value based on appraisals prepared by external professional valuers once every three years or more frequently if market factors indicate a material change in fair value. Any revaluation surplus is recognised in other comprehensive income and credited to the revaluation reserve in equity. To the extent that any revaluation decrease or impairment loss has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase recognised in other comprehensive income. Downward revaluations are recognised upon appraisal or impairment testing, with the decrease being charged to other comprehensive income to the extent of any revaluation surplus in equity relating to this asset and any remaining decrease recognised in profit or loss. Any revaluation surplus remaining in equity on disposal of the asset is transferred to retained earnings.

As no finite useful life for land can be determined, related carrying amounts are not depreciated. Other property, plant and equipment

Property, plant and equipment are initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment are subsequently measured using the cost model, cost less subsequent depreciation and impairment losses.



3.12 Property, plant and equipment (cont’d)

Other property, plant and equipment (cont’d)

Depreciation is recognised on a straight-line basis to write down the cost less estimated residual values. The depreciation rates are as follows:

Building - 2%Building on leasehold land - 2%Furniture and equipment - 10 - 50%Computer equipment - 10 - 33⅓%Motor vehicles - 10 - 30%Improvement to leasehold building - 10%Tools and equipment - 10 - 33⅓%

No depreciation is provided on freehold land and on assets under the course of construction.

All acquisitions not exceeding Rs 3,000 are expensed in the same period of acquisition.

Property, plant and equipment held under finance leases are depreciated over their expected useful lives on the same basis as owned assets.

Where the carrying amount of an asset is greater than its estimated amount, it is written down immediately to its recoverable amount.

Material residual value estimates and estimates of useful life are updated as required. Repairs and maintenance costs are expensed as incurred.

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses.

3.13 Leases

Finance leases

The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease liability.

See Note 3.12 for the depreciation method and useful lives for assets held under finance leases.The corresponding finance lease liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to statement of comprehensive income, as finance costs over the period of the lease. Operating leases

All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred. Where the Group is a lessor, rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

52


3.14 Intangible assets

Intangible assets comprise of brand names, computer software, website costs and customers lists and technical knowhow. Website costs are included within computer software.

The intangible assets are amortised over a period of 3 to 10 years.

The method of amortisation reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up and where such pattern cannot be reliably determined, a straight line amortisation method is used. Intangible assets are also subject to impairment testing.

3.15 Impairment of assets

At each reporting date, the Group reviews the carrying amount of its assets to determine whether there is any indication that these assets have suffered an impairment loss. When an indication of impairment loss exists, the carrying amount of the asset is assessed and written down to its recoverable amount.

3.16 Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation, and are accounted for using the fair value model.

Investment properties are revalued every three years and are included in the consolidated statement of financial position at their open market values. These values are supported by market evidence and are determined by external professional valuers with sufficient experience with respect to both the location and the nature of the investment property.

Any gain or loss resulting from either a change in the fair value or the sale of an investment property is immediately recognised in profit or loss within change in fair value of investment property.

Rental income and operating expenses from investment property are reported within other income and administrative expenses, and are recognised as described in Notes 3.8 and 3.9, respectively.

On consolidation, investment properties which are rented within the Group are transferred to property, plant and equipment and any revaluation gain/loss recognised in respect of these properties are reclassified to revaluation reserves. Depreciation is thereafter charged as per the Group’s policy.

3.17 Financial instruments

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments, are classified into loans and receivables and available-for-sale financial assets.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets.



3.17 Financial instruments (cont’d)

Classification and subsequent measurement of financial assets (cont’d)

The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

All income and expenses relating to financial assets that are recognised in statement of comprehensive income are presented within finance income and finance costs, except for impairment of receivables which is presented within administrative expenses.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

An allowance for credit losses is established if there is objective evidence that the Group will be unable to collect all amounts due.

Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that do not qualify for inclusion in any of the other categories. The Group’s available-for-sale financial assets include quoted and unquoted investments.

The Group’s unquoted available-for-sale financial assets are stated at cost which is a reflection of the fair value. Quoted investment is measured at fair value and gains or losses are recognised in other comprehensive income and reported within other components of equity in the consolidated statement of financial position. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss is recognised in other comprehensive income is reclassified from the equity reserves to profit or loss and presented as a reclassification adjustment within other comprehensive income.

Reversals of impairment losses are recognised in other comprehensive income, except for financial assets that are debt securities which are recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.

Classification and subsequent measurement of financial liabilities

The Group’s financial liabilities include borrowings and trade and other payables.

Financial liabilities are measured subsequently at amortised cost using the effective interest method.

All interest-related charges on financial liabilities are included within finance costs or finance income.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

3.18 Derivative financial instruments

Derivative financial instruments are meant to manage the exposure to foreign exchange risks. The derivative financial instruments used are mainly forward exchange rate contracts. Derivatives are initially measured at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss.

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3.19 Post employment benefits and short term employee benefits

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

Defined contribution plan

A defined contribution plan is a pension plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions in addition to its fixed contributions which are recognised as an expense in the period that relevant employee services are received.

Contributions to the National Pension Scheme are expensed to the consolidated statement of comprehensive income in the year in which they fall due.

Defined benefit plan

Plans that do not meet the definition of a defined contribution plan are defined benefit plans. Under the Group’s defined benefit plans, the amount of pension benefit that an employee will receive on retirement is defined by reference to length of service and final salary. The legal obligation for any benefits remains with the Group, even if plan assets for funding the defined benefit plan have been set aside. Plan assets may include assets specifically designated to a long-term benefit fund as well as qualifying insurance policies.

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

Management estimates the DBO annually with the assistance of independent actuaries. This is based on standard rates of inflation, future salary increase, future guaranteed pension increase and post retirement mortality rates. It also takes into account the Group’s specific anticipation of future salary increase. Discount factors are determined close to each year-end by reference to high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses are not recognised as an expense unless the total unrecognised gain or loss exceeds 10% of the greater of the obligation and related plan assets. The amount exceeding this 10% corridor is charged or credited to profit or loss over the employees’ expected average remaining working lives. Actuarial gains and losses within the 10% corridor are disclosed separately. Past service costs are recognised immediately in profit or loss, unless the changes to the pension plan are conditional on the employees remaining in services for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

Short-term employee benefits

Short-employee benefits, including holiday entitlements, sick and local leaves, are included in salaries and related costs.

3.20 Income taxes

Tax expense recognised in profit or loss comprises the sum of deferred tax, current tax and CSR (Corporate Social Responsibility Fund) not recognised in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

The Company and its Mauritian subsidiaries are subject to Corporate Social Responsibility Fund and the contribution is at a rate of 2% on the chargeable income of the preceding financial year.

The foreign subsidiaries are subject to tax laws applicable in the jurisdiction where they are incorporated.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.



3.20 Income taxes (cont’d)

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period.

Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income, based on the Group’s forecast of future operating results which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full.

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

Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.

3.21 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. At the time of the effective payment, the provision is deducted from the corresponding expenses. All known risks at reporting date are reviewed in detail and provision is made where necessary.

3.22 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts are shown within borrowings under current liabilities. 3.23 Equity, reserves and dividend payments

Share capital is determined using the nominal value of shares that have been issued.

Share premium represents the excess amount received on the nominal value of shares issued.

Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

All transactions with owners of the parent are recorded separately within equity.

Other components of equity include the surplus on the revaluation of land and building, retranslation of foreign operations and revaluation of available-for-sale investment.

Retained earnings include the retained profits for both the current and prior periods.

Dividend distributions payable to equity shareholders are included in current liabilities when the dividends have been approved by the Board prior to the reporting date.

3.24 Trade receivables

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and are classified as current assets if settlement is expected within one year.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

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3.25 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers and are classified as current liabilities if payment is due within one year.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

3.26 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on loan facilities are recognised as transaction costs.

3.27 Related parties

A related party is a person or company where that person or company has control or joint control of the reporting company; has significant influence over the reporting company; or is a member of the key management personnel of the reporting company or of a parent of the reporting company. 3.28 Comparatives

Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

A third statement of financial position is not presented as a result of reclassification of investment property to property, plant and equipment and of retained earnings to revaluation reserves as the information is unchanged from the previously published consolidated financial statements which are readily available for financial analysis.

3.29 Significant management judgement in applying accounting policies and estimation uncertainty

When preparing the consolidated financial statements, management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

Significant management judgement

The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the consolidated financial statements.

Determination of functional currency

The determination of the functional currency of the Group is critical since recording of transactions and exchange differences arising therefrom are dependent on the functional currency selected. Management has considered those factors and has determined that the functional currency of the Group is the Mauritian rupee (MUR or Rs).

Recognition of service

Determining when to recognise revenues from after-sales services requires an understanding of the customer’s use of the related products, historical experience and knowledge of the market.

Deferred tax assets

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



3.29 Significant management judgement in applying accounting policies and estimation uncertainty (cont’d)

Significant management judgement (cont’d)

Intangible assets

Management uses its judgement when determining whether the recognition requirements for the capitalisation of intangible assets are met. After capitalisation management monitors whether the recognition requirements continue to be met and whether there are indicators that these assets may be impaired. Available-for-sale investments

The Group follows the guidance of IAS 39 on determining when an investment is other than temporarily impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Going concern assumption

The directors have exercised significant judgement is assessing that the preparation of these consolidated financial statements on a going concern basis is appropriate. In making this assessment, the directors have considered current financial position and financial performance, future business prospects and cash flows and also the availability of credit facilities from financial institutions.

Estimation uncertainty

Defined benefit liability

Management estimates the defined benefit liability annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimate of its defined benefit liability Rs 49,251,589 (2012: Rs 44,265,123) is based on standard rates of inflation, future salary increases, future guaranteed pension increase and post retirement mortality rates. It also takes into account the Group’s specific anticipation of future salary increases. Discount factors are determined close to each year-end by reference to high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. Estimation uncertainties exist particularly with regard to salary escalation (analysis given in Note 20), which may vary significantly in future appraisals of the Group’s defined benefit obligations.

Useful lives of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting date. At the reporting date, management assesses that the useful lives represent the expected utility of the assets to the Group. The carrying amounts are analysed in Notes 9 and 10. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment.

Inventories

Inventories are measured at the lower of cost and net realisable value. In estimating net realisable values, management takes into account the most reliable evidence available at the times the estimates are made. Actual prices may differ from these estimates. Provision for doubtful debts

Management reviews the adequacy of provision for doubtful debts at each reporting date. During the year, the directors considered that provisions made are adequate, based on the credit worthiness of its receivables.

The review of credit risk by management is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly.

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Notes to the Consolidated Financial Statements for the year ended 30 June 20134. Prior period adjustment

The subsidiary Pharmacie Nouvelle Limited has property which is rented to fellow subsidiaries. This property was classified as investment property in prior years at their fair values. During the year under review, and in line with IAS 16, this property has been reclassified under property, plant and equipment and the financial effects of this reclassification are as follows:

The Group2012Rs

Increase in property, plant and equipment 70,300,000

Decrease in investment property (70,300,000)

Increase in revaluation and other reserves 27,838,192

Decrease in retained earnings (27,838,192)

5. Financial instrument risk

Risk management objectives and policies

The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to date information systems.

The Group’s risk management is coordinated by management in close cooperation with the Board of Directors, and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to financial markets.

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

The most significant financial risks to which the Group is exposed are described below.

5.1 Market risk analysis

The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, which result from both its operating and investing activities.

Foreign currency sensitivity

The Group is exposed to foreign exchange risk arising from its currency exposures, primarily with respect to the Euro (“EUR”) and the US Dollar (“USD”). Consequently, the Group is exposed to the risk that the exchange rates of the Mauritian rupee relative to the EUR and USD may change in a manner which has a material effect on the reported value of the Group’s assets and liabilities which are in EUR and USD.

The Group manages its foreign currency exposures by forecasting its need for foreign currencies and retaining such amounts that will be necessary to settle purchases denominated in foreign currencies. The Group also has a banking facility to negotiate better rates for spot transactions.

To mitigate the Group’s exposure to foreign currency risk, non-MUR cash flows are monitored and forward exchange contracts are entered into in accordance with the Group’s risk management policies.


Notes to the Consolidated Financial Statements for the year ended 30 June 20135. Financial instrument risk (cont’d)

Risk management objectives and policies (cont’d)

5.1 Market risk analysis (cont’d)

Foreign currency sensitivity (cont’d)

Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into MUR at the closing rate:

30 June 2013 The Group The CompanyFinancial

assetsFinancial liabilities

Financial assets

Financial liabilities

Rs Rs Rs Rs

United States Dollar (USD) 53,254,220 108,136,225 22,221 182,262Euro (EUR) 70,370,985 320,629,296 2,297,357 218,179,778South African Rand (ZAR) 1,329,052 4,110,676 - 131,609Pounds Sterling (GBP) 305,044 25,063 305,044 -Seychelles Rupee (SCR) 771,184 163,371 - -Japanese Yen (JPY) - 416,917 - 416,917Others 12,882 - - -Total 126,043,367 433,481,548 2,624,622 218,910,566

30 June 2012

United States Dollar (USD) 38,805,893 92,119,539 5,706 253,151Euro (EUR) 91,232,106 297,621,631 10,343,186 117,624,077South African Rand (ZAR) 2,571,850 7,818,043 - 62,018Pounds Sterling (GBP) 335,497 1,028,906 335,497 2,588Seychelles Rupee (SCR) 594,947 438,346 - -Others 12,331 - - -Total 133,552,624 399,026,465 10,684,389 117,941,834

The exchange rates for the year ended 30 June 2013 and 30 June 2012 were as shown below:

2013 2012Rs Rs

EURO/MUR 40.27 39.42USD/MUR 30.90 31.35ZAR/MUR 3.10 3.81GBP/MUR 47.06 47.75SCR/MUR 2.36 1.95

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The Group

The following table illustrates principally the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities and the USD/MUR, EUR/MUR and ZAR/MUR exchange rate, “all other things being equal”.

It assumes a 1% change of the USD/MUR exchange rate for the year ended 30 June 2013 (2012: 9%), a 5% change for the EUR/MUR (2012: 6%) exchange rate and a 16% change for ZAR/MUR (2012: 12%). These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group’s foreign currency financial instruments held at each reporting date and also takes into account forward exchange contracts that offset effects from changes in currency exchange rates.

If the MUR had strengthened against the USD by 1%, Euro by 5% and ZAR 16% respectively, then this would have the following impact:

2013 2012Profit Equity Profit Equity

Rs Rs Rs Rs

EURO 12,512,916 12,512,916 12,383,372 12,383,372USD 548,820 548,820 4,798,225 4,798,225ZAR 445,060 445,060 629,543 629,543

If the MUR had weakened against the USD by 1%, Euro by 5% and ZAR by 16% respectively, then this would have the following impact:

The Company

If the MUR had strengthened/weakened against EURO by 5% (2012: 6%), the impact would have been a increase/decrease of MUR 10,794,121 respectively on the Company’s profit and equity (2012: increase/decrease of MUR 6,436,853).

2013 2012Profit Equity Profit Equity

Rs Rs Rs Rs

EURO (12,512,916) (12,512,916) (12,383,372) (12,383,372)USD (548,820) (548,820) (4,798,225) (4,798,225)ZAR (445,060) (445,060) (629,543) (629,543)






The following table details the forward foreign currency contracts outstanding for the Group as at the reporting date:

Average spot exchange rate Foreign currency Contract value Fair value

2013 2012 2013 2012 2013 2012 2013 2012Rs Rs Rs Rs

Outstanding contracts:Buy EUR CurrencyLess than 3 months 40.99 39.42 350,000 750,000 14,219,000 29,415,000 14,346,700 29,565,0003 to 6 months - 39.73 - 1,000,000 - 39,220,000 - 39,730,000

Buy USD CurrencyLess than 3 months - 31.35 - 300,000 - 9,471,000 - 9,405,0003 to 6 months - 31.35 - 450,000 - 14,206,500 - 14,107,500

Buy ZAR CurrencyLess than 3 months 3.20 3.81 1,000,000 2,400,000 3,090,300 8,843,673 3,200,000 9,144,0003 to 6 months - 3.81 - 2,000,000 - 7,369,727 - 7,620,000

17,309,300 108,525,900 17,546,700 109,571,500

One of the Company’s subsidiaries, Pharmacie Nouvelle Limited, has entered into forward foreign exchange contracts (for terms not exceeding 6 months) to minimise the exchange rate risk arising from future purchases. The derivative financial asset arising from these transactions was MUR 237,400 for the year ended 30 June 2013 (2012: Rs 1,045,600).

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Interest rate sensitivity

The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Long-term borrowings are therefore usually at fixed rates. At 30 June 2013, the Group has interest bearing financial liabilities in the form of bank overdrafts, loans from financial institutions, import loans and finance leases. The Group is exposed to interest rate risk as it also borrowed funds at floating interest rates. The interests on the bank overdrafts, import loans and loans from financial institutions are based on the market rates. The Group’s finance leases are partly at fixed rates and partly at variable rates.

The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date. The analysis is prepared assuming that the amount of liability outstanding at the reporting date was as such outstanding for the whole year.

If interest rate had been 25 basis points higher/lower, the effect on profit and equity would have been as follows:

The Group The Company2013 2013

Profit Equity Profit EquityRs Rs Rs Rs

+ 25% (2,431,955) (2,431,955) (663,243) (663,243)- 25% 2,431,955 2,431,955 663,243 663,243

The Group The Company2012 2012

Profit Equity Profit EquityRs Rs Rs Rs

+ 25% (1,685,458) (1,685,458) (616,044) (616,044)- 25% 1,685,458 1,685,458 616,044 616,044

Price risk

The Group is exposed to price risk in respect of its investment listed on the Stock Exchange of Mauritius. Any adverse movement in the quoted price of the investment would have a marginal impact on the equity of the Group.

5.2 Credit risk analysis

Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for various financial instruments, for example by providing credit to customers, placing deposits, etc.




5.2 Credit risk analysis (cont’d)

The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below:


Non-current assetsAvailable-for-sale investments 1,742,438 1,706,738 160,500 139,500Loan 1,446,376 2,159,696 - -

3,188,814 3,866,434 160,500 139,500

Current assetsTrade and other receivables 820,651,812 714,061,244 221,609,898 184,005,274Cash and cash equivalents 54,460,976 67,128,428 15,795,282 8,643,568

875,112,788 781,189,672 237,405,180 192,648,842

Total 878,301,602 785,056,106 237,565,680 192,788,342

The Group continuously monitors default of its customers and other counterparties and incorporate this information into its credit risk controls. The risk of default for capital goods is minimised since the Group works on leasing conditions for this type of goods.

Based on historical information about customer default rates, the directors consider that trade receivables that are past due and not impaired for each reporting dates under review are of good credit quality.

The borrowings and bills payable of the Group and the Company are secured by floating charges on all assets of the Group, including financial assets.

Details of unimpaired trade receivables are described in Note 17.

The carrying amount of financial assets recorded in the consolidated financial statements represents the Group’s maximum exposure to credit risk.

The credit risk for the cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

5.3 Liquidity risk analysis

Liquidity risk is that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for current and long-term financial liabilities as well as forecasted cash inflows and outflows due in day-to-day business. The ultimate responsibility for liquidity risk management rests with the Board of Directors.

64



5.3 Liquidity risk analysis (cont’d)

The Group’s objective is to maintain sufficient cash and bank balances in order to meet its liquidity requirements for a 30-day period at a minimum. Funding for current and long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities.

The Group considers expected cash flows from financial assets in assessing liquidity risk, in particular its cash resources and trade receivables. In addition to relying on existing cash resources and trade receivables, the Group relies on banking facilities to meet its current cash outflow requirements.

The following are the contractual maturities of financial liabilities including interest payments:

The Group Carrying amount

Contractual cash flows

Less than 1 year

More than 1 year

30 June 2013 Rs Rs Rs Rs

Bills payable 189,710,788 191,909,057 191,909,057 -Obligations under finance leases 186,062,172 214,340,717 75,087,215 139,253,502Bank overdrafts 247,747,263 247,747,263 247,747,263 -Loans from financial institutions 593,678,198 725,801,788 444,394,241 281,407,547Trade and other payables 609,408,112 609,408,112 609,408,112 -Other loans 435,000 435,000 200,000 235,000Total 1,827,041,533 1,989,641,937 1,568,745,888 420,896,049

30 June 2012

Bills payable 207,436,079 360,133,280 360,133,280 -Obligations under finance leases 209,898,505 244,644,620 79,988,816 164,655,804Bank overdrafts 276,339,986 276,339,986 276,339,986 -Loans from financial institutions 468,767,761 510,748,433 440,081,327 70,667,106Trade and other payables 671,790,292 671,790,292 671,790,292 -Other loans 435,000 435,000 200,000 235,000Total 1,834,667,623 2,064,091,611 1,828,533,701 235,557,910

The Company

30 June 2013

Bills payable 54,466,311 54,824,708 54,824,708 -Obligations under finance leases 135,669,676 156,583,048 53,053,875 103,529,173Bank overdrafts 5,532,651 5,532,651 5,532,651 -Loans from financial institutions 205,298,235 277,868,271 103,288,047 174,580,224Other loans 235,000 235,000 - 235,000Trade and other payables 271,497,869 271,497,869 271,497,869 -Total 672,699,742 766,541,547 488,197,150 278,344,397




5.3 Liquidity risk analysis (cont’d)

30 June 2012Carryingamount

Contractual cash flows

Less than1 year

More than 1 year

Rs Rs Rs Rs

Bills payable 83,568,642 83,924,488 83,924,488 -Obligations under finance leases 150,375,010 176,097,538 56,081,829 120,015,709Bank overdrafts 7,472,812 7,472,812 7,472,812 -Loans from financial institutions 162,848,812 177,781,576 125,277,627 52,503,949Trade and other payables 222,341,117 222,341,117 222,341,117 -Other loans 235,000 235,000 - 235,000Total 626,841,393 667,852,531 495,097,873 172,754,658

6. Capital management policies and procedures

The Company’s capital management objectives are:

· to ensure its ability and that of its subsidiaries to continue as a going concern; and· to provide an adequate return to the shareholders

by pricing products and services commensurately with the level of risk.

The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the statement of financial position.

The Company sets the amount of capital in proportion to its overall financing structure, that is, equity and financial liabilities. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid, reduce capital, issue new shares, or sell assets to reduce debts.

The gearing ratio for the Group and the Company are as follows:

The Group 2013 2012Rs Rs

Debt 1,027,922,633 955,441,252Cash and cash equivalents (54,460,976) (67,128,428)

Net debt 973,461,657 888,312,824

Equity 993,352,154 896,851,550

Total capital 1,966,813,811 1,785,164,374

Gearing ratio 49.49% 49.75%

66

Notes to the Consolidated Financial Statements for the year ended 30 June 20136. Capital management policies and procedures (cont’d)

The Company 2013 2012Rs Rs

Debt 346,735,562 320,931,634Cash and cash equivalents (15,795,282) (8,643,568)

Net debt 330,940,280 312,288,066

Equity 667,483,594 612,903,148

Total capital 998,423,874 925,191,214

Gearing ratio (Net debt to total capital) 33.15% 33.75%

Debt is defined as long and short-term borrowings, as detailed in Note 21.

Equity includes both capital and reserves.

7. Financial instruments measured at fair value

The Group’s quoted investment is measured at fair value. The Group’s unquoted investments are measured at cost since their fair values cannot be reliably measured. The Group’s unquoted investments, other financial assets and liabilities are measured at their carrying amounts, approximate their fair values.

The financial assets measured at fair value in the consolidated statement of financial position are grouped into three levels of fair value hierarchy. This hierarchy groups financial assets into three levels based on the significance of inputs used in measuring the fair value of the financial assets. The fair value hierarchy has the following levels:

- Level 1: quoted prices (unadjusted) in active markets for identical assets;- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset, either directly (that is, as prices)

or indirectly (that is, derived from prices); and- Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).

The hierarchy of the fair value measurement of the Group’s financial assets is as follows:

The Group30 June 2013 Level 1 Level 2 Level 3 Total

Rs Rs Rs RsAssetsAvailable-for-sale investments 175,100 - - 175,100

The Company30 June 2013

AssetsAvailable-for-sale investment 103,000 - - 103,000

Listed security

The listed equity security is publicly traded on the Stock Exchange of Mauritius in the Republic of Mauritius. Fair value has been determined by reference to quoted bid price of the investment at the reporting date.


Notes to the Consolidated Financial Statements for the year ended 30 June 20138. Goodwill

2013 2012Rs Rs

At 01 July 245,853 265,240On acquisition of subsidiary (Note 30.2) 7,788,713 -

8,034,566 265,240Exchange differences 52,193 (19,387)At 30 June 8,086,759 245,853

The directors are of the opinion that the goodwill has not suffered any impairment at 30 June 2013.

9. Intangible assets

The GroupBrand name

Computer software Others Total

Rs Rs Rs RsCostAt 01 July 2012 15,293,001 2,280,933 3,000,000 20,573,934Additions - 16,066 - 16,066Exchange differences 244,972 31,189 - 276,161At 30 June 2013 15,537,973 2,328,188 3,000,000 20,866,161

Amortisation At 01 July 2012 7,933,722 886,803 1,000,000 9,820,525Charge for the year 965,735 431,169 - 1,396,904Exchange differences - 19,038 - 19,038At 30 June 2013 8,899,457 1,337,010 1,000,000 11,236,467

Net book valuesAt 30 June 2013 6,638,516 991,178 2,000,000 9,629,694

68

Notes to the Consolidated Financial Statements for the year ended 30 June 20139. Intangible assets (cont’d)

The GroupBrand name

Computer software Others Total

Rs Rs Rs RsCostAt 01 July 2011 15,541,395 1,855,781 - 17,397,176Additions - 625,789 3,000,000 3,625,789Exchange differences (248,394) (18,567) - (266,961)Impairment losses - (182,070) - (182,070)At 30 June 2012 15,293,001 2,280,933 3,000,000 20,573,934

Amortisation At 01 July 2011 6,867,987 710,611 - 7,578,598Charge for the year 1,065,735 193,796 1,000,000 2,259,531Exchange differences - (17,604) - (17,604)At 30 June 2012 7,933,722 886,803 1,000,000 9,820,525Net book valuesAt 30 June 2012 7,359,279 1,394,130 2,000,000 10,753,409

The CompanyBrand name

Computer software Total

Rs Rs RsCostAt 01 July 2012 and 30 June 2013 6,708,000 1,225,071 7,933,071

AmortisationAt 01 July 2012 5,332,000 462,238 5,794,238Charge for the year 688,000 122,507 810,507At 30 June 2013 6,020,000 584,745 6,604,745

Net book valuesAt 30 June 2013 688,000 640,326 1,328,326

CostAt 01 July 2011 and 30 June 2012 6,708,000 1,225,071 7,933,071

Amortisation At 01 July 2011 4,644,000 339,731 4,983,731Charge for the year 688,000 122,507 810,507At 30 June 2012 5,332,000 462,238 5,794,238

Net book valuesAt 30 June 2012 1,376,000 762,833 2,138,833

Intangible assets have been pledged as security for bank and other credit facilities. Refer to Note 21 for a summary of borrowings arrangement.


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761

Dep

reci

atio

nAt

01

July

201

2-

3,69

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7,18

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123

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13,5

57,3

1519

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168,

080,

068

Cha

rge

for t

he y

ear

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440,

467

36,1

27,5

696,

474,

414

3,35

2,84

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249,

228

56,6

44,5

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spos

als

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stm

ent

--

(27,

324,

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(13,

904)

--

(27,

338,

649)

Writ

e of

fs a

djus

tmen

t-

--

(1,1

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67)

(2,4

18,0

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(2,6

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At 3

0 Ju

ne 2

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115,

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29,2

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At 3

0 Ju

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013

97,3

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0016

6,10

1,04

115

9,58

5,98

438

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20,8

23,0

3520

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503,

190,

621

72

10. P

rope

rty,

pla

nt a

nd e

quip

men

t (co

nt’d

)

The

Com

pany

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hold

la

ndFr

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ld

build

ing

Mot

or

vehi

cles

Furn

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and

eq

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Com

pute

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Tota

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At 0

1 Ju

ly 2

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4,57

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24,3

82,8

0434

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632,

111,

624

Addi

tions

-36

5,11

386

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12,5

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119,

523,

355

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811

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5,81

0Di

spos

als

--

(61,

278,

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(3,0

04,9

35)

(918

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)(3

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,118

)(6

8,34

5,83

9)At

30

June

201

2 97

,300

,000

170,

639,

231

280,

180,

275

60,2

82,6

0232

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35,6

52,0

4467

7,04

1,59

5

Dep

reci

atio

nAt

01

July

201

1-

283,

667

107,

587,

631

21,3

46,5

9311

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15,9

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2115

6,84

7,67

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harg

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r the

yea

r-

3,41

0,35

037

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5,59

2,28

82,

810,

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6,76

4,52

255

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Disp

osal

s ad

just

men

t-

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2,36

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)(9

18,7

16)

(3,0

16,6

54)

(44,

442,

667)

At 3

0 Ju

ne 2

012

-3,

694,

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107,

182,

201

23,9

33,9

4613

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19,7

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8916

8,08

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8

Net

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k va

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At 3

0 Ju

ne 2

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0016

6,94

5,21

417

2,99

8,07

436

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19,4

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2815

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508,

961,

527

If th

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Rs

Rs

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t24

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417

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ciat

ion

(26,

570,

224)

(22,

837,

671)

(19,

788,

654)

(16,

898,

399)

Net

boo

k va

lues

222,

213,

323

219,

681,

873

159,

064,

915

159,

358,

876

Not

es to

the

Con

solid

ated

Fin

anci

al S

tate

men

ts fo

r the

yea

r end

ed

30 J

une

2013


Notes to the Consolidated Financial Statements for the year ended 30 June 201310. Property, plant and equipment (cont’d)

The net book values of property, plant and equipment held under finance leases comprise of:


Motor vehicles 193,097,128 220,231,292 155,006,799 162,150,758Furniture and equipment 6,418,727 3,239,398 - -Tools and equipment 3,673,315 4,606,422 2,982,391 3,441,689Computer equipment 1,246,578 2,195,136 1,160,091 1,978,978At 30 June 204,435,748 230,272,248 159,149,281 167,571,425

Property, plant and equipment have been pledged as security for bank and other credit facilities. Refer to Note 21 for a summary of borrowings arrangement.

11. Investment property


At 01 July – as restated - 70,300,000 118,527,630 47,755,605Additions - 70,772,025 9,286,897 70,772,025Transfer to property, plant and equipment - (70,772,025) - -At 30 June – as previously reported - 70,300,000 127,814,527 118,527,630Prior year adjustment (Note 4) - (70,300,000) - -At 30 June – as restated - - 127,814,527 118,527,630

The investment property is leased out on operating leases. Rental income amounted to Rs 16,369,844 is included within other income. Direct operating expenses of Rs 4,871,841 are reported within administrative expenses.

Investment property has been pledged as security for bank and other credit facilities. Refer to Note 21 for a summary of borrowings arrangement.

12. Investments in subsidiaries

12.1 Unquoted and at cost

2013 2012Rs Rs

At 01 July 151,883,097 135,579,072Additions 11,753,957 28,904,025Reclassification from investment in associates 6,000,000 -Impairment loss (2,828,842) (12,600,000)At 30 June 166,808,212 151,883,097

74

Notes to the Consolidated Financial Statements for the year ended 30 June 201312. Investments in subsidiaries (cont’d)

12.2 Details pertaining to the subsidiaries are as follows:

Direct holding

Proportion of voting rights held

Name of subsidiaries Principal activities

No. of ordinary

shares held 2013 2012

Leal Communications & Informatics Ltd IT Services 1,302,500 90% 90%Leal Equipements Compagnie Ltée (see note below)

Mechanical engineering and agricultural equipment 211,765 75% 75%

United Motors LimitedDealer in motor vehicles and spare parts 570,167 100% 100%

Societe Clency & Patrick Leal Investment holding - 91% 91%DistriPc Ltd Softwares and hardwares 60,000 75% 75%Leal Logistics & Shipping Ltd Investment holding 33,538 92% 92%SARL Solinfo IT Services 8,000 50% 50%Heavy Duty Motors Ltd (formerly Supreme Refinement (EU) Ltd)

Dealer in motor vehicles and spare parts 208,128 100% 100%

Pharmacie Nouvelle Limited (see note below)

Distributor of pharmaceutical products 7,575,986 56.02% 55.20%

Solar-Ernte-Technik Ltd (see note below) Renewable energy 15,000 60% 60%Cisolve International Ltd IT Services 12,100 55% -

Leal ReunionDealer in motor vehicles and spare parts 10 100% -

Indirect holding through Leal Equipements Compagnie Ltée

Leal Equipements Compagnie (Seychelles) LtdMechanical and hydraulic after sales services 9,999 100% 100%

Equipment Provider Solutions Company Ltd

Dealer in motor vehicles, spare parts, commercial and industrial equipment and accessories and electronic appliances 1,000 100% 100%


Notes to the Consolidated Financial Statements for the year ended 30 June 201312. Investments in subsidiaries (cont’d)

12.2 Details pertaining to the subsidiaries are as follows (cont’d):

Indirect holding through Pharmacie Nouvelle Limited

Proportion of voting rights held

Name of subsidiaries Principal activities

No. of ordinary

shares held 2013 2012

Compagnie Mauricienne D’Exportation LimitéeImport and distribution of textile products 10,435 100% 100%

Compagnie Manufacturière de Produits Cosmétiques Limitée

Manufacturing of cosmetics 109,368 100% 100%

Océan Indien Distribution (Ile Maurice) Ltée General retailing - 100% 100%Distrimed Ltée Dormant 160,000 100% 100%

Indirect holding through Solar-Ernte-Technik Ltd

SETL Outremer LtdImport and export of equipment 10,000 100% 100%

SETL Meeco LtdJob contractor and wholesale dealer 50 50% -

13. Investments in associates

The Group 2013 2012Rs Rs

At 01 July 2,217,590 3,064,818Additions - 1,164,000Share of loss for the year (267,549) (2,011,228)Derecognition of associate:Fair value of investment transferred to investment in subsidiaries (6,000,000) -Profit on derecognition 6,000,000 -At 30 June 1,950,041 2,217,590

76

13. I

nves

tmen

ts in

ass

ocia

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(con

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13.1

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Prin

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Rs

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Con

solid

ated

Fin

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tate

men

ts fo

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yea

r end

ed

30 J

une

2013


Notes to the Consolidated Financial Statements for the year ended 30 June 2013

Nam

e of

ass

ocia

tes

Prin

cipa

l ac

tiviti

esAs

sets

Liab

ilitie

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(1,3

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13. Investments in associates (cont’d)

13.2 Cisolve International Ltd has been consolidated using the equity method up to 15 May 2013, the date when control was obtained and thereafter it has been derecognised as an associate. The effect of this derecognition as an associate was as follows:

2013Rs

Fair value of investment in Cisolve International Ltd before derecognition 6,000,000Carrying amount of investment at date control is obtained -Profit on derecognition 6,000,000

The Company 2013 2012Rs Rs

At 01 July 9,125,000 7,961,000Additions - 1,164,000Transfer to investment in subsidiary (6,000,000) -At 30 June 3,125,000 9,125,000

14. Available-for-sale investments


At 01 July 1,706,738 1,580,088 139,500 65,000Fair value gain for the year 35,700 126,650 21,000 74,500At 30 June 1,742,438 1,706,738 160,500 139,500

Details of the investments are as follows:

2013The Group The Company

Name of companies Class of shares Fair value Cost Fair value Cost Rs Rs Rs Rs

Progos Ltd Ordinary shares 50,000 50,000 50,000 50,000State Bank of Mauritius Ltd Ordinary shares 175,100 12,750 103,000 7,500Ariva Ltee Ordinary shares 1,478,838 1,478,838 - -Other investments Ordinary shares 38,500 38,500 7,500 7,500Total 1,742,438 1,580,088 160,500 65,000

The above investments are stated at cost which is a reflection of the fair values except for the shares held in State Bank of Mauritius Ltd which is stated at its fair value based on closing bid price at year end.

15. Loan

The loan to a related company is interest free, unsecured and receivable after more than one year.

78

Notes to the Consolidated Financial Statements for the year ended 30 June 201316. Inventories (At cost)


Motor vehicles 241,921,776 146,201,395 135,603,894 88,443,826Machines and equipment 46,560,826 32,655,369 - -General goods 66,832,430 66,432,151 - -Spare parts 124,010,736 141,118,527 77,310,424 80,516,250Raw materials 21,492,936 31,729,517 - -Work-in-progress 22,774,076 948,959 - 109,663Finished goods 277,380,207 310,702,066 - -Goods in transit 145,582,153 226,834,383 103,102,753 112,189,844

946,555,140 956,622,367 316,017,071 281,259,583Less provision for write down (16,309,845) (22,870,808) (3,955,508) (5,249,905)Total 930,245,295 933,751,559 312,061,563 276,009,678

The cost of inventories expensed during the year was as follows:


Cost of inventories 3,739,574,350 3,496,368,106 1,202,636,860 947,370,529

The above inventories have been pledged as security for bank and other credit facilities. Refer to Note 21 for a summary of borrowings arrangement.

17. Trade and other receivables

The Group The Company 2013 2012 2013 2012 Rs Rs Rs Rs

Trade receivables, gross 808,982,438 705,934,350 205,339,391 169,722,530Allowance for credit losses (18,904,286) (23,466,167) (5,398,010) (9,810,198)Trade receivables, net 790,078,152 682,468,183 199,941,381 159,912,332Due by related parties 295,329 649,849 17,567,423 18,968,177Deposits 2,090,485 1,612,692 - -Amount due by suppliers 5,715,875 6,654,175 2,565,059 3,865,470Staff loans 2,497,627 1,539,349 1,260,034 1,259,295Other receivables 19,974,344 21,136,996 276,001 -Financial assets 820,651,812 714,061,244 221,609,898 184,005,274Advances to suppliers 47,471,398 32,618,769 - 1,235,313Dividend receivables - 51,293,997 50,990,000Prepayments 25,023,941 29,621,254 11,979,247 13,749,266Other receivables 232,448 25,035,759 957,420 1,167,773Non-financial assets 72,727,787 87,275,782 64,230,664 67,142,352Total 893,379,599 801,337,026 285,840,562 251,147,626


Notes to the Consolidated Financial Statements for the year ended 30 June 201317. Trade and other receivables (cont’d)

All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.

All of the Group’s trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be impaired and an allowance for credit losses of Rs 9,387,471 (2012: Rs 11,670,295) has been recorded accordingly within administrative expenses.

The impaired trade receivables are mostly due from customers in the business-to-business market that are experiencing financial difficulties.

The movements in the allowance for credit losses are presented below:


At 01 July 23,466,167 20,197,570 9,810,198 4,954,583Impairment loss 9,387,471 11,670,295 2,730,000 7,967,631Amounts written off (uncollectible) (13,949,352) (8,401,698) (7,142,188) (3,112,016)At 30 June 18,904,286 23,466,167 5,398,010 9,810,198

Included in trade receivables balance are trade debtors with a carrying amount of Rs 212,783,849 (2012: Rs 91,367,031) which are past due at year end for which the Group has not provided as there has not been a significant change in the credit quality and the amounts are fully recoverable. An analysis of unimpaired trade receivables that are past due is given below:

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that no further credit provision is required in excess of the existing provision.

The amounts due by the related parties are unsecured, interest free and receivable on demand.

Trade and other receivables have been pledged as security for bank and other credit facilities. Refer to Note 21 for a summary of borrowings arrangement.


60-90 days 112,586,291 41,343,011 5,810,265 22,703,264Over 90 days 100,197,558 50,024,020 55,896,573 33,439,262Total 212,783,849 91,367,031 61,706,838 56,142,526

80

Notes to the Consolidated Financial Statements for the year ended 30 June 201318. Cash and cash equivalents

The Group The Company 2013 2012 2013 2012 Rs Rs Rs RsCash at bank and in handMUR 18,470,484 49,182,622 13,170,660 8,179,748USD 25,560,446 7,508,473 22,221 5,706EURO 9,890,339 9,812,012 2,297,357 122,617GBP 305,044 335,497 305,044 335,497ZAR 104,131 1,708 - -SCR 117,650 12,331 - -Others 12,882 275,785 - -Total 54,460,976 67,128,428 15,795,282 8,643,568

The cash and cash equivalents above have been pledged as security for bank and other credit facilities. Refer to Note 21 for a summary of borrowings arrangement.

19. Equity

19.1 Share capital

The share capital of the Company consists only of fully paid ordinary shares with a nominal value of Rs 100. All shares are equally eligible to receive dividends and the repayment of capital and one share represents one vote at the shareholders’ meeting.

2013 2012 Rs Rs

At 01 July 258,104,200 227,739,000Issue of shares - 30,365,200At 30 June 258,104,200 258,104,200

The share capital was increased last year by the issue of 303,652 ordinary shares of Rs 100 each at a premium of Rs 30 each.

19.2 Share premium

2013 2012 Rs Rs

At 01 July 21,719,820 12,610,260Issue of shares - 9,109,560At 30 June 21,719,820 21,719,820


Notes to the Consolidated Financial Statements for the year ended 30 June 201319. Equity (cont’d)

19.3 Other components of equity

The Group The Company Revaluation and other reserves Revaluation and other reserves 2013 2012 2013 2012 Rs RS Rs Rs

At 01 July – as restated 194,099,005 156,799,625 72,033,602 71,959,102

Transfer from non-controlling interests on additional investments in subsidiaries 704,708 4,898,578 - -

Other comprehensive incomeRevaluation of land and buildings 22,180,816 4,499,402 - -Available-for-sale investments- Current year gain 35,700 126,650 21,000 74,500Exchange differences on translation of foreign operations 91,086 (63,442) - -Total other comprehensive income 22,307,602 4,562,610 21,000 74,500

At 30 June – as previously reported 217,111,315 166,260,813 72,054,602 72,033,602

Prior year adjustment (Note 4) - 27,838,192 - -

At 30 June – as restated 217,111,315 194,099,005 72,054,602 72,033,602

20. Retirement benefit obligations

Analysis of retirement benefit obligations

The Group The Company 2013 2012 2013 2012 Rs Rs Rs Rs

Defined benefit plan (Note 20.1) 49,251,589 44,265,123 29,604,775 25,296,429Other retirement benefit (Note 20.2) 181,565 - - -

49,433,154 44,265,123 29,604,775 25,296,429

82

Notes to the Consolidated Financial Statements for the year ended 30 June 201320. Retirement benefit obligations (cont’d)

20.1 Defined benefit plan

The Group The Company 2013 2012 2013 2012 Rs Rs Rs RsAmounts recognised in the statement of financial position Present value of funded obligations 278,557,373 223,457,067 191,061,432 150,120,518Fair value of plan assets (153,544,822) (130,979,869) (107,671,752) (91,107,342)Deficit of plan assets 125,012,551 92,477,198 83,389,680 59,013,176Unrecognised actuarial loss (75,760,962) (48,212,075) (53,784,905) (33,716,747)Liability recognised 49,251,589 44,265,123 29,604,775 25,296,429

Amounts recognised in the statement of comprehensive income Current service cost 11,544,854 9,856,707 8,602,242 7,228,585Interest cost 21,889,063 20,594,882 14,652,805 12,777,903Expected return on plan assets (13,123,519) (12,748,611) (9,171,077) (8,331,224)Recognised actuarial losses 1,701,042 1,039,739 1,187,600 870,713Scheme expenses 747,440 709,964 491,405 468,680Cost of insuring risk benefits 2,493,781 2,525,451 1,936,773 1,869,921Effect of curtailment - (1,648) - -Total included in staff costs 25,252,661 21,976,484 17,699,748 14,884,578

Movement in liability recognised in the statement of financial position At 01 July 44,265,123 39,539,934 25,296,429 21,482,255Total expenses 25,252,661 21,976,464 17,699,748 14,884,558Contributions paid (20,266,195) (17,251,275) (13,391,402) (11,070,384)At 30 June 49,251,589 44,265,123 29,604,775 25,296,429

Change in defined benefit obligations

Present value of defined benefit obligation at 01 July 223,457,067 207,721,747 150,120,518 127,954,914Current service cost 11,544,854 9,856,707 8,602,242 7,228,585Interest cost 21,889,063 20,594,474 14,652,805 12,777,903Benefits paid (2,597,475) (19,452,721) - -Actuarial losses 24,366,461 7,533,877 17,788,464 4,956,133Net transfer in (102,597) (2,797,017) (102,597) (2,797,017)Present value of defined benefit obligations at 30 June 278,557,373 223,457,067 191,061,432 150,120,518



20.1 Defined benefit plan (cont’d)

The Group The Company 2013 2012 2013 2012 Rs Rs Rs RsChange in plan assets Fair value of plan assets at 01 July 130,979,869 131,391,631 91,107,342 80,137,592Expected return on plan assets 13,123,519 12,748,309 9,171,077 8,331,224Employer’s contribution 20,266,195 17,251,275 13,391,403 11,070,384Scheme expenses (747,440) (709,944) (491,405) (468,660)Cost of insuring risk benefits (2,493,781) (2,525,451) (1,936,773) (1,869,921)Actuarial losses (4,883,469) (4,926,213) (3,467,295) (3,296,260)Benefits paid (2,597,475) (19,452,721) - -Net transfer in (102,597) (2,797,017) (102,597) (2,797,017)Fair value of plan assets at 30 June 153,544,823 130,979,869 107,671,752 91,107,342

The assets in the plan and the expected rate of return were:


Local equities 57,579,308 49,117,450 40,376,907 34,165,253Overseas equities 34,547,586 29,470,472 24,226,145 20,499,152Fixed interest 53,740,687 45,842,953 37,685,113 31,887,569Properties 7,677,242 6,548,994 5,383,588 4,555,368Total market value of assets 153,544,823 130,979,869 107,671,752 91,107,342Present value of plan liability (278,557,373) (223,457,067) (191,061,432) (150,120,518)Deficit (125,012,550) (92,477,198) (83,389,680) (59,013,176)Unrecognised actuarial gain 75,760,961 48,212,075 53,784,905 33,716,747

Net liability for retirement obligations recognised in the statement of financial position (49,251,589) (44,265,123) (29,604,775) (25,296,429)

84



Amounts for the current and previous periods

The Group 2009 2010 2011 2012 2013Rs Rs Rs Rs Rs

Defined benefit obligations (153,124,575) (166,327,336) (207,721,747) (223,457,067) (278,557,373)Plan assets 98,289,797 112,792,660 131,391,631 130,979,869 154,544,822Surplus/(deficit) (54,834,778) (53,534,676) (76,330,116) (92,477,198) (125,012,551)Experience (gains)/losses on plan liabilities 2,238,731 7,973,301 (16,040,567) (7,533,877) (24,366,461)Experience (gains)/losses on plan assets (3,857,742) (3,259,888) (5,001,084) (4,926,213) (4,883,469)

The Company 2009 2010 2011 2012 2013Rs Rs Rs Rs Rs

Defined benefit obligations (87,391,754) (102,872,629) (127,954,914) (150,120,518) (191,061,432)Plan assets 57,257,904 67,611,759 80,137,592 91,107,342 107,671,752Surplus/(deficit) (30,133,850) (35,260,870) (47,817,322) (59,013,176) (83,389,680)Experience (gains)/losses on plan liabilities 2,238,731 (695,414) (7,949,943) (4,956,133) (17,788,464)

Experience l(gains)/losses on plan assets (2,286,274) (1,934,902) (2,889,205) (3,296,260) (3,467,295)

The assets of the plan are invested in Anglo-Mauritius Deposit Administration Fund. The latter is expected to produce a smooth progression of return from one year to the next. The breakdown of the assets above corresponds to a notional allocation of the underlying investments based on the long-term strategy of the fund.

As the Fund is expected to produce a smooth return, a fairly reasonable indication of future returns can be obtained by looking at historical ones. Therefore, the long term expected return on asset assumption has been based on historical performance of the Fund.

In terms of the individual expected returns, the expected return on equities has been based on an equity risk premium above a risk free rate. The risk free rate has been measured in accordance to the yields on government bonds at the measurement date.

The fixed interest portfolio includes government bonds, debentures, mortgages and cash. The expected return for this asset class has been based on yields of government bonds at the measurement date.

The main actuarial assumptions used for accounting purposes were as follows:

The Group and the Company2013 2012

Discount rate 7.5% 9.5%Expected return on plan assets 7.5% 9.5%Future salary increase 5.5% 7.5%Future guaranteed pension increase 0.0% 0.0%




General description of the plan

The scheme is a final salary Defined Benefit Plan. The plan provides for a pension at retirement and a benefit on death or disablement in service before retirement. The scheme for managers and directors are included in the holding company scheme and the contributions were paid by the respective group companies.

Retirement benefit obligations have been calculated using the Projected Unit Credit method and are based on the latest actuarial report dated September 2013 submitted by Anglo-Mauritius Assurance Society Limited.

The actual return on plan assets was Rs 8,240,050 for the year ended 30 June 2013 for the Group (2012: Rs 11,022,303).

The Group expects to make a contribution of Rs 22,075,677 to the defined benefit plans during the next financial year (2012: Rs 17,236,554).

20.2 The subsidiary

The subsidiary incorporated in the Republic of Seychelles made an employee compensation provision of Rs 181,565 in accordance with its employment legislation.

20.3 Defined contribution scheme

The Group also operates a defined contribution scheme for its employees who joined as from 01 July 2004 and no pension liability arises from this scheme. The Group has made a contribution of Rs 4,362,112 to the defined contribution scheme during the year ended 30 June 2013 (2012: Rs 7,957,485).

21. Borrowings


Non-currentLoans from financial institutions 169,922,898 59,016,612 106,101,296 44,171,212Obligations under finance leases (see note below) 124,734,597 144,642,041 92,644,079 105,676,334Other loans 235,000 235,000 235,000 235,000

294,892,495 203,893,653 198,980,375 150,082,546CurrentBank overdrafts 247,747,263 276,339,986 5,532,651 7,472,812Loans from financial institutions 272,210,205 271,563,106 99,196,939 118,677,600Obligations under finance leases (see note below) 61,327,575 65,256,464 43,025,597 44,698,676

Import loans 151,545,095 138,188,043 - -Other loans 200,000 200,000 - -

733,030,138 751,547,599 147,755,187 170,849,088

Total borrowings 1,027,922,633 955,441,252 346,735,562 320,931,634

86

Notes to the Consolidated Financial Statements for the year ended 30 June 201321. Borrowings (cont’d)

Obligations under finance leases


Not later than 1 year 75,087,215 79,988,816 53,053,875 56,081,829Later than 1 year and not later than 5 years 139,253,502 164,655,802 103,529,173 120,015,708

214,340,717 244,644,618 156,583,048 176,097,537Future finance charges (28,278,545) (34,746,113) (20,913,372) (25,722,527)Present value of finance lease liabilities 186,062,172 209,898,505 135,669,676 150,375,010

Apportioned as follows:The Group The Company

2013 2012 2013 2012Rs Rs Rs Rs

Portion repayable within 1 year 61,327,575 65,256,464 43,025,597 44,698,676Portion repayable after more than 1 year 124,734,597 144,642,041 92,644,079 105,676,334

186,062,172 209,898,505 135,669,676 150,375,010

Fair value

The fair value of the finance lease liabilities is approximately equal to their carrying amount.

Summary of borrowings arrangements

Loans from financial institutions

Bank loans

Bank loans are secured by fixed and floating charges on the assets of the Group and the rates of interest vary between 6.90% and 12.50% at 30 June 2013.

Loans from Anglo Mauritius Assurance Society Limited

The loans from Anglo Mauritius Assurance Society Limited carries interest at 7.15% per annum and is repayable in monthly instalments. The loans are secured by floating charge on all assets of the Group.

Bank overdrafts

The bank overdrafts are secured by fixed and floating charges on the Group’s assets.


Notes to the Consolidated Financial Statements for the year ended 30 June 201321. Borrowings (cont’d)

Summary of borrowings arrangements (cont’d)

Leasing arrangements

Finance leases relate to motor vehicles, furniture and equipment, tools and equipment and computer equipment with leases varying from 3 to 5 years. The Group has options to purchase the leased assets for a nominal amount at the conclusion of the lease arrangements. The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.

22. Trade and other payables


Bills payable 189,710,788 207,436,079 54,466,311 83,568,642Trade payables 503,505,339 504,279,502 214,625,340 117,941,834Due to related parties 443,967 6,528,852 4,449,222 50,929,989Other payables and accruals 142,611,139 113,314,002 52,423,307 53,469,293Advances from customers 56,222,139 58,653,090 30,109,129 47,667,936Total 892,493,372 890,211,525 356,073,309 353,577,694

The average credit period for payment is 30 days. No interest is charged on trade payables for overdue balances. The Group has financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

The amounts due to related parties are unsecured, interest free and repayable on demand.

Deferred warranty income of Rs 37,152,333 (2012: Rs 26,809,368) is included in other payables and accruals.

The carrying amount of trade and other payables is considered to be a reasonable approximation of the fair value.

Bill payables are secured by floating charges on the Group’s assets, bear interest at market rates and are repayable within one year.

23. Dividends

During the year, the Company paid interim dividend of Rs 18,067,294 to its equity shareholders which represent a payment of Rs 7 per share (2,581,042 ordinary shares). A final dividend of Rs 23,229,378 was paid representing a payment of Rs 9 per share (2,581,042 ordinary shares).


Interim dividend paid 18,067,294 15,245,706 18,067,294 15,245,706Final dividend paid 23,229,378 23,229,378 23,229,378 23,229,378

41,296,672 38,475,084 41,296,672 38,475,084

Dividends payable 8,519,512 7,910,000 - -

88

Notes to the Consolidated Financial Statements for the year ended 30 June 201324. Revenue

Revenue represents amounts invoiced to clients in respect of goods sold and services provided, net of returns and taxes.


Sales of new vehicles 2,205,232,886 2,059,986,985 1,244,745,833 978,987,548Sales of spare parts 409,169,846 371,798,752 250,310,312 224,836,910Sales of services 282,383,931 206,460,392 95,022,092 76,944,526Rental services 102,051,696 100,362,532 83,225,570 86,427,654Sales of solar panels 83,218,716 39,033,076 - -Sales of IT products 833,751,727 802,519,401 - -Tour operator & travel agency services - 3,525,388 - -Others 8,933,060 38,741,948 4,730,402 4,039,635Consumer goods 858,889,697 828,399,493 - -Pharmaceutical products 302,148,324 274,466,054 - -Textile and chemical auxiliaries 45,945,244 48,437,600 - -Total 5,131,725,127 4,773,731,621 1,678,034,209 1,371,236,273

25. Profit before tax


The above is stated after charging/(crediting):

Major components of costs of sales:Cost of inventories expensed 3,739,574,350 3,496,368,106 1,206,636,860 947,370,529Service costs 80,959,372 38,791,359 15,004,235 14,532,588

Major components of selling expenses:Advertising 83,818,593 87,594,535 15,063,401 17,682,143Commissions 61,533,992 67,753,555 41,018,470 40,366,335Overseas travelling 15,886,276 15,974,534 4,820,238 3,970,349

Major components of administrative expenses:Audit fees 3,266,000 2,745,000 750,000 580,000Impairment losses - 182,070 2,828,242 12,600,000Repairs and maintenance 8,913,763 7,483,550 5,962,750 4,302,503Insurance general 6,022,396 5,077,612 1,307,620 1,305,209


Notes to the Consolidated Financial Statements for the year ended 30 June 201325. Profit before tax (cont’d)


Included in both cost of sales and administrative expenses:Directors’ remuneration 62,013,210 68,595,540 41,348,870 40,943,282Staff costs 354,945,677 304,188,551 99,821,380 80,651,136Pension costs 29,506,909 25,317,666 13,129,144 11,505,623Depreciation and amortisation 99,600,664 93,857,353 57,455,032 56,485,568Motor vehicles running expenses 127,816,953 115,703,169 31,533,379 31,423,846Rent 39,640,364 38,449,211 8,763,342 10,061,806

Profit on disposals of property, plant and equipment (1,387,378) (2,881,792) (1,286,251) (3,645,782)

Net foreign exchange gains (40,797,631) (57,003,680) (14,604,635) (20,888,666)

Interest expense (Note 27.2) 95,922,681 97,975,529 33,985,102 33,139,498

Directors’ remuneration The Group The Company2013 2012 2013 2012Rs Rs Rs Rs

- Full-time directors 47,485,569 56,031,084 32,946,112 34,888,682- Part-time directors 14,527,641 12,564,456 8,402,758 6,054,600

62,013,210 68,595,540 41,348,870 40,943,282

Analysis of staff costs (excluding directors’ remuneration and fees) and number of employees


Salaries and relevant contributions 333,807,054 284,646,234 94,837,279 75,835,405Social security costs 21,138,623 19,542,317 4,984,101 4,815,731

354,945,677 304,188,551 99,821,380 80,651,136

Number of employees at end of year 947 885 341 316


Defined benefit plan (Gross) 25,252,661 21,976,484 17,699,748 14,884,578Charged to subsidiaries - - (6,032,475) (4,462,208)Defined contribution plan 4,254,248 3,341,182 1,461,871 1,083,253

29,506,909 25,317,666 13,129,144 11,505,623

90

Notes to the Consolidated Financial Statements for the year ended 30 June 201326. Other income


Dividend income 95,700 5,100 36,732,034 77,049,943Rental income - 300,000 16,369,844 12,568,832Management fees - - 9,835,938 8,533,168Profit on disposals of property, plant and equipment 1,387,378 2,881,792 1,286,251 3,645,782Commission earned 70,835,174 58,689,408 2,425,942 1,812,593Rebates on purchases 20,234,325 18,493,496 7,343,201 7,345,394Compensation from breach of contract - 6,357,102 - -Others 8,013,750 5,058,120 3,392,580 1,493,755Total 100,566,327 91,785,018 77,385,790 112,449,467

27. Finance income/(costs)


27.1 Finance incomeInterest income on:- Bank deposits 36,028 21,022 36,028 21,022- Other loans 745,279 1,393,330 47,765 742,505Total 781,307 1,414,352 83,793 763,527

27.2 Finance costsInterest expense on:Bank overdrafts (18,809,157) (20,398,597) (316,699) (1,023,660)Bank loans (36,311,274) (33,250,143) (12,542,580) (10,513,712)Finance leases (20,761,462) (22,660,063) (12,157,287) (13,021,307)Others (5,390,072) (4,550,524) (4,176,814) (1,263,127)Import loans (14,650,716) (17,116,202) (4,791,722) (7,317,692)

(95,922,681) (97,975,529) (33,985,102) (33,139,498)Bank charges (8,567,817) (8,332,489) (2,118,140) (1,850,026)Total (104,490,498) (106,308,018) (36,103,242) (34,989,524)


Notes to the Consolidated Financial Statements for the year ended 30 June 201328. Taxation

28.1 Income tax expense

The Company

The Company is liable to income tax at the rate of 15% and at 30 June 2013 it had an income tax liability of Rs 12,162,423 (2012: Rs 9,597,094). The income tax liability is calculated according to the tax rate and tax laws applicable to the fiscal period which it relates, based on the taxable profit for the year.

At 30 June 2013, the Company had a tax liability of Rs 1,145,917 for CSR. During the year, the Company has made qualified donations of Rs 956,150.

The Subsidiaries

The subsidiaries incorporated in the Republic of Mauritius are liable to income tax at the rate of 15% and at 30 June 2013, they had income tax liabilities of Rs 11,024,681 (2012: Rs 25,135,950).

The subsidiaries incorporated in Reunion Island is liable to income tax at the rate of 33 1/3% and at 30 June 2013 they had no income tax liability (2012: Nil).

The subsidiary incorporated in the Republic of Seychelles is liable to income tax at the rate of 25% on the first SCR 1,000,000 chargeable income and 33% on all chargeable income above SCR 1,000,000 and at 30 June 2013, it had income tax liability of Rs 46,133 (2012: Nil).

The Company and its local subsidiaries are subject to the Alternative Minimum Tax (AMT). The AMT applies where a company’s “normal tax payable” is less than 7.5% of its book profit. It is not applicable where a company is exempt from tax or where 10% of any dividend declared does not exceed the “normal tax payable”. At 30 June 2013, the AMT did not apply to the Company or its local subsidiaries.

The Company and its local subsidiaries are also subject to the Advanced Payment Scheme (APS) whereby they are required to submit an APS Statement and pay tax quarterly on the basis of either last year’s income or the income for the current quarter.

One of the subsidiaries had a CSR payable of Rs 1,031,261 for year ended 30 June 2013.

Statement of comprehensive income


Income tax on the adjusted profit 23,233,237 34,733,044 12,162,423 9,597,094CSR 1,221,028 1,212,894 189,767 533,831Movement on deferred taxation (Note 28.2) 4,451,166 (3,846,624) 2,304,842 1,098,924(Over)/under provision for prior year 158,504 1,284,986 (1,002,716) 436,736Tax penalty 226,786 - - -Tax expense 29,290,721 33,384,300 13,654,316 11,666,585

92

Notes to the Consolidated Financial Statements for the year ended 30 June 201328. Taxation (cont’d)

28.1 Income tax expense (cont’d)

Statement of financial position


At 01 July 8,472,606 5,835,985 1,561,348 75,539Tax liability for the year 23,233,237 34,733,043 12,162,423 9,597,094Tax paid during the year (10,640,801) (7,391,353) (558,632) (512,275)Refund for tax overpaid - 173,596 - -Tax deducted at source (3,299,208) (1,222,108) (1,357,970) (752,929)Tax paid under APS (16,045,060) (26,154,437) (9,377,915) (7,816,648)CSR 1,221,028 1,212,894 189,767 533,831Currency translation differences 4,040 - - -(Over)/under provision for prior year 158,504 1,284,986 (1,002,716) 436,736Tax penalty 226,786 - - -At 30 June 3,331,132 8,472,606 1,616,305 1,561,348

Tax payable 4,212,069 8,834,572 1,616,305 1,561,348Tax recoverable (880,937) (361,966) - -Net tax 3,331,132 8,472,606 1,616,305 1,561,348

Income tax reconciliation

The tax on the Group’s and the Company’s profit before taxation differs from the theoretical amount that would arise using the basic tax rate as follows:


Profit before tax 145,106,334 156,696,101 109,510,434 111,952,344

Tax at 15 % 21,765,950 23,504,415 16,426,565 16,792,852Adjustment for tax rate difference in foreign jurisdiction 24,815 - - -Non-allowable expenses 21,977,719 21,440,949 11,790,274 14,352,212Unrecognised tax losses - 5,024,673 - -(Over)/under provision for prior year 158,504 1,284,986 (1,002,716) 436,736Deferred tax assets not recognised 146,230 545,653 - -Exempt income (2,734,467) (696,096) (5,702,743) (12,104,329)Movement in deferred taxation 4,451,166 (3,846,624) 2,304,842 1,098,924Other items - 139,393 - -CSR 1,221,028 1,212,894 189,767 533,831Tax losses utilised (1,184,253) - - -Tax penalty 226,786 - - -Annual allowances (16,762,757) (15,225,943) (10,351,673) (9,443,641)Tax expense 29,290,721 33,384,300 13,654,316 11,666,585


Notes to the Consolidated Financial Statements for the year ended 30 June 201328. Taxation (cont’d)

28.2 Deferred taxation

Deferred income taxes are calculated on all temporary differences under the liability method at the rate of 15%.

The movement on the deferred taxation is as follows:


At 01 July (4,636,798) (8,483,422) (12,306,206) (11,207,282)Movement for the year (4,451,166) 3,846,624 (2,304,842) (1,098,924)Deferred tax on acquisition of subsidiary 3,134,431 - - -At 30 June (5,953,533) (4,636,798) (14,611,048) (12,306,206)

Deferred tax assets 15,178,830 12,358,006 - -Deferred tax liabilities (21,132,363) (16,994,804) (14,611,048) (12,306,206)Net (5,953,533) (4,636,798) (14,611,048) (12,306,206)

29. Earnings per share

The earnings and number of ordinary shares in issue used in the calculation of earnings per share are as follows:


Profit for the year attributable to owners of the parent 99,685,003 123,291,350 95,856,118 100,285,759

Number Number Number Number

Weighted average number of ordinary shares in issue 2,581,042 2,340,651 2,581,042 2,340,651

Rs Rs Rs Rs

Earnings per share 38.62 52.67 37.14 42.85

94

Notes to the Consolidated Financial Statements for the year ended 30 June 201330. Consolidation

30.1 Details regarding the new subsidiaries, their activities, their total assets and liabilities as at 30 June 2013, and revenues and net operating loss for its period then ended are as follows:

30.2 Goodwill on acquisition for year ended 30 June 2013

Cisolve International Ltd SETL Meeco Ltd

Country of incorporation Republic of Mauritius Republic of Mauritius

Proportion of ownership interest 55% 50%

Activities

Provide services in the information and communication

technologies sector

Manufacture of electricity distribution and control

apparatus

Total assets 13,529,312 5,900

Total liabilities 11,136,733 100,215

Operating revenues 3,472,379 -

Operating loss (206,175) (104,315)

RsPurchase considerationFair value of previously held equity interest 6,000,000Cost of shares acquired 3,218,029Total consideration 9,218,029

Fair value of net assets at date of acquisition:Share capital 12,116,017Pre-acquisition reserve (10,686,701)

1,429,316

Goodwill 7,788,713

At 30 June 2013 7,788,713

Goodwill of Rs 7,788,713 is from the acquisition of control over Cisolve International Ltd on 14 May 2013.


Notes to the Consolidated Financial Statements for the year ended 30 June 201331. Related party transactions

For the year ended 30 June 2013, both the Company and its subsidiaries entered into the following transactions with related parties:

The Group

The Company

Nature of relationship Nature of transactionsVolume of

transactions

Debit/(credit) balances at

30 June 2013


30 June 2012Rs Rs Rs

Shareholder Corporate services 34,440 - 39,606Associates Sales of goods and services 334,820 521,904 873,958Associates Financing 257,443 - (257,443)Associates Purchase of goods - - -Associates Loans 31,630 127,590 95,960Common directorship Loans 285,328 1,874,368 2,159,696

Expenses 5,211,385 772,531 -Key management personnel Remuneration and other benefits 99,454,757 (510,000) (510,000)

Post employment benefit 4,243,673 - -Dividend paid 653,237 - -Sales 372,895 6,071 67,338

Nature of relationship Nature of transactionsVolume of

transactions


30 June 2013


30 June 2012

Shareholder Corporate services 34,440 - 39,606Subsidiaries Purchases of goods 25,905,032 (3,939,590) (296,519)Subsidiaries Corporate services 29,705,230 3,613,093 -Subsidiaries Sales of goods 20,216,691 246,668 6,254,938Subsidiaries Rental expenses 420,000 -Subsidiaries Interest income 32,274 -Subsidiaries Insurance pension scheme 6,032,475 -Subsidiaries Other services 9,835,938 1,200,000 1,336,083Subsidiaries Rental income 16,369,844 - -Subsidiaries Loans 9,313,977 14,327,409 13,737,053Subsidiaries Dividend income 36,728,534 51,293,997 50,990,000Sub subsidiary Others 21,377 21,377 -Sub subsidiary Sales of land and building 50,011,478 - (50,011,478)Associates Sales of goods and services 334,820 521,904 873,958Associates Financing 257,443 - (257,443)Associates Loans 31,630 127,590 95,960Key management personnel Remuneration and other benefits 63,860,062 - -

Post employee benefits 3,026,574 - -

The amounts receivable from related parties are unsecured, interest free and receivable on demand.

96

Notes to the Consolidated Financial Statements for the year ended 30 June 201331. Related party transactions (cont’d)

The amounts payable to related parties are unsecured, interest free and repayable on demand.

All the other transactions are carried out on commercial terms.

Key management personnel are not entitled to short term employee benefit and other long-term and termination benefits and share based payments.

32. Commitments

The Group

Operating lease arrangements where the Group is a lessee

2013 2012 Rs Rs

Minimum lease payment under operating lease recognised in statement of comprehensive income 39,640,364 38,449,211

2013 2012 Rs Rs

Minimum lease payment under operating lease recognised in statement of comprehensive income 8,763,342 10,061,806

At the reporting date, the Group had outstanding commitments under non-cancellable operating leases which fall due as follows:

At the reporting date, the Company had outstanding commitments under non-cancellable operating leases which fall due as follows:

2013 2012 Rs Rs

Within one year 38,384,491 44,039,456

Between 2 to 5 years 93,856,907 71,893,093

2013 2012 Rs Rs

Within one year 7,704,967 10,197,247

Between 2 to 5 years 8,426,273 9,161,878

Operating lease payments represent rental for motor vehicles, offices and land. The lease is negotiated for an average term of 5 years and rentals are fixed for an average of 5 years.

The Company

Operating lease arrangements where the Company is a lessee

Operating lease payments represent rental for motor vehicles, offices and land. The lease is negotiated for an average term of 5 years and rentals are fixed for an average of 5 years.

Operating lease arrangement where the Company is a lessor

Rental income for the year amounted to Rs 16,369,844 (2012: Rs 12,568,832).


Notes to the Consolidated Financial Statements for the year ended 30 June 201332. Commitments (cont’d)

The Company

Operating lease arrangement where the Company is a lessor

The freehold land and building was leased out on operating leases. Future maximum lease payments are as follows:

2013 2012Rs Rs

Within 1 year 17,068,614 12,794,1211 to 5 years 14,306,644 9,402,080

31,375,258 22,196,201

Other commitments

The GroupRs

Capital CommitmentsApproved and contracted for 4,075,857

The capital commitments for office equipment and IT equipment.

33. Contingent liabilities and guarantees

The Group

Contingent liabilities

At 30 June 2013, the Group had contingent liabilities in respect of letters of credit for a total of Rs 164,158,200 arising in the ordinary course of business from which the directors anticipate that no material liabilities will arise.

Guarantees

The Group had bank guarantees of Rs 107,403,631 in favour of third parties and for which no material adverse effect on the Company’s financial position or results of operation is anticipated by the directors.

34. Events after the reporting date

(i) The Board of Directors of Solar Ernte Tecknik Ltd resolved that as from 01 July 2013 all operations assets and employees of the company be transferred to SETL Meeco Ltd, a newly incorporated fellow subsidiary. Solar Ernte Technik Ltd will thereafter operate as an investment holding company.

(ii) The Board of Directors of Pharmacie Nouvelle Limited is considering a change in the business model with the disposal of certain assets and the consequent outsourcing of its production process.

(iii) Solar Ernte Technik Ltd has acquired 19,950 additional shares in SETL Meeco Ltd, the newly incorporated fellow subsidiary, for Rs 1,995,000.

98

Notes

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