PORTLAND PAINTS AND PRODUCTS NIG. PLC

FINANCIAL STATEMENT (UNAUDITED)
FOR THE PERIOD ENDED
30 Jun 2013
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED
30 Jun 2013
ITEM

YTD 2013
N...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
STATEMENT OF FINANCIAL POSITION
As at 30 Jun 2013
Notes
ASSETS:
Non - current asset...
Portland Paints and Products Nigeria Plc
Statement of Changes in Equity
30 Jun 2013

Share
capital

Retained
earnings

N'0...
PORTLAND PAINTS & PRODUCTS PLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED
30 Jun 2013
2013
N'000

DEC 2012
N'000

Cash f...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES
30 JUNE 2013
1.

Corporate information
Portland Pai...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
Significant accounting jud...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.

Summary of significa...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.15 Employees’ benefits...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.2.15 Employees’ benefits...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.3.

Standards issued but...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.3.

Standards issued but...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
SIGNIFICANT ACCOUNTING POLICIES - Continued
30 JUNE 2013
2.4.

First-time adoption ...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
2013
N'000

N'000

East

214,890

2...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
2013
N'000

5(a) Finance income:
In...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
Decorative

Marine
Paints

Portland...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013

Addition to Non-current Assets
Rep...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013

10. Property, plant and equipment
...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
Motor
Vehicles
Assets under Finance...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
Trade
Mark

Total

N'000

12 Intang...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
13a.

Corporate Tax Liability
Jun-1...
13.c

Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
Investments in Equity Account...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
2013
15.

Dec-12

Trade and Other R...
16(a).

Portland Paints and Products Nigeria Plc
Notes to the Financial Statements
30 Jun 2013
Interest bearing loans and ...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
16(c) Lessor

Total facility Repaym...
PORTLAND PAINTS & PRODUCTS PLC
Notes to the Management Accounts For the Period Ended
30 Jun 2013
2013
N'000

Dec-12
N'000
...
17.

Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
Trade and Other Payables

2013...
Portland Paints and Products Nigeria Plc
Notes to the financial statements
30 Jun 2013
19. Share capital
Authorised
Dec-12...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
30 JUNE 2013
20.

Financial risk mana...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
30 JUNE 2013
20.

Financial risk mana...
PORTLAND PAINTS & PRODUCTS NIGERIA PLC
NOTES TO THE FINANCIAL STATEMENTS - Continued
30 JUNE 2013
20.

Financial risk mana...
PORTLAND PAINTS & PRODUCTS PLC
STATEMENT OF VALUE ADDED FOR THE PERIOD ENDED
30 Jun 2013
YTD 2013
N'000
Turnover
Non tradi...
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Portland Paints and Products Plc Nigeria HY 2013

  1. 1. PORTLAND PAINTS AND PRODUCTS NIG. PLC FINANCIAL STATEMENT (UNAUDITED) FOR THE PERIOD ENDED 30 Jun 2013
  2. 2. PORTLAND PAINTS & PRODUCTS NIGERIA PLC STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 Jun 2013 ITEM YTD 2013 Note Revenue 3 YTD 2012 Dec 2012 N'000 N'000 N'000 1,354,171 1,466,334 2,865,582 Cost of Sales (757,522) (838,358) (1,602,288) Gross Profit 596,649 627,976 1,263,294 Other Operating Income 34,561 4,964 41,313 Selling and distribution expenses 4 (208,031) (153,526) (439,200) Administrative expenses (301,052) (314,489) (699,535) Other operating expenses - Profit from Operations 122,127 Finance Income (278,387) (112,515) 1,824 13c Profit Before Taxation - - (37,394) Finance Expenses Share of (loss) / profit of an associate 164,925 (35,200) (86,146) - - (503) 86,558 6 Profit from Continuing Operations Profit from Discontinued Operations (27,699) (41,512) (29,199) 58,859 Income Tax Expenses 129,725 (199,164) 88,213 (228,363) - - 58,859 88,213 Other Comprehensive Income - - Total Comprehensive Income 58,859 88,213 (228,363) Basic (Kobo) 15 22 (57) Diluted (Kobo) 15 22 (57) 15 22 (57) 15 22 (57) Profit for The Year (228,363) - Earnings Per Share for Profit Attributable to Owners of The Parent During The Year: Continuing Operations: Basic (Kobo) Diluted (Kobo) - 1
  3. 3. PORTLAND PAINTS & PRODUCTS NIGERIA PLC STATEMENT OF FINANCIAL POSITION As at 30 Jun 2013 Notes ASSETS: Non - current assets: Property, plant and equipment Assets under finance lease Intangible assets Investment in Associate Non- current prepayments Deferred tax assets Total non - current assets 2013 N'000 DEC 2012 N'000 10 11 12 13c 15 533,628 65,901 223,493 72,528 895,550 575,321 74,768 243,103 2,842 38,008 934,042 Current assets: Inventories 14 898,818 818,527 Trade and other receivables Prepayments Cash and short term deposits 15 15 16d 489,173 94,783 49,098 482,203 71,804 79,449 Total current assets 1,531,873 1,451,983 Total assets 2,427,423 2,386,024 200,000 91,923 542,661 200,000 91,923 484,643 834,584 776,567 121,966 48,465 134,502 82,615 140,473 55,389 134,837 82,615 387,548 413,314 763,873 358,439 13,848 69,130 815,038 295,721 13,848 71,537 Total current liabilities 1,205,290 1,196,143 Total liabilities 1,592,839 1,609,457 Total equity and liabilities 2,427,423 2,386,024 Equity and liabilities Equity: Issued share capital Other capital reserve Retained earnings 19 Equity attributable to owners of the parent Non current liabilities: Interest bearing loans and borrowings Government grants Employee benefit liability Deferred tax liabilities 16 16e 18 12c Total non current liabilities Current liabilities: Trade and other payables Interest bearing loans and borrowings Government grants Income tax payable Olufemi Oguntade Managing Director / CEO 17 16 16e 12b Adewale Osobukola Finance Controller 2
  4. 4. Portland Paints and Products Nigeria Plc Statement of Changes in Equity 30 Jun 2013 Share capital Retained earnings N'000 January 2012 Revaluation Surplus Total equity available to owners of parent N'000 N'000 N'000 200,000 69,945 808,787 1,078,732 Dividend - - (80,000) (80,000) Profit for the year - - (228,365) (228,365) Other comprehensive income - 21,978 (15,779) 6,199 31ST December, 2012 200,000 91,923 484,643 776,566 January 2013 200,000 91,923 484,643 776,566 Dividend Paid - - (841) (841) Profit / (Loss) for the year - - 58,859 58,859 Other comprehensive income - 30 Jun 2013 (0) 200,000 91,923 3 - 542,661 (0) 834,584
  5. 5. PORTLAND PAINTS & PRODUCTS PLC STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 Jun 2013 2013 N'000 DEC 2012 N'000 Cash flows from operating activities: Cash receipts from customers Payment to suppliers and employees Value Added Tax (Net) Gratuity payment Income Tax paid 1,381,761 (1,365,930) (22,500) (30,106) 2,876,302 (2,544,813) (4,766) (31,141) 16d (36,775) 295,582 Purchase of fixed assets 10 (6,629) (38,845) Addition to finance lease assets 11 (0) Net cash provided / (absorbed) by Operating activities Cash flows from investing activities: Purchase of intangible assets - 123 1,824 Finance income (56,404) 2,198 Proceeds from sale/transfer of property, plant and equipment - 254 Long term prepayment - (38,008) Purchase of investments - - Net cash provided / (absorbed) by Investing activities (4,682) (130,805) 64,380 (54,279) (841) (80,000) Interest paid (37,394) (70,690) Net cash provided / (absorbed) by financing activities 26,145 (204,969) Net increase/(decrease) in cash and cash equivalents (15,312) (40,192) Cash and cash equivalents at 31st Dec, 2011 (10,312) 29,880 (25,624) (10,312) Cash flows from financing activities: (Repayment) / proceed from borrowings Dividend paid Cash and cash equivalents as at 16d 30 Jun 2013 4
  6. 6. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES 30 JUNE 2013 1. Corporate information Portland Paints and Products Nigeria Plc (The Company) was incorporated as a Limited Liability Company on 3 September 1985 and became a Public Company on 24 April 2008. The Company was listed on the floor of the Nigerian Stock Exchange on 9 July 2009. The registered office is located at Elephant Cement House 4th Floor, Assbifi Road, Central Business District, Alausa, Ikeja, Lagos in Nigeria. The principal activities of the company are manufacturing and sale of paints, marketing of sanitary ware, and manufacture and marketing of Instant Road Repair materials and marketing of cements. The main products of the company are Sandtex highly quality Decorative Industrial Paints and Hempel Marine Protective Coatings for Oil and Gas Sector. 2.1 Basis of preparation and adoption of IFRS The financial statements of Portland Paints and Products Nigeria Plc have been prepared in accordance with International Financial Reporting Standards (IFRS), the provisions of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004 and Financial Reporting Council of Nigeria Act, No 6, 2011. These are Portland Paints and Products Nigeria Plc’s first financial statements prepared in accordance with IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. Subject to certain transition elections disclosed in Note 2.2, Portland Paints and Products Nigeria Plc has consistently applied the same accounting policies in its opening IFRS statement of financial position at 1 January 2011 (date of transition) and throughout all periods presented, as if these policies had always been in effect. Note 2.2 disclose the impact of the transition to IFRS on Portland Paints and Products Nigeria Plc reported financial position, statement of comprehensive income and cash flows. Significant accounting judgments, estimates and assumptions The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses assets and liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur. Material estimates in the financial statements include the following: Accounts receivable The allowance for doubtful accounts involves management judgment and review of individual receivable balances based on an individual customer’s prior payment record, current economic trends and analysis of historical bad debts of a similar type. 5
  7. 7. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 Significant accounting judgments, estimates and assumptions continued Property, plant and equipment Land and Building held for use in the production or supply of goods or services or for administration purposes are stated in the Statement of Financial Position at their revalued amounts being the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment loss. Revaluations will be performed every two (2) years such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period. Any revaluation increases arising on the revaluation of such Land or Building is recognized in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognized in profit or loss, in which case is credited to profit or loss to the extent of the decrease previously expended. A decrease in the carrying amount arising on revaluation of such land or building is recognized in profit or loss to the extent that it exceeds the balance, if any held in the revaluation reserve relating to a previous revaluation of that asset. Accumulated depreciation at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised. The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. Intangible assets Externally acquired intangible assets that have indefinite useful lives are initially recognized at cost and are subsequently tested for impairment at each financial year end and stated at their recoverable amount. The impairment loss where the carrying amount is greater than the recoverable amount is charged to the Income Statement. Intangible asset with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight line basis over the estimated useful life. The estimated useful life and amortization are review at the end of each reporting period with the effect of any changes in estimate being accounted for on a prospective basis . Going concern assumption Portland Paints and Products Nigeria Plc is a going concern, which assumes that it will be able to continue operation into the foreseeable future and will be able to realise its assets and discharge its liabilities in the normal course of business. The financial statements have been prepared in Nigerian Naira and under the historical cost convention and the use of estimates and approximations, which have been made using careful judgment. Actual results could differ materially from those estimates. 6
  8. 8. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies The following are the significant accounting policies applied by Portland Paints & Products Nigeria Plc in preparing its financial statements: 2.2.1 Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on tangible assets with finite lives is recognised in the income statement as the expense category that is consistent with the function of the intangible assets. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. Intangible assets include purchased trade mark, computer software and software licences. Trade mark is externally acquired with indefinite useful lives. It is recognized at cost and are subsequently tested for impairment at each financial year end and stated at their recoverable amounts. The impairment loss, where the carrying amount is greater than the future economic benefits, is charged to the income statement. Purchased software and software licences with finite useful lives are recognised as assets if there is sufficient certainty that future economic benefits associated with the item will flow to the entity. Amortisation is calculated using the straight-line method over 5 years. Computer software primarily comprises external costs and other directly attributable costs. 2.2.2 Property, Plant and Equipment Property, plant and equipment are initially recognized at cost but subsequently recognized at fair value less cost to sell based on the valuations by the independent valuers less accumulated depreciation and accumulated impairment loss. Cost comprises the cost of acquisition and costs directly related to the acquisition up until the time when the asset is available for use. In the case of assets of own construction, cost comprises direct and indirect costs attributable to the construction work, including salaries and wages, materials, components and work performed by subcontractors. Replacement or major inspection costs are capitalised when incurred and if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. 7
  9. 9. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued The depreciation base is determined as cost less any residual value. Depreciation is charged on a straightline basis over the estimated useful lives of the assets and begins when the assets are available for use. The assets’ residual values, and useful lives and method of depreciation are reviewed and adjusted, if appropriate, at each financial year end and adjusted prospectively, if appropriate. Impairment reviews are performed when there are indicators that the carrying value may not be recoverable. Impairment losses are recognised in the income statement as an expense. On revaluation of property, plant and equipment, the surplus thereon is transferred to the revaluation surplus account in the statement of changes in equity and recognized as other comprehensive income in the comprehensive income statement. Assets on lease Finance leases are recognized at amount equal to the fair value of the leased property or if lower the present value of the minimum lease property, each determined at the inception of the lease. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease terms so as to produce a constant periodic rate of interest on the remaining balance of the liability. Asset category Useful lives Long leasehold land Freehold Buildings Plant and machinery Furniture, fittings and equipment Motor vehicles Computer hardware Computer software Over the lease period 2% 10% 10% 20% 33.33% 20% An item of property and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised. 2.2.3 Earnings per share Basic earnings per share Basic earnings are determined by dividing the profit attributable to share holders by the weighted average number of shares on issue during the year. 8
  10. 10. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued 2.2.4 Impairment of non-financial assets Property, plant and equipment and intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, or in the case of indefinite life intangibles, then the asset’s (CGU’s) recoverable amount is estimated. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cashgenerating units (CGUs). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGUs). An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Portland Paints & Products Nigeria Plc evaluates impairment losses for potential reversals when events or circumstances may indicate such consideration is appropriate. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. 2.2.5 Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:  Raw materials: Purchase cost on weighted average basis  Goods- In-Transit, Work- in -progress and Finished goods Goods in transit are valued at invoice price together with other attributable charges. Work-in-progress cost consist of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. The cost of finished goods comprises suppliers’ invoice prices and, where appropriate, freight, printing costs and other charges incurred to bring the materials to their location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. 9
  11. 11. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued 2.2.6 Financial instruments A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party.  Financial Asset Initial recognition and measurement Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available for-sale financial assets. Portland Paints & Products determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus directly attributable transaction costs, except in the case of financial assets measured at fair value through profit or loss where transaction costs are recognised as an expense when incurred. The company’s financial assets include cash, trade and other receivables, all of which are classified as loans and receivables, Subsequent measurement The subsequent measurement of financial assets depends on their classification Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest rate method. Derecognition of financial assets A financial asset (or, when applicable, a part of a financial asset or part of a company of similar financial assets) is derecognised when: a) b) c) The rights to receive cash flows from the asset have expired Or The Company retains the right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: The Company has transferred substantially all the risks and rewards of the asset Or The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its right to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. 10
  12. 12. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued Impairment of financial assets The Company assesses at each reporting date whether there is any objective evidence that a financial asset or company of financial assets is impaired. A financial asset or a company of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the company of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a company of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.  Financial Assets carried at amortised cost For financial assets carried at amortised cost, the Company first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a company of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.  Financial liabilities Financial liabilities are classified as financial liabilities at fair value through profit or loss, or at amortised cost. The company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value, including directly attributable transaction costs, except in the case of financial liabilities classified as fair value through profit or loss where transaction costs are expensed immediately. Portland Paints & Products Nigeria Plc’s financial liabilities are trade and other payables, loans and borrowings, all of which are classified as amortised cost liabilities. 11
  13. 13. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued Financial liabilities at amortised cost: Financial liabilities at amortised cost are measured at amortised cost using the effective interest rate method. Financial liabilities are classified as current liabilities if payment is due within 12 months. Otherwise, they are presented as non-current liabilities. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement. 2.2.7 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the statement of financial position. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of any outstanding bank overdraft. 2.2.8 Taxes Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date in Nigeria. Current income tax assets and liabilities also include adjustments for tax expected to be payable or recoverable in respect of previous periods. Current income tax relating to items recognised directly in equity or other comprehensive income is recognised in equity or other comprehensive income and not in the income statement. Deferred tax Deferred tax is provided using the liability method in respect of temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits. No deferred tax is recognised when relating to temporary differences that arise from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. 12
  14. 14. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax items are recognised in correlation to the underlying transaction either in profit or loss, other comprehensive income or directly in equity. Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax, except:  Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable  Receivables and payables are stated with the amount of sales tax included The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. 2.2.9 Government grants Grants for expenditure are netted against the relevant expenditures as and when these are recognized in profit and loss in the statement of comprehensive income. Where retention of a government grant is dependent on the company satisfying certain criteria, it is recognized as deferred income. When the criteria for retention have been satisfied, the deferred income balance is released to the statement of comprehensive income (when related to expenses) or netted against the asset purchased (when specific to an asset). When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant. 2.2.10 Provisions Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 13
  15. 15. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued 2.2.11 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Company has concluded that it is acting as a principal in all of its revenue. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Where a buyer has a right of return, the Company defers recognition of revenue until the right to return lapsed. Handling charge income Handling charge income is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Rendering of services Revenue from application of paints to customers’ is recognised as income from special project by reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered. Interest income For all financial instruments measured at amortised cost and interest bearing financial assets classified as available-for-sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement. Dividends Revenue is recognised when the Company’s right to receive the payment is established, which is generally when shareholders approve the dividend. 2.2.12 Borrowing cost Specific Borrowing costs on qualifying assets are capitalized from the date the actual costs on the qualifying asset are incurred. Where such borrowed amount, or part thereof, is invested, the income earned is netted off the borrowing costs capitalised. Where the entity does not specifically borrow funds to construct a qualifying asset, general borrowing costs are capitalized by applying the weighted average cost of the borrowing cost proportionate to the expenditure on the asset. 14
  16. 16. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2. Summary of significant accounting policies continued 2.2.13 Foreign currency The company’s financial statements are presented in naira, which is also the company’s functional currency. Transactions in the foreign currency are recognized in Naira at the official spot rate at the date of transaction. Monetary assets and liabilities denominated in a foreign currency are translated into Naira at the spot rate of exchange ruling at reporting date. Differences arising on settlement or translation of monetary items are recognised in income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary measured at fair value is treated in line with the recognition of gain or loss on change in fair value in the item (i.e., the translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively). 2.2.14 Segment Reporting The reportable segments are identified on the basis of Strategic Business Units (SBU) and the threshold of recognition is a contribution of not less than 10% of the revenue, assets, profits or losses of all the operating segments. Where the board and management is of the opinion that a strategic business unit is important to the growth initiative of the company such SBU may be reported as a reportable segment even though it is not meeting the threshold of a reportable segment. 2.2.15 Employees’ benefits All employees' benefits both legal and constructive in the short and long term (including termination, gratuity and pensions) are adequately recognized in the income statement. The company operates a defined contribution pension scheme in line with the Pension Reform Act 2004. The employees and the company each contribute 7.5% of basic salary, housing and transport allowances. The company's contributions are accrued and charged to the income statement as and when the relevant service is provided by employees. The company has no further payment obligations once the contributions have been paid. The company also operates a gratuity scheme; employees are eligible to join the scheme after 5 years of continuous service to the company. The bases of the awards are:      5 years - under 10 years 10 years - under 15 years 15 years - under 20 years 20 years - under 25 years 25 years of service and above 5 weeks pay for each completed year of service 5 ½ weeks pay for each completed year of service 6 ½ weeks pay for each completed year of service 7 ½ weeks pay for each completed year of service 8 ½ weeks pay for each completed year of service Executive directors are entitled to a defined contribution plan (pension) in accordance with pension reform act 2004 and employee’s gratuity benefits in accordance with the company’s policy. But non-executive directors are not entitled to any form of pension or post employment benefits. 15
  17. 17. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2.15 Employees’ benefits – Continued The Directors’ gratuity benefits are based on 3 months gross salary and allowances for every year of service on the Board. Allowances shall be limited to housing, Transport and Leave Allowance. A retiring Director shall also be paid a sum of money as follows:  If a Managing Director N5 million  If a Deputy Managing Director N3 million  If a Executive Director N2.5 million The benefits payable to employees on retirement or resignation are accrued over the service life of the employee concerned based on their salary and the cost charged to the income statement. The liability recognised in the statement of financial position in respect of defined gratuity scheme is the present value of the gratuity obligation at the date of the statement of financial position less the fair value of any plan asset, together with adjustments for unrecognised actuarial gains or losses and past service costs. The gratuity obligation is calculated annually by independent actuaries using the projected unit credit method. The gratuity is derecognize upon the discharge of the obligation by the Company to a qualifying staff. 2.2.16 Investment in an associate The company’s investment in its associate is accounted for using the equity method. An associate is an entity in which the company has significant influence. Under the equity method, the investment is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Company’s share of net assets of the associate since the acquisition date. The income statement reflects the Company’s share of the results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Company recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate. The company’s share of profit or loss of an associate is shown on the face of the income statement and represents profits or loss after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the company. When necessary, adjustments are made to bring the accounting policies in line with those of the Company. After application of the equity method, the Company determines whether it is necessary to recognise an impairment loss on its investment in its associate. The company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in ‘Share of losses of an associate’ in the income statement. 16
  18. 18. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.2.15 Employees’ benefits – Continued Upon loss of significant influence over the associate, the Company measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss. 2.3. Standards issued but not yet effective The standards and interpretations that are issued but not yet effective up to the date of issuance of the financial statements are disclosed below. The company intends to adopt these standards, if applicable, when they become effective. IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1 The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or recycled) to profit or loss at a future point in time would be presented separately from items which will never be reclassified. The amendment affects presentation only and has no impact on the Company’s financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012, and will therefore be applied in the Company’s first annual report after becoming effective. IAS 19 Employee Benefits (Revised) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes like removing the corridor mechanism and the concept of expected returns on plan assets, to simple clarifications and rewording. The company is currently assessing the full impact of the remaining amendments. The amendment becomes effective for annual periods beginning on or after 1 January 2013. IAS 27 Separate Financial Statements (as revised in 2011) As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The amendment becomes effective for annual periods beginning on or after 1 January 2013. The company is still in the process of assessing the possible impact. IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the new IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities , IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The revised standard becomes effective for annual periods beginning on or after 1 January 2013. IAS 32 Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32 These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Company’s financial position or performance and become effective for annual periods beginning on or after 1 January 2014. 17
  19. 19. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.3. Standards issued but not yet effective continued IFRS 1 Government Loans – Amendments to IFRS 1 These amendments require first-time adopters to apply the requirements of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, prospectively to government loans existing at the date of transition to IFRS. Entities may choose to apply the requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20 to government loans retrospectively if the information needed to do so had been obtained at the time of initially accounting for that loan. The exception would give first-time adopters relief from retrospective measurement of government loans with a below-market rate of interest. The amendment is effective for annual periods on or after 1 January 2013. The amendment has no impact on the Company. IFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities The amendment requires additional disclosures about rights of set-off and related arrangements (e.g. collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on the Company’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or ‘similar agreement’, irrespective of whether they are set off in accordance with IAS 32. The standard is effective for annual periods beginning on or after 1 January 2013. IFRS 9 Financial Instruments: Classification and Measurement IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures , issued in December 2011, moved the mandatory effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the financial assets, but will not have an impact on classification and measurements of financial liabilities. The company will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after 1 January 2013. The company is still in the process of assessing the possible impact. 18
  20. 20. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.3. Standards issued but not yet effective continued IFRS 11 Joint Arrangements, IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. Portland Paints & Products Nigeria Plc has not concluded its review of the joint arrangements that would potentially be accounted for differently under the new standard, but which in the aggregate are not expected to significantly impact Portland Paints and Products Nigeria Plc’s net income, equity or classifications in the statement of financial position or statement of income. This standard becomes effective for annual periods beginning on or after 1 January 2013, and is to be applied retrospectively for joint arrangements held at the date of initial application. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, IFRS 12 is effective in annual period beginning on or after 1 January 2013. The company is still in the process of assessing the possible impact. IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The company is currently assessing the impact that this standard will have on the financial position and performance, but based on the preliminary analyses, no material impact is expected. This standard becomes effective for annual periods beginning on or after 1 January 2013. IAS 12 Income Taxes The amendments to IAS 12 provides a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model in IAS 40; Investment Property. The amendment introduces a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. This standard is applicable for annual periods beginning on or after 1 January 2013, with early adoption permitted. This is not applicable to the Company. IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine This new interpretation provides guidance on how to account for stripping cost in the development phase of a surface mine. Effective 1 January 2013. This would not be applicable to the Company. 19
  21. 21. PORTLAND PAINTS & PRODUCTS NIGERIA PLC SIGNIFICANT ACCOUNTING POLICIES - Continued 30 JUNE 2013 2.4. First-time adoption of IFRS These financial statements, for the year ended 31 December 2012, are the first that Portland Paints & Products Nigeria Plc has prepared in accordance with IFRS. For periods up to and including the year ended 31 December 2011, Portland Paints & Products Nigeria Plc prepared its financial statements in accordance with Nigeria generally accepted accounting practice (Local GAAP). Accordingly, the company has prepared financial statements which comply with IFRS applicable for periods ending on or after 31 December 2012, together with the comparative period data as at and for the year ended 31 December 2011, as described in the accounting policies. In preparing these financial statements, Portland Paints & Products Nigeria Plc’s opening statement of financial position was prepared as at 1 January 2011, Portland Paints & Products Nigeria Plc’s date of transition to IFRS. This note explains the principal adjustments made by Portland Paints & Products Nigeria Plc in restating its Local GAAP statement of financial position as at 1 January 2011 and its previously published Local GAAP financial statements as at and for the year ended 31 December 2011. Fair value as deemed cost Land and factory building were carried in the statement of financial position prepared in accordance with local GAAP as at 31 December 2010 at cost less accumulated depreciation. At the date of transition to IFRS, the assets were fair value and the Company has elected to regard those values as deemed cost at the date of the revaluation.   Estimates The estimates at 1 January 2011 and at 31 December 2011 are consistent with those made for the same dates in accordance with Local GAAP (after adjustments to reflect any differences in accounting policies). The estimates used by the Company to present this amount in accordance with IFRS reflect conditions at 1 January 2011, the date of transition to IFRS and as of 31 December 2011. 20
  22. 22. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 2013 N'000 N'000 East 214,890 263,350 FCT, Abuja 119,893 171,415 Lagos 523,723 544,177 North 134,185 165,420 West 142,698 109,726 Total 3. 2012 1,135,389 1,254,088 24,739 27,801 147,603 20,401 239,948 21,086 52,546 79,020 36,196 19,554 1,857 183,044 56,702 113,472 204,983 10,422 7,391 107,406 19,597 51,482 148,008 25,520 127,893 30,214 40,955 90,749 0 526 82,395 21,410 84,118 223,438 273 31,482 60,976 73,735 15,152 86 126,079 1,354,171 1,254,088 Revenue: 3.1 Analysis by region in Nigeria 3.2 Analysis by product categories Auto refinish Industrial coatings Intra emulsion Intra gloss Intra textured Sandtex finebuild Sandtex gloss Sandtex matt Sandtex stabilision solution Sandtex textured Sandtex trowel Satin emulsion Supershine Vinyl matt emulsion Colorcrete / Cement Colour boutique Maine coatings Marine hempadur Marine hempalin Marine hempatex Sanitary wares Total 4. Other operating income: Government grants 6,924 - Profit on sale of fixed assets 600 1,201 Sale of scrap - - Income on executed project - - Freight In - Net 14,680 - Exchange gain - 2,066 Other Income 12,357 1,697 Total 34,561 4,964 21
  23. 23. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 2013 N'000 5(a) Finance income: Interest received on bank deposits Interest income on available for sale financial assets Dividend income on available for sale financial assets Gain on foreign exchange Total DEC 2012 N'000 1,824 1,824 - 30,280 7,114 32,172 3,028 37,394 35,200 Adjustment for (under)/over provision in prior periods Underprovision for income tax in prior year 25,967 1,731 27,699 - 41,025 5,472 46,497 - Total current tax 27,699 46,497 - (17,298) (17,298) - - 27,699 29,199 (b) Finance costs: Interest on debts ad borrowings Finance charges payable under finance lease Total 6. Income tax: Current Tax Expense Current tax on profits for the year: Company income tax Education tax Deferred tax expense: Origination and reversal of temporary differences Recognition of previously unrecognised deferred tax assets Tax expense excluding tax on sale of discountinued operations and share of tax of equity accounted associates Income tax on gain on sale of discountinued operation Share of tax charge of equity accounted associates Total tax expense 7. Earnings per share Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used on the basic earnings per share computations: Weighted average number of ordinary shares for basic earnings per share Basic earnings per share 22 58,859 88,213 400,000 400,000 15 Net (loss) / profit attributable to ordinary equity holders 22
  24. 24. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 Decorative Marine Paints Portland Bathrooms Total Jun-12 N'000 8) Segment Information Jun-12 N'000 Jun-12 N'000 Jun-12 N'000 Revenue: Total Revenue Inter-segmental revenue 1,067,042 - 250,069 - 149,223 - 1,466,334 - Total Revenue From External Customers 1,067,042 250,069 149,223 1,466,334 - - 1,067,042 250,069 149,223 1,466,334 Depreciation Amortisation (95,645) - (1,323) - (1,492) - (98,460) - Segement Profit 971,397 248,746 147,731 1,367,874 (843,329) (3,204) (31,868) 4,964 - (230,063) (2,030) - (131,316) (1,302) - (1,204,709) (3,204) (35,200) 4,964 - 97,960 16,653 15,113 129,725 Discountinued Operations Company's Revenue per Statement of Comprehensive Income Impairment of Assets Operating Expenses Depreciation on Factory Building Share of Profits in Associates Finance Expense Finance Income Other Income Segment Profit Include in Discountinued Operations Company's Profit Before Tax and Discountinued Operations - - Decorative Marine Paints Portland Bathrooms Total Jun-13 N'000 8) Segment Information Jun-13 N'000 Jun-13 N'000 Jun-13 N'000 Revenue: Total Revenue Inter-segmental revenue 916,620 - 352,567 - 84,984 1,354,171 - Total Revenue From External Customers 916,620 352,567 84,984 1,354,171 Discountinued Operations Company's Revenue per Statement of Comprehensive Income 916,620 352,567 84,984 1,354,171 Depreciation Amortisation (33,843) (13,224) (10,500) (4,342) (5,250) (2,171) (49,593) (19,737) Segement Profit 869,554 337,724 77,562 1,284,841 (790,047) 1,865 1,824 (37,394) 34,561 80,364 (317,310) 20,414 (91,782) (14,220) (1,199,140) 1,865 1,824 (37,394) 34,561 86,558 Impairment of Assets Operating Expenses Depreciation on Factory Building Share of Profits in Associates Finance Expense Finance Income Other Income Segment Profit Include in Discountinued Operations Company's Profit Before Tax and Discountinued Operations The operating segment did not transact with each other ans as such there are no transfer prices between operating segments. Production activities in the factory is mainly production of decorative. Hence the relevant costs are absorbed by Decorative Business Unit. This accounts for the depreciation on Factory building wholly absorbed by Decorative Business Unit. Other Income is generated from the application of paints in addition to the sales and marketting of paint products. 23
  25. 25. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 Addition to Non-current Assets Reportable Segment Assets Investment in Associates Available For Sales Financial Assets Decorative Marine Paints Portland Bathrooms Total Dec-12 N'000 9) Segment Information Dec-12 N'000 Dec-12 N'000 Dec-12 N'000 95,249 1,266,332 477,205 357,904 95,249 2,101,440 2,842 - - - 2,842 - Tax Assets Factory Office Property Assets in process 186,493 - - 186,493 - Total Company Assets 1,550,916 477,205 357,904 2,386,024 349,303 98,422 193,198 95,398 689,690 - - 349,303 98,422 193,198 95,398 689,690 1,426,010 - - 1,426,010 Reportable Segement Liabilities: Loans and Borrowings (Excluding Leases and Overdrafts) Defined Benefit Pension Scheme Financial Liabilities Deferred Tax Laibilities Other Unallocated and Central Liabilities Total Company Liabilities Addition to Non-current Assets Reportable Segment Assets Investment in Associates Available For Sales Financial Assets Tax Assets Factory Office Property Total Company Assets Decorative Marine Paints Portland Bathrooms Total Jun-13 N'000 9) Segment Information Jun-13 N'000 Jun-13 N'000 Jun-13 N'000 6,629 1,386,567 485,485 - 364,113 - 184,629 1,577,825 - 485,485 364,113 6,629 2,236,165 184,629 2,427,423 Reportable Segement Liabilities: Loans and Borrowings (Excluding Leases and Overdrafts) Defined Benefit Pension Scheme Financial Liabilities Deferred Tax Laibilities Other Unallocated and Central Liabilities Total Company Liabilities 427,949 134,502 114,769 82,615 833,003 - - 427,949 134,502 114,769 82,615 833,003 1,592,838 - - 1,592,838 Items of Plant, Property and Equipments are directly allocated to the SBU enjoying the economic benefits of the Assets. 24
  26. 26. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 10. Property, plant and equipment Land N'000 Factory building N'000 Plant and machinery N'000 Furniture and fittings N'000 Motor vehicles N'000 Work-inprogress N'000 Total N'000 Cost At 1 January 2012 Additions Revaluation Surplus Transfers Reclasification Disposal Re-classified to non current assets held for sale 35 39,965 - 73,505 896 72,092 - 328,169 11,364 - 118,469 11,674 70,728 - At 31 December 2012 40,000 146,493 339,533 At 1 January 2013 Additions On Revaluation - Deprn Written back Revaluation Surplus Transfers Disposal Re-classified to non current assets held for sale 40,000 - 146,493 0 - As at 30 Jun 2013 40,000 - Depreciation At 1 January 2012 Charge for the year On Revaluation - Deprn No longer Required On disposal On transfer Impairment 224,666 10,575 207,356 60,740 12,470.00 (3,670) - (197,368) (70,728) - 200,871 244,041 0 970,938 339,533 2,904 - 200,871 3,345 - 244,041 380 - 0 (0) 970,938 6,629 - 146,494 342,437 204,216 244,421 (0) 977,567 14,566 (14,566) 138,473 26,225 56,971 20,110 108,877 33,423 3,777 (3,670) 11,431 - - 318,887 79,758 (14,566) (3,670) 11,431 3,777 - - - 952,200 95,249 112,057 (184,898) (3,670) - - At 31 December 2012 - - 164,698 80,858 150,061 - 395,617 At 1 January 2013 Charge for the year On Revaluation - Deprn No longer Required On disposal Impairment - 1,865 - 164,699 13,486 - 80,857 16,566 - - - - - 150,062 16,404 - - 395,618 48,321 - As at 30 Jun 2013 - 1,865 178,185 97,423 166,466 - 443,939 - Net Book Value at: As at 30 Jun 2013 40,000 144,629 164,252 106,793 77,955 (0) 533,628 At 31 December 2012 40,000 146,493 174,835 120,012 93,980 0 575,321 Revaluation of land and building: The company uses the revaluation model of measurement of land and buildings. The company engaged Obosi Eleh & Co. (Estate Valuer), am accredited independent valuer, to determine the fair value of land and buildings. Fair value is determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any didfference in the nature, location or condition of the specific property. The date of the most recent revaluation was 18 December 2012. the previous revaluation was on 31 December 2010. Other items of PPE were carried at cost, duly reviewed for impairment as at June 30, 2013, no impairment provision is deemed necessary. 25
  27. 27. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 Motor Vehicles Assets under Finance Lease 11. N'000 Cost At 1 January 2012 Additions during the year Disposals Transfers 61,296 39,843 (12,470) At 31 December 2012 88,669 At 1 January 2012 Additions during the year Disposal Transfer 88,669 0 - As at 30 Jun 2013 88,669 Depreciation At 1 January 2012 Charge for the year On disposal On transfers 10,417 14,915 (11,431) At 31 December 2012 13,901 At 1 January 2012 Charge for the year On disposal On transfers 13,902 8,867 - As at 30 Jun 2013 22,769 Net Book values at: As at 30 Jun 2013 65,901 At 31 December 2012 74,768 The leased assets include motor vehicles required for efficient sales and distribution activities. The lessors are Financial Derivatives Co. Limited, Citicorp Financial Services Limited, Stanbic IBTC PLC and United bank for Africa. The company has option to buy the leased assets at the end of the lease term. 26
  28. 28. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 Trade Mark Total N'000 12 Intangible Assets Computer Software N'000 N'000 Cost At 1 January 2012 Additions - externally acquired during the year 49,024 - 197,368 49,024 197,368 At 31 December 2012 49,024 197,368 246,392 At 1 January 2013 Additions - externally acquired during the year 49,025 - 197,368 123 246,393 123 As at 30 Jun 2013 49,025 197,491 246,516 Amortization: At 1 January 2012 Charge for the year - 3,289 3,289 At 31 December 2012 - 3,289 3,289 At 1 January 2013 Charge for the year - 3,289 19,734 3,289 19,734 As at 30 Jun 2013 - 23,023 23,023 As at 30 Jun 2013 49,025 174,468 223,493 At 31 December 2012 49,024 194,079 243,103 Net Book values at: The Company's intangible asset represents the N49m trade mark purchased from Blue Circle adjudged to have an infinite life and N197m investment on licence and technical agreement on oracle ERP applications. The oracle ERP application was acquired during the year to be amortised to income statement over a period of five years. While the trade mark is carried at cost to be tested annually for impairment. At present no impairment is deemed required and there is no contractual commitment as at June 30, 2013. 27
  29. 29. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 13a. Corporate Tax Liability Jun-13 N'000 Balance at Beginning of the year Company Income Tax Education Tax Dec-12 N'000 71,537 71,537 56,180 56,180 25,967 1,731 99,236 41,025 5,472 102,677 Payment During the year (30,106) (31,140) Balance as at March 31st, 2012 69,130 71,537 Current Tax Expense Company Income Tax Education Tax 13b Deferred tax Jun-13 N'000 At 1 January Dec-12 N'000 82,615 Recognised in profit and loss Tax expense Recognised in other comprehensive income (Losses)/gains on available for-sale investments Share of associates gains and losses recognised in other comprehensive income Revaluation of property 82,615 - (0) - 82,615 82,615 Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets where the directors believe it is probable that these assets will be recovered. 28
  30. 30. 13.c Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 Investments in Equity Accounted Associates: The following Company has met the definition of an associate and has been equity Accounted for in the financial statements Name Country of Incorporation Portland Construction Limited (Formerly Portland Construction and Renovation Limited) Nigeria Proportion of Voting Rights Held as at 2013 Dec-12 14. 20% 2013 N'000 Portland Construction Limited (Formerly Portland Construction and Renovation Limited) 0% Dec-12 N'000 0 2,842 Raw Materials Packaging Materials Work in progress Goods In Transist Finished Goods Spare Parts Diesel Provision for stock loss 221,286 12,038 6,693 12,174 641,063 2,489 2,204 (1,130) 211,504 10,424 6,693 10,288 576,824 2,489 1,435 (1,130) Total 898,818 818,527 Inventories: Management conducts monthly physical Inventory count exercise in all our depots accross the country. The quantity counted was valued using weighted Average Costing model as per the Company's policy and agreed as stated herein. 29
  31. 31. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 2013 15. Dec-12 Trade and Other Receivables N'000 N'000 Trade receivables Less: Provision for Trade Receivables Provision for impairment of trade receivables 514,019 478,742 (59,120) - (59,212) - Trade receivables net Receivables from related parties 454,899 (0) 419,530 - Total financial assets other than cash and cash equivalent classified as receivables 454,899 419,530 Prepayments Other receivables 167,311 34,275 109,812 62,673 Total trade and other receivables Less: Non-current portion - prepayment 656,484 72,528 592,015 38,008 Current portion 583,956 554,007 The fair values of trade and other receivables classified as loans and receivables are as follows: 2013 N'000 Trade receivables Receivables from related parties Total 454,899 454,899 Dec-12 N'000 419,530 419,530 Note on Impairment: Management has reviewed trade and other receivables as at 31 March 2013. No impairement deemed necessary. Trade Credit Risk Management Management manages trade credit risk through its all encompassing Trade Credit Policy. 80% of the Company sales are on cash basis while some major distributors are availed with credit lines with strigent credit terms. Controls are in place to ensure full compliance with the credit terms and also aggresive debit recovery is also adopted to ensure due debts are collected. Distributors enjoying credit facilities are expected to provide insurance bond as part of conditions preceeding appointment as a distributor. 30
  32. 32. 16(a). Portland Paints and Products Nigeria Plc Notes to the Financial Statements 30 Jun 2013 Interest bearing loans and borrowings: 2013 N'000 160,357 10,074 170,431 53,571 124,303 28,087 295,721 542,718 Total loans and borrowings 89,760 42,856 224,736 31,973 372,287 Current : Overdrafts Bank loans: Long term liabilities (Note 16b) Commercial papers Collateralised borrowings Obligation under finance lease (Note 16c) 108,757 - 72,722 Non-Current Bank loans: Long term liabilities (Note 16b) Unsecured Collateralised borrowings Redeemable preference shares Obligation under finance lease (Note 16c) Dec-12 N'000 436,194 31,716 140,473 The bank loans overdrafts and finance lease borrowings were secured with the followings: Current borrowings: The bank overdrafts, commercial paper, import finance facility and finance lease were secured with the following: - Debenture on fixed and floating assets of Portland Paints & Products Nigeria Plc, valued at N1,105,867,773.97 as at December 2011, by Ubosi Eleh & Co. estate surveyors - Execution of trust receipts by the borrower. - Ownership of assets financed - Promissory note of the Company for principal and interest - Personal guarantee of the Managing Director, Mr. Bayo Osibo supported by notarised statement of net worth. - Saltes collection agreement 16b Long term borrowings Non current liabilities The secured loan is a Central Bank of Nigeria (CBN) intervention fund through Bank of Industry (BOI). The applicable interest rate is 6% per annum subject to review by the BOI from time to time in line with the prevailing market conditions. The loan is repayable in instalments at various dates between January 2011 to 2018. After bifurcation of the government grant, in the form of a low interest rate loan, the loan bears an effective interest rate of 22% 2013 Lender Total Facility Repayment Terms N'000 31 203,213 (42,856) Due After One Year N300m 28 equal quarterly installments from date of draw down Current Portion of Term-Loans Bank of Industry (BOI) Intervention funds Through Ecobank Nigeria Plc 160,357
  33. 33. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 16(c) Lessor Total facility Repayment Terms 2013 N'000 Dec-12 N'000 N6.804m Citicorps Financial Services Ltd N39.16m N36m 16,993 25,273 42,047 59,803 31,973 28,087 Non current obligation Stanbic IBTC Bank Financial derivatives Company Limited 32,611 Current obligation N6.4mm 25,054 Total Finance Lease United Bank for Africa 24 months installments commencing from June 2011 - May 2013 24 months installments commencing from June 2011 46 months installments commencing from November 2011 to Aug 2015 36 months installments commencing from June 2012 10,074 42,047 31,716 59,803 - 1,517 - 402 The finance leases were secured with a legal ownership of the motor vehicles, comprehensive insurance cover on the vehicle under finance and vehicle tracker installation on the vehicle under finance lease. The applicable interest rate is between 17% 23% per annum. 16(d) Cash & Cash Equivalent: For the purpose of the statement of cash flow, cash and cash equivalents comprise the following as at 30 June, 2013 Cash in hand and bank Fixed deposit Bank Overdraft 6,734 42,365 (72,722) 35,909 43,540 (89,760) 30 Jun 2013 (23,624) (10,311) As at January Received during the year Released to the income statement 69,237 (6,924) 83,085 (13,848) 30 Jun 2013 62,313 69,237 Current Non current 13,848 48,465 62,313 13,848 55,389 69,237 16(e) Government grants: Government grants relates to loan granted by Agency of Nigeria Government (Centra Bank of Nigeria) with 6% interest rate which was below the current applicable market rate, the effect of this favourable interest is regarded as a government grant. There are no unfulfilled conditions or contigencies attached to these grants. 32
  34. 34. PORTLAND PAINTS & PRODUCTS PLC Notes to the Management Accounts For the Period Ended 30 Jun 2013 2013 N'000 Dec-12 N'000 16d. Reconciliation of net profit to net cash provided by operating activities (Loss) / Profit after tax 58,859 (222,166) 37,394 (1,824) 47,728 19,737 103,034 86,146 (2,198) 101,692 (254) (30,731) 3,289 503 158,447 (64,469) (80,291) (51,165) 0 (335) (2,407) (198,667) (33,718) (15,152) 354,402 (8,545) 46,957 15,357 359,301 Net Adjustment (95,633) 517,748 Net cash provided by operating activities (36,773) 295,582 Adjustments to reconcile net income to net cash provided by operating activities: Interest payable Finance income Depreciation Charges (Profit)/Loss on disposal of fixed assets Revaluation of land & building Amortisation of intangible assets Decrease / (increase) on investment in associate Changes in assets and liabilities: (Increase)/Decrease in Trade debtors and prepayments Decrease/(Increase) in Stock (Decrease)/Increase in Trade creditors & Accruals (Decrease)/Increase in Deferred tax Increase/(Decrease) in Gratuity (Decrease)/Increase in taxation payable 33
  35. 35. 17. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 Trade and Other Payables 2013 18. Liabilities for employees benefit include: Provision Gratuity Categorised as: Due within one year or less Due after more than one year: 23,851 20,682 2,842 6,000 1,036 6,648 10,814 4,142 6,385 82,400 47,777 87,060 134,837 134,837 134,837 134,837 134,502 134,502 Payment during the year At the end of the year 815,038 815,038 134,502 134,502 Employee benefits At the beginning of the year Provision for the year 763,873 763,873 134,837 (335) 134,502 134,502 17.1) Provisions & Accruals: Accruals - Discount, Rebate & Commission Accruals -Pension Funds Accruals - Professional Fees Accruals - Audit Fees Accruals - Salaries & Wages Payable Accruals - Finance Charges Provisions - Rent Provisions - ITF (Balance Sheet) Provision - Calendar / Diaries Provision - Miscelleneuos Total N'000 575,548 31,038 208,452 34,095 23,964 2,842 3,500 3,234 14,068 10,814 6,577 3,885 67,060 170,038 Trade payables Other payables Provision & Accruals (See note 17.1) Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost Other payables, tax and social security payments Deferred income Dividends payable Total trade and other payables Dec-12 N'000 562,636 28,379 172,857 134,837 134,837 The employee benefit represents full gratuity provision as at December 31st, 2012. The gratuity has been computed in line with the Company policy and collective bargaining of the Chemical and Non Metallic Employers Federation. Management has frozen the company gratuity policy effective from December, 2012. Management has also put necessary machinery in place to pay in cash or transfer amount due to respective qualifying staff Pension fund Administrator accounts. The Company recognises acturial gains and losses in the period in which they occur in full in other comprehensive income in accordance with IAS 19.93A. Accordingly, the Company recognised all cumulative actuarial gains and losses as at 31st December 2012. 34
  36. 36. Portland Paints and Products Nigeria Plc Notes to the financial statements 30 Jun 2013 19. Share capital Authorised Dec-12 Dec-12 Number N'000 Authorised Dec-12 Dec-12 Number N'000 Ordinary shares on 50 kobo each 400,000,000 200,000 400,000,000 200,000 Total 400,000,000 200,000 400,000,000 200,000 Issued and Fully Paid 2013 Number Issued and Fully Paid 2013 N'000 Issued and Fully Paid 2013 Number Issued and Fully Paid 2013 N'000 Ordinary shares of 50kobo each at the beginning of the year 400,000,000 200,000 400,000,000 200,000 At end of the year 200,000 400,000,000 200,000 400,000,000 Nature and purpose of reserves Other capital reserve Asset revaluation reserve: The asset revaluation reserve is used to record increases in the fair value of property, plant and equipment and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. The reveluation was carried out on land and building in December 2010 and 2012 by Ubosi Eleh & Co., a professional firm of Chartered Surveyors on an open market basis. 35
  37. 37. PORTLAND PAINTS & PRODUCTS NIGERIA PLC NOTES TO THE FINANCIAL STATEMENTS - Continued 30 JUNE 2013 20. Financial risk management Portland Paints & Products Nigeria Plc’s principal financial assets comprise Trade and other receivables, cash and short term deposits that arise directly from its operations. The Company’s principal financial liabilities comprise of Interest bearing loans and borrowing and Trade and other payables. The main purpose of these financial liabilities is to finance and to provide guarantee to support the Company’s operations. Portland Paints & Products Nigeria Plc’s is exposed to credit risk, liquidity risk and market risk. The company’s Board has overall responsibility to oversee the management of these risks. The company’s board of director’s is supported by a risk management and governance committee that is responsible for developing the Company’s Corporate Governance policies and practices and to consider the nature, extent and category of risks facing the Company. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company competitiveness and flexibility. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below: 1. Credit risk This is the risk of financial loss to the Company if a customer or counterparty to financial instrument fails to meet its Contractual obligations. The company is mainly exposed to credit risk from credit sales. It is Company policy, implemented locally, to assess the credit risk of new customers before entering contracts. (a) Trade receivables Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored by the credit committee comprising of sales, finance and internal audit and sales to major distributors/customers are generally covered by insurance certificate. The entity has adopted a policy of only dealing with credit worthy counter-parties and a credit committee is instituted which comprises of sale, finance and internal audit department to review the outstanding balances on customers’ account. Insurance certificate is required before credit is granted to key distributors. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. On-going credit evaluation is performed on the financial conditions of account receivable and where appropriate, credit guarantee insurance cover is purchased. Apart from Chevron and Prodecco the largest customers of the entity with an outstanding balance of N100 million and N50 million respectively, the entity does not have significant credit risk exposure to any single counterparts or any group of counterparties having similar characteristic. Concentration of credit risk to any other counterparty did not exceed 5% of gross monetary assets at anytime during the year. 36
  38. 38. PORTLAND PAINTS & PRODUCTS NIGERIA PLC NOTES TO THE FINANCIAL STATEMENTS - Continued 30 JUNE 2013 20. Financial risk management continued The credit risk on liquid funds is limited because the counterparties are banks with high credit-rating assigned by international credit-rating agencies. (b) Cash and short term deposits Credit risk from balances with banks and financial institutions is managed by the Portland Paints’ treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counter party. Counterparty credit limits are reviewed by the Company’s Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the Company’s Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure. Portland Paints’ maximum exposure to credit risk for the components of the statement of financial position at 30 June 2013 and 2012 is the carrying amounts. 2. Liquidity risk This is the risk arises from the Company’s management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company policy is to ensure that it will always have sufficient cash to allow it meet its liabilities when they become due. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the entity’s short, medium and long-term funding and liquidity requirement. The entity manages liquidity risk through the use of bank overdrafts, bank loans, and finance leases. The company has agreement with our bankers to provide overdraft facilities for short term funds requirement and long-term borrowing facilities, by continuously monitoring forecast and actual cash flow and matching the maturity profile of financial assets and liabilities. 3. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The activities of the entity are exposed primary to the following market risks; interest rate risk, foreign currency risk and commodity price risk. (a) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The company’s exposure to the risk of changes in market interest rates relates primarily to the company’s short-term debt obligations with floating interest rates. The company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The company’s policy is to keep between 30% and 60% of its borrowings at fixed rates of interest and has been achieved by converting the short term funds to long term fund through the BOI which has fixed and single digit effective interest rate and more flexibility in repayments. (b). Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency). In preparing the financial statement of the entity, transactions in currencies other than the entity’s functional currency [foreign currencies] are recognized at the rates of exchanges prevailing at the date of the transactions. The company is not managing its foreign currency risk by hedging because the entity’s dealing in foreign currencies is minimal and will not have material effect on the financial statements of Portland Paints & Products Nigeria Plc. 37
  39. 39. PORTLAND PAINTS & PRODUCTS NIGERIA PLC NOTES TO THE FINANCIAL STATEMENTS - Continued 30 JUNE 2013 20. Financial risk management continued (c). Commodity price risk The company is affected by the volatility of certain commodities. Its operating activities involve the ongoing purchase and manufacturing of paints, purchase and marketing of sanitary wares and therefore require a continuous supply of resins, titanium dioxide and calcium carbonate. Due to the significantly increased volatility of the price of the underlying, the Company’s Board of Directors has developed and enacted a risk management strategy dealing with commodity price risk and its mitigation. The company also has an agreement with the major suppliers of those raw materials for constant supplies at stable prices. For the sanitary wares the Company is the sole distributor of Ideal Standard and Armitage Shanks in Nigeria and the manufacturer of those products treat the company with utmost care in terms of quality and product prices. In view of the above financial statements of the entity is not exposed to price risk. . 21. Capital management Management considers capital to consist only of equity as disclosed in the statement of financial position. The primary objective of the Portland Paints capital management is to ensure that it maintains a healthy capital ratio that support its business and maximise shareholder value. The company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2013 and 31 December 2012. In order to ensure an appropriate return for shareholder’s capital invested in the company, management thoroughly evaluates all material projects and potential acquisitions before approval. The company is not subject to any capital restriction requirements. The company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The company’s policy is to keep the gearing ratio between 20% and 50%. The company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents. 22. Events after the reporting period There are no material events which could have had a material effect on the state of affairs of the Company after the reporting period. 2330. Commitments and contingencies Capital commitments At 30 June 2013, the Company did not have any capital commitments (2012: Nil, 1 January 2012: Nil). Legal claim contingency There is litigation and claim against the Company as at 30 June 2013 amounting to N50 million (2012: N50 million, 1 January 2012: Nil). The company has been advised by its legal counsel that it is only possible, but not probable, that the action will succeed. Accordingly, no provision for any liability has been made in these financial statements. Guarantees The company has provided financial guarantee contracts unbehalf of the associate to maximum amount of N36.638 million (2012: Nil, 1 January 2012: Nil). 38
  40. 40. PORTLAND PAINTS & PRODUCTS PLC STATEMENT OF VALUE ADDED FOR THE PERIOD ENDED 30 Jun 2013 YTD 2013 N'000 Turnover Non trading items % YTD 2012 N'000 1,354,171 36,385 1,390,556 % 1,466,334 4,964 1,471,298 Bought-in-material and services: - Local - Imported (804,745) (226,979) Value added (831,318) (234,474) 358,831 100% 405,506 100% 187,152 52% 186,192 46% To pay Government: Corporate tax 27,699 8% 41,512 10% To pay provider of capital: Interest charges 37,394 10% 35,200 9% - 0% - 0% Applied as follows:To pay employees: Salaries and labour related expenses To pay shareholders as dividend To provide for replacement of assets dividend to shareholders and development of business - Depreciation - Deferred tax - Profit for the year 0% 47,728 58,859 13% 0% 16% 54,389 88,213 13% 0% 22% 358,831 100% 405,506 100% Value added represents the additional wealth which the company has been able to create by its own and its employees' efforts. This statement shows the allocation of that wealth to employees, providers of capital, government and that retained for the future creation of more wealth. 39

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