STAR WIN PRODUCTS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS 31 DECEMBER 2016 1
STARWIN PRODUCTS LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2016
INDEX
Page
Corporate Information 2
Report of the Directors 3
Independent Auditor's Report 8 - 12
Statement of Financial Position 13
Statement of Comprehensive Income 14
Statement of Changes in Equity 15
Statement of Cash Flows 16 - 17
Notes to the Financial Statements 18 2
STARWIN PRODUCTS LIMITED
CORPORATE INFORMATION
BOARD OF DIRECTORS Nik Amarteifio - Chairman Yaw Opare Asamoah -Managing Director Rev. (Dr.) Mensah Otabil- (Resigned in December 2016) Kwasi Yirenkyi Amarteokor Amarteifio Alex Bonney Samuel Attah Mensah Dr. Barima Afrane
SECREATARY Kwesi Austin Ayawaso Chambers, 11thLane P. O. Box 4916 Osu - Re, Accra
REGISTERED OFFICE Plot 16 South Industrial Area Ring Road West P. O. Box 5760 Accra- North
REGISTRARS Universal Merchant Bank Limited 57 Examination Loop, North Ridge P.O Box 401 Accra
AUDITORS KPMG Chartered Accountants 13 Yiyiwa Drive, Abelempke P. O. Box GP 242 Accra
BANKERS Capital Bank Ghana Limited GCB Bank Limited Stanbic Bank Ghana Limited Standard Chartered Bank Ghana Limited Zenith Bank Ghana Limited 3
REPORT OF THE DIRECTORS TO THE MEMBERS OF STARWIN PRODUCTS LIMITED
The directors present their report and audited financial statements of the company for the year ended 31 December 2016.
Directors' responsibility statement The directors are responsible for the preparation of financial statements that give a true and fair view of Starwin Products Limited, comprising the statement of financial position at 31 December 2016, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179). In addition, the directors are responsible for the preparation of the directors' report.
The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.
The directors have made an assessment of the ability of the company to continue as a going concern and have no reason to believe that the business will not be a going concern in the year ahead.
The auditor is responsible for reporting on whether the financial statements give a true and fair view in accordance with the applicable financial reporting framework.
Year end: 31 December 2016 2015 2014 2013 2012 GH¢ GH¢ GH¢ GH¢ GH¢ Operating results:
Revenue 9,172,862 5,762,183 6,946,716 6,678,090 4,808,858
EBIT 5,552,896 89,814 617,599 1,075,381 614,845
Net Earnings (Loss) 3,821,164 (115,864) 174,123 646,102 299,270
EPS 0.0147 0.00004 0.0022 0.0090 0.0042 Financial position results:
Non-Current Assets 1,215,269 1,429,236 1,532,216 1,608,660 1,550,309
Current Assets 17,161,621 9,183,301 9,139,794 3,586,427 2,899,214
Total Assets 18,376,890 10,612,537 10,672,010 5,195,087 ~,449,523
Non-Current Liabilities 68,079 60,139 93,541 45,674
Current Liabilities 6,664,747 2,529,822 2,397,955 2,073,089 1,863,389
Equity 11,644,064 8,082,715 8,213,916 3,028,457 2,540,560
Total Debt and Equity 18,376,890 10,612,537 10,672,010 5,195,087 4,449,623 ------~------.
4
Directors' responsibility statement (Cont'd)
Revenue Starwin recorded an overall revenue growth of36% between 2011 and 2015. Revenue grew steadily from 2011 to 2014 but dipped by 17% in 2015.
Net Profits The company recorded profits from 2011 to 2014 but made a loss in 2015. The company could not grow its profit steadily as profits fluctuated over the period.The loss recorded in 2015 was as a result of cessation of production for about two months immediately after the flood disaster on 3 June 2015.
Total Assets Total Assets grew steadily at an average rate of 18% from 2011 to 2013 but more than doubled (105%) in 2014 following an additional capital injection raised through a rights issue to existing shareholders. Total Assets dipped marginally by 1% in 2015.
Total Liabilities Total Liabilities grew by 82% between 2011 and 2015 compared to an average growth in Total Assets of 184% during the same period
Asset to Liability Ratio Total assets to total liabilities increased by 56% between 2011 and 2015. The ratio grew from 2.69 in 2011 to 4.19 in 2015 thus showing an improved gearing ratio over the years.
Financial statements/ Business review The results for the year are as set out in the attached financial statements, highlights of which are as follows:
GH¢
Profit for the year ended 31 December 2016 after taxation is 3,821,164 which when added to the balance brought forward on the-retained earnings account of 974,323
giving a total retained earnings account balance of 4,795,487
Less: Dividend declared of (259,815)
leaving a total retained earnings of 4,535,672
The directors consider the state of affairs of the company to be satisfactory.
Nature of business/ Principal activities The company is registered to carryon the business of the manufacturing, sale, import and export of pharmaceutical products and drugs of any kind.
There was no change in the nature of business of the company during the year under review.
Objectives of the company
The objective of the company are:
1. To manufacture, import, export and deal in pharmaceutical products and drugs of any kind including germicides, Antiseptics, insecticides, industrial and household cleaners materials and equipment. 2. To create distinctive solutions for the needs of mankind in the pharmaceutical and consumer Health products. 3. To dedicate all resources to continuous impro ement in our processes and products. 5
REPORT OF THE DIRECTORS TO THE MEMBERS OF STARWIN PRODUCTS LIMITED (CONT'D)
Holding company The company is 71.33% owned by Dannex Limited, a company incorporated in Ghana.
Related party transactions Apart from Mr. Kwasi Yirenkyi a non-executive Director on the board who holds shares of Starwin Products Ltd, no director had a material interest in any contract to which the company was a party during the year. Related party transactions with (Dannex Limited) are also disclosed in (note 12) of the financial statements
Auditor The [Audit Committee] has responsibility delegated from the board of directors for making recommendations on the appointment, reappointment, removal and remuneration of the external auditor. KPMG has been the auditor of Starwin Products Limited for over ten (10) years. With the approval of the Board of Directors, KPMG provides tax services to the Company at a fee ofGHS 12,000.
Board of Directors
Profile
Executive Qualification Outside board and management position MBA. lot. Business, Bsc Admin Managing DirectorlBoard Member, Dannex Limited
MBA, B.A. Economics Chairman ofOmni Media and Vice Chair., G.A.F.C BSc. Business Administration Board Member, OISL Masters Social Work, Degree Executive Director, Accra Social Work Sym hony Orchestra PGD. Economics, Univ. of Florida President, (OTUW A) MBA, Bsc Computer Science M.D Omni Media Ltd. PhD. Pharmacy, Bsc Chemistry Lecturer, UGSOP
Biographical information of directors
Age category Number of directors Up to - 40 years 41 - 60 years 2 Above 60 years 4 6
REPORT OF THE DIRECTORS TO THE MEMBERS OF STARWIN PRODUCTS LIMITED (CONT'D)
Role of the Board The main activity of the Board of Directors is to give clear strategies and recommendation to the management team of the company to follow. Furthermore, one of the roles of the Board of Directors is to oversee the company's risk management control measures. The established control measures are revised on a periodical manner to ensure that the economic and the market environments are considered. The composition of the Board is made up on one Executive and 6 non-executive directors, one of which is the Chairman.
The Company's management team is represented on the Board by the Managing Director. He ensures that there is a direct communication line opened between the operational drivers of our company and the Board of Directors. Therefore the managing Director always, with his team, finds innovative approaches to implement strategies and recommendations provided by the Board. The Board meets regularly to deliberate on the company strategies and other matters relating to the business.
We strongly believe that the success of the company depends on the effectiveness of the members of the board. Therefore in accordance with the regulations of the company and the Ghana Stock Exchange, all the directors with the exception of the Managing Director go through a re-election at the Annual General Meeting.
Internal control systems Starwin Products Limited has internal control systems for identifying, managing and monitoring risks, these controls are intended to provide reasonable assurances that the risks facing the company are being controlled. The directors have reviewed the effectiveness of the internal control systems, including controls related to financial, operational and reputational risks identified by the company as at the reporting date and no significant failings or weaknesses were identified during this review.
Directors' performance evaluation Every year the performance and effectiveness of the Board of Directors ("the Board), its committees and individual directors is evaluated. The evaluation is conducted by comparing Annual targets set for the Board and the sub committees to actual results achieved for the year. The results of the evaluation is shared with all members of the Board and discussed prior to the Annual General Meeting. All the Directors with exception of the Managing Director go through an annual re-election at the Annual General Meeting. Overall, it was noted that the board of directors and its committees were operating in an effective manner and performing satisfactorily, with no major issues identified.
Professional development and training New Directors appointed to the Board of Starwin Products Limited are provided with an induction programme to familiarise themselves with the pharmaceutical industry, the risks and strategic challenges it faces, and its economic, competitive, legal and regulatory environment. A programme of strategic and other reviews, together with the other training provided during the year, ensures that directors continually update their skills, their knowledge and familiarity with the company's businesses, and their awareness of sector, risk, regulatory, legal, financial and other developments to enable them to fulfil effectively their role on the Board and committees of the Board.
Conflicts of interest Starwin Products Limited has put in place proper authorisation procedures for Conflict of Interest issues, whereby actual or potential conflicts are regularly anticipated, reviewed and authorisations sought from the Board of Directors. During the year, no su h onfli ts arose and no such authorisations were sought. 7
REPORT OF THE DIRECTORS TO THE MEMBERS OF STARWIN PRODUCTSLIMITED (CONT'D)
Board balance and independence The composition of Starwin's board of directors and its Committees is reviewed during every Annual General Meeting to ensure that Board members have the required mix of skills, independence, knowledge and experience to carry out the business of the Board. The Board considers that the Chairman is independent on appointment and all non-Executive Directors are independent as it pertains to the management of the company. The continuing independent and objective judgement of the non-Executive Directors has been confirmed by the Board of Directors.
Corporate responsibility Starwin Products limited did not embark on corporate responsibilities during the year. The company has a documented code of business ethics and policies to guide all employees in the discharge of their duties. This code sets the professionalism and integrity required for business operations which covers compliance with the law, conflicts of interest, environmental issues, reliability of financial reporting, bribery and strict adherence to the principles so as to eliminate the potential for illegal practices.
Approval of the financial statements The financial statements of Starwin Products Limited, as identified in the first paragraph, were approved oard of directors on .. ~~. ¥ 2017 and signed on their behalf by:
Director 8
INDEPENDE T AUDITOR'S REPORT TO THE MEMBERS OF ST ARWIN PRODUCTS LIMITED
Report on the Audit of the Financial Statements
Opinion We have audited the fmancial statements of Starwin Products Limited, which comprise the statement of financial position at 31 December 2016, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 13 to 41.
In our opinion, these financial statements give a true and fair view of the financial position of Starwin Products Limited at 31 December 2016, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and in the manner required by the Companies Act, 1963 (Act 179).
Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. iiri-ventory(C-iI¢ 3,629,803] ..------.. ------.-- ..-.-.---- ..--.--.-.---. i I Refer to Note 10 to the fmancial statements I
~T-h-e-k-e-YaUdit~atter i How the matter was addressed in our audit ------J.·-' ---i I. Inventories consist of raw materials, I Our audit procedures included:
!I' work-in-progress, fmished goods and i i I goods in transit. i • Testing of design and operating effectiveness of internal I I control over inventory management process. These I i The Company has a significant I includes, testing the inventory cycle counts and 'I I investment in inventory at 31 I management review of unit cost calculations. I December 2016 and there is a risk that I I I the inventory has not been correctly i • Attending the inventory counts in stores performed by I I valued and that the financial statements I the company at the year end. We compared our count I I do not correctly account for the I results with the results of the counts by Starwin Products I I ownership of inventory. In particular! Limited representatives. : I there is judgement involved in" I I assessing the level of inventory I
I prov~sio~ required in._r_e_sp_e_c_t_o_f_SI_O_W_! !, ~ng mventory._ ---'
AOodoo E.O. Asiedu N.D. Harlley KPMG. a partnership established under Ella;=- ~ Sarponq D.S. Adoteye A.O.Akoto KPMG network of independent member ~ ""~'tc:3=_0 !?I'" • Ayivt:x K. Frempong-Kore F:N. Dennis International Coorperative ("KPMG imerreao-e a s-:s:s _ _ Coerran 9
INDEPENDE T AUDITOR'S REPORT TO THE MEMBERS OF STARWIN PRODUCTS LIMITED (CONT'D)
I Inventory [GH¢ 3,629,803] I Refer to Note 10 to the financial statements I
I The key audit matter i How the matter was addressed in our audit I In addition, valuation of the inventories I I is at the lower of cost or net realizable I • Challenging the basis for identifying and providing for I value. Valuation at cost includes I obsolete inventory by management. For the damaged or I different components such as cost I obsolete stock identified during the year end stock count I incurred in acquiring the inventory, we evaluated whether it is included in the assessment I item. The assessment of net realizable I made by management. I value is also mainly based on I i management estimates. I • Performing a price test of some selected inventory : I items. I I • Recalculating the cost of a sample of inventory items. ! I • Challenging assumptions made by management in assessing the net realisable values.
• Performing test of details on actual margins and I valuation of obsolete inventories
• Considering the adequacy of the company's disclosures about the degree of estimation involved in arriving at the I rovision. r------·..--·-·····------·---·-.-···------.------.-·------·----.- ! Trade receivables {GH¢ 823,789J I Refer to Note 11 to the financial statements ---I
! The key audit matter I How the matter was addressed in our audit ---1,1 i Trade receivables (net of impairment) I Our audit procedures included, but were not limited to: I I I I i amounted to GH¢ 823,789 as at 31 I • Internal control testing on the recognition of revenue to I I December 2016. I ensure its accounting in accordance with IAS 18: I I I "Revenue". I i This amountis material to the financial I 'I I statements. Management exercises I • Testing samples of revenue recognized during the year I I judgment in the determination of the I to supporting documents including invoices and delivery I i collectability of trade receivables at I documentation, to evaluate the timing of revenue I I year end.Further, given the nature of recognition during the accounting period and the I i the company's business and the volume existence of the related accounts receivable balances at I ! of sales transactions there are factors the year end. ! which may result in the recognition of ! revenue before the risks and rewards I have been transferred to the company's i customers. i I
ADodoo E.O. Asiedu N.D. Harlley KPMG, a partnership established under Gha.~ ,K. Sarpong D.S. Adoteye A.O. Akoto KPMG network of independent memberfWmsc....,..,.,=~=.-."-' AAyivor K. Frempong-Kore F.N. Dennis International Coorperative (" KPMG Interna:D'C ~ - ..J Coleman 10
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF STARWIN PRODUCTS LIMITED (CONT'D)
I The key audit matter I • Comparing trade receivable balances to customer I confirmations, subsequent receipts from customers I and/or delivery documentation where applicable. I i • Evaluating and testing the Company's process and I documented policy for accounts receivable provisioning. I We also challenged and evaluated management's! assumptions and explanations in relation to trade I receivable provisioning through inspection of the aged I receivables listing and verification to supporting I documentation. I ! • Assessing the appropriateness of the disclosures in the I notes to the financial statements, with reference to the , I requirements of International Financial Reporting Standards.
Other Information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and the Directors' Report as required by the Companies Act, 1963 (Act 179) but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the fmancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Statements
The Directors are responsible for the preparation of fmancial statements that give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179), and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for overseeing the Co ial reporting process.
, Jodoo E.O. Asiedu N.D. Harlley Sarpong D.S. Adoteye A.O. Akoto • f«Ivoc K. Frempong-Kore F.N. Dennis _ Coleman 11
!DEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF STAR PRODUCTS LIMITED (CONT'D)
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
NA Dodoo E.D. Asiedu N.D. Harlley D.S. Adoteye A.D. Akoto KPMG a partnership established under Ghanaian law, is a member of the A.K. Sarpong N.A.Ayivor K. Frempong-Kore F.N. Dennis KPMG'neiYf'Od.o· independent member firms affiliated with K~MG International Coorperative ("KPMG International"), a Swiss entrty. J. Coleman 12
Dl1>EPENDENT AUDITOR'S REPORT TO THE MEMBERS OF STAR PRODUCTS LIMITED (CONT'D)
Report on Other Legal and Regulatory Requirements
Compliance with the requirements of Section 133 of the Companies Act, 1963 (Act 179)
We have obtained all the information and explanations which, to the best of our knowledge and belief were necessary for the purpose of our audit.
In our opinion, proper books of account have been kept, and the statements of financial position and comprehensive income are in agreement with the books of account.
The engagement partner on the audit resulting in this independent auditor's report is Frederick Nyan Dennis (ICAG/P/1426).
For and on behalf of: KPMG: (ICAGIF/2017/038) CHARTERED ACCOUNTANTS 13 YIYIW A DRIVE, ABELENKPE POBOXGP242 ACCRA
.....?:? fr.d ,2017
NA Dodoo E.O. Asiedu N.D. Harlley D.S. Adoteye A.O. Akoto KPMG, a partnership established """'" AX Sarpong KPMG network of independent rrerrce- =i---s.:. N.A. Ayivor K.Frempong-Kore F.N. Dennis International Coorperative t"KPMG -te-esc-a :::: J. Coleman 13
TAR PRODUCTS LIMITED STATK ILIT OF FDi CIAL POSITION AT 31 DECEMBER 2016
Asset Note 2016 2015 GH¢ GH¢ Non-current assets Property, plant and equipment 6 1,033,019 1,229,428 Long term investments 9(a) 182,250 182,250 Deferred tax assets 8 17,558
Total non-current assets 1,215,269 1,429,236
Current assets Inventories 10 3,629,803 1,786,412 Trade and other receivables 11 893,440 864,667 Due from related party 12 12,625,520 Income tax asset 7 139,834 Investments 9(b) 6,342,379 Cash and bank balance 13 12,858 50,009
Total current assets 17,161,621 9,183,301
Total assets 18,376,890 10,612,537
Equity Share capital 17 7,549,127 7,549,127 Issue reserve (555,763) (555,763) Capital surplus 115,028 115,028 Retained earnings 4,535,672 974,323
Total equity 11,644,064 8,082,715
Non-current liabilities Deferred tax liabilities 8 68,079
Total non-current liabilities 68,079
Current liabilities Bank overdraft 14 719,208 863,987 Trade and other payables 19 1,857,072 1,659,092 Dividend payable 16 266,558 6,743 Short-term loan 15 2,765,587 Income tax liability 7 1,056,322
Total current liabilities 6,664,747 2,529,822
Total liabilities 6,732,826 2,529,822
18,376,890
The notes on pages 18 to 41 form an in egral part of these financial statements. 14
AR L\ PRODUCTS LIMITED STAT~ rrxr OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016
Note 2016 2015 GH¢ GH¢
Revenue 9,172,862 5,762,183
Cost of sales (3,986,351 ) (2,875,291) ------Gross profit 5,186,511 2,886,892
Other income 20 3,464,060 1,388,066
General, administrative and selling expenses (3,097,675) (4,185,144) ------Results from operating activities 5,552,896 89,814
Finance costs 23 (407,154) (298,712) ------
Profit/Il.oss) before income taxation 21 5,145,742 (208,898)
Income tax expense 7 (1,324,578) 93,034 ------Proflt/tLoss) for the year 3,821,164 (115,864)
Other comprehensive income
Capital gains on investment - tax revision 8 (15,337)
Total comprehensive income for the year 3,821,164 (131,201)
Basic earnings per share 18 0.0147 (0.00004)
Diluted earrings per share 18 0.0147 (0.00004)
The notes on pages 18 to 41 form an integral part ofthese financial statements.
• 15
STAR PRODUCTS LIMITED STATE- IE~'T OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016
Stated Issue Capital Retained Total Capital Reserve Surplus Earnings Equity GH¢ GH¢ GH¢ GH¢ GH¢
Balance at 1 January 2016 7,549,127 (555,763) 115,028 974,323 8,082,715 Total comprehensive income for the year Profit for the year 3,821,164 3,821,164 Other comprehensive income
------Total comprehensive income for the year 3,821,164 3,821,164 Transaction with equity holders Issue of ordinary shares Dividend declared (259,815) (259,815) Total transactions with equity holders
------Balance at 31 December 2016 7,549,127 (555,763) 115,028 4,535,672 11,644,064 ------
Stated Issue Capital Retained Total Capital Reserve Surplus Earnings Equity GH¢ GH¢ GH¢ GH¢ GH¢
Balance at 1 January 2015 7,549,127 (555,763) 130,365 1,090,187 8,213,916 Total comprehensive income for the year Loss for the year (15,337) (115,864) (131,201) Other comprehensive income
------Total comprehensive income for (15,337) (115,864) (131,201) the year Transaction with equity holders Issue of ordinary shares Dividend declared Total transactions with equity holders
------Balance at 31 December 2015 7 -49,L (555,763) 115,028 974,323 8,082,715 ---.--.--.------
The notes on pages 18 to 41 form an integ of these financial statements. 16
STARWI PRODUCTS LIMITED ST ATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016
2016 2015 GH¢ GH¢ Cash flows from operating activities Profit/(Loss) after taxation 3,821,164 (131,201) Adjustments for: Depreciation 312,585 185,124 Loss on disposal of assets (1,694,800) 6,564 Impairment loss 9,533 Interest expense 407,154 298,712 Interest income (1,699,465) Doubtful debt provision 115,186 75,365 Income tax 1,324,578 (77,697)
2,595,935 356,867 Changes in: Inventories (1,843,392) 276,828 ** Trade and other receivables (143,959) 814,510 Trade and other payables 197,979 248,240 Due from related party (11,645,714)
Cash generated from operations (10,839,151) 1,696,445
Interest paid (407,154) (298,712) Income taxes paid (42,785) (12,114)
Net cash flow from operating activities (11,289,090) 1,385,619
Cash flows from investing activities Purchase of property, plant and equipment (330,908) (71,150) Proceeds from sale of PPE 1,900,000 Interest income received 719,660
Net cash flow used in investing activities 2,288,752 (71,150)
Cash flows from financing activities Proceeds from borrowings 2,765,587
Net cash flow from financing activities 2,765,587
Net (decrease)/increase in cash and cash equi alents (6,234,751) 1,314,469
** Changes in trade and other recei ables: This amount excludes impairment of trade receivables amounting to GH¢ 115,186. 17
STARWIN PRODUCTS LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 (CONT'D)
2016 2015 GH¢ GH¢ Analysis of changes in cash and cash equivalents during the year Balance at 1 January 5,528,401 4,213,932 Net cash flow (6,234,751) 1,314,469 ------Balance at 31 December (706,350) 5,528,401 ------Analysis of balances of cash and cash equivalents Cash and bank balances 12,858 50,009 Bank overdraft (719,208) (863,987) Treasury bills 6,342,379 ------Balance at 31 December (706,350) 5,528,401 ======
The notes on pages 18 to 41 form an integral part of these financial statements. 18
ST ARWIN PRODUCTS LIMITED OTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016
1. REPORTING ENTITY
Starwin Products Limited is a company registered and domiciled in Ghana. The address of the company's registered office can be found on page 2 of the annual report. The company is authorised to carryon the business of manufacturing, sale, import and export of pharmaceutical products and drugs of any kind.
2. BASIS OF PREPARATION
a. Statement of compliance
The financial statements of Starwin Products Limited have been prepared in accordance with International Financial Reporting Standards (IFRSs).
b. Basis of measurement
Financial statements are prepared on the historical cost basis except for financial instruments that are stated at fair values.
c. Functional and presentational currency
The financial statements are presented in Ghana cedis (GH¢) which is the company's functional currency.
d. Use of estimates and judgement
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that ha e the most significant effect on the amount recognised in the financial statements are described in notes 4 and _
The accounting policies set ou . been applied consistently to all periods presented in these financial statements by the co 19
3. SIGNIFICANT ACCOUNTING POLICIES a. Financial Instruments
(i) Non-derivative financial instruments
Non-derivative financial instruments comprise investment in shares and treasury bills, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instrument not at fair value through profit and loss, any directly attributable transaction cost. Subsequent to initial recognition non-derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses, if any.
Non-derivative financial instruments are categorised as follows:
• Loans and receivables - these are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are measured at amortised cost using the effective interest rate method, less any impairment losses.
• Financial liabilities measured at amortised cost - this relates to all other liabilities that are not designated at fair value through profit or loss.
• Available-for-sale financial assets - The company's investments in shares are classified as available- for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.
(ii) Off setting
Financial assets and liabilities are set off and the net amount presented in the statement of financial position when, and only when, the company has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.
(iii) Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at .initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
(iv) Stated capital (Share capital)
Ordinary Shares
Ordinary shares are classified as equity. In cementa I costs directly attributable to the issue of ordinary shares are recognised as a dedu tion m equity, net of any tax effects.
Repurchase of stated capital (treas
When stated capital recognised - is repurchased, the amount of the consideration paid, which includes directly attributable any tax effects, and is recognised as a deduction from equity. Repurchased shares are 1 ----"'-- - ;-:"??;;:J'"'_- shares and are presented as a deduction from total equity. 20
3. SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on transaction is transferred to/from retained earnings.
(b) Property, plant and Equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self- constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components).
(ii) Subsequent costs
The cost of replacing part of an item of property, plant or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Machinery and Equipment 5 years Motor Vehicles 3 years Office Machines 5 years Furniture and Fittings 10 years Leasehold Properties over period of lease
Depreciation methods, useful lives and residual values are reassessed at each reporting date. Gains and losses on disposal of property, plant and equipment are included in the profit or loss.
(d) Intangible Assets
Software
Software acquired by the company stared at cost less accumulated amortisation and accumulated impairment losses.
Subsequent expenditure on -0 "- capitalised only when it increases the future economic benefits embodied in the spec" " h it relates. All other expenditure is expensed as incurred.
Amortisation is recognised " 10-- on a straight-line basis over the estimated useful life of the software, from the date ••.-.•";;(. ,,:"Ie - r use. The estimated useful life of software is three years. 1 21 3. SIG.lIFICANT ACCOUNTING POLICIES (CONT'D)
(e) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.
(f) Trade and Other Receivables
Trade receivables are stated at amortised costs, less impairment losses. Specific allowances for doubtful debts are made for receivables of which recovery is doubtful.
Other receivables are stated at their cost less impairment losses.
(g) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and bank balances and these are carried at amortised cost in the statement of financial position.
(h) Employee Benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and will have no legal or constructive obligation to pay future amounts. Obligations for contributions to defined contribution schemes are recognised as an expense in the profit or loss when they are due.
(i) Revenue
(i) Sale of goods
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, taxes and volume rebates. Revenue is recognised when the significant risks and rewards of the ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement in the goods, and the amount of revenue can be measured reliably.
(j) Finance Income and Expense
Finance income comprises interest income on funds invested (including available-for-sale financial assets) and dividend income. Interest income is recognised in the income statement using the effective interest method. Dividend income is recognised in profit or loss on the date that the company's right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expenses comprise interest expense on borrowings. All borrowing costs are recognised in profit or loss using the effective interest method. 1 1 22 3. SIGNIFIC T ACCOUNTING POLICIES (CONT'D)
(k) Impairment
(i) Financial assets
A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
1 An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining 1 financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the profit or loss. An impairment loss is reversed if the reversal 1 can be related objectively to an event occurring after the impairment loss was recognised. 1 (ii) Non-financial assets The carrying amounts of the company's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any 1 such indication exists then the asset's recoverable amount is estimated. (I) Income Tax
Income tax expense comprises current and deferred tax. The company provides for income taxes at the current tax rates on the taxable profits of the company.
Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(m) Dividend
Dividend payable is recognised as a liability in the period in which they are declared.
(n) Post Balance Sheet Events
Events subsequent to the reporting date are reflected in the financial statements only to the extent that they relate to the year under consideration and the effect is material. 23
3. SIGNIFICANTACCOUNTING POLICIES (CONT'D)
(0) Segment reporting
A segment is a distinguishable component of the company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
(p) Earnings per Share
The company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
(q) Comparatives
Where necessary the comparative information has been changed to agree to the current year presentation.
(r) New standard and interpretation not yet adopted
There are new or revised Accounting Standards and Interpretations in issue that are not yet effective for the year ended 31 December 2016, and have not been applied in preparing these financial statements. These include the following Standards and Interpretations that may have an impact on future financial statements:
Standard/Interpretation Date issued by Effective date IASB (1) Periods beginning on or after IAS 7 Disclosure amendments January 2014 1 January 2017
IAS 12 Recognition of Deferred Tax Assets May 2014 1 January 2017 for Unrealised Losses IFRS 15 Revenue from contracts with May 2014 1 January 2018 customers IFRS 9 Financial Instruments July 2014 1 January 2018
/AS 7 Disclosure Initiative (Amendments to /AS 7)
The amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. This includes providing a reconciliation between the opening and closing balances for liabilities arising from financing activities.
The amendments apply for annual periods beginning on or after 1 January 2017 and early application is permitted. 24
3. SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
(r) New standard and interpretation not yet adopted- Cont'd
/AS 12 Recognition of Deferred Tax Assets for Unrealised Losses
The amendments provide additional guidance on the existence of deductible temporary differences, which depend solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset.
The amendments also provide additional guidance on the methods used to calculate future taxable profit to establish whether a deferred tax asset can be recognised.
Guidance is provided where an entity may assume that it will recover an asset for more than its carrying amount, provided that there is sufficient evidence that it is probable that the entity will achieve this. Guidance is provided for deductible temporary differences related to unrealised losses are not assessed separately for recognition. These are assessed on a combined basis, unless a tax law restricts the use of l losses to deductions against income of a specific type. The amendments apply for annual periods beginning on or after 1 January 2017 and early application is l permitted. IFRS 15 Revenue from contracts with customers
This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from l Customers and SIC-31 Revenue - Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.
This new standard will most likely have a significant impact on the Company, which will include a possible change in the timing of when revenue is recognised and the amount of revenue recognised. The Company is currently in the process of performing a more detailed assessment of the impact of this standard on the Company and will provide more information in the year ended 31 December 2016 financial statements.
The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. ,
IFRS 9 Financial Instruments
On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions ofIFRS 9 and completesthe IASB's project to replace IAS 39 Financial Instruments: Recognition and Measurement.
This standard will have a significant impact on the Company, which will include changes in the measurement bases of the Company's financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an "incurred loss" model from IAS 39 to an "expected credit loss" model, which is expected to increase the provision for bad debts recognised in the Company.
The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted. r 25 4. DETERMINATION OF FAIR VALUES r A number of the company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about r the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(i) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the current market rate of instruments with similar credit risk profile and maturity at the reporting date. Receivables due within 6-month period are not discounted as the carrying values of approximate their fair values.
(ii) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Instruments with maturity period of 6 months are not discounted as their carrying values approximate their fair values.
IT (iii) Investments in equity
Available-for-sale financial assets are measured at cost as there is no longer a reliable measure of fair value available. The shares are not actively traded and therefore no reliable stock price can be ascertained.
5. SEGMENT REPORTING
Starwin Products Limited has only one reportable segment. Required disclosure information is listed below for this segment.
a. Information about reportable segments
2016 2015 GH¢ GH¢
Revenue 9,172,862 5,762,183 Profit/rLoss) before taxation 5,(45,742 (208,898) Total assets 18,376,890 10,612,537 Non-current assets 1,215,269 1,429,236 Total liabilities 6,732,826 2,529,822
Other material non-cash items: Interest income 3,464,060 1,388,066 Interest expense (407,154) (298,712) Depreciation and amortisation 312,584 185,124
b. Geographical information
Starwin Products Limited operates solely in Ghana in the following regions;
Northern region Ashanti region Western region Central region Easter region Greater A ra region Brong Ahafo region oha re 'on 26
5. SEGMENT REPORTING (CONT'D)
c. Major customer
Revenue from Starwin's largest customer represents approximately GH¢ 101,933 of Starwin Products Limited revenue in 2016 and GH¢148,000 in 2015.
6. PROPERTY, PLANT AND EQUIPMENT
2016 Leasehold Machinery properties & Equipment Total GH¢ GH¢ GH¢ Cost At 11112016 1,199,324, 1,799,733 2,999,057 Additions 330,908 330,908 Disposal (205,200) (205,200) r At 31112116 994,124 2,130,641 3,124,765
Accumulated Depreciation I At 111/2016 309,960 1,459,669 1,769,629 Charge for the year 37,718 274,866 312,584 [ Impairment 9,533 9,533 At 31112116 347,678 1.744,068 2.091.746 r Net Book Value At 31112/16 646.446 386,573 1.033,019
1- At 31112/15 889.364 340,064 1.229.428
2015 Leasehold Machinery properties & Equipment Total GH¢ GH¢ GH¢ Cost At 11112015 1,199,324 1,741,673 2,940,997
Additions 71,150 71,150 Write off (13,090) (13,090) 1,199,324 1,799,733 2,999,057
At 31112115
Accumulated Depreciation At 111/2015 272,244 1,318,787 1,591,031 Charge for the year 37,716 147,408 185,124 Write off (6,526) (6,526)
At 31112115 309,960 1.459,669 1.769,629
Net Book Value At 31112/15 889,364 340,064 1.229.428
At 31112114 927,080 422,886 1.349,966 27
6. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
a. Depreciation has been charged in the financial statements as follows: 2016 2015 l GH¢ GH¢
Cost of sales 187,523 147,408 General, administrative and selling expenses 125,061 37,716 1 312,584 185,124
b. Profit on disposal of property, plant and equipment 2016 2015 GH¢ GH¢
1 Gross book value 205,200 13,090 Accumulated depreciation (6,526)
] 205,200 6,564 Proceeds (1,900,000)
(Profit)lLoss on disposal (1,694,800) 6,564
This relates to proceeds from the sale of land.
7. TAXATION 2016 2015 GH¢ GH¢ (i) Income tax expense
Current tax expense 1,238,941 Deferred tax expense: Continuing operations 85,637 (93,034) Other Comprehensive Income 15,337
1,324,578 (77,697)
Deferred tax expense relates to the origination and reversals of temporary differences and deferred capital gains tax on long term investment. 28
7. TAXATION (CONT'D)
(ii) Taxation payable Payments Charged Balance at during the to PIL Balance at 111116 year account 31112/16 GH¢ GH¢ GH¢ GH¢ Income Tax
Up to 2005 (54,139) (54,l39) 2006 6,652 6,652 2007 (1) (l) 2010 (21,742) (21,742) 2011 48,589 48,589 2012 (47,553) (47,553) 2013 4,849 4,849 2014 (60,678) (60,678) 2015 (l2, ll4) (l2, ll4) 2016 (42,785) 1,238,941 1,196,156
National Reconstruction Levy ( l,598) (1,598) Tax Credit (2, llO) (2,110) Capital Gains Tax II II
(139,834) (42,785) 1,238,941 1,056,322
Tax liabilities up to and including the 2005 year of assessment have been agreed with the tax authorities. The remaining liabilities are however subject to agreement with the tax authorities.
National Reconstruction Levy: This relates to a levy imposed on companies by the Government on profits before tax between 2001 and 2005. This levy has been abolished.
(iii) Reconciliation of effective tax rate 2016 2015 GH¢ GH¢
Profit/d.oss) before taxation 5,145,742 (208,898)
Income tax using the domestic tax rate (25%) 1,286,436 (52,224) Non-deductible expenses 330,492 363,788
Income not taxable (150,775) (63,821) Tax at different tax rate (141,575) (340,777)
Tax charge 1,324,578 (93,034)
Effective tax rate 26% 45% 29
8. DEFERRED TAXATION 2016 2015 GH¢ GH¢
Balance at 1 January (17,558) 60,139 Released into Income Statement 85,637 (93,034) Charge to Other Comprehensive Income 15,337
Balance at 31 December 68,079 (17,558)
(i) Recognised deferred tax assets and liabilities.
Deferred tax liabilities are attributable to the following:
2016 2015 Assets Liabilities Net Assets Liabilities Net GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ Property, plant and Equipment 103,876 103,876 176,890 176,890 Capital gains 15,337 15,337 Others (35,797) (35,797) (209,785) (209,785)
Net tax (assets )/liabilities (35,797) 103,876 68,079 (209,785) 192,227 (17,558)
9(a) LONG TERM INVESTMENTS 2016 2015 GH¢ GH¢
Ordinary shares 182,250 182,250
This relates to the value of 280,385 ordinary shares in Stanbic Bank Ghana Limited. The company reclassified this investment from "measure at fair value" to "measurement at cost". The shares are not actively traded and therefore no reliable stock price can be ascertained.
9(b) CURRENT INVESTMENTS 2016 2015 GH¢ GH¢
Treasury bills 6,342,379
2Q16 2015 10. INVENTORIES GH¢ GH¢
Raw and Packing Materials 1,812,540 1,338,472 Work-in-Progress 93,774 402,334 Finished Goods 153,790 3,102 Goods in transit 1,535,168 Tools and Spares 34,531 42,504
3,629,803 1,786,412 l n 30 11. TRADE AND OTHER RECEIVABLES 2016 2015 GH¢ GH¢ ~ Trade receivables due from customers 823,789 794,102 Other receivables 58,928 69,703 l Staff debtors 10,723 862
893,440 864,667
2016 2015 12. RELATED PARTY TRANSACTIONS GH¢ GH¢
Amount due from related party Dannex Limited 12,625,520
2016 2015 GH¢ GH¢ 13. CASH AND CASH EQUIVALENTS
Bank balances 12,858 50,009
14. BANK OVERDRAFT 2016 2015 GH¢ GH¢
Standard Chartered Bank Ghana Limited 719,208 863,987
The company has an overdraft facility not exceeding GH¢ 1,000,000 with Standard Chartered Bank Ghana Limited to finance working capital, mainly payment of utilities, salaries, custom duty, VAT and other operating expenses. The company's floating assets, land and buildings have been pledged as security for the facility. Interest rate is at 30% per annum.
15. SHORT TERM LOAN 2016 2015 GH¢ GH¢
Standard Chartered Bank Ghana Limited 2,765,587
The company has a short term loan facility not exceeding GH¢4,000,000 with Standard Chartered Bank Ghana Limited. Out of the total amount, GH¢2,000,000 is to provide short term finances to finance local raw materials and the remaining GH¢2,000,000 to finance payments under import Letters of Credit covering stocks and documentary collections. The company's floating assets, land and buildings have been pledged as security for the facility. Interest rate is at 30% per annum. 31
16. DIVIDEND PAYABLE 2016 2015 GH¢ GH¢
Balance at 1 January 6,743 6,743 Dividend declared during the year 259,815
266,558 6,743 Dividend paid
Balance as at 31 December 266,558 6,743
17. STATED CAPITAL
(a) Ordinary shares No. of Shares Proceeds No. of Shares Proceeds 2016 2016 2015 2015 '000 GH¢ '000 GH¢ Authorised: Ordinary Shares 500,000 500,000 of no par value Issued and fully paid For cash 223,110 7,360,512 223,1l0 7,360,512 For consideration other than cash 610 14,658 610 14,658 Capitalisation issue 36,095 173,957 36,095 173,957
259,815 7,549,127 259,815 7,549,127
The holders of the ordinary shares are entitled to receive dividend as declared from time to time and are entitled to one vote per share at meetings of the company. There is no call or instalment unpaid on any shares.
18. EARNINGS PER SHARE
Basic
Basic earnings per share are calculated by dividing the net result attributable to equity holders of the company by the weighted average number of shares in issue excluding treasury shares during the year.
2016 2015 GH¢ GH¢ Profit/(Loss) attributable to equity holders of the Company 3,821.164 (115,864)
Weighted average number of ordinary shares in issue 259,814,797 259,814,797
Basic earnings per share (expressed in GH¢ per share) 0.0147 (0.0004) 32
18. EARNINGS PER SHARE (CONT'D)
Diluted Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares, to assume of all dilutive potential ordinary shares. At 31 December 2016 and 2015, the company had no dilutive potential ordinary shares.
19. TRADE AND OTHERPAYABLES 2016 2015 GH¢ GH¢
Trade payables 1,178,810 872,780 Non-trade payables 227,465 253,124 Accrued Charges 449,139 531,530 End of service benefit (note 18(i) 1,658 1,658 1.857.072 1.659.092
(i). End of service benefit
Balance at 31 December
The amount represents outstanding due to staff on a scheme which was terminated a few years ago.
20. OTHER INCOME 2016 2015 GH¢ GH¢
Interest on treasury bills 720,872 1,385,726 Profit from the sale of property, plant and equipment 1,694,800 Insurance proceeds 68,582 2,340 Interest on third party loans 979,806
3,464,060 1,388,066
21. PROFIT BEFORE TAX IS STATED AFTER CHARGING:
Personnel cost (note 20) 1,751,479 1,781,310 Auditors remuneration 70,000 75,000 Depreciation (note 6) 312,584 185,124 Directors emoluments ~ 130,906
22. PERSONNEL COSTS
Wages and salaries 1,486,287 1,512,745 Social security contributions 179,960 187,747 Provident fund 85,232 80,818
1,751,479 1,781,310
The average number of persons employed by the company during the year was 82 (2015: 97) 33
23. FINANCE COSTS 2016 2015 GH¢ GH¢
Interest expense (407,154) (298,712)
24. FINANCIAL RISK MANAGEMENT
(i) Overview
The company has exposure to the following risks from its use of financial instruments:
• credit risk • liquidity risk • market risks
This note presents information about the company's exposure to each of the above risks, the company's objectives, policies and processes for measuring and managing risk, and the company's management of capital.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the company's risk management framework. The Board's Audit Committee is responsible for monitoring compliance with the company's risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the company.
The Audit Committee gains assurance in relation to the effectiveness of internal control and risk management from: summary information in relation to the management of identified risks; detailed review of the effectiveness of management of selected key risks and results of management's self-assessment process over internal control, which ensures that the audit committee and management understand the company's key risks and risk management capability; sets standards on governance and compliance; and provides assurance over the quality of the company's internal control and management of key risks.
The company also has in place an internal audit department, which monitors compliance with internal procedures and processes and also assesses the effectives of internal controls.
The company's risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations.
(ii) Credit risk
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company's receivable from customers. 34
24. FINANCIAL RISK MANAGEMENT (CONT'D)
Trade and other receivables
The company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The credit control committee has established a credit policy under which a new customer is analysed individually for credit worthiness before the company's standard payment terms and conditions are offered. The company generally trades with pre-defined and selected customers. Credit exposure on trade receivable is covered by customers issuing post-dated cheques to cover amount owed, as well the use of dealer's security deposits.
Allowances for impairment
The company establishes an allowance for impairment losses that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss allowance established for homogeneous assets in respect of losses that have been incurred but have not yet been identified. The collective loss allowance is determined based on historical data of payment for similar financial assets.
Exposure to credit risks
The carrying amount of fmancial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: 2016 2015 GH¢ GH¢
Trade and other receivables 893,440 864,667 Investment 6,342,379 Cash and Bank 12,858 50,009 ------906,298 7,257,055 ======
The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
2016 2015 GH¢ GH¢
Individuals and companies 823.789 794.102
(ii) Impairment losses
Trade receivables that are neither past due nor impaired are within their approved credit limits and management does not expect any non-payments from these parties.The trade receivables which were past due but not impaired relate to certain customers from whom there is no history of default. The aging analysis of the trade receivables are as follows:
2016 2015 GH¢ GH¢
Neither past due nor impaired 537,065 400,693 Past due but not impaired by up to 90 days 164,099 13,968 over 90 days 141,629 Past due and impaired 122,625 237,812
823,789 794,102 Gross Trade Receivables 35
24. FINANCIAL RISK MANAGEMENT (CONT'D)
The movement in the allowance in respect of trade receivables during the year was as follows:
2016 2015 GH¢ GH¢
Balance at 1 January 237,812 162,447 Impairment loss (reversed)/recognised (115,187) 75,365
Balance at 31 December 122,625 237,812
Based on historical default rates, the company believes that no impairment is necessary in respect of trade receivables past due up to 180 days. However, impairment loss has been recognised for specific customers whose debts are considered impaired.
No impairment loss was recognised for financial assets other than trade receivables.
(iii) Liquidity risk
Liquidity risk is the risk that the company either does not have sufficient financial resources available to meet all its obligations and commitments as they fall due, or can access them only at excessive cost. The company's approach to managing liquidity is to ensure that it will maintain adequate liquidity to meet its liabilities when due.
The following are contractual maturities of financial liabilities:
6mths Amount or less 6-12 mths 1-3 years 31 December 2016 GH¢ GH¢ GH¢ GH¢
Non-derivative financial liability
Trade and other payabies 1,857,072 1,857,072 Dividend payable 266,558 266,558 Short term loan 2,765,587 2,765,587 Bank overdraft 719,208 719,208
Balance at 31 December 2016 5,608,425 5,608,425
6mths Amount or less 6-12 mths 1-3 years 31 December 2015 GH¢ GH¢ GH¢ GH¢
Non-derivative financial liability
Trade and other payables 1,659,092 1,659,092 Dividend payable 6,743 6,743 Bank overdraft 863,987 863,987
Balance at 31 December 2015 2,529,822 2,529,822 36
24. FINANCIAL RISK MANAGEMENT (CONT'D)
6mths Amount or less 6-12 mths 1-3 years 31 December 2016 GH¢ GH¢ GH¢ GH¢
Non-derivative financial assets Trade and other receivables 893,440 893,440 Cash and cash equivalents 12,858 12,858 Non current investments 182,250 182,250 Balance at 31 December 2016 1,088,548 906,298 182,250
6mths Amount or less 6-12 mths 1-3 years 31 December 2015 GH¢ GH¢ GH¢ GH¢
Non-derivative financial assets
Trade and other receivables 864,667 864,667 Cash and cash equivalents 50,009 50,009 Current investments (Treasury bills) 6,342,379 6,342,379 Non-current investments 182,250 182,250 Balance at 31 December 2015 7,439,305 7,257,055 182,250
(iv) Fair Value
Fair Value Hierarchy
IFRS 7 requires disclosures about the level in the fair value hierarchy for assets and liabilities measured in the statement of financial position.
When measuring fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the following inputs used in the valuation techniques:
a. Levell: quoted prices (adjusted) in active markets for identical assets or liabilities.
b. Level 2: inputs other than quoted prices included in Levell that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (Le. derived from prices).
c. Level 3: inputs for assets and liability that are not based on observable market data (unobservable inputs). 37
24. FINANCIAL RISK MANAGEMENT (CONT'D)
(iv) Fair Value (continued)
Starwin fair value hierarchy and maximum credit risk exposure are as follows:
2016 Levell Level 2 Level 3 Financial assets held at fair value through GH¢ GH¢ GH¢ GH¢ profit and loss
Long term investments 182,250 182,250 Current investments (Treasury bills) 182,250 182,250 Total =- =-
2015 Level 1 Level 2 Level 3 Financial assets held at fair value through GH¢ GH¢ GH¢ GH¢ profit and loss
Long term investments 182,250 182,250 Current investments (Treasury bills) 6,342,379 6,342,379 6,524,629 6,524,629 Total =- =-
(v) Market risks
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the company's income or the value of its holdings of financial instruments, The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Foreign currency risk
The company is exposed to currency risk on purchases and borrowings that are denominated in currencies other than the functional currency. The currencies in which these transactions primarily are denominated are Great British Pounds and US Dollars.
Currency Risk
The company's exposure to foreign currency risk was as follows based on notional amounts,
31 December 2016 31 December 2015 USD GBP USD GBP
Bank balances --- - Gross exposure - =- =
The following significant exchange rates applied during the year:
Average Rate Reporting Date Cedis 2016 2015 2016 2015
USD 1 3.9733 3.7851 4.2400 3.8048 GBP1 5.3791 5.7827 5.2130 5.7009 38
24. FINANCIAL RISK MANAGEMENT (CONT'D)
Sensitivity analysison currency risks
The following table shows the effect of a strengthening or weakening of GH¢ against all other currencies on the company's income statement. This sensitivity analysis indicates the potential impact on the income statement based upon the foreign currency exposures recorded at December 31. (See "currency risk" above) and it does not represent actual or future gains or losses. The sensitivity analysis is based on the percentage difference between the highest daily exchange rate and the average exchange rate per currency recorded in the course of the respective financial year.
A strengthening/weakening of the Ghana cedi, by the rates shown in the table, against the following currencies at 31 December have increased/decreased equity and income statement by the amounts shown below.
(vi) Market risks
This analysis assumes that all other variables, in particular interest rates, remain constant.
As of 31 December 2016 2015 Income Income Income Income InGH¢ % statement statement % statement statement Change impact: impact: Change impact: impact: Strengthening Weakening Strengthening Weakening GH¢ GH¢ GH¢ GH¢ US$ 6.3% (40,558) 40,558 ±13% (91,971) 91,971
Interest rate risk
Profile At the reporting date the interest rate profile of the company's interest-bearing financial instruments was:
Carrying amount 2016 2015 GH¢ GH¢ Variable rate instrument Financial liabilities 719,208 863,987
Fair value-sensitivity analysis for fixed rate instrument
The company did not have fixed rate instrument at 31 December 2016.
Cash flow sensitivity analysis for variable rate instrument
A change of 200 basis points in interest rate at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2015. 39
24. FINANCIAL RISK MANAGEMENT (CONT'D)
Variab le rate instrument 200bp 200bp Increase Decrease GH¢ GH¢ Effect in cedis 31 December 2016 Variable rate instrument 4.315 (4.315)
31 December 2015 Variable rate instrument 3,802 (3,802)
Fair values
Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
31 December 2016 31 December 2015 Carrying Fair Carrying Fair Amount Value Amount Value (i) Financial assets
Trade and other receivables 893,440 893,440 864,667 864,667 Cash and cash equivalents 12,858 12,858 50,009 50,009 Current investments 6,342,379 6,342,379 Long term investments 182,250 182,250 182,250 182,250 1.088,548 1,088,548 7.439.305 7.439.305
(ii) Other financial liabilities
Trade and other payables 1,857,072 1,857,072 1,659,092 1,659,092 Bank overdraft 719,208 719,208 863,987 863,987 2,576,280 2,576,280 2,523,079 2,523,079
25. CAPIT AL COMMITMENTS
There were no commitments for capital expenditure not provided for at the reporting date (2015: Nil).
26. EMPLOYEE BENEFITS Defined Contribution Plans
(i) Social Security
Under a National Deferred Benefit Pension Scheme, the company contributes 13% of employees' basic salary to the Social Security and National Insurance Trust (SSNIT) for employee pensions. The company's obligation is limited to the relevant contributions, which were settled on due dates. The pension liabilities and obligations, however, rest with SSNIT.
(ii) Provident Fund
The company has a provident fund scheme for staff under which the company contributes 6.5% of staff basic salary. The obligation under the plan is limited to the relevant contribution and these are settled on due dates to the fund manager. 40
27. SHAREHOLDING INFORMATION
(i) Directors' Shareholding
The Directors named below held the following number of shares in the company as at 31 December 2016:
Ordinary Shares 2016 0/0 Kwasi Yirenkyi 38,700 0.01
(ii) Number of Shares in Issue
Earnings and dividend per share are based on 79,391,778 weighted average number of ordinary shares in issue during the year.
(iii) Number of Shareholders
The company had 259,814,797 ordinary shares at 31 December 2016 distributed as follows:
Holding No. of Holders Total Holding % Holding
1 - 1,000 2,418 1,807,690 0.70 1,001 - 5,000 2,222 5,861,136 2.26 5,001 - 10,000 578 4,581,394 1.76 10,001 and over 411 247,564,577 95.28 ------5,629 259,814,797 100.00 ======
The company had 259,814,797 ordinary shares at 31 December 2015 distributed as follows:
Holding No. of Holders Total Holding % Holding
1 - 1,000 2,417 1,809,751 0.70 1,001 - 5,000 2,234 5,905,845 2.27 5,001 - 10,000 578 4,588,975 1.77 10,001 and over 416 247,510,226 95.26 ------5,645 259,814,797 100.00 ======41
(iv) List of twenty largest shareholders as at 31 December 2016
Name of Shareholder No. of 0/0 of Issued shares Capital
• Dannex Limited 185,317,279 71.33 • Mirfield Properties 20,266,470 7.80 • Damseuoteng-Gyasi Anthony 3,291,230 1.27 • Starwin Products Limited 2,585,129 0.99 • Mr E.H Boohene 2,475,511 0.95 • International Central Gospel Church 2,080,000 0.80 • Enviro Solutions Ghana Limited 1,858,481 0.72 • Mr Austin N.E. Amissah 1,416,219 0.55 • Mad. Comfort Asiedu 1,335,138 0.51 • Mr. Godfried Ampofo 1,335,138 0.51 • Dr. Albert Gyang Boohene 1,254,813 0.48 • Estate of Bernard Forson 1,225,538 0.47 • Starwin Trust Fund 1,218,476 0.47 • Estate of Patrick Okai 967,323 0.37 • Mr. George Anakwa 851,025 0.33 • Worldwide Securities Limited 820,000 0.32 • Teachers Fund 787,250 0.30 • Pentecost Pension Fund 640,000 0.25 • Belshaw Limited 610,000 0.23 587,038 0.23 • Mr. P. F. Annancy 230,922,058 88.88