General information 3. Statement of comprehensive income 4. Statement of financial position 5. Statement of changes in equity 6

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2 UNAUDITED FINANCIAL STATEMENTS CONTENTS PAGE General information 3 Statement of comprehensive income 4 Statement of financial position 5 Statement of changes in equity 6 Statement of cash flows 7 Notes to the financial statements 8 Other information: Statement of value added 31 2

3 GENERAL INFORMATION BOARD OF DIRECTORS REGISTERED OFFICE Mr. Larry Ettah Mr. Adedamola Olusunmade Mr. Abdul Bello Mr. Mukhtar Yakasai Engr. Dipo Ashafa Mrs. Adeline Ogunfidodo Sandtex House 105A, Adeniyi Jones avenue, Ikeja. Lagos State. - Chairman - MD/CEO - Director - Director - Director - Director FACTORY REGISTERED NUMBER FRCN NUMBER COMPANY SECRETARY AUDITORS REGISTRAR BANKERS Km 36, Abeokuta Lagos expressway Ewekoro, Ogun State. RC76075 FRC/2012/ Mrs. Bolanle Oyekan UAC House 1-5 Odunlami street Marina,Lagos PricewaterhouseCoopers Landmark Towers, Plot 5B Water Corporation Road, Victoria Island, Lagos. Africa Prudential Plc 220B, Ikorodu Road Palmgrove, Lagos. Zenith Bank Plc United Bank for Africa Plc Guaranty Trust Bank Ecobank Nigeria Plc First City Monument Bank Plc 3

4 STATEMENT OF COMPREHENSIVE INCOME (All amounts are in thousands of naira, unless otherwise stated) 3 Months to JUNE 2018 JUNE Months to JUNE 2017 JUNE 2017 Note Revenue 3 809,569 1,433, ,884 1,066,383 Cost of Sales 5 (489,946) (901,536) (367,141) (781,489) Gross Profit 319, , , ,894 Other Operating Income 4 20,861 53,238 27,874 57,337 Selling and distribution expenses 5 (62,084) (127,219) (41,239) (81,004) Administrative expenses 5 (183,188) (329,163) (117,586) (206,895) Profit from Operations 95, ,990 18,793 54,332 Finance Income 6 2,513 5,734 1,026 1,029 Finance Expenses 7 (1,504) (3,726) (14,690) (36,856) Net Finance Expenses 1,008 2,007 (13,665) (35,828) Profit Before Taxation 96, ,998 5,129 18,505 (Tax expense)/tax Credit 8 (30,790) (41,919) (1,641) (5,921) Profit from Continuing Operations 65,431 89,079 3,487 12,583 Profit from Discountinued Operations Other Comprehensive Income Total Comprehensive Profit 65,431 89,079 3,487 12,583 Earnings Per Share for Profit Attributable to Owners of The Company During The Year: Basic (Kobo) Diluted (Kobo) The notes on pages 8 to 31 form an integral part of these financial statements 4

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6 STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2018 (All amounts are in thousands of naira, unless otherwise stated) Share capital Share Premium Revaluation Surplus Retained earnings Total equity 1 January ,000-91, , ,214 Rights Issue 196, , ,631 Profit for the Year ,170 58, December , ,923 91, ,462 1,393,015 1 January , ,923 91, ,462 1,393,015 Profit for the period ,079 89, June , ,923 91, ,541 1,482,093 The notes on pages 8 to 31 form an integral part of these financial statements 6

7 STATEMENT OF CASH FLOWS (All amounts are in thousands of naira, unless otherwise stated) Cash flows from operating activities: JUNE 2018 JUNE 2017 Cash generated from operations ,559 (392,129) Income Tax paid 15 (28,255) (1,061) Net cash (used in) / generated from Operating activities 217,304 (393,190) Cash flows from investing activities: Purchase of Property, Plant and Equipment 9 (17,485) (12,609) Purchase of intangible assets 10 (2,189) (47,156) Proceeds from sales of PPE (Property,Plant and Equipment) 6,391 1,290 Finance income 6 5,734 1,029 Net cash used in Investing activities (7,549) (57,446) Cash flows from financing activities: Repayments of borrowings (29,688) (30,717) Interest paid (3,726) (36,856) Right issues 634,631 Net cash used in financing activities (33,414) 567,058 Net increase/(decrease) in cash and cash equivalents 176, ,421 Cash and cash equivalents brought forward 194,205 34,408 Cash and cash equivalents , ,829 The notes on pages 8 to 31 form an integral part of these financial statements 7

8 1.0 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 The Company was listed on the floor of the Nigerian Stock Exchange on 9 July The registered office is located at 105A, Adeniyi Jones Avenue, Ikeja, Lagos in Nigeria. The principal activities of the Company are manufacturing and sale of paints and marketing of sanitary ware. The main products of the Company are Sandtex range of decorative and industrial coatings and Hempel marine & protective coatings for Oil and Gas Sector. 2.0 Summary of significant accounting policies 2.1 Basis of preparation The financial statements of Portland Paints and Products Nigeria Plc ("the Company") have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). The financial statements are presented in the functional currency, Nigerian naira (N), rounded to the nearest thousand, and prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note Basis of Measurement The financial statements have been prepared on a historical cost basis. The company s financial statements are presented in naira, which is also the company s functional currency. Transactions in foreign currency are recognized in naira at the official spot rate at the date of transaction. 2.2 Changes in accounting policy and disclosures (a) New and amended standards adopted by the Company A number of new improvements to IFRSs and cycles were effective for the first time for financial reporting periods commencing on or after 1 January 2017.However,none of the amended standards were adopted by the company in the period as they were not applicable in the preparation of the financial statements. (b) New standards, amendments and interpretations not yet adopted The following relevant IFRS and IFRIC interpretations which are effective for the first time for the financial year beginning on or after 1 January 2017 have been adopted by the Company.The company has not elected to early adopt and the impact of new standards that is applicable to the company is still being assessed. Amendments to IAS 12 Income taxes The amendments were issued to clarify the requirements for recognising deferred tax assets on unrealised losses. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset s tax base. They also clarify certain other aspects of accounting for deferred tax assets. The amendments clarify the existing guidance under IAS 12. They do not change the underlying principles for the recognition of deferred tax assets. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is not permitted. 8

9 Amendments to IAS 7 Cash flow statements In January 2016, the International Accounting Standards Board (IASB) issued an amendment to IAS 7 introducing an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment responds to requests from investors for information that helps them better understand changes in an entity s debt. The amendment will affect every entity preparing IFRS financial statements. However, the information required should be readily available. Preparers should consider how best to present the additional information to explain the changes in liabilities arising from financing activities. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is not permitted. IFRS 9 Financial instruments IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In July 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard. Following the changes approved by the IASB in July 2014, the Company no longer expects any impact from the new classification, measurement and derecognition rules on the Company s financial assets and financial liabilities. The new requirements will not have any impact on the Company's financial assets. The new hedging rules align hedge accounting more closely with the Company s risk management practices. As a general rule it will be easier to apply hedge accounting going forward as the standard introduces a more principles-based approach. The new standard also introduces expanded disclosure requirements and changes in presentation. The new impairment model is an expected credit loss (ECL) model which may result in the earlier recognition of credit losses. The company currently does not have any hedging arrangements and hence would not be affected by the new rules. IFRS 15: Revenue from contract with customers. This standard is a single, comprehensive revenue recognition model for all contracts with customers to achieve greater consistency in the recognition and presentation of revenue.revenue is recognized based on the satisfaction of performance obligations,which occurs when control of good or service transfers to a customer. Amendment is not applicable to current year financial statements. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the company. IFRS 16 Leases IFRS 16 was issued in January It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short term and low-value leases. The accounting for lessors will not significantly change. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is not permitted. The Company is assessing the impact of IFRS Significant accounting judgements, 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 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: 9

10 2.3.1 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. Additional information on impaired receivables is included in note Useful life and residual value of property, plant and equipment and definite life intangible assets. Property, plant and equipment and intangible assets with definite life are depreciated over their useful life. The Company estimates the useful lives of PPE and intangible assets based on the period over which the assets are expected to be available for use. The estimation of the useful lives of plant and machinery are based on technical evaluations carried out on the assets. Estimates could change if expectations differ due to physical wear and tear and technical or commercial obsolescence. It is possible however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the plant and machinery would increase expenses and decrease the value of non-current assets Income Tax The Company is subject to income tax under the Nigerian tax legislation.significant judgement is required in determining the provision for income taxes.there are many transactions and calculations for which the ultimate tax determination is uncertain Impairment of 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 profit or loss or income statement. Management is of the opinion that the trademark is adjudged to have an indefinite life as the ownership had been transferred to the Company in perpetuity and the Company expects to generate cashflows from the use of the asset in perpetuity. 10

11 2.4 Summary of significant accounting policies 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 and computer software. 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 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. Category Trade Mark Computer software Useful lives Indefinite 5 years Property Plant and Equipment Land and buildings 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 for building. All other property, plant and equipments are initially recognized at historical cost 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. The depreciation base is determined as cost less any residual value. Depreciation is charged on a straight-line 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. 11

12 2.4.3 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. Category Long leasehold land Freehold buildings Heavy Plant and machinery Furniture, fittings and equipment Motor vehicles Computer equipments Useful lives Over the lease period up to 99 years 5-10 years 3-5years 2-4 years 3-5 years 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 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 Diluted Earnings per share Diluted Earnings per share is calculated by dividing the profit attributable to shareholders by the total number of shares (inclusive of diluted shares) 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 cash-generating 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 Inventories Inventories are valued at the lower of cost and net realizable 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 overheads,suppliers invoice prices, and,where appropriate, freight, printing costs and other charges incurred to bring the materials to their location and condition. Net realizable 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. 12

13 2.4.8 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 Classification The Company s financial assets include cash, trade and other receivables, all of which are classified as loans and receivables. This classification is based on the purpose for which the financial assets were acquired. Management determines the classiification of finanancial assets at initial recognition. 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 measurement Subsequent to initial recognition, loans and receivables are measured at ammortised 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) The rights to receive cash flows from the asset have expired or b) 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: c) 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. Impairment of financial assets The Company assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. A financial asset is impaired and impairment losses are incurred 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 group 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 ammortised 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 ammortised 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. 13

14 Financial liabilities Classification The financial liabilities are at ammortised cost. The classification is based on the purpose for which the financial liabilities were incurred. Management determines the classification of financial liabilities at initial recognition. Subsequent measurement The Company's financial liabilities are recognised initially at fair value and subsequently, measured at ammortised cost using the effective interest rate method. These includes borrowings and trade and other payables. They are classified as current liabilities except for those with maturities greater than 12 months after the reporting period and these are classified 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 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously Cash and cash equivalent Taxes 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. 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 tax 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. 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. 14

15 Taxes (continued) 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 Government grants Grants for expenditure are netted against the relevant expenditures as and when due and these are recognized in profit or 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 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 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 transactions. 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. Rendering of services Revenue from painting services is recognised as income from 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. 15

16 Interest income All financial instruments measured at ammortised cost and 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 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 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 nonmonetary 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) 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. The Managing Director (CEO) is the Chief Operating Decision Maker (CODM) of the Company whom the segment information is presented to Employees' benefits Employees' benefits both legal and constructive which are long and short term in nature are adequately recognized in the income statement. The Company operates a defined contribution pension scheme in line with the Pension Reform Act The total contribution rate is 18%,where the employees contributes 8% and the Company contributes 10% 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. 16

17 (All amounts are in thousands of Naira, unless otherwise stated) 3 Segment Information: For management purpose, the Company is organised into Strategic Business Units (SBU) based on products categories and has three reportable segments as follows: - Portland Decorative Paints segment, which manufactures and market various ranges of decorative paints. - Portland Marine Segment, which manufactures and markets various ranges of marine protective paints. - Portland Bathroom segment, which markets and distributes ranges of sanitary ware products. No other segment has been aggregated to form the above reportable operating segments. The chief operating decision maker (CODM) has been identified as the executive management. The Executive Management monitors the operating results of each business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on gross profit or loss and is measured consistently with gross profit or loss in the combined financial statements. (i) Income Decorative Marine & Industrial Paints Sanitary Wares Total Revenue: Jun-18 Jun-18 Jun-18 Jun-18 Total Revenue 830, , ,433,670 Inter-segmental revenue Total Revenue From External Customers 830, , ,433,670 Company's Revenue per Statement of Comprehensive Income 830, , ,433,670 Segment Gross Profit 299, ,732-2, ,134 Operating Expenses 420,566 Depreciation 30,469 Amortisation 5,347 Finance Income (5,734) Finance Expense 3,726 Other Income (53,238) Sub-total 401,136 Company's Profit Before Tax 130,998 Decorative Marine Paints Sanitary Wares Total Jun-17 Jun-17 Jun-17 JUNE 2017 Revenue: Total Revenue 857, , ,066,383 Total Revenue From External Customers 857, , ,066,383 Company's Revenue per Statement of Comprehensive Income 857, , ,066,383 Segment Gross Profit 160,750 49, ,010 Operating Expenses 254,630 Depreciation 31,698 Amortisation 1,572 Finance Income (1,029) Finance Expense 36,856 (Other Income)/Loss (57,337) Sub-total 266,390 Company's Profit Before Tax 18,505 The operating segments did not transact with each other and as such there are no transfer prices between operating segments. 17

18 (All amounts are in thousands of naira, unless otherwise stated) Production activities in the factory is mainly production of decorative paints. 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 marketing of paint products. The amounts provided to the chief operating decision maker (CODM) with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segments and the physical location of the assets. (ii) Assets & Liabilities Decorative Marine Paints Sanitary Wares Total Jun-18 Jun-18 Jun-18 Jun-18 Addition to Non-current Assets 17,485 17,485 Reportable Segment Assets 1,939,406 30,969 97,942 2,068,317 Factory Office Property 194, ,159 Total Company Assets 2,151,050 30,969 97,942 2,279,961 Reportable Segment Liabilities: Loans and Borrowings (Excluding Leases and Overdrafts) 14, ,054 Defined Contribution Pension Scheme 8, ,383 Financial Liabilities 1, ,159 Deferred Tax Laibilities 22, ,054 Other Unallocated and Central Liabilities 752, ,214 Total Company Liabilities 797, ,865 Decorative Marine Paints Sanitary Wares Total Dec-17 Dec-17 Dec-17 Dec-17 Addition to Non-current Assets 54,325 54,325 Reportable Segment Assets 1,387, ,395 13,143 1,768,413 Factory Office Property 213, ,164 Total Company Assets 1,655, ,395 13,143 2,035,902 Reportable Segment Liabilities: Loans and Borrowings (Excluding Leases and Overdrafts) 43,742 43,742 Defined Contribution Pension Scheme 9, ,595 Financial Liabilities 7, ,742 Deferred Tax Laibilities 22, ,056 Other Unallocated and Central Liabilities 559, ,752 Total Company Liabilities 642, ,886 Items of Property, Plant and Equipment are directly allocated to the SBU enjoying the economic benefits of the assets. 18

19 (All amounts are in thousands of naira, unless otherwise stated) 6 Months to JUNE Months to JUNE Other Operating Income: Government grants 6,113 12,252 Profit on sale of fixed assets Sale of scrap 1,018 4,426 Insurance claim received 3, Exchange gain/(loss) 7,650 17,853 Sundry Income 34,734 21,039 Container Deposit Refund Total 53,238 57,337 Sundry Income is majorly made up of:profit from closed projects (N15.7m);Franchisee fee - non refundable deposit (N4.1m);Management fee (N8.7m);Others (N6.2m) 5a Expense by function Cost of sales 901, ,489 Selling & distribution expenses 127,219 81,004 Adminstrative expenses 329, ,895 1,357,917 1,069,388 5b Expenses by nature Change in inventories of finished goods and work in progress 796, ,567 Amortization of intangible assets 5,347 1,572 Depreciation on property, plant and equipment 52,376 31,698 Staff costs 257, ,525 Distribution costs 32,992 21,590 Repairs and maintenance 31,309 20,590 Energy Consumption 16,348 19,336 Advert and promotional expenses 37,649 13,557 Commercial Service Fee 11,283 11,559 Auditors' fees 5,400 5,400 Bad debt provision 12,500 10,000 Contingent liability 20,000 - Information technology 18,564 20,083 Rent & rates 9,853 15,340 Bank Charges 2,996 2,054 Legal & Professional Fees 16,629 16,803 Travelling expenses 24,102 17,164 Directors Fees 1,303 1,068 Telephone & Stationery 2,024 5,396 Other expenses 3,454 5,086 1,357,917 1,069,388 6 Finance Income: Interest received on bank deposits 5,734 1,029 Total 5,734 1,029 7 Finance costs: Interest on debts and borrowings 3,726 36,856 Total 3,726 36,856 8 Taxation: (i) Current tax on profits for the period: Company income tax 39,299 5,551 Education tax 2, ,919 5,921 Deferred tax ( Note 15b) - - Total current tax 41,919 5,921 (ii) Reconciliation of tax charge: Profit before tax 130,998 18,505 Tax at Nigerian's statutory income tax rates (Minimum Tax) 39,299 5,551 Disallowable expenses - 31,012 Disallowable income - (1,550) Balancing charge - 2,008 Tax effect of capital allowance - (31,470) Education of assessable profit 2, Deffered Tax - - Total tax charge for the period 41,919 5,921 19

20 (All amounts are in thousands of Naira, unless otherwise stated) 9 Factory building Plant and machinery Computer Equipments Furniture and fittings Motor vehicles Work-inprogress Land Total Property, plant and equipment Cost At 1 January , , , ,759 26, , ,306 Additions ,270 16,465 1,961 21,257 2,372 54,325 Write off (400) (400) Transfers / Held for sales Disposal - - (4,068) (121) (24,462) - (28,651) At 31 December , , , ,103 28, ,510 2,372 1,014,581 At 1 January , , , ,103 28, ,510 2,372 1,014,581 Additions - 0 7,159 3,065 5,361 1,900-17,485 Transfers / Held for sales (1,066) (1,066) Disposal (1,002) - - (1,002) At 30 JUNE , , , ,166 34, ,410 1,306 1,029,997 40, , , ,669 34, , Depreciation At 1 January , , ,321 22, , ,225 Charge for the Year - 3,462 29,917 15,183 2,494 12,657-63,713 Disposal (673) (64) 0 (20,576) (21,313) Transfer - - At 31 December , , ,440 25, , ,625 At 1 January , , ,440 25, , ,625 Charge for the period - 1,731 15,281 3,528 1,690 6,397-28,627 Disposal At 30 JUNE , , ,968 27, , ,252 Net book Value as at: At 30 JUNE , , ,200 30,198 7,021 48,861 1, ,746 At 31 December , , ,322 31,663 3,351 53,358 2, ,956 Fair Value of land and building Land and building held for use in the production or supply of goods and services, or for administrative purposes are stated at cost less any accumulated impairment losses (for land and buildings) and accumulted depreciation (for buildings).land and building comprise mainly of factories and offices. Depreciation amounting to N14.6m (2017-N64m) has been charged to income statement, N9.6m (2017-N29m) charged to cost of sales, N22.6m (2017- N10m) to administrative expenses and N12.6m (2017-N15m) to selling and distribution expenses. 20

21 (All amounts are in thousands of Naira, unless otherwise stated) Trade Mark Computer Software Total 10 Intangible Assets Cost At 1 January , , ,393 Additions - 51,276 51,276 At 31 December , , ,669 At 1 January , , ,669 Additions - externally acquired during the period - 2,189 2,189 At 30 JUNE , , ,858 Amortization: At 1 January , ,368 Charge for the year - 6,356 6,356 At 31 December , ,724 At 1 January , ,724 Charge for the period - 5,347 5,347 At 30 JUNE , ,071 Net Book values at: At 30 JUNE ,025 41,763 90,788 At 31 December ,025 44,920 93,945 The Company's Intangible asset represents the N49million trade mark purchased from Blue Circle Industries Plc adjudged to have an indefinite life. The trade mark is carried at cost to be tested annually for impairment. The trade mark was reviewed for impairment as at 30 June,2018 and at present no impairment is deemed required and there are no contractual commitment that may have impact on the carrying value of the trade mark. Intangible assets amortization charged to income statement amounts to N5.3m (2017-N6.4m) has been included as part of administrative expenses. 21

22 (All amounts are in thousands of Naira, unless otherwise stated) 11 Inventories: Jun-18 Dec-17 Raw Materials 188, ,514 Packaging Materials 34,513 32,170 Work in progress 7,778 6,974 Finished Goods 654, ,633 Spare Parts 13,397 15,008 Diesel 4,848 4,093 Stock Impairment (84,961) (64,961) Total 818, ,430 Quarter end stock count was conducted across all Company's stock holding locations. The quantity counted was valued using Weighted Average Costing model as per the Company's policy and agreed as stated herein. The amount of write-down on inventories to net realizable value recognised as an expense is N84.9m (2017: N64.9m). This represents impairment for slow moving, obsolete and damaged inventories. All inventory with the exception of finished goods are stated at cost. Finished goods are stated at their net realisable values. The value of finished goods include N463m (Dec 2017: N395m) imported merchandizing products. 22

23 (All amounts are in thousands of Naira, unless otherwise stated) Jun-18 Dec Trade and Other Receivables (i) Trade receivables 555, ,810 Less: Provision for impairment of trade receivables - (Note 13iii) (184,682) (176,905) Net trade receivables 370, ,905 Other receivables 87,779 14,545 Less: Provision for impairment of other receivables - - Net other receivables 87,779 14,545 Receivables from related parties (note 18a) 13,171 13,171 Withholding tax receivable 10,029 66,990 VAT receivable 52,235 55,202 Total trade and other receivables 534, ,812 (ii) Prepayments Prepayments - Current 48,393 16,307 Prepayments - Non Current portion 10,223 3,245 Total prepayments 58,616 19,552 The balance on prepayment represent rent,medical,education and insurance paid in advance which will be charged against earnings in the periods it relates. The fair values of trade and other receivables classified as loans and receivables are as follows: Jun-18 Dec-17 Trade receivables 370, ,906 Receivables from related parties (Note 18d) 13,171 13,171 Withholding tax receivable 10,029 66,990 VAT receivable 52,235 55,202 Other receivables 87,779 14,545 Total 534, ,813 Trade receivables are non-interest bearing and are generally on terms of days. Trade and other receivables as at 30 June, 2018 were not reviewed for impairment test. Jun-18 Dec-17 (iii) Allowance for impairment of trade receivables: As at January 1st , ,765 Additional allowance for receivable impairment 12,500 23, , ,765 Un-utilised amounts reversed / (amount written off) (4,723) (17,860) Total as at 30 June , ,905 23

24 (All amounts are in thousands of naira, unless otherwise stated) 13 Interest bearing loans and borrowings: Jun-18 Dec-17 (ii) Current Borrowings: Bank loans: Long term liabilities due within one year 14,054 43,742 Total Current Borrowings 14,054 43,742 Total Loans and Borrowings 14,054 43,742 The movement in Loan and Borrowings represent principal repayment as at 30 June 2018 Current borrowings: The bank loan is secured with the followings: - Debenture on fixed and floating assets of Portland Paints & Products Nigeria Plc, valued at N1.1 billion as at August 2016, by Steve Akhigbemidu & Co Estate Surveyors &Valuers - Execution of trust receipts by the borrower. - Ownership of assets financed - Promissory note of the Company for principal and interest - Sales collection agreement (iii) 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 After bifurcation of the government grant, in the form of a low interest rate loan, the loan bears an effective current interest rate of 22%. N2.7m (2017:N6m) interest on BOI facility was charged to income statement as at 30 June,2018 Lender Bank of Industry (BOI) Intervention funds Through Ecobank Nigeria Plc Total Repayment Facility Terms Jun-18 Dec-17 Carrying Value - N300m 28 equal quarterly - 0 installments from date of draw down Bank of Industry (BOI) Intervention Funds Through FCMB Nigeria Plc Carrying Value - N255m 60 equal monthly 14,054 43,742 installments with 12 months moratorium Total Long Term Facility 14,054 43,742 Current Portion of Term-Loans (14,054) (43,742) Due After One Year