This report was approved by the Board of Directors at its meeting held on 8 May managing director s report. board of directors

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2 Dear Shareholder, The Board of Directors of Bychemex Limited is pleased to present the Annual Report for the year ended 31 December 2016, the contents of which are listed below. This report was approved by the Board of Directors at its meeting held on 8 May Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director what s inside 05 managing director s report 18 independent auditors report 06 board of directors 21 statement of financial position 07 senior management profile 22 statement of profit or loss and other comprehensive income 08 corporate governance report 23 statement of changes in equity vision mission guiding principles statutory disclosures 24 statement of cash flows company profile business segments corporate information secretary s certificate 25 notes to the financial statements 04 chairman s statement 17 statement of directors responsibilities statement of compliance ANNUAL REPORT

3 vision To be a regional leader in textile chemicals and auxiliaries. mission To provide the Mauritian textile industry with a cost effective, innovative textile auxiliaries, while working towards shareholders and employees expectations. guiding principles Agility and Determination in achieving Care and Engagement in what we do Trust and Responsibility in our relationships 02 BYCHEMEX LIMITED

4 company profile Set up in 1987, Bychemex has established itself as a key and reliable supplier of speciality high-end chemicals and auxiliaries for the textile industry in Mauritius. Bychemex is listed on the Development and Enterprise Market (DEM) since 2007 and is a subsidiary of Harel Mallac & Co. Ltd. Bychemex represents worldwide recognised principals which includes CHT (Chemische Fabrik Tubingen) in Germany, Evonik South-Africa, Formosa Group and Arabian Alkali. business segments Textile Auxiliaries Bleaching and Dyeing Chemicals Scouring Chemicals Detergents Wetting Agents Anticrease Agents Sequestrants Dispersants Softeners Hydrogen Peroxide Brine Solution Dyestuffs Caustic Solutions corporate information REGISTERED OFFICE Chaussée Tromelin Fort George Port Louis BUSINESS REGISTRATION NUMBER C SECRETARY HM Secretaries Ltd. 18 Edith Cavell Street Port Louis AUDITORS BDO & Co BANKERS ABC Banking Corporation Ltd The Mauritius Commercial Bank Ltd LEGAL ADVISERS Ivan Collendavelloo Chambers Étude Georges Robert NOTARY Mr Didier Maigrot Notary Public REGISTRY Harel Mallac Corporate Services Ltd 18 Edith Cavell Street Port Louis ANNUAL REPORT

5 chairman s statement Dear Shareholder, The Company maintained its revenue despite a 8.6% contraction in exports of the textile and apparel sectors. The impact of Brexit and its repercussions across the whole industry further exacerbated the woes of the operators. Management focussed on cost reduction and implemented strategies to retain market share. The Company ended the year on a positive bottom line. A dividend of Re 0.08 per share was declared in December Acknowledgements The Board would like to thank the Management and the staff for their dedication and hard work. The Board renews its confidence in the Management to improve the Company s profitability and meet its goals next year. Antoine L. Harel Chairman The Management focused on market share and cost reduction to ensure that the Company remained profitable. 04 BYCHEMEX LIMITED

6 managing director s report The Company remained profitable despite continued contraction of the textile and apparel sector (2.8% last year and 3% in 2016). Revenue for 2016 reached 59.2M, from 58.9M during the previous period. Lower operating costs (down by 5%) contributed to keeping the Company profitable. The continued relocation of the above sectors to more competitive manufacturing bases in the region requires the Company to expand its market base into the region. Management will continue to improve operational efficiencies and provide cost-effective and innovative chemicals to its customers, whilst keeping a leaner chemical footprint. The Company s long association with CHT-Bezema will be further strengthened. A range of new products has been introduced during the second semester of They are expected to help us provide a more differentiated range of products to our customers during the course of Shemboosingh Cheekhooree Managing Director ANNUAL REPORT

7 board of directors Antoine L. Harel (59) Chairman (Non-Executive) Antoine L. Harel is a Fellow Member of the Institute of Chartered Accountants in England and Wales and holds a BA (Hons) degree in Accounting and Computing. He joined Harel Mallac & Co. Ltd in In 1997, he was appointed Group CEO and has been Chairman of the Board since April He was President of the Mauritius Chamber of Commerce and Industry in 1992/1993. He was appointed to the Board of Directors of Bychemex Limited on 30 November Other Directorships (listed Companies): Harel Mallac & Co. Ltd (Chairman), Compagnie des Magasins Populaires Limitée (Chairman), The Mauritius Chemical and Fertilizer Industry Limited (Chairman), Chemco Limited (Chairman) and Les Gaz Industriels Ltd (Chairman). Charles Harel (49) Non-Executive Director Charles Harel holds an MBA from the University of Birmingham and a National Diploma in Management and Finance from Cape Technikon, South Africa. He joined the Harel Mallac Group in 1993 and was nominated CEO of the Group effective January He was appointed to the Board of Directors of Bychemex Limited on 29 May Other Directorships (listed companies): Harel Mallac & Co. Ltd, Compagnie des Magasins Populaires Limitée, The Mauritius Chemical and Fertilizer Industry Limited and Chemco Limited. Suie Sen Hock Meen Ah Kine (55) Executive Director Suie Sen Hock Meen Ah Kine is an Associate Member of the Institute of Chartered Accountants in England and Wales and holder of a BSc (Hons) Management Science from the University of Ottawa. He joined Harel Mallac in 2005 as Financial Controller of Harel Mallac Bureautique Ltd and was appointed Group Financial Controller in February Since 15 November 2015, he holds the position of Finance Director of the Chemicals and Fertilisers Sub-Division of the Harel Mallac Group. He was appointed to the Board of Directors of Bychemex Limited on 6 November Other Directorships (listed Companies): Chemco Limited and The Mauritius Chemical and Fertilizer Industry Limited. Guy Harel (68) Independent Director Guy Harel joined the Harel Mallac Group in 1981 as Managing Director of Fapcom Ltd. In 1983, he created Henkel Chemicals (Mauritius) Limited and took over as Managing Director in Following the acquisition of the company in 2007 by the Harel Mallac Group, he became the Managing Director of Archemics Ltd and held the position until 31 December He was appointed to the Board of Bychemex Limited on 29 May Other Directorships (listed companies): Chemco Limited and The Mauritius Chemical and Fertilizer Industry Limited. Shemboosingh Cheekhooree (55) Executive Director Shemboosingh Cheekhooree holds a bachelor s degree in Chemical Engineering from the North East London Polytechnic, United Kingdom. He has over 25 years experience in the textile and apparel sector and has served in various senior management positions during the last 15 years in the textile industry, in Mauritius and in India, before joining the Harel Mallac Group in 2012 as Managing Director of Harel Mallac Export Ltd, a company forming part of the Chemicals and Fertilisers Sub- Division of the Harel Mallac Group. In October 2013, he was appointed General Manager of the MCFI Group of Companies. Since October 2014, he is the Managing Director of Harel Mallac Export Ltd, Harel Mallac (Tanzania) Limited and the MCFI Group of Companies. He was appointed to the Board of Directors of Bychemex Limited on 31 October Other Directorships (listed Companies): Chemco Limited and The Mauritius Chemical and Fertilizer Industry Limited. 06 BYCHEMEX LIMITED

8 Vincent Labat (54) Independent Director Vincent Labat graduated as a Chemical Engineer. From 1996 to 2009, he was the Managing Director of the listed company, Les Gaz Industriels Ltd. In 2010, he joined Medine Ltd as Project Development Executive. In July the following year, he was appointed as Managing Director of the Agriculture Cluster. He was appointed to the Board of Directors of Bychemex Limited on 12 August Other Directorships (listed Companies): Chemco Limited and The Mauritius Chemical and Fertilizer Industry Limited. Michel Rivalland G.O.S.K. (63) Non-Executive Director Michel Rivalland G.O.S.K. is a Fellow Member of the Chartered Association of Certified Accountants. He joined the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited on 1 June 2006 and served as Managing Director from October 2006 to 30 June He is currently an Executive Director of Harel Mallac & Co. Ltd. He was appointed to the Board of Directors of Bychemex Limited on 21 December Other Directorships (listed companies): Compagnie des Magasins Populaires Limitée, Harel Mallac & Co. Ltd, Chemco Limited and The Mauritius Chemical and Fertilizer Industry Limited. senior management profile Ajay Luximun Operations Manager Ajay Luximun holds a degree in Business Studies and a master s in International Business Management. He joined Chemco Limited in May 1993 and has held various positions within the Company. He was appointed Operations Manager of Bychemex Limited in January Suie Sen Hock Meen Ah Kine Finance Director Shemboosingh Cheekhooree Managing Director Shemboosingh Cheekhooree holds a degree in Chemical Engineering from the North East London Polytechnic, United Kingdom. He joined the Harel Mallac Group in 2012 as Managing Director of Harel Mallac Export Ltd, a company forming part of the Chemicals and Fertilisers Sub-Division of Harel Mallac Group after spending 25 years at senior positions within the textile industry. He was appointed Managing Director of Bychemex Limited in October Suie Sen Hock Meen Ah Kine is an Associate Member of the Institute of Chartered Accountants in England and Wales and holder of a BSc (Hons) Management Science from the University of Ottawa. He joined Harel Mallac in 2005 as Financial Controller of Harel Mallac Bureautique Ltd and was appointed Group Financial Controller in February Since 15 November 2015, he is the Finance Director of the Chemicals and Fertilisers Sub-Division of Harel Mallac Group. ANNUAL REPORT

9 corporate governance report Bychemex Limited (the Company ) is committed to the highest standards of business integrity, transparency and professionalism in all its activities and ensures that the activities within the Company are managed ethically and responsibly to enhance business value for all stakeholders. the board of directors The Board endeavours to exercise leadership, entrepreneurship, integrity and judgement in directing the Company, so as to achieve continuing prosperity for the organisation while embracing both performance and compliance. The Board also ensures that the activities of the Company comply with all legal and regulatory requirements as well as with its constitution from which the Board derives its authority to act. The Board inter alia oversees the development and implementation of the Company s corporate strategy and reviews performance objectives. It provides for succession plans for key individuals, ensures effective communication with the Company s stakeholders, promotes the Company s Code of Ethics, and oversees financial and capital management. As such, it reviews and approves quarterly and annual financial reports, monitors financial results and approves major capital expenditure, acquisitions, divestitures and material commitments. The Board finally oversees compliance and risk management. At 31 December 2016, the Board of Directors consisted of seven members, of whom two are Independent Directors and two are Executive Directors. Non-Executive Directors have free access to members of the senior management team. All Directors have access to the Company Secretary. The Directors are elected as per the provisions of the Company s constitution that do not provide for a definite term of office. With a view to enhancing the Board s effectiveness, a Board performance review is carried out yearly to assess the Directors appreciation of the Board s performance, its procedures and practices. The results of the assessment are examined by the Corporate Governance Committee. This Committee makes its recommendations to the Board on any required remedial action. Since the Company has a management contract with The Mauritius Chemical and Fertilizer Industry Limited (MCFI), the Board has delegated authority to MCFI s Audit Committee and Corporate Governance Committee to provide assistance in discharging its duties and responsibilities. This is done through a more comprehensive evaluation of specific issues that are the remit of such committees. The Board regularly receives the reports and recommendations of these committees and takes appropriate action. The Board entrusts the day-to-day management of the Company to MCFI through its Managing Director, who ensures the smooth running of the organisation. The composition of the Board of Directors and other directorships held by the Directors in other listed companies are given on pages 6 and 7. board meetings The Board meets regularly during the year. For the period under review, the Board met five times. Board meetings are conducted in accordance with the Company s constitution and the Companies Act. Board meetings are organised in such a way as to allow Directors to receive all relevant information critical to their understanding of the business to be conducted at the Board meeting, and therefore to participate fully in the decision-making process. The Board may invite management or external consultants to attend Board meetings whenever required. responsibilities entrusted to MCFI s corporate governance committee The Board has entrusted to MCFI s Corporate Governance Committee the key areas that are the remit of a nomination and remuneration committee. The Committee s main responsibilities include establishing a formal and transparent procedure for developing policy on senior management remuneration. The Committee also fixes the fees of the Company s non-executive and independent non-executive Directors. It oversees the process regarding recommendation of potential candidates as Directors, ensures that proposed Directors are not disqualified from holding that position, and monitors the balance and effectiveness of the Board. The Committee met three times in BYCHEMEX LIMITED

10 corporate governance report responsibilities entrusted to MCFI s audit committee The Board has entrusted to MCFI s Audit Committee the key areas that are the remit of an Audit Committee as detailed in the formal terms of reference approved by the Board. The Committee thus assists the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems and control processes, and the preparation of accurate financial reports and statements, in compliance with all applicable legal requirements and accounting standards. The Committee also addresses issues relating to risk management and provides a forum for discussing business risks and control issues, and formulates relevant recommendations for consideration by the Board. During the period under review, the Committee met four times. attendance at board meetings held in 2016 Directors Antoine L. Harel 5/5 Suie Sen Hock Meen Ahkine 5/5 Shemboosingh Cheekhooree 5/5 Charles Harel 5/5 Guy Harel 5/5 Vincent Labat 4/5 Michel Rivalland G.O.S.K. 5/5 risk management Attendance The Board regularly addresses and evaluates physical, HR, IT, business, financial, reputational as well as regulatory and compliance risks. In the course of 2016, the internal audit function examined and evaluated the adequacy and effectiveness of control systems in place. Reports were subsequently produced and submitted to the Audit Committee, which, when applicable, made relevant recommendations to the Board. In 2010, a Risk Management Framework for the Company was adopted followed by the implementation of a continuous and dynamic system of risk assessment through compliance checks and discussions with the management for enhanced risk mitigation strategies. Some of the major risk areas entail: physical risks Among the physical risks identified are unavoidable events such as riots, cyclones and other natural calamities. Mitigating actions such as the adoption of cyclone and fire procedures, subscription to a relevant insurance cover, and the identification of a business continuity plan and disaster recovery plan have been taken. To limit the occurrence of on-site accidents, health and safety as well as security procedures have been implemented. The Company also draws upon the expertise of both an Occupational Physician Consultant and a full-time Health and Safety Officer. business (market) risks As a result of a continued contraction in the Mauritian textile sector and the relocation of textile companies, the business environment of Bychemex Limited has become more competitive and difficult. human resources risks Loss of key personnel has been identified as a major risk factor. In view of mitigating this risk, retention policies have been adopted as well as a formal performance assessment and reward system implemented within the Company. Furthermore, a Code of Ethics has been adopted, so as to limit reputational risks. Health surveillance is performed at regular intervals on employees in high risks jobs in line with the Company s Health and Safety policy. ANNUAL REPORT

11 corporate governance report risk management (cont d) technology risks In order to mitigate the risk of an IT crash or major breakdown, back-up and restriction procedures have been set up within the Company. internal control Internal control is a process designed to provide reasonable assurance regarding the achievement of organisational objectives with respect to: effectiveness and efficiency of operations; safeguarding of assets and data of the organisation; reliability of financial and other reporting; prevention of fraud and irregularities; acceptance and management of risk; conformity with the codes of practice and ethics adopted by the organisation; compliance with applicable laws and regulations; and supporting business sustainability under normal as well as adverse operating conditions. Internal Control is applicable to and is built into various business processes so as to cover all significant enterprise areas. During the year, one internal control review was performed by Internal Audit. The Board has set appropriate policies to ensure that the above control measures are implemented. internal audit Internal Audit is an objective assurance function reporting to the Board of Directors and Management. The Internal Audit function is performed by the Harel Mallac Group s Internal Auditor. Internal Audit provides assurance as to the adequacy and effectiveness of the risk management and internal control framework of an organisation. Internal Audit assists the Board and Management to maintain and improve the process by which risks are identified and managed, and helps the Board discharge its responsibilities to maintain and strengthen the internal control framework. The Internal Auditor has examined the current control systems to check their suitability and to ensure that they are being adhered to. The Internal Auditor conducts its assignments based on a yearly plan which is validated by the Audit Committee and has unrestricted access to the Company s records, Management and employees. Systems reviewed in 2016 at Company level include sales, debtors and cash cycles, fixed assets cycles, procurement and expenses as well as the stock cycle and cover all significant areas of the Company s internal control. In 2016, the Internal Auditor has regularly submitted to the Audit Committee reports for discussion and follow-up of the implementation of recommended actions. group structure The Directors recognise that the parent entity is Harel Mallac & Co. Ltd and that the ultimate parent entity is Société Pronema. The Directors common to the aforesaid entities are Mr Antoine L. Harel who is gérant of Société Pronema and Director of Harel Mallac & Co. Ltd and Messrs Charles Harel and Michel Rivalland G.O.S.K. who sit on the Board of Directors of Harel Mallac & Co. Ltd. shareholders holding more than 5 percent of the company Shareholders directly or indirectly interested in 5 percent or more of the ordinary share capital of the Company are detailed on page BYCHEMEX LIMITED

12 corporate governance report dividend policy Dividends are distributed after considering the Company s performance and profitability, gearing, investment needs, capital expenditure requirements and growth opportunities. Year Dividend per share Dividend Cover Dividend Yield () (Times) (%) share price index from January 2015 to December 2016 Bychemex Share Price v/s Demex from January 2015 to December Bychemex Share Price () DEMEX 0 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec Months Bychemex Demex directors interest in shares The direct and indirect interests of Directors in the ordinary shares of the Company are to be found on page 15. directors dealings in shares of the company The Directors are aware of Appendix 6 of the Listing Rules of the Stock Exchange of Mauritius Ltd which provides for restrictions on dealings during a closed period as well as the provisions of the Companies Act 2001 on disclosure and restrictions on share dealings by Directors. All the disclosures made by the Directors are entered into an Interest Register. During the year under review, none of the Directors bought or sold any of the Company s shares. ANNUAL REPORT

13 corporate governance report related party transactions Related party transactions are detailed on pages 48 and 49. senior management profile The profile of the senior management members is given on page 7. company s constitution The constitution of the Company does not provide any ownership restrictions or pre-emption rights. It is in agreement with the Companies Act 2001 and the DEM rules, and does not contain any material clause that needs to be disclosed. shareholders agreement affecting the governance of the company by the board The Company is not aware of any such agreement during the period under review. third party management agreement The Company has a management agreement with The Mauritius Chemical and Fertilizer Industry Limited for management support services including but not limited to the financial, accounting, legal, internal audit and human resources fields. The agreement is renewable on a yearly basis. directors fees Directors are paid Directors fees with the exception of the Executive Directors and one of the Non-Executive Directors. directors remuneration Directors remuneration is given on page 15. It has been disclosed globally due to the sensitivity of the information. remuneration policy The Company s remuneration policy recommends that the Company provides competitive rewards for its senior management staff, taking into account the Company s performance and external market data from independent sources, in particular, where available, salary levels for similar positions in comparable companies. The remuneration package consists of base salary, fringe benefits and an annual individual performance bonus. The remuneration package is determined by the Board of Directors upon recommendations of the Corporate Governance Committee. employee share option plan No employee share option plan is available within the Company. code of ethics The Company abides to the Code of Ethics of Harel Mallac Group. 12 BYCHEMEX LIMITED

14 corporate governance report profile of company s shareholders as at 31 March 2017 Size of Shareholding Number of Shareholders Number of Shares Owned % Holding , , , ,001-5, , ,001-10, , ,001-50, , , , , , , ,171, , , , Over 500, ,245, Total 615 5,000, summary of shareholding category as at 31 March 2017 Category of Shareholders Number of Shareholders Number of Shares Owned % Holding Individual 557 1,161, Insurance and assurance companies 2 267, Pension and provident funds 4 379, Investment and trust companies 4 171, Other corporate bodies 48 3,019, Total 615 5,000, shareholder information Forthcoming Annual Meeting A proxy form is enclosed for those shareholders unable to attend. Shareholders are requested to bring their identity cards or passports to the meeting, as these are required for registration. Schedule of Events Publication of condensed audited results for previous year March 2017 Annual Meeting May/June 2017 Publication of condensed results for the 1st quarter May 2017 Publication of condensed results for the 2nd quarter August 2017 Publication of condensed results for the 3rd quarter November 2017 Dividend declaration and payment December 2017/January 2018 Shareholders Practical Guide Issues Change of address If shares are deposited with CDS Change of name Acquisition or disposal of shares Lost share certificate Direct dividend credit Action Contact the Company s secretariat Contact the personal broker Contact the Company s secretariat Contact the personal broker Contact the Company s secretariat Forward the relevant form to the Company s secretariat ANNUAL REPORT

15 corporate governance report social, health and safety Maintaining a high standard of Health & Safety at work is a key objective for the Company in ensuring the welfare of its employees. Thus, the Company strives to continuously improve the workplace environment whilst driving injuries, occupational illnesses and operational incidents as close to zero as possible. It has in place on-going hazard and risk assessment processes, control systems and preventive measures against any occupational diseases in compliance with OSHA In 2017, the work environment will be further enhanced by instigating a sustainable change in employees safety-oriented behaviours at the workplace. The Company also ensures that its recruitment and promotion policies are fair and that procedures adopted are both transparent as well as competency and merit based. We also promote honest and transparent business practices. corporate social responsibility As a member of the Harel Mallac Group, Bychemex Limited fully supports the causes embraced by the Fondation Harel Mallac (FHM), which focuses on improving the education and living conditions of underprivileged children, in particular in the localities where the Group companies operate, since its inception in In 2016, the FHM has partnered with four major non-governmental organisations working with children: SOS Children s Village in Bambous, Ecole Sainte Famille in Roche Bois, APEIM School in Port Louis, and Collège Technique Saint Gabriel in Sainte Croix. This financial support was complemented by regular employee volunteering activities ranging from Music and Arts days to the Christmas Wish in a Box celebration. The FHM has also supported sports-related projects led by the Trust Fund for Excellence in Sports and the Northern Pirates Sports Club. 14 BYCHEMEX LIMITED

16 statutory disclosures principal activities The principal activities of the Company during the year have remained unchanged and consist of the trading of specialised chemical products for the textile industry. directors The Directors of the Company as at 31 December 2016 are listed on pages 6 and 7. directors service contracts There are no service contracts between the Company and its Directors. directors remuneration and benefits Remuneration and benefits received, or due from the Company were: Executive Directors Non-executive Directors Total directors interests in shares The interests of the Directors in the shares of the Company as at 31 December 2016 were: Directors Direct Interest Indirect Interest Antoine L. Harel - 112,775 Charles Harel - 110,191 The other Directors have no shares either directly or indirectly in the Company. contracts of significance There was no contract of significance to which the Company has been a party and in which a Director of the Company was materially interested, be it directly or indirectly. third party management agreement The Company has a management contract with The Mauritius Chemical and Fertilizer Industry Limited. shareholders At 31 December 2016, the following shareholders were directly or indirectly interested in more than 5 percent of the Company s share capital. Shareholders Interest % Harel Mallac & Co. Ltd % The State Investment Corporation 9.53% National Pension Fund 5.95% ANNUAL REPORT

17 statutory disclosures corporate social responsibility Donations Political Other Corporate Social Responsibility auditors fees The fees payable to the auditors for the audit and other services were: Auditors fees payable: -BDO & Co Fees paid for other services provided by: -BDO & Co. - - secretary s certificate We certify that, to the best of our knowledge and belief, the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Companies Act HM Secretaries Ltd Secretary 20 March BYCHEMEX LIMITED

18 statement of statement directors of responsibilities compliance Directors acknowledge their responsibilities for: 1. Adequate accounting records and maintenance of effective internal control systems; 2. The preparation of financial statements which fairly present the state of affairs of the Company as at the end of the financial year, the results of its operations, and cash flow for that year and which comply with International Financial Reporting Standards (IFRS); and 3. The selection of appropriate accounting policies supported by reasonable and prudent judgements. The External Auditors are responsible for reporting on whether the Company s financial statements are fairly presented. The Directors report that: 1. Adequate accounting records and an effective system of internal controls and risk management have been maintained; 2. Appropriate accounting policies supported by reasonable and prudent judgements and estimates have been used consistently; 3. International Financial Reporting Standards have been adhered to. Any departure in the interest of fair presentation has been disclosed, explained and quantified; and 4. The Code of Corporate Governance has been adhered to. Reasons have been provided where there has not been compliance. Signed on behalf of the Board of Directors on 20 March Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director NAME OF PIE: BYCHEMEX LIMITED statement of compliance REPORTING PERIOD: Year ended 31 December 2016 We, the Directors of Bychemex Limited, confirm that to the best of our knowledge, the PIE has not complied with Section of the Code of Corporate Governance. The reasons for non-compliance are detailed on page 12 of the Corporate Governance Report. Antoine L. Harel Chairman 20 March 2017 Shemboosingh Cheekhooree Managing Director ANNUAL REPORT

19 independent auditors report To for the Shareholders year ended 31 of December Bychemex 2016 Limited To the shareholders of Bychemex Limited This report is made solely to the members of Bychemex Limited (the Company ), as a body, in accordance with Section 205 of the Companies Act Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Report on the audit of the Financial Statements Opinion We have audited the financial statements of Bychemex Limited (the Company ), on pages 21 to 50 which comprise the statement of financial position as at 31 December 2016, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements on pages 21 to 50 give a true and fair view of the financial position of the Company as at 31 December 2016, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act 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) together with the ethical requirements that are relevant to our audit of the financial statements in Mauritius, and we have fulfilled our other ethical responsibilities in accordance with these requirements and 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. 1 Valuation of Inventory Key Audit Matter Inventory is carried in the financial statements at the lower of cost and net realisable value. The net carrying value of inventory at 31 December 2016 was 10,107,561. Sales in the industry can be extremely volatile with consumer demand changing significantly based on current trends. As a result there is a risk that the carrying value of inventory exceeds its net realisable value. Related Disclosures Refer to note 2.3 (accounting policy note) and note 8 (financial statement disclosures). Audit Response Our audit procedures were designed to challenge the adequacy of the Company s provisions against inventory and included: Examining the Company s historical trading patterns of inventory sold at full price and inventory sold below full price, together with the related margins achieved for each product lines in order to gain comfort that stock has not been sold below cost; and Assessing the appropriateness of the provision percentages applied by challenging the assumptions made by the Directors on the extent to which older season inventory can be sold. We have also considered the adequacy of the Company s disclosures in respect of the levels of provisions against inventory. 2 Valuation of buildings on leasehold land Key Audit Matter The Company measures its buildings on leasehold land at fair value which is a significant accounting estimate and involves a range of judgemental assumptions and the use of external valuation expertise. Property, plant and equipment is valued at 6,153,316 as at 31 December All Property, plant and equipment are measured initially at cost, with land and buildings subsequently measured at fair value. Valuations are performed by an independent valuer, Professional Valuers Co Ltd, Chartered Valuation Surveyors and the valuation resulted in a net increase in the value of the buildings by 2,322,630. Related Disclosures Refer to the critical accounting estimates and judgements in note 4.1, and in note 5 of the accompanying financial statements. Audit Response We have reviewed the valuation report issued by Professional Valuers Co Ltd and have challenged the key assumptions used such as the estimated useful lives and the valuation techniques. 18 BYCHEMEX LIMITED

20 independent auditors report for the To the shareholders of Bychemex Limited 2 Valuation of buildings on leasehold land (cont d) Audit Response (cont d) We confirmed that the adjustments arising from the valuation were correctly accounted for and disclosed in the financial statements. The results of these procedures did not identify any issues with the valuation of land and buildings in the financial statements. Other information Directors are responsible for the other information. The other information comprises the Corporate Governance Report, Board of Directors, Senior Management Profile, Statutory Disclosures, Statement of Directors Responsibilities and Statement of Compliance (but does not include the financial statements and our auditor s report thereon), which we obtained prior to the date of this auditor s report, and the Vision, Mission and guiding principles, Company Profile, Corporate Information, Business Segments, Chairman s and Managing Director s Report (together referred as the other statements ), which is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above 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 on the Corporate Governance Report, Board of Directors, Senior Management Profile, Statutory Disclosures, Statement of Directors Responsibilities and Statement of Compliance, that we obtained prior to the date of this auditor s report, 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. When we read the other statements which will be made available to us after that date, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of Directors and Those Charged with Governance for the Financial Statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the 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. Those charged with governance are responsible for overseeing the Company s financial reporting process. 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 skepticism 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 directors. Conclude on the appropriateness of 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 ANNUAL REPORT

21 independent auditors report To for the Shareholders year ended 31 of December Bychemex 2016 Limited To the shareholders of Bychemex Limited Auditor s Responsibilities for the Audit of the Financial Statements (cont d) 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 those charged with governance 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. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Companies Act 2001 We have no relationship with, or interests in, the Company, other than in our capacity as auditors and dealings in the ordinary course of business. We have obtained all information and explanations we have required. In our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those records. Financial Reporting Act 2004 The Directors are responsible for preparing the corporate governance report. Our responsibility is to report the extent of compliance with the Code of Corporate Governance as disclosed in the annual report and on whether the disclosure is consistent with the requirements of the Code. In our opinion, the disclosure in the annual report is consistent with the requirements of the Code. BDO & Co Chartered Accountants Port Louis, Mauritius. 20 March 2017 Rookaya Ghanty, FCCA Licensed by FRC 20 BYCHEMEX LIMITED

22 statement of financial position at 31 December 2016 Notes ASSETS Non-current assets Property, plant and equipment 5 6,153,316 4,702,805 Intangible assets 6 213, ,259 Investment in financial assets 7 100, ,000 6,466,796 5,138,064 Current assets Inventories 8 10,107,561 9,526,906 Trade and other receivables 9 19,799,207 19,216,094 Cash and cash equivalents 26(b) 8,179,641 10,183,890 38,086,409 38,926,890 Total assets 44,553,205 44,064,954 EQUITY AND LIABILITIES Capital and reserves Share capital 10 5,000,000 5,000,000 Revaluation reserves 1,974,237 - Actuarial reserves (220,542) (374,243) Retained earnings 24,413,553 24,697,187 Owners interest 31,167,248 29,322,944 LIABILITIES Non-current liabilities Obligations under finance lease , ,679 Deferred tax liabilities , ,930 Retirement benefit obligations 14 1,303,394 1,330,032 2,326,568 2,196,641 Current liabilities Trade and other payables 15 10,495,041 11,805,316 Current tax liabilities 16 20, ,391 Obligations under finance lease , ,662 Dividends , ,000 11,059,389 12,545,369 Total liabilities 13,385,957 14,742,010 Total equity and liabilities 44,553,205 44,064,954 These financial statements have been approved for issue by the Board of Directors on 20 March Antoine L. Harel Chairman Shemboosingh Cheekhooree Managing Director The notes on pages 25 to 50 form an integral part of these financial statements. Auditors report on pages 18 to 20. ANNUAL REPORT

23 statement of profit or loss and other comprehensive income Notes Revenue ,229,117 58,882,354 Cost of sales 24 (46,454,117) (45,643,047) Gross profit 12,775,000 13,239,307 Other income , ,819 Other (losses)/gains 19 (16,650) 465,043 Operating expenses 24 (13,467,162) (14,169,341) (90,146) (138,172) Net finance income , ,129 Profit before taxation , ,957 Income tax expense 16 (35,704) (99,473) Profit for the year 116,366 35,484 Other comprehensive income: Items that will not be reclassified to profit and loss: Remeasurements of post employment benefit obligations, net of deferred tax ,701 61,801 Gains on revaluation of buildings, net of deferred tax 11 1,974,237 - Other comprehensive income for the year, net of tax 2,127,938 61,801 Total comprehensive income for the year 2,244,304 97,285 Earnings per share (Re/share) The notes on pages 25 to 50 form an integral part of these financial statements. Auditors report on pages 18 to BYCHEMEX LIMITED

24 statement of changes in equity Notes Share capital Revaluation reserves Actuarial gains/(losses) Retained earnings Total Balance at 01 January ,000,000 - (374,243) 24,697,187 29,322,944 Profit for the year , ,366 Other comprehensive income for the year 11-1,974, ,701-2,127,938 Total comprehensive income for the year - 1,974, , ,366 2,244,304 Dividends (400,000) (400,000) Balance at 31 December ,000,000 1,974,237 (220,542) 24,413,553 31,167,248 Balance at 01 January ,000,000 - (436,044) 25,161,703 29,725,659 Profit for the year ,484 35,484 Other comprehensive income for the year ,801-61,801 Total comprehensive income for the year ,801 35,484 97,285 Dividends (500,000) (500,000) Balance at 31 December ,000,000 - (374,243) 24,697,187 29,322,944 The notes on pages 25 to 50 form an integral part of these financial statements. Auditors report on pages 18 to 20. ANNUAL REPORT

25 statement notes to the of financial cash flows statements Notes Cash flows from operating activities Cash (used in)/generated from operations 26(a) (1,629,221) 5,636,240 Interest received 414,082 - Interest paid (50,301) (23,224) Tax paid (196,700) (81,212) Net cash (used in)/ generated from operating activities (1,462,140) 5,531,804 Cash flows from investing activities Purchase of property, plant and equipment 5 (200,963) (368,250) Purchase of intangible assets 6 - (365,704) Proceeds from sale of property, plant and equipment - 289,652 Net cash used in investing activities (200,963) (444,302) Cash flows from financing activities Finance lease principal payments (133,663) (52,810) Dividends paid 17 (500,000) (3,500,000) Net cash used in financing activities (633,663) (3,552,810) Net (decrease)/increase in cash and cash equivalents (2,296,766) 1,534,692 Movement in cash and cash equivalents At 1 January, 10,183,890 8,352,845 (Decrease)/increase (2,296,766) 1,534,692 Effect of foreign exchange rate changes 292, ,353 At 31 December, 26(b) 8,179,641 10,183,890 The notes on pages 25 to 50 form an integral part of these financial statements. Auditors report on pages 18 to BYCHEMEX LIMITED

26 notes to the financial statements 1. GENERAL INFORMATION Bychemex Limited is a public limited liability company incorporated and domiciled in Mauritius. The address of its registered office is Chaussée Tromelin, Fort George, Port Louis. Its main activities consist of the trading of specialised chemical products for the textile industry. The Company is listed on the Development & Enterprise Market (DEM) of the Stock Exchange of Mauritius. The directors consider Harel Mallac & Co. Ltd, incorporated in the Republic of Mauritius as the holding company and Société Pronema, an entity registered in the Republic of Mauritius as the ultimate parent entity. 2. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation The financial statements of Bychemex Limited comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (IFRS). These financial statements are that of an individual entity and are presented in Mauritian Rupees. Where necessary, comparative figures have been amended to conform with change in presentation in the current year. The financial statements are prepared under the historical cost convention, except that: (i) Buildings are carried at revalued amounts (ii) Relevant financial assets and financial liabilities are stated at their fair value. Standards, Amendments to published Standards and Interpretations effective in the reporting period IFRS 14 Regulatory Deferral Accounts provides relief for first-adopters of IFRS in relation to accounting for certain balances that arise from rate-regulated activities ( regulatory deferral accounts ). IFRS 14 permits these entities to apply their previous accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts. The standard is not expected to have any impact on the Company s financial statements. Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11). The amendments clarify the accounting for the acquisition of an interest in a joint operation where the activities of the operation constitute a business. They require an investor to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a business. Existing interests in the joint operation are not remeasured on acquisition of an additional interest, provided joint control is maintained. The amendments also apply when a joint operation is formed and an existing business is contributed. The amendment has no impact on the Company s financial statements. Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38). The amendments clarify that a revenue-based method of depreciation or amortisation is generally not appropriate. Amendments clarify that a revenue-based method should not be used to calculate the depreciation of items of property, plant and equipment. IAS 38 now includes a rebuttable presumption that the amortisation of intangible assets based on revenue is inappropriate. This presumption can be overcome under specific conditions. The amendment has no impact on the Company s financial statements. Equity method in separate financial statements (Amendments to IAS 27). The amendments allow entities to use the equity method in their separate financial statements to measure investments in subsidiaries, joint ventures and associates. IAS 27 currently allows entities to measure their investments in subsidiaries, joint ventures and associates either at cost or at fair value in their separate FS. The amendments introduce the equity method as a third option. The election can be made independently for each category of investment (subsidiaries, joint ventures and associates). Entities wishing to change to the equity method must do so retrospectively. The amendment has no impact on the Company s financial statements. ANNUAL REPORT