Mission Statement
Caribbean Flavours and Fragrances Limited is dedicated to providing its customers with Flavours and Fragrances of the highest quality and functionality. We will maintain consistency in our batches through internal and external quality systems. We endeavour to ensure that our customers, our employees and all our stakeholders are satisfied by our daily efforts to
“Tease The Senses”
1 Corporate Profile
Caribbean Flavours and Fragrances Ltd. began operating on October 1, 2001. The Company was previously owned and managed by Bush Boake Allen (Jamaica) Ltd.
The company has applied product development expertise to formulate exciting concepts without forfeiting enjoyable taste. Exercising their strong regulatory knowledge and company
C&F has continued in the tradition of its predecessor by manufacturing and distributing the highest quality flavours for the food, beverage, baking, confectionery and pharmaceutical industries, as well as water soluble food colours to enhance their visual appearance. It also manufactures and Supplies Fragrances for household cleaning, body care, aromatherapy and air re-freshener Industries.
Caribbean Flavours and Fragrances creates our unique and delicious products to meet clients’ varied needs. Keeping up to date with current market trends and demands, the company is well versed in the taste preferences of major ethnic and demographic groups. Additionally, Caribbean Flavours has an advantage as a worldwide company.
commitment to natural, healthful products, Caribbean Flavours & Fragrances has created a profile of 26 unique flavours.
Caribbean Flavours and Fragrances coordinates flavour experience with flavour composition to achieve authentic sensory perceptions. Flavour ingredients include aroma chemicals, essential oils, oleoresins, distillates, extracts and reaction products. Up-to-date with technology and trends, creatively combining maximum health and superior taste, Caribbean Flavours & Fragrances, Inc. excels in the food and beverage flavour industry.
2 Chairman’s Report
Our Company has achieved substantial growth over the last seven years. Revenues for the current financial year saw an increase of more than 11% moving from $230 M in the previous year to $256M.
Revenues
Our profit before taxation increased by a multiple of seven in 2011/12 and has further increased this Financial Year.
The net profit reported for the period was $51.5M which represents a 32% increase over the $38.8M reported in 2012/2013.
Howard Mitchell, J.P. Chairman
Due to prudent and efficient management, we have kept our rate of growth in operating expenses below our rate of growth in revenue. The efficiency of our management team has been exemplary as we have been able to realize a reduction of 6% on the prior year’s expenses for 2013/2014 in our current volatile economic environment.
A significant milestone that occurred during the year was the listing of our Company on the Junior Market of the Jamaica Stock Exchange. This was a strategic decision, and represents another stage of this historic company.
We continue to seek out new opportunities in other markets as we strive to diversify our income stream and support our thrust to hedge against the impact of the foreign exchange devaluation. The year in review saw a reestablishing of relationship with one of our partner in The Dominican Republic thereby providing valuable foreign exchange to the Company.
We are pleased with the recent equity participation by Derrimon Trading Limited and the consequent addition of new energies and abilities on our Board, which we believe will benefit the Company and will guarantee continued growth and positive returns to all of our stakeholders.
3 Notice of Annual General Meeting
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the annual general meeting of Caribbean Flavours and Fragrances Limited (the “Company”) will be held at 10:00 a.m. on November 5, 2014 at the Knutsford Court Hotel, 11 Ruthven Rd. Kingston 10 for shareholders to consider and, if thought fit, to pass the following resolutions:
Ordinary Resolutions
1. RECEIPT OF AUDITED ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2014
THAT the annual report and audited accounts of the Company for the financial year ended 30 June 2014 presented to the meeting and initialled by the Chairman for the purposes of identification, be and are hereby received.
2. RETIREMENT AND RE-APPOINTMENT OF DIRECTORS
THAT the following Directors of the Board who, being the longest serving have retired by rotation prior to the reading of the resolution in accordance with the Articles of Incorporation of the Company, and, being eligible, have consented to be re-appointed and to act on reappointment:
• Anand James • Joan James
3. RE-APPOINTMENT OF DIRECTORS APPOINTED TO FILL CASUAL VACANCIES
TO reappoint the following Directors of the Board who, each having been appointed to fill a casual vacancy and having resigned prior to reading of this resolution in accordance with the Articles of Incorporation of the Company and, being eligible, have consented to be reappointed and to act on re-appointment:
(i) Derrick Cotterell (ii) Ian Kelly
4. DIRECTORS’ REMUNERATION
THAT the Board be and is hereby approved to fix and agree the remuneration of the Directors.
5. AUDITORS’ REMUNERATION
THAT the Board be authorized to appoint the auditors based on the result of tender, and to fix and agree their remuneration.
6. FINAL DIVIDEND
THAT the dividend of $0.10 per ordinary stock unit paid to stockholders on April 2014 be and is hereby approved as the final dividend for the year.
SPECIAL RESOLUTION
7. AMENDMENT OF ARTICLES OF INCORPORATION
TO amend the Articles of Incorporation of the Company in order to facilitate the future sending of the Annual Report and audited accounts of the Company in electronic form, by the insertion of the following text at the end of Article 138A:
“For the purposes of this Article, a “copy” shall be a copy in any readable form including but not limited to print, CD-ROM or otherwise, provided always that the Company shall furnish a printed copy of the report of the Board and the annual accounts to any shareholder requesting such a copy, free of charge.”
Dated this 8th day of October 2014
By order of the Board,
Joan James, Company Secretary
A form of proxy accompanies this Notice. A shareholder who is entitled to attend and vote at the Extraordinary General Meeting of the Company may appoint one or more proxies to attend in his/her place. A proxy need not be a shareholder of the Company. The proxy form should bear stamp duty of $100.00, before being signed. The stamp duty may be paid by adhesive stamps, which are to be cancelled by the person signing the proxy. All completed original proxy forms must be deposited together with the power of attorney or other document appointing the proxy, at the registered office of the Company at least 48 hours before the Extraordinary General Meeting.
The Essence of Nature
4
7 Year Statistics Review
5 Directors’ Report
The Directors of Caribbean Flavours and Fragrances are pleased to present their report for the Financial Year ended June 30, 2014.
Caribbean Flavours and Fragrances Ltd. has continued its consistently good performance in all areas of activities. Our sales in flavours, fragrances and colour powders all increased by 11% in the financial year 2013/2014 when compared to the similar period for the 2012/2013 financial year. The Company has expanded its customer base beyond the shores of Jamaica and is now a regional exporter in 5 Caribbean countries as well as in North America.
SALES INCREASE 11%
The management team has been strengthened in order to capitalize on the projected growth opportunities as well the roll out of the Company’s strategic plan. The addition of a General Manager and innovative and enthusiastic Quality Assurance Managers will ensure that the Company continues to maintain quality whilst being innovative and creative. We are very excited about the renewed energy that these new professionals bring to the Company as we continue on the journey of providing quality products to our loyal and new customers.
We remain focused on providing our customers the highest quality of flavours and fragrances. Our international partners International Flavours and Fragrances Inc. remain our primary supplier and support and we continue to enjoy an excellent relationship with them.
Our customers are very important to our business and we treat them with the highest level of customer service. We will endeavor always to improve our service delivery as we are always cognizant of the fact that we operate in a changing market space that requires us to be able to satisfy our customers’ needs without any form of inconvenience.
In order to continuously improve on our service delivery, we continue to work closely with our customers to build a database that will facilitate continued research and development in anticipation of their future needs.
As such, we have put in place some new supporting systems to improve our efficiency and to ensure that there exist adequate quantities of raw materials and other finished products.
Our sincere thanks to all of our stakeholders, customers, staff, shareholders and service providers for choosing us as their partners for the supply of top quality flavours and fragrances.
Joan James, Company Secretary
6 Board of Directors
Anand James
Managing Director (appointed February 2001)
Anand James is a founding shareholder and the Managing Director of the Company. Mr. James has a Bachelor of Arts degree from the University of Guyana, and a Master of Arts degree from the University of the West Indies. He is a qualified teacher and worked in the management function of the Company’s predecessor, Bush Boake Allen (Jamaica) Limited prior to its voluntary winding up in 2000.
Mr. James spearheaded the purchase of the assets of that entity and the founding of the current Company in 2001. He has over 20 years’ combined experience in the Company. He is also a director of Spurtree Spices Jamaica Limited, AMJ Agro Processors Guyana Inc., and Anjoja Limited.
Joan James
Non Executive Director (appointed February 2001)
Joan James is a founding shareholder and a Non - Executive Director of the Company. Dr. James is a graduate of the University of the West Indies (B.A., Ph.D.). She is a lecturer at the University’s Mona campus and is a trained and certified graduate teacher. She is also a Director of Anjoja Limited.
1. LECTURER IN WHAT?
Anthony James
Non Executive Director (appointed February 2011)
Anthony James is a Non - Executive Director of the Company. A graduate of Tufts University in the United States where he attatined a B.Sc., in Computer Engineering. He is both a director and a software engineer of Anjoja Limited and Paytronics Inc.
Howard Mitchell, J.P.
Non Executive Director (appointed July 2013)
Mr. Mitchell has spent more than 30 years as a practicing Attorney–at–Law. He is an alumnus of the Institute of Management Development (Switzerland) and currently serves as a company Director, on Boards inclusive of Corrpak Jamaica Ltd (Chairman), Island Grill/Chicken Mistress and TM Traders Ltd., Jamaica Deposit Insurance Corporation, CariMed and Kirk Distributors Limited, Associated Manufacturers Limited and the G. Raymond Chang Foundation and, most recently, All Jamaica Air Services Limited (Chairman).
Mr. Mitchell is the immediate past Chairman of the National Housing Trust, the Coffee Industry Board, the Cocoa Industry Board, the Bauxite and Alumina Trading Company of Jamaica, Jamaica Bauxite Mining Ltd., and the Jamaica Bauxite Institute.
Board of Directors Continued
Clive Nicholas, C.D.
Non Executive Director (appointed
July 2013)
Mr. Clive Nicholas is a Tax Consultant and Chartered Accountant who retired as Director General for Tax Administration after over forty (40) years of combined service to the Income Tax Department, the Revenue Board, the General Consumption Tax Department and the Ministry of Finance and Planning. He is a graduate of Harvard Law School and was awarded the Order of Distinction (Commander Class) for his services to Jamaica.
Mr. Nicholas is a member of the Integrity Commission, a Director of the Kingston College Development Trust Fund, Marjoblac Limited, and a Trustee of the Jamaica Church Pension Scheme. He has also served as a Director of Container Services Limited and a Commissioner of the Betting Gaming and Lotteries Commission.
He is currently the Administrative Head for the eGov Secretariat attached to the Central Information Technology Office and is Chairman of the Kingston College Development Trust Fund Audit Committee.
W. “Billy” Heaven, J.P. Non Executive Director (appointed
July 2013)
W. Billy Heaven is the Chief Executive Officer of the CHASE Fund, a post he assumed in 2003. Prior to this he served as a Small Medium-sized Enterprise (SME) consultant and Executive Director of the National Development Foundation of Jamaica. Mr. Heaven has worked as an Accountant, Management Accountant and Financial Controller with local and multi-national corporations. He is also a Risk Management Consultant.
Mr. Heaven is a founding member of the Association of Development Finance Institution (DEFINA) and Chairman of the Jamaica Conservation and Development Trust (JCDT). He was also a member of the Board of the Mico University College and President of the Mico Old Students’ Association; a member of the Boards of the University Hospital of the West Indies (Chairman of the Audit Committee and member of the Finance and General Purpose Committee); the Jamaica Civil Aviation Authority (Deputy Chairman, Chairman of the Audit Committee and member of the Procurement Committee); the Museums of History and Ethnography, the Heart Institute of the Caribbean; and the Edna Manley College of the Visual and Performing Arts (Audit Committee).
Mr. Heaven served as the Chairman of the Health and Sight Committee of the Lion’s Club; he served as a member of the Community Development Committee on the NHT and President of the Mearnsville 4-H Club.
He is also the Chairman of the Finance Committee for the Jamaica Cricket Association and a member of the Man and Biosphere Committee of the Jamaican National Commission of UNESCO.
Mrs. Tania Waldron-Gooden Mentor
Mrs. Tania Waldron-Gooden is the Senior Vice President of Corporate Finance, Research & Special Projects at Mayberry Investments Limited. As the Mentor of the Company, she is responsible for providing the Board with support in establishing proper procedures, systems and controls for its compliance with the Junior Market Rule requirements for financial reporting, good corporate governance, and the making of timely announcements.
Mrs. Waldron – Gooden joined Mayberry Investments Limited as a Management Trainee approximately seven years ago. She rotated through the Research, Asset Management, Equity Trading, Corporate Financing, Risk & Compliance and Information Technology departments.
Prior to joining Mayberry Investments, Mrs. Waldron-Gooden worked at Capital & Credit Financial Services limited in the area of Pension Fund and Client Portfolio Management. She holds a BSc. (Hons.) in Geology from the University of the West Indies (Mona). She also holds an M.B.A from the University of Sunderland (U.K.). She has completed the Jamaica Securities Course as well as the Canadian Securities Course administered by the Canadian Securities Institute.
7 Disclosure of Shareholdings
8 Management Discussion Analysis
What Is Caribbean Flavours And Fragrances Ltd?
Caribbean Flavours and Fragrances Ltd. opened for business in Jamaica on Monday October 1st 2001. It acquired the business as a going concern of Bush Boake Allen Jamaica Ltd, which was part of a multinational company operating in over forty countries in the world. The core business was to manufacture flavours and fragrances for the beverage, baking, confectionery, and pharmaceutical industries. The fragrances were used in the household and body care industries.
Caribbean Flavours and Fragrances continued in the tradition of producing high quality flavours and fragrances by sourcing unique oils and flavour blends from International Flavors and Fragrances Inc. Over the last thirteen (13) years, the business has grown tremendously.
We have been able to increase our product offerings with additional flavours, giving our customers a wider selection to choose from and ultimately passing that variety down to their consumers. Additionally, due to deliberate and focused sales initiatives, we have seen a significant increase in our customer base thus giving us a wider reach both regionally and internationally. We now have customers in Jamaica, Barbados, St. Kitts, Trinidad and Tobago, Guyana, Grenada, Canada and most recently The Dominican Republic.
Manufacturers account for the lion share of our customers as our business model
is not retail based but rather supports manufacturers with raw material to produce some of the most popular carbonated, non alcoholic and alcoholic beverages, baked goods, soaps and other household cleaners.
Given our key role in supporting manufacturers with these critical raw materials, we pride ourselves on producing very high quality products and over the years have won awards for quality, systems and practices. We have also won the Ray Hadeed Award for best SME Manufacturer of the Year.
In keeping with our mandate to produce high quality products, we are always working towards improving our efficiencies so that the direct benefits can be passed on to our customers. In the 2013/14 financial year, we did experience some challenges with expediting raw material due to a number of environmental and logistic concerns.
In light of this, we are seeking to implement a system involving the importation of raw material to ensure that we are always able to supply our customers on a timely basis.
Looking AheadStrategic Planning
We recognize the value of working closely with our customers to ensure we are always meeting their needs, and therefore keep them at the pinnacle of our strategic planning. For the financial year 2014/15 some of the strategic initiatives include:
• Ensuring our quality control standards are maintained to continue to provide quality products.
• Effectively managing our operations to ensure timely delivery of goods to our customers.
• Listening to our customers and working with them to develop new flavours that will please and tease their consumers senses. The creation of new products will allow us to offer our existing customers a wider selection as well as attract new customers.
As part of our long term strategy the management of Caribbean Flavours intends to explore and take advantage of other market opportunities both locally and regionally.
In addition, a fundamental part of strengthening the organization’s management and processes in preparation for growth. We intend to have quarterly
training and refresher courses for all members of staff. Caribbean Flavours and Fragrances places high value on staff training and development and therefore see this as a critical and key component to the Company’s continued upward trajectory for growth.
Our solid management team and very experienced and qualified employees will guarantee the Company’s continued success to the benefit of its shareholders, customers and wider team.
Financial performance Highlights
During the ensuing reporting period ended June 30, 2014, the company made great strides with respect to the financial performance.
Revenue
Revenue for the company at the end of June 30, 2014 was $255.4 million, an increase of 11.09% or $25.5 million over the previous year’s revenue of $229.9 million.
Our revenue growth was impacted by the combination of the deepening of existing relationships as well as new business acquired within the various markets that we serviced. Despite the various economic issues, we continue to grow our revenue at a consistent rate at above 10%. This growth continues to be influenced by our consistency of products and ability to deliver these products within a short period of time. From time to time, we do have challenges with raw materials, however steps have been, taken at all times, to reduce the slack time.
Gross Profit
The Company recorded gross profit of $101.635 million or a $9.352 or 10.13% growth over the $92.283 million reported in the comparative 2013 period.
• Deepening of existing business relationships,
• Consistency of products and supplier relationships,
• Broadening of the relationship within the Caricom and the diaspora.
Operating Expenses
The management of expenses continues to be an integral part of our daily operations and we continue to take an eagle’s eye approach with respect to the management of expenses. This is manifested in the expenses that we have incurred for the current reporting period. The total operating expenses record was $55.690 million, a 6.16% or $3.656 million below the $59.346 million recorded for the similar period in 2013.
The major areas of cost reductions were: depreciation, directors fees and legal and professional fees. Staffs cost and rent continues to be the major expenses. The movement in these cost were in line with budget and came out below inflation. As we strengthen the competence base of this organization, there is an expectation that cost relating to the hiring of competent professionals will increase.
The year-over-year improvement to the gross profit was driven by:
• The year over year average 10% increase in revenues,
Net Profit
We continue to experience tremendous bottom line growth and this year is the same. The Company reported Net Profit of $51.557 million which translates to a 32.77% or $12.725 million growth over the $38.832 million recorded in 2013. The healthy net profit is driven by the improvement in sales, as well as the management of cost. We expect that this positive growth path will continue as the company strives to diversify its revenue stream and to increase its sales in the Caribbean.
Risk Management
Risk management is a critical component in managing our business and is structured in our organisation and management processes. At the highest level, it involves oversight by the Audit Committee to ensure that our corporate governance objective for effectively managing risks is met. At the organization level, our management teams are responsible for identifying, evaluating, assessing, managing and tracking each risk. This will be further enhanced with the addition of the new personnel to the management team.
In supporting our continued growth, we have strengthened our internal controls and the organizational structure for cash and credit sales and the collections process.
Looking ahead, we have instituted further measures to increase the security of our assets and information, and have completed the data protection infrastructure; that will enable us to have business continuity in the event of any catastrophic occurrence. The Company will continue to manage risks to protect its employees, assets and the interests of its stakeholders.
This technologically advanced approach to managing the process, will ensure that changing circumstances are taken into consideration and best practices are applied.
9 Operation Team
L-R
Chris Carless - Accountant
Delvia Clarke - Administrative Assistant
Carlton Campbell - Security
Janice Lee - General Manager (seated)
Guylene Gayle - Sales Customer Service Supervisor
Brian William - Cashier
Wayne Murray - Driver
10 Risk Management
Risk Management
The management of Caribbean Flavours and Fragrances recognizes the importance of risk management for the smooth and continued operation of the business. To this end, we have ensured that the organization is structured to effectively manage any likely risk.
Our audit committee meets regularly and has oversight of the company’s operational risk. The committee seeks to ensure that all corporate governance guidelines and principles are adhered to.
While the committee ensures that an appropriate risk culture exists, senior managers are entrusted with the overall responsibility of identifying, tracking and managing possible risks. Our strong risk management framework equips our senior managers with the ability to proactively respond to potential risk.
Managing risk at the operational level is critical to the success of the organization as we are cognizant of the complexities that could arise in our environment. For example, in the event of any type of contamination, there is a reliable system in place to immediately identify the source and deal with the situation effectively. Additionally, in order to mitigate against low stock levels, which is vital to our operations, we seek to implement a reliable system to ensure the sufficiency of raw material.
The company’s infrastructure is able to manage and protect the company’s assets in the event of any catastrophic occurrence. The company is committed to best practices and as such, utilise technology that assists in obtaining real time information. This technology has allowed us to strengthen controls for credit and collections, thereby reducing our exposure to bad debt.
The management of Caribbean Flavours and Fragrances is confident that, should there be any environmental disruption, the company will continue to exist with minimum interruption.
We will continue to manage risk to protect our assets and stakeholders’ interests.
Corporate Governance
The Board of Directors of Caribbean Flavours and Fragrances Ltd. is committed to promoting high standards of corporate governance by ensuring the soundness of the Company’s financial policies, business strategies, internal controls and risk management framework.
The Board recognises its role in providing entrepreneurial leadership and strategic direction as critical components in the creation of shareholder long term value and maintaining the confidence of its shareholders, employees, stakeholders and the community. As such, the Board accepts and embraces the principles of transparency and accountability and maintains an active approach to ensuring that all stakeholders’ interests are protected.
The directors, management and staff of the Company are expected to exercise the highest standard of ethical conduct and the adherence of company operating policies and procedures which have been approved by the Board of Directors thereby ensuring compliance with the Junior Market Rules of the Jamaica Stock Exchange, The Company’s Act and the laws and regulations of Jamaica.
The members of the board are experienced professionals with diverse skills and knowledge from various professions. Their composite experience guarantees that the decisions made are in the best interest of all stakeholders and the company’s long term success.
Board Composition
During the financial year 2013/2014 a total of six (6) members comprised the Company’s Board, three executive and three non executive. These include:
1. Howard Mitchell - Chairman ( Independent )
2. Wilford ( Billy ) Heaven ( Independent )
3. Clive Nicholas ( Independent )
4. Anand James-Managing Director
5. Joan James – Non independent
6. Anthony James – Non independent
The Company also appointed an external Mentor, Mrs. Tania Waldron- Gooden as required by the Jamaica Stock Exchange Junior Market Rules to assist with its preparation for the listing of the shares on the Exchange.
The Board met on six ( 6 ) occasions during the year 2013/2014 and the focus was on enhancing shareholder value and ensuring the long term viability through its provision of guidance and strategic direction to management
Board Sub-Committees
There are two (2) sub-committees, the Audit and the Compensation Committee. The members were appointed by the full Board of Directors and any member may, by invitation, attend subcommittee meetings.
Audit Committee
The Audit Committee is comprised of two (2) independent members and one nonindependent director who is the Managing Director. This Committee is chaired by Mr. Clive Nicholas, who assists the Board by overseeing the financial reporting and auditing process of the company’s activities.
The Committee had six (6) meetings in 2013/2014 in which it reviewed the integrity of the monthly, quarterly and annual financial statements and the formal announcements relating to the company’s financial performance to the Jamaica Stock Exchange. In addition it reviewed and recommended budgets for approval by the Board of Directors , the effectiveness of internal controls and risk management systems and other matters that fall within its mandate.
Compensation Committee
This Committee comprises the two (2) independent members and the Managing Director. This Committee is chaired by Mr. Howard Hamilton and has the responsibility for providing advice to the Board on all matters relating to compensation of the Executive Directors and Senior Managers.
The Committee met on three (3) occasions during which it developed compensation policies for the Managing Director and other members of staff of the Company, These were subsequently approved by the full Board of Directors
11 Financials
Lee Clarke Chang
Chartered Accountants
9 Cargill Avenue
Kingston 10
Telephone: (876) 926-4546
(876) 926-6310
Telefax: (876) 960-7383
Email: leeclarke@cwjamaica.com
INDEPENDENT AUDITORS' REPORT
To The Members of Caribbean Flavours and Fragrances Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Caribbean Flavours and Fragrances Limited set out on the pages 32 to 56 which comprise the Company’s statement of financial position as at June 30, 2014, statement of comprehensive income, statements of changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and the fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Jamaican Companies Act, and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether or not the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Oswald R. Lee, FCA, ACIS
Lee Clarke Chang
Chartered Accountants
INDEPENDENT AUDITORS’ REPORT
Members of Caribbean Flavours and Fragrances Limited
Report on the Financial Statements Cont’d.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at June 30, 2014 and financial performance and cash flows for year then ended of accordance with International Financial Reporting Standards, and comply with the provisions of the Jamaican Companies Act.
Report on other Legal and Regulatory Requirements
As required by the Jamaican Companies Act, we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit.
In our opinion, proper accounting records have been maintained and the financial statements are in agreement therewith and give the information required by the Jamaican Companies Act, in the manner so required.
August 25, 2014
REVENUE
Cost of sales
Gross profit
Profit on disposal of fixed asset
Bad debt recovered
Impairment of fixed asset
Selling and distribution costs
Administrative expenses
Net finance income
Profit before tax
Restated (Note 20)
30, 2014
The financial statements on pages 32 to 56 were approved for issue by the Board of Directors on August 25, 2014 and signed on its behalf by:
Howard Mitchell Director
Clive Nicholas Director
Balance at June 30, 2011
Net profit
Balance at June 30, 2012
Net profit
Balance at June 30, 2013
Issue of shares
Net profit
Dividend paid
Balance at June 30, 2014 STATEMENT OF CHANGES IN EQUITY YEAR ENDED JUNE 30, 2014
Depreciation
Profit on sale of fixed assets
Impairment of fixed assets
Exchange gain on foreign currency balances
Interest
Directors’ current account Repayment of loan
1. IDENTIFICATION:
The company is incorporated under the Companies Act of Jamaica and domiciled in Jamaica. Its principal activity is the manufacture and distribution of flavours, mainly for the beverages, baking and confectionary industries.
Its registered office is located at 226 Spanish Town Road,Kingston 11.
2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION:
The principal accounting policies applied in the preparation of these financial statements are noted below and they are consistently applied to all the years presented in the financial statements, unless otherwise stated.
(a) Basis of preparation -
(i) Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards and their interpretations issued by the International Accounting Standard Board, and comply with the Jamaican Companies Act.
(ii) Basis of Measurement
The financial statements have been prepared on the historical cost basis.
(iii) Functional and presentation currency
These financial statements are presented in Jamaican dollars, which is the Company’s functional currency.
(iv) Going concern
The Company’s financial statements have been prepared on the going concern basis which anticipates that the Company will be in operation for the foreseeable future.
(v) New standards, interpretations and amendments that became effective during the year.
Certain new or amended IFRS’s and Interpretation to Existing Standards (IFRICs) became effective as of July 1 2013, the beginning of the Company’s financial year. Those that became effective during the year and which management considered relevant to the Company’s operations are:
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(a) Basis of preparation (cont’d) –
(v) New standards, interpretations and amendments that became effective during the year cont’d:
IAS 1 Presentation of Financial Statements:
Presentation of items of Other Comprehensive Income (effective July 1, 2013) has been amended to require an entity to present separately the items of other comprehensive income (OCI) that may be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss. Consequently, an entity that presents its items of OCI before related tax effects will also have to allocate the aggregated tax amount between these sections. The existing option, to present the profit or loss and other comprehensive income in two statements, has not changed. However, an entity is still allowed to use other titles.
IFRS 13, Fair Value Measurement:
This is effective for annual reporting periods beginning on or after January 1, 2014, defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. It explains how to measure fair value and is applicable to assets, liabilities and an entity’s own equity instruments that, under other IFRSs, are required or permitted to be measured at fair value, or when disclosure of fair values is provided. It does not introduce new fair value measurements, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(a) Basis of preparation (cont’d) –
(v) New standards, interpretations and amendments to existing standards not yet effective:
IFRS 9 Financial Instruments
This is effective for annual reporting periods beginning on or after January 1, 2015.The revised IFRS will supersede the previous version of IFRS 9 issued in 2009. The standard retains but simplifies the mixed measurement model and establishes two primary categories for financial assets: amortised cost and fair value. The revised standard includes guidance on classification and measurement of financial liabilities designated as fair value through profit or loss and incorporates certain existing requirements of IAS 39 Financial Instruments: recognition and measurement of the recognition and de-recognition of financial assets and financial liabilities.
(b) Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and contingent liabilities and the total comprehensive income and expenses in the financial statements and accompanying notes. Actual results could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and any adjustments that may be necessary would be reflected in the period in which actual results are known. The areas involving a higher degree of judgment in complexity are areas where assumptions or estimates are significant to the financial statements such as:
(i) Accruals
Amounts accrued for certain expenses are based on estimates and are included in payables and accruals.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(b) Use of estimates and judgements (cont’d)
(ii) Property, plant and equipment
Management exercises judgement in determining whether cost incurred can accrue significant future economic benefits to the Company to enable the value to be treated as a capital expense.
Further judgement is applied in the annual review of the useful lives of all categories of property, plant and equipment and their expected utility to the Company resulting in the depreciation determined thereon.
(iii) Provision for impairment of receivables
In determining amounts recorded for provision for impairment of receivables in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be a measureable decrease in the estimated future cash flows from receivables, for example, default and adverse economic conditions. Management also makes estimate of likely future cash flows from impaired receivables as well as the time of such cash flows. Historical cost experience is applied where indicators of impairment are not observable on individual significant receivables with similar characteristics, such as credit risks.
(iv) Net realizable value of inventories
Estimates of net realizable value are based on most realisable evidence available at the time the estimates are made, of the amounts the inventories are expected to realize. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the year to the extent that such events confirm conditions existing at the end of the year.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(c) Property, plant and equipment -
Property, plant and equipment are stated at historical cost less accumulated depreciation.
Depreciation is calculated on the straight-line basis at annual rates estimated to write-off the cost of fixed assets over their expected useful lives. The annual rates are as follows:-
The assets’ residual values and useful lives are reviewed periodically for impairment. Where an asset’s carrying amount is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds with the carrying amount and are recognized in other income in the statement of comprehensive income.
Repairs and maintenance expenditure are charged to statement of comprehensive income during the financial period in which they are incurred.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(d) Inventories -
Inventories are valued at the lower of cost, determined principally on an average cost basis, and net realizable value. Costs of material, labour and appropriate allocations for overhead expenses are included in work-in-progress and manufactured finished goods.
(e) Foreign currency translations -
Balances in foreign currencies are translated at the rate of exchange ruling at the statement of financial position date. Transactions during the year are translated at the exchange rate prevailing at the date of the transactions. Gains or losses on translation are dealt with in the statement of comprehensive income.
Exchange rates are determined by the weighted average rate at which Commercial Banks trade in foreign currencies as published by the Central Bank.
(f) Trade receivables -
Trade receivables are carried at anticipated realizable value. A provision is made for impairment of trade receivables when it is established that there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivable. Subsequent recoveries of amounts previously written off are credited in the statement of comprehensive income.
(g) Revenue recognition -
Revenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or material associated costs on the possible return of goods.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(h) Income taxes -
Taxation on profits comprises current and deferred income tax. Income tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.
Current tax is based on the taxable income for the year, using tax rates enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the statement of financial position date.
(i) Financial instruments -
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. For the purpose of the financial statements, financial assets have been determined to include cash and cash equivalents and accounts receivable; financial liabilities represent accounts payable and directors’ current account.
(j) Borrowing and borrowing costs -
Bank and other borrowings are recognized initially at cost. Borrowings are subsequently stated at amortized cost, with any difference between cost and redemption value being recognized in the statement of comprehensive income over the period of the borrowing on an effective interest basis.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(j) Borrowing and borrowing costs (cont’d)-
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of these assets. Capitalization of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in the statement of comprehensive income in the period in which they are incurred.
(k)
Dividends
Dividends on ordinary shares are recognized in stockholders’ equity in the period in which they become legally payable. Interim dividends are due when declared and approved by the directors while final dividends are approved by shareholders at the Annual General Meeting.
(l) Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.
The expense relating to any provision is charged to the statement of comprehensive income net of any reimbursement.
(m)
Impairment
The Company assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less cost to sell and its value in use and is determined of an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(m)
Impairment (cont’d)
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognized in the statement of comprehensive income.
Calculation of recoverable amount and reversal of impairment.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company makes an estimate of the recoverable amount.
A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation. Such reversal is recognized in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.
(n) Employee benefits
Employee benefits include current or short term benefits such as salaries,statutory contributions paid, annual vacation and sick leave, non-monetary benefits such as medical care. Entitlement to annual leave and other benefits are recognized when they accrue to employees.
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(o) Related parties –
A related party is a person or entity that is related to the entity that is preparing its financial statements; referred to in IAS 24 Related Party Disclosures as the “reporting entity”.
(a) A person or close member of that person’s family is related to a reporting entity if that person:
(i) has control or joint control over the reporting entity;
(ii) has significant influence over the reporting entity; or
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
(b) An entity is related to a reporting entity if any of the following conditions apply:
(i) the entity and the reporting entity are members of the same group.
(ii) one entity is an associate or joint venture of the other entity.
(iii) both entities are joint ventures of the same third party
(iv) one entity is joint venture of a third entity and the other entity is an associate of the third entity
(v) the entity is a post-employment benefit plan for the benefit of the employees of either the reporting entity or an entity related to the reporting entity.
(vi) the entity is controlled or jointly controlled by a person identified in (a).
2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(o) Related parties –
(vii) a person identified in (a) i has significant influence over the entity or is a member of the key management personnel of the entity.
A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.
(p) Earnings per share -
The earnings per share is computed by dividing the profit attributable to the ordinary shareholders by the number of ordinary shares issued.
(q) Comparative balances -
When necessary, comparative figures are reclassified to conform with changes in presentation in the current year in relation to the fair values presentation of financial assets and liabilities.
3. REVENUE:
Revenue represents the invoiced value of sales, net of General Consumption Tax, returns and discounts.
4. SELLING AND DISTRIBUTION COSTS:
5.
ADMINISTRATIVE EXPENSES:
7. TAXATION:
The charge for taxation is based on the profit for the year adjusted for taxation purposes and is calculated at 30% of profits earned from July to December 2013 and 25% of profits earned from January 2014 to year end which is an average of 27.5% (2013:33 1/3%).
7. TAXATION CONT’D:
Current taxation
Deferred taxation (note 12)
Deferred tax asset written back
The tax effect of difference bet ween treatment of items for financial statements and taxation purposes is as follows:
Profit before tax
Taxation at 27.5% (2013:25%)
Difference between depreciation and capital allowances
Income not subjected to tax
Expenses not allowed for tax purposes
Unrealised foreign currency conversion gain
Unrealised foreign currency conversion loss
Remission of tax
Remission of income tax:
( 22) 15 (15,936)
2,224 ( 3,713) 1,524 ( 62) 4412,614
The company’s shares were listed on the junior market of the Jamaica Stock Exchange effective October 2, 2013. Consequently, the company is entitled to a remission of taxes for ten (10) years in the proportions set out below, provided the shares remain listed for at least fifteen (15) years:
Years 1 to 5 – 100%
Years 5 to 10 – 50%
The financial statements have been prepared on the basis that the company will have the full benefit of the tax remissions.
provision for bad debts
The movement in allowance for doubtful debts is as follows: 10. INVENTORIES:
at July 1
11. PROPERTY, PLANT AND EQUIPMENT:
June 30, 2012 Addition Disposal June 30, 2013 Additions Impairment At June 30, 2014 DepreciationJune 30, 2012 Charge for the year Disposal June 30, 2013 Charge for the year Impairment At June 30, 2014 Net Book
June 30, 2014 June 30, 2013
12. DEFERRED TAXATION:
Deferred tax is calculated on all temporary differences under the liability method using a tax rate of 25% (2013:33 1/3%).
The movement in deferred tax balance is as follows:
Deferred tax (asset)/liability) at beginning of year
Debit/(credit) to statement of comprehensive income (note 7)
Deferred
asset at end of year
13. PAYABLES AND ACCRUALS:
LONG TERM LOAN:
This represents an amortised loan of $5,000,000 at an annual interest rate of 9% accruing on a daily basis, from National Commercial Bank. Repayment is $103,792, per month, inclusive of interest which commenced February 2010 for 60 months. The loan is guaranteed by a director. There is no charge for the guarantee.
15. SHAREHOLDERS’ LOAN
This represents amounts advanced to the Company by the shareholders. The loan was fully repaid during the year.
16. SHARE CAPITAL:
Authorised:
91,452,000 ordinary shares of no par value (2013: 5,621,000)
Issued and fully paid:
89,920,033 ordinary shares of no par value
Effective 13 September, 2013 the shareholders passed a resolution to re-register as a public company under section 34 of the Companies Act 2004 and adopted new articles for that purpose. In addition, the following resolutions were passed:
- The authorised share capital be increased by 85,831,000 shares.
- That each of the existing 5,620,002 ordinary shares in the capital of the company be subdivided into 12 ordinary shares and 11 ordinary shares be issued as bonus shares for each ordinary share held by the existing shareholders prior to the public issue.
By prospectus dated 18 September, 2013, 22,480,009 shares were offered to the general public at an invitation price of $2.25 per ordinary share.
17. STAFF COSTS:
The average number of persons employed full-time by the Company during the year was 14 ( 2013- 12).
18. FINANCIAL INSTRUMENTS:
(a) Financial instrument risks:
Exposure to financial instrument risks arises in the ordinary course of the Company’s business. Derivative financial instruments are not presently used to reduce exposure to these risks.
(i) Credit risk:
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.
Trade receivables:
Management has a credit policy in place to minimize exposure to credit risk. Credit evaluations are performed on all customers requiring credit. The Company generally does not require collateral in respect of trade receivables. The maximum exposure to credit risk is represented by the carrying amount of each financial asset. Credit limits and company limits for all customers are reviewed at least annually, against the customers’ payment history, assessment of customers’ credit risk and sales department information.
Cash and cash equivalents:
Cash and cash equivalents are placed with counterparties believed to have minimal risk of default. No provision for impairment is deemed necessary.
Exposure to credit risk:
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
18. FINANCIAL INSTRUMENTS (CONT’D):
(a) Financial instrument risks (cont’d):
(i) Credit risk:
The aging of trade receivables at reporting date was:
Current: below 30 days
Past due 31-60 days
Past due 61-90 days
More than 90 days
Provision for doubtful debt
Exposure to credit risk:
The allowance account in respect of trade receivables is used to record impairment losses, unless management is satisfied that no recovery of the amount owing is possible. At that point the amount considered irrecoverable is written off directly against the receivable balance.
(ii) Liquidity risk:
Liquidity risk, also referred to as funding risk, is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at or close to its fair value. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities. Liquidity risk is managed by keeping lines of credit available and by efficiently managing the Company’s
cycle.
18. FINANCIAL INSTRUMENTS (CONT’D):
(a) Financial instrument risks (cont’d):
(ii) Liquidity risk cont’d:
At the end of the reporting period, the Company was not exposed to any liquidity risk as current assets significantly exceeded current liabilities.
(iii) Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
(a) Interest rate risk:
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. At June 30, 2014, there was no significant exposure to interest rate risk.
(b) Foreign currency risk:
Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates, primarily the United States Dollars (US$) and Euro (€).
Exposure to currency risk:
At June 30, 2014 there was no significant exposure to foreign exchange risk as the Company had foreign payables amounting to US$105,715.94, foreign receivables amounting to US$112,167.86 and foreign currency savings account amounting to US$73,974.08 and €4,943.24.
(c) Cash flow risk:
Cash flow risk is the risk that future flows associated with a monetary financial instrument will fluctuate in amount. The Company manages this risk by ensuring, as far as possible, that fluctuations in cash flows relating to monetary financial assets and liabilities are matched, to mitigate any significant adverse cash flows.
18. FINANCIAL INSTRUMENTS (CONT’D):
(b) Fair value disclosure:
(i) Fair value amounts represent estimates of the arm’s length consideration that would be currently agreed upon between knowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted market price, if one exists.
(ii) The fair values of cash and cash equivalents, accounts receivable and accounts payable are assumed to approximate to their carrying values due to their short-term nature.
19. COMMITMENTS AND CONTINGENCIES
The Company had no capital commitments as at June 30, 2014 and as far as the Directors are aware, there were no claims, disputes and legal proceedings against the Company.
20. RESTATEMENT
The restatement was done to correct export charges of $447,000 which should have been charged to cost of sales in 2013 but was erroneously treated as a selling and distribution cost.
INFORMATION YEAR ENDED JUNE 30, 2014
YEAR ENDED JUNE 30, 2014
CARIBBEAN FLAVOURS AND FRAGRANCES LIMITED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2014
Lee Clarke Chang Chartered Accountants
9 Cargill Avenue
Kingston 10
Telephone: (876) 926-4546 (876) 926-6383
Telefax: (876) 960-7383
Email: leeclarke@cwjamaica.com Page 1
AUDITORS' REPORT:
To The Directors of Caribbean Flavours and Fragrances Limited
The supplementary information presented on pages 2 and 3 has been taken from the accounting records of the Company and has been subjected to the tests and other auditing procedures applied in our examination of the financial statements of the Company for the year ended June 30, 2014.
In our opinion, this information is fairly presented in all material respects in relation to the financial statements taken as a whole, although it is not necessary for a fair presentation of the state of the Company's financial affairs at June 30, 2014 or the results of its operation or cash flows for the year then ended.
August 25, 2014
Oswald R. Lee, FCA, ACIS
Revenue
Cost of sales: Manufactured goods
Resale goods
Raw materials
Other direct costs of production
Gross profit
Other income
Profit on disposal of fixed assets
91,065 40,904 2,511 19,823 (154,303) 71,059 229,892 ( 75,366) ( 37,813) ( 4,569) ( 19,414) ( 137,162) 92,730
Net finance income (page 3) Export charges4,383 798 76,240 14,854 2,597110,181
Selling and distribution costs (page 3)
Administrative expenses (page 3)
Net profit ( 898) ( 53,275) 22,067 ( 1,575) ( 58,218) 50,388
NOTES
Caribbean Flavours & Fragrances Limited
226 Spanish Town Road, Kingston 11, Jamaica
Telephone: (876) 923-5111, 923-8777, 937-0366, 923-5256
Website: www.caribbeanflavoursjm.com
E-mail: ajames@cffjamaica.com