portland paints & products nigeria plc

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

PORTLAND PAINTS & PRODUCTS NIGERIA PLC


FINANCIAL STATEMENTS


CONTENTS PAGE

Board of Directors and Professional Advisers 3

Results at a Glance 4

Directors' Report 5

Corporate Goverance Report 12

Report of the Audit Committee 19

Statement of Directors' Responsibilities 20

Independent Auditor's Report 21

Statement of Profit or Loss and Other Comprehensive Income 24

Statement of Financial Position 25

Statement of Changes in Equity 26

Statement of Cash Flows 27

Notes to the Financial Statements 28

Other National Disclosures:

Statement of Value Added 73

Five year Financial Summary 74


BOARD OF DIRECTORS AND PROFFESSIONAL ADVISERS


BOARD OF DIRECTORS

NAME DESIGNATION STATUS

Mrs. Esosa Balogun Chairman (Non-Executive Director) Appointed with effect from April 26, 2019

Mrs. Bolarin Okunowo Managing Director

Appointed as a director with effect from 29 May

2019 and appointed as Managing Director with

effect from March 21, 2020

Engr. ‘Dipo Ashafa Non-Executive Director

Mrs. Adeline Ogunfidodo Non-Executive Director

Dr. Vitus Ezinwa Non-Executive Director Appointed with effect from March 21, 2020

Mr. Mukhtar Yakasai Non-Executive Director Resigned with effect from January 31, 2019

Mr. Adedamola Olusunmade Managing Director Resigned with effect from March 20, 2020

Retirement by Rotation

RC Number: 76075

Company Secretary

Ms. Ayomipo Wey

FRC/2013/NBA/00000003124

Registered/Head Office

Sandtex House, 105A, Adeniyi Jones Avenue

Ikeja – Lagos

Tel: 08177290233

E-mail: [email protected]

Registrars Auditors

Africa Pridential Plc PriceWaterHouseCoopers

220b, Ikorodu road Palmgrove, Lagos

Landmark Towers, Plot 5B water corporation

road, Victoria Island Lagos

Tel: 07080606400 Tel: 01-2711700

Record of Directors’ Attendance at Board Meetings

In accordance with section 258 (2) of the Companies and Allied Matters Act, Cap C20 LFN 2004, the record of Directors’

attendance at Board meetings during the year is available for inspection at this Annual General Meeting.

FRC Number: FRC/2012/0000000000221

In accordance with the Articles of Association of the Company and Section 259 of CAMA, Mrs. Adeline Ogunfidodo and

Mrs. Esosa Balogun are the directors retiring by rotation and being eligible offer themselves for re-election.

bosaigbovo

Typewritten text

3


RESULTS AT A GLANCE


Dec-19 Dec-18

N'000 N'000

Revenue from contracts with customers 2,610,178 2,829,262

Profit before taxation 127,195 307,533

Tax expense (42,301) (100,840)

Profit net of tax attributable to equity holders of the Company 84,894 206,693

4

Total equity and liabilities 2,254,911 2,251,468

Shareholders' fund 1,582,204 1,536,981

Earnings per share (kobo) 11 26.05

Net assets per share (Naira) 2 2

Market price per share as at 31 December 2.23 2.80

Market capitalization as at December 1,769,317 2,221,564


DIRECTORS' REPORT


1. LEGAL FORM

2. Principal activitiesPRINCIPAL ACTIVITIES

3. OPERATING RESULTS

Dec-19 Dec-18

N'000 N'000

2,610,178 2,829,262

859,552 836,496

127,195 307,533

(42,301) (100,840)

84,894 206,693

- 39,671

655,650 610,421

4. DIVIDEND

6. BOARD CHANGES

. Resignation

Pursuant to Section 258(2) of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria

2004, the record of Directors' attendance at Board meetings during the year under review will be available for

inspection at the Annual General Meeting.

The following resignations from the Board occurred during the course of the year:

Declared Dividend

The Directors do not recommend the payment of dividend for the financial year ended December 31, 2019 (2018:5k

per share).

Taxation

Profit After taxation

The following is the summary of the performance of the Company during the year under review as compared with the

previous year:

Operating Expenses

5. RECORD OF DIRECTORS’ ATTENDANCE AT MEETINGS

Retained Earnings

The Directors have the pleasure in presenting to the Members, their report on the affairs of Portland Paints & Products

Nigeria Plc (“Portland Paints” or the “Company”), together with the Audited Financial Statements and Independent

Auditor’s Report for the year ended December 31, 2019.

Portland Paints and Products Nigeria Plc (“Portland Paints” or “the Company”), a subsidiary of UAC of Nigeria Plc,

was incorporated as a private limited liability company on September 3, 1985. The Company by a special resolution

dated April 24, 2008 became a public limited liability company and thus changed its name to Portland Paints &

Portland Paints is a leading paints manufacturer in Nigeria and is among the most diversified paints manufacturing

companies with decades of experience in producing Decorative, Industrial and Marine/Protective coatings for the

building/construction and oil and gas industries in Nigeria. The flagship brand of the Company, Sandtex, has been, for

decades, distinguished for its exceptional quality. Sandtex has been formulated to provide protection and aesthetics for

various residential, commercial, corporate and industrial buildings.

The Company is certified with the NIS ISO 9001:2015 Quality Management System and conducts its business

operations by promoting the safety of all employees, customers and other stakeholders.

Turnover

Profit before taxation

5


DIRECTORS' REPORT


. Appointments

7. DIRECTORS RETIRING BY ROTATION

- Mr Muhktar Yakasai resigned from the Board as Non-Executive Director, effective January 31, 2019

- Mr Adedamola Olusunmade resigned from the Board as managing Director effective March 20, 2020

In accordance with Section 256 of the Companies and Allied Matters Act, CAP C20, Laws of the Federation of

Nigeria 2004 and in line with Article 95 of the Company's Articles of Association, Muhkar Yakasai resigned from the

board during the year, while Adedamola Olusunmade resigned after year end.

The Board was deeply appreciative of Mr Yakasai and Mr. Olusunamade for their immense contributions to the

growth of the company while wishing them all the very best as they purse other interests. The Nigerian Stock

Exchange and the Corporate Affairs Commission were also notified of their resignations

(a) Mrs. Bolarin Okunowo was appointed to the Board as a Non-Executive Director with effect from May 29, 2019.

Following the resignation of Mr. Adedamola Olusunmade, Mrs. Bolarin Okunowo was appointed as the Managing

Director with effect from March 21, 2020. The appointment of Mrs. Okunowo will be presented at this Meeting for

the approval of the Shareholders. The Nigerian Stock Exchange and the Corporate Affairs were notified of her

appointment.

Mrs. Bolarin Okunowo is a seasoned finance and investment specialist with over 15 years’ experience in a range of

finance roles including debt advisory, debt finance, corporate finance, principal investments and financial

management. She joined UAC of Nigeria Plc (“UACN”) Group in October 2018 and served as UACN’s Investment

Executive responsible for managing the company’s investments in its Industrial businesses (paints, logistics and real

estate). In her role as an Investment Executive, Bolarin was responsible for working with management teams to shape

strategy and deliver commercial outcomes.

Profile of Mrs. Bolarin Okunowo

Prior to joining UACN, she was the Head, Energy & Infrastructure Finance at Stanbic IBTC Capital (“Stanbic”) with

responsibility for the oil and gas, power and infrastructure debt finance portfolio. Bolarin led the execution of debt

advisory and debt arranging mandates for large scale energy and infrastructure projects in Nigeria. Prior to Stanbic,

Bolarin worked with ARM Investments Managers and PricewaterhouseCoopers. Bolarin is a qualified Chartered

Accountant; she holds a Bachelor’s degree in Commerce from the University of Birmingham UK and a Master’s

degree in Information Systems from the prestigious London School of Economics. She currently serves on the board

of Chemical and Allied Products Plc as a Non –Executive Director.

(b) Dr. Vitus Ezinwa – Dr. Ezinwa was appointed as a Non-Executive Director with effect from March 21, 2020.

The appointment of Dr. Ezinwa will be presented at this Meeting for the approval of the Shareholders. The Nigerian

Stock Exchange and the Corporate Affairs were notified of his appointment.

Profile of Dr. Vitus Ezinwa

Dr. Vitus Ezinwa is currently the Group Human Resources Director at UACN. He is a seasoned business manager

and human resource professional with experience in leading multinational corporations. Prior to Joining UACN, Vitus

worked as Group Human Resources Director for Promasidor Africa; Human Resources Director, Coca-Cola Nigeria

& Equatorial Africa with responsibility for 10 countries and Human Resources Director for British American

Tobacco, West & Central Africa covering Ghana, Benin, Niger & Togo. Vitus was, until recently, the Group Human

Resource Director for Tropical General Investments (TGI) Group. He is a member of the Advisory Board of

Afterschool Graduate Development Centre, member of the Institute of Directors and a Fellow of the Chartered

Institute of Personnel and Development (CIPD) UK. He is a co-founder and Director of HR Network Africa and was

until 2014, a member of the Lagos Business School’s Advisory Board.

In accordance with the Articles of Association of the Company and Section 259 of CAMA, Mrs. Adeline Ogunfidodo

and Mrs. Esosa Balogun are the directors retiring by rotation and being eligible, offer themselves for re-election.

Vitus holds a Bachelor’s degree in Sociology/Anthropology from the University of Nigeria, Nsukka, MBA in

Management from Lagos Business School, a Masters in Applied Business Research and a Doctorate in Business

Administration, both from Swiss Business School, Zurich, Switzerland. He joined UACN in November 2018 as the

Group Human Resources Director. In addition to sitting on the board of UACN, Vitus is a non-executive director of

Grand Cereals Limited.

6


DIRECTORS' REPORT


8. DIRECTORS’ INDUCTION AND TRAINING

9. DIRECTORS INTERESTS IN CONTRACTS

10. DIRECTORS AND THEIR INTERESTS IN THE SHARES OF THE COMPANY.

31-Dec-19 31-Dec-19 31-Dec-18 31-Dec-18

S/N NAMES OF DIRECTORS DIRECT INDIRECT DIRECT INDIRECT

1 Mrs Esosa Balogun Nil Nil Nil Nil

2 Mrs Bolarin Okunowo Nil Nil Nil Nil

3 Engr. Oladipo Ashafa 776,347 Nil 776,347 Nil

4 Mrs Adeline Ogunfidodo 50,000 Nil 50,000 Nil

5 Dr. Vitus Ezinwa Nil 677,077,225 Nil Nil

11. ALTERNATE DIRECTORSHIP

12. SHAREHOLDING AND SUBSTANTIAL SHAREHOLDERS

S/N

PARTICULARS OF

SHAREHOLDER

1 UAC OF NIGERIA PLC

Directors’ interests in the issued share capital of the Company as recorded in the Register of Members and/or as

notified by the Directors in compliance with Sections 275 and 276 of the Companies and Allied Matters Act, CAP

C20, LFN 2004 and the Listing Requirements of the Nigerian Stock Exchange were as follows:

PERCENTAGE % OF

SHAREHOLDING

677,077,225 85.34

The issued and fully paid up share capital of the Company is N396,708,000 (Three Hundred and Ninety Six Million

Seven hundred and Eight Thousand Naira) divided into 793,415,535 (Seven Hundred and Ninety three Million Four

hundred and Fifteen Thousand, Five hundred and Thirty five) Ordinary shares of N0.50k each.

PERCENTAGE

85.34

NAME

Dr. Vitus Ezinwa

In terms of significant shareholding (5% and above), the Register as at 31 Dec, 2019 shows that UAC of Nigeria Plc

is the largest shareholder with 677,077,225 units of shares. The table below is instructive.

NUMBERS OF

SHARES

The newly appointed Directors all received letters of appointment detailing the terms of reference and composition of

the board and board committees, schedule of board meetings, their entitlements and demand on their time as a result

of their appointments. The letters of appointment was accompanied with the Memorandum and Articles of

Association of the Company, the previous year’s Annual Report, the Code of Corporate Governance for Public

Companies in Nigeria, UACN Code of Business Conduct, and other documents, policies, processes and procedures of

Portland Paints that help the directors gain understanding of the business operations of the Company, its history,

culture, values, business principles, people, projects, processes and plan.

None of the Directors has notified the Company for the purpose of Section 277 of the Companies and Allied Matters

Act of any declarable interest in Contracts in which Portland Paints is involved.

The details of indirect shareholding of Directors in the issued share capital of the Company is as follows:

INDIRECT

INTEREST (UAC

NIGERIA PLC

677,077,225

There was no alternate directorship during the year under review.

7


DIRECTORS' REPORT


13. RANGE ANALYSIS OF SHAREHOLDING

No of

Holders Holder %

Holders

Cum Units Units % Units Cum

626 48.64% 626 206,631 0.03% 206,631

194 15.07% 820 564,539 0.07% 771,170

345 26.81% 1165 9,395,231 1.18% 10,166,401

34 2.64% 1199 2,726,648 0.34% 12,893,049

44 3.42% 1243 9,948,755 1.26% 22,841,804

17 1.32% 1260 12,808,561 1.61% 35,650,365

26 2.02% 1286 80,687,945 10.17% 116,338,310

1 0.08% 1287 677,077,225 85.34% 793,415,535

1,287 100% 793,415,535 100%

14. DIRECTORS’ REMUNERATION

Type

Fixed

Fixed

Fixed

Fixed

15. RESIGNATION AND APPOINTMENT OF COMPANY SECRETARY

Package

Basic Salary

13th

Month Salary

Directors’ fees

Sitting Allowance

5,001 - 50,000

50,001 - 100,000

100,001 - 500,000

500,001 - 1,000,000

1,000,001 - 250,000,000

250,000,001 - 1,000,000,000

Description Period

This is part of the gross

salary package for the

Managing Director only

Paid monthly during the

financial year

This is part of the gross

salary package for the

Managing Director only

Paid in the last month of the

year

Ms. Ayomipo Wey holds a Bachelor of Laws degree (LLB) from the Lagos State University, was called to the

Nigerian bar in 2008 and obtained a Master of Laws (LLM) (with distinction) from Queen Mary, University of

London in 2011. She has extensive legal, company secretarial, compliance and corporate governance experience

spanning over twelve (12) years. Prior to joining the Company, she was the Assistant Group General Counsel of

United Capital Plc from June 2015 to August 2019. She had her formative legal years in the prestigious law firm of

Banwo & Ighodalo where she spent over seven (7) years gathering extensive and invaluable knowledge and

experience in the legal aspects of corporate finance, mergers and acquisitions, corporate restructurings, corporate

governance and company secretarial practice.

She has an uncommon flair for corporate governance principles and practices and constantly advises on compliance

with extant laws and regulations on corporate governance.

Ms. Wey is a Member of the Institute of Chartered Secretaries and Administrators (UK) and the Nigerian Bar

Association.

As at the end of 2019, Portland Paint’s shares were held by 1,287 shareholders as analyzed below:

The Company ensures that remuneration paid to its Directors complies with the provisions of the Code of Corporate

Governance issued by the Securities and Exchange Commission (SEC) and the Financial Reporting Council. In

compliance with Section 34 (5) (f) of the SEC Code of Corporate Governance for Public Companies, the Company

makes disclosures of the remuneration paid to its Directors.

Mrs. Bolanle Maryanne Oyekan resigned as Company Secretary of the Company in August 2019. Following the

resignation of Mrs. Oyekan as Company Secretary of Portland Paints and after due and careful consideration by the

Board, Ms. Ayomipo Wey was appointed as Company Secretary of the Company with effect from September 9, 2019.

This is paid to Non-

Executive Directors only

Paid after attendance at each

meeting

Range

1 - 1,000

1,001 - 5,000

This is paid annually to

Non-Executive Directors

Paid in the first month of the

year

Profile of Ms Ayomipo Wey

8


DIRECTORS' REPORT


16. BOARD EVALUATION

17. COMPLAINT MANAGEMENT FRAMEWORK

18. INSIDER TRADING AND PRICE SENSITIVE INFORMATION

19. WHISTLE BLOWING PROCEDURE.

20. ACQUISITION OF OWN SHARES

22. HUMAN RESOURCES REPORT

· Health, Safety and Welfare of Company employees

To assess the effectiveness of the Board and the individual Directors, a Board evaluation was undertaken, covering the

period of the financial year under review. This was driven by the Chairman of the Board in consultation with the

Company Secretary. The performance of the Board, Board Committees and individual directors were adjudged to be

satisfactory and the necessary feedback, arising from the exercise, were communicated to the individual directors of

the Company.

In accordance with the SEC directives on resolution of complaints, the Company has developed a Complaint

Management Policy and framework.

The Company has in place a Securities Trading Policy which prohibits the directors and employees from trading on

the Company’s shares during periods in which they are in possession of price sensitive information. The Company

was in compliance with the Securities Trading Policy during the year under review.

The Company has a Whistle Blowing Procedure which ensures that complaints are anonymously received, discretely

investigated and a report of the outcome of the investigation, sent to the Risk and Governance Committee.

The Company did not purchase any of its own shares during the year.

21. SEC CODE OF CORPORATE GOVERNANCE FOR PUBLIC COMPANIES AND THE NIEGRIAN

CODE OF CORPORATE GOVERNANCE 2018

The Company has complied with the Securities and Exchange Commission’s Code of Corporate Governance for

Public Companies in Nigeria. The Company also continues to comply with the provisions of the Nigerian Code of

Corporate Governance 2018.

The Company considers it a paramount objective to hire individuals based on standards of merit and competence.

Also, the Company upholds a sound culture of providing continued development and training for its Staff to address

knowledge gaps and provide new skill sets along the Company’s lines of responsibilities. Annually, trainings are

identified for staff and followed through in accordance with an approved training plan meant to ensure that this

objective is achieved. The Company encourages easy interaction between Management and other staff of the

Company so as to foster an atmosphere of warmth at work and also to kindle the necessary synergy required for the

Company’s success.

Our policy at all times is to conduct our operations safely, protecting the health and safety of employees and all

persons who may be affected. We manage our activities so as to give benefits to the society, ensuring that relevant

laws and regulations are kept and that our activities are acceptable to the community at large with minimal

environmental impact.

9


DIRECTORS' REPORT


· Employee Involvement

· Training and Staff Development

· Anti-corruption and Business integrity

· Donations

S/N Amount (N)

1 450,000

2 182,767

632,767

23. EVENTS AFTER REPORTING PERIOD

24. FIXED ASSETS

25. AUDITORS

FRC/2013/NBA/00000003124

Children's Day - Visit to Love Orphanage, Magodo

Painting of Boet Estate Gate, Ikeja, Lagos

Total

BY ORDER OF THE BOARD

There were no significant events after the reporting period which could have had a material effect on the financial

position of the Company as at 31 December 2019 and on the profit and other comprehensive income for the period

then ended.

In the opinion of the Directors, the market value of the Company’s fixed assets is not less than as shown in the

Balance Sheet. Information relating to property, plant and equipment is given in Note 10 to the financial statements.

The Auditors are Messrs. PricewaterhouseCoopers, having indicated their willingness to continue in office pursuant to

Section 357 (2) of the Companies and Allied Matter Act, CAP C20 Laws of the Federation of Nigeria, 2004.

Dated this 17th day of March, 2020

Description

AYOMIPO WEY

Company Secretary

Portland Paints continues to pursue the Great place to work global initiative which is aimed at creating a better society

of happier employees. To achieve this, an engaged work culture is being entrenched company-wide.

The Company recognizes training of its human resources as an investment which adds value to the business. We are

therefore committed to continuous development of our workforce through courses and seminars organized internally

and externally including overseas courses. Individual needs of each employee are considered in organizing training

courses. Members of staff are also encouraged and assisted financially to embark on self-development schemes to

improve themselves both academically and professionally.

The Company does not give or receive whether directly or indirectly, bribes or other improper advantages for business

or financial gain. No employee may offer, give or receive any gift or payment which is or may be construed as being,

a bribe. Any demand for, or offer of, a bribe must be rejected immediately and reported to management. No employee

will be criticized for any loss of business resulting from adherence to these principles. The Company’s accounting

records and supporting documents must accurately describe and reflect the nature of the underlying transactions. No

undisclosed or unrecorded account, fund or asset will be established or maintained.

A whistle blowing policy has also been put in place to encourage employees at all levels to alert and inform

management of any negative development that might impinge on the value, performance and/or image of the

Company before any harm is done. Similarly a corporate fraud policy has been established to facilitate the

development of controls which will aid in the detection and prevention of fraud against the company. It is our

intention to promote consistent organizational behavior by providing guidelines and assigning responsibility for the

development of controls and conduct of investigations.

The following amounts were given by way of gifts and donations during the year ended 31 December, 2019:

10


DIRECTORS' REPORT


SHAREHOLDERS INFORMATION

Register Range Analysis

No of

Holders Holder %

Holders

Cum Units Units % Units Cum

626 48.64% 626 206,631 0.03% 206,631

194 15.07% 820 564,539 0.07% 771,170

345 26.81% 1165 9,395,231 1.18% 10,166,401

34 2.64% 1199 2,726,648 0.34% 12,893,049

44 3.42% 1243 9,948,755 1.26% 22,841,804

17 1.32% 1260 12,808,561 1.61% 35,650,365

26 2.02% 1286 80,687,945 10.17% 116,338,310

1 0.08% 1287 677,077,225 85.34% 793,415,535

1,287 100% 793,415,535 100%

Share Capital History

Year Authorized Share Capital N'000

1993 2,000,000

2002 200,000,000

2008 200,000,000

2015 500,000,000

2017 500,000,000

2019 500,000,000

Notice to Shareholders

Unclaimed Dividends and Share Certificates

1,000,001 - 250,000,000

250,000,001 - 1,000,000,000

Range

1 - 1,000

1,001 - 5,000

5,001 - 50,000

50,001 - 100,000

100,001 - 500,000

4,000,000

400,000,000

400,000,000

40,000,000

500,001 - 1,000,000

The total amount of unclaimed dividends as at December 31, 2019 is N20,009,026.21. The total number of unclaimed

certificates as at December 31, 2019 is nil.Shareholders who are yet to claim their dividends are required to fill out the e-dividend mandate form attached to this

Annual Report and to submit physical or scanned copies of the form to the Registrar at Africa Prudential Plc, 220b,

Ikorodu road, Palmgrove, Lagos; Email- [email protected]

793,415,535

793,415,535

4,000,000

36,000,000

360,000,000 Bonus Issue

360,000,000

393,415,535 Right Issue

793,415,535

2,000,000

18,000,000

180,000,000

180,000,000

196,707,768

396,707,768

According to the Register of Members, UAC of Nigeria Plc held 5% and above of the issued share capital of Portland

Paints and Products Nigeria Plc as at 31 December 2019.

Issued Share Capital N'000

Number of Shares

'000

Cumulative Number of

Shares

'000

11



INTRODUCTION

1. THE BOARD

1.1 General

1.2 Appointment Process

1.3 General Board Philosophy

1.4 Chairman and CEO Positions

1.5 Non-Executive Directors

1.6 Board Changes

CORPORATE GOVERNANCE REPORT

In the same vein, Mrs. Bolarin Okunowo was appointed to the Board as a Non-Executive Director with effect from

May 29, 2019.

Mr. Adedamola Olusunmade resigned as Managing Director and from the Board with effect from March 20, 2020

while Mrs. Bolarin Okunowo was appointed as the Managing Director of the Company with effect from March 21,

2020. Also, Dr. Vitus Ezinwa was appointed to the Board as a Non-Executive Director effective March 21, 2020.

Their appointments will be presented to the Members at General Meeting for approval. The Nigerian Stock Exchange

and the Corporate Affairs Commission were notified on the various changes to the Board.

In accordance with best practices, the Board comprises of Five (5) Directors made of up four (4) non-executive

directors and the Managing Director. The Board members are professionals and business persons with vast experience

and credible track record.

The Board appointment process is guided by transparent and high ethical standards. In other words, the process of

appointment to the Board of Portland Paints is transparent and in accordance with relevant regulatory laws and

guidelines. In compliance with the SEC Code of Corporate Governance, the Nigerian Code of Corporate Governance

and the Board Charter, the Directors are selected based on their skills, competence and experience. Upon approval by

the Board, the Nigerian Stock Exchange and the Corporate Affairs Commission are notified of the appointments of

The Board provides overall guidance and policy direction to the Management and acts on behalf of Shareholders in

the overall interest of stakeholders and is accountable to the shareholders. It prides itself in people with a blend of

experience and knowledge cutting across various industries.

In accordance with good corporate governance practices, the positions of the Managing Director and that of the

Chairperson of the Board are occupied by different persons and while the Managing Director is responsible for

implementation of the Company’s business strategy and the day-to-day management of the business, the Chairperson

is not involved in the day-to-day operations of the Company and is not a member of any committee of the Board.

The Non-Executive Board members possess strong knowledge of the Company’s business and usually contribute

actively at Board meetings.

During the year under review, Mr. Muhktar Yakasai resigned from the Board of Portland Paints as a Non-Executive

Director effective January 31, 2019.

Portland Paints has in place an effective governance mechanism that ensures proper oversight of its business by the

Directors and other principal organs of the Company.

The Board is responsible for developing the Company’s strategy and ensuring that its available assets are utilized

towards the attainment of its set strategy and plans. The Board performs supervisory oversight over management

activities ensuring that the affairs of the Company are conducted in a manner that increases the value of shareholders’

investments and is also beneficial to all other stakeholders of the Company.

Portland Paints & Products Nigeria Plc (“Portland Paints” or the “Company”) is a Company with high ethical

standards. The Company is committed to conducting its business operations in full compliance with the laws and

regulations of Nigeria and the UAC of Nigeria Group Code of Business Conduct.

Our actions and interactions with customers, employees, government officials, suppliers, shareholders and other

stakeholders reflect our values, beliefs and principles.

12




1.7 Attendance of Board Meetings

1.8 Board Meeting Attendance

KEY

P = Present

S/N Members 11/3/2019 17/4/2019 30/5/2019 19/7/2019 15/10/2019 29/11/2019

1 Mrs Esosa Balogun NYA NYA P P P P

2 Mr Adedamola Olusunmade P P P P P P

3 Engr 'Dipo Ashafa P P P P P P

4 Mrs Adeline Ogunfidodo P P P P P P

5 Mrs Bolarin Okunowo NYA NYA P P P P

1.9 Board Committees

1.9.1 Risk and Governance Committee

5. Mr. Adedamola Olusunmade- Member/ Managing Director (resigned with effect from March 20, 2020)

The Risk and Governance Committee is responsible for the oversight of risk and on governance related matters.

The Committee is constituted as follows:

1. Engr. Oladipo Ashafa - Chairman/Non-Executive Director

2. Mrs. Bolarin Okunowo - Member/ Non-Executive Director (appointed as Non-Executive Director effective

May 29, 2019 and subsequently as Managing Director with effect from March 20, 2020)

3. Mrs. Adeline Ogunfidodo - Member/Non-Executive Director

4. Dr. Vitus Ezinwa - Member/Non-Executive Director (Appointed with effect from March 21, 2020)

The Board meets at least once in every quarter or as frequently as the Board’s attention may be required on any

situation which may arise. Sufficient notices with clear agenda and reports are usually given prior to convening such

meetings.

A total of six (6) Board Meetings were held in the 2019 Financial Year. The table below shows Directors’ attendance

at the meetings.

The Board carries out its oversight function through its standing Committee, the Risk and Governance Committee,

which has a Term of Reference that clearly defines its purpose, composition and structure, frequency of meetings and

tenure amongst others. Through the Committee, the Board monitors the effective coverage and control over the

operations of the Company. It is important to state that in line with best practice, the Chairman of the Board does not

sit on the Board Committee.

NYA = Not Yet appointed

13




Risks

Governance

17. Review the Company’s operational performance;18. Make recommendations to the Board on capital expenditure, specific projects and their financing within the

overall approved plan;

19. Appraise the investment climate and recommend to the board where, when and what investment(s) to make with

the Company’s surplus funds;

20. Make recommendations on management of Company’s cash and debt exposure/ borrowings;

21. Monitor compliance with applicable laws and regulations by the Company;

22. Review updates on implementation level of Internal and external auditors’ recommendations by management

from Board representatives on the Audit Committee;

11. Review the process for identifying and analyzing business level risks;

12. Review the structure for, and implementation of, risk measurement and reporting standard as well as

methodologies;

13. Review key control processes and practices of the Company, including limit structures.

14. Ensure that the Company’s risk management practices and conditions are appropriate for the business

environment;

15. Assess new risk return opportunities.

16. Oversee the Company’s financial reporting, its policies and processes;

5. Periodically evaluate the Company’s risk profile, action plans to manage high risks and progress on the

implementation of these plans;

6. Ensure that the Company’s risk exposures are within the approved risk control limits;

7. Undertake at least annually a thorough risk assessment covering all aspects of the company’s business with a

view to using the result of the risk assessment to update the risk management framework of the company;

8. Understand the principal risk to achieving the Company’s strategy;

9. Ensure that the business profile and plans are consistent with the Company’s risk appetite;

10. Make recommendation on the Company’s risks management framework including responsibilities, authorities and

control;

The following are the Committee’s terms of reference:

1. Assist the Board in its oversight of risk management and monitoring the Company’s performance with regards to

risk management;

2. Recommend for Board approval the risk policy of the Company and review its implementation at all levels to

achieve the Company’s objective ;

3. Monitor that risk management policies are integrated into the Company’s culture;

4. Review quarterly risk management reports and make recommendation to the Board on appropriate actions;

14




S/N Members 7/3/2019 16/4/2019 18/7/2019 14/10/2019

Total

Number of

Meeteings

Attended

Percentage of

Attendance

1 Engr 'Dipo Ashafa P P P P 4 100%

2 Mr Adedamola Olusunmade P P P P 4 100%

3 Mrs Bolarin Okunowo NYA NYA P P 2 100%

4 Mrs Adeline Ogunfidodo P P P P 4 100%

2. THE STATUTORY AUDIT COMMITTEE

2.1 Terms of Reference of the Statutory Audit Committee

c) review the findings as reported through the management controls report and management responses thereon;

d) keep under review the effectiveness of the Company’s system of accounting and internal control;

e) make recommendation to the Board with regards to the appointment, removal and remuneration of the external

auditors of the Company;

f) authorize the internal auditor to carry out investigations into any activities of the Company, which may be of

interest or concern to the Committee.

2. Comrade Sulaimon Adenrele Member/Shareholder

3. Mrs. Adeline Ogunfidodo Member/Non-Executive Director

4. Engr. ‘Dipo Ashafa Member/Non-Executive Director

The Committee is authorized by the Companies and Allied Matters Act, CAP C20 Laws of the Federation 2004 to:

a) ascertain whether the accounting and reporting policies of the Company are in accordance with legal

requirements and agreed ethical practices;

b) review the scope and planning of external audit;

29. Periodically review and make recommendations to the Board on the compensation, performance and talent

management, succession planning and retention for the Company;

30. Make recommendations on the whistle blowing process for the Company.

The Committee met four (4) times in 2019. The table below shows Directors’ attendance at the meetings.

By virtue of section 359 (3) of the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria

2004, every public company is required to establish a Statutory Audit Committee (“SAC”) composed of an equal

number of Directors and representatives of its Shareholders, subject to a maximum of six (6) members.

The Committee is currently constituted with 4 (Four) members as follows:

1. Mr. Shamsideen Balogun Chairperson/Shareholder

23. Periodically review the manning level and adequacy of the resources with which internal audit and the risk

management functions discharge their duties;

24. Monitor, benchmark and apply as appropriate, best practices with regard to governance and risk;

25. Review accounting policies and reporting standards and ensure their adequacy for the Company’s purposes;

26. Make recommendations on the composition of the Board;

27. Recommend the appointment, remuneration and promotion of Executive Directors and Senior Management;

28. Make recommendations to the Board on the adoption of a code of conduct (including the policy on trading in

company shares) for Directors and senior executives and to review same from time to time;

15




2.2 Attendance of SAC Meetings

S/N Members 7/3/2019 16/4/2019 18/7/2019 14/10/2019

Total

Number of

Meeting

Attended

Percentage of

Attendance

1 Mr Shamsideen Balogun P P P P 4 100%

2

Comrade Sulaimon

Adenrele P P P P 4 100%

3 Engr 'Dipo Ashafa P P P P 4 100%

4 Mrs Adeline Ogunfidodo P P P P 4 100%

n) Consider any related party transactions that may arise within the company or group;

o) Invoke its authority to investigate any matter within its terms of reference and the company must make available

resources, including internal audit and access to external advice where necessary, to carry out this function; and report

In the course of the financial year 2019, the SAC met five (5) times as outlined in the schedule below:

h) Discuss policies and strategies with respect to risk assessment and management;

i) Meet separately and periodically with management, internal auditors and external auditors;

j) Review and ensure that adequate whistle-blowing procedures are in place. A summary of issues reported are

highlighted to the chairman;

k) Review, with the external auditor, any audit scope limitations or problems encountered and management’s

responses to same;l) Review the independence of the external auditors and ensure that where non-audit services are provided by the

external auditors, there is no conflict of interest;m) Preserve auditor independence, by setting clear hiring policies for employees or former employees of

independent auditors;

b) Assist in the oversight of the integrity of the Company’s financial statements, compliance with legal and other

regulatory requirements, assessment of qualifications and independence of external auditor and performance of the

Company’s internal audit function as well as that of external auditors;

c) Establish an internal audit function and ensure there are other means of obtaining sufficient assurance of regular

review or appraisal of the system of internal controls of the company;

d) Ensure the development of a comprehensive internal control framework for the company; obtain assurance and

report annually in the financial report, on the operating effectiveness of the company’s internal control framework;

e) Oversee management’s process for the identification of significant fraud risks across the company and ensure

that adequate prevention, detection and reporting mechanisms are in place;

f) At least on an annual basis, obtain and review a report by the internal auditor describing the strength and quality

of internal controls including any issues or recommendations for improvement, raised by the most recent control

review of the company;g) Discuss the annual audited financial statements and half yearly unaudited statements with management and

external auditors;

In addition, the 2011 Securities and Exchange Commission (SEC) Code of Corporate Governance also assigns the

following responsibilities to the Audit Committee:

a) To oversee internal audit and internal controls; and to document and review the roles, responsibilities, authority

and scope of operations of the internal audit function; approve the annual internal audit plan.

16




3. ACOUNTABILITY, AUDIT AND CONTROL

3.1 Financial reporting

3.2 Control Environment

4. COMPANY SECRETARY

5 SHAREHOLDERS

The Company ensures the existence of adequate interaction among the Shareholders, the Management and the Board

of the Company. The Company’s General Meetings provide Shareholders the platform to contribute to the

administration of the Company. The Annual General Meetings (AGMs) are held in accessible locations and are open

to Shareholders or their proxies. The AGMs are conducted in a manner that facilitates Shareholders’ participation in

accordance with relevant regulatory and statutory requirements.

The Company encourages Shareholders to attend these meetings by ensuring that notices of meetings and other

information required by Shareholders to make informed decisions are dispatched in a timely manner. The office of the

Company Secretary additionally affords Shareholders channels of communication to the Board and the Management

of the Company.

The Company has consistently improved its internal control system to ensure effective management of risks. The

Directors review the effectiveness of the system of internal control through regular reports and reviews at Board and

Risk and Governance Committee Meetings.

The Board has continued to place emphasis on risk management as an essential tool for achieving the Company’s

objectives. Towards this end, it has ensured that the Company has in place robust risk management policies and

mechanisms to ensure the identification of risks and effective controls.

The Board approves the annual budget for the Company and ensures that a robust budgetary process is operated with

adequate authorization levels put in place to regulate capital expenditure.

The Company Secretary plays an important role in supporting the effectiveness of the Board by assisting the Board

and management to develop good corporate governance practices and culture within the Company. The Company

Secretary ensures adequate dissemination of information among Board members and between the Board and the

Management of the Company. In furtherance of Board and Committee meetings, the Company Secretary undertakes

the preparation of the necessary papers and other documents requisite for the success in deliberations. The Company

Secretary is responsible for providing the Board and Directors individually, with detailed guidance as to how their

responsibilities should be properly discharged in the best interest of the Company.

The Office of the Company Secretary ensures that the Company complies with the relevant regulatory laws including

the Investments and Securities Act No 29 of 2007, the Securities and Exchange Commission (SEC) Rules and

Regulations, the Securities and Exchange Commission (SEC) Code of Corporate Governance, the Nigerian Code of

Corporate Governance, the Companies and Allied Matters Act, the Nigeria Stock Exchange Rules and Regulations,

amongst others.

The procedure for the appointment and removal of the Company Secretary is a matter for the Board.

The Directors make themselves accountable to shareholders through regular publication of the Company’s financial

performance and annual reports.

The Board is mindful of its responsibilities and is satisfied that in the preparation of its financial report, it has

presented a balanced assessment of the Company’s position and prospects in accordance with its obligation under the

Code of Corporate Governance.

PriceWaterHouseCoopers acted as external auditors to the Company during the 2019 financial year.

17




6. CODE OF BUSINESS CONDUCT

It is the responsibility of the Shareholders to approve the appointment of Directors and to grant other approvals that

are required by law or the Articles of Association of the Company.

The Shareholders through its representatives on the Statutory Audit Committee in line with section 359 of the CAMA

and the SEC Code also assume responsibility for the integrity of the Company’s audited accounts.

As a member of the UAC of Nigeria Plc Group, the employees of the Company subscribe to UACN Code of Business

Conduct. The Code forms the basis of the conduct expected of every employee of the Company and reflects our core

values and principles. The Board of Directors is responsible for ensuring that the Code is communicated to,

understood and observed by all employees.

18


REPORT OF THE AUDIT COMMITTEE


To Members of Portland Paints and Products Nigeria Plc,

(1)

(2)

(3)

(4)

Mr Shamsideen Balogun

Chairman, Audit Committee

FRC/2015/NIM/00000013086

Mr. Shamsideen Balogun Chairman

Comrade Sulaiman B. Adenrele Member

Mrs. Adeline Ogunfidodo Member

Engr.Dipo Ashafa Member

We deliberated with the external auditors who confirmed that all necessary cooperation was received from

management and that they had issued a clean report in respect of the year ended December 31, 2019.

Dated March 16, 2020

Members of the Statutory Audit Committee are as follows:

In compliance with the provisions of Section 359 (6) of the Companies and Allied Matters Act (Cap C20) Laws

of the Federation of Nigeria 2004 (“CAMA”), we the members of the Statutory Audit Committee of Portland

Paints and Products Nigeria Plc (the “Company”) hereby report that we have exercised our statutory functions

under Section 359 (6) of CAMA and acknowledge the cooperation of the Management and Staff in the conduct

of these responsibilities.

Specifically we confirm that:

The accounting and reporting policies of the Company are consistent with legal requirements and agreed

ethical practices.

The scope and planning of the external audit for the year ended December 31, 2019 were satisfactory and

adequate.

The Company maintained effective systems of accounting and internal controls during the year.

The Company’s Management adequately responded to matters covered in the management report issued

by the external auditors.

19


STATEMENT OF DIRECTORS' RESPONSIBILITIES


a)

b)

c)

Mrs Esosa Balogun

Chairperson Managing Director

FRC/2013/ICAN/00000001186 FRC/2020/003/00000020616

March 17, 2020

The Companies and Allied Matters Act Cap C20, Laws of the Federation of Nigeria, 2004 (“CAMA”) requires the

Directors to prepare financial statements for each financial year that give a true and fair view of the state of financial

affairs of the Company at the end of the year and of its profit or loss. The responsibility includes:

The directors accept responsibility for the financial statements, which have been prepared using appropriate accounting

policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial

Reporting Standards and the requirements of the Companies and Allied Matters Act.

The responsibilities includes:

Ensuring that the Company keeps proper accounting records that disclose, with reasonable accuracy, the financial

position of the Company and comply with the requirements of CAMA;

preparing the company’s financial statements using suitable accounting policies supported by reasonable and

prudent judgements and estimates, that are consistently applied.

designing, implementing and maintaining internal control relevant to the preparation and fair presentation of

financial statements that are free from material misstatement, whether due to fraud or error; and

The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of

the Company and of its profit or loss. The directors further accept responsibility for the maintenance of accounting

records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial

control.

Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least

twelve months from the date of this statement.

March 17, 2020

Mrs Bolarin Okunowo

20

PricewaterhouseCoopers Chartered Accountants Landmark Towers, 5B Water Corporation Road, Victoria Island, Lagos, Nigeria

Independent auditor’s report To the Members of Portland Paints & Products Nigeria Plc

Report on the audit of the financial statements

Our opinion In our opinion, Portland Paints & Products Nigeria Plc’s (“the company’s”) financial statements give a true and fair view of the financial position of the company as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act and the Financial Reporting Council of Nigeria Act.

What we have audited

Portland Paints & Products Nigeria Plc’s financial statements comprise:

• the statement of profit or loss and other comprehensive income for the year ended 31 December 2019;

• the statement of financial position as at 31 December 2019;

• the statement of changes in equity for the year then ended;

• the statement of cash flows for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies.

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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards), i.e. the IESBA Code issued by the International Ethics Standards Board for Accountants. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

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.

We have determined that there are no key audit matters to communicate in our report.

Other information

The directors are responsible for the other information. The other information comprises the Board of directors

and professional advisers, Results at a glance, Director’s Report, Corporate Governance Report, Statement of Directors’ Responsibilities, Report of the Audit Committee, Statement of Value Added and Five-Year Financial Summary (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 other sections of the Portland Paints & Products Nigeria Plc 2019 Annual Report, which are 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 an audit opinion or 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 other information 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 sections of the Portland Paints & Products Nigeria Plc 2019 Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of the directors and those charged with governance for the financial statements The directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act, the Financial Reporting Council of Nigeria Act, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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 scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with 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

The Companies and Allied Matters Act requires that in carrying out our audit we consider and report to you on the following matters. We confirm that:

i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii) the company has kept proper books of account, so far as appears from our examination of those books and returns adequate for our audit have been received from branches not visited by us;

iii) the company’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account.

For: PricewaterhouseCoopers 30 April 2020

Chartered Accountants

Lagos, Nigeria

Engagement Partner: Rasheed Rahji

FRC/2014/ICAN/00000008856


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


(All amounts are in thousands of naira, unless otherwise stated)

Dec-19 Dec-18

Note N'000 N'000

Revenue from contracts with customers 4 2,610,178 2,829,262

Cost of sales 6(a) (1,649,439) (1,753,972)

Gross profit 960,739 1,075,290

Other operating income 5 18,354 67,841

Selling and distribution expenses 6(a) (286,238) (264,619)

Administrative expenses 6(a) (536,698) (551,883)

Impairment losses on financial assets 13ii (36,616) (19,994)

Profit from operations 119,541 306,635

Finance income 7 11,522 11,799

Finance cost 8 (3,868) (10,901)

Net finance costs 7,654 898

Profit before taxation 127,195 307,533

Tax expense 9 (42,301) (100,840)

Profit from continuing operations 84,894 206,693

Profit from discountinued operations - -

Other comprehensive income - -

Total comprehensive income 84,894 206,693

Earnings per share for profit attributable to owners

of the Company during the year:

Basic (Kobo) 20 11 26

Diluted (Kobo) 20 11 26

The notes on pages 28 to 72 form an integral part of these financial statements.

24


STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019


Notes Dec-19 Dec-18

N'000 N'000

ASSETS:

Non - current assets:

Property, plant and equipment 10 428,123 441,919

Intangible assets 11 74,749 85,442

Prepayments 14 1,769 5,537

Right of use asset 15 22,092 -

Deferred tax asset 19(a) 11,619 -

Total non - current assets 538,352 532,898

Current assets:

Inventories 12 891,255 728,047

Trade and other receivables 13 512,499 476,180

Prepayments 14 33,057 22,688

Cash and cash equivalents 16 279,749 491,655

Total current assets 1,716,560 1,718,570

Total assets 2,254,911 2,251,468

Equity and liabilities

Equity:

Issued share capital 20 396,708 396,708

Share premium 20 437,923 437,923

Other reserves 20 91,923 91,923

Retained earnings 655,650 610,427

Equity attributable to owners of the parent 1,582,204 1,536,981

Non current liabilities:

Deferred tax liabilities 19(a) - 14,048

Lease liability 15aii 17,374 -

Total non current liabilities 17,374 14,048

Current liabilities:

Trade and other payables 17 553,489 501,988

Contract liabilities 4(b) 17,147 55,373

Provisions 18 3,000 24,917

Lease liability 15aii 4,416 -

Income tax payable 19 77,281 118,161

Total current liabilities 655,333 700,439

Total liabilities 672,707 714,487

Total equity and liabilities 2,254,911 2,251,468

Raheem Adejumobi

(Finance Manager)

Mrs Bolarin Okunowo

(Managing Director)

FRC/2016/ICAN/00000014225 FRC/2020/003/00000020616

The audited financial statements on pages 24 to 74 was approved by the board of directors on 17th March, 2020

and signed on its behalf by:

Mrs Esosa Balogun

(Chairman)

FRC/2013/ICAN/00000001186

25


STATEMENT OF CHANGES IN EQUITY

FOR YEAR ENEDED 31 DECEMBER 2019


Share

capital

Share

Premium

Other

Reserves

Retained

earnings Total equity

N'000 N'000 N'000 N'000 N'000

1 January 2018 396,708 437,923 91,923 466,461 1,393,015

Increase in impairment losses on

adoption of IFRS 9 - - - (62,727) (62,727)

1 January 2018 restated 396,708 437,923 91,923 403,734 1,330,288

Profit for the year - - - 206,693 206,693

31 December 2018 396,708 437,923 91,923 610,427 1,536,981

1 January 2019 396,708 437,923 91,923 610,427 1,536,981

Dividend paid - - - (39,671) (39,671)

Profit for the year - - - 84,894 84,894

31 December 2019 396,708 437,923 91,923 655,650 1,582,204


26


STATEMENT OF CASH FLOWS



Dec-19 Dec-18

N'000 N'000

Cash flows from operating activities:

Cash (used in) / generated from operations 21 (75,215) 474,831

Legal claims paid - (4,983)

Income tax paid 19 (51,709) (44,692)

Net cash generated from / (used in) operating activities (126,924) 425,156

Cash flows from investing activities:

Purchase of property, plant and equipment 10 (53,815) (84,996)

Purchase of intangible assets 11 - (2,190)

Proceeds from sales of property,plant and equipment 21.1 2,982 2,322

Finance income 7 11,522 11,799

Net cash used in investing activities (39,311) (73,065)

Cash flows from financing activities:

Repayments of borrowings - (47,813)

Interest paid (3,868) (1,974)

Other direct fees and charges on borrowings - (4,856)

Repayment on lease liabilities (2,132) -

Dvidend paid (39,671) -

Net cash used in financing activities (45,671) (54,643)

Net (decrease)/ increase in cash and cash equivalents (211,906) 297,448

Cash and cash equivalents brought forward 491,655 194,207

Cash and cash equivalents 16 279,749 491,655


27


NOTES TO THE FINANCIAL STATEMENTS


1.0 Corporate Information

1.1 Securities Trading Policy

2.0 Summary of significant accounting policies

2.1 Basis of preparation

2.1.1 Basis of Measurement

Portland Paints & Products Nigeria Plc (the Company) has a Securities Trading Policy regulating securities

transactions by its directors and other insiders. The Company’s Securities Trading Policy complies with the

standard set out by the Rules of the Nigerian Stock Exchange are no less stringent than the said standard.

The Company’s Securities Trading Policy is to generally ensure the board members, employees and its

external stakeholders who have knowledge of confidential and potentially price sensitive information are

aware of the prohibition imposed by law against using, disclosing (other than in the normal course of the

performance of their duties) or encouraging transactions in securities on the basis of such inside information.

In addition to obligations imposed by law, the Company wants board members, employees and external

stakeholders to respect the safeguarding of confidential information and potentially price sensitive

information. The Policy has been made available to all stakeholders and is also available on the Company’s

website.

Having made specific enquiry of all directors, the Company confirms that all of its directors have complied

with the standards set out in relevant laws as well as the Company’s Securities Trading Policy.

Portland Paints & Products Nigeria Plc (The Company) was incorporated as a Limited Liability Company on

3 September 1985 and became a Public Company on 24 April 2008. The Company was listed on the floor of

the Nigerian Stock Exchange on 9 July 2009.

The registered office is located at 105A, Adeniyi Jones Avenue, Ikeja, Lagos in Nigeria.

The principal activities of the Company are manufacturing and sale of paints. The main products of the

Company are Sandtex range of decorative and industrial coatings and Hempel marine & protective coatings

for oil and gas sector.

The financial statements of Portland Paints & Products Nigeria Plc ("the Company") have been prepared in

accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS

Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements

comply with IFRS as issued by the International Accounting Standards Board (IASB).

The financial statements are presented in Nigerian Naira (N), rounded to the nearest thousand, and prepared

under the historical cost convention. The functional currency of the Company' is Nigerian Naira.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting

estimates. It also requires management to exercise its judgement in the process of applying the Company’s

accounting policies. The areas involving a higher degree of judgement or complexity, or areas where

assumptions and estimates are significant to the financial statements are disclosed in note 2.3

The financial statements have been prepared on a historical cost basis. Transactions in foreign currency are

recognized in naira at the official spot rate at the date of transaction.

28




2.2

2.2.1

2.2.1.1 IFRS 16 - Leases

Lease liabilities

The Company’s leased assets include buildings and land. Lease terms are negotiated on an individual basis

and contain different terms and conditions, including extension options. The lease terms are between 1 and 2

years. On renewal of a lease, the terms are renegotiated. Leased assets may not be used as security for

borrowing purposes.

From 1 January 2019, on adoption of IFRS 16, leased assets are recognised as a right-of-use assets and a

corresponding liability at the date at which the leased asset is available for use by the company is also

recognised. The company elected to use the transition practical expedient allowing the standard to be applied

only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial

application. The company also elected to use the recognition exemptions for lease contracts that, at the

commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term

leases’). Lease liabilities for leases formerly classified as operating leases were measured at the present value

of the remaining lease payments, discounted using the company’s incremental borrowing rate of 16.17% as at

that date.

At commencement date of a lease, the company recognises lease liabilities measured at the present value of

lease payments to be made over the lease term. The lease payments include the exercise price of a purchase

option reasonably certain to be exercised by the company and payments of penalties for terminating a lease, if

the lease term reflects the company exercising the option to terminate. The variable lease payments that do not

depend on an index or a rate are recognised as expense in the period in which the event or condition that

triggers the payment occurs.

In calculating the present value of lease payments, the company uses the incremental borrowing rate at the

lease commencement date if the interest rate implicit in the lease is not readily determinable. The incremental

borrowing rate is the weighted average interest rate applicable to the company’s general borrowings

denominated in naira during the period. After the commencement date, the amount of lease liabilities is

increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying

amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the

in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The lease

term refers to the contractual period of a lease.

The Company has applied the following standards for the first time for their annual reporting period

commencing 1 January 2019:

Changes in accounting policy and disclosures

New and amended standards adopted by the Company

IFRS 16: Leases was issued in January 2016 and became effective for reporting periods beginning on or after

1 January 2019. It replaces the provisions of IAS 17 Leases and IFRIC 4 Determining whether an

arrangement contains a lease. The Company has adopted IFRS 16 from 1 January 2019 using the simplified

transitional approach, and thus has not restated comparative figures for the 2018 reporting period, as

permitted under the specific transitional provisions in the standard. There was no impact on the Company’s

retained earnings at the date of initial application (i.e. 1 January 2019).

The adoption of IFRS 16 resulted in the recognition of right-of-use assets and corresponding lease liabilities

for leases that were formerly classified as operating leases under the provisions of IAS 17, with the exception

of the Company’s shortterm leases, as the distinction between operating and finance leases has been removed.

The impact of the adoption of this standard and the related new accounting policy are disclosed below:

29




2.2

2.2.1

Right of use assets

Impact of adoption

Changes in accounting policy and disclosures (continued)

The Company recognises right-of-use assets at the commencement date of a lease (i.e., the date the underlying

asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and

impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets

includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or

before the commencement date less any lease incentives received. Unless the Company is reasonably certain

to obtain ownership of the leased asset at the end of the lease term, the recognised right-ofuse assets are

depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use

assets are subject to impairment

Short-term leases and leases of low value

The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that

have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It

also applies the lease of low-value assets recognition exemption to leases that are considered of low value (i.e.

low value assets). Low-value assets are assets with lease amount of less than $5,000 when new. Lease

payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis

over the lease term

The new Leases standard, IFRS 16 replaces the provisions of IAS 17 Leases and IFRIC 4 Determining

whether an arrangement contains a lease. The Company has elected to apply the new standard using the

simplified method.

On adoption of IFRS 16, the lease liabilities as at 1 January 2019 for leases formerly classified as operating

leases were measured at the present value of the remaining lease payments, discounted using the Company’s

incremental borrowing rate as at that date. The Company’s weighted average incremental borrowing rate for

the year was 16.17%.

On adoption of the new accounting standard, the Company elected to apply the following practical

expedients:

• The Company relied on previous assessment of existing lease contracts

• Leases with a remaining lease term of one year with no extension commitments as at 1 January 2019 were

treated as short-term leases.

• The Company excluded initial direct costs in determining the cost of right-of-use assets

• The same discount rate was applied for a portfolio of leases with reasonably similar character

New and amended standards adopted by the Company (continued)

30




a)

Amount

without

impact of

IFRS 16

Impact of

IFRS 16

As at Jan 1

2019

N'000 N'000 N'000

ASSETS

Non-current assets

Right-of-use assets - 23,922 23,922

Prepayment - 2,625 2,625

Total non-current assets - 26,547 26,547

Current assets

Prepayment 28,225 (2,625) 25,600

Total current assets 28,225 (2,625) 25,600

Total assets 28,225 23,922 52,148

Non-current liabilities

Lease liabilities - 17,374 17,374

Total non-current liabilities - 17,374 17,374

Current assets

Lease liabilities - 4,416 4,416

Total current liabilities - 4,416 4,416

Total liabilites - 21,790 21,790

The following table summarises the impact of transition to IFRS 16 on the statement of financial position as at

1 January 2019 for each affected individual line item. Line items that were not affected by the changes have

not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers

provided.

EQUITY AND LIABILITIES

Impact on statement of financial position

31




2.2

2.2.1

Right-of-use assets

N'000

Opening balance as at 1 January

2019 -

Effect of initial application of IFRS

16 26,547

Adjusted opening balance as at 1 January 2019 26,547

Less: depreciation for the period (4,455)

Closing balance as at 31 December 2019 22,092

31-Dec-19 1-Jan-19

N'000 N'000

Building 22,092 26,547

Lease liabilities

N'000

Total undiscounted operating lease commitment as at 31 December 2018 -

Lease liability as at 1 January 2019 23,922

Additions -

Lease payments (6,000)

Add: interest on lease liabilities 3,868

Closing balance as at 31 December 2019 21,790

At 31

December

2019

As at 1

January

2019

N’000 N’000

Non-current 17,374 19,505

Current 4,416 4,416

21,790 23,921

A reconciliation of the Company’s remaining operating lease payments as at 31 December 2018 and the lease

liability as at 1 January 2019 and 31 December 2019 is shown below:

The lease liability as at 1 January 2019 is the total operating lease commitment as at 31 December 2018

discounted using the incremental borrowing rate as at that date.

Short term leases relate to leases of franchisee outlets with contractual lease term of less than or equal to 12

months at the date of initial application of IFRS 16.

The Company’s lease liability as at 1 January 2019 and 31 December 2019 is split into current and non-

current portions as follows:

All the Company’s right-of-use assets are non-current assets. A reconciliation of the Company’s right-of-use

assets as at 1 January 2019 and 31 December 2019 is shown below:

The right-of-use assets recognised as at 1 January 2019 and 31 December 2019 comprised of the following



32




b)

N’000

Depreciation expense (4,455)

Operating profit (4,455)

Finance cost (3,868)

Profit for the year (8,323)

c)

N’000

Depreciation of right-of-use assets

4,455

Interest on lease liabilities 3,868

Net cash flows from operating activities 8,323

d)

Amount

under

IAS 17

Impact of

IFRS 16

Amount

under

IFRS 16

N’000 N’000 N’000

Profit for the period 84,894 (8,323) 76,571

Earnings per share for profit

attributable to the equity

shareholders 0.11 (0.01) 0.10

Impact on earnings per share

As a result of adoption of IFRS 16, the earnings per share of the Company for the year decreased as shown in

Impact on the statement of profit or loss

Impact on the statement of cash flows

33




2.2

2.2.1

e) Impact on deferred taxes

2.3

2.3.1

(a)

(b)


As a result of adoption of IFRS 16, there were no impact on deferred taxes as interest expense on lease

liabilities and depreciation of right-of-use assets give rise to permanent differences for tax purposes.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a

material impact on the Company.


The combined effect of both the following:

- The expected length of time between when the Company transfers the paint to their customers and when

payment is received and;

- The prevailing interest rate in the relevant market.

The advance period is less than 12 months, usually within 30 days. As a result, the effect of discounting will

not be material.

The Company does not expect to have any contracts where the period between the transfer of the promised

goods or services to the customer and payment by the customer exceeds one year. Consequently, the Company

does not adjust any of the transaction prices for the time value of money.

Significant accounting judgements, estimates and assumptions

Impairment of financial assets

Revenue recognition

The loss allowances for financial assets are based on assumptions on default definition and expected loss

rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment

calculation, based on the Company’s past history, existing market conditions as well as forward looking

estimates at the end of each reporting period.

The difference, if any, between the amount of promised consideration and cash selling price and;

The Company has contracts with customers that requirees advance payment to be made before sale of paints

can occur. The Company has considered whether the contract contains a financing component and whether

that financing component is significant to the contract, including both of the following;

The preparation of the Company’s historical financial information requires management to make judgements,

estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and

the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these

assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount

of assets or liabilities affected in future periods.

The Company based its assumptions and estimates on parameters available when the financial statements were

prepared. Existing circumstances and assumptions about future developments, however, may change due to

market changes or circumstances arising beyond the control of the Company. Such changes are reflected in

the assumptions when they occur.

Material estimates in the financial statements include the following:

New Standards, amendments and interpretations issued but not yet effective

Significant financing component

34




2.3.1

2.3.2

2.3.3

2.3.4

Revenue recognition (continued)

Significant financing component (continued)

Trademark however has an indefinite useful life as the Company's forecasted sales provides evidence that

Sandtex products will generate net cash inflows for the Company for an indefinite period. Therefore, the

trademark is carried at cost without amortisation, but is tested for impairment annually.

The Company applies the IFRS 9 simplified approach in measuring the expected credit losses (ECL) which

uses a lifetime expected loss allowance for all trade receivables. The expected credit loss rate for this

receivable is determined using a provision matrix approach.

The allowance for doubtful accounts involves management judgment and review of individual receivable

balances based on behavior of customers over the expected life of the receivable and adjusted for forward-

looking estimates of relevant macroeconomic variables. The macroeconomic variables considered include

inflation and gross domestic product (GDP). Additional information on impaired receivables is included in

note 13.

Accounts receivable

Useful life and residual value of property, plant and equipment and definite life intangible assets.

Property, plant and equipment and intangible assets with definite life are depreciated over their useful life.

The Company estimates the useful lives of PPE and intangible assets based on the period over which the

assets are expected to be available for use. The estimation of the useful lives of plant and machinery are based

on technical evaluations carried out on the assets. Estimates could change if expectations differ due to

physical wear and tear and technical or commercial obsolescence.

A certain level of judgement is required for recognition of deferred tax assets. Management is required to

assess the ability of the Company to generate future taxable economic earnings that will utilise the deferred

tax assets. Assumptions over the generation of future taxable profits depends on management's estimates of

future cash flows. This estimate of future taxable income are based on forecast cash flows from operations.

Impairment of intangible assets

Income and deferred tax

The Company is subject to income taxes under the Nigerian tax legislation. Significant judgement is required

in determining the provision for income taxes. There are many transactions and calculations for which the

ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax audit issues

based on estimates of whether additional taxes will be due.

Management is of the opinion that the trademark is adjudged to have an indefinite life as the ownership had

been transferred to the Company in perpetuity and the Company expects to generate cashflows from the use of

the asset in perpetuity.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such

differences will impact the current and deferred tax assets and liabilities in the period in which such

determination is made.

It is possible however, that future results of operations could be materially affected by changes in the

estimates brought about by changes in factors mentioned above. The amounts and timing of expenses for any

period would be affected by changes in these factors and circumstances. A reduction in the estimated useful

lives of the plant and machinery would increase expenses and decrease the value of non-current assets.

Externally acquired intangible assets that have indefinite useful lives are initially recognized at cost and are

subsequently tested for impairment at each financial year end or more frequently if events or changes in

circumstances indicate they might be impaired and stated at their recoverable amount (the recoverable amount

is the higher of an asset's fair value less cost of disposal and value-in-use). The impairment loss where the

carrying amount is greater than the recoverable amount is charged to the profit or loss or income statement.

Management is of the opinion that the trademark is adjudged to have an indefinite life as the ownership had

35




2.4 Summary of significant accounting policies

2.4.1 Intangible Assets

Category Useful lives

Trade Mark Indefinite

Computer software 5 years

2.4.2

Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets with finite

lives are amortised over the useful economic life and assessed for impairment whenever there is an indication

that the intangible asset may be impaired. The amortisation period and the amortisation method for an

intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in

the expected useful life or the expected pattern of consumption of future economic benefits embodied in the

asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in

accounting estimates. The amortisation expense on tangible assets with finite lives is recognised in the income

statement as the expense category that is consistent with the function of the intangible assets. Gains or losses

arising from derecognition of an intangible asset are measured as the difference between the net disposal

proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is

derecognised.

Intangible assets include purchased trade mark and computer software.

Trade mark is externally acquired with indefinite useful lives. It is recognized at cost and are subsequently

tested for impairment at each financial year end and stated at their recoverable amounts. The impairment loss,

where the carrying amount is greater than the future economic benefits, is charged to the income statement.

Purchased software with finite useful lives are recognised as assets if there is sufficient certainty that future

economic benefits associated with the item will flow to the entity. Amortisation is calculated using the straight-

line method over 5 years.

The assets’ residual values, and useful lives and method of depreciation are reviewed and adjusted, if

appropriate, at each financial year end and adjusted prospectively, if appropriate.

Impairment reviews are performed when there are indicators that the carrying value may not be recoverable.

Impairment losses are recognised within "other income/loss" in the income statement as an expense.

The depreciation base is determined as cost less any residual value. Depreciation is charged on a straight-line

basis over the estimated useful lives of the assets and begins when the assets are available for use.

Cost comprises the cost of acquisition and costs directly related to the acquisition up until the time when the

asset is available for use. In the case of assets under construction, cost comprises direct and indirect costs

attributable to the construction work, including salaries and wages, materials, components and work

performed by subcontractors.

Replacement or major inspection costs are capitalised when incurred and if it is probable that future economic

benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.

Property Plant and Equipment

Land and buildings are initially recognized at cost less any subsequent accumulated depreciation and

accumulated impairment loss for land and buildings. All other property, plant and equipments are initially

recognized at historical cost less accumulated depreciation and accumulated impairment loss.

Computer software primarily comprises external costs and other directly attributable costs.

36




Category Useful lives

Long Leasehold Land Over the lease periodFreehold buildings up to 99

yearsFactory Building 50 years

Plant and machinery 5-10 years

Furniture and fittings 3-5years

Motor vehicles 2-4 years

Office/ computer equipments 3-5 years

2.4.3 Assets on lease

2.4.4 Earnings per share

2.4.5 Diluted Earnings per share

2.4.6 Impairment of non-financial assets

2.4.7 Inventories

Raw materials:

Property, plant and equipment and intangible assets are reviewed at each reporting date to determine whether

there is any indication of impairment. If any such indication exists, or in the case of indefinite life intangibles,

then the asset’s (CGU’s) recoverable amount is estimated. For the purpose of measuring recoverable amounts,

assets are grouped at the lowest levels for which there are separately identifiable cash-generating units

(CGUs). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being

the present value of the expected future cash flows of the relevant asset or CGUs). An impairment loss is

recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

Portland Paints & Products Nigeria Plc evaluates impairment losses for potential reversals when events or

circumstances may indicate such consideration is appropriate. The increased carrying amount of an asset other

than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would

have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the

asset in prior years.

Inventories are valued at the lower of cost and net realizable value. Cost is determined using the weighted

average method. Costs incurred in bringing each product to its present location and conditions are accounted

for as follows:

Purchase cost on weighted average basis.

Diluted Earnings per share is calculated by dividing the profit attributable to shareholders by the total number

of shares (inclusive of diluted shares).

Finance leases are recognized at amount equal to the fair value of the leased property or if lower the present

value of the minimum lease property, each determined at the inception of the lease.

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding

liability. The finance charge is allocated to each period during the lease terms so as to produce a constant

periodic rate of interest on the remaining balance of the liability.

An item of property and equipment is derecognised upon disposal or when no further future economic

benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset

(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is

included in the income statement in the year the asset is derecognised.

Basic earnings are determined by dividing the profit attributable to share holders by the weighted average

number of shares on issue during the year.

37




Goods-In-Transit, Work-in-progress and Finished goods:

2.4.8 Financial instruments

(a)

(i)

(ii)

The Company’s financial assets include trade and other receivables, cash and cash equivalents. They are

included in current assets, except for maturities greater than 12 months after the reporting date. Interest

income from these assets is included in finance income using the effective interest rate method. Any gain or

Fair value gains or losses for financial liabilities designated at fair value through profit or loss are accounted

for in profit or loss except for the amount of change that is attributable to changes in the Company’s own

credit risk which is presented in other comprehensive income. The remaining amount of change in the fair

value of the liability is presented in profit or loss. The Company’s financial liabilities include trade and other

payables and interest bearing loans and borrowings.

- Fair value through other comprehensive income: Financial assets in this category are held to collect

contractual cash flows and sell where there are advantageous opportunities. The cash flows represents solely

payment of principal and interest. These financial assets are measured at fair value through other - Fair value through profit or loss: This category is the residual category for financial assets that do not meet

the criteria described above. Financial assets in this category are managed in order to realise the asset’s fair

value.The business model for the Company’s financial assets are held to collect contractual cashflows that are solely

payments of principal (for non-interest bearing financial assets) or solely payments of principal and interest

(for interest bearing financial assets)

Classification and measurement

Financial assets

Goods in transit are valued at invoice price together with other attributable charges.

Work-in-progress cost consist of direct materials and labour and a proportion of manufacturing overheads

based on normal operating capacity but excluding borrowing costs.

The cost of finished goods comprises overheads,suppliers’ invoice prices, and,where appropriate, freight,

printing costs and other charges incurred to bring the materials to their location and condition.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of

completion and the estimated costs necessary to make the sale.

Financial liabilities of the Company are classified and measured at fair value on initial recognition and

subsequently at amortised cost net of directly attributable transaction costs.

The Company’s accounting policies were changed to comply with IFRS 9. IFRS 9 replaces the provisions of

IAS 39 that relate to the recognition, classification. and measurement of financial assets and financial

liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS

9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial

Instruments: Disclosures.

It is the Company’s policy to initially recognise financial assets at fair value plus transaction costs, except in

the case of financial assets recorded at fair value through profit or loss which are expensed in profit or loss.

Classification and subsequent measurement is dependent on the Company’s business model for managing the

asset and the cashflow characteristics of the asset. On this basis, the Company may classify its financial

instruments at amortised cost, fair value through profit or loss and at fair value through other comprehensive

income.

Financial liabilities

- Hold to collect: Financial assets in this category are held by the Company solely to collect contractual cash

flows and these cash flows represents solely payments of principal and interest. Assets held under this

business model are measured at amortised cost

The business models applied to assess the classification of the financial assets held by the company are;

38




2.4.8 Financial instruments (continued)

(b)

(c)

(i)

(ii)

(d) Offsetting of financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount is reported in the statement of financial position.

Offsetting can be applied when there is a legally enforceable right to offset the recognised amounts, and there

is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial

asset expire or when it transfers the financial asset and the transfer qualifies for derecognition. Gains or losses

on derecognition of financial assets are recognised as finance income/cost.

Financial liabilities

Recognition of impairment provisions under IFRS 9 is based on the expected credit loss (ECL) model. The

ECL model is applicable to financial assets classified at amortised cost under IFRS 9: Financial instruments.

The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by

evaluating a range of possible outcomes, time value of money and reasonable and supportable information

that is available without undue cost or effort at the reporting date, about past events, current conditions and

forecasts of future economic conditions.

The legally enforceable right is not contingent on future events and is enforceable in the normal course of

business, and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

In line with the Company’s credit risk management practices, a financial asset is defined to be in default when

contractual payments have not been received at least 90 days after the contractual payment period. Subsequent

to default, the Company carries out active recovery strategies to recover all outstanding payments due on

receivables. Where the Company determines that there are no realistic prospects of recovery, the financial

asset, and any related loss allowance is written off either partially or in full.

Derecognition

Financial assets

The Company derecognises a financial liability when it is extinguished i.e. when the obligation specified in

the contract is discharged or cancelled or expires. When an existing financial liability is replaced by another

from the same lender on substantially different terms, or the terms of an existing liability are substantially

modified, such an exchange or modification is treated as a derecognition of the original liability and the

recognition of a new liability. The difference in the respective carrying amounts is recognised immediately in

the statement of profit or loss.

Impairment of financial assets

The simplified approach is applied for trade receivables from related parties and third party customers. The

simplified approach requires expected lifetime losses to be recognised from initial recognition of the

receivables. This involves determining the expected loss rates using a provision matrix that is based on the

Company’s historical default rates observed over the expected life of the receivable and adjusted forward-

looking estimates. This is then applied to the gross carrying amount of the receivable to arrive at the loss

allowance for the period.

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount

of the related financial assets and the amount of the loss is recognised in profit or loss.

39




2.4.9 Cash and cash equivalent

2.4.10 Taxes

Current income tax

Deferred tax

• Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax, except:

• Receivables and payables are stated with the amount of sales tax included

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of

receivables or payables in the statement of financial position.

Current income tax assets and liabilities for the current period are measured at the amount expected to be

recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those

that are enacted or substantively enacted by the reporting date in Nigeria. Current income tax assets and

liabilities also include adjustments for tax expected to be payable or recoverable in respect of previous

periods.

Current income tax relating to items recognised directly in equity or other comprehensive income is

recognised in equity or other comprehensive income and not in the income statement.

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits that are readily

convertible to known aounts of cash and which are subject to an insignificant risk of changes in value with an

original maturity of three months or less in the statement of financial position.

For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents

as defined above, net of any outstanding bank overdraft.

• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation

authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of

the expense item, as applicable.

Deferred tax is provided using the liability method in respect of temporary differences at the reporting date

between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are

recognised for all deductible temporary differences, carry forward of unused tax losses.

No deferred tax is recognised when relating to temporary differences that arise from the initial recognition of

an asset or liability in a transaction that is not a business combination and, at the time of the transaction,

affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it

is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income

tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are

recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset

to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the

asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or

substantively enacted at the reporting date.

Deferred tax items are recognised in correlation to the underlying transaction either in profit or loss, other

comprehensive income or directly in equity.

40




2.4.11 Government grants

2.4.12 Provisions

2.4.13 Revenue recognition

The probability that a customer would make payment is ascertained based on the evaluation done on the

customer as stated in the credit management policy at the inception of the contract. The Company is the

principal in all of its revenue arrangement since it is the primary obligor in most of the revenue arrangements,

has inventory risk and determines the pricing for the goods and services.

Revenue is measured at the fair value of the consideration received or receivable for goods or services, in the

ordinary course of the Company's activities and it is stated net of value added tax (VAT), rebates and returns .

A valid contract is recognised as revenue after;

- Collectability is probable.

- The contract has commercial substance.

Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event,

it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured on

initial recognition at the present value of management best estimate of the expenditure required to settle the

present obligation at the end of the reporting period. Where the Company expects some or all of a provision to

be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset

but only when the reimbursement is virtually certain.

- The payment terms and consideration are identifiable.

Government grants for expenditure are netted against the relevant expenditures as and when due and these

are recognized in profit or loss in the statement of comprehensive income.

Where retention of a government grant is dependent on the Company satisfying certain criteria, it is

recognized as deferred income. When the criteria for retention have been satisfied, the deferred income

balance is released to the statement of comprehensive income (when related to expenses) or netted against the

asset purchased (when specific to an asset).

When loans or similar assistance are provided by governments or related institutions with an interest rate

below the current applicable market rate, the effect of this favourable interest is regarded as a government

grant.

The expense relating to any provision is presented in the income statement. If the effect of the time value of

money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the

risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of

time is recognised as a finance cost.

- The contract is approved by the parties.

- Rights and obligations are recognised.

41




2.4.13 Revenue recognition

(a)

(b)

('c)

Sale of

Paint

Income

from

executed

projects

Franchise/

Managemen

t fees Total

2,536,897 58,698 14,583 2,610,178

2.4.14 Interest income

The Company recognises revenue from the transfer of goods at a point in time and services overtime in the

following product lines and geographical regions. The Company derives revenue from three major revenue

lines, sale of paint, franchise fees and income from executed projects.

Sale of goods arises from sales of paint products to third parties and related parties. Revenue from the sale of

goods is recognised when the control of the goods are transferred to the buyer. This occurs when the goods

are delivered to the customer or picked up by the customers. This is at a point in time.

Revenue from sale of paint is recognised based on the price specified in the contract, net of the estimated

rebates and returns. Rebates are estimated at the inception of the contract except where the time lag between

the recognition of revenue and granting rebates is within one month.

Returns on goods are estimated at the inception of the contract except where the timing between when the

revenue is recognised and when the returns occur is considered immaterial. In these instances, the returns are

accounted for when they occur.

Revenue from contract with customers

Disaggregation of revenue from contract with customers

Revenue from painting services is recognised as income from executed projects and it is recognised overtime

by measuring the progress towards complete satisfaction of the performance obligation.

The sale-based management fees (royalties) are recognized at the later of when the sale occurs (provided there

is no expectation of a subsequent reversal of the revenue); or the performance obligation to which some or all

of the sales-based royalty has been allocated is satisfied (in whole or in part). An agreed royalty rate (1%) is

charged on the turnover declared by each franchisee quarterly and recognized in the books as

franchise/management fee.

(in thousands)

Sale of goods

Portland transfers control to the customers after the goods have been delivered to the customer, however, the

customer obtains the right to return goods that are bad or damaged after they have been delivered.

Delivery occurs when the goods have been shipped to the specific location, the risks of obsolescence and loss

have been transferred to the customer, and when the customer has accepted the products in accordance with

the sales contract, or the acceptance provisions have lapsed, or the company has objective evidence that all

criteria for acceptance have been satisfied.

Rendering of services

All financial instruments measured at ammortised cost and interest income or expense is recorded using the

effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or

receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net

carrying amount of the financial asset or liability. Interest income is included in finance income in the income

statement.

42




2.4.15 Borrowing cost

2.4.16 Foreign currency

2.4.17

2.4.18 Employees' benefits

Employees' benefits both legal and constructive which are long and short term in nature are adequately

recognized in profit or loss and the related liabilities are included in other liabilities in the statement of

financial position.

The Company operates a defined contribution pension scheme in line with the Pension Reform Act 2014. The

total contribution rate is 18%,where the employees contributes 8% and the Company contributes 10% of basic

salary, housing and transport allowances. The Company's contributions are accrued and charged to the income

statement as and when the relevant service is provided by employees. The Company has no further payment

obligations once the contributions have been paid.

Specific borrowing costs on qualifying assets are capitalized from the date the actual costs on the qualifying

asset are incurred. Where such borrowed amount, or part thereof, is invested, the income earned is netted off

the borrowing costs capitalised.

Where the entity does not specifically borrow funds to construct a qualifying asset, general borrowing costs

are capitalized by applying the weighted average cost of the borrowing cost proportionate to the expenditure

on the asset.

The Company’s financial statements are presented in Nigerian Naira, which is also the Company’s functional

currency. Transactions in the foreign currency are recognized in Naira at the official spot rate at the date of

transaction.

Monetary assets and liabilities denominated in a foreign currency are translated into Naira at the spot rate of

exchange ruling at reporting date. Differences arising on settlement or translation of monetary items are

recognised in income statement.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are

translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at

fair value in a foreign currency are translated using the exchange rates at the date when the fair value is

determined. The gain or loss arising on translation of non-monetary measured at fair value is treated in line

with the recognition of gain or loss on change in fair value in the item (i.e. the translation differences on items

whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss,

respectively).

Segment reporting

The reportable segments are identified on the basis of Strategic Business Units (SBU) and the threshold of

recognition is a contribution of not less than 10% of the revenue, assets, profits or losses of all the operating

segments. Where the board and management is of the opinion that a strategic business unit is important to the

growth initiative of the Company such SBU may be reported as a reportable segment even though it is not

meeting the threshold of a reportable segment. The Chief Operating Decision Maker (CODM) has been

identified as the executive management.

43





3 Segment information:

(a) Income

Decorative

paints

Marine

paints

Sanitary

wares

Management

fees

Total

Dec-19 Dec-19 Dec-19 Dec-19 Dec-19

N'000 N'000 N'000 N'000 N'000

Revenue:

Revenue from contracts with

customers 1,788,941 806,648 6 14,583 2,610,178

Company's revenue per statement

of profit or loss and other

comprehensive income 1,788,941 806,648 6 14,583 2,610,178

Segment gross profit /(Loss) 698,142 248,061 (46) 14,583 960,739

Operating expenses (746,388)

Impairment losses on financial assets (36,616)

Depreciation (65,855)

Amortisation (10,693)

Finance income 11,522


Other income 18,354

Sub-total (833,544)

Company's profit before tax 127,195

The Chief Operating Decision Maker (CODM) has been identified as the executive management. The Executive

Management monitors the operating results of each business units separately for the purpose of making decisions

about resource allocation and performance assessment. Segment performance is evaluated based on gross profit or

loss and is measured consistently with gross profit or loss in the combined financial statements.

- Portland decorative paints segment, which manufactures and markets a range of decorative paints.

- Portland marine segment, which manufactures and markets various ranges of marine protective paints.

- Portland sanitary wares segment, which markets and distributes a range of sanitary ware products.

The company derives revenue from the transfer of goods and services overtime and at a point in time. All

revenue are generated in Nigeria.

-Portland services segment which carries out the exceution of painting projects for customers and also earns

income from management fees arising on franchisee agreements.

For management purpose, the Company is organised into Strategic Business Units (SBU) based on products

categories and has three reportable segments as follows:

No other segment has been aggregated to form the above reportable operating segments.

44





Decorative

paints

Marine

paints

Sanitary

wares

Management

fees

Total

Dec-18 Dec-18 Dec-18 Dec-18 Dec-18

N'000 N'000 N'000 N'000 N'000

Revenue:

Revenue from contracts with

customers 1,810,367 1,000,921 137 17,837 2,829,262 Company's revenue per statement

of profit or loss and other

comprehensive income 1,810,367 1,000,921 137 17,837 2,829,262

Segment gross profit /(Loss) 659,155 400,798 (2,500) 17,837 1,075,290

Operating expenses (746,443)

Impairment losses on financial assets (19,994)

Depreciation (59,366)

Amortisation (10,693)

Finance income 11,799


Other income 67,841

Sub-total (767,757)

Company's profit before tax 307,533

The operating segments did not transact with each other and as such there are no transfer prices between operating

segments.

Production activities in the factory is mainly production of decorative paints. Hence the relevant costs are

absorbed by Decorative Paints Segment. This accounts for the depreciation on Factory building wholly absorbed

by Decorative Paints. Other Income is generated from the application of paints in addition to the sales and

marketing of paint products.

The amounts provided to the Chief Operating Decision Maker (CODM) with respect to total assets are measured

in a manner consistent with that of the financial statements. These assets are allocated based on the operations of

the segments and the physical location of the assets.

45





(ii) Assets & Liabilities

Decorative

Paints

Marine

Paints

Sanitary

wares Total

Dec-19 Dec-19 Dec-19 Dec-19

N'000 N'000 N'000 N'000

Addition to non-current assets 16,608 38,304 - 54,912

Reportable segment assets 1,536,839 500,047 12,450 2,049,336

Factory office property 188,967 - - 188,967

Total company assets 1,742,414 538,351 12,450 2,293,215

Reportable segment liabilities:

Loans and borrowings (excluding leases

and overdrafts) - - - -

Defined contribution pension scheme 4,543 - - 4,543

Financial liabilities 528,915 - - 528,915

Contact liabilities 17,147 - - 17,147

Deferred tax laibilities - - - -

Other unallocated and central liabilities 97,312 - - 97,312

Total company liabilities 647,917 - - 647,917

Decorative

Paints

Marine

Paints

Sanitary

wares Total


N'000 N'000 N'000 N'000

Addition to non-current assets 57,346 30,022 - 87,368

Reportable segment assets 1,678,313 312,418 10,962 2,001,693

Factory office property 192,429 - - 192,429

Total company assets 1,928,088 342,440 10,962 2,281,490

Reportable segment liabilities:

Loans and borrowings (excluding leases

and overdrafts) (1,974) - - (1,974)

Defined contribution pension scheme 7,817 - - 7,817

Financial liabilities 463,867 - - 463,867

Contact liabilities 55,373 - - 55,373

Deferred tax laibilities 14,048 - - 14,048

Other unallocated and central liabilities 173,382 - - 173,382

Total company liabilities 712,513 - - 712,513

Items of property, plant and equipment are directly allocated to the SBU enjoying the economic

benefits of the assets.

46





4 Revenue from contracts with customers

(a) Disaggregation of revenue from contracts with customers

Dec-19 Dec-18

N'000 N'000

Sale of paint 2,536,897 2,787,882

Revenue from executed projects 58,698 23,543

Franchise / Management fees 14,583 17,837

2,610,178 2,829,262

4(b) Liabilities related to contracts with customers

Dec-19 Dec-18

N'000 N'000

Contract liabilities - customer deposits 17,147 55,373

17,147 55,373

Dec-19 Dec-18

5 Other operating income N'000 N'000

Discount received - 10,940

Government grants - 7,742

Profit on sale of property, plant & equipment 1,227 937

Sale of scrap 2,954 2,268

Insurance claim received 1,215 4,315

Exchange gain 1,850 23,397

Other income 11,108 16,134

Container deposit refund - 2,108

Total 18,354 67,841

The company derives revenue from the transfer of goods and services over time and at a point in time in the

following major product lines:

Revenues of approximately N777 million (2017: N624 million) are derived from a single external customer.

The company has recognised the following liabilities related to contracts with customers:

Contract liabilities relate to advance payments from customers and also volume rebates earned by

franchisees both of which can be used as consideration for purchase of goods and services.

No revenue recognised in the current reporting period relates to carried-forward contract liabilities.

47





Dec-19 Dec-18

6(a) Expense by function N'000 N'000

Cost of sales 1,649,439 1,753,972

Selling & distribution expenses 286,238 264,619

Adminstrative expenses 536,698 551,883

2,472,375 2,570,474

6(b) Expenses by nature

Change in inventories of finished goods and work in progress 1,473,970 1,514,480

Amortization of intangible assets 10,693 10,693

Depreciation on property, plant and equipment 65,856 59,366

Staff costs 477,089 475,203

Distribution costs 88,977 86,865

Repairs and maintenance 45,960 61,180

Energy consumption 23,830 32,730

Advert and promotional expenses 55,126 58,707

Commercial service Fee 27,060 28,078

Auditors' fees 11,900 11,880

** Fees for non - audit services provided by auditor - 2,258

Information technology 48,022 43,172

Rent & rates 23,972 19,951

Bank charges 6,193 6,471

Legal and professional Fees 13,592 22,294

Impairment of non-current assets (note 10) - 3,282

Provisions for legal claims (note 18) - 29,900

Travelling expenses 62,164 62,057

Directors fees 3,050 4,184

Telephone and stationery 6,388 4,792

Other expenses 28,534 32,934

2,472,375 2,570,474

*Change in inventories of finished goods and work in progress relates to movement in finished goods

inventory during the year charged to cost of goods sold.

**Fees for non-audit services provided by auditor relates to expenses incurred in respect of transfer pricing

services and consultancy for implementation of IFRS 9 and IFRS 15 provided by the auditor during the year

(2018: N2.2m).

48





Dec-19 Dec-18

7 Finance income: N'000 N'000

Interest received on bank deposits 11,522 11,799

Total 11,522 11,799

8 Finance costs:

Interest expense - lease liability 3,868 10,901

Total 3,868 10,901

9 Taxation: Dec-19 Dec-18

(i) Current tax on profits for the year:

Company income tax 62,510 100,608

Education tax 5,458 8,240

67,968 108,848

Deferred tax credit (note 19a) (25,667) (8,008)

Total current tax 42,301 100,840

(ii) Reconciliation of tax charge:

Profit before tax 127,195 307,533

Tax at Nigerian's statutory income tax rates (Minimum tax) 38,159 92,260

Disallowable expenses 52,370 -

Disallowable income (8,662) (284)

Balancing charge 849 634

Effect of permanent difference (20,206) 102

Education tax @2% of assessable profit 5,492 8,240

Others - (112)

Deffered tax (25,667) -

Total tax charge for the year 42,335 100,840

49




(All amounts are in thousands of Naira, unless otherwise stated)

Land

Factory

building

Plant

and

machinery

Office/

computer

equipments

Furniture

and

fittings

Motor

vehicles

Work-in-

progress Total

10 Property, plant and

equipment N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 1 January 2018 40,000 173,164 417,630 156,103 28,802 196,510 2,372 1,014,581

Additions - 1 45,170 9,997 2,866 22,800 4,162 84,996

Transfers - - - - 2,372 - (2,372) -

Write off - - (3,282) - - - - (3,282)

Disposal - - - (3,001) (209) (8,775) - (11,985)

At 31 December 2018 40,000 173,165 459,518 163,099 33,831 210,535 4,162 1,084,310

At 1 January 2019 40,000 173,165 459,518 163,099 33,831 210,535 4,162 1,084,310

Additions - - 38,304 6,939 953 8,715 - 54,911

Transfers /Reclassification - - - - - - (1,096) (1,096)

Write off - - - - - - - -

Disposal - - - (3,783) - (18,127) - (21,910)

At 31 December 2019 40,000 173,165 497,822 166,255 34,784 201,123 3,066 1,116,215

Depreciation

At 1 January 2018 - 17,274 283,308 124,440 25,451 143,152 - 593,626

Charge for the year - 3,462 31,276 9,573 3,402 11,653 - 59,366

Disposal - - - (2,572) (130) (7,898) - (10,600)

At 31 December 2018 - 20,736 314,584 131,441 28,723 146,907 - 642,391

At 1 January 2019 - 20,736 314,584 131,441 28,723 146,907 - 642,391

Charge for the year - 3,462 34,117 9,390 3,225 15,662 - 65,856

Write off - - - - - - - -

Disposal - - - (3,780) - (16,375) - (20,155)

At 31 December 2019 - 24,198 348,701 137,051 31,948 146,194 - 688,092

Net book value as at:

At 31 December 2019 40,000 148,967 149,121 29,204 2,836 54,929 3,066 428,123

At 31 December 2018 40,000 152,429 144,934 31,658 5,108 63,628 4,162 441,919

Land and building held for use in the production or supply of goods and services, or for administrative purposes are stated at cost less

any accumulated impairment losses and accumulted depreciation.

Depreciation amounting to N65.9 million (2018:N59.4 million) has been charged to the income statement, N33.8million (2018: N25.5

million) charged to cost of sales, N22.2million (2018: N12.1 million) to administrative expenses and N9.9million (2018: N7.3 million)

to selling and distribution expenses.

There were no borrowing costs capitalised during the year (2018: Nil).

50





Trade Mark

Computer

Software Total

11 Intangible Assets N'000 N'000 N'000

Cost

At 1 January 2018 49,025 248,644 297,669

Additions - 2,190 2,190

At 31 December 2018 49,025 250,834 299,859

At 1 January 2019 49,025 250,834 299,859

Additions - - -

At 31 December 2019 49,025 250,833 299,859

Amortization:

At 1 January 2018 - 203,724 203,724

Charge for the year - 10,693 10,693

At 31 December 2018 - 214,417 214,417

At 1 January 2019 - 214,417 214,417

Charge for the year - 10,693 10,693

At 31 December 2019 - 225,110 225,110

Net Book values at:

At 31 December 2019 49,025 25,723 74,749

At 31 December 2018 49,025 36,417 85,442

Intangible assets amortization charged to income statement amounts to N10.7m (2018: N10.7million) has

been included as part of administrative expenses.

The Company's trademark represents the N49 million trade mark purchased from Blue Circle Industries

Plc adjudged to have an indefinite life. The trade mark is carried at cost to be tested annually for

impairment.

The trade mark was reviewed for impairment as at 31 December 2019 and at present no impairment is

deemed required and there are no contractual commitment that may have an impact on the carrying value

of the trade mark.

The trademark used to identify and distinguish (Sandtex brands; carrying amount N49million) has an

indefinite life. The Company intends to continue the production of paints in the Sandtex product

categories and evidence supports its ability to do so. An analysis of the Company's forecasted sales

provides evidence that Sandtex products will generate net cash inflows for the Company for an indefinite

period. Therefore, the trademark is carried at cost without amortisation, but is tested for impairment

annually.

51





Dec-19 Dec-18

12 Inventories: N'000 N'000

Raw materials 233,443 217,476

Packaging materials 29,233 31,357

Work in progress 156 2,986

Finished goods 717,708 537,402

Spare parts 9,490 10,135

Diesel 1,279 4,591

Stock impairment (100,054) (75,900)

Total 891,255 728,047

Dec-19 Dec-18

13 Trade and other receivables N'000 N'000

(i) Trade receivables 596,143 447,789

Less: Provision for impairment of trade receivables - (note 13ii) (238,912) (202,296)

Net trade receivables 357,231 245,493

Other receivables 5,914 57,393

Right of return asset 5,253 9,593

Unutilized withholding tax credit note 31,407 8,630

Less: Provision for impairment of other receivables - - Net other receivables 42,574 75,616

Receivables from related parties (note 22) 5,759 5,286

Less: provision for impairment of receivable from related parties (1,692) (1,692)

4,067 3,594

Withholding tax receivable 50,754 88,614

VAT receivable 57,873 62,863

Total trade and other receivables 512,499 476,180

The amount of write-down on inventories to net realizable value recognised as an expense is N100 million

(2018: N75.9 million). This represents impairment for slow moving, obsolete and damaged inventories. All

inventory items are stated at the lower of cost and their net realisable values.

Year end stock count was conducted across all Company's stock holding locations. The quantity counted

was valued using weighted average costing model as per the Company's policy and agreed as stated herein.

The value of finished goods include N500 million (2018: N312 million) imported merchandizing products.

*Other receivables relates to advance payments made to suppliers.

52





13 Trade and other receivables (continued)

Dec-19 Dec-18

N'000 N'000

Trade receivables 357,231 245,493

Receivables from related parties (note 22e) 4,067 3,594

Withholding tax receivable 50,754 88,614

VAT receivable 57,873 62,863

Right of return asset 5,253 9,593

Untilized withholding tax credit note 31,407 8,630

Other receivables 5,914 57,393

Total 512,499 476,180

Dec-19 Dec-18

N'000 N'000

(ii) Allowance for impairment of trade receivables:

At 1 January 2019 202,296 176,905

Increase in impairment losses on transition (Adoption of IFRS 9) - 62,727

202,296 239,632

Additional allowance for receivable impairment 36,616 19,994

238,911 259,626

Amount written off - (57,330)

Total as at 31 Dec 2019 238,911 202,296

(iii) Reconciliation of gross carrying amount of trade receivables Dec-19 Dec-18

N'000 N'000

Gross carrying amount as at 1 January 447,789 433,811

Revenue from contracts with customers 2,599,258 2,823,950

Receipts from customers (2,450,904) (2,752,642)

Receivables written off as uncollectible - (57,330)

Gross carrying amount as at 31 December 596,143 447,789

(iv) Reconciliation of gross carrying amount of related party receivables

Gross carrying amount as at 1 January 5,286 13,171

Revenue from contracts with customers 10,920 5,312

Receipts from customers (10,447) (13,197)

Gross carrying amount as at 31 December 5,759 5,286

Trade receivables are non-interest bearing and are generally on terms of 30-90 days. Trade and other

receivables as at 31 December 2019 were reviewed for impairment.

The fair values of trade and other receivables classified as amortised cost are as follows:

53





Dec-19 Dec-18

N'000 N'000

14 Prepayments

Prepayments - current portion 33,057 22,688

Prepayments - non current portion 1,769 5,537

Total prepayments 34,825 28,224

15 Right of use - Asset

Dec-19 Dec-18

Building N'000 N'000

(i) At 1 January 2019 26,547 -

Additions - -

At 31 December 2019 26,547 -

Accumulated Depreciation

At 1 January 2019 - -

Charge for the year 4,455 -

At 31 December 2019 4,455 -

Carrying amount

At 1 January 2019 26,547 -

At 31 December 2019 22,092 -

15ai Lease liability

Dec-19 Dec-18

N'000 N'000

I January 23,922 - Lease payment c/fwd - -

Payments during the year (6,000) -

Interest on lease liability during the year 3,868 -

31 December 21,790 -

15aiiLease liability(Current & Non Current)

Lease liability - current portion 4,416 -

Lease liability - non current portion 17,374 -

Total Lease Liability 21,790 -

The balance on prepayment represent rent, housing,generator allowances and insurance paid

in advance which will be charged against earnings in the periods it relates.

IFRS 16 affect the accounting for Portland's current operating lease which is the lease of its office premises.

The estimated amount of right-of-use assets of ₦ 26.5million and lease liabilities of ₦ 23.9million was

recognised on adoption of the new standard.

54





Dec-19 Dec-18

Interest bearing loans and borrowings N'000 N'000

Bank loans:

At 1 January - 43,742

Interest expense in the year - 6,045

Principal repayments in the year - (47,813)

Interest repayments in the year - (1,974)

At 31 December - -

The movement in loan and borrowings represent principal and interest repayment is as follows:

(iii) Government grants:

Dec-19 Dec-18

N'000 N'000

As at 1 January 2019 - 7,742

Total government grant for the year - 7,742

Released to the income statement - (7,742)

- -

16 Cash and cash equivalent:

Dec-19 Dec-18

N'000 N'000

Cash in hand and bank 22,758 326,655

Treasury bills & fixed deposit 256,991 165,000

Cash & short term deposit 279,749 491,655

Cash and cash equivalents 279,749 491,655

For the purpose of the statement of cash flow, cash and cash equivalents comprise the following as at 31

December 2019

Treasury bills & fixed deposit are made for varying periods of between one month and three months

depending on the immediate cash requirements of the Company, and earn interest at the respective short-

term deposit rates. During the reporting period, an expected credit loss assessment was performed on these

balances. The impairment allowance is considered immaterial.

Government grants relates to loan granted by an Agency of the Nigeria Government (Central Bank of

Nigeria) with 6% interest rate which is below the current applicable market rate, the effect of this

favourable interest is regarded as a government grant. There are no unfulfilled conditions or contigencies

attached to these grants.

55





Dec-19 Dec-18

17 Trade and other payables N'000 N'000

Trade payables 297,608 217,446

Accrued employee benefits 4,833 44,156

Other payables 87,579 86,403

Refund liability (note 17i) 7,985 15,276

Intercompany payable (note21d) 110,901 80,577

Dividends payable (refunded) 20,009 20,009

528,915 463,867

PAYE payable 485 514

Defined contribution pension scheme 4,543 7,817

VAT payable 17,482 28,726

Withholding tax payable 2,064 1,064 Customer deposits - -

Total trade and other payables 553,489 501,988

17(i)

Dec-19 Dec-18

N'000 N'000

At 1 January 2019 15,277 15,277

Addition/(release) (7,292) -

Total refund liability 7,985 15,277

18 ProvisionsDec-19 Dec-18

N'000 N'000

At 1 January 2019 24,917 -

Charge to profit or loss - 29,900

Amount used during the year (9,917) (4,983)

Provisions write back (12,000) -

3,000 24,917

Terms and conditions of the above financial and non-financial liabilities.

Total financial liabilities, excluding loans and borrowings, classified as

financial liabilities measured at amortised cost

Trade payables are non-interest bearing and normally settled on 30 day term.

Other payables and accruals are non-interest bearing and have an average term of 90 days. Dividend payable

represents the total unclaimed dividend as at 31 Dec 2019.

Refund Liability

When a customer has a right to return products bought within a given period, the company recognises a

refund liability for the amount of consideration received for which the entity does not expect to be entitled. At

the same time, the company has a right to recover the products from the customer where the customer

exercises his right of return and recognises an asset.

The recognised provision reflects the directors' best estimate of the most likely outcome of legal

cases against the company based on legal advice from the company's legal counsel

The costs to recover the products are not material because the customers usually return the product

in a saleable condition.

56





Dec-19 Dec-18

19 Corporate tax liability N'000 N'000

Balance at beginning of the year



118,161 71,592

Current tax expense



186,129 180,440 Withholding tax credit Un - Utilized

Payment (108,848) (62,279)

Income tax payable 77,281 118,161

The analysis of tax payment during the year is as follows:

Cash payment 51,709 44,692

Withholding tax credit Utilized 57,139 17,587

108,848 62,279

19(a)

Dec-19 Dec-18

Deferred tax N'000 N'000

At 1 January 14,048 22,056

Recognised in profit and loss

Tax expense (25,667) (8,008)

At 31 December (11,619) 14,048

Provisions

Property, plant

& equipment

Unrealised

exchange gain Total

Deferred tax (assets)/liabilities N'000 N'000 N'000 N'000

At 1 January 2018 (73,571) 95,627 - 22,056

Charged/(credited) to profit and loss (11,408) 3,400 - (8,008)

At 31 December 2018 (84,979) 99,027 - 14,048

At 1 January 2019 (84,979) 99,027 - 14,048

Charged/(credited) to profit and loss (24,292) (1,375) - (25,667)

At 31 December 2019 (109,271) 97,652 - (11,619)

There are no unrecognised deferred tax assets as at 31 December 2019 (2018:Nil).

Deferred taxes are calculated on all temporary differences using the balance sheet method and a tax

rate of 30% (2018:30%).

Deferred income tax assets and liabilities, deferred income tax charge/(credit) in profit or loss are attributable

to the following items:

57





20 Equity

(1) Share capital

Number'000 N'000 Number'000 N'000

Ordinary shares of 50 kobo each 1,000,000 500,000 1,000,000 500,000

Total 1,000,000 500,000 1,000,000 500,000

Issued and

Fully Paid

Issued and

Fully Paid

Issued and

Fully Paid

Issued and

Fully Paid


Number'000 N'000 Number'000 N'000

Ordinary shares of 50 Kobo each at the

beginning of the year 793,416 396,708 793,416 396,708

Rights issue - - - -

As at 31 Dec 2019 793,416 396,708 793,416 396,708

Dec-19 Dec-18

(ii) Share premium N'000 N'000

At 1 January 2019 437,923 437,923

Additions in the year - -

As at 31 Dec 2019 437,923 437,923

(iii) Nature and purpose of reserves:

Dec-19 Dec-18

Other reserves N'000 N'000

At 1 January 2019 91,923 91,923

Revaluation during the year - -

As at 31 Dec 2019 91,923 91,923

Other reserves:

(iv) Earnings per share

The other reserves relates to increases in the fair value of property, plant and equipment and decreases to the

extent that such decrease relates to an increase on the same asset previously recognised in equity. The

revaluation was carried out on land and building in December 2010 and 2012 by Ubosi Eleh & Co., a

professional firm of Chartered Surveyors on an open market basis. However, upon the conversion of the

Company's accounting standard to International Financial Reporting Standards, the cost and revaluation

surplus of the asset was taken as deemed cost and no subsequent revaluations are required in line with the

UACN Plc group accounting policy.

Share premium relates to the excess consideration paid forN 393 million ordinary shares issued in 2017 over

the nominal amount of 50kobo per share. Funds raised from the right issues were used for general working

capital purposes.

Basic earnings per share is calculated by dividing net profit for the period attributable to ordinary equity

holders of the parent by the weighted average number of ordinary shares during the year.

The following reflects the income and share data used on the basic and diluted earnings per share

computations:

Authorised Authorised

Dec-19 Dec-18

58





20 Equity (continued)

Dec-19 Dec-18

(iv) Earnings per share (continued) N'000 N'000

Net profit attributable to ordinary equity holders 84,894 206,693

Weighted average number of ordinary shares for basic earnings per share 793,416 793,416

Basic earnings per share (in kobo) 11 26

Weighted average number of ordinary shares for diluted earnings per share 793,416 793,416

Diluted earnings per share (in kobo) 11 26

Dec-19 Dec-18

21 Reconciliation of net profit to net cash generated from operations N'000 N'000

Profit before tax 127,195 307,533

Adjustments to reconcile net income to net cash provided by operating activities:

Dec-19 Dec-18

N'000 N'000

Interest paid 3,868 10,901

Impairment of non-current assets (note 10) - 3282

Provisions for legal claims (note 18) - 29,900

Finance income (11,522) (11,799)

Depreciation charges 65,856 59,366

Depreciation - Right of use asset 4,455 -

Impairment loss recognised in profit or loss (note 13ii) (36,616) (19,994)

WHT credit notes utilized (note 19a) (57,139) (17,587)Interest Expense - Lease Liability - -

Amortization of government grant - (7,742)

Profit on disposal of fixed assets (1,227) (937)

Amortisation of intangible assets 10,693 10,693

(21,632) 56,083

Changes in assets and liabilities:

Increase in trade debtors and prepayments (8,929) (58,046)

Increase in impairment losses on transition (adoption of IFRS 9) - (62,727)

(Increase)/decrease in inventories (163,208) 172,383

Increase in trade creditors & accruals 29,584 4,232

(Decrease)/increase in contract liabilities (38,226) 55,373

(180,779) 111,215

Net adjustment (202,410) 167,298

Net cash provided by operating activities (75,215) 474,831

21.1 Gain/(Loss) on disposal of property, plant and equipment

Proceeds on disposal of property, plant and equipment 2,982 2,322

Less: net book value 1,755 1,385

Gain on disposal of property plant and equipment 1,227 937

59





22 Related party transactions

Dec-19 Dec-18

(a) Sales of goods and services Relationship N'000 N'000

UACN Property Development Company Plc Sister company - 2,237

Grand Cereals Limited Sister company 4,243 2,467

Chemical and Allied Products (CAP) Plc Sister company 2,322 -

UAC Foods Limited Sister company 1,716 608

MDS Logistics Ltd Sister company 1,968 -

UAC Resturants Ltd Sister company 670 -

10,920 5,312

Dec-19 Dec-18

(b) Purchases of goods and services N'000 N'000

UAC of Nigeria Plc: Service fee Principal shareholder 27,060 28,078

27,060 28,078

Dec-19 Dec-18

(c) Other transactions with related parties N'000 N'000

UAC of Nigeria Plc Principal shareholder 72,927 48,450

Grand Cereals Limited Sister company - 423

72,927 48,873

Dec-19 Dec-18

(d) Intercompany payable: N'000 N'000

UAC of Nigeria Plc Principal shareholder 99,986 76,528

Grand Cereals Limited Sister company - 1,101

Chemical and Allied Products (CAP) Plc Sister company 10,912 2,736

Livestock Feeds Plc Sister company 3 -

UAC Foods Limited Sister company - 212

110,901 80,577

Dec-19 Dec-18

(e) Intercompany receivable: N'000 N'000

UACN Property Development Company Plc Sister company 2,349 2,237

Grand Cereals Limited Sister company 1,843 2,441

Chemical and Allied Products (CAP) Plc Sister company 11 -

UAC Foods Limited Sister company 1,556 608

5,759 5,286

The parent, ultimate parent and controlling party of the company is UAC of Nigeria Plc incorporated in

Nigeria. There are other companies that are related to Portland Paints & Products Nigeria Plc through

common share holdings and directorship.

All trading balances will be settled in cash.

All related party transactions were carried out on commercial terms and conditions (See also disclosures in

Note 17).

The following transactions were carried out with related parties:

Receivables are largely as a result of sales of paints to related parties. Payables due to related parties are not

as a result of trade transactions but relate to settlement of liabilities and reimbursements for expenses

incurred by related parties on behalf of the Company.

Provisions for doubtful related party receivables as at 31 December 2019 amounted to N1.7 million (2018:

N1.7million) and charges to the income statement in respect of related party receivables is nil. (2018:

N1.7million).

60





Dec-19 Dec-18

N'000 N'000

23 Compensation to key management personnel:

Short-term employee benefits 22,762 20,382

Long-term employee benefits 1,908 1,325

24,669 21,707

Dec-19 Dec-18

N'000 N'000

The emoluments of the highest paid director 24,669 21,707

Emolument of non-executive directors:

Fee 375 913

Sitting allowance 2,675 2,575

Passage Allowance 30,171 -

33,221 3,488

Directors' mix Dec-19 Dec-18

Number Number

Executive Director 1 1

Non-executive Directors 4 5

5 6

24 Employee compensation

Dec-19 Dec-18

Number Number

Production 12 37

Sales, marketing and depot 36 46

Administration 29 28

77 111

Dec-19 Dec-18

Number Number

N10,000 - N500,000 - -

N500,001 - N1,000,000 - 31

Above N1,000,001 77 80

77 111

The amounts disclosed above are the amounts recognised as an expense during the reporting period related to

key management personnel (The Executive Directors). The Executive Director is paid salaries and housing

allowance, transportation is also provided for him. While the Non-executive Directors are only entitled to

Directors Fees, sitting and passage allowance. The Executive Director is entitled to a defined contribution plan

(pension) in accordance with Pension Reform Act 2004. But non-executive Directors are not entitled to any

form of pension or post employment benefits with the company. Amounts paid to Directors are disclosed

below:

The average number of persons employed by the Company during the year, including Director, is as follows:

The number of employees in respect of emoluments within the following ranges was:

61



FOR THE YEAR ENDED 31 DEC 2019


24 Employee compensation (continued)

Dec-19 Dec-18

The aggregate cost of these employees were: N'000 N'000

Salaries and wages 295,951 334,757

Director's fees (note 23) 33,221 3,489

Defined contributions 20,479 22,203

Staff training expenses 2,097 8,430

Other employment related expenses 125,341 106,324

477,089 475,203

Cost of sales 87,733 93,860

Selling & distribution expenses 94,601 75,424

Adminstrative expenses 294,755 305,919

477,089 475,203

25 Financial risk management

Staff costs have been recognised in the "statement of profit or loss and other comprehensive income" as

follows:

Portland Paints & Products Nigeria Plc’s principal financial assets comprise trade and other receivables,

cash and short term deposits that arise directly from its operations. The Company’s principal financial

liabilities comprise of trade and other payables. The main purpose of these financial liabilities is to finance

and to provide guarantee to support the Company’s operations.

Portland Paints & Products Nigeria Plc is exposed to credit risk, liquidity risk and market risk. The

Company’s board has overall responsibility to oversee the management of these risks. The Company’s

Board of Directors is supported by a risk management and governance committee that is responsible for

developing the Company’s Corporate Governance policies and practices and to consider the nature, extent

and category of risks facing the Company.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without

unduly affecting the Company’s competitiveness and flexibility.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised

below:

62





25.1 Credit risk

The concentration of the Company's credit risk is as follows:

Item

Total gross

amount

Fully

performing

Past due but

not impaired Impaired

N'000 N'000 N'000 N'000

Trade receivables 596,143 288,329 68,902 238,912

Receivables from related companies 5,759 4,067 - 1,692

Cash and cash equivalent 279,749 279,749 - -

881,651 572,145 68,902 240,604

Item

Total gross

amount

Fully

performing

Past due but

not impaired Impaired

N'000 N'000 N'000 N'000

Trade receivables 447,789 144,648 102,537 200,604

Receivables from related companies 5,286 3,594 - 1,692

Cash and cash equivalent 491,655 491,655 - -

944,730 639,897 102,537 202,296

Dec-19 Dec-18

Age analysis of past due but not impaired receivables N'000 N'000

52,227 34,708 16,675 67,829

68,902 102,537

(a) Trade receivables

31 December 2018

91 - 180 days181 - 360 days

Credit quality of the customer is assessed based on an extensive credit rating scorecard and individual

credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly

monitored by the credit committee comprising of sales, finance and internal audit and the Company intends

to explore issuing of issurance certificates to major distributors and customers.

This is the risk of financial loss to the Company if a customer or counterparty to financial instrument fails

to meet its Contractual obligations. The Company is mainly exposed to credit risk from credit sales. It is

Company policy, implemented locally, to assess the credit risk of new customers before entering contracts.

31 December 2019

63





25.1 Credit risk (continued)

(a) Trade receivables (continued)

Counterparties with external credit ratings: Dec-19 Dec-18

N'000 N'000

193,781 81,551

193,781 81,551

Counterparties without external credit ratings: Dec-19 Dec-18

N'000 N'000

21,852 134,082

72,249 114,880

308,261 117,276

402,362 366,238

The Company defines the rating as follows:

Trade receivables

Group 1

Total

Trade receivables

Group 1

Group 2

Group 3

Total

Group 1 – These are balances with Blue Chip, Listed and other large entities with a low chance of default.

Group 2 - These are balances with small – medium sized entities with no history of defaults.

Group 3 – These are balances with small entities and also medium sized entities with history of defaults or

late payments.

The entity has adopted a policy of only dealing with credit worthy counter-parties and a credit committee is

instituted which comprises of sale, finance and internal audit department to review the outstanding balances

on customers’ account. Insurance certificate is required before credit is granted to key distributors. Trade

receivables consist of a large number of customers, spread across diverse industries and geographical areas.

On-going credit evaluation is performed on the financial conditions of account receivable and where

appropriate, credit guarantee insurance cover is purchased.

Portland Paints & Products Nigeria Plc has 25% of it's credit risk exposure to a single key customer.

Apart from this key customer, the entity does not have significant credit risk exposure to any single

counterparts or any group of counterparties having similar characteristic. Concentration of credit risk to any

other counterparty did not exceed 5% of gross monetary assets at any time during the year.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-rating

assigned by international credit-rating agencies.

64





Sensitivity of estimates used in IFRS 9 ECL

Estimation uncertainty in measuring impairment loss

(a)

2019

N’000

Increase/decrease in estimated cash flows

+20% 42,036

-20% (38,439)

-10% Held constant 10%

N’000 N’000 N’000

+10% 57,062 54,928 52,795

Held constant 2,134 - (2,133)

-10% (119,719) (124,945) (130,172)

In establishing sensitivity to ECL estimates for trade receivables from customers and related parties, three

variables (GDP growth rate, unemployment rate, Inflation rate) were considered. Of these variables, the

Company's receivables portfolio reflects greater responsiveness to GDP growth rate and inflation rates.

The table below shows information on the sensitivity of the carrying amounts of the Company’s financial

assets to the methods, assumptions and estimates used in calculating impairment losses on those financial

assets at the end of the reporting period. These methods, assumptions and estimates have a significant risk

of causing material adjustments to the carrying amounts of the Company’s financial assets.

Effect on profit

before tax

-

-

Expected cash flow recoverable from trade receivables:

The table below demonstrates the sensitivity to a 20% change in the expected cash flows from trade

receivables, with all other variables held constant:

The table below demonstrates the sensitivity to a 20% change in the expected cash flows from trade

GDP growth rate

This table shows the sensitivity of the expected credit loss to an inverse and positive change to each

forward-looking macro variables, with all other variables held constant:

Inflation Rate

Effect on other components

of profit before tax

2019

N’000

65





(b) Cash and short term deposit

Counterparties with external credit ratings:

Dec-19 Dec-18

N'000 N'000

- 6,866

8,438 9,149

58,102 7,666

810 53,584

- -

206,231 410,634

- -

B 5,571 2,683

CCC - 827

597 246

279,749 491,655

'AA' A financial institution of very good financial condition and strong capacity to meet its obligations as

and when they fall due. Adverse changes in the environment (macro-economic, political and regulatory)

will result in a slight increase the risk attributable to an exposure to this financial institution. However,

financial condition and ability to meet obligations as and when they fall due should remain strong.

'A' A financial institution of good financial condition and strong capacity to meet its obligations. Adverse

changes in the environment (macro-economic, political and regulatory) will result in a medium increase in

the risk attributable to an exposure to this financial institution. However, financial condition and ability to

meet obligations as and when they fall due should remain largely unchanged.

BBB+

BBB-

BBB

Unrated

Total

Counterparty credit limits are reviewed by the Company’s Board of Directors on an annual basis, and may

be updated throughout the year subject to approval of the Managing Director. The limits are set to minimise

the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure.

Portland Paints’ maximum exposure to credit risk for the components of the statement of financial position

at 31 December 2019 and 2018 is the carrying amounts.

Cash and short term deposits

AA

AA-

AA+

A+

Credit risk from balances with banks and financial institutions is managed by the Portland Paints’ treasury

department in accordance with the Company’s policy. Investments of surplus funds are made only with

approved counterparties and within credit limits assigned to each counter party.

66





25.1 Credit risk (continued)

25.2 Liquidity risk

CCC' There is substantial credit risk and default is a real possibility. Failure of the bank is a real

possibility. The capacity for continued unsupported operation is highly vulnerable to deterioration in the

business and economic environment.

This is based on Fitch ratings.

This is the risk arising from the Company’s management of working capital and the finance charges and

principal repayments on its debt instruments. It is the risk that the Company will encounter difficulty in

meeting its financial obligations as they fall due.

The Company policy is to ensure that it will always have sufficient cash to allow it meet its liabilities when

they become due. Ultimate responsibility for liquidity risk management rests with the Board of Directors,

which has established an appropriate liquidity risk management framework for the management of the

entity’s short, medium and long-term funding and liquidity requirement. The entity manages liquidity risk

through the use of bank overdrafts and bank loans. The company has agreement with our bankers to

provide overdraft facilities for short term funds requirement and long-term borrowing facilities, by

continuously monitoring forecast and actual cash flow and matching the maturity profile of financial assets

and liabilities.

'BBB' A financial institution of satisfactory financial condition and adequate capacity to meet its

obligations as and when they fall due. It may have one major weakness which, if addressed, should not

impair its ability to meet obligations as and when due. Adverse changes in the environment (macro-

economic, political and regulatory) will result in a medium increase in the risk attributable to an exposure

to this financial institution.

'BB' Financial condition is satisfactory and ability to meet obligations as and when they fall due exists.

May have one or more major weaknesses. Adverse changes in the environment (macro-economic, political

and regulatory) will increase risk significantly.

'B' Financial condition is weak but obligations are still being met as and when they fall due. Has more than

one major weakness and may require external support.

The modifiers "+" or "-" may be appended to a rating to denote comparative position within the rating

categories.

67





25.2 Liquidity risk (continued)

31 December 2019

Less than 3

months

Between 3

months and 1

year

Between 1

and 5 years Over 5 years

Borrowings - - - -

Trade and other payables 528,915 - - -

Total 528,915 - - -

31 December 2018

Borrowings - - - -

Trade and other payables 463,867 - - -

Total 463,867 - - -

25.3 Market risk

25.4 Interest rate risk

Other payables excludes withholding tax payable and customer deposits (see note 17) as these are non financial instrument.

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate

because of changes in market prices. The activities of the entity are exposed primary to the following

market risks; interest rate risk, foreign currency risk and commodity price risk.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will flunctuate

because of changes in market interest rates. The company’s exposure to the risk of changes in market

interest rates relates primarily to the company’s short-term debt obligations with floating interest rates.

The company interest rate risk arises from short term deposits and borrowings held at fixed rates. The

Company does not carry any borrowings at fair value and as such is not exposed to fair value risk.

The balances below are undiscounted amounts and are based on contractual cashflows.

68





Concentration of interest risks is as follows:

Weighted

average

interest rate

Interest

bearing

balance

Fixed rate

Non interest

bearing

% N'000 N'000

Financial assets:

Trade and other receivables - - 361,298

Cash and bank balances - 256,991 22,758

Total 256,991 384,056

Financial liabilities:

Borrowings - - -

Trade and other payables - - 528,915

Total - 528,915

Weighted

average

interest rate

Interest

bearing

balance

Non interest

bearing

%

Fixed rate

N'000 N'000

Financial assets:

Trade and other receivables - - 249,087

Cash and bank balances - - 326,655

Short term deposits - 165,000 -

Total 165,000 575,742


Borrowings - - -

Trade and other payables - - 463,867

Total - 463,867

31 December 2019

31 December 2018

69





25.5 Foreign currency risk

Naira USD GBP Total

N'000 N'000 N'000 N'000

Financial assets:

Trade and other receivables 180,425 180,873 - 361,298

Cash and short term deposits 45,895 233,043 811 279,749

Total 226,319 413,916 811 641,047


Trade and other payables 278,629 102,657 36,727 418,013

Inter-company payables 110,901 - - 110,901

389,531 102,657 36,727 528,915

Naira USD GBP Total

N'000 N'000 N'000 N'000

Financial assets:

Trade and other receivables 136,572 112,515 - 249,087

Cash and short term deposits 228,277 263,374 4 491,655

Total 364,849 375,889 4 740,742


Trade and other payables 366,430 16,860 - 383,290

Inter-company payables 80,577 - - 80,577

Total 447,007 16,860 - 463,867

31 December 2018

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in foreign exchange rates. The company’s exposure to the risk of changes in

foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is

denominated in a different currency from the Company’s functional currency). In preparing the financial

statement of the entity, transactions in currencies other than the entity’s functional currency [foreign

currencies] are recognized at the rates of exchanges prevailing at the date of the transactions. The company

is not managing its foreign currency risk by hedging because the entity’s dealing in foreign currencies is

minimal and will not have material effect on the financial statements of Portland Paints & Products Nigeria

Plc.

31 December 2019

70





26 Capital management

Dec-19 Dec-18

- -

1,582,204 1,536,981

Total capital 1,582,204 1,536,981

0% 0%

27 Commitments and contingencies

Capital commitments

28 Events after reporting period

At 31 December, 2019 the Company did not have any capital commitments (Dec 2018: Nil).

In the first quarter of 2020, there was a COVID -19 outbreak which has spread globally. The outbreak has

been declared a Public Health Emergency of International concern by World Health Organisation (WHO)

in March 2020. As at the date of this report, several cases have been confirmed in Nigeria by the Nigerian

Centre for Disease Control.

Interest bearing debt

Equity

Gearing ratio

Management considers capital to consist only of equity as disclosed in the statement of financial position.

The primary objective of the Portland Paints capital management is to ensure that it maintains a healthy

capital ratio that support its business and maximize shareholder value. The company manages its capital

structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the

capital structure, the Company may adjust the dividend payment to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital during the year ended

31 December 2019. In order to ensure an appropriate return for shareholder’s capital invested in the

company, management thoroughly evaluates all material projects and potential acquisitions before

approval. The company is not subject to any capital restriction requirements.

The company monitors capital using a gearing ratio, which is interest bearing debt divided by total capital

plus interest bearing debt. The company’s policy is to keep the gearing ratio between 0% and 50%.

Item

The disease has caused a significant reduction in social interaction, with a shutdown of public facilities and

physical interaction. Measures taken to contain the virus have affected economic activity. The slowdown in

the global and Nigerian economy, coupled with global crude oil price declines and pressure on the Naira is

expected to impact disposable income and in turn consumer demand for decorative, industrial and marine

paint.

71





28 Events after reporting period (continued)

In the light of these recent developments and its underlying impact on revenue (due to reduced demand for

products), increase costs (given imported products and expected inflationary pressures). However, detailed

estimate cannot be made now given the uncertainty about the extent and duration of the pandemic.

Management has also considered the potential implications of this outbreak and have put in place measures

to mitigate against a significant impairment of the carrying value of assets. The management is confident

that there are no plans to liquidate any of the Company's operations or to cease trading. Management is

confident that we can manage liquidity and remain a going concern.

However, its reasonably possible, based on existing knowledge, that outcomes within the next financial

year that are different from assumptions used for some estimates and judgement, could require a material

adjustment to the carrying amount of the asset or liability affected.

72


STATEMENT OF VALUE ADDED


Dec-19 Dec-18

N'000 % N'000 %

Turnover 2,610,178 2,829,262

Non trading items 29,876 79,640

2,640,054 2,908,902

Bought-in-material and services:

- Local (1,502,572) (1,603,601)

- Imported (423,802) (452,298)

Value added 713,680 100% 853,003 100%

Applied as follows:-

To pay employees:

Salaries and labour related expenses 477,089 67% 475,203 56%

To pay Government:

Corporate tax 67,968 10% 108,848 13%

To pay provider of capital:

Interest charges 3,868 1% 10,901 1%

To pay shareholders

as dividend 39,671 6% - 0%

Retained for replacement of assets and business growth:

- Depreciation 65,856 9% 59,366 7%

- Deferred tax (25,667) -4% (8,008) -1%

- Profit for the year 84,894 12% 206,693 24%

713,680 100% 853,003 100%

Value added represents the additional wealth which the company has been able to create by its own and its employees' efforts.

This statement shows the allocation of that wealth to employees, providers of capital, government and the portion retained for

the future creation of more wealth.

73


FIVE YEAR FINANCIAL SUMMARY


2019 2018 2017 2016 2015

N’000 N’000 N’000 N’000 N’000

Statement of financial position:

Property, plant & equipment 428,123 441,919 420,955 438,083 456,202

Intangible asset 74,749 85,442 93,945 49,025 124,685

Right of use asset 22,092 - - - -

Deferred tax asset 11,619 - - - -

Non-current prepayments 1,769 5,537 3,245 13,402 10,789

Net current assets 1,061,227 1,018,131 896,926 260,019 252,858

Non-current liabilities:

Borrowings - - - (43,492) (101,571)

Government grants - - - (7,728) (32,240)

Deferred taxation - (14,048) (22,056) (9,095) (19,106)

Lease liabilites (17,374) - - - -

1,582,204 1,536,981 1,393,015 700,214 691,617

Shareholders’ funds:

Issued share capital 396,708 396,708 396,708 200,000 200,000

Share premium 437,923 437,923 437,923 - -

Other capital reserve 91,923 91,923 91,923 91,923 91,923

Retained earnings 655,650 610,427 466,461 408,291 399,694

1,582,204 1,536,981 1,393,015 700,214 691,617

Statement of comprehensive income

Revenue 2,610,178 2,829,262 2,316,289 1,844,050 2,771,147

Profit/(loss) before taxation 127,195 307,533 123,868 7,502 (258,369)

Taxation (42,301) (100,840) (65,698) 1,094 25,384

Profit/(loss) after taxation 84,894 206,693 58,170 8,596 (232,985)

Dividend declared per share - 0.05 - - -

Per share data (kobo)

Earnings /(loss) per share – Basic 11 26 8 2 (58)

Diluted earnings per share 11 26 8 2 (58)

Note:

Earnings per share is based on profit after taxation and the number of issued and fully paid ordinary shares at the end of

each financial year.

74

portland paints & products nigeria plc

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