Property, plant and equipment, except for freehold land and buildings and site improvements are stated at cost less accumulated depreciation and/or accumulated impairment losses, if any. Freehold land is stated at revalued amounts and buildings are stated at revalued amounts less subsequent accumulated depreciation and subsequent accumulated impairment losses.
Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at each financial year end. It is the Group's policy to revalue its freehold land and buildings at least once every three years. The basis used is market value derived using the Sales Comparison Approach and the Depreciated Replacement Cost Approach and independent valuers are used for such exercises. Any revaluation surplus is credited to other comprehensive income, except to the extent that it reverses a revaluation deficit for the same asset previously recognised in profit or loss, in which case the surplus is credited to profit or loss to the extent of the deficit previously charged. A decrease in an asset’s carrying amount arising on revaluation is charged to profit or loss to the extent that it exceeds the balance, if any, held in the property revaluation reserve relating to a previous revaluation of that asset.
Depreciation on revalued buildings is charged to profit or loss. On the subsequent disposal or retirement of a revalued property, the attributable revaluation surplus remaining in the property revaluation reserve is transferred directly to the retained earnings.
Properties in the course of construction are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Freehold land and capital work in progress are not depreciated.
It is the Group’s policy to maintain its buildings in a continued state of sound repair, such that their value is not significantly diminished by the passage of time or usage. Accordingly, in estimating the residual values, the Group has assessed the value of the building at the end of their useful life based on today’s rate and this exercise is done by an independent qualified valuer. Therefore, buildings are depreciated on a straight-line basis to their estimated residual values over their estimated useful lives.
Leasehold land improvements are depreciated over the shorter of their useful life and the lease period. On other property, plant and equipment, depreciation is calculated on a straight-line basis to write off their depreciable amounts (cost less residual value) over their estimated useful lives.
| Rate per annum | |
| Buildings | 2% to 10% |
| Buildings on leasehold land | 2% to 12.5% |
| Plant, equipment and machinery | 4% to 20% |
| Motor vehicles and boats | 10% to 35% |
| Furniture, fittings and equipment | 5% to 50% |
| Farming buildings and equipment | 2.5% to 10% |
| Office, computer and other equipment | 10% to 33% |
The gain or loss arising on the disposal or retirement of an item (or part of an item) of property, plant and equipment is determined as the difference between the disposal proceeds and the carrying amount of the item (or part of the item, as applicable) and is recognised in profit or loss.
Work in progress is valued at the cost of the project. Costs include an appropriate portion of fixed and variable overhead expenses.
The Group carries its land and buildings at fair value. The revaluation surplus net of applicable deferred income taxes was credited to other comprehensive income and shown in 'revaluation surplus' in the statement of changes in equity.
Details of the Group's land and buildings measured at fair value and information about the fair value hierarchy as at 30 June 2022 are as follows:
The Group's main land and buildings were last revalued on 30 June 2022.
If the land and buildings were stated on the historical cost basis, the amount would be MUR 11.4Bn (2021: MUR 11.4Bn).
(a) The Group's policy is to revalue its freehold land and buildings at least every three years and the preceding revaluation was conducted on 30 June 2021. In the aftermath of COVID-19, a revaluation exercise was carried out as at 30 June 2022 to determine if there have been any significant changes to the fair values of the property, plant and equipment. The Chartered Valuers, Elevante Property Services Ltd revalued the freehold land and buildings and revaluation adjustment was accounted for those properties where there is no indication of impairment of the cash generating units.
Freehold land was valued taking into consideration comparable sales evidences. Sales prices of comparable land in close proximity were adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square metre. The basis of valuation in estimating the market value has been undertaken in accordance with the principles set out by the International Valuation Standards Committee as per the International Valuation Application 1 (IVA 1) which deals with Valuation for Financial Reporting and which is to be used in the context of International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board (IASB).
The buildings, structures and site improvement have been valued on a depreciated replacement cost basis taking into consideration their replacement cost, with adjustments being made for age and condition. This method of valuation is based on the theory of substitution and is used in situations where it is difficult to estimate inputs to be used to calculate value due to volatile market factors. The most significant input into this method of valuation is the replacement cost per square metre.
(b) Management assessed the recoverable amount of assets for which indicators of impairment exists as at 30 June 2022.
(c) Hierarchy level
Details of the Group's freehold land and buildings and site improvements and information about the fair value hierarchy are as follows:
| Level 1 MUR '000 |
Level 2 MUR '000 |
Level 3 MUR '000 |
|
|---|---|---|---|
| 2022 | |||
| Freehold Land | - | 3,496,183 | - |
| Buildings and improvement to leasehold land | - | - | 12,091,279 |
| Site improvements | - | - | 597,332 |
| Balance as at 30 June 2022 | - | 3,496,183 | 12,688,611 |
There were no transfers from one level to another during the year.
(d) Bank borrowings are secured on fixed and floating charges on property, plant and equipment of the Group and the Company.
The following summarises the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurements:
| Valuation technique and key inputs |
Sensitivity used | Effect on fair value Increase/(decrease) |
||
|---|---|---|---|---|
| 2022 MUR '000 |
2021 MUR '000 |
|||
| Buildings and improvement to leasehold land | Depreciated replacement cost approach | 1% increase in current cost of replacing property | 120,913 | 105,778 |
| 1% decrease in current cost of replacing property | (120,913) | (105,778) | ||
| Site improvements | Depreciated replacement cost approach | 1% increase in current cost of replacing property | 5,973 | 5,912 |
| 1% decrease in current cost of replacing property | (5,973) | (5,912) | ||
(a) The freehold land of Ferney Limited (“FL”) relates to hunting ground, sugar cane fields, land surrounding the factory and fallow land as well as land earmarked for the Ferney Integrated Development Project under a Smart City Scheme developed through Ferney Development Limited (“FDL”). These lands were valued by CDDS Land Surveyors and Property Valuer, an independent and professionally qualified valuer, as at 30 June 2022. The valuation of land was derived using the residual approach and sales comparison approach by reference to land transactions in the vicinity and the buildings using the depreciated replacement cost.
(b) Ferney Integrated Development Project: On 17 November 2020, the Economic Development Board issued a letter of intent to FDL pursuant to Regulation 9(3) of the SCS Regulations. The letter of intent is issued on the basis that FDL will develop a Smart City Project based on five pillars - Sustainability, Agri-Hub, Nature and Science Economy, Eco-Tourism, of an extent of 500 Hectares under the Smart City Scheme (the “Scheme”).
(c) The land (the “earmarked land”) that has been earmarked for the purposes of carrying out the smart city development is currently owned by FL: the extent of the earmarked land is 500 Hectares so that a change in the ownership of the earmarked land from FL to FDL is required to enable FDL to develop the earmarked land in accordance with the Investment Promotion (Smart City Scheme) Regulations 2015. The earmarked land was previously valued at MUR0.6M per acre and the objective is to revalue the land based on the Smart City project. In May 2022, FDL obtained its Smart City Certificate.
(d) Basis of valuation of the earmarked land: The residual method of valuation is to estimate the possible revenue of the developable land and assuming all Smart City permits are granted net of all the costs of developing the entire Smart City, mostly being the cost of construction of the buildings and services, to end up with a value of bare developable land.
(e) In June 2021, the earmarked land had been valued at MUR 195M giving rise to a fair value increase of MUR 115M which was credited to revaluation reserves in shareholders' equity. This represented an average estimated price per acre is MUR 1.5M. There has been no further increase/decrease in the valuation of land in the year ended 30 June 2022 following the desktop review done in 2022.
(f) In May 2022, a transfer of MUR 301M has been made from FL to FDL against an additional issue of shares.
(g) The land is classified as level 3 on the fair value hierarchy.
| Significant valuation input: | Fair value MUR |
Range MUR |
|---|---|---|
| Price per hectare – earmarked land | - | 8,292 – 2,200,000 |
| Price per hectare - remaining land | 1,222,130 | 474 – 14,215 |
| Fair Value at | Range of Inputs | |||||
|---|---|---|---|---|---|---|
| Description | 2022 MUR '000 |
2021 MUR '000 |
Unobservable inputs | 2022 % |
2021 % |
Relationship of unobservable inputs to fair value |
| Earmarked land | - | 194,780 | Capitalisation rate | 1% - 9% | 1% - 9% | The higher the capitalisation rate and expected vacancy rate, the lower the fair value |
| Expected vacancy rate | 0% - 7.5% | 0% - 7.5% | ||||
| Other Land | 1,222,130 | 1,106,800 | Years purchase | 3% - 5% | 3% - 5% | The higher the capitalisation rate an |
| Expected vacancy rate | 5% | 5% | ||||
| Discount rate | 5% | 5% | The higher the discount rate and terminal yield, the lower the fair value | |||
| Terminal yield | 3% - 5% | 3% - 5% | ||||
| Rental growth rate | 6.70% | 6.70% | The higher the rental growth rate and terminal yield, the higher the fair value | |||
At 30 June 2022, an independent valuation was performed by an independent qualified valuer, Cabinet Razafindratandra for land and buildings located at the headquarters in Madagascar. The properties were valued at MUR 999M (2021: MUR 854M). The external valuations have been performed using sales comparison approach and depreciated replacement cost basis.
(a) Valuation inputs and relationships to fair value
| Valuation model | Replacement Cost |
|---|---|
| Unobservable inputs | Obsolescence Rate/ Unobservable sale price per square meter |
| Range of inputs | 4.28 % to 31.24% (2021: 6.02% - 53.22%) |
(b) Sensitivity analysis
A 5% increase or decrease in the obsolescence rate would lead to a decrease/increase of MUR 35.2M (2021: MUR 27.1M) in the fair value of land and building.
The revalued land and buildings consist of office and clinic premises. Management determined that these constitute one class of assets under IFRS 13, based on the nature, characteristics and risks of the property.
The C-Care Group's land and building are stated at their revalued amounts. The land and building were valued in June 2022. The valuation was performed by an independent valuer CDDS Valuation and Land Survey, Certified Practising Valuer, who has the appropriate qualification and experience in the fair value measurement of properties in the relevant location. Valuation is performed by the valuer using on-market comparable method for Land & Cost approach for building.
The land is classified as level 2 for C-Care and level 3 for International Medical Group and buildings are classified as level 3 on the fair value hierarchy.
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis at 30 June 2022 and 2021 are shown below:
The main inputs used in the valuation approach ranged as follows:
| Description | Fair value at June 30 | Valuation technique | Unobservable inputs | Unobservable inputs | Range of Unobservable inputs (Probability - weighted average) | Relationship of Unobservable inputs to fair value |
|---|---|---|---|---|---|---|
| 2022 MUR '000 |
2021 MUR '000 |
|||||
| Land | 154,720 | 178,170 | On market comparable | Price per Square metre | MUR 4,250-MUR 5,000 per square metre | The higher the price per square metre, the higher the fair value |
| Building | 742,382 | 654,809 | Replacement less depreciation | Price per Square metre | MUR 3,000-MUR 28,500 per square metre | The higher the price per square metre, the higher the fair value |
| 897,102 | 832,979 |
The Textile Segment engages external, independent and qualified valuers to determine the fair value of the Segment's land and buildings on a regular basis. The latest valuation was performed during the year ended June 30, 2020 and the fair value of the land and buildings have been determined by CDDS Land Surveyors and Property Valuer; Ratsimbazafy Ihanta Evelyne; Kumar & Associates, S. Pichaiya & associates and Jorip O Paridarshan Company Limited for land and buildings held in Mauritius, Madagascar, India and Bangladesh respectively.
The external valuations of level 3 land and buildings were performed using:
(i) a sales comparison approach, and
(ii) replacement cost less depreciation approach.
Given that there were limited or no similar sites in the vicinity in which the land and buildings of the Segment were located, the external valuers determined the inputs based on the size, age and condition of the land and buildings, the state of the local economy and comparable prices where relevant.
Information about fair value measurements using significant unobservable inputs (Level 3)
| Description | 2022 MUR’000 | 2021 MUR’000 | Valuation Technique | Unobservable inputs | Range of Unobservable inputs (Probability - weighted average) | Relationship of Unobservable inputs to fair value |
|---|---|---|---|---|---|---|
| Manufacturing sites – Mauritius | 1,125,156 | 1,103,107 | Sales comparison and replacement cost less depreciation approach | Price per square metre | MUR 1,186-MUR 1,895/square metre (land) and MUR 450- MUR 128,000/ square metre (buildings | The higher the price per square metre, the higher the fair value |
| Manufacturing sites – Madagascar | 634,997 | 606,911 | Sales comparison and replacement cost less depreciation approach | Price per Square metre | MGA 45,000 - MGA 1,065,000/ square metre (land) and MGA 30,090 - MGA 1,102,200 (buildings | The higher the price per square metre, the higher the fair value |
| Manufacturing sites – Asia | 811,354 | 802,667 | Sales comparison and replacement cost less depreciation approach | 1 bigha equivalent to 33 decimals and square feet for land and square feet for building | Tk. 1742424 / decimal for the land and Tk.850-Tk.1,450 per sq.ft for the building. INR.12,500,000/acre for land and INR.1,800 per sq.ft for the building. INR 3,250,000/acre for land and INR.432- INR.19,250 per sqm for the building | The higher the price per bigha/ square feet, the higher the fair value |
| 2,571,507 | 2,512,685 |
There were no transfers between Levels 1, 2 and 3 during the year.
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