Lanka Walltiles PLC

Transcription

Lanka Walltiles PLC

Lanka Walltiles PLC Annual Report 2014/15
Multiplying Value
Lanka Walltiles PLC
Lanka Walltiles PLC
215, Nawala Road, Narahenpita, Colombo 05 Sri Lanka
www.lankatiles.com
Annual Report 2014/15
Corporate Information
NAME OF THE COMPANY
FACTORY
Lanka Walltiles PLC
Meepe, Padukka
LEGAL FORM
Lanka Walltiles PLC is a public limited liability company which was
incorporated under the Companies Ordinance No.51 of 1938 as a
public company on 24th day of September 1975. Pursuant to the
requirements of the new Companies Act No. 7 of 2007, the Company
was re-registered on 24th July 2007 and bears registration number PQ
55. Telephone : + 94 - 11 - 4309809
Facsimile : + 94 - 11 - 2859168
E-mail
: meepe_fac@lankawalltile.lk
PARENT COMPANY
Lanka Ceramic PLC
No. 20, R A De Mel Mawatha
Colombo 03
DIRECTORS
Telephone : + 94 - 11 - 4336644
Mr. W D N H Perera (Chairman)
Facsimile : + 94 - 11 - 4412518
Mr. J A P M Jayasekera (Managing Director)
Mr. T de Zoysa
Dr. S Selliah Mr. T G Thoradeniya Mr. K D G Gunaratne
Ms. A M L Page
Mr. M W R N Somaratne
REGISTERED OFFICE
215, Nawala Road, Narahenpita, Colombo 05
Telephone : + 94 -11 - 4526700
Facsimile : + 94 -11 - 2805463
E-mail
: info@lankatiles.com
Website : www.lankatiles.com
SECRETARIES
P W Corporate Secretarial (Pvt) Ltd
No. 3/17, Kynsey Road
Colombo 08
Telephone : + 94 - 11 - 4640360-3
Facsimile : + 94 - 11 - 4740588
E-mail
: pwcs@pwcs.lk
BANKERS
Commercial Bank of Ceylon PLC
Hatton National Bank PLC
Bank of Ceylon
HSBC Bank
People’s Bank
DFCC Bank PLC
AUDITORS
Ernst & Young Chartered Accountants
201, De Saram Place
Colombo 10
Contents
Performance Highlights Corporate Philosophy
Chairman’s Statement
Managing Director’s Review
The Board of Directors
Senior Management
Management Discussion & Analysis
Corporate Governance
Risk Management
Sustainability Report
Remuneration Committee Report
Audit Committee Report
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3
6
10
14
17
18
26
33
37
44
45
Annual Report of The Board of Directors
on The Affairs of The Company
Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement
Statement of Directors Responsibilities
Independent Auditor’s Report
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Statements
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Designed & produced by
Digital Plates & Printing by
Softwave Printing and Publishing (Pvt) Ltd
Multiplying Value
We believe that our business targets must
keep growing and evolving to exceed stakeholder expectations each year. Living up to
the challenge of constantly adding to and
multiplying our corporate value and thereby our long-term sustainability is how we
ensure that our base is steady, our progress
strong.
Today as we continue in our mission to
manufacture cost effective products of
exceptional quality, we are proud to record
that the year under review has been a very
successful one, bringing quantifiable growth
and multiplying value to the many stakeholders who place their trust in us.
Lanka Walltiles PLC
Multiplying Value
Introduction . Operational . Governance . Financial
Performance Highlights
Total Comprehensive
Income
91%
Group total comprehensive income
attributable to equity holders
increased to Rs. 1.1Bn. , up 91%
from the Rs. 0.58 Bn. recorded in
the preceding year.
Earnings per share
Revenue growth
19.12 9%
Group Earning Per Share up by
72% compared to preceding year.
Group revenue for the year under
review increased to Rs.14.6 Bn., up
9% from the Rs.13.4 Bn. recorded
in the preceding year.
Key performance Indicators
20152014
Revenue
Rs. Mn
14,596 13,419
Profit for the year
Rs. Mn
1,451 920
Profit attributable to equity holders
Rs. Mn
1,044 605
Total comprehensive income
Rs. Mn
1,604 861
Total comprehensive income attributable to equity holders
Rs. Mn
1,108 581
Net assets
Net assets per share
Earnings per share
Interest cover
Closing share price
Price earning ratio
Rs. Mn
Rs.
Rs.
Times
Rs.
Times
Group turnover grew by 9% to reach Rs. 14.6 Bn for
the year under review, up from Rs. 13.4 Bn in the
previous year... post-tax profits grew from Rs. 0.92 Bn
in the previous year to Rs. 1.45 Bn in the current year,
registering a healthy YoY increase of 58%.
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Lanka Walltiles PLC . Annual Report 2015
6,497 119.00 19.12 6.50 95.80 5.0 5,742
105.17
11.09
2.96
61.50
5.5
Multiplying Value
Corporate philosophy
Vision
To be a leading producer of wall and floor coverings
and related products for local and international
markets
Mission
The production and marketing of exceptional quality
products and optimum affordability
Who we are
Lanka Walltiles PLC has been producing and exporting high quality
ceramic tiles for over thirty five years. The market leader and premier
ceramic wall tile manufacturer in Sri Lanka, LANKA WALLTILES PLC
is a major contender in the highly competitive international arena,
supplying quality tiles to discerning markets. Our product quality
and designs are second to none. We have the capacity to produce
approximately 2.7 million square meters of tiles annually. Sri Lanka
is a beautiful and diverse country that has an abundance of raw
materials for the production of our tiles.
We are strongly committed to investment in Research & Development
in order that our tiles continue to meet the exacting manufacturing
standards of the international marketplace. We are equally committed
to the well being of the environment and have many policies in place
to help the company be on the cutting edge of green tile production.
Our tiles conform to ISO 13006.
A wide range of tiles in a variety of colors, textures and sizes
including special trim tiles and decorated tiles are manufactured by
the company today.
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Multiplying Value
OPERATIONAL
Multiplying Value
Performance Highlights
Chairman's Statement
2
6
Managing Director's Review 10
Management Discussion & Analysis 18
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How we are
multiplying
our corporate
value...
Chairman’s statement
Dear Shareholder,
As I present to you the annual report and financial statements of your
company for the year ended 31st March 2015, I take great pride in
noting how well we have aligned our strategic priorities to achieve our
goals. Underpinned by our sound strategies, we have created a stable
business platform to able to support consistent value creation for all
stakeholders of the company.
Macro-economic Overview
In 2014, a significant turnaround was observed following improved
economic data from advanced economies, setting the pace for a firm
recovery of global economic conditions. Key emerging economies
however responded with a lower-than-expected economic activity for
the second consecutive year, once again contributing less to global
growth in 2014.
Outperforming many regional peers, the performance of Sri Lanka’s
economy however continued at a moderate pace as seen in the past
three years, tabling a 7.4% GDP growth for 2014.
With all sectors demonstrating sizable improvements,
group turnover grew by 9% to reach Rs. 14.59 Bn for
the year under review, up from Rs. 13.42 Bn in the
previous year.
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Multiplying Value
Group Performance
The current economic growth model admittedly proved to be a strong
foundation that bolstered market sentiments and helped boost the
overall performance of the Lanka Walltiles PLC group. With all sectors
demonstrating sizable improvements, group turnover grew by 9% to
reach Rs. 14.6 Bn for the year under review, up from Rs. 13.4 Bn in the
previous year. Moreover with all group companies making a strong
contribution to the bottom line, post-tax profits grew from Rs. 0.92
Bn in the previous year to Rs. 1.45 Bn in the current year, registering
a healthy YoY increase of 58%,. In particular, I wish to recognise the
commendable performance tabled by Swisstek Group of companies,
which demonstrates the potent prospects for the group in the coming
years.
The core business, Lanka Walltiles PLC (LWPLC) also grew steadily during
the year to record a commendable 19% YoY growth in the topline from
Rs. 2.6 Bn in the previous year to Rs. 3.1 Bn for the current financial
year. The company’s PAT increased to Rs. 517 Mn from Rs. 194 Mn in
the last year, a substantial YoY increase of 166%.
Fixed Assets
Always conscious of the importance of reinvesting for the future,
LWPLC invested Rs. 106 Mn towards upgrading existing technology
and streamlining procedures that will help convey greater efficiencies
at all levels of the business. I believe these investments would deliver
considerable benefits to augment the existing portfolio of offerings and
enrich the company’s value proposition in the coming years.
14.6 Bn 2.1Bn
Group Turnover
a growth of 9% over last year
Group Operating
Income
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Chairman’s statement
Appropriations
An interim dividend of Rs. 2.00 per share was made to shareholders of
the company in November 2014, followed by a further interim dividend
of Rs. 2.00 was paid out in April 2015. Therefore the total dividend paid
for the year is Rs. 4.00 per share. Compared to the previous year payout
of Rs. 2.50 per share demonstrating the strong profitability and cash
flow of the Company.
14.6 Bn
Corporate Sustainability
At LWPLC corporate sustainability is not merely a buzz word, but a
very real concept that is a big part of our core principles and applies to
all aspects of the business model. We measure sustainability through
the eyes of our stakeholders and make sure that our products and the
processes we use to derive these products are financially, socially and
environmentally sustainable so as to create a positive impact on the
triple bottom line. It is this commitment that resonates in our actions
and determines how we manage our day-to-day operations in an
ethical and socially responsible manner.
Responsible Stewardship
The Board of Directors of your company remains the apex body
responsible for proper governance mechanisms and an appropriate
code of conduct that outlines the day-to-day functions of the company.
To secure the interest of all stakeholders, the company engages in
transparent reporting practices and conforms to the guidelines laid
out under the Code of Best Practice on Corporate Governance jointly
issued by The Institute of Chartered Accountants of Sri Lanka, The
Securities and Exchange Commission of Sri Lanka and The Colombo
Stock Exchange.
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Group Turnover
2.1Bn
Group Operating
Income
Future Outlook
I believe that Sri Lanka’s transition towards greater economic stability
would certainly herald an era of nascent growth for all key sectors of
the economy. While the prospects in the domestic construction sector
remain strongly appended to this growth trajectory, the possibilities
for your company in the coming years appear to be robust. On the
downside however, as the range of opportunities expand, competition
is also likely to intensify as more players enter the market in the years
ahead. In counteracting these challenges, I am confident that our best
strategy would be to leverage on group synergies that strengthen our
core competencies. The ensuing benefits would undoubtedly improve
the versatility of our operations and offer us a definite competitive
advantage, allowing us to fully exploit the diversity of the market in the
future.
Acknowledgements
I would like to extend my sincere thanks to the Board of Directors
for their keen interest and eager participation in all board matters.
I also wish to take this opportunity to thank the Managing Director,
the senior management and the entire staff of Lanka Walltiles PLC
for the dedication and commitment with they have worked to deliver
consistent results for all stakeholders of the company. A special thank
you also to our valued customers, bankers, distributors, dealers and
other business partners for their continued support. Finally, I wish to
thank all our Shareholders for the trust and confidence placed in the
company. I look forward to your continued support in the years ahead.
W D N H Perera
Chairman
29th May 2015
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How we are
multiplying
our corporate
value...
Macro-economic Review
Global growth for the year 2014 registered a slight improvement,
indicating a possible end to the economic slump of the past three years.
There appeared to be renewed interest in economic activity across
many advanced economies amidst positive market sentiments led by
growing financial stability in the US. However, the Russian Rouble crisis,
the deteriorating crude oil prices and the escalating political tensions
in the middle-east, have all contributed to increase the downside risks
renewing fears of the global economy sliding back into recession any
time in 2015.
Most emerging economies had to contend with a tough year as real
growth eluded many leading nations including India and China. Sri
Lanka’s economy was seen easing into a more temperate growth
model resulting in a modest GDP growth of 7.4% for the year, with no
significant contributions from any key sectors of the economy.
I am happy to note that they have also been able to
deliver tangible results for the company, leading to
a 20% YoY increase in volumes for the period under
review. The growth in volumes also translated well for
the company’s top line, with the turnover growing by
19% YoY from Rs. 2.6 Bn in the previous year to reach
Rs. 3.1 Bn for the year ended 31st March 2015.
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Multiplying Value
Group Performance
Amidst this backdrop, the Lanka Walltiles PLC (LWPLC) group tabled a
very healthy performance for the year ended 31st March 2015. Group
turnover stood at Rs. 14.6 Bn, a YoY increase of 9%, compared to Rs.
13.4 Bn in 2014, while the post-tax profits also grew by 58% from Rs.
920 Mn in the previous year to Rs. 1.4 Bn for the current financial year.
The group results comprise of LWPLC and its subsidiary holdings in the
Tile and associated products manufacturing, Aluminium, Plantation
and Packaging sectors. The Tile and associated products manufacturing
sector consists of LWPLC its subsidiaries, Lanka Tiles PLC and Swisstek
(Ceylon) PLC (SCPLC). The Aluminium sector represented by Swisstek
Aluminium Ltd (SAL), a subsidiary of SCPLC. The Plantation sector is
represented by Vallibel Plantation Management Ltd (VPL) along with
its subsidiary holdings in Horana Plantations PLC (HPPLC) and Unidil
Packaging Ltd (UPL). UPL on its own denotes the group interests in the
packaging sector.
During the year under review, all sectors performed commendably well
as indicated by the results as for the financial year ended 31st March
2015.
F/Y
Turnover
(Rs. Mn)
Post-tax
Profits
(Rs. Mn)
To offset the competition we
continued to produce a range of
new design concepts and widen
the range of sizes on offer so as
to cater to a broader spectrum of
customer needs.
Business Report
Having summarised the group performance, I now refer to the
performance of the company, in this case LWPLC’s core business: the
manufacture and sale of wall tiles, where business prospects are aligned
with the country’s domestic housing and construction sector. Following
a slow start to the year, the construction sector was able to record
approximately 13% growth for the year. From an industry perspective,
the highly competitive operating environment remained a key challenge
for LWPLC. In particular, the competition from imported tiles continued
to be a major worry that threatens to undermine the company’s market
share, which is about 56% at present.
Tile and Associated Products Manufacturing Sector
Aluminium
Sector
Plantation
Sector
Packaging
Sector
Consolidated
LWPLC
LTPLC
SCPLC
CONSOLIDATED
2015
3,078
5,349
339
8,522
1,527
2,164
2,382
14,596
2014
2,599
5,109
320
7,765
1,181
2,258
2,216
13,420
2015
517
730
92
1,307
157
55
173
1,451
2014
194
652
50
804
70
124
88
920
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To offset the competition we continued to produce a range of new
design concepts and widen the range of sizes on offer so as to cater to
a broader spectrum of customer needs. Once again, we invested heavily
to enhance our digital printing capabilities. Addressing the strong
demand for the larger tile format, particularly in urban areas, we also
took steps to gear ourselves to respond accordingly.
On the supply side, it appears that the lobbying efforts of the Ceramics
Council have led to the imposition of stricter controls, signalling an end
to illegal mining of ball clay and feldspar deposits across the country.
This means we now have access to a sustainable supply of raw material
at fair market price, which provides a level playing field for all in the tile
cluster.
Moreover to overcome currently held misconceptions regarding the use
of wall tiles, we also initiated a highly focused marketing campaign to
stimulate the mainstream demand for wall tiles in other regions of the
country. Our aim was to promote ‘LANKATILES’ as a brand synonymous
with high quality, locally manufactured wall tiles. As part of the efforts,
we launched an aggressive media campaign to boost the brand image.
From a cost perspective, energy accounts for over 40% of our cost of
production and the high cost involved continues to be a grave concern,
given the dependence on LP gas and Kerosene oil as the primary
source of power for the energy intensive manufacturing operation.
Encouragingly however, the sharp decline in world oil prices in the latter
half of the year, offered some relief that lowered the cost of production
and edged up the gross profit margin to 30% compared to the 25%
recorded in the year before.
In addition to developing our existing delivery channels, we introduced
a range of alternative distribution channels to help penetrate new
markets across the country. Among them was the launch of the
‘Lankatiles Tilers Club’, a ground-breaking move that partners with the
island-wide Tiler communities to promote our offerings to the mass
market. In yet another innovative step, we introduced the ‘Lankatile
Plus’ sales outlet concept, a partnership that offers small businesses
the opportunity to become registered sales agents for our brand. These
initiatives were well received and appear to have had a positive impact
on customer sentiments.
I am happy to note that they have also been able to deliver tangible
results for the company, leading to a 20% YoY increase in volumes for
the period under review. The growth in volumes also translated well for
the company’s top line, with the turnover growing by 19% YoY from Rs.
2.6 Bn in the previous year to reach Rs. 3.1 Bn for the year ended 31st
March 2015.
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A culmination of these factors provided the impetus for strong bottom
line growth from Rs. 194 Mn in the previous year to Rs. 517 Mn for the
current year, a YoY increase of 166%
While business indicators confirm the strength of the company’s
presence in the local market, the year saw a great deal of emphasis
on developing export markets as well. Having already entered regional
markets in India and the Maldives, the focus for the year was to tap into
the North American and European markets vis-à-vis specific marketing
forums held in the USA and Germany.
Multiplying Value
Developing Support Services
Aside from our pursuit of financial success, as a dynamic organisation
at the forefront of Sri Lanka’s corporate sector, we are fully aware
that the key to maintaining our competitive edge lies in continuously
strengthening all our core competencies.
I believe, remaining competitive depends largely on the skills and
competencies of the workforce and their ability to face the challenges
in the modern commercial landscape. Human resource development
is thus a key priority for the company. As part of our efforts, we have
created a safe, progressive work environment that will ensure our
employees thrive and grow both personally and professionally. Training
and development is another key aspect that we continue to invest
in, to nurture a future ready-workforce who would drive corporate
aspirations in the years ahead.
Alongside the focus on human capital development, we also proactively engaged in fine tuning our information technology systems so
as to improve efficiencies at multiple levels of the business.
Share Performance
Characterized by healthy trading volumes, the company’s shares
performed progressively well during the year. While the lowest traded
price per share of Rs. 57/- was in April 2014, the share reached Rs.
105/-, the highest traded price in November 2014. As at 31st March
2015, the trading price stood at Rs. 95/- per share.
This opens up opportunities for the company to present new designs,
textures and format sizes to highlight the functionality of wall tiles in
deference to floor tiles. The key to harnessing this potential will depend
on the versatility of our product range and how well it is articulated to
the potential customers. We would thus need to develop a marketing
strategy that would go hand in hand with our brand building efforts to
promote our brand to the mass market in the coming years.
I am confident, the synergies derived from the group would ideally
support the level of diversity we seek and give us an edge over our
competitors to truly position ourselves as the market leader in Sri
Lanka’s wall tile space.
Acknowledgements
I wish to extend my sincere thanks to all employees of LWPLC for their
loyalty towards the company and the dedication with which they have
delivered corporate success. I would also like to thank the Chairman and
my colleagues on the Board for the unstinted support extended to me
during the year.
I take this opportunity to thank all our customers, dealers, distributors,
bankers, suppliers and other stakeholders for their loyal and continued
support.
In conclusion I wish to thank the shareholders of the company for the
confidence placed in the company. I seek your valued patronage in the
years ahead as well.
Future Outlook
The company’s product range remains in the most vulnerable segment
of the tile industry, given the perceived notion that wall tiles are a
luxury item, which has prompted customers to habitually opt for floor
tiles as a replacement for wall tiles. Altering this practise has proved
to be a considerable challenge that demands a complete change in
the customer mind-set vis-a-vis a new value proposition for the
mainstream wall tile market.
J A P M Jayasekera
Managing Director
29th May 2015
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6
1. Mr. Nimal Perera - Chairman
2. Mr. J A P M Jayasekera - Managing Director
On the Board of Lanka Walltiles PLC since 2013, Mr. Nimal Perera also
serves on boards of Pan Asia Banking Corporation PLC, Lanka Ceramic
PLC, Lanka Tiles PLC, Horana Plantations PLC, Swisstek (Ceylon) PLC, N
P Capital Limited and N Capital (Pvt) Ltd as the Chairman, Vallibel One
PLC as the Deputy Chairman, Royal Ceramic Lanka PLC as the Managing
Director, LB Finance PLC as an Executive Director, Vallibel Power Erathna
PLC and The Fortress Resorts PLC as an Alternate Director.
Mr. Mahendra Jayasekera joined Lanka Walltiles PLC in June 1998 as a
Director. He was appointed as the Managing Director in April 2008 and
continues to hold the same position at present.
He also holds directorships in Hayleys PLC, Kingsbury PLC, Haycarb PLC,
Talawakelle Tea Estates PLC and Amaya Leisure PLC.
He is a renowned business magnate, stock trader and shareholder of
many companies in the country.
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He is the Managing Director of Lanka Tiles PLC, Swisstek (Ceylon)
PLC. He is also a Director of Industrial Technology Institute (ITI), HNB
Assurance PLC and is the Chairman of Centre for Technical Excellence in
Ceramics (CENTEC).
Mr. Jayasekera holds a BSc Special (Hons) degree in Business
Administration from University of Sri Jayawardenapura and is a Fellow
Member of the Institute of Chartered Accountants of Sri Lanka.
Multiplying Value
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4
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3. Mr. T de Zoysa - Director
A well-known figure in the Sri Lankan business community, Mr. Tilak
de Zoysa, FCMI (UK) FPRI (SL), Honorary Consul for Croatia and Global
Ambassador for HelpAge International was conferred the title of
“Deshabandu” by His Excellency the President of Sri Lanka in recognition
of his services to the country and was the recipient of “The Order of the
Rising Sun. Gold Rays with Neck Ribbon” conferred by His Majesty the
Emperor of Japan.
In addition to being the Chairman of the Supervisory Board and Advisor
to the Al-Futtaim Group of Companies in Sri Lanka, he chairs Carsons
Cumberbatch PLC, Associated CEAT (Pvt) Ltd., Amaya Hotels and Resorts
USA (Radisson), AMW Capital Leasing and Finance PLC, Jetwing Zinc
Journey Lanka (Pvt) Ltd and HelpAge Sri Lanka.
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He is also the Vice Chairman of Ceat Kelani Holdings (Pvt) Ltd., Orient
Insurance Ltd. and serves on the boards of several listed and private
companies which include John Keells PLC, Taj Lanka Hotels PLC, TAL
Hotels and Resorts Ltd, Lanka Walltiles PLC, Nawaloka Hospitals PLC,
Dutch Lanka Trailer Manufacturers (Tata Group), Associated Electrical
Corporation Ltd., Inoac Polymer Lanka (Pvt) Ltd., Cinnovation INC., GVR
Lanka (Pvt) Ltd and Varun Beverages Lanka (Pvt) Ltd (Pepsi).
Mr. Tilak de Zoysa is a past Chairman of the Ceylon Chamber of
Commerce, the National Chamber of Commerce of Sri Lanka, HelpAge
International (UK) and served as Member of the Monetary Board of Sri
Lanka (2003-2009).
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4. Dr. S Selliah - Director
7. Ms. A M L Page - Director
Dr. Sivakumar Selliah joined the Board of Lanka Walltiles PLC in 2003.
Dr. Selliah holds an MBBS degree and a Master’s Degree (M.Phil). He
has over 23 years of experience in diverse fields.
Ms. Anjalie Page holds a BSc (Hons) Psychology (First Class) from the
University of Nottingham, United Kingdom and a MSc in Economics,
Finance and Management (Distinction) from the University of Bristol,
United Kingdom.
He is currently the Deputy Chairman of Asiri Hospitals Holdings PLC,
Deputy Chairman of Asiri Surgical Hospital PLC and Central Hospital
Private Ltd. Dr. Selliah is also the Chairman of Cleanco Lanka Pvt Ltd
and JAT Holdings Pvt Ltd.
Ms. Page has been employed at several institutions and lastly served at
Ernst & Young LLP, UK – (Advisory, Financial Services).
Ms. Page is currently working at Habitat for Humanity Sri Lanka.
He is a Director of Lanka Tiles PLC, Horana Plantation PLC, Softlogic
Holdings PLC, Lanka Ceramic PLC, HNB Assurance PLC and ODEL PLC.
Dr. Selliah serves on the Remuneration Committee and Audit Committee
of some of the companies listed above.
5. Mr. T G Thoradeniya - Director
Mr. Tharana Thoradeniya has over two decades of senior management
experience in multi- industry scenarios. He sits on the Boards of several
public quoted and privately held companies in Sri Lanka, including Pan
Asia Banking Corporation PLC, Lanka Walltiles PLC, Lanka Tiles PLC,
Lanka Ceramic PLC, Hayleys Fibre PLC, Delmege Ltd., Unidil Packaging
Ltd., Vallibel Plantation Management Ltd., Dipped Products (Thailand)
Ltd., and several others. He is a Group Director of Royal Ceramics
Lanka PLC and CEO/Director of Rocell Bathware Ltd. Tharana has been
credited as a proven business innovator across industries. A marketer by
profession, Tharana was in the pioneering batch of Chartered Marketers
of the Chartered Institute Marketing (UK).
6. Mr. K D G Gunaratne - Director
Mr. Gamini Gunaratne studied at St. Thomas’ College Mt. Lavinia and
was a member of the Western Province Council during the period 1989
to 2009.
He currently holds the position of Chairman Lanka Hotels & Residences
(Pvt) Ltd.
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8. Mr. M W R N Somaratne - Director
Mr. Nandajith Somaratne currently serves as a Director of Hayleys MGT
Knitting Mills PLC, a subsidiary of Hayleys PLC; Royal Porcelain (Pvt) Ltd
and Ever Paint & Chemical Industries (Pvt) Ltd, fully owned subsidiaries
of Royal Ceramics Lanka PLC. He is currently working as the General
Manager (Manufacturing) for Royal Ceramics Group which includes
Lanka Walltiles PLC and Lanka Tiles PLC.
He has served in Ansell Lanka (Pvt) Ltd and in Central Engineering
Consultancy Bureau (CECB) before joining Royal Ceramics Lanka PLC in
1993. Mr. Nandajith Somaratne counts more than 22 years experience
in the Ceramic industry and manufacturing field.
He holds a MBA from the University of Colombo, Post Graduate
Diploma in Industrial Engineering from NIBM and BSc. degree (Physical
Science) from the University of Peradeniya.
Multiplying Value
Senior Management
Mr. Mahendra Jayasekera
Mr. Nandajith Somaratne
Mr. Shirley Mahendra
Managing Director
Group General Manager Manufacturing
Head of Marketing
Mr. Tyrell Roche
Mr. Nihal Kumarasinghe
Mr. Upul Weerasinghe
Head of Finance
Factory Manager
Ms. Nathalie Kehrli
Mr. Prasad Keerthiratna
Head of Design
Group IT Manager
Group Engineering Manager
17
How we are multiplying our
corporate value...
Overview of the local Tile industry
The country’s recent growth spurt has bolstered the tourism industry, where the robust
tourist arrivals continue to drive more and
more refurbishments and expansions in the
hotel industry, signalling encouraging years.
18
The Sri Lankan tile manufacturing industry is dominated by a few key
players focusing primarily on servicing the domestic market for tiles.
As the demand for tiles remain strongly linked to the prospects of the
domestic construction and housing sector, the recent upsurge in the
demand for tiles is deemed to be a direct result of the construction
boom taking place within the country. This has also led to a rapid
increase in size of the market, allowing incumbent firms to double their
sales volumes within the last 15 years. Moreover, the country’s recent
growth spurt has also bolstered the tourism industry, where the robust
tourist arrivals continue to drive more and more refurbishments and
expansions in the hotel industry, signalling encouraging prospects for
the tile cluster in the coming years.
Meanwhile, the demand for tiles is further segmented into wall tiles
and floor tiles, each occupying 20% and 80% of the total market
respectively. While local customers appear to have readily accepted floor
tiles as a suitable alternative for floor surfaces, the market has remained
stubbornly resistant towards embracing the wall tile proposition. This is
mainly due to the lack of perceived value for the wall tile offering based
on the commonly held misconception that it is a luxury item. While
these sentiments have been largely responsible for market trends in the
past, a notable shift has been observed in the recent years, signifying
a maturity in customer behaviour patterns that are likely to favour the
wall tile segment in the future.
Multiplying Value
From a supply side, the clay mining process too has come a long way
from its early days. At present, all mining activities are conducted as per
a strict regulatory framework. While this has assured the quality and
integrity of the source material, it has nevertheless resulted in driving
up the cost of mining, ultimately increasing the cost of production in
the tile industry. Meanwhile, given the dependence on LP gas, the high
cost of energy also remains a grave concern for the local tile cluster,
where energy costs account for more than 40% of the industry-wide
average cost of production.
While the high cost of production continues to be a drawback, locally
manufactured tiles do still command a premium price and have been
able to retain market share, due mainly to high quality and durability
of the offerings. However, in the recent past, the local tile industry
has been plagued by a fresh threat, in the form of cheap imports from
China, India and Indonesia which appear to have found a demand
among the lower end of the market space.
Financial Review
Revenue
Despite the slow growth landscape, the company performed well to
secure an 19% growth in revenue, which exceeded the Rs. 3.0 Bn mark
as at 31st March 2015, with local sales leading the effort, also with a
15% year on year increase from the previous year. Of the local sales,
the franchise network contributed well, accounting for 18% of the
volume, while the dealer network contributed to the annual top line.
Despite the slow growth landscape, the company performed
well to secure an 18% growth in
revenue, which exceeded the Rs.
3.0 Mn mark as at 31st March
2015, with local sales leading
the effort, also with a 12%
year on year increase from the
previous year.
The performance in export markets was as expected,
with the LWPLC wall tile range recording a YoY increase of 32%, with the regional showrooms in India
and the Maldives showing promising results for the
year.
Ottawa
Vancouver
Toronto
Osaka
Kobe
Dubai
Karachi
California
Bangalore Chennai
COLOMBO
Male
Singapore
Brisbane
Freemantle
Sydney
Melbourne
Auckland
Littleton
19
Profitability
Investments
Driven mainly by decreasing energy costs, production overheads for the
year saw a marked drop, leading to an increase in gross profit margin
to 31%. Moreover, while both administrative costs and distribution
expenses saw no material change from the previous year, a sizable 27%
year on year decrease in finance expenses was observed during the year.
Thus PBT increased from Rs. 194 Mn. in the previous year to Rs. 554
Mn. in the current year, a significant YoY increase of 186%. Further, due
to better performance during the current year, LWPLC’s PAT posted a
healthy Rs. 517 Mn which significantly better than 2013/14 PAT of Rs.
194 Mn.
With increased focus on consolidation, investments were curtailed
during the year. Only Rs. 106 Mn. was spent in total, of which Rs. 32
Mn. was incurred for the building of new Finished Goods warehouse at
Meepe factory. Meanwhile, ongoing efforts to upgrade existing facilities,
improve technology and ensure environmental compliance also
continued, accounting for the remainder of the investments increase
design capability.
As a result Earnings per Share (EPS) also increased from Rs. 3.55 per
share, in the previous year to Rs. 9.47 per share for the current year.
Borrowings
Total borrowings dropped 11% YoY due to better cash flow status and
better financial control. Total borrowings for the year, both short and
long term, amounted to Rs. 1.9 Mn. as against the Rs. 2.1 Bn recorded
in the previous year.
Share performance
With the total number of issued shares being the same, the LWPLC
share performed well in the stock market, with the highest recorded
trading price of Rs. 105/- per share coming on 13th November 2014,
while, the lowest recorded trading price was Rs. 57.60 per share
recorded on 07th April 2014 and ending the year with a price of Rs.
95.80 per share as at 31st March 2015.
Sales and Marketing
While the influx of imported tiles did manage to erode LWPLC’s market
share, the company was still able to maintain a strong 51% share of the
local wall tile market as at 31st March 2015. Meanwhile, overcoming
their long-held views, growing customer acceptance of the wall
tile concept is reflected by the 15% YoY volume growth registered
by LWPLC for the year. Notably, the larger format tiles introduced
in the previous year also appear to have caught on in the market,
demonstrating promising results as at 31st March 2015.
Further efforts to map a vibrant wall tile offering, led to the launch
of three new collections during the year, namely Concrete, Essential
and Xilosophy, each of which are meant to capture a dynamic sense of
well-being and comfort for modern living spaces. Meanwhile, exiting
products were also regrouped and launched together with the new
collections in mid-2014. All products were well received by the market
and have shown good results within the year itself.
LANKA WALLTILES PLC
The Fine Art Of Living.....
20
LANKA WALLTILES PLC
Celebrating World Water Day!
Multiplying Value
Encouraged by the positive customer sentiments, the company
launched an aggressive promotion to reinforce the versatility of
the LWPLC brand both as a mass market offering as well as a niche
placement. Appropriately themed “Wall Styles”, the series of highly
focused media adverts was aimed at enhancing customer brand
association in line with trending lifestyle concepts around the world.
Coinciding with the promotional effort, the visual ambience of the
franchise network was also altered to capture international display
standards, where all racking, display and merchandising material was
changed as per the designated theme for the year. Moreover, a more
interactive, customer friendly service model was introduced, with all
showrooms now equipped to provide customers with a value added,
end-to-end solution for all their tiling needs.
To further augment the feedback lines open to customers, LWPLC
stepped into the social media space, vis-à-vis YouTube, Facebook and
Twitter. Given the encouraging response received from customers via
these mediums, it is likely that the social media platform could be
leveraged as an effective marketing tool in the coming years.
Meanwhile, emphasizing the importance of effective customer
communication led to the introduction of additional warning labels
on the packaging material to ensure customers are made aware of the
safety and handling requirements for the company’s products.
The performance in export markets was also as expected, with the
LWPLC wall tile range recording a YoY increase of 32%, with the
regional showrooms in India and the Maldives showing promising
results for the year. Aside from the regional markets, North America
and Europe were the other key export markets, having received a
considerable boost following the company’s presence at the COVERINGS
2014, held in Las Vegas and the Cersaie 2014 exhibition in Bologna, Italy
respectively.
56%
Company market share in the local
Walltile market
Distribution Channels
While group synergies did help growth the company’s presence across
Sri Lanka, as LWPLC’s the strategic expansion plan, the company
continued to grow the number of customer touch points across the
country, where the three new franchise showrooms were commissioned
during the year in Mahiyanganya, Kottawa and Ampara, bringing the
total number of island-wide showrooms to 40.
Meanwhile, efforts to migrate towards a more cost effective distribution
structure, resulted in the introduction of two new distribution channels
during the year, namely the Tiler Club launched in followed by the
Tiler Plus scheme introduced in. Under the Tiler Club programme, Tile
workers from across the island were encouraged to sign up with LWPLC
to promote the company’s products to Tilers’ own clients. The scheme is
a commission based exercise that would entitle all Tiler Club members
to a percentage of any sales that they bring in, while their customers
too are entitled to a discount for their purchases. Meanwhile, the Tiler
Plus concept is a cost efficient channel that will help broad base the
company’s reach across the island, by encouraging small area-based
businesses to act agents for the company’s products.
Strict cost control measures were also implemented to curb excessive
distribution costs, which resulted in rationalization of the dealer
network so as to help the registered dealer base to streamline their
operations and maximize their geographical coverage.
21
168%
Growth in post Tax Profits of the
Company
A number of measures were taken to enhance the
presentation and overall visual profile of the tile
surface, including substantial investments to enhance
the digital printing capabilities of the larger size tile
formats.
Operational Aspects
Improving efficiencies at each stage of the manufacturing process
was considered a key priority for LWPLC, particularly with the factory
operating at an average 90% capacity throughout the year. A number
of measures were taken to enhance the presentation and overall visual
profile of the tile surface, including substantial investments to enhance
the digital printing capabilities of the larger size tile formats. The
company’s design function was also strengthened during the year, with
3 new additions to the design team, while training was intensified to
update the knowledge and skills of the entire design unit.
From a cost perspective, the high cost of energy (LP Gas) continued
to be a worry and much effort was put into finding energy efficient
mechanisms that could be integrated into the existing production floor.
While these efforts did result in some reductions during the year, LWPLC
experienced a notable drop in energy costs following the decline in
crude oil prices in November 2014.
A number of investments were also made during the year to upgrade
the environmental systems at LWPLC’s Meepe plant, in line with the ISO
14001, Environmental Management Systems.
Meanwhile, working in tandem with the ISO 9001 guidelines for Quality
Management Systems, a series of investments were made to improve
the quality of the post manufacturing processes, including packaging
and storage mechanisms.
22
Sri Lanka’s domestic
construction and housing
industry is set to grow
steadily in the years ahead
and the future prospects
for the Tile sector remain
upbeat.
Multiplying Value
Procurement Systems
Although LWPLC does own a limited quantity of clay deposits, to
accommodate the growing raw material requirements, the company
has become increasingly dependent on procuring ball clay from third
parties. To ensure the quality and overcome the incumbent risks
associated with third parties, LWPLC is governed by the group-wide
supply chain management framework, consisting of an extensive data
base of approved ball clay suppliers. All suppliers in the data base
are evaluated as per the CEA guidelines for ethical mining practices,
including the sustainability of the post-mining process. Moreover, an
independent assessment is carried out to verify labour and human
rights practices of these suppliers.
Leveraging on this group-wide procurement process, has helped LWPLC
benefit from considerable synergies both in terms of cost advantages
as well as a guarantee of better quality raw material. Meanwhile, the
company continues to engage with suppliers in an ongoing effort to
further enhance the supply chain processes.
Outsourcing
While the company retains control over all core operations, certain noncore areas, including calcite crushing are outsourced to third parties.
Here too, strict guidelines are followed when establishing working
relationships with outsource partners, while continuous engagement
ensures that the company’s quality benchmarks are enforced at every
stage of the outsourcing process.
Human Capital Development
Given that over 80% of LWPLC’s workforce comprises of workers
at the production plant, the company deploys a concerted effort to
ensure effective development of human capital resources. Maintaining
strong employee relations has been at the crux of this goal, setting the
stage for meaningful dialogue with both employees and their union
representatives. The strong communicative culture that cascades to all
levels of employee network has facilitated uninterrupted operations
throughout the year, with no industrial disputes or union-induced work
stoppages during the year.
Further efforts to ensure employee well-being has prompted LWPLC to
initiate the process of obtaining OHSAS 18001, Occupational Health and
Safety Standards, so as to align the manufacturing process at the plant,
on par with internationally accredited safety management practices.
Future Outlook
Amidst widespread urbanization taking place across the country, Sri
Lanka’s domestic construction and housing industry is set to grow
steadily in the years ahead and the future prospects for the Tile sector
remain upbeat. Meanwhile however, the inherent issues surrounding
the Tile sector are deemed to, once again overshadow progress for all
the local tile manufacturers in the years ahead.
From a marketing perspective, the best way for LWPLC to combat these
challenges would be to leverage on group synergies to expand the
market share. To do so, the company would need to push the benefits
of the “Buy local” concept to a wider island-wide market. To illustrate
versatility of the LANKA TILES offering, LWPLC would be called upon to
strengthen brand identity and to reposition the brand as the premier
choice in the local wall tile market. Further, the company would also
need to consider capacity expansions to help strengthen the LANKA
TILES brand identity in targeted overseas markets as well.
From an operational perspective too change would be imperative. In
this context, the company would be called upon to work collaboratively
with all industry stakeholders to refine and improve the long term
sustainability of the business model.
23
24
Multiplying Value
GOVERNANCE
Multiplying Value
14
Senior Management
17
26
Risk Management
33
37
44
45
25
The Board of Directors of Lanka Walltiles PLC is committed to upholding the highest standards
of integrity and transparency in its governance of the Company and its subsidiaries. The Board
is guided by the Code of Best Practice issued by the Institute of Chartered Accountants of Sri
Lanka and the Securities and Exchange Commission of Sri Lanka and the listing rules of the
Colombo Stock Exchange. The Board is responsible for protecting the rights and interests of
shareholders and are accountable to them for the overall management of the Company.
Corporate Governance Framework
The Corporate Governance framework to accomplish the corporate governance objective of Lanka Walltiles PLC is given below.
External
Regulations
Framework
Elects the
Board
Protect rights
provides
Value
Nominations
Policy
Independent
Audit
Framework
Shareholders
Audit Committee
Ensures good
Board
composition
Reviews
Integrity of
financial
statements
The Board
Risk Management
Ensures
good risk
management
Delegates
day to day
management
Risk
Management
Framework
Provides
Transparent
information
The Chief Executive and
management team
Ensures
Remuneration
is appropriate
Remuneration
Committee
External
Stakeholders
Framework
THE COMPLIANCY TO CORPORATE GOVERNANCE CODE
The compliance of Lanka Walltiles PLC with the Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of
Sri Lanka and the Securities and Exchange Commission of Sri Lanka is as follows:
26
Multiplying Value
Governance Principle
Lanka Walltiles Adherence
Compliance Status
A. Directors
A.1 - The Board
Frequency of Board Meetings
The Board met on a monthly basis in the year under review. The Board’s Compliant
Audit and Remuneration sub committees met on 05 occasions.
Board meeting attendance:
Responsibility of the Board
W D N H Perera (Chairman)
- 11/11
J A P M Jayasekera (Managing Director)
– 11/11
T de Zoysa (Director)
– 07/11
Dr. S Selliah (Director) – 09/11
T G Thoradeniya (Director) – 10/10
K D G Gunaratne (Director) – 09/11
A M L Page (Director) – 09/11
M W R N Somaratne (Director)
– 10/11
The Board is responsible for:
Compliant
a. The formulation and implementation of a sound business strategy.
b. Monitoring compliance of governance, laws and regulations.
c. Overseeing systems of internal control and risk management.
d. Approving annual budgets and strategic plans.
e. Appointing and reviewing the performance of the Managing
Director.
f. Approving any change in the Company’s business portfolio and
sanctioning major investments and disinvestments in accordance
with parameters set.
g. Ensuring that effective remuneration, reward and recognition
policies are in place to assist employees in giving their best.
h. Submitting themselves for re-election at regular intervals and at
least once in every three years.
Compliance with applicable law
The Board ensured in the year under review that the Company adhered
to all applicable laws, rules and regulations.
Compliant
Company Secretary
The services and advice of the Company Secretary M/s. PW Corporate
Secretarial (Pvt.) Ltd. is made available to Directors as necessary. The
Company Secretary keeps the Board informed of new laws, regulations
and requirements coming into effect which are relevant individually as
Directors and collectively to the Board.
Compliant
Independent judgment
The Board members are required to divulge all functions with
the Company, refrain from matters of self interest and to bring
independent judgement to the decision making process.
Compliant
Dedication of adequate time and effort
Board members attend all Board meetings in person and need to be
prepared to engage in decision making matters which may entail an
adequate amount of time and effort spent.
Compliant
Appropriate training for Directors
All Directors have considerable experience in managing Companies
and the ceramic industry. Relevant training opportunities are made
available to all Directors locally and internationally to further their
knowledge and expertise.
Compliant
27
Compliance Status
There is a clear division of responsibility at the head of the Company.
This is between the running of the Board (Chairman) and the executive
responsibility of overseeing the Company’s business (Managing
Director). No single individual has liberal powers with regard to
decision making.
Compliant
The Chairman is responsible for the efficient conduct of Board
meetings. The Chairman maintains close contact with all Directors
and holds informal meetings with Non-Executive Directors whenever
necessary.
Compliant
The Board includes directors, who possess the necessary knowledge
and competence to offer the Board guidance on financial matters. The
Managing Director is a Chartered Accountant.
Compliant
The Board comprises eight members, seven of whom including the
Chairman are Non Executive Directors. The Board has determined
that four of such Non Executive Directors are ‘independent’ as per the
Listing Rules of the Colombo Stock Exchange.
Compliant
A2 - Chairman and CEO
Division of responsibilities between the
Chairman and CEO
A.3 - Role of the Chairman
Prepare good corporate governance and
facilitate effective discharge of Board functions
A.4 - Financial Acumen
Availability of sufficient financial acumen and
knowledge.
A.5 - Board Balance
The Board should have an adequate number of
Directors with a balance of executive and nonexecutive Directors of sufficient calibre along
with independent Directors.
Directors’ status is as follows:
W D N H Perera (Chairman) - Non executive
J A P M Jayasekera (Managing Director) - Executive
T de Zoysa (Director) – Non executive - Independent
Dr. S Selliah (Director) Non-executive - Independent
T G Thoradeniya (Director) - Non-executive
K D G Gunaratne (Director) - Non-executive - Independent
A M L Page (Director) - Non-executive - Independent
M W R N Somaratne (Director) - Non-executive
A.6 - Supply of Information
Relevant information and agenda to be
circulated in a timely manner to the Board.
The Board papers are circulated a week prior to Board meetings with
an adequate briefing on relevant information.
Compliant
A.7 - Appointments to the Board
Procedure for the appointment and disclosure of The appointment to the Board is undertaken by the Board itself, taking
new Directors/ Assessment of Board composition into consideration the Board composition required and the strategic
input required. All Board appointments are informed to the CSE as per
the existing regulations.
Compliant
A.8 - Re-election
Re-election of Directors at regular intervals.
28
As per the Articles of Association one-third of the Director for the time
being shall retire from office and shall offer themselves for re-election
each year by Shareholders.
Compliant
Multiplying Value
Compliance Status
The Board regularly evaluates its performance based on achievement
of results, implementation of strategy, risk management, internal
controls, compliance with laws and stakeholder requirements.
Compliant
A.9 - Appraisal of Board Performance
Boards should periodically appraise their
own performance in order to ensure that
responsibilities are discharged in a satisfactory
manner.
A.10 - Disclosure of information with respect to Directors
Shareholders at all times should be aware of
relevant details with respect to Directors.
All Directors have declared their details in pages 14 to 16 as Director
profiles.
Compliant
A.11 - Appraisal of Chief Executive Officer
The Board should be required to assess the
performance of the CEO annually.
The CEO is evaluated each year as per the yearly targets that have been Compliant
agreed with the annual budget
B. Directors’ remuneration
B.1 - Remuneration Procedure
Formal and transparent procedure for
developing policies on remuneration.
The Board has implemented a formal and transparent procedure for
developing policies on remuneration by setting up a Remuneration
Committee. Its purpose is to assist the Board of Directors in matters
relating to compensation of the Company’s Directors, Executive
Officers and such other employees as determined by the Committee.
Compliant
Composition and disclosure of the members of
the Remuneration Committee
The Remuneration Report which is in Page 44 of the report addresses
all related matters.
Compliant
Remuneration levels have been designed to attract, retain and
motivate Directors and Senior Management required to run the
Company successfully, while remaining within the industry’s
remuneration standards.
Compliant
Details of the Remuneration Committee and the statement of
remuneration policy are provided in the Annual Report.
Compliant
B.2 - The level and make up of Remuneration
Levels of Remuneration
B.3 - Disclosure of Remuneration
Disclosure of Remuneration in the Annual
Report
The aggregate remuneration paid to Executive and Non executive
Directors are disclosed on Page 104 of this Report.
C. Relations with Shareholders
C.1 - Constructive use of the Annual General Meeting
Boards should use the Annual General Meeting
to communicate with shareholders and
encourage their participation.
The active participation of shareholders at the AGM is encouraged. The
Board believes the AGM is a means of continuing effective dialogue
with Shareholders.
Compliant
There have been no transactions during the year under review, which
fall within the definition of ‘Major Transactions’ in terms of the
Companies Act.
Compliant
C.2 - Major Transactions
Disclosure of major corporate transactions that
will materially effect the net asset base.
D. Accountability and Audit
D.1 - Financial Reporting
The Board should present a balanced and
understandable assessment of the Company’s
financial position, performance and prospects.
Compliant
The Annual Report of the Company provides a balanced and
understandable assessment of the Company which is in addition to the
accounts of the management and financial reviews, Director’s report
and responsibility structures.
29
Compliance Status
Your Board has taken necessary steps to ensure the integrity of the
Group’s accounting, financial reporting and internal control systems
and also their review and monitoring on a periodic basis. Our systems
covering risk management, financial and operational control, ethical
conduct, compliance with legal and regulatory requirements and
corporate social responsibility are detailed below.
Compliant
The Audit Committee Report on page 45 of the report and the CSE
adherence note 7.10.6 addresses this section in full.
Compliant
The Code of Best Practice issued by the Institute of Chartered
Accountants of Sri Lanka and the Securities Exchange Commission is
adopted by the Directors who then ensure that the Company and the
employees behave ethically.
Compliant
Adhered to as per the Corporate Governance report in the Annual
Report Pages 26 to 32.
Compliant
All institutional shareholders are encouraged to participate and their
views are communicated to all concerned.
Compliant
The Report contains the Company’s Corporate Governance process and
structure for investor’s attention.
Compliant
The Annual Report contains sufficient information to make an
informed decision. The report is hosted in Colombo Stock Exchange
website with the quarterly reports to facilitate investors and
shareholders to make informed decisions.
Compliant
All shareholders are encouraged to participate at the Annual General
Meeting / Extraordinary General Meeting and cast their votes. AGM’s
are noticed in advance as per Companies Act and held on accessible
area to ensure shareholders can participate effectively.
Compliant
D.2 - Internal Control
The Board should maintain a sound system
of internal control to safeguard shareholders’
investments and the Company’s assets.
D.3 - Audit Committee
The Board should establish formal and
transparent arrangements in the manner in
which they select and apply accounting policies,
financial reporting, internal control principles
and maintaining an appropriate relationship
with the Company’s Auditors.
D.4 - Code of Business Conduct and Ethics
Companies must adopt a Code of Business
Conduct and Ethics for Directors and members
of the Senior Management team and promptly
disclose any waivers of the Code for Directors
or others.
D.5 - Corporate Governance Disclosures
Directors should be required to disclose the
extent to which the Company adheres to
established principles and practices of good
Corporate Governance.
E. Shareholders
E.1 - Shareholder Voting
Institutional shareholders should be encouraged
to ensure their voting intentions are translated
into practice.
E.2 - Evaluation of Governance Disclosures
Institutional investors should be encouraged to
give due weight to all relevant factors drawn to
their attention.
F. Other Investors
F.1 - Investing / Divesting Decision
Individual shareholders, should be encouraged
to carry out adequate analysis in investing or
divesting decisions.
F.2 - Shareholder Voting
Individual shareholders should be encouraged to
participate in the General Meeting of Companies
and exercise their voting rights.
30
Multiplying Value
CSE LISTING RULES COMPLIANCE
Lanka Walltiles PLC’s extent of adherence to corporate governance rules under section 7.10 of continuous listing requirements of the Colombo Stock
Exchange is given below.
Compliance Status
Lanka Walltiles PLC has seven non- executive Directors out of eight
as given in item A5 in the ICASL adherence table, which is above the
minimum requirement.
Compliant
The Company has four independent Directors out of eight as given in
item A5 in ICASL adherence table, which is above the minimum level.
Compliant
The Board has determined the independence of each independent
director and set out and declared the independence in the Annual
Report.
Compliant
a. Non-Executive Directors
The Board of Directors should include at least
two non-executive directors or such number of
non-executive Directors equivalent to one third
of the total number of directors whichever is
higher.
b. Independent Directors
The Board of Directors should include two or
1/3 of non-executive Directors appointed to the
Board of Directors, whichever is higher shall be
‘independent’.
c. Disclosure relating to Directors
The Board shall make a determination annually
as to the independence or non-independence
of each non-executive Director based on such
declaration and other information available
to the Board and shall set out in the annual
report the names of Directors determined to be
‘independent’.
Please refer Note ‘d’ below.
d. Criteria for Defining ‘Independence’
The Colombo Stock Exchange identified
criteria of independence should be met by the
independent directors of the Company
All Directors meet the above criteria and the Board of Directors is
of the view that the period of service as a Board member exceeding
nine years rendered by Mr. Tilak de Zoysa, and Dr. S Selliah does not
compromise their independence and objectivity in discharging their
functions as Directors.
Compliant
Accordingly, the Board has determined that Mr. Tilak de Zoysa,
Dr. S Selliah, Mr. K D G Gunaratne and Ms. A M L Page are
‘independent’ Directors as per the criteria set out in the Listing Rules of
the Colombo Stock Exchange.
e. Remuneration Committee
i.Composition of Remuneration Committee
The remuneration committee shall comprise of
at least two non-executive Directors in which a
majority shall be Independent.
As per the remuneration committee report given in page44 the
Remuneration Committee comprises of three independent nonexecutive Directors of Royal Ceramics Lanka PLC and who are also the
members of the Group Remuneration Committee
Compliant
The remuneration committee met once for the year and have
recommended the remuneration of the CEO and the Senior
management of the Company to the board and there report is
published in page 44.
Compliant
ii. Functions of Remuneration Committee
The Remuneration Committee shall recommend
the remuneration payable to the executive
directors and Chief Executive Officer of the
Listed Entity to the board of the Listed Entity
among other defined functions.
31
Compliance Status
The remuneration committee report in page 44 as set out the names
of the directors in the remuneration committee report and aggregate
remuneration paid to all Directors is given in page 104
Compliant
The Audit Committee comprises of three independent, non – executive
Directors of Royal Ceramics Lanka PLC
Compliant
The audit committee report in page 45 of the annual report explains
the function of the audit committee which has executed the above
function.
Compliant
iii. Disclosure in the Annual Report
The annual report should set out the names
of Directors in comprising the remuneration
committee and contain a statement of the
remuneration policy and set out the aggregate
remuneration paid to executive and nonexecutive directors
f. Audit Committee
i. Composition of the Audit Committee
The audit committee shall comprise of at least
two non-executive directors a majority of whom
shall be independent
ii. Functions Audit Committee
Overseeing of the preparation, presentation
and adequacy of disclosures in the financial
statements of a Listed Entity, in accordance with
Sri Lanka Accounting Standards.
iii. Disclosure in the Annual Report relating to Remuneration Committee
The names of the Directors comprising the audit
committee should be disclosed in the annual
report.
The audit committee report in page 45 has addressed this
requirements.
STATEMENT OF COMPLIANCE
The Company is fully compliant with the requirements of the Code of
Best Practice on Corporate Governance issued jointly by the Institute
of Chartered Accountants of Sri Lanka and the Securities and Exchange
Commission of Sri Lanka in 2008. Please refer the tables appearing
on pages 27 to 32 for the requirements of ‘Corporate Governance
Principles’ and the response of the company on its adherence to the
said requirements.
In addition, tables appearing on pages 31 to 32 demonstrate the
company’s adherence to corporate governance rules under section 7.10
of continuous listing requirements of the Colombo Stock Exchange.
Further, the Board of Directors to the best of their knowledge and belief
and is also satisfied that all statutory payments due to the Government,
other regulatory institutions and those payments related to employees,
have been made on time.
Therefore the Board has concluded and declared the Company is fully
compliant to with the Corporate Governance Rules of the Colombo
Stock Exchange.
32
Compliant
Multiplying Value
Risk Management
Introduction
Risk Management Framework
Risk Management is a critical requirement for any company operating
in a competitive market and a changing economy. Lanka Walltiles PLC
henceforth has taken a strategic initiative to identify the areas relevant
to the organisation and respond to potential risk. The risk management
process will enable administration to evaluate strategies existing within
the organisation to mitigate the risk factors identified, gain comfort
over the continuation of the business and ensure the required returns
to the stakeholders. This process additionally assists the Company in
managing sustainability of growth and profitability. The objective is
to improve performance and decision making through identification,
evaluation and management of key risks. The responsibility of the Risk
Management process lies with the Board of Directors and the process is
supervised by the Company’s Executive Committee and reviewed by the
Audit Committee. A review of the risk management framework and the
process of the Company is described below.
The Committee of Sponsoring Organisations of the Tradeway
Commission (COSO)’s Enterprise Risk Management (ERM) integrated
framework defines ERM as a process, effected by the entity’s Board of
Directors and management and applied in strategy setting and across
the enterprise, designed to identify potential events that may affect
the entity, and manage risk to be within the risk appetite, to provide
reasonable assurance regarding the achievement of entity objectives.
A graphical overview of the Company’s risk management framework is
given below.
Lanka Walltiles PLC risk management frame work with COSO’s
integrated enterprise risk management can be presented as follows;
Organisation Strategy
Risk Management Strategy
Risk Management Policies & Procedures
Risk Management Roles & Responsibilities
Risk Identification
& Assessment
Risk Response &
Reporting
Governance
33
Risk Management
Risk culture
A Company has to cultivate an appropriate risk awareness culture
for effective ERM practice. A strong endorsement by the Board of
Directors and senior management of the value of investing time and
infrastructure into better understanding the organisation’s most
significant risk exposures is an important and necessary condition that
must be in place.
In this regard the senior management and the Board of Directors have
a clear understanding of the objectives of ERM relative to traditional
approaches to risk management and the CEO embraces the need and
provides adequate endorsement of an enterprise wide approach to risk
oversight that seeks to obtain a top-down view of major risk exposures.
The Board of Directors is also supportive of management’s efforts to
implement an enterprise wide approach to risk oversight and the Board
of Directors sets aside agenda time at each of its meetings to discuss the
most significant risks facing the organisation. The senior management has
effective risk management capabilities and competencies.
Risk identification
Robust processes have to be in place in the organisation to identify
risks, particularly those risks that may be currently unknown, but
emerging and should encourage the management to regularly think
about risk.
In this regard, the organisation has defined and widely communicated
to members of management and the Board what it means by the term
“risk.” The organisation has identified a broad range of risks that may arise
both internally and externally, including risks that can be controlled or
prevented, as well as those over which the organisation has no control.
The organisation engages in identifiable processes to regularly scan the
environment in an effort to identify unknown, but potentially emerging
risks such as competitor moves, new regulations, changing consumer
preferences, etc. Each member of the Board of Directors has provided
input into the risk identification process.
Risk assessment
Organisation needs methods to prioritise risks that encourages a
consistent consideration of both the likelihood of the risk occurring
and the impact of the event to the organisation, if the risk occurs.
The organisation defines a five year time period over which risks should
be assessed to ensure consistency in management’s evaluations. The
organisation strives to assess inherent risk of the Company and industry
and the organisation assesses not only the likelihood of a risk event
occurring but also the impact of the risk to the organisation. The Board
of Directors has concurred with the assessment of the risks completed by
management.
Articulation of risk appetite
While determining the organisation’s appetite for risk taking can be
challenging, it is important that the board and senior management
make some attempt to articulate its overall appetite for risk taking.
The Board and management have engaged in discussions to articulate the
organisation’s overall appetite for risk taking. The Board of Directors has
concurred with the organisation’s risk appetite.
Risk response
It is very important to ensure that an appropriate risk response method
is implemented, and then to ensure that the response is working as
intended. Periodic evaluation of whether identified risk responses are
effectively being carried out will ensure an effective ongoing ERM
process.
The organisation has identified risk owners with responsibility for each
of its most significant risks. The organisation has evaluated whether
the existing response is sufficient to manage the risks to be within the
organisation’s risk appetite. The organisation has separately evaluated the
potential cost of the risk response relative to the benefit provided by the
response towards either reducing the impact or reducing the probability
of occurrence of the risk event. The organisation’s ERM process helps
identify potential overlaps or duplications in risk responses across the
enterprise.
Risk reporting
As risks are identified and assessed across the organisation, processes
are needed to facilitate the communication of risk-related information
so that an aggregate view of important risks and their related risk
responses are provided to senior management, the Board, and to
critical stakeholders.
34
The organisation has developed and monitors critical risk indicators that
are leading in nature in that they provide some indication that a risk
event is more likely to occur in the future. Senior management regularly
review management reports that provide the status of critical risks and
risk response plans. The Board monthly receives and reviews these reports
which provide the status of critical risks and risk response plans.
Multiplying Value
Integration with strategic planning
Effective ERM can be an important input and consideration into the
determination and execution of any organisation’s strategy. ERM
provides critical insights into the portfolio of existing and emerging
risk exposures that can contribute to the strategic success of the
organisation.
The organisation has a formal strategic planning process and the
strategic plan is updated at least annually. The organisation’s existing
risk profile is an important input for the strategic planning process.
Senior management links the top risk exposures to strategic objectives
to determine which objectives face the greatest number of risks and to
determine which risks impact the greatest number of objectives.
Assessment of ERM effectiveness of the risk management process:
Senior management and the Board of Directors need to view ERM as
an evolution, not a point-in-time project to be implemented.
In the organisation the senior management regards ERM as an ongoing
process rather than just a project and they seek to understand and
monitor emerging ERM best practices and adequate resources have been
dedicated to support and complete the ERM function, successfully.
Risk Management Process
BOARD OF DIRECTORS
The risk management process has been designed to ensure
identification of any situation or circumstance that would adversely
effect the achievement of Company activities and to accept and
manage unavoidable risks and to ensure surprise events or situations
are minimized. This process is aligned directly to the Company strategy,
annual plans and monitored by the Board which is reviewed by the
Audit Committee.
AUDIT COMMITTEE
CEO
To facilitate a professional risk management process a facilitative
management structure and a robust management process needs to be
in place in the organisation.
GROUP EXECUTIVE COMMITTEE
Lanka Walltiles PLC has the following management structure to
facilitate risk management;
OPERATION MANAGERS
RISK EXPOSURES
Risk Identification
This part of the process
will identify the events or
scenarios that could prevent
the Company from achieving
its set objectives.
Monitoring
Risk Assessment and Evaluation
On a monthly basis the risk
mitigation action plans will be
monitored and reported to the
Company Executive Committee and
Board Meetings and on a quarterly
basis these will be monitored and
reported to the Audit Committee.
The management will determine
whether the risk will have an ultra,
high, moderate, low or insignificant
impact on the operations of the
Company and also the likelihood
of risk occurrence based on past
experience as well as future
projections are evaluated.
Risk Mitigation Action Plans
Identified and evaluated risks
are assigned to risk owners. Risk
mitigation action plans will be
developed with time lines for
implementation by the risk owners
along with the management of
the Company.
Some of the Key Risks that may hinder the
Achievement of the Company’s
Strategic Business Objectives are set
out below
35
Risk Management
Business Environment Risk
Integrity Risk
Environment risk arises when there are external forces that may
affect the viability of the enterprise’s business model, including the
fundamentals that drive the overall objectives and strategies that define
it. Adverse political actions and changing laws may be harmful to the
firm ’s resources and future cash flows in a country in which the firm
has invested significantly and is dependent on a significant volume of
business.
Integrity risk is the risk of management fraud, employee fraud, illegal
acts, unauthorized acts and any or all of which could lead to loss of
reputation in the marketplace.
To counter political and regulation risk the Company brings the relevant
issues to the notice of government institutions, persistently monitors
them and maintains a close relationship with relevant government
institutions and industry associations and chambers. The Company
also assists government institutions in formulating new laws and
regulations pertaining to the industry and provides information on
relevant issues to government institutions. In addition, a legal feasibility
evaluation has been made a standard process in order to approve
capital projects.
Operations Risk
Operations risk is the risk of inefficiency in executing the firm’s business
model, satisfying customers and achieving the Company’s quality, cost
and time performance objectives. Unproductive operations threaten the
Company’s capacity to produce goods at or below cost levels incurred
by competitors.
To counter operations risk, the Company has a strong operational
control mechanism where production, quality, cost and efficiency are
monitored on a daily basis and improvement projects are undertaken to
increase efficiency. Plant upgrades with new plants and machinery are
done annually to be on par with world class manufacturers. In addition,
a five year strategic plan has been implemented to enhance capacity
and ensure operations run smoothly.
Capacity Risk
Insufficient capacity will pose a hindrance to the Company’s ability to
meet customer demands or excess capacity threatens the firm’s ability
to generate competitive profit margins.
Presently the firm has identified that it needs more capacity and
therefore a Capacity Expansion Program has been planned for next
five years and reviewed monthly. This includes installation of the
new kiln, importing tiles to meet specific demands and implementing
the capacity expansion plan to monitor financial and resources
requirements.
36
To mitigate this risk the Company conducts a monthly internal audit
of transactions undertaken by an independent firm of chartered
accountants, to detect and reduce fraud and detail approval processes
for official transactions which mitigate the above risk. In addition
quarterly audit committee meeting to monitor the reporting status
coupled with monthly Board meetings which supervise the financial
status of the Company and the integrity of employees are held.
Financial Risk
Exposure to lower returns or the necessity to borrow due to shortfalls
in cash or expected cash flows or variances in timing or significant
movements in interest rates expose the firm to a number of negative
factors. These include higher borrowing costs, lower investment
yields or decreased asset values and result in financial helping risk.
Movements in prices, rates, indices and such, affect the value of the
Company’s financial assets and stock price, which may additionally
impact its cost of capital and/ or the ability to raise capital.
Credit limits and given credit is reviewed through a detailed approval
process reducing risk of debt, exports under DA terms are insured using
SLECIC and monthly overdue debtors are reported to the Board for
necessary action. These actions reduce cash flow risk and all capital
projects are financially evaluated to ensure that inflows match with
borrowings. Both floating and fixed rate debt is maintained and is
structured using loans, share capital and internal fund management to
reduce borrowings.
Confirmation
The Board confirming that an effective risk management framework
and an adequate ongoing risk management process are in place to
minimize all potential risks and its probability of impact to the Company
and the financial reporting.
System has been designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes has been done in according with
applicable accounting standards and regulatory requirements and the
Board has not any significant risks that may impact the operation of
the business as a going concern.
Multiplying Value
Report Profile
Ethics and Governance
This report has been prepared to table sustainability efforts of Lanka
Wall Tiles PLC’s (LWPLC) to coincide with the financial year ending 31st
March 2015. The report contains Standard Disclosures from the GRI
Sustainability Reporting Guidelines, a list of which is captured in the
attached GRI content index.
While the Corporate Governance report comprehensively captures
all aspects of the company’s governance mechanism, given below
is LWPLC’s organisational structure which embeds ethical business
practices and sustainability governance as part of the day-to-day
operations. It is also a representation of how we aim to create triple
bottom line value for all stakeholders associated with our business.
Report Boundary and Scope
While the financial and operational capabilities of the company have
been captioned in the Management Discussion and Analysis section on
pages 18 to 23 of this annual report, the sustainability section aims to
establish the environmental and social parameters that are deemed to
be relevant to the company’s stakeholders.
As such, the sustainability section has been prepared to include
operations at both the head office located in Nawala and the
manufacturing facility in Meepe. Moreover to achieve completeness
of reporting, the company has sought information from the following
sources;
•
HR information and data obtained from the Human Resources
department
•
Environmental data obtained from the green team
•
CSR project information and data obtained from CSR division
Materiality and the Triple Bottom Line
Using the GRI G4 framework as a guideline, we have been able to
determine the materiality of economic, environmental and social
aspects by encouraging the active participation of all key stakeholders
of the company. We have thus been able to gauge the opportunities
available to us and identify the underlying downside risks applicable
to the triple bottom line of the business. Having established what
areas are material in this manner, we have been able to strengthen our
core competencies and enhance our value creation process vis-à-vis
strategies that would secure the expectation of all our stakeholders.
Managing
Director
Factory
Manager
Group
Engineer
AM
Safety
Manager
AM
Head of
Marketing
Head of
Finance
Technology
AFM
AM
Group
Commercial
Manager
AM
Production
AFM
Chief
Designer
Export
Manager
Sales
Manager
Customer
Relations
Manager
AM
AM
Sales
Administration
Manager
AM
Group IT
Manager
HR
Manager
Stores
Manager
Group
Financial
Accountant
AM
AM
Management
Accountant
37
Material Economic Aspects
Stakeholders
Material Aspects
Strategy and Focus
Shareholders
Dividend
Announcement
Consistent long term
value creation
Ethics and integrity
Capitalise on new
emerging market
trends both locally
and internationally
Loss of market
share due to
imports
Explore new
technology and
innovation
Highly competitive
environment
amidst saturating
markets
Changes in
lifestyles and
customer spending
behaviour
Changes in
lifestyles and
customer spending
behaviour
Sustainable Business
Practices to improve overall
performance
Risks
Quarterly
Publications
Operational Efficiency
Opportunities
Engagement Mechanisms
AGM / EGM
Statutory Compliance
and transparent reporting
structure
Annual Report
Customers
Face to face
interactions
Customer
Responsiveness
Innovative Design concepts
in tandem with global trends
and changing lifestyles
Customer hotline
Customer surveys
Customer
satisfaction index
Product Responsibility
Marketing and
Communications
Risks
Unparalleled customer service
Opportunities
Customer complaints
mechanism
Improving profitability
Versatile, ergonomic product
range
Responsible advertising and
marketing campaigns
High brand visibility and
market presence across the
country
Monthly dealer /
distributor visits
Product Responsibility
Marketing and
Merchandising
Availability of the product
range
Risks
Dealer convention
Opportunities
Engagement
Mechanisms
Dealers/ Distributors
Adequate merchandising
support
Suppliers
Stability and continuity
of business
Knowledge sharing
industrial workshops
Enhanced competencies
Sustainable business
practices to improve overall
performance
Risks
Bi-weekly meetings
Opportunities
Supplier visits
Knowledge transfer and skills
development
Participation in
industry forums
38
Regulatory compliance
Annual Reporting
structure
Contribution towards
national development
Good governance practices
Risks
Monthly reporting
framework
Opportunities
Engagement
Mechanisms
Regulatory Authorities
Creating employment and
new business opportunities
Multiplying Value
For the benefit of stakeholders who expect economic returns from our
business, we have addressed how we manage all material economic
aspects and demonstrated the effectiveness of our economic value
creation mechanisms in the Management Discussion and Analysis
section of this report. However, the above summary is intended to
highlight how our economic value creation model correlates to the GRI
G4 parameters for economic sustainability.
possible opportunities we are aware that we would need to make timely
investments in improving the versatility of our product range. At the
same time, it is important to make sure that our value proposition
truly represents the demands of the customer. Thinking ahead, we have
already started mapping out our strategic thrust for both the medium
and long term. To do this, we have been working not only with current
trends, but also trying to pre-empt future possibilities.
Case Study: Illustrating the importance of economic sustainability
We continue to invest in developing our design function, as we feel
herein lies the key to captioning these trends. While we have made
sizable investments to improve our design infrastructure, we also
continue to strengthen our design team. Now comprising of 12 ember
unit, our designers possess internationally accredited qualifications
and are experts in the field of design, backed by international design
experiences.
The rapid changes in customer are likely to be both an opportunity
as well as a risk for companies like LWPLC. To be able to benefit from
Material Environmental Aspects
Stakeholders
Material Aspects
Strategy and Focus
NATURE COMMUNITY
Reduce carbon footprint
Participation in
community activities
Promote “Green”
energy concepts
Conducting
community welfare
programmes
Promote
responsible mining
practices
Pursue ethical
sourcing
alternatives
Environmental
degradation and
depletion of natural
resources
Impact on biodiversity
Carbon footprint
Sustainable operations that
improve energy efficiency at
all levels of the business
Explore alternative energy
solutions
Risks
Incident hotline to
address community
complaints
Promote resource
efficiency
Opportunities
Monthly community
meetings
Sustainable operations that
manage and control the
usage of water
Mitigation of sound and
dust pollution and Control of
effluents
Minimize the
use of hazardous
materials
Promote the efficient use of
manufacturing waste
Environmental outlook
and approach
Bi-weekly meetings
Knowledge sharing
industrial workshops
Participation in
industry forums
Environmental track
record
Develop partnerships that
would promote a sustainable
supply chain
Risks
Supplier visits
Opportunities
SUPPLIERS
Knowledge transfer and skills
development to encourage
better mining practices
Improve compliance
Risks
Regular monitoring
and audits
Opportunities
Engagement
Mechanisms
REGULATORY AUTHORITIES
Greater integration of
environmental concerns
as part of the day-to-day
operations
39
Managing key impacts
Given our energy intensive manufacturing operation, LWPLC’s primary
environmental footprint arises from the dependency on non-renewable
energy sources. Meanwhile, the high water usage, treatment of
effluents and the disposal of manufacturing waste together with sound
and dust emissions are the other key areas of concern for the company.
Following an integrated approach to environmental stewardship, we
made a conscious effort to integrate environmental concerns as part
of the day-to-day operations at our production facility in Meepe. All
processes at the factory have been developed cognizant to the ISO
14000 Standards for Environmental Management Systems, where
continuous monitoring helps detect areas for further improvement.
established in conformity with the CEA stipulated parameters for water
positivity.
Meanwhile, the quantity of solid waste deposits that are part of the
effluent treatment process amounted to approximately 360 MT for
the year. To address part of the issue, a new solid waste disposal
programme was initiated during the year, in partnership with CENTEC,
whereby local roof tile manufacturers were encouraged to use
these residual deposits as a substitute for a portion of their red clay
requirements.
Disposal of Manufacturing Waste
Statistics for the year;
Goals for the year
Tile Grog (Recycled)
Glaze Disposal (refilling)
Improve
manufacturing
waste practices
Increase recycled
Water by 5%
Reduce Water
Consumption by 5%
Reduce Energy
Consumption by 3%
1,570 MT
360 MT
Tile Chips (Sold to Cement industry)
1,223 MT
C Grade Tiles sold commercially
2,440 MT
D Grade Tiles Sold Commercially
373 MT
Strapping and Polythene
3.2 MT
Storage Pallets
Packaging Materials reclaimed and recycled 900 Pts
10%
Controlling of sound and dust emissions
Improving Energy Efficiency
While we continue to depend largely on non-renewable LP Gas to
for our energy requirements. Over the years we have introduced a
number of improvements on the production floor which have resulted
in a sizable reduction in the annual KWH consumed, despite notable
capacity expansions. Moreover, to reduce the dependency on nonrenewable energy sources, we continue to explore the possibility of
introducing renewable and alternative energy sources to power certain
aspects of the manufacturing process.
Water Management
With over 15 Mn. litres of water used annually, we intensified our
efforts to control the volume drawn from municipal water resources,
while at the same time, making a concerted effort to improve factorywide efficiencies so as to reduce the amount of water used during
manufacturing process. Meanwhile, we also stepped up efforts to
increase the volume of recycled and reused water. These efforts were
strongly linked to the treatment of effluents aimed at improving the
positivity of the treated water.
Treatment of Effluents
Current statistics indicate that nearly 75% of LWPLC’s treated water is
recycled back through the manufacturing process, amounting to nearly
150 million litres for the current financial year. The remaining 25% was
released to the environment as waste water. As part of our commitment
to environmental stewardship, the safety of the waste water has been
40
Sound emissions are an unavoidable part of our business, where the
primary concerns originate during the crushing process. However, in
the interest of the environment and the communities surrounding
our factory, we have made a concerted effort to mitigate the sound
emissions resulting from our operations. As such the crushing of calcite
and feldspar is no longer done in-house, but is now outsourced. This
has led to a considerable reduction in our sound emissions. Moreover,
we continue to adhere to the minimum noise levels as stipulated by the
CEA directives to regulate the noise levels within the factory premise
and well as along the perimeter of the factory premises.
Dust emissions are yet another area of concern for our business.
However, our ongoing efforts have been successful in minimizing dust
levels released to the environment during the production process,
whereby we have been able to register an improvement in the ambient
air quality surrounding the Meepe facility.
Going beyond the call of duty the factory at Meepe have made a new
fresh water lake using recycled water. This lake has natural fish, birds
and flowers within it. This has created a mini bio habitat beautifying
the factory environmental and displays the commitment to given
environment by the Company.
Multiplying Value
Material Social Aspects
Stakeholders
Material Aspects
Strategy and Focus
EMPLOYEES
Labour forums
Quarterly and Annual
Appraisals
Fairness and Equality
Job Security
Learning and
awareness
workshops
Company sponsored
social interactions
Career Development
Social alienation
due to changing
lifestyles and
technology
developments
Social alienation
due to changing
lifestyles and
technology
developments
Loss of traditional
cultural values
due to technology,
work practices and
branding strategies
Loss of traditional
cultural values
due to technology,
work practices and
branding strategies
Remuneration Policy
Employee Engagement and
Labour Relations
Risks
Remuneration and
Benefits
Opportunities
Direct interactions
with senior
management
Performance and Reward
Management
Training and Mentoring
Occupational Health and
Safety
Safety and Well-being
Livelihood Development
Environmental track
record
Risks
Interactions
with stakeholder
communities
Opportunities
Engagement
Mechanisms
COMMUNITY
Enhancing value for our employees
Workforce Statistics
Head
Office
Factory
Provision of basic facilities to
improve the living standards
of the community
As per our HR fundamentals, we encourage our employees to create
greater value, by sharing their knowledge and experience to overcome
both personal and workplace challenges. We have also nurtured a
progressive work ethic aimed at inspiring employees to grow together
with the company. Among other things, we ensure that the working
conditions at our factory are non-discriminatory, while our leadership
principles spell out the guidelines set out for managers, which includes
the respectful treatment of colleagues, the creation of a strong
feedback culture and the professional development of all employees.
Given the rapid growth trajectory that the company has witnessed in
the recent past, we are well aware of the crucial role played by our
workforce in sustaining our business success. We have thus migrated
towards a more proactive HR framework that would help us nurture our
workforce as key drivers of corporate success in the years ahead.
As at 31st March 2015
Initiating livelihood
development programmes to
uplift the living standards of
communities
Gender Distribution
Total
As a percentage of
total workforce
Executive
Staff
Operative
Female
23
26
49
10.43%
11
21
17
Male
62
359
421
89.57%
39
63
319
Total
85
385
470
50
84
336
Labour Turnover rate
9%
Attrition rate
2.76%
Return to work after maternity leave
100%
41
We also have a reward mechanism to recognise innovative
contributions by employees that are likely to add value to the company,
while merit awards are also conferred in recognition of extended loyal
service to the company.
Training and Mentoring
Once we have carried out an assessment to determine the competencies
that need to developed, we focus on helping employees develop these
specialized skills. We introduce employees to a wide range of specialized
technical and non-technical skills that would not only enrich their
employment capacity but also drive sustainable growth on for the
company.
Remuneration and Benefits
Being fully compliant with all applicable labour laws, our benefit
structure is aligned to industry standards and as such may comprise of
certain industry-specific entitlements from time to time.
However, in fairness to all employees, salaries are determined based on
individual aptitudes, whereas ancillary benefits may vary based on the
level of responsibility allocated to the employee either at the time of
recruitment or through a subsequent evaluation. Moreover, salaries are
regularly reviewed to take account of the employee’s job performance
and variations in the market.
Employee engagement and labour relations
LWPLC’s proactive engagement with employees and an open-door
management policy has been the basis of strong employee relations
over the years. Moreover, regular employee forums take the form
of interactive discussions that encourage employee feedback and
serve to enhance the communicative culture within the company. We
have in place an active grievance mechanism offering employees an
opportunity to voice their concerns securely and confidentially.
Meanwhile, with 95% of our operative employees represented by
collective bargaining agreements, LWPLC continues to emphasize the
importance of maintaining a strong consultative dialogue with union
representatives. This has laid the ground work for the company to work
collectively with union representatives to ensure the betterment of
those employees who are represented by these unions.
Meanwhile, our human resources policy is geared to identify talented
employees and offer them opportunities for further development and
enhanced prospects within the company. Our systematic approach to
ensure personal growth of employees’ has prompted us to undertake
a mentoring role towards developing our human capital. Our aim to
groom the next generation of leaders capable of taking over the reins of
the company. We hire external resource personnel in addition to our inhouse trainers to conduct knowledge sharing workshops, covering both
practical and classroom sessions that will help foster the leadership
skills needed for the future.
Occupational health and safety
LWPLC’s corporate safety policy stems for the fundamental need to
create a safe environment for our employees to work in. As we strive to
achieve a zero accident workplace, we have activated a voluntary safety
management mechanism alongside a risk-assessment approach aimed
at pre-empting potential dangers on the production floor. Meanwhile,
a hazard identification process has been put in place to document all
incidents that occur. These hazard reports are then used as point of
reference to trigger necessary preventative measures that will improve
the overall safety standards of the production facility.
We also conduct regular training and safety awareness programmes
that seek to imbibe the “Safety First” mindset among all employees and
encourage them to be more vigilant not only about their own personal
safety, but also with that of their colleagues.
2013/14
2014/15
Injuries
32
27
Days lost due to occupational health
and Safety reasons
24
35
Performance and rewards management
No. of hazardous incidents reported
-
-
All employees are subject to regular performance evaluations to
measure how well each employee has achieved certain pre-determined
goals. The entire evaluation process is linked to an incentive-based
remuneration mechanism that allows the company to set realistic,
achievable targets that will motivate actually motivate employees, both
individually and as a team. By fostering employee goal congruence in
this manner, the performance management mechanism aims to also
facilitate succession planning as the basis of long term sustainable
growth for the employee as well as the company.
Key areas for improvement
-
-
42
Safety Training
No. of Programs
No. of participants
6
6
68
43
Multiplying Value
Reiterating the commitment to secure greater occupational health and
safety, the company is working towards obtaining the OHSAS 18001
certification for occupational health and safety mechanisms.
Community Empowerment
Our social responsibility initiatives are structured in such a manner that
they link back to our business, vis-à-vis community stakeholders who
are closely impacted by our work. We feel that linking our community
efforts to our core business is the most effective way in which we can
make a difference towards creating broader social change and inspiring
national progress.
Our key initiative for the year was the launch of the Lanka Tiles, Tiler
Club, as a livelihood development effort aimed at developing the Tilerbased communities across the country. As it is a sustainable business
initiative, the details of the Tiler Club have been comprehensively
captured on pages 18 to 21 of the Management Discussion and Analysis
section of this report.
Additionally, we also offer practical help for construction projects
by providing materials, time, financial assistance and know-how
for projects that uplift community infrastructure. We also focus on
improving the standard of education, general health and well-being
of communities who are closely linked to our work. These projects are
driven by our employees who volunteer their time and effort to bring
about meaningful change for the community.
From an environmental perspective too, we remain bound by our green
ethics, where we engage with our supplier communities, by providing
them with technical expertise on sustainable clay mining practices
and creating awareness regarding the importance of practicing mine
restoration techniques. As a business at the forefront of Sri Lanka’s tile
cluster, we consider this as one of our primary responsibilities.
43
Role of the Remuneration Committee
The Committee evaluates the performance of the Chief Executive
Officer, Key Management Personal and staff against the set objectives
and goals, and determines the remuneration policy of the Company
for all levels of employees. The Committee supports and advises the
Board on remuneration and remuneration related matters and makes
decisions under delegated authority with a view to aligning the
interests of employees and shareholders.
Composition of the Remuneration Committee
The Remuneration Committee is a sub - committee of the main Board,
to which it is accountable. The Remuneration Committee comprises
of the following three independent non-executive Directors of Royal
Ceramics Lanka PLC.
Mr. R B Thambiayah Chairman of the Remuneration Committee
Mr. M D S Goonatilleke
Committee Member
Mr. L T Samarawickrama
Committee Member
The Managing Director attends the Committee meeting by invitation.
The company secretary is the secretary of the Remuneration Committee.
The Committee members possess vast experience in the fields of
Business Management, Human Resources Management, Labour
Relations and Labour Law. Hence the Committee has adequate expertise
in remuneration policy and management to deliberate and propose
necessary changes, improvements to meet the roles and responsibility
of the Committee.
Meetings
The Remuneration Committee met once for the year where all members
participated.
Functions performed by the Remuneration Committee
a.
The Remuneration Committee recommended the remuneration
payable to the Managing Director and the Key Management
Personal of the Company to the Board to make the final
determination. Based on that the aggregate remuneration paid
to Executive and Non Executive Directors for last financial year is
given on Page 104 of the Annual Report under key management
remuneration.
b. Ensuring that the Board complies with the Companies Act in
relation to Directors remunerations, especially the requirements
of section 216. And it also ensures that employees are adequately
compensated based on their performance and contribution for the
period under review and future potential.
44
c. Constructing a specific remuneration policy and remuneration
framework that enables the Company to attract and retain a high
quality and representative staff in its operations and do this inter
alia with reference to appropriate market rates where these are
relevant, and benchmarking specific categories where required.
d. Ensuring internal equity and fairness in and between the various
pay categories and building incentives in the cost of employment
structure to encourage and reward excellent performance, on
objectively defined criteria.
e. Ensuring that staff costs are within the budget set by the Board,
and are sustainable over time.
Conclusion
The Committee is satisfied that it has performed the responsibilities that
were delegated to it by the Board for the year under review and the
necessary objectives were achieved for the year under review.
R B Thambiayah
Chairman - Remuneration Committee
29th May 2015
Multiplying Value
Role of the Audit Committee
The Audit Committee is a sub committee of the main Board to which
it is accountable. The primary function of the Audit Committee is
to assist the Board in its oversight of the integrity of the financial
statements of the Company, to assess the adequacy of the risk
management framework of the Company, assess the independence and
the performance of the Company’s external audit function and internal
audit functions, and review compliance of the Company with legal and
regulatory requirements.
c.
The Committee reviewed the external auditors’ report and
management letter for the last year. All recommendations
proposed by the external auditors were discussed with the senior
partner and recommendations proposed were duly carried out
by the management. In addition the Audit Committee reviewed
the engagement partner’s relationships with the Company, and
assessed that the external auditors are independent.
Composition of the Audit Committee
d. The Audit Committee in conjunction with the Managing Director
of the Company reviewed the Company’s disclosure controls and
procedures and internal control over financial reporting.
The Audit Committee comprises of the following four independent,
non – executive Directors of Royal Ceramics Lanka PLC.
e.
Mr. M D S Goonatilleke Chairman of the Audit Committee
Mr. L T Samarawickrama Committee Member
Mr. R N Asirwatham Committee Member
The Audit Committee reviewed the Company’s policies and
practices with respect to risk assessment and risk management,
including discussing with management the Company’s major
financial risk exposures and the steps that have been taken to
monitor and control such exposures.
Mr. S H Amarasekera Committee Member
Conclusion
The Managing Director attends meetings at the invitation of the Audit
Committee.
The Audit Committee is satisfied that the Company’s accounting
policies, independence of the auditors and risk management are
adequate for its operations. The Audit Committee has also accomplished
responsibilities and functions that are delegated to it by the Board.
The company secretary functions as the Secretary to the Audit
Committee. Representatives of the Company, external auditors and
internal auditors also attend Audit Committee meetings by invitation.
The Audit Committee has the required expertise in finance, law and
business management to deliberate Audit Committee matters and
recommend necessary action to be taken.
M.D.S. Goonatilleke
Chairman – Audit Committee
29th May 2015
Meetings
The Audit Committee met 04 times during the year. The attendance of
the members at the meeting is as follows.
Mr. M.D.S. Goonatilleke
-
4/4
Mr. L.T. Samarawickrama
-
3/4
Mr. R.N. Asirwatham
-
3/4
Mr. S H Amarasekera
-
1/2
Functions performed by the Audit Committee
a.
The Committee reviewed the provisional financial statements
that were published for financial year 2014/15 and the Annual
Report of 2013/14. It oversaw of the preparation, presentation
and adequacy of disclosures in the financial statements of the
Company, in accordance with Sri Lanka Accounting Standards
and SLFRS. It also reviewed the Company’s compliance with
financial reporting requirements, information requirements of
the Companies Act and other relevant financial reporting related
regulations and requirements.
b. The Committee reviewed the monthly internal audit reports. The
internal audit function is carried out by M/s. KPMG Ford Rhodes
Thornton & Co. The Internal audits are done on a process based
audits framework to improve process performance and control.
45
46
Multiplying Value
FINANCIAL
Multiplying Value
48
Chief Executive Officer’s and Chief Financial Officer’s
Cash Flow Statement
58
59
Five Year Summary Statement Of Financial Position
112
Responsibility Statement
52
Five Year Summary Statement of Comprehensive Income
114
53
Statement of Value Added
116
54
Shareholder Information 117
55
20 Major shareholders of the Company
118
56
Notice of Meeting
119
57
Form of Proxy
123
47
The Directors of Lanka Walltiles PLC have pleasure in presenting their
Annual Report together with the Audited Financial Statements of the
Company for the year ended 31st March 2015.
This Annual Report of the Board on the affairs of the Company contains
the information required in terms of the Companies Act No. 07 of 2007,
the Listing Rules of the Colombo Stock Exchange and is guided by
recommended best practices.
Directors
The names of the Directors who held office as at the end of the
accounting period are given below and their brief profiles appear on
pages 14 to 16
Executive Directors
Mr. J A P M Jayasekera
-
(Managing Director)
-
Chairman
Non - Executive Directors
General
was re-registered on 24th July 2007 and bears registration number
PQ55.
Principal activities of the Company and review of performance during
the year
The main activity of Lanka Walltiles PLC, is the manufacture of glazed
ceramic walltiles for export and for sale in the local market.
Mr. W D N H Perera
Mr. T G Thoradeniya
Independent Non - Executive Directors
Dr. S Selliah
Mr. T de Zoysa
Mr. K D G Gunaratne
Ms. A M L Page
This Report together with the Financial Statements, reflect the state of
affairs of the Company.
Messrs. T G Thoradeniya and K D G Gunaratne retire by rotation at the
conclusion of the Annual General Meeting in terms of Articles 103 and
104 of the Articles of Association and being eligible are recommended
by the Directors for re-election.
Financial Statements`
Directors of subsidiary Companies are given below.
The Financial Statements of the Company duly signed by two Directors
on behalf of the Board and the Auditors are given on pages 55 to 111
Lanka Tiles PLC
Summarised Financial Results
Mr. Dhammika Perera
Year ended 31st March
Revenue
Profit for the year
2015
Rs. ’000
2014
Rs. ’000
14,596,21413,419,770
1,450,596
920,629
Mr. W D N H Perera
Mr. P L Amarasinghe
Dr. S Selliah
Mr. T G Thoradeniya
Mr. K D G Gunaratne
Independent Auditors’ Report
Ms. A M L Page
The Report of the Independent Auditors on the Financial Statements of
the Company is given on page 54
Mr. G A R D Prasanna
Accounting Policies
The financial statements of the Company have been prepared in
accordance with the revised Sri Lanka Accounting Standards and the
policies adopted thereof are given on pages 59 to 61 Figures pertaining
to the previous period have been re-stated where necessary to conform
to the presentation for the year under review.
Directors’ responsibility for Financial Reporting
The Directors are responsible for the preparation of Financial
Statements of the Company to reflect a true and fair view of the
state of its affairs. The Directors are of the view that these financial
statements have been prepared in conformity with requirements of the
Sri Lanka Accounting Standards, the Companies Act No.7 of 2007 and
the Listing Rules of the Colombo Stock Exchange.
48
Swisstek (Ceylon) PLC
Mr. W D N H Perera
Mr. K Y Choi
Mr. S A D M Ratnayake
Mr. J K A Sirinatha
Ms. K C Silva (Appointed w.e.f 01/09/14)
Multiplying Value
Interests Register
Swisstek Aluminum Limited
Mr. W D N H Perera
Mr. N A Abeyesekera
Mr. D De Silva
Mr. A S Mahendra
Mr. B T T Roche
Mr. K Y Choi
Mr. S A D M Ratnayake
Vallibel Plantation Management Limited formerly known as Ceytea
Plantation Management Limited
Mr. W D N H Perera
Mr. N T Bogahalande
The Company maintains an Interests Register in terms of the Companies
Act, No. 7 of 2007, which is deemed to form part and parcel of this
Annual Report and available for inspection upon request.
All related party transactions which encompasses the transactions of
Directors who were directly or indirectly interested in a contract or
a related party transaction with the Company during the accounting
period are recorded in the Interests Register in due compliance with the
applicable rules and regulations of the relevant Regulatory Authorities.
The relevant interests of Directors in the shares of the Company as at
31st March 2015 as recorded in the Interests Register are given in this
Report under Directors’ shareholding.
Directors’ Remuneration
The Directors’ remuneration is disclosed under key management
personnel compensation in Note 30.3 to the Financial Statements on
page 104
Mr. T G Thoradeniya
Directors’ Interests in Contracts
Mr. N A Abeyesekera
The Directors have no direct or indirect interest in any other contract
or proposed contract with the Company. Except for the transactions
referred to in Note 30 to the Financial Statements, the Company did not
carry out any transaction with any of the Directors.
Mr. J M Kariapperuma
Horana Plantations PLC
Mr. W D N H Perera
Mr. Dhammika Perera
Mr. L J A Fernando
Dr. S Selliah
Mr. K D H Perera
Mr. A M Pandithage
Mr. A N Wickremasinghe
Mr. J M Kariapperuma
Mr. R Rajadurai
Mr. K D G Gunaratne - Alternate Director to Mr. Dhammika Perera
Mr. N T Bogahalande - Alternate Director to Mr. K D H Perera)
Uni Dil Packaging Limited
Mr. W D N H Perera
Mr. D B Gamalath
Mr. N A Abeyesekera
Mr. H Somashantha
Mr. N T Bogahalande
The Company carried out transactions during the year in the ordinary
course of its business at commercial rates with the following Director
related entities.
Auditors
Messrs Ernst & Young, Chartered Accountants served as the Auditors
during the year under review and also provided non audit/ consultancy
services. They do not have any interest in the Company other than that
of Auditor and provider of tax related services.
A total amount of Rs. 1,245,2600/- is payable by the Company to the
Auditors for the year under review comprising Rs. 955,000/- as audit
fees and Rs. 290,260/- for non audit services.
The Auditors have expressed their willingness to continue in office. The
Audit Committee at a meeting held on 19th May 2015 recommended
that they be re-appointed as Auditors. A resolution to re-appoint the
Auditors and to authorise the Directors to determine their remuneration
will be proposed at the Annual General Meeting.
Stated Capital
The Stated Capital of the Company is Rs.787,765,736/-..
Uni Dil Paper Sacks (Private) Limited
The number of shares issued by the Company stood at 54,600,000 fully
paid ordinary shares as at 31st March 2015 (which was the same as at
31st March 2014).
Mr. D B Gamalath
Mr. N A Abeyesekera
49
Directors’ Shareholding
The movement of fixed assets during the year is given in Note 03 to the
financial statements.
The relevant interests of Directors in the shares of the Company as at
31st March 2015 and 31st March 2014 are as follows.
ShareholdingShareholding
as at
as at
31/03/2015
31/03/2014
Mr. W D N H Perera
-
-
86
17,286
Dr. S Selliah
-
-
Mr. T de Zoysa -
2,520
Mr. T G Thoradeniya
-
-
Mr. K D G Gunaratne
-
-
Ms. A M L Page
-
-
-
-
Shareholders
There were 10,885 shareholders registered as at 31st March 2015
(11,025 shareholders as at 31st March 2014). The details of distribution
are given on page 117 of this Report.
Major Shareholders, Distribution Schedule and other information
Information on the distribution of shareholding, analysis of
shareholders, market values per share, earnings, dividends, net assets
per share, twenty largest shareholders of the Company, percentage of
shares held by the public as per the Listing Rules of the Colombo Stock
Exchange are given on page 118 under Share Information.
Employment Policy
The Company’s employment policy is totally non-discriminatory which
respects individuals and provides carrier opportunities irrespective of
the gender, race or religion.
As at 31st March 2015, 532 persons were in employment (543 persons
as at 31st March 2014).
Reserves
The reserves of the Company with the movements during the year are
given in Note 13 to the Financial Statements on page 83
Dividends
An interim dividend of Rs. 2/- per share for the year ending 31st March
2015 was paid on 27th November 2014.
A second interim dividend of Rs. 2/- per share for the year ending 31st
March 2015 was approved by the Board on 31st March 2015 and paid
on 24th April 2015.
Substantial Shareholdings
The Company is controlled by Lanka Ceramic PLC which holds 62.192%
of the issued share capital of the Company. The ultimate parent
Company is Vallibel One PLC.
Investments
Details of the Company’s quoted and unquoted investments as at 31st
March 2015 are given in Note 05 to the Financial Statements on pages
79 to 80
Donations
The Company made donations amounting to Rs. 680,000/- in total,
during the year under review. (2014 Rs. 539,000/-).
Risk Management
An ongoing process is in place to identify and manage the risks that
are associated with the business and operations of the Company. The
Directors review this process through the Audit Committee.
Specific steps taken by the Company in managing the risks are detailed
in the section on Risk Management on pages 33 to 36
Statutory Payments
The Directors confirm that to the best of their knowledge, all taxes,
duties and levies payable by the Company, all contributions, levies
and taxes payable on behalf of, and in respect of employees of the
Company and all other known statutory dues as were due and payable
by the Company as at the Balance Sheet date have been paid or, where
relevant provided for, except for certain assessments where appeals
have been lodged.
Land holdings
The book value of property, plant and equipment as at the balance sheet
date amounted to Rs. 2,233,154,000/The extents, locations, valuations and the number of buildings of the
Company’s land holdings are given below:
Location
No. of
Buildings
A
R
P
Valuation
‘000
Head Office
1
1
2
5
353,675
Meepe Factory
17
23
3
35
352,969
Total
18
25
02
00
706,644
50
Lands in Extent
Contingent Liabilities
Except as disclosed in Note 31 to the Financial Statements on pages 105
to 105, there were no material Contingent Liabilities as at the Balance
Sheet date.
Events occurring after the Balance Sheet date
Except for the matters disclosed in Note 32 to the Financial Statements
on page 105 there are no material events as at the date of the Auditor’s
report which require adjustment to, or disclosure in the Financial
Statements.
Multiplying Value
Corporate Social Responsibility
The Board of Directors confirm that the Company is compliant with
section 7.10 of the Listing Rules of the CSE.
The Company continued its Corporate Social Responsibility Programme,
details of which are set out on pages 37 to 43 of this Report.
An Audit Committee and a Remuneration Committee function as Board
sub committees, with Directors who possess the requisite qualifications
and experience. The composition of the said committees is as follows.
Environmental Protection
Audit Committee
- Chairman
After making adequate enquiries from the management, the Directors
are satisfied that the Company operates in a manner that minimizes
the detrimental effects on the environment and provides products
and services that have a beneficial effect on the customers and the
communities within which the Company operates.
Mr. R N Asirwatham
Going Concern
Mr. S H Amarasekera
The financial statements are prepared on going concern principles.
After making adequate enquires from the management, the Directors
are satisfied that the Company has adequate resources to continue its
operations in the foreseeable future.
Remuneration Committee
Mr. R B Thambiayah -
Chairman
Annual General Meeting
The Notice of the Thirty Eighth (38th) Annual General Meeting appears
on page 119.
The Corporate Governance of the Company is reflected in its strong
belief in protecting and enhancing stakeholder value in a sustainable
manner, supported by a sound system of policies and practices. Prudent
internal controls ensure professionalism, integrity and commitment of
the Board of Directors, Management and employees.
This Annual Report is signed for and on behalf of the Board of Directors
by
The Corporate Governance Statement on pages 26 to 32 explains the
measures adopted by the Company during the year.
W D N H Perera Chairman
J A P M Jayasekera
Managing Director
Secretaries
29th May 2015
51
Chief Executive Officer’s and Chief Financial
Officer’s Responsibility Statement
The financial statements are prepared in compliance with the Sri
Lanka Accounting Standards issued by the Institute of Chartered
Accountants of Sri Lanka and the requirements of the Companies
Act No. 7 of 2007 and any other applicable statues to the extent
applicable to the Company. There are no departures from the prescribed
accounting standards in their adoption. The accounting policies used
in the preparation of the financial statements are appropriate and
are consistently applied, except where otherwise stated in the notes
accompanying the financial statements.
The Board of Directors and the management of your Company accept
responsibility for the integrity and objectivity of these financial
statements. The estimates and judgments relating to the financial
statements were made on a prudent and reasonable basis, in order that
the financial statements reflect in a true and fair manner, the form and
substance of transactions, and reasonably present the Company’s state
of affairs. To ensure this, the Company has taken proper and sufficient
care in installing a system of internal control and accounting records,
for safeguarding assets, and for preventing and detecting frauds as
well as other irregularities, which is reviewed, evaluated and updated
on an ongoing basis. Our internal auditors have conducted periodic
audits to provide reasonable assurance that the established policies
and procedures of the Company were consistently followed. However,
there are inherent limitations that should be recognised in weighing the
assurances provided by any system of internal controls and accounting.
The financial statements were audited by M/s. Ernst & Young, Chartered
Accountants, the independent auditors.
52
The Audit Committee of your Company meets periodically with the
internal auditors and the independent auditors to review the manner
in which these auditors are performing their responsibilities, and to
discuss auditing, internal control and financial reporting issues. To
ensure complete independence, the independent auditors and the
internal auditors have full and free access to the members of the Audit
Committee to discuss any matter of substance.
It is also declared and confirmed that the Company has complied with
and ensured compliance by the auditors with the guidelines for the
audit of Listed Companies where mandatory compliance is required.
J A P M Jayasekera
Managing Director 29th May 2015
B T T Roche
Head of Finance
Multiplying Value
The Directors are required by the Companies Act, No. 7 of 2007 to
prepare financial statements for each financial year, which give a true
and fair view of the statement of affairs of the Company as at the end
of the financial year and the income and expenditure of the Company
for the financial year.
The Directors are also responsible to ensure that the financial
statements comply with any regulations made under the Companies Act
which specifies the form and content of financial statements and any
other requirements which apply to the Company’s financial statements
under any other law.
The Directors consider that the financial statements presented in this
Annual Report have been prepared using appropriate accounting
policies, consistently applied and supported by reasonable and
prudent judgments and estimates and in compliance with the Sri
Lanka Accounting Standards, Companies Act, No. 7 of 2007, Sri Lanka
Accounting and Auditing Standards Act No. 15 of 1995.
The Directors are responsible for ensuring that the Company keeps
sufficient accounting records, which disclose the financial position of
the Company with reasonable accuracy and enable them to ensure
that the financial statements have been prepared and presented as
aforesaid. They are also responsible for taking measures to safeguard
the assets of the Company and in that context to have proper regard
to the establishment of appropriate systems of internal control with a
view to prevention and detection of fraud and other irregularities.
The Directors continue to adopt the going concern basis in preparing
the financial statements. The Directors, after making inquiries and
review of the Company’s Business Plan for the financial year 2015/2016,
including cash flows and borrowing facilities, consider that the
Company has adequate resources to continue in operation.
By Order of the Board
Lanka Walltiles PLC
Secretaries
29th May 2015
53
TO THE SHAREHOLDERS OF LANKA WALLTILES PLC
Opinion
Report on the Financial Statements
In our opinion, the consolidated financial statements give a true and
fair view of the financial position of the Group as at 31 March 2015,
and of its financial performance and cash flows for the year then ended
in accordance with Sri Lanka Accounting Standards.
We have audited the accompanying financial statements of Lanka
Walltiles PLC (“Company”) and the consolidated financial statements
of the Company and its Subsidiaries which comprise the statement
of financial position as at 31 March 2015, and the statement of
comprehensive income, statement of changes in equity and, cash
flow statement for the year then ended, and a summary of significant
accounting policies and other explanatory information set out on pages
59 to 111.
Board’s Responsibility for the Financial Statements
The Board of Directors (“Board”) is responsible for the preparation of
these financial statements that give a true and fair view in accordance
with Sri Lanka Accounting Standards and for such internal controls as
Board determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit in accordance with Sri
Lanka Auditing Standards. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation
of the financial statements that give a true and fair view 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. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of
accounting estimates made by Board, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
54
Report on Other Legal and Regulatory Requirements
As required by Section 163(2) of the Companies Act No. 7 of 2007, we
state the following:
a) The basis of opinion and scope and limitations of the audit are as
stated above.
b) In our opinion :
-
we have obtained all the information and explanations that were
required for the audit and, as far as appears from our examination,
proper accounting records have been kept by the Company.
-
the financial statements of the Company give a true and fair view
of the financial position as at 31 March 2015, and of its financial
performance and cash flows for the year then ended in accordance
with Sri Lanka Accounting Standards and
-
the financial statements of the Company and the Group, comply
with the requirements of Section 151 and 153 of the Companies
Act No. 07 of 2007.
CHARTERED ACCOUNTANTS
Colombo
29th May 2015
Multiplying Value
NoteGroup
Company
As at 31st March2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
ASSETS
Non-current assets
Property, plant and equipment
3
10,061,471
9,796,164
2,233,154
2,306,044
Intangible assets - goodwill
4
24,519
24,519
-
Investments in subsidiaries
5
-
-
1,276,096
1,276,096
Long term receivables
6
27,285
27,285
-
Deferred tax asset
7
52,183
22,729
-
10,165,4589,870,6973,509,2503,582,140
Current assets
Inventories
83,473,2623,648,3721,349,1341,363,613
Trade and other receivables
9
2,327,095
2,444,967
681,483
720,176
Amounts due from related parties
10
1,263
-
272
10,399
Income tax receivable
34,092
21,884
34,092
21,884
Short term investments
112,9643,6242,9643,624
Cash and cash equivalents
28
977,467
168,900
34,805
12,187
6,816,1436,287,7472,102,7502,131,883
Total assets
16,981,601
16,158,444
5,612,000
5,714,023
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital
12787,765787,765787,765787,765
Reserves
13
1,004,516936,147296,294296,294
Retained earnings
4,705,024
4,018,704
1,886,370
1,728,484
Shareholders’ funds6,497,3055,742,6162,970,4292,812,543
Non controlling interest
2,750,143
2,383,029
-
Total equity9,247,4488,125,6452,970,4292,812,543
Non-current liabilities
Interest bearing liabilities
14
1,742,100
1,923,947
358,697
560,105
Deferred tax liabilities
15
702,135
596,455
167,892
131,840
Retirement benefit liability
16
691,214
642,946
67,027
58,310
Deferred income & Capital grants
17
121,613
118,411
-
3,257,0623,281,759 593,616 750,255
Current liabilities
Trade and other payables
18
1,649,063
1,356,977
360,936
300,804
Income tax liabilities
165,450
45,764
-
Amounts due to related parties
19
28,782
2,456
138,180
250,281
Current portion of interest bearing liabilities
14
2,633,796
3,345,843
1,548,839
1,600,140
4,477,0914,751,0402,047,9562,151,225
Total equity and liabilities
16,981,601
16,158,444
5,612,000
5,714,023
I certify that, these Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007.
B T T Roche
Head of Finance
The Board of Directors is responsible for the preparation and presentation of these financial statements.
Signed for and on behalf of the Board,
W D N H Perera
J A P M Jayasekera
Chairman
Managing Director
The accounting policies and notes on pages 59 to 111 form an integral part of the financial statements.
29th May 2015
Colombo
55
Group
Company
For the Year ended 31 March
2015
2014
2015
2014
NoteRs.’000Rs.’000Rs.’000Rs.’000
Revenue
2014,596,21413,419,770 3,078,121 2,599,659
Cost of Sales
(10,855,981)
(10,282,638)
(2,142,319)
(1,951,099)
Gross Profit3,740,2333,137,132 935,802 648,560
Other Income
21189,012167,148277,718245,093
Distribution Costs (987,637)(829,354)(292,894)(285,389)
Administrative Expenses
(822,113)
(722,631)
(201,007)
(186,504)
Finance Cost
22 (327,204)(600,231)(165,140)(226,973)
Finance Income
23
5,913
23,266-Profit Before Tax
24
1,798,203
1,175,330
554,479
194,787
Income Tax Expense
25
Profit for the Year
(347,607)
1,450,596
(254,701)
920,629
(37,426)
517,052
(755)
194,032
Other Comprehensive Income
Net Other Comprehensive Income not to be
reclassified to profit or loss in subsequent periods (net of tax):
Revaluation of Land
3
Actuarial Loss on Retirement Benefit Liability
16
Deferred tax on components of
other comprehensive income
25
Total Comprehensive Income for the Year
155,075
(4,429)
14,680
(85,448)
-
(5,640)
(2,217)
2,881
1,604,124
11,742
861,603
1,373
512,786
191,815
Profit attributable to :
Equity holders of the parent
Profit for the year
1,043,793
406,803
1,450,596
605,704
314,925
920,629
517,052
-
517,052
194,032
194,032
Total comprehensive income attributable to :
Total Comprehensive Income for the Year
1,107,509
496,614
1,604,124
581,522
280,081
861,603
512,786
-
512,786
191,815
191,815
19.12
-
11.09
-
9.47
6.50
3.55
2.00
Basic Earnings Per Share - Profit Attributable to Ordinary Equity Holders
Dividends Per Share
56
26
27
Multiplying Value
Attributable to equity holders of the parent
Non
controlling
Total
Note
StatedRevaluation Retained
Total
interest
equity
capital reserveEarnings
Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000
GROUP
Balance as at 01 April 2014
787,765
971,218 3,254,614 5,013,597
3,370,511 8,384,108
Profit for the Year
-
-
605,704
605,704
314,925
920,629
-
14,680
(38,862)
(24,182)
(34,844)
(59,026)
Total Comprehensive Income
- 14,680566,842581,522280,081861,603
Write back of unclaimed dividends
-
-
2,189
2,189
-
2,189
Dividends
Final 2012/2013 (Rs. 2.00 per share)
27
-
- (109,200) (109,200)
- (109,200)
Reclassification of investment property-
(49,751)
49,751--Dividend to non controlling interest
-
-
-
- (131,808) (131,808)
Acquisition of non controlling interest
-
-
254,508
254,508 (1,135,755) (881,247)
Balance as at 31 March 2014
787,765
936,147 4,018,704 5,742,616 2,383,029 8,125,645
Profit for the Year
-
- 1,043,793 1,043,793
406,803 1,450,596
-
68,369
(4,652)
63,717
89,811
153,528
-
68,369 1,039,141 1,107,510
496,614 1,604,124
Dividends
27
-
- (136,500) (136,500)
- (136,500)
1st Interim 2014/15 (Rs. 2.00 per share)
-
- (109,200) (109,200)
- (109,200)
2nd Interim 2014/15 (Rs. 2.00 per share)
-
- (109,200) (109,200)
- (109,200)
-
-(354,900)(354,900)
-(354,900)
Dividend to non controlling interest
-
-
2,079
2,079 (129,500) (127,421)
787,765 1,004,516 4,705,024 6,497,305 2,750,143 9,247,448
Stated
Revaluation
Retained
Total
capital
reserve
Earnings
Rs.’000Rs.’000Rs.’000Rs.’000
COMPANY
Balance as at 01 April 2013
Profit for the Year
Write back of unclaimed dividends
Reclassification of investment property
Dividends
27
787,765
-
-
-
-
-
346,045 1,593,929 2,727,739
-
194,032
194,032
-
(2,217)
(2,217)
-
191,815
191,815
-
2,189
2,189
(49,751)
49,751
-
-
787,765
- (109,200) (109,200)
296,294 1,728,484 2,812,543
Profit for the Year
-
-
517,052
517,052
-
-
(4,266)
(4,266)
-
-
512,786
512,786
Dividends
27
-
- (136,500) (136,500)
1st Interim 2014/15 (Rs. 2.00 per share)
-
- (109,200) (109,200)
2nd Interim 2014/15 (Rs. 2.00 per share)
-
- (109,200) (109,200)
--
(354,900)
(354,900)
787,765
296,294 1,886,370 2,970,429
The accounting policies and notes on pages 59 to 111 form an integral part of the financial statements.
57
Cash Flow Statement
Group
Company
For the Year ended 31st March
2015
2014
2015
2014
NoteRs.’000Rs.’000Rs.’000Rs.’000
Profit before income tax1,798,2031,175,330 554,479 194,787
Adjustments for
Depreciation & amortisation
585,227
551,174
147,272
145,141
Income from investments
3
-
-
(236,778)
(167,121)
Profit/ (loss) on sale of property, plant & equipment
(33,921)
3,898
2,101
2,153
Interest income
(5,913)
(23,266)
-
Finance costs327,204600,231165,140226,973
Provision for retirement benefit obligations
16
115,803
108,358
12,107
10,751
Allowance/ (reversal) for obsolete and slow moving inventories
7,476
(16,502)
848
1,450
Allowance for impairment of trade receivable
12,889
653
(5,487)
(1,246)
Deferred income / capital grants amortisation
17
(4,653)
(4,255)
-
Changing in Fair Value of Biological Assets
3.1(9)
(56,640)
(26,052)
-
Profit on sale of investment property
-
(50,000)
-
(50,000)
Foreign exchange (gain)/ loss
4,017
4,116
3,508
6,245
Operating profit/(loss) before working capital changes
2,749,693
2,323,685
643,191
369,133
Working capital adjustments
(Increase)/ decrease in inventories
(Increase)/ decrease in trade and other receivables
(Increase) /decrease in due from related parties
Increase/ (decrease) in due to related parties
Increase /(decrease) in trade and other payables
Increase/ (decrease) in investments
Cash generated from operations
167,633
104,983
(1,263)
26,326
292,837
660
3,340,869
143,128
(255,233)
-
1,896
(426,175)
(289)
1,787,012
13,631
44,180
10,127
(112,101)
60,132
660
659,819
33,787
(122,009)
18,357
45,560
(28,453)
(238)
316,137
Interest received
5,913
931-Finance costs paid (327,204)(598,048)(165,140)(226,973)
Retirement benefit plan costs paid
(72,715)
(82,425)
(9,030)
(5,200)
Income tax paid
(161,191)
(80,632)
(12,208)
Net cash flows from/(used in) operating activities
2,785,671
1,026,838
473,440
83,964
CASH FLOWS FROM / (USED IN) INVESTING ACTIVITIES
Acquisition of property, plant & equipment
Acquisition of plantation assets
(Acquisition) / disposal of investments
Proceeds from sale of property, plant & equipment
Income from investments
Proceeds from disposal of investment property
Net cash flows from/(used in) investing activities
(396,681)
(240,800)
-
56,208
-
-
(581,273)
(550,406)
(288,736)
(881,247)
8,362
-
130,000
(1,582,027)
(84,925)
-
-
8,443
236,778
-
160,296
(166,995)
(726,207)
3,845
167,121
130,000
(592,236)
CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES
Interest bearing loans & borrowings obtained
463,082
3,963,744
-
734,859
Repayment of interest bearing borrowings
(1,264,982)
(3,395,338)
(315,595)
(166,572)
Dividends paid - on Ordinary Shares
27
(354,900)
(109,200)
(354,900)
(109,200)
Dividend paid to non controlling interest
(127,421)
(131,808)
-
Dividend write back-
2,189-Capital grants received
17
7,855
11,525
-
Net cash flows from/(used in) financing activities
(1,276,366)
339,708
(670,495)
459,087
Net increase/(decrease) in cash and cash equivalents
928,032
(215,481)
(36,760)
(49,185)
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
28
(868,424)
59,608
(652,943)
(868,424)
(364,624)
(401,384)
(315,439)
(364,624)
The accounting policies and the notes on pages 59 to 111 form an integral part of these financial statements.
58
Multiplying Value
Notes to the Financial
Statements
1.
CORPORATE INFORMATION
1.1General
2.1.3
Going concern
When preparing financial statements, management has
made assessments of the ability of the constituents of the
Group to continue as going concern, taking into account all
available information about the future, including intentions of
curtailment of business, as decided by Board.
Lanka Walltiles PLC is a limited liability company incorporated
and domiciled in Sri Lanka and listed on the Colombo Stock
Exchange. The registered office and the principal place of
business of the Company is located at No. 215, Nawala Road,
Narahenpita, Colombo 05.
1.2
Principal activities and nature of operations
During the year, the principal activities of the Company were
the manufacture and sale of ceramic walltiles for export and
local markets and holding investments.
The accounting policies adopted are consistent with those of
the previous financial year.
There has been no significant effect to the accounting policies
due to the adoption of the SLFRS 10 -Consolidated Financial
Statements, SLFRS 12 - Disclosure of Interests in Other
Entities and SLFRS 13 - Fair Value Measurement. Changes to
disclosure requirement, on adoption of SLFRS 13 – Fair value
measurement and SLFRS 12 – Disclosure of interest in other
Entities have been disclosed under note 3.1 (l) ,13.6 and Note
34 respectively. 2.1.5
Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 March
2015. Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through
its power over the investee. Specifically, the Group controls an
investee if, and only if, the Group has:
The principal activities of the other Companies of the Group are
disclosed in Note 5.2 to the Financial Statements.
1.3
Parent enterprise and ultimate parent enterprise
The Company’s parent entity is Lanka Ceramic PLC. In the
opinion of the Directors, the Company’s ultimate parent
undertaking and controlling party is Vallibel One PLC, which is
incorporated in Sri Lanka.
1.4
Date of authorization for issue
The Financial Statement of Lanka Walltiles PLC and its
Subsidiaries for year ended 31 March 2015 was authorized for
issue in accordance with a resolution of the Board of Directors
(Awaiting Information).
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
2.1
Basis of Preparation
The financial statements of the Company and the Group
have been prepared in accordance with Sri Lanka Accounting
Standards comprising SLFRS and LKAS (hereafter “SLFRS”) as
issued by the Institute of Chartered Accountants of Sri Lanka.
2.1.4 Changes in Accounting Policies
1. Power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee)
2. Exposure, or rights, to variable returns from its
involvement with the investee
3. The ability to use its power over the investee to affect its
returns
2.1.1 Basis of measurement
The financial statements of the Company and the Group have
been prepared on a historical cost basis, except otherwise
indicated including land which have been measured at fair
value.
The financial statements are presented in Sri Lankan Rupees
(Rs), except when otherwise indicated.
1. The contractual arrangement with the other vote holders of
the investee
2.1.2 Statement of Compliance
The financial statements of the Company and consolidated
financial statements of the Group have been prepared in
accordance with Sri Lanka Accounting Standards (“SLFRS”) as
issued by Institute of Chartered Accountants of Sri Lanka.
The preparation and presentation of these financial statements
is in compliance with the requirements of the Companies Act
No.07 of 2007.
Generally, there is a presumption that a majority of voting
rights result in control. To support this presumption and when
the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an
investee, including:
2. Rights arising from other contractual arrangements
3. The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee
if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation
of a subsidiary begins when the Group obtains control over
59
the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included
in the consolidated financial statements from the date the
Group gains control until the date the Group ceases to control
the subsidiary.
Profit or loss and each component of other comprehensive
income (OCI) are attributed to the equity holders of the parent
of the Group and to the non-controlling interests, even if
this results in the non-controlling interests having a deficit
balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies. All intra-group
assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are
eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the
related assets (including goodwill), liabilities, non-controlling
interest and other components of equity while any resultant
gain or loss is recognised in profit or loss. Any investment
retained is recognised at fair value.
Companies in the Group, the Group holdings in its subsidiary
are given in Note 6.2 to the financial statements.
2.2
60
Business combinations are accounted for using the
acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred measured
at acquisition date fair value and the amount of any noncontrolling interests in the acquiree. For each business
combination, the Group elects whether to measure the noncontrolling interests in the acquiree at fair value or at the
proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred and included
in administrative expenses.
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests, and any previous
interest held, over the net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets acquired
is in excess of the aggregate consideration transferred, the
Group re-assesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be
recognised at the acquisition date. If the reassessment still
results in an excess of the fair value of net assets acquired
over the aggregate consideration transferred, then the gain is
recognised in profit or loss.
Significant Accounting Judgments, Estimates And Assumptions
2.2.1Judgments
In the process of applying the Group accounting policies,
management has made the following judgments, apart from
those involving estimations, which has the most significant
effect on the amounts recognised in the financial statements.
a)Taxation
The Group is subject to Income Taxes and other taxes.
Uncertainties exist, with respect to the interpretation of
the applicability of tax laws, at the time of the preparation
of these Financial Statements. Accordingly, the Group has
exercised judgment in determining the tax effect due to the
change in the accounting base and the tax base due to first
time adoption of Sri Lanka Accounting Standards. Where
the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will
impact the income and deferred tax amounts in the period
in which the determination is made.
b) Useful life-time of the Property, Plant and equipment
2.1.6Goodwill
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group’s
cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities
of the acquiree are assigned to those units.
The Group reviews the useful lives and methods of
depreciation of assets at each reporting date. Judgement
of the management is exercised in the estimation of these
values, rates, methods and hence they are subject to
uncertainty (Note 3).
2.2.2 Estimates and Assumptions
The key assumptions concerning the future and other key
sources of estimation uncertainty at the reporting date, that
have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below. The respective carrying
amounts of assets and liabilities are given in related notes to
the financial statements.
a) Defined benefit plans
The cost of defined benefit plan- gratuity is determined
using actuarial valuations. The actuarial valuation involves
making assumptions about discount rates, future salary
increases, mortality rates and future pension increases.
Due to the long term nature of these plans, such estimates
are subject to significant uncertainty. Retirement benefit
liability of the Group is disclosed in Note 16.
Multiplying Value
b) Provision for Slow moving inventories
h) Fair Valuation of Biological Assets
A provision for slow moving inventories is recognised
based on the best estimates available to management on
their future usability/sale. As management uses historical
information as the basis to determine the future usability
and recoverability, actual future losses on inventories could
vary from the provision made in these financial statements
(Note 8).
The fair value of managed timber determined based on
discounted cash flow method using various financial and
non-financial assumptions. The growth of the trees is
determined by various biological features that are highly
unpredictable. Any change to the assumptions will impact
the fair value of biological assets. Key assumptions and
sensitivity analysis of the biological assets are given in the
note 3.1 (h) and 2.4.2 (b) (i).
c) Freehold land
The fair value of freehold land and building was determined
by means of a revaluation by independent valuers in
reference to market based evidence as detailed in Note 3.1
(l).
2.3 d) Impairment of debtors
The Group reviews at each reporting date all receivables to
assess impairment of debtors. (Note 9).
e) Deferred tax assets
Deferred tax assets are recognised in respect of tax losses
to the extent it is probable that future taxable profits will
be available against which such tax losses can be set off.
Judgment is required to determine the amount of deferred
tax assets that can be recognised, based on the likely
timing and level of future taxable profits, together with the
future tax-planning strategies.
The Group assesses whether there are any indicators of
impairment for all non-financial assets at each reporting
date. Non-financial assets are tested for impairment
when there are indicators that the carrying amounts may
not be recoverable. When values in use calculations are
undertaken, management must estimate the expected
future cash flows from the assets or cash generating unit
and choose a suitable discount rate in order to calculate
the present value of those cash flows.
Fair value related disclosures for assets measured at fair value
or financial instruments that are not measured at fair value,
for which fair values are disclosed, are summarized in the Note
3.1(l) and 14.8 to the financial statements.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in
their economic best interest.
The Group uses valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or
disclosed in the Financial Statements are categorised within the
fair value hierarchy, described as follows,
Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable
Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable
g) Fair Value of Financial Instruments
Where the fair values of financial assets and financial
liabilities disclosed in the financial statements cannot be
derived from active markets, they are determined using
a variety of valuation techniques that include the use
of mathematical models. The inputs to these models are
derived from observable market data where possible, but
if this is not available, judgment is required to establish
fair values. The judgments include considerations of
liquidity and inputs such as discount rates. The valuation
of financial instruments is described in more detail in Note
14.8.
The financial statements are presented in Sri Lanka Rupees,
which is the Group’s functional and presentation currency.
Transactions in foreign currencies are initially recorded at the
functional currency rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are re-translated at the functional currency rate
of exchange ruling at the reporting date. All differences are
taken to profit or loss. Non monetary items 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 was determined.
2.3.2 Fair Value Measurement
f) Impairment of Non Financial Assets
Summary Of Significant Accounting Policies
2.3.1 Foreign currency translation
61
For assets and liabilities that are recognised in the Financial
Statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the
end of each reporting period.
The management determines the policies and procedures for
both recurring fair value measurement and for non- recurring
measurement.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
profit nor taxable profit or loss; and the carrying amount of
deferred income 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.
Deferred income 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 income tax relating to items recognised directly in
equity statement is recognised in equity statement and not in
the statement of total comprehensive income.
2.3.3Taxation
Sales tax
Current taxes
Current income tax assets and liabilities for the current and
prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
The provision for income tax is based on the elements of
income and expenditure as reported in the financial statements
and computed in accordance with the provisions of the
relevant tax legislations. Current income tax relating to items
recognised directly in equity statement is recognised in equity
and not in the statement of comprehensive income.
Revenue, expenses and assets are recognised net of the amount
of sales tax except where the sales tax incurred on a purchase
of assets or services is not recoverable from the taxation
authorities in which case the sales tax is recognised as a part of
the cost of the asset or part of the expense items as applicable
and receivable and payable are stated with the amount of sales
tax included. The amount of sales tax recoverable and payable
in respect of taxation authorities is included as a part of other
receivables and other payables in the Statement of Financial
Position.
Deferred taxation
Deferred income tax is provided, using the liability method, on
temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences except where the deferred income tax
liability arises 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.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax assets
and unused tax losses, to the extent that it is probable that
taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax
assets and unused tax losses can be utilised except where the
deferred income tax asset relating to the deductible temporary
difference arises 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
62
2.3.4 Borrowing costs
Borrowing costs are recognised as an expense in the period
in which they are incurred, except to the extent where
borrowing costs that are directly attributable to the acquisition,
construction, or production of an asset that takes a substantial
period of time to get ready for its intended use or sale, are
capitalised as part of that asset.
Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are
recognised in statement of comprehensive income using the
effective interest method.
The amounts of borrowing costs which are eligible for
capitalisation are determined in accordance with LKAS 23 –
“Borrowing Costs”.
Borrowing cost incurred in respect of specific loans that
are utilised for the field development activities have been
capitalised as part of the cost of relevant immature plantation.
The capitalisation will ceased when crops are ready for
commercial harvest.
Multiplying Value
2.3.5Inventories
Inventories are valued at the lower of cost and net realizable
value, after making due allowances for obsolete and slow
moving items. Net realizable value is the price at which
inventories can be sold in the ordinary course of business
less the estimated cost of completion and the estimated cost
necessary to make the sale.
The Group’s financial assets include cash and short-term
deposits, trade and other receivables, loans and other
receivables and quoted and unquoted financial instruments.
Subsequent Measurement
The subsequent measurement of financial assets depends on
their classification as follows:
The cost incurred in bringing inventories to its present location
and condition is accounted using the following cost formulae:-
a) Loans and Receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in
an active market. After initial measurement, such financial
assets are subsequently measured at amortised cost using
the effective interest rate method (EIR), less impairment.
The losses arising from impairment are recognised in the
statement of comprehensive income in finance costs.
Finished goods and work-in-progress
Manufacturing goods
At the cost of direct materials, direct labour and an appropriate
proportion of fixed production overheads based on normal
operating capacity, but excluding borrowing cost.
Trading goods
At purchase cost on first in first out basis
Consumable and spares
At actual cost on weighted average basis
• The rights to receive cash flows from the asset have expired
Raw materials
At purchase cost on weighted average cost basis, except for
Vallibel Plantation Management Limited and Swisstek (Ceylon)
PLC which is on a first in first out basis.
• The Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the
received cash flows in full.
Derecognition
Goods in transit
At actual cost
Impairment of Financial Assets
The Group assesses at each reporting date whether there is any
objective evidence that a financial asset or a Group of financial
assets is impaired. A financial asset or a Group of financial
assets is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset (an
incurred ‘loss event’) and that loss event has an impact on the
estimated future cash flows of the financial asset or the Group
of financial assets that can be reliably estimated. Evidence
of impairment may include indications that the debtors or a
Group of debtors is experiencing significant financial difficulty,
default or delinquency in payments, the probability that they
will enter bankruptcy or other financial reorganisation and
where observable data indicate that there is a measurable
decrease in the estimated future cash flows, such as changes in
arrears or economic conditions that correlate with defaults.
Financial Assets carried at Amortised Cost
For financial assets carried at amortised cost, the Group first
assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant,
or collectively for financial assets that are not individually
significant. If the Group determines that no objective evidence
of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a
Group of financial assets with similar credit risk characteristics
2.3.6 Financial Instruments
Financial Assets
Initial Recognition and Measurement
Financial assets within the scope of LKAS 39 are classified
as financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments, available-forsale financial assets, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Group
determines the classification of its financial assets at initial
recognition.
All financial assets are recognised initially at fair value plus,
in the case of assets not at fair value through profit or loss,
directly attributable transaction costs.
Purchases or sales of financial assets that require delivery
of assets within a time frame established by regulation
or convention in the marketplace (regular way trades) are
recognised on the trade date, i.e., the date that the Group
commits to purchase or sell the asset.
A financial asset (or, where applicable a part of a financial asset
or part of a Group of similar financial assets) is derecognised
when:
63
when the liabilities are derecognised as well as through the
effective interest rate method (EIR) amortisation process.
and collectively assesses them for impairment. Assets that
are individually assessed for impairment and for which an
impairment loss is, or continues to be, recognised are not
included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the assets carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred).
The carrying amount of the asset is reduced through the use of
an allowance account and the amount of the loss is recognised
in the statement of comprehensive income. Loans together
with the associated allowance are written off when there is
no realistic prospect of future recovery and all collateral has
been realised or has been transferred to the Group. If, in a
subsequent year, the amount of the estimated impairment
loss increases or decreases because of an event occurring after
the impairment was recognised; the previously recognised
impairment loss is increased or reduced by adjusting the
allowance account. If a future write-off is later recovered,
the recovery is credited to finance costs in the statement of
comprehensive income.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities within the scope of LKAS 39 are classified
as financial liabilities at fair value through profit or loss, loans
and borrowings, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Group
determines the classification of its financial liabilities at initial
recognition.
All financial liabilities are recognised initially at fair value and,
in the case of loans and borrowings, carried at amortised cost.
This includes directly attributable transaction costs.
The Group’s financial liabilities include trade and other
payables, bank overdrafts and loans and borrowings.
Accordingly Group financial liabilities have been classified as
and loans and borrowings.
Subsequent Measurement
The measurement of financial liabilities depends on their
classification as follows:
a) Loans and Borrowings
64
After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortised cost
using the effective interest rate method. Gains and losses
are recognised in the statement of comprehensive income
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs
those are an integral part of the EIR. The EIR amortisation
is included in finance costs in the statement of
comprehensive income.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
2.3.7 Property, plant and equipment
Property, plant and equipment is stated at cost or valuation,
excluding the costs of day to day servicing, less accumulated
depreciation and accumulated impairment in value. Such cost
includes the cost of replacing part of the plant and equipment
when that cost is incurred, if the recognition criteria are met.
Depreciation is calculated on a straight line basis over the
useful life of the assets.
Free hold land is initially measured at cost and thereafter
measured at fair value.
When each major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied.
An item of property, plant and equipment is derecognised upon
disposal or when no 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 statement of total comprehensive income in
the year the asset is derecognised.
The asset’s residual values, useful lives and methods of
depreciation are reviewed, and adjusted if appropriate, at each
financial year end.
2.3.8Leases
2.3.8.1 Finance leases
Assets obtained under finance lease, which effectively transfer
to the Group substantially the entire risks and benefits
incidental to ownership of the leased assets, are treated as
if they have been purchased outright and are capitalised at
their cash price. Assets acquired by way of a finance lease are
measured at an amount equal to the lower of the present value
of the minimum lease payments and fair value of the leased
property.
Multiplying Value
Assets held under finance lease are amortized shorter of the
lease period or the useful lives of equivalent owned assets,
unless ownership is not transferred at the end of the lease
period.
The principal/capital element payable to the lessor is shown as
liability/obligation. The lease rentals are treated as consisting of
capital and interest elements. The capital element in the rental
is applied to reduce the outstanding obligation and interest
element is charged against profit, in proportion to the reducing
capital outstanding.
The cost of improvements on leased property is capitalised,
disclosed as improvements to leasehold property and
depreciated over the unexpired period of the lease, or the
estimated useful lives of the improvements, whichever is
shorter.
Leases where the lessor effectively retains substantially all
the risks and benefits of ownership over the leased term are
classified as operating leases.
Rentals paid under operating leases are recognised as an
expense in the income statement on a straight-line basis over
the lease term. When an operating lease is terminated before
the lease period has expired, any payment required to be made
to the lessor by way of penalty is recognised as an expense in
the period in which termination takes place.
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of past events, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. When
the Group expects some or all of a provision to be reimbursed,
the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The expense
relating to any provision is presented in the statement of total
comprehensive income net of any reimbursement.
2.3.10 Retirement benefit obligations
A defined benefit plan is a post-employment benefit
plan other than a defined contribution plan. The defined
benefit is calculated by independent actuaries using
Projected Unit Credit (PUC) method as recommended by
LKAS 19 – “Employee benefits”. The present value of the
defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates that are
denominated in the currency in which the benefits will be
paid, and that have terms to maturity approximating to the
terms of the related liability.
Accordingly, the employee benefit liability is based on the
actuarial valuation as of 31 March 2015.
Funding Arrangements
The Gratuity liability is not externally funded.
Employees are eligible for Employees’ Provident Fund
Contributions and Employees’ Trust Fund Contributions
in line with respective statutes and regulations. These are
recognised as an expense in the statement of income as
incurred.
The Group contributes 12% and 3% of gross emoluments
of the employees to Employees’ Provident Fund and
Employees’ Trust Fund respectively.
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, the Group makes an estimate of the asset’s recoverable
amount. An asset’s recoverable amount is the higher of an
asset’s or cash-generating unit’s fair value less costs to sell
and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets.
Where the carrying amount of an asset exceeds its recoverable
amount an asset is considered impaired and is written down to
its recoverable amount.
2.3.12 Revenue recognition
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the Group and that the
revenue and associated costs incurred or to be incurred can be
reliably measured. Revenue is measured at the fair value of the
consideration received or receivable net of trade discounts and
sales taxes. The following specific criteria have been used for
the purpose of recognition of revenue.
Sale of goods
Revenue from sale of goods is recognised when the significant
risks and rewards of ownership of the goods have passed to
buyer with the Group retaining neither continuing managerial
involvement to the degree usually associated with ownership
nor effective control over the goods sold.
(a) Defined Benefit Plan – Gratuity
2.3.11 Impairment of non-financial assets
2.3.9 Provisions
The present value of the defined benefit obligations
depends on a number of factors that are determined on
an actuarial basis using a number of assumptions about
discount rate, expected rates of return on assets, future
salary increases and mortality rates. Due to the longterm nature of these plans, such estimates are subject to
significant uncertainty. All assumptions are reviewed at
each reporting date.
(b) Defined Contribution Plans- Employees’ Provident Fund
and Employees’ Trust Fund
2.3.8.2 Operating leases
65
Interest
For all financial instruments measured at amortised cost and
interest bearing financial assets, 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.
Dividend income is recognised when the shareholders’ right to
receive payment is established.
Rental income
Rental income receivable under operating leases is recognised
on a straight-line basis over the term of the lease.
Other income
Other income is recognised on an accrual basis.
Net gains and losses of a revenue nature on the disposal
of property, plant & equipment and other non- current
assets including investments have been accounted for in the
statement of total comprehensive income, having deducted
from proceeds on disposal, the carrying amount of the assets
and related selling expenses. On disposal of re-valued property,
amount remaining in revaluation reserve relating to that asset
is transferred directly to retained earnings.
Gains and losses arising from incidental activities to main
revenue generating activities and those arising from a group
of similar transactions which are not material, are aggregated,
reported and presented on a net basis.
2.3.13
Segmental Reporting
A segment is a distinguishable component of the Group that
is engaged either in providing products or services (business
segment) or in providing products or services within a
particular economic environment (geographical segment),
which is subject to risks and rewards that are different from
those of other segments.
Segment result, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items mainly comprise of
goodwill on consolidation.
The Group comprises the following main business segments:
Tiles and associated items
The manufacture and distribution of wall tiles, floor tiles and
related products.
Biological Assets
Cultivation, processing and sale of tea and rubber
Aluminium products
The manufacture and distribution of aluminium extrusions and
allied products through a network of dealers & distributors.
Packing materials
The manufacture and distribution of packing materials
Management considers that there is no suitable basis for
allocating such assets and related liabilities to geographical
segments. Accordingly, segment assets, segment liabilities and
other segment information by geographical segment is not
disclosed.
2.3
Significant accounting policies that are specific to the
business of plantation
Interest income is included in finance income in the statement
of total comprehensive income.
Dividends
Segment information is presented in respect of the Group’s
business and has been prepared in conformation with the
accounting policies adopted for preparing and presenting the
consolidated financial statements of the Group. The business
segments are reported based on Group’s management and
internal reporting structure.
Inter segment pricing is determined at prices mutually agreed
by the companies.
66
2.4.1 Basis of Preparation
The Financial Statements have been prepared on historical
cost convention except for the following material items in the
statement of financial position.
a) Lease hold right to Bare Land and leased assets of JEDB/
SLSPC, which have been revalued as more fully described in
note 3.1.(d) and (e).
b) Consumable Mature Biological Assets are measured at fair
value less cost to sell. (LKAS 41)
c) Employee Benefits recognised based on actuarial valuation
(LKAS 19)
2.4.2 Property, Plant and Equipment
a) Permanent Land Development Cost
Permanent land development costs incurred in making
major infrastructure development and building new access
roads on leasehold lands.
These costs have been capitalised and amortised over the
remaining lease period.
Multiplying Value
value of timber trees are measured using Discounted Cash
Flow method taking in to consideration the current market
prices of timber, applied to expected timber content of a
tree at the maturity by an independent professional valuer
Permanent impairments to land development costs are
charged to the Statement of Comprehensive Income in full
and reduced to the net carrying amounts of such assets in
the year of occurrence after ascertaining the loss.
b) Biological Assets
(i) Bearer Biological Assets & Consumer Biological Assets
Biological assets are classified in to mature biological assets
and immature biological assets. Mature biological assets
are those that have attained harvestable specifications or
are able to sustain regular harvests. Immature biological
assets are those that have not yet attained harvestable
specifications. Tea, rubber, other plantations and nurseries
are classified as biological assets.
Variable
Comment
Timber content
Estimate based on physical verification
of girth, height and considering the
growth of the each species.
Factor all the prevailing statutory
regulations enforced against
harvesting of timber coupled with
forestry plan of the Company.
The cost of land preparation, rehabilitation, new planting,
re-planting, crop diversifying, inter-planting and fertilizing,
etc.,incurred between the time of planting and harvesting
(when the planted area attains maturity), are classified
as immature plantations. These immature plantations are
shown at direct costs plus attributable overheads, including
interest attributable to long term loans used for financing
immature plantations.
Biological assets are further classified as bearer biological
assets and consumable biological assets. Bearer biological
asset includes tea and rubber trees, those that are not
intended to be sold or harvested, however used to grow for
harvesting agricultural produce from such biological assets.
Consumable biological assets includes managed timber
trees those that are to be sold as biological assets.
The main variables in DCF model concerns,
Economic
useful life
Estimated based on the normal life
span of each species by factoring the
forestry plan of the Company.
Selling price
Estimated based on prevailing Sri
Lankan market price. Factor all the
conditions to be fulfilled in bringing
the trees in to saleable condition
Planting cost
Estimated costs for the further
development of immature arrears are
deducted.
Discount Rate
Discount rate reflects the possible
variations in the Cash flows and the
risk related to the biological assets.
The expenditure incurred on bearer biological assets
(tea and rubber) fields, which come in to bearing during
the year, has been transferred to mature plantations.
Expenditure incurred on consumable biological assets is
recorded at cost at initial recognition and thereafter at fair
value at the end of each reporting period.
Nursery cost includes the cost of direct materials,
direct labour and an appropriate proportion of directly
attributable overheads, less provision for overgrown plants.
The entity recognise the biological assets when, and
only when, the entity controls the assets as a result of
past event, it is probable that future economic benefits
associated with the assets will flow to the entity and the
fair value or cost of the assets can be measured reliably.
The gain or loss arising on initial recognition of biological
assets at fair value less cost to sell and from a change in
fair value less cost to sell of biological assets are included
in the Statement of Comprehensive Income for the period
in which it arises.
Permanent impairments to Biological Assets are charged
to the Statement of Comprehensive Income in full and
reduced to the net carrying amounts of such asset in the
year of occurrence after ascertaining the loss.
The bearer biological assets are measured at cost less
accumulated depreciation and accumulated impairment
losses, if any, in terms of LKAS 16 – Property Plant &
Equipment as per the option provided by the ruling issued
by Institute of Chartered Accountants of Sri Lanka.
The managed timber trees are measured on initial
recognition and at the end of each reporting period at its
fair value less cost to sell in terms of LKAS 41- Agriculture.
The cost is treated as approximation to fair value of young
plants as the impact on biological transformation of such
plants to price during this period is immaterial. The fair
(ii) Infilling Cost on Biological Assets
The land development costs incurred in the form of infilling
have been capitalised to the relevant mature field, only if
it increases the expected future benefits from that field,
beyond its pre-infilling performance assessment. Infilling
costs so capitalised are depreciated over the newly assessed
remaining useful economic life of the relevant mature
plantation, or the unexpired lease period, whichever is
lower.
67
2.4.3
deferred and allocated to income on a systematic basis over
the useful life of the related Property, Plant and Equipment
is more fully mentioned in Note 17 to the Financial
Statements.
Infilling costs that are not capitalised have been charged
to the Statement of Comprehensive Income in the year in
which they are incurred.
Inventories
a) Agricultural produce harvested from Biological Assets
Agricultural produce harvested from Biological Assets are
measured at their fair value less cost to sell at the point of
harvest. The finished and semi finished inventories from
Agricultural produce are valued by adding the cost of
conversion to the fair value of agricultural produce.
b) Agricultural produce after further processing
Further processed output of agricultural produce are valued
at the lower of cost and estimated net realisable value,
after making due allowances for obsolete and slow moving
items.
Provision for Gratuity on the Employees of the Company
is based on an actuarial valuation, using the Project
Unit Credit (PUC) method as recommended by LKAS 19
“Retirement Benefit Costs”. The actuarial valuation was
carried out by a professionally qualified firm of actuaries,
Messrs. Actuarial Management Consultants (Private)
Limited as at 31.03.2015.
However, according to the Payment of Gratuity Act No.12
of 1983, the liability for payment to an employee arises
only after the completion of 5 years continued services.
The liability is not externally funded.
b) Defined Contribution Plans - Provident Funds and Trust
Fund
The Company contributes 12% on consolidated salary
of the employees to Ceylon Planters’ Provident Society
(CPPS)/Estate Staff’s Provident Society (ESPS)/ Employees’
Provident Fund (EPF).
All the employees of the Company are members of the
Employees’ Trust Fund, to which the Company contributes
3% on the consolidated salary of such employees.
2.4.5 Deferred Income
a) Grants and Subsidies
68
Grants related to Property, Plant and Equipment other than
grants received for consumer biological assets are initially
Unconditional grants received for consumer biological
assets are measured at fair value less cost to sell are
recognised in the Statement of Comprehensive income
when and only when such grants become receivable.
Revenue Recognition
Revenue is recorded at invoice value net of brokerage, sale
expenses and other levies related to revenue. Revenue is
recognised when persuasive evidence exists, usually in the
form of an executed sales agreement, that the significant risks
and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs
and possible return of goods can be estimated reliably, there
is no continuing management involvement with the goods,
and the amount of revenue can be measured reliably. If it is
probable that discounts will be granted and the amount can
be measured reliably, then the discount is recognised as a
reduction of revenue as the sales are recognised. The fair value
gain arising on the valuation of harvested crops has been
separately disclosed as part of the revenue.
2.5
Effect Of Sri Lanka Accounting Standards Issued But Not Yet
Effective:
The standards that are issued but not yet effective up to
the date of issuance of the Group financial statements are
disclosed below. The Group intends to adopt these standards, if
applicable, when they become effective.
a) Defined Benefit Plan
The retirement benefit plan adopted is as required under
the Payment of Gratuity Act No.12 of 1983 and the Indian
Repatriate Act No.34 of 1978 to eligible employees. This
item is grouped under Retirement Benefit Liability in the
Statement of Financial Position.
Grants related to income are recognised in the Statement
of comprehensive Income in the year which it is receivable.
2.4.6
2.4.4 Retirement Benefit Obligation
(i) SLFRS 9 -Financial Instruments: Classification and
Measurement
SLFRS 9, as issued reflects the first phase of work on
replacement of LKAS 39 and applies to classification and
measurement of financial assets and liabilities.
This standard was originally effective for annual periods
commencing on or after 01 January 2015. However the
effective date has been deferred subsequently.
(ii) SLFRS 15 -Revenue from Contracts with Customers
SLFRS 15 establishes a comprehensive framework for
determining whether, how much and when revenue
is recognised. It replaces existing revenue recognition
guidance, including LKAS 18 Revenue, LKAS 11 Construction
Contracts and IFRIC 13 Customer Loyalty Programmes. This
standard is effective for the annual periods beginning on or
after 01 January 2017.
Multiplying Value
3
PROPERTY, PLANT & EQUIPMENT
3.1GROUP
a)
Gross Carrying Amounts
At Cost
Buildings
Plant and Machinery
Water Supply, Electricity Distribution Scheme
Tools, Implements, Furniture
& Fittings and Electrical Appliances
Transport & Communication Equipment
At Valuation
Freehold Land
Assets on Finance Lease
Leasehold Land
Plant and Machinery
Balance
Balance
as at Revaluations
Additions
Disposals/
as at
01.04.2014
Transfers
31.03.2015
Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000
1,972,833
5,785,634
277,673
- 67,118
-
202,242
-
14,311
(24,419)2,015,532
1,600
5,989,476
56,279
348,263
586,477
408,274
9,030,891
-
69,691
(118,878)
537,290
-
50,142
(35,024)
423,392
- 403,504 (120,442)9,313,953
Balance
Balance
as at Revaluations
Additions
Disposals/
as at
01.04.2014
Transfers
31.03.2015
Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000
2,098,785
155,075
2,098,785 155,075
9,738
9,738
(75)
2,263,523
(75)2,263,523
14,600---
14,600
63,342
-
6,099
(14,556)
54,885
44,712
-
17,617
-
62,329
122,654
- 23,716 (14,556) 131,814
Balance
Balance
as at Revaluations
Additions
Disposals/
as at
01.04.2014
Transfers
31.03.2015
Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000
In the Course of Construction
Capital Work In Progress - Building & Others
Capital Work In Progress - Plant & Machinery
Total
80,419
-
90,651
(96,101)
74,969
561
-
-
-
561
80,980
- 90,651 (96,101) 75,530
11,333,309 155,075 527,609 (231,174)11,784,821
69
b)Depreciation
BalanceBalance
as at
Additions
Disposals/
as at
01.04.2014 Transfers31.03.2015
Rs.’000Rs.’000Rs.’000Rs.’000
At Cost
Buildings 337,482
Plant and Machinery
2,407,632
208,207
Tools, Implements, Furniture &
Fittings and Electrical Appliances
369,461
257,850
Total 3,580,632
46,429 (1,901) 382,010
337,333
41,857
2,786,822
21,513
(7,628)
222,092
56,831
42,586
504,691
(52,707)
373,585
(30,188)
270,248
(50,566)4,034,757
Leasehold Land568487 (81)974
Plant and Machinery
63,261
5,384
(49,937)
18,708
28,453
11,594
(1,000)
39,047
92,28217,465(51,018)58,729
Total 3,672,914 522,156 (101,584)4,093,486
c)
Net book value of assets
20152014
Rs.’000Rs.’000
At Valuation
Freehold Land2,263,5232,098,785
At Cost
Buildings
1,633,522
1,635,351
Plant and Machinery
3,202,654
3,378,002
126,172
69,466
Tools, Implements, Furniture & Fittings and Electrical Appliances
163,706
217,016
153,144
150,424
7,542,7207,549,044
Assets on Finance Leases
Leasehold Land13,62614,032
Plant and Machinery
36,177
81
23,282
16,259
7,615,8057,579,416
Capital Work in Progress
75,530
80,980
Net Value [ 3.1(i)]
7,691,335
7,660,396
70
Multiplying Value
(d)
Leasehold right to bare land of JEDB/SLSPC estates
20152014
Rs.’000Rs.’000
Capitalised value
As at 22.06.1992
Amortisation
At the beginning of the year
Charge for the year
At the end of the year
Carrying Amount
204,931
204,931
84,212
3,866
88,078
80,345
3,867
84,212
116,853
120,719
The leasehold rights to the bare land on all estates (except for Dumbara Estate which is under an operating lease) have been taken into the
books of Horana Plantations PLC.(HPPLC), as at 22nd June 1992, immediately after formation of HPPLC, in terms of the opinion obtained
from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose lands have been revalued at
Rs.204.931 Mn. being the value established for these lands by Valuation Specialist, D.R.Wickremasinghe just prior to the formation of HPPLC.
However Institute of Chartered Accountants of Sri Lanka has withdrawn the UITF ruling with the implementation of LKAS/SLFRs and introduced
Statement of Alternative Treatment SoAT on right to used land. As per the SoAT right to use land does not permit further revaluation.
(e)
Immovable JEDB/SLSPC estate assets on finance leases (other than right to bare land)
Revaluation
As at 22.06.1992
Transfers to mature
Immature
Mature
Permanent Land Buildings
Plant &
2015
2014
Plantations
Plantations Development Cost
Machinery
Rs.’000Rs.’000
Rs.’000
Rs.’000Rs.’000Rs.’000Rs.’000
145,993
68,817
(145,993)
145,993
-214,810
4,014
47,173
6,818
272,815
272,815
-
-
-
-
4,014
47,173 6,818272,815272,815
Amortisation
At the beginning
During the year
At the end
-
-
-
139,644
7,160
146,804
2,915
134
3,049
Written Down Value
As at 31.03.15
As at 31.03.14
-
-
68,006
75,166
965
1,099
All immovable estate property, plant and equipment under finance leases have been taken into the books of HPPLC retrospective to 22nd June
1992. For this purpose all estate immovables have been revalued at their book values as they appear in the books of the lessor (JEDB/SLSPC), as
the case may be on the day immediately preceding the date of formation of HPPLC.
Investments in Bearer Biological assets which were immature, at the time of handing over to the Company by way of estate lease, are shown
under Bearer Biological assets - immature (Revalue as at 22.06.1992). Further investments in such a bearer biological assets (Immature to bring
them to maturity are shown under “ Note 3.1 (f) Bearer Biological assets (Immature Plantation). When these plantations become mature the
additional investment to bring them to maturity will be moved from the Note 3.1 (f) - Bearer Biological assets(Immature plantations) to Note
3.1 (f) - Bearer Biological assets (Mature Plantations) shown under Note 3.1(f) and corresponding move from bearer biological assets (Immature)
to bearer biological assets (Mature) will be made in the above category, namely cost incurred before take over.
41,096
1,887
42,983
6,818
-
6,818
190,473
9,181
199,654
181,292
9,181
190,473
4,190
-
6,077
73,161
-
82,342
71
(f)
Bearer Biological Assets
Tea
Rubber
Oil Palm
Diversi-TotalTotal
-fication
2015
2014
Rs’000Rs’000Rs’000Rs’000Rs’000Rs’000
Immature Plantations
Cost or Valuation :
Opening Balance
Additions
Transfers from Mature
182,325
505,649
41,497
69,703133,163 23,703
(82,010)
(112,814)
-
170,018
525,998
65,200
5,380
734,851
627,112
5,286231,855277,536
(4,127)
(198,951)
(169,797)
6,539
767,755
734,851
494,711
82,010
576,721
19,695
4,127
23,822
Mature Plantations
Cost or Valuation :
Opening Balance
Transfers from Immature
Accumulated Amortization
Opening Balance
Charge for the year
Written Down Value
Total Bearer Biological Assets
686,696
112,814
799,510
-
-
-
91,401190,580
-
14,841
34,335
-
106,242
224,915
-
470,479
574,595
-
640,497
1,100,593
65,200
1,201,102
198,951
1,400,053
1,031,305
169,797
1,201,102
5,193287,174244,423
849
50,025
42,751
6,042
337,199
287,174
17,780
1,062,854
913,928
24,319
1,830,609
1,648,779
These are investments in immature/mature plantations since the formation of HPPLC. The assets (including plantations) taken over by way of
estate leases are set out in Notes 3.1(d) and 3.1(e). Further investments in the immature plantations taken over by way of these lease are also
shown in the above. When such plantations become mature, the additional investments since take over to bring them to maturity have been (or
will be ) moved from immature to mature under this category as and when field become mature.
(g)
Consumable Biological Assets
20152014
Rs’000Rs’000
Immature Plantations
Cost :
20,916
14,790
Additions
8,945
11,200
Transfers to Mature Plantations
(6,425)
(5,074)
23,436
20,916
Mature Plantations
Cost :
Increase due to new plantations
Change in Fair Value less costs to sell
Total Consumable Biological Assets
72
263,012
6,425
56,640
326,077
349,513
231,886
5,074
26,052
263,012
283,928
Multiplying Value
(h)
Basis of Valuation
Under LKAS 41 the company has valued its managed plantations at fair value less cost to sell, Managed timber plantations as at 31st March
2015 comprised approximately 350 hectares.
Managed trees which are less than three years old are considered to be immature consumable biological assets, amounting Rs. 24.43 Mn as at
31st March 2015. The cost of immature trees is treated as approximate fair value, particularly on the ground that little biological transformation
has taken place and the impact of the biological transformation on price is not material. When such plantation become mature, the additional
investments since taken over to bring them to maturity are transferred from immature to mature.
The mature consumable biological assets were valued by Chartered Valuers Mr.S.M.Wijepala for 2014/15 using Discounted Cash Flow (DFC)
method . In ascertaining the fair value of timber, physical verification was carried covering all the estates.
Key assumptions used in valuation are;
The prices adopted are net of expenditure
Discounted rates used by the Valuer are within the range of 10% - 12%.
The valuation, as presented in the external valuation model based on the net present value, takes into accounts the long-term exploitation
of the timber plantation. Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the
volatility of the variables, their carrying value may differ from their realisation value. The Board of Directors retains their view that commodity
markets are inherently volatile and their long-term price projection are highly unpredictable. Hence, the sensitivity analysis regarding the selling
price and discount rate variation as included in this note allows every investor to reasonably challenge the financial impact of the assumptions
used in the valuation against his own assumptions.
The biological assets of the Company are mainly cultivated in leased lands. When measuring the fair value of the biological assets it was
assumed that these concession can and will be renewed at normal circumstances. Timber content expects to be realised in future and is included
in the calculation of the fair value that takes into account the age of the timber plants and not the expiration date of the lease.
The Company is exposed to the following risks relating to its timber plantation:-
Regulatory and Environmental Risks
The Company is subject to laws and regulations in Sri Lanka. The Company has established environmental policies and procedures aimed at
compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that
the systems in place are adequate to manage those risks.
Supply and Demand Risks
The Company is exposed to risks arising from fluctuations in the price and sales volume of timber. When possible the Company manages this
risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analyses to ensure that the
Company’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand.
Climate and Other Risks
The Company’s timber plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces.
The Company has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and
industry pest and disease surveys.
73
Sensitivity Analysis
Sensitivity Variation on Sales Price
Net Present Value of the Biological Assets as appearing in the Statement of Financial Position are very sensitive to changes in the average sales
price applied. Simulations made for timber show that an increase or decrease by 10% of the estimated future selling price has the following
effect on the Net Present Value of the Biological assets.
-10%
10%
Managed Timber
2015
Rs. 293.47 Mn Rs. 226.08 Mn Rs. 358.69 Mn
Sensitivity Variation on Discount Rate
Net Present Value of the Biological Assets as appearing in the Statement of Financial Position are very sensitive to changes in the discount rate
applied. Simulations made for timber show that an increase or decrease by 1% of the estimated future discount rate has the following effect on
the Net Present Value of the Biological assets.
-1%
1%
Managed Timber
2015 Rs. 340.37 Mn Rs. 326.08 Mn Rs. 312.82 Mn
Borrowing costs amounting to Rs.48.664 Mn (Rs.43.195 Mn in 2013/14) directly relating to investment in Biological Assets (Immature
Plantations) have been capitalised during the period, at an average borrowing rate of 7.58% (10.87% in 2013/14).
(i)
Net book value of assets
As at
As at
31.03.201531.03.2014
Rs.’000Rs.’000
Property, plant and equipment [3.1 (c)]
7,691,335
7,660,396
Leasehold right to bare land of
JEDB/SLSPC Estates [3.1 (d)]
116,853
120,719
Immovable JEDB/SLSPC estate assets on
finance leases (other than right to bare land) [3.1 (e)]
73,161
82,342
Bearer Biological Assets [3.1 (f)]
1,830,609
1,648,779
Consumable Biological Assets [3.1 (g)]
349,513
283,928
Total
10,061,471
9,796,164
(j)
Fixed assets include fully depreciated assets, the cost of which at the reporting date amounted to Rs. 1,074 (2014- Rs. 805.08 Mn)
(k)
During the financial year, the Group acquired property, plant & equipment to the aggregate value of Rs. 768.41Mn( 2014 - Rs. 839.39 Mn). Cash
payments amounting to Rs. 637.48 Mn ( 2014 - Rs. 839.14 Mn) were made during the year for purchase of property, plant and equipment.
(l)
“The following properties are revalued and recorded under freehold land & clay mining land. Fair Value measurement disclosure for revalued
land based on un-observable inputs are as follows,
(A)
Quoted Price (unadjusted) in active markets for identical assets or liabilities (Level -1).
(B) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is derived from prices) (Level -2)
(C)
Input for the assets or liability that are not based on observable market data (that is, unobservable inputs) (Level -3).
74
A1-R1-P2.1
Lanka Walltiles PLC
Lanka Tiles PLC
Uni Dil Packing Ltd.
Uni Dil Paper Sacks
(Pvt) Ltd.
Swisstek (Ceylon)
PLC
Swisstek
Aluminium Ltd.
1
2
3
4
5
6
Messrs. Sunil Fernando
and Associates (Pvt) Ltd.
Valuer
Mr. Ranjan J Samarakone
A13-R0-P2
Mr. T. J. Tissera
Mr. K. D. T. Tissera
Mr. Anton Rich
Balummara, Imbulgoda
Land at Narampola road,
Moragala, Deketana
Land at Narampola road,
Moragala, Deketana
Land at Madampe
Warehouse at Biyagama
Factory at Jaltara, Ranala &
Ball Clay land at Kaluthara
Plan No 2205 Situated at
Mawathgama and Galagedara
Village
No. 215, Nawala Road,
Narahenpita, Colombo 05
Location
18 February 2013 Land at Pahala Dompe, Dompe
31 March 2015
31 March 2014
31 March 2014
31 March 2013
31 March 2013
31 March 2013
31 March 2013
28 December
2012
Valuation Date
Rs. 98,898/- per perch
Rs. 85,837/-to Rs.
115,321/- per perch
Rs. 1,750,000/- per
perch
Significant
unobservable input :
price per perch/ acre/
range
Significant increases/ (decreases) in estimated price per perch in isolation would result in a significantly higher/ (lower) fair value.
A08-R02-P20
A06-R01-P01
A2-R2-P35
Mr. Anton Rich
A2-R0-P16
A9-R0-P17.8
A40-R3-P34
A23-R1-P24.16 Messrs. Sunil Fernando
and Associates (Pvt) Ltd.
Extent
No Company
Market based
evidence
Market based
evidence
Market based
evidence
Market based
evidence
Market based
evidence
Market based
evidence
Market based
evidence
Market based
evidence
Market based
evidence
Valuation Details
160,000
465,000
21,750
87,968
35,784
218,354
524,639
352,000
353,675
Fair Value
measurement
using Significant
unobservable
inputs (Level 3)
Rs.000's
Multiplying Value
75
3.2
The useful lives of the assets are estimated as follows ;
As at
As at
31.03.201531.03.2014
Rs.’000Rs.’000
Non plantation assets
Buildings on free hold land and roadway
Plant and machinery
Water supply and electricity distribution scheme
Tools, implements and furniture and fittings
Transport and communication equipment
25,40 & 50
5 to 20
5 to 25
2,4,5 & 10
4 to 12
25,40 & 50
5 to 20
5 to 25
2,4,5 & 10
4 to 12
Plantation assets
The leasehold rights to JEDB/ SLSPC are amortised in equal
amounts over the following years
Bare land5353
Mature plantations3030
Permanent land development costs
30
30
Buildings2525
Plant and machinery
15
15
Mature Plantation(re-planting and new planting)
Mature plantations (Tea)
Mature plantations (Rubber)
Mature plantations (Coconut)
Mature plantations (Cinnamon)
Mature plantations (Coffee and pepper)
Mature plantations (Pineapple)
Permanent Land Development Cost
No depreciation is provided for immature plantations.
33 1/3
20
50
15
4
3
40
33 1/3
20
50
15
4
3
40
The carrying amount of revalued assets of the Company would have been included in the Financial Statement had the assets been carried at
cost less depreciation as follows
Group
Company
Cost Accumulated Net Carrying Net Carrying
Cost Accumulated Net Carrying Net Carrying
Depreciation
Amount
AmountDepreciation
Amount
Amount
2015 20152015 2014 20152015 20152014
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Freehold Land
1,167,022
1,167,022
76
-
1,167,022
1,157,284410,350
-
1,167,022
1,157,284410,350
-410,350410,350
-410,350410,350
Multiplying Value
3.3
PROPERTY, PLANT & EQUIPMENT
Balance
Disposals/Balance
COMPANY
as at
Addition
Transfers/
as at
01.04.2014 Write-off31.03.2015
Rs.000Rs.000Rs.000Rs.000
Gross Carrying Amounts
At Cost
Buildings 497,910
Plant and Machinery
1,712,583
117,708 Tools, Implements, Furniture & Fittings and Electrical Appliances
194,829
140,021
2,663,051 13,062 (23,112)487,860
13,967
(12,194)
1,714,356
12,326 -
130,034
17,532
5,580
62,467 (59,850)
(16,903)
(112,058)
152,512
128,698
2,613,460
Balance
Disposals/Balance
as at
Addition
Transfers/
as at
01.04.2014 Write-off31.03.2015
Rs.000Rs.000Rs.000Rs.000
At Valuation
Freehold Land706,644
706,644
-
-
-706,644
-706,644
Leasehold Land14,600
14,600
-
-
-14,600
-14,600
Balance
Disposals/Balance
as at
Addition
Transfers/
as at
01.04.2014 Write-off31.03.2015
Rs.000Rs.000Rs.000Rs.000
Capital Work In Progress Plant &
Machinery and Building
561
43,754
561 43,754
-
44,315
- 44,315
Total 3,384,856 106,221 (112,058)3,379,019
77
Balance
Disposals/Balance
as at
Addition
Transfers/
as at
01.04.2014 Write-off31.03.2015
Rs.000Rs.000Rs.000Rs.000
At Cost
Buildings 114,758 9,857 (1,841)122,774
Plant and Machinery
678,711
102,162
(10,263)
770,610
Water Supply, Electricity
Distribution Scheme68,442 4,566
-73,008
155,939
17,448
(59,440)
113,947
60,394
12,753
(8,595)
64,552
Total 1,078,244 146,786 (80,139)1,144,891
Leasehold Land568487 (81)974
568487 (81)974
Total 1,078,812 147,273 (80,220)1,145,865
3.4
Net Book Value of Assets
20152014
Rs.’000Rs.’000
At Valuation
Freehold Land706,644706,644
At Cost
Buildings365,086383,152
Plant and Machinery
943,746
1,033,872
57,026
49,266
38,565
38,890
64,146
79,627
2,175,213
2,291,451
Assets on Finance Leases
Leasehold Land13,62614,032
2,188,8392,305,483
Capital Work in Progress
44,315
561
Total2,233,1542,306,044
3.5
Assets At Valuation
3.5.1
“The fair value of freehold lands were determined by means of a revaluation during the financial year 2012 / 2013 in reference to market based
evidence by using following methods.
a)
Property bearing assets No. 215, Nawala Road, Narahenpita, Colombo 05 (Lot No 1 in Plan No 270 and Lot No 11019 in Plan No 1916), which is
revalued at Rs.353,675,000/-. The Valuation was carried out by Messrs. Sunil Fernando and Associates (Pvt) Ltd an independent firm of chartered
valuation surveyors. The Valuer’s assessment is based on reference made to market evidence of transacted prices for similar sized and located
land. The results of such revaluation was incorporated in these financial statements as of the effective date which is 28 December 2012. The
surplus arising from the revaluation was transferred to a revaluation reserve as of the said date (Note 13).
78
Multiplying Value
b)
Property depicted as lot No.1 in Plan No. 2205 situated at Mawathgama and, Galagedara village, Meepe which is revalued at Rs.352,000,000/-.
The Valuation was carried out by Messrs. Ranjan J Samarakone a corporate valuer. The Valuer assessment is based on reference made to market
evidence of transacted prices for similar sized and located land. The results of such revaluations were incorporated in these financial statements
as of the effective date which is 31 March 2013. The surplus arising from the revaluation was transferred to a revaluation reserve as of the said
date (Note 13).
3.6
During the financial year 2013, the Company acquired a right to leasehold land to the value of Rs.14.60 Mn for a period of 30 years.
3.7
During the financial year, the Company acquired property, plant and equipment to the aggregate value of Rs. 106.2 Mn (2013/2014 - Rs. 166.99
Mn). Cash payments amounting to Rs. 84.92 Mn (2013/2014- Rs. 66.99 Mn) were made during the year for purchase of Property, Plant and
Equipment.
3.8
“Fixed assets include fully depreciated assets the cost of which at the reporting date amounted to Rs. 277.6 Mn (2013/2014 - Rs.228.22 Mn).
4GOODWILL
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for noncontrolling interest over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less
any accumulated impairment losses.
Goodwill acquired through business combinations have been allocated to Lanka Tiles PLC and Horana Plantations PLC for impairment testing.
20152014
Rs.’000Rs.’000
5
INVESTMENTS IN SUBSIDIARIES
24,519
24,519
Market Value/ Market Value/
COMPANY
NumberDirectors’ Directors’
of SharesHolding
Cost Valuation*
Cost Valuation*
2015201420152014201520152014 2014
’000
’000
%
%Rs.’000Rs.’000Rs.’000 Rs.’000
5.1Subsidiary
a)Quoted
Lanka Tiles PLC
36,189
36,189
68.22
68.22
3,141
3,141
11.48
11.48
Total Quoted Investment in Subsidiary
b)Non-quoted
Vallibel Plantation Management Ltd
10,336
10,336
100.00
100.00
Total Non-quoted
Investments in Subsidiaries
Carrying Value of Investments in Subsidiaries
Total Net Carrying Value of Investments in Subsidiaries
935,958
41,247
977,205
3,836,055
131,618
3,967,673
935,958
41,247
977,205
2,739,522
64,082
2,803,604
298,891
298,891
298,891
298,891
298,891
298,891
298,891
298,891
1,276,096
1,276,096
1,276,096
1,276,096
*Non quoted investments of the Company has been valued by the Directors based on the cost of investments.
79
5.2
Details of those companies in which Lanka Walltiles PLC, held a controlling interest, as at 31 March 2015 directly or indirectly (Group) are set
out below:
Name of Company
Percentage of share
holding in subsidiaries
GroupCompany
20152014 2015 2014
Principal activities of the company
Auditors
1)
Lanka Tiles PLC
68.22 68.22
68.22
68.22
Manufacture of glazed ceramic floor tiles
2)
Vallibel Plantation Management Ltd
100.00 100.00
100.00 100.00
Providing management
services to plantation industry
3)
51.00 51.00
-
-
Agricultural production
4)
Fairlawn Power (Pvt) Ltd
27.54 27.54
-
-
Mini hydro power project
5)
Uni-Dil Packaging Ltd
100.00 100.00
-
-
Manufacture and sale of cartons for
packing
6)
Uni-Dil Paper Sacks (Pvt) Ltd
100.00 100.00
-
-
Manufacture and sale of paper sacks
for packing
7)
59.28 59.28
11.48
11.48
Manufacture and sale of tile grout
and tile mortar.
8)
Swisstek Aluminium Ltd
51.81 51.81
-
-
Manufacture and sale of aluminium
extrusions
M/s. Pricewater-
houseCoopers
M/s KPMG
M/s KPMG
M/s KPMG
M/s KPMG
M/s KPMG
M/s KPMG
M/s. Pricewater- houseCoopers
5.3
The financial statements of Fairlawn Power (Pvt) Ltd has not been consolidated as at the reporting date, since the company is still in the pre
operational stage and no real value to share holders of the Horana Plantations PLC, under section 153 (6)a of the companies act No. 07 of 2007.
Further Horana Plantations PLC has fully provided for this investment. The shares of Fairlawn Power (Pvt) Ltd were allotted on 29th July 1997.
6
LONG TERM RECEIVABLES
Group
20152014
Rs.’000Rs.’000
Advance company tax receivable
27,285
27,285
Total27,28527,285
7
DEFERRED TAX ASSET
Group
20152014
Rs.’000Rs.’000
Deferred tax assets at the beginning of the year
Deferred tax (charge) / reversal
Deferred tax release on components of
other comprehensive income
Deferred tax assets at the end of the year
80
22,729
29,497
22,369
153
(43)
52,183
207
22,729
Multiplying Value
7.1
Deferred tax assets amounting to Rs. 39 Mn have been recognised as 31 March 2015 ( 2014 - 22.7Mn which was 50% of the Net Deferred Tax
Asset ) in Swisstek (Ceylon) PLC based on recoverability as assessed by the management. Deferred tax assets have been recognised in respect
of the unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be
used.
7.2
Uni Dil Paper Sacks (Pvt) Ltd has not recognised the deferred tax asset of Rs. 13.36 Mn as at 31 March 2014 as directors of the company were of
the view that the reversal of the deferred tax asset will not be crystallized in the foreseeable future. However deferred tax asset of Rs. 12.5 Mn
has been recognised as at 31 March 2015 based on recoverability as assessed by the management. Deferred tax assets have been recognised in
respect of the unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses
can be used.
7.3
Vallibel Plantation Management Limited Deferred tax asset amounting to Rs. 1.06 Mn as at 31st March 2014 was not recognised as the
Management were of the view that the deferred tax asset will not be crystallized in the foreseeable future. However Deferred Tax Asset
amounting to Rs. 0.66 Mn has been recognised as at 31st March 2015 based on recoverability as assessed by the management. Deferred tax
assets have been recognised in respect of the unused tax losses to the extent that it is probable that future taxable profit will be available
against which the unused tax losses can be used.
7.4
In terms of the agreement entered into on 27 August 2009 with the Board of Investments of Sri Lanka, under section 17 of Law No. 04 of 1978,
the profits and income of Swisstek Aluminium Ltd is exempted from income tax for a period of 5 years from the date on which the Company
commences to make profits or any year of assessment not later than two years reckoned date of commencement of commercial production/
operation, whichever occurs earlier. Accordingly, Swisstek Aluminium Ltd did commence its tax exemption period from the year of assessment
2012/2013. The tax losses available to carry forward which were incurred prior to the commencement of exemption period amounted to Rs
188.7 Mn and company has not recognised Deferred Tax Asset or Deferred Tax Liability in the books of accounts as at 31 March 2014. Swisstek
Aluminium Ltd has recognised Net Deferred Tax Liability of Rs. 9 Mn as at 31 March 2015. (Refer Note 15)
8INVENTORIES
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Raw materials
1,145,671678,746153,776139,465
Work in progress
106,408
135,120
31,571
35,058
Finished goods
1,747,511
2,078,616
921,912
939,183
Goods in transit
1,719
3,265
381
1,363
Consumables and spares
358,504
615,564
259,031
265,233
Harvested crops
196,865
213,001-
Allowances for obsolete and slow moving stock
(83,416)
(75,940)
(17,537)
(16,689)
Total3,473,2623,648,3721,349,1341,363,613
9
TRADE AND OTHER RECEIVABLES
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Trade debtors - related parties (9.1)
66,267
12,796
42,770
Other1,877,824 2,011,625 565,298 615,522
1,944,0912,024,421 608,068 615,522
Less: Allowances for doubtful debts
(43,435)
(30,546)
(17,511)
(22,998)
1,900,6561,993,876 590,557 592,525
Other debtors258,979265,632 32,982 34,980
Advance and prepayments
130,707
180,534
53,506
87,746
Loans to company officers
36,753
4,926
4,438
4,926
Total2,327,0952,444,967 681,483 720,176
81
9.1
Trade debtors - related parties
Group
Company
2015201420152014
Company
Relationship
Rs.’000Rs.’000Rs.’000Rs.’000
Lanka Ceramic PLC
Parent Company
Royal Ceramics Lanka PLC
Group Company
Royal Porcelain (Pvt) Ltd
Group Company
Royal Bathware Ltd
Group Company
Mabroc Teas (Pvt) Ltd
Group Company
Dipped Products PLC
Group Company
Swisstek Ceylon PLC
Subsidiary Company
Uni Dil Packaging Ltd
Subsidiary Company
Total
9.2
126
315
12,230
394
3,344
47,803
11,968
38,748
2,795
118
-
5
3,308
-
-
572
-
-
106
66,267 12,796 42,770
-
-
As at 31 March, the age analysis of trade receivables are as follows:
Group
Neither past duePast due but not impaired
nor impaired
< 3 Months 3- 12 Months
> 1 Year
Total
Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000
2015
2014
1,139,997 618,477 170,870 14,7481,944,091
1,398,951383,538227,389 14,543
2,024,421
Company
Neither past duePast due but not impaired
nor impaired
< 3 Months 3- 12 Months
> 1 Year
Total
Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000
2015
2014
10
528,921 66,310 11,679 1,158 608,068
523,28778,00912,768 1,458615,522
AMOUNTS DUE FROM RELATED PARTIES
Group
Company
2015201420152014
Company
Relationship
Rs.’000Rs.’000Rs.’000Rs.’000
Subsidiary Company
Royal Bathware Ltd
Group Company
Group Company
Total
11
-
5
1,258
1,263
-
-
-
-
267
10,399
5
-
272 10,399
SHORT TERM INVESTMENTS
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Deposit of Tsunami donations2,9643,6242,9643,624
Total2,9643,6242,9643,624
82
Multiplying Value
12
STATED CAPITAL
12.1
Issued & fully paid
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Balance at the beginning of the year
Balance at the end of the year
12.2
Issued & fully paid
787,765
787,765
787,765
787,765
787,765
787,765
787,765
787,765
Group
Company
2015201420152014
’000’000’000’000
Balance at the beginning of the year
Balance at the end of the year
54,600
54,600
54,600
54,600
54,600
54,600
54,600
54,600
12.3
The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at a
meeting of the Company. All shares rank equally with regard to the Company’s residual assets.
13RESERVES
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Revaluation reserve (13.1)
1,004,516936,147296,294296,294
Total
1,004,516936,147296,294296,294
13.1
Revaluation reserve
On: Property Plant & Equipment
As at 01 April
Revaluation of freehold land (13.3)
Transferred to retained earnings (13.2)
Revaluation reversal on disposal of land (13.4
As at 31 March
The above revaluation surplus consists of net surplus resulting from the revaluation of freehold land described in Note 3.1 (i)
13.2
Lanka Walltiles PLC has disposed investment property (land and building) held at Balangoda during the 2013/14 financial year and the
revaluation surplus resulted from the property has been transferred to Retained Earnings.
13.3
During the year Swisstek (Ceylon) PLC has revalued the land at Balummahara, Imbulgoda by an independent chartered valuer Mr. K.T.D Tissera
on 31 March 2015 at Rs. 465 Mn. Refer Note 3 (i) for details pertaining to revaluation.
13.4
During the year Swisstek (Ceylon) PLC has disposed a land and revaluation surplus relating to the disposal of land has been reversed.
936,147
72,859
-
(4,490)
1,004,516
971,218
14,680
(49,751)
296,294
-
-
346,045
(49,751)
936,147
296,294
296,294
83
14
INTEREST BEARING LIABILITIES
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Non Current
Long term loans (14.1)
1,636,122
1,817,449
358,697
560,105
Finance leases (14.2)
105,978
106,498
-
Total1,742,1001,923,947 358,697 560,105
Current
Long term loans (14.1)
522,582
511,452
204,710
204,081
Finance leases (14.2)
21,247
26,143
-
Short term loans1,172,1081,770,923 907,9401,019,248
Bank overdrafts (28.0)
917,859
1,037,325
436,189
376,811
Total2,633,7963,345,8431,548,8391,600,140
Total4,375,8965,269,7901,907,5362,160,245
14.1
Long term loans
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
At the beginning
2,328,901
2,190,216
764,186
844,512
Loans obtained446,896593,639
- 80,000
Exchange gain/(loss)
4,017
(4,029)
3,508
6,246
Effect of fair value
-
(233)
-
Repayments (621,110)(450,692)(204,287)(166,572)
At the end
2,158,704
2,328,901
563,407
764,186
Amount payable within 12 months
522,582
511,452
204,710
204,081
Amount payable after 12 months
1,636,122
1,817,449
358,697
560,105
Total2,158,7042,328,901 563,407 764,186
84
Multiplying Value
14.2
Finance leases
For the Year ended 31 March
Group
20152014
Rs.’000Rs.’000
JEDB/SLSPC estates (14.3)156,840162,068
Other finance lease creditors
43,386
47,404
Gross liability200,226209,472
Finance charges allocated to future period
(73,001)
(76,831)
Net liability
127,225
132,641
Amount payable within one year
21,247
26,143
Amount payable after one year
105,978
106,498
Total
127,225
132,641
JEDB/SLSPC estates (14.3)
At the beginning
162,068
167,296
New leases obtained
12,393
11,287
Repayments
(17,621)
(16,515)
At the end
156,840
162,068
Other finance lease creditors
At the beginning
47,404
97,327
New leases obtained
27,509
Repayments
(31,527)
(49,923)
At the end
43,386
47,404
14.3
“The lease rentals have been amended with effect from 22nd June 1996 to an amount substantially higher than the previous nominal lease
rental of Rs.500/-per estate per annum. The basic rental payable under the revised basis is Rs.5.228 Mn per annum. This amount is to be inflated
annually by the Gross Domestic Product(GDP) deflator in the form of contingent rent.
This lease agreement was further amended on 10th June 2005, freezing the annual lease rental at Rs.7.472 Mn for a period of six years
commencing from 22nd June 2002. Hence, the GDP Deflator adjustment will be frozen at Rs.2.244 Mn per annum until 21st June 2008.
Accordingly, the Financial Statements have been adjusted, in order to reflect the future net liability in the following manner:-
14.4
Future liability on the revised annual lease payment of Rs.7.472 Mn will continue until 21st June 2008, and thereafter from 22nd June 2008,
annual lease payment will remain at Rs.5.228 Mn, until 21st June 2045. The Net Present Value of this liability at a 4% discounting rate would
result in a liability of Rs.89.551 Mn.
14.5
The net present value as at date is represented by :-
Rs. Mn
Gross Liability
- Overdue
- 31 Years @ Rs. 5.228 million per annum
156,840
156,840
Less : Interest in Suspense
(67,289)
Net Present Value
89,551
14.6
The contingent rental charged during the current year to Statement of Comprehensive Income amounted to Rs. 12,393.029/- and the gross
liability to make contingent rentals for the remaining 30 years of lease term at the current rate would be estimated to Rs. 371,790,870/- as at 31
March 2015.
85
14.7
Details of long term loans of the
Group
Financial Institution
Repayment terms
Principal
Interest rate
Security
Balance
Balance
as at 31.03.2015 as at 31.03.2014
Rs ‘000
Rs ‘000
National
Development Bank PLC
60 monthly
instalments
4,960
8.50%
Primary mortgage over
plant & machinery worth
Rs. 3.6 million
-
292
Hatton National Bank
60 monthly
instalments
300,000
AWPLR based
Primary mortgage bond
for Rs. 390 million over the
project
assets comprising land,
building and machinery at
Meepe.
165,000
225,000
60 monthly
instalments
(USD
1,800,000)
LIBOR based
Secondary mortgage
bond for USD 1.8 million
over the project assets
comprising land, building
and machinery at
Meepe.
173,802
218,081
60 instalments
200,000
AWPLR based
Primary mortgage bond
for Rs.200 million over the
property situated at 215, Nawala
Road, Colombo 5
55,950
96,150
60 instalments
80,000
AWPLR based
Primary Mortgage bond for
Rs.80Mn over the ceramic
printer
58,655
74,664
DFCC Bank
60 monthly
instalments
200,000
AWDR based
movable machinery at
Meepe
110,000
150,000
Company Total
Lanka Walltiles PLC
563,407
764,186
97,500
127,500
100,179
123,750
Lanka Walltiles PLC
Commercial Bank of
Ceylon PLC
Lanka Tiles PLC
DFCC Bank
48 monthly
instalments
150,000
AWPLR based
84 monthly
instalments
165,000
AWPLR based
85 monthly
instalments
287,712 (USD
3,000,000)
LIBOR based
245,070
278,646
54 monthly
instalments
80,000
AWPLR based
72,593
-
59 monthly
instalments
22,243
AWPLR based
725
5,177
48 monthly
instalments
100,000
AWPLR based
A primary mortgage
over land, building and
immovable assets of Lanka
Tiles PLC at Ranala
amounting to Rs.100
million
-
81,100
59 monthly
instalments
38,000
AWPLR based
A primary mortgage bond
for Rs.27million over the
sorting line imported.
-
13,274
Company Total -
Lanka Tiles PLC
516,066
629,447
Commercial Bank of
Ceylon PLC
86
A primary mortgage over
land, building and plant
and machinery of Lanka
Tiles PLC at Ranala
amounting to Rs.300
million
Multiplying Value
Repayment terms
Principal
Interest rate
Security
Sampath Bank PLC
US$ 3,000
monthly
instalments
USD 153,339
LIBOR based
Mortgage bond for USD
175,000 over machinery
Concurrent mortgage
bond over stocks &
debtors for USD 2.55
million with HNB, HSBC
& Deutsche Bank
Securing Sampath Bank
for USD 575,000.
Central Finance PLC
LKR 991,106
monthly
instalments
42,500
14.10%
HSBC
US$ 7,380.95
monthly
instalments
USD 310,000
PLC
LKR 308,300
monthly
instalments
10,000
Company Total
Uni-Dil Packaging
Limited
Balance
Balance
as at 31.03.2015 as at 31.03.2014
Rs ‘000
Rs ‘000
Uni-Dil Packaging
Limited
-
USD 44,619
Mortgage bond for
42.5 Mn over Moveable
machinery
24,778
-
LIBOR based
Mortgage bond for USD
310,000 over Moveable
machinery
547
USD 303.4
-
AWPLR based
Concurrent Mortgage
bond for LKR 110 Mn
over immovable property
3
-
65,349
USD 44,619
Bank of Ceylon (75% of
project cost out of ADB
Line of credit)
120 monthly
instalments
244,988
11% -14%
Leasehold rights of Alton
Bambarakelle, Eldon Hall
and Gouravilla Estates,
to the value of
Rs. 244.99 million.
-
7,892
Lanka Orix Leasing
Co.,PLC
Out of ADB Plantation
development project
line of credit
84 monthly
instalments
52,214
21,079
10.86%
11.63%
Secondary mortgage
over the leasehold rights
of Millakanda Estate
and Mirishena Estate
-
23,590
People’s Leasing Co., Ltd 48 monthly
Out of DFCC e-Friends
instalments
line of credit
12,001
6.50%
Promissory note and
the leasehold rights
of Hillstream Estate of
to the value of 12.00
million.
2,056
5,226
87
Repayment terms
Principal
Interest rate
Security
PLC
72 monthly
instalments
150,000
200,000
200,000
AWPLR based
National Development
Bank PLC
38 monthly
instalments
200,000
Indian Bank
54 monthly
instalments
Central Finance
Company PLC
54 monthly
instalments
PLC
Company Total
Balance
as at 31.03.2015
Rs ‘000
Balance
as at 31.03.2014
Rs ‘000
Primary mortgage for
150 million over the
leasehold rights of
Frocester Estate
545,800
350,000
AWPLR based
Undertaking from tea
brokers to recover &
remit from sales
-
24,000
75,000
AWPLR based
leasehold rights of
Tillicoultry Estate
42,000
58,800
16,483
AWPLR based
Equipments and it’s
accessories
100,000
AWPLR based
Primary mortgage
over leasehold rights
of Alton, Bambarakelly,
Eildon Hall and
Gouravilla
Horana
Plantations PLC
14,868
100,000
-
689,856
484,376
8,202
13,824
8,202
13,824
159,872
250,993
Bank of Ceylon
58 monthly
instalments
Company Total
Swisstek (Ceylon)
PLC
25,817
AWPLR based
Mortgage over
immovable property
at Balummahara,
Imbulgoda
Swisstek Aluminium
Limited
DFCC Bank
Company Total
88
78 monthly
instalments
290,000
AWPR based
60 monthly
instalments
50,000
AWPR based
32,850
-
60 monthly
instalments
10,000
AWPR based
9,511
-
202,234
250,993
Swisstek
Aluminium
Limited
Mortgage over land,
building, plant &
machinery
stocks and book debts
Multiplying Value
Repayment terms
Principal
Interest rate
Security
Commercial Bank of
Ceylon PLC
60 monthly
instalments
144,790
AWPR based
12,750,000 shares of
Horana Plantation PLC
Company Total
Vallibel
Plantation
Management
Limited
Balance
as at 31.03.2015
Rs ‘000
Balance
as at 31.03.2014
Rs ‘000
113,590
144,790
113,590
144,790
Vallibel Plantation
Management Limited
14.8
Fair Value of Financial Assets and Liabilities not Carried at Fair Value
Set out below is a comparison, by class, of the carrying amounts and fair values of the Company’s financial instruments that are not carried at
fair value in the Financial Statements. This table does not include the fair values of non–financial assets and non–financial liabilities.
Group
Carrying Amount
Fair value
2015201420152014
Rs. 000
Rs. 000
Rs. 000
Rs. 000
Financial assets
Trade and other receivables2,327,0952,444,9672,327,0952,444,967
Total2,327,0952,444,9672,327,0952,444,967
Financial liabilities
Trade and other payables1,649,0631,356,9771,649,0631,356,977
Loans and borrowings- current2,633,7963,345,8432,633,7963,345,843
Loans and borrowings- non current
1,742,100
1,923,947
1,742,100
1,923,947
Total6,024,9606,626,7676,024,9606,626,767
Company
Carrying Amount
Fair value
2015201420152014
Rs. 000
Rs. 000
Rs. 000
Rs. 000
Financial assets
681,483
720,176
681,483
720,176
Total681,483720,176681,483720,176
Financial liabilities
Trade and other payables360,936300,804360,936300,804
Loans and borrowings- current1,548,8391,600,1401,548,8391,600,140
Loans and borrowings- non current
358,697
560,105
358,697
560,105
Total2,268,4722,461,0492,268,4722,461,049
89
The following describes the methodologies and assumptions used to determine the fair values for those financial instruments which are not
already recorded at fair value in the Financial Statements.
Assets for which Fair Value Approximates Carrying Value
For financial assets and financial liabilities that have a short term maturity (original maturities less than a year), it is assumed that the carrying
amounts approximate their fair values.
Financial assets and financial liabilities with variable interest rates are also considered to be carried at fair value in the books.
Fixed Rate Financial Instruments
In fair valuing financial assets and financial liabilities with fixed rate , Average Weighted Primary Lending Rates rates published by the CBSL
were used.
15
DEFERRED TAX LIABILITIES
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Income/ (expense) arising during the year ( Note 15.2)
Deferred tax release on components of
other comprehensive income ( Note 15.2)
At the end
15.1
596,455
108,605
471,843
136,147
131,840
37,426
131,085
755
(2,925)
702,135
(11,535)
596,455
(1,373)
167,892
131,840
Deferred Tax Liability
Capital Allowances
1,129,866996,360279,132273,010
Deferred Tax Assets
Retirement Benefit Liability
(124,504)
(119,987)
(16,321)
(14,461)
Carried Forward Tax Losses
(278,401)
(254,982)
(86,384)
(116,558)
Provision for Obsolete and Slow Moving, Consumables and Spares
(20,561)
(18,924)
(4,270)
(4,139)
Allowances for Doubtful Debts
(4,264)
(6,012)
(4,264)
(6,012)
702,135596,455167,892131,840
15.2
Deferred Tax Charge / (Reversal)
Capital Allowances133,506224,490
(4,517)
(27,021)
(23,419)
(83,249)
Provision for Obsolete and Slow Moving,
Consumables and Spares
(1,637)
7,039
1,748
3,353
Income/ (expense) arising during the year
105,680
124,612
90
6,122 68,491
(1,860)
(1,911)
30,174
(65,478)
(131)
1,748
36,052
(355)
8
755
Multiplying Value
16
RETIREMENT BENEFIT LIABILITY
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
At the Beginning of the Year
674,196
557,963
58,310
50,542
Current service cost
48,007
44,958
5,467
4,807
Net interest on the net defined benefit liability (asset)
67,796
63,400
6,640
5,944
115,803 108,358 12,107 10,751
Net Actuarial Gain / loss for the year
4,429
85,448
5,640
2,217
Payments made during the Year
(72,716)
(77,573)
(9,030)
(5,200)
(68,287)7,875(3,390)(2,983)
Payable for retired employees included under current liabilities
At the End of the Year
(30,498)
691,214
(31,249)
642,947
-
67,027
58,310
Lanka Walltiles PLC - Company
In order to illustrate the significance of the salary escalation rates and discount rates assumed in this valuation a sensitivity analysis for all
employees in Lanka Walltiles PLC is as follows;
20152014
Rs. 000’s
Rs. 000’s
Discount Rate as at 31 March
Effect on DBO due to decrease in the discount rate by 1%
Effect on DBO due to increase in the discount rate by 1%
Salary Escalation Rate as at 31 March
Effect on DBO due to decrease in the salary escalation rate by 1%
Effect on DBO due to increase in the salary escalation rate by 1%
Group
6,758
(5,870)
6,129
(5,321)
(5,691)
6,409
(6,078)
6,916
In order to illustrate the significance of the salary escalation rates and discount rates assumed in this valuation a sensitivity analysis for all
employees of Lanka Walltiles PLC, Lanka Tiles PLC, Horana Plantation PLC ,Swisstek Ceylon PLC, Swisstek Aluminium Limited, Uni Dil Packaging
(Pvt) Ltd and Uni Dil Paper Sacks (Pvt) Ltd is as follows;
20152014
Rs. 000’s
Rs. 000’s
Discount Rate as at 31 March
Effect on DBO due to decrease in the discount rate by 1%
Effect on DBO due to increase in the discount rate by 1%
61,719
(54,715)
59,043
(47,197)
Salary Escalation Rate as at 31 March
Effect on DBO due to decrease in the salary escalation rate by 1%
Effect on DBO due to increase in the salary escalation rate by 1%
(40,549)
43,244
(31,019)
34,401
Lanka Walltiles PLC
The defined benefit liability as of 31 March 2015 was actuarially valued by M/s Piyal S. Goonetilleke and Associates qualified actuary.
The principal assumptions underlying the valuation are as follows;
91
20152014
Discount rate (per annum)
Salary scale (per annum) - Executives
- Non Executives
Retirement Age
Rates of turnover at selected ages as follows;
Executive and staff
Age
Turnover
10.14%
12.82%
11.03%
10.48%
12.90%
11.13%
55 Years
55 Years
20253035404550
10%10%10%5%3%1%1%
Lanka Tiles PLC
The defined benefit liability of Lanka Tiles PLC was actuarially valued by Piyal S Gunathilake and Associates qualified actuary on 31 March 2015.
Principal Actuarial Assumptions are as follows
20152014
Discount rate10.14%10.33%
Future salary increases
Executives
13.65%
11.00%
Non Executives8.00%8.12%
In addition to above, demographic assumptions such as mortality, withdrawal disability and retirement age were considered for the actuarial
valuation.
GA 1983 mortality table issued by the Society of Actuaries USA was taken as the base for the valuation.
An actuarial valuation of the retirement benefit obligation was carried out as at 31st March 2015 by Mr. Poopalanathan, Acturial and
Management Consultants (Pvt) Ltd.
The valuation method used by the actuary to value the benefit is the “projected Unit Credit Method”.
Rate of interest
2015
2014
per annum
Rate of salary increase
10.50%
10.50%
per annum
Workers
15.00%
16%
every two years
Staff
12.50%
12.50%
per annum
Head Office Staff
8.00%
8.00%
per annum beyond
Retirement age
Workers
60
60
years
Staff
60
60
years
Head Office Staff
55
55
years
Daily wage rate
Tea Rs.450.00
Rs.450.00
Rubber Rs.450.00
Rs.450.00
The company will continue as a going concern
92
Multiplying Value
Uni Dil Packaging Ltd and Uni Dil Paper Sacks (Pvt) Ltd
An actuarial valuation of the retirement benefit obligation was carried out as at 31st March 2015 by M/s Acturial and Management C
onsultants
(Pvt) Ltd.
The valuation method used by the actuaries to value the benefit is the “projected Unit Credit Method”.
2015
2014
Discount rate p.a
Staff turnover factor
Retirement age (Years)
The Company will continue as a going concern.
10.0%
10%
8%
55
10%
10%
8%
55
Swisstek (Ceylon)PLC
Gratuity liability based on the actuarial valuation carried out by Messrs. Piyal S Gunathilake & Associates on 31 March 2015.
2015
2014
Discount rate p.a
9.80%
14%
10%
12.0%
Swisstek Aluminium Limited
Gratuity liability based on the actuarial valuation carried out by Messrs. Piyal S Gunathilake & Associates on 31 March 2015.
2015
2014
Discount rate p.a
Retirement age (Years)
9.34%
10%
55
10.96%
12%
55
17
CAPITAL GRANTS
GROUP
20152014
Rs.’000Rs.’000
Capital grants (17.1)
121,613
118,411
Total
121,613
118,411
93
17.1
Capital grants
Capital grants received on plantations
Granted by
Sri Lanka Tea Board
Purpose of the grant
Tea factory
modernisation
Rate of depreciation
applicable to plant &
machinery (7.5% p.a.)
Tea replanting subsidy
Will be amortised at rate
applicable to Tea mature
plantations, after become
mature (3.00%)
Amount
received
Balance
at the
beginning
Received
Amortised Balance at
during the during the the end
period
period
Rs.'000
Rs.'000
Rs.'000
419
230
1,215
1,215
Rs.'000
Rs.'000
(31)
199
1,215
Plantation development Improvement
project / Asian
of workers living
Development Bank
environment
applicable to buildings
(2.5% p.a.)
31,588
21,198
(790)
20,408
Plantation human
development trust
Improvement
of workers living
environment
and furniture & fittings
(2.5% & 10% p.a.)
45,143
33,697
(1,120)
32,577
Estate infrastructure
development project
Improvement
of workers living
environment
(2.5% p.a.)
489
342
(12)
330
Plantation development Improvement
project
of workers living
environment
(2.5% p.a.)
20,051
16,836
(501)
16,335
Rubber Development
Department
Export Agriculture
Department (EAD)
Ergonomic equipment
applicable to equipment
(12.5% p.a.)
5,853
1,288
(732)
556
Internal road
development and
boundary posts
applicable to permanent
land development cost
(2.5% p.a.)
4,622
3,976
(116)
3,860
Minor factory
development
(2.5% p.a.)
10,099
8,771
(252)
8,519
Rubber replanting
subsidy
Rate applicable to rubber
mature plantations (5%
p.a.)
39,246
30,546
(1,048)
37,301
Rubber factory
development
applicable to plant &
machinery (7.5% p.a.)
675
312
(51)
261
Cinnamon replanting
subsidy
Rate applicable to rubber
mature plantations (5%
p.a.)
52
-
52
-
52
159,452
118,411
7,855
(4,653)
121,613
Total
94
Basis of amortisation
7,803
Multiplying Value
18
TRADE AND OTHER PAYABLES
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Trade creditors - other
720,861
684,246
72,498
176,191
- related parties [18.1]
33,718
31,456
2,506
3,391
754,579 715,702 75,004179,582
Sundry creditors including accrued expenses
688,508
586,394
148,438
98,452
Provision for terminal benefits (current) [16.0]
30,498
31,249
-
Donations in respect of Tsunami fund
2,964
3,015
2,964
3,015
Dividends Payable
172,514
20,617
134,530
19,755
Total1,649,0631,356,977 360,936 300,804
18.1
Trade creditors - related parties
Group
Company
2015201420152014
Company
RelationshipRs.’000Rs.’000Rs.’000Rs.’000
Lanka Ceramic PLC
Parent Company
12,225
17,903
Group Company
15,852
2,810
Hayleys Agriculture Holding
Subsidiary Company
1,575
730
Hayleys Agro Fertilizer
Group Company
2,049
2,848
Agro Technica
Group Company
1,396
759
Hayleys Agro Products
Group Company
15
15
Hayleys Agro Farms
Group Company
-
42
Puritas (Pvt) Ltd
Group Company
605
6,350
33,718 31,456
19
2,506
-
-
-
-
-
-
-
2,506
3,391
3,391
AMOUNTS DUE TO RELATED PARTIES
Group
Company
Current2015201420152014
Company
RelationshipRs.’000Rs.’000Rs.’000Rs.’000
Lanka Tiles PLC
Subsidiary Company
-
Swisstek Ceylon PLC
Subsidiary Company
-
Royal Ceramics PLC
Ultimate Parent Company
25,080
Royal Porcelain (Private) Limited
Group Company
3,702
28,782
-
124,941
247,520
-
1,308
305
2,456
8,229
2,456
-
3,702
2,456 138,180 250,281
95
20
REVENUE
Group
Company
Year ended 31st March2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Sale of tiles & associated items
Export sales945,093558,518702,160532,522
Local sales7,659,8057,263,2902,375,9612,067,137
8,604,8987,821,8083,078,1212,599,659
Sale of aluminium products
Sale of plantation products
Sale of packing materials
Turnover net of tax
Segmental information is given in Note 33 to these financial statements.
21
OTHER INCOME
1,518,103
2,164,860
2,308,353
14,596,214
1,166,967
2,268,825
2,162,170
13,419,770
-
-
-
3,078,121
2,599,659
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Income from investments in related Parties - Quoted
-
-
213,522
132,806
- Non quoted
-
-
23,256
34,315
Rental income - Related parties
-
-
23,972
23,406
Amortisation of capital and revenue grants
4,653
5,659
-
Disposal Gain/(Loss) on Property, Plant and Equipment
33,921
48,190
-
48,035
Reversal of debtors impairment
-
1,246
-
1,246
Change in fair value of consumable biological assets
56,640
26,052
-
Sundry income93,79886,00116,968 5,285
189,012167,148277,718245,093
22
FINANCE COST
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Interest expense on overdrafts47,96474,24422,58439,264
Interest expense on bank loans
312,936
552,877
142,556
187,709
Finance charges on lease liabilities
14,968
16,305
-
Less : Capitalisation of borrowing costs on immature plantations
(48,664)
(43,195)
-
327,204600,231165,140226,973
23
FINANCE INCOME
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Interest income
5,913
23,266-
5,913
23,266-96
Multiplying Value
24
PROFIT BEFORE TAX
Is stated after Charging /(Crediting) Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Included in cost of sales
Depreciation540,862533,665129,376129,438
Defined benefit plan costs - gratuity
88,683
82,773
-
Defined contribution plan costs - EPF & ETF
183,168
180,786
16,905
8,090
Other staff cost
1,849,584
1,808,969
97,493
88,045
Operating lease rentals
838
838
-
Inventory written off and allowances
7,476
(16,502)
-
Included in administration expenses
Depreciation30,16713,49213,894 11,686
Defined benefit plan costs - gratuity
27,120
25,585
12,107
10,751
Defined contribution plan costs - EPF & ETF
19,489
11,138
3,553
4,189
Other staff cost210,25489,32037,55534,486
Exchange (Gain)/Loss4,0172,3764,0174,416
Audit Fee5,5305,0211,3321,021
Technical Fee
155,861-
31,409
Included in distribution cost
Depreciation
14,1984,0174,0024,017
- Defined benefit plan costs - gratuity Defined
contribution plan costs - EPF & ETF
7,746
6,491
3,341
2,903
- Other staff costs
104,217
66,288
40,119
20,252
Allowance for doubtful Debts
12,889
653
(5,487)
25
INCOME TAX EXPENSES
25.1
The major components of income tax expense are as follows ;
Group
Company
Rs.’000Rs.’000Rs.’000Rs.’000
(a) Current income tax
Current income tax charge - continuing operations
244,192
103,892
-
Under/(over) provision of current taxes in respect of prior years
544
59
-
Tax effect on Inter company Dividends
23,933
14,756
-
268,669
118,707-(b)
Deferred income tax
Deferred taxation charge
Income tax expense reported in the Income statement
78,939
347,607
135,994
254,701
37,426
37,426
(c)
Deferred tax reversal reported in the OCI
(2,881)
(11,742)
(1,373)
344,726242,959 36,053
755
755
755
97
25.2
Reconciliation between current tax expense and the product of accounting profit.
Group
Company
2015201420152014
Year ended 31st MarchRs.’000Rs.’000Rs.’000Rs.’000
Accounting profit before income tax
1,798,203
1,175,330
554,479
194,787
Income considered as separate source of income
22,271
22,415
250
Non deductible expenses924,300859,723184,036186,055
Deductible expenses(1,311,057)(1,711,388)(425,456)(668,194)
Total Statutory Income
1,433,717
346,080
313,308
(287,352)
Tax losses utilised
(172,389)
(56,789)
(109,658)
Qualifying Payment Relief
(464,791)
(254,878)
(203,650)
Taxable profit/loss
796,537
34,413-
Current income tax expense
Taxation -10%
-
1,606
Taxation -12%
18,520
11,850-
Taxation -28%
222,072
85,406-
Dividend tax3,6005,030
-
244,192
103,892-
Deferred income tax reported in income statement
Capital Allowances172,940224,739
(2,497)
(14,841)
(91,020)
(84,296)
Provision for Obsolete and Slow Moving, Consumables and Spares
(2,172)
7,039
1,689
3,353
Deferred taxation charge/(reversal)
78,939
135,994
6,122 68,491
(487)
(1,911)
30,174
(65,478)
(131)
(355)
1,748
8
37,426
755
Deferred income tax reported in other comprehensive income
(2,881)
(11,742)
(1,373)
76,058124,25236,053
Effective Income Tax Rate
25.3
Notes on income tax of Group companies
19.33%
21.67%
6.75%
755
0.39%
Lanka Walltiles PLC, Lanka Tiles PLC, Vallibel Plantation Management Ltd, Unidil Packaging (Private) Limited and Swisstek (Ceylon) PLC
The statutory tax rate of above companies are as follows;
20152014
Local sales and other profits
28%
28%
Qualified export profit
12%
12%
Agricultural profit10%10%
Specified profits12%15%
Swisstek Aluminium Ltd is exempted from income tax for a period of five years, commencing from the year of assessment 2012/2013.
In terms of Section 16 of the Inland Revenue Amendment Act No.10 of 2006,and subsequent amendments thereto, “Profits from any
Agricultural Undertaking “ is liable for income tax at 10%, commencing from 01 April 2011. Manufacturing profit and other income are liable for
income tax at 28% except for management fee which is taxable at 12%.
98
Multiplying Value
26
EARNINGS PER SHARE
26.1
Earnings per share - basic
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders of L anka Walltiles PLC by the
weighted average number of ordinary shares outstanding during the year. T he weighted average number of ordinary shares outstanding during
the year and the previous year are adjusted for events that have changed the number of ordinary shares outstanding without a corresponding
change in the resources such as a bonus issue. T he following reflects the income and share data used in the basic earnings per share
computations.
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Amounts used as the numerator:
Profit attributable to equity holders for
basic earnings per share
Profit attributable to equity holders for
basic earnings per share - from continuing operations
1,043,793
605,704
517,052
194,032
2015201420152014
Number of ordinary shares used as the denominator:
’000
’000
’000
’000
Weighted average number of ordinary shares in issue
applicable to basic earnings per share
27
DIVIDENDS PAID
54,600
54,600
54,600
Group
Declared and paid during the year
2015
2014
Equity dividends on ordinary shares :
Rs.’000
Rs.’000
2015
Rs.’000
54,600
Company
2014
Rs.’000
-
109,200
-
109,200
136,500
-
136,500
First Interim 2014/15 (Rs. 2.00 per share)
109,200
-
109,200
Second Interim 2014/15 (Rs. 2.00 per share)
109,200
-
109,200
354,900109,200354,900109,200
28.
CASH AND CASH EQUIVALENTS
Components of cash and cash equivalents
Group
Company
2015201420152014
Rs.’000Rs.’000Rs.’000Rs.’000
Favourable cash & cash equivalents balance
Cash & bank balances
777,299
168,732
34,805
12,187
Short term bank deposits
200,168
168
-
977,467168,900 34,805 12,187
Unfavourable cash & cash equivalent balances
Bank overdrafts (14)
(917,859)
(1,037,324)
(436,189)
(376,811)
Total cash and cash equivalents for
the purpose of cash flow statement
59,608
(868,424)
(401,384)
(364,624)
99
29.
ASSETS PLEDGED
Following Assets have been pledged as security for liabilities, in addition to the items disclosed in Note 14.7 to these financial statements.
Lanka Tiles PLC
Bank overdrafts are secured primarily on inventories.
Uni Dil Paper Sacks (Pvt) Ltd
Import Loans are secured by Primary on mortgage bond over land and building for Rs. 30 million at Naranpola, Dekatana for the banking
facilities of Hatton National Bank PLC and registered primary floating mortgage bond over stock and book debts for Rs. 60 million for the
banking facilities of Hong kong & Shanghai Banking corporation.
The following securities were offered for bank overdraft facilities .
Institution Securities
Rate of Interest
Seylan Bank PLC
Millennium Branch
Colombo 1
Primary Mortgage for
- Rs. 3.50 million
7.47% p.a.
Secondary Mortgage for
- Rs. 2.45 million
(AWPLR based)
Commercial Bank of Ceylon
PLC
Mortgage over leasehold rights of Stockholm Estate and
Fairlawn Estate, including buildings, fixed and floating assets.
Facility
Available
Rs’000
10,000
Tertiary Mortgage for
- Rs.30.00 million over leasehold rights of
leasehold rights of Mahanilu Estate
6.47% p.a.
(AWPLR based)
200,000
210,000
210,000
100
Lanka Walltiles PLC
Hatton National Bank Rs. 100 Mn bank overdraft is secured primarily on registere primary floating mortgage bond for Rs.390 Mn over the
project assets comprising of land, building and machinery at Meepe.
Multiplying Value
30
RELATED PARTY DISCLOSURES
Details of significant related party disclosures are as follows
30.1Company
Transactions with the Transactions with Transactions
Royal Ceramic Lanka PLC the Parent Company, with Subsidiaries and Lanka Ceramic PLC Affiliate Companies
201520142015201420152014
ZZ
Note
Rs. ‘000
Rs. ‘000
Rs. ‘000
Rs. ‘000
Rs. ‘000
Rs. ‘000
Balance as at 01 April
Sale of Tiles/ (Sales returns)
Purchase of raw materials
Purchase of other items
Sale of raw materials
Settlements/(Recoveries) by the Company
Allocation of common cost
Rent received
Expenses apportioned
Advances received/( paid)
Commission on sales
Expenses incurred and transferred
Sale of fixed assets
Other income
Cash/Goods in transit
Short Term Loan
Technical Fees
Balance as at 31 March
(2,456)
-
(3,391)
(6,112)
(237,427)
(153,172)
13,477
13,388
-
-
39,320
8,868
-
(5,201)
(5,867)
(12,132)
(53,925)
(36,951)
(796)-----
3,034
-
-
7,265
2,069
24,341
(7,494)
2,743
14,000
14,091
15,269
-
18
-
2,853
-
(12,993)
----
16,611
16,363
(448)- - -
(79,448)----
(34,488)
(809)
(7,439)
(6,201)
-
-
(4,083)
(2,496)
442
-
4,009
-
93,139
----
61----
148,631(598)
-
-
(2,000)
-
(8,575)
-----
(65,000)
(31,409)----(4,885)
(2,456)
(2,506)
(3,391)
(90,253)
(237,427)
Included under
Trade and other receivable
9.1
3,344 -
-
- 39,426 Trade and other payable
18.1
- -
(2,506)
(3,391)
-
Amount due from related parties
10
- -
-
- 272 10,399
Amount due to related parties
19
(8,229)
(2,456)
-
- (129,951)
(247,825)
(4,885)
(2,456)
(2,506)
(3,391)
(90,253)
(237,427)
The above subsidiaries and affiliates include following companies;
Company
- Lanka Tiles PLC
- Unidil Packaging (Pvt) Ltd
- Vallibel Plantation Management (Pvt) Ltd
- Horana Plantations PLC
- Swisstek Aluminum Ltd
- Swisstek (Ceylon) PLC
- Royal Porcelain (Pvt) Ltd
- Royal Bathware Ltd
Terms and conditions with related parties
The ‘Sales to’ and ‘Purchases from’ related parties are made on commercial terms agreed with respective parties.
Outstanding balances as at the year and are unsecured, interest free and settlement occur in cash.
Technical fee paid to Royal Ceramic Lanka PLC is for services rendered in providing technical advises to improve manufacturing process of Lanka
Walltiles PLC, Lanka Tiles PLC and Swisstek Aluminum Ltd.
101
30.2
Group - Related Party Transactions
30.2.1 Lanka Tiles PLC
Sale of goods to
Raw materials
Spares
Consumables
Royal Bathware Ltd
Raw materials
Services
Spares
Raw materials
Spares
Ever Paint and Chemical Industries Ltd
Services
2015
Rs. ‘000
2014
Rs. ‘000
7,188
13,404
694
6
-
91
184
6
778
288
421
3
9,280 13,783
Purchase of goods/services from
20152014
Rs. ‘000
Rs. ‘000
Lanka Ceramic PLC
Raw materials
Raw materials
Spares
Consumables
Raw materials
Spares
Ever Paint and Chemical Industries Ltd
Raw materials
Delmage Freight Services (Pvt) Ltd
Services
Delmage Forsyth & Co (Shipping) Ltd
Services
113,753
125,852
7,051
1,441
900
15
126
48
151
506
153
4,012
3,344
-
200
126,514 131,038
Expenses incurred and transferred to/(from)
2015
Rs. ‘000
2014
Rs. ‘000
109,176
-
2015
Rs. ‘000
2014
Rs. ‘000
Finished goods
1,652
3,913
Sales commission
Warehouse rental
8,196
1,312
789
-
803
30
Technical fees
30.2.2 Swisstek (Ceylon ) PLC
Sale of goods to
Other Income
102
Royal Ceramics Lanka PLCReimbursement of security expenses
Multiplying Value
30.2.3 Swisstek Aluminium Ltd
2015
Rs. ‘000
2014
Rs. ‘000
Administration expenses
Technical fees
21,661
15,275
-
Sale of goods to
2015
Rs. ‘000
2014
Rs. ‘000
Finished goods
Finished goods
Finished goods
47,661
11,240
26,294
29,704
2,573
17,230
2015
Rs. ‘000
2014
Rs. ‘000
Expenses reimbursed
3,287
66
2015
Rs. ‘000
2014
Rs. ‘000
Expenses reimbursed
947
-
Sale of goods to
2015
Rs. ‘000
2014
Rs. ‘000
30.2.4 Uni Dil Packaging Ltd
Royal Bathware LTD
Lanka Ceramic PLC
30.2.5 Uni Dil Papersack Ltd
Lanka Ceramic PLC
30.2.6 Horana Plantations PLC
Sale of tea
48
Royal Bathware LTD
Sale of tea
161
Sale of tea
119
Lanka Ceramic PLC
Sale of tea
55
Dipped Products PLC
Sale of latex
79,591
79,974
Purchase of goods/services from
2015
Rs. ‘000
5
27
5
11
48
2014
Rs. ‘000
Hayleys Agriculture Holdings Ltd
Chemicals
1,697
125,852
Hayleys Agro Fertilizer (Pvt) Ltd
Fertilizer
48,003
18,839
Hayleys Agro Products Ltd
Spraying equipment
-
15
Hayleys Agro Farms (Pvt) Ltd
Fertilizer
114
186
Agro Technica Ltd
Chemicals
4,635
1,789
54,449 146,681
103
Lanka Ceramic PLC
Expenses reimbursed
Office rent
Expenses reimbursed
Other Income
Hiring of Vehicles
30.3
Transactions with key management personnel of the company
2015
Rs. ‘000
2014
Rs. ‘000
952
3,725
885
487
388
-
900
150
The key management personnel of the company are the members of its Board of Directors and that of its parent.
Key management personnel compensation
Group
Company
2015201420152014
Rs’000Rs’000Rs’000Rs’000
Short Term Employment Benefits
54,765
56,513
9,430
18,486
Post Employment Benefits
11,985
9,705
2,329
2,025
66,750 66,218 11,759 20,511
31
COMMITMENTS AND CONTINGENCIES
31.1
Capital commitments
There were no significant capital commitments as at reporting date in the Company or Group except as detailed below,
Lease commitments
a)
Lanka Tiles PLC has operating lease commitments where Lanka Tiles PLC is the lessee.
The future minimum lease payments under non cancellable operating leases are as follows
Group
as at 31st March
2015
2014
Rs.’000Rs.’000
Not later than one year
-
2,881
Later than one year not later than five years
-
-
2,881
Lanka Tiles PLC is committed to pay
Rs. 324,500/- & Rs. 2,295,887/- respectively as rent per month for the use of buildings situated in Rajagiriya and Nawala.
b).
Horana Plantation PLC has commitments under operating lease rentals on Dumbara Estate as given below;
1 - 10 years (per annum)
Finance lease rentals payable to the Secretary to the Treasury ;
22.06.2011 to 21.06.2045 (per annum)
104
Rs. 0.552 million
Rs. 0.698 million
Rs. 0.838 million
Rs. 5.228 million
Multiplying Value
31.1Contingencies
a)
The Lanka Walltiles PLC, Vallibel Plantation Management Limited and Horana Plantations PLC are defendants in lawsuits in respect of labour
tribunal cases filed by employees for which maximum liability cannot be reliably measured as at the balance sheet date. The directors believe,
based on the information currently available, that the ultimate resolution of such legal procedures would not likely to have a material adverse
effect on the results of operations, financial position or liquidity. Accordingly no provision for any liability has been made in the financial
statements.
Lanka Walltiles PLC
b)
As at the reporting date, the Lanka Walltiles PLC has received assessments issued by the Department of Inland revenue in respect of Income
tax, Value added tax and economic service charge totalling Rs. 52,581,411/- for the year of assessment 2008/09, 2009/10. The Company has
appealed against the assessments in the appeal hearing branch. The Directors believe, based on the information currently available, the ultimate
resolution of such assessment is not likely t have a material adverse effect on the Company. Accordingly no provision for liability has been made
in these financial statements.
Horana Plantation PLC
c)
Unfulfilled condition on capital grants - Capital grants received from Ceylon Electricity Board for stand by power generators is subject to a
condition of minimum usage of CEB power as against the Generator power. A liability will arise only if the above condition is not fulfilled.
Horana Planatation PLC - Contingent Rent (Refer Note 14.6 to the Financial Statements)
The case bearing No 27692/L filed by Rev Hadapanagoda Mahinda Thero , claiming the possession of Dumbara Estate, on the basis that the
terms of the indenture of the aforesaid lease agreement have been violated. The thero also made the claims for the value of rubber trees
excavated together with the interest. Furthermore he claims for the loss incurred due to the non cultivation on the property leased. The
directors believe, based on the information currently available, that the ultimate resolution of such legal procedures would not likely to have a
material adverse effect on the results of operations, financial position or liquidity. Accordingly no provision for any liability has been made in the
financial statements.
d)
“Super Gain Tax (SGT) - As per the interim Budget 2015 passed in the Parliament of Sri Lanka on 07th February 2015, the government proposed
a one off 25% Super Gain Tax (SGT) be imposed on companies which have earned in excess of Sri Lankan Rupees 2,000 million profit before
income tax on Group profit as per the Audited Financial Statement in the Financial Year 2013/14. The Gazette notification in respect of the
above budget proposal was issued by the Government of Sri Lanka on 30th March 2015.
Accordingly, liable Companies will be assessed for SGT based on taxable income for the year of assessment 2013/14 and would be required to
pay such SGT in three instalments commencing from 15th May 2015. However, as of date, this bill has not been passed in the Parliament. In the
event the Bill is enacted as a law in the future, the Company would become liable to pay the above SGT. The quantum of such have not yet been
estimated by the company.
There are no other material contingent liabilities as at the reporting date.
32
EVENTS OCCURRING AFTER THE REPORTING PERIOD
There have been no material events occurring after the reporting date that require adjustments to or disclosure in the Financial Statements.
105
106
12,716,531
4,747,868
Segment Assets
Segment Liabilities
Reconciliation of liabilities
Segment Liabilities
Inter- company balance eliminations
Reconciliation of assets
Segment Assets
Inter- company balance eliminations
Investment in subsidiary elimination
Goodwill adjustment
Segment net profit for the year
Inter- segment dividend income
Group net profit for the year
Reconciliation of net profit for the year
4,747,868
(419,848)
4,328,020
12,716,531
(419,848)
(1,522,164)
19,570
10,794,089
1,307,495
(242,666)
1,064,829
(5,871)
28,238
1,307,495
Net Profit for the year
Trade debtors and inventory impairment
Provision for retirement benefit
(284,466)
Income Tax Expense
371,324
1,591,961
Profit Before Tax
Other Segment Information
Total cost incurred during the period to
depreciation and amortisation
5,355
(210,378)
Finance Cost
Finance Income
(871,962)
(551,467)
295,467
Other Income
2,924,947
Gross Profit
Distribution Costs
8,521,605
210,421
8,732,036
Sales to External Customers
Inter Segment Sales
Total Revenue
789,605
789,605
1,331,896
1,331,896
157,363
157,363
7,439
1,851
48,611
1,331,896
789,605
157,363
(9,392)
166,755
-
(45,766)
(103,976)
(25,524)
2,776
339,245
1,527,464
1,527,464
1,759,920
1,759,920
3,272,425
(346,407)
4,949
2,930,967
55,217
55,217
79,629
121,247
3,272,425
1,759,920
55,217
(28,652)
83,869
558
(38,561)
(89,196)
-
69,492
141,576
2,164,860
13,279
2,178,139
2015
Tiles & Aluminium Plantation
associated
Products
products
items
Rs. 000's
Rs. 000's
Rs. 000's
1,693,262
(242,666)
1,450,596
7,123
115,802
585,227
19,367,901
8,154,001
1,693,262
(347,607)
2,040,869
5,913
(327,204)
(822,113)
(987,637)
431,678
3,740,233
14,596,214
223,700
14,819,914
Rs. 000's
Total
856,608
856,608
8,154,001
(419,848)
7,734,153
2,047,049 19,367,901
(419,848)
(122,400) (1,990,971)
24,519
1,924,649 16,981,601
173,187
173,187
5,555
6,084
44,045
2,047,049
856,608
173,187
(25,097)
198,284
-
(32,499)
(77,474)
(90,151)
63,943
334,465
2,382,285
2,382,285
Rs. 000's
Packing
materials
5,307,267
(470,204)
4,837,063
12,517,516
(470,204)
(1,522,164)
19,570
10,544,718
803,781
(167,121)
636,660
(1,246)
26,494
369,831
12,517,516
5,307,267
803,781
(193,675)
997,456
22,951
(403,737)
(508,526)
(705,024)
238,197
2,353,595
7,765,142
248,323
8,013,465
800,590
800,590
1,187,087
1,187,087
70,723
70,723
617
49,559
1,187,087
800,590
70,723
-
70,723
-
(87,141)
(57,457)
(40,899)
4,006
252,214
1,180,893
1,180,893
1,562,073
(298,693)
1,562,073
3,016,910
(346,407)
4,949
2,675,452
124,541
124,541
75,939
110,046
3,016,910
1,562,073
124,541
(30,378)
154,919
315
(61,817)
(88,837)
-
34,097
271,161
2,257,841
1,714
2,259,555
2014
Tiles & Aluminium Plantation
associated
Products
products
items
Rs. 000's
Rs. 000's
Rs. 000's
1,087,750
(167,121)
920,629
653
108,358
551,174
18,595,100
8,503,003
1,087,750
(254,701)
1,342,451
23,266
(600,231)
(722,631)
(829,354)
334,269
3,137,132
13,419,770
250,037
13,669,807
Rs. 000's
Total
833,073
833,073
8,503,003
(470,204)
8,032,799
1,873,587 18,595,100
(470,204)
(122,400) (1,990,971)
24,519
1,751,187 16,158,444
88,705
88,705
1,899
5,308
47,463
1,873,587
833,073
88,705
(30,648)
119,353
-
(47,536)
(67,811)
(83,431)
57,969
260,162
2,215,894
2,215,894
Rs. 000's
Packing
materials
Multiplying Value
34.
FINANCIAL RISK MANAGEMENT
The Group’s activities are exposed to variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk.
The Group’s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group. Financial risk management is carried out through risk reviews, internal control
systems, insurance programmes and adherence to the Group’s financial risk management policies. The board of directors regularly reviews these
risks and approves the risk management policies, which covers the management of these risks.
Market risk
Market risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of the changes in market prices.
(i) Foreign currency exchange risk – risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
(ii)
Cash flow interest rate risk – risk that future cash flows associated with a financial instrument will fluctuate.
Foreign currency/ exchange risk
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 group operate internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to
the USD, AUD and Euro.
Foreign exchange risk arises mainly as a result of foreign exchange gains/losses on translation of US dollar - denominated loans granted, trade
receivables, trade creditors and Euro - denominated trade creditors.
Foreign currency sensitivity
Change in Change in profit
basis points
before tax
Rs. 000’s
2015
2014
0.05
0.05
28,527
18,165
Cash flow and fair value interest rate risk
The group’s interest rate risk arises from long-term borrowings issued at variable rates. The group manages its interest rate risk by actively
monitoring the yield curve trend and interest rate movement for the various financial instruments.
The group’s borrowings comprise borrowings from financial institutions. The group’s interest rate risk objective is to manage an acceptable level
of rate fluctuation on the interest expense. In order to achieve this objective, the group targets floating borrowings based on assessment of its
existing exposure and desirable interest rate profile. The group analyses its interest rate exposure on a dynamic basis.
Change in
Change in profit
Interest rate sensitivity
basis points
before tax
Rs. 000’s
2015
2014
0.05
0.05
33,726
22,014
107
Credit risk
Credit risk arises from cash and cash equivalents, deposits with banks, as well as credit exposures to customers, including outstanding
receivables. Trade receivables are mainly secured with bank guarantees given by customers in favour of the Group. Individual credit limits are set
based on the amount of bank guarantee. The utilisation of credit limits is regularly monitored.
The group places its cash and cash equivalents with a number of creditworthy financial institutions. The group’s policy limits the concentration
of financial exposure to any single financial institution. The maximum credit risk exposure of the financial assets of the group is approximately
the carrying amounts as at reporting date, except for trade receivables which are secured by bank guarantees. ( Please refer Note 10.3 for ageing
analysis of trade receivables)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient liquid funds to meet its financial obligations.
In the management of liquidity risk, the group monitor and maintain a level of cash and cash equivalents deemed adequate by the management
to finance the group’s operations and to mitigate the effects of fluctuations in cash flows. Due to the dynamic nature of the underlying
business, the group aims at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available.
The table below analyses the group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the
statement of financial position date to the contractual maturity date.
Group
At 31 March 2015
Rs (‘000)
Less than 3 Between 3 months
months
and 1 year
Between year 1
and 2 year
Between year 2
and year 5
Over 5 years
Bank Borrowings
2,156,170479,990582,342793,554363,840
Trade and other payables1,649,064---
At 31 March 2014
Rs (‘000)
months
and 1 year
Between year 1
and 2 year
Between year 2
and year 5
Over 5 years
Bank Borrowings
2,526,174805,694483,889
1,267,516186,517
Trade and other payables1,356,977---Company
At 31 March 2015
Rs (‘000)
months
and 1 year
Between year 1
and 2 year
Between year 2
and year 5
Over 5 years
Bank Borrowings
1,395,307153,533180,261 41,128137,308
Trade and other payables 360,937---
At 31 March 2014
Rs (‘000)
months
and 1 year
Between year 1
and 2 year
Between year 2
and year 5
Over 5 years
Bank Borrowings
1,395,426204,667203,742356,410
Trade and other payables 300,804---
108
Capital management risk
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order
to support its business and maximise shareholder value.
Multiplying Value
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the
capital structure, the group may or may not make dividend payments to shareholders, return capital to shareholders or issue new shares or
other instruments.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total borrowings
by total equity. Total borrowings including non-current and current borrowings as shown in the statements of financial position. Total equity is
calculated as ‘Total equity’ in the statements of financial position.
The gearing ratio as at 31 March is as follows:
Group
Company
2015201420152014
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Borrowings4,375,8965,269,7901,907,5362,160,245
Total equity9,247,4488,125,6452,970,4292,812,543
Gearing ratio ; Debt to Equity
47%
65%
64%
77%
35.
Material partly-owned subsidiaries
Financial information of subsidiaries that have material non-controlling interests is provided below:
Proportion of equity interest held by non-controlling interests:
Name
Country of incorporation and operation
2015
2014
Lanka Tiles PLC
Sri Lanka
Sri Lanka
Sri Lanka
Sri Lanka
31.78%
49.00%
55.91%
61.48%
31.78%
49.00%
55.91%
61.48%
20152014
Rs. 000’s
Rs. 000’s
Accumulated Balances of Material Non - Controlling Interest
Lanka Tiles PLC
1,402,061
1,282,929
699,838
674,511
314,864
187,985
333,380
237,603
2,750,143
2,383,029
Profit allocated to Material Non - Controlling Interest
Lanka Tiles PLC
232,082
190,913
30,368
67,246
47,613
13,288
96,741
43,478
406,803
314,925
109
T he summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-company
eliminations.
Summarised statement of profit or loss for year ended 31 March 2015:
Lanka Tiles PLC
Horana Swisstek
Swisstek
Plantations PLC
(Ceylon) PLC
Aluminium
Ltd
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Revenue5,349,6702,164,859 339,0961,527,464
Cost of sales
(3,421,137)
(2,023,284)
(277,112)
(1,188,219)
Distribution costs
(598,823)
-
(22,661)
(25,524)
Administrative expenses(371,146)(95,240)(20,238)(103,976)
Finance costs (49,242)(28,848)(14,573)(45,766)
Profit before tax
956,225
86,980
89,052
180,195
Income tax
(225,949)
(25,004)2,842(9,392)
Profit for the year
730,276
61,976
91,894
157,363
719,692
76,685
247,143
155,794
Profit attributable to non-controlling interests
232,082
30,368
47,613
96,741
Dividends paid to non-controlling interests
109,586
12,250
7,664
Summarised statement of profit or loss for year ended 31 March 2014:
Lanka Tiles PLC
Horana Swisstek
Swisstek
Plantations PLC
(Ceylon) PLC
Aluminium
Ltd
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Revenue5,109,3182,269,092 320,1281,180,893
Cost of sales
(3,452,185)
(1,997,931)
(273,006)
(928,679)
Distribution costs
(468,288)
-
(15,848)
(40,899)
Administrative expenses
316,315
(92,297)
(15,307)
(57,457)
Finance costs(150,696)(50,399)(23,599)(87,141)
Profit before tax
775,162
162,562
53,400
70,723
Income tax
(174,426)
(25,325)
(3,738)
Profit for the year
600,736
137,237
49,662
70,723
599,085
70,786
48,393
69,016
Profit attributable to non-controlling interests
190,389
67,246
13,288
43,478
Dividends paid to non-controlling interests
96,470
24,500
-
Prior to the acquisition of non controlling interest in the 2014, Rs. 10.84 Mn paid as dividend for non controlling interest of the Vallibel
Plantation Management Ltd.
Summarised statement of financial position as at 31 March 2015:
Lanka Tiles PLC
Horana Swisstek
Swisstek
Plantations PLC
(Ceylon) PLC
Aluminium
Ltd
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Current Assets
2,884,238393,363166,375719,977
Non- Current Assets
3,433,863
2,957,747
902,334
611,919
Current Liabilities
1,036,292494,553181,280605,213
Non- Current Liabilities
870,037
1,428,316
95,192
184,392
Total equity
4,411,772
1,428,241
792,237
542,291
Attributable to:
Equity holders of parent
3,009,711
728,403
349,279
208,911
Non-controlling interest
1,402,061
699,838
314,864 333,380
110
Multiplying Value
Summarised statement of financial position as at 31 March 2014:
Lanka Tiles PLC
Horana Swisstek
Swisstek
Plantations PLC
(Ceylon) PLC
Aluminium
Ltd
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Current Assets
2,697,358362,556149,043535,501
Non- Current Assets
3,516,696
2,719,752
753,029
651,586
Current Liabilities
1,260,388516,600198,659559,373
Non- Current Liabilities
916,758
1,189,154
134,920
241,217
Total equity4,036,9081,376,554 568,493 386,497
Attributable to:
Equity holders of parent
2,753,979
702,043
250,636
148,894
Non-controlling interest
1,282,929 674,511 187,985 237,603
Summarised cash flow information for year ending 31 March 2015:
Lanka Tiles PLC
Horana Swisstek
Swisstek
Plantations PLC
(Ceylon) PLC
Aluminium
Ltd
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Operating1,688,420 105,620
Investing (196,896)(261,167)
Financing (563,431) 147,153
Net increase / (decrease) in cash and cash equivalents
928,093
(8,394)
19,135 174,845
37,863 (7,528)
(43,042)(140,941)
13,956
26,376
Summarised cash flow information for year ending 31 March 2014:
Lanka Tiles PLC
Horana Swisstek
Swisstek
Plantations PLC
(Ceylon) PLC
Aluminium
Ltd
Rs. 000’s
Rs. 000’s
Rs. 000’s
Rs. 000’s
Operating568,423235,387 (7,663)169,431
Investing (236,793)(361,631) 3,363 (35,677)
Financing(400,977) 8,798 4,713(132,984)
(69,347)(117,446)
413
770
111
Five Year Summary Statement Of
Financial Position
As at 31st March
GROUP
ASSETS
Non-current assets
Property, plant & equipment
Investment property
Investments in associates
Deferred tax asset
2015
2014
2013
2012
2011
Rs.'000
Rs.'000
Rs.'000
Rs.'000
Rs.'000
10,061,471
24,519
27,285
52,183
10,165,458
9,796,164
24,519
27,285
22,729
9,870,697
9,479,724
80,000
24,519
27,285
22,369
9,633,897
8,833,822
56,691
24,519
27,285
22,369
8,964,686
7,361,226
56,691
24,519
27,285
7,469,721
3,473,262
2,327,095
1,263
34,092
2,964
977,467
6,816,143
16,981,601
3,648,372
2,444,967
21,884
3,624
168,900
6,287,747
16,158,444
3,774,997
2,186,173
21,884
3,554
231,901
6,218,510
15,852,407
2,447,523
1,904,371
24,490
8,030
92,069
4,476,483
13,441,169
1,810,414
1,124,516
2,587
96,847
276,654
21,339
3,332,357
10,802,078
Stated capital
Reserves
Retained earnings
Shareholders' funds
787,765
1,004,516
4,705,023
6,497,305
787,765
936,147
4,018,704
5,742,616
787,765
971,218
3,254,614
5,013,597
787,765
770,048
2,998,951
4,556,764
787,765
776,048
2,383,488
3,947,301
Total equity
2,750,143
9,247,448
2,383,029
8,125,645
3,370,511
8,384,108
3,023,396
7,580,160
2,801,930
6,749,231
1,742,100
702,135
691,213
121,613
3,257,061
1,923,947
596,455
642,946
118,411
3,281,759
1,913,944
471,843
531,565
112,545
3,029,897
1,846,564
346,422
538,611
114,926
2,846,523
1,187,101
231,929
474,557
116,743
2,010,330
1,649,064
1,356,977
1,783,712
1,665,402
1,228,801
165,450
45,764
19,512
10,887
158,381
28,782
2,633,796
4,477,092
16,981,601
2,456
3,345,843
4,751,040
16,158,444
2,635,178
4,438,402
15,852,407
541
1,337,655
3,014,485
13,441,169
523
654,812
2,042,517
10,802,078
Current assets
Inventories
Assets classified as held for sale
Total assets
Deferred income & Capital grants
Current liabilities
112
Multiplying Value
As at 31st March
COMPANY
ASSETS
Non-current assets
Property, plant & equipment
Investment property
Investments in associates
Deferred tax asset
2015
2014
2013
2012
2011
Rs.'000
Rs.'000
Rs.'000
Rs.'000
Rs.'000
2,233,154
1,276,096
3,509,250
2,306,044
1,276,096
3,582,140
2,290,186
80,000
508,642
41,247
2,920,075
2,091,871
56,691
508,642
41,247
2,698,451
1,580,106
56,691
508,642
41,247
2,186,686
Total assets
1,349,134
681,483
272
34,092
2,964
34,805
2,102,750
5,612,000
1,363,613
720,176
10,399
21,884
3,624
12,187
2,131,883
5,714,023
1,398,850
596,972
28,756
21,884
3,386
47,621
2,097,469
5,017,544
914,138
609,931
20,870
24,490
3,862
23,229
1,596,520
4,294,971
474,043
309,200
5,308
67,616
14,478
21,339
891,984
3,078,670
Stated capital
Reserves
Retained earnings
Shareholders' funds
787,765
296,294
1,886,370
2,970,429
787,765
296,294
1,728,484
2,812,543
787,765
346,045
1,593,929
2,727,739
787,765
170,296
1,553,799
2,511,861
787,765
176,296
1,195,486
2,159,547
Total equity
2,970,429
2,812,543
2,727,739
2,511,861
2,159,547
358,697
167,892
67,027
593,616
560,105
131,840
58,310
750,255
683,417
131,085
50,542
865,044
799,406
85,510
49,080
933,997
312,321
3,386
36,582
352,289
360,937
300,805
331,444
539,079
451,209
-
-
-
138,180
1,548,839
2,047,956
5,612,000
250,281
1,600,140
2,151,226
5,714,023
204,722
888,595
1,424,761
5,017,544
Current assets
Inventories
Assets classified as held for sale
Current liabilities
58,138
48
309,986
849,113
4,294,971
127
57,359
566,833
3,078,670
113
Five Year Summary Statement of
Comprehensive Income
Year ended 31 March
2015
2014
2013
2012
2011
Rs.'000
Rs.'000
Rs.'000
Rs.'000
Rs.'000
Revenue
14,596,214
13,419,770
12,006,220
10,568,536
8,443,481
Cost of Sales
(10,855,981)
(10,282,638)
(9,048,800)
(7,924,073)
(5,939,049)
Gross Profit
3,740,233
3,137,132
2,644,464
2,644,463
2,504,432
Other Income
189,012
167,148
88,167
82,204
58,388
Distribution Costs
(987,637)
(829,354)
(677,883)
(469,891)
(307,850)
(822,113)
(722,631)
(661,993)
(636,432)
(569,526)
Finance Cost
(327,204)
(600,231)
(501,577)
(223,927)
(180,312)
5,913
23,266
2,606
6,839
11,983
Release of negative goodwill
-
-
-
-
42,467
Share of associate results
-
-
-
-
-
Deemed gain on legal mMerger
-
-
-
-
-
GROUP
Continuing Operations
Finance Income
Fair value adjustment in investment property
-
-
23,309
-
-
1,798,203
1,175,330
1,403,256
1,403,256
1,559,582
(347,607)
(254,701)
(203,070)
(238,319)
(268,924)
Profit/(Loss) for the Year from Continuing Operations
1,450,596
920,629
1,200,186
1,164,936
1,290,658
Profit/(Loss) After Tax for the Year from Discontinued
Operations
-
-
-
(4,102)
(300,637)
1,450,596
920,629
1,200,186
1,160,834
990,021
1,043,793
605,703
509,553
753,229
484,467
Profit/(Loss) Before Tax from Continuing Operations
Income Tax (Expense) / Reversal
Profit for the Year
Profit for the year
Basic Earnings Per Share - Profit Attributable to Ordinary
Equity Holders
114
406,803
314,925
517,426
407,605
505,554
1,450,596
920,629
1,026,979
1,160,834
990,021
19.12
11.09
9.33
13.80
10.65
Multiplying Value
Year ended 31 March
2015
2014
2013
2012
2011
Rs.'000
Rs.'000
Rs.'000
Rs.'000
Rs.'000
3,078,121
2,599,659
2,308,935
2,413,704
676,383
COMPANY
Continuing Operations
Revenue
Cost of Sales
(2,142,319)
(1,951,099)
(1,572,001)
(1,506,717)
(477,516)
Gross Profit
935,802
648,560
736,934
906,987
198,867
Other Income
277,718
245,093
137,372
133,928
193,005
Distribution Costs
(292,894)
(285,389)
(269,134)
(204,461)
(42,435)
(201,007)
(186,504)
(173,457)
(211,438)
(129,214)
Finance Cost
(165,140)
(226,973)
(157,884)
(42,515)
(2,730)
Finance Income
-
-
-
2,568
4,576
Release of negative goodwill
-
-
-
-
-
Share of associate results
-
-
-
-
-
Deemed gain on legal merger
-
-
-
-
874,987
Fair value adjustment in investment property
-
-
23,309
-
-
Profit/(Loss) Before Tax from Continuing Operations
554,479
194,787
297,140
585,068
1,097,056
Income Tax (Expense) / Reversal
(37,426)
(755)
(45,575)
(85,902)
71,429
Profit/(Loss) for the Year from Continuing Operations
517,052
194,032
251,565
499,166
1,168,485
Profit/(Loss) After Tax for the Year from Discontinued
Operations
-
-
-
(4,102)
(300,637)
517,052
194,032
251,565
495,064
867,848
517,052
194,032
251,565
495,064
867,848
Profit for the Year
-
-
-
-
517,052
194,032
251,565
495,064
867,848
Basic Earnings Per Share - Profit Attributable to Ordinary
Equity Holders
9.47
3.55
4.61
9.07
19.07
Dividends Per Share
2.00
4.00
2.50
2.50
2.00
Profit for the year
115
Statement of Value Added
Year ended 31st March
2015
%
2014
%
2013
%
2012
%
2011
Rs. '000
Rs. '000
Rs. '000
Rs. '000
Rs. '000
14,596,214
13,419,770
12,006,220
10,568,536
8,443,481
%
Group
Turnover
Other income
Cost of material and services
purchased
Value Added
167,148
88,167
82,204
58,388
(10,000,114)
189,012
(8,981,656)
(8,321,924)
(7,259,167)
(5,511,124)
4,785,112
4,605,262
3,772,463
3,391,573
2,990,745
2,489,768
52.0 2,349,132
51.0 2,101,746
55.7 1,866,014
55.0 1,676,445
576,965
12.5
498,971
13.2
Distributed as follows
To employees as remuneration
To providers of funds as interest
321,291
6.7
To state as taxes
347,607
7.3
254,701
5.5
203,070
To shareholders as dividends
354,900
7.4
109,200
2.4
218,400
Depreciation
585,227
12.2
551,174
12.0
Reserves
686,319
14.3
764,090
16.6
56.1
217,088
6.4
180,312
6.0
5.4
238,319
7.0
268,924
9.0
5.8
136,500
4.0
136,500
4.6
456,455
12.1
439,978
13.0
388,054
13.0
293,821
7.8
493,674
14.6
340,510
11.4
100.0 2,990,745
100.0
Retained in the business
Total
116
4,785,112
100.0 4,605,262
100.0 3,772,463
100.0 3,391,573
Multiplying Value
Shareholder Information
Distribution of shareholdings as at 31st march 2015
Size of shareholdingsShareholdersShareholding
NumberNumber
%Number
1 -1,000
10,171
93.44
2,176,166
%
3.99
1,001
-
10,000 5875.39
1,567,8412.87
10,001
-
100,000 980.90
2,669,7454.89
100,001- 1,000,000
23
0.21
7,442,760
13.63
Over 1,000,000
6
0.06
40,743,488
74.62
10,885100.00
54,600,000100.00
Categories of shareholders as at 31st march 2015
CategoryShareholdersShareholding
Number
%Number
%
Local Individuals
10,566
97.07
8,361,232
15.31
Local Institutions
228
2.09
45,887,563
84.04
Foreign Individuals 840.77
85,4830.16
Foreign Institutions
70.06
265,7220.49
10,885100.00
54,600,000100.00
Other information
GROUP
COMPANY
Rs.Rs.Rs.Rs.
Net assets per ordinary share
119.00
105.18
54.40
51.51
Interest cover per rupee of interest
6.50
2.96
4.36
1.86
Share price -
Highest
105.00
75.40
-
Lowest
57.60
52.10
-
Closing
95.80
61.50
The percentage of shares held by the public - 29.87% comprising 10,873 shareholders.
117
Shareholder Information
20 Major shareholders of the Company
Name
1
Lanka Ceramics PLC
No. of Shares
As at
31.03.2015
33,957,014
(%)
No. of Shares
As at
31.03.2014
(%)
62.192
33,957,014
62.192
2
National Savings Bank
1,758,846
3.221
619,700
1.135
3
CT Holdings PLC
1,499,628
2.747
1,499,628
2.747
4
Arunodhaya Industries (Private) Limited
1,176,000
2.154
1,176,000
2.154
5
Arunodhaya (Private) Limited
1,176,000
2.154
1,176,000
2.154
6
Arunodhaya Investments (Private) Limited
1,176,000
2.154
1,176,000
2.154
7
Mr. A A Page
915,356
1.676
915,356
1.676
8
Sri Lanka Insurance Corporation Ltd-Life Fund
807,600
1.479
807,600
1.479
9
580,170
1.063
580,170
1.063
10
Bank of Ceylon A/C Ceybank Unit Trust
520,614
0.954
642,257
1.176
11
Andysel Private Limited
420,000
0.769
420,000
0.769
12
Bank of Ceylon No. 1 Account
409,515
0.750
410,040
0.751
13
Mrs. A Selliah
378,000
0.692
378,000
0.692
14
Mrs. A Kailasapillai
378,000
0.692
378,000
0.692
15
Bank of Ceylon A/C Ceybank Centure Growth Fund
375,941
0.689
419,900
0.769
16
Mr. K Aravinthan
336,000
0.615
336,000
0.615
17
Ms. S Subramaniam
311,000
0.570
336,000
0.615
18
Pinnacle Trust (Pvt) Limited
284,565
0.521
67,200
0.123
19
Mr. V Kailasapillai
250,000
0.458
378,000
0.692
20
Mr. D F G Dalpethado and Mrs H A K D Dalpethado
243,548
0.446
2,378
0.004
46,953,797
85.996
45,675,243
83.652
Sub Total
Other 10,865 Shareholders
Issued Capital
118
7,646,203
14.004
8,924,757
16.348
54,600,000
100.000
54,600,000
100.000
Multiplying Value
Notice of Meeting
NOTICE IS HEREBY GIVEN that the Thirty Eighth (38th) Annual General
Meeting of Lanka Walltiles PLC will be held at the Victorian Ballroom
(located in the 10th floor), The Kingsbury Hotel, No. 48, Janadhipathi
Mawatha, Colombo 01 on Monday, 29th June 2015 at 11.00 a.m. for the
following purposes:
1. To receive and consider the Annual Report of the Board of
Directors on the affairs of the Company and the Statement of
Accounts for the year ended 31st March 2015 and the Report of
the Auditors thereon.
2. To re-elect Mr. T G Thoradeniya, who retires by rotation in terms of
Articles 103 and 104 of the Articles of Association, as a Director of
the Company.
3. To re-elect Mr. K D G Gunaratne, who retires by rotation in terms
of Articles 103 and 104 of the Articles of Association, as a Director
of the Company.
4. To re-appoint Messrs Ernst & Young, Chartered Accountants, the
retiring Auditors and to authorize the Directors to determine their
remuneration.
5. To authorize the Directors to determine Donations for the ensuing
year.
By Order of the Board
LANKA WALLTILES PLC
Director / Secretaries
At Colombo
29th May 2015
Notes: 1) A shareholder entitled to attend or attend and vote at the Meeting is entitled to appoint a Proxy who need not be a shareholder, to attend and vote
instead of him/her. A Proxy need not be a member of the Company. A Form of Proxy is enclosed for this purpose.
2) A Form of Proxy is enclosed in this Report.
3) The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 215, Nawala Road, Narahenpita, Colombo 05, not
less than forty-eight (48) hours before the time fixed for the commencement of the Meeting.
119
Notes
120
Multiplying Value
Notes
121
Notes
122
Multiplying Value
Form of Proxy
*I/We…………………………………………………………………………………………………………………………………of………………………………………………………………………………....
being a *Shareholder /Shareholders of Lanka Walltiles PLC, do hereby appoint ……………………………………………………………………………………………………….…...
of ………………………………………………………………………………………………………………………………………or failing him/her
Mr. Wannakuwattawaduge Don Nimal Hemasiri Perera
of Colombo or failing him*
Mr. Jayasekera Arachchige Panduka Mahendra Jayasekera
Mr. Tilak De Zoysa
Dr. Sivakumar Selliah
Mr. Tharana Gangul Thoradeniya
Mr. Kalupathiranalage Don Gamini Gunaratne
Ms. Anjalie Maryanne Letitia Page of Colombo or failing her*
Mr. Migel Wasam Rizvi Nandajith Somaratne
as *my/our proxy to represent me/us to speak and vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 29th
June 2015 at 11.00 a.m and any adjournment thereof and at every poll which may be taken in consequence thereof.
FOR
AGAINST
1)
To receive and consider the Annual Report of the Board of Directors
along with the Financial Statements of the company for the year ended
31st March 2015
2) To re-elect Mr. T G Thoradeniya, who retires by rotation in terms
of Article 103 and 104 of the Articles of Association as a Director of
the Company.
3)
To re-elect Mr. K D G Gunaratne, who retires by rotation in terms
of Article 103 and 104 of the Articles of Association as a Director of
the Company.
4)
To re-appoint M/s Ernst & Young as Auditors of the Company for
the ensuing year and to authorize the Directors to determine their
remuneration.
5)
To authorize the Directors to determine donations for the ensuing year
Signed this…………………………… day of ……………………………. Two Thousand and Fifteen.
……………………………………
Signature
1) *Please delete the inappropriate words.
2) Instructions as to completion are noted on the reverse thereof.
123
INSTRUCTIONS AS TO COMPLETION
1. This Form of Proxy must be deposited at No. 215, Nawala Road, Narahenpita, Colombo 5 not less than forty eight (48)
hours before the time fixed for the Meeting.
2. In perfecting the Form of Proxy please ensure that all details are legible.
3. If you wish to appoint a person other than a Director of the Company as your proxy, please insert the relevant details in
the space provided.
4. Please indicate with an ‘X’ in the space provided, how your proxy is to vote on the resolution. If no indication is given, the
proxy in his discretion will vote as he thinks fit.
5. In the case of a Company/Corporation, the proxy must be under its Common Seal, which should be affixed and attested
in the manner prescribed by its Articles of Association.
6. In the case of a Proxy signed by an Attorney, the Power of Attorney must be deposited at The Secretaries’ Office (i.e. P W
Corporate Secretarial (Pvt) Ltd, No.3/17, Kynsey Road, Colombo 8) for registration.
7. In the case of joint holders the Form of Proxy must be signed by the first holder.
124
Corporate Information
NAME OF THE COMPANY
FACTORY
Lanka Walltiles PLC
Meepe, Padukka
LEGAL FORM
was re-registered on 24th July 2007 and bears registration number PQ
55. Telephone : + 94 - 11 - 4309809
Facsimile : + 94 - 11 - 2859168
E-mail
: meepe_fac@lankawalltile.lk
PARENT COMPANY
Lanka Ceramic PLC
No. 20, R A De Mel Mawatha
Colombo 03
DIRECTORS
Telephone : + 94 - 11 - 4336644
Mr. W D N H Perera (Chairman)
Facsimile : + 94 - 11 - 4412518
Mr. J A P M Jayasekera (Managing Director)
Mr. T de Zoysa
Dr. S Selliah Mr. T G Thoradeniya Mr. K D G Gunaratne
Ms. A M L Page
REGISTERED OFFICE
215, Nawala Road, Narahenpita, Colombo 05
Telephone : + 94 -11 - 4526700
Facsimile : + 94 -11 - 2805463
E-mail
: info@lankatiles.com
Website : www.lankatiles.com
SECRETARIES
No. 3/17, Kynsey Road
Colombo 08
Telephone : + 94 - 11 - 4640360-3
Facsimile : + 94 - 11 - 4740588
E-mail
: pwcs@pwcs.lk
BANKERS
Commercial Bank of Ceylon PLC
Hatton National Bank PLC
Bank of Ceylon
HSBC Bank
People’s Bank
DFCC Bank PLC
AUDITORS
Ernst & Young Chartered Accountants
201, De Saram Place
Colombo 10
Contents
Performance Highlights Corporate Philosophy
Chairman’s Statement
Senior Management
Risk Management
2
3
6
10
14
17
18
26
33
37
44
45
Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement
Cash Flow Statement
48
52
53
54
55
56
57
58
59
Designed & produced by
Digital Plates & Printing by
Softwave Printing and Publishing (Pvt) Ltd
Lanka Walltiles PLC Annual Report 2014/15
Multiplying Value
Lanka Walltiles PLC
Lanka Walltiles PLC
215, Nawala Road, Narahenpita, Colombo 05 Sri Lanka
www.lankatiles.com
Annual Report 2014/15

Lanka Walltiles PLC

Transcription

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