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MELSTA C ORP PLC a Nnual Report 2017

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MELSTA C ORP PLC a Nnual Report 2017 MELSTACORP PLC MELSTACORP Annual Report Annual 2017 | 18 www.melsta.com MELSTACORP PLC 110, Norris Canal Road, Colombo 10, Sri Lanka. Tel: +94 11 5900300 Fax: +94 11 5900333 Annual Report 2017 | 18 From its inception, Melstacorp has believed in “responsible diversity”, and, following this credo, we have grown from strength to strength, committed to continuously expand the horizons of the group and its people. Embodied with decades of business acumen and focused on sustainable growth which creates value for all, we have made many strategic investments in key sectors of the economy, resulting in a presence in virtually every part of the country. We will leverage our successful past and positive present to carve out a promising future for the group and all stakeholders. For Melstacorp, the future is limitless. Contents Highlights of the Year 3 Financial Highlights 4 Our Businesses 6 Chairman’s Statement 10 Board of Directors 14 Heads of Group Companies 18 Management Discussion and Analysis 20 Sustainability Report 28 Corporate Governance 38 Enterprise Risk Management 50 Board Audit Committee Report 54 Remuneration Committee Report 56 Board Related Party Transactions Review Committee 57 Annual Report of the Board of Directors 58 Financial Information Statement of Directors Responsibility 63 Independent Auditors’ Report 64 Income Statement 68 Statement of Profit or Loss and Other Comprehensive Income 69 Statement of Financial Position 70 Statement of Changes in Equity 72 Statement of Cash Flows 76 Notes to the Financial Statements 78 Statement of Value Added 172 Shareholder Information 173 Summarised Financial Information 175 Group Directory 176 Notice of Meeting 183 Form of Proxy 187 Attendance Slip 189 Corporate Information Inner Back Cover MELSTACORP PLC Annual Report 2017 | 18 03 Highlights of the Year September 2017 November 2017 Æ Madusima Plantations PLC became a subsidiary of the Melstacorp was ranked No. 08 in the Business Today ‘Top Group. Thirty’. This year was the first time Melstacorp was listed among corporate heavy weights in the rankings. March 2018 Æ Aitken Spence PLC became a subsidiary of the Group. April 2018 Æ Melstacorp divested its holding in Melsta Regal Finance DCSL PLC shares re-commenced trading in the Colombo Stock Limited. Exchange after the successful completion of the restructure in the Group. April 2018 Fitch Ratings Lanka affirmed Continental Insurance Lanka Limited’s National Insurer Financial Strength Rating and National Long-Term Rating at ’A (lka)’ with a Stable Outlook. July 2018 Fitch Rating has placed DCSL a National Long-Term Rating of ‘AAA (lka)’ with a Stable Outlook. May 2018 Melstacorp signed a joint venture agreement with Pyramid GAMA (Private) Limited to venture into the business of processing, packaging & distribution of cement, under the name of Melsta GAMA (Private) Limited. 04 MELSTACORP PLC Annual Report 2017 | 18 Financial Highlights Group Company For the year ended 31 March, 2018 2017 2018 2017 SUMMARY OF RESULTS Gross Turnover Rs. Mn 109,957 108,999 228 193 Excise Duty Rs. Mn 65,227 68,806 - - Net Turnover Rs. Mn 44,730 40,193 228 193 Profit After Tax Rs. Mn 6,250 6,800 2,802 2,866 Shareholders’ Funds Rs. Mn 75,676 68,080 90,540 88,995 Working Capital Rs. Mn 9,414 (3,241) 10,437 7,501 Total Assets Rs. Mn 215,546 111,919 91,605 89,602 Staff Cost Rs. Mn 4,839 4,553 62 46 No. of Employees 25,917 11,976 24 19 PER SHARE Basic Earnings Rs. 5.64 6.29 2.40 3.03 Net Assets Rs. 64.94 58.42 77.69 76.36 Dividends Rs. 2.44 1.00 2.44 1.00 Market Price - High Rs. 71.50 69.50 71.50 69.50 Low Rs. 56.50 54.90 56.50 54.90 Year End Rs. 58.10 59.20 58.10 59.20 RATIOS Price Earnings times 10 9 24 20 Return on Shareholders’ Funds % 8.3 10.0 3.1 3.2 Current Ratio times 1.2 0.9 17.4 16.0 Interest Cover times 4.2 9.3 36.3 39.1 Debt to Equity % 122.3 26.9 1.2 0.1 Debt to Total Assets % 42.9 36.3 1.2 0.7 Dividend Payout % 101.7 33.0 101.7 33.0 Dividend Yield* % 4.2 1.7 4.2 1.7 MELSTACORP PLC Annual Report 2017 | 18 05 Gross Turnover - Group Total Assets - Group Rs. 109,957 Mn Rs. 216,347 Mn Gross Turnover - Group Total Assets - Group (Rs. Mn) (Rs. Mn) 120,000 109,957 108,999 250,000 216,347 100,000 88,865 200,000 80,000 150,000 60,000 111,819 99,306 100,000 40,000 50,000 20,000 0 0 2015/16 2016/17 2017/18 2015/16 2016/17 2017/18 Taxes Paid - Group Profit After Tax - Group Rs. 68,848 Mn Rs. 6,250 Mn Taxes Paid - Group Profit After Tax - Group (Rs. Mn) (Rs. Mn) 80,000 72,500 7,000 6,800 68,848 70,000 60,233 60,000 6,500 6,250 50,000 40,000 6,000 30,000 5,670 20,000 5,500 10,000 0 5,000 2015/16 2016/17 2017/18 2015/16 2016/17 2017/18 06 MELSTACORP PLC Annual Report 2017 | 18 Our Businesses Beverages Distillation, Manufacture and Distribution of Liquor Products Plantations Cultivation and Processing of Tea & Rubber Telecommunication Voice, Data, Broadband, Hardware, Software and Networking Solutions MELSTACORP PLC Annual Report 2017 | 18 07 Insurance General Insurance Services Diversified Tourism, Maritime & Logistics, Strategic Investments and Services Power Generation Hydropower Generation Bogo Power 08 MELSTACORP PLC Annual Report 2017 | 18 Our Businesses Logistics Automobile Servicing and Logistics Media & Creative Media Buying and Creative Services Textiles Dyeing and Printing Fabric MELSTACORP PLC Annual Report 2017 | 18 09 Leisure Hotels & Hospitality BPO Services BPO, KPO & Call Centre Services Information Technology Oracle Applications, Mobile Applications, Digitisation 10 MELSTACORP PLC Annual Report 2017 | 18 Chairman’s Statement Melstacorp PLC is now a highly diversified company encompassing many industries such as beverages, tea and rubber plantations, telecommunication, financial services, power generation, logistics, textiles and hospitality. I am pleased to share with you, the approximately around 4.2% in the first Group Turnover Company’s annual report and audited half of 2018. Sri Lanka is targeting fiscal financial statements for the year ended consolidation, as the large budget deficit 31st March 2018. Subsequent to the is threatening the economic stability Rs. 110 Bn share swap carried out by Distilleries of the country, by adopting tight fiscal Company of Sri Lanka PLC in December discipline, proposing new measures to Total Assets 2016, this financial year is the first full increase tax revenue etc. This has resulted year Melstacorp PLC functioned as in an increase in both direct and indirect the holding company of the group. taxes, pushing retail prices upward. Rs. 216 Bn Our effort to add value to the then shareholders of DCSL PLC was successful Group’s Performance duty. Reintroduction of VAT together with and that Company became a listed Group Turnover reached Rs. 110 billion, a massive increase in duty on imports entity with around Rs. 100 billion while the profit after tax for the year was of main ingredient, ethanol and higher market capitalisation. Melstacorp PLC Rs. 6.25 billion. The Group contributed excise duty on hard alcoholic beverages is now a highly diversified company Rs. 69 billion in taxes during this financial resulted in a substantial increase in encompassing many industries such as year. consumer prices. As a result there was beverages, tea and rubber plantations, a notable decline in volumes. We are telecommunication, financial services, Beverage Sector extremely disappointed in the way the power generation, logistics, textiles and legal beverage industry is overtaxed The beverage sector is the highest hospitality. without considering the affordability of contributor to both the top line and the product. For the year under review the bottom line of the Group. Our main Macro Economic Climate the beverage sector revenue reached Rs. subsidiary DCSL PLC’s profitability 97 billion and the net profit for the year The global economy is going through dropped in the first three quarters was Rs. 4.7 billion. a challenging phase due to the managed to recover and record a strengthening of the US dollar in the net profit after tax of Rs. 4.35 billion. international currency markets, pressure Periceyl (Private) Limited, the second Plantation Sector on many emerging market currencies liquor company of the Group saw its Year 2017 is recorded as one of the better and escalating trade tensions among profitability shrinking when compared years for the tea industry with an increase major economies. Sri Lanka too is going with last year. The reduction of beer in production and auction averages through a difficult period, facing issues prices and a simultaneous increase in reached all-time high levels. However, such as escalating inflation as a result of the hard alcoholic beverage prices have despite the ascent witnessed in 2017, the upward adjustments in fuel prices and resulted in more consumers shifting to Industry continued to be plagued with volatile food prices, declining foreign beer and other cheaper beverages. geo-political tension in the tea importing reserves due to outflow of foreign countries, policy decisions which affected investments in LKR denominated As you are aware the beverage sector the production of tea and temperature government securities in response to of the group was subject to a severe variability due to climatic changes. The the major economies tightening of challenge through unprecedented ban of Glyco-phosphate (which was interest rates, rising debt to support increases in taxation in the last two recently eased) that is used for weed the mega development activities, years.
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