There is more to us than meets the eye.
John Keells Holdings PLC is a Company that has offered increasing investor value over the years. We present here an ‘atomic-level’ view of our operations that offers you many perspectives on how value is deployed, where it is stored and the way it is multiplied within the Group.
Nearly a century and a half of growth and prosperity are not achieved without strength in depth, without flexibility and without the willingness to re-invent oneself - not once, but over and over again, as circumstances demand. Nor is such an achievement possible without a strong sense of identity, of a living tradition. Such is our Group - a complex, multi-faceted, seamlessly integrated organism that generates value for the whole through the interaction of myriad energetic, individually viable parts.
The closer you look, the more there is to see. GROUP HIGHLIGHTS
AbOUT US John Keells Holdings PLC (JKH) is the largest listed Our values Company on the Colombo Stock Exchange, with We are passionate about - • Changing constantly, re-inventing and evolving business interests in Transportation, Leisure, Property, • Striving to get things right the first time Consumer Foods & Retail, Financial Services and • Doing the right things always Information Technology, among others. Since its • Constantly raising the bar modest beginnings as a produce and exchange • Fostering a great place to work broker in the early 1870s, JKH has been known to • Building strong relationships based on openness and trust constantly re-align, re-position and re-invent itself in JKH is - pursuing growth sectors of the time. Our investment • The largest capitalised Company listed on the Colombo Stock philosophy is based on a positive outlook, bold Exchange approach, commitment to delivery and flexibility to • The first Sri Lankan Company to be listed overseas - Global change. JKH is also committed to maintaining depository receipts listed on the Luxembourg Stock integrity, ethical dealings, sustainable development Exchange and greater social responsibility in a multi-stakeholder • AAA (lka) credit rated by Fitch Ratings Lanka Ltd • A full member of the World Economic Forum context. Having produced superior returns for our • A member of the UN Global Compact shareholders and experienced significant growth, the Group’s immediate phases of growth are fuelled by our vision - ‘Building businesses that are leaders in the region’.
2 John Keells Holdings PLC ORGAnISATIOn STRUcTURe
Annual Report 2010/11 3 YeAR AT A GLAnce OPeRATInG HIGHLIGHTS And SIGnIFIcAnT eVenTS
April 2010 Construction work on the 200 room hotel in Beruwala - ‘Chaaya Walkers Tours and Whittall Boustead became the only destination Bey’, commenced. management companies to have obtained both ISO 9001 and ISO 14001 certifications for quality management and October 2010 environmental management in Sri Lanka. The Group’s property arm launched the ‘OnThree20’ development which is a 475 unit apartment complex in the heart May 2010 of Colombo. JKH was adjudged a gold award winner at HRM Awards Super 10 organised by the Association of Human Resource November 2010 Professionals (Sri Lanka). JKH was placed first in Business Today magazine’s TOP 20 The refurbishment of The Coral Gardens Hotel, Hikkaduwa rankings. JKH was ranked first for the sixth time since 1999. commenced. The Hotel will be re-branded and re-launched as ‘Chaaya Tranz’ in November 2011. December 2010 Ceylon Cold Stores PLC (CCS) launched its own cola under the June 2010 brand name ‘KIK’. Fitch Ratings affirmed John Keells Holdings PLC's National Long- term rating at 'AAA(lka)', as well as its senior unsecured notes at February 2011 'AAA(lka)'. JKH was adjudged the winner in the large scale category in the Sustainability Reporting Awards competition organised by the July 2010 ACCA Sri Lanka. John Keells PLC executed a 2 for 1 subdivision of shares. March 2011 August 2010 The Group acquired 6.3 million shares of Nations Trust Bank JKH was ranked first in LMD magazine’s “Most Respected through the conversion of warrants with an investment of Entities in Sri Lanka” survey for 2010. JKH was ranked first for Rs. 219.4 million, thereby maintaining its percentage stake in the the fifth time, in the six years since inception of the survey. bank. Trans Asia Hotels PLC executed a 2 for 1 subdivision of shares. JKH acquired 5.6 million shares of Union Assurance PLC, thereby increasing its stake to 95.6 per cent. The Group divested the head lease of Alidhoo Island and purchased the head lease of Dhonveli Island for a period of eighteen years.
FInAncIAL AcHIeVeMenTS & GOALS
Achievement Indicator (%) Goal (as at 31 March) 2011 2010 2009 EBIT growth >20 44.5 (1.0) (2.6) EPS growth (fully diluted) >20 54.5 11.4 (5.8) Cash EPS growth (fully diluted) >20 30.0 46.5 (17.5) Return on capital employed (ROCE)* >15 14.7 10.8 12.0 Return on equity (ROE)* >18 15.1 10.9 10.6 Net debt (cash) to equity 50 (6.2) (7.9) 8.8
* Goal is based on current and projected interest rates (for further details refer the Portfolio Movement and Evaluation section of the report)
4 John Keells Holdings PLC FInAncIAL HIGHLIGHTS
Year ended 31 March 2011 2010 Change % 2009 Earnings highlights and ratios Group revenue - consolidated Rs. million 60,500 47,980 26 41,023 Group revenue - including associates Rs. million 69,824 57,986 20 52,269 Group profit before interest and tax (EBIT) Rs. million 11,425 7,908 44 7,986 Group profit before tax Rs. million 10,629 6,538 63 6,291 Group profit after tax Rs. million 9,063 5,552 63 4,965 Group profit attributable to shareholders Rs. million 8,246 5,201 59 4,732 Dividends * Rs. million 1,869 1,844 1 1,883 Diluted earnings per share Rs. 13.01 8.42 54 7.56 Cash earnings per share Rs. 15.00 11.54 30 7.88 Interest cover No. of times 14.4 5.8 149 4.7 Return on equity (ROE) % 15.1 10.9 38 10.6 Return on capital employed (ROCE) % 14.7 10.8 35 12.0
Balance sheet highlights and ratios Total assets Rs. million 110,292 98,658 12 92,140 Total debt Rs. million 14,641 17,453 (16) 21,597 Net debt (cash) ** Rs. million (4,168) (4,435) (6) 4,452 Total shareholders' funds Rs. million 59,587 49,832 20 45,506 No. of shares in issue millions 630 619 2 611 Net assets per share Rs. 94.63 80.44 18 74.44 Debt / equity % 21.8 31.0 (30) 42.8 Net debt (cash) / equity ** % (6.2) (7.9) (21) 8.8 Debt / total assets % 13.3 17.7 (25) 23.4
Market / shareholder information Market price of share as at 31 March (actual) Rs. 285.60 184.00 55 62.75 Market price of share as at 31 March (diluted) Rs. 285.60 184.00 55 62.75 Market capitalisation Rs. million 179,840 113,983 58 38,362 Enterprise value ** Rs. million 175,672 109,548 60 42,815 Total shareholder return % 56.8 198.0 (71) (44.7) Price earnings ratio (PER) (diluted) No. of times 22.0 21.8 - 8.3 Dividend payout % 32.2 38.5 (18) 42.0 Dividend per share Rs. 3.00 3.00 - 3.00 Dividend yield % 1.1 1.6 (36) 4.7
Other Economic value generated Rs. million 69,787 55,602 26 48,220 Economic value distributed Rs. million 61,101 49,966 22 43,376 Employees Rs. million 6,873 6,138 12 5,544 Government Rs. million 3,194 2,906 10 2,781 Others Rs. million 51,034 40,922 25 35,051 Economic value retained Rs. million 8,686 5,635 54 4,844 Total employees*** Number 11,389 10,885 5 10,501
* Cash dividends paid during the year ** Customer advances in the Property Development sector have been excluded *** Excluding employees of the associate companies of the Group
Annual Report 2010/11 5 cHAIRMAn’S MeSSAGe
I am pleased to present our Annual Report and Statement of growth in the economy. Increased flight frequencies and the Accounts for the financial year ending 31st March 2011. Whilst advent of new airlines contributed to the performance of the the results are the best ever in our history, I am of the view that Airline segment in the subject year. This will also enable future we are yet to realise the full potential of the Group in this new and growth in both passenger and cargo volumes. Profitability in the exciting environment. A ‘closer look’ at our overall and industry bunkering business grew on the back of efficiencies achieved in group performance, balance sheet, portfolio, employee depth, operations and fuel purchasing, whilst shipping, air express and sustainable development and governance model is appropriate logistics segments benefited from the pick up in trade volumes as is suggested by the theme of our Annual Report. arising out of increased economic activity. As the anticipated growth in infrastructure projects materialises and economic The Group’s profit before tax (PBT) was Rs. 10.63 billion, a 63 per activity gathers further momentum, the outlook for the cent increase over the PBT of 2009/10 and the profit attributable Transportation group is positive. to equity holders at Rs. 8.25 billion was an increase of 59 per cent over the previous year. It is encouraging to note that our As anticipated, the Leisure group had a good year. Revenues at investment strategies in the past few years are contributing Rs. 13.81 billion and PAT at Rs. 2.32 billion were 23 per cent and towards our endeavours to better balance our portfolio of 26 per cent of the Group’s total revenue and PAT respectively. businesses. Overall, PAT in 2010/11 was a 138 per cent increase over 2009/10. During the financial year, country arrivals to Sri Lanka at The recurring PBT was Rs. 8.83 billion, a 58 per cent increase 709,191 passengers being a 41 per cent increase over the over that recorded in 2009/10. previous year and the Maldives country arrivals of 819,000 being an 18 per cent increase over the previous year, resulted in the City Summarised below are the key financial highlights of our operating hotels, Sri Lankan Resorts, Maldivian Resorts and Destination performance during the year. Management performing to expectations. The Maldives based • Group revenue increased by 26 per cent to Rs. 60.50 billion resorts benefited from the divestment of the loss making Cinnamon Island Alidhoo and the acquisition of the head lease of • Group PBT increased by 63 per cent to Rs. 10.63 billion Chaaya Island Dhonveli. As has been stated in my quarterly • Group profit after tax (PAT) also increased by 63 per cent to statements, we remain confident about Sri Lanka’s tourism Rs. 9.06 billion potential. Work commenced during the year on the construction • Group profit attributable to equity holders increased by 59 per of the 200 roomed Chaaya Bey, in Beruwela which is due to open cent to Rs. 8.25 billion in May 2012 and the complete refurbishment of the former Coral • Earnings per share increased by 54 per cent to Rs. 13.01 Gardens, Hikkaduwa, which will be re-launched as Chaaya Tranz in November 2011. Other developments during the year included • Cash earnings per share increased by 30 per cent to Rs. 15.00 the refurbishment and expansion of Chaaya Blu in Trincomalee, • Total shareholder return was 56.8 per cent refurbishment of the Courtyard Wing at the Cinnamon Grand, • Net cash flow from operating activities was Rs. 8.50 billion refurbishment of Chaaya Lagoon Hakuraa Huraa Maldives, • Return on capital employed (ROCE) was 14.7 per cent refurbishment and re-launch of the Cinnamon Lodge Habarana compared to 10.8 per cent in the previous year as a five star hotel and the soft re-fit of the Bentota Beach Hotel. Yala Village was closed in May 2011 for expansion and • Return on equity (ROE) was 15.1 per cent compared to 10.9 refurbishment and will be launched as Chaaya Wild in November per cent in the previous year 2011. The balance 216 rooms of Cinnamon Lakeside are in the process of refurbishment which is expected to be completed by The strength of our balance sheet is demonstrated, amongst September 2011. Given the positive outlook for tourism, we others, by a debt to equity of 21.8 per cent, a net cash to equity expect to make substantial investments in the Leisure industry in of 6.2 per cent, a debt to total assets of 13.3 per cent and an Sri Lanka. We believe that Sri Lanka has to be positioned as a interest cover of 14.4 times (previous year 5.8 times). Further, we destination which provides visitors with a variety of ‘experiences’ believe that the present asset turnover can be significantly if we are to attract the ‘2.5 million arrivals’ target by 2016. It is in improved as increasing market demand emanating from a rapidly this light we are working with our Property group in exploring the growing economy, makes our current capacities work more economic feasibility of creating multi-functional, integrated efficiently both in terms of asset utilisation as well as productivity. developments.
Given that a detailed analysis of our industry groups is available The Property group with a revenue of Rs. 2.49 billion and a PAT elsewhere in the Annual Report, I will restrict myself to discussing of Rs. 780 million contributed 4 per cent and 9 per cent the highlights of 2010/11 and the high level outlook for each of respectively to the total Group revenue and PAT. The PAT in them. 2010/11 was 128 per cent above the previous year with revenue recognition crystallising more emphatically this year. The Emperor The Transportation group has remained the main contributor to construction will be completed by July 2011 and the handover of the Group’s after tax profits. Revenues at Rs. 13.43 billion and apartments is expected to commence by August 2011. PAT at Rs. 2.78 billion were 22 per cent and 31 per cent of the Construction of the 475 apartment ‘OnThree20’ at Union Place Group’s total revenue and PAT respectively. Whilst the port commenced in May 2011 with 60 per cent of the apartments sold operations performed to expectations, the PAT growth of 22 per off-plan with more bookings still to be finalised. ‘OnThree20’ is cent over the previous year was mainly due to improved expected to be completed by December 2014. The Group will performances by all the strategic business units driven by the continue to look for opportunities to maximise the potential of its
6 John Keells Holdings PLC large land bank in Colombo and will look to expand it with the year with the acquisition of a number of substantial customers. acquisition of sites with high development potential. The costs of relocation to a new facility under our own management and the impairment of a deferred tax asset booked The Consumer Foods and Retail (CF&R) group with a revenue of during the previous year had one-off impacts on the results. Rs. 18.36 billion and a PAT of Rs. 230 million contributed 30 per Everything else being equal, we are confident that the BPO cent and 3 per cent respectively to the total Group revenue and operations will contribute positively to Group profits in 2011/12. PAT. The PAT in 2010/11 was 162 per cent above that recorded The Office Automation segment, performed well with the in 2009/10. The volumes in Beverage, Frozen Confectionary and Samsung mobile phone agency business increasing its market Convenience Foods segments grew due to increase in demand share significantly. and the expansion of the new markets in the North and the East which contributed towards maintaining market leadership in all three segments. The Retail segment saw higher footfalls and basket values with improved margins. CF&R is a group that we believe in and we are well aware that its true potential has not been “...we are yet realised as yet. We have taken a variety of measures in to realise the full repositioning our product and service offerings and we are currently in the process of reviewing our operating practices in potential of the both the manufacturing and retail segments. As a first step in its Group in this new repositioning strategy, the ‘Elephant House’ brand was re- and exciting launched aligning itself with the aspirations of the consumers whilst retaining the trust, loyalty and equity of the brand. The beverage environment” product portfolio was extended with the introduction of KIK Cola in order to compete in the Cola segment, which is estimated to be 30 per cent of the total carbonated soft drinks market in Sri Lanka. KIK has had good customer acceptance and the initial volumes are in line with expectations. The Elephant House frozen ‘Other’, which includes Plantation Services, with a revenue of Rs. confectionary range too was extended with the introduction of the 2.82 billion and a PAT of Rs. 2.11 billion contributed 5 per cent new production facility for a range of impulse products. The retail and 23 per cent respectively to total Group revenue and PAT. The sector established ‘KZone’ in Moratuwa, a 50,000 square foot PAT in 2010/11 was 60 per cent higher than the PAT recorded in ‘neighbourhood’ mall complete with a Keells Super outlet, a 2009/10 and included a capital gain of Rs. 1.79 billion from the department store, various retailers and a food court. The Retail sale of stakes in Asian Hotels and Properties PLC (AHPL) and in Sector will continue to increase its footprint in select key locations. John Keells Hotels PLC (KHL) compared to the Rs. 940 billion As I stated earlier, the Consumer Foods and Retail group has capital gain made in 2009/10. Plantation Services segment was much more to contribute to the Group profitability and I am impacted by the depressed tea prices and the PAT at Rs. 285 confident that the steps we have taken to date will bear fruit. million was flat compared to 2009/10. The Group’s share of loss after tax from its 24.6 per cent stake in Central Hospital (Pvt) Ltd The Financial Services group enjoyed another good year. Revenue was Rs. 57 million. While the loss was expected in the first year at Rs. 6.48 billion and PAT at Rs. 860 million contributed 11 per of the hospital’s operations, the growth in the occupancy levels cent and 9 per cent respectively to the total Group revenue and and the outpatient numbers is encouraging. PAT. The PAT in 2010/11 was 62 per cent above the previous year. While the PAT in both the Insurance and Banking segments To our Employees, I say Thank You. We will continue to place grew by 56 per cent and 58 per cent respectively, the Stock great importance on ensuring that the Group provides you a safe, Broking segment, aided by a buoyant stock market, grew by 83 secure and a conducive environment to realise your true potential. per cent. John Keells Capital, the investment banking arm of JKH The section on ‘Stakeholder-Employees at JKH’, in the PLC, accounted under ‘Other’, has made its presence felt in the Governance section of this Report explains in detail the policies Sri Lankan market through the execution of a number of pursued and the processes and systems employed by the Group mandates and the creation of a strong pipeline of business for in actualising that JKH remains - ‘more than just a workplace’. 2011/12. Given the ownership restriction imposed by the Central Through the constant review of our governance model at regular Bank of Sri Lanka in commercial banks, the Group is exploring intervals we have, I believe, a best in class system and it is that the various options available to it to comply with the guidelines belief which spurs me to state that we have the organisational by April 2012. The steady growth of the financial services industry capability to surpass our current and past achievements. We have is expected to continue into the future as the economic activity in declared 2011 to be the ‘Year of Innovation’ and it is heartening Sri Lanka gets into higher gear. to note the unbridled enthusiasm with which our Employees have embraced the objectives behind it. The Information Technology group with a revenue of Rs. 3.11 billion and loss after tax of Rs. 22 million contributed 5 per cent As was stated by me last year, our Group pursues its business and 0.2 per cent (negative) to the total Group revenue and PAT. goals under a stakeholder model of business governance. We The loss after tax was Rs. 22 million, compared to the PAT of Rs. believe that the long term value creation in our Group rests on 18 million in the previous year. As intimated mid way through the the sustainability of the performance of our businesses, our year, the BPO operations are making significant progress with the environment and the communities in which we operate. In this current revenue run rate more than doubling from the previous endeavour, we are committed to achieving the highest standards
Annual Report 2010/11 7 cHAIRMAn’S MeSSAGe
of corporate citizenship. As per our sustainability model, we have • Eradication of avoidable blindness due to cataract in Sri Lanka taken specific steps in measuring and monitoring the impacts of through the John Keells Vision Project. The Project continued all our actions on all our stakeholders including the communities to touch the lives of vision-impaired persons, with a reported in which we operate and this process has been integrated into 337 cataract operations being carried out island wide. In our business model. The progress we have made in this regard is addition, 282 spectacles were provided to adults during the encapsulated in our separate Sustainability Report which year under review. accompanies this Annual Report. It is pleasing to note that this • Consolidation of the activities at the Nature Field Centre at year too, Det Norske Veritas AS (DNV) has provided the external Rumassala, in Galle in collaboration with the Central assurance that our Sustainability Report is a fair representation of Environmental Authority (CEA) aimed at facilitating experiential the Group’s sustainability related strategies, management learning about the environment and biodiversity, primarily systems and performance and the report itself meets the general among school children. There was a total of 2,039 visitors content and quality requirements of the Global Reporting Initiative during the year attending programmes to raise awareness on (GRI) G3 and that it has met the Application Level B+ of the GRI the need to protect the environment and our rich biodiversity requirements. The 2010/11 Sustainability Report achieved the through eco-friendly practices and the importance of GRI ‘application level check’ of B+, which reaffirms the report’s co-existing in harmony with the environment. compliance with GRI guidelines. • Adoption of the Mangalagama Village in the Ampara District Corporate Social Responsibility (CSR) is regarded as a high of the Eastern Province of Sri Lanka, this being the second priority, not just for its philanthropy, but more for its linkage to the village to be selected for development after Halmillawe, the creation of sustainable partnerships and sustainable social adoption of which is now complete. This `border village’ deliverables. Our corporate social responsibility work continues affected by the long-drawn ethnic conflict, complements the to flourish under the aegis of the John Keells Foundation (formerly efforts of CCS in developing the cashew farmers of the village John Keells Social Responsibility Foundation). The Foundation to supply a substantial part of the cashew requirement for its looks to improve the lives of communities touched by our ice cream products. businesses by mustering the energies and commitment of the • Sri Lanka’s popular open-air art gallery/art fair ‘Kala Pola’ very people involved in these businesses, with particular emphasis which was conceptualised by the George Keyt Foundation, on education, health, environment, community and livelihood enjoyed the unbroken patronage of the John Keells Group for development, arts and culture and disaster relief. All such efforts the 17th consecutive year. This year there were 320 artists and are aligned to the Millennium Development Goals and the sculptors displaying their creativity on canvas and other media principles espoused by the United Nations Global Compact. At a to over 27,000 visitors. The total estimated sales for the day time where people have little time in caring for their fellow beings, were Rs. 7 million. it is most gratifying to see the enthusiastic voluntary participation of our Group employees in various CSR projects. Such As you are aware, your Board declared a final dividend of Rs 1.00 participation has certainly exceeded our expectations. per share to be paid on 9 June 2011 and also recommended, for the consideration and approval of the shareholders, at a General Whilst the details are available in the Sustainability Report, the Meeting, that, subject to the approval of the Colombo Stock highlights of the Foundation’s work during the year were; Exchange, the number of shares in issue be increased by way of • The reintroduction of foundation-level ‘English for Teens’ a share sub-division whereby three (3) existing shares will be sub- programme for school children within the age limits of 12 to divided to four (4). 14 years from disadvantaged schooling backgrounds. A total of 1,149 students registered during the year, entitling them to In closing, we at JKH look to the future with excitement. course fees, examination fees, text books and other course material. During the year, 503 students completed the course I would like to welcome Dr. Indrajit Coomaraswamy as a member with a passing rate of 97 per cent. 584 students are registered of the Board and thank my colleagues for their guidance and under the second intake of the programme of which 435 have support. completed the programme with 97.7 per cent of them passing the course. Finally, on behalf of the Board and everyone in the John Keells • The conduction of ‘Final Step’, a five-day series of workshops Group, I wish to thank all of you, our stakeholders, for the support on soft skills at the University of Sri Jayewardenepura designed that you extended to us during the past year and I look to your for the benefit of university undergraduates towards grooming faith in, and support of, the exciting plans that we have for the them for employment. This workshop was in collaboration with coming years. the Career Guidance Unit (CGU) of the university and attracted an average of 260 undergraduates each day. • Education of 15,078 persons in an effort to ensuring that Sri Lanka remains a ‘low prevalent’ country for HIV and AIDS through 111 sessions held and the adoption by the Group, Susantha Ratnayake and the implementation, of a HIV and AIDS Workplace Policy Chairman in the lead up to World AIDS Day 2010. 20 May 2011
8 John Keells Holdings PLC MAnAGeMenT dIScUSSIOn And AnALYSIS cOnSOLIdATed GROUP PeRFORMAnce
OVERVIEW In the backdrop of the improved economic environment, JKH The Management Discussion & Analysis (MD&A) section of this achieved a landmark performance with its profit before tax (PBT) report will discuss the performance of the Group in the context of exceeding Rs. 10 billion for the first time. We now take a ‘closer the macro-economic environment and also the challenges and look’ at what it takes to achieve such results. opportunities faced by the JKH Group. This section will cover a brief review of the key macro-economic variables and its impact The following table identifies key macro-economic variables and on the Group and will thereafter review the performance of the discusses its current and/or potential impacts on the businesses Group and its financial position. Details pertaining to the strategies, within their Group. Whilst there are many other variables that could operations and performance of each of the industry groups are be discussed, the following discussion is based on the key discussed in the Chairman’s Message and also the Industry Group variables considered important. Naturally, the study of external Analysis section of the report. Further details on the economic risks and related impacts would be covered under a more outlook and review are discussed in the section on the Sri Lankan structured process within the risk management framework of the Economy in the Supplementary Information section of this report. Group. Overview of macro-economic conditions
Macro variable Movement Cause Impact to JKH
GDP growth Increased to 8.0% in 2010 as Growth in all sectors driven by stable All businesses benefited from the higher against 3.5% in 2009 environment, post the conflict. Increased growth which had a cascading effect output in tea, paddy as well as higher throughout the economy. Improved prices in international markets for key business conditions positively impacted exports. Industry sector also grew driven B2B sectors whilst improved sentiment by food and beverage and garments. The and disposable incomes had a positive Services sector grew due to expansion in impact on consumption wholesale and retail and the restaurant subsectors
Inflation The annual average CCPI Increase driven partially by base effects Relatively muted inflation helped contain increased to 6.2% as at 31 from the previous year. Certain supply certain costs in businesses. However, March 2011 from 3.2% in the related shocks due to floods and increases in commodities and electricity previous year increases in global oil and food prices rate hikes had impacts on the consumer also impacted inflation, although policy foods and hotel businesses. Subdued makers did not cite concerns regarding inflation and inflation expectations from a demand-driven inflation consumer’s viewpoint had a positive impact on businesses with a retail focus
Interest rates AWPLR fell to 8.98% in March CBSL policy to encourage growth Reduced finance costs for LKR 2011 from 10.74% in the resulted in a relaxed monetary policy and borrowings. Lower interest rates also previous year. The 3 month direction to financial markets helped spur businesses such as property, Government treasury bill rate fell stock broking and bank lending and to 6.98% by March 2011 from provided an impetus to consumption 8.45% in the previous year related businesses
Interest rates - Remained in line with last year Lower growth outlook driven by high Lower finance expenses on account of the global with LIBOR essentially the same. unemployment and muted inflation IFC borrowing at the holding company and 3 month LIBOR decreased allowed the US Federal Reserve to dollar denominated debt in the Maldives. marginally to 0.2517% from maintain a loose monetary policy No swaps were entered into as it was 0.3095% in the previous year. throughout the period. Swap costs believed that remaining on a floating Swap costs for a five year fluctuated based on negative outlook for interest rate would be more beneficial in interest rate swap fell to 2.3% the US economy and then increased the current environment which had a levels from 2.7% levels last year based on rate hike expectations in 2011 positive impact on the Group
Exchange rates The Sri Lankan Rupee (LKR) Continued inflows of US dollars into the The appreciation of the LKR presented appreciated to Rs. 110.46 as at country enabled the CBSL to adopt a challenges for some businesses which 31 March 2011 against the US more controlled appreciation of the LKR. have foreign currency denominated dollar compared to Rs. 114.09 Excess liquidity in the system also revenue streams – particularly in Leisure. last year. The Rupee however necessitated some level of appreciation Steps were taken to proactively monitor depreciated marginally against by the CBSL. The Euro and GBP these exposures and to take the necessary the Euro and GBP due to strengthened against the US dollar due measures to mitigate these exposures. strengthening of the cross rates to the rate hike by the ECB and Similar steps were taken in relation to the against the USD expectations for interest rates to move Euro and GBP although overall exposure up faster than in the US levels are not considered material in the context of the Group
Notes – GDP – gross domestic product; CCPI – Colombo consumer price index; AWPLR – average weighted prime lending rate; LIBOR – London interbank offered rate; IFC – International Finance Corporation; LKR – Sri Lanka rupee; CBSL – Central Bank of Sri Lanka; GBP – Sterling pound; ECB – European Central Bank; USD – United States dollar; B2B - business to business
REVIEW [2009/10: Rs. 47.98 billion] primarily due to the increase in Leisure, Revenue Transportation and Consumer Foods & Retail (CF&R) – which The favourable economic conditions in the country had a positive continue to be the highest contributors to Group revenue. In terms impact on the performance of the Group. In the year under review, of geographical mix, revenues were very much skewed towards Group revenue increased by 26 per cent to Rs. 60.50 billion Sri Lanka with approximately 87 per cent of revenues originating
10 John Keells Holdings PLC from domestic sources. Considering the high growth prospects in company, offset by a reduction in interest income also at the Sri Lanka, this skew is not expected to have a negative impact in holding company level. The overall administrative, distribution and the short to medium term. Group revenue, inclusive of associate other operating expenses of the Group did not increase company revenue increased by 20 per cent to Rs. 69.82 billion significantly as increases related to costs of expansion, launch of [2009/10: Rs. 57.99 billion]. new products and marketing were partly offset by reductions in sublease rentals in the Maldives as a result of the restructuring referred to in the Leisure industry group analysis.
Industry group EBIT margins The Group EBIT margin increased to 16.4 per cent from 13.6 per cent in the previous year. As illustrated below, all industry groups witnessed an increase in EBIT margins, with the exception of Transportation where an increase in revenue did not see a corresponding increase in EBIT, where despite a lower margin, asset utilisation improved on account of the revenue increase.
EBIT margins (%) 2010/11 2009/10 2008/09 Earnings before interest and tax Transportation 16.1 16.9 15.2 The growth in revenue translated into a considerable increase in Leisure 20.3 12.9 6.5 earnings before interest and tax (EBIT). In the year under review, Property 34.1 24.0 33.7 Group EBIT increased 44 per cent to Rs. 11.43 billion [2009/10: Consumer Foods & Retail 3.7 2.6 3.5 Rs. 7.91 billion], an increase of Rs. 3.52 billion against last year. Financial Services 13.8 9.0 8.1 Growth in EBIT was driven by all industry groups, although most Information Technology 2.9 0.6 (4.3) significantly by Leisure. The Leisure EBIT increased by 88 per cent Other 87.1 83.6 131.7 to Rs. 2.80 billion as against Rs. 1.49 billion. Transportation, at Rs. Overall Group 16.4 13.6 15.3 2.94 billion [2009/10: Rs. 2.39 billion] has the highest contribution to EBIT, amounting to 26 per cent of Group EBIT. Overall, the Finance expenses increase in Group EBIT was driven by an increase in gross profits The finance expenses of the Group declined to Rs. 796 million as a result of higher revenues and the increase in other operating [2009/10: Rs. 1.37 billion], a reduction of Rs. 574 million. This income. The gross profit margin of the Group declined to 22.6 per reduction was a combination of reduced debt levels in the Group cent as against 23.1 per cent as growth in revenues were primarily as well as the reduction in interest rates. Leisure and the holding driven by lower margin, high volume businesses. The absolute company continue to account for a bulk of the finance expense increase in gross profits was Rs. 2.58 billion. EBIT was also within the Group, collectively accounting for over 80 per cent of positively impacted by the growth in other operating income mainly total finance expenses. The interest cover of the Group has due to a profit on sale of disposal of Asian Hotels & Properties PLC increased to 14.4 times driven by the growth in EBIT as well as a (AHPL) and John Keells Hotels PLC (KHL) shares by the holding reduction in the finance expense.
Annual Report 2010/11 11 cOnSOLIdATed GROUP PeRFORMAnce
Taxation The positive momentum in performance is aptly illustrated when The Group tax expense increased to Rs. 1.57 billion [2009/10: Rs. reviewing the quarterly performance table below. Net revenues 985 million]. The effective tax rate on Group profits was 14.7 per have shown a strong and consistent rate of increase quarter on cent compared with 15.1 per cent in the previous year. Financial quarter. Profit before taxation (PBT) also demonstrates a similar Services and Consumer Foods & Retail were the highest trend with the exception of Q2 where PBT is skewed due to the contributors to Group tax with taxes of Rs. 473 million and Rs. profit from the sale of shares in AHPL and KHL by the holding 349 million respectively. The effective tax rates for both industry company. The performance of Leisure is noteworthy where PBT groups fell during the year. During the year, the Government in the peak season in Q4 alone was Rs. 1.54 billion in spite of room announced the reduction of corporate tax rates from 35 per cent inventory not being at full capacity due to the closure of rooms for to 28 per cent for standard rate companies to be implemented refurbishment. Transportation continues to be the single largest from April 2011 onwards. This reduction will have a positive impact contributor to the Group with a PBT of Rs. 2.93 billion for 2010/11. on companies within this tax bracket. There was additional relief granted to the banks where the financial value added tax (VAT) was eliminated, although there is a mechanism to administer the FY 20010/11 cash pool from such savings. The biggest beneficiaries of the tax Rs. Million Q1 Q2 Q3 Q4 Total reductions are expected to be the Financial Services group and Net revenue 12,919 13,967 15,616 17,998 60,500 Consumer Foods which were in any case groups with higher tax PBT 1,531 3,445 2,356 3,297 10,629 rate companies. Transportation 802 556 611 960 2,929 Leisure (14) 337 632 1,537 2,492 For further details on tax impacts of the Group refer the Notes to Property 145 145 222 319 831 the Financial Statements in the Annual Report. CF&R 169 137 156 117 579 Financial Services 377 308 528 120 1,333 Profit after taxation IT 1 34 14 65 114 Other 52 1,928 192 178 2,350 Group profit after taxation (PAT) increased by 63 per cent to Rs. 9.06 billion [2009/10: Rs. 5.55 billion] with all industry groups with Profit attributable to equity holders 1,010 2,927 1,757 2,552 8,246 the exception of Information Technology (IT) making a positive contribution to PAT. IT was impacted by the impairment of a Total assets 97,520 104,170 104,348 110,292 110,292 deferred tax asset booked during the previous year, and on a Total equity 56,559 60,803 62,210 67,195 67,195 positive note, was profitable at an EBIT level. Of the industry Total debt 17,478 17,965 15,378 14,641 14,641 groups, Transportation and Leisure were the highest contributors to PAT with contributions of Rs. 2.78 billion [2009/10: Rs. 2.28 Contribution to Sri Lankan economy billion] and Rs. 2.32 billion [2009/10: Rs. 973 million] respectively. The economic value statement as per the Global Reporting Other including Plantation Services recorded a PAT of Rs. 2.11 Initiative (GRI) Indicator EC1 is available in the Financial Information billion primarily on the account of the capital gains on the sale of section of the Annual Report. shares by the holding company. • The direct economic value generated in 2010/11 was Minority interest Rs. 69.79 billion [2009/2010: Rs.55.60 billion] comprising Minority interest (MI) increased to Rs. 818 million [2009/10: Rs. primarily of revenue, interest income, share of results of 351 million] due to the higher contribution from Leisure which has associates and profits on sale of assets. a relatively higher minority shareholding. The MI share of profits in • The corresponding economic value distributed was Rs. 61.10 Property also increased due to the higher profits recorded by Asian Hotels & Properties PLC. billion [ 2009/2010: Rs. 49.97 billion], comprising primarily of • Rs. 54.38 billion in operating and employee related costs Profit attributable to equity holders of the parent [2009/2010: Rs. 43.47] The profit attributable to equity holders of the parent increased by • Rs. 3.48 billion in payments to providers of funds 59 per cent to Rs. 8.25 billion [2009/10: Rs. 5.20 billion]. The net [2009/2010: Rs. 3.57 billion] profit margin of the Group increased to 11.8 per cent as against • The Group contributed a total of Rs. 3.19 billion [2009/2010: 9.0 per cent in the previous year. Rs. 2.91 billion] as payments to government primarily on account of taxes • The economic value retained, comprising of profits after dividends, depreciation, and amortisation was Rs. 8.69 billion [2009/2010: Rs. 5.64 billion] which will be utilised towards investment/growth.
Return on capital employed and return on equity The return on capital employed (ROCE) for the Group increased to 14.7 per cent as against 10.8 per cent in the previous year. The increase in ROCE was a result of higher EBIT margins as well as improved asset turnover. Group capital employed increased to Rs. 81.84 billion in the current year as against Rs. 73.71 billion in the previous year due to the investments undertaken during the year and the revaluation of land and investment property. The ROCE of all industry groups increased compared to the previous year.
12 John Keells Holdings PLC The return on equity (ROE) of the Group improved to 15.1 per cent as against 10.9 per cent in the previous year. The ROE increase was primarily due to an increase in the return on assets to 8.7 per cent from 5.8 per cent in the prior year.
OUTLOOK AND THE FUTURE The year ahead looks quite promising from where we stand today. The overall economy is expected to continue its growth momentum of 2010. Whilst inflation could see an uptick, we believe interest rates and exchange rates will remain relatively stable, providing a conducive environment for growth. In this backdrop, the Group expects to continue its high trajectory growth momentum building on the Rs. 10.63 billion PBT of 2010/11. Whilst all our industry groups will strive to meet our return hurdles, the environment and external factors may favour certain industries. Leisure would be a definite beneficiary. With more rooms available for occupancy in the ensuing year, coupled with increases in average room rates (ARRs) due to negotiations when contracting, the profits from Leisure are expected to continue its growth momentum. Improvement in corporate earnings will have a cascading effect and would positively impact B2B markets as well as retail level consumption. CF&R, Banking and Insurance are likely to benefit from such an improvement.
The announcement of mega mixed property developments is a positive sign. It will create momentum and also uplift the profile of the country through some well-established international brand names having a presence in the country. We will continue with our strategy of capitalising on our land bank which includes sites which The previous graph illustrates the relative EBIT contribution of each have excellent development potential. Other infrastructure industry group against the capital employed and ROCE. During development in certain strategic sectors is another area the Group the year, the Group revised its hurdle rates for ROE to 18 per cent would continue to monitor and evaluate. from 20 per cent previously and for ROCE to 15 per cent from 18 per cent previously. Further details on the ROCE of each of the The significant growth in certain industries and the scaling up by industry groups can be found in the Portfolio Movement and all players in the respective markets has resulted in a dearth of Evaluation section of the Annual Report. skilled professionals in certain areas. JKH has always been conscious of the need to train and develop the staff and has ROCE = EBIT x Asset x Assets/ placed great emphasis on the HR related initiatives required to margin turnover (debt+equity) continue to motivate and inspire staff at JKH. Further details on 2010/11 14.7% = 16.4% x 0.67 x 1.34 staff related initiatives can be found in the Governance section 2009/10 10.8% = 13.6% x 0.61 x 1.31 under Stakeholder-Employees at JKH.
ROE = ROA x CEL* x CSL** In line with the global trend in enabling a common language for 2010/11 15.1% = 8.7% x 0.91 x 1.91 financial reporting, the Institute of Chartered Accountants of 2009/10 10.9% = 5.8% x 0.94 x 2.00 Sri Lanka have taken steps to adopt International Financial Reporting Standards (IFRS) by issuing new accounting standards * CEL- common earnings leverage; **CSL - capital structure leverage comprising of Sri Lanka Accounting Standards (SLFRS) and Lanka Accounting Standards (LKAS) for annual financial periods beginning on or after 1 January 2012. The adoption of SLFRS and LKAS would have an impact on the reported financial results of the Group, the impact of which is being presently evaluated.
The areas where there could be a significant impact to the Group would be the method of accounting for consolidated results of the parent, accounting for financial assets and liabilities of the Group, specifically in the financial services and insurance businesses and revenue recognition in selected sectors. The Group is proposing to adopt SLFRS & LKAS for the financial period beginning 1 April 2012 and will present the financial statements for the year ending 31 March 2013 using SLFRS and LKAS.
Annual Report 2010/11 13 cAPITAL ReSOURceS And LIqUIdITY
Summary of key balance sheet items
Item 2011 2010 Change Change Explanatory highlights for YoY changes Rs.Mn Rs.Mn Rs.Mn % Property, plant and 28,628 29,989 (1,361) (5) • Additions of Rs. 4.98 billion in relation to capital expenditure in hotels, equipment JMSL mall expansion and CCS equipment for ice cream impulse range • Transfer out of Rs. 3.18 billion from PPE under Tranquility post the restructuring in the Maldives • Revaluation of CCS property of Rs. 1.69 billion, more than offset by the subsequent re-classification as investment property. The surplus on revaluation was accounted under revaluation reserves and had no impact on the income statement • Depreciation charge of Rs. 1.70 billion
Leasehold property 9,516 4,577 4,939 108 • Addition of Rs. 5.54 billion as a result of the purchase of the head lease of Dhonveli Island for 18 years under Tranquility
Investment property 5,386 2,334 3,052 131 • CCS re-classification of land as an investment property - Rs. 2.58 billion • Fair value gain on IP at AHPL of Rs. 216 million and Trans Asia of Rs. 228 million
Investments in 14,670 14,309 361 3 • Associate company profits of Rs. 2.34 billion, offset by dividends of associates Rs. 2.19 billion • Subscription to NTB warrants
Other investments 11,792 8,415 3,377 40 • Increase in investments under UA life fund of Rs. 2.87 billion
Other non-current 3,231 1,725 1,506 87 • Transfer of The Emperor apartments as work in progress of Rs.2.47 assets billion, partially offset by transfer to cost of sales of Rs.1.65 billion • Transfer of Rs. 880 million from PPE due to OnThree20 project of JKRP Inventories 3,144 2,295 849 37 • JKOA – inventory of mobile phone stocks and other products • JMSL, CCS and KFP - all consumer related businesses due to higher seasonal inventory requirements • LMS - higher global oil prices resulting in an increase in the value of inventory and arrival of stocks at the end of the month
Trade and other 12,072 9,934 2,138 22 • Primarily on LMS, Cinnamon Grand, CCS, JKOA and JMSL due to receivables higher operating volumes
Short term 18,994 22,314 (3,320) (15) • Reduction in funds at KHL raised via the rights issue which have now investments and cash been deployed in on-going hotel projects in hand • AHPL - funds utilised to repay debt and pay dividends Shareholders' funds 59,587 49,832 9,755 20 • Profit for the year of Rs. 8.26 billion and surplus on revaluation of Rs. 2.45 billion offset by dividends of Rs. 1.87 billion
Insurance provision 12,663 10,236 2,427 24 • Increase in provision due to UA insurance funds
Non-current interest 8,353 10,539 (2,186) (21) • Reduction in JKH due to repayment of IFC loan installments bearing borrowings • Repayment of loans of AHPL - Cinnamon Grand • Restructuring in Maldives – settlement and re-financing of loan with minimal net impact
Trade and other 12,380 11,577 803 7 • LMS on higher volumes similar to receivables payables • JMSL due to increased inventory for the season and JKSB trade dues on higher daily turnover Current portion of 2,134 4,169 (2,035) (49) • Payment of Rs. 2 billion of JKH debentures in October 2010 interest bearing borrowings
Bank overdraft 3,904 2,576 1,328 52 • Increased in JMSL and CCS to fund higher working capital requirements in a rapidly growing market
Note: CCS – Ceylon Cold Stores; JKMR – John Keells Maldivian Resorts; IP – investment property; AHPL – Asian Hotels & Properties; NTB – Nations Trust Bank; UA – Union Assurance; JMSL – Jaykay Marketing Services; KFP – Keells Foods Products ; LMS – Lanka Marine Services; KHL – John Keells Hotels; IFC – International Finance Corporation; JKOA – John Keells Office Automation; JKRP – John Keells Residential Properties; JKSB - John Keells Stock Brokers
14 John Keells Holdings PLC BALANCE SHEET STRUCTURE However, the overall working capital cycle of the Group has Total assets increased by Rs. 11.63 billion to Rs. 110.29 billion declined due to focused efforts of managing inventory and [2009/10: Rs. 98.66 billion] primarily due to increases in leasehold accounts receivables. property, investment property and other investments as described in the summary table. CASH FLOW Cash and cash equivalents decreased by Rs. 2.72 billion to Rs. Non-current assets 12.02 billion by the end of the year [2009/10: Rs. 14.74 billion]. Non-current assets of the Group were Rs. 76.06 billion [2009/10: Net cash from operating activities decreased to Rs. 8.50 billion Rs. 64.09 billion], an increase of Rs. 11.97 billion. Non-current as against Rs. 9.49 billion due to increased working capital assets increased primarily due to an increase in leasehold requirements, thus impacting the cash generated from property, investment property and other investments. Leasehold operations. Net cash used in investing activities was Rs. 4.47 property increased by Rs. 4.94 million primarily due to the billion [2009/10: Rs. 5.82 billion]. In the current year, cash invested restructuring done in the Maldives which resulted in the purchase in purchase of property, plant and equipment was Rs. 4.98 billion of the head lease on Dhonveli Island for a period of 18 years. which is significantly higher than in the previous year. This capital Investment property increased by Rs. 3.05 billion mainly due to a expenditure was largely in the Leisure and Consumer Foods & re-classification of the revalued Ceylon Cold Stores (CCS) land as Retail industry groups which accounted for Rs. 3.05 billion and an investment property, based on the change in the nature of its Rs. 1.27 billion respectively. This was however offset to an extent use. with the cash proceeds from the sale of shares in AHPL and KHL. Net cash used in financing activities was Rs. 6.79 billion [2009/10: Working capital Rs. 636 million] mainly due to the high level of debt repayments Net working capital of the Group decreased to Rs. 14.78 billion amounting to Rs. 5.60 billion. [2009/10: Rs. 15.01 billion] due to a reduction in short term investments and cash. The overall working capital requirements LEVERAGE AND CAPITAL STRUCTURE of the Group pertaining to inventory and trade and other Capital structure receivables increased in tandem with the growth in volumes. The nature of some of the consumer related businesses are such that Total assets of Rs. 110.29 billion were funded by shareholders’ working capital requirements have increased significantly. funds (54 per cent), minority interest (7 per cent), long term creditors (21 per cent) and short term creditors (18 per cent). Thus, the long term funding of assets was Rs. 90.87 billion – 83 2010/11 2009/10 per cent of total assets. Current ratio (times) 1.8 1.8 Quick ratio (times) 1.6 1.6 Debt Net working capital (Rs. Mn) 14,779 15,007 The total debt of the Group was Rs. 14.64 billion [2009/10: Asset turnover (times) 0.7 0.6 Rs. 17.45 billion], a decline of Rs. 2.81 billion from last year. The Capital employed (Rs. Mn) 81,836 73,715 primary source of debt reduction was at the JKH holding Total debt (Rs. Mn) 14,641 17,453 company level due to repayment of Rs. 2 billion of debentures in Net debt (cash) (Rs. Mn) (4,168) (4,435) October 2010. JKH also repaid International Finance Corporation Debt/equity ratio (%) 21.8 31.0 bi-annually on the USD 75 million term loan which has resulted in the reduction of debt. In addition, Cinnamon Grand repaid its long Net debt (cash)/equity ratio (%) (6.2) (7.9) term debt considering the high level of cash reserves built up due Long-term debt to total debt (%) 57.2 60.5 to improved cash inflows from its operations. It was financially Debt/total assets (%) 13.3 17.7 prudent to settle the long term loan given the interest rate Debt/EBITDA (times) 1.1 1.7 differentials between investment and borrowing rates. The
Annual Report 2010/11 15 cAPITAL ReSOURceS And LIqUIdITY
restructuring in the Maldives required settlement of debt which The investment policies of the Group continue as before within was then re-financed with an extension of the maturity. the guidelines set out by the Group Executive Committee (GEC). Investments are placed with financial institutions meeting a The debt to equity ratio of the Group declined to 21.8 per cent minimum rating criterion as agreed with the GEC. Long term from 31.0 per cent in the previous year. These are very low debt investments are done in consultation with the Group Finance to equity ratios, demonstrating the borrowing capacity of the Director and members of the GEC to ensure availability of Group to fund its next phase of growth. Reinforcing this position, adequate funding to meet investments in the project pipeline. the debt to EBITDA cover stood at just 1.1 times against 1.7 times in the previous year, where norms would be for companies to Credit facilities borrow upto 4-5 times its EBITDA. Long term to total debt JKH retained its AAA(lka) rating from Fitch Ratings Lanka Limited declined marginally to 57.2 per cent from 60.5 per cent in the on account of its strong balance sheet and steady performance. previous year. The Leisure industry group and the holding In addition to its sizeable cash reserves, the Group continues to company continue to have the largest share of the overall debt. have significant credit facilities available with banks in Sri Lanka. The availability of cash reserves has not necessitated utilisation STATEMENT OF CHANGES IN EQUITY of a majority of the funding lines available, particularly at a holding Total equity increased to Rs. 67.19 billion [2009/10: Rs. 56.26 company level. However, the Company is looking to proactively billion]. The increase was due to a profit contribution of Rs. 9.06 manage potential funding requirements and we have finalised a billion, revaluations of Rs. 2.87 billion, offset by dividends paid of few large stand-by loan facilities with some large banks. The Rs. 1.87 billion. current cash position of the Group and leverage ratios demonstrate its ability to leverage its balance sheet further if the TREASURY MANAGEMENT requirement arises. During the year, interest rates continued to decline at a relatively slower pace than the previous year. Reductions in interest rates naturally had a positive impact on highly leveraged companies. The Group also proactively managed the funding requirements and converted some long term facilities into shorter tenures taking into account the more attractive pricing on the lower end of the yield curve. Considering the outlook for the Rupee, the Group will evaluate, where possible, opportunities to fund debt in US dollars to take advantage of the yield differential. However, ensuring adequate foreign currency inflows is critical to ensure a ‘natural hedge’. The appreciation of the Rupee has a negative impact on a number of businesses across the Group. The Group continued to implement necessary steps to monitor foreign currency exposures and to mitigate these proactively, if thought fit.
16 John Keells Holdings PLC IndUSTRY GROUP AnALYSIS IndUSTRY GROUP FInAncIAL HIGHLIGHTS
TURNOVER * Rs. billion TRP LEISURE PROP CF&R FIN SER IT OTHER 2010/11 18.31 13.81 2.49 18.36 9.50 4.23 3.12 2009/10 14.18 11.50 1.62 15.84 9.43 2.59 2.82 2008/09 15.44 9.66 1.58 14.13 5.98 2.73 2.75
EBIT Rs. billion TRP LEISURE PROP CF&R FIN SER IT OTHER 2010/11 2.94 2.80 0.85 0.68 1.31 0.12 2.72 2009/10 2.39 1.49 0.39 0.42 0.85 0.02 2.36 2008/09 2.34 0.62 0.53 0.49 0.49 (0.12) 3.63
CAPITAL EMPLOYED** Rs. billion PROP TRP LEISURE CF&R FIN SER IT OTHER 2010/11 14.17 30.69 7.73 6.97 6.39 1.77 14.10 2009/10 13.80 29.57 6.13 4.00 6.40 1.39 12.43 2008/09 13.92 25.78 5.45 4.46 5.57 1.47 15.42
TOTAL ASSETS Rs. billion TRP PROP LEISURE CF&R FIN SER IT OTHER 2010/11 16.19 33.71 8.67 10.26 23.96 2.42 15.09 2009/10 14.83 32.54 6.99 7.02 21.46 1.74 14.08 2008/09 14.81 28.40 5.73 7.06 17.88 1.80 16.47
EMPLOYEES*** Number OTHER TRP LEISURE PROP CF&R FIN SER IT 2010/11 572 4,459 99 3,029 1,121 979 1,130 2009/10 543 4,319 104 2,878 996 818 1,227 2008/09 643 3,986 120 3,016 924 638 1,174
* Turnover is inclusive of the Group's share of associate company turnover ** For associate companies, the capital employed is representative of the Group’s equity investment in these companies *** EBIT per employee is calculated excluding the employees of associate companies
Annual Report 2010/11 17 TRAnSPORTATIOn With a vision to be recognised as a leading provider of transportation solutions and related services through a balanced portfolio of businesses in selected markets, the Transportation industry group operates under the following two strategic sectors- • Ports & Shipping • Transportation • Logistics • Airlines
These operations offer a complete array of transportation related services in Sri Lanka and the region. Businesses in the industry group include operations of South Asia Gateway Terminals in the Port of Colombo, a marine bunkering business, joint ventures/associations with leading transportation multinationals and logistics, travel and airline services in Sri Lanka, India and Maldives.
Increased ROce flights by Jet of 21% Airways and Gulf Air
Profit Growth of 138%
18 John Keells Holdings PLC Ports & Shipping Transportation
The businesses within Operations of a private terminal in the Logistics services which include operations of DHL air express in Sri the sector Port of Colombo under South Asia Lanka, third party logistics and freight forwarding solutions under the John Gateway Terminals Keells Logistics brand, bunkering services under LMS
Associate company stake in Maersk Representation of airlines as general sales agents through Mack Air in Sri Lanka Lanka and through its subsidiary in Maldives – on-line operations by Jet Airways, Gulf Air and Mihin Lanka. Travel agency business through MAET
Revenue and growth Rs. 4.89 billion (inclusive of associate Rs. 13.43 billion – growth of 41% driven by higher volumes across the company revenue) – growth of 4% as a Logistics and Airlines segments. Revenues of LMS also increased in line result of marginal growth in revenues of with volume growth in the sector and due to higher global oil prices SAGT and Maersk Lanka
EBIT and growth Rs. 2.14 billion – drop of 1% due to Rs. 798 million – growth of 245% on the back of improved performances marginal fall in EBIT level at SAGT due across the Airline and Logistics segments. LMS performance also to foreign currency translation impact improved due to rising oil prices and more stable pricing policies adopted in the market
Key developments • The Port of Colombo handled a • JKLL expanded its third party logistics business into the petroleum during the year combined volume in excess of 4 industry, including warehousing, inventory management and island- million TEUs, with SAGT having a wide distribution volume of 1.97 million TEUs for the • Jet Airways increased frequencies and Gulf Air and Mihin Lanka calendar year 2010 commenced on-line operations from Colombo and Maldives • SAGT invested in an upgrade of its respectively IT systems in accounting and • DHL increased its market share in the fast growing air express category procurement to further enhance process efficiencies. Also • JKLI and JKLLL – rebranded in India and Sri Lanka and expanded its implemented ‘e-post’, an electronic global footprint through agency tie-ups. JKLI also relocated its offices in based invoicing system key metros with a view to providing its customers higher levels of service delivery
Key external/internal • Recovery from the global financial • Improvement in the domestic economy and resulting growth in import variables affecting crisis and increasing trade volumes volumes would have a positive impact on logistics opportunities business globally, particularly from India, will • Increased tourist arrivals and regional traffic will positively impact the have a positive impact on Airlines segment. However, with airlines moving towards direct transshipment volumes marketing, market share and volumes in some segments of the travel • Improvement in the domestic agency business could reduce over time economy and resulting growth in • Shortage of capacity and skilled manpower in the Indian freight import and export volumes will forwarding industry positively impact revenues • Higher trade volumes at the Port of Colombo will positively impact the • Continued appreciation of the overall market size of the bunkering industry Rupee could have an impact on translation in the JKH accounts, since reporting currency for SAGT is in USD
Outlook/action plans • SAGT will take delivery of two new, • JKLL will explore opportunities to construct and manage a ship-to-shore cranes during the year state-of-the-art warehousing complex, catering to multiple 3PL clients which will enhance capacity • Increased frequencies by Jet Airways and Mihin Air will positively • Upgrading of prime movers with impact market share in the passenger and cargo markets investment in 15 new prime movers • Continue to evaluate opportunities for development and management of port operations directly and through Public-Private partnerships
Note – JKLLL – John Keells Logistics Lanka; JKLI – John Keells Logistics India; JKLL – John Keells Logistics; LMS – Lanka Marine Services; MAET – Mackinnons American Express Travels; SAGT – South Asia Gateway Terminals; 3PL – third party logistics; TEU – twenty foot equivalent container unit; IT - information technology
Operational review and discussion Rs. 18.31 billion [2009/10: Rs. 14.18 billion]. The Transportation The Transportation industry group witnessed steady overall group EBIT increased by 23 per cent to Rs. 2.94 billion [2009/10: growth during the year driven by improved revenues from Rs. 2.39 billion]. The Ports & Shipping sector continued to be the logistics, bunkering and airlines. Revenues grew by 37 per cent dominant contributor in terms of EBIT, although year on year to Rs. 13.43 billion [2009/10: Rs. 9.81 billion]. Revenues, growth was flat, resulting in a slightly lower growth rate in EBIT including associate company revenues, grew by 29 per cent to than revenue.
Annual Report 2010/11 19 IndUSTRY GROUP AnALYSIS
The improvement in economic conditions in Sri Lanka and Return on capital employed resultant improvement in trade volumes had a positive impact on • ROCE increased to 21.0 per cent against 17.3 per cent in the the port operations and logistics businesses. SAGT achieved last year. container volumes of almost 2 million TEUs, which consist • EBIT margins fell to 16.1 per cent from 16.9 per cent as primarily of transshipment volumes. Whilst transshipment will revenue growth was largely driven by the relatively lower continue to play a vital role, development of the domestic margin bunkering business. economy would also have a positive impact on container volumes • However, asset utilisation improved with asset turnover and margins. increasing to 1.18 as against 0.96 on the back of revenue growth in the bunkering business as well as the other logistics Improved trade activity will also have a positive impact on the and airlines businesses, which more than offset the negative logistics businesses. The continued growth of the apparel sector impact on ROCE due to the reduction in EBIT margins. and expectations for this momentum to continue is expected to have a positive impact on the air express business of DHL. The establishment of the ‘John Keells Logistics’ brand had a positive (Rs. million) 2010/11 2009/10 Chg % 2008/09 impact on the market. The businesses falling under the John Turnover* 18,314 14,177 29.2 15,435 Keells Logistics brand are able to market itself better as an overall solutions provider under one brand which has helped in signing EBIT 2,941 2,391 23.0 2,340 on new customers. PBT 2,929 2,366 23.8 2,287 PAT 2,781 2,282 21.9 1,658 The John Keells Logistics India (JKLI) operation has also been Total assets 16,185 14,831 9.1 14,806 revamped with increased focus on expanding networks through Total equity 13,954 13,498 3.4 13,605 agency tie ups. JKLI will have a renewed focus on the air freight Total debt 218 298 (27.0) 317 segment in India which is expected to grow rapidly in the short to medium term. We are witnessing significant investment in Capital employed** 14,172 13,796 2.7 13,922 capacity expansion by our competitors in India and will continue Capital expenditure 70 53 30.9 103 to monitor the impact on the industry. No. of employees 572 543 5.3 643 EBIT per employee*** 5.1 4.4 16.7 3.6 The increase in global oil prices had a positive impact on revenues of the bunkering business whilst margins also improved due to * Turnover is inclusive of the Group's share of associate company the benefit of purchasing inventory in an environment of increasing turnover prices. After the volatility witnessed last year, the market settled ** For associate companies the capital employed is representative of the Group’s equity investment in these companies down with more stable pricing policies being adopted overall. *** EBIT per employee is calculated excluding the employees of associate companies The Airlines segment witnessed strong growth during the year driven by higher passenger and cargo volumes. The commencement of on-line operations by two key partners – Gulf Air and Mihin Lanka, where both airlines commenced direct frequencies out of Colombo and Maldives respectively, had a positive impact on revenues and EBIT. With tourism arrivals set to grow over the next few years, this volume growth is expected to continue.
20 John Keells Holdings PLC LeISURe
The Leisure industry group is organised into- • City Hotels • Sri Lankan Resorts • Maldivian Resorts • Destination Management • Hotel Management
Representing JKH's single largest net asset exposure, the Leisure industry group encompasses two city hotels that offer 40 per cent of the five star room capacity in Colombo and seven resort hotels spread in Profit growth prime tourist locations all over Sri Lanka and of 138% three resorts in the Maldives offering beaches, mountains, wildlife and cultural splendour under the two brands ‘Cinnamon Hotels and erior il An int lustration o f Cha Resorts’ and ‘Chaaya Hotels and Resorts’. aya Tran z, The Leisure industry group also has Hik ka du destination management businesses in wa to Sri Lanka and India. b e op en e d
in N o v e m b e r
2 0 1 1
chaaya bey under construction
Annual Report 2010/11 21 Industry Group AnAlysIs
City Hotels Sri Lankan Resorts Maldivian Resorts Destination Management
The businesses within Cinnamon Grand – 501 7 resort hotels in Sri Lanka – 3 resort hotels in Maldives Walkers Tours and the sector rooms 798 rooms – 340 rooms Whittall Boustead inbound tour operations
Cinnamon Lakeside Inbound tour operations (CLS) – 340 rooms in India
Revenue and growth Rs. 4.81 billion – a 49% Rs. 1.44 billion – growth of Rs. 4.04 billion – a fall of Rs. 3.52 billion – a 38% growth on back of 50% on account of turnaround 15% as a result of the growth due to increase increasing ARRs and in all resorts divestment of the Alidhoo in volumes from all key occupancies. Also due to resort and closure of markets lower base last year, as Chaaya Lagoon for CLS was closed for 5 refurbishment months
EBIT and growth Rs. 1.42 billion – a 165% Rs. 158 million – growth of Rs. 641 million – 14% Rs. 190 million – 60% growth driven by revenue 540% driven by higher growth as a result of growth driven by higher growth and high revenues and an increase in divestment of the loss- revenues and high operating leverage the EBIT margin making Alidhoo resort. operating leverage on Closure of Chaaya Lagoon account of largely fixed impacted EBIT growth cost base
Key developments • Commenced the • Opened Chaaya Blu in • Refurbished Chaaya • Higher volume growth during the year refurbishment of 216 Trincomalee Lagoon in the Maldives in leisure market rooms at CLS at a cost • Commenced construction of • Divestment of head compared to market of Rs. 379 million Chaaya Bey in Beruwala lease of Alidhoo Island growth • Completed the • Refurbishment of Coral • Purchased the head • Assisted refurbishment of the Gardens hotel in Hikkaduwa lease of Dhonveli island entrepreneurs through south wing, and the for a period of 18 years a unique self-financing atrium within, of the • Cinnamon Lodge, Habarana scheme to invest in Cinnamon Grand. The refurbished and upgraded to vehicles on a newly refurbished wing a five star property sustainability model, is now known as the thereby allowing for ‘Courtyard’ wing expansion in capacity
Key external/ internal • Increase in minimum • Long haul travel being • Long haul travel being • Lack of top quality variables affecting room rates to USD 100 affected due to high cost of affected due to high inventory (hotel business • Possible shortage of air travel coupled with cost of air travel rooms) experienced/trained economic issues in coupled with economic • Ability to retain and staff in the future traditional European markets issues in traditional recruit experienced/ European markets • Introduction of new • Possible shortage of trained staff electricity tariffs for experienced/trained staff in • Introduction of business • Appreciation of the hotels the future profit tax of 15% Rupee and volatility of • Appreciation of the • Appreciation of the Rupee • Introduction of goods cross currencies Rupee and services tax of (Euro and GBP) 3.5% effective from January 2011
Outlook/action plans • Further increase in • Continue to grow room • Diversify distribution • Focus on enhancing minimum rates to USD inventory in Sri Lankan channels including volumes from 125, effective from Resorts and leverage digital channels traditional western April 2011, will ensure strength to re-position Sri • Introduce energy saving European markets growth in ARR Lanka as an emerging and green practices to through tour operator • Continued growth in destination with a diverse reduce carbon footprint relationships offering business travel and • Strong focus on • Concentrated effort in tourist arrivals is • Diversify distribution breaking into emerging new emerging expected to positively channels including digital markets such as China markets such as impact occupancies channels and India China and India which • Cost structures - • Refurbishment of Yala are expected to show particularly staffing and Village and reposition as high volume growth heat, lighting and luxury game lodge • Target MICE segment power to be managed • Chaaya Tranz to be which demonstrates • Floating restaurant operational from November high potential project at CLS to be 2011 • Tap into high end completed • Cost structures - particularly niche segments such staffing and heat, lighting as cruises, study and power to be managed tours, luxury jets etc. ARR – average room rate; USD – US dollar; EBIT – earnings before interest and tax; GBP – Sterling pound; MICE – meetings, incentives, conferences, exhibitions
22 John Keells Holdings PLC In addition to the sectors referred to in the previous table, the of new services such as internal air taxi operations is a positive Hotel Management sector functions as the hotel management step. arm of the Leisure industry group. The sector achieved an EBIT of Rs. 387 million – a growth of 59 per cent on the back of an Whilst traditional western European markets will continue to be improvement in the performance of hotels under management. of importance to the Sri Lankan and Maldivian operations, new Going forward, one of the key variables affecting the sector will emerging travel markets such as China, India and the Middle East be the ability to retain and recruit experienced staff. The action are expected to provide impetus to growth. The Leisure industry plans in this regard are discussed in detail in the operational group recognises the importance of such emerging markets and review. The outlook for Hotel Management is positive where the has implemented strategies to capitalise on this opportunity, portfolio of hotels under management is expected to increase with which includes ensuring that products and services cater to such the addition of Chaaya Bey, the re-launch of Chaaya Tranz and segments as well. The importance of such destinations is other new hotel ventures. The strategy will be to expand the exemplified by the Chinese market becoming number one into inventory of hotels under management, not necessarily owned by the Maldives. The Destination Management sector in particular the Group. will look to capitalise on this opportunity by leveraging on existing tour operator networks and establishing new networks as well. Operational review and discussion The Leisure industry group recorded a strong performance during During the year, the Maldivian Resorts were restructured with the the year, witnessing growth in all its sectors driven primarily by the divestment of the head lease of Alidhoo island, which resulted in growth in tourism in Sri Lanka. Overall arrivals into the country the discontinuation of the Cinnamon brand presence in the increased by 41 per cent to 709,101 tourists, having a positive Maldives. The Group purchased the head lease of Dhonveli island impact on the hotels and destination management businesses for a period of 18 years. As a result of the restructuring and during the financial year. Revenue grew by 20 per cent to Rs. divestment of the loss-making Alidhoo resort, the profitability of 13.81 billion [2009/10: Rs. 11.50 billion]. EBIT increased by 88 Maldivian Resorts has increased significantly. This was achieved per cent to Rs. 2.80 billion [2009/10: Rs. 1.49 billion], in spite of the closure of Chaaya Lagoon Hakuraa Huraa for 4 demonstrating the high operating leverage of the city and resort months due to a USD 2.6 million refurbishment. The change in hotels. This performance was recorded in the backdrop of room the tax policies in the Maldives has resulted in the introduction of inventory not being at maximum levels throughout the entire year a business profit tax of 15 per cent, effective from the ensuing due to the closure of Coral Gardens hotel, the partial closure of financial year. A goods and services tax of 3.5 per cent was also Cinnamon Lodge Habarana, Cinnamon Lakeside and Chaaya introduced with effect from January 2011. The introduction of Lagoon Hakuraa Huraa in the Maldives. these taxes will have an impact on the net profitability of the resorts. However, since these changes were discussed over a Reflecting the rapidly changing landscape and the need to create period of time, the industry has had adequate time to take a unique value proposition to our clients, the Leisure industry necessary steps to partially mitigate the impact. group launched its new vision during the year – “We will always be the Hospitality Trendsetter”. Our positive outlook on the leisure industry is demonstrated through our investments in expanding room inventory as well as refurbishing and upgrading our existing hotels to reflect our vision. The Group committed in excess of Rs. 5 billion in the current financial year, which includes the development of a brand new 200 room hotel in Beruwala to be branded as Chaaya Bey. In addition, we are currently refurbishing Coral Gardens Hotel, Hikkaduwa which will be re-branded as Chaaya Tranz. The hotel is expected to commence operations in November 2011.
The anticipated growth in tourism in Sri Lanka is expected to continue during the next few years. The tourism industry expects arrivals of 1 million tourists in three years. This level of growth would require a significant addition to the current room inventory in the country. In order to meet demand expectations, the Leisure group intends to add a minimum of 200 rooms per year in the next five years, which could be in Resort Hotels as well as City Hotels. The creation of tourism development zones and entry of reputed international hotel chains would also improve the attractiveness and visibility of Sri Lanka as an emerging destination, whilst changing the competitive landscape. The need for integrated developments, encompassing hotels, entertainment, convention facilities and retail space is important to ensure a unique positioning and creation of iconic developments that would attract visitors, similar to other hotel developments in the region. The need for development of related infrastructure still has to be addressed, although the emergence
Annual Report 2010/11 23 IndUSTRY GROUP AnALYSIS
The resurgence of tourism and business travel positively impacted order to maintain our high service standards. The Group has been the City Hotels sector with both Cinnamon Grand and Cinnamon conscious of this need and has taken steps to continuously Lakeside witnessing sharp growth. During the year, the minimum ensure staff are given adequate exposure and training to develop rate policy increased the rate of five star rooms to USD 100. This the requisite competencies.The Group has tied up with an naturally had a positive impact on average room rates (ARR), internationally reputed 5 star training academy to cater to this whilst not impacting occupancies due to the growth in arrivals. requirement. Many senior and middle level managers have already Cinnamon Lakeside will expand its food and beverage portfolio undergone overseas training under this programme. through the launch of a floating restaurant to be introduced in the ensuing year. Return on capital employed • ROCE increased to 9.3 per cent against 5.4 per cent. The growth in tourism and expansion in capacity is likely to stretch • EBIT margins improved considerably to 20.3 per cent from the infrastructure resources of the country which will need to 12.9 per cent, driven by higher ARRs/margins as well as the evolve at a rapid pace. Whilst infrastructure is important to achieve high operating leverage enjoyed by the hotels and destination this growth, the development of human capital is considered management businesses considering the relatively high level critical considering the service oriented nature of the industry. of fixed costs. Training and development of staff will assume greater importance with high levels of growth and additions to the employee cadre in • Asset turnover at 0.42 times as against 0.38 times did not increase significantly as a result of relatively lower overall revenue growth due to closure of some hotels for refurbishments as discussed above.
(Rs. million) 2010/11 2009/10 Chg % 2008/09 Turnover 13,810 11,500 20.1 9,662 EBIT 2,799 1,485 88.5 624 PBT 2,492 1,011 146.4 133 PAT 2,319 973 138.3 128 Total assets 33,711 32,539 3.6 28,400 Total equity 25,317 23,535 7.6 18,592 Total debt 5,377 6,040 (11.0) 7,189 Capital employed 30,694 29,574 3.8 25,780 Capital expenditure 3,055 1,298 135.3 1,213 No. of employees 4,459 4,319 3.2 3,986 EBIT per employee 0.6 0.3 82.6 0.2
24 John Keells Holdings PLC PROPeRTY
Owning a significant land bank in prime areas of Colombo, the Property industry group is one of the largest private sector proprietors of real estate in Colombo. As the controlling shareholder of Asian Hotels and Properties PLC - the owners and promoters of ‘Crescat City’ which houses the five star hotel ‘Cinnamon Grand’, the up-market shopping mall ‘The Crescat Boulevard’, the 30-storey luxury apartment complex ‘The Monarch’, the 35-storey luxury apartment complex ‘The Emperor’, and the ‘Angsana City Club & Spa’, the Property Development arm concentrates primarily on development and sale of residential apartments such as the recently launched ‘OnThree20’ project and the operations of the Crescat Boulevard. Management and operation of office sites within the city are handled under the Real Estate arm.
ebIT growth of 119%
Revenue growth 54%
Annual Report 2010/11 25 IndUSTRY GROUP AnALYSIS
Property Development Real Estate
The businesses within Development and sale of residential apartments– currently ‘The Renting of the commercial office sites and the the sector Emperor’ and ‘OnThree20’ condominium projects management of the Group’s real estate within the city
Owning and operating the Crescat Boulevard mall
Revenue and growth Rs. 2.44 billion – 56% growth due to cycles of revenue Rs. 49 million – 6% fall as a result of the scaling recognition of The Emperor project which is nearing completion. down of operations on one of the major sites on Revenues of the mall operations also increased on the back of Union Place and making way for the OnThree20 higher occupancies and an increase in the rentable space project
EBIT and growth Rs. 779 million – 158% growth due to the corresponding profit Rs. 71 million – 18% fall due to relocation costs recognition based on higher revenue as above and fair value borne due to the commencement of the gain on investment property amounting to Rs. 216 million OnThree20 project at Union Place
Key developments • Launch of OnThree20 – a 475 unit residential apartment • Continued focus on energy saving initiatives during the year building project on Union Place consisting of three towers. across the Group Over 60% of units are sold prior to formal launch • Steps to optimise the utilisation of space and • Excellent sales at the Emperor with only 5 units out of the ensure minimal un-occupied space total of 163 remaining • The OnThree20 project model was established based on an efficient design-based construction model to optimise construction costs, thus giving the ability to competitively price units • The Crescat Boulevard mall was expanded with the addition of approximately 5,000 square feet of retail space
Key external/internal • Improvement in macro-economic conditions resulting in • The growth in the economy has resulted in variables affecting higher disposable incomes and the reduction in interest rates increased demand for office space within the business generally has a positive impact on the property market city. However since the Real Estate sector has • The increase in the cost of construction materials could drive prioritised the meeting of the requirements of the cost of construction higher the Group’s office needs, especially with one of its major sites handed over for • The shortage of specialised resources and manpower could development, the sector has not been able to become an issue if the construction industry grows very capitalise on this growth rapidly
Outlook/action plans • Increase in tourism, per capita income and changes in • Continue to focus on driving efficiencies and lifestyles will increase the potential for retail and commercial managing costs developments and residential apartments. Sri Lanka is • Optimise space utilisation relatively under-priced compared to the region • Expansion of the Group’s land bank to ensure continuous development pipeline. The Group is currently finalising the purchase of a 6 acre site in Ja-Ela which has excellent development potential
Operational review and discussion impact on property prices. During the year, the Property The Property industry group witnessed considerable growth Development sector launched ‘OnThree20’ – a 475 unit during the year with revenues growing by 54 per cent to Rs. 2.49 residential apartment complex centrally located in Union Place. billion [2009/10: Rs. 1,62 billion], primarily due to the revenue The product targets the luxury market at the mid to upper middle recognition cycle of The Emperor project. EBIT increased 119 per class category. Over 60 per cent of units have been sold. cent to Rs. 851 million [2009/10: Rs. 388 million] primarily driven Construction commenced in April 2011 with completion expected by the revenue recognition of The Emperor and fair value gain of in December 2014. Development of OnThree20 will be done by Rs. 216 million on investment property. The fair value gain was John Keells Residential Properties (Private) Limited, which is a on account of a revaluation of the Crescat Boulevard. wholly owned subsidiary of JKH.
The property markets in Sri Lanka have hardened with prices for The Emperor project is nearing completion and the hand over of large blocks of land in Colombo city and suburbs increasing. A units is expected to commence from August 2011. Whilst revenue continuation of current interest rates could have a further positive has been recognised throughout the project, a fair portion of
26 John Keells Holdings PLC revenue recognition will take place upon hand over. The levels could spur the property market in the medium term as operations of the Crescat Boulevard were scaled up during the property becomes an alternative investment choice. The increase year, with an addition of approximately 5,000 square feet. in disposable incomes and the increased availability of credit Occupancies increased during the year and yields also increased. could also spur home ownership. The establishment of an efficient design based construction model will allow for flexibility in In the ensuing year, the Property group will continue to monitor developing products targeted at the appropriate segment of the the market and evaluate opportunities to expand its land bank in market. Colombo with a view to acquiring sites with a high development value. We will also pursue opportunities for joint ventures by Return on capital employed leveraging on the expertise in managing developments and the • ROCE increased to 12.3 per cent against 6.7 per cent. marketing depth that we have acquired. Currently, we are in the • EBIT margins improved considerably to 34.1 per cent from process of finalising the purchase of a 6 acre site in Kapuwatte, 24.0 per cent, due to the revenue recognition on The Emperor Ja-Ela, which has excellent development potential as it is located project. adjacent to the Colombo-Katunayake airport road with a wide road frontage. Development plans for this site are currently being drawn up. The possibility that interest rates will remain at present
artment project nea (Rs. million) 2010/11 2009/10 Chg % 2008/09 r’ ap ring pero com Em ple Turnover 2,494 1,620 53.9 1,578 he tio ‘T n EBIT 851 388 119.0 532 PBT 831 378 119.8 535 PAT 780 342 128.2 486 Total assets 8,671 6,986 24.1 5,730 Total equity 7,856 6,119 28.4 5,410 Total debt (125) 14 (979.0) 37 Capital employed 7,732 6,134 26.1 5,447 Capital expenditure 6 6 7.4 12 No. of employees 99 104 (4.8) 120 EBIT per employee 8.6 3.7 130.1 4.4
Annual Report 2010/11 27 cOnSUMeR FOOdS & ReTAIL
The Consumer Foods sector is home to a portfolio of leading brands including ‘Elephant House’ carbonated soft drinks, ice creams and the ‘Keells’ and ‘Krest’ ranges of processed meats, all market leaders in their respective categories and supported by a well-established island-wide distribution channel.
The Consumer Foods sector of the industry group competes in the following three major categories- • Beverages • Frozen Confectionary • Convenience Foods
The Retail sector focuses on modern organised retailing through the ‘Keells Super’ chain of supermarkets and in partnership with Nations Trust Bank, has created ‘Nexus’, the most successful coalition loyalty card in the country
Profit Growth of 162%
‘KZone’ neighbourhood mall
28 John Keells Holdings PLC Consumer Foods Retail
The businesses within Ceylon Cold Stores (CCS) – portfolio of leading products under the Modern organised retailing through ‘Keells the sector ‘Elephant House’ brand with carbonated soft drinks and Wild Elephant Super’ chain of supermarkets, operating energy drinks (Beverages segment) and Elephant House ice creams 47 stores spread across the country. Also (Frozen Confectionary segment) has Nexus loyalty card network in collaboration with NTB
Keells Food Products (KFP) – portfolio of processed meat products Operations of the ‘KZone’ mall in under ‘Keells’ and ‘Krest’ ranges (Convenience Foods segment) Moratuwa
Revenue and growth Rs. 8.11 billion – 20% growth driven by both CCS and KFP primarily Rs. 10.25 billion – growth of 13% due to on the back of volume increases. In absolute terms, contribution of growth in sales volumes through growth in CCS to revenue is higher. Although not material, revenues from JKFIL same store sales and expansion of new fell due to a change in the operating model in India outlets in Matara and the KZone mall
EBIT and growth Rs. 641 million – growth of 54% driven by KFP and a significant Rs. 42 million – growth over 10-fold, off a reduction in losses in the Indian operations. EBIT of CCS was flat in low base, due to higher revenues and spite of revenue growth due to lower margins as cost increases were resultant contribution towards the dilution not fully passed onto consumers. Higher marketing and distribution of fixed costs. EBIT was also positively costs associated with the corporate brand revitalisation of the impacted by an improvement in margins Elephant House brand and costs associated with the launch of KIK due to higher basket values and a change Cola also impacted EBIT in the mix
Key developments • Elephant House brand underwent a corporate brand revitalisation • Launch of the ‘KZone’ shopping mall in during the year • KIK Cola was launched to cater to the previously untapped cola Moratuwa segment • Launched its own Department Store • Enhanced production capabilities in Frozen Confectionary leading to under the brand name ‘Keko’ an enhanced range in the impulse segment of the market • Opened an outlet in Matara, expanding • Indian operations of Keells Foods witnessed a turnaround due to a our reach in the south of the country change in the operating model
Key external/internal • Improvement in economic conditions and the opening up of North • Growth in per capita income and variables affecting and East of the country have created opportunities to grow volumes disposable incomes will have a positive business • Growth in the hospitality trade driven by increased tourism and impact on modern retailing and also domestic consumption overall footfall • Changes in lifestyles and consumers increasingly opting for convenience • Rapid increase in number of outlets in modern trade format due to expansion plans of competitors
Outlook/action plans • Launch of new products in Beverages and Frozen Confectionary • Focus on opening larger format stores catering to market needs and demands of consumers in key locations, providing a wider • KFP will continue to expand its portfolio with particular focus on the choice for consumers RTE segment of the market which is expected to grow in the • Provide more value for money to our medium term customers with an extended portfolio of private label products and increased choice in the fresh produce category
Note- JKFIL – John Keells Foods India; NTB – Nations Trust Bank; RTE – ready-to-eat; EBIT – earnings before interest and tax
Operational review and discussion sector was able to capitalise on the opportunities presented due In the backdrop of improved macro-economic conditions locally, to the opening up of the North and East of the country, thereby the Consumer Foods & Retail (CF&R) industry group witnessed entering a market that previously only had limited access. The strong top line and bottom line growth. Revenues of the CF&R growth in the hospitality industry due to increased tourist arrivals industry group increased 16 per cent to Rs. 18.36 billion also benefitted the Consumer Foods sector. [2009/10: Rs. 15.84 billion]. EBIT increased by 63 per cent to Rs. 683 million [2009/10: Rs. 420 million] driven largely by the The ‘Elephant House’ brand underwent a corporate brand turnaround in the Indian operations of the Convenience Foods revitalisation to reflect the diverse nature of the markets that our segment coupled with an improved EBIT contribution from the products cater to and the need to adapt ourselves and the brand. local operations. During the year, the Beverages segment increased its market share, where we remain the market leader, despite heavy The improvement in per capita GDP and an increase in competition from multinational giants. Revenues increased due disposable incomes had a positive impact on overall to improvement in overall volumes as price increases were limited consumption levels in the country. Both sectors within the CF&R in spite of increased cost pressures due to key inputs such as group benefitted from this improvement. The Consumer Foods sugar increasingly significantly in price. CCS launched a cola
Annual Report 2010/11 29 IndUSTRY GROUP AnALYSIS
beverage branded as ‘KIK’ Cola to cater to the previously in Moratuwa. The mall consists of Keells Super as an anchor untapped cola market. The cola market accounts for around 30 tenant as well as our own department store ‘Keko’, and includes per cent of the overall carbonated soft drinks market. During the outlets carrying many well-known brands in addition to a food year, CCS also installed new equipment to expand its impulse court, bank branch and ATMs. Initial indications on the operation range of products in the Frozen Confectionary segment which of the mall are positive and further steps will be taken to expand lacked a wide range in its product portfolio. With the enhanced our footprint with stores in this type of format. The establishment production capabilities, we have doubled the range of stick and of such stores and expansion of the current network is expected other impulse products. Whilst price points are typically lower, the to have a positive impact on profitability given the high fixed cost impulse category offers significantly high volumes and also the nature of the business. During the ensuing year, we will look to breadth in the product portfolio to expand our distribution reach expand the ‘Keko’ clothing label which was launched last year. further. The expansion of the product portfolio, extension of private label and fresh produce as well as expectations for a change in basket As discussed briefly, the Indian operations of Keells Foods were values are likely to positively impact margins. revamped under a new operating model with the appointment of a master distributor who will handle all logistics aspects of the Return on capital employed business. As a result, the flexibility in our cost structures has • The ROCE increased to 12.5 per cent as against 9.9 per cent enabled the significant reduction in losses in the Indian operations. in the previous year. Domestically, Keells Foods witnessed strong growth driven by • The increase in ROCE was driven by the improvement in EBIT improved consumption patterns both in retail and the hospitality margins to 3.7 per cent as against 2.6 per cent due to segments. KFP launched a few canned products in the improved EBIT margins in the Convenience Foods segment ready-to-eat (RTE) segment of the market, where we will continue and the Retail sector. to evaluate opportunities to expand the product range. (Rs. million) 2010/11 2009/10 Chg % 2008/09 The Retail sector expanded its operations during the year and ventured into a new concept with the launch of the ‘KZone’ mall Turnover 18,358 15,843 15.9 14,130 EBIT 683 420 62.8 494 PBT 579 288 100.9 278 PAT 230 88 162.4 121 Total assets 10,259 7,025 46.0 7,057 Total equity 5,055 3,181 58.9 3,051 Total debt 1,919 816 135.0 1,408 Capital employed 6,973 3,997 74.4 4,460 Capital expenditure 1,266 270 369.4 479 No. of employees 3,029 2,878 5.2 3,016 EBIT per Employee 0.2 0.1 54.7 0.2
30 John Keells Holdings PLC FInAncIAL SeRVIceS
The Financial Services industry group operates in the following sectors- • Insurance • Banking & Leasing • Stock Broking
The cluster of financial services companies offer a complete range of financial solutions including commercial banking, insurance, stock broking, debt trading, fund management and leasing with the vision of becoming a leading player in the financial services sector offering a total solutions package to our customers. ROce 20.5%
Launched ‘Union challenger’
Annual Report 2010/11 31 IndUSTRY GROUP AnALYSIS
Insurance Banking & Leasing Stock Broking
The businesses within Union Assurance (UA) offers Nations Trust Bank (NTB) which offers One of the leading stockbroking the sector comprehensive insurance solutions complete banking solutions through its companies in Sri Lanka – John in general and life insurance network of branches for corporate, Keells Stock Brokers (JKSB). JKSB segments retail and SME clients and is the has a trading tie up with Credit franchise holder for American Express Suisse (Hong Kong) Limited credit cards in Sri Lanka. The bank also has a leasing arm
Revenue and growth Rs. 6.00 billion – growth of 21% Rs. 3.02 billion (share of associate Rs. 480 million – growth of 68% driven by growth in both life and company revenue from NTB) – 28% driven by significantly higher general segments drop as a result of the fall in interest volumes on the Colombo Stock rates and hence interest income. Net Exchange (CSE) interest income was however higher during the period since the interest expense fell at a higher rate
EBIT and growth Rs. 387 million – 47% growth due Rs. 607 million – 47% growth due to Rs. 319 million – 85% growth due to to higher investment income and growth in net income and improved an increase in revenues and the comparatively lower cost increases recoveries of bad and doubtful debts higher contribution as a result of the as compared to revenue variability of cost structures
Key developments • Entered into a ‘bancassurance’ • Acquired over 25,000 new • Continued to be one of the top during the year partnership with Commercial customers in the retail banking brokers in the country and Bank segment, growing the deposit base witnessed growth in line with the • Launch of the Union ‘Challenger’ • Corporate loan growth of 61% market product targeting the • Launched a focused SME strategy • Growth of the CSE had a positive pension/retirement segment given the growth prospects of this impact on retail participation • Expanded ‘Union Pay Easy’ sector • Curtailment of credit granted by scheme with an addition of 350 stock brokers, although this did premium collection points not have an impact on JKSB
Key external/internal • Insurance penetration in the • Economic growth and growth in • Low interest rates have positively variables affecting country is low relative to its peers credit due to increased investments impacted investment in equities. business • Ageing population requiring more and consumption A rise in rates, could dampen healthcare and an increase in • Access to low cost fund base by equity investments affluence would create further expanding geographically although • New entrants into the market and opportunities this needs to be weighed with the reduction in mandatory • Treasury circular requiring all capital allocation brokerage rates would impact state entities to insure with state • Reduction of corporate taxes from revenues insurance agencies limits the 35% to 28% and financial VAT from • Corporate earnings and growth prospects of the private 20% to 12% effective from April valuations drive the market and sector 2011 hence will dictate the direction of • Interest rates impact the • Competition and regulatory the market investment income of both the developments have resulted in • Lack of trained and qualified staff life and general insurance lower net interest margins, placing resulting in intense competition for segments an importance on fee based income skilled resources
Outlook/action plans • Insurance penetration levels set • Increased focus on allocation of • Relatively high valuations to increase while opening up of capital and return across customer compared to regional peers may the north and east will create segments, product areas and result in lower foreign participation opportunities locations given tightening interest • Strong pipeline of IPOs will • Continue to grow the life margins encourage more accounts to be insurance segment in a cost • Expansion of SME portfolio and opened and also keep turnover effective manner consolidating access points levels buoyant on ‘bancassurance’ channels • Capitalise on opportunities in • Aggressively penetrate the • Use differentiated service and IT infrastructure development, internet trading segment to infrastructure to build a balanced commercial agriculture and tourism expand reach and grow volumes portfolio in the general insurance segment and maintain price discipline
Note – SME – small and medium enterprises; VAT – value added tax; IPO – initial public offering
Operational review and discussion inclusive of associate company revenues, increased marginally by The Financial Services industry group revenues increased 23 per 1 per cent to Rs. 9.50 billion [2009/10: Rs. 9.43 billion] as a result cent to Rs. 6.48 billion [2009/10: Rs. 5.26 billion] driven by Union of the Group’s share of Nations Trust Bank (NTB ) revenues falling Assurance (UA), the insurance arm of the Group. Revenue, as against the previous year. This fall was driven by the fall in
32 John Keells Holdings PLC interest income on account of lower interest rates. However, the ensure sustainability of the growth. During the year, the regulator net income of NTB increased as the interest expense fell at a granted a few more broking licenses which will result in increased higher rate than revenues. EBIT grew by 55 per cent to Rs. 1.31 competition. With the setting up of new broking houses, trained billion [2009/10: Rs. 848 million] with strong contributions from all experienced staff were in high demand. Retention of staff was a three sectors towards this growth. priority issue to ensure continuation of the strong performance of the business. The financial services industry experienced rapid growth on the back of a vastly improved economic landscape in the country. Return on capital employed Interest rates declined during the year with minimal volatility, whilst • ROCE increased to 20.5 per cent as against 14.2 per cent in equity markets continued to show a strong performance. The the previous year. stable economic environment coupled with the Government’s • EBIT margin improved to 13.8 per cent from 9.0 per cent in intention to drive growth saw a significant pick up in credit growth. the prior year mainly as a result of an improvement in the EBIT This pick up in credit growth had a positive impact on the Banking margin of the Banking sector. Insurance and Stock Broking sector, whilst the availability of liquidity also assisted in maintaining both saw improvements in EBIT margins. the momentum on equity markets. • Asset turnover fell marginally to 0.42 times due to the fall in The improvement in the business climate had a positive impact revenues in banking as a result of the fall in interest income. on the Insurance sector which saw fair topline growth driven by growth in both life and general segments. In the Life segment, UA (Rs. million) 2010/11 2009/10 Chg % 2008/09 launched a unit-linked product catering to the retired/pension Turnover* 9,501 9,435 0.7 5,979 segment of the market, which will also cater to a more investment EBIT 1,313 848 54.8 486 savvy client segment. The relative under-penetration of insurance PBT 1,333 868 53.5 486 in the country is likely to ensure continued growth momentum for this business. However, the reduction in interest rates has also PAT 860 530 62.3 339 necessitated insurance companies to re-evaluate pricing policies Total assets 23,961 21,461 11.7 17,878 to ensure achievement of underwriting profits. The opening up of Total equity 6,287 6,270 0.3 5,570 the North and East will expand volumes whilst the improvement Total debt 103 126 (17.8) 1 in per capita incomes will result in insurance becoming more Capital employed** 6,390 6,396 (0.1) 5,571 affordable. Capital expenditure 172 80 115.2 0.3 The Banking sector saw remarkable growth on the back of the No. of employees 1,121 996 12.6 924 improved business climate. The banking industry overall saw non- EBIT per employee*** 1.2 0.9 37.6 0.5 performing assets falling significantly and an improvement in * Turnover is inclusive of the Group's share of associate company recoveries, which was the same with NTB. Whilst the North and turnover East present tremendous opportunities for expansion, the bank ** For the associate company the capital employed is representative of is conscious of the need to balance the capital allocation the Group’s equity investment in this company requirements with profitability. Having recognised the potential for ***EBIT per employee is calculated excluding the employees of the small and medium enterprise (SME) sector in the country, the associate company bank launched a focused SME strategy to capitalise on such opportunities.
The Colombo Stock Exchange (CSE) continued to be one of the best performing stock markets in the world. The continued rise of the market had a positive impact on total volumes, thus having a positive impact on the Stock Broking sector. Many new retail accounts were opened driven by a number of initial public offerings (IPOs) of companies entering the market. New high net- worth individuals also were seen active in the market. The restriction on broker credit by the regulator had a dampening impact on the market but was seen to be a positive move to
Annual Report 2010/11 33 InFORMATIOn TecHnOLOGY
The Information Technology industry group is organised in to- • IT Services • Software Services • Office Automation • IT Enabled Services
The industry group has a vision of providing quality, world- class information communication technology services from BPO, software services and information integration to office automation by offering end-to-end ICT services and solutions. With a strong customer base in Sri Lanka, the rest of South Asia, as well as the UK, Middle East, Scandinavia and the Far East, we are at the forefront of making Sri Lanka an ICT hub in South Asia. Revenue growth of 63%
Launch of Samsung Galaxy Tab
34 John Keells Holdings PLC IT Services Office Automation IT Enabled Services
The businesses within Operations of John Keells Operations of John Keells Office Business Process Outsourcing (BPO) the sector Computer Services which Automation who are the agents operations, primarily in the Voice vertical offers software services to a for Toshiba office equipment in through JK BPO and the Finance & wide range of clients in Sri Sri Lanka commanding a dominant Accounting (F&A) vertical through QF&A. Lanka and overseas. market position Operates approximately 500 seats at Operations of ISA in present with operations in India and partnership with Air Arabia the US
Core focus areas on National distributor for Samsung Shared service function of the Group as development of aviation mobile phones and printers. Portfolio well as for external clientele under related software and hotel of other office automation products InfoMate in the F&A and payroll verticals reservation management including RISO duplicating solutions systems
Revenue and growth Rs. 400 million – a marginal Rs. 2.57 billion – growth of 147% Rs. 1.26 billion (inclusive of associate growth of 4% as a result of the through growth in Toshiba business company revenue) – growth of 8% driven lag effect of converting new line and primarily through the by the acquisition of new customers in product developments into introduction of the Samsung mobile North America by JK BPO during the latter sales phone business part of the year
EBIT and growth Rs. 21 million negative EBIT as Rs. 211 million – growth of 93% Rs. 68 million negative – reduced by 29% against an EBIT of Rs. 2 million primarily from Samsung and Toshiba as a result of the one-off relocation and last year due to flat revenues business growth. EBIT growth not in severance costs and lower losses in the and costs associated with the line with revenue growth since Sri Lankan BPO operations which were development and launch of Samsung business is a high turnover discontinued two new products and relatively low margin business
Key developments • Launch of ‘Zhara’ hospitality • Recognised by Toshiba as one of • The AuxiCogent group which operates during the year suite for the regional leisure the few markets worldwide with in the Voice vertical has been re- industry over 50% market share in copiers branded as ‘John Keells BPO’ • New products to be • Successful launch of the Samsung • The BPO operations in India shifted to delivered on a SaaS mobile phone distributorship, its own facility and will operate with a (software as a service) reaching #2 position in the market team of dedicated professionals model within a short span of time • The shared service unit increased its • Launch of Samsung Galaxy Tab customer base and added an overseas and other products within a few client weeks of their global launch
Key external/internal • Appreciation of Rupee has • The continued growth in mobile • Adequate availability of requisite skills variables affecting affected the price phone handsets in Sri Lanka for BPO operations in India at the business competitiveness when • Replacement cycles of handsets current juncture, although skills maybe bidding for projects are relatively short, showcasing in short supply within the next few years the potential • Slow but steady recovery of the United States will increase business volumes and opportunity
Outlook/action plans • Continue to develop • Low duty regime could fuel growth • With the Voice related BPO operations software products delivered of demand for mobile phones and moving into its own facility, a ramp up on a cloud-based, software office automation products of seats is expected as a service model • Focus on managing working • The outlook in this vertical is increasingly • Recovery of global travel capital given the high volume positive following the acquisition of new and aviation industry will nature of the mobile phone customers and significant progress on have a positive impact on business negotiations with world renowned the software business companies to sign up for contracts
Note – JK BPO – John Keells Business Process Outsourcing; ISA – Information Systems Associates; EBIT – earnings before interest and tax
Operational review and discussion During the year, JKOA commenced the distribution of the Samsung The Information Technology (IT) industry group recorded a 116 per range of mobile phones in the Sri Lankan market. Samsung mobile cent growth in revenues to Rs. 3.11 billion [2009/10: Rs. 1.44 billion]. phones enjoy a strong position globally, being the leader in key Revenue was driven largely by growth in sales of John Keells Office markets in North America and Europe, having a wide range of Automation (JKOA) with the commencement of the Samsung mobile products that cater to different segments of the market. Whilst mobile phone distributorship. However, revenue, inclusive of associate penetration in Sri Lanka is quite high, the replacement cycles for company revenue increased at a relatively lower rate of 63 per cent mobile phones would still offer sizeable growth opportunities in this to Rs. 4.23 billion [2009/10: Rs. 2.59 billion] since revenues of the industry. Given the relatively lower margins in the industry, ensuring associate company operations in India fell marginally. EBIT of the scale and volume growth is critical. The Toshiba range continued to industry group increased 663 per cent, albeit off a small base, to Rs. perform well with Toshiba being the market leader in the 122 million [2009/10: Rs. 16 million]. EBIT growth was also driven photocopying segment of the business with a dominant market share primarily by JKOA, which had the single largest contribution to EBIT well above the regional average. The improved business climate is within the IT industry group. expected to have a positive impact on the Toshiba business line.
Annual Report 2010/11 35 IndUSTRY GROUP AnALYSIS
John Keells Computer Services (JKCS) faced a challenging year due underway with potential clients where negotiations are at an to the lag between bringing products to market and generating advanced stage. The BPO industry is forecasted to continue its revenue to cover the costs already incurred in research, development growth trajectory and has attractive prospects. India continues to be and marketing of such products. JKCS’s most mature and a preferred location for BPO operations due to the availability of the established product, the Evinta internet booking engine as well as required infrastructure and the abundant availability of educated its UAE based JV company- ISA’s flagship product, the Accelaero graduates at relatively lower costs. The challenge, as with any BPO, LCC reservation system secured several new customers in the is to attract the right talent and being able to manage attrition. The Middle East, Asia and the Africa regions. During the year, JKCS also shared service unit InfoMate which primarily serves internal launched a new departure control system which has received requirements of the JKH Group, added a few more external clients international accreditation as well. The economic conditions in into its growing portfolio. This included the first client from Europe. developed countries and low growth levels, impacted the decision making process of airlines/airport operators in investing in such Return on capital employed departure control systems and airline reservation systems. With an • ROCE increased to 7.7 per cent as against 1.1 per cent in the improved outlook, we anticipate the development efforts will pay off previous year. in the coming years. Aviation software products used by recognised • EBIT margins increased to 2.9 per cent from 0.6 per cent in the carriers and deployed globally need to conform to international previous year on account of the increased profitability of JKOA. industry standards. JKCS’s product initiatives fall into this category and the requisite investments have been made to secure acceptance • ROCE was positively impacted by the increased asset utilisation by globally recognised certifying authorities. This ensures these where asset turnover improved to 2.04 as against 1.46 in the products can be used by the largest players, resulting in significant prior year primarily due to higher revenues in JKOA. upside potential once these products mature and secure a wider customer base. The ‘Zhara’ hospitality suite, which incorporates a (Rs. million) 2010/11 2009/10 Chg % 2008/09 central reservation system, property management system and an Turnover 4,229 2,590 63.3 2,731 internet booking engine, was implemented across the hotels within EBIT 122 16 662.6 (118) the Group. The product has been sold to external clients in Sri Lanka PBT 114 14 740.7 (121) and the Far East region. In the context of anticipated high PAT (22) 18 (225.6) (167) occupancies in Sri Lanka, the system would add value to hotel operators in enhancing revenue yields. Total assets 2,419 1,736 39.3 1,804 Total equity 1,651 1,360 21.3 1,417 The recovery of the global travel and tourism industry will help all Total debt 124 25 387.2 50 offerings in the JKCS portfolio. All of JKCS’s new offerings are built Capital employed 1,774 1,386 28.1 1,467 to be delivered as cloud-based services and sold on a SaaS Capital expenditure 24 13 82.5 119 (software as a service) model where revenues are chargeable on No. of employees 979 818 19.7 638 volumes of the client. It is widely anticipated that this will be the EBIT per employee 0.1 0.0 537.2 (0.2) emerging scenario where most clients will prefer to buy their computing capacity ‘on demand’ on a ‘pay as you go’ model similar * Turnover is inclusive of the Group's share of associate company turnover to utilities. JKCS will be well positioned as an early mover in this ** For associate companies the capital employed is representative of space. the Group’s equity investment in these companies ***EBIT per employee is calculated excluding the employees of The operations of the IT Enabled sector in India were restructured associate companies during the year. The BPO operations in the Voice vertical have shifted to a state-of-the-art facility and will operate on its own with the onboarding of key dedicated management personnel. The new facility has the capacity to ramp up to 1,000 seats. With this move, the AuxiCogent group was re-branded as ‘John Keells BPO’. The investment in the latest technology such as unified computing systems (UCS boxes) will enable the JK BPO operations to function at high efficiency levels leading to added value to our clients. During the year, we were successful in adding to our portfolio of clients with the addition of a number of flagship customers. Discussions are
36 John Keells Holdings PLC OTHeR IncLUdInG PLAnTATIOn SeRVIceS
Other businesses in the JKH portfolio include - • Plantation Services • Tea and rubber broking • Tea smallholder factories • Other
Tea Smallholder Factories PLC is amongst the top manufacturers of orthodox low grown teas and is also recognised as the producer of the best CTC teas in Sri Lanka. With over 140 years of experience in the tea trade, John Keells PLC is one of the leading tea brokers in the country. Our warehousing facility is the largest and one ROce of of the best state-of-the-art complexes in the country for 19.4% pre-auction produce. Infusing international best practices in the production and sale of ‘‘Ceylon Tea’’, John Keells PLC has been a steadfast partner to Sri Lanka's top income earning tea industry.
Annual Report 2010/11 37 IndUSTRY GROUP AnALYSIS
Plantation Services Other
The businesses within Tea and rubber broking under John Keells PLC (JK JKH and other ancillary businesses the sector PLC), one of the leading commodity broking firms in the country. Also has a state of the art warehousing facility for pre-auction produce
Tea Smallholder Factories (TSF) has 8 factories in John Keells Capital (JK Capital) is the private equity (PE) operation and is amongst the top manufacturers of arm of the Group having made a few PE investments in the quality low grown teas in the country, specially the last few years. JK Capital also has an investment banking CTC variety unit with a primary focus on equity related structuring and advice. IT consulting services carried out by the Strategic Group Information Technology (SGIT) division
Revenue and growth Rs. 2.81 billion – remained flat primarily due to TSF Revenue is negligible as there are no significant operating where volume increases were offset by price declines businesses under this segment
EBIT and growth Rs. 439 million – drop of 9% primarily due to Rs. 2.28 billion – growth of 21% due to capital gains reduction in EBIT of TSF due to lower margins as a recognised on the sale of AHPL and KHL shares result of higher bought leaf prices. This reduction in EBIT was partially offset by higher EBIT at JK PLC due to a reduction in administrative expenses
Key developments • The tea crop in the calendar year 2010 was at a • JKH realised capital gains through the sale of shares in during the year record high resulting in record export earnings AHPL and KHL from tea • JK Capital invested Rs. 502 million in Expolanka • A levy of Rs. 3.50 per kilogram was imposed as a Holdings Limited through a private sell down by its tea promotional levy existing shareholders • JK Capital – undertook many financial advisory mandates during the year, including mandates pertaining to the IPOs of Odel Limited, Free Lanka Capital Holdings Limited and the private sell down of Expolanka Holdings Limited • SGIT – undertook a few assignments on SAP related consulting services for external clients, successfully completing a comprehensive implementation for a manufacturing and distribution client
Key external/internal • Being an agricultural commodity, weather • General macro-economic conditions and equity markets variables affecting fluctuations have an impact on the yields could have an impact on potential private equity style business • The impending wage revision will have an impact investment opportunities for the Group on cost of production • Global prices of food commodities which generally tend to have a high correlation, thus impacting tea prices
Outlook/action plans • TSF has embarked on an initiative servicing tea • Continue to look for private equity style investment smallholders by knowledge transfer and financial opportunities, whereby JKH would have a portfolio of support to re-plant with the objective of increasing private equity investments productivity and sustainability
Note – EBIT – earnings before interest and tax; AHPL – Asian Hotels & Properties; KHL – John Keells Hotels; IPO – initial public offering; SAP – System Analysis and Program Development; CTC - cut, tear and curl teas
Operational review and discussion Volumes in the tea industry increased during the year although Plantation Services the national sales average (NSA) declined marginally from the Revenues of Plantation Services remained flat at Rs. 2.81 billion previous year’s high. The increased global output of tea in 2010 [2009/10: Rs. 2.81 billion] due to the decline in tea prices, should however be viewed in conjunction with the shortfall of although offset by an increase in volumes. Earnings before approximately 70 million kilograms in the previous year. Between interest and tax (EBIT) fell 9 per cent to Rs. 439 million [2009/10: June and November, the average price of tea was below the Rs. 482 million] on the back of a reduced contribution from TSF levels of corresponding months of the previous year in line with due to lower margins and a reduction in the contribution to EBIT the fall in global prices of other food commodities. The increasing from the tea warehousing business. Although EBIT of JK PLC tea consumption from around the world, particularly India and increased, this increase was inadequate to compensate for the China is expected to positively impact prices which should drop in EBIT from the other segments. maintain its current levels. Given large domestic demand, the
38 John Keells Holdings PLC quantum of tea exported from China and India is expected to be (Rs. million) 2010/11 2009/10 Chg % 2008/09 relatively low, thus creating an opportunity for the tea industry in Turnover* 3,119 2,821 10.6 2,754 Sri Lanka. The impending wage revision is expected to have a EBIT 2,716 2,359 15.1 3,628 negative impact on the cost of production, although our broking PBT 2,350 1,612 45.7 2,692 operations will remain unaffected unless overall volumes decline PAT 2,115 1,320 60.3 2,400 due to other factors. Total assets 15,085 14,081 7.1 16,466 Other Total equity 7,075 2,298 207.9 2,822 The revenues of the other businesses are negligible in the context Total debt 7,025 10,133 (30.7) 12,595 of the Group as there are no significant operating companies. The Capital employed** 14,101 12,431 13.4 15,417 EBIT increased 21 per cent to Rs. 2.28 billion [2009/10: Rs. 1.88 Capital expenditure 385 61 527.1 120 billion] primarily due to the gain on the sale of shares of Asian No. of employees 1,130 1,227 (7.9) 1,174 Hotels & Properties PLC (AHPL) and John Keells Hotels PLC EBIT per Employee*** 2.4 1.9 25.0 3.1 (KHL). Another significant contributor to EBIT was interest income, which is treated as other income in the financial statements. * Turnover is inclusive of the Group's share of associate company turnover The investment in Central Hospital (Private) Limited (CHL) is held ** For associate companies the capital employed is representative of as an associate company under the private equity arm of the the Group’s equity investment in these companies Group – John Keells Capital (JK Capital, a division of the holding *** EBIT per employee is calculated excluding the employees of company). As expected, CHL recorded a negative EBIT during associate companies the year since the hospital commenced operations during the year. JK Capital also provides financial advisory, structuring and capital raising solutions to external clients. The Group IT division – SGIT – also provides consultancy services on SAP related platforms leveraging on its knowledge in implementing and maintaining the system for the JKH Group.
Return on capital employed • ROCE of 19.4 per cent as against 16.9 per cent in the previous year. • EBIT margins increased to 87.1 per cent on account of the capital gains on the sale of shares as discussed above.
Annual Report 2010/11 39 PORTFOLIO MOVeMenT And eVALUATIOn
With the country moving towards an unprecedented period of per cent compared to 14.2 per cent recorded last year. All the three development, active portfolio management will assist to identify and businesses in the industry group namely Union Assurance, Nations invest in better performing sectors of the economy, while reducing Trust Bank & John Keells Stock Brokers recorded a considerably exposure to underperforming sectors. The JKH Group has followed better EBIT compared to the previous year on the back of the a strategy of actively managing and evaluating its business improving economic environment of the country and the surging portfolio. This has enabled the Group to focus on investment stock market. strategies that have contributed towards the Group’s endeavours to achieve a better balance of the portfolio of businesses and has The ROCE of the Consumer Foods & Retail industry group rose to helped the Group consolidate its position as one of the premier 12.5 per cent compared to 9.9 per cent last year. The EBIT margin conglomerates in the country. of the industry group improved from 2.6 per cent to 3.7 per cent. However, there was a significant increase in capital employed due The process undertaken for this purpose is based on continuous to the investments made for the outlet expansion of the Retail evaluation and review of the performance, potential and longer term sector and for the expansion of both the beverage and the frozen prospects of our industry groups, sectors and companies, confectionary product range. Ceylon Cold Stores also revalued its grounded on four filters - land in Colombo and the resulting revaluation surplus contributed • ‘Financial filter’ – that has the JKH hurdle rate as its corner stone towards increasing the capital employed of the industry group. • ‘Growth filter’ – which evaluates a business in terms of its Although the Plantations Services sector achieved a ROCE of 34.8 industry attractiveness per cent, this is marginally lower than the 37.9 per cent achieved • ‘Strategic fit’ – that critiques the long term competitive last year. The decrease in ROCE was mainly due to the decline of advantage of a business/industry by evaluating the strength of the EBIT margin of Tea Smallholder Factories, which was affected competitive forces, specific industry/business risks, ability to by higher raw material and production costs during the year. control value drivers and the competencies and critical success factors already inherent in the Group company The Property industry group achieved a ROCE of 12.3 per cent • ‘Complexity filter’ – which considers factors such as senior compared to 6.7 per cent last year. The EBIT of the Property management time and the risk to brand, image and reputation Development sector increased due to the recognition of a higher revenue contribution from ‘The Emperor’ apartment project, which JKH’s hurdle rate (or required rate of return) is a function of the is nearing completion. weighted average cost of capital (WACC), derived from the Group’s cost of equity, cost of debt, target leverage, tax rates and the value Buoyed by the growth in tourist arrivals to both Sri Lanka and the creation premium required over and above the WACC. Strategic Maldives, the Leisure industry group achieved a ROCE of 9.3 per business units are assessed for risk under headings such as cent compared to 5.4 per cent last year. All sectors of the industry customer concentration, suppliers/JV partner dependence, risk of group recorded noteworthy increases in EBIT. The hotels and international entrants, labour dependence, cyclicality, dependence destination management sectors had increases in EBIT margins. on the Sri Lankan economy and regulatory dependence. During This was achieved despite several hotels being fully or partially the year, considering the decline in interest rates and the outlook closed during the year for refurbishment. The City Hotels performed of the long term interest rates, the Group revised its hurdle rates. exceptionally well which resulted in the ROCE of this sector The new hurdle rates of 18 per cent for return on equity (ROE) and increasing from 4.3 percent to 10.8 per cent this year. 15 per cent for return on capital employed (ROCE) are based on current and future expectations. The rates have been derived ROCE of the Information Technology industry group improved to based on the methodology as discussed before. 7.7 per cent compared to 1.1 per cent recorded last year. The EBIT of the industry group increased from Rs. 16.0 million to Rs. 122.3 The Transportation industry group recorded a strong performance million due to better performance from the Office Automation sector in the financial year under review by achieving a 21.0 per cent and the reduced losses from the BPO operations. ROCE compared to 17.3 per cent achieved last year. Given above is a graphical representation of the JKH portfolio The Financial Services industry group achieved a ROCE of 20.5 evaluation and the following page shows the portfolio movement.
40 John Keells Holdings PLC Annual Report 2010/11 41 SHARe InFORMATIOn
Total number of shares in and a low of Rs. 177.00 in the year under review. The JKH share issue as at 31/03/2011 629,692,367 underperformed against the ASPI whilst marginally Free Float 68.25% underperforming the MPI growth. In the previous year, the JKH Stock Symbol JKH.N0000 share grew by 193 per cent against a growth of 127 per cent in the ASPI. During the year under review, the ASPI witnessed high Newswire Codes levels of volatility due to the sharp upward movement in some Bloomberg JKH.SL illiquid counters, thus impacting the overall index. Dow Jones P.JKH Reuters JKH.CM The JKH share has continued to be resilient to the volatile trends of the Colombo bourse which is reflected in the beta of 0.9 (the The JKH Share beta was calculated on daily JKH share and market movements Continuing its growth momentum from last year, the Colombo as measured by the ASPI for the 5 year period from 1 April 2006 Stock Exchange (CSE) witnessed strong growth in the year under to 31 March 2011) for the current financial year. The JKH share review. The benchmark All Share Price Index (ASPI) recorded an grew at a compound annual growth rate (CAGR) of 20.5 per cent increase of 94 per cent while the Milanka Price Index (MPI) over the most recent five years, whilst the more liquid MPI grew recorded an increase of 61 per cent during the financial year at a CAGR of 19 per cent. Within the same period, the ASPI grew 2010/11. The CSE was one of the best performing stock markets at a CAGR of 26 per cent. This is illustrated in the graph titled globally in 2010 sustaining its performance from the previous year. ‘JKH share performance vs ASPI and MPI’. The market was driven by positive sentiment stemming from the economic prospects for the country as well as the strong growth With most developed economies in the world still on the path of in corporate earnings, albeit from a smaller base in 2009. The recovery from the global financial crisis, the US and European market did witness some volatility and witnessed a slight stock markets under performed their counterparts in Asia during correction towards end December 2010, due to reduced foreign the financial year under review. Despite the comparatively lower interest and also some level of liquidity being pulled out of the return from the Straits Times Index of Singapore (SGX’s STI), the market due to fairly large private placements of some unlisted rest of the markets in the South East Asian region displayed companies and some initial public offerings. strong growth with the Jakarta Composite Index of Indonesia (JCI) recording a growth of 30 per cent during the year ended 31 March 2011. Nevertheless, the attractiveness of the development opportunities expected in Sri Lanka and the corresponding earnings growth has resulted in the ASPI outperforming all the major stock market indices including the Dow Jones Industry Average (DJIA), FTSE 100, SENSEX Index of Mumbai, SGX’S STI and the JCI in 2010/11 and over the last five years based on the compound annual growth rate.
Issued Share Capital The total number of shares in issue at the beginning of the financial year was 619.5 million. During the financial year, 10.2 million shares were issued through the exercise of employee share options (ESOPs), resulting in the number of shares in issue increasing to 629.7 million by the year end. In addition to the shares in issue, there are 22.3 million shares equivalent of The JKH share closed at Rs. 285.60 as at 31 March 2011 as unexercised ESOPs as at 31 March 2011. These are eligible for against Rs. 184.00 in the previous year – a growth of 55 per cent immediate exercise as at the date of this report. during the year. The share traded between a high of Rs. 360.00
42 John Keells Holdings PLC The balance of global depositary receipts (GDRs), in ordinary Earnings per share share equivalents, decreased to 0.95 million as at the end of the The fully diluted earnings per share (EPS) for the period increased year due to conversions as against 0.98 million at the beginning 54 per cent to Rs. 13.01 [2009/10: Rs. 8.42] as profit after tax of the year. attributable to the equity holders grew by 59 per cent. The items affecting the bottom-line are discussed in the Management On 20 May 2011, the Board recommended for the consideration Discussion & Analysis section of the Annual Report. The cash EPS and approval of the shareholders, at a General Meeting, that, increased by 30 per cent to Rs.15.00 [2009/10: Rs. 11.54] in the subject to the approval of the Colombo Stock Exchange, the current year due to the increase in cash earnings of 33 number of shares in issue be increased by way of a share sub- per cent compared to last year. division whereby three (3) existing shares will be sub-divided to four (4).
Dividend The dividend policy of JKH seeks to ensure a dividend payout which correlates with the growth in profits, whilst ensuring that the Company retains adequate funds to support investments, thereby facilitating the creation of sustainable shareholder value in the short, medium and long term.
During the year, the Company declared, and paid, two interim dividends of Rs. 1 per share. The Company also announced a final dividend of Rs. 1 per share based on the profits of the financial year 2010/11 for payment on 9 June 2011. Accordingly, the dividend per share (DPS) in the current year remained at Rs. 3 per share. Total shareholder return The total shareholder return (TSR) of the share was 56.8 per cent The dividend payout ratio dropped to 32.2 per cent [2009/10: during the year, primarily owing to the appreciation of 55 per cent 39.3 per cent], primarily due to the increase in profits for the year in the JKH share price during the year. In comparison, the 1-year in comparison to last year. In absolute terms, the dividend paid treasury bill rate was at 9.47 per cent as at 01 April 2010. and payable out of 2010/11 profits will be Rs. 1.87 billion [2009/10: Rs. 1.84 billion]. Market capitalisation and enterprise value Market capitalisation of the Company increased by 58 per cent 2010/11 2009/10 2008/09 to Rs. 179.84 billion during the year [2009/10: Rs.113.98 billion]. Market cap (Rs. Bn) 179.84 113.98 38.36 The enterprise value as at 31 March 2011 increased 60 per cent Enterprise value (Rs. Bn) 175.67 109.55 42.81 to Rs. 175.67 billion as a result of the increase in the market Market value added (Rs. Bn) 120.25 64.20 (7.14) capitalisation, offset by the reduction in debt levels across the EV/EBITDA (times) 13.1 10.9 4.3 Group. Diluted EPS (Rs.) 13.01 8.42 7.56 PER (diluted) 22.0 21.8 8.3 Price earnings ratio Price to book (times) 3.0 2.3 0.8 The JKH share was trading at 22.0 times earnings as at 31 March Price/cash earnings (times) 19.0 15.9 8.0 2011, almost similar to the 2009/10 trailing PER of 21.8. Although Dividend yield (%) 1.1 1.6 4.7 earnings grew at a rapid pace of 59 per cent during the year, Dividend payout ratio (per cent) 32.2 39.3 42.0 appreciation of the JKH share by 55 per cent offset this impact. TSR (%) 56.8 198.0 (44.7) As a result, the trailing PER of the JKH share remained in line with
Annual Report 2010/11 43 SHARe InFORMATIOn
the previous year. The broad market PER of the CSE was 18.36 the 296.2 million shares transacted in the previous year. The times as at the end of the year under review, while the PER for average daily turnover of the JKH share was Rs. 237 million which JCI was 37.8 times (10/2010) and KLSE was 18 times (10/2010). amounted to 8.5 per cent of the daily total market turnover. The JKH share historically has always traded at a premium to the market considering its free float and liquidity, coupled with the Distribution and composition of shareholders consistent performance of the Company. The total number of shareholders of JKH increased to 9,639 from the 8,365 seen last year. Out of the total number of shareholders, Price to book as at 31 March 2011, 68.3 per cent of the shares in issue were As at 31 March 2011, the price to book ratio of the Group was held by the public, while 6.0 per cent of the shares were held by 3.0 times [2009/10: 2.3 times]. The book value of the Group the directors, executives and connected parties, and the balance increased by 20 per cent during the year under review. 25.7 per cent by shareholders holding more than 10 per cent. In terms of the domicility of shareholders, 60.2 per cent of shares Liquidity were held by residents and 39.8 per cent was held by non During the year, 221.7 million shares changed hands, as against residents. This compares to 44 per cent held by non residents at the end of last year. Market information on ordinary shares of the Company 2010/11 Q4 Q3 Q2 Q1 2009/10 Share Information High 360.00 301.00 360.00 330.00 207.00 188.00 Low 177.00 260.00 289.00 197.00 177.00 62.50 Close 285.60 285.60 298.40 329.50 205.00 184.00 Dividends paid (per share) 3.00 1.00 1.00 0.00 1.00 3.00
Trading Statistics Number of transactions 27,107 4,489 10,010 7,654 4,954 36,367 Number of shares traded '000 221,701 19,799 66,286 69,882 65,734 296,176 % of total shares in issue 35.2 3.1 10.7 11.2 10.6 47.8 Value of all shares traded (Rs.million) 56,744 5,732 20,159 18,217 12,636 43,479 Average daily turnover (Rs.million) 237 97 330 289 226 182 % of total market turnover 8.5 3.0 12.3 9.3 10.5 20.3 Market capitalisation (Rs. million) 179,840 179,840 185,485 204,806 126,968 113,983 % of total market capitalisation 7.4 7.4 8.7 8.9 8.4 9.4 Distribution of shareholders 31 March 2011 31 March 2010 Number of % Number of % Number of % Number of % shareholders shares held shareholders shares held Less than or equal to 1,000 5,791 60.1 1,636,699 0.3 4,893 58.5 1,261,545 0.2 1,001 to 10,000 2,632 27.3 9,445,792 1.5 2,317 27.7 8,371,031 1.3 10,001 to 100,000 922 9.6 26,676,841 4.2 882 10.6 25,170,515 4.1 100,001 to 1,000,000 215 2.2 69,682,337 11.1 187 2.2 65,538,729 10.6 Over 1,000,001 79 0.8 522,250,698 82.9 86 1.0 519,131,812 83.8 Grand total 9,639 100.0 629,692,367 100.0 8,365 100.0 619,473,632 100.0 Composition of shareholders 31 March 2011 31 March 2010 Number of Number of % Number of Number of % shareholders shares held shareholders shares held Executive directors and spouses 4 8,452,015 1.3 4 7,723,529 1.2 Non executive directors and connected parties 1 4,136 0.0 1 4,136 0.0 Executives and connected parties 157 29,620,298 4.7 138 28,044,397 4.5 Public Resident Institutions 694 149,983,231 23.8 532 126,431,935 20.4 Individuals 8,430 94,353,883 15.0 7,377 93,520,037 15.1 Public Non-Resident Institutions 104 178,545,941 28.4 100 198,219,261 32.0 Individuals 246 5,959,806 0.9 210 7,458,211 1.2 Global depositary reciepts 1 952,114 0.2 1 983,736 0.2 Shareholders holding more than 10% 2 161,820,943 25.7 2 157,088,390 25.4 Grand Total 9,639 629,692,367 100.0 8,365 619,473,632 100.0
44 John Keells Holdings PLC Twenty largest shareholders of the Company 31 March 2011 31 March 2010 Number % Number % of Shares of Shares 1 Mr S E Captain 96,918,843 15.4 92,186,290 14.9 2 Janus Overseas Fund 64,902,100 10.3 64,902,100 10.5 3 Employees Provident Fund 44,968,248 7.1 10,365,548 1.7 4 J P Morgan Clearing Corporation 28,317,277 4.5 - - 5 Paints & General Industries Limited 20,771,633 3.3 13,467,521 2.2 6 Deutsche Bank AG - London 18,603,279 3.0 16,331,000 2.6 7 Est. of Mr A A N De Fonseka 14,964,269 2.4 14,964,269 2.4 8 Aberdeen Global Asia Pacific Equity Fund 14,885,803 2.4 14,885,803 2.4 9 Arisaig India Fund Limited 14,431,575 2.3 14,431,575 2.3 10 Janus Aspen Series Overseas Portfolio 13,727,500 2.2 13,727,500 2.2 11 Sri Lanka Insurance Corporation Ltd - Life Fund 11,216,113 1.8 13,716,085 2.2 12 Rubber Investment Trust Limited A/C no.1 10,802,178 1.7 10,927,178 1.8 13 HSBC INTL NOM LTD-Bp2s London-Edinburgh Dragon Trust PLC 7,452,498 1.2 7,452,498 1.2 14 Ms L A Captain 7,381,489 1.2 7,433,789 1.2 15 Mr K Balendra 7,190,457 1.1 7,440,457 1.2 16 Aberdeen Asia Pacific Fund 6,805,672 1.1 6,805,672 1.1 17 Aberdeen Global Asian Smaller Companies Fund 5,727,113 0.9 7,102,113 1.1 18 Aberdeen Global Emerging Markets Smaller Companies Fund 5,141,364 0.8 - - 19 L V C Samarasinha 5,031,579 0.8 - - 20 Polypak Secco Ltd 4,871,075 0.8 4,871,075 0.8
Employee share option plan as at 31 March 2011 Date of Shares Expiry Option Shares* Exercised Lapsed/ Outstanding Current* grant granted date grant adjusted cancelled price (Rs.) price (Rs.) PLAN 3 Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 8,953,047 1,348,812 - 120.74 Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 1,606,493 1,137,970 7,806,599 146.00 PLAN 4 Award 1 25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 894,575 233,350 4,278,020 120.00 PLAN 5 Award 1 17.12.2009 6,126,960 16.12.2014 160.25 6,126,960 551,337 19,460 5,556,163 160.25 PLAN 6 Award 1 09.12.2010 4,672,823 08.12.2015 292.00 4,672,823 9,800 3,200 4,659,823 292.00 Total 33,402,365 37,058,649 12,015,252 2,742,792 22,300,605
* Adjusted for bonus issues and rights issues Directors' shareholding Employee share options** 31 March 11 31 March 10 Year ended 31 March Number of options exercised (million) S C Ratnayake 3,434,928 3,403,909 1997 0.02 A D Gunewardene 4,279,992 3,903,830 1998 0.16 J R F Peiris 737,095 415,790 1999 0.27 E F G Amerasinghe 4,136 4,136 2000 0.47 I Coomaraswamy Nil Nil 2001 0.02 T Das Nil Nil 2002 1.78 S Enderby Nil Nil 2003 2.30 P D Rodrigo Nil Nil 2004 4.08 S S Tiruchelvam Nil Nil 2005 1.53 2006 2.04 Options available under the 2007 3.67 employee share option plan of 2008 4.06 John Keells Holdings PLC 2009 0.86 S C Ratnayake 1,658,609 1,778,099 2010 8.12 A D Gunewardene 1,451,308 1,554,882 2011 10.23 J R F Peiris 1,238,357 1,326,015 ** First exercised in FY1997 Annual Report 2010/11 45 SHARe InFORMATIOn
Dividends since 1995/96 Share capital since 1995/96 Year ended 31 March DPS Dividends Year ended 31 March Number of shares (Rs.) (Rs. ’000) in issue (million) 1996 2.80 77,586 1996 28.00 1997 3.00 92,050 1997 32.02 1998 4.00 155,783 1998 40.21 1999 4.00 151,343 1999 40.47 2000 3.00 168,150 2000 61.18 2001 2.00 353,128 2001 183.56 2002 2.00 329,869 2002 185.35 2003 2.00 342,203 2003 187.64 2004 2.50 725,783 2004 300.08 2005 3.00 1,027,497 2005 331.63 2006 3.00 1,199,460 2006 400.00 2007 3.00 1,412,306 2007 552.94 2008 5.00 3,176,302 2008 635.99 2009 3.00 1,883,442 2009 611.35 2010 3.00 1,843,642 2010 619.47 2011 3.00 1,868,707 2011 629.69 History of scrip issues and repurchases since 1995/96 Year ended 31 March Issue Basis Number of shares (million) Ex-date 1996 Bonus 1:7 3.50 20-Dec-95 1997 Bonus 1:7 4.00 20-Jan-97 1998 Bonus 1:4 8.02 9-Jan-98 2000 Bonus 1:5 8.09 15-Jun-99 2000 Bonus 1:4 12.14 5-Jan-00 2001 Bonus 2:1 122.36 27-Jul-00 2004 Bonus 1:4 46.94 10-Jun-03 2004 Private placement n/a 24.00 21-Oct-03 2004 Rights @ Rs. 75* 1:7 37.42 7-Nov-03 2005 Bonus 1:10 30.02 13-May-04 2006 Bonus 1:5 66.34 11-May-05 2007 Bonus 1:7 57.16 13-Jun-06 2007 Rights @ Rs. 140* 1:5 92.10 23-Jan-07 2007 Bonus 1:7 78.96 13-Mar-07 2009 Repurchase 1:25 25.50 11-Oct-08 * unadjusted prices GDR history (in terms of ordinary shares, million) Financial calendar 2010/11 Year ended 31 March Issued** Converted/ Balance Interim financial statements Repurchased Three months ended 30 June 2010 29 July 2010 1995 - 0.21 4.29 Six months ended 30 September 2010 2 November 2010 1996 0.59 0.20 4.67 Nine months ended 31 December 2010 26 January 2011 1997 0.27 2.80 2.14 First interim dividend paid on 1 December 2010 1998 0.28 1.06 1.37 Second interim dividend paid on 16 March 2011 1999 - 0.75 0.63 Final dividend proposed to be paid on 9 June 2011 2000 0.26 0.52 0.36 Annual Report 30 May 2011 2001 0.72 0.23 0.85 32nd Annual General Meeting 24 June 2011 2002 - 0.17 0.68 2003 - 0.16 0.52 2011/12 2004 0.13 - 0.65 Interim financial statements 2005 0.06 - 0.71 Three months ended on or before 28 July 2011 2006 0.14 - 0.85 30 June 2011 2007 0.12 - 0.97 Six months ended on or before 9 November 2011 2008 0.14 - 1.11 30 September 2011 2009 1.11 0.12 0.99 Nine months ended on or before 26 January 2012 2010 0.99 0.01 0.98 31 December 2011 2011 0.98 0.03 0.95 Annual Report 2011/12 on or before 5 June 2012 * 1 GDR equivalent to 2 ordinary shares 33rd Annual General Meeting 29 June 2012 ** First issued in FY1994 and subsequently increased along with bonus issues of ordinary shares 46 John Keells Holdings PLC GOVeRnAnce Susantha Ratnayake Ajit Gunewardene Chairman-CEO Deputy Chairman Susantha Ratnayake was appointed as Ajit Gunewardene is the Deputy Chairman the Chairman and CEO of John Keells of John Keells Holdings PLC and has been Holdings PLC in January 2006 and has a member of their Board for over 18 years. served on the JKH Board since He is a Director of many companies in the 1992/93. He is also the Chairman of John Keells Group and is the Chairman of many of the listed and un-listed Nations Trust Bank PLC and Union companies within the Group. He is a Assurance PLC. He is a member of the council member of the Employers’ board of Nanco (Pvt) Ltd, a company Federation of Ceylon, serves on various established for the development of clusters of the National Council of nanotechnology in Sri Lanka under the Economic Development (NCED) and is auspices of the Ministry of Science and the Vice Chairman of the Ceylon Technology. He has also served as the Chamber of Commerce as well as the Chairman of the Colombo Chairman of the Sri Lanka Tea Board. Stock Exchange. Ajit has a degree in He has over 33 years of management Economics and brings experience, all of which is within the over 29 years of John Keells Group. management experience.
Ronnie Peiris Group Finance Director Appointed to the John Keells Holdings PLC Board during 2002/03, Ronnie Peiris has overall responsibility for the Group's Finance and Accounting including Taxation, the Information Technology function and Group Initiatives. He was previously the Managing Director of Anglo American Corporation (Central Africa) Limited in Zambia.
Ronnie has 40 years of finance and general management experience in Sri Lanka and abroad. He is a Fellow of the Chartered Institute of Management Accountants, UK; Association of Chartered Certified Accountants UK and the Society of Certified Management Accountants, Sri Lanka and holds an MBA from the University of Cape Town, South Africa. He is a member of the committee of the Ceylon Chamber of Commerce, Chairman of its Taxation Sub Committee and also serves on its Economic, Fiscal and Policy Planning Sub Committee. He is the Vice President of the Sri Lanka Institute of Directors.
Dr Indrajit Coomaraswamy Franklyn Amerasinghe ** Director * Director Dr Indrajit Coomaraswamy was appointed to the John Keells Appointed to the Board during 1999/00, Franklyn Holdings PLC Board in February 2011. Amerasinghe is the former CEO and Director General of the Employers’ Federation of Ceylon. He was thereafter attached Dr Coomaraswamy was an official in the Central Bank of Sri to the ILO as a senior specialist in the social dialogue sector Lanka from 1974-1989. He worked in the Economic Research, in charge of Employer’s Organisations in East Asia up to Statistics and Bank Supervision Divisions. During this time he October 2002. A bachelor of law and a lawyer by profession, was also seconded to the Ministry of Finance and Planning he is currently a consultant and trainer in social dialogue, (1981-89). human resource management, corporate social responsibility and industrial relations, both in Sri Lanka and abroad. He has He was employed by the Commonwealth Secretariat from also authored books on a wide range of subjects and 1990-2008. During that time he held the positions, inter alia, of published papers in some international and local journals. He Director, Economic Affairs Division and Deputy-Director, is a founder trustee of the Association for Dialogue & Conflict Secretary-General's Office. He was subsequently Interim Resolution. He was also one of the founder directors of the Director, Social Transformation Programme Division, Skills Development Fund. Commonwealth Secretariat (Jan-July 2010). Dr Coomaraswamy completed his undergraduate degree at Cambridge University and obtained his Doctorate at the University of Sussex.
48 John Keells Holdings PLC Tarun Das ** Director Mr Das has spent his entire working career in industry associations, starting in November 1963 with the predecessor body of Confederation of Indian Industry (CII) and was the Director General and Chief Executive of CII from April 1967 to May 2004 and Chief Mentor from June 2004 to October 2009.
He is Co-Chair of the Indo–US Strategic Dialogue (Track II) and of Indo-US-Japan Strategic Dialogue (Track II). He is also a member of the India-Singapore Strategic Dialogue (Track II) and the India-China Strategic Dialogue (Track II).
He is a Lifetime Trustee of The Aspen Institute, USA; Member, Board of Governors, East West Centre, USA; Member, International Council, The Asia Society, USA; President, Aspen Institute India; Managing Trustee, Indian Business Trust for HIV/AIDS; Vice President, World Wide Fund- India; Member of the Board of GIVE India Foundation; Member, Board of Trustees, Public Interest Foundation; Member, Board of Governors, National Council of Applied Economic Research (NCAER).
He is a member of the Advisory Group for G-20, Ministry of Finance, Government of India. He is also a member of the Expert Group set up by the Planning Commission on Government- Industry Consultations and member of the Expert Group to formulate a jobs plan for the State of J&K. Earlier, he chaired the Planning Commission Task Force on Skills Development.
He is non executive Chairman, Haldia Petrochemicals Ltd; Member of the Board of Directors of West Bengal Industrial Development Corporation (WBIDC) and of John Keells Holdings PLC, Sri Lanka. He was a member of the Government-nominated Board of Satyam Computers in 2009. He is also on the International Advisory Board of ACE Insurance, USA; Member, India Advisory Board of VOITH (Germany); JCB (UK).
Steven Enderby ** Director Appointed to the Board in 2005/06, Steven Enderby is currently based in India where he is a partner in the leading emerging markets private equity investor, Actis. His other directorships include SML Isuzu, Avtec, Tema India, Halonix and Actis Advisers. Steven holds a BSc (Hons) in Economics and Accounting from the Queens University of Belfast and is a member of the Chartered Institute of Management Accountants, UK.
Deshamanya Deva Rodrigo ** Director
Appointed to the Board in July 2006, Deva Rodrigo, a chartered accountant, had a career with the international accounting and consulting organisation PricewaterhouseCoopers, joining the firm in East Africa in 1974 and serving in its London offices in 1980. He was a Founder Partner when PricewaterhouseCoopers established its Sri Lankan firm in 1981, and held the position of Senior Partner from 1992 to 30 June 2006, when he retired from the firm. He was the Chairman of the Ceylon Chamber of Commerce from 2004 to 2006.
He has previously held public office as a director of People’s Bank and as a member of the Telecommunication Regulatory Commission. Deva was also a member of the Monetary Board of the Central Bank of Sri Lanka and a member of the National Council for Administration. He also serves as the Chairman Audit Committee and Non Executive Director of Ceylon Tobacco Co., PLC and Chevron Lubricants Lanka PLC.
Sithie Tiruchelvam ** Director Appointed to the Board in January 2007, Sithie Tiruchelvam, is a lawyer of the Supreme Court of Ceylon, and specialises in corporate law, intellectual property law and labour law. She has obtained her LLB from the University of Ceylon in 1966, and was admitted to the Supreme Court as an Advocate in 1968. She is a Founding Partner of the law firm Tiruchelvam Associates. She has been listed as a leading lawyer in corporate and commercial matters by Chamber Asia Pacific. She currently serves on the board of Central Corporate & Consultancy Services (Pvt.) Limited and the Nadesan Centre for Human Rights through Law.
* Senior Independent non executive ** Independent non executive
Annual Report 2010/11 49 cOMMITTee RePORTS ReMUneRATIOn cOMMITTee RePORT The Remuneration Committee met three times during the year. The Committee met to examine the performance of the Chief The Committee interacted among themselves as well as with the Executive and his evaluation of the Executive Directors and executive board members when the necessity arose. The members of the Group Executive Committee (GEC). They were Chairman also, from time to time, requested information from the evaluated on fixed and measurable criteria which had been President in charge of Human Resources in order to facilitate the pre-agreed with them individually. The team performed well and work of the Committee. the results have been exceptional.
A report from the Remuneration Committee continues to be a The Committee also met to consider a recommendation to the standing agenda item at the quarterly board meetings. The Board in relation to a new employee share option plan ie. Plan 6, Chairman of the Committee reports any matters pertaining to the and this was approved by the shareholders at an Extraordinary Committee at each board meeting drawing attention to matters General Meeting of the Company held on 6 December 2010. where the Board consideration was required or where the Board has to be updated. The Board was also kept advised of the work In conclusion, I wish to thank my colleagues, Deshamanya Deva of the Committee at times by electronic mail. Rodrigo and Mrs Sithie Tiruchelvam, for their valuable contribution to the work of the committee and our secretary, Linda Starling. The Committee ensured that the board complied with the Companies Act, particularly in relation to director remuneration especially the requirements of section 216.
The ‘pay for performance’ scheme is carefully monitored and the CEO briefs the Committee of the employee compensation and Franklyn Amerasinghe how it compares with the market. The goal is for above average Chairman performers to be at or above the 75th percentile of the market. Remuneration Committee The executives have now realised that there is a balanced and fair appraisal scheme. In general, the compensation scheme is 20 May 2011 working admirably and producing the results which were expected.
Members S S Tiruchelvam, P D Rodrigo
nOMInATIOnS cOMMITTee RePORT The Nominations Committee, as of 31 March 2011, consisted of During the year, the Committee recommended to the Board that three independent directors and the Chairman-CEO of John Dr. Indrajit Coomaraswamy be appointed to the Board as a Non Keells Holdings PLC (JKH). Executive Director. This recommendation was accepted by the Board. The mandate of the committee remains;- • To recommend to the Board the process of selecting the Chairman and the Deputy Chairman • To identify suitable persons who could be considered for appointment to the Board as non executive directors Tarun Das • Make recommendation on matters referred to it by the Board Chairman Nominations Committee During the period under review, the Committee met once, with all members in attendance. 20 May 2011 The Committee continues to work closely with the Board in reviewing, regularly, its skills needs based on the objectives and strategies set forth for the Group for the coming years and other Members emerging needs based on the dynamic local and global business S Enderby, S S Tiruchelvam, S C Ratnayake environments. Individual Directors also have the opportunity of commenting on the skills needs of the Board when completing an annual JKH Board evaluation.
50 John Keells Holdings PLC AUdIT cOMMITTee RePORT Role of the Committee reports are considered and that risk management issues are The responsibilities of the JKH Audit Committee flow from its appropriately dealt with. Charter approved and adopted by the Board. The terms of reference comply with and go beyond the requirements of the The key findings of the Audit Committee are communicated to Listing Rules of the Colombo Stock Exchange (CSE). the Board of Directors, through formal minutes and an oral presentation. The Audit Committee has maintained its vigilance in exercising its oversight role in respect of financial reporting, internal controls Composition of the Audit Committee and risk management. The Audit Committee consists exclusively of independent, non executive directors. The committee continued to draw on the The Committee has overall responsibility for recommending to the expertise of members with backgrounds in finance, audit, law, Board, the financial statements for adoption and for reviewing the human resource management and regulatory institutions. In Group’s financial reporting and accounting policies, including keeping with the Guidelines for Best Practice on the ‘Role of formal announcements and trading statements relating to the Auditors’ issued by the Securities and Exchange Commission of Company’s financial performance. Sri Lanka, the Chairman of the Committee is a Chartered Accountant and former Senior Partner of The Company’s management has the primary responsibility for PricewaterhouseCoopers, Sri Lanka. The Head of Group R&CR the financial statements, for maintaining effective internal control serves as Secretary to the Audit Committee. over financial reporting, and for assessing the effectiveness of such control systems. In fulfilling its oversight responsibilities over Meetings financial reporting, the Committee reviewed the Company and Seven meetings of the committee were held during the year. The consolidated financial statements with the management, Chief Executive Officer and the Chief Financial Officer, both examined the acceptability of the accounting principles; the executive directors, together with the Group Financial Controller reasonableness of significant estimates and judgments, suitability attend most parts of these meetings by invitation. Other officials of assertions made and the adequacy of disclosures in the of the Company attend meetings by invitation on a needs basis. financial statements. The external auditors and internal auditors are present at meetings when matters pertaining to their functions come up for It is also responsible for the relationship with the external auditors consideration. and for assessing the role and effectiveness of the Company’s Group Risk & Control Review (Group R&CR) Division. Report of the Committee’s activities The Committee reviews the Group’s procedures for detecting, Appointment of Group lead / consolidation auditor monitoring and managing the risk of fraud and compliance with At the last Annual General Meeting held on 28 June 2010, the legal and regulatory requirements. The Committee keeps under shareholders approved the appointment of Ernst & Young as the review the Group’s internal controls and systems for assessing Lead/Consolidation Auditor of John Keells Group for the financial and mitigating financial and non-financial risks. It also reviews the year 2010/11. The Board, after evaluating proposals from nine performance of the Company’s Group R&CR Division and the reputed audit firms in 2010, decided to retain Ernst & Young as reports of the independent outsourced internal audit firms the Lead/Consolidation Auditor for the next three financial years, engaged to carry out the internal audits of Group entities. subject to shareholder approval each year.
The Committee has responsibility for recommending to the Board Oversight of Company and consolidated financial the appointment of the external auditors and for reviewing the statements results of the annual external audit. It also approves the audit fee The Committee reviewed with the independent external auditors and, on an annual basis, assesses the effectiveness and who are responsible for expressing an opinion on the truth and independence of the external auditors. A resolution to reappoint fairness of the audited financial statements and their conformity Ernst & Young, Chartered Accountants, as auditors for the with Sri Lanka Accounting Standards (SLAS), their judgments as financial year ending 31 March 2012 and to authorise the to the quality, not just the acceptability of the accounting policies Directors to determine their remuneration will be proposed at the of the Company and the Group and such other matters as are next Annual General Meeting. required to be discussed with the Committee in compliance with Sri Lanka Auditing Standard 260 - Communication of Audit To maintain free and open communication between the Matters with those charged with Governance. Committees, independent external auditors, the Group R&CR Division and the outsourced internal audit firms performing the The external auditors have direct communication channels with JKH internal audit, the Committee held at least one closed door the Audit Committee and have kept the committee informed of meeting with the external auditors, with the outsourced internal matters of significance that arose during the course of their limited auditors and with the Group R&CR without the presence of any review of financial statements for the nine months ended 31 executive directors and management, on whose stewardship the December 2010 and financial year end audit. audit firms and Group R&CR are required to report. It also had more than one meeting with the management of the Company, The Audit Committee met with the external auditors on 13th and the external auditors and outsourced internal auditors to 19th May 2011 to review and approve the year end financial determine that all parties are aware of their responsibilities, their statements before presentation to the Board for adoption.
Annual Report 2010/11 51 cOMMITTee RePORTS
AUdIT cOMMITTee RePORT
Quarterly compliance confirmations The split between audit and non-audit fees for the year ended The Committee obtained quarterly declarations from the industry 31March 2011 appears in the Notes to the accounts. groups and sectors confirming financial, operational and sustainability reporting compliance with established Group Operational business assurance policies to determine that the policies and procedures provide In September 2010, the Group R&CR Division, recommended to reasonable assurance that all relevant laws, rules and regulations the Audit Committee to shift the focus of Internal Audits from mere have been complied with. financial reviews to a more operational business assurance review. The new operating model has since been effectively implemented Convergence to Sri Lanka Financial Reporting Standards across the Group. (SLFRS) and Lanka Accounting Standards (LKAS) The Committee also discussed the Company’s and Group’s Risk and Control Review – internal audit readiness for the pending convergence of the Sri Lanka The Audit Committee is assisted by the Group R&CR Division, Accounting Standards (SLAS) to be in line with International which manages the internal audit assignments of the Group. Financial Reporting Standards (IFRS) to be adopted locally from Internal audits are outsourced to leading audit firms in line with January 2012 as Sri Lanka Financial Reporting Standards an agreed annual audit plan. (SLFRS) and LKAS and noted that the Group is in the process of carrying out, in consultation with external auditors, a gap analysis During the year, the Audit Committee reviewed the performance to identify areas requiring action. John Keells Group IFRS of the internal audit function carried out by Group R&CR Division implementation teams have been appointed to migrate to SLFRS and appointed outsourced internal auditors, the findings of the and LKAS before the deadline. The Audit Committee is apprised audits completed during the year and the Division’s resource of on an ongoing basis, the progress of this project and the requirements. The Committee also approved the internal audit implications of adopting SLFRS and LKAS. plan for the year ending 31 March 2012.
Independent external auditors The internal audit, in addition to evaluating the efficacy of internal The Committee held a special closed door meeting with the controls, reviews the actions taken to control and mitigate Group lead/consolidation external auditors without the presence operational and business risks and monitors and reports on the of any executive directors or officials of the Group, to ensure that compliance of Group companies with statutory requirements and no limitations had been placed on their examination and reporting Group accounting and operational policies. and that they received full co-operation from the management and unhindered access to records and personnel. The internal audit independently reviews the risks and control processes operated by management and provides an overview Independence of external auditors of the risk profile of the businesses reviewed. It carries out Both the Board and the external auditors have for many years had independent audits in accordance with an internal audit plan safeguards in place to avoid the possibility that the auditors’ which is agreed with the Audit Committee and respective objectivity and independence could be compromised. The business units before the start of the financial year. Group R&CR Committee reviewed the external auditors’ independence and the also conducts special reviews as requested either by the Audit internal rules and guidelines followed by them to maintain their Committee or by the management. independence. The Committee also ensured that any non audit services provided by the auditors did not impair their The plan provides a high degree of financial and geographical independence. coverage and devotes significant effort to the review of the risk management framework surrounding the major business risks. Our policy in respect of services provided by the external auditors is as follows: Internal audit reports include recommendations to improve internal controls together with agreed management action plans • Audit related services – the external auditors are invited to to resolve the issues raised. Group R&CR follows up the provide services which, in their position as auditors, they must implementation of recommendations and reports progress to or are best placed to undertake. These include reviewing senior management and the Audit Committee. compliance with terms and conditions relating to borrowings, shareholders’ and other circulars, other regulatory reports and The effectiveness of the Group R&CR function is reviewed and work in respect of acquisitions and disposals. discussed on an annual basis with the Head of Group R&CR. • Tax consulting – in cases where they are best suited, we use the external auditors. In addition, the Committee has obtained Subsidiary company Audit Committees the services of outside independent tax and legal consultants Subsidiaries quoted on the CSE have their own audit committees for other significant tax consulting work. comprising non executive directors. Such audit committees are • General consulting – in recognition of public concern over the independent of the Audit Committee of John Keells Holdings PLC effect of consulting services on auditors’ independence, our but maintain the standards agreed with John Keells Holdings PLC policy is that the external auditors are not invited to tender for Audit Committee and make available to the JKH Audit Committee general consulting work that could compromise their the minutes of their meetings. independence and objectivity.
52 John Keells Holdings PLC Audit Committee effectiveness self assessment In January 2011, the Audit Committee undertook a self- assessment of its own performance by each member of the Committee, executive directors who attend Audit Committee meetings, the external auditors and the outsourced internal auditors. The results of the self-assessment have been presented to the Board.
Conclusion The Audit Committee wishes to acknowledge with thanks the services rendered by the Group auditors, Ernst & Young and their efforts to meet JKH requirements and expectations.
The contribution made by Mr Franklyn Amerasinghe, Mr Steven Enderby and Ms Sithie Thiruchelvam as members of the Committee is acknowledged with grateful appreciation. Their professional expertise was invaluable in making the Audit Committee function effective and useful.
Deva Rodrigo Chairman Audit Committee
20 May 2011
Members F Amerasinghe, S Enderby, S S Thiruchelvam
Annual Report 2010/11 53 GROUP execUTIVe cOMMITTee
Dilani Alagaratnam Sanjeeva Fernando President President Dilani Alagaratnam, President, Group HR, Legal & Secretarial has Sanjeeva Fernando has overall responsibility for the IT Industry overall responsibility for the Group Human Resources, Legal, group which includes Software operations, the Office Automation Secretarial and Corporate Communication functions of John business and the Group’s BPO businesses spanning across India, Keells Holdings PLC. Sri Lanka, Canada and the USA. He has over 24 years of management experience, 17 of which have been with the John A Lawyer by profession, she has been with the Group for 19 years Keells Group in diverse businesses and capacities. Joining the and is a law graduate and a holder of a Masters Degree in Law. Group in 1993 to head the Group’s Printing and Packaging businesses he went on to take over Lanka Marine Services as its She is the Chairperson of the Steering Committee on Human CEO in 2002 at the time of its acquisition from the Government. Resources and Education of the Ceylon Chamber of Commerce, Prior to his current assignment he was the Sector Head of the member of the National Labour Advisory Committee and a Transportation sector. A printer by profession, Sanjeeva qualified member of the Technical Advisory Committee of the Sri Lanka from the London School of Printing and is a member of the Institute of Directors. London Institute of Printing.
Krishan Balendra Jitendra Gunaratne President President Krishan Balendra has responsibility for the Retail sector, John Jitendra Gunaratne is responsible for the Consumer Foods sector. Keells Stock Brokers, John Keells Capital and the Corporate Prior to his appointment as President, he overlooked the Finance & Strategy function of the Group. He started his Plantations and Retail sectors. His 30 years of management professional career at UBS Warburg, Hong Kong, in investment experience in the Group also covers Leisure and Property. banking, focusing primarily on equity capital markets. After a four Jitendra holds a diploma in marketing and serves as a member year stint in Hong Kong, he continued his career in corporate of the Advisory Committee on Consumer Affairs of the Ceylon finance at Aitken Spence & Co. PLC, Sri Lanka prior to joining Chamber of Commerce. JKH. Krishan holds a law degree (LLB) from the University of London and an MBA from INSEAD. He is a member of the board Suresh Rajendra of the Colombo Stock Exchange. President Suresh Rajendra has overall responsibility for the Property industry Romesh David group. He has over 19 years of experience in the fields of finance, President travel and tourism, and business development acquired both in Romesh David has been with the Group for 31 years during which Sri Lanka and overseas. Prior to joining the Group, he was the he has served in the Leisure, Domestic & International Trade, IT head of commercial and business development for NRMA and Transportation sectors of the Group. He is a member of the Motoring & Services in Sydney, Australia. Suresh is a Fellow of National Council for Economic Development (Transport Cluster), the Chartered Institute of Management Accountants, UK. a member of the Economic Infrastructure sub-committee of the Ceylon Chamber of Commerce and is currently a Vice Chairman Note : The Group Executive Committee is currently a nine member team of the Chartered Institute of Logistics and Transport – Sri Lanka including the three executive directors and the above members. chapter. He serves on the Executive Committee of the Council for Business with Britain, the Advisory Council of the Sri Lanka Freight Forwarders Association and the Executive Committee of the Indo- Lanka Chamber of Commerce. He is a past Chairman of the Sri Lanka Freight Forwarders’ Association and the Council for Business with Britain.
54 John Keells Holdings PLC GROUP OPeRATInG cOMMITTee
Sujiva Dewaraja Vasantha Leelananda Executive Vice President Executive Vice President Sujiva Dewaraja heads the IT sector. Since passing out as a Vasantha Leelananda is Head of the Destination Management Chartered Management Accountant in London in 1980, he sector and counts over 32 years in the leisure industry with the worked in corporate strategy at a diversified conglomerate and in John Keells Group. He served as the Managing Director of MIS for a Middle Eastern government. Moving to the USA in 1987, Walkers Tours from 1997 to 2005 and heads the travel operations he read for an MBA from the University of Pittsburgh, in Sri Lanka and India. Vasantha holds an MBA from the University Pennsylvania, earning a place on the Dean’s List. Since then, he of Leicester. He is a past President of the Sri Lanka Association has held varied general management positions. He is a Fellow of of Inbound Tour Operators (SLAITO), a board member of the Sri CIMA, UK and an Associate member of the Chartered Institute of Lanka Convention Bureau from 2003 to 2007 and served as a Bankers, London. Sujiva was founder Secretary of the Consumer board member of the Sri Lanka Institute of Tourism and Hotel Electronics and Domestic Appliances Association and the Sri Management from 2007 to 2010. He is a board member of the Lanka Netherlands Association. He served on the committee of Responsible Tourism Partnership which is affiliated to the Travel the Ceylon Chamber of Commerce in 1997/98 and on the Foundation UK. ministerial advisory panel on ICT export since 2007. He was a founding board member of the Lanka Software Foundation as Chandrika Perera well as SLASSCOM (Sri Lanka Association of Software and Executive Vice President Services Co’s), of which he is currently Vice President. Chandrika Perera was appointed as the Chief Financial Officer of the Leisure industry group in March 2005. She has been with the Roshanie Jayasundera-Moraes Group for 28 years. She held the position of Group Financial Executive Vice President Controller from 1999 to 2005. A Fellow of the Institute of Roshanie Jayasundera-Moraes, Head of the Retail sector, has Chartered Accountants of Sri Lanka and the Society of Certified been with the Group since 1991. She was with the Airlines sector Management Accountants, Sri Lanka, she holds an MBA (finance) of the Transportation industry group, before being appointed as from the University of Southern Queensland. Chandrika serves as head of the Group’s supermarket business in November 2003. A a committee member of the Accounting Standards committee of holder of a diploma in marketing from the Chartered Institute of ICASL, and is a member of the Steering Committee on Income Marketing (CIM), UK, Roshanie also holds an MBA from the Post- Taxes. Graduate Institute of Management of the University of Sri Jayawardenepura, Sri Lanka. Mano Rajakariar Executive Vice President Sanjeewa Jayaweera Mano Rajakariar, has been the Group Financial Controller since Executive Vice President April 2005. He has been with the Group for over 15 years in many Sanjeewa Jayaweera, Chief Financial Officer for the Consumer capacities including serving as the Sector Financial Controller of Foods & Retail industry group, has been with the Group for 18 the Plantations sector and heading the Shared Services years, during which he served in the Resort Hotels sector of the implementation within the Group. He has over 23 years of Leisure industry group and was the Sector Financial Controller for experience in audit, finance and general management acquired Resort Hotels from 1998 to 2005. Prior to joining the Group, both in Sri Lanka and overseas. Mano is a Fellow member of the Sanjeewa was based in the United Kingdom and worked for Institute of Chartered Accountants of Sri Lanka (ICASL) and the several years as an audit manager. Chartered Institute of Management Accountants, UK. He currently serves as a committee member of the Urgent Issues Task Force Jayantissa Kehelpannala (UITF) and of the financial reporting faculty of the ICASL. Executive Vice President Jayantissa Kehelpannala, Sector Head Resort Hotels, has over Waruna Rajapakse 29 years of experience in the leisure industry both in hoteliering Executive Vice President and inbound tourism. He is currently Chairman of the Hotels and Waruna Rajapakse, Head of New Business Development and Tourism Employers Group of the Employers’ Federation of Ceylon Group Initiatives, has over 24 years of experience in Sri Lanka and and represents them at the EFC Council Meetings and is a in the UK, primarily in management consultancy and project member of the Wages Board for the Hotel & Catering trade. In finance. Prior to joining the Group in 2002, he worked for the addition he is also the Vice President of The Tourist Hotels Government at the Bureau of Infrastructure Investment, Association of Sri Lanka (THASL) and represents the Association Informatics International Ltd (UK) and at Ernst & Young. Waruna at the Committee of Ceylon Chamber of Commerce. is a Fellow member of the Chartered Institute of Management Accountants, UK, and an Associate member of the Institute of He is a member of the Tourism Cluster of NCED (National Council Chartered Accountants of Sri Lanka. He also holds an MBA from for Economic Development) under the purview of the Ministry of City University Cass Business School, London, UK. He is a Finance and Planning. member of the infrastructure steering committee of the Ceylon Chamber of Commerce and a member of the Sri Lanka Board of the Chartered Institute of Management Accountants (CIMA) of UK where he is also a member of the Technical and Employer Relations Committees.
Annual Report 2010/11 55 GROUP OPeRATInG cOMMITTee
Lallith Ramanayake technology & computer science) with phi kappa phi honours from Executive Vice President Rochester Institute of Technology, MBA (general) from Lallith Ramanayake, Head of the Plantation Services sector and Postgraduate Institute of Management, University of Sri head of the CSR initiative of JKH, has been with the Group for 39 Jayewardenepura, BSc.Eng. (electronics & telecommunications) years. He has also served as the Head of the Transportation with first class honours from University of Moratuwa. He is a sector during the period from 2007 to 2009. He is a member of chartered engineer, chartered IT professional and a Fellow of the the Chartered Institute of Marketing, UK with the chartered British Computer Society. He has active memberships in several marketer status and holds an MBA from the Postgraduate other professional institutions and is a visiting faculty member for Institute of Management, University of Sri Jayewardenepura. several post-graduate programmes. He is also the Chair of the Lallith has been the Chairman of the Colombo Brokers’ SLASSCOM CIO Council. Association, a director of the Sri Lanka Tea Board, Deputy Chairman of the Tea Association of Sri Lanka, and a member of Devika Weerasinghe the plantation/tea cluster of the National Council for Economic Executive Vice President Development, where he chaired the sub committee which Devika Weerasinghe, Chief Financial Officer of the Transportation developed the national 10 year plan for the tea industry. He has industry group previously held the position of Sector Financial served on the executive committee of the Ceylon Chamber of Controller of the Transportation sector. She also served as the Commerce. Sector Financial Controller of the Airlines SBU of the Transportation sector during the period 1998-2004. An Associate Sunimal Senanayake member of the Chartered Institute of Management Accountants- Executive Vice President UK, Devika also holds a bachelors degree in Business Sunimal Senanayake, Head of the Maldivian Resorts Sector, has Administration, from the University of Sri Jayawardenepura. over 30 years of experience in the Leisure industry, both in hotels and inbound tourism. He served as the Managing Director of Suran Wijesinghe Walkers Tours Limited from 1991 – 1997. He is a past president Executive Vice President of the Sri Lanka Association of Inbound Tour Operators (SLAITO) Suran Wijesinghe, joined the Group in January 2004 as the Sector and has held many positions in travel trade related associations Financial Controller of the Financial Services industry group and and committees. He has also been a member of the Tourist was appointed as the Chief Financial Officer for the same industry Hotels Classification Committee and a member of the Advisory group in July 2010. He has over 30 years of experience in the Board of the Sri Lanka Institute of Tourism & Hotel Management. fields of audit, financial and general management, which has been acquired while serving in organisations both locally and overseas. Ramesh Shanmuganathan Suran is a Fellow member of both the Institute of Chartered Executive Vice President Accountants of Sri Lanka (ICASL) and the Chartered Institute of Ramesh Shanmuganathan is the Group’s Chief Information Officer Management Accountants of UK. He currently serves as a and member of the Group Management Committee for the committee member of the Urgent Issues Task Force (UITF) of the Information Technology industry group and has over 18 years of ICASL. experience in the ICT industry both in Sri Lanka and the USA, with the last 11 years in C-level management. Prior to this, he has Note: The Group Operating Committee is currently a 22 member team served in the Group’s IT sector as the CEO of Keells Business consisting of the Group Executive Committee and the above members. Systems Limited since 2001 and Head of Strategy/New Business Initiatives of John Keells Computer Services Ltd since 2004 until he assumed duties as the Group’s CIO. Ramesh is a Hayes- Fulbright Scholar and holds to his credit a MSc (information
56 John Keells Holdings PLC cORPORATe GOVeRnAnce
• The recommendations of the Combined Code of 2010 to the extent that they are practicable in the context of the nature of our diverse businesses and their risk profiles JKH Code of Conduct • All provisions of the Code of Governance of the Institute of • Allegiance to the Company and Chartered Accountants of Sri Lanka. the Group JKH corporate governance framework • Compliance with rules and regulations The framework expects the Board of Directors to: applying in the territories that the Group operates in • Act in the best interest of the Company and its stakeholders • Conduct of business in an ethical in fulfilling its stewardship obligations manner at all times and in keeping with • Facilitate the optimisation of shareholder wealth-creation on a acceptable business practices sustainable basis while safeguarding the rights of multiple • Exercise of professionalism and stakeholders integrity • Ensure that no one person has unfettered powers of decision in all business and ‘public’ making personal transactions • Recognise that the methods employed to achieve goals are as important as the goals themselves • Maintain strong governance practices which present strong commercial advantages especially through a lowering of cost JKH is committed to the highest standards of business integrity, of capital as a result of the strengthened stakeholder ethical values and professionalism in all its activities towards confidence, particularly the confidence of the investors, both rewarding all its stakeholders with greater creation of value, year- institutional and individual on-year. • Opt, when practical, for early adoption of best practices This philosophy has been institutionalised at all levels in the Group • Encourage proactive discussions with the relevant regulatory through a strong set of corporate values and the written Code of bodies to facilitate the implementation of matters of Conduct as given above, that all employees, senior management governance and other business reforms in Sri Lanka and other and the Board of Directors are required to follow in the jurisdictions where the Group has major business interests performance of their official duties and in other situations that • Make business decisions and resource allocations, in an could affect the Group's image. The behaviors of JKH staff at efficient and timely manner, within a framework that ensures executive and above level, particularly the senior management are transparent and ethical dealings which are compliant with the monitored regularly including through an annual 360° feedback. laws of the country and the standards of governance our All the Group's recognition schemes insist, as a minimum, that all stakeholders expect of us. nominees have lived the JKH values. THE BOARD OF DIRECTORS The Group's values are found in the ‘About Us’ section of the Board responsibilities and decision rights Annual Report and are/have been constantly referred to by the The Board of Directors is accountable to the shareholders for the Chairman-CEO, Presidents, Sector Heads and Business Unit governance of the Company. All directors share a responsibility Heads during employee, agent and other key stakeholder in ensuring the highest standards of disclosure and reporting, engagement. The Group believes that the main source of its ethics and integrity across the Group. Powers specifically competitive advantage is the trust that the stakeholders have reserved for the Board include – continued to place on the core values underlying its corporate activities. • Providing direction and guidance to the Company in the formulation of its strategies with emphasis on the medium and The Chairman of the Board affirms that there has not been any long term in the pursuance of its operational and financial goals material violation of any of the provisions of the aforementioned • Approving annual budgets and strategic plans Code of Conduct. In the instances where violations did take place, • Reviewing HR processes with emphasis on top management or were alleged to have taken place, they were investigated and succession planning handled through the Company’s well established procedures • Appointing and reviewing the performance of the which, among others, include direct and confidential access to Chairman-CEO an independent, external ombudsperson. • Monitoring systems of governance and compliance The JKH corporate governance philosophy practiced is in full • Overseeing systems of internal control and risk management compliance with the following and where necessary, any • Determining any changes to the discretions/authorities deviations as allowed by the relevant rules and regulations have delegated from the Board to the executive levels been explained. • Approving major acquisitions and disposals and capital • Companies Act of 2007 expenditure • Listing Rules of the Colombo Stock Exchange (CSE) and • Approving any changes to constitutional documents subsequent revisions up to 1 April 2011 • Approving the issue of JKH equity/debt securities
Annual Report 2010/11 57 cORPORATe GOVeRnAnce
Board composition The presence of the Senior Independent Director ensures that As at 31 March 2011, the Board consists of 9 directors – 3 governance within the Board is preserved and stakeholder executive directors and 6 non executive independent directors. concerns are addressed As at the last Annual General Meeting (AGM) of JKH, held on 28 June 2010, the Board consisted of 8 directors.
Board induction, supply of information and external Role of the Senior professional advice Independent Director Newly appointed non executive directors are apprised of: The terms of reference of the role of Senior • values and culture Independent Director (SID) include: • Meeting with the other non executive directors, • the operations of the Group and its strategies without the presence of the Chairman-CEO, on at • operating model least an annual basis and addressing any concerns • policies, governance framework and processes with the Chairman-CEO or the Board as appropriate • responsibilities as a director in terms of prevailing legislation • Acting as the point of contact for stakeholders with concerns which have failed to be resolved • the Code of Conduct demanded by the Company. through the normal channels All directors are fully briefed on important developments in the • Acting as the point of contact for stakeholders various business activities of the Group. The directors have with concerns over the executive directors access to: • Acting as an alternative point of contact • information as is necessary to carry out their duties and to the Chairman-CEO for executive directors responsibilities effectively and efficiently • information updates from management on topical matters, new regulations and best practices as relevant to the Group's businesses • external and internal auditors Report of the Senior Independent Director • experts and other external professional advisory services This is the first report that is being furnished to shareholders and • the services of the company secretaries whose appointment other stakeholders from the Senior Independent Director, a post and/or removal is the responsibility of the Board which was created in 2009. The purpose of this position is to • periodic performance reports ensure that there is a possible avenue for review of the CEO’s role • senior managers under a structured arrangement and the effectiveness of the Board and especially its independent directors. The Board seeks independent professional advice when and where necessary. During the year under review, professional The Company appointed an Ombudsman in the year 2010 and advice was sought on various matters including: the objective was to enable an independent person to examine • Impacts on JKH businesses arising out of current and future complaints from employees in relation to the manner in which the economic, geo-political shifts personnel of the Company carry out their functions with particular emphasis on adherence to the Group’s Code of Conduct. This • A Group wide stakeholder engagement to meet the includes the work of the Group Executive Committee, the requirements of the Global Reporting Initiative Executive Directors and the CEO. The function is independent of • Employee satisfaction survey and employee compensation the disciplinary processes of the Company and the interaction of and benefit survey to ensure that JKH is “more than just a the Ombudsman has been direct with the Senior Independent workplace” Director, the CEO and the auditors as well. The external auditors • Legal, tax and accounting aspects, particularly where annually query the Ombudsman in relation to the issues independent external advice was deemed necessary in investigated by him. There have been no frauds reported. The ensuring the integrity of the subject decision Ombudsman reports that he is satisfied that the employees who • Market surveys, architectural and engineering advisory have made complaints to him have had their complaints services as necessary for business operations adequately dealt with. The system appears to be working well and the Board is satisfied that the Company is well governed and the • Actuarial valuation of retirement benefits and valuation of employees are acting in a responsible manner in the best interests property including that of investment property of the Company. Non executive/independent directors and the board balance The independent directors have adequate opportunity to interact • Collectively, the non executive directors bring a range of value as well as express any matters of concern to them. The adding domestic and international experience, and expertise, independent directors continue to have their annual meeting in specialised functions exclusively where they evaluate their performance and what they • The Company is conscious of the need to maintain an see as areas where they could contribute more. This is followed appropriate mix of skills and experience on the board and to with a meeting with the CEO and the issues brought up in 2009 refresh progressively its composition over time in line with were adequately addressed by the Board in the current year. needs There have been two strategy sessions in which the independent directors actively participated. They have had the highest
58 John Keells Holdings PLC consideration paid to their requests for information and are happy Independent directors to report that the Board functions in a transparent and responsible Independence of the directors has been determined in manner in safeguarding the interests of all stakeholders. accordance with CSE Listing Rules and the 6 independent non executive members have submitted signed confirmations of their I have pleasure in declaring that the Company takes note of best independence. practice in relation to governance and is eager to change whenever better ways of governance are advocated.
Franklyn Amerasinghe Senior Independent Director
20 May 2011
Non Executive/Independent Share Management Material Employed by Family member, Continously Director (NED/ID) holding 1 /Director 2 business the company 4 a director served for nine relationship 3 or CEO 5 years 6 F Amerasinghe I Coomaraswamy T Das S Enderby D Rodrigo S Tiruchelvam • Compliant • Compliant with explanation Definitions Explanation 1 Shareholding carrying not less than 10 per cent of voting rights None of the individual EDs or NED/IDs shareholding exceeds 1 per cent 2 Director of another company* None of the NED/IDs are directors of another related party company as defined 3 Income/non cash benefit equivalent to 20 per cent of the NED/ID income/cash benefits are less than 20 per cent of individual director's income director income 4 Two years immediately preceding appointment as director None of the NED/IDs are employed or have been employed at JKH 5 Close family member who is a director or CEO No family members of any ED or NED/IDs is a director/CEO of a related party company 6 Has served on the board continuously for a period exceeding nine years See note below
Note: All directors make a formal declaration of all their interests on an annual basis. Based on such declarations and notwithstanding that Franklyn Amerasinghe and Tarun Das have completed 9 consecutive years, the Board considers them 'independent' given their objective and unbiased approach to matters of the Board. * Other companies in which a majority of the other directors of the listed company, are employed, or are directors or have a significant shareholding or have a material business relationship
Conflicts of interest and independence Each director has a continuing responsibility to determine whether he or she has a potential or actual conflict of interest arising from external associations, interests in material matters and personal relationships which may influence his judgment. Such potential conflicts are reviewed by the Board from time to time.
Details of companies in which board members hold board or board committee membership are available with the Company for inspection by shareholders on request.
Annual Report 2010/11 59 cORPORATe GOVeRnAnce
Prior to Once During board appointment appointed meetings
Nominees are requested to make Once appointed to the Board, all Directors who have an interest in a known their various interests that directors are expected to inform the matter under discussion; could potentially conflict with the board and obtain board clearance prior • Excuse themselves from interest of the Company to deliberations on the subject matter • Accepting any new position • Abstain from voting on the subject • Engaging in any transaction that matter (abstentions, where could create a potential conflict of applicable, from board decisions, interest are duly minuted)
All NEDs are required to notify the Chairman-CEO of changes to their current board representations or interests Board meetings and attendance The Board of JKH meets once every quarter, in the least.
Attendance of Board meetings 22 April 22 July 25 October 4 January 20 January 20 May 2010 2010 2010 2011 2011 2011 S Ratnayake - Chairman-CEO √ √ √ √ √ √ A Gunewardene - Deputy Chairman √ √ √ √ √ √ R Peiris √ √ √ √ √ √ F Amerasinghe √ √ √ √ √ √ I Coomaraswamy* N/A N/A N/A N/A N/A √ T Das - - - √ √ - S Enderby √ √ - √ √ - D Rodrigo √ √ √ √ √ √ S Tiruchelvam √ √ - √ √ √ *Appointed on 7th February 2011 Note : Any absences are excused in advance and duly minuted. The absent members are immediately briefed on the discussions and actions taken during the meeting.
Time commitment of the Board of Directors Every member of the board has dedicated adequate time and effort in discharging their duties as a JKH director. Allowing for non executive director involvement in various board committees and time spent by them in considering various matters that require discussion and decision in between the formal board meetings, the Company estimates that non executive directors devoted around a minimum 30 full time equivalent days each to the Group during the year.
Board of Directors delegation of authority The Board has delegated some of its functions to board committees while retaining final decision rights pertaining to matters under the purview of these committees.
The Board has, subject to pre-defined limits, delegated its executive authority to the Chairman-CEO who exercises this authority through the Group Executive Committee (GEC), which he heads and to which he provides leadership and direction.
60 John Keells Holdings PLC Role of the Chairman-CEO As the head of the Group Executive Committee (GEC), the The Chairman-CEO had structured direct discussions with the Chairman-CEO provides the overall direction and policy/execution non executive directors during the year, subsequent to meetings framework for the board's decisions via this structure. Experience convened by the SID with the NEDs. Issues arising from these has proved that this structure has enabled him to effectively discussion have been actioned in consultation with the effected balance his role as the Chairman of the board and the CEO of the persons. Company/Group.
An overview of the delegation of board functions and the Appropriateness of combining roles of Chairman and CEO delegation of the executive authority is graphically illustrated The appropriateness of combining the roles of Chairman and CEO below. has been discussed regularly and in the minimum, once per year. On the basis of such discussions and the ‘pros’ and ‘cons’ that emerged from a review by the Boston Consulting Group, the Board deems that combining the two roles is more appropriate for the Group at present, in meeting stakeholder objectives in a conglomerate setting.
Board of Directors delegation of authority
Annual Report 2010/11 61 cORPORATe GOVeRnAnce
Board committee meetings and attendance As illustrated above, the Board has delegated some of its functions to board committees while retaining final decision rights pertaining to matters under the purview of these committees. The committees meet during the financial year as required, chaired by an independent director and a summary of meetings attended is as follows:
Member attendance at committee meetings Nominations Remuneration Audit Committee Committee Committee meetings meetings meetings HEA A HEA A HEA A S Ratnayake - Chairman-CEO 11 F Amerasinghe - Chairman Remuneration Committee 33 77 T Das - Chairman Nominations Committee 11 S Enderby 11 77 D Rodrigo - Chairman Audit Committee 33 77 S Tiruchelvam 113275 By Invitation Chairman-CEO 77 Group Finance Director 77 HEA - Meetings held and eligible to attend A - Attended
Board appointments and Nominations Committee • role clarity and effective discharge of responsibilities (in relation Board appointments follow a formal and transparent procedure. to the responsibilities highlighted earlier in this report) Dr I Coomaraswamy was appointed to the Board as at 7th • people mix and structures February 2011 and an announcement was made to the CSE as • systems and procedures required. • quality of participation The detailed Nominations Committee report is given in the Board • board image. Committee reports section of the Annual Report. The scoring, and open comments, were collated by the SID and Board tenure, retirement and re-election the results were analysed to give the Board an indication of its effectiveness as well as areas that required addressing and/or • The EDs are appointed and recommended for re-election until strengthening. Despite the original anonymity of the remarks, the their prescribed company retirement age open and frank discussions that follow, including some directors • The NEDs are appointed for a term of three years, ideally up identifying themselves as the person making the remark, reflects to a maximum of three terms each, subject to the age limit as the keenness of the Board to make themselves more effective. per statutory provision at the time of re-appointment following The evaluations for this year revealed that whilst areas previously the end of a term identified as weak had strengthened, there were others which could be further improved. One-third of the directors, except the Chairman-CEO, retire by rotation on the basis prescribed in the articles of the Company. Chairman-CEO’s appraisal A director retiring by rotation, or a director who is subject to election by shareholders at the first AGM after their The Remuneration Committee appraises the performance of the appointment are eligible for re-election by a shareholder Chairman-CEO on the basis of pre-agreed objectives for the resolution at the AGM. Group set in consultation with the board as follows.
The resolutions for the AGM to be held on 24 June cover the re- Group’s Group’s performance Soft aspects election of: performance √ against plan √ against peers √ company image • Mr Tarun Das who retires in line with Section 210 of the • revenue growth √ customer orientation Companies Act 2007, upon reaching the age of 70 • market share √ human resource • Mr E F G Amerasinghe and Mr S Enderby who retire in terms • profit growth management of Article 84 of the Articles of Association of the Company • earnings per share √ societal trust • Dr I Coomaraswamy, who retires in terms of Article 91 of the Articles of Association of the Company. REMUNERATION Board evaluation The remuneration policy for all levels at the Group and the The Board continued with its annual board performance appraisal remuneration of the executive directors and the GEC are reviewed in 2010/11. It is a formalised process of self appraisal, whereby and approved by the Remuneration Committee on an annual each member assesses, on an anonymous basis, the basis. performance of the Board under the headings of:
62 John Keells Holdings PLC Board remuneration Value of total remuneration (cash) Rs. million Make-up of remuneration for executive directors Executive directors (Company) 74.6 million The remuneration of the Chairman-CEO and the executive Non executive directors (Company) 11.9 million directors is determined as per the remuneration principles of the Group. At this higher level, the benchmark weightage between ‘Cash’ compensation highlighted above comprises salary, individual and organisation performances in establishing pension contributions, short term incentive plans and other non- compensation is 20:80. share based benefits. In accordance with the guidelines of the Securities & Exchange Commission of Sri Lanka, we have The remuneration of executive directors has a significant element disclosed the aggregate remuneration paid to executive and non which is variable, such variability being linked to the peer adjusted executive directors during the financial year 2010/11. consolidated Group bottom-line and expected returns on shareholder funds. None of the executive directors or members of the GEC are involved in influencing or determining their own compensation The remuneration of EDs in 2010/11 compared to that in 2009/10 packages. shows a higher variable pay component reflecting the actual performance of the Group against the targets set. For the purpose of this report, the terms ‘compensation’ and ‘remuneration’ have been used in reference to cash and non-cash benefits received in consideration of employment (excluding statutory entitlements such as employees provident fund and employees trust fund contributions), unless otherwise qualified.
The detailed Remuneration Committee report is given in the Board Committee reports section of the Annual Report. The key principles of the JKH compensation policy are discussed in detail in the Stakeholder-Employees at JKH section of the Annual Report.
GROUP OPERATING STRUCTURE, SUCCESSION PLANNING AND ACCOUNTABILITY Organisational and operational control The executive directors, like other eligible employees, have The operating model currently in place clearly defines authority received employee share options based on role responsibility and limits, responsibilities and accountability facilitating operating actual performance. The number of options so awarded was expediency, healthy debate and decision freedom. The delegation recommended to the Board by the Remuneration Committee. of executive authority through a committee structure, as depicted Such options were awarded at the closing market price on the earlier, ensures that no one operating body or individual has date of award. The last ESOP award was made on 9 December unfettered powers of decision making, and allows consensus to 2010. as great an extent as practical. The Chairman-CEO, the presidents, sector/functional heads and profit centre/function The share options made available to each of the executive managers, are accountable for the total Group, industry/ functions directors for the year have been disclosed in the Annual Report groups, the sectors/functions and the business units/sub- of the Board of Directors 2010/11. Disclosures have been also functions respectively. been made to the Colombo Stock Exchange as and when executive directors exercised their options or sold their shares. The independence of the finance function is preserved through a structure that has executive vice presidents-finance and sector Make-up of remuneration of non executive directors financial controllers having a direct functional reporting line to the Compensation of NEDs is determined in reference to fees paid to Group Finance Director in a setting that allows them to contribute other NEDs of comparable companies. The fees received by and add value to operations via their direct administrative NEDs are determined by the Board and reviewed annually. reporting links with industry group presidents and sector heads.
NEDs receive a fee for devoting time and expertise for the benefit Group Executive Committee (GEC) and succession planning of the Group in their capacity as Director and additional fees for As at 31 March 2011, the 9 member GEC consisted of the either chairing or being a member of a committee. NEDs do not Chairman-CEO, the Deputy Chairman, the Group Finance receive any performance/incentive payments and are not eligible Director and the presidents of each industry group. to participate in any of the Group's pension plans or share option plans. Non executive fees are not time bound or defined by a The succession planning process by the GEC is well tested where maximum/minimum number of hours committed to the Group per proactively a pool of potential successors for a number of key annum, and hence are not subject to additional/lower fees for positions are identified and earmarked for specific training and additional/lesser time devoted. development as is necessary.
Annual Report 2010/11 63 cORPORATe GOVeRnAnce
A key feature of the JKH operating model is that the GEC The agendas of these committees are carefully structured to avoid members, particularly the presidents, not only play a mentoring duplication of effort and ensure that discussions and debate are role, but are totally accountable for the businesses and functions complementary both in terms of a bottom-up and top-down flow under them. of accountabilities and information. As stated earlier, the responsibility and accountability lie with the Chairman-CEO, the presidents, the sector/functional heads and the profit centre/function managers as applicable.
The introduction of peer adjusted organisational ratings in 2007/08 in determining pay for performance has resulted in the search by business units, sectors and industry groups for productivity enhancements, process improvements and cost efficiencies within a framework of better teamwork.
Operations planning, decision rights and monitoring Responsibility for monitoring and achieving plans as well as ensuring compliance with Group policies and guidelines rests with the Presidents, Sector Heads, and the Chief Executive Officers of each Group company and heads of functions at the corporate centre at the business unit and function levels.
At the GMC level and above, the focus is more on headline financial and non-financial indicators, strategic priorities, risk management, use of IT as a tool of competitive advantage, new business development, continuous process improvements and human resource management.
Group Operating Committee (GOC) Monitoring of financial data: As at 31 March 2011, the 22 member GOC consisted of the • Actual financials are compared against the original plan and/or Chairman-CEO, the Deputy Chairman, the Group Finance the reforecast on a monthly basis at GMC, Sector Committee, Director, the presidents and the executive vice presidents. Management Committee and Departmental Committee levels • Actual financials are reviewed at least quarterly by the GEC The GOC provides a platform to share learning on issues that • The presidents and executive vice presidents, the CEOs of cross industry groups, sectors, business units and functions. It is business units and managers of functions are able to view also the forum to discuss Group strategy, Group initiatives and online, the information relevant to their areas of responsibility Group best practices. Its main purpose is to act as a glue binding • The Chairman-CEO and the GEC are able to view key financial the various businesses within the Group towards identifying and information for all Group companies on a real time basis via extracting Group synergies in implementing them. the Group ERP system Group Management Committee (GMC) and other committees and succession planning INVESTMENT APPRAISAL AND DECISION MAKING PROCESS The other key operating committees are the GMCs, the Sector Committees and the Management Committees that focus on: Over the years, the Group has maintained a process of investment appraisal and investment decision which ensures the • strategy involvement of all the relevant persons. In this manner, several • performance monitoring views, opinions and advice are obtained prior to the making of • career management and succession planning of employees the decision. JKH experience is that a holistic and well debated below assistant vice president level view of the commercial viability and potential of any project including operational, financial, funding, risk and tax implications • risk management and has most of the time culminated in a good result. All investment • Group initiatives decisions are made through a committee structure where no one individual has unfettered decision making powers in investment for and at industry group, sector, strategic business unit and decisions. business unit levels respectively. A summary of the investment process is given as follows- Each industry group and key functions have GMCs, sector and management committees as appropriate. Business and function Project origination units are encouraged to take responsibility and accountability to A project could originate from an operating committee such as the lowest possible level via suitably structured committees and the GEC, GOC, GMC etc, a BU, the Group's New Business teams in a management by objectives setting. Development (NBD) or Corporate Finance (CF) functions or alternatively a public advertisement, Request for Proposal (RFP) or a call for an Expressions of Interest.
64 John Keells Holdings PLC Feasibility study AUDIT FUNCTION, FINANCIAL REPORTING & COMPLIANCE If there is interest in principle, the president under whom the AND GOING CONCERN project falls or a GEC appointed committee will engage the CF or Integrity of systems processes and internal control NBD functions to work with other relevant persons in the Group The Board has taken necessary steps to ensure the integrity of in preparing a detailed feasibility report covering key business the Group's accounting and financial reporting systems and areas such as - internal control systems remain effective via the review and • industry overview and trends monitoring of such systems on a periodic basis. What follows is a brief description of some of the key systems. • the potential operating and financial performance of the project • key assumptions and sensitivities Internal compliance • SWOT analysis A quarterly self certification programme requires the chief financial • HR and IT considerations officers of industry groups, heads of finance of sectors and • funding costs and optimum structuring of the transaction finance managers of operating units to confirm compliance with among others financial standards and regulations. The CEOs of business units are required to confirm operational compliance with statutory and • A comprehensive study of the tax regime that applies to the other regulations and key control procedures, and also identify project in order to determine tax incentives available as well as any significant deviations from the expected norms. to propose format of incorporation. Audit Committee Review by the GEC The Audit Committee report highlighting the key areas reviewed Following discussion at a GMC where applicable, the feasibility during the financial year 2010/11 is found in the Committee report is then discussed by the GEC and, if found to meet the Report s ection of the Annual Report. Group's strategic and financial objectives will forward the report to the Board (if the investment is beyond the authority limits of the External auditors and independence GEC) for approval in principle to proceed to detailed due diligence and negotiation stage. • Ernst & Young are the external auditors of the holding company and many other Group companies and also audit Performance of a due diligence the consolidated financial statements. • Once approval in principle is obtained, the multi-disciplined • The individual Group companies employ KPMG Ford, Rhodes, project team will proceed to the next phase of investigation Thornton & Co, Pricewaterhouse Coopers, Deloitte and which would focus on detailed operational, commercial, Touché, India and Luthra and Luthra, India. financial and legal due diligence The audits have been distributed in a manner that gives adequate • Discussions will also commence with regulatory and licensing coverage to the Group auditor. In addition to the normal audit authorities, financial institutions and possible partners as services, Ernst and Young and the other external auditors, also relevant and necessary. Social and environmental impacts will provided certain non-audit services to the Group. However, the also be considered in ensuring the sustainability of the lead/consolidator auditor would not engage in any services which business and the communities touched by it are in the restricted category as defined by the CSE for external • Where the transaction involves the transfer or lease of land, auditors. All such services have been provided with the full title searches would be conducted for both private and public knowledge of the respective audit committees and are assessed land. In the case of public land, every step would be taken to to ensure that there is no compromise of external auditor ensure compliance with the rules and regulations. As independence. The Board has agreed that, such non-audit appropriate, written authority and approvals will be obtained services should not exceed the value of the total audit fees • Where the project is part of a privatisation, the entire process charged by the subject auditor within the relevant geographic will be conducted in line with the directives of the relevant territory. The external auditors also provide a certificate of administrative authority as communicated through Expressions independence on an annual basis. of Interest, RFPs, pre-bid meetings and official approvals and correspondence The audit and non-audit fees paid by the Company and Group to • Where necessary, the GEC and/or the Board will appoint a its auditors are separately classified in the Notes to the Financial person to lead the discussions with the relevant authorities on Statements of the Annual Report. behalf of the Company and in most instances this would be the president of the subject industry group. Internal auditors Care is taken to ensure that the internal audit function in Group Final approval by the Board companies is not outsourced to the external auditor of that Subject to the project satisfying all the criteria as highlighted company in a further attempt to ensure external auditor before, the final approval to proceed will be given by the Board. independence.
As is apparent from the foregoing, all investment decisions are The Auditors' report on the financial statements of the Company made through a committee structure and no one individual has for the year under review is found in the Financial Information unfettered decision making powers. section of the Annual Report.
Annual Report 2010/11 65 cORPORATe GOVeRnAnce
System of internal control Exchange, shareholders and the press in a timely manner and in The Board has, through the involvement of the Group Risk and keeping with the regulations. Control Review function, taken steps to obtain assurance that systems designed to safeguard the Company's assets, maintain International Financial Reporting Standards (IFRS) proper accounting records and provide management information, The Group has a committee comprising of financial personnel are in place and are functioning according to expectations. The from within the Group working on the implementation of IFRS as risk review programme covering the internal audit of the whole per the guidelines set by the ICASL. As per the given requirements Group is outsourced and the reports arising out of such audits by the ICASL, IFRS is to be implemented by the start of the are, in the first instance, considered and discussed at the 2012/2013 financial year and JKH is in line to meet this business/ functional unit levels and after review by the sector head requirement. and the president of the industry group are forwarded to the relevant audit committee on a regular basis. Further, the audit Securities trading policy committees also assess the effectiveness of the risk review The Group's securities trading policy prohibits all employees and process and systems of internal control on a regular basis. Follow- agents engaged by JKH who are aware of unpublished price ups on internal audits are done on a structured basis. sensitive information from trading in JKH shares or the shares of other companies in which the Group has a present business Risk management interest. The Board, GEC, GOC as well as certain identified The GEC has adopted a Group-wide risk management employees in senior executive roles who are privy to JKH's results programme, wider sustainability development, to identify, evaluate prior to their availability to the public are prohibited from trading and manage significant Group risks and stress-test for various during periods leading up to the release of quarterly and annual risk scenarios. The programme ensures that a multitude of risks, results, new investments, particularly mergers and acquisitions, arising as a result of the Group's diverse operations, are effectively announcements of scrip issues and dividend payments. managed in creating and preserving shareholder and other stakeholder wealth. The detailed Risk Management report of the Compliance Annual Report describes the process of risk management as The Board, through the Group Legal division, the Group Finance adopted by the Group and the key risks to the achievement of division and its other operating structures, strives to ensure that the Group's strategic business objectives. the Company and all of its subsidiaries and associates comply with the laws and regulations of the countries they operate in. Going concern, financial reporting and disclosure The directors are satisfied that the Company has sufficient The Board of Directors has also taken all reasonable steps in resources to continue in operation for the foreseeable future. In ensuring that all financial statements are prepared in accordance the unlikely event that the net assets of the Company fall below a with the Sri Lanka Accounting Standards and the requirements half of shareholders funds, shareholders would be notified and an of the Colombo Stock Exchange and other applicable authorities. extraordinary resolution passed on the proposed way forward. The Sri Lanka Accounting Standards, as set by the Institute of Chartered Accountants of Sri Lanka, are those, which govern the The going concern principle has been adopted in preparing the preparation of the financial statements. The International financial statements. All statutory and material declarations are Accounting Standard is used in the rare instance where a Sri highlighted in the Annual Report of the Board of Directors in the Lanka Accounting Standard does not exist. The Board is aware Annual Report. Financial statements are prepared in accordance of the growing importance of the disclosure of critical accounting with the Sri Lanka Accounting Standards (SLAS), including all the policies as a part of good governance and opine that there are new standards introduced during the subject year, and no instances where the use of such concept would have a International Accounting Standards (IAS), as applicable. material impact on the Company's and the Group's financial performance. Information in the financial statements of the Annual Report are supplemented by a detailed ‘Management Discussion and The Group has made every effort to comply with the requirements Analysis’ which explains to shareholders the strategic, of the Companies Act of 2007 and the new CSE Listing Rules as operational, investment and risk related aspects of the Company revised in 2011. that have translated into the reported financial performance and are likely to influence future results. Major transactions All material and price sensitive information about the Company is The Statement of Directors' Responsibilities in relation to financial promptly communicated to the Colombo Stock Exchange, where reporting is given in the Financial Information section of the Annual the shares of the Company are listed, and released to the press Report. The directors' interests in contracts of the Company are and shareholders. The Group also publishes three months ended, addressed in the Annual Report of the Board of Directors. six months ended and nine months ended interim reports. The interim and annual reports, contain a Chairman's message which The directors have taken all reasonable steps in ensuring the explains, at a high level, the performance, background and accuracy and timeliness of published information and in rationale for all major transactions. presenting an honest and balanced assessment of results in the quarterly and annual financial statements. As discussed in the shareholder relations section of this note, all price sensitive information has been made known to the Colombo Stock
66 John Keells Holdings PLC STAKEHOLDER COMMUNICATIONS The Company, through its Investor Relations division maintains The JKH Board believes in maintaining open-door policies for its an active dialogue with shareholders, potential investors, employees and key stakeholders and this is promoted at all levels investment banks, stock brokers and other interested parties. Any of the Group. concerns raised by a shareholder are addressed promptly at the department level and are forwarded, when necessary, to the GEC Employee relations for consideration and advice. Analysts reports are circulated The HR units are designed in a manner that enables high among the GEC, as and when available, and its contents debated. accessibility by any employee to every level of management. Constant dialogue and facilitation are also maintained, relating to work-related issues as well as matters pertaining to general The SID is available to meet and or discuss with shareholders interest that could affect employees and their families. The Group regarding any concerns/conflicts that arise during the course of has young fora that meet with the Chairman, Deputy Chairman the financial year. In the current year, there were instances where the SID had such correspondence with major shareholders. and the Group Finance Director in an informal setting to discuss issues of hard and soft matters relating to the Group. The Group also has skip level meetings where an employee can discuss Other stakeholders: Corporate social responsibility and matters of concern with superiors who are at a level higher than sustainability their own immediate supervisor in an open but confidential The Group recognises that it exists not only to maximise long term environment. In addition, the Group has a whistle blower policy shareholder value but also to look after the rights and appropriate in place and an Ombudsperson who an employee or a group of claims of many non-shareholder groups such as employees, employees can complain to, of alleged violations of the published consumers, clients, suppliers, lenders, environmentalists, host Code of Conduct if an alleged violation has not been addressed communities and governments. The John Keells Foundation, the satisfactorily using the available/existing procedures and vehicle used by the Group in developing and implementing the processes. Each of these processes are described in detail in the Group's involvement in 'the community' has geared itself to Stakeholder-Employees at JKH section of the Annual Report. ensure that the social programmes of the Group are consistent with the principles of sustainable development. Shareholder relations JKH released its Sustainability Report which achieved the Constructive use of AGM ‘application level check’ of B+ of the GRI requirements in line with Shareholders have the opportunity at the JKH AGM, to put GRI-G3 guidelines for the current financial year ending 31 March forward questions to the board and to the Chairman-CEO of JKH 2011. Further details regarding corporate sustainability at JKH and the chairmen of the various committees to have better can be found in the separately enclosed Sustainability Report. familiarity with the Group’s business and operational workings. The contents of this Annual Report will enable existing and THE FUTURE prospective stakeholders to make better informed decisions in JKH is committed to conducting its affairs with integrity, efficiency their dealings with the Company. and fairness to all stakeholders. Our approach to governance is of introspection, critical review, continued benchmarking and In general, all steps are taken to facilitate the exercise of improvement. This, we believe, is not a choice as much as it is shareholder rights at AGMs, including the receipt of notice of the essential, as the global investor witnesses a change in the manner AGM and related documents within the specified period, voting in which investments are structured and evaluated. As we seek for the election of new directors, new long term incentive schemes to remain a preferred choice for investment, our key areas of focus or any other issue of materiality that requires a shareholder will remain as follows- resolution. • Creating robust operating structures that are able to evolve to Dialogue with shareholders face the challenges of our strategic plans and continuous reinvention of our portfolio The Company has a well-developed investor relations programme • Maintaining sound internal controls and a robust framework of to address the information needs of investment institutions and risk management and mitigation analysts regarding the Company, its strategy, performance and competitive position. Given the wide geographic distribution of • Developing the depth and reach of our external stakeholder the Company's current and potential shareholders, this relationships, improving transparency and efficiency in programme includes regular roadshows to Asia Pacific, Europe information flows and promoting partnership and mutual and the USA conducted by the Deputy Chairman and the Head understanding between management and external of Investor Relations. Matters discussed, and issues raised, at stakeholders these meetings are brought to the attention of the GEC and/or • Taking a ‘closer look’ at the internal processes, benchmarking the board, as appropriate, and addressed. against international best practices and adopting those that provide for a sustainable value addition to the Group and its stakeholders.
Annual Report 2010/11 67 cORPORATe GOVeRnAnce cHecK LIST
68 John Keells Holdings PLC STAKeHOLdeR-eMPLOYeeS AT JKH
More than just a workplace – an equal opportunity employer The John Keells Group considers its employees as its greatest asset. In recognition of the same, policies, processes and systems are in place to ensure effective recruitment, development and retention as the Group is committed to hiring, developing and promoting individuals who possess the required competencies, skills and experience in carrying out their duties and have the potential for growth.
The Group provides a safe, secure and conducive environment for its employees, allows freedom of association and collective bargaining, prohibits child labour, forced or compulsory labour and any discrimination based on gender, race or religion, and The spread between JKH staff in Sri Lanka and overseas is given promotes workplaces which are free from physical, verbal or below: sexual harassment. JKH staffing Sri Lanka vs overseas* At JKH, employee relations are designed to enable, and facilitate, Sri Lanka Overseas high accessibility by all employees to every level of management. Transportation 522 50 Informal and formal dialogue on matters relating to work, as well Leisure 3,873 586 as of general interest, are encouraged. The several channels of Property 99 0 communication which have been established for varying purposes CF&R 3,029 0 include the following: Financial Services 1,121 0 IT 942 37 Interaction with senior management Other 1,129 1 • Practice of an 'open door' policy by management Total 10,715 674 • Feedback in the form of 360 degree evaluations for * Excludes employees of associate companies employees at assistant vice president and above • Continuous feedback on the Company and its management Pay for performance from different perspectives by holding regular skip level At JKH, the employees are rewarded with a customised ‘pay for meetings at assistant manager and above levels performance’ scheme based on the following: Innovative ideas • Manager and above level: Performance is measured annually • Availability of an online forum to forward new suggestions for on well defined individual and organisation objectives and business opportunities metrics which reflect, and are positively correlated to, the company's objectives, thereby aligning employee, • Facilitation of a knowledge sharing blog and the existence of management and stakeholder interests a ‘bright idea’ channel • Assistant manager and executive level: individual performance Grievance process rating only. • Availability of a direct email address to the Chairman for employees to bring to his notice any transgression of Group The rationale for the exclusion of organisational rating at assistant values when other established avenues have not yielded manager and executive levels was that individuals at those levels results had little direct influence on the bottom line of their organisations. • Availability of an ‘independent’ Ombudsperson for employees Organisational ratings are determined using the annual plan as to meet if they fail to obtain satisfactory results via established the yardstick with adjustments made, as relevant, for the channels in matters relating to Group values and sexual organisation’s performance relative to its peers harassment • Practice of exit interviews for all employees at executive level The rating system which was introduced in 2006/07 has led to and above where all such reports are forwarded to the increased productivity and better performance, greater employee respective Presidents and Executive Vice Presidents for recognition and, consequently, reward and the alignment of comment. Comments are also discussed by the Group employee, management and stakeholder interests Executive Committee The pay for performance system has, as its bedrock, the The strength of the JKH family performance management system (PMS) and the detailed remuneration surveys which the Group conducts on a regular The total staffing of JKH for the year is at 11,389. Given below is basis. A comprehensive review of the PMS was made during the the functional level spread given as a percentage of total staff. year with a view to determining whether the PMS lead to employee behaviour in line with what was expected when it was introduced. Any shortcomings identified were addressed.
Annual Report 2010/11 69 STAKeHOLdeR-eMPLOYeeS AT JKH
Additionally, the Group also engages in ongoing reviews of inculcate a sense of ownership, reduce bureaucracy and speed- remuneration obtained via the participation in other corporate up the decision-making. Annual and five year plans are formulated surveys which are relevant to the Group. In 2010/11, the Group on a bottom-up basis using futuristic scenarios developed by the also conducted a climate survey titled ‘Great Place to Work’ GEC and GMCs and macro economic factors developed by the (GPTW) during the year to better understand the varying needs corporate centre. of the staff. The GPTW survey benchmarked the Group against the top 25 companies in India and the Fortune 100 companies in Employee communication employee satisfaction aspects including credibility, management Whilst great strides have been taken in improving both the formal competency and employee engagement. and informal communication within the Group, it is yet to take the form, and be in the extent, that is desired. The importance of Key principles of the compensation policy communication, top-down, bottom-up and lateral in gaining The Group believes in a Compensation Policy based on equal pay employee commitment to organisational goals has been for equal roles, irrespective of gender. conveyed, extensively, and intensively, through various communiqués issued by the Chairman-CEO and other senior The key principles underlying the Group's remuneration policy managers. The tone from the top in this respect has been, and are- is, unrelenting. The Group continues to have an innovative mind set when making future plans and encourages all employees at • All Assistant Vice President (AVP) and above roles are banded all levels to be innovative when addressing the emerging needs by an independent third party on the basis of the relative of the consumer. worth of jobs, thereby enabling internal equity • Fixed compensation is set at competitive levels to enable the Skip level meetings recruitment and the retention of high calibre executives in the Skip level meetings were, once again, conducted throughout the identified career levels/job bands - using the median, 65th Group companies in 2010/11 for assistant manager and above percentile and 75th percentile of the best comparator set of levels. Whilst this enabled employees to interact and discuss, with companies (from Sri Lanka and the region, where relevant) as superiors who are at a level higher than their own immediate a guide supervisor, the sincerity, and the openness, of the process • Compensation, comprising of fixed (base) payments, short resulted in the subject employees participating in the meetings term incentives and long term incentives are based on ‘pay with more enthusiasm and purpose. This enabled to have a first- for performance’ as described earlier hand feedback on the aspirations of all levels of employees. The • The more senior the level of management, the higher the feed-back so obtained will be used in structuring new employee proportion of the incentive component, and thereby lower the processes and/or revising existing employee processes. proportion of the fixed (base) component in the total target compensation Young forum • As the decision influencing capability of a role increases, the With a view to broadening the top level communication with the individual performance holds lesser weightage than the rest of the Group employees, young fora consisting of the 7 organisational performance in determining total compensation youngest ladies and gentlemen at various levels within the Group and incentives were introduced starting this year. The goal of this forum is for these young representatives to meet with the Chairman, Deputy • Long term incentives have, up to now, taken the form of Chairman and the Group Finance Director, in an informal setting, Employee Share Options (ESOP). They have been offered to to discuss both hard and soft issues relating to the Group employees, in defined career levels, based on pre-determined operations. One suggestion made by one such group was to criteria which are uniformly applied across the eligible levels. establish an on-line forum, through the JKH intranet, which would Such options are offered at market prices prevailing on the enable the employees to share knowledge not only on ‘work’ date of the offer. The last ESOP award was made on 9 matters but also on ‘life’ matters such as health, wealth and other December 2010 important topics that could enhance their lives, outside of work. • All remuneration policies are ultimately based on This latest addition to the communication tools at JKH also has considerations of affordability and sustainability been productive in gaining trust amongst the employees that their • Clear communication, and the transparency, of current and suggestions for new businesses or process improvements are proposed policies are deemed a must heard by the senior management as they too contribute to the forum. The process mentioned above is reviewed regularly for any shortcomings and steps are taken to address any issues Whistleblower policy identified. The employees can report to the Chairman through a communication link named ‘Chairman Direct’, concerns about Employee involvement and empowerment unethical behaviour and any violation of Group values. Employees Top management and other senior staff are mandated to involve, reporting such incidents are guaranteed complete confidentiality as appropriate, all levels of staff in formulating goals, strategies and such complaints are investigated and addressed via a select and plans. Decision rights are defined for each level in order to committee under the direction of the Chairman.
70 John Keells Holdings PLC Ombudsperson The Ombudsperson is to entertain complaints, from an employee or a group of employees, of alleged violations of the published Code of Conduct, when that employee or group of employees feel that an alleged violation has not been addressed satisfactorily using the available/existing procedures and processes.
The findings of the Ombudsperson and recommendations arising there from shall be confidential and be communicated to the Chairman/CEO or the Senior Independent Director, as applicable, and thereupon the Ombudsperson’s duty ceases.
The Chairman/CEO or the Senior Independent Director, as the case may be, will place before the Board- I. the decision and the recommendations II. action taken based on the recommendations III. where the Chairman/CEO or the Senior Independent Director disagrees with any or all of the findings and or the recommendations thereon, the areas of disagreement and the reasons therefore.
In situation (iii) the board is required to consider the areas of disagreement and decide on the way forward. The Chairman/CEO or the Senior Independent Director is expected to take such steps as are necessary to ensure that the complainant is not victimised for having invoked this process.
Corporate communications The corporate communications (Corp Coms) team plays an integral role in keeping all employees informed of Group happenings and milestones. One of its main aims is to enhance and safeguard the ‘John Keells’ corporate brand. Accordingly, it engages in activities to build the brand amongst its employees, potential employees and the public in general. The main communication channels used are the Group’s Intranet myPortal, the quarterly newsletter JK Puwath, the corporate website, the media and participation at brand building events. Corp Coms works very closely with the John Keells Foundation to create awareness and secure the voluntary participation of Group employees and other stakeholders in programmes which promise sustainable development.
Annual Report 2010/11 71 RISK MAnAGeMenT
Risk management is an integral part of ‘Sustainability’ at JKH and CURRENT STATUS - MODERATE AND ABOVE MODERATE has enabled the Group to identify and manage risks, harness RISKS opportunities, adapt to the changing environment and adopt long For the financial year ending 31 March 2011 the sub categories term and short term strategies which link well with the overall considered to be of moderate to ultra high risk were objectives of the Group. macro-economic conditions, the legal and regulatory compliance structures in the jurisdictions the Group operates in and The identification of risk categories is founded on the success stakeholders particularly employees including human resources factors which are critical for the implementation and attainment management and customers. of Group objectives. The Group has identified external environment, business strategies and policies, organisation and Macro-economic conditions people, business processes and technology and data as the main Financial year 2010/11 2009/10 2008/09 2007/08 risk categories that could have an impact on the Group. These main categories of risks are further analysed into sub components Risk rating Moderate Moderate Ultra High Ultra High using a universal risk register, which has been adapted by the Group, over the years, to cater to the Group's specific needs. Status and action plan Since the end of hostilities in mid 2009, the Government of Each risk event is analysed by a simple formula that identifies Sri Lanka has been aggressively developing the infrastructure of possible occurrence, the likelihood of occurrence (probability) and the country such as roads, bridges, power plants, ports, airports
outcome (severity). Risk review is a continuous process in the etc. which has enabled the lowering of the risk ratings from ultra Group companies. Internal risk management is complemented by high in 2007/08 to a Moderate in 2010/11. However, the a Group-wide Stakeholder engagement process. Risk issues increased activity in tourism and the significant increase identified during the Stakeholder engagement process are anticipated in per capita income and growth in the economy considered and addressed through the selection of a relevant demands an acceleration of the infrastructure development indicator found in the Global Reporting Initiative (GRI) framework. progress. The Group has made various overtures to the Some of the issues which are not directly addressed by the authorities in encouraging private public partnership projects in indicators are monitored through the relevant risk matrix. The risks this regard. The Group will continue to support and encourage matrices are reviewed quarterly with the emphasis on the the government in this respect, directly as well as through outcome of either mitigation, transfer, avoidance or acceptance chambers, trade associations and other lobby groups. of the risk based on the risk appetite. Legal and regulatory uncertainties The continuous updating of the risk documentation is coordinated centrally giving GEC/ Management Committees of the businesses Financial year 2010/11 2009/10 2008/09 2007/08 virtual access to an overall picture of the risk status at business Risk rating Moderate High Ultra high High unit, sector, industry group and overall Group level through the documented reporting channels. Status and action plan There has been considerable progress made in this area with the introduction of guidelines and regulations relating to the conduct of business and other investment activities by the authorities.
72 John Keells Holdings PLC However more work needs to be done. Internal processes are in successful in lowering the risks that were identified as high to place to identify changes to legislation and possible changes to medium risks in the past. Though some risks were lowered due legislation in a timely manner allowing the Group to adapt as to the current improvement in the country situation most others appropriate. The Group is also working with various fora such as have been lowered due to internal processes that have been industry associations and chambers in urging the government to implemented and proactive measures taken. strengthen clarity and consistency in this area. Political & economic confidence Stakeholder – Employees and human resources Financial year 2010/11 2009/10 2008/09 2007/08 management Risk rating Low Moderate High Ultra High Financial year 2010/11 2009/10 2008/09 2007/08 Risk rating High Moderate Moderate Moderate The structural visibility and the linkages between national economic objectives and the institutions that facilitate and Status and action plan implement them have improved over time and therefore the political and economic status of the country has significantly High calibre employees are attracted to the Group companies due improved in the last year and subsequently, an increased investor to many factors such as working environment, performance interest in Sri Lanka due to the investment potential offered. recognition, career development and reward and benefit plans. Whilst Group companies have many programmes in place to JKH too has been working with international partners in projecting retain good employees such as short term incentives and long Sri Lanka’s potential in this regard and has experienced a positive term incentives in the form of employee share option plans, there response. JKH being a member of key bodies such as Chamber is yet a risk of losing them due to migration and to the market. of Commerce, National Council for Economic Development (NCED) and other various trade associations, will continue to work The Group is actively carrying out many brand awareness with the relevant authorities in creating a better economic programmes amongst current and potential employees in order environment for all. to attract and retain skilled staff. The Group also conducted an employee survey titled ‘Great Place to Work’ (GPTW) during the Brand control and protection threats year to better understand the needs of the staff and to proactively address them. Although the GPTW survey conducted recently Financial year 2010/11 2009/10 2008/09 2007/08 showed improvement from the results obtained in 2005, it is Risk rating Low Moderate Moderate Moderate recognised that there are some areas where the Group needs to improve, in order to make JKH a truly a great place to work, not The pursuit of ‘sustainable development’, particularly in the last just in the local environment but also from a global context. Focus three years, has resulted in the enhancement of the JKH brand groups have been enlisted to address the areas of concerns. through media exposure received on the Group’s financial performance, governance structure and CSR activities. Efforts are Stakeholder-Employees at JKH section outlined in the Annual monitored through triple bottom line reporting via sustainability Report summarises the steps taken by the Group in mitigating indicators. Senior management’s participation at various fora, and the above described risks. the imparting of their knowledge and skills to the society at large have also contributed immensely towards brand building. Stakeholder - Customers Environmental health and safety concerns Financial year 2010/11 2009/10 2008/09 2007/08 Financial year 2010/11 2009/10 2008/09 2007/08 Risk rating Ultra high Moderate Moderate Moderate Risk rating Low Moderate Moderate Moderate Status and action plan By encompassing the sustainability initiatives which include GRI Many globally renowned business organisations are looking at Sri indicators, the Group has set up formal processes for establishing Lanka as a possible investment destination. Some of them have policies and for monitoring performance periodically regarding the already taken steps to establish themselves in the country. In this risk associated with Group’s environmental, health and safety light, it is essential that the Group sharpens its ability to serve (EHS) concerns. These concerns are addressed through a system customer needs. The failure to do so will invariably result in loss of reports which confirm compliance with applicable laws and of market share and competitor advantage. The Group has regulations, company performance standards, and other external already taken steps by tying up with internationally reputed requirements. In the event of an emergency, relevant procedures organisations in areas of training and development. Further, the and trained personnel are in place to ensure that all risks are Group will enhance its research and development capabilities and minimised or mitigated. Sessions were also conducted on the will continuously scan the external environment with a view to proper usage of Personal Protective Equipments (PPE) in mainly establishing best practice benchmarks. factory and hotel environments and tsunami evacuation procedures are periodically tested involving both guests and CURRENT STATUS - LOW RISKS associates especially in the hotels. The Group EHS task force has As Risk mitigation and control are considered key for the growth successfully implemented OHSAS 18000 in many of the Group of Group companies, the Group has taken active steps to reduce companies that are not operating in an office or IT environment risks identified over the years and, as indicated below, have been and work is in progress in others.
Annual Report 2010/11 73 RISK MAnAGeMenT
Financial exposures Internal operational process efficiencies Financial year 2010/11 2009/10 2008/09 2007/08 Financial year 2010/11 2009/10 2008/09 2007/08 Risk rating Low Moderate Moderate Moderate Risk rating Low Moderate Moderate Moderate
The centralised treasury and finance functions of the JKH Group This is an area where much work has been performed over the are responsible for the management of the Group’s financial risks years. Cross functional teams comprising of employees and together with its liquidity and financing requirements. Treasury consultants that are subject matter experts have reviewed and and finance operations are conducted within a framework of strengthened the Company’s information systems and business policies and guidelines approved and monitored by the GEC. The processes in keeping with the latest regulatory requirements. finance and treasury framework is reviewed regularly and are fine Environments so implemented enable business users to balance tuned to meet the Group’s current and anticipated operating between performance and control. Furthermore, the Group needs. This framework also facilitates the execution of board provides the user the opportunity through these structured approved strategies for interest rates, currency and liquidity processes to manage and mitigate risk, making John Keells management. businesses more competitive in the market.
Information technology dependency Financial year 2010/11 2009/10 2008/09 2007/08 . Risk rating Low Moderate Moderate Moderate
JKH operations are reliant on information technology. The increased centralisation of IT systems allows more disciplined and uniform enforcement of security measures across the Group. JKH Group companies and the centralised IT function comply with a strict IT security policy and appropriate security safeguards have been implemented and are continuously monitored to ensure the security, privacy and confidentiality of the IT systems, especially in order to mitigate the risks when operating under a centralised system. Planning for worse-case scenarios, such as complete system failures, by having disaster recovery procedures in place, have enabled the Group to focus on the methods and speed of recovery required which are imperative in such instances. Business continuity plans have been or are being implemented Group wide in order to mitigate the identified risks.
74 John Keells Holdings PLC FInAncIAL InFORMATIOn AnnuAl RepoRt of the BoARd of diRectoRs
The directors have pleasure in presenting the 32nd annual report of The final dividend of Rs.1.00 per share for the financial year 2009/10 your company together with the audited financial statements of John (2009 – Rs.1.00) was paid on 10 June 2010. First interim dividend of Keells Holdings PLC (JKH), and the audited consolidated financial Rs.1.00 per share for the year 2010/11 (2010 – Rs.1.00) was paid statements of the group for the year ended 31 March 2011. on 1 December 2010. A second interim dividend for 2010/11 of Rs.1.00 per share was paid on 16 March 2011 (2010 – Rs.1.00). This PRINCIPAL ACTIVITIES results in a total dividend pay-out of Rs.3.00 per share (2010 – John Keells Holdings PLC, the group’s holding company, manages a Rs.3.00) amounting to Rs.1,869 mn (2010 - Rs.1,844 mn). portfolio of holdings consisting of a range of diverse business operations, which together constitute the John Keells group, and Dividend per share has been computed based on the amount of provides function based services to its subsidiaries and associates. dividends recognised as distribution to the equity holders during the period. The companies within the group and its business activities are described in the group directory under the supplementary information As required by Section 56 (2) of the Companies Act No 7 of 2007, section of the annual report. the Board of directors has confirmed that the company satisfies the solvency test in accordance with Section 57 of the Companies Act REVIEW OF BUSINESS SEGMENTS No 7 of 2007, and has obtained a certificate from the auditors, prior A review of the financial and operational performance and future to declaring a final dividend of Rs.1.00 per share for this year. The business developments of the group, sectors, and its business units final dividend will be paid on 9 June 2011 to those shareholders on are described in the management discussion and analysis section of the register as on 30 May 2011. the annual report. These reports together with the audited financial Detailed description of the results and appropriations are given below; statements reflect the state of the affairs of the company and the group. For the year ended 31 March 2011 2010 Segment wise contribution to group revenue, results, assets and In Rs.'000s liabilities is provided in note 32 to the financial statements. Profit earned before interest, after In June 2010, Fitch Ratings affirmed the National long-term rating for providing for all known liabilities, bad JKH at 'AAA(lka)'. Fitch also affirmed the National long-term rating on and doubtful debts and depreciation JKH's senior unsecured notes at 'AAA(lka)'. JKH's rating reflected on property, plant and equipment 6,521,291 5,237,068 the diversified nature of its businesses, the currently strong financial Interest paid (796,074) (1,370,156) profile driven in part by its high cash position, continued strong 5,725,217 3,866,912 operating cash generating ability and the dominant market share of Profit on sale of non-current investments 1,795,069 114,776 its subsidiaries. Change in fair value of investment property 467,764 - Profit accruing to the company In August 2010, John Keells Holdings PLC, disposed of 11.62 million and subsidiaries 7,988,050 3,981,688 shares held in Asian Hotels and Properties PLC, for a consideration Share of results of associates 2,640,911 2,555,867 of Rs.1.98 billion. Profit before tax 10,628,961 6,537,555 In September 2010, JKH disposed of 37.5 million shares held in John Provision for taxation including Keells Hotels PLC, for a consideration of Rs.787.5 million. deferred tax (1,565,801) (985,240) Profit after tax 9,063,160 5,552,315 In March 2011, the company purchased a further 5,604,200 shares Profit attributable to minority shareholders (817,575) (350,824) of Union Assuarance PLC for a consideration of Rs.841million, Amount available to the group's increasing its stake to 95.6%. shareholders 8,245,585 5,201,491 Other adjustments 101,258 3,785 In March 2011, the company acquired 4.2 million shares of Nations Balance brought forward from the Trust Bank PLC through the conversion of warrants with an previous year 12,768,823 9,415,309 investment of Rs.146.8 million, thereby maintaining its percentage Amount available for appropriation 21,115,666 14,620,585 stake in the bank. 1st interim dividend of Rs.1.00 per share REVENUE (2010 - Rs.1.00) paid out of dividend received (623,037) (612,834) Revenue generated by the company amounted to Rs.554 million (2010 - 2nd interim dividend of Rs.1.00 per share Rs.544 million), whilst group revenue amounted to Rs.60,500 million (2010 (2010 - Rs.1.00) paid out of - Rs.47,980 million). Contribution to group revenue, from the different dividend received (625,803) (619,455) business segments is provided in note 23, to the financial statements. 19,866,826 13,388,296 RESULTS AND APPROPRIATIONS Final dividend declared of Rs.1.00 per share (2010 – Rs.1.00) The profit after tax of the holding company was Rs.5,963 million to be paid out of dividend received* (629,693) (619,473) (2010 - Rs.4,661 million) whilst the group profit attributable to equity Balance to be carried forward next year 19,237,133 12,768,823 holders of the parent for the year was Rs.8,246 million (2010 - Rs.5,201 million). * The final dividend recommended for this financial year has not been Results of the company and of the group are given in the income recognised as at the balance sheet date in compliance with SLAS 12 statement. (Revised 2005) - Events after the Balance Sheet Date.
76 John Keells Holdings PLC ACCOUNTING POLICIES M/s A Y Daniel & Son, Incorporated Valuer, R G Wijesinghe, Details of accounting policies have been discussed in note 1 of the Consultant Valuer and Assesor, Haleen Gouse, Incorporated Valuer financial statements. There have been no changes in the accounting and J M J Fernando, Incorporated Valuer. policies adopted by the group during the year under review. All properties classified as investment property were valued in accordance with the requirements of SLAS 40 (2005). The DONATIONS investment property carried by the company was re-valued at Rs.925 Total donations made by the company and group during the year million (carrying value 2010 – Rs.899 million) and sold to John Keells amounted to Rs.6 million (2010 - Rs.10.4 million) and Rs.16 million Residential Properties (Pvt) Ltd. The group revalued all its (2010 - Rs.19 million), respectively. Of these, the donations to investments properties as at 31 March 2011. The carrying value of approved charities were Rs.5.6 million (2010 - Rs.10 million) at investment property of the group is Rs.5,386 million (2010 - Rs.2,334 company and Rs.13 million (2010 - Rs.15.3 mn) at group. These million). amounts do not include contributions on account of corporate social responsibility (CSR) initiatives. Investment properties of business units, when significantly occupied by group companies, are classified as property, plant and equipment in the The John Keells Foundation, which operates with funds contributed consolidated financial statements in compliance with SLAS 40 (2005). by each of the companies in the group, handles most of the group’s CSR initiatives and activities. The Foundation manages a range of Details of the revaluation of property, plant and equipment and programmes that underpin its key principle of acting responsibly in all investment property are provided in notes 2.5 and 4.1 to the financial areas of business to bring about sustainable development. The CSR statements. initiatives, including completed and on-going projects, are detailed in the sustainability report in the annual report. Details of group properties as at 31 March 2011 are disclosed in the Group Real Estate Portfolio section of the annual report. In quantifying the group’s contribution to charities, no account has been taken of ’in-house’ costs or management time. INVESTMENTS Investments of the company and the group in subsidiaries, PROPERTY, PLANT AND EQUIPMENT associates, joint ventures and other external equity investments The book value of property, plant and equipment as at the balance amounted to Rs.33,321 million (2010 - Rs.30,962 million) and sheet date amounted to Rs.74 million (2010 - Rs.112 million) and Rs.58,206 million (2010 - Rs.50,978 million), respectively. Rs.28,628 million (2010 - Rs.29,989 million) for the company and group respectively. Detailed description of the long term investments held as at the balance sheet date, are given in note 6 to the financial statements. Capital expenditure for the company and group amounted to Rs.4.8 mn (2010 - Rs.5.2 mn) and Rs.4,978 mn (2010 - Rs.1,782 mn), STATED CAPITAL respectively. The authorised capital and par value concept in relation to share Details of property, plant and equipment and their movements are capital were abolished by the Companies Act No 07 of 2007. The given in note 2 to the financial statements. total amounts received by the company in respect of the issue of shares are now referred to as stated capital. The total stated capital of the company as at 31 March 2011 was Rs.24,611million MARKET VALUE OF PROPERTIES (2010 - Rs.23,322 million) as given in note 12 to the financial All land and buildings owned by group companies were revalued in statements. financial year 2007/08, with the following exceptions; Options in respect of 10,218,735 shares (2010 – 8,120,636 shares) Wirawila Walk Inn Ltd was revalued in financial year 2008/09. were exercised during the year under the employee share option plan, for a total consideration of Rs.1,289 million Trinco Walk Inn Ltd, International Tourist and Hoteliers Ltd, Trinco (2009 - Rs.797 million). Holiday Resorts (Private) Ltd, Union Assurance PLC, were revalued in the financial year 2009/10. SHARE INFORMATION
John Keells Holdings PLC, John Keells PLC, Mackinnons and Keells The distribution and composition of shareholders and the information Financial Services Ltd, Keells Realtors Ltd, Whittall Boustead Ltd, JK relating to earnings, dividend, net assets, market value per share and Properties (Pvt) Ltd, Yala Village (Pvt) Ltd, Ceylon Cold Stores PLC share trading is given in the share information section of the annual and Ceylon Holiday Resorts Ltd, were revalued in the financial year report. 2010/11. Given below, as additional disclosure, are the John Keells Holding’s Valuations were carried out by P B Kalugalgedera, Chartered Board of directors’ shareholdings in group companies as at 31 March Valuation Surveyor, G J Sumanasena, Incorporated Valuer, 2011.
Annual Report 2010/11 77 AnnuAl RepoRt of the BoARd of diRectoRs
John Keells Holdings PLC (JKH) MAJOR SHAREHOLDERS S C Ratnayake - 3,434,928 (2010 – 3,403,909) Details of the twenty largest shareholders of the company and the percentages held by each of them are disclosed in the share A D Gunewardene – 4,279,992 (2010 – 3,903,830) information section of the annual report. J R F Peiris – 737,095 (2010 – 415,790) RESERVES E F G Amerasinghe - 4,136 (2010 – 4,136) Total reserves as at 31 March 2011 for the company and group T Das - Nil (2010 - Nil) amounted to Rs.13,439 million (2010 - Rs.9,345 million) and S Enderby - Nil (2010 - Nil) Rs.34,975 million (2010 - Rs.26,510 million), respectively.
P D Rodrigo - Nil (2010 - Nil) The movement and composition of the capital and revenue reserves S S Tiruchelvam – Nil (2010 - Nil) is disclosed in the statement of changes in equity.
I Coomaraswamy – Nil (2010 – N/A) DIRECTORS The Board of directors of the company as at 31 March 2011 and their Options available under the employee share option plan of JKH brief profiles are given in the Board of directors section of the annual S C Ratnayake – 1,658,609 (2010 – 1,778,099) report. A D Gunewardene – 1,451, 308 (2010 – 1,554,882) In accordance with Article 84 of the Articles of Association of the J R F Peiris – 1,238,357 (2010 - 1,326,015) company, E F G Amerasinghe and S Enderby retire by rotation and being eligible offer themselves for re-election. Asian Hotels and Properties PLC The company has also received notice of the resolution to propose S C Ratnayake – 10,000 (2010 – 10,000) the re-election of T Das who is over 70 years of age and who retires in terms of section 210 of the Companies Act. The resolution Ceylon Cold Stores PLC proposes that the age limit stipulated in Section 210 of the S C Ratnayake – 760 (2010 - 760) Companies Act No 7 of 2007 shall not apply to T Das who is over 70 years and that he be re-elected a director of the company. A D Gunewardene – 7,000 (2010 - 7,000) J R F Peiris - 150 (2010 - 150) On 7 February 2011 Dr Indrajit Coomaraswamy was appointed to the board as an independent director. John Keells Hotels PLC In accordance with Article 91 of the Articles of Association of the S C Ratnayake – 550,311 (2010 - 550,311) company, Dr Indrajit Coomaraswamy retires by rotation and being A D Gunewardene – 74,806 (2010 - 74,806 eligible offer himself for re-election.
Keells Food Products PLC The group directory details the names of persons holding office as directors of the company and all its subsidiary and associate S C Ratnayake – 4,250 (2010 - 4,250) companies, as at 31 March 2011 and the names of persons who were appointed or who ceased to hold office as directors during the Nations Trust Bank PLC period. A D Gunewardene – 5,756,249 (2010 – 4,652,212) BOARD COMMITTEES Warrants held at Nations Trust Bank PLC The following members serve on the Board, Audit, Remuneration and A D Gunewardene Nomination Committees; Warrants 2011 – Nil (2010 – 1,057,627) Audit Committee Trans Asia Hotels PLC P D Rodrigo - Chairman S C Ratnayake – 200 (2010 - 100) E F G Amerasinghe A D Gunewardene - 200 (2010 - 100) S Enderby J R F Peiris - 200 (2010 - 100) S S Tiruchelvam Union Assurance PLC The report of the audit committee is given under the Board committee A D Gunewardene – 3,746 (2010 – 3,746) reports section of the annual report.
78 John Keells Holdings PLC Remuneration Committee Chairman/CEO, A D Gunewardene, Deputy Chairman/President, and J R F Peiris, Group Finance Director for the period 1 April E F G Amerasinghe - Chairman 2010 to 31 March 2011 comprising of; P D Rodrigo • an increment from 1st July 2010 based on the individual S S Tiruchelvam performance rating obtained by the executive directors in terms of the performance management system of the John The report of the remuneration committee is given under the Board Keells group committee reports section of the annual report and the remuneration policy is given in the corporate governance report. • short term variable incentive based on individual performance, organization performance and role Nominations Committee responsibility based on the results of the financial year 2009/2010 paid in July 2010; and T Das - Chairman S Enderby • long term Incentive in the nature of ESOP in John Keells Holdings PLC dependant on the aforesaid performance rating, S C Ratnayake organizational rating and role responsibility granted in S S Tiruchelvam December 2010
The report of the nominations committee is given under the Board as recommended by the remuneration committee having conducted committee reports section of the annual report. market surveys, spoken to experts and having taken into consideration the specific management complexities associated with the John Keells group and in keeping with the group remuneration policy. INTERESTS REGISTER The company has maintained an interests register as contemplated 2. Further to the appointment of Dr I Coomaraswamy as a non by the Companies Act No 7 of 2007. executive director of John Keells Holdings PLC from 7th February 2011, the Board approved the payment to Dr I Coomaraswamy In compliance with the requirements of the Companies Act No. 7 of of the standard Non Executive fees approved by the Board for 2007, this annual report also contains particulars of entries made in Non Executive Directors, which are commensurate with the the interests registers of subsidiaries which are public companies or market complexities of the company. private companies which have not dispensed with the requirement to maintain an interests register as permitted by Section 30 of the Companies Act No 7 of 2007. Particulars of entries in interests register of subsidiaries Asian Hotels & Properties PLC
Particulars of entries in the JKH interests register Indemnities and remuneration Interests in contracts The Board approved the payment to R J Karunarajah and Mr S Rajendra, executive directors of the company, of remuneration, The directors have all made a general disclosure to the Board of comprising of; directors as permitted by Section 192 (2) of the Companies Act No 7 of 2007 and no additional interests have been disclosed by any • an increment from 1st July 2010 based on the individual director. performance rating obtained by the executive directors in terms of the performance management system of the John Keells a) Share dealings: group; and
NAME OF DIRECTOR NATURE OF SHARE DEALING • short term variable incentive based on individual performance, S C Ratnayake Sale of 400,000 shares and 431,019 organization performance and role responsibility based on the share options exercised under ESOP results of the financial year 2009/2010, paid in July 2010; and
A D Gunewardene 376,162 share options exercised • long term Incentive in the nature of ESOP in John Keells Holdings under ESOP PLC dependant on the aforesaid performance rating, J R F Peiris 321,305 share options exercised organizational rating and role responsibility granted in December under ESOP 2010 b) Indemnities and remuneration as recommended by the remuneration committee of John Keells Holdings PLC the holding company of Asian Hotels & Properties PLC 1. The Board approved the payment of remuneration of the in keeping with the group remuneration policy. executive directors of the company, namely, S C Ratnayake,
Annual Report 2010/11 79 AnnuAl RepoRt of the BoARd of diRectoRs
Ceylon Cold Stores PLC John Keells Hotels PLC Indemnities and remuneration Share dealings: The Board approved the payment to the executive director of the NAME OF DIRECTOR NATURE OF SHARE DEALING company J R Gunaratne of remuneration, comprising of; Mr. M A Omar Purchase of 2,800,000 shares by • an increment from 1st July 2010 based on the individual Phoenix Ventures (Pvt) Limited performance rating obtained by the executive directors in terms of the performance management system of the John Keells Walkers Tours Ltd. group; Indemnities and remuneration The Board approved payment to the executive director of the • short term variable incentive based on individual performance, company V Leelananda of remuneration, comprising of; organization performance and role responsibility based on the results of the financial year 2009/2010, paid in July 2010; and • an increment from 1st July 2010 based on the individual performance rating obtained by the executive directors in terms • long term Incentive in the nature of ESOP in John Keells Holdings of the performance management system of the John Keells PLC dependant on the aforesaid performance rating, group organizational rating and role responsibility granted in December 2010 • short term variable incentive based on individual performance, organization performance and role responsibility based on the as recommended by the remuneration committee of John Keells results of the financial year 2009/2010 paid in July 2010; and Holdings PLC the holding company of Ceylon Cold Stores PLC in keeping with the group remuneration policy. • long term Incentive in the nature of ESOP in John Keells Holdings PLC dependant on the aforesaid performance rating, Keells Hotel Management Services Ltd. organizational rating and role responsibility granted in December Indemnities and remuneration 2010 The Board approved the payment to the executive director of the company J E P Kehelpannala of remuneration, comprising of; as recommended by the remuneration committee of John Keells Holdings PLC the holding company of Walkers Tours Limited in • an increment from 1st July 2010 based on the individual keeping with the group remuneration policy. performance rating obtained by the executive directors in terms of the performance management system of the John Keells group John Keells PLC Indemnities and remuneration • short term variable incentive based on individual performance, The Board approved payment to the executive director of the organization performance and role responsibility based on the company L D Ramanayake of remuneration, comprising of; results of the financial year 2009/2010 paid in July 2010; and • an increment from 1st July 2010 based on the individual • long term Incentive in the nature of ESOP in John Keells Holdings performance rating obtained by the executive directors in terms PLC dependant on the aforesaid performance rating, of the performance management system of the John Keells organizational rating and role responsibility granted in December group 2010. • short term variable incentive based on individual performance, as recommended by the remuneration committee of John Keells organization performance and role responsibility based on the Holdings PLC the holding company of Keells Hotel Management results of the financial year 2009/2010 paid in July 2010; and Services Limited in keeping with the group remuneration policy. • long term Incentive in the nature of ESOP in John Keells Holdings Trans Asia Hotels PLC PLC dependant on the aforesaid performance rating, Share dealings organizational rating and role responsibility granted in December 2010 NAME OF DIRECTOR NATURE OF SHARE DEALING N L Gooneratne Purchase of 84,300 shares as recommended by the remuneration committee of John Keells and Sale of 400 shares Holdings PLC the holding company of John Keells PLC in keeping with the group remuneration policy.
80 John Keells Holdings PLC DIRECTORS’ REMUNERATION The options outstanding under the 3rd award of plan 3 and under Details of the remuneration and other benefits received by the plan 4, 5 and 6 were valid for exercise as at 31 March 2011. directors are set out in note 28 of the financial statements. The key principles of the group’s compensation policy appears in the The highest, lowest and the closing prices of the share recorded governance section of the annual report. during the year were Rs.360.00, Rs.177.00 and Rs.285.60 respectively.
EMPLOYEE SHARE OPTION PLAN Company has not granted any funding to employees to exercise At the beginning of the year, the employee share option plan options. consisted of the third, fourth and fifth plans approved by the shareholders on 28 June 2004, 13 December 2007 and 2 December Details of the options granted, options exercised, the grant price and 2009 respectively. the options cancelled or lapsed and outstanding as at the date of the directors' report have been tabulated below. Under the third plan, the company was authorised to issue up to 5% of the issued share capital within an annual limit of up to 2% of non- CORPORATE GOVERNANCE transferable call share options and the options granted under this plan have to be exercised within five years of such grant. Under the Directors’ declarations fourth plan, the company was authorised to issue non-transferable The directors declare that having considered all information and call share options, not exceeding in aggregate 0.85% of the shares explanations made available to them that; in issue of the company as at the date of granting the award and have to be exercised within five years of such grant. On 2 December a) the company complied with all applicable laws and regulations 2009, the shareholders approved a fifth plan, whereby the company in conducting its business. could issue non-transferable call share options, not exceeding 1% of the shares in issue of the company as at the date of granting the b) the directors have declared all material interests in contracts award and have to be exercised within five years of such grant. On involving the company and refrained from voting on matters 6 December 2010, shareholders approved a sixth plan, whereby the in which they were materially interested. company could issue non-transferable call share options, not exceeding in aggregate 0.75% of shares in issue of the company as c) the company has made all endeavours to ensure the equitable at the date of granting the award and have to be exercised within treatment of shareholders. five years of such grant.
EMPLOYEE SHARE OPTION PLAN (ESOP)
EMPLOYEE SHARE OPTION PLAN (ESOP) AS AT 31ST MARCH 2011 Date of Shares Expiry Option Shares * Exercised Lapsed / Outstanding Current grant granted date grant adjusted cancelled price * price
PLAN 3 Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 8,953,047 1,348,812 - 120.74 Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 1,606,493 1,137,970 7,806,599 146.00 17,196,637 20,852,921 10,559,540 2,486,782 7,806,599
PLAN 4 25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 894,575 233,350 4,278,020 120.00 PLAN 5 17.12.2009 6,126,960 16.12.2014 160.25 6,126,960 551,337 19,460 5,556,163 160.25 PLAN 6 09.12.2010 4,672,823 08.12.2015 292.00 4,672,823 9,800 3,200 4,659,823 292.00 Total 33,402,365 37,058,649 12,015,252 2,742,792 22,300,605
* Adjusted for bonus issues and right issues
Annual Report 2010/11 81 AnnuAl RepoRt of the BoARd of diRectoRs
d) the business is a going concern with supporting assumptions ENVIRONMENTAL PROTECTION or qualifications as necessary, and The group complies with the relevant environmental laws, regulations and endeavors to comply with best practices applicable in the e) have conducted a review of internal controls covering financial, country of operation. A summary of selected group activities in the operational and compliance controls and risk management above area is contained in the sustainability Report. and have obtained a reasonable assurance of their effectiveness and successful adherence herewith. RESEARCH AND DEVELOPMENT The corporate governance report is given under the governance The group has an active approach to research and development and section of the annual report. recognises the contribution that it can make to the group’s operations. Significant expenditure has taken place over the years and substantial efforts will continue to be made to introduce new SUSTAINABILITY products and processes and develop existing products and The group pursues its business goals under a stakeholder model of processes to improve operational efficiency. business governance. As per this model, the group has taken specific steps, particularly, in ensuring the conservation of its natural resources and environment. These steps have been encapsulated STATUTORY PAYMENTS in a group-wide sustainability programme which was launched in The directors confirm that to the best of their knowledge, all taxes, 2008/2009 and has since progressed significantly. The separate duties and levies payable by the company and its subsidiaries, all Sustainability Report details such progress. Det Norske Veritas AS contributions, levies and taxes payable on behalf of, and in respect (DNV) has confirmed that the sustainability report meets the general of the employees of the company and its subsidiaries, and all other content and quality requirements of the Global Reporting Initiative known statutory dues as were due and payable by the company and (GRI) G3 and that it has met the Application Level B+ of the GRI its subsidiaries as at the balance sheet date have been paid or, where requirements. The 2010/11 sustainability report has also received a relevant provided for, except as specified in note 34 to the financial “GRI application level check of B+” and this reaffirms the report’s statements, covering contingent liabilities. compliance with the GRI guidelines.
RISK MANAGEMENT AND INTERNAL CONTROL EMPLOYMENT The Board confirms that there is an ongoing process for identifying, The group has an equal opportunity policy and these principles are evaluating and managing any significant risks faced by the group. enshrined in specific selection, training, development and promotion Risk assessment and evaluation for each business unit takes place policies, ensuring that all decisions are based on merit. The group as an integral part of the annual strategic planning cycle and the practices equality of opportunity for all employees irrespective of principle risks and mitigating actions in place are reviewed regularly ethnic origin, religion, political opinion, gender, marital status or by the Board and the audit committee. The Board, through the physical disability. Employee ownership in the company is facilitated involvement of the risk review and control department takes steps through the employee share option plan. to gain assurance on the effectiveness of control systems in place. The audit committee receives reports on the results of internal control Details of the group’s human resource initiatives are detailed in the reviews and the head of the group risk review and control employees’ section of the sustainability report. department has direct access to the chairman of the audit committee. The number of persons employed by the company and group as at 31 March 2011 was 127 (2010 - 139) and 11,389 (2010 – 10,885), The risk management report is given under the governance section respectively. of the annual report.
There have been no material issues pertaining to employees and EVENTS OCCURRING AFTER THE BALANCE SHEET DATE industrial relations of the company. There have been no events subsequent to the balance sheet date, which would have any material effect on the company or on the SUPPLIER POLICY group other than those disclosed in note 38 to the financial The group applies an overall policy of agreeing and clearly statements. communicating terms of payment as part of the commercial agreements negotiated with suppliers, and endeavors to pay for all GOING CONCERN items properly charged in accordance with these agreed terms. As at 31 March 2011 the trade and other payables of the company and The directors are satisfied that the company, its subsidiaries and group amounted to Rs.221 million (2010 - Rs.343 million) and associates, have adequate resources to continue in operational Rs.12,379 million (2010 - Rs.11,576 million), respectively. existence for the foreseeable future, to justify adopting the going concern basis in preparing these financial statements.
82 John Keells Holdings PLC AUDITORS Messrs Ernst & Young, Chartered Accountants, are willing to continue as Auditors of the company, and a resolution proposing their reappointment will be tabled at the annual general meeting.
The Auditors Report is found in the financial reports section of the annual report.
The audit committee reviews the appointment of the auditor, its effectiveness, its independence and its relationship with the group, including the level of audit and non-audit fees paid to the auditor.
The group works with 4 firms of Chartered Accountants across the group, namely, Ernst & Young, KPMG Ford Rhodes Thornton and Co, PricewaterhouseCoopers, and Deloitte Haskins & Sells. Details of audit fees are set out in note 28 of the financial statements. The auditors do not have any relationship (other than that of an auditor) with the company or any of its subsidiaries.
Further details on the work of the auditor and the audit committee are set out in the audit committee report.
ANNUAL REPORT The Board of directors approved the consolidated financial statements on 20 May 2011. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board on 30 May 2011.
ANNUAL GENERAL MEETING The annual general meeting will be held at the Institute of Chartered Accountants of Sri Lanka, 30, Malalasekera Mawatha, Colombo 7, on Friday, 24 June 2011 at 10.00 a.m. The notice of meeting appears in the supplementary information section of the comprehensive annual report.
This annual report is signed for and on behalf of the Board of directors.
By Order of the Board
Director Director
Keells Consultants (Pvt) Ltd. Secretaries 20 May 2011
Annual Report 2010/11 83 the stAtement of diRectoRs’ ResponsiBility
The responsibility of the Directors in relation to the financial statements is The directors are also responsible for taking reasonable steps to set out in the following statement. The responsibility of the auditors, in safeguard the assets of the company and of the group and in this regard relation to the financial statements prepared in accordance with the to give proper consideration to the establishment of appropriate internal provisions of the Companies Act No 7 of 2007, is set out in the Report of control systems with a view to preventing and detecting fraud and other the Auditors. irregularities
The financial statements comprise of: The directors are required to prepare the financial statements and to provide the auditors with every opportunity to take whatever steps and • a balance sheet, which presents a true and fair view of the state undertake whatever inspections that may be considered being of affairs of the company and its subsidiaries as at the end of the appropriate to enable them to give their audit opinion. financial year; and Further, as required by Section 56 (2) of the Companies Act No 7 of 2007, • an income statement of the company and its subsidiaries, which the Board of directors have confirmed that the company, based on the presents a true and fair view of the profit and loss of the company information available, satisfies the solvency test immediately after the and its subsidiaries for the financial year. distribution, in accordance with Section 57 of the Companies Act no 7 of 2007, and have obtained a certificate from the auditors, prior to declaring The directors are required to confirm that the financial statements have a final dividend of Rs 1.00 per share for this year, to be paid on 9 June been prepared; 2011.
• using appropriate accounting polices which have been selected The directors are of the view that they have discharged their and applied in a consistent manner, and material departures, if any, responsibilities as set out in this statement. have been disclosed and explained; and Compliance Report • presented in accordance with the Sri Lanka Accounting The directors confirm that to the best of their knowledge, all taxes, duties Standards; and that and levies payable by the company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of • reasonable and prudent judgements and estimates have been the company and its subsidiaries, and all other known statutory dues as made so that the form and substance of transactions are properly were due and payable by the company and its subsidiaries as at the reflected; and balance sheet date have been paid, or where relevant provided for, except as specified in Note 34 to the financial statements covering contingent • provides the information required by and otherwise comply with liabilities. the Companies Act and the Listing Rules of the Colombo Stock Exchange. By Order of the Board
The directors are also required to ensure that the company has adequate resources to continue in operation to justify applying the going concern basis in preparing these financial statements.
Further, the directors have a responsibility to ensure that the company Keells Consultants (Pvt) Ltd maintains sufficient accounting records to disclose, with reasonable Secretaries accuracy the financial position of the company and of the group. 20 May 2011
84 John Keells Holdings PLC RepoRt of the AuditoRs
INDEPENDENT AUDITORS’ REPORT We have obtained all the information and explanations which to the best TO THE SHAREHOLDERS OF JOHN KEELLS HOLDINGS PLC of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our Report on the Financial Statements opinion. We have audited the accompanying financial statements of John Keells Holdings PLC (“Company”), the consolidated financial statements of the Opinion Company and its subsidiaries which comprise the balance sheets as at In our opinion, so far as appears from our examination, the Company 31 March 2011, and the income statements, statements of changes in maintained proper accounting records for the year ended 31 March 2011 equity and cash flow statements for the year then ended, and a summary and the financial statements give a true and fair view of the Company’s of significant accounting policies and other explanatory notes. state of affairs as at 31 March 2011 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of In our opinion, the consolidated financial statements give a true and fair these financial statements in accordance with Sri Lanka Accounting view of the state of affairs as at 31 March 2011 and the profit and cash Standards. This responsibility includes: designing, implementing and flows for the year then ended, in accordance with Sri Lanka Accounting maintaining internal control relevant to the preparation and fair Standards, of the Company and its subsidiaries dealt with thereby, so far presentation of financial statements that are free from material as concerns the shareholders of the Company. misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that Report on Other Legal and Regulatory Requirements are reasonable in the circumstances. In our opinion, these financial statements also comply with the requirements of Sections 151(2) and 153(2) to 153(7) of the Companies Scope of Audit and Basis of Opinion Act No. 07 of 2007. 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 plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 20 May 2011 An audit includes examining, on a test basis, evidence supporting the Colombo. amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
Annual Report 2010/11 85 BAlAnce sheet
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
ASSETS Non-current assets Property, plant and equipment 2 28,627,982 29,988,664 73,543 111,615 Leasehold property 3 9,515,621 4,576,687 - - Investment property 4 5,386,166 2,334,475 - 899,000 Intangible assets 5 2,631,950 2,556,145 43,724 37,450 Investments in subsidiaries and joint ventures 6 5,115 5,115 23,482,112 21,772,182 Investments in associates 6 14,670,235 14,309,186 9,257,569 9,110,819 Other investments 6 11,792,453 8,415,216 581,806 79,507 Deferred tax assets 7 202,850 182,252 54,198 - Other non-current assets 8 3,231,401 1,724,717 258,539 60,079 76,063,773 64,092,457 33,751,491 32,070,652 Current assets Inventories 9 3,143,630 2,295,066 760 778 Trade and other receivables 10 12,072,147 9,933,777 589,015 848,223 Amounts due from related parties 33 18,520 22,889 612,073 532,884 Short term investments 11 16,881,036 19,300,956 10,071,249 10,177,965 Cash in hand and at bank 2,112,626 3,013,164 19,382 82,154 34,227,959 34,565,852 11,292,479 11,642,004 Total assets 110,291,732 98,658,309 45,043,970 43,712,656
EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital 12 24,611,507 23,322,400 24,611,507 23,322,400 Capital reserves 13 9,560,417 7,573,612 - - Revenue reserves 14 25,414,789 18,936,259 13,439,260 9,345,064 59,586,713 49,832,271 38,050,767 32,667,464 Minority interest 7,608,220 6,429,512 - -
Total equity 67,194,933 56,261,783 38,050,767 32,667,464
Non-current liabilities Insurance provisions 15 12,662,500 10,236,117 - - Non-interest bearing borrowings 16 18,000 18,000 - - Interest bearing borrowings 17 8,352,587 10,539,450 5,520,000 6,840,000 Deferred tax liabilities 7 647,960 781,742 - - Employee benefit liabilities 18 1,215,597 1,041,395 104,752 92,630 Other deferred liabilities 19 4,143 4,655 - - Other non-current liabilities 746,938 216,401 - - 23,647,725 22,837,760 5,624,752 6,932,630 Current liabilities Trade and other payables 20 12,379,589 11,576,537 220,667 343,426 Amounts due to related parties 33 2,237 13,163 9,274 3,001 Income tax liabilities 21 796,714 454,292 - - Short term borrowings 22 232,000 150,000 - - Current portion of interest bearing borrowings 17 2,134,418 4,168,976 1,104,000 3,135,493 Dividend payable - 619,455 - 619,455 Bank overdrafts 3,904,116 2,576,343 34,510 11,187 19,449,074 19,558,766 1,368,451 4,112,562 Total equity and liabilities 110,291,732 98,658,309 45,043,970 43,712,656
I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007.
M J S Rajakariar Group Financial Controller The Board of directors is responsible for the preparation and presentation of these financial statements.
S C Ratnayake J R F Peiris Chairman Group Finance Director The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements. 20 May 2011
86 John Keells Holdings PLC income stAtement
Group Company For the year ended 31st March Note 2011 2010 2011 2010 In Rs.'000s
Revenue 23 60,500,068 47,980,004 554,627 544,193 Cost of sales (46,856,982) (36,914,007) (232,598) (230,156)
Gross profit 13,643,086 11,065,997 322,029 314,037 Dividend income 24 62,599 43,951 3,500,955 3,573,576 Other operating income 25 6,114,821 5,020,745 3,188,221 2,205,081 Distribution expenses (2,410,865) (2,066,691) - - Administrative expenses (7,442,017) (7,218,294) (603,524) (654,211) Other operating expenses 26 (1,651,264) (1,493,864) (42,870) (44,187) Finance expenses 27 (796,074) (1,370,156) (379,499) (716,629) Change in fair value of investment property 4 467,764 - - - Share of results of associates 2,640,911 2,555,867 - -
Profit before tax 28 10,628,961 6,537,555 5,985,312 4,677,667 Tax expense 29 (1,565,801) (985,240) (22,409) (16,608)
Profit for the year 9,063,160 5,552,315 5,962,903 4,661,059
Attributable to: Equity holders of the parent 8,245,585 5,201,491 Minority interest 817,575 350,824 9,063,160 5,552,315
Rs. Rs. Earnings per share Basic 30 13.24 8.48 Diluted 30 13.01 8.42
Dividend per share 31 3.00 3.00
Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements.
20 May 2011
Annual Report 2010/11 87 cAsh floW stAtement
Group Company For the year ended 31st March Note 2011 2010 2011 2010 In Rs.'000s
CASH FLOWS FROM OPERATING ACTIVITIES Profit before working capital changes A 5,601,971 3,339,240 (255,719) (231,287)
(Increase) / decrease in inventories (869,848) (40,763) 18 32 (Increase) / decrease in receivables and prepayments (1,915,530) (775,277) 155,635 (531,046) (Increase) / decrease in other non-current assets (952,598) (85,051) (198,460) 24,660 Increase / (decrease) in creditors and accruals 1,255,259 2,437,778 (116,589) (50,284) Increase in insurance provision 2,426,383 1,708,052 - - Cash generated from operations 5,545,637 6,583,979 (415,115) (787,925)
Interest received 2,747,650 2,946,331 757,847 1,206,484 Finance expenses paid (796,074) (1,370,156) (379,499) (716,629) Dividend received 2,244,783 2,399,690 3,500,955 3,573,576 Tax paid (1,170,569) (966,869) (54,216) (62,239) Gratuity paid (70,150) (107,904) (3,598) (19,442) Net cash flow from operating activities 8,501,277 9,485,071 3,406,374 3,193,825
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Purchase and construction of property, plant and equipment (4,977,752) (1,781,594) (4,764) (5,216) Addition to intangible assets (114,754) (70,986) (17,444) (30,603) Addition to lease rights (317,654) - - - Addition to investment property (1,732) (5,460) - - Acquisition of associates - (1,000,000) - - Increase in interest in subsidiaries (844,217) (83,853) (1,360,795) (2,124,946) Increase in interest in associates (441,192) (376,100) (146,750) (1,151,572) Proceeds from sale of property, plant and equipment 441,747 184,702 1,459 6,270 Proceeds from sale of non-current investments 2,754,030 - 2,748,505 46,483 Proceeds from sale of rights in subsidiaries - 750,975 - 750,975 Proceeds from sale of investments held for sale - 84,632 - 72,404 Proceeds from sale of quoted investments held for sale 396,639 19,201 - - Acquisition of quoted investments held for sale (650,719) (211,958) - - Proceeds from insurance claim on property, plant and equipment - 30,000 - - Proceeds from / (purchase of) short term investments (net) 2,664,055 (3,801,998) (663,010) - (Purchase) / disposal of other investments (net) (3,377,237) 438,943 (502,299) 947,727 Net cash flow from (used in) investing activities (4,468,786) (5,823,496) 54,902 (1,488,478)
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES Proceeds from issue of shares 1,289,107 797,292 1,289,107 797,292 Proceeds from minority on issue of rights in subsidiaries 3,176 1,692,237 - - Direct cost on issue of shares (24,557) (33,674) - - Dividend paid to equity holders of parent (2,488,162) (1,224,187) (2,488,162) (1,224,187) Dividend paid to minority shareholders (281,323) (240,094) - - Proceeds from long term borrowings 227,330 684,000 - - Repayment of long term borrowings (5,598,409) (2,371,809) (3,118,042) (1,172,000) Proceeds from short term borrowings (net) 82,000 60,000 - - Net cash flow used in financing activities (6,790,838) (636,235) (4,317,097) (1,598,895)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (2,758,347) 3,025,340 (855,821) 106,452
CASH AND CASH EQUIVALENTS AT THE BEGINNING 14,775,191 11,713,071 10,248,932 10,142,480
CASH AND CASH EQUIVALENTS AT THE END 12,016,844 14,738,411 9,393,111 10,248,932
ANALYSIS OF CASH AND CASH EQUIVALENTS Favourable balances Short term investments 11 13,808,334 14,301,590 9,408,239 10,177,965 Cash in hand and at bank 2,112,626 3,013,164 19,382 82,154 Unfavourable balances Bank overdrafts (3,904,116) (2,576,343) (34,510) (11,187) Total cash and cash equivalents as previously reported 12,016,844 14,738,411 9,393,111 10,248,932 Effect of exchange rate changes - 36,780 - - Cash and cash equivalents restated 12,016,844 14,775,191 9,393,111 10,248,932
Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements.
88 John Keells Holdings PLC Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
A Profit before working capital changes Profit before tax 10,628,961 6,537,555 5,985,312 4,677,667 Adjustments for: Interest income (2,747,650) (2,946,331) (757,847) (1,206,484) Dividend income (62,599) (43,951) (3,500,955) (3,573,576) Finance expenses 796,074 1,370,156 379,499 716,629 Change in fair value of investment property (467,764) - - - Share of results of associates (2,640,911) (2,555,867) - - Profit on sale of non-current investments (1,795,069) (105,667) (2,172,441) (102,536) Depreciation of property, plant and equipment 1,700,095 1,736,853 42,391 102,742 Derecognition / impairment losses on property, plant and equipment and non-current assets 49,689 20,955 - 3,018 (Profit) / loss on sale of property, plant and equipment 57,929 (25,053) (1,014) (101) Profit on sale of investment property - - (26,200) - Gain on sale of rights in subsidiaries - (946,515) - (750,975) Profit on sale of investments held for sale - (9,109) - (19,508) Amortisation / depreciation of leasehold property and other non-current assets 375,171 314,303 - - Amortisation / impairment of intangible assets 234,023 226,849 11,170 5,719 Amortisation of other deferred liabilities (512) (512) - - Gratuity provision and related costs 244,668 191,695 15,720 19,714 Gain on disposal of quoted investments held for sale (297,268) (9,992) - - Increase in market value of quoted investments held for sale (186,042) (208,642) - - Unrealised (gain) / loss on foreign exchange (net) (286,925) (132,393) (231,354) (103,596) Proceeds from insurance claim on property, plant and equipment - (30,000) - - Unrealised profits 101 (4,981) - - Negative goodwill on acquisitions - (40,113) - - 5,601,971 3,339,240 (255,719) (231,287)
Annual Report 2010/11 89 90 John Keells HoldingsPLC stAtement ofchAnGesineQuity Attributable to equity holders of parent
GROUP Stated Revaluation Exchange Other Other Accumulated Total MinorityTotal In Rs.'000s capital reserve translation capital revenue profit interest equity reserve reserves reserves
As at 1 April 2009 22,525,108 5,517,736 1,493,222 425,765 5,517,963 10,026,662 45,506,456 4,960,309 50,466,765 Share options exercised 797,292 - - - - - 797,292 - 797,292 Direct cost on issue of shares - - - - - (27,916) (27,916) (5,758) (33,674) Currency translation differences - - (42,672) - - - (42,672) (4,917) (47,589) Reserved during the year - - - - 30,000 (30,000) - - - Net gain / (loss) recognised directly in equity Surplus on revaluation - 276,718 - - - - 276,718 38,898 315,616 Acquisitions, disposals and changes in holding - - - - - (11) (11) 1,356,009 1,355,998 Associate company share of net assets - - (32,629) 2,600 - (7,502) (37,531) - (37,531) Write off / transfers - (67,128) - - - 45,508 (21,620) (2,053) (23,673) Profit for the year - - - - - 5,201,491 5,201,491 350,824 5,552,315 Final dividend paid - 2008/09 - - - - - (611,353) (611,353) - (611,353) Interim dividend paid - 2009/10 - - - - - (1,232,289) (1,232,289) - (1,232,289) Subsidiary dividend to minority shareholders - - - - - 23,706 23,706 (263,800) (240,094)
As at 31 March 2010 23,322,400 5,727,326 1,417,921 428,365 5,547,963 13,388,296 49,832,271 6,429,512 56,261,783 Share options exercised 1,289,107 - - - - - 1,289,107 - 1,289,107 Direct cost on issue of shares - - - - - (20,861) (20,861) (3,696) (24,557) Currency translation differences - - (171,339) - - - (171,339) (33,412) (204,751) Net gain / (loss) recognised directly in equity Surplus on revaluation - 2,445,660 - - - - 2,445,660 421,337 2,866,997 Acquisitions, disposals and changes in holding ------306,934 306,934 Associate company share of net assets - - (225,521) - - (225,521) - (225,521) Write off / transfers - (106,101) - - - 61,209 (44,892) (800) (45,692) Deferred tax impact due to reduction in tax rate - 44,106 - - - - 44,106 13,397 57,503 Profit for the year - - - - - 8,245,585 8,245,585 817,575 9,063,160 Final dividend paid - 2009/10 - - - - - (619,867) (619,867) - (619,867) Interim dividend - 2010/11 - - - - - (1,248,840) (1,248,840) - (1,248,840) Subsidiary dividend to minority shareholders - - - - - 61,304 61,304 (342,627) (281,323)
As at 31 March 2011 24,611,507 8,110,991 1,021,061 428,365 5,547,963 19,866,826 59,586,713 7,608,220 67,194,933
Details of other revenue reserves have been disclosed in Note 14. Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements. COMPANY Stated General Accumulated Total capital reserve profit equity In Rs.'000s
As at 1 April 2009 22,525,108 4,194,322 2,333,325 29,052,755
Share options exercised 797,292 --797,292
Profit for the year --4,661,059 4,661,059
Final dividend paid - 2008/09 --(611,353) (611,353) Interim dividend paid - 2009/10 --(1,232,289) (1,232,289)
As at 31 March 2010 23,322,400 4,194,322 5,150,742 32,667,464
Share options exercised 1,289,107 --1,289,107
Profit for the year --5,962,903 5,962,903
Final dividend paid - 2009/10 --(619,867) (619,867) Interim dividend - 2010/11 --(1,248,840) (1,248,840)
As at 31 March 2011 24,611,507 4,194,322 9,244,938 38,050,767
Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements.
Annual Report 2010/11 91 notes to the finAnciAl stAtements
1. CORPORATE INFORMATION The financial statements of the subsidiaries are prepared for the John Keells Holdings PLC. is a public limited liability company same reporting period as the parent company, which is 12 months incorporated and domiciled in Sri Lanka and listed on the ending 31 March, using consistent accounting policies. Colombo Stock Exchange. The registered office and principal place of business of the company is located at 130, Glennie Subsidiaries Street, Colombo 2. Subsidiaries are those enterprises controlled by the parent. Control exists when the parent holds more than 50% of the voting rights Ordinary shares of the company are listed on the Colombo Stock or otherwise has a controlling interest. Exchange. Global depository receipts (GDRs) of John Keells Holdings PLC. are listed on the Luxembourg Stock Exchange. Subsidiaries consolidated have been listed in the group directory. The following companies, with equity control less than 50%, have In the annual report of the Board of directors and in the financial been consolidated as subsidiaries based on the power to govern statements, “the company” refers to John Keells Holdings PLC. the financial and operating policies of those entities. as the holding company and “the group” refers to the companies whose accounts have been consolidated therein. The financial % Holding statements for the year ended 31 March 2011 were authorised for DHL Keells (Pvt) Limited 50.00 issue by the directors on 20 May 2011. Trans-ware Logistics (Pvt) Limited 50.00 Mack Air Services Maldives (Pte) Limited 49.00 John Keells Holdings PLC became the holding company of the Tea Smallholder Factories PLC 37.62 group during the financial year ended 31 March 1986. The principal activities of the group are stated in the annual report of The following subsidiaries have been incorporated outside Sri the Board of directors. Lanka:
1.2. BASIS OF PREPARATION Country of The consolidated financial statements have been prepared on an Incorporation Name accrual basis and under the historical cost convention unless India John Keells Air Services India (Pvt) Ltd stated otherwise. John Keells Foods India (Pvt) Ltd John Keells Logistics India (Pvt) Ltd The consolidated financial statements are presented in Sri Lankan Serene Holidays (Pvt) Ltd Rupees, which is the group’s functional and presentation currency and all values are rounded to the nearest rupees thousand Mauritius Auxicogent Alpha (Pvt) Ltd (Rs.’000) except when otherwise indicated. Auxicogent Holdings (Pvt) Ltd Auxicogent International (Pvt) Ltd The significant accounting policies are discussed in note 1.3 Auxicogent Investments Mauritius (Pvt) Ltd below. John Keells Hotels Mauritius (Pvt) Ltd John Keells Holdings Mauritius (Pvt) Ltd Statement of compliance Keells Food Products Mauritius (Pvt) Ltd The balance sheet, statement of income, statement of changes in equity and the cash flow statement, together with the accounting Republic of policies and notes (the ”financial statements”) have been prepared Maldives Fantasea World Investments (Pte) Ltd in compliance with the Sri Lanka Accounting Standards (SLAS) John Keells Maldivian Resorts (Pte) Ltd issued by the Institute of Chartered Accountants of Sri Lanka and Mack Air Services Maldives (Pte) Ltd the requirement of the Companies Act No. 7 of 2007. Tranquility (Pte) Ltd Travel Club (Pte) Ltd Basis of consolidation The consolidated financial statements comprise the financial Singapore John Keells Singapore (Pte) Ltd statements of the company and its subsidiaries as at 31st March 2011. The financial statements of the subsidiaries are prepared in compliance with the group’s accounting policies unless stated United Kingdom John Keells Computer Services (UK) Ltd otherwise. USA Auxicogent International US Inc. All intra group balances, income and expenses and unrealised gains and losses and dividends resulting from Intra group transactions are eliminated in full. Canada Auxicogent International Canada Inc.
Subsidiaries are fully consolidated from the date of acquisition or The total profits and losses for the year of the company and of its incorporation, being the date on which the group obtains control subsidiaries included in consolidation and all assets and liabilities and continue to be consolidated until the date that such control of the company and of its subsidiaries included in consolidation ceases. are shown in the consolidated income statement and balance sheet respectively.
92 John Keells Holdings PLC Minority interest which represents the portion of profit or loss and data from an active market, in an arm’s length transaction, of net assets not held by the group, are shown as a component of similar assets or observable market prices less incremental costs profit for the year in the income statement and as a component for disposing of the asset. The value in use calculation is based of equity in the consolidated balance sheet, separately from on a discounted cash flow model. The cash flows are derived from parent’s shareholders’ equity. the budget for the next five years and do not include restructuring activities that the group is not yet committed to or significant future The consolidated cash flow statement includes the cash flows of investments that will enhance the asset’s performance of the cash the company and its subsidiaries. generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow 1.3. ACCOUNTING POLICIES model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions used 1.3.1 CHANGES IN ACCOUNTING POLICIES to determine the recoverable amount for the different cash The accounting policies adopted are consistent with those of the generating units, are further explained in Note 5. previous financial year. Taxes Comparative information Uncertainties exist with respect to the interpretation of complex Previous year’s figures and phrases have been re-arranged, tax regulations and the amount and timing of future taxable wherever necessary, to conform to the current year’s presentation. income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual 1.3.2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND agreements, differences arising between the actual results and the ASSUMPTIONS assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already The preparation of the financial statements of the group require recorded. Accordingly based on such reasonable estimates the the management to make judgements, estimates and group establishes the provisions to be made during the financial assumptions, which may affect the amounts of income, year. expenditure, assets, liabilities and the disclosure of contingent liabilities, at the end of the reporting period. In the process of Deferred tax assets are recognised for all unused tax losses to the applying the group’s accounting policies the key assumptions extent that it is probable that taxable profit will be available against made relating to the future and the sources of estimation at the which the losses can be utilised. Significant management reporting date together with the related judgements that have a judgement is required to determine the amount of deferred tax significant risk of causing a material adjustment to the carrying assets that can be recognised, based upon the likely timing and amounts of assets and liabilities within the next financial year are the level of future taxable profits together with future tax planning discussed below. strategies.
Revaluation of property, plant and equipment and investment The group has tax losses carry forward amounting to Rs.5,287 properties million (2010 - Rs.5,287 million). These losses relate to subsidiaries The group measures land and buildings at revalued amounts with that have a history of losses that do not expire and may not be changes in fair value being recognised in the statement of equity. used to offset other tax liabilities and where the subsidiary has no In addition, it carries its investment properties at fair value, with taxable temporary differences nor any tax planning opportunities changes in fair value being recognised in the income statement. available that could partly support the recognition of these losses The group engaged independent valuation specialists to determine as deferred tax assets. fair value of investment properties and certain identified land and buildings as at 31 March 2011. Further details on taxes are disclosed in Note 29.
The valuer has used valuation techniques such as market values Deferred tax for tax holiday companies and discounted cash flow methods where there was lack of For group companies under BOI tax holidays, deferred tax during comparable market data available based on the nature of the the tax holiday period has been recognised for temporary property. differences, when reversals of such differences extend beyond the tax exemption period, taking into account the requirements of The determined fair values of investment properties, using SLAS 14 and The Institute of Chartered Accountants of Sri Lanka investment method, are most sensitive to the estimated yield as (ICASL) council ruling on deferred tax. well as the long term occupancy rate. The methods used to determine the fair value of the investment properties, are further Employee benefit liability explained in Note 4. The employee benefit liability of listed companies with more than Impairment of non-financial assets 100 employees and Jaykay Marketing Services (Pvt) Ltd. is based on the actuarial valuation carried out by Messrs. Actuarial & An impairment exists when the carrying value of an asset or cash Management Consultants (Pvt) Ltd., actuaries. The actuarial generating unit exceeds its recoverable amount, which is the valuations involve making assumptions about discount rates and higher of its fair value less costs to sell and its value in use (VIU). future salary increases. The complexity of the valuation, the The fair value less costs to sell calculation is based on available underlying assumptions and its long term nature, a defined benefit
Annual Report 2010/11 93 notes to the finAnciAl stAtements
obligation are highly sensitive to changes in these assumptions. trends may not apply in future, (for example to reflect one-off The employee benefit liability of all other companies in the group occurrences, changes in external or market factors such as public is based on the gratuity formula in Appendix E of SLAS 16 - attitudes to claiming, economic conditions, levels of claims Employee Benefits. All assumptions are reviewed at each reporting inflation, judicial decisions and legislation, as well as internal factors date. Details of the key assumptions used in the estimates are such as portfolio mix, policy features and claims handling contained in Note 18 on page 123. procedures). This judgement is used in order to arrive at the estimated ultimate cost of claims that presents the likely outcome Valuation of insurance contract liabilities and investment contract from the range of possible outcomes, taking account of all the liabilities – Union Assurance PLC uncertainties involved. Life insurance contracts The carrying value at the balance sheet date of non-life insurance The liability for life insurance contracts is based on current contract liabilities is Rs.2.82 billion (2010 – Rs.2.71 billion). assumptions or on assumptions established at inception of the contract, incorporating regulator recommended minimum 1.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES requirements. 1.4.1. Buiness combinations & goodwill The main assumptions used relate to mortality, morbidity, Acquisitions of subsidiaries are accounted for using the purchase investment returns and discount rates. method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair Industry and company experience on mortality and morbidity is value of the assets acquired and liabilities and contingent liabilities considered, adjusted when appropriate to reflect the product assumed at the date of acquisition. characteristics, target markets and own claims severity and frequency experiences. When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and Discount rates are based on current and historical rates, adjusted designation in accordance with the contractual terms, economic for regulator recommended basis. circumstances and pertinent conditions as at the acquisition date.
The carrying value at the balance sheet date of life insurance Goodwill is initially measured at cost being the excess of the contract liabilities is Rs.12.66 billion (2010 – Rs.10.24 billion). consideration transferred over the group’s net identifiable assets acquired and liabilities assumed. If this consideration is lower than Non-life insurance (which comprises general insurance and the fair value of the net assets of the subsidiary acquired, the healthcare) contract liabilities difference is recognised in the income statement as negative For non-life insurance contracts, estimates have to be made for goodwill. the expected ultimate cost of claims reported at the balance sheet date and consequently for the expected ultimate cost of claims After initial recognition, goodwill is measured at cost less any incurred but not yet reported at the balance sheet date (IBNR). It accumulated impairment losses. Goodwill is reviewed for can take a significant period of time before the reported values impairment, annually or more frequently if events or changes in near the ultimate claims cost, and so for some type of policies, circumstances indicate that the carrying value maybe be impaired. IBNR claims form the majority of the balance sheet liability. For the purpose of impairment testing, goodwill acquired in a The ultimate cost of outstanding claims is estimated by using a business combination is, from the acquisition date, allocated to range of standard actuarial claims projection techniques, such as each of the group’s cash generating units that are expected to the Chain Ladder and Bornheutter-Ferguson methods. benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. The main assumption underlying these techniques is that a company’s past claims development experience is representative Impairment is determined by assessing the recoverable amount of the projected future claims development and hence the ultimate of the cash-generating unit to which the goodwill relates. Where claims costs. As such, these methods extrapolate the the recoverable amount of the cash generating unit is less than development of paid and reported losses, average costs per claim the carrying amount, an impairment loss is recognised. The and numbers of claims based on the observed development of impairment loss is allocated first to reduce the carrying amount of earlier years and expected loss ratios. Historical claims any goodwill allocated to the unit and then to the other assets pro- development is analysed by accident years, for each significant rata to the carrying amount of each asset in the unit. business line and claim type. Large claims are usually separately addressed, either by being reserved based on the loss adjuster Goodwill and fair value adjustments arising on the acquisition of a estimates or separately projected in order to reflect their future foreign operation are treated as assets and liabilities of the foreign development. In most cases, no explicit assumptions are made operation and translated at the closing rate. regarding future rates of claims inflation or loss ratios, instead, the assumptions used are those implicit in the historical claims Where goodwill forms part of a cash-generating unit and part of development data on which the projections are based. Additional the operation within that unit is disposed of, the goodwill qualitative judgement is used to assess the extent to which past associated with the operation disposed of is included in the
94 John Keells Holdings PLC carrying amount of the operation when determining the gain or The investments in associates are carried in the balance sheet at loss on disposal of the operation. Goodwill disposed of in this cost plus post acquisition changes in the group’s share of net circumstance is measured based on the relative values of the assets of the associates. Goodwill relating to an associate is operation disposed of and the portion of the cash-generating unit included in the carrying amount of the investment and is neither retained. amortised nor individually tested for impairment. After application of the equity method, the group determines whether it is necessary 1.4.2 Interest in Joint venture to recognise any additional impairment loss with respect to the A joint venture is a jointly controlled entity, whereby the group and group’s net investment in the associate. The group determines at other parties have a contractual arrangement that establishes joint each reporting date whether there is any objective evidence that control over the economic activities of the entity. the investment in the associate is impaired. If this is the case the group calculates the amount of impairment as the difference The group recognises its interest in the joint venture using the between the recoverable amount of the associate and its carrying proportionate consolidation method until the date on which the value and recognises the amount in the income statement. group ceases to have joint control. The group’s share of each of the assets, liabilities, income and expenses of the joint venture are The income statement reflects the share of the results of combined with similar items, line by line, in the consolidated operations of the associate. Changes, if any, recognised directly financial statements. The financial statements of the joint venture in the equity of the associate, the group recognises its share and are aligned to the group accounting policies. discloses this, when applicable in the statement of changes in equity. Unrealised gains and losses resulting from transactions The gains or losses arising from transactions between group and between the group and the associate are eliminated to the extent the joint venture are recognised based on the substance of the of the interest in the associate. transactions. The group’s share of unrealised gain on asset purchases is not recognised until such assets are resold to a third The group ceases to recognise further losses when the group’s party. share of losses in an associate equals or exceeds the interest in the undertaking, unless it has incurred obligations or made Information Systems Associates (a joint venture) has been payments on behalf of the entity. incorporated in United Arab Emirates. The accounting policies of associate companies conform to those Financial statements of joint ventures are proportionately used for similar transactions of the group. Accounting policies that consolidated using their respective 12 month financial reporting are specific to the business of associate companies are discussed period. in note 1.5.
In the case of joint ventures where the reporting dates are different Equity method of accounting has been applied for associate to group reporting dates, adjustments are made for any significant financial statements using their respective 12 month financial transactions or events upto 31 March. period.
1.4.3. Investment in an associate In the case of associates, where the reporting dates are different to group reporting dates, adjustments are made for any significant Associates are those investments over which the group has transactions or events upto 31 March. significant influence and holds 20% to 50% of the equity and which are neither subsidiaries nor joint ventures of the group. 1.4.4 Foreign currency translation
The group ceases to use the equity method of accounting on the Foreign currency transactions and balances date from which it no longer has significant influence in the The consolidated financial statements are presented in Sri Lanka associate. rupees, which is the company’s functional and presentation currency. Associate companies of the group which have been accounted for under the equity method of accounting are; The functional currency is the currency of the primary economic environment in which the entities of the group operate. Maersk Lanka (Pvt) Ltd. Nations Trust Bank PLC. All foreign exchange transactions are converted to functional South Asia Gateway Terminals (Pvt) Ltd. currency, at the rates of exchange prevailing at the time the AuxiCogent BPO Solutions (Pvt) Limited (Previously known as transactions are effected. Quatrro Business Support Services (Pvt) Ltd). Quatrro FPO Solutions (Pvt) Limited (Previously known as Quatrro Monetary assets and liabilities denominated in foreign currency are Finance & Accounting Solutions (Pvt) Ltd). retranslated to functional currency equivalents at the exchange Central Hospital (Private) Ltd. rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using exchange rates that existed All associates are incorporated in Sri Lanka, except for AuxiCogent when the values were determined. The resulting gains and losses BPO Solutions (Pvt) Limited and Quatrro FPO Solutions (Pvt) Ltd. are accounted for in the income statement. which are incorporated in India.
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Foreign operations • where the deferred income tax asset relating to the deductible The balance sheet and income statement of overseas subsidiaries temporary difference arises from the initial recognition of an and joint ventures which are deemed to be foreign operations are asset or liability in a transaction that is not a business translated to Sri Lanka rupees at the rate of exchange prevailing combination and, at the time of the transaction, affects neither as at the balance sheet date and at the average annual rate of the accounting profit nor taxable profit or loss; and exchange for the period respectively. • in respect of deductible temporary differences associated with The exchange differences arising on the translation are taken investments in subsidiaries, associates and interests in joint directly to a separate component of equity. On disposal of a foreign ventures, deferred tax assets are recognised only to the extent entity, the deferred cumulative amount recognised in equity relating that it is probable that the temporary differences will reverse in to that particular foreign operation is recognised in the income the foreseeable future and taxable profit will be available statement. against which the temporary differences can be utilised.
The exchange rates applicable during the period were as follows: The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer Balance Sheet Income Statement probable that sufficient taxable profit will be available to allow all Average rate or part of the deferred tax asset to be utilised. Unrecognised 2010/11 2009/10 2010/11 2009/10 deferred tax assets are reassessed at each balance sheet date Rs. Rs. Rs. Rs. and are recognised to the extent that it has become probable that Singapore dollar 87.54 81.32 84.21 80.60 future taxable profit will allow the deferred tax asset to be Pound sterling 177.83 171.89 174.39 183.56 recovered. US dollar 110.40 114.00 112.13 115.02 Canadian dollar 113.67 111.87 110.30 105.62 Deferred tax assets and liabilities are measured at tax rates that Indian rupee 2.48 2.52 2.47 2.43 are expected to apply to the year when the asset is realised or UAE dhiram 30.06 31.04 30.53 31.32 liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the balance sheet 1.4.5 Tax date. Current tax Income tax relating to items recognised directly in equity is Current tax assets and liabilities for the current and prior periods recognised in equity and not in the income statement. are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used Deferred tax assets and deferred tax liabilities are offset, if a legally to compute the amount are those that are enacted or substantively enforceable right exists to set off current tax assets against current enacted by the balance sheet date in the countries where the tax liabilities and when the deferred taxes relate to the same group operates and generates taxable income. taxable entity and the same taxation authority.
Deferred tax Sales tax Deferred tax is provided using the liability method on temporary Revenues, expenses and assets are recognised net of the amount differences at the balance sheet date between the tax bases of of sales tax except: assets and liabilities and their carrying amounts for financial reporting purposes. • where the sales tax incurred on a purchase of a assets or services is not recoverable from the taxation authority, in which Deferred tax liabilities are recognised for all taxable temporary case the sales tax is recognised as part of the cost of differences, except; acquisition of the asset or as part of the expense item as applicable; and • where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a • receivables and payables that are stated with the amount of business combination and, at the time of the transaction, affects sales tax included. neither the accounting profit nor taxable profit or loss; and The net amount of sales tax recoverable from, or payable to, the • in respect of taxable temporary differences associated with taxation authority is included as part of receivables or payables in investments in subsidiaries, associates and interests in joint the balance sheet. ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the 1.4.6 Property, plant and equipment temporary differences will not reverse in the foreseeable future. Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss. Deferred tax assets are recognised for all deductible temporary differences, and unused tax credits and tax losses carried forward, Land and buildings are measured at fair value less depreciation on to the extent that it is probable that taxable profit will be available buildings and impairment charged subsequent to the date of the against which the deductible temporary differences and the unused revaluation. tax credits and tax losses carried forward can be utilised except;
96 John Keells Holdings PLC The carrying values of property plant and equipment are reviewed The asset’s residual values and useful lives are reviewed, and for impairment when events or changes in circumstances indicate adjusted if appropriate, at each financial year end. that the carrying value may not be recoverable. Upon major inspection, the cost is recognised in the carrying Where land and buildings are subsequently revalued, the entire amount of the plant and equipment if the recognition criteria are class of such assets are revalued at fair value on the date of satisfied. revaluation. The group has adopted a policy of revaluing assets every 5 years, except for properties held for rental and occupied 1.4.7 Leases mainly by group companies, which are revalued every 3 years. Finance lease Property, plant and equipment on finance leases, which effectively When an asset is revalued, any increase in the carrying amount transfer to the group substantially all the risk and benefits incidental is credited directly to a revaluation reserve included in the equity to ownership of the leased items, are capitalised and disclosed as section of the balance sheet, except to the extent that it reverses finance leases at their cash price and depreciated over the period a revaluation decrease of the same asset previously recognised the group is expected to benefit from the use of the leased assets. in the income statement, in which case the increase is recognised in the income statement. Any revaluation deficit that The corresponding principal amount payable to the lessor is offsets a previous surplus in the same asset is directly offset shown as a liability. Lease payments are apportioned between the against the surplus in the revaluation reserve and any excess finance charges and reduction of the lease liability so as to achieve recognised as an expense. Upon disposal, any revaluation a constant rate of interest on the outstanding balance of the reserve relating to the particular asset being sold is transferred liability. The interest payable over the period of the lease is to retained earnings. transferred to an interest in suspense account. The interest element of the rental obligations pertaining to each financial year Accumulated depreciation as at the revaluation date is eliminated is charged to the income statement over the period of lease. against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The cost of improvements to buildings on leasehold land is capitalised, disclosed as leasehold improvements, and Item of property, plant and equipment are derecognised upon depreciated over the unexpired period of the lease or the replacement, disposal or when no future economic benefits are estimated useful life of the improvements, whichever is shorter. expected from its use. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the Operating leases asset is derecognised. Leases, where the lessor effectively retains substantially all of the Bottle depreciation of Ceylon Cold Stores PLC. risks and benefits of ownership over the term of the lease, are classified as operating leases. Returnable glass bottles are reflected at cost less accumulated depreciation and any impairment loses. Depreciation is Lease payments are recognised as an expense in the income provided over its useful life. The bottle breakages during the statement on a straight-line basis over the term of the lease. financial year are written off to the income statement at written down value. 1.4.8 Leasehold property Upon termination of dealership the weighted average cost of Prepaid operating lease rentals paid to acquire land use rights are bottles not returned less the deposit is written off to the income amortised over the lease term in accordance with the pattern of statement. benefits provided.
Depreciation 1.4.9 Investment properties Depreciation is calculated by using a straight-line method on the Investment properties are measured initially at cost. The carrying cost or valuation of all property, plant and equipment, other than value of an investment property includes the cost of replacing part freehold land, in order to write off such amounts over the estimated of an existing investment property, at the time that cost is incurred useful economic life of such assets. if the recognition criteria are met, and excludes the costs of day to day servicing of the investment property. Subsequent to initial The estimated useful life of assets is as follows; recognition, the investment properties are stated at fair values, which reflect market conditions at the balance sheet date. Assets Years Buildings (other than hotels) 50 Gains or losses arising from changes in fair value are included in Hotel buildings upto 75 the income statement in the year in which they arise. Plant and machinery 10 - 20 Equipment 3 - 8 Investment properties are derecognised when disposed, or Furniture and fittings 2 - 15 permanently withdrawn from use because no future economic Motor vehicles 4 – 10 benefits are expected. Any gains or losses on retirement or Laboratory equipment 10 disposal are recognised in the income statement in the year of Returnable containers 5 retirement or disposal.
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Transfers are made to or from investment property only when there Purchased software is a change in use. For a transfer from investment property to owner Purchased software is recognised as intangible assets and is occupied property or inventory (WIP), the deemed cost for amortised on a straight line basis over its estimated useful life. subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property Software license or inventory (WIP) the group accounts for such property in Software licenses cost is recognised as an intangible asset and accordance with the policy stated under property, plant and amortised over the period of expected future usage of related ERP equipment up to the date of change in use. systems. Where group companies occupy a significant portion of the Research & development costs investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the consolidated Research costs are expensed as incurred. An intangible asset financial statements, and accounted using group accounting arising from development expenditure on an individual project is policy for property, plant and equipment. recognised of as an intangible asset when the group can demonstate: 1.4.10 Intangible assets • the technical feasibility of completing the intangible asset so Intangible assets acquired separately are measured on initial that it will be available for use or sale, recognition at cost. The cost of intangible assets acquired in a • its intention to complete and its ability to use or sell the asset, business combination is the fair value as at the date of acquisition. • how the asset will generate future economic benefits, • the availability of resources to complete the asset, Following initial recognition, intangible assets are carried at cost • the ability to measure reliably the expenditure during less any accumulated amortisation and any accumulated development. impairment losses. Following initial recognition of the development expenditure of an Internally generated intangible assets, excluding capitalised asset, the cost model is applied requiring the asset to be carried development costs, are not capitalised, and expenditure is at cost less any accumulated amortisation and accumulated charged against income statement in the year in which the impairment losses expenditure is incurred. Amortisation of the asset begins when development is complete The useful lives of intangible assets are assessed as either finite and the asset is available for use. It is amortised over the period or indefinite lives. Intangible assets with finite lives are amortised of expected future benefit from the use or expected future sales over the useful economic life and assessed for impairment from the related project. During the period of development, the whenever there is an indication that the intangible asset may be asset is tested for impairment annually. impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at A summary of the policies applied to the group’s intangible assets each financial year-end and such changes are treated as is as follows; accounting estimates. The amortisation expense on intangible Intangible Useful Acquired/ Impairment assets with finite lives is recognised in the income statement. life Internally testing generated Intangible assets with indefinite useful lives are not amortised but Present Value 12 Acquired When indicators tested for impairment annually, or more frequently when an of Inforce of impairment indication of impairment exists either individually or at the cash- Business arise. The generating unit level. The useful life of an intangible asset with an (PVIB) amortisation indefinite life is reviewed annually to determine whether indefinite method is life assessment continues to be supportable. If not, the change in Purchased 05 Acquired reviewed the useful life assessment from indefinite to finite is made on a Software at each financial prospective basis. Software 05 Acquired year end. License Present value of acquired in-force business (PVIB) Developed 05 Internally Annually for assets The present value of future profits on a portfolio of long term life Software generated not yet in use insurance contracts as at the acquisition date is recognised as an and more frequently intangible asset based on a valuation carried out by an when indicators of independent actuary. Subsequent to initial recognition, the impairment arise. The intangible asset is carried at cost less accumulated amortisation amortisation method and accumulated impairment losses. is reviewed at each financial year end. The PVIB is amortised over the average useful life of the related contracts in the portfolio. The amortisation charge and any Gains or losses arising from derecognition of an intangible asset impairment losses would be recognised in the consolidated are measured as the difference between the net disposal proceeds income statement as an expense. and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
98 John Keells Holdings PLC 1.4.11 Equity investments 1.4.13 Inventories All quoted and unquoted securities, which are held as non-current Inventories are valued at the lower of cost and net realisable value. investments, are valued at cost. All quoted equities held as short Net realisable value is the estimated selling price less estimated term investments are stated at market values with the resultant costs of completion and the estimated costs necessary to make gain or loss recognised in the income statement. The cost of the sale. investment is the cost of acquisition inclusive of brokerage and costs of transaction. The carrying amounts of long term The costs incurred in bringing inventories to its present location investments are reduced to recognise a decline which is and condition, are accounted for as follows; considered other than temporary, in the value of investments, determined on an individual investment basis. Raw materials - On a weighted average basis Finished goods and - At the cost of direct materials, direct In the company’s financial statements, investments in subsidiaries, Work-in-progress labour and an appropriate proportion joint ventures and associate companies have been accounted for of fixed production overheads based at cost, net of any impairment losses which are charged to the on normal operating capacity income statement. Income from these investments are recognised Produce inventories - At since realised price only to the extent of dividends received. Other inventories - At actual cost 1.4.12 Impairment of assets 1.4.14 Trade and other receivables The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication Trade and other receivables are stated at the amounts they are exists, or when annual impairment testing for an asset is required, estimated to realise, net of provisions for bad and doubtful the group makes an estimate of the asset’s recoverable amount. receivables. 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 A provision for doubtful debts is made when the debt exceeds 180 and is determined for an individual asset, unless the asset does days, and collection of the full amount is no longer probable. Bad not generate cash inflows that are largely independent of those debts are written off when identified. from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is Reinsurance receivable considered impaired and is written down to its recoverable Reinsurance assets include the balances due from both insurance amount. In assessing value in use, the estimated future cash flows and reinsurance companies for paid and unpaid losses and loss are discounted to their present value using a pre-tax discount rate adjustment expenses. Amounts recoverable from reinsurers are that reflects current market assessments of the time value of estimated in a manner consistent with the claim liability associated money and the risks specific to the asset. with the reinsured policy. Reinsurance is recorded gross in the consolidated balance sheet unless a right to offset exists. Impairment losses are recognised in the income statement, except that, impairment losses in respect of property, plant and If a reinsurance asset is impaired, the company reduces the equipment are recognised against the revaluation reserve to the carrying amount accordingly and recognises a loss in the extent that it reverses a previous revaluation surplus. statement of income. A reinsurance asset is impaired if there is objective evidence, as a result of an event that occurred after the An assessment is made at each reporting date as to whether there initial recognition of the reinsurance asset, that the company may is any indication that previously recognised impairment losses may not receive all amounts due to it under the terms of the contract, no longer exist or may have decreased. If such indication exists, and the event has a reliably measurable impact on the amount the recoverable amount is estimated. A previously recognised that the company will receive from the reinsurer. impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since Premiums receivable the last impairment loss was recognised. If that is the case the Collectability of premiums and other debts are reviewed on an carrying amount of the asset is increased to its recoverable ongoing basis. Policies issued on debt basis and that are known amount. That increased amount cannot exceed the carrying to be uncollectible are cancelled and respective gross written amount that would have been determined, net of depreciation, premium is reversed. A provision for doubtful debts is raised when had no impairment loss been recognised for the asset in prior some doubt as to collection exists. years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal 1.4.15 Short-term investments is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the Treasury bills and other interest bearing securities held for resale asset’s revised carrying amount, less any residual value, on a in the near future to benefit from short-term market movements systematic basis over its remaining useful life. Impairment loss on are accounted for at cost plus the relevant proportion of the goodwill is not reversed. discounts or premiums.
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1.4.16 Cash and cash equivalents some or all of a provision to be reimbursed, for example under an Cash and cash equivalents in the cash flow statement comprise insurance contract, the reimbursement is recognised as a separate cash at bank and in hand and short term deposits with a maturity asset but only when the reimbursement is virtually certain. The of 3 months or less, net of outstanding bank overdrafts. expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value 1.4.17 Defined benefit plan - gratuity of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to The liability recognised in the balance sheet is the present value the liability. Where discounting is used, the increase in the provision of the defined benefit obligation at the balance sheet date using due to the passage of time is recognised as a finance cost. the projected unit credit method. Any actuarial gains or losses arising are recognised immediately in the income statement. All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. 1.4.18 Defined contribution plan - Employees’ Provident Fund and Employees’ Trust Fund Contingent assets are disclosed, where inflow of economic benefit Employees are eligible for Employees’ Provident Fund is probable. contributions and Employees’ Trust Fund contributions in line with respective statutes and regulations. The companies contribute the 1.4.23 Revenue recognition defined percentages of gross emoluments of employees to an Revenue is recognised to the extent that it is probable that the approved Employees’ Provident Fund and to the Employees’ Trust economic benefits will flow to the group, and the revenue and Fund respectively, which are externally funded. associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the 1.4.19 Insurance provision - life consideration received or receivable, net of trade discounts and The directors agree to the long term and unit link insurance value added taxes, after eliminating sales within the group. business provisions on the recommendation of the actuary following annual valuation of the life insurance business. The following specific criteria are used for recognition of revenue:
The actuarial valuation takes into account all liabilities including Sale of goods contingent liabilities and is based on assumptions recommended Revenue from the sale of goods is recognised when the significant by the independent external actuary. risk and rewards of ownership of the goods have passed to the buyer with the group retaining neither a continuing managerial 1.4.20 Insurance - general involvement to the degree usually associated with ownership, nor Insurance provision comprises of reserve for the net unearned an effective control over the goods sold. premium, reserve or the deferred acquisition cost (net), reserve for gross outstanding claims and the incurred but not reported (IBNR) Rendering of services provision. Revenue from rendering of services is recognised by reference to the stage of completion. Unearned premium, deferred acquisition cost and the reserve for gross outstanding claims are stated according to the industry General insurance business - Gross written premium practices where as the IBNR reserve is decided by an independent external actuary to estimate the outstanding liabilities as of Gross written premium is generally recognised as written upon reporting date. inception of the policy. Upon inception of the contract, premiums are recorded as written and are earned primarily on a pro-rata 1.4.21 Government grants basis over the term of the related policy coverage. However, for those contracts for which the period of risk differs significantly from Government grants are recognised only when they are received the contract period, premiums are earned over the period of risk and all attaching conditions are complied with. When the grant in proportion to the amount of insurance protection provided. relates to an expense item, it is recognised as income over the period necessary to match to the costs, that it is intended to Life insurance business - Gross written premium compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the Premiums from traditional life insurance contracts, including income statement over the expected useful life of the relevant participating contracts and non participating contracts, are asset by equal annual installments. recognised as revenue when cash is received from the policy holder. 1.4.22 Provisions, contingent assets and contingent liabilities Turnover based taxes Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that Turnover based taxes include value added tax, economic service an outflow of resources embodying economic benefits will be charge, turnover tax and tourism development levy. Companies in required to settle the obligation and a reliable estimate can be the group pay such taxes in accordance with the respective made of the amount of the obligation. Where the group expects statutes.
100 John Keells Holdings PLC Dividend loan losses are made on the basis of a continuous review of all Dividend income is recognised on a cash basis. advances to customers, including consumer advances and credit cards. Thereafter, interest income on these loans and advances Interest income are recognised on cash basis. Interest falling due on non- performing advances is credited to interest suspense account Interest income is recognised as interest accrues. which is netted in the balance sheet.
Rental income Interest accrued until such advances being classified as non- Rental income is recognised on an accrual basis over the term of performing are also eliminated from interest income and the lease. transferred to interest in suspense. The interest income on non- performing advances is recognised on a cash basis. Gains and losses Net gains and losses of a revenue nature arising from the disposal Income on discounting of bills of exchange of property, plant and equipment and other non-current assets, Income from discounting of bills of exchange is recognised on a including investments, are accounted for in the income statement, cash basis. after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses. Income from government and securities purchased under resale agreements and other securities Gains and losses arising from activities incidental to the main Discounts/premium on treasury bills, treasury bonds are amortised revenue generating activities and those arising from a group of over the period to reflect a constant periodic rate of return. The similar transactions, which are not material are aggregated, coupon interest on treasury bonds is recognised on an accrual reported and presented on a net basis. basis. The interest income on securities purchased under resale agreement and other securities are recognised in the income Any losses arising from guaranteed rentals are accounted for in statement on a straight-line basis. the year of incurring the same. A provision is recognised if the projection indicates a loss. Fees and commission income
Other income Fees and commission income comprise mainly of fees receivable from customers for guarantees, factoring, credit cards and other Other income is recognised on an accrual basis. services provided by the bank together with foreign and domestic tariff. Such income is recognised as revenue as the services are 1.4.24 Expenditure recognition provided. Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of Profit or loss on sale of securities specific items of income. All expenditure incurred in the running of Profit or loss arising from the sale of marketable securities is the business and in maintaining the property, plant and equipment accounted for on the date of transaction. in a state of efficiency has been charged to the income statement. Lease income For the purpose of presentation of the income statement, the “function of expenses” method has been adopted, on the basis The bank follows the finance method of accounting for lease that it presents fairly the elements of the company and group’s income. performance. 1.5.2 South Asia Gateway Terminals (Pvt) Ltd Borrowing costs Revenue recognition Borrowing costs are recognised as an expense in the period in Stevedoring revenue is recognised on the berthing time of the which they are incurred, unless they are incurred in respect of vessel. Storage revenue is recognised on the issue of delivery qualifying assets in which case it is capitalised. advice.
1.5 SIGNIFICANT ACCOUNTING POLICIES THAT ARE SPECIFIC TO 1.6 EMPLOYEE SHARE OPTION PLAN THE BUSINESS OF ASSOCIATE COMPANIES On 28 June 2004, shareholders approved a third plan, whereby the company could issue annually nontransferable call share 1.5.1 Nations Trust Bank PLC options, not exceeding in aggregate 2% of the total issued capital of the company as at the date of granting every award under this Revenue recognition plan, to a total of 5% of the total issued share capital as at the Interest income from customer advances date of the last award. Approvals of the CSE and SEC have been In terms of the provisions of the Sri Lanka Accounting Standard obtained for this plan. As at 31 March 2011, the total number of No. 23 on Revenue Recognition and Disclosures in the financial options granted under this plan, after allowing for bonus issues statements of banks and the guidelines issued by the Central Bank and rights issues, was 30,599,744 of which 19,635,972 had been of Sri Lanka, interest receivable is recognised on an accrual basis. exercised, 3,157,173 had lapsed and 7,806,599 remain Interest ceases to be taken into revenue when loans and advances unexercised. are classified as non-performing, as specific provisions for possible
Annual Report 2010/11 101 notes to the finAnciAl stAtements
On 13 December 2007, shareholders approved a fourth plan, b) Sri Lanka Accounting Standard 45 Financial Instruments; whereby the company could issue non-transferable call share Recognition and Measurement (SLAS 45) options, not exceeding in aggregate 0.85% of the shares in issue of the company as at the date of granting the award. Approvals of c) Sri Lanka Accounting Standard 39 Share Based Payments (SLAS the CSE and SEC have been obtained for this plan. As at 31 39) March 2011, the total number of options granted under this plan, was 5,405,945 of which 894,575 had been exercised, 233,350 The effective date of SLAS 44, 45 and 39 was changed during the had lapsed and 4,278,020 remain unexercised. year to be effective for financial periods beginning on or after 01 January 2012. These three standards have been amended and On 2 December 2009, shareholders approved a fifth plan, forms a part of the new set of financial reporting standards whereby the company could issue non-transferable call share mentioned below. options, not exceeding in aggregate 1% of shares in issue of the company as at the date of granting the award. Approvals of the Subsequent to the proposed convergence of Sri Lanka CSE and SEC have been obtained for this plan. As at 31 March Accounting Standards with the International Financial Reporting 2011, the total number of options granted under this plan was Standards, the Council of the Institute of Chartered Accountants 6,126,960 of which 551,337 had been exercised, 19,460 had of Sri Lanka has adopted a new set of financial reporting standards lapsed and 5,556,163 remains unexercised. that would apply for financial periods beginning on or after 01 January 2012. The application of these financial reporting On 6 December 2010, shareholders approved a sixth plan, standards is substantially different to the prevailing standards. whereby the company could issue non-transferable call share options, not exceeding in aggregate 0.75% of shares in issue of 1.8 SEGMENT INFORMATION the company as at the date of granting the award. Approvals of Reporting segments the CSE and SEC have been obtained for this plan. As at 31 The group’s internal organisation and management is structured March 2011, the total number of options granted under this plan based on individual products and services which are similar in was 4,672,823 of which 9,800 had been exercised, 3,200 had nature and process and where the risk and return are similar. The lapsed and 4,659,823 remains unexercised. primary segments represent this business structure. Of the 22,300,605 options unexercised and outstanding as at 31 The secondary segments are determined based on the group’s March 2011 (2010 – 27,996,532), 7,806,599 are exercisable geographical spread of operations. The geographical analysis of before 27 May 2012, 4,278,020 are exercisable before 24 March turnover and profits are based on location of customers and 2013, 5,556,163 are exercisable before 16 December 2014 and assets respectively. 4,659,823 are exercisable before 8 December 2015.
The activities of each of the reported business segments of the 1.7 EFFECT OF SRI LANKA ACCOUNTING STANDARDS (SLAS) group are detailed in the group directory. ISSUED BUT NOT YET EFFECTIVE
The following standards have been issued by the Institute of Segment information Chartered Accountants of Sri Lanka. Segment information has been prepared in conformity with the accounting policies adopted for preparing and presenting the a) Sri Lanka Accounting Standard 44 Financial Instruments; consolidated financial statements of the group. Presentation (SLAS 44)
102 John Keells Holdings PLC 9,654 2,234 9,799 31,769 (89,385) (43,752) (92,337) 310,167 404,138 (563,786) 1,781,594 (7,648,629) (1,736,853) (8,927,888) 37,614,051 38,916,552 1,155 20,641 67,395 (21,682) 592,595 538,566 (139,020) 2,785,859 4,977,752 (7,445,607) (8,927,888) (1,700,095) (1,038,241) (9,407,631) 38,916,552 38,035,613 ------work in 2011 2010 progress - - 316 - 1,447 - (1,803) - (2,577) - - - - 2,543,929 417,815 - (1,750,686) - 793,243 417,815 29,988,664 - 467,134 161,578 (1,165,797) - - (158,481) 23,790 ------25,251 138,527 - 168,821 471,537 1,613,953 - (54,917) (159,491) (265,375) - - - - Motor vehicles Returnable Others Capital Total Total - - 733 and fittings - (1,402) - - - 106 land - (105,058) (10,464) (22,523) (2,422) - 14,020 2,435 4,690 1,299 - 22 21,851 68,520 259,280 25,115 (1,182) (16,521) 21,102 46,293 (10,715) 459,802 88,081 157,168 32,950 (57,246) (76,727) (90,564) (305,938) (27,983) 567,092 717,851 499,468 859,044 79,986 buildings leasehold machinery furniture Freehold Leasehold containers (131,091) (263,205) (321,562) (600,074) (49,601) (5,552) (50,147) (278,863) (321,192) (744,511) (2,344,089) (3,589,629) (334,533) (21,581) (183,377) (1,868,719) Land and Buildings on Plant and Equipment, 2,676,842 109,017 (2,941,663) (3,742,622) (204,998) 35,534 (54,773) property / others property difference property / others property difference and impairment Transfers to investment Transfers Exchange translation Transfers to investment Transfers Exchange translation Impairment / derecognition Derecognition Charge for the year Disposals Revaluations In Rs.'000s Revaluations Cost or valuation At the beginning of year 15,607,429 9,173,495 4,743,994 5,848,040 551,036 30,814 Additions Disposals Accumulated depreciation Accumulated depreciation At the beginning of year (200,510) (1,023,378) (2,181,563) (3,411,426) (344,296) (16,029) Carrying value 2011As at 31 March 2010As at 31 March 15,530,080 15,406,919 5,314,924 8,150,117 2,593,347 2,562,431 2,823,126 2,436,614 211,311 206,740 9,233 14,785 397,661 1,147,704 600,596 28,627,982 At the end of year 15,851,272 6,059,435 4,937,436 6,412,755 545,844 30,814 581,038 At the end of year 3,016,423 600,596 22.1 PLANT AND EQUIPMENT PROPERTY, Group
Annual Report 2010/11 103 notes to the finAnciAl stAtements
Plant and Equipment, Motor Total Total machinery furniture vehicles 2011 2010 In Rs.'000s and fittings
2.2 Company Cost At the beginning of the year 32,495 593,554 57,161 683,210 708,843 Additions - 4,764 - 4,764 5,216 Disposals (1,139) (53,414) - (54,553) (9,905) Transferred to intangible assets ---- (20,944)
At the end of the year 31,356 544,904 57,161 633,421 683,210
Accumulated depreciation and impairment At the beginning of the year (25,351) (529,287) (16,957) (571,595) (480,966) Charge for the year (1,443) (33,284) (7,664) (42,391) (102,742) Disposals 1,104 53,004 - 54,108 3,735 Transferred to intangible assets ---- 8,378
At the end of the year (25,690) (509,567) (24,621) (559,878) (571,595)
Carrying value As at 31 March 2011 5,666 35,337 32,540 73,543 As at 31 March 2010 7,144 64,267 40,204 111,615
Group Company As at 31st March 2011 2010 2011 2010 In Rs'000s
2.3 Land and building At cost 3,279,507 2,862,024 - - At valuation 17,565,497 20,695,012 - -
20,845,004 23,557,036 - -
2.4 Carrying value At cost 11,002,149 9,083,238 73,543 111,615 At valuation 17,616,600 20,890,639 - - On finance lease 9,233 14,787 - -
28,627,982 29,988,664 73,543 111,615
104 John Keells Holdings PLC Property Method of Effective date Property valuation of valuation valuer
Details of group’s land, building and other properties stated at valuation are indicated below;
Buildings on leasehold land and other properties of Open market value 04 May 2007 Haleen Gouse, Tranquility (Pte) Ltd. method Incorporated Valuer
Land and building of Open market value 31 March 2008 P B Kalugalagedara, Whittall Boustead (Pvt) Ltd. method Chartered Valuation Keells Food Products PLC. Surveyor Ceylon Cold Stores PLC.
Land of Land and building 31 March 2008 R G Wijesinghe, Resort Hotels Ltd. method Consultant Valuer and Assessor
Land and building of Land and building 31 March 2008 R G Wijesinghe, Kandy Walk Inn Ltd. method Consultant Valuer Transware Logistics (Pvt) Ltd. and Assessor
Buildings on leasehold land of Land and building 31 March 2008 R G Wijesinghe, Ceylon Holiday Resorts Ltd. - Bentota Beach Hotel method Consultant Valuer Habarana Lodge Ltd. and Assessor Habarana Walk Inn Ltd.
Land and building of Land and building 31 March 2008 G J Sumanasena, Tea Smallholder Factories PLC. method Incorporated Valuer
Plant and machinery of Contractors test Tea Smallholder Factories PLC. method
Buildings on leasehold land of Land and building 31 March 2008 A Y Daniel & Son, Trans Asia Hotels PLC. method Incorporated Valuer
Land and building of Contractors (cost) 31 March 2008 A Y Daniel & Son, Asian Hotels and Properties PLC. Summation basis Incorporated Valuer
Land and building of Land and building 31 March 2009 R G Wijesinghe, Wirawila Walk Inn Ltd. method Consultant Valuer and Assessor
Land of Open market value 31 Dec 2009 P B Kalugalagedara, International Tourists & Hoteliers Ltd. method Chartered Valuation Surveyor
Land and building of Land and building 31 Dec 2009 R G Wijesinghe, Trinco Holiday Resorts (Pvt) Ltd. method Consultant Valuer Trinco walk Inn Ltd. and Assessor
Land and building of Investment method 31 Dec 2009 P B Kalugalagedara, Union Assurance PLC. Chartered Valuation Surveyor
Buildings on leasehold land of Land and building 10 June 2010 J M J Fernando, Ceylon Holiday Resorts Ltd. - Coral Gardens Hotel method Incorporated Valuer
Annual Report 2010/11 105 notes to the finAnciAl stAtements
Property Method of Effective date Property valuation of valuation valuer
Land and building of Open market value 31 March 2011 P B Kalugalagedara, John Keells PLC. method Chartered Valuation Mackinnons and Keells Financial Services Ltd. Surveyor Keells Realtors Ltd. Whittall Boustead Ltd. JK Properties (Pvt) Ltd.
Buildings on leasehold land of Open market value 31 March 2011 A Y Daniel & Son, Yala Village (Pvt) Ltd. method Incorporated Valuer
Land of Open market value 31 March 2011 P B Kalugalagedara, Ceylon Cold Stores PLC.* method Chartered Valuation Surveyor
* The freehold land of Ceylon Cold Stores PLC at Glennie Street & Justice Akbar Mawatha were revalued as at 31 March 2011 by Messrs P B Kalugalagedara & Associates - Chartered valuation surveyors. The lands were valued at their open market values, and the surplus arising from the revaluation was transferred to the revaluation reserve and due to the change in the nature of use, the total freehold land value was reclassified as invesment property.
Group As at 31st March 2011 2010 In Rs.'000s
The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows;
Cost 12,184,417 11,684,192 Accumulated depreciation (2,272,805) (1,658,914) Carrying value 9,911,612 10,025,278
2.5 Group land and buildings with a carrying value of Rs.639 mn (2010 - Rs.592 mn) have been pledged as security for term loans obtained, details of which are disclosed in Note 17.3.
2.6 Group property, plant and equipment with a cost of Rs.3,550 mn (2010 - Rs.3,570 mn) have been fully depreciated and continue to be in use by the group. The cost of fully depreciated assets of the company amounts to Rs.482 mn (2010 - Rs.436 mn).
Group As at 31st March 2011 2010 In Rs.'000s
3 LEASEHOLD PROPERTY At the beginning of the year 4,576,687 4,775,712 Additions 5,535,669 - Amortisation for the year (373,922) (150,876) Exchange gain / (loss) (222,813) (48,149) At the end of the year 9,515,621 4,576,687
Prepaid lease rentals paid to acquire land use rights have been classified as leasehold property and are amortised over the lease term in accordance with the pattern of benefits provided.
106 John Keells Holdings PLC Property Land extent Lease period Amount In Rs.'000s (in acres) 2011 2010
3.1 Details of leasehold Property
John Keells Maldivian Resorts (Pte) Ltd. Chaaya Island Dhonveli, Republic of Maldives --- 2,194,020
John Keells Warehousing (Pvt) Ltd. Muthurajawela 6.00 50 years from 19-09-2001 43,468 43,468
Rajawella Hotels Ltd. 10.00 95 years and 10 months from 02-02-2000 35,006 35,420
Tea Smallholder Factories PLC. Karawita Tea Factory 4.98 50 years from 15-08-1997 10,800 11,091
Tranquility (Pte) Ltd. Chaaya Island Dhonveli, Republic of Maldives 18.62 18 years from 26-08-2010 7,257,887 - (Previously owned by John Keells Maldivian Resorts (Pte) Ltd.)
Trans Asia Hotels PLC. Colombo 7.65 99 years from 07-08-1981 855,876 868,280
Travel Club (Pte) Ltd. Chaaya Reef Ellaidhoo, Republic of Maldives 13.75 19 years from 03-08-2006 1,235,990 1,344,820
Yala Village (Pvt) Ltd. 10.00 30 years from 27-11-1997 76,594 79,588 9,515,621 4,576,687
Annual Report 2010/11 107 notes to the finAnciAl stAtements
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
4 INVESTMENT PROPERTY At the beginning of the year 2,334,475 2,329,015 899,000 899,000 Additions / transfers 2,583,927 5,460 - - Change in fair value during the year 467,764 - - - Disposals - - (899,000) - At the end of the year 5,386,166 2,334,475 - 899,000
Freehold property 4,016,475 1,194,460 - 899,000 Leasehold property 1,369,691 1,140,015 - - 5,386,166 2,334,475 - 899,000
Property Method of valuation Valuer
4.1 Valuation details of investment property Investment properties of the group were valued by a qualified professional valuer as at 31-03-2011, Details of which are as follows;
Freehold property Asian Hotels and Properties PLC. Investment method P B Kalugalagedera, Chartered Valuation Surveyor Crescat Boulevard, Colombo 3
Ceylon Cold Stores PLC. -- Slave Island Complex, Colombo 2*
Tea Smallholder Factories PLC. Open market value P B Kalugalagedera, Chartered Valuation Surveyor Stores Complex, Peliyagoda
Leasehold property Trans Asia Hotels PLC. Open market value P B Kalugalagedera, Chartered Valuation Surveyor Commercial Centre, Colombo 2
* The freehold land of Ceylon Cold Stores PLC at Glennie Street & Justice Akbar Mawatha were revalued as at 31 March 2011 by Messrs. P B Kalugalagedara & Associates - Chartered valuation surveyors. The lands were valued at their open market values, and the surplus arising from the revaluation was transferred to the revaluation reserve and due to the change in the nature of use the total freehold land value was reclassified as invesment property.
Rental income earned from investment property by the group and company amounts to Rs.233 mn (2010 - Rs.236 mn) and Rs.32 mn. (2010 - Rs.45 mn) respectively. Direct operating expenses incurred by the group and company amounted to Rs.65 mn (2010 - Rs.61 mn) and Rs.13 mn (2010 - Rs.7 mn) respectively.
108 John Keells Holdings PLC ------(8,378) (5,719) 51,547 51,547 (14,097) Company - - - - - Software licenses Software 37,450 68,991 43,724 17,444 51,547 (11,170) (14,097) (25,267) - - 670 (149) (31,769) (21,272) 167,863 (226,849) (258,767) 2,814,912 2,667,651 Group Total Total Group - 295 (685) 2011 2010 2011 2010 (5,327) 194,341 121,204 (234,023) (244,677) (478,405) 3,110,355 2,800,822 ------(5,327) - 194,341 - - - - - (187,416) - - 2,061,584 316,597 49,500 2,556,145 - (187,416) - - (374,832) - 2,249,000 316,597 49,500 ------Software - - 63,895 57,291 20,292 33,723 101,258 37,450 17,226 1,874,168 505,611 49,500 2,631,950 85,736 73,909 129,373 17,226 2,249,000 505,611 49,500 23,637 2,515 77,826 17,226 (16,643) (15,946) (14,018) (21,841) (53,617) (28,115) Developed Purchased licenses WIP PVIB Goodwill Other non-current investments non-current and impairment Exchange translation difference 295 Transfers Exchange translation difference (685) Amortisation Adjustment due to sale of Carrying value 2011 As at 31 March 2010 As at 31 March Accumulated amortisation At the beginning of year (5,493) (37,671) (14,097) Increase in interest in subsidiaries in interest Increase - At the end of year At the end of year Cost/carrying value At the beginning of year 62,784 71,394 51,547 In Rs.'000s Additions / transfers 5 ASSETS INTANGIBLE
Annual Report 2010/11 109 notes to the finAnciAl stAtements
5.1 Present value of acquired in-force business (PVIB) In compliance with SLAS 25 - Business Combinations, upon acquiring a controlling stake in Union Assurance PLC (UA), the group has recognised in the consolidated financial statements an intangible asset representing the present value of future profits on UA’s portfolio of long term life insurance contracts, known as the present value of acquired in-force business (PVIB) at the acquisition date. Further, PVIB recognised at the acquisition date will be amortised over the life of the business acquired and reviewed annually for any impairment in value.
In Rs.'000s Net carrying value of goodwill
5.2 Goodwill Goodwill acquired through business combinations have been allocated to 6 cash generating units (CGU’s) for impairment testing as follows;
Airlines 5,054 Chaaya Hotels and Resorts 131,485 Cinnamon Hotels and Resorts 34,763 Consumer Foods and Retail 57,025 Financial Services 265,358 Logistics, Ports and Shipping 11,926 505,611
The recoverable amount of all CGUs have been determined based on the fair value less cost to sell or the value in use (VIU) calculation.
Key assumptions used in the VIU calculations Gross margins The basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceeding the budgeted year adjusted for projected market conditions.
Discount rates The discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.
Inflation The basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic conditions.
Volume growth Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to four years immediately subsequent to the budgeted year based on Industry growth rates. Cash flows beyond the five year period are extrapolated using 0% growth rate.
110 John Keells Holdings PLC Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
6 INVESTMENTS 6.1 Carrying value Investments in subsidiaries Investments consolidated Quoted 6.2 - - 17,649,155 17,379,441 Unquoted 6.3 - - 5,827,842 4,387,626 Investments not consolidated Unquoted 6.4 5,115 5,115 5,115 5,115 5,115 5,115 23,482,112 21,772,182 Investmets in joint ventures 6.5 --- - Investments in associates 6.6 14,670,235 14,309,186 9,257,569 9,110,819 Other investments Other equity investments Quoted 6.8 13 13 - - Unquoted 6.9 609,466 107,167 581,806 79,507 609,479 107,180 581,806 79,507 Other non equity investments 6.11 11,182,974 8,308,036 - - 11,792,453 8,415,216 581,806 79,507 26,467,803 22,729,517 33,321,487 30,962,508
Group Company As at 31st March Number of 2011 2010 Number of 2011 2010 In Rs.'000s shares shares
6.2 Group quoted investments Asian Hotels and Properties PLC. 173,912,095 5,216,368 5,564,807 173,912,095 5,216,367 5,564,807 Ceylon Cold Stores PLC. 17,381,649 788,478 788,476 15,060,722 775,440 775,440 Ceylon Cold Stores PLC. - Preference shares 118 1 1 118 1 1 John Keells Hotels PLC. 1,169,598,478 7,102,140 7,329,765 1,169,598,478 7,102,140 7,329,765 John Keells PLC. 26,417,392 394,830 394,830 26,417,392 394,830 394,830 Keells Food Products PLC. 7,180,063 248,439 248,438 5,581,307 202,397 202,397 Tea Smallholder Factories PLC. 5,643,000 63,466 63,466 5,643,000 63,466 63,466 Trans Asia Hotels PLC. 92,053,642 2,254,710 2,254,710 48,642,128 1,594,665 1,594,665 Union Assurance PLC. 35,870,242 2,334,522 1,488,744 31,847,765 2,299,849 1,454,070 18,402,954 18,133,237 17,649,155 17,379,441
The market value of quoted investments amounts to Rs.96,878 mn (2010 - 64,889 mn) and Rs.85,714 mn (2010 - 60,136 mn) for the group and company respectively, the details of which are as follows;
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
Market value Group quoted investments Asian Hotels and Properties PLC. 32,678,083 24,397,275 32,678,083 24,397,275 Ceylon Cold Stores PLC. 13,046,666 2,989,664 11,304,578 2,590,464 John Keells Hotels PLC. 20,117,094 22,331,322 20,117,094 22,331,322 John Keells PLC. 4,892,501 2,569,091 4,892,501 2,569,091 Keells Food Products PLC. 1,077,009 495,424 837,196 385,110 Tea Smallholder Factories PLC. 959,310 846,450 959,310 846,450 Trans Asia Hotels PLC. 18,024,103 8,112,227 9,524,129 4,286,588 Union Assurance PLC. 6,083,593 3,147,668 5,401,381 2,729,331 96,878,359 64,889,121 85,714,272 60,135,631
Annual Report 2010/11 111 notes to the finAnciAl stAtements
Group Company Number of Number of As at 31st March shares 2011 2010 shares 2011 2010 In Rs.'000s 6.3 Group unquoted investments Auxicogent Alpha (Pvt) Ltd. 7,350 792 792 - - - Auxicogent Alpha (Pvt) Ltd. - Preference A 57,200,000 615,358 615,358 - - - Auxicogent Holdings (Pvt) Ltd. 18,000,000 1,878,693 1,543,353 - - - Auxicogent International Canada Inc. 5,000 542 --- - Auxicogent International (Pvt) Ltd. 1,500,000,000 1,615,203 1,615,203 - - - Auxicogent International Lanka (Pvt) Ltd. 32,843,578 - 323,674 - - - Auxicogent International US Inc. 5,000 538 538 - - - Auxicogent Investments Mauritius (Pvt) Ltd. 14,700 1,584 1,584 - - - Auxicogent Investments Mauritius (Pvt) Ltd. - Preference A 57,200,000 615,358 615,358 - - - Ceylon Holiday Resorts Ltd. 12,119,739 1,052,011 566,570 - - - Beruwala Holiday Resorts (Pvt) Ltd. 98,800,000 988,000 166,000 - - - DHL Keells (Pvt) Ltd. 1,000,000 10,000 10,000 1,000,000 10,000 10,000 Elephant House Farms Ltd. 400,000 - 4,000 - - - Facets (Pvt) Ltd. 15,000 - - 15,000 - - Fantasea World Investments (Pte) Ltd. 7,299 433,708 433,708 - - - Habarana Lodge Ltd. 12,981,548 695,083 695,083 - - - Habarana Walk Inn Ltd. 4,321,381 311,851 311,851 - - - Hikkaduwa Holidaty Resorts (Pvt) Ltd. 81,263,544 812,635 --- - InfoMate (Pvt) Ltd. 2,000,000 20,000 20,000 2,000,000 20,000 20,000 International Tourists and Hoteliers Ltd. 22,998,223 1,194,741 247,495 - - - J K Packaging (Pvt) Ltd. 1,450,000 - - 1,450,000 - - J K Properties (Pvt) Ltd. 24,000,000 192,169 192,169 24,000,000 192,169 192,169 Jaykay Marketing Services (Pvt) Ltd. 49,800,000 522,892 522,892 - - - John Keells Air Services India (Pvt) Ltd. 186,120 - 3,271 94,921 - - John Keells Air Services India (Pvt) Ltd. - Redeemable non voting preference shares 650,000 - 14,815 - - - John Keells Computer Services (Pvt) Ltd. 9,650,000 96,500 96,500 9,650,000 96,500 96,500 John Keells Computer Services (UK) Ltd. 98 9 9 98 9 9 John Keells Foods India (Pvt) Ltd. 9,000,000 6,132 89,000 - - - John Keells Holdings Mauritius (Pvt) Ltd. 1,977,225 222,313 107,756 1,977,225 222,312 107,756 John Keells Hotels Mauritius (Pvt) Ltd. 34,100 3,832 980 - - - John Keells International (Pvt) Ltd. 188,034,000 1,880,340 1,545,000 188,034,000 1,880,340 1,545,000 John Keells Logistics (Pvt) Ltd. 20,000,000 200,000 200,000 20,000,000 200,000 200,000 John Keells Logistics India (Pvt) Ltd. 6,731,371 128,037 14,546 627,999 - - John Keells Logistics India (Pvt) Ltd. - Redeemable non voting preference shares 4,600,000 113,359 113,359 2,600,000 41,097 41,097 John Keells Logistics Lanka (Pvt) Ltd. 13,000,000 105,069 40,069 13,000,000 105,069 40,069 John Keells Maldivian Resorts (Pte) Ltd. 49,044,238 4,739,853 3,172,350 - - - John Keells Office Automation (Pvt) Ltd. 500,000 5,000 5,000 500,000 5,000 5,000 John Keells Residential Properties (Pvt) Ltd. 92,520,000 925,200 - 92,520,000 925,200 - John Keells Singapore (Pte) Ltd. 160,000 4,209 4,209 160,000 4,209 4,209 John Keells Software Technologies (Pvt) Ltd. 800,000 - - 800,000 - - John Keells Stock Brokers (Pvt) Ltd. 750,000 500 500 180,000 120 120 John Keells Teas Ltd. 12,000 120 120 12,000 120 120 John Keells Warehousing (Pvt) Ltd. 12,000,000 120,000 120,000 - - - Keells Consultants (Pvt) Ltd. 16,000 1,419 1,299 16,000 1,419 1,299 Keells Food Products Mauritius (Pvt) Ltd. 9,850 - 2,214 - - - Keells Hotel Management Services Ltd. 1,000,000 19,055 19,055 1,000,000 19,055 19,055 Keells Realtors Ltd. 7,500,000 75,000 75,000 3,000,000 30,000 30,000 Keells Shipping (Pvt) Ltd. 50,000 502 502 50,000 502 502 Kandy Walk Inn Ltd. 6,165,484 409,128 409,128 - - - Lanka Marine Services (Pvt) Ltd. 34,805,470 1,325,218 1,325,218 34,805,470 1,325,218 1,325,218 Mack Air (Pvt) Ltd. 500,000 7,563 7,563 500,000 7,563 7,563 Mack Air Services Maldives (Pvt) Ltd. 4,900 2,035 2,035 4,700 2,021 2,021 Mackinnon & Keells Financial Services Ltd. 1,080,000 12,806 12,806 972,000 11,912 11,912 Mackinnon Mackenzie and Company (Shipping) Ltd. 500,000 14,200 14,200 - - - Mackinnon Mackenzie and Company of (Ceylon) Ltd. 9,000 - - 6,600 - -
112 John Keells Holdings PLC Group Company Number of Number of As at 31st March shares 2011 2010 shares 2011 2010 In Rs.'000s 6.3 Group unquoted investments Mackinnons Travels (Pvt) Ltd. 500,000 13,901 13,901 500,000 13,901 13,901 Mortlake (Pvt) Ltd. 300 327,240 327,240 300 327,240 327,240 Nexus Networks (Pvt) Ltd. 10,000 100 100 10,000 100 100 Rajawella Hotels Company Ltd. 2,000,000 20,000 20,000 - - - Resort Hotels Ltd. 75,007 750 750 - - - Serene Holidays (Pvt) Ltd. 800,000 34,153 34,153 - - - Tranquility (Pte) Ltd. 637,500 1,106,270 1,106,270 - - - Trans-ware Logistics (Pvt) Ltd. 11,000,000 111,100 111,100 11,000,000 111,100 111,100 Travel Club (Pte) Ltd. 29,059 302,640 302,640 - - - Trinco Holiday Resort (Pvt) Ltd 8,120,005 357,000 357,000 - - - Trinco Walk Inn Ltd. 3,000,000 95,940 95,940 - - - Walkers Tours Ltd. 4,925,577 128,141 128,141 4,925,577 128,141 128,141 Whittall Boustead (Travel) Ltd. 750,000 40,985 40,985 675,000 40,935 40,935 Whittall Boustead (Pvt) Ltd. 9,918,880 133,383 133,383 7,258,264 106,590 106,590 Wirawila Walk Inn Ltd. 1,500,000 21,885 21,885 - - - Yala Village (Pvt) Ltd. 28,268,000 300,678 300,678 - - - Yala Village (Pvt) Ltd.- Non voting preference shares 10,000,000 100,000 100,000 - - - 24,472,723 18,376,298 5,827,842 4,387,626
Directors’ valuation of unquoted investments amount to Rs.24,473 mn (2010 - Rs.18,376 mn) and Rs.5,828 mn (2010 - Rs.4,388 mn) for the group and company respectively.
Group Company Number of Number of As at 31st March shares 2011 2010 shares 2011 2010 In Rs.'000s 6.4 Investments in subsidiaries not consolidated Keells Systems Integrators Ltd. 500,000 5,115 5,115 500,000 5,115 5,115 5,115 5,115 5,115 5,115
The directors’ valuation of investments in subsidiaries not consolidated amount to Rs.5 mn (2010 - Rs.5 mn) for the group and company.
Keells System Integrators Ltd is a non-operating subsidiary, currently under liquidation, with a net asset value that equals the book value of investments.
Group Number of As at 31st March shares 2011 2010 In Rs.'000s 6.5 Investments in joint ventures Information Systems Associates 73 46,482 46,482 46,482 46,482
The directors’ valuation of the investment in the joint venture amounts to Rs.46 mn (2010 - Rs.46 mn).
The group has a 49% of interest in Information Systems Associates (ISA), a jointly controlled entity which is involved in the software development services in United Arab Emirates. The summarised financial information of ISA is given in Note 6.7.
Annual Report 2010/11 113 notes to the finAnciAl stAtements
Group Company Number of Number of As at 31st March shares 2011 2010 shares 2011 2010 In Rs.'000s
6.6 Investments in associates Quoted Nations Trust Bank PLC. 68,951,695 1,561,355 1,341,963 46,121,532 1,011,052 864,302
Unquoted Central Hospitals (Pvt) Ltd. 58,823,529 1,000,000 1,000,000 52,941,176 900,000 900,000 Maersk Lanka (Pvt) Ltd. 30,000 150 150 30,000 150 150 South Asia Gateway Terminals (Pvt) Ltd. 159,826,750 7,375,263 7,375,263 159,826,750 7,346,367 7,346,367 Auxicogent BPO Solutions (Pvt) Ltd. 49,000 12,689 12,689 - - - (formerly known as Quatrro Business Support Services (Pvt) Ltd.) - Preference A 20,654,506 544,620 544,620 - - - - Pending share issue - 221,800 --- - Quatrro FPO Solutions (Pvt) Ltd. 77,326,071 615,358 615,358 - - - (formerly known as Quatrro Finance & Accounting Solutions (Pvt) Ltd.)
Cumulative profit accruing to the group net of dividend 2,792,879 2,750,711 Cumulative adjustment on account of associate company share of net assets 546,121 668,432 14,670,235 14,309,186 9,257,569 9,110,819
Market Value Quoted Nations Trust Bank PLC. 5,261,014 2,193,918 3,519,073 1,467,503 5,261,014 2,193,918 3,519,073 1,467,503
The directors’ valuation of unquoted associate investments amount to Rs.12,391 mn (2010 Rs.12,479 mn) and Rs.8,247 mn (2010 Rs.8,247 mn) for the group and company respectively.
Refer group directory in the supplementary section of the annual report for effective holding percentages of group investments.
Associates Joint ventures As at 31st March 2011 2010 2011 2010 In Rs.'000s
6.7 Summarised financial information of associates/joint ventures Group share of; Revenue 9,323,780 10,005,881 89,573 77,122 Operating expenses (6,570,073) (7,402,806) (85,156) (70,067) Finance expenses (112,796) (47,208) - - Profit for the year 2,640,911 2,555,867 4,417 7,055
Group share of; Total assets 35,454,638 31,108,125 60,697 71,948 Total liabilities (25,909,272) (21,923,909) (23,272) (37,508) Net assets 9,545,366 9,184,216 37,425 34,440 Goodwill 5,125,324 5,125,324 - - Unrealised profits (455) (354) - - 14,670,235 14,309,186 37,425 34,440
Contingent liabilities 19,379,479 15,403,161 - - Capital and other commitments 104,586 161,109 - -
The group and the company have neither contingent liabilities nor capital and other commitments in respect of its associates and joint venture.
114 John Keells Holdings PLC Group Cost Market value Number of As at 31st March shares 2011 2010 2011 2010 In Rs.'000s
6.8 Other quoted equity investments Ceylon Hotels Corporation PLC. 500 13 13 13 13 13 13 13 13
Group Company Number of Number of As at 31st March shares 2011 2010 shares 2011 2010 In Rs.'000s
6.9 Other unquoted equity investments ACW Insurance Co. Ltd. 450,000 1,269 1,269 - - - Asia Power (Pvt) Ltd. 777,055 79,507 79,507 777,055 79,507 79,507 Expo Lanka (Pvt) Ltd. 83,300,000 502,299 - 83,300,000 502,299 - Fitch Rating Lanka Limited. 62,500 625 625 - - - Pyramid Unit Trust. 310,000 - --- - Rainforest Ecolodge (Pvt) Ltd. 2,500,000 25,000 25,000 - - - SLFFA Cargo Services Ltd. 64,642 715 715 - - - Sri Lanka Hotel Tourism Training Institute. 15,004 50 50 - - - The York Company Ltd. 100 1 1 - - - 609,466 107,167 581,806 79,507
The director’s valuation of other unquoted equity investments amount to Rs.609 mn (2010 - Rs.107 mn) and Rs.582 mn (2010 - Rs.80 mn) for the group and company respectively.
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
6.10 Movement in equity investments At the beginning of the year 14,421,481 13,112,801 30,962,507 27,739,388 Additions 943,491 376,100 2,935,044 2,376,519 New acquisitions - 1,000,000 - 900,000 Disposals and transfers - (17,400) (576,064) (50,382) Net movement in fall in value of investments / impairment - (3,110) - (3,018) Adjustment on account of associate company share of net assets (122,311) (103,663) - - Share of results of associates net of dividend 42,168 56,753 - - At the end of the year 15,284,829 14,421,481 33,321,487 30,962,507
Total value of investments including subsidiaries 58,206,988 50,977,498 33,321,487 30,962,507 Group investments (42,922,159) (36,556,017) - - Total value of investments 15,284,829 14,421,481 33,321,487 30,962,507
Group As at 31st March 2011 2010 In Rs.'000s
6.11 Other non equity investments Bank deposits 300,000 100,000 Debentures 1,229,300 1,130,000 Government securities 9,653,674 7,078,036 11,182,974 8,308,036
Annual Report 2010/11 115 notes to the finAnciAl stAtements
Group Company Assets Liabilities Assets As at 31st March 2011 2010 2011 2010 2011 2010 In Rs.'000s
7 DEFERRED TAX At the beginning of the year 182,252 147,846 781,742 777,236 - - Charge and release 50,812 34,289 8,527 4,442 54,198 - Charge and release on rate differential (33,343) - (145,246) - - - Transfers / exchange translation difference 3,129 117 2,937 64 - - At the end of the year 202,850 182,252 647,960 781,742 54,198 -
The closing deferred tax asset and liability balances relate to the following; Revaluation of land and building to fair value (11,706) (10,813) 240,131 298,743 - - Revaluation of investment property to fair value - - 35,507 43,617 - - Accelerated depreciation for tax purposes (166,866) (147,413) 458,769 577,665 (24,746) - Employee benefit liability 85,490 60,638 (141,154) (137,434) 29,330 - Losses available for offset against future taxable income 290,513 271,105 (31,382) (54,433) 49,614 - Others 5,419 8,735 86,089 53,584 - - 202,850 182,252 647,960 781,742 54,198 -
7.1 The group has tax losses amounting to Rs.5,287 mn (2010 - Rs.5,286 mn) that are available indefinitely for offset against future taxable profits of the companies in which the tax losses arose.
7.2 Deferred tax assets amounting to Rs.53 mn (2010 - Rs.172 mn) for the group and Rs.Nil (2010 - Rs.54 mn) for the company have not been recognised for the year since the companies do not expect these assets to reverse in the forseeable future.
7.3 Deferred tax for tax holiday companies For group companies under BOI tax holidays, deferred tax during the tax holiday period has been recognised for temporary differences, when reversals of such differences extend beyond the tax exemption period, taking into account the the requirements of SLAS 14 and the ICASL council ruling on deferred tax.
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
8 OTHER NON-CURRENT ASSETS Bottle stocks - 308,654 - - Loans to executives 8.1 704,423 585,045 50,898 42,079 Loans to life policy holders 239,420 226,862 - - Loans to subsidiaries 33.3 - - 207,641 18,000 Work-in-progress of apartments 2,265,985 596,156 - - Others 21,573 8,000 - - 3,231,401 1,724,717 258,539 60,079
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
8.1 Loans to executives At the beginning of the year 732,441 775,392 60,098 82,912 Loans granted / transfered 481,986 261,733 36,260 3,694 Recoveries (334,934) (304,684) (25,138) (26,508) At the end of the year 879,493 732,441 71,220 60,098
Receivable within one year 175,070 147,396 20,322 18,019 Receivable between one and five years 704,423 585,045 50,898 42,079 879,493 732,441 71,220 60,098
116 John Keells Holdings PLC Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
9 INVENTORIES Raw materials 260,263 183,032 - - Finished goods 2,120,337 1,492,315 - - Produce stocks 254,814 153,580 - - Other stocks 508,216 466,139 760 778 3,143,630 2,295,066 760 778
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
10 TRADE AND OTHER RECEIVABLES Trade and other receivables 8,327,209 6,407,160 554,552 816,063 Reinsurance receivables 10.1 656,901 901,315 - - Premium receivable 10.2 992,092 810,734 - - Tax refunds 1,920,875 1,667,172 14,141 14,141 Loans to executives 8.1 175,070 147,396 20,322 18,019 12,072,147 9,933,777 589,015 848,223
Group As at 31st March 2011 2010 In Rs.'000s
10.1 Reinsurance receivables Reinsurance receivables on outstanding claims 522,172 849,604 Reinsurance receivables on settled claims net of dues 136,430 53,398 Less: Provision for bad debts (1,701) (1,687) 656,901 901,315
10.2 Premium receivable Premium receivable 1,000,123 818,765 Less: Provision for bad debts (8,031) (8,031) 992,092 810,734
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
11 SHORT TERM INVESTMENTS Quoted equities at market value 11.1 1,199,292 461,901 - - Debentures - 265,000 - - Asset backed securities - 61,000 - - Investments - unit linked 11,027 - - - Bank deposits (more than 3 months and less than 1year) 684,510 2,036,500 663,010 - Government securities (more than 3 months and less than 1year) 1,177,873 2,174,965 - - 3,072,702 4,999,366 663,010 -
Bank deposits (less than 3 months) 5,463,864 4,277,435 4,657,255 4,778,785 Government securities (less than 3 months) 8,344,470 10,024,155 4,750,984 5,399,180 Reported for cash flow 13,808,334 14,301,590 9,408,239 10,177,965 16,881,036 19,300,956 10,071,249 10,177,965
Annual Report 2010/11 117 notes to the finAnciAl stAtements
Group Group Cost Market value As at 31st March Number of shares 2011 2010 2011 2010 In Rs.'000s
11.1 Quoted equities at market value Aitken Spence Hotel Holdings PLC. 100,000 - 12,424 - 38,500 Aitken Spence PLC. 64,000 - 21,849 - 87,920 Asian Hotels and Properties PLC.* 47,500 9,063 - 8,925 - AVIVA NDB Insurance PLC. 69,000 19,710 - 20,638 - Brown and Company PLC.* 15,700 3,889 - 4,549 - Central Finance Company PLC. 109,900 41,480 14,255 139,980 22,308 Chemical Industries Colombo PLC.* 15,500 2,211 - 2,403 - Chevron Lubricants Lanka PLC.* 205,400 24,921 10,004 32,896 23,120 Colombo Dockyard PLC. 178,900 38,193 31,168 45,637 42,826 Commercial Bank of Ceylon PLC.* 76,689 19,910 15,280 20,384 20,175 Commercial Bank of Ceylon PLC. (Non voting) 221,163 17,015 20,394 36,625 28,829 DFCC Bank PLC.* 56,800 11,312 - 9,758 - Dialog Axiata PLC.* 6,946,800 58,215 15,559 72,941 18,900 Diesel and Motor Engineering PLC. 43,100 66,436 - 63,991 - Distilleries Company of Sri Lanka PLC.* 300,600 43,592 9,975 54,108 13,570 Environmental Resources Investments PLC.* 67,900 5,787 - 5,249 - Galadari Hotels Lanka PLC.* 39,000 1,454 - 1,264 - Hatton National Bank PLC.* (Non voting) 339,800 44,971 34,445 79,464 53,340 Hemas Holdings PLC.* 517,450 11,954 6,708 23,803 9,738 HNB Assurance PLC. 294,233 21,018 - 23,539 - Janashakthi Insurance PLC.* 78,600 1,262 - 1,297 - John Keells Holdings PLC.* 129,500 38,439 - 36,985 - John Keells Hotels PLC.* 317,600 6,341 - 5,463 - Lanka Tiles PLC. 469,700 63,217 - 61,578 - LB Finance PLC.* 14,000 1,977 - 2,451 - Merchant Bank of Srilanka PLC.* 30,100 1,391 - 1,391 - National Development Bank PLC.* 17,700 6,311 - 6,025 - Nations Trust Bank PLC.* 45,500 3,775 - 3,472 - Nawaloka Hospitals PLC.* 305,600 1,226 - 1,222 - Overseas Reality Ceylon PLC.* 178,800 2,882 - 2,682 - Pan Asia Banking Corporation PLC.* 31,600 1,666 - 1,621 - Piramal Glass PLC. 1,874,100 16,585 - 20,803 - Richard Pieris and Company PLC.* 417,100 4,819 - 5,673 - Royal Ceremics Lanka PLC. 780,900 46,806 23,448 122,601 40,409 Sampath Bank PLC.* 231,620 28,083 28,671 66,772 35,342 Seylan Bank PLC.* 26,400 2,514 - 1,985 - Sri Lanka Telecom PLC. 520,200 24,933 - 29,651 - Tokyo Cement Company (Lanka) PLC. 654,325 9,878 7,817 38,577 14,499 Tokyo Cement Company (Lanka) PLC. (Non voting) 2,866,500 55,515 9,389 95,326 12,425 United Motors Lanka PLC. 312,500 53,978 - 47,563 - 812,729 261,386 1,199,292 461,901
* Investments made by Union Assurance PLC under the unit linked equity tracker fund, which invests in the 25 Companies that comprise the Milanka Price Index.
118 John Keells Holdings PLC As at 31st March 2011 2010 Number of shares Value of shares Number of shares Value of shares In '000s Rs. Rs. 12 STATED CAPITAL Fully paid ordinary shares At the beginning of the year 619,474 23,322,400 611,352 22,525,108 Share options exercised 10,219 1,289,107 8,122 797,292 At the end of the year 629,693 24,611,507 619,474 23,322,400
The number of shares in issue as at 31-03-2011, include global depository receipts (GDRs) of 952,114 (2010- 983,736), whereby 31,622 GDRs (in terms of ordinary shares) were converted during the year into ordinary shares. Further information on the composition of shares in issue is given under the share information section of the annual report. 22,300,605 shares (2010 - 27,996,532) have been reserved to be issued under the employee share option plan as at 31 March 2011.
Group As at 31st March Note 2011 2010 In Rs.'000s
13 CAPITAL RESERVES Revaluation reserve 13.1 8,110,991 5,727,326 Exchange translation reserve 13.2 1,021,061 1,417,921 Other capital reserves 428,365 428,365 9,560,417 7,573,612
13.1 Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment and present value of acquired in-force business (PVIB).
13.2 Exchange translation reserve comprises the net exchange movement arising on the translation of net equity investments of overseas subsidiaries, joint venture and associates into Sri Lankan rupees.
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
14 REVENUE RESERVES General reserves 5,547,963 5,547,963 4,194,322 4,194,322 Accumulated profit 19,866,826 13,388,296 9,244,938 5,150,742 25,414,789 18,936,259 13,439,260 9,345,064
Group As at 31st March 2011 2010 In Rs.'000s
15 INSURANCE PROVISION Provision - life 12,475,589 10,080,394 Unclaimed benefits 186,911 155,723 12,662,500 10,236,117
Long duration contract liabilities included in the life insurance fund, result primarily from traditional participating and non participating life insurance products. Short duration contract liabilities are primarily group term, accident and health insurance products. The actuarial reserves have been established based on the following; Interest rates which vary by product and as required by regulations issued by the Insurance Board of Sri Lanka (IBSL), Mortality rates based on published mortality tables adjusted for actual experience as required by regulations issued by the IBSL Surrender rates based on the actual experience. The amount of policy holder dividend to be paid is determined annually by the company. The dividend includes life policy holders’ share of net income that is required to be allocated by the insurance contract or by insurance regulations. The actuarial valuation of the life insurance business was conducted by M Poopalanathan of Acturial & Management Consultants (Pvt) Ltd, as at 31 December 2010.
Annual Report 2010/11 119 notes to the finAnciAl stAtements
Group As at 31st March 2011 2010 In Rs.'000s
16 NON-INTEREST BEARING BORROWINGS At the beginning of the year 18,000 21,000 Repayments - (3,000) At the end of the year 18,000 18,000
Repayable within one year - - Repayable between one and five years 18,000 18,000 18,000 18,000
Non-interest bearing borrowings represent loans received by Transware logistics (Pvt) Limited (TWL), a subsidiary of the group, from MISC Enterprises Holdings SDN BHD and Keppel Logistics (Pvt) Ltd, joint venture partners of TWL.
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
17 INTEREST BEARING BORROWINGS 17.1 Movement At the beginning of the year 14,708,426 16,556,652 9,975,493 11,260,243 Additions / transfers 1,731,979 684,000 - - Repayments (5,598,409) (2,368,809) (3,118,042) (1,172,000) Adjustments / exchange difference (354,991) (163,417) (233,451) (112,750) At the end of the year 10,487,005 14,708,426 6,624,000 9,975,493
Repayable within one year 2,134,418 4,168,976 1,104,000 3,135,493 Repayable after one year Repayable between one and five years 7,248,442 9,399,305 5,520,000 5,700,000 Repayable after five years 1,104,145 1,140,145 - 1,140,000 8,352,587 10,539,450 5,520,000 6,840,000
10,487,005 14,708,426 6,624,000 9,975,493
Group interest bearing borrowings include finance lease obligations amounting to Rs.6 mn (2010 - Rs.21 mn), details of which are disclosed in note 17.2.
Group As at 31st March 2011 2010 In Rs.'000s
17.2 Finance leases At the beginning of the year 20,537 29,153 Repayments (7,583) (8,616) Adjustments / transfers (7,162) - At the end of the year 5,792 20,537
Finance lease obligations repayable within one year Gross liability 6,697 10,885 Finance charges (1,391) (2,270) Net lease obligation 5,306 8,615
Finance lease obligations repayable between one and five years Gross liability 495 13,082 Finance charges (9) (1,160) Net lease obligation 486 11,922
120 John Keells Holdings PLC - 12,632 10,083 98,958 70,000 100,000 247,886 362,980 104,533 9,975,493 1,995,493 7,980,000 - - - - 2011 2010 6,626 83,333 59,733 36,458 40,000 230,000 6,624,000 6,624,000 12 equal quarterly installments commencing 31 monthly installments commencing April 2009 36 monthly installments 24 monthly installments of 4 years, Bi-annual repayments. Repayment commencing April 2009 60 monthly installments 2008 commencing March 60 monthly installments commencing August 2007 Repayment over 5 years commencing November 2007 Repayment over 4 1/2 years commencing July 2008 48 monthly installments commencing August 2011 November 2010 Bi-annual repayments terms Bullet repayment at end of tenure at end of tenure Bullet repayment Letter of comfort from monthly, unsecured monthly, and machinery of soft drink plant and machinery of soft drink plant and machinery of soft drink plant and machinery of soft drink plant 26 mn shares of Union Assurance PLC 26 mn shares and machinery of soft drink plant John Keells Holdings PLC 6 months LIBOR+2.75%, and security PLC, of Asian Hotels & Properties 165 mn shares of John Keells Hotels PLC, 862 mn shares Asia Hotels PLC and of Trans 14 mn shares December 2009 commencing from Term loanTerm 1 month SLIBOR + 1% Term loanTerm unsecured AWPLR, Term loanTerm SLIBOR + .35% E Friendly loan 6.5%, Kaduwela land, building Project loanProject 10.5%, Kaduwela land, building Debentures Fixed, semi fixed & floating Bank Commercial Commercial loan Term + 0.5% revised AWPLR HNB SCB International institution facility Finance Corporation Lending of Nature rate Interest NDB NDB DFCC loan Project 10.5%, Kaduwela land, building DFCCDFCC loan Term + 4%, Kaduwela land, building AWDR loan Project 13%, Kaduwela land,building Cinnamon Grand John Keells Logistics (Pvt) Ltd. SCB Stores PLC. Stores Group companies Group PLC. Asian Hotels and Properties DHL Keells (Pvt) Ltd. Holdings PLC. Ceylon Cold In Rs.'000s John Keells 17.3 terms Security and repayment
Annual Report 2010/11 121 notes to the finAnciAl stAtements - 145 1,405 1,123 1,123 1,123 7,160 2,274 6,329 55,083 10,411 20,537 550,732 934,393 (150,000) 1,301,360 1,003,200 14,687,889 14,708,426 - - - 555 414 414 330 145 672 2011 2010 8,140 5,792 3,407 41,025 794,880 312,102 770,828 1,473,943 10,481,213 10,487,005 36 monthly installments commencing September 2009 commencing May 2003 Repayment over 5 years Repayment terms 30 quarterly installments Repayment over 5 years Repayment over 10 years 83 monthly installments commencing December 2007 for first two years and LIBOR + 1.5% thereafter Head lease rights quarterly, revised of Dhonveli resorts 3 months LIBOR + 4.25% Corporate guarantee of guarantee of and lease Peliyagoda warehouse LIBOR + 2%, sub lease rights and 28 quarterly installments LIBOR + 1.5%, lease rights corporate guarantee of John Keells Interest rate Interest and security 3 months LIBOR + 1.3% John Keells Hotels PLC. 3 months LIBOR + 3.25% Leasehold right of Hakuraa huraaIsland resort commencing August 2011 John Keells PLC. 9% per annum, mortgage of rights of land Hotels PLC 7.5%, unsecured Finance lease Finance lease Finance lease Finance lease Finance lease Nature of Nature facility Term loan Term Debenture Finance lease Finance lease People’s BankPeople’s loan Term BOC Maldives loan Term BOC Maldives loan Term NTB NTB NTB UDA NTB institution Sampath Bank loan Term Lending Resorts (Pte) Ltd. In Rs.'000s John Keells Maldivian Fantasea World Investments Fantasea World (Pte) Ltd. HNB (Pvt) Ltd.John Keells Warehousing Deutsche Bank Asset backed notes Smallholder Factories PLC.Tea Bank People’s 21.98%, corporate Club (Pte) Ltd. Travel loan Term (Pte) Ltd. Tranquility Whittal Boustead Ltd. held by Union Assurance PLC. Less; JKH debenture Ceylon Holiday Resorts Ltd.Habarana Lodge Ltd. Inn Ltd. Habarana Walk NTB John Keells Logistics (Pvt) Ltd. Inn Ltd. Kandy Walk Asia Hotels PLC. NTB Trans Inn Ltd. Walk Trinco 17.3 terms Security and repayment
122 John Keells Holdings PLC
Group Company As at 31st March 2011 2010 2011 2010 In Rs.'000s
18 EMPLOYEE BENEFIT LIABILITIES At the beginning of the year 1,041,395 956,917 92,630 92,358 Current service cost 148,093 106,450 7,074 7,049 Transfers - - 1,245 (2,087) Interest cost on benefit obligation 104,140 95,692 9,262 9,236 Payments (70,150) (107,904) (4,843) (17,355) (Gain) / loss arising from changes in assumptions or
due to (over) / under provision in the previous year (7,565) (10,447) (616) 3,429
Exchange translation difference (316) 687 - - At the end of the year 1,215,597 1,041,395 104,752 92,630
The expenses are recognised in the income statement in the following line items; Cost of sales 104,956 87,861 6,797 4,244 Distribution expenses 126,373 89,116 - -
Administrative expenses 13,339 14,718 8,923 15,470 244,668 191,695 15,720 19,714
The employee benefit liability of listed companies (with more than 100 employees) and of Jaykay Marketing (Pvt) Ltd is based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries. The employee benefit liability of all other companies in the group are based on the gratuity formula in Appendix E of SLAS 16 - Employee Benefits.
The principal assumptions used in determining the cost of employee benefits were; Discount rate 10% Future salary increases 10%
Group
As at 31st March 2011 2010
In Rs.'000s
19 OTHER DEFERRED LIABILITIES At the beginning of the year 4,655 5,167 Amortisation (512) (512) At the end of the year 4,143 4,655
Amounts expected to be amortised within one year 512 512
Amounts expected to be amortised after one year 3,631 4,143 4,143 4,655
Basis of amortisation
Tea Smallholder Factories PLC.
Sri Lanka Tea Board subsidy 10% p.a. 1,895 2,082
Yala Village (Pvt) Ltd. Ceylon Chamber of Commerce grant 10% p.a. 2,248 2,573 4,143 4,655
Annual Report 2010/11 123 notes to the finAnciAl stAtements
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
20 TRADE AND OTHER PAYABLES Trade payables 4,436,189 2,986,127 - - Reinsurance payables 458,520 391,210 - - Insurance provision - general 20.1 2,822,274 2,709,459 - - Obligation to repurchase securities - 534,243 - - Advances and deposits 370,242 1,616,370 - - Sundry creditors including accrued expenses 3,849,894 2,877,638 220,667 343,426 Other payables 442,470 461,490 - - 12,379,589 11,576,537 220,667 343,426
Group As at 31st March 2011 2010 In Rs.'000s
20.1 Insurance provision - general Reserve for net unearned premiums 1,781,488 1,330,245 Reserve for net deferred acquisition cost (48,862) (23,574) Reserve for gross outstanding claims 1,089,648 1,402,788 2,822,274 2,709,459
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.'000s
21 INCOME TAX LIABILITIES At the beginning of the year 454,292 514,362 - - Charge for the year 29.1 1,207,940 706,317 76,457 16,608 Payments and set off against refunds (865,293) (766,410) (76,457) (16,608) Exchange translation difference (225) 23 - - At the end of the year 796,714 454,292 - -
Group As at 31st March 2011 2010 In Rs.'000s
22 SHORT TERM BORROWINGS Loans 232,000 150,000 232,000 150,000
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
23 REVENUE 23.1 Revenue Gross revenue 60,862,206 48,390,217 554,627 544,193 Turnover tax (362,138) (410,213) - - Net revenue 60,500,068 47,980,004 554,627 544,193
124 John Keells Holdings PLC For the year ended 31st March 2011 2010 Sale of Rendering of Total Sale of Rendering of Total goods services revenue goods services revenue In Rs.'000s
23.2 Business segment analysis Transportation 11,391,682 2,034,078 13,425,760 7,810,649 1,684,003 9,494,652 Leisure - 13,809,589 13,809,589 - 11,499,732 11,499,732 Property - 2,493,634 2,493,634 - 1,620,030 1,620,030 Consumer Foods & Retail 8,106,401 10,251,975 18,358,376 6,743,614 9,099,873 15,843,487 Financial Services - 6,483,587 6,483,587 - 5,262,251 5,262,251 Information Technology 2,276,576 829,959 3,106,535 923,254 515,777 1,439,031 Others - 2,822,587 2,822,587 - 2,820,821 2,820,821 Group revenue 21,774,659 38,725,409 60,500,068 15,477,517 32,502,487 47,980,004
Group For the year ended 31st March 2011 2010 In Rs.'000s
23.3 Geographical segment analysis (by location of customers) Sri Lanka 52,615,665 40,249,444 Asia (excluding Sri Lanka) 5,042,812 5,560,447 Europe 2,358,770 1,912,349 Others 482,821 257,764 Total group external revenue 60,500,068 47,980,004
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
24 DIVIDEND INCOME Income from investments in related parties - - 3,458,217 3,533,941 Income from other investments 62,599 43,951 42,738 39,635 62,599 43,951 3,500,955 3,573,576
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
25 OTHER OPERATING INCOME Interest income 2,747,650 2,946,331 757,847 1,206,484 Negative goodwill on acquisitions - 40,113 - - Gain on disposal of rights in subsidiaries - 946,515 - 750,975 Gain on disposal of quoted investments held for sale 297,268 9,992 - - Increase in market value of quoted investments held for sale 186,042 208,642 - - Exchange gain 299,893 112,512 102,348 11,401 Insurance claims - 198,317 - - Profit on sale of property, plant and equipment - 25,053 1,014 101 Profit on sale of non-current investments 1,795,069 114,776 2,172,441 122,044 Profit on sale of investment property - - 26,200 - Promotional income from consumer foods and retail group 178,419 168,253 - - Income from commercial projects 124,486 34,240 124,486 34,240 Sundry income 485,994 216,001 3,885 79,836 6,114,821 5,020,745 3,188,221 2,205,081
26 OTHER OPERATING EXPENSES Other operating expenses consists mainly of power and energy costs, repairs and maintenance expenditure of the group.
Annual Report 2010/11 125 notes to the finAnciAl stAtements
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
27 FINANCE EXPENSES Interest expense on borrowings Long term 595,174 991,625 376,623 676,289 Short term 200,900 378,531 2,876 40,340 796,074 1,370,156 379,499 716,629
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
28 PROFIT BEFORE TAX Profit before tax is stated after charging all expenses including the following; Remuneration to executive directors 177,255 153,213 74,611 61,510 Remuneration to non executive directors 27,877 24,430 11,910 9,120 Auditors’ remuneration Audit 30,711 29,631 5,113 4,622 Non-audit 9,802 6,334 903 244 Costs of defined employee benefits Defined benefit plan cost 244,668 191,695 15,720 19,714 Defined contribution plan cost - EPF and ETF 514,221 435,721 42,243 40,673 Staff expenses 6,018,930 5,394,355 312,125 294,852 Depreciation of property, plant and equipment 1,700,095 1,736,853 42,391 102,742 Amortisation / impairment of intangible assets 234,023 226,849 11,170 5,719 Derecognition / impairment losses on property, plant and equipment and other non-current assets 49,689 20,955 - 3,018 Operating lease payments 905,413 1,136,837 - - Loss on sale of property, plant and equipment 57,929 - - - Donations 15,734 19,168 6,127 10,418
Group Company For the year ended 31st March Note 2011 2010 2011 2010 In Rs.'000s
29 TAX EXPENSE Current income tax Current tax charge 1,355,993 999,960 10,159 - Under provision of current tax of previous years 100,312 21,174 66,448 16,608 Economic service charge 29.2 22,681 8,763 - - 10% Withholding tax on inter company dividends 97,382 93,234 - - Deferred income tax Relating to origination and reversal of temporary differences 29.3 (10,567) (137,891) (54,198) - 1,565,801 985,240 22,409 16,608
126 John Keells Holdings PLC Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
29.1 Reconciliation between tax expense and the product of accounting profit Profit before tax 10,628,961 6,537,555 5,985,312 4,677,667 Dividend income from group companies 3,874,419 3,869,665 - - Share of results of associates (2,640,911) (2,555,867) - - Other consolidation adjustments 880,471 (247,660) - - 12,742,940 7,603,693 5,985,312 4,677,667 Exempt profits (1,855,005) (1,355,765) (193,990) (467,044) Profits not charged to income tax (2,558,077) (1,188,918) (2,172,440) (770,483) Resident dividend (3,694,297) (3,725,751) (3,500,955) (3,573,576) Accounting profit / (loss) chargeable to income taxes 4,635,561 1,333,259 117,927 (133,436)
Tax effect on chargeable profits 1,394,449 428,127 41,274 (46,703) Tax effect on non deductible expenses 214,547 197,664 19,880 20,762 Tax effect on deductions claimed (418,005) (70,125) (12,904) (27,835) Net tax effect of unrecognised deferred tax assets for the year 53,014 171,938 - 53,776 Net tax effect of unrecognised deferred tax assets for prior years (211,976) (69,290) (92,439) - Tax effect on rate differentials (5,418) (7,368) - - Under provision for previous years 100,312 21,174 66,448 16,608 Other income based taxes Economic service charge 22,681 8,763 - - Social responsibility levy 16,265 11,133 150 - Fringe benefit tax (indian companies) - 20 - - 10% WHT on inter company dividends 97,382 93,234 - - Current and deferred tax share of associates 302,550 199,970 - - 1,565,801 985,240 22,409 16,608
Income tax charged at Standard rate 35% 909,310 642,999 10,009 - Concessionary rate of 15% 196,463 40,339 - - Off-Shore dividend 10% - 1,805 - - Off-Shore profits at varying rates 1,855 - - - Under provision for previous years 100,312 21,174 66,448 16,608 Charge for the year 1,207,940 706,317 76,457 16,608 Deferred tax reversal (81,017) (34,197) (54,198) - Other income based taxes Economic service charge 22,681 8,763 - - Social responsibility levy 16,265 11,133 150 - Fringe benefit tax (indian companies) - 20 - - 10% WHT on inter company dividends 97,382 93,234 - - Current and deferred tax share of associates 302,550 199,970 - - Total income tax expense 1,565,801 985,240 22,409 16,608
Group tax expense is based on the taxable profit of individual companies within the group. At present the tax laws of Sri Lanka do not provide for group taxation.
Group For the year ended 31st March 2011 2010 In Rs.'000s
29.2 Economic service charge (ESC) ESC written-off 22,681 8,763 22,681 8,763
Annual Report 2010/11 127 notes to the finAnciAl stAtements
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
29.3 Deferred tax expense Income statement Deferred tax expense arising from; Accelerated depreciation for tax purposes (96,303) 26,483 24,746 - Revaluation of investment property to fair value 728 - - - Employee benefit liabilities (26,136) (23,278) (29,330) - Benefit arising from tax losses 5,462 (64,963) (49,614) - Others 35,232 27,561 - - (81,017) (34,197) (54,198) - Share of associate company deferred tax 70,450 (103,694) - - Deferred tax charge (10,567) (137,891) (54,198) -
Statement of changes in equity Deferred tax expense arising from; Revaluation of land and building to fair value (73,386) 4,350 - - Total deferred tax charge (83,953) (133,541) (54,198) -
Deferred tax has been computed at 28% for all standard rate companies (including listed companies), and at 12% for leisure group companies and at rates as disclosed in note 29.6 and 29.7.
Temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been recognised, amounts to Rs.1,145 mn (2010 Rs.1,110 mn). The deferred tax effect on undistributed reserves of subsidiaries has not been recognised since the parent can control the timing of the reversal of these temporary differences. The deferred tax liability on temporary differences relating to undistributed profits of associates has not been recognised as there is no current intention of distributing retained earnings to the holding company.
However, the group has recognised the deferred tax impact pertaining to the current year on declared dividends of subsidiaries and associate companies amounting to Rs.100mn.
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
29.4 Tax losses carried forward Tax losses brought forward 5,286,093 3,328,734 1,258,794 1,124,662 Adjustments on finalisation of liability (45,729) 45,953 452 31,284 Tax losses arising during the year 423,923 778,012 - 102,848 Utilisation of tax losses (377,383) (235,160) (29,337) - Adjustments due to acquisitions / mergers / disposals - 1,368,553 - - 5,286,904 5,286,092 1,229,909 1,258,794
Year of Cost of Relief Liability to investment approved claimed on additional investment investment tax on disposal of Investment
29.5 Details of investment relief Company 1999/2000 579,036 284,051 -
The company is eligible for qualifing payment relief granted under Section 31(2)(s) of the Inland Revenue Act No 28 of 1979 and the transitional povisions at Section 218 of the Inland Revenue Act No 10 of 2006. The company has carried forward the unclaimed investment relief for set off in future years.
128 John Keells Holdings PLC 29.6 Applicable rates of income tax The tax liability of resident companies are computed at the standard rate of 35% except for the following companies which enjoy full or partial exemptions and concessions.
Company / Sector Basis Exemption or Period concession Exemptions / concessions granted under the Inland Revenue Act Ceylon Cold Stores PLC. Off-Shore activities for payment Exempt Open-ended in foreign currency John Keells Computer Services (Pvt) Ltd. - do - - do - - do - John Keels Office Automation (Pvt) Ltd. - do - - do - - do - Keells Hotel Management Services Ltd. - do - - do - - do - Keells Shipping (Pvt) Ltd. - do - - do - - do - Walkers Tours Ltd. - do - - do - - do - John Keells Computer Services (Pvt) Ltd. On-shore activities for payment - do - - do - in foreign currency Ceylon Cold Stores PLC. Manufacture of dairy produce - do - Upto 31 March 2011 Lanka Marine Services (Pvt) Ltd. Export consignment sales of petroleum products 10% Open-ended Leisure sector Promotion of tourism 15% - do - Mackinnons Travels (Pvt) Ltd. - do - - do - - do - Consumer Foods and Retail sector Qualified export profits - do - Upto 31 March 2014
Exemptions / concessions granted under the Board of Investment Law Asian Hotels and Properties PLC. Construction and operation of Exempt 15 years from April 1996 with a office and apartment complex 3 year extension on merger Auxicogent International Lanka (Pvt) Ltd. Business / knowledge process - do - 8 years from 1st year of profit outsourcing centre or 2 years from operations Beruwala Holiday Resorts (Pvt) Ltd. Construction and operation of a - do - 8 years from 1st year of profit 4 star hotel or 2 years from operations John Keells Logistics (Pvt) Ltd. Integrated supply chain - do - 5 years from April 2009 management John Keells Residential Properties (Pvt) Ltd. Construction and operation of an - do - 8 years from 1st year of profit apartment complex or 2 years from operations Trinco Holiday Resorts (Pvt) Ltd. For upgrading and refurbishment - do - 10 years from 1st year of profit of a hotel in the Eastern province or 2 years from operations South Asia Gateway Terminals (Pvt) Ltd. "Port Services" at - do - 20 years from September 1999 Queen Elizabeth Quay InfoMate (Pvt) Ltd. Provision of IT enabled services 10% Upto March 2012 John Keells International (Pvt) Ltd. Regional operating headquarters 10% Upto March 2011 Yala Village (Pvt) Ltd. Construction and operation of 15% 15 years from September 2003 safari-style tourist hotel
Other miscellaneous concessions Exemption on interest income earned from foreign currency denominated accounts. Capital gains from sale of shares is excluded from chargeability to income tax. Income / profits from offshore dividends and interest is exempt from income tax.
Country of incorporation Company Rate
29.7 Income tax rates of off-shore subsidiaries India John Keells Foods India (Pvt)Ltd. 30.9% John Keells Air Services India (Pvt) Ltd. 30.9% John Keells Logistics India (Pvt) Ltd. 30.9% Serene Holidays (Pvt) Ltd. 30.9% Mauritius Auxicogent Alpha (Pvt) Ltd. 3%(Effective) Auxicogent Holdings (Pvt) Ltd. 3%(Effective) Auxicogent International (Pvt) Ltd. 3%(Effective) Auxicogent Investments Mauritius (Pvt) Ltd. 3%(Effective) John Keells Holdings Mauritius (Pvt) Ltd. 3%(Effective) John Keells Hotels Mauritius (Pvt) Ltd. 3%(Effective) Keells Food Products Mauritius (Pvt) Ltd. 3%(Effective)
Annual Report 2010/11 129 notes to the finAnciAl stAtements
Country of incorporation Company Rate
29.7 Income tax rates of off-shore subsidiaries (Contd.) Republic of Maldives Fantasea World Investments (Pte) Ltd. Nil Tranquility (Pte) Ltd. Nil Travel Club (Pte) Ltd. Nil John Keells Maldivian Resorts (Pte) Ltd. Nil Mack Air Services Maldives (Pte) Ltd. Nil Singapore John Keells Singapore (Pte) Ltd. 17% (Max) United Arab Emirates Information System Associates. Nil United Kingdom John Keells Computer Services (UK) Ltd. 30% USA Auxicogent International US Inc. 35%(Max) Canada Auxicogent International Canada Inc. 28%
Group For the year ended 31st March Note 2011 2010 In '000s
30 EARNINGS PER SHARE
30.1 Basic earnings per share Profit attributable to equity holders of the parent 8,245,585 5,201,491 Weighted average number of ordinary shares 30.3 622,627 613,164 Basic earnings per share 13.24 8.48
30.2 Diluted earnings per share Profit attributable to equity holders of the parent 8,245,585 5,201,491 Adjusted weighted average number of ordinary shares 30.3 633,927 617,662 Diluted earnings per share 13.01 8.42
30.3 Amount used as denominator Ordinary shares at the beginning of the year 619,474 611,353 Effect of share options exercised 3,153 1,811 Weighted average number of ordinary shares in issue before dilution 622,627 613,164 Number of shares outstanding under the share option scheme 26,318 30,488 Number of shares that would have been issued at fair value (15,018) (25,990) Adjusted weighted average number of ordinary shares 633,927 617,662
For the year ended 31st March Rs. 2011 Rs. 2010 In Rs.'000s
31 DIVIDEND PER SHARE Equity dividend on ordinary shares
Declared and paid during the year Final dividend* 1.00 619,867 1.00 611,353 Interim dividend 2.00 1,248,840 2.00 1,232,289 Total dividend 3.00 1,868,707 3.00 1,843,642
*Previous years’ final dividend paid in the current year.
130 John Keells Holdings PLC Transportation Leisure Property Consumer Foods & Retail Financial Services InformationOthers Technology Group Total As at 31st March 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 In Rs.’000s
32 SEGMENT INFORMATION 32.1 Primary segments (business segments) Property, plant and equipment 657,179 725,68917,965,961 19,850,164 805,109 811,418 3,863,1463,656,792 1,125,9551,070,195 67,999 97,744 784,804 825,205 25,270,153 27,037,207 Lease hold property - - 9,461,3524,522,127 ------54,269 54,560 9,515,621 4,576,687 Investment properties - - 1,369,6921,140,016 4,800,8054,266,210 2,582,195 - - - - - 102,000 79,000 8,854,692 5,485,226 Intangible assets 19,574 33,723 - - - - 53,558 - 1,923,6682,111,084 85,814 57,291 43,725 37,450 2,126,339 2,239,548 Other investments 715 715 25,063 25,063 1,270 1,270 - - 11,183,5998,308,661 - - 581,806 79,507 11,792,453 8,415,216 Other non-current assets 45,854 42,301 73,036 46,496 2,361,668 606,519 94,867 380,246 625,880 559,863 38,445 32,428 68,652 56,864 3,308,402 1,724,717
Intercompany lending - 43,950 3,938,4891,646,326 ------3,528 304,641 76,000 4,243,130 1,769,804 Segment non-current assets 723,322 846,37832,833,593 27,230,1927,968,852 5,685,417 6,593,7664,037,03814,859,102 12,049,803 192,258 190,991 1,939,8971,208,586 65,110,790 51,248,405
Investments in associates 10,425,99610,571,862 ------2,279,2611,829,721 1,024,147 909,956 940,831 997,647 14,670,235 14,309,186 Investment in subsidiaries and joint venture 5,115 5,115 Deferred tax assets 202,850 182,252 Goodwill 505,611 316,597 Eliminations / adjustments (4,430,828) (1,969,098) Total non-current assets 76,063,773 64,092,457
Inventories 388,939 236,477 247,979 248,782 4,979 5,870 1,901,3841,561,723 6,751 5,681 341,964 85,457 271,362 171,096 3,163,358 2,315,086 Trade and other receivables 2,224,9451,548,299 9,063,6876,523,440 104,701 360,890 1,576,3581,111,075 2,784,6212,805,460 1,203,1421,170,823 1,507,5031,440,563 18,464,957 14,960,550 Short term investments 1,458,080 337,280 586,065 3,391,121 497,067 947,588 8,823 62,484 3,977,6413,963,331 170,210 154,10310,183,150 10,445,049 16,881,036 19,300,956 Cash in hand and at bank 313,697 748,891 1,173,4951,266,412 127,653 42,451 75,403 101,541 289,434 542,168 67,415 58,563 75,149 239,119 2,122,246 2,999,145 Segment current assets 4,385,6612,870,94711,071,226 11,429,755 734,400 1,356,799 3,561,9682,836,823 7,058,4477,316,640 1,782,7311,468,94612,037,164 12,295,827 40,631,597 39,575,737 Tax refunds 1,920,875 1,667,172 Eliminations / adjustments (8,324,513) (6,677,057) Total current assets 34,227,959 34,565,852 Total assets 110,291,732 98,658,309 Insurance provision ------12,662,50010,236,117 - - - - 12,662,500 10,236,117 Non interest bearing borrowings 36,000 79,950 3,938,4891,646,326 ------3,974,489 1,726,276 Interest bearing borrowings 50,487 86,741 2,532,7733,420,582 189,786 145 316,769 200,817 - - - - 5,549,4126,889,164 8,639,227 10,597,449 Employee benefit liability 77,823 62,885 331,200 288,909 34,488 31,260 367,550 325,775 149,618 104,069 72,573 67,362 182,345 161,135 1,215,597 1,041,395 Other deferred liabilities - - 2,248 2,573 ------1,895 2,082 4,143 4,655 Other non current liabilities - - 51,687 - 438,606 - 256,645 216,401 ------746,938 216,401 Segment non-current liabilities 164,310 229,576 6,856,3975,358,390 662,880 31,405 940,964 742,99312,812,118 10,340,186 72,573 67,362 5,733,6527,052,381 27,242,894 23,822,293 Deferred tax liabilities 647,960 781,742 Eliminations / adjustments (4,243,129) (1,766,275) Total non-current liabilities 23,647,725 22,837,760 Trade and other payables 1,837,564 976,069 3,029,6572,693,520 494,747 938,680 2,645,9132,512,831 4,598,0844,761,457 1,115,1411,139,735 661,563 665,997 14,382,669 13,688,289 Short term borrowings 107,227 113,309 5,786,2134,418,727 172,953 141,329 478,066 209,164 - - 41,227 10,528 35,074 335,074 6,620,760 5,228,131 Current portion of interest bearing borrowings36,254 32,221 821,364 994,176 - - 153,048 140,757 - - - - 1,123,7523,001,822 2,134,418 4,168,976 Dividend Payable ------619,455 - 619,455
Annual Report 2010/11 Bank overdrafts 112,995 161,178 2,022,7181,624,847 45,599 14,036 1,313,714 532,786 103,492 125,876 123,714 25,393 181,884 92,227 3,904,116 2,576,343 Segment current liabilities 2,094,0401,282,77711,659,952 9,731,270 713,299 1,094,045 4,590,7413,395,538 4,701,5764,887,333 1,280,0821,175,656 2,002,2734,714,575 27,041,963 26,281,194 Income tax liabilities 796,714 454,292 Eliminations / adjustments (8,389,603) (7,176,720) Total current liabilities 19,449,074 19,558,766 Total liabilities 43,096,799 42,396,526 Total segment assets 5,108,9833,717,32543,904,819 38,659,9478,703,252 7,042,21610,155,734 6,873,86121,917,549 19,366,4431,974,989 1,659,93713,977,061 13,504,413105,742,387 90,824,142 Total segment liabilities 2,258,3501,512,35318,516,349 15,089,6601,376,179 1,125,450 5,531,7054,138,53117,513,694 15,227,5191,352,655 1,243,018 7,735,92511,766,956 54,284,857 50,103,487 131 notes to the finAnciAl stAtements - 512 70,986 20,955 350,824 314,303 226,849 191,695 (985,240) 1,781,594 1,736,853 5,552,315 2,555,867 5,552,315 5,201,491 2,944,412 6,537,555 2,407,432 (1,500,977) (1,261,218) (1,370,156) 47,980,004 50,742,199 49,241,222 Group Total Group 512 49,689 817,575 375,171 114,754 234,023 244,668 467,764 (796,074) 4,977,752 1,700,095 9,063,160 2,640,911 9,063,160 8,245,585 5,933,190 2,383,170 (1,957,380) (1,455,474) (1,565,801) 60,500,068 63,912,922 61,955,542 10,628,961 - (1,892) (77,244) 114,507 (449,551) (292,488) (746,794) 2,820,821 1,319,639 3,347,616 1,319,639 3,270,372 1,612,127 2,246,306 Others - 3,111 23,000 (52,041) (83,094) 225,683 (466,907) (234,586) (366,389) 2,822,585 2,114,930 3,341,533 2,114,930 3,289,492 2,349,516 2,550,316 - 98,711 103,170 - 1,381 1,381 - - 187 187 - 4,024 5,345 11,170 5,719 (6,558) (2,417) 17,640 40,383 17,444 30,603 13,216 385,083 47,401 61,419 132,575 191,481 17,640 14,096 29,259 37,207 17,640 2,016,219 1,216,469 13,616 17,718 (13,508) (153,712) 1,439,031 1,599,301 1,592,743 - - - - - (7,805) 43,720 24,122 39,589 21,256 10,397 (22,149) (12,944) (22,584) (22,149) (22,149) 114,467 334,194 (216,424) (136,616) 3,106,536 3,335,904 3,322,960 - - - - - (177) 3,587 52,102 79,815 87,753 26,635 20,180 (69,858) 529,704 412,908 187,416 529,704 477,602 431,667 ( 189,338 ) 11,823 868,342 (338,638) 5,262,251 5,332,286 5,332,109 - - - - - (5,698) 84,369 54,065 15,475 20,177 (99,673) 859,777 606,542 171,784 115,512 187,416 859,777 775,408 691,082 (473,499) 6,483,587 6,588,958 6,583,260 1,333,276 - - - - - 4,777 87,681 41,875 87,681 51,818 45,806 16,563 (78,597) 163,427 380,870 269,712 403,124 288,020 (395,521) (200,339) (131,667) 15,843,487 16,317,605 15,922,084 - - - - 32 2,784 46,980 53,590 57,539 (72,583) 230,077 439,717 230,077 573,011 183,097 578,711 110,151 (437,877) (348,634) (104,451) 1,265,967 18,358,377 18,868,837 18,430,960 ------5,763 3,914 (1,726) 49,815 10,559 13,682 22,492 (36,315) (10,162) 341,924 341,924 292,109 365,909 378,239 (199,715) 1,620,030 1,821,471 1,819,745 Property Property Consumer Foods & Retail Financial Services Information Technology ------6,191 3,597 33,800 10,411 (51,151) (19,357) 780,208 165,528 780,208 614,680 831,359 215,088 (213,993) (895,080) 2,493,635 2,707,628 2,707,628 1,530,708 Deferred liabilities Deferred 5 - - - 325 408 80,398 13,067 51,188 43,322 (19,029) (37,910) 973,445 149,495 911,601 973,445 893,047 (473,854) 1,298,364 1,441,887 1,011,355 (1,019,751) 11,499,732 12,538,512 11,518,761 Leisure Leisure - - - 325 Non-current assets, Non-current 13,105 72,201 4 (36,774) 367,172 373,790 838,452 203,049 229,676 (172,884) (307,062) 2,319,251 3,054,832 2,319,251 1,952,079 2,366,472 2,492,135 (1,448,820) 13,809,588 15,295,182 13,846,362 ------6,837 23,464 53,305 14,279 57,444 (83,574) (25,442) 107,188 175,495 (290,756) 9,494,652 2,158,359 2,282,282 9,785,408 2,282,282 2,258,818 9,785,408 2,365,856 Leasehold property, Leasehold property, ------3 Transportation Transportation 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 54,815 69,773 14,149 17,610 65,065 (11,187) 123,839 735,572 (349,120) (148,431) 2,140,047 2,781,066 2,781,066 2,726,251 2,929,497 13,425,760 13,774,880 13,774,880 Intangible assets, 1 2 2 5 4 4 1 2 and other NCA and other NCA 3 1 Property, plant and equipment, Property, LHP PPE 1 For the year ended 31st March For the year ended 31st March Intra segment revenue Inter segment revenue Revenue of associates of results Share expense Tax (loss) for the year Profit/ Minority interest In Rs.’000s revenue Total Gratuity provision and related costs and related Gratuity provision In addition to segment results, information such as finance expenses, tax expenses has been allocated to segments for better presentation. In addition to segment results, Depreciation of PPE Depreciation Amortisation / depreciation of Amortisation / depreciation Addition to IA Amortisation / impairment of IA Segment revenue Attributable to: Equity holders of the parent Segment results tax / (loss) before Profit Amortisation of other DL Purchase and construction of PPE Purchase Derecognition / impairment losses on Derecognition Eliminations Finance expenses Change in fair value of investment property 32.2 Primary segments (business segments)
132 John Keells Holdings PLC Sri Lanka Asia (excluding Sri Lanka) Others Group Total 2011 2010 2011 2010 2011 2010 2011 2010 In Rs.’000s
32.3 Secondary segments (geographical segments, based on the location of assets) Segment assets 84,318,439 74,127,216 20,548,758 15,693,458 875,190 1,003,468 105,742,387 90,824,142 Segment liabilities 39,094,439 37,648,986 14,533,330 11,589,915 657,088 864,586 54,284,857 50,103,487 Investment in associates 13,646,088 13,399,230 1,024,147 909,956 - - 14,670,235 14,309,186 Segment revenue 55,076,252 43,881,158 6,649,939 5,263,382 229,351 96,682 61,955,542 49,241,222 Segment results 4,730,717 2,587,801 1,195,937 350,445 6,536 6,166 5,933,190 2,944,412 Purchase and construction of property, plant and equipment 4,507,453 1,652,371 467,360 124,070 2,939 5,153 4,977,752 1,781,594 Purchase and construction of intangible assets 102,955 62,264 - - 11,799 8,722 114,754 70,986 Depreciation of property, plant and equipment 1,385,954 1,308,397 312,749 424,243 1,392 4,213 1,700,095 1,736,853 Amortisation of intangible assets 222,168 221,504 - - 11,855 5,345 234,023 226,849 Amortisation / depreciation of leasehold property and other non-current assets 17,192 180,619 357,979 133,684 - - 375,171 314,303 Gratuity provision and related costs 243,045 189,239 1,209 (13) 414 2,469 244,668 191,695 Impairment losses / reversal of impairment losses 46,905 16,178 2,784 4,777 - - 49,689 20,955 Amortisation of other deferred liabilities 512 512 - - - - 512 512
Group Company As at 31st March Note 2011 2010 2011 2010 In Rs.’000s
33 RELATED PARTY TRANSACTIONS The company carried out transactions in the ordinary course of business with the following related entities. The list of directors at each of the subsidiary, joint venture and associate companies have been disclosed in the group directory.
33.1 Amounts due from related parties Subsidiaries 33.3 - - 611,884 531,686 Joint ventures 7,564 21,096 - - Associates 10,956 1,793 189 1,198 Key management personnel (KMP) - - - - Post employment benefit plan - - - - 18,520 22,889 612,073 532,884
33.2 Amounts due to related parties Subsidiaries 33.3 - - 9,274 3,001 Joint ventures - - - - Associates 2,237 13,163 - - Key management personnel - - - - Post employment benefit plan - - - - 2,237 13,163 9,274 3,001
Annual Report 2010/11 133 notes to the finAnciAl stAtements
Company Amounts due from Amounts due to As at 31st March 2011 2010 2011 2010 In Rs.’000s
33.3 Subsidiaries Asian Hotels and Properties PLC. 2,235 3,172 - - Auxicogent International Lanka (Pvt) Ltd. 352 2,435 - - Beruwala Holiday Resorts (Pvt) Ltd. 81 - - - Ceylon Cold Stores PLC. 4,353 5,445 - - Ceylon Holiday Resorts Ltd. 539 1,535 - - DHL Keells (Pvt) Ltd. 21,919 11,429 - - Fantasea World Investments (Pvt) Ltd. 30 39 - - Habarana Lodge Ltd. 497 1,943 - - Habarana Walk Inn Ltd. 452 1,234 - - Hikkaduwa Holiday Resorts (Pvt) Ltd. 3,400 - - - InfoMate (Pvt) Ltd. 5,399 6,420 - - International Tourists & Hoteliers Ltd. - 5 - - Jaykay Marketing Services (Pvt) Ltd. 20,038 6,648 - - John Keells Air Services (Pvt) Ltd. 396 353 - - John Keells Computer Services (Pvt) Ltd. - 409 303 - John Keells Hotels PLC. 205 244 - - John Keells International (Pvt) Ltd. 3,578 1,728 - - John Keells Logistics (Pvt) Ltd. 976 479 - - John Keells Logistics India (Pvt) Ltd. 4,692 3,230 - - John Keells Logistics Lanka (Pvt) Ltd. 1,537 10,649 - - John Keells Maldivian Resorts (Pte) Ltd. 146 6 - - John Keells Office Automation (Pvt) Ltd. 1,729 3,444 -- John Keells PLC. --5,570 2,942 John Keells Properties (Pvt) Ltd. 59 - - - John Keells Residential Properties (Pvt) Ltd. - - 3,094 3 John Keells Teas Ltd. 498 248 - - John Keells Warehousing (Pvt) Ltd. 263 268 - - Kandy Walk Inn Ltd. 419 1,263 - - Keells Consultants (Pvt) Ltd. - - 307 56 Keells Food Products PLC. 2,238 5,360 - - Keells Hotel Management Serivces Ltd. 1,406 2,491 - - Keells Realtors Ltd. 221 229 - - Lanka Marine Services Ltd. 2,857 1,562 - - Mack Air (Pvt) Ltd. 1,763 1,845 - - Mack Air Services Maldives(Pte) Ltd. 48 88 - - Mackinnon & Keells Financial Services Ltd. 4,104 1,132 - - Mackinnon Mackenzie and Company (Shipping) Ltd. 46 61 - - Mackinnon Mackenzie and Company of Ceylon Ltd. 7 - - - Mackinnons Travels (Pvt) Ltd. 207 535 - - Nexus Networks (Pvt) Ltd. 15 214 - - Serene Holidays (Pvt) Ltd. 362 915 - - Tea Small Holder Factories PLC. 74 - - - Trans Asia Hotels PLC. 1,917 3,437 - - Transware Logistics (Pvt) Ltd. 35 15 - - Tranquility Private Ltd. 52 36 - - Travel Club (Pvt) Ltd. 72 14 - - Trinco Holiday Resorts (Pvt) Ltd. 1,972 2,771 - - Union Assurance PLC. 915 483 - - Walkers Tours Ltd. 2,119 271 - - Whittall Boustead (Pvt) Ltd. 1,225 469 - - Whittall Boustead (Travel) Ltd. 13 44 - - Yala Village (Pvt) Ltd. 1,705 896 - -
134 John Keells Holdings PLC Company Amounts due from Amounts due to As at 31st March 2011 2010 2011 2010 In Rs.’000s
33.3 Subsidiaries (Contd.) Loans - Current JayKay Marketing Services (Pvt) Ltd. 164,164 164,164 - - John Keells International (Pvt) Ltd. 15,000 15,000 - - John Keells Properties (Pvt) Ltd. 3,003 - - - Keells Food Products PLC. 81,902 45,000 - - Mackinnon & Keells Financial Services Ltd. - 139,528 - - Trinco Holiday Resorts (Pvt) Ltd. 82,500 82,500 - - Whittall Boustead (Pvt) Ltd. 168,149 - - - 611,884 531,686 9,274 3,001
Loans - Non-current Mackinnon & Keells Financial Services (Pvt) Ltd. 189,641 - - - Transware Logistics (Pvt) Ltd. 18,000 18,000 - - 207,641 18,000 - -
Group Company For the year ended 31st March Note 2011 2010 2011 2010 In Rs.'000s
33.4 Transactions with related parties Subsidiaries (Purchases) / Sales of goods - - (4,372) (2,537) (Receiving) / Rendering of services 33.5 - - 412,761 431,948 Loans given 33.5 - - 391,995 454,028 Interest received / (Interest paid) - - 42,970 469 Rent (taken) / Given - - (23,907) (16,001) (Guarantees taken) / Guarantees given - - 690 716
Joint Ventures (Receiving) / Rendering of services 14,010 21,294 - -
Associates (Purchases) / Sales of goods 3,788 7,839 - - (Receiving) / Rendering of services 33,346 22,645 (2,972) (3,048) Interest received / (Interest paid) 33.6 356,387 402,404 369,371 363,229 Loans taken - - - - Leases taken (2,921) - - -
Key management personnel (Receiving) / Rendering of services - 10,420 - -
Close family members of KMP (Receiving) / Rendering of services - 18 - -
Post employment benefit plan Contributions to the provident fund 182,258 161,209 35,877 34,551
Annual Report 2010/11 135 notes to the finAnciAl stAtements
Company For the year ended 31st March 2011 2010 In Rs.'000s
33.5 Transactions with related parties - Subsidiaries (Receiving) / Rendering of services Asian Hotels & Properties PLC. 17,875 18,301 Ceylon Cold Stores PLC. 31,291 38,231 DHL Keells (Pvt) Ltd. 112,449 96,258 Infomate (Pvt) Ltd. 12,693 13,726 Jaykay Marketing Services (Pvt) Ltd. 41,983 40,762 John Keells Office Automation (Pvt) Ltd. 11,803 11,912 John Keells PLC. 14,460 18,204 Keells Food Products PLC. 14,548 17,625 Keells Hotel Management Services Ltd. 49,305 51,496 Trans Asia Hotels PLC. 14,021 13,631 Walker Tours Ltd. 15,813 17,404 Other subsidiaries 76,520 94,398 412,761 431,948 Loans given Jaykay Marketing Services (Pvt) Ltd. - 150,000 John Keells Office Automation (Pvt) Ltd. - 12,000 John Keells Properties (Pvt) Ltd. 3,003 - Keells Food Products PLC. 36,902 45,000 Mackinnon & Keells Financial Services Ltd. 72,641 124,528 Trans Asia Hotels PLC. - 40,000 Trinco Holiday Resorts. - 82,500 Whittall Boustead (Pvt) Ltd. 279,449 - 391,995 454,028
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
33.6 Transactions with related parties - Associates Interest received / (Interest paid) Nations Trust Bank PLC. 356,387 402,404 369,371 363,229
The company and group held interest bearing deposits of Rs.1,850mn and 2,081mn respectively, at Nations Trust Bank PLC as at 31 March 2011.
33.7 Terms and conditions of transactions with related parties Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year end are unsecured, interest free and settlement occurs in cash. Interest bearing borrowings are at pre-determined interest rates and terms.
33.8 Compensation of key management personnel Key management personnel include members of the Board of directors of John Keells Holdings PLC and its subsidiary companies.
Group Company For the year ended 31st March 2011 2010 2011 2010 In Rs.'000s
Short-term employee benefits 205,132 177,643 86,521 70,630 Post employment benefits - - - - Other long-term benefits - - - - Termination benefits - 15,840 - 15,840 Share based payments - - - - 205,132 193,483 86,521 86,470
136 John Keells Holdings PLC Directors’ interest in the employee share option plan of the company As at 31 March 2011, the executive members of the Board of directors held options to purchase ordinary shares under the employee share option plan as follows;
1,128,486 Ordinary shares at a price of Rs.120.74 each, exercisable before 09-4-2011 1,136,800 Ordinary shares at a price of Rs.146.00 each, exercisable before 27-5-2012 1,327,050 Ordinary shares at a price of Rs.120.00 each, exercisable before 24-3-2013 1,066,660 Ordinary shares at a price of Rs.160.25 each, exercisable before 16-12-2014 817,764 Ordinary shares at a price of Rs.292.00 each, exercisable before 08-12-2015
No share options have been granted to the non-executive members of the Board of directors under the employee share option plan.
34 CONTINGENT LIABILITIES
34.1 JOHN KEELLS HOLDINGS PLC (JKH) The contingent liability of JKH as at 31 March 2011, relates to the following; • GST & VAT Assessments for the year of assessment 2002/03 - The company has filed appeals against these assessments and these are currently pending with the Board of Review of the Department of Inland Revenue and Court of Appeal respectively.
• Income tax assessment for the year of assessment 2006/07 - The company has filed an appeal against this assessment and is currently pending with the Board of Review of Department of Inland Revenue.
Having discussed with independent legal and tax experts and based on information available, the contingent liability as at 31 March 2011 is estimated at Rs.123 mn.
34.2 LANKA MARINE SERVICES (PVT) LIMITED (LMS) The contingent liability of LMS as at 31 March 2011, relates to the following; • Post privatisation turnover tax levied by the Western Provincial Council - The company has disputed this on the basis that its business activity is that of an export. An appeal has been made by the company to the Western Provincial Council.
• Income tax assessment relating to year of assessment 2001/02 - Assessment was received by the company based on normal tax rates. The company has appealed against this assessment on the grounds that the sale of bunker to foreign ships is an export, which attracts concessionary rates of taxes, but this has been disputed by the Department of Inland Revenue. The appeal made by the company is currently with the Court of Appeal of Sri Lanka.
• Income tax assessments relating to years of assessments 2005/06, 2006/07 and 2007/08 - Assessments were received in August 2008 and October 2009, consequent to the Supreme Court judgement, whereby the original BOI concessions granted were annulled. Although the assessments were based on normal tax rates the company computed and paid income taxes at concessionary rates of taxes, based on opinions from independent legal counsel and tax consultants, that the supply of bunkers to foreign vessels is an export and therefore eligible to concessionary rates of taxes as provided in the Inland Revenue Act. Appeals have been lodged against the balance taxes assessed and penalties charged by the Inland Revenue. The appeals made by the company have been referred to the Board of Review.
• Income tax assessments relating to years of assessments 2002/03, 2003/04 and 2004/05 – Assessments were received in January 2009, once again based on normal tax rates. It is the view of the company, based on opinions from independent legal counsel and tax consultants, that the subject years were statutorily time barred as provided in the Inland Revenue Act. The appeal made by the company is currently before the Commissioner General of Inland Revenue for determination.
Having discussed with independent legal and tax experts and based on information available, the contingent liability as at 31 March 2011 is estimated at Rs.700mn.
Annual Report 2010/11 137 notes to the finAnciAl stAtements
35 CAPITAL AND OTHER COMMITMENTS Capital commitments approved and contracted as at the balance sheet date, but not provided for in the financial statements amounted to Rs.4,391 mn (2010 Rs. 2,652 mn) and Rs. 451 mn (2010 Rs. Nil) for the group and company respectively.
Other commitments for the group relating to guarantees and forward exchange contracts amounted to Rs. 1,231 mn (2010 Rs. 589 mn).
Group As at 31st March 2011 2010 In Rs.'000s
36 LEASE COMMITMENTS Lease rentals due on non-cancellable operating leases: Within one year 313,263 986,977 Between one and five years 1,254,877 4,182,394 After five years 1,954,333 13,965,519 3,522,473 19,134,890
Company Lessor Leased properties
36.1 Details of leases Ceylon Cold Stores PLC. Colombo Divisional Secretariat Land occupied. Ceylon Holiday Resorts Ltd. Bentota Beach Hotel. Sri Lanka Tourist board Land occupied. Coral Gardens Hotel. Sri Lanka Tourist board Fantasea World Investment (Pte) Ltd. Government of Maldives Land occupied. Habarana Lodge Ltd. Kekirawa Divisional Secretariat Land occupied. Habarana Walk Inn Ltd. Kekirawa Divisional Secretariat Land occupied. Jaykay Marketing Services (Pvt) Ltd. R.J. S. Exports (Pvt) Ltd/Mr. Ramesh Abeywardena Land occupied. John Keells PLC. Colombo Divisional Secretariat Land occupied. Travel Club (Pte) Ltd. Government of Maldives and a sub lease with Land occupied. Ellaidhoo Investments (Pte) Ltd. Tranquility (Pte) Ltd. Government of Maldives Land occupied. Yala Village (Pvt) Ltd. Sri Lanka Tourist board Land occupied.
36.2 Extent of lease hold land is given in the group real estate portfolio in the supplementary section of the annual report.
37 ASSETS PLEDGED Assets pledged for facilities obtained is given in note 17.3 to the financial statements.
38 POST BALANCE SHEET EVENTS The board of directors of the company has declared a final dividend of Rs.1.00 per share for the financial year ended 31 March 2011. As required by section 56 (2) of the Companies Act no 07 of 2007, the board of directors has confirmed that the company satisfies the solvency test in accordance with section 57 of the companies Act No.07 of 2007,and has obtained a certificate from auditors, prior to declaring a final dividend which is to be paid on the 9 June 2011.
In accordance with the Sri Lanka Accounting Standard 12 (Revised 2005), Events after the balance sheet date, the final dividned has not been recognised as a liability in the financial statements as at 31 March 2011.
The board of directors of the company also resolved to recommend the increase in the number of shares in issue by way of a share sub-division, whereby three (3) existing shares will be sub-divided into four (4). The proposed sub-division is subject to the approval of the Colombo Stock Exchange and the shareholders of the company at a general meeting.
138 John Keells Holdings PLC economic VAlue stAtement -- 44 0.08 30 0.05 541 0.97 2,906 5.23 1,737 3.12 2,075 3.73 2,556 4.60 2,947 5.30 5,636 10.14 3,358 6.04 3,565 6.41 6,138 11.04 49,966 89.86 47,980 86.29 37,327 67.13 55,602 100.00 Group Total Total Group 63 0.09 46 0.07 609 0.87 468 0.67 3,194 4.58 1,700 2.44 3,367 4.82 2,641 3.78 2,748 3.94 8,686 12.45 6,377 9.14 3,482 4.99 6,873 9.85 61,101 87.55 60,500 86.69 47,506 68.07 69,787 100.00 ------16 44 (297) (4,710) (3,871) (2,173) (2,762) (2,189) (2,200) (2,510) (6,886) ------Adjustments (531) (344) (911) (5,173) (3,874) (3,897) (3,410) (3,897) (2,258) (2,915) (9,070) - 30 525 2,906 3,915 1,737 7,809 2,031 2,556 3,244 5,547 5,765 6,138 54,676 50,742 39,837 62,488 Total Total Eliminations/ 46 609 3,194 3,937 1,700 3,898 2,641 3,092 5,740 1,379 6,873 66,274 12,583 10,274 63,910 50,421 78,857 - 7 (2) 20 343 192 939 585 3,598 6,236 2,876 1,231 2,677 3,053 3,348 2,235 9,114 13 23 24 (83) 262 133 775 633 3,571 5,937 4,113 2,423 3,967 2,708 3,341 2,310 10,050 - - 5 2 60 47 18 12 (98) (13) 121 464 (150) 1,714 1,599 1,067 1,616 - - 6 1 21 39 50 10 (23) 127 513 (290) (350) 3,659 3,336 3,008 3,369 - 4 1 88 52 187 627 744 314 413 469 740 6,908 1,590 5,332 5,488 7,653 - 2 17 187 558 116 578 671 633 607 368 921 8,887 1,712 6,589 6,828 9,558 - - - 5 14 163 917 381 285 426 298 (118) 1,740 16,203 16,318 13,256 16,630 - - - - 7 43 10 440 238 483 380 Foods & Retail Services Technology 1,149 1,891 18,775 18,868 15,490 19,258 - - - - 6 (4) 10 49 53 26 36 465 127 1,927 1,821 1,282 1,932 - - 1 81 10 56 67 29 315 140 2,273 1,726 2,707 1,126 1,716 1,750 3,999 - - 6 149 250 912 342 791 292 451 1,654 2,066 1,512 7,393 12,539 11,910 13,423 - 9 263 374 136 838 488 837 230 1,734 2,266 3,039 1,827 8,526 15,294 13,372 16,411 - (4) 14 14 94 69 107 115 135 416 2,158 9,785 9,116 9,778 2,343 2,222 12,120 - 5 2 14 72 220 124 194 157 509 Transportation Transportation Leisure Property Consumer Financial Information Others 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 % 2010 % 2,140 2,841 2,703 13,775 12,509 16,212 13,371 assets and other income of associates government providers of funds providers and benefits investments Community Amortisation Economic value retained Economic value retained Depreciation Profit on sale of Profit Share of results of results Share Dividend income Interest income Interest Payments to Payments to Rs.millions economic value generated Direct Revenue Employee wages Economic value distributed Operating costs 31 March 31 March For the year ended Valuation gain on IP Valuation after dividends Profit
Annual Report 2010/11 139 histoRy of the John Keells GRoup
1870 decAde At A GlAnce The foundation was laid for the corporate journey of John Keells 2002 - 2003 Holdings, when two English brothers, George and Edwin John set up JKH acquired Lanka Marine Services (LMS), the bunkering facility at E. John & Co., a firm of produce and exchange brokers. the port of Colombo. Nations Trust Bank acquired the local operations 1948 of American Express. The firm merged with two London based tea brokers, William Jas and 2003 - 2004 Hy Thompson & Co., and GeoWhite & Co., thereby evolving into a In the largest ever transaction on the CSE at that time, JKH acquired private liability company in the name of E. John, Thompson,White & Asian Hotels & Properties, an acquisition that brought with it 40 per Company Ltd. cent of the five star room capacity in Colombo. The Group sold its 50 1960 per cent stake in RPK Management Services (Pvt) Ltd (its Plantations management company). Ever more enthusiastic to expand its activities, the firm amalgamated with Keell and Waldock Ltd., another long established produce, share 2004 - 2005 and freight broking company thus changing its name to John Keell John Keells Hotels Limited (KHL) was created as a holding company Thompson White Ltd. for all Group resorts. JKH acquired a controlling stake in Mercantile 1973 Leasing Limited (MLL). The John Keells Social Responsibility Foundation, the Group’s CSR arm, was established as a charitable The company acquired a controlling stake in Walkers Tours and company and registered as a voluntary social service organisation. Travels (Ceylon) Ltd., one of the country’s leading inbound tour operators. 2005 - 2006 The Group entered into a MOU to develop a third resort in the 1974 Maldives on Alidhoo Island. JKH acquired 80 per cent of Yala Village The firm became a rupee quoted public company and took the name Hotel. With the sale of Keells Plantations, the Group exited from the of John Keells Ltd. ownership of plantations. JKH entered into the BPO space through a joint venture with Raman Roy Associates. The Group also launched 1986 its new hotel brands ’Cinnamon Hotels & Resorts’ and ’Chaaya A newly incorporated John Keells Holdings Ltd. (JKH) acquired a Hotels & Resorts’. NTB merged with Mercantile Leasing Limited. controlling stake in John Keells Limited and obtained a quotation on 2006 - 2007 the Colombo Stock Exchange (CSE) amidst a heavily over-subscribed public share issue. The Group acquired a lease on Dhonveli Beach and Spa and Ellaidhoo Tourist Resort in the Maldives. Furthermore, JKH acquired 1991 20 per cent of Associated Motorways PLC (AMW). JKH increased its JKH was involved in the biggest ever deal at the time, when Whittalls stake in SAGT by 7.5 per cent to 33.75 per cent. The Group exited group of companies was acquired thus gaining controlling stakes in its restaurant businesses with the sale of majority stakes in Keells Ceylon Cold Stores (CCS) (the country’s leading producer of Restaurants (Pvt) Limited and Crescat Restaurants (Pvt) Limited. John carbonated soft drinks and ice cream), Ceylon Holiday Resorts (owner Keells Holdings Ltd was renamed as John Keells Holdings PLC. of Bentota Beach Hotel and Coral Gardens Hotel) and a stake in 2007 - 2008 Union Assurance (UA). The Group’s first ’Cinnamon’ resort in the Maldives, ’Cinnamon Island 1994 Alidhoo’, commenced operations. The lease held by the Group in the JKH became the first Sri Lankan company to obtain a listing abroad, Velidhu Island of the Maldives, expired. The International Finance and issued Global Depository Receipts (GDRs) that were quoted on Corporation (IFC), a member of the World Bank group, signed a long the Luxembourg Stock Exchange. term funding arrangement amounting to USD 75 million to support the Group’s expansion plans. 74 per cent stake Keells Business 1996 Systems Ltd was divested. Velidhu Resort Hotel, an 80 roomed island resort in the Maldives, was acquired making it JKH’s first major overseas investment. 2008 - 2009 JKH acquired a further 8.44 per cent in SAGT and also increased 1999 stakes in UA, CCS, John Keells PLC and Keells Food Products PLC. Nations Trust Bank (NTB) was established in a joint venture with the The privatisation of LMS was declared null and void as per judgement IFC and Central Finance Co. Ltd. Fortune magazine named JKH “One delivered by the Supreme Court. The stake in AMW was divested. of the ten best Asian stocks to buy”. South Asia Gateway Terminals Acquired a 44 per cent stake in Quatrro Finance & Accounting (SAGT) the largest private sector investment in Sri Lanka at that time Solutions. commenced operations to own, operate and develop the Queen Elizabeth Quay at the port of Colombo. 2009 - 2010 The market capitalization exceeded USD 1 billion. JKH increased its 2000 effective stake of UA to 80.6 per cent. JKH purchased a 24.6 per JKH was rated among the best 300 small companies in the world by cent stake in Central Hospital (Private) Limited. At the conclusion of Forbes Global magazine. JKH also became the first company in Sri the KHL 1:3 rights issue, JKH owned 82.9 per cent of KHL. JKH was Lanka to obtain the SL AAA rating from Fitch Rating Ltd. JKH was ranked first by the Business Today magazine’s ’Top 10’ award. admitted as a full member of the World Economic Forum. TransAsia Hotel was re-branded and re-launched as Cinnamon Lakeside Colombo. The group released its first stand alone Sustainability Report for 2008/09 in adherence to the Global Reporting Initiative (GRI-G3) framework. 2010-2011 Please refer ’Operating highlights and significant events’ section.
140 John Keells Holdings PLC decAde At A GlAnce
31st March 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 In Rs.millions
OPERATING RESULTS Group revenue 60,500 47,980 41,023 41,805 32,855 29,463 23,232 22,285 16,784 11,777 EBIT 11,425 7,908 7,986 8,197 6,115 4,850 3,569 3,458 1,311 1,206 Finance expenses (796) (1,370) (1,695) (1,618) (1,314) (525) (404) (458) (329) (324) Share of results of associates 2,641 2,556 2,340 2,243 1,701 958 833 703 451 322 Profit before tax 10,629 6,538 6,291 6,579 4,801 4,325 3,165 2,393 937 882 Tax expense (1,566) (986) (1,326) (1,054) (852) (819) (645) (286) (316) (290) Profit after tax 9,063 5,552 4,965 5,525 3,949 3,506 2,520 2,107 621 592 Extra-ordinary item ------185 -- - Profit for the year 9,063 5,552 4,965 5,525 3,949 3,506 2,705 2,107 621 592
Attributable to: Equity holders of the parent 8,245 5,201 4,733 5,119 3,540 3,064 2,291 1,905 452 543 Minority interest 818 351 232 406 409 442 414 202 169 49 9,063 5,552 4,965 5,525 3,949 3,506 2,705 2,107 621 592 CAPITAL EMPLOYED Stated capital 24,612 23,322 22,525 22,464 22,246 9,205 9,095 9,005 2,794 2,691 Capital reserves 9,560 7,574 7,437 6,019 3,137 2,815 2,115 1,892 1,938 1,632 Revenue reserves 25,415 18,936 15,545 14,914 13,087 10,011 6,686 5,545 4,281 4,028 59,587 49,832 45,507 43,397 38,470 22,031 17,896 16,442 9,013 8,351 Minority interest 7,608 6,430 4,960 4,770 3,696 3,630 3,712 4,936 2,057 1,802 Total equity 67,195 56,262 50,467 48,167 42,166 25,661 21,608 21,378 11,070 10,153 Total debt 14,641 17,453 21,596 12,667 15,363 5,327 9,105 4,056 4,121 3,568 81,836 73,715 72,063 60,834 57,529 30,988 30,713 25,434 15,191 13,721
ASSETS EMPLOYED Property, plant and equipment (PP&E) 28,628 29,989 29,965 28,381 19,688 18,423 19,299 18,103 9,444 8,928 Non-current assets other than PP&E 47,436 34,104 33,456 19,128 17,730 8,850 6,033 3,649 3,719 3,039 Current assets 34,228 34,566 28,718 23,440 27,759 11,478 13,589 9,798 6,134 9,243 Liabilities net of debt (28,456) (24,944) (20,076) (10,115) (7,648) (7,763) (8,208) (6,116) (4,106) (7,489) 81,836 73,715 72,063 60,834 57,529 30,988 30,713 25,434 15,191 13,721 CASH FLOW Net cash flows from operating activities 8,501 9,485 4,146 6,914 2,523 2,664 4,620 3,138 1,891 1,149 Net cash flows from / (used in) investing activities (4,469) (5,823) (3,972) (4,359) (10,088) (2,848) (4,482) (6,746) (2,002) (1,001) Net cashflows from / (used in) financing activities (6,791) (636) 2,332 (6,262) 18,422 (1,027) 271 5,414 (31) (330) Net increase / (decrease) in cash and cash equivalents (2,759) 3,026 2,506 (3,707) 10,857 (1,211) 409 1,806 (142) (182)
KEY INDICATORS Basic earnings per share (Rs.) 13.2 8.5 7.6 8.1 6.2 5.4 4.1 3.7 0.9 1.1 Interest cover (no. of times) 14.0 5.8 4.7 5.1 4.7 9.2 8.8 7.6 4.0 3.7 Net assets per share* (Rs.) 95.0 80.4 74.4 68.2 69.6 57.0 46.9 57.4 52.3 45.4 Enterprise value 175,672 109,548 42,815 76,713 95,962 64,389 47,222 33,578 15,841 9,968 EV / EBITDA 13.1 10.9 4.3 7.8 13.0 10.7 10.0 9.1 5.5 5.1 Debt / equity ratio (%) 21.8 31.0 42.8 26.3 36.4 20.8 29.0 18.3 34.7 35.4 Dividend payout (Rs’millions) 1,869 1,844 1,883 3,176 1,412 1,197 1,075 726 342 330 Current ratio (no. of times) 1.8 1.8 2.1 1.8 1.9 1.2 1.2 1.6 1.2 1.1 Market price per share unadjusted (Rs.) 285.6 184.0 62.8 119.8 155.0 157.8 137.5 111.0 70.8 58.0 Market price per share diluted (Rs.) 285.6 184.0 62.8 118.8 153.7 113.5 82.5 60.5 29.1 23.8
* Net assets per share has been calculated based on the net assets of the group and number of shares in issue as at the end of each year.
Annual Report 2010/11 141 indicAtiVe us dollAR finAnciAl stAtements
Balance sheet For information purposes only
Group Company As at 31st March 2011 2010 2011 2010 In USD'000s
ASSETS Non-current assets Property, plant and equipment 259,310 263,058 666 979 Leasehold property 86,192 40,146 - - Investment property 48,788 20,478 - 7,886 Intangible assets 23,840 22,422 396 329 Investments in subsidiaries and joint ventures 46 45 212,700 190,984 Investments in associates 132,883 125,519 83,855 79,919 Other investments 106,816 73,818 5,270 697 Deferred tax assets 1,837 1,599 491 - Other non-current assets 29,270 15,130 2,342 527 688,982 562,215 305,720 281,321 Current assets Inventories 28,475 20,132 7 7 Trade and other receivables 109,349 87,138 5,335 7,441 Amounts due from related parties 168 201 5,544 4,674 Short term investments 152,908 169,307 91,225 89,280 Cash in hand and at bank 19,136 26,431 176 721 310,036 303,209 102,287 102,123 Total assets 999,018 865,424 408,007 383,444
EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital 222,930 204,582 222,930 204,582 Capital reserves 86,598 66,435 - - Revenue reserves 230,206 166,108 121,732 81,974 539,734 437,125 344,662 286,556 Minority interest 68,915 56,399 - -
Total equity 608,649 493,524 344,662 286,556
Non-current liabilities Insurance provisions 114,697 89,791 - - Non-interest bearing borrowings 163 158 - - Interest bearing borrowings 75,657 92,451 50,000 60,000 Deferred tax liabilities 5,869 6,857 - - Employee benefit liabilities 11,011 9,135 949 813 Other deferred liabilities 38 41 - - Other non-current liabilities 6,766 1,898 - - 214,201 200,331 50,949 60,813
Current liabilities Trade and other payables 112,134 101,549 1,999 3,013 Amounts due to related parties 20 115 84 26 Income tax liabilities 7,217 3,985 - - Short term borrowings 2,101 1,316 - - Current portion of interest bearing borrowings 19,333 36,570 10,000 27,504 Dividend payable - 5,434 - 5,434 Bank overdrafts 35,363 22,600 313 98 176,168 171,569 12,396 36,075 Total equity and liabilities 999,018 865,424 408,007 383,444
Exchange rate 110.40 114.00 110.40 114.00
142 John Keells Holdings PLC Income statement For information purposes only
Group Company For the year ended 31st March 2011 2010 2011 2010 In USD'000s
Revenue 548,008 420,877 5,024 4,774 Cost of sales (424,429) (323,807) (2,107) (2,019)
Gross profit 123,579 97,070 2,917 2,755 Dividend income 567 386 31,711 31,347 Other operating income 55,388 44,042 28,879 19,343 Distribution expenses (21,838) (18,129) - - Administrative expenses (67,410) (63,318) (5,467) (5,739) Other operating expenses (14,957) (13,104) (388) (388) Finance expenses (7,211) (12,019) (3,437) (6,286) Change in fair value of investment property 4,237 - - - Share of results of associates 23,921 22,420 - -
Profit before tax 96,276 57,348 54,215 41,032 Tax expense (14,183) (8,642) (203) (146)
Profit for the year 82,093 48,706 54,012 40,886
Attributable to: Equity holders of the parent 74,687 45,629 Minority interest 7,406 3,077 82,093 48,706
Exchange rate 110.40 114.00 110.40 114.00
This information does not constitute a full set of financial statements in compliance with SLAS. The above should be read together with the Auditors’ opinion and the notes to the financial statements. Exchange rates prevailing at each year end have been used to convert the income statement and balance sheet.
Annual Report 2010/11 143 GRoup ReAl estAte poRtfolio
Net book value Buildings Land in acres 2011 2010 Owning company and location in (Sq. Ft) Freehold Leasehold Rs.'000s Rs.'000s
PROPERTIES IN COLOMBO Ceylon Cold Stores PLC. Slave Island Complex, Colombo 2. 26,910 4.61 3.72 2,611,792 928,962 John Keells Holdings PLC. 320, Union Place, Colombo 2. 81,920 1.94 - - 882,510 John Keells PLC. 130, Glennie Street, Colombo 2. 122,368 1.78 0.58 1,011,500 615,746 56/1, 58, 58 1/1 Kirulapone Avenue, Colombo 5. - 0.08 - 1,250 1,250 John Keells Properties (Pvt) Ltd. 125, Glennie Street, Colombo 2. 27,050 0.49 - 283,425 197,412 Keells Realtors Ltd. 427 & 429, Ferguson Road, Colombo 15. 27,750 1.22 - 232,600 123,320 Mackinnon & Keells Financial Services Ltd. Leyden Bastian Road, York Street, Colombo 01. 31,656 0.45 - 333,000 270,308 Union Assurance PLC. No 20, St. Michaels’ Road, Colombo 03. 57,916 0.33 - 654,560 661,440 Whittall Boustead (Pvt) Ltd. No.199,Union Place, Colombo 2. 14,014 0.50 - 247,000 - 148, Vauxhall Street, Colombo 2. 62,818 3.06 - 1,285,750 939,883 452,402 14.46 4.30 6,660,877 4,620,831
PROPERTIES OUTSIDE COLOMBO Ceylon Cold Stores PLC. Kaduwela. 243,039 26.81 - 537,194 512,947 Trincomalee. 24,905 1.14 - 29,671 30,021 Jaykay Marketing Services (Pvt) Ltd. 385, Negombo Road, Wattala. 12,820 - 0.30 6,849 8,202 Liberty Plaza, Colombo 3. 10,000 --- - 388, Galle Road, Mount Lavinia. 6,000 - 0.24 4,709 6,163 John Keells PLC. 17/1, Temple Road, Ekala, Ja-Ela. - 2.64 - 74,000 59,000 John Keells Warehousing (Pvt) Ltd. Muthurajawela. 141,276 - 6.00 143,675 146,037 Keells Food India (Pvt) Ltd. M 56/A, Greater Kailash Market Part II, New Delhi. --0.04 - 190 Keells Food Products PLC. 41, Temple Road, Ekala, Ja-Ela. 50,199 3.00 3.26 124,357 125,403 Tea Smallholder Factories PLC. Broadlands. 58,063 4.14 - 39,937 40,992 Halwitigala. 56,686 9.60 - 29,182 29,930 Hindul Oya. 10,500 0.88 - 1,697 1,738 Hingalgoda. 56,796 18.27 - 35,692 34,921 Karawita. 75,745 - 4.98 86,892 89,240 Kurupanawa. 62,401 12.26 - 37,972 38,791 Neluwa. 46,708 4.72 - 32,132 31,436 New Panawenna. 41,772 10.59 - 29,373 30,082 Pasgoda. 40,354 5.41 - 20,653 21,176 Peliyagoda. 31,633 - 0.99 102,000 79,000 Raxawa. 24,623 1.22 - 11,025 11,297
144 John Keells Holdings PLC Net book value Buildings Land in acres 2011 2010 Owning company and location in (Sq. Ft) Freehold Leasehold Rs.'000s Rs.'000s
PROPERTIES OUTSIDE COLOMBO Transware-Logistics (Pvt) Ltd. Tudella, Ja-Ela. 63,670 18.67 - 363,209 365,556 Union Assurance PLC. No 06,Rajapihilla Road, Kurunegala. 27,904 0.20 - 130,442 132,490 Whittall Boustead Ltd. - 150, Badulla Road, Nuwara Eliya. 4,346 0.46 - 69,711 69,808 1,089,440 120.01 15.81 1,910,372 1,864,420 HOTEL PROPERTIES Asian Hotels and Properties PLC. Cinnamon Grand Premises, Colombo 2. 648,813 7.82 - 8,170,167 8,105,075 Crescat Boulevard, Colombo 2. 145,196 --1,332,280 1,115,460 Beruwala Holiday Resorts (Pvt) Ltd. Hotel Bayroo, Beruwela. - 6.55 - 230,879 - Beruwala. - 4.72 - 231,801 231,801 Ceylon Holiday Resorts Ltd. Bentota Beach Hotel & Club Intersport, Bentota. 220,414 0.70 11.02 479,470 412,106 Coral Gardens Hotel, Hikkaduwa. ---- 161,343 Central Laundary. Warahena. 16,110 1.38 - 27,834 28,580 Fantasea World Investments (Pte) Ltd. Chaaya Lagoon Hakuraa Huraa, Republic of Maldives. 150,412 - 13.42 708,624 520,586 Habarana Lodge Ltd. The Lodge, Habarana. 194,606 - 25.47 673,382 463,020 Habarana Walk Inn Ltd. Chaaya Village, Habarana. 162,323 - 9.34 190,461 192,883 Hikkaduwa Holiday Resort (Pvt) Ltd. Coral Gardens Hotel, Hikkaduwa. 190,862 - 4.36 319,340 - International Tourists and Hoteliers Ltd. Hotel Bayroo, Beruwela. ---- 223,182 John Keells Maldivian Resorts (Pte) Ltd. Chaaya Island Dhonveli, Republic of Maldives. ---- 2,497,548 Kandy Walk Inn Ltd. The Chaaya Citadel, Kandy. 116,725 5.79 - 314,989 316,504 Resort Hotels Ltd. Nilaveli. 4,485 44.37 - 107,900 107,900 Rajawella Hotels Company Ltd. Mahaberiatenna, Kandy. 3,700 - 10.00 35,585 36,009 Trans Asia Hotels PLC. Cinnamon Lake Side, Colombo 2. 426,933 - 7.65 4,058,392 3,817,688 Tranquility (Pte) Ltd. Chaaya Island Dhonveli, Republic of Maldives. 246,358 18.62 7,550,432 - Cinnamon Island Alidhoo, Republic of Maldives. ---- 3,296,174 Travel Club (Pte) Ltd. Chaaya Reef Ellaidhoo, Republic of Maldives. 179,876 - 13.75 1,708,618 1,887,671 Trinco Holiday Resorts (Pvt) Ltd. Chaaya Blu, Trincomalee. 108,442 13.24 - 510,640 187,068 Trinco Walk Inn Ltd. Club Oceanic, Trincomalee. 89,960 14.64 - 250,586 115,591 Wirawila Walk Inn Ltd. Randunukelle Estate, Wirawila. - 25.15 - 32,568 32,568 Yala Village (Pvt) Ltd. The Village, Yala. 67,330 - 10.00 241,594 234,190 2,972,545 124.36 123.63 27,175,542 23,982,947
Consolidated Value of Land and Buildings 4,514,387 258.83 143.74 35,746,791 30,468,198
Annual Report 2010/11 145 GRoup diRectoRy
TRANSPORTATION John Keells Logistics India (Pvt) Ltd (100%) Air Lines Ports and Shipping Shipping agency representation & freight forwarding & John Keells Air Services India (Pvt) Ltd (100%) logistics services Keells Shipping (Pvt) Ltd (100%) (Formaly known as Matheson Keells Air Services (Pvt) Ltd) No.22, 4th Floor, Oxford Palazzo, Shipping agency representation & logistics services General sales agents for airlines in India. Rustambagh Main Road, Off Airport Road, No. 11, York Street, Colombo 1 No.22, 4th Floor, Oxford Palazzo, Bangalore - 560017, India (2475200 Rustambagh Main Road, Off Airport Road, (+91(080)42040004, 42040005 Directors: S C Ratnayake - Chairman Bangalore - 560017, India Directors: S C Ratnayake - Chairman ( J R F Peiris, R M David +91(080)42040004, 42040005 J R F Peiris, R M David, R S Fernando, Stated capital: Rs.500,000 Directors: S C Ratnayake - Chairman C Hewamallika J R F Peiris, R M David, R S Fernando, Stated capital: Rs.264,719,241 Mackinnon Mackenzie & Co (Shipping) Ltd (100%) C Hewamallika Shipping agency representation & logistics services Stated capital: Rs.17,995,097 John Keells Logistics Lanka (Pvt) Ltd (100%) 4, Leyden Bastian Road, Colombo 1 International freight forwarding and clearing & forwarding (2307526 Mack Air (Pvt) Ltd (100%) No. 11, York Street, Colombo 1 Directors: S C Ratnayake - Chairman General sales agents for airlines in Sri Lanka (2475200 J R F Peiris, R M David No. 11 A, York Street, Colombo 1 Directors: S C Ratnayake - Chairman ( Stated capital: Rs.5,000,000 2475375/2475335 J R F Peiris, R M David Directors: S C Ratnayake - Chairman Stated capital: Rs.130,000,000 Maersk Lanka (Pvt) Ltd (30%) J R F Peiris, R M David, C N Lawrence Shipping agency representation & freight forwarding services Stated capital: Rs.12,500,000 Lanka Marine Services (Pvt) Ltd (99.44%) No. 36, D. R Wijewardene Mawatha, Colombo 10 Importer & supplier of heavy marine fuel oils & lubricants (0112423700 Mackinnons Travels (Pvt) Ltd (100%) 4, Leyden Bastian Road, Colombo 1 Directors: W T Ellawala, Dinesh Lal, R M David IATA accredited travel agent and travel related services (2475410-421 Ceylon Cold Stores Building Robert Janvan Trooijen, Rizwan Sultan Ali Directors: S C Ratnayake - Chairman No. 1 Justice Akbar Mawatha, Colombo 2 Stated capital: Rs.10,000,000 A D Gunewardene, J R F Peiris, (2318600 R M David, R S Fernando Directors: S C Ratnayake - Chairman South Asia Gateway Terminals (Pvt) Ltd (42.19%) Stated capital: Rs.350,000,000 (Alt. A D Gunawardene) Ports & shipping services J R F Peiris, R M David Port of Colombo, P.O. Box 141, Colombo 1. Mackinnon Mackenzie & Co. of Ceylon Ltd (100%) Stated capital: Rs.5,000,000 (2457500 Foreign recruitment agents & consultants Directors: S C Ratnayake - Chairman No. 11, York Street, Colombo 1 Mack Air Services Maldives (Pte) Ltd (49%) A D Gunewardene, J R F Peiris, R M David, (2475200 General sales agents for airlines in the Maldives C Kuo Cheng, H O Madsen, H M Jepsen, Directors: S C Ratnayake - Chairman 4th Floor, STO Aifaanu Building, H G Wieske, Dr S Senerath, D C Alagarathnam, J R F Peiris, R M David Boduthakurufaanu Magu, Male 20-05 Capt N Keppetipola, K N J Balendra, C Menkhorst Stated capital: Rs.90,000 Republic of Maldives Stated capital: Rs.3,788,485,900 (+9603334708 - 09 Trans-ware Logistics (Pvt) Ltd (50%) Directors: S C Ratnayake - Chairman Logistics Integrated container depot. operations & logistics J R F Peiris, R M David, S Hameed, A Shihab DHL Keells (Pvt) Ltd (50%) services provider Stated capital: Rs.677,892 Express courier services No.150,150/1, Pamunugama Road, Tudella, Ja-Ela (2475508/2475538 No. 148, Vauxhall Street, Colombo 2. LEISURE (2304304 / 4798600 Directors: S C Ratnayake- Chairman Hotel Management Directors: S C Ratnayake - Chairman (Alt. A D Gunawardene), Keells Hotel Management Services Ltd (100%) R M David (Alt. J R F Peiris), J R F Peiris, R M David, Manager & marketer of resort hotels M A Monteiro, S P C Ong Z M Gui (appointed w.e.f. 04.08.2010) No.130, Glennie Street, Colombo 2. Stated capital: Rs.20,000,020 A A Miskon (appointed w.e.f. 30.08.2010) (2306600, 2421101-8 Z M Amin (resigned w.e.f. 30.08.2010) Directors: S C Ratnayake – Chairman John Keells Logistics (Pvt) Ltd (100%) Stated capital: Rs.220,000,000 A D Gunewardene, J R F Peiris, J E P Kehelpannala Integrated supply chain & third party logistics solutions Stated capital: Rs.19,520,000 No. 11, York Street, Colombo 1 Whittall Boustead (Pvt) Ltd - Cargo Division (100%) (2475200 International freight forwarder & logistics services John Keells Maldivian Resorts (Pte) Ltd (80.32%) Directors: S C Ratnayake - Chairman No.148, Vauxhall Street, Colombo 2 Hotel holding company in the Maldives J R F Peiris, A D Gunawardene, (2475299 2nd Floor, H. Maizan Building, R M David Directors: S C Ratnayake - Chairman Sosun Magu, Male, Republic of Maldives Stated capital: Rs.200,000,000 A D Gunewardene, J R F Peiris, (00960 3329083 / 00960 3304601 / 00960 3313738 R M David, S Rajendra Directors: S C Ratnayake - Chairman Stated capital: Rs.99,304,300 A D Gunewardene, J R F Peiris, J E P Kehelpannala (resigned w.e.f.14.10.2010) B J S A M Senanayake (appointed w.e.f. 14.10.2010) S A S Perera (appointed w.e.f. 14.10.2010) Stated capital: Rs.3,978,671,681
146 John Keells Holdings PLC John Keells Hotels PLC (80.32%) Ceylon Holiday Resorts Ltd-Bentota Beach Hotel (79.25%) Rajawella Hotels Ltd (80.32%) Holding company of group resort hotel companies Owner & operator of "Bentota Beach Hotel" in Bentota Owner of real estate in Sri Lanka & Maldives Galle Road, Bentota No.130, Glennie Street, Colombo 2. No.130, Glennie Street, Colombo 2. (034 2275176 / 034 2275266 (2306780, 2421101-8 ( 2306600 Directors: S C Ratnayake - Chairman Directors: S C Ratnayake – Chairman Directors: S C Ratnayake – Chairman A D Gunewardene, J R F Peiris, A D Gunewardene, J R F Peiris A D Gunewardene, J R F Peiris, J E P Kehelpannala Stated capital: Rs.20,000,000 J E P Kehelpannala, M A Omar, Stated capital: Rs.744,517,303 R T Wijesinha, D A Cabraal, Resort Hotels Ltd (79.25%) N B Weerasekera (appointed w.e.f. 01.11.2010) Hikkaduwa Holiday Resorts (Pvt) Limited (79.25%) Owner of real estate Stated capital: Rs.9,500,246,939 Owner & will operate "Chaaya Tranz" in Hikkaduwa No.130, Glennie Street, Colombo 2. 130, Glennie Street, Colombo 2 (2306780, 2421101-8 John Keells Hotels Mauritius (Pvt) Ltd (80.32%) (2306600, 2421101-8 Directors: S C Ratnayake – Chairman Hotel holding company in the Mauritius Directors: S C Ratnayake - Chairman A D Gunewardene, J R F Peiris IFS Court, Twenty Eight, Cybercity, Ebene, Mauritius (appointed w.e.f. 06.10.2010), Stated capital: Rs.750,070 ( (230) 467 3000 A D Gunewardene (appointed w.e.f. 06.10.2010), Directors: K D Joory - Chairman J R F Peiris (appointed w.e.f. 06.10.2010), Trinco Holiday Resorts (Pvt) Ltd (80.32%) A D Gunewardene, J R F Peiris, F Soreefan J E P Kehelpannala (appointed w.e.f. 06.10.2010) Owner & operator of "Chaaya Blu" in Trincomalee Stated capital: Rs.981,435 Stated capital: Rs.812,635,460 Alles Garden, Uppuvelli, Sampathiv Post (2421101-8 City Hotels Habarana Lodge Ltd (78.99%) Directors: S C Ratnayake - Chairman Asian Hotels and Properties PLC-Cinnamon Grand (78.56%) Owner & operator of "The Cinnamon Lodge" in Habarana A D Gunewardene, J R F Peiris, Owner & operator of the five star city hotel "Cinnamon Grand" P.O Box 2, Habarana J E P Kehelpannala (appointed w.e.f. 06.11.2010) 77, Galle Road, Colombo 3 (066 2270011-2/ 066 2270072 Stated Capital: Rs.357,000,000 ( 2437437 /2497442 Directors: S C Ratnayake - Chairman Directors: S C Ratnayake - Chairman A D Gunewardene, J R F Peiris, Trinco Walk Inn Ltd (80.32%) A D Gunewardene - Managing Director J E P Kehelpannala, Owner of real estate J R F Peiris, R J Karunarajah, Stated capital: Rs.341,555,262 Alles Garden, Uppuveli,Sampathiv Post, S Rajendra, A R Gunasekara, Trincomalee S K G Senanayake, S A Jayasekara Habarana Walk Inn Ltd (79.34%) (026 112421101-8, 2306600 B M Amarasekera (resigned w.e.f. 28.06.2010) Owner & operator of "Chaaya Village Habarana" Directors: S C Ratnayake – Chairman I Samarawickrama (resigned w.e.f. 28.06.2010) P.O Box 1, Habarana A D Gunewardene, J R F Peiris, Stated capital: Rs.3,345,118,012 (066 2270046-7/ 066 2270077 J E P Kehelpannala Directors: S C Ratnayake - Chairman Stated capital: Rs.119,850,070 Trans Asia Hotels PLC (82.74%) A D Gunewardene, J R F Peiris, Owner & operator of the five star city hotel Wirawila Walk Inn Ltd (80.32%) "Cinnamon Lakeside". J E P Kehelpannala Owner of real estate No. 115,Sir Chittampalam A. Gardiner Stated capital: Rs.126,350,000 No.130, Glennie Street, Colombo 2. Mawatha, Colombo 2. (2306780, 2421101-8 (2491000 International Tourists and Hoteliers Ltd (79.45%) Directors: S C Ratnayake – Chairman Directors: S C Ratnayake - Chairman Owner of real estate A D Gunewardene, J R F Peiris A D Gunewardene, J R F Peiris, D S J Pelpola, No.130, Glennie Street, Colombo 2. ( Stated capital: Rs.15,000,000 N L Gooneratne, R L Nanayakkara, 2306600, 2421101-8 A R Gunasekara Directors: S C Ratnayake – Chairman Yala Village (Pvt) Ltd (75.33%) Stated capital: Rs.1,112,879,750 A D Gunewardene, J R F Peiris, J E P Kehelpannala, W M S Fernando, Owner and operator of "Yala Village" in Yala Resort Hotels - Sri Lanka D C Alagaratnam, P.O Box 1,Kirinda, Tissamaharama (047 2239449-52 Beruwala Holiday Resorts (Pvt) Ltd (79.45%) H G Arrawawala (resigned w.e.f. 05.08.2010) Directors: M A Perera - Chairman Owner of real estate Stated capital: Rs.1,039,675,925 S C Ratnayake - Deputy Chairman No.130, Glennie Street, Colombo 2. A D Gunewardene, J R F Peiris, (2306600, 2421101-8 Kandy Walk Inn Ltd (79.03%) J A Davis, J E P Kehelpannala Directors: S C Ratnayake - Chairman Owner & operator of "The Chaaya Citadel" in Kandy Stated capital: Rs.419,427,600 A D Gunewardene, J R F Peiris, No.124, Srimath Kuda Ratwatte Mawatha, Kandy ( J E P Kehelpannala (appointed w.e.f. 06.11.2010) 081 2234365-6/ 081 2237273-4 Stated Capital: Rs.988,000,000 Directors: S C Ratnayake- Chairman A D Gunewardene, J R F Peiris, J E P Kehelpannala, R T Molligoda Stated capital: Rs.115,182,009
Annual Report 2010/11 147 GRoup diRectoRy
Resort Hotels - Maldives Destination Management Real estate Fantasea World Investments (Pte) Ltd (80.32%) Serene Holidays (Pvt) Ltd (98.74%) J K Properties (Pvt) Ltd (100%) Owner & operator of "Chaaya Lagoon Hakuraa Huraa" Tour operators Renting of office space in Maldives 421,Midas, Shar Plaza, JB Cpitals Nagar, No.130, Glennie Street, Colombo 2. 2nd Floor, H.Maizan Building, Andheri, Kurla Road, Andheri (East), (2306000 /2397263 Sosun Magu, Male, Republic of Maldives Mumbai 400 059, India Directors: S C Ratnayake – Chairman (00960 6720014 / 00960 6720064 / 00960 6720065 (091-2240053036-8 A D Gunewardene, J R F Peiris, S Rajendra Directors: S C Ratnayake - Chairman Directors: A D Gunewardene, V Leelananda Stated capital: Rs.240,000,030 A D Gunewardene, J R F Peiris, Stated capital: Rs.22,758,176 B J S A M Senanayake Keells Realtors Ltd (95.57%) (appointed w.e.f. 14.10.2010), Walkers Tours Ltd (98.51%) Owner of real estates S A S Perera (appointed w.e.f. 14.10.2010) Inbound tour operators No.130, Glennie Street, Colombo 2. J E P Kehelpannala (resigned w.e.f.14.10.2010) No.130, Glennie Street, Colombo 2. (2306000 /2397263 Stated capital: Rs.341,573,190 (2306000 Directors: S C Ratnayake – Chairman Directors: S C Ratnayake – Chairman A D Gunewardene, J R F Peiris, S Rajendra John Keells Maldivian Resorts (Pte) Ltd (80.32%) A D Gunewardene, J R F Peiris,V Leelananda Stated capital: Rs.75,000,000 Hotel holding company in the Maldives Stated capital: Rs.51,374,200 2nd Floor, H.Maizan Building, Whittall Boustead (Pvt) Ltd - Real Estate Division-(100%) Sosun Magu, Male, Republic of Maldives Whittall Boustead (Travel) Ltd (100%) Renting of office space (00960 3329083 / 00960 3304601 / 00960 3313738 Inbound tour operators No. 148, Vauxhall Street, Colombo 2. Directors: S C Ratnayake - Chairman No.130, Glennie Street, Colombo 2. (2397263 /2327805 A D Gunewardene, J R F Peiris, (2306000 Directors: S C Ratnayake – Chairman B J S A M Senanayake Directors: S C Ratnayake – Chairman A D Gunewardene, J R F Peiris, (appointed w.e.f 14.10.2010), A D Gunewardene, J R F Peiris,V Leelananda R M David, S Rajendra S A S Perera (appointed w.e.f. 14.10.2010) Stated capital: Rs.7,500,000 Stated capital: Rs.99,304,300 J E P Kehelpannala (resigned w.e.f.14.10.2010) Stated capital: Rs.3,978,671,681 PROPERTY CONSUMER FOODS AND RETAIL Property Development Consumer Foods Tranquility (Pte) Ltd (80.32%) Asian Hotels and Properties PLC - Crescat (78.56%) Ceylon Cold Stores PLC (80.47%) Owner and operator of "Chaaya Island Dhoinveli" in Maldives Boulevard, The Monarch, The Emperor developer and Beverages, frozen confectionery, processed meats, diary 2nd Floor, H.Maizan Building, manager of integrated properties products and holding company of Jaykay Marketing Sosun Magu, Male, Republic of Maldives No.77, Galle Road, Colombo 3 Services (Pvt) Ltd. (00960 6640055 / 00960 6640012 (5540404 No. 1, Justice Akbar Mawatha, Colombo 2 Directors: S C Ratnayake – Chairman Directors: S C Ratnayake - Chairman (2328221/7, 2318777 A D Gunewardene, J R F Peiris, A D Gunewardene, J R F Peiris, Directors: S C Ratnayake- Chairman B J S A M Senanayake R J Karunarajah, S Rajendra, A D Gunewardene, J R F Peiris, J R Gunaratne, (appointed w.e.f. 14.10.2010), A R Gunasekara, S K G Senanayake, U P Liyanage, P S Jayawardena, A R Rasiah S A S Perera (appointed w.e.f. 14.10.2010), S A Jayasekara, Stated capital: Rs.274,200,000 J E P Kehelpannala (resigned w.e.f.14.10.2010) B M Amarasekera (resigned w.e.f. 28.06.2010), Stated capital: Rs.552,519,608 I Samarawickrama (resigned w.e.f. 28.06.2010) Keells Food Products PLC (83.18%) Manufacturer and distributor of branded meat and Stated capital: Rs.3,345,118,012 convenience food products. Travel Club (Pte) Ltd (80.32%) P.O Box 10,No.16, Minuwangoda Road, Ekala, Ja-Ela Operator of "Chaaya Reef Ellaidhoo" in Maldives John Keells Residential Properties (Pvt) Limited (100%) (2236317/ 2236364 2nd Floor, H.Maizan Building, Developer of "OnThree20" project Directors: S C Ratnayake- Chairman Sosun Magu, Male, Republic of Maldives No. 130, Glennie Street,Colombo 2. A D Gunewardene, J R F Peiris, J R Gunaratne, ( ( 00960 6660839 / 00960 6660663 / 00960 6660664 2300065 R Pieris, S H Amarasekera, A D E I Perera, Directors: S C Ratnayake - Chairman Directors: S C Ratnayake – Chairman M P Jayawardena A D Gunewardene, J R F Peiris, (appointed w.e.f. 20.10.2010) Stated capital: Rs.274,815,000 B J S A M Senanayake A D Gunewardene (appointed w.e.f. 20.10.2010), (appointed w.e.f. 14.10.2010), J R F Peiris (appointed w.e.f. 20.10.2010), S A S Perera (appointed w.e.f. 14.10.2010), S Rajendra (appointed w.e.f. 28.10.2010) J E P Kehelpannala (resigned w.e.f.14.10.2010) Stated capital: Rs.925,200,000 Stated capital: Rs.143,172,000
148 John Keells Holdings PLC John Keells Foods India (Pvt) Ltd (83.18%) INFORMATION TECHNOLOGY AuxiCogent Holdings Private Limited (100%) Manufacturer and distributor of branded meat IT Services Holding company of AuxiCogent group companies and convenience food products. Information Systems Associates (49%) IFS Court, 28, Cybercity, Ebene, Mauritius M-56/A Greater Kailash Market Part II Software development services ((230) 467 3000 New Delhi -110048 P.O Box. 132, Sajaah, UAE Directors: S C Ratnayake, A D Gunewardene, J R F Peiris, (0091 47600300 - 31 (97165088810 R S Fernando, K N J Balendra, K D Joory, Directors: S C Ratnayake - Chairman Directors: A Ali, P Suckling (appointed w.e.f. 23.9.2010), AF Soreefan, J R F Peiris, J R Gunaratne, A Hamdany, J R F Peiris, Stated capital: Rs.1,877,040,000 Sanjeewa Fernando (appointed w.e.f 8.10.2010) D Hubbard (resigned w.e.f. 23.9.2010), Stated capital: Rs.220,294,544 G S Dewaraja, R S Fernando AuxiCogent International (Pvt) Ltd (100%) Stated capital: Rs.98,973,637 Investment holding company Retail IFS Court, 28, Cybercity, Ebene, Mauritius Jaykay Marketing Services (Pvt) Ltd (80.47%) John Keells Computer Services (UK) Ltd (100%) ((230) 467 3000 Operator of "Keells Super" chain of supermarkets Software development services Directors: S C Ratnayake, A D Gunewardene, J R F Peiris, No.125, Glennie Street, Colombo 2 268, Bath Road, Slough, SLI 4DX, United Kingdom R S Fernando, K N J Balendra, K D Joory, (2316800 (441753725283 A F Soreefan, Directors: S C Ratnayake- Chairman Directors: A D Gunewardene - Chairman R Dutta (resigned w.e.f 4.10.2010), J R F Peiris, M R N Jayasundera-Moraes, G S Dewaraja, R S Fernando R Roy (resigned w.e.f 4.10.2010) K N J Balendra Stated capital: Rs.9,507 Stated capital: Rs.1,616,700,008 Stated capital: Rs.498,000,000
John Keells Computer Services (Pvt) Ltd (100%) AuxiCogent International Lanka (Pvt) Limited (100%) FINANCIAL SERVICES Software services BPO operations in Sri Lanka John Keells Stock Brokers (Pvt) Ltd (90.04%) No. 148, Vauxhall Street,Colombo 2. No.4, Leyden Bastian Road, Colombo 1 Share broking services (2300770-77 ((94) 112479709 No.130, Glennie Street, Colombo 2. Directors: A D Gunewardene - Chairman Directors: S C Ratnayake, A D Gunewardene, J R F Peiris, (2446694-5 /2338066 / 4710721-4, 0112306250 S C Ratnayake, J R F Peiris, G S Dewaraja, R S Fernando, R M David Directors: A D Gunewardene - Chairman R S Fernando Stated capital: Rs.328,435,800 S C Ratnayake, J R F Peiris, K N J Balendra Stated capital: Rs.96,500,000 Stated capital: Rs.7,500,000 AuxiCogent International US Inc. (100%) John Keells Software Technologies (Pvt) Ltd (100%) Provides sales & marketing support for AuxiCogent in Nations Trust Bank PLC (29.90%) North America Marketer of software packages Commercial banking and leasing operations 9225, Ulmerton Road, Suite H, Largo, Florida 33771, USA No. 148, Vauxhall Street,Colombo 2. No. 242, Union Place, Colombo 2. (+1 727 518 0000 (2300770-77 (4313131 Director: Mithila Prasanna Gunaratna Directors: A D Gunewardene - Chairman Directors: A D Gunewardene - Chairman (appointed w.e.f. 23.2.2011) J R F Peiris, G S Dewaraja, R S Fernando J R F Peiris, A K Gunaratne, E H Wijenaike, Edward Quintero (resigned w.e.f. 23.2.2011) Stated capital: Rs.8,000,000 C H S K Piyaratna, A R Rasiah, D Weerakoon, Stated capital: Rs.538,250 M E Wickremesinghe, K N J Balendra, Office Automation S G Rajakaruna, AuxiCogent International Canada Inc. (100%) John Keells Office Automation (Pvt) Ltd (100%) Murtaza Jafferjee (appointed w.e.f. 15.12.2010), BPO operation in Canada Distributor/reseller and services provider in office automation Kemal de Soysa (appointed w.e.f. 21.01.2011) (OA), retail automation (RA) and mobile devices 1900, 736-6th Avenue S.W., Calgary, Stated capital as at Rs.5,101,369,000 Corporate Office: 90, Union Place, Colombo - 2 Alberta T2P 3T7, Canada Technical Services:148, Vauxhall Street, Colombo - 2 Directors: Deepak Kumar Malik (appointed w.e.f 26.7.2010), Union Assurance PLC (95.60%) (2313000, 2431576, 4702611 J R F Peiris (appointed w.e.f. 26.7.2010), Life and general insurance underwriters Directors: A D Gunewardene - Chairman K N J Balendra (appointed w.e.f. 26.7.2010), No.20, St. Michaels' Road, Colombo 3 J R F Peiris, G S Dewaraja, R S Fernando R S Fernando (appointed w.e.f. 26.7.2010) (2428428 Stated capital: Rs.5,000,000 Stated capital: Rs.543,140 Directors: A D Gunewardene - Chairman J R F Peiris, K N J Balendra, A K Gunaratne, IT Enabled Services AuxiCogent Investments Mauritius Private Limited (100%) A S De Zoysa, G F C De Saram, AuxiCogent Alpha Private Limited (100%) Investment holding company M A Tharmaratnam (resinged w.e.f. 31.12.2010) Investment holding company IFS Court, 28, Cybercity, Ebene, Mauritius Stated capital: Rs.388,433,000 IFS Court, 28, Cybercity, Ebene, Mauritius ((230) 467 3000 ((230) 467 3000 Directors: SC Ratnayake, A D Gunewardene, J R F Peiris, Directors: S C Ratnayake, A D Gunewardene, J R F Peiris, R S Fernando, K N J Balendra, R Roy, R Dutta, R S Fernando, K N J Balendra, K D Joory, K D Joory, A F Soreefan, A F Soreefan Stated capital: Rs.618,085,966 Stated Capital: Rs.617,293,783
Annual Report 2010/11 149 GRoup diRectoRy
InfoMate (Pvt) Ltd (100%) Tea Smallholder Factories PLC (37.62%) J K Packaging (Pvt) Ltd (100%) IT enabled services Owner and operator of bought leaf factories Printing and packaging services provider No.4, Leyden Bastian Road, Colombo 1 No. 4, Leyden Bastian Road, Colombo 1 for the export market (2318224 /2318240 (2335880 / 2149994 No.130, Glennie Street, Colombo 2. ( Directors: S C Ratnayake - Chairman Directors: S C Ratnayake – Chairman 2475308 J R F Peiris, M J S Rajakariar, A D Gunewardene, J R F Peiris, Directors: S C Ratnayake - Chairman R S Fernando E H Wijenaike, R Seevaratnam, R E Rambukwella, R M David, R S Fernando Stated capital: Rs.20,000,000 A S Jayatilleke, J S Ratwatte, L D Ramanayake Stated capital: Rs.14,500,000 Stated capital: Rs.150,000,000 AuxiCogent BPO Solutions Private Limited (49%) John Keells Singapore (Pte) Ltd (80%) BPO operations in India (Formally known as Quatrro Centre & Others International trading services Business Support Services (Pvt) Ltd) Central Hospital (Pvt) Ltd (27.21%) No.3, Raffles Place, #07-01, Basement-24, C Block, Community Centre, Janakpuri, Providers of healthcare services Bharat Building, Singapore - 048617 New Delhi ( 114, Norris Canal Road, Colombo 10 65 67329636 (+91 124 4561000 (4666000, 4665500, 4665544 Directors: S C Ratnayake - Chairman Directors: JRF Peiris - Chairman Directors: A K Pathirage, S Selliah, D S Rajapakse, J R F Peiris, R M David, R Ponnampalam Sunil Rawal, R S Fernando, K N J Balendra D Wimalasundera, K M P Karunaratne, Stated capital: Rs.9,638,000 Upendra Singh (resigned w.e.f. 4.10.2010) S D Nimalasuriya, S A B Rajapaksa, Stated capital: Rs.397,541,000 A D Gunewardene, K N J Balendra, Keells Consultants (Pvt) Ltd (100%) H D I Hettiarachchi, G L H Premaratne Company secretarial services to the group Quatrro FPO Solutions Private Limited (44%) Stated capital: Rs.2,992,147,950 No.130, Glennie Street, Colombo 2. IT based services, electronic remote processing (2421101-9 services, e services Directors: S C Ratnayake- Chairman Basement-24, C Block, Community Centre, Janakpuri, Facets (Pvt) Ltd (100%) A D Gunewardene, J R F Peiris, New Delhi Owner of real estate D C Alagaratnam (+91 124 4561000 No.130, Glennie Street, Colombo 2. ( Stated capital: Rs.160,000 Directors: V Srinivasan, V Balakrishnan, R S Fernando, 2306000 K N J Balendra Directors: S C Ratnayake - Chairman Mackinnon and Keells Financial Services Ltd (100%) Cesar Soriano (Resigned w.e.f 10.07.2010), J R F Peiris, Rental of office space Suresh Subramaniam (Resigned w.e.f. 7.05.2010) Stated capital: Rs.150,000 No. 4, Layden Bastian Road, Colombo 1 Stated capital: Rs.434,080,445 ( John Keells Holdings PLC 2475102-3 Group holding company & function based services Directors: S C Ratnayake- Chairman A.D Gunewardene, J R F Peiris, S Rajendra OTHERS No.130, Glennie Street, Colombo 2. Stated capital: Rs.10,800,000 Plantation Services (2306000 /2421101-9 John Keells PLC (86.90 %) Directors: S C Ratnayake- Chairman Mortlake Ltd (100%) Produce broking and real estate ownership A D Gunewardene, J R F Peiris, Investment company No.130, Glennie Street, Colombo 2. E F G Amerasinghe, Steven Enderby, No. 148, Vauxhall Street, Colombo 2. (2306000 P D Rodrigo, T Das, S S Thiruchelvam, (2475308 Directors: S C Ratnayake - Chairman Dr I Coomaraswamy (appointed w.e.f. 07.02.2011) Directors: S C Ratnayake – Chairman A D Gunewardene, J R F Peiris, L D Ramanayake, Stated capital: Rs.24,611,507,871 A D Gunewardene, J R F Peiris, T de Zoysa, K D W Ratnayaka,Y A Hansen, D C Alagaratnam S T Ratwatte John Keells Holdings Mauritius (Pvt) Ltd (100%) Stated capital: Rs.3,000 Stated capital: Rs.152,000,000 Holding company in the Mauritius IFS Court, 28, Cybercity, Ebene, Mauritius ( Nexus Networks (Pvt) Ltd (99.99%) John Keells (Teas) Ltd (100%) 2304673000 Operator of a loyalty card programme Manager eight bought leaf tea factories Directors: S C Ratnayake - Chairman No. 125, Glennie Street, Colombo 2. No.130, Glennie Street, Colombo 2. A F Soreefan, A D Gunewardene, J R F Peiris, (2343792 / 2343794-98 (2306518 K D Joory Directors: S C Ratnayake – Chairman Directors: S C Ratnayake - Chairman Stated capital: Rs.222,311,990 J R F Peiris, M R N Jayasundera-Moraes, J R F Peiris, L D Ramanayake K N J Balendra Stated capital: Rs.120,000 John Keells International (Pvt) Ltd (100%) Regional holding company providing administrative & Stated capital: Rs.100,000 function based services John Keells Warehousing (Pvt) Ltd (86.90%) No.130, Glennie Street, Colombo 2. Warehousing of tea and rubber (2306000 /2421101-9 No.93,1st Lane, Kerawalapitiya, Wattala, Directors: S C Ratnayake- Chairman Muturajawela. A D Gunewardene, J R F Peiris (4819560 Stated capital: Rs.1,880,340,000 Directors: S C Ratnayake - Chairman J R F Peiris, L D Ramanayake Stated capital: Rs.120,000,000
150 John Keells Holdings PLC sRi lAnKAn economy
Summary Indicator Units 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 GDP Growth Per cent (1.5) 4.0 5.9 5.4 6.2 7.7 6.8 6 3.5 8 GDP(current prices) Rs.Billion 1,410 1,582 1,822 2,091 2,453 2,939 3,578 4411 4,835 5,602 GDP(current prices) USD Billion 15.77 16.53 18.88 20.66 24.41 28.27 32.34 40.72 42.07 49.55 GDP per Capita (USD) Growth Per cent (6.5) 3.4 9.0 8.6 20.5 14.5 13.8 24.6 2.1 16.6 GDP per capita (market prices) Rs.000 75.1 83.2 94.7 107.4 124.7 147.8 178.8 218.2 236.4 271.3 GDP per capita (market prices) USD 841 870 948 1,030 1,241 1,421 1,617 2,014 2,057 2,399 Inflation (CCPI- 100=2002) YoY Per cent 13.0 7.4 13.5 18.8 14.4 4.8 6.9 Current Account Balance USD Billion (0.2) (0.2) (0.07) (0.6) (0.7) (1.5) (1.4) (1.4) (0.2) (1.4) Current Account % of GDP Per cent (1.4) (1.4) (0.4) (3.1) (2.7) (5.3) (4.2) (9.5) (0.5) (2.9) Population Million 18.8 19.0 19.3 19.5 19.7 19.9 20.0 20.2 20.5 20.7 Exchange Rate (Annual Average) Rs./USD 89.4 95.7 96.5 101.2 100.5 104.0 110.6 108.3 114.9 113.1 Exchange Rate Change (Annual Average) Per cent 17.9 7.0 0.9 4.8 (0.7) 3.4 6.4 (2.1) 6.1 (1.6) 12m T-Bill yield (yr-end) Per cent 13.7 9.9 8.0 7.7 10.4 13.0 20.0 19.12 9.33 7.55 Prime Lending Rate (yr-end) Per cent 14.3 12.2 9.3 10.2 12.2 15.2 18.0 18.5 10.91 9.29 M2b Money supply growth Per cent 13.6 13.4 15.3 19.6 19.1 17.8 16.6 8.5 18.6 15.8 Exports USD Billion 4.8 4.7 5.1 5.8 6.3 6.7 7.7 8.1 7.1 8.3 Imports USD Billion 6.0 6.1 6.7 8.0 8.9 10.3 11.3 14.1 10.2 13.5 Balance of Payments (BOP) Per cent of GDP 1.3 2.0 2.7 (1.0) 2.1 0.7 1.6 (3.5) 6.5 1.9 Budget Deficit Per cent of GDP (10.4) (8.5) (7.3) (7.5) (7.0) (7.0) (6.9) (7.0) (9.9) (7.9) Unemployment Rate Per cent 7.9 8.8 8.4 8.3 7.2 6.5 6.0 5.4 5.8 4.9 All Share Index (yr-end) Points 621 815 1,062 1,507 1,922 2,722 2,541 1503.0 3,386 6,636 Tourist Arrivals No.' 000 337 393 501 566 549 560 494 438.5 447.9 654.5
The economy bounced back strongly in 2010 reflecting post-war investor Growth in the industry sector was driven by the positive performance in optimism, favourable domestic macroeconomic conditions and global industries such as food and beverages, textiles and garments and construction economic recovery. It recorded a gross domestic product (GDP) growth of due to the increase in domestic and external demand and increased investor 8% which was a rapid recovery from the GDP growth of 3.5% in 2009. This and consumer confidence. The service sector which accounts for the largest was the second highest growth rate recorded since independence. As per share in GDP bounced back in 2010 from its 3.3% growth in 2009. This growth the Colombo Consumer Price Index (CCPI), inflation picked up to record a was led by the wholesale and retail and hotels and restaurants subsectors. The YoY change of 6.9% in 2010 compared to 4.8% in 2009, but remained below wholesale and retail sub sector recorded an impressive growth of 7.5% from its double digits and as such the Central Bank of Sri Lanka (CBSL) was able to negative growth in 2009 due to an increase in domestic and external trading continue its relaxed monetary policy stance. activity while hotels and restaurants recorded a notable growth of 39.8% due to the buoyant increase in tourist arrivals by 46%. The key economic benefits from the end of the 3 decade long civil war such as the boost in investor confidence, increase in tourist arrivals, land With the increase in economic activity, aggregate consumption and investment availability for the expansion of the agriculture sector, removal of restrictions in real terms have improved by 8.4% and 15.5% respectively from 3.6% and on fishing and usage of abandoned natural resources in the affected North 2.1% in 2009, while aggregate investment and domestic savings have and East areas has led to the strong performance in 2010. The CBSL increased as a percentage of GDP to 27.8% and 18.7% from 24.4% and believes that these benefits will provide the impetus for high growth 17.9% in the previous year. prospects in the short to medium term and have thus projected a growth Inflation continued to be moderate throughout the first three quarters of 2010 of 8.5% in 2011 while International agencies such as the International but with a slight pick up during the 4th quarter. Substantial demand Monetary Fund (IMF) and Asian Development Bank (ADB) have projected a pressures, improvement in domestic supply and reduction on import duties lower GDP growth of 6.95% and 8% respectively. Further, the CBSL allowed the central bank to cut down its policy rates. The repurchase rate believes that in order to maintain this growth, investments will gradually (Repo) in 2010 was cut by 25 basis points to 7.25% while the reverse have to advance up to 35% of GDP from its current level of 28% while repurchase rate (Re-Repo) was cut by 75 basis points to 9% during the year. domestic savings is required to be brought up to 25% of GDP from its The average annual growth of the broad money supply (M2b) was 15.8% in current level of 19%. While the short to medium term outlook on the 2010 which was broadly in line with the target of 15%. economy is positive, supported by the strengthening of the global economy, sustaining this growth momentum will prove to be a challenge with internal Export earnings increased by 17.25% led by agriculture and industrial and external shocks and demand side pressures. Agency forecasts project products while imports increased by 32.38%. The trade balance increased upward pressure on inflation for 2011 while the CBSL has shown concern by 66.7% which led to the current account deficit widening by 562.6%. This and recently hiked the statutory reserve ratio stemming from the high however was largely eased by the high growth of remittances by 23.6% and growth trajectory and continued increase in domestic credit flows. Therefore increase in travel and tourism earnings to US$ 576 million from its previous we are most likely to see further policy rate hikes in 2011 to prevent the US$ 350 million. The BOP recorded a surplus of US$ 921 million following a builp up of demand side pressures. surplus of US$ 2,725 million in the previous year due to the widening of the current account deficit, however the surplus was generated by a continued On the external front the BOP continued to record a surplus of US$ 921 million increase of inflows to the capital and financial accounts due to the faster in 2010. Both exports and imports recovered strongly with the upturn of disbursement of foreign loans to finance infrastructure projects, the issuing of domestic and global demand, while the widening of the trade account deficit the 3rd international sovereign bond of US$ 1 billion and the continuation of was largely mitigated by the increase in remittance inflows and tourism the stand-by agreement with the IMF. The external reserves of the country earnings reducing the pressure on the current account deficit. Although the further improved to an all time high of US$ 8,035 million (equivalent to 7.1 following years should see the current account expand as a result of increasing months of imports) from US$ 6,770 million by end 2010 with gross official demand pressures, the overall BOP may remain positive if strong inflows reserves (excluding ACU receipts) increasing up to US$ 6,610 million from through the capital and financial account continue. US$ 5,097 million in 2009. Year that was There was an improvement in the overall fiscal situation in the country with The 3 major sub sectors of GDP, agriculture, industry and services recorded the budget deficit reducing to 7.9% of GDP from 9.9% in 2009. Expenditure growth rates of 7%, 8.4% and 8% respectively. Of these the industry and and net lending was in line with original budgetary targets as it was 22.9% of service sectors recorded the highest ever growth since 2002. GDP. The government with its commitment for tax consolidation aims at The agriculture sector with a commendable growth of 7% compared to 3.2% reducing its budget deficit further to 6.8% of GDP in 2011. in 2009 was driven by the increased production in paddy, tea and other minor Sri Lanka was graduated to a middle-income status country in the list of exports as well as improved prices in the international market for agricultural poverty reduction and growth trust (PRGT) in January 2010 by the IMF. In goods. There was also a significant improvement in the fisheries industry while 2010 per capita income in market prices increased by 16.6% to US$ 2,399 the coconut sub sector recorded a negative growth of 14.3% as a result of while unemployment as a percentage of the labour force decreased to 4.9% adverse weather conditions. from 5.8% in 2009 (excluding the Northern and Eastern provinces).
Annual Report 2010/11 151 GlossARy of finAnciAl teRms
Accrual basis Effective rate of taxation Recording revenues & expenses in the period in which they are Tax expense divided by profit before tax. earned or incurred regardless of whether cash is received or disbursed in that period. EV (enterprise value) Market capitalisation plus net debt. Beta Co-variance between daily market return and daily JKH share return Interest cover divided by variance of daily JKH share return over a period of 5 years. Consolidated profit before interest and tax over finance expenses. Capital employed Long term debt to total debt Shareholders’ funds plus minority interest and debt. Long term loans as a percentage of total debt. Capital structure leverage (CSL) Market capitalisation Average total assets divided by average shareholders equity. Number of shares in issue at the end of period multiplied by the market price at end of period. Cash earnings per share Profit after tax adjusted for non cash items minus share of associate Market value added company profits plus dividends from associate companies divided by Market capitalisation minus shareholder’s funds. the weighted average number of ordinary shares in issue during the Net assets period. Total assets minus current liabilities minus long term liabilities minus Cash interest and tax cover minority interest. Cash flow from operations before working capital changes divided by Net assets per share cash interest and tax payments. Net assets divided by the number of shares in issue. Cash ratio Net debt (Cash) Cash plus short term investments divided by current liabilities. Total debt minus (cash plus short term deposits). Cash to price earnings Net profit margin Diluted market price per share divided by diluted cash earnings per Profit after tax divided by turnover inclusive of share of associate share. company turnover. Common earnings leverage (CEL) Net working capital Profit attributable to equity holders of the parent divided by profit after Current assets minus current liabilities. tax. Price earnings ratio Contingent liabilities Market price per share (diluted) over diluted earnings per share. A condition or situation existing at the balance sheet date due to past events, where the financial effect is not recognised because: Price to book ratio Market price per share (diluted) over net asset value per share. 1. the obligation is crystalised by the occurrence or non occurrence of one or more future events or, Quick ratio Cash plus short term investments plus receivables, divided by current 2. a probable outflow of economic resources is not expected or, liabilities. 3. it is unable to be measured with sufficient reliability. Return on assets Current ratio Profit after tax divided by the average total assets. Current assets divided by current liabilities. Return on capital employed Debt/equity ratio Consolidated profit before interest and tax as a percentage of average Debt as a percentage of shareholders’ funds and minority interest. capital employed. Diluted earnings per share (EPS) Return on equity Profit attributable to equity holders of the parent divided by the Profit attributable to shareholders as a percentage of average weighted average number of ordinary shares in issue during the shareholders’ funds. period adjusted for options granted but not exercised. Sales to assets ratio/total asset turnover Dividend payout ratio Turnover including share of associate company turnover divided by average total assets. Dividend as a percentage of company profits adjusted for non cash gains items. Share turn ratio Dividend yield Total volume of shares traded during the year divided by average Dividends adjusted for changes in number of shares in issue as a number of shares in issue. percentage of the share price at the end of the period. Shareholders funds Earnings per share Total of stated capital, capital reserves and revenue reserves. Profit attributable to equity holders of the parent divided by the Total debt weighted average number of ordinary shares in issue during the period. Long term loans plus short term loans and overdrafts. EBIT Total equity Earnings before interest and tax (includes other operating income). Shareholders funds plus minority interest. EBIT margin Total shareholder return EBIT divided by turnover inclusive of share of associate company (P1 - P0 +D) / P0 x 100 turnover. P1 = Market price at the end of the financial year P0 = Diluted market price at the end of the previous financial year EBITDA D = Adjusted dividend for the year Earnings before interest, tax, depreciation and amortisation.
152 John Keells Holdings PLC coRpoRAte infoRmAtion
Name of company Depository for GDRs John Keells Holdings PLC Citibank N A New York Legal form Registered office of the company Public Limited Liability Company 130 Glennie Street Incorporated in Sri Lanka in 1979 Colombo 2 Ordinary shares listed on the Colombo Stock Exchange Sri Lanka GDRs listed on the Luxembourg Stock Exchange Contact details Company registration No. P.O.Box 76 PQ 14 130 Glennie Street Colombo 2 Directors Sri Lanka S C Ratnayake – Chairman A D Gunewardene – Deputy Chairman Internet : www.keells.com J R F Peiris Email : [email protected] E F G Amerasinghe T Das Secretaries and registrars S Enderby Keells Consultants (Pvt) Ltd. P D Rodrigo 130 Glennie Street S S Tiruchelvam Colombo 2 I Coomaraswamy (appointed w.e.f. 7 February 2011) Sri Lanka Senior independent director Telephone : +(94) 11 230 6245 E F G Amerasinghe Facsimile : +(94) 11 243 9037 Audit committee Investor relations P D Rodrigo – Chairman John Keells Holdings PLC E F G Amerasinghe P.O. Box 76 S Enderby 130 Glennie Street S S Tiruchelvam Colombo 2 Sri Lanka Remuneration committee E F G Amerasinghe – Chairman Telephone : +(94) 11 230 6167 P D Rodrigo +(94) 11 230 6000 S S Tiruchelvam Facsimile : +(94) 11 230 6160 Internet : www.keells.com Nominations committee Email : [email protected] T Das – Chairman S Enderby Contact for media S C Ratnayake Corporate Communications Division S S Tiruchelvam John Keells Holdings PLC P.O. Box 76 Bankers 130 Glennie Street Bank of Ceylon Colombo 2 Citibank N A Sri Lanka Commercial Bank Deutsche Bank A G Telephone : +(94) 11 230 6191 DFCC Bank Facsimile : +(94) 11 471 7706 DFCC Vardhana Bank Hatton National Bank Auditors Hongkong and Shanghai Banking Corporation Ernst & Young ICICI Bank Chartered Accountants Nations Trust Bank P.O. Box 101 Pan Asia Banking Corporation Colombo People’s Bank Sri Lanka Sampath Bank Seylan Bank Standard Chartered Bank
Annual Report 2010/11 153 notice of meetinG
Notice is hereby given that the Thirty Second Annual General Notes: Meeting of John Keells Holdings PLC will be held on 24 June i. A member unable to attend is entitled to appoint a Proxy to 2011 at 10 a.m. at The Auditorium, The Institute of Chartered attend and vote in his/her place. Accountants of Sri Lanka, 30A, Malalasekera Mawatha (Longdon Place), Colombo 7. ii. A Proxy need not be a member of the Company.
The business to be brought before the meeting will be: iii. A member wishing to vote by Proxy at the Meeting may use the Proxy Form enclosed. • to read the notice convening the meeting. iv. In order to be valid, the completed Proxy Form must be lodged • to receive and consider the Annual Report and Financial at the Registered Office of the Company not less than 48 hours Statements for the Financial Year ended 31st March 2011 with before the meeting. the Report of the Auditors thereon.
• to re-elect as Director, Mr. E F G Amerasinghe, who retires in terms of Article 84 of the Articles of Association of the Company.
• to re-elect as Director, Mr. S Enderby, who retires in terms of Article 84 of the Articles of Association of the Company.
• to re-elect as a Director, Dr. I Coomaraswamy, who retires in terms of Article 91 of the Articles of Association of the Company.
• to re-elect as Director, Mr. T Das who is over the age of 70 years and who retires in terms of section 210 of the Companies Act No. 7 of 2007, for which notice of the following ordinary resolution has been given by a member:
“THAT the age limit stipulated in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. T Das, who is 72 years and that he be re-elected a Director of the Company.”
• to authorise the Directors to determine and make donations.
• to re-appoint Auditors and to authorise the Directors to determine their remuneration.
• to consider any other business of which due notice has been given.
By Order of the Board JOHN KEELLS HOLDINGS PLC
Keells Consultants (Private) Limited Secretaries
30 May 2011
154 John Keells Holdings PLC foRm of pRoXy
I/We ……………………………………………………………………………..………..…………………………………………. of
………………………………………………………………..………..…………………………………………...... being a member/s of John Keells Holdings PLC hereby appoint
…………………………………………………………………..………..…………………………………………...... of …………………………………………………………………………….………...... or failing him/her
MR. SUSANTHA CHAMINDA RATNAYAKE of Colombo, or failing him MR. AJIT DAMON GUNEWARDENE of Colombo, or failing him MR. JAMES RONNIE FELITUS PEIRIS of Colombo, or failing him MR. EMMANUEL FRANKLYN GAMINI AMERASINGHE of Colombo, or failing him MR. TARUN DAS of India, or failing him MR. STEVEN ENDERBY of India, or failing him MR. PARAKRAMA DEVASIRI RODRIGO of Colombo, or failing him MRS. SITHIE SUBAHNIYA TIRUCHELVAM of Colombo, or failing her DR. INDRAJIT COOMARASWAMY of Colombo as my/our proxy to represent me/us and vote on my/our behalf at the Thirty Second Annual General Meeting of the Company to be held on 24 June 2011 at 10.00 a.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof.
I/We, the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the specified Resolution as indicated by the letter “X” in the appropriate cage:
FOR AGAINST
To re-elect as Director, Mr. E F G Amerasinghe, who retires in terms of Article 84 of the Articles of Association of the Company.
To re-elect as Director, Mr. S Enderby, who retires in terms of Article 84 of the Articles of Association of the Company.
To re-elect as Director, Dr. I Coomaraswamy, who retires in terms of Article 91 of the Articles of Association of the Company
To re-elect as Director, Mr. T Das who is over the age of 70 years and who retires in terms of section 210 of the Companies Act No. 7 of 2007
To authorise the Directors to determine and make donations.
To re-appoint Auditors and to authorise the Directors to determine their remuneration.
Signed on this ………………… day of …………………… Two Thousand and Eleven.
……………………………. Signature/s of Shareholder/s
NOTE: INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.
Annual Report 2010/11 155 INSTRUCTIONS AS TO COMPLETION OF PROXY 1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature.
2. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 130, Glennie Street, Colombo 2, not later than 48 hours before the time appointed for the holding of the Meeting.
3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.
4. If the appointer is a company or Corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorised officer of the company or Corporation in accordance with its Articles of Association or Constitution.
5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.
Please fill in the following details:
Name : ……………………………………………………………………………………
Address : ……………………………………………………………………………………
…………………………………………………………………………………….
…………………………………………………………………………………….
Jointly with : ……………………………………………………………………………………
Share Folio No. : ……………………………………………………………………………………
156 John Keells Holdings PLC