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HORANA PLANTATIONS PLC ANNUAL REPORT 2017/18 HORANA PLANTATIONS P PLANTATIONS HORANA Think L C | New www.horanaplantations.com ANNU A L REPO R T 2017/18 Contents Corporate Information COMPANY NAME REGISTERED OFFICE ADDRESS LEGAL ADVISORS Horana Plantations PLC No.400 Deans Road, Nithi Murugesu & Associates About Horana Plantations 2 Colombo 10. Attorneys-at-Law & Notaries Public Non-Financial Highlights 3 DOMICILE AND LEGAL FORM Telephone : 011 2627000 No.28 (Level 2) W.A.D.Ramanayake Financial Highlights 4 Horana Plantations PLC is a Quoted 011 2627301-7322 Mawatha, Chairman’s Message 6 Public Company with limited liability, Facsimile: 011 2627323 Colombo 2. Managing Director’s Review of Operations 10 Incorporated and domiciled in Sri Lanka, E Mail: [email protected] Board of Directors 16 under the Companies Act No.17 of [email protected] TAX ADVISORS Management Team 18 1982 in terms of the provisions of the Web: www.horanaplantations.com Nanayakkara & Company Sustainability Report 20 Conversion of Public Corporations Chartered Accountants Statement of Corporate Governance 29 of Government Owned Business PARENT COMPANY 3rd Floor, Yathama Building Risk Management 34 Undertakings into Public Companies Act Vallibel Plantation Management Ltd No.142 Galle Road, Annual Report of the Board of Directors No.23 of 1987 and re-registered under No.400 Deans Road, Colombo 3. on the Affairs of the Company 35 the Companies Act No.7 of 2007 Colombo 10. Statement of Directors’ Responsibilities 39 BANKERS Report of the Remuneration Committee 40 DATE OF INCORPORATION ULTIMATE PARENT COMPANY OF THE Commercial Bank of Ceylon PLC Related Party Transactions Review 22nd June 1992 GROUP Hatton National Bank PLC Committee Report 41 Vallibel One PLC People’s Bank Audit Committee Report 43 REGISTRATION NUMBER Level 29, West Tower, Seylan Bank PLC PQ 126 World Trade Centre, Echelon Square, Financial Reports Colombo 1. Financial Information 44 BOARD OF DIRECTORS Independent Auditors’ Report 45 Mr. A M Pandithage – Chairman SECRETARIES Statement of Profit or Loss and Mr. Dhammika Perera – Deputy Chairman P W Corporate Secretarial (Pvt) Ltd Other Comprehensive Income 49 (Alternate Director Mr. K D G Gunaratne) 3/17, Kynsey Road, Colombo - 8 Statement of Financial Position 50 Mr. Roshan Rajadurai – Managing Director Telephone 011 4640360-3 Statement of Changes in Equity 52 Mr. J Manuja Kariapperuma - Director/ Statement of Cash Flows 53 Chief Executive Officer INDEPENDENT AUDITORS Significant Accounting Policies 55 Mr. L J A Fernando KPMG Notes to the Financial Statements 65 Mr. K D H Perera Chartered Accountants Value Added Statement 107 (Alternate Director Mr. N T Bogahalande) No.32A, Sir Mohamed Macan Markar Ten Year Summary 108 Mr. A N Wickremasinghe Mawatha, Shareholder and Investor Information 110 Mr. S C Ganegoda Colombo 3. Statistical Information 115 Our Plantations 117 Quarterly Results 118 Notice of Meeting 119 Notes 120 Form of Proxy 123 Corporate Information Inner Back Cover With a challenging year behind us, diversity was our strong suit and with new ventures in Oil Palm, Cinnamon and Coconut that utilised our unique strengths and resources, we girded ourselves for a year of opportunity. All while enhancing the lives of our team and assisting them in creating better living standards for themselves as well as their families. From our corporate outlook, to our positive ventures, we think different, and think new. Think New 2 HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 About Horana Plantations Horana Plantations PLC is one of Sri Lanka’s premier Plantation Companies, comprising of sixteen prime estates. Since being incorporated on the 22nd of June 1992, following the privatization of plantation estates into the hands of the Regional Plantation Companies (RPC), Horana Plantations has grown into a leading producer of the finest Tea, Rubber and other agricultural produce in Sri Lanka. The Company’s sixteen estates are spread over a total area of 7534 hectares (18,458 acres), primarily in the Central and Western provinces of Sri Lanka. 29% of the cultivated area has been dedicated to Tea, 31% to Rubber, 7% to timber, and 5% to other diversified agricultural crops. Horana Plantation has an annual production of 4 Mn Kg of Tea and 1.4 Mn Kg of Rubber. Horana Plantations product range is renowned for its excellent quality and high standards. A significant proportion of the Company’s estates have been internationally certified with quality standards such as HACCP, ISO:22000:2005, Rain Forest Alliance, Ethical Tea Partnership, Fair Trade and Forest Stewardship Council certification. Horana Plantations PLC is a public quoted limited liability Company and its shares are listed on the Colombo Stock Exchange bearing the stock symbol HOPL. The Company is a subsidiary of the Vallibel Plantation Management Ltd, with its ultimate Parent Company being Vallibel One PLC. Vallibel One PLC spans a widespread of interests in Retailing, Hospitality, Ceramics & Tiles, Finance and Hydro Power Generation. HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 3 Non-Financial Highlights No of Estates Extent 7,534 Ha 08 08 16 Up Country Low Country Sound Reputation and Brand Image for Quality Tea No of Top Prices High Grown Gross Sale Recorded Average - Ranking Tea - 36 Invoices No. 01 ( CTA Ranking) 2017/18 Resident Population New Revenue Streams 183 Ha 67 Ha Oil Palm Coconut 74 Ha 62 Ha 31,600 Cinnamon Fruits and Other Crop Tea 1,323 Kg / Ha 1,158 Kg / Ha 2.8 Kg / Man Day High Grown Yeild Low Grown Yield Worker Productivity Tea Production Volume Rubber Production Volume 3,037,686 Kg 832,855 Kg 4 HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 Financial Highlights For the Year ended 31st March 2018 2017 Change Rs'000 Rs'000 % Financial Performance Revenue 2,248,462 1,947,278 15.5 Gross Profit 265,514 102,743 158.4 Profit from Operations 191,586 45,774 318.5 Net Finance Expenses 86,914 88,656 2.0 Profit before Taxation 104,672 (42,882) 344.1 Tax (Expense)/ Reversal (20,329) 1,161 (1,851.7) Profit after Taxation 84,343 (41,722) 302.2 Other Comprehensive Income/(Expense) (35,196) 27,095 (229.9) Total Comprehensive Income/ (Expense) 49,147 (14,627) 436.0 Financial Position Shareholders' Funds 1,420,798 1,371,652 3.6 Borrowings 1,250,800 1,259,879 0.7 Total Liabilities (excluding Borrowings) 1,022,407 920,748 (11.0) Total Assets 3,694,006 3,552,279 4.0 Cash Flows Operating Activities 284,016 48,366 487.2 Investing Activities (252,141) (202,572) (24.5) Financing Activities (38,353) 109,132 (135.1) Total Net Cash Outflow for the period (6,478) (45,074) 85.6 Cash & Cash Equivalents at the end (278,681) (272,203) (2.4) Key Indicators per Ordinary Share Earnings per Share (Rs.) 3.37 (1.67) 302.2 Market Value per Share (Rs.) 22.00 16.50 33.3 Net Assets per Share (Rs.) 56.83 54.87 3.6 Price-Earnings Ratio (times) 6.52 (9.89) 166.0 Earnings Yield (%) 15.34 (10.11) 251.6 Key Ratios Current Ratio (times) 0.49 0.53 (8.3) Interest Cover (times covered) 2.20 0.52 326.9 Revenue to Capital Employed (times) 0.84 0.74 13.7 Return after Taxation on Net Assets (%) 3.46 (1.07) 424.4 Property, Plant & Equipment to Shareholders' Funds (times) 2.31 2.30 0.6 Debt to Equity Ratio (%) 88.04 91.85 4.2 Equity to Total Assets Ratio (%) 38.46 38.61 (0.4) HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 5 Revenue Gross Profit Profit after Tax Rs. Mn Rs. Mn Rs. Mn 2,400 300 160 2,000 240 120 1,600 180 80 1,200 120 40 800 60 0 400 0 (40) 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18 Total Assets Shareholders’ Funds Operating Cash Flow Rs. Mn Rs. Mn Rs. Mn 4,200 1,800 300 3,500 1,500 250 2,800 1,200 200 2,100 900 150 1,400 600 100 700 300 50 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18 6 HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 Chairman’s Message HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 7 Horana Plantations will continue in its direction of growth by developing its diversification strategy to enhance revenue streams. Mohan Pandithage Chairman 8 HORANA PLANTATIONS PLC | ANNUAL REPORT 2017/18 Chairman’s Message Dear Shareholder, GLOBAL RUBBER INDUSTRY demand from some of the major It gives me great pleasure to present Global natural Rubber production rose importers. The average price at the CTA the Annual Report and audited Financial 6.8% last year to 13.3 Mn MT, compared for the year 2017 increased significantly Statements of Horana Plantations PLC for to the 12.4 Mn MTs produced in 2016. by 31% to Rs. 618.14 per Kg, compared the Financial Year 2017-18. Your Company Global natural Rubber consumption, to the previous year. has been able to turnaround this year meanwhile, rose by a mere 1.4% to reporting a Profit Before Tax of 12.9 Mn MTs during 2017. While there In terms of exports of Ceylon Tea, Turkey Rs. 104.6 Mn as against a loss of Rs 42.8 were signs of recovery in natural Rubber was the largest buyer of Sri Lankan Tea Mn reported during the comparative period prices in December, this was linked to in 2017, followed by Iraq and Russia.