Distilleries Company of Sri Lanka PLC / Annual Report 2015 / 16
Distilleries Company of Sri Lanka PLC / Annual Report 2015 / 16
The right track The operations of the Distilleries Group are wide-ranging and complex, now grown to include diverse sectors. Over the years, we have honed our business model to one that is vibrant and dynamic, constantly evolving to meet changing consumer and stakeholder needs.
We’re building on our fine heritage to evolve your company into the future. We’re looking to the years ahead with confidence and anticipation, because we know we have the right people, the right positions and the right strategies to keep us firmly on the right track. Contents
Group Overview 3 Highlights of the Year 4 Financial Highlights 8 Our Businesses 12 Historical Perspective 14 The Story of Arrack 22 Chairman’s Statement 26 Board of Directors 30 Group Management 32 DCSL Management
Management Information 34 Management Discussion and Analysis 44 Sustainability Report
Governance Reports 55 Corporate Governance 68 Enterprise Risk Management 72 Board Audit Committee Report 74 Remuneration Committee Report 75 Board Related Party Transactions Review Committee 76 Annual Report of the Board of Directors
Financial Reports 80 Statement of Directors Responsibility 81 Independent Auditors’ Report 82 Statement of Profit or Loss and Other Comprehensive Income 83 Statement of Financial Position 84 Statement of Changes in Equity 87 Statement of Cash Flows 88 Notes to the Financial Statements 163 Statement of Value Added 164 Details of Real Estate 165 Shareholder Information 167 Ten Year Summary
Suplimentary Information 168 DCSL Management Team and Unit Management Team 175 Notice of Meeting 176 Notes
179 Form of Proxy Scan the QR code with your smart 181 Attendance Slip device to view this report online.
Distilleries Company of Sri Lanka PLC 2 Annual Report 2015/16 Highlights of the Year
May July 2015 2015
Continental Insurance Lanka was Melsta Regal Finance was reaffirmed reaffirmed Continental Insurance Lanka A+ (lka) / Stable by Fitch. Thus ‘A-(lka)’ / Stable by Fitch. Continental signifying a very high credit rating November Insurance is the Sri Lanka’s only ‘A-(lka)’ for a finance company. 2015 Fitch Rated insurance company.
December December 2015 2015 DCSL was ranked No. 05 in the Business Today ‘Top Twenty Five’. This was the 17th consecutive year DCSL was listed among corporate heavy weights in the rankings.
Fitch Rating reaffirmed DCSL a March national long term Rating of AAA (lka) / stable outlook - The best & highest entity credit rating for a 2016 corporate in Sri Lanka. DCSL PLC annual report was awarded certificate of compliance in the annual report competition organised by the Institute of Chartered Accountants of Sri Lanka.
Introduction of award winning single malts Speyburn and Old Pulteney from the stable of International Beverage Holdings – Scotland, and Stolichnaya Vodka
3 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Financial Highlights
2016 2015 2016 2015 Group Group Company Company
SUMMARY OF RESULTS Gross Turnover Rs Mn 88,865 66,759 72,114 51,800 Excise Duty Rs Mn 55,025 37,846 50,573 34,884 Net Turnover Rs Mn 33,840 28,913 21,541 16,916 Profit After Tax Rs Mn 5,670 6,474 5,302 10,285 Shareholders Funds Rs Mn 63,204 61,004 53,056 50,283 Working Capital Rs Mn (1,577) 214 (3,271) (6,255) Total Assets Rs Mn 99,306 92,689 69,416 65,028 Staff Cost Rs Mn 4,364 4,017 1,298 1,125 No. of Employees 12,692 11,897 1,136 1,197
PER SHARE Basic Earnings Rs. 19.88 21.84 17.67 15.48* Net Assets Rs. 210.68 203.35 176.85 167.61 Dividends Rs. 3.35 3.25 3.35 3.25 Market Price High Rs. 320.00 246.00 320.00 246.00 Low Rs. 205.00 210.50 205.00 210.50 Year End Rs. 206.20 240.50 206.20 240.50
RATIOS Price Earnings times 10 11 12 16* Return on Shareholders Funds % 9.44 10.74 9.99 9.24* Current Ratio times 0.98 1.01 0.79 0.56 Interest Cover times 13.7 11.3 23.0 9.4* Stock Turnover (Finished Goods) days 16 15 13 12 Debt to Equity % 22.98 22.68 9.80 12.88 Debt to Total Assets % 15 15 7 10 Dividend Payout % 16.85 14.88 18.96 20.99* Dividend Yield % 1.62 1.35 1.62 1.35
* Previous year Company’s profit has been adjusted for intra-group capital gain on share transfer
Distilleries Company of Sri Lanka PLC 4 Annual Report 2015/16 Taxes Paid - Group Total Assets - Group (Rs. Mn.) (Rs. Mn.)
70,000 100,000 99,306 60,460 60,000 80,000 50,000
40,000 60,000
30,000 40,000 20,000 20,000 10,000
0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Gross Turnover - Group Profit After Tax - Group (Rs. Mn.) (Rs. Mn.)
100,000 7,000 88,865
6,000 5,670 80,000 5,000
60,000 4,000
40,000 3,000 2,000 20,000 1,000
0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Taxes Paid - Group Total Assets - Group Rs. 60,460 Mn. Rs. 99,306 Mn.
Gross Turnover - Group Profit After Tax - Group Rs. 88,865 Mn. Rs. 5,670 Mn.
5 Latest addition to our range
Distilleries Company of Sri Lanka PLC 6 Annual Report 2015/16 7 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Our Businesses
Beverages Distillation, Manufacture and Distribution of Liquor Products
Plantations Cultivation & Processing of Tea & Rubber
Telecommunication Voice, Data, Broadband, Hardware, Software and Networking Solutions
Distilleries Company of Sri Lanka PLC 8 Annual Report 2015/16 Insurance General Insurance Services
Financial Services Variety of innovative Financial Solutions under one roof
Power Generation Hydro Power Generation
Bogo Power
9 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Our Businesses
Logistics Automobile Servicing and Logistics
Media Media Buying & Creative Services
Textiles Dyeing and Printing Fabric
Distilleries Company of Sri Lanka PLC 10 Annual Report 2015/16 Leisure Hotels & Hospitality
BPO Services BPO, KPO & Call Centre Services
Information Technology Oracle ERP Cloud Oracle HCM Cloud Oracle Tech
11 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Historical Perspective
Excise Department of Ceylon, which Today, we are present in all parts of the was initially created as the enforcement country, operating under the principle authority to distribute and sell liquor products in Sri Lanka, branched out into of providing the highest standard of the distillation and manufacture of liquor products and services products. In 1974, the State Distilleries Corporation was incorporated by statute, to take over this venture, while the Excise Department realigned its operations as a monitoring body.
Touching lives for over a century… Thus, DCSL has the distinction of being Present in Sri Lanka for over a century, the pioneer distiller in Sri Lanka. In 1989, The Distilleries Company of Sri Lanka under a government policy decision, PLC (DCSL), is one of the most profitable the State Distilleries Corporation was and well respected corporate entities converted into a limited liability company. in the country. Its proud tradition, This transfer of ownership took place at rich heritage and proven credentials the Colombo Stock Exchange (CSE) in have made the Company a beacon of 1992, making it the largest transaction in inspiration for others. Over the past 100 the history of the CSE at that time. years, our corporate DNA has been Under new private management, strengthened with our values of tradition, the Company entered an era of quality, innovation, resilience and the modernisation that witnessed upgrading determination to succeed. DCSL’s roots of machinery and equipment, the can be traced back to 1913, when the introduction of modern management
Distilleries Company of Sri Lanka PLC 12 Annual Report 2015/16 systems & processes and the continuous but have been recognised as a leading international markets to render our brand upgrading of the quality of our products. corporate with the highest quality an internationally recognised one. The Plant and machinery were upgraded standards. Despite these achievements newly installed ultra modern state-of- to modern international standards and and our strong position of business the-art fully automated plant will ensure new technology developed by world leadership, we continue to look for that only products of the highest quality renowned experts was introduced. Large ways to improve and grow. Since 1992, reach the consumer. investments have also been made in the Company has not only expanded Research and Development (R&D) and in production, but has also diversified into upgrading laboratories. The best experts other non-alcohol related activities. in the spirit industry were tasked with ensuring that all the spirits marketed by us were up to international quality standards.
These improvements have equipped the Company with top of the line facilities enabling it to produce beverages which are world class. Furthermore, storage facilities and product distribution systems have been upgraded to modern standards with fully computerised systems. A fleet of modern vehicles ensures that customers in even the remotest areas are able to enjoy the best DCSL products delivered island wide. These improvements contributed towards higher production efficiencies across the supply chain. Our people are regularly trained in the best international Today, we are present in all parts of the practices in locations famed for high country, operating under the principle quality alcohol, such as France, Scotland of providing the highest standard of and Ireland. products and services for the people of Sri Lanka, imbued with a vision of Over the years, we have not only grown uplifting the quality of life of our people. to become Sri Lanka’s largest distiller, We aim to expand our presence into
13 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
The Story of Arrack
The Sri Lankan coconut arrack is believed to be one of the purest, naturally derived alcoholic beverages in the world distilled through a natural fermentation process. Sri Lanka has perfected the technique of making coconut arrack through the years. Today, it has acquired the perfect balance for the discerning palate and coconut arrack reigns as The pristine ambrosia-like qualities the alcoholic beverage of choice in the of Sri Lanka’s unique coconut arrack country.
can be traced back thousands of The initial step in the process of making centuries earlier, finding mention in coconut arrack is toddy tapping, an early literature - “…liquor drawn from age-old vocation which is lovingly passed down from father to son. Toddy Tapping the coconut flower” is as much an intricate art as it is a science. Toddy tappers manually extract the toddy from coconut trees which are The Sri Lankan flavour that coupled and girdled by deftly rappelling lingers on… from tree to tree. Coconut sap or toddy The pristine ambrosia-like qualities of is obtained by tapping the unopened Sri Lanka’s unique coconut arrack can coconut flower for its nectar. Thereafter, be traced back thousands of centuries the toddy is collected in earthenware earlier, finding mention in early literature - pots. This toddy when fresh contains “…liquor drawn from the coconut flower”. much sugar, but yeasts, microscopic This delectable beverage is steeped in vegetable organisms soon find their legend and tradition, making it one of the way into it, act on the sugar present most prised offerings from Sri Lanka to and produce alcohol. This process the world. of converting the sugar into alcohol is called fermentation. After a minute
Distilleries Company of Sri Lanka PLC 14 Annual Report 2015/16 The Sri Lankan coconut arrack is believed to be one of the purest, naturally derived alcoholic beverages in the world distilled through a natural fermentation process.
filtration process, this liquor is poured into massive casks made of Halmilla wood and are gently transported to our factories for distillation.
The process of distillation comprises of two stages; continuous distillation (patent still distillation) and pot distillation. This distillation process is usually completed within 24 hours. The purified spirit comes out with the distinctive flavour of arrack, ready to be savoured. The contents of the wooden vats are mixed artfully every fortnight for better aeration and to increase contact with the wood. Herbs and spices from ancient recipes are also added at particular stages, to enhance flavour and mellow the liquor during the crucial maturation process. The maturation process is completed after flavour enhancing and smoothening while ageing in the wooden vats.
Finally, spirits of different ages and flavours are blended to create the various DCSL brands, all under the careful supervision of an experienced connoisseur and Master Blender. As the largest coconut arrack distillery in Sri Lanka, possibly even in the world, this golden brew remains our pride and flagship product.
15 What’s behind Our Continuing Success? Tradition Served with Pride
OLD ARRACK COCONUT ARRACK DOUBLE DISTILLED VERY SPECIAL EXTRA SPECIAL ARRACK OLD ARRACK ARRACK A 100% coconut Superior blend spirit, refined, aged of mellow 100% Twice distilled A blend of 100% A blend of coconut and matured in coconut arrack full in pot stills and aged coconut spirits and imported Halmilla vats - giving of character and a matured slowly in spirits, well-matured neutral spirits a woody & natural distinctive flavour Halmilla vats giving in Halmilla vats to bringing herbal vanilla flavour stemming from the a remarkable taste give a taste of oak flavours with a traditional process of and aroma distinctively rich maturing taste and smooth aroma
Distilleries Company of Sri Lanka PLC 16 Annual Report 2015/16 SRI LANKA ARRACK SRI LANKA ARRACK WHITE LABEL SPECIAL ARRACK BLUE LABEL ARRACK ARRACK A 100% coconut A 100% pure coconut A blend of coconut spirit, matured spirit, which brings Crystal clear and an and neutral spirits Finest blend of in Halmilla vats, out the full-bodied absolutely pure blend bringing a distinctively matured coconut producing a taste and aroma of of coconut arrack and rich and smooth arrack and neutral woody character desiccated coconut neutral spirits giving flavour spirits giving a rich and exceptional with a subtle a tint of fresh lime and smooth flavour smoothness sweetness. Best with a slight burning served as a cocktail sensation on your mixer tongue
17 What’s behind Our Continuing Success? World Class Blends, Distinctly Sri Lankan
WHITE RUM TILL SIDER WHISKY BLACK OPAL HOUSE OF TILBURY PETROFF VODKA ARRACK WHISKY Exceptional selection A combination of Unique variety of of spirits blended to scotch and fine spirits Unique premium Premium blend of imported spirits that create a great rum, to produce a rich blended arrack, malts and fine spirits combines together matching international blend of whisky smooth on the palate to produce this to produce an standards with pleasant aromas classic whisky international standard vodka
Distilleries Company of Sri Lanka PLC 18 Annual Report 2015/16 PERICEYL APPLE GALERIE BRANDY FRANKLIN BRANDY FLINTON LEMON GIN PERICEYL MANGO ARRAK ARRAK Aged fine French A blend of finest Fine spirits blended Flavour of apple with brandy blended with French brandy with a rich recipe Flavour of mango fine imported spirits fine spirits matured in merged with fine flavoured with lemon with fine imported which provides a rich vats to enhance the spirits to bring out a spirits that combines apple aroma with a smooth characters of unique flavour that is tempting aromas smooth apple flavour a superior brandy incomparable and flavours of rich on the palate mango
19 What’s behind Our Continuing Success? Premium Brands from around the World
GRAND CHAIS DE ALBERT BICHOT PASSION POP NAPOLÉON 1875 WINCARNIS - FRANCE TONIC WINE “THE EPIC STORY” OF A There is nothing serious about this French traditional Founded in 1979, our GREAT HOUSE little number! Passion Pop is low brandy is made First produced in family company “Les From 1350, the Bichot in alcohol and loaded with soft, from the finest 1887, Wincarnis Grand Chais de France” family was established approachable passionfruit sweetness. wine eaux- de-vie, Tonic Wine is has built its reputation in Burgundy, with a deer rigorously selected a natural tonic, upon the simple motto… as a symbol. It was only SOMERTON by the master and incorporating an “Des Hommes, des in the XIXth century that The Somerton range reflects the bright aged for a minimum unique infusion terriors, une passion” As the family ventured into fruit flavors that are the hallmark of of 12 months in oak of herbs and the owners of over 30 the wine business, when casks, until perfectly spices. It is also Australia’s sunny climate regions at domains and chateaux Bernard Bichot found in matured. Its beautiful rich in vitamins, incredible value for money. in some of the greatest 1831, a wine brokerage. amber color, unique especially energy- French appellations, as The family heritage has BURONGA HILL woody bouquet, giving Vitamins. well as being an influential been passed down from full and soft palate Usually enjoyed player in the Bordeaux father to son until now. Buronga Hill Estate is the flagship and communicative straight, Wincarnis market for Grand Crus Since 1996, Albéric Bichot brand of the Buronga Hill Winery. warmth at the finish, Tonic Wine can Classe, we hope that our has represented the 6th Located in the Sunraysia district of all thanks to the oak also be mixed with customers will benefit generation to run the southern NSW, Buronga Hill Winery ageing. Can be drunk gin to make a ‘Gin from our 20 years House. is one of the largest wineries in as an aperitif or after- and Win’. experience in wines and Australia, Using the latest technology, dinner. spirits this batch processing large-scale Distilleries Company of Sri Lanka PLC winery renowned for its commitment 20 Annual Report 2015/16 to efficient and enviro - friendly winemaking AGAVITA – TEQUILA CAPE DREAMS MUD HOUSE TERRA ANDINA DOÑA PAULA - LOS CARDOS Tequila Blanco, or “OUR STORY” The Our founders set sail By Sur Andina From the white Tequila, is a name Cape Dreams to travel the world; magnificence of the Andes Doña Paula is among Mexican spirit that reflects our personal only to fall in love with to the cool waters of the the main Argentinean can be served as aspiration to build New Zealand. After Pacific, Terra Andina use wineries that export a shot or mixed an internationally planting vines they modern and innovative premium wines; in cocktails. Even recognised brand used the local earth winemaking skills to craft 97% of production though it is colorless, whilst making a to build their home. premium wines. Terra is exported to more it gives a slight taste difference. Our Two decades on, we Andina is an innovator than 60 countries of mint and pepper. objective is to continue to celebrate within the Chilean wine and the international develop and grow the spirit of striking industry. Blending grapes press has assigned Cape Dreams into a out and breaking from different valleys with our wines at very brand synonymous boundaries. Wherever different climates and high ratings. with wines of superb you are in the world soil conditions, for its full quality, offering an look out for our advantage of richness and enhanced palate distinctive wines and diversity of Chile’s different experience aimed celebrate your taste wine growing regions. at both emerging for adventure. Fresh and innovative winery and established free of taboos, Terra Andina wine markets. Like is focused on making the Rainbow, Cape quality wines to capture Dreams is for the the full potential of Chilean 21 world to share. viticulture. Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Chairman’s Statement
I am pleased to share with you, our note that the Central Bank permitted the valued shareholders, the company’s currency to depreciate and tightened Total Assets annual report and audited financial monetary policy, while moving interest statements for the year ended 31st rates up. March 2016. Rs. 100 Bn. Group Financial Performance During this period, your company During the financial year under continued its pursuit of growth and consideration, Gross Revenue of the expansion. In the face of persisting unfair Group was Rs. 89 Bn, while the Group Taxes practices favouring a few unscrupulous Profit after Tax for the year was Rs. 6 Bn. elements, we continue to operate in an The Group contributed a staggering Rs. 60 Bn. industry which has not offered a level Rs. 60 Bn in taxes (including Rs. 2 Bn playing field in years. However, measures as Super Gain Tax) to the national taken by the present Minister of Finance exchequer during this financial year. have curtailed to a large extent the This is a 46% increase in taxes when Employees inflow of spirits into the country through compared to Rs. 41 Bn paid in the dubious means. The increase in duties previous financial year. collected by the Excise Department 12,692 easily indicates the progress made by the Continuous Challenges Faced industry to fight corruption. Compared with last year we have observed a remarkable drop in illegal Macro Economic Climate production of liquor. However toddy Sri Lanka is going through a difficult makers release large quantities of never, under any circumstance, target period, facing various issues such artificial toddy to manufacturers while the children. However, most of the players as declining foreign reserves and Department of Excise turns a Nelsonian in the industry openly flout the NATA Act export revenues, large overseas debt eye. The damaging effect and colossal by indulging in various barely disguised repayments, and substantial fund impact to the final product makes such advertising and promotional activities outflows from the stock market and products injurious to health. The so while authorities repeatedly turn a blind government debt securities. Lower called “old arrack” in the market is made eye and deaf ear to such illegal practices. revenues from all traditional products of artificial toddy and the consumer is not A unique and traditional Sri Lankan such as tea, rubber and coconut, which aware of this. Toddy made artificially is industry which has been passed are selling below the cost of production, transported to the South to make spirits down generation to generation over have made a big dent in the economy. with the blessings of the enforcement the centuries is today an endangered The Country’s foreign exchange reserves authorities; the consumer unfortunately is industry. This sorry state of affairs is fell by a third from late 2014 to 6.2 Bn. unaware of the real situation. dollars at the end of March 2016. The the direct result of the proliferation of government debt to GDP ratio was The industry as a whole is highly illegal, artificial toddy manufacturers, around 76% percent at end 2015 regulated and as a legitimate entity, who fuel the illegal alcoholic beverage compared to 72% five years ago. DCSL complies with all the rules and business by producing cheap artificial regulations laid down in the National toddy, unfit for human consumption. As The present regime is targeting fiscal Authority on Tobacco and Alcohol (NATA) a result, traditional toddy suppliers, who consolidation, as the large budget deficit Act. The act mandates that companies are unable to compete with such low is threatening the economic stability will not advertise or promote their cost artificial toddy, are finding that their of the country. This has resulted in an products in any form and in any medium; rich legacy is becoming unsustainable. increase in both direct and indirect taxes, that they will not directly or indirectly Amidst the barren wasteland of illegal pushing retail prices upward. We also lure young people into alcoholism; and practices and disregard for tradition,
Distilleries Company of Sri Lanka PLC 22 Annual Report 2015/16 D. H. S. Jayawardena Chairman / Managing Director
23 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Chairman’s Statement
DCSL remains the only company We are somewhat surprised at the Continental Insurance has established producing 100% natural coconut arrack manner in which a new form of itself as one of the most innovative and using 100% pure coconut toddy distilled competition has emerged in the recent dynamic insurance companies in Sri at our own distilleries thereby providing past. It was observed that bogus Lanka and holds great potential for the consumers a 100% natural product. consumers are demonstrating opposite future. Its (A-) Fitch rating reflects the We have strengthened procedures by the licensees’ premises in an attempt to financial stability of the Company with top appointing qualified personnel to inspect convince onlookers that our products are of the line Quality Management System every barrel of toddy, in order to detect inferior and other products are superior. now conforming to ISO standards. any form of adulteration and extraneous This is below the belt competition The Company reached new heights, matter it may contain. We are single- launched by a newly established exceeding the industry performance, handedly nurturing the traditional toddy competitor who has no other means to with a 30% year-on-year growth in tapping custom although only a handful fight a genuine product well accepted by Gross Written Premium at the end of of such genuine tappers remain in consumers. Such competitors carry out 2015, proving resilient against numerous existence. Even though we lack trained below the belt campaigns while their own challenges to sustain its growth toddy tappers, the Department of Excise products are manufactured with artificial momentum. is not focusing on this issue to help the toddy containing harmful substances and Melsta Regal Finance embarked on its industry and to ensure the production of released to the market. fourth year of operations with a focus on genuine coconut toddy. It is pathetic to note that although the penetrating the market with innovative The Excise Ordinance which came conditions of the manufacturing license financial solutions. Melsta Regal, an into operation on 1st January 1913 is indicate that a manufacturer is prohibited A+(lka) rated finance house, achieved now 103 years old. It is high time that from holding any interest in the retail noteworthy milestones in terms of asset legislators introduce a practical, new sale of liquor, this condition is blatantly size and achieved a balance sheet ordinance in place of antiquated laws violated. The government must seriously size of Rs 5 Bn in a challenging market to suit modern day requirements and look at a few unscrupulous traders environment. We are glad to state that make it easier for manufacturers and purchasing FL4 licenses to sell their our hydro power project, Bogo Power, consumers to carry out their day to day adulterated products. Today such traders which was commissioned in December operations and prevent malpractices. operate approximately 233 licenses out 2011, is now yielding encouraging results of a total of 1,000 licenses and this itself for the Group. Duplicated, adulterated products are proves how far rules are manipulated frequently available in the hill country and for personal benefit and how much Lanka Bell continued to show negative north and east where stringent policing revenue is thereby lost to the State. Out results. However the new LTE technology does not take place up to the required of these 233 licenses, one licensee has is showing positive momentum and has standard. As a result, State coffers are 52 licenses and sells counterfeit and non- achieved over 15,000 subscribers. DCSL losing revenue as the required standard invoiced products. Group also experienced a dip in the of checking is either not carried out or results of our key associate company, not supervised at all by the regulators. Diversified Performance Aitken Spence PLC during the financial It is common knowledge that legislators With regard to other group business year. of the last Government imported and interests, Balangoda Plantations The uncertainties surrounding the distributed ethanol according to their experienced a drop in revenue, which status of our subsidiary, Pelwatte Sugar whims and fancies. We commend the had an adverse effect on profitability Industries continue to weigh upon the Minister of Finance for tightening the incurring a loss of Rs. 430 Mn against a Group. Following the occupation of the loopholes thereby preventing large scale backdrop of increasing costs and drop in factory by state officials, the ownership movement of ethanol into the market revenue. of this property remains unresolved. The illegally. Group has not changed its position,
Distilleries Company of Sri Lanka PLC 24 Annual Report 2015/16 advocated since the occurrence of this Accountant who will undoubtedly add his unfortunate incident, of being the legal significant experience and expertise to owner of the property and as such we our Group. have communicated our views to the I would also like to thank our valued Treasury. However, as a precautionary shareholders for placing their confidence measure, the Group has also lodged in the Group. Our strength lies in the an official claim with the Compensation loyalty shown by our customer base Tribunal appointed by the State. We hope and other stakeholders, who continue that some clarity regarding this untoward to inspire us to retain our position as situation would be forthcoming during one of the most valuable and respected the new financial year. corporate entities in the country. With regard to Sri Lanka Insurance Corporation Ltd. (SLIC), even after a lapse of 7 years, we still await the payment of profit earned during DCSL Group’s tenure at the helm of SLIC. We are hopeful that the profit earned, which has to be paid to us as per the Supreme Court directive, will be reimbursed to us D. H. S. Jayawardena as early as possible. Chairman / Managing Director
DCSL has complied with the Listing 05 August 2016 Rules of the Colombo Stock Exchange and the Code of Best Practices on Corporate Governance issued by the Securities and Exchange Commission and the Institute of Chartered Accountants of Sri Lanka. We are committed to the furtherance of the best Corporate Governance principles and practices. The measures taken in this regard are set out in the Corporate Governance Report.
Appreciation I take this opportunity to thank the Board of Directors for their unstinted support and the management and staff for their single-minded pursuit of profitability for the Group against all odds.
I welcome Mr. Ranjeevan Seevaratnam as an Independent Non Executive Director and the Chairman of Audit Committee of DCSL, a senior Chartered
25 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Board of Directors
Mr. D. H. S. Jayawardena Mr. C. R. Jansz Chairman / Managing Director Executive Director
Mr. D. Hasitha S. Jayawardena Mr. Ranjeevan Seevaratnam Non-Independent Non-Executive Director Independent Non-Executive Director
Distilleries Company of Sri Lanka PLC 26 Annual Report 2015/16 Mr. N. de S. Deva Aditya Capt. K. J. Kahanda (Retd.) Dr. Naomal Balasuriya Independent Non-Executive Director Executive Director Independent Non-Executive Director
Ms. V. J. Senaratne Mr. Amitha Gooneratne Company Secretary and Chief Legal Officer Alternate Director to N. de S. Deva Aditya
27 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Board of Directors
up, beating the Liberal candidate into 3rd Mr. D. H. S. Jayawardena Mr. C. R. Jansz place to be the President (Speaker) to Chairman / Managing Director Executive Director the European Parliament. He was the first Mr. Harry Jayawardena is one the most Mr. Jansz is the Chairman of DFCC Bank Asian to be elected as a Conservative successful and prominent business PLC. and is a Director of Melstacorp Ltd. Member of British Parliament, first Asian magnates in Sri Lanka. He was elected and other Companies in the Distilleries MP to serve in the British Government as Chairman of the DCSL Group in 2006 Group. He is a Director of Lanka Milk PPS in the Scottish Office and first Asian after serving as its Managing Director for Foods (CWE) PLC., Lanka Dairies (Pvt) born MP to be elected to the European almost two decades. He heads many Ltd. and other Companies in the Lanka Parliament. He was nominated as a successful ventures in diversified fields Milk Foods Group. candidate to succeed Kofi Annan as of business. He is the founder Director Secretary General to the UN in 2006. He is a former Chairman of Sri Lanka and the present Chairman / Managing Shippers Council and a former member He is a Hon. Ambassador without Director of the Stassen Group of of the National Trade Facilitation portfolio for Sri Lanka; the first Asian to Companies. Committee of Sri Lanka. He has many be appointed as Her Majesty’s Deputy years experience in logistics and in Lord Lieutenant for Greater London, He is the Chairman of Aitken Spence documentation, insurance, banking and representing The Queen on official PLC., Aitken Spence Hotel Holding finance relating to international trade. occasions since 1985; awarded the PLC., Lanka Milk Foods (CWE) PLC., honour “ViswaKirthi Sri Lanka Abhimani“ Madulsima Plantations PLC., Milford Mr. Jansz holds a Diploma in Banking by the Buddhist Clergy for his Services to Exports (Ceylon) (Pvt) Ltd., Ceylon and Finance from the London Guildhall Sri Lanka and given the Knighthood with Garden Coir (Pvt) Ltd., Ambewela University, UK. He is a Chevening Scholar Merit of the Sacred Constantinian Military Products (Pvt) Ltd., Ambewela Livestock and a UN-ESCAP Certified Training Order of St. George for his global work Manager on Maritime Transport for Co. Ltd., Danish Dairy Products Lanka on poverty eradication. He is a Fellow of Shippers. (Pvt) Ltd., Lanka Dairies (Pvt) Ltd., the Royal Society for Arts, Manufacture Melstacorp Ltd. and its subsidiaries; and Commerce (Est:1765). Balangoda Plantations PLC., Browns Mr. N. de S. Deva Aditya Beach Hotels PLC., Lanka Bell Ltd., DL, FRSA Capt. K. J. Kahanda (Retd.) Periceyl (Pvt) Ltd., Bogo Power (Pvt) Ltd. Independent Non-Executive Director and Texpro Industries Ltd. Executive Director Mr. Niranjan Deva Aditya, is an Captain Kahanda joined the Company He is a former Director of Hatton National Aeronautical Engineer, Scientist and in 1993 as Regional Manager (Central Bank PLC., the largest listed bank in Sri Economist, is a Conservative Member Region) and was appointed a Director in Lanka and former Chairman of Ceylon of the European Parliament elected from December 2006. Being a former officer Petroleum Corporation and SriLankan the SE England. He is the Vice President of the Sri Lanka Army, he spearheaded Airlines. of the Development Committee; ECR Co-ordinator, Chairman of the European the re-organisation of the operations of Mr. Jayawardena is the Honorary Consul Parliament’s Delegation for Relations with the Central Region since privatisation. He for Denmark and was the only Sri Lankan the Korean Peninsula and Conservative specialises in logistics, distribution and honoured with the prestigious “Knight’s Spokesman for Overseas’ Development security matters, and is also a Director Cross of Dannebrog’ by Her Majesty, and Co-operation. of G4S Security Services (Pvt) Ltd. and Queen Margrethe II of Denmark, for his Pelwatte Sugar Industries Group. He was the Co Leader of the significant contribution to the Danish arts, Parliamentary Delegation to the UN sciences and business life. Dr. Naomal Balasuriya World Summit and General Assembly MBBS [Sri Lanka], MBA [Sri.J], CIM [UK], He has also been awarded the title, 2006, Chairman Working Group A of MCGP [SL], MSLIM, MIMSL “Deshamanya” in recognition of his Development Committee overseeing Independent Non-Executive Director services to the Motherland, since Asia, Central Asia and Far East; - Co Co- November 2005. ordinator Assembly of 79 Parliaments of Dr. Naomal Balasuriya, a medical doctor the EU-ACP 2004 and the President EU turned-entrepreneur is internationally India Chamber of Commerce from 2005. sought after as a life changing In 2012 he stood for and came runner motivational speaker. His professional
Distilleries Company of Sri Lanka PLC 28 Annual Report 2015/16 expertise ranges from medicine, military, Chemistry, Botany and Zoology. He is Ltd., and former Chairman of the Sri management, marketing, mentoring to a Fellow of the Chartered Accountants Lanka Banks’ Association (Guarantee) motivational speaking. He holds both of England and Wales and Fellow of the Ltd. He was also the Managing Director the Master of Business Administration Chartered Accountants of Sri Lanka. of Commercial Development Company (MBA) and CIM (UK) qualifications. Mr. Seevaratnam was a Senior Partner PLC, a Public Quoted Company listed Having worked in the government sector, of KPMG, Chartered Accountants, for a in the CSE and was the Chairman of private sector and the Sri Lanka Air period of 30 years, where he was mainly Commercial Insurance Brokers (Pvt) Force as a medical doctor, he now leads involved with audits of banks, financial Limited. He was also nominated to his entrepreneurial training company, services and manufacturing companies. the Board of SriLankan Airlines during Success Factory. He is also a Director He was a designated banking partner 2002–2004 by the Government of Sri in Sri Lanka. He is also a Non Executive of Melstacorp Ltd., a subsidiary of the Lanka. Independent Director of a number of Group. Public Quoted Companies. On his retirement, Mr. Gooneratne, assumed duties as Managing Director Mr. D. Hasitha S. Jayawardena of Melstacorp Limited, which is the Ms. V. J. Senaratne BBA (Hons) (UK) strategic investment arm of the Distilleries Attorney-At-Law, Notary Public, Solicitor Non-Independent Non-Executive Director (Eng.& Wales) Company of Sri Lanka PLC. He is the Chairman of Melsta Regal Finance Mr. Hasitha Jayawardena holds Alternate Director to K. J. Kahanda / Limited, Melsta Logistics (Pvt) Limited a Bachelor’s Degree in Business Company Secretary and Chief Legal Officer Administration BBA (Hons) from the and Bellvantage (Pvt) Limited; Board Ms. Senaratne was appointed as the University of Kent in the United Kingdom. Member of Periceyl (Pvt) Limited, Company Secretary in 1993. She was Balangoda Plantations PLC, Lanka Bell Mr. Jayawardena joined Stassen Group admitted to the Bar in 1977 and was Limited, Telecom Frontier (Pvt) Limited, in February 2013. He is a Director of enrolled as a Solicitor (England & Wales) Bell Solutions (Pvt) Limited, Timpex (Pvt) Stassen Exports (Pvt) Ltd., Milford in June 1990. She also holds the position Limited Texpro Industries Limited, Bogo Exports (Ceylon) (Pvt) Ltd., Stassen as Company Secretary of Periceyl (Pvt) Power Limited., Continental Insurance International (Pvt) Ltd., Stassen Natural Ltd Limited and Browns Beach Hotel PLC., Foods (Pvt) Ltd., Ceylon Garden Coir which are subsidiary companies of She also serves as a Director on the (Pvt). Ltd., Milford Developers (Pvt) Melstacorp Limited. Board of Paradise Resort Pasikudah Ltd., Stassen Foods (Pvt) Ltd., C. B. (Private) Limited, Amethyst Leisure D. Exports (Pvt) Ltd., Zahra Exports He is an Independent Director of Lanka Limited, DFCC Bank PLC and as an (Pvt) Ltd. and Mcsen Range (Private) IOC PLC, Textured Jersey Lanka PLC Alternate Director of Melstacorp Limited Ltd. He was appointed to the Board of and Commercial Development Company and Distilleries Company of Sri Lanka Meltsacorp Ltd. in January 2015 and Limited. PLC. Periceyl (Pvt) Ltd. in April 2015. He is also the Alternate Director to Mr Mr. Jayawardena has also worked as N. de S. Deva Aditiya on the Board of Mr. Amitha Gooneratne an Intern at the Clinton Global Initiative Distilleries Company of Sri Lanka and FCA (SL), FCA (Eng. & Wales) programme (CGI) in New York in 2007. Aitken Spence PLC. Alternate Director to N. de S. Deva Aditya
Mr. Amitha Gooneratne has held several Mr. Ranjeevan Seevaratnam senior positions at Commercial Bank of FCA (SL), FCA (Eng. & Wales) Ceylon PLC and served as the Managing Independent Non-Executive Director Director from 1996 to April 2012. He is a Fellow of the Institute of Chartered Mr. Ranjeevan Seevaratnam was Accountants, United Kingdom and appointed to the Board as an Wales and a Fellow of the Chartered Independent Non Executive Director Accountants of Sri Lanka. He was from 21st September 2015. He is a the Founder Chairman of the Financial Graduate of University of London in Ombudsman Sri Lanka (Guarantee)
29 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Group Management
Amitha Gooneratne Capt. Jagath Kahanda (Retd.) Ms. Stasshani Jayawardena Managing Director - Melstacorp Ltd. / Managing Director - Pelwatte Sugar Chairperson - Splendor Media, Chairman – Melsta Regal Finance Ltd., Distilleries (Pvt) Ltd. / Director - Distilleries Director - Aitken Spence PLC Melsta Logistics (Pvt) Ltd., Bellvantage (Pvt) Company of Sri Lanka PLC, Melstacorp Ltd., Ltd., Melsta Tower (Pvt) Ltd. / Director – Pelwatte Sugar Industries PLC, Melsta Continental Insurance Lanka Ltd., Periceyl Properties (Pvt) Ltd., Milford Holdings (Pvt) Ltd. (Pvt) Ltd., Lanka Bell Ltd., Texpro Industries Ltd., Bogo Power (Pvt) Ltd.
Lalith Obeyesekere Capt. Ranjith Wettewa SLN (Retd.) Asoka Abeyewardene Director / CEO - Balangoda Plantations PLC, Director - Pelwatte Sugar Industries PLC Director - Continental Insurance Lanka Ltd. Madulsima Plantations PLC
Senaka Amarathunga Dinal Peiris Chaminda De Silva Director / General Manager - Periceyl (Pvt) Ltd. Managing Director - Texpro Industries Ltd Managing Director - Continental Insurance Lanka Ltd
Distilleries Company of Sri Lanka PLC 30 Annual Report 2015/16 Dr. Prasad Samarasinghe Nishaman Karunapala Palitha Rodrigo Managing Director - Lanka Bell Ltd. Director / CEO - Melsta Regal Finance Ltd. Managing Director - Melsta Technologies (Pvt) Ltd.
Ms. Farzana Sulaiman Chief Operating Officer - Bellvantage (Pvt) Ltd.
31 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
DCSL Management
Ms. V. J. Senaratne Nimal Nagahawatte S. Rajanathan Company Secretary & Chief Legal Officer Head of Finance Head of Procurement
Capt. Ranjith Wettewa SLN (Retd.) Ms. Gayathri Chakravarthy Premasiri Liyanaarachchi Head of Uva Region Head of Human Resources Chief Internal Auditor
Maj. Roshan Cabraal (Retd.) Col. Ranjith Rupasinghe (Retd.) Brig. Aruna Wijewickrama (Retd.) Head of Northern Region Head of Extra Special Head of Southern Region Heritage Arena
Distilleries Company of Sri Lanka PLC 32 Annual Report 2015/16 Capt. Chula Ranasinghe (Retd.) Maj. Gen. Mano Perera (Retd.) Roshanth Kumar Perera Acting Head of Central Region Head of Operations Head of Transport & Logistics
Lalith Ratnayake Mahesh Jayaweera Head of Inventory Management Head of Sales
33 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Management Discussion and Analysis
The DCSL Group epitomises one of Sri Lanka’s reputed diversified conglomerates, holding a portfolio encompassing beverages, plantations, telecommunication, insurance, finance, power generation, textiles, leisure, logistics and media and creative services. The group is synonymous with dynamism and professionalism and has carved a unique niche for itself in the sectors in which it operates. Having long established its credentials as a respected corporate entity over a period of a century, DCSL embodies state-of- the-art systems and processes led by a distinguished senior management board increased presence were achieved during and a professional team of employees the year, recent investments are yet to dedicated to deliver maximum value yield commensurate returns. to shareholders and other valued stakeholders. Unfortunately, the expropriation of Group Pelwatte Sugar Industries PLC (PSIP), Group Overview under the Revival of Under-Performing Total Assets Our flagship company, engaged in the Enterprises and Under-Utilised Assets alcohol beverage sector represents the Act (Act) in November 2011, was an Rs. 99,306 Mn. majority of the Group’s revenue and issue that remained unresolved during profitability with DCSL prevailing as the the financial year under review. Despite dominant market leader in the industry. being listed as an ‘under-utilised asset’ under the Act, we remain emphatic that Share Holders’ Value In order to offer superior products, DCSL we are the legal owners of PSIP. We has invested in a state-of-the-art fully remain hopeful that this issue will be Rs. 63,204 Mn. automated blending and bottling plant resolved in a transparent manner at the to enhance efficiency and quality. DCSL earliest instance. remains committed and strongly believes that such high value investments will Furthermore, despite a lapse of seven ensure the sustainability of its operations. years, we have still not been reimbursed the profit earned during the DCSL Company Melstacorp Group of Companies, Group’s tenure at the helm of Sri Lanka Total Assets under which falls the other diversified Insurance Corporation Ltd, (SLIC). We operations of the Group, succeeded are hopeful that the profit earned, which in expanding its sphere of influence is rightfully ours, will be paid soon, as per Rs. 69,416 Mn. and in creating a distinct identity for the Supreme Court directive. itself. Our focused efforts to build the Melstacorp brand yielded positive The Group’s gross revenue recorded Share Holders’ Value results, with greater brand awareness at Rs.88.9 Bn in the current year. The and recall amongst key stakeholders. Group’s profit before tax was Rs. 9.0 While heightened brand equity and an Bn and a profit after tax of Rs. 5.7 Rs. 53,056 Mn.
Distilleries Company of Sri Lanka PLC 34 Annual Report 2015/16 Bn. The contribution to total revenue Profit Before Tax - Group Gross Turnover - Group from the alcoholic beverage sector (Rs. Mn.) (Rs. Mn.) was Rs. 79 Bn and continues to be the largest contributor to the bottom line. The Group’s plantations business, contributed revenue of Rs. 2.4 Bn, with Telecommunication at Rs. 3.3 Bn, Financial Services at Rs. 2.0 Bn and Diversified businesses at Rs. 1.9 Bn. Share of associate investees contributed Rs. 0.75 Bn to the Group’s profitability.
The Group’s total assets increased to 2016 2015 2016 2015 Rs. 99.3 Bn from Rs. 92.7 Bn and the Beverage Sector 8,390 8,398 Beverage Sector 79,232 56,992 Plantations Sector (431) (106) Plantations Sector 2,413 3,002 net assets per share was Rs. 210.68 Telecommunication Sector (642) (692) Telecommunication Sector 3,286 3,372 from Rs. 203.35. DCSL’s share was Rs. Financial Services 234 188 Financial Services 2,031 1,441 Diversified Sector 692 550 Diversified Sector 1,903 1,951 206.20 as at end of March 2016. Share of Associate Companies Profit 748 1,391 88,865 66,759 8,992 9,729 The DCSL Group strived hard to generate social and economic gains in order to make a significant contribution impact on social, environmental and year persisted despite aggressive to the prosperity of the country. As a economic pillars. lobbying efforts on our part to ensure a market leader in the beverage sector level playing field. and one of the most valued corporate Beverage Sector entities in the county, we consider it our DCSL sustained its status as the Flagship The fact that DCSL continues to maintain responsibility to deliver sustainability Company and highest revenue generator market leader status despite operating across all our operations, while ensuring for the Group in the year under review. in such a challenging eco system in the that our activities have a favourable The challenges faced in the preceding legal alcohol industry is a reflection of the
35 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Management Discussion and Analysis
loyal customer base and brand loyalty we world at the recently concluded World products, mainly Arrack, at a lower price. have succeeded in generating. Despite Whiskies Awards in London this year. Such products were supplied to retailers the infusion of cheaper priced alcohol to at a lesser cost and these same products Further, one of the world’s leading the market, DCSL consumers uphold their were offered by the manufacturers vodkas, Stolichnaya Vodka too was trust in DCSL brands. Considering that with a larger margin to retailers, which introduced to the market. The range the excise duty component is over 68%, it encouraged the retailers to sell the consists of Stolichnaya Regular, Flavours, is impossible for legal producers to retain products over DCSL/Periceyl products iconic premium and Stolichnaya Elite competitiveness in such markets. Further, a Vodka. high tax regime and escalating cost of living Artificial toddy being supplied at a cheaper price has also created a difficult serve to render consumers no choice but During the current financial year, both situation for manufacturers such as to opt for cheaper products, despite their DCSL and Periceyl continued to maintain DCSL/Periceyl, who are using 100% dubious quality. profitability despite the challenges posed genuine coconut toddy to produce to the legal alcohol business in the It must be duly noted that we adhere coconut spirits. 100% Coconut Old country as a result of a skewed playing strictly to the NATA Act which prohibits Arrack is a flagship product, which is field. Gross turnover of DCSL was advertising and promoting alcoholic endemic to Sri Lanka and is similar to recorded at Rs. 72.1 Bn. DCSL recorded brands. The fact that DCSL has Scotch whisky in Scotland and Cognac a profit after tax of Rs. 5.3 Bn. The sustained and grown its market share in France. However, due to the weak beverage sector contributed a staggering despite these severe restrictions is Rs. 60 Bn to the State by way of taxes a reflection of the superior quality of including super gain tax. our products which is appreciated by discerning consumers. Periceyl (Pvt) Ltd., achieved greater brand building success during the year Unfortunately, unscrupulous operators do with remarkable volume growth while not pursue the same sustainable goals sustaining its profitability. Its brands - as DCSL, since they focus on earning Black Opal Arrack, Franklin Brandy and high profits with a short term view of the Galerie Brandy - performed convincingly. business, resulting in a high social cost. In contrast, the DCSL Group pays all However, we observed some of the taxes as per the laws of the land, making local manufacturers distributing finished the Group one of the largest contributors to state coffers.
During the third quarter of the financial year, the beverage sector experienced a very significant increase in excise duties, resulting in product price increases of over approximately 23%.
In March 2016, two award winning Single Malts from the stable of International Beverage Holdings Limited were introduced to the Sri Lankan market. These included the Speyburn 10 year old, which is a classic Speyside malt and Old Pulteney 12 YO, a whisky whose 1989 expression recently won the prestigious title of best whisky in the
Distilleries Company of Sri Lanka PLC 36 Annual Report 2015/16 build a common brand under the ‘Melsta’ Gross Turnover Beverage Sector Profit Before Tax Beverage Sector umbrella will be sustained into the future. (Rs. Mn.) (Rs. Mn.) Melstacorp is striving to combine the Group companies’ synergies in a 80,000 79,231 9,000 8,398 8,391 manner that will drive optimum resource 70,000 8,000 utilisation and financial benefits. We have 7,000 envisioned that Melstacorp will emerge 60,000 56,992 6,000 as a diversified conglomerate, enhancing 50,000 5,000 the contribution from the non-alcohol 40,000 sector whilst reducing the Group’s 4,000 30,000 dependence on the alcohol sector. 3,000 20,000 2,000 Plantations Sector 10,000 1,000 The year under review proved to be an 0 0 extremely challenging year for Balangoda 2014/15 2015/16 2014/15 2015/16 Plantations (BPL) and the Industry as a whole, amid many adverse financial and non-financial variables, resulting in the monitoring framework in the country to constant pursuit of new and emerging Company recording unfavourable results. crack down artificial toddy suppliers, the opportunities emanating from the Profitability indicators demonstrate country will lose the edge for authentic country’s leisure and tourism sectors. a declining trend over previous year 100% Coconut Arrack. In conclusion, we remain hopeful that due to the tea prices falling well short the relevant authorities will exert greater of last year’s levels consequent to the Future Outlook control to curb the illegal liquor industry negative impact caused by various Despite the challenges in the sector, we for the benefit of the consumer. micro and macroeconomic factors. The remain optimistic about the prospects for Middle Eastern region, where the bulk the beverage industry and for DCSL to Melstacorp Limited of our teas is exported did not show further secure even greater market share Consequent to Group restructuring any recovery from the socio economic in the future. plan implemented the previous year, unrest. Further other export destinations Melstacorp currently holds 19 direct and We are happy to commend the measures such as Russia, Ukraine and Turkey too indirect subsidiaries and two associate taken by the present Minister of Finance faced many challenges, which led to companies. Under the new arrangement, to curtail the inflow of spirits into the devaluation of currencies , thus impacting DCSL’s shareholdings of subsidiaries country through dubious means to a prices at the Colombo Auctions. This and associates were realigned to large extent. The increase in collection scenario was prevalent in the Rubber Melstacorp Limited, enabling Melstacorp of duty by the Excise Department easily Industry too where the prices in the world to provide greater focus and attention to indicates the progress made by the market showed a dramatic fall, reflecting the diversified investments of the DCSL industry. We also appreciate the efforts a similar declining trend in the Colombo Group. to introduce a Security Seal at the point Rubber Auction prices as well. of production to monitor output and In a bid to ingrain the Group philosophy, BPL recorded a pre-tax loss of Rs. eradicate counterfeits. a series of measures were taken to infuse 430 Mn. The turnover of the company Group culture and strengthen the shared DCSL is reputed for its innovation decreased from Rs. 3.0 billion in 2014 services framework. Some of the key and our R & D team perseveres in to Rs. 2.4 billion in 2015, reflecting a areas of the shared services such as innovating new products to ensure drop of 20%. The tea industry as a treasury, finance, audit and control and that our products evolve and change whole experienced an unfavourable human resources, were put in place. Our with the times. Periceyl remains in year, posting a decline of 9.07 Mn Kgs efforts to strengthen shared services and
37 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Management Discussion and Analysis
in output. The shortfall is mainly due to the population socially, it is of paramount Financial year of 2015/16, along with the the deficit shown by the high & medium importance for the policy makers to above mentioned two operators who grown sectors due to the impact of intervene and resurrect the Industry provide full range of solutions, Lanka weather in production. as the Regional Plantation Companies Bell too managed to record a positive cannot on their own find solutions to EBITDA., Sri Lanka Rubber Production declined address the multitude of issues affecting significantly for the fourth consecutive the Plantation Sector Despite the rise in operational year amid weak global demand and costs during the year, the Group’s adverse weather conditions. Rubber The Company is in the process of telecommunication arm, Lanka Bell, was production for the year was 88.5 Mn pursuing a diversification strategy to able to sustain a reasonable EBITDA kgs versus 98 Mn kgs in 2014. The reduce the volatility from the Tea and margin in line with the industry. Lanka Colombo auction prices reflected the Rubber sectors and to deliver sustainable Bell is now equipped with the latest lowest price levels since 2009, continuing returns to our shareholders and is in technology to propel itself to the the decreasing trend witnessed during currently studying the prospects of crop forefront of the industry. The launch of the recent years. The surplus stocks diversification, such as to Oil Palm. 4G positions the company as one of the of rubber in the global market and leaders in the sector, thereby ensuring it weakening crude oil prices, which Telecommunication Sector takes a quantum leap into the future of prompted the demand for synthetic The past year has seen a few evolving wireless telephony and connectivity in its rubber contributed to the decline in trends in the Telecommunication Industry tradition of pioneering technology such natural rubber prices that could shape the future success as introducing CDMA technology to Sri in terms of profitability & sustainability Lanka in 2005. BPL sustained its momentum in of Telecom Operators. The Sri Lankan replanting programmes, where Telecommunication Industry has two Lanka Bell operates its 4G LTE network unproductive Tea areas were diversified operators with the ability to offer a full on a bandwidth of 25 MHz in the 2.3 into Rubber. Further, new planting was range of related solutions such as mobile, GHz spectrum called the LTE Band done in 23.58 hectares in Balangoda & fixed, data & television. The remaining number 40, which is the most sought Badulla regions. four players have clearance to provide after band in the Asian region. LTE one or two of the mentioned solutions, technology offers faster data rates to Future Outlook of which Lanka Bell is one of them. It customers and is the current trend The Plantation Industry is facing perhaps is interesting to note that during the the most challenging period in recent history following the nationalisation of the plantations in the 1970s. As a result of a worldwide decline in commodity prices and other external factors beyond our control, including volatility in a vast majority of our key export markets, prices of both Rubber and Tea have plummeted.
Far-reaching changes to the operating model of Sri Lanka’s Plantation Sector, which extend beyond the worker remuneration mechanism, are essential for the Industry’s survival, growth and sustainability.
Considering the significance of the Industry to the economy of this country and to the plantation related segment of
Distilleries Company of Sri Lanka PLC 38 Annual Report 2015/16 The General Insurance Sector of Gross Turnover Plantations Sector Profit/(Loss) Before Tax Plantation Sector the country showed an improved (Rs. Mn.) (Rs. Mn.) performance in 2015. Many supervisory and regulatory reforms were introduced 4,000 500 in the year under review with a view
(431) to further strengthen the regulatory 3,500 framework, ensuring insurance
3,002 400 3,000 policyholders safety and protection,
2,413 improving the safety and soundness 2,500 300 of insurance companies, solvency of 2,000 insurance brokers and streamlining the 200 1,500 canvassing of business by insurance
1,000 (106) agents. 100 500 Continental Insurance’s comprehensive 0 0 product offerings in the general 2014/15 2015/16 2014/15 2015/16 insurance sector encompass solutions poised to address diverse needs of both corporate and individual clients. and future of the ICT (Information and a Gross Written Premium (GWP) of 2.43 Constantly upgraded to remain Communication Technology) industry. Bn at the end of 2015, proving resilient innovative, competitive and cohesive, against numerous challenges to sustain CIL continued to offer solutions ranging Lanka Bell offers an attractive portfolio its growth momentum. in the broad categories of Automobile, of value-added high speed broadband Home-Owners, Travel, Marine, General and voice services at competitive rates, Reinstating its stance as one of the Accident, Personal Liability and Property which makes it a preferred telecom fastest growing insurance companies Insurances. The product offering was service partner for customers. Its in the country, CIL now accounts for further augmented during the year with strong reputation for customer care approximately 4% of the market share the inclusion of Individual Health Policies, and technical expertise is pushing the in the intensely competitive General Group Personal Accident Covers, company to reach the pinnacle. Insurance segment.
One of the main challenges for the local Telco Industry and Lanka Bell in particular is the increase in costs pressuring profit margins.
Future Outlook Despite these challenges, Lanka Bell looks forward to the future prospects of its various businesses activities, as investor confidence improves in the local economic environment and demand for Data related connectivity increases.
Financial Sector Insurance Continental Insurance (CIL) reached new heights, exceeding industry performance, with a 30% year-on-year growth to reach
39 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Management Discussion and Analysis
Customisable Combined Covers for Gross Turnover Telecommunication Sector Profit/(Loss) Before Tax Hoteliers and Comprehensive Home (Rs. Mn.) Telecommunication Sector Insurance Covers. (Rs. Mn.)
CIL expanded its reach during the year 4,000 700 (692)
under review, increasing its branches (642)
3,500 3,372 to 40, with the latest additions in 3,286 600 Nikaweratiya, Ampara and Hingurakoda. 3,000 500 With a clear strategy to establish its 2,500 presence in all key business centres 400 of the country, CIL envisages to 2,000 300 spread its network far and wide to 1,500 Homagama, Mathugama, Wennapuwa, 200 1,000 Mahiyanganaya and Kalmunei during the ensuing year. 500 100 0 0 Though a Company young in age, CIL 2014/15 2015/16 2014/15 2015/16 has already made a strong footing in the industry with many boastful accomplishments, including the As always, the CIL recognises its highly Future accolade of a “A-(lka)” rating by Fitch professional and skilled workforce as its In compliance with the regulations of Ratings Lanka - the first insurance main asset and continues its investment the Insurance Board of Sri Lanka, CIL is company under 05 years of operations to in people. The company provides training envisaged to be listed on the Colombo be thus rated. With top of the line Quality across the board to all its employees Stock Exchange in 2016. Looking Management Systems conforming to ISO to enhance their technical skills, not towards the future, we believe that CIL is standards, CIL guarantees its customers forgetting to harness their soft skills, better equipped to cater to the changing better, faster and cost-efficient service. crucial to deliver superior customer demographics of the country, moving Striving to service communities in need service, in line with the strategic vision of ahead of the competition with expansion through CSR projects, CIL believes in the Company and innovation, banking on its core creating positive social reform through strengths to come forth as a key player in our community welfare programmes. the industry. The company carried out various CSR projects across the country, serving communities in need
Continuing the development o ICT to scale with the expanding business requirements, a Claim Tracking System (CTS) was introduced for motor claim processing, with a view to streamline the process and offer an enhanced customer experience. During the year under review, a strategic alliance with leading mobile operator, Dialog Axiata was made to enable customers to pay their motor premiums via sms. In pursuance of its relentless goal of advancing technologically, the IT infrastructure was upgraded to facilitate the purchase of Marine and Travel insurance online
Distilleries Company of Sri Lanka PLC 40 Annual Report 2015/16 Financial Services Gross Turnover Financial Services Sector Profit Before Tax Financial Services Sector Melsta Regal Finance embarked on the (Rs. Mn.) (Rs. Mn.) third year of operation with a focus on penetrating the market with innovative 2,500 250 financial solutions. The Company 23 4 during the year focused on expanding 2,03 1
its geographical foot print across the 2,000 200 18 8 island by opening new branches in the major cities of Kiribathgoda, Kegalle and 1,500 1,44 1 150 Kuliyapitiya. Consequently, the Company had a reach of seven branches, which 1,000 100 facilitated the expansion of the business portfolio. Company’s portfolio stood at 500 50 Rs 4.8 Bn at year end, translating to strong increase in revenue, surpassing 0 0 industry growth levels by 40%. 2014/15 2015/16 2014/15 2015/16
Since its inception, Melsta Regal Finance differentiated itself with the widest transactions at any given time and add machinery, equipment and unparalleled product portfolio in the financial services value to the wide range of services know-how on treating vehicles based industry. The Company introduced a offered by the company. on the manufacturer’s specifications. novel product, which facilitated lease These specialised facilities have served clients opting for new vehicles with the Diversified Sector to create a distinctive niche for Melsta added advantage of trading their existing Collision Repair & Logistics Logistics. The newly-formed logistics vehicles. The Collision Repair Centre at Melsta operation continues to accrue gains for During the year, the Company placed Logistics performed well during the year Melsta Logistics. Melsta Logistics is now the necessary infrastructure to launch and enabled the Group to add value for focused on expanding this facility beyond a chip enabled VISA International Debit both internal and external clients. The the Group, while investing in superior card. This initiative would add value and Centre offers state-of-the-art technology, technology to enhance efficiency. complement the liability/savings products and would be a great impetus for the Company to expand its savings and fixed deposit base.
Future Outlook Melsta Regal Finance plans to expand its product range to encompass housing loans and micro leasing products. With the expansion of its geographical network this would be a platform on which a wider product portfolio could be launched.
Recognising the needs of the market the Company has developed an internet banking facility, which would enable the customers to view their account
41 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Management Discussion and Analysis
Textiles positioned amongst the Top BPO’s in Sri Customer Contact Solution, which During the year under review, Texpro Lanka. Honored with the ISO 2008-2001 offers a competitive edge in the market experienced a marginal drop in sales certification, the company is both locally with the ability to provide a flexible and volumes due to the drop in demand for and internationally recognised for its customised solution to its clients with a woven cotton fabrics coupled with stiff renowned brand portfolio and high end range of hosted services such as Contact competition from overseas suppliers, clientele, which attests its excellent value Centre Management, Messaging, Data offering highly competitive prices for dyed proposition and exemplary service levels. Entry and CRM solutions. Further, fabric. Bellvantage is the first to offer a unique The company with its wealth of service solution to eliminate the barriers in The textile industry is expecting a experience and know-how in the outsourcing by offering its clientele a remarkable improvement in market business, assures standards of high remote access to monitor their contact conditions in the next year with the quality with the expertise in managing center operation around the clock with reinstatement of GSP+ in Sri Lanka. multiple industries, highlighting the complete transparency of the operation. efficiency levels of a well experienced, Future Outlook motivated and dedicated team. Bellvantage has continued to grow over Texpro continues to convert more of its the years with a proven track record Despite the rapid and fierce competition fossil fuel consuming equipment, which of 98% of the clientele renewing their in the industry, Bellvantage has proven will reduce operating costs, enabling business contracts in outsourcing, given the confidence levels its customers have Texpro to become very competitive in its capabilities of maintaining exceptional placed in them, revealing a very positive pricing with regional players. Texpro will service across its esteemed clientele. business growth in comparison to the sustain its strategy to be an efficient, The company is optimistic in the potential last financial year. The company has also flexible niche market printer and dyer growth of the industry both locally & been successful in securing a significant and provide value added services to its internationally. client base within the banking sector for discerning customers. BPO, with market share of 30% out of Melsta Technologies Private Limited Power Generation the licensed Commercial & Specialised Melsta Technologies (Pvt) Ltd was Banks listed in Sri Lanka. Bellvantage is Bogo Power (Pvt) Ltd was formed to established with a vision to “Deliver the first to provide a holistic solution to set up a Mini Hydro Plant at Kirkoswald, technology solutions people can depend the media sector, where a hotline is being Bogowantalawa. Bogo Power (Pvt) on”. To this end, it is envisaged that published to the public. Ltd is registered with the Board of Melsta Technologies will play a strategic role and specialise in niche verticals Investment of Sri Lanka (BOI) and has With its continuous investments in the within the fast evolving ICT industry. obtained necessary approvals from the state of the art technology, Bellvantage During the short period of commercial Sustainable Energy Authority of Sri Lanka invested on new version of Aspect and the Public Utilities Commission of Sri Lanka. A Power Purchase Agreement has been entered into with the Ceylon Electricity Board for the sale of electricity generated for a period of 20 years. The project was fully commissioned in December 2011 with power capacity of 4 MW and average annual energy generation of 15.2 GWH. During the year 2015/2016, the project delivered 20.0 GWH, thus exceeding the projected value.
Business Process Outsourcing Bellvantage is a leading Business Process Outsourcing company and is
Distilleries Company of Sri Lanka PLC 42 Annual Report 2015/16 Media & Creative Services Gross Turnover Diversified Sector Profit Before Tax Diversified Sector (Rs. Mn.) (Rs. Mn.) Splendor has evolved from its humble beginnings as a media centric agency, Splendor is surely and steadily spreading 69 2 1,95 2 2000 1,90 3 700 its wings as a fully-fledged creative agency offering cutting edge 360 degree
600 55 0 marketing communication solutions. We 1500 500 have re-energised, re-vitalised and re- aligned our core competencies with fresh 400 1000 and innovative processes, systems and 300 most of all a new way of thinking from the ground up. Our core team is now 200 500 empowered by several industry veterans 100 who have joined the fray to encourage, guide and steer the company towards 0 0 2014/15 2015/16 2014/15 2015/16 greatness.
Our new journey is fueled by our passion for creativity and innovation. Without operations, Melsta Technologies has location and proximity to the airport which, we would be left behind in an obtained Oracle Gold Partner Status and lend it a unique advantage. Heritance ever changing marketplace. We strongly has an Oracle implementation practice in Negombo is expected to spearhead the believe in approaching work strategically place, with Oracle EBS implementation area’s tourism with its luxury signature to ensure an integrated marketing and projects currently in progress. The hospitality. communications offering, individually company has also secured several Oracle crafted and tuned to perfection. services contracts for Oracle E‐Business Future Outlook Suite and Oracle Technology. Our leisure arm is poised to unveil a Future Outlook signature hospitality experience as Splendor is enthusiastically exploring new Leisure denoted by the Heritance brand and frontiers, new opportunities and carving Sri Lanka’s tourism industry achieved we expect the new property to rapidly a much needed niche for its valued many milestones with tourist arrivals accelerate to the forefront of the portfolio of brands. With this in mind, we reaching 1.8 Mn. in 2015 and being country’s hospitality market. Overseas are expanding our services into areas strongly poised towards achieving its tour operators and industry partners have such as public relations, digital media, target of 2.2 Mn. tourists by 2016 and already expressed a keen interest in the online marketing, event management and 4.2 Mn. tourists by 2020. Investment in property and we are extremely bullish more to come. the industry has increased significantly, about the prospects. from tourism related infrastructure development to strategic promotional campaigns conducted by both the private sector and government have helped achieve record high arrivals. The Group’s leisure arm is also gearing up to position itself in this rapidly evolving scenario. Browns Beach Hotels PLC was re-launched as Heritance Negombo in April 2016, with 139 rooms offering a luxurious experience just 40 seconds away from Indian Ocean. Negombo’s rich culture and sandy beaches. strategic
43 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Sustainability Report
Touching Lives proud track record as one of the most fully automated plant in Seeduwa was sustainable organisations in the country. declared open in March 2015. Our Sustainability Motto in Action We understand that, globally, The DCSL Story Report Scope stakeholders at large are demanding History, Ownership and Legal We believe that we have a responsibility that companies they associate with Framework towards our stakeholders to ensure demonstrate non-financial metrics to The roots of DCSL hark back to 1913, that they are given a clear insight into define sustainability and sustainable when the Excise Department of Ceylon, how we have managed their business operations. Financial profitability as the which was originally established as an and how we intend to work in the sole criteria of a company’s success is an enforcement authority, was mandated future. This, therefore, is our honest outdated concept and outrightly rejected to distribute and sell liquor in Sri Lanka effort in sustainability reporting. While by most right-thinking stakeholders and and also began the distillation and we do know that this report is work in the organisations they support. More manufacture of liquor products. Much progress and requires to be developed importantly, being an environmentally, later, in 1974, the State Distilleries comprehensively, this attempt helps economic and socially sustainable Corporation was incorporated by us to put our results, both positive organisation is helping companies earn statute to take over this role. In 1989, and negative, down on paper and corporate respect and drive customer the state agency was converted to a work on plans that would ensure that loyalty, not to mention earning respect limited liability company and DCSL took our presence as a corporate leader from peers and industry. In an era of on the mantle of a pioneer in distillation will surely be advantageous to all our growing global competition, climate and is now positioned as the largest stakeholders. The report presents a change and diminishing resources, distiller in the country. DCSL is quoted balanced analysis of our sustainability companies that put sustainability as their on the Colombo Bourse since 1992 performance strategy in relation to foremost goal are winning the race. and is a modernised entity, working on issues that are relevant and material to As one of the oldest, diversified, blue a sophisticated knowledge base built the Company and to our stakeholders, chip conglomerates in existence in Sri on technology, experience, skill and while complementing our ongoing Lanka, we are living proof of continuous acumen. Its large investments in R & D, engagement with stakeholders. improvement and sustainable business infrastructure, plants and machinery and This report focuses on key practices. While we celebrate over-a- the diversification into key economic developments and includes only the century of existence in the year 2015, sectors in the country, places DCSL most pertinent indicators in order to we consider this an opportunity to today unequivocally as an industry provide stakeholders with an integrated strengthen our conceptions of business captain and one of Sri Lanka’s blue chip and succinct view of our sustainability practices that are environmentally conglomerates. DCSL’s business areas performance. Unless otherwise and socially sustainable, while also are diverse and penetrative, ranging from indicated, facts and figures refer to being financially sustainable, the key hospitality to telecommunication, BPO to the DCSL Group. Sustainability in our requirement of any commercial entity textiles, plantations to hydropower and business is built on natural capital, In our journey over the decades within insurance to finance and its largest and social capital and economic capital, the corporate arena of Sri Lanka, an most influential business contributor – all of which must be taken together overarching tenet has always been to beverages, encompassing alcohol. rather than in isolation for a true picture ensure that our decisions, actions and of sustainability. It is these capital impacts are sustainable and positive at Significant Events during the segments that run through as themes all times. We are extremely cognisant Reporting Period of this report. that as a corporate steward involved in The global rating agency, Fitch, numerous business and industry areas, reaffirmed DCSL’s National Long-term Materiality Rating of AAA (lka) with a Stable outlook. we must set an example to others, while Having embarked on this sustainability This is the best and highest entity credit making our stakeholders a part of our reporting process, we must confess that rating for a corporate in Sri Lanka. journey of progress. In this Sustainability in documenting the necessary areas, we Today, DCSL remains one of the most Report, we set out the measures we may not yet have a clear idea or focus preferred corporate among bankers, take to ensure that sustainability is on the extent of materiality involved. overseas lenders, suppliers and stock infused along the length and breadth However, we have focused on earmarked analysts. In fact, consequent to the of our value chain. Simultaneously, we areas and platforms that have formed rating announcement, DCSL was able continue to invest time and resources in the foundation for our sustainability to significantly reduce its interest costs. understanding how we can enhance our programme and hence, we have used DCSL’s ultra modern state-of-the-art
Distilleries Company of Sri Lanka PLC 44 Annual Report 2015/16 those as the guideline to report on the Governance, Commitments and which require Board intervention. The arising issues. We have also been able Engagement Board sub committees are a vital conduit to identify shortcomings and gaps in in identifying and managing economic, Board of Directors data gathering, which is now being environmental and social performance, Collectively, the DCSL Board has documented and acted upon to ensure including relevant risks and opportunities, significant corporate acumen, skill, that we bridge those gaps in future. We as well as compliance. Ongoing Board knowledge and experience aided by initially garnered the information from education is an imperative at DCSL to astute and knowledgeable support and all our business sectors on a common ensure that Directors remain abreast of information from senior management questionnaire and began mapping the all applicable legislation and regulations, and external specialists when the need categories that were most common. changes to rules, standards and codes, arises to be sufficiently informed and Once charted, the categories were as well as relevant sector developments, be independent. Board governance placed in perspective and we were able which could potentially impact the ensures that relevant related party to consider the materiality of our findings, Group and its operations. During the transactions are reviewed by Related positioning them in priority order and only year, all Board Members and Committee Party Transactions Review Committee focus on those that our stakeholders felt Members were reviewed for compliance and Group discloses related party were crucial or important. with the Colombo Stock Exchange transactions periodically and if any requirements for a listed company. Reporting Period Director has a direct or leading interest in any matter being discussed, they will This report supports the DCSL The DCSL Sustainability Approach abstain from opining, discussing and Group’s Annual Report and presents Vision voting, all of which could influence the our sustainability performance for outcome. This avoids conflict of interest To be an industry leader who will practice the year ended 31 March 2016. It and ensures independence of the Board. the tenets of a ‘green company’ and be covers company activities, including DCSL has established a governance upheld as a true proponent of sustainable the subsidiaries’ reporting period (for structure that remains aligned to the development. example, fiscal/calendar year) for laws of the land and ensures compliance information provided 01 April 2015 to Mission to various regulatory mandates. The 31 March 2016. Data measurement To truly ‘walk the talk’ in becoming green governance structure therefore includes techniques and the bases of calculations and espouse upward momentum for committees responsible for specific tasks applied for compilation and other people, planet and profit and setting strategy and future direction information in the report is disclosed for the Group. The Board structure and wherever applicable. We invite feedback Philosophy committees are detailed on page 56 in from our stakeholders on this report and • Infusing innovation, value addition, this report. DCSL’s Board comprises the way we approach our sustainability quality and service excellence to give Seven Directors (Three Executive, Three priorities in order to continue improving our customers the best Independent Non-Executive, One Non- our performance, transparency and Independent Non Executive), who meet accountability practices. to map strategy and for decision making
DCSL Children’s Christmas Party 2015 DCSL Christmas Party 2015
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Sustainability Report
• Create a knowledge gaining culture • We will cascade our Sustainability discontent, political and social unrest where our team grows and develops Policy among our valued business or even natural disasters. These can be as individuals, while honing the partners, encouraging them and termed costly, have negative publicity, entrepreneurial spark to contribute assisting them to adopt sound threaten operating frameworks and towards macro development sustainable management practices also prompt unforeseen expenditure. Reputational damage too can far exceed • Continue giving our shareholders • We intend to review and annually the immediate cost impacts. While we the confidence and trust that we will report and to continually strive seek to proactively reduce and manage always do what’s best, thus ensuring towards improving our sustainable these risks, challenges have never consistent growth in shareholder performance been a deterrent for us at DCSL; rather, value and returns they have been a means of directing At DCSL, we are committed to promoting us towards opportunity and improving • Make our planet healthy and green sustainability. We remain extremely business performance over time. These by contributing social dividends that concerned for the environment and opportunities have driven us to enhance will translate towards sustainable for promoting a broader sustainability business growth, while ensuring that we development for society and the agenda, both of which are integral remain within compliance benchmarks, environment to our professional activities and the while ensuring that our stakeholders are management of the organisation. We empowered and remain inclusive to our • Ensure that everything we do aim to follow and to promote good end goal. Over the year, we identified will always keep us ahead sustainability practice to reduce the some challenges and risks that eventually and at the helm, collating the negative environmental impacts of all our saw an opportunity emerge, and which, facets of economic, social and activities and to help our stakeholders to through the inherent pragmatic and environmental features into our join in this journey that will surely benefit astute business acumen possessed business dimensions. We integrate our future generations. this three-pronged approach to within DCSL, was transformed and sustainability, so that the journey with The Framework included into the strategic way forward of our stakeholders will remain one in The DCSL Sustainability Framework, the Group. which we grow together, forging and which incorporates our Sustainability Stakeholder Engagement strengthening long-term relationships. Philosophy, Policy and Principles, We are extremely committed to engaging articulates our strategic commitment to Sustainability Policy all of our stakeholders, both internally sustainable development and remains and externally, to become the most Our Sustainability Policy is based upon integral to risk management. This sustainable, responsible company the following principles: framework assists our stakeholders in we can possibly be. By listening imbuing a similar sustainability approach, • We will continue to comply with and to, partnering with and considering promotes sound environmental exceed wherever practicable, all the perspectives of our associates, and social practices, encourages applicable and related legislation, customers, shareholders, academic transparency and accountability, and regulations and codes of practice leaders, government, value business contributes to positive development partners and sometimes, even our • We will integrate the principles and impacts. We ensure that this framework competitors, we can truly ensure that tenets of sustainability into all our reflects good practice for sustainability quantifiable and qualitative returns are business decisions and risk mitigation, keeping abreast with assured. Stakeholder engagement trends that bring up challenging issues, is a crucial element to sustainable • We will strive to minimise any which remain at the core to managing development as it is this engagement negative impacts that may ensue a sustainable business. These include process that prompts the two-way while engaging in our day to day supply chain management, resource dialogue and communication process activities efficiency, climate change and human which eventually aligns the strong rights. • We will integrate a sustainability mind- relationships among our stakeholders set among our team, making them Key Challenges and Opportunities and forms the foundation to our fully aware of our sustainability policy Risks and challenges go hand in sustainability journey. Having identified and empower them with a sense hand in the business of running an our stakeholder groups, as given of ownership and commitment to organisation, whether the risk may be below, we engage with them at various implement, practice and improve it from environmental problems, social forums related to their interests and expectations, in an effort to adapt to
Distilleries Company of Sri Lanka PLC 46 Annual Report 2015/16 changing needs and issues, which forums, opinion surveys, internal be consistent and presented in a continue to evolve. As we pursue newsletters and an open door policy. standardised approach, therefore, it is our corporate sustainability goals, imperative that disclosures are succinct, we intend to further strengthen Government/Regulators clear, and truthful and hold fast to the these relationships. Together, we are Regular meetings with relevant underlying ethos of a principled ethical establishing transparency and enhancing government authorities and regulators to well governed business entity, which is our relevancy with the customers and discuss impending legal mandates are what DCSL espouses to be. communities we serve. We have created held to find solutions where necessary. more formal channels for interacting with This may involve discussions on Economic Disclosures stakeholders both to learn from their challenges, risks, strategy development, The company ensures that both positive expertise and to provide a forum for them execution of such laws and regulations and negative information about itself to provide us with feedback. and best practice permeation. is conveyed as fairly as possible to all stakeholders, especially shareholders. Key Stakeholders Suppliers DCSL ensures its shareholders and other Shareholders Regularly engage with suppliers to interested parties are given accurate Quarterly and annual financial reporting, promote and institute sustainability information to help them make an annual meeting of shareholders, periodic solutions informed choice when investing. Our investors have proof of our consistent individualised mailings and conference Disclosures calls between senior management performance in our financials and and investors and/ or analysts when The purpose of our sustainability share performance, as well as our necessary, serve to deepen shareholder reporting is to create greater astute business strategies including engagement in an ongoing manner transparency and accountability and restructuring and acquisitions. Given through the financial year. to allow for better informed and more our status as an industry leader, we robust decision-making as it is becoming also remain a strong partner in ensuring Customers more important than ever to manage that the country meets its vision and Listening and engaging with customers both positive and negative impacts of objectives, generating direct and on a one-to-one basis and through other our business activities. Our Customers indirect employment and thus improving channels such as customer satisfaction are increasingly developing an ethical lifestyles, investing in infrastructure, surveys has helped us understand them conscience, using sustainability upping quality and standards within the better. information to identify their chosen industry and thus setting benchmarks brands. Customers want transparency, to develop these industries and Employees clarity and accessibility to information imbuing best practices. We practice an We adopt numerous routes, such as and disclosures on social, environmental environment of zero tolerance on bribery regular communications and engagement and economic performance. Needless and corruption and eschew ethically on one to one basis, monthly or quarterly to say, this information needs to unsound or corrupt practices among any
DCSL Quiz 2016 - Winners Northern Quiz Wits DCSL Sports Day
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Sustainability Report
stakeholder segment. In this context, This would include the use of science, terminating its business relationship with we have had no incidences of bribery technology, experience and skill to the offender. and corruption, unethical practices or determine the acceptability of not only anti-competitive behaviour stemming the ingredients but also permitted Environmental Disclosure from our Group brought to our notice. levels of these ingredients. Using the We have never knowingly harmed the Our business dealings remain transparent available scientific evidence, these expert environment through any process that and sincere in action, while accountability opinions have repeatedly concluded we have engaged in. We ensure that remains a top priority. We remain strictly that our products, used responsibly by in all our processes and systems, we compliant with all mandatory and adults in the case of alcohol and spirits, implement as many environmentally regulatory mandates that are prevalent in do not increase health risks. There’s friendly initiatives as possible as is seen our business even though the regulatory also a cohesive group that monitors in the waste water treatment, energy environment in some of our businesses legislation pertinent to the product and management, recycling initiatives, may be seen as unfair and unjust. individual ingredients which helps us in decrease in emissions and increase in We do not make contributions to political our decision making. In the beverages forest cover that we have strategically parties; no member of the Board of industry, we work in a ‘dark’ market embarked upon. We also constantly Directors is actively involved or an office where all advertising and promotions engage our valued business partners, bearer of any political party in Sri Lanka. are prohibited by law. We remain very suppliers and wherever possible our cognisant that our product in this customers, to permeate environmental Product Disclosure industry is to be sold and consumed best practices among them. As a company engaged in the business by adults and our responsibility is to of alcoholic beverages, we ensure that always ensure that this is the overarching Human Rights and HR Practice our products, if used in a responsible tenet of our marketing initiatives. We Disclosures manner, and by the target age groups communicate all product information The DCSL Group espouses and it is meant to be used by, will not have comprehensively either through the commits itself as an equal opportunity an ill-effect or increase risks to health. labeling or through product information employer, stringently applying a slew The processes that cover our supply available on numerous channels. We do of non-discriminatory policies vis a vis chain including the sourcing and use of not condone or agree to sell any of our gender, age, religion, ethnicity, social, ingredients, resources and raw materials products that are meant to be consumed cultural and economic backgrounds are aligned to stringent quality standards by an adult, to any underage consumer on the foundation of meritocracy. We that are initially tested repeatedly before under any circumstances. This is very unwaveringly uphold and support the product manufacture. We work with strictly adhered to, not only within the tenets mandated by the International experts and specialists in the field immediate Company and the team, Labour Organisation and other prevalent both locally and internationally, who but is a message that is cascaded very regulatory bodies pertaining to human may also conduct their independent emphatically to our entire value chain and rights and child labour. We adhere to a analysis and research, which assists retailers. Any deviation from this, is dealt strict policy of ‘zero tolerance to child us in manufacturing our final product. with severely and may result in DCSL labour’, a mandate that is permeated to
Sportsman of The DCSL Sports 2015 Overall Champions - DCSL Sports 2015 - Northern Warriors
Distilleries Company of Sri Lanka PLC 48 Annual Report 2015/16 our valued business partners including • Setting an example of ethical country’s dependence on fossil fuels and retailers and the supply chain. leadership through a well governed thereby reduce the expenditure of foreign accountable entity exchange, we embarked on a mini-hydro Community Disclosure power project. The Kirkoswald Mini- Our philosophy is to partner the • Creating benchmarks for industry. Hydro Power Project, under the umbrella community in its sustainable Sustainability Performance of Bogo Power (Pvt) Limited and located development journey, which in turn within Madulsima Plantation’s land, has gains us considerable advantage. Environmental Impact gained approval from the Sustainable We are inextricably entwined with Our business interests are wide-ranging Energy Authority of Sri Lanka, generating our communities and we intend to and diverse, ranging from manufacturing, an average of 20.0 GwH of power to ensure that our presence within these plantations, telecommunication, financial the national grid. The water required communities will benefit them and us. services, logistics, textiles, hydro power, for the hydropower project is diverted This year, our social focus was based to business process outsourcing (BPO) and returned to the river within a short on ‘Education & Training and Health, and media. These, in different dimensions distance from the point of diversion. Sanitation & Housing’ and by sustaining and levels, do impact the environment. The channel, weir and power house are social initiatives in these key areas of The DCSL Group, having conformed and small structures, which have minimum interest, we believe that we can empower remain strictly compliant with the Central impact on the natural eco-system and these communities. Environmental Authority standards, the communities around the area. The is additionally subjected to regular companies of the DCSL Group have all Environmental audits to ensure full transparency. This initiated in-house modes of energy, waste • Better waste and energy ensures that we remain conscious of the and water management, as part of the management in our manufacturing impacts our actions would have on the Group’s holistic vision of environmental processes environment and have through the years, impact mitigation. Continental Insurance worked on improving our processes and (CILL) has commenced emphatically • Reducing our carbon footprint by systems that would eventually help us to working on a better waste and energy introducing more ‘green’ initiatives reduce the negative impact we have on management practices in its journey the environment, while minimising climate • Reducing dependency on fossil fuels with a view to become a carbon change. neutral company. As a way forward, • Enhancing forest cover and food the company places the preservation security through planting of hard Energy, Waste & Water of nature as a top priority taking the wood and fruit trees Management initiative to give back to the environment Energy and waste management are to sustain our planet’s greenery and Sustainability Focus crucial features in our environmental fertility. Continental Insurance has tied Social management focus, especially in up with Neptune Recyclers since 2011 • Enhancing entrepreneurial skills our manufacturing processes. A for the recycling of all waste papers. The among estate youth sophisticated distilling system using Company experienced a saving of 4 fully French technology which is totally grown trees and total of 7,309 litres of • Assisting educational initiatives from environmentally friendly embeds energy water, while electricity usage decreased childcare to university level students saving features into our plants, as low by 920 kwh and 404 litres of oil was also evaporation during distillation aids the saved which meant lesser usage of fossil • Creating awareness of preventable saving of energy. This technology has fuels during the year 2015, In addition, diseases among lesser affluent also helped in decreasing emission 1 cubic metre of landfill were conserved communities levels. Waste water treatment plants and and Green House Gas Emission an environmentally friendly zero-harm was reduced by 236 kg’s of Carbon Economic effluent management system ensures Environment. While creating economic • Ensuring that shareholder wealth is that waste, water and effluents are all value within the organisation, CILL strives optimised without compromising on managed well within the compliance to develop social value as a responsible standards or principles norms. While the waste water is treated corporate citizen. Being a benefactor to to neutralise acidity and released for • Permeating best practices to valued the society and communities in which further use once deemed 100% safe, the business partners it operates, CILL believes in giving methane which is discharged during the something back to different segments purification process is used for factory of the society especially to those who consumption. In our bid to reduce the are under privileged and isolated in
49 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Sustainability Report
the society. Hence, CILL renewed its waste paper, which resulted in the saving green ethos. Further augmenting this sponsorship as the Official Insurance of four trees for the year, which though green ethos, Balangoda Plantations Partner for the second consecutive may be considerably small, certainly lays embarked on a re-forestation drive, year to facilitate the safe transport of the footprint for the Company to increase which, while increasing our forest cover, cancer patients to the Karapitiya National its recycling initiatives and reduce the also significantly impacted the challenges Hospital. Going further, CILL organised number of trees even further. the country will face in the future of food a blood donation campaign in Head security. In addition, the estates began Office and a Health Care Camp. The Sustainable Agriculture implementing a composting programme, Collision Repair Centre, which comes We are proud to report that the which converted non-usable materials under Melsta Logistics Limited, remains Balangoda Plantations has been into compost, deemed for use in the very compliant with environmental accredited by Rain Forest Alliance as three hectares that are being replanted regulations and in fact, has ensured that Rain Forest Alliance Certified Plantation. with tea. its entire facility is eco-friendly. Waste This move will be a new milestone of disposal is managed efficiently, with Balangoda Plantations in its commitment Organic Best Practices disposable waste being recycled and towards adding value and a greater Texpro Industries, (a specialty dye and organic waste converted to compost, emphasis on environmental management print business of woven fabric) as a which is used to nurture vegetation within and community development. This backward integration to the apparel the premises. In addition, a waste water exercise is also a testament to our industry, stringently conforms to the treatment plant maximised the usage of continued commitment in stepping Global Organic Textile Standard (GOTS), water. Melsta Logistics also took on the into the growing market of enlightened which ensures that the end product responsibility of managing the Group’s consumers who make conscious remains true to the tenets of an organic fleet of vehicles to ensure that measures choices about supporting sustainable product. GOTS is the worldwide leading are taken to monitor and control emission agricultural practices through their textile processing standard for organic levels and usage of fossil fuels and purchases and would be a baseline fibre and includes ecological and thus reduce its carbon footprint. The to benchmark us with players in the social criteria, backed by independent fact that Texpro Industries is certified Industry with clear goals and targets to certification pertaining to the entire with a Global Organic Textile Standard be achieved. As a part of its pledge to textile supply chain. This standard gives ensures that the entire value chain must continually improve environmental and the product international recognition conform to globally accepted waste social sustainability, many initiatives were in organic textile manufacture, from management practices in addition to its launched by Balangoda Plantations harvesting of raw materials, through sourcing and manufacturing processes. to protect and conserve the natural environmentally and socially responsible Texpro is subjected to continuous environment through the prevention of manufacturing, until the labeling process, audits, which keeps compliance levels pollution, efficient utilisation of resources, providing a credible assurance to the end above the required norm. At present, effective waste management practices, consumer. Texpro is using biomass thermic fluid promotion of environmental awareness heaters instead of fossil fuel consuming and sensitivity amongst the plantation Social: Diversity in Our Team equipment, as a result the Company community. Balangoda Plantations Our longevity and culture of achievement managed to reduce the energy cost by always espoused sustainable agricultural is rooted in the motivation and mind- 30%. standards and good manufacturing set of our people, who are committed practices. The company ensured that and dedicated towards achieving Recycling nearly all its manufacturing facilities have greater heights of performance and Packaging gained emphasis to mitigate gained ISO and HACCP certifications, raising the benchmark. Given that environmental impact with over 50% of which ensured that it remained within the DCSL Group has grown into a the bottles used for alcohol and spirits the stringent guidelines required for diversified conglomerate encompassing being recycled and crates used for conducting business, manufacturing a number of diverse industries and transport, being reused. Cellophane, processes and systems. In order to yet is unequivocally positioned with a glass, aluminium and plastic generated retain these standard certifications, the leadership status, evidences that our by the factory were outsourced to an facilities are also continuously subjected team is a winning one. The dynamism, external party for reuse, while used to audits. The larger result however is motivation and ‘overzealous’ attitude they labels were transformed into pulp. This that with the infusion of best practices always espouse has enabled this Group also reduced the number of trees being in agriculture, we are not only enhancing to take on challenges, some deemed felled. Continental Insurance imbued the our end product, but also ensuring insurmountable and win against the odds 3R concept and engaged in recycling of that our practices are governed by a
Distilleries Company of Sri Lanka PLC 50 Annual Report 2015/16 HR Philosophy best practices in human resource ,crucial to deliver a better customer • To provide and promote an management as well as the development service, in line with the strategic vision encouraging and professional of human resource. As a growing of the Company. Bellvantage focuses on working environment for our team. business, Continental Insurance is in developing employees with continuous need of regular fresh blood from the improvement strategies. The specialised • Believe that the prosperity of our outside, while growing talent from within. Trainers and quality evaluators give business depends on successfully Hence, Continental Insurance ensures a them continuous support and guidance. developing an integrated group of healthy mix of both. As an organisation In addition to the in-house trainings, motivated and innovative employees. is nothing more than the collective the company initiated outward bound Hence we facilitate positive employee capacity of its people to create value, training programs with team building relations and inspire employees by organisational culture is an important activities. At Balangoda Plantations, offering opportunities for challenging element in any organisation’s make up conducted a series of training sessions work, personal development and and success. Therefore, at Continental on quality manufacture and agricultural growth. Insurance new recruitment is based on practices, team work, career growth alignment with the Company’s internal and development, health and safety • Committed to hire, develop and retain culture, in addition to knowledge, skills instructions. the most talented people in order to and attitudes required for the role. achieve a committed pool of talent. Recognition & Staff Well-Being Training & Development The DCSL HR policy is based on the Recruitment & Retention Training and development forms the axis belief that a satisfied employee is a A range of processes have been to the sustainability of our business and motivated employee who will contribute instilled within the Group to ensure into this we have instilled a knowledge towards achieving company goals that recruitment is non-discriminatory, gaining culture, which enables individuals voluntarily, while being more productive. unbiased and driven by meritocracy. to attain their personal goals while We have continuously infused numerous In addition, in a bid to streamline our working towards the company’s rewards and remuneration schemes, recruitment processes, a recruitment aspirations. Melstacorp is facilitating all while adding welfare initiatives that would requisition form was introduced, which the training programmes for the Group. add value to our employees to better is the base upon which recruitment is The training programmes span on the their lifestyles. Given below briefly are effected and a comprehensive interview job, off the job, external, hands on some of the more important initiatives evaluation form was brought in, to and internal programmes, all designed currently in place: streamline the interview process from to enhance knowledge, update skills initial screening to final interview stage. and create an empowered workforce. DCSL The Group companies follow HR best Continental Insurance, provides training • Continuous remuneration reviews and practices ensuring consistency in HR across the board to all its employees increases according to predetermined Policy approach and fair playing field to enhance their technical skills, not scales, which could also be tied to for potential employees. For instance, forgetting to harness their soft skills Continental Insurance strives to follow
DCSL Cricket Champions 2016 - Dakshina Shoorayo Sportswoman of The DCSL Sports 2015
51 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Sustainability Report
performance incentives and bonus Occupational Health & Safety units for estate families. These new, scheme. As a diversified conglomerate with modern housing units are built to high interests in wide-ranging economic construction standards, enabling hygienic • A range of insurance policies are activities including manufacturing, it is and healthy life styles for plantation in effect including orkmen’sW imperative that we make our workplaces families with the benefits of essential Compensation and Personal Accident safe. Occupational Health and Safety amenities and conducted a re-roofing Insurance. DCSL PLC offers all remains a high priority for the DCSL programme for 57 housing units. Further employees this 24 hour insurance Group and we have taken numerous Balangoda Plantations invested on a new cover which includes a natural death steps to ensure, to the best of our ability, water supply project in Matwagalla Estate cover. that the workplace is safe, hygienic Health Care and Safety • The DCSL Quiz Competition 2015/16 and not harmful to our team’s health. Balangoda Plantation manages a number was held with the enthusiastic Our manufacturing processes conform of child care centres and pre-schools participation of the regions and to accepted industry guidelines and within the plantations. The child care divisions at the Colombo Office, practices in safety management and centres are supported by full-time Periceyl and Melstacorp. Over 100 we have set for ourselves a target of trained teachers and nutritional feeding employees participated in the quiz ‘a zero accident workplace’. By being programmes. Regular child immunisation programme. proactive, conscious and focused, we have inculcated a conscience and culture programmes are also conducted at the • DCSL holds annual staff get-together, of prevention, while team members have child care centres, ensuring access to annual cricket tournament, sports been trained to remain alert to any gaps proper child immunisation for estate days with indoor and outdoor sports and hazards that may arise. children. Further, awareness programmes events and children’s parties to build on improving nutritional status of women team spirit and facilitate fun and Giving back to the Community and children, dental clinics, awareness friendships Balangoda Plantation contributes programmes on prevention and detection towards community development by of cancer, disaster management, Periceyl providing financial support to workers rehearsals on landslide situations, are • A continuous chain of performance including short term loans, housing some of the many activities carried out to related incentives including social loans and distress assistance, facilitating create a healthy community. activities, training initiatives and purchase of goods and equipment on Economic Contribution excursions/ trips are extended to high easy payment schemes, death benefit achievers. scheme, and so on, through the Estate Today, although our core business is Worker Housing Cooperatives, which beverages, our scope of business is Continental Insurance are actively functioning on Balangoda diverse transcending different spheres • The Continental Insurance HR policy Plantation. across the national economy. Over aligns remuneration with employee the years, we have made inroads in performance and the reward strategy Health, Housing and Sanitation telecommunication, plantations, textiles, not only focuses on monetary Balangoda Plantations has been actively BPO, logistics, leisure, financial services, rewards, which will have a short involved in uplifting the lifestyles of its insurance, media and hydro-power, term impact on employee behaviour, estate community by facilitating new committing ourselves to add economic but also timely appreciation and housing and better working conditions. value to all these industry sectors, while recognition of employees. All In addition, numerous awareness being responsible for our actions and employees and their immediate family programmes were undertaken towards the decisions we make. Therefore, as a members are covered under the staff improving the socio economic growth leading corporate, we will strive towards medical scheme which will ease the and health and nutritional status, and building continuous sustainable value, financial burden when hospitalisation living environment, youth empowerment generating returns for our shareholders, is required. and community capacity building, of the while ensuring that we consciously resident plantation population. do the right thing not only for our Melsta Logistics Limited stakeholders, but for the environment • The Melsta Logistics team is covered Housing Facilities as well. It is this holistic outlook that under a comprehensive medical During the current year too, Balangoda allows us to work proactively with all our scheme and other facilities include Plantations continued its efforts at stakeholders, creating shareholder wealth cafeteria, resting areas and lockers. upgrading living standards of plantation and social value, inspiring our team and communities by building 10 housing
Distilleries Company of Sri Lanka PLC 52 Annual Report 2015/16 permeating best practices among our of operations through knowledge worked on a platform of mutual benefit. suppliers. sharing, innovative solutions and the Just as we position ourselves as a latest technologies. Our companies responsible industry leader, we strongly Given our leadership status in the embrace international best practices, believe that we must permeate the beverages industry, the company standards and quality certifications best practices we have within our has been subjected to numerous that have contributed towards setting business, the standards and integrity actions, diktats and mandates that has new standards within the industries and compliance initiatives to our entire continually stifled the legal alcohol and we operate in. However, we have supply chain. This in effect cascades spirits industry, which have only served also shared our knowledge, skills and to quality, productivity and standards to allow the illegal trade to flourish. We expertise with other corporates and overall being improved. DCSL has a believe that this situation will eventually like-minded individuals, as we believe widespread and diverse supply chain take a toll on the nation’s health, both knowledge sharing among the industry is spanning the full range of businesses economically and socially. We are by far vital for sustained growth and ultimately from micro entrepreneurs, to SMEs to one of the largest contributors to the national development. large corporates. We also emphasise national treasury, having paid Rs. 60 among our supply chain and valued Bn at Group level this year. It is these Investor Relations business partners the need to implement funds that are eventually used by the DCSL continued to attract high level and promote business practices that state for meeting its development goals. interest from foreign investors during not only encourage a safe workplace, Therefore, we are proud to be a major the current financial year. We have but also request them ‘to do right’ by contributor to national development, as conducted many meetings with current the environment, their employees and a legal, law abiding corporate citizen and prospective shareholders during communities. In other words, we want with future potential to contribute toward the year. Such interest in the Company them to, in turn, be responsible entities the nation’s development agenda. The is symptomatic of positive external and individuals. Suppliers and business diversification of the DCSL Group into perceptions regarding the Company’s partners, once among the DCSL Group, various industries has benefited the future potential towards growth in are provided with further support national economy through investments shareholder value. and guidance, enabling improvement in human capital and on infrastructure, against these principles as the business employment opportunities, uplifting Supplier Engagement relationship develops. Our suppliers are industry standards and wider consumer Forging strong supplier relationships selected on pre-determined criteria that choices. Our infrastructure investments offers a comprehensive way for DCSL would position them and align them into plant and machinery conform to to assess and streamline the processes to our standards and principles. This stringent standards that naturally add between our organisation and our conformance goes beyond compliance value to the overall economy. Similarly, suppliers for an effective partnership. In and would by no means involve us in all companies in the Group conform reality, suppliers are people as well and engaging or aiding and abetting illegal or to numerous and relevant international we believe in emotionally engaging with hazardous and dangerous activities. We standards and have gained certifications our suppliers so that they work harder want our suppliers to be partners with us, of compliance, which means that the for us and help us cover potential risk in joining us in our journey that will truly entire industry is being improved through areas. Whatever the size or category be one of mutual respect, understanding the setting of higher benchmarks. of supplier, the DCSL’s Supplier Policy and trust. Currently, the DCSL Group provides ensures a level playing field and equal employment to 12,692 people while opportunities for all our suppliers. We We Seek Suppliers into Our Value Chain indirectly granting employment to many have procedures in place to ensure who: others. The benefits, remuneration, responsible behaviour towards all our • will proactively support our efforts rewards and welfare gained by our suppliers, while committing our suppliers to combat illegal and illicit trade employees also ensures that their families towards reciprocity in responsible practices gain an improvement in their lifestyles, behaviour towards the Company. while additional education and training This ensures our stringent quality and • comply with laws and regulations adds to elevating knowledge levels standards are understood and met by pertaining to conducting business amongst our team all our suppliers. We believe strongly in and environmental performance, positioning our supplier philosophy on occupational health and safety, Industry Leadership good corporate conduct, sourcing and do not support or condone child DCSL Group has contributed to industry producing responsible quality products labour, slavery, harassment, corporal development in different spheres and influencing a win-win relationship
53 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Sustainability Report
punishment or discrimination of quality. Therefore, we are vociferous in Awards & Recognitions gender or any other denominator numerous forums to curb and annihilate • DCSL was ranked No. 05 in Business the illicit and illegal liquor trade. We work Today’s ‘Top Twenty Five’ edition. • are cognisant of human rights and on education and awareness initiatives This was the 17th consecutive year the rights of workers among various forums to take the DCSL was listed among corporate message of the hazards and dangers • do not engage in any fraudulent or heavy weights in the ranking. posed to the eventual consumer in corrupt practices drinking illicit brew or illegal liquor, given • DCSL was accredited with Certificate • provide their teams with a safe and that the latter too has no guarantee of Compliance in the 51st Annual healthy work environment of quality. Our subsidiary companies Report Competition organised by CA have continued to gain the trust and Sri Lanka in December 2015 • actively engage to empower the loyalty of their customers through their communities in which they operate customer centric policies, innovative Long term Sustainability Goals solutions and technology applications 1. Be known as the preferred employer Customer Interaction for increased cost savings and higher having the ability to attract and retain We believe that nurturing our customers customer value creation. Lanka Bell, the talented people, inducting them is an ongoing dialogue and not a one-off Group’s telecommunications subsidiary, in a knowledge-based corporate event. Nurturing an ongoing and genuine commenced its 4G LTE network second culture, while assuring them of relationship with customers will have a stage during the financial year in line with career enhancement in a responsible major impact on the way they perceive its planned schedule, becoming one of company they will be proud to be a our brand but also serve to strengthen the four operators in the country to have part of. our operations through focused a 4G-LTE network. The introduction of customer feedback. We engage our this latest technology is to offer world 2. Retain market leadership by ensuring customers in numerous ways, nurturing class data solutions to customers, while that we work on high quality and strengthening relationships to ensure providing access to greater bandwidth sustainable competitive advantages strong loyalty to brand and product. From capacity at faster speeds. Continental to infuse trust and loyalty among face to face ad hoc conversations, to Insurance provides comprehensive our customer base by evolving the conducting customer surveys, to formal policies to large hotel chains operating business to be ahead of customer gatherings and informal events, we are luxury properties in Sri Lanka and the expectations, which in turn will constantly engaged with our consumer. Maldives. CILL operates an Android deliver qualitative and quantitative It is this feedback and varied dialogue mobile application to all technical sustainable returns. and communication channels we have assessors to facilitate efficiency in 3. Never lose sight of the tenets created that have assuredly enabled us the processing of claims. In addition, of corporate stewardship; instill to charter our future plans. Our beverage payments of premiums online were also governance and regulatory best business is fundamentally about offering implemented in order to cater to the practices, while demonstrating our adult consumers a range of high quality growing market of online users, thereby commitment to being an ethical, products and brands with the necessary giving customers an enhanced service transparent, accountable Group of knowledge to make informed choices. with greater convenience and ease. companies. We do not in any way coerce or inveigle During its short period of operations, our customers to stay with us and our Melsta Regal Finance Ltd (MRF) 4. Create economic and social value portfolio of products by any illegal or introduced a wide spectrum of financial among the communities we work unscrupulous means. Moreover, though solutions in leasing, hire purchase, with, supporting both the rural and engaged in a legal industry forced factoring, trade finance, corporate loans, urban economies and key industries to work in a dark market, prohibitive personal loans and savings products for that are earmarked to be drivers in excise duties and constant taxation, our a client portfolio ranging from corporates national development. products have remained at the helm, to SMEs to consumers. The key focus which has thus driven us to continually of the current financial year was market 5. Be a Green Ideologue; an advocate exceed our customers’ demands. We expansion and product development. who will address environmental do believe it is our responsibility to The geographical footprint of MRF was issues and ‘change’ the direction ensure that consuming alcohol must expanded to the key cities of Kurunegala, of climate change, walking the talk be done responsibly, knowing that Matara, Kandy, Negombo, Kegalle, to spread the need to reduce our the product is manufactured to high Kiribathgoda and Divulapitiya. carbon footprint and ensure a better standards and is a proven brand of planet for future generations.
Distilleries Company of Sri Lanka PLC 54 Annual Report 2015/16 Corporate Governance
Enterprise Governance • Implemented an environment of Exchange and Securities & Exchange Working on an integrated approach responsible and balanced corporate Commission of Sri Lanka, NATA, for applying governance throughout governance that enhances Integrity Excise Department, Central Bank of Sri the organisation, DCSL practices and respect for the Company and Lanka and the Government Treasury, the key principle of infusing the tenet ensures the Company’s stewardship Institute of Chartered Accountants that everyone is responsible for and stability in the industry and of Sri Lanka, Telecommunication the performance of the Group, the market. Regulatory Commission of Sri management of risk and value creation. Lanka, Insurance Board of Sri Lanka, • Introduced a culture in which We strongly recommend and commit Central Environmental Authority, the entire organisation takes ourselves to ensuring that Enterprise relevant Ministry and departmental ownership for risk, compliance and Governance operates through people, authorisations and regulations and performance. processes, policy, procedure, culture numerous Codes introduced by and ethics. We infuse governance tenets that Professional Associations and the continue to hold us in high esteem Chamber of Commerce from time to The principles of governance are and as a spearhead among our time. applied effectively by the Board of shareholders, stakeholders and peers. Directors and are seen in the consistent This corporate governance statement This is further augmented with our growth performance of the Group, defines in detail the structures Board’s adherence to the highest while also improving the long term and processes that we use in our standard of corporate behaviour return to stakeholders. Beyond the organisation to balance the interests and ethics at all times. To remain at Board, the application of governance of our stakeholders, reviewed at the helm of Sri Lanka’s corporate methodologies and the integration of regular intervals to ensure that Group’s landscape, we realise that we must governance into other organisational expectations are met and are aligned incorporate new dimensions into our functions, we strongly believe that it with evolving growth strategies. core decision-making processes and has significantly benefited the long term practice due diligence to protect the The Board of Directors performance of DCSL. interests of our shareholders, while Role of the Board of Directors maintaining an unrelenting focus on To further augment our effective The Board of Directors is responsible to the expectations of other stakeholder governance strategies, we have the Company’s shareholders to ensure segments. implemented the following: at all times that the activities of the Company are conducted to the highest • Strive to achieve corporate DCSL has a strong and sound ethical standards and in the best objectives of managing strategy, risk foundation of sustainability principles interest of all stakeholders. and compliance to ensure long term that remain the overarching fundamentals in instituting and returns to shareholders and other The key responsibilities of the Board maintaining uncompromising stakeholders. are; governance practices and principles. • Oversee business objectives The section of the report details the • To enhance shareholder value. including management of IT, governance structure and the practices • Provide direction and guidance in sustainability, finance and project and guidelines DCSL has adopted in formulating corporate strategies. portfolio management to ensure ensuring that we remain within the sustainable consistent results. parameters of the numerous regulatory • Monitor systems and procedures and authorised bodies that govern • Board of Directors remain especially with regard to internal the industry and the Company. We emphatic on due diligence to ensure controls and risk management. stringently adhere to and comply with accountability, transparency and the mandates of the Colombo Stock • Approve major investments. sincerity of action.
55 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Corporate Governance
Name of Director Status Attendance *
D. H. S. Jayawardena Chairman / Managing Director 2/2 C. R. Jansz Executive Director 2 /2 N. de S. Deva Aditya Independent Non-Executive Director 2 /2 K. J. Kahanda Executive Director 2 /2 A. N. Balasuriya Independent Non-Executive Director 2/2 D. Hasitha S. Jayawardena Non-Independent Non-Executive Director 2/2 R. Seevaratnam (Appointed w.e.f. 21/09/2015) Independent Non-Executive Director 1/2
*In person or by alternate
Composition of the Board and Meetings and Attendance D. Hasitha S. Jayawardena (Appointed Independence The attendance of the meetings of the w.e.f. 05/08/2015) The Board of Directors of DCSL Board during the year is given above: The report of the Remuneration comprises the Chairman / Managing Committee is given on the page 74. Director, two Executive Directors, Board Committees one Non-Independent Non-Executive Certain responsibilities of the Board Related Party Transactions Director and Three Independent Non- have been delegated to the following Review Committee sub-committees. Executive Directors as given in the table The Related Party Transactions Review above. Brief profiles of the Directors are Audit Committee Committee was established by the given on pages 28 to 29. Board on 23rd March 2016. The The Audit Committee comprises three Related Party Transactions Review The Board considers that three Non- independent Non- Executive Directors Committee is responsible to the Executive Directors are independent in as follows; Board of Directors comprises of two accordance with the criteria detailed R. Seevaratnam - Chairman Independent Non Executive Directors within the Listing Rules of the CSE and (Appointed w.e.f. 21/09/2015) and one Non-Independent Non- have submitted signed confirmations in Executive Director. this regard. A. N. Balasuriya - (Chairman up to 21/09/2015) R. Seevaratnam - Chairman The Board constructed that N. de S. Deva Aditya who has served N. de. S. Deva Aditya A. N. Balasuriya on the Board continuously for a D. Hasitha S. Jayawardena D. Hasitha S. Jayawardena period exceeding nine (9) years, is (Appointed w.e.f. 05/08/2015) determined as an Independent Director The report of the Related Party after taking into consideration all the The detailed report of the Audit Transactions Review Committee is relevant circumstances, including the Committee is on pages 72 to 73. given on the page 75 fact that he resides overseas and he Remuneration Committee Investor Relations is not directly or indirectly get involved The Remuneration Committee has two One of the prime fundamentals that in the day-to-day management of the independent Non- Executive Directors are prevalent and identified with the Company or in any of its Subsidiaries, and one Non-Independent Non- Group’s sustained success and growth and the Board believes the Executive Director: has been the close rapport in investor independence of N. de S. Deva Aditya relations. Given that we are mandated is not compromised by virtue of him A. N. Balasuriya - Chairman to safeguard and create shareholder being a Director of Aitken Spence PLC, N. de. S. Deva Aditya wealth and are duty bound to share an Associate of the Company.
Distilleries Company of Sri Lanka PLC 56 Annual Report 2015/16 all Company information with our The main companies in the Group have shareholders at all times in order to established internal audit divisions that nurture sustainable relationships with are controlled by the annual internal our stakeholders, we foster effective audit plans approved by the respective dialogue and engagement with the Boards. The Audit Committee reviews relevant stakeholders and the financial and monitors the activities and the community. We strongly believe findings of the internal audit divisions at that it is our strategic management regular intervals. responsibility to maintain an open line of communication with shareholders Going Concern and address any concerns or issues After an extensive review of the Group’s that may require discussion or corporate plan, budgets, capital resolution. The designated investor expenditure requirements and future relations officers regularly meet cash flows, the Board has taken a shareholders and fund managers to fuel decision to apply the Going Concern these long term relationship, providing principle in the preparation of the information and answering any Financial Statements for 2015 / 16. queries. Further, the Group possesses Further, the Board is satisfied that the performance measurement tools to Group possesses the necessary funds ensure that these objectives are met. for adequate liquidity and to sustain its operations for the foreseeable future Apart from personal interaction with stakeholders, our quarterly financial The Company’s compliance with statements and the Annual Report offer the CSE Listing Rules and the best a comprehensive canvas of the Group’s practices set out in the Code of Best performance, constituting the principal Practice on Corporate Governance means of communication with the issued jointly by ICASL and SEC is set shareholders. out in the following table
Internal Controls The Board instills and maintains a strong set of internal controls to safeguard shareholder wealth. The responsibility of the Board has been clearly stated as one where it is in charge of the Group’s internal control systems and will regularly review if they are adequately safeguarding Company and shareholder assets while supplying precise and timely information for informed decision making. The responsibility of the Board covers financial, operational and compliance related activities and risk management.
57 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Corporate Governance
The Company’s compliance with the CSE Listing Rules
Section Applicable Rule Compliance Details Status
7.10.1 Non-Executive Directors Complied Four out of seven Directors At least one third of the total number of Directors should be Non- are Non-Executive Directors Executive Directors.
7.10.2(a) Independent Directors Complied Three out of Four Non- Two or one third of Non-Executive Directors, whichever is higher, Executive Directors are should be Independent. Independent
7.10.2(b) Independent Director’s Declaration each Non-Executive Director Complied should submit a declaration of independence/ non-independence in the prescribed format
7.10.3(a) Disclosure relating to Directors Complied Please refer page 56 The Board shall annually make a determination as to the independence or otherwise of the Non-Executive Directors and names of Independent Directors should be disclosed in the Annual Report.
7.10.3(b) Disclosure relating to Directors Complied Please refer page 56 The basis for the Board to determine a Director is Independent, if criteria specified for Independence is not met.
7.10.3(c) Disclosure relating to Directors Complied Please refer pages 28 to 29 A brief resume of each Director should be included in the Annual Report and should include the Director’s areas of expertise.
7.10.3(d) Disclosure relating to Directors Complied A new Director was appointed Forthwith provide a brief resume of new Directors appointed to during the year. Please refer the Board with details specified in 7.10.3(a), (b) and (c) to the pages 29 and page 56 Exchange.
7.10.4 Criteria for Defining ‘Independence’ Complied Selection criteria of Independent Directors of a listed company
7.10.5 Remuneration Committee Complied Please refer page 74 A listed Company shall have a Remuneration Committee.
7.10.5(a) Composition of Remuneration Committee Complied Two out of Three Non- Shall comprise of Non-Executive Directors a majority of whom Executive Directors are will be Independent. Independent
7.10.5(b) Functions of Remuneration Committee Complied Please refer page 74 The Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and Executive Directors.
Distilleries Company of Sri Lanka PLC 58 Annual Report 2015/16 Section Applicable Rule Compliance Details Status
7.10.5(c) Disclosure in the Annual Report The Annual Report should set out; i. Names of the Directors comprising the Remuneration Committee. Complied Please refer page 56
ii. Statement of Remuneration Policy Complied Please refer page 74
iii. Aggregated remuneration paid to Executive and Non- Complied Please refer note 11 to the Executive Directors. financial statements
7.10.6 Audit Committee Please refer Audit The Company shall have an Audit Committee Committee report on page 72 to 73
7.10.6(a) Composition i. Shall comprise of Non-Executive Directors a majority of whom will be Independent. Complied Please refer page 72
ii. One Non-Executive Director shall be appointed as Chairman of the committee. Complied Please refer page 72
iii. Chief Executive Officer and Chief Financial Officer shall attend Committee meetings. Complied Please refer page 72
iv. The Chairman or one member of the Committee should be a member of a professional accounting body. Complied Please refer page 72
7.10.6(b) Functions i. Overseeing the preparation, presentation and adequacy of Complied Please refer Audit disclosures in the Financial Statements in accordance with Committee report on pages 72 Sri Lanka Accounting Standards to 73
ii. Overseeing the compliance with financial reporting Complied requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements
iii. Overseeing the process to ensure that the Entity’s internal Complied controls and risk management, are adequate to meet the requirements of the Sri Lanka Accounting Standards / IFRS migration
iv. Assessment of the independence and performance of the Complied entity’s external auditors
v. Make recommendations to the Board pertaining to Complied appointment, re-appointment and removal of external auditors and to approve the remuneration and terms of engagement of the external auditors
59 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Corporate Governance
Section Applicable Rule Compliance Details Status
7.10.6(c) Disclosure in Annual Report Complied Please refer Corporate Governance Report on page 56 and Audit Committee i. The names of the Directors report on pages 72 to 73 comprising the Audit Committee. Complied ii. Basis of the determination of the Independence of the Auditors.
iii. Report by the Audit Committee Complied setting out the manner of compliance by the Company.
9.2.1 & Related Party Transactions Review Complied The Committee was formed on 23rd March 2016. The 9.2.3 Committee functions of the Committee are stated in Related Party Transactions Review Committee report in page 75.
9.2.2 Composition of the Related Party Complied Please refer the Related Party Transactions Review Transactions Review Committee Committee Report on page 75.
9.2.4 Related Party Transactions Review Complied The Committee was appointed on 23rd March 2016 and Committee Meetings the transactions were reviewed in respect of the financial year 2015/16 at the meeting held on 2nd June 2016.
9.3.1 Immediate disclosures Complied Company did not have any non-recurrent related party transactions which require immediate disclosure to the Colombo Stock Exchange.
9.3.2(a) Disclosure - Non- Recurrent Related Complied Company did not have any non recurrent related party Party Transactions transactions with aggregate value which exceeds 10% of the equity or 5% Total assets whichever is lower. Hence no disclosure is required.
9.3.2(b) Disclosure - Recurrent Related Party Complied DCSL PLC carries out transactions with its subsidiaries Transactions and expected to extend over a period which are carried out on continues basis and are of time in the ordinary course of the business of the Company. However, the aggregate values of these transactions were below 10% of gross revenue of the 2014/2015 Financial Statements.
9.3.2(c) Report by the Related Party Complied Report by the Related Party Transactions Review Transactions Review Committee Committee on page 75.
9.3.2 (d) A declaration by the Board of Directors Complied Refer the Annual Report of Board of Directors for an affirmative statement of compliance of the Board on page 78.
Distilleries Company of Sri Lanka PLC 60 Annual Report 2015/16 Code of Best practice of Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (CA-Sri Lanka)
Ruling Description of the Ruling Compliance Details Index Status
A.1 The Board
A.1 Company to be headed by an effective P Board consists of members who are qualified and board to direct and control the experienced in various fields. Please refer Corporate company Governance Report on page 55.
A.1.1 Regular Board meetings and supply of P Please refer Corporate Governance Report on page 56. information.
A.1.2 Board should be responsible for P Please refer Corporate Governance Report, Report of matters including implementation of the Board of Directors and Report of Audit Committee business strategy, skills and succession for the details. of the management team, integrity of information, internal controls and risk management, compliance with laws and ethical standards, stakeholder interests, adopting appropriate accounting policies and fostering compliance with financial regulations and fulfilling other board functions.
A.1.3 Act in accordance with the laws of the P Please refer Report of the Board of country and obtain professional advice Directors on page 76. as and when required
A.1.4 Access to advice and services of the P The Company Secretary position is headed by a Company Secretary professionally qualified Company Secretary.
A.1.5 Bring Independent judgment on various P All the Board members actively participate in the business issues and standards of Board meetings by bringing up their own Independent business conduct judgment.
A.1.6 Dedication of adequate time and effort P The Directors dedicate sufficient time before a meeting to review Board Papers and call for additional information and clarification if necessary, and follow up issues consequent to the meeting.
A.1.7 Board induction & training P The Directors are provided with training as and when it is required
61 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Corporate Governance
Ruling Description of the Ruling Compliance Details Index Status
A. 2 Chairman and Chief Executive officer
A.2.1 Justification for combining the roles of the Chairman and P The positions of Chairman and CEO are CEO. separated
A.3 Chairman’s role
A.3.1 The Chairman should ensure Board proceedings are P Please refer Corporate Governance conducted in a proper manner Report on page 56 for the following details - effective participation of both Executive and Non- Executive Directors - balance of power between Executive and Non-Executive Directors
A.4 Financial Acumen
A.4 The Board should ensure the availability within it of those P Please refer the Audit Committee report with sufficient financial acumen and knowledge to offer on page 72 guidance on matters of finance.
A.5 Board Balance
A.5.1 In the event the Chairman and CEO is the same person, Non-Executive Directors should comprise a majority of the N/A N/A Board
A.5.2 Where the constitution of the Board of Directors includes P Board of Directors consists of Four Non- only two Non-Executive Directors, both such Non- Executive Directors, out of which Three Executive Directors should be ‘independent’ are independent. Report on page 56
A.5.3 Definition of Independent Directors P Please refer Corporate Governance Report on page 56
A.5.4 Declaration of Independent Directors P Please refer Corporate Governance Report on page 56
A.5.5 Board determinations on independence or non- P Please refer Corporate Governance independence of Non-Executive Directors. Report on page 56
A.5.6 If an Alternate Director is appointed by a Non-Executive Director such Alternate Director should not be an N/A N/A executive of the company.
A.5.7 In the event the Chairman and CEO is the same person, the Board should appoint one of the independent N/A N/A Non- Executive Directors to be the “Senior Independent Director” (SID)
Distilleries Company of Sri Lanka PLC 62 Annual Report 2015/16 Ruling Description of the Ruling Compliance Details Index Status
A.5.8 The Senior Independent Director should make himself available for confidential discussions with other Directors N/A N/A who may have concerns
A.5.9 The Chairman should hold meetings with the Non- P Executive Directors only, without the Executive Directors being present
A.5.10 Where Directors have concerns about the matters of the P Company which cannot be unanimously resolved, they should ensure their concerns are recorded in the Board minutes
A.6 Supply of information
A.6.1 Board should be provided with timely information to P enable it to discharge its duties
A.6.2 Timely submission of the minutes, agenda and papers P required for the Board Meeting
A.7 Appointments to the Board
A.7 Formal and transparent procedure for Board appointments P Activities of the Nomination Committee are currently handled by the Board of Directors
A.7.1 Nomination Committee to make recommendations on new P Activities of the Nomination Committee Board appointments are currently handled by the Board of Directors
A.7.2 Assessment of the capability of Board to meet strategic P Activities of the Nomination Committee demands of the company are currently handled by the Board of Directors
A.7.3 Disclosure of new Board member profile and Interests P A new Director was appointed during the year. Please refer page 29
A.8 Re-election
A.8/ A.8.1/ Re-election at regular intervals and should be subject to P Please refer Annual Report of the A.8.2 election and re-election by shareholders Directors on page 77
A.9 Appraisal of Board performance
A.9.1 The Board should annually appraise itself on its P performance in the discharge of its key responsibilities
A.9.2 The Board should also undertake an annual self-evaluation P of its own performance and that of its committees
63 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Corporate Governance
Ruling Description of the Ruling Compliance Details Index Status
A.9.3 The Board should state how such performance P evaluations have been conducted
A.10 Disclosure of information in respect of Directors
A.10.1 Profiles of the Board of Directors and Board meeting P Please refer page 28 to 29 and Corporate Attendance Governance Report on page 56.
A. 11 Appraisal of the Chief Executive Officer
A.11.1/ Appraisal of the CEO against the set strategic targets P The CEO’s performance is reviewed A.11.2 annually.
B. Directors Remuneration
B.1 Remuneration Procedure
B.1.1 the Board of Directors should set up a Remuneration P Please refer Remuneration Committee Committee Report on 74
B.1.2 Remuneration Committees should consist exclusively of P Non-Executive Directors
B.1.3 The Chairman and members of the Remuneration P Committee should be listed in the Annual Report each year
B.1.4 Determination of the remuneration of Non-Executive P Directors
B.1.5 The Remuneration Committee should consult the P Chairman and/or CEO about its proposals relating to the remuneration of other Executive Directors
B.2 The Level and Makeup of Remuneration
B.2.1 to Performance related elements in pay structure and P B. 2.4 alignment to industry practices
B.2.5 Executive share options should not be offered at a discount N/A N/A
B.2.6 Designing schemes of performance-related remuneration P
B.2.7/ Compensation commitments in the event of early P B.2.8 termination of the Directors
B.2.9 Level of remuneration of Non-Executive Directors P
B.3 Disclosure of Remuneration
B.3/B.3.1 Disclosure of remuneration policy and aggregate P Please refer Remuneration Committee remuneration Report on 74 and note 11 to the financial statements
Distilleries Company of Sri Lanka PLC 64 Annual Report 2015/16 Ruling Description of the Ruling Compliance Details Index Status
C. Relations with Shareholders
C.1 Constructive use of the Annual General Meeting (AGM) P The Company holds the AGM within the and conduct of general meetings appropriate regulatory time intervals and effectively uses it for communication with shareholders.
C.1.1 Counting of proxy votes P
C.1.2 Separate resolution to be proposed for each item P
C.1.3 Heads of Board sub-committees to be available to P answer queries
C.1.4 Notice of Annual General Meeting to be sent to P Please refer the page 175 of the Annual shareholders with other papers as per statute Report for the notice of the meeting.
C.1.5 Summary of procedures governing voting at general P meetings to be informed
C.2 Communication with Shareholders
C.2.1 Channel to reach all shareholders to disseminate timely P information
C.2.2/ Policy and methodology of communication with P C.2.7 shareholders and implementation
C.3 Major and material transactions including major related P party transactions
C.3.1 Disclosure of all material facts involving all material P Please refer note 35 to the Financial transactions including related party transactions Statements.
D. Accountability and Audit
D.1 Financial Reporting
D.1.1 Disclosure of interim and other price-sensitive and P The Board presents a balanced and statutorily mandated reports to Regulators. understandable assessment extends to interim and other price-sensitive public reports and reports to regulators, as well as to information required to be presented by statutory requirements complying with regulatory deadlines.
D.1.2 Declaration by the Directors that the company has P Please refer Annual Report of the not engaged in any activities, which contravene laws Directors on page 76. and regulations, declaration of all material interests in contracts, equitable treatment of shareholders and going concern with supporting assumptions or qualifications as necessary
65 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Corporate Governance
Ruling Description of the Ruling Compliance Details Index Status
D.1.3 Statement of Directors Responsibility P Please refer the Statement of Directors Responsibility on Page 80.
D.1.4 Management Discussion and Analysis P Please refer Management Discussion and Analysis from page 34 to 43.
D.1.5 The Directors should report that the business is a going P Please refer Annual Report of the Board of concern, with supporting assumptions or qualifications as Director on page 76. necessary
D.1.6 Remedial action at EGM if net assets fall below 50% of N/A N/A value of shareholders’ funds
D.1.7 Disclosure of Related Party Transactions P Please refer Note 35 to the Financial Statements.
D.2 Internal Control
D.2.1 Annual review of effectiveness of system of Internal P Please refer Audit Committee Report on Control and report to shareholders as required page 72 and Annual Report of the Board of Directors on page 76.
D.2.2 Internal Audit Function P
D.2.3/ Maintaining a sound system of internal control P D.2.4
D.3 Audit Committee
D.3.1 The Audit Committee should be comprised of a minimum P Please refer Audit Committee Report on of two Independent Non-Executive Directors or exclusively pages 72 to 73. by Non-Executive Directors, a majority of whom should be independent, whichever is higher. The Chairman of the Committee should be a Non-Executive Director, appointed by the Board
D.3.2 Terms of reference, duties and responsibilities P
D.3.3 The Audit Committee to have written terms of reference P coving the salient aspects as stipulated in the section
D.3.4 Disclosure of Audit Committee membership P
Distilleries Company of Sri Lanka PLC 66 Annual Report 2015/16 Ruling Description of the Ruling Compliance Details Index Status
D. 4 Code of Business Conduct and Ethics
D.4.1 Availability of a Code of Business Conduct & Ethics and an P Please refer Corporate Governance affirmative declaration that the Board of Directors abide Report from page 55 to 67 by such Code
D.4.2 The Chairman must certify that he/she is not aware of any P violation of any of the provisions of this Code
D.5 Corporate Governance Disclosures
D.5.1 The Directors should include in the Company’s Annual P Please refer Corporate Governance Report a Corporate Governance Report Report from pages 55 to 67
E. Institutional Investors
E.1 Shareholder Voting
E.1.1 Conducting regular and structured dialogue with P Please refer Corporate Governance shareholders based on a mutual understanding of Report from page 56 objectives
E.2 Evaluation of Governance Disclosures
E.2. When evaluating Companies’ governance arrangements, P Please refer Corporate Governance particularly those relating to Board structure and Report from page 56 composition, institutional investors should be encouraged to give due weight to all relevant factors drawn to their attention
F. Other Investors
F. 1 Investing / Divesting Decision
F. 1 Individual shareholders, investing directly in shares of P companies should be encouraged to carry out adequate analysis or seek independent advice in investing or divesting decisions
F. 2 Shareholder Voting
F. 2 Individual shareholders should be encouraged to P participate in General Meetings of companies and exercise their voting rights
G Sustainability Reporting
G.1/ Disclosure on adherence to sustainability principles P Please refer Sustainability Report from G.1.7 page 44 to 54
67 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Enterprise Risk Management
Undoubtedly, there is risk in today’s conjunction to identifying, analysing, A dedicated team has been established volatile and uncertain business evaluating, monitoring and prioritising to assist the Board in reviewing risk environment, which demands increased risks, which will follow the application factors at regular intervals. Evaluation transparency within an organisation’s of coordinated and economical meetings are held to ensure that the risk profile. There are vulnerabilities, solutions that minimise the probability focus from effective risk coverage probabilities, threats and weaknesses and impact of identified vulnerabilities. remains strong and concentrated. The that must be addressed to ensure Once identified, elimination, reduction, Board is kept updated on the progress that risk in any enterprise is mitigated. transfer and retention are the broad risk and its opinion sought for mitigating any This greater emphasis on risk and risk management strategies employed across challenges that may emerge. management also prompts greater DCSL. penalties on entities that do not or fail Risk Management Framework Changes in Risk Profile to manage key risks, which naturally The Group remains committed to permeates to organisations being Given the range of industry, geographic increasing shareholder value within a more cognisant of identifying and locales and market segments that our carefully designed risk management assessing risks. In this backdrop, it is business spans, the diversification which framework. An effective risk management also increasingly important that once we have embarked upon provides a framework enables us to prioritise and these risks are identified and assessed, prudent pathway that would signal allocate resources against those risks they are managed with pre-defined positive correlation between business that underscore the ongoing sustainability tolerances. Any entity faces myriad risks, and environmental risks, while on the of the organisation. Our systematic from well known risks that are inherent converse, exposing the Group to a wider policies help us to identify and uncover and characteristic of the business to spread of risks, as well as opportunities. risks and help us to be cognisant of unknown risks that may emerge or are the same. This preparedness builds This therefore prompts the DCSL just emerging. Risk resilient organisations the resilience of the organisation and Board to make risk assessment and must objectively assess their existing risk allows us to establish procedures for risk identification of mitigating activities management capabilities, evaluate their mitigation. a priority and pivotal in achieving the organisational culture with regard to risk, Group’s strategic objectives. The Board The principal risks in achieving the Group performance and reward and implement is tasked with an overall responsibility objectives of enhancing shareholder sustainable risk management practices. for monitoring risks and gaining value and safeguarding the Group’s In the current market context, risk is assurance for managing these risks at an assets have been identified as set out defined as the probability or threat of a acceptable level. overleaf. The nature and the scope of liability, loss or other negative occurrence, risks are subject to change and not all of caused by external or internal Strategic Action Plan the factors listed, are within the control vulnerabilities which would affect the Board oversight coupled with a strong of your Company. It should be noted desired objectives of the organisation. organisational ethic is the cornerstone of that the other factors besides those This also means that stakeholder DCSL risk framework. listed may affect the performance of the expectations must be worked into the business, although we do reiterate, that The Board remains acutely aware that organisation’s risk management strategy. we remain very vigilant to both internal to generate business value it must Vulnerabilities could mean exposure that and external factors that could prompt manage and oversee all possible risks could trigger an adverse outcome and risk in any form and therefore, are able that the business or external factors therefore, prevent the achievement of to, without delay, implement strategies could impose on the profitability of the company objectives. to prevent, minimise or mitigate those Company, while in tandem, protecting ensuing risks. The process of risk management at and enhancing shareholder wealth. DCSL involves analysing exposure to The DCSL Board is committed to DCSL Group’s risk management risks, by identifying vulnerabilities and deploying the highest standards of framework takes into account the range their probability of occurrence, which risk management to support a strong of risks to be managed, the systems determines the way we handle such governance framework, ensuring that and processes in place to deal with exposure. This would therefore involve shareholder wealth is safeguarded from these risks and the chain of responsibility the implementation of numerous policies, all the possible risk elements. within the organisation to monitor the procedures and practices that work in effectiveness of the mitigation measures.
Distilleries Company of Sri Lanka PLC 68 Annual Report 2015/16 Risk & Implication
Credit Risk & Implication Mitigation Strategies:
This risk ensues when a Group customer is unable to meet his • Measure, monitor and manage credit risk for each borrower financial obligations. through clear credit approval procedures • Regularly review customer credit ratings and constantly update records to ensure complete awareness of borrower credit status Please refer financial risk management note on pages 157 to 162
Legal and Regulatory Risk & Implication Mitigation Strategies
Risks arising from non conformance to statutory and regulatory • Established a dedicated unit to keep abreast of all policy requirements remain a reality due to the possibilities of changes changes, to manage risk and ensure adherence to all to regulations and policies being sudden or constant. It also regulations increases costs and liabilities due to these periodic regulatory • Recruitment of ex-regulators to senior positions within the changes. The nature of our liquor, telecommunications, Group with an objective to enhance regulatory awareness insurance and finance businesses continue to be subjected and increase compliance to a steady stream of changes in regulations and extensive compliance requirements. The authorities have severely restricted liquor advertising and limited other forms of communication with consumers via promotional and distribution activities, all of which affect profitability.
Investment Risk & Implication Mitigation Strategies
The Group handles significant market investments which • The Chairman / Managing Director is tasked with tracking require smooth pre-study, monitoring and control. In this returns on Group investments with the assistance of the regard, there is stringent conformance by the Board in Head of Finance and Group Financial Controller practicing due diligence. • Carry out mark to market revaluation of equity portfolios to identify the viability of investments
• The Board develops policies and procedures to ensure that new investments and initiatives are subjected to mandatory compliance procedures.
• Regular reviews by Audit Committee and Internal Audit Division
Human Risk & Implication Mitigation Strategies
This is the risk arising from the inability to attract and retain • Maintaining above industry remuneration schemes skilled staff at middle to senior management levels. The • Skills upgrading migration of skilled workers, which is a phenomenon across • Professional growth avenues most industry sectors, has created a brain-drain and the Group remains at risk of losing key personnel to better job • Performance-based reward systems prospects overseas. • Best practices being introduced and upgraded continually • Measures taken to retain and minimise casual / temporary labour turnover.
69 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Enterprise Risk Management
Risk & Implication
Operational Risk & Implication Mitigation Strategies
Operational risk is the risk of loss resulting from inadequate or • A structured internal control framework implemented failed internal processes, people and systems or from external works through a state of the art MIS system, internal audit events. The nature of our business renders us vulnerable to mechanism and insurance policies several common operational risks including fraud, human error, • A comprehensive system established to ensure that any natural disasters, loss of data and unrequited disclosure of loss is communicated to all related parties and across the sensitive information. company to prevent similar incidences
• Regular meetings are conducted to assess these risks
• Contingency plans are in place to minimise work-stop situations
• Regular reviews of contingencies and disaster recovery plans
• Financial risk arising from operation is covered in financial risk management on pages 157 to 162
Socio-Economic Risk & Implication Mitigation Strategies
Given the government dictate in stifling and repressing the • A committed Investigations Unit established to monitor and consumption of alcohol and tobacco, there is a very real report illegal activities that challenge our business threat being imposed on the Company’s profitability and the perception of our business. In this milieu also exists a thriving of spurious liquor manufacturers, which naturally erodes our profitability base. A resurgent economy however should boost licit alcohol consumption.
Socio-Political Risk & Implication Mitigation Strategies
Socio-Political risk is the possibility of instability in a country Our diversified portfolio of businesses encompasses or the world which would cascade to negatively impacting investments that will not be minimally impacted. The markets. Unrest of any kind could affect investor attitudes only exception was the enactment of the Revival of towards the markets in general, leading to disruption of Underperforming Enterprises and Underutilised Assets Act business. Continuity of a cohesive policy towards local that re-acquired land of Pelwatte Sugar Industries PLC. business is a key element here. Here again, the impact was managed and legal redress is being sought.
Technology Risk & Implication Mitigation Strategies
Stemming from the failure of the Group’s ICT systems where • Implementation of stringent barriers including password hardware, software and communications systems may have protection and restricted access, stringent user guidelines, breakdowns, halts and herald lack of recovery, as a business contingency plans and physical security measures closely that leverages strategically on ICT systems, we are very much monitored by the Central IT Unit. aware of the potentiality of risk and the cascading negativities • Comprehensive backup and recovery systems in place that could result to both business and profitability due to Technology Risk. The Group has identified system failures and • A robust ERP system is deployed in the Company. Phased theft of information as factors that can cause significant levels implementation of same across Group companies. of operational, reputational and financial loss to the Group.
Distilleries Company of Sri Lanka PLC 70 Annual Report 2015/16 Risk & Implication
Product Risk & Implication Mitigation Strategies
Product risk implies any negative impact or perceived impact • Employing established operating procedures to review and of our products on stakeholders in general which could approve all raw material prior to use, to ensure maintenance decrease our market share. There were no reported incidents of quality control of intoxication or health hazards arising from our range of liquor • Remain emphatic on safety, health and environmental products. hazards that may ensue due to possible negative publicity
• Equipping our R & D Team with ample knowledge to field any technical questions about our products
• Marketing and distribution procedures have complete control of the supply chain
Foreign Exchange Risk & Implication Mitigation Strategies
A depreciated Sri Lankan Rupee could impact the importation • Remaining acutely attuned to the frequent changes seen in of rectified spirits and foreign brands in our distilleries portfolio. foreign currency rates with our bankers
• Monitoring local and international events and news related to economics which can impact to exchange rates
Please refer financial risk management note on pages 157 to 162.
Cheaper Product, Counterfeiting and Unethical Competition Mitigation Strategies Risk & Implication
An increase in the import and in some cases smuggling • Ensuring our products are competitively priced and and counterfeit of cheaper products that compete directly continue to retain the highest standards of quality in order with our product portfolio could create an impact on our to drive a loyal consumer base who disregard cheaper locally manufactured products, leading our products to be options out priced in the market. This also endangers a reputational • Our Investigations unit maintains close scrutiny on any risk. The nature of the liquor business increases incidences counterfeit DCSL products in the market of counterfeiting and smuggling of low quality or sub-quality liquor. The success of our brands also fuels a lucrative • Communicate and demonstrate to our consumers on breeding ground for counterfeiters to indulge in illegal activity. measures and processes in identifying DCSL brands, authorised dealers and retailers
• Continuing to improve manufacturing process which includes tamper proof bottles
• Make every effort to sustain and enhance brand equity, ensuring that consumers are not cheated in any manner due to third party action
• Co-operate with law enforcement bodies to curb illegal distillation
71 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Board Audit Committee Report
Composition As allowed by the Listing Rules of the Colombo Stock The Board Audit Committee appointed by and responsible to Exchange, the Audit Committee of the Company, functions as the Board of Directors comprises of three Independent Non the Audit Committee of each of the subsidiary companies which Executive Directors. Former Consultant Mr. R. Seevaratnam, have not appointed a separate Audit Committee. All matters a fellow member of the Chartered Accountants of England & are dealt with through the Agenda of the Parent Company Audit Wales, was appointed to the Board as an Independent Non- Committee. Executive Director and also appointed as the Chairman of the Role of the Board Audit Committee Audit Committee at the Extra Ordinary General Meeting held on The Board Audit Committee in its role assists the Board in 21 September 2015 as per the Listing Rules of Colombo Stock fulfilling their responsibility with regard to: Exchange. • Ensuring the integrity of the statements of the Company The other members of the Audit Committee comprise Dr. A. N. and that good financial reporting systems are in place Balasuriya, Independent Non Executive Director, a Motivational and is managed in order to give accurate, appropriate Speaker, Mr. N. de S. Deva Aditya Independent Non Executive and timely information to the management, regulatory Director, Member of the European Parliament. Mr. D. Hasitha S. authorities and shareholders in accordance with the Jayawardena, Non-Independent Non-Executive Director was financial reporting standards of the Institute of Chartered appointed to the Audit Committee on 05 August 2015. Accountants of Sri Lanka, Companies Act No: 07 of 2007, A brief profile of each member is given on pages 28 to 29. the Sri Lanka Accounting and Auditing Standards and the Continuing Listing Rules of the Colombo Stock Exchange. The Company Secretary functions as the Secretary to the Audit Committee. • Assessing the independence and monitoring the performance of external auditors. Meetings The Board Audit Committee met four (4) times during the year. • Ensuring the company’s internal control and risk Mr. N. de S. Deva Aditya could not attend any meetings during management process operates efficiently and effectively. the year, due to his engagements abroad. Nevertheless, • Ensure compliance with applicable laws, regulations and Mr. Deva Aditya was represented at all meeting by his alternate policies of Distilleries Group and Company. and was kept informed of all the proceedings of the Audit Committee and his opinion was sought on important matters • Assess the Company’s ability to continue as a going through his alternate on the Board. concern in the foreseen future.
The attendance of the other members at these meetings is as Internal Audit follows: The internal audit function of the Company was carried out Mr. R. Seevaratnam 4/4 by the Internal Audit Division. The Committee reviewed the Dr. A. N. Balasuriya 4/4 effectiveness of the internal audit plan to ensure that it was designed to provide reasonable assurance that the financial Mr. D. Hasitha S. Jayawardena 3/3 reporting system adopted by the Group can be relied upon in The Group Financial Controller, Head of Finance and Chief the preparation and presentation of the Financial Statements. Internal Auditor also attended these meetings by invitation The Committee also reviewed the findings of the Internal when needed. Auditors and their recommendations together with the management responses and regularly followed up the progress Terms of Reference of the implementation of such recommendations in order to enhance the overall control environment. The Board Audit Committee Charter approved and adopted by the Board clearly sets out the terms of reference governing the Audit Committee ensuring highest compliance with the Corporate Governance Rules applicable to Listed Companies in accordance with the Rules of the CSE and the Code of Best Practice on Corporate Governance.
Distilleries Company of Sri Lanka PLC 72 Annual Report 2015/16 External Audit The Audit Committee met with the External Auditors to discuss the scope and the audit strategy including the coordination of the Group Audit. The Committee also reviewed the Report of the Auditors & Management Letters issued by them with and without the Management on separate occasions to ensure that no limitations were placed on their independence of work and conduct of the audit.
The Committee carried out an annual evaluation of the External Auditors to establish their independence and objectivity and also obtained a written declaration from the Auditors in this regard. The Committee stipulated that the Lead Audit Partner is rotated every seven years. The Audit Committee recommended to the Board of Directors that Messrs. KPMG be reappointed as Auditors for the financial year ending 31 March 2017.
Compliance with Laws and Regulations The Committee reviewed the quarterly compliance reports submitted by the relevant officers to ensure that the Group complied with all statutory requirements.
Conclusion The Audit Committee is satisfied that the Group’s accounting policies, operational controls and risk management processes provide reasonable assurance that the affairs of the Group are managed in accordance with Group policies and that Group assets are properly accounted for and adequately safeguarded.
R. Seevaratnam Chairman Audit Committee
05 August 2016
73 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Remuneration Committee Report
The Remuneration Committee of Distilleries Company of Sri Lanka PLC is appointed and responsible to its Board of Directors. It comprises of two Independent, Non Executive Directors, namely Mr. N. de S. Deva Aditya, Member of the European Parliament and Dr. Naomal Balasuriya, Motivational Speaker, who chairs the Committee and one Non-Independent Non-Executive Director namely Mr. D. Hasitha S. Jayawardena who was appointed to the Remuneration Committee on 05 August 2015.
Brief profiles of these Directors are given on pages 28 to 29.
Ms. Vijayanthi Senaratne, Company Secretary, functions as the Secretary to this Committee.
The Remuneration Committee is governed by the Remuneration Committee Charter, which has been approved and adopted by the Board of Directors. It is responsible for determining the remuneration policy of the Key Management Personnel of the Company.
The Chairman / Managing Director who is responsible for the overall management of the Company assists the Committee.
Dr. Naomal Balasuriya Chairman Remuneration Committee
05 August 2016
Distilleries Company of Sri Lanka PLC 74 Annual Report 2015/16 Board Related Party Transactions Review Committee
Composition A RPT entered into without pre-approval of the Committee, As per the latest directive issued by the Securities and shall not be deemed to violate the Policy, or be invalid or Exchange Commission of Sri Lanka, which has been unenforceable, so long as the transaction is brought to the incorporated into the Listing Rules of the Colombo Stock notice of the committee as promptly as reasonably practical, Exchange, the Related Party Transactions Review Committee after it is entered into or after it becomes reasonably evident was established by the Board on 23 March 2016. The Related that the transaction is covered by the Policy. Party Transactions Review Committee is responsible to the Board of Directors comprises of two Independent Non Executive Directors and one Non-Independent Non-Executive Director. R. Seevaratnam Mr. R. Seevaratnam, a Fellow of the Institute of Chartered Chairman Accountants of England & Wales, was appointed as the Related Party Transactions Review Committee Chairman of the Related Party Review Committee. The other members of the Committee comprise Dr. A. N. Balasuriya, 05 August 2016 Independent Non Executive Director, Mr. D. Hasitha S. Jayawardena, Non-Independent Non-Executive Director.
A brief profile of each member is given on pages 28 to 29.
The Group Financial Controller and Head of Finance also attended these meetings by invitation when needed.
Purpose of the Committee The purpose of the Committee as set out in Appendix 9A of the CSE Listing Rules is to review all Related Party Transactions except for transactions set out in Rule 9.5, either prior to the transaction being entered into or, if the transaction is expressed to be conditional on such review, prior to completion of the transaction.
Meetings The Committee was appointed on 23rd March 2016 and the transactions were reviewed in respect of the financial year 2015/16 at the meeting held on 02 June 2016 as required by the applicable rules / regulations for the period under review and a process has been set in place to facilitate compliance in future.
Disclosures As per the existing practice, related party transactions (RPT) are disclosed to the stakeholders through the Company’s Financial Statements and in order to comply with the rules set out in Appendix 9A of the CSE Listing Rules the Committee newly appointed will establish its functions with a view of further strengthening the internal procedures and policies with the requirements thereof and relevant disclosures will be made in a timely and detailed manner in future reports.
75 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Annual Report of the Board of Directors
Board of Directors of Distilleries Company of Sri Lanka PLC has Results and Appropriations pleasure in presenting the 26th Annual Report and the Audited The gross turnover of the Group in the year under review Financial Statements of the Company and the Group for the amounted to Rs 88,865 Mn (2014/15 – Rs. 66,759 Mn). The financial year ended 31 March 2016.The details setout herein Group profit after tax was Rs. 5,670 Mn (2014/15 – Rs. 6,474 provide the pertinent information requested under Section 168 Mn). The segmental analysis of the turnover and profit is of the Companies Act No. 07 of 2007, the Colombo Stock provided in Note 5 to the Financial Statements. The Board of Exchange Listing Rules and the recommended best practices Directors has recommended a dividend of Rs. 3.35 per share on Corporate Governance. (2014/15 - Rs. 3.25 per share) for the financial year ended 31 March 2016, amounting to Rs. 1,005 Mn. The dividend payout Principal Activities for the year under review has been formulated in accordance The principal activities of Distilleries Company of Sri Lanka PLC with the Company’s policy to pay sustainable dividends linked are distillation, manufacture and distribution of liquor products. to long term performance, keeping in view the Company’s need The Company has also invested in a portfolio of diverse for capital for its growth plans and the intent to finance such business enterprises comprising the DCSL Group. plans through internally generated funds. An optimum debt / equity mix is warranted for DCSL given the volatility in money Business Review markets and fact that DCSL is taxed at a high rate of 40%. A review of the Group’s business, providing a comprehensive The Board of Directors confirms that the Company satisfies the analysis of the financial and operational performance along with requirements of the Solvency Test in accordance with Section future trends and business development activities are described 56 (2) of the Companies Act No. 07 of 2007 on the payment of in the ‘Chairman’s Message’ and ‘Management Discussion and the proposed dividend. A solvency certificate in this regard was Analysis’ sections of the Annual Report. received from the Auditors. Amount Due from Secretary to the Treasury o/a of Sri Lanka Insurance Corporation Ltd (SLIC) Financial Statements The Financial Statements of the Company and the Group for We still await the payment of profit earned during DCSL the year ended 31 March 2016 as approved by the Board of Group’s tenure at the helm of SLIC. We are hopeful that the Directors on 05 August 2016 are given on pages 82 to 162. profit earned to be paid as per the Supreme Court directive will be reimbursed to us as early as possible. Detailed note is given Audit Report in note 37 to the Financial Statements. The Auditor’s Report on the Financial Statements of the Company and the Group is given on page 81. Pelwatte Sugar Industries PLC (PSIP) Following the expropriation of the PSIP by the State, the Accounting Policies ownership of this property remains unresolved. The Company The Financial Statements have been prepared in accordance has not changed its position advocated since the occurrence with the Sri Lanka Accounting Standards (SLFRSs/LKASs). of this unfortunate incident of being the legal owner of the The accounting policies adopted in the preparation and property and as such, we have communicated our views to the presentation of the Financial Statements are given on pages Treasury. However, as a precautionary measure, the Company 88 to 104. There were no changes in the accounting policies has also lodged an official claim with the Compensation adopted by the Group during the year under review. Tribunal, appointed by the State. Since our group is deprived of participating in controlling the financial, operating policies and Investments other relevant activities, the financial statements of PSIP have Total investments of the Company in subsidiaries, associates been deconsolidated from the group financial statements. We and other investments amounted to Rs. 50,776 Mn (2014 /15 hope some clarity regarding this untoward situation would be - Rs. 51,088 Mn). The details of the investments are given in forthcoming within the new financial year. Further details are Notes 19, 20 and 21 to the Financial Statements. given in note 38 to the Financial Statements. Property, Plant and Equipment Melstacorp Limited The net book value of property, plant and equipment of the Melstacorp Share Trust (Trustee) was created effective from 1 Company and the Group as at 31 March 2016 was Rs. 6,657 April 2011 for the holding of the company shares. Details are Mn (2014/15 – Rs. 6,220 Mn) and Rs. 22,283 Mn (2014/15 – given in note 26.1 to the financial statements. Rs. 18,477 Mn.)
Distilleries Company of Sri Lanka PLC 76 Annual Report 2015/16 Total capital expenditure during the year for acquisition of senior Chartered Accountant who will undoubtedly add his property, plant and equipment by the Company and the Group significant experience and expertise to our Group. amounted to Rs.519 Mn (2014/15 – Rs. 4,481 Mn) and Rs. 1,828 Mn (2014/15 – Rs. 6,576 Mn) respectively. Directors Standing for Re-election In terms of Article 92 of the Articles of Association of the The details of property, plant and equipment are given in Note Company, C. R. Jansz and N. de S. Deva Aditya retire by 15 to the Financial Statements. rotation and being eligible are being recommended by the Board for re-election. Stated Capital and Reserves The Stated Capital of the Company as at 31 March 2016 was Further, to re-elect as a Director, Mr. D. H. S. Jayawardena, Rs. 300 Mn consisting of an equal number of Ordinary Shares. who is over 70 years, as a Director by passing a resolution; There was no change in the stated capital during the year. that the age limit stipulated in Section 210 of the Companies The total Group Reserves as at 31 March 2016 amounted Act No.07 of 2007 shall not apply to Mr. D. H. S. Jayawardena to Rs 62,904 Mn (2014 /15 – Rs. 60,706 Mn) comprising of who has attained the age of 73 and that he be re-elected a Capital Reserves of Rs. 8,433 Mn (2014 /15 – Rs. 5,963 Mn) Director of the Company. Also, to re elect as a Director, Mr. R. and Revenue Reserves & Retained Earnings of Rs. 54,471 Mn Seevaratnam, who is over 70 years, as a Director by passing (2014 /15 - Rs. 54,743 Mn) the movement of which is disclosed a resolution; that the age limit stipulated in Section 210 of in the Statement of Changes in Equity. the Companies Act No.07 of 2007 shall not apply to Mr. R. Seevaratnam who has attained the age of 72 and that he be Internal Controls and Risk Management re-elected a Director of the Company. The Directors acknowledge their responsibility for the Groups’ system of internal control. The systems are designed to Interest Register provide reasonable assurance that the assets of the Group are The Company maintains an Interest Register in compliance with safeguarded and to ensure that proper accounting records are the Companies Act No. 07 of 2007. This Annual Report also maintained. contains particulars of entries made in the Interest Register. Directors’ Interests in Contracts are disclosed in the Related The Board, having reviewed the system of internal control is Party Transactions under Note 35 to the Financial Statements. satisfied with the systems and measures in effect at the date A Code of Business Conduct and Ethics along with other of signing this report. At present DCSL is rolling out an ERP controls are in place to ensure that related party transactions system across the Group. involving directors, senior managers or their connected parties are conducted on an arm’s length basis. The Directors to the Capital and Other Commitments best of their knowledge and belief hereby confirm compliance Contingent liabilities and capital commitments are disclosed in with this code. Note 39 to the Financial Statements of the Company. Directors’ Shareholdings Events after the Reporting Period The shareholdings of Directors of the Company as defined There were no material events or circumstances that have under the Colombo Stock Exchange Rules are as follows. arisen since the reporting date that would require adjustment, other than the information disclosed in Note 41 to the Financial As at 31 March March Statements. 2016 2015 Employees D. H. S. Jayawardena Nil Nil The number of persons employed by the Company and Group C. R. Jansz Nil Nil as at 31 March 2016 was 1,136 (2014 /15 1,197) and 12,692 N. de S. Deva Aditya Nil Nil (2014 /15 -11,897) respectively. Capt. K. J. Kahanda (Retd.) Nil Nil Dr. A. N. Balasuriya Nil Board of Directors Nil D. Hasitha S. Jayawardena 1,882,833 The Board of Directors of the Company as at 31 March 2016 1,882,833 and their brief profiles are given on pages 28 and 29. R. Seevaratnam (Appointed Nil Nil w.e.f. 21/09/2015) The Board of Directors would like to welcome Mr. Ranjeevan Seevaratnam as an Independent Non-Executive Director, a
77 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Annual Report of the Board of Directors
Share Information Going Concern Information relating to Earnings, Dividends, Net Assets and The Directors having reviewed the business plans, capital Market Value per Share is given on page 4. There were 10,538 expenditure commitments and expected cash flows are registered shareholders holding ordinary voting shares as satisfied that the Company and the Group have adequate at 31 March 2016. The distribution and the composition of resources to continue operations for the foreseeable future shareholdings are given on page 163 of this report. Major and therefore continue to adopt the going concern basis in Shareholdings details of the Twenty Major Shareholders of the preparing these Financial Statements. Company including the number of shares held by them are given on page 166 of the Annual Report. Auditors Messrs. KPMG, Chartered Accountants are deemed Corporate Governance reappointed, in terms of section 158 of the Companies Act The Board has ensured that the Company has complied with No. 07 of 2007, as Auditors of the Company. A resolution to the Listing Rules of the Colombo Stock Exchange and the authorise the Directors to determine their remuneration will be Code of Best Practices on Corporate Governance issued by proposed at the Annual General Meeting. Total audit fees paid the Securities and Exchange Commission and the Institute of to Messrs. KPMG and other Auditors of Group companies Chartered Accountants of Sri Lanka. The Board is committed are disclosed in Note 11 to the Financial Statements. The towards the furtherance of Corporate Governance principles of Auditors of the Company and its subsidiaries have confirmed the Company. The measures taken in this regard are set out in that they do not have any relationship with the Company or the Corporate Governance Report. its subsidiaries (other than that of Auditor) that would have an impact on their independence. Board Committees The Board has appointed three Sub-Committees i.e. the Annual General Meeting Audit Committee, the Remuneration Committee and Related The 26th Annual General Meeting of the Company will be held Party Transaction Review Committee. The composition and at the Sri Lanka Foundation Institute, on 06th September 2016 responsibilities of the said Committees are detailed in the at 10.00 a.m. The Notice of Meeting appears on page 175 of respective reports. the Annual Report.
Related Party Transactions For and on behalf of the Board of Directors, The Board of Directors has given the following statements in respect of the related party transactions.
The related party transactions of the Company during the financial year have been reviewed by the Related Party
Transactions Review Committee and are in compliance with the D. H. S. Jayawardena C. R. Jansz Chairman / Managing Director Director Section 09 of the CSE Listing Rule.
Environment The Company has not engaged in any activity that was detrimental to the environment and has been in due compliance with all applicable laws and regulations of the country to the V. J. Senaratne best of its ability. The Group’s effort to conserve scarce and Company Secretary non-renewable resources are more fully described in the 05 August 2016 Sustainability Report. Colombo Statutory Payments The Directors, to the best of their knowledge and belief are satisfied that all statutory obligations due to the government and its employees have been duly paid or adequately provided for in the Financial Statements as confirmed by the Statement of Directors’ Responsibility.
Distilleries Company of Sri Lanka PLC 78 Annual Report 2015/16 Financial Information
80 Statement of Directors Responsibility 81 Independent Auditors’ Report 82 Statement of Profit or Loss and Other Comprehensive Income 83 Statement of Financial Position 84 Statement of Changes in Equity 87 Statement of Cash Flows 88 Notes to the Financial Statements 163 Statement of Value Added 164 Details of Real Estate 165 Shareholder Information 167 Ten Year Summary 175 Notice of Meeting 176 Notes 179 Form of Proxy 181 Attendance Slip
79 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Statement of Directors Responsibility
The Directors are responsible under the Companies Act No. Compliance Report 07 of 2007, to ensure compliance of the requirements set The Directors confirm that to the best of their knowledge and out therein to prepare Financial Statements for each financial belief that all statutory payments in relation to regulatory and year giving a true and fair view of the state of the affairs of the statutory authorities that were due in respect of the Company Company and its Subsidiaries as at the Reporting date and and its Subsidiaries as at the reporting date have been paid or the profit of the Company and its Subsidiaries for the financial where relevant, provided for. year. The Directors are also responsible for ensuring that proper accounting records are kept to disclose, with reasonable By Order of the Board, accuracy, the financial position and enable preparation of the Financial Statements.
The Board accepts the responsibility for the integrity and objectivity of the Financial Statements presented. The Directors confirm that proper accounting records have been maintained V. J. Senaratne Company Secretary and appropriate accounting policies have been selected and applied consistently in the preparation of such Financial 05 August 2016 Statements which have been prepared and presented in accordance with the Sri Lanka Accounting Standards and provide information required by the Companies Act and the Listing Rules of the Colombo Stock Exchange.
Further, the Directors confirm that the Financial Statements have been prepared on a going concern basis and are of the view that sufficient funds and other resources are available within the Group to continue its operations and to facilitate planned future expansions and capital commitments.
The Directors have taken adequate measures to safeguard the assets of the Group and in this regard have established appropriate systems of internal control with a view to preventing and detecting fraud and other irregularities.
The External Auditors were provided with all information and explanations necessary to enable them to form their opinion on the Financial Statements.
The Directors are confident that the Company would satisfy the solvency test as mandated under Section 56 (2) of the Companies Act No. 07 of 2007 regarding the payment of the proposed dividend and have sought a Certificate of Solvency from its Auditors.
Distilleries Company of Sri Lanka PLC 80 Annual Report 2015/16 Independent Auditors’ Report
TO THE SHAREHOLDERS OF DISTILLERIES estimates made by Board, as well as evaluating the overall COMPANY OF SRI LANKA PLC presentation of the financial statements.
Report on the Financial Statements We believe that the audit evidence we have obtained is We have audited the accompanying financial statements of sufficient and appropriate to provide a basis for our audit Distilleries Company of Sri Lanka PLC, (“the Company”), and opinion. the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of Opinion financial position as at 31 March 2016, and the statement of In our opinion, the consolidated financial statements give a profit or loss and other comprehensive income, statement of true and fair view of the financial position of the Group as at 31 changes in equity and, statement of cash flows for the year March 2016, and of its financial performance and cash flows for then ended, and a summary of significant accounting policies the year then ended in accordance with Sri Lanka Accounting and other explanatory information set out on pages 82 to 162 Standards. of the annual report. Report on Other Legal and Regulatory Requirements Board’s Responsibility for the Financial Statements As required by section 163 (2) of the Companies Act No. 07 of The Board of Directors (“Board”) is responsible for the 2007, we state the following: preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, a) The basis of opinion and scope and limitations of the audit and for such internal control as Board determines is necessary are as stated above. to enable the preparation of financial statements that are free b) In our opinion: from material misstatement, whether due to fraud or error. - we have obtained all the information and explanations that Auditors’ Responsibility were required for the audit and, as far as appears from our Our responsibility is to express an opinion on these financial examination, proper accounting records have been kept by statements based on our audit. We conducted our audit the Company, in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements - The financial statements of the Company give a true and and plan and perform the audit to obtain reasonable assurance fair view of its financial position as at 31 March 2016, and about whether the financial statements are free from material of its financial performance and cash flows for the year misstatement. then ended in accordance with Sri Lanka Accounting Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial - The financial statements of the Company, and the Group statements. The procedures selected depend on the auditors’ comply with the requirements of sections 151 and 153 of judgment, including the assessment of the risks of material the Companies Act No. 07 of 2007. misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the CHARTERED ACCOUNTANTS circumstances, but not for the purpose of expressing an Colombo opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of 05 August 2016 accounting policies used and the reasonableness of accounting
81 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Statement of Profit or Loss and Other Comprehensive Income Group Company
For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Gross Revenue 6 88,865,200 66,759,414 72,113,727 51,800,065 Net Revenue 6 33,840,097 28,912,874 21,540,884 16,916,526 Cost of Sales, Net Benefits Paid and Interest Expenses 7 (20,822,056) (16,233,934) (12,314,596) (8,093,405) Gross Profit 13,018,041 12,678,940 9,226,288 8,823,121 Other Operating Income 8 1,154,403 1,376,876 1,036,667 6,251,274 Distribution Expenses (1,770,814) (1,719,883) (467,255) (387,056) Administrative Expenses (3,604,812) (3,835,464) (1,364,727) (1,313,387) Other Operating Expenses 9 (350,489) (18,676) - - Results from Operating Activities 8,446,329 8,481,793 8,430,973 13,373,952 Finance Income 10.1.1 402,769 566,668 158,483 191,846 Finance Cost 10.1.2 (605,177) (711,309) (366,826) (495,479) Net Finance Income 10 (202,408) (144,641) (208,343) (303,633) Share of Profit of Equity-Accounted Investees (Net of Tax) 20.1 748,537 1,390,668 - - Profit before Income Tax Expense 11 8,992,458 9,727,820 8,222,630 13,070,319 Taxation 12 (3,322,878) (3,254,315) (2,920,455) (2,785,596) Profit for the Year 5,669,580 6,473,505 5,302,175 10,284,723 Other Comprehensive Income Items that will never be Reclassified to Profit or Loss Revaluation of Property, Plant and Equipment 2,842,321 26,092 540,330 - Share of Other Comprehensive Income of Equity- 20.1 298,775 85,771 - - Accounted Investees (Net of Tax) Actuarial Gain/(Losses) on Retirement Benefit Obligations 31.1 32,624 (53,859) 11,936 (19,885) Tax on Other Comprehensive Income 22.1.1 (386,378) 11,382 (143,566) 7,954 2,787,342 69,386 408,700 (11,931) Items that are or may be Reclassified to Profit or Loss Net Change in Fair Value of Available for Sale Financial Assets (3,473,765) 1,708,471 (224,350) 721,172 Reversal of AFS Reserve on Disposal of AFS Investments - - - (3,574,279) (3,473,765) 1,708,471 (224,350) (2,853,107) Total Other Comprehensive Income for the Year (686,423) 1,777,857 184,350 (2,865,038) Total Comprehensive Income for the Year 4,983,157 8,251,362 5,486,525 7,419,685 Profit Attributable To: Equity Holders of the Parent 5,963,414 6,552,956 5,302,175 10,284,723 Non Controlling Interest (293,834) (79,451) 5,669,580 6,473,505 5,302,175 10,284,723 Total Comprehensive Income Attributable To: Equity Holders of The Parent 5,271,994 8,339,918 5,486,525 7,419,685 Non Controlling Interest (288,837) (88,556) - - 4,983,157 8,251,362 5,486,525 7,419,685 Earnings Per Share 13
Basic 19.88 21.84 17.67 34.28 Diluted 19.88 21.84 17.67 34.28
The notes from pages 88 to 162 form an integral part of these financial statements.
Figures in brackets indicate deductions.
Distilleries Company of Sri Lanka PLC 82 Annual Report 2015/16 Statement of Financial Position
Group Company
As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 ASSETS Non Current Assets Property, Plant and Equipment 15 22,283,214 18,477,298 6,657,068 6,219,769 Intangible Assets 16 2,472,672 2,736,603 15,091 22,971 Investment Property 17 1,195,695 586,095 - - Biological Assets 18 3,914,452 3,551,869 - - Investments in Subsidiaries 19 - - 48,320,750 48,320,750 Investment in Equity Accounted Investees 20 26,293,943 24,192,237 28,703 28,703 Other Non Current Financial Investments 21 15,588,519 17,523,262 2,368,254 2,561,053 Deferred Tax Asset 22 702,452 502,714 49,884 54,845 Finance Lease, Hire Purchases and Operating Lease Receivables 23 1,634,071 868,225 - - Advances and Other Loans 24 433,724 459,705 - - 74,518,742 68,898,008 57,439,750 57,208,091 Current Assets Inventories 25 6,014,160 4,984,050 3,489,835 2,796,489 Trade and Other Receivables 26 11,279,695 10,092,709 6,287,602 4,234,115 Finance Lease, Hire Purchases and Operating Lease Receivables 23 931,350 311,999 - - Advances and Other Loans 24 1,840,213 1,224,551 - - Amounts Due From Related Companies 35.1.1 135,133 672,539 1,909,572 426,925 Other Current Financial Investments 21 2,998,528 2,431,815 58,409 177,863 Cash and Cash Equivalents 27 1,588,014 4,072,931 231,146 184,718 24,787,093 23,790,594 11,976,564 7,820,110 Total Assets 99,305,835 92,688,602 69,416,314 65,028,201 Equity and Liabilities Share Capital and Reserves Stated Capital 28 300,000 300,000 300,000 300,000 Reserves 29 22,475,352 22,751,448 11,518,891 11,341,703 Retained Earnings 40,428,243 37,952,431 41,236,762 38,641,622 Equity Attributable to Owners of The Company 63,203,595 61,003,879 53,055,653 50,283,325 Non Controlling Interest 3,529,347 3,820,118 - - Total Equity 66,732,942 64,823,997 53,055,653 50,283,325 Non Current Liabilities Interest Bearing Loans and Borrowings 30 2,831,914 1,776,356 - - Deferred Tax Liabilities 22 2,108,642 1,301,892 988,000 532,164 Employee Benefits 31 1,018,298 949,961 124,708 137,110 Other Deferred Liabilities 32 250,494 258,935 - - 6,209,348 4,287,144 1,112,708 669,274 Current Liabilities Trade and Other Payables 33 11,997,768 10,211,241 7,468,734 6,032,439 Deposit Liabilities 34 1,207,074 511,789 - - Other Deferred Liabilities 32 75,259 56,112 - - Amount due to Related Companies 35.1.2 294,030 272,403 1,709,280 1,305,721 Income Tax Payable 1,095,567 463,460 872,498 260,986 Interest Bearing Loans and Borrowings 30 9,485,110 7,809,076 4,780,000 4,795,000 Bank Overdrafts 27 2,208,737 4,253,380 417,441 1,681,456 26,363,545 23,577,461 15,247,953 14,075,602 Total Liabilities 32,572,893 27,864,605 16,360,661 14,744,876 Total Equity and Liabilities 99,305,835 92,688,602 69,416,314 65,028,201 Net Assets per Share 210.68 203.35 176.85 167.61 The notes from pages 88 to 162 form an integral part of these Financial Statements. I certified that the Financial Statements are prepared and presented in compliance with the requirements of the Companies Act No.07 of 2007.
N.N. Nagahawatte Head of Finance The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved for and on behalf of the Board of Directors;
D. H. S. Jayawardena C. R. Jansz Chairman / Managing Director Director Colombo, 05 August 2016 83 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Statement of Changes in Equity - 714 Total Equity 85,771 - - - Non Interest Controlling - Total Total 25,595 497 26,092 1,708,158 313 1,708,471 1,965 1,965 (32,484) (30,519) (34,090) 714 (23,825) 85,771 (56,387) 1,786,962 (9,105) 1,777,857 (32,562) (32,562) (9,915) (42,477) Earnings (975,000) (975,000) (15,674) (990,674) Retained 6,496,569 8,339,918 (88,556) 8,251,362 6,552,956 6,552,956 (79,451) 6,473,505 37,952,431 61,003,879 3,820,118 61,003,879 64,823,997 37,952,431 ------Fund (2,844) (1,048,407) (972,321) (48,158) (1,020,479) (2,844) (41,282) Investment --- - 28,085 for Sale Reserve Available 1,736,243 1,708,158 1,736,243 - - - Timber 62,223 39,932 Reserve 102,155 - - (37,043) (37,043) (37,043) Reserve Exchange Attributable to Equity Holders of Parent Attributable to Equity Holders of Parent Fluctuation -- 63,856 General Reserve Fund 4,194 63,856 4,194 Reserve ------Capital Reserve ------25,595 (91,275) (91,275) Reserve 144,149 118,554 144,149 Revaluation ------Stated Capital Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 300,000 5,846,432 110,930 5,992 8,286,434 337,838 700,076 7,463,746 300,000 5,793,558 110,930 1,798 8,222,578 374,881 597,921 5,727,503 3,956,832 53,636,282 57,593,114 2,844 32,504,269 Effect On Percentage Holding Change Effect On Percentage Contributions by and Distributions to Owners Total 2015 Balance as at 31 March Total Comprehensive Income for the Year Comprehensive Total in Recorded with Owners Directly Transactions the Equity Contributions by and Distributions to Owners of Net Assets Equity-Accounted Share Investees (Net of Tax) Dividends Paid during the Year Retained Earnings from/to Transferred Share of Other Comprehensive Income of Equity- of Other Comprehensive Share Accounted Investees (Net of Tax) Income for the Year Other Comprehensive Total Group Balance as at 01 April 2014 Income for the Year Comprehensive Total Year for the Profit Income Other Comprehensive for Sale of Available Net Change in Fair Value Financial Assets Plant and Equipment Revaluation of Property, Defined Benefit Plan Actuarial Gains (Losses) (Net of Tax)
Distilleries Company of Sri Lanka PLC 84 Annual Report 2015/16 Total Equity 14,791 298,775 (975,000) 2,842,321 - - - - Non (1,826) (1,826) Interest Controlling - - - Total Total 2,842,321 (3,473,662) (103) (3,473,765) (3,640) (385,328) (1,050) (386,378) 55,051 (691,420) 4,997 (686,423) 26,474 26,474 6,150 32,217 32,624 298,775 (42,076) (413,508) 14,791 (975,000) (975,000) Earnings Retained 6,018,465 5,271,994 (288,837) 4,983,157 5,963,414 5,963,414 (293,834) 5,669,580 (2,112,069) (2,112,069) (108) (2,112,177) (1,430,584) (960,209) (1,826) (962,035) 35,840,362 58,891,810 3,820,010 62,711,820 37,952,431 61,003,879 3,820,118 64,823,997 40,428,243 63,203,595 3,529,347 66,732,942 ------Fund Investment ------8,543 for Sale Reserve Available (3,465,119) (3,465,119) (3,473,662) - - - 38,733 Timber Reserve Reserve 258,015 258,015 258,015 Exchange Attributable to Equity Holders of Parent Attributable to Equity Holders of Parent Fluctuation - - General Reserve 327,534 (3,209) 94,885 - Fund 3,343 Reserve ------9,089 9,089 3,343 327,534 (3,209) 133,618 Capital Reserve Reserve (381,688) 2,842,321 2,460,633 2,460,633 Revaluation ------Stated Capital Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 300,000 5,846,432 110,930 5,992 8,286,434 337,838 700,076 7,463,746 300,000 5,846,432 110,930 5,992 8,286,434 337,838 700,076 7,463,746 300,000 8,307,065 120,019 9,335 8,613,968 592,644 833,694 3,998,627 Group Balance as at 01 April 2015 (Note 1) Super Gain Tax Income for the Year Comprehensive Total Year For The Profit Income Other Comprehensive for Sale of Available Net Change in Fair Value Financial Assets Defined Benefit Plan Actuarial Gains (Losses) (Net Of Tax) and Equipment Revaluation of Property,Plant Income of Equity- of Other Comprehensive Share Accounted Investees (Net of Tax) Income on Other Comprehensive Tax Income for the Year Other Comprehensive Total Income for the Year Comprehensive Total in recorded with owners directly Transactions the Equity Interest Dividends paid to Non Controlling of Net Assets Equity-Accounted Share Investees (Net of Tax) Dividends Paid During the Period Retained Earnings From/To Transferred Contributions by and Distributions to Owners Total 2016 Balance as at 31 March to the Act, super gain Tax of Rs.2.1 Bn. According is liable for Super Gain of Part II the Finance Act, No. 10 2015 which was certified on 30th October 2015, Group As per the provisions of the Sri Lanka requirements relating to the year of assessments which commenced on 1st April 2013. The Act supersedes in the financial statements tax shall be deemed to an expenditure on (SoAT) by the Statement of Alternative of the said Act as recommended Treatment with the requirements hence the expense of super gain tax is accounted in accordance Accounting Standards, Accountants of Sri Lanka, dated 24th November 2015. accounting for super gain tax issued by the Institute of Chartered pages 88 to 162 form an integral part of these financial statements. The notes from in brackets indicate deductions. Figures
85 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Statement of Changes in Equity - - Total Total 7,954 7,954 540,330 540,330 (224,350) (2,853,107) - - 7,954 7,954 7,162 7,162 184,350 (4,774) (143,566) 11,936 11,936 11,936 (19,885) (19,885) 676,645 676,645 (975,000) (975,000) (298,355) (298,355) (975,000) (975,000) (975,000) (975,000) (975,000) Earnings Retained 5,302,175 5,302,175 5,302,175 (1,739,197) (1,739,197) 10,284,723 10,284,723 10,284,723 ------(224,350) (224,350) (224,350) 5,309,337 5,486,525 (2,853,107) (2,853,107) (11,931) (2,865,038) (2,853,107) 10,272,792 7,419,685 Available for Available Sale Reserve Sale Reserve ------General Reserve Reserve ------Capital Capital Reserve Reserve ------540,330 540,330 401,538 401,538 401,538 401,538 (676,645) (676,645) Reserve Reserve (138,792) Revaluation ------Stated Stated Capital Capital Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 300,000 300,000 1,971,799 107,882 8,210,000 4,581,774 28,667,185 43,838,640 300,000 300,000 1,295,154 107,882 8,210,000 1,728,667 38,641,622 50,283,325 300,000 300,000 1,295,154 107,882 8,210,000 1,728,667 38,641,622 50,283,325 300,000 300,000 1,295,154 107,882 8,210,000 1,728,667 36,902,425 48,544,128 300,000 300,000 1,696,692 107,882 8,210,000 1,504,317 41,236,762 53,055,653 Company Balance as at 01 April 2014 to the Act, super gain tax shall Tax of Rs. 1.7 Bn. According of Part II the Finance Act, No. 10 2015 which was certified on 30 October 2015, Company is liable for Super Gain As per the provisions of the Sri Lanka Accounting Standards, requirements relating to the year of assessment which commenced on 1st April 2013. The Act supersedes in the financial statements be deemed to an expenditure on Accounting for Super Gain Tax (SoAT) by the Statement of Alternative of the said Act as recommended Treatment with the requirements hence the expense of Super gain tax is accounted in accordance Accountants of Sri Lanka, dated 24 November 2015. issued by the Institute of Chartered pages 88 to 162 form an integral part of these financial statements. The notes from in brackets indicate deductions. Figures Total Comprehensive Income for the Year Comprehensive Total for the year Profit Other Comprehensive Income Other Comprehensive for Sale Financial Sssets of Available Net Change in Fair Value Actuarial Gain/(Losses) on Retirement Benefit Obligations Actuarial Gain/(Losses) on Retirement Tax on Other Comprehensive Income on Other Comprehensive Tax Total Other Comprehensive Income for the Year Income for the Year Other Comprehensive Total Total Comprehensive Income for the Year Comprehensive Total Transactions with Owners Directly Recorded in the Equity Recorded with Owners Directly Transactions Dividends Paid During the Period Transferred from/to Retained Earnings from/to Transferred Total Other Movements Total Balance as at 31 March 2015 Balance as at 31 March Balance as at 01 April 2015 Super Gain Tax Paid Super Gain Tax Total Comprehensive Income for the Year Comprehensive Total Year for the Profit Other Comprehensive Income Other Comprehensive for Sale Financial Sssets of Available Net Change in Fair Value Actuarial Gain/(Losses) on Retirement Benefit Obligations Actuarial Gain/(Losses) on Retirement Revaluation of Property, Plant and Equipment Revaluation of Property, Income Tax on Other Comprehensive Income on Other Comprehensive Income Tax Income on Other Comprehensive Tax Total Other Comprehensive Income for the Year Income for the Year Other Comprehensive Total Total Comprehensive Income for the Year Comprehensive Total Transactions with Owners Directly Recorded in the Equity Recorded with Owners Directly Transactions Dividends Paid During the Period Total Contributions by and Distributions to Owners Total Balance as at 31 March 2016 Balance as at 31 March
Distilleries Company of Sri Lanka PLC 86 Annual Report 2015/16 Statement of Cash Flows
Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.000 Rs.000 Rs.000 Rs.000 Cash Flow from Operating Activities Profit Before Tax 8,992,458 9,727,820 8,222,630 13,070,319 Adjustments for; Gain on Disposal of Property, Plant and Equipment (36,803) (39,762) (33,706) (430,761) Depreciation of Property,Plant and Equipment 2,109,214 1,257,964 504,289 160,882 Provision for Retirement Benefit Obligation 173,951 161,227 24,971 20,641 Provision/ (Reversal) for Inventories (156,075) (6,828) - - Provision/(Reversal) of Bad & Doubtful Debts and Impairment of Loans and Advances 250,712 174,749 19,326 7,916 Share of Profit of Equity-Accounted Investees, Net of Tax (748,537) (1,390,668) - - Amortisation of Biological Assets 39,597 39,245 - - Amortisation of Intangible Assets 285,157 277,477 7,880 699 Amortisation of Deferred Grants & Subsidies (11,275) (11,443) - - Loss on Revaluation of Property,Plant and Equipment 222,570 - - - (Gain)/Loss on Change In Fair Value of Financial Assets at Fair Value through Profit or Loss (69,940) (143,869) 16,349 (35,161) (Gain)/Loss on Transalation of Foreign Currency 48,133 12,781 - Deffered Income Recognised (74,690) (72,576) - (Profit)/Loss on Sale of Subsidiaries,Associates and Quoted Shares (20,263) (330,926) 11,743 (5,429,933) Dividend Income (661,474) (351,653) (879,632) (278,221) (Gain)/Loss on Change in Fair Value of Biological Assets (89,603) (92,377) - Fair Value Gain on Investment Property (86,912) - - Interest Income (312,881) (422,630) (158,483) (156,684) Interest Expense 625,472 777,005 350,477 495,478 Operating Profit/(Loss) before Working Capital Changes 10,478,811 9,553,346 8,085,842 7,425,175
(Increase)/Decrease in Inventories (874,035) (541,426) (693,347) (550,332) (Increase)/Decrease in Receivables (5,688,209) (2,343,083) (3,555,464) (514,246) Increase/(Decrease) in Payables 2,502,767 1,280,131 1,839,860 1,256,846
Cash Flows Generated from/(used in) Operations 6,419,334 7,948,968 5,676,891 7,617,443
Interest Paid (625,472) (772,985) (350,477) (495,478) Income Tax Paid (include Super Gain Tax Paid) (4,463,144) (3,495,720) (3,730,911) (3,028,617) Retiring Gratuity Paid (72,992) (96,898) (25,437) (13,585)
Net Cash Flows Generated from/(used in) Operations 1,257,726 3,583,365 1,570,066 4,079,763
Cash Flow from Investing Activities Acquisition of Property, Plant and Equipment (3,259,007) (9,668,788) (437,739) (817,325) Acquisition of Investment Property (445,487) (579,005) - Additions to Biological Assets (312,574) (322,702) - Net Proceeds from Disposal of AFS 91,361 585,369 91,362 577,319 Investment in Equity Accounted Investees (840,694) (55,744) - Proceeds from Sale of Property, Plant and Equipment 56,458 6,213,329 33,831 14,334 Interest Received 312,881 422,630 158,483 156,684 Dividend Received 996,600 686,822 879,632 278,221 Proceeds from Disposal/ (Acquisition) of Biological Assets - Acquisition of Intangible Assets (20,559) (23,587) - Net Cash Flows Generated from/(used in) Investing Activities (3,421,021) (2,741,676) 725,570 209,233
Cash Flow From Financing Activities Acquisition of Non Controlling Interests - (30,686) - - Principle Repayments under Lease Liabilities (41,670) (10,160) - - Proceeds from Long Term Interest Bearing Loans and Borrowings 4,559,866 1,259,137 - - Repayments of Long Term Interest Bearing Loans and Borrowings (1,810,033) (162,904) - - Dividend Paid (970,193) (975,000) (970,193) (975,000) Dividends Paid by Subsidiaries to Minority Shareholders (1,826) (15,674) - - Receipt of Deferred Income 96,671 89,765 - - Net Cash Flows Generated from/(used in) Financing Activities 1,832,815 154,478 (970,193) (975,000)
Net Increase/(Decrease) in Cash and Cash Equivalents (330,480) 996,167 1,325,443 3,313,996 Cash and Cash Equivalents at the Beginning of the Year (7,159,141) (8,155,308) (6,291,738) (9,605,734) Cash and Cash Equivalents at the end of the Year (Note 27) (7,489,621) (7,159,141) (4,966,295) (6,291,738)
Note B Analysis of Cash and Cash Equivalents at the end of the Year Short Term Deposits 27.1 616,312 3,180,904 - 42,099 Cash at Bank 27 856,821 804,823 137,135 66,553 Cash in Hand 27 30,774 17,862 9,904 6,724 Cash in Transit 27 84,107 69,342 84,107 69,342 Other Short Term Borrowings 30 (6,868,898) (6,978,692) (4,780,000) (4,795,000) Bank Overdraft 27 (2,208,737) (4,253,380) (417,441) (1,681,456) (7,489,621) (7,159,141) (4,966,295) (6,291,738) Figures in brackets indicate deductions. The Financial Statements are to be read in conjunction with related notes, which form a part of the Financial Statements of the Group set out in pages 88 to 162.
87 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
1. Reporting Entity ended 31 March 2016 comprise the Company and 1.1 Domicile & Legal Form its subsidiaries (together referred to as the “Group” and individually “Group companies”) and the Group’s Distilleries Company of Sri Lanka PLC (“the Company”) interests in associates. is a quoted Public Limited Company incorporated and domiciled in Sri Lanka. The registered office 1.2 Principle Activities and Nature of Operation and principal place of business of the Company is located at 110, Norris Canal Road, Colombo 10. 1.2.1 Company The Consolidated Financial Statements of Distilleries The principal activity of the Company is distillation, Company of Sri Lanka PLC, as at and for the year manufacture and distribution of liquor products.
1.2.2 Subsidiaries
Name of Subsidiary Principal Activities 1 Melstacorp Limited Investment Holding Company 2 Balangoda Plantations PLC Cultivation and processing of Tea & Rubber 3 Bellvantage (Pvt) Ltd BPO, KPO & Software Development 4 Bogo Power (Pvt) Ltd Generation and sale of Hydro Electric Energy 5 Browns Beach Hotel PLC Leisure 6 Continental Insurance Lanka Limited General Insurance Services 7 Melsta Logistics (Pvt) Ltd Automobile Servicing and Logistics 8 Melsta Regal Finance Ltd Finance, Leasing, Hire Purchasing and Factoring 9 Milford Holdings (Pvt) Ltd Investment Holding Company 10 Periceyl (Pvt) Ltd Distribution of locally manufactured Foreign Liquor 11 Splendor Media (Pvt) Ltd Media Buying & Creative Services 12 Timpex Ltd Investment Holding Company 13 Melsta Properties (Pvt) Ltd Management of Real Estate 14 Melsta Tower (Pvt) Ltd. Real Estate 15 Melsta Technologies (Pvt) ltd. IT Services 16 Lanka Bell Ltd Telecommunication Services 17 Texpro Industries Ltd Dyeing and Printing Woven Fabrics 18 Negombo Beach Resorts (Pvt) Ltd Leisure 19 Bell Solutions (Pvt) Ltd Information & Communication Technology 20 Telecom Frontier (Pvt) Ltd Telecommunication Services
1.2.3 Associates
Name of Associate Principal Activities 1 Madulsima Plantations PLC Cultivation and processing of tea 2 Aitken Spence PLC Diversified holdings
1.3 Parent Enterprise and Ultimate Parent Enterprise as laid down by the Institute of Chartered Accountants The immediate and ultimate parent entity of Distilleries of Sri Lanka (ICASL) and the requirements of the Company of Sri Lanka PLC is Milford Exports Ceylon Companies Act No. 07 of 2007. (Pvt) Limited. 2.2 Directors Responsibility for Financial Statements 2. Basis of Preparation The Board of Directors is responsible for the 2.1 Statement of Compliance preparation and presentation of the Consolidated Financial Statements in accordance with Sri Lanka The Financial Statements of the Company and the Accounting Standards. Group have been prepared in accordance with new Sri Lanka Accounting Standards (referred “SLFRS/LKAS”)
Distilleries Company of Sri Lanka PLC 88 Annual Report 2015/16 2.3 Approval of Financial statements Information about assumptions and estimation The Consolidated Financial Statements for the year uncertainties that have significant effect on the ended 31 March 2016 were authorised for issue on amounts recognised in the consolidated financial 05 August 2016 by the Board of Directors. statements is included in following notes;
2.4 Basis of Measurement Note 18 - Biological Assets The Consolidated Financial Statements have been Note 22 - Recognition of deferred tax assets prepared on the historical cost basis except for the :availability of future taxable profit against which carry following items, which are measured on an alternative forward tax losses can be used. basis on each reporting date. Note 26 - Provisions for bad and doubtful debts. Property, Plant and Fair value Equipment- Land and Note 31 - Measurement of defined benefit plan; key Building actuarial assumptions. Investment Property Fair Value Defined benefit obligation Actuarially valued and Note 38 & 39 - Recognition and measurement recognised at present of provisions for contingencies; key assumptions value of the defined about the likelihood and magnitude of an outflow of benefit obligation resources. Available for sale financial Fair Value 3. Significant Accounting Policies assets The Group has consistently applied the following Fair value through profit or Fair Value accounting policies to all periods presented in these loss financial assets consolidated financial statements. Consumable Biological Fair Value Assets 3.1. Basis of consolidation The Financial Statements of the Company and Group 2.5 Functional and Presentation Currency comprise the Financial Statements of the Company and its Subsidiaries for the year ended 31 March 2016 The Consolidated Financial Statements are presented other than Periceyl (Pvt) Ltd, Continental Insurance in Sri Lankan Rupees, which is the Company’s Lanka Limited and Balangoda Plantations PLC whose functional currency. All amounts have been rounded to financial year ends on 31 December. The difference the nearest thousand, unless otherwise indicated. between the reporting date of the above companies 2.6 Materiality and Aggregation and that of the parent does not exceed three months but adjustments are made for any significant Each material class of similar item is presented transactions or events up to 31 March. separately in the Financial Statements. Items of dissimilar nature or function are presented separately 3.1.1. Business combinations unless they are immaterial. The Group accounts for business combinations using 2.7 Use of Judgments and Estimates the acquisition method when control is transferred to the Group. The consideration transferred in the In preparing these consolidated financial statements, acquisition is generally measured at fair value, based management has made judgments, estimates and on are the identifiable net assets acquired. Any assumptions that affect the application of the Group goodwill that arises is tested annually for impairment. accounting policies and the reported amounts of Any gain on a bargain purchase is recognised in profit assets, liabilities, income and expenses. Actual results or loss immediately. Transaction costs are expensed as may differ from those estimates. incurred, except if related to the issue of debt or equity securities. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised prospectively.
89 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
The Group measures goodwill at the acquisition date as: Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no • The fair value of the consideration transferred; plus evidence of impairment. • The recognised amount of any non – controlling interest in acquiree; plus 3.2.5 Interests in Equity Accounted Investees • If the business combination is achieved in stages, Associates are those entities in which the Group the fair value of the pre – existing equity interest in has significant influence, but not control, over the the acquire; less financial and operating policies. Interests in associates are accounted for using the equity method (equity- • The net recognised amount (generally fair value) accounted investees).They are recognised initially at of the identifiable assets acquired and liabilities cost, which includes transaction costs. Subsequent to assumed. initial recognition, the consolidated financial statements The consideration transferred does not include include the Group’s share of the profit or loss and OCI amounts related to the settlement of pre-existing of equity accounted investees, until the date on which relationships. Such amounts are generally recognised significant influence ceases. in profit or loss. 3.2 Foreign Currency Transactions 3.1.1 Subsidiaries Transactions in foreign currencies are translated Subsidiaries are entities controlled by the Group. The into the respective functional currencies of Group Group ‘controls’ an entity if it is exposed to, or has companies at the exchange rates at the dates of the rights to, variable returns from its involvement with the transactions. entity and has the ability to affect those returns through its power over the entity. The financial statements Monetary assets and liabilities denominated in foreign of subsidiaries are included in the consolidated currencies are translated into the functional currency at financial statements from the date on which control the exchange rate at the reporting date. Non-monetary commences until the date when control ceases. assets and liabilities that are measured at fair value in a foreign currency are translated into the functional 3.2.2 Non-controlling interests (“NCI”) currency at the exchange rate when the fair value was determinated. Foreign currency differences are NCI are measured at their proportionate share of the generally recognised in profit or loss. Non-monetary acquiree’s identifiable net assets at the acquisition items that are measured based on historical cost in a date. foreign currency are not translated. Changes in the Group’s interest in a subsidiary that 3.3 Statement of Financial Position do not result in a loss of control are accounted for as equity transactions. 3.3.1 Property, Plant & Equipment 3.3.1.1 Freehold Assets 3.2.3 Loss of control a. Recognition When the Group loses control over a subsidiary, it Property, plant & equipment are tangible items that are derecognises the assets and liabilities of the subsidiary, held for servicing, or for administrative purposes and and any related NCI and other components of equity. are expected to be used during more than one period. Any resulting gain or loss is recognised in profit or Property, Plant & Equipment are recognised if it is loss. Any interest retained in the former subsidiary is probable that future economic benefits associated with measured at fair value when control is lost. the assets will flow to the Group and cost of the asset can be reliably measured. 3.2.4 Transactions eliminated on consolidation Intra-group balances and transactions, and any b. Measurement unrealised income and expenses (except for foreign Items of property, plant & equipment are measured at currency transaction gains or losses) arising from cost or at fair value in the case of land and buildings intra-group transactions, are eliminated. Unrealised less accumulated depreciation and accumulated gains arising from transactions with equity impairment losses. accounted investees are eliminated against the investment to the extent of the Group’s interest in The cost of property, plant & equipment includes the investee. expenditures that are directly attributable to the
Distilleries Company of Sri Lanka PLC 90 Annual Report 2015/16 acquisition of the asset. The cost of self-constructed estimated useful lives, and is generally recognised in assets includes the cost of materials and direct labour, profit or loss. Freehold land is not depreciated. Leased any other costs directly attributable to bringing the assets are depreciated over the shorter of the lease asset to a working condition for its intended use, and term or the useful lives unless it is reasonably certain the costs of dismantling and removing the items and that the Group will obtain ownership by the end of the restoring the site on which they are located. lease term.
If significant parts of an item of property, plant Significant components of individual assets are and equipment have different useful lives, they are assessed and if a component has a useful life that accounted for as separate items (major components) is different from the remainder of that asset, that of property, plant and equipment. component is depreciated separately. The estimated useful lives of property, plant and equipment for current c. Subsequent Cost and comparative periods are as follows. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, Freehold Buildings 20 years as appropriate, only when it is probable that future Plant, Machinery & Equipment 10 years economic benefit associated with the item will flow to Furniture, Fittings, Office Equipment & 10 years the Group and the cost of the item can be measured Fire Fighting Equipment reliably. The cost of the day-to-day servicing of property, plant and equipment are recognised in the Vats & Casks 10 years profit or loss. Oil Storage Tanks 10 years Computers 03 years d. De-recognition Motor Vehicles 04 years An item of property, plant and equipment is Empty Drums 02 years derecognised upon disposal or when no future Kitchen Equipment 10 years economic benefits are expected from its use or disposal. Any gain or loss arising on derecognising of Soft Furnishing, Crockery, Cutlery and 05 years the asset (calculated as the difference between the Glassware net disposal proceeds and the carrying amount of the Depreciation of an asset begins when it is available for asset) is included in the statement of profit or loss in use and ceases at the earlier of the date that the asset the year the asset is derecognised. is classified as held for sale and the date that the asset is derecognised. e. Revaluation The Group revalues its land and buildings at least Depreciation methods, useful lives and residual values once in every five years which is measured at its fair are reviewed at each reporting date and adjusted if value at the date of revaluation less any accumulated appropriate. depreciation and any accumulated impairment losses. On revaluation of land, any increase in the g. Capital Work-in-progress revaluation amount is credited to the revaluation Capital work-in-progress is stated at cost. These are reserve in shareholder’s equity unless it offsets a expenses of a capital nature directly incurred in the previous decrease in value of the same asset that was construction of buildings, major plant and machinery, recognised in the profit or loss. A decrease in value awaiting capitalisation. is recognised in the profit or loss where it exceeds the increase previously recognised in the revaluation h. Reclassification to investment property reserve. Upon disposal, any related revaluation reserve is transferred from the revaluation reserve to retained When the use of a property changes from owner- earnings and is not taken into account in arriving at the occupied to investment property, the property is gain or loss on disposal. remeasured to fair value and reclassified accordingly. Any gain arising on this remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment f. Depreciation losses on the specific property, with any remaining gain Depreciation is calculated to write off the cost of items recognised in OCI and presented in the revaluation reserve. of property, plant and equipment less their estimated Any loss is recognised in profit or loss. residual values using straight-line basis over the
91 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
3.3.2 Leases or changes in circumstance indicate that it might 3.3.2.1 Leased Assets be impaired and carried at cost less accumulated impairment losses. Impairment losses on goodwill are Assets held by the Group under leases that transfer not reversed. to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The Goodwill is allocated to cash generating units for the leased assets are measured at an amount equal to purpose of impairment testing. The allocation is made the lower of their fair value and the present value of to those cash generating units or groups of cash minimum lease payments at the inception. Subsequent generating units that are expected to benefit from the to initial recognition, the assets are accounted for in business combination in which goodwill arose. accordance with the accounting policy applicable to that asset. b. Subsequent expenditure The principal/ capital elements payable to the lessor Subsequent expenditure is capitalised only when it are shown as liability/ obligation. The lease rentals are increases the future economic benefits embodied treated as consisting of capital and interest elements. in the specific asset to which it relates. All other The capital element in the rental that is applied to expenditure, including expenditure on internally reduce the outstanding obligation and interest element generated goodwill and brands, is recognised in profit is charged against profit, in proportion to the reducing or loss as incurred. capital element outstanding. c. Amortisation The cost of improvements to or on leased property is Amortisation is calculated to write off the cost of capitalised, disclosed as improvements to leasehold intangible assets less their estimated residual values property and depreciated over the unexpired period using straight-line basis over the estimated useful lives of the lease, or the estimated useful lives of the from the date that they are available for use, and is improvements, whichever is shorter. generally recognised in profit or loss. Goodwill is not amortised. 3.3.2.2 Operating Leases When the lessor effectively retains substantially all The estimated useful lives for the current and the risks and rewards of an asset under the lease comparative periods are as follows: agreement, such leases are classified as operating leases. Payments under operating leases are Computer software 3 years recognised as expense in the profit or loss on a straight line basis over the term of the lease. 3.3.4 Impairment 3.3.4.1 Non Financial Assets 3.3.3 Intangible Asset The carrying amounts of the Group’s non-financial An intangible asset is recognised if it is probable assets are reviewed at each reporting date to that future economic benefits will flow to the entity determine whether there is any indication of and the cost of the asset can be measured reliably impairment. If any such indication exists, then the in accordance with LKAS 38 “Intangible Assets”. asset’s recoverable amount is estimated. Goodwill is Intangible assets with finite useful lives are measured at tested for annually for impairment. cost less accumulated amortisation and accumulated impairment losses. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds a. Goodwill its recoverable amount. A cash-generating unit is the Goodwill represents the excess of the cost of smallest identifiable asset group that generates cash acquisition over the fair value of Group’s share of the flows that are largely independent from other assets net identifiable assets of the acquired subsidiary at the and groups. date of acquisition. Goodwill arising on the acquisition The recoverable amount of an asset or cash- of subsidiaries is measured at cost less accumulated generating unit is the greater of its value in use and impairment losses. its fair value less costs to sell. In assessing value in Goodwill acquired in a business combination is tested use, the estimated future cash flows are discounted to annually for impairment or more frequently if events their present value using a pre-tax discount rate that
Distilleries Company of Sri Lanka PLC 92 Annual Report 2015/16 reflects current market assessments of the time value 3.3.7 Financial Instruments of money and the risks specific to the asset. 3.3.7.1 Non-derivative Financial Assets The Group recognises a financial asset in its Statement An impairment loss is recognised in profit or loss. They of Financial Position when the Group becomes a party are allocated first to reduce the carrying amount of any to the contractual provisions of the instrument. goodwill allocated to the cash generating unit and then to reduce the carrying amounts of the other assets in The Group initially recognises loans and receivables the cash generating unit on a pro rata basis. and debt securities issued on the date when they are originated. All other financial assets are initially An impairment loss in respect of goodwill is not recognised on the trade date. reversed. The Group derecognises a financial asset when 3.3.5 Investment Property the contractual rights to the cash flows from the Investment property is property held either to earn asset expire, or it transfers the rights to receive the rental income or for capital appreciation or for contractual cash flows in a transaction in which both, but not for sale in the ordinary course of the substantially all the risks and rewards of ownership of business, use in the production or supply of goods the financial asset are transferred, or it neither transfers or services or administrative purpose. Investment nor retains substantially all of the risks and rewards of properties are initially measured at its cost including ownership and does not retain control over transferred related transaction costs and subsequently at fair asset. value with any change therein recognised in profit or loss. Financial assets and financial liabilities are offset and the net amount presented in the statement of financial Investment properties are derecognised when position when, and only when, the Group has a legal disposed or permanently withdrawn from use right to offset the amounts and intends either to settle because no future economic benefits are expected. them on a net basis or to realise the asset and settle Any gains or losses on the retirement or disposal the liability simultaneously. is recognised in the profit or loss in the year of retirement or disposal. Transfers are made to The Group has following non derivative financial assets: investment property, when there is a change in use. Fair value through profit or loss, Loans and receivables, Where a group company occupies in a significant Held to Maturity and Available for sale. portion of an investment property of a subsidiary, such investment properties are treated as property, a. Fair Value through Profit or Loss plant & equipment the consolidated financial A financial asset is classified as fair value through statements and accounted for as per LKAS 16 profit or loss if it is classified as held for trading or is Property, Plant & Equipment. designated as such upon initial recognition. Financial assets are designated as fair value through profit or 3.3.6 Inventories loss if the Group manages such investments and Inventories are measured at the lower of cost or makes purchase and sales decisions based on their net realisable value. Net realisable value is the fair value in accordance with the Group’s documented estimated selling price in the ordinary course of risk management or investment strategy. Upon business less the estimated cost of completion initial recognition, attributable transaction costs are and selling expenses. The general basis on which recognised in profit or loss as incurred. Financial assets cost is determined is: all inventory items, except at fair value through profit or loss are measured at fair manufactured inventories and work-in progress are value, and changes therein, including any interests or measured at weighted average directly attributable dividend income, are recognised in profit or loss. cost. Fair value through profit or loss comprise trading Manufactured inventories and work-in-progress are portfolio of the Group which includes investment in measured at weighted average factory cost which quoted shares and share warrants. includes all direct expenditure and appropriate shares of production overhead based on normal b. Loans and Receivables operating capacity. Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
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Notes to the Financial Statements
market. Such assets are recognised initially at fair quoted shares purchased for long term investment value plus any directly attributable transaction costs. purpose. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective 3.3.7.2 Non- derivative Financial Liabilities interest method. Non-derivative financial liabilities are ecognisedr initially at fair value plus any directly attributable transaction Loans and receivables comprise trade receivables, costs. Subsequent to initial recognition, these financial amounts due for related parties, trust certificates, short liabilities are measured at amortised cost using the term deposits and cash and cash equivalents. effective interest method.
Cash and Cash Equivalents Financial liabilities comprise of interest bearing loans, Cash and cash equivalents comprise cash balances trade and other payables and bank overdrafts. Bank and call deposits. Bank overdrafts that are repayable overdrafts that are repayable on demand and form on demand and form an integral part of the Group’s an integral part of the Group’s cash management are cash management are included as a component of included as a component of cash and cash equivalents cash and cash equivalents for the purpose of the for the statement of cash flows. Statement of Cash Flows. a. De-recognition Investments with short maturities, i.e. three months The Group derecognises a financial liability when its or less from the date of acquisition are also treated as contractual obligations are discharged, cancelled or cash equivalents. expired.
c. Held to Maturity 3.3.8. Impairment If the Group has the positive intent and ability to hold 3.3.8.1 Financial Assets debt securities to maturity, then such financial assets A financial asset not classified as fair value through are classified as held-to-maturity. Held to Maturity profit or loss including and interest in equity accounted financial assets are recognised initially at fair value plus investee are assessed at each reporting date to any direct attributable transaction costs. Subsequent determine whether there is objective evidence of to initial recognition, held-to-maturity financial assets impairment. A financial asset is impaired if objective are measured at amortised cost using effective interest evidence indicates that a loss event has occurred after method, less any impairment losses. the initial recognition of the asset, and that the loss event had a negative effect on the estimated future Held to Maturity financial assets comprise debt cash flows of that can be estimated reliably. securities. Objective evidence that financial assets are impaired d. Available-for-Sale Financial Assets can include default or delinquency by a debtor, Available-for-sale financial assets are non-derivative restructuring of an amount due to the Group on financial assets that are designated as available-for- terms that the Group would not consider otherwise, sale or are not classified in any of the above categories indications that a debtor or issuer will enter bankruptcy, of financial assets. Available-for-sale financial assets or the disappearance of an active market for a security. are recognised initially at fair value plus any directly attributable transaction costs. Financial Assets measured at Amortised Cost The Group considers evidence of impairment for Subsequent to initial recognition, they are measured at financial assets measured at amortised cost (loans fair value and changes therein, other than impairment and receivables and held-to-maturity financial assets) losses, are recognised in other comprehensive income at both a specific asset and collective level. All and presented in the fair value reserve in equity. individually significant assets are individually assessed When these assets are derecognised, the gain or loss for impairment. Those found not to be impaired are accumulated in available for sale reserve is reclassified then collectively assessed for any impairment that has to profit or loss. been incurred but not yet identified. Assets that are not individually significant are collectively assessed for Available- for-sale financial assets comprise of impairment by grouping together assets with similar investment in unquoted shares and unit trust and risk characteristics.
Distilleries Company of Sri Lanka PLC 94 Annual Report 2015/16 In assessing collective impairment, the Group uses rendered by employees. Prepaid contributions are historical trends of the probability of default, the recognised as an asset to the extent that a cash timing of recoveries and the amount of loss incurred, refund or a reduction in future payments is available. adjusted for management’s judgment as to whether current economic and credit conditions are such that Employees’ Provident Fund (EPF): the actual losses are likely to be greater or lesser than The Group entities and employees contribute 15% suggested by historical trends. and 10% respectively on the basic salary of each employee to the above mentioned fund. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the Employees’ Trust Fund (ETF) difference between its carrying amount and the present The Group entities contributes 3% of the basic value of the estimated future cash flows discounted salary of each employee to the Employees’ Trust at the asset’s original effective interest rate. Losses Fund. are recognised in profit or loss and reflected in an allowance account against loans and receivables or Defined Benefit Plans held-to-maturity investment securities. Interest on the A defined benefit plan is a post-employment impaired asset continues to be recognised. When an benefit plan other than a defined contribution plan. event occurring after the impairment was recognised The Group’s net obligation in respect of defined causes the amount of impairment loss to decrease, the benefit plans is calculated separately for each plan decrease in impairment loss is reversed through profit by estimating the amount of future benefit that or loss. employees have earned in return for their service Available-for-Sale Financial Assets in the current and prior periods; that benefit is discounted to determine its present value. Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses The valuation is performed annually by a qualified accumulated in the fair value reserve to profit or loss. actuary using the projected unit credit method. The amount reclassified is the difference between When the valuation results in a benefit to the Group, the acquisition cost (net of any principal repayment the recognised asset is limited to the total of any and amortisation) and the current fair value, less any unrecognised past service costs and the present impairment loss previously recognised in profit or loss. value of economic benefits available in the form of If the fair value of an impaired available-for-sale debt any future refunds from the plan or reductions in security subsequently increases and the increase can future contributions to the plan. An economic benefit be related objectively to an event occurring after the is available to the Group if it is realisable during impairment loss was recognised, then the impairment the life of the plan, or on settlement of the plan loss is reversed through profit or loss; otherwise, it is liabilities. When the benefits of a plan are improved, reversed through OCI. the portion of the increased benefit relating to past service by employees is recognised in profit or loss 3.3.9 Stated Capital on a straight line basis over the average period until Ordinary Capital the benefits become vested. To the extent that the Ordinary Shares are classified as equity. Incremental benefits vest immediately, the expense is recognised costs directly attributable to the issue of ordinary immediately in profit or loss. The Group recognises shares and share options are recognised as a all actuarial gains and losses arising from defined deduction from equity, net of any tax effects. benefit plans directly in the other comprehensive income and all expenses related to defined benefit 3.3.10 Employee Benefits plan in personnel expense in profit or loss. Defined Contribution Plans Short Term Benefits Defined contribution plan is a post-employment benefit plan under which contributions are made Short-term employee benefit obligations are into a separate fund and the entity will have no legal measured on an undiscounted basis and are or constructive obligation to pay further amounts. expensed as the related service is provided. Obligations for contributions to defined contribution plan are recognised as an employee benefit expense in profit or loss in the periods during services is
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Notes to the Financial Statements
3.3.11 Provisions, Contingent Assets and Contingent to get ready for its intended use or sale is capitalised Liabilities as part of that asset. Provisions are recognised, if as a result of a past event, the Group has a present legal or constructive Borrowing costs that are not capitalised are recognised obligation that can be estimated reliably, and it is as expenses in the period which they are incurred and probable that an outflow of economic benefits will be charged to the statement of profit or loss. required to settle the obligation. The amounts of the borrowing costs which are eligible All the contingent liabilities are disclosed, as Notes for capitalisation are determined in accordance with to the Financial Statements unless the outflow of the in LKAS 23 – ‘Borrowing Costs’. resources is made contingent assets if exits are disclosed when inflow of economic benefit is probable. 3.4.3 Finance Income and Expenses Finance income comprises interest income on funds 3.3.12 Commitments invested (including available for sale financial assets), All material commitments as at the reporting date gains on the disposal of available for sale financial have been identified and disclosed in the Notes to the assets. Interest income is recognised as it accrues in Financial Statements. the profit or loss, using the effective interest method.
3.4 Statement of Profit or Loss and Other Finance cost comprise interest expenses on Comprehensive Income borrowings, unwinding of the discount on provisions and contingent consideration, losses on disposal of 3.4.1 Revenue available for sale financial assets, impairment losses Revenue from the sale of goods is measured at the fair recognised on financial assets (other than trade value of the consideration received or receivable, net receivables). of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant Borrowing costs that are not directly attributable to the risks and rewards of ownership have been transferred acquisition, construction or production of a qualifying to the buyer, recovery of the consideration is probable, asset are recognised in profit or loss using the effective the associated costs and possible return of goods interest rate method. can be estimated reliably, and there is no continuing management involvement with the goods. Foreign currency gains and losses are reported on a net basis as either finance income or finance cost Dividend income from investments is recognised when depending on whether foreign currency movements the shareholder’s right to receive payment has been are in a net gain or net loss position. established. 3.4.4 Taxation Rental Income is recognised in profit and loss as it Income tax expense comprises current and deferred accrues. tax. Income tax expense is recognised in profit or loss except to the extent that it relates to a business Gains and losses on the disposal of investments combination, or items recognised directly in equity, or held by the Group have been accounted for in the in OCI. Statement of profit or loss.
a. Income Tax Gains and losses on the disposal of property, plant & equipment are determined by comparing the net sales Provision for taxation is based on the profit for the year proceeds with carrying amount. These are included in adjusted for taxation purposes in accordance with the profit and loss. provisions of the Inland Revenue Act, No.10 of 2006 and amendments made thereto. 3.4.2 Borrowing Costs Current tax comprises the expected tax payable or Borrowing costs are recognised as an expense in the receivable on the taxable income or loss for the year period in which they are incurred, except to the extent and any adjustments to the tax payable or receivable where borrowing costs that are directly attributable in respect of previous years. It is measured using tax to the acquisition, construction or production of a rates enacted or subsequently enacted at the reporting qualifying asset that takes a substantial period of time
Distilleries Company of Sri Lanka PLC 96 Annual Report 2015/16 date. Current tax also includes any tax arising from 3.6 Earnings Per Share dividends. The Group presents basic and diluted Earnings Per Share (EPS) for its ordinary shares. Basic EPS is Current tax assets and liabilities are offset only if certain calculated by dividing the profit or loss attributable to criteria are met. ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during b. Deferred Tax the period. Diluted EPS is determined by adjusting Deferred tax is recognised in respect of temporary the profit or loss attributable to ordinary shareholders differences between the carrying amounts of assets and the weighted average number of ordinary shares and liabilities for financial reporting purposes and the outstanding for the effects of all dilutive potential amounts used for taxation purposes. Deferred tax is ordinary shares. not recognised for the following temporary differences: 3.7 Segment Reporting • Temporary differences on the initial recognition A segment is a distinguishable component of the of assets or liabilities in a transaction that is not Group that is engaged either in providing related a business combination and that affects neither products or services (Business Segment) or in accounting nor taxable profit or loss; providing products or services within a particular • Temporary differences related to investments in economic environment (Geographical Segment), which subsidiaries, associates to the extent that the Group is subject to risks and rewards that are different from is able to control the timing of the reversal of the those of other segments. temporary differences and it is probable that they will not reverse in the foreseeable future; and The activities of the segments are described in Note 05 to the Financial Statements. • Taxable temporary differences arising on the initial recognition of goodwill. 3.8 Statement of Cash Flows The Statement of Cash Flows has been prepared A deferred tax assets are recognised only to the extent using the ‘Indirect Method’ of preparing Cash Flows in that it is probable that future taxable profits will be accordance with the Sri Lanka Accounting Standard available against which the assets can be utilised. - LKAS 7 ‘Statement of Cash Flows.’ Cash and Deferred tax assets are reviewed at each reporting cash equivalents comprise short term, highly liquid date and are reduced to the extent that it is no longer investments that are readily convertible to known probable that the related tax benefit will be realised. amounts of cash and are subject to an insignificant risk Unrecognised deferred tax assets are reassessed at of changes in value. each reporting date and recognised to the extent that it 3.9 Comparative Figures has become probable that future taxable profits will be available against which they can be used. Where necessary comparative figures have been reclassified to conform to the current year’s Deferred tax is measured at the tax rates that are presentation. expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively 3.10 Grants and Subsidies enacted at the reporting date. Grants and subsidies are credited to the statement profit or loss over the periods necessary to match Deferred tax assets and liabilities are offset only if them with the related costs which they are intended to certain criteria are met. compensate, on a systematic basis. Grants related to assets, including non-monetary grants at fair value, are 3.5 Subsequent Events deferred in the reporting date and credited to the profit All material post reporting events have been or loss over the useful life of the related asset. considered and where appropriate adjustments or disclosures have been made in the respective notes to Grants related to income are recognised in the the Financial Statements. statement of profit or loss in the period in which it is receivable.
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Notes to the Financial Statements
3.11 Policies Specific to Plantation Sector The managed timber trees are measured on initial recognition and at the end of each reporting period at 3.11.1 Biological Asset its fair value less cost to sell in terms of LKAS 41. The 3.11.1.1 Immature and Mature Plantations cost is treated as approximation to fair value of young Biological assets are classified into mature biological plants as the impact on biological transformation of assets and immature biological assets. Mature biological such plants to price during this period is immaterial. assets are those that have attained harvestable The fair value of timber trees are measured using DCF specifications or are able to sustain regular harvests. method taking in to consideration the current market Immature biological assets are those that have not yet prices of timber, applied to expected timber content of attained harvestable specification. Tea, rubber, other a tree at the maturity by an independent professional plantations and nurseries are classified as biological valuer. Key assumptions and sensitivity analysis are assets. given in Note 18.2.1.
Biological assets are further classified as bearer biological The main variables in DCF model concerns assets and consumable biological assets. Bearer biological asset includes tea plants, those that are not Variable Comment intended to be sold or harvested, however used to grow Currency valuation Sri Lankan Rupees for harvesting agriculture produce. Consumable biological Timber content Estimate based on physical assets includes managed timber trees those that are verification of girth, height to be harvested as agricultural produce from biological and considering the growth assets or sold as biological assets. of the each spices in different geographical regions. The entity recognise the biological assets when, and only when, the entity controls the assets as a result of Factor all the prevailing past event, it is probable that future economic benefits statutory regulations enforced associated with the assets will flow to the entity and the for harvesting of timber fair value or cost of the assets can be measured reliably. coupled with forestry plan of the company. The bearer biological assets are measured at cost less Economic useful life Estimated based on the normal accumulated depreciation and accumulated impairment life span of each spices by losses, if any, in terms of LKAS 16 – “Property Plant factoring the forestry plan of & Equipment” as per the ruling issued by Institute of the Company Chartered Accountants of Sri Lanka. Selling price Estimated based on prevailing The cost of land preparation, rehabilitation, new Sri Lankan market price. Factor planting, replanting, crop diversification, inter planting all the conditions to be fulfilled and fertilizing, etc., incurred between the time of in bringing the trees in to planting and harvesting (when the planted area attains saleable condition maturity), are classified as immature plantations. These immature plantations are shown at direct costs plus Planting cost Estimated costs for the further attributable overheads, including interest attributable development of immature to long-term loans used for financing immature areas are deducted. plantations. The expenditure incurred on bearer Discount rate Future cash flows are biological assets (Tea, Rubber, Timber fields) which discounted at following discount comes into bearing during the year, is transferred rates: Timber trees 13% to mature plantations. Expenditure incurred on consumable biological assets is recorded at cost at Nursery cost includes the cost of direct materials, direct initial recognition and thereafter at fair value at the end labor and an appropriate proportion of directly attributable of each reporting period. overheads, less provision for overgrown plants.
Permanent impairments to biological asset are charged The gain or loss arising on initial recognition of biological to the statement of profit or loss in full and reduced to assets at fair value less cost to sell and from a change in the net carrying amounts of such asset in the year of fair value less cost to sell of biological assets are included occurrence after ascertaining the loss. in profit or loss for the period in which it arises.
Distilleries Company of Sri Lanka PLC 98 Annual Report 2015/16 3.11.1.2 Infilling Cost on Bearer Biological Assets Depreciation of an asset begins when it is available The land development costs incurred in the form of for use and ceases at the earlier of the date on infilling have been capitalised to the relevant mature which the asset is classified as held for sale or is field, if it increases the expected future benefits from that derecognised. Depreciation methods, useful lives field, beyond its pre-infilling performance assessment. and residual values are reassessed at the reporting Infilling costs so capitalised are depreciated over the date and adjusted prospectively, if appropriate. newly assessed remaining useful economic life of the Mature plantations are depreciated over their useful relevant mature plantation, or the unexpired lease period, lives or unexpired lease period, whichever is less. No whichever is lower. depreciation is provided for immature plantations.
Infilling costs that are not capitalised have been charged (b) Amortisation to the Income Statement in the year in which they are The leasehold rights of assets taken over from incurred. SLSPC are amortised in equal amounts over the shorter of the remaining lease periods and the useful 3.11.1.3 Land Development Cost lives as follows: Permanent land development costs are those costs incurred in making major infrastructure development and No. of Years Rate (%) building new access roads on leasehold lands. Bare land 53 1.89 Improvements to land 30 3.33 These costs have been capitalised and amortised over the remaining lease period. Mature Plantations (Tea 30 3.33 & Rubber) Permanent impairments to land development costs Buildings 25 4.00 are charged to the statement of profit or loss in full or Machinery 15 6.67 reduced to the net carrying amounts of such assets in the year of occurrence after ascertaining the loss. 3.11.3 Deferred Income 3.11.3.1 Grants and Subsidies 3.11.2 Depreciation and Amortisation Government grants are recognised where there is (a) Depreciation reasonable assurance that the grant will be received Depreciation is recognised in statement of profit or and all attached conditions will be complied with. loss on a straight-line basis over the estimated useful When the grant relates to an expense item, it is economic lives of each part of an item of property, recognised as income over the period necessary to plant & equipment. Assets held under finance leases match the grant on a systematic basis to the costs are depreciated over the shorter of the lease term and that it is intended to compensate. Where the grant the useful lives of equivalent owned assets unless it is relates to an asset, it is recognised as deferred reasonably certain that the Group will have ownership by income and released to income in equal amounts the end of the lease term. Lease period of land acquired over the expected useful life of the related asset. from JEDB/ SLSPC will be expired in year 2045. The estimated useful lives for the current and comparative Where the Group receives non-monetary grants, the periods are as follows: asset and the grant are recorded gross at nominal amounts and released to the income statement over No. of Years Rate (%) the expected useful life and pattern of consumption Buildings & Roads 40 2.50 of the benefit of the underlying asset by equal annual Plant & Machinery 20/25 5.00/4.00 installments. Where loans or similar assistance are Motor Vehicles 15/20 6.67/5.00 provided by governments or related institutions with an interest rate below the current applicable Equipment 8/4 12.50/25 market rate, the effect of this favorable interest is Furniture & Fittings 10 10.00 regarded as additional government grant. Assets are Mature Plantations amortised over their useful lives as follows; (Replanting and New Planting) - Buildings 40 years Tea 33 1/3 3.00 Rubber 20 5.00
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Notes to the Financial Statements
3.12 Policies Specific to Insurance Sector 3.12.2 Deferred Acquisition Costs (DAC) 3.12.1 Insurance Contracts Those direct and indirect costs incurred during the As permitted by SLFRS 4 Insurance Contracts, the financial period arising from the writing or renewing of Group continues to apply the existing accounting insurance contracts are deferred and amortised over the policies for Insurance Contracts that were applied period in which the related revenues are earned. All other prior to the adoption of SLFRS. acquisition costs are recognised as an expense when incurred. Product Classification The DAC is applicable only to Non - Life Insurance SLFRS 4 requires contracts written by insurers Contracts. In line with the available regulatory guidelines to be classified as either “insurance contracts” or from the Insurance Board of Sri Lanka (IBSL), the DAC is “investment contracts” depending on the level of calculated based on the 365 days basis. insurance risk transferred. An impairment review is performed at each reporting Insurance contracts are those contracts when date or more frequently when an indication of impairment the Group (the insurer) has accepted significant arises. When the recoverable amount is less than the insurance risk from another party (the policyholders) carrying value, an impairment loss is recognised in the by agreeing to compensate the policyholders if a statement of comprehensive income. No such indication specified uncertain future event (the insured event) of impairment was experienced during the year. DAC adversely affects the policyholders. As a general is derecognised when the related contracts are either guideline, the Group determines whether it has settled or disposed-off. significant insurance risk, by comparing benefits paid with benefits payable if the insured event did 3.12.3 Reinsurance not occur. Insurance contracts can also transfer financial risk. The Group cedes insurance risk in the normal course of business to recognised reinsurers through formal Investment contracts are those contracts that reinsurance arrangements. Reinsurance assets include transfer significant financial risk and no significant the balances due from reinsurance companies for paid insurance risk. and unpaid losses and loss adjustment expenses. Amounts recoverable from reinsurers are estimated in a Financial risk is the risk of a possible future change manner consistent with the outstanding claims provision in one or more of a specified interest rate, financial or settled claims associated with the reinsurer’s policies instrument price, commodity price, foreign exchange and are in accordance with the related reinsurance rate, index of price or rates, credit rating or credit contract. index or other variable, provided in the case of a nonfinancial variable that the variable is not specific Reinsurance is recorded gross in the statement to a party to the contract. of financial position unless a right to offset exists. Reinsurance assets are reviewed for impairment at each Once a contract has been classified as an insurance reporting date, or more frequently, when an indication of contract, it remains an insurance contract for the impairment arises during the reporting year. Impairment remainder of its lifetime, even if the insurance risk occurs when there is objective evidence as a result of reduces significantly during this period, unless all an event that occurred after initial recognition of the rights and obligations are extinguished or expire. reinsurance asset that the Group may not receive all Investment contracts can, however, be reclassified outstanding amounts due under the terms of the contract as insurance contracts after inception if insurance and the event has a reliably measurable impact on the risk becomes significant. amounts that the Group will receive from the reinsurer. The impairment loss, if any is recorded in the statement of All the products sold by the Group are insurance profit or loss. contracts and therefore classified as Insurance contracts under the SLFRS 4 – Insurance Contracts. Ceded reinsurance arrangements do not relieve the Thus, the Group does not have any investment Group from its obligations to policyholders. Reinsurance contracts within its product portfolio as at the assets or liabilities are derecognised when the contractual reporting date. rights are extinguished or expire or when the contract is transferred to another party.
Distilleries Company of Sri Lanka PLC 100 Annual Report 2015/16 3.12.4 Premium Receivable Written Premium is generally recognised is written Insurance receivables are recognised when due and upon inception of the policy. Upon inception of the measured on initial recognition at the fair value of the contract, premiums are recorded as written and are consideration receivable. Collectability of premiums is earned primarily on a prorate basis over the term of the reviewed on an ongoing basis. related policy coverage.
According to the Premium Payment Warranty (PPW) Rebates that form part of the premium rate, such directive issued by the Insurance Board of Sri Lanka as no claim rebates, are deducted from the gross (IBSL), all Non-Life insurance policies are issued premium. Unearned premiums are those proportions subject to PPW and are cancelled upon the expiry of of premiums written in a year that relate to periods 60 days if not settled except some selected customers of risk after the reporting date. Unearned premiums where Group has allowed extra period for settlements. are calculated on 365 days basis in accordance with the Regulation of Insurance Industry Act, No. 43 of 3.12.5 Insurance Provision – Non - Life Insurance 2000. However, for those contracts for which the period of risk differs significantly from the contract Non - Life Insurance contract liabilities include the period, premiums are earned over the period of risk outstanding claims provision including IBNR /IBNER in proportion to the amount of insurance protection and provision for unearned premiums. provided. The proportion attributable to subsequent The outstanding claims provision is based on the periods is deferred as a provision for unearned estimated ultimate cost of all claims incurred but premiums which is included under liabilities. not settled at the reporting date, whether reported or not, together with related claims handling costs b) Reinsurance Premiums and reduction for the expected value of salvage and Gross reinsurance premiums on insurance contracts other recoveries. Delays can be experienced in the are recognised as an expense on the earlier of the notification and settlement of certain types of claims, date when premiums are payable or when the policy therefore, the ultimate cost of these cannot be known becomes effective. Reinsurance premiums are decided with certainty at the reporting date. based on rates agreed with reinsurers. Unearned reinsurance premiums are those proportions of The valuation of Unearned Premium Reserve is premiums written in a year that relate to periods of measured in accordance with guidelines of the risk after the reporting date. Unearned reinsurance Regulation of Insurance Industry Act, No. 43 of 2000 premiums are deferred over the term of the underlying (i.e. based on the 365 days basis). The Incurred But direct insurance policies for risks-attaching contracts Not Reported (IBNR) and Incurred But Not Enough (using 365 days basis in accordance with the Reported (IBNER) claims reserve are actuarially Regulation of Insurance Industry Act, No. 43 of 2000). computed. The liability is not discounted for the time value of money. No provision for equalisation 3.12.6.2 Policy Income or catastrophe reserves is recognised. The liabilities Insurance contract policyholders are charged for are derecognised when the obligation to pay a claim policy administration services and other contract fees. expires, is discharged or is cancelled. These fees are recognised as revenue upon receipt or becoming due and is classified under other income. Liability Adequacy Test (LAT) As required by the SLFRS 4- Insurance Contracts, the 3.12.7 Benefits, Claims and Expenses Group performed a Liability Adequacy Test (LAT) in a) Gross Benefits and Claims respect of Non - Life Insurance contract liabilities with Non - Life Insurance Business the assistance of the external actuary. Non - Life insurance claims include all claims occurring during the year, whether reported or not together 3.12.6 Revenue Recognition with claims handling costs that are directly related to 3.12.6.1 Insurance Premiums the processing and settlement of claims, a reduction a) Non - Life Insurance Business for the value of salvage and other recoveries, and Gross written premiums - Non - Life Insurance any adjustments to claims outstanding from previous comprise the total premiums received /receivable years. Claims outstanding are assessed by review of for the whole period of cover provided by contracts individual claim files and estimating changes in the entered into during the accounting period. Gross ultimate cost of settling claims.
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Notes to the Financial Statements
The provision in respect of Claims Incurred But Not Office/Other equipment 1 – 5 years Reported (IBNR) and Claims Incurred But Not Enough Digital Electronic Switches 10 years Reported (IBNER) is actuarially valued to ensure a more realistic estimation of the future liability based on Network Equipment 10 years the past experience and trends. Actuarial valuations Towers 10 years are performed on a semi-annual basis. Whilst the Customer premise equipment 1 – 10 years Directors consider that the provisions for claims are FLAG project assets 5 – 15 years fairly stated on the basis of information currently WiMAX 5 – 10 years available, the ultimate liability will vary as a result of subsequent information and events. This may result in 3.13.2 Intangible Assets adjustments to the amounts provided. Such amounts 3.13.2.1 License Fees and Access Rights are reflected in the financial statements for that period. Separately acquired licences and access rights are The methods used to estimate claims and the shown at historical cost. Expenditures on license fees estimates made are reviewed regularly. and access rights that is deemed to benefit or relate to more than one financial year is classified as intangible assets and is being amortised over the agreement b) Reinsurance Claims period on a straight line basis. Reinsurance claims are recognised when the related gross insurance claim is recognised according to the 3.13.2.2 Amortisation terms of the relevant contract. Amortisation is recognised in the statement of profit or loss on a straight line basis over the estimated useful 3.12.8 Net Deferred Acquisition Expenses lives of intangible assets from the date that they are Acquisition expenses, representing commissions, available for use. The estimated useful lives for the which vary with and are directly related to the current and comparative periods are as follows: production of business, are deferred and amortised over the period in which the related written premiums Computer software 3 – 5 years are earned. FLAG access rights 15 years Licenses 10 years Reinsurance commission is also treated in the same manner within deferred acquisition costs. 3.13.3 Revenue Revenue from services rendered in the course of 3.12.9 Premium income (GWP) and other sundry sales ordinary activities is measured at fair value of the related taxes consideration received or receivable net of trade Revenue, expenses and assets are recognised net discounts and volume rebates. of the amount of sales taxes and premium taxes except where the premium or sales tax incurred on the Revenue is recognised when persuasive evidence purchase of assets services is not recoverable from exist, usually in the form of an executed sales agreement, that the significant risks and rewards of the taxation authority, in which case, the sale tax is ownership have been transferred to the customer, recognised as a part of the cost of acquisition of the recovery of the consideration is probable and the asset or as a part of the expense item, as applicable. amount of revenue can be measured reliably. 3.13 Policies Specific to Telecommunication Sector If it is probable that discounts will be granted and the 3.13.1 Depreciation amount can be measured reliably, then the discount is The estimated useful lives used are as follows; recognised as a reduction of revenue as the sales are recognised. Buildings 8 years Shelters and other equipment 5 years The revenue is recognised as follows: Vehicles 5 years Furniture and fittings 5 years 3.13.3.1 Domestic and International Call Revenue, Rental Income Computer software 3 years Revenue for call time usage by customers is Leasehold improvements 5 years recognised as revenue as services are performed on Leased equipment 3 – 10 years accrual basis.
Distilleries Company of Sri Lanka PLC 102 Annual Report 2015/16 Fixed rental is recognised as income on a monthly 3.14 Policies Specific to Finance Sector basis in relation to the period of the rental. 3.14.1 Revenue Recognition Revenue is recognised to the extent that it is probable 3.13.3.2 Revenue from other Network Operators and that the economic benefits will flow to the Group and International Settlements the revenue can be reliably measured. The following The revenue received from other network specific recognition criteria must also be met before operators, local and international, for the use revenue is recognised. of the Group’s telecommunication network are recognised, net of taxes, based on usage taking a) Interest Income and Expense the traffic minutes/per second rates stipulated For all financial instruments measured at amortised in the relevant agreements and regulations and cost, interest bearing financial assets classified as based on the terms of the lease agreements available-for-sale and financial instruments designated for fixed rentals. Revenue arising from the as fair value through profit or loss, interest income interconnection of voice and data traffic between and expense are recognised in profit or loss using the other telecommunications operators is recognised Effective Interest Rate (EIR) method. The EIR is the at the time of transit across the Group’s network rate that exactly discounts the estimated future cash and presented on gross basis. payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a The relevant revenue accrued is recognised shorter period) to the carrying amount of the financial under income in the statement of profit or loss asset or liability. When calculating the EIR, the Group and interconnection expenses recognised under estimates future cash flows considering all contractual operating costs in the statement of profit or loss. terms of the financial instrument, but not future credit losses. 3.13.3.3 Revenue from Broadband Revenue from broadband service is recognised The calculation of the EIR takes into account all on usage and the fixed rental on a monthly basis contractual terms of the financial instrument (for when it is earned net of taxes, rebates and example, prepayment options) and includes all discounts. material transaction costs and fees and points paid or received that are an integral part of the EIR. 3.13.3.4 Revenue from other Telephony Services Transaction costs include incremental costs that are The revenue from Data services and other directly attributable to the acquisition or issue of a telephony services are recognised on an accrual financial asset or liability. basis based on fixed rental contracts entered between the Group and subscribers. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates 3.13.3.5 Installation Revenue of payments or receipts. The adjusted carrying The installation revenue relating to Code amount is calculated based on the original EIR and Divisional Multiple Access (CDMA) and non CDMA the change in carrying amount is recorded in ‘Interest connections are deferred over the expected life of Income’ for financial assets and in ’Interest and similar the customer on the network. expense’ for financial liabilities.
3.13.3.6 Service Agreements Revenue However, for a reclassified financial asset for which the Group subsequently increases its estimates Capacity contracts which convey the right to use of future cash receipts as a result of increased a specified capacity in an identified fiber cable are recoverability of those cash receipts, the effect of that accounted as service arrangements. Customers increase is recognised as an adjustment to the EIR are charged on a monthly basis based on usage, from the date of the change in estimate. and the contracts are for a short term. Once the recorded value of a financial asset or a 3.13.3.7 Prepaid Card Revenue group of similar financial assets has been reduced Revenue from the sale of prepaid card on CDMA, due to an impairment loss, interest income continues Internet is recognised upon activation of the to be recognised using the rate of interest used to said card as the period of expiry of the card and discount the future cash flows for the purpose of the non refundable nature of the amounts are measuring the impairment loss. considered immaterial to the revenue recognition process.
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Notes to the Financial Statements
b) Lease Income SLFRS 9-Financial Instruments In terms of the provisions of the Sri Lanka Accounting Standard – LKAS 17 on ‘Leases’, the recognition of SLFRS 9 - “Financial Instruments” replaces finance income on leasing is accounted, based on a the existing guidance in LKAS 39 – Financial pattern reflecting a constant periodic rate of return on Instruments: Recognition and Measurement. SLFRS capital outstanding. 9 includes revised guidance on the classification and measurement of financial instruments including a new The excess of aggregate lease rentals receivable over the expected credit loss model for calculating impairment cost of the leased assets constitutes the total unearned on financial assets. finance income at the commencement of a lease. The unearned finance income included in the lease rentals SLFRS 9 is effective for annual period beginning on or receivable is recognised in profit or loss over the term of after 1 January 2018 with early adoption permitted. the lease commencing from the month in which the lease is executed using Effective Interest Rate. SLFRS 15 - Revenue Recognition from Customer Contracts Minimum lease payments made under finance leases are apportioned between the finance expense and the SLFRS 15 - “Revenue from Contracts with reduction of the outstanding liability. Customers” establishes a comprehensive framework for determining whether, how much and when c) Hiring Rental Income revenue is recognised. It replaces existing revenue recognition guidance LKAS 18- “Revenue”, LKAS 11- Payments made under operating leases are recognised “Construction Contracts”. in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the SLFRS 15 is effective for annual reporting period term of the lease. beginning on or after 1 January 2018, with early adoption permitted. 3.14.2 Impairment Losses on Loans and Advances Agriculture Bearer Plants (Amendments to IAS 16 and The Group reviews its individually significant loans and IAS 41) advances at each reporting date to assess whether an impairment loss should be provided for in the statement These amendments require a bearer plant, defined as of profit or loss. In particular, management’s judgment a living plant, to be accounted for as property, plant is required in the estimation of the amount and timing and equipment and included in the scope of LKAS 16 of future cash flows when determining the impairment –“Property, Plant and Equipment”, instead of LKAS 41- loss. These estimates are based on assumptions about a “Agriculture”. number of factors and actual results may differ, resulting in future changes to the allowance made. The amendments are effective for annual eportingr periods beginning on or after 1 January 2016, with Loans and advances that have been assessed early adoption permitted. individually and found not to be impaired and all individually insignificant loans and advances are then The Group is assessing the potential impact on its assessed collectively, by categorising them into groups Consolidated Financial Statements resulting from the of asset with similar risk characteristics, to determine application of above standards. Given the nature of the whether a provision should be made due to incurred Group’s operations, this standard is expected to have loss events for which there is objective evidence, a pervasive impact on the Group’s financial statements. but the effects of which are not yet evident. The collective assessment takes account of data from the The following new or amended standards are not loan portfolio (such as loan to collateral ratio, level of expected to have a significant impact on the Group‘s restructured performing loans, etc.), and judgment on consolidated financial statements. the effect of concentrations of risks and economic data. • SLFRS 14- “Regulatory Deferral Accounts”. 4 New Accounting Standards Issued but not Effective • Clarification of Acceptable Methods of Depreciation and Amortisation. ( Amendments to LKAS 16 and The Institute of Chartered Accountants of Sri Lanka LKAS 38) has issued the following new Sri Lanka Accounting Standard which will become applicable for financial • Equity method in separate financial statements. periods beginning on or after 1 January 2018. (Amendments to LKAS 27) Accordingly, the Group has not applied the following • Disclosure initiative. (Amendments to LKAS 1) new standards in preparing these consolidated financial statements.
Distilleries Company of Sri Lanka PLC 104 Annual Report 2015/16 5 Operating Segment Information A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), which is subject to risks and rewards that are different from those of other segments.
Segmental information is presented in respect of the Group’s business segments. The business segments are determined based on the Group’s management and internal reporting structure. Inter-segment transfers are based on fair market prices. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
5.1 Segment Revenues
For the year ended 31 March, 2016 2015 Rs.'000 Rs.'000
Beverages 79,231,340 56,992,501 Plantations 2,413,055 3,002,156 Telecommunication 3,286,251 3,372,078 Financial Services 2,031,204 1,441,161 Diversified 1,903,350 1,951,518 Total Gross Revenue 88,865,200 66,759,414 Excise Duty (55,025,103) (37,846,540) Total Net Revenue 33,840,097 28,912,874
5.2 Segment Profits / (Losses)
For the year ended 31 March, 2016 2015 Rs.'000 Rs.'000 Beverages 8,390,759 8,397,998 Plantations (430,454) (106,444) Telecommunication (642,417) (691,844) Financial Services 233,568 187,615 Diversified 692,465 549,827 8,243,921 8,337,152 Share of Profit of Equity-Accounted Investees (Net of Tax) 748,537 1,390,668 Profit before Income Tax Expense 8,992,458 9,727,820 Taxation (3,322,878) (3,254,315) Profit for the Year 5,669,580 6,473,505
105 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements 2015 2015 Rs.000 Rs.000 23,589 777,005 277,477 1,257,904 9,661,636 2016 2016 Group Total Group Group Total Group Rs.000 Rs.000 20,559 702,452 502,714 625,472 285,157 1,095,567 463,460 2,108,642 1,301,892 1,018,298 949,961 2,109,214 4,706,319 32,572,893 27,864,604 99,305,835 92,688,602 ------2015 2015 (9,584) Rs.000 Rs.000 (468,209) (1,835,945) - - - - - 2016 2016 Adjustments 40,132 Rs.000 Rs.000 Consolidated Consolidated 380,399 171,321 Eliminations/Other (168,148) (547,998) Eliminations/Other (60,252,583) (60,279,310) Consolidated Adjustments Consolidated 673 304 2015 2015 2015 Rs.000 Rs.000 Rs.000 35,826 141,799 112,613 287,672 3,741,608 1,062,303 1,062,303 1,254,882 1,254,882 (1,072,577) (3,389,762) Diversified Diversified 2016 2016 2016 Diversified Rs.000 Rs.000 Rs.000 124,332 1,687,357 1,687,357 2,522,113 2,522,113 (2,204,302) (6,413,772) 2015 2015 2015 Rs.000 Rs.000 Rs.000 1,825,536 1,825,536 (1,253,309) (1,571,607) (1,507,238) - - 2016 2016 2016 Rs.000 Rs.000 12,608 11,150 1,013 25,789 23,179 239,956 19,204 21,271 1,355 52,276 17,600 2,105,217 Rs.000 Financial Srvices Financial Srvices 851,580 851,580 Financial Srvices (873,734) 1,329,817 1,329,817 1,351,971 1,351,971 - - 2015 2015 2015 Rs.000 Rs.000 Rs.000 88,431 60,914 55,366 95,318 95,318 (24,910) 451,153 451,153 (330,925) - - Plantation Plantation 2016 2016 2016 Rs.000 Rs.000 59,893 Rs.000 123,711 143,895 Reporting Segments Reporting Segments 291,784 291,784 (331,757) (182,219) (441,322) Reporting Segments - 2015 2015 2015 Rs.000 Rs.000 Rs.000 93,062 93,062 166,853 264,582 719,974 169,028 169,028 663,290 663,290
(587,324) 1,106,899 - 2016 2016 2016 Rs.000 Rs.000 Rs.000 195,100 263,253
Telecommunication Telecommunication 713,864 713,864 137,228 (462,310) 1,237,122 2,237,134 (1,313,402) 2015 2015 2015 1,072 2,014 Rs.000 Rs.000 Rs.000 495,479 166,165 442,798 442,798 5,208,372 3,584,864 3,584,864 4,217,066 4,217,066 (1,075,000) - Beverages Beverages 2016 2016 2016 Beverages Telecommunication Plantation 8,283 Rs.000 Rs.000 52,357 57,074 417 383 405,119 271,979 121,001 60,665 123,558 Rs.000 989,828 532,293 166 125 450,873 412,340 101,428 44,014 185,948 131,092 142,682 75,208 74,241 757,903 684,326 14,151 11,794 39,944 36,918 350,477 506,322 715,795 819,712 819,712 1,046,823 403,692 3,628 565 15,958 16,288 7,851 106 21,307 42,809 1,366,111 1,366,111 1,616,592 1,616,592 16,914,727 15,229,435 4,645,187 4,086,434 3,463,391 2,794,624 5,828,273 5,095,807 5,441,151 2,494,249 (3,719,836) 72,499,463 67,753,437 7,823,121 7,908,267 5,750,117 5,416,257 8,139,908 7,204,655 65,345,809 64,685,296 (1,070,193) Information (Contd.) Information Segmental Cash Flows For the year ended 31 March, Operating Cash Flow Investing Cash Flow Financing Cash Flow Income Tax Payable Income Tax Deferred Tax Liabilities Tax Deferred Deferred Tax Assets Tax Deferred Retirement Benefit Obligations Retirement Operating Segment Operating Other Segmental Information Total Liabilities Total Total Assets Total As at 31 March, Interest Expense Interest Amortisation and Impairment of Intangible Assets Depreciation of PPE Depreciation Additions to Intangible Assets Purchase of PPE Purchase For the year ended 31March,
5.4 5 5.3
Distilleries Company of Sri Lanka PLC 106 Annual Report 2015/16 6 Revenue
Group For the year ended 31 March, 2016 2015 Gross Excise Duty Net Revenue Gross Revenue Excise Duty Net Revenue Revenue Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Sale of Goods 82,860,198 (55,025,103) 27,835,095 61,674,643 (37,846,540) 23,828,103 Rendering of Services 6,005,002 - 6,005,002 5,084,771 - 5,084,771 Total 88,865,200 (55,025,103) 33,840,097 66,759,414 (37,846,540) 28,912,874
Increase in the Gross Revenue of the beverage sector in the current year was largely due to significant changes in the tax structure of the Liquor Industry in October 2014, wherein the Value Added Tax and Nations building Tax components were added to the Excise Duty.
Company For the year ended 31 March, 2016 2015 Gross Direct Turnover Net Revenue Gross Revenue Direct Turnover Net Revenue Revenue Related Taxes Related Taxes Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Sale of Goods 72,113,727 (50,572,843) 21,540,884 51,800,065 (34,883,539) 16,916,526 Total 72,113,727 (50,572,843) 21,540,884 51,800,065 (34,883,539) 16,916,526
6.1 Business Segment Analysis
For the year ended 31 March, 2016 2015 Sale of Goods Rendering of Total Revenue Sale of Goods Rendering of Total Revenue Services Services Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Beverages 24,206,237 - 24,206,237 19,145,961 - 19,145,961 Plantations 2,413,055 - 2,413,055 3,002,156 - 3,002,156 Telecommunication - 3,286,251 3,286,251 - 3,372,078 3,372,078 Financial Services - 2,031,204 2,031,204 - 1,441,161 1,441,161 Diversified 1,215,803 687,547 1,903,350 1,679,986 1,712,693 1,951,518 27,835,095 6,005,002 33,840,097 23,828,103 5,084,771 28,912,874
7 Cost of Sales, Net Benefits Paid and Interest Expenses This includes all directly attributable costs of sale of goods and rendering of services. Further the interest expense on customer deposits in financial services and net insurance benefits and claims paid, net change in insurance claims outstanding and underwriting and net acquisition costs in insurance businesses are included.
107 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
8 Other Operating Income
Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Gain on Change in Fair Value of Biological Assets 18.2 89,603 92,377 - - Government Grants 11,275 11,443 - - Gain on Sale of Property, Plant and Equipment 8.2 36,803 39,762 33,706 430,761 Fees and Commission Income 32,652 42,674 - Rent Income 70,355 39,366 34,047 36,190 Refunds on Telecommunication Development Charge (TDC) 8.1 - 144,279 - Sale of Timber 17,313 19,941 - Other Income 127,737 191,523 101,025 76,169 Dividend Income from Subsidiary Companies - - 796,350 - Dividend Income from Equity Accounted Investees - - 373 602 Dividend Income on Available-For-Sale Financial Assets 618,853 407,267 80,279 255,727 Dividend Income from Fair Value Through Profit and Loss 42,621 55,614 2,630 21,892 Investments Gain/(Loss) on Disposal of Fair Value Through Profit and Loss Investments 19,609 330,926 (11,743) 206,512 Gain on Disposal of Available-For-Sale Financial Assets Transferred from Equity 8.2 654 - - 5,223,421 Gain from Changes in Fair Value of Investment Properties 17 86,912 - - - Loan Loss Recoveries - 500 - - Reversal of Impairment of Doubtful Debts 16 1,204 - - 1,154,403 1,376,876 1,036,667 6,251,274
8.1 Lanka Bell Limited - Refunds on Telecommunication Development Charge (TDC) In accordance with the Finance Act No. 11 of 2004, all Telecommunication Gateway Operators are required to pay a levy defined as the Telecommunication Development Charge (TDC) to the Government of Sri Lanka, based on international call minutes terminated in the country. This levy was made effective from 03rd March, 2003 where initially the levy was defined in such a way that operators were allowed to claim the 2/3rd of the TDC against the costs of network development charges.
First revision to this regulation was introduced with effect from 15th July, 2010 with a TDC rate change from USD cents 3.80 to USD cents 1.50. Through the same revision the disbursement process was removed from the regulation. The revised rates prevailed until such time the rate was again revised to USD cents 3.0 per minute with effect from January, 2012 in accordance with the Budget Proposal for 2012.
Total TDC Refunds claimed are as follows;
For the year ended 31 March, 2016 2015 Rs.'000 Rs.'000 - 144,279
8.2 Gain/(Loss) on Disposal of Shares / Lands and Buildings During the year ended 31 March 2015, the Company structured its Investments and lands and buildings into its fully own subsidiary, Melstacorp Limited. As a result a capital gain of Rs. 5.6 Bn was recognised in the Company and eliminated in the Group Financial Statements as an inter group transaction.
Distilleries Company of Sri Lanka PLC 108 Annual Report 2015/16 9 Other Operating Expenses
Group Company For the year ended 31 March, 2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Impairment on Loans and Other Advances 127,919 18,676 - - Loss on Revaluation of Property, Plant and Equipment 222,570 - - - 350,489 18,676 - -
10 Finance Income and Finance Costs 10.1 Recognised in Profit and Loss 10.1.1 Finance Income Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Interest Income on Unimpaired Held-To-Maturity 4,394 6,946 - - Investments Interest Income on Available-For-Sale Financial Assets 50,495 53,477 31,997 31,998 Interest Income on Loans and Receivables 257,992 362,207 126,486 124,687 Foreign Exchange Gain 3,599 169 - - Gain on Change in Fair Value of Financial Assets at Fair Value 86,289 143,869 - 35,161 Through Profit or Loss 402,769 566,668 158,483 191,846
10.1.2 Finance Cost Interest Expense on Financial Liabilities Measured at Amortised Cost Interest Expense on Long Term Borrowings (135,957) (122,238) - - Interest Expense on Bank Overdrafts and Other Short (461,077) (628,437) (350,477) (495,479) Term Borrowings Interest Expense on Finance Leases (591) (34) - - Government Lease Interest (JEDBb/SLSPC) (27,847) (26,296) - - Foreign Exchange Loss (51,732) (12,950) - - Loss on Change in Fair Value of Financial Assets at Fair (16,349) - (16,349) - Value Through Profit or Loss Preference Share Dividends 10.4 (1,265) (1,265) - - (694,818) (791,220) (366,826) (495,479) Less:Borrowing Cost Capitalised 10.1.2.1 89,641 79,911 - - (605,177) (711,309) (366,826) (495,479) Net Finance Costs Recognised in Profit or Loss (202,408) (144,641) (208,343) (303,633)
10.1.2.1 During the year Balangoda Plantations PLC, a subsidiary of the company, capitalised borrowing cost amounting to Rs. 74,933,088 (2015 - Rs. 58,231,199/-) incurred on borrowings obtained to meet expenses relating to immature plantations being part of the cost of the immature plantations. The amount of borrowing cost eligible for capitalisation is determined in accordance with LKAS 23 (Borrowing Costs). Further this borrowing Cost includes amount of Rs.14,708,475/- (2015-Rs.21,679,737/-) from Lanka Bell Limited.
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Notes to the Financial Statements
10.2 The above finance income and finance costs include the following interest income and expense in respect of assets (liabilities) not at fair value through profit or loss:
Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Total Interest Income on Financial Assets 312,881 422,630 158,483 156,685 Total Interest Expense on Financial Liabilities (625,472) (777,005) (350,477) (495,479)
10.3 Recognised in Other Comprehensive Income
Net Change in Fair Value of Available-for-Sale Financial Assets (3,473,765) 1,708,471 (224,350) 721,172 Net change in Fair Value of Available-for-Sale Financial - - - (3,574,279) Assets Reclassified to Profit or Loss (3,473,765) 1,708,471 (224,350) (2,853,107)
10.4 Based on the features of the cumulative redeemable preference shares as specified in the agreement dated 25 Octoer 2001, the preference shares of Texpro Industries Limited have been classified as liability and related dividends have been classified as finance expense. Accordingly, the dividend on preference shares computed at 10% has been reported as finance expense.
11 Profit before Income Tax Expense Profit before income tax expense is stated after charging all expenses including the following;
Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Remuneration to Executive Directors 117,838 92,888 30,814 24,121 Auditor’s Remuneration Audit - KPMG 10,682 10,325 5,360 5,196 - Other auditors 4,643 4,745 - - Non-audit - KPMG 3,558 2,803 3,558 2,376 - Other auditors 816 1,026 816 1,026 Management Fees 26,708 31,841 - - Personnel Costs 11.1 4,364,484 4,017,215 1,297,570 1,125,346 Depreciation and Amortisation Depreciation of Property Plant And Equipment 15 2,131,541 1,257,904 504,289 160,215 Amortisation of Intangible Assets 16 285,157 277,477 7,880 669 Amortisation of Bearer Biological Assets 18.1.1/18.1.2 39,597 39,245 Gain on Change in Fair Value of Biological Assets 18.2 89,603 92,376 Provision /(Reversal) for Bad & Doubtful Debts 119,655 156,072 19,326 7,916 Provision /(Reversal) for Inventories (156,075) (6,828) Donations 3,812 5,777 3,172 4,432 Direct Operating Expenses Arisen from Investment Properties 10,318 - - -
Distilleries Company of Sri Lanka PLC 110 Annual Report 2015/16 11.1 Personnel Costs
Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Salaries, Wages and Other Benefits 3,830,213 3,524,677 1,191,503 1,047,538 Employee Benefits Defined Contribution Plans- EPF and ETF 360,320 331,311 81,096 57,168 Defined Benefit Plans 31.1.1 173,951 161,227 24,971 20,640 Total 4,364,484 4,017,215 1,297,570 1,125,346
11.1.1 Number of Employees Group Company As at 31 March, 2016 2015 2016 2015 12,692 11,897 1,136 1,197 12,692 11,897 1,136 1,197
12 Taxation
Group Company For the year ended 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Income Tax Expense 12.1 3,322,878 3,254,315 2,920,455 2,785,596 3,322,878 3,254,315 2,920,455 2,785,596
12.1 Income Tax Expense
Current Tax Expense 12.2 3,102,245 2,780,292 2,603,224 2,317,212 Deferred Tax Charged/(Credited) 22.1.1 220,633 474,023 317,231 468,384 3,322,878 3,254,315 2,920,455 2,785,596
12.2 Current Tax Expense
Current Tax Charge 12.2.1 3,054,972 2,743,315 2,603,224 2,317,212 (Over)/Under Provision Of Current Tax Of Previous Years 6,376 (567) - - 10% Withholding Tax On Intercompany Dividends 40,897 37,544 - - 3,102,245 2,780,292 2,603,224 2,317,212
111 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
12.2.1 Numerical Reconciliation of Accounting Profits to Income axT Expense
Group Company For the year ended 31March, 2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Profit Before Income Tax Expense 8,992,458 9,727,820 8,222,630 13,070,319 Share of Results of Equity Accounted Investees (748,537) (1,390,668) - - Dividend Income from Group Companies 1,507,543 337,894 - - Other Consolidation Adjustments 544,648 - - - 10,296,112 8,675,046 8,222,630 13,070,319 Exempt (Profits)/Loss 395,807 (261,828) - Profit Before Income Tax After Adjusted 10,691,919 8,413,218 8,222,630 13,070,319 (-) Income Not Subject to Tax (3,066,932) (6,528,614) (917,130) (6,092,137) (-) Income From Other Sources (561,548) (602,546) (261,672) (350,982) (+) Disallowable Expenses 2,033,772 7,500,300 600,820 192,805 (-) Allowable Expenses (2,729,828) (2,880,383) (1,319,759) (1,272,664) Tax Profit from Business 6,367,385 5,901,975 6,324,889 5,547,341
Taxable Profit from Business 7,370,360 7,035,410 6,324,889 5,547,341 (+) Income from Other Sources 561,549 602,546 261,672 350,982 (-) Tax Losses Utilised (89,117) (92,560) - - Taxable Income 7,842,792 7,545,396 6,586,561 5,898,323
Income tax at, 40% 2,867,442 2,528,189 2,529,956 2,218,937 28% 187,530 215,126 73,268 98,275 Total Current Tax Charge 3,054,972 2,743,315 2,603,224 2,317,212 Average Statutory Income Tax Rate (%) 38.95% 36.49% 39.52% 39.29%
12.2.2 Effective Tax Rate
For the year ended 31March, Group Company 2016 2015 2016 2015 Note % % % % 12.2.2.1 28.57% 32.61% 31.66% 17.73%
Distilleries Company of Sri Lanka PLC 112 Annual Report 2015/16 12.2.2.1 Reconciliation Of Effective Tax Rate Group For the year ended 31 March, 2016 2015 Rs.000 % Rs.000 % Accounting Profit / (Loss) Chargeable To Income Tax 10,691,919 8,413,218 Income Tax Expense at the Average Statutory Income Tax Rate 4,164,781 38.95% 3,069,899 36.49% Income Not Subject to Tax (1,194,650) (11.17%) (2,382,226) (28.32%) Disallowable Expenses 792,207 7.41% 2,736,785 32.53% Allowable Expenses (1,063,339) (9.95%) (849,196) (10.09%) Tax Losses Incurred 390,692 3.65% 201,827 2.40% Tax Losses Utilised (34,713) (0.32%) (33,774) (0.40%) Current Tax Expense 3,054,972 28.57% 2,743,315 32.61%
Company For the year ended 31 March, 2016 2015 Rs.000 % Rs.000 % Accounting Profit / (Loss) Chargeable To Income Tax 8,222,630 13,070,319 Income Tax Expense at the Average Statutory Income Tax Rate 3,249,852 39.52% 5,134,798 39.29% Income Not Subject to Tax (362,480) (4.41%) (2,393,354) (18.31%) Disallowable Expenses 237,464 2.89% 75,745 0.58% Allowable Expenses (521,612) (6.34%) (499,978) (3.83%) Current Tax Expense 2,603,224 31.66% 2,317,212 17.73%
12.2.3 Applicable Rates and Exemptions, Concessions or Holidays Granted on Income Tax The tax liabilities of the companies are computed at the standard rate of 28% on non liquor business and 40% on liquor business except for the following companies which enjoy exemptions and concessions.
Company Sector Basis Exemption or Concessions Period Lanka Bell Telecommuni In terms of an agreement The profits and income of the company is exempt for a Commencing Limited cation entered in to with the Board period of 20 years.Thereafter the company will be taxed from year of of Investment(BOI) of Sri at a normal rate of 28%. assessment Lanka under section 17 of 97/98 Law No. 04 0f 1978. Bogo Power Generation and Pursuant to the agreement The Company is exempt from income tax arising from the For a period (Pvt) Limited sale of Hydro dated 22nd April 2010 income of generation of hydropower.After the expiration of 05 years Electric Energy entered with the Board of of exemption period the profits and income of the commencing Investment (BOI) under enterprise shall be charged for each year of assessment from 01st April section 17 of the BOI Law. at the rate of ten per centum (10%) (Concessionary 2012 period) for a period of two years immediately succeeding the last date of the tax exemption period during which the profits and income of the Enterprise is exempted from income tax.After the expiration of Concessionery period, the profits and income of the Enterprise shall, for any year of assessment be charged at the rate of twenty per centum (20%).
113 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
12.2.4 Tax Losses Group Company For the year ended 31 March, 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Losses Brought Forward 2,094,641 1,634,083 - - Losses Incurred 1,002,994 553,118 - - Unrecognised Tax Losses on Previous Years 1,769 - - - Losses Utilised (89,117) (92,560) - - Loss Carried Forward 3,010,288 2,094,641 - -
13 Earnings Per Share 13.1 Basic Earnings Per Share The calculation of basic earnings per share is based on the profit attributable to Ordinary shareholders and the weighted average number of shares outstanding during the year.
Group Company For the year ended 31 March, 2016 2015 2016 2015 Profit Attributable to Equity Holders of the Company (Rs.'000) 5,963,414 6,552,956 5,302,175 10,284,723 Weighted Average Numbers of Ordinary Shares (000) 300,000 300,000 300,000 300,000 Basic Earnings per Share (Rs.) 19.88 21.84 17.67 34.28
13.2 Diluted Earnings Per Share There were no potential dilutive ordinary shares outstanding at any time during the year. Therefore, diluted Earnings per Share is same as Basic Earnings per Share shown above.
14 Dividend Per Share Equity dividend on ordinary shares declared and paid during the year
Company For the year ended 31 March, 2016 2015 Per share Total Per share Total Rs. Rs.000 Rs. Rs.000 Final Dividend / Proposed and Paid 3.35 1,005,000 3.25 975,000 1,005,000 975,000
The Directors recommended a final dividend of Rs. 3.35 per share for the year ended 31 March 2016, for approval by the shareholders at the Annual General Meeting to be held on 06 September 2016. As stipulated by Sri Lanka Accounting Standards - Events After the Reporting date (LKAS 10), this proposed dividend is not recognised as a liability as at 31 March 2016.
As required by Section 56 of the Companies Act No7 of 2007, the Board of Directors have satisfied the solvency test in accordance with Section 57. A statement of solvency completed and duly signed by the directors has been audited by Messrs KPMG.
However, for the purpose of computing dividend per share, the final dividend to be approved has been taken into consideration.
Distilleries Company of Sri Lanka PLC 114 Annual Report 2015/16 ------As at 2015 618 Rs.000 1,314 3,471 7,180 13,228 34,083 10,215 19,292 53,790 83,062 28,762 31 March 461,050 467,374 312,095 493,930 349,763 254,842 187,825 351,223 566,648 200,897 237,457 3,232,682 2,654,942 3,824,029 4,864,983 18,477,298 14,415,812 ------2016 As at Carrying Value 31 March 5,392,275 6,502,881 - - - - - 80 315 191 483 At the End of 3,764 1,119 Rs.000 Rs.000 3,529 130,556 the Year 59,022 10,553 37,255 3,548 44,288 16,444 59,932 239,853 38,425 77,291 14,029 219,618 16,149 173,649 537,535 520,276 8,767 686,123 243,373 872,368 243,830 215,854 63,323 792,071 300,585 127,436 550,862 329,553 5,081 431,463 3,773,718 246,595 191,546 593,897 327,666 2,931,553 505,168 1,748,673 342,426 1,019,210 187,140 2,456,878 2,938,708 13,032,150 22,283,214 12,438,253 16,563,273 ------(574) (283) (127) (160) (1,526) (3,169) (2,091) (1,864) (1,864) Transfers (12,130) (63,671) Disposals/ (459,242)
------
Year During the Revaluations ------Year for the Charge Accumulated Depreciation and Impairment Accumulated Depreciation - - - - - 80 56 135 315 At the Rs.000 Rs.000 Rs.000 Rs.000 3,569 195 1,781 1,748 56,347 2,675 69,630 105,545 36,533 722 41,440 2,848 44,943 14,989 94,384 33,052 32,654 5,771 14,029 Beginning 216,364 15,384 515,759 5,091 606,807 79,599 766,435 106,060 190,171 25,683 957,821 61,549 662,484 193,258 327,499 3,918 484,371 152,959 (205,867) 237,244 9,351 580,609 15,152 of the Year 2,680,960 709,835 1,591,317 160,525 2,040,647 418,322 11,673,640 2,109,214 (205,867) (544,837) 11,093,031 2,094,062 (205,867) (542,973) - - - 80 315 674 At the end of 4,883 Rs.000 the Year 69,575 40,803 60,732 14,029 235,767 711,184 529,043 929,496 299,785 279,177 678,298 334,634 438,141 115,716 134,085 921,563 3,436,721 2,091,099 1,116,198 1,206,350 1,092,656 5,395,586 4,205,181 5,392,275 6,502,881 35,315,364 29,001,526 ------(588) (283) (893) (7,767) (6,296) (2,501) (1,864) (1,864) Transfers (15,485) (67,305) Disposals/ (461,506) (1,310,189) ------Year During the Revaluations Cost or Valuation ------Year Additions During the - - - 80 At the 315 674 4,883 69,575 40,004 799 60,732 14,029 30,543 103,542 Beginning of the Year 250,447 805 530,680 188,271 525,974 3,657 918,902 10,877 299,785 243,961 35,216 661,032 17,266 334,679 1,819 438,141 115,716 818,066 105,361 3,148,334 749,893 2,085,247 12,148 1,116,198 1,145,646 61,597 1,013,707 146,254 5,273,329 124,758 3,139,313 323,371 748,362 (5,865) 3,824,029 2,878,435 4,864,983 47,611 1,665,522 (75,235) 30,150,938 4,706,319 2,413,884 (1,955,777) 25,508,843 1,722,523 2,413,884 (643,724) Note Rs.000 Rs.000 Rs.000 Rs.000 15.2 15.1 15.2 Property, Plant and Equipment Property,
Freehold Drums Vats & Casks Vats Oil Storage Tanks Fire Fighting Equipment Fire Wi-Max Lte Project Flag Project Shelters and Other Equipment Water Sanitation Water Settler Zone Infrastructure Roads and Bridges Customer Premise Equipment Customer Premise Towers Network Equipment Digital Electronic Switches Digital Electronic Electro Mechanical Equipment Electro Computer Equipment & Software Furniture, Fittings & Office Equipment Motor Vehicles Plant, Machinery & Other Equipment Civil Constructions Buildings Constructed on Leasehold Land Leasehold Improvements Buildings Immovable (JEDB/SLSPC) Assets on Finance Lease Total Property, Plant & Equipment Property, Total Land Improvements Furniture, Fittings & Equipment Leasehold Motor Vehicles Capital Work in Progress Capital Work 15 Group Land Total Freehold Property, Plant & Property, Freehold Total Equipment Total Leasehold Property, Plant & Equipment Leasehold Property, Total Plant & Machinery
115 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements - - - - As at 2015 1,314 Rs.000 13,228 13,342 13,658 88,497 151,883 31 March 6,219,769 6,067,886 3,298,841 1,292,806 1,346,200 - - - 2016 As at 1,119 Carrying Value Rs.000 34,751 10,553 12,637 19,351 140,919 133,096 31 March 6,657,068 6,622,317 2,971,150 1,746,331 1,587,161 80 36 315 End of 3,764 59,022 58,543 76,630 the Year 846,681 - (155) 49,485 (55,579) 404,634 Disposals At the ------Year During the Revaluations 36 Year for the Charge Accumulated Depreciation and Impairment Accumulated Depreciation ------At the Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Beginning of the Year 80 80 315 315 At the end of 4,883 3,569 195 Rs.000 69,575 56,347 2,675 71,180 49,910 8,633 the Year 133,132 3,817,831 484,286 362,395 1,822,961 48,732 74,146 (46,248) 1,587,161 ------(280) 68,836 46,678 2,962 (55,579) 545,553 406,966 53,247 Transfers (314,037) 34,751 Disposals/ ------Year During the Revaluations Cost or Valuation - - - - - Year Additions 133,132 During the - 80 315 At the Rs.000 Rs.000 Rs.000 Rs.000 4,883 69,575 63,252 7,928 60,336 8,780 Beginning 151,883 196,905 495,463 105,669 of the Year 7,316,652 715,420 494,082 (369,896) 8,156,258 1,096,883 504,289 (46,248) (55,734) 1,499,190 7,164,769 518,515 494,082 (55,859) 8,121,507 1,096,883 504,289 (46,248) (55,734) 1,499,190 3,783,127 34,704 1,341,538 180,691 300,732 1,346,200 47,611 193,350 Property, Plant and Equipment (Contd.) Property,
Freehold Total Property, Plant & Equipment Property, Total Drums In Progress Capital Work Total Freehold Property, Plant & Property, Freehold Total Equipment Oil Storage Tanks Vats & Casks Vats Fire Fighting Equipment Fire Computer Equipment & Software Furniture, Fittings & Office Equipment Motor Vehicles Plant, Machinery & Other Equipment Buildings Constructed on Leasehold Land Buildings 15 Land Improvements Company Land
Distilleries Company of Sri Lanka PLC 116 Annual Report 2015/16 15.1 Immovable (JEDB/SLSPC) Assets on Finance Lease
Group For the year ended 31 March, 2016 2015 Right to Use Unimproved Improvement Other Vested Buildings Machinery Total Total of Land Lease Land to Land Assets Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 (Note 15.1.1) Capitalised Value (18 June 1992) Balance at the Beginning of the Year 331,201 899 15,702 152 64,024 26,164 438,141 438,141 Balance at the End of the Year 331,201 899 15,702 152 64,024 26,164 438,141 438,141 Amortisation As at Beginning of the Year 140,968 383 11,807 152 57,771 26,164 237,244 227,894 Amortisation for the year 6,249 18 523 - 2,560 - 9,351 9,350 At the End of the Year 147,217 401 12,330 152 60,332 26,164 246,595 237,244 Carrying Amount As at Beginning of the Year 190,233 516 3,895 - 6,253 - 200,897 210,247 As at the End of the Year 183,984 498 3,372 - 3,692 - 191,546 200,897
These assets are being amortised in equal annual amounts over the following periods. Mature plantations/improvements to land 30 years Buildings 25 years Machinery 15 years
15.1.1 Right to Use of Land “Right-To-Use of Land on Lease” as above was previously titled “Leasehold Right to Bare Land”. The change is in order to comply with Statement of Alternative Treatment (SoAT) issued by the Institute of Chartered Accountants of Sri Lanka dated 21st August 2013. Such leases have been executed for all estates for a period of 53 years.
This Right-to-use land is amortised over the remianing lease term or useful life of the right whichever is shorter and is disclosed under non-current assets. The Statement of Alternative Treatment (SoAT) for right-to-use land does not permit further revaluation of right-to-use land. However an adjustment to the “Right-To-Use of Land” could be made to the extent that the change relate to the future period on the reassessment of liability to make the lease payment. The values taken into the Statement of Financial Position as at 18th June 1992 and amortisation of the right to use land up to 31 December 2015 are as stated above.
15.2 Land and Buildings 15.2.1 Details of Land and Building Stated at Fair Value Lanka Bell Limited Free hold land and building of the company was valued by Mr. Sivaskanthan, A.M.I.V (Sri Lanka) a professional valuer on 31st March 2015 on “Contractor’s Basis” and the excess of Rs. 26,091,250 over the net book value as at 31 March 2015 has been credited to the revaluation reserve.
Texpro Industries (Pvt) Ltd The Company’s land and building were revalued on 01 April 2009. The land was subsequently revalued on 3rd April 2013 by a professionally qualified independent valuer K. Arthur Perera. The valuation was based on contractors method of valuation.
Browns Beach Hotel PLC The Book value of freehold land owned by the Company, which is situated at No. 175, Lewis Place, Negombo has been revalued by Mr. J. Rajasooriya, (A.I.V. (Sri Lanka), M.P.V.A. (Sri Lanka) on 26 March 2003. The surplus on revaluation, Rs. 74.3 million, has been credited to the revaluation reserve.
117 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
Freehold land at No. 175, Lewis Place, Negombo was valued by Mr. J. Rajasooriya, A.I.V. (Sri Lanka), M.P.V.A. (Sri Lanka) a professional valuer, on 28 March 2007 on “Market pricing basis” and the excess of Rs.290,000,000 over the net book value has been placed to the credit of revaluation reserve.
Free hold land at No.175, Lewis Place, Negombo of Browns Beach Hotel PLC was revalued by Mr. K. C. B. Condegama, (A.I.V. Sri Lanka) a professional valuer on 31 March 2012 on “Market Pricing Basis” and the excess of Rs. 476,500,000 over the net book value as at 31 March 2012 has been placed to the credit of revaluation reserve.
15.2.1.1 Revaluation of Lands and Buildings during the year A valuation of freehold Lands and Buildings of Distilleries Company of Sri Lanka PLC, Melstacorp Limited and Melsta Properties (Pvt) Limited was carried out by incorporated Valuers Mr. S. Sivaskantha F. I. V. (Sri Lanka) by using contracted test basis method and incorporated in the Financial Statements of the Group as at 31 March 2016. The surplus on revaluation of Lands and Buildings for the Group and Company, Rs.2.8 Bn and Rs.540 Mn have been credited to the revaluation reserve respectively.
Analysis of Sensitivity of Revaluation of Land and Buildings during the Year Total Lands Total Buildings Sensitivity on per Perch Value Sensitivity on per Square Feet Company +5% Value as -5% +5% Value as -5% Stands Stands Distilleries Company of Sri Lanka PLC 1,453,830 1,384,600 1,315,370 130,190 123,990 117,791 Melstacorp Limited 1,527,507 1,450,166 1,382,030 756,626 720,596 684,566 Melsta Properties (Pvt) Limited 2,340,501 2,229,049 2,117,597 369,984 352,366 334,747 5,321,838 5,063,815 4,814,997 1,256,800 1,196,952 1,137,105
15.2.2 The carrying amount of revalued land and buildings if they were carried at cost less depreciation would be as follows;
Group For the year ended 31 March, 2016 2015 Land Building Land Building Rs.000 Rs.000 Rs.000 Rs.000 Cost 617,607 446,412 617,607 446,412 Accumulated Depreciation and Impairment - (280,318) - (272,967) Carrying Value 617,607 166,094 617,607 173,445
Company For the year ended 31 March, 2016 2015 Land Building Land Building Rs.000 Rs.000 Rs.000 Rs.000 Cost 51,047 46,248 51,047 46,248 Accumulated Depreciation and Impairment - (46,248) - (46,248) Carrying Value 51,047 - 51,047 -
15.3 Gross Carrying Value of Fully Depreciated Assets The cost of the fully depreciated assets of the Group and Company amounts to Rs.7,696 Mn and Rs.647Mn respectively as at reporting date.
15.4 Property Plant and Equipment that have been Pledged The property plant and eqipments that are pledged for long term borrowings are disclosed in Note 41 to these financial statements.
Distilleries Company of Sri Lanka PLC 118 Annual Report 2015/16 15.5 Impairment of Property Plant and Equipment There is no permanent fall in value of Property, Plant and Equipment which require a provision for impairment.
16 Intangible Assets Group For the year ended 31 March, 2016 License FLAG Software Goodwill on Total Total Fees Cable Cost and Acquisition 2016 2015 Implementation Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Note 16.1 Note 16.2 Cost/Carrying Value Balance at the Beginning of the Year 661,867 2,797,761 86,594 792,297 4,338,519 4,314,932 Additions 14,629 - 5,930 - 20,559 23,587 Capitalisations/ Transfers ------Balance at the End of the Period 676,496 2,797,761 92,524 792,297 4,359,078 4,338,519
Accumulated Amortisation and Impairment Balance at the Beginning of the Year 135,083 1,243,529 32,319 190,985 1,601,916 1,324,439 Amortised Durring the Year 76,984 186,517 20,989 - 285,157 277,477 Impaired Durring the Year ------Balance at the End of the Period 212,067 1,430,046 53,308 190,985 1,886,406 1,601,916
Carrying Value As at Beginning of the Year 526,784 1,554,232 54,942 601,312 2,737,270 2,990,493 As at End of the Year 464,429 1,367,715 39,216 601,312 2,472,672 2,736,603
Company For the year ended 31 March, 2016 2015 Software Total Total Cost and Implementation Rs.000 Rs.000 Rs.000 Cost/Carrying Value Balance at the Beginning of the Year 23,640 23,640 23,640 Additions - - - Balance at the End Of the Year 23,640 23,640 23,640
Accumulated Amortisation And Impairment Balance at the Beginning of the Year 669 669 - Amortised Durring the Year 7,880 7,880 669 Balance at the End of the Year 8,549 8,549 669
Carrying Value As at Beginning of the Year 22,971 22,971 23,640 As at End of the Year 15,091 15,091 22,971
119 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
16.1 License Fees License fee represents the operator license fee of Rs. 300 million which was paid in 1996, and amortised over 226 months on straight line basis commencing from that year. The External Gateway License fee of Rs. 4.85 million which was renewed in 2013 amounting to Rs. 102Mn is amortised over a period of 10 years, commencing from 28th February 2013. The Wi-Max 2365-2380 MHz License Fee of Rs.510.2Mn was paid in 2011/12 and 2012/13 and operations commenced on 01st July 2013.
16.2 Flag Cable FLAG expenditure represents the expenditure incurred on undersea fiber optic cable link and the landing station , which enables Lanka Bell to offer direct global connectivity and a complete end-to-end data connectivity solution. The total expenditure will be amortised over the license period of 15 years on a straight line basis from August 2008.
17 Investment Property Group Land Building Total 2016 Rs.000 Rs.000 Rs.000 Cost/Valuation Balance at the Beginning of the Year 579,004 7,091 586,095 Additions 291,412 154,076 445,487 Change in Fair Value 84,734 2,178 86,912 Transfers From Property, Plant and Equipment 71,335 5,865 77,200 Balance at the End of the Year 1,026,485 169,210 1,195,695
17.1 Valuation Details of Investment Property During the year the Group has change its Accounting Policy of subsiquent measurement of Investment Property from Cost Model to Fair value Model
A valuation of freehold Land and Buildings of Melstacorp Limited and Melsta Tower (Pvt) Limited was carried out by incorporated Valuers Mr. S. Sivaskantha, F. I. V. (Sri Lanka) by using contracted test basis method and incorporated in the Financial Statements of the Group as at 31 March 2016.
17.1.1 Analysis of Sensitivity of Investment Property Valuation during the year Total Lands Total Buildings Company +5% Value as -5% +5% Value as -5% Stands Stands Melsta Tower (Pvt) Limited 716,974 682,833 648,691 9,789 9,323 8,857 Melstacorp Limited 355,372 338,450 321,527 160,271 159,976 159,681 Melsta Regal Finance Limited 6,195 5,900 6,195 - - - 1,078,541 1,027,182 976,413 170,060 169,299 168,538
18 Biological Assets
Group As at 31 March, 2016 2015 Note Rs.'000 Rs.'000 Bearer Biological Assets 18.1 2,158,633 1,889,494 Consumer Biological Assets 18.2 1,755,819 1,662,375 3,914,452 3,551,869
18.1 Bearer Biological Assets
Bearer Biological Assets 18.1.1 69,823 78,863 Consumer Biological Assets 18.1.2 2,088,810 1,810,631 2,158,633 1,889,494
Distilleries Company of Sri Lanka PLC 120 Annual Report 2015/16 18.1.1 On Finance Lease (JEDB/SLSPC) In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka prevailed at the time of privatisation of plantation estates, all immovable assets in these estates under finance leases have been taken into the books of the Company retroactive to 18th June 1992. For this purpose, the Board decided at its meeting on 8th March, 1995, that these assets be stated at their book values as they appear in the books of the JEDB/SLSPC, on the day immediately preceding the date of formation of the Company. These assets are taken into the Statement of Financial Position as at 18 June, 1992 and amortisation of immovable leased assets to 31 December 2015 are as follows.
Mature plantations For the year ended 31March, 2016 2015 Tea Rubber Total Total Rs.000 Rs.000 Rs.000 Rs.000 Cost Balance at the Beginning of the Year 206,227 64,997 271,224 271,224 Balance at the End of the Year 206,227 64,997 271,224 271,224
Accumulated Amortisation Balance at the Beginning of the Year 146,551 45,810 192,361 183,320 Amortisation for The Year 6,874 2,166 9,040 9,041 Balance at the End of the Year 153,425 47,976 201,401 192,361 Carrying Amount 52,802 17,021 69,823 78,863
Investment in Immature Plantations at the time of handing over to the Company as at 18 June, 1992 by way of estate leases were shown under Immature Plantations.
However, since then all such investments in immature plantations attributable to JEDB/ SLSPC period have been transferred to mature plantations. These mature tea and rubber were classified as bearer biological assets in terms of LKAS 41 - Agriculture. The carrying value of the bearer biological assets leased from JEDB/SLSPC is recognised at cost less amortisation. Further investments in such plantations to bring them to maturity are shown in Note 18.1.2.
18.1.2 Investments after Formation of the Plantation Company Mature Plantations For the year ended 31March, 2016 2015 Immature Mature Total Total Plantations Plantations Rs.000 Rs.000 Rs.000 Rs.000 Cost Balance as at the Beginning of the Year 1,413,230 713,188 2,126,418 1,813,950 Additions During The Year 308,735 - 308,735 312,468 Transfers (From)/To (6,821) 6,821 - - Balance as at the End of the Year 1,715,144 720,009 2,435,153 2,126,418
Accumulated Amortisation Balance as at the Beginning of the Year - 315,787 315,787 285,583 Charge for the Year - 30,556 30,556 30,204 Balance as at the End of the Year - 346,343 346,343 315,787 Carrying Amount at the end of the Year 1,715,144 373,666 2,088,810 1,810,631
121 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
These are investments in immature mature plantations since the formation of the Company. The assets (including plantation assets) taken over by way of estate leases are set out in Notes 18.1.1 Further investment in immature plantations taken over by way of these leases are shown in the above note. When such plantations become mature, the additional investments since take over to bring them to maturity, will be moved from immature to mature under this note.
The requirement for recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on March, 2nd 2012 by the Institute of Chartered Accountants of Sri Lanka. Accordingly, the Company has elected to measure the bearer biological assets at cost using LKAS 16 - Property, Plant & Equipment.
Specific borrowings have been obtained to finance the planting expenditure. The above additions include Rs.74,933,088 (2015-Rs.58,231,199/-) of borrowing costs capitalised during the year.
18.2 Consumer Biological Assets
Group For the year ended 31 March, 2016 2015 Rs.'000 Rs.'000 Balance as at the Beginning of the Year 1,662,375 1,559,765 Gain/(loss) arising from changes in Fair Value Less Cost to Sell 89,603 92,376 Decrease due to Harvest/Transfer (1,736) Increase due to Development 5,577 10,234 Balance as at the End of the Year 1,755,819 1,662,375
Managed timber plantations include commercial timber plantations cultivated in estates. The cost of immature trees is treated as approximate fair value particularly on the ground of little biological transformation has taken place and impact of the biological transformation on price is not material. When such Plantations become mature, the additional investments since taken over to bring them to maturity are transferred from Immature to Mature.
The fair value of managed trees was ascertained since the LKAS 41 is only applicable for managed agricultural activity in terms of the ruling issued by The Chartered Accountants of Sri Lanka. The valuation was carried by Messers Mr. W.M Chandrasena, incorporated valuers, using Discounted Cash Flow methods. In ascertaining the fair value of timber, a physical verification was carried covering all the estates.
As at 31 March, Group 2016 Rs.'000 Timber Reserve Balance at the beginning of the year 1,662,376 Gain recognised during the year 89,603 Balance at the end of the year 1,751,979
18.2.1 Measurement of Fair Values a) Fair Value Hierarchy The fair value measurements of for the standing timber have been categorised as Level 3 fair values based on the inputs to the valuation techniques used.
The fair value of managed timber plantations was ascertained since the LKAS 41 is only applicable for managed agricultural activity in terms of the ruling issued by The Institute of Chartered Accountants of Sri Lanka. The valuation was carried by Messers Mr. W.M.Chandrasena, incorporated valuers, using Discounted Cash Flow (DCF) methods. In ascertaining the fair value of timber a physical verification was carried out covering all the estates.
Distilleries Company of Sri Lanka PLC 122 Annual Report 2015/16 Key assumption used in the Valuation 1. The haversting is approved by the PMMD and Forestry Department Based on the Forestry Department Plan. 2. The current market prices used are net of selling expenditure. 3. Discount rate is 13%, a Sensitivity analysis at (+) or (-) 1% is also disclosed 4. Though the replanting is a condition precedent for harvesting , yet the costs are not taken into consideration, as these are not considered to be material.
The valuations, as presented in the external valuation models based on net present values, take into account the long term exploitation of the timber plantations. Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the volatility of the variables, their carrying value may differ from their realisable value. The Board of Directors retains their view that commodity markets are inherently volatile and that long term price projections are highly unpredictable. Hence, the sensitivity analysis regarding discount rate variations as included in this note allows every investor to reasonably challenge the financial impact of the assumptions used in the LKAS 41 against his own assumptions.
b) Level 3 Fair Values The break down of the total gains (losses) in respect of Level 3 fair values is shown below.
As at 31 March, Group 2016 2015 Rs.'000 Rs.'000 Gain included in Other Income Change in Fair Value (realised) 17,313 19,941 Change in Fair Value (unrealised) 89,603 92,377 106,916 112,318
18.2.2 Sensitivity Analysis Sensitivity Variation Discount Rate Values as appearing in the Statement of Financial Position are very sensitive to changes of the discount rate applied. Simulations made for timber trees show that a rise or decrease by 1% of the discount rate has the following effect on the net present value of biological assets:
12% 13% 14% Managed Timber 1,580,237 1,755,819 1,931,400 Total 1,580,237 1,755,819 1,931,400
19 Investments in Subsidiaries
2016 2015 Number of Effective Cost Number of Effective Cost Shares Holding Rs.’000 Shares Holding Rs.’000 Melstacorp Limited 265,450,000 100% 48,320,750 265,450,000 100% 48,320,750 AION SG Residencies (Pvt) Ltd - 100% 25,000 - 100% 25,000 Less: Provision for Impairment of - - (25,000) - - (25,000) Investment 48,320,750 48,320,750
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Notes to the Financial Statements
19.1 Group Holdings in Subsidiaries
Subsidiary Principal Activity Reporting Reason for using a Indirectly 2016 2016 date different period holding No. of shares Effective through held ownership interest 1 Balangoda Plantations PLC BPL Cultivation and processing of 31-Dec To comply with the rules MC 10,217,300 43.23% Tea & Rubber and regulations in the Plantation sector 2 Bell Solutions (Pvt) Ltd BSL Information & Communication 31-Mar - LB 98,090 98.09% Technology 3 Bellvantage (Pvt) Ltd BV BPO,KPO & Software 31-Mar - MC 5,000,100 100% Development 4 Bogo Power (Pvt) Ltd BP Generation and sale of Hydro 31-Mar - MC 993,000,000 99.30% Electric Energy 5 Browns Beach Hotel PLC BBH Leisure 31-Mar - MC 54,273,234 41.88% 6 Continental Insurance Lanka CIL General Insurance Services 31-Dec To comply with the rules MC 70,000,017 100% Limited and regulations in the Insurance sector 7 Lanka Bell Ltd LB Telecommunication Services 31-Mar - MH 50,719,061 99.73% 8 Melstacorp Limited MC Investment Holding Company 31-Mar - 265,450,000 100% 9 Melsta Logistics (Pvt) Ltd ML Automobile Servicing and 31-Mar - MC 66,572,573 100% Logistics 10 Melsta Regal Finance Ltd MRF Finance, Leasing, Hire 31-Mar - MC 134,029,451 100% Purchasing and Factoring” 11 Milford Holdings (Pvt) Ltd MH Investment Holding Company 31-Mar - MC 333,067,925 98.36% 12 Negombo Beach Resorts NBR Leisure 31-Mar - BBH 91,400,001 41.88% (Pvt) Ltd 13 Periceyl (Pvt) Ltd PVL Distribution of locally 31-Dec To operate in line with MC 40,000 100% manufactured Foreign Liquor foreign strategic alliances 14 Splendor Media (Pvt) Ltd SM Media Buying & Creative 31-Mar - MC 100,000.00 100% Services 15 Telecom Frontier (Pvt) Ltd TF Telecommunication Services 31-Mar - LB 98,090 98.09% 16 Texpro Industries Ltd TEXP Dyeing and Printing Woven 31-Mar - TIM 46,836,524 41.75% Fabrics 17 Timpex Ltd TIM Investment Holding Company 31-Mar - MC 15,611,661 51.03% 18 Melsta Properties (Pvt) Ltd MP Management of Real Estate 31-Mar - MC 170,194,901 100% 19 Melsta Tower (Pvt) Limited MT Real Estate 31-Mar MC 65,751,636 100% 20 Melsta Technologies (Pvt) Limited MTEC IT Services 31-Mar MC 1,000,000 100%
19.2 Significant Judgements and Assumptions Made in Determining Whether the Group has Control Although the Group owns less that half of the voting rights of Browns Beach Hotel PLC (BBH), Balangoda Plantations PLC (BPL),Negombo Beach Resorts (Private) Limited (NBR) and Texpro Industries (Private) Limited (TEXP), the Group assesed that it is able to govern the financial and oporating policies of BBH,BPL,NBR and TEXP by virtue of de facto control on the basis that the remaining share holders are widely spread out and there is no indication to belive that all of them will exercise their votes collectively.
Distilleries Company of Sri Lanka PLC 124 Annual Report 2015/16 19.3 Disclosure of the interest that Non-Controlling Interests have in the group’s activities and cash flows 19.3.1 Nature of interests in subsidiaries with material NCI Name of the subsidiary : Balangoda Plantations PLC Browns Beach Hotels PLC (BPL) (BBH) Principal place of business : In the areas of No. 175, Lewis Place, Negombo Ratnapura,Balangoda and Badulla Proportion of ownership interest held by non : 56.77% 58.12% controlling interest Profit / (loss) allocated to non controlling interest : (194,822) (61,070) (Rs. '000) Accumulated non controlling interest at the end of the : 1,298,241 2,002,389 reporting period (Rs. '000)
19.3.2 Summerised Financial Information of Subsidiaries that have Material NCI BPL BBH As at/ for the year ended 31 March, 2016 2015 2016 2015 Rs.’000 Rs.000 Rs.’000 Rs.000 Dividends Paid to Non Controlling Interests - 13,419 - - Current Assets 550,093 795,348 19,566 87,119 Non Current Assets 4,794,904 4,348,929 5,635,322 4,253,596 Current Liabilities 1,253,468 876,898 158,295 124,391 Non Current Liabilities 1,804,803 1,645,747 2,067,955 665,848 Revenue 2,413,055 3,002,156 - - Profit/(Loss) After Tax (343,159) (95,231) (105,019) (15,671) Other Comprehensive Income 8,252 (16,048) (339) (169) Total Comprehensive Income (334,907) (111,280) (105,358) (15,840) Cash Flows Cash Flows from Operationg Activities (182,218,846) (24,910) (19,855) 18,613 Cash Flows from Investing Activities (441,321,711) (330,925) (1,384,993) (1,680,237) Cash Flows from Financing Activities (291,783,510) 451,153 1,401,442 665,000
20 Investment in Equity Accounted Investees Group As at 31 March, 2016 2015 No. of Effective Equity Cost No. of Effective Equity Value Cost Shares Holding Value Shares Holding Rs.000 Rs.000 Rs.000 Rs.000
Note 20.1 Note 20.1 Aitken Spence PLC 176,401,090 43.45% 25,297,704 19,647,511 167,584,298 41.28% 23,735,329 18,809,061 Madulsima Plantations PLC 77,817,810 45.90% 996,239 736,092 9,048,307 31.20% 456,908 90,000 26,293,943 20,383,603 24,192,237 18,899,061
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Notes to the Financial Statements
Company As at 31 March, 2016 2015 No. of Effective Cost No. of Effective Cost Shares Holding Shares Holding Rs.000 Rs.000 Aitken Spence PLC 186,500 0.001% 28,703 186,500 0.001% 28,703 28,703 28,703 20.1 Equity Value of Investment in Equity Accounted Investees to the Group
Equity Accounted Balance as at Acquisitions/ Share of Profit/ Dividend Share of Other Share of Balance as at Investee 1 April 2015 (Disposal) (Loss) Net Received Comprehensive Net Assets 31 March 2016 of Tax Income Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Aitken Spence PLC 23,735,329 840,618 880,759 (335,126) 280,504 (104,380) 25,297,704 Madulsima Plantations PLC 456,908 653,282 (132,222) - 18,271 - 996,239 24,192,237 1,493,900 748,537 (335,126) 298,775 (104,380) 26,293,943
Equity Accounted Balance as at Acquisitions/ Share of Profit/ Dividend Share of Other Share of Balance as at Investee 1 April 2014 (Disposal) (Loss) Net Received Comprehensive Net Assets 31 March 2015 of Tax Income Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Aitken Spence PLC 22,538,992 55,744 1,477,319 (335,169) (2,271) 714 23,735,329 Madulsima Plantations PLC 455,517 - (86,651) - 88,042 - 456,908 22,994,509 55,744 1,390,668 (335,169) 85,771 714 24,192,237
20.2 Market Value Quoted Equity Accounted Investees and Other Information As at 31 March, Principal Activity Reporting Date Group Company 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Aitken Spence Holdings PLC Diversified Holdings 31 March 12,965,480 16,674,637 13,708 18,557 Madulsima Plantations PLC Cultivation and Processing 31 December 599,197 103,151 - - of Tea 13,564,677 16,777,788 13,708 18,557
20.3 Summerised Financial Information of Equity Accounted Investees (entire amount reported in Associate’s Financial Statements)
Aitken Spence PLC Madulsima Plantations PLC As at/ for the year ended 31 March, 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Total Current Assets 21,209,750 25,383,192 336,196 411,709 Total Non Current Assets 51,995,356 39,780,640 4,755,721 4,454,513 Total Current Liabilities 15,514,730 12,426,235 1,248,098 2,202,176 Total Non Current Liabilities 13,639,158 10,727,403 1,182,141 1,088,871 Revenue 25,977,795 35,318,891 1,870,384 2,207,886 Profit / (Loss) from Continuing Operations 2,944,279 4,883,600 (288,065) (277,727) Other Comprehensive Income 916,978 11,799 39,808 282,185 Total Comprehensive Income 3,861,257 4,895,399 (248,258) 4,458 Cash and Cash Equivalents 4,653,788 2,911,135 2,636 1,747
Distilleries Company of Sri Lanka PLC 126 Annual Report 2015/16 Aitken Spence PLC Madulsima Plantations PLC As at/ for the year ended 31 March, 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Depreciation and Amortisation. 1,746,018 1,391,376 83,996 74,533 Interest Income. 637,739 622,825 116 212 Interest Expense. 873,223 804,836 110,782 192,877 Income Tax Expense or (Income) 861,229 826,323 6,193 7,685
20.4 Right Issue in Madulsima Plantations PLC Melstacorp Limited (MC) has subscribed for Rights and additional Rights of Madulsima Plantations PLC (MPL) and allotted 45,241,535 and 23,516,968 shares respectively for a total consideration of Rs.653.2 Mn. The entire consideration was settled as an Capitalisation of Related Party Loan Balance between MC and MPL, hence there were no cash outflow from MC to MPL.
21 Other Financial Investments
Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Non Current Investments Available for Sale Financial Investments - (AFS) 21.1 15,406,754 17,340,724 2,368,254 2,561,053 Loans and Receivables (L&R) Financial Investments 21.4 181,765 182,538 - - 15,588,519 17,523,262 2,368,254 2,561,053 Current investments Available For Sale Financial Investments - (AFS) 21.1 9,171 177,517 - - Fair Value Through Profit or Loss (FVTPL) Financial 21.2 1,728,838 2,011,416 58,409 177,863 Investments Held to Maturity (HTM) Financial Investments 21.3 - 40,911 - - Loans and Receivables (L&R) Financial Investments 21.4 1,260,519 201,971 - - 2,998,528 2,431,815 58,409 177,863
21.1 Available for Sale Financial Investments - (AFS)
Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Non Current Investments Quoted Equity Securities 21.1.1 14,667,682 16,931,800 2,028,606 2,223,612 Unquoted Equity Securities 21.1.2 114,102 114,102 113,771 113,771 Investments In Unit Trusts 21.1.3 50,923 59,152 3,000 3,000 Government Securities 21.1.5 104,014 - - - Corporate Debt Securities 21.1.4 470,033 235,670 222,877 220,670 15,406,754 17,340,724 2,368,254 2,561,053 Current Investments Government Securities 21.1.5 9,171 177,517 - - 9,171 177,517 - -
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Notes to the Financial Statements ------Rs.000 Fair Value ------Cost 2015 3,000 3,000 Rs.000 494,946 2,223,612 494,946 2,223,612 113,771 113,771 ------
------No. of Shares 10,016,272 494,946 2,223,612 ------4 200 4 4 3 100 3 3 Company 3,000 3,000 300,000 3,000 3,000 Rs.000 113,771 113,764 43,266,167 113,764 113,764 Fair Value - - - 2016 Cost 3,000 Rs.000 113,771 - 526,497 2,028,606 - - - 526,497 2,028,606 ------200 4 100 3 No. of Shares 300,000 3,000 10,178,656 526,497 2,028,606 43,266,167 113,764 - - 4 3 813 331 3,000 59,152 56,152 Rs.000 832,489 832,489 114,102 113,764 Fair Value 8,821,542 2,223,612 3,456,291 3,140,826 7,277,769 7,277,769 16,931,800 2015 - 4 3 331 Cost 3,000 57,000 54,000 Rs.000 926,473 926,473 606,109 606,109 494,946 114,102 113,764 6,983,150 3,566,627 2,921,577 7,193,181 7,193,181 15,708,913 200 100 3,310 3,252 No. of Shares 300,000 301,614 5,946,351 33,140,501 10,016,272 17,042,856 18,989,272 43,266,167 36,498,341 - - Group 631 Rs.000 Fair Value - 2016 Cost 46,538 50,923 Rs.000 698,043 768,304 114,102 114,102 926,473 926,473 7,778,067 7,444,117 7,514,940 6,455,261 16,917,523 14,667,682 3 200 4 4 100 3 3 3,310 331 331 No. of Shares 300,000 3,000 3,000 6,710,084 698,043 768,304 1,683,505 43,538 47,923 33,140,501 10,178,656 526,497 2,028,606 17,042,856 3,566,627 2,334,871 24,541,902 3,684,943 3,080,009 43,266,167 113,764 113,764 43,616,626 7,514,940 6,455,261 Quoted Equity Securities - Non Current Investments Quoted Equity Securities - Non Current Total Quoted Equity Securities - AFS Total Manufacturing Pelwatte Sugar Industries PLC Beverage, Food & Tobacco Lanka Milk Foods (CWE) PLC National Development Bank PLC
Hatton National Bank PLC DFCC Bank PLC Bank Finance & Insurance Bank of Ceylon PLC Commercial Credit Investment Bureau of Sri Investment Bureau Credit Lanka Amethyst Leisure Ltd Amethyst Leisure Investments in Unit Trusts As at 31 March, Diversified Investments John Keells Holdings PLC Unquoted Equity Securities International Distilleries Lanka Ltd & Co., Ltd W.M.Mendis Acuity Asset Management Guardian Limited Unit Trust Mgt Co., Ltd Unit Trust 21.1.1 21.1.2 21.1.3
Distilleries Company of Sri Lanka PLC 128 Annual Report 2015/16 21.1.4 Corporate Debt Securities As at 31 March, Group 2016 2015 Cost Fair value Cost Fair value Rs.'000 Rs.'000 Rs.'000 Rs.'000 Corporate Debentures 467,826 470,033 235,670 235,670 467,826 470,033 235,670 235,670
As at 31 March, Company 2016 2015 Cost Fair value Cost Fair value Rs.'000 Rs.'000 Rs.'000 Rs.'000 Corporate Debentures 220,670 222,877 220,670 220,670 220,670 222,877 220,670 220,670
21.1.5 Government Securities
As at 31 March, Group 2016 2015 Carrying Fair value Carrying Fair value Value Value Rs.'000 Rs.'000 Rs.'000 Rs.'000 Non Current Investments Treasury Bonds 112,115 104,014 - - 112,115 104,014 - - Current Investments Treasury Bills 9,429 9,171 205,748 177,517 9,429 9,171 205,748 177,517 21.2 Fair Value Through Profit Or Loss (FVTPL) Financial Investments
As at 31 March, Group Company Fair value Fair value 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Quoted Equity Securities 21.2.1 1,025,102 1,111,052 58,409 177,863 Investments In Unit Trusts 21.2.2 569,390 765,487 - - Quoted Debentures 21.2.3 134,346 134,877 - - Mutual Funds 21.2.4 - - - - 1,728,838 2,011,416 58,409 177,863
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Notes to the Financial Statements
21.2.1 Quoted Equity Securities Group Company As at 31 March, 2016 2015 2016 2015 No. of shares Fair value No. of shares Fair value No. of shares Fair value No. of shares Fair value Rs.000 Rs.000 Rs.000 Rs.000 Bank Finance & Insurance Nation Trust Bank PLC 50,000 4,315 ------Seylan Balnk PLC - - 16,203 932 - - -- Commercial Bank of Ceylon PLC - NV 662 81 ------4,396 932 - - Beverage, Food & Tobacco Renuka Agri Foods PLC 6,118,560 20,168 6,118,560 28,877 4,918,560 15,248 4,918,560 23,117 Nestle Lanka PLC 3,997 8,136 3,997 8,912 2,625 5,324 2,625 6,024 Lanka Milk Foods (CWE) PLC - - 763,733 106,923 -- 763,733 106,923 28,304 144,712 20,572 136,064 Hotel And Travels The Kingsbury Hotel PLC 205,000 3,588 823,600 13,588 -- 618,600 9,898 Aitken Spence Hotel Holdings PLC 23,100 1,571 23,100 1,813 -- -- Hotel Services PLC 618,600 9,279 -- 618,600 9,279 -- John Keells Hotels PLC 528,850 6,822 528,850 7,941 388,850 4,666 388,850 5,561 21,260 23,342 13,945 15,459 Manufacturing ACL Cables PLC 63,000 7,617 63,000 4,813 - - -- Tokyo Cement PLC 100,000 3,950 ------Hemas Holdings PLC 100,000 9,290 ------Lanka IOC 29,998 1,113 ------Bukit Darah PLC 72,200 25,270 72,200 48,952 - - -- Textured Jersey Lanka PLC 13,511,928 433,754 13,511,928 324,569 - - -- 480,994 378,334 - -
Diversified Investments John Keells Holdings PLC - Warrant - - 1,666,208 34,657 -- -- 2015 John Keells Holdings PLC - Warrant 1,904,237 17,710 1,666,208 53,485 -- -- 2016 CT Holding PLC 1,475,500 191,667 1,475,500 188,864 -- -- Softlogic Holdings PLC 380,000 5,054 380,000 5,016 380,000 5,054 380,000 5,016 Softlogic Capital PLC 40,000,000 240,000 40,000,000 240,000 Free Lanka Capital Holdings PLC 2,850,850 3,421 2,850,850 4,561 2,850,850 3,421 2,850,850 4,561 Carson Cumberbatch PLC 29,400 7,938 29,400 10,772 -- -- Vallibal One PLC 121,084 2,373 121,084 2,671 -- -- 468,163 540,026 8,475 9,577
Distilleries Company of Sri Lanka PLC 130 Annual Report 2015/16 Group Company As at 31 March, 2016 2015 2016 2015 No. of shares Fair value No. of shares Fair value No. of shares Fair value No. of shares Fair value Rs.000 Rs.000 Rs.000 Rs.000 Hospitals Durdens - Non Voting 40,040 3,003 Ceylon Hospitals PLC - Non Voting 95,869 7,056 135,909 10,403 95,869 7,056 95,869 7,200 10,059 10,403 7,056 7,200
Chemicals and Pharmaceuticals Heycarb PLC 73,876 11,926 73,876 13,303 52,255 8,361 52,255 9,563 11,926 13,303 8,361 9,563
Total Quoted Equity Securities -FVTPL 1,025,102 1,111,052 58,409 177,863
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21.2.2 Investments in Unit Trusts Group As at 31 March, 2016 2015 No. of Units Fair value No. of Units Fair value Rs.'000 Rs.'000 Namal High Yield Fund - - 5,186,213 71,309 JB Vantage Money Market Fund 8,798,474 138,169 14,617,175 215,543 Eagle Income Fund - - 5,639,583 58,894 NDB Wealth Money Plus 2,153,386 30,548 - - First Capital Money Market 23,414 25,188 - - Guardian Acuity Fixed Income Fund 1,689,189 21,453 1,689,189 20,557 NDB Wealth Income 6,014,539 62,813 - - Eagle Money Fund - - 4,236,359 44,581 Ceybank Savings Plus Money Market Fund - - 5,200,912 69,037 NDB GILT EDGED - - 2,509,294 25,573 Comtrust 8,924,581 104,570 12,408,657 143,215 Investrust 6,721,936 186,649 10,919,517 116,778 Total Unit Trust Investment -FVTPL 569,390 765,487
21.2.3 Quoted Debentures Group
Carrying value Fair value Carrying value Fair value As at 31 March, 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 People's Leasing Company PLC 56,424 56,424 50,000 59,625 Hatton National Bank PLC 20,562 20,562 19,003 19,003 Senkadagala Finance PLC 21,514 21,514 20,000 23,718 Lion Brewery (Ceylon ) PLC 17,734 17,734 15,000 16,082 Hayleys PLC 18,112 18,112 15,000 16,449 Total Investmenets in Quoted Debentures 134,346 134,346 119,003 134,877
21.3 Held To Maturity (HTM) Financial Investments Group
As at 31 March, 2016 2015 Rs.'000 Rs.'000 Commercial Papers - 40,911 - 40,911
Distilleries Company of Sri Lanka PLC 132 Annual Report 2015/16 21.4 Loans And Receivables (L&R) Financial Investments Group As at 31 March, 2016 2015 Rs.'000 Rs.'000 Non Current Investments Coporate Debentures 181,765 182,538 181,765 182,538 Current Investments Commercial Papers - 83,341 Term Deposit Matured After 3 Months 1,130,114 118,630 Reverse Repurchase Agreement 130,405 - 1,260,519 201,971
21.5 Investments That Have Been Pledged The investments that are pledged for liabilities are disclosed in Note 41 to these financial statements if any.
22 Deferred Tax Asset and Liabilities 22.1 Recognised Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following:
Group As at 31 March, 2016 2015 Assets Liabilities Net Assets Liabilities Net Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Property, Plant and Equipment (9,726) 1,637,272 1,627,546 (15,419) 923,078 907,659 Biological Assets - 384,463 384,463 - 347,301 347,301 Provisions (21,849) - (21,849) - - - Employee Benefits (189,391) - (189,391) (178,715) - (178,715) Accelerated Tax Depreciation On (3,862) 86,907 83,045 - 31,513 31,513 Leasing Assets Unutilised Tax Loss Carry-Forwards (477,624) - (477,624) (308,580) - (308,580) (702,452) 2,108,642 1,406,190 (502,714) 1,301,892 799,178
Company As at 31 March, 2016 2015 Assets Liabilities Net Assets Liabilities Net Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Property, Plant and Equipment - 988,000 988,000 - 532,164 532,164 Employee Benefits (49,884) - (49,884) (54,845) - (54,845) (49,884) 988,000 938,116 (54,845) 532,164 477,319
133 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
22.1.1 Movement in recognised Deferred Tax Assets and Liabilities As at 31 March, Group 2016 Charged/(Credited) in Balance as at Profit or Loss Other Balance as at 1 April 2015 Comprehensive 31 March Income 2016 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Property, Plant and Equipment 907,659 338,199 381,688 1,627,546 Provisions - (21,849) - (21,849) Biological Assets 347,301 37,162 - 384,463 Employee Benefits (178,715) (15,366) 4,690 (189,391) Accelerated Tax Depreciation on Leasing Assets 31,512 51,533 - 83,045 Unutilised Tax Loss Carry-Forwards (308,578) (169,046) - (477,624) 799,179 220,633 386,378 1,406,190
As at 31 March, Group 2015 Charged/(Credited) in Balance as at Profit or Loss Other Balance as at 1 April 2014 Comprehensive 31 March Income 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Property, Plant and Equipment 404,698 502,961 - 907,659 Biological Assets 308,814 38,487 - 347,301 Employee Benefits (154,542) (12,791) (11,382) (178,715) Accelerated tax Depreciation on Leasing Assets 8,456 23,056 - 31,512 Unutilised Tax Loss carry-forwards (230,889) (77,690) - (308,579) 336,537 474,023 (11,382) 799,178
As at 31 March, Company 2016 Charged/(Credited) in Balance as at Profit or Loss Other Balance as at 1 April 2015 Comprehensive 31 March Income 2016 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Property, Plant and Equipment 532,164 317,044 138,792 988,000 Employee Benefits (54,845) 187 4,774 (49,884) 477,319 317,231 143,566 938,116
As at 31 March, Company 2015 Charged/(Credited) in Balance as at 1 Profit or Loss Other Directly in Balance as at April 2014 Comprehensive Equity 31 March Income 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Property, Plant and Equipment 60,958 471,206 - - 532,164 Employee Benefits (44,068) (2,823) (7,954) - (54,845) 16,890 468,383 (7,954) - 477,319
Distilleries Company of Sri Lanka PLC 134 Annual Report 2015/16 22.2 Unrecognised Deferred Tax Assets Deferred tax assets have not been recognised in respect of the following items:
For the year ended 31March, Group Company
2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Tax Losses 540,432 509,586 - - Other Deductible Temporary Differences 459,517 594,714 - - 999,949 1,104,300 - -
Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from.
23 Finance Lease, Hire Purchases And Operating Lease Receivables Group As at 31 March, 2016 2015 Finance Hire Total Finance Hire Total Lease Purchase Lease Purchase Receivables Receivables Receivables Receivables Note Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Non Current Assets Receivable in One To Five Years 23.1 1,568,869 65,202 1,634,071 704,659 163,566 868,225 Receivable in More Than Five Years ------1,568,869 65,202 1,634,071 704,659 163,566 868,225 Current Assets Receivable Within One Year 23.2 884,879 46,471 931,350 235,719 76,280 311,999 884,879 46,471 931,350 235,719 76,280 311,999 23.1 Receivable in One to Five Years
Gross Rental Receivable 1,991,254 76,979 2,068,233 881,254 204,215 1,085,469 Unearned Interest Income (419,327) (11,401) (430,728) (172,668) (39,814) (212,482) Allowance for Impairment Individual Impairment ------Collective Impairment (3,058) (376) (3,434) (3,927) (835) (4,762) 1,568,869 65,202 1,634,071 704,659 163,566 868,225 23.2 Receivable Within One Year Group As at 31 March, 2016 2015 Finance Lease Hire Purchase Total Finance Lease Hire Purchase Total Receivables Receivables Receivables Receivables Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Gross Rental Receivable 1,246,925 68,038 1,314,963 365945 111979 477,924 Unearned Interest Income (323,238) (15,108) (338,346) (128,917) (35,306) (164,223)
Allowance For Impairment ------Individual Impairment (36,853) (6,282) (43,135) (1,309) (393) (1,702) Collective Impairment (1,955) (177) (2,132) (1,309) (1,309) (1,309) 884,879 46,471 931,350 235,719 76,280 311,999
135 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
24 Advances and Other Loans Group As at 31 March, 2016 2015 Loans and Factoring Total Loans and Factoring Total Advances Receivables Advances Receivables Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Non Current Assets Note 24.1 Note 24.1 Receivable with in One To Five Years 433,724 - 433,724 459,705 - 459,705 433,724 - 433,724 459,705 - 459,705
Current Assets Receivable Within One Year 1,548,961 291,252 1,840,213 958,980 265,571 1,224,551 1,548,961 291,252 1,840,213 958,980 265,571 1,224,551 1,982,685 291,252 2,273,937 1,418,685 265,571 1,684,256
24.1 Loans And Advances
Loans And Advances Loans Secured by Fixed Deposits - - - - Loans Secured by Other Assets 730,230 - 730,230 640,873 - 640,873 Trade Finance Receivables 1,305,562 - 1,305,562 786,160 - 786,160 Allowance for Impairment Individual Impairment (40,614) - (40,614) - - - Collective Impairment (12,493) - (12,493) (8,348) (8,348) 1,982,685 - 1,982,685 1,418,685 - 1,418,685
Distilleries Company of Sri Lanka PLC 136 Annual Report 2015/16 25 Inventories
As at 31 March, Group Company 2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Raw Materials 1,948,757 1,779,695 1,395,739 1,459,991 Packing Material 920,351 637,827 815,603 556,689 Work In Progress 479,161 322,799 378,593 222,679 Finished Goods 1,096,083 722,604 607,078 250,360 Harvested Crop 218,420 273,323 - - Nurseries 11,257 18,163 - - Input Materials, Consumables And Spares 2,069,690 2,129,459 298,265 312,213 Goods In Transit 19,174 4,988 - - 6,762,893 5,888,858 3,495,278 2,801,932 Provision for Slow Moving and Obsolete Inventories (748,733) (904,808) (5,443) (5,443) 6,014,160 4,984,050 3,489,835 2,796,489
25.1 Inventories That Have Been Pledged The Inventories that are pledged for long term borrowings are disclosed in Note 41 to these financial statements if any.
26 Trade and Other Receivables
As at 31 March, Group Company 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Financial Assets Trade Receivables 4,921,525 4,414,892 3,024,758 2,167,795 Other Financial Receivables 1,363,598 2,128,136 203,067 390,674 Receivable from Share Trust 26.1 1,392,132 1,418,716 - - Insurance Contract Receivables 657,799 554,077 - - Loans Given to Employees 2,933 5,379 - - Refundable Deposits 50,816 236,026 4,620 - 8,388,803 8,757,226 3,232,445 2,558,469 Provision for Impairment Loss on Financial Assets (1,234,640) (1,114,985) (180,951) (161,625) 7,154,163 7,642,241 3,051,494 2,396,844
Non Financial Assets Prepayments and Advances 3,587,651 1,933,284 3,203,008 1,772,319 Accrued Income 33,109 64,952 33,100 64,952 Prepaid Staff Costs 38,038 35,884 - - Other Non Financial Receivables 173,498 112,975 - - Tax Receivables 296,374 303,373 - - 4,128,670 2,450,468 3,236,108 1,837,271 Provision for Bad and Doubtful Debts (3,138) - - - 4,125,532 2,450,468 3,236,108 1,837,271 11,279,695 10,092,709 6,287,602 4,234,115
137 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
26.1 Receivable from Share Trust Trade and Other receivables balance of the group includes Rs. 1,392,132,049 from Melstacorp Limited Share Trust “Trust”. Melstacorp Limited “Company” has acquired 8,650,732 shares of the Distilleries Company of Sri Lanka PLC for Rs.1,513.1 Mn in order to form a Share Trust for the benefit of its employees and its subsidiaries “Beneficiaries”. Melstacorp Limited Share Trust was created effective from 01 April 2011 for the holding of shares in the company, its holding company, its subsidiary companies and associate companies and any other companies listed on the Colombo Stock Exchange at the discretion of the Trustees for the purpose of distributing the income, profit, dividends and benefits arising from such portfolio of shareholding/s among the said beneficiaries subject to the provisions in the Trust deed.
The intention of the Melstacorp Limited to transfer the said shares to the Trustees having been delayed, Melstacorp Limited itself continued to hold those shares in the Trust for the benefit of the said beneficiaries. Subsequently on 23 March 2015, Company declared itself as a Trustees of the Trust by an addendum to the original Trust Deed.
27 Cash and Cash Equivalents
Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Favorable Balances Classified Under Current Assets Short Term Deposits 27.1 616,312 3,180,904 - 42,099 Cash at Bank 856,821 804,823 137,135 66,553 Cash in Hand 30,774 17,862 9,904 6,724 Cash in Transit 84,107 69,342 84,107 69,342 Total 1,588,014 4,072,931 231,146 184,718
Unfavorable Balances Classified Under Current Liabilities Bank Overdrafts 2,208,737 4,253,380 417,441 1,681,456 Total 2,208,737 4,253,380 417,441 1,681,456 (620,723) (180,449) (186,295) (1,496,738)
27.1 Short Term Deposits
Government Securities which Matures Within 3 Months 166,473 419,729 - - Fixed Deposits which Matures Within 3 Months 449,839 2,761,175 - 42,099 616,312 3,180,904 - 42,099
27.1.1 Short Term Deposits That Have Been Pledged The Short term deposits that are pledged for long term borrowings are disclosed in Note 41 to these financial statements if any.
28 Stated Capital
As at 31 March, 2016 2015 No. of Value of No. of Value of shares shares shares shares Rs.'000 Rs.'000 Balance at the Beginning of the Year 300,000,000 300,000 300,000,000 300,000 Issue of Shares - - - - Balance at the End of the Year 300,000,000 300,000 300,000,000 300,000
Distilleries Company of Sri Lanka PLC 138 Annual Report 2015/16 The Company’s stated capital consist with fully paid ordinary shares which provides entitlement to its holders to receive dividends as declared from time to time and to vote per share at a meeting of the Company.
29 Reserves
Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Capital Reserves Revaluation Reserve 29.1 8,307,065 5,846,432 1,696,692 1,295,154 Capital Reserve 29.2 120,019 110,930 107,882 107,882 Reserve Fund 29.3 9,335 5,992 - - Total Capital Reserves 8,436,419 5,963,354 1,804,574 1,403,036
Revenue Reserves General Reserve 29.4 8,613,968 8,286,434 8,210,000 8,210,000 Exchange Fluctuation Reserve 29.5 592,644 337,838 - - Timber Reserve 29.6 833,694 700,076 - - AFS Reserve 29.7 3,998,627 7,463,746 1,504,317 1,728,667 Total Revenue Reserves 14,038,933 16,788,094 9,714,317 9,938,667
Total Reserves 22,475,352 22,751,448 11,518,891 11,341,703
29.1 Revaluation Reserve The revaluation reserve comprises of the gain arisen from the revaluation of Property, Plant and Equipment. This reserve is realised upon the derecognition of the revalued Property, Plant and Equipment.
29.2 Capital Reserve Capital reserve comprises profits retained in order to utilise for the capital commitments.
29.3 Reserve Fund Reserve fund was created in Melsta Regal Finance Limited to comply with the Direction No.1 of 2003 (Capital funds) issued by the Central Bank. The Company is required to transfer 5% of annual profits to this reserve fund as long as the capital funds are not less 25% of total deposit liabilities.
29.4 General Reserve General reserve reflects the amount the Group has reserved over the years from its earnings.
29.5 Exchange Fluctuation Reserve Exchange fluctuation reserve comprises of all foreign exchange differences arising from the translation of foreign subsidiaries in the Group and the portion of exchange gain or loss arising from the translation of the hedge instrument in relation to cash flow hedges of Aitken Spence PLC Group.
29.6 Timber Reserve This represents the unrealised gains arising from the fair value of consumable biological assets ( Timber plantations) until the assets are derecognised or impaired.
29.7 AFS Reserve This represents the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired.
139 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
30 Interest Bearing Loans and Borrowings
Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Non Current Liabilities Term Loans Payable after One Year 30.1 2,651,005 1,661,933 - - Liability To Make Lease Payments Payable after One Year 30.2 95,344 97,133 - - Finance Lease Liabilities Payable after One Year 30.3 85,565 17,290 - - 2,831,914 1,776,356 - - Current Liabilities Term Loans Payable within One Year 30.1 2,435,419 757,016 - - Liability To Make Lease Payments Payable within One Year 30.2 1,789 1,719 - - Finance Lease Liabilities Payable within One Year 30.3 34,950 6,000 - - Other Short Term Borrowings 6,868,898 6,978,692 4,780,000 4,795,000 Debt Instruments-Commercial Papers 131,408 53,003 - - Redeemable Preference Shares 30.4 12,646 12,646 - - 9,485,110 7,809,076 4,780,000 4,795,000
30.1 Term Loans
Balance as at Beginning of the Year 2,418,949 1,175,264 - - Received During the Year 4,477,508 1,259,136 - - Repaid During the Year (1,810,033) (15,451) - - 5,086,424 2,418,949 - -
Repayable within One Year 2,435,419 757,016 - - Repayable after One Year 2,651,005 1,661,933 - - 5,086,424 2,418,949 - -
Distilleries Company of Sri Lanka PLC 140 Annual Report 2015/16 30.2 Liability to Make Lease Payments
Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Gross Liability as at the Beginning of The Year 172,712 178,385 - Finance Leases Obtained During the Year - - - Acquisition of Subsidiaries (Gross Liability) - - - Repayments during The Year (5,673) (5,673) - 167,039 172,712 - - Finance Costs Allocated to Future Years (69,906) (73,860) - Net Liability as at the End of the Year 97,133 98,852 - -
Repayable within One Year Gross Liability 5,673 5,673 - - Finance Costs Allocated to Future Years (3,884) (3,954) - - Net Liability 1,789 1,719 - -
Repayable within Two to Five Years Gross Liability 22,692 22,692 - - Finance Costs Allocated to Future Years (14,796) (15,098) - - Net Liability 7,896 7,594 - -
Repayable after Five Years Gross Liability 138,674 144,347 - - Finance Costs Allocated to Future Years (51,226) (54,808) - - Net Liability 87,448 89,539 - - Finance Lease Liabilities Payable after One Year 95,344 97,133 - -
The lease of the estates have been amended, with effect from 11th June 1996 to an amount substantially higher than the previous lease rental of Rs. 500/= per estate per annum. The first rental payable under the revised basis is Rs.5,673 million from 11th June 1997.This amount is to be inflated annually by the Gross Domestic Product (GDP) deflator, and is in the from of Contingent rental. The contingent rental charged to the Income statement amounted to Rs.22,276,019/= Which is based on GDP deflator of 7.3% (2014)
The Statement of Recommended Practice (SoRP) for Right-to-use of Land on Lease was approved by the Council of the Institute of Chartered Accountants of Sri Lanka on 19th December 2012. Subsequently, the amendments to the SoRP along with the modification to the title as Statement of Alternative Treatment (SoAT) were approved by the Council on 21st August 2013. The Company has not reassessed the Right-to-use of Land because this is not a mandatory requirement. However, if the liability is reassessed according to the alternative treatment (SoAT) on the assumption that the lease rent is increased constantly by GDP deflator of 4% and discounted at a rate of 13% , liability would be as follows.
As at 31 March 2016 Amount Rs.'000 Gross Liability 1,771,019 Finance Charges (570,871) Net Liability 1,200,148
The above reassessed liability is not reflected in theses financial statements.
141 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
30.3 Finance Lease Group Company
As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Gross Liability as at the Beginning of the Year 28,968 36,805 - - Finance Leases Obtained during the Year 146,420 790 - - Repayments During the Year (35,997) (8,627) - - 139,391 28,968 - - Finance Costs Allocated to Future Years (18,875) (5,678) - - Net Liability as at the End of The Year 120,516 23,290 - - Repayable Within One Year Future Minimum Lease Payments 44,846 8,759 - - Interest (9,896) (2,759) - - Present Value of Future Minimum Lease Payments 34,950 6,000 - - Repayable Within Two to Five Years Future Minimum Lease Payments 94,544 20,209 - - Interest (8,979) (2,919) - - Present Value of Future Minimum Lease Payments 85,565 17,290 - - 120,516 23,290 - -
30.4 Redeemable Preference Shares As per LKAS/ SLFRS requirements, preference shares of 1,264,616 amounting to Rs. 12.646 Mn which is redeemable as per the terms of its agreement has been classified as borrowings based on the features of the said shares. There fore the purpose of the financial reporting, the Company has classified the redeemable preference shares under borrowings.
31 Employee Benefits Group Company
As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Present Value of Unfunded Obligations 31.1 1,018,298 949,961 124,708 137,110 Present Value of Funded Obligations - - - - Total Present Value of Obligations 1,018,298 949,961 124,708 137,110 Fair Value of Planed Assets - - - - Provision for Retirement Benefit Obligations 1,018,298 949,961 124,708 137,110
31.1 Movement in Present Value of Defined Benefit Obligations
Balance as at Beginning of the Year 949,961 831,769 137,110 110,170 Benefits Paid by the Plan (72,990) (96,894) (25,437) (13,585) Expense Recognised in the Income Statement 31.1.1 173,951 161,227 24,971 20,640 Actuarial (Gain) / Loss Recognised in Other (32,624) 53,859 (11,936) 19,885 Comprehensive Income Balance as at the End of the Year 1,018,298 949,961 124,708 137,110 31.1.1 Expense Recognised in the Profit or Loss
Current Service Costs 82,154 74,266 12,631 9,623 Interest Costs 91,797 86,961 12,340 11,017 173,951 161,227 24,971 20,640
Distilleries Company of Sri Lanka PLC 142 Annual Report 2015/16 31.1.2 Actuarial Assumptions Principal actuarial assumptions at the reporting date
Group Company As at 31 March, 2016 2015 2016 2015 Discount rate (%) 9% - 10% 9% - 10% 10% 9% Future Salary Increases (%) 5%-10% 5-15% 4% 5%
Retirement Age (Years) 55-65 years 55-65 years 55-65 years 55-65 years
Sensitivity of Assumptions Used If one percentage increase in the assumptions, would have the following effects,
Effect On Define Benefit Obligation Liability,
2016 2015 As at 31 March, Group Company Group Company Discount Salary Discount Salary Discount Salary Discount Salary Rate Increment Rate Increment Rate Increment Rate Increment Rate Rate Rate Rate Increase by 1% (68,178) 50,067 (3,797) 4,567 (68,178) 52,974 (4,093) 4,790 Decrease by 1% 80,692 (47,829) 4,068 (4,321) 78,912 (48,186) 4,349 (4,577)
Effect on Comprehensive Income,
2016 2015 As at 31 March, Group Company Group Company Discount Salary Discount Salary Discount Salary Discount Salary Rate Increment Rate Increment Rate Increment Rate Increment Rate Rate Rate Rate Increase by 1% 68,178 (50,067) 3,797 (4,567) 68,178 (52,974) 4,093 (4,790) Decrease by 1% (80,692) 47,829 (4,068) 4,321 (78,912) 48,186 (4,349) 4,577
32 Other Deferred Liabilities Group
As at 31 March, 2016 2015 Note Rs.'000 Rs.'000 Non Current Liabilities Deferred Grants and Subsidies 32.1 191,421 202,696 Deferred Revenue 32.2 59,073 56,239 250,494 258,935 Current Liabilities Deferred Revenue 32.2 75,259 56,112 75,259 56,112
143 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
32.1 Deferred Grants and Subsidies As at 31 March, Group
2016 2015 Rs.'000 Rs.'000 Balance at the Beginning of the Year 202,696 214,139 Grants Received during the Year - - Amortisation for the Year (11,275) (11,443) Balance at the End of the Year 191,421 202,696
The Balangoda Plantation PLC has received funding from the Plantation Housing and Social Welfare Trust and Plantation Development Project (PDP) for the development of workers facilities such as re-roofing of line rooms, latrines, water supply, sanitation and roads etc. The amounts spent are included under the relevant classification of property, plant & equipment and the grant component is reflected under Deferred Grants and Subsidies. Grants are amortised over the life of the assets for which they are being deployed.
32.2 Deferred Revenue Group
As at 31 March, 2016 2015 Rs.'000 Rs.'000 Balance at the Beginning of the Year 112,351 95,162 Revenue Received During the Year 96,671 89,765 Deferred Revenue Recognised During the Year (74,690) (72,576) Balance at the End of the Year 134,332 112,351
Deferred Revenue to be Recognised within One Year 75,259 56,112 Deferred Revenue to be Recognised after One Year 59,073 56,239 134,332 112,351 33 Trade and Other Payables Group Company
As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Financial Liabilities Trade Payables 924,374 1,209,700 155,327 127,411 Insurance Contract Liabilities 1,399,473 1,087,389 - - Other Financial Liabilities 3,358,949 3,327,835 2,897,208 2,937,834 Refundable Advances and Deposits 158,209 145,480 - - 5,841,005 5,770,404 3,052,535 3,065,245 Non Financial Liabilities Accrued Expenses 1,666,496 1,652,022 267,590 425,106 Other Non Liabilities 73,452 - - - Direct and Indirect Taxes Payables 33.1 4,263,179 2,630,283 4,002,198 2,400,483 Non Refundable Advances and Deposits 689 3,047 - - Unclaimed Dividends 152,947 155,485 146,411 141,605 6,156,763 4,440,837 4,416,199 2,967,194 11,997,768 10,211,241 7,468,734 6,032,439
Distilleries Company of Sri Lanka PLC 144 Annual Report 2015/16 33.1 Direct and Indirect Taxes Payables Group Company As at 31 March, 2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Excise Duty Payable 4,194,055 2,589,439 3,987,651 2,392,276 Value Added Tax (VAT) Payable 17,226 17,825 12,318 7,090 Nation Building Tax (NBT) Payable 51,868 23,019 2,229 1,117 4,263,179 2,630,283 4,002,198 2,400,483 34 Deposit Liabilities
Group As at 31 March, 2016 2015 Note Rs.'000 Rs.'000 Term Deposits 1,133,975 458,609 Savings Deposits 72,214 26,485 Liabilities to First Barakah Investment Limited (FBIL) Customers 34.1 885 26,695 1,207,074 511,789 34.1 Liabilities To FBIL Customers The liability is recognised based on the Scheme of Arrangements approved at the meeting of the creditors of First Barakah Investments Limited (FBIL), (Subsequently renamed as Group Subsidiary Melsta Regal Finance Limited) held on 12/02/2011 and upheld by the Colombo Commercial High Court (Case No. H.C.(Civil) 01/2011 (CO)).During the period under consideration, the Melsta Regal Finance Limited has repaid sum of Rs.25,809,790/- to its creditors according to the repayment scheme.
35 Related Party Disclosures The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard (LKAS 24) “Related Party Disclosures”, the details of which are reported below. The Pricing applicable to such transactions is based on the assessment of risk and pricing model of the Company and is comparable with what is applied to transactions between the Company and its unrelated Customers.
Outstanding current account balances at year end are unsecured, interest free and settlement occurs in cash except the balances arisen from restructure.
35.1 Balances with Related Parties 35.1.1 Amount due from Related Companies Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Subsidiaries 35.1.3 - - 1,885,998 415,825 Associates 35.1.4 110,973 660,492 - - Other Related Companies 35.1.5 24,160 12,047 23,574 11,100 135,133 672,539 1,909,572 426,925
145 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
35.1.2 Amounts due to Related Parties Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Subsidiaries 35.1.3 - - 1,709,280 1,305,721 Associates 35.1.4 2,526 166 - - Other Related Companies 35.1.5 291,504 272,237 - - 294,030 272,403 1,709,280 1,305,721
35.1.3 Subsidiaries Group Company Amounts due from Amounts due to Amounts due from Amounts due to As at 31 March, 2016 2015 2016 2015 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 AION SG Residencies (Pvt) Ltd - - - - 11,920 11,920 - - Bellvantage (Pvt) Ltd - - - - - 424 934 Continental Insurance Lanka Limited - - - - 5,198 2,790 - - Lanka Bell Ltd (Note 35.1.6) - - - - 64,390 68,181 - - Melsta Logistics (Pvt) Ltd ------774,009 603,982 Melsta Regal Finance Ltd - - - - 330 1,263 - - Periceyl (Pvt) Ltd ------821,945 674,316 Splendor Media (Pvt) Ltd ------24,855 25,360 Texpro Industries Ltd ------1,128 1,129 Melstacorp Limited - - - - 1,816,080 343,591 - - Melsta Properties (Pvt) Ltd ------79,074 - Melsta Technologies (Private) Limited ------7,845 - - - - - 1,897,918 427,745 1,709,280 1,305,721 Provission for impairment of amounts - - - - (11,920) (11,920) - - due from subsidiaries - - - - 1,885,998 415,825 1,709,280 1,305,721
35.1.4 Associates Group Company Amounts due from Amounts due to Amounts due from Amounts due to As at 31 March, 2016 2015 2016 2015 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Aitken Spence PLC 1,226 2,331 1,699 166 - - - - Madulsima Plantations PLC 109,747 658,161 827 - - - - - (Note 35.1.7) 110,973 660,492 2,526 166 - - - -
Distilleries Company of Sri Lanka PLC 146 Annual Report 2015/16 35.1.5 Other Related Companies Group Company Amounts due from Amounts due to Amounts due from Amounts due to As at 31 March, 2016 2015 2016 2015 2016 2015 2016 2015 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Ace Power Generation Matara 20 5 ------(Pvt) Ltd Aitken Spence Hotel Holdings PLC - 571 ------Aitken Spence Hotel Management 84 72 1,404 1,827 - - - - (Pvt) Ltd Ambewela Livestock Co.Ltd 19,694 - - - 19,694 --- Ambewela Products (Pvt) Ltd 29 15 ------Comark Engineers (Pvt) Ltd - - 31 - - --- Lanka Aluminium Industries PLC - - 3,609 4,355 - --- Lanka Milk Foods (CWE) PLC 89 9,149 - - 24 9,105 -- Lanka Stassens Distributors (Pvt) Ltd 119 119 ------Milford Exports (Pvt) Ltd 843 - - - 843 --- Pattipola Livestock Co. Ltd 889 - - - 889 --- Stassen Lanka (Private) Limited - 176,079 161,584 - --- (Note 35.1.8) Stassen Export (Private) Limited 2,389 2,114 - 104,471 2,124 1,995 -- Stassen Natural Foods (Pvt) Ltd 4 2 ------24,160 12,047 181,123 272,237 23,574 11,100 - -
35.1.6 This represents the remaining balance of loan granted for Rs.200Mn to Lanka Bell Limited at the rate of AWPLR plus 1% adjusted on quartely basis.
35.1.7 This amount represents the balance remaining on a short term loan granted to Madulsima Plantations PLC along with the interest.
35.1.8 This represents the an interest free loan amounting to USD 1.212 Mn from Stassens Lanka Private Limited by the Texpro Industries Limited.The Company has to settle this loan on demand.Hence, it has been classified under current liabilities and no fair value adjustments have been made.
35.2 Transactions with Related Parties 35.2.1 Transactions with Subsidiaries, Associates and Other Related Companies Name of the Company Names of Directors Interest Nature of Transaction Transaction Balance due Value (to) / from Rs.000 Rs.000 1 Milford Exports (Ceylon) (Pvt) Mr. D.H.S.Jayawardena Parent Co. Dividend Paid 382,501 843 Limited Mr.D.Hasitha Supply of Services 843 S.Jayawardena 2 Periceyl (Pvt) Limited Mr. D.H.S.Jayawardena Subsidiary Co. Debtor Collections & 7,748,912 (821,945) Transfers Mr. C.R.Jansz Supply of Goods & Services 449,262 Mr.D.Hasitha Goods Received 61 S.Jayawardena Interest of Current Account 32,693 3 Balangoda Plantations PLC Mr. D.H.S.Jayawardena Subsidiary Co. Rent Paid 242 - Mr. C.R.Jansz Purchase of Tea 206
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Name of the Company Names of Directors Interest Nature of Transaction Transaction Balance due Value (to) / from Rs.000 Rs.000 4 Splendor Media (Pvt) Ltd. Subsidiary Co. Loan Interest 2,051 (24,855) Supply of Goods & Services 1,614 Services Received 716 5 Texpro Industries Ltd. Mr. D.H.S.Jayawardena Subsidiary Co. Supply of Materials 1,258 (1,128) 6 Continental Insurance Lanka Ltd Mr. D.H.S.Jayawardena Subsidiary Co. Insurance Premium 58,697 5,198 Insurance Claim Received 1,133 Supply of Goods & Services 2,615 7 Melsta Logistics (Pvt) Ltd Subsidiary Co. Vehicle Hiring charges 316,760 (774,009) Repair Charges & Other 5,853 Services Rent 5,097 Interest of Current Account 33,036 Supply of Goods & Services 57,985 8 Melstacorp Ltd. Mr. D.H.S. Jayawardena Subsidiary Co. Dividend Paid 26,584 1,816,080 Mr. C.R. Jansz Rent & Other Services 211,046 Mr. N.de S. Deva Aditya Supply of Goods & Services 2,093 Capt. K.J.Kahanda Transferred Value of Shares 91,361 Dr. N. Balasuriya Funds Transferred 2,603,691 Mr. D. Hasitha S. Funds Received 1,864,518 Jayawardena R. Seevaratnam Dividend Received 796,350 (w.e.f. 21/09/2015) Interest of Current Account 89,728 9 Lanka Bell Ltd Mr. D.H.S.Jayawardena Subsidiary Co. Loan Interest Received 5,004 64,390 Mr. C.R.Jansz Telephone Bills Paid & 10,466 Services Rendered Loan Repayment 5,000 10 Bellvantage (Pvt) Ltd. Subsidiary Co. Maintenance Charges 29,283 (424) Supply of Goods & Services 272 11 Bell Solutions (Pvt) Ltd. Mr. D.H.S.Jayawardena Subsidiary Co. Maintenance Charges 7,628 - 12 Melsta Regal Finance Ltd. Subsidiary Co. Supply of Goods & Services 1,739 330 13 Aitken Spence PLC Mr. D.H.S.Jayawardena Associate co. Supply of Services 175 - Mr. N.de S. Deva Aditya 14 Stassen Exports (Pvt) Ltd. Mr. D.H.S.Jayawardena Affiliate Co. Dividend Paid 6,497 2,124 Mr. D. Hasitha S. Purchases , Repairs & 45,129 Jayawardena Maintenance & Transport Charges Supply of Goods & Services 1,356 Rent Income 23,447
15 Lanka Dairies (Pvt) Ltd. Mr. D.H.S.Jayawardena Affiliate Co. Purchase of Milk Foods 417 - Mr. C.R.Jansz 16 Lanka Milk Foods (CWE) PLC Mr. D.H.S.Jayawardena Affiliate Co. Dividend Paid 116,657 24 Mr. C.R.Jansz Purchase of Milk Foods 13,796 Supply of Goods & Services 3,342 Dividend Received 955 17 Aitken Spence Hotel Holding PLC Mr. D.H.S.Jayawardena Affiliate Co. Sales 1,078 -
Distilleries Company of Sri Lanka PLC 148 Annual Report 2015/16 Name of the Company Names of Directors Interest Nature of Transaction Transaction Balance due Value (to) / from Rs.000 Rs.000 18 Melsta Properties (Pvt) Ltd Capt. K.J.Kahanda Subsidiary Co. Rent Expense 75,972 (79,074) Current Account Interest 3,843 19 Ambewela Live Products (Pvt) Ltd Mr. D.H.S.Jayawardena Affiliate Co. Purchase of Milk Foods 32 19,694 Mr. C.R.Jansz Supply of Goods & Services 34,968 20 Pattipola Live Products (Pvt) Ltd Mr. D.H.S.Jayawardena Affiliate Co. Supply of Goods & Services 1,978 889 Mr. C.R.Jansz 21 Melsta Technologies (Pvt) Ltd Subsidiary Co. Professional Fee - Software 54,076 (7,845) Maintenance Supply of Goods & Services 109
35.2.3 Transactions with Key Management Personnel (KMP) According to Sri Lanka Accounting Standard (LKAS 24) “Related Party Disclosures”, Key Management Personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Board of Directors (including executive and non-executive Directors) has been classified as Key Management Personnel of the Company.
35.2.4 Transactions, Arrangements and Agreements involving KMP and their Close Family Members (CFM) CFM of a KMP are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity. They may include;
(a) the individual’s domestic partner and children; (b) children of the individual’s domestic partner; and (c) dependents of the individual or the individual’s domestic partner
CFM are related parties to the entity. There were no transactions with CFM during the year.
35.2.3.1 Compensations to Key Management Personnel There were no compansetion paid to Key Management Personnel durring the year other than those disclosed below.
As at 31 March, Group Company 2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Short Term Employee Benefits 117,838 92,888 30,814 24,121 Post Employment Benefits 3,163 900 - - Other Long Term Benefits - 1,750 - - Share Base Payments - - - -
35.2.3.2 Loans To Directors There were no loans granted to Directors durring the year.
35.2.4 There are no related party transactions exceeding 10% of the equity or 5% of the total assets of the entity as per audited financial statements, whichever is lower (CSE Ruling).
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Notes to the Financial Statements 2015 2015 Rs.000 Rs.000 868,225 459,705 311,999 672,539 426,925 177,863 184,718 7,642,241 2,561,053 1,224,551 2,431,815 4,072,931 2,396,844 5,747,403 35,207,268 17,523,262 Total Total 2016 2016 Rs.000 Rs.000 58,409 433,724 931,350 135,133 231,146 1,634,071 7,154,163 2,368,254 1,840,213 2,998,528 1,588,014 3,051,494 1,909,572 7,618,875 32,303,715 15,588,519 ------2015 2015 Rs.000 Rs.000 177,517 2,561,053 2,561,053 17,518,241 17,340,724 ------2016 2016 Assets (AFS) Assets (AFS) 9,171 Rs.000 Rs.000 2,368,254 2,368,254 Available for Sale Financial Available Available for Sale Financial Available 15,415,925 15,406,754 ------2015 2015 Rs.000 Rs.000 40,911 40,911 ------Group Company 2016 2016 Rs.000 Rs.000 Held to Maturity Held to Maturity Investments (HTM) Investments (HTM) ------2015 2015 Rs.000 Rs.000 177,863 177,863 2,011,416 2,011,416 ------(FVTPL) (FVTPL) 2016 2016 Rs.000 Rs.000 58,409 58,409 Assets at Fair Value Assets at Fair Value Assets at Fair Value Assets at Fair Value Through Profit and Loss Profit Through Through Profit and Loss Profit Through 1,728,838 1,728,838 - - 2015 2015 Rs.000 Rs.000 182,538 868,225 459,705 311,999 672,539 201,971 426,925 184,718 7,642,241 1,224,551 4,072,931 2,396,844 3,008,487 15,636,700 (L&R) (L&R) - - 2016 2016 Rs.000 Rs.000 181,765 433,724 931,350 135,133 231,146 Loans and Receivables Loans and Receivables 1,634,071 7,154,163 1,840,213 1,260,519 1,588,014 3,051,494 1,909,572 5,192,212 15,158,952 21 23 24 26 23 24 21 27 26 21 27 Note Note 35.1.2 As at 31 March, As at 31 March, Assets as per Statement of Financial Position Assets Non Current Financial Investments Other Non Current and Operating Purchases Finance Lease, Hire Lease Receivables Advances and Other Loans Current Assets Current and Other Receivables Trade and Operating Purchases Finance Lease, Hire Lease Receivables Advances and Other Loans Related Companies Amounts Due From Other Current Financial Investments Other Current Cash and Equivalents Total Assets as per Statement of Financial Position Assets Non Current Financial InvestmentsOther Non Current 21 Current Assets Current and Other Receivables Trade Amounts Due From Related CompaniesAmounts Due From 35.1.2 Other Current Financial Investments Other Current Cash and Equivalents Total Financial Instruments Accounting Classification of Financial Instruments Accounting Classification of Financial Assets
36.1.1 36 36.1
Distilleries Company of Sri Lanka PLC 150 Annual Report 2015/16 36.1.2 Accounting Classification of Financial Liabilities
Group As at 31 March, Financial Liabilities at Fair Value Financial Liabilities measured at Total through Profit or Loss Amortised Cost 2016 2015 2016 2015 2016 2015 Notes Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Liabilities as per Statement of Financial Position Non Current Liabilities Interest Bearing Loans and Borrowings 30 - - 2,831,914 1,776,356 2,831,914 1,776,356
Current Liabilities Trade and Other Payables 33 - - 5,841,005 5,770,404 5,841,005 5,770,404 Deposit Liabilities 34 - - 1,207,074 511,789 1,207,074 511,789 Amount Due to Related Companies 35.1.2 - - 294,030 272,403 294,030 272,403 Interest Bearing Loans and Borrowings 30 - - 9,485,110 7,809,076 9,485,110 7,809,076 Bank Overdrafts 27 - - 2,208,737 4,253,380 2,208,737 4,253,380 Total - - 21,867,870 20,393,408 21,867,870 20,393,408
Company As at 31 March, Financial Liabilities at Fair Value Financial Liabilities measured Total through Profit or Loss at Amortised Cost 2016 2015 2016 2015 2016 2015 Notes Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Liabilities as per Statement of Financial Position Non Current Liabilities Interest Bearing Loans and 30 ------Borrowings
Current Liabilities Trade and Other Payables 33 - - 3,052,535 3,065,245 3,052,535 3,065,245 Amount Due to Related Companies 35.1.2 - - 1,709,280 1,305,721 1,709,280 1,305,721 Interest Bearing Loans and 30 - - 4,780,000 4,795,000 4,780,000 4,795,000 Borrowings Bank Overdrafts 27 - - 417,441 1,681,456 417,441 1,681,456
Total - - 9,959,256 10,847,422 9,959,256 10,847,422
36.2 Fair Value Hierarchy of Financial Instruments The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the group/company is the closing market price in Colombo Stock Exchange. These instruments are included in Level 1. Instruments included in Level 1 comprise equity investments classified as fair value through profit and loss securities or available for sale.
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Notes to the Financial Statements
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
Level 3: Inputs for the asset or liability that are not based on observable market data (Unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Group As at 31 March, Level 1 Level 2 Level 3 Total 2016 2015 2016 2015 2016 2015 2016 2015 Note Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Non Current Assets Other Non Current Financial 21 Investments Available for Sale Financial 21.1 Investments - (AFS) Quoted Equity Securities 21.1.1 14,667,682 16,931,800 - - - - 14,667,682 16,931,800 Unquoted Equity Securities 21.1.2 - - - - 114,102 114,102 114,102 114,102 Investments In Unit Trusts 21.1.3 - - 50,923 59,152 - - 50,923 59,152 Government Securities 21.1.5 104,014 - - - - - 104,014 - Corporate Debt Securities 21.1.4 470,033 235,670 - - - - 470,033 235,670
Current Assets Other Current Financial 21 Investments Available for Sale Financial 21.1 Investments - (AFS) Government Securities 21.1.5 9171 177,517 9,171 177,517 Fair Value Through Profit 21.2 ------or Loss (FVTPL) Financial Investments Quoted Equity Securities 21.2.1 1,025,102 1,111,052 - - - - 1,025,102 1,111,052 Investments In Unit Trusts 21.2.2 - - 569,390 765,487 - - 569,390 765,487 Quoted Debentures 21.2.3 134,346 134,877 - - - - 134,346 134,877 Total 16,410,348 18,590,916 620,313 824,639 114,102 114,102 17,144,763 19,529,657
Distilleries Company of Sri Lanka PLC 152 Annual Report 2015/16 Company As at 31 March, Level 1 Level 2 Level 3 Total 2016 2015 2016 2015 2016 2015 2016 2015 Note Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Non Current Assets Other Non Current Financial 21 Investments Available for Sale Financial 21.1 Investments - (AFS) Quoted Equity Securities 21.1.1 2,028,606 2,223,612 - - - - 2,028,606 2,223,612 Unquoted Equity Securities 21.1.2 - - - - 113,771 113,771 113,771 113,771 Investments In Unit Trusts 21.1.3 - - 3,000 3,000 - - 3,000 3,000 Government Securities 21.1.5 ------Corporate Debt Securities 21.1.4 222,877 220,670 - - - - 222,877 220,670
Current Assets Other Current Financial 21 Investments Fair Value Through Profit 21.2 or Loss (FVTPL) Financial Investments Quoted Equity Securities 21.2.1 58,409 177,863 - - - - 58,409 177,863
Total 2,309,892 2,622,145 3,000 3,000 113,771 113,771 2,426,663 2,738,916
37 Amount Due from the Secretary to the Treasury on Account of SLIC A) In Respect Of Shares As per the Judgment delivered by the Supreme Court of the Democratic Socialist Republic of Sri Lanka on 4 June 2009 it was declared and directed that the shares of SLIC purported to have been sold to Distilleries Consortium on 11 April 2003 along with any shares purchased from employees as per SSPA shall be deemed to have been held for and on behalf of the Secretary to the Treasury.
As directed by the said judgment, the Secretary to the Treasury returned Rs.5,716 Mn in 2010/11 that was paid by Group Subsidiary Milford Holdings (Pvt) Limited (MHL) to purchase shares from SLIC.
B) In Respect Of Profits Earned Furthermore, MHL was entitled to retain the profits of SLIC derived by MHL from 11 April 2003 to 04 June 2009 in lieu of the interest for the aforesaid investment. The Secretary to the Treasury was directed to cause profits of SLIC to be computed and audited from the date of the last audited Reporting of SLIC to 04 June 2009 to enable MHL to obtain such profits.
However, Secretary to the Treasury has not yet determined the value of profits to be retained by the MHL; hence no adjustments were made to the financial statements in this regards.
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Notes to the Financial Statements
38 Impact of Revival of Underperforming Enterprises and Underutilised Assets Bill – Pelwatte Sugar Industries PLC Group (PSIP) Consequent to the enactment and passage of the above Act of Parliament on 9 November 2011, the state officials ear occupying the land leased to PSIP. As the leasing of the land to PSIP was done in 1985, and the above mentioned Act empowers the vesting of land leased during a period of 20 years before the enactment of the Act. The Company believes that the land that was used by PSIP have not been vested in the state. At this moment the management is unable to comment further on the implications on the ruling as the Company is awaiting instructions by the Secretary to the Treasury.
Financial results of PSIP up to 30 September 2011 were consolidated to Group results for the year ended 31 March 2012. Subsequent financial results have not been incorporated to the Group results due to non accessibility of the information. Subsequently a Compensation Tribunal was formed as required by the Act. Without assuming any liability or without any prejudice to, or impact on its rights, PSIP has submitted a claim to the Compensation Tribunal.
Commercial High Court of Western Province (Colombo Civil) issued a winding-up order of Pelwatte Sugar Industries PLC on 13 March 2013. The Court has appointed P.E.A. Jayewickreme and G.J. David, as the Liquidators.
39 Pending Litigations and Contingent Liabilities Based on the available information, the Management is of the view that following litigation or clams that could have material impact on the financial position on the group. Accordingly, no provision has been made for legal claims in the Financial Statements.
39.1 Distilleries Company of Sri Lanka PLC A plaint filled by Censtear (Pvt) Limited against the Company claiming a sum of Rs 18 Mn was decided in favor of the plaintiff by the Commercial High Court of Colombo. The Company has filed an appeal this order and a claim has been made in reconvention.
39.2 Lanka Bell Limited Sri Lanka Customs carried out an investigation claiming that Lanka Bell Limited is required to pay duty on the FLAG fiber optic submarine cable network which spans the globe connecting over 86 locations around the world. The Company is confident that no such duties are payable since Lanka Bell does not own this global network and also has already obtained BOI approval for the FLAG project.
The company filed a writ application in Court of Appeal citing irregularities in the procedure adopted by the Sri Lanka Customs.The above application was resolved directing the Customs Department to commence a fresh inquery before a new inquiring officer under section 8(1) of the Customs Ordinance. The Customs inquiry was commenced a fresh and is in progress.
39.3 Splendor Media (Pvt) Ltd. There were no material contingent liabilities as at end of the reporting period which require adjustments to or disclosure in the financial statements except the company has contingent liability., in respect of legal claims arising in the ordinary course of business’ The company management considers these claims to be uniustified and possibility ol an outflow of resources for their settlement is remote. This evaluation is consistent with Company’s legal consultants. Accordingly. no provision-has been made for rear claims .
Distilleries Company of Sri Lanka PLC 154 Annual Report 2015/16 39.3 Other Contingent Liabilities
As at 31 March, Group Company 2016 2015 2016 2015 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Bank Guarantees 27,050 26,998 - - Import/Export Bill Collection 102,329 20,359 - - Letter Of Credit 998,725 38,915 - - Shipping Guarantee 134,425 95,724 - - There are no material contingent liabilities as at 31 March 2016 other than disclose above. 40 Capital and Other Commitments There were no material capital expenditure approved by the Board of Directors as at 31 March 2016 other than followings;
40.1 Browns Beach Hotel PLC The new resort hotel, Negombo Beach Resort (Pvt) Limited which is a 100% owned subsidiaryof Browns Beach Hotels PLC commenced its operations on 2nd of April 2016.The total project cost is currently estimated to be in the region of Rs.5.2 billion.
Capital expenditure approved by the Board of Directors for which provision has not been made in these accounts are as follows,
As at 31 March, 2016 2015 Rs.'000 Rs.'000 Approved but Not Contracted for 150,000 - Approved Contracted for But Not Incurred 137,951 1,624,329
40.2 Bogo Power (Private) Limited Operating Lease Commitments - Company as a Lease
The Company has entered into a lease on the land on which the power house has constructed with a lease term of thirty years.The Company has the option, to lease the land for additional terms as negotiated with the lessor.
The approximate future minimum lease rentals payable as per the above operating leases as at 31st March are as follows.
As at 31 March, 2016 2015 Rs.Mn Rs.Mn Within One Year 22.9 22.8 After One Year but not More Than Five Years 92.2 94.4 More Than Five Years 429.5 471.8 544.6 589
40.3 Lanka Bell Limited The company has opened letters of credit amounting to US $ 2.58Mn during the year for its operations and balance as at 31st March 2016 is amounting to US $ 6.65Mn.
Capital expenditure approved by the Board of Directors for which provision has not been made in these accounts amounted o approximately,
As at 31 March, 2016 2015 Rs.Mn Rs.Mn Approved and Contracted for - 449 Approved and Not Contracted for - -
155 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
41 Assets Pledged Following assets have been pledged as securities for liabilities.
Company Nature of Liability Security Value of the assets pledged (Rs.000) Description Asset type 2016 Melstacorp Limited Permanent over draft Long term investments held in Quoted Other Long Term 9,465,446 fascilities and other shares of John Keels Holdings PLC Investments and short term borrowings (28,571,428 shares) and Aitken Spence Investments in Equity of DCSL PLC (71.25 Mn shares) are pledged Accounted Investees. on the other short term borrowings obtained by Distilleries Company of Sri Lanka PLC. Primary mortgage over the lease hold Property, Plant and 11,110 rights of Balangoda Estates. Equipment Long Term Loan Mortgage on Colour Separator Property, Plant and 41,567 Equipment Balangoda Permanent over draft Primary mortgage over the lease hold Property, Plant and 5,416 Plantations PLC facility rights of Walaboda Estates. Equipment Mortgage on Colour Separator and Property, Plant and 103,542 Machinery Equipment Finance Lease Absolute ownership of the leased bikes Property, Plant and 483 Equipment Long term loan The Company has provided existing Property, Plant and 473,903 primary floating mortgage bond for Equipment USD 3.262 Mn over land, building and immovable machinery at Ranala as collateral against the bank facility and borrowings. Other short term Hypothecation of Stock Inventory 248,971 borrowings The Company has provided letter from Indemnity of the Texpro Industries SL Army, Navy, Air Force and other Company,documents (Pvt) Ltd Government departments regarding of title to goods award of order,indemnity of the shipped Company, documents of title to goods shipped. Build up cash margin of 2% from each Revenue-Export 544,663 export procceds,pro note Secondary mortgage over land, Property, plant and 217,920 building and immovable machinery at equipment Embulagama,Ranala for USD 1.5Mn Lanka Bell Limited Term Loans and other Tower portfolio has been pledged as a Property, Plant and 425,000 borrowings security against the financing facilities. Equipment Movable and immovable property has Property, Plant and 1,169,424 been pledged as a security against the Equipment financing facilities.
Distilleries Company of Sri Lanka PLC 156 Annual Report 2015/16 42 Events after the Reporting Period There were no other material events occurring after the reporting period that requires adjustments to or disclosure in the Financial Statements other than the items disclosed below and proposed dividend disclosed in Note 14 to these financial statements.
42.1 Distillaries Company of Sri Lanka PLC The Company made an application to the District Court of Colombo on 01 August 2016, seeking approval to carry out a share swap that will result in the shareholders of DCSL PLC will become shareholders of Melstacorp Limited. The proposed swap will result in DCSL PLC becoming a fully owned subsidiary of Melstacorp Limited. On 03 August 2016, the Court made Order approving the holding of an Extraordinary General Meeting of the shareholders of the Company to place before the shareholders a Special Resolution seeking approval for the ‘Arrangement”. Once the swap is completed Melstacorp Limited will seek a listing of its shares in the Colombo Stock Exchange.
42.2 Continental Insurance Lanka Limited Company has submitted its application to Securities and Exchange Commission for Listing in the Colombo Stock Exchange by Initial Public Offer of Rs.140,400,000/- after the reporting date.
42.3 Browns Beach Hotels PLC Browns Beach Hotel ceased its operations on 31 March 2011 to fascilitate the construction of a new resort. The new resort commenced its operations on 02 April 2016, under Negombo Beach Resorts (Pvt) Ltd which is fully owned subsidiary of Browns Beach Hotel PLC.
42.4 Periceyl (Pvt) Ltd Periceyl (Pvt) Ltd has Re-Purchased 38,500 shares from its issued capital for a consideration of Rs. 2.5 Bn after the reporting period.
43 Financial Risk Management The Group has adopted practices to mitigate risks arising from adverse market conditions (prices, rates and volatile markets) by hedging (or not) using financial instruments.
Financial risk derives from economic uncertainty. The inability to forecast with certainty would either erode profitability (e.g. adverse exchange rate) or could jeopardise the ability of the company to raise finance from markets (e.g. volatile interest rates).
Group’s core business of beverage is essentially a cash business hence has a short cash cycle. This results in low financial risk adding to greater degree of control of finance. Other sectors such as Telecommunication, Plantation, Insurance, Finance and other diversified holdings exercise policies stemming from DCSL’s practices of effective financial risk management as common members of the board ensures uniformity. Continental Insurance and Melsta Regal Finance are exceptional and adhere to an even higher degree of management to comply with IBSL and CBSL regulatory compliance/guidelines respectively.
Financial Instruments Group’s financial instruments consist of ASSETS - its portfolio of equity investments, deposits in banks Government securities debentures and accounts receivable. LIABILITIES - Loan obligations, accounts payable and accrued liabilities such excise duty, taxes, payroll and pension account.
43.1 Financial Risk Management Objectives and Policies Whilst ‘risk management’ is ingrained in the business from the Board down to operational level, financial risk management at Group is entrusted to a niche of in-house financial professionals ably supported by external economists, financial consultants, legal counsel, tax experts, banks and auditors.
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Notes to the Financial Statements
In the normal course of business, the Group is exposed to financial risks that have the potential to negatively impact its financial performance. The Group does not use derivative financial instruments to manage these risks, as management believes that the risks arising from the financial instruments are already at an acceptable level. This is further accredited by the AAA (lka) Stable rating assigned by Fitch this year.
The Group has exposure to the following risks from financial instruments
43.1.1 Credit Risk This is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to financial loss. Group’s credit risk arises primarily from credit exposure to customers, including outstanding receivable from select retail chains.
The Group assesses the credit quality of its counter-parties, taking into account their financial position, past experience and seasonal factors.
The group trades only with recognised, credit worthy third parties. It is a group policy that all clients who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
Maximum Credit Exposure The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was as follows, Group Company As at 31 March, 2016 2015 2016 2015 Note Rs.000 % from Total Rs.000 % from Total Rs.000 % from Total Rs.000 % from Total Exposure Exposure Exposure Exposure Trade And Other Receivables 43.1.1.1 7,154,163 45% 7,642,241 48% 3,051,494 57% 2,396,844 76% Receivables from/ in Finance 43.1.1.2 4,839,358 31% 2,864,480 18% - 0% - 0% Business Amounts due from Related 43.1.1.3 135,133 1% 672,539 4% 1,909,572 36% 426,925 14% Companies Corporate Debt Securities 43.1.1.4 786,144 5% 553,085 3% 222,877 4% 220,670 7% Government Securities 43.1.1.5 410,063 3% 597,246 4% - 0% - 0% Deposits with Bank 43.1.1.6 1,579,953 10% 2,879,805 18% - 0% 42,099 1% Cash at Bank 43.1.1.7 856,821 5% 804,823 5% 137,135 3% 66,553 2% 15,761,635 100% 16,014,219 100% 5,321,078 100% 3,153,091 100% 43.1.1.1 Trade and Other Receivables As the large majority of Beverage accounts receivable balances are collectable from licensed retailers, management believes that the sector’s credit risk relating to accounts receivable is at an acceptably low level.
The Group has observed higher credit risk in telecommunication sector due to large number of small customers. However, risk is managed and mitigated by adopting timely disconnection policy and converting customer to prepaid mode.
The requirement for an impairment is analysed at each reporting date on an individual basis for major customers. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively.
The group’s maximum exposure to credit risk from Insurance contract receivables are mainly consist with Premium Receivables.
Some of the actions specific to Premiums Receivables in Non-Life Insurance are shown below.
Distilleries Company of Sri Lanka PLC 158 Annual Report 2015/16 -Premium Payment Warranty (PPW) is strictly implemented and all Non - Life Insurance policies with payments outstanding for more than 60 days are cancelled.
- Follow-up meetings on debt collection are conducted with the participation of finance, distribution and underwriting officials on a monthly basis.
- Claim settlements are processed only after reviewing the position of outstanding receivables.
43.1.1.2 Receivables From/ In Finance Business The above stated financial assets are backed with the underlying securities and, are neither past due or impaired.
43.1.1.3 Amounts Due from Related Companies The amounts due from related parties mainly consist of receivables from associates and other related ventures and those are closely monitored by the group.
The amounts receivable from related parties are mainly consist of its fully owned subsidiary, Melstacorp Limited and its due to the group restructuring process.
43.1.1.4 Corporate Debt Securities The Corporate debt securities are entirely consist of Corporate Debentures which are listed in Colombo Stock Exchange wich are gurenteed by local and foreing credit rating agencies as BBB+ or Better.
An Analysis of credit ratings of the issuers of debenture are as follows,
Group Company As at 31 March, 2016 2015 2016 2015 Amount % From Amount % From Amount % From Amount % From Total Total Total Total Exposure Exposure Exposure Exposure Credit Rating Rs.000 Rs.000 Rs.000 Rs.000 AA- 173,181 22% 92,156 17% - 0% - 0% A+ 71,680 9% 19,003 3% - 0% - 0% A 49,019 6% 220,670 40% - 0% 220,670 100% BBB+ 441,157 56% 221,256 40% 222,877 100% - 0% BBB- 51,108 7% -- - 0% -- 786,145 100% 553,085 100% 222,877 100% 220,670 100%
43.1.1.5 Government Securities Government securities are referred to as risk free instruments in its nature.
43.1.1.6 Deposits with Bank and Cash at bank The Deposits with banks are entirely consist of fixed deposits and call deposits placed in both Banks and other financial institutions. Further the cash at bank is mainly consist of favourable balances in Savings and current accounts of private and government commercial banks.
The Group has selected its bankers by considering the credit ratings of the rating agencies, the reputation in the economy, efficiency in transaction processing by minimising the transaction costs..
The financial institutions in which the deposits and cash at bank is existed are gurenteed by local and foreing credit rating agencies as AA- or Better.
159 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
43.1.2 Liquidity Risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations on time.
Group’s sources of liquidity are its short term deposits in banks and its cash generated by operating activities. Group’s total contractual maturities are represented by its accounts payable and accrued liabilities, and are mostly due to be paid within one year. The Group believes that its deposits in cash management pools, ready bank lines (ODs, loans), debt with rollover options, combined with its historically strong and consistent operational cash flows, are more than sufficient to fund its operations, investing activities and commitments for the foreseeable future.
Group does not have any investments in asset-backed commercial papers and, therefore, has no exposure to this type of liquidity risk.
Maturity analysis The table below summarises the maturity profile of the Group’s financial liabilities as at 31 March 2016.
Within Between Between More than Total 1 year 1-3 years 3-5 years 5 years Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Interest Bearing Loans And Borrowings 9,485,110 1,092,629 581,623 1,157,662 12,317,024 Trade And Other Payables 11,997,768 - - - 11,997,768 Deposit Liabilities 1,207,074 - - - 1,207,074 Amount Due To Related Companies 294,030 - - - 294,030 Bank Overdrafts 2,208,737 - - - 2,208,737 25,192,719 1,092,629 581,623 1,157,662 28,024,633
The table below summarises the maturity profile of the Company’s financial liabilities as at 31 March 2016
Within Between Between More than Total 1 year 1-3 years 3-5 years 5 years Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Interest Bearing Loans and Borrowings 4,780,000 - - - 4,780,000 Trade and Other Payables 7,468,734 - - - 7,468,734 Amount Due To Related Companies 1,709,280 - - - 1,709,280 Bank Overdrafts 417,441 - - - 417,441 14,375,455 - - - 14,375,455
43.1.3 Market Risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk; equity price risk, interest rate risk, currency risk (or foreign exchange risk), and other price risks such as commodity price risk. Financial instruments at Group level affected by market risk include loans and borrowings, deposits, letters of credit and available for sale investments. The objective of market risk management is to manage and to control market risk exposures within acceptable parameters while optimising the return.
Equity Price Risk Certain companies of the Group have their major equity investment portfolios held on a long term basis; hence immune to daily fluctuations. Those are classified as AFS. Further, a small trading portfolio is managed by two reputed Unit Trust companies licensed by the SEC and individual companies manage their own short term portfolios as well. These investments are held by compling with group investment policies. Safe Custodian agreements with banks are in place that adds a control dimension.
Distilleries Company of Sri Lanka PLC 160 Annual Report 2015/16 The Group manages the equity price risk through divercification of its investments to each sector. Further the Management daily monitors the reports of the equity portfolios
The extend of diversification of short term equity investments (FVTPL) are analysed bellow.
Group Company As at 31 March, 2016 2015 2016 2015 Rs.000 % Rs.000 % Rs.000 % Rs.000 % Bank Finance and Insurance 4,396 0% 932 0% - 0% 0% Beverage Food and Tobacco 28,304 3% 144,712 13% 20,572 35% 136,064 76% Chemicals and 11,926 1% 13,303 1% 8,361 14% 9,563 5% Pharmaceuticals Construction and Engineering - 0% - 0% - 0% - 0% Diversified Holdings 468,163 46% 540,026 49% 8,475 15% 9,577 5% Hospitals 10,059 1% 10,403 1% 7,056 12% 7,200 4% Hotel and Travels 21,260 2% 23,342 2% 13,945 24% 15,459 9% Manufacturing 480,994 47% 378,334 34% - 0% - 0% Plantations - 0% - 0% - 0% - 0% Power and Energy - 0% - 0% - 0% - 0% Telecommunications - 0% - 0% - 0% - 0% 1,025,102 100% 1,111,052 100% 58,409 100% 177,863 100%
43.1.3 Market Risk Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has short and long-term debt facilities. Interest rate risk exists as Group earns market rates of interest on its deposits in cash management pools. An active risk management program does not exist, as management believes that changes in interest rates would not have a material impact on Group’s financial position over the long term.
Foreign currency risk The Group has exposure to foreign currency risk as it conducts business in a select few foreign currencies; however, its exposure is primarily limited to the US dollar. Group does not utilise derivative instruments to manage this risk. Subject to competitive conditions, changes in foreign currency rates may be passed on to consumers through pricing over the long term.
The beverage sector demand for USD has traditionally outpaced its supply, due to USD sourcing of production inputs (imported spirits and machinery) exceeding that of the sector’s USD sales. Therefore, decreases in the value of the Sri Lankan Rupee (LKR) relative to the USD will have an unfavourable impact on the sector earnings.
43.1.4 Financing Risk The company has a very strong Financial Position and is among the most preferred among local providers of finance. This was further cemented by the high credit rating assigned by Fitch negating any doubts of Group’s ability to secure funding at cheaper rates. Often the company has access to bank lines sans security. However, the management as a policy maintains a healthy gearing ratio and a Debt Service Coverage Ratio always in par with the industry without overstretching the Financial Position. Since of late foreign funding lines too have been cautiously approached to benefit from low interest rates globally.
43.2 Capital Management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
161 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Notes to the Financial Statements
In order to maintain or adjust the capital structure, the Group’s may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt/total capital. Net debt is calculated as total borrowings (including current and non-current interest bearing borrowing as shown in the consolidated Statement of Financial Position plus bank overdrafts) less cash and cash equivalents. Total capital is calculated as “equity” as shown in the consolidated Statement of Financial Position plus net debt. Gearing ratios at 31 March 2016 and 2015 are as follows.
Group Company
As at 31 March, 2016 2015 2016 2015 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Total Interest Bearing Loans and Borrowing 12,317,024 9,585,432 4,780,000 4,795,000 Bank Overdrafts 2,208,737 4,253,380 417,441 1,681,456 Less: Cash & Cash Equivalents (1,588,014) (4,072,931) (231,146) (184,718) Net Debt 12,937,747 9,765,881 4,966,295 6,291,738
Total Equity 66,732,942 64,823,997 53,055,653 50,283,325
Total Capital 79,670,689 74,589,878 58,021,948 56,575,063
Gearing Ratio 16% 13% 9% 11%
Distilleries Company of Sri Lanka PLC 162 Annual Report 2015/16 Statement of Value Added
Value Added
2016 2015 For the year ended 31 March, Group Company Group Company Rs.'000 Rs.'000 Rs.'000 Rs.'000 Gross Turnover 88,865,200 72,113,727 66,759,414 51,800,065 Other Operating Income 1,154,403 1,036,667 1,376,876 6,251,274 Finance Income 402,769 158,483 566,668 191,846 Share of Profits of Equity Accounted Investees 748,537 - 1,390,668 - 91,170,909 73,308,877 70,093,626 58,243,185
Value Distributed
2016 For the year ended 31 March, Group Company Rs,000 As a % of Total Rs,000 As a % of Total To the State as Taxes 60,460,158 66.32% 53,493,298 72.97% Operating Expenses 22,183,687 24.33% 12,849,008 17.53% To the Employees 4,364,484 4.79% 1,297,570 1.77% To Providers of Debt Capital 626,737 0.69% 350,477 0.48% To the Shareholders as Dividends 975,000 1.07% 975,000 1.33% Retained with the Business As Depreciation 2,433,968 2.67% 512,169 0.70% As Retained Earnings 126,875 0.14% 3,831,355 5.23%
2015 For the year ended 31 March, Group Company Rs,000 As a % of Total Rs,000 As a % of Total To the State as Taxes 41,100,855 58.64% 37,669,135 64.68% Operating Expenses 17,790,742 25.38% 8,619,678 14.80% To the Employees 4,017,215 5.73% 1,174,170 2.02% To Providers of Debt Capital 778,270 1.11% 495,479 0.85% To the Shareholders as Dividends 975,000 1.39% 975,000 1.67% Retained with the Business As Depreciation 1,574,626 2.25% 160,884 0.28% As Retained Earnings 3,856,918 5.50% 9,148,839 15.71%
163 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Details of Real Estate
Location Lands Buildings Value Extent No of Extent Cost/Revaluation ARP Units In (Sq. Ft.) Rs. 000 Distilleries Company of Sri Lanka PLC Seeduwa No. 3 Warehouse, New Bottling Plant Complex & 15 2 17.09 27 274,546.50 2,575,981 Housing Complex Seeduwa New W/H, Old W/H & Distillery 5 2 15.10 22 93,276.00 574,768 Kandy Mawilmada Land 2 0 0.00 0 - 39,373 Kalutara Bare Land 1 0 23.00 0 - 27,500 Dickoya Wholesale Outlet 4 14,800 133,132 Melsta Properties (Pvt.) Limited Gampola Wholesale Outlet 0 3 35.50 5 8,415.00 61,500 Dickoya Wholesale Outlet 0 3 9.60 4 16,735.50 9,000 Dankotuwa Old Distillery 2 1 38.00 3 8,083.50 40,250 Marawila Toddy Collection Centre 2 0 0.00 0 - 19,200 Kalutara No. 1 Warehouse 4 0 33.38 5 56,580.00 258,700 Kalutara Teak Stores / Warehouse 1 0 32.82 3 14,870.00 35,600 Mirishena Warehouse 0 3 28.32 4 10,280.00 23,000 Badulla Warehouse 0 2 8.64 3 9,390.00 55,000 Vauniya Wholesale Outlet 0 3 33.69 2 14,315.50 111,700 Jaffna Bare Land 1 0 21.65 0 - 11,900 Batticaloa Wholesale Outlet 3 0 11.04 2 5,545.75 91,300 Trincomalee Wholesale Outlet 0 1 38.68 2 4,762.00 51,500 Kalutara No. 2 Warehouse / Premises No. 14 & 16 1 1 4.27 7 20,410.00 73,000 Kaithadi Bare Land 2 0 11.71 0 - 20,000 Colombo 10 Head Office 1 1 15.20 6 30,000.00 1,600,000 Negombo Wholesale Outlet 0 1 27.50 3 8,576.00 123,200 Melstacorp Limited Ambalantota Wholesale Outlet - 1 24.16 5 7,657.00 41,600 Anuradhapura Proposed Wholesale Outlet - 3 21.46 3 8,401.00 60,000 Badulla Warehouse - 3 37.20 1 1,522.00 11,050 Beruwala Warehouse 2 1 19.08 12 15,279.50 183,300 Colombo 14 Warehouse 2 1 14.10 8 86,500.00 719,150 Galle Wholesale Outlet - 1 37.00 4 9,879.00 52,000 Katugastota Warehouse - 2 27.54 6 11,798.50 45,600 Katugastota Wholesale Outlet 5 - 3.84 11 28,385.00 169,000 Kurunegala Wholesale Outlet - 2 29.00 2 9,519.00 55,000 Ranala - Nawagamuwa Industrial Building 10 -- 7 83,094.50 269,000 Ratmalana Wholesale Outlet 1 - 28.20 4 30,871.00 246,750 Seeduwa New Material Warehouse and Service Centre 1 1 39.35 4 25,058.00 91,088 Seeduwa Bare Land 19.75 7,900 Seeduwa Factory Complex - 1 2.55 1 18,920.00 16,000 Seeduwa Residential property - - 10.00 1 1,975.00 10,100 Seeduwa Residential property - - 24.05 1 980.00 12,750 Seeduwa Residential property - - 12.27 1 1,910.00 11,500 Seeduwa Bare Land - - 36.41 0 - 20,000 Seeduwa Bare Land - 1 0.50 0 - 18,100 Seeduwa Bare Land - 2 22.00 0 - 48,500 Seeduwa Residential property - - 18.75 2 2,771.00 15,500 Seeduwa Residential property - - 22.85 1 1,470.00 12,500 Colombo 10. Residential property - - 25.94 2 5,642.00 122,600 Colombo 03. Commercial Property - - 20.38 1 21,490.00 375,796 Melsta Tower (Private) Limited Colombo 10. Bare Land 2 38.75 0 - 415,645 Colombo 10. Bare Land - 0 15.27 0 - 53,445 Colombo 10. Residential property 1 1.90 2 3,550.00 153,430 Colombo 10. Residential property 20.65 1 1,750.00 69,656 Lanka Bell Limited Minuwangoda Warehouse & Switch 1 3 35.35 2 20,920.00 98,650 Texpro Industries Limited Embulgama Factory - 2 - 4,000 Ranala Factory 6 - 6.05 5 92,537.00 173,889 Browns Beach Hotels PLC Negombo Hotel Complex-Under Constructions 6 3 33.50 1 225,347.00 856,500
Distilleries Company of Sri Lanka PLC 164 Annual Report 2015/16 Shareholder Information
1. Stock Exchange Listing The Issued Ordinary Shares of the Company are listed with the Colombo Stock Exchange. Ticker Symbol - DIST.N0000 Market Sector - Beverage, Food & Tobacco
2. Distribution of Shareholding
As at 31 March 2016 31 March 2015 Holding No. of Share Total Holdings % of Holding No. of Share Total Holding % of Holding Holders Holders
1 to 1,000 8,704 2,797,918 0.93% 8,678 2,844,827 0.95% 1,001 to 10,000 1,529 4,883,454 1.63% 1,610 5,223,162 1.74% 10,001 to 100,000 211 6,391,973 2.13% 244 7,325,766 2.44% 100,001 to 1000,000 63 18,097,290 6.03% 65 18,367,339 6.12% 1,000,001 & Over 31 267,829,365 89.28% 29 266,238,906 88.75% 10,538 300,000,000 100.00% 10,626 300,000,000 100.00%
3. Analysis of Shareholding
Holding No. of Share Holding % of Holding Holders
Individuals 10,261 43,308,526 14.44% Institutions 277 256,691,474 85.56% 10,538 300,000,000 100.00%
Resident 10,400 230,320,594 76.77% Non-Resident 138 69,679,406 23.23% 10,538 300,000,000 100.00%
4. Market Prices
Holding 31 March 2016 31 March 2015
Last Traded 206.20 240.50 Highest 320.00 246.00 Lowest 205.00 210.50
Share Price Performance
350
300
250
200
150
100
50
0 2012 2013 2014 2015 2016
165 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Shareholder Information
5 Twenty Largest Shareholders
As at 31 March, 2016 2015 Rank Name Share Holding % Share Holding % 1 Milford Exports (Ceylon) (Pvt) Limited 124,470,500 41.49% 124,470,500 41.49% 2 Lanka Milk Food (CWE) PLC 37,961,500 12.65% 37,961,500 12.65% 3 Mr. Muzaffar Ali Yaseen 22,418,512 7.47% 25,418,512 8.47% 4 Commercial Bank of Ceylon PLC/L.E.M.Yaseen 13,050,000 4.35% 4,750,000 1.58% 5 Melstacorp Limited 8,650,732 2.88% 8,650,732 2.88% 6 CITIGROUP Global Markets Limited Agency Trading Prop Security 6,324,326 2.11% -- 7 HSBC International Nominees Ltd- Morgan Stanley And Co INTL P 4,400,000 1.47% 4,400,000 1.47% 8 Commercial Bank of Ceylon PLC/M.A. Yaseen 4,000,000 1.33% 4,000,000 1.33% 9 Caceis Bank Luxembourg S/A Barca Global Master Fund LP 3,713,286 1.24% 3,713,286 1.24% 10 Lahugala Plantation (Pvt) Ltd 3,695,560 1.23% 3,695,560 1.23% 11 BNYM SA/NV – Blackrock Frontiers Investment Trust PLC 3,159,949 1.05% 2,287,157 0.76% 12 HSBC INTL NOM LTD – SSBT – Wasatch Frontier Emerging Small COU 2,859,925 0.95% 4,230,100 1.41% 13 Mrs. Shantha Marie Chrysostom 2,847,500 0.95% 2,847,500 0.95% 14 Northern Trust CO S/A National Westminister Bank PLC as Trust C/O SCB 2,800,000 0.93% 2,800,000 0.93% 15 CITIBANK New York S/A Norges Bank Account 2 2,652,290 0.88% -- 16 Mrs. Lorraine Estelle Marlene Yaseen 2,456,000 0.82% 10,721,177 3.57% 17 BNYM SA/NV – Consilium Frontier Equity Fund L.P 2,208,189 0.74% 2,949,848 0.98% 18 Stassen Exports Limited 2,114,200 0.70% 2,114,200 0.70% 19 Mr. Don Hasitha Stassen Jayawardena 1,882,833 0.63% 1,882,833 0.63% 20 HSBC INTL NOM LTD-SSBT-Parametric Emerging Markets Fund 1,684,527 0.56% -- Sub Total 253,349,829 84.43% 246,892,905 82.30% Other Shareholders 46,650,171 15.57% 53,107,095 17.70% Total 300,000,000 100% 300,000,000 100%
Percentage of Shares held by the public as at 31 March 2016 42.34% 42.34% Total No. of share holders who hold the public holding as at 31 March 2016 10,531 10,619
Distilleries Company of Sri Lanka PLC 166 Annual Report 2015/16 Ten Year Summary
In Rs Million - Company 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 RESULTS Gross Turnover 72,113.7 51,800.1 47,755.5 51,548.9 49,135.6 38,987.1 29,964.1 29,569.8 27,416.0 22,653.1 Excise Duty 50,572.8 34,883.6 31,057.4 34,087.5 33,859.7 25,464.4 18,979.0 18,339.2 16,458.0 14,020.3 Net Turnover 21,540.9 16,916.5 16,698.1 17,461.4 15,275.9 13,522.7 10,985.0 11,230.5 10,958.0 8,632.8 Profit/(Loss) Before Tax 8,222.6 13,070.3 8,136.6 9,275.9 6,905.4 9,972.0 4,004.5 3,977.9 3,014.9 2,826.6 Profit/(Loss) After Tax 5,302.1 10,284.7 5,357.9 6,872.7 4,297.2 7,768.7 2,815.0 2,682.4 1,981.6 1,868.9 FUNDS EMPLOYED Stated Capital 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 Capital Reserves 1,804.6 1,403.0 2,079.7 2,160.1 2,506.9 2,923.6 107.9 107.9 107.9 107.9 Revenue Reserves & Retained Earnings 50,951.1 48,580.3 41,459.0 36,695.0 29,790.3 21,718.0 14,849.3 12,709.3 10,551.8 8,708.1 Shareholders Funds 53,055.7 50,283.3 43,838.7 39,155.1 32,597.2 24,941.7 15,257.2 13,117.2 10,959.7 9,116.0 Total Borrowings 5,197.4 6,476.4 10,025.8 8,576.0 9,741.5 254.6 76.2 920.1 2,648.1 1,634.0 Non Current Liabilities Net of Borrowings 1,112.7 669.3 171.1 159.6 116.1 270.1 111.4 171.5 109.6 88.0 Current Liabilities Net of Borrowings 10,050.5 7,599.2 7,154.0 8,095.6 20,107.8 6,860.7 5,159.9 4,785.2 4,662.9 4,279.9 69,416.3 65,028.2 61,189.6 55,986.3 62,562.6 32,327.1 20,604.7 18,994.0 18,380.1 15,118.0 ASSETS EMPLOYED Non-Current Assets 57,439.7 57,208.1 48,459.1 45,578.4 54,982.5 20,212.7 14,024.6 12,840.9 12,302.9 10,383.5 Current Assets 11,976.6 7,820.1 12,730.5 10,407.9 7,580.1 12,114.4 6,580.1 6,153.1 6,007.5 4,734.4 69,416.3 65,028.2 61,189.6 55,986.3 62,562.6 32,327.1 20,604.7 18,994.0 18,310.4 15,117.9 CASHFLOW Net Cashflow from Operating Activities 1,570.0 4,079.8 671.2 3,148.9 1,954.9 4,275.1 2,692.7 1,881.7 2,509.3 1,118.2 Net Cashflow from Investing Activities 725.6 209.2 (1,569.3) (689.3) (16,037.3) 1,247.0 (661.2) (35.6) (3,041.8) (48.4) Net Cashflow from Financing Activities (970.2) (975.0) (2,167.9) (1,535.6) 1,147.0 (875.8) (675.0) (525.0) (465.0) (169.7) Net Increase/(Decrease) in Cash & Cash 1,325.4 3,314.0 (3,065.9) 924.0 (12,935.4) 4,646.3 1,356.5 1,321.1 (997.5) 900.1 Equivalents KEY INDICATORS Earnings per Share (Rs.) 17.67 15.48* 17.86 10.68* 11.85* 15.08 9.38 8.90 6.60 6.20 Net Assets per Share (Rs.) 176.85 167.61 146.13 130.52 108.66 83.14 50.86 43.70 36.50 30.40 Market Value per Share (Rs) Year End 206.20 240.50 203.00 166.50 145.00 180.00 118.00 65.00 98.00 105.00 Return on Shareholders’ Funds 10% 9%* 12% 8%* 11%* 31% 18% 21% 18% 21% Dividends per Share (Rs.) 3.35 3.25 3.25 3.00 3.00 3.00 2.50 2.25 1.75 1.55 Dividend Payout 18.96% 21%* 18% 28%* 25%* 20% 27% 25% 27% 25% Dividend Yield 1.6% 1% 2% 2% 2% 2% 2% 3% 2% 1%
With effect from year ended 31 March 2012 the figures are derived from financial statements prepared in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS). Figures for the remaining periods are derived from financial statements prepared in accordance with previous version of Sri Lanka Accounting Standards (SLAS).
* For the purpose of calculation of EPS for the years ended 31 March 2015, 31 March 2013 and 31 March 2012, the Company profit has been adjusted for intragroup capital gain on assets transfer.
167 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
DCSL Management Team and Unit Management Team
Head Office Extra Special Heritage Arena Col. Ranjith Rupasinghe (Retd.) Operations Division Head of Extra Special Heritage Arena RSP, IG Head of Operations Maj. Gen. Mano Perera (Retd.) RWP, RSP, psc Deputy Head of Extra Maj. Gen. M. Anton Maithri Dias Special Heritage Arena (Retd.) RWP, RSP, VSV, USP, psc Finance Division Chief Engineer - D. S. P. Jayawardena M.Sc. Nimal Nagahawatte B.Sc. Head of Finance Production (Building Services Engineering), Asst. Finance Manager Suranjan Lakmanaratchi AMCIBSE U.K., Eng. Tec. U.K., Asst. Finance Manager Justin Algama B.Sc., Dip. Acc MASHRAE U.S.A., Mar.Eng. (DIP) Manager - IT Ms. P. Gamagedara Dip. (NIBM), Senior Production Capt. K. G. N. S. Senanayake AACS Manager SLN (Retd.), MDS, B.Sc., psc Supplies Division Manager - Engineering W. M. U. R. Gunadasa Head of Procurement S. Rajanathan Services B.Sc. (Eng) (Hons) Manager - IT R. Aravinth B.Sc. (Hons) Internal Audit Division H. D. A. C. Herath BA (Sp) (Hons) Chief Internal Auditor L. P. Liyanaarachchi FCA, FCMA, Manager - Distribution Dip.Acc. Manager - Logistics Maj. J.A.A. Sanjeewa Jayalath Manager - Security and Wg. Cdr. A.G. Shane Keil M.Sc. Investigation Division Fire (Defence Studies in Management) Alfred Wijewardene DIG (Retd.) Director - Investigations Post Grad. Dip. in Conflict A. X. Clarence Motha ASP (Retd.) Dy. Director - Investigations Resolution and Security Studies Dy. Director - Investigations G. U. J. Vithanage SSP (Retd.) Assistant Engineer - Civil R. W. D. M. N. Senadheera Company Secretarial & Legal Division NCT (Civil) Company Secretary and Ms. V. J. Senaratne Attorney-At-Law Warehouse No 03 Warehouse Chief Legal Officer & N.P., Solicitor (Eng. & Wales) Regional Offices Human Resources Division Northern Region - Seeduwa Ms. Gayathri Chakravarthy Head of Human Head of Northern Region Maj. R. M. Cabraal (Retd.) Resources LLB, Attorney-at-Law Deputy Head of Northern Col. A. M. B. Peiris (Retd.) RWP, Manager - Human Ms. U. R. Edirisinghe Region MHRP, MBA (Sri J) MBA (Sri J), B.Sc. (HRM) Sp Resources Group Security Manager Deshabandu R. M. L. N. Bandara Asst. Manager - HR Ms. Lakshini Gunathilaka (Retd. MBA (USA), SSP (Retd.) Administration & Sqn. Ldr.) B.Sc. (Defence Studies Ex. Chief of Professional Compliance in Aeronautical Engineering) Standards & Discipline Office U. N. (East Timor) Transport Division Head of Analytical T. D. Ekmon B.Sc. (Hons), Head of Transport & Roshanth Kumar Perera Division M.I.Chem C, Chartered Chemist Logistics Chief Engineer M. N. Perera Stock Control Division Consultant – Analytical K. Sivarajah B.Sc. (Cey), M.Sc. Lalith Ratnayake MBA (WUSL), Head of Inventory Procedures (UK), F. I Chem. C, Chartered Management B.Sc. (B.Ad) Sp Chemist, (Retd. Govt. Analyst) Capt. K.A.P. Perera SLN (Retd.) Sales Division Senior Production Manager RSP, B.Sc. (Defence Studies) Head of Sales P. Mahesh Jayaweera MBA (SMU) Production Manager S. G. Bandula Silva B.Sc. J. R. de Crusz Consultant - Enactments Manager - Transport T. Ranga Hasantha and Regulations (Retd. Dy. Commissioner of Excise)
Distilleries Company of Sri Lanka PLC 168 Annual Report 2015/16 Senior Chemist S. M. Sumanasekera B.Sc., Uva Region - Badulla M.Sc. (Food Science and Head of Uva Region Capt. Ranjith Wettewa SLN (Retd.) Technology) I Chem RSP, P.S.N. Capt. K. V. G. H. Harischandra Senior Executive - IT Warehouse Badulla (Retd.) Wholesale Outlet Badulla Distillery Seeduwa Group Management Division Warehouses New Warehouse, Old Warehouse Cleetus Mallawaarachchi FCA, Peliyagoda (W), Peliyagoda (S), Group Financial Wholesale Outlets FCMA, MBA Rajakadaluwa, Negombo, Controller Kurunegala Group Chief Information Prasanna Karunanayake B.Sc. Officer (Eng), MBCS Southern Region - Kalutara Head of Southern Region Brig. Aruna Wijewickrama USP (Retd.) PQHRM (IPM) Asst. Head of Southern Maj. C.R. Lokuarachchi RSP, psc, Region MDS (Kelaniya), M.Sc. (Nanjing - China) Senior Production A. D. Amaradewa Manager Chemist W. A. Indunil Wickramasinghe A.I. Chem C, Grad Chem, Dip in POM (UK) Asst. Engineer H. P. D. P. Mangala Gunasekara Manager (Beruwala C. E. Nanayakkara Distillery) Distillery Beruwala Warehouses Kalutara No 01 & Kalutara No 02, Teak Store, Mirishena Wholesale Outlets Kalutara, Ratmalana, Ambalantota, Galle, Kuruwita
Central Region - Kandy Head of Central Region Capt. Chula Ranasinghe USP - (Acting) SLN (Retd.) Senior Production V. Jeiyachandiran B.Sc. (Hons) Manager Production Manager N. Thiranagama B.Sc. Consultant - Quality W. W. M. S. U. Wijayarathna B.Sc. Control (Hons), M.Phil, Chartered Chemist Civil Engineer A. M. A. J. B. Abeykoon Senior Executive- M. R. I. K. Bandara B.Sc. (Hons) Operations/IT Asst. Accountant Mrs. W. M. P. Perera Warehouse Nawayalatenna Wholesale Outlets Nawayalatenna, Gampola, Vavuniya, Batticaloa,Dickoya, Trincomalee, Jaffna, Anuradhapura
169 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Group Directory
Beverage Secretary : Ms. V. J. Senaratne Periceyl (Pvt) Limited Registered Office Board of Directors 110, Norris Canal Road, Colombo 10 D. H. S. Jayawardena – Chairman Tel: (94-11) 2808565 Fax: (94-11) 5551777 R. K. Obeyesekere (Ceased to be a Director w.e.f. 17/04/2015) C. R. Jansz Co. Reg. No. PV 5529 S. K. S. D. Amarathunga Auditors : Messrs Ernst & Young (Chartered Accountants) A. L. Gooneratne D. Hasitha S. Jayawardena (Appointed w.e.f. 17/04/2015)
Plantation Secretary : P. A. Jayatunga Balangoda Plantations PLC Registered Office Board of Directors 110, Norris Canal Road, Colombo 10 D. H. S. Jayawardena – Chairman / Managing Director Tel: (94-11) 2522871-2 Fax: (94-11) 2522913 R. K. Obeyesekere (Ceased to be a Director w.e.f. 29/06/2016) C. R. Jansz Co. Reg. No. PQ 165 S. K. L. Obeyesekere Auditors : Messrs Ernst & Young (Chartered Accountants) Dr. A. Shakthevale D. S. K. Amarasekera A. L. Gooneratne
Telecommunication Secretary : Ms. C. M. Chandrapala Lanka Bell Limited Registered Office Board of Directors 344, Galle Road, Colombo 03. D. H. S. Jayawardena – Chairman Tel: (94-11) 5335000 Fax: (94-11) 5545988 Dr. T. K. D. A. P. Samarasinghe – Managing Director C. R. Jansz Co. Reg. No. PB 306 M. R. Peries (Resigned w.e.f. 01/03/2016) Auditors : Messrs KPMG (Chartered Accountants) D. S. C. Mallawaarachchi A. L. Gooneratne
Telecom Frontier (Pvt) Limited Secretary : Ms. C. M. Chandrapala Board of Directors D. H. S. Jayawardena – Chairman Registered Office No: 344, Galle Road, Colombo 03 Dr. T. K. D. A. P. Samarasinghe – Managing Director Tel: (94-11) 5335000 M. R. Peries (Resigned w.e.f. 31/03/2016) D. S. C. Mallawaarachchi Co. Reg. No. PV 61396 A. L. Gooneratne Auditors : Messrs Amarasekara & Company (Chartered Accountants)
Bell Solutions (Pvt) Limited Secretary : Ms. C. M. Chandrapala Board of Directors D. H. S. Jayawardena – Chairman Registered Office No: 344, Galle Road, Colombo 03 Dr. T. K. D. A. P. Samarasinghe – Managing Director Tel: (94-11) 5335000 M. R. Peries (Resigned w.e.f. 31/03/2016) PV 61398 D. S. C. Mallawaarachchi Co. Reg. No. A. L. Gooneratne Auditors : Messrs Amarasekara & Company (Chartered Accountants)
Distilleries Company of Sri Lanka PLC 170 Annual Report 2015/16 Financial Services Secretaries : P. W. Corporate Secretarial (Pvt) Limited Continental Insurance Lanka Limited Registered Office Board of Directors 79, Dr. C. W. W. Kannangara Mawatha, Colombo 07 G. D. C. de Silva - Managing Director Tel : (94-11) 5200300 A. S. Abeyewardene A. L. Gooneratne Co. Reg. No. PB 3784 A. M. De S. Jayaratne Auditors : Messrs KPMG (Chartered Accountants)
Melsta Regal Finance Limited Secretaries : P. W. Corporate Secretarial (Pvt) Limited Board of Directors A. L. Gooneratne – Chairman Registered Office 110, Norris Canal Road, Colombo 10 D. M. N. P. Karunapala- CEO Tel: (94-11) 268 2742-3, 5288571 Fax: (94-11) 268 2741 L. P. Liyanarachchi Web : www.melstaregalfinance.lk N. A. Rodrigo (Retired w.e.f. 22/06/2016) K. D. Bernard Co. Reg. No. PB 878 M. S. J. D. Coorey : Messrs KPMG (Chartered Accountants) D. S. C. Mallawaarachchi Auditors J. M. T. Galgamuwa Ms. S. A. Atukorale B. A. S. P. S. Balasuriya
Diversified Holdings Secretaries : P. W. Corporate Secretarial (Pvt) Limited Melstacorp Limited Registered Office Board of Directors 110, Norris Canal Road, Colombo 10 D. H. S. Jayawardena – Chairman Tel: (94-11) 5696794 A. L. Gooneratne – Managing Director Web : www.melsta.com C. R. Jansz N. de. S. Deva Aditya Co. Reg. No. PV 11755 PB Capt. K. J. Kahanda (Retd.) : Messrs KPMG (Chartered Accountants) Dr. A. N. Balasuriya Auditors D. Hasitha S. Jayawardena R. Seevaratnam (Appointed w.e.f. 01/01/2016) Ms. V. J. Senaratne (Alternate to N. de. S. Deva Aditya)
Milford Holdings (Pvt) Limited Secretaries : P. W. Corporate Secretarial (Pvt) Limited Board of Directors D. H. S. Jayawardena – Chairman Registered Office 110, Norris Canal Road, Colombo 10 R. K. Obeyesekere Tel: (94-11) 2695295-7 Fax: (94-11) 2696360 C. R. Jansz Capt. K. J. Kahanda (Retd.) Co. Reg. No. PV 5944 Auditors : Messrs KPMG (Chartered Accountants)
Browns Beach Hotels PLC Secretaries : Aitken Spence Corporate Finance (Private) Limited Board of Directors D. H. S. Jayawardena – Chairman Registered Office 315, Vauxhall Street, Colombo 02 M. V. Theagarajah Tel: (94-11) 2308308 Fax: (94-11) 2308099 J. M. S. Brito S. M. Hapugoda (Resigned w.e.f. 30/06/2015) Co. Reg. No. PQ 202 Ms. D. S. T. Jayawardena (Appointed w.e.f. 01/01/2016) : Messrs KPMG (Chartered Accountants) T. D. U. D. Peiris (Resigned w.e.f. 10/02/2016) Auditors A. L. Gooneratne R. N. Asirwatham (Appointed w.e.f. 17/03/2016) N. de S. Deva Aditya (Appointed w.e.f. 17/03/2016)
171 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Group Directory
Texpro Industries Limited Secretaries : SSP Corporate Services (Pvt) Limited Board of Directors Registered Office D. H. S. Jayawardena – Chairman 1st Floor, Lakshman’s Building, J. D. Peiris – Managing Director 321, Galle Road, Colombo 03 H. I. Munasinha Tel: (94-11) 2565951 A. L. Gooneratne D. S. C. Mallawaarachchi Co. Reg. No. PB 748
Auditors : Messrs KPMG (Chartered Accountants)
Timpex (Pvt) Limited Secretaries SSP Corporate Services (Pvt) Limited Board of Directors Registered Office D. H. S. Jayawardena – Chairman 1st Floor, Lakshman’s Building, J. D. Peiris – Managing Director 321, Galle Road, Colombo 03 H. I. Munasinha Tel: (94-11) 2565951 A. L. Gooneratne D. S. C. Mallawaarachchi Co. Reg. No. PV 17863
Auditors : Messrs KPMG (Chartered Accountants)
Melsta Logistics (Pvt) Limited Secretaries : P. W. Corporate Secretarial (Pvt) Limited Board of Directors Registered Office A. L. Gooneratne – Chairman 160, Negombo Road, Seeduwa A. M. J. Abeysinghe Tel: (94-11) 5223300 Fax: (94-11) 5223322 T. Q. Fernando Web: www.crc.lk M. R. Peries (Resigned w.e.f 01/03/2016) D. S. C. Mallawaarachchi Co. Reg. No. PV 14051
Auditors : Messrs Amarasekara & Company (Chartered Accountants)
Splendor Media (Pvt) Limited Secretaries : P. W. Corporate Secretarial (Pvt) Limited Board of Directors Registered Office Ms. D. S. T. Jayawardena – Chairperson 110, Norris Canal Road, Colombo 10 Ms. G. Chakravarthy Tel: (94- 11) 5 639 501 Fax: (94-11) 5 373 344 N. N. Nagahawatte Co. Reg. No. PV 1230 O. A. R. P. Obeysinghe Auditors : Messrs KPMG (Chartered Accountants)
Bogo Power (Pvt) Limited Secretary : P. A. Jayatunga Board of Directors D. H. S. Jayawardena – Chairman Registered Office 833, Sirimavo Bandaranaike Mawatha, Colombo 14 Dr. N. M. Abdul Gaffar Tel: (94-11) 2522871-2 Fax: (94-11) 2522913 S. K. L. Obeyesekere A. L. Gooneratne Co. Reg. No. PV 64901
Auditors : Messrs Ernest & Young (Chartered accountants)
Distilleries Company of Sri Lanka PLC 172 Annual Report 2015/16 Bellvantage (Pvt) Limited Secretaries : P. W. Corporate Secretarial (Pvt) Limited Board of Directors A. L. Gooneratne – Chairman Registered Office 33, Park Street, Colombo 02 P. Karunanayke Tel: (+94-11)-5753753 Fax: (+94-11)-5753754 D. S. C. Mallawaarachchi Web : www.bellvantage.com
Co. Reg. No. PV 65022
Auditors : Messrs Amarasekara & Company (Chartered Accountants)
Melsta Properties (Pvt) Limited Secretary : P. A. Jayatunga Board of Directors Capt. K. J. Kahanda (Retd.) Registered Office 110, Norris Canal Road, Colombo 10 S. Rajanathan Tel: (94-11) 5900300 Fax : (94-11) 2695794 R. R. P. L. S. Ratnayake Co. Reg. No. PV 78422
Auditors : Messrs KPMG (Chartered Accountants)
Melsta Towers (Pvt) Limited Secretaries : P. W. Corporate Secretarial (Pvt) Limited Board of Directors A. L. Gooneratne Registered Office 110, Norris Canal Road, Colombo 10 M. R. Peries (Resigned w.e.f. 01/03/2016) Tel: (94-11) 5900300 Fax : (94-11) 2695794 Ms. S. A. Atukorale D. S. C. Mallawaarachchi Co. Reg. No. PV 90157
Auditors : Messrs KPMG (Chartered Accountants)
Melsta Technologies (Pvt) Limited Secretaries P. W. Corporate Secretarial (Pvt) Limited Board of Directors B. A. S. P. S. Balasuriya Registered Office 110, Norris Canal Road, Colombo 10 B. K. J. P. Rodrigo Tel: (94-11) 5288625 Fax : (94-11) 2695794 P. Karunanayke D. A. C. Peiris Co. Reg. No. PV 104028 D. M. Welikandage Auditors Messrs KPMG (Chartered Accountants)
Pelwatte Sugar Industries PLC Secretaries : Managers & Secretaries (Pvt) Limited Board of Directors Registered Office D. H. S. Jayawardena 27, Melbourne Avenue, Colombo 04 Capt. K. J. Kahanda (Retd.) Tel: (94-11) 2589390 Fax: (94-11) 2500674 M. R. Peries (Resigned w.e.f. 01/03/2016) R. Wettewa Co. Reg. No. PQ 30 D. A. de S. Wickramanayake D. H. J. Gunawardena Auditors : Messrs Ernst & Young (Chartered Accountants) C. S. Weeraratne D. A. E. de S. Wickramanayake K. K. U. Wijeyesekera
173 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information
Group Directory
Pelwatte Sugar Distilleries (Pvt) Limited Secretaries : Managers & Secretaries (Pvt) Limited Board of Directors Capt. K. J. Kahanda (Retd.) - Managing Director Registered Office 27, Melbourne Avenue, Colombo 04 M. R. Peries (Resigned w.e.f. 01/03/2016) Tel: (94-11) 2589390 Fax: (94-11) 2500674 D. A. de S. Wickramanayake Co. Reg. No. PV 10221
Auditors : Messrs Ernst & Young (Chartered Accountants)
Pelwatte Agriculture & Engineering Services (Pvt) Limited Secretaries : Managers & Secretaries (Pvt) Limited Board of Directors D. A. de S. Wickramanayake Registered Office 27, Melbourne Avenue, Colombo 04 C. S. Weeraratne Tel: (94-11) 2589390 Fax: (94-11) 2500674
Co. Reg. No. PV 66850
Auditors : Messrs Ernst & Young (Chartered Accountants)
Associates Secretary : R. E. V. Casie Chetty Aitken Spence PLC Registered Office Board of Directors 315, Vauxhall Street, Colombo 02 D. H. S. Jayawardena – Chairman Tel: (94-11) 2308308 Fax : (94-11) 2445406 J. M. S. Brito – Managing & Finance Director Web: www.aitkenspence.com Dr. R. M. Fernando Dr. M. P. Dissanayake Co. Reg. No. PQ 120 Ms. D. S. T. Jayawardena : Messrs KPMG (Chartered Accountants) G. C. Wickremasinghe Auditors C. H. Gomez N. de S. Deva Aditya V. M. Fernando (Retired w.e.f. 30/06/2015) R. N. Asirwatham
Madulsima Plantations PLC Secretary : P. A. Jayatunga Board of Directors D. H. S. Jayawardena – Chairman / Managing Director Registered Office 833, Sirimavo Bandaranaike Mawatha, Colombo 14 R. K. Obeyesekere (Ceased to be a director w.e.f 23/06/2015) Tel: (94-11) 2522871-2 Fax: (94-11) 2522913 Z. Alif (Ceased to be a director w.e.f 23/06/ 2015) Dr. N. M. Abdul Gaffar Co. Reg. No. PQ 184 S. K. L. Obeyesekere : Messrs Ernst & Young (Chartered Accountants) Dr. A. Shakthevale Auditors D. S. K. Amarasekera
Pelwatte Dairy Industries Limited Secretaries : Maidas Secretarial Services (Pvt) Limited Board of Directors Registered Office D. A. de S. Wickramanayake A/4, Perahera Mawatha, Colombo 03 D. A. E. de S. Wickramanayake D. H. J. Gunawardena Co. Reg. No. PV 16876 A. N. F. Perera Auditors : Messrs Ernst & Young (Chartered Accountants)
Distilleries Company of Sri Lanka PLC 174 Annual Report 2015/16 Notice of Meeting
NOTICE IS HEREBY GIVEN that the TWENTY SIXTH By Order of the Board, ANNUAL GENERAL MEETING OF DISTILLERIES COMPANY OF SRI LANKA PLC will be held at the Sri Lanka Foundation on 6th September 2016 at 10.00 A.M. for the following purposes.
1. To receive and consider the Annual Report of the Directors Ms. V. J. Senaratne and the Financial Statements of the Company for the year Company Secretary ended 31st March 2016. 05 August 2016 2. To approve a final dividend as recommended by the Board Colombo. of Directors.
3. To re elect Mr. C. R. Jansz who retires by rotation at the Notes: Annual General Meeting in terms of Article 92 of the Articles 1. A member is entitled to attend and vote at the meeting or of Association, as a Director of the Company. to appoint a proxy to attend and vote on behalf of him/her by completing the Form of Proxy enclosed herewith. 4. To re elect Mr. N. De. S. Deva Aditya who retires by rotation at the Annual General Meeting in terms of Article 2. A Proxy need not be a member of the Company. 92 of the Articles of Association, as a Director of the Company. 3. The completed Form of Proxy should be deposited at the Registered Office of the Company at No.110, Norris Canal 5. To re elect as a Director, Mr. D. H. S. Jayawardena, who Road, Colombo 10, before 10.00 a.m. on 04th September is over 70 years, as a Director by passing the following 2016. resolution: The Dividend warrants will be posted within seven market “That the age limit stipulated in Section 210 of the days, if the dividend proposed is approved at the Annual Companies Act No.07 of 2007 shall not apply to General Meeting. In accordance with the rules of the Mr. D. H. S. Jayawardena who has attained the age of 73 Colombo Stock Exchange, the shares of the Company will and that he be re-elected a Director of the Company.” be quoted ex-dividend with effect from 2016.
6. To re elect as a Director, Mr. R. Seevaratnam, who is over THE SHAREHOLDERS AND THE PROXY HOLDERS 70 years, as a Director by passing the following resolution: ATTENDING THE MEETING ARE KINDLY REQUESTED TO BE IN THEIR SEATS BY 9.45 A.M. THEY ARE ALSO “That the age limit stipulated in Section 210 of the REQUESTED TO BRING THIS ANNUAL REPORT, ALONG Companies Act No. 07 of 2007 shall not apply to WITH AN ACCEPTABLE FORM OF IDENTITY. Mr. R. Seevaratnam who has attained the age of 72 and that he be re-elected a Director of the Company.”
7. To authorise the Directors to determine contributions to charities.
8. To authorise the Directors to determine the remuneration of the Auditors, Messrs.KPMG who are deemed to have been reappointed as Auditors in terms of Section 158 of the Companies Act No. 07 of 2007.
175 Notes
Distilleries Company of Sri Lanka PLC 176 Annual Report 2015/16 177 Notes
Distilleries Company of Sri Lanka PLC 178 Annual Report 2015/16 Form of Proxy
Folio No.
I/We...... of ...... being a member / members of the Distilleries Company of Sri Lanka PLC hereby appoint Don Harold Stassen Jayawardena* or failing him Cedric Royle Jansz* or failing him Niranjan de Silva Deva Aditya* or failing him Kolitha Jagath Kahanda* or failing him Adrian Naomal Balasuriya* or failing him Don Hasitha Stassen Jayawardena* or failing him Ranjeevan Seevaratnam* or ...... of ...... as my/our* Proxy to represent me/us* and vote for me/us* on my/our* behalf at the Twenty Sixth Annual General Meeting of the Company to be held on the 06th September 2016 and at any adjournment thereof and at every poll which may be taken in consequent thereof.
* Please delete the inappropriate words. ** Please write your Folio Number which is given on the top left of the address sticker
……………………………… Signature of Shareholder Dated this ……………………day of …………….2016.
Notes: 1. Proxy need not be a member of the Company.
2. In terms of the Article 71 of the Articles of Association of the Company.
The instrument appointing a Proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or where the appointer is a corporation, either under seal, or under the hand of an officer or attorney duly authorised. A Proxy need not be a member of the Company.
3. In terms of Article 72 of the Articles of Association of the Company.
The instrument appointing a Proxy and the Power of Attorney or other authority, if any, under which it is signed or notarially certified copy of that power of attorney shall be deposited at the registered office of the Company or at such other place within Sri Lanka as is specified for the purpose in the notice convening the meeting not later than 48 hours before the time of the holding of the meeting or adjourned meeting at which the person named in the instrument proposes to vote or in the case of the poll, not later than 24 hours before the time appointed for the taking of the poll and in default the instrument of Proxy shall not be treated as valid.
4. In terms of Article 66 of the Articles of Association of the Company.
In case of the Joint holders the votes of the senior who tenders a vote, whether in person or by Proxy, shall be accepted to the exclusion of the votes of the other joint-holders; and for this purpose seniority shall be determined by the order in which the names stand in the register of members.
The first joint-holder thereby has power to sign the Proxy without the consent of the other joint holder.
5. Instructions as to completion are noted overleaf.
179 Instructions as to completion
1. Kindly perfect the Form of Proxy, after filling in legibly your full name and address, by signing on the space provided and filling in the date of signature.
2. Kindly return the completed Form of Proxy to the Company after deleting one or other of the alternate words indicated by an asterisk.
3. To be valid the completed Form of Proxy should be deposited at the Registered Office of the Company at No.110, Norris Canal Road, Colombo-10, not later than 48 hours before the time appointed for the holding of the meeting.
4. Every alteration or addition to the Form of Proxy must be duly authenticated by the full signature of the shareholder signing the Form of Proxy. Such signature should as far as possible be placed in proximity to the alteration or addition intended to be authenticated.
Distilleries Company of Sri Lanka PLC 180 Annual Report 2015/16 Attendance Slip
Distilleries Company of Sri Lanka PLC PQ 112 110, Norris Canal Road, Colombo 10, Sri Lanka.
I / We hereby record my / our presence at the Twenty Sixth Annual General Meeting of the Distilleries Company of Sri Lanka PLC at the Sri Lanka Foundation on 06th September 2016 at 10.00 a.m.
1. Full Name of Shareholder : ...... (In Capital Letters please)
2. Shareholder’s NIC No./Passport No. : ......
3. Number of Shares held and Folio No. : ......
4. Name of Proxy Holder : ......
5. Proxy Holder’s NIC No./Passport No. : ......
6. Signature of Attendee : ......
Notes 1. Shareholders / Proxy Holders are requested to bring this Attendance Slip with them when attending the meeting and hand it over at the entrance to the meeting hall after signing it.
2. Shareholders are also kindly requested to indicate any changes in their addresses / names by completing the following and forward same to the registered office 110, Norris Canal Road, Colombo 10, if not attending the meeting.
Name of the Shareholder : ......
Certificate No. : ......
Previous Address : ......
Present Address : ......
Any changes to the Name : ......
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fuu jdr®;dj iïmQr®Kfhkau ms ,t;twpf;if KOikahf Mq;fpyj;jpy; cs;sJ. jiythpd; nra;jp> gzpg;ghsh; rigapd; tUlhe;j mwpf;if> fzf;fha;thshpd; mwpf;if> Mfpatw;wpd; rpq;fsk; my;yJ jkpo; nkhopngah;g;G Ntz;Lkhapd;> jaTnra;J fbjk; %yk; gpd;tUk; tpyhrj;jpw;F> 2016> Mf];l; khjk; 30 jpfjpf;F Kd; mwptpf;fTk;. nrayhsh;> b];byhP]; fk;gdp xg; =yq;fh gp.vy;.rp> ,yf;fk; 110> nehhp]; nfdy; tPjp> nfhOk;G 10. This report is entirely in English. If you require a translated copy of The Chairman’s Message, Annual Report of the Board of Directors and The Auditor’s Report in Sinhala or Tamil, please make a request by letter addressed to the Secretary, Distilleries Company of Sri Lanka PLC, No. 110, Norris Canal Road, Colombo 10 before 30th day of August 2016. Corporate Information Company Name Related Party Transactions Distilleries Company of Sri Lanka PLC Review Committee Mr. R. Seevaratnam - Chairman Domicile and Legal Form of the Holding Company (Appointed w.e.f. 23/03/2016) Public Limited Liability Company incorporated and domiciled Dr. A. N. Balasuriya in Sri Lanka and listed on the Colombo Stock Exchange (Appointed w.e.f. 23/03/2016) Registration No. Mr. D. Hasitha S. Jayawardena PQ 112 (Appointed w.e.f. 23/03/2016) Ultimate Parent Company Secretary Milford Exports (Ceylon) Ltd. Ms. V. J. Senaratne Registered Ofce Auditors 110, Norris Canal Road, Colombo 10, KPMG (Chartered Accountants) Sri Lanka 32A, Sir Mohamed Macan Marker Mawatha, Tel : +94 11 5507000 / 2695295 -7 Colombo 03, Sri Lanka Fax : +94 11 2696360 Web : www.dcslgroup.com Registrars P. W. Corporate Secretarial (Pvt) Ltd. Board of Directors 3 / 17, Kynsey Road, Mr. D. H. S. Jayawardena - Chairman / Managing Director Colombo 08, Sri Lanka Mr. C. R. Jansz Mr. N. de. S. Deva Aditya Bankers Capt. K. J. Kahanda (Retd.) Bank of Ceylon Dr. A. N. Balasuriya Commercial Bank of Ceylon Mr. D. Hasitha S. Jayawardena Hatton National Bank Mr. R. Seevaratnam - (Appointed w.e.f. 21/09/2015) Hong Kong & Shanghai Banking Corporation Mr. A. L. Gooneratne - (Alternate to N. de. S. Deva Aditya) MCB Bank Ms. V. J. Senaratne - (Alternate to Capt. K. J. Kahanda) Nations Trust Bank People’s Bank Audit Committee Standard Chartered Bank Mr. R. Seevaratnam - Chairman (Appointed w.e.f. 21/09/2015) Seylan Bank PLC Dr. A. N. Balasuriya - Chairman (up to 21/09/2015) Mr. N. de. S. Deva Aditya Credit Rating Mr. D. Hasitha S. Jayawardena (Appointed w.e.f. 05/08/2015) The Company has been assigned ‘AAA (lka)’ National Long Term Rating with a Remuneration Committee Stable Outlook by Fitch Ratings Lanka Limited. Dr. N. Balasuriya - Chairman Mr. N. de. S. Deva Aditya Mr. D. Hasitha S. Jayawardena (Appointed w.e.f. 05/08/2015) Designed & produced by Digital Plates & Printing by Aitken Spence Printing & Packaging (Pvt) Ltd www.dcslgroup.com 110, Norris Canal Road, Colombo 10, Sri Lanka. Tel. +94 11 5507000 / 2695295-7 Fax: +94 11 2696360