Annual-Report-2018-2
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STEADY Two years down the road as a stand-alone entity, Hatton Plantations PLC has made steady progress whilst navigating a challenging industry environment. We are maturing, with a progress built upon a strong history in tea and underpinned by our core ethos that enshrines pristine ethics and a steadfast commitment to quality and sustainability. CONTENTS 3 45 About this report How we are managed Board of Directors – 46 4 Executive committee and management team – 48 Corporate governance report – 49 Who we are Annual report of the Board of Directors – 59 Report of the Audit Committee – 62 Report of the Remuneration and Nominations 7 Committee – 64 Report of the Related Party Transactions Review Year in review Committee – 65 Highlights – 8 Chairman’s message – 10 Managing Director’s review – 12 67 Financial reports 15 Financial calendar – 67 Statements of Directors’ responsibility – How we do tea 68 Managing Director’s and Deputy General Operating environment – 16 Manager – Finance’s responsibility statement – 69 Stakeholders – 20 Independent Auditor’s Report – 70 Strategy – 22 Statement of financial position –74 Risks and materiality – 25 Statement of income – 75 Value creation model – 26 Statement of comprehensive income – 76 Statement of changes in equity – 77 Statement of cash flows –78 29 Notes to the financial statements –79 Our impact Financial capital – 30 115 Manufactured capital – 31 Supplementary information Intellectual capital – 33 Social and relationship capital – 35 Value added statement – 116 Human capital – 39 Historical financial information – 117 Natural capital – 43 Estate hectarage statement – 120 Crops and yields – 120 Permanent buildings on estates – 121 Shareholders’ and investors’ information – 122 GRI content index – 124 Glossary – 129 Notice of meeting – 130 Form of proxy – Enclosed 2 Hatton Plantations PLC Annual Report 2018/19 ABOUT THIS REPORT This is Hatton Plantations PLC’s (HPL) second Annual Report, For governance-related matters, where applicable, which has been prepared to provide all stakeholders with a we voluntarily comply with the Code of Best Practice on balanced assessment of the Company’s ability to create and Corporate Governance issued jointly by The Institute of sustain value in the short-, medium- and long-terms. Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka. The Report also complies with the listing requirements of the Colombo Stock SCOPE AND BOUNDARY Exchange. This Annual Report provides an accurate and balanced review of HPL’s financial, social and environmental KEY CHANGES TO THE STRUCTURE performance within the context of its strategy, risks and opportunities and long-term prospects. The Report covers Reporting principle Improvement the operations of HPL for the year ended March 2019 and where relevant is supported by comparable data relating to Strategic focus and future Strategy linked to internal and the previous period; information pertaining to six months prospects external factors ended 31 March 2018. Unless otherwise mentioned, the Connectivity of Strategy, governance, capitals, and boundary for all material aspects reported in this Report is information future prospects discussed in the the Company. context of the value creation model Stakeholder engagement Greater analysis of stakeholder COMPLIANCE interest and value; Reporting on frequency of engagement The Financial Statements of HPL has been prepared in accordance with the Sri Lanka Accounting and Auditing Comparability More comparable information Standards Act No. 15 of 1995 and the Sri Lanka Accounting provided Standards which comprise Sri Lanka Financial Reporting Reliability Information is carefully scrutinised Standards (SLFRS) and Sri Lanka Accounting Standards to ensure reliability (LKAS). The Company has followed additional guidelines as established by the Companies Act No. 07 of 2007. QUERIES In particular, we have drawn on concepts, principles and guidance, of International Integrated Reporting Council We welcome your comments or inquiries on this Annual (IIRC), Global Reporting Initiative (GRI) Sustainability Report 2018/19. Please contact: Reporting Guidelines G4, where we have opted for the “In accordance – Core” option, the United Nations Mr Prasanna Pahalagamage Sustainable Development Goals (UNSDG) and the Smart Deputy General Manager – Finance Integrated Reporting MethodologyTM. Phone: +94 77 145 3142/+94 11 470 2404 email: [email protected] OVERALL REPORT ARCHITECTURE Companies Act No. 07 of 2007 Integrated Reporting Framework Financial Statements Economic, Social and Financial Reporting Corporate Governance Sri Lanka GRI G4 Guidelines Code of Best Practice on Accounting and Auditing “In Accordance core” Corporate Standards Act No. 15 of 1995 Governance Sri Lanka Financial Reporting Standards Listing Requirement of the Colombo Stock Exchange Hatton Plantations PLC Annual Report 2018/19 3 ABOUT THIS report ARE WE WHO HO W WE ARE 4 Hatton Plantations PLC Annual Report 2018/19 Our journey began in 1992 with the privatisation of orthodox and CTC (Cut, Tear, Curl) manufacturing methods 22 regional plantation companies in Sri Lanka by the supported by versatile production facilities, we produce ARE Government, paving the path for a strategic joint venture high and medium-grown teas in the key regions of Hatton, between Watawala Plantations PLC and Tata Tea Ltd. of Watawala, and Lindula. As a stand-alone company, we WE India. The joint venture continued up to 1996 until Estate produce over thirty-five grades of tea, combining sustainable Management Services (Pvt) Ltd. took over the steering agricultural practices and balanced nutrient intake to of Watawala Plantations. In 2017, the entity underwent a harness the best in quality parameters. Our modernised and HO demerger leading to the floating of a new entity known as well-equipped factories are capable of extracting the most in W Hatton Plantations PLC (HPL). HPL was incorporated on liquoring characteristics whilst retaining all of its flavour and 14 September 2017 as a part of the arrangement quality considerations. Approximately, 99% is auctioned at proceedings carried out by Watawala Plantations PLC the Colombo Tea Auction and the balance sold directly (WATA) under the Section 256 of the Companies to buyers. Act No. 07 of 2007 to carry out the existing upcountry tea business of Watawala Plantations. We continue to build upon the long-standing legacy of excellence spun off from our pursuit of excellence, and the Since the demerger from Watawala Plantations PLC in 2017, continued quest to become the most respected producer we have consolidated our position as one of the largest tea of tea in Sri Lanka. Endowed with a strong capital base, our plantation companies in Sri Lanka, with a strong emphasis expertise, innovativeness and the commitment to uphold on innovation and value addition. We have continued to ethical business values and practices have been the critical build upon the established and proud reputation of being a success factors that propel us to focus on driving higher prime producer of pure Ceylon tea and continue to set new crop volumes and yields with attention to detail to produce standards in the industry. highest quality tea for domestic and international markets. Our 13 estates with a combined area of 7,206 ha are located over 4,800 feet above sea level in the central hills of Sri Lanka. We own 12 tea processing factories with a combined green leaf capacity of 158,500 kg. Using both Pussellawa Nawalapitiya Ramboda Kotmale Ginigathena Watagoda Watawala Nanuoya Rosella Lindula 102 km Hatton Keppetipola Colombo Nuwara Eliya Maskeliya Galle Nuwara Eliya District Hatton Plantations PLC Annual Report 2018/19 5 ARE WE HO W OUR FUTURE “To be the most admired Plantation Company in Sri Lanka” OUR PURPOSE “Growing Hatton Plantations to be the Industry Leader” OUR VALUES Our Approach Our Heritage Our Solutions Our Promise Integrity Perseverance Innovation Responsibility Honest, open Never give up Improvement Accountable to all and transparent through continuous stakeholders change TRUST The foundation upon which we grow 6 Hatton Plantations PLC Annual Report 2018/19 ABOUT THIS report REVIEW YEAR IN IN REVIEW YEAR Hatton Plantations PLC Annual Report 2018/19 7 HIGHLIGHTS EARNINGS HIGHLIGHTS AND RATIOS Revenue LKR Mn 4,040 REVIEW Results from operating activities LKR Mn (55) (Loss) Profit before tax LKR Mn (118) IN (Loss) Profit after tax LKR Mn (113) Dividends LKR Mn 59 YEAR Basic (loss)/earnings per share LKR (0.48) BALANCE SHEET HIGHLIGHTS AND RATIOS Total assets LKR Mn 3,421.4 Total debt LKR Mn 147 Net debt (Cash) LKR Mn (38) Total shareholders’ funds LKR Mn 1,564 Net assets per share LKR 6.6 Debt/equity % 9 Debt/total assets % 4 MARKET/SHAREHOLDER INFORMATION Market price of share as at 31 March (actual) LKR 6.70 Market capitalisation as at 31 March LKR Mn 1,586 Enterprise value LKR Mn 1.7 Dividend per share LKR/share 0.25 Dividend yield % 3.7 8 Hatton Plantations PLC Annual Report 2018/19 SOCIAL AND RELATIONSHIP CAPITAL 100+ 100% LKR 59 Mn 14,000+ LKR 135.8 Mn REVIEW local purchases dividends to residents benefited invested in community IN smallholders from local shareholders for from development development and supported suppliers FY 2018/19 support worker welfare YEAR MANUFACTURED CAPITAL NATURAL CAPITAL LKR 1,042 Mn 4,109 ha LKR 620 Mn property/plant and tea cultivated value of bearer equipment value extent plants on estate 103,095 kg 50 ha of green leaf processed