For over a century DCSL, has been renowned for their exquisitely distilled, fine blended spirits. This dedication to quality coupled with our dynamic and definitive corporate culture has propelled us to the summit of our industry and amongst the foremost blue chip companies in Sri Lanka.
We are determined not to rest on our laurels, and will strive to improve and refine our products to compete with the best in the world.
DCSL; Determined, Dynamic & Definitive. CONTENTS
Company Overview Financial Highlights 3 Historical Perspective 4 The Story of Arrack 6 Chairman’s Statement 16 Board of Directors 20 DCSL Management 24
Governance Reports Corporate Governance 28 Enterprise Risk Management 40 Board Audit Committee Report 44 Remuneration Committee Report 46 Board Related Party Transactions 47 Review Committee Annual Report of the Board of 48 Directors
Financial Reports 52 Statement of Directors Responsibility 53 Independent Auditors’ Report 56 Statement of Profit or Loss and Other Comprehensive Income 57 Statement of Financial Position 58 Statement of Changes in Equity 59 Statement of Cash Flow 60 Notes to the Financial Statements 91 Statement of Value Added 91 Details of Real Estate 92 Shareholder Information 93 Ten Year Summary
Suplimentary Information 94 DCSL Management Team and Unit Management Team 96 Notice of Meeting 97 Form of Proxy 99 Attendance Slip 100 Notes
DISTILLERIES COMPANY OF SRI LANKA PLC |
Financial Highlights
2018 2017
SUMMARY OF RESULTS Gross Revenue Rs. Mn 90,387 90,273 Excise Duty Rs. Mn 61,204 63,254 Net Revenue Rs. Mn 29,183 27,019 Profit After Tax Rs. Mn 4,349 4,975 Shareholders' Funds Rs. Mn 5,713 2,235 Working Capital Rs. Mn (1,422) (6,826) Total Assets Rs. Mn 24,118 22,852 Staff Cost Rs. Mn 1,610 1,552 No. of Employees 1,060 1,121
PER SHARE Basic Earnings Rs. 5.64 (233.42) Net Assets Rs. 1.24 7.45 Dividends Rs. 0.67 1.75 Market Price High Rs. -** 294.00 Low Rs. -** 208.00 Year End Rs. -** -**
RATIOS Price Earnings times -** -** Return on Shareholders' Funds % 76.60 222.61 Current Ratio times 0.91 0.65 Interest Cover times 10 6 Stock Turnover (Finished Goods) days 27 17 Debt to Equity % 93 328 Debt to Total Assets % 22.02 32.12 Dividend Payout % 70.50 -** Dividend Yield % -** -**
**Market values were not available since the shares of DCSL PLC were not trading from 30 September 2016 to 31 March 2018.
Annual Report 2017/18 3 | DISTILLERIES COMPANY OF SRI LANKA PLC
Historical Perspective
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Touching lives for over a century
Present in Sri Lanka for over a century The Distilleries Company of Sri Lanka PLC (DCSL), is among the most profitable and well respected corporate entities in the country. Its proud tradition, august heritage and proven credentials have made the Company a beacon of inspiration for others. Over the past 100 years, our corporate DNA has been strengthened refinement of product quality. Plants areas are able to enjoy the best DCSL with our values of tradition, quality, and machinery were upgraded to products, delivered island wide. innovation, resilience and the modern international standards and determination to succeed. DCSL’s new technology developed by world These improvements contributed roots can be traced back to 1913, renowned experts was introduced. towards higher production efficiencies when the Excise Department of Large investments have also been across the supply chain. Employees Ceylon, which was initially created as made in Research and Development are regularly trained in the best the enforcement authority to distribute (R&D) and in upgrading laboratories. international practices, in locations and sell liquor products in Sri Lanka, The best experts in the spirit industry famed for high quality alcohol, such branched out into the distillation and were tasked with ensuring that all as France, Scotland and Ireland. Over manufacture of liquor products. In the spirits marketed by DCSL were the years, we have not only grown to 1974, the State Distilleries Corporation up to international quality standards. become Sri Lanka’s largest distiller, was incorporated by statute, to take These improvements have equipped but have also been recognised as a over this venture, while the Excise the Company with top of the line leading corporation with the highest Department rearranged its operations facilities enabling it to produce quality standards. Despite these to function as the monitoring body. beverages, which are world class. achievements and our strong position of business leadership, we continue Thus, DCSL has the distinction Furthermore, storage facilities and to look for ways to improve and of being the pioneer distiller in Sri grow. Since 1992, the Company has Lanka. In 1989, under a government expanded production and diversified policy decision, the State Distilleries Today, we are present in into other industries now under the Corporation was converted into a all parts of the country, umbrella of Melstacorp. limited liability company. This transfer operating under the principle of ownership took place at the Today, we are present in all parts of the Colombo Stock Exchange (CSE) in of providing the highest country, operating under the principle 1992, making it the largest transaction of providing the highest standard of in the history of the CSE at that time. standard of products to the products to the people. We aim to expand our presence further into the Under new private management, people. global market and in doing so, render the company entered an era of our brand internationally ubiquitous. modernization that encompassed product distribution systems have The newly installed, ultra-modern, the upgrading of machinery and been upgraded to modern standards state-of-the-art, fully automated plant, equipment, the introduction of with fully computerized systems. A will ensure that only products of the modern management, systems fleet of modern vehicles ensure that highest quality reach the consumer. & processes and the continuous even customers in the most remote
Annual Report 2017/18 5 | DISTILLERIES COMPANY OF SRI LANKA PLC
The Story of Arrack
“Sri Lankan coconut arrack is undeniably 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.
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The Sri Lankan flavour that lingers on... old vocation which is culturally renowned distillation process is usually completed The pristine ambrosia-like qualities of and passed down from father to son. within 24 hours. The purified spirit comes Sri Lanka’s unique coconut arrack can Toddy tapping is as much an intricate out with the distinctive flavour of arrack, be traced back thousands of centuries, art as it is a science. Toddy tappers ready to be savoured. The contents of finding mention in early literature – “ … manually extract the toddy from coconut the wooden vats are mixed diligently liquor drawn from the coconut flower”. This trees, which are coupled and girdled every fortnight for better aeration and to renowned beverage is steeped in legend by skilfully rappelling from tree to tree. increase contact with the wood. Herbs and tradition, making it one of the most Coconut sap or toddy is obtained by and spices from ancient recipes are also celebrated offerings from Sri Lanka to the tapping the unopened coconut flower for added at particular stages, to enhance world. its nectar. Thereafter the toddy is collected flavour and mellow the liquor during the in earthenware pots. This toddy when crucial maturation process. The maturation Sri Lankan coconut arrack is undeniably fresh contains much sugar, but yeasts, process is completed after flavour one of the purest naturally derived microscopic vegetable organisms soon enhancing and smoothening, while ageing alcoholic beverages in the world, distilled find their way into it, act on the sugar in the wooden vats. through a natural fermentation process. present and produce alcohol. This process Finally spirits of different ages and flavours Sri Lanka has perfected the technique of of converting the sugar into alcohol is are blended to create the various DCSL making coconut arrack through the years. called fermentation. After a minute filtration brands, all under the careful supervision of Today, it has acquired the perfect balance process, this liquor is poured into massive an experienced connoisseur and Master for the discerning palate and coconut casks made of Halmilla wood and carefully Blender. As the largest coconut arrack arrack reigns as the alcoholic beverage of transported to our factories for distillation. choice in the country. distillery in Sri Lanka, possibly even in the The process of distillation involves two world, this golden-brew remains our pride The initial step in the process of making stages; continuous distillation (patent and flagship product. coconut arrack is toddy tapping, an age- still distillation) and pot distillation. This
Annual Report 2017/18 7 | DISTILLERIES COMPANY OF SRI LANKA PLC
Tradition Served with Pride
Extra Special Arrack A blend of coconut spirits and imported neutral spirits bringing Double Distilled herbal flavours with a distinctively Arrack rich taste and smooth aroma Twice distilled in pot stills and matured slowly in Halmilla vats giving a remarkable taste and aroma
Old Arrack A 100% coconut spirit, refined, aged and matured in Halmilla vats - giving a woody & natural flavour
Very Special Old Arrack A blend of 100% aged coconut spirits, well-matured in Halmilla vats to give a taste of oak
Coconut Arrack Superior blend of mellow 100% coconut arrack full of character and a distinctive flavour stemming from
8 Annual Report 2017/18 the traditional process of maturing DISTILLERIES COMPANY OF SRI LANKA PLC |
White Label Arrack Crystal clear and an absolutely pure blend of coconut arrack and neutral spirits giving a tint of fresh lime with a slight burning sensation on your tongue
Narikela A 100% pure coconut spirit, which brings out the full-bodied taste and aroma of desiccated coconut with a subtle sweetness. Best served as a cocktail mixer
Special Arrack A blend of coconut and neutral Sri Lanka Arrack spirits bringing a distinctively rich A 100% coconut spirit, and smooth flavour matured in Halmilla vats, producing a woody character and exceptional Blue Label Arrack smoothness Finest blend of matured coconut arrack and neutral spirits giving a rich and smooth flavour
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Premium brands from around the world
BURONGA HILL WINCARNIS - TONIC WINE Buronga Hill Estate is First produced in 1887, the flagship brand of the Wincarnis Tonic Wine is a Buronga Hill Winery. Located natural tonic, incorporating in the Sunraysia district of an unique infusion of herbs southern NSW, Buronga Hill and spices. It is also rich in Winery is one of the largest vitamins, especially energy- wineries in Australia, using giving Vitamins. Usually enjoyed the latest technology. straight, Wincarnis Tonic Wine can also be mixed with gin to make a ‘Gin and Win’.
Grand Chais de France Founded in 1979, our family company “Les Grand Chais de France” has built its reputation upon the simple motto… “Des Hommes, des terriors, une passion” As the owners of over 30 domains and chateaux in some of the greatest French Albert Bichot appellations, as well as being an “THE EPIC STORY” OF A influential player in the Bordeaux GREAT HOUSE market for Grand Crus Classe, From 1350, the Bichot family was we hope that our customers established in Burgundy, with a deer will benefit from our 20 years as a symbol. It was only in the XIXth experience in wines and spirits century that the family ventured into the wine business, when Bernard Bichot found in 1831, a wine PASSION POP brokerage. The family heritage has There is nothing serious about this been passed down from father to little number! son until now. Since 1996, Albéric Passion Pop is low in alcohol and Bichot has represented the 6th loaded with soft, approachable generation to run the House. passionfruit sweetness. 10 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
viejo - marchante Navarro López Bodegas was founded in 1904 as a modest family winery by Don Juan Sánchez Megía. The original winery still stands today in the town of Valdepeñas. In 1988, after many successive family generations, the current president - Navarro Doroteo Donado - acquired the winery which now focuses on quality aged wines, from single grape varieties.
MUD HOUSE Our founders set sail to travel the world; only to fall in love DOÑA PAULA - LOS CARDOS with New Zealand. After planting vines they used the Doña Paula is among the local earth to build their home. main Argentinean wineries Two decades on, we continue that export premium to celebrate the spirit of striking wines; 97% of production out and breaking boundaries. is exported to more than 60 countries and the international press has assigned our wines at very high ratings.
CAPE DREAMS - “OUR STORY” The name Cape Dreams reflects our personal aspiration to build an internationally recognized brand whilst making TERRA ANDINA - By Sur Andina a difference. Our objective is to develop and grow Cape From the magnificence of the Andes to the cool waters of the Pacific. Dreams into a brand synonymous with wines of superb Blending grapes from different valleys with different climates and soil quality, offering an enhanced palate experience aimed conditions, for its full advantage of richness and diversity of Chile’s at both emerging and established wine markets. Like the different wine growing regions. Terra Andina is focused on making Rainbow, Cape Dreams is for the world to share. quality wines to capture full potential of Chilean viticulture. Annual Report 2017/18 11 | DISTILLERIES COMPANY OF SRI LANKA PLC
Premium brands from around the world
Caminos - By Sur Andina From the magnificence of the Caminos to the cool waters of the Pacific, Caminos use modern and OLD PULTENEY innovative winemaking Single malt scotch whisky skills to craft premium Pulteney distillery is one of the wines. Blending grapes most northerly distilleries on the from different valleys with Scottish mainland. The extreme different climates and location and unique stills have soil conditions, for its full resulted in a Single Malt Scotch advantage of richness and Whisky that is bursting with the diversity of Chile’s different power and subtlety of the sea. wine growing regions. Caminos is focused on making quality wines to capture full potential of Chilean viticulture.
Echo Falls - PINOT GRIGIO The fresh apple, pear and peach flavors will dance across your tongue, flirting with each and every taste bud along the way. Not literally of course - but SPEYBURN if it was actually dancing, we Single malt scotch whisky think it would dance the Jive; a Carving our own path since 1897 lively drink with exciting flavors! For over 100 years Speyburn Golden straw. Fruity apple, have trusted in their instincts and pear and citrus. challenged whisky norms to create a single malt Scotch worthy of the vibrancy of the Speyside region.
Somerton The Somerton range reflects the bright fruit flavors that are the hallmark of Australia’s sunny climate
12 Annual Report 2017/18 regions at incredible value for money. DISTILLERIES COMPANY OF SRI LANKA PLC |
ELIT & STOLICHNAYA VODKA Since the dawn of the 20th Century, I Have witnessed Great moments of humanity. I have journeyed into space on board soyuz 19 and bound men together in oaths of allegiance and honored their triumphs. I pioneered flavored vodkas in the 60s and have mixed cocktails for the finest actors and the greatest Presidents. I have no official birthday, but for more then 80 years have been produced to the same traditions and highest quality standards.
AGAVITA - TEQUILA Tequila Blanco, or white Tequila, is a Mexican spirit that can be served as a shot or mixed in cocktails. Even though it is colorless, it gives a slight taste of mint and peppery.
12 Year Old Regency (Premium) Left to quietly mature in American ex-bourbon casks for 12 long years, then expertly combined to create this spicy, sweet and distinctively balanced, blended Scotch Whisky that satisfies the most discerning of tastes.
Annual Report 2017/18 13 Argenté The ultimate expression of distinguished taste
As the largest and oldest distiller of
pure coconut arrack in the world,
we have perfected the process of
extraction, distilling and blending
for over a century. Made exclusively
from coconut spirit aged for a
minimum of 20 years, Argenté
Centenary Blend is the result of this
progression. Where the finest raw
materials are transformed by our
master-craftsmen, into a creation
that is the essense of excellence and
an icon of distinguished taste. Our Latest Addition | DISTILLERIES COMPANY OF SRI LANKA PLC
Chairman's Statement
We are happy to note that current market capitalisation of DCSL PLC is approximately Rs. 100 billion which shows that the market has recognized the true value of your company.
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I am pleased to share with you, been collected; the increase of the the company now has, which the company’s annual report and price of basic goods could have enable our customers to enjoy audited financial statements for been mitigated to a great degree products of the highest standard the year ended 31st March 2018. without imposing more burdens on without having any ill-effects. During this period, your company the poor. continued its pursuit of Group Restructure growth and expansion. During the financial year In the face of continuous under consideration, unfair and unethical These efforts have DCSL / Melstacorp practices favouring a few completed the restructure unscrupulous elements, we resulted in the arrangement in the continue to operate in an Group. In March 2018, industry which in years has sophisticated production shares of DCSL have not offered a level playing facilities the company now been given as dividend field. All of these defects, in specie to Melstacorp loopholes, shortcomings posses, which enables shareholders fulfilling and man-made situation our original promise to in the industry have been our customers to enjoy give a special allocation brought to the notice of products of the highest of shares in DCSL PLC. responsible authorities, As a result shares of as well as the shocking standard. DCSL PLC commenced revelations published its trading again in by newspapers of these the Colombo Stock findings of the special Exchange. We are happy to note presidential commission set up by Despite the difficulties we have that current market capitalisation His Excellency the President , have had to encounter from ineffective of DCSL PLC is approximately Rs. not had any effect to date. This regulators, tax-unpaid products 100 billion which shows that the may be because; the very people introduced to the market by who are responsible to take action competitors and politicians with market has recognized the true may be siding with the wrongdoers. vested interests, we continued value of your company. I am very Otherwise such, blatant unethical our forward march. Under our confident that DCSL will grow from practices would not have gone management we have acquired the strength to strength, despite the unchecked and unpunished. As world-class technology & know- obstacles mentioned above. revealed in the Commission these how and adopted best practices practices deprive the State coffers while modernising our distillery and Company’s Performance billions of rupees in revenue. We bottling plant, training our chemists Turnover of the company was Rs. strongly believe that the law of the and production staff to provide 90 billion, while the Profit after Tax land should be applied equally the best products to consumers. for the year was Rs. 4.35 billion. and fairly to all for the good of the These efforts have resulted in the During the year the Company paid nation. Had these defrauded taxes sophisticated production facilities Rs. 64 billion in taxes.
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Chairman's Statement
Continuous Challenges Faced distilled at our own distilleries thereby Cogent evidence has surfaced that When compared with last year we guaranteeing consumers a 100% some unscrupulous manufacturers of have noted a drastic increase in the natural product free from artificial toddy alcohol are offering staggering prices illegal production of liquor. We have containing poisonous substances. to purchase retail licenses with the also observed that a large amount of It is only now the newspapers are sole intention of channelling their non- spirit is being smuggled into the country highlighting this mafia in the toddy trade. invoiced, tax-unpaid liquor through their passing through the customs without We have upgraded our laboratories outlets and thereby evading a colossal payment of taxes by classifying the and also strengthened procedures by amount of tax revenue to State Coffers. product as paint removers, thinner and appointing qualified personnel to inspect This issue has reached unprecedented spirit for eau de cologne etc, depriving every barrel of toddy brought to our level, whereby 6 manufacturers are the State by billions of Rupees. Such distillery, in order to detect any form of currently controlling over 225 retail acts are carried out by powerful people adulteration and extraneous matter it outlets out of approximately 1000 belonging to political groups outlets in the name of their kith (and this is well known in the & kin, thereby defrauding the market) with the connivance of the State of billions of Rupees whilst enforcement authorities who turn Such pricing policies the regulators turn a deaf ear a blind eye and deaf ear. and blind eye. This is about are promoting bootleggers 1/5th of the total licenses. It Our unique and traditional Sri and harming innocent is disheartening to note that Lankan toddy industry which even some officers from the has been passed down from consumer’s health, leading enforcement authority are generation to generation over the operating FL4 licenses using centuries is gradually becoming to the eventual shortening other names to find a market an endangered industry. This for illegal products, and this is sorry state of affairs is the direct of many consumers’ very well known to the Excise result of the rapid increase lifespan. Department. The fact that these of illegal and artificial toddy unscrupulous manufacturers are manufacturers, who aid and paying such staggering prices to abate the moonshine business by obtain a license itself is a proof producing cheap artificial toddy, unfit may contain. We are single handedly of the existence of such illegal trade for human consumption. As a result, nurturing the traditional toddy tapping and indicates how rampant corruption traditional toddy suppliers, who are customs although only a handful of such has spread like a deadly disease unable to compete with such low-cost genuine tappers remain in the industry. in the industry. Although we have artificial toddy, are finding that their rich The toddy industry lacks trained toddy continuously requested the regulator legacy is becoming unsustainable. It is tappers, yet the Department of Excise to rescind the said condition from the saddening that, some of our competitors is not focusing on this issue to help the excise notification whereby excise use artificial toddy to distill spirit thereby industry and to ensure the production of licenses could be transferred to another, bringing various health hazards to genuine coconut toddy. our requests have fallen on deaf ears innocent consumers. The so called “Old to date. Very soon the balance licenses Arrack” in the market is made of artificial The Excise Ordinance which came that are available also will be absorbed toddy and the consumer is unaware into operation on 1st January 1913 is by the unscrupulous manufacturers to of the real situation. We are unable to now 105 years old. It is high time that dispose their illegal products with ease. make the public aware of this danger legislators introduce a practical, new due to the restrictions imposed by the ordinance in place of archaic laws to In the recent past the price of alcohol NATA Act. suit modern day requirements and was increased on two occasions by the make it easier for manufacturers and authorities, making legally produced We are proud to say that DCSL PLC consumers to carry out their day to day arrack beyond the reach of the common is the only company that produces operations as the industry has gone man in the country. Such pricing policies 100% natural coconut arrack using through so many changes since its are promoting bootleggers and harming 100% pure coconut toddy. The toddy is inception. innocent consumer’s health, leading
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to the eventual shortening of many I would also like to thank our valued consumers’ lifespan. shareholders for placing their confidence in the Our Company’s It is high time that the law enforcement strength which lies in the loyalty shown authorities seriously look into the by our customer base and other revelations and shortcomings published stakeholders, who continue to inspire in this annual report and take effective us to retain our position as one of the action for the benefit of the public. We most valuable and respected corporate sincerely hope this is an eye opener entities in the country. and it is our duty to protect the public and our valued consumers from this perilous situation.
Dividend D. H. S. Jayawardena Subsequent to the restructure Chairman / Managing Director your company will continue as a manufacturer of liquor while other 21 August 2018 business activities have been transferred to the holding company, Melstacorp PLC. Therefore the company would now be maintaining a much higher dividend pay-out ratio than the past. The Board has resolved that a minimum of 70% pay-out ratio will be maintained in the future. Accordingly I am pleased to announce that your directors are recommending a Rs. 0.67 per share dividend for the year 2017/18.
Compliance I am pleased to report that the Company has complied with all relevant provisions of the Code of Best Practice of Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission 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 Company against all odds.
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Board of Directors
Mr. D. H. S. Jayawardena Mr. C. R. Jansz Chairman / Managing Director Executive Director
Mr. N. de S. Deva Aditya Capt. K. J. Kahanda (Retd.) Independent Non-Executive Director Executive Director
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Dr. Naomal Balasuriya Mr. Ranjeevan Seevaratnam Independent Non-Executive Director Independent Non-Executive Director
Mr. D. Hasitha S. Jayawardena Ms. V. J. Senaratne Mr. Amitha Gooneratne Non-Independent Non-Executive Director Company Secretary and Chief Legal Officer Alternate Director to N. de S. Deva Aditya
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Board of Directors
the EU-ACP 2004 and the President EU Mr. D. H. S. Jayawardena Mr. C. R. Jansz Chairman / Managing Director Executive Director India Chamber of Commerce from 2005. In 2012 he stood for and came runner Mr. Harry Jayawardena is one the most Mr. Jansz is the Chairman of DFCC Bank up, beating the Liberal candidate into 3rd successful and prominent business PLC. and is a Director of Melstacorp PLC. place to be the President (Speaker) to magnates in Sri Lanka. He was elected and other Companies in the Melstacorp the European Parliament. He was the first Chairman of the DCSL Group in 2006 Group. He is a Director of Lanka Milk Asian to be elected as a Conservative after serving as its Managing Director Foods (CWE) PLC., Lanka Dairies (Pvt) Ltd., and other Companies in the Lanka Member of British Parliament, first Asian for almost two decades. He heads many Milk Foods Group. MP to serve in the British Government successful ventures in diversified fields of as PPS in the Scottish Office and first business. He is the founder Director and He is a former Chairman of Sri Lanka the present Chairman / Managing Director Shippers Council and a former Member Asian born MP to be elected to the of the Stassen Group of Companies. of the National Trade Facilitation European Parliament. He was nominated Committee of Sri Lanka. He has many as a candidate to succeed Kofi Annan as He is the Chairman of Lanka Milk Foods years of experience in logistics and in Secretary General to the UN in 2006. (CWE) PLC., Milford Exports (Ceylon) documentation, insurance, banking and He is a Hon. Ambassador without (Pvt) Ltd., Ceylon Garden Coir (Pvt) Ltd., finance relating to international trade. Ambewela Products (Pvt) Ltd., Ambewela portfolio for Sri Lanka; the first Asian to Mr. Jansz holds a Diploma in Banking and Livestock Co. Ltd., Danish Dairy Products be appointed as Her Majesty’s Deputy Finance from the London Metropolitan Lanka (Pvt) Ltd., Lanka Dairies (Pvt) Ltd., Lord Lieutenant for Greater London, University (Formerly London Guildhall Melstacorp PLC and its subsidiaries; representing The Queen on official University) – UK. He is a Chevening Aitken Spence PLC., Aitken Spence Hotel occasions since 1985; awarded the Scholar and a UN-ESCAP Certified Holding PLC., Balangoda Plantations honour “Viswa Kirthi Sri Lanka Abhimani“ Training Manager on Maritime Transport PLC., Madulsima Plantations PLC., for Shippers. by the Buddhist Clergy for his Services to Browns Beach Hotels PLC., Lanka Bell Sri Lanka and given the Knighthood with Mr. N. de S. Deva Aditya Ltd., Periceyl (Pvt) Ltd., Bogo Power (Pvt) Merit of the Sacred Constantinian Military DL, FRSA Ltd., and Texpro Industries Ltd., Melsta Independent Non-Executive Director Order of St. George for his global work Health (Private) Ltd. on poverty eradication. He is a Fellow of Mr. Niranjan Deva Aditya, is an the Royal Society for Arts, Manufacture He is a former Director of Hatton National Aeronautical Engineer, Scientist and and Commerce (Est:1765). Bank PLC., the largest listed bank in Sri Economist, a Conservative Member of Lanka and former Chairman of Ceylon the European Parliament elected from Capt. K. J. Kahanda (Retd.) Petroleum Corporation and Sri Lankan the SE England. He is the Vice President Executive Director Airlines. of the Development Committee; ECR Captain Kahanda joined the Company Co-ordinator, Chairman of the European Mr. Jayawardena is the Honorary Consul in 1993 as Regional Manager (Central Parliament’s Delegation for Relations with for Denmark and was the only Sri Lankan Region) and was appointed a Director in the Korean Peninsula and Conservative honoured with the prestigious “Knight’s Spokesman for Overseas’ Development December 2006. Being a former officer Cross of Dannebrog’ by Her Majesty, and Co-operation. of the Sri Lanka Army, he spearheaded Queen Margrethe II of Denmark, for his the re-organisation of the operations of He was the Co Leader of the significant contribution to the Danish arts, the Central Region since privatisation. He Parliamentary Delegation to the UN sciences and business life. specialises in logistics, distribution and World Summit and General Assembly He has also been awarded the title, 2006, Chairman Working Group A of security matters, and is also a Director of “Deshamanya” in recognition of his Development Committee overseeing Melstacorp PLC, G4S Security Services services to the Motherland, since Asia, Central Asia and Far East; - Co- (Pvt) Ltd., and Pelwatte Sugar Distilleries November 2005. ordinator Assembly of 79 Parliaments of (Pvt) Ltd., a subsidiary of the Group.
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Mr. Jayawardena has also worked as Dr. Naomal Balasuriya Mr. Amitha Gooneratne MBBS [Sri Lanka], MBA [Sri.J], CIM an Intern at the Clinton Global Initiative FCA (SL), FCA (Eng. & Wales) [UK], MCGP [SL], MSLIM, MIMSL programme (CGI) in New York in 2007. Alternate Director to N. de S. Deva Aditya Independent Non-Executive Director Mr. Ranjeevan Seevaratnam Mr. Amitha Gooneratne has held several Dr. Naomal Balasuriya, a medical doctor FCA (SL), FCA (Eng. & Wales) senior positions at Commercial Bank of Independent Non-Executive Director turned-entrepreneur is internationally Ceylon PLC and served as the Managing Director from 1996 to April 2012. He sought after as a life changing Mr. Ranjeevan Seevaratnam motivational speaker. His professional is a Fellow member of the Institute of was appointed to the Board as expertise ranges from medicine, military, Chartered Accountants, United Kingdom an Independent Non Executive management, marketing, mentoring to and Wales and a Fellow Member of the Director from September 2015. motivational speaking. He holds both Institute of Chartered Accountants, Sri He is a Graduate of University of the Master of Business Administration Lanka. He was the Founder Chairman London in Chemistry, Botany and (MBA) and CIM (UK) qualifications. of the Financial Ombudsman Sri Lanka Zoology. He is a Fellow Member of Having worked in the government sector, (Guarantee) Ltd., and former Chairman Chartered Accountants of England private sector and the Sri Lanka Air of the Sri Lanka Banks’ Association and Wales and Fellow Member of Force as a medical doctor, he now leads (Guarantee Ltd. He was also the Managing Chartered Accountants of Sri Lanka. his entrepreneurial training company, Director of Commercial Development Mr. Seevaratnam was a Senior Partner Success Factory. He is also a Director of Company PLC, a Public Quoted Company of KPMG, Chartered Accountants, for Melstacorp PLC. listed in the CSE and was the Chairman of a period of 30 years, where he was Commercial Insurance Brokers (Pvt) Ltd. Mr. D. Hasitha S. Jayawardena mainly involved with audits of banks, He was also nominated to the Board of BBA (Hons) (UK) financial services and manufacturing SriLankan Airlines during 2002–2004 by Non-Independent Non-Executive Director companies. He was a designated the Government of Sri Lanka. Mr. Hasitha Jayawardena holds banking partner in Sri Lanka. He is also a Non Executive Independent Director On his retirement, Mr. Gooneratne, a Bachelor’s Degree in Business of Melstacorp PLC and a number of assumed duties as Managing Director Administration BBA (Hons) from the of Melstacorp PLC. He is the Chairman Public Quoted Companies. University of Kent in the United Kingdom. of Melsta Regal Finance Limited, Melsta Mr. Jayawardena joined the Stassen Ms. V. J. Senaratne Logistics (Pvt) Limited and Bellvantage Attorney-at-Law, Notary Public, Solicitor Group in February 2013. He is a Director (Pvt) Limited., Board Member of Periceyl (Eng. & Wales) Alternate Director to K. J. (Pvt) Limited, Balangoda Plantation PLC, of Stassen Exports (Pvt) Ltd., Milford Kahanda / Company Secretary and Chief Lanka Bell Limited, Telecom Frontier Exports (Ceylon) (Pvt) Ltd., Stassen Legal Officer International (Pvt) Ltd., Stassen Natural (Pvt) Limited, Bell Solutions (Pvt) Limited, Foods (Pvt) Ltd., Ceylon Garden Coir Ms. Senaratne was appointed as the Timpex (Pvt) Limited, Texpro Industries Company Secretary in 1993. She was Limited, Bogo Power Limited., Continental (Pvt) Ltd., Milford Developers (Pvt) admitted to the Bar in 1977 and was Insurance Limited and Browns Beach Ltd., Stassen Foods (Pvt) Ltd., C. B. D. enrolled as a Solicitor (England & Wales) Hotel PLC., Melsta Health (Private) Exports (Pvt) Ltd., Lanka Milk Foods in June 1990. She also holds the position Ltd., which are subsidiary companies of (CWE) PLC., Lanka Dairies (Pvt) as Company Secretary of Periceyl (Pvt) Melstacorp PLC. Ltd., Ambewela Livestock Company Ltd., and Melsta Health (Private) Ltd. Ltd., Pattipola Livestock Company He is an independent Director of Lanka Ltd., Ambewela Products (Pvt) Ltd., She also currently serves as a director IOC, Teejay Lanka PLC and Commercial Melstacorp PLC., Periceyl (Pvt) Ltd., on the Board of Paradise Resort Development Company Limited. Balangoda Plantations PLC., Madulsima Pasikudah (Pvt) Ltd., Amethyst Leisure He is also the Alternate Director to Mr.N. Plantations PLC., Melsta Health (Private) Limited, DFCC Bank PLC and as an de S. Deva Aditiya on the Board of Ltd., Zahra Exports (Pvt) Ltd. and Mcsen alternate Director of Melstacorp PLC and Distilleries Company of Sri Lanka PLC and Range (Private) Ltd. Distilleries Company of Sri Lanka PLC. Aitken Spence PLC.
Annual Report 2017/18 23 | DISTILLERIES COMPANY OF SRI LANKA PLC
DCSL Management
1 2 3
4 5 6
7 8 9
24 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
10 11
12 13
1 Ms. V. J. Senaratne 6 Premasiri Liyanaarachchi 11 Maj. Gen. Mano Perera (Retd.) Company Secretary & Chief Legal Officer Chief Internal Auditor Head of Operations
2 Nimal Nagahawatte 7 Maj. Roshan Cabraal (Retd.) 12 Roshanth Kumar Perera Head of Finance Head of Northern Region Head of Transport & Logistics
3 S. Rajanathan 8 Col. Ranjith Rupasinghe (Retd.) 13 Lalith Ratnayake Head of Procurement Head of Extra Special Heritage Arena Head of Inventory Management
4 Capt. Ranjith Wettewa SLN (Retd.) 9 Brig. Aruna Wijewickrama (Retd.) Head of Uva Region Head of Southern Region
5 Ms. Gayathri Chakravarthy 10 Capt. Chula Ranasinghe (Retd.) Head of Human Resources Head of Central Region
Annual Report 2017/18 25 | DISTILLERIES COMPANY OF SRI LANKA PLC
Fun and Games DCSL Style!
DCSL Children's Party 2017
ea wor is an essential in redient in our success, as we endeavor shoulder to shoulder hrou hout the DCSL Cric et Cha ionshi year e loyees ta e ti e off 2018 their busy schedule and convene for recreation, enjoy ent, and fellowshi Here are so e hi hli hts fro events ast, showcasin the DCSL fa ily and our essential es rit de cor s
DCSL et-to ether 2017 DCSL Children's Party 2017
DCSL Qui 2018 - unners u - S ooth s Sil
DCSL Children's Party 2017
DCSL et-to ether 2017
26 Annual Report 2017/18 DCSL Qui 2018 - Winner- Da shina Shoorayo DISTILLERIES COMPANY OF SRI LANKA PLC |
DCSL Children's Party 2017
ea wor is an essential in redient in our success, as we endeavor shoulder to shoulder hrou hout the DCSL Cric et Cha ionshi year e loyees ta e ti e off 2018 their busy schedule and convene for recreation, enjoy ent, and fellowshi Here are so e hi hli hts fro events ast, showcasin the DCSL fa ily and our essential es rit de cor s
DCSL et-to ether 2017 DCSL Children's Party 2017
DCSL Qui 2018 - unners u - S ooth s Sil
DCSL Children's Party 2017
DCSL et-to ether 2017
DCSL Qui 2018 - Winner- Da shina Shoorayo Annual Report 2017/18 27 | DISTILLERIES COMPANY OF SRI LANKA PLC
Corporate Governance
Enterprise Governance accountability, transparency and We stringently adhere to and comply sincerity of action. with the mandates of the Colombo Stock Working on an integrated approach for Exchange and Securities & Exchange applying governance throughout the ● Implemented an environment of Commission of Sri Lanka, NATA, Excise organisation, DCSL practices the key responsible and balanced corporate Department, Central Bank of Sri Lanka principle of infusing the tenet that everyone governance that enhances Integrity and the Government Treasury, Institute is responsible for the performance of the and respect for the Company and of Chartered Accountants of Sri Lanka Company, the management of risk and ensures the Company’s stewardship Central Environmental Authority, relevant value creation. We strongly recommend and stability in the industry and market. Ministry and departmental authorisations and commit ourselves to ensuring that and regulations and numerous Codes Enterprise Governance operates through ● Introduced a culture in which introduced by Professional Associations the entire organisation takes people, processes, policy, procedure, and the Chamber of Commerce from ownership for risk, compliance and culture and ethics. time to time. performance. The principles of governance are applied This corporate governance statement We infuse governance tenets that effectively by the Board of Directors defines in detail the structures continue to hold us in high esteem and and are seen in the consistent growth and processes that we use in our as a spearhead among our shareholders, performance of the Company, while organisation to balance the interests of stakeholders and peers. This is further also improving the long term return to our stakeholders, reviewed at regular augmented with our Board’s adherence stakeholders. Beyond the Board, the intervals to ensure that Company’s to the highest standard of corporate application of governance methodologies expectations are met and are aligned behaviour and ethics at all times. To and the integration of governance into with evolving growth strategies. remain at the helm of Sri Lanka’s other organisational functions, we strongly corporate landscape, we realise that we believe that it has significantly benefited The Board of Directors must incorporate new dimensions into the long term performance of DCSL. our core decision-making processes Role of the Board of Directors To further augment our effective and practice due diligence to protect The Board of Directors is responsible to governance strategies, we have the interests of our shareholders, while the Company’s shareholders to ensure implemented the following: maintaining an unrelenting focus on at all times that the activities of the the expectations of other stakeholder Company are conducted to the highest ● Strive to achieve corporate objectives segments. ethical standards and in the best interest of managing strategy, risk and of all stakeholders. compliance to ensure long term DCSL has a strong and sound returns to shareholders and other foundation of sustainability principles that The key responsibilities of the Board are; stakeholders. remain the overarching fundamentals in instituting and maintaining ● To enhance shareholder value. ● Oversee business objectives uncompromising governance practices ● Provide direction and guidance in including management of IT, and principles. The section of the report formulating corporate strategies. sustainability, finance and project details the governance structure and portfolio management to ensure the practices and guidelines DCSL has ● Monitor systems and procedures sustainable consistent results. adopted in ensuring that we remain especially with regard to internal within the parameters of the numerous controls and risk management. ● Board of Directors remain emphatic regulatory and authorised bodies that on due diligence to ensure govern the industry and the Company. ● Approve major investments
Name of Director Status Attendance * D. H. S. Jayawardena Chairman / Managing Director 1/1 C. R. Jansz Executive Director 1/1 N. de S. Deva Aditya Independent Non-Executive Director 1/1 K. J. Kahanda Executive Director 1/1 A. N. Balasuriya Independent Non-Executive Director 1/1 D. Hasitha S. Jayawardena Non-Independent Non-Executive Director 1/1 R. Seevaratnam Independent Non-Executive Director 1/1 *In person or by alternate
28 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
Composition of the Board and D. Hasitha S. Jayawardena may require discussion or resolution. Independence The detailed report of the Audit The designated investor relations officers regularly meet shareholders and The Board of Directors of DCSL Committee is on pages 44 to 45. fund managers to fuel these long term comprises the Chairman / Managing relationship, providing information and Director, two Executive Directors, Remuneration Committee answering any queries. one Non-Independent Non-Executive The Remuneration Committee has two independent Non-Executive Directors Director and Three Independent Non- Apart from personal interaction with and one Non-Independent Non- Executive Directors as given in the table stakeholders, our quarterly financial Executive Director as follows: above. Brief profiles of the Directors are statements and the Annual Report given on pages 22 to 23. A. N. Balasuriya - Chairman offer a comprehensive canvas of the Company’s performance, constituting the The Board considers that three Non- N. de. S. Deva Aditya principal means of communication with Executive Directors are independent D. Hasitha S. Jayawardena the shareholders. in accordance with the criteria detailed within the Listing Rules of the CSE and The report of the Remuneration Internal Controls have submitted signed confirmations in Committee is given on page 46. The Board instills and maintains a strong this regard. Related Party Transactions set of internal controls to safeguard The Board constructed that N. de Review Committee shareholder wealth. The responsibility of S. Deva Aditya who has served on the Board has been clearly stated as one The Related Party Transactions Review the Board continuously for a period where it is in charge of the Company’s Committee is responsible to the Board of exceeding nine (10) years, is determined internal control systems and will Directors comprises of two Independent as an Independent Director after taking regularly review if they are adequately Non-Executive Directors and one Non- into consideration all the relevant safeguarding Company and shareholder Independent Non-Executive Director. circumstances, including the fact that he assets while supplying precise and resides overseas and he is not directly R. Seevaratnam - Chairman timely information for informed decision or indirectly get involved in the day-to- making. The responsibility of the Board A. N. Balasuriya day management of the Company or in covers financial, operational and D. Hasitha S. Jayawardena any of its Subsidiaries, and the Board compliance related activities and risk management. The Audit Committee believes the independence of N. de S. The report of the Related Party reviews and monitors the activities and Deva Aditya is not compromised by virtue Transactions Review Committee is given the findings of the internal audit divisions of him being a Director of Aitken Spence on the page 47. PLC, a related Company. at regular intervals. Investor Relations Meetings and Attendance Going Concern One of the prime fundamentals that After an extensive review of the The attendance of the meetings of the are prevalent and identified with the Company’s corporate plan, budgets, Board during the year is given above: Company’s sustained success and capital expenditure requirements growth has been the close rapport in Board Committees and future cash flows, the Board has investor relations. Given that we are taken a decision to apply the Going Certain responsibilities of the Board have mandated to safeguard and create Concern principle in the preparation of been delegated to the following sub- shareholder wealth and are duty bound the Financial Statements for 2017/18. committees. to share all Company information with Further, the Board is satisfied that the our shareholders at all times in order to Company possesses the necessary Audit Committee nurture sustainable relationships with funds for adequate liquidity and to sustain The Audit Committee comprises three our stakeholders, we foster effective its operations for the foreseeable future. independent Non- Executive Directors dialogue and engagement with the and one Non-Independent Non- relevant stakeholders and the financial The Company’s compliance with the Executive Director as follows; community. We strongly believe CSE Listing Rules and the best practices that it is our strategic management set out in the Code of Best Practice on R. Seevaratnam – Chairman responsibility to maintain an open line of Corporate Governance issued jointly A. N. Balasuriya communication with shareholders and by ICASL and SEC is set out in the N. de S. Deva Aditya address any concerns or issues that following table
Annual Report 2017/18 29 | DISTILLERIES COMPANY OF SRI LANKA PLC
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 29 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 29 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 22 to 23 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 N/A No new Directors appointed Forthwith provide a brief resume of new Directors appointed to during the year. the Board with details specified in 7.10.3(a), (b) and (c) to the 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 46 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 46 The Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and Executive Directors.
30 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
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 29
ii. Statement of Remuneration Policy. Complied Please refer page 46
iii. Aggregated remuneration paid to Executive and Non- Executive Directors. Complied Please refer note 8 to the financial statements
7.10.6 Audit Committee Please refer Audit Committee The Company shall have an Audit Committee. report on page 44 to 45
7.10.6(a) Composition i. Shall comprise of Non-Executive Directors a majority of whom will be Independent. Complied Please refer page 44 ii. One Non-Executive Director shall be appointed as Chairman of the committee. Complied Please refer page 44 iii. Chief Executive Officer and Chief Financial Officer shall attend Committee meetings. Complied Please refer page 44 iv. The Chairman or one member of the Committee should be a member of a professional accounting body. Complied Please refer page 44
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 44 Sri Lanka Accounting Standards. to 45
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 controls and risk management, are adequate to meet the Complied requirements of the Sri Lanka Accounting Standards / IFRS migration.
iv. Assessment of the independence and performance of the entity’s external auditors. Complied v. Make recommendations to the Board pertaining to appointment, re-appointment and removal of external Complied auditors and to approve the remuneration and terms of engagement of the external auditors.
Annual Report 2017/18 31 | DISTILLERIES COMPANY OF SRI LANKA PLC
Corporate Governance
Section Applicable Rule Compliance Details Status
7.10.6(c) Disclosure in Annual Report Complied Please refer Corporate Governance Report on page 29 i. The names of the Directors and Audit Committee report on pages 44 to 45 comprising the Audit Committee.
ii. Basis of the determination of the Complied Independence of the Auditors.
iii. Report by the Audit Committee setting out the manner of Complied compliance by the Company.
9.2.1 & Related Party Transactions Review Complied The functions of the Committee are stated in 9.2.3 Committee. Related Party Transactions Review Committee report in page 47.
9.2.2 Composition of the Related Party Complied Please refer the Related Party Transactions Review Transactions Review Committee. Committee Report on page 47.
9.2.4 Related Party Transactions Review Complied Committee Meetings.
9.3.1 Immediate disclosures. Complied Company’s non-recurrent related party transactions which occurred due to the “Restructure Arrangement” were disclosed to the Colombo Stock Exchange immediately.
9.3.2(a) Disclosure - Non-Recurrent Related Complied Party Transactions.
9.3.2(b) Disclosure - Recurrent Related Party Complied DCSL PLC carries out transactions with its related Transactions. Companies and expected to extend over a period which are carried out on continuous 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 2017/18 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 47.
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 49.
32 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
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 Board consists of members who are qualified and Board of Directors and control the experienced in various fields. Please refer Corporate Company. Governance Report on page 28.
A.1.1 Regular Board meetings and supply of Please refer Corporate Governance Report on page 28. information.
A.1.2 Board should be responsible for Please refer Corporate Governance Report, Report of matters including implementation the Board of Directors and Report of Audit Committee of business strategy, skills and for the details. succession 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 Please refer Report of the Board of country and obtain professional advice Directors on pages 48-50. as and when required.
A.1.4 Access to advice and services of the The Company Secretary position is headed by a Company Secretary. professionally qualified Company Secretary.
A.1.5 Bring Independent judgment on All the Board members actively participate in the various business issues and standards Board meetings by bringing up their own Independent of business conduct. judgment.
A.1.6 Dedication of adequate time and effort. 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. The Directors are provided with training as and when it is required.
Annual Report 2017/18 33 | DISTILLERIES COMPANY OF SRI LANKA PLC
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 _ The positions of Chairman and CEO are CEO. separated.
A.3 Chairman’s role.
A.3.1 The Chairman should ensure Board proceedings are Please refer Corporate Governance conducted in a proper manner. Report on page 28 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 Please refer the Audit Committee report with sufficient financial acumen and knowledge to offer on pages 44-45. 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 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 29
A.5.3 Definition of Independent Directors Please refer Corporate Governance Report on page 29
A.5.4 Declaration of Independent Directors Please refer Corporate Governance Report on page 29
A.5.5 Board determinations on independence or non- Please refer Corporate Governance independence of Non-Executive Directors. Report on page 29
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 Non- N/A N/A Executive Director to be the 'Senior Independent Director' (SID).
34 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
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- Executive Directors only, without the Executive Directors being present.
A.5.10 Where Directors have concerns about the matters of the 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 enable it to discharge its duties.
A.6.2 Timely submission of the minutes, agenda and papers required for the Board Meeting.
A.7 Appointments to the Board
A.7 Formal and transparent procedure for Board Activities of the Nomination Committee appointments. are currently handled by the Board of Directors.
A.7.1 Nomination Committee to make recommendations on new 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 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. No Directors appointed during the year.
A.8 Re-election
A.8/ A.8.1/ Re-election at regular intervals and should be subject to Please refer Annual Report of the A.8.2 election and re-election by shareholders. Directors on page 49.
A.9 Appraisal of Board performance.
A.9.1 The Board should annually appraise itself on its performance in the discharge of its key responsibilities.
A.9.2 The Board should also undertake an annual self- evaluation of its own performance and that of its committees.
Annual Report 2017/18 35 | DISTILLERIES COMPANY OF SRI LANKA PLC
Corporate Governance
Ruling Description of the Ruling Compliance Details Index Status A.9.3 The Board should state how such performance 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 Please refer pages 22 to 23 and Attendance. Corporate Governance Report on page 28.
A. 11 Appraisal of the Chief Executive Officer
A.11.1/ Appraisal of the CEO against the set strategic targets 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 Please refer Remuneration Committee Committee. Report on 46.
B.1.2 Remuneration Committee should consist exclusively of Non-Executive Directors.
B.1.3 The Chairman and members of the Remuneration Committee should be listed in the Annual Report each year.
B.1.4 Determination of the remuneration of Non-Executive Directors.
B.1.5 The Remuneration Committee should consult the 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 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
B.2.7/ Compensation commitments in the event of early B.2.8 termination of the Directors.
B.2.9 Level of remuneration of Non-Executive Directors.
B.3 Disclosure of Remuneration
B.3/B.3.1 Disclosure of remuneration policy and aggregate Please refer Remuneration Committee remuneration. Report on 46 and note 8 of the financial statements.
36 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
Ruling Description of the Ruling Compliance Details Index Status C. Relations with Shareholders
C.1 Constructive use of the Annual General Meeting (AGM) 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
C.1.2 Separate resolution to be proposed for each item
C.1.3 Heads of Board sub-committees to be available to answer queries
C.1.4 Notice of Annual General Meeting to be sent to Please refer the page 96 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 meetings to be informed
C.2 Communication with Shareholders
C.2.1 Channel to reach all shareholders to disseminate timely information
C.2.2/ Policy and methodology of communication with C.2.7 shareholders and implementation
C.3 Major and material transactions including major related party transactions
C.3.1 Disclosure of all material facts involving all material Please refer note 25 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 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 Please refer Annual Report of the not engaged in any activities, which contravene laws Directors on pages 48-50. and regulations, declaration of all material interests in contracts, equitable treatment of shareholders and going concern with supporting assumptions or qualifications as necessary
Annual Report 2017/18 37 | DISTILLERIES COMPANY OF SRI LANKA PLC
Corporate Governance
Ruling Description of the Ruling Compliance Details Index Status
D.1.3 Statement of Directors Responsibility Please refer the Statement of Directors Responsibility on Page 52.
D.1.4 Management Discussion and Analysis Please refer Chairman's Statement on page 16.
D.1.5 The Directors should report that the business is a going Please refer Annual Report of the Board concern, with supporting assumptions or qualifications as of Directors on pages 48-50. necessary
D.1.6 Remedial action at EGM if net assets fall below 50% of N/A value of shareholders’ funds
D.1.7 Disclosure of Related Party Transactions Please refer Note 25 to the Financial Statements.
D.2 Internal Control
D.2.1 Annual review of effectiveness of system of Internal Please refer Audit Committee Report on Control and report to shareholders as required page 44 and Annual Report of the Board of Directors on pages 48-50.
D.2.2 Internal Audit Function
D.2.3/ Maintaining a sound system of internal control D.2.4
D.3 Audit Committee
D.3.1 The Audit Committee should be comprised of a Please refer Audit Committee Report on minimum of two Independent Non-Executive Directors page 44. or exclusively 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
D.3.3 The Audit Committee to have written terms of reference covering the salient aspects as stipulated in the section
D.3.4 Disclosure of Audit Committee membership
38 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
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 Please refer Corporate Governance an affirmative declaration that the Board of Directors Report from pages 28 to 39 abide by such Code
D.4.2 The Chairman must certify that he/she is not aware of any 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 Please refer Corporate Governance Report a Corporate Governance Report Report from pages 28 to 39
E. Institutional Investors
E.1 Shareholder Voting
E.1.1 Conducting regular and structured dialogue with Please refer Corporate Governance shareholders based on a mutual understanding of Report from page 28 objectives
E.2 Evaluation of Governance Disclosures
E.2. When evaluating Company’s governance arrangements, Please refer Corporate Governance particularly those relating to Board structure and Report from page 28 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 Company 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 participate in General Meetings of Company and exercise their voting rights
G Sustainability Reporting
G.1/ Disclosure on adherence to sustainability principles Please refer Annual Report of the Board G.1.7 of Directors on pages 48-50.
Annual Report 2017/18 39 | DISTILLERIES COMPANY OF SRI LANKA PLC
Enterprise Risk Management
Undoubtedly, there is risk in today’s such exposure. This would therefore risk management to support a strong volatile and uncertain business involve the implementation of numerous governance framework, ensuring that environment, which demands policies,procedures and practices shareholder wealth is safeguarded from increased transparency within an that work in conjunction to identifying, all the possible risk elements. organisation’s risk profile. There are analysing, evaluating, monitoring A dedicated team has been established vulnerabilities,probabilities, threats and and prioritising risks, which will follow to assist the Board in reviewing risk weaknesses that must be addressed the application of coordinated and factors at regular intervals. Evaluation to ensure that risk in any enterprise economical solutions that minimise meetings are held to ensure that the is mitigated. This greater emphasis on the probability and impact of identified focus from effective risk coverage risk and risk management also prompts vulnerabilities. Once identified, remains strong and concentrated. The greater penalties on entities that do elimination, reduction, transfer and Board is kept updated on the progress not or fail to manage key risks, which retention are the broad risk management and its opinion sought for mitigating any naturally permeates to organisations strategies employed across DCSL. challenges that may emerge. being more cognisant of identifying Changes in Risk Profile and assessing risks. In this backdrop, Risk Management Framework it is also increasingly important that Given the range of industry, geographic The Company remains committed to once these risks are identified and locales and market segments that increasing shareholder value within a assessed, they are managed with pre- our business spans, which we have carefully designed risk management defined tolerances. Any entity faces embarked upon provides a prudent framework. An effective risk myriad risks, from well known risks pathway that would signal positive management framework enables us to that are inherent and characteristic correlation between business and prioritise and allocate resources against of the business to unknown risks that environmental risks, while on the those risks that underscore the ongoing may emerge or are just emerging. Risk converse, exposing the Company to sustainability of the organisation. resilient organisations must objectively a wider spread of risks, as well as Our systematic policies help us to assess their existing risk management opportunities. identify and uncover risks and help capabilities, evaluate their organisational This therefore prompts the DCSL us to be cognisant of the same. This culture with regard to risk, performance Board to make risk assessment and preparedness builds the resilience of the and reward and implement sustainable identification of mitigating activities a organisation and allows us to establish risk management practices. priority and pivotal in achieving the procedures for risk mitigation. In the current market context, risk is Group’s strategic objectives. The Board The principal risks in achieving the DCSL defined as the probability or threat is tasked with an overall responsibility objectives of enhancing shareholder of a liability, loss or other negative for monitoring risks and gaining value and safeguarding the Company’s occurrence, caused by external or assurance for managing these risks at assets have been identified as set out internal vulnerabilities which would an acceptable level. overleaf. The nature and the scope of affect the desired objectives of the Strategic Action Plan risks are subject to change and not all of organisation. This also means that the factors listed, are within the control stakeholder expectations must be Board oversight coupled with a strong of your Company. It should be noted worked into the organisation’s risk organisational ethic is the cornerstone of that the other factors besides those management strategy. Vulnerabilities DCSL risk framework. listed may affect the performance of the could mean exposure that could trigger The Board remains acutely aware that business, although we do reiterate, that an adverse outcome and therefore, to generate business value it must we remain very vigilant to both internal prevent the achievement of Company manage and oversee all possible risks and external factors that could prompt objectives. that the business or external factors risk in any form and therefore, are able The process of risk management at could impose on the profitability of the to, without delay, implement strategies DCSL involves analysing exposure Company, while in tandem, protecting to prevent, minimise or mitigate those to risks, by identifying vulnerabilities and enhancing shareholder wealth. ensuing risks. and their probability of occurrence, The DCSL Board is committed to which determines the way we handle deploying the highest standards of
40 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
DCSL risk management framework takes into account the range of risks to be managed, the systems and processes in place to deal with these risks and the chain of responsibility within the organisation to monitor the effectiveness of the mitigation measures.
Risk & Implication
Credit Risk & Implication Mitigation Strategies: This risk ensues when a DCSL customer is unable to meet ● Measure, monitor and manage credit risk for each borrower his 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 86 to 90. Legal and Regulatory Risk & Implication Mitigation Strategies Risks arising from non conformance to statutory and ● Established a dedicated unit to keep abreast of all policy regulatory requirements remain a reality due to the changes, to manage risk and ensure adherence to all possibilities of changes to regulations and policies being regulations sudden or constant. It also increases costs and liabilities due to these periodic regulatory changes. The nature of ● Recruitment of ex-regulators to senior positions within our liquor business continue to be subjected to a steady the Company with an objective to enhance regulatory stream of changes in regulations and extensive compliance awareness and increase 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 Company handles significant investments which require ● The Chairman / Managing Director is tasked with tracking smooth pre-study, monitoring and control. In this regard, returns on investments with the assistance of the Head of there is stringent conformance by the Board in practicing due Finance and Group Financial Controller diligence. ● 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 migration of skilled workers, which is a phenomenon across ● Skills upgrading most industry sectors, has created a brain-drain and the ● Professional growth avenues Company remains at risk of losing key personnel to better job prospects overseas. ● Performance-based reward systems
● Best practices being introduced and upgraded continually
● Measures taken to retain and minimise casual / temporary labour turnover.
Annual Report 2017/18 41 | DISTILLERIES COMPANY OF SRI LANKA PLC
Enterprise Risk Management
Risk & Implication
Operational Risk & Implication Mitigation Strategies Operational risk is the risk of loss resulting from inadequate ● A structured internal control framework implemented or failed internal processes, people and systems or from works through a state of the art MIS system, internal audit external events. The nature of our business renders us mechanism and insurance policies vulnerable to several common operational risks including fraud, human error, natural disasters, loss of data and ● A comprehensive system established to ensure that any unrequited disclosure of sensitive information. loss is communicated to all related parties and across the 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 86 to 90. 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 or the world which would cascade to negatively impacting markets. Unrest of any kind could affect investor attitudes towards the markets in general, leading to disruption of business. Continuity of a cohesive policy towards local business is a key element here. Technology Risk & Implication Mitigation Strategies Stemming from the failure of the Company’s ICT systems ● Implementation of stringent barriers including password where hardware, software and communications systems may protection and restricted access, stringent user guidelines, have breakdowns, halts and herald lack of recovery, as a contingency plans and physical security measures closely business that leverages strategically on ICT systems, we are monitored by the Central IT Unit. very much aware of the potentiality of risk and the cascading negativities that could result to both business and profitability ● Comprehensive backup and recovery systems in place due to Technology Risk. The Group has identified system failures and theft of information as factors that can cause ● A robust ERP system is deployed in the Company. Phased significant levels of operational, reputational and financial loss implementation of same across the divisions of DCSL. to the Company.
42 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
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 products. ● Remain emphatic on safety, health and environmental 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 foreign currency rates with our bankers portfolio. ● Monitoring local and international events and news related to economics which can impact to exchange rates
Please refer financial risk management note on pages 86-90. Cheaper Product, Counterfeiting and Unethical Mitigation Strategies Competition Risk & Implication An increase in the import and in some cases smuggling ● Ensuring our products are competitively priced and continue and counterfeit of cheaper products that compete directly to retain the highest standards of quality in order to drive a with our product portfolio could create an impact on our loyal consumer base who disregard cheaper options locally manufactured products, leading our products to be 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
Annual Report 2017/18 43 | DISTILLERIES COMPANY OF SRI LANKA PLC
Board Audit Committee Report
Composition information to the management, regulatory authorities and shareholders in accordance with the financial reporting The Board Audit Committee appointed by and responsible to standards of the Institute of Chartered Accountants of the Board of Directors is made up of three Independent Non- Sri Lanka, Companies Act No: 07 of 2007, the Sri Lanka Executive Directors. The Chairman of the Audit Committee is Accounting and Auditing Standards and the Continuing Listing Mr. R. Seevaratnam who is a fellow member of the Chartered Rules of the Colombo Stock Exchange. Accountants of England & Wales. The other members of the Audit Committee comprise ● Assessing the independence and monitoring the performance of external auditors. Dr. A. N. Balasuriya, Independent Non-Executive Director, Mr. N. de S. Deva Aditya Independent Non Executive Director ● Ensuring the Company’s internal control and risk Mr. D. Hasitha S. Jayawardena, Non-Independent Non- management process operates efficiently and effectively. Executive Director. ● Ensure compliance with applicable laws, regulations and policies of Company. A brief profile of each member is given on pages 22 to 23. Ms.N. C. Gunawardena functions as the Secretary to the Audit ● Assess the Company’s ability to continue as a going Committee. concern in the foreseen future.
Meetings Internal Audit The internal audit function of the Company was carried out The Board Audit Committee met four (4) times during the year. by the Internal Audit Division. The Committee reviewed the Mr. N. de S. Deva Aditya could not attend any meetings during effectiveness of the internal audit plan to ensure that it was the year, due to his engagements abroad. Nevertheless, Mr. designed to provide reasonable assurance that the financial Deva Aditya was represented at all meeting by his alternate reporting system adopted by the Company can be relied and was kept informed of all the proceedings of the Audit upon in the preparation and presentation of the Financial Committee and his opinion was sought on important matters Statements. The Committee also reviewed the findings of the through his alternate on the Board. The attendance of the Internal Auditors and their recommendations together with other members at these meetings is as follows: the management responses and regularly followed up the Mr. R. Seevaratnam 4/4 progress of the implementation of such recommendations in Dr. A. N. Balasuriya 4/4 order to enhance the overall control environment. Mr. D. Hasitha S. Jayawardena 4/4 External Audit The Group Financial Controller, Head of Finance and Chief The Audit Committee met with the External Auditors to Internal Auditor also attended these meetings by invitation discuss the scope and the audit strategy. The Committee when needed. also reviewed the Report of the Auditors & Management Letters issued by them on separate occasions to ensure that Terms of Reference no limitations were placed on their independence of work The Board Audit Committee Charter approved and adopted and conduct of the audit. The Committee carried out an by the Board clearly sets out the terms of reference governing annual evaluation of the External Auditors to establish their the Audit Committee ensuring highest compliance with the independence and objectivity and also obtained a written Corporate Governance Rules applicable to Listed Companies declaration from the Auditors in this regard. The Committee in accordance with the Rules of the CSE and the Code of Best stipulated that the Lead Audit Partner is rotated every seven Practice on Corporate Governance. years. The Audit Committee recommended to the Board of Directors that Messrs. KPMG be reappointed as Auditors for Role of the Board Audit Committee the financial year ending 31 March 2019. The Board Audit Committee in its role assists the Board in fulfilling their responsibility with regard to:
Ensuring the integrity of the statements of the Company and that good financial reporting systems are in place and is managed in order to give accurate, appropriate and timely
44 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
Compliance with Laws and Regulations The Committee reviewed the quarterly compliance reports submitted by the relevant officers to ensure that the Company complied with all statutory requirements.
Conclusion The Audit Committee is satisfied that the Company’s accounting policies, operational controls and risk management processes provide reasonable assurance that the affairs of the Company are managed in accordance with Company policies and that Company assets are properly accounted for and adequately safeguarded.
R. Seevaratnam Chairman Audit Committee
21 August 2018
Annual Report 2017/18 45 | DISTILLERIES COMPANY OF SRI LANKA PLC
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, and Dr. Naomal Balasuriya who chairs the Committee and one Non-Independent Non-Executive Director Mr. D. Hasitha S. Jayawardena.
Brief profiles of these Directors are given on pages 22 to 23. Ms.N.C.Goonawardena, 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.
Remuneration policy of the Company is based on evaluation of personnel on eight criteria. Annual assessment is carried out and increments and incentives are awarded based on the rating / ranking of each individuals.
The Chairman / Managing Director who is responsible for the overall management of the Company assists the Committee.
Dr. Naomal Balasuriya Chairman Remuneration Committee
21 August 2018
46 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
Board Related Party Transactions Review Committee Composition Disclosures The Related Party Transactions Review Committee is As per the existing practice, related party transactions are responsible to the Board of Directors and comprises of disclosed to the stakeholders through the Company’s Financial two Independent Non-Executive Directors and one Non- Statements and in order to comply with the rules set out in Independent Non-Executive Director. The Chairman of the Appendix 9A of the CSE Listing Rules. The Committee will Related Party Review Committee is Mr. R. Seevaratnam, a establish its functions with a view of further strengthening the Fellow of the Institute of Chartered Accountants of England internal procedures and policies with the requirements thereof & Wales. The other members of the Committee comprise of and relevant disclosures will be made in a timely and detailed Dr. A. N. Balasuriya, Independent Non Executive Director, manner. Mr.D. Hasitha S. Jayawardena, Non-Independent Non- Executive Director. Related party transactions entered into without pre-approval of the Committee, shall not be deemed to violate the Policy, or be A brief profile of each member is given on pages 22 to 23. invalid or unenforceable, so long as the transaction is brought Ms.N. C. Goonawardena functions as the secreting to this to the notice of the committee as promptly as reasonably committee. The Group Financial Controller and Head of practical, after it is entered into or after it becomes reasonably Finance also attended these meetings by invitation when evident that the transaction is covered by the Policy. needed.
Purpose of the Committee The purpose of the Committee as set out in Appendix 9A R. Seevaratnam of the CSE Listing Rules is to review all Related Party Chairman Transactions except for transactions set out in Rule 9.5, either Related Party Transactions Review Committee prior to the transaction being entered into or, if the transaction is expressed to be conditional on such review, prior to 21 August 2018 completion of the transaction.
Meetings The Committee has reviewed the transactions in respect of the financial year 2017/18 as required by the applicable rules / regulations and process has been set in place to facilitate compliance in future.
Annual Report 2017/18 47 | DISTILLERIES COMPANY OF SRI LANKA PLC
Annual Report of the Board of Directors
Board of Directors of Distilleries Company of Sri Lanka PLC Audit Report has pleasure in presenting the 28th Annual Report and the The Auditor’s Report on the Financial Statements of the Audited Financial Statements of the Company and the Group Company is given on page 53 to 55. for the financial year ended 31 March 2018.The details set out herein provide the pertinent information requested Accounting Policies under Section 168 of the Companies Act No. 07 of 2007, the The Financial Statements have been prepared in accordance Colombo Stock Exchange Listing Rules and the recommended with the Sri Lanka Accounting Standards (SLFRSs/LKASs). best practices on Corporate Governance. The accounting policies adopted in the preparation and Principal Activities presentation of the Financial Statements are given on pages 60 to 66. There were no changes in the accounting policies The principal activities of Distilleries Company of Sri Lanka PLC adopted by the Company during the year under review. are distillation, manufacture and distribution of liquor products. Investments Business Review Total investments of the Company amounted to Rs.3,515 Mn A review of the Company’s business, providing a (2016/17 - Rs.4,223 Mn). The details of the investments are comprehensive analysis of the financial and operational given in Note 14 to the Financial Statements. performance along with future trends and business development activities are described in the ‘Chairman’s Property, Plant and Equipment Statement’ section of the Annual Report. The net book value of property, plant and equipment of the Group Restructure Company as at 31 March 2018 was Rs.5,796 Mn (2016/17 – Rs.6,214 Mn). Consequent to the restructure arrangement of the Group in the year 2016, DCSL PLC became a standalone liquor company, Total capital expenditure during the year for acquisition of without any substantial investments in non-liquor sectors. property, plant and equipment by the Company amounted to In February 2018 DCSL PLC subdivided its 300,000,000 Rs.138 Mn (2016/17 – Rs.135 Mn). ordinary shares into ten (10) shares without any change to the stated capital of the company and leaving unaffected the The details of property, plant and equipment are given in Note relative voting and distribution rights of the holders of the 11 to the Financial Statements. same shares. Further, Company was recapitalized with Rs. 20,000 Mn by way of a private placement with Melstacorp Stated Capital and Reserves PLC. A capital reduction was followed to partially set off The Stated Capital of the Company as at 31 March 2018 the negative retained earnings position which was a result was Rs.3,000 Mn consisting of 4,600 Mn Ordinary Shares. of aforementioned restructure. In March 2018 the parent During the year 300 Mn ordinary shares were subdivided to Melstacorp PLC distributed shares of DCSL PLC as dividend 3,000 Mn shares and further new ordinary shares of 1,600 Mn in specie to its shareholders in order to restore the public were issued for a consideration of Rs.20,000 Bn by way of a float of DCSL PLC. This exercise has increased the public private placement to parent Melstacorp PLC. At the same time float to 3.256%. The holding company intends to reduce its company carried out a capital reduction exercise by Rs.17,300 holding in DCSL PLC to comply with the minimum public float Mn in order to set of the negative retained earnings. The requirements stipulated by the Colombo Stock Exchange. total Company Reserves as at 31 March 2018 amounted Results and Appropriations to Rs.3,181 Mn (2016/17 – Rs.11,726 Mn) comprising of Capital Reserves of Rs.1,209 Mn (2016/17 – Rs.1,805 Mn) The gross turnover of the Company in the year under review and Revenue Reserves & Retained Earnings of Rs.1,503 amounted to Rs. 90,387 Mn (2016/17 – Rs. 90,273 Mn). The Mn (2016/17 - Rs. (19,870) Mn) the movement of which is profit after tax was Rs. 4,350 Mn (2016/17 – Rs. 4,975 Mn). disclosed in the Statement of Changes in Equity. The Board of Directors recommends a dividend of Rs.0.67 per share for the year ending 31st March 2018. (2016/17 - Rs.1.75 Internal Controls and Risk Management per share). The Directors acknowledge their responsibility for the Financial Statements Companies system of internal control. The systems are designed to provide reasonable assurance that the assets The Financial Statements of the Company for the year ended of the Company are safeguarded and to ensure that proper 31 March 2018 was approved by the Board of Directors on accounting records are maintained. 21st August 2018 are given on pages 56 to 90.
48 Annual Report 2017/18 DISTILLERIES COMPANY OF SRI LANKA PLC |
The Board, having reviewed the system of internal control is with other controls are in place to ensure that related party satisfied with the systems and measures in effect at the date transactions involving directors, senior managers or their of signing this report. connected parties are conducted on an arm’s length basis. The Directors to the best of their knowledge and belief hereby Capital and Other Commitments confirm compliance with this code. Contingent liabilities and capital commitments are disclosed in Note 27 to the Financial Statements of the Company. Directors’ Shareholdings The shareholdings of Directors of the Company as defined Events after the Reporting Period under the Colombo Stock Exchange Rules are as follows. There were no material events or circumstances that have arisen since the reporting date that would require adjustment, As at 31 March 2018 March 2017 other than the information disclosed in Note 31 to the Financial D. H. S. Jayawardena Nil Nil Statements. C. R. Jansz Nil Nil Employees N. de S. Deva Aditya Nil Nil Capt. K. J. Kahanda Nil Nil The number of persons employed by the Company as at 31March 2018 was 1,060 (2016/17 1,121). Dr. A. N. Balasuriya Nil Nil D. Hasitha S. Jayawardena 2,231,505 Nil Board of Directors R. Seevaratnam Nil Nil The Board of Directors of the Company as at 31 March 2018 and their brief profiles are given on pages 22 and 23. Share Information Information relating to Earnings, Dividends, Net Assets and Directors Standing for Re-election Market Value per Share is given on page 3. The shareholding To re elect Mr. N.de S. Deva Aditya who retires by rotation details of the Company are given on page 92 of the Annual at the Annual General Meeting in terms of Article 30 of the Report. Articles of Association, as a Director of the Company and who is over 70 years by passing a resolution; that the age Corporate Governance limit stipulated in Section 210 of the Companies Act No.07 The Board has ensured that the Company has complied of 2007 shall not apply to Mr.N.de S. Deva Aditya who has with the Code of Best Practices on Corporate Governance attained the age of 70 and that he be re-elected a Director of issued by the Securities and Exchange Commission and the the Company." Institute of Chartered Accountants of Sri Lanka. The Board is committed towards the furtherance of Corporate Governance Further, to re-elect as a Director, Mr. D. H. S. Jayawardena, principles of the Company. The measures taken in this regard who is over 70 years, as a Director by passing a resolution; are set out in the Corporate Governance Report. that the age limit stipulated in Section 210 of the Companies Act No.07 of 2007 shall not apply to Mr. D. H. S. Jayawardena Board Committees who has attained the age of 76 and that he be re-elected a Director of the Company. Also, to re elect as a Director, Mr. R. The Board has appointed three Sub-Committees i.e. the Seevaratnam, who is over 70 years, as a Director by passing Audit Committee, the Remuneration Committee and Related a resolution; that the age limit stipulated in Section 210 of Party Transaction Review Committee. The composition and the Companies Act No.07 of 2007 shall not apply to Mr. R. responsibilities of the said Committees are detailed in the Seevaratnam who has attained the age of 75 and that he be respective reports. re-elected a Director of the Company. Related Party Transactions Interest Register The Board of Directors has given the following statements in The Company maintains an Interest Register in compliance respect of the related party transactions. The related party with the Companies Act No. 07 of 2007. This Annual Report transactions of the Company during the financial year have also contains particulars of entries made in the Interest been reviewed by the Related Party Transactions Review Register. Directors’ Interests in Contracts are disclosed in the Committee and are in compliance with the Section 09 of the Related Party Transactions under Note 25 to the Financial CSE Listing Rule. Statements. A Code of Business Conduct and Ethics along
Annual Report 2017/18 49 | DISTILLERIES COMPANY OF SRI LANKA PLC
Annual Report of the Board of Directors
Sustainability Principles Annual General Meeting The Company carries out its business adherence to the best The 28th Annual General Meeting of the Company will be held sustainable practices and has not engaged in any activity at the Sri Lanka Foundation, No. 100, Sri Lanka Padanama that was detrimental to the environment and has been in due Mawatha, Independent Square, Colombo 07 on 28th compliance with all applicable laws and regulations of the September 2018 at 10.00 a.m. The Notice of Meeting appears country to the best of its ability. on page 96 of the Annual Report.
Statutory Payments For and on behalf of the Board of Directors, 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. D. H. S. Jayawardena C. R. Jansz Going Concern Chairman / Managing Director Director The Directors having reviewed the business plans, capital expenditure commitments and expected cash flows are satisfied that the Company has adequate resources to continue operations for the foreseeable future and therefore V. J. Senaratne continue to adopt the going concern basis in preparing these Company Secretary Financial Statements.
21 August 2018 Auditors Colombo Messrs. KPMG, Chartered Accountants are deemed reappointed, in terms of section 158 of the Companies Act No. 07 of 2007, as Auditors of the Company. A resolution to authorise the Directors to determine their remuneration will be proposed at the Annual General Meeting. Total audit fees paid to Messrs. KPMG are disclosed in Note 08 to the Financial Statements. The Auditor of the Company has confirmed that they do not have any relationship with the Company (other than that of Auditor) that would have an impact on their independence.
50 Annual Report 2017/18 FINANCIAL INFORMATION Financial Reports Suplimentary Information Statement of Directors Responsibility Report Auditors’ Independent Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flow Notes to the Financial Statements Added Statement of Value Details of Real Estate Shareholder Information Summary Year Ten and Unit Team Management DCSL Team Management Notice of Meeting Form of Proxy Attendance Slip Notes 52 53 56 57 58 59 60 91 91 92 93 94 96 97 99 100 Statement of Directors Responsibility
The Directors are responsible under the Companies Act Compliance Report No.07 of 2007, to ensure compliance of the requirements The Directors confirm that to the best of their knowledge and set out therein to prepare Financial Statements for each belief that all statutory payments in relation to regulatory and financial year giving a true and fair view of the state of the statutory authorities that were due in respect of the Company affairs of the Company as at the Reporting date and the as at the reporting date have been paid or where relevant, profit of the Company for the financial year. The Directors are provided for. also responsible for ensuring that proper accounting records are kept to disclose, with reasonable accuracy, the financial position and enable preparation of the Financial Statements. By Order of the Board, 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 and appropriate accounting policies have V. J. Senaratne been selected and applied consistently in the preparation Company Secretary of such Financial Statements which have been prepared and presented in accordance with the Sri Lanka Accounting 21 August 2018 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 Company 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 Company 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.
52 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Independent Auditors’ Report
TO THE SHAREHOLDERS OF DISTILLERIES Basis for Opinion COMPANY OF SRI LANKA PLC We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under Report on the Audit of the Financial those standards are further described in the Auditors’ Statements Responsibilities for the Audit of the Financial Statements Opinion section of our report. We are independent of the Company in accordance with the Code of Ethics issued by CA Sri Lanka We have audited the financial statements of Distilleries (“Code of Ethics”) and we have fulfilled our other ethical Company of Sri Lanka PLC (“the Company”), which comprise responsibilities in accordance with the Code of Ethics. We the statement of financial position as at 31st March 2018, believe that the audit evidence we have obtained is sufficient and the statement of profit or loss and other comprehensive and appropriate to provide a basis for our opinion. income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial Key Audit Matters statements, including a summary of significant accounting Key audit matters are those matters that, in our professional policies set out on pages 56 to 90 in the annual report. judgment, were of most significance in our audit of the In our opinion, the accompanying financial statements give financial statements of the current period. These matters a true and fair view of the financial position of the Company were addressed in the context of our audit of the financial as at 31st March 2018, and of its financial performance and statements as a whole, and in forming our opinion thereon, its cash flows for the year then ended in accordance with Sri and we do not provide a separate opinion on these matters. Lanka Accounting Standards.
Carrying value of Inventories Refer to the significant accounting policies in Note 3.2.5 “Inventories” and explanatory Note 16 “Inventories” to the financial statements. Risk Description Our response As disclosed in explanatory Note Our audit procedures included; 16 to the financial statements, the Company has recorded ● Evaluating the method of standard costing calculation. We compared the respective inventories of Rs.4,694.53 Mn as elements of standard cost with the actual costs incurred based on underlying at 31st March 2018. management information to ensure there was no material difference. We checked the arithmetical accuracy of the calculations within the standard cost. We focused on this area ● Evaluating the nature of the overheads absorbed to ensure only directly attributable because the Company uses costs were included. We also considered production levels to ensure inefficiencies a standard cost approach to were not absorbed. We performed sample tests on the inputs to the calculation and valuing inventories throughout we challenged management on the key assumptions and estimates used within the the year which involves elements calculations. of judgment. As the Company
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 53 Independent Auditors’ Report
uses a standard cost as its ● Testing the key control procedures over inventory cycle counts. basis of inventory valuation, ● In addition our procedures included testing whether the standard costs which form the changes in price and production basis of the inventory valuation were set appropriately (e.g. by comparing standard levels lead to purchase price costs back to supporting purchase invoices and other supporting costing) and variances which, if not accounted reflected normal production levels, having been adjusted appropriately for any capacity for correctly, may lead to the underutilization; and agreeing the calculation of overheads absorbed into inventory to valuation of inventories being supporting analyses of production costs incurred during the time of production of year- misstated. In addition, changes end inventory. in production volume and ● Testing the key control procedures over inventory cycle which form the basis of the mix, and the cost base of raw inventory valuation were set appropriately (e.g. by comparing standard costs back to materials impact the carrying supporting purchase invoices and other supporting costing’s) and reflected normal amount of work in progress production levels, having been adjusted appropriately for any capacity underutilization; and finished goods as those and agreeing the calculation of overheads absorbed into inventory to supporting drive the allocation of labour analyses of production costs incurred during the time of production of year-end and production overheads for inventory. inventory valuation.
We identified this as a key audit matter because of the significant judgments and estimates involved in estimating the value of inventories.
Other Information In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as Management is responsible for the other information. The other a going concern, disclosing, as applicable, matters related to information comprises the information included in the annual going concern and using the going concern basis of accounting report, but does not include the financial statements and our unless management either intends to liquidate the Company or auditor’s report thereon. to cease operations, or has no realistic alternative but to do so. Our opinion on the financial statements does not cover the Those charged with governance are responsible for overseeing other information and we will not express any form of assurance the Company’s financial reporting process. conclusion thereon.
In connection with our audit of the financial statements, our Auditors’ Responsibilities for the Audit of the responsibility is to read the other information identified above Financial Statements when it becomes available and, in doing so, consider whether Our objectives are to obtain reasonable assurance about the other information is materially inconsistent with the financial whether the financial statements as a whole are free from statements or our knowledge obtained in the audit, or otherwise material misstatement, whether due to fraud or error, and to appears to be materially misstated. issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee Responsibilities of Management and Those that an audit conducted in accordance with SLAuSs will always Charged with Governance for the Financial detect a material misstatement when it exists. Misstatements Statements can arise from fraud or error and are considered material if, Management is responsible for the preparation of financial individually or in the aggregate, they could reasonably be statements that give a true and fair view in accordance with Sri expected to influence the economic decisions of users taken on Lanka Accounting Standards, and for such internal control as the basis of these financial statements. management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
54 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC As part of an audit in accordance with SLAuSs, we exercise matters that may reasonably be thought to bear on our professional judgment and maintain professional scepticism independence, and where applicable, related safeguards. throughout the audit. We also: From the matters communicated with those charged with ● Identify and assess the risks of material misstatement of governance, we determine those matters that were of most the financial statements, whether due to fraud or error, significance in the audit of the financial statements of the design and perform audit procedures responsive to those current period and are therefore the key audit matters. We risks, and obtain audit evidence that is sufficient and describe these matters in our auditors’ report unless law or appropriate to provide a basis for our opinion. The risk regulation precludes public disclosure about the matter or of not detecting a material misstatement resulting from when, in extremely rare circumstances, we determine that a fraud is higher than for one resulting from error, as fraud matter should not be communicated in our report because may involve collusion, forgery, intentional omissions, the adverse consequences of doing so would reasonably misrepresentations, or the override of internal control. be expected to outweigh the public interest benefits of such communication. ● Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are Report on Other Legal and Regulatory appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Requirements Company’s internal control. As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations ● Evaluate the appropriateness of accounting policies used that were required for the audit and, as far as appears from and the reasonableness of accounting estimates and our examination, proper accounting records have been kept by related disclosures made by management. the Company. ● Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the CA Sri Lanka membership number of the engagement partner audit evidence obtained, whether a material uncertainty responsible for signing this independent auditors’ report is 3029. exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements CHARTERED ACCOUNTANTS or, if such disclosures are inadequate, to modify our Colombo opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, 21 August 2018 future events or conditions may cause the Company to cease to continue as a going concern.
● Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 55 Statement of Profit or Loss and Other Comprehensive Income
2018 2017 For the year ended 31 March, Note Rs.'000 Rs.'000
Gross Revenue 5 90,386,965 90,273,469
Net Revenue 5 29,182,824 27,019,445 Cost of Sales (19,759,674) (15,986,452) Gross Profit 9,423,150 11,032,993
Other Operating Income 6 346,639 234,460 Distribution Expenses (694,403) (547,428) Administrative Expenses (1,165,775) (1,373,995) Results from Operating Activities 7,909,611 9,346,030
Finance Income 7.1.1 244,054 360,934 Finance Cost 7.1.2 (828,821) (1,643,281) Net Finance Income (584,767) (1,282,347)
Profit Before Income Tax Expense 8 7,324,844 8,063,683
Taxation 9 (2,975,376) (3,088,682) Profit after Tax before Loss on Restructuring 4,349,468 4,975,001 Loss on Restructuring (Net of Tax) - (74,999,935) Profit/(Loss) for the Year 4,349,468 (70,024,934)
Other Comprehensive Income/(Expense) Items that will never be reclassified to Profit or Loss Actuarial Gain/(Loss) on Retirement Benefit Obligations (2,518) 4,046 Deferred tax on Actuarial Gain/(Loss) 1,007 (1,619) Deferred tax on revaluation surplus on land (595,401) - (596,912) 2,427
Items that are or may be reclassified to Profit or Loss Net Change in Fair Value of Available for Sale Financial Assets 7.2 250,494 206,713 250,494 206,713 Total Other Comprehensive Income/(Expense) for the Year (346,418) 209,140 Total Comprehensive Income/(Expense) for the Year 4,003,050 (69,815,794)
Basic Earnings/(Loss) per Share 10.1 5.64 (233.42) Diluted Earnings/(Loss) per Share 10.2 5.64 (233.42)
The notes from pages 60 to 90 form an integral part of these financial statements. Figures in brackets indicate deductions.
56 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Statement of Financial Position
2018 2017 As at 31 March, Note Rs.'000 Rs.'000 ASSETS Non Current Assets Property, Plant and Equipment 11 5,796,136 6,214,121 Intangible Assets 12 - 7,211 Investment in Subsidiaries 13 - - Other Non Current Financial Investments 14 3,242,237 4,176,692 9,038,373 10,398,024 Current Assets Inventories 16 4,694,531 4,488,626 Trade and Other Receivables 17 8,735,981 6,943,758 Amounts Due From Related Companies 25.1.1 906,033 667,264 Other Current Financial Investments 14 272,616 46,432 Cash and Cash Equivalents 18 470,087 259,481 15,079,248 12,405,561 Total Assets 24,117,621 22,803,585
EQUITY AND LIABILITIES Share Capital and Reserves Stated Capital 19 3,000,000 300,000 Pending Allotment 20 - 20,000,000 Reserves 21 3,180,697 11,725,604 Accumulated Losses (467,788) (29,790,745) Total Equity 5,712,909 2,234,859
Non Current Liabilities Deferred Tax Liabilities 15 1,773,956 1,214,841 Retirement Benefit Obligations 22 129,349 122,230 1,903,305 1,337,071 Current Liabilities Trade and Other Payables 23 9,084,009 8,067,670 Amount due to Related Companies 25.1.2 1,225,090 2,949,577 Income Tax Payable 892,286 875,226 Interest Bearing Loans and Borrowings 24 4,075,000 6,821,594 Bank Overdrafts 18 1,225,022 517,588 16,501,407 19,231,655 Total Liabilities 18,404,712 20,568,726 Total Equity and Liabilities 24,117,621 22,803,585
Net Assets Per Share (Rs.) 1.24 7.45 The notes from pages 60 to 90 form an integral part of these Financial Statements. Figures in brackets indicate deductions. I certify 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, 21 August 2018
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 57 Statement of Changes in Equity - - Total Total 1,007 4,046 (2,518) (1,619) Rs.'000 209,140 250,494 206,713 (595,401) (525,000) (525,000) (346,418) 5,712,909 4,349,468 2,234,859 2,234,859 4,003,050 (1,005,000) 18,995,000 20,000,000 53,055,653 (70,024,934) (69,815,794) - - - - - 1,007 2,427 4,046 (1,511) (2,518) (1,619) losses) Rs.'000 earnings/ (467,788) (525,000) Retained 4,349,468 4,347,957 (1,005,000) (1,005,000) (Accuulated 25,500,000 24,975,000 41,236,762 (29,790,745) (29,790,745) (70,024,934) (70,022,507) ------for sale reserve Rs.'000 250,494 250,494 250,494 206,713 206,713 206,713 Available Available 1,711,030 1,711,030 1,711,030 1,711,030 1,961,524 1,504,317 ------reserve 10,000 Rs.'000 General 8,210,000 8,210,000 8,210,000 (8,200,000) (8,200,000) ------reserve Capital Rs.'000 107,882 107,882 107,882 107,882 ------reserve Rs.'000 (595,401) (595,401) (595,401) 1,101,291 1,696,692 1,696,692 1,696,692 Revaluation Revaluation ------Rs.'000 Pending Allotment 20,000,000 20,000,000 20,000,000 20,000,000 (20,000,000) (20,000,000)
------capital Stated Rs.'000 300,000 300,000 300,000 2,700,000 3,000,000 20,000,000 (17,300,000)
Balance as at 1 April 2017 Balance as at 1 Year Comprehensive Income for the Total Profit for the year Other Comprehensive Income Assets Net change in fair value of available for sale Financial Deferred tax on actuarial Loss Deferred tax on revaluation surplus land ** other comprehensive income for the year Total with Owners directly Transactions recorded in the Equity Issue of Shares Balance as at 31 March 2018 Act No. 24 of 2017 which is effective The Company has considered the lands owned by as capital assets in terms of requirements Inland Revenue ** the deferred tax liability has been recognized on revaluation surplus relating to land since those will be subject income at Accordingly, April 2018. from 1 rate of 40% at the point disposal. The Notes from pages 60 to 90 form an integral part of these fin ancial statements. Figures in brackets indicate deductions. Total contributions by and distributions to owners Total Balance as at 31 March 2017 Acturial Loss on Retirement Benefit Obligations comprehensive income for the year Total Transfers Dividends paid during the year contributions by and distributions to owners Total Other Comprehensive Income Assets for Sale Financial Available of Net change in Fair Value Actuarial Gain Deferred tax on other comprehensive income for the year Total with Owners directly Transactions recorded in the Equity Allotment Pending Dividends paid during the year Total Comprehensive Income for the Year Comprehensive Income for the Total Year Loss for the Actuarial Gain on Retirement Benefit Obligations comprehensive income for the year Total Balance as at 1 April 2016 Balance as at 1
58 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Statement of Cash Flow
For the year ended 31 March, Note 2018 2017 Rs.’000 Rs.’000 CASH FLOW FROM OPERATING ACTIVITIES Profit Before Tax 7,324,844 8,063,683 Adjustment for: Gain on Sale of Property, Plant and Equipment (16,304) (19,967) Depreciation and Amortization of PPE and Intangible Assets 563,527 551,247 Provision for Retirement Benefit Obligations 27,290 25,104 (Gain)/Loss on Change in Fair Value of Financial Assets at Fair Value through Profit or Loss (8,009) 969 Interest Income (244,054) (360,934) (Profit)/Loss on Sale of Quoted and Non-Quoted Shares (72,673) 439 Dividend Income (99,798) (82,992) Interest Expenses 828,821 1,642,312 Reversal of provision for Impairment - (893) Operating Profit Before Working Capital Changes 8,303,644 9,818,968 Working Capital Changes Increase in Trade, Amount Due from Related Companies and Other Receivables (1,978,068) (124,559) Increase in Inventories (205,905) (998,791) Increase/(Decrease) in Trade, Amount Due to Related Companies and Other Payables (824,191) 1,275,605 Cash Flows Generated from Operations 5,295,480 9,971,223 Finance Cost Paid (712,777) (177,100) Income Tax and Economic Service Charge Paid (2,993,595) (2,852,743) Retiring Gratuity Paid (22,689) (23,536) Net Cash Flows Generated from Operating Activities 1,566,419 6,917,844 CASH FLOW FROM INVESTING ACTIVITIES Investment in Subsidiary Companies - (26,679,250) Acquisition of Property, Plant and Equipment (138,431) (135,075) Proceeds from the Sale of Property, Plant and Equipment 16,304 19,169 Proceeds on Sale of Investments 1,482,298 10,569 Net (acquisitions) of Other Financial Investments (378,306) (1,321,792) Interest Received 148,351 268,160 Dividend Received 78,131 17,958 Net Cash Flows Generated from/(used in) Investing Activities 1,208,347 (27,820,261) CASH FLOW FROM FINANCING ACTIVITIES Cash Received in Terms of Shares (Pending Allotment) - 20,000,000 Dividend Paid (525,000) (1,010,989) Investment in Debentures - (200,000) Net Cash Flows Generated from/(used in) Financing Activities (525,000) 18,789,011 Net Increase/(Decrease) in Cash and Cash Equivalents During the Year 2,249,766 (2,113,406) Cash and Cash Equivalents at the Beginning of the year (7,079,701) (4,966,295) Cash and Cash Equivalents at the End of the Year (4,829,935) (7,079,701) Analysis of Cash and Cash Equivalents at the End of the Year Cash in Hand 18 9,042 10,467 Cash in Bank 18 278,713 152,202 Cash in Transit 18 182,332 96,812 Other Short Term Borrowings 24 (4,075,000) (6,821,594) Bank Overdraft 18 (1,225,022) (517,588) (4,829,935) (7,079,701)
The Notes from pages 60 to 90 form an integral part of these financial statements. Figures in brackets indicate deductions.
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 59 Notes to the Financial Statements
1. Reporting Entity Statements as per the provisions of the Companies Act No. 07 of 2007 and Sri Lanka Accounting Standards. 1.1. Domicile & Legal Form Distilleries Company of Sri Lanka PLC (the “Company/ 2.3 Approval of Financial statements DCSL”) is a quoted public limited liability Company The Financial Statements of the Company for the year incorporated and domiciled in Sri Lanka. The Company ended 31 March 2018 were approved and authorised has been registered under the Companies Act No. 17 for issue by the Board of Directors in accordance with of 1982 and re-registered under the Companies Act No. Resolution of the Directors on 21 August 2018. 07 of 2007. The registered office and principal place of business of the Company are located at No.110, Norris 2.4 Basis of Measurement Canal Road, Colombo 10. The Financial Statements have been prepared on the historical cost basis except for the following items, 1.2. Principal Activities and Nature of Operation which are measured on an alternative basis as at each The principal activity of the Company is distillation, reporting date. manufacture and distribution of liquor products. There were no significant changes in the nature of the Property, Plant and Fair value principal business activities of the Company during the Equipment- Land and financial year under review. Buildings Retirement benefit Actuarially valued and 1.3. Parent Enterprise and Ultimate Parent Enterprise obligation recognised at present The immediate parent of the Company is Melstacorp value of the defined PLC and ultimate parent entity is Milford Exports benefit obligation Ceylon (Pvt) Limited. Available for sale Fair Value financial assets 2. Basis of Preparation Fair Value through Fair Value 2.1 Statement of Compliance profit or loss financial The Financial Statements of the Company has been assets prepared in accordance with Sri Lanka Accounting Standards (referred “SLFRS/LKAS”) as laid down by 2.5 Functional and Presentation Currency the Institute of Chartered Accountants of Sri Lanka The Financial Statements are presented in Sri Lankan (ICASL) and the requirements of the Companies Act Rupees, which is the Company’s functional currency. No. 07 of 2007. All amounts have been rounded to the nearest thousand, unless otherwise indicated. These Financial Statements include the following components: 2.6 Materiality and Aggregation ● Statement of Profit or Loss and Other Each material class of similar item is presented Comprehensive Income providing the information separately in the Financial Statements. Items of on the financial performance of the Company for dissimilar nature or function are presented separately the year under review. unless they are immaterial. ● Statement of Financial Position providing the 2.7 Use of Judgments and Estimates information on the financial position of the Company as at the year-end. In preparing these financial statements, management has made judgments, estimates and assumptions ● Statement of Changes in Equity depicting all that affect the application of the Company accounting changes in shareholders’ funds during the year policies and the reported amounts of assets, liabilities, under review of the Company. income and expenses. Actual results may differ from those estimates. ● Statement of Cash Flows providing the information to the users, on the ability of the Company to Estimates and underlying assumptions are reviewed on generate cash and cash equivalents and utilization an ongoing basis. Revisions to accounting estimates of those cash flows. are recognised prospectively. ● Notes to the Financial Statements comprising Information about assumptions and estimation Accounting Policies and other explanatory uncertainties that have significant effect on the information. amounts recognised in the financial statements is included in following notes; 2.2 Directors Responsibility for Financial Statements Note 15 - Recognition of deferred tax assets/liabilities The Board of Directors of the Company is responsible for the preparation and presentation of Financial Note 17 - Provisions for impairment.
60 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Note 22 - Measurement of retirement benefit The cost of property, plant & equipment includes obligations; key actuarial assumptions. expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed Note 27, 28 & 29 - Recognition and measurement assets includes the cost of materials and direct labour, of provisions for contingencies; key assumptions any other costs directly attributable to bringing the about the likelihood and magnitude of an outflow of asset to a working condition for its intended use, and resources. the costs of dismantling and removing the items and restoring the site on which they are located. 2.8 Going Concern The Management has made an assessment of its If significant parts of an item of property, plant and ability to continue as a going concern and is satisfied equipment have different useful lives, they are that it has the resources to continue in business for accounted for as separate items (major components) of the foreseeable future. Furthermore, the Management property, plant and equipment. is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to c. Subsequent Cost continue as a going concern. Therefore, the Financial Subsequent costs are included in the asset’s Statements of the Company continue to be prepared carrying amount or recognised as a separate asset, on a going concern basis. as appropriate, only when it is probable that future economic benefit associated with the item will flow 3. Significant Accounting Policies to the Company and the cost of the item can be The Company has consistently applied the following measured reliably. The cost of the day-to-day servicing accounting policies to all periods presented in these of property, plant and equipment are recognised in the financial statements. profit or loss.
3.1 Foreign Currency Transactions d. De-recognition Transactions in foreign currencies are translated into An item of property, plant and equipment is de- the respective functional currency of the Company at recognised upon disposal or when no future economic the exchange rates at the dates of the transactions. benefits are expected from its use or disposal. Any gain or loss arising on de-recognising of the asset Monetary assets and liabilities denominated in foreign (calculated as the difference between the net disposal currencies are translated into the functional currency at proceeds and the carrying amount of the asset) is the exchange rate at the reporting date. Non-monetary included in the statement of profit or loss in the year the assets and liabilities that are measured at fair value asset is de-recognised. in a foreign currency are translated into the functional currency at the exchange rate when the fair value e. Revaluation was determinated. Foreign currency differences are The Company revalues its land and buildings at least generally recognised in profit or loss. Non-monetary once in every five years which is measured at its fair items that are measured based on historical cost in a value at the date of revaluation less any accumulated foreign currency are not translated. depreciation and any accumulated impairment losses. On revaluation of land, any increase in the 3.2 Statement of Financial Position revaluation amount is credited to the revaluation 3.2.1 Property, Plant & Equipment reserve in shareholder’s equity unless it offsets a previous decrease in value of the same asset that was 3.2.1.1 Freehold Assets recognised in the profit or loss. A decrease in value a. Recognition is recognised in the profit or loss where it exceeds Property, plant & equipment are tangible items that the increase previously recognised in the revaluation are held for servicing, or for administrative purposes reserve. Upon disposal, any related revaluation reserve and are expected to be used during more than one is transferred from the revaluation reserve to retained period. Property, Plant & Equipment are recognised if earnings and is not taken into account in arriving at the it is probable that future economic benefits associated gain or loss on disposal. with the assets will flow to the Company and cost of the asset can be reliably measured. f. Depreciation Depreciation is calculated to write off the cost of items b. Measurement of property, plant and equipment less their estimated Items of property, plant & equipment are measured at residual values using straight-line basis over the cost or at fair value in the case of land and buildings estimated useful lives, and is generally recognised in less accumulated depreciation and accumulated profit or loss. Freehold land is not depreciated. impairment losses.
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 61 Notes to the Financial Statements
Significant components of individual assets are b. Amortisation assessed and if a component has a useful life that Amortisation is calculated to write off the cost of is different from the remainder of that asset, that intangible assets less their estimated residual values component is depreciated separately. The estimated using straight-line basis over the estimated useful lives useful lives of property, plant and equipment for current from the date that they are available for use, and is and comparative periods are as follows. generally recognised in profit or loss.
Freehold Buildings 20 years The estimated useful lives for the current and comparative periods are as follows: Plant, Machinery & Equipment 10 years Furniture & Fittings, office Equipment & 10 years Computer Software - 3 years Fire Fighting Equipment 3.2.4 Impairment Vats & Casks 10 years 3.2.4.1 Non Financial Assets Oil Storage Tanks 10 years The carrying amounts of the Company’s non- Computers 03 years financial assets are reviewed at each reporting Motor Vehicles 04 years date to determine whether there is any indication of Empty Drums 02 years impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset An impairment loss is recognised if the carrying amount is classified as held for sale and the date that the asset of an asset or its cash-generating unit exceeds its is de-recognised. recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash Depreciation methods, useful lives and residual values flows that are largely independent from other assets are reviewed at each reporting date and adjusted if and groups. appropriate. The recoverable amount of an asset or cash generating g. Capital Work-in-progress unit is the greater of its value in use and its fair value Capital work-in-progress is stated at cost. These are less costs to sell. In assessing value in use, the expenses of a capital nature directly incurred in the estimated future cash flows are discounted to their construction of buildings, major plant and machinery, present value using a pre-tax discount rate that reflects awaiting capitalisation. current market assessments of the time value of money and the risks specific to the asset. 3.2.2 Leases 3.2.5 Inventories 3.2.2.1 Operating Leases Inventories are measured at the lower of cost or net When the lessor effectively retains substantially all realisable value. Net realisable value is the estimated the risks and rewards of an asset under the lease selling price in the ordinary course of business less the agreement, such leases are classified as operating estimated cost of completion and selling expenses. leases. Payments under operating leases are The general basis on which cost is determined is: all recognised as expense in the profit or loss on a straight inventory items, except manufactured inventories and line basis over the term of the lease. work-in progress are measured at weighted average directly attributable cost. 3.2.3 Intangible Asset An intangible asset is recognised if it is probable Manufactured inventories and work-in-progress are that future economic benefits will flow to the entity measured at weighted average factory cost which and the cost of the asset can be measured reliably includes all direct expenditure and appropriate shares in accordance with LKAS 38 “Intangible Assets”. of production overhead based on normal operating Intangible assets with finite useful lives are measured capacity. at cost less accumulated amortisation and accumulated 3.2.6 Financial Instruments impairment losses. 3.2.6.1 Non-derivative Financial Assets a. Subsequent expenditure The Company recognises a financial asset in its Subsequent expenditure is capitalised only when it Statement of Financial Position when the Company increases the future economic benefits embodied in the becomes a party to the contractual provisions of the specific asset to which it relates. All other expenditure, instrument. including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. The Company initially recognises loans and receivables and debt securities issued on the date
62 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC when they are originated. All other financial assets are cash and cash equivalents for the purpose of the initially recognised on the trade date. Statement of Cash Flows. The Company de-recognises a financial asset Investments with short maturities, i.e. three months or when the contractual rights to the cash flows from less from the date of acquisition are also treated as the asset expire, or it transfers the rights to receive cash equivalents. the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of Available-for-Sale Financial Assets the financial asset are transferred, or it neither transfers Available-for-sale financial assets are non-derivative nor retains substantially all of the risks and rewards of financial assets that are designated as available-for- ownership and does not retain control over transferred sale or are not classified in any of the above categories asset. of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly Financial assets and financial liabilities are offset and attributable transaction costs. the net amount presented in the statement of financial position when, and only when, the Company has a Subsequent to initial recognition, they are measured at legal right to offset the amounts and intends either to fair value and changes therein, other than impairment settle them on a net basis or to realise the asset and losses, are recognised in other comprehensive income settle the liability simultaneously. and presented in the fair value reserve in equity. When these assets are de-recognised, the gain or loss The Company has following non derivative financial accumulated in available for sale reserve is reclassified assets: Fair value through profit or loss, Loans and to profit or loss. receivables and Available for sale. Available- for-sale financial assets comprise of Fair Value through Profit or Loss investments in unquoted shares, debentures, treasury A financial asset is classified as fair value through bonds,unit trusts, quoted shares purchased for long profit or loss if it is classified as held for trading or is term investment purpose, designated as such upon initial recognition. Financial assets are designated as fair value through profit 3.2.6.2 Non- derivative Financial Liabilities or loss if the Company manages such investments Non-derivative financial liabilities are recognised and makes purchase and sales decisions based on initially at fair value plus any directly attributable their fair value in accordance with the Company’s transaction costs. Subsequent to initial recognition, documented risk management or investment strategy. those financial liabilities are measured at amortised Upon initial recognition, attributable transaction costs cost using the effective interest method. are recognised in profit or loss as incurred. Financial Financial liabilities comprise of interest bearing loans, assets at fair value through profit or loss are measured trade and other payables and bank overdrafts. Bank at fair value, and changes therein, including any overdrafts that are repayable on demand and form an interests or dividend income, are recognised in profit or integral part of the Company’s cash management are loss. included as a component of cash and cash equivalents Fair value through profit or loss comprise trading for the statement of cash flows. portfolio of the Company which includes investment in quoted shares. a. De-recognition The Company de-recognises a financial liability when Loans and Receivables its contractual obligations are discharged, cancelled or Loans and receivables are financial assets with fixed or expired. determinable payments that are not quoted in an active market. Such assets are recognised initially at fair 3.2.7 Impairment value plus any directly attributable transaction costs. 3.2.7.1 Financial Assets Subsequent to initial recognition, loans and receivables A financial asset not classified as fair value through are measured at amortised cost using the effective profit or loss including an interest in equity accounted interest method. investee are assessed at each reporting date to Loans and receivables comprise trade receivables, determine whether there is objective evidence of amounts due for related parties, trust certificates, short impairment. A financial asset is impaired if objective term deposits and cash and cash equivalents. evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss Cash and Cash Equivalents event had a negative effect on the estimated future Cash and cash equivalents comprise cash balances cash flows of that can be estimated reliably. and call deposits. Bank overdrafts that are repayable Objective evidence that financial assets are impaired on demand and form an integral part of the Company’s can include default or delinquency by a debtor, cash management are included as a component of
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 63 Notes to the Financial Statements
restructuring of an amount due to the Company on 3.2.9 Employee Benefits terms that the Company would not consider otherwise, Defined Contribution Plans indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. Defined contribution plan is a post-employment benefit plan under which contributions are made Financial Assets measured at Amortised Cost into a separate fund and the entity will have no legal The Company considers evidence of impairment or constructive obligation to pay further amounts. for financial assets measured at amortised cost Obligations for contributions to defined contribution (loans and receivables) at both a specific asset and plan are recognised as an employee benefit expense in collective level. All individually significant assets are profit or loss in the periods during services is rendered individually assessed for impairment. Those found by employees. Prepaid contributions are recognised as not to be impaired are then collectively assessed for an asset to the extent that a cash refund or a reduction any impairment that has been incurred but not yet in future payments is available. identified. Assets that are not individually significant Employees’ Provident Fund (EPF): are collectively assessed for impairment by grouping together assets with similar risk characteristics. The Company entities and employees contribute 15% and 10% respectively on the basic salary of each In assessing collective impairment, the Company uses employee to the above mentioned fund. historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted Employees’ Trust Fund (ETF) for management’s judgment as to whether current The Company entities contributes 3% of the basic economic and credit conditions are such that the actual salary of each employee to the Employees’ Trust Fund. losses are likely to be greater or lesser than suggested by historical trends. Defined Benefit Plans An impairment loss in respect of a financial asset A defined benefit plan is a post-employment benefit measured at amortised cost is calculated as the plan other than a defined contribution plan. The difference between its carrying amount and the present Company’s net obligation in respect of defined value of the estimated future cash flows discounted benefit plans is calculated separately for each plan by at the asset’s original effective interest rate. Losses estimating the amount of future benefit that employees are recognised in profit or loss and reflected in an have earned in return for their service in the current allowance account against loans and receivables or and prior periods; that benefit is discounted to held-to-maturity investment securities. Interest on the determine its present value. impaired asset continues to be recognised. When an The valuation is performed annually by a qualified event occurring after the impairment was recognised actuary using the projected unit credit method. When causes the amount of impairment loss to decrease, the the valuation results in a benefit to the Company, decrease in impairment loss is reversed through profit the recognised asset is limited to the total of any or loss. unrecognised past service costs and the present value of economic benefits available in the form of Available-for-Sale Financial Assets any future refunds from the plan or reductions in Impairment losses on available-for-sale financial future contributions to the plan. An economic benefit is assets are recognised by reclassifying the losses available to the Company if it is realisable during the accumulated in the fair value reserve to profit or loss. life of the plan, or on settlement of the plan liabilities. The amount reclassified is the difference between When the benefits of a plan are improved, the portion the acquisition cost (net of any principal repayment of the increased benefit relating to past service by and amortisation) and the current fair value, less any employees is recognised in profit or loss on a straight impairment loss previously recognised in profit or loss. line basis over the average period until the benefits If the fair value of an impaired available-for-sale debt become vested. To the extent that the benefits vest security subsequently increases and the increase can immediately, the expense is recognised immediately in be related objectively to an event occurring after the profit or loss. impairment loss was recognised, then the impairment loss is reversed through profit or loss; otherwise, it is The Company recognises all actuarial gains and losses reversed through OCI. arising from defined benefit plans directly in the other comprehensive income and all expenses related to 3.2.8 Stated Capital defined benefit plan in personnel expense in profit or loss. Ordinary Capital Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.
64 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Short Term Benefits and contingent consideration, losses on disposal of Short-term employee benefit obligations are measured available for sale financial assets, impairment losses on an undiscounted basis and are expensed as the recognised on financial assets (other than trade related service is provided receivables). Borrowing costs that are not directly attributable to the 3.2.10 Provisions, Contingent Assets and Contingent acquisition, construction or production of a qualifying Liabilities asset are recognised in profit or loss using the effective Provisions are recognised, if as a result of a past interest rate method. event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is Foreign currency gains and losses are reported on probable that an outflow of economic benefits will be a net basis as either finance income or finance cost required to settle the obligation. depending on whether foreign currency movements are in a net gain or net loss position. All the contingent liabilities are disclosed, as Notes to the Financial Statements unless the outflow of 3.3.4 Taxation resources is made contingent assets if exits are Income tax expense comprises current and deferred disclosed when inflow of economic benefit is probable. tax. Income tax expense is recognised in profit or loss except to the extent that it relates to a business 3.2.11 Commitments combination, or items recognised directly in equity, or in All material commitments as at the reporting date OCI. have been identified and disclosed in the Notes to the Financial Statements. a. Income Tax Provision for taxation is based on the profit for the year 3.3 Statement of Profit or Loss and Other adjusted for taxation purposes in accordance with the Comprehensive Income provisions of the Inland Revenue Act, No.10 of 2006 3.3.1 Revenue and amendments made thereto. Revenue from the sale of goods is measured at the fair Current tax comprises the expected tax payable or value of the consideration received or receivable, net receivable on the taxable income or loss for the year of returns and allowances, trade discounts and volume and any adjustments to the tax payable or receivable rebates. Revenue is recognised when the significant in respect of previous years. It is measured using tax risks and rewards of ownership have been transferred rates enacted or subsequently enacted at the reporting to the buyer, recovery of the consideration is probable, date. Current tax also includes any tax arising from the associated costs and possible return of goods dividends. can be estimated reliably, and there is no continuing management involvement with the goods. Current tax assets and liabilities are offset only if certain criteria are met. 3.3.2 Other Income Dividend income from investments is recognised when b. Deferred Tax the shareholder’s right to receive payment has been Deferred tax is recognised in respect of temporary established. differences between the carrying amounts of assets and liabilities for financial reporting purposes and the Rental Income is recognised in profit and loss as it accrues. amounts used for taxation purposes. Deferred tax is Gains and losses on the disposal of investments not recognised for the following temporary differences: held by the Company have been accounted for in the ● Temporary differences on the initial recognition Statement of profit or loss. of assets or liabilities in a transaction that is not Gains and losses on the disposal of property, plant & a business combination and that affects neither equipment are determined by comparing the net sales accounting nor taxable profit or loss; proceeds with carrying amount. These are included in ● Temporary differences related to investments profit and loss. in subsidiaries, associates to the extent that the Company is able to control the timing of 3.3.3 Finance Income and Expenses the reversal of the temporary differences and Finance income comprises interest income on funds it is probable that they will not reverse in the invested (including available for sale financial assets), foreseeable future; and gains on the disposal of available for sale financial assets. Interest income is recognised as it accrues in ● Taxable temporary differences arising on the initial the profit or loss, using the effective interest method. recognition of goodwill. Finance cost comprise interest expenses on Deferred tax assets are recognised only to the extent borrowings, unwinding of the discount on provisions that it is probable that future taxable profits will be
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 65 Notes to the Financial Statements
available against which the assets can be utilised. Accordingly, the Company has not applied the following Deferred tax assets are reviewed at each reporting new standards in preparing these financial statements. date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. SLFRS 9-Financial Instruments SLFRS 9 - “Financial Instruments” replaces Unrecognised deferred tax assets are reassessed at the existing guidance in LKAS 39 – Financial each reporting date and recognised to the extent that it Instruments: Recognition and Measurement. SLFRS has become probable that future taxable profits will be 9 includes revised guidance on the classification and available against which they can be used. measurement of financial instruments including a new Deferred tax is measured at the tax rates that are expected credit loss model for calculating impairment expected to be applied to temporary differences when on financial assets. they reverse, using tax rates enacted or substantively SLFRS 9 is effective for annual period beginning on or enacted at the reporting date. after 1st January 2018 with early adoption permitted. Deferred tax assets and liabilities are offset only if certain criteria are met. SLFRS 15 - Revenue Recognition from Customer Contracts 3.4 Subsequent Events SLFRS 15 - “Revenue from Contracts with Customers” All material post reporting events have been establishes a comprehensive framework for considered and where appropriate adjustments or determining whether, how much and when revenue is disclosures have been made in the respective notes to recognised. It replaces existing revenue recognition the Financial Statements. guidance LKAS 18- “Revenue”, LKAS 11- “Construction Contracts”. 3.5 Earnings Per Share SLFRS 15 is effective for annual reporting period The Company presents Basic and Diluted Earnings beginning on or after 1st January 2018, with early Per Share (EPS) for its ordinary shares. Basic EPS is adoption permitted. calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted SLFRS 16 – Leases average number of ordinary shares outstanding during SLFRS 16 – “Leases” requires lessees to recognise all the period. leases on their Statement of Financial Position as lease Diluted EPS is determined by adjusting the profit liabilities with the corresponding right of use assets. or loss attributable to ordinary shareholders and The profit or loss recognition pattern for recognised the weighted average number of ordinary shares leases will be similar to existing finance lease outstanding for the effects of all dilutive potential accounting, with interest and depreciation expense ordinary shares. recognised separately in Profit or Loss. SLFRS 16 is effective for annual reporting period 3.6 Statement of Cash Flows beginning on or after 1st January 2019, with early The Statement of Cash Flows has been prepared adoption permitted. using the ‘Indirect Method’ of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard - LKAS 7 ‘Statement of Cash Flows.’ Cash and cash equivalents comprise short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.
3.7 Comparative Figures The presentation and classification of the financial statements of the previous years have been amended, where relevant for better presentation and to be comparable with those of the current year.
4 New Accounting Standards Issued but not Effective as at the Reporting date The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standard which will become applicable for financial periods beginning on or after 1 January 2018.
66 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 5 Revenue 2018 2017 Rs.’000 Rs.’000 Gross Revenue 90,386,965 90,273,469 Direct Turnover Related Taxes (61,204,141) (63,254,024) Net Revenue 29,182,824 27,019,445
6 Other Operating Income 2018 2017 Rs.’000 Rs.’000 Gain on sale of Property, Plant and Equipment 16,304 19,967 Rent Income 54,869 43,988 Other Sundry Income 95,001 83,792 Dividend Income on Available-For-Sale Financial Assets 97,232 708 Dividend Income from Fair Value Through Profit and Loss Investments 2,566 82,284 Loss on Disposal of Fair Value Through Profit and Loss Investments (16) (439) Gain on Disposal of Available - For-Sale Investments 72,674 4,160 Gain on Change in Fair Value of Financial Assets at Fair Value Through Profit or Loss Investments 8,009 - 346,639 234,460
7 Finance Income and Finance Costs 2018 2017 Rs.’000 Rs.’000
7.1 Recognized in Profit and Loss
7.1.1 Finance Income Interest Income on Available-For-Sale Financial Assets 125,120 171,826 Interest Income on Loans and Receivables 118,934 189,108 244,054 360,934 7.1.2 Finance Cost Interest Expense on Financial Liabilities Measured at Amortized Cost (828,821) (1,642,312) Loss on Change in Fair Value of Financial Assets at Fair Value Through Profit or Loss Investments - (969) (828,821) (1,643,281) Net Finance Costs Recognized in Profit or Loss (584,767) (1,282,347)
7.2 Recognized in Other Comprehensive Income Net Change in Fair Value of Available-for-Sale Financial Assets 250,494 206,713 250,494 206,713
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 67 Notes to the Financial Statements
8 Profit before Income Tax Expense Profit before income tax expense is stated after charging all the expenses including the following;
For the year ended 31 March, 2018 2017 Note Rs.’000 Rs.’000 Remuneration to Directors 36,550 38,160 Auditor’s Remuneration - Audit 5,624 5,460 - Non-audit 2,086 13,041 Personnel Costs 8.1 1,610,483 1,551,632 Depreciation of Property, Plant and Equipment 11 556,316 543,367 Amortization of Intangible Assets 12 7,211 7,880 Donations 179,369 4,344
8.1 Personnel Costs For the year ended 31 March, 2018 2017 Note Rs. ‘000 Rs.’000 Salaries, Wages and Other Benefits 1,486,691 1,428,840 Employee Benefits - Defined Contribution Plans - EPF and ETF 96,502 97,688 - Defined Benefit Plans 22.1.1 27,290 25,104 Total 1,610,483 1,551,632
9 Income Tax Expense For the year ended 31 March, 2018 2017 Note Rs.’000 Rs.’000 Current Tax Expense 9.1 3,010,655 2,813,576 Deferred Tax Charge/(Reversal) (35,279) 275,106 2,975,376 3,088,682
9.1 Current Tax Expense Current Tax Charge 9.1.1 3,010,655 2,828,750 Over Provision of Current Tax of Previous Years - (15,174) 3,010,655 2,813,576
9.1.1 Reconciliation of Accounting Profits to Income Tax Expense For the year ended 31 March 2018 2017 Rs.'000 Rs.'000 Profit Before Income Tax Expense 7,324,844 8,063,683 (-) Other Income/ Exempt Income (590,692) (594,425) (+) Disallowable Expenses 772,380 581,454 (-) Allowable Expenses (221,194) (1,292,073) Taxable Business Profit 7,285,338 6,758,639 Profit from Trade or Business 7,285,338 6,758,639 Taxable Other Income 344,715 447,473 Taxable Income 7,630,053 7,206,112 Income Tax at, 40% 2,914,135 2,703,456 28% 96,520 125,294 Total Current Tax Charge 3,010,655 2,828,750 Average Statutory Income Tax Rate (%) 39.46% 39.25%
68 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 9.1.2 Effective Tax Rate For the year ended 31 March, Note 2018 2017 % % 9.1.2.1 41.10% 34.89%
9.1.2.1 Reconciliation of Effective Tax Rate For the year ended 31 March, 2018 Effective 2017 Effective Rs.'000 % Rs.'000 % Accounting Profit Chargeable to Income Tax 7,324,844 8,063,683 Income Tax Expense at the Average Statutory Income Tax Rate 2,890,226 39.46% 3,165,388 39.25% Income Not Subject to Tax (97,057) (1.33%) (57,686) (0.72%) Disallowable Expenses 304,765 4.16% 228,249 2.83% Allowable Expenses (87,278) (1.19%) (507,201) (6.29%) Over Provision of Current Tax of Previous Years - 0.00% (15,174) (0.19%) Current Tax Expense 3,010,655 41.10% 2,813,576 34.89%
10 Earnings/(Loss) Per Share 10.1 Basic Earnings/(Loss) Per Share The calculation of basic Earnings/(Loss) per share is based on the profit attributable to Ordinary shareholders and the weighted average number of shares outstanding during the year. For the year ended 31 March, 2018 2017 Profit/(Loss) for the year (Rs.’000) 4,349,468 (70,024,934) Weighted Average Numbers of Ordinary Shares (000) 771,233 300,000 Basic Earnings/(Loss) per Share (Rs.) 5.64 (233.42)
10.2 Diluted Earnings/(Loss) per Share There were no potential dilutive ordinary shares outstanding at any time during the year. Therefore, diluted earnings/(loss) per share is same as Basic Earnings/(Loss) per share shown above.
10.3 Dividend per Share Equity dividend on ordinary shares declared and paid during the year For the year ended 31 March, 2018 2017 Per Share Total Per Share Total Rs.'000 Rs.'000 Rs.'000 Rs.'000 Dividednd Paid 1.75 525,000 3.35 1,005,000 1.75 525,000 3.35 1,005,000
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 69 Notes to the Financial Statements
- - 2017 100 936 As at 7,291 7,950 19,090 Rs.'000 31 March 126,439 183,980 1,587,161 6,214,021 6,214,121 1,655,183 2,625,991
- - - 2018 756 As at 5,352 11,365 11,365 16,509 Rs.'000 119,782 119,782 31 March 163,945 1,653,459 5,796,136 5,796,136 1,564,035 2,260,933 Carrying Value - - 80 315 4,127 13,350 43,795 49,633 64,223 Rs.'000 258,926 484,157 At the End of the Year of the 2,492,039 2,492,039 1,573,433 ------Rs.'000 (31,416) (31,416) (31,416) Disposals - - - - 180 6,657 5,103 3,197 2,598 91,148 81,585 the Year the Rs.'000 556,316 556,316 365,848 Charge for Accumulated Depreciation - - 80 Year 315 At the of the 6,693 3,947 38,692 46,436 61,625 Rs.'000 167,778 433,988 Beginning 1,967,139 1,967,139 1,207,585 - 80 315 4,883 55,160 66,142 69,575 Rs.'000 133,132 648,102 At the End of the Year of the 1,653,459 8,288,175 8,288,175 1,822,961 3,834,366 ------(100) Rs.'000 (31,416) (31,516) (31,416) Write Offs Write Disposals/ ------Year 790 616 9,177 Cost / Valuation 66,298 61,550 Rs.'000 138,431 138,431 Additions During the 80 Year 100 315 At the of the 4,883 45,983 65,526 69,575 Rs.'000 133,132 617,968 Beginning 8,181,160 8,181,260 1,587,161 1,822,961 3,833,576
11. Property, Plant and Equipment Property, 11. Total Freehold Property, Freehold Property, Total Plant & Equipment In Progress Capital Work Plant & Equipment Property, Total Freehold Land Buildings Buildings Constructed on Leasehold Lands Plant, Machinery & Other Equipment Motor Vehicles Fire Fighting Equipment Computer Equipment Tanks Oil Storage Furniture, Fittings & Office Equipment Drums Vats & Casks Vats
70 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 11.1 Details of Land and Building Stated at Fair Value A valuation of freehold Lands and Buildings of Distilleries Company of Sri Lanka PLC 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 Company as at 31 March 2016. Analysis of Sensitivity of Revaluation of Land and Buildings during the Year
Total Lands Sensitivity on Total Buildings Sensitivity per Perch Value on per Square Feet Name of the 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
11.2 The carrying amount of revalued land and buildings if they were carried at cost less depreciation would be as follows;
2018 2017 Lands Buildings Lands Buildings Rs.'000 Rs.'000 Rs.'000 Rs.'000 Cost 117,345 46,248 51,047 46,248 Accumulated Depreciation - (46,248) - (46,248) Carrying Value 117,345 - 51,047 -
11.3 Gross Carrying Value of Fully Depreciated Assets The cost of fully depreciated assets of the Company amounting to Rs.555Mn (2017 - Rs.587Mn) as at reporting date.
11.4 Impairment of Property, Plant & Equipment There is no permanent fall in value of Property, Plant & Equipment which require a provision for impairment.
11.5 Property, Plant & Equipment that have been Pledged There were no items of Property, Plant & Equipment pledged as security as at 31 March 2018.
12 Intangible Assets 2018 2017 Software Total Total Cost and Implementation Rs.'000 Rs.'000 Rs.'000 Cost 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 amortization Balance at the Beginning of the Year 16,429 16,429 8,549 Amortized durring the year 7,211 7,211 7,880 Balance at the End of the Year 23,640 23,640 16,429
Carrying Value As at Beginning of the Year 7,211 7,211 15,091 As at End of the Year - - 7,211
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 71 Notes to the Financial Statements
13 Investments in Subsidiaries As at 31 March, 2018 2017 Number Effective Cost Number Effective Cost of Shares Holding of Shares Holding % Rs.'000 % Rs.'000 Investment in Subsidiaries AION SG Residencies (Pvt) Ltd - 100% 25,000 - 100% 25,000 Provision for Impairment of (25,000) (25,000) Investments - -
14 Other Financial Investments
As at 31 March 2018 2017 Note Rs.'000 Rs.'000 Non Current Investments Available for Sale Financial Investments - (AFS) 14.1 3,242,237 4,176,692 3,242,237 4,176,692 Current Investments Available for Sale Financial Investments - (AFS) 14.1.4.1 220,670 - Fair Value through Profit or Loss (FVTPL) Financial Investments 14.2 51,946 46,432 272,616 46,432
14.1 Available for Sale Financial Investments - (AFS) Non Current Investments Quoted Equity Securities 14.1.1 2,949,136 2,303,797 Unquoted Equity Securities 14.1.2 90,101 125,233 Investments in Unit Trusts 14.1.3 3,000 3,000 Investment in Debentures 14.1.4 200,000 422,877 Investment in Government Securities 14.1.5 - 1,321,785 3,242,237 4,176,692
72 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC As at 31 March, 2018 2017 No. of Cost Fair No. of Cost Fair shares/ value shares/ value Units Units Rs.'000 Rs.'000 Rs.'000 Rs.'000 14.1.1 Quoted Equity Securities Bank, Finance & insurance Hatton National Bank PLC 12,037,030 2,703,620 2,949,072 10,178,656 526,497 2,293,252 2,703,620 2,949,072 526,497 2,293,252 Diversified Investments Melstacorp PLC - Non Voting 1,000 64 64 1,000 64 64 Aitken Spence PLC - - - 186,500 28,704 10,481 64 64 28,768 10,545 Total Quoted Equity Securities - AFS 2,703,684 2,949,136 555,265 2,303,797
14.1.2 Unquoted Equity Securities Amethyst Leisure Limited 58,266,167 125,226 90,094 58,266,167 125,226 125,226 International Distilleries Lanka Limited 100 3 3 100 3 3 W.M.Mendis & Co., Limited 200 4 4 200 4 4 125,233 90,101 125,233 125,233
14.1.3 Investments in Unit Trusts Unit Trust Mgt Co., Ltd 300,000 3,000 3,000 300,000 3,000 3,000 3,000 3,000 3,000 3,000
14.1.4 Investment in Debentures LB Finance PLC 14.1.4.1 - - - 2,206,700 220,670 222,877 DFCC Bank PLC 2,000,000 206,208 200,000 2,000,000 200,000 200,000 206,208 200,000 420,670 422,877
14.1.4.1 Current Investments LB Finance PLC 2,206,700 228,597 220,670 - - - 228,597 220,670 - -
As at 31 March, 2018 2017 Note Rs.'000 Rs.'000 14.1.5 Investment in Government Securities Treasury Bonds - 1,321,785 - 1,321,785 14.2 Fair Value through Profit or Loss (FVTPL) Financial Investments Quoted Equity Securities 14.2.1 51,946 46,432 51,946 46,432
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 73 Notes to the Financial Statements
As at 31 March, 2018 2017 No. of Shares Fair Value No. of Shares Fair Value Rs.'000 Rs.'000 14.2.1 Quoted Equity Securities Beverage, Food & Tobacco Renuka Agri Foods PLC 4,918,560 11,313 4,918,560 13,771 Nestle Lanka PLC - - 1,194 2,495 11,313 16,266
Hotel and Travels The Kingsbury Hotel PLC 618,600 11,135 618,600 9,588 John Keells Hotels PLC 388,850 3,616 388,850 3,889 14,751 13,477
Diversified Investments Softlogic Holdings PLC 380,000 9,348 380,000 4,522 Browns Capital PLC 2,850,850 10,263 2,850,850 4,276 19,611 8,798
Chemicals and Pharmaceuticals Haycarb PLC 52,255 6,271 52,255 7,891 6,271 7,891 Total Quoted Equity Securities -FVTPL 51,946 46,432
15 Deferred Tax Liability As at 31 March 2018 2017 Rs.'000 Rs.'000 Balance as at 1 April 1,214,841 938,116 Charge during the year 559,115 276,725 Balance as at 31 March 1,773,956 1,214,841
15.1 Movement in recognized deferred tax (assets)/liabilities
For the year ended 2018 2017 31 March Charge/(Reversal) Charge/(Reversal) Balance as at Profit or Other Balance as at 31 Balance as at Profit or Other Balance as at 1 April 2017 Loss Comprehensive March 2018 1 April 2016 Loss Comprehensive 31 March 2017 Income Income On Retirement Benefit (49,884) (628) 1,619 (48,893) Obligations (48,893) (1,840) (1,007) (51,740) On Property, Plant and 849,208 275,734 1,124,942 Equipment 1,124,942 (33,439) - 1,091,503 On Revaluation Surplus 138,792 - - 138,792 on Buildings 138,792 - - 138,792 On Revaluation Surplus - - - - on Lands - - 595,401 595,401 1,214,841 (35,279) 594,394 1,773,956 938,116 275,106 1,619 1,214,841
74 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 15.2 The recognised deferred tax (assetss)/liabilitities of the Company is attributable to the following; As at 31 March 2018 2017 Temporary Temporary Tax Effect Tax Effect Difference Difference Rs.'000 Rs.'000 Rs.'000 Rs.'000 On Retirement Benefit Obligations (129,349) (51,740) (122,231) (48,893) On Property, Plant and Equipment 2,728,759 1,091,503 2,812,357 1,124,942 On Revaluation Surplus on Buildings 346,980 138,792 346,980 138,792 On Revaluation Surplus on Lands 1,488,503 595,401 - - 4,434,893 1,773,956 3,037,106 1,214,841
As at 31 March, 2018 2017 Rs.'000 Rs.'000
16 Inventories Raw Materials 2,343,940 1,986,494 Packing Material 669,456 719,030 Work in Progress 494,766 611,978 Finished Goods 611,005 851,904 Input Materials, Consumables and Spares 340,118 324,663 Goods In Transit 240,689 - 4,699,974 4,494,069 Less: Provision for Slow Moving and Obsolete Inventories (5,443) (5,443) 4,694,531 4,488,626
17 Trade and Other Receivables
Financial Assets Trade Receivables 6,241,258 4,249,241 Other Financial Receivables 180,726 162,295 Refundable Deposits 5,052 4,566 6,427,036 4,416,102 Provision for Impairment Loss on Financial Assets (180,059) (180,059) 6,246,977 4,236,043 Non Financial Assets Prepayments and Advances 2,193,195 2,339,407 Accrued Income 21,667 65,223 Other Non Financial Receivables 274,142 303,085 2,489,004 2,707,715 8,735,981 6,943,758
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 75 Notes to the Financial Statements
18 Cash and Cash Equivalents As at 31 March 2018 2017 Rs.'000 Rs.'000 Favorable Balances Classified under Current Assets Cash at Bank 278,713 152,202 Cash in Hand 9,042 10,467 Cash in Transit 182,332 96,812 Total 470,087 259,481 Unfavorable Balances Classified Under Current Liabilities Bank Overdraft 1,225,022 517,588 Total 1,225,022 517,588 (754,935) (258,107)
As at 31 March, 2018 2017 No. of Shares Value of No. of Shares Value of Shares Shares Rs.'000 Rs.'000 19 Stated Capital Balance at the Beginning of the Year 300,000,000 300,000 300,000,000 300,000 Effect from sub division of shares 19.1 2,700,000,000 - - - Issue of Shares 20.2 1,600,000,000 20,000,000 - - Capital Reduction 19.2 - (17,300,000) - - Balance at the End of the Year 4,600,000,000 3,000,000 300,000,000 300,000 The Company’s Stated Capital consists 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.
19.1 Subdivision of Ordinary Shares The Board of Directors of the Company has decided that each ordinary shares held by a shareholder be subdivided into ten (10) ordinary shares in conformity with Article 5 (vi) (a) of the Articles of Association of the Company. Before subdivision, the total number of shares of the Company is three hundred million (300,000,000) ordinary shares. After the subdivision, total number of shares of the Company has increased to three billion (3,000,000,000) ordinary shares.
19.2 Capital Reduction The Company has reduced the stated capital held by the shareholders in terms of the section 59 of the Companies Act No 07 of 2007 during the year. The capital reduction amount was Rs.17.30 billion and the stated capital balance after capital reduction is Rs.3 billion as at 31 March 2018. Reduced stated capital was transferred to the retained earnings of the Company.
As at 31 March, 2018 2017 Note Rs.'000 Rs.'000 20 Pending Allotment
Balance at the Beginning of the Year 20,000,000 Pending Allotment 20.1 - 20,000,000 Transferred to stated capital 20.2 (20,000,000) - Balance at the End of the Year - 20,000,000
76 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 20.1 Issuing Shares (Pending Allotement) to Melstacorp PLC & settlement of Short Term Loan On 01 January 2017, DCSL PLC has received Rs.20 Bn from the holder of 99.95% of its shares Melstacorp PLC for allotment of Shares. DCSL has utilized the funds to settle the sums payable to Melstacorp PLC on Short Term Loan. The Company is awaiting approval of the Securites and Exchange Commission to effect a private placement of shares with Melstacorp PLC. 20.2 Share allotment On 26 October 2017, DCSL PLC has obtained the approval of the Securities and Exchange Commission for the grant of the waiver in terms of Rule 5.4(b) of the listing rules for the issue of shares by way of a private placement and accordingly the Company has issued 1.6 Bn number of shares to Melstacorp PLC.
As at 31 March, 2018 2017 Note Rs.'000 Rs.'000 21 Reserves Capital Reserve 21.1 107,882 107,882 Revaluation Reserve 21.2 1,101,291 1,696,692 General Reserve 21.3 10,000 8,210,000 Available For Sale Reserve 21.4 1,961,524 1,711,030 Total Reserves 3,180,697 11,725,604
21.1 Capital Reserve Capital reserve comprises profits retained in order to utilize for the capital commitments. 21.2 Revaluation Reserve The Revaluation Reserve comprises of the gain arisen from the revaluation of Property, Plant and Equipment. This reserve is realized upon the derecognition of the revalued Property, Plant and Equipment. 21.3 General Reserve General reserve reflects the amount the Company has reserved over the years from its earnings. 21.4 Available For Sale Reserve This represents the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired.
As at 31 March 2018 2017 Note Rs.'000 Rs.'000 22 Retirement Benifit Obligations Present Value of Unfunded Obligations 22.1 129,349 122,230 Present Value of Funded Obligations - - Total Present Value of Obligations 129,349 122,230 Fair Value of Planed Assets - - Provision for Retirement Benefit Obligations 129,349 122,230
22.1 Movement in Present Value of Defined Benefit Obligations Balance as at Beginning of the Year 122,230 124,708 Benefits Paid by the Plan (22,689) (23,536) Expense Recognized in the Income Statement 22.1.1 27,290 25,104 Actuarial (Gain) / Loss Recognized in Other Comprehensive Income 2,518 (4,046) Balance as at the End of the Year 129,349 122,230
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 77 Notes to the Financial Statements
22.1.1 Expences Recognized in the Income Statement 2018 2017 Rs.'000 Rs.'000 Current Service Costs 13,234 12,633 Interest Costs 14,056 12,471 27,290 25,104
As at 31 March, 2018 2017 22.2 Actuarial Assumptions Principal actuarial assumptions at the reporting date Discount Rate (%) 11.00% 11.50% Future Salary Increases (%) 5% 5% Retirement Age (years) 55-65 years 55-65 years
22.3 Sensitivity of Assumptions Used One presentage change in the assumptions would have the following effects,
2018 2017 Effect on Define Benefit Obligation Liability, Discount Salary Discount Salary Rate Increment Rate Increment Rs.'000 Rs.'000 Rs.'000 Rs.'000 Increase by 1 % (4,750) 5,326 (4,576) 5,108 Decrease by 1 % 5,131 (5,002) 4,927 (4,811)
Effect on Comprehensive Income 2018 2017 Discount Salary Discount Salary Rate Increment Rate Increment Rs.'000 Rs.'000 Rs.'000 Rs.'000 Increase by 1 % (4,750) 5,326 (4,576) 5,108 Decrease by 1 % 5,131 (5,002) 4,927 (4,811)
As at 31 March, 2018 2017 Note Rs.'000 Rs.'000 23 Trade and Other Payables Financial Liabilities Trade Payables 171,695 170,455 Other Financial Liabilities 531,200 500,686 702,895 671,141 Non Financial Liabilities Direct and Indirect Taxes Payable 23.1 5,001,792 4,422,512 Unclaimed Dividends 152,225 152,960 Other Non Financial Liabilities 3,227,097 2,821,057 8,381,114 7,396,529 9,084,009 8,067,670
78 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 23.1 Direct and Indirect Taxes Payable 2018 2017 Rs.'000 Rs.'000 Excise Duty Payable 3,606,735 3,359,449 Value Added Tax (VAT) Payable 1,393,391 1,061,340 Nation Building Tax (NBT) Payable 1,567 1,723 Stamp Duty Payable 99 - 5,001,792 4,422,512
24 Interest Bearing Loans and Borrowings Short Term Borrowings 4,075,000 5,621,594 Repo Borrowings - 1,200,000 4,075,000 6,821,594
25 Related party Disclosures The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties as per 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.
25.1 Balances with Related Parties
25.1.1 Amounts Due from Related Companies As at 31 March, 2018 2017 Rs.'000 Rs.'000 Aion SG Residencies (Pvt) Ltd 11,920 11,920 Continental Insurance Lanka Limited 1,084 1,116 Lanka Bell Limited (Note 25.1.3) 69,352 64,933 Melstacorp PLC 264,701 - Periceyl (Pvt) Ltd 504,541 590,055 Madulsima Plantation PLC 52,475 - Balangoda Plantation PLC 175 - Melsta Regal Finance Limited 102 - Melsta Technologies (Pvt) Ltd 32 - Milford Exports (Pvt) Ltd - 84 Ambewela Livestock Co.Limited 3,837 9,725 Pattipola Livestock Co.Limited 1,198 1,037 Lanka Milk Foods (CWE) PLC - 314 Stassen Exports (Pvt) Limited 8,536 - 917,953 679,184 Less: Provision for Impairment (11,920) (11,920) 906,033 667,264
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 79 Notes to the Financial Statements
25.1.2 Amounts Due to Related Companies 2018 2017 Rs.'000 Rs.'000 Bellvantage (Pvt) Ltd 1,726 1,902 Melstacorp PLC - 1,768,091 Melsta Logistics (Pvt) Ltd 1,204,499 1,006,565 Splendor Media (Pvt) Ltd 5,127 24,970 Texpro Industries Limited 1,128 1,128 Melsta Properties (Pvt) Ltd 11,538 131,999 Melsta Regal Finance Limited - 95 Stassen Exports (Pvt) Limited - 10,135 Lanka Milk Foods (CWE) PLC 1,072 - Lanka Dairies (Pvt) Ltd - 7 Melsta Technologies (Pvt) Ltd - 4,685 1,225,090 2,949,577
25.1.3 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.
25.1.4 The Company pays or recovers interest on the balances with the following related companies as per the basis explained below;
Company Name Account type Interest Rate Periceyl (Pvt) Ltd Current account Monthly AWPLR only Melstacorp PLC Current account 3 Months Average of last published Average Weighted Prime Lending Rate (AWPLR) + 1% p.a. on the average monthly balance outstanding as at the last date of each month. Lanka Bell Limited Loan account AWPLR + 1% Melsta Logistics (Pvt) Ltd Current account Monthly AWPLR only
80 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 25.2 Transactions with Related Companies
No. Name of Company Name of Directors Nature of Interest Nature of Transaction Transaction Balance (due to) Value / due from as at 31-03-2018 (Rs.'000) ( Rs.'000) 1 Milford Exports (Ceylon) (Pvt) Mr. D.H.S.Jayawardena Ultimate Parent Co. No Transactions - - Limited Mr.D.Hasitha S.Jayawardena 2 Periceyl (Pvt) Limited Mr. D.H.S.Jayawardena Affiliate Co. Debtor Collections 7,357,055 504,541 Mr. C.R.Jansz Supply of Goods and Services 434,670 Mr.D.Hasitha S.Jayawardena Goods Received 840 Fund Transfers 7,268,000 Interest of Current Account 48,029 3 Balangoda Plantations PLC Mr. D.H.S.Jayawardena Affiliate Co. Rent Paid 265 175 Mr. C.R.Jansz 4 Splendor Media (Pvt) Ltd. Affiliate Co. Loan Interest 2,085 (5,127) Settlement of Short Term Loan 20,000 Services Received 1,172 5 Texpro Industries Limited Mr. D.H.S.Jayawardena Affiliate Co. Supply of Materials 617 (1,128) 6 Continental Insurance Lanka Ltd Affiliate Co. Insurance Premium 52,049 1,084 Insurance Claim Received 208 Supply of Goods and Services 14 7 Melsta Logistics (Pvt) Ltd Affiliate Co. Vehicle Hiring charges 361,978 (1,204,499) Repair Charges and Other 48,959 Services Rent 3,520 Interest of Current Account 95,620 Supply of Goods and Services 47,324 8 Melstacorp PLC Mr. D.H.S.Jayawardena Parent Co. Rent Expenses 232,384 264,701 Mr. C.R.Jansz Supply of Goods and Services 98,552 Mr. N.de S. Deva Aditya Loans given to MPL 150,000 Capt. K.J.Kahanda Loans given to BPL 136,500 Dr. N. Balasuriya Share purchased 10,972 Mr.D.Hasitha Refund of funds given to 336,500 S.Jayawardena Lanka Belll Mr.R.Seevaratnam Funds Transferred 1,087,207 Rent Paid 45,758 Interest Received 17,599 Interest Paid 25,911 Dividend Paid 480,546 Settlement of Promissory note 1,080,215 Interest
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 81 Notes to the Financial Statements
No. Name of Company Name of Directors Nature of Interest Nature of Transaction Transaction Balance (due to) Value / due from as at 31-03-2018 (Rs.'000) (Rs.'000) 9 Lanka Bell Ltd Mr. D.H.S.Jayawardena Affiliate Co. Loan Interest Received 7,636 69,352 Mr. C.R.Jansz Telephone Bills Paid and 7,760 Services Rendered Supply of Goods and Services 58 10 Bellvantage (Pvt) Ltd Affiliate Co. Maintenance Charges 19,869 (1,726) 11 Bell Solutions (Pvt) Ltd. Mr. D.H.S.Jayawardena Affiliate Co. Maintenance Charges 556 - 12 Melsta Regal Finance (Pvt) Ltd Affiliate Co. Supply of Goods and Services - 102 13 Stassen Exports (Pvt) Limited Mr. D.H.S.Jayawardena Affiliate Co. Purchases, Repairs and 70,469 8,536 Maintenance and Transport Charges Supply of Goods and Services 3,654 Rent Income 24,292 14 Lanka Dairies (Pvt) Ltd. Mr. D.H.S.Jayawardena Affiliate Co. Purchase of Milk Foods 323 - Mr. C.R.Jansz 15 Lanka Milk Foods (CWE) PLC Mr. D.H.S.Jayawardena Affiliate Co. Purchase of Milk Foods 19,467 (1,072) Mr. C.R.Jansz Supply of Goods and Services 3,849 16 Aitken Spence Hotel Holding PLC Mr. D.H.S.Jayawardena Affiliate Co. Sales 29,834 - 17 Melsta Properties (Pvt) Ltd Capt. K.J.Kahanda Affiliate Co. Rent Expense 85,731 (11,538) Supply of Goods and Services 101 Maintance charges 510 Rent Paid 225,073 Current Account Interest 18,340 18 Ambewela Live Products Mr. D.H.S.Jayawardena Affiliate Co. Purchase of Milk Foods 5 3,837 Mr. C.R.Jansz Supply of Goods and Services 44,696 19 Pattipola Live Products Mr. D.H.S.Jayawardena Affiliate Co. Supply of Goods and Services 8,316 1,198 Mr. C.R.Jansz 20 Melsta Technologies (Pvt) Ltd Affiliate Co. Software Maintenance Fee 64,730 32 Supply of Goods and Services 74 21 Madulsima Plantations PLC Mr. D.H.S.Jayawardena Affiliate Co. Supply of Goods and Services 10,242 52,475
82 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 25.3 Transactions with Key Management Personnel
25.3.1 Key Management Personnel Key Management Personnel include all the members of the Board of Directors (Executive and Non Executive) of the Company having authority and responsibility for planning, directing and controlling the activities of the Company.
25.3.2 Compensations to Key management Personnel For the year ended 31 March, 2018 2017 Rs.'000 Rs.'000 Short term Employee Benefits 36,550 38,160 Post Employment Benefits - - Other Long Term Benefits - -
25.4 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
There were no transactions with CFM during the year.
25.5 Loans to Directors There were no loans given to Directors during the year.
25.6 Recurrent Transactions Related party transactions exceeding 10% of gross revenue of the entity as per audited financial statements (CSE Ruling)
Name of Relationship Nature of the Aggregate Value Aggregate Value Terms & the Related Transaction of Related Party of Related Party Conditions of Party Transactons Transactons as a the Related Party entered into during % of Net Revenue / Transactions the financial year Income
(Rs.'000) Periceyl (Pvt) Debtor Commercial 7,357,055 25% Limited Collections Transaction Affiliate Co. Fund Transfers 7,268,000 25%
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 83 Notes to the Financial Statements 2017 46,432 Rs.'000 2017 667,264 259,481 4,176,692 4,236,043 9,385,912 Rs.'000 671,141 517,588 2,949,577 6,821,594 10,959,900 Total 2018 Rs.'000 906,033 272,616 470,087 Total 3,242,237 6,246,977 11,137,950 2018 - - - - Rs.'000 702,895 2017 7,228,007 1,225,090 4,075,000 1,225,022 Rs.'000 4,176,692 4,176,692 - - - Assets (AFS) 2018 2017 Rs.'000 220,670 Rs.'000 671,141 517,588 3,242,237 3,462,907 Available for Sale Financial Available 2,949,577 6,821,594 10,959,900
------2017 Rs.'000 amortized cost 2018 Rs.'000 702,895 (HTM) ------7,228,007 1,225,090 4,075,000 1,225,022 2018 Rs.'000 Financial liabilities measured at Held to Maturity Investments ------2017 2017
46,432 46,432 Rs.'000 Rs.'000 - - - - (FVTPL) 2018 Profit and Loss 51,946 51,946 - - - - - Rs.'000 through profit or loss Assets at Fair Value through Assets at Fair Value 2018 Rs.'000 - -
2017 Financial liabilities at fair value Rs.'000 667,264 259,481 4,236,043 5,162,788 (L&R) - - 23 24 18 Note 2018 25.1.2 Rs.'000 906,033 470,087 Loans and Receivables 6,246,977 7,623,097 Note 14.1 17 25.1.1 14.2 18 Financial Instruments Accounting Classification of Financial Instruments Current Liabilities and Other Payables Trade Interest Bearing Loans and Borrowings Bank Overdrafts Amount Due to Related Companies Total As at 31 March, 26.1.2 Accounting Classification of Financial Liabilities 26.1.2 26 26.1 Assets Accounting Classification of Financial 26.1.1 As at 31 March, Non Current Assets Non Current Other Non Current Financial Investments Current Assets Current and Other Receivables Trade Amounts Due From Related Companies Other Current Financial Investment Cash and Equivalents Total
84 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 26.2 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 reporting 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 marketv transactions on an arm’s length basis. The quoted market price used for financial assets held by the 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. 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 maximize 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.
Level 1 Level 2 Level 3 Total As at 31 March, 2018 2017 2018 2017 2018 2017 2018 2017 Note Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Non Current Assets Other Non Current Financial Investments Available for Sale Financial Investments - (AFS) Quoted Equity Securities 14.1.1 2,949,136 2,303,797 - - - - 2,949,136 2,303,797 Unquoted Equity Securities 14.1.2 - - - - 90,101 125,233 90,101 125,233 Investments In Unit Trusts 14.1.3 - - 3,000 3,000 - - 3,000 3,000 Investment in Debentures 14.1.4 200,000 422,877 - - - - 200,000 422,877 Investment in Government 14.1.5 - 1,321,785 - - - - - 1,321,785 Securities
Current Assets Other Current Financial Investments Available for Sale Financial Investments - (AFS) Investment in Debentures 14.1.4 220,670 - - - - - 220,670 - Fair Value Through Profit or Loss (FVTPL) Financial Investments Quoted Equity Securities 14.2.1 51,946 46,432 - - - - 51,946 46,432 3,421,752 4,094,891 3,000 3,000 90,101 125,233 3,514,853 4,223,124
27 Contingent Liabilities There were no material contingent liabilities as at the reporting date, which require adjustment to or disclosure in the Financial Statements, other than followings “ Two Corporate guarantees have been provided to Sampath Bank PLC for a sum of Rs.400Mn and Rs.300Mn for loan facilities obtained by Lanka Bell Limited.”.
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 85 Notes to the Financial Statements
28 Capital Commitments There were no material capital commitments which require disclosure in the Financial Statements as at reporting date. 29 Litigations and Claims There are no cases filed against the Company which would have a material Impact on the Statement of Financial Position of the Company other than what is disclosed below. A plaint filed by Censtal (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.
30 Assets Pledged Following assets have been pledged as securities for liabilities,
Value of the Assets Nature of Security Pledged Liabiliy Description Asset Type (Rs.) Interest bearing Quadruple agreement between DCSL, Melstacorp Other Long Term 3.3 Bn borrowings PLC,Share brokering company and Commercial Investments Bank of Ceylon PLC on a portfolio of Melstacorp PLC investment in Aitken Spence PLC and John Keells Holdings PLC.
31 Subsequent Events There were no material events occurring after the reporting date that requires adjustments to or disclosure in the Financial Statements. 32 Restructure of DCSL Group The DCSL being the sole investor of Melstacorp Limited ("MC") has restructured the DCSL Group with effect from 30 September 2016 as described in the announcement made to CSE on 1 August 2016. The restructuring of the Group has been dully approved by the shareholders of DCSL and the Courts under the part X of the Companies Act No. 07 of 2007. Consequent to the restructuring arrangement, the shareholders of DCSL have been allotted with shares in MC in the proportion of Four (4) MC shares in exchange of every One (1) share held in DCSL. Accordingly, DCSL became the wholly own subsidiary of MC with effect from 30 September 2016 and the shareholders of DCSL became the shareholders of MC and through MC all the subsidiaries in the Group. As a result of the restructuring arrangement, DCSL's ownership interest in MC was diluted from 99.95% (voting shares) to 0.0002% (non-voting) shares and the resultant loss on dilution of Rs, 75Bn is has been recognized in the profit or loss. The Company subdivided 300,000,000 shares being the all of the shares issued by the Company at end of trading on 14th February 2018 into ten (10) shares without any change to the stated capital of the company and leaving unaffected the relative voting and distribution rights of the holders of the same shares and consequent to the sub division, the total number of shares was increased to a total of 3,000,000,000 shares. Further, the Company issued 1,600,000,000 shares rank equally and pari passu in all respects with the existing ordinary shares by way of a private placement to its parent Melstacorp PLC for a consideration of Rs. 20,000,000,000. On completion of the private placement the total number of shares was increased to 4,600,000,000. The Company also carried a capital reduction from Rs. 20,300,000,000 to Rs. 3,000,000,000 in order to partially wipe out the negative retained earnings of the Company without any changes to the number of issued shares of the Company.
33 Financial Risk Management The Company 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 jeopardize the ability of the company to raise finance from markets (e.g. volatile interest rates). The Company 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.
Financial Instruments The Company'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.
86 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 33.1 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 the Company is entrusted to a niche of in-house financial professionals ably supported by external economists, financial consultants, legal counsel, tax experts, banks and auditors. In the normal course of business, the Company is exposed to financial risks that have the potential to negatively impact its financial performance. The Company 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 Company has exposure to the following risks from financial instruments 33.1.1 Credit Risk This is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to financial loss. The Company’s credit risk arises primarily from credit exposure to customers, including outstanding receivable from select retail chains. The Company assesses the credit quality of its counter-parties, taking into account their financial position, past experience and seasonal factors. The Company trades only with recognized, credit worthy third parties. It is a Company 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 Company’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,
Note 2018 % from Total 2017 % from Total Exposure Exposure Rs.'000 Rs.'000 Trade And Other Receivables 33.1.1.1 8,735,981 84% 4,236,044 62% Amounts due from Related Companies 33.1.1.2 906,033 9% 667,264 10% Corporate Debt Securities 33.1.1.3 420,670 4% 422,877 6% Government Securities 33.1.1.4 - 0% 1,321,785 19% Cash at Bank 33.1.1.5 278,713 3% 152,202 3% 10,341,397 100% 6,800,172 100%
33.1.1.1 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. 33.1.1.2 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 Company. 33.1.1.3 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 A- or Better. An Analysis of credit ratings of the issuers of debenture are as follows,
2018 2017 Credit Rating Amount % from Total Amount % from Total Exposure Exposure Rs.'000 Rs.'000 A+ 200,000 48% 200,000 47% BBB+ 220,670 52% 222,877 53% 420,670 100% 422,877 100%
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 87 Notes to the Financial Statements
33.1.1.4 Government Securities Government securities are referred to as risk free instruments in its nature.
33.1.1.5 Cash at bank Cash at bank is mainly consist of favorable balances in Savings and current accounts of private and government commercial banks. The Company 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 guaranteed by local and foreign credit rating agencies as AA- or Better.
33.1.2 Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations on time. Company’s sources of liquidity are its short term deposits in banks and its cash generated by operating activities. Company’s total contractual maturities are represented by its accounts payable and accrued liabilities, and are mostly due to be paid within one year. The Company 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. Company 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 Company’s financial liabilities as at 31 March 2017 and 31 March 2016.
2018 Within 1 Between 1-3 Between 3-5 More than Total year years years 5 years Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Interest Bearing Loans and Borrowings 4,075,000 - - - 4,075,000 Trade and Other Payables 9,084,009 - - - 9,084,009 Amount Due to Related Companies 1,225,090 - - - 1,225,090 Bank Overdrafts 1,225,022 - - - 1,225,022 15,609,121 - - - 15,609,121
2017 Within Between Between More than Total 1 years 1-3 year 3-5 years 5 years Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Interest Bearing Loans and Borrowings 6,821,594 - - - 6,821,594 Trade and Other Payables 8,067,670 - - - 8,067,670 Amount Due to Related Companies 2,949,577 - - - 2,949,577 Bank Overdrafts 517,588 - - - 517,588 18,356,429 - - - 18,356,429
33.1.3 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 Company 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.
88 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Equity Price Risk Company has 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 company investment policies. Safe Custodian agreements with banks are in place that adds a control dimension. The Company 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.
2018 2017 As at 31 March, Rs.'000 % Rs.'000 % Beverage Food and Tobacco 11,313 22% 16,266 35% Chemicals and Pharmaceuticals 6,271 12% 7,891 17% Diversified Investments 19,611 38% 8,798 19% Hotel and Travels 14,751 28% 13,477 29% 51,946 100% 46,432 100%
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 Company has short and long-term debt facilities. Interest rate risk exists as Company 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 Company’s financial position over the long term.
Foreign currency risk The Company 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. Company 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.
33.1.4 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 Company’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.
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 89 Notes to the Financial Statements
33.2 Capital Management The Company’s objectives when managing capital are to safeguard the Company’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. In order to maintain or adjust the capital structure, the Comany’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 Company 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 Statement of Financial Position plus bank overdrafts) less cash and cash equivalents. Total capital is calculated as “equity” as shown in the Statement of Financial Position plus net debt. Gearing ratios at 31 March 2018 and 2017 are as follows.
As at 31 March, 2018 2017 Rs.'000 Rs.'000 Total Interest Bearing Loans and Borrowing 4,075,000 6,821,594 Bank Overdrafts 1,225,022 517,588 Less: Cash & Cash Equivalents (470,087) (259,481) Net Debt 4,829,935 7,079,701 Total Equity 5,712,909 2,234,860 Total Capital 10,542,844 9,314,561 Gearing Ratio 46% 76%
90 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Statement of Value Added
Value Added For the year ended 31 March, 2018 2017 Rs. '000 Rs. '000 Gross Turnover 90,386,965 90,273,469
Other Operating Income 346,639 234,460 Finance Income 244,054 360,934 90,977,658 90,868,863
Value Distributed For the year ended 31 March, 2018 Rs. '000 As a % of Total To the State as Taxes 64,214,796 70.58% Operating Expenses 19,445,842 21.37% To the Employees 1,610,483 1.77% To Providers of Debt Capital 828,821 0.91% To Shareholders as Dividends 525,000 0.58% Retained with the Business As Depreciation 563,527 0.62% As Retained Earnings 3,789,189 4.17% 90,977,658 100.00%
2017 Rs. '000s As a % of Total To the State as Taxes 66,067,600 72.71% Operating Expenses 16,356,243 18.00% To the Employees 1,551,632 1.71% To Providers of Debt Capital 1,642,312 1.81% To Shareholders as Dividends 1,005,000 1.11% Retained with the Business As Depreciation 551,247 0.61% As Retained Earnings 3,694,829 4.07% 90,868,863 100.00%
Details of Real Estate 2017/2018 Location Land Extent Buildings Value Cost / No of Extent in Revaluation A R P Units ( Sq. Ft. ) Rs.'000 Seeduwa Seeduwa No: 03,New Bottling Plant 15 2 17.09 27 274,546.50 2,575,981 Complex & Housing Complex Seeduwa Seeduwa New & Old 5 2 15.10 22 93,276.00 529,530 Seeduwa - - - 16.70 - - 20,799 Seeduwa - - - 16.70 - - 24,439 Seeduwa - - - 8.00 - - 24,959 Seeduwa - - - 13.25 - - 41,339 Kandy Mawilmada 2 - - - - 39,373 Kalutara Bare Land 1 - 23.00 - - 27,500 Dickoya Dickoya - - - 4 14,800.00 133,132
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 91 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. Non Financial Information Holding 31 March 2018 31 March 2017 Last Traded N/A* N/A* Highest N/A* 294.00 Lowest N/A* 208.00 *Market values were not available since the shares of DCSL PLC were not trading from 30 September 2016 to 31 March 2018.
3. Distribution of Shareholding As at Holding 31 March 2018 31 March 2017 No. of Share Holders Total Holdings % of Holding No. of Share Holders Total Holdings % of Holding 1 to 1,000 8,039 2,014,501 0.04% 54 16,362 0.01% 1,001 to 10,000 2,322 5,377,658 0.12% 14 52,452 0.02% 10,001 to 100,000 253 6,482,089 0.14% 2 93,350 0.03% 100,001 to 1000,000 45 13,166,420 0.29% - - - 1,000,001 & Over 31 4,572,959,332 99.41% 1 299,837,836 99.94% 10,690 4,600,000,000 100.00% 71 300,000,000 100.00% 4. Analysis of Shareholding Holding No. of Share Holders Holding % of Holding
Individuals 10,447 52,365,710 1.14% Institutions 243 4,547,634,290 98.86% 10,690 4,600,000,000 100.00%
Resident 10,562 4,509,417,976 98.03% Non-Resident 128 90,582,024 1.97% 10,690 4,600,000,000 100.00%
5. Top 20 Shareholders - 31 March 2018 2017 Rank 2018 Name Share Holding % Share Holding % 1 Melstacorp PLC 4,253,266,969 92.46% 299,837,836 99.946% 2 Milford Exports (Ceylon) (Pvt) Limited 147,520,592 3.21% - - 3 Lanka Milk Foods (CWE) PLC 44,991,407 0.98% - - 4 Mr. M.A.Yaseen 25,924,620 0.56% - - 5 Commercial Bank of Ceylon PLC/L.E.M.Yaseen 15,466,666 0.34% - - 6 Bnymsanv Re-Neon Liberty Lorikeet Master Fund LP 12,077,595 0.26% - - 7 Caceis Bank Luxembourg Branch-Barca Global Master 8,385,243 0.18% - - 8 Northern Trust Company S/A Kuroto Fund LP 6,933,478 0.15% - - 9 Citibank Newyork S/A Norges Bank Account 2 6,087,366 0.13% - - 10 Mrs.L.E.M.Yaseen 4,977,777 0.11% - - 11 Citigroup Global Markets Limited Agency Trading P 4,835,689 0.11% - - 12 Commercial Bank of Ceylon PLC/M.A.Yaseen 4,740,740 0.10% - - 13 Lahugala Plantation (Pvt) Ltd 4,379,922 0.10% - - 14 Mrs.S.M.Chrysostom 3,374,814 0.07% - - 15 BNYMSANV Re-Blackrock Frontiers Investment Trust P 3,152,532 0.07% - - 16 BNYMSANV Re-Consilium Frontier Equity Fund L.P 3,081,895 0.07% - - 17 Deutsche Bank Ag-London 2,978,017 0.06% - - 18 Stassen Exports Limited 2,505,718 0.05% - - 19 Mr.Don Hasitha Stassen Jayawardena 2,231,505 0.05% - - 20 HSBC INTL NOM LTD-SSBT-Parametric Emerging Markets 1,996,476 0.04% - Sub Total 4,558,909,021 99.11% 299,837,836 99.946% Other Shareholders 41,090,979 0.89% 162,164 0.054% Total 4,600,000,000 100% 300,000,000 100%
Percentage of Shares held by the public: 3.25% 0.05% Total No. of share holders who hold the public holding : * 10,682 70
92 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Ten Year Summary
In Rs. Million - Company 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 RESULTS Gross Turnover 90,387.0 90,273.4 72,113.7 51,800.1 47,755.5 51,548.9 49,135.6 38,987.1 29,964.1 29,569.8 Excise Duty 61,204.1 63,254.0 50,572.8 34,883.6 31,057.4 34,087.5 33,859.7 25,464.4 18,979.0 18,339.2 Net Turnover 29,182.8 27,019.4 21,540.9 16,916.5 16,698.1 17,461.4 15,275.9 13,522.7 10,985.0 11,230.5 Profit/(Loss) Before Tax 7,324.8 8,063.7 8,222.6 13,070.3 8,136.6 9,275.9 6,905.4 9,972.0 4,004.5 3,977.9 Profit/(Loss) After Tax 4,349.5 4,975.0 5,302.1 10,284.7 5,357.9 6,872.7 4,297.2 7,768.7 2,815.0 2,682.4 FUNDS EMPLOYED Stated Capital 3,000.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 Capital Reserves 1,209.2 1804.6 1,804.6 1,403.0 2,079.7 2,160.1 2,506.9 2,923.6 107.9 107.9 Revenue Reserves & Retained Earnings 1,503.7 130.2 50,951.1 48,580.3 41,459.0 36,695.0 29,790.3 21,718.0 14,849.3 12,709.3 Shareholders Funds 5,712.9 2,234.9 53,055.7 50,283.3 43,838.7 39,155.1 32,597.2 24,941.7 15,257.2 13,117.2 Total Borrowings 5,300.0 7,339.2 5,197.4 6,476.4 10,025.8 8,576.0 9,741.5 254.6 76.2 920.1 Non Current Liabilities Net of Borrowings 1,903.3 1,386.0 1,112.7 669.3 171.1 159.6 116.1 270.1 111.4 171.5 Current Liabilities Net of Borrowings 11,201.4 11,892.5 10,050.5 7,599.2 7,154.0 8,095.6 20,107.8 6,860.7 5,159.9 4,785.2 24,117.6 22,852.6 69,416.3 65,028.2 61,189.6 55,986.3 62,562.6 32,327.1 20,604.7 18,994.0 ASSETS EMPLOYED Non-Current Assets 9,038.4 10,447.0 57,439.7 57,208.1 48,459.1 45,578.4 54,982.5 20,212.7 14,024.6 12,840.9 Current Assets 15,079.2 12,405.6 11,976.6 7,820.1 12,730.5 10,407.9 7,580.1 12,114.4 6,580.1 6,153.1 24,117.6 22,852.6 69,416.3 65,028.2 61,189.6 55,986.3 62,562.6 32,327.1 20,604.7 18,994.0 CASH FLOW Net Cash flow from Operating Activities 1,566.4 6,918.0 1,570.0 4,079.8 671.2 3,148.9 1,954.9 4,275.1 2,692.7 1,881.7 Net Cash flow from Investing Activities 1,208.3 (27,820.0) 725.6 209.2 (1,569.3) (689.3) (16,037.3) 1,247.0 (661.2) (35.6) Net Cash flow from Financing Activities (525.0) 18,789.0 (970.2) (975.0) (2,167.9) (1,535.6) 1,147.0 (875.8) (675.0) (525.0) Net Increase/(Decrease) in Cash & Cash Equivalents 2,249.8 (2,113.0) 1,325.4 3,314.0 (3,065.9) 924.0 (12,935.4) 4,646.3 1,356.5 1,321.1 KEY INDICATORS Earnings per Share (Rs.) 5.64 (233.42) 17.67 15.48* 17.86 10.68* 11.85* 15.08 9.38 8.90 Net Assets per Share (Rs.) 1.24 7.45 176.85 167.61 146.13 130.52 108.66 83.14 50.86 43.70 Market Value per Share (Rs.) Year End - - 206.20 240.50 203.00 166.50 145.00 180.00 118.00 65.00 Return on Shareholders’ Funds 76.61% 222.61% 10% 9%* 12% 8%* 11%* 31% 18% 21% Dividends per Share (Rs.) 0.67 1.75 3.35 3.25 3.25 3.00 3.00 3.00 2.50 2.25 Dividend Payout 70.50% (0.75%) 18.96% 21%* 18% 28%* 25%* 20% 27% 25% Dividend Yield - - 1.6 1% 2% 2% 2% 2% 2% 3%
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.
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 93 DCSL Management Team and Unit Management Team
HEAD OFFICE EXTRA SPECIAL HERITAGE ARENA OPERATIONS DIVISION Head of Extra Special Col. Ranjith Rupasinghe (Retd.) RSP, IG Head of Operations Maj. Gen. Mano Perera (Retd.) Heritage Arena RWP, RSP, psc Chief Engineer - Production D.S.P. Jayawardena Mar. Eng. (DIP), M.Sc. (Building Services FINANCE DIVISION Engineering), AMCIBSE U.K., Head of Finance Nimal Nagahawatte B.Sc. Eng. Tec. U.K., MASHRAE U.S.A. Asst. Manager - Finance Suranjan Lakmanaratchi Senior Manager – Processing Capt. P.A. Wijeratne SLN Asst. Manager - Finance Justin Algama B.Sc., Dip. Acc. (Retd.) USP, B.Sc. (DS) EE Manager - IT Ms. P. Gamagedara Dip. Eng, PGD in EI (UOM), CEng (NIBM), AACS (Ind), MIE (Ind), MIM (SL), MIET (UK), AMIE (SL) SUPPLIES DIVISION Manager – Production Cdr. A.S. Galabadage SLN Head of Procurement S. Rajanathan (Retd.) psn, B.Sc. (DS) Mgt , M.Sc WS (Maritime), MISMM, INTERNAL AUDIT DIVISION CMILT (UK) Chief Internal Auditor L.P. Liyanaarachchi FCA, Engineer – Mechatronics Eng. J. Vivegananthan B.Tech FCMA, Dip.Acc. (Hons) in Eng. (OUSL), AMIE (SL) Engineer – Mechatronics M.S. Munasinghe HND in INVESTIGATION DIVISION Mechatronics Eng. (UK), B.Eng. Director - Investigations Alfred Wijewardene DIG (Retd.) (Hons) in Mechatronics (UOW- UK), AMIMechE (UK) Deputy Director - G.U.J. Vithanage SSP (Retd.) Investigations Manager – IT R. Aravinth B.Sc. (Hons) Manager – Administration Maj. Mahinda Abeysinghe COMPANY SECRETARIAL & LEGAL DIVISION (Retd.) RSP Company Secretary and Ms. V.J. Senaratne Manager – Distribution H.D.A.C. Herath BA (Hons) Chief Legal Officer Attorney-At-Law & N.P., Solicitor (Eng. & Wales) Manager – Stores Maj. Ranga Juwandarage (Retd.) RWP, RSP, PgD Legal Officer & Assistant Ms. N.C. Goonawardena, LRHRM (University of Colombo) Company Secretary Attorney-At-Law & N.P., Commissioner for Oaths, LLM Manager – Logistics R.M.B. Lakshantha Grad Chem (London), MBA (UK), ACCS (SL) , A.I. Chem C Civil Engineer R.W.D.M.N. Senadhira NCT HUMAN RESOURCES DIVISION (Civil) Head of Human Resources Ms. Gayathri Chakravarthy LLB, Attorney-At-Law REGIONAL OFFICES Senior Manager - Human Ms. U.R. Edirisinghe B.Sc. Northern Region - Seeduwa Resources (HRM) Sp, MBA (Sri J.) Head of Northern Region Maj. R.M. Cabraal (Retd.) Manager - HR Administration Sqn. Ldr. Lakshini Gunathilaka Col. A.M.B. Peiris (Retd.) RWP, (Retd.) B.Sc. (DS) in Deputy Head of Northern & Compliance MBA (Sri J) Aeronautical Eng. Region Group Security Manager Deshabandu R.M.L.N. Bandara TRANSPORT DIVISION SSP (Retd.), MBA (USA) Head of Transport & Roshanth Kumar Perera Head of Analytical Division T.D. Ekmon B.Sc. (Hons), Logistics Chartered Chemist, M.I.Chem C Head of Distillery Operations D.L.D. Jayantha B.Sc., M.Sc. STOCK CONTROL DIVISION (Agriculture) Head of Inventory Lalith Ratnayake B.Sc. (B.Ad) Senior Chemist S.M. Sumanasekera B.Sc., Sp, MBA (WUSL) Management M.Sc. (Food Science & Technology), I Chem Consultant - Enactments & J.R. de Crusz (Retd. Dy. Chief Engineer M.N. Perera Commissioner of Excise) Regulations Senior Manager – Production Capt. K.A.P. Perera SLN (Retd.) RSP, psc, B.Sc. (DS) Manager – Production S.G. Bandula Silva B.Sc. Manager Warehouse M.R.G. Thilakasiri B.Sc.
94 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Manager Distillery (Acting) K.P.C.N.T. Fernando B.Sc. CENTRAL REGION – KANDY Manager – Transport Lt. Col. Indaka Yakandawela Capt. Chula Ranasinghe SLN (Retd.) B.Sc. (DS), MPM, MIM (SL) Head of Central Region (Retd.) USP Assistant Manager – Capt. K.V.G.H. Harischandra Deputy Head of Central V. Jeiyachandiran B.Sc. (Hons) Operations (Retd.) Region Manager Wholesale Outlet- F.H.D.M. Silva Senior Manager – Production N. Thiranagama B.Sc. Peliyagoda (W) (Acting) Chemist G. Chandana Kumara A.D. Mallikaarachchi Manager Wholesale Outlet- B.Sc. (Hons) Peliyagoda (S) Civil Engineer A.M.A.J.B. Abeykoon Manager Wholesale Outlet- K. P. Nishantha Degree of AA Rajakadaluwa (USA) Manager -Stores A.R.N. Atapattu Manager Wholesale Outlet- P. H. R. Indika Territory Manager-Sales S.M.N. Manikkam Negombo Assistant Manager - M.R.I.K. Bandara B.Sc. (Hons) Manager Wholesale Outlet- Lt. Col. W. N. Somasiri (Retd.) Administration Kurunegala Asst. Accountant Ms. W.M.P. Perera Distillery Seeduwa Manager Wholesale Outlet- Cdr. D.K.S.D. Perera SLN (Retd.) RSP & Bar Warehouses New Warehouse, Old Nawayalatenna Warehouse Manager Wholesale Outlet- W.P. Sugathapala Wholesale Outlets Peliyagoda (W), Peliyagoda Gampola (S), Rajakadaluwa, Negombo, Manager Wholesale Outlet- N. Narenthiran B.Sc. in C & Mgt. Kurunegala Vavuniya SOUTHERN REGION – KALUTARA Manager Wholesale Outlet- M. Sivakumar Batticaloa Head of Southern Region Brig. Aruna Wijewickrama (Retd.) USP, PQHRM (IPM) Manager Wholesale Outlet- K.K. Gunaratne passed finalist Dickoya AAT, Dip. in Mgt. Deputy Head of Southern Lt. Col. M.W. Susantha Region Marapana (Retd.) RSP Manager Wholesale Outlet- K.D.P. Pushpakumara Trincomalee Senior Manager – Production A.D. Amaradewa Manager Wholesale Outlet- P. Ratnakumar Manager - Operations D.H.L. Nissanka B.Sc. (Microbiology) NRI (Ind) Jaffna Asst. Engineer H.P.D.P. Mangala Gunasekara Manager Wholesale Outlet- Maj. K.A.C.T. Kalansooriya Anuradhapura (Retd.) Manager - Beruwala Distillery C.E. Nanayakkara Warehouse Nawayalatenna Manager Wholesale Outlet- A.D.C. Krishantha Kalutara Wholesale Outlets Nawayalatenna, Gampola, Vavuniya, Batticaloa, Manager Wholesale Outlet- D.R.D. Wijesinghe Dickoya, Trincomalee, Jaffna, Ratmalana Anuradhapura Manager Wholesale Outlet- M.A.C. Mandanayake UVA REGION – BADULLA Ambalantota Head of Uva Region Capt. Ranjith Wettewa SLN Manager Wholesale Outlet- K.D. Nagahawatte (Retd.) RSP, P.S.N. Galle Manager Warehouse S. Rajendran Manager Wholesale Outlet- P.S.H. Kumar Kuruwita Manager Wholesale Outlet W. M. Dayananda -Badulla Distillery Beruwala Warehouse Badulla Warehouses Kalutara No 01 & Kalutara No 02, Teak Stores, Mirishena Wholesale Outlet Badulla Wholesale Outlets Kalutara, Ratmalana, GROUP MANAGEMENT DIVISION Ambalantota, Galle, Kuruwita Group Financial Controller Cleetus Mallawaarachchi - FCA, FCMA, MBA Group Chief Information Prasanna Karunanayake - B.Sc. Officer (Eng), MBCS, ACMA, CGMA
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 95 Notice of Meeting
NOTICE IS HEREBY GIVEN that the TWENTY EIGHTH Notes: ANNUAL GENERAL MEETING OF DISTILLERIES COMPANY OF SRI LANKA PLC will be held at the Sri Lanka Foundation, 1. A member is entitled to attend and vote at the meeting or No. 100, Sri Lanka Padanama Mawatha, Independence to appoint a proxy to attend and vote on behalf of him/her Square, Colombo 07 on 28th September 2018 at 10.00 A.M. by completing the Form of Proxy enclosed herewith. for the following purposes. 2. A Proxy need not be a member of the Company. 3. The completed Form of Proxy should be deposited at the 1. To receive and consider the Annual Report of the Directors Registered Office of the Company at No.110, Norris Canal and the Financial Statements of the Company for the year Road, Colombo 10, before 10.00 a.m. on 27th September ended 31st March 2018. 2018. 2. To approve a final dividend as recommended by the Board THE SHAREHOLDERS AND THE PROXY HOLDERS of Directors. ATTENDING THE MEETING ARE KINDLY REQUESTED 3. To re elect Mr.N.de S. Deva Aditya who retires by rotation TO BE IN THEIR SEATS BY 9.45 A.M. THEY ARE ALSO at the Annual General Meeting in terms of Article 30 of the REQUESTED TO BRING THIS ANNUAL REPORT, ALONG Articles of Association, as a Director of the Company and WITH AN ACCEPTABLE FORM OF IDENTITY. who is over 70 years by passing the Following resolution. "That the age limit stipulated in Section 210 of the Companies Act No.07 of 2007 shall not apply to Mr.N.de S. Deva Aditya who has attained the age of 70 and that he be re-elected a Director of the Company." 4. To re elect as a Director, Mr.D.H.S. Jayawardena, who is over 70 years as a Director, by passing the following resolution : "That the age limit stipulated in Section 210 of the Companies Act No.07 of 2007 shall not apply to Mr.D.H.S. Jayawardena who has attained the age of 76 and that he be re-elected a Director of the Company.” 5. To re elect as a Director, Mr. R.Seevaratnam, who is over 70 years, as a Director by passing the following resolution: "That the age limit stipulated in Section 210 of the Companies Act No.07 of 2007 shall not apply to Mr. R.Seevaratnam who has attained the age of 75 and that he be re-elected a Director of the Company.” 6. To authorize the Directors to determine contributions to charities. 7. To authorize 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.
By Order of the Board,
Ms.V.J.Senaratne Company Secretary
21 August 2018 Colombo.
96 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 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 Jarawardena* 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 Eighth Annual General Meeting of the Company to be held on the 28th September 2018 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 …………….2018.
Notes:
1. Proxy need not be a member of the Company
2. In terms of the Article 20 (III) of the Articles of Association of the Company.
A proxy shall be appointed by notice in writing signed
(a) in the case of an individual, by the appointer or his attorney;
(b) in the case of a corporation, either under its common seal or by its attorney or by an officer on behalf of the corporation;
and shall be addressed to the Chairman or the Secretary. The notice of appointment shall state whether the appointment is for a particular meeting, or for a specified term.
3. In terms of Article 20 (IV) of the Articles of Association of the Company.
No proxy is effective in relation to a meeting, unless a copy of the instrument which contained the notice of appointment together with the duly executed power of attorney (if any) is submitted to the Secretary not less than twenty-four (24) hours before the start of the meeting.
4. In terms of Article 22 of the Articles of Association of the Company.
Where two (02) or more persons are registered as the holder of a Share, the vote of the person named first in the share register and voting on a matter shall be accepted to the exclusion of the votes of the other joint holders. Where there are several executors or administrators of a deceased shareholder in whose sole name any Shares are registered, any one of such executors or administrators may vote in respect of such Shares unless any other of such executors or administrators is present at the meeting at which such a vote is tendered and objects to the vote. In such an event, a vote in relation to such Shares on any matter shall not be accepted unless all such executors or administrators agree thereto.
5. Instructions as to completion are noted overleaf.
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 97 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 24 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.
98 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 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 Eighth Annual General Meeting of the Distilleries Company of Sri Lanka PLC at the Sri Lanka Foundation, No. 100, Sri Lanka Padanama Mawatha, Independence Square, Colombo 07 on 28th September 2018 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 : ......
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 99 Notes
100 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Notes
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 101 Notes
102 Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC Notes
Annual Report 2017/18 | DISTILLERIES COMPANY OF SRI LANKA PLC 103 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> 2018> nrg;lk;gh; khjk; 18 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 18th day of September 2018. 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 Dr. A N. Balasuriya Public Limited Liability Company Incorporated and domiciled Mr. D. Hasitha S. Jayawardena in Sri Lanka and listed on the Colombo Stock Exchange Secretary Registration No. Ms. V. J. Senaratne PQ 112 Auditors Ultimate Parent Company Messrs KPMG (Chartered Accountants) Milford Exports (Ceylon) Ltd. 32A, Sir Mohamed Macan Marker Mawatha, Registered Office Colombo 03, Sri Lanka 110, Norris Canal Road, Colombo 10, Registrars Sri Lanka Central Depository Systems (Pvt) Ltd. Tel: +94 11 5507000/2695295-7 Registrar Services and Corporate Actions Unit Fax: +94 11 2696360 No.341/5, M & M Center, Kotte Road, Web: www.dcslgroup.com Rajagiriya, Sri Lanka. Board of Directors Tel: +94 11 2356456 Fax: +94 11 2440396 Mr. D. H. S. Jayawardena - Chairman I Managing Director Bankers Mr. C. R. Jansz Bank of Ceylon Mr. N. de. S. Deva Aditya Commercial Bank of Ceylon PLC Capt. K. J. Kahanda (Retd.) DFCC Bank PLC Dr. A. N. Balasuriya Hatton National Bank PLC Mr. D. Hasitha S. Jayawardena Hong Kong & Shanghai Banking Corporation Mr. R. Seevaratnam Nation's Trust Bank PLC Mr. A. L. Gooneratne - (Aitemate to N. de. S. Deva Aditya) People's Bank Ms. V. J. Senaratne- (Aitemate to Capt. K. J. Kahanda) Seylan Bank PLC Audit Committee Standard Chartered Bank Mr. R. Seevaratnam - Chairman Credit Rating Dr. A. N. Balasuriya The Company has been assigned 'AAA (lka)' Mr. N. de. S. Deva Aditya National Long Term Rating with a Stable Outlook Mr. D. Hasitha S. Jayawardena by Fitch Ratings Lanka Limited. Remuneration Committee Dr. A. N. Balasuriya - Chairman Mr. N. de. S. Deva Aditya Mr. D. Hasitha S. Jayawardena