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Elpitiya Plantations PLC | Annual Report 2019/20 1 ELPITIYA PLANTATIONS PLC ANNUAL REPORT 2019/20 Contents About Our Report / 2 FINANCIAL INFORMATION Us at a Glance / 4 Financial Calendar / 115 Key Milestones/Awards / 8 Annual Report of the Board of Directors Board of Directors / 10 on the Affairs of the Company / 116 Board of Directors Profile / 12 Statement of Directors’ Responsibility / 119 Corporate Management / 15 Audit Committee Report / 120 Estate Management Team / 17 Remuneration Committee Report / 123 Performance Highlights / 19 Related Party Transactions Review Committee Report / 124 Financial Highlights / 22 The Board of Directors’ Statement on Internal Controls / 126 Chairman’s Message / 24 Independent Auditor’s Report / 128 Managing Director's Report / 28 Statement of Profit or Loss / 132 Our Integrated Strategy / 32 Statement of Comprehensive Income / 133 Corporate Governance / 42 Statement of Financial Position / 134 Risk Management / 66 Statement of Changes in Equity / 136 Performance Review / 71 Statement of Cash Flows / 138 Tea Sector / 74 Notes to the Financial Statements / 140 Rubber Sector / 78 Oil Palm Sector / 82 SUPPLEMENTARY INFORMATION Strategic Investments / 85 Value Added Statement / 206 Capital Management / 87 Information on Estates / 207 Financial Capital / 87 Shareholders and Investors Information / 209 Manufactured Capital / 90 Ten Year Summary / 212 Human Capital / 92 Definitions / 214 Social and Relationship Capital / 98 Notice of Meeting / 215 Intellectual Capital / 103 Form of Proxy / 217 Natural Capital / 106 Shareholder Feedback Form / 219 GRI Context Index / 110 Corporate Information / Inner Back Cover www.elpitiya.com Elpitiya Plantations PLC | Annual Report 2019/20 1 ON THE MOVE As we enter another year in which we have ceaselessly strived to create innovation, we are excited to see what lies ahead and to witness the transformation that we have set in motion since our inception. We are more than just a plantation company, and while traditional crops may not have garnered the expected returns, we have looked to ground breaking new thinking that will set a smooth passage to our diversification. With great ideas on our side and an unquenchable thirst for navigating new horizons, we are on the move towards the future of enterprise. 2 Elpitiya Plantations PLC | Annual Report 2019/20 About Our Report Elpitiya Plantations PLC and its subsidiaries (herein after referred to as the “Group”) present to you, our Second Integrated Annual Report which aims to provide a balanced review of the Group’s financial, social, and environmental performance. Despite the operating challenges presented by the outbreak of the COVID-19 pandemic, we have maintained consistency in our reporting practice, complying with both the quantitative and qualitative reporting disclosures required by the Integrated Reporting Framework and GRI Standards. Reporting Period This report covers the period from 1st April 2019 to 31st March 2020 which is the Group’s annual reporting cycle. This Report builds on the Group’s previous Annual Report for the period ending 31st March 2019. Scope and Boundary The Report covers the operations of Elpitiya Plantations PLC and its subsidiaries, EPP Hydro Power Company (Pvt) Ltd, Water Villas (Pvt) Ltd and Escape Parks Ceylon (Private) Limited (Formerly Known as Venture Valley (Pvt) Ltd) and focuses on aspects that are material and relevant to the Group’s operations and to our key stakeholders. Both the financial and non-financial disclosures pertaining to the Group, unless specifically mentioned otherwise. There were no material changes to the Group’s structure, size, or supply chain during the year under review. Reporting Principles Financial Reporting Narrative Reporting R Sri Lanka Financial Reporting Standards/ Sri R Integrated Reporting Framework of the Lanka Accounting Standards International Integrated Reporting Council R Companies Act No. 7 of 2007 (IIRC) R The Institute of Chartered Accountants of Sri R "A Preparer’s Guide to Integrated Corporate Lanka (LKAS) Reporting"-issued by the Institute of R IFRS/IAS Chartered Accountants of Sri Lanka Sustainability Reporting Corporate Governance R GRI Standards - In Accordance ‘Core’ R Listing Requirements of the Colombo Stock R UN Sustainability Development Goals Exchange (SDG’s) R Code of Best Practice on Corporate Governance issued by the CA Sri Lanka and SEC Elpitiya Plantations PLC | Annual Report 2019/20 3 Materiality We apply the principle of materiality in determining content for our Integrated Report. This report therefore focuses on issues that have the most material impact on our ability to deliver sustainable value to shareholders and key stakeholders. The process for determining material issues is detailed on page 36 of this Report, along with the material topics on page 37 to 38. External Assurance External assurance on the financial statements have been provided by Messrs. Ernst & Young. Apart from this engagement as independent assurance providers, the Group, Board of Directors and leadership team does not have any other relationship with the external assurance providers. Reporting Improvements RIncreased strategic orientation with connectivity across the Report through navigation icons RDemonstration of the connectivity to SDGs wherever relevant Navigating our Report The following navigation icons have been used throughout the Report in order to demonstrate connectivity between information as prescribed by the <IR> Framework. Capitals Manufactured Financial Human Social and Natural Intellectual Capital Capital Capital Relationship Capital Capital Capital Feedback We welcome your comments, suggestions, and queries on this Report. Please direct your feedback to, Chief Financial Officer Elpitiya Plantations PLC Level 09, Aitken Spence Tower I, No. 305, Vauxhall Street, Colombo 02, Sri Lanka. [email protected] 4 Elpitiya Plantations PLC | Annual Report 2019/20 Us at a Glance Elpitiya Plantations PLC (EPP) is a leading Regional Plantation Company (RPC) with a diversified crop base including tea, rubber, Oil Palm, forestry, cinnamon among others. The company’s 13 estates are located in the up, mid, and low country regions of Sri Lanka and cover a land extent of 8,800 hectares. In 2017/18 the Company embarked on a strategy aimed at transforming itself from a primarily commodity-based company to a more diversified operation. Accordingly, the Group has expanded its interests in a wide range of sectors including Eco-Tourism, Renewable Energy, Speciality-Tea manufacturing and Adventure theme park. Our Operations Our Plantation Buinesses Renewable Energy Generation Capacity Solar 3,666 GJ Hydropower 13,213 GJ Biomass 161,131 GJ Total 178,010 GJ Tea Rubber Oil palm Cinnamon Value Chain 71% 5% 24% Cultivated Extent 110.37 Ha Processing Capacity 3,353.92 KGs Revenue Contribution Revenue Our Diversified Businesses Our Diversified Oil Palm Processing 42.3% 18.5% 39.2% 1,959.38 Ha 855.98 Ha 1,818.59 Ha Processing Capacity 19,152,800 KGs Land Distribute Commercial Forestry and Other Crops 4,174,065 Kgs 552,536 Kgs 17,322,970 Kgs Cultivated Extent Crop Crop Commercial Forestry 935.36 Ha Berries 1 Ha Russia, Turkey, Japan, USA, Vietnam, UK, Domestic Market Iraq, Iran, UAE, China China, Japan Key Markets Markets Key Elpitiya Plantations PLC | Annual Report 2019/20 5 Our Impact Employment Environment 5,152 2,365 (46%) 2,787 (54%) 178,010 GJ 2% 7% 91% Direct Employment Male Female Renewable Energy Solar Hydro Bio Mass Opportunities Generated Economy Estate Communities Rs. 18,84 Mn Rs. 2,235 Mn 4,697 Rs. 118.6 Mn 21,054 Taxes Paid Export Revenue Direct/ Estate Workers Investment on Estate No of Beneficiaries Indirect Community Development 54% of our employees are female Rs. 202 Mn spent on field and factory mechanisation 16,879 GJ of renewable energy supplied to the Provision of rations during COVID-19 and Cultivation of national grid vegetables for community consumption Access to healthcare facilities provided to all estate workers 237.8 Mn litres of rainwater harvesting capacity and employees 95% of energy requirement met through renewable Rs. 6.2 Mn spent on scholarships grants to students in our sources estate communities Rs. 44.2 Mn spent on reforestation and soil management Provision of potable water to all households within our estates initiatives Rs. 18.84 Mn in taxes paid during the year USD 12.45 Mn Youth empowerment of estate communities through job in export revenue opportunities within the group 6 Elpitiya Plantations PLC | Annual Report 2019/20 Our Elpitiya Plantations PLC | Annual Report 2019/20 7 R We will continuously enhance our shareholder value. CredoR We are committed to continuous strategic H R D initiatives. R We will continuously explore opportunities for value addition to our resource base. R We are committed to enhancing employees quality of life. R We encourage positive and innovative initiatives to improve the competitive advantage of the company. R We strive to bring high quality in all aspects of our activities. R We will always pursue environmentally-friendly operations. 8 Elpitiya Plantations PLC | Annual Report 2019/20 Key Milestones/Awards 2002 ǡ ASPM increases its stake from 51% to 1997 60.79% 2008 ǡ Aitken Spence ǡ Diversification into Plantation renewable energy Managements PLC generation with the (ASPM) acquires commissioning of EPP from Carsons 2005 Sheen MHPP Agro Services Ltd. ǡ Diversification into Palm Oil Milling by setting up of a Joint Venture-AEN Palm Oil Processing (Pvt) 2000 Ltd 2009 ǡ Nayapane