otoi odns Annual Report 2014-15 | Softlogic Holdings
Progressive Entrepreneurship Softlogic Holdings | Annual Report 2014-15 Our Vision To be the most preferred and trusted product and service provider delivering high quality solutions to the corporate and retail sector with a view to enhancing shareholder value and revolutionising industry competencies. Our Credo To make sound and responsible investment decisions in all our businesses and to employ and retain the best people; through this, to become the most admired corporate in Sri Lanka.
Our Core Values
Softlogic’s corporate values are backgrounds, experiences, PASSION in our DNA. They guide the way approaches and ideas. We are passionate about we think and act. our businesses and brands, ACCOUNTABILITY and jealously safeguard our Through integrity, We emphasize accountability in reputation. accountability, humility, our behaviors as individuals and simplicity, passion and a focus collectively as a corporation. FOCUS ON SUCCESS on success, we have created We foster a “can do” attitude a vibrant corporate culture in HUMILITY and work tirelessly to reap which ideas flourish, people We seek the humility to place great results, simultaneously thrive and success is assured. the organization and society seeking profit optimization and before ourselves. capital growth. INTEGRITY We act with honesty and SIMPLICITY uphold ethical standards We strive for simplicity by always. We genuinely value examining and improving individuals for the diversity they processes, procedures and bring, through their different activities, and breaking down internal barriers. Entrepreneurship is about always being equipped with the right profit-making decisions involving several business activities impacting the organisation simultaneously or separately. Such decisions necessarily underpin strong financial discipline and speed of response to changing market forces. At Softlogic, we are forward-looking because we have always been forward- thinking, thereby aligning our business decisions with expanding market realities. In progressive entrepreneurship, we know that our thinking creates markets, stimulates demand and shapes our destiny when we smartly execute revenue and profit imperatives. This year we have synergized and consolidated operations and have focused on reinvesting profits to create more future value for our shareholders, business partners and all other stakeholders at large.
We think big; therefore, we are!
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Contents
The Odel Story A walk through Centara Ceysand Resort & Spa > See page 38 > See page 68
Financial 5 pg> Highlights About Softlogic 3 Group Structure 4 Financial Highlights 5 Highlights of 2014/15 6 Chairman’s Our Value Creation Model – ‘Make good to GREAT’ 8 13pg> Chairman’s Review 12 Review Board of Directors 16 Sector Heads 20 Functional Heads 22 Corporate Management Discussion & Analysis 26 70pg> Governance
Business Overview Retail Sector 32 Financial Statements Healthcare Services Sector 42 Statement of Directors’ Responsibilities 106 ICT Sector 48 Independent Auditors’ Report 107 Financial Services Sector 54 Income Statement 108 Automobile Sector 60 Statement of Comprehensive Income 109 Leisure Sector 64 Statement of Financial Position 110 Corporate Governance 70 Statement of Changes in Equity 112 Risk Management Review 79 Cash Flow Statement 114 Sustainability Report 85 Notes to the Financial Statements 117 Board Remuneration Committee Report 98 Investor Information 215 Audit Committee Report 100 Corporate Directory 218 Annual Report of the Board of Notice of Meeting 219 Directors on the Affairs of the Company 101 Form of Proxy 223 Financial Calendar 2015 104 Corporate Information IBC
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About Softlogic
Softlogic Holdings PLC was founded in importantly, paying dividends to our >> Softlogic is a leading 1991, and was listed on the Colombo shareholders. Our focus remains on the Stock Exchange in June 2011. long-term success of our businesses; diversified group, with our strategy has significantly been to interests in six distinct Softlogic is a leading diversified group, acquire businesses and help them grow with interests in six distinct business faster, using the expertise that is ours. business sectors -- sectors -- ICT, Retail, Financial Services, This “progressive entrepreneurship” ICT, Retail, Financial Healthcare Services, Automobiles and has proven time and again to be an Leisure, in which we employ over 8,000 excellent basis for value creation. Services, Healthcare people across 46 companies. Services, Automobiles As we look forward, we continue to and Leisure, in which Our aspirations are best expressed execute our simple, proven strategy to in our corporate dictum, “Best in the deliver more than acceptable returns we employ over Business.” to our shareholders. Our current 8,000 people across businesses continue to provide many We strive for continuing revenue opportunities for further growth of 46 companies. growth and the necessary cash flow individual businesses, and of the Group to allow us invest in continuously as a whole. developing our businesses and, as
Doing it the “Softlogic Way” Softlogic is a conglomerate operating with a universal set of values we call the “Softlogic Way”; we work with an array of globally recognised brands and partners to respond to and benefit from the growing Sri Lankan economy and provide a platform for our own growth.
CUSTOMERS LEADERSHIP COMMUNITY Delighted customers assure our Everyone at Softlogic is a Softlogic cares about Sri Lanka future; we earn their loyalty by potential leader. We encourage and Sri Lankans, and we are committing to high standards our people to “raise the bar” proud of the ways in which of customer care, delivery and higher to assure their success, we help them, not least by after-sales service. and ours. our concern for the natural environment.
SHAREHOLDERS BUSINESS PARTNERS TEAM WORK We are conscious of our We believe in an open Softlogic is ultimately judged shareholders’ expectations of us; relationship with our principals by how well its people work we know we will be judged by and partners, and know they will together. We encourage an our delivery of monetary returns judge us by how well we deliver open door policy and clear to them and by our standard of solutions to our customers, communication to help people corporate governance. in keeping with their service deliver performance and share standards and reputation. pride in their own achievements and those of the team.
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Group Structure
Softlogic Holdings PLC
Healthcare Finance Retail Leisure Automobile ICT & Other
Asiri Hospital Softlogic Softlogic Retail Softlogic Properties Future Automobiles Softlogic Information Holdings PLC Capital PLC (Pvt) Ltd. (Pvt) Ltd. (Pvt) Ltd. Technologies (Pvt) Ltd.
Softlogic Asiri Surgical Softlogic Dai-Nishi Softlogic City Hotels Softlogic International Hospital PLC Finance PLC Securities (Pvt) Ltd. (Pvt) Ltd Automobiles (Pvt) Ltd. (Pvt) Ltd.
Softlogic Softlogic Communications Central Odel PLC Stockbrokers (Pvt) Ltd. Hospital Ltd. Ceysand Resorts Ltd (Pvt) Ltd. Softlogic Brands Softlogic Computers (Pvt) Ltd. (Pvt) Ltd. Asiri Central Asian Alliance Hospitals Ltd. Insurance PLC Odel Lanka Softlogic Destination Management (Pvt) Ltd. (Pvt) Ltd. Softlogic Australia (Pty) Ltd. Asiri Capital Reach Diagnostics Portfolio Management Odel Apparels Services (Pvt) Ltd. (Pvt) Ltd. (Pvt) Ltd. Softlogic Real Estate (Pvt) Ltd. Softlogic Solar (Pvt) Ltd. BSL International Asian Alliance Asiri Hospital General Lanka (Pvt) Ltd. Matara (Pvt) Ltd. Softlogic Insurance Ltd. Communication Greenfield Trading Services (Pvt) Ltd. (Pvt) Ltd. Asiri Hospital Kandy (Pvt) Ltd. Abacus International Odel Properties Lanka (Pvt) Ltd. Pvt) Ltd.
Odel Information Digital Health Nextage (Pvt) Ltd. (Private) Limited * Technologies Services (Pvt) Ltd.
Softlogic Softlogic Corporate Restaurants (Pvt) Ltd. Services (Pvt) Ltd.
Silk Route Foods (Pvt) Ltd. Softlogic BPO Services (Pvt) Ltd.
* Digital Health (Private) Limited. Softlogic Retail One (Pvt) Ltd. was incorporated on 14 August 2015 Softlogic Mobile Distribution (Pvt) Ltd.
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Financial Highlights
For the Year ended 31 March 2015 2014 2013 2012 2011 Earnings Highlights Group Revenue (Rs. Mn) 39,563.9 29,246.4 25,351.3 21,818.8 10,788.0 Gross Profit (Rs. Mn) 14,116.6 11,011.6 8,983.3 7,329.8 2,880.4 Earnings Before Interest Tax, Depreciation & Amortisation (Rs. Mn) 6,400.6 5,024.9 4,227.3 4,486.2 2,198.9 Finance Cost (Rs. Mn) 2,692.8 2,660.0 2,754.6 2,007.4 857.0 Group Earnings Before Interest & Taxation (Rs. Mn) 4,961.5 3,918.0 3,207.5 3,608.0 1,903.9 Group Earnings Before Taxation (Rs. Mn) 2,268.7 1,258.0 453.0 1,600.5 1,047.0 Group Earnings After Taxation (Rs. Mn) 1,819.1 1,009.1 153.0 1,015.9 971.0 Total Comprehensive Income Net of Tax (Rs. Mn) 2,160.4 1,236.6 2,077.0 855.8 - Group Earnings Attributable to Equity holder (Rs. Mn) 555.8 155.8 (371.0) 448.3 829.0 Group Comprehensive Income Attributable to Equity holder (Rs. Mn) 760.7 220.1 557.0 340.0 - Gross Profit Margin (%) 36 38 35 34 27 Net Profit Margin (%) 5 3 1 5 9 Earnings Per Share (Rs.) 0.7 0.2 (0.5) 0.6 1.3 Dividends (Rs. Mn) - 120 234 101 - Interest Cover (X) 2.38 1.89 1.53 2.23 2.57 Return on Capital Employed* (%) 11 12 11 15 17 Balance Sheet Highlights Total Assets (Rs. Mn) 87,587 65,863 53,836 44,688 29,134 Current Ratio (X) 1.0 0.9 0.82 0.73 0.49 Asset Turnover (x) 0.5 0.4 0.5 0.5 0.4 Total Interest Bearing Borrowings (Rs. Mn) 43,906 31,518 23,037 22,782 17,938 Shareholders' Funds (Rs. Mn) 7,625 6,802 7,288 7,202 3,041 Net Asset per Share** (Rs.) 9.8 8.7 9.4 9.2 3.9 Total Equity (Rs. Mn) 15,782 13,351 13,568 11,312 7,045 Debt : Equity*** (X) 2.8 2.4 1.7 2.0 2.5 Debt : Total Assets (X) 0.5 0.5 0.4 0.5 0.6 Operating Cashflow (Rs. Mn) 426 1,775 1,777 157 (1,916) Capital Expenditure (Rs. Mn) 4,438 3,604 2,271 1,138 621 Cash Earnings per Share (Rs.) 0.5 2.3 2.3 0.2 (2.5) Investor Information Market close price as at 31 March (Rs.) 13.2 10.6 10.4 11.2 - Shares in Issue (Mn) 779 779 779 779 640 Market Capitalisation as at 31 March (Rs. Mn) 10,283 8,257 8,102 8,725 - 52 Week Market Share Price High (Rs.) 20.4 8.1 13.3 28.0 - 52 Week Market Share Price Low (Rs.) 10.3 12.5 9.4 11.1 - Price Earnings Ratio (X) 18.4 65.9 n/a 22.9 - Price to Book Value (X) 1.3 1.5 1.4 1.4 - Enterprise Value (Rs. Mn) 52,263 38,014 29,816 30,593 17,658 Enterprise Value : EBITDA (X) 8.17 7.56 7.05 6.82 8.03 Dividend Pay Out (%) - 77 n/a 23 - Dividend per Share (Rs.) - 0.155 0.3 0.13 - Dividend Yield (%) - 1 2 1 - Total Shareholder Return (%) 25 3 (4) - - Debenture Information 52-week Debenture Share Price High (Rs.) 110.5 n/a n/a n/a n/a 52-week Debenture Share Price Low (Rs.) 106.0 n/a n/a n/a n/a Last Traded Price as at 31 March (Rs.) 108.1 n/a n/a n/a n/a Last Traded Yield (%) 9.7 n/a n/a n/a n/a No. of Debentures Traded 1,005,000 n/a n/a n/a n/a Value Traded (Rs. Mn) 108.8 n/a n/a n/a n/a Group Employment**** 8,433 6,822 6,400 6,085 4,581
* Return on Capital Employed calculated as percentage of EBIT and Total Capital Employed (Equity plus interest bearing borrowings). ** Net Asset Value calculated based on weighted number of shares as at 31.03.2015. *** Debt to Equity calculated based on Total Equity Capital. **** Excluding employees of the associate companies of the Group.
Annual Report 2014-15 6 Highlights of 2014/15
Softlogic opened stores -- Galleria, Samsung, Charles & Keith & BURGER KING® -- at the Arcade Independence Square June 2014 April 2014 With leading Consultants in
Softlogic Holdings opened the doors of its Cosmetology and Dermatology July 2014 Softlogic partnered with first resort, Centara Ceysand Resort & Spa in providing services to its Metropolitan to promote Acer Bentota. discerning patients, Central Hospital opened the doors of its computers. Softlogic launched its online retail store – new unit dedicated to cosmetic www.mysoftlogic.lk Asiri introduced a modern platelet procedures, ‘Beauty Central’. counter that measures young The Bone Marrow Transplant and Clinical platelets in peripheral blood. Hematology Unit at Central Hospital carried out the first allogeneic procedure in Sri Lanka. Softlogic Finance was recognised as the ‘Most Innovative Non-Banking Finance Company’ and the ‘Best Customer Service Company For Finance’ in Sri Lanka for 2014 at the Global Banking & Finance Review Awards.
Asian Alliance Insurance celebrated 15 years in business. Softlogic Finance won an Effie Award as a finalist in the ‘Finance’ category at the 2014 Awards of the Sri Lanka Institute of Marketing, for their ‘The Bus’ campaign on the ‘Easy withdrawals’ facility offered Central Hospital launched a to Fixed Deposit customers. one-stop heart care centre, to enable patients access to nearly all Cardiologists, Cardiac Surgeons and a range of highly-advanced, BURGER KING® Sri Lanka potentially life-saving won the award for Best equipment in one place. New Market in Restaurant Excellence and the Employee Asian Alliance Insurance of the Year at the BK AsiaPac received a Silver Award in PTE Ltd 2014 Asia Pacific the ‘Insurance Category’ Convention. and a further Silver Award for Overall Excellence in Softlogic Information the ‘Large Companies Technologies launched the Category’ at the ‘National Softlogic introduced Tommy Hilfiger to Sri new Latitude 14 Rugged Business Excellence Lanka with the opening of its first store at Extreme notebook and the Awards 2014’. Arcade Independence Square. Latitude 12 Rugged Extreme convertible notebooks for Softlogic Finance received Splash, the Middle East’s largest high customers who require a Merit Award in the street fashion retailer, opened its first powerful solutions that ‘Non-Banking and Financial exclusive store in Colombo. December 2014
survive tough environments. November 2014 Services Category’ at the same event.
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Softlogic concluded a major transaction on the Colombo Stock Exchange with the acquisition of a significant shareholding in Odel PLC, leading later to a 93.39% ownership of that Company.
August 2014 Asian Alliance Insurance BURGER KING® opened its outlet opened its General Insurance October 2014 in Kandy. Corporate Office at Ward Place, Colombo 07. September 2014 Asian Alliance Insurance Softlogic Retail, the authorised launched innovative solutions distributor for Panasonic in in General Insurance with new Sri Lanka, added a new dimension “DRIVE THRU” and “365 DAY in its quality assurance by INSURANCE” services, mainly acquiring SLS certification for its targeting motor customers. Compact Fluorescent Light (CFL) Bulb.
A BURGER KING® was opened BURGER KING® introduced the world at Central Hospital. famous Chicken Whopper to its menu. Softlogic Retail concluded an agreement with Whirlpool to market and distribute Whirlpool products in Sri Lanka. BURGER KING® opened at the Departures Hall of the Bandaranaike International Airport. Future Automobiles was awarded the
January 2015 “FORD GOLDEN SHOVEL AWARD” by Ford Motor Company in recognition Asiri Laboratory Services opened two collection of leading-edge-facilities to support centres in Gampaha and Wattala. long-term customer satisfaction and Asian Alliance Insurance launched another owner loyalty. innovative insurance solution, Click2Claim, Asiri Laboratory Services received the allowing motor insurance policyholders to esteemed 15189-2012 international accelerate claim procedures by providing a accreditation in recognition of its photograph of the damaged vehicle via this competence and effectiveness in mobile phone app. modernisation and development of The microbiology section of Asiri Laboratory pathology and laboratory services. Services was placed first in the National External Quality Assessment Scheme in bacteriology. Softlogic Holdings was ranked second most Crocs™ was added to Softlogic Brand’s valuable conglomerate brand in 2015 based portfolio, with Crocs shoes being retailed on independent market research conducted at Odel and Mothercare. amongst 1,700 respondents in Colombo and Gampaha. Asiri Hospital Holdings, Odel, Asian Alliance Insurance and Softlogic Finance were other Group companies recognised in this prestigious annual ranking. February 2015 Softlogic Retail opened its 200th showroom in March 2015 Mahawilachchiya.
Annual Report 2014-15 8
Our Value Creation Model – ‘Make good to GREAT’ The catalyst driving many business acquisitions involves synergies. When companies are merged, the whole is often greater than the sum of its parts.
1991 COMPANY Softlogic Information Technologies (Pvt) Ltd (Previously known as Softlogic Information Systems (Pvt) Ltd. after being merged with Softlogic Trading (Pvt) Ltd).
OPERATIONS Hardware and software solutions provider.
AT ACQUISITION/ INITIATION RS. 6 MN RS. 1 MN Turnover Asset base NOW RS. 2.3 BN RS. 1.8 BN Turnover Asset base
1995
COMPANY Softlogic Computers (Pvt) Ltd.
OPERATIONS Specialised in marketing and supporting networking and power protection products through a locally established dealer channel.
AT ACQUISITION/ INITIATION RS. 8 MN RS. 8 MN Turnover Asset base NOW RS. 484 MN RS. 220 MN Turnover Asset base
1997
COMPANY Softlogic International (Pvt) Ltd.
OPERATIONS Authorised partner of Dialog Axiata PLC providing mobile packages. Retailer of ‘Nokia’, ‘Microsoft Lumia’ and ‘Samsung’ handsets. AT ACQUISITION/ INITIATION RS. 0.4 MN RS. 1.1 MN Turnover Asset base NOW RS. 396 MN RS. 1.1 BN Turnover Asset base
1998
COMPANY Abacus International (Pvt) Ltd
OPERATIONS An associate set up in partnership with Abacus International Ltd, Asia Pacific’s largest computer reservations system. AT ACQUISITION/ INITIATION RS. 8 MN RS. 15 MN Turnover Asset base NOW RS. 184 MN RS. 91 MN Turnover Asset base
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2004
COMPANY Softlogic Properties (Pvt) Ltd
OPERATIONS Holding company of the leisure sector.
AT ACQUISITION/ INITIATION RS. 227 MN Centara Ceysand - a 84-room resort in 2010. Asset Base Property acquired to construct a five-star city hotel, Movenpick City Hotel in 2011. RS. 3.6 BN Centara Ceysand Resorts & Spa - a 166-room 4-star plus NOW Resort & Spa. Asset Base Movenpick City Hotel has an asset base of Rs.3.2 Bn.
2006
COMPANY Softlogic Retail (Pvt) Ltd (Previously known as Uni Walkers Ltd)
OPERATIONS Was agent for Daihatsu and Panasonic. This operation is now carried out through our Automotive, Consumer Durables and apparel sector. AT ACQUISITION/ INITIATION RS. 150 MN RS. 658 MN Turnover Asset base
NOW RS. 9.1 BN RS. 13.2 BN Turnover Asset base
2010
COMPANY Softlogic Capital PLC (Previously known as Capital Reach Holding (Pvt) Ltd.)
OPERATIONS Sector holding company of the financial services cluster.
AT ACQUISITION/ INITIATION RS. 960 MN RS. 5.4 BN Turnover Asset base NOW RS. 10 BN RS. 32.9 BN Turnover Asset base
2011
COMPANY Asiri Hospital Holdings PLC
OPERATIONS Acquired controlling stake of country’s leading private healthcare provider.
AT ACQUISITION/ INITIATION RS. 4.9 BN RS. 12.4 BN Turnover at initial consolidation Asset base NOW RS. 8.6 BN RS. 18.2 BN Turnover Asset base
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We’re in the business of adding value - whatever we do...
Softlogic Holdings PLC Softlogic Holdings PLC 11
Softlogic reaches out to thousands of EXTENSIVE customers across the island every day, through our wide branch network and REACH strong presence in six sectors.
Restaurants – 07 Branded Apparel – 22 RETAIL Odel - 20 Consumer Electronics – 208 Furniture – 01
HEALTHCARE Hospitals – 05 Laboratories – 09 SERVICES Collection Centres – 12
Telco, Regional Distributors – 24 Telco, Dealers – <1,500 Telco, Retail points – <40 ICT Mobile Service Centres – 05 Softlogic Computers and Service Center – 01 IT, Regional Technical Support points – 17
Softlogic Finance – 23 Softlogic Finance Gold Loan Centres – 09 FINANCIAL Asian Alliance Insurance – 63 SERVICES Asian Alliance General Insurance – 13 Asian Alliance Insurance operating via Softlogic Retail network – 36
Ford Centre – 01 AUTOMOBILE Ford Service Dealers – 04 Daihatsu – 01
LEISURE Centara Ceysand Resorts & Spa – 01
While we focus on providing growing value to every stakeholder, we have significantly expanded our customer service capabilities through a broader presence across the island. At Softlogic we are confident that we can further strengthen our positions in the markets we serve, adding value to all stakeholders.
Annual Report 2014-15 Annual Report 2014-15 12 Chairman’s Review 13
Dear Shareholders, >> The progress we made in 2014, Progressive Entrepreneurship takes time to put in place. Patience, hard combined with the presence in six work, trust, agility and passion are sectors which will benefit from growth important. But above all, creative vision is essential. in the economy, will consolidate We present this year’s Annual Report with Softlogic’s position in the market. satisfaction. The theme is ‘Progressive Entrepreneurship’, and we continue to pursue the optimal value for our mix of stakeholders - shareholders, employees, partners and the communities with whom Your Group performed strongly during the withheld for re-evaluation, the industry we interact. We have achieved solid results year. Notable achievements were: forged ahead with purchasing power this year and have created the groundwork • Asset growth: Total assets at end- improving, corporate interest re-emerging, for even better results in the future. March 2015 rose to Rs.87.6 Bn, from public awareness rising and device prices Rs.65.9 Bn last year. declining. ‘Dell’ was recognised as the No. A long term view is essential to sustainable 1 PC brand in the country for the seventh • Revenue & Profit Growth: We growth. The year brought us investment consecutive year in the latest report boosted Group Revenue to nearly opportunities we capitalised on. We from the International Data Corporation, Rs.40.0 Bn (a 35.3% growth). Profit aggressively pursued the acquisition capturing 38.5% of the PC market during before tax grew to Rs.2.3 Bn (up of Odel while tightening our existing 2Q2014. 80.3%) and profit after tax increased operations to consolidate activities and to to Rs.1.8 Bn (up 80.3%). ensure greater Shareholder Value. Our IT businesses have moved a step • Strategic Moves: Opening of ahead, to focus on advanced end-user The external environment was challenging Group’s first resort, Centara Ceysand computing, data centre and recovery in many sectors, especially in the early part Resorts & Spa, acquisition of Odel, solutions, advanced infrastructure of the year when interest rates impacted commencement of ‘Samsung’ (including intelligent building management and floods affected purchasing ability. operations and the representation of systems) and data security. These areas Despite these challenges, our strategy new brands (Tommy Hilfiger, Pepe are considered key elements in Sri and our engaged workforce enabled us Jeans, Whirlpool and Crocs™). Lanka’s IT industry in the future. Routine reinforce our strong positions across our • Investments: Expansion of our technological upgrades were deferred business sectors. We made progress with retail business and BURGER KING® by users due to uncertainty. With the our cost leadership initiatives, consolidating franchise, construction of Softlogic conclusion of both the Presidential and and streamlining individual sectors while City Hotel and investment in high-tech General Elections, we expect to see extending our reach and customer service medical facilities at Asiri. resurgence this year. capability. The progress we made in • Immediate Goal: Improving 2014, combined with the presence in six performance at Retail and ICT sectors. Impressive results in our sectors which will benefit from growth in telecommunications business was the economy, will consolidate Softlogic’s Your faith in Softlogic Holdings brought primarily driven by our recently position in the market. rewards, with the value of our share rising commenced ‘Samsung’ operations – 25% during the year. Softlogic Mobile Distribution. Despite being in business for only four months BUSINESS PERFORMANCE of the year, the company contributed The Sri Lankan economy grew 7.4% INFORMATION & notably to the sector’s achievements. amidst many challenges in 2014. COMMUNICATIONS Synergies helped this success. ‘Nokia’ Consumer and investor confidence TECHNOLOGY and ‘Microsoft Lumia’ handset ranges recovered during the year, due to low Information Technology is dynamic, fast- continued to perform strongly. With inflation and interest rates, and the changing and fiercely competitive. Despite consumer preference favouring authorised exchange rate remaining stable. challenges due to some projects being and reliable suppliers, the grey market
Annual Report 2014-15 Annual Report 2014-15 14
Chairman’s Review
Considerable synergies have Our Quick Service Restaurant chain extended to Kandy, a fast developing part been realised following the of the hill region. Another was opened at Odel acquisition. These accrue Central Hospital. BURGER KING® also from the sharing of retail space, opened at the Colombo International Airport and at the Arcade, Independence back-end infrastructure, in-house Square during the financial year. management expertise, and a wider exposure for our brands. These initiatives drove performance of the retail sector strongly during the year. no longer poses a serious threat. We continued to lead the mobile handset HEALTHCARE SERVICES market in Sri Lanka in 2014. ‘Asiri’ is recognised for its world-class healthcare in Sri Lanka. Each Asiri hospital RETAIL is a centre of excellence, offering the The Odel acquisition was the year’s highest standard of medical care by highlight, and we now own 93.39% dedicated medical personnel. We have of the company. We saw Odel as one continuously invested in state-of-the-art of the strongest local fashion brands medical facilities to ensure we continue serving a broader spectrum of customers. to provide the best of modern medical The company’s asset base was also treatments. considered, when we decided on this strategic acquisition. Considerable Central Hospital launched the first synergies have been realised following the ever advanced cosmetology and acquisition. These accrue from the sharing dermatology centre, ‘Beauty Central’. of retail space, back-end infrastructure, in- The centre’s procedures include; laser house management expertise, and a wider hair removal, removal of vascular exposure for our brands. birthmarks, dermatological procedures, facial rejuvenation and face-lifts, keloid The geographical expansion of our scar reductions and a host of aesthetic Consumer Durables business continued. treatments not requiring incision, surgery Our current 208 showrooms cover retail or general anaesthesia. A state-of-the-art space of 263,714 sq. ft, and we expect Cardiac Centre was also opened at Central to have 250 stores in place by end-March Hospital in November 2014. 2016. Expansion is planned taking an approach emphasising cost consciousness Asiri Surgical Hospital introduced Digital and synergy. Mammography, making Asiri the first private healthcare provider to offer Brand acquisitions continued at Softlogic advanced three dimensional imaging Brands, as we added ‘Tommy Hilfiger’ in detection of breast cancer. December 2014, and ‘Crocs™’ and ‘Pepe Jeans’ in April and June 2015 respectively. Training and qualifying for the Joint Revenue ‘Splash’ was relocated in Colombo in Commission International Accreditation is December 2014 to better position itself to near completion. We expect to obtain this capture its middle income target audience. accreditation next year. We opened three stores at Liberty Plaza Rs. Bn We pursue development of our hospital in 39.6 for ‘Pepe Jeans’, ‘Giordano’ and an Kandy, based on research that identifies 35.3% international watch station in April 2015.
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a need for private healthcare outside AUTOMOBILES POSITIONED FOR PROGRESS Colombo. Kandy is the commercial hub of The Automobile sector’s fortunes are Softlogic is well positioned to grow its the hill country. Asiri, a brand which has closely linked to changes in the import duty business and deliver strong results to its won the trust of people across the country, structure. Notable improvements in sales owners. We have a diversified platform will be well accepted there. We intend were achieved during the year, following that gives us wide exposure to Sri Lanka’s to set up a 133-bed hospital expected relaunch of our ‘King Long’ bus range. economic growth, which we expect will to commence operations in 2018. Sales of these buses are mainly to the receive fresh impetus following Sri Lanka’s Construction is to begin in October 2015. leisure sector. Our Body, Paint and Repair recent elections. Centre, which works closely with Asian FINANCIAL SERVICES Alliance General Insurance, progressed An extraordinary team with an unrelenting ahead of expectation, while the 3S Facility commitment to excellence provides Our Financial Services sector moved for Ford and Daihatsu showed modest the expertise and maturity to guide our steadily during the year, with good returns. decisions and actions. performances all round. Asian Alliance Insurance, which ranks 5th in Life We are repositioning our products We expect that Softlogic will, after a time Insurance, led the way. Overall Gross competitively to drive volumes in the of consolidation, enhance revenues from Written Premium for both Life and future. We will widen our portfolio with every sector in which it is active. General insurance reached Rs.4.9 Bn, new FORD models, and will focus on an increase by 16.1% over the previous ‘green’ vehicles to benefit from tax year. Life business recorded a growth of concessions applicable there. APPRECIATION 20.4%. General Insurance, which enjoys We are fortunate to have an excellent some synergy with our Healthcare and executive team and pool of human Automotive Sectors, saw premiums rise LEISURE resources. I thank all of them for 8.9%. We opened the doors of our first resort, committing their talent and effort to Centara Ceysand Resorts & Spa, in June building our success. With changes in the duty structure and tax 2014. Feedback and reviews have been concessions for vehicles, vehicle values positive, and the resort enjoyed full I also record my personal appreciation to all declined significantly affecting the Leasing/ occupancy during the winter peak season. our Directors, who have been unstinting in HP business of the finance companies. This four-star plus resort has become a their support during the year. This made us focus more on lending to preferred destination on the southern the SME sector, where we see immense coast. It offers a wide range of amenities We thank our investors for their confidence potential. Softlogic Finance, which ranked to complement its exquisitely furnished in us. When I report to you on Softlogic’s 10th in the Industry with Total Assets of hotel rooms and suites. Its facilities and progress next year, I am sure I will be Rs.20 Bn, saw Customer Deposits rise to warm hospitality ensure success. reporting on a robust organisation ever Rs.12.0 Bn and the Lending Portfolio to more focused on delivering value to you. Rs.15.3 Bn during the year. We believe the success story of Centara Ceysand Resorts & Spa will also extend to We look forward to continuing our journey Softlogic Stockbrokers has a very our city hotel. Both hotels are managed by together. experienced investment advisory team international operators- Centara Hotels & and a strong foreign and institutional client Resorts, Thailand and Movenpick Hotels & base. The company performed well and Resorts, Switzerland. was ranked third in the industry at the end of the year. The structure of the Movenpick City Hotel was completed in September 2014. We raised capital in these businesses We are now at an advanced stage of during the year, concluding rights issues installations and interior fit-out works. We Ashok Pathirage of 10:28 (at Rs.30 per share) and 13:10 (at expect to open this five-star hotel late in Chairman Rs.3.40 per share) at Softlogic Finance and 2016. Softlogic Capital respectively. 31 July 2015
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Board of Directors
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Left to right Harris Premaratne - Non-Executive Director, Ashok Pathirage - Chairman/ Managing Director, Roshan Rassool - Executive Director, Richard Ebell - Non-Executive Independent Director, Ranjan Perera - Executive Director, Dr. Sivakumar Selliah - Non-Executive Independent Director, Prashantha Lal De Alwis - Non-Executive Independent Director, Haresh Kaimal - Executive Director, Hemantha Gunawardena - Executive Director
Annual Report 2014-15 18
Board of Directors
‘With their knowledge and experience gained in diverse businesses as Directors and Senior Managers, the Board of Directors has the capability needed to build on successes of the past and establish Softlogic as a pre-eminent Sri Lankan conglomerate.’
Ashok Pathirage joining Softlogic. He is presently Roshan Rassool Chairman/ Managing Director Director/CEO of the Software Division Executive Director of Softlogic Information Technologies With a visionary outlook, Mr. Pathirage Mr. Roshan Rassool joined Softlogic (Pvt) Ltd and Director Softlogic BPO provides strategic leadership to a in 1995 and was appointed to the Services (Pvt) Ltd. conglomerate whose turnover is nearly Board in 2009. He is Director/CEO of Rs.40 Bn. He was appointed Chairman the Computing Systems & Systems of Softlogic in 2003. Six other entities Haresh Kaimal Integration Solutions Division of under his Chairmanship are listed on Softlogic Information Technologies Executive Director the Colombo Stock Exchange. He is (Pvt) Ltd., which has business the Chairman/Managing Director of the Mr. Haresh Kaimal is a co-founder partnerships with Dell Corporation, country’s leading private healthcare of Softlogic and a Director since its Apple Computers, Lenovo, CISCO, provider, Asiri Group of Hospitals. He is inception. With over 25 years of EMC storage systems, Microsoft, HP also Chairman of Softlogic Capital PLC, experience in IT and operations, he imaging products and VMware. He was Softlogic Finance PLC, Asian Alliance currently heads the IT division of appointed a member of Dell South Asia Insurance PLC, Asian Alliance General the Group to drive advancements in Partner Advisory Council in 2011. He Insurance Ltd. and Odel PLC whilst Information Technology and Enterprise served as Chairman of Infotel Lanka also being Chairman of other Group Resource Management within in 2006/2007 and was President of Sri companies that operate in Leisure, Softlogic. He is also a Director of Odel Lanka Computer Vendors Association at Retail, Automobile and ICT businesses. PLC and Softlogic BPO Services (Pvt) the same time. He was also Chairman He also serves as Deputy Chairman of Ltd. of the Federation of Information National Development Bank PLC and is Technology Industries, Sri Lanka in Chairman of NDB Capital Holdings PLC. 2007. Ranjan Perera Executive Director He holds an MBA from the University Hemantha Gunawardena Mr. Ranjan Perera is one of the co- of East London. He is also an Associate Executive Director founders of Softlogic. He is Sector Head Member of the Association of Business Mr. Gunawardena is one of the co- – Mobile Business and the Managing Executives and a Member of the founders of the Softlogic Group and has Director of Softlogic International Cyprus Institute of Marketing. He has served as a Director from its inception. (Pvt) Ltd. He possesses extensive over 25 years of experience behind him He has extensive experience in the knowledge from his many years in the ICT industry having worked at field of IT, both front- and back-end, of experience in senior managerial senior managerial positions in reputed and counts over 25 years in this field. positions handling world renowned companies. He was a Senior Software Manager at brands in mobile telecommunication. a leading Sri Lankan Blue Chip before
Softlogic Holdings PLC 19
Dr. Sivakumar Selliah was a Director of Sampath Bank PLC Non-Executive Independent Director from 2002 to 2011 and Chairman of its Human Resources, Remuneration Richard Ebell Dr. Selliah holds an MBBS degree and and Risk Management Committees. a Masters Degree (M.Phil). He joined Non-Executive Independent Director He presently serves as a Director of the Board of Softlogic in 2010. He has Mr. Richard Ebell was appointed to Siyapatha Finance PLC, Orit Apparel over two decades of experience in the Board of Softlogic in March 2014. Ltd. and Coral Sands Hotel Ltd. He is varied fields. He is Deputy Chairman He is a Fellow of the Institute of an Associate Member of the Chartered of Asiri Hospitals Holdings PLC, Asiri Chartered Accountants of Sri Lanka Institute of Marketing (CIM) UK and Surgical Hospital PLC and Central (CA Sri Lanka) and the Chartered is presently Honorary Legal Advisor Hospital Ltd. He is a Director of Odel Institute of Management Accountants of CIM Sri Lanka and the Ayurveda PLC, HNB Assurance PLC, Lanka (CIMA), UK. He also holds a Diploma in Doctors (Gampaha Wickremarachchi) Walltiles PLC, Lanka Tiles PLC, Horana Marketing from the Chartered Institute Association of Sri Lanka. He was a Plantations PLC, ACL Cables PLC and of Marketing (CIM), UK. Mr Ebell founder member of the Consumer Lanka Ceramics PLC. He is also the has experience of almost 40 years in Affairs Authority of Sri Lanka in 2002. Chairman of Cleanco Lanka (Pvt) Ltd finance and commercial activity after He was appointed as Honorary Consul and JAT Holdings (Pvt) Ltd. Dr. Selliah qualifying as a Chartered Accountant. for Seychelles in Sri Lanka by the serves on the Remuneration and Audit He is a Past President of CIMA, Sri President of the Republic of Seychelles Committees of some of the companies Lanka Division, and a member of CA in October 2013. on whose Board he serves. Sri Lanka’s Quality Assurance Board. He participated in establishing an Audit Committee Forum in June 2014, and Harris Premaratne Prashantha Lal De Alwis, PC remains involved with that initiative. Non-Executive Director Non-Executive Independent Director Mr. Harris Premaratne joined the Mr. Prasantha Lal De Alwis joined the Mr. Ebell also serves on the Boards of Softlogic Board in February 2014. He Softlogic Board as a Non-Executive Finlays Colombo PLC and Cargills Bank has extensive banking experience, Director in 2011. He obtained his Ltd. having held several top positions and LL.B (Bachelor of Law) and LL.M gained many accolades in the banking (Masters in Law) from the University Note : Desamanya Deva Rodrigo industry. He is an Associate of the of Colombo and Sri Lanka Law College served as a Non-Executive Independent Chartered Institute of Bankers, London. respectively and was enrolled as an Director of Softlogic Holdings PLC until Mr. Premaratne is a Past President of Attorney-at-Law in 1983. He started his resignation from the Board on 30 the Sri Lanka Banks’ Association. He is his career as a State Counsel at the June 2014. currently on the Boards of Asiri Hospital Attorney General’s Department of Holdings PLC, Asiri Surgical Hospital Sri Lanka in 1983 and served in that PLC, Softlogic Capital PLC, Asiri Central capacity until 1990. He subsequently Hospitals Ltd. and Central Hospital joined the private bar and since then Ltd. and is Chairman of Remuneration has practised in both Appellate and Committee and member of the Audit Trial courts, specialised in Criminal Committee of all those hospitals. He and Family Law. He was appointed a was appointed Executive Director and President’s Counsel in 2012. He is a Deputy Chairman of Softlogic Finance visiting Lecturer at the Faculty of Law, PLC on 21 January 2015. University of Colombo, and a member of the Board of Management of the Centre for Studies of Human Rights, University of Colombo. Mr. De Alwis
Annual Report 2014-15 20
Sector Heads
Iftikar Ahamed - Financial Services Dr. Manjula Karunaratne - Healthcare Services
Nasser Majeed - Retail Dr. Stephan Anthonisz - Leisure
Softlogic Holdings PLC 21
The entrepreneurial spirit of our team ‘It is our endeavour to remain focused on opportunities to reach operational excellence. We balance this freedom with a strong sense of cost-discipline in mind being fully aware of those market forces which require fast response to change. Our guidelines and processes, facilitate innovation and promote unrivalled customer service which is documented and well understood across the Group’
Iftikar Ahamed 2006, and is currently Chief Executive General Management. His experience Sector Head – Financial Services Officer of the Asiri Hospitals Group. He includes a stint as Director / General also serves on the Boards of Central Manager of PT Singer Indonesia Tbk., Iftikar Ahamed heads the Financial Hospital Ltd, Asiri Central Hospital from 2005 to 2006 and thereafter Services sector of the Group. He is Ltd., Asiri Hospital Matara (Pvt) Ltd., as Marketing Director of Singer Sri Managing Director of Softlogic Capital Asiri Diagnostic Services (Pvt) Ltd. Lanka PLC from 2007 to 2013. Nasser PLC, the holding Company of the and Asiri Hospital Kandy (Pvt) Ltd. He also served on the Boards of Regnis Financial Service sector, and is also previously held the positions of Medical Appliances Ltd., and Singer Sri Lanka Managing Director of Asian Alliance Director, Asiri Hospital Holdings PLC PLC as an Alternate Director. Insurance PLC and an Executive and was Group Chief Operating Officer, Director of Softlogic Finance PLC Asiri Hospitals Group. Dr. Karunaratne and Softlogic Stockbrokers (Pvt) Ltd. is a Specialist in Sports/ Orthopedic Dr. Stephan Anthonisz Mr. Ahamed counts over 30 years of Medicine. He possesses over 25 years Sector Head – Leisure experience in a wide range of roles of professional medical experience within the financial services industry Dr. Anthonisz joined Softlogic in 2012 both in Sri Lanka and overseas, and and has extensive banking experience as CEO/ Director of Softlogic Properties is responsible for the overall medical both in Sri Lanka and overseas. He (Pvt) Ltd. He is responsible for our two policy of the Group. has held senior management positions leisure projects of which one, Centara as Deputy Chief Executive Officer at Ceysand Resorts & Spa, is now in Nations Trust Bank PLC and Senior operation. Stephan has held managerial Nasser Majeed Associate Director at Deutsche Bank positions covering diverse roles in Sector Head – Retail AG. He holds an MBA from the Sri Lanka and overseas with leading University of Wales, UK. Mr. Nasser Majeed assumed duties as conglomerates. He previously held the CEO, Retail Sector in 2013. He counts position of Head of Value Added Tea over 25 years of multi- disciplined Exports at Unilever Ceylon Ltd., before Dr. Manjula Karunaratne business experience, starting his career taking on the role of CEO, Property MBBS, M.Sc (Trinity, Dublin), Dip. MS at KPMG Ford Rhodes Thornton & Development with Asian Hotel & Med (UK) MSOrth Med. (Eng) Company in 1981 and moving to Singer Properties PLC. He holds an MBA and Sector Head – Healthcare Services Industries (Ceylon) Ltd. in 1984. He a Doctorate in Business Administration Dr. Karunaratne was appointed to served the Singer group in many areas from the Australian Institute of the Board of Asiri Hospital Holdings including Cost Accounting, Product Business Administration, Adelaide. PLC and Asiri Surgical Hospital PLC in Management, Exports, Marketing and
Annual Report 2014-15 22
Functional Heads
Desiree Karunaratne - Group Director Marketing Linton Nelson – Director, Logistics
Vindya Solangarachchi - Head of IT Ruwanthi Fernando - Head of Business Consultancy and Resource Planning
Damith Vitharanage - Group Head of Risk and Internal Audit Erandi Wickramaarchchi - Group Chief Financial Officer
Softlogic Holdings PLC 23
Natasha Fonseka - Group Head of Human Capital & Taxation Meneka Galgamuwa - Head of Corporate Planning
Hiran Perera - Head of Treasury and Corporate Finance Chinthaka Ranasinghe - Head of Strategy and Business Development
Annual Report 2014-15 24
Functional Heads
Chinthaka Ranasinghe Desiree Karunaratne Hiran Perera Head of Strategy and Business Group Director - Marketing Head of Treasury and Corporate Development She joined Softlogic in 2003 and is Finance Joining Softlogic in 2014, Mr. Chinthaka Group Director Marketing. He joined Softlogic in 2013 as the Head Ranasinghe heads the Group Strategy of Corporate Finance and Treasury. and Business Development division. He She holds an MBA from the University Prior to this appointment, he was has over 18 years of senior managerial of Wales. She has over 15 years of Head of Wholesale Risk, Sri Lanka and experience in equity research and senior management experience across Maldives, at HSBC. He counts 28 years investment banking in one of Sri a diverse range of businesses in retail, of experience in banking, including Lanka’s leading conglomerates. fashion, information technology, travel three years of cross-border exposure. and media. She serves on the Boards He is a Management Graduate from of Softlogic Restaurants (Pvt) Ltd., the University of Colombo (BBA) and Softlogic Destinations Management Linton Nelson a Passed Finalist of the Chartered (Pvt) Ltd., Silk Route Foods (Pvt) Ltd Director - Logistics Institute of Management Accountants and Nextage (Pvt) Ltd. He joined Softlogic in 2013 as Director – UK. - Logistics and is responsible for Group Shipping & Logistics (including Erandi Wickramaarchchi Odel’s distribution centre) and Group Damith Vitharanage Group Chief Financial Officer Security. He counts over 37 years Group Head of Risk and Internal Audit She joined Softlogic in 2004 and serves of experience in the Department of He joined Softlogic in 2013 and has as Group Chief Financial Officer. She Customs of Sri Lanka, with 15 years of over 15 years of senior managerial holds a Special Degree in Accountancy senior managerial experience as Head experience in Audit, Investigation, and Financial Management from the of Intelligence and Director Sea Cargo Financial Management, Financial University of Sri Jayawardenepura. She Clearance. He is in the final stages of a Analysis, Administration, Human is a Fellow of the Institute of Chartered Bachelor’s Degree in Law at the Open Resource Management, Information Accountants of Sri Lanka and an University of Sri Lanka and holds a Security, Risk Management and Associate of the Institute of Certified Higher National Certificate in Business General Management in both the state Management Accountants, Sri Lanka. Studies. He has had special training in and private sectors in Sri Lanka and She holds an MBA in Finance from the the UK, USA, Japan, Australia and China the Middle East. He is a Management Cardiff Metropolitan University. She to strengthen his expertise in logistics. Graduate from the University of is also an Associate of the Institute Colombo (BBA), holds a Post- graduate of Certified Public Accountants (CPA), diploma in HR and possesses a Australia. She serves on the Boards Meneka Galgamuwa Management MBA specialised in of Softlogic Capital PLC, Softlogic Head of Corporate Planning Transformational Leadership. Communications (Pvt) Ltd., Softlogic She joined Softlogic in 2011 and serves Corporate Services (Pvt) Ltd., Softlogic as Head of Group Corporate Planning. He has Associate Memberships from BPO Services (Pvt) Ltd. and Ceysand She is an Associate of the Chartered the Institute of Chartered Accountants Resorts & Spa Ltd. Institute of Management Accountants of Sri Lanka, the Chartered Institute (CIMA), UK, and an Associate of of Management Accountants (CIMA), the Chartered Institute of Marketing UK, and the Chartered Institute of (CIM), UK, and holds an MBA from Marketing (CIM), UK, and is a Certified the University of Sri Jayawardenapura. Information System Auditor (CISA) USA She has over 15 years of senior and Certified Project Manager (PMP) management experience in diverse USA. industries in Sri Lanka and the UK.
Softlogic Holdings PLC 25
Natasha Fonseka She holds an MBA from the University Group Head of Human Capital & of New Haven, Connecticut, USA and Taxation completed a Programme on Investment Appraisal, Project Finance and Risk She joined the Group in 2010 and is Analysis, Harvard International Institute currently Group Head, Human Capital of Development (HIID), Harvard & Taxation. She is an Associate of the University, USA. She is also a finalist of Chartered Institute of Management the Chartered Institute of Management Accountants (CIMA), UK and a Accountants (CIMA), UK. Chartered Global Management Accountant (CGMA), USA. She counts over 20 years of experience in senior Vindya Solangaarachchi managerial positions in taxation, Head of IT financial advisory services, finance and human resources in reputed He joined Softlogic in 2013 as Head professional firms and in the private of IT. He holds a Master of Science sector. Degree in Technology Management (from Staffordshire University), a Bachelor’s Degree in Information (from Ruwanthi Fernando Charles Stuart University), a Higher Head of Business Consultancy and National Diploma (from Edexcel) and Resource Planning a Diploma in Computer Studies (from NCC, UK) and is a Member of the Ruwanthi joined Softlogic in 2014. She British Computer Society. He counts brings on board more than 17 years over 15 years of senior management of experience as a senior manager in experience in ICT, retail and insurance. various MNCs based in Sri Lanka and the USA. Her career in finance and in ICT spans across corporate banking, venture capital, equity research, technology advisory and business process outsourcing (BPO)/ offshoring.
Annual Report 2014-15 26
>> We believe that with policy stability, a fast moving economy would ensure the multiplier effect of growth which then will naturally accompany the principle of intrinsic value creation inherent in our diversified business model; this will propel the Group to a new unparalleled height.
Management Discussion & Analysis
LOCAL ECONOMY Economic Indicators 2014 2013 2012 2011 2010 2009 GDP (Market Prices) USD Bn 74.9 67.2 59.4 59.2 49.6 42.1 GDP per Capita USD 3,625 3,280 2,922 2,836 2,400 2,057 GDP Growth % 7.4 7.2 6.3 8.2 8.0 3.5 Unemployment Rate % 4.3 4.4 4.0 4.2 4.9 5.8 GDP Deflator 5.1 6.7 8.9 7.9 7.3 5.9 Export USD Mn 11,130 10,394 9,774 10,559 8,626 7,085 Imports USD Mn 19,417 18,003 19,190 20,269 13,451 10,207 Workers' Remittances USD Mn 7,017.8 6,407.0 5,985 5,145 4,116 3,330 Current Account Balance % of GDP (2.7) (3.8) (6.7) (7.8) (2.2) (0.5) Tourist Arrivals '000 1,527 1,275 1,006 856 654 448 Overall Balance USD Mn 1,369.0 985.0 151 (1,061) 921 2,725 Total External Debt USD Mn 43.0 39.9 37.1 42.2 43.3 44.4 Annual Average Exchange Rate Rs/ USD 130.6 129.1 127.6 110.6 113.1 114.9 Budget Deficit % of GDP 6.0 5.9 6.5 6.9 8.0 9.9 Government Debt % of GDP 75.5 78.3 79.2 78.5 81.9 86.2 Interest Rate (91-Day T-Bill), % p.a 5.7 7.5 10.0 8.7 7.2 7.7 Inflation Rate (Annual Avg CCPI Change) % 3.3 6.9 7.6 6.7 6.2 3.5 Year End All Share Price Index 7,298.95 5,912.8 5,643.0 6,074.4 6,635.9 3,385.6 Diversified Sector Index 2,105.5 1,759.5 1,822.0 1,909.1 2,2421 1,132.8 S&P SL20 Index 4,089.1 3,263.9 3,069.0 n/a n/a n/a Population '000 20,675 20,483 20,328 20,869 20,653 20,450 Doing Business Ranking 99 85 83 102 105 97
Sovereign Ratings: Fitch BB- Stable BB- Stable BB- Stable BB- Stable B+ Positive B+Negative Standard & Poor's B+ Stable B+ Stable B+ Stable B+ Positive B+ Stable B Negative Moody's B1 Positive B1 Positive B1 Positive B1 Positive B1 Stable -
Softlogic Holdings PLC 27
‘Slower Growth in Emerging Markets, a Gradual Pickup in Advanced Economies’
– World Economic Outlook, July 2015 Update
Sri Lanka’s economy grew 7.4% in Sri Lanka’s external sector reflected OUTLOOK 2014, up marginally from 7.2% a year an overall BOP balance. The current Global earlier yet lower than the projection account deficit narrowed to 2.7% of of 7.8%. Accordingly, per capita GDP (3.8% in 2013) with help from A global slowdown was witnessed GDP increased to USD3,625 in 2014 workers’ remittances. The trade deficit during 1Q2015, mostly from North from USD3,280 in the previous year. declined to 11.1% of the GDP in America. However, easy financial Inflation was contained at single-digit 2014 (from 11.3% last year). Regular conditions, more helpful fiscal policies levels for the sixth consecutive year, policy intervention maintained foreign in the Euro region, lower oil prices and with reductions in fuel, gas, electricity exchange rates during the year. improving confidence and labour market and water prices late in the year. conditions countered stalling growth. Unemployment declined marginally, to 4.3% in 2014 from 4.4% last year. GLOBAL ECONOMY • Emerging Markets – Negative The year witnessed a political transition The global economy grew 3.4% in Growth for the last four years has with the Presidential Election in January 2014. Advanced economies recovered, not encouraged expectations of mid- 2015, bringing some uncertainty on while growth in emerging market and term growth. However, a rebound is economic policy. developing economies slowed. expected in 2016.
Growth was led by domestic consumption expenditure, while investments added to the economic Projections expansion during the year. The Services 2013 2014 2015E 2016E sector, which accounted for 57.6% Global of GDP, grew 6.5% for 2014 led by World Output (Annual Growth %) 3.4% 3.4% 3.3% 3.8% wholesale and retail trade, transport Advance Economies (Annual Growth %) 1.4% 1.8% 2.1% 2.1% and communication, banking, insurance Emerging Market and Developing Economies (Annual Growth %) 5.0% 4.6% 4.2% 4.7% and real estate. The Industrial sector World Trade Volume - Goods & Services (Annual Growth %) 3.3% 3.2% 4.1% 4.4% recorded growth of 11.4% in 2014, Commodity Prices increasing its share to 32.3% of GDP Oil -0.9% -7.5% -38.8% 9.1% (31.1% in 2013), with the Construction Non-Fuel (average based on world commodity export weights) -1.2% -4.0% -15.6% -1.7% sub-sector being the top contributor. Consumer Prices Agriculture suffered due to adverse Advance Economies (Annual Growth %) 1.4% 1.4% 0.0% 1.2% weather patterns, and grew marginally Emerging Market and Developing Economies (Annual Growth %) 5.9% 5.1% 5.5% 4.8% in 2014. Lower interest rates drove private consumption, whilst domestic London Interbank Offered Rate (%) On USD (six month) 0.40% 0.3% 0.40% 1.20% savings grew slightly to 21.1% of the On Euro (three month) 0.2% 0.2% 0% 0% GDP (20.0% of the GDP in 2013). On JPY (six month) 0.2% 0.2% 0.10% 0.10%
Source : World Economic Outlook – July 2015 Update
Annual Report 2014-15 28
Management Discussion & Analysis
‘Going forward, the Sri Lankan Projections economy is projected to reach Local 2015E 2016E 2017E 2018E GDP (Market Prices - Rs. Bn) 11,080 12,447 14,044 15,853 upper middle income levels Annual Average Inflation (%) 3% 4% 4% 4% and sustain the favourable high Per Capita GDP (USD) 4,009 4,469 4,997 5,624 growth and low inflation nexus in Current Account Balance (% of GDP) -1% -1.4% -1% -1% the medium term, supported by Overall Budget Deficit (% of GDP) -4.4% -4.2% -4.0% -3.8% appropriate economic policies.’ Growth in credit to private sector (%) 15.5% 15% 15% 15%
- Central Bank of Sri Lanka Source : Central Bank of Sri Lanka
• Advanced Economies –Temporary • Oil – Oil prices recovered in 2Q2015 human resources. Monetary policy setbacks in North America will reflecting higher demand. Global oil will assist in maintaining inflation at drag down growth of the advanced supply is running well above 2014 single-digit levels and fiscal policy will economies. Ageing population and levels and inventories are still rising. reduce budget deficits and improve the declining investments are some The reduction in oil investments Government’s debt profile. weaknesses. Wage growth and may, however, lead to weaker relaxed financial conditions, lower oil activity in North America than prices and stronger housing markets, expected earlier. CONSOLIDATED FINANCIAL are strengths. The economic REVIEW recovery in the Euro region resulted Local Reporting Compliance in a robust recovery in domestic Growth in 2015 will be determined by The financial performance and position demand there and reflects a strong political stability and the priorities of the for the year are based on Sri Lanka economic comeback. Japan recorded Government. Modest growth will be Accounting Standards. The statements a more-than-expected growth in the reported in 2015, with the slowdown are in line with the requirements of first quarter of 2015 supported by a of public sector construction. Political the Colombo Stock Exchange and the pickup in capital investment. uncertainty could impede private Companies Act No.07 of 2007. investments, but consumption will increase with the price reductions Revenue Revenue on food and fuel. State consumption (Rs. Mn) Consolidated revenue for the year will increase recurrent expenditure. ending 31 March 2015 approached Export industries will benefit from Rs.40.0 Bn, an increase of 35.3%. the economic climate in advanced 40,000 Retail contributed most, making up economies. Performance of the 35,000 31.2% of the Group’s top line, followed agricultural sector is dependent on by ICT with 23.5%, Healthcare and the weather, although increases 30,000 Financial Services with 21.7% and in government-guaranteed prices 25,000 20.1% respectively. for several agricultural products 20,000 are likely to induce increases in The boost in the Retail segment production. Economic growth is likely 15,000 followed the consolidation of Odel’s to gain pace beyond 2015 following results for five months of the year. implementation of new policies by 10,000 Expansions in Consumer Durables, the Government. Productivity levels apparel and restaurants added to 5,000 will increase with the adoption of the growth. ICT sector performance technology and development of 0 reflected the success of our recently 2011 2012 2013 2014 2015
Softlogic Holdings PLC 29
commissioned ‘Samsung’ operations, Asian Alliance Insurance, and fees on Net Finance Expenses while ‘Microsoft Lumia’ handsets and new loans at Softlogic Finance. Net debt, comprising short- and ‘Dell’ computers also contributed. long-term interest bearing borrowings Healthcare Services maintained steady Operational costs, at Rs 11.0 Bn, (overdrafts included) less cash and growth, with continuous investment accounted for 27.9% of turnover, cash equivalents, increased 34.2% to in state-of-the-art facilities during the against 27.0% last year. Administrative Rs.36.6 Bn as at 31 March 2015, from year, including Cardiac Centre, Beauty expenses made up 81.7% of these Rs.27.3 Bn a year before. The increase Central, Bi-planer Catheterisation costs, growing 41.4% to Rs.9.0 Bn for was primarily driven by the Odel Lab, Digital Mammography and the year, while distribution expenses acquisition (cost Rs.5.6 Bn), while other Bone Marrow transplant facilities. grew 33.4%, to Rs.2.0 Bn. investments, expansions and working Financial Services reflected healthy capital needs absorbed the balance. performances of Asian Alliance Our operating model has proved Insurance, Asian Alliance General effective throughout. Softlogic has a Stabilisation of interest rates at a lower Insurance, Softlogic Finance and history of acquisitions and business level supported our growth strategy. Softlogic Stockbrokers. formations which are analysed by Finance expenses for the year rose only our Strategy team, with strategies by 1.2%, to Rs.2.7 Bn. Finance income Results from Operating Activities emphasising synergy implemented declined 3.0% to Rs.1.1 Bn. A marginal post-acquisition. Gross Profit grew 28.2% to Rs.14.1 decline in mark-to-market gains on Bn for the year, despite slight erosions Asian Alliance Insurance’s investment in margins as a result of product and Operating Profit for the year was Rs.4.3 portfolio contributed to the reduction. channel mix in the Retail and Healthcare Bn, reflecting a strong increase of The life insurer’s fixed income also sectors. 17.3%. declined, with fluctuations of interest rates in the treasury/ bond market. Other operating income reflected a Of the six sectors, the highest significant Rs.1.2 Bn for the year (up contribution to consolidated operating 133.8%). The increase was led by the profit came from Healthcare Services, gain on disposal of investments by a contribution of 42.6% for the year, followed by Financial Services which
EBITDA contributed 24.0%. Compared to Profit Before Tax (Rs. Mn) the previous year, the wholly owned (Rs. Mn) sectors, Retail and ICT improved their contributions significantly, to 20.7% 8,000 and 16.6% respectively. We expect the 2,500 improvement to continue as synergies 7,000 and cost discipline, and the growth 2,000 6,000 impetus at retail strengthens. The performance of the Automotive sector 5,000 faced challenges, but measures have 1,500 4,000 been taken to turn the business around.
The Leisure sector sees positive 1,000 3,000 indications from its newly opened 2,000 resort Centara Ceysand, and Movenpick City Hotel nearing completion. 500 1,000
0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Annual Report 2014-15 30
Management Discussion & Analysis
Profit After Tax Profit after Taxation Total Assets (Rs. Mn) (Rs. Mn) Consolidated Profit after taxation for the year reached Rs.1.8 Bn, an improvement of 80.3%. Consequently, 2,000 100,000 net profit margins improved to 4.6% for the year from 3.4% last year. Earnings per share for the year increased to 80,000 1,500 Rs.0.7 from Rs.0.2 last year.
60,000 The result was boosted by a Rs.513.4 1,000 Mn fair value gain on the property of 40,000 Asiri Central Hospitals, which has since been realised on its sale. 500 20,000 Non-Controlling Interest 0 Non-Controlling Interest share of profit 0 2011 2012 2013 2014 2015 increased 48.1% to Rs.1.3 Bn, due to 2011 2012 2013 2014 2015 increased earnings in the Healthcare Taxation Comprehensive Income Statement and Financial Services sectors. Tax expenses increased 80.5% to Revaluations of the property of Central Rs.449.6 Mn, compared with Rs.249.2 Hospital (Rs.369.6 Mn). Currency It is noteworthy though, that this Mn last year. The effective tax rate translations of Softlogic Australia’s share of profit reduced to 69.4%, from remained at 19.8%. operation resulted in a gain of Rs.48.5 84.6% last year, we expect the trend to Mn. Total comprehensive income continue as performances of our fully amounted to Rs.2.2 Bn for the year, owned sectors - Retail, ICT and Leisure against Rs.1.2 Bn last year. - improve.
Five -year Cash allocation Y/E 31 March 2011 2012 2013 2014 2015
Purchase and construction of property, plant and equipment (244.55) (1,064.26) (2,258.47) (3,459.16) (4,023.08) Addition to prepaid lease rentals - (65.00) - - (702.52) (Purchase) / disposal of short term investments (Net) (181.2) 524.3 263.1 469.1 3,007.2 Addition to intangible assets (0.22) (155.03) (8.38) (305.01) (71.18) (Increase) / decrease in other non current assets (165.89) 0.15 (69.65) (63.14) (114.59) Dividends Received - 90.47 145.01 146.29 141.86 (Purchase) / disposal of other non current financial assets - (1,144.54) (1,603.70) (1,989.24) (858.86) Proceeds from disposal of controlling interest - - 28.90 - 347.86 Increase in interest in subsidiaries (12.96) - - - - Increase in interest in associate (807.72) - (1.25) - - Acquisition of business, net of cash acquired (3,272.82) (4,240.02) (183.98) - (5,817.19) Proceeds from sale of property, plant and equipment 65.31 58.69 129.30 91.40 124.17 Net outflow of investing activities (4,720.1) (5,995.3) (3,559.1) (5,109.8) (7,966.3)
Softlogic Holdings PLC 31
Cashflow With the conclusion of the Presidential Cash and cash equivalents increased and General Elections, political stability by Rs.3.9 Bn to Rs.5.6 Bn at 31 March has been achieved. However, we are 2015. Net cash flow from operating waiting for policy reforms of the new activities decreased by Rs.1.4 Bn to regime. Interest and exchange rates Rs.425.9 Mn. The most significant stabilised during last financial year contributor in this respect was the coupled with low inflation. Other macro increase in loans and advances granted. elements too supported our business Net cash outflow on investing activities story. Our six sectors performed increased by Rs.2.9 Bn to Rs.8.0 Bn within our expectations with the Retail during the year. Major contributors cluster emerging stronger following were the increased investment in the acquisition of Odel. Given our Property, Plant and Equipment, and the debt funded acquisition, we may acquisition of Odel. Net cash flow from consider replacing debt with equity financing activities increased by Rs.6.1 should a change in the macroeconomic Bn to Rs.11.5 Bn due to increased long environment takes shape prompting and short term borrowings. a prudent rebalancing of the portfolio. We believe that with policy stability, a fast moving economy would ensure the PROGRESSIVE OUTLOOK multiplier effect of growth which then Interest and exchange rates stabilised will naturally accompany the principle during the year, which also saw of intrinsic value creation inherent in continuing low inflation. Our six sectors our diversified business model; this will generally performed to expectations, propel the Group to a new unparalleled with the Retail cluster emerging height. stronger following Odel’s acquisition.
Annual Report 2014-15 32
Retail Sector Apparel business offers authentic brands. Consumer durables offer quality, value for money and easy reach.
We have developed a distinctive retail strategy in the consumer durables space, and in the premium clothing and accessories segment. Our apparel business offers authentic brands, while our consumer durables offer quality, value for money and easy reach.
Our Furniture stores are the definitive provider of contemporary furniture and home accessories including bedding, cutlery and home décor.
Our entry into fast foods has been a success, with BURGER KING® becoming one of the top choices of consumers. Our Quick Service Restaurant (QSR) operation extended its reach during the year, while
Softlogic Holdings PLC 33
Revenues reached Rs.12 Bn, up 64%, for the year
Store Expansion Brand Authenticity Increasing Footfall
also expanding its menu. Restaurants SOFTLOGIC HOLDINGS PLC were opened in Kandy and at the Colombo Airport, Central Hospital and Arcade at Independence Square. ® SOFTLOGIC RETAIL (PVT) LTD. SOFTLOGIC RESTAURANTS (PVT) LTD. BURGER KING was recognised as Sri Retailer of Consumer Durables and Furniture Quick Service Restaurant chain Lanka’s Best New Market in Restaurant operating BURGER KING® restaurants’ Excellence at the 2014 Asia Pacific Convention. DAI-NISHI SECURITIES ODEL PLC SILK ROUTE FOODS (PVT) LTD. (PVT) LTD. Chain of retail We added ‘Whirlpool’ to our range Restaurant at the Non-operating subsidiary departmental stores during the year, and also now Colombo Airport retail ‘Samsung’ products from our telecommunication subsidiary. SOFTLOGIC BRANDS (PVT) LTD. Branded apparel stores. A restructuring took place after the Odel acquisition so we could capitalise OTHER ODEL SUBSIDIARIES on synergies. Odel is now the holding Manufacturing products company of our fashion and apparel for Odel and supporting services -- premises, logistics, businesses with Softlogic Retail being warehousing, IT and other the parent of all businesses covering business services consumer durables, furniture and apparels.
Annual Report 2014-15 34
Retail Sector
Consumer Electronics
Branded Apparel
International Watches
Departmental Stores Online Store
Restaurants Furniture
Authentic Brands / Products Off Seasonal Promotions
Service Promotional updates voicemails and SMS Value Value for Money Reach
Online Store
Softlogic Holdings PLC 35
FY15 FY14 % YoY FY13 Today’s shoppers, Sri Lankans as well Profitability as tourists, are more conscious in their Revenue (Rs. Mn) 12,334.3 7,538.7 63.6% 5,647.1 buying decisions, seeking value for their EBITDA (Rs. Mn) 1,112.5 693.7 60.4% 750.7 money and therefore the best deals EBT (Rs. Mn) 340.7 192.1 77.4% 364.5 available. They are also shifting their PAT (Rs. Mn) 271.2 153.5 76.7% 282.6 channel of purchase from physical visits No. of Employees 1,863 805 746 to virtual stores. Financial Position Total Assets (Rs. Mn) 22,368.8 9,034.6 147.6% 6,511.4 Total Equity (Rs. Mn) 6,904.4 1,746.2 295.4% 1,088.5 COMPANY REVIEWS Total Debt (Rs. Mn) 10,560.3 3,620.9 191.6% 3,359.4 Softlogic Retail (Pvt) Ltd. Capital Employed (Rs. Mn) 17,464.7 5,367.1 225.4% 4,447.9 Demand for consumer durables and aspirational goods showed clear growth during the year. This was seen in rural INDUSTRY REVIEW portends a significantly higher retail areas as well as in metropolitan areas. Sri Lanka has a significant-sized spend in the future. population of some 21 Mn. The Consumer Durables market was Increasing and changing consumer stable, with favourable exchange rates and interest rates helping. Relaxed Increases in Sri Lanka’s retail spend are needs have catalysed the development credit fueled consumer growth, as closely correlated with growth in GDP. of retailing in the country. There are a did increased cash in the hands of Private Consumption Expenditure (PCE) small number of organised players in consumers. We used a number of on clothing and footwear grew 15.4% the sector. These established players sales strategies to hold our own against in 2014, rising to 5.7% of PCE. A per continue to pursue market penetration competitors. Competitive pricing, capita GDP of USD5,624 is projected in strategies, focusing on hitherto interest-free hire purchase facilities, 2018, up from USD3,625 in 2014. This untapped regions of the country. tie- ups with banks for interest-free
Annual Report 2014-15 36
Retail Sector
instalment schemes, and an effective sales team ensured growth during the Market Penetration Strategy year. Softlogic’s distribution network is a key strength which we are resolutely building on to achieve territorial Fold 01 Fold 02 expansion. Metropolitan and Urban Reach Rural Reach Upscale ‘Softlogic Max’ stores, with Softlogic and mini showrooms, easily and A stronger contribution is expected industry-best visual merchandising and quickly set up, target rural markets. These from the furniture segment in the sales practices. These stores have an have retail space ranging between 800-1,500 average retail space of 4,500 sq.ft. sq.ft. We also encourage the sales concept future, as we have recently begun There are 12 ‘Softlogic Max’ stores in prime of ‘travelling bags’ taking our products to representing ‘Natuzzi Italia’ - a large city locations. doorsteps across the island. We have 194 furniture house with a strong global Softlogic and mini showrooms islandwide. reach, having 7 manufacturing plants and more than 1,200 points of sale Number of Consumer Electronics showrooms 208 worldwide. (includes 02 ‘Samsung’ flagship stores) Total Retail Space (Sq. ft) 263,714 Softlogic Brands (Pvt) Ltd. Targeted showroom count by 31 March 2016 250 We are Sri Lanka’s only fashion Targeted Retail Space by 31 March 2016 (Sq. ft) 303,714 retailer, holding exclusive rights for leading international brands which are and establishing Softlogic Brands as Softlogic Restaurants (Pvt) Ltd. trend setting and enjoy widespread a leading fashion retailer in Sri Lanka. This company holds the master brand loyalty and quality acceptance. The Odel acquisition confirmed our franchise for BURGER KING® in Sri We added a number of franchise commitment to the local fashion market. Lanka. BURGER KING ® is the world’s partnerships during the year – ‘Tommy second largest hamburger chain serving Hilfiger’, ‘Crocs™’ and ‘Pepe Jeans’ over 11 Mn guests per day across 91 were introduced most recently. This nations. We opened seven restaurants has assisted us in driving the market – in Kollupitiya, Rajagiriya, Mount
Softlogic Holdings PLC 37
Lavinia, and Kandy, and at the Arcade Number of Branded Apparel Stores 17 Independence Square, the Central Total Retail Space of Branded Apparel Stores (Sq.ft) 38,358 Hospital, and the Colombo Airport -- within a year of operation. Number of Odel Stores 20 Odel Retail Space (Sq.ft) 108,118
PROGRESSIVE PERFORMANCE The Retail sector recorded a revenue Mn for the year, contributing 15.0% to Brands has successfully signed growth of 63.6% during the year to the Group. The sector completed the exclusive distributorship agreements Rs.12.3 Bn, five months of Odel’s year with a bottom line of Rs.271.2 Mn, with many other international brands. revenue being consolidated in reporting a strong increase of 76.7%. ‘Peter England’, ‘Van Heusen’, ‘Louis Group turnover. The year began with Philippe’, ‘Only’, ‘Jack & Jones’, ‘Vero unfavourable weather conditions Moda’, ‘Puma’ and ‘Allen Solly’ are impacting the purchasing power of PROGRESSIVE OUTLOOK new apparel brands with Softlogic. We customers. The situation reversed with The retail industry is set for a steady will also introduce Luxottica’s eyewear a good harvest, and Government actions run in the next years, with a growing portfolio inclusive of ‘Prada’, ‘Alain Mikli’, putting more money in consumers’ consumer preference for authentic ‘Armani Exchange’, ‘Arnette’, ‘Burberry’, hands. Favourable interest and exchange brands and a shift towards organised ‘Bvlgari’, ‘Chanel’, ‘Coach’, Dolce & rates helped. trade taking shape. Gabbana’, ‘Emporio Armani’, ‘Giorgio Armani’, ‘Michael Kors’, ‘Miu Miu’, The Sector’s operating profits grew Tourists have been a target audience for ‘Oakley’, ‘Polo Ralph Lauren’, ‘Tiffany & 47.8% to Rs.878.3 Mn in FY2014/15. us. The average tourist stay in Sri Lanka Co.’, ‘Tory Burch’, ‘Versace’ and ‘Vogue An increase of 20.0% in finance costs in 2014 was 10 days, and the average Eyewear’.These brands will be retailed was primarily due to the acquisition of spend USD161 per day. It is estimated in exclusive showrooms as well as in our Odel and increases in working capital that 55% of this spending is on food departmental stores – Odel and Galleria. consequent to expanding activity. Profit and lodging, while the balance is on before tax increased 77.4%, to Rs.340.7 shopping. Given the country’s ambitious Our QSR chain will continue to expand tourist arrivals target of 2.5 Mn for 2018, its presence in prime city locations. we believe this market will contribute strongly to the retail industry in future years. THE ODEL MALL Studies reveal that Sri Lanka’s per Domestic purchases have by no means capita mall stock versus its per capita slowed down. Sri Lanka’s growing income of the country is relatively low middle-class population and changing within the region. Colombo has about spending patterns favouring branded 8 limited space malls with around 10 products and the organised retail sector in the pipeline. Considering the Sri is expected to help keep retail demand Lankan preference for organised retail upbeat in the upcoming years. Colombo, space, the paucity of outlets in existing as the commercial capital of the country, malls and the relatively few malls in has enormous retail potential and is the pipeline, the idea of an Odel mall expected to witness significant retail concept came to life. Odel’s mall in the development. prime Colombo location it occupies, will add to retail dynamism in the country. Softlogic Retail will continue with its This 400,000 sq.ft mall will be in expansion strategy, while Softlogic operations by 2018.
Annual Report 2014-15 38
Household name in Sri Lanka’s retail market, attracting c.3,500 footfalls on weekdays and over 5,000 on weekends
THE STORY OF THE ACQUISITION OF ODEL Odel is one of the largest retailers of apparel and The cost of accepting the offer, at a price of Rs.22.0 fashion lines in Sri Lanka, with its brand ideals of per share was approximately Rs.2.7 Bn. As required satisfying “Mind, Body & Soul”. The company by the Company Takeover’s and Mergers Code focuses on creating fashion trends and delivering 1995 as amended in 2003, a joint offer was then value to its shoppers by offering compelling made by Softlogic Holdings and Softlogic Retail to selections of local and imported apparel, fashion the other shareholders. Parkson Retail Asia Limited, accessories and footwear, and a home store. Odel who held 47.46% of the share capital accepted the is the country’s strongest local fashion brand and offer. Taking note of other acceptances also, a total serves a broad spectrum of customers. of Rs.5.6 Bn, shared between Softlogic Holdings and Softlogic Retail, was ultimately invested in Softlogic was offered the 44.5% of the shareholding acquiring a 93.39% stake in the company. of the promoters of Odel, in September 2014. Odel has achieved a high level of visibility in Colombo and other urban areas, as shown below
• Colombo 07 • Battaramulla • Majestic City • Kiribathgoda • Katunayake Airport • Kandy • Ja-Ela • Wattala • Kohuwela • Dutch Hospital • Crescat • Queens • Nugegoda • Negambo • Mount Lavinia • Galle • Panadura • Moratuwa
Rationale for the acquisition Odel is a household name in the Sri Lankan apparel market, attracting approximately 3,500 footfalls on weekdays and over 5,000 on weekends. Softlogic Holdings through its subsidiary, Softlogic Brands, possesses the largest international branded apparel and fashion accessory portfolio in Sri Lanka. These lines complement Odel’s range of products excellently 40
The story of the acquisition of Odel PLC
when they are combined, giving the rental space is priced at a premium. It overhead rationalisation and retail shopper a unique experience. also holds land in Battaramulla, which is space/ revenue optimisation. planned to be disposed of. The addition of Odel to our business Wider brand choice under one roof portfolio has already created significant Odel has been a favourite shopping synergies through: FUTURE – OUR PATHWAY TO FURTHER SYNERGIES centre for Sri Lankans, expatriates and • Odel’s footfalls becoming available foreign visitors. This retailer has been to Softlogic‘s branded apparel and Ownership Changes the one to attract customers from both accessories when those are sold by A change of ownership was in effect middle and high income categories Odel. with Odel becoming the holding selling a good mix of exclusive as well company of the apparel and fashion affordable quality range of various • Sharing of back-end infrastructure businesses of Softlogic. The transfer of related-products. Building on these and optimal use of available retail Softlogic Brands from Softlogic Retail strengths, we have gradually housed store space. was based on an independent valuation some of our own international apparel of Softlogic Brands. The stake in Odel section at Odel. Odel was already Softlogic Brands has over 35,000 sq. held by Softlogic Holdings has been selling Nike and Levis products, and ft. of prime retail space in Colombo, transferred to Softlogic Retail, making our international watch range, before in which 19 brands are retailed. The Softlogic Retail the parent of Odel. the acquisition. All our apparel brands combination of this with Odel’s makes other than Charles & Keith and French us a very powerful player. Synergetic effects have been evident in Connection have now been placed at Odel’s post acquisition (2HFY2014/15) Odel. Odel owns a large land area in period with the operational cost base Ward Place, Colombo 07, whose improving significantly. We expect that We also plan to offer other leading underutilised area is planned to be these changes will further help realise local brands at Odel. Our aspiration converted to a high-end mall, in which the synergies of shared expertise,
Softlogic Holdings PLC 41
is to make Softlogic/Odel, the choice shopping destination for people across all strata of society.
The Odel Mall Shopping malls are popular in Sri Lanka with the greater sophistication and international awareness of customers and the convenience malls offer. We will be constructing a premier shopping mall using German designers at Odel’s flagship store at Kannangara Mawatha, Colombo 07. The present Odel store would continue its operations with the mall being planned at the under-utilised land base. Top German designers and architects have already developed the blue print of this mall. This mall will feature an extensive retail space to house some of the best known brands both locally and abroad to better cater to local and international tourists and retail customers. 42
Healthcare Services Sector Core focus is on upgrading technology and assembling the best team of medical professionals we can, to contribute to the highest quality standards possible.
‘Asiri’ has established and is consolidating its presence as one of the foremost private healthcare provider in Sri Lanka. The hospitals have continuously invested to keep up with global trends. Asiri’s consultants and the medical expertise it offers are its core strengths.
Softlogic Holdings PLC 43
Revenue increased 11% to Rs.9 Bn during the year
Leading healthcare State-of-the-art Well-trained Medical provider in Sri Lanka medical facilities Professionals
INDUSTRY REVIEW The private healthcare sector in Sri Lanka is growing rapidly. The large- SOFTLOGIC HOLDINGS PLC scale private healthcare providers have invested in technological advancements, research and ASIRI HOSPITAL HOLDINGS PLC 108-bed hospital at Kirula Road, Colombo 5. innovation. The State’s healthcare services are under-resourced and lack advanced medical treatment facilities. ASIRI SURGICAL CENTRALHOSPITAL LTD. ASIRI CENTRAL HOSIPTAL ASIRI HOSPITAL MATARA In 2014, 221 registered private hospitals HOSPITAL PLC 228-bed hospital at Norris LTD. (PVT) LTD. 147-bed hospital at Canal Road, Colombo 10. Not operational 62-bed hospital in Matara. with 5,776 beds operated. This Kirimandala Mawatha, included 10 Ayurvedic hospitals with 90 Colombo 5. beds. Accessibility to leading medical consultants and advanced technologies DIGITAL HEALTH (PVT) ASIRI DIAGNOSTICS ASIRI HOSPITAL KANDY without a wait, and the increasing LTD. SERVICES (PVT) LTD. (PVT) LTD. popularity of health insurance, have A joint Venture with A joint venture to oversee Hospital under supported the growth of private Dialog Axiata PLC laboratory services in the construction in Kandy. Central Province healthcare. Private healthcare players are now not limiting their presence to the big cities alone, but are moving into rural regions.
Annual Report 2014-15 44
Healthcare Services Sector
As healthcare costs increase FY15 FY14 % YoY FY13 elsewhere, more people are now Profitability looking to Medical Tourism. With Revenue (Rs. Mn) 8,592.0 7,745.8 10.9% 6,927.4 potential savings between 25% EBITDA (Rs. Mn) 2,480.4 2,557.3 -3.0% 2,389.5 and 75% of what it might cost EBT (Rs. Mn) 1,780.2 1,475.1 20.7% 1,165.2 them otherwise, patients seek Sri PAT (Rs. Mn) 1,616.7 1,322.2 22.3% 996.5 Lanka’s private healthcare service for No. of Employees 3,802 3,596 3,635 high quality and timely treatments. Financial Position Sri Lanka’s healthcare sector has Total Assets (Rs. Mn) 30,015.8 27,497.6 9.2% 24,505.0 undergone enormous transition in Total Equity (Rs. Mn) 17,349.7 15,885.9 9.2% 15,020.8 terms of technology and expertise in Total Debt (Rs. Mn) 8,400.2 8,963.1 -6.3% 6,431.3 recent years and the country stands Capital Employed (Rs. Mn) 25,749.9 24,849.0 3.6% 21,452.1 on the threshold of becoming a global health destination. With this in mind, private healthcare providers are actively continued investment in better Asiri Surgical Hospital PLC working on international accreditations. technology even further. With a capacity of 147 beds, this hospital offers specialised surgical The need for professional medical staff care and an advanced heart centre, is felt by the industry as a whole. Asiri COMPANY REVIEWS modern operating theatres and an has taken a step forward by providing Asiri Hospital Holdings PLC urology operating theatre. The specialty rigorous 3-year training for its nursing of this hospital has been recognised staff, ensuring to generate a steady This 108-bed hospital which started as worldwide; research papers at several stream of qualified and trained staff a laboratory service provider is now a medical conferences in the past came to deliver service in keeping with our specialist in Pediatrics and Maternity, from this hospital. Its heart centre philosophy of excellent patient care. whilst catering to other branches includes a dedicated coronary care unit Excellence in nursing care remains a of medicine. Asiri Hospital Holdings with 49 beds, and a surgical ICU with hallmark of the ‘Asiri’ brand. operates one of the country’s most technologically advanced laboratory advanced monitoring systems. The hospital introduced Sri Lanka’s first The rise of Non-Communicable facilities, accounting for 13,000 daily lab Digital Mammography facility during Diseases particularly from the tests and some 65% of the market. It is the year, making Asiri the first private country’s rapidly ageing population has the market leader through its innovation healthcare provider to offer advanced made private healthcare procedures and its network of over 400 collection three dimensional breast imaging for conscious of the need to address centres (Including third party collection the earliest detection of breast cancer. this area. Greater awareness of points). The new technology, Tomosynthesis, “wellness” and the need for preventive is the gold standard in breast cancer health screening and prompt medical To strengthen its dominant position in screening and detection. The hospital assistance when needed, generated laboratory services, a state-of-the-art also introduced a bariatric surgery greater demand across all our hospitals. laboratory building is to be built adjacent to the hospital. A facelift is also in programme for weight management during the year. Stiff competition has, however, led progress. The completion of this Rs.200 to the erosion of margins of private Mn project in 2016 will give the hospital More than fifty Sri Lankans travel healthcare providers, as they compete a modern façade, and a building to overseas annually for liver transplant on price to maintain patient volume. house the very profitable pathology and surgery, at great inconvenience and This has emphasised the need for phlebotomy units. cost to themselves. Mindful of this, the
Softlogic Holdings PLC 45
Group is setting up a dedicated liver first ever Bone Marrow Transplant in point of blockage. Bi-planer Digital transplant unit at Asiri Surgical Hospital, June 2014. Patients with hematological Imaging also enables perfect delivery which will be operational by end-2015. disorders such as Thalassemia can now of chemotherapy to the location be treated locally by Asiri at much lower where it is needed in treating cancers, Central Hospital Ltd. cost than overseas. This unit handles minimising collateral damage and Allogenic Transplants treating blood and potentially adverse side effects. This 228-bed hospital is a one-stop, bone marrow related disorders, a boon technologically advanced medical centre for children with Thalassemia especially, An advanced Cardiac Centre, with offering diagnostic, therapeutic and for whom a Bone Marrow Transplant a Cardio-Catheterization Laboratory intensive care facilities. Started in 2010, will in most cases be a lifetime cure. focusing on diagnosis, prevention, this hospital has gained recognition as treatment and surgery for heart one of the best in Neuro Sciences in Sri During the year, the Interventional diseases was opened in November Lanka. The hospital has 12 ultra-modern Cath-Lab was established here, the first 2014 with six successful surgeries operating theatres for neurosurgery, Bi-planer Catheterisation Laboratory in being undertaken in its first month. maternity, orthopedics, ophthalmology Sri Lanka. It is the first in Sri Lanka to and genitourinary surgery, and a offer Interventional Radiology, where Asiri also invested in a ‘Beauty sophisticated haemo-dialysis unit. The minimally invasive techniques are Central’ at Central Hospital, opened in hospital has 310 qualified nurses, 182 used to diagnose and treat various September 2014. This unit is equipped skilled paramedical staff and more than pathologies. The high standard of with the latest medical technology 300 Consultants treating in- and out- accuracy in imaging by Bi-planer and the best specialist team for patients. DSA unit offers the most promising treatments including Abdominoplasty, outcomes for stroke patients to date, Nasal Surgery, Breast Augmentation Central Hospital has continuously due to speedy detection of the precise & Reduction, Liposuction, Acne invested in technology. It conducted the
Annual Report 2014-15 46
Healthcare Services Sector
Treatment, Eyelid Surgery and all and surgical care facilities. It was Asiri’s PROGRESSIVE PERFORMANCE Oculoplastic Surgery. first venture outside Colombo. The sector continued to perform well, and registered growth of 10.9% (to The hospital is also now installing Asiri Diagnostic Services (Pvt) Ltd. Rs.8.6 Bn) in revenue, contributing the world’s most advanced neuro- This is the Group’s laboratory services 21.7% to the Group’s top-line. Central navigational and intra-operational in the Central Province, carried out with Hospital was the largest contributor to monitoring system for its patients. a joint venture partner. Group earnings, supported by its strong market position in the diagnostics Asiri Central Hospital Ltd. segment. Operating profit declined Asiri Kandy (Pvt) Ltd. This hospital ceased operations in marginally to Rs.1.8 Bn, still 42.6% Our focus is not limited to Colombo. 2010 with operations being transferred to the Group’s operating profit. The A 133-bed facility will commence to Central Hospital. The land and sector had finance income of Rs.91.3 operation in Kandy in 2018. building of the hospital at Horton Place, Mn, up 85.1% during the year, helped Construction of the hospital is to begin Colombo 7, was leased to the Army by the receipt of an advance on the in October 2015. Hospital until June 2014. The asset was sale of Asiri Central Hospital’s property. recognised as held for sale in its books Finance cost increased 14.8% to when an agreement to sell was signed Digital Health (Pvt) Ltd. Rs.635.3 Mn, while a fair value gain in respect of the property. The sale was This is a joint venture formed in of Rs 513.4 Mn was registered on completed in July 2015. August 2015 in partnership with Digital the Asiri Central Hospital property. Holdings Lanka (Pvt) Ltd., a subsidiary Profit before taxation increased 20.7% of Dialog Axiata PLC, and Asiri Hospital to Rs.1.8 Bn, contributing 78.5% to Asiri Hospital Matara (Pvt) Ltd. Holdings to develop a state-of-the-art Group profit before tax. Profit after This is a 62-bed facility in the Southern electronic commerce infrastructure for taxation improved 22.3% to Rs.1.6 Province, offering a range of general Sri Lanka’s healthcare sector. Bn contributing 88.9% to the Group’s bottom line.
Softlogic Holdings PLC 47
PROGRESSIVE OUTLOOK Ambitious plans reflect the sector’s long term view and its consequent investment strategy. Our core focus is on upgrading technology and assembling the best team of medical professionals we can, to contribute to the highest quality standards possible. The Group is working towards Joint Commission International Accreditation (JCIA) for Asiri Surgical and Central Hospital in 2016. It has already garnered a substantial share of Maldivian medical tourists visiting Sri Lanka. We expect to welcome medical tourists from other countries going forward, and are supported in our aspiration by the investments being made and the development efforts underway.
Annual Report 2014-15 48
ICT Sector Emphasis on 4G adoption, migration from feature to smart phones and active usage of ICT in economic activities would drive demand
Our ICT product lines include, but are not limited to, mobile handsets & accessories, computers, software and hardware solutions.
INDUSTRY REVIEW IT is one of the largest components of the worldwide spend on technological products and related services. Global spending on IT in 2014 was some USD3.7 trillion, a 1.9% increase from 2013.
Softlogic Holdings PLC 49
Revenue of Rs.9 Bn, improvement of 55%
Strong Distribution Technical Leading Brands Network Expertise
SOFTLOGIC HOLDINGS PLC
SOFTLOGIC INFORMATION SOFTLOGIC COMMUNICATIONS (PVT) LTD. TECHNOLOGIES (PVT) LTD. Handles ‘Nokia’ and ‘Microsoft Lumia business Software and hardware solutions provider
SOFTLOGIC COMPUTERS (PVT) LTD. SOFTLOGIC COMMUNICATION SERVICES (PVT) LTD. Tailor-made IT solutions provider Service arm of Softlogic Communications (Pvt) Ltd
SOFTLOGIC BPO SERVICES (PVT) LTD. SOFTLOGIC INTERNATIONAL (PVT) LTD. ICT service provider to the Group as well as third Authorised dealer for Dialog Axiata PLC and retailer parties for ‘Samsung and Nokia / Microsoft Lumia operations
SOFTLOGIC AUSTRALIA (PTY) LTD. SOFTLOGIC MOBILE DISTRIBUTION (PVT) LTD. Software solutions provider in Australia Handles the ‘Samsung’ operations
Annual Report 2014-15 50
ICT Sector
With Government acting to improve FY15 FY14 % YoY FY13 IT literacy in the country, Sri Lanka’s IT Profitability market has experienced double-digit Revenue (Rs. Mn) 9,252.0 5,982.3 54.7% 6,283.8 growth over the last several years. IT EBITDA (Rs. Mn) 766.2 543.2 41.1% 719.0 has become essential to households EBT (Rs. Mn) 408.1 29.8 1270.5% 183.0 and corporates, and non-availability PAT (Rs. Mn) 270.6 19.4 1296.0% 168.3 of a proper IT infrastructure makes No. of Employees 887 805 727 businesses dysfunctional and less Financial Position competitive. The B2B IT business Total Assets (Rs. Mn) 7,596.3 5,838.8 30.1% 5,553.3 has therefore experienced significant Total Equity (Rs. Mn) 1,400.2 1,266.5 10.6% 678.5 growth for several years. Total Debt (Rs. Mn) 3,217.5 2,764.4 16.4% 3,145.3 Capital Employed (Rs. Mn) 4,617.7 4,030.9 14.6% 3,823.8
The recent past has seen major improvements in the country’s internet services. Internet penetration in 2014 grew 67.3%, raising internet availability COMPANY REVIEWS Softlogic Communication Services to 16.4 per 100 persons. This was (Pvt) Ltd. Softlogic Communications (Pvt) Ltd. driven by mobile internet connections, This is the authorised service partner which grew by 85.8%. Nokia, now a part of Microsoft, is a of Softlogic Communications. The world leader in telecommunications, company has six Care Centres, in Sri Lanka is ranked 16th in the Global driving the growth and sustainability of Colombo, Kandy, Kurunegala, Galle, Services Location Index, which the broader mobile industry. Softlogic Anuradhapura and Ratnapura, delivering assesses off-shoring destinations Communications is the national convenient and comprehensive for services such as IT support. The exclusive distributor for its handsets in after-sales service. This company’s industry targets USD5 Bn in export Sri Lanka since 2000. Our distribution performance is closely correlated with revenue from the IT-BPO sector by network remains a core strength, with that of Softogic Communications. 2022, and we believe our IT businesses over 2,000 retail points island-wide. This network includes seven retail will benefit from the trickle-down Softlogic Mobile Distribution (Pvt) showrooms in Colombo and seven in effects. Ltd. other parts of the country. Our newest telco company holds The telecommunication industry in distributor rights for one of the Following the acquisition of the Nokia Sri Lanka has evolved significantly. world’s best-known handset brands— Devices and Services business by There was exponential growth in smart SAMSUNG—in Sri Lanka. The Microsoft, the smart phone range phones especially, driven by aspirations company operates through 13 regional was rebranded-‘Microsoft Lumia’ and short product life-cycles. According distributors. With an approximately in November 2014. The company’s to the International Data Corporation, 30% share, Samsung leads the market smart phone range, ‘Microsoft Lumia’, the mobile phone market in Sri Lanka in smart phones. Samsung remains continued to perform strongly, while reached 1 Mn in the last quarter of one of the most favoured smart phone demand for ‘Nokia’ feature handsets 2014, smart phones accounting for brands in the country. approximately 22% of this volume. The stands undisturbed. Microsoft / Nokia data excludes “grey” imports coming stands third in the smart phone market, This company has been very into the country through irregular with close to a 9% market share. successful, and is expected to be a channels. driver of the ICT sector’s future growth.
Softlogic Holdings PLC 51
Softlogic International (Pvt) Ltd. services to its customers, consolidating highest quality ICT services to the Softlogic International, which operates its market leadership. Group, via a fully integrated software 27 franchise service centres, is the platform. In doing this, the company Authorised Business Partner for Dialog This B2B business has very competent seeks to help all Group businesses Axiata, offering corporate and individual IT consultants and engineers in its leverage the potential of IT to achieve GSM packages, DTV, CDMA & HSPA Enterprise Solutions team. We also long-term competitive advantage. connections and provides customer provide outsourced IT services to service. This fits well in Softlogic’s a wide clientele. Our Engineering Additionally, Softlogic BPO Services repertoire. Services team provides engineering and provides ICT consultancy and bespoke consulting services to a host of clients, MIS solutions to third party clients in Sri Softlogic International also retails and includes experts in all the relevant Lanka and overseas. ‘Nokia/ Microsoft Lumia’ and ‘Samsung’ areas. handsets, operating a phone gallery in Softlogic Australia (Pty) Ltd. Colombo. Softlogic Computers (Pvt) Ltd. This is Softlogic’s overseas subsidiary, This company provides a wide range a leading software solutions provider Softlogic Information Technologies of tailor-made solutions, and occupies catering primarily to the needs of (Pvt) Ltd. a profitable niche serving the retail, healthcare and age-care clients in The company is the leading importer hospitality, banking, and financial Australia, and serving over 50 clients in of personal computers in Sri Lanka. It services markets. these areas. Its flagship Chefmax food also markets and distributes notebook services suite is implemented in many computers, servers, storage, network Softlogic BPO Services (Pvt) Ltd. reputed state and private hospitals and is well known amongst healthcare infrastructure and printers. It strives to Established in 2013, Softlogic BPO professionals. provide the world’s best products and Services is creating a Centralised ICT Services Unit aimed at giving the
Annual Report 2014-15 52
ICT Sector
PROGRESSIVE PERFORMANCE PROGRESSIVE OUTLOOK ICT sector revenue grew 54.6% to Active usage of ICT services in Rs.9.3 Bn, increasing its contribution economic activities such as e-banking, from 20.5% to 23.5% of the Group’s mobile banking, e-bus ticketing, top-line. The growth was driven and mobile points of sale (POS) has by its new ‘Samsung’ business at increased in recent years. Reduction Softlogic Mobile Distribution, while the in unemployment levels, stabilisation performance of ‘Nokia’ and ‘Microsoft of exchange and interest rates and Lumia’ continued to be good. The B2B increasing per capita income augur IT business performed in line with well for the sector. The inclination expectations. towards technology, an emphasis on 4G adoption and an increasing Operating profit reached Rs.705.3 migration from feature phones to Mn, up 39.6%, and contributed smart phones will drive volumes in the 16.6% to Group operating profit. next few years. Considering the low Finance cost, primarily from working PC penetration and low device prices, capital borrowings, declined 37.3% the hardware market will grow while to Rs.302.1 Mn on the back of low software will be driven by enterprise- interest rates during the year. based software.
Profit before taxation was Rs.408.1 Mn We expect our ICT companies to be a (Rs.29.8 Mn last year), and the sector prime beneficiary of this growth. closed the year on a strong note with profit after taxation of Rs.270.6 Mn (Rs.19.4 Mn last year).
Softlogic Holdings PLC 53
Annual Report 2014-15 54
Financial Services Sector Financial Services cluster has achieved many milestones in the short time since Softlogic became involved in these businesses in 2010.
Softlogic’s investment strategy has focused on the sectors that are most likely to benefit from Sri Lanka’s growth. We anticipate that per capita GDP will soon reach upper middle income levels, due to the sustained growth we expect will accrue from appropriate economic policies. Financial Services is one area in which we see huge potential.
Softlogic Holdings PLC 55
Revenues reached Rs.8 Bn mark for the year under review
5th Life Insurance player Innovative financial Increasing presence solutions island wide
SOFTLOGIC HOLDINGS PLC
SOFTLOGIC CAPITAL PLC Holding company of the Financial Services cluster. Licensed by the Securities & Exchange Commission as a market intermediary in the Investment Manager category
SOFTLOGIC FINANCE PLC ASIAN ALLIANCE INSURANCE PLC CAPITAL REACH PORTFOLIO SOFTLOGIC STOCKBROKERS Licensed finance company regulated Insurer licensed by the Insurance MANAGEMENT (PVT) LTD. (PVT) LTD. by the Central Bank of Sri Lanka. Board of Sri Lanka to undertake Life Not operational Stockbroker licensed to operate on Core activities include acceptance Insurance the Colombo Stock Exchange of deposits, and grant of lease, hire purchase, loan and other credit facilities ASIAN ALLIANCE GENERAL INSURANCE LIMITED Insurer licensed by the Insurance Board of Sri Lanka to undertake General Insurance
Annual Report 2014-15 56
Financial Services Sector
The Financial Services cluster has FY15 FY14 % YoY FY13 achieved many milestones in the short Profitability time since Softlogic became involved Revenue (Rs. Mn) 8,001.8 7,457.5 7.3% 5,681.2 in these businesses in 2010. The year EBITDA (Rs. Mn) 1,282.2 969.7 32.2% 399.9 has been one of the most significant in EBT (Rs. Mn) 844.8 400.8 110.8% (212.0) performance, with many key indicators PAT (Rs. Mn) 784.5 337.6 132.4% (245.5) reaching ‘best ever’ levels. No. of Employees 1,295 1,134 1,041 Financial Position Total Assets (Rs. Mn) 35,258.1 30,509.8 15.6% 25,302.1 INDUSTRY REVIEWS Total Equity (Rs. Mn) 8,126.2 4,939.5 64.5% 4,522.2 Non-Bank Financial Institutions Total Debt (Rs. Mn) 7,016.4 8,806.3 -20.3% 6,077.1 (NBFIs) Capital Employed (Rs. Mn) 15,142.6 13,745.8 10.2% 10,599.3 The NBFI sector is a key part of Sri Lanka’s financial system. The NBFI sector comprised 48 LFCs cost deposits. The interest margin (net Licensed Finance Company (LFC) and and 8 SLCs at end-2014. Its branch interest income as a percentage of total Specialised Leasing Company (SLC) network increased by 72, to 1,132, assets) increased to 8.0% for 2014, sector asset growth moderated in during the year. 47 of the new branches compared to 6.6% in 2013. 2014 due to lower demand for credit, were opened outside the Western particularly in the early part of the year. Province. The low interest rates resulted in total Demand picked up in the second half, assets of the sector growing 18.9% in with lower interest rates helping. The sector’s assets and liabilities are 2014. ROA and ROE improved to 3.0% being re-priced, given the currently and 13.1% respectively. The NPL ratio Mergers and acquisitions during the lower interest rates. This re-pricing has increased marginally, from 6.7% in year were aimed at building resilience had a positive effect on net interest 2013, to 6.9%. and improving the stability of the sector. income, due to the access to lower
The sector provides scope for mutually beneficial relationships with Softlogic’s other business sectors, as depicted below.
RETAIL AUTOMOBILE ICT LEISURE HEALTHCARE SERVICES Hire purchase solutions Leasing/ motor insurance Hire purchase Travel insurance Medical insurance
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Insurance 31st December 2013 2014 The industry, which accounts for 3.4% Market Size (Rs. Mn) 41,675.9 44,610.4 of financial sector assets, experienced Market Growth (%) 11.2% 7.0% moderate growth in 2014. There were Asian Alliance Insurance PLC’s market share (Rs. Mn) 2,520.3 3,048.1 21 insurance companies registered with Asian Alliance Insurance PLC’s market share (%) 6.1% 6.8% the Insurance Board of Sri Lanka (IBSL). Of these, 12 are composite insurance The reach of the insurance sector in Sri Life Insurance companies carrying on both long-term Lanka is relatively low. Total premium Long term insurance business insurance and general insurance, 6 as a percentage of GDP was 1.05% in generated a GWP of Rs.44.6 Bn in engage exclusively in general insurance 2014- 0.45% for long-term insurance 2014 (2013: Rs.41.7 Bn). The market and 3 conduct only long-term insurance. and 0.6% for general insurance. The recorded slower growth of 7.0% in sector recorded 5.1% growth in 2014, compared with 11.2% in 2013. The separation of composite insurance Gross Written Premium (GWP), to companies, transition to a Risk Based Rs.99.9 Bn in 2014.The low market The top five contributors accounted Capital (RBC) Regime, increase in penetration is caused, significantly by a for 81.6% of total long term insurance minimum capital requirements and lack of awareness of insurance and its GWP in 2014 (2013: 82.6%). The preparation for public listings by benefits. number of long term insurance policies 2016 were key policies introduced during the year. The RBC parallel test run commenced and is expected to 31st December 2013 2014 continue till end-2015. Seven insurance Market Size (Rs. Mn) 53,310.8 55,261.6 companies are listed on the Colombo Stock Exchange (CSE) and the balance Market Growth (%) 7.3% 3.7% must be listed on the CSE by February Asian Alliance General Insurance Ltd’s market share (Rs. Mn) 1,556.4 1,651.8 2016. Asian Alliance General Insurance Ltd’s market share (%) 2.9% 3.0%
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Financial Services Sector
in force had risen by 5.4%, to 2,612,497 Equity Market the availability of tax concessions, and at end-2014. 545,721 long term The equity market improved, recording this has affected the existing Leasing insurance policies were issued during growth of 13.6% in the year with / HP portfolios of NBFI’s. This, and the year. the index reaching 6,820.34 at end- new competition from Banks in this March 2015. Market Capitalisation area, has encouraged a shift in product General Insurance stood at Rs.2.9 trillion then, with Price emphasis. Softlogic Finance has shifted its focus towards SME working capital The total GWP generated from general Earnings and Price to Book Value financing, which offers considerable insurance was Rs.55.2Mn in 2014 ratios of 18.4X and 2.0X, respectively. scope and where speed of execution compared to Rs.53.3Mn in 2013, an The improvement is attributed to and accessibility are key success increase of 3.7 %. This low growth low interest rates, improved growth factors. This change in product focus was due to slow growth in marine, prospects, relatively better corporate has resulted in a SME loan portfolio of miscellaneous and motor insurance earnings and continued foreign Rs.4.9 Bn at year-end, or 31% of the businesses and negative growth in purchasing. total, compared with Leasing and Hire fire insurance. Most classes of general Purchase, where the portfolio was insurance remained price competitive, COMPANY REVIEWS Rs.3.1 Bn. or 20% of the total. with insurance companies competing fiercely for market share. Softlogic Finance PLC The Company continues to enjoy a The focus of NBFIs is mainly on the successful deposit franchise, with Motor insurance dominated the general SME sector. SME’s have benefited Customer Deposits rising to Rs.12.1 Bn insurance market, generating a GWP from a number of developments during at end-March 2015, an increase of 30% of Rs.34.9 Bn in 2014 (2013: Rs.33.2 the year, especially on Leasing and Hire from Rs.9.3 Bn in the previous year. Bn). This represented 63.2% of the Purchase products. With interest rates remaining low and total GWP in general insurance. Motor stimulating demand for credit, Softlogic insurance grew by 5.4% in 2014. Vehicle valuations reduced significantly Finance, which is ranked 10th amongst due to changes in import taxes and
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LFC’s, is poised to deliver excellent We are confident that our strategy Rs.844.8 Mn (Rs.400.8 Mn last year) performance. will deliver superior results and the led by the decline in finance costs. profitability that has been elusive for Accordingly, the sector closed the year Softlogic Finance boasts of an island- General Insurance in the country, with a substantial 132.4% rise in Profit wide presence of 17 fully fledged and when combined with our high after Taxation, to Rs.784.5 Mn. branches and 13 Gold Loan Centres. performing Life Insurance business that our continued progress in the industry is assured. PROGRESSIVE OUTLOOK Asian Alliance Insurance PLC We expect future growth in the Life Low penetration provides the Insurance sector with customers opportunity for growth in Life Insurance. Softlogic Stockbrokers (Pvt) Ltd diversifying their investments, Asian Alliance Insurance focuses almost Softlogic Stockbrokers has one of the whilst the revamping of strategy in entirely on Life products. GWP grew most experienced teams in the industry. General Insurance will improve both 21% in 2014, with a further growth of This research driven stockbroker customer convenience and operational 21% in the 1st Quarter 2015. We feel focused on building its clientele during efficiencies. lower interest rates will enhance Life the year. One of the company’s core business, as customers diversify their strengths is its competent independent Softlogic Finance continues to enjoy investment options. research team, which provides a successful deposit franchise, and comprehensive research and analysis of with its new focus on working capital Asian Alliance Insurance continued Sri Lankan equities, the economy and loans to the SME sector is confident its strong performance, recording the debt markets. The company has tie-ups of maintaining satisfactory growth and highest growth rates in the market with the global brokerage Auerbach profitability in the coming year. and the highest average premium, and Grayson and Company LLC. Amongst emerging 5th in the industry during the other foreign tie-ups are Exotix Partners The performance of the stockbroking year. It has a presence of 70 Branches LLP and Pictet & Cie. The firm ranked unit depends on the buoyancy of the island-wide. 3rd in the industry at 31st March 2015, Colombo Stock Exchange, which in with a market share of 8.9%. turn hinges on economic and business Complying with the regulator’s direction sentiment in the country. It is hoped that Life and General businesses should FINANCIAL REVIEW that with a stable government and be separated, Asian Alliance General clear direction on economic and fiscal Insurance Ltd was incorporated as Revenues for the sector approached policies, the growth seen thus far will a wholly owned subsidiary of Asian Rs.8.0 Bn, an increase of 7.3% for continue, and that with the quality of its Alliance Insurance, to undertake the year, to contribute 20.1% to the research team the stockbroking unit’s General Insurance. We have revamped Group’s top line. Operating Profit progress will continue. General Insurance operations with rose by 36.7% to Rs.1.0 Bn making a focus on technology, to improve up 24% of the Group’s Consolidated Overall, the Financial Services customer convenience and operational Operating Profit for the year. Finance businesses are primed and poised to efficiency as we concentrate on the Income, which reflects performance benefit from Sri Lanka’s growth, and key Motor and Health sectors in the of Asian Alliance Insurance’s fixed and management is optimistic that results in retail area, supported by the Softlogic equity investment portfolio, declined future will reflect this. Group’s presence in relevant sectors. marginally to Rs.935.6 Mn. The decline The development of creative packages was due to interest rate fluctuations, included ‘DRIVE THRU’ and ‘365 which affected the treasury bond DAYS INSURANCE’. The company’s investments of the Life business. ‘CLICK2CLAIM’ motor product, offering Rs.944.3 Mn was transferred to life a hassle-free claims process, is one of policy holders during the year. Finance the most innovative introduced thus Cost halved to Rs.168.1 Mn for the far, and has been recognised for its year, primarily due to the low interest innovativeness globally as well. rates. Profit before Taxation doubled to
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Automobile Sector We are redrafting initiatives to significantly improve customer experiences and convenience, while driving quality and building relationships with customers
Softlogic entered into the automotive sector with the acquisition of Uni-Walkers Limited, now Softlogic Retail, in 2006.
INDUSTRY REVIEW New vehicle registrations for 2014 increased 31.5% to 429,556, against the decline seen in 2013. Car registrations increased 37%. The demand for new vehicles was driven chiefly by low interest rates and the stability of the Sri Lanka Rupee.
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Revenues improved 76% to Rs.743 Mn during the Financial year 2014/15
Expert after New range of Prospect of introducing sales service Ford vehicles “green” vehicles
SOFTLOGIC HOLDINGS PLC
SOFTLOGIC AUTOMOBILES (PVT) LTD. FUTURE AUTOMOBILES (PVT) LTD. Authorised dealer for Daihatsu and King Long Authorised dealer for Ford
The year saw several initiatives to COMPANY REVIEWS In 2012, Softlogic Automobiles simplify the tax structure on vehicle commenced a strategic partnership Softlogic Automobiles (Pvt) Ltd. imports. While taxes applicable on with Xiamen King Long United hybrid vehicles were increased, taxes Softlogic Automobiles handles the Automotive Industry, the National Bus on motor cars with an engine capacity Daihatsu business, which commenced Manufacturer of China, for introduction under 1,000 cc were reduced. Taxes on with the acquisition of Uni Walkers in of King Long buses and vans to the Sri electric cars were also reduced. 2006. The turnaround post acquisition Lankan market. The range of buses was was noteworthy, but was slowed relaunched in 2014, and King Long has thereafter by changes in import duties. now become one of the bestselling
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Automobile Sector
brands of luxury coaches in Sri Lanka, FY15 FY14 % YoY FY13 sought after by both tour operators and Profitability public transport providers. A high-tech Revenue (Rs. Mn) 743.4 423.6 75.5% 704.7 3S (Sales, Service and Spare Parts) EBITDA (Rs. Mn) (14.7) (10.4) -41.6% 17.1 facility for Daihatsu is in place. EBT (Rs. Mn) (97.4) (55.5) -75.6% (48.5) PAT (Rs. Mn) (106.3) (40.3) -164.1% (43.9) Softlogic aggressively promoted its No. of Employees 94 73 76 Body, Paint and Repair Centre to Financial Position mitigate the effect of slowing sales Total Assets (Rs. Mn) 1,321.0 627.8 110.4% 329.3 of new vehicles. This facility serves Total Equity (Rs. Mn) 67.3 34.8 93.6% 29.9 all light vehicles including Ford and Total Debt (Rs. Mn) 477.6 112.7 323.7% 187.6 Daihatsu, as well as King Long buses. Capital Employed (Rs. Mn) 544.9 147.5 269.4% 217.5 It works closely with Asian Alliance General Insurance.
services are now available under one The Daihatsu business continued its Future Automobiles (Pvt) Ltd. roof. steady performance, while contributions Future Automobiles handles the Ford from the Collision Repair Centre and business, which started in 2010. A Franchise Workshops (FORD, Daihatsu state-of-the-art 3S facility conforming PROGRESSIVE PERFORMANCE & King Long) progressed satisfactorily. to global standards was unveiled at the Revenues of the automobile sector The investment in the 3S Ford facility Ford facility recently. This has driven grew by a healthy 75.5% during the increased finance costs, which resulted sales, and has increased convenience year, to Rs.743.4 Mn. This was led in a loss for the year. and customer confidence, as all primarily by sales of ‘King Long’ buses.
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PROGRESSIVE OUTLOOK The sector strives to raise its profile and performance in the years ahead. We are redrafting initiatives to significantly improve customer experiences and convenience, while driving quality and building relationships with customers.
We are repositioning our products with competitive pricing, and will introduce the following new FORD Models in the current year. a. Mustang Sports Car. b. Everest SUV. c. Mondeo Hybrid Car. d. Ranger Double Cab. e. Transit passenger van.
The sector is also focusing on introducing a line of “green” vehicles, to benefit from the tax structure applying to these.
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Leisure Sector Softlogic opened its first resort in June 2014, and has received positive feedback from both local and foreign guests.
Softlogic opened its first resort in June 2014, and has received positive feedback from both local and foreign guests. The resort achieved an average occupancy of 72% in the winter season.
INDUSTRY REVIEW Sri Lanka’s tourism industry has experienced high growth since the civil conflict ended. Tourist arrivals have increased, reaching 1.5 Mn in 2014 (up 19.8%) and 1.0 Mn between January and July 2015. Chinese
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Achieved Rs.628 Mn as revenues for the year as against Rs.92 Mn reported last year
Increasing occupancy Centara Resort - Best Movenpick City Hotels and yield new hotel of the year to open in April 2016
SOFTLOGIC HOLDINGS PLC
SOFTLOGIC DESTINATION SOFTLOGIC PROPERTIES (PVT) LTD. MANAGEMENT (PVT) LTD. Holding Company of the Leisure Sector Travel solutions provider
CEYSAND RESORTS LTD. SOFTLOGIC CITY HOTELS (PVT) LTD. Four-star plus resort in the 5-star hotel In Colombo, under construction Southern part of the country
tourists led the arrivals in 2014. The now the third largest foreign exchange global operators have boosted tourism. Sri Lanka Tourist Board targets 2.0 Mn earner in the country. An increased Sri Lanka climbed 11 notches to rank arrivals in 2015. duration of stay, to 9.9 days (up from 63rd of 141 countries in the World 8.6 days), was seen in 2014. Improved Economic Forum’s Travel & Tourism Industry income increased 41.7%, to road and rail connectivity, port and Competitiveness Report 2015. USD2.4 Bn, in 2014 and tourism is airport development, and the entry of
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Leisure Sector
Sri Lanka is not only a holiday FY15 FY14 % YoY FY13 destination, and is fast gaining Profitability popularity for MICE tourism. This Revenue (Rs. Mn) 628.1 91.7 584.5% 54.9 segment accounts for 11% of total EBITDA (Rs. Mn) 93.0 (50.2) 285.3% (44.4) arrivals, and 240,000 MICE visitors are EBT (Rs. Mn) (142.3) (91.0) -56.3% (97.3) targeted in 2016. PAT (Rs. Mn) (142.8) (76.3) -87.2% (79.5) No. of Employees 289 7 7 This industry faces numerous Financial Position challenges. Present room stock is Total Assets (Rs. Mn) 11,329.7 8,074.4 40.3% 6,267.2 insufficient to cater to the ambitious Total Equity (Rs. Mn) 5,077.1 3,963.5 28.1% 3,840.1 arrivals targets. The formal hotel Total Debt (Rs. Mn) 3,437.7 2,511.5 36.9% 1,646.2 sector needs to expand. There are Capital Employed (Rs. Mn) 8,514.8 6,475.0 31.5% 5,486.3 26,700 graded rooms island wide. Approximately 50,000 rooms are needed to serve 2.5 Mn tourists in 2016. Some 75 hotels are under COMPANY REVIEWS freshwater swimming pool, water sports and entertainment facilities and construction and these would add Ceysand Resorts Ltd. 5,300 rooms. The informal sector warm hospitality make the resort one of Ideally located oceanfront on the Indian could add another 4,000 rooms, and the most sought after in the southern Ocean and bordering the Bentota river, condominiums can service part of the part of Sri Lanka. It provides an ideal Centara Ceysand Resorts & Spa offers market. This still leaves a gap. escape from the hustle and bustle of a unparalleled luxury and service. This hectic lifestyle. The strategic location four-star plus resort offers a wide range of the resort between the Indian Local tourism has also been growing of amenities and exclusive facilities to Ocean and the Bentota river, makes it rapidly. We expect this to continue complement its exquisitely furnished especially attractive. with increases projected in per capita rooms and suites. Its luxurious spa, income.
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The resort is operated by Centara group, which is based in Rhode Island, The sector closed the year with a loss Hotels & Resorts of Thailand and US, has worked with prestigious brands of Rs.142.8 Mn (Rs.76.3 Mn last year). functions in line with Centara’s such as Marriott, Ritz Carlton and international standards. Sheraton. The “fit out” contract was awarded to S&T of Oman, who are now PROGRESSIVE OUTLOOK Its success is one we at Softlogic engaged in fitting-out guestrooms and Centara Ceysand Resorts & Spa has celebrate. public areas. proved an immediate success, and we believe this success will quickly extend to Movenpick City Hotel also, following Movenpick City Hotels (Pvt) Ltd. We envisage the hotel will be operational by April 2016. its opening. Softlogic has strategically partnered Movenpick Hotels and Resorts, who will manage this world class business Softlogic Destination Management hotel in the city of Colombo. This will (Pvt) Ltd be a five-star hotel built in Colombo Softlogic Destination Management (Pvt) after very many years. The upscale city Ltd. is one of Sri Lanka’s well-reputed hotel, located in the heart of the city, travel companies engaged in both will occupy half an acre in its prime inbound and outbound travel, providing downtown location, surrounded by quality management services to tour commercial activity and prestigious operators as well as local corporate restaurants. businesses.
The 24-storied hotel, designed with This is a total travel solution sustainability in mind, will feature provider with a 24/7 service covering contemporary architecture. It will boast a unmatchable range of travel 219 rooms ranging from standard options, hotels, travel insurance and rooms to fully-fledged luxury suites. Visa assistance. Its wide range of Guests will enjoy a range of facilities services includes assistance upon including a fitness centre, spa and arrival, transfers, tours and safaris, pool. The hotel will feature rooftop special interest activities, tailor- al fresco bar and restaurant facilities, made arrangements and contracting providing guests with stunning views accommodation. of downtown Colombo and the Indian Ocean. The hotel will have an all-day dining restaurant, French and Asian PROGRESSIVE REVIEW Fusion specialty restaurants and an Revenue grew to Rs.628.1 Mn in the exclusive nightclub. It will be equipped year (against Rs.91.7 Mn last year). This to handle any business need, and will accrued mainly from Ceysand Resort, have five meeting/ boardrooms and a whilst destinations management fully functional business centre. operations made a nominal contribution.
The structure of the building has been Finance cost increased to Rs.90.2 Mn completed, and the hotel is nearing during the year, from Rs.1.9 Mn in completion. For Interior design an the previous year, due to funding of internationally renowned design firm Ceysand Resorts. Di Leonardo was commissioned. This
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165 Total Rooms Superior - 106 Deluxe - 44 Family Residence - 8 Suites - 7
A pontoon takes you across the tranquil Bentota River to the resort.
Café Bem offers authentic Sri Lankan, Asian and international cuisines. 360 Seafood restaurant specialises in seafood.
Rooms and suites each with a furnished balcony or terrace looking out across the ocean or river. 69
90m palm-fringed swimming pool is situated next to the beach, and boasts a Jacuzzi. Its luxurious spa, freshwater swimming pool, water sports and entertainment facilities and warm hospitality make the resort one of the most sought after in the southern part of Sri Lanka.
Strategic location of the resort between the Indian Ocean and the Bentota river, makes it very attractive. 70
Corporate Governance
The success of Softlogic depends on our ability to continually add value. Building trust with customers and investors is a priority in our pursuit of value. Responsible corporate governance is therefore very important to us.
OUR GOVERNANCE statements. The responsibility for good sectors. Each business is directed by FRAMEWORK governance lies with the Board of more detailed guidelines establishing As a Group with global representations, Directors. objectives, strategies, and control the Corporate Governance practices and reporting requirements. These followed by the Company and its The Board, which is entrusted with are regularly reviewed to monitor subsidiaries are of best practices. the direction of Softlogic and the compliance and encourage continuous Through the Governance mechanism supervision and control of management, improvement. in the Company, the Board along has delegated responsibility for day- with its Committees undertakes its to-day management of Softlogic to its Our Governance Aspirations Executive Management. The Group’s responsibilities to all its shareholders • Adopt best governance practices, management and organisational by ensuring transparency, fair play and respecting principles established structure corresponds to its segmental independence in its decision making. by relevant industry regulators. reporting lines. Each business sector’s • Act in the best interests of Softlogic strives to expand its management team is responsible for stakeholders and satisfactorily businesses and be competitive in all the activity of the sector and reports to address situations involving of them. It seeks to adopt the 'best the Sector Head, who in turn reports, conflicts of interest. practices' followed in Corporate through Executive Management, to the Governance across all its sectors. The Board. • Maintain effective internal control Company recognises the need for and risk management systems. transparency and accountability in all We seek high standards and efficient • Preserve data integrity. its actions, to protect the interests of processes through: its stakeholders. The Board considers • an appropriate organisational • Implement appropriate accounting itself a ‘Trustee of its Shareholders’ and structure; policies compliant with Sri Lanka acknowledges its responsibilities for Accounting Standards. • effective internal control and risk adding to and safeguarding their wealth. management; and • Provide accurate, complete, clear and timely information. Hence, Softlogic’s shareholders • sound internal and external participate at the Annual General reporting. • Pursue best corporate governance Meeting in appointing its Board of practices, respecting principles Directors, and also its Auditors. The Our model strives for a robust established by relevant industry Board of Directors manage Softlogic’s framework of responsibility and regulators. affairs on behalf of its shareholders. accountability throughout Softlogic, The Auditors report to the shareholders establishing guidelines and on their scrutiny of Softlogic’s financial performance standards across all
Softlogic Holdings PLC 71
1 Board Governance 2 Shareholder Governance • Board Committees • Annual General Meeting Audit Committee • Quality and frequent communication Remuneration Committee with investors/ analysts • Diverse Board • Active investor relations department • Assessment of Board effectiveness • Instant web based query-response • Balance mix of Non-Executive Directors
3 Checks and Balances • Effective Risk Management • Prevention of insider trading • Independent assurance: Internal and external audit Corporate Governance
4 Code of Conduct • Effective internal audit and risk management • Legal and compliance • Management governance and assurance • ‘The Code’ 5 Ombuds Process • Ombuds process for both employees and non-employees • Employee suggestion box to track complaints, suggestions and any unethical reporting. • External Regulators Companies Act No.07 of 2007 CA Sri Lanka Securities & Exchange Commission of Sri Lanka Colombo Stock Exchange Sri Lanka Accounting & Auditing Standards Monitoring Act 15 of 1995 Finance Business Act No. 42 of 2011 Insurance Board of Sri Lanka Private Health Service Regulatory Council of the Ministry of Health Sri Lanka Medical Ordinance and Council and other relevant governing bodies of the Healthcare sector
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Corporate Governance
External Control: Softlogic Group has The Board has a formal schedule of The Directors have collective prepared its Corporate Governance matters reserved for its attention. responsibility for the Group’s direction. Code (‘the Code’) in line with the These include: Non-Executive Directors contribute to Code of Best Practice on Corporate the Board’s workings by bringing to • strategy and long-term plans; Governance issued by the Securities discussions their skills and experience, and Exchange Commission of Sri • major capital projects, acquisitions and independent judgement and Lanka and The Institute of Chartered and divestments; constructive challenges on areas Accountants of Sri Lanka (CA Sri Lanka) • financial structure; covered. They continuously; in 2013. • annual budgets and operating • scrutinise and challenge plans; and performance across the Group’s Internal Control: Articles of business; Association, Code of Ethics and • annual and quarterly financial Business Conduct (the Code), policies results. • review risk profile and the integrity such as the Financial Policy and Human of the financial information and controls; Resource Policy, guidelines and Specific responsibilities are delegated manuals. to Board Committees. • determine the Company’s broad policy for executive remuneration; and the remuneration packages HOW THE BOARD OPERATES BOARD COMPOSITION for the Executive Directors and the The role of the Board Our Board consists of nine Directors, Chairman. The Board, along with its Committees, who served through the year. One other Non-Executive Director, Desamanya provides leadership and guidance to the Non-Executive Directors P D Rodrigo relinquished his position Company’s management and directs, The table below shows the on 30 June 2014. The Directors at supervises and exercises control over independence or otherwise of our Non- 31 March 2015 were the Chairman its activity. The Board is responsible Executive Directors. for the overall conduct of Softlogic’s & Managing Director, four Executive businesses. Directors and four Non-Executive Directors.
Date first elected by Independence shareholders Dr. Sivakumar Selliah 11 February 2011 Yes Mr. Prasantha Lal De Alwis, PC. 23 September 2011 Yes Mr. Harris Premaratne 12 September 2011 Non-Executive Independent to 21 January 2015; Non-Executive from that date. Mr. Richard Ebell 12 September 2011 Yes
Conflicts of Interest The Board is aware of the other engagements of its Directors and is satisfied that these are not in conflict with their engagement as Directors of the Company.
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The process for avoiding conflicts is as • Operations updates; follows: • Potential changes to the Group’s • Directors report their other business and asset portfolio; and engagements to the Board • Reports from the Audit and Secretary, identifying potential Remuneration Committees. conflicts of interest on appointment, and actual conflicts Dates for Board Meetings in the of interest when the need arises. current year have been decided and • Other engagements, potential communicated in advance. Agendas, conflicts and actual conflicts with relevant papers, will be sent in identified are advised to the Board. advance to the Directors. Additional meetings of the Board are held when • Directors do not participate in any deemed necessary by the Board. discussion or decision on matters in which actual conflicts of interest exist. Board activities in the year under review Board Meetings Board activities are structured to assist the Group in achieving its Matters considered by the Board objectives to support and advise the include: management on the delivery of the • Strategic and business Group’s strategy within a transparent developments; governance framework. • Financial reports;
Business Performance Business Strategy Shareholder Focus • Sectoral Performance • Acquisitions, technology, • Returns to shareholders • Subsidiary performance expansions and structural strategy • Shareholders Engagement • Brand performance
Key areas of Business Risk focus for the • Strategic and operational risks Board
Financial Governance Diversity and talent • Chief Financial Officers’ report • Board Performance • Succession planning • Budgets • Board Committee reports • Talent capability and diversity • Management Accounts
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Corporate Governance
The Directors, their attendance at the Board Meeting and the Annual General Meeting held during the year, are given below, as are the numbers of Directorships and Committee Memberships held by them in other companies and their shareholdings in the Company:
Name of Director Category Attendance at Board Meeting during FY2014/2015 Attendance at the last AGM No. of Directorships in other quoted companies No. of Committee positions held in other quoted companies Shareholding in Softlogic Holdings PLC as at 31 March 2015 Chairman Director Chairman Member
Ashok Pathirage (Chairman) Executive ✓ ✓ 06 01 01 04 46.59% Haresh Kaimal Executive ✓ ✓ - - - - 8.33% Hemantha Gunawardena Executive ✓ ✓ - - - - 7.38% Ranjan Perera Executive ✓ ✓ - 01 - - 7.81% Roshan Rassool Executive ✓ ✓ - - - - - Dr. Sivakumar Selliah Independent ✓ ✓ - 09 - 04 0.26% Non-Executive Prasantha Lal De Alwis, PC Independent ✓ ✓ - - - - - Non-Executive Harris Premaratne Independent Non-Executive up to 21 January 2015; ✓ ✓ - 04 04 01 - Non-Executive from that date Richard Ebell Independent ✓ ✓ - 01 01 01 - Non-Executive
HOW THE BOARD IS KEPT • The Board is kept briefed on and information and address UPDATED matters of significance. matters of concern to them.
Directors take responsibility for • Non-Executive Directors The Board believes Directors possess identifying their training needs, for are provided with briefings the knowledge, ability and experience keeping abreast of their responsibilities and information at their request. to function effectively as Directors of a as Directors and for ensuring they These briefings are often provided listed conglomerate. are adequately informed about the at Board Committee meetings, by Company. Hence, the Directors Senior Executives. Re-election of Directors must keep updated to maintain their • Non-Executive Directors meet the effectiveness. This is achieved as Messrs. R J Perera, H K Kaimal and Chairman & Managing Director on follows: Dr. S Selliah retire by rotation and offer a monthly basis to receive briefings themselves for re-election at the Annual
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General Meeting to be held on the 30th play. The Committee also monitors the financial statements and the re-election day of September 2015. work and performance of internal audit. of Directors and auditors.
Independent Advice The Committee relies on the Extraordinary General Meetings (EGMs) competence of management, its are held when a particular need arises. The Board recognises that there may internal auditors and its external No EGMs were held during the year. be occasions when Directors feel it auditor in discharging its oversight is necessary to seek independent responsibilities. Management is professional advice in the discharge External Auditors responsible for the proper preparation of their duties. They are permitted External Auditors are appointed at and presentation of the financial to do this, in consultation with the Softlogic’s Annual General Meeting statements, and for internal control over Company Secretary. each year. The auditors scrutinise financial reporting. and report on the annual financial statements, and perform interim audit Board Committees The Audit Committee is made up of reviews when these are required. It The Board has delegated defined four Non-Executive Directors of whom is Softlogic’s preference to appoint as responsibilities to an Audit Committee three are Independent Directors. auditor a leading international audit and the Remuneration Committee. firm. Ernst & Young were appointed to Information on these Committees and The Board Audit Committee Report audit the financial statements of the their activities can be found in their appears on page 100. Company for the financial year ended reports on pages 98 to 100. These 31 March 2015. Committees are given the resources Board Remuneration Committee they require and the access to information they need to allow them The Board Remuneration Committee Group Internal Audit to undertake their duties effectively. is empowered to review and make Group Internal Audit (GIA) is a unit The Board is appropriately briefed by recommendations in respect of the that assists Softlogic to accomplish its these Committees during the year. remuneration of the Chairman & objectives by bringing an independent Managing Director, Executive Directors and systematic approach to evaluating and Executive Management of the Directors who are unable to attend and improving effectiveness of Company and the CEOs of certain Board and Committee meetings may the Company’s internal control, subsidiary companies. be briefed on discussions arising risk management and governance thereafter. processes. GIA is empowered by the The Committee comprises three Non- Board to perform engagements in Executive Directors of whom two are Board Audit Committee any Group company. The Head of GIA Independent Directors. reports to the Board Audit Committee. The Board Audit Committee monitors the integrity of the Company’s financial The Board Remuneration Committee Chairman/ Managing Director reporting and reviews annual and Report appears on page 98. interim financial statements before The combination of the roles of they are recommended to the Board for Chairman and Managing Director in General Meetings approval and release. The Committee one individual has proven effective for monitors the Company’s relationship The Annual General Meeting is the Softlogic. The Chairman & Managing with its external auditors who attend forum in which shareholders express Director is well acquainted with Committee meetings when necessary, their views on Softlogic’s affairs. This the importance of sound Corporate and their independence in the role they Meeting considers adoption of the Governance across Softlogic. He encourages participation of Directors in
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Corporate Governance
discussions, to make sure their views Softlogic’s Risk Management System Ethics, Code of Conduct and Insider are known. Softlogic strives to maintain is focused on identifying, assessing, Administration a balance of power between Executive communicating and managing risks. A The Softlogic Code of Business and Non-Executive Directors, ensuring description of the Risk Management Conduct and Ethics lays out relevant the Board remains in control of its System appears on pages 79 to 84 of principles as a guide to employees, who affairs and is alert to its obligations to this Annual Report. are required to read, understand and stakeholders. follow ‘the Code’. An Effective Governance Culture The Managing Director is responsible Good governance stems from the We have communicated ‘the Code’ for the daily management of the culture and mindset of the organisation. to all subsidiary companies and business as directed by the Board. It requires people to meet performance established it as a fundamental part He reports to the Board on Softlogic’s expectations while managing the of our corporate culture. For example, activities and expansions, and is the organisation’s resources effectively All new employment contracts include main point of contact with investors, and responsibly, and meeting high a reference to the Code and the the market, the media and relevant standards of ethical performance. At obligation to comply with it. authorities. Softlogic we are committed to meeting the aspirations of our stakeholders, Softlogic considers the reputation it Details regarding the Chairman & as demonstrated by the processes enjoys to be an invaluable asset. To Managing Director and other Directors we aspire to put in place, the safeguard this reputation, it verifies are set out on pages 16 to 19 of the entrepreneurial performance-focused the integrity of its business partners. Annual Report. work environment we espouse, and the This allows us understand potential shareholder returns we seek. business partners before entering any Company Secretary relationship with them, reducing the The Corporate Company Secretary acts The demands of corporate governance risk of a relationship that can damage as Secretary to the Board. In doing so it: require professionals to raise their the Company/ Group or its business. Renowned international agencies such • assists the Chairman in providing competency and capability levels to as IFC, DEG, FMO, Actis and a number Directors with relevant information; meet the expectations in managing the enterprise and its resources effectively of internationally recognised franchises • minutes the proceedings of each with the highest standards of ethics. form Softlogic’s stakeholder list. Board meeting and makes draft It has thus become crucial to foster minutes available to Directors prior and sustain a culture that integrates Softlogic’s legal division is in charge of to the next meeting; all components of good governance the guidance and supervision of insider • assists the Chairman in providing by carefully balancing the complex issues and also maintains the project- inductions; inter-relationship among the Board of specific insider registers if necessary. • is responsible for advising the Directors, Audit Committee, Finance, Board on corporate governance Corporate Secretarial team, Auditors The up-to-date shareholdings of the procedures required to be and Senior management. At Softlogic, Directors can be obtained on the followed; and our employee satisfaction is reflected in quarterly financial release to the • assisting Directors, where the stability of our senior management, Colombo Stock Exchange and the appropriate, to obtain the low attrition across various levels Annual Report. Every share dealings of independent professional and substantially higher productivity. the Directors is disclosed as and when advice they require, at the (Corporate Sustainability Report on the transaction takes place to the CSE. Company’s expense. pages 85 to 97).
Risk Management
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Whistle Blower Policy Means of Communication Intimations to CSE – Price sensitive Softlogic’s whistle blower policy Financial results – The quarterly information and matters which are provides guidance to employees for and annual results are published on material and relevant to shareholders approaching designated persons to the Colombo Stock Exchange (CSE) are intimated to the CSE and posted on convey information about unethical website in keeping with the relevant Soflogic’s website. behaviour, breaches of laws and rules, and are shared with the media regulations, and violations of ‘the Code’. and posted on the Softlogic website Briefings – Group Investor Relations after submission to the CSE. As meets investors and analysts from a part of the Green initiative, the time to time, to brief them on Group quarterly results are sent by email to activities. Shareholders whose email IDs are registered with the Group Investor Corporate Website – http://www. Relations. softlogic.lk/– Softlogic’s website provides comprehensive information Annual Report – Softlogic’s on the Group and provides for comprehensive Annual Report is investors and potential investors to made available to shareholders and submit inquiries and seek feedback. others entitled to it, and is available The section on News Room includes on the Company's website in a freely all major press reports and releases, downloadable format. awards and campaigns.
COMPLIANCE DISCLOSURE The Company has complied with all requirements related to capital markets, with no penalties or strictures having been imposed by the relevant authorities.
Compliances with the Corporate Governance Rules of the Colombo Stock Exchange are set out below
CSE Listing Subject Condition Compliance Details Rule No. Status
Board of Directors Disclosures 7.10.1 Non-Executive Two, or at least one third of the Compliant 44% of the Board comprises Non- Directors (NEDs) total number of Directors, should be Executive Directors. Refer page 72 Non-Executive Directors. of the Annual Report (on Corporate Governance) 7.10.2 (a) Independent Two, or one third of NEDs Compliant Three Non-Executive Directors of and (b) Directors (whichever is higher), should be Softlogic are independent. Refer page independent. 72 of the Annual Report on Corporate Governance Each Non-Executive Director should submit a declaration of independence/ non-independence in the required format. 7.10.3(a) Disclosure relating Names of Independent Directors Compliant Disclosed under Directors’ Profiles and (b) to Directors should be disclosed in the Annual (pages 18 and 19) and Corporate Report. Governance (page 72).
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Corporate Governance
CSE Listing Subject Condition Compliance Details Rule No. Status 7.10.3(c) Directors’ Resumes A brief resume of each Director Compliant Disclosed under Directors’ Profiles should be included in the Annual (pages 18 and 19). Report, including his areas of The profiles of new Directors expertise, with a resume being are advised to the CSE on their submitted for new Directors on appointment. their appointment. 7.10.4 Definition of Requirements for fulfilling criteria. Compliant “Independence”
Remuneration Committee 7.10.5(a) Requirement and The Committee shall consist of Compliant Disclosed on page 98 of the Board composition of Non–Executive Directors, a majority Remuneration Committee Report. Remuneration of whom shall be independent. Committee 7.10.5(b) Disclosure of the The Committee shall recommend Compliant Disclosed in the Board Remuneration functions of the the remuneration payable to the Committee Report (pages 98 to 99). Remuneration Executive Directors and Chief Committee Executive Officer or equivalent role.
Audit Committee 7.10.6.(a) Composition of Shall comprise NEDs, a majority Compliant Disclosed in the Corporate Audit Committee of whom shall be independent. Governance Report (page 75) and The Chairman or a member should Board Audit Committee Report (page be a member of a recognised 100). professional accounting body. 7.10.6.(b) Functions of the Overseeing preparation, Compliant Disclosed in the Corporate Audit Committee presentation and adequacy Governance Report (page 75) and the of disclosures in the financial Committee Report (page 100). statements. Monitoring the system of internal controls. Assessing the independence and quality of performance of the external auditors. Recommending to the Board the appointment, re- appointment and removal of the external auditors. 7.10.6.(c) Annual Report The names of the members of the Compliant Disclosed in Board Audit Committee disclosures on the Audit Committee. Report (page 100). Audit Committee A report of the Audit Committee setting out the manner of compliance with their functions.
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Risk Management Review
‘We seek to achieve an appropriate balance between risks and rewards in our business spheres, and aspire to build and enhance a risk management framework that will facilitate delivering the required risk insights and inputs into our ambitious growth plans in a vibrantly entrepreneurial environment’
Effective risk management is one of systematic swings, and ensuring The development of risk management the fundamental factors of success continued availability of resources to processes across the Group has of Softlogic. Our approach includes counter downturns. continued over the year. Management limiting the concentration of exposure in our six business sectors is directly and managing potential losses from involved in risk management initiatives,
How we manage risk
Oversight and governance Audit and Compliance structure
Subsidiary Risk Management
Board Group Risk Management
Management Structure
Tactical Risk - Managing Executives and Group Executives Strategic Risk Operational Risk - Executive Heads
Process Risk Senior management - Line Management
Chief Executive Officers Project Risk - Project Manager
Business Heads
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with Financial Services and Healthcare for each major risk category to which OUR APPROACH having advanced and presently striving it is exposed. The standards will Our approach to risk management is to achieve best practices in risk establish consistency in the way in based on well-established practices management. which major risk types are dealt with and calls for individual responsibility, across the Group. Management in each and oversight supported by exception business unit will be responsible for reporting. We focus on management DEVELOPMENT AND ensuring appropriate implementation. participation, with comprehensive IMPLEMENTATION OF RISK Compliance will be assessed through risk management structures being GOVERNANCE STANDARDS assessments conducted by Business developed within individually listed To be on par with its increasing Unit Risk Officers, supplemented by and large business units particularly. diversity, complexity and size, reviews by the Group Risk Department Business Unit Risk Officers and Softlogic’s risk management practices and by Internal Audit. Business Heads will be responsible to needed review. Consequently, Softlogic ensure the management of risk within is developing risk governance standards their businesses and for ensuring that appropriate, and adequately designed risk management frameworks are in The Process we follow: Our Process of defining, assessing, classifying place. These frameworks are compliant and monitoring risks is set out below with the Group’s risk governance standards.
1 Defining risk To ensure independence, Business Management defines risks as Unit Risk Officers report only strategic, project, process, 2 Assessing risk administratively to their Business Unit operational and tactical levels. Risks are assessed based on Heads, and indirectly to the Group Head their potential impact on of Risk and directly to the Chairman of business activity, financial position and reputation. A Risk Committee. ‘level 1’ risk is insignificant while a ‘level 5’ risk is 3 Assessing likelihood catastrophic. OUR RISK MANAGEMENT Risks are assessed based on their likelihood of occurrence, MODEL considering controls in place The acceptance of risk is an integral to address them. A scale of 1 to 5 is used, where 1 part of Softlogic’s businesses. The Classifying risks indicates ‘Never’ and 5 is 4 definition of risk appetite and the ‘Almost certain, despite the Risks are classified as critical, control and management of risk is controls in place’. high, medium and low, based on impact and likelihood. therefore critical. Where a risk has a high likelihood of occurrence and Strong management and prudential the impact is high, it would be considered critical. decision making has been key to 5 Monitoring and Softlogic’s growth, stability and reporting risks success. Our risk management model Operational, tactical and is based on ‘three lines of defence’. strategic risks are monitored, reported on and managed. The primary responsibility for risk Internal Audit reviews Risk management lies at business level Departments and reports on which is, the first line of defence; an their findings. essential role of all business managers
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is to ensure risks are managed. The risk 1. Setting of objectives – The negative impact on achievement of management function is the second Board of Directors sets out the Group objectives. line of defence, which independently expectations regarding appropriate assesses material risks. The third line of financial and non-financial Strategic and business risk defence is the Internal Audit. objectives. This is the risk that the profitability of the Group is adversely impacted by 2. Alignment of risk appetite – Group failure to identify and implement correct RISK APPETITE Head of Risk in consultation with strategy, or react appropriately to Risk appetite refers to the nature and Executive and Non- Executive changes in the environment. extent of risk the Group is willing to Directors devise the risk accept. The Healthcare and Financial management plan. We are conscious of the need to Service clusters are reaching an understand all elements of new advanced state in this respect; other 3. Leading and executing the businesses/ expansions before they sectors will follow. strategies– Corporate and middle are undertaken. We are well aware of management operationally acquisition / expansion risks; failing to Parameters influencing risk appetites embark on implementing these deliver on integrated objectives, on are below: expectations by their actions, commercial, operational and cost-saving communication, consequences, targets and on expectations of synergy SOFTLOGIC’S RISK education and organisational with existing businesses. MANAGEMENT CULTURE governance.
Mitigation Strategy: Our concentration Softlogic recognises that effective 4. Monitoring - Effectiveness is risk is limited through the diversity risk management is more than just assessed and periodically reported of our business model. Decisions management information systems and to allow adjustment and refinement concerning new business are vetted controls; embedding an effective risk as necessary. by relevant Business Heads, the management culture amongst staff is Group’s strategy team and the Risk of paramount importance. 5. Learning and feed forward – The Management Department, who learning from risk that varied from support the Chairman’s and Board’s Fostering an effective risk culture is set parameters are studied and assessments. The new business a key theme that we anticipate to fed into the next cycle of risk approval process requires relevant trickle down the organisation and is management plan. risks (including market, financial and maintained broadly through five steps operational risks) to be examined to at Softlogic: We communicate our risk management ensure these are understood and approach to employees via induction addressed prior to implementation. and training sessions, to help embed PLAN Internal Audit performs a post-audit, 1 Continual this culture throughout Softlogic. Improvement typically within six to twelve months of acquisition or launch. This is followed by continuous monitoring of progress 2 SOFTLOGIC’S ENTERPRISE RISK ADJUST against the integration plan. We ensure Review and Continual PROFILE Revise Improvement DO Communicate the ‘Softlogic Way’ is embedded & Implement The Enterprise risk profile seeks to 4 throughout the acquired business. identify and measure risk across six sectors and monitor emerging trends CHECK 3 General economic risk Analyse & and exposures. Softlogic defines risks Monitor as occurrences which have a potentially Weak or deteriorating local or foreign (systematic or uncontrollable) economic
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obligations, causing losses to the Specific risk constraints in individual Group. 1 business units are defined Limits The capacity to endure Mitigation Strategy: Robust credit 2 risk is determined Tolerance Levels assessment and management policies are established Group-wide. Credit The level of risk considered outstanding is closely monitored, Risk Appetite Statements 3 acceptable in pursuing objectives is defined with guarantees and deposits / assets available as security helping to reduce losses on defaults. The Group conditions could adversely affect significant level of borrowings. Changes mostly lends to rated or internally achievement of Group’s objectives. in interest rates also have implications vetted counter parties with sound for the Financial Services Cluster’s credit quality. Their credit ratings are business. Mitigation Strategy: Our Risk routinely monitored. A continuous Management Department monitors review of credit risk profiles consisting changes in local and foreign conditions. Mitigation Strategy: Our Treasury both external and internal factors We stay in touch with our overseas Management teams monitor market analysis across the Group’s investment stakeholders, including principals, conditions to manage the impact from portfolios is in place. suppliers and financing partners to changing interest rates. Forward rate monitor material changes happening in agreements, interest rate swaps, cap Liquidity risk those countries. and floor agreements, fixed and floating rates and asset / liability maturity Liquidity risk arises when the Group, despite being solvent, cannot Market risk matching are used to mitigate risks. generate sufficient cash to meet Market risk is the risk of adverse – Equities – changes in the price and its payment obligations as they fall changes due to changes in foreign volatility of individual equities. Six, due, or can only do so on materially exchange rates, interest rates and including the Holding Company, are disadvantageous terms. This may arise prices. listed on the Colombo Stock Exchange– where counterparties who provide Commodities (product prices) – Softlogic with funding, withdraw or do Softlogic is exposed to risks in these Changes in the cost of our products can not accommodate a roll-over of that areas: have major impacts on our bottom line. funding, or as a result of a disruption in asset markets resulting in normally – Foreign exchange – Volatility will Mitigation Strategy: Procurement liquid assets becoming illiquid. affect profitability and can threaten the teams monitor likely price movements sustainability of business, Softlogic and work with the Corporate Planning Mitigation Strategy: It is a Group-wide being a significantly import-reliant Division to establish pricing that will practice to prepare annual cash flow business. satisfactorily balance profitability and forecasts, building in provisions for market share. Our healthy, long- term contingencies, maintaining buffers Mitigation Strategy: Exchange rate partnerships with overseas principals for unutilised limits/ contingencies/ movements are monitored for reduce the prospects of radical price non-roll-overs, and identifying maturity currencies on which the Group has increases. mismatches, are used at company and exposure; where appropriate, Group Group levels. Group Treasury maintains Treasury enters into forward exchange good relationships with bankers and Credit risk rate contracts to mitigate the risk. investors in Commercial Paper and Credit risk arises from failure by other credit lines, to help ensure – Interest rates – Softlogic is sensitive counterparties to meet their contractual availability of funds. The CFO, Group to interest rate movements given its Head of Risk and Head of Treasury
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meet regularly to monitor liquidity risks external events can cause loss of practices are also in place to review the and needs, and gearing. earnings and reputation. risk of incidents across the Group on a periodic basis, BCP and DR plans are Operational risks Mitigation Strategy: The implementation tested without business disruptions. of a new ERP system is an important Risks in this category are broad in initiative in standardising systems and Risk departments are mapping nature and inherent in most businesses processes. We will also centralise back operational procedures and related and processes. These include the risk office activity within an in-house BPO, controls to feedback internal audit of failures in resourcing or planning, to optimise efficiency. departments. errors or fraud, and weaknesses in systems and processes. In essence, – Information security – Cyber-attacks these relate to people, systems and Political, environmental, will result in disruption of information processes in our operations. technological and regulatory risk technology (IT) systems and a loss Our business sectors may be affected of important information, can cause – People – We believe that our People by various external changes, local and significant business disruption. These form the basis of enduring advantage; global. can negatively impact cash flows without their engagement and and financial position, and have other alignment with the Group’s aspirations Mitigation Strategy: We engage with adverse consequences. our performance can only be sub- Governmental and non-Governmental optimal. it is essential that we develop organisations to ensure they understand Mitigation Strategy: Executive and maintain management capability Softlogic and to respond to questions Management approves and periodically across our 46 subsidiaries. We identify, they have. We seek to anticipate and reviews Group IT strategy to ensure develop and retain an appropriate respond to important changes in public investment in IT systems and succession plan of able managers for policy wherever we operate. Legal and innovations to safeguard and improve the present and future needs of the regulatory compliances of the Group are business efficiency. Group Head of IT, Group. monitored continuously by compliance with the Cluster Heads of IT, monitor officers. the integrity of IT infrastructure and Mitigation Strategy: We believe in data. To complement IT security teams, building leadership through our Group under risk departments review, areas Social and reputational risk Talent Management initiative, and in related to IT security. Damage to Softlogic’s brands can inculcating a culture of accountability, arise from any association, action or empowerment and personal inaction perceived by stakeholders to development among all employees. Business Continuity and Disaster be inappropriate or unethical. This could An effective induction programme is Recovery Plans lead to loss of trust and confidence in place to orient new comers. The A disaster or major disruption could and a decline in our customer base and importance of succession planning have severe implications on the affect our ability to recruit and retain for key management positions is business. talented people. recognised. Processes are in place to understand and respond to employee Mitigation Strategy: Business Continuity Mitigation Strategy: Softlogic values needs; bi-annual performance reviews and Disaster Recovery Plans are in have been embedded in all our are also conducted. place for each cluster, and are tested business activities. Our Code of periodically. Disaster Recovery Plans Business Conduct guides employees – Systems & processes – Information, extend to key IT systems and data in dealing with customers, employees, other systems, internal control failures, bases/ warehouses. Physical and suppliers and society at large. Social inadequate procedures and human electronic security systems are also media publicity is monitored. A well- errors, inadequate procedures and in place. Processes that reflect best
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structured stakeholder communication Grievance Handling Procedure mechanism exists to understand The Company’s Grievance Procedure is set out below. All employees should bring their diverse viewpoints. grievance to the notice of the Management as per the process laid down below.
EMPLOYEE HAS A CONCERN FUTURE PLANS As one of Sri Lanka’s fast-growing Does not like Yes conglomerates, Softlogic aims to bring to discuss with the value, expertise and innovation in line Discus with Immediate Concern / immediate issue resolve Yes End with its Credo. Supervisor Supervisor
Does not like No Softlogic’s ambitious expansion to discuss with the and growth during the year has Discus with the Head Concern / immediate Yes End Supervisor Department / Operations issue resolved made it obligatory to review the risk or HOD management structure in the Group in No a much detailed manner. Experienced and able risk teams will be set up as Discuss with HR Department required at retail and healthcare service sectors.
Financial Services sector will be Initial Inquiry of the concern Concern / issue resolved Yes End taking the next step in terms of risk (Verbal / Written) management following various levels No of stress testing across credit risk components and portfolio levels (For Written Complaint Lodged instance, concentration risks with deeper analysis such as stress testing and scenario analysis of expected credit losses). Cluster Risk Officers will Initial Assessment of the be appointed. We would strengthen Complaint focus on operational risk areas and concentrate on developing internal control systems of our Retail Sector. Respondent notified of complaint, reply and sought further information / evidence Softlogic will form a Board appointed sought from complaint / witness Sub-Committee on Integrated Risk Management (IRMC), headed by a Non- Executive Board member. Case Review Conciliation
These strong risk management practices will allow us strengthen the
Group so we can aspire to exceed the Concern / Further Investigation Yes End needs of our stakeholders. issue resolved
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Sustainability Report Sustainability is integral to Softlogic and all its actions. We believe a business must act responsibly and be sustainable to create long-term value for its stakeholders.
LIVING THE HIGHEST
+14,000 Other Societal Shareholders Stakeholders contribution ‘Maximizing Shareholder ‘Maximizing returns to employees, ‘Contribute to the greater Returns’ customers, lenders and other good of all’ business partners’
Our People
Corporate Governance Our and internal Environment control Softlogic CSR Strategy focus Our Quality Economic Contribution
Community/ Philanthropy
This report explains our efforts strong community partnerships, and an condition of communities in which to promote economic, social and engaged and solution-driven workforce we operate. If they are not thriving, it environmental sustainability in the in our businesses. is likely that our businesses cannot, communities in which we live and either. Our decisions therefore must work. In it, we give examples of how The theme LIVE THE HIGHEST is consciously help build sustainable we are LIVING THE HIGHEST in terms built on our commitment to making a communities. We regard this approach of health and safety, environmental positive difference to the communities as one to which every employee at stewardship, openness and honesty we serve. Our success is linked to the Softlogic can contribute.
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Sustainability Report
We have always linked the more sustainable communities and we are working energetically to deliver earning our social acceptance as an on this aspiration. success of our business to the environmental trustee— an intrinsic strength of the environment and value of sustainability. We regard our Softlogic’s approach to CSR and community in which we operate. social reputation as a responsibility sustainability focuses on: of every employee at Softlogic, and it • conducting business responsibly; starts with ‘me’. • considering stakeholders’ In the environmental space, we focus perspectives in decision-making; on saving energy, water, recycling paper In this report, you will read about our • creating value for our shareholders and several other green projects. In the sustainability strategy and goals, the and communities; and workplace, we focus on fostering human things we have done and the progress rights, inclusion and diversity, and on we have made. We are a company • contributing to sustainable creating safe and healthy workplaces committed to LIVE THE HIGHEST, and development. for our associates. And in contributing to building sustainable communities, we focus on promoting economic opportunity and empowerment.
We have always linked the success of our business to the strength of the environment and community in which we operate. If they are not thriving, there is a strong likelihood that our businesses would suffer. The decisions we make are related to building
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STAKEHOLDER ENGAGEMENT MAP
Invest or Government & Communities Employees Customers Business & Lenders Regulations Partners Ú Ú Ú Ú Ú Ú
• Business • Regulatory • Local • Health and • Satisfaction • Active Strategy and Compliance Employment Safety involvement • After Sales Continuity of partners • Taxes and • Building trust • Business Service and principals • Risk and Royalties with local Continuity and • Product Quality in relevant reputation communities Success • Economic and Safety business areas. management Development • Improving • Professional • New Products • Financial living standards Development
Top Priorities Top • Job Creation performance of local • Job Security communities • Other Benefits Ú Ú Ú Ú Ú Ú
• Corporate • Social Projects • Social • Training & • Value for Money • Constant Governance Investment Development dialogue with • Policy • New product programmes partners/ • Investor development • Internal introductions principals, most Presentations, and advocacy • Media and social Communication whom are conferences, media • Industry trade • ‘The Code’ international web releases association • Royalty relations agencies/ brands and general • Human Capital memberships meetings Helpline • 1:1 Formal • Active Investor dialogues when Relations Desk/ necessary Helpline Corporate Engagement • CSE/ SEC Filing and notifications Ú Ú Ú Ú Ú Ú
• Roadshows • Permit Review • Community • Employee • Investment in • Presentations and other outreach Volunteering effective team, and conference • Meetings compliance procedures, calls at regular with Research • Philanthropy and • Management activities brands etc. intervals on analysts/ volunteering System financial and investment • Collaboration • Customer • Media non-financial advisors/ fund on social questionnaires updates managers and investment • Management other investors projects • International organised store expertise on • Participating visits board from in surveys and • Customer Help strategic/
Operations Engagement research desk operational execution
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“To win in the marketplace, our employees will be the differentiator. Softlogic needs the right people in the right roles, with the right skills and attitude and doing their best work, to excel,” Natasha Fonseka, Group Head of Human Capital
Softlogic’s CSR Decision-Making Process
Sectoral/ Group Senior Management
CSR Working Groups (representatives of functions related to sustainability strategies and CSR teams at individual sectors)
We strive to recruit the brightest We have these key people talent and provide them with priorities: the resources to succeed. This 1. Putting the right people in the commitment to, and focus on, right place at the right time, to people has been part of Softlogic’s support customer needs; core values from its origin. 2. engaging them, to make sure they share our passion for Our people are at the forefront better customer service; and of everything we do. Having the 3. building leaders, and right people, properly resourced strengthening our leadership and motivated, enables us deliver capability at all levels. excellent results and meet our strategic aspirations.
‘A priority is to ensure everyone who works with, or at, Softlogic is treated fairly.’ 2004/05 2014/15 560 8,433
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Development is prioritised, so all employees develop their skills and contribute as best they can. Accelerated leadership prepares leaders for future roles and provides greater bench strength. development Clear career paths ensure employees are in appropriate positions, allowing Softlogic to serve customers better. Diversity and inclusion are part of our talent decisions. By embracing diversity of thought, background, ethnicity and gender, Softlogic is more inclusive and reflects that diversity in its actions.
GREAT RESULTS FROM to obtaining the Joint Commission A GREAT TEAM International Accreditation (JCIA), the Softlogic is investing strategically in highest accreditation a hospital can a talent-focused culture. Our training obtain. In addition to Asiri’s routine framework brings a consistent approach training, specialised training was to development opportunities across conducted for the staff of Asiri Surgical the Group and provides job profiles and Hospital and Central Hospital. career paths, and technology and career development tools, for employees. A Regional Product Training workshops range of in-house and external training are held monthly to enhance product opportunities is provided for staff, knowledge and provide market based on the annual Training Need updates to retail sales staff. These Analysis. are conducted by representatives of our principals and by use of in-house Our approach has equipped staff with resources. the skills to excel in their jobs. For instance, Asiri nursing staff are among the most valued in the industry, as they undergo a three-year comprehensive 1 Training need Analysis training course at the Asiri School of Nursing, focused primarily on improving patient care and service quality. During the year, Asiri gave special attention 2 Training Plan
3 Iddenfication of Training sources and preparation of Training budget
4 Publishing the training Calendar for the year
5 Post training evaluation / Assessment of training effectiveness
Female Male 44% 56%
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Sustainability Report
Softlogic’s commitment to learning and development is directed at helping employees and leaders achieve outstanding results. This commitment is delivered in many ways, focused on:
• New Employee Orientation • Job Skill Training • Sales and Product Training • Employee Development • Leadership Development • Mentoring sustainability are ingrained in our culture We engage employees in establishing • Job Rotation and values, and enshrined in ‘the Code’. goals, initiatives and processes. They are kept informed of key happenings • Executive Coaching across the Group. Investor Relations • Career Guidance EMPLOYEE INVOLVEMENT emails employees on financial and We believe engaged employees share performance; promotional emails During the year understand Softlogic’s vision, feel a and updates from Group Human Capital • Softlogic Retail organised a sense of ownership in the Company’s keep staff informed of happenings workshop and team building success and contribute to improved across the Group. activity dealing with business business performance across the objectives and areas of focus. Each board, not least in safety, customer Employees at Softlogic have many employee was given their annual satisfaction, financial performance and opportunities to participate in social objectives at this workshop. environmental leadership. activities of the Group. • A six-month course in English was held for Centara Ceysand’ employees, for whom familiarity with English is very important. • A training session on cocktails was held for relevant employees, led by Mike Sweetman, National Leverage Vice President, United Kingdom job skills Bartenders Guild and British Trainer of Food and Beverage for Sri Lanka. Experts from our supplier Participation in Grande Champagne also conducted volunteer work a seminar for employees.
Donations RESPONSIBLE BEHAVIOUR Conducting business responsibly is essential to maintain Softlogic’s Raise awareness of reputation. Compliance and risk social issues management are integrated in our day to day activity. Responsibility and
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A Blood Donation Campaign was organised in July, at Asiri Surgical Hospital. Over 110 employees donated blood at this event.
Employees of Centara Ceysand Resorts & Spa, have undertaken responsibility to ensure the river and beaches surrounding the resort are kept clean.
SHARED VALUES ensuring policies and initiatives are using a three-level approach, where The Group Sustainability Team, with appropriately communicated. employees are first encouraged to learn individual subsidiaries, formulates about CSR, second to participate in CSR Softlogic’s social responsibilities policies Recognising the importance of activities, and third to incorporate CSR and implements these across the employee awareness on effective CSR, in their day-to-day work. Group. Group Human Capital promotes Softlogic offers a variety of programs CSR activities through the Group by
• Job Profile • Resources • Processes • Accomplishments Work • Physical work and environment • Work life balance
Societal contribution People
• Senior Leadership • Colleagues • Valuing People Engagement • Customers
Company Policies Operations and Practices
• Performance Appraisals • Training and development • Diversity Total • Intercompany transfers • Company Reputation Rewards and other career opportunities • Pay • Performance related incentives • Recognitions • Other benefits
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We believe employee participation A Showroom Staff Day is held for packages at Asiri, health coaching, is essential for our community showroom employees, to show wellness challenges and financial engagement to be meaningful. Softlogic appreciation for the efforts they put in. counselling. Free medical insurance encourages employees to become Ten programmes were held across the packages are provided to employees aware of social issues, deepen their island during the year. across the Group; discounts are understanding of these and participate provided when employees purchase in fundraising initiatives, community A staff motivational programme themed any Softlogic product /service. projects and other activities. We “Sales Magic” was held before the encourage employees to be instructors November/December retail sales The year’s highlights include these: in workshops for children and students, season. This was directed at the Sales and to contribute in other ways that team, with over 300 participating. Centara Ceysand Resorts & Spa held benefit from their skills and aptitudes. an awareness programme for its Clean Organisational Culture employees on World AIDS Day. A video Centara Ceysand opened their doors to presentation on AIDS was followed Softlogic has zero tolerance of unlawful University students for a day, so they by a quiz. Winners received prizes activity. We strive for an unblemished could visit and learn about the hotel to encourage involvement in such organisational culture through education industry. awareness sessions. and strict monitoring. Induction programmes and communications on A campaign was organised by the Asiri EMPLOYEE RECOGNITION ethics guide employees on the courses Group in May 2014 to mark World Hand of action they should take in given Acknowledging the contributions of our Hygiene Day, with over 300 employees situations. Strict disciplinary action is workforce is important in engaging and participating. Participants were given taken where there are breaches, with retaining employees. Channels through practical knowledge in proper hand countermeasures installed to prevent which we recognise employees for hygiene. recurrence. their exceptional work are:
• Spotlight, our corporate employee Fire drills are organised regularly Other Employee Benefits recognition/ promotion program. in Softlogic locations, to ensure Softlogic takes a comprehensive employees are aware of emergency • Quarterly/ Annual Performance approach to enhancing employee procedure in case of fire. Awards in subsidiary companies, wellbeing, whether related to health, which provide leadership teams life or money. Softlogic offers tools with the opportunity to honour elite Softlogic strives for a flexible work and resources that support the various performance. environment so employees can be facets of wellness. Program offerings more effective in their work and home include special health assessment lives. Arrangements include job sharing
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and flextime. These and other initiatives promote work-life balance and enable employees to realise their potential, while maintaining a healthy balance.
Several of Softlogic’s initiatives are aimed at bringing together employees who work in different parts of the country.
Softlogic supports employees on Academic and Continuous Professional During the year, the e-waste mechanism was extended across our key retail showrooms and Development, by sharing costs they branches. The Group’s waste paper disposal during the year was: incur on external training, professional memberships and examinations.
THINKING GREEN At Softlogic, we believe responsible 540 fully 55,791 litres 127,160 kwh 1,010,286 management of the materials we use grown Trees of Oil of Electricity litres of and the waste we produce is important Water for operational efficiency and for the environment. We seek opportunities to reduce waste, and to recycle and reuse it to ensure the waste we do produce is handled responsibly. We monitor paper waste generation and recycling across 95 cubic meter Reduced Green House Gas the Group through an outsourced of Land fill Emissions by 31,792 Kgs recycler. of Carbon equivalent
Our environmental initiatives focus on: • Energy use Waste management is an important • Using licensed organisations to focus as our operations generate paper, remove/ recycle waste. • Waste management plastic and metal waste; we strive to consume less and recycle more, and to Green Projects reduce our environmental impact by: Energy use is important to our • Encouraging individual business from environmental and cost responsibility for recycling, and perspectives; we strive to consume providing recycling facilities for less and reduce our environmental paper. impact by monitoring power • Setting printers/copiers to double- consumption. Some elements of our sided printing and photocopying as approach involve use of promotional default. emails / text messages rather than printed handbills, and use of energy • Using proper disposal for IT and efficient lighting systems and products. electronic equipment.
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Sustainability Report
‘Green’ projects for the year included: ‘Clean Zone’ initially focuses on 500m Besides this, Asian Alliance Insurance of road on either side of the Nawala contributed to the ‘Manampitiya project’ Future Automobiles, with its principal branch. The project is next looking in collaboration with the Department Ford Motor Company, awarded a at improving cleanliness of 2km of of Wildlife Conservation. This centres USD20,000 (approximately Rs.2.6 Mn) road on either side of all branches and on the Floodplains Park, Manampitiya, grant to the Field Ornithology Group pawning centres across the island. The an area of 17,500 hectares. The of Sri Lanka (FOGSL) under Ford’s benefit of this programme is potentially destruction of forests and pollution Environmental Grants Program for significant, contributing also to disease of the environment have made wild 2014. The grant will promote the study control. animals stray from their natural habitat of birds and through this, environmental and wander into densely populated conservation and social interaction Asian Alliance Insurance continued areas, which results in them being in Sri Lanka. The FOGSL project is its ‘Protect Your Beautiful World’ harmed by vehicles and also becoming entitled “Exemplary Citizens through project, focused on supporting natural a threat to near-by villages. 19 signs Conservation – Creating Ambassadors reserves and related establishments were erected on the main road of Peace and Reconciliation”. The island-wide. The project provides eco- between Batticaloa and Polannaruwa. program will link communities and friendly paper bags to tourists visiting The signs, in all three languages, are students from previously war-torn World’s End, without charge, and on luminous surfaces and urge drivers regions in the North and East with was launched in 2013 in co-operation to ‘Drive Slow’ and ‘Be Watchful’. The counterparts elsewhere in Sri Lanka, with the Department of Wildlife project also seeks to stop residents with nature studies and the study of Conservation. The unique design of the from dumping garbage and polluting the birds as a focal point of their interaction. bags differentiates them from ordinary environment. The first of a series of workshops was eco-friendly bags; their attractiveness held in the Sinharaja World Heritage site even makes users preserve them as Asian Alliance Insurance also worked recently. souvenirs of their journey to World’s with the Department of Forests End. to spread awareness about the Softlogic Finance launched its first importance of protecting natural ‘Clean Zone’ in March. The programme Asian Alliance Insurance also continued resources. 13 signs were erected along aims to improve cleanliness across placing awareness boards on the the Habarana–Trincomalee road carrying 100km of road, with waste segregation outskirts of the Yala National Park, and messages such as ‘Keep Nature Clean’, and recycling supported. The project at Habarana and Minneriya, to create ‘Drive Slowly’, ‘Love Animals’, ‘Love was launched by Deputy Minister awareness on the preservation of Nature’, ‘Be Watchful of Nature’, ‘Keep of Policy Planning and Economic wildlife. your eyes on the road’, ‘Slow Down Affairs, Hon. Dr. Harsha de Silva at – Elephant Crossing’, ‘Give Life to the company’s Nawala branch. The
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Wild Life’ and ‘Slow Down – Peacock Sea, a non-profit, non-governmental Crossing’. organisation whose mission is conservation of the marine habitat. In conjunction with the Mayor and District Secretary of Nuwara Eliya, Odel also conducted a campaign to Asian Alliance Insurance designed a save Sri Lanka’s beaches through an guide book for local and foreign visitors inspired Eco Art festival marking World to Nuwara Eliya, providing valuable Environment Day. The objective was information for tourists on beautiful to create awareness of the problem locations in the town. of beach pollution amongst the younger generation. The spectre of Asian Alliance Insurance’s numerous coastal pollution caused by unchecked ‘green’ projects were reflected in their littering was colourfully and poignantly annual calendar, drawing stakeholder addressed by a hundred little hands. attention to these initiatives. Equipped with crayons, water colours, pencils, paper and other materials, Odel made responsible whale-watching they sketched and painted under the its cause for World Animal Day 2014. watchful eyes of a panel of judges, Sri Lanka lies within the International producing a kaleidoscope of visual Whaling Commission’s protected zone interpretations of Odel’s theme of in the Indian Ocean. The most popular 'Save our beaches; Do your bit to spots for whale-watching excursions combat pollution.' This was preceded are Kalpitiya, Mirissa, Dondra and by a clean-up of Mount Lavinia beach Trincomalee. Because of our proximity organised by the Human Resource to the deep waters of the continental Department of Odel to involve shelf, whales come in very close to employees in this cause, along with the land. A campaign to protect the giant general public. cetaceans was carried out by Odel as part of its commitment to promote Centara Ceysand Resorts & Spa took animal conservation in support of World steps with its employees and guests Animal Day. Nearly 500 children and to mark Earth Day. Earth Hour was their parents attended the educational marked with a shutdown of power programme at Odel’s Alexandra and an outdoor barbecue for guests. Place store to learn about these giant The employees participated in a mammals of the ocean; their habitat, special training programme touching their lifestyle, from what they need to on energy saving and preserving the be protected, and why. As part of the environment. The Human Resources campaign, Odel produced a whale- Division of the resort organised a inspired range of products including T seminar on environment preservation at shirts, mugs, soft toys and stationery. the junior section of Aluthgama Maha Part of the profits from the sale of Vidyalaya. The senior students of this these products were contributed to school visited the resort for a seminar Sri Lanka’s first Responsible Whale delivered by Dr. Varuna Fernando, a Watching Accreditation programme in consultant in environmental studies. Mirissa conducted by Friends of the
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Sustainability Report
COMMUNITY INVOLVEMENT These are a few projects the Group to determine how to serve them AND PHILANTHROPY handled or contributed to during the most effectively. Our approach to year: community engagement and charitable Making a positive difference in our giving allows individual companies to community Softlogic Holdings contributed Rs.10 determine how best to respond. In the spirit of our corporate ideal – all Mn to a project of the National Housing people, regardless of race, religion or Development Authority aimed at Asiri Group continued its free health culture, living and working together assisting communities facing housing camp programmes, this time in harmoniously into the future– Softlogic problems across the island. The collaboration with social organisations takes an approach to business that is Authority’s programmes benefit low and the Military Forces in various socially responsible and economically income rural and urban families. locations. Each camp costs about logical. For our customers, we offer the Rs.150,000. The rural areas in which best products possible, simultaneously Softlogic Holdings was lead sponsor for camps were held during the year striving to improve our relationships the event ‘Ridhi Pahan Rayak’ organised were Hambantota, Galle, Kataragama, with local communities and contributing by the Kandy Sinhala Velada Peramuna Udawalawe, Panama, Mullaitivu, to peoples’ happiness. This is even women’s arm towards establishing a Vavuniya and Padaviya. more marked as we expand our new kidney transplant unit at the Kandy presence across the island, amongst National Hospital. Asiri Hospital Matara organised a Health diverse communities in cities and in Camp (Lama Suwasahana) for school rural areas facing difficult social and Softlogic Holdings helped the Holy children at Mahindarama Temple, economic conditions. Rosary Church of Arukgoda to establish Thalaramba, at which approximately a ‘Daham Pasala’. Previously, catechism 500 children were treated through Our branch network in the Retail classes were conducted outdoor, under the concerted efforts of its staff. and Financial Services clusters looks trees. Scorching heat and monsoon Another Medical Camp was organised at employing people and sourcing rains were hindrances. The Parish for villagers at Kohuliadda School, materials from the immediate Council and the students organised a Hakmana, at which nearly 250 people community, helping raise local living Fundraising Raffle to which Softlogic were treated. A free health camp (Guru standards. provided handsets. The proceeds were Matha, Guru Piyawaru Upahara Dinaya) utilised to construct a ‘Daham Pasala’ for retired school teachers was also building. organised in Hakmana, to celebrate the 7th Anniversary of Asiri in Matara; 110 Softlogic recognises, in its philanthropy, retired school teachers were treated at that our subsidiaries are closest to the camp. their customers and best positioned
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Asiri Surgical Hospital has performed many in the area. Softlogic Finance other necessities to those families. free heart surgeries for underprivileged assisted those displaced, some of This was conducted with the help of its children since 2011, successfully whom were left with no families or Polonnaruwa Branch, who coordinated conducting 67 such surgeries to date. homes, with employees of its Badulla the supplies. The employees of 22 of these were performed during the Branch coordinating relief operations. Softlogic Finance were prime year, at an average cost of Rs.450,000 A large consignment of clothes for contributors to this initiative. each. The patients are referred to Asiri adults and children, and much needed Surgical Hospital by the Lady Ridgeway dry rations, were sent to the area and Softlogic Group continued its cattle Hospital for Children; this initiative distributed among the victims. rescue programme this year. Cattle enables children from low-income intended for slaughter were released households to obtain life-saving surgery Millions of people across 14 districts of and given to low income families to at no cost. Sri Lanka were affected by prolonged help them in their daily lives. drought. Polonnaruwa, where hundreds Group employees supported the Sirasa of families rely on agriculture for their Copies of the 'Tripitaka', the collection Shakthi Sahana Yathra unit by donating livelihood, was one of the areas most of teachings of Lord Buddha, were essential provisions to individuals severely affected. Softlogic Finance presented to newly ordained Buddhist who had been displaced owing to the delivered a large consignment of monks in the monastery situated at landslide in Koslanda, which affected much-needed water, dry rations and Samangala in Ampara.
Our Economic Contribution Year Ending 31 March 2015 2014 Change (%) Direct Economic Value Generated Revenue 39,563.9 29,246.4 35% Interest Income 608.9 654.4 (7%) Dividend Income 141.9 146.3 (3%) Share of results of Associates 5.3 13.3 (60%) Value Gain in investment property 526.7 91.1 478% Other Income 1,534.0 853.6 72% Total Value Created 42,380.6 31,005.1 37%
Economic Value Distributed Operating Cost 29,343.3 21,687.0 35% Employee Wages & Benefit 5,562.6 3,745.8 49% Payments to Government 2,962.8 1,903.4 56% Capital Providers 2,692.8 2,780.1 (3%) Total Value Distributed 40,561.5 30,116.2 35%
Economic Value Created Depreciation 1,190.0 901.8 32% Amortisation 248.0 204.0 22% Defined Cost Benefit - Net 68.8 65.6 5% Retained Profit 1,819.1 888.8 105% Total Retained 3,325.9 2,060.2 61%
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Board Remuneration Committee Report
The Remuneration Committee The Remuneration Committee d. Board members’ remuneration on recommends to the Board, the Group’s comprises three Non-Executive factors including their contribution framework of executive remuneration Directors (two of whom, including the to the activities of the Board, the and specific packages and conditions of Chairman, are Independent Directors). number of Board and Committee employment for each of the Executive Decisions of the Committee are taken meetings attended, and the Directors and Senior Management. at meetings or by circular resolutions. performance and results of the Company.
In discharging its responsibilities During the year under review, one e. Ensure disclosure of Directors’ the Remuneration Committee is Remuneration Committee meeting was remuneration is accurate, complete assisted by the Group Head of Human held in May 2014. The composition of and transparent. Capital, who acts on the instructions the Remuneration Committee and the of the Committee and maintains an attendance at the meeting held is as f. Recommend retirement benefits independent position in which conflicts below: of the Managing Director and of interest are avoided. Executive Directors, in terms of guidelines adopted by the Board.
Name Category Meetings attended g. Recommend short term incentive schemes, after reviewing their Mr. W M P L de Alwis, PC Chairman 01/01 design, the targets set and the Desamanya P D Rodrigo* Member 01/01 participation thresholds. Mr. G L H Premaratne** Member n/a h. Review and monitor progress in Mr. R A Ebell *** Member n/a people management. * Resigned with effect from 30 June 2014 ** Appointed with effect from 31 July 2014 *** Appointed with effect from 8 July 2015 COMMITTEE STRATEGY Softlogic Holdings’ remuneration The Chairman of the Group, who is also The broad terms of reference of the policy is designed to attract, develop Managing Director, attends meetings by Remuneration Committee are to: and retain passionate, committed invitation. No Director of the Company a. Recommend the remuneration and talented people to effectively is involved in determining his own policy to be adopted at Softlogic implement Group strategy and remuneration. Holdings PLC. The remuneration create value for its shareholders. strategy considers current The remuneration strategy is based The Chairman of the Committee industrial trends, employee on retaining critical skills and driving reports to the Board on its activities. experience, past performance performance through attractive pay The performance of the Committee is and the need for retention and and incentive packages. A significant reviewed as part of the effectiveness motivation. portion of executives’ total potential review of the Board Committees. remuneration is performance-related, b. Review the performance of the to drive the right behaviours. Targets Managing Director, Executive are set annually in the context of COMMITTEE OBJECTIVE Directors and Senior Management the Group’s plans and the economic in the context of the Company’s The main purpose of the Board environment in which it operates. Remuneration Committee is to ensure performance. adoption of remuneration policies which c. Recommend the perquisites attract and retain top talent in alignment applicable to the Managing Director INTERNAL & EXTERNAL INPUT with the Company’s strategy, and to and Executive Directors. The Group’s policy on senior executive drive performance in the short and long remuneration is designed to encourage term. individuals who can bring their
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experience and independent views • considered succession plans for to discussions on the policy, strategic executives and reviews successors decisions and governance of the Group. identified for key positions in the In setting remuneration, the Committee Group. takes into consideration the practices The Committee also focused on: of other companies of similar size and scope. A key philosophy is that • Developing a Succession and staff must be properly rewarded and Talent Management Plan. motivated to perform in the Group’s • Monitoring equality of treatment, best interests. and the encouragement of diversity, across the Group. Members of Senior Management • Recognising long service through and the Company Secretary have, awards to long-serving employees. as necessary, contributed to the Committee’s discussions. I thank Desamanya P D Rodrigo, who stepped down from the Board and The Committee considers market data the Committees of Softlogic Holdings available when considering incentive during the year, for his valuable and remuneration packages. contribution in the past years as a member of the Committee. I welcome The Remuneration Committee will seek Mr. Harris Premaratne and Mr. Richard relevant professional advice whenever Ebell, who were appointed to the necessary to increase its understanding Committee on 31 July 2014 and 8 July and effectiveness. 2015 respectively. I also extend my gratitude to the Head of Group Human Capital, Natasha Fonseka and her team, ACTIVITIES DURING THE YEAR for their valuable contributions. The Committee:
• formally considers succession plans for executives and regularly reviews identified successors for key positions in the Group; Prasantha Lal De Alwis • recommended to the Board the 31 July 2015 remuneration of the Chairman/ Managing Director, Executive Directors and Senior Management;
• recommended bonuses and salary adjustments for Group employees, following quarterly and bi-annual appraisals and a final performance evaluation; and
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Audit Committee Report
SCOPE • the work and performance of the The Chief Financial Officer attends The responsibilities of the Committee internal auditors; all meetings by invitation, and other members of Senior Management attend are set forth in the written Terms of • the Company’s relationship with meetings by invitation as required. Reference (TOR), a revised version of its External Auditors, auditor The External Auditors attend meetings which was adopted by the Board on 8 independence and performance, and by invitation when their presence is July 2015. the management’s responsiveness necessary; discussion of their major audit to external audit; and The Committee will not engage directly and review findings is a key component with Group companies covered by other • procedures in place to examine, of those meetings. The Committee audit committees established under regularly, the Company’s ability to further meets with the External Auditors, mandatory regulatory requirements; it continue as a going concern in the with no members of management receives briefings on the activities of foreseeable future. present, to cover contentious matters these committees as necessary. and matters they wish to discuss in The Committee meets quarterly to confidence with the Committee. COMPOSITION review and make recommendations The Committee makes written The Committee was chaired by on the quarterly and annual financial reports to the Group Chairman / Desamanya P D Rodrigo until his statements before they are considered Managing Director, for dissemination resignation from the Board on 30 June and approved by the Board for release to the Board, following each 2014, and thereafter by R A Ebell, who to shareholders and the public. It also quarterly meeting at which financial was appointed a Director on 20 March meets at other times to consider statements are reviewed prior to 2014 and a member of the Committee matters arising from its review of the a recommendation being made on on 19 June 2014. Other members of financial statements and other subjects, them. These draw attention to matters the Committee are: including internal audit findings and reviews of specific businesses and requiring consideration and action. Dr. S Selliah change initiatives. The Committee also briefs the Group Mr. W M P L De Alwis, PC Chairman /Managing Director from time Mr. G L H Premaratne (appointed w.e.f. The Committee has reviewed the plan for to time on matters of concern, at ad 19 June 2014) reducing the number of External Auditors hoc meetings or at meetings scheduled deployed across the Group and reassigning by him with the Non-Executive audits to improve audit cohesiveness. It has Softlogic Corporate Services (Pvt) Ltd., Directors. also provided inputs in the determination of served as Secretary of the Committee up KPIs and evaluation of performance of the to 30 June 2014. Mr D Vitharanage, Chief REAPPOINTMENT OF EXTERNAL CRO / CIA. Risk Officer Chief Internal Auditor (CRO/ AUDITORS CIA) served as Secretary thereafter. The Audit Committee has proposed MEETINGS & REPORTING to the Board of Directors that ACTIVITY & FOCUS The Committee met fourteen [ 14 ] the incumbent auditors, Ernst & times during the year. The Audit Committee has primarily Young, Chartered Accountants be focused during the year on its recommended for re-appointment for responsibilities for monitoring: Attendance at these meetings has been the year ending 31 March 2016 at the as follows: upcoming Annual General Meeting. • integrity of the Company’s and Group’s financial statements, Name Meetings including the reasonableness of attended assertions made in their preparation, Desamanya P D Rodrigo 2 / 2 the appropriateness of accounting Mr. R A Ebell 13 / 13 policies used and the adequacy of R A Ebell presentation and disclosures made; Dr. S Selliah 14 / 14 Chairman (w.e.f. 1 July 2014) Mr. W M P L de Alwis, PC 12 / 14 Audit Committee • effectiveness of internal control Mr. G L H Premaratne 12 / 14 over financial reporting; 31 July 2015 Softlogic Holdings PLC 101
Annual Report of the Board of Directors on the Affairs of the Company
The Directors of Softlogic Holdings and services in each of its business SIGNIFICANT ACCOUNTING PLC have pleasure in presenting to the segments. POLICIES members their Annual Report together The significant accounting policies with the Audited Financial Statements adopted in the preparation of the PERFORMANCE REVIEW of the Company and the Group for the financial statements are given on year ended 31 March 2015. The Financial Statements reflect the pages 117 to 140 of the Annual Report. state of affairs of the Company and the There was no change in the accounting Group. This report forms an integral part policies adopted from the previous year GENERAL of the Annual Report of the Board of except those mentioned in Note 1.7 to Softlogic Holdings PLC is a public Directors. the Financial Statements. limited company which was incorporated under the Companies Act No. 17 of 1982 as a private limited FINANCIAL STATEMENTS PROPERTY, PLANT & company on 25 February 1998, re- Section 168 (b) of the Companies Act EQUIPMENT registered under the Companies Act requires that the Annual Report of the The details and movement of property, No. 07 of 2007 on 17 December 2007, Directors include financial statements plant and equipment during the year converted to a public limited liability of the Company, in accordance with under review is set out in Note 15 to company on 10 December 2008, and Section 151 of the Act and Group the Financial Statements on pages 172 listed on the Colombo Stock Exchange financial statements for the accounting and 175. on 20 June 2011. The name of the period, in accordance with section Company was changed to Softlogic 152 of the Act. The requisite financial Holdings PLC on 25 August 2011. statements of the Company are given CAPITAL EXPENDITURE on pages 108 to 214 of the Annual The total capital expenditure incurred Report. on the acquisition of property, plant PRINCIPAL ACTIVITIES and equipment for the Company and The principal activities of the Company the Group amounted to Rs.6 Mn DIRECTORS’ RESPONSIBILITY are holding investments, providing (2014 – Rs.15 Mn) and Rs.4,284 Mn FOR FINANCIAL REPORTING management services and financial (2014 – Rs.3,505 Mn) respectively. assistance to its subsidiaries. The The Directors are responsible for Details of capital expenditure and their principal activities of the subsidiary the preparation of the Financial movements are given in Note 15 to the companies are Information and Statements of the Company to reflect Financial Statements on pages 172 to Communications technology, a true and fair view of the state of 174 of the Annual Report. Automobiles, Retailing, Hoteliering affairs. The Directors are of the view and Leisure, providing Financial and that these financial statements have Insurance services and Healthcare been prepared in conformity with the RESERVES services. The Group operates through requirements of the Companies Act No. The reserves for the Company and the branches, offices and subsidiaries in Sri 07 of 2007 and the Sri Lanka Financial Group amounted to Rs.541 Mn (2014 Lanka and overseas. Reporting Standards. A statement in Rs.223 Mn) and Rs.2,536 Mn (2014 – this regard is given on page 106. Rs.1,713 Mn) respectively. FUTURE DEVELOPMENTS The movement and composition of An indication of likely future AUDITOR’S REPORT the Capital and Revenue reserves is developments is set out in the The Auditor’s Report on the financial disclosed in the Statement of Changes Chairman’s Review on pages 13 to statements is given on page 107 of the in Equity. 15. In the ordinary course of business Annual Report. the Group develops new products
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Annual Report of the Board of Directors on the Affairs of the Company
DONATIONS disclosure in the financial statements Mr. M P R Rassool - During the year, donations made by other than those disclosed in Note 47 to Dr. S Selliah 2,000,000 the Financial Statements. the Company and the Group amounted Mr. W M P L De Alwis, PC - to Rs.10.1 Mn (2014 - Rs.0.1 Mn) Mr. G L H Premarathne - and Rs.16.1 Mn (2014 – Rs.4.7 Mn) DIRECTORATE Mr. R A Ebell - respectively. The following Directors held Office during the year under review. The DIRECTORS’ REMUNERATION STATED CAPITAL biographical details of the Board Directors’ remuneration in respect of The stated capital of the Company members are set out on pages the Company for the financial year as at 31 March 2015 was 18 and 19. ended 31 March 2015 was Rs.19 Mn Rs.5,089,000,000.00. There was no Mr. A K Pathirage (Chairman / Managing (2014 – 34 Mn). The remuneration of change in the stated capital of the Director) the Directors is determined by the Company during the year under review. Mr. G W D H U Gunawardena Board. Mr. R J Perera TAXATION Mr. H K Kaimal DIRECTORS’ INTERESTS IN Mr. M P R Rassool The information relating to income tax CONTRACTS AND PROPOSED and deferred taxation is given in Note Dr. S Selliah CONTRACTS WITH THE 10 to the Financial Statements. Desamanya P D Rodrigo (resigned COMPANY w.e.f. 30th June 2014) Directors’ interests in contracts, both DIVIDENDS Mr. W M P L De Alwis, PC direct and indirect are referred to in Note 42 to the Financial Statements. The Directors declared an interim Mr. G L H Premarathne The Directors have no direct or indirect dividend of Rs.0.25 per share for the Mr. R A Ebell interest in any other contract or year under review which was paid on proposed contract with the Company. 19 May 2015. RETIREMENT AND RE-ELECTION OF DIRECTORS INTERESTS REGISTER STATUTORY PAYMENTS In terms of Article 87 of the Articles of The Interests Register is maintained The Directors, to the best of their Association of the Company, Messrs R by the Company as per the Companies knowledge and belief are satisfied that J Perera, H K Kaimal and Dr. S Selliah Act No. 07 of 2007. All Directors have all statutory payments in relation to the retire by rotation and being eligible offer disclosed their interests pursuant to government and the employees have themselves for re-election. Section 192(2) of the said Act. been either duly paid or appropriately provided for in the Financial DIRECTORS’ SHAREHOLDING Statements. SHAREHOLDERS’ INFORMATION Directors’ interest in the shares of the Company as at 31 March 2015 were as The distribution of shareholders is EVENTS AFTER THE DATE OF follows. indicated on page 215 of the Annual THE STATEMENT OF FINANCIAL Report. There were 14,169 registered Name of Director No. of Shares POSITION shareholders as at 31 March 2015 Mr. A K Pathirage 362,933,569 (31 March 2014 – 15,557). No circumstances have arisen and no Mr. G W D H U Gunawardena 57,527,300 material events have occurred after the date of Statement of Financial Position, Mr. R J Perera 60,836,700 which would require adjustments to, or Mr. H K Kaimal 64,870,800
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SHARE INFORMATION The Auditors of the Company, Messrs ANNUAL GENERAL MEETING Information on share trading is given on Ernst & Young, Chartered Accountants The Annual General Meeting of page 216 of the Annual Report. were paid Rs.1.7 Mn as audit fees for the Company will be held at the the financial year ended 31 March 2015 “Committee Room C” of Bandaranaike (2014 – Rs.1.5 Mn) by the Company, Memorial International Conference INTERNAL CONTROL details of which are given in Note 8 to Hall (BMICH), Bauddhaloka Mawatha, The Directors are responsible for the the Financial Statements. Colombo 07 on Wednesday 30th day governance of the Company including of September 2015 at 10.30 a.m. The the establishment and maintenance As far as the Directors are aware, the Notice of the Annual General Meeting is of the Company’s system of internal Auditors do not have any relationship on page 219 of the Annual Report. control. Internal control systems are (other than that of an auditor) with the designed to meet the particular needs Company that would have an impact For and on behalf of the Board of the organisation concerned and the on their independence. The Auditors risk to which it is exposed and by their also do not have any interest in the nature can provide reasonable, but not Company. absolute assurance against material misstatement or loss. The Directors Having reviewed the independence are satisfied that a strong control and effectiveness of the external environment is prevalent within the auditors, the Audit Committee has Company and that the internal control recommended to the Board that the A K Pathirage systems referred to above are effective. existing auditors, Messrs Ernst & Chairman/Managing Director Young, Chartered Accountants be reappointed. Ernst & Young have RISK MANAGEMENT expressed their willingness to continue The Group’s risk management in office and an ordinary resolution objectives and policies and the reappointing them as auditors and exposure to risks, are set out in pages authorising the Directors to determine 79 to 84 of the Annual Report. their remuneration will be proposed at the forthcoming AGM. H K Kaimal Director CORPORATE GOVERNANCE The report on Corporate Governance is GOING CONCERN given on pages 70 to 78 of the Annual The Directors having assessed the Report. environment within which it operates are satisfied that the Company and the Group have adequate resources Softlogic Corporate Services (Pvt) Ltd THE AUDITORS to continue its operations in the Secretaries The Board Audit Committee reviews foreseeable future. Therefore, the the appointment of the external Directors have adopted the going- 31 July 2015 auditors, as well as their relationship concern basis in preparing the financial Colombo with the Group, including monitoring statements. the Group’s use of the auditors for non- audit services and the balance of audit and non-audit fees paid to the auditors.
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Financial Calendar 2015
15 August 2014 14 November 2014
1QFY15 Interim release 2QFY15 Interim release
Group revenue – Rs.8.0 bn, up 14.6% Cumulative Group revenue – Rs.16.7 bn, up 17.7% Gross profit – Rs.2.5 bn, up 14.4% Cumulative gross profit – Rs.6.1 bn, up 19.3% Profit before tax– Rs.294.9 mn, up 36.0% Cumulative profit before tax– Rs.721.8 mn, up 110.5% Profit after tax– Rs.225.3 mn, up 21.9% Cumulative profit after tax– Rs.579.1 mn, up 90.1%
16 February 2015 29 May 2015
3QFY15 Interim release 4QFY15 Interim release
Cumulative Group revenue – Rs.27.8 bn, up 27.7% Annual Group revenue – Rs.39.5 bn, up 35.0% Cumulative gross profit – Rs.10.0 bn, up 25.6% Annual gross profit – Rs.14.1 bn, up 28.2% Cumulative profit before tax– Rs.1.4 bn, up 39.5% Annual operating profit – Rs.4.3 bn, up 22.0% Cumulative profit after tax– Rs.1.1 bn, up 37.4% Annual profit before tax– Rs.2.4 bn, up 87.7% Annual profit after tax– Rs.1.8 bn, up 83.5%
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Financial Statements
Statement of Directors’ Responsibilities 106 Independent Auditors’ Report 107 Income Statement 108 Statement of Comprehensive Income 109 Statement of Financial Position 110 Statement of Changes in Equity 112 Cash Flow Statement 114 Notes to the Financial Statements 117 106
Statement of Directors’ Responsibilities
The responsibilities of the Directors, statements since adequate resources COMPLIANCE REPORT in relation to the financial statements are available to continue operations in The Directors confirm that to the best of the Company differ from the the foreseeable future. of their knowledge, all taxes, duties responsibilities of the Auditors, which and levies payable by the Company, all are set out in the Report of the Auditors The Directors are responsible for contributions, levies and taxes payable on page 107. keeping proper accounting records, on behalf of and in respect of the which disclose with reasonable employees of the Company and other The Companies Act No. 07 of 2007 accuracy, at any time, the financial known statutory dues as were due and stipulates that the Directors are position of the Company and to enable payable by the Company as at the date responsible for preparing the Annual them to ensure the financial statements of the Statement of Financial Position Report and the financial statements. comply with the Companies Act No. 07 have been paid or, where relevant Company law requires the Directors to of 2007. provided for, in arriving at the financial prepare financial statements for each results for the year under review. financial year, giving a true and fair view They are also responsible for of the state of affairs of the Company at safeguarding the assets of the For and on behalf of the Board of the end of the financial year, and of the Company and for taking reasonable SOFTLOGIC HOLDINGS PLC Statement of Comprehensive Income steps for the prevention and detection of the Company and the Group for the of fraud and other irregularities. In this financial year, which comply with the regard the Directors have instituted an requirements of the Companies Act. effective and comprehensive system of internal control. The Directors are The Directors consider that, in required to prepare financial statements Softlogic Corporate Services (Pvt) Ltd preparing financial statements set out and to provide the external auditors Secretaries on pages 108 to 214 of the Annual with every opportunity to take whatever Report, appropriate accounting policies steps and undertake whatever have been selected and applied in a inspections they may consider to be 31 July 2015 consistent manner and supported by appropriate to enable them to give their Colombo reasonable and prudent judgments independent audit opinion. and estimate, and that all applicable accounting standards have been The Directors are of the view that they followed. The Directors confirm that have discharged their responsibilities as they are justified in adopting the going set out in this statement. concern basis in preparing the financial
Softlogic Holdings PLC 107
Independent Auditors’ Report
TO THE SHAREHOLDERS OF SOFTLOGIC HOLDINGS PLC
Report on the Financial Statements used and the reasonableness of accounting estimates made We have audited the accompanying financial statements of by Board, as well as evaluating the overall presentation of the Softlogic Holdings PLC (“the Company”), and the consolidated financial statements. financial statements of the Company and its subsidiaries We believe that the audit evidence we have obtained is (“Group”), which comprise the statement of financial position sufficient and appropriate to provide a basis for our audit opinion. as at 31 March 2015, and the income statement and statement of comprehensive income, statement of changes in equity and Opinion cash flow statement for the year then ended, and a summary of In our opinion, the consolidated financial statements give a significant accounting policies and other explanatory information. true and fair view of the financial position of the Group as at 31 March 2015, and of its financial performance and cash flows for Board’s Responsibility for the Financial Statements the year then ended in accordance with Sri Lanka Accounting The Board of Directors (“Board”) is responsible for the Standards. preparation of these financial statements that give a true and fair Report on other legal and regulatory requirements view in accordance with Sri Lanka Accounting Standards, and for such internal controls as Board determines is necessary to As required by Section 163(2) of the Companies Act No. 07 of enable the preparation of financial statements that are free from 2007, we state the following: material misstatement, whether due to fraud or error. a) The basis of opinion, scope and limitations of the audit are as stated above. Auditor’s Responsibility b) In our opinion: Our responsibility is to express an opinion on these financial - we have obtained all the information and explanations that statements based on our audit. We conducted our audit in were required for the audit and, as far as appears from our accordance with Sri Lanka Auditing Standards. Those standards examination, proper accounting records have been kept by require that we comply with ethical requirements and plan and the Company, perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. - the financial statements of the Company give a true and fair view of its financial position as at 31 March 2015, and of An audit involves performing procedures to obtain audit its financial performance and cash flows for the year then evidence about the amounts and disclosures in the financial ended in accordance with Sri Lanka Accounting Standards, statements. The procedures selected depend on the auditor’s and judgment, including the assessment of the risks of material - the financial statements of the Company and the Group misstatement of the financial statements, whether due to comply with the requirements of section 151 and 153 of the fraud or error. In making those risk assessments, the auditor Companies Act No. 07 of 2007. considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also 31 July 2015 includes evaluating the appropriateness of accounting policies Colombo
Annual Report 2014-15 108
Income Statement
In Rs. Note Group Company For the year ended 31 March 2015 2014 2015 2014
Revenue 3 39,563,884,110 29,246,435,584 416,018,805 355,554,590 Cost of sales (25,447,258,306) (18,234,876,165) (80,991,653) (90,424,044) Gross profit 14,116,625,804 11,011,559,419 335,027,152 265,130,546 Dividend income 4 - - 961,271,765 403,985,123 Other operating income 5 1,162,561,036 497,258,384 108,111,472 94,532,167 Distribution expenses (2,016,859,252) (1,511,521,978) - - Administrative expenses (9,010,634,418) (6,374,080,924) (347,890,153) (221,702,118) Results from operating activities 4,251,693,170 3,623,214,901 1,056,520,236 541,945,718 Finance income 6 1,122,173,265 1,156,974,990 201,540,615 355,897,046 Finance expenses 7 (2,692,809,554) (2,660,026,602) (1,006,903,157) (980,482,527) Net finance cost (1,570,636,289) (1,503,051,612) (805,362,542) (624,585,481) Change in insurance contract liabilities 9 (944,348,980) (966,545,920) - - Change in fair value of investment property 17 526,702,000 91,100,500 40,736,886 60,300,500 Share of profit of equity accounted investees 19.5 5,290,016 13,280,969 - - Profit/ (loss) before tax 2,268,699,917 1,257,998,838 291,894,580 (22,339,263) Tax expense 10 (449,618,026) (249,163,813) 28,417,501 (1,195,889) Profit/ (loss) for the year 1,819,081,891 1,008,835,025 320,312,081 (23,535,152)
Attributable to: Equity holders of the parent 555,779,746 155,863,630 Non controlling interest 1,263,302,145 852,971,395 Profit for the year 1,819,081,891 1,008,835,025
Earnings per share Basic 11 0.72 0.20
Dividend per share 12 - 0.15
Figures in brackets indicate deductions.
The accounting policies and notes as set out in pages 117 to 214 form an integral part of these financial statements.
Softlogic Holdings PLC 109
Statement of Comprehensive Income
In Rs. Note Group Company For the year ended 31 March 2015 2014 2015 2014
Profit/ (loss) for the year 1,819,081,891 1,008,835,025 320,312,081 (23,535,152) Other comprehensive income
Other comprehensive income to be reclassified to income statement in subsequent periods Currency translation of foreign operations 48,583,081 18,526,748 - - Net (loss) / gain on available for sale financial assets 16,245,855 (59,626,107) - 2,749,371
Net other comprehensive income to be reclassified to income statement in subsequent periods 64,828,936 (41,099,359) - 2,749,371
Other comprehensive income not to be reclassified to income statement in subsequent periods Revaluation of land and buildings 15.1 369,616,947 313,990,550 - - Net change in fair value on derivative financial 32.5 30,540,342 (30,540,342) - - instruments Actuarial gains/ (loss) on retirement benefits 35 (84,380,473) 931,713 (2,634,546) (3,531,852) Share of other comprehensive income of equity 19.5 accounted investees 134,233 (85,252) - -
Net other comprehensive income not to be reclassified to income statement in subsequent periods 315,911,049 284,296,669 (2,634,546) (3,531,852) Tax on other comprehensive income (39,411,524) (15,421,880) 737,672 - Other comprehensive income/ (loss) for the year, net of tax 341,328,461 227,775,430 (1,896,874) (782,481) Total comprehensive income/ (loss) for the year, net of tax 2,160,410,352 1,236,610,455 318,415,207 (24,317,633)
Attributable to: Equity holders of the parent 760,741,038 220,149,620 Non controlling interest 1,399,669,314 1,016,460,835 2,160,410,352 1,236,610,455
Figures in brackets indicate deductions.
The accounting policies and notes as set out in pages 117 to 214 form an integral part of these financial statements.
Annual Report 2014-15 110
Statement of Financial Position
In Rs. Note Group Company As at 31 March 2015 2014 2015 2014
Assets Non current assets Property, plant and equipment 15 24,909,536,887 17,538,277,279 121,538,318 150,325,511 Lease rentals paid in advance 16 854,795,905 153,312,184 - - Investment property 17 94,848,000 2,266,146,000 442,641,386 394,000,000 Intangible assets 18 8,857,003,875 7,731,412,573 1,723,508 5,341,896 Investments in subsidiaries 19 - - 10,592,900,172 9,007,349,757 Investments in equity accounted investees 19.1 26,216,105 24,746,404 11,000,000 11,000,000 Other non current financial assets 20 9,087,649,679 6,166,907,714 1,277,947,548 57,797,564 Rental receivable on lease assets and hire purchase 21.1 3,669,327,302 3,762,890,106 - - Other non current assets 22 292,792,966 142,966,541 - - Deferred tax asset 23 318,527,576 307,629,785 68,817,557 - 48,110,698,295 38,094,288,586 12,516,568,489 9,625,814,728
Current assets Inventories 24 7,669,562,845 5,109,353,850 - - Trade and other receivables 25 6,622,803,106 5,070,927,688 241,724,591 167,169,840 Loans and advances 26 5,524,162,085 2,077,038,702 - - Rental receivable on lease assets and hire purchase 21.2 2,881,969,879 4,616,673,500 - - Amounts due from related parties 42.1 572,053 778,460 2,290,507,881 2,453,097,064 Other current assets 27 3,760,097,208 2,773,900,450 21,724,101 31,136,264 Short term investments 28 8,392,441,152 6,358,330,664 3,670,748,138 1,643,996,055 Cash in hand and at bank 1,926,725,822 1,762,101,994 42,695,145 279,766,916 36,778,334,150 27,769,105,308 6,267,399,856 4,575,166,139 Investment property held for sale 17 2,698,000,000 - - - 39,476,334,150 27,769,105,308 6,267,399,856 4,575,166,139
Total assets 87,587,032,445 65,863,393,894 18,783,968,345 14,200,980,867
Equity and Liabilities Equity attributable to equity holders of the parent Stated capital 29 5,089,000,000 5,089,000,000 5,089,000,000 5,089,000,000 Revenue reserves 1,167,195,634 628,907,045 541,413,224 222,998,017 Other components of equity 30 1,368,340,826 1,083,932,574 - - 7,624,536,460 6,801,839,619 5,630,413,224 5,311,998,017 Non controlling interest 8,157,436,153 6,548,905,153 - - Total equity 15,781,972,613 13,350,744,772 5,630,413,224 5,311,998,017
Softlogic Holdings PLC 111
In Rs. Note Group Company As at 31 March 2015 2014 2015 2014
Non current liabilities Insurance contract liabilities 31 5,129,272,339 4,184,923,357 - - Interest bearing borrowings 32 22,844,291,422 12,999,848,935 5,767,785,189 2,448,181,474 Public deposits 33 2,214,295,787 1,885,402,009 - - Deferred tax liabilities 34 314,257,283 332,324,498 - - Employee benefit liabilities 35 655,925,545 444,467,274 30,669,730 30,083,785 Other deferred liabilities 36 3,044,433 5,476,209 - - Other non current financial liabilities 37 31,710,620 6,260,352 509,915,332 - 31,192,797,429 19,858,702,634 6,308,370,251 2,478,265,259
Current liabilities Trade and other payables 38 7,041,840,113 5,751,656,616 29,531,350 14,569,828 Amounts due to related parties 42.2 15,970,784 19,508,602 148,005,634 946,657,314 Income tax liabilities 39 322,656,391 174,142,951 - - Short term borrowings 40 14,787,184,778 11,822,115,977 4,191,598,768 3,920,810,772 Current portion of interest bearing borrowings 32 4,616,956,512 4,144,437,836 2,368,998,067 1,455,262,816 Other current liabilities 41 2,330,891,786 771,866,598 24,009,337 18,028,769 Public deposits 33 9,838,760,403 7,418,343,338 - - Bank overdrafts 1,658,001,636 2,551,874,570 83,041,714 55,388,092 40,612,262,403 32,653,946,488 6,845,184,870 6,410,717,591
Total equity and liabilities 87,587,032,445 65,863,393,894 18,783,968,345 14,200,980,867
I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007.
Group Chief Financial Officer
The Board of directors is responsible for the preparation and presentation of these financial statements.
Director Director
The Accounting Policies and Notes as set out in pages 117 to 214 form an integral part of these Financial Statements.
31 July 2015 Colombo
Annual Report 2014-15 112
Statement of Changes in Equity
Group In Rs. Attributable to equity holders of parent Attributable to equity holders of parent Total Non controlling Total equity Stated Treasury Revaluation Exchange Available for sale Statutory Other Revenue interest capital shares reserve translation reserve reserve fund reserves reserve reserves
As at 01 April 2013 5,089,000,000 (47,753,697) 1,337,323,893 (93,885,610) 240,463,858 87,790,590 - 675,126,490 7,288,065,524 6,280,065,130 13,568,130,654 Profit for the year ------155,863,630 155,863,630 852,971,395 1,008,835,025 Other comprehensive income / (loss) - - 124,450,980 18,526,748 (63,890,355) - - (14,801,383) 64,285,990 163,489,440 227,775,430 Total comprehensive income - - 124,450,980 18,526,748 (63,890,355) - - 141,062,247 220,149,620 1,016,460,835 1,236,610,455
Direct cost on issue of shares ------(5,871,054) (5,871,054) - (5,871,054) Transfer to reserve fund - - - - - 61,377,352 - (61,377,352) - - - Treasury shares purchased during the year (8,167,488) ------(8,167,488) - (8,167,488) Acquisition, disposal and changes in non controlling interest ------(572,303,697) - (572,303,697) (134,030,648) (706,334,345) Dividend paid ------(120,033,286) (120,033,286) - (120,033,286) Subsidiary dividend to non controlling interest ------(613,590,164) (613,590,164) As at 31 March 2014 5,089,000,000 (55,921,185) 1,461,774,873 (75,358,862) 176,573,503 149,167,942 (572,303,697) 628,907,045 6,801,839,619 6,548,905,153 13,350,744,772
Profit for the year ------555,779,746 555,779,746 1,263,302,145 1,819,081,891 Other comprehensive income / (loss) - - 171,272,900 48,583,081 23,754,556 - - (38,649,245) 204,961,292 136,367,169 341,328,461 Total comprehensive income - - 171,272,900 48,583,081 23,754,556 - - 517,130,501 760,741,038 1,399,669,314 2,160,410,352
Direct cost on issue of shares ------(11,477,810) (11,477,810) (2,847,938) (14,325,748) Transfer to reserve fund - - - - - (32,635,898) - 32,635,898 - - - Deferred tax reversal on depreciation impact of revaluation - - 3,327,624 - - - - - 3,327,624 - 3,327,624 Acquisition, disposal and changes in non controlling interest ------70,105,989 - 70,105,989 726,589,317 796,695,306 Subsidiary dividend to non controlling interest ------(514,879,693) (514,879,693)
As at 31 March 2015 5,089,000,000 (55,921,185) 1,636,375,397 (26,775,781) 200,328,059 116,532,044 (502,197,708) 1,167,195,634 7,624,536,460 8,157,436,153 15,781,972,613
Company In Rs. Stated Available for sale Revenue Total capital reserve reserve
As at 01 April 2013 5,089,000,000 (2,749,371) 370,810,021 5,457,060,650 Loss for the year - - (23,535,152) (23,535,152) Other comprehensive income/ (loss) - 2,749,371 (3,531,852) (782,481) Total comprehensive income - 2,749,371 (27,067,004) (24,317,633)
Dividend paid - - (120,745,000) (120,745,000) As at 31 March 2014 5,089,000,000 - 222,998,017 5,311,998,017
Profit for the year - - 320,312,081 320,312,081 Other comprehensive loss - - (1,896,874) (1,896,874) Total comprehensive income - - 318,415,207 318,415,207
As at 31 March 2015 5,089,000,000 - 541,413,224 5,630,413,224
Figures in brackets indicate deductions.
The accounting policies and notes as set out in pages 117 to 214 form an integral part of these financial statements.
Softlogic Holdings PLC 113
Group In Rs. Attributable to equity holders of parent Attributable to equity holders of parent Total Non controlling Total equity Stated Treasury Revaluation Exchange Available for sale Statutory Other Revenue interest capital shares reserve translation reserve reserve fund reserves reserve reserves
As at 01 April 2013 5,089,000,000 (47,753,697) 1,337,323,893 (93,885,610) 240,463,858 87,790,590 - 675,126,490 7,288,065,524 6,280,065,130 13,568,130,654 Profit for the year ------155,863,630 155,863,630 852,971,395 1,008,835,025 Other comprehensive income / (loss) - - 124,450,980 18,526,748 (63,890,355) - - (14,801,383) 64,285,990 163,489,440 227,775,430 Total comprehensive income - - 124,450,980 18,526,748 (63,890,355) - - 141,062,247 220,149,620 1,016,460,835 1,236,610,455
Direct cost on issue of shares ------(5,871,054) (5,871,054) - (5,871,054) Transfer to reserve fund - - - - - 61,377,352 - (61,377,352) - - - Treasury shares purchased during the year (8,167,488) ------(8,167,488) - (8,167,488) Acquisition, disposal and changes in non controlling interest ------(572,303,697) - (572,303,697) (134,030,648) (706,334,345) Dividend paid ------(120,033,286) (120,033,286) - (120,033,286) Subsidiary dividend to non controlling interest ------(613,590,164) (613,590,164) As at 31 March 2014 5,089,000,000 (55,921,185) 1,461,774,873 (75,358,862) 176,573,503 149,167,942 (572,303,697) 628,907,045 6,801,839,619 6,548,905,153 13,350,744,772
Profit for the year ------555,779,746 555,779,746 1,263,302,145 1,819,081,891 Other comprehensive income / (loss) - - 171,272,900 48,583,081 23,754,556 - - (38,649,245) 204,961,292 136,367,169 341,328,461 Total comprehensive income - - 171,272,900 48,583,081 23,754,556 - - 517,130,501 760,741,038 1,399,669,314 2,160,410,352
Direct cost on issue of shares ------(11,477,810) (11,477,810) (2,847,938) (14,325,748) Transfer to reserve fund - - - - - (32,635,898) - 32,635,898 - - - Deferred tax reversal on depreciation impact of revaluation - - 3,327,624 - - - - - 3,327,624 - 3,327,624 Acquisition, disposal and changes in non controlling interest ------70,105,989 - 70,105,989 726,589,317 796,695,306 Subsidiary dividend to non controlling interest ------(514,879,693) (514,879,693)
As at 31 March 2015 5,089,000,000 (55,921,185) 1,636,375,397 (26,775,781) 200,328,059 116,532,044 (502,197,708) 1,167,195,634 7,624,536,460 8,157,436,153 15,781,972,613
Company In Rs. Stated Available for sale Revenue Total capital reserve reserve
As at 01 April 2013 5,089,000,000 (2,749,371) 370,810,021 5,457,060,650 Loss for the year - - (23,535,152) (23,535,152) Other comprehensive income/ (loss) - 2,749,371 (3,531,852) (782,481) Total comprehensive income - 2,749,371 (27,067,004) (24,317,633)
Dividend paid - - (120,745,000) (120,745,000) As at 31 March 2014 5,089,000,000 - 222,998,017 5,311,998,017
Profit for the year - - 320,312,081 320,312,081 Other comprehensive loss - - (1,896,874) (1,896,874) Total comprehensive income - - 318,415,207 318,415,207
As at 31 March 2015 5,089,000,000 - 541,413,224 5,630,413,224
Figures in brackets indicate deductions.
The accounting policies and notes as set out in pages 117 to 214 form an integral part of these financial statements.
Annual Report 2014-15 114
Cash Flow Statement
In Rs. Note Group Company For the year ended 31 March 2015 2014 2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES Profit/ (loss) before tax 2,268,699,917 1,257,998,838 291,894,580 (22,339,263) Adjustments for: Finance income 6 (1,122,173,265) (1,156,974,990) (201,540,615) (355,897,046) Dividend income - - (961,271,765) (403,985,123) Finance cost 7 2,692,809,554 2,660,026,602 1,006,903,157 980,482,527 Change in fair value of investment property 17 (526,702,000) (91,100,500) (40,736,886) (60,300,500) Share of results of equity accounted investees 19.5 (5,290,016) (13,280,969) - - Gratuity provision and related costs 35 140,196,129 105,555,003 6,520,501 6,319,025 Provisions for/ write off of impaired receivables 8 96,689,666 34,210,138 61,416,769 4,577,366 Provision for impairment of inventories 8 190,001,431 49,765,780 - - Fair value adjustment on assets held for sale - - 8,250,980 - Depreciation of property, plant and equipment 15 1,189,997,919 901,836,851 24,239,655 25,452,041 Profit on sale of property, plant and equipment 5 (24,486,006) (34,808,911) (6,368,059) (16,622,339) Profit on sale of investments (644,439,532) (222,795,432) (80,981,615) (56,984,480) Unrealised (gain)/ loss on foreign exchange (65,919,502) 25,855,552 - - Amortisation/ impairment of intangible assets 8 248,049,626 204,045,351 2,624,845 2,221,133 Amortisation of prepaid lease rentals 8 1,036,939 1,036,927 - - Provision for put option liability - 6,260,352 - - Increase / (decrease) in deferred income 64,246,524 (61,646,822) - - Impairment / derecognition of property, plant & equipment and Intangible assets 29,141,735 29,691,599 995,249 - Profit before working capital changes 4,531,859,119 3,695,675,369 111,946,796 102,923,341
(Increase) / decrease in inventories (1,317,762,392) (1,453,796,534) - - (Increase) / decrease in trade and other receivables (1,974,792,070) (860,489,097) (74,554,750) (68,400,306) (Increase) / decrease in loans and advances (5,344,525,114) (818,798,373) - - (Increase) / decrease in investments in lease and hire purchase 1,828,266,427 (1,102,821,152) - - (Increase) / decrease in other current assets (1,083,438,824) (1,105,659,002) 1,999,042 (3,221,346) (Increase) / decrease in amounts due from related parties 206,407 93,603,954 (1,662,568,488) (1,951,918,164) Increase / (decrease) in trade and other payables 1,033,858,656 1,876,437,387 14,961,522 (502,247) Increase / (decrease) in amounts due to related parties (3,537,818) (2,512,237) (294,537,636) (348,808,956) Increase / (decrease) in other current liabilities 1,394,780,108 500,247,453 5,980,569 (6,312,073) Increase / (decrease) in public deposits 2,749,310,843 2,346,794,300 - - Increase / (decrease) in insurance provision 944,348,982 966,545,920 - - Cash generated from/ (used in) operations 2,758,574,324 4,135,227,988 (1,896,772,945) (2,276,239,751)
Finance income received 653,876,070 732,654,329 199,719,324 354,408,194 Finance expenses paid (2,619,644,709) (2,650,623,018) (994,129,825) (965,397,880) Dividend received 1,000,000 27,000,000 961,271,765 403,985,123 Tax paid (296,639,907) (429,862,142) (32,249,264) (14,310,092) Gratuity paid 35 (71,288,846) (38,898,992) (2,767,813) (1,335,500) Net cash flow from/ (used in) operating activities 425,876,932 1,775,498,165 (1,764,928,758) (2,498,889,906)
Softlogic Holdings PLC 115
In Rs. Note Group Company For the year ended 31 March 2015 2014 2015 2014
CASH FLOWS FROM /(USED IN) INVESTING ACTIVITIES Purchase and construction of property, plant and equipment (4,023,075,585) (3,459,164,705) (5,539,092) (14,782,876) Addition to prepaid lease rentals 16 (702,520,660) - - - Addition to investment property - - (7,904,500) (7,563,029) Purchase of intangible assets (71,178,662) (305,007,400) (1,861,900) - (Increase)/ decrease in other non current assets (114,585,768) (63,138,432) - - (Purchase) / disposal of short term investments (net) 3,007,229,282 469,049,446 - 507,968,637 Dividends received 141,855,097 146,289,554 - - (Purchase) / disposal of other non current financial assets (net) (858,863,791) (1,989,235,451) - 36,324,001 Proceeds from disposal of controlling interest 347,856,250 - 1,787,901,615 - Increase in interest in subsidiaries - - (1,305,012,469) (326,688,191) Acquisition of business, net of cash acquired (A) (5,817,191,859) - (2,789,975,487) - Proceeds from sale of property, plant and equipment 124,167,193 91,402,881 17,405,813 24,095,340 Net cash flow from/ (used in) investing activities (7,966,308,503) (5,109,804,107) (2,304,986,020) 219,353,882
CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid to non controlling interest (514,879,693) (613,590,164) - - Proceeds from shareholders with non-controlling interest on issue of rights in subsidiaries 311,113,243 - - - Proceeds from long term borrowings 18,538,930,076 7,546,880,910 5,738,547,536 2,000,000,000 (Increase) / decrease of controlling interest (179,401,247) (2,529,972,054) - - (Increase) / decrease in other non-current financial liabilities 25,450,268 - - - Repayment of long term borrowings (8,799,899,215) (3,554,156,028) (1,517,981,903) (492,003,416) Proceeds from / (repayment of) short term borrowings (net) 2,140,258,979 4,643,339,981 270,787,996 2,973,374,625 Direct cost on issue of shares (14,325,748) (5,871,054) - - Unamortisation of debenture issue expense/ loan processing fee (17,878,920) (20,136,995) - (11,094,231) Dividend paid to equity holders of parent - (120,033,286) - (120,745,000) Net cash flow from financing activities 11,489,367,743 5,346,461,310 4,491,353,629 4,349,531,978
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,948,936,172 2,012,155,368 421,438,851 2,069,995,954 CASH AND CASH EQUIVALENTS AT THE BEGINNING 1,700,038,527 (312,393,037) 1,737,755,263 (332,240,691) Effect of exchange rate changes (928,291) 276,196 - -
CASH AND CASH EQUIVALENTS AT THE END 5,648,046,408 1,700,038,527 2,159,194,114 1,737,755,263
ANALYSIS OF CASH AND CASH EQUIVALENTS Favourable balances Cash in hand and at bank 1,926,725,822 1,762,101,994 42,695,145 279,766,916 Short term investments 5,379,322,222 2,489,811,103 2,199,540,683 1,513,376,439 Unfavourable balances Bank overdrafts (1,658,001,636) (2,551,874,570) (83,041,714) (55,388,092)
Cash and cash equivalents 5,648,046,408 1,700,038,527 2,159,194,114 1,737,755,263
Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 117 to 214 form an integral part of these financial statements.
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Cash Flow Statement
A. ACQUISITION OF SUBSIDIARIES Softlogic Holdings PLC and Softlogic Retail (Pvt) Ltd, a subsidiary of Softlogic Holdings PLC acquired 122,894,000 (45.16%) ordinary shares of Odel PLC respectively at a price of Rs.22.00 per share on 11 September 2014.
This acquisition resulted in Softlogic Holdings PLC and Softlogic Retail (Pvt) Ltd having to make a mandatory offer to the shareholders of Odel PLC to acquire all remaining shares of Odel PLC at a price of Rs.22.00 per share which is the highest price paid by them within the previous twelve months.
The Joint Mandatory Offer made by Softlogic Holdings PLC and Softlogic Retail (Pvt) Ltd to the shareholders of Odel PLC expired on 13 October 2014 and Softlogic Holdings PLC and Softlogic Retail (Pvt) Ltd, a subsidiary of Softlogic Holdings PLC acquired further 130,739,418 (48.04%) ordinary shares of Odel PLC.
The acquisition had the following effect on the Groups’ assets and liabilities.
In Rs. Group For the year ended 31 March 2015
Acquisition of Odel PLC and its subsidiaries Property, plant & equipment 3,867,168,723 Intangible assets 84,847,663 Deferred tax asset 2,328,157 Other non current assets 35,240,657 Inventories 1,242,446,603 Trade and other receivables 216,926,184 Other current assets 38,653,229 Short term investments 1,332,148,214 Cash in hand and at bank 97,324,121
Interest bearing borrowings (338,609,995) Deferred tax liabilities (31,848,115) Retirement benefit liabilities (58,279,692) Trade and other payables (322,244,333) Income tax liabilities (59,901,192) Short term borrowings (795,520,205) Other current liabilities (60,298,308) Bank overdrafts (334,567,106) Net identifiable assets and liabilities 4,915,814,605 Non controlling interest holding (360,023,384) Brand name recognised on acquisition 998,180,211 5,553,971,432 Investment by non controlling interest 25,977,443 5,579,948,875
Total purchase price paid Cash consideration 5,579,948,875 Cash at bank and in hand acquired (net) 237,242,985 5,817,191,860
The accounting policies and notes as set out in pages 117 to 214 form an integral part of these financial statements.
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Notes to the Financial Statements
1.1 CORPORATE INFORMATION Responsibility for financial statements
Reporting entity The responsibility of the Board of Directors in relation to the financial statements is set out in the “Statement of Softlogic Holdings PLC is a public limited liability Directors’ Responsibilities” report in the Annual Report. company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered office and principal place of business of the company is 1.2 GENERAL POLICIES located at No. 14, De Fonseka Place, Colombo 5. Statement of compliance
Softlogic Holdings PLC became the holding company The financial statements which comprise the Income of the Group during the financial year ended 31 March Statement, Statement of Comprehensive Income, 2003. Statement of Financial Position, Statement of Changes in Equity and the Statement of Cash Flow , together Consolidated financial statements with the accounting policies and notes (the “financial statements”) have been prepared in accordance The financial statements for the year ended 31 March with Sri Lanka Accounting Standards (herein referred 2015, comprise “the Company” referring to Softlogic to as SLFRSs/LKASs) as issued by the Institute of Holdings PLC as the holding Company and “the Group” Chartered Accountants of Sri Lanka (CA Sri Lanka) and referring to the companies that have been consolidated in compliance with the requirements of the Companies therein. Act No. 7 of 2007.
Approval of financial statements The Financial statements for the year ended 31 March 1.3 SIGNIFICANT ACCOUNTING POLICIES 2015 were authorised for issue by the Board of Basis of preparation Directors on 31 July 2015. The consolidated financial statements have been prepared on an accrual basis and under the historical Principal activities and nature of operations cost convention except for investment properties, land Holding Company and buildings, fair value through profit or loss financial assets, derivative financial instruments and available for Softlogic Holdings PLC, the Group’s holding company, sale financial assets that have been measured at fair manages a portfolio of investments consisting of a value. range of diverse business operations, which together constitute the Softlogic Group, and provide function based services to its subsidiaries and associates. Presentation and functional currency The consolidated financial statements are presented Subsidiaries and associates in Sri Lankan Rupees (Rs.) the Group’s functional and presentation currency, which is the primary The business activities of the companies within the economic environment in which the Holding Company Group are information and communication technology, operates. Each entity in the Group uses the currency automobiles, retailing of consumer electronics , of the primary economic environment in which they manufacturing garments & fashion retailing , hoteliering, operate as their functional currency except the entities providing financial services, providing healthcare incorporated outside Sri Lanka. services, providing insurance services, stock brokering and providing management consultancy and financial The following subsidiary is using a different functional advisory services. currency other than Sri Lankan Rupees (Rs.); There were no significant changes in the nature of the Subsidiary Country of Functional principal activities of the Company and the Group during Incorporation currency the financial year under review. Softlogic Australia Australia Australian Dollar (Pty) Ltd (AUD)
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Notes to the Financial Statements
Going concern Consolidation of a subsidiary begins when the Group The Directors have assessed, and are confident that obtains control over the subsidiary and ceases when the company will be able to continue in operation for the Group loses control of the subsidiary. Assets, the foreseeable future. In addition, the Directors are liabilities, income and expenses of a subsidiary acquired not aware of any material uncertainties that may cast or disposed of during the year are included in the significant doubt upon the Group’s ability to continue as consolidated financial statements from the date the a going concern. Accordingly, these financial statements Group gains control until the date the Group ceases to have been prepared on a going concern basis. control the subsidiary.
Profit or loss and each component of other 1.4 CONSOLIDATION POLICY comprehensive income (OCI) are attributed to the Basis of consolidation equity holders of the parent of the Group and to the non-controlling interests, even if this results in the The consolidated financial statements comprise the non-controlling interests having a deficit balance. The financial statements of the Company and its subsidiaries financial statements of the subsidiaries are prepared as at 31 March 2015. The financial statements of for the same reporting period as the parent Company, the subsidiaries are prepared in compliance with the which is 12 months ending 31 March, using consistent Group’s accounting policies unless otherwise stated. accounting policies.
Subsidiaries are those entities controlled by the All intra-group assets, liabilities, equity, income, Group. Control over an investee is achieved when the expenses and cash flows relating to transactions Group is exposed, or rights to variable returns from between members of the Group are eliminated in full on its involvement with the investee and when it has the consolidation. ability to affect those returns through its power over the investee. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity Specifically, the Group controls an investee if, and only transaction. if, the Group has:
• Power over the investee (i.e., existing rights that give If the Group loses control over a subsidiary, it it the current ability to direct the relevant activities of derecognises the related assets (including goodwill), the investee) liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised • Exposure, or rights, to variable returns from its in the income statement. Any investment retained is involvement with the investee recognised at fair value. • The ability to use its power over the investee to affect its returns The total profits and losses for the year of the Company and of its subsidiaries included in consolidation are Subsidiaries consolidated have been listed in note 19. shown in the consolidated income statement and consolidated statement of comprehensive income The following subsidiary has been incorporated outside and all assets and liabilities of the Company and of its Sri Lanka: subsidiaries included in consolidation are shown in the consolidated statement of financial position. Name of the Company Country of Incorporation Non-controlling interest which represents the portion Softlogic Australia (Pty) Ltd Australia of profit or loss and net assets not held by the Group, are shown as a component of profit for the year in The Group re-assesses whether or not it controls an the consolidated income statement and statement of investee, if facts and circumstances indicate that there comprehensive income and as a component of equity are changes to one or more of the three elements of in the consolidated statement of financial position, control.
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separately from equity attributable to the shareholders of the financial asset. The calculation takes into account of the parent. all contractual terms of the financial instrument and includes any fees or incremental costs that are directly The Consolidated Statement of Cash Flows includes the attributable to the instrument and are an integral part of cash flows of the Company and its subsidiaries. the EIR.
The unearned income is recognised over the facility 1.5 SUMMARY OF SIGNIFICANT ACCOUNTING commencing on the month on which the facility is POLICIES executed in proportion to the declining receivable These accounting policies have been applied balance. consistently by Group entities. However, accrual of income from lease ceases when 1.5.1 INCOME STATEMENT the account is overdue for more than six months.
Revenue recognition Overdue charges Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group, Overdue charges of leasing/hire purchase have been and the revenue and associated costs incurred or to accounted for on cash received basis. be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received Life and General insurance business - gross written or receivable, net of trade discounts and value added premiums taxes, after eliminating sales within the Group. Gross recurring premiums on life insurance are recognised as revenue when receivable from the The following specific criterias are used for the revenue policyholder. recognition: Gross general insurance written premiums comprise Sale of goods the total premiums receivable for the whole period of Revenue from the sale of goods is recognised when the cover provided by contracts entered into during the significant risk and rewards of ownership of the goods accounting period and are recognised on the date on have passed to the buyer with the Group retaining which the policy commences. neither a continuing managerial involvement to the degree usually associated with ownership, nor an Life insurance business - reinsurance premiums effective control over the goods sold. Gross reinsurance premiums on life insurance and investment contracts are recognised as an expense Rendering of services when the date on which the policy is effective. Revenue from rendering of services is recognised Gross general reinsurance premiums written comprise by reference to the stage of completion. Where the the total premiums payable for the whole cover contract outcome cannot be measured reliably, revenue provided by contracts entered into the period and are is recognised only to the extent that the expenses recognised on the date on which the policy incepts. incurred are eligible to be recovered. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts Income from leases, hire purchases, loans and incepting in prior accounting periods. advance The accounting for income from leases, hire purchases, Unearned reinsurance premiums are those proportions loans and advance is recognised using the Effective of premiums written in a year that relate to periods Interest Rate (EIR) which is the rate that exactly of risk after the Statement of Financial Position date. discounts the estimated future cash receipts through Unearned reinsurance premiums are deferred over the the expected life of the financial instrument or a shorter term of the underlying direct insurance policies for risks- period, where appropriate, to the net carrying amount
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Notes to the Financial Statements
attaching contracts and over the term of the reinsurance from the proceeds on disposal, the carrying amount of contract for losses occurring contracts. such assets and the related selling expenses.
Life insurance business - unearned premium Gains and losses arising from activities incidental to the reserve main revenue generating activities and those arising from a group of similar transactions, which are not Unearned premium reserve represents the portion material are aggregated, reported and presented on a of the premium written in the year but relating to the net basis. unexpired term of coverage. Unearned premiums are calculated on the 365 basis except for marine policies which is computed on a 60-40 basis. Other income Other income is recognised on an accrual basis. Dividend Dividend income is recognised when the Group’s right Turnover based taxes to receive the payment is established. Turnover based taxes include Value Added Tax, Economic Service Charge, Nation Building Tax, Turnover Consultancy and professional service income Tax and Tourism Development Levy. Recognise as income in the period in which entitlement Companies in the Group pay such taxes in accordance to the consideration arises. with the respective statutes.
Finance income Expenditure recognition Finance income comprises interest income on funds Expenses are recognised in the Income Statement invested (including available for sale financial assets), on the basis of a direct association between the cost dividend income, , fair value gains on financial assets incurred and the earning of specific items of income. at fair value through profit or loss, gains on the re- All expenditure incurred in the running of the business measurement to fair value of any pre-existing interest in and in maintaining the property, plant and equipment in an acquiree that are recognised in Income Statement. a state of efficiency has been charged to the Income Statement. Interest income is recorded as it accrues using the effective interest rate (EIR), which is the rate that For the purpose of presentation of the Income exactly discounts the estimated future cash receipts Statement, the “function of expenses” method has through the expected life of the financial instrument or been adopted, on the basis that it presents fairly the a shorter period, where appropriate, to the net carrying elements of the Company and Group’s performance. amount of the financial asset. Interest income is included in finance income of the Income Statement. Finance costs
Rental income Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, Rental income arising from operating leases on fair value losses on financial assets at fair value through investment properties is accounted for on a straight-line profit or loss, impairment losses recognised on financial basis over the lease terms. assets (other than trade receivables) that are recognised in the Income Statement. Gains and losses Net gains and losses of a revenue nature arising from Interest expense is recorded as it accrues using the the disposal of property, plant and equipment and effective interest rate (EIR), which is the rate that other non current assets, including investments, are exactly discounts the estimated future cash payments accounted for in the Income Statement, after deducting through the expected life of the financial instrument or
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a shorter period, where appropriate, to the net carrying • in respect of taxable temporary differences amount of the financial liability. associated with investments in subsidiaries and associates, except where the timing of the reversal Borrowing costs of the temporary differences can be controlled and Borrowing costs directly attributable to the acquisition, it is probable that the temporary differences will not construction or production of an asset that necessarily reverse in the foreseeable future. takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost deferred tax assets are recognised for all deductible of the respective assets. All other borrowing costs are temporary differences, carry-forward of unused tax expensed in the period they occur. Borrowing costs credits and unused tax losses, to the extent that it is consist of interest and other costs that the Group incurs probable that taxable profit will be available against in connection with the borrowing of funds. which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax 1.5.2 TAXATION losses can be utilised except:
Current Tax • where the deferred tax asset relating to the deductible temporary difference arises from the initial Current tax assets and liabilities for the current and prior recognition of an asset or liability in a transaction that periods are measured at the amount expected to be is not a business combination and, at the time of the recovered from or paid to the taxation authorities. The transaction, affects neither the accounting profit nor tax rates and tax laws used to compute the amount the taxable profit or loss; and are those that are enacted or substantively enacted at the reporting date in the countries where the Group • in respect of deductible temporary differences operates and generates taxable income. associated with investments in subsidiaries and associates, deferred tax assets are only recognised Current income tax relating to items recognised to the extent that it is probable that the temporary directly in equity is recognised in equity and for items differences will reverse in the foreseeable future recognised in other comprehensive income shall be and taxable profit will be available against which the recognised in other comprehensive income and not temporary differences can be utilised. in the income statement. Management periodically The carrying amount of deferred income tax assets is evaluates positions taken in the tax returns with respect reviewed at each reporting date and reduced to the to situations in which applicable tax regulations are extent that it is no longer probable that sufficient taxable subject to interpretation and establishes provisions profit will be available to allow all or part of the deferred where appropriate. tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are Deferred Tax recognised to the extent that it has become probable Deferred tax is provided, using the liability method, on that future taxable profits will allow the deferred tax temporary differences at the reporting date between assets to be recovered. the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when Deferred tax liabilities are recognised for all taxable the asset is realised or the liability is settled, based temporary differences except; on tax rates (and tax laws) that have been enacted or • Where the deferred tax liability arising from the initial substantively enacted as at the reporting date. recognition of goodwill or of an asset or liability in a Deferred tax relating to items recognised outside the transaction that is not a business combination and, Income Statement is recognised outside the Income at the time of the transaction, affects neither the Statement. Deferred tax relating to items recognised in accounting profit nor taxable profit or loss; and correlation to the underlying transaction either in other comprehensive income or directly in equity.
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Notes to the Financial Statements
Deferred tax assets and deferred tax liabilities are • There is no unconditional right to defer the offset, if a legally enforceable right exists to set off settlement of the liability for at least twelve months current tax assets against current tax liabilities and after the reporting period. when the deferred taxes relate to the same taxable entity and the same taxation authority. The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non- Sales tax current assets and liabilities. Revenues, expenses and assets are recognised net of the amount of sales tax except: Fair value measurement • where the sales tax incurred on a purchase of assets The Group measures financial instruments and certain or services is not recoverable from the taxation non-financial assets at fair value at each reporting date. authority, in which case the sales tax is recognised Fair value related disclosures for financial instruments as part of the cost of acquisition of the asset or as and non-financial assets that are measured at fair value part of the expense item as applicable; and or where fair values are disclosed, are summarised in • where the receivable and payables that are stated the following notes: with the amount of sales tax included. Note The net amount of sales tax recoverable from, or payable Disclosures for valuation methods, to, the taxation authority is included as part of receivables significant estimates and assumptions 13.5.3.1.1 or payables in the Statement of Financial Position. Quantitative disclosures of fair value measurement hierarchy 14.5 On dividend income Investment in unquoted equity shares 20.2 Tax on dividend income from subsidiaries is recognised Financial instruments (including those as an expense in the Consolidated Income Statement. carried at amortised cost) 14
1.5.3 Current versus non current classification Fair value is the price that would be received to sell The Group presents assets and liabilities in the an asset or paid to transfer a liability in an orderly statement of financial position based on current/non- transaction between market participants at the current classification. An asset as current when it is: measurement date. The fair value measurement is based on the presumption that the transaction to sell • Expected to be realised or intended to be sold or the asset or transfer the liability takes place either: consumed in normal operating cycle • In the principal market for the asset or liability, or • Held primarily for the purpose of trading • In the absence of a principal market, in the most • Expected to be realised within twelve months after advantageous market for the asset or liability the reporting period, or
• Cash or cash equivalent unless restricted from being The principal or the most advantageous market must be exchanged or used to settle a liability for at least accessible by the Group. twelve months after the reporting period The fair value of an asset or a liability is measured using All other assets are classified as non-current. the assumptions that market participants would use when pricing the asset or liability, assuming that market A liability is current when: participants act in their economic best interest.
• It is expected to be settled in normal operating cycle A fair value measurement of a non-financial asset takes • It is held primarily for the purpose of trading into account a market participant's ability to generate economic benefits by using the asset in its highest and • It is due to be settled within twelve months after the reporting period, or
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best use or by selling it to another market participant basis of the nature, characteristics and risks of the asset that would use the asset in its highest and best use. or liability and the level of the fair value hierarchy as explained above. The Group uses valuation techniques that are appropriate in the circumstances and for which 1.5.4. Property, plant and equipment sufficient data are available to measure fair value, maximising the use of relevant observable inputs and Basis of recognition minimising the use of unobservable inputs. Property, plant and equipment are recognised if it is probable that future economic benefits associated with All assets and liabilities for which fair value is measured the asset will flow to the Group and the cost of the or disclosed in the financial statements are categorised asset can be reliably measured. within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the Basis of measurement fair value measurement as a whole: Plant and equipment are stated at cost less • Level 1 - Quoted (unadjusted) market prices in active accumulated depreciation and any accumulated markets for identical assets or liabilities impairment loss. Such cost includes the cost of replacing component parts of the plant and equipment • Level 2 - Valuation techniques for which the lowest and borrowing costs for long-term construction projects level input that is significant to the fair value if the recognition criterias are met. When significant measurement is directly or indirectly observable parts of plant and equipment are required to be replaced • Level 3 - Valuation techniques for which the lowest at intervals, the Group derecognises the replaced part, level input that is significant to the fair value and recognises the new part with its own associated measurement is unobservable useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the For assets and liabilities that are recognised in the carrying amount of the plant and equipment as a financial statements on a recurring basis, the Group replacement if the recognition criteria are satisfied. All determines whether transfers have occurred between other repair and maintenance costs are recognised in levels in the hierarchy by reassessing categorisation the Income Statement as incurred. (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each Land and buildings are measured at fair value less reporting period. accumulated depreciation on buildings and impairment charged subsequent to the date of the revaluation. The Group determines the policies and procedures Where land and buildings are subsequently revalued, for both recurring fair value measurement, such as the entire class of such assets is revalued at fair value investment properties and unquoted AFS financial on the date of revaluation. The Group has adopted a assets, and for non-recurring measurement, such as policy of revaluing land and buildings by professional assets held for sale in discontinued operations. valuers at least every 3 years.
External valuers are involved for valuation of significant The carrying values of property, plant and equipment assets, such as land and building and investment are reviewed for impairment when events or changes in properties, and significant liabilities, such as insurance circumstances indicate that the carrying value may not contracts. Selection criteria for external valuers include be recoverable. market knowledge, reputation, independence and whether professional standards are maintained. The Any revaluation surplus is recognised in the Statement Group decides, after discussions with the external of Other Comprehensive Income and accumulated valuers, which valuation techniques and inputs to use in equity in the asset revaluation reserve, except to for each case. the extent that it reverses a revaluation decrease of the same asset previously recognised in the Income For the purpose of fair value disclosures, the Group Statement, in which case the increase is recognised has determined classes of assets and liabilities on the in the income statement. A revaluation deficit is
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Notes to the Financial Statements
recognised in the Income Statement, except to the appropriate asset category and are depreciated together extent that it offsets an existing surplus on the same with the related asset. asset recognised in the asset revaluation reserve. 1.5.5 Leases Accumulated depreciation as at the revaluation date The determination of whether an arrangement is, or is eliminated against the gross carrying amount of the contains, a lease is based on the substance of the asset and the net amount is restated to the revalued arrangement at the inception date, whether fulfillment amount of the asset. of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a Upon disposal, any revaluation reserve relating to the right to use the asset, even if that right is not explicitly particular asset being sold is transferred to retained specified in an arrangement. earnings.
For arrangements entered into prior to 1 April 2011, Derecognition the date of inception is deemed to be 1 April 2011 in An item of property, plant and equipment are accordance with the SLFRS 1. derecognised upon replacement, disposal or when no future economic benefits are expected from its use. Group as a lessee Any gain or loss arising on derecognition of the asset is Finance leases which transfer to the Group substantially included in the income statement in the year the asset all the risks and benefits incidental to ownership of the is derecognised. leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, Depreciation if lower, at the present value of the minimum lease Depreciation is calculated by using a straight-line payments. Lease payments are apportioned between method on the cost or valuation of all property, plant and finance charges and reduction of the lease liability so as equipment, other than freehold land, in order to write to achieve a constant rate of interest on the remaining off such amounts over the estimated useful economic balance of the liability. Finance charges are recognised life of such assets. in finance costs in the Income Statement.
The estimated useful lives of assets is as follows: A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty Assets Years that the Group will obtain ownership by the end of the Building 40-60 lease term, the asset is depreciated over the shorter Buildings on leasehold land 40-60 or over the of the estimated useful life of the asset and the lease period of lease term. Operating lease payments are recognised as Plant & machinery 4-10 an operating expense in the Income Statement on a Computer equipment, furniture straight-line basis over the lease term. & fittings 2-10 Motor vehicle 4-8 Group as a lessor Leases in which the Group does not transfer The useful lives and residual values of assets are substantially all the risks and benefits of ownership reviewed, and adjusted if required, at the end of each of the asset are classified as operating leases. Initial financial year end. direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset Capital work in progress and recognised over the lease term on the same basis Capital work in progress consists of cost of assets, as rental income. Contingent rents are recognised as labour and other direct costs associated with property, revenue in the period in which they are earned. plant and equipment being constructed by the group. Once the assets become operational, the related costs The cost of improvements to buildings on are transferred from construction in progress to the leasehold land is capitalised, disclosed as leasehold
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improvements, and depreciated over the unexpired a significant portion of the investment property of a period of the lease or the estimated useful life of the subsidiary, such investment properties are treated improvements, whichever is shorter. as property, plant and equipment in the consolidated financial statements, and accounted using Group 1.5.6 Lease rentals paid in advance accounting policy for property, plant and equipment. Prepaid lease rentals paid to acquire land use rights are amortised over the lease term in accordance with the 1.5.8 Intangible assets pattern of benefits provided. Basis of recognition An intangible asset is recognised if it is probable that Details of the pre-paid lease rentals are given in note 16 future economic benefits associated with the asset to the financial statements. will flow to the Group and the cost of the asset can be reliably measured. 1.5.7 Investment properties
Properties held to earn rental income and properties Basis of measurement held for capital appreciation has been classified as Intangible assets acquired separately are measured on investment property. initial recognition at cost. The cost of intangible assets Investment properties are measured initially at cost, acquired in a business combination is the fair value as at including transaction costs. The carrying value of an the date of acquisition. investment property includes the cost of replacing Following initial recognition, intangible assets are carried part of an existing investment property, at the time at cost less any accumulated amortisation and any that cost is incurred if the recognition criteria are met, accumulated impairment losses. and excludes the costs of day-to-day servicing of the investment property. Subsequent to initial recognition, Internally generated intangible assets, excluding the investment properties are stated at fair values, capitalised development costs, are not capitalised, and which reflect market conditions at the reporting date. expenditure is charged against Income Statement in the year in which the expenditure is incurred. Gains or losses arising from changes in fair value are included in the Income Statement in the year in which they arise. Fair values are evaluated at frequent intervals Useful economic lives, amortisation and by an accredited external, independent valuer. impairment The useful lives of intangible assets are assessed as Investment properties are derecognised when either finite or infinite lives. Intangible assets with disposed, or permanently withdrawn from use because finite lives are amortised over the useful economic life no future economic benefits are expected. Any gains or and assessed for impairment whenever there is an losses on de-recognition or disposal are recognised in indication that the intangible asset may be impaired. the Income Statement in the year of de-recognition or disposal. The amortisation period and the amortisation method for an intangible asset with a finite useful life is Transfers are made to or from investment property reviewed at least at each financial year-end and such only when there is a change in use. For a transfer changes are treated as accounting estimates. The from investment property to owner occupied property amortisation expense on intangible assets with finite or inventory (WIP), the deemed cost for subsequent lives is recognised in the Income Statement. accounting is the fair value at the date of change in use. If owner occupied property becomes an investment Intangible assets with infinite useful lives are not property or inventory (WIP), the Group accounts for amortised but tested for impairment annually, or more such property in accordance with the policy stated frequently when an indication of impairment exists under property, plant and equipment up to the date either individually or at the cash-generating unit level. of change in use. Where Group companies occupy The useful life of an intangible asset with an infinite life is reviewed annually to determine whether infinite life
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Notes to the Financial Statements
assessment continues to be supportable. If not, the Software license change in the useful life assessment from infinite to Software license costs are recognised as an intangible finite is made on a prospective basis. asset and amortised over the period of the related license. Lease rights Lease rights acquired as part of a business combination, Brand Name are capitalised if it meets the definition of an intangible Brands acquired as part of a business combination, asset and the recognition criteria are satisfied. Leased are capitalised as Brand name, if the Brand meets the rights are amortised on a straight-line basis over their definition of an intangible assets and are tested for estimated useful life. impairment, annually or more frequently if the events or changes in the circumstances indicate that the carrying Present value of acquired in-force business (PVIB) value may be impaired. The present value of future profits on a portfolio of long term life insurance contracts as at the acquisition date is Customer list recognised as an intangible asset based on a valuation carried out by an independent actuary. Subsequent The present value of the income anticipated deriving to initial recognition, the intangible asset is carried at from repeat customer list of the leasing and hire cost less accumulated amortisation and accumulated purchase portfolio and registered tour agent list impairment losses. as at the acquisition date are recognised as an intangible asset based on a valuation carried out by an The PVIB is amortised over the average useful life of independent valuer. Subsequent to initial recognition, the related contracts in the portfolio. The amortisation the intangible asset is carried at cost less accumulated charge and any impairment losses would be recognised amortisation and accumulated impairment losses. in the consolidated Income Statement as an expense. Customer list recognised at the acquisition date will be Software amortised over the period interest income is anticipated to derive from repeat customers and reviewed annually Purchased software for any impairment in value. Purchased software is recognised as an intangible asset and is amortised on a straight line basis over its useful A summary of the policies applied to the group’s life. intangible assets are as follows;
Intangible Useful Life Acquired/ Internally Impairment testing generated
Goodwill Infinite Acquired annually or when an indication of impairment exists Lease Rights 25-88 years Acquired when an indication of impairment exists Purchased Software 3-5 years Acquired when an indication of impairment arise Present value of acquired 16 years Acquired when an indication of impairment exists in-force business (PVIB) Brand Name Infinite Acquired annually or when an indication of impairment exists Customer List 5 years Acquired when an indication of impairment exists
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Income Statement when the asset is derecognised.
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1.5.9 Business combinations & goodwill not fall within the scope of LKAS 39, it is measured in Business combinations are accounted for using the accordance with the appropriate SLFRS/LKAS. acquisition method of accounting. After initial recognition, goodwill is measured at cost The Group measures goodwill at the acquisition date less any accumulated impairment losses. Goodwill is as the fair value of the consideration transferred reviewed for impairment, annually or more frequently including the recognised amount of any non-controlling if the events or changes in the circumstances indicate interests in the acquiree, less the net recognised that the carrying value maybe impaired. amount (generally fair value) of the identifiable assets For the purpose of impairment testing, goodwill acquired and liabilities assumed, all measured as of the acquired in a business combination is, from the acquisition date. acquisition date, allocated to each of the Group’s cash When the fair value of the consideration transferred generating units that are expected to benefit from the including the recognised amount of any non-controlling combination, irrespective of whether other assets or interests in the acquiree is lower than the fair value of liabilities of the acquiree are assigned to those units. net assets acquired, a gain is recognised immediately in Impairment is determined by assessing the recoverable the Income Statement. amount of the cash-generating unit to which the The Group elects on a transaction by transaction basis goodwill relates. Where the recoverable amount of the whether to measure non-controlling interests at fair cash generating unit is less than the carrying amount, value, or at their proportionate share of the recognised an impairment loss is recognised. The impairment loss amount of the identifiable net assets, at the acquisition is allocated first to reduce the carrying amount of any date. Transaction costs, other than those associated goodwill allocated to the unit and then to the other with the issue of debt or equity securities, that the assets pro-rata to the carrying amount of each asset in Group incurs in connection with a business combination the unit. are expensed as incurred. Goodwill and fair value adjustments arising on the When the Group acquires a business, it assesses the acquisition of a foreign operation are treated as assets financial assets and liabilities assumed for appropriate and liabilities of the foreign operation and translated at classification and designation in accordance with the closing rate. the contractual terms, economic circumstances and Where goodwill forms part of a cash generating unit pertinent conditions as at the acquisition date. and part of the operation within that unit is disposed If the business combination is achieved in stages, the of, the goodwill associated with the operation disposed acquisition date fair value of the acquirer’s previously of is included in the carrying amount of the operation held equity interest in the acquiree is re measured to when determining the gain or loss on disposal of the fair value at the acquisition date through the Income operation. Goodwill disposed of in this circumstance is Statement. measured based on the relative values of the operation disposed of and the portion of the cash-generating unit Any contingent consideration to be transferred by the retained. acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to 1.5.10 Associates be an asset or liability, which is a financial instrument An associate is an entity over which the Group has and within the scope of LKAS 39, is measured at fair significant influence. Significant influence is the power value with changes in fair value either in the Income to participate in the financial and operating policy Statement or as a change to the Statement of Other decisions of the investee, but is not control or joint Comprehensive Income. If the contingent consideration control over those policies. is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does
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Notes to the Financial Statements
Associate companies of the Group which have been Upon loss of significant influence over the associate, accounted for under the equity method of accounting the Group measures and recognises any retained are: investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant Name of the Company Country of influence and the fair value of the retained investment Incorporation and proceeds from disposal is recognised in income statement. Abacus International Lanka (Pvt) Ltd Sri Lanka Nextage (Pvt) Ltd Sri Lanka The accounting policies of associate companies Gerry’s Softlogic (Pvt) Ltd Pakistan conform to those used for similar transactions of the Group. The consideration made in determining significant influence is similar to those necessary to determine Equity method of accounting has been applied for control over subsidiaries. The Group’s investments associate financial statements using their corresponding in its associates are accounted for using the equity / matching 12 month financial period. In the case of method. Under the equity method, the investment in associates, where the reporting dates are different to an associate is initially recognised at cost. The carrying Group reporting dates, adjustments are made for any amount of the investment is adjusted to recognise significant transactions or events up to 31 March. changes in the Group’s share of net assets of the associate since the acquisition date. Goodwill relating to 1.5.11 Foreign currency translation the associate is included in the carrying amount of the investment and is not tested for impairment individually. Foreign currency transactions and balances The consolidated financial statements are presented in The income statement reflects the Group’s share of Sri Lankan Rupees (Rs.), which is the holding company’s the results of operations of the associates. Any change functional and presentation currency. in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change The functional currency is the currency of the primary recognised directly in the equity of the associate, the economic environment in which the entities of the Group recognises its share of any changes, when Group operate. applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions All foreign exchange transactions are converted to between the Group and the associate is eliminated to functional currency, at the rates of exchange prevailing the extent of the interest in the associate. at the time the transactions are effected.
The aggregate of the Group’s share of profit or loss Monetary assets and liabilities denominated in foreign of an associate is shown on the face of the income currency are retranslated to functional currency statement outside operating profit and represents equivalents at the spot exchange rate prevailing at the profit or loss after tax and non-controlling interests in reporting date. the subsidiaries of the associate. After application of the equity method, the Group determines whether it Non-monetary items that are measured in terms of is necessary to recognise an impairment loss on its historical cost in a foreign currency are translated investment in its associate. At each reporting date, the using the exchange rates as at the dates of the initial Group determines whether there is objective evidence transactions. Non-monetary assets and liabilities are that the investment in the associate is impaired. If there translated using exchange rates that existed when the is such evidence, the Group calculates the amount of values were determined. The gain or loss arising on impairment as the difference between the recoverable translation of non-monetary items is treated in line with amount of the associate and its carrying value, and the recognition of gain or loss on changing fair value of then recognises the loss as ‘Share of results of equity the item. accounted investees’ in the income statement. Foreign exchange forward contracts are fair valued at each reporting date. Gains and losses arising from
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changes in fair value are included in the Income the deferred cumulative amount recognised in the Statement in the period in which they arise. Statement of Other Comprehensive Income relating to that particular foreign operation is recognised in the Foreign operations Income Statement. The Statement of Financial Position and Income The Group treated goodwill and any fair value Statement of overseas subsidiaries and associate which adjustments to the carrying amounts of assets and are deemed to be foreign operations are translated liabilities arising on the acquisition as assets and to Sri Lankan Rupees (Rs.) at the rate of exchange liabilities of the parent. Therefore, those assets and prevailing as at the reporting date and at the average liabilities are non-monetary items already expressed annual rate of exchange for the period respectively. in the functional currency of the parent and no further The exchange differences arising on the translation translation differences occur. are taken directly to the Statement of Other The exchange rates applicable during the period were Comprehensive Income. On disposal of a foreign entity, as follows:
Statement of Financial Position Income Statement (Avg. Rate) 31-03-2015 31-03-2014 31-03-2015 31-03-2014 Rs. Rs. Rs. Rs.
US Dollar 133.10 130.73 131.03 128.79 Australian Dollar 101.55 120.90 114.63 121.51 Pakistan Rupees 1.31 1.33 1.30 1.31
1.5.12 Impairment of non-financial assets An assessment is made at each reporting date as The Group assesses at each reporting date whether to whether there is any indication that previously there is an indication that an asset may be impaired. If recognised impairment losses may no longer exist any such indication exists, or when annual impairment or may have decreased. If such indication exists, testing for an asset is required, the Group makes an the recoverable amount is estimated. A previously estimate of the asset’s recoverable amount. An asset’s recognised impairment loss is reversed only if there has recoverable amount is the higher of an asset’s or cash been a change in the estimates used to determine the generating unit’s fair value less costs to sell and its asset’s recoverable amount since the last impairment value in use and is determined for an individual asset, loss was recognised. unless the asset does not generate cash inflows that If that is the case, the carrying amount of the asset is are largely independent of those from other assets increased to its recoverable amount. That increased or groups of assets. Where the carrying amount of amount cannot exceed the carrying amount that an asset exceeds its recoverable amount, the asset would have been determined, net of depreciation, is considered impaired and is written down to its had no impairment loss been recognised for the recoverable amount. In assessing value in use, the asset in prior years. Such reversal is recognised in estimated future cash flows are discounted to their the Income Statement unless the asset is carried at present value using a pre-tax discount rate that reflects revalued amount, in which case the reversal is treated current market assessments of the time value of money as a revaluation increase. After such a reversal, the and the risks specific to the asset. depreciation charge is adjusted in future periods to Impairment losses are recognised in the Income allocate the asset’s revised carrying amount, less any Statement, except that, impairment losses in respect residual value, on a systematic basis over its remaining of property, plant and equipment previously revalued useful life. The following criteria are also applied in are recognised against the revaluation reserve through assessing impairment of specific assets: the Statement of Other Comprehensive Income to the extent that it reverses a previous revaluation surplus.
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Notes to the Financial Statements
1.5.13 Impairment of goodwill Financial assets at fair value through profit or loss Goodwill is tested for impairment annually and when Financial assets at fair value through profit or loss circumstances indicate that the carrying value may be include financial assets held for trading and financial impaired. assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as Impairment is determined for goodwill by assessing held for trading if they are acquired for the purpose of the recoverable amount of each cash-generating selling or repurchasing in the near term. unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of Financial assets at fair value through profit or loss are the cash generating unit is less than their carrying carried in the Statement of Financial Position at fair amount, an impairment loss is recognised. Impairment value with changes in fair value recognised in finance losses relating to goodwill cannot be reversed in future income or finance costs in the Income Statement. periods. The Group evaluates its financial assets held for 1.5.14 Financial instruments - initial recognition and trading, other than derivatives, to determine whether subsequent measurement the intention to sell them in the near term is still appropriate. When the Group is unable to trade Financial assets these financial assets due to inactive markets and Initial recognition and measurement management’s intention to sell them in the foreseeable Financial assets within the scope of LKAS 39 are future significantly changes, the Group may elect to classified as financial assets at fair value through reclassify these financial assets in rare circumstances. profit or loss, loans and receivables, held-to-maturity The reclassification to loans and receivables, available- investments, available-for-sale financial assets, or as for-sale or held to maturity depends on the nature of derivatives designated as hedging instruments in an the asset. This evaluation does not affect any financial effective hedge, as appropriate. The Group determines assets designated at fair value through profit or loss the classification of its financial assets at initial using the fair value option at designation. recognition. Loans and receivables All financial assets are recognised initially at fair value Loans and receivables are non-derivative financial plus, in the case of assets not at fair value through profit assets with fixed or determinable payments that are not or loss, directly attributable transaction costs. Purchases quoted in an active market. After initial measurement, or sales of financial assets that require delivery of such financial assets are subsequently measured at assets within a time frame established by regulation amortised cost using the effective interest rate method or convention in the marketplace (regular way trades) (EIR), less impairment. Amortised cost is calculated are recognised on the trade date, i.e. the date that the by taking into account any discount or premium on Group commits to purchase or sell the asset. acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in The Group’s financial assets include cash and short- finance income in the Income Statement. The losses term deposits, trade and other receivables, loans and arising from impairment are recognised in the Income advances, Rental receivable on lease assets and hire Statement in finance costs. purchase, quoted and unquoted financial instruments and derivative financial instruments. Held to maturity investments Held to maturity investments non derivative financial Subsequent measurement assets with fixed or determinable payments and fixed The subsequent measurement of financial assets maturities are classified as held to maturity when the depends on their classification as follows: Group has the positive intention and ability to hold them to maturity. After initial measurement, held to maturity investments are measured at amortised cost using the effective interest method, less impairment. Amortised
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cost is calculated by taking into account any discount that has been recognised in equity is amortised to or premium on acquisition and fees or costs that are an the Income Statement over the remaining life of the integral part of the EIR. The EIR amortisation is included investment using the EIR. Any difference between in finance income in the Income Statement. The losses the new amortised cost and the expected cash flows arising from impairment are recognised in the Income is also amortised over the remaining life of the asset Statement in finance costs. using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is Available for sale financial investments reclassified to the Income Statement. Available for sale financial investments include equity and debt securities. Equity investments classified as 1.5.14.1 Derecognition available for sale are those, which are neither classified A financial asset (or, where applicable, a part of a as held for trading nor designated at fair value through financial asset or part of a group of similar financial profit or loss. Debt securities in this category are those assets) is derecognised when: which are intended to be held for an indefinite period of time and which may be sold in response to needs • the rights to receive cash flows from the asset have for liquidity or in response to changes in the market expired conditions. • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation After initial measurement, available for sale financial to pay the received cash flows in full without investments are subsequently measured at fair value material delay to a third party under a ‘pass through’ with unrealised gains or losses recognised as Other arrangement; and either Comprehensive Income in the available for sale reserve until the investment is derecognised, at which time the (a) the Group has transferred substantially all the risks cumulative gain or loss is recognised in other operating and rewards of the asset, or income, or determined to be impaired, at which time the cumulative loss is reclassified to the Income (b) the Group has neither transferred nor retained Statement in finance costs and removed from the substantially all the risks and rewards of the asset, available for sale reserve. Interest income on available but has transferred control of the asset. for sale debt securities is calculated using the effective interest method and is recognised in the Income When the Group has transferred its rights to receive Statement. cash flows from an asset or has entered into a pass through arrangement, and has neither transferred The Group evaluates its available for sale financial nor retained substantially all of the risks and rewards assets to determine whether the ability and intention of the asset nor transferred control of it, the asset is to sell them in the near term is still appropriate. When recognised to the extent of the Group’s continuing the Group is unable to trade these financial assets due involvement in it. to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the In that case, the Group also recognises an associated Group may elect to reclassify these financial assets liability. The transferred asset and the associated liability in rare circumstances. Reclassification to loans and are measured on the basis that reflects the rights and receivables is permitted when the financial assets meet obligations that the Group has retained. the definition of loans and receivables and the Group has the intent and ability to hold these assets for the Continuing involvement that takes the form of a foreseeable future or until maturity. Reclassification to guarantee over the transferred asset is measured at the the held to maturity category is permitted only when lower of the original carrying amount of the asset and the entity has the ability and intention to hold the the maximum amount of consideration that the Group financial asset accordingly. could be required to repay.
For a financial asset reclassified out of the available for sale category, any previous gain or loss on that asset
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Notes to the Financial Statements
1.5.14.2 Impairment of financial assets The carrying amount of the asset is reduced through The Group assesses at each reporting date whether the use of an allowance account and the amount of the there is any objective evidence that a financial asset or loss is recognised in the Income Statement. Interest a group of financial assets is impaired. A financial asset income continues to be accrued on the reduced carrying or a group of financial assets is deemed to be impaired amount and is accrued using the rate of interest used if, and only if, there is objective evidence of impairment to discount the future cash flows for the purpose of as a result of one or more events that has occurred measuring the impairment loss. The interest income after the initial recognition of the asset (an incurred is recorded as part of finance income in the Income ‘loss event’) and that loss event has an impact on the Statement. estimated future cash flows of the financial asset or the Loans together with the associated allowance are group of financial assets that can be reliably estimated. written off when there is no realistic prospect of future Evidence of impairment may include indications that the recovery and all collateral has been realised or has been debtors or a group of debtors is experiencing significant transferred to the Group. If, in a subsequent year, the financial difficulty, default or delinquency in interest or amount of the estimated impairment loss increases principal payments, the probability that they will enter or decreases because of an event occurring after the bankruptcy or other financial reorganisation and where impairment was recognised, the previously recognised observable data indicate that there is a measurable impairment loss is increased or reduced by adjusting decrease in the estimated future cash flows, such as the allowance account. changes in arrears or economic conditions that correlate If a future write off is later recovered, the recovery is with defaults. credited to finance costs in the Income Statement.
Financial assets carried at amortised cost Available for sale financial investments For financial assets carried at amortised cost, the Group first assesses whether the objective evidence For available for sale financial investments, the Group of impairment exists individually for financial assets assesses at each reporting date whether there is that are individually significant, or collectively for objective evidence that an investment or a group of financial assets that are not individually significant. If investments is impaired. the Group determines that no objective evidence of In the case of equity investments classified as available impairment exists for an individually assessed financial for sale, objective evidence would include a significant asset, whether significant or not, it includes the asset or prolonged decline in the fair value of the investment in a group of financial assets with similar credit risk below its cost. characteristics and collectively assesses them for impairment. Assets that are individually assessed ‘Significant’ is evaluated against the original cost of the for impairment and for which an impairment loss is, investment and ‘prolonged’ against the period in which or continues to be, recognised are not included in a the fair value has been below its original cost. Where collective assessment of impairment. there is evidence of impairment, the cumulative loss measured as the difference between the acquisition If there is objective evidence that an impairment loss cost and the current fair value, less any impairment loss has been incurred, the amount of the loss is measured on that investment previously recognised in the Income as the difference between the assets carrying amount Statement is removed from the Statement of Other and the present value of estimated future cash flows Comprehensive Income and recognised in the Income (excluding future expected credit losses that have not Statement. Impairment losses on equity investments yet been incurred). The present value of the estimated are not reversed through the Income Statement; future cash flows is discounted at the financial asset’s increases in their fair value after impairments are original effective interest rate. If a loan has a variable recognised directly in the Statement of Other interest rate, the discount rate for measuring any Comprehensive Income. impairment loss is the current effective interest rate.
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In the case of debt instruments classified as available- cost using the effective interest rate method. Gains for-sale, impairment is assessed based on the same and losses are recognised in the Income Statement criteria as financial assets carried at amortised cost. when the liabilities are derecognised as well as through However, the amount recorded for impairment is the the Effective Interest Rate method (EIR) amortisation cumulative loss measured as the difference between process. the amortised cost and the current fair value, less any impairment loss on that investment previously Amortised cost is calculated by taking into account any recognised in the Income Statement. discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation Future interest income continues to be accrued based is included in finance costs of the Income Statement. on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows Financial guarantee contracts for the purpose of measuring the impairment loss. The Financial guarantee contracts issued by the Group are interest income is recorded as part of finance income. those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the If, in a subsequent year, the fair value of a debt specified debtor fails to make a payment when due instrument increases and the increase can be in accordance with the terms of a debt instrument. objectively related to an event occurring after the Financial guarantee contracts are recognised initially impairment loss was recognised in the Income as a liability at fair value, adjusted for transaction costs Statement, the impairment loss is reversed through the that are directly attributable to the issuance of the Income Statement. guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required 1.5.15. Financial liabilities to settle the present obligation at the reporting date and Initial recognition and measurement the amount recognised less cumulative amortisation. Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through 1.5.15.1 Derecognition profit or loss, loans and borrowings, or as derivatives A financial liability is derecognised when the obligation designated as hedging instruments in an effective under the liability is discharged or cancelled or expires. hedge, as appropriate. The Group determines the classification of its financial liabilities at initial When an existing financial liability is replaced by another recognition. from the same lender on substantially different terms, or the terms of an existing liability are substantially All financial liabilities are recognised initially at fair modified, such an exchange or modification is treated value and, in the case of loans and borrowings, carried as a derecognition of the original liability and the at amortised cost. This includes directly attributable recognition of a new liability, and the difference in transaction costs. the respective carrying amounts is recognised in the Income Statement. The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, Investment sold together with a deep in the money financial guarantee contracts, and derivative financial put option are not derecognised from the Statement instruments. of Financial Position as the Group retains substantially all of the risks and rewards of ownership. The Subsequent measurement corresponding cash received is recognised in the The measurement of financial liabilities depends on Consolidated Statement of Financial Position as their classification as follows: an asset with a corresponding obligation to return it, including accrued interest as a financial liability, reflecting the transaction’s economic substance as a Loans and borrowings loan to the Group. The difference between the sale and After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised
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Notes to the Financial Statements
put option exercise price is treated as interest expense Any gains or losses arising from changes in the fair and is accrued over the life of agreement using the EIR. value of derivatives are taken directly to the Income Statement. 1.5.16 Offsetting of financial instruments Financial assets and financial liabilities are offset and Derivative financial instruments and hedging the net amount reported in the Consolidated Statement activities of Financial Position if, and only if, there is a currently Derivatives are initially recognised at fair value on enforceable legal right to offset the recognised the date a derivative contract is entered into and are amounts and there is an intention to settle on a net subsequently remeasured at their fair value. The basis, or to realise the assets and settle the liabilities method of recognising the resulting gain or loss simultaneously. depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item 1.5.17 Fair value of financial instruments being hedged. The group designates certain derivatives The fair value of financial instruments that are traded either, in active markets at each reporting date is determined • hedges of the fair value of recognised assets or by reference to quoted market prices, without any liabilities or a firm commitment (fair value hedge) deduction for transaction costs. • hedges of a particular risk associated with a For financial instruments not traded in an active market, recognised asset or liability or a highly probable the fair value is determined using appropriate valuation forecast transaction (cash flow hedge) techniques. Such techniques may include using • hedges of a net investment in a foreign operation recent arm’s length market transactions; reference (net investment hedge) to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis The Group documents at the inception of the or other valuation models. transaction the relationship between hedging instruments and the hedged items, as well as its risk An analysis of fair values of financial instruments management objectives and strategies for undertaking and further details as to how they are measured are various hedging transactions. The company also provided in note 14 documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that 1.5.18 Derivative financial instruments are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of Initial recognition and subsequent measurement hedged items. The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps The fair values of various derivative instruments and forward commodity contracts to hedge its foreign used for hedging purposes are disclosed in note currency risks, interest rate risks and commodity price 32. Movements on the hedging reserve on Other risks, respectively. Such derivative financial instruments Comprehensive Income Statement (OCI) are shown in are initially recognised at fair value on the date on the same note. The fair value of a hedging derivative which a derivative contract is entered into and are is classified as a non current asset or liability when the subsequently remeasured at fair value. Derivatives are remaining hedged item is more than 12 months and as carried as financial assets when the fair value is positive a current asset or liability when the remaining maturity and as financial liabilities when the fair value is negative. of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. The fair value of commodity contracts that meet the definition of a derivative as defined by LKAS 39 are Cash flow hedge recognised in the Income Statement in cost of sales. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in Statement of Other
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Comprehensive Income (OCI). The gain or loss in However, as per the payment of Gratuity Act No. 12 of relation to ineffective portion is recognised immediately 1983 this liability only arises upon completion of 5 years in the income statement. of continued service.
Amounts accumulated in equity are reclassified to profit The gratuity liability is not externally funded. or loss in the periods when the hedged item affects profit or loss. When a hedging instrument expires or 1.5.22 Defined contribution plan - Employees’ Provident is sold, or when a hedge no longer meets the criteria Fund and Employees’ Trust Fund for hedge accounting, any cumulative gain or loss Employees are eligible for Employees’ Provident Fund existing in equity at that time remains in equity and is contributions and Employees’ Trust Fund contributions recognised when the forecast transaction ultimately in line with respective statutes and regulations. The recognised in the income statement. When the forecast companies contribute the defined percentages of gross transaction is no longer to expected to occur, the emoluments of employees to an approved Employees’ cumulative gain or loss that was reported in equity is Provident Fund and to the Employees’ Trust Fund immediately transferred to the Income Statement. respectively, which are externally funded.
1.5.19 Inventories 1.5.23 Insurance contract liabilities - Life Inventories are valued at the lower of cost and net Life insurance liabilities are recognised when contracts realisable value. Net realisable value is the estimated are entered into and premiums are received. The selling price less estimated costs of completion and the liability is determined as the sum of the discounted estimated costs necessary to make the sale. value of the expected future benefits, claims handling and policy administration expenses, policyholder The costs incurred in bringing inventories to its present options and guarantees and investment income from location and condition, are accounted for as follows: assets backing such liabilities, which are directly • Finished goods - direct materials, direct labour and an related to the contract, less the discounted value appropriate proportion of fixed overheads based on of the expected gross premiums that would be normal operating capacity required to meet the future cash outflows based on the valuation assumptions used. The liability is either • Other inventories - at actual cost based on current assumptions or calculated using the assumptions established at the time the contract was 1.5.20 Cash and cash equivalents issued, in which case a margin for risk and adverse Cash and short term deposits in the statement of deviation is generally included. Furthermore, the liability financial position comprise cash at banks and in hand for life insurance contracts comprises the provision for and short term deposits with a maturity of three months unearned premiums and unexpired risks, as well as for or less. claims outstanding, which includes an estimate of the incurred claims that have not yet been reported to the For the purpose of the cash flow statement, cash company. Adjustments to the liabilities at each reporting and cash equivalents consist of cash and short term date are recorded in the Statement of Comprehensive deposits as defined above, net of outstanding bank Income. Profits originated from margins of adverse overdrafts. deviations on run off contracts are recognised in the Statement of Comprehensive Income over the life of 1.5.21 Defined benefit plan - Gratuity the contract, whereas losses are fully recognised in the The liability recognised in the Statement of Financial Statement of Comprehensive Income during the first Position is the present value of the defined benefit year of run off. The liability is derecognised when the obligation at the reporting date using the projected unit contract expires, is discharged or is cancelled. credit method. Any actuarial gains or losses arising are recognised immediately in the Other Comprehensive At each reporting date, an assessment is made of income. whether the recognised life insurance liabilities are adequate, net of related PVIF (Present Value Interest
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Notes to the Financial Statements
Factor) and DAC (Deferred Acquisition Costs), by 1.5.25 Provisions, contingent assets and contingent using an existing liability adequacy test. The liability liabilities value is adjusted to the extent that it is insufficient to Provisions are recognised when the Group has a meet future benefits and expenses. Any inadequacy is present obligation (legal or constructive) as a result of a recorded in the Statement of Comprehensive Income, past event, it is probable that an outflow of resources initially by impairing PVIF and DAC and, subsequently, embodying economic benefits will be required to settle by establishing a technical reserve for the remaining the obligation and a reliable estimate can be made of loss. In subsequent periods, the liability for a block of the amount of the obligation. Where the Group expects business that has failed the adequacy test is based on some or all of a provision to be reimbursed, for example the assumptions that are established at the time of under an insurance contract, the reimbursement is the loss recognition. The assumptions do not include a recognised as a separate asset but only when the margin for adverse deviation. reimbursement is virtually certain. The expense relating to any provision is presented in the Income Statement 1.5.24 Insurance contract liabilities – Non life net of any reimbursement. Non life insurance contract liabilities are recognised when contracts are entered into and premiums are If the effect of the time value of money is material, charged. These liabilities, known as the policy liability provisions are discounted using a current pre-tax rate provisions include the premium and claim liabilities. that reflects, where appropriate, the risks specific to the The premium liabilities relate to policies for which the liability. Where discounting is used, the increase in the premium has been received but the exposure has not provision due to the passage of time is recognised as a fully expired, while the claim liabilities relate to claims finance cost. that have been incurred but not yet settled. All contingent liabilities are disclosed as a note to the The provision for unearned premiums represents financial statements unless the outflow of resources is premiums received for risks that have not yet expired. remote. A contingent liability recognised in a business Generally the reserve is released over the term of the combination is initially measured at its fair value. contract and is recognised as premium income. Subsequently, it is measured at the higher of:
The claim liabilities are based on the estimated ultimate • the amount that would be recognised in accordance cost of all claims incurred but not settled at the with the general guidance for provisions above (LKAS Statement of Financial Position date, whether reported 37) or or not, with a reduction for the expected value of • the amount initially recognised less, when salvage and other recoveries. appropriate, cumulative amortisation recognised Delays can be experienced in the notification and in accordance with the guidance for revenue settlement of claims, therefore, the ultimate cost of recognition (LKAS 18) these cannot be known with certainty at the Statement Contingent assets are disclosed, where inflow of of Financial Position date. The liability is calculated at economic benefit is probable. the reporting date using a range of standard actuarial claim projection techniques, based on empirical data and current assumptions that may include a margin 1.5.26 SEGMENT INFORMATION for adverse deviation. No provision for equalisation or Operating segments catastrophe reserves is recognised. The liabilities are The Group’s internal organisation and management is derecognised when the contract expires, is discharged structured based on individual products and services or is cancelled. which are similar in nature and process and where the risk and return are similar. The operating segments The calculation may use current estimates of future represent this business structure. contractual cash flows to determine the investment return expected to arise on assets relating to the relevant non life insurance technical provisions.
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Segment information 1.6.2 Impairment of non financial assets Segment information has been prepared in conformity Impairment exists when the carrying value of an asset with the accounting policies adopted for preparing and or cash generating unit exceeds its recoverable amount, presenting the consolidated financial statements of the which is the higher of its fair value less costs to sell Group. and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active market, in an arm’s length transaction, of similar assets 1.6 SIGNIFICANT ACCOUNTING JUDGMENTS, or observable market prices less incremental costs for ESTIMATES AND ASSUMPTIONS disposing of the asset. The value in use calculation is The preparation of the financial statements of the based on a discounted cash flow model. The cash flows Group requires the management to make judgments, are derived from the budget for the next five years and estimates and assumptions, which may affect the do not include restructuring activities that the Group is amounts of income, expenditure, assets , liabilities and not yet committed to or significant future investments the disclosure of contingent liabilities, at the end of the that will enhance the asset’s performance of the cash reporting period. In the process of applying the Group’s generating unit being tested. The recoverable amount accounting policies, the key assumptions made relating is most sensitive to the discount rate used for the to the future and the sources of estimation at the discounted cash flow model as well as the expected reporting date together with the related judgments that future cash inflows and the growth rate used for have a significant risk of causing a material adjustment extrapolation purposes. The key assumptions used to to the carrying amounts of assets and liabilities within determine the recoverable amounts for the different the financial year are discussed below. cash generating units, are further explained in note 18.1.
1.6.1 Valuation of property, plant and equipment and 1.6.3 Fair value of financial instruments investment property Where the fair value of financial assets and financial The Group measures land and buildings at revalued liabilities recorded in the Statement of Financial Position amounts with changes in fair value being recognised in cannot be derived from active markets, their fair value other comprehensive income and in the statement of is determined using valuation techniques including equity. In addition, it carries its investment properties at the discounted cash flow model. The inputs to these fair value, with changes in fair value being recognised in models are taken from observable markets where the income statement. The Group engaged independent possible. valuation experts to determine fair value of investment properties and land and buildings as at 31 March 2015. Where this is not feasible, a degree of judgment is required in establishing fair values. The judgments The valuer has used valuation techniques such as include considerations of inputs such as liquidity risk, market values and discounted cash flow methods credit risk and volatility. Changes in assumptions about where there was a lack of comparable market data these factors could affect the reported fair value of available based on the nature of the property. financial instruments, are further explained in note 14
The determined fair values of investment properties, 1.6.4 Taxes using investment method, are most sensitive to the estimated yield as well as the long term occupancy rate. The Group is subject to income tax and other taxes The methods used to determine the fair value of the including VAT. Significant judgment was required to investment properties, are further explained in note 14. determine the total provision for current, deferred and other taxes due to the uncertainties that exists with respect to the interpretation of the applicability of tax laws, at the time of the preparation of these financial statements.
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Notes to the Financial Statements
Uncertainties also exist with respect to the valuation assumptions used. The liability is computed interpretation of complex tax regulations and the based on IBSL specified guidelines and current amount and timing of future taxable income. Given the assumptions which vary based on the contract type. wide range of business relationships and the long- Furthermore, adjustments are performed to capture term nature and complexity of existing contractual likely liability that may arise due to currently lapsed agreements, differences arising between the actual contracts reviving in the future. results and the assumptions made, or future changes to such assumptions, could necessitate future The minimum mandated amount, which are to be adjustments to tax income and expense already paid to policyholders plus and declared / undeclared recorded. Where the final tax outcome of such matters additional benefits, are recorded in liabilities. is different from the amounts that were initially recorded, such differences will impact the income The liability is derecognised when the contract expires, and deferred tax amounts in the period in which the is discharged or cancelled. determination is made. At each reporting date, an assessment is made of The Group has tax losses relate to subsidiaries that whether the recognised life insurance liability is have a history of losses that do not expire and may adequate by using an existing liability adequacy test. not be used to offset other tax liabilities and where the subsidiaries have no taxable temporary differences nor 1.6.7 Valuation of Insurance Contract liabilities – General any tax planning opportunities available that could partly Insurance support the recognition of these losses as deferred tax General insurance contract liabilities include the assets. Further details on taxes are disclosed in note outstanding claims provision (Reserve for gross 10.4 in the financial statements. outstanding and incurred but not reported, and incurred but not reported enough – IBNR / IBNER) and the 1.6.5 Employee benefit liability provision for unearned premium and the provision for The employee benefit liability of the Group is based premium deficiency. on the actuarial valuation carried out by independent actuarial specialist. The actuarial valuations involve Gross claims payable including IBNR making assumptions about discount rates and future The outstanding claims provision is based on the salary increases. The complexity of the valuation, the estimated ultimate cost of all claims incurred but not underlying assumptions and its long term nature, the settled at the reporting date, whether reported or not, defined benefit obligation is highly sensitive to changes together with related claims handling cost and reduction in these assumptions. All assumptions are reviewed for expected value of salvage and other recoveries. at each reporting date. Details of the key assumptions Delays can be experienced in the notification and used in the estimates are contained in note 35. settlement of certain types of claims, therefore the ultimate cost of these cannot be known with certainty 1.6.6 Valuation of Insurance Contract Liabilities – Life at reporting date. The liability is calculated at the Insurance reporting date using range of slandered actuarial claim Life Insurance liabilities are recognised when contracts projection techniques, based on empirical data and are entered into and premiums are charged. These current assumptions that may include a margin for liabilities are measured by suing the Net Premium adverse deviation. The liability is not discounted for the Valuation (NPV) method as specified by the Insurance time value of money. No provision for equalisation or Board of Sri Lanka (IBSL) based on the recommendation catastrophe reserves is recognised. of the Independent Consultant Actuary. The liabilities are derecognised when the obligation to The liability is determined as the sum of the discounted pay a claim expires, is discharged or is cancelled. value of expected future benefits, less the discounted IBNR reserve is determined by an independent external value of the expected future premiums that would be actuary. required to meet the future cash outflows based on the
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1.6.8 Liability adequacy test (LAT) - Life insurance SLFRS 11 - Joint Arrangements SLFRS 11 Replaces At each reporting date, an assessment is made of LKAS 31 whether the recognised life insurance liabilities are Interests in Joint Ventures and SIC-13 Jointly- adequate by using an existing liability adequacy test as controlled Entities Non-monetary Contributions by laid out under SLFRS 4. The liability value is adjusted to Venturers. SLFRS 11 removes the option to account the extent that it is insufficient to meet future benefits for jointly controlled entities (JCEs) using proportionate and expenses. In performing the adequacy test, consolidation. Instead, JCEs that meet the definition of current best estimates of future contractual cash flows, a joint venture under SLFRS 11 must be accounted for including related cash flows such as claims handling and using the equity method. No impact on application of policy administration expenses, policyholder options and this standard to the Group. guarantees, as well as investment income from assets backing such liabilities, are used. A number of valuation SLFRS 12 - Disclosure of Interests in Other Entities methods are applied, including discounted cash flows SLFRS 12 sets out the requirements for disclosures to the extent that the test involves discounting of cash relating to an entity’s interests in subsidiaries, joint flows, the interest rate applied based on management’s arrangements, associates and structured entities. The prudent expectation of current market interest rates. requirements in SLFRS 12 are more comprehensive than the previously existing disclosure requirements Any deficiencies shall be recognised in the Income for subsidiaries. For example, where a subsidiary is Statement by setting up a provision for liability controlled with less than a majority of voting rights. adequacy. While the Group has subsidiaries with material non- controlling interests, there are no unconsolidated 1.7 CHANGES IN ACCOUNTING POLICIES structured entities. SLFRS 12 disclosures are provided The accounting policies adopted by the Group are in notes 44 to the Financial Statements. consistent with those used in the previous year except for the following SLFRSs with effect from current year. SLFRS 13 - Fair Value Measurement SLFRS 13 establishes a single source of guidance • SLFRS 10 Consolidated Financial Statements under SLFRS for all fair value measurements. SLFRS 13 • SLFRS 11 Joint Arrangements does not change when an entity is required to use fair • SLFRS 12 Disclosure of Interests in Other Entities value, but rather provides guidance on how to measure fair value under SLFRS. SLFRS 13 defines fair value • SLFRS 13 Fair Value Measurement as an exit price. As a result of the guidance in SLFRS • LKAS 1 Presentation of Financial Statements 13, the Group reassessed its policies for measuring (amendments) fair values. Application of SLFRS 13 has not materially impacted the fair value measurements of the Group. SLFRS 10 - Consolidated Financial Statements Additional disclosures where required, are provided in With the adoption of SLFRS 10 in Sri Lanka with the individual notes relating to the assets and liabilities effect from 1st January 2014, the Group changed its whose fair values were determined. accounting policy for determining whether an investee is a subsidiary based on the definition of control. The LKAS 1 Presentation of Items of Other Group considers that control exists when the company Comprehensive Income has power over an investee; has exposure or rights to Amendments to LKAS 1 The amendments to LKAS variable returns from its involvement with the investee 1 introduce a grouping of items presented in Other and when it has ability to use its power over the Comprehensive Income. Items that will be reclassified investee to affect the amount of the Company’s returns. (‘recycled’) to Income Statement at a future point in time (e.g., net loss or gain on AFS financial assets) have to be presented separately from items that will not be reclassified (e.g., revaluation of land). The amendments
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Notes to the Financial Statements
affect presentation only and have no impact on the SLFRS 15 Revenue from Contracts with Customers Group’s financial position or performance. SLFRS 15 establishes a new five step model that will apply to revenue arising from contracts with customers. 1.8 COMPARATIVE INFORMATION Under SLFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity The presentation and classification of the financial expects to be entitled in exchange for transferring statements of the previous years have been amended, goods or services to a customer. The principles in where relevant for better presentation and to be SLFRS 15 provide a more structured approach to comparable with those of the current year. measuring and recognising revenue.
2 SRI LANKA ACCOUNTING STANDARDS The new revenue standard is applicable to all entities (SLFRS/LKAS) ISSUED BUT NOT YET and will supersede all current revenue recognition EFFECTIVE requirements under SLFRS 15. Either a full or modified retrospective application is required for annual periods The following SLFRS have been issued by the Institute beginning on or after 1 January 2018 with early adoption of Chartered Accountants of Sri Lanka that have an permitted. The Group is currently assessing the impact effective date in the future and have not been applied of SLFRS 15 and plans to adopt the new standard on in preparing these financial statements. Those SLFRS the required effective date. will have an effect on the accounting policies currently adopted by the Group and may have an impact on the future financial statements.
SLFRS 9 –Financial Instruments: Classification and Measurement SLFRS 9, as issued reflects the first phase of work on replacement of LKAS 39 and applies to classification and measurement of financial assets and liabilities.
This standard was originally effective for annual periods commencing on or after 01 January 2018. However the effective date has been deferred subsequently.
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3 REVENUE In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Sale of goods 22,312,130,430 13,404,473,971 - - Rendering of services 17,251,753,680 15,841,961,613 416,018,805 355,554,590 39,563,884,110 29,246,435,584 416,018,805 355,554,590
3.1 Business segment analysis In Rs. Group For the year ended 31 March 2015 2014
Information Technology 9,251,981,418 5,982,330,875 Leisure 628,053,779 91,747,256 Retail 12,334,289,525 7,538,707,859 Automobile 743,443,707 423,571,341 Financial Services 8,001,764,086 7,457,509,687 Healthcare Services 8,591,960,503 7,745,800,066 Other 12,391,092 6,768,500 39,563,884,110 29,246,435,584
4 DIVIDEND INCOME In Rs. Company For the year ended 31 March 2015 2014
Income from investment in related parties 961,271,765 403,985,123 961,271,765 403,985,123
5 OTHER OPERATING INCOME In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Profit on sale of property, plant & equipment 24,486,006 34,808,911 6,368,059 16,622,339 Profit on disposal of investments 644,439,532 222,795,432 80,981,615 56,984,480 Exchange gain/ (loss) 80,712,189 (64,914,308) - - Fees received 108,101,975 101,809,356 - - Commission income 41,704,900 42,404,017 10,698,225 15,472,224 Sundry income 263,116,434 160,354,976 10,063,573 5,453,124 1,162,561,036 497,258,384 108,111,472 94,532,167
6 FINANCE INCOME In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Interest income 608,924,563 654,420,002 121,757,916 353,712,620 Finance income on other financial instruments 513,248,702 502,554,988 79,782,699 2,184,426 1,122,173,265 1,156,974,990 201,540,615 355,897,046
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Notes to the Financial Statements
7 FINANCE EXPENSES In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Interest expense on borrowings 1,982,452,160 2,347,217,455 378,824,446 885,700,435 Finance cost on other financial instruments 610,418,341 212,068,316 622,203,634 88,027,397 Other finance expenses 99,939,053 100,740,831 5,875,077 6,754,695 2,692,809,554 2,660,026,602 1,006,903,157 980,482,527
8 PROFIT/(LOSS) BEFORE TAX Profit/ (loss) before tax is stated after charging all expenses including the following;
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Remuneration to executive and non executive Directors 203,187,470 174,197,317 19,020,680 37,260,000 Auditors' remuneration - Audit 16,933,012 15,114,223 1,684,320 1,452,000 - Non audit 5,693,497 6,150,404 670,900 176,901 Cost of defined employee benefit - Defined benefit plan cost 140,086,952 105,555,003 6,520,701 6,319,025 - Defined contribution plan cost - EPF/ETF 493,632,066 385,202,893 21,636,469 21,225,823 Staff expenses 4,723,500,928 3,065,956,858 169,320,283 141,837,978 Depreciation of property, plant and equipment 1,189,997,919 901,836,851 24,239,655 25,452,041 Amortisation of intangible assets 248,049,626 204,045,351 2,624,845 2,221,133 Amortisation of lease rentals paid in advance 1,036,939 1,036,927 - - Exchange losses/ (gains) (80,712,189) 64,914,308 - - Donations 16,079,974 4,717,296 10,058,750 107,500 Provisions for/ write off of impaired receivables 96,689,666 34,210,138 61,416,769 4,577,366 Provision for impairment of inventories 190,001,431 49,765,780 - - Impairment and derecognition of property, plant and equipment 1,526,928 29,691,599 995,249 - Impairment and derecognition of intangible assets 27,614,808 - - -
9 CHANGE IN LIFE INSURANCE CONTRACT LIABILITIES The results of Asian Alliance Insurance life business segment is consolidated line by line into the Group’s consolidated income statement. The change in life insurance contract liabilities represents the transfer to the Life Fund, the difference between all income and expenditure attributable to life policy holders during the year.
In Rs. Group For the year ended 31 March 2015 2014
Revenue 2,853,600,448 2,375,811,906 Cost of sales (1,504,101,485) (1,182,119,230) Gross profit 1,349,498,963 1,193,692,676 Operating expenses including distribution and administration expenses (1,752,626,994) (1,400,622,644) Net finance income 781,263,011 704,975,888 Profit attributable to shareholders 566,214,000 468,500,000 Change in insurance contract liabilities 944,348,980 966,545,920
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10 TAX EXPENSE In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Current income tax Current tax charge 359,033,601 336,526,604 11,065,070 1,195,889 Under provision of income tax of previous years 40,027,509 17,018,719 28,597,314 - 10% Withholding tax on inter company dividends 145,083,916 20,106,273 - - ESC written-off - 1,949,573 - - Deferred income tax Relating to origination and reversal of temporary differences (94,527,000) (126,437,356) (68,079,885) - 449,618,026 249,163,813 (28,417,501) 1,195,889
10.1 Reconciliation between current tax charge and the accounting profit
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Profit/ (loss) before tax 2,268,699,917 1,257,998,838 291,894,580 (22,339,263) Dividend income from group companies 1,653,064,339 1,191,449,827 - - Share of results of equity accounted investees (5,290,016) (13,280,969) - - Other consolidation adjustments 138,208,837 384,653,543 - - Profit after adjustment 4,054,683,077 2,820,821,239 291,894,580 (22,339,263) Exempt profits (638,349,692) (698,473,529) - - Profits not charged to income tax (587,882,106) (358,210,653) (121,718,501) (141,222,563) Resident dividend (1,794,919,435) (1,337,739,381) (961,531,131) (403,985,123) Adjusted accounting profit chargeable to income taxes 1,033,531,844 426,397,676 (791,355,052) (567,546,949) Deductible expenses (2,541,925,794) (742,172,003) (119,612,903) (61,534,177) Non deductible expenses 3,323,906,278 1,009,841,911 966,243,610 92,911,146 Other source of income 25,834,322 358,210,653 5,521,435 6,570,818 Set off against tax losses (255,496,411) (305,695,503) (21,278,981) (2,299,786) Other reductions (103,501,877) (4,569,249) - - Taxable income 1,482,348,362 742,013,485 39,518,108 (531,898,948)
10.2 Reconciliation between tax expense and the product of accounting profit
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Tax effect on chargeable profits 120,638,635 383,222,879 (220,033,413) 1,839,829 Tax effect on non deductible expenses 678,193,423 160,965,349 270,548,210 - Tax effect on deductible expenses (442,711,142) (212,199,054) (39,449,727) (643,940) Under/ (over) provision for previous years 40,027,509 17,018,719 28,597,314 - Other income based taxes ESC - 1,949,573 - - 10% WHT on inter company dividends 145,083,916 20,106,273 - - Current and deferred tax share of equity accounted investees 2,912,685 4,537,430 - - Total income tax expense 544,145,026 375,601,169 39,662,384 1,195,889
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Notes to the Financial Statements
10.2 Reconciliation between tax expense and the product of accounting profit
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Income tax charged at Standard rate of 28% 268,002,289 250,461,453 11,065,070 1,195,889 Concessionary rate of 12% 88,118,629 81,527,721 - - Under/ (over) provision for previous years 40,027,509 17,018,719 28,597,314 - Charge for the year 396,148,427 349,007,893 39,662,384 1,195,889 Other income based taxes ESC - 1,949,573 - - 10% WHT on inter company dividends 145,083,916 20,106,273 - - Current and deferred tax share of equity accounted investees 2,912,685 4,537,430 - - Total income tax expense 544,145,028 375,601,169 39,662,384 1,195,889
Group tax expense is based on the taxable profit of individual companies within the Group. At present the tax laws of Sri Lanka do not provide for Group taxation.
10.3 Deferred tax charge / (release)
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Income statement Deferred tax expense arising from Accelerated depreciation for tax purposes 151,515,976 49,858,092 6,511,796 - Revaluation of investment property to fair value (3,345,592) (5,433,565) 36,995,098 - Employee benefit liabilities (2,343,356) (14,177,521) (8,587,525) - Benefit arising from tax losses (194,432,183) (123,427,648) (86,540,231) - Others (45,921,845) (33,256,714) (17,196,695) - (94,527,000) (126,437,356) (68,817,557) -
Other comprehensive income Deferred tax expense arising from revaluation of land and building to fair value 46,880,016 13,614,458 - - Deferred tax expense arising from actuarial gains/ (loss) on retirement benefits (7,510,356) 1,831,292 - - Share of associate company deferred tax 41,864 (23,870) - - 39,411,524 15,421,880 - -
Deferred tax has been computed at 28% for all standard rate companies (including listed companies), and at 12% for Leisure sector companies & Healthcare sector companies and at rates as disclosed in notes 10.5.
10.4 Tax losses carried forward
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Tax losses brought forward 7,849,400,321 6,921,859,196 1,463,202,788 929,751,347 Adjustments on finalisation of liability 945,895,734 (968,288) (16,436,697) (418,753) Acquisition through business combinations 63,492,085 - - - Tax losses arising during the year 2,065,672,968 1,234,204,916 - 536,169,980 Utilisation of tax losses (255,496,411) (305,695,503) (21,278,981) (2,299,786) 10,668,964,697 7,849,400,321 1,425,487,110 1,463,202,788
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10.5 Applicable rates of income tax The tax liability of resident companies are computed at the standard rate of 28% except for the following companies which enjoy full or partial exemptions and concessions.
Exemptions/ concessions granted under the Board of Investment Law/ Inland Revenue Act
Company Basis Exemption or Period concessions
Healthcare sector Providing healthcare 12% Open ended (except companies enjoy full services exemptions) Asiri Surgical Hospital PLC -do- Exempt 10 years from 2004 (expired on 31 December 2014) Central Hospital Ltd -do- Exempt 8 years from 1st year of profit or 2 years from commencement of operation whichever is earlier (from FY 2012/13 onwards) Asiri Hospital Matara (Pvt) Ltd -do- Exempt 8 years from March 2008 Softlogic City Hotels (Pvt) Ltd Construction of tourist Exempt 7 Years from 1st year of profit or 2 years from hotel commencement of operation whichever is earlier Ceysand Resorts Ltd Promotion of tourism 12% Open ended Softlogic BPO Services (Pvt) Ltd Providing IT services Exempt 6 years from 1st year of profit or 2 years from commencement of operation whichever is earlier
Income tax rates of off-shore subsidiaries
Company Country of incorporation Rate Softlogic Australia (Pty) Ltd Australia 33.3%
11 EARNINGS PER SHARE
11.1 Basic earnings per share
In Rs. Group For the year ended 31 March 2015 2014
Profit attributable to equity holders of the parent 555,779,746 155,863,630 Weighted average number of ordinary shares 774,408,298 774,408,298
Basic earnings per share 0.72 0.20
11.2 Amount used as denominator
In Rs. Group For the year ended 31 March 2015 2014
Ordinary shares at the beginning of the year 779,000,000 779,000,000 Effect of purchase of treasury shares (4,591,702) (4,591,702) Ordinary shares at the end of the year 774,408,298 774,408,298
12 DIVIDEND PER SHARE Equity dividend on ordinary shares declared and paid during the year
In Rs. Group For the year ended 31 March 2015 2014
Interim dividend - - 0.15 120,033,286
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Notes to the Financial Statements
13 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s principal financial liabilities, comprise of public deposits, borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group financial assets comprise loans and advances, rental receivable on lease assets and hire purchase, trade & other receivables and cash and short term deposits that flows directly from its operations. The Group also holds other financial instruments such as investments in equity instruments.
The Group is exposed to market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. Risk management is carried out under 3 lines of defence in the order of senior management officials under policies approved by the Group’ s operating segments and units. The Group’s overall risk management program seeks to minimise potential adverse effect on the Group’s financial performance.
The Board of Directors of the Group and Boards of directors of individual components manage each of these risks, which are summarised below.
Risk management framework The Board of Directors of the Group and Boards of directors of individual components has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set the appropriate risk limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risk faced by the Group. The Group Audit committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management control and procedures, the results of which are reported to the Audit Committee.
13.1 Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will adversely deviate because of changes in market movements.
Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments are affected by market risk includes: borrowings, trade payable, short term investment and available for sale investments.
13.1.1 Management of market risk Group separates its exposure to market risk between trading and non trading portfolios. Trading portfolio of the Group is mainly held by the finance services segment, include position arising from market making and proprietary position taking, together with financial assets and liabilities that are managed on a fair value basis.
With the exception of translation risk arising on the Group’s net investments in its foreign operations, all foreign exchange positions within the Group are transferred by Group’s central treasury. Accordingly, the foreign exchange positions are treated as part of the Group’s trading portfolios for risk management purpose.
The Group employs a range of tools to monitor and limit market risk exposures. These are discussed below, separately for trading and non trading portfolios.
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The table below sets out the allocation of assets and liabilities subject to market risk between trading and non trading portfolios.
Group Market risk measure Market risk measure Carrying Trading Non trading Carrying Trading Non trading amount portfolio portfolio amount portfolio portfolio As at 31 March 2015 2015 2015 2014 2014 2014
Assets subject to market risk Other non current financial assets 5,640,315,376 611,778,969 5,028,536,407 4,616,975,141 600,882,720 4,016,092,421 Rental receivable on lease assets and hire purchase 6,551,297,181 - 6,551,297,181 8,379,563,606 - 8,379,563,606 Loans and advances 8,835,995,112 - 8,835,995,112 3,512,629,173 - 3,512,629,173 Policyholders loans 135,501,276 - 135,501,276 114,342,102 - 114,342,102 Reinsurance receivables 226,767,434 - 226,767,434 160,845,746 - 160,845,746 Trade and other receivables 6,396,035,672 - 6,396,035,672 4,910,081,942 - 4,910,081,942 Short term investments 8,392,441,152 2,545,608,628 5,846,832,524 6,358,330,664 1,651,035,281 4,707,295,383 Cash in hand and at bank 1,926,725,822 - 1,926,725,822 1,762,101,994 - 1,762,101,994
Liabilities subject to market risk Other non current financial liabilities 31,710,620 - 31,710,620 6,260,352 - 6,260,352 Interest bearing borrowings 27,461,247,934 - 27,461,247,934 17,144,286,771 - 17,144,286,771 Public deposits 12,053,056,190 - 12,053,056,190 9,303,745,347 - 9,303,745,347 Trade and other payables 7,041,840,113 - 7,041,840,113 5,751,656,617 - 5,751,656,617 Short term borrowings 14,787,184,778 - 14,787,184,778 11,822,115,977 - 11,822,115,977 Bank overdrafts 1,658,001,636 - 1,658,001,636 2,551,874,570 - 2,551,874,570
Company Market risk measure Market risk measure Carrying Trading Non trading Carrying Trading Non trading amount portfolio portfolio amount portfolio portfolio As at 31 March 2015 2015 2015 2014 2014 2014
Assets subject to market risk Other non current financial assets 1,277,947,548 - 1,277,947,548 57,797,564 - 57,797,564 Trade and other receivables 241,724,591 - 241,724,591 167,169,840 - 167,169,840 Short term investments 3,670,748,138 1,346,207,455 2,324,540,683 1,643,996,055 5,619,616 1,638,376,439 Cash in hand and at bank 42,695,145 - 42,695,145 279,766,916 - 279,766,916
Liabilities subject to market risk Interest bearing borrowings 8,136,783,256 - 8,136,783,256 3,903,444,290 - 3,903,444,290 Trade and other payables 29,531,350 - 29,531,350 14,569,828 - 14,569,828 Short term borrowings 4,191,598,768 - 4,191,598,768 3,920,810,772 - 3,920,810,772 Bank overdrafts 83,041,714 - 83,041,714 55,388,092 - 55,388,092
Annual Report 2014-15 148
Notes to the Financial Statements
13.1.2 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long term debt obligations with floating interest rates.
Exposure to interest rate risk The interest rate profile of the Group’s interest bearing financial instruments as reported to management of the Group is as follows.
Group Company Nominal amount Nominal amount As at 31 March 2015 2014 2015 2014
Fixed rate instrument Financial assets 23,512,675,261 19,833,489,296 2,528,664 530,528,664 Financial liabilities (17,249,360,709) (22,076,183,607) (1,074,685,050) (1,118,687,507) 6,263,314,552 (2,242,694,311) (1,072,156,386) (588,158,843) Effect of interest rate swaps - (30,540,342) - - 6,263,314,552 (2,273,234,653) (1,072,156,386) (588,158,843)
Variable rate instruments Financial liabilities 38,710,129,828 18,715,298,710 11,846,654,019 6,760,955,646 Effect of interest rate swaps - 30,540,342 - - 38,710,129,828 18,745,839,052 11,846,654,019 6,760,955,646
Interest rate sensitivity The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings. Provided all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:
Increase in basis points Effect on profit before tax As at 31 March Rupee Other Group Company borrowings currencies
2015 +25b.p +15b.p (84,116,612) (29,616,635) -25b.p -15b.p 84,116,612 29,616,635
2014 +25b.p +15b.p (66,243,894) (16,902,389) -25b.p -15b.p 66,243,894 16,902,389
The assumed spread of basis points for the interest rate sensitivity analysis is based on the currently observable market environment changes to base floating interest rates.
13.1.3 Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of adverse fluctuations in foreign exchange rates. The Group’s exposure to the risk of fluctuations in foreign exchange rates relates primarily to the Group’s operating activities and foreign currency borrowings.
Management has set up a policy that requires the company and its subsidiaries to manage their foreign exchange risk with strict limits on maximum exposure.
Foreign currency sensitivity The following table demonstrates the sensitivity to a possible changes in the USD/LKR exchange rate, provided that all other variables are held constant such as, Group’s profit before tax following changes in the fair value of the Group’s forward exchange contracts on borrowings.
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The Group’s exposure to foreign currencies other than USD is not material.
Effect on profit before tax As at 31 March Increase in Group Company exchange rate USD
2015 +3% 101,757,120 N/A -3% (101,757,120) N/A
2014 +3% 121,812,108 N/A -3% (121,812,108) N/A
The Group manages its foreign currency risk using a balanced approach in respect of forward contracts that are expected to occur within a maximum 24 month period.
Where the nature of the hedging is not an economic one, it is the Group’s policy to negotiate with counterparties or banks to obtain most advantage position for the Group.
As at 31 March 2015, the Group entered into forward contracts in respect of 13.56% (2014 : 60%) of its foreign currency borrowings for which firm commitments existed at the reporting date, respectively.
Foreign Exchange risk in operating activities The exposure is mainly from foreign creditors arising out of operating activities where fluctuation of foreign exchange rate may occur where the credit period is between 3-6 months.
13.1.4 Equity price risk The Group’s finance sector holds listed and unlisted equity securities and put option over quoted equity instruments which are susceptible to market price risk arising from uncertainties about future values of these securities.
The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Periodic reports on equity investment portfolio are submitted to the senior management of individual business segment based on the relevance. The respective Board of Directors reviews and approves all equity investment decisions. To manage its price risk arising from investments in equity securities, the group diversifies its equity investment portfolio.
Group
Financial assets at fair value through Available for sale investments profit or loss As at 31 March 2015 2014 2015 2014 Rs. % Rs. % Rs. % Rs. %
Bank, Finance and Insurance 2,446,925,110 96.12 1,573,569,944 95.31 610,234,121 99.75 530,757,732 88.33 Beverage, Food and Tobacco 2,587,074 0.10 - - - - - Construction and Engineering - - 1,912,500 0.12 - - 46,000,000 7.66 Diversified Holdings 12,000,875 0.47 11,456,482 0.69 1,521,440 0.25 24,106,200 4.01 Footware and Textile ------Hotels and Travels 1,353,165 0.05 13,165 0.00 - - - Manufacturing 55,216,004 2.17 52,132,364 3.16 23,408 - 18,788 0.00 Power and Energy 18,492,960 0.73 4,133,426 0.25 - - - Telecommunications 9,033,440 0.35 7,817,400 0.47 - - - 2,545,608,628 100.00 1,651,035,281 100.00 611,778,969 100.00 600,882,720 100.00
Annual Report 2014-15 150
Notes to the Financial Statements
Company
Financial assets at fair value through Available for sale investments profit or loss As at 31 March 2015 2014 2015 2014 Rs. % Rs. % Rs. % Rs. %
Bank, Finance and Insurance 4,812,557 0.36 3,186,416 56.70 - - - - Footware and Textile 1,338,847,938 99.45 ------Power and Energy 2,546,960 0.19 2,433,200 43.30 - - - - 1,346,207,455 100.00 5,619,616 100.00 - - - -
Investments in unquoted investments are made after obtaining the board approval.
Sensitivity analysis The following table demonstrate the sensitivity of cumulative change in fair value to reasonably possible changes in equity prices provided all other variables are held constant. The effect of a decrease in equity prices is expected to be equal and opposite to the effect of the increase shown.
This table consider only equity shares classified under short term and long term financial assets.
Change in Group Company As at 31 March equity Effect on profit Effect on Effect on profit Effect on price before tax Equity before tax Equity
2015 Quoted equity investments listed in Colombo Stock Exchange and put option over quoted equity instruments +10% 258,642,381 61,177,563 135,445,845 Nil - 10% (252,165,220) (61,177,563) (135,445,845) Nil
2014 Quoted equity investments listed in Colombo Stock Exchange and put option over quoted equity instruments +10% 167,500,068 167,500,068 561,962 Nil - 10% (168,214,004) (168,214,004) (561,962) Nil
13.2 Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables and customer lending) and from its investing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all clients who wish to trade on credit terms are subject to credit evaluation procedures. In addition, receivable balances are monitored on an ongoing basis with that the Group’s exposure to bad debt is not significant.
Hire purchase and lease portfolio is broad based accounting for over 95,622 (2014 - 75,950) contracts and risk of non payment is mitigated by stringent standard of credit approval process. There is no concentration risk on any single region, customer or sector in particular collection of dues from customers is robust with the delinquency rate being better than the financial industry average.
With respect to credit risk arising from other financial assets of the Group, such as cash and cash equivalents, available for sale financial investments, short term investments, the Group’s exposure to credit risk arise from default of the counterparty. The Group manages its operations to avoid any excessive concentration of counterparty risk.
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13.2.1 Credit Risk - Default risk Default risk is the risk that one party to financial instruments will fail to discharge an obligation and cause the other party to incur financial loss. It arises from lending, trade finance, treasury and other activities undertaken by the Group. The Group has in place standards, policies and procedures for the control and monitoring of all such risks.
Credit Risk - Concentration risk The Group seeks to manage its credit concentration risk exposure through diversification of its lending, investing and financing activities to avoid undue concentrations of risks with individuals or group of customers in specific businesses. It also obtains security when appropriate. The types of collateral obtained include cash margins, mortgages over properties and pledge over equity instruments.
The requirement for an impairment is analysed at each reporting date on an individual basis for major clients. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 13.2.2.
The tables below show the maximum exposure to credit risk for the components of financial position. The maximum exposure is shown gross before the effect of mitigation through the use of collateral agreements.
Annual Report 2014-15 152
Notes to the Financial Statements
13.2.2 Risk Exposure - Group As at 31 March 2015 Note Other non Rental receivable Rental receivable Cash in hand and at Trade and other Short term Amounts due Total % of allocation current on leased assets on leased assets banks receivable investments from related investments & hire purchases & hire purchases parties - long term - short term
Government securities 13.2.2.1 3,877,841,032 - - - - 2,726,980,399 - 6,604,821,431 19.05 Corporate debt securities 13.2.2.2 953,348,819 - - - - 92,576,655 - 1,045,925,474 3.02 Deposits with banks and Unit Trusts 13.2.2.3 42,442,694 - - - - 2,902,275,470 - 2,944,718,164 8.49 Loans to executives 13.2.2.4 4,686,862 - - - 16,370,946 - - 21,057,808 0.06 Loans and advances 13.2.2.5.1 3,447,334,303 - - - 5,388,660,809 - - 8,835,995,112 25.48 Policyholders loans 13.2.2.5.2 - - - - 135,501,276 - - 135,501,276 0.39 Trade and other receivables 13.2.2.6 - - - - 6,379,664,726 - - 6,379,664,726 18.40 Reinsurance receivables 13.2.2.7 - - - - 226,767,434 - - 226,767,434 0.65 Amounts due from related parties 13.2.2.8 ------572,053 572,053 - Rental receivable on leased assets & hire purchases 13.2.2.9 - 3,669,327,302 2,881,969,879 - - - - 6,551,297,181 18.89 Cash in hand and at bank 13.2.2.10 - - - 1,926,725,822 - - - 1,926,725,822 5.56 Total credit risk exposure 8,325,653,710 3,669,327,302 2,881,969,879 1,926,725,822 12,146,965,191 5,721,832,524 572,053 34,673,046,481 100.00
Financial assets at fair value through profit or loss - - - - - 2,545,608,628 - 2,545,608,628 74.16 Available for sale investments 761,995,969 - - - - 125,000,000 - 886,995,969 25.84 Total equity risk exposure 761,995,969 - - - - 2,670,608,628 - 3,432,604,597 100.00 Total 9,087,649,679 3,669,327,302 2,881,969,879 1,926,725,822 12,146,965,191 8,392,441,152 572,053 38,105,651,078
13.2.2 Risk Exposure - Group As at 31 March 2014 Note Other non Rental receivable Rental receivable Cash in hand and at Trade and other Short term Amounts due Total % of allocation current on leased assets on leased assets banks receivable investments from related investments & hire purchases & hire purchases parties - long term - short term
Government securities 13.2.2.1 3,189,701,356 - - - - 2,697,282,330 - 5,886,983,686 21.57 Corporate debt securities 13.2.2.2 627,299,943 - - - - 31,924,215 - 659,224,158 2.42 Deposits with banks and Unit Trusts 13.2.2.3 48,874,122 - - - - 1,853,088,838 - 1,901,962,960 6.97 Loans to executives 13.2.2.4 - - - - 22,702,451 - - 22,702,451 0.08 Loans and advances 13.2.2.5.1 1,549,932,573 - - - 1,962,696,600 - - 3,512,629,173 12.87 Policyholders loans 13.2.2.5.2 - - - - 114,342,102 - - 114,342,102 0.42 Trade and other receivables 13.2.2.6 - - - - 4,887,379,491 - - 4,887,379,491 17.91 Reinsurance receivables 13.2.2.7 - - - - 160,845,746 - - 160,845,746 0.59 Amounts due from related parties 13.2.2.8 ------778,460 778,460 - Rental receivable on leased assets & hire purchases 13.2.2.9 - 3,762,890,106 4,616,673,500 - - - - 8,379,563,606 30.71 Cash in hand and at bank 13.2.2.10 - - - 1,762,101,994 - - - 1,762,101,994 6.46 Total credit risk exposure 5,415,807,994 3,762,890,106 4,616,673,500 1,762,101,994 7,147,966,390 4,582,295,383 778,460 27,288,513,827 100.00
Financial assets at fair value through profit or loss - - - - - 1,651,035,281 - 1,651,035,281 65.33 Available for sale investments 751,099,720 - - - - 125,000,000 - 876,099,720 34.67 Total equity risk exposure 751,099,720 - - - - 1,776,035,281 - 2,527,135,001 100.00 Total 6,166,907,714 3,762,890,106 4,616,673,500 1,762,101,994 7,147,966,390 6,358,330,664 778,460 29,815,648,828
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13.2.2 Risk Exposure - Group As at 31 March 2015 Note Other non Rental receivable Rental receivable Cash in hand and at Trade and other Short term Amounts due Total % of allocation current on leased assets on leased assets banks receivable investments from related investments & hire purchases & hire purchases parties - long term - short term
Government securities 13.2.2.1 3,877,841,032 - - - - 2,726,980,399 - 6,604,821,431 19.05 Corporate debt securities 13.2.2.2 953,348,819 - - - - 92,576,655 - 1,045,925,474 3.02 Deposits with banks and Unit Trusts 13.2.2.3 42,442,694 - - - - 2,902,275,470 - 2,944,718,164 8.49 Loans to executives 13.2.2.4 4,686,862 - - - 16,370,946 - - 21,057,808 0.06 Loans and advances 13.2.2.5.1 3,447,334,303 - - - 5,388,660,809 - - 8,835,995,112 25.48 Policyholders loans 13.2.2.5.2 - - - - 135,501,276 - - 135,501,276 0.39 Trade and other receivables 13.2.2.6 - - - - 6,379,664,726 - - 6,379,664,726 18.40 Reinsurance receivables 13.2.2.7 - - - - 226,767,434 - - 226,767,434 0.65 Amounts due from related parties 13.2.2.8 ------572,053 572,053 - Rental receivable on leased assets & hire purchases 13.2.2.9 - 3,669,327,302 2,881,969,879 - - - - 6,551,297,181 18.89 Cash in hand and at bank 13.2.2.10 - - - 1,926,725,822 - - - 1,926,725,822 5.56 Total credit risk exposure 8,325,653,710 3,669,327,302 2,881,969,879 1,926,725,822 12,146,965,191 5,721,832,524 572,053 34,673,046,481 100.00
Financial assets at fair value through profit or loss - - - - - 2,545,608,628 - 2,545,608,628 74.16 Available for sale investments 761,995,969 - - - - 125,000,000 - 886,995,969 25.84 Total equity risk exposure 761,995,969 - - - - 2,670,608,628 - 3,432,604,597 100.00 Total 9,087,649,679 3,669,327,302 2,881,969,879 1,926,725,822 12,146,965,191 8,392,441,152 572,053 38,105,651,078
13.2.2 Risk Exposure - Group As at 31 March 2014 Note Other non Rental receivable Rental receivable Cash in hand and at Trade and other Short term Amounts due Total % of allocation current on leased assets on leased assets banks receivable investments from related investments & hire purchases & hire purchases parties - long term - short term
Government securities 13.2.2.1 3,189,701,356 - - - - 2,697,282,330 - 5,886,983,686 21.57 Corporate debt securities 13.2.2.2 627,299,943 - - - - 31,924,215 - 659,224,158 2.42 Deposits with banks and Unit Trusts 13.2.2.3 48,874,122 - - - - 1,853,088,838 - 1,901,962,960 6.97 Loans to executives 13.2.2.4 - - - - 22,702,451 - - 22,702,451 0.08 Loans and advances 13.2.2.5.1 1,549,932,573 - - - 1,962,696,600 - - 3,512,629,173 12.87 Policyholders loans 13.2.2.5.2 - - - - 114,342,102 - - 114,342,102 0.42 Trade and other receivables 13.2.2.6 - - - - 4,887,379,491 - - 4,887,379,491 17.91 Reinsurance receivables 13.2.2.7 - - - - 160,845,746 - - 160,845,746 0.59 Amounts due from related parties 13.2.2.8 ------778,460 778,460 - Rental receivable on leased assets & hire purchases 13.2.2.9 - 3,762,890,106 4,616,673,500 - - - - 8,379,563,606 30.71 Cash in hand and at bank 13.2.2.10 - - - 1,762,101,994 - - - 1,762,101,994 6.46 Total credit risk exposure 5,415,807,994 3,762,890,106 4,616,673,500 1,762,101,994 7,147,966,390 4,582,295,383 778,460 27,288,513,827 100.00
Financial assets at fair value through profit or loss - - - - - 1,651,035,281 - 1,651,035,281 65.33 Available for sale investments 751,099,720 - - - - 125,000,000 - 876,099,720 34.67 Total equity risk exposure 751,099,720 - - - - 1,776,035,281 - 2,527,135,001 100.00 Total 6,166,907,714 3,762,890,106 4,616,673,500 1,762,101,994 7,147,966,390 6,358,330,664 778,460 29,815,648,828
Annual Report 2014-15 154
Notes to the Financial Statements
13.2.2 Risk Exposure - Company As at 31 March 2015 Note Other non Cash in Trade Short term Amounts Total % of current hand and at and other investments due from allocation investments banks receivable related parties
Corporate debt securities 13.2.2.2 2,528,664 - - - - 2,528,664 0.04 Deposits with bank 13.2.2.3 - - - 2,199,540,683 - 2,199,540,683 36.34 Loans to executives 13.2.2.4 - - 774,677 - - 774,677 0.01 Trade and other receivables 13.2.2.6 - - 240,949,914 - - 240,949,914 3.98 Amounts due from related parties 13.2.2.8 1,275,418,884 - - - 2,290,507,881 3,565,926,765 58.92 Cash in hand and at bank 13.2.2.10 - 42,695,145 - - - 42,695,145 0.71 Total credit risk exposure 1,277,947,548 42,695,145 241,724,591 2,199,540,683 2,290,507,881 6,052,415,848 100.00
Financial assets at fair value through profit or loss - - - 1,346,207,455 - 1,346,207,455 91.50 Available for sale investments - - - 125,000,000 - 125,000,000 8.50 Total equity risk exposure - - - 1,471,207,455 - 1,471,207,455 100.00 Total 1,277,947,548 42,695,145 241,724,591 3,670,748,138 2,290,507,881 7,523,623,303
13.2.2 Risk Exposure - Company
As at 31 March 2014 Note Other non Cash in Trade Short term Amounts Total % of current hand and at and other investments due from allocation investments banks receivable related parties
Corporate debt securities 13.2.2.2 2,528,664 - - - - 2,528,664 0.06 Deposits with bank 13.2.2.3 - - - 528,000,000 - 528,000,000 11.81 Loans to executives 13.2.2.4 - - 6,503,850 - - 6,503,850 0.15 Trade and other receivables 13.2.2.6 - - 59,936,203 - - 59,936,203 1.34 Amounts due from related parties 13.2.2.8 55,268,900 - 100,729,787 985,376,439 2,453,097,064 3,594,472,190 80.39 Cash in hand and at bank 13.2.2.10 - 279,766,916 - - - 279,766,916 6.26 Total credit risk exposure 57,797,564 279,766,916 167,169,840 1,513,376,439 2,453,097,064 4,471,207,823 100.00
Financial assets at fair value through profit or loss - - - 5,619,616 - 5,619,616 4.30 Available for sale investments - - - 125,000,000 - 125,000,000 95.70 Total equity risk exposure - - - 130,619,616 - 130,619,616 100.00 Total 57,797,564 279,766,916 167,169,840 1,643,996,055 2,453,097,064 4,601,827,439
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13.2.2.1 Government securities As at 31 March 2015 as shown in the table above, 19.05% (2014 - 21.57%) of Group debt securities comprise investments in government securities which consist of treasury bonds, bills and reverse repo investments. Government securities are usually referred to as risk free due to the sovereign nature of the instrument.
13.2.2.2 Corporate debt securities As at 31 March 2015, corporate debt securities comprise 45.49% (2014 - 44.13%) and 100.00% (2014 - 100.00%) of the total investments for the Group and Company respectively out of which were rated “A-” or better, or guaranteed by Treasury.
Group Company As at 31 March 2015 2014 2015 2014 Fitch rating Rs. Rating % Rs. Rating % Rs. Rating % Rs. Rating % of total of total of total of total
AA- 188,165,584 17.99 195,006,820 29.58 - - 2,528,664 100.00 A+ 181,281,273 17.33 ------A 10,028,664 0.96 - - 2,528,664 100.00 - - A- 96,338,351 9.21 95,938,900 14.55 - - - - BBB+ 236,674,432 22.63 43,253,172 6.56 - - - - BBB 94,988,304 9.08 141,290,116 21.43 - - - - BBB- 238,448,866 22.80 92,174,420 13.98 - - - - Guaranteed by Treasury - - 59,636,515 9.05 - - - - Not rated - - 31,924,215 4.84 - - - - Total 1,045,925,474 100.00 659,224,158 100.00 2,528,664 100.00 2,528,664 100.00
13.2.2.3 Deposits with banks and Unit Trusts Deposits with banks mainly consist of fixed and call deposits.
As at 31 March 2015, 94.31% (2014 - 61.01%) and 100.00% (2014 - 100.00%) of the fixed and call deposits and investments in Unit Trusts were rated “A-” or better for the Group and Company respectively.
Group Company As at 31 March 2015 2014 2015 2014 Fitch rating Rs. Rating % Rs. Rating % Rs. Rating % Rs. Rating % of total of total of total of total
AA 177,560,635 6.03 ------AA- 2,580,928,895 87.65 597,210,292 31.40 2,199,540,683 100.00 457,000,000 86.55 A 6,773,430 0.23 71,100,000 3.74 - - 71,000,000 13.45 A- 11,803,809 0.40 492,110,139 25.87 - - - - BBB 125,000,402 4.24 142,971,142 7.52 - - - - BB- - - 30,958 0.00 - - - - Unit trust 42,620,393 1.45 549,666,306 28.90 - - - - Not rated 30,600 0.00 48,874,123 2.57 - - - - Total 2,944,718,164 100.00 1,901,962,960 100.00 2,199,540,683 100.00 528,000,000 100.00
13.2.2.4 Loans to executives Loans to executives portfolio is largely made with short term distress loans granted to executive staff. The respective business units have taken necessary power of attorney/ promissory notes as collateral for the loans granted.
Annual Report 2014-15 156
Notes to the Financial Statements
13.2.2.5 Loans and advances
13.2.2.5.1 Loans and advances As a part of overall risk management strategy, the board of directors of the respective components specially in the finance cluster has delegated responsibility for the oversight of credit risk to its ‘Credit Committee’ and ‘Credit Risk Committee’. Company ‘Credit Risk Monitoring Unit’ is reporting to ‘Risk Committee’ through the ‘Chief Risk Officer’ who is responsible for management of the company’s credit risk. Following are the few steps to manage credit risk; • introduction of a comprehensive credit policy as the guide line in lending has strengthened the credit evaluation process • concentration risk of credit is evaluated regularly and amends the credit policy accordingly in order to ensure credit granting process response to market requirements • implementation of delegated authority levels in line with the process of strengthening credit screening and evaluation process • implementation of a customer rating system as a way of building a data base within the company for efficient and effective credit evaluation process to service current evaluation as well as prospective evaluations • regular discussions are initiated in both ‘Credit Committee’ and ‘Integrated Risk Management Committee’ in relation to credit risk and identifying necessary actions to be implemented The table below shows the maximum exposure to credit risk for the components of statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.
Softlogic Holdings PLC 157 2014 Total 2014 Total 6,504,339 9,889,519 35,371,627 10,995,145 12,560,234 16,428,670 24,400,358 37,145,858 (93,769,560) (35,843,564) (979,411,268) 1,176,667,968 3,444,985,597 3,512,629,173 1,082,898,408 3,409,142,033 4,492,040,441 3,444,985,597 3,291,689,847 2015 2015 Total Total 61,881,888 66,544,769 31,800,743 45,726,246 (81,512,922) 207,847,232 120,581,367 237,377,200 252,349,921 (125,126,316) 8,622,429,686 1,959,720,647 7,598,320,320 8,622,429,686 8,835,995,112 1,878,207,725 (1,539,515,983) 8,497,303,370 10,375,511,095 ------loans loans Other Other 2,286,142 2,286,142 2,286,142 2,286,142 - - - SME SME loans loans 2,610,772 3,159,807 4,176,430 6,490,146 37,996,203 14,065,284 16,664,648 59,890,688 (54,976,199) (378,238,902) 5,389,527,898 5,244,473,920 5,389,527,897 4,956,312,796 5,334,551,698 5,334,551,698 ------loans loans Consumer Consumer (19,020,691) (48,338,426) 338,280,852 270,921,735 319,260,161 319,260,161 ------loans loans Revolving Revolving (28,673,634) 524,830,914 496,157,280 496,157,280 496,157,280 ------debtors debtors Pawning Pawning (1,747,871) 385,236,606 383,488,735 383,488,735 383,488,735 loans loans Personal Personal 47,816,604 63,933,997 28,640,936 41,549,816 (32,070,726) (70,150,117) 169,851,029 114,091,221 220,712,552 192,459,233 708,942,877 676,872,151 3,232,901,788 2,353,846,400 3,232,901,789 2,726,685,168 (1,112,938,655) 3,162,751,672 3,839,623,823 ------lending lending 143,256 143,256 143,256 143,256 Short term Short term
Total above 365 days 181 - 365 days 151 - 180 days 121 - 150 days 91 - 120 days 61 - 90 days 31 - 60 days - allowance for impairment Less than 30 days - allowance for impairment Not due/ current Individually impaired - gross amount for the rest of portfolio where collective impairment is applicable - gross amount Net carrying amount Less : Unearned income Loans and advances excluding loans to life policyholder Assets at amortised cost As at 31 March Gross carrying amount Gross carrying amount carrying amount Total Age analysis of facilities considered for collective impairment Category As at 31 March
Annual Report 2014-15 158
Notes to the Financial Statements
Movement in impairment allowance for loans advances
In Rs. Movement in specific Movement in collective Movement in impairment impairment allowance impairment allowance allowance (total) As at 31 March 2015 2014 2015 2014 2015 2014
At the beginning of the year 93,769,560 31,736,935 35,843,564 3,196,847 129,613,124 34,933,782 Net impairment charge for the year 45,918,614 62,032,625 89,282,752 32,646,717 135,201,366 94,679,342 Write offs during the year (3,264,732) - - - (3,264,732) - Setoffs during the year (54,910,520) - - - (54,910,520) - At the end of the year 81,512,922 93,769,560 125,126,316 35,843,564 206,639,238 129,613,124
13.2.2.5.2 Loans to life policyholders The Company issued loans to life policyholders considering the surrender value of the life policy as collateral. As at the reporting date, the value of policy loans granted amounted to Rs.135.50 mn (2014 – Rs.114.34 mn) and its related surrender value is more than its carrying value.
13.2.2.6 Trade receivables Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any consignments to major customers are generally covered by bank guarantees or other forms of credit insurance.
In Rs. Group Company As at 31 March 2015 2014 2015 2014
Trade receivable settlement profile Current/ 0 - 30 days 2,585,966,771 1,693,953,959 8,197,258 7,652,521 31 - 60 days 949,978,060 846,041,373 - - 61 - 90 days 489,445,907 687,783,446 17,185,660 12,589,592 91 - 120 days 994,755,964 343,466,538 - - > 121 days 913,994,985 520,001,713 104,431,386 80,487,674 Impaired 188,210,125 141,105,814 - - Gross carrying value 6,122,351,812 4,232,352,843 129,814,304 100,729,787 Less : Impairment provision Individually assessed impairment provision (64,744,932) (60,145,332) - - Collectively assessed impairment provision (123,465,194) (80,960,484) - - Total 5,934,141,686 4,091,247,027 129,814,304 100,729,787
The requirement for an impairment is analysed at each reporting date on an individual basis for major clients. Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data.
13.2.2.7 Reinsurance receivable As a part of overall risk management strategy, the Group cedes insurance risk through proportional, non proportional and specific risk reinsurance treaties. While these mitigate insurance risk, the recoverable from reinsurers and receivables arising from ceded reinsurance exposes the company to credit risk. Following are the few steps to manage reinsurance risk in addition to explained above; • placed in line with policy guidelines approved by the Board of Directors on an annual basis in line with the guidelines issued by the Insurance Board of Sri Lanka • counterparties’ limits that are set each year and are subject to regular reviews on a regular basis management assesses the creditworthiness of reinsurers to update the reinsurance strategy and ascertain the suitable allowance for impairment of reinsurance assets
Softlogic Holdings PLC 159
• outstanding reinsurance receivables are reviewed on a monthly basis to ensure that all dues are collected or set off against payable • maintain close and professional relationship with reinsurers • no cover is issue without confirmation from reinsurance unless non reinsurance business As at reporting date reinsurance receivables amount to Rs.226.77 mn as at 31 March 2015 (2014 - Rs.160.85 mn). This mainly consists of reinsurance receivable on paid claims amounting to Rs.90.60 mn (2014 - Rs.64.00 mn) and reinsurance share of claim reserve (receivables on outstanding claims) of Rs.136.17 mn as at 31 March 2015 (2014 - Rs.97.00 mn).
13.2.2.8 Amounts due from related parties The Group’s amounts due from related parties mainly consist of associates and receivables from KMPs.
The Company balance consists of the balance from affiliate companies.
13.2.2.9 Rental receivable on leased assets & hire purchases As a part of overall risk management strategy, the board of directors has delegated responsibility for the oversight of credit risk to its ‘Board of Credit Committee’. Company ‘Independent Credit Risk Monitoring Unit’ is reporting to ‘Risk Committee’ through the ‘Head of Credit Risk’ who is responsible for management of the company’s credit risk. Following are the few steps to manage credit risk;
• introduction of a comprehensive credit policy as the guide line in lending , has strengthened the credit evaluation process • such credit policy is formulated in consideration with current market conditions and implemented policy is evaluated regularly (once in 3 months) in order to make sure, such policy is in line with the market conditions • determine the levels of service and quality of the valuers involving in the credit evaluation process • regular discussions are initiated in both Credit Committee and Integrated Risk Management Committee in relation to credit risk and identifying necessary actions to be implemented
The table below shows the maximum exposure to credit risk for the components of statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.
Credit quality by class of financial assets Assets at amortised cost Rental Rental Total Rental Rental Total As at 31 March receivable on receivable on 2015 receivable on receivable on 2014 lease assets hire purchase lease assets hire purchase
Individually impaired - gross amount 9,123,406 26,414,222 35,537,628 95,426,326 124,559,403 219,985,729 - allowance for impairment (4,214,008) (6,006,016) (10,220,024) (1,797,172) (23,639,131) (25,436,303) - write off during the year - - - (87,748,192) (70,552,038) (158,300,230) Gross carrying amount 4,909,398 20,408,206 25,317,604 5,880,962 30,368,234 36,249,196 For the rest of portfolio where collective impairment is applicable - gross amount 2,163,767,882 6,065,913,572 8,229,681,454 3,248,858,523 7,817,645,659 11,066,504,182 - allowance for impairment (33,938,983) (113,991,814) (147,930,797) (14,064,491) (53,609,871) (67,674,362) Gross carrying amount 2,129,828,899 5,951,921,758 8,081,750,657 3,234,794,032 7,764,035,788 10,998,829,820
Total carrying amount 2,134,738,297 5,972,329,964 8,107,068,261 3,240,674,994 7,794,404,022 11,035,079,016 Less : Unearned income (406,402,040) (1,149,369,040) (1,555,771,080) (837,884,960) (1,817,630,450) (2,655,515,410) Net carrying amount 1,728,336,257 4,822,960,924 6,551,297,181 2,402,790,034 5,976,773,572 8,379,563,606
Annual Report 2014-15 160
Notes to the Financial Statements
Age analysis of facilities considered for collective impairment
Category Rental Rental Total Rental Rental Total As at 31 March receivable on receivable on 2015 receivable on receivable on 2014 lease assets hire purchase lease assets hire purchase
Not due/ current 1,864,579,559 5,228,487,992 7,093,067,551 3,026,813,784 7,240,242,278 10,267,056,062 Overdue: Less than 30 days 63,242,060 148,423,009 211,665,069 75,984,453 197,270,468 273,254,921 31 - 60 days 46,764,505 99,209,509 145,974,014 52,244,971 124,337,928 176,582,899 61 - 90 days 31,577,307 87,980,213 119,557,520 31,359,210 77,230,060 108,589,270 91 - 120 days 20,926,672 71,730,748 92,657,420 13,461,486 33,122,085 46,583,571 121 - 150 days 19,547,658 67,154,286 86,701,944 11,966,159 30,838,499 42,804,658 151 - 180 days 13,055,786 45,634,818 58,690,604 9,191,653 24,174,645 33,366,298 181 - 365 days 52,257,142 174,667,820 226,924,962 22,594,837 57,580,359 80,175,196 above 365 days 51,817,193 142,625,177 194,442,370 5,241,970 32,849,337 38,091,307 Total 2,163,767,882 6,065,913,572 8,229,681,454 3,248,858,523 7,817,645,659 11,066,504,182
Movement in impairment allowance 2015 2014
At the beginning of the year 104,497,172 41,212,308 Net impairment charge for the year 273,582,089 216,321,662 Recoveries during the year 54,465,996 5,263,432 Write offs during the year (258,172,216) (158,300,230) At the end of the year 174,373,041 104,497,172 Reversal of notional interest for the year (16,222,220) (11,386,507) At the end of the year after notional interest for the year 158,150,821 93,110,665
13.2.2.10 Cash in hand and at bank Deposits with banks mainly consist of fixed and call deposits. Credit risk from balances with banks and financial institutions is managed by the Group’s Treasury Department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed in an annual basis, and may be updated throughout the year subject to appropriate approval. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments. The Group’s maximum exposure to credit risk for the components of the Statement of Financial Position is the carrying amounts as illustrated.
13.3 Liquidity risk Liquidity risk is the risk that Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damages to the Group’s reputation.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, finance leases and hire purchase contracts that will always have sufficient liquidity to meet its liabilities when its due under normal and stressed conditions. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.
Softlogic Holdings PLC 161
Net debt / (cash)
Group Company 2015 2014 2015 2014
Short term investments 8,392,441,152 6,358,330,664 3,670,748,138 1,643,996,055 Cash in hand and at bank 1,926,725,822 1,762,101,994 42,695,145 279,766,916 Total liquid assets 10,319,166,974 8,120,432,658 3,713,443,283 1,923,762,971 Short term borrowings 14,787,184,778 11,822,115,977 4,191,598,768 3,920,810,772 Current portion of borrowings 4,616,956,512 4,144,437,836 2,368,998,067 1,455,262,816 Bank overdrafts 1,658,001,636 2,551,874,570 83,041,714 55,388,092 Total liabilities 21,062,142,926 18,518,428,383 6,643,638,549 5,431,461,680
Net debt / (cash) 10,742,975,952 10,397,995,725 2,930,195,266 3,507,698,709
Liquidity risk management An optional combination of positive and negative cash flows along with investment returns and contractual obligation maturing is collated through an intra day cash reporting system for all business segments. High value contractual outflows are processed through various control filters. The group is in the process of building a “Liquidity Dashboard” with the implementation of ERP program. This would help further accelerate the review and identification of debt maturities relating to net liquidity position on daily basis and thus enable proactively mobile necessary funding mobilisation or reinvest of cash surplus if any. Closely monitoring and working to reschedule maturity profile is any to de-stress cash flows and re-align them with actual investment tenor. This would engender optimal liquidity positioning and this would reduce borrowing cost and enhance reinvestment income.
Maturity analysis The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2015 based on contractual undiscounted payments.
Within Between Between Between Between More than Total 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years
Interest bearing loans and borrowings 4,616,956,512 7,840,463,194 3,383,374,968 3,139,491,673 4,091,400,830 4,389,560,757 27,461,247,934 Other non current financial liabilities - 31,710,620 - - - - 31,710,620 Trade and other payables 7,041,840,113 - - - - - 7,041,840,113 Amounts due to related parties 15,970,784 - - - - - 15,970,784 Short term borrowings 14,787,184,778 - - - - - 14,787,184,778 Public deposits 9,838,760,403 1,037,598,357 976,766,009 199,931,421 - - 12,053,056,190 Bank overdrafts 1,658,001,636 - - - - - 1,658,001,636 37,958,714,226 8,909,772,171 4,360,140,977 3,339,423,094 4,091,400,830 4,389,560,757 63,049,012,055
Contingent gross commitment on put option - 1,812,828,000 - - - - 1,812,828,000
Annual Report 2014-15 162
Notes to the Financial Statements
Maturity analysis The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2014 based on contractual undiscounted payments.
Within Between Between Between Between More than Total 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years
Interest bearing loans and borrowings 4,144,437,836 3,777,682,210 3,517,675,155 1,573,134,513 1,617,996,492 2,513,360,565 17,144,286,771 Other financial liabilities - - 6,260,352 - - - 6,260,352 Trade and other payables 5,751,656,616 - - - - - 5,751,656,616 Amounts due to related parties 19,508,602 - - - - - 19,508,602 Short term borrowings 11,822,115,977 - - - - - 11,822,115,977 Public deposits 7,418,343,338 1,659,008,444 226,393,565 - - - 9,303,745,347 Bank overdrafts 2,551,874,570 - - - - - 2,551,874,570 31,707,936,939 5,436,690,654 3,750,329,072 1,573,134,513 1,617,996,492 2,513,360,565 46,599,448,235
Contingent gross commitment on put option - - 1,812,828,000 - - - 1,812,828,000
The table below summarises the maturity profile of the Company’s financial liabilities at 31 March 2015 based on contractual undiscounted payments.
Within Between Between Between Between More than Total 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years
Interest bearing loans and borrowings 2,368,998,068 2,775,286,889 903,062,884 672,132,048 650,650,922 766,652,445 8,136,783,256 Other financial liabilities - 50,000,000 50,000,000 50,000,000 50,000,000 309,915,332 509,915,332 Trade and other payables 29,531,350 - - - - - 29,531,350 Amounts due to related parties 148,005,634 - - - - - 148,005,634 Short term borrowings 4,191,598,768 - - - - - 4,191,598,768 Bank overdrafts 83,041,714 - - - - - 83,041,714 6,821,175,534 2,825,286,889 953,062,884 722,132,048 700,650,922 1,076,567,777 13,098,876,054
Softlogic Holdings PLC 163
The table below summarises the maturity profile of the Company’s financial liabilities at 31 March 2014 based on contractual undiscounted payments.
Within Between Between Between Between More than Total 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years
Interest bearing loans and borrowings 1,455,262,816 743,675,727 1,449,097,231 254,760,724 647,792 - 3,903,444,290 Trade and other payables 14,569,828 - - - - - 14,569,828 Amounts due to related parties 946,657,314 - - - - - 946,657,314 Short term borrowings 3,920,810,772 - - - - - 3,920,810,772 Bank overdrafts 55,388,092 - - - - - 55,388,092 6,392,688,822 743,675,727 1,449,097,231 254,760,724 647,792 - 8,840,870,296
13.4 Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2015.
The Group monitors capital using a gearing ratio for company and subsidiary level, which is net debt divided by total capital plus net debt which is monitored very closely by the senior management officials. Net debt of the Group includes, interest bearing loans and borrowings, short term borrowings and bank overdrafts (excluding discontinued operations).
Group Company As at 31 March 2015 2014 2015 2014
Interest bearing loans and borrowings 43,906,434,348 31,518,277,317 12,921,339,070 7,879,643,152 Total debt 43,906,434,348 31,518,277,317 12,921,339,070 7,879,643,152
Equity 15,781,972,613 13,350,744,771 5,630,413,224 5,311,998,017 Total capital 15,781,972,613 13,350,744,771 5,630,413,224 5,311,998,017
Capital and total debt 59,688,406,961 44,869,022,088 18,551,752,294 13,191,641,169
Gearing ratio-(X) 0.74 0.70 0.70 0.60
Annual Report 2014-15 164
Notes to the Financial Statements
14 FINANCIAL INSTRUMENTS Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
Financial assets by categories - Group
In Rs Loans and receivables Financial assets fair value through Available for sale financial assets Held to maturity investments Total profit or loss As at 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Financial instruments in non current assets Other non current financial assets 3,460,146,640 1,598,806,695 - - 5,397,343,129 4,342,420,083 230,159,910 225,680,936 9,087,649,679 6,166,907,714 Rental receivable on lease assets and hire purchase 3,669,327,302 3,762,890,106 ------3,669,327,302 3,762,890,106
Financial instruments in current assets Trade and other receivables 6,622,803,106 5,070,927,688 ------6,622,803,106 5,070,927,688 Loans and advances 5,524,162,085 2,077,038,702 ------5,524,162,085 2,077,038,702 Rental receivable on lease assets and hire purchase 2,881,969,879 4,616,673,500 ------2,881,969,879 4,616,673,500 Amounts due from related parties 572,053 778,460 ------572,053 778,460 Short term investments 5,600,345,437 3,038,042,580 2,656,395,983 3,320,288,084 135,699,732 - - - 8,392,441,152 6,358,330,664 Cash in hand and at bank 1,926,725,822 1,762,101,994 ------1,926,725,822 1,762,101,994 Total 29,686,052,324 21,927,259,725 2,656,395,983 3,320,288,084 5,533,042,861 4,342,420,083 230,159,910 225,680,936 38,105,651,078 29,815,648,828
Financial liabilities by categories - Group In Rs Financial liabilities at fair value through Financial liabilities measured at Total profit or loss (FVPTPL) amortised cost As at 31 March 2015 2014 2015 2014 2015 2014
Financial instruments in non current liabilities Other non current financial liabilities 6,260,352 6,260,352 25,450,268 - 31,710,620 6,260,352 Interest bearing borrowings - - 22,844,291,422 12,999,848,935 22,844,291,422 12,999,848,935 Public deposits - - 2,214,295,787 1,885,402,009 2,214,295,787 1,885,402,009
Financial instruments in current liabilities Trade and other payables - - 7,041,840,113 5,751,656,616 7,041,840,113 5,751,656,616 Amounts due to related parties - - 15,970,784 19,508,602 15,970,784 19,508,602 Short term borrowings - - 14,787,184,778 11,822,115,977 14,787,184,778 11,822,115,977 Current portion of interest bearing borrowings - - 4,616,956,512 4,144,437,836 4,616,956,512 4,144,437,836 Public deposits - - 9,838,760,403 7,418,343,338 9,838,760,403 7,418,343,338 Bank overdrafts - - 1,658,001,636 2,551,874,570 1,658,001,636 2,551,874,570 Total 6,260,352 6,260,352 63,042,751,703 46,593,187,883 63,049,012,055 46,599,448,235
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: • Fair value of quoted equities, debentures and bonds is based on price quotations in an active market at the reporting date • The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as other non current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities
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14 FINANCIAL INSTRUMENTS Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
Financial assets by categories - Group
In Rs Loans and receivables Financial assets fair value through Available for sale financial assets Held to maturity investments Total profit or loss As at 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Financial instruments in non current assets Other non current financial assets 3,460,146,640 1,598,806,695 - - 5,397,343,129 4,342,420,083 230,159,910 225,680,936 9,087,649,679 6,166,907,714 Rental receivable on lease assets and hire purchase 3,669,327,302 3,762,890,106 ------3,669,327,302 3,762,890,106
Financial instruments in current assets Trade and other receivables 6,622,803,106 5,070,927,688 ------6,622,803,106 5,070,927,688 Loans and advances 5,524,162,085 2,077,038,702 ------5,524,162,085 2,077,038,702 Rental receivable on lease assets and hire purchase 2,881,969,879 4,616,673,500 ------2,881,969,879 4,616,673,500 Amounts due from related parties 572,053 778,460 ------572,053 778,460 Short term investments 5,600,345,437 3,038,042,580 2,656,395,983 3,320,288,084 135,699,732 - - - 8,392,441,152 6,358,330,664 Cash in hand and at bank 1,926,725,822 1,762,101,994 ------1,926,725,822 1,762,101,994 Total 29,686,052,324 21,927,259,725 2,656,395,983 3,320,288,084 5,533,042,861 4,342,420,083 230,159,910 225,680,936 38,105,651,078 29,815,648,828
Financial liabilities by categories - Group In Rs Financial liabilities at fair value through Financial liabilities measured at Total profit or loss (FVPTPL) amortised cost As at 31 March 2015 2014 2015 2014 2015 2014
Financial instruments in non current liabilities Other non current financial liabilities 6,260,352 6,260,352 25,450,268 - 31,710,620 6,260,352 Interest bearing borrowings - - 22,844,291,422 12,999,848,935 22,844,291,422 12,999,848,935 Public deposits - - 2,214,295,787 1,885,402,009 2,214,295,787 1,885,402,009
Financial instruments in current liabilities Trade and other payables - - 7,041,840,113 5,751,656,616 7,041,840,113 5,751,656,616 Amounts due to related parties - - 15,970,784 19,508,602 15,970,784 19,508,602 Short term borrowings - - 14,787,184,778 11,822,115,977 14,787,184,778 11,822,115,977 Current portion of interest bearing borrowings - - 4,616,956,512 4,144,437,836 4,616,956,512 4,144,437,836 Public deposits - - 9,838,760,403 7,418,343,338 9,838,760,403 7,418,343,338 Bank overdrafts - - 1,658,001,636 2,551,874,570 1,658,001,636 2,551,874,570 Total 6,260,352 6,260,352 63,042,751,703 46,593,187,883 63,049,012,055 46,599,448,235
• Fair value of the unquoted ordinary shares has been estimated using a Discounted Cash Flow (DCF) model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.
• Fair value of loans and advances, rental receivable on lease assets and hire purchase approximately 70% of the portfolio has a remaining maturity of less than one year. Therefore fair value of lending portfolio approximates to the carrying value as at the reporting date. All loans and advances are granted with a fixed interest rate terms.
Annual Report 2014-15 166
Notes to the Financial Statements
14 FINANCIAL INSTRUMENTS Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
Financial assets by categories - Company
In Rs Loans and receivables Financial assets fair value through Available for sale financial assets Held to maturity investments Total profit or loss As at 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Financial instruments in non current assets Other non current financial assets 1,275,418,884 55,268,900 - - - - 2,528,664 2,528,664 1,277,947,548 57,797,564
Financial instruments in current assets Trade and other receivables 241,724,591 167,169,840 ------241,724,591 167,169,840 Amounts due from related parties 2,290,507,881 2,453,097,064 ------2,290,507,881 2,453,097,064 Short term investments 2,199,540,683 1,513,376,439 1,346,207,455 5,619,616 125,000,000 125,000,000 - - 3,670,748,138 1,643,996,055 Cash in hand and at bank 42,695,145 279,766,916 ------42,695,145 279,766,916 Total 6,049,887,184 4,468,679,159 1,346,207,455 5,619,616 125,000,000 125,000,000 2,528,664 2,528,664 7,523,623,303 4,601,827,439
Financial liabilities by categories - Company In Rs Financial liabilities measured at Total amortised cost As at 31 March 2015 2014 2015 2014
Financial instruments in non current liabilities Interest bearing borrowings 5,767,785,189 2,448,181,474 5,767,785,189 2,448,181,474 Other non current financial liabilities 509,915,332 - 509,915,332 -
Financial instruments in current liabilities Trade and other payables 29,531,350 14,569,828 29,531,350 14,569,828 Amounts due to related parties 148,005,634 946,657,314 148,005,634 946,657,314 Short term borrowings 4,191,598,768 3,920,810,772 4,191,598,768 3,920,810,772 Current portion of interest bearing borrowings 2,368,998,067 1,455,262,816 2,368,998,067 1,455,262,816 Bank overdrafts 83,041,714 55,388,092 83,041,714 55,388,092 Total 13,098,876,054 8,840,870,296 13,098,876,054 8,840,870,296
Softlogic Holdings PLC 167
14 FINANCIAL INSTRUMENTS Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.
Financial assets by categories - Company
In Rs Loans and receivables Financial assets fair value through Available for sale financial assets Held to maturity investments Total profit or loss As at 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Financial instruments in non current assets Other non current financial assets 1,275,418,884 55,268,900 - - - - 2,528,664 2,528,664 1,277,947,548 57,797,564
Financial instruments in current assets Trade and other receivables 241,724,591 167,169,840 ------241,724,591 167,169,840 Amounts due from related parties 2,290,507,881 2,453,097,064 ------2,290,507,881 2,453,097,064 Short term investments 2,199,540,683 1,513,376,439 1,346,207,455 5,619,616 125,000,000 125,000,000 - - 3,670,748,138 1,643,996,055 Cash in hand and at bank 42,695,145 279,766,916 ------42,695,145 279,766,916 Total 6,049,887,184 4,468,679,159 1,346,207,455 5,619,616 125,000,000 125,000,000 2,528,664 2,528,664 7,523,623,303 4,601,827,439
Financial liabilities by categories - Company In Rs Financial liabilities measured at Total amortised cost As at 31 March 2015 2014 2015 2014
Financial instruments in non current liabilities Interest bearing borrowings 5,767,785,189 2,448,181,474 5,767,785,189 2,448,181,474 Other non current financial liabilities 509,915,332 - 509,915,332 -
Financial instruments in current liabilities Trade and other payables 29,531,350 14,569,828 29,531,350 14,569,828 Amounts due to related parties 148,005,634 946,657,314 148,005,634 946,657,314 Short term borrowings 4,191,598,768 3,920,810,772 4,191,598,768 3,920,810,772 Current portion of interest bearing borrowings 2,368,998,067 1,455,262,816 2,368,998,067 1,455,262,816 Bank overdrafts 83,041,714 55,388,092 83,041,714 55,388,092 Total 13,098,876,054 8,840,870,296 13,098,876,054 8,840,870,296
Annual Report 2014-15 168
Notes to the Financial Statements
FAIR VALUE HIERARCHY 14.1 Financial assets and liabilities by fair value hierarchy - Group The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
The Group held the following financial instruments carried at fair value in the statement of financial position:
In Rs. Level 1 Level 2 Level 3 As at 31 March 2015 2014 2015 2014 2015 2014
Assets measured at fair value Financial assets held for trading 2,656,395,983 3,320,288,084 - - Available for sale 5,258,012,261 4,067,389,483 275,000,000 275,000,000 30,600 30,600 Total 7,914,408,244 7,387,677,567 275,000,000 275,000,000 30,600 30,600
Liabilities measured at fair value Other non current financial liabilities - - 31,710,620 31,710,620 - - Total - - 31,710,620 31,710,620 - - During the reporting period ended 31 March 2015, there were no transfers between Level 1 and Level 2 fair value measurements.
Financial assets and liabilities by fair value hierarchy - Company In Rs. Level 1 Level 2 Level 3 As at 31 March 2015 2014 2015 2014 2015 2014
Assets measured at fair value Financial assets held for trading 1,346,207,455 5,619,616 125,000,000 125,000,000 - - Total 1,346,207,455 5,619,616 125,000,000 125,000,000 - - During the reporting period ended 31 March 2015, there were no transfers between Level 1 and Level 2 fair value measurements.
14.2 Non financial assets - Group In Rs. Level 1 Level 2 Level 3 As at 31 March 2015 2014 2015 2014 2015 2014
Assets measured at fair value Land and buildings - - - - 11,264,632,760 7,745,483,022 Buildings on leasehold land - - - - 5,128,906,334 2,285,165,523 Investment property - - - - 94,848,000 2,266,146,000 Total - - - - 16,488,387,094 12,296,794,545
Non financial assets - Company In Rs. Level 1 Level 2 Level 3 As at 31 March 2015 2014 2015 2014 2015 2014
Assets measured at fair value Investment property - - - - 442,641,386 394,000,000 Total - - - - 442,641,386 394,000,000 In determining the fair value, highest and best use of the property including the current condition of the properties, future usability and associated redevelopment requirements have been considered. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.
Softlogic Holdings PLC 169
14.2.1 Details of Group’s land and buildings stated at valuations are indicated below;
Group Company Property Method of Effective date Property Extent Significant Sensitivity of valuation of valuation valuer unobservable fair value to inputs unobservable inputs
Land of Softlogic 14, De Fonseka Open market 19-03-2015 R S Wijesuriya 0 A 0 R 22.45 P Estimated price Positively Holdings PLC Place, Colombo value method Incorporated per perch correlated 05 Valuer Rs.6,500,000 sensitivity Softlogic Dharmapala Open market 30-09-2013 R S Wijesuriya 0 A 2 R 28.51 P Estimated price Positively Properties (Pvt) Mw., Colombo value method Incorporated per perch correlated Ltd 03 Valuer Rs.8,500,000 sensitivity Odel Lanka 271 & 271F, Open market 01-11-2014 P B 1 A 1 R 7.39 P Estimated price Positively (Pvt) Ltd Kaduwela value method Kalugalgedara per perch correlated Road, Chartered Rs.1,000,000 - sensitivity Thalangama Valuation Rs.2,250,000 Surveyor
Building of Softlogic 14, De Fonseka Direct capital 19-03-2015 R S Wijesuriya - Estimated Positively Information Place, Colombo comparison Incorporated value per correlated Technologies 05 method Valuer square foot sensitivity (Pvt) Ltd Rs.8,500 Asiri Surgical 21, Depreciated 31-05-2012 P B - Estimated Positively Hospital PLC Kirimmandala replacement Kalugalgedara value per correlated Mw., Colombo cost method Chartered square foot sensitivity 05 Valuation Rs.3,500 - Surveyor Rs.8,000
Land and Building of Softlogic 262, Gagarama Open market 26-03-2015 R S Wijesuriya 1 A 2 R 30 P Estimated price Positively Holdings PLC Rd., Piliyandala value method/ Incorporated per perch correlated direct capital Valuer Rs.275,000 sensitivity comparison Estimated Positively method value per correlated square foot Rs. sensitivity 800 - Rs.5,500 Softlogic Retail Galle Road, Open market 30-09-2012 R S Wijesuriya 0 A 0 R 30 P Estimated price Positively (Pvt) Ltd Colombo 03 value method/ Incorporated per perch correlated direct capital Valuer Rs.7,000,000 sensitivity comparison Estimated Positively method value per correlated square foot sensitivity Rs.7,500 Asiri Hospital 181, Open market 31-05-2012 P B 1 A 0 R 17.23 P Estimated price Positively Holdings PLC Kirula Road, value method/ Kalugalgedara per perch correlated Colombo 05 direct capital Chartered Rs.3,250,000 sensitivity comparison Valuation Estimated Positively method Surveyor value per correlated square foot sensitivity Rs.1,500 - Rs.5,000
Annual Report 2014-15 170
Notes to the Financial Statements
Company Property Method of Effective date Property Extent Significant Sensitivity of valuation of valuation valuer unobservable fair value to inputs unobservable inputs
Central Hospital 114, Norris Open market 31-03-2015 P B 1 A 0 R 21.03 P Estimated price Positively Ltd Canal Road, value method/ Kalugalgedara per perch correlated Colombo 10 direct capital Chartered Rs.5,500,000 sensitivity comparison Valuation Estimated Positively method Surveyor value per correlated square foot sensitivity Rs.2,000 - Rs.9,000
Asiri Hospital 15, Dharmapala Open market 31-03-2015 P B 1 A 2 R 1.5 P Estimated price Positively Matara (Pvt) Mw., value method/ Kalugalgedara per perch correlated Ltd Uyanwatta direct capital Chartered Rs.500,000 - sensitivity comparison Valuation Rs.750,000 method Surveyor Estimated Positively value per correlated square foot sensitivity Rs.2,000 - Rs.9,000 Odel PLC 10, Ward Place, Open market 01-11-2014 P B 1 A 2 R 32.07 P Estimated price Positively Colombo 07 value method Kalugalgedara per perch correlated direct capital Chartered Rs.3,000,000 - sensitivity comparison Valuation Rs.10,000,000 method Surveyor Estimated Positively value per correlated square foot sensitivity Rs.1,000 - Rs.3,750 29 A, Jayatilake Open market 01-11-2014 P B 0 A 1 R 2.16 P Estimated price Positively Mw., Panadura value method Kalugalgedara per perch correlated direct capital Chartered Rs.1,000,000 sensitivity comparison Valuation Estimated Positively method Surveyor value per correlated square foot sensitivity Rs.2,000 - Rs.3,750 Odel Properties 475/32, Kotte Open market 01-11-2014 P B 0 A 1 R 7.39 P Estimated price Positively (Pvt) Ltd Road, Rajagiriya value method Kalugalgedara per perch correlated direct capital Chartered Rs.3,000,000 sensitivity comparison Valuation Estimated Positively method Surveyor value per correlated square foot sensitivity Rs.4,000 - Rs.5,000
Softlogic Holdings PLC 171
14.2.2 Valuation details of investment property
14.2.2.1 Group Company Property Method of Effective date Property Extent Significant Sensitivity of valuation of valuation valuer unobservable fair value to inputs unobservable inputs
Land of Softlogic Retail Dekatana, Open market 31-03-2015 R S Wijesuriya 18 A 2 R 4 P Estimated price Positively (Pvt) Ltd Gampaha value method Incorporated per perch correlated Valuer Rs.30,000 sensitivity
Land and Building of Asiri Central 37, Horton Open market 31-03-2015 P B 1 A 3 R 10 P Estimated price Positively Hospital Ltd Place, Colombo value method/ Kalugalgedara per perch correlated 07 direct capital Chartered Rs.9,000,000 sensitivity comparison Valuation Estimated Positively method Surveyor value per correlated square foot sensitivity Rs.100 - Rs.1,500
14.2.2.2 Company Company Property Method of Effective date Property Extent Significant Sensitivity of valuation of valuation valuer unobservable fair value to inputs unobservable inputs
Land of Softlogic 14, De Fonseka Open market 19-03-2015 R S Wijesuriya 0 A 0 R 22.45 P Estimated price Positively Holdings PLC Place, Colombo value method Incorporated per perch correlated 05 Valuer Rs.6,500,000 sensitivity
Land and Building of Softlogic 262, Gagarama Open market 26-03-2015 R S Wijesuriya 1 A 2 R 30 P Estimated price Positively Holdings PLC Rd., Piliyandala value method/ Incorporated per perch correlated direct capital Valuer Rs.275,000 sensitivity comparison Estimated Positively method value per correlated square foot sensitivity Rs.800 - Rs.5,500
Annual Report 2014-15 172
Notes to the Financial Statements
15 PROPERTY, PLANT AND EQUIPMENT
15.1 Group
In Rs. Land and Buildings on Plant and Computer, Motor Capital work in Total Total As at 31 March buildings leasehold machinery Equipment, vehicles progress 2015 2014 land furniture and fittings
Freehold assets Cost or Valuation At the beginning of the year 7,933,933,817 2,423,404,289 3,796,287,148 3,633,774,340 264,252,113 3,278,312,756 21,329,964,463 17,669,281,400 Additions 41,564,500 665,816,693 670,791,686 1,050,638,042 60,844,833 1,794,025,417 4,283,681,171 3,505,412,862 Acquisition through business combinations 3,389,004,962 92,085,754 - 772,241,209 37,897,164 46,468,896 4,337,697,985 - Disposals - (24,250,626) (48,251,602) (37,530,922) (56,001,045) - (166,034,195) (139,184,278) Transfers* (376,398,034) 2,345,833,431 (31,875,534) (10,796,819) 4,657,480 (2,143,175,455) (211,754,931) 11,217,875 Impairment/ derecognition - - - (8,270,465) - (502,023) (8,772,488) (29,691,599) Revaluations 369,616,947 - - - - - 369,616,947 313,990,550 Effect of movements in exchange rates - (96,687) - (1,255,629) - - (1,352,316) (1,062,347) At the end of the year 11,357,722,192 5,502,792,854 4,386,951,698 5,398,799,756 311,650,545 2,975,129,591 29,933,046,636 21,329,964,463
Leasehold assets Cost At the beginning of the year - - 68,511,367 4,297,487 247,005,373 - 319,814,227 252,427,100 Additions - - 90,904,858 - 63,896,762 - 154,801,620 98,507,144 Acquisition through business combinations - - - - 4,718,750 - 4,718,750 - Disposals - - - - (28,531,601) - (28,531,601) (19,902,142) Transfers - - - - (4,718,750) - (4,718,750) (11,217,875) At the end of the year - - 159,416,225 4,297,487 282,370,534 - 446,084,246 319,814,227
Total value of assets 11,357,722,192 5,502,792,854 4,546,367,923 5,403,097,243 594,021,079 2,975,129,591 30,379,130,882 21,649,778,690
Softlogic Holdings PLC 173
In Rs. Land and Buildings on Plant and Computer, Motor Capital work in Total Total As at 31 March buildings leasehold machinery Equipment, vehicles progress 2015 2014 land furniture and fittings
Freehold assets Accumulated depreciation At the beginning of the year 188,450,795 138,238,766 1,903,666,918 1,632,509,672 131,894,674 - 3,994,760,825 3,210,440,908 Charge for the year 99,510,503 160,116,605 350,034,918 505,347,375 30,293,841 - 1,145,303,242 866,463,360 Acquisition through business combinations 9,004,962 60,442,635 - 380,933,023 20,384,579 - 470,765,199 - Disposals - (6,224,653) (27,552,317) (11,916,213) (35,439,579) - (81,132,762) (87,475,496) Transfers* (203,876,828) 21,358,993 (10,919,919) (10,439,075) 3,877,673 - (199,999,156) 6,230,971 Impairment/ derecognition - - - (7,245,560) - - (7,245,560) - Effect of movements in exchange rates - (45,826) - (1,100,522) - - (1,146,348) (898,918) At the end of the year 93,089,432 373,886,520 2,215,229,600 2,488,088,700 151,011,188 - 5,321,305,440 3,994,760,825
Leasehold assets Accumulated depreciation At the beginning of the year - - 2,010,408 4,297,486 110,432,692 - 116,740,586 102,615,018 Charge for the year - - 9,667,439 - 35,027,238 - 44,694,677 35,373,491 Acquisition through business combinations - - - - 4,482,813 - 4,482,813 - Disposals - - - - (13,751,848) - (13,751,848) (15,016,953) Transfers - - - - (3,877,673) - (3,877,673) (6,230,970) At the end of the year - - 11,677,847 4,297,486 132,313,222 - 148,288,555 116,740,586
Total accumulated depreciation 93,089,432 373,886,520 2,226,907,447 2,492,386,186 283,324,410 - 5,469,593,995 4,111,501,411
Carrying value As at 31 March 2015 11,264,632,760 5,128,906,334 2,319,460,476 2,910,711,057 310,696,669 2,975,129,591 24,909,536,887 As at 31 March 2014 7,745,483,022 2,285,165,523 1,959,121,189 2,001,264,669 268,930,120 3,278,312,756 17,538,277,279
* Transfers include the accumulated depreciation as at revaluation date that was eliminated against the gross carrying amount of the revalued assets.
Annual Report 2014-15 174
Notes to the Financial Statements
15 PROPERTY, PLANT AND EQUIPMENT
15.2 Company In Rs. Furniture and Computer and Motor Total Total As at 31 March fittings Office vehicles 2015 2014 equipment
Freehold assets Cost At the beginning of the year 20,255,760 38,596,492 46,812,766 105,665,018 103,273,891 Additions 1,524,137 3,888,467 126,488 5,539,092 14,782,876 Disposals - (373,230) (5,076,797) (5,450,027) (16,296,875) Transfers - 1,721,423 - 1,721,423 3,905,126 Impairment/ derecognition (2,128,213) (6,085,004) - (8,213,217) - At the end of the year 19,651,684 37,748,148 41,862,457 99,262,289 105,665,018
Leasehold assets Cost At the beginning of the year - - 142,002,523 142,002,523 133,274,077 Additions - - - - 29,910,714 Disposals - - (21,930,535) (21,930,535) (17,277,142) Transfers - - - - (3,905,126) At the end of the year - - 120,071,988 120,071,988 142,002,523
Total value of assets 19,651,684 37,748,148 161,934,445 219,334,277 247,667,541
Freehold assets Accumulated depreciation At the beginning of the year 7,881,775 12,570,922 36,479,127 56,931,824 58,234,274 Charge for the year 1,972,593 3,951,572 2,546,870 8,471,035 8,238,987 Disposals - (128,760) (5,076,797) (5,205,557) (13,446,563) Transfers - (224,949) - (224,949) 3,905,126 Impairment/ derecognition (1,840,805) (5,377,164) - (7,217,969) - At the end of the year 8,013,563 10,791,621 33,949,200 52,754,384 56,931,824
Leasehold assets Accumulated depreciation At the beginning of the year - - 40,410,206 40,410,206 39,756,731 Charge for the year - - 15,768,620 15,768,620 17,213,054 Disposal - - (11,137,251) (11,137,251) (12,654,453) Transfers - - - - (3,905,126) At the end of the year - - 45,041,575 45,041,575 40,410,206
Total accumulated depreciation 8,013,563 10,791,621 78,990,775 97,795,959 97,342,030
Carrying value As at 31 March 2015 11,638,121 26,956,527 82,943,670 121,538,318 As at 31 March 2014 12,373,985 26,025,570 111,925,956 150,325,511
Softlogic Holdings PLC 175
15.3 Land and Buildings In Rs. Group Company As at 31 March 2015 2014 2015 2014
At cost 3,192,566,590 629,800,066 - - At valuation 13,200,972,504 9,400,848,479 - - 16,393,539,094 10,030,648,545 - -
15.4 Carrying value In Rs. Group Company As at 31 March 2015 2014 2015 2014
At cost 11,410,768,692 7,934,355,159 46,507,905 48,733,194 At valuation 13,200,972,504 9,400,848,479 - - On finance lease 297,795,691 203,073,641 75,030,413 101,592,317 24,909,536,887 17,538,277,279 121,538,318 150,325,511
15.5 Details of group’s land and buildings stated at valuations are indicated below;
Revaluation of land and buildings The Group uses the revaluation model of measurement of land and buildings. The Group engaged independent expert values, to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence. Valuations are based on active market prices, adjusted for any difference in the nature, location or condition of the specific property. The date of the most recent revaluation was 31 March 2015.
Details of Group’s land and building stated at valuation are indicated in the note no 14.2.1
As a result of the valuations of the land and buildings the surplus arising from the change in fair value was Rs.369.62 mn (2014 - Rs.313.99 mn) has been credited to the revaluation reserve.
15.6 The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows;
In Rs. Group As at 31 March 2015 2014
Cost 8,423,755,965 6,511,552,386 Accumulated depreciation (737,964,528) (543,494,520) Carrying value 7,685,791,437 5,968,057,866
15.7 Group land and buildings with a carrying value of Rs.11,833 mn (2014 - Rs.7,344 mn) have been pledged as security for term loans obtained, details of which are disclosed in note 48.
15.8 Group property, plant and equipment with a cost of Rs.1,295.24 mn (2014 - Rs.676.32 mn) have been fully depreciated and continue to be still in use by the Group. The cost of fully depreciated assets of the company amounts to Rs.1.67 mn (2014 - Rs.13.56 mn).
15.9 Odel PLC, a subsidiary of Softlogic Holdings PLC is in the process of consolidating the premises no bearing 10, 15, 21/5, 25/2 , 3, 5, 6 & 6B and 17, 17/1, 17/1A,1 9 & 19A situated at Colombo 07. The consolidated survey plan has been already submitted to the relevant authorities to obtain necessary approvals.
Annual Report 2014-15 176
Notes to the Financial Statements
16 LEASE RENTALS PAID IN ADVANCE In Rs. Group As at 31 March 2015 2014
At the beginning of the year 153,312,184 154,349,111 Additions during the year 702,520,660 - Amortisation for the year (1,036,939) (1,036,927) At the end of the year 854,795,905 153,312,184 16.1 Prepaid lease rentals paid to acquire land use rights have been classified as lease rental paid in advance and are amortised over the lease term in accordance with the pattern of benefits provided.
16.2 Details of prepaid lease rentals In Rs. Group As at 31 March Extent Lease period 2015 2014
Asiri Surgical Hospital PLC - Colombo 05 2 A 1 R 11.6 P 50 years from 29 March 2000 87,275,245 88,312,184 Asiri Hospital Kandy (Pvt) Ltd - Mulgampala 2 A 1 R 13.84 P 50 years from 01 January 2015 767,520,660 65,000,000 854,795,905 153,312,184
17 INVESTMENT PROPERTY In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
At the beginning of the year 2,266,146,000 2,175,045,500 394,000,000 333,699,500 Additions during the year - - 7,904,500 - Change in fair value during the year 526,702,000 91,100,500 40,736,886 60,300,500 Transfers to assets held for sale 17.1 (2,698,000,000) - - - At the end of the year 94,848,000 2,266,146,000 442,641,386 394,000,000
17.1 Assets held for sale During the financial year 2014-15, Asiri Central Hospitals Ltd, a subsidiary of Softlogic Holdings PLC approved and authorised, as a special resolution and as required by Section 185 of the Companies Act No. 07 of 2007, the sale of the land and premises located at No. 37, Horton Place, Colombo 07 at a total consideration of Rs.2,600,000,000/- or to such other purchaser approved by the Board of Directors of the Company at a minimum consideration reflecting the value of the said land and premises as arrived at by an independent valuer.
The said transaction was completed on 09 July, 2015 for a total consideration of Rs.2,700,000,000/-.
17.2 Fair value of investment property Fair value of the investment property was appraised in accordance with SLFRS 13, LKAS 40 and 8th edition of International Valuation Standards published by the International Valuation Standards Committee (IVSC), by the independent valuer.
The market value has been used as the fair value. In determining the fair value, the current condition of the properties, future usability and associated redevelopment requirements have been considered. Also valuer has made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are approximated within appropriate range of values.
17.3 Valuation details of investment property Details of Group’s and Company’s investment property stated at fair value are indicated in the note no 14.2.2.1 and 14.2.2.2
17.4 Investment property generated rental income In Rs. Group Company For the year ended 2015 2014 2015 2014
Amounts recognised in income statement Revenue 15,494,196 60,870,540 25,917,469 18,780,000 Direct operating expenses 6,454,244 5,468,864 7,009,385 5,349,631
Softlogic Holdings PLC 177
18 INTANGIBLE ASSETS In Rs. Group Company As at 31 March 2015 2014 2015 2014 Goodwill Lease right PVIB Brand name Others Computer Software
Cost / carrying value At the beginning of the year 4,115,823,525 874,405,830 1,980,619,826 735,402,648 614,102,277 8,320,354,106 8,017,307,696 7,563,029 - Additions - - - - 312,911,256 312,911,256 305,007,400 1,861,900 7,563,029 Acquisition through business combinations - - - 998,180,211 129,481,860 1,127,662,071 - - - Transfers - - - - 5,316,607 5,316,607 - (2,855,443) - Impairment/ Derecognition - - - - (27,614,808) (27,614,808) - - - Exchange translation difference - - - - (2,408,044) (2,408,044) (1,960,990) - -
At the end of the year 4,115,823,525 874,405,830 1,980,619,826 1,733,582,859 1,031,789,147 9,736,221,188 8,320,354,106 6,569,486 7,563,029
Accumulated amortisation and impairment At the beginning of the year - 67,893,858 319,787,576 - 201,260,099 588,941,533 386,477,075 2,221,133 - Amortisation - 21,921,133 123,788,739 - 102,339,754 248,049,626 204,045,351 2,624,845 2,221,133 Acquisition through business combinations - - - - 44,634,198 44,634,198 - - - Exchange translation difference - - - - (2,408,044) (2,408,044) (1,580,893) - -
At the end of the year - 89,814,991 443,576,315 - 345,826,007 879,217,313 588,941,533 4,845,978 2,221,133
Carrying value As at 31 March 2015 4,115,823,525 784,590,839 1,537,043,511 1,733,582,859 685,963,140 8,857,003,875 1,723,508 As at 31 March 2014 4,115,823,525 806,511,972 1,660,832,250 735,402,648 412,842,178 7,731,412,573 5,341,896
18.1 Goodwill Goodwill acquired through business combinations have been allocated to six cash generating units (CGU’s) for impairment testing as follows:
In Rs. As at 31 March 2015 2014
Communication and Information Technologies 14,086,631 14,086,631 Retail 742,615,817 742,615,817 Travel and Leisure 182,206,628 182,206,628 Others 31,462,743 31,462,743 Financial Services 817,741,917 817,741,917 Healthcare 2,327,709,789 2,327,709,789 4,115,823,525 4,115,823,525
Annual Report 2014-15 178
Notes to the Financial Statements
The recoverable amount of all CGUs have been determined based on the higher of its fair value less costs to sell and its Value in Use (VIU) calculation. VIU was determined by discounting the future cash flows generated from the continuing use of the unit. The key assumptions used are given below: Business growth Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to five years immediately subsequent to the budgeted year based on industrial growth rates. Cash flows beyond five year period are extrapolated using 0% growth rate. Inflation The basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic condition. Discount rate The discounting rate used is the risk free rate adjusted by the additional appropriate risk premium. Margin The basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceding the budgeted year adjusted for projected market conditions and business plans.
18.2 Present Value of acquired-In -force Business (PVIB) Upon acquiring controlling stake in Asian Alliance Insurance PLC (AAI), the group has recognised in the consolidated financial statements an intangible assets representing the present value of future profits on AAI’s portfolio of long term life insurance contracts , known as the present value of acquired in-force business (PVIB) at the acquisition date, PVIB recognised at the acquisition date will be amortised over life of the business acquired and reviewed annually for any impairment in value.
19 INVESTMENTS IN SUBSIDIARIES In Rs. Group Company As at 31 March 2015 2014 2015 2014 Group quoted investments - - 6,416,364,048 5,385,313,619 Group unquoted investments - - 4,176,536,124 3,622,036,138 - - 10,592,900,172 9,007,349,757 19.1 Investment in equity accounted investee
In Rs. Group Company As at 31 March 2015 2014 2015 2014 Investment in equity accounted investee 26,216,105 24,746,404 11,000,000 11,000,000 26,216,105 24,746,404 11,000,000 11,000,000 19.2 Group quoted investments In Rs. Group Company As at 31 March 2015 2015 2014 No of shares Effective No of shares Effective holding% holding% Cost Asian Alliance Insurance PLC 22,212,836 43.32% 17,555 0.05% 1,559,884 1,559,884 Asiri Hospital Holdings PLC 565,964,414 51.23% 505,914,144 46.03% 3,793,288,077 3,655,303,107 Asiri Surgical Hospital PLC 389,391,719 37.75% - - - - Odel PLC 254,172,871 93.39% - - - - Softlogic Capital PLC 503,151,380 73.12% 503,151,380 73.12% 2,596,738,846 1,709,831,037 Softlogic Finance PLC 32,968,978 47.84% 779,969 1.53% 24,777,241 18,619,591 6,416,364,048 5,385,313,619 19.3 Group quoted investments In Rs. Group Company As at 31 March 2015 2014 2015 2014 Market Value Asian Alliance Insurance PLC 2,932,094,352 1,801,461,000 2,317,260 1,423,711 Asiri Central Hospitals Ltd - 5,547,666,930 - - Asiri Hospital Holdings PLC 11,432,481,163 12,410,612,809 10,219,465,709 11,077,496,815 Asiri Surgical Hospital PLC 5,918,754,129 4,555,883,112 - - Odel PLC 5,591,803,162 - - - Softlogic Capital PLC 3,018,908,280 844,123,714 3,018,908,280 844,123,714 Softlogic Finance PLC 1,150,617,332 734,830,196 27,220,918 17,643,720 30,044,658,418 25,894,577,761 13,267,912,167 11,940,687,960
Softlogic Holdings PLC 179
19.4 Group unquoted investments In Rs. Group Company As at 31 March 2015 2015 2014 No of shares Effective No of shares Effective holding % holding %
Asian Alliance Insurance General Ltd 10,000,000 43.32 - - - - Asiri Central Hospitals Ltd 22,265,721 51.08 - - - - Asiri Diagnostics Services (Pvt) Ltd 273,221 34.09 - - - - Asiri Hospital Kandy (Pvt) Ltd 4,000,000 51.23 - - - - Asiri Hospital Matara (Pvt) Ltd 25,999,999 51.23 - - - - BSL International (Pvt) Ltd 298,400 93.39 - - - - Central Hospital Ltd 194,121,930 46.18 - - - - Ceysand Resorts Ltd - Voting 8,587,669 99.79 - - - - - Non voting 134,250 96.16 - - - - Dai-Nishi Securities (Pvt) Ltd 49,999,998 99.99 - - - - Future Automobiles (Pvt) Ltd 19,300,000 100.00 19,300,000 100.00 195,675,000 52,675,000 Greenfield Trading (Pvt) Ltd 1 93.39 - - - Odel Apparels (Pvt) Ltd 2 93.39 - - - Odel Information Technology Services (Pvt) Ltd 1 93.39 - - - Odel Lanka (Pvt) Ltd 27,000,002 93.39 - - - Odel Properties (Pvt) Ltd 1,081,002 93.39 - - - Silk Route Foods (Pvt) Ltd 5,100 51.00 - - - Softlogic Australia (Pty) Ltd 400,002 100.00 400,002 100.00 4,604,600 4,604,600 Softlogic Automobiles (Pvt) Ltd 5,000,000 100.00 5,000,000 100.00 50,000,000 50,000,000 Softlogic B P O Services (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000,000 1,000,000 Softlogic Brands (Pvt) Ltd 249,998 93.39 - - - - Softlogic City Hotels (Pvt) Ltd 116,344,836 99.83 - - - - Softlogic Communications (Pvt) Ltd 534,699 99.00 534,699 99.00 5,978,490 5,978,490 Softlogic Communication Services (Pvt) Ltd 99 99.00 99 99.00 990 990 Softlogic Computers (Pvt) Ltd 199,998 100.00 199,998 100.00 2,354,365 2,354,365 Softlogic Corporate Services (Pvt) Ltd 2,725,002 100.00 2,725,002 100.00 10,393,962 10,393,962 Softlogic Destination Management (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000,000 1,000,000 Softlogic Information Technologies (Pvt) Ltd 1,464,997 99.99 1,464,997 99.99 16,465,336 16,465,336 Softlogic International (Pvt) Ltd 4,999,999 99.99 4,999,999 99.99 49,999,990 49,999,990 Softlogic Mobile Distribution (Pvt) Ltd 1,000,000 100.00 1,000,000 100.00 10,000,000 - Softlogic Properties (Pvt) Ltd 230,748,208 99.83 230,748,208 99.83 1,911,484,085 1,911,484,085 Softlogic Real Estate (Pvt) Ltd 100,000 100.00 100,000 100.00 - - Softlogic Restaurants (Pvt) Ltd 25,000,000 100.00 25,000,000 100.00 250,000,000 250,000,000 Softlogic Retail (Pvt) Ltd 169,345,616 99.99 169,345,616 99.99 1,666,579,306 1,266,079,320 Softlogic Retail One (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000,000 - Softlogic Solar (Pvt) Ltd 99 99.00 99 99.00 - - Softlogic Stockbrokers (Pvt) Ltd 19,700,000 73.12 - - - - 4,176,536,124 3,622,036,138
Annual Report 2014-15 180
Notes to the Financial Statements
19.5 Group investment in equity accounted investees In Rs. Group Company As at 31 March 2015 2014 2015 2014
Unquoted Abacus International Lanka (Pvt) Ltd 21,168,381 41,863,087 9,750,000 9,750,000 Gerry's Softlogic (Pvt) Ltd - - 2,699,800 2,699,800 Nextage (Pvt) Ltd 3,578,024 1,201,160 1,250,000 1,250,000 Share of profit accruing to the group 5,290,016 13,280,969 - - Share of associate companies tax (2,912,685) (4,537,430) - - Share of associate companies dividend (1,000,000) (27,000,000) - - Share of OCI accruing to the group 134,233 (85,252) - - Share of associate OCI tax (41,864) 23,870 - - Less: impairment of investment in Gerry's Softlogic (Pvt) Ltd - - (2,699,800) (2,699,800) 26,216,105 24,746,404 11,000,000 11,000,000 The Directors’ valuation of unquoted equity accounted investees amounts to Rs.26,216,105/- (2014 - Rs.24,746,404/-) and Rs.11,000,000/- (2014 - Rs.11,000,000/-) for the group and company respectively.
19.6 Summarised financial information of equity accounted investees In Rs. Group As at 31 March 2015 2014
Group share of; Revenue 81,620,456 93,166,414 Operating expenses (74,462,600) (81,048,685) Other income 750,542 841,470 Profit for the year 7,908,398 12,959,199
Group share of; Actuarial gains/ (loss) on retirement benefits 134,233 (85,252) Share of associate OCI tax (41,864) 23,870 Net share of OCI for the year 92,369 (61,382)
Group share of; Total assets 73,125,516 83,904,537 Total liability (40,098,293) (51,902,360) Net assets 33,027,223 32,002,177 Unrealised profits (893,645) (1,338,301) Deferred tax on undistributable profits (5,917,473) (5,917,472) 26,216,105 24,746,404
Contingent liabilities Nil Nil Capital commitments Nil Nil
20 OTHER NON CURRENT FINANCIAL ASSETS In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
Other quoted equity investments 20.1 611,778,969 600,882,720 - - Other unquoted equity investments 20.2 150,217,000 150,217,000 - - Other non equity investments 20.3 8,325,653,710 5,415,807,994 1,277,947,548 57,797,564 9,087,649,679 6,166,907,714 1,277,947,548 57,797,564
Softlogic Holdings PLC 181
20.1 Other quoted equity investments In Rs. Group Company As at 31 March No of Shares 2015 2014 2015 2014
Access Engineering PLC - - 46,000,000 - - ACL Cables PLC - Bonus shares 308 23,408 18,788 - - Expo Lanka Holdings PLC - - 22,109,310 - - F L C Holdings PLC 950,900 1,521,440 1,996,890 - - Hatton National Bank PLC 21,841 4,848,702 3,276,150 - - National Development Bank PLC 2,414,835 598,882,418 516,191,328 - - Seylan Bank PLC - Non voting 102,571 6,503,001 11,290,254 - - 611,778,969 600,882,720 - -
20.2 Other unquoted equity investments In Rs. Group Company As at 31 March 2015 2014 2015 2014
Voyages Jean Mermoz Ltd 10,000 10,000 - - Ceylon Lexcon Services Ltd 207,000 207,000 - - Cargills Bank Ltd 150,000,000 150,000,000 - - 150,217,000 150,217,000 - -
20.3 Other non equity investments In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
Placement with banks and financial institutions 30,600 30,600 - - Debentures 953,348,819 627,299,943 2,528,664 2,528,664 Government securities 3,877,841,032 3,189,701,356 - - Deposits - 9,217,655 - - Other investments and receivables 47,098,956 39,625,867 - - Receivable from related parties - - 1,275,418,884 55,268,900 Loans and advances 26 3,447,334,303 1,549,932,573 - - 8,325,653,710 5,415,807,994 1,277,947,548 57,797,564
Annual Report 2014-15 182
Notes to the Financial Statements
21. RENTAL RECEIVABLE ON LEASE ASSETS AND HIRE PURCHASE 21.1 Receivable from one to five years In Rs. Group As at 31 March 2015 2014 Rental Rental Total Rental Rental Total receivable on receivable on receivable on receivable on lease assets hire purchase lease assets hire purchase
Rental receivables 1,240,601,550 2,762,934,665 4,003,536,215 1,640,137,792 3,355,608,059 4,995,745,851 Rentals received in advance - - - (2,907,286) - (2,907,286) Unearned income (174,045,323) (160,163,590) (334,208,913) (418,603,862) (811,344,597) (1,229,948,459) 1,066,556,227 2,602,771,075 3,669,327,302 1,218,626,644 2,544,263,462 3,762,890,106
21.2 Receivable within one year In Rs. Group As at 31 March 2015 2014 Rental Rental Total Rental Rental Total receivable on receivable on receivable on receivable on lease assets hire purchase lease assets hire purchase
Rental receivables 1,061,084,992 3,202,694,206 4,263,779,198 1,620,311,137 4,516,044,966 6,136,356,103 Rentals received in advance (2,289,650) - (2,289,650) (1,004,987) - (1,004,987) Unearned income (232,356,717) (989,012,131) (1,221,368,848) (419,281,098) (1,006,285,853) (1,425,566,951) Impairment (38,152,991) (119,997,830) (158,150,821) (15,861,663) (77,249,002) (93,110,665) 788,285,634 2,093,684,245 2,881,969,879 1,184,163,389 3,432,510,111 4,616,673,500 1,854,841,861 4,696,455,320 6,551,297,181 2,402,790,033 5,976,773,573 8,379,563,606
22. OTHER NON CURRENT ASSETS In Rs. Group As at 31 March 2015 2014 Rent advances 192,728,934 50,548,070 Deferred expenditure 100,064,032 92,418,471 292,792,966 142,966,541
23. DEFERRED TAX ASSETS In Rs. Group Company As at 31 March 2015 2014 2015 2014
At the beginning of the year 307,629,785 230,672,828 - - Acquisition through business combinations 2,328,157 - - - Deferred tax reversal on depreciation impact of revaluation 382,651 - - - Charge and release 8,186,983 76,956,957 68,817,557 - At the end of the year 318,527,576 307,629,785 68,817,557 -
Softlogic Holdings PLC 183
23.1 The closing deferred tax asset balance relates to the following: In Rs. Group Company As at 31 March 2015 2014 2015 2014
Accelerated depreciation for tax purposes (228,318,844) (126,767,753) (43,506,894) - Employee benefit liabilities (17,885,081) 21,794,070 8,587,525 - Losses available for offset against future taxable income 536,006,351 430,560,572 86,540,231 - Others 28,725,150 (17,957,104) 17,196,695 - 318,527,576 307,629,785 68,817,557 - 23.2 The group has tax losses amounting to Rs.10,669 mn (2014 - Rs.7,849 mn) that are available indefinitely to offset against future taxable profits of the companies in which the tax losses arose.
24. INVENTORIES In Rs. Group As at 31 March 2015 2014
Finished goods 6,391,162,278 4,065,928,317 Other stocks 1,278,400,567 1,043,425,533 7,669,562,845 5,109,353,850
25. TRADE AND OTHER RECEIVABLES In Rs. Group Company As at 31 March 2015 2014 2015 2014
Trade and other receivables 5,934,141,688 4,091,247,027 129,814,305 100,729,787 Reinsurance receivables 226,767,434 160,845,746 - - Loans to executives 16,370,946 22,702,451 774,677 6,503,850 Other receivables 445,523,038 796,132,464 111,135,609 59,936,203 6,622,803,106 5,070,927,688 241,724,591 167,169,840
26. LOANS AND ADVANCES In Rs. Group As at 31 March 2015 2014 Note Gross Unearned Total Total income
Short term lending 143,256 - 143,256 252,018 Personal loans 3,941,844,666 (1,112,938,655) 2,828,906,012 2,234,669,849 Pawning debtors 385,236,606 - 385,236,606 407,488,720 Policyholders loans 135,501,276 - 135,501,276 114,342,102 Revolving loans 524,830,914 - 524,830,914 429,130,543 Consumer loans 338,280,852 (48,338,426) 289,942,425 107,530,596 SME loans 5,389,527,897 (378,238,902) 5,011,288,995 463,170,570 Other loans 2,286,142 - 2,286,142 - Allowance for impairment (206,639,238) (129,613,123) 10,717,651,609 (1,539,515,983) 8,971,496,388 3,626,971,275
Loans and advances Receivable within one year 5,524,162,085 2,077,038,702 Receivable after one year 20.3 3,447,334,303 1,549,932,573 8,971,496,388 3,626,971,275
Annual Report 2014-15 184
Notes to the Financial Statements
27. OTHER CURRENT ASSETS In Rs. Group Company As at 31 March 2015 2014 2015 2014
Prepayments, advances & non cash receivables 1,665,955,848 1,000,564,401 2,589,114 4,588,156 Tax refunds & receivables 559,933,805 637,573,888 19,134,987 26,548,108 Other receivables 1,534,207,555 1,135,762,161 - - 3,760,097,208 2,773,900,450 21,724,101 31,136,264
28. SHORT TERM INVESTMENTS In Rs. Note Group Company As at 31 March 2015 2014 2015 2014
Quoted equities at market value 28.1 2,545,608,628 1,651,035,281 1,346,207,455 5,619,616 Unquoted equity investments 28.2 125,000,000 125,000,000 125,000,000 125,000,000 Other investments (more than 3 months and less than 1 year) 28.3 342,510,302 2,092,484,280 - - 3,013,118,930 3,868,519,561 1,471,207,455 130,619,616
Other investments (less than 3 months) Government securities 2,490,405,967 1,690,000,000 - - Commercial papers - - - 985,376,439 Short term deposits 2,852,658,229 528,000,000 2,199,540,683 528,000,000 Fixed deposits 36,258,026 271,811,103 - - 5,379,322,222 2,489,811,103 2,199,540,683 1,513,376,439 8,392,441,152 6,358,330,664 3,670,748,138 1,643,996,055
Softlogic Holdings PLC 185
28.1 Quoted equities at market value In Rs. Group Company As at 31 March No of Shares 2015 2014 No of Shares 2015 2014
Access Engineering PLC - - 1,912,500 - - - ACL Cables PLC 132 10,032 8,052 - - - Aitken Spence Hotel Holdings PLC 20,000 1,340,000 - - - - Aitken Spence PLC 114,269 11,369,766 11,186,935 - - - Alumex PLC 3,401,850 53,749,230 49,700,000 - - - Asia Capital PLC - - 9,235,556 - - - Bairaha Farms PLC 23,866 2,587,074 - - - - Ceylinco Insurance PLC 89 150,561 124,600 - - - Commercial Bank of Ceylon PLC - non voting 504,482 66,188,038 48,021,984 - - - DFCC Bank PLC 415 30,014 42,594 - - - Dialog Axiata PLC 868,600 9,033,440 7,817,400 - - - Dunamis Capital PLC 38 7,290 3,843 - - - Hatton National Bank PLC 22,443 4,982,346 3,366,450 - - - Hatton National Bank PLC - non voting 408,505 67,403,325 43,020,600 - - - Hemas Holdings PLC - - 188,500 - - - John Keells Holdings PLC 334 66,600 75,818 - - - Lanka IOC PLC 63,200 2,652,642 3,896,200 63,200 2,546,960 2,433,200 Lanka Tiles PLC 13,497 1,325,000 69,292 - - - Laugfs Gas PLC - 237,226 - - - National Development Bank PLC 8,629,342 2,140,074,762 1,456,008,281 - - - Odel PLC - - - 61,231,769 1,338,847,938 - Panasian Power PLC 4,690,000 15,946,000 - - - - People's Leasing & Finance PLC 100,000 2,210,000 - - - - Renuka City Hotel PLC 50 13,165 13,165 - - - Richard Pieris & Company PLC 75,210 557,220 1,386 - - - Richard Pieris Exports PLC 200 26,060 11,020 - - - Sampath Bank PLC 10,782 2,718,142 1,963,402 10,782 2,718,142 1,963,402 Seylan Bank PLC 135 13,500 8,600 135 13,500 8,600 Seylan Bank PLC - non voting 358,321 22,717,551 11,777,877 32,822 2,080,915 1,214,414 Textured Jersey Lanka PLC - - 2,054,000 - - - Tokyo Cement Company (Lanka) PLC - - 290,000 - - - Union Bank of Colombo PLC 5,827,256 140,436,870 - - - - 2,545,608,628 1,651,035,281 1,346,207,455 5,619,616
28.2 Unquoted equity investments In Rs. Group Company As at 31 March 2015 2014 2015 2014
Cargills Bank Ltd 125,000,000 125,000,000 125,000,000 125,000,000 125,000,000 125,000,000 125,000,000 125,000,000
Annual Report 2014-15 186
Notes to the Financial Statements
28.3 Other investments In Rs. Group Company As at 31 March 2015 2014 2015 2014
More than 3 months and less than 1 year Government securities 236,574,432 1,007,282,330 - - Fixed deposits 13,150,916 256,147,490 - - Debentures maturing within a year 92,576,655 - - - Placement with banks and financial institution - 247,463,938 - - Investment in commercial papers - 31,924,215 - - Others - Investment in Unit Trust 208,299 549,666,307 - - 342,510,302 2,092,484,280 - -
29. STATED CAPITAL In Rs. As at 31 March 2015 2014 Number of Value of shares Number of Value of shares shares shares
Fully paid ordinary shares At the beginning of the year 779,000,000 5,089,000,000 779,000,000 5,089,000,000 779,000,000 5,089,000,000 779,000,000 5,089,000,000
30. OTHER COMPONENTS OF EQUITY In Rs. Group As at 31 March Note 2015 2014
Treasury shares 30.1 (55,921,185) (55,921,185) Revaluation reserve 30.2 1,636,375,397 1,461,774,873 Foreign currency translation reserve 30.3 (26,775,781) (75,358,862) Available for sale reserve 30.4 200,328,059 176,573,503 Statutory reserve fund 116,532,044 149,167,942 Other reserves 30.5 (502,197,708) (572,303,697) 1,368,340,826 1,083,932,574
30.1 Investment in treasury shares reserve reflects the cost of investment made by Asian Alliance Insurance PLC in Softlogic Holdings PLC. 30.2 Revaluation reserve consists of the net surplus on the revaluation of property. 30.3 Foreign currency translation reserve comprises the net exchange movement arising on the currency translation of foreign operations and net equity investments of other currency denominated associates into Sri Lankan rupees. 30.4 Available for sale reserve includes changes on fair value of financial instruments designated as available for sale financial assets. 30.5 Other reserve is used to recognise goodwill or gain from a bargain purchase on subsequent acquisitions of further equity interest in its subsidiaries and gains or losses arising from fully/ partial and deemed disposals in its subsidiaries.
31. INSURANCE CONTRACT LIABILITIES In Rs. Group As at 31 March 2015 2014 Provision - life 5,129,272,339 4,184,923,357 5,129,272,339 4,184,923,357
Softlogic Holdings PLC 187
Valuation of Life Insurance Fund The valuation of the long term life insurance fund as at 31 December 2014 was conducted by Mr. M. Poopalanathan of Actuarial & Management Consultants (Pvt) Ltd, for an behalf of Asian Alliance Insurance PLC (AAI).
Long duration contract liabilities included in the Life insurance fund, result primarily from traditional participating and non-participating life insurance products. Short duration contract liabilities are primarily group term, accident and health insurance products. The actuarial reserves have been established based upon the following. - Interest rates which vary by product and as required by Regulations issued by the Insurance Board of Sri Lanka (IBSL) - Mortality rates based on published mortality tables adjusted for actual experience as required by - Regulations issued by the IBSL Surrender rates based upon actual experience.
Recommendation of Surplus Transfer In accordance with the Consultant’s Actuary Report as at 31 December 2014, the sum of provision Rs.4,999.00 mn (2013 - Rs.3,746.00 mn) includes the liability in respect of policy holders bonus as well. In the opinion of the consultant actuary, the provision is adequate to cover the liabilities pertaining to long term insurance.
The actuary recommended to transfer a sum of Rs.368.45 mn (2014 - Rs.300.00 mn) to the share holders of AAI as at 31 December 2014 and transferred further Rs.197.76 mn (2014 - Rs.168.50 mn) for the three months period ending 31 March 2015.
Solvency Margin In the opinion of the consultant actuary, the Admissible Assets of the Life Insurance fund as at 31 December 2014 is adequate to cover the liabilities of the fund and the solvency margin requirement prescribed under section 26 of the Regulation of Insurance Industry Act No 43 of 2000.
Actuarial Assumptions as at 31 December 2014 2013
Interest Rate 7.5% 7.5% Mortality Table Used A67/70 A67/70
31.1 Movement in life insurance fund In Rs. Group As at 31 March 2015 2014
At the beginning of the year 4,184,923,357 3,218,377,437 Increase in life fund 1,510,562,982 1,435,045,920 Transfer to shareholders (566,214,000) (468,500,000) At the end of the year 5,129,272,339 4,184,923,357
Annual Report 2014-15 188
Notes to the Financial Statements
32. INTEREST BEARING BORROWINGS In Rs. Group As at 31 March 2015 2014 Finance leases Debentures Loans Total Finance leases Debentures Loans Total
At the beginning of the year 196,989,817 1,290,000,000 15,697,835,748 17,184,825,565 178,256,750 - 12,252,681,765 12,430,938,515 Additions 128,786,077 1,465,000,000 17,073,930,076 18,667,716,153 99,822,625 1,290,000,000 6,256,880,910 7,646,703,535 Acquisition through business combinations 217,807 - 338,392,188 338,609,995 - - - - Transfers ------531,800,000 531,800,000 Repayments (108,702,282) - (8,691,196,932) (8,799,899,214) (81,089,558) - (3,473,066,469) (3,554,156,027) Unamortised Loan Processing cost - - (26,921,683) (26,921,683) - - (9,042,764) (9,042,764) Unamortisation of debenture issue expense - (5,547,116) - (5,547,116) - (9,245,193) - (9,245,193) Finance charges 3,988,016 - - 3,988,016 (22,250,837) - - (22,250,837) Exchange translation difference - - 98,476,218 98,476,218 - - 129,539,542 129,539,542 At the end of the year 221,279,435 2,749,452,884 24,490,515,615 27,461,247,934 174,738,980 1,280,754,807 15,688,792,984 17,144,286,771
Repayable within one year 69,898,505 - 4,547,058,007 4,616,956,512 63,913,478 - 4,080,524,358 4,144,437,836 Repayable after one year 151,380,930 2,749,452,884 19,943,457,608 22,844,291,422 110,825,502 1,280,754,807 11,608,268,626 12,999,848,935 221,279,435 2,749,452,884 24,490,515,615 27,461,247,934 174,738,980 1,280,754,807 15,688,792,984 17,144,286,771 Security pledged and interest rates pertaining to interest bearing borrowings are disclosed in note 48 to the financial statements.
32.1 INTEREST BEARING BORROWINGS In Rs. Company As at 31 March 2015 2014 Finance leases Debentures Loans Total Finance leases Debentures Loans Total
At the beginning of the year 96,024,466 1,000,000,000 2,833,429,597 3,929,454,063 90,234,752 - 2,286,592,789 2,376,827,541 Additions - - 5,738,547,537 5,738,547,537 44,122,626 1,000,000,000 1,000,000,000 2,044,122,626 Repayments (40,664,689) - (1,477,317,214) (1,517,981,903) (38,332,912) - (453,163,192) (491,496,104) Amortisation of debenture issue expense - (5,547,116) - (5,547,116) - (9,245,193) - (9,245,193) Finance charges (7,689,325) - - (7,689,325) (16,764,580) - - (16,764,580) At the end of the year 47,670,452 994,452,884 7,094,659,920 8,136,783,256 79,259,886 990,754,807 2,833,429,597 3,903,444,290
Repayable within one year 23,440,536 - 2,345,557,531 2,368,998,067 28,983,625 - 1,426,279,191 1,455,262,816 Repayable after one year 24,229,916 994,452,884 4,749,102,389 5,767,785,189 50,276,261 990,754,807 1,407,150,406 2,448,181,474 47,670,452 994,452,884 7,094,659,920 8,136,783,256 79,259,886 990,754,807 2,833,429,597 3,903,444,290 Security pledged and interest rates pertaining to interest bearing borrowings are disclosed in note 48 to the financial statements.
Softlogic Holdings PLC 189
32.2 Details regarding the listed debentures are as follows; Debenture category Annual interest rate Interest Allotment Maturity Amortised Amortised payment date date cost as at cost as at frequency 31-03-2015 31-03-2014
Company Listed, unsecured debentures 16.70% Quarterly 09-09-2013 09-09-2016 994,452,884 990,754,807 994,452,884 990,754,807
Group Softlogic Holdings PLC Listed, unsecured debentures 16.70% Quarterly 09-09-2013 09-09-2016 864,452,884 860,754,807 Softlogic Finance PLC Listed, unsecured, Type "A" debentures 17.00% Annually 28-08-2013 27-08-2016 167,840,000 167,840,000 Listed, unsecured, Type "B" debentures 16.50% Semi-annually 28-08-2013 27-08-2016 100,160,000 100,160,000 Listed, unsecured, Type "C" debentures 16.00% Monthly 28-08-2013 27-08-2016 152,000,000 152,000,000 Listed, secured, Type "A" debentures* 10.00% Quarterly 29-08-2014 28-08-2019 949,870,000 - Listed, secured, Type "B" debentures* 3 month TB net+1.50% Quarterly 29-08-2014 28-08-2019 450,130,000 - Unlisted, unsecured, subordinated debentures 15.50% Quarterly 29-11-2013 28-11-2018 65,000,000 - 2,749,452,884 1,280,754,807
* Secured by a 100% guarantee provided by “GuarantCo” upto an aggregate of Rs.1,400 mn (Rupee equivalent of USD 10 mn)
32.3 Interest rate of comparable government securities as at 31 March, 2015 8.26% (net of tax) (2014 - 7.85% (net of tax))
32.4 Debenture trading information,
For the year ending 31-03-2015 31-03-2014
No. of transactions 09 - No. of debentures traded 100,500 - Value of debentures traded 108,822,759 - Highest price 110.53 - Lowest price 106.00 - Last traded price 108.05 - Interest yield 14.60% - Yield to maturity 9.74% -
32.5 Derivative financial instruments In Rs. Group As at 31 March 2015 2014 Asset Liability Asset Liability
Cross currency interest rate Swap - Cash flow hedges Nil Nil Nil 11,484,342
Interest rate SWAP - Cash flow The objective of the cash flow hedge is to reduce the variability of the cash flows of a foreign currency denominated borrowing. Cash flow hedge has effectively mitigated the interest rate risk and foreign currency risk arising from the variability in the cash flow of the borrowing attributable to change in LIBOR interest rates and the USD/LKR exchange rate. Hedging instrument - Non deliverable interest rate cross currency SWAP. Hedged item - The 4 Year USD Denominated floating rate borrowing amounting to USD 4.8 mn.
Cash flow hedge has a notional amount of USD 4.8 mn and cash flows are expected to occur as at 15 April and 15 October of 2014, 2015, 2016 and 2017 in USD 1.2 mn capital repayments at every 15 of April in each year and interest repayments at 15 April and 15 October of each year.
Annual Report 2014-15 190
Notes to the Financial Statements
In respect of cash flow hedge instrument following balance has been recognised under Other Comprehensive Income Statement (OCI) as the fair value loss on hedging instrument.
Group 2015 2014
Net change in fair value on derivative financial instruments 30,540,342 (30,540,342)
On the hedged item (USD denominated borrowing), attributable to the hedged risk, following balance has been recognised in Group Income Statement.
Group 2015 2014
Under cost of sales Interest expense 31,599,480 22,205,775 Early settlement fee * 21,489,510 Nil 53,088,990 22,205,775
Under administrative expenses Loss in fair value on derivative financial instruments 19,056,000 Nil 19,056,000 -
* In December 2014, cash flow hedge instrument has been settled in fully and charged Rs.21,489,510/- as early settlement fee.
33. PUBLIC DEPOSITS In Rs. Group As at 31 March 2015 2014
Deposits maturing after one year 2,214,295,787 1,885,402,009 Deposits maturing within one year 9,838,760,403 7,418,343,338 12,053,056,190 9,303,745,347
34. DEFERRED TAX LIABILITIES In Rs. Group As at 31 March 2015 2014
At the beginning of the year 332,324,498 366,359,147 Acquisition through business combinations 31,848,115 - Deferred tax reversal on depreciation impact of revaluation (2,944,973) - Provision/(reversal) (46,970,357) (34,034,649) At the end of the year 314,257,283 332,324,498
34.1 The closing deferred tax liability balance relates to the following: In Rs. Group As at 31 March 2015 2014
Revaluation of land and building to fair value 282,412,981 238,477,938 Accelerated depreciation for tax purposes 207,639,248 157,674,363 Employee benefit liabilities (72,319,553) (45,993,219) Losses available for offset against future taxable income (119,443,821) (30,457,417) Others 15,968,428 12,622,833 At the end of the year 314,257,283 332,324,498
Softlogic Holdings PLC 191
35. EMPLOYEE BENEFIT LIABILITIES In Rs. Group Company As at 31 March 2015 2014 2015 2014
At the beginning of the year 444,467,274 378,903,000 30,083,785 21,435,500 Current service cost 90,716,857 71,066,278 4,099,580 3,897,509 Interest cost on benefit obligation 49,370,095 34,488,725 2,420,921 2,421,516 (Gain) / loss arising from changes in assumptions 84,380,473 (931,713) 2,634,545 3,531,852 Acquisition through business combinations 58,279,692 - - - Transfers from/ (to) related companies - - (5,801,288) 132,908 Payments (71,288,846) (38,898,992) (2,767,813) (1,335,500) Exchange translation difference - (160,024) - - At the End of the year 655,925,545 444,467,274 30,669,730 30,083,785
The employee benefit liability of the Group is based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd, actuaries. The principal assumptions used in determining the cost of employee benefits were:
2015 2014
Discount rate 8% - 11% 9% - 11% Future salary increases 8% - 10% 8% - 10%
35.1 Sensitivity of assumptions used If one percentage point changes in the assumptions, would have the following effect:
In Rs. Group Company 2015 2014 2015 2014
Effect on the defined benefit obligation liability; Increase by one percentage point in discount rate (42,271,289) (35,683,948) (1,929,997) (2,531,545) Decrease by one percentage point in discount rate 46,732,737 29,389,895 2,175,460 2,224,485
Effect on the defined benefit obligation liability; Increase by one percentage point in salary increment rate 49,061,768 34,632,599 2,284,654 2,669,107 Decrease by one percentage point in salary increment rate (44,115,972) (31,634,966) (2,057,925) 2,377,544
35.2 Maturity analysis of the payments The following payments are expected on employees benefit liabilities in future years.
In Rs. Group Company 2015 2014 2015 2014
- within the next 12 months 102,812,944 64,840,554 1,102,112 695,852 - between 1 and 2 years 98,248,275 58,081,394 3,146,122 1,994,476 - between 3 and 5 years 141,817,585 85,795,810 14,574,994 11,145,608 - between 6 and 10 years 145,429,487 97,518,826 4,870,292 8,894,659 - beyond 10 years 167,617,254 138,230,690 6,976,210 7,353,190 Total expected payments 655,925,545 444,467,274 30,669,730 30,083,785
35.3 The Group and Company’s weighted average duration of defined benefit obligation is 6.95 years (2014 - 8.78 years) and 7.22 years (2014 - 8.52 years) respectively.
Annual Report 2014-15 192
Notes to the Financial Statements
36. OTHER DEFERRED LIABILITIES Group In Rs. Within one year After one year As at 31 March 2015 2014 2015 2014
Deferred revenue 77,529,960 19,098,215 2,503,695 4,048,380 Warranty provision 48,230,093 39,983,537 540,738 1,427,829 125,760,053 59,081,752 3,044,433 5,476,209
37. OTHER NON CURRENT FINANCIAL LIABILITIES In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
Other liabilities 37.1 6,260,352 6,260,352 - - Deposits 25,450,268 Payable to related party - - 509,915,332 - 31,710,620 6,260,352 509,915,332 -
37.1 Softlogic Holdings PLC (“SH”), Softlogic Capital PLC (“SC”) and Asian Alliance Insurance PLC (“AAI”) entered into a “Shareholders Agreement” and “Share Purchase Agreement” dated 20 December 2012 as amended 13 February 2013 with Deutsche Investitions - Und Entwicklungsgesellschaft MBH (“DEG”) and Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (“FMO”) to sell 19% of the ordinary shares of AAI, held by SH to FMO and 19% of the AAI ordinary shares held by SC to DEG. As per the above agreements, SC has granted a ‘Put Option’ to FMO and DEG which will be valid for a three year period with effect from 7 March 2017 to repurchase 38% of the shares held by DEG and FMO based on a ‘Put Option’ price as specified in the amended agreements.
As per the Sri Lankan Accounting Standards framework (SLFRS/LKAS) adopted by the group with effect from 1 April 2012 the Investment in AAI sold to FMO and DEG by SH and SC did not met the de-recognition criteria in LKAS 39, and continued to be recognised as an Investment and the proceeds received under this transaction with FMO and DEG was recognised as a financial liability in the group financial statements as of 31 March 2013.
Subsequent to the further amendments made to the “Shareholders Agreement” on 31 March 2014, the group met the de-recognition criteria as per LKAS 39, and the said 38% stake held by SH and SC in AAI and the financial liability which initially recognised in the group financial statements were de recognised in the group financial statements as at 31 March 2014.
As at 31 March, 2015, the group has pledged 52,368,036 shares (2014 – 52,368,036 shares) of Asiri Hospital Holdings PLC owned by Softlogic Holdings PLC and 2,000 shares (2014 – 2, 000 shares) of Asian Alliance Insurance PLC owned by Softlogic Capital PLC as collaterals to the said transaction.
38. TRADE AND OTHER PAYABLES In Rs. Group Company As at 31 March 2015 2014 2015 2014
Trade and other payables 4,538,968,017 3,385,866,377 29,531,350 14,569,828 Reinsurance payables 219,282,604 94,989,789 - - Insurance provision - general 1,134,071,314 944,664,510 - - Sundry creditors including accrued expenses 1,149,518,178 1,326,135,940 - - 7,041,840,113 5,751,656,616 29,531,350 14,569,828
Softlogic Holdings PLC 193
39. INCOME TAX LIABILITIES In Rs. Group As at 31 March 2015 2014
At the beginning of the year 174,142,951 234,890,927 Charge for the year 343,408,401 332,759,233 Acquisition through business combinations 59,914,563 - Payments and set off against refunds (254,809,524) (393,507,209) At the end of the year 322,656,391 174,142,951
40. SHORT TERM BORROWINGS In Rs. Group Company As at 31 March 2015 2014 2015 2014
Loans 7,454,147,000 3,976,934,513 182,851,146 84,619,125 Commercial papers 7,333,037,778 7,830,931,792 4,008,747,622 3,821,941,975 Margin trading loans - 14,249,672 - 14,249,672 14,787,184,778 11,822,115,977 4,191,598,768 3,920,810,772
41. OTHER CURRENT LIABILITIES In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
Advances received 1,347,640,363 142,536,919 - - Other taxes payables 160,074,088 120,373,841 10,514,607 18,028,769 Other liabilities 697,417,282 449,874,086 13,494,730 - Other deferred liabilities 36 125,760,053 59,081,752 - - 2,330,891,786 771,866,598 24,009,337 18,028,769
42 RELATED PARTY TRANSACTIONS The Group and Company carried out transactions in the ordinary course of business with the following related entities.
42.1 Amounts due from related parties In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
Subsidiaries 42.3 - - 2,290,290,201 2,452,716,329 Associates 42.4 373,316 579,913 217,680 380,735 Key management personnel 198,737 198,547 - - 572,053 778,460 2,290,507,881 2,453,097,064
42.2 Amounts due to related parties In Rs. Group Company As at 31 March Note 2015 2014 2015 2014
Subsidiaries 42.3 - - 146,013,477 945,639,488 Associates 42.5 4,333,114 5,234,509 - - Key management personnel 11,637,670 14,274,093 1,992,157 1,017,826 15,970,784 19,508,602 148,005,634 946,657,314
Annual Report 2014-15 194
Notes to the Financial Statements
42.3 Subsidiaries Company In Rs. Amount due to Amounts due from As at 31 March 2015 2014 2015 2014
Asiri Hospital Holdings PLC 31,562,127 35,917,856 - - Asiri Surgical Hospital PLC 27,121,755 22,888,811 - - Ceysand Resorts Ltd - - 370,241,895 519,833,119 Future Automobiles (Pvt) Ltd - - 64,592,158 53,510,599 Softlogic Australia (Pty) Ltd - - 3,714,411 - Softlogic Automobiles (Pvt) Ltd 707,965 142,511 - - Softlogic B P O Services (Pvt) Ltd - - 77,733,865 7,866,170 Softlogic Brands (Pvt) Ltd - - 240,707 6,674,515 Softlogic Capital PLC - - - 3,219,480 Softlogic City Hotels (Pvt) Ltd - - 633,274 41,249,959 Softlogic Communications (Pvt) Ltd 503,631 372,890,263 - - Softlogic Communication Services (Pvt) Ltd - - 674,038 32,343 Softlogic Computers (Pvt) Ltd - - 17,511,505 19,606,300 Softlogic Corporate Services (Pvt) Ltd - - 1,259,507 180,615 Softlogic Destination Management (Pvt) Ltd - - 7,358,981 5,414,184 Softlogic Information Technologies (Pvt) Ltd - 204,694,175 3,799,681 - Softlogic International (Pvt) Ltd - 7,605,872 8,147,076 - Softlogic Mobile Distribution (Pvt) Ltd - - 538,211 - Softlogic Properties (Pvt) Ltd - - 192,459,790 164,794,165 Softlogic Real Estate (Pvt) Ltd - - 74,468 - Softlogic Restaurant (Pvt) Ltd - - 79,654,313 22,097,912 Softlogic Retail (Pvt) Ltd - - 79,486,932 392,668,763 Softlogic Retail One (Pvt) Ltd 1,117,999 - - - Softlogic Solar (Pvt) Ltd - - 34,391,891 22,975,122 61,013,477 644,139,488 942,512,703 1,260,123,246 Less - Provision for impairment - - (84,391,891) (22,975,122) 61,013,477 644,139,488 858,120,812 1,237,148,124
42.3.1 Subsidiaries Company In Rs. Loans received Loans given For the year ended 2015 2014 2015 2014
Loans - current Asiri Hospital Holdings PLC - 85,000,000 - - Asiri Surgical Hospital PLC 85,000,000 95,500,000 - - Future Automobiles (Pvt) Ltd - - 179,694,692 137,911,574 Softlogic Capital PLC - - - 350,664,035 Softlogic Communications (Pvt) Ltd - - 526,798,030 246,929,824 Softlogic Destination Management (Pvt) Ltd - - 29,766,350 1,584,606 Softlogic Brands (Pvt) Ltd - - 27,957,723 - Softlogic Information Technologies (Pvt) Ltd - - 27,995,900 4,376,012 Softlogic Automobiles (Pvt) Ltd - - 32,427,681 - Softlogic International (Pvt) Ltd - - 56,324 2,225,332 Softlogic Retail (Pvt) Ltd - 121,000,000 607,472,689 471,876,822 85,000,000 301,500,000 1,432,169,389 1,215,568,205
Total 146,013,477 945,639,488 2,290,290,201 2,452,716,329
Softlogic Holdings PLC 195
42.4 Amounts due from related parties In Rs. Group Company As at 31 March 2015 2014 2015 2014
Associates Abacus International Lanka (Pvt) Ltd 373,316 579,913 217,680 380,735 373,316 579,913 217,680 380,735
42.5 Amounts due to related parties In Rs. Group Company As at 31 March 2015 2014 2015 2014
Associates Gerry's Softlogic Pakistan 4,333,114 5,234,509 - - 4,333,114 5,234,509 - -
42.6 Transactions with related parties In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Subsidiaries (Purchases) / sales of goods - - 19,841,281 (16,203,937) (Receiving) / rendering of services - - 378,449,744 330,606,590 (Purchases) / sale of property plant & equipment - - (3,512,615) (12,668,394) Loans given / (obtained) - - 132,223,001 862,622,047 Interest received / (paid) - - 76,146,109 301,540,484 Rent received / (paid) - - 22,477,477 17,230,000 Dividend received - - 960,371,765 379,542,198 Guarantee charges received - - 77,702,041 1,440,000 Guarantees given / (obtained) - - 9,525,800,000 8,274,478,000
Associates (Purchases) / sale of property plant & equipment 2,851,064 26,466,211 - - (Receiving) / rendering of services 6,308,272 6,462,771 12,251,592 11,568,000 Dividend received - - 900,000 24,300,000
Key management personnel (KMP) Loans given / (received) (11,438,933) (14,075,546) (1,992,157) (1,017,826) Guarantees given / (obtained) (1,361,000,000) (1,551,000,000) (130,000,000) (230,000,000) Loans given / (deposits received) (44,212,192) (6,139,846) - -
Close family members of KMP (Receiving) / rendering of services - - - -
42.7 Terms and conditions of transactions with related parties Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year end are unsecured, interest free and settlement occurs in cash. Interest bearing borrowings are at pre-determined interest rates and terms.
42.8 Compensation of key management personnel Key management personnel include members of the Board of Directors of Softlogic Holdings PLC and its subsidiary companies.
In Rs. Group Company For the year ended 31 March 2015 2014 2015 2014
Short term employee benefits 203,187,470 174,197,317 13,580,000 37,260,000 203,187,470 174,197,317 13,580,000 37,260,000
Annual Report 2014-15 196
Notes to the Financial Statements
43 OPERATING SEGMENT INFORMATION
REVENUE AND PROFIT
Information Technology Leisure Retail Auto Mobiles Financial Services Healthcare Services Others Group For the year ended 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Revenue Total revenue 9,912,024,862 6,403,570,630 704,941,030 132,423,798 12,925,183,030 8,658,972,526 780,445,604 439,380,205 8,133,617,536 7,639,711,388 8,591,960,503 7,765,208,318 424,290,305 365,318,819 41,472,462,870 31,404,585,684 Inter group (660,043,444) (421,239,755) (76,887,251) (40,676,542) (590,893,505) (1,120,264,669) (37,001,897) (15,808,864) (131,853,450) (182,201,701) - (19,408,252) (411,899,213) (358,550,317) (1,908,578,760) (2,158,150,100) Total external revenue 9,251,981,418 5,982,330,875 628,053,779 91,747,256 12,334,289,525 7,538,707,857 743,443,707 423,571,341 8,001,764,086 7,457,509,687 8,591,960,503 7,745,800,066 12,391,092 6,768,502 39,563,884,110 29,246,435,584
Operating profit/ (loss) 705,335,615 505,411,875 (58,680,236) (98,372,924) 878,265,229 594,282,485 (43,633,906) (15,598,806) 1,022,155,789 747,916,440 1,810,926,609 1,895,460,923 (62,675,930) (5,885,092) 4,251,693,170 3,623,214,901
Finance income 4,788,785 5,730,967 6,584,627 9,217,727 76,771,232 113,408,796 99,955 7,767 935,095,599 971,900,078 91,275,550 49,302,047 7,557,517 7,407,608 1,122,173,265 1,156,974,990 Finance cost (302,058,048) (481,368,010) (90,195,304) (1,882,058) (627,715,710) (523,027,200) (53,890,522) (39,901,477) (168,137,069) (352,467,432) (635,347,411) (553,342,061) (815,465,490) (708,038,364) (2,692,809,554) (2,660,026,602) Change in fair value of investment property - - - - 13,338,000 7,410,000 - - - - 513,364,000 83,690,500 - - 526,702,000 91,100,500 Share of results of associates ------5,290,016 13,280,969 5,290,016 13,280,969 Change in insurance contract liabilities ------(944,348,980) (966,545,920) - - - - (944,348,980) (966,545,920) Profit/ (loss) before taxation 408,066,352 29,774,832 (142,290,913) (91,037,255) 340,658,751 192,074,081 (97,424,473) (55,492,516) 844,765,339 400,803,166 1,780,218,748 1,475,111,409 (865,293,887) (693,234,879) 2,268,699,917 1,257,998,838 Taxation (137,462,759) (10,390,349) (486,175) 14,763,485 (69,453,877) (38,604,022) (8,889,061) 15,238,087 (60,292,650) (63,229,742) (163,562,844) (152,884,263) (9,470,660) (14,057,009) (449,618,026) (249,163,813) Profit/ (loss) after taxation 270,603,593 19,384,483 (142,777,088) (76,273,770) 271,204,874 153,470,059 (106,313,534) (40,254,429) 784,472,689 337,573,424 1,616,655,904 1,322,227,146 (874,764,547) (707,291,888) 1,819,081,891 1,008,835,025
Depreciation of property, plant & equipment (PPE) 47,744,677 34,027,729 104,096,529 564,045 200,924,164 94,785,419 28,925,768 5,213,793 117,172,301 84,505,964 660,951,774 653,281,972 30,182,706 29,457,929 1,189,997,919 901,836,851 Amortisation of lease rentals paid in advance ------1,036,939 1,036,927 - - 1,036,939 1,036,927 Amortisation of intangible assets 13,146,053 3,764,778 47,629,767 47,588,114 33,283,406 4,641,721 - - 142,843,678 137,307,727 8,521,877 8,521,877 2,624,845 2,221,134 248,049,626 204,045,351 Retirement benefit obligations and related cost 20,102,679 20,098,130 2,056,554 77,692 18,549,287 9,361,371 1,885,619 2,038,930 20,582,591 15,827,191 70,250,850 51,580,366 6,659,372 6,571,323 140,086,952 105,555,003 Purchase and construction of PPE 54,752,664 107,308,111 2,092,996,338 2,045,795,408 786,544,835 483,296,847 283,818,892 128,922,594 275,807,176 433,644,779 930,849,409 361,963,301 13,713,477 42,988,966 4,438,482,791 3,603,920,006 Additions to intangible assets 3,662,518 125,781,610 314,826 - 267,976,420 157,422,822 - - 39,095,592 14,239,939 - - 1,861,900 7,563,029 312,911,256 305,007,400 Additions to lease rentals paid in advance ------702,520,660 - - 702,520,660 -
Softlogic Holdings PLC 197
43 OPERATING SEGMENT INFORMATION
REVENUE AND PROFIT
Information Technology Leisure Retail Auto Mobiles Financial Services Healthcare Services Others Group For the year ended 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Revenue Total revenue 9,912,024,862 6,403,570,630 704,941,030 132,423,798 12,925,183,030 8,658,972,526 780,445,604 439,380,205 8,133,617,536 7,639,711,388 8,591,960,503 7,765,208,318 424,290,305 365,318,819 41,472,462,870 31,404,585,684 Inter group (660,043,444) (421,239,755) (76,887,251) (40,676,542) (590,893,505) (1,120,264,669) (37,001,897) (15,808,864) (131,853,450) (182,201,701) - (19,408,252) (411,899,213) (358,550,317) (1,908,578,760) (2,158,150,100) Total external revenue 9,251,981,418 5,982,330,875 628,053,779 91,747,256 12,334,289,525 7,538,707,857 743,443,707 423,571,341 8,001,764,086 7,457,509,687 8,591,960,503 7,745,800,066 12,391,092 6,768,502 39,563,884,110 29,246,435,584
Operating profit/ (loss) 705,335,615 505,411,875 (58,680,236) (98,372,924) 878,265,229 594,282,485 (43,633,906) (15,598,806) 1,022,155,789 747,916,440 1,810,926,609 1,895,460,923 (62,675,930) (5,885,092) 4,251,693,170 3,623,214,901
Finance income 4,788,785 5,730,967 6,584,627 9,217,727 76,771,232 113,408,796 99,955 7,767 935,095,599 971,900,078 91,275,550 49,302,047 7,557,517 7,407,608 1,122,173,265 1,156,974,990 Finance cost (302,058,048) (481,368,010) (90,195,304) (1,882,058) (627,715,710) (523,027,200) (53,890,522) (39,901,477) (168,137,069) (352,467,432) (635,347,411) (553,342,061) (815,465,490) (708,038,364) (2,692,809,554) (2,660,026,602) Change in fair value of investment property - - - - 13,338,000 7,410,000 - - - - 513,364,000 83,690,500 - - 526,702,000 91,100,500 Share of results of associates ------5,290,016 13,280,969 5,290,016 13,280,969 Change in insurance contract liabilities ------(944,348,980) (966,545,920) - - - - (944,348,980) (966,545,920) Profit/ (loss) before taxation 408,066,352 29,774,832 (142,290,913) (91,037,255) 340,658,751 192,074,081 (97,424,473) (55,492,516) 844,765,339 400,803,166 1,780,218,748 1,475,111,409 (865,293,887) (693,234,879) 2,268,699,917 1,257,998,838 Taxation (137,462,759) (10,390,349) (486,175) 14,763,485 (69,453,877) (38,604,022) (8,889,061) 15,238,087 (60,292,650) (63,229,742) (163,562,844) (152,884,263) (9,470,660) (14,057,009) (449,618,026) (249,163,813) Profit/ (loss) after taxation 270,603,593 19,384,483 (142,777,088) (76,273,770) 271,204,874 153,470,059 (106,313,534) (40,254,429) 784,472,689 337,573,424 1,616,655,904 1,322,227,146 (874,764,547) (707,291,888) 1,819,081,891 1,008,835,025
Depreciation of property, plant & equipment (PPE) 47,744,677 34,027,729 104,096,529 564,045 200,924,164 94,785,419 28,925,768 5,213,793 117,172,301 84,505,964 660,951,774 653,281,972 30,182,706 29,457,929 1,189,997,919 901,836,851 Amortisation of lease rentals paid in advance ------1,036,939 1,036,927 - - 1,036,939 1,036,927 Amortisation of intangible assets 13,146,053 3,764,778 47,629,767 47,588,114 33,283,406 4,641,721 - - 142,843,678 137,307,727 8,521,877 8,521,877 2,624,845 2,221,134 248,049,626 204,045,351 Retirement benefit obligations and related cost 20,102,679 20,098,130 2,056,554 77,692 18,549,287 9,361,371 1,885,619 2,038,930 20,582,591 15,827,191 70,250,850 51,580,366 6,659,372 6,571,323 140,086,952 105,555,003 Purchase and construction of PPE 54,752,664 107,308,111 2,092,996,338 2,045,795,408 786,544,835 483,296,847 283,818,892 128,922,594 275,807,176 433,644,779 930,849,409 361,963,301 13,713,477 42,988,966 4,438,482,791 3,603,920,006 Additions to intangible assets 3,662,518 125,781,610 314,826 - 267,976,420 157,422,822 - - 39,095,592 14,239,939 - - 1,861,900 7,563,029 312,911,256 305,007,400 Additions to lease rentals paid in advance ------702,520,660 - - 702,520,660 -
Annual Report 2014-15 198
Notes to the Financial Statements
43 OPERATING SEGMENT INFORMATION Information Technology Leisure Retail Auto Mobiles Financial Services Healthcare Services Others Group As at 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Property, plant and equipment 226,953,170 159,032,690 6,278,865,626 3,713,905,587 4,618,394,111 1,132,134,602 377,645,319 126,715,473 780,512,241 639,084,976 10,823,681,819 10,287,141,045 122,259,126 150,728,002 23,228,311,412 16,208,742,375 Lease rentals paid in advance ------854,795,905 153,312,184 - - 854,795,905 153,312,184 Investment property 233,000,000 225,300,000 1,045,292,349 757,492,349 94,848,000 81,510,000 - - - - - 2,184,636,000 442,641,387 394,000,000 1,815,781,736 3,642,938,349 Intangible assets 172,487,509 125,328,306 356,760 - 387,674,115 152,781,100 - - 87,691,123 58,404,700 - - 1,723,508 5,341,896 649,933,015 341,856,002 Other non current financial assets 5,023,408 10,736,443 - - 7,403,862 42,342,867 - - 8,473,811,327 5,680,300,612 598,882,418 430,999,128 2,528,664 2,528,664 9,087,649,679 6,166,907,714 Rental receivable on lease assets and hire purchase - - - - 126,505,603 24,197,630 - - 3,542,821,699 3,738,692,476 - - - - 3,669,327,302 3,762,890,106 Other non current assets 12,706,949 937,385 1,456,000 1,455,999 172,101,507 41,005,220 2,327,169 - 97,868,006 92,234,601 6,333,335 7,333,336 - - 292,792,966 142,966,541 Segment non current assets 650,171,036 521,334,824 7,325,970,735 4,472,853,935 5,406,927,198 1,473,971,419 379,972,488 126,715,473 12,982,704,396 10,208,717,365 12,283,693,477 13,063,421,693 569,152,685 552,598,562 39,598,592,015 30,419,613,271 Investments in associates 26,216,105 24,746,404 Goodwill 4,115,823,525 4,115,823,525 Intangible assets through business combinations 4,091,247,335 3,273,733,046 Deferred tax assets 318,527,576 307,629,785 Eliminations/ adjustment (39,708,261) (47,257,445) Total non current assets 650,171,036 521,334,824 7,325,970,735 4,472,853,935 5,406,927,198 1,473,971,419 379,972,488 126,715,473 12,982,704,396 10,208,717,365 12,283,693,477 13,063,421,693 569,152,685 552,598,562 48,110,698,295 38,094,288,586
Inventories 1,357,795,215 772,240,418 18,730,434 271,532 4,831,209,253 3,059,829,268 437,289,869 258,882,616 643,475,335 662,793,833 381,062,739 355,052,697 - 283,486 7,669,562,845 5,109,353,850 Investment property held for sale ------2,698,000,000 - - - 2,698,000,000 - Trade and other receivables 1,893,274,480 1,066,543,206 163,100,663 26,892,425 3,182,598,483 2,577,477,901 135,578,478 53,447,666 835,695,086 899,003,312 300,561,558 371,391,759 111,994,358 76,171,419 6,622,803,106 5,070,927,688 Loans and advances ------5,524,162,085 2,077,038,702 - - - - 5,524,162,085 2,077,038,702 Rental receivable on lease assets and hire purchase ------2,881,969,879 4,616,673,500 - - - - 2,881,969,879 4,616,673,500 Other current assets 347,502,003 249,395,077 128,769,657 380,854,430 1,237,152,558 410,527,140 215,829,612 123,695,495 1,438,401,554 1,348,527,338 375,083,931 228,555,867 17,357,893 32,345,103 3,760,097,208 2,773,900,450 Short term investments 273,773,507 24,305,264 332,460 124,600 124,778,113 21,811,103 1,500,000 - 4,628,754,611 5,653,252,963 1,031,151,896 - 2,332,150,565 658,836,734 8,392,441,152 6,358,330,664 Cash in hand and at bank 299,506,237 95,216,569 131,561,486 101,276,817 326,103,928 398,005,784 17,335,786 27,486,059 887,298,353 667,360,092 218,238,185 192,422,009 46,681,847 280,334,664 1,926,725,822 1,762,101,994 Segment current assets 4,171,851,442 2,207,700,534 442,494,700 509,419,804 9,701,842,335 6,467,651,196 807,533,745 463,511,836 16,839,756,903 15,924,649,740 5,004,098,309 1,147,422,332 2,508,184,663 1,047,971,406 39,475,762,097 27,768,326,848 Amounts due from related parties 572,053 778,460 Total current assets 4,171,851,442 2,207,700,534 442,494,700 509,419,804 9,701,842,335 6,467,651,196 807,533,745 463,511,836 16,839,756,903 15,924,649,740 5,004,098,309 1,147,422,332 2,508,184,663 1,047,971,406 39,476,334,150 27,769,105,308
Total assets 87,587,032,445 65,863,393,894
Insurance contract liabilities ------5,129,272,339 4,184,923,357 - - - - 5,129,272,339 4,184,923,357 Interest bearing borrowings 103,404,274 199,598,401 3,211,708,823 2,471,430,887 4,313,107,439 337,250,829 143,009,930 - 2,448,174,951 2,169,747,391 7,067,100,816 5,889,307,057 5,767,785,191 2,453,597,715 23,054,291,424 13,520,932,280 Public deposits ------2,214,295,787 1,885,402,009 - - - - 2,214,295,787 1,885,402,009 Employee benefit liabilities 95,782,724 56,284,746 9,134,018 4,190,878 99,296,869 40,135,117 4,142,559 3,132,559 71,639,427 71,993,574 344,721,139 238,394,313 31,208,809 30,336,087 655,925,545 444,467,274 Other deferred liabilities 1,065,277 2,434,550 - - 1,979,156 3,041,659 ------3,044,433 5,476,209 Other non current financial liabilities 25,450,268 ------6,260,352 6,260,352 - - - - 31,710,620 6,260,352 Segment non current liabilities 225,702,543 258,317,697 3,220,842,841 2,475,621,765 4,414,383,464 380,427,605 147,152,489 3,132,559 9,869,642,856 8,318,326,683 7,411,821,955 6,127,701,370 5,798,994,000 2,483,933,802 31,088,540,148 20,047,461,481 Deferred tax liabilities 314,257,283 332,324,498 Eliminations/ adjustment (210,000,002) (521,083,345) Total non current liabilities 225,702,543 258,317,697 3,220,842,841 2,475,621,765 4,414,383,464 380,427,605 147,152,489 3,132,559 9,869,642,856 8,318,326,683 7,411,821,955 6,127,701,370 5,798,994,000 2,483,933,802 31,192,797,429 19,858,702,634
Trade and other payables 1,507,752,162 754,007,370 201,077,037 159,724,034 2,035,910,916 1,942,204,873 273,945,919 19,880,500 2,360,310,618 2,434,433,358 632,777,866 431,876,287 30,065,595 9,530,194 7,041,840,113 5,751,656,616 Short term borrowings 2,947,855,009 2,364,068,501 - 8,812,033 5,516,758,202 2,518,062,113 277,919,687 79,164,603 3,199,590,318 4,938,910,384 - 591,957,381 4,191,598,768 3,920,810,771 16,133,721,984 14,421,785,786 Current portion of interest bearing borrowings 95,757,208 104,707,592 194,143,391 - 418,579,581 77,775,799 28,977,351 - 492,471,999 1,182,022,442 1,076,324,813 1,350,530,887 2,368,998,068 1,457,670,016 4,675,252,411 4,172,706,736 Other current liabilities 296,889,800 78,423,878 77,916,408 908,136 207,006,468 209,153,431 5,609,903 56,477,520 378,186,433 272,648,703 1,341,102,283 134,331,686 24,180,491 19,923,244 2,330,891,786 771,866,598 Public deposits ------9,838,760,403 7,418,343,338 - - - - 9,838,760,403 7,418,343,338 Bank overdrafts 70,521,669 96,051,644 31,895,624 31,238,545 311,887,092 687,855,291 27,658,863 33,554,932 876,193,386 515,644,064 256,724,918 1,131,293,129 83,120,084 56,236,965 1,658,001,636 2,551,874,570 Segment current liabilities 4,918,775,848 3,397,258,985 505,032,460 200,682,748 8,490,142,259 5,435,051,507 614,111,723 189,077,555 17,145,513,157 16,762,002,289 3,306,929,880 3,639,989,370 6,697,963,006 5,464,171,190 41,678,468,333 35,088,233,644 Income tax liabilities 322,656,391 174,142,951 Amounts due to related parties 15,970,784 19,508,602 Eliminations/ adjustment (1,404,833,105) (2,627,938,709) Total current liabilities 4,918,775,848 3,397,258,985 505,032,460 200,682,748 8,490,142,259 5,435,051,507 614,111,723 189,077,555 17,145,513,157 16,762,002,289 3,306,929,880 3,639,989,370 6,697,963,006 5,464,171,190 40,612,262,403 32,653,946,488
Total liabilities 71,805,059,832 52,512,649,122
Total segment assets 4,822,022,478 2,729,035,358 7,768,465,435 4,982,273,739 15,108,769,533 7,941,622,615 1,187,506,233 590,227,309 29,822,461,298 26,133,367,105 17,287,791,786 14,210,844,025 3,077,337,348 1,600,569,968 79,074,354,111 58,187,940,119 Total segment liabilities 5,144,478,391 3,655,576,682 3,725,875,301 2,676,304,513 12,904,525,723 5,815,479,112 761,264,212 192,210,114 27,015,156,013 25,080,328,972 10,718,751,835 9,767,690,740 12,496,957,006 7,948,104,992 72,741,558,213 55,135,695,125
Softlogic Holdings PLC 199
43 OPERATING SEGMENT INFORMATION Information Technology Leisure Retail Auto Mobiles Financial Services Healthcare Services Others Group As at 31 March 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Property, plant and equipment 226,953,170 159,032,690 6,278,865,626 3,713,905,587 4,618,394,111 1,132,134,602 377,645,319 126,715,473 780,512,241 639,084,976 10,823,681,819 10,287,141,045 122,259,126 150,728,002 23,228,311,412 16,208,742,375 Lease rentals paid in advance ------854,795,905 153,312,184 - - 854,795,905 153,312,184 Investment property 233,000,000 225,300,000 1,045,292,349 757,492,349 94,848,000 81,510,000 - - - - - 2,184,636,000 442,641,387 394,000,000 1,815,781,736 3,642,938,349 Intangible assets 172,487,509 125,328,306 356,760 - 387,674,115 152,781,100 - - 87,691,123 58,404,700 - - 1,723,508 5,341,896 649,933,015 341,856,002 Other non current financial assets 5,023,408 10,736,443 - - 7,403,862 42,342,867 - - 8,473,811,327 5,680,300,612 598,882,418 430,999,128 2,528,664 2,528,664 9,087,649,679 6,166,907,714 Rental receivable on lease assets and hire purchase - - - - 126,505,603 24,197,630 - - 3,542,821,699 3,738,692,476 - - - - 3,669,327,302 3,762,890,106 Other non current assets 12,706,949 937,385 1,456,000 1,455,999 172,101,507 41,005,220 2,327,169 - 97,868,006 92,234,601 6,333,335 7,333,336 - - 292,792,966 142,966,541 Segment non current assets 650,171,036 521,334,824 7,325,970,735 4,472,853,935 5,406,927,198 1,473,971,419 379,972,488 126,715,473 12,982,704,396 10,208,717,365 12,283,693,477 13,063,421,693 569,152,685 552,598,562 39,598,592,015 30,419,613,271 Investments in associates 26,216,105 24,746,404 Goodwill 4,115,823,525 4,115,823,525 Intangible assets through business combinations 4,091,247,335 3,273,733,046 Deferred tax assets 318,527,576 307,629,785 Eliminations/ adjustment (39,708,261) (47,257,445) Total non current assets 650,171,036 521,334,824 7,325,970,735 4,472,853,935 5,406,927,198 1,473,971,419 379,972,488 126,715,473 12,982,704,396 10,208,717,365 12,283,693,477 13,063,421,693 569,152,685 552,598,562 48,110,698,295 38,094,288,586
Inventories 1,357,795,215 772,240,418 18,730,434 271,532 4,831,209,253 3,059,829,268 437,289,869 258,882,616 643,475,335 662,793,833 381,062,739 355,052,697 - 283,486 7,669,562,845 5,109,353,850 Investment property held for sale ------2,698,000,000 - - - 2,698,000,000 - Trade and other receivables 1,893,274,480 1,066,543,206 163,100,663 26,892,425 3,182,598,483 2,577,477,901 135,578,478 53,447,666 835,695,086 899,003,312 300,561,558 371,391,759 111,994,358 76,171,419 6,622,803,106 5,070,927,688 Loans and advances ------5,524,162,085 2,077,038,702 - - - - 5,524,162,085 2,077,038,702 Rental receivable on lease assets and hire purchase ------2,881,969,879 4,616,673,500 - - - - 2,881,969,879 4,616,673,500 Other current assets 347,502,003 249,395,077 128,769,657 380,854,430 1,237,152,558 410,527,140 215,829,612 123,695,495 1,438,401,554 1,348,527,338 375,083,931 228,555,867 17,357,893 32,345,103 3,760,097,208 2,773,900,450 Short term investments 273,773,507 24,305,264 332,460 124,600 124,778,113 21,811,103 1,500,000 - 4,628,754,611 5,653,252,963 1,031,151,896 - 2,332,150,565 658,836,734 8,392,441,152 6,358,330,664 Cash in hand and at bank 299,506,237 95,216,569 131,561,486 101,276,817 326,103,928 398,005,784 17,335,786 27,486,059 887,298,353 667,360,092 218,238,185 192,422,009 46,681,847 280,334,664 1,926,725,822 1,762,101,994 Segment current assets 4,171,851,442 2,207,700,534 442,494,700 509,419,804 9,701,842,335 6,467,651,196 807,533,745 463,511,836 16,839,756,903 15,924,649,740 5,004,098,309 1,147,422,332 2,508,184,663 1,047,971,406 39,475,762,097 27,768,326,848 Amounts due from related parties 572,053 778,460 Total current assets 4,171,851,442 2,207,700,534 442,494,700 509,419,804 9,701,842,335 6,467,651,196 807,533,745 463,511,836 16,839,756,903 15,924,649,740 5,004,098,309 1,147,422,332 2,508,184,663 1,047,971,406 39,476,334,150 27,769,105,308
Total assets 87,587,032,445 65,863,393,894
Insurance contract liabilities ------5,129,272,339 4,184,923,357 - - - - 5,129,272,339 4,184,923,357 Interest bearing borrowings 103,404,274 199,598,401 3,211,708,823 2,471,430,887 4,313,107,439 337,250,829 143,009,930 - 2,448,174,951 2,169,747,391 7,067,100,816 5,889,307,057 5,767,785,191 2,453,597,715 23,054,291,424 13,520,932,280 Public deposits ------2,214,295,787 1,885,402,009 - - - - 2,214,295,787 1,885,402,009 Employee benefit liabilities 95,782,724 56,284,746 9,134,018 4,190,878 99,296,869 40,135,117 4,142,559 3,132,559 71,639,427 71,993,574 344,721,139 238,394,313 31,208,809 30,336,087 655,925,545 444,467,274 Other deferred liabilities 1,065,277 2,434,550 - - 1,979,156 3,041,659 ------3,044,433 5,476,209 Other non current financial liabilities 25,450,268 ------6,260,352 6,260,352 - - - - 31,710,620 6,260,352 Segment non current liabilities 225,702,543 258,317,697 3,220,842,841 2,475,621,765 4,414,383,464 380,427,605 147,152,489 3,132,559 9,869,642,856 8,318,326,683 7,411,821,955 6,127,701,370 5,798,994,000 2,483,933,802 31,088,540,148 20,047,461,481 Deferred tax liabilities 314,257,283 332,324,498 Eliminations/ adjustment (210,000,002) (521,083,345) Total non current liabilities 225,702,543 258,317,697 3,220,842,841 2,475,621,765 4,414,383,464 380,427,605 147,152,489 3,132,559 9,869,642,856 8,318,326,683 7,411,821,955 6,127,701,370 5,798,994,000 2,483,933,802 31,192,797,429 19,858,702,634
Trade and other payables 1,507,752,162 754,007,370 201,077,037 159,724,034 2,035,910,916 1,942,204,873 273,945,919 19,880,500 2,360,310,618 2,434,433,358 632,777,866 431,876,287 30,065,595 9,530,194 7,041,840,113 5,751,656,616 Short term borrowings 2,947,855,009 2,364,068,501 - 8,812,033 5,516,758,202 2,518,062,113 277,919,687 79,164,603 3,199,590,318 4,938,910,384 - 591,957,381 4,191,598,768 3,920,810,771 16,133,721,984 14,421,785,786 Current portion of interest bearing borrowings 95,757,208 104,707,592 194,143,391 - 418,579,581 77,775,799 28,977,351 - 492,471,999 1,182,022,442 1,076,324,813 1,350,530,887 2,368,998,068 1,457,670,016 4,675,252,411 4,172,706,736 Other current liabilities 296,889,800 78,423,878 77,916,408 908,136 207,006,468 209,153,431 5,609,903 56,477,520 378,186,433 272,648,703 1,341,102,283 134,331,686 24,180,491 19,923,244 2,330,891,786 771,866,598 Public deposits ------9,838,760,403 7,418,343,338 - - - - 9,838,760,403 7,418,343,338 Bank overdrafts 70,521,669 96,051,644 31,895,624 31,238,545 311,887,092 687,855,291 27,658,863 33,554,932 876,193,386 515,644,064 256,724,918 1,131,293,129 83,120,084 56,236,965 1,658,001,636 2,551,874,570 Segment current liabilities 4,918,775,848 3,397,258,985 505,032,460 200,682,748 8,490,142,259 5,435,051,507 614,111,723 189,077,555 17,145,513,157 16,762,002,289 3,306,929,880 3,639,989,370 6,697,963,006 5,464,171,190 41,678,468,333 35,088,233,644 Income tax liabilities 322,656,391 174,142,951 Amounts due to related parties 15,970,784 19,508,602 Eliminations/ adjustment (1,404,833,105) (2,627,938,709) Total current liabilities 4,918,775,848 3,397,258,985 505,032,460 200,682,748 8,490,142,259 5,435,051,507 614,111,723 189,077,555 17,145,513,157 16,762,002,289 3,306,929,880 3,639,989,370 6,697,963,006 5,464,171,190 40,612,262,403 32,653,946,488
Total liabilities 71,805,059,832 52,512,649,122
Total segment assets 4,822,022,478 2,729,035,358 7,768,465,435 4,982,273,739 15,108,769,533 7,941,622,615 1,187,506,233 590,227,309 29,822,461,298 26,133,367,105 17,287,791,786 14,210,844,025 3,077,337,348 1,600,569,968 79,074,354,111 58,187,940,119 Total segment liabilities 5,144,478,391 3,655,576,682 3,725,875,301 2,676,304,513 12,904,525,723 5,815,479,112 761,264,212 192,210,114 27,015,156,013 25,080,328,972 10,718,751,835 9,767,690,740 12,496,957,006 7,948,104,992 72,741,558,213 55,135,695,125
Annual Report 2014-15 200
Notes to the Financial Statements
44 MATERIAL PARTLY-OWNED SUBSIDIARIES Financial information of subsidiaries that have material non controlling interest (NCI) is given below.
In Rs. Healthcare Services Asiri Hospital Holdings PLC Asiri Surgical Hospital PLC Central Hospital Ltd 2015 2014 2015 2014 2015 2014
Summarised income statement for the year ending 31 March Revenue 2,440,580,228 2,333,174,129 2,653,704,728 2,508,490,641 2,869,533,166 2,519,646,603 Other income 448,493,363 726,535,377 9,817,000 11,165,641 22,524,436 21,832,227 Operating cost (1,800,900,602) (1,631,005,263) (2,271,473,024) (2,073,140,572) (2,356,791,849) (1,966,495,689) Finance income 67,381,467 74,998,914 73,381,946 132,259,531 2,418,042 1,171,774 Finance cost (413,793,612) (386,985,466) (58,945,894) (73,270,368) (195,429,028) (313,685,437) Profit before tax 741,760,844 1,116,717,691 406,484,756 505,504,873 342,254,767 262,469,478 Taxation expense (76,592,406) (104,601,364) 1,692,734 (32,169,706) (48,058,113) (43,284,364) Profit for the year 665,168,438 1,012,116,327 408,177,490 473,335,167 294,196,654 219,185,114 Other comprehensive income 156,100,462 30,661,117 (14,314,030) (5,145,563) 281,937,807 234,855,500 Total comprehensive income 821,268,900 1,042,777,444 393,863,460 468,189,604 576,134,461 454,040,614
Profit attributable to material NCI 135,250,163 194,838,669 254,397,190 296,286,172 159,500,075 151,163,394
Dividend paid to NCI 91,117,008 298,626,341 131,582,501 517,026,498 125,051,081 -
Summarised statement of financial position as at 31 March Current assets 1,796,255,276 1,323,149,687 626,880,855 1,598,814,918 387,767,727 441,782,941 Non current assets 11,491,750,349 11,258,102,665 3,834,849,555 2,878,157,192 6,088,553,626 5,659,342,066 Total assets 13,288,005,625 12,581,252,352 4,461,730,410 4,476,972,110 6,476,321,353 6,101,125,007
Current liabilities 1,372,669,403 2,266,713,636 412,635,571 978,227,003 692,235,977 544,800,940 Non current liabilities 4,860,402,150 3,531,327,390 845,572,399 479,531,270 2,136,757,184 2,252,993,097 Total liabilities 6,233,071,553 5,798,041,026 1,258,207,970 1,457,758,273 2,828,993,161 2,797,794,037
Accumulated balance of material NCI 3,440,401,993 3,350,907,145 1,994,140,433 1,893,518,405 1,963,095,844 1,799,001,238
Summarised cash flow information for the year ending 31 March Cash flows from operating activities 1,064,455,440 233,016,320 761,918,371 549,273,245 739,925,325 495,054,640 Cash flows from / (used in) investing activities 299,737,517 (1,772,971,556) (164,455,548) 47,486,546 (519,274,814) (153,401,106) Cash flows from / (used in) financing activities (69,242,522) 1,737,767,860 102,142,446 (1,011,961,713) (341,850,334) 2,279,872 Net increase / (decrease) in cash and cash equivalents 1,294,950,435 197,812,624 699,605,269 (415,201,922) (121,199,823) 343,933,406
Softlogic Holdings PLC 201
Financial Services In Rs. Softlogic Finance PLC Asian Alliance Asian Alliance Insurance PLC General Insurance Ltd 2015 2014 2015 2014 2015 2014
Summarised income statement for the year ending 31 March Revenue 3,673,994,558 3,338,542,921 3,849,478,287 4,258,872,792 385,464,589 - Other income 290,172,434 132,349,170 585,911,655 239,363,099 6,093,350 - Operating cost (3,704,400,200) (3,258,626,350) (3,670,387,777) (3,880,938,193) (440,482,470) - Change in insurance contract liabilities - - (944,348,981) (966,545,920) - - Finance income 8,735,408 20,001,414 967,687,589 976,749,580 5,898,925 - Finance cost (47,840,955) (40,841,902) (27,915,165) (14,311,997) (1,546,859) - Profit before tax 220,661,245 191,425,253 760,425,608 613,189,361 (44,572,465) - Taxation expense (4,171,605) (25,771,363) (7,887,006) (36,753,715) (2,724,147) - Profit for the year 216,489,640 165,653,890 752,538,602 576,435,646 (47,296,612) - Other comprehensive income 22,304,794 (4,520,823) (135,627,403) (81,627,037) (25,491,445) - Total comprehensive income 238,794,434 161,133,067 616,911,199 494,808,609 (72,788,057) -
Profit / (loss) attributable to material NCI 90,722,921 87,750,869 412,019,478 143,483,124 (26,808,275) -
Dividend paid to NCI - 30,466,226 213,259,131 103,520,951 - -
Summarised statement of financial position as at 31 March Current assets 14,596,440,276 10,917,835,034 2,904,967,830 4,725,329,940 1,299,666,637 - Non current assets 5,417,393,545 7,341,904,270 5,593,512,741 3,364,671,317 1,036,693,876 - Total assets 20,013,833,821 18,259,739,304 8,498,480,571 8,090,001,257 2,336,360,513 -
Current liabilities 13,542,569,559 13,083,292,160 1,072,182,055 1,845,609,116 1,599,287,105 - Non current liabilities 4,521,628,870 3,866,898,514 5,173,001,907 4,233,006,726 10,361,465 - Total liabilities 18,064,198,429 16,950,190,674 6,245,183,962 6,078,615,842 1,609,648,570 -
Accumulated balance of material NCI 1,017,011,587 698,576,478 1,277,124,186 1,156,780,729 411,886,031 -
Summarised cash flow information for the year ending 31 March Cash flows from/ (used in) operating activities (3,230,105,331) 2,680,678,188 375,663,645 1,242,721,094 862,709,088 - Cash flows from / (used in) investing activities 1,383,701,778 (1,558,731,054) (139,591,380) (1,171,950,390) (1,781,647,788) - Cash flows from / (used in) financing activities 401,292,330 (56,180,927) (223,978,515) (180,000,000) 799,500,000 - Net increase / (decrease) in cash and cash equivalents (1,445,111,223) 1,065,766,207 12,093,750 (109,229,296) (119,438,700) -
44.1 The above information is based on amounts before inter company eliminations.
Annual Report 2014-15 202
Notes to the Financial Statements
45 CONTINGENT LIABILITIES There were no significant contingent liabilities as at the date of the statement of financial position other than what is disclosed below, which require adjustments to or disclosures in the financial statements.
45.1 Softlogic Holdings PLC Softlogic Holdings PLC received an income tax assessments from The Department of Inland Revenue for the years of assessment 2009/10 and 2010/11. The company has lodged an appeal against the said assessment and The Department of Inland Revenue has issued their determination. The Management and the tax consultants has submitted an appeal to the Tax Appeal Commission on that determination.
Based on the information available and the advice of the tax consultants, the directors are confident that the ultimate resolution of the above contingency is unlikely to have a material adverse effect on the company or on the group.
45.2 Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Asiri Hospital Matara (Pvt) Ltd Pending litigations against Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Asiri Hospital Matara (Pvt) Ltd with a maximum liability of Rs.43 mn, Rs.50 mn and Rs.51 mn respectively exist as at 31 March 2015 (2014 - Asiri Hospital Holdings PLC : Rs.43 mn, Asiri Surgical Hospital PLC : Rs.Nil and Asiri Hospital Matara (Pvt) Ltd - Rs.51 mn).
Although there can be no assurance, the directors believe, based on the information currently available, that the ultimate resolution of such legal procedures would not likely to have a material adverse effect on the company or on the group. Accordingly, no provision for any liability has been made in these financial statements.
45.3 Asian Alliance Insurance PLC VAT Assessments were received by Asian Alliance Insurance PLC in October 2011 and April 2013 in relation to taxable periods ended 31 December 2009 and 31 December 2010.
The Company has filed an appeal in November 2011 on the basis that the underlying computation includes items which are exempt /out of scope of the Value Added Tax Act. The Commissioner General of Inland Revenue has determined the assessment and the Company is in the process of appealing to the Tax Appeals Commission and awaiting the final decision.
Based on the information available and the advice of the tax consultants, the directors are confident that the ultimate resolution of the above contingency is unlikely to have a material adverse effect on the company or on the group.
45.4 Odel PLC, Odel Information Technology Services (Pvt) Ltd, Odel Properties (Pvt) Ltd Odel PLC, Odel Information Technology Services (Pvt) Ltd, Odel Properties (Pvt) Ltd received an income tax assessments from The Department of Inland Revenue for the years of assessment 2009/10 & 2010/11,. 2007/08, 2008/09, 2009/10, 2010/11 & 2011/12 and 2011/12 & 2012/13 respectively.
The group has lodged appeals against the said assessments and The Department of Inland Revenue has issued their determinations. The Management and the tax consultants have submitted appeals to the Tax Appeal Commission on that determinations.
Based on the information available and the advice of the tax consultants, the directors are confident that the ultimate resolution of the above contingencies is unlikely to have a material adverse effect on the respective companies or on the group.
Softlogic Holdings PLC 203
46 CAPITAL AND OTHER COMMITMENTS
46.1 Capital commitments Group Company As at 31 March 2015 2014 2015 2014
Capital commitments approved but not provided for 4,567,654,857 3,360,750,088 - -
46.2 Guarantees issued and in-force Group Company As at 31 March 2015 2014 2015 2014
Guarantees issued and in-force 12,250,000 14,650,000 9,525,800,000 8,274,478,000
46.3 As at 31 March 2015, outstanding currency forward agreement amount of Rs.507,960,000/- (USD 4,000,000) (2014 - Rs.1,455,676,658/, USD 11,041,177) exist for the group.
47 POST BALANCE SHEET EVENTS There were no significant events subsequent to the date of the statement of financial position, which require disclosure in the financial statements other than the following.
47.1 Dividend announcement – Softlogic Holdings PLC The directors of Softlogic Holdings PLC declared a final dividend of Rs.0.25 per share for the financial year ended 31 March 2015.
As required by section 56 (2) of the companies Act No. 07 of 2007, the board of directors has confirmed that the company satisfies the solvency test in accordance with section 57 of the Companies Act No. 07 of 2007, and has obtained a certificate of solvency from the auditors to this effect.
47.2 Sub division of ordinary shares – Asian Alliance Insurance PLC The directors of Asian Alliance Insurance PLC, a subsidiary of Softlogic Holdings PLC resolved subject to the approval at a general meeting and any other regulatory approvals (if any) to sub divide its ordinary shares in the ratio of one (01) existing ordinary share in to ten (10) sub divided ordinary shares.
So that the existing thirty seven million five hundred thousand (37,500,000) shares will be sub divided in to three hundred and seventy five million (375,000,000) new shares, there being no change to the Stated Capital of the company.
47.3 Sale of land – Asiri Central Hospitals Ltd On 09 July, 2015, the directors of Asiri Central Hospitals Ltd, a subsidiary of Softlogic Holdings PLC approved and authorised the completion of sale of the land and premises located at No. 37, Horton Place, Colombo 07 for a total consideration of Rs.2,700,000,000/-.
Annual Report 2014-15 204
Notes to the Financial Statements Security Primary concurrent mortgage for Rs.200.00 mn (Seylan Bank's interest Rs.70.00 mn) over land and building at No. 14, De Fonseka Place Colombo - 05 Secondary concurrent mortgage for Rs.80.00 mn (Seylan Bank's interest Rs.30.00 mn) over land and building at No. 14, De Fonseka Place Colombo - 05 A. K. Pathirage for Rs.30.00 mn Personal guarantee of Mr. Mortgage of 62,000,000 Asiri Hospital Holdings PLC shares and additional Rs.500.00 mn (20,840,000 shares) worth Asiri Hospital Holdings PLC shares owned by Softlogic Holdings PLC in Seylan Bank slash account Mortgage of Rs.500.00 mn (66,670,000 shares) worth Softlogic Capital PLC shares owned by Holdings PLC in Seylan Bank slash account Mortgage of 63,200 shares Lanka IOC PLC owned by Softlogic Holdings PLC Primary concurrent mortgage for Rs. 200.00 mn (Commercial Bank's interest Rs. 130.00 mn) over land and building at No. 14 and 14B De Fonseka Place Colombo - 05 Secondary concurrent mortgage for Rs. 80.00 mn (Commercial Bank's interest Rs. 50.00 mn) over land and building at No. 14, 14B De Fonseka Place, Colombo - 05 Mortgage of Rs. 100.00 mn over 11,547,000 shares Asiri Hospital Holdings PLC owned by Softlogic PLC Primary mortgage bond for Rs. 750.00 mn over 100,000,000 shares of Softlogic Capital PLC owned by Softlogic Holdings PLC
• • • • • • • • • • 2,284,966,960 Carrying value of collaterals 1,013,249,400 - - Rs. 2014 4,761,000 58,393,897 12,539,373 107,731,039 502,445,171 - Rs. 2015 Outstanding balance 8,255,720 42,856,000 18,133,900 395,082,659 968,865,498 1,960,199,620
Rs.4,696,000 commencing from January 2011 Rs.2,998,000 commencing from November 2011 Rs.305,804 commencing from October 2010 Rs. 1,334,000 commencing from January 2010 47 equal monthly installments of Rs.3,027,000 and final installment 48 equal monthly installments of Rs. 1,382,000 and final installment of Repayment term 67 equal monthly installments of Rs.305,766 and final installment 47 equal monthly installments of Rs. 10,416,667 and final installment Rs. 10,416,667 commencing from June 2014 59 equal monthly installments of Rs.4,770,000 and final installment of 20 equal monthly installments of Rs. 50,000,000 each commencing on completion of grace period one year or upon drawing the facility in full, whichever occurs first 71 equal monthly installments of Rs. 27,780,000 and a final installment of Rs. 27,620,000 commencing after one year of grace period from November 2014 AWPLR + 2% AWPLR + 1.5% AWPLR Interest rate 8% AWPLR + 2% AWPLR AWPLR + 2% AWPLR AWPLR + 2% AWPLR AWPLR + 1% AWPLR Term loan Term loan Term Nature of facility Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Lending institution Seylan Bank PLC Commercial Bank of Ceylon PLC Company Softlogic Holdings PLC INTEREST BEARING BORROWINGS Security and Repayment Terms 48 48.1
Softlogic Holdings PLC 205 Security
(shared security given by Softlogic Holdings PLC and Softlogic Retail (Pvt) Ltd to finance the acquisition of Odel PLC) Mortgage of 87,041,230 shares Asiri Hospital Holdings PLC owned by Softlogic Holdings Mortgage of 504,069,145 shares (total) Asiri Hospital Holdings PLC and Odel lodged in slash account owned by: Softlogic Holdings PLC - 126,817,359 shares of Odel Softlogic Holdings PLC - 209,965,897 shares of Asiri Hospital Holdings PLC Softlogic Retail (Pvt) Ltd - 126,817,359 shares of Odel PLC (Pvt) Ltd - 19,233,030 Softlogic Information Technologies shares of Asiri Hospital Holdings PLC Softlogic International (Pvt) Ltd - 21,235,500 shares of Asiri Hospital Holdings PLC Mortgage of 13,084,000 shares (total) Asiri Hospital Holdings PLC lodged in slash account owned by: Softlogic Holdings PLC - 8,393,785 shares (Pvt) Ltd - 2,163,753 Softlogic Information Technologies shares Softlogic Communications (Pvt) Ltd - 72,108 shares Softlogic International (Pvt) Ltd - 2,454,354 shares a) b) c) d) e) a) b) c) d) 264,296,800 1,758,232,846 10,638,739,221 Carrying value of collaterals - - Rs. 2014 36,133,441 449,990,000 123,967,574 Rs. 2015 Outstanding balance 71,939,280 24,305,992 249,950,000 1,445,194,682 1,342,276,569
Rs. 1,400.00 mn bullet payment before end of 24th month from the first date of disbursement and balance to be paid in 20 equal quarterly installments of Rs. 20.00 mn from the month 27 to 84 (during the period of year 3 to 7) Rs. 16.57 mn from January 2014 after an initial grace period of 6 months Rs. 750.00 mn bullet payment before end of 24th month from the first date of disbursement and balance to be paid in 20 equal quarterly installments of Rs. 5.00 mn from the month 27 to 84 (during the period of year 3 to 7) Rs. 4,166,667 commencing from September 2011 83 monthly installment and final installment of Rs. 576,622 commencing from September 2010 Repayment term 59 monthly installments of Rs. 4,166,667 each and final installment of 29 monthly equal installments of Rs. 16.67 mn and a final installment of AWPLR + 1.25% AWPLR AWPLR + 1.25% AWPLR 9.50% Interest rate AWPLR + 1.0% AWPLR AWPLR + 1.5% AWPLR Term loan Term Term loan Term loan Term Nature of facility Term loan Term Term loan Term Sri Lanka Savings Bank Lending institution Nations Trust Nations Trust Bank PLC Hatton National Bank PLC Company
Annual Report 2014-15 206
Notes to the Financial Statements
Security Rs. 1,631.00 mn Primary mortgage over warehouse land and building Lot B 3R 20p) complex at Piliyandala (extent Lot 3R 10P, owned by Softlogic Holdings PLC Mortgage of 201,166,182 shares Softlogic Capital PLC owned by Softlogic Holdings PLC Mortgage of 10,125,000 Asian Alliance Insurance PLC shares owned by Softlogic Capital PLC Corporate guarantees from Softlogic Capital PLC for
• • • 306,641,386 4,174,497,092 Carrying value of collaterals Rs. 2014 81,173,319 89,764,654 1,366,530,129 2,833,429,597 - Rs. 2015 Outstanding balance 50,000,000 517,600,000 7,094,659,920
63 equal monthly installment of Rs. 1,666,667 commencing from February 2013 Rs. 750,000,000 before 31 December 2014 and balance to be paid in 33 equal monthly installments of Rs. 6,200,000 and final installment of Rs. 5,400,000 commencing from January 2014 Rs. 3,125,000 commencing from June 2012 Repayment term 48 monthly installment of 13 equal installments of Rs. 4,000,000 each from December 2013 to December 2014, a bulk repayment of AWPLR + 2.5% AWPLR (floor of 14.5%) Interest rate AWPLR + 1.0% AWPLR AWPLR + 1.25% AWPLR Term loan Term Nature of facility Term loan Term Term loan Term Bank of Ceylon Lending institution Peoples Bank Sampath Bank PLC Company
Softlogic Holdings PLC 207 Security Existing primary floating mortgage bond for Rs. 179.00 mn over property No. 402, Galle Road, Colombo - 03 owned by Softlogic Retail (Pvt) Ltd Existing tertiary mortgage bond for Rs. 100.00 mn over property situated at No. 402, Galle Road, Colombo - 03 owned by Softlogic Retail (Pvt) Ltd Existing primary floating mortgage bond for Rs. 30.00 mn over immovable property at Danawakanda Estate, Demalagama, Dekatana owned by Softlogic Retail (Pvt) Ltd Quaternary mortgage bond for Rs. 120.00 mn over the property situated at No. 402, Galle Road Colombo - 03 owned by Softlogic Retail (Pvt) Ltd Mortgage of 504,069,145 shares (total) Asiri Hospital Holdings PLC and Odel lodged in slash account owned by: Softlogic Holdings PLC - 126,817,359 shares of Odel Softlogic Holdings PLC - 209,965,897 shares of Asiri Hospital Holdings PLC Softlogic Retail (Pvt) Ltd - 126,817,359 shares of Odel PLC (Pvt) Ltd - 19,233,030 Softlogic Information Technologies shares of Asiri Hospital Holdings PLC Softlogic International (Pvt) Ltd - 21,235,500 shares of Asiri Hospital Holdings PLC (shared security given by Softlogic Holdings PLC and Softlogic Retail (Pvt) Ltd to finance the acquisition of Odel PLC) Corporate guarantees from Softlogic Holdings PLC for Rs. 1,350.00 mn and Rs. 1,500.00
a) b) c) d) e) • • • • • • 429,000,000 1,350,000,000 Carrying value of collaterals 1,500,000,000 - - Rs. 2014 44,989,000 19,000,000 12,000,000 76,000,000 - Rs. 2015 Outstanding balance 24,985,000 13,000,000 52,000,000 1,350,000,000 1,443,748,268
60 monthly installments of Rs. 1,667,000 each plus interest commencing from June 2010 Rs. 1,400.00 mn bullet payment before end of 24th month from the first date of disbursement and balance to be paid in 20 equal quarterly installments of Rs. 20.00 mn from the month 27 to 84 (during the period of year 3 to 7) Repayment term 60 monthly installments of Rs. 500,000 each plus interest commencing from June 2012 59 monthly installments of Rs. 1,000,000 each and a final installment of Rs. 2,000,000 plus interest commencing from May 2010 60 monthly installments of Rs. 2,000,000 each plus interest commencing from June 2012 Rs. 750.00 mn bullet payment before end of 24th month from the first date of disbursement and balance to be paid in 20 equal quarterly installments of Rs. 5.00 mn from the month 27 to 84 (during the period of year 3 to 7) AWPLR + 1.5% AWPLR + 1.25% AWPLR Interest rate AWPLR + 1.5% AWPLR AWPLR + 1.5% AWPLR AWPLR + 1.5% AWPLR AWPLR + 1.25% AWPLR Term loan Term loan Term Nature of facility Term loan Term Term loan Term Term loan Term Term loan Term Lending institution Hatton National Bank PLC Company Softlogic Retail (Pvt) Ltd
Annual Report 2014-15 208
Notes to the Financial Statements Security Softlogic Holdings PLC - 8,485,638 shares Softlogic International (Pvt) Ltd - 272,206 shares Softlogic Communications (Pvt) Ltd - 1,233,123 shares Mortgage over freehold property of 2 R and 11.68 P owned by Softlogic Properties (Pvt) Ltd and other project assets of Hotel being constructed Lodgment of share certificates Softlogic City Hotels (Pvt) Ltd which is owned by Softlogic Properties (Pvt) Ltd Primary mortgage bond over credit and debit card sales receivables including installment sales of all outlets Softlogic Retail (Pvt) Ltd Mortgage of 9,990,967 shares (total) Asiri Hospital Holdings PLC owned by:
• • • • •
201,817,533 Carrying value of collaterals 4,615,703,035 1,500,000,000 Rs. 2014 7,823,442 1,700,000 4,320,000 3,753,607 192,000,000 1,178,530,888 - - - - Rs. 2015 Outstanding balance 156,000,000 2,058,360,663 1,443,300,000 83 equal monthly installments of Rs. 200,641.86 commencing from September 2010 Repayment term 112 months including 30 capital repayment grace period first 06 months @ USD 100,000 pm each followed by next 12 months @ USD 250,000 pm each followed by next 64 months @ USD 300,000 pm each 6 equal monthly installments of Rs. 1,380,000 and final installment of Rs. 1,700,000 together with interest (as per amended facility offered dated March 2011) 72 monthly installments as detailed and annexed to the loan agreement 47 monthly installments of Rs. 2,080,000 and a final installment of Rs. 2,240,000 with a grace period of 1 year commencing from April 2009 60 monthly installments of Rs. 1,481,481.49 with a 6 months grace period commencing from July 2009 48 monthly installments commencing from 13 November 2013 as follows 10 equal months @ Rs. 2,000,000 each followed by 12 equal months @ Rs. 4,000,000 each followed by 12 equal months @ Rs. 5,000,000 each followed by 11 equal months @ Rs. 6,000,000 each followed by a final installment of Rs. 2,000,000 8.00% Interest rate 7.00% AWPLR + 1.5% AWPLR AWPLR + 0.5% AWPLR + 3% AWPLR AWPLR + 3.0% AWPLR AWPLR + 1.5% AWPLR Term loan Term Nature of facility Term loan Term Term loan Term Term loan Term loan Term Term loan Term Term loan Term Seylan Bank PLC Lending institution Bank of Ceylon Commercial Bank of Ceylon PLC Hatton National Bank PLC Bank of Ceylon Commercial Bank of Ceylon PLC Softlogic Solar (Pvt) Ltd Company Softlogic City Hotels (Pvt) Ltd Softlogic International (Pvt) Ltd
Softlogic Holdings PLC 209
Security Primary mortgage over lease right paradise Island land and Hotel building to be refurbished/ constructed by Ceysand Resorts Ltd Mortgage over all movable assets held on the loan granted date Mortgage over 60% Ceysand Resorts Ltd shares owned by Softlogic Properties (Pvt) Ltd Corporate guarantee from Softlogic Holdings PLC for Rs. 200.00 mn Mortgage of 19,125,000 shares Asian Alliance Insurance PLC owned by Softlogic Capital
• • •
Hire purchase and finance lease receivables Hire purchase and finance lease receivables Hire purchase and finance lease receivables Hire purchase and finance lease receivables
3,590,824 9,374,979 34,320,000 12,110,500 200,000,000 Carrying value of collaterals 1,655,645,602 2,524,500,000 - Rs. 2014 520,833 9,101,697 29,417,469 90,858,352 10,409,325 88,365,822 28,125,000 15,330,473 18,749,990 338,416,000 1,292,899,999 - - - - - Rs. 2015 Outstanding balance 9,315,769 2,762,172 6,249,986 26,400,000 126,380,000 256,816,000 1,336,500,000
71 equal monthly installments of Rs. 1,810,000 and final installment of Rs. 1,490,000 together with interest after a grace period of 6 months Within 48 months commencing from October 2010 Within 48 months commencing from April 2011 Within 48 months commencing from May 2011 Repayment term 2 monthly installments of Rs. 1,000,000, 2 monthly installments of Rs. 500,000, 55 monthly installments of Rs. 6,800,000 and a final installment of Rs. 5,216,000 commencing from June 2012 17 equal semi annual installments (March and September) starting on March 2016 48 equal monthly installments of Rs. 520,833 commencing on September 2010 48 equal monthly installments of Rs. 1,041,667 commencing January 2011 48 equal monthly installments of Rs. 5,200,000 commencing from August 2011 48 Equal monthly installments of Rs.1,562,500 commencing from September 2011 48 equal monthly installments of Rs. 1,041,667 commencing from June 2011 48 equal monthly installments of Rs. 1,041,667 commencing from September 2011 AWPLR + 2 % AWPLR with a floor of 12% 12.31% 15.23% 13.08% Interest rate AWPLR + 1.25% AWPLR 5,25% + 6 Months LIBOR 17.14% 17.14% AWPLR + 2.5% AWPLR AWPLR + 2.5% AWPLR AWPLR + 3.25% AWPLR AWPLR + 3.0% AWPLR Term loan Term Nature of facility Securitisation Securitisation Securitisation Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Sampath Bank PLC Lending institution Sampath Bank PLC International Finance Corporation DFCC Bank Commercial Bank of Ceylon PLC People's Bank Bank of Ceylon Pan Asia Banking Corporation PLC Future Automobiles (Pvt) Ltd Company Softlogic Capital PLC Ceysand Resorts Ltd Softlogic Finance PLC
Annual Report 2014-15 210
Notes to the Financial Statements Security
Hire purchase and finance lease receivables Hire purchase and finance lease receivables Hire purchase and finance lease receivables Hire purchase and finance lease receivables Hire purchase and finance lease receivables
8,736,333 33,281,270 24,623,457 63,789,101 115,726,266 Carrying value of collaterals - - - - - Rs. 2014 5,292,758 24,584,781 89,509,961 43,750,000 135,145,557 297,894,855 279,907,904 774,460,487 507,960,000 ------Rs. 2015 Outstanding balance 5,824,222 22,187,513 16,415,638 42,526,067 77,150,844 507,960,000
Within 36 months commencing from October 2011 Within 48 months commencing from November 2011 Within 24 months commencing from November 2012 Within 24 months commencing from May 2013 Within 18 months commencing from May 2013 Within 24 months commencing from November 2013 Within 48 months commencing from May 2011 Within 48 months commencing from November 2011 Within 24 months commencing from May 2013 Within 24 months commencing from May 2013 Within 24 months commencing from October 2013 year grace period from the date Two of disbursement, repayable within 60 months of USD 1.2 mn commencing from April 2014 Convertible option will be started from August 2013 to 2016 with an option of converting USD 1.00 mn per year 60 equal monthly installments of Rs. 333,000 together with interest after a grace period of one year Repayment term 13.17% 16.59% 16.59% 16.88% 14.64% 13.18% 15.23% 13.17% 17.04% 16.88% 14.64% 13.76% LIBOR + 7% + 0.5% AWPLR Interest rate Nature of facility Securitisation Securitisation Securitisation Securitisation Securitisation Securitisation Securitisation Securitisation Securitisation Securitisation Securitisation loan Term Convertible to equity loan Term Lending institution FMO Deustche Bank Commercial Bank of Ceylon PLC Company Asiri Hospital Holdings PLC
Softlogic Holdings PLC 211
Security Primary mortgage bond for Rs. 2,225.00 mn over 74,454,026 shares of Central Hospital Ltd held by Asiri Holdings PLC Corporate guarantee from Asiri Surgical Hospital PLC for Rs. 500.00 mn Corporate guarantee from Central Hospital Ltd for Rs. 562.50 mn Primary concurrent mortgage bond for Rs. 160.00 mn over hospital property at No. 181, Kirula Road, Narahenpita owned interest - by Asiri Hospital Holdings PLC (Commercial Bank’s Rs. 100.00 mn) Corporate guarantee from Asiri Surgical Hospital PLC for Rs. 380.52 mn Corporate guarantee from Asiri Surgical Hospital PLC for Rs. 550.00 mn
• • • • •
550,000,000 482,520,000 Carrying value of collaterals 3,287,500,000 - - - Rs. 2014 3,294,000 80,000,000 77,500,000 47,500,000 446,669,000 2,225,000,000 ------Rs. 2015 Outstanding balance 536,789,462 322,074,390 2,405,635,414
95 equal monthly installments of Rs. 5,584,000 each and a final installment of Rs. 5,520,000 together with interest commencing from April 2015 59 equal monthly installments of Rs. 3,334,000 and final installment of Rs. 3,294,000 commencing from October 2008 60 equal monthly installments of Rs. 2,500,000 together with interest after a grace period of one year Repayment term 71 equal monthly installments of Rs. 5,107,000 each and a final installment of Rs. 5,085,000 together with interest commencing from July 2014 60 equal monthly installments of Rs. 2,500,000 commencing from October 2011 89 equal monthly installments of Rs. 24.72 mn commencing from 7th month after first disbursement and a final installment of Rs. 24.92 mn commencing from August 2014 60 equal monthly installments of Rs. 2,500,000 commencing from October 2010 59 equal monthly installments of Rs. 8,333,000 each and a final installment of Rs. 8,353,000 together with interest commencing from September 2013 95 equal monthly installments of Rs. 25,025,000 each and a final installment of Rs. 24,591,000 together with interest commencing from April 2015 PLR + 0.25% + 1% AWPLR AWPLR + 0.5% AWPLR Interest rate PLR + 0.25% AWPLR AWPLR + 0.5% AWPLR AWPLR + 1.0% AWPLR AWPLR + 0.5% AWPLR PLR + 0.5% Term loan Term loan Term Nature of facility Term loan Term Term loan Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Hatton National Bank PLC Lending institution Amana Bank Limited Commercial Bank of Ceylon PLC Nation Trust Nation Trust Bank PLC Company
Annual Report 2014-15 212
Notes to the Financial Statements
Security (shared security given by Asiri Hospital Holdings PLC,Asiri Surgical Hospital PLC and Central Ltd) Rs. 148.40 mn Primary mortgage in respect of leasehold rights over the property at Krimandala Mawatha, Narahenpita belonging to Asiri surgical Hospital PLC Primary additional security mortgage in respect of the property at Norris Canal Road, Colombo - 10 belonging to Central Hospital Ltd ranking concurrently and pari passu with the existing mortgage in respect of such property as further and additional security to the mortgage bond above Primary mortgage in respect of all shares Central Hospital Ltd, Asiri Diagnostics Services (Pvt) Hospital Matara (Pvt) Ltd belonging to Asiri Hospital Holdings PLC and all shares of Central Hospital Ltd belonging to Asiri Hospitals Primary additional security mortgage in respect of movable assets belonging to Asiri Surgical Hospital PLC and Central Hospital Ltd 134,915,107 ordinary shares of Asiri Surgical Hospital PLC held by Asiri Hospital Holdings PLC Primary concurrent mortgage bond for Rs. 200.00 mn over hospital property at No. 181, Kirula Road, Narahenpita owned interest - by Asiri Hospital Holdings PLC (Commercial Bank’s Rs. 125.00 mn) Corporate guarantee from Asiri Hospital Holdings PLC for Corporate guarantee from Asiri Surgical Hospital PLC for Rs. 363.00 mn
• • • • • • •
273,400,000 363,000,000 Carrying value of collaterals 8,809,654,792 - - Rs. 2014 13,160,000 17,121,867 196,392,000 791,532,379 - - - Rs. 2015 Outstanding balance 512,233,073 363,321,727 693,618,130
59 equal monthly installments of Rs. 1,670,000 and final installment Rs. 1,470,000 commencing from December 2009 59 equal monthly installments of Rs. 3,390,000 commencing from August 2009 after one month grace period from the date of first disbursement Repayment term 95 equal monthly installments of Rs. 5,328,000 each and a final installment of Rs. 5,266,000 together with interest commencing from April 2015 60 equal monthly installments of Rs. 5,300,000 commencing from May 2012 60 equal monthly installments of Rs. 6,050,000 commencing from April 2015 17 equal semi annual installments commencing from April 2013 AWPLR + 0.5% AWPLR + 1% AWPLR Interest rate PLR + 0.25% AWPLR + 0.5% AWPLR AWPLR 6.24% Term loan Term loan Term Nature of facility Term loan Term Term loan Term Term loan Term Term loan Term Commercial Bank of Ceylon PLC DFCC Bank Lending institution Sampath Bank PLC International Financial Corporation Asiri Surgical Hospital PLC Company
Softlogic Holdings PLC 213
Security IFC loan securities given by Asiri Hospital Holdings PLC, Surgical Hospital PLC and Central Ltd Primary concurrent mortgage over the company's premises at No. 114, Norris Canal Road, Colombo - 10 Corporate guarantee of Asiri Hospital Holdings PLC for Rs. 250.00 mn
960,000,000 Carrying value of collaterals Rs. 2014 8,999,990 85,538,200 54,072,354 42,416,666 98,166,657 64,999,990 75,000,000 49,999,990 68,499,990 224,431,880 960,055,519 179,000,000 ------Rs. 2015 Outstanding balance 38,344,666 196,671,295 878,882,177
Repayment term 59 equal monthly installments of Rs. 3,390,000 commencing from April 2011 after one month grace period from the date of first disbursement 56 equal monthly installments of Rs. 1,786,000 commencing from September 2011 after four months grace period from the date of first disbursement 17 equal semi annual installments commencing from April 2013 25 years commencing from FY 2000/01 55 equal monthly installments of Rs. 3,166,667 commencing from June 2008 54 equal monthly installments of Rs. 2,166,667 commencing from June 2008 54 equal monthly installments of Rs. 2,500,000 commencing from June 2008 54 equal monthly installments of Rs. 1,666,667 commencing from June 2008 54 equal monthly installments of |Rs. 416,667 commencing from June 2008 54 equal monthly installments of Rs. 2,166,667 commencing from June 2008 96 equal monthly installments of Rs. 10,146,667 commencing from July 2014 onwards after two years grace period 59 equal monthly installments of Rs. 4,200,000 each and a final installment of Rs. 2,200,000 commencing from October 2013 Interest rate AWPLR + 0.25% AWPLR AWPLR + 0.25% AWPLR 6.24% AWDR AWPLR + 2.5% AWPLR AWPLR + 0.75% AWPLR AWPLR + 0.5% AWPLR Nature of facility Term loan Term Term loan Term Term loan Term Lease Syndication loan Term loan Term Term loan Term Lending institution DFCC Bank International Financial Corporation Board of Investment Sampath Bank PLC Bank of Ceylon Commercial Bank of Ceylon PLC Hatton National Bank PLC National Development Bank PLC National Savings Bank Bank of Ceylon Sampath Bank PLC Company Asiri Central Hospital Ltd Central Hospital Ltd
Annual Report 2014-15 214
Notes to the Financial Statements
Security Primary mortgage bond for Rs. 55.00 mn over an allotment of land Lot Y depicted in Plan No. 9150 dated 20 September 1991 situated at Panadura containing an extent of 1 R 2.16 P Primary mortgage bond for Rs. 41.00 mn over an allotment of land Lot A in Plan No. 3418 dated 24 July 1995 situated at Cinnamon Gardens containing an extent of 2 R 36.12 P Primary floating mortgage over property situated in Kaduwela Road, Thalangama, Battaramulla owned by Odel Lanka (Pvt) Ltd Primary mortgage over immovable property situated in Ward Sri Jayawardenapura, kotte with an extent of 1 R3, Welikada, 12.25 P owned by Odel Properties (Pvt) Ltd Corporate guarantee of Asiri Hospital Holdings PLC for Rs. 326.00 mn IFC loan securities given by Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Central Ltd Corporate guarantee of Asiri Hospital Holdings PLC for Rs. 30.00 mn Corporate guarantee of Asiri Hospital Holdings PLC for Rs. 73.46 mn Corporate guarantee of Asiri Hospital Holdings PLC for Rs. 630.60 mn
• •
30,000,000 73,460,000 531,000,000 287,800,000 326,000,000 630,600,000 116,000,000 Carrying value of collaterals ------Rs. 2014 80,120,000 15,600,000 15,688,792,984 1,329,474,705 - Rs. 2015 Outstanding balance 66,000,000 12,704,700 61,436,000 57,142,828 151,405,095 326,000,000 630,600,000 24,490,515,615 1,165,114,596
47 equal monthly installments of Rs. 3.35 mn each and a final installment of Rs. 2.35 mn commencing from December 2011 Repayment term 60 equal monthly installments of Rs. 4.58 mn each commencing from January 2013 95 equal monthly installments of Rs. 3,396,000 each and a final installment of Rs. 3,380,000 commencing from April 2015 17 equal semi annual installments commencing from April 2013 59 equal monthly installments of Rs. 3,330,000 each and a final installment of Rs. 3,530,000 commencing from March 2010 71 equal monthly installments of Rs. 201,700 and a final installment of Rs. 199,300 commencing from July 2014 71 equal monthly installments of Rs. 976,000 and a final installment of Rs. 924,000 commencing from July 2014 Bridging loan facility that is repayable with in 6 months from the date of granted and will be converted to term borrowing to part finance lease value of the property acquired from UDA for the Asiri Hospital Kandy (Pvt) Ltd project 84 equal monthly installments after a grace period of 12 months from the date of first disbursement AWPLR + 1.0% AWPLR p.a. Interest rate 1 to 2 year AWPLR 1 to 2 year AWPLR + 1.5% p.a. 3 to + 6 year AWPLR 2.5% p.a. AWPLR 6.24% + 0.5% AWPLR PLR + 0.25% PLR + 0.25% 7.5% 7.0% Term loan Term Nature of facility Term loan Term Term loan Term Term loan Term loan Term Term loan Term Term loan Term Term loan Term Term loan Term Hatton National Bank PLC Lending institution Bank of Ceylon International Financial Corporation Sampath Bank PLC Commercial Bank of Ceylon PLC Commercial Bank of Ceylon PLC DFCC Bank
Company
Asiri Hospital Matara (Pvt) Ltd
Asiri Hospital Kandy (Pvt) Ltd Odel PLC
Softlogic Holdings PLC 215
Investor Information
1 GENERAL Stated Capital
2 STOCK EXCHANGE LISTING The ordinary shares of Softlogic Holdings PLC were listed in the Colombo Stock Exchange of Sri Lanka on 20 June 2011 and the trading commenced on 12 July 2011.
3 Shares held by the public was 28.50 % as at 31 March 2015. The number of public shareholders as at 31 March 2015 was 14,161.
4 DISTRIBUTION OF SHAREHOLDING AS AT 31 MARCH 2015 There were 14,169 registered shareholders as at 31 March 2015.
No. of Shares held No. of % of Total % of Total Shareholders Shareholders Holding Holding
1 - 1,000 8,517 60.11 5,671,763 0.73 1,001 - 10,000 4,601 32.47 16,484,169 2.12 10,001 - 100,000 892 6.30 26,491,949 3.40 100,001 - 1,000,000 117 0.83 31,546,085 4.05 Over 1,000,000 42 0.30 698,806,034 89.71 Total 14,169 100.00 779,000,000 100.00
5 ANALYSIS REPORT OF SHAREHOLDERS AS AT 31 MARCH 2015
Category No. of % of Total % of Total Shareholders Shareholders Holding Holding
Individual 13,796 97.37 604,929,934 77.65 Institutional 373 2.63 174,070,066 22.35 Total 14,169 100.00 779,000,000 100.00
Resident 14,115 99.62 720,525,030 92.49 Non-resident 54 0.38 58,474,970 7.51 Total 14,169 100.00 779,000,000 100.00
Annual Report 2014-15 216
Investor Information
6 TWENTY MAJOR SHAREHOLDERS AS AT 31 MARCH 2015 Shareholder No. of Shares % as at 31/03/2015
1 Mr. A K Pathirage 323,983,569 41.59 2 Mr. H K Kaimal 64,870,800 8.33 3 Mr. R J Perera 60,836,700 7.81 4 Mr. G W D H U Gunawardena 57,527,300 7.38 5 Pemberton Asian Opportunities Fund 46,000,000 5.91 6 Commercial Bank of Ceylon PLC/A K Pathirage 38,950,000 5.00 7 HSBC INTL NOM LTD - UBS AG ZURICH 9,427,494 1.21 8 Employees Provident Fund 7,230,500 0.93 9 Bank of Ceylon A/C Ceybank Unit Trust 5,632,425 0.72 10 Asian Alliance Insurance PLC - A/C 02 (Life Fund) 4,591,702 0.59 11 Mrs. A Selliah 4,236,000 0.54 12 Arunodhaya Investments (Private) Limited 3,950,000 0.51 13 Arunodhaya Industries (Private) Limited 3,950,000 0.51 14 Arunodhaya (Private) Limited 3,950,000 0.51 15 Seylan Bank PLC/W D N H Perera 3,933,327 0.50 16 Miss. S Subramaniam 3,800,000 0.49 17 Mr. V Kailasapillai 3,800,000 0.49 18 Mrs. A Kailasapillai 3,800,000 0.49 19 Sampath Bank PLC A/C No. 1 3,594,000 0.46 20 Mr. K Aravinthan 3,500,000 0.45
7 SHARE TRADING INFORMATION 8 EQUITY INFORMATION 2014/2015 2014/2015
Highest (Rs.) 20.40 Earnings per share (Rs.) 0.72 Lowest (Rs.) 10.30 Dividend per share (Rs.) 0.25 Closing (Rs.) 13.20 Dividend pay out - Turnover (Rs.) 2,338,338,680.00 Net Asset Value per share (Rs.) - No. of shares Traded 163,573,631.00 No. of Trades 20,431.00
Softlogic Holdings PLC 217
9 DEBT INFORMATION 10,000,000 rated, unsecured, redeemable debentures at the rate of 15.75% (annual effective rate of 16.70%) were issued on 9 September 2013.
Highest (Rs.) 110.53 Lowest (Rs.) 106.00 Closing (Rs.) 108.05 Turnover (Rs.) 108,822,759.32 Last Traded Yield 9.74% Yield to Maturity 14.58% No. of Debentures Traded 1,005,000 No. of Trades 09
Lanka Rating Agency assigned the long- and short-term corporate credit ratings of A- and P2 to be assigned to Softlogic Holdings PLC on 2 October 2014. Concurrently, LRA assigned an initial issue rating of A- to the Company’s existing Rs.1 Bn Rated, Unsecured, Redeemable Debenture (2013/2016). All long-term ratings carry a stable outlook.
Interest rate of comparable government security - One Year Treasury Bill rate 8.26%
Debt/equity ratio (X) 2.80 Interest cover (X) 2.38 Quick asset ratio (X) 0.78
Annual Report 2014-15 218
Corporate Directory
Date of Registered office Registration
Softlogic Holdings PLC 25-02-1998 No. 14, De Fonseka Place, Colombo 05
1 Abacus International Lanka (Pvt) Ltd 21-01-1999 Softlogic Building, Level 4, No. 14, De Fonseka Place, Colombo 05 2 Asian Alliance General Insurance Limited 28-03-2014 No. 65, Ward Place, Colombo 07 3 Asian Alliance Insurance PLC 21-04-1999 No. 283, R A De Mel Mawatha, Colombo 03 4 Asiri Central Hospitals Ltd 07-09-1992 No. 114, Norris Canal Road, Colombo 10 5 Asiri Diagnostics Services (Pvt) Ltd 19-09-1995 No. 181, Kirula Road, Colombo 05 6 Asiri Hospital Holdings PLC 29-09-1980 No. 181, Kirula Road, Colombo 05 7 Asiri Hospital Kandy (Pvt) Ltd 16-03-2007 No. 21, Kirimandala Mawatha, Colombo 05 8 Asiri Hospital Matara (Pvt) Ltd 17-04-2007 No. 26, Esplanade Road, Uyanwatta, Matara 9 Asiri Surgical Hospital PLC 30-03-2000 No. 21, Kirimandala Mawatha, Colombo 05 10 BSL International (Pvt) Ltd 22-07-2009 No. 475/32, Kotte Road, Rajagiriya 11 Capital Reach Portfolio Management (Pvt) Ltd 24-05-2006 No. 13, De Fonseka Place, Colombo 04 12 Central Hospital Ltd 14-09-2006 No. 114, Norris Canal Road, Colombo 10 13 Ceysand Resorts Ltd 06-03-1973 No. 14, De Fonseka Place, Colombo 05 14 Dai-Nishi Securities (Pvt) Ltd 26-07-1993 No. 14, De Fonseka Place, Colombo 05 15 Digital Health (Private) Limited 14-08-2015 No. 475, Union Place, Colombo 02 16 Future Automobiles (Pvt) Ltd 06-12-2010 No. 14, De Fonseka Place, Colombo 05 17 Greenfield Trading (Pvt) Ltd 23-03-2012 No. 475/32, Kotte Road, Rajagiriya 18 Nextage (Pvt) Ltd 11-04-2012 No. 79, C W W Kannangara Mawatha, Colombo 07 19 Odel Apparels (Pvt) Ltd 10-10-1991 No. 475/32, Kotte Road, Rajagiriya 20 Odel Information Technology Services (Pvt) Ltd 30-11-2007 No. 475/32, Kotte Road, Rajagiriya 21 Odel Lanka (Pvt) Ltd 04-07-2006 No. 475/32, Kotte Road, Rajagiriya 22 Odel PLC 31-10-1990 No. 475/32, Kotte Road, Rajagiriya 23 Odel Properties (Pvt) Ltd 10-10-1991 No. 475/32, Kotte Road, Rajagiriya 24 Silk Route Foods (Private) Limited 10-10-2014 No. 14, De Fonseka Place, Colombo 05 25 Softlogic Australia (Pty) Ltd 05-01-2000 Unit 2, Building B, 18-24 Ricketts Road, Mount Waverley, Vic 3149 26 Softlogic Automobiles (Pvt) Ltd 02-04-2012 No. 14, De Fonseka Place, Colombo 05 27 Softlogic B P O Services (Private) Limited 13-12-2013 No. 14, De Fonseka Place, Colombo 05 28 Softlogic Brands (Pvt) Ltd 08-11-1993 No. 14, De Fonseka Place, Colombo 05 29 Softlogic Capital PLC 21-04-2005 No. 14, De Fonseka Place, Colombo 05 30 Softlogic City Hotels (Pvt) Ltd 30-06-2011 No. 14, De Fonseka Place, Colombo 05 31 Softlogic Communication Services (Pvt) Ltd 16-09-2009 No. 14, De Fonseka Place, Colombo 05 32 Softlogic Communications (Pvt) Ltd 30-10-2000 No. 14, De Fonseka Place, Colombo 05 33 Softlogic Computers (Pvt) Ltd 13-09-1995 No. 14, De Fonseka Place, Colombo 05 34 Softlogic Corporate Services (Pvt) Ltd 24-06-2005 No. 14, De Fonseka Place, Colombo 05 35 Softlogic Destination Management (Pvt) Ltd 22-03-2012 No. 14, De Fonseka Place, Colombo 05 36 Softlogic Finance PLC 24-08-1999 No. 13, De Fonseka Place, Colombo 04 37 Softlogic Information Technologies (Pvt) Ltd 02-09-1992 No. 14, De Fonseka Place, Colombo 05 38 Softlogic International (Pvt) Ltd 09-06-1997 No. 14, De Fonseka Place, Colombo 05 39 Softlogic Mobile Distribution (Private) Limited 30-09-2014 No. 14, De Fonseka Place, Colombo 05 40 Softlogic Properties (Pvt) Ltd 04-01-2005 No. 14, De Fonseka Place, Colombo 05 41 Softlogic Real Estate (Private) Limited 27-08-2014 No. 14, De Fonseka Place, Colombo 05 42 Softlogic Restaurants (Private) Limited 05-08-2013 No. 14, De Fonseka Place, Colombo 05 43 Softlogic Retail (Pvt) Ltd 06-09-1969 No. 14, De Fonseka Place, Colombo 05 44 Softlogic Retail One (Private) Limited 04-07-2014 No. 14, De Fonseka Place, Colombo 05 45 Softlogic Solar (Pvt) Ltd 14-11-2002 No. 14, De Fonseka Place, Colombo 05 46 Softlogic Stockbrokers (Pvt) Ltd 26-11-2010 No. 6, 37th Lane, Queens Road, Colombo 03
Softlogic Holdings PLC 219
Notice of Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Softlogic Holdings PLC will be held at the “Committee Room C” of Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaloka Mawatha, Colombo 07 on Wednesday the 30th day of September 2015 at 10.30 a.m. for the following purposes: 1. To receive and consider the Annual Report of the Board of Directors and Financial Statements of the Company and of the Group for the year ended 31 March 2015 together with the Report of the Auditors thereon. 2. To re-elect Mr. R J Perera who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director. 3. To re-elect Mr. H K Kaimal who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director. 4. To re-elect Dr. S Selliah who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director. 5. To re-appoint the retiring Auditors, Messrs Ernst & Young, Chartered Accountants, as Auditors of the Company for the ensuing year and to authorise the Directors to determine their remuneration. 6. To authorise the Directors to determine and make donations for the year ending 31 March 2016 and up to the date of the next Annual General Meeting.
By Order of the Board SOFTLOGIC CORPORATE SERVICES (PVT) LTD
SECRETARIES
31 July 2015 Colombo
Note: A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to attend on behalf of him/her. The Form of Proxy is enclosed in this Report. The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 14, De Fonseka Place, Colombo 05 by 10.30 a.m. on Monday the 28th day of September 2015 being forty eight (48) hours before the time appointed for the holding of the meeting.
Annual Report 2014-15 220
Notes
Softlogic Holdings PLC 221
Annual Report 2014-15 222
Notes
Softlogic Holdings PLC 223
Form of Proxy
*I/We ...... of
...... being *a member/ members of SOFTLOGIC HOLDINGS PLC, do hereby appoint
...... (holder of N.I.C. No. ……………………………………) of ...... ………………………...... ………………… or (whom failing)
Mr. A K Pathirage of Colombo (whom failing) Mr. G W D H U Gunawardena of Colombo (whom failing) Mr. R J Perera of Colombo (whom failing) Mr. H K Kaimal of Colombo (whom failing) Mr. M P R Rassool of Colombo (whom failing) Dr. S Selliah of Colombo (whom failing) Mr. W M P L De Alwis, PC of Colombo (whom failing) Mr. G L H Premaratne of Colombo (whom failing) Mr. R A Ebell of Colombo as *my/our Proxy to represent *me/us and to speak and vote for *me/us on *my/our behalf at the ANNUAL GENERAL MEETING OF THE COMPANY to be held at the “Committee Room C” of Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaloka Mawatha, Colombo 07 at 10.30 a.m. on the 30th day of September 2015 and at any adjournment thereof, and at every poll which may be taken in consequence thereof.
FOR AGAINST
1) To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company and of the Group for the year ended 31st March 2015 ❏ ❏ together with the Report of the Auditors thereon.
2) To re-elect Mr. R J Perera who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company. ❏ ❏
3) To re-elect Mr. H K Kaimal who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company. ❏ ❏
4) To re-elect Dr. S Selliah who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company. ❏ ❏
5) To re-appoint Messrs Ernst & Young, as Auditors and to authorise the Directors to determine their remuneration. ❏ ❏ 6) To authorise the Directors to determine and make Donations ❏ ❏
……...... ……………… ……...... ……………… *Signature/s Date
Note: 1. *Please delete the inappropriate words. 2. Instructions as to completion are noted on the reverse hereof.
Annual Report 2014-15 224
Instructions as to completion 1. Kindly perfect the Form of Proxy after filling in legibly your full name, address and the National Identity Card number and signing in the space provided and filling in the date of signature.
2. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to attend and vote on behalf of him. Please indicate with an “X” in the boxes provided how your Proxy is to vote on each resolution. If no indication is given, the Proxy in his discretion will vote as he thinks fit.
3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.
4. In the case of a Corporate Member, the Form of Proxy must be executed in the manner prescribed by the Articles of Association/Statute.
5. The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 14, De Fonseka Place, Colombo 05 by 10.30 a.m. on Monday the 28th day of September 2015 being forty eight (48) hours before the time appointed for the holding of the meeting.
Please provide the following details:
Shareholder’s N.I.C./ Passport/ ...... Company Registration No......
Shareholder’s Folio No......
Number of shares held ......
Proxy Holder’s N.I.C. No...... (if not a Director) ......
Softlogic Holdings PLC Corporate Information
NAME OF COMPANY DIRECTORS CONTACT FOR MEDIA Softlogic Holdings PLC A K Pathirage - Chairman/ Managing Softlogic Holdings PLC Director 14, De Fonseka Place, LEGAL FORM G W D H U Gunawardena Colombo 05 Company was incorporated on 25th R J Perera Sri Lanka H K Kaimal February 1998 under the name of Tel : +94 11 5575 000 M P R Rassool Softlogic Holdings (Private) Limited Fax : +94 11 2595 441 and re-registered on 17th December Dr S Selliah W M P L De Alwis, PC 2007 under the Companies Act No. 07 BANKERS of 2007. Changed to a Public Limited G L H Premaratne Sampath Bank PLC Liability Company on 10th December R A Ebell Commercial Bank of Ceylon PLC 2008. The shares of the Company were Hatton National Bank PLC listed on the Colombo Stock Exchange AUDIT COMMITTEE Seylan Bank PLC on 20th June 2011 and the name of R A Ebell - Chairman National Development Bank PLC the Company was changed to Softlogic Dr S Selliah National Savings Bank Holdings PLC w.e.f. 25th August 2011. W M P L De Alwis, PC Nations Trust Bank PLC G L H Premaratne DFCC Bank Limited COMPANY REGISTRATION NO Bank of Ceylon PV 1536 PB/PQ REMUNERATION COMMITTEE Union Bank of Colombo PLC W M P L De Alwis, PC - Chairman Pan Asia Banking Corporation PLC REGISTERED OFFICE OF G L H Premaratne Hongkong And Shanghai Banking THE COMPANY R A Ebell Corporation Limited 14, De Fonseka Place, People’s Bank Colombo 05 SECRETARIES AND REGISTRARS Cargills Bank Limited Sri Lanka Softlogic Corporate Services MCB Bank Ltd. (Pvt) Ltd CONTACT DETAILS 14, De Fonseka Place, AUDITORS 14, De Fonseka Place, Colombo 05 Ernst & Young Colombo 05 Sri Lanka Chartered Accountants Sri Lanka No. 201, De Saram Place INVESTOR RELATIONS Colombo 10 Tel : +94 11 5575 000 Softlogic Holdings PLC Sri Lanka Fax : +94 11 2595 441 14, De Fonseka Place, E-mail : [email protected] Colombo 05 LAWYERS Web : www.softlogic.lk Sri Lanka Nithya Partners, Attorneys-at- Law Tel : +94 11 5575 176 No. 97 A, Galle Road Fax : +94 11 2595 441 Colombo 03 Sri Lanka
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Softlogic Holdings PLC 14, De Fonseka Place, Colombo 05, Sri Lanka Tel : +94 (11) 557 5000, Fax : +94 (11) 259 5441 E-mail : [email protected]