Annual Report 2015/16 Carson Cumberbatch PLC Strategy Focused Carson Cumberbatch PLC | Annual Report 2015/16 Contents Sector Overview 2 Corporate Information 8 Financial Highlights 9 Chairman’s Statement 10 Profiles of the Directors 12 Group Structure 16 Sector Review 18 Graphical Financial Review 28 Financial Review 30 Sustainability Report 36 Value Added Statement 58 Management Teams 60 Group Directorate 62 Risk Management 68 Information to Shareholders & Investors 74 Carson Cumberbatch PLC No. 61, Janadhipathi Mawatha, Colombo 1, Sri Lanka www.carsoncumberbatch.com Strategy Focused Carson Cumberbatch PLC has long been recognised as one of the most successful and dynamic conglomerates in Sri Lanka having a regional presence. This annual report reviews a challenging year of operations worldwide. Yet as always, your company remains confident of its ability to strategically expand its business interests to deliver consistent value back to the many stakeholders we partner today. Carson Cumberbatch PLC is a broadly diversified conglomerate with interests in oil palm plantations, oils & fats, beverages, portfolio & asset management, real estate and leisure sectors. 2 Carson Cumberbatch PLC Annual Report 2015/16 Sector Overview In addition to its own brands, Lion Brewery (Ceylon) PLC also produces the internationally renowned Beverage global brand “Carlsberg”, The flagship brand “Lion” is also exported to several under license from Carlsberg countries including USA, Canada, Australia, UK, Japan, International Denmark, since and the Maldives where the company is the market leader. 1993. In addition to its own brands, Lion Brewery (Ceylon) PLC also produces the internationally renowned global brand for more details “Carlsberg”, under license from Carlsberg International Page 22 Denmark, since 1993. With the recent acquisition of Millers Brewery, the product portfolio of Lion Brewery has expanded further, to include a number of Millers brands, such as “Three Coins Lager”, “Sando Power Strong”, “Grand Blonde”, “Sando Dark” and “Sando Stout”. The beverage sector recently acquired distribution The beverage sector of the Group has roots going back rights for the legendary Mexican beer brand “Corona” to over 100 years in the brewing industry of Sri Lanka, and is also the licensed distributor for Diageo brands in where sector holding company, Ceylon Beverage Holdings Sri Lanka. PLC, formerly known as ‘The Ceylon Brewery’, was the In addition to Lion Brewery (Ceylon) PLC, Ceylon country’s pioneer brewer. It has nurtured its brand “Lion” Beverage Holdings has also invested in a chain of pubs through times of traditional brewing in the picturesque (“Machan” & “O!”) and retail outlets, under subsidiary and cool climes of Nuwara Eliya, to its modern high tech companies Retail Spaces and Pubs N Places, with the state-of-the-art plant owned by subsidiary and operating aim of providing consumers with a pleasant ambience company, Lion Brewery (Ceylon) PLC in Biyagama. and environment to purchase the alcoholic beverages they desire. Carson Cumberbatch PLC 3 Annual Report 2015/16 We entered Indonesia in Oil Palm Plantation 1996 and since then we have grown to a total extent Majority of our Oil Palm Plantations are situated in of over 70,000 hectares Indonesia, in the Kalimantan and in Irian Jaya regions, whilst our entry into plantations dates back to over 100 planted in Indonesia and years with Rubber plantations in Malaysia. with a total land bank of over 145,000 hectares. We entered Indonesia in 1996 with the setting up of PT Agro Indomas, in Central Kalimantan with a land bank of 12,000 hectares. Our second plantations in Indonesia, PT Agro Bukit commenced development in for more details 2005 and since then we have grown to a total extent Page 18 of over 70,000 hectares planted in Indonesia and with a total land bank of over 145,000 hectares. During FY 15/16 our plantations yielded more than 1 million MT’s of FFB (Fresh Fruit Bunches) and over 240,000 MT of CPO (Crude Palm Oil). Goodhope Asia Holdings Ltd was incorporated in and developed infrastructure within the operating Singapore in 2008 as the holding company consolidating locations. Our plantations are developed adopting all investments by the Carsons Group in the Oil Palm stringent sustainable development criterion. Goodhope Plantations and Oils & fats business segments. As the is a member of the RSPO (Roundtable on Sustainable planted extents grew, we have also set up required Palm Oil) and we produce RSPO certified palm oil at processing facilities to produce Crude Palm Oil (CPO) some of our palm oil mills. 4 Carson Cumberbatch PLC Annual Report 2015/16 Sector Overview Our downstream operation supplies specialty fats to Oils & Fats the confectionery, ice cream and bakery businesses, Goodhope entered the downstream edible Oils & Fats exporting specialty fats segment, with the acquisition of a specialty Oils & manufactured to over 55 Fats manufacturing operation in Malaysia and a palm countries. oil refinery in India. Our total refining and specialty fats manufacturing capacity is over 300,000 MT. Our downstream operation supplies specialty fats to the confectionery, ice cream and bakery businesses, with the for more details Malaysian plant exporting specialty fats manufactured Page 20 out of palm kernel oil, palm oil and coconut oil to over 55 countries. Our customers range from multi nationals to regional and national players within these industries who command significant market shares in their respective businesses. The downstream businesses will facilitate us to integrate with the upstream plantations in Indonesia over the medium to long term, facilitating towards achieving our vision of becoming an integrated player within the Palm oil industry value chain. Carson Cumberbatch PLC 5 Annual Report 2015/16 The Guardian group, serves as an investment house which offers investors variety in terms of exposure to asset classes based on Portfolio & their preference and risk Asset Management appetite. The Portfolio & Asset Management segment of the for more details Carson’s group is primarily focused on capital market Page 24 activities for management of portfolios across multiple asset classes. Ceylon Guardian Investment Trust PLC, which is positioned as the sector holding company, holds the privilege of being the largest listed investment company on the Colombo Stock Exchange to date. formed with Acuity Partners. Guardian Acuity Asset The Guardian group, serves as an investment house Management primarily has three unit trust funds in which offers investors variety in terms of exposure to offer; Guardian Acuity Fixed Income Funds, Guardian asset classes based on their preference and risk appetite. Acuity Equity Fund and Guardian Acuity Money To this end, the group has two listed subsidiary Market Gilt Fund. companies; Ceylon Investments PLC (CINV) and Guardian Capital Partners PLC (WAPO) which act The sector also offers the Sri Lanka Fund, (formerly as investment vehicles for listed and private equity known as the Regent Sri Lanka Fund), a dedicated respectively. Ceylon Guardian’s own proprietary USD denominated country fund incorporated with the portfolio forms the anchor funds under management, objective of facilitating investors residing overseas to gain further to which, the group has diversified its business exposure to the local market. As at 31st March 2016, the reach on three fronts –client portfolio management, unit total Assets under Management of the Guardian Group trust management and private equity management. amounted to Rs. 28.9 Bn, of which, the discretionary portion of Guardian’s proprietary portfolio was valued at The Group also has presence in the Unit Trust segment, Rs.12.3 Bn and external client portfolios together with via Guardian Acuity Asset Management, a joint venture Unit Trust’s stood at a cumulative Rs. 9.5 Bn. 6 Carson Cumberbatch PLC Annual Report 2015/16 Sector Overview Further to the location factor, the sector also boasts of a diverse tenant profile featuring Real Estate banks, multinationals and other corporates which speaks spread across a land bank of 2.94 acres, all positioned of the high level of service in the prime areas of Colombo, bearing significant value provided. potential. For instance, the sector’s office properties at Janadhipathi Mawatha are located in the commercial hub of Sri Lanka, facing the Central Bank, and neighbouring State and Commercial banks, the World for more details Trade Centre, star class hotels and the Port. Page 27 The group’s warehouse complex at Vauxhall Lane is also situated in an area which would eventually fall within development plans. On the other hand many landmark projects envisaged to come up in the city, some of which have already broken ground, could threaten the rental market with over supply. The total property portfolio The Real Estate business of Carson Cumberbatch PLC of the sector was valued at Rs. 3.2 Bn as at 31st March comprising of sector holding company, Equity One 2016. Further to the location factor, the sector also PLC and its subsidiaries, Equity Two PLC and Equity boasts of a diverse tenant profile featuring banks, Three pvt Ltd is primarily engaged in the rental of office multinationals and other corporates. The group has and warehouse spaces. The sector owns and manages maintained healthy tenant retention levels over the a total built up area of approximately 193,000 sq. ft. past few years, which speaks of the high level of service provided. Carson Cumberbatch PLC 7 Annual Report 2015/16 In efforts to provide a unique guest experience and elevate Leisure the overall standards of the hotel, Pegasus Reef The Leisure sector of the Carsons Group constitutes launched an exclusive sea of two hotel properties; The Pegasus Reef Hotel and Giritale Hotel, the latter being fully owned by the food restaurant, named “The former. The Pegasus Reef Hotel, which entered the Fishery” in August 2015. hospitality industry of Sri Lanka during the early 1970’s as one of the first premier star class resort establishments in the country, is a luxurious tropical getaway, located in Hendala, Wattala, overlooking for more details Page 26 the breath taking Indian Ocean.