ANNUAL BROWN AND COMPANY PLC BROWN AND COMPANY REPORT 2019/20 ANNUAL REPORT 2019/20 REPORT ANNUAL www.brownsgroup.com CORPORATE INFORMATION COMPANY NAME REGISTERED OFFICE BROWN AND COMPANY PLC No. 481, T. B. Jayah Mawatha (Darley Road), P. O. Box 200, Colombo 10. LEGAL FORM Tel: 011 5063000 A Public Limited Liability Company incorporated in Sri Lanka on Fax: 011 2307380 17th August 1892 under the Joint Stock Companies Ordinance Website: www.brownsgroup.com 1861 and re-registered under the Companies Act No. 07 of 2007. The Company was listed on the Colombo Stock Exchange on BUSINESS OFFICE 25th April 1991. No. 34, Sir Mohamed Macan Markar Mawatha, Colombo 3. CONTENT COMPANY REGISTRATION NO. Tel: 011 5063000. PQ 25 Fax: 011 2307380. Website: www.brownsgroup.com. Our Vision and Our Mission Inner Cover DIRECTORS Ishara Nanayakkara AUDITORS Financial Highlights 1 Executive Chairman Messrs PricewaterhouseCoopers, Board of Directors 2 Chartered Accountants, Kapila Jayawardena Management Discussion & Analysis 4 No. 100, Braybrooke Place, Colombo 02. Non-Executive Director Corporate Governance Report 13 Tel: 011 7719838 Audit Committee Report 38 Kalsha Amarasinghe Fax: 011 2303197 Website: www.pwc.com Remuneration Committee Report 41 Non-Executive Director The Related Party Transactions Review Committee Report 42 Janaka de Silva Business Operations Committee Report 43 Independent Non-Executive Director BANKERS Bank of Ceylon FINANCIAL INFORMATION Tissa Bandaranayake Commercial Bank of Ceylon PLC Independent Non-Executive Director Cargills Bank Ltd. Annual Report of the Board of Directors 46 OUR VISION DFCC Bank PLC Statement of Directors’ Responsibility 51 To be a leading Sri Lankan SECRETARIES Hatton National Bank PLC Independent Auditor’s Report 52 ICICI Bank Ltd. conglomerate excelling through L O L C Corporate Services (Private) Limited, Statement of Profit or Loss 59 MCB Bank Ltd. No.100/1, Sri Jayewardenepura Mawatha, Statement of Comprehensive Income 60 sunrise and sunshine industries with National Development Bank PLC Rajagiriya. Statement of Financial Position 61 a global presence and cutting edge Peoples Bank Tel: 011 5063000 Statement of Changes in Equity - Group 63 Pan Asia Banking Corporation PLC technology. Fax: 011 2307380 Statement of Changes in Equity - Company 64 Standard Chartered Bank 65 Sampath Bank PLC Statement of Cash Flows REGISTRARS Notes to the Financial Statements 67 Seylan Bank PLC S S P Corporate Services (Pvt) Ltd Union Bank of Colombo PLC SUPPLEMENTARY INFORMATION 101, Inner Flower Road, OUR MISSION Colombo 03 Ten Year Summary 166 With generations of trust and Tel: 011 2573894 Investor Relations 168 reliability, our aim is to continuously Fax: 011 2573609 Economic Value Generated 170 enhance the value propositions to our Parent, Subsidiary and Associate Companies 171 stakeholders through innovative and Glossary of Financial Terms 175 Notice of the Annual General Meeting 176 customer-centric solutions. Form of Proxy 179 Corporate Information Inner Back Cover Designed & produced by Digital Plates & Printing by Gunaratne Offset (Pvt) Ltd Online References: The PDF version of the Annual Report 2019/20 FINANCIAL HIGHLIGHTS Group 31st March 2020 2019 2018 2017 2016 Results for the Year Revenue (Gross) Rs.Mn 20,439 21,194 20,554 22,648 19,890 EBIT Rs.Mn 4,448 3,980 5,403 7,330 134 Profit/(Loss) before Taxation Rs.Mn (970) 118 2,432 4,420 (1,237) Profit/(Loss) after Taxation Rs.Mn (1,515) 3 1,936 3,961 (1,311) Group Profit Attributable to Equityholders Rs.Mn 3,620 1,274 814 1,898 -205 Position at the Year end Shareholders’ Funds Rs.Mn 30,257 25,720 19,360 18,210 16,014 Total Assets Rs.Mn 147,673 92,736 75,262 66,055 61,538 Market Capitalisation Rs.Mn 8,930 10,206 4,890 5,032 5,656 Retained Earnings Rs.Mn 16,520 12,753 14,900 14,123 11,997 Financial Ratios Gross Profit % 24.37 24.22 26.21 23.00 19.00 Interest Cover Times 0.82 1.03 1.82 2.52 0.10 Current Ratio Times 0.51 0.58 0.57 0.71 0.81 Price/earnings (year-end) Times 2.47 6.65 6.01 2.65 (27.57) Debt to Equity % 50.97 56.57 49.29 46.37 47.13 Return on Shareholders’ funds % 11.97 4.96 4.20 10.42 (1.28) Per Share Earnings per Share (Rs.) 17.03 7.22 11.48 26.78 (2.89) Market Price per Share (Rs.) 42.00 48.00 69.00 71.00 79.80 Net Assets per Share (year-end) (Rs.) 142.30 120.97 273.16 256.93 225.94 Dividend per Share (Rs.) - - - 0.50 0.30 RS. 20 BN RS. 4 BN REVENUE EBIT RS. 148 BN 24.37% TOTAL ASSETS GP RATIO Annual Report 2019/20 | 1 BOARD OF DIRECTORS ISHARA NANAYAKKARA MRS. KALSHA AMARASINGHE Executive Chairman Non- Executive Director Mr. Ishara Nanayakkara is a prominent entrepreneur serving on Kalsha Amarasinghe holds an Honours Degree in Economics the Boards of many corporates and conglomerates in the region. and has an outstanding vision for investments. This vision has He initially ventured into the arena of financial services with a led her to play a key role in the strategic planning of the Group. strategic investment in LOLC Holdings PLC (formerly known as She is also vested with the responsibilities for advising the senior Lanka ORIX Leasing Company PLC) and was appointed to the management on the risk mitigation processes. She serves on the Board in 2002. Today, he is the Deputy Chairman of LOLC Group Boards of subsidiaries of Browns Group of Companies and LOLC and the Executive Chairman of Browns Group. His vision to cater Holdings PLC. to the entire value chain of the finance sector manifested in the development of Microfinance, Islamic Finance, factoring through Other key appointments: LOLC Factors, LOLC Life & General Insurance Companies and Executive Director – LOLC Holdings PLC, LOLC Finance PLC stock broking through LOLC Securities Ltd. Leveraging LOLC Group’s expertise in the SME sector, the expansion into the Micro Non-Executive Director - Browns Investments PLC, Eden Hotel Sector was spearheaded by Mr. Nanayakkara, through LOLC Lanka PLC, Palm Garden Hotels PLC Micro Credit Ltd (presently merged with LOLC Finance PLC), and LOLC Development Finance PLC. This interest in microfinance Director - LOLC Life Assurance Limited, Riverina Resorts (Pvt) led to the growth of LOLC Group’s international footprint, Ltd, Green Paradise (Pvt) Ltd and Browns Holdings Ltd. starting with an investment in PRASAC in the year of 2007, the largest microfinance Company in Cambodia, followed by the inauguration of LOLC Myanmar Microfinance Company Ltd, a KAPILA JAYAWARDENA green field investment in Myanmar in which he was the founding Non-Executive Director Chairman, as well as his strategic involvement in LOLC Cambodia Kapila Jayawardena. holds an MBA in Financial Management and Ltd; the 5th largest microfinance company in Cambodia. This is a Fellow member of the Institute of Bankers and an Associate year, LOLC Group secured a lucrative deal with Kookmin Bank, member of the Institute of Cost and Executive Accountants, Korea to sell off PRASAC for a sum of USD 603Mn. Building London. He served as the Country Head and the CEO (Sri upon his forte in microfinance, LOLC Group has further expanded Lanka and Maldives) of Citibank NA from 1998 to 2007. With his its offshore portfolio with Mr. Nanayakkara serving as a Director varied experience in the fields of Investment Banking, Banking of Pak Oman Microfinance Bank Limited, a joint venture based Operations, Audit, Relationship Management, Corporate Finance, in Pakistan between the governments of the Islamic Republic Corporate Banking and Treasury Management. Mr. Jayawardena of Pakistan and the Sultanate of Oman. Mr. Nanayakkara’s served in the following Boards/Committees: motivation to expand into various growth peripheries is further Chairman of the Sri Lanka Banks’ Association (SLBA) in illustrated through his role as the Executive Chairman of Browns 2003/2004 Investments PLC. Through various strategic investments, he is committed to catalyzing development in the growth sectors of President of the American Chamber of Commerce in Sri Lanka in the Sri Lankan economy. Endorsing his entrepreneurial spirit, Mr. 2006/2007 Ishara Nanayakkara received the prestigious ‘Young Entrepreneur Member of Financial Sector Reforms Committee (FSRC) of the Year’ Award at the Asia Pacific Entrepreneurship Awards (APEA) in 2012. He holds a diploma in Business Accounting from Member of the National Council of Economic Development Australia. (NCED) Board Member of the United States - Sri Lanka Fulbright Other Key appointments: Deputy Chairman –LOLC Holdings Commission. PLC, Executive Chairman - Browns Investments PLC, Director - Associated Battery Manufacturers (Cey) Ltd, LOLC Myanmar Mr. Jayawardena joined LOLC in the year 2007 as the Group Microfinance Co. Ltd, Pak Oman MFB, LOLC Asia (Pvt) Ltd, Managing Director/CEO and is the Chairman/Director of the LOLC International Private Limited & LOLC Private Limited, following companies and is also on the Boards of the subsidiaries Singapore. of LOLC Group: Chairman – Palm Garden Hotels PLC, Eden Hotel Lanka PLC, LOLC General Insurance Ltd, LOLC Securities Ltd, LOLC Development Finance PLC. Deputy Chairman: Seylan Bank PLC 2 | Brown and Company PLC Director: Browns Investments PLC, Riverina Resorts (Pvt) Ltd, financial institution with all branches connected online for the first LOLC International Pvt Limited, L O L C Advanced Technologies time in Sri Lanka. He was the first to introduce credit cards with a (Private) Limited, LOLC Asia (Private) Limited, LOLC Private major international franchise and a multipoint ATM network. Limited, Ceylon Graphene Technologies (Private) Limited, LOLC He pioneered many new innovations such as extended banking Africa Holdings (Private) Limited. hours, interest on daily balance on Savings Accounts, and the use of UV lights for signature verification.