SUSTAINABLE PROTECTION DIPPED PRODUCTS PLC | ANNUAL REPORT 2019/20 Scan to view this report online at: www.dplgroup.com SUSTAINABLE PROTECTION Dipped Products PLC is an entity committed to sustaining and protecting our stakeholders and the environment in which we operate. As a respected global manufacturer of sustainable protective hand-wear, we have committed ourselves to the highest standards of quality, innovation and responsibility, entrenching sustainable practices in all we do. In the year under review, we have recorded a significant improvement in profitability while building customer relationships that reinforce and shield our long-term business strategy. Today as we prepare to take on the future with a pledge to sustain and protect the people, we are well-equipped to leverage our resources and explore new avenues to carry forth the value we have secured today into the future. Dipped Products PLC. We’re advocates of sustainable protection. SUSTAINABLE PROTECTION CONTENTS OVERVIEW CORPORATE GOVERNANCE About this Report 04 Corporate Governance 34 Performance Highlights 05 Related Party Transactions Review Chairman and Managing Director’s Committee Report 54 Joint Message 07 Audit Committee Report 55 Board of Directors 10 Annual Report of the Board of Directors Management Team 12 on the Affairs of the Company 57 Value Creation Model 14 Statement of Directors’ Responsibility 61 DPL AT A GLANCE IMPACT OF COVID 19 AND Business Overview 16 WAY FORWARD 62 Group Structure 18 FINANCIAL STATEMENTS PERFORMANCE REVIEW Financial Calendar 64 Operating Environment 20 Independent Auditor's Report 65 Our Strategy 21 Statements of Profit or Loss 68 Operational Review 22 Statements of Comprehensive Income 69 Financial Review 24 Statements of Financial Position 70 Risk Management 26 Statements of Changes in Equity 71 Statements of Cash Flows 74 VALUE CREATION Notes to the Financial Statements 76 Manufactured Capital 28 Human Capital 29 ANNEXES Social and Relationship Capital 30 Decade at a Glance 136 Intellectual Capital 31 The Share 138 Natural Capital 33 Group Structure 142 Glossary 144 Notice of Meeting 145 Form of Proxy 147 Corporate Information IBC 2 DIPPED PRODUCTS PLC | ANNUAL REPORT 2019/20 OVERVIEW VISION To be the preferred and most sought after provider of hand protection wear in the world. MISSION DPL strives to be the preferred global hand protection provider. We are committed to the continual improvement of our business processes and systems. We shall comply with environmental and social obligations, meet the aspirations of our employees, suppliers and shareholders and build relationships of trust. DIPPED PRODUCTS PLC | ANNUAL REPORT 2019/20 3 SUSTAINABLE PROTECTION ABOUT THIS REPORT In the wake of unprecedented operational and financial challenges posed by COVID-19 and our subsequent efforts to rationalise nonessential costs, this year Dipped Products PLC has sought to produce a concise, yet statutorily compliant Annual Report. Content included in the Report has been carefully selected and structured to fulfil the essential information requirements of our stakeholders given the prevalent conditions. The Report includes high-level disclosures on the Group’s operating environment, strategy, performance, governance, sustainability, and our plans for the future. REPORTING ENTITY REPORTING PERIOD STANDARDS AND PRINCIPLES Dipped Products PLC and its operating The Report covers the period from Sri Lanka Financial Reporting Standards subsidiaries in Sri Lanka, Thailand and April 01, 2019 to March 31, 2020. Listing Requirements of the Colombo Italy which are engaged in the Hand Stock Exchange Protection and Plantation sectors. Code of Best Practice on Corporate Governance issued by Securities and Exchange Commission of Sri Lanka (2017) REPORT STRUCTURE This year’s report has been structured to address the following key topics/ questions raised by our stakeholders: Core topic/question The information we share Where to look High-level overview of the Our strategic imperatives and the progress we made Chairman and Managing Director’s Joint Group’s strategy, performance, Developments in our operating landscape Message (Page 07) risk factors and way forward The Group’s financial and operational performance Performance Highlights (Page 05) Introduction to DPL and how Snapshot of the Group DPL at a Glance (Page 136) we create value The process through which we transform our capital Value Creation Model (Page 14) inputs What were the key trends Developments in the global and local economy Operating Environment (Page 20) that shaped the Group’s Market development performance? How the Group performed Operating performance of our key business lines Operating Review (Page 20) during the year? Group’s financial performance Financial Review (Page 24) Approach to Sustainability and Summary of how we nurtured all capitals during Manufactured Capital (Page 28) how the Group created value the year Human Capital (Page 29) Social and Relationship Capital (Page 30) Intellectual Capital (Page 31) Natural Capital (Page 33) How the COVID-19 pandemic Impacts of COVID-19 and what we are doing to Way Forward (Page 62) affects us and our plans for the address the resultant challenges future? Outlook for the future 4 DIPPED PRODUCTS PLC | ANNUAL REPORT 2019/20 OVERVIEW PERFORMANCE HIGHLIGHTS Metric 2019/20 2018/19 % Y-o-Y FINANCIAL PERFORMANCE Revenue Rs. "million" 30,563 30,089 1.57 Operating profit Rs. "million" 1,441 1,782 (19.13) Profit before tax Rs. "million" 1,160 1,643 (29.38) Profit after tax Rs. "million" 850 1,224 (30.55) Return on equity % 6.72 8.33 (19.33) Return on capital employed % 10.27 14.16 (27.47) Working Capital Ratios Inventory holding period Days 65.80 67.04 (1.86) Debtor holding period Days 59.71 61.09 (2.27) Payable holding period Days 50.27 48.25 4.18 Cash conversion cycle Days 75.23 79.88 (5.82) Current ratio Times 1.62 1.53 5.49 Quick asset ratio Times 0.97 0.93 4.37 Financial Stability Total assets Rs. "million" 27,279 26,202 4.11 Total liabilities Rs. "million" 13,248 12,989 1.99 Shareholders’ funds Rs. "million" 11,137 10,422 6.86 Non controlling interest Rs. "million" 2,894 2,791 3.69 Total debt Rs. "million" 6,068 5,270 15.14 FINANCIAL CAPITAL FINANCIAL Debt/Equity No. of times 0.34 0.40 (14.76) Net debt (cash)/Equity No. of times 0.30 0.27 14.16 Debt/Total assets % 22.00 20.00 10.00 Shareholder Information No. of shares In issue Number 59,861,512 59,861,512 - Earnings per share Rs. 12.50 14.51 (13.85) Dividends per share Rs. 4.00 4.50 (11.11) Net asset value per share Rs. 186.04 174.09 6.86 Closing price Rs. 57.00 78.00 (26.92) Market capitalization Rs. "million" 3,412 4,669 (26.92) P/E ratio No. of times 4.56 5.38 (15.17) Dividend payout % 32.00 31.01 3.18 Dividend cover No. of times 3.12 3.22 (3.24) Dividend yield % 7.02 5.77 21.64 DIPPED PRODUCTS PLC | ANNUAL REPORT 2019/20 5 SUSTAINABLE PROTECTION PERFORMANCE HIGHLIGHTS Metric 2019/20 2018/19 % Y-o-Y Property, plant and equipment Rs. “million” 12,317 12,218 0.81 Carbon intensity* Kg/per pair 0.06 0.06 - Capital expenditure Rs. “million” 1,690 748 125.94 CAPITAL MANUFACTURED MANUFACTURED AN INSPIRED TEAM Total employees* No. 1,767 1,531 15.41 Payments to employees* Rs. “million” 2,546 2,389 6.57 Employee retention rate* % 81 74 9.46 No. of promotions* No. 33 21 57.14 Female representation* % 35 33 6.06 HUMAN CAPITAL Investment in training* Rs. “million” 8.6 13.4 (35.82) Total training hours* Hours 28,496 21,841 30.47 Average training hours/employee* Hours 16.12 14.26 13.04 SUSTAINABLE OPERATIONS Payments to suppliers* Rs. “million” 9,096 8,076 12.63 Beneficiaries* No. 5,500 5,000 10.00 Investment in CSR* Rs. “million” 4 4 - SOCIAL AND SOCIAL NETWORK CAPITAL NETWORK PRODUCTS AND INNOVATION New products launched* No. 17 8 112.50 Investment in R &D* Rs. “million” 113.5 86.4 31.37 CAPITAL Customer satisfaction* % 87 81 7.41 INTELLECTUAL INTELLECTUAL SUSTAINABLE OPERATIONS Energy consumption* GJ “million” 1.32 1.33 (0.75) % of renewable energy* % 91 91 - 3 CAPITAL NATURAL NATURAL Water consumption* M “million” 1.56 1.49 4.70 Carbon footprint* MtCO2e 14,559 14,296 1.84 * Hand Protection sector only 6 DIPPED PRODUCTS PLC | ANNUAL REPORT 2019/20 OVERVIEW CHAIRMAN AND MANAGING DIRECTOR’S JOINT MESSAGE “We are confident that recent investments we have made in strengthening our production, process and human capabilities have positioned us in good stead to weather the challenges presented by this pandemic” A M Pandithage Chairman Dear Shareholder, operational efficiencies enabled the Hand Protection Sector to The year under review was one which tested the mettle of our record a 29% growth in pre-tax profits to Rs. 1.0 billion. On the team and the agility of our strategy. The economic and social other hand, the escalation of costs arising from the 40% increase implications of the COVID-19 pandemic we began to experience in the basic wage of plantation sector workers coupled with lower in the latter part of the year under review were unprecedented. prices resulted in the Plantation Sector recording a sharp drop in The organisations were compelled to rethink their strategies and pre-tax profit to Rs. 221 million. Overall, the Group’s Consolidated reinvent their business models to ensure commercial viability and pre-tax profit recorded a 29% decline to Rs. 1.16 billion during the sustainability. For Dipped Products PLC, we are confident that year under discussion. recent investments we have made in strengthening our production, process and human capabilities have positioned us in good stead An Agile Strategy to weather the challenges presented by this pandemic.