Creating Value since 1928 C T Holdings PLC - Annual Report 2017-18 Contents Our Business at a Glance 01 / Milestones 02 / What we do... 04 / Financial Highlights 06 / Chairman’s Report 08 Profile of Directors 11 / Review of Operations 14 / Corporate Governance 22 / Risk Management 25 Report of the Remuneration Committee 27 / Report of the Nominations Committee 28 Report of the Related Party Transactions Review Committee 29 Financial Statements Annual Report of the Board of Directors of the Company 33 / Report of the Audit Committee 36 Statement of Directors’ Responsibilities 38 / Independent Auditors’ Report 39 Statement of Profit or Loss and other Comprehensive Income 44 / Statement of Financial Position 45 Statement of Changes in Equity 46 / Statement of Cash Flows 48 Notes to the Financial Statements 50 / Five Year Review – Group 123 / Group Directory 124 Information to Shareholders 127 Notice of Meeting 130 / Form of Proxy 131 / Corporate Information Inner Back Cover We are... Professionals inspired by the ingrained family values inherited over generations Value Creators driven by innovation and technology towards building strong brands Accountable firmly committed to transparency and good governance brands Dedicated to people as our most important asset Socially Responsible pursuing trusted leadership Our Business at a Glance C T Holdings PLC then known as Ceylon Theatres Limited was incorporated in 1928 with its primary focus on the entertainment industry. The Company owned and operated a string of cinemas in various parts of the country including such well- known destinations such as Regal Colombo, Empire and Majestic cinemas. The Company also set up the first film production and processing facilities in the country with the establishment of Ceylon Studios Ltd in 1956, thus paving the way for the development of the local film production expertise. Despite the Company’s first production “Asokamala” being unsuccessful, the Company persevered to subsequently produce hit films such as “Golu Hadawatha”, “Akkara Paha”, “Sakman Maluwa” etc. The hit film “Nidhanaya” was adjudged the best Sri Lankan film produced in the past 50 years. Anticipating the effects of the changes within the film industry in the 1970s and 80s, the Company began to diversify into other areas of business, notably, consolidating its interest in Millers Limited and through it, Cargills (Ceylon) Ltd. Millers Ltd was subsequently merged with C T Holdings PLC. The Company also diversified into Financial Services and Real Estate. The subsidiary Cargills shed the Department Store concept to introduce and expand the Supermarket concept to Sri Lanka. This change was to be the most significant change to the Group and the backbone of future growth. Cargills also expanded into Food Processing, Dairy, Agri Business and Confectionery. A fully fledged Commercial Bank under the name ‘Cargills Bank’ has also been set up by the Group. All this while also staying true to its roots in cinema business by developing cinemas with digital sounds, 3D viewing and upgrading facilities for patrons. C T Holdings is now a diversified Group with interest in Retail, Fast Moving Consumer Goods, Distribution, Real Estate, Entertainment, Banking and Financial Services. 02 C T Holdings PLC Annual Report 2017/18 Milestones 2006 1928 Cargills commissioned its Ceylon Theatres new state-of-the art meat Limited established, processing facility. focusing primarily on the entertainment industry by Sir Chittampalam A. Gardiner. 2008 Ceylon Theatres merged with 1991 its subsidiary Millers PLC to create an investment holding Completed the Majestic City Company. shopping and entertainment Cinema exhibition operation mall through C T Land transferred to a wholly Development PLC. owned subsidiary, Ceylon Theatres (Private) Limited. 2010 Name of Ceylon Theatres 1996 PLC changed to C T Holdings PLC KFC franchise awarded to Cargills. 2002 Cargills acquired the Walls Ice Cream plant and CPC/ Best foods production facility of jams, cordials and sauces. 1981 Acquired Millers and Cargills 1999 and ventured into retail Entered the Ceramic / Tiles, and distribution under the Plantation and Packaging leadership of Mr. Albert A 2009 sectors. Page. C T Properties Limited completed its flagship 1992 ‘Empire’ residential development project. Entered the financial services sector through C T Smith Stockbrokers (Member, Colombo Stock Exchange) – now re named as C T CLSA Securities (Private) Limited. Cargills diversified into food processing with the acquisition of the Goldi processed meat plant – now known as Cargills Quality Foods Ltd. 03 C T Holdings PLC Annual Report 2017/18 2012 Cargills entered the brewery sector. Ceylon Theatres added three 2017 new screens to the Majestic Cineplex including Sri 2015 Cargills commissioned the Lanka’s first ever 3D cinema. Retail sector comprising the expanded dairy facility. supermarkets spun off into a Cargills Square mall separate company with new Gampaha opened with a direct equity injection into the supermarket, KFC and two Company. cinema screens. Two new cinema screens set up by Ceylon Theatres at Arcade Independence Square, the Group’s Regal cinema was refurbished. Cargills exited the brewery sector. 2013 2016 Cargills set up the Cargills Bank began expansion TGI Fridays Franchise of its network by opening 11 2018 Restaurant in branches. Colombo, Fort. Regal Cinema in Nuwara Eliya fully refurbished and re-opened. 2014 Group received license 2011 to set up and operate a Cargills acquired controlling Commercial Bank. interest in Kotmale Holdings Cargills Square Mall opened PLC. in Jaffna. Cargills also acquired Exited the Ceramic / Tiles, Diana Biscuits Plantation and Packaging Manufacturers (Private) sectors. Limited (subsequently re-named Cargills Quality Confectioneries (Pvt) Ltd). 04 C T Holdings PLC Annual Report 2017/18 What we do... Retail and Wholesale Distribution The retail sector of the Group functions under Cargills Foods Company (Pvt) Ltd. The modern trade arm covers all districts of the island through Cargills Food City and Food City Express store formats. Cargills Food City has been rated the 10th most valuable brand in Sri Lanka as per the Brand Finance Index ratings of 2017 with a AA+ rating and is the only Retailer ranked in the top ten of national brands. This sector maintains a backward integration model with local fruit and vegetable collection centres in every district of the island. Millers Limited the marketing and distribution arm holds the agency rights for leading international food brands reaching 40,000 groceries islandwide. The Company is also the distributor for the Group’s own brands. Fast Moving Consumer Goods (FMCG) The Group’s FMCG brands are some of the widest consumed household brands in the Country which include, ‘Magic’ and ‘Kotmale’ dairy products, ‘Kist’ range of jams, cordials, nectars, juices and accompaniments, ‘Cargills Finest’, ‘Goldi’ and ‘Sams’ processed meats and ‘Kist’ brand of confectioneries. The sector operates some of the most modern facilities with many ISO International Standard certifications among them such as ISO 9001: 2000 Quality Management System certification, ISO 22000: 2005 Food Safety Management System certification and ISO 14001: 2004 Environment Management System certification. Real Estate C T Land Development is a long established name in the Real Estate and Property sector. The Company owns and operates ‘Majestic City’, the largest and most popular shopping and entertainment mall in the Country. The Group also owns and operates the Cargills Square Malls in Jaffna and Gampaha. Property development operations under C T Properties previously completed the ‘Empire’ luxury apartment complex in Colombo 2 and C T Gardens Township project in Piliyandala. 05 C T Holdings PLC Annual Report 2017/18 Restaurants The restaurants’ sector includes the world renowned ‘KFC’ and ‘TGI Fridays’ franchises with 31 KFC restaurants and one flagship TGIF Restaurant. Banking and Financial Services Cargills Bank which was promoted and launched by the Group completed its third year of operations. Capital Market operations of the Group are carried out under C T CLSA Holdings Ltd, which covers stockbroking, advisory services and capital market solutions. Entertainment The Group has been associated with the national cinema industry for over 85 years with the making of the first national production and thereon producing landmark motion pictures that have won international acclaim. Ceylon Theatres (Private) Limited is engaged in operating Fifteen cinema screens in Seven locations. 06 C T Holdings PLC Annual Report 2017/18 Financial Highlights Group Company 2018 2017 Change % 2018 2017 Change % Operations Revenue 92,134,483 85,037,781 8.35 - - - Results from operating activities 6,802,234 5,798,305 17.31 32,887 (142,988) 123.00 Profit before taxation 5,791,257 4,690,108 23.48 1,138,168 1,323,215 (13.98) Profit for the year 3,739,465 2,667,014 40.21 1,119,572 1,298,524 (13.78) Profit attributable to owners of the Parent 2,597,342 1,747,876 48.60 1,119,572 1,298,524 (13.78) Per Share Data Earnings Per Share (Rs.) 12.90 8.68 48.60 5.56 6.45 (13.78) Dividends Per Share (Rs.) 5.50 5.20 5.77 5.50 5.20 5.77 Dividend Cover (Times) 2.34 1.67 40.12 1.01 1.24 (18.54) Shareholders’ Interest Stated Capital 6,489,758 3,194,008 6,489,758 3,194,008 Total equity attributable to equity holders of the parent 20,657,466 18,794,039 7,700,164 7,580,200 Return on equity attributable to equity holders of the parent (%) 12.57 9.30 14.54 17,13 Total equity attributable to equity holders of the parent per Share (Rs.) 102.57 93.31 38.23 37.64 Leverage Net Finance Costs (1,319,208) (1,131,121) 1,105,281 1,466,203 Interest Cover (Times) 5.16 5.13 (0.03) 0.10 Borrowings (including overdrafts) 17,809,035 18,579,107 - - Borrowing as a Percentage of total equity attributable to equity holders of the parent (%) 86.21 98.86 N/A N/A Note Earnings, dividends and shareholders’ funds per share have been calculated based on the number of issued shares presently in issue.