Distilleries Company of Sri Lanka PLC / Annual Report 2015 / 16 / Distilleries Company of Sri Lanka PLC / Annual Report 2015 Distilleries Company of Sri Lanka PLC / Annual Report 2015 / 16 The right track The operations of the Distilleries Group are wide-ranging and complex, now grown to include diverse sectors. Over the years, we have honed our business model to one that is vibrant and dynamic, constantly evolving to meet changing consumer and stakeholder needs. We’re building on our fine heritage to evolve your company into the future. We’re looking to the years ahead with confidence and anticipation, because we know we have the right people, the right positions and the right strategies to keep us firmly on the right track. Contents Group Overview 3 Highlights of the Year 4 Financial Highlights 8 Our Businesses 12 Historical Perspective 14 The Story of Arrack 22 Chairman’s Statement 26 Board of Directors 30 Group Management 32 DCSL Management Management Information 34 Management Discussion and Analysis 44 Sustainability Report Governance Reports 55 Corporate Governance 68 Enterprise Risk Management 72 Board Audit Committee Report 74 Remuneration Committee Report 75 Board Related Party Transactions Review Committee 76 Annual Report of the Board of Directors Financial Reports 80 Statement of Directors Responsibility 81 Independent Auditors’ Report 82 Statement of Profit or Loss and Other Comprehensive Income 83 Statement of Financial Position 84 Statement of Changes in Equity 87 Statement of Cash Flows 88 Notes to the Financial Statements 163 Statement of Value Added 164 Details of Real Estate 165 Shareholder Information 167 Ten Year Summary Suplimentary Information 168 DCSL Management Team and Unit Management Team 175 Notice of Meeting 176 Notes 179 Form of Proxy Scan the QR code with your smart 181 Attendance Slip device to view this report online. Distilleries Company of Sri Lanka PLC 2 Annual Report 2015/16 Highlights of the Year May July 2015 2015 Continental Insurance Lanka was Melsta Regal Finance was reaffirmed reaffirmed Continental Insurance Lanka A+ (lka) / Stable by Fitch. Thus ‘A-(lka)’ / Stable by Fitch. Continental signifying a very high credit rating November Insurance is the Sri Lanka’s only ‘A-(lka)’ for a finance company. 2015 Fitch Rated insurance company. December December 2015 2015 DCSL was ranked No. 05 in the Business Today ‘Top Twenty Five’. This was the 17th consecutive year DCSL was listed among corporate heavy weights in the rankings. Fitch Rating reaffirmed DCSL a March national long term Rating of AAA (lka) / stable outlook - The best & highest entity credit rating for a 2016 corporate in Sri Lanka. DCSL PLC annual report was awarded certificate of compliance in the annual report competition organised by the Institute of Chartered Accountants of Sri Lanka. Introduction of award winning single malts Speyburn and Old Pulteney from the stable of International Beverage Holdings – Scotland, and Stolichnaya Vodka 3 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information Financial Highlights 2016 2015 2016 2015 Group Group Company Company SUMMARY OF RESULTS Gross Turnover Rs Mn 88,865 66,759 72,114 51,800 Excise Duty Rs Mn 55,025 37,846 50,573 34,884 Net Turnover Rs Mn 33,840 28,913 21,541 16,916 Profit After Tax Rs Mn 5,670 6,474 5,302 10,285 Shareholders Funds Rs Mn 63,204 61,004 53,056 50,283 Working Capital Rs Mn (1,577) 214 (3,271) (6,255) Total Assets Rs Mn 99,306 92,689 69,416 65,028 Staff Cost Rs Mn 4,364 4,017 1,298 1,125 No. of Employees 12,692 11,897 1,136 1,197 PER SHARE Basic Earnings Rs. 19.88 21.84 17.67 15.48* Net Assets Rs. 210.68 203.35 176.85 167.61 Dividends Rs. 3.35 3.25 3.35 3.25 Market Price High Rs. 320.00 246.00 320.00 246.00 Low Rs. 205.00 210.50 205.00 210.50 Year End Rs. 206.20 240.50 206.20 240.50 RATIOS Price Earnings times 10 11 12 16* Return on Shareholders Funds % 9.44 10.74 9.99 9.24* Current Ratio times 0.98 1.01 0.79 0.56 Interest Cover times 13.7 11.3 23.0 9.4* Stock Turnover (Finished Goods) days 16 15 13 12 Debt to Equity % 22.98 22.68 9.80 12.88 Debt to Total Assets % 15 15 7 10 Dividend Payout % 16.85 14.88 18.96 20.99* Dividend Yield % 1.62 1.35 1.62 1.35 * Previous year Company’s profit has been adjusted for intra-group capital gain on share transfer Distilleries Company of Sri Lanka PLC 4 Annual Report 2015/16 Taxes Paid - Group Total Assets - Group (Rs. Mn.) (Rs. Mn.) 70,000 100,000 99,306 60,460 60,000 80,000 50,000 40,000 60,000 30,000 40,000 20,000 20,000 10,000 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Gross Turnover - Group Profit After Tax - Group (Rs. Mn.) (Rs. Mn.) 100,000 7,000 88,865 6,000 5,670 80,000 5,000 60,000 4,000 40,000 3,000 2,000 20,000 1,000 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Taxes Paid - Group Total Assets - Group Rs. 60,460 Mn. Rs. 99,306 Mn. Gross Turnover - Group Profit After Tax - Group Rs. 88,865 Mn. Rs. 5,670 Mn. 5 Latest addition to our range Distilleries Company of Sri Lanka PLC 6 Annual Report 2015/16 7 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information Our Businesses Beverages Distillation, Manufacture and Distribution of Liquor Products Plantations Cultivation & Processing of Tea & Rubber Telecommunication Voice, Data, Broadband, Hardware, Software and Networking Solutions Distilleries Company of Sri Lanka PLC 8 Annual Report 2015/16 Insurance General Insurance Services Financial Services Variety of innovative Financial Solutions under one roof Power Generation Hydro Power Generation Bogo Power 9 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information Our Businesses Logistics Automobile Servicing and Logistics Media Media Buying & Creative Services Textiles Dyeing and Printing Fabric Distilleries Company of Sri Lanka PLC 10 Annual Report 2015/16 Leisure Hotels & Hospitality BPO Services BPO, KPO & Call Centre Services Information Technology Oracle ERP Cloud Oracle HCM Cloud Oracle Tech 11 Group Overview | Management Information | Governance Reports | Financial Reports | Suplimentary Information Historical Perspective Excise Department of Ceylon, which Today, we are present in all parts of the was initially created as the enforcement country, operating under the principle authority to distribute and sell liquor products in Sri Lanka, branched out into of providing the highest standard of the distillation and manufacture of liquor products and services products. In 1974, the State Distilleries Corporation was incorporated by statute, to take over this venture, while the Excise Department realigned its operations as a monitoring body. Touching lives for over a century… Thus, DCSL has the distinction of being Present in Sri Lanka for over a century, the pioneer distiller in Sri Lanka. In 1989, The Distilleries Company of Sri Lanka under a government policy decision, PLC (DCSL), is one of the most profitable the State Distilleries Corporation was and well respected corporate entities converted into a limited liability company. in the country. Its proud tradition, This transfer of ownership took place at rich heritage and proven credentials the Colombo Stock Exchange (CSE) in have made the Company a beacon of 1992, making it the largest transaction in inspiration for others. Over the past 100 the history of the CSE at that time. years, our corporate DNA has been Under new private management, strengthened with our values of tradition, the Company entered an era of quality, innovation, resilience and the modernisation that witnessed upgrading determination to succeed. DCSL’s roots of machinery and equipment, the can be traced back to 1913, when the introduction of modern management Distilleries Company of Sri Lanka PLC 12 Annual Report 2015/16 systems & processes and the continuous but have been recognised as a leading international markets to render our brand upgrading of the quality of our products. corporate with the highest quality an internationally recognised one. The Plant and machinery were upgraded standards. Despite these achievements newly installed ultra modern state-of- to modern international standards and and our strong position of business the-art fully automated plant will ensure new technology developed by world leadership, we continue to look for that only products of the highest quality renowned experts was introduced. Large ways to improve and grow. Since 1992, reach the consumer. investments have also been made in the Company has not only expanded Research and Development (R&D) and in production, but has also diversified into upgrading laboratories. The best experts other non-alcohol related activities. in the spirit industry were tasked with ensuring that all the spirits marketed by us were up to international quality standards. These improvements have equipped the Company with top of the line facilities enabling it to produce beverages which are world class. Furthermore, storage facilities and product distribution systems have been upgraded to modern standards with fully computerised systems. A fleet of modern vehicles ensures that customers in even the remotest areas are able to enjoy the best DCSL products delivered island wide. These improvements contributed towards higher production efficiencies across the supply chain. Our people are regularly trained in the best international Today, we are present in all parts of the practices in locations famed for high country, operating under the principle quality alcohol, such as France, Scotland of providing the highest standard of and Ireland.