MULTIFACETED LANKA TILES PLC Integrated Annual Report 2017/18 MULTIFACETED At Lanka Tiles PLC, we are focussed on being the best we can be. That is why, year after year we push ourselves to become better, to ensure we are a dynamic, vibrant entity, constantly evolving and creating value for the thousands of stakeholders we partner. We are gearing ourselves for the future through state-of-the- art technology, our forward-looking strategies, and exploring new avenues for growth. We are also mindful that our true purpose lies in our long-term impact on society and the environment in which we operate. This is the underlying reason behind our pursuit of a more holistic approach towards doing business. Our focus is multifaceted – as we continue to seek operational excellence and profitability, we are fostering a culture of sustainability, integrity and good governance, building relationships that last a lifetime. CONTENTS Introduction to report / 3 About Us / 6 Performance Highlights / 10 Chairman’s Statement / 12 Managing Director’s Review / 16 Board of Director’s / 22 Senior Management / 26 Creating Value for Our Stakeholders / 28 Corporate Governance Report / 56 Risk Management / 67 Annual report of the Board of Directors on the Affairs of the Company / 74 Statement of Directors Responsibilities / 78 Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement / 79 Related Party Transactions Review Committee Report / 80 Remuneration Committee Report / 81 Audit Committee Report / 82 Independent Auditor’s Report / 84 Consolidated Statement of Financial Position / 90 Consolidated Statement of Comprehensive Income / 91 Consolidated Statement of Changes in Equity / 92 Consolidated Statement of Cash Flows / 93 Notes to the Financial Statements / 94 Five Year Summary Statement of Financial Position / 129 Five Year Summary Statement of Profit or Loss / 130 Shareholder Information / 131 Statement of Value Added / 133 Notice of Meeting / 134 Form of Proxy / 135 2 LANKA TILES PLC INTRODUCTION TO THIS REPORT Continuing our journey of integrated reporting, Lanka Through the process of selecting material topics for Tiles PLC (LTPLC) is pleased to present the Company’s disclosure, we have attempted to present a connected and performance for the reporting period 01st April 2017 to complete, but concise report. 31st March 2018. In addition, we have attempted to presented a consistent DIRECTORS STATEMENT OF RESPONSIBILITY FOR THIS and strategic picture of our performance for the financial REPORT year 2017-18 and our future plans. The Board of Directors have acknowledged their responsibility for this annual report in the Annual Report of FEEDBACK AND CONTACT the Board of Directors on the Affairs of the Company and LTPLC values stakeholder feedback on our reporting to the Statement of Directors Responsibilities, as required enable us to continually meet their expectations and under the Companies Act of 2007. improve reporting criteria. For feedback on this report please contact : BASIS OF PREPARATION AND PRESENTATION OF THIS REPORT Name of contact person: The material topics selected for disclosure in this report Mr. Tyrell Roche - General Manager (Finance) were decided by the top management, under the guidance Telephone number: 011 4526700 of the Managing Director. The process of selecting material Email: [email protected] topics took into account the disclosure requirements under: 1. The International Integrated Reporting (IR) framework of 2013 2. The Companies Act of 2007 3. The Code of Best Practice on Corporate Governance for public listed companies, jointly issued by The Institute of Chartered Accountants of Sri Lanka, The Securities and Exchange Commission of Sri Lanka and The Colombo Stock Exchange. The Company has not obtained external assurance for the sustainability performance measures and aspects disclosed in this report. COMPLIANCE WITH INTEGRATED REPORTING PRINCIPLES On meeting the principle of reliability of information, we state that the financial statements of the Company have been audited by Chartered Accountants, M/s. PricewaterhouseCoopers. All other information have been approved by relevant senior managers to ensure maximum reliability. INTEGRATED ANNUAL REPORT 2017/18 3 INTRODUCTION TO THIS REPORT MATERIALITY ASSESSMENT 3. These topics were then matched against stakeholder A materiality assessment process was conducted to ensure expectations. the report conforms to Integrated Reporting principles by disclosing topics of relevance to both the Company and key 4. Topics were prioritised. stakeholder groups. This was a 5-step process where: 5. Topics deemed to be high priority for both the 1. Key stakeholders were identified (please refer the Company and stakeholders were selected for Stakeholder Engagement chapter for information discussion in the report. This process is depicted regarding our key stakeholder groups). below. 2. An assessment was conducted to identify material topics under each of the coverage areas of the IR Framework, for the given period. Process of identifying material topics for disclosure Key stakeholder mapping High interest + High interest + high influence low influence Identify key stakeholders 1. Regulators 1. Minority 2. Large shareholders Identify topics material to shareholders 3. Institutional key stakeholders shareholders + Identify topics material to company Prioritise topics High influence + Low influence + Select only high material high interest Interest level of stakeholders level Interest low interest topics for both key 1. Employees stakeholders and company 1. Small 2. Large suppliers shareholders 3. Business partners Low High Influence of stakeholders Low High 4 LANKA TILES PLC PRIORITISATION OF TOPICS FOR DISCUSSION IN CURRENT REPORT Vital GROUP 3 GROUP 1 TOPICS GAINING VITAL TOPICS IN INTEREST FOR KEY AMONG STAKEHOLDERS STAKEHOLDERS AND COMPANY GROUP 4 GROUP 2 TOPICS AND HIGH MATERIAL STATEMENTS THAT TOPICS FOR COMPANY AND KEY Level of importance to key stakeholders of importance to Level GIVE BUDGET INFORMATION TO ALL STAKEHOLDERS STAKEHOLDERS Vital Level of importance for company WHERE TO FIND THIS INFORMATION IN THIS ANNUAL REPORT Group 1 topics Chapter Page Nos. 1. Regulatory compliance Corporate Governance Report 56 - 66 2. Good governance practices Financial statements 90 - 128 3. Risk management and internal controls Statutory reports 67 - 73 Group 2 topics 1. Shareholder returns Chairman’s review 12 - 15 Financial statements 90 - 128 2. Proper management of the company Managing Director’s review 16 -21 Operational performance 34 - 36 3. Future outlook for the company Chairman’s Message 12 - 15 Managing Director’s Review 16- 21 4. Growth strategies and resource allocations Chairman’s Message 12 - 15 Managing Director’s Review 16 - 21 Group 3 topics 1. Sustainability related topics Capital management reports 37 - 55 2. Corporate information Corporate information 137 3. Business highlights Industrial highlights 10 Group 4 topics 1. Investors information Investor information 131 - 132 2. Finance History 5 years summary 129 - 130 3. Meeting information Notice of meeting 133 INTEGRATED ANNUAL REPORT 2017/18 5 ABOUT US VISION MISSION Our vision is of a future, in which Our mission is to be a Company that sets and constantly exceeds LankaTiles will have become not the benchmark of the highest quality in producing ceramic products only a household name but a of exceptional beauty and functionality and to cater to every need of global one... discerning customers both in Sri Lanka and abroad. These traits have kept us at the forefront of our chosen spheres, creating peerless career development opportunities within the organisation. We believe that improvement is a continuing process. It is the constant endeavour of our employees and the driving force behind our success. Group structure and shareholding LANKA WALLTILES 11.48% PLC 68.217% 100% LANKA TILES Vallibel Plantation 47.80% PLC Management Limited 100% 51% 100% 100% SWISSTEK Beyond Paradise LWL HORANA UNI DIL (CEYLON) Collections Limited DEVELOPMENT PLANTATIONS PACKAGING PLC (PVT) LIMITED PLC LIMITED 87.38% 100% Swisstek Aluminium Uni Dil Packaging Limited Solutions (Pvt) Limited 100% 100% 51% Swisstek Development LTL Development Lankatiles Private (Pvt) Limited (Pvt) Limited Limited - India 6 LANKA TILES PLC ¾ Lanka Tiles PLC, which is owned ¾ The Swisstek (Ceylon) PLC ¾ Beyond Paradise Collections Ltd 68% by Lanka Walltiles PLC, is Group includes Swisstek and LTL Development (Pvt) Ltd – the majority shareholder of the Aluminium Limited and Swisstek Holding of property for industrial Swisstek (Ceylon) PLC Group Development (Pvt) Ltd. estate with 47.8% ownership, the 100% shareholder of Beyond ¾ Swisstek (Ceylon) PLC is involved ¾ Lankatiles Private Limited – Paradise Collections Ltd and LTL in the manufacture and sale of Based in India to distribute Development (Pvt) Ltd, the 51% tile grout, tile mortar, decorative ‘LANKATILES’ products in India shareholder of Lankatiles Private pebbles and imports wooden Limited. flooring for domestic retailing. Lanka Tiles organisation structure Managing Director Asst. General General Manager General Manager Manager (P/T) (Finance) (Marketing) Factory Manager Group Group Group Customer TPM Production Head of Sales Manager Engineering DFM Business Relations (Sales Manager AFM Design Manager Manager Development Manager Administration) Manager AM AM AM AM AMAM AM AM Commercial Head of IT HR Group Stores Group Finance Management Manager Manager Manager Manager Accountant AM AM AM AM INTEGRATED