WEALTH CREATION FOR VALUE CREATION Vallibel One PLC Annual Report 2015/16 WEALTH CREATION FOR VALUE CREATION Vallibel One PLC Annual Report 2015/16 VISION Achieve uniqueness through diversity, leadership, creativity and inspiration. MISSION To run healthy core businesses, leverage strengths into new ventures, work together with people to be Sri Lanka’s corporate leader. Business Today Top 25 - 2014/15 CIMA LMD 100 - 2014/15 1 The tree creates a wealth of oxygen for the planet; oxygen that powers the entire eco-system. A business powers economies and communities by creating wealth. And it is through the creation of wealth that the business can create value for all its stakeholders. This philosophy is what drives and empowers us at Vallibel One. VALLIBEL ONE PLC ANNUAL REPORT 16 2015 | Contents 04-05 06-09 10-15 Highlights Chairman’s Chief Executive Officer’s Message Review 16-71 Management Discussion and Analysis 16-47 48-61 62-71 Our Guiding Philosophy Our Business Impact Our Business Portfolio Wealth creation is our reason We strive to have a positive Creating wealth and value for being. It drives us to create business impact on all for all stakeholders means value for our stakeholders. It stakeholders including the being on a mission to run is a vision that is powered by Sri Lankan economy, our healthy businesses, power our core guiding philosophy; shareholders, business new ventures while utilising a uniqueness that stems partners, employees and our strengths and working from three essential values: customers. together with people to become leadership, diversity and Sri Lanka’s corporate leader. innovation. zz Leadership 18 zz The Economy 50 zz Royal Ceramics Lanka PLC 66 zz Diversity 30 zz Shareholders 52 zz L B Finance PLC 67 zz Innovation 38 zz Business Partners 54 zz Delmege Limited 68 zz Employees 58 zz Greener Water Limited 69 zz Customers 60 zz The Fortress Resorts PLC 70 zz Sampath Bank PLC 71 72-84 85-190 191-198 Stewardship Financial Reports Annexes zz Board of Directors 72 zz Independent zz Five Year Summary - Auditors’ Report 86 Company 192 zz Corporate Governance 74 zz Statement of zz Group Value Added zz Statement on Risk 75 Financial Position 87 Statement 193 zz Annual Report of the zz Statement of zz Shareholder Information 194 Board of Directors on the Comprehensive Income 89 Affairs of the Company 76 zz GRI Content Index 196 zz Statement of zz Report of the zz Notice of Annual Changes in Equity 91 Related Party Transactions General Meeting 198 Review Committee 81 zz Consolidated zz Form of Proxy Enclosed Statement of Cash Flow 94 zz Directors’ Responsibility for Financial Reporting 82 zz Notes to the Financial Statements 96 zz Report of the Audit Committee 84 Scan to view the PDF version of this Annual Report 4 GROUP FINANCIAL HIGHLIGHTS 2016 2015 Change Rs. '000 Rs. '000 % HIGHLIGHTS For the Year ended 31st March Turnover 47,667,846 43,449,784 9.71 Profit Before Tax 10,969,687 7,348,664 49.27 Profit After Tax 7,456,720 5,201,892 43.35 Profit Attributable to Equity Holders of the Company 4,227,980 2,891,094 46.24 As at 31st March Shareholders' Funds 38,091,062 34,736,706 9.66 Market Capitalisation - Company 19,340,756 22,057,155 (12.32) Total Assets 150,871,742 129,517,572 16.49 Per Share (Issued and Fully paid Shares 1,086,559,353) Earnings (Rs.) 3.89 2.66 46.24 Net Assets (Rs.) 35.06 31.97 9.66 Market Value - Company (Year-end) (Rs.) 17.80 20.30 (12.32) Price Earnings (Year-end) (No. of Times) 4.57 7.63 (40.04) Gross Profit (%) 44.38 40.55 9.45 Total Assets and Revenue Profit Before Tax and Profit After Tax Rs. Mn Rs. Mn Rs. Mn 3,100 3,832 3,062 5,202 4,183 7,349 4,028 7,457 5,234 10,970 97,119 82,657 150,872 124,998 129,518 60,000 160,000 12,000 45,000 120,000 9,000 30,000 80,000 6,000 15,000 40,000 3,000 48,331 43,450 47,668 33,110 0 27,227 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Revenue (Rs. Mn) (left Y axis) Profit Before Tax VALLIBEL ONE PLC ANNUAL REPORT Total Assets (Rs. Mn) (right Y axis) Profit After Tax 16 2015 | 5 GROUP GROWTH RECORD HIGHLIGHTS Indicator 2012 2016 4-year CAGR* Revenue (Rs. Mn) 27,227 47,668 15.03% Profit Before Tax (Rs. Mn) 5,234 10,970 20.32% Profit After Tax (Rs. Mn) 4,028 7,457 16.65% Total Assets (Rs. Mn) 82,657 150,872 16.23% Shareholders' Funds (Rs. Mn) 28,979 38,091 7.07% Earnings Per Share (Rs.) 2.34 3.89 13.56% Net Assets Per Share (Rs.) 26.67 35.06 7.07% Return on Assets (ROA) (%) 4.87 4.94 0.35% Return on Equity (ROE) (%) 11.80 13.64 3.69% * Taking 2012 as the base year. Compound Annual Growth Rate (CAGR) is the average growth rate over a specified number of years as if the growth had occurred at a constant rate each year over that time period. ROA and ROE Shareholders' Funds and Net Assets Per Share % Rs. Mn Rs. 4.02 2.45 3.19 8.53 4.87 6.87 4.94 11.80 10.84 13.64 29.90 28.22 35.06 26.67 31.97 16 40,000 40.00 12 30,000 30.00 8 20,000 20.00 4 10,000 10.00 30,347 32,492 34,737 38,091 28,979 0 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 ROA Shareholders' Funds (Rs. Mn.) ROE Net Assets Per Share (Rs.) VALLIBEL ONE PLC ANNUAL REPORT 16 2015 | VALLIBEL ONE PLC 6 CHAIRMAN’S MESSAGE 2015 | 16 ANNUAL REPORT CHAIRMAN DHAMMIKA PERERA DHAMMIKA 7 CHAIRMAN’S MESSAGE CHAIRMAN’S A large part of our success in wealth creation is owed to the resilience we derive through diversity. VALLIBEL ONE PLC ANNUAL REPORT 16 2015 | 8 Wealth and value have been at the heart of our business proposition since the inception of Vallibel One in 2010. In fact, they are the fundamental core pillars CHAIRMAN’S MESSAGE CHAIRMAN’S of our business. This wealth value proposition has been propelled through innovation across business sectors, and our shareholders and stakeholders will agree that innovation is indeed the spark that differentiates how we do business and the business that we do. For Vallibel One, wealth creation has always been about value creation through innovation. We recognise that wealth creation is the outcome of the judicious deployment of capital to create value, and it is this constant exploration to invest towards enhancing our resources, enlarging our capacity for value creation that has been the bedrock for our continued growth. We view this wealth-value proposition as a conduit in creating ‘advantage’ as a means to be a step ahead, as a catalyst to amplifying the impact of our operations on not just our balance sheet but also in transcending sustainable business practice across all stakeholders. A large part of our success in wealth creation is owed to the resilience we derive through diversity. The potent mix of diverse businesses under the Vallibel One umbrella, have, and continues to deliver value, balancing out the impact of socio-economic constraints and contractions. These well-known businesses and brands, both old and new, have succeeded in winning hearts and minds in their respective markets. Truly, the law of 2+2=5, a concept that I have elaborated on in previous years, continues to validate the case for diversity, with Vallibel One witnessing persistent growth, as we leverage greater returns across core sectors. In looking to the future, Vallibel One’s onus will be to further extrapolate returns by VALLIBEL ONE PLC ANNUAL REPORT 16 2015 | 9 amplifying this learning curve, with the execution of a strategy of investment towards diversification. We also understand that we need to continue to CHAIRMAN’S MESSAGE CHAIRMAN’S innovate to ensure we can build our capability in our growth areas. Given our strong performance despite a difficult socio-economic climate, I am cautiously optimistic about our future outlook. Our performance this year is convincing proof of our ability to achieve strong and sustainable growth that benefits all our stakeholders. I would like to thank our Shareholders for their continued faith in us, our Business Partners for a much valued and mutually beneficial relationship and members of our Board of Directors for their commitment and support. I close with these wise words from Benjamin Franklin, which resonate with meaning in the context of our beliefs. “Without continual growth and progress, such words as improvement, achievement and success have no meaning.” DHAMMIKA PERERA CHAIRMAN/MANAGING DIRECTOR VALLIBEL ONE PLC ANNUAL REPORT 16 2015 | VALLIBEL ONE PLC 10 CHIEF EXECUTIVE OFFICER’S REVIEW 2015 | 16 ANNUAL REPORT CHIEF EXECUTIVE OFFICER EXECUTIVE CHIEF YOGADINUSHA BHASKARAN YOGADINUSHA 11 CHIEF EXECUTIVE OFFICER’S REVIEW CHIEF EXECUTIVE OFFICER’S The unwavering focus on wealth creation for value creation constructed on a ‘continuing business’ formula, has enabled the Group to post phenomenal results this year. VALLIBEL ONE PLC ANNUAL REPORT 16 2015 | 12 A corporate spearhead such as ours has a crucial responsibility within our stakeholders’ overarching development matrix. It is we who must formulate the pathways of growth, innovation, best practices and continuous improvement and thereby ensure that the wealth creation is prompted by this singular focus.