Softlogic Holdings | Annual Report 2014-15 Progressive Entrepreneurship Softlogic Holdings | Annual Report 2014-15 Our Vision To be the most preferred and trusted product and service provider delivering high quality solutions to the corporate and retail sector with a view to enhancing shareholder value and revolutionising industry competencies. Our Credo To make sound and responsible investment decisions in all our businesses and to employ and retain the best people; through this, to become the most admired corporate in Sri Lanka. Our Core Values Softlogic’s corporate values are backgrounds, experiences, PASSION in our DNA. They guide the way approaches and ideas. We are passionate about we think and act. our businesses and brands, ACCOUNTABILITY and jealously safeguard our Through integrity, We emphasize accountability in reputation. accountability, humility, our behaviors as individuals and simplicity, passion and a focus collectively as a corporation. FOCUS ON SUCCESS on success, we have created We foster a “can do” attitude a vibrant corporate culture in HUMILITY and work tirelessly to reap which ideas flourish, people We seek the humility to place great results, simultaneously thrive and success is assured. the organization and society seeking profit optimization and before ourselves. capital growth. INTEGRITY We act with honesty and SIMPLICITY uphold ethical standards We strive for simplicity by always. We genuinely value examining and improving individuals for the diversity they processes, procedures and bring, through their different activities, and breaking down internal barriers. Entrepreneurship is about always being equipped with the right profit-making decisions involving several business activities impacting the organisation simultaneously or separately. Such decisions necessarily underpin strong financial discipline and speed of response to changing market forces. At Softlogic, we are forward-looking because we have always been forward- thinking, thereby aligning our business decisions with expanding market realities. In progressive entrepreneurship, we know that our thinking creates markets, stimulates demand and shapes our destiny when we smartly execute revenue and profit imperatives. This year we have synergized and consolidated operations and have focused on reinvesting profits to create more future value for our shareholders, business partners and all other stakeholders at large. We think big; therefore, we are! Scan the QR Code with your smart device to view this report online. 2 Contents The Odel Story A walk through Centara Ceysand Resort & Spa > See page 38 > See page 68 Financial 5 pg> Highlights About Softlogic 3 Group Structure 4 Financial Highlights 5 Highlights of 2014/15 6 Chairman’s Our Value Creation Model – ‘Make good to GREAT’ 8 13pg> Chairman’s Review 12 Review Board of Directors 16 Sector Heads 20 Functional Heads 22 Corporate Management Discussion & Analysis 26 70pg> Governance Business Overview Retail Sector 32 Financial Statements Healthcare Services Sector 42 Statement of Directors’ Responsibilities 106 ICT Sector 48 Independent Auditors’ Report 107 Financial Services Sector 54 Income Statement 108 Automobile Sector 60 Statement of Comprehensive Income 109 Leisure Sector 64 Statement of Financial Position 110 Corporate Governance 70 Statement of Changes in Equity 112 Risk Management Review 79 Cash Flow Statement 114 Sustainability Report 85 Notes to the Financial Statements 117 Board Remuneration Committee Report 98 Investor Information 215 Audit Committee Report 100 Corporate Directory 218 Annual Report of the Board of Notice of Meeting 219 Directors on the Affairs of the Company 101 Form of Proxy 223 Financial Calendar 2015 104 Corporate Information IBC Softlogic Holdings PLC 3 About Softlogic Softlogic Holdings PLC was founded in importantly, paying dividends to our >> Softlogic is a leading 1991, and was listed on the Colombo shareholders. Our focus remains on the Stock Exchange in June 2011. long-term success of our businesses; diversified group, with our strategy has significantly been to interests in six distinct Softlogic is a leading diversified group, acquire businesses and help them grow with interests in six distinct business faster, using the expertise that is ours. business sectors -- sectors -- ICT, Retail, Financial Services, This “progressive entrepreneurship” ICT, Retail, Financial Healthcare Services, Automobiles and has proven time and again to be an Leisure, in which we employ over 8,000 excellent basis for value creation. Services, Healthcare people across 46 companies. Services, Automobiles As we look forward, we continue to and Leisure, in which Our aspirations are best expressed execute our simple, proven strategy to in our corporate dictum, “Best in the deliver more than acceptable returns we employ over Business.” to our shareholders. Our current 8,000 people across businesses continue to provide many We strive for continuing revenue opportunities for further growth of 46 companies. growth and the necessary cash flow individual businesses, and of the Group to allow us invest in continuously as a whole. developing our businesses and, as Doing it the “Softlogic Way” Softlogic is a conglomerate operating with a universal set of values we call the “Softlogic Way”; we work with an array of globally recognised brands and partners to respond to and benefit from the growing Sri Lankan economy and provide a platform for our own growth. CUSTOMERS LEADERSHIP COMMUNITY Delighted customers assure our Everyone at Softlogic is a Softlogic cares about Sri Lanka future; we earn their loyalty by potential leader. We encourage and Sri Lankans, and we are committing to high standards our people to “raise the bar” proud of the ways in which of customer care, delivery and higher to assure their success, we help them, not least by after-sales service. and ours. our concern for the natural environment. SHAREHOLDERS BUSINESS PARTNERS TEAM WORK We are conscious of our We believe in an open Softlogic is ultimately judged shareholders’ expectations of us; relationship with our principals by how well its people work we know we will be judged by and partners, and know they will together. We encourage an our delivery of monetary returns judge us by how well we deliver open door policy and clear to them and by our standard of solutions to our customers, communication to help people corporate governance. in keeping with their service deliver performance and share standards and reputation. pride in their own achievements and those of the team. Annual Report 2014-15 4 Group Structure Softlogic Holdings PLC Healthcare Finance Retail Leisure Automobile ICT & Other Asiri Hospital Softlogic Softlogic Retail Softlogic Properties Future Automobiles Softlogic Information Holdings PLC Capital PLC (Pvt) Ltd. (Pvt) Ltd. (Pvt) Ltd. Technologies (Pvt) Ltd. Softlogic Asiri Surgical Softlogic Dai-Nishi Softlogic City Hotels Softlogic International Hospital PLC Finance PLC Securities (Pvt) Ltd. (Pvt) Ltd Automobiles (Pvt) Ltd. (Pvt) Ltd. Softlogic Softlogic Communications Central Odel PLC Stockbrokers (Pvt) Ltd. Hospital Ltd. Ceysand Resorts Ltd (Pvt) Ltd. Softlogic Brands Softlogic Computers (Pvt) Ltd. (Pvt) Ltd. Asiri Central Asian Alliance Hospitals Ltd. Insurance PLC Odel Lanka Softlogic Destination Management (Pvt) Ltd. (Pvt) Ltd. Softlogic Australia (Pty) Ltd. Asiri Capital Reach Diagnostics Portfolio Management Odel Apparels Services (Pvt) Ltd. (Pvt) Ltd. (Pvt) Ltd. Softlogic Real Estate (Pvt) Ltd. Softlogic Solar (Pvt) Ltd. BSL International Asian Alliance Asiri Hospital General Lanka (Pvt) Ltd. Matara (Pvt) Ltd. Softlogic Insurance Ltd. Communication Greenfield Trading Services (Pvt) Ltd. (Pvt) Ltd. Asiri Hospital Kandy (Pvt) Ltd. Abacus International Odel Properties Lanka (Pvt) Ltd. Pvt) Ltd. Odel Information Digital Health Nextage (Pvt) Ltd. (Private) Limited * Technologies Services (Pvt) Ltd. Softlogic Softlogic Corporate Restaurants (Pvt) Ltd. Services (Pvt) Ltd. Silk Route Foods (Pvt) Ltd. Softlogic BPO Services (Pvt) Ltd. * Digital Health (Private) Limited. Softlogic Retail One (Pvt) Ltd. was incorporated on 14 August 2015 Softlogic Mobile Distribution (Pvt) Ltd. Softlogic Holdings PLC 5 Financial Highlights For the Year ended 31 March 2015 2014 2013 2012 2011 Earnings Highlights Group Revenue (Rs. Mn) 39,563.9 29,246.4 25,351.3 21,818.8 10,788.0 Gross Profit (Rs. Mn) 14,116.6 11,011.6 8,983.3 7,329.8 2,880.4 Earnings Before Interest Tax, Depreciation & Amortisation (Rs. Mn) 6,400.6 5,024.9 4,227.3 4,486.2 2,198.9 Finance Cost (Rs. Mn) 2,692.8 2,660.0 2,754.6 2,007.4 857.0 Group Earnings Before Interest & Taxation (Rs. Mn) 4,961.5 3,918.0 3,207.5 3,608.0 1,903.9 Group Earnings Before Taxation (Rs. Mn) 2,268.7 1,258.0 453.0 1,600.5 1,047.0 Group Earnings After Taxation (Rs. Mn) 1,819.1 1,009.1 153.0 1,015.9 971.0 Total Comprehensive Income Net of Tax (Rs. Mn) 2,160.4 1,236.6 2,077.0 855.8 - Group Earnings Attributable to Equity holder (Rs. Mn) 555.8 155.8 (371.0) 448.3 829.0 Group Comprehensive Income Attributable to Equity holder (Rs. Mn) 760.7 220.1 557.0 340.0 - Gross Profit Margin (%) 36 38 35 34 27 Net Profit Margin (%) 5 3 1 5 9 Earnings Per Share (Rs.) 0.7 0.2 (0.5) 0.6 1.3 Dividends (Rs. Mn) - 120 234 101 - Interest Cover (X) 2.38 1.89 1.53 2.23 2.57 Return on Capital Employed* (%) 11 12 11 15 17 Balance Sheet Highlights Total Assets (Rs. Mn) 87,587 65,863 53,836 44,688 29,134 Current Ratio (X) 1.0 0.9 0.82 0.73 0.49 Asset Turnover (x) 0.5 0.4 0.5 0.5 0.4 Total Interest Bearing Borrowings (Rs. Mn) 43,906 31,518 23,037 22,782 17,938 Shareholders' Funds (Rs. Mn) 7,625 6,802 7,288 7,202 3,041 Net Asset per Share** (Rs.) 9.8 8.7 9.4 9.2 3.9 Total Equity (Rs. Mn) 15,782 13,351 13,568 11,312 7,045 Debt : Equity*** (X) 2.8 2.4 1.7 2.0 2.5 Debt : Total Assets (X) 0.5 0.5 0.4 0.5 0.6 Operating Cashflow (Rs.