Elpitiya Plantations Plc Annual Report 2010/11 - Colombo Stock ...
Elpitiya Plantations Plc Annual Report 2010/11 - Colombo Stock ...
Elpitiya Plantations Plc Annual Report 2010/11 - Colombo Stock ...
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<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
1
2<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Contents<br />
Financial Highlights 02<br />
Chairman’s Statement 03<br />
Managing Director’s Review 05<br />
Board of Directors 07<br />
<strong>Annual</strong> <strong>Report</strong> of the Board of Directors 09<br />
Audit Committee <strong>Report</strong> <strong>11</strong><br />
<strong>Report</strong> of the Remuneration Committee <strong>11</strong><br />
Corporate Governance 12<br />
Corporate Sustainability <strong>Report</strong> 16<br />
Risk Management 20<br />
Management Team 21<br />
Statement of Directors’ Responsibilities 22<br />
Auditors’ <strong>Report</strong> 23<br />
Balance Sheet 24<br />
Income Statement 25<br />
Statement of Changes in Equity 26<br />
Cash Flow Statement 27<br />
Notes to the financial Statements 28<br />
Value Added Statement 53<br />
Information on Estates 54<br />
Ten year summary 55<br />
Shareholder & Investor Information 56<br />
Definitions 58<br />
Financial calendar 59<br />
Corporate Information 60<br />
Notice of Meeting 61<br />
Attached - Form of Proxy and Instructions as to Completion<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
1
Financial Highlights<br />
2,800<br />
2,600<br />
2,400<br />
2,200<br />
2,000<br />
1,800<br />
1,600<br />
1,400<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
200<br />
-<br />
Turnover<br />
(Rs.million )<br />
2007 2008 2009 <strong>2010</strong> 20<strong>11</strong><br />
Tea Rubber Oil palm & Other Crops<br />
380<br />
330<br />
280<br />
230<br />
180<br />
130<br />
80<br />
30<br />
(20)<br />
(70)<br />
(120)<br />
Net Profit After Tax<br />
(Rs.million )<br />
2007 2008 2009 <strong>2010</strong> 20<strong>11</strong><br />
1,400<br />
1,300<br />
1,200<br />
1,100<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
-<br />
Shareholders' Funds<br />
(Rs. million)<br />
2007 2008 2009 <strong>2010</strong> 20<strong>11</strong><br />
6.00<br />
5.00<br />
4.00<br />
3.00<br />
2.00<br />
1.00<br />
-<br />
(1.00)<br />
(2.00)<br />
EPS (Rs)<br />
2007 2008 2009 <strong>2010</strong> 20<strong>11</strong><br />
20.00<br />
18.00<br />
16.00<br />
14.00<br />
12.00<br />
10.00<br />
8.00<br />
6.00<br />
4.00<br />
2.00<br />
-<br />
Net Assets<br />
Per Share (Rs)<br />
2007 2008 2009 <strong>2010</strong> 20<strong>11</strong><br />
30.00<br />
25.00<br />
20.00<br />
15.00<br />
10.00<br />
5.00<br />
-<br />
(5.00)<br />
(10.00)<br />
(15.00)<br />
Return on<br />
Shareholders' Funds (%)<br />
2007 2008 2009 <strong>2010</strong> 20<strong>11</strong><br />
20<strong>11</strong> <strong>2010</strong> %<br />
Year ended 31 st March Rs.000’ Rs.000’ increase/<br />
(Decrease)<br />
Turnover 2,601,501 2,215,126 17<br />
Gross Profit 594,432 241,2<strong>11</strong> 146<br />
Profit / (Loss) before Tax 384,233 63,817 502<br />
Income Tax (Expense) / Income (20,729) - -<br />
Profit/(Loss) after Tax 363,504 63,817 470<br />
Non-Current Assets 3,086,299 2,910,616 6<br />
Current Assets 580,485 774,102 (25)<br />
Current Liabilities 613,941 888,019 (22)<br />
Shareholders’ Fund 1,363,284 1,017,997 34<br />
Capital Expenditure 242,536 268,524 (10)<br />
Earnings per Share (Rs.) 4.99 1.23 305<br />
Dividend per Share (Rs.) 0.36 0.25 44<br />
Net assets per Share (Rs.) 18.71 13.97 34<br />
Stated Capital 694,236 694,236 -<br />
Net Assets 1,363,284 1,017,997 34<br />
Return on Equity (%) 26.66 6.27 325<br />
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<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Chairman’s Statement<br />
It gives me great pleasure to submit this report for the year ended<br />
March 20<strong>11</strong> where the highest net profit before management<br />
fees of Rs 386 mn was recorded, for <strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> (EPP)<br />
for the year under review. Attractive prices for rubber and palm oil<br />
were the main contributors to this commendable performance.<br />
There were several other significant events that took place in EPP,<br />
all of which were responsible for improving the bottom line. The<br />
shareholders of the company subscribed to a rights issue, which<br />
helped to restructure the balance sheet resulting in a lower<br />
interest for the year compared to the previous year. We thank<br />
them for their support and confidence in the company. Further<br />
our efforts in diversifying the asset base contributed significantly<br />
to the operational results. The investment in palm oil both at field<br />
and factory level, and the diversification into hydropower<br />
contributed to sustaining the company’s profits by being a good<br />
balance to fluctuating commodity prices.<br />
The company is committed to protecting the environment and<br />
developing a sustainable model of plantation practices, covering<br />
both the field and the factories. Several initiatives have been<br />
undertaken at estate level to improve the condition of the soil, to<br />
contain water, and mitigate the effects of global warming. The<br />
gradual replacing of artificial fertilizer with organic fertilizer to<br />
minimise soil impact, and site specific fertilizing, providing only<br />
the required nutrients without excessive chemicals, are some of<br />
the other initiatives towards sustainability. Compost pits are<br />
maintained on the estates, with the long term goal of replacing<br />
one round of artificial fertilizer on estates with organic products.<br />
Further the company has a continuous forestry management<br />
programme to improve the biodiversity in the plantations and<br />
enhance the value of the environment. Currently over 700 ha of<br />
commercial forest has been planted by the company.<br />
Energy efficiency has also taken primary focus with several<br />
energy efficient initiatives being implemented covering the head<br />
office to the factories. These investments have given adequate<br />
results not only in terms of cost reductions but also in terms of<br />
lower energy use, thus making a contribution to reducing carbon<br />
emissions. Among the micro level efficiency improvements<br />
carried out are fuel switching and power factor correction systems<br />
and fibre reinforced plastic fan installation. A comparison of<br />
energy saving on the estates in the last 3 years shows a saving of<br />
approximately 1000 KVA units per month, which have been<br />
achieved with no production cutbacks or outsourcing of<br />
production. Energy savings have also been enabled through<br />
process redesign and efficiency improvements.<br />
Global warming and climate change will be a major risk that has<br />
to be addressed by the plantation industry and whilst we have<br />
taken a few steps to mitigate these effects, I believe that a clear<br />
consciousness and commitment to overcoming these effects<br />
must be addressed by all employees and stakeholders in the<br />
industry. Or else, all plantation crops in particular will be affected<br />
by its ill effects.<br />
We have also been in a position to develop five of our factories to<br />
obtain ISO 22000 underlying our commitment to quality, as well<br />
as customer commitment. Several other factories will also fall<br />
within this initiative in the next year.<br />
Despite the significant profits this year, the contribution from the<br />
tea sector particularly the up country estates were far below<br />
expectations. This was caused by a combination of events, i.e.<br />
inconsistent weather resulting in lower tea production and a tea<br />
market that was lower than the previous year. The low grown tea<br />
prices were somewhat better, although nowhere near the<br />
previous year levels. It was only in the month of March 20<strong>11</strong> that<br />
both tea production and prices improved culminating in the<br />
company being able to reduce the losses on tea before the close<br />
of the financial year. It was fortunate that profits from rubber, palm<br />
oil and hydropower compensated to the poor performance from<br />
the tea sector.<br />
The future for EPP is very challenging. On one side, with the<br />
government’s thrust and priority towards plantations and<br />
agriculture, the estates show great promise for diversification into<br />
other crops and industries. On the other hand, the industry is<br />
faced with twin problems of rising cost and lower productivity<br />
particularly for high and mid grown tea. This has been an area of<br />
concern for the past several years as Sri Lanka’s competitiveness<br />
as a tea producer has declined with each successive wage<br />
increase and it is unfortunate that there does not appear to be a<br />
visible solution in sight to resolve this issue. All stakeholders must<br />
realize that unless each stakeholder acts with responsibility and<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
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Chairman’s Statement (contd.)<br />
commitment to ensure the long term well being and<br />
competitiveness of the tea industry, the future of this glorious<br />
industry will be severely eroded.<br />
We all need to accept the fact that cost will always increase.<br />
However, if the industry is to contribute to the economic<br />
advancement of Sri Lanka, it has to be coupled with increased<br />
productivity from the land and employees. It is only then that the<br />
industry will see positive growth and leap forward in the global tea<br />
industry. Thanks to His Excellency the President, the peace<br />
dividend in Sri Lanka, has opened new vistas on plantations.<br />
What is now required is to put these lands to the most productive<br />
use in a manner that the economic well being of Sri Lanka will be<br />
improved thus creating more employment, foreign exchange, and<br />
economic growth. Investors must be attracted to participate in<br />
the opportunities that the plantation industry offers and we as a<br />
company is committed to developing EPP to be a strong<br />
economic platform, in the future.<br />
We are fortunate that the government has provided a very<br />
attractive fertiliser subsidy covering the plantation companies as<br />
well, which will assist in ensuring adequate nutrient ratios on our<br />
soils and increase productivity of all crops. We are grateful to the<br />
government for this progressive step. Bank interest has also been<br />
well controlled unlike in the past, all of which have contributed<br />
towards curtailing cost. What remains is to significantly improve<br />
all round productivity for which a concerted effort is required from<br />
all the stakeholders.<br />
The estates work closely with the plantation community and<br />
address the critical needs of the community by enhancing<br />
education, awareness, social development and promoting good<br />
practices. We have specifically focused on crèche development,<br />
improving nutrition, welfare and co-operatives and worker health<br />
amongst several other areas. The Merrill J Fernando Charitable<br />
Foundation has supported us in many of these initiatives and<br />
provides educational scholarships to children of estate workers.<br />
We have also been fortunate to have the support of the Ministry<br />
of Livestock and Rural Development to concrete estate roads in<br />
addition to developing roads under the Plantation Development<br />
Project (PDP). The <strong>Plantations</strong> Human Development Trust (PHDT)<br />
continues to play a useful role in supporting the company in<br />
several social development initiatives. I thank all these institutions<br />
for their commitment and dedication to uplifting the communities<br />
on the estates.<br />
I am thankful to all the workers and staff of the plantations for their<br />
continuous support, co-operation and commitment throughout<br />
the year.<br />
We do appreciate the co-operation they have always given us<br />
during times of uncertainty and unrest. The Plantation executives<br />
have been a tower of strength and have worked tirelessly<br />
throughout the financial year and have faced much risk and<br />
hardship in the course of their duties. Their loyalty and dedication<br />
to the company has been admirable.<br />
I thank the Managing Director, CEO, the executives and staff of<br />
the head office for the leadership, guidance and support they<br />
constantly provide to the estates. The CEO and his team at the<br />
head office have always been inextricably linked to the progress<br />
and development of the estates and am grateful to them for the<br />
role they have played through the years.<br />
Finally, my grateful thanks and appreciation to the shareholders<br />
and board of directors including the two independent non<br />
executive directors, and the board member representing the<br />
government, for their involvement in the affairs of the company<br />
and their guidance and insight in assisting me in my role as<br />
Chairman of Elpitya <strong>Plantations</strong> <strong>Plc</strong>.<br />
J M S Brito<br />
Chairman<br />
23 rd August 20<strong>11</strong><br />
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<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Managing Director’s Review<br />
The financial year ended March 20<strong>11</strong> was a remarkable year for<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong>, (EPP) as the company recorded its<br />
highest profit since the inception of the company. This<br />
achievement brought immense satisfaction to all who have been<br />
associated with EPP particularly since 1997. We owe this<br />
performance to the Chief Executive Officer (CEO) and all the<br />
employees at the head office, the general managers, managers<br />
and assistant managers on the estates, the staff and the workers<br />
for their tireless efforts during the year. The performance would<br />
have been even better had the tea estates contributed more<br />
meaningfully to the profits of the company.<br />
It is unfortunate that the tea industry, the country’s backbone and<br />
the larger component in the company continues to lag behind<br />
and was barely able to make a profit during the year. The high and<br />
medium grown estates in particular were affected by inconsistent<br />
weather and fluctuating tea prices, which contributed to the<br />
negative margins on the estates. This is a serious area of concern<br />
and has been aggravated by the recent wage increase.<br />
Once in two years plantation sector wages are increased in<br />
keeping with the collective agreement and whilst we appreciate<br />
the need for increased wages and benefits to employees, it is<br />
important that the increases are compensated with an increase in<br />
productivity. When this does not happen, the industry gradually<br />
erodes to a position when investors and stakeholders begin to<br />
lose confidence on this industry. Unfortunately this is the current<br />
position of the tea industry, which is clearly seen by the rate of<br />
replanting in all the high and medium grown estates in Sri Lanka.<br />
Unless this situation is corrected no investor will be willing to risk<br />
capital in the cultivation/replanting of tea particularly in the high<br />
and medium grown estates. This will not be in the interest of Sri<br />
Lanka as a premier International Tea Producer.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong>. had a rights issue to restructure the<br />
balance sheet and stabilize the company. The rights issue was<br />
fully subscribed and we were able to use the funds for the<br />
intended purpose and eliminate much of the short debts. We<br />
thank the shareholders for their confidence in subscribing to the<br />
rights issue. This resulted in a substantially lower finance cost in<br />
the company. We were also able to restructure some of the debt<br />
and reduce overall finance cost by these efforts.<br />
Our company has been fortunate that timely diversification has<br />
helped to mitigate the vagaries of commodity prices. Rubber,<br />
palm oil and hydropower profits have compensated to the losses<br />
in tea. Rubber had one of its best years in the last two decades<br />
with boom prices. Palm oil continued to show great promise with<br />
price stability and contributed to the bottom line. The hydropower<br />
investment too continues to yield more than adequate dividends.<br />
The future for the plantations is no doubt challenging and does<br />
pose great opportunities. The government has supported<br />
agriculture and shown its commitment in no uncertain terms with<br />
an attractive fertilizer subsidy, which was provided this year.<br />
Economic policies have also been streamlined and the plantations<br />
have great opportunities particularly for diversification provided<br />
the right climate is created for such investments. This is the<br />
challenge to all stakeholders as the company needs to attract<br />
both investors and technology. Our strategy is to develop a<br />
sustainable plantation company and accordingly, energy<br />
conservation, water and soil conservation, soil enhancement and<br />
commercial forestry has received top priority.<br />
Several energy reducing initiatives have been introduced in the<br />
factories such as fuel switching, process improvements and<br />
installing energy efficient trough fans to reduce energy cost and<br />
reduce emissions. Substantial savings have been seen as a result<br />
of a combination of initiatives. Another mini hydro power project<br />
is also expected to be constructed in the following year for which<br />
all the preliminary work has been undertaken.<br />
We are pleased to state that the asset base of the company has<br />
significantly grown since 1997 particularly with the large timber<br />
and forestry reserves in the high and medium grown areas gaining<br />
in value each year. Even the year under review, the company<br />
invested Rs. 242.8 Mn. for capital development. On the<br />
diversification front the joint venture (JV) – Elpiitya Lifestyle<br />
Solutions (Pvt) Ltd. has reduced its losses and created the much<br />
needed turnaround. The branded tea operation – Harrow Ceylon<br />
Choice has still not come upto expectations, although the<br />
distribution network has significantly improved and the brand<br />
value grown. AEN Palm Oil Processing (Pvt) Ltd. continues to fair<br />
remarkably well and produce adequate returns. The company<br />
has in place several committees that work closely with the<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
5
Managing Director’s Review (contd.)<br />
plantations communities on our estates. These committees focus<br />
on crèche development , road rehabilitation, welfare matters,<br />
nutrition aspects, etc.<br />
government could quite rightly take the leadership to resolve<br />
these issues and ensure that the industry continues in the<br />
forefront as the major foreign exchange earner.<br />
The company is also thankful to the Plantation Human<br />
Development Trust and the Merrill J Fernando Charitable<br />
Foundation for supporting the estate communities by way of<br />
educational scholarships and social development initiatives. The<br />
company also continues to focus on carrying out medical camps,<br />
welfare events, pilgrimages, book donation schemes etc. for the<br />
benefit of the estate community. Several awareness building<br />
programmes aimed at dengue prevention and prenatal and<br />
antenatal care have also been carried out. The company is also<br />
grateful to the Ministry of Livestock and Rural Community<br />
Development for the assistance given to concrete roads on the<br />
Pundalu Oya estates. In addition, we also received funding for<br />
this same purpose under the Plantation Development Project and<br />
express our grateful thanks to all these institutions.<br />
EPP has also focused on training and skills development<br />
programs for different levels of employees. Quality circles were<br />
also set up on the estates with similar objectives. Regular training<br />
programmes have also been held particularly aimed at the<br />
plantation executives, workers and staff, as this is an investment<br />
that is well worth the effort. The company was also able to obtain<br />
ISO 22000 for five tea factories, whilst several others are in the<br />
pipeline for next year. In addition, the ELS factory also received<br />
the Forestry Stewardship Council Chain of Custody Certification,<br />
which was a great achievement.<br />
I take this opportunity to convey my appreciation to the CEO and<br />
the staff at the head office and all plantation executives, workers<br />
and staff for their continued dedication and commitment. The<br />
workers and staff have always co-operated with us and developed<br />
a wonderful dialogue with the plantation executives and the team<br />
at head office. We are grateful to them in resolving all issues. The<br />
plantation executives have continued to give leadership on the<br />
estates and have faced much hardship with fortitude and<br />
commitment. I am grateful to all of them. I must also thank all our<br />
customers who purchase our product and the brokers for the<br />
confidence they have in our products, without whose support this<br />
performance would not have been possible. I thank the CEO for<br />
his unwavering leadership, hard work and perseverance.<br />
There have been several who have contributed to the progress of<br />
this company. The Management Committee (MC) chaired by Mr.<br />
Devan de Mel meets monthly and reviews the performance of the<br />
estates and the company and offers pragmatic advice and<br />
solutions. I thank them for their valuable time and the candid<br />
feedback given to me in the discharge of my duties. The chairman<br />
and the board of directors have been a great source of<br />
encouragement and guidance to me and I thank them for the<br />
continuous support and advice given to me in the discharge of<br />
my duties, which I have always valued and look forward in the<br />
future too.<br />
The challenges for the industry are global warming and climate<br />
change, inconsistent commodity prices and escalating cost. No<br />
sustainable solutions have been found for any of these issues<br />
and therefore, it is of concern to the company. It is time that all<br />
stakeholders get together and find a long-term solution or else<br />
this can affect the long term stability of the plantation sector. The<br />
R.M. Fernando<br />
Managing Director<br />
23 rd August 20<strong>11</strong><br />
6<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Board of Directors<br />
Mr. J M S Brito (Chairman)<br />
Mr. Merrill J Fernando<br />
Mr Brito was appointed to the Board of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC<br />
on December 01, 2002 and as Chairman on April 28, 2003. Mr<br />
Brito is the Deputy Chairman and Managing Director of Aitken<br />
Spence PLC, a Law Graduate of London University, a Fellow of<br />
the Institute of Chartered Accountants of England and Wales and<br />
has a Master’s Degree in Business Administration from the City<br />
Business School, London. Together with this multi disciplined<br />
knowledge, he also brings with him a wealth of 25 years of<br />
international experience working with Price Waterhouse-London,<br />
British EverReady PLC, Minmetco Group, World Bank and PERC.<br />
Presently Mr Brito is Chairman of the Development Finance<br />
Corporation of Ceylon and the DFCC Vardhana Bank. He is a<br />
former Chairman of Sri Lanka Airlines and was a non-executive<br />
Director of Sri Lanka Insurance Corporation and the Strategic<br />
Enterprise Management Agency and the Task Force for Rebuidling<br />
the Nation.<br />
Mr. Merrill J Fernando was appointed as a Director to the Board<br />
of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC in August 01, 1997.<br />
One of the first Sri Lankan tea tasters in the then British-dominated<br />
trade, Mr. Merrill J Fernando is the Chairman of MJF Holdings<br />
Limited. He founded the ‘Dilmah’ tea brand that reintroduced<br />
pre-packaged Pure Ceylon Tea to Western markets. ’Dilmah’,<br />
launched in Australia is now sold in over 90 countries around the<br />
world and is considered a role model for the value added<br />
marketing of a third world commodity.<br />
Mr. Fernando is the founder of the MJF Foundation, a low profile<br />
charity that works to create better conditions for plantation<br />
workers ‘underprivileged children, elders and society’s victims.<br />
Mr. Malik J Fernando<br />
Dr. R M Fernando (Managing Director)<br />
Dr R M Fernando was appointed to the Board of <strong>Elpitiya</strong><br />
<strong>Plantations</strong> PLC on August 01, 1997 and as Managing Director<br />
on May 14, 2004. Dr Fernando, who heads <strong>Plantations</strong> and<br />
Business Development in Aitken Spence PLC, holds a PhD and<br />
a MBA from the University of <strong>Colombo</strong> and is also a Chartered<br />
Marketer and a Fellow of the Chartered Institute of Marketing<br />
(CIM), UK.<br />
Mr. Malik J Fernando was appointed as a Director to the Board of<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> PLC in August 01, 1997.<br />
He is the Director operations of the MJF Group, which comprises<br />
several tea growing and tea packing/exporting companies,<br />
supplying the ‘Dilmah Tea’ brand around the world.<br />
Mr. Fernando holds a Bachelor of Science Degree in Management<br />
from Babson College, USA.<br />
He has extensive experience in the plantation industry both in the<br />
public and private sectors and played a key role in the plantations<br />
privatization programme.<br />
He plays an important role in the re-branding strategy of Aitken<br />
Spence and also leads the CSR and Sustainability initiatives of<br />
the Group. He was awarded the Brand Leadership Award at the<br />
Asia Brand Congress 2008, held in Mumbai in September 2008.<br />
He has been recently appointed as Honorary President of CIM,<br />
Sri Lanka region and Chairman of United Nations Global Compact<br />
Network, Ceylon.<br />
Mr. Lalit N de Silva Wijeyeratne<br />
Mr L N De S Wijeyeratne was appointed as a Director to the<br />
Board of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC on January 9, 2009.<br />
He is a Fellow of The Institute of Chartered Accountants in Sri<br />
Lanka and counts over thirty five years of experience in Finance<br />
and General Management both in Sri Lanka and overseas. He<br />
was the Group Finance Director of Richard Peiris PLC from<br />
January 1997 to June 2008 and also held senior management<br />
positions at Aitken Spence PLC, Brooke Bonds Ceylon and<br />
Zambia Consolidated Copper Mines Limited. He is presently a<br />
Director of several listed and unlisted companies.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
7
Board of Directors (contd.)<br />
Dr. Anura Ekanayake<br />
Mr. M P D U K Mapa Pathirana<br />
Dr Anura Ekanayake was appointed as a Director to the Board of<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> PLC on January 09, 2009. He was the<br />
Chairman of the Ceylon Chamber of Commerce during the period<br />
August 2009 to July 20<strong>11</strong> and the immediate past Chairman of<br />
the Industrial Association of Sri Lanka. He started his professional<br />
career in the public sector and served in a number of senior Sri<br />
Lankan Government positions before moving to the private<br />
sector. He has held several key positions in the Plantation Sector,<br />
first serving as the Director of Planning at the Ministry of Plantation<br />
Industries and thereafter as Director General (Development) of<br />
the Ministry of Public Administration, Home Affairs and Plantation<br />
Industries. He served on the Boards of J.E.D.B. and S.L.S.P.C.<br />
prior to their privatization and thereafter served on the Boards of<br />
all 23 RPCs for several years. During this period he also served<br />
as a member of the Tea Research Board as well as the Board of<br />
the Post Graduate Institute of Agriculture of University of<br />
Peradeniya. During his public sector tenure, he also held a<br />
number of international positions including that of the Chairman<br />
of international Natural Rubber Organization based in Kuala<br />
Lumpur, Malaysia. He holds a PhD in Economics from Australia<br />
National University where he conducted research on ‘Economics<br />
of human capital’. He has widely published in Sri Lanka and<br />
abroad on economics, human capital, agriculture and environment<br />
related areas. His current professional interests are supporting<br />
businesses on organizational transformation including culture<br />
change and coaching young professionals to realize their full<br />
potential.<br />
M P D U K Mapa Pathirana is the Director General of the<br />
Department of External Resources of the Ministry of Finance and<br />
Planning. He is a class 1 Officer of the Sri Lanka Administrative<br />
Service counting 24 years of experience in Provincial<br />
Administration and Ministry of Finance and Planning. He holds a<br />
B.Sc. Special Degree in Estate Management and Valuation from<br />
the University of Sri Jayawardenapura and a Masters Degree in<br />
Commerce and Management in Economics from Lincoln<br />
University, New Zealand. He also has completed the Professional<br />
Part II examination of the Institute of Chartered Accountants. He<br />
has a wide experience in auditing and finance, mobilizing<br />
development financing from bilateral and multilateral financing<br />
agencies and implementing development projects and provincial<br />
and divisional administration levels. He also possesses wide<br />
experience in international relations gained during his tenure in<br />
the Diplomatic Services.<br />
8<br />
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<strong>Annual</strong> <strong>Report</strong> of the Board of Directors<br />
The Directors are pleased to submit their <strong>Report</strong> together with the<br />
Audited Accounts for the year ended 31 March 20<strong>11</strong>.<br />
Principal Activities of the Company<br />
The principal activities of the Company are cultivation,<br />
manufacture and sale of black Tea, Rubber, Palm Oil and other<br />
crop.<br />
Review of Performance<br />
The Chairman’s and the Managing Director’s reviews contain a<br />
detailed account of the years’ operations and developments of<br />
the Group.<br />
Profit/(Loss)<br />
The net profit/(loss) for the year is Rs. 363,504,155/-<br />
Taxation<br />
A detailed statement of the income tax rates applicable is set out<br />
on pages 48 & 49.<br />
Dividend<br />
The Directors recommended a First & Final Dividend of 36 cents<br />
per share for the year ended March 31, 20<strong>11</strong>.<br />
The Directors are confident that the Company would meet the<br />
requirement of the Solvency test under Section 56(2) of the<br />
Companies Act No.7 of 2007 immediately after the payment of<br />
the first and final dividend is made.<br />
Capital & Reserves<br />
The Capital and the Reserves of the Company as at 31st March<br />
20<strong>11</strong> is given below<br />
Shareholder Information<br />
Information relating to earnings, net assets, market price per<br />
share is given in the financial highlights and the shareholder and<br />
the investor information on pages 2 & 55 of the <strong>Annual</strong> <strong>Report</strong>.<br />
Corporate Governance<br />
The Company’s corporate governance practices are set out on<br />
pages12,13, 14 & 15.<br />
Major Shareholders<br />
The 20 largest shareholders of the Company as at 31 March<br />
20<strong>11</strong> are given in the share information on pages 56 & 57 together<br />
with an analysis of the shareholding.<br />
Directors<br />
The names of the Directors of the Company as at the date of the<br />
<strong>Report</strong> are on Pages 7, 8 & 60.<br />
In terms of Article 92 of the Articles of Association of the Company,<br />
Dr. S A B Ekanayake and Mr. L N D S Wijeyeratne retire by rotation<br />
and being eligible stand for re-election and are being<br />
recommended by the Board for re-election at the forthcoming<br />
<strong>Annual</strong> General Meeting.<br />
Mr. Merrill J Fernando attained the age of 70 years on May 6,<br />
2000 and in accordance with Section 210(2) of the Companies<br />
Act No.7 of 2007, he vacates office at the forthcoming <strong>Annual</strong><br />
General Meeting. In terms of Section 2<strong>11</strong> of the Companies Act<br />
No. 7 of 2007, a shareholder has given notice of an Ordinary<br />
Resolution to the Company that the age limit of Mr. Merrill J<br />
Fernando in terms of Section 210(1) of the said Companies Act<br />
No. 7 of 2007, shall not apply to him. The Directors recommend<br />
the adoption of the Ordinary Resolution.<br />
Details are as follows:<br />
Rs.<br />
Stated Capital 694,236,120.00<br />
Accumulated Profits 669,048,314.00<br />
1,363,284,434.00<br />
Share Split Information<br />
Mr. D V H de Mel resigned as a Director on 10 th August 20<strong>11</strong>.<br />
Directors’ Interest in Contracts<br />
The Directors have disclosed their interest in contracts of the<br />
Company at meetings of the Directors. The details of which are<br />
set out in the notes to the financial statements (Pages 51 & 52)<br />
Company subdivided every one (01) ordinary share into two (02)<br />
issued and fully paid ordinary shares on 19th October <strong>2010</strong>.<br />
Consequently, the number of ordinary shares of the company<br />
increased from 36,433,215 to 72,866,430.<br />
Interest Register<br />
The Interest Register is maintained as per the requirements of the<br />
Companies Act No. 7 of 2007 and is available for inspection.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
9
<strong>Annual</strong> <strong>Report</strong> of the Board of Directors (contd.)<br />
Directors’ fees<br />
Auditors<br />
A sum of Rs 1,050,000 was paid as directors’ fees during the<br />
financial year 31st March 20<strong>11</strong>.<br />
The accounts for the year have been audited by Messrs. Ernst &<br />
Young who offer themselves for re-appointment.<br />
Directors’ shareholdings<br />
None of the Directors hold shares in the Company<br />
Post Balance Sheet Events<br />
The post Balance Sheet events have been disclosed in Note 27<br />
to the Accounts.<br />
The audit fee payable by the Company to the Auditors’ Messrs.<br />
Ernst & Young was Rs. 1,340,000/-<br />
As far as the directors are aware, the auditors do not have any<br />
relationship with the Company that would have an impact on their<br />
independence.<br />
By Order of the Board<br />
<strong>Annual</strong> General Meeting<br />
The Nineteenth <strong>Annual</strong> General Meeting of your Company will be<br />
held on 26th September 20<strong>11</strong> at 3.00 p.m.<br />
Public Holding<br />
The percentage of shares held by the public as at March 31,<br />
20<strong>11</strong> was 16.95% (March 31, <strong>2010</strong> –9.52%)<br />
Mr. J M S BRITO DR. R M FERNANDO AITKEN SPENCE<br />
CHAIRMAN MANAGING DIRECTOR CORPORATE<br />
FINANCE<br />
(PVT) LTD.,<br />
Secretaries<br />
COLOMBO<br />
23 rd August 20<strong>11</strong><br />
10<br />
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Audit Committee <strong>Report</strong><br />
Composition of Audit Committee<br />
Compliance<br />
The Audit Committee (AC) comprises of 2 Independent Non<br />
Executive Directors – M/s Dr. Anura Ekanayake (Chairman) and L<br />
N de S Wijeyeratne and Devan de Mel, Non Executive Director.<br />
The Chief Internal Auditor of Aitken Spence PLC (AS) and Mr. W<br />
M Ratnayake, Manager Internal Audit <strong>Plantations</strong> carry out<br />
regular internal audits on the estates and also attend the meetings<br />
by invitation. Further the Managing Director (MD), the Chief<br />
Executive Officer (CEO) and the Deputy General Manager (DGM<br />
- Finance) are also present at meetings. In addition, the estate<br />
General Managers and the estate Managers whose audit reports<br />
are reviewed and discussed are also present at the meetings.<br />
Activities<br />
The Committee ensures the adoption of effective internal controls,<br />
and compliance with the Sri Lanka Accounting Standards and<br />
the prevailing laws of the country based on guidelines provided<br />
by the respective regulatory authorities in all aspects and in the<br />
preparation of financial statements.<br />
External Audit<br />
The Committee has assessed the performance of the external<br />
auditors M/s Ernst & Young and is of the opinion that the external<br />
auditors do not have any relationship with the Company that<br />
would have an impact on their independence.<br />
The committee met during the financial year and reports from<br />
several estates arising from both field and factory operations<br />
including financial reports were reviewed and discussed. Having<br />
reviewed the audit reports of several estates, the Committee<br />
recommended several controls, risk mitigation strategies and<br />
internal monitoring mechanisms to mitigate frauds, discrepancies<br />
and other financial risks and issues that could occur on the<br />
estates and in the Company. In addition, the Audit Committee<br />
also reviewed the financial statements for the year and approved<br />
the accounts for signature.<br />
Dr. Anura Ekanayake<br />
Chairman<br />
Audit Committee<br />
23 rd August 20<strong>11</strong><br />
<strong>Report</strong> of the Remuneration Committee<br />
The Remuneration Committee (RC) consists of Mr. Malik<br />
Fernando, Non Executive Director as Chairman and two Non<br />
Executive Independent Directors, M/s Dr. Anura Ekanayake and<br />
Lalit N de S Wijeyeratne as members who form the committee.<br />
The Non Executive Independent Directors are independent of<br />
management and are able to exercise independent judgment in<br />
the decisions of the committee, as they do not have any business<br />
or other relationships with the Company or its employees. The<br />
Managing Director (MD) of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC (EPP) attends<br />
the meeting by invitation. The RC met once during the year under<br />
review prior to considering salary increases.<br />
The policy that was adopted for remuneration of employees was<br />
based on competitive remuneration structures of other plantation<br />
companies, and also with the objective of retaining professional<br />
and managerial talent and encouraging and motivating good<br />
performers to perform at a higher level. The Company has a<br />
formal performance appraisal system and regular evaluations are<br />
carried out to evaluate each employee’s performance.<br />
The remuneration policy adopted also takes into consideration,<br />
the cost of living and inflation and the basic needs of the<br />
employees particularly in the lower income groups. The<br />
performance of the Company and affordability together with<br />
economic conditions that prevail were also considered in<br />
recommending increases in remuneration.<br />
The RC having deliberated the performance of all employees in<br />
the Company, approved revisions of individual remuneration<br />
packages based on individual performance, industry norms and<br />
the contribution of the individuals in the performance of the<br />
Company.<br />
Mr. Malik J Fernando<br />
Chairman<br />
Remuneration Committee<br />
23 rd August 20<strong>11</strong><br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
<strong>11</strong>
Corporate Governance<br />
The processes adopted by a Corporate to optimize profits without compromising on principles and standards thus ensuring that the<br />
Corporate’s objectives are achieved by adhering to such principles and practices, is good Corporate Governance.<br />
Hence, the Company has adopted the principles and best practices suggested jointly by the Institute of Chartered Accountants of<br />
Sri Lanka and the Securities and Exchange Commission of Sri Lanka and by the relevant regulatory bodies including the <strong>Colombo</strong><br />
<strong>Stock</strong> Exchange to achieve its objectives and to ensure accountability to the shareholders and other stakeholders of the Company.<br />
The Company’s compliance with the Code of Best Practices on Corporate Governance is given below;<br />
A. DIRECTORS<br />
1. The Board of Directors<br />
Composition and Attendance at Board Meetings<br />
The Board as at 31 st March 20<strong>11</strong> comprised of the following Directors; Two Executive Directors including the Chairman and<br />
the Managing Director and six other Non-Executive Directors. These Directors are named below and their profiles appear on<br />
pages 7 & 8 of this <strong>Report</strong>. Details of Directors’ shareholdings in the Company and Directorates in other related companies<br />
are given on pages 51 & 52 respectively.<br />
The Board meets at least four times a year to review the business performance of the Company.<br />
In addition to attending meetings, the Directors take decisions via circular resolutions. During the year under review the Board<br />
met 04 times. Attendance at these Meetings are given below.<br />
NAME 10.06.10 27.08.10 14.12.10 23.03.<strong>11</strong><br />
Mr. J M S Brito ✓ ✓ ✓ ✓<br />
Dr. R M Fernando ✓ ✓ ✓ ✓<br />
Mr. Merrill J Fernando Excused Excused Excused Excused<br />
Mr. Malik J Fernando ✓ ✓ ✓ ✓<br />
Mr. D V H De Mel (resigned w.e.f. 10.08.20<strong>11</strong>) ✓ ✓ Excused ✓<br />
Mr. J H J Jayamaha<br />
✓<br />
Dr. S A B Ekanayake ✓ Excused ✓ ✓<br />
Mr. L N de S Wijeyeratne ✓ ✓ ✓ Excused<br />
Mr. M D U K Mapa Pathirana<br />
Excused<br />
The Directors communicate with one another regularly to discuss relevant business issues and to familiarize themselves with<br />
business opportunities, challenges, risks and controls that need to be instituted.<br />
Responsibilities of the Board of Directors<br />
The Board is responsible for:<br />
• Maximizing shareholder value.<br />
• Formulating, communicating, implementing and monitoring the business goals, objectives, strategies and policies of the<br />
Company.<br />
• Ensuring adherence to appropriate accounting policies and practices.<br />
• Setting priorities and communicating values and ethical standards for management.<br />
• Ensuring proper risk management and audit systems covering all aspects of the business are in place and are<br />
implemented.<br />
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Corporate Governance (contd.)<br />
• Ensuring due compliance with applicable laws of the country and institute best practices on ethical, legal, health,<br />
environmental and safety standards for the Company.<br />
• Reviewing and approving the Operational and Financial Budgets and monitoring performance against the Budgets.<br />
• Reviewing and approving major investments and business proposals recommended by the Management Committee<br />
• Approving the annual and interim Financial Statements and recommending dividends for approval by the shareholders.<br />
• The Board is responsible ultimately, for the Company’s financial performance.<br />
• The Directors obtain independent professional advice, whenever required at the Company’s expense in discharging<br />
their duties.<br />
.<br />
2. Chairman and Managing Director<br />
The functions of the Chairman and of the Managing Director are distinct and separate which ensures the balance of power<br />
and authority within the Company.<br />
3. The Chairman’s Role<br />
The Chairman conducts all Board Meetings and ensures,<br />
• The effective discharge of the Board’s functions.<br />
• The effective participation by the individual directors to make their contribution on matters under consideration prior to<br />
taking decisions.<br />
• The balance between the Executive and Non-Executive Directors is maintained and views considered and ascertained.<br />
• The Board is in complete control of the Company’s affairs and alert to its obligations to all shareholders and stakeholders.<br />
4. Board Balance<br />
The balance of Executive and Non-Executive Directors on the Board ensures that decision making is transparent and not<br />
dominated by any individual or small group.<br />
The Board comprised of six Non-Executive Directors of whom two are independent Non-Executive Directors. Their profiles<br />
reflect their caliber and the weight their views carry in Board deliberations. The Non-Executive Directors do not get involved<br />
in the day to day management and are free from any relationship that can interfere with the affairs of the Company.<br />
5. Financial Acumen<br />
The Chairman is a fellow member of the Institute of Chartered Accountants of London and Wales, and has a Degree in Law<br />
and a Moters Degree in Business Administration. The Board also includes another Senior Chartered Accountant. Hence, the<br />
Board possesses the necessary knowledge and competence to provide guidance on matters of finance.<br />
6. Company Secretaries<br />
All Directors have access to the Secretaries to the Company who ensure Board Procedures are followed, applicable rules<br />
regulations are complied with and appropriate facilities are available for the proper conduct of Meetings.<br />
7. Supply of information<br />
Directors are furnished with monthly reports of performance and are given appropriate information and board papers well<br />
in advance of Board Meetings to study the matters that would be discussed. This enables Board Members to actively<br />
participate at Board Meetings. The Chairman ensures that all Directors are adequately briefed on issues arising at Meetings.<br />
8. Appointment and Re-election of Directors<br />
A formal and transparent procedure is adopted for the appointment of Directors to the Board. Upon the appointment of<br />
a Director, the Company discloses same to the <strong>Colombo</strong> <strong>Stock</strong> Exchange together with a brief resume of such Director<br />
containing details with regard to his expertise.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
13
Corporate Governance (contd.)<br />
The Directors are elected by the shareholders of the Company in terms of the Articles of Association. The Articles of Association<br />
of the Company empower the Board of Directors to either fill a casual vacancy to the directorate or appoint additional<br />
Directors. Directors so appointed hold office until the next <strong>Annual</strong> General Meeting at which they are eligible for election.<br />
The Articles require one-third of the Directors in office to retire at each <strong>Annual</strong> General Meeting. The Directors to retire each<br />
year are those who have been longest in office since their re-appointment. Retiring Directors are eligible for re-election by the<br />
shareholders.<br />
The Managing Director does not retire by rotation.<br />
B. DIRECTORS’ REMUNERATION<br />
Remuneration Committee<br />
The composition of the Remuneration Committee satisfies the requirements laid down in the Listing Rules of the <strong>Colombo</strong><br />
<strong>Stock</strong> Exchange. The Remuneration Committee consists of :<br />
Mr Malik J Fernando (Chairman) - Non Executive Director<br />
Dr Anura Ekanayake - Independent Non Executive Director<br />
Mr Lalit N de S Wijeyeratne - Independent Non Executive Director<br />
The Remuneration Committee is entrusted with the responsibility of formulating and reviewing the remuneration packages of<br />
Executive Directors and Executive employees.<br />
Disclosure of Remuneration<br />
The report of the Remuneration Committee is given on Page <strong>11</strong> of this <strong>Annual</strong> <strong>Report</strong>. The total of the Directors’ Remuneration<br />
is under Note 21 to the Financial Statement.<br />
C. RELATIONS WITH SHAREHOLDERS<br />
The Board encourages the active participation of all the shareholders at the <strong>Annual</strong> General Meeting.<br />
Shareholders are free to communicate with the Company whenever it is considered necessary. Such communication can<br />
be either with the Chairman or with the Managing Director or the Chief Executive Officer or the Secretaries of the Company<br />
depending on the matters being addressed.<br />
1. Constructive use of the <strong>Annual</strong> General Meeting<br />
The Board considers the <strong>Annual</strong> General Meeting as an opportunity to communicate with shareholders, and encourages<br />
their participation. The Board is willing to answer questions raised by the shareholders at the General Meetings of the<br />
Company and maintains an appropriate dialogue with them.<br />
2. Major Transactions<br />
There were no transactions during the year under review which was within the definition of ‘Major Transactions’ in terms<br />
of the Companies Act.<br />
D. ACCOUNTABILITY AND AUDIT<br />
1. Financial <strong>Report</strong>ing<br />
The Board of Directors confirm that the Financial Statements of the Company have been prepared in a meaningful<br />
manner and are in accordance with the Sri Lanka Accounting Standards and the Companies Act. No. 07 of 2007. The<br />
Company has duly complied with all the requirements prescribed by the regulatory authorities including the <strong>Colombo</strong><br />
<strong>Stock</strong> Exchange and the Registrar of Companies.<br />
The <strong>Annual</strong> <strong>Report</strong> includes descriptive, non-financial content through which an attempt is made to provide stakeholders<br />
with information to assist them to make more informed decisions.<br />
The Statement of Directors’ Responsibilities in relation to the Financial Statements is set out on Page 22.<br />
14<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Corporate Governance (contd.)<br />
2. Audit Committee<br />
The Audit Committee is a sub committee of the Board of Directors of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC. The Committee comprised<br />
of three Non-Executive Directors of whom one member is a Fellow of the Institute of Chartered Accountants of Sri Lanka.<br />
The Audit Committee is headed by an Independent Non-Executive Director. The names of the members of the Audit<br />
Committee are as follows:<br />
Dr Anura Ekanayake (Chairman) - Independent Non-Executive Director<br />
Mr Lalit N de S Wijeyeratne - Independent Non-Executive Director<br />
Mr Devan de Mel - Non-Executive Director (resigned w.e.f. 10.08.20<strong>11</strong>)<br />
The Audit Committee is entrusted with the responsibility of monitoring and evaluating the internal control functions,<br />
evaluating the performance of the External Auditors and make their recommendations to the Board on their reappointment<br />
or removal which is subject to the approval of the shareholders at the <strong>Annual</strong> General Meeting.<br />
The Audit Committee is also entrusted with the responsibility of monitoring and guiding the Internal Audit function and<br />
reviewing the effectiveness of the internal controls.<br />
The Audit Committee <strong>Report</strong> appears on Page <strong>11</strong> of this report.<br />
3. Internal Control<br />
The Company has set out effective systems of control including Financial, Operational and Compliance.<br />
The Company’s Internal Audit Team mainly focuses on transaction assurances, positive assurances, internal controls,<br />
routine checks, special reviews and evaluations. The team also assists the Management in evaluating various Operational<br />
Risks and ensures that the systems and controls are in place.<br />
The Board of Directors is assured by the Internal Audit Team of the adequacy of the internal controls, compliance with<br />
the code of Business Ethics and other applicable corporate policies.<br />
The Board is fully conscious that any internal control system contains inherent limitations and no system of internal<br />
controls could provide absolute assurance against the occurrence of material errors, poor judgement in decision making,<br />
human errors, losses, frauds or irregularities. The Board has taken appropriate action to minimize such situations.<br />
E. OTHER<br />
1. Organization<br />
The Board has put in place an organizational structure with formally defined lines of responsibility, reporting and<br />
appropriate limits of authority. There are established procedures for planning and investment, risk management and for<br />
information and reporting systems to monitor the Company’s businesses.<br />
2. Management Committee<br />
The Management Committee meets monthly to evaluate the strategic plans, actual performance, and corrective actions<br />
with a view to achieve the desired goals. The Committee also periodically reviews the Company’s various Policies<br />
involving agriculture, manufacture, personnel, remuneration, asset management, and other controls. The decisions of the<br />
Management Committee meetings are communicated to the Estate Management through the Cluster General Managers<br />
at the monthly Cluster Meetings with the Managers.<br />
3. Managing Agent<br />
Aitken Spence Plantation Managements Limited (ASPM) has been appointed as the Managing Agent, since the<br />
acquisition of the Company in August 1997. ASPM also owns the controlling interest of the Company.<br />
The Board of ASPM has clear objectives in advising the Board of the Company, on strategic and operational decisions<br />
as the Managing Agents of the Company. The Board of ASPM also meets at least four times a year to review the<br />
performance of the Company.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
15
CORPORATE SUSTAINABILITY REPORT<br />
At <strong>Elpitiya</strong> <strong>Plantations</strong> PLC, sustainability plays a key role and<br />
strategies have been implemented to meet these objectives.<br />
We have a well diversified portfolio of businesses/ crops<br />
which increases the bio-diversity of the estates and ensures<br />
environmental conservation in achieving our goal of long term<br />
sustainability.<br />
From the inception, through a visionary corporate plan the<br />
company has grown in terms of Asset value, Profitability and<br />
the quality of the Human Capital. We also developed strategies<br />
through the years towards strengthening multiethnic harmony in<br />
our workforce.<br />
• <strong>Elpitiya</strong> <strong>Plantations</strong> in association with the Merrill J.<br />
Fernando Charitable Foundation provides educational<br />
scholarships to children of estate workers. This includes<br />
scholarships to students who have been accepted to<br />
university and students who have performed well at<br />
their GCE Ordinary Examinations. In the year <strong>2010</strong>/<strong>11</strong>,<br />
3 students qualified to receive scholarships to continue<br />
their studies from GCE Ordinary level to Advanced level<br />
of Rs. 750 per month for 2 years and 5 students who<br />
qualified to enter University for higher studies were<br />
granted scholarships of Rs. 1500 monthly for 3 years.<br />
Currently, there are 20 scholarship recipients.<br />
Social Development.<br />
• High standards of quality in the health and welfare for<br />
the children and a series of activities carried out towards<br />
improving the literacy of estate workers’ children. Total<br />
spending to maintain the creche facilities in all estates<br />
in <strong>2010</strong>/<strong>11</strong> was Rs. 24 Million. Gulugahakande Child<br />
Development Center was placed first at the all island<br />
child development center competition Organized by<br />
PHDT beating 430 estates.<br />
• The plantation sector recognizes that its success is<br />
linked inevitably to its workers, and as such, the health<br />
of employees is of paramount importance. During the<br />
year, <strong>Elpitiya</strong>, Deviturai, Bentota, Talgaswella, Ketandola,<br />
New Peacock and Nayapane Estates organized free<br />
medical camps and eye camps for employees and<br />
treated 820 employees and their family members,<br />
and also conducted a” Well Woman Clinic” and a<br />
workshop to create awareness on Sexually Transmitted<br />
Diseases. Sheen Estate conducted Ante Natal Clinics,<br />
Expanded Immunization and Contraception clinics<br />
for employees which were also extended to villagers.<br />
Similar programmes were also held at Gulugahakande,<br />
Ketandola, Talgaswella, and Dunsinane Estates.<br />
• <strong>Plantations</strong> provide health facilities including pre<br />
natal and antenatal clinics on all estates with free<br />
vaccination and medical checkups. Each estate has a<br />
medical officer who looks into these programmes. The<br />
company has also made available four (4) ambulances<br />
to minimize the time taken to transport serious patients<br />
to base hospitals.<br />
• During pregnancy, female workers are given ‘light<br />
work’ at a location close to their homes and a ‘Nursing<br />
Interval’ for 12 months is extended to all new mothers. A<br />
qualified mid wife looks after the wellbeing of expecting<br />
mothers on every estate.<br />
• Our plantations have encouraged the community spirit<br />
by organizing and supporting events such as annual<br />
trips, get-togethers, pilgrimages and shramadana<br />
campaigns on a regular basis.<br />
16<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
CORPORATE SUSTAINABILITY REPORT (contd.)<br />
• With the aim of improving the quality of life of plantation<br />
staff, many awareness programmes have been<br />
conducted, specifically addressing issues such as<br />
Dengue prevention at Lelwela, New peacock, Sheen<br />
and Talgaswella Estates, and pre-natal and ante-natal<br />
care on Talgaswella, New Peacock and Dunsinane<br />
Estates.<br />
• The secretaries of Aitken Spence led by Mrs.Daisy<br />
Kunanandham in their special annual project, donated<br />
educational and health care utenciils for the children<br />
of Dunsinane, Sheen, Fernlands and Meddacombra<br />
Estates. Over 1600 students benefited from these<br />
activities.<br />
• The company has collaborated with the Ministry of<br />
Livestock & Rural Community Development in a special<br />
project to concrete roads in the Nuwara Eliya Region.<br />
The full length of the roads developed by Dunsinane,<br />
Fernlands and Sheen Estates was 32 kilometers<br />
at a approximate cost of Rs. 43.5 Million in the<br />
corresponding year.<br />
• Skills development and prevention of alcoholism<br />
programmes were conducted for the members of<br />
Quality Circles in utilizing the funds granted by the PDP<br />
aiming at prevention of Absenteeism on our plantations.<br />
• Total spending on developing field rest rooms, water<br />
schemes, play grounds, places of worship, social<br />
development centres, re-roofing and rehabilitating<br />
internal roads was in the rang of Rs. 55.3 Million.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
17
CORPORATE SUSTAINABILITY REPORT (contd.)<br />
Environmental Conservation<br />
In the context of the plantation sector, environmental conservation<br />
is two pronged – controlling the soil erosion, soil pollution, water<br />
pollution and land loss caused by the process of cultivation, and<br />
managing the energy consumed by estates, and the Tea, Rubber<br />
and Palm Oil factories.<br />
The team at <strong>Elpitiya</strong> is in the process of gradually replacing<br />
artificial fertilizer with organic fertilizer to minimise the impact to<br />
the soil, by moving into site specific fertilizing, which provide only<br />
the required nutrients. Compost pits are also maintained in the<br />
estates for this purpose with the long term goal of replacing one<br />
round of artificial fertiliser with compost/ organic fertiliser on all<br />
the estates.<br />
At Deviturai Estate, a new secondary level wastewater treatment<br />
unit, including anaerobic and aerobic tanks and a clarifier tank,<br />
was built . This followed tests carried out on a collection of water<br />
samples for contamination levels. Henceforth, water samples will<br />
be tested randomly for Biochemical Oxygen Demand (BOD) and<br />
Chemical Oxygen Demand (COD) levels from Deviturai as well as<br />
other estates to identify and mitigate significant impacts to the<br />
environment.<br />
The plantations also grow leguminous cover crops in order to<br />
improve soil properties, reduce soil erosion and to control the<br />
growth of weeds which would otherwise require chemicals and<br />
weedicides.<br />
Tea estates of <strong>Elpitiya</strong> <strong>Plantations</strong> do not produce effluents<br />
or waste water that can be considered significant to require<br />
immediate attention. The estate management has undertaken<br />
to minimise, and eventually eliminate, the spraying of pesticides<br />
to control tea tortrix by pursuing biological methods such as<br />
collection of egg masses and using moth traps.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> works with their communities to reduce their<br />
solid waste generation and also harvests rain water to improve<br />
moisture content in the micro environment.<br />
18<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
CORPORATE SUSTAINABILITY REPORT (contd.)<br />
Our plantations span over 4410 Hects of mature area and 1201 Hects of immature area and none of our estates are within a 20km<br />
radius to any nature reserve or protected area. <strong>Elpitiya</strong> <strong>Plantations</strong> have a continuous Forestry Management programme which has<br />
helped to preserve and improve the bio diversity in the plantations and enhance their environmental value at large. Currently over<br />
700hects of forestry has been planted by the Company. The forestry management programme includes the planting of Eucalyptus<br />
Grandis and other species to fuel the Tea Manufacturing process, instead of using nonrenewable fuels.<br />
Certifications<br />
The following Tea Factories are certified for I.S.O 22000 which ensures the quality of tea manufactured.<br />
New Peacock, Dunsinane, Nayapane, Deviturai and Talgaswella.<br />
Nayapane is proud to be the first tea factory in Sri Lanka to be certified for ISO 9001 back in 1998.<br />
All the <strong>Plantations</strong> are in the process of achieving I.S.O 14001 in complying with Environmental standards. Dunsinane Tea factory was<br />
honored with a merit award at the Taiki Akimoto 5S awards and the only plantation company to win an award in this competition.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
19
Risk Management<br />
Risk management refers to a coordinated set of activities and<br />
methods that is used to direct an organization and to control the<br />
many risks that can affect its ability to achieve objectives.<br />
Risk and reward bear a direct relationship to each other.<br />
Managing risk in this ever changing dynamic business<br />
environment for any organization is a challenge. As the diversity<br />
of an organization increases, so does the complexity of risk<br />
management. The <strong>Elpitiya</strong> <strong>Plantations</strong> PLC is of the view that a<br />
disciplined approach to risk management is important in ensuring<br />
that the company only accepts risks that are adequately<br />
compensated for when pursuing its strategic objectives. Our<br />
goal is to optimize the tradeoff between risk and reward.<br />
The Board of Directors of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC has placed an<br />
effective risk management system to minimize, monitor and<br />
control the impact of adverse events or to maximize the realization<br />
of opportunities.<br />
Operational Risk<br />
An operational risk is, as the name suggests, a risk arising from<br />
execution of a company’s business functions. It is a very broad<br />
concept which focuses on the risks arising from the people,<br />
systems and processes through which a company operates.<br />
A sound system of internal controls is in place to mitigate the<br />
operational risk. Periodic checks are carried out at the estate<br />
level to ensure the quality and the cost effectiveness of the<br />
system of controls. In addition, the Company’s assets are<br />
adequately insured to minimize any financial losses.<br />
Product Quality Risk<br />
This is viewed as the inability to maintain consistency in quality of<br />
the product which causes low prices and poor demand.<br />
Nayapane & New Peacock Estates which are located in<br />
Pussellawa Region and Dunsinane Estate in Pundaluoya Region<br />
have obtained ISO 22000 Food Safety Certification and Deviturai,<br />
Polgahawila and Talgaswella Tea Factories located in Low<br />
Country Region are working towards obtaining ISO 22000 Food<br />
Safety Certification. The Marketing Division is in close contact<br />
with all Estate Managers ensuring that product quality is<br />
maintained at the highest levels on a consistent basis. The HR<br />
Division is providing ongoing training to all sectors such as Field<br />
Workers, Factory Workers and Executives on the aspects of the<br />
quality and adopting TQM procedures<br />
Interest Rate Risk<br />
Interest rate risk is the risk of financial loss that investors,<br />
businesses and borrowers face when interest rates rise.<br />
The Company is utilizing the long term funds at concessionary<br />
rates available under the ADB (Asian Development Bank) line of<br />
credit, Plantation Trust Fund and E-Friends loan scheme to its<br />
fullest potential. The company has also obtained multi facilities<br />
from various banks under different terms and conditions which<br />
allow to maintain appropriate mix of floating and fixed, different<br />
maturities, etc.<br />
Negotiations with banks take place often time to obtain the best<br />
possible interest rate for company borrowings.<br />
Human Risk<br />
Human risk is the potential that a chosen action or activity<br />
including the choice of inaction will lead to an undesirable<br />
outcome. The notion implies that a choice having an influence on<br />
the outcome exists. Potential losses themselves may also be<br />
called “risks”. Almost any human endeavour carries some risk,<br />
but some are much more risky than others.<br />
As the industry is highly labor intensive and unionized low<br />
productivity, work stoppages, go slows, strikes, etc. would<br />
adversely affect the overall performance of the Company. A<br />
Collective Agreement has been signed between the Trade Unions<br />
and the Employer’s Federation of which the Company is a<br />
member. This ensures industrial peace between the Managements<br />
and Trade Unions. In addition, continuous training and<br />
development programs including welfare are carried out to<br />
motivate, develop and retain the human resource of the Company,<br />
Legal Risk<br />
The potential loss that may occur to a business as a result of<br />
insufficient, improperly applied, or simply unfavorable legal<br />
proceedings in the country in which the business is operate.<br />
The Company with the assistance of the Aitken Spence Group<br />
Legal Department, Company Secretaries and Registrars<br />
endeavor compliance with all legal, company secretarial, stock<br />
market and other regulations.<br />
Liquidity Risk<br />
Probability of loss arising from a situation where there will not be<br />
enough cash and/or cash equivalents to meet financial<br />
obligations.<br />
Liquidity is directly linked with the performance of the Company.<br />
Finance division of the Company strives to ensure sufficient funds<br />
are available to meet the debt commitments and working capital<br />
requirements. Loans and Overdraft facilities are arranged with<br />
banks to meet any cash flow deficits.<br />
Climatic Changes<br />
This risk arises due to adverse climatic changes which affect the<br />
performance of the Company<br />
The Company adopts best agricultural practices, planting of<br />
selected cultivars in order to mitigate loss of crop due to<br />
unfavorable climatic changes. In addition, various research<br />
programs on soil & foliar analysis for fertilizer recommendations,<br />
shade-planting, fuel wood planting, pest & disease control, etc.<br />
are carried out together with the Tea and Rubber Research<br />
Institutes.<br />
20<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Management Team<br />
Head Office<br />
Left to right Mr Athula Fernando (General Manager - Ceylon Choice Operation), Mr A Segarajasingam (General Manager - Marketing),<br />
Mr A L W Goonewardena (Chief Executive Officer), Mr B Bulumulla (Deputy Chief Executive Officer), Mr P S Dissanayake (General<br />
Manager - Engineering & Projects), Mr Ruwan Nissanka (Deputy General Manager - Finance)<br />
Estates<br />
UC - Cluster 1<br />
Up Country (UC)<br />
UC - Cluster 2<br />
Mr R K Gunasekera, Manager – Sheen Estate;<br />
Mr S K S B Pahathkumbura, General Manager<br />
Cluster I – Up Country & Dunsinane Estaste; M r D M S R Dissanayake,<br />
Manager – Meddecombra Estate;<br />
& Mr H Wickremasinghe, Manager – Fernlands Estate<br />
Mr M I Izzadeen, General Manager – Cluster II – Up Country &<br />
New Peacock Estate &<br />
Mr K R Mathavan, Manager – Nayapane Estate<br />
Low Country (LC)<br />
Mr N D Ratnayake, Manager – Deviturai Estate; Mr U A Karunanayake, Manager – Lelwalla Estate; Mr D C Kumarage<br />
Manager – Bentota Estate; Mr A G Geethkumara, General Manager – Low Country & Talgaswella Estate,<br />
Mr M H P Gunaratne, Manager – Katandola Estate; Mr D T Fernando, Deputy Manager in charge, Gulugahakande<br />
Estate; & Mr R R Vanderputt, Manager - <strong>Elpitiya</strong> Estate<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
21
Statement of Directors’ Responsibilities<br />
The Companies Act No. 7 of 2007 requires the Directors of the<br />
Company to be responsible for the preparation and presentation<br />
of the financial statements to the shareholders in accordance<br />
with the relevant provisions of the Companies Act No.7 of 2007<br />
and the Sri Lanka Accounting and Auditing Standards Act No<br />
15 of 1995 and the Listing Rules of the <strong>Colombo</strong> <strong>Stock</strong><br />
Exchange.<br />
The Directors confirm that the financial statements of the<br />
Company for the year ended 31st March 20<strong>11</strong> incorporated in<br />
this report have been prepared in accordance with the<br />
Companies Act No. 7 of 2007, Sri Lanka Accounting and<br />
Auditing Standards Act No 15 of 1995 and the Listing Rules of<br />
the <strong>Colombo</strong> <strong>Stock</strong> Exchange.<br />
In the preparation of the financial statements, the Directors have<br />
selected the appropriate accounting policies and have applied<br />
them consistently. Any material departures from accounting<br />
policies have been disclosed and explained in the financial<br />
statements.<br />
The Directors have adopted the going concern basis in preparing<br />
the financial statements. The Directors having considered the<br />
Company’s business plans, and a review of its current and future<br />
operations, are of the view that the Company has adequate<br />
resources to continue in operation.<br />
The Directors accept the responsibility to ensure that the<br />
Company maintains adequate and accurate records which<br />
reflect the true financial position of the Company.<br />
The Directors have taken reasonable steps to safeguard the<br />
assets of the Company. The Directors have instituted appropriate<br />
systems of internal controls in order to prevent and detect fraud<br />
and other irregularities.<br />
The Directors have provided the Auditors with every opportunity<br />
to carry out any reviews and tests that they consider appropriate<br />
and necessary for the performance of their responsibilities.<br />
The Directors confirm to the best of their knowledge that all<br />
taxes, levies and financial obligations of the Company have been<br />
either duly paid or adequately provided for in the financial<br />
statements.<br />
By Order of the Board,<br />
Sgd.<br />
AITKEN SPENCE CORPORATE FINANCE (PVT) LTD<br />
Secretaries<br />
<strong>Colombo</strong><br />
23 rd August 20<strong>11</strong><br />
22<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Auditors’ <strong>Report</strong><br />
Chartered Accountants<br />
201 De Saram Place<br />
P. O. Box 101<br />
<strong>Colombo</strong> 10<br />
Sri Lanka.<br />
Tel : (0) <strong>11</strong> 2463500<br />
Fax Gen : (0) <strong>11</strong> 2697369<br />
Tax : (0) <strong>11</strong> 5578180<br />
eysl@lk.ey.com<br />
INDEPENDENT AUDITORS’ REPORT<br />
TO THE SHAREHOLDERS OF ELPITIYA PLANTATIONS PLC<br />
<strong>Report</strong> on the Financial Statements<br />
An audit includes examining, on a test basis, evidence supporting<br />
the amounts and disclosures in the Financial Statements. An<br />
audit also includes assessing the accounting principles used<br />
and significant estimates made by management, as well as<br />
evaluating the overall Financial Statement presentation.<br />
We have audited the accompanying Financial Statements of<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> PLC which comprise the Balance Sheet as<br />
at March 31, 20<strong>11</strong> and the Income Statement, Statement of<br />
Changes in Equity and Cash Flow Statement for the year then<br />
ended, and a summary of significant Accounting Policies and<br />
other explanatory notes.<br />
We have obtained all the information and explanations which to<br />
the best of our knowledge and belief were necessary for the<br />
purpose of our audit. We therefore believe that our audit provides<br />
a reasonable basis for our opinion.<br />
Opinion<br />
Management’s Responsibility for the Financial Statements<br />
Management is responsible for the preparation and fair<br />
presentation of these Financial Statements in accordance with<br />
Sri Lanka Accounting Standards. This responsibility includes:<br />
designing, implementing and maintaining internal control<br />
relevant to the preparation and fair presentation of Financial<br />
Statements that are free from material misstatement, whether<br />
due to fraud or error; selecting and applying appropriate<br />
accounting policies; and making accounting estimates that are<br />
reasonable in the circumstances.<br />
Scope of Audit and Basis of Opinion<br />
In our opinion, so far as appears from our examination, the<br />
Company maintained proper accounting records for the year<br />
ended March 31, 20<strong>11</strong>, and the Financial Statements give a true<br />
and fair view of the Company’s state of affairs as at March 31,<br />
20<strong>11</strong> and its profit and cash flows for the year then ended in<br />
accordance with Sri Lanka Accounting Standards.<br />
<strong>Report</strong> on Other Legal and Regulatory Requirements<br />
In our opinion, these Financial Statements also comply with the<br />
requirements of Section 151(2) of the Companies Act No. 07 of<br />
2007.<br />
Our responsibility is to express an opinion on these Financial<br />
Statements based on our audit. We conducted our audit in<br />
accordance with Sri Lanka Auditing Standards. Those standards<br />
require that we plan and perform the audit to obtain reasonable<br />
assurance whether the Financial Statements are free from<br />
material misstatements.<br />
24 May 20<strong>11</strong><br />
<strong>Colombo</strong><br />
Partners :<br />
A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. Y A De Silva ACA W R H Fernando FCA FCMA<br />
W K B S P Fernando FCA ACMA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond)<br />
H MA Jayesinghe FCA FCMA Ms. G G S Manatunga ACA Ms. L C G Nanayakkara FCA FCMA B E Wijesurya ACA ACMA<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
23
Balance Sheet<br />
As at 31 st March 20<strong>11</strong><br />
ASSETS<br />
Non Current Assets<br />
Note 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Leasehold Property 3 180,186,524 185,452,948<br />
Immovable estate assets on finance lease<br />
(Other than leasehold property) 4 202,632,518 218,180,073<br />
Tangible assets other than immature/mature plantations 5 459,939,769 458,614,<strong>11</strong>7<br />
Immature/mature plantations 6 2,105,763,627 1,971,092,682<br />
Long Term Investment - (Unquoted) 7 97,776,444 77,276,420<br />
Amounts due from related companies 10.1 40,000,000 -<br />
3,086,298,882 2,910,616,240<br />
Current Assets<br />
Inventories 8 326,469,489 190,036,643<br />
Trade and other receivables 9 154,135,778 140,072,753<br />
Amounts due from related companies 10 26,336,535 54,932,532<br />
ESC Recoverable 3,700,926 18,040,934<br />
Cash and Bank balances 69,842,686 371,019,291<br />
580,485,414 774,102,153<br />
TOTAL ASSETS 3,666,784,296 3,684,718,393<br />
EQUITY AND LIABILITIES<br />
Capital and Reserves<br />
Stated Capital <strong>11</strong> 694,236,120 694,236,120<br />
Accumulated Profits 669,048,314 323,760,772<br />
Total Equity 1,363,284,434 1,017,996,892<br />
Non Current liabilities & Deferred Income<br />
Interest Bearing Loans & Borrowings 12 831,279,460 953,671,551<br />
Retirement Benefit Obligations 13 464,154,667 448,410,122<br />
Deferred Income 14 206,7<strong>11</strong>,663 186,516,926<br />
Net liability to the Lessor payable after one year 15 187,412,977 190,104,072<br />
1,689,558,767 1,778,702,671<br />
Current Liabilities<br />
Interest Bearing Loans & Borrowings (Including Overdraft) 12 308,304,543 312,805,4<strong>11</strong><br />
Net liability to the Lessor payable within one year 15 2,691,095 2,587,592<br />
Trade and other payables 16 278,426,690 246,761,<strong>11</strong>7<br />
Amounts due to related companies 17 24,518,767 325,864,710<br />
613,941,095 888,018,830<br />
Total Equity and Liabilities 3,666,784,296 3,684,718,393<br />
These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.<br />
Chief Financial Officer<br />
The board of directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of<br />
the board by<br />
DIRECTOR<br />
MANAGING AGENT<br />
1 1<br />
2 2<br />
The accounting policies and notes on pages 28 through 52 form an integral part of the Financial Statements.<br />
<strong>Colombo</strong>,<br />
24 May 20<strong>11</strong><br />
24<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Income Statement<br />
Year Ended 31 st March 20<strong>11</strong><br />
Note 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Revenue 18 2,601,501,029 2,215,126,092<br />
Cost of Sales (2,007,069,199) (1,973,914,603)<br />
Gross Profit 594,431,830 241,2<strong>11</strong>,489<br />
Other Income And Gains 19 99,055,529 81,097,740<br />
Administration Expenses (159,319,697) (143,037,064)<br />
Management Fee & Workers Profit Share (40,059,177) (10,202,236)<br />
Finance Cost 20 (144,583,738) (144,075,445)<br />
Share of Profit/ (Loss) of Joint Ventures 7.1 34,707,997 38,822,310<br />
Profit/(Loss) Before Taxation 21 384,232,743 63,816,794<br />
Income Tax Expense 22 (20,728,587) -<br />
Net Profit/(Loss) for the Year 363,504,155 63,816,794<br />
Basic Earnings / (Loss) Per Share 23 4.99 1.23<br />
The accounting policies and notes on pages 28 through 52 form an integral part of the Financial Statements.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
25
Statement Of Changes In Equity<br />
Year Ended 31 st March 20<strong>11</strong><br />
Stated Capital Accumulated Total<br />
Profit/ ( Loss )<br />
Rs Rs Rs<br />
Balance as at 31 March 2009 350,000,010 259,943,978 609,943,988<br />
Rights Shares Issued 344,236,<strong>11</strong>0 - 344,236,<strong>11</strong>0<br />
(<strong>11</strong>,474,537 @ 30/- per share)<br />
Net Profit/(Loss) for the year - 63,816,794 63,816,794<br />
Balance as at 31 March <strong>2010</strong> 694,236,120 323,760,772 1,017,996,892<br />
Net Profit/(Loss) for the year - 363,504,155 363,504,155<br />
Dividends - (18,216,613) (18,216,613)<br />
Balance as at 31 March 20<strong>11</strong> 694,236,120 669,048,314 1,363,284,434<br />
The accounting policies and notes on pages 28 through 52 form an integral part of the Financial Statements.<br />
26<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
N note 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
CASH FLOWS FROM OPERATING ACTIVITIES<br />
Net Profit/(Loss) before Taxation 384,232,743 63,816,794<br />
ADJUSTMENTS FOR<br />
Depreciation/Amortization 21 103,809,009 88,215,186<br />
Provision for Defined Benefit Plans 13 78,468,529 172,695,485<br />
Amortization of Grants 14.1 (10,203,521) (7,539,513)<br />
Share of Profit/ (Loss) of Joint Ventures (34,707,997) (38,822,310)<br />
Finance Cost 20 144,583,738 144,075,445<br />
Deferred Income from Sublease 14.2 (9,748,782) (<strong>11</strong>,005,541)<br />
Provision for Doubtful Debtors 13,000,000 7,576,810<br />
Operating Profit before Working Capital Changes 669,433,718 419,012,356<br />
(Increase)/Decrease in Trade and other Receivables (14,063,025) (56,460,037)<br />
(Increase)/Decrease in Amounts due from Related Companies 15,595,997 (4,933,<strong>11</strong>0)<br />
(Increase)/Decrease in Inventories (136,432,846) (89,946,700)<br />
Increase/(Decrease) in Trade and Other Payables 35,8<strong>11</strong>,650 (77,770,634)<br />
Increase/(Decrease) in Amounts due to Related Companies (301,345,943) (92,472,871)<br />
Cash Generated from Operations 268,999,551 97,429,004<br />
Cash Received as Sublease of Land 1,292,901 13,330,819<br />
Finance Cost Paid (102,416,858) (<strong>11</strong>9,830,419)<br />
Defined Benefit Plan Cost Paid 13 (62,723,984) (51,013,346)<br />
Grants Received 14.1 38,854,140 42,046,975<br />
Economics Service Charges Paid (6,388,578) (3,817,432)<br />
Net Cash from Operating Activities 137,617,172 (21,854,399)<br />
CASH FLOWS FROM INVESTING ACTIVITIES<br />
Field Development Expenditure 6 (175,700,796) (185,232,716)<br />
Purchase of Property, Plant & Equipment (32,490,835) (83,290,950)<br />
Dividend Received 14,207,983 8,357,661<br />
Right Issue on Ordinary Shares - 344,236,<strong>11</strong>0<br />
Loan Given to Related Party (40,000,000) -<br />
Investment in shares (10) -<br />
Net Cash used in Investing Activities (233,983,658) 84,070,105<br />
CASH FLOWS FROM FINANCING ACTIVITIES<br />
Cash Flow Statement<br />
Year Ended 31 st March 20<strong>11</strong><br />
Payment of Government Lease Rentals (44,727,217) (27,383,428)<br />
Proceeds from Loans 104,589,181 860,150,198<br />
Settlement of Loan (230,068,462) (399,877,135)<br />
Dividend Paid (18,216,613) -<br />
Other Lease Rental Paid (16,604,925) (10,442,841)<br />
Net Cash (used in) / from Financing Activities (205,028,036) 422,446,794<br />
Net Increase/(Decrease) in Cash & Cash Equivalents (301,394,522) 484,662,500<br />
A. Cash & Cash Equivalents at the beginning of the year 332,626,350 (152,036,150)<br />
B. Cash & cash Equivalents at the end of the year 31,231,828 332,626,350<br />
NOTE A<br />
Cash & Cash Equivalents at the beginning of the year<br />
Cash & Bank Balances 371,019,291 20,607,486<br />
Bank Overdrafts (Note 12) (38,392,941) (172,643,636)<br />
332,626,350 (152,036,150)<br />
NOTE B<br />
Cash & Cash Equivalents at the end of the year<br />
Cash & Bank Balances 69,842,686 371,019,291<br />
Bank Overdrafts (Note 12) (38,610,858) (38,392,941)<br />
31,231,828 332,626,350<br />
The accounting policies and notes on pages 28 through 52 form an integral part of the Financial Statements.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
27
1. CORPORATE INFORMATION<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Domicile and Legal Form<br />
<strong>Elpitiya</strong> plantations PLC is a limited liability Company incorporated and domiciled in Sri Lanka, under the Companies Act No.<br />
17 of 1982 (The Company re-registered under the Companies Act No. 07 of 2007) in terms of the provisions of the conversion<br />
of public Corporations or Government Owned Business undertakings into public Companies Act No. 23 of 1987. The<br />
registered office of the Company is located at No. 315, Vauxhall Street, <strong>Colombo</strong> – 02, and <strong>Plantations</strong> are situated in the<br />
planting districts of Nuwera Eliya and Galle.<br />
1.2 Principal Activities and Nature of Operations<br />
During the year, the principal activities of the Company were cultivation, manufacture and sale of black Tea, Rubber, Oil Palm<br />
and other crops.<br />
1.3 Parent Enterprise<br />
The Company’s parent undertaking is Aitken Spence Plantation Managements Limited.<br />
1.4 Date of Authorisation for Issue<br />
The Financial Statements of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC for the year ended 31 March 20<strong>11</strong> were authorised for issue in accordance<br />
with a resolution of the Board of Directors on 24 May 20<strong>11</strong>.<br />
2.1 BASIS OF PREPARATION<br />
These financial statements presented in Sri Lanka Rupees have been prepared on a historical cost basis except for certain<br />
Property, Plant and Equipment which are stated at revalued amounts. The Financial Statements are prepared in Sri Lankan<br />
rupees and all values are rounded to the nearest rupee.<br />
2.1.1 Statement of compliance<br />
The Financial Statements of <strong>Elpitiya</strong> <strong>Plantations</strong> PLC have been prepared in accordance with the Sri Lanka Accounting<br />
Standards (SLAS) adopted by the Institute of Chartered Accountants of Sri Lanka (ICASL) and also in compliance with the<br />
requirements of the Companies Act No 07 of 2007.<br />
2.1.2 Going Concern<br />
The Directors have made an assessment of the Company’s ability to continue as a going concern and they do not intend either<br />
to liquidate or to cease trading.<br />
2.1.3 Comparative Information<br />
The accounting policies have been consistently applied by the Company and are consistent with those used in the previous<br />
year unless otherwise stated.<br />
2.2 SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS<br />
Judgments<br />
In the purpose of applying the company’s accounting policies , management has made the following judgments , apart from<br />
those involving estimations , which has the most significant effect on the amounts recognized in the financial statements.<br />
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<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Inventory valuation – Produce stock<br />
Company has valued part of unsold produce stock at since realized prices. The balance unsold stock remained as at the<br />
balance sheet date valued at an estimated selling prices based on most recent selling prices available subsequent to the year<br />
end.<br />
Estimates and Assumptions<br />
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that<br />
have a significant risk of causing a material adjustments to the carrying amounts of assets and liabilities within the next<br />
financial year are discussed below.<br />
Impairment of Goodwill<br />
The company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the “value in<br />
use” of the cash generating units to which the goodwill is allocated .Estimating a value in use amount requires management<br />
to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount<br />
rate in order to calculate present value of those cash flows. However, at present company does not have any recorded<br />
Goodwill balance as at the balance sheet date.<br />
Deferred Tax Assets<br />
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available<br />
against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred<br />
tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax<br />
planning strategies. The carrying value of the unrecognised deferred tax assets at 31 March 20<strong>11</strong> was Rs.188,650,437/-<br />
(<strong>2010</strong>. Rs. 471,<strong>11</strong>6,273/-).<br />
Defined Benefit Plans<br />
The cost of defined benefit pension plan is determined using actuarial valuations. The actuarial valuation involves making<br />
assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future<br />
pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. The net<br />
employee liability at 31 March 20<strong>11</strong> is Rs. 464,154,667/- (<strong>2010</strong> Rs. 448,410,122/-). Further details are given in Note 13.<br />
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br />
2.3.1 Foreign Currency Translation<br />
The financial statements are presented in Sri Lankan rupees, which is the Company’s functional and presentation currency.<br />
Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction.<br />
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange<br />
ruling at the balance sheet date. All differences are taken to profit or loss with the exception of differences on foreign currency<br />
borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal<br />
of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to exchange<br />
differences on those borrowings are also dealt with in equity. Non monetary items that are measured in terms of historical cost<br />
in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items<br />
measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was<br />
determined. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying<br />
amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and<br />
translated at the closing rate.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
29
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
2.3.2 Taxation<br />
a) Current Taxes<br />
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be<br />
recovered from or paid to the commissioner general of Inland Revenue. The tax rates and tax laws used to compute the<br />
amount are those that are enacted or substantively enacted by the balance sheet date.<br />
The provision for income tax is based on the elements of income and expenditure as reported in the financial statements and<br />
computed in accordance with the provisions of the Inland Revenue Act.<br />
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement<br />
b) Deferred Taxation<br />
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the<br />
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.<br />
Deferred income tax liabilities are recognised for all taxable temporary differences:<br />
• except where the deferred income tax liability arises from goodwill amortisation or the initial recognition of an asset or<br />
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting<br />
profit nor taxable profit or loss; and<br />
• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint<br />
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that<br />
the temporary differences will not reverse in the foreseeable future.<br />
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets<br />
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible<br />
temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:<br />
• except where the deferred income tax asset relating to the deductible temporary difference arises from the initial<br />
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,<br />
affects neither the accounting profit nor taxable profit or loss; and<br />
• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in<br />
joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will<br />
reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be<br />
utilised.<br />
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it<br />
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be<br />
utilised.<br />
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset<br />
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the<br />
balance sheet date.<br />
Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.<br />
30<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
2.3.3 Borrowing Costs<br />
Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent where borrowing<br />
costs that are directly attributable to the acquisition, construction, or production of a qualifying asset that takes a substantial<br />
period of time to get ready for its intended use or sale is capitalised as part of that asset. The amount of borrowing costs<br />
eligible for capitalisation is determined in accordance with SLAS 20-Borrowing Costs – Allowed Alternative Treatment. The<br />
capitalisation rate of <strong>11</strong>% (<strong>2010</strong>– 22%) percent was used.<br />
Borrowing costs amounting to Rs. 31,131,878/= (previous year Rs. 97,507,174/=) incurred on borrowings obtained to meet<br />
expenses relating to immature plantations have been capitalised as part of the cost of the immature plantations.<br />
2.3.4 Intangible Assets<br />
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a<br />
business combination is fair value as at the date of acquisition. Following the initial recognition of the intangible assets, the cost<br />
model is applied requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment<br />
losses. Internally generated intangible assets, excluding capitalised development costs are not capitalised and expenditure is<br />
reflected in the income statement in the year in which the expenditure is incurred.<br />
The useful lives of intangible assets are assessed to be either finite or indefinite.<br />
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is<br />
an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible<br />
asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected<br />
pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation<br />
period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible<br />
assets with finite lives is recognised in the income statement in the expense category consistent with the function of the<br />
intangible asset. Amortisation was commenced when the assets were available for use.<br />
As at the balance sheet date, company does not have any intangible assets with finite lives.<br />
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit<br />
level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to<br />
determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from<br />
indefinite to finite is made on a prospective basis.<br />
Intangible assets that are not yet available for sale are tested for impairments at each financial year end, even if there is no<br />
indication that the asset is impaired.<br />
As at the balance sheet date, company does not have any intangible assets with indefinite lives.<br />
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal<br />
proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.<br />
Research and Development Costs<br />
Research costs are expensed as incurred. An intangible assets arising from development expenditure on an individual project<br />
is recognised only when the company can demonstrate the technical feasibility of completing the intangible assets so that it<br />
will be available for use or sale , its intention to complete and its ability to use or sell the assets , how the assets will generate<br />
future economic benefits , the availability of recourses to complete the assets and the ability to measure reliably the expenditure<br />
during the development.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
31
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
During the period of development, the assets is tested for impairment annually, Following the initial recognition of the<br />
development expenditure, the cost model is applied requiring the assets to be carried at cost less any accumulated amortisation<br />
and accumulated impairment losses . Amortisation of the assets begins when development is complete and the asset is<br />
available for use. It is amortised over the period of expected future sales. During the period of which the asset is not yet in uses<br />
it is tested for impairments annually.<br />
2.3.5 Deferred Expenditure<br />
Expenditure which is deemed to have a benefit or relationship to more than one financial year is classified as deferred<br />
expenditure. Such expenditure is written off over the period to which it relates, on a straight-line basis.<br />
2.3.6 Inventories<br />
Inventories other than produce stocks are valued at the lower of cost and estimated net realisable value, after making due<br />
allowances for obsolete and slow moving items. Net realisable value is the price at which Inventories can be sold in the<br />
ordinary course of business after allowing for cost of realisation and / or cost of conversion from their existing state to saleable<br />
condition.<br />
The cost incurred in bringing inventories to its present location and condition are accounted using the following cost formula.<br />
Input Material<br />
At average cost.<br />
Growing Crop-Nurseries<br />
At the cost of direct materials, direct labour and an appropriate proportion of directly<br />
attributable overheads.<br />
Produce <strong>Stock</strong>s<br />
Valued at estimated selling prices or since realised prices.<br />
Consumables & Spares<br />
At actual cost.<br />
2.3.7 Trade and Other Receivables<br />
Trade receivables are stated at the amounts they are estimated to realise net of provisions for bad and doubtful receivables.<br />
Other receivables and dues from related parties are recognised at cost less provision for bad and doubtful receivables.<br />
2.3.8 Cash and Cash Equivalents<br />
Cash and Cash Equivalents are defined as cash in hand, demand deposits and short term highly liquid investments readily<br />
convertible to known amounts of cash and subject to insignificant risk of changes in value.<br />
For the purpose of Cash Flow Statement Cash and Cash Equivalents consist of cash in hand and deposits in banks net of<br />
outstanding bank overdrafts. Investments with short term maturities i.e. three months or less from the date of acquisitions are<br />
also treated as Cash Equivalents.<br />
Interest paid is classified as operating Cash Flows.<br />
The Cash Flow Statement is reported based on indirect method.<br />
2.3.9 Property, Plant and Equipment<br />
a) Cost<br />
Property, Plant & Equipment is recorded at cost less accumulated depreciation and less any impairment in value.<br />
32<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
b) Cost and Valuation<br />
All items of Property, Plant & Equipment are initially recorded at cost. Where items of Property, Plant and Equipment are<br />
subsequently revalued, the entire class of such assets is revalued. Revaluations are made with sufficient regularity to<br />
ensure that their carrying amounts do not differ materially from their fair values at the balance sheet date. Subsequent<br />
to the initial recognition as an asset at cost, revalued Property, Plant and Equipment are carried at revalued amounts<br />
less any subsequent depreciation thereon. All other Property, Plant and Equipment are stated at historical cost less<br />
depreciation.<br />
When an asset is revalued, any increase in the carrying amount is credited directly to a revaluation surplus unless it<br />
reverses a previous revaluation decrease relating to the same asset, which was previously recognised as an expense.<br />
In these circumstances the increase is recognised as income to the extent of the previous written down. When an<br />
asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised as an expense unless it<br />
reverses a previous increment relating to that asset, in which case it is charged against any related revaluation surplus,<br />
to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of that same<br />
asset. Any balance remaining in the revaluation surplus in respect of an asset, is transferred directly to accumulated<br />
profits or loss on retirement or disposal of the asset.<br />
c) Restoration Costs<br />
Expenditure incurred on repairs or maintenance of property, plant and equipment in order to restore or maintain the<br />
future economic benefits expected from originally assessed standard of performance, is recognized as an expense<br />
when incurred.<br />
d) Depreciation<br />
The provision for depreciation is calculated on the cost or valuation of all property, plant and equipment other than<br />
freehold land, in order to write off such amounts over the estimated useful lives by equal instalments as follows:<br />
Buildings 2.5 %<br />
Plant & machinery 7.5 %<br />
Furniture & fittings 10 %<br />
Vehicles 20 %<br />
Equipment 12.5 %<br />
Water Sanitation 5 %<br />
Mature <strong>Plantations</strong><br />
- Tea 3 %<br />
- Rubber 5 %<br />
- Oil Palm 5 %<br />
- Coconut 2 %<br />
- Cinnamon 5 %<br />
The leasehold rights are being amortised in equal amounts over the following periods.<br />
Bare Land - Over 53 years<br />
Mature <strong>Plantations</strong> - Over 30 years<br />
Buildings - Over 25 years<br />
Machinery - Over 15 years<br />
Improvements to Land - Over 53 years<br />
Other Vested Assets - Over 53 years<br />
Unimproved Land - Over 53 years<br />
The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each<br />
financial year end.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
33
e) Derecognition<br />
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are<br />
expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference<br />
between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the<br />
year the asset is derecognised.<br />
2.3.10 Immature and Mature <strong>Plantations</strong><br />
The cost of Replanting and New Planting are classified as immature plantations up-to the time of harvesting the crop.<br />
Further, the general charges incurred on the plantation are apportioned based on the labour days spent on respective<br />
Replanting and New Planting, and capitalised on the immature areas. The remaining portion of the general charges is expensed<br />
in the accounting period in which it is incurred.<br />
The cost of areas coming into bearing are transferred to mature plantations and depreciated over their useful life period.<br />
2.3.<strong>11</strong> Infilling Cost<br />
Where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of<br />
performance, the costs are capitalised in accordance with Sri Lanka Accounting Standard No. 32 and depreciated over the<br />
useful life at rates applicable to mature plantation.<br />
2.3.12 Leases<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Infilling costs that are not capitalised have been charged to the Income Statement in the year in which they are incurred.<br />
a) Finance leases - where the company is the lessee<br />
Property, plant and equipment on finance leases, (which effectively transfer to the company substantially all of the risks<br />
and benefits incidental to ownership of the leased item) are capitalised at their cash price, and depreciated/amortised<br />
over the period the company is expected to benefit from the use of the leased assets.<br />
The corresponding principal amount payable to the lessor is shown as a liability.<br />
The finance charges allocated to future periods are separately disclosed under Notes 12.5 & 15.<br />
The interest element of the rental obligation applicable to each financial year is charged to the Income Statement over<br />
the period of the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability for<br />
each period.<br />
The cost of improvements to or on leased property is capitalised, and depreciated over the unexpired period of the lease<br />
or the estimated useful lives of the improvements, whichever is shorter.<br />
b) Assets leased to third parties under agreements that transfer substantially all the risks and rewards associated with<br />
ownership other than legal title, are classified as finance leases. Lease rentals receivable from the lessee shown in the<br />
balance sheet.<br />
c) Operating Leases<br />
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are<br />
classified as operating leases.<br />
Lease payments (excluding costs for services such as insurance and maintenance) paid under operating leases are<br />
recognised as an expense in the income statement on a straight-line basis over the lease term<br />
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<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
d) Leasehold Property<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Leasehold property comprising of land use rights obtained on a long term basis, is stated at the recorded carrying<br />
values as at the effective date of Sri Lanka Accounting Standard 19 – Leases in line with Ruling of the Urgent Issues<br />
Task Force of The Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortised over the<br />
remaining lease term or useful life of the leased property whichever is shorter.<br />
2.3.13 Investment in Joint Venture<br />
The company have interest in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement<br />
whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a<br />
joint venture that involves the establishment of a separate entity in which each venturer has an interest. The company<br />
recognises its interest in the joint venture using the equity method.<br />
Under the equity method, the investment in the joint venture is carried in the balance sheet at cost plus post acquisition<br />
changes in the company’s share of net assets of the associate. Goodwill relating to a joint venture is included in the carrying<br />
amount of the investment and is not amortised. The income statement reflects the share of the results of operations of the joint<br />
venture. Where there has been a change recognised directly in the equity of the joint venture, the company recognises its<br />
share of any changes and discloses this, when applicable, in the statement of changes in equity. Profits and losses resulting<br />
from transactions between the company and the joint venture are eliminated to the extent of the interest in the joint venture.<br />
The reporting dates of the joint venture and the company are identical and the joint venture’s accounting policies conform to<br />
those used by the company for like transactions and events in similar circumstances<br />
2.3.14 Provisions<br />
Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, where<br />
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable<br />
estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are<br />
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the<br />
time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the<br />
provision due to the passage of time is recognized as an interest expense.<br />
2.3.15 Retirement Benefit Obligation<br />
a) Defined Benefit Plans –Gratuity<br />
The Company measures the present value of the promised retirement benefits of gratuity which is a defined benefit plan<br />
with the advice of an actuary every two years using projected benefits valuation method. Actuarial gains and losses are<br />
recognised as income or expenses over the expected average remaining working lives of the participants of the plan.<br />
The key assumptions used by the actuary include the following:<br />
i) Rate of Discount <strong>11</strong>.5% (per annum)<br />
ii) Rate of Salary Increase - Workers 9% (per annum)<br />
- Staff 10% (per annum)<br />
iii) Retirement Age - Workers 55 years<br />
- Staff 55 years<br />
iv)<br />
The company will continue as a going concern.<br />
The actuarial present value of the accrued benefits as at 31st March 20<strong>11</strong> is Rs. 464,154,667/- This item is grouped<br />
under retirement benefit obligations in the balance sheet. The liability is not externally funded.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
35
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
b) Defined Contribution Plans – Employees’ Provident Fund & Employees’ Trust Fund<br />
Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line<br />
with the respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments of employees<br />
to the Employees’ Provident Fund and to the Employees’ Trust Fund respectively.<br />
2.3.16 Grants and Subsidies<br />
Grants and subsidies are recognised at their fair value where there is reasonable assurance that the grant/subsidy will be<br />
received and all attaching conditions, if any, will be complied with. When the grant or subsidy relates to an income item it is<br />
recognised as income over the periods necessary to match them to the costs to which it is intended to compensate on a<br />
systematic basis.<br />
Grants and subsidies related to assets, including non-monetary grants at fair value are deferred in the balance sheet and<br />
credited to the income statement over the useful life of the asset.<br />
2.3.17 Impairment of Non Financial Assets<br />
The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such<br />
indication exists, or when annual impairment testing for an asset is required, the company makes an estimate of the asset’s<br />
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs<br />
to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are<br />
largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its<br />
recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use,<br />
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market<br />
assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an<br />
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices or other<br />
available fair value indicators.<br />
Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent<br />
with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In<br />
this case the impairment is also recognised in equity up to the amount of any previous revaluation.<br />
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that<br />
previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the company<br />
makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a<br />
change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If<br />
that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot<br />
‘’exceed’ the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised<br />
for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount,<br />
in which case the reversal is treated as a revaluation increase. Impairment losses recognised in relation to goodwill are not<br />
reversed for subsequent increases in its recoverable amount.<br />
The following criteria are also applied in assessing impairment of specific assets:<br />
Goodwill<br />
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the<br />
carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of the cashgenerating<br />
unit (or group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cashgenerating<br />
unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (group of<br />
cash-generating units) to which goodwill has been allocated, an impairment loss is recognised. Impairment losses relating to<br />
Goodwill cannot be reversed in future periods. The company performs its annual impairment test of goodwill as at 31<br />
December. However, at present company does not have any recorded Goodwill as at the balance sheet date.<br />
36<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Intangible Assets<br />
Intangible assets with indefinite useful lives are tested for impairment annually as of 31 March either individually or at the cash<br />
generating unit level, as appropriate. However, at present company does not have any recorded intangible assets as at the<br />
balance sheet date.<br />
2.3.18 Income Statement<br />
Revenue Recognition<br />
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue<br />
and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the<br />
consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the<br />
purpose of recognition of revenue<br />
(a)<br />
Sale of Goods<br />
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have<br />
passed to the buyer, usually on dispatch of the goods.<br />
(b)<br />
Interest<br />
Interest Income is recognised as the interest accrued (taking into account the effective yield on the asset) unless<br />
collectibility is in doubt.<br />
(c)<br />
Dividends<br />
Dividend income is recognised on a cash basis.<br />
(d)<br />
Rental income<br />
Rental income is recognised on an accrual basis.<br />
(e)<br />
Others<br />
Other income is recognised on an accrual basis<br />
Net Gains and losses of a revenue nature on the disposal of property, plant & equipment and other non current assets<br />
including investments have been accounted for in the income statement, having deducted from proceeds on disposal,<br />
the carrying amount of the assets and related selling expenses. On disposal of revalued property, plant and equipment,<br />
amount remaining in Revaluation Reserve relating to that asset is transferred directly to Accumulated Profit / (Loss).<br />
Gains and losses arising from incidental activities to main revenue generating activities and those arising from a group<br />
of similar transactions which are not material, are aggregated, reported and presented on a net basis.<br />
Expenditure Recognition<br />
a) Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and<br />
the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the<br />
property, plant & equipment in a state of efficiency has been charged to income in arriving at the Profit/ (Loss) for the<br />
year.<br />
b) For the purpose of presentation of the Income Statement the directors are of the opinion that function of expenses<br />
method presents fairly the elements of the Company’s performance, and hence such presentation method is adopted.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
37
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
2.3.19 Effect of Sri Lanka Accounting Standards issued but not yet effective:<br />
a) The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka.<br />
- Sri Lanka Accounting Standard 44 Financial Instruments; Presentation (SLAS 44)<br />
- Sri Lanka Accounting Standard 45 Financial Instruments; Recognition and Measurement (SLAS 45)<br />
- Sri Lanka Accounting Standard 39 Share Based Payments (SLAS 39)<br />
The effective date of SLAS 44, 45 and 39 was changed during the year to be effective for financial periods beginning on<br />
or after 01 January 2012. These three standards have been amended and forms a part of the new set of financial<br />
reporting standards mentioned under note (b) below.<br />
b) Following the convergence of Sri Lanka Accounting Standards with the International Financial <strong>Report</strong>ing Standards, the<br />
Council of the Institute of Chartered Accountants of Sri Lanka has adopted a new set of financial reporting standards<br />
that would apply for financial periods beginning on or after 01 January 2012. The application of these financial reporting<br />
standards is substantially different to the prevailing standards.<br />
3. LEASEHOLD PROPERTY<br />
Although leases of all JEDB/SLSPC estates handed over to the company have not been executed todate, leases have been<br />
executed for Fernlands,Harrow, New Peacook, Nayapana, North Meddakumbura, Sheen, Talgaswella, Igallkanda, Gallinda,<br />
<strong>Elpitiya</strong>, Katandola, Lelwela, Diviturai, Gulugahakanda and Habarakada Estates. Leases remains to be executed for Nagoda and<br />
Mapalagama estates. All of these leases will be retroactive on 22 June, 1992, the date of formation of the Company. The<br />
leasehold right to the land on all of these estates have been taken into the books of the Company on June 22, 1992 immediately<br />
after formation of the Company, in terms of the ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of<br />
Chartered Accountants of Sri Lanka. For this purpose the Board decided at its meeting on 8 March 1995 that this bare land would<br />
be revalued at the value established for this land by valuation specialist, D.R. Wickramasinghe just prior to the formation of the<br />
company. The value taken into the 22 June 1992, Balance Sheet and the amortisation of the leasehold rights to 31 March 20<strong>11</strong><br />
are as follows.<br />
The above mentioned leasehold right to bare land comprising of land use rights obtained on a long term basis is re-classified as<br />
leasehold property and stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard 19<br />
Leases, in line with revised Ruling of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka. Such<br />
carrying amounts are amortized over the remaining lease term or useful life of the leased property whichever is shorter. The<br />
leasehold right to land is disclosed under non current assets under leasehold property. The revised UITF ruling does not permit<br />
further revaluation of Leasehold Property. The values taken into the 22 June 1992 balance sheet and amortization of the leasehold<br />
property up to 31 March 20<strong>11</strong> are as follows.<br />
Accumulated<br />
accumulated<br />
Revaluation Balance Amortization Amortisation Amortization Written Down Written Down<br />
as at as at as at for the as at Value as at Value as at<br />
22.06.92 Disposals 01.04.<strong>2010</strong> 01.04.<strong>2010</strong> year 31.03.20<strong>11</strong> 31.03.20<strong>11</strong> 31.03.<strong>2010</strong><br />
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.<br />
Leasehold property 280,058,758 (938,279) 279,120,479 93,667,531 5,266,424 98,933,955 180,186,524 185,452,948<br />
280,058,758 (938,279) 279,120,479 93,667,531 5,266,424 98,933,955 180,186,524 185,452,948<br />
The leasehold rights to bare land are being amortised by equal amounts over 53 year period.<br />
38<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
4. IMMOVABLE ESTATE ASSETS ON FINANCE LEASE (OTHER THAN LEASEHOLD PROPERTY)<br />
As morefully explained in Note 3 all JEDB/SLSPC estates leases have been executed as at the Balance Sheet date, in terms of the ruling<br />
of the UITF of Institute of Chartered Accountants of Sri Lanka all immovable assets in these estates under finance leases have been taken<br />
into the books of the Company retroactive to 22 June 1992. For this purpose the Board decided at its meeting on March 8, 1995 that<br />
these assets would be taken at their book values as they appear in the books of the JEDB/SLSPC,on the day immediately preceding<br />
the date of formation of the Company. These assets are taken into the 22 June 1992 Balance Sheet and amortised as follows:<br />
Immature Improvement Other Vested Unimproved Mature Plant &<br />
<strong>Plantations</strong> to Land Assets lands <strong>Plantations</strong> Buildings Machinery Total<br />
Rs. Rs. Rs. Rs Rs. Rs. Rs. Rs.<br />
Revaluation as at 22.06.1992 283,368,199 4,214,618 4,028,217 1,564,267 95,362,391 73,002,143 47,785,047 509,324,882<br />
Transferred to mature (283,368,199) - - - 283,368,199 - - -<br />
- 4,214,618 4,028,217 1,564,267 378,730,590 73,002,143 47,785,047 509,324,882<br />
Acquired by Government 2002/2003 - - - - (1,389,400) (3,390,250) - (4,779,650)<br />
Balance as at 31.03.20<strong>11</strong> - 4,214,618 4,028,217 1,564,267 377,341,190 69,6<strong>11</strong>,893 47,785,047 504,545,232<br />
Accumulated amortisation as at 01.04.<strong>2010</strong> - 1,799,019 1,353,644 391,070 185,242,613 49,793,766 47,785,047 286,365,157<br />
Amortisation during the year - 79,521 76,004 29,514 12,578,040 2,784,476 - 15,547,557<br />
Accumulated amortisation as at 31.03.20<strong>11</strong> - 1,878,540 1,429,648 420,584 197,820,653 52,578,242 47,785,047 301,912,714<br />
Written down value as at 31.03.20<strong>11</strong> - 2,336,078 2,598,569 1,143,683 179,520,537 17,033,651 - 202,632,518<br />
Written down value as at 31.03.<strong>2010</strong> - 2,415,599 2,674,573 1,173,197 192,098,577 19,818,127 - 218,180,073<br />
These assets are being amortised in equal annual amounts over the following periods:<br />
Mature plantations<br />
Buildings<br />
Machinery<br />
Other vested assets/ Unimproved land<br />
30 years<br />
25 years<br />
15 years<br />
53 Years<br />
Investment in plantation assets which were immature at the time of handing over to the company by way of estate leases are shown<br />
under immature plantation (revalued as at 22nd June 1992). Further, investment in such immature plantation to bring them to maturity<br />
are shown under Note No 6. When these plantations become mature the additional investment to bring them to maturity will be moved<br />
from the category immature plantations to mature plantations under Note 6 and a corresponding move from immature plantations to<br />
mature plantations will be made in the above note.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
39
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
5. TANGIBLE ASSETS Balance Additions Disposals Balance<br />
OTHER THAN IMMATURE/MATURE as at for the during the as at<br />
PLANTATIONS 31.03.<strong>2010</strong> year Year 31.03.20<strong>11</strong><br />
Rs. Rs. Rs. Rs.<br />
Cost<br />
Buildings 19,974,422 - - 19,974,422<br />
Motor Vehicles 61,386,516 775,000 - 62,161,516<br />
Plant & Machinery 120,286,288 19,808,142 - 140,094,430<br />
Furniture & Fittings 10,230,013 593,956 - 10,823,969<br />
Equipment 47,257,494 5,352,179 - 52,609,673<br />
Water Sanitation 202,951,568 29,505,564 - 232,457,132<br />
462,086,301 56,034,841 - 518,121,142<br />
Assets on Sheen Mini Hydro Project<br />
Plant & Machinery 57,453,147 291,282 - 57,744,429<br />
Equipment 4,098,854 48,600 - 4,147,454<br />
Motor Vehicles 99,889 - - 99,889<br />
Civil Construction & Others 81,380,332 - - 81,380,332<br />
143,032,222 339,882 - 143,372,104<br />
Assets Acquired on Finance Lease<br />
Motor Vehicles 19,359,784 10,800,000 - 30,159,784<br />
Plant & Machinery 73,280,594 - - 73,280,594<br />
92,640,378 10,800,000 - 103,440,378<br />
697,758,901 67,174,723 - 764,933,624<br />
Balance charge Accumulated Balance<br />
as at for the depreciation as at<br />
31.03.<strong>2010</strong> Year on disposals 31.03.20<strong>11</strong><br />
Rs. Rs. Rs. Rs.<br />
Depreciation<br />
Buildings 3,979,487 503,530 - 4,483,017<br />
Motor Vehicles 60,102,672 729,457 - 60,832,129<br />
Plant & Machinery 81,4<strong>11</strong>,893 8,245,438 - 89,657,331<br />
Furniture & Fittings 5,985,626 577,131 - 6,562,757<br />
Equipment 27,554,895 3,861,642 - 31,416,537<br />
Water Sanitation 45,367,639 <strong>11</strong>,257,220 - 56,624,859<br />
224,402,212 25,174,418 - 249,576,630<br />
Assets on Sheen Mini Hydro Project<br />
Plant & Machinery 6,041,219 4,314,448 - 10,355,667<br />
Equipment 721,949 513,829 - 1,235,778<br />
Motor Vehicles 19,978 19,978 - 39,956<br />
Civil Construction & Others 2,034,508 2,034,508 - 4,069,016<br />
8,817,654 6,882,763 - 15,700,417<br />
Assets Acquired on Finance Lease<br />
Motor Vehicles 9,154,992 4,4<strong>11</strong>,957 - 13,566,949<br />
Plant & Machinery 22,249,688 5,496,045 - 27,745,733<br />
31,404,680 9,908,002 - 41,312,682<br />
264,624,546 41,965,183 - 306,589,729<br />
Written Down Value 433,134,355 458,343,895<br />
Balance Additions Capitalised Balance<br />
as at for the during the as at<br />
31.03.<strong>2010</strong> Year Year 31.03.20<strong>11</strong><br />
Rs. Rs. Rs. Rs.<br />
Capital Work-in-Progress 25,479,762 941,<strong>11</strong>7 (24,825,005) 1,595,874<br />
TOTAL WRITTEN DOWN VALUE 458,614,<strong>11</strong>7 459,939,769<br />
The assets shown above are those movable assets vested in the Company by gazette notification at the date of formation of the<br />
company (22 June 1992) and all investments in tangible assets by the company since its formation. The assets taken over by way of<br />
estate leases are set out in Notes 3 & 4.<br />
Further, the valuation of immovable JEDB / SLSPC estate assets on finance lease (other than leasehold property) and tangible<br />
assets other than immature / mature plantations taken over as at 22 June 1992 is based on net book values obtained from the state<br />
plantations corporation and Janatha Estate Development Board as at such date. These values were not made available to us by<br />
individual asset.<br />
40<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
6. IMMATURE/MATURE PLANTATIONS Immature Mature<br />
<strong>Plantations</strong> <strong>Plantations</strong> total<br />
Rs. Rs. Rs.<br />
Cost<br />
At the beginning of the year 1,<strong>11</strong>5,853,637 1,024,697,928 2,140,551,565<br />
Additions 175,700,796 - 175,700,796<br />
Transfers (362,798,305) 362,798,305 -<br />
At the end of the year 928,756,128 1,387,496,233 2,316,252,361<br />
Depreciation<br />
At the beginning of the year - 169,458,890 169,458,890<br />
Charge for the year - 41,029,844 41,029,844<br />
At the end of the year - 210,488,734 210,488,734<br />
Written Down Value - as at 31.03.20<strong>11</strong> 928,756,128 1,177,007,499 2,105,763,627<br />
Written Down Value - as at 31.03.<strong>2010</strong> 1,<strong>11</strong>5,853,637 855,239,045 1,971,092,682<br />
These are investments in immature/ mature plantations since the formation of the Company. The assets (including plantation<br />
assets) taken over by way of estate leases are set out in Notes 3 and 4. Further investment in immature plantations taken over by<br />
way of these leases are shown in the above note. When such plantations become mature, the additional investments since take<br />
over to bring them to maturity, will be moved from immature to mature under this note. Borrowing costs amounting to<br />
Rs. 31,131,878/= (<strong>2010</strong> - Rs. 97,507,174/=) incurred on borrowings obtained to meet expenses relating to immature plantations<br />
have been capitalised as part of the cost of the immature plantations.<br />
7. LONG TERM INVESTMENTS 20<strong>11</strong> <strong>2010</strong><br />
Rs<br />
Rs.<br />
AEN Palm Oil Processing (Pvt) Ltd. (7.1) 97,776,414 77,276,400<br />
Tea Country Home (Pvt) Ltd. 10 10<br />
Water Villas (Pvt) Ltd. 10 10<br />
EPP Hydro Power (Pvt) Ltd. 10 -<br />
97,776,444 77,276,420<br />
7.1 AEN PALM OIL PROCESSING (PVT) LTD<br />
Balance B/F 77,276,400 46,8<strong>11</strong>,727<br />
Gross Dividend (14,207,983) (8,357,637)<br />
Share of Profit/ (Loss) of Joint venture 34,707,997 38,822,310<br />
Total Carrying Value of Investment 97,776,414 77,276,400<br />
The above investment represents the amount invested in AEN Palm Oil Processing (Pvt) Ltd. which is a joint venture company<br />
established with Namunukula <strong>Plantations</strong> PLC and Agalawatta <strong>Plantations</strong> PLC.<br />
7.2 Company’s investment in <strong>Elpitiya</strong> Lifestyle Solutions (Pvt) Ltd recorded at Zero value due to losses of that Company.<br />
8. INVENTORIES 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Growing Crop - Nurseries 15,387,382 16,514,478<br />
Produce <strong>Stock</strong> 289,377,545 158,345,882<br />
Consumables & Spares 21,704,562 15,176,283<br />
326,469,489 190,036,643<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
41
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
9. TRADE AND OTHER RECEIVABLES 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Produce debtors 80,658,710 73,214,543<br />
Advances & Prepayments 18,546,931 22,126,476<br />
Employee Related Debtors 21,497,595 21,544,294<br />
Other debtors 31,978,653 21,278,251<br />
VAT Recoverable 3,049,649 3,504,949<br />
155,731,538 141,668,513<br />
Provision for doubtful debtors (1,595,760) (1,595,760)<br />
154,135,778 140,072,753<br />
10. AMOUNT DUE FROM RELATED COMPANIES Relationship 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
<strong>Elpitiya</strong> Tea Farmers (Pvt) Ltd. Related Company 70,910 70,910<br />
AEN Palm Oil Processing (Pvt ) Ltd. Related Company 4,684,996 3,949,905<br />
<strong>Elpitiya</strong> Lifestyle Solutions (Pvt) Ltd. - Current Account 10.1 Related Company 7,803,986 29,043,062<br />
<strong>Elpitiya</strong> Lifestyle Solutions (Pvt) Ltd. - Loan Related Company 17,381,213 17,762,909<br />
Dunsinane Power Company (Pvt) Ltd. Related Company 225,562 213,562<br />
New Peacock Cottages (Pvt)Ltd. Related Company 168,006 168,006<br />
Water Villas (Pvt) Ltd. Related Company 3,850,<strong>11</strong>2 3,750,040<br />
Meddecombra Power Co. (Pvt) Ltd. Related Company 637,597 637,597<br />
EPP Hydro Power (Pvt) Ltd. Related Company 4,906,312 -<br />
Tea Country Homes (Private) Ltd. Related Company 5,413,444 5,142,144<br />
45,142,138 60,738,135<br />
Less:Provision for Doubtful Receivables (18,805,603) (5,805,603)<br />
26,336,535 54,932,532<br />
10.1 <strong>Elpitiya</strong> Lifestyle Solutions (Pvt) Ltd. - Current Account<br />
Recoverable After one year (Note) 40,000,000 -<br />
Recoverable Within one year 7,803,986 29,043,062<br />
47,803,986 29,043,062<br />
Note:- The above balance represents interest free loan given to <strong>Elpitiya</strong> Lifestyle Solutions (Pvt) Ltd. Payment will commence<br />
after a grace period of 03 years.<br />
<strong>11</strong>. STATED CAPITAL 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Issued and Fully Paid Number of Shares<br />
Beginning of the year 36,433,215 36,433,215<br />
Share Sub Division During the year 36,433,215 -<br />
Ordinary Shares Including Two golden share held by the Treasury which 72,866,430 36,433,215<br />
has Special rights<br />
Value of Issued and Fully Paid Shares<br />
B/F Ordinary Shares Including one golden share held by the Treasury which 694,236,120 350,000,010<br />
has Special rights<br />
Right Shares Issued during the year - 344,236,<strong>11</strong>0<br />
694,236,120 694,236,120<br />
Stated Capital represents the amount paid to the company in respect of issuing 72,866,430 ordinary shares including Two<br />
Golden shares which has special rights. During the year, Company has sub divided every one (1) existing issued and fully paid<br />
ordinary share into two (2) issued and fully paid ordinary shares.<br />
42<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
12. INTEREST BEARING LOANS AND BORROWINGS<br />
12.1. Long Term Loans<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
20<strong>11</strong> 20<strong>11</strong> <strong>2010</strong> <strong>2010</strong><br />
Repayable Repayable Repayable Repayable Repayable Repayable<br />
within after 1 year Less after 20<strong>11</strong> within after 1 year Less after <strong>2010</strong><br />
1 year than 05 years 05 years total 1 year than 05 years 05 years total<br />
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.<br />
(ADB Loans through DFCC) 38,122,501 67,690,<strong>11</strong>8 - 105,812,619 39,566,736 108,249,253 1,163,390 148,979,379<br />
12.2. Term Loans 41,069,463 171,210,<strong>11</strong>8 44,608,475 256,888,056 76,675,097 138,732,182 48,983,722 264,391,001<br />
12.3. Short Term Loans 75,826,000 - - 75,826,000 104,035,576 - - 104,035,576<br />
12.4 Tea Securitising Loan 108,600,000 458,900,000 - 567,500,000 43,800,000 461,400,000 108,900,000 614,100,000<br />
12.5. Finance leases 6,075,721 13,870,749 - 19,946,470 10,335,061 10,727,912 515,092 21,578,065<br />
12.6 Guaranteed Redeemable Debentures - 75,000,000 - 75,000,000 - 75,000,000 - 75,000,000<br />
Bank Overdraft 38,610,858 - - 38,610,858 38,392,941 - - 38,392,941<br />
308,304,543 786,670,985 44,608,475 1,139,584,003 312,805,4<strong>11</strong> 794,109,347 159,562,204 1,266,476,962<br />
831,279,460 953,671,551<br />
12.1 Long Term Loans 20<strong>11</strong> 20<strong>11</strong> 20<strong>11</strong> Rate of terms of<br />
ADB Loans (Through DFCC)<br />
Repayable Repayable Repayable total total Interest Repayment<br />
within after 1 year Less after 05 years as At as At<br />
1 year than 05 years 31.03.20<strong>11</strong> 31.03.<strong>2010</strong><br />
Rs. Rs. Rs. Rs. Rs.<br />
Loan - 1 15,848,100 22,914,474 - 38,762,574 54,610,674 (I)<br />
Loan - 2 10,054,752 27,650,637 - 37,705,389 47,760,141 (II)<br />
Loan - 3 933,372 1,0<strong>11</strong>,081 - 1,944,453 2,877,825 (III)<br />
Loan - 5 - - - - 1,714,284 (IV)<br />
Loan - 6 208,333 - - 208,333 2,708,329 (V)<br />
Loan - 7 94,392 - - 94,392 1,227,096<br />
(DFCC Vardana) 10,983,552 16,<strong>11</strong>3,926 - 27,097,478 38,081,030 (VI)<br />
12.2 Term Loans<br />
38,122,501 67,690,<strong>11</strong>8 - 105,812,619 148,979,379<br />
H.N.B (66061001) - - - - 7,750,000 (VII)<br />
H.N.B (6606<strong>11</strong>01) - - - - 6,930,000 (VIII)<br />
H.N.B-(E friends Loan) 2,000,004 2,333,318 - 4,333,322 6,333,326 (IX)<br />
Seylan Bank 6,478,571 51,828,572 32,392,857 90,700,000 90,700,000 (X)<br />
Bank of Ceylon - - - - 52,212,121 (XI)<br />
NDB (0920500305) 6,915,888 47,423,228 12,215,618 66,554,734 61,965,554 (XII)<br />
Sampath Bank-Marketing - - - - 10,000,000 (XIII)<br />
Sampath Bank (39365000406) - - - - 28,500,000 (XIV)<br />
HNB - 40045642 16,300,000 4,000,000 - 20,300,000 - (XV)<br />
NTB Loan 9,375,000 65,625,000 - 75,000,000 - (XVI)<br />
41,069,463 171,210,<strong>11</strong>8 44,608,475 256,888,056 264,391,001<br />
120 equal monthly installments<br />
commencing from 30.09.2003<br />
120 equal monthly installments<br />
commencing from 13.12.2004<br />
96 equal monthly installments<br />
commencing from 13.04.2005<br />
48 equal monthly installments<br />
commencing from 30.09.2002<br />
84 equal monthly installments<br />
commencing from 13.04.2004<br />
84 equal monthly installments<br />
commencing from 13.04.2004<br />
78 equal monthly installments<br />
commencing from 20.12.2006<br />
36monthly installement of Rs 750,000<br />
33monthly installement of Rs 695,000<br />
and final installement of Rs 675,000<br />
60monthly installement of Rs 166,000<br />
83 equal Monthly installments<br />
commencing from September 20<strong>11</strong><br />
24 monthly installements<br />
83 equal Monthly installments<br />
commencing from September 20<strong>11</strong><br />
59 monthly installment of Rs 166,670/-<br />
and final instalment of Rs 166,470 /-<br />
60 monthly installement of Rs 500,000/-<br />
17 monthly installment of Rs 1.4 Mn. Each<br />
and final instalment of Rs 1.2 Mn. Plus Interest<br />
48 monthly installment of Rs 1,562,500/-<br />
commencing from september 20<strong>11</strong>.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
43
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
12.3 Short Term Loans 20<strong>11</strong> 20<strong>11</strong> 20<strong>11</strong> Rate of terms of<br />
Repayable Repayable Repayable total total Interest Repayment<br />
within after 1 year Less after 05 years as At as At<br />
1 year than 05 years 31.03.20<strong>11</strong> 31.03.<strong>2010</strong><br />
Rs. Rs. Rs. Rs. Rs.<br />
HNB Money Market Loan 75,000,000 - - 75,000,000 100,000,000 (XVII)<br />
Marketing Development Tempory Loan 826,000 - - 826,000 4,035,576 (XVIII)<br />
75,826,000 - - 75,826,000 104,035,576<br />
Payable within 03 months<br />
Payable within 03 months<br />
12.4 Tea Securitising Loans<br />
National Development Bank 19,400,000 - - 19,400,000 49,100,000<br />
National Development Bank 17,000,000 28,500,000 - 45,500,000 50,000,000 (XIX)<br />
National Development Bank 28,200,000 78,200,000 - 106,400,000 <strong>11</strong>5,000,000 (XX)<br />
National Development Bank 19,000,000 129,000,000 - 148,000,000 150,000,000 (XXI)<br />
State Bank of India-through NDB 25,000,000 223,200,000 - 248,200,000 250,000,000 (XXII)<br />
108,600,000 458,900,000 - 567,500,000 614,100,000<br />
12.5 Finance Leases<br />
Gross Liability 9,415,897 17,734,068 - 27,149,965 27,873,881<br />
Less: Finance charges (3,340,176) (3,863,319) - (7,203,495) (6,295,816)<br />
allocated to future periods<br />
Net liability 6,075,721 13,870,749 - 19,946,470 21,578,065<br />
12.6 Guaranteed Redeemable Debentures (Rs.75,000,000/-)<br />
The above balance represents 03 Guaranteed Redeemable Debenture, for the value of Rs. 25,000,000/- each at the par value of Rs.<br />
25,000,000/- each (principal sum) payable to <strong>Plantations</strong> Trust Fund. The rate of interest will be 13.08% per annum is payable semi-annually on<br />
or before 30 June and 31 December until the said debenture shall have been redeemed on 04 December 2012. Debentures shall mandatorily<br />
be converted to ordinary shares if Company fails to adhere to the conditions stated in the debenture invested agreement.<br />
(I)<br />
(II)<br />
(III)<br />
(IV)<br />
(V)<br />
(VI)<br />
(VII)<br />
(VIII)<br />
15.75% per annum. 4% reduction on timely payments.<br />
17.6% per annum. 4% reduction on timely payments.<br />
18.33% p.a 4% reduction on timely payments<br />
18 % per annum. 4% reduction on timely payments.<br />
18% per annum, 4%, reduction on timely payments.<br />
AWPR+ 2 per annum<br />
AWPLR + 3% (reviewed monthly)<br />
AWPLR + 3% (reviewed monthly)<br />
(XV)<br />
(XVI)<br />
(XVII)<br />
(XVIII)<br />
(XIX)<br />
(XX)<br />
(XXI)<br />
(XXII)<br />
Short term money market rate.<br />
AWPLR-0.2T% per centum per annum<br />
Short term money market rate.<br />
18% per annum.<br />
18.43% per annum.<br />
AWPLR + 1.95% per annum.<br />
AWPLR of 1.75% per annum.<br />
AWPLR + 2.25% per annum.<br />
(IX)<br />
6.5% {untill refinance funds are received at AWPLR+3% (reviewed monthly)}<br />
(X)<br />
16% per annum.<br />
(XI)<br />
AWPLR + 2.5% with a floor rate of 21.0% p.a<br />
(XII)<br />
16.44% per annum.<br />
(XIII)<br />
AWPLR +2.0% with a floor rate of 16% p.a<br />
(XIV)<br />
AWPLR +2.0% with a floor rate of 19% p.a<br />
44<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
13. RETIRING BENEFIT OBLIGATIONS 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
At the beginning of the year 448,410,122 326,727,983<br />
Provisions for the year 78,468,529 172,695,485<br />
Payments for the year (62,723,984) (51,013,346)<br />
At the end of the year 464,154,667 448,410,122<br />
The actuarial valuation had been carried out as at 31 March <strong>2010</strong> and updated as at 31 march 20<strong>11</strong> which amounts to Rs. 464,154,667/=.<br />
The provision made in the current year, comprised with current service cost and interest cost amounting to Rs. 22,973660/- and<br />
Rs. 54,209,134/-.<br />
14. DEFERRED INCOME 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
14.1 Deferred Grants and Subsidies 156,951,693 128,301,074<br />
14.2 Sub Lease Income 49,759,970 58,215,852<br />
206,7<strong>11</strong>,663 186,516,926<br />
14.1 Deferred Grants and Subsidies<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
At the beginning of the year 128,301,074 93,793,612<br />
Add : Grants received for the year - Monitory 38,854,140 42,046,975<br />
Less : Amortisation for the year (10,203,521) (7,539,513)<br />
At the end of the year 156,951,693 128,301,074<br />
The Company has received funding from the Plantation Housing and Social Welfare Trust and Asian Development Bank for the<br />
development of workers facilities such as re-roofing of line rooms, latrines, water supply and sanitation etc. The amounts spent are<br />
included under the relevant classification of Property, Plant & Equipment and the grant component is reflected under Deferred Grants<br />
and Subsidies. Further this includes the C.T.C. Machinery Subsidy which represents the funds received from Sri Lanka Tea Board in<br />
relation to C.T.C. Project.<br />
14.2 Sub Lease Income 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
At the beginning of the year 58,215,852 55,382,302<br />
Add: Cash received for the year 1,292,901 13,839,091<br />
Less : Amortisation for the year (9,748,782) (<strong>11</strong>,005,541)<br />
At the end of the year 49,759,970 58,215,852<br />
15. NET LIABILITY TO THE LESSOR OF SLSPC / JEDB ESTATES 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Repayable after 5 years<br />
Gross liability 302,182,594 312,492,594<br />
Less : finance charges (126,654,359) (133,816,159)<br />
Net liability 175,528,235 178,676,435<br />
Repayable after1 year less than 5 years<br />
Gross liability 41,240,000 41,240,000<br />
Less : finance charges (29,355,258) (29,812,363)<br />
Net liability <strong>11</strong>,884,742 <strong>11</strong>,427,637<br />
Repayable after1 year 187,412,977 190,104,072<br />
Repayable within1 year<br />
Gross liability 10,310,000 10,310,000<br />
Less : finance charges (7,618,905) (7,722,408)<br />
Net liability 2,691,095 2,587,592<br />
Total 190,104,072 192,691,664<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
45
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
The lease of the estates have been amended, with effect from 22nd June, 1996 to an amount substantially higher than the previous lease<br />
rental of Rs. 500/- per estate per annum. The first rental payable under the revised basis is Rs. 10.31 million from 22nd June 1996 to 21 June<br />
1997. This amount is to be inflated annually by the Gross Domestic Product (GDP) deflator, and is in the form of a contingent rental. The GDP<br />
deflator used for the current year is 5.7%.<br />
16. TRADE AND OTHER PAYABLES 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Trade creditors 80,050,421 68,727,198<br />
Employee related creditors 93,168,097 67,997,768<br />
Others 105,208,172 <strong>11</strong>0,036,151<br />
278,426,690 246,761,<strong>11</strong>7<br />
17. AMOUNTS DUE TO RELATED COMPANIES Relationship 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Aitken Spence Plantation Managements Ltd. - Current Account Parent Company 22,084,413 63,939,223<br />
- Interest Free Loan Parent Company - 200,000,000<br />
Aitken Spence & Co. PLC (Other Expenditure) Related Company 2,434,354 27,189,134<br />
Aitken Spence & Co. PLC (Short Term Loan) Related Company - 8,000,000<br />
Aitken Spence & Co. PLC (Interest Payable) Related Company - 26,736,353<br />
24,518,767 325,864,710<br />
18. REVENUE 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Sale of Produce<br />
Tea 1,900,250,656 1,766,738,751<br />
Rubber 490,051,378 254,683,950<br />
Coconut 633,717 737,093<br />
Oil Palm & Other Crops 210,565,278 192,966,298<br />
2,601,501,029 2,215,126,092<br />
46<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
18a Segment Information<br />
Industry Tea Rubber Coconut Oil Palm & Other crop Total<br />
20<strong>11</strong> <strong>2010</strong> 20<strong>11</strong> <strong>2010</strong> 20<strong>11</strong> <strong>2010</strong> 20<strong>11</strong> <strong>2010</strong> 20<strong>11</strong> <strong>2010</strong><br />
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.<br />
Revenue 1,900,250,656 1,766,738,751 490,051,378 254,683,950 633,717 737,093 210,565,278 192,966,298 2,601,501,029 2,215,126,092<br />
Revenue Expenditure (1,577,239,232) (1,529,612,239) (181,565,532) (134,967,976) 827,968 1,013,389 (66,814,856) (49,437,107) (1,824,791,652) (1,713,003,933)<br />
Depreciation / Amortization (60,816,994) (52,027,061) (23,802,595) (20,029,686) (772,740) (650,685) (18,416,690) (15,507,754) (103,809,019) (88,215,186)<br />
Gratuity (45,971,151) (101,851,381) (17,992,219) (39,2<strong>11</strong>,348) (584,109) (1,273,820) (13,921,050) (30,358,935) (78,468,529) (172,695,484)<br />
Segment Results 216,223,279 83,248,070 266,691,032 60,474,940 104,836 (174,023) <strong>11</strong>1,412,683 97,662,502 594,431,830 241,2<strong>11</strong>,489<br />
Other Income 99,055,529 81,097,740<br />
Unallocated Expenses (159,319,697) (143,037,064)<br />
Management Fees & workers profit share (40,059,177) (10,202,236)<br />
Finance cost (144,583,738) (144,075,445)<br />
Income tax Expence (20,728,587) -<br />
Share of Profit/ (Loss) of Joint Ventures 34,707,997 38,822,310<br />
Profit/ (Loss) for the year 363,504,155 63,816,794<br />
18b Segment Assets<br />
non Current Assets<br />
Cost 2,253,030,799 2,058,758,510 881,792,659 792,366,805 28,626,975 613,042,418 682,266,047 102,998,862 3,845,716,480 3,567,166,595<br />
Accumulated Depreciation / Amortization (528,432,109) (467,<strong>11</strong>3,031) (206,818,102) (179,831,941) (6,714,250) (139,232,812) (160,020,576) (5,842,023) (901,985,037) (792,019,807)<br />
1,724,598,690 1,591,645,480 674,974,557 612,534,864 21,912,725 473,809,606 522,245,471 97,156,839 2,943,731,443 2,775,146,788<br />
Current Assets 260,913,849 <strong>11</strong>2,078,753 58,699,075 43,148,742 276,107 33,407,417 6,580,458 1,401,731 326,469,490 190,036,643<br />
1,985,512,539 1,703,724,232 733,673,632 655,683,606 22,188,832 507,217,023 528,825,929 98,558,570 3,270,200,933 2,965,183,431<br />
Unallocated<br />
Non Current Assets<br />
Cost 160,522,593 157,565,761<br />
Accumulated Depreciation / Amortization (17,955,154) (22,096,309)<br />
142,567,439 135,469,452<br />
Current Assets 254,015,924 584,065,510<br />
396,583,363 719,534,962<br />
Total Non Current Assets 3,086,298,882 2,910,616,240<br />
Total Current Assets 580,485,414 774,102,153<br />
Total Assets 3,666,784,296 3,684,718,393<br />
18c Segment Liabilities<br />
non Current Liabilities 271,927,160 264,460,824 106,427,029 101,813,694 3,455,102 3,307,521 82,345,376 78,828,082 464,154,667 448,410,121<br />
271,927,160 264,460,824 106,427,029 101,813,694 3,455,102 3,307,521 82,345,376 78,828,082 464,154,667 448,410,121<br />
Current Liabilities 359,680,232 523,730,799 140,771,883 201,628,985 4,570,091 6,550,122 108,918,889 156,108,924 613,941,095 888,018,830<br />
Unallocated<br />
Non Current Liabilities 1,225,404,100 1,330,292,550<br />
Total Non Current Liabilities 1,689,558,767 1,778,702,671<br />
Capital and Reserve 1,363,284,434 1,017,996,892<br />
Total Equity and Liabilities 3,666,784,296 3,684,718,393<br />
18d Segment Capital Expenditure<br />
Cost 20,339,876 27,573,393 84,106,8<strong>11</strong> 97,686,646 - - <strong>11</strong>4,544,954 136,884,104 218,991,641 262,144,143<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
47
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
19. OTHER INCOME AND GAINS 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Profit from Refuse Tea Project 20,297,829 19,563,<strong>11</strong>7<br />
Profit on Hydro Power Project - Sheen MHP 42,484,013 33,566,601<br />
Amortisation of Capital Grants 10,203,521 7,539,513<br />
Income from Sub Lease 9,980,041 <strong>11</strong>,638,929<br />
Interest Income 905,062 865,949<br />
Sundry Income from Ceylon Choice Operations 713,460 -<br />
Others 14,471,603 7,923,631<br />
99,055,529 81,097,740<br />
20. FINANCE COST 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Overdraft Interest 8,172,375 25,281,629<br />
Term Loan Interest 123,522,295 176,631,810<br />
Interest on Government Lease 7,722,408 7,821,931<br />
Variable Lease Rental 30,271,138 5,073,428<br />
Lease Interest 4,249,886 5,938,293<br />
Interest Paid to related Companies 59,178 20,687,713<br />
Exchange Loss 1,718,336 147,815<br />
175,715,616 241,582,619<br />
Amount Capitalised (31,131,878) (97,507,174)<br />
144,583,738 144,075,445<br />
21. PROFIT BEFORE TAXATION IS STATED AFTER CHARGING 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Auditors fees 1,340,000 1,217,000<br />
Depreciation/Amortisation 103,809,009 88,215,186<br />
Defined Benefit Plan Costs 78,468,529 172,695,485<br />
Defined Contributions Plan Costs - EPF & ETF 101,064,241 108,636,657<br />
Others - Staff Costs (Including Estate Employees) 900,463,199 736,803,732<br />
Director fees 1,050,000 1,019,000<br />
Donations 25,000 235,988<br />
22. INCOME TAX EXPENSE<br />
The Company is liable for income tax at the rate of 35% on its profit from manufacture & exempt on profit from agriculture. The carried<br />
forward tax losses of the Company as at 31 March 20<strong>11</strong>, amounts to Rs.1,315,351,044/- (provisional) 2009/<strong>2010</strong> Rs.1,337,847,971/-).<br />
Current Tax Expense 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Current Income Tax Expense 20,728,587 -<br />
20,728,587 -<br />
48<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
22.1 Reconciliation between Current Tax (Expense) / Income and the product of<br />
Accounting Profit Multiplied by the Statutory Tax rate of (35%) as follows. 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Accounting Profit / (Loss) before Tax and Joint Venture Profit 349,524,746 24,994,484<br />
Tax effect on Accounting Profit / (Loss) 122,333,661 8,748,069<br />
Tax effect on Aggregate Disallowed items 87,769,072 96,934,759<br />
Tax effect on Aggregate Allowable items (<strong>11</strong>5,479,601) (142,531,534)<br />
Business Profit / (Loss) 94,623,131 (36,848,706)<br />
Tax effect on interest income 316,772 -<br />
Tax effect on exempt Income - Agriculture (64,343,729) -<br />
Tax Losses Brought Forward & Utilized (10,708,661) -<br />
19,887,513 -<br />
SRL 298,313 -<br />
Business Profit/(Loss) 20,185,825 -<br />
Last Year Under/(over) Provision 257,185 -<br />
ESC Setoff 285,577 -<br />
20,728,587 -<br />
Provided in the accounts 20,728,587 -<br />
23. EARNINGS PER SHARE<br />
The calculation of the basic earnings per share has been done based on profit after tax for the year divided by the weighted average<br />
number of ordinary shares outstanding during the year.<br />
The following reflects the income and share data used in the basic earnings per share computations.<br />
20<strong>11</strong> <strong>2010</strong><br />
RS.<br />
Rs.<br />
Amount used as the numerator<br />
Net profit /(loss) for the year<br />
363,504,155 63,816,794<br />
Amount used as the denominator<br />
Weighted average number of ordinary shares outstanding during the year 72,866,430 51,829,778<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
49
24. SECURITIES PLEDGED<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Following assets have been pledged as security for liabilities.<br />
Name of Bank Loan Security nature of Liability carrying Amount Pledged<br />
Facility 20<strong>11</strong> <strong>2010</strong><br />
Rs. Rs. Rs.<br />
Bank of Ceylon 125,000,000 Primary mortgage over estate produce consisting of Tea, Rubber, Oilpalm, Coffee, Overdraft 53,797,091 57,572,458<br />
Coconuts, Clove & Paddy on estate.<br />
Primary floating mortgage bond for Rs. 25 Mn. over stock of estate produce consisting<br />
of Tea, Rubber, Oil Palm and Coconut stored at Dunsinane, Sheen, Fernlands and<br />
Medecombra Estates at Pundaluoya.<br />
Hatton National Bank 50,000,000 Primary floating mortgage bond for Rs. 10 Mn. over leasehold property at “Talgaswella<br />
Estate” in Galle.<br />
Overdraft 15,359,281 15,808,105<br />
Corporate Guarantee of Aitken Spence Plantation Managements Ltd.<br />
Hatton National Bank 10,000,000 Primary floating mortagage bond for Rs. 25 Mn. over lease hold property “Gallinda E-Friends Loan 15,359,281 15,808,105<br />
Estate” at Mapagala, Galle.<br />
Hatton National Bank 75,000,000 Primary floating mortgage bond for Rs. 100 Mn. over leasehold property at “Fernlands Money Market Loan 7,086,861 7,293,951<br />
Estate” Pundaluoya,Nuwara Eliya.<br />
Hatton National Bank 25,000,000 Primary floating mortgage bond for Rs. 100 Mn. over leasehold property at “Fernlands Money Market Loan 7,086,861 25,000,000<br />
Estate” Pundaluoya,Nuwara Eliya.<br />
Hatton National Bank 10,000,000 Leeway available on the primary floating mortagage band for Rs. 50 Mn over leasehold Short Term Loan <strong>11</strong>,952,017 12,301,274<br />
property “Harrow Estate” situated at Pundaluoya, Nuwara Eliya<br />
Seylan Bank 90,700,000 Primary mortgage over leasehold rights to the land and Buildings of <strong>Elpitiya</strong> and Term Loan 27,101,570 27,986,152<br />
Bentota Estates.<br />
DFCC Bank 158,481,886 Primary mortgage over leasehold rights to the land and buildings of Nayapane, Term Loan 37,478,674 38,574,938<br />
Deviturai & Newpeacock estates.<br />
DFCC Bank 124,014,728 Further mortgage over leasehold rights to the land and the buildings of Nayapane, Term Loan 37,478,674 38,574,938<br />
Deviturai & Newpeacock estates.<br />
DFCC Bank 25,429,000 Further mortgage over leasehold rights to the land and the buildings of Nayapane, Term Loan 37,478,674 38,574,938<br />
Deviturai & Newpeacock estates.<br />
DFCC Bank 47,000,000 Secondary mortgage over the leasehold rights of Sheen estate<br />
Term Loan <strong>11</strong>,572,377 <strong>11</strong>,910,540<br />
together with buildings & machinery situated at Kadorapitiya.<br />
Secondary mortgage over the leasehold rights of Sheen estate<br />
DFCC Bank 18,000,000 Term Loan <strong>11</strong>,572,377 <strong>11</strong>,910,540<br />
together with buildings & machinery situated at Kadorapitiya.<br />
NDB 80,000,000 Primary Mortgage over lealehold rights of Lelwela Estate.<br />
Tea Securitising Loan 5,393,827 5,551,443<br />
Corporate Guarantee of Aitken Spence Plantation Managements Ltd.<br />
NDB 150,000,000 Primary Mortgage over lealehold rights of Ketandola Estate & Gulugahakanda Estate.<br />
Further mortgage over future Tea receivables.<br />
Tea Securitising Loan 18,852,544 19,424,6<strong>11</strong><br />
Further Mortgage over leasehold rights of Lelwela Estate.<br />
State Bank of India 250,000,000 Primary Mortgage over lealehold rights of Dunsinane Estate & Meddacombra Estate. Tea Securitising Loan 35,137,854 36,164,640<br />
NDB 75,000,000 Securitising of future Tea Sales.<br />
Tea Securitising Loan Securitising of future Tea Sales<br />
NDB <strong>11</strong>5,000,000 Securitising of future Tea Sales.<br />
Tea Securitising Loan Securitising of future Tea Sales<br />
NDB 50,000,000 Securitising of future Tea Sales.<br />
Tea Securitising Loan Securitising of future Tea Sales<br />
50<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
25. CAPITAL COMMITMENTS 20<strong>11</strong> <strong>2010</strong><br />
Followings are the capital commitments as at the balance sheet date. Rs. (Mn) Rs. (Mn)<br />
Approved by Board & Contracted for - -<br />
Approved by Board & not Contracted for 237 167<br />
26. CONTINGENCIES<br />
No known contingent liabilities exist as at the balance sheet date other than few legal matters pending as at the year end of which the outcome<br />
is not determinable.<br />
27. POST BALANCE SHEET EVENTS<br />
There have been no material events occurring after the balance sheet date that require adjustment or disclosure in the financial statements.<br />
28. RELATED PARTY DISCLOSURES<br />
The details of the significant related party disclosures are as follows.<br />
28.1 Transactions with the Parent and Related entities.<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
Company name of Relationship nature of Charged/(Credited)<br />
Director transaction 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
Aitken Spence <strong>Plantations</strong> Mr. J.M.S. Brito Parent Company Management Fees 22,400,000 9,019,066<br />
Managements Ltd. Dr. R.M. Fernando Executive Staff Salaries & Expenses 16,871,867 15,445,3<strong>11</strong><br />
Mr. Merril J. Fernando Short Term Loan Interest - 9,622,863<br />
Mr. Malik J. Fernando Loan Repayment - 44,166,662<br />
Mr. D.V.H.de Mel<br />
Mr. D.A.de S.Wickremanayake<br />
Mr.A.L.W.Goonewardena<br />
Aitken Spence PLC Mr. D.H.S.Jayawardena Related Company Interest on Current Account - <strong>11</strong>,180,749<br />
Mr. J.M.S. Brito & Short Term Loans 4,258,593 3,359,345<br />
Dr. R.M. Fernando<br />
Services & Sundries<br />
Mr. G.C.Wickremasinghe<br />
Mr.G.M.Perera<br />
Mr. C.H.Gomez<br />
Mr.N.J.de Silva Deva Adithya<br />
Mr.V.M.Fernando<br />
Dr. P Dissanayake<br />
Mr. R N Asirwatham<br />
Tea Country Homes (Pvt) Ltd. Mr. J.M.S. Brito Related Company Professional & Secretarial Charges 274,780 249,908<br />
Dr R.M. Fernando<br />
Mr. A.L.W.Goonewardena<br />
Mr. Malik J. Fernando<br />
Mr. D.A.de S.Wickremanayake<br />
New Peacock Cottage (Pvt) Ltd. Mr. J.M.S. Brito Related Company Professional Charges - 27,769<br />
Dr R.M. Fernando<br />
Mr. Merril J. Fernando<br />
Mr. Malik J. Fernando<br />
Mr. D.V.H.de Mel<br />
Mr. D.A.de S.Wickremanayake<br />
Mr.A.L.W.Goonewardena<br />
Water Villas (Pvt) Ltd. Mr. J.M.S. Brito Related Company Professional Charges & Secretarial Fees 103,552 30,644<br />
Dr R.M. Fernando<br />
Mr. Merril J. Fernando<br />
Mr. Malik J. Fernando<br />
Mr. D.V.H.de Mel<br />
Mr. D.A.de S.Wickremanayake<br />
Mr.A.L.W.Goonewardena<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
51
28. RELATED PARTY DISCLOSURES (CONT.)<br />
Company name of Relationship nature of Charged/(Credited)<br />
Director transaction 20<strong>11</strong> <strong>2010</strong><br />
Rs.<br />
Rs.<br />
AEN Palm Oil Processing (Pvt) Ltd. Mr. J.M.S. Brito Related Company Expenditure Incurred 356,466 361,423<br />
Mr R.M. Fernando<br />
Mr. F. L. Fonseka<br />
Dr. C.N.A.Nonis<br />
Mr. S.S.Poholiyadda<br />
Mr. J.H.P. Ratnayake<br />
<strong>Elpitiya</strong> Lifestyle Solutions (Pvt) Ltd. Mr. S. Pathirane Related Company Expenditure Incurred 9,964,446 6,033,084<br />
Dr. R.M. Fernando USD Loan & Interest <strong>11</strong>,887,082 17,876,941<br />
Mr. Malik J. Fernando<br />
Mr. D.A.de S.Wickramanayake<br />
Ms. D.Pathirane<br />
Mr. A.Kanthasamy<br />
Meddecombra Power Company (Pvt) Ltd Mr. J.M.S.Brito Related Company Professional Fees - 27,769<br />
Dr. R.M.Fernando<br />
& Secretarial Charges<br />
Mr. Malik J Fernando<br />
Mr. D.A.de S.Wickremanayake<br />
EPP Hydro Power (Pvt) Ltd Mr. J.M.S. Brito Related Company Professional Fees 1,626,552 -<br />
Dr R.M. Fernando<br />
& Secretarial Charges<br />
Mr. Merril J. Fernando Expenditure Incurred 2,080,000 -<br />
Mr. Malik J. Fernando<br />
Mr. D.V.H.de Mel<br />
Mr. D.A.de S.Wickremanayake<br />
HNB Bank Mr. D.H.S.Jayawardana Related Company Loan Receipts 25,000,000 -<br />
Loan Repayment 46,380,004 49,852,428<br />
Finance Lease Repayment 7,482,383 10,964,386<br />
Finance Lease Obtained - 928,836<br />
DFCC Vardhana Mr. J.M.S. Brito Related Company Loan Repayment 10,983,552 <strong>11</strong>,914,138<br />
DFCC Bank Mr. J.M.S. Brito Related Company Loan Receipts - 50,000,000<br />
ADB Loans Repayment 32,183,208 88,213,742<br />
Lanka Commodity Brokers Ltd Dr. Anura Ekanayake Related Company Tea Sales 42,228,680 -<br />
28.2 Transactions with the Key Management Personnel of the Company and parent<br />
There are no transactions with the key management personnel of the company and its parent other than those disclose in Note 21.<br />
28.3 Other Related Party Transactions<br />
Guarantees given by Aitken Spence Plantation Managements Ltd on behalf of the company.<br />
* Corporate Guarantee of Rs.25.429 Mn. for DFCC Loan 26262/F/002 31464 & 26262/G/001 31465.<br />
* Corporate Guarantee of Rs.7.467 Mn. for DFCC Loan 23338/C/002 30966.<br />
* Corporate Guarantee of Rs.125 Mn. for Bank of Ceylon Overdraft Facility.<br />
* Corporate Guarantee of Rs.50 Mn. for HNB Permanent Overdraft Facility.<br />
* Corporate Guarantee of Rs.75 Mn. for debentures.<br />
* Corporate Guarantee of Rs.80 Mn. for NDB Loan.<br />
29. RELATED PARTY TRANSACTIONS<br />
Notes to the Financial Statements<br />
Year Ended 31 st March 20<strong>11</strong><br />
There are no related party transactions other than those disclosed in Notes 7, 10, 17, 20, 24 & 28 to the Financial Statements.<br />
52<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Value Added Statement<br />
Figures in Rs.000’ Year ended as a Year ended as a<br />
Value Added<br />
31.03.<strong>11</strong> % 31.03.10 %<br />
Turnover 2,601,501 2,215,126<br />
Other Income 99,056 81,098<br />
2,700,557 100 2,296,224 100<br />
Purchase of goods and Services (1,450,637) (54) (1,218,494) (53)<br />
Total Value Added 1,249,920 46 1,077,730 47<br />
Distributed as follows<br />
To Employee,<br />
as remuneration 1,001,527 80.13 845,440 78.45<br />
To Government,<br />
as lease rental 37,994 3.04 12,895 1.20<br />
To Lenders,<br />
as interest on short &<br />
long term borrowings 106,590 8.53 131,180 12.17<br />
Retained for re-investment and 103,809 8.30 88,215 8.18<br />
future growth<br />
Depreciation 103,809 8.30 88,215 8.18<br />
Reserves - - - -<br />
1,249,920 100 1,077,730 100<br />
Distribution of Value Added <strong>2010</strong>/20<strong>11</strong><br />
Government 3.04%<br />
Remuneration 80.13%<br />
Depreciation 8.30%<br />
Lenders 8.53%<br />
Distribution of Value Added 2009/<strong>2010</strong><br />
Government 1.20%<br />
Remuneration 78.45%<br />
Depreciation 8.18%<br />
Lenders 12.17%<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
53
NUWARAELIYA DISTRICT<br />
Dunsinane 577.75 - - 51.75 629.50 790.00 1,026 - - Tea 1,0<strong>11</strong><br />
Sheen 303.50 - - 69.75 373.25 517.25 497 - - Tea 674<br />
Fernlands 383.99 - - 38.25 422.24 484.25 546 - - Tea 771<br />
Meddecombra 474.50 - - 232.04 706.54 890.00 640 - - Tea 893<br />
KANDY DISTRICT<br />
New Peacock 290.49 - - 170.29 460.78 535.73 777 - - Tea 584<br />
Nayapane 268.15 - - 190.00 458.15 576.50 498 - - Tea 481<br />
GALLE DISTRICT<br />
Information On Estates<br />
Year Ended 31 st March 20<strong>11</strong><br />
Cultivated Area (ha.)<br />
Annula Production Factory Details No. of<br />
Total<br />
Area<br />
Kg’000<br />
Crop Workers<br />
Estate Tea Rubber Oil Palm Others Total (ha.) tea Rubber OilPalm Manfd.<br />
Devitura 1 96.52 247.22 193.04 66.10 602.88 896.22 384 163 1,779 Tea 549<br />
Rubber<br />
Talgaswella 51.05 203.83 448.55 20.72 724.15 1,033.85 308 144 3,890 Tea 479<br />
Rubber<br />
Gulugahakanda 60.73 51.91 68.13 14.86 195.63 418.18 105 35 434 - 214<br />
Lelwala 68.81 42.28 - 21.00 132.09 240.35 180 26 - Tea 235<br />
Ketandola 65.35 127.08 79.48 10.16 282.07 832.69 120 60 458 Tea 224<br />
Bentota - 354.42 30.00 <strong>11</strong>.92 396.34 684.06 50 249 - Rubber 264<br />
<strong>Elpitiya</strong> - 335.63 160.92 56.39 552.94 952.44 25 266 1,445 Rubber 305<br />
2,632.06 1,376.57 990.14 953.23 5,952.00 8,851.52 5,186 937 8,006 6,689<br />
<strong>2010</strong>/20<strong>11</strong> 2009/<strong>2010</strong><br />
Tea Rubber Oil Palm Tea Rubber Oil Palm<br />
Total Crop (Kg.000’s) 5,186 937 8,006 4,635 913 8,449<br />
Total NSA (Rs/Kg) 341.34 520.63 23.60 344.87 278.86 21.39<br />
Y P H 1,539 900 10,220 1,367 878 10,785<br />
Employment Strength<br />
Workers Clerical & Technical Executives<br />
Total<br />
<strong>2010</strong> 6,841 384 82 7,307<br />
20<strong>11</strong> 6,689 385 82 7,156<br />
54<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Ten Year Summary<br />
Year ended 31 st March 20<strong>11</strong> <strong>2010</strong> 2009 2008 2007 2006 2005 2004 2003 2002<br />
Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000<br />
TRADING RESULTS<br />
Revenue 2,601,501 2,215,126 1,556,182 1,883,109 1,281,922 1,046,338 1,214,280 1,022,891 1,103,657 999,283<br />
Other Income 99,056 81,098 53,795 44,757 35,718 30,681 31,101 78,264 41,268 67,229<br />
Gross Profit 594,432 241,2<strong>11</strong> 89,528 362,925 199,722 93,149 163,512 70,719 <strong>11</strong>3,773 <strong>11</strong>0,087<br />
Finance Cost (144,584) (144,075) (<strong>11</strong>4,548) (120,717) (107,420) (80,009) (56,360) (55,536) (57,034) (68,701)<br />
Profit / (Loss) Before Tax 384,233 63,817 (61,705) 166,317 <strong>11</strong>,286 (29,284) 52,534 31,128 30,178 40,167<br />
Income Tax (Expense) / Income (20,729) - - 3,919 (3,391) (8,327) - - - -<br />
Profit / ( Loss) After Tax 363,504 63,817 (61,705) 170,237 7,895 (37,610) 52,534 31,128 30,178 40,167<br />
BALANCE SHEET<br />
Funds Employed<br />
Stated Capital 694236 694,236 350,000 350,000 - - - - - -<br />
Share Capital - - - - 249,587 249,587 249,587 249,587 249,587 200,000<br />
Share Premium - - - - 100,413 100,413 100,413 100,413 100,413 -<br />
Revenue Reserves 669,048 323,761 259,944 321,649 151,412 (25,501) 12,<strong>11</strong>0 (40,424) (71,552) (101,730)<br />
Negative Goodwill - - - - - 169,017 183,102 197,187 2<strong>11</strong>,271 225,356<br />
Total Equity 1,363,284 1,017,997 609,944 671,649 501,412 493,517 545,212 506,763 489,719 323,626<br />
Convertible Debentures - - - - - - - - - 150,000<br />
Redeemable Debentures 75,000 75,000 75,000 75,000 - - - - - 20,000<br />
Deferred Income 206,712 186,517 149,176 138,306 <strong>11</strong>6,943 93,758 91,661 87,205 77,741 60,954<br />
Retirement Benefit Obligations 464,155 448,410 326,728 305,449 264,845 230,658 243,149 240,858 231,722 217,313<br />
Net Liability to Lessor 187,413 190,104 192,692 195,180 197,570 199,872 202,084 204,2<strong>11</strong> 206,256 208,624<br />
Interest Bearing Borrowings 681,279 878,672 415,789 394,491 254,478 326,363 368,747 383,173 367,509 368,673<br />
Non-Current Liabilities 1,614,559 1,778,703 1,159,384 1,108,426 833,836 850,651 905,641 915,447 883,227 875,564<br />
2,977,843 2,796,700 1,769,328 1,780,074 1,335,248 1,344,168 1,450,853 1,422,210 1,372,947 1,349,190<br />
Assets Employed<br />
Non-Current Assets 3,086,299 2,910,616 2,699,843 2,485,862 2,318,057 2,231,841 2,120,496 1,951,754 1,806,591 1,675,196<br />
Current Assets 580,485 774,102 271,273 416,094 314,884 219,897 233,766 224,927 226,801 194,092<br />
Current Liabilities (613,941) (888,019) (1,201,788) (1,121,882) (1,297,693) (1,107,571) (903,410) (754,471) (660,445) (520,098)<br />
2,977,843 2,796,700 1,769,328 1,780,074 1,335,248 1,344,168 1,450,853 1,422,210 1,372,947 1,349,190<br />
Key Indicators<br />
EPS (basic) (Rs.) 4.99 1.23 (1.24) 3.41 0.16 (0.75) 1.05 0.62 0.64 1.00<br />
Dividend Per Share(Rs.) 0.36 0.25 - - - - - - - -<br />
Net Assets Per Share (Rs.) 18.71 13.97 12.22 13.46 10.04 9.89 10.92 10.15 9.81 8.09<br />
Market Price Per Share (Rs.) 33.50 34.00 39.00 80.50 34.50 30.00 9.75 12.00 10.00 *<br />
Price Earnings Ratio 7 28 (32) 24 218 (40) 9 19 16 *<br />
Current Ratio 0.95 0.87 0.23 0.37 0.24 0.20 0.26 0.30 0.34 0.37<br />
Equity to Total Assets 37.18 27.63 20.53 23.14 19.04 20.13 23.16 23.28 24.08 17.31<br />
Return on Shareholder’s Funds % 26.66 6.27 (10.12) 25.35 1.57 (7.62) 9.64 6.14 6.16 12.41<br />
* Shares had not been traded during this period.<br />
** The figures for the previous years have been re-stated taking into consideration the sub division of shares.<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong><br />
55
Shareholder & Investor Information<br />
SHAREHOLDING BREAKDOWN<br />
AS AT 31 - MARCH - 20<strong>11</strong><br />
Category N no. of Shareholders No. of Shares %<br />
1 - 1,000 10,581 3,684,928 5.06<br />
1,001 - 10,000 623 2,2<strong>11</strong>882 3.04<br />
10,001 - 100,000 95 2,609,066 3.58<br />
100,001 - 1,000,000 8 2,560,900 3.51<br />
Over 1,000,000 Shares 3 61,799,654 84.81<br />
SUMMARY OF SHAREHOLDINGS<br />
AS AT 31 - MARCH - 20<strong>11</strong><br />
<strong>11</strong>,310 72,866,430 100.00<br />
Category no. of Shares no. of %<br />
Shareholders<br />
Residents 71,797,830 <strong>11</strong>,300 98.54<br />
Non Residents 1,068,600 10 1.46<br />
Individuals 9,812,962 <strong>11</strong>,243 13.47<br />
Institutions 63,053,468 67 86.53<br />
SHARES TRADED DURING THE YEAR<br />
April 1, <strong>2010</strong> to March 31, 20<strong>11</strong><br />
Number of share transactions 15,087<br />
Number of shares 21,379,700<br />
Total Value 8<strong>11</strong>,525,400.00<br />
Highest Price Traded (Rs) 55.00<br />
17.09.<strong>2010</strong><br />
Lowest Price Traded (Rs) 15.00<br />
26.10.<strong>2010</strong><br />
Value of Share as at the end of financial year (Rs) 33.50<br />
Excludes:<br />
Public Holding:<br />
AS AT 31 - MARCH - 20<strong>11</strong><br />
* Parent, subsidiary or associate companies<br />
* Subsidiaries or associates of the parent company<br />
* Directors, CEO, their spouses & children under 18 & their nominees<br />
* Co. in which a director’s holding exceeds 50% of the equity or where the<br />
Director controls the composition of the Board<br />
* Shareholders whose holding exceeds 10% of the issued capital<br />
Total no of shares 72,866,430<br />
Less: Holding by the parent co (ASPM) 44,917,354 (61.64%)<br />
Less: Shareholder exceeding 10% (S to T) 15,600,000 (21.41%)<br />
Public holding 12,349,076 (16.95%)<br />
56<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Shareholder & Investor Information (contd.)<br />
20 Major ShareHolders Holding as at<br />
31 st March 20<strong>11</strong><br />
Name of the Shareholder shareholding %<br />
1 AITKEN SPENCE PLANTATION MANAGEMENTS LTD 44,917,354 61.64<br />
2 SECRETARY TO THE TREASURY 15,600,000 21.41<br />
3 S.N.C.W.M.B.C. KANDEGEDARA 1,282,300 1.76<br />
4 GULF EAST FINANCE LTD., 717,300 0.98<br />
5 D S DALUWATTE 400,000 0.55<br />
6 M M UDESHI 332,000 0.46<br />
7 TRANZ DOMINION LLC 310,000 0.43<br />
8 SEYLAN BANK PLC/SNCWMBC KANDEGEDERA 274,500 0.38<br />
9 COMMERCIAL BANK OF CEYON/AF MUNAS & NM MUNAS 260,000 0.36<br />
10 T L M IMTIAZ 135,600 0.19<br />
<strong>11</strong> PAN ASIA BANKING CORP PLC/S A WARNAKULASURIYA 131,500 0.18<br />
12 P A DAYANANDA 100,000 0.14<br />
13 K S D SENAWEERA 88,800 0.12<br />
14 K S JINADASA 85,700 0.12<br />
1 5 N W N JAYASIRI 77,200 0.<strong>11</strong><br />
16 W L B PERERA 70,100 0.10<br />
17 FIRST CAPITAL MARKETS LTD/EPI FERNANDO 67,400 0.09<br />
18 D D W CHANDRADEVA 65,700 0.09<br />
19 M A U WIJESEKERA 65,000 0.09<br />
20 P C COORAY 59,600 0.08<br />
Total No. of Shares 65,040,054 89.26<br />
Golden Shareholder<br />
The Golden Share has been allotted to the Secretary to the Treasury for and on behalf of the State of Democratic Socialist Republic of<br />
Sri Lanka. The rights attached to the Golden Share are set out in the Articles of Association which are as follows:<br />
1) The Golden Share shall only be held by the Secretary to the Treasury in his official capacity.<br />
2) The Golden Shareholder’s prior written concurrence is required,<br />
(a) to amend the definition of the words Golden Share or Golden Shareholder and the Articles setting out specific rights<br />
attached to such share.<br />
(b) to sub-lease, cede or assign the rights in part or all of the lands assigned to the Company.<br />
3) The Golden Shareholder is entitled to<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
call upon the Directors once in every three months if desired to meet with him or his nominees to discuss matters of the<br />
Company of interest to the State.<br />
inspect the books of accounts of the Company either by himself or by his nominees with due notice.<br />
receive within 60 days of the end of every quarter, a quarterly report relating to the performance of the Company.<br />
receive within 90 days from the end of each financial year, information relating to the Company in a pre-specified format.<br />
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Definitions<br />
FINANCIAL TERMS<br />
Accounting policies<br />
Specific principles, bases, conventions, rules and practices adopted<br />
by an enterprise in preparing and presenting financial statements.<br />
Borrowings<br />
All interest bearing liabilities.<br />
Capital employed<br />
Total assets less interest free liabilities and provisions.<br />
Cash equivalents<br />
Liquid investments with original maturities of three months or less.<br />
Contingent Liabilities<br />
Conditions or situations at the Balance Sheet date, the financial effect<br />
of which are to be determined by future events which may or may not<br />
occur.<br />
Current ratio<br />
Current assets divided by current liabilities.<br />
Earnings Per Share<br />
Profits attributable to ordinary shareholders divided by the number of<br />
ordinary shares in issue.<br />
Effective Tax Rate<br />
Income tax expenses divided by profit from ordinary activities before<br />
tax.<br />
Equity<br />
Shareholders’ funds, i.e. share capital and reserves.<br />
Net Assets Per Share<br />
Shareholders’ funds divided by the number of ordinary shares.<br />
Price Earnings Ratio<br />
Market price of a share divided by earnings per share.<br />
Related parties<br />
Parties who could control or significantly influence the financial and<br />
operating policies of the business.<br />
Return on Shareholder’s Funds<br />
Attributable profits to the shareholders divided by shareholders funds.<br />
Segment<br />
Constituent business units grouped in terms of nature and similarity<br />
of operations.<br />
SLAS<br />
UITF<br />
Urgent Issues Tasks Force of The Institute of Chartered Accountants<br />
of Sri Lanka.<br />
Working capital<br />
Capital required to finance the day - to -day operations (current<br />
assets minus current liabilities).<br />
NON - FINANCIAL TERMS<br />
COP<br />
The Cost of Production. This generally refers to the Cost of producing<br />
a Kilo of produce. (Tea / Rubber / Oil Palm).<br />
Crop<br />
The total produce harvested over a given period of time (usually<br />
during a financial year).<br />
Extent in bearing<br />
The extent of land from which crop is being harvested. Also see<br />
“Immature Plantation”.<br />
Field<br />
An unit extent of land. Estates are divided in to fields in order to<br />
facilitate management.<br />
Immature plantation<br />
The extent of plantation that is under development and is not being<br />
harvested.<br />
Infilling<br />
A method of field development whereby planting of individual plants<br />
is done in order to increase the yield of a given field, whilst allowing<br />
the field to be harvested.<br />
Mature plantation<br />
The extent of plantation from which crop is being harvested. Also see<br />
“Extent in Bearing”.<br />
NSA<br />
The Net Sales Average. This is the average sale price obtained (over<br />
a period of time) after deducting Brokerage fees and cost of Gratis<br />
teas.<br />
Replanting<br />
A method of field development where an entire unit of land is taken<br />
out of “bearing” and developed by way of uprooting the existing trees,<br />
bushes and replanting with new trees / bushes.<br />
Yield<br />
The average crop per unit extent of land over a given period of time<br />
(usually kgs. per hectare per year).<br />
Sri Lanka Accounting Standards.<br />
58<br />
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Financial Calendar <strong>2010</strong>/20<strong>11</strong><br />
August 27, <strong>2010</strong> - 18 th <strong>Annual</strong> General Meeting.<br />
November 29, <strong>2010</strong> - Half-yearly Accounts as at September 30, <strong>2010</strong>.<br />
May 30, 20<strong>11</strong> - Accounts for the year ended March 31, 20<strong>11</strong>.<br />
September 26, 20<strong>11</strong> - 19 th <strong>Annual</strong> General Meeting.<br />
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59
CORPORATE INFORMATION<br />
NAME<br />
ELPITIYA PLANTATIONS PLC<br />
LEGAL FORM<br />
A Public Quoted Company with Limited Liability, incorporated in Sri Lanka on 22 June 1992.<br />
COMPANY REGISTRATION NO<br />
PQ 171<br />
REGISTERED OFFICE<br />
315, Vauxhall Street, <strong>Colombo</strong> 2,<br />
BUSINESS ADDRESS<br />
No. 305, Vauxhall Street, <strong>Colombo</strong> 2.<br />
DIRECTORS<br />
Mr. J M S Brito - Chairman<br />
Dr. R M Fernando - Managing Director<br />
Mr. Merrill J Fernando<br />
Mr. Malik J Fernando<br />
Mr. D C Fernando - Alternate Director to Mr. Merrill J Fernando<br />
Mr. D V H de Mel - (Resigned w.e.f. 10.08.20<strong>11</strong>)<br />
Mr. B A K W Mahendra - (Resigned w.e.f. 14.07.<strong>2010</strong>)<br />
Ms. Minette D A Perera - Alternate Director to Mr. Malik J Fernando<br />
Dr. S A B Ekanayake<br />
Mr. L N de S Wijeyeratne<br />
Mr. J H J Jayamaha - (Resigned w.e.f. 29.12.<strong>2010</strong>)<br />
Mr. M P D U K Mapa Pathirana - (Appointed w.e.f. 29.12.<strong>2010</strong>)<br />
CHIEF EXECUTIVE OFFICER<br />
Mr. A L W Goonewardena<br />
MANAGING AGENT<br />
Aitken Spence Plantation Managements Limited<br />
SECRETARIES<br />
Aitken Spence Corporate Finance (Pvt) Ltd<br />
AUDITORS<br />
Messrs. Ernst & Young<br />
201, De Saram Place, <strong>Colombo</strong> 10.<br />
LAWYERS<br />
Julius & Creasy<br />
Attorneys – at – Law<br />
BANKERS<br />
Bank of Ceylon - Corporate Branch<br />
Sampath Bank PLC - Nawam Mawatha Branch<br />
Hatton National Bank PLC - Panchikawatta Branch<br />
Seylan Bank PLC - Millennium Corporate<br />
GROUP COMPANIES<br />
Tea Country Homes (Private) Limited<br />
Water Villas (Private) Limited<br />
E P P Hydro Power Company (Private) Limited<br />
JOINT VENTURE COMPANIES<br />
<strong>Elpitiya</strong> Lifestyle Solutions (Private) Limited<br />
A E N Palm Oil Processing (Private) Limited<br />
REGISTRARS<br />
SSP Corporate Services (Pvt) Ltd.,<br />
101, Inner Flower Road,<br />
<strong>Colombo</strong> 3<br />
60<br />
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Notice of Meeting<br />
NOTICE is hereby given that the Nineteenth <strong>Annual</strong> General Meeting of ELPITIYA PLANTATIONS PLC., will be held at the Auditorium<br />
of the Ceylon Chamber of Commerce, No.50 Nawam Mawatha, <strong>Colombo</strong> 2, at 3.00 p.m. on Monday, 26th September 20<strong>11</strong> for the<br />
following purposes:-<br />
l<br />
To receive and consider the <strong>Annual</strong> <strong>Report</strong> of the Board of Directors together with the Financial Statements of the Company<br />
for the year ended 31 st March 20<strong>11</strong> and the report of the Auditors thereon.<br />
l<br />
To declare a First and Final Dividend as recommended by the Directors<br />
l<br />
To re-elect Dr. S A B Ekanayake who retires by rotation in terms of Article 92 of the Articles of Association.<br />
l<br />
To re-elect Mr. L N D S Wijeyeratne who retires by rotation in terms of Article 92 of the Articles of Association.<br />
l<br />
To re-elect Mr. Merrill J Fernando who is over 70 years, as a Director by passing the following resolution.<br />
“That the age limit stipulated in Section 210 of the Companies Act No 7 of 2007 shall not apply to Mr Merrill J Fernando<br />
who has attained the age of 81 and that he be re-elected a Director of the Company”<br />
l<br />
To re-elect Mr. M P D U K Mapa Pathirana who retires in terms of Article 98 of the Articles of Association.<br />
l<br />
To re-appoint the retiring Auditors, Messrs. Ernst & Young, and authorize the directors to determine their remuneration.<br />
By order of the Board<br />
Sgd.<br />
Aitken Spence Corporate Finance (Pvt) Ltd<br />
Secretaries<br />
23 rd August 20<strong>11</strong><br />
<strong>Colombo</strong><br />
Note:<br />
1. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy to attend and vote in his/her stead and a<br />
Form of Proxy is enclosed for this purpose. A Proxy need not be a member of the Company.<br />
2. The completed Form of Proxy must be deposited at the Registrars, SSP Corporate Services (Pvt) Ltd., No.101, Inner Flower<br />
Road, <strong>Colombo</strong> 3 forty – eight hours before the time fixed for the meeting.<br />
3. Any member or Proxy holder attending the meeting is kindly requested to bring this report.<br />
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notes<br />
62<br />
<strong>Elpitiya</strong> <strong>Plantations</strong> <strong>Plc</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>11</strong>
Form of Proxy<br />
I/We ……………………………………………………………………………………………………………..…....................………............… of<br />
……………………………………………………………………………..…………………………….........…..…………………............……..……<br />
being a member / members of ELPITIYA PLANTATIONS PLC., hereby appoint ………………………………………..……………………<br />
..………………………………………….………………………................................................................................…….........................… of<br />
………………………………....………….…………………………………….…………..……….....…............……….….......…… (whom failing)<br />
Joseph Michael Suresh Brito of <strong>Colombo</strong><br />
(whom failing)<br />
Rohan Marshall Fernando of <strong>Colombo</strong><br />
(whom failing)<br />
Merrill Joseph Fernando of <strong>Colombo</strong><br />
(whom failing)<br />
Malik Joseph Fernando of <strong>Colombo</strong><br />
(whom failing)<br />
Sumith Anura Bandara Ekanayake of <strong>Colombo</strong><br />
(whom failing)<br />
Lalit Nihal de Silva Wijeyeratne of <strong>Colombo</strong><br />
(whom failing)<br />
Mapa Pathirannahalage Deshapriya Udaya Kumara Mapa Pathirana of <strong>Colombo</strong><br />
as my / our Proxy to vote for me/us and on my /our behalf at the <strong>Annual</strong> General Meeting of the Company to be held on 26th September<br />
20<strong>11</strong> and at any adjournment thereof and at every poll which may be taken in consequence thereof.<br />
Signed this .............................day of .........................Two Thousand and Eleven<br />
.....................................<br />
Signature<br />
Note: Instructions as to completion are noted on the reverse hereof.
Instructions As to Completion<br />
Kindly perfect the form of proxy by filling in legibly your full name and address, signing in the<br />
space provided and filling in the date of signature.<br />
If the proxy form is signed by an Attorney, the relative power of attorney should also<br />
accompany the proxy form for registration, if such power of attorney has not already been<br />
registered with the Company.<br />
In the case of a Company/Corporation, the proxy must be under its Common Seal, which<br />
should be affixed and attested in the manner prescribed by its Articles of Association.<br />
The completed form of proxy should be deposited at the Registrars, SSP Corporate Services<br />
(Pvt) Ltd., 101, Inner Flower Road, <strong>Colombo</strong> 3, on 24th September 20<strong>11</strong> being 48 hours<br />
before the time appointed for the holding of the meeting.
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