Annual Report 2010-2011 - Colombo Stock Exchange
Annual Report 2010-2011 - Colombo Stock Exchange
Annual Report 2010-2011 - Colombo Stock Exchange
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Richard Pieris &<br />
Company PLC<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong> / <strong>2011</strong>
Vision and Mission<br />
Vision<br />
To be a market driven, technologically oriented diverse<br />
group.<br />
We will organise and operate to continually focus on<br />
exceeding the expectations of our customers, whilst<br />
excelling in profitability and we will attract, develop and<br />
retain talented people to ensure the continued growth<br />
and viability of all our business ventures.<br />
Mission<br />
To continually exceed the expectations of our customers.<br />
To optimise the contribution from our employees<br />
by providing career and personal development<br />
opportunities, thereby creating an atmosphere that<br />
would motivate and internalise employee aspirations with<br />
corporate objectives.<br />
To provide a satisfactory return to shareholders whilst<br />
retaining sufficient funds for reinvestment, thereby<br />
enhancing corporate wealth.<br />
To ensure continuous growth by the planned expansion<br />
and diversification of business activities.<br />
To continually strive for the upliftment of our community<br />
whilst adhering to high ethical standards in business.
4 Financial Highlights<br />
5 Corporate Information<br />
7 Chairman’s Review<br />
12 The Board of Directors<br />
14 Sector Reviews<br />
33 Corporate Social Responsibility<br />
35 Financial Review<br />
41 Risk Management<br />
45 Our People<br />
47 Group Structure<br />
51 Financial Information<br />
52 <strong>Annual</strong> <strong>Report</strong> of the Board of Directors<br />
56 Corporate Governance<br />
58 <strong>Report</strong> of the Remuneration Committee<br />
59 <strong>Report</strong> of the Audit Committee<br />
60 Statement of Directors’ Responsibility<br />
61 Auditor’s <strong>Report</strong><br />
62 Balance Sheet<br />
63 Income Statement<br />
64 Cash Flow Statement<br />
66 Statement of Changes in Equity<br />
67 Notes to the Financial Statements<br />
104 Ten Year Summary<br />
106 Shareholder Information<br />
108 Group Real Estate Portfolio<br />
109 Glossary of Financial Terms<br />
111 Notes<br />
114 Notice of Meeting<br />
115 Form of Proxy<br />
Contents<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 2
Think Big<br />
No dream is ordinary, no target is unachievable and nothing is<br />
impossible. We have proved this by having the most successful<br />
year, brought about by exceptional strategy and performance.<br />
We believe that thinking positive opens new horizons and inspires<br />
our team to reach further. By setting our goals high, we have<br />
achieved big and having strengthened our core businesses,<br />
expansion is our next goal, adding to our diverse list of ventures<br />
and continuing to be a leading player in the industry. Our scope<br />
for growth is endless and possibility is everything. We believe in<br />
pushing the envelope and our position as one of the largest and<br />
most diversified conglomerates in Sri Lanka is a testament to our<br />
dedication. At Richard Pieris and Company PLC, our foundations<br />
are firm; the future is now and we’re thinking big.<br />
3<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Financial Highlights<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs.’000<br />
Rs.’000<br />
Net turnover 27,241,577 22,339,288<br />
Profit from operations 3,450,366 1,969,697<br />
Profit before tax from continuing operations 2,768,757 1,060,159<br />
Income tax expense (616,566) (330,592)<br />
Profit for the year from continuing operations 2,152,191 729,567<br />
Loss after tax from discontinued operations (11,609) (17,873)<br />
Profit for the year 2,140,582 711,694<br />
Profit attributable to equity holders of the parent 1,680,684 580,204<br />
Total assets 20,639,457 17,364,817<br />
Shareholder funds 5,002,929 3,792,892<br />
Market capitalisation 26,346,485 7,053,806<br />
Total value addition 9,889,518 7,557,169<br />
Per Ordinary Share<br />
Earnings (Rs.)* 0.87 0.30<br />
Net assets (Rs.)* 2.58 1.97<br />
Market value (Rs.)* 13.60 3.67<br />
Ratios<br />
Return on equity (%) 38.22 16.56<br />
Interest cover (No of times) 4.34 2.03<br />
Gearing ratio (%) 38.62 49.69<br />
Turnover vs. Turnover Growth<br />
Rs. Mn. %<br />
30,000<br />
25,000<br />
20,000<br />
35<br />
30<br />
25<br />
20<br />
15,000<br />
15<br />
10,000<br />
10<br />
5,000<br />
0<br />
5<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Turnover Turnover Growth Rate<br />
Operating Profit vs. Growth Rate<br />
Rs. Mn. %<br />
4,000<br />
3,500<br />
3,000<br />
80<br />
60<br />
40<br />
2,500<br />
20<br />
2,000<br />
1,500<br />
500<br />
0<br />
(20)<br />
0<br />
(40)<br />
06/07 07/08 08/09 09/10 10/11<br />
Operating Profit Growth Rate<br />
Operating Profit vs. EBT vs. EAT<br />
Market Cap & Total Return<br />
Rs. Mn.<br />
4,000<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
(500)<br />
06/07 07/08 08/09 09/10 10/11<br />
Operating Profit EBT<br />
EAT<br />
Rs. Mn. %<br />
30,000<br />
400<br />
25,000<br />
20,000<br />
250<br />
15,000<br />
10,000<br />
100<br />
5,000<br />
0<br />
(50)<br />
06/07 07/08 08/09 09/10 10/11<br />
Market Cap Total Return<br />
Financial Highlights<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 4
Corporate Information<br />
Name of the Company<br />
Richard Pieris and Company PLC<br />
Legal Form<br />
A quoted public Company with limited liability, incorporated<br />
in Sri Lanka under the Companies Ordinance No. 51 of 1938<br />
on 11th May 1940. The Company registration number is<br />
PQ 138.<br />
<strong>Stock</strong> <strong>Exchange</strong> Listing<br />
The Ordinary shares of the Company are listed in the<br />
<strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong> of Sri Lanka.<br />
Board of Directors<br />
Dr. Sena Yaddehige<br />
- Chairman/ Managing<br />
Director/CEO<br />
Mr. Pravir D. Samarasinghe - Director/Chief Operating<br />
Officer<br />
(Resigned w.e.f. 15/02/<strong>2011</strong>)<br />
Mr. J. H. Paul Ratnayeke - Director<br />
Prof. Lakshman R. Watawala - Director<br />
Prof. Susantha D. Pathirana - Director<br />
Mr. M. M. Udeshi<br />
- Director<br />
Mr. W. J. Viville. P. Perera - Director<br />
Head/Registered Office<br />
No. 310, High Level Road,<br />
Nawinna, Maharagama,<br />
Sri Lanka.<br />
Telephone : + (94) 114310500<br />
Fax : + (94) 114310777<br />
Website : www.arpico.com<br />
E-mail : cpu@arpico.com<br />
Secretaries<br />
Richard Pieris Group Services (Private) Limited<br />
No. 310, High Level Road,<br />
Nawinna, Maharagama,<br />
Sri Lanka.<br />
Auditors<br />
Ernst & Young<br />
Chartered Accountants<br />
No. 201, De Saram Place,<br />
<strong>Colombo</strong> 10,<br />
Sri Lanka.<br />
Bankers<br />
Bank of Ceylon<br />
Commercial Bank of Ceylon PLC<br />
Deutsche Bank A G<br />
DFCC Bank PLC<br />
Hatton National Bank PLC<br />
Hongkong & Shanghai Banking Corporation PLC<br />
Indian Bank<br />
Nations Trust Bank PLC<br />
NDB Bank PLC<br />
National Servings Bank<br />
PABC Bank PLC<br />
People’s Bank<br />
Sampath Bank PLC<br />
Seylan Bank PLC<br />
Standard Chartered Bank<br />
State Bank of India<br />
Legal Advisors<br />
Paul Ratnayeke Associates<br />
International Legal Consultants,<br />
Solicitors and Attorneys-at-Law,<br />
No. 59, Gregory’s Road,<br />
<strong>Colombo</strong> 7,<br />
Sri Lanka.<br />
Executive Management Committee<br />
Dr. Sena Yaddehige (Chairman)<br />
Priyantha Abeygunawardana<br />
Wasantha Abeysirigunawardena<br />
Andrew Dalby<br />
Raj De Silva<br />
Jagath Dissanayake<br />
Thushara Hettithantrige<br />
Sunil Jayakoddy<br />
Januka Jayanga<br />
Sunil Liyanage<br />
Jayantha Perera<br />
Viville Perera<br />
Fabio Piccolo<br />
Sunil Poholiyadde<br />
Pradeep Samaratunge<br />
Niranjan Vithanage<br />
Muditha Welihinda<br />
Corporate Information<br />
5<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Chairman’s Review<br />
Need Image<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 6
Chairman’s Review<br />
Dr. Sena Yaddehige<br />
Chairman/CEO/MD<br />
“The Group reported<br />
a Profit before Tax of<br />
Rs. 2,769 mn and a net<br />
attributed profit of Rs.<br />
1,681 mn, indicating<br />
growth of 161% and 190%<br />
respectively over the<br />
figures recorded in the<br />
preceding year.”<br />
Chairman’s Review<br />
Total assets of the Group stood at Rs. 20,639 mn<br />
while total equity was recorded at Rs. 6,864 mn.<br />
Simultaneously, Earnings per Share stood at Rs.<br />
0.87 for the year and Return on Equity at 38%.<br />
7<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Chairman’s Review<br />
It gives me great pleasure to present the 72nd <strong>Annual</strong> <strong>Report</strong><br />
and Audited Accounts of the Company and its subsidiaries for<br />
the year ended 31st March <strong>2011</strong>.<br />
It is with great pride that I announce to you that your group of<br />
companies posted record sales and earnings for the financial<br />
year <strong>2010</strong>/<strong>2011</strong>. Total net sales recorded by the Group were Rs.<br />
27,242 mn, 22 % increase over the previous year, while the<br />
Gross Profit increased by 41% to Rs. 6,610 mn. The Group also<br />
reported a Profit before Tax of Rs. 2,769 mn and a net attributed<br />
profit of Rs. 1,681 mn, indicating growth of 161% and 190%<br />
respectively over the figures recorded in the preceding year.<br />
Finance costs witnessed a significant decrease during the year<br />
from Rs. 969 mn to Rs. 795 mn, mainly due to reduced interest<br />
rates and efficient working capital and treasury management.<br />
Other operating income of the Group increased by 39% while<br />
profit from associates increased by Rs. 53 mn. The year also<br />
recorded an operating cash flow of Rs. 2,819 mn compared to<br />
Rs. 2,156 mn in the financial year 2009/<strong>2010</strong>. Total assets of the<br />
Group stood at Rs. 20,639 mn while total equity was recorded<br />
at Rs. 6,864 mn. Simultaneously, Earnings per Share stood at<br />
Rs. 0.87 for the year and Return on Equity at 38%.<br />
The Group operations for the year <strong>2010</strong>/11 created a total value<br />
of Rs. 3,450 mn, an increase of 75% from the value created in<br />
the preceding year. The significant contribution of all operating<br />
segments resulted in reaching such a healthy performance<br />
outcome.<br />
The retail sector<br />
continued to be<br />
the value driver<br />
of the group,<br />
representing 40%<br />
of consolidated<br />
revenue and 21%<br />
of earnings before<br />
interest and tax.<br />
Economy<br />
In <strong>2010</strong>, the Sri Lankan economy recorded an impressive<br />
growth of 8.0%, the highest annual rate of growth reported in<br />
the last three decades. Favorable performance in all key sectors<br />
of the economy contributed towards achieving this desirable<br />
milestone. Growth of the agricultural sector was recorded at<br />
7%, which is a significant improvement when compared with<br />
Group Performance<br />
Return on Equity vs. Return on Capital Employed<br />
Rs. Mn.<br />
29,500<br />
24,500<br />
19,500<br />
9,500<br />
4,500<br />
(500)<br />
06/07 07/08 08/09 09/10 10/11<br />
Rs. Mn.<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
(500)<br />
%<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
(10)<br />
(20)<br />
8 15<br />
(6)<br />
17<br />
(10)<br />
13<br />
21<br />
17<br />
39 38<br />
06/07 07/08 08/09 09/10 10/11<br />
Turnover Operational Profit<br />
Profit attributable to Equity holders of Parent Company<br />
ROE<br />
ROCE<br />
Chairman’s Review<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 8
Chairman’s Review<br />
the growth of 3.2% achieved in 2009. Reflecting a similar trend,<br />
industries recorded a growth of 8.4% while services posted a<br />
growth of 8%, both of which were significantly higher than the<br />
values recorded in the previous year.<br />
The annual average rate of inflation as measured by the<br />
<strong>Colombo</strong> Consumers’ Price Index stood at 5.9% in <strong>2010</strong>. The<br />
annual average rate of unemployment reached its lowest ever<br />
level of 4.9%, while the per capita income rose further to US $<br />
2,399 in <strong>2010</strong>.<br />
In response to the significant reductions in policy interest<br />
rates, there was a substantial downward adjustment of market<br />
interest rates across the term structure.<br />
With favorable macroeconomic conditions and the consequent<br />
recovery in economic activity, performance and stability of the<br />
financial sector strengthened in <strong>2010</strong>. Accordingly, the financial<br />
sector expanded further during the year and thereby stimulated<br />
more economic activity. Improved performance of financial<br />
sector institutions was observed in terms of profitability, capital<br />
levels, asset quality and the range of products and services<br />
offered.<br />
The overall fiscal deficit was reduced to 7.9% of GDP in <strong>2010</strong><br />
from the 9.9% recorded in 2009. Several vital revisions were<br />
also introduced to the tax structure, with special focus on the<br />
simplification of the tax system, rationalization of exemptions,<br />
improvement of tax compliance and strengthening of tax<br />
administration.<br />
The external sector continued to sustain its strong<br />
performance in <strong>2010</strong>, supported by the favorable global<br />
economic environment that persisted during the year. The<br />
Balance of Payments recorded a surplus of $ 921 mn, an<br />
outcome attributable to the higher inflows to the capital and<br />
financial account which exceeded the current account deficit.<br />
Consequently, the appreciating trend in the exchange rate<br />
continued during year, as reflected by the nominal effective<br />
exchange rate of the Sri Lanka rupee, (based on the 5-currency<br />
basket) appreciating by 4.1%. Gross official reserves also<br />
increased substantially from US $5,097 mn in 2009, to record<br />
US $6,610 mn by end <strong>2010</strong>.<br />
The All Share Price Index and the Milanka Price Index<br />
increased by 96% and 83% respectively in <strong>2010</strong>. The number<br />
of shares traded increased four-fold and the average daily<br />
turnover rose more than three-fold, while market capitalization<br />
of the CSE reached Rs.2.2 trillion by end <strong>2010</strong>.<br />
Sector Review<br />
The Group achieved a respectable growth and surpassed the<br />
revenue milestone of Rs. 27,242 mn in <strong>2010</strong>/<strong>2011</strong>. The plantation<br />
and retail sectors accounted for a larger portion of the total<br />
revenue generated.<br />
The plantations sector was the most significant contributor,<br />
representing more than half of the earnings before interest<br />
and tax. The retail sector, in continuing its long term trend, also<br />
contributed towards both the top line and bottom line. Except for<br />
the rubber and tyre sectors, all operating segments significantly<br />
contributed to the outstanding consolidated performance.<br />
Cash generated from operating activities of the group<br />
amounted to Rs. 2,819 mn of which Rs. 2,077 mn was<br />
attributable to the plantations sector. Plastic & Services sectors<br />
contributed Rs. 168 mn and Rs. 1,097 mn respectively to the<br />
operating cash flow. During the year under review, all sectors<br />
excepting Rubber and Services expanded their asset base and<br />
the group Return on Assets stood at 17% in <strong>2010</strong>/11 compared<br />
to 12% in 2009/10<br />
Real GDP vs. Real Growth Rate vs. Unemployment Rate<br />
Balance of Payments vs. <strong>Exchange</strong> Rates LKR/USD $<br />
Rs. Bn. %<br />
3,000<br />
2,500<br />
10<br />
8<br />
2,000<br />
6<br />
1,500<br />
4<br />
1,000<br />
500<br />
2<br />
0<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Real GDP Real Economic Growth Rate<br />
Unemployment Rate<br />
USD$ Mn.<br />
3,500<br />
2,000<br />
500<br />
(1,000)<br />
(2,500)<br />
(4,000)<br />
(5,500)<br />
(7,000)<br />
LKR/USD$<br />
116<br />
114<br />
112<br />
110<br />
108<br />
106<br />
104<br />
06/07 07/08 08/09 09/10 10/11<br />
Trade Deficit USD $ Mn (Jan - Dec)<br />
Overall Balance of Payment USD $ Mn (Jan - Dec)<br />
<strong>Annual</strong> <strong>Exchange</strong> Rate LKR / USD (March)<br />
9<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Chairman’s Review<br />
Retail<br />
The retail sector continued to be the value driver of the<br />
group, representing 40% of consolidated revenue and 21% of<br />
earnings before interest and tax. The sector posted revenue of<br />
Rs. 10,926 mn in <strong>2010</strong>/<strong>2011</strong>, compared to Rs. 9,043 mn in the<br />
preceding year, while segment profit was recorded at Rs. 828<br />
mn. As mentioned in the last <strong>Annual</strong> <strong>Report</strong>, an aggressive<br />
and accelerated expansion of the chain of outlets continued<br />
to operate in targeted areas of the country, with the aim of<br />
capitalizing on the post war economic boom. Consequently,<br />
the sector performed well by increasing its turnover by 21%<br />
and profitability by 61%. The results generated demonstrate<br />
the potential of the retail industry, specifically for the Company<br />
and in general for Sri Lanka, for future growth. The steady<br />
improvement of the post-war Sri Lankan economy has created<br />
a positive sentiment on consumer confidence, which in turn has<br />
driven retailing in the country. This positive trend is expected to<br />
continue in the coming year as well.<br />
Plantations<br />
The Financial Year <strong>2010</strong>/<strong>2011</strong> was an impressive year for the<br />
plantations sector where earning before interest and tax (EBIT)<br />
grew 147% to 2,032 mn. Plantations were the highest earner<br />
for the group, accounting for over 51% of the group profits and<br />
28 % of the group revenue.<br />
Plantations were<br />
the highest earner<br />
for the group,<br />
accounting for over<br />
51% of the group<br />
profits and 28 % of<br />
the group revenue.<br />
Being the largest rubber producing Plantation Company in the<br />
country, Kegalle Plantations produced 4,082 metric tons of<br />
rubber during the year, which constituted 2.7% of the national<br />
production.<br />
At national scale too plantation sector recorded a successful<br />
year, with an outstanding contribution to the National GDP,<br />
despite hampered production due to adverse weather. Tea and<br />
Rubber crops contributed 4.34% and 3.78% respectively at the<br />
national level in the year of review.<br />
Interest Rates - AWPLR<br />
Rs. Bn.<br />
21.00<br />
19.00<br />
17.00<br />
15.00<br />
13.00<br />
11.00<br />
9.00<br />
7.00<br />
5.00<br />
April<br />
May<br />
June<br />
July<br />
August<br />
September<br />
October<br />
November<br />
December<br />
January<br />
February<br />
March<br />
2009<br />
<strong>2010</strong><br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 10
Chairman’s Review<br />
Rubber<br />
Although the sector has played a key role in enhancing the<br />
Group’s reputation for high quality and dependable products,<br />
the dramatic and unprecedented increase in rubber prices<br />
had a severe impact on its profitability, specifically in the low<br />
end products. Although sector turnover increased by 25% to<br />
Rs. 2,215 mn, rubber sector recorded a negative operational<br />
contribution of Rs. 25 mn, when compared to the profit of Rs.<br />
65 mn in the financial year 2009/<strong>2010</strong>. Nevertheless, despite<br />
current and potential challenges such as high rubber prices,<br />
high cost of furnace oil and of electricity, the sector has focused<br />
on improving operations and business processes, with the aim<br />
of achieving reductions in cost and enhancements in quality.<br />
Tyre<br />
In the tyre sector too, although turnover increased by 20%<br />
to Rs. 2,530 mn, profit from operations dipped to Rs.264<br />
mn, despite having recorded a profit of Rs. 300 mn in the<br />
financial year 2009/<strong>2010</strong>. Even though the entire tyre industry<br />
was affected by the high rubber prices, Richard Pieris Tyre<br />
Company was able to maintain a substantial performance.<br />
The sector also benefitted from the process consolidation,<br />
which reduced production cost. During the next year, the<br />
sector expects further growth in volumes, market share and<br />
profitability, as market conditions improve.<br />
Plastics & Distribution<br />
This year was both challenging and rewarding for the plastics<br />
and distribution sector, with an exceptional increase in turnover<br />
and profits. Revenue for the year increased by 33% from the<br />
prior year, while sector profitability was also up from Rs. 321<br />
mn in 2009/10 to Rs. 460 mn in <strong>2010</strong>/11. Extensive volume<br />
growth was visible in the Polyurethane, Rigifoam and Water<br />
Tanks divisions. Continued focus on quality control at all stages<br />
of the production process and the introduction of innovative<br />
processes, have further strengthened the companies’ position<br />
in this sector.<br />
The Outlook for next year<br />
In the coming year, The Group intends to continue exploring<br />
opportunities for expansion and growth, while being vigilant of<br />
global and local market conditions.<br />
Dividend<br />
During the year, the company declared and paid interim<br />
dividend of Rs.0. 20 per share. The directors also recommend a<br />
final dividend of Rs. 0.10 per share.<br />
Conclusion<br />
I take this opportunity to thank all our stakeholders including<br />
the management team and employees, our suppliers, our<br />
customers, our business partners and my co- directors of<br />
Richard Pieris and Company PLC for their support given in<br />
this challenging year. I also wish to thank all the shareholders<br />
for the confidence vested in the Company, and ask for their<br />
continued understanding and support.<br />
Dr. Sena Yaddehige<br />
Chairman/CEO/MD<br />
27th May <strong>2011</strong><br />
Services<br />
The services sector includes various businesses outside<br />
the Group’s main sectors of Plantations, Rubber, Tyre, Retail<br />
and Plastics. During the year, the group re-entered the<br />
financial services industry via the formation of its fully owned<br />
subsidiaries RP Securities (Pvt) Ltd & RP Financial Services<br />
(Pvt) Ltd. From the outset, the performance appears to be good<br />
with a wide client base and positive results. The Group targets<br />
at becoming a dominant player in the financial services market<br />
domain by taking full advantage of its brand equity and countrywide<br />
infrastructure.<br />
11<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
The Board of Directors<br />
[1] Dr. Sena Yaddehige<br />
Chairman/Managing Director/Chief<br />
Executive Officer<br />
Dr. Sena Yaddehige is a Sri Lankan born<br />
British Scientist/Engineer and a UK<br />
based industrialist. He is the Managing<br />
Director of an European Company,<br />
which is part of a group involved in<br />
the development of high technology,<br />
automated manufacturing, and export<br />
of automotive components and systems<br />
to Europe, China and the United States.<br />
He holds a large number of worldwide<br />
patents on radiation processing,<br />
contactless sensors and drive by wire<br />
systems along with a Srilankan patent for<br />
slow release fertilizer.<br />
He is Founder, Chairman and Director of<br />
numerous companies in Sri Lanka and<br />
abroad.<br />
Dr. Yaddehige is the Chairman of the<br />
Richard Pieris Group of Companies<br />
comprising 5 Listed Companies and<br />
almost over 45 companies wholly or<br />
majority owned by Richard Pieris and<br />
Company PLC. He was appointed<br />
to the Board of Directors of National<br />
Development Bank PLC in December<br />
2007 and was in the directorate until his<br />
resignation from the Bank in November<br />
<strong>2010</strong>.<br />
Dr. Yaddehige was conferred with Doctor<br />
of Science (D.Sc.) in consideration of<br />
his original research work in the fields<br />
of Radiation, Radiation processing,<br />
Electromechanical Sensor technology,<br />
non contact sensor technology and<br />
automotive pedal systems along with<br />
numerous patents in the above fields.<br />
[2] Mr. J. H. P. Ratnayeke<br />
Mr. Paul Ratnayeke is a Senior<br />
Corporate Lawyer who is also the<br />
precedent partner of Paul Ratnayeke<br />
Associates, a leading law firm in<br />
Sri Lanka which he founded in<br />
1987 handling all areas of law and<br />
international legal consultancy work.<br />
Mr. Ratnayeke is a Solicitor of England<br />
and Wales and an Attorney - at - Law<br />
of the Supreme Court of Sri Lanka.<br />
He holds a bachelors degree in law<br />
with honours and has been awarded a<br />
Masters Degree in Law by the University<br />
of London.<br />
Currently Mr. Ratnayeke holds<br />
directorships in several companies of<br />
which 8 are public quoted companies.<br />
He has also been elected/appointed as<br />
Chairman/ Deputy Chairman to several<br />
of these companies.<br />
At Paul Ratnayeke Associates, he<br />
specializes in corporate and commercial<br />
areas of law including mergers and<br />
acquisitions, aviation, insurance and<br />
maritime law.<br />
[3] Prof. Lakshman R. Watawala<br />
Prof. Lakshman R. Watawala is a<br />
Fellow of the Institute of Chartered<br />
Accountants of Sri Lanka, Fellow of<br />
the Institute of Certified Management<br />
Accountants of Sri Lanka and Fellow of<br />
the Chartered Institute of Management<br />
Accountants in UK. He is the Former<br />
Chairman and Director General of<br />
the Board of Investment of Sri Lanka,<br />
former Chairman of People’s Bank,<br />
People’s Merchant Bank, State Mining<br />
and Mineral Development Corporation<br />
and the Ceylon Leather Products<br />
Corporation and a Committee Member<br />
of the Ceylon Chamber of Commerce.<br />
He is also President of the Institute of<br />
1 2 3<br />
The Board of Directors<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 12
The Board of Directors<br />
Certified Management Accountants-Sri<br />
Lanka. Past President of the Institute of<br />
Chartered Accountants of Sri Lanka and<br />
South Asian Federation of Accountants,<br />
Founder President of AAT Sri Lanka<br />
and Past President- Organisation of<br />
Professional Associations of Sri Lanka.<br />
He also serves on the Board of Directors<br />
of several public listed companies.<br />
[4] Prof. Susantha Pathirana<br />
Prof. Susantha Pathirana is a graduate<br />
in Production Engineering from the<br />
University of Peradeniya with a MSc<br />
in Automatic Control and a PhD in<br />
Mechanical Engineering. He is a<br />
Member of the Institute of Engineering<br />
& Technology - U.K, Fellow of the<br />
Institution of Engineers - Sri Lanka and<br />
a Member of the Institution of Electrical<br />
& Electronic Engineers – U.S.A. He is<br />
the former Head of the Department<br />
of Production Engineering and former<br />
Dean of the Faculty of Engineering<br />
at the University of Peradeniya, Sri<br />
Lanka. He is currently a Professor in the<br />
Department of Production Engineering at<br />
the University of Peradeniya, Sri Lanka.<br />
[5] Mr. M. M. Udeshi<br />
Mr. Morarji Udeshi Joined C V Bhatt<br />
Group of Companies in 1947. He was<br />
appointed Chairman and Managing<br />
Director of the C V Bhatt Group in 1991,<br />
and Asha Phillip Securities Ltd.<br />
[6] Mr. Viville Perera<br />
Mr. Viville Perera is a Science graduate<br />
from Kelaniya University with Second<br />
Class Honours and a Fellow Member of<br />
the Chartered Institute of Management<br />
Accountants and Associate Member<br />
of the Chartered Institute of Marketing<br />
in United Kingdom. Mr. Perera has<br />
over 30 years experience in senior<br />
managerial capacity in leading business<br />
organisations such as Associated<br />
Newspapers of Ceylon Limited,<br />
Middeleway Ltd (Ceylinco Group) and<br />
Amico Group of Companies. He has<br />
served as a Treasurer and Vice President<br />
of Sri Lanka Institute of Packaging<br />
and a member of the lecture panel for<br />
SLIM and ABE Sri Lanka Branch for<br />
examinations leading to CIM and ABE<br />
(UK). He is a Director of Richard Pieris<br />
Exports PLC.<br />
4 5 6<br />
13<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Retail<br />
Retail<br />
The selective expansion of its chain of Supercentres/stores in<br />
targeted areas of the country will continue, capitalising on the<br />
post war economic boom that is expected in the ensuing years.<br />
The Product Portfolio: Fast Moving Consumer Goods including Food, Household<br />
Goods, Apparel, Furniture & Electronics<br />
Sector Review - Retail<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 14
Sector Review - Retail<br />
The Retail Sector operates the Arpico Supercentres,<br />
Superstores and a network of showrooms and also provides<br />
interior decorating solutions for institutions. During the past few<br />
years this sector has been a key growth oriented arm of the<br />
Group. The Sector performed very well in the year under review<br />
increasing its turnover by 21% and profitability by 61% when<br />
compared to the previous year. This demonstrates the potential<br />
of the retail industry, in Sri Lanka, for future growth.<br />
The steady improvement of the economy in post war Sri Lanka<br />
is also having a positive sentiment on consumer confidence,<br />
which has helped drive retailing in the Country. This positive<br />
trend is expected to continue in the coming year as well and<br />
should have a positive impact on the performance of this<br />
Sector.<br />
Retail Sector Performances<br />
Rs. Mn.<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Net Turnover Operating Profit<br />
Rs. Mn.<br />
900<br />
750<br />
600<br />
450<br />
300<br />
150<br />
0<br />
The Sector is represented by Richard Pieris Distributors<br />
Limited, Arpimalls Development Company (Pvt.) Limited,<br />
RPC Retail Developments (Pvt.) Limited, RPC Real Estate<br />
Development (Pvt.) Limited and Arpico Interiors (Pvt.) Limited.<br />
Richard Pieris Distributors Ltd.<br />
Richard Pieris Distributors operates the well-known Arpico<br />
chain of Supercentres, Super Stores and Showrooms islandwide.<br />
The network retails a wide array of fast moving consumer<br />
goods (FMCG), household goods, including furniture &<br />
electronics, and offers a host of value added services through<br />
its eleven super centres/stores, twenty six showrooms, five mini<br />
stores and one furniture outlet.<br />
The turnover and profitability of the Company improved steadily<br />
compared to the previous year. All key product categories<br />
including FMCG, household goods, furniture & electronics<br />
recorded a steady growth in business during the year under<br />
review. These positive trends are expected to continue into the<br />
coming year as well.<br />
The Company opened its eleventh large format retail outlet<br />
in the town of Wattala with a grand opening amidst a large<br />
gathering of invitees in December <strong>2010</strong>. This outlet, which is in<br />
excess of 50,000 square feet can comfortably park 150 cars,<br />
and is arguably the most environmentally friendly retail store<br />
as of date. The outlet has become the focal point in the town of<br />
Wattala and has fast become a destination where thousands of<br />
people congregate on a daily basis.<br />
The Company also commenced business operations in five<br />
mini stores in the Central Province, a furniture outlet in Nawala<br />
and a showroom in Dambulla in the year under review. This has<br />
further helped enhance the volume growth of the Company.<br />
Customer convenience has enabled the Arpico Supercentres<br />
and stores to gain a competitive edge over its rivals. All super<br />
centres and stores have ample parking space, wide aisle space<br />
for easy shopping and state-of-the-art cool rooms to provide<br />
fresh products. We continue to focus on improving levels of<br />
convenience and service.<br />
15<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Retail<br />
Special events were organised throughout the year, including<br />
activities for children in order to create an added level<br />
of excitement and provide customers with a comfortable<br />
environment to shop in. The Arpico Family range of branded<br />
products was expanded and new products adapted to suit<br />
today’s market.<br />
Carefully targeted marketing and sales strategies over the<br />
years have led to better awareness of the Arpico Brand. The<br />
Company carried out a re-branding exercise in the year under<br />
review with its “fresh ideas everyday” tag line been very well<br />
received by a large majority of customers. The Company also<br />
carried out an aggressive seasonal campaign in the festive<br />
month of December giving away a brand new Santafe SUV to<br />
the winner of the grand draw. This had a positive impact on the<br />
turnover growth of the Company. The Company continued with<br />
the provision of value added products and services with the<br />
inclusion of the HSBC credit card bill settlement facility to its<br />
portfolio.<br />
The Arpico Privilege Card customer base continued to grow<br />
with its membership increasing to approximately 180,000 by<br />
the end of the year. Tempting rewards to members contributed<br />
to the increasing popularity of the Privilege Card. Sri Lanka’s<br />
first ever environmentally friendly biodegradable Privilege card<br />
was also launched coinciding with the launch of the outlet in<br />
Wattala.<br />
The careful implementation of cost reduction programmes and<br />
focus on inventory control has enabled the retail operation<br />
to run efficiently keeping expenses well within budgeted and<br />
acceptable proportions while continuing to improve the quality<br />
of its products and services. The supply chain operation was<br />
constantly monitored and evaluated and this enhanced the<br />
capability of selling a wide range of high quality products at<br />
competitive prices.<br />
The Company was also the recipient of a sum of money<br />
exceeding Rs. 1 billion from four financial institutions as a result<br />
of Sri Lanka’s first ever credit card securitization transaction in<br />
January <strong>2011</strong>. This should help significantly speed up the retail<br />
expansion of the Company.<br />
The Company believes in the continuous training and<br />
development of its employees. The training academy at<br />
Nawinna which was opened two years ago continued to provide<br />
training to all employees. The results are visible in improved<br />
efficiency and better customer service.<br />
Arpimalls Development Company (Pvt.) Ltd.<br />
Arpimalls Development Company owns the two large Arpico<br />
Supercentres in Battaramulla and Dehiwela operated by<br />
Richard Pieris Distributors Ltd. The company continued its<br />
profitable record during the year under review.<br />
RPC Retail Developments (Pvt.) Ltd.<br />
RPC Retail Developments owns the 45,000 square foot Arpico<br />
Supercentre in Negombo which is now in its fourth year of<br />
operation and has continued recording profitable results in the<br />
year under review.<br />
RPC Real Estate Development (Pvt.) Ltd.<br />
RPC Real Estate Development owns the Arpico Supercentre in<br />
Kandy. The Company also continued its profit making record in<br />
the year under review.<br />
Arpico Interiors (Pvt.) Ltd.<br />
Arpico Interiors provides institutional and corporate customers<br />
in both the public and private sectors with comprehensive<br />
services in interior decorating and solutions including the<br />
provision of furniture. Over the years, it has built a strong<br />
reputation as a provider of turnkey solutions and supplier<br />
of furniture. It focuses on projects for hotels, apartments,<br />
hospitals, factories and offices from concept planning to<br />
complete turnkey solutions. The products are of high quality<br />
sourced from reputed local manufacturers as well as those<br />
of personally handpicked suppliers, from the U.S.A., Europe,<br />
Dubai, China and Malaysia. Its wide range of products, are on<br />
display at the Interior Decor Showroom at Hyde Park Corner.<br />
The Company remained profitable despite the slow recovery<br />
from the economic slowdown which had a significant impact<br />
on the construction industry and the institutional sector in<br />
particular. The impact on profitability was further compounded<br />
by the increasing cost of imports due mainly to high import<br />
duties and taxes. Consequently, plans to introduce high<br />
end items to its product portfolio, were deferred until market<br />
conditions become more favourable.<br />
Arpico Interiors, while continuing to adopt a cautious approach<br />
during the coming year, is confident of improving its profitability,<br />
with the recovery of economic activities. The company has<br />
drawn up plans to meet the opportunities of the coming year<br />
with increased offerings.<br />
The selective expansion of its chain of Supercentres/stores in<br />
targeted areas of the country will continue, capitalising on the<br />
post war economic boom that is expected in the ensuing years.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 16
Sector Review - Plantations<br />
Plantations<br />
The year <strong>2010</strong>/<strong>2011</strong> witnessed the plantation sector emerging<br />
as the highest contributor to group profitability for the third<br />
consecutive year.<br />
The Product Portfolio: Leasehold Ownership & Management of Tea, Rubber, Oil<br />
Palm, Coconut Plantations and Branded Tea<br />
Sector Review - Plantations<br />
17<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Plantations<br />
The year <strong>2010</strong>/<strong>2011</strong> witnessed the plantation sector emerging<br />
as the highest contributor to group profitability for the third<br />
consecutive year. The sector, comprising of three public<br />
quoted companies, namely Kegalle Plantations, Namunukula<br />
Plantations and Maskeliya Plantations, performed exceptionally<br />
well during the year despite bearing the burden of a 42% wage<br />
hike in the previous year and adverse weather conditions.<br />
The outcome was also recorded as the historical best for both<br />
Kegalle Plantations and Namunukula Plantations.<br />
Output of the plantation sector is highly diversified and includes<br />
high grown, mid grown and low grown tea, rubber, oil palm,<br />
coconut, cinnamon, cardamom, rambutan and other crops.<br />
Of these, the highest contribution to revenue was from tea at<br />
61.9%, followed by rubber at 32.8% and oil palm at 3.3%. Out<br />
of the total 27,800 hectares of extent, 7290.4 hectares were<br />
employed for tea, while 5,864.30 hectares were used for rubber.<br />
Oil palm and other crops utilized 1,105.7 and 751.15 hectares<br />
respectively.<br />
At national level, despite the negative growth in the agricultural<br />
sector initially, the year end witnessed the sector encouragingly<br />
maintaining its prominence with a 11.9% contribution to<br />
the GDP. It was also during this year that the national tea<br />
production reached its all-time high of 330 mn kg, a sharp rise<br />
from the 320 mn kg produced in the preceding year.<br />
Tea prices were at attractive levels, with high grown tea being<br />
traded at Rs. 341.03 and low grown tea being traded at Rs.<br />
362.00 per kg on average. An attractive trend in terms of<br />
price was also witnessed in the market for rubber, with Latex<br />
Crepe claiming its’ highest ever price of Rs. 700.00 per kg,<br />
and speculation is ripe that the trend will continue for the next<br />
year as well. The average price of oil palm was recorded at Rs.<br />
23.24 per kg during the year.<br />
Plantation Sector Performances<br />
Rs. Mn.<br />
9,000<br />
7,500<br />
6,000<br />
4,500<br />
3,000<br />
1,500<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Net Turnover<br />
Operating Profit<br />
Rs. Mn.<br />
3,000<br />
2,000<br />
1,000<br />
The plantation sector runs a risk of being imposed another<br />
pay hike in the coming year as a consequence of the<br />
Collective agreement entered in to between regional plantation<br />
companies and trade unions. There is a pressing need to<br />
consider the sustainability of the industry during the negotiation<br />
process, as failure to do so will reflect adversely on the viability<br />
of the industry.<br />
KEGALLE PLANTATIONS PLC<br />
For Kegalle Plantations, the year ended on a high note, with it<br />
generating the highest ever profit recorded in its history.<br />
Despite a 11% decrease in production, it was able to maintain<br />
its stature as the largest rubber producer, with production<br />
amounting to 4,082 metric tons. The decrease is largely<br />
attributable to the adverse weather that persisted during the<br />
third quarter of the year, whose effects hampered production<br />
during the months where usually the highest crop is reaped.<br />
In absolute terms, the Company’s total rubber production<br />
dropped from 4,578 metric tons in the previous year to 4,082<br />
metric tons in the year under review by 496 metric tons. The<br />
0<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 18
Sector Review - Plantations<br />
average yield per hectare (YPH) for rubber was recorded<br />
at 936 kg while national increase in tea production was<br />
recorded at 27%, Kegalle Plantations recorded growth stood<br />
at 12%. Nevertheless, this is a commendable achievement<br />
when considered in the light of the unfavourable weather<br />
conditions that persisted in the Udapussellawa region. It was<br />
also desirable to note that the tea prices in the Udapussellawa<br />
region remained encouraging during the year.<br />
All factories of the Company were able to maintain an<br />
acceptable NSA. This is reflected in the Gampaha factory<br />
obtaining 63 top prices, Luckyland 57 top prices and Doteloya<br />
32 top prices during the year. Kirklees and Yataderiya recorded<br />
6 and 3 top prices respectively.<br />
The Company continued its replanting programme and<br />
accordingly 23.15 hectares of tea and 147 hectares of rubber<br />
were replanted with expenditure of Rs. 145 mn. The year also<br />
saw the commencement of the upgrading of the Doteloya<br />
factory at an investment of Rs. 18 mn. The Company’s practice<br />
of embracing new inventions in order to improve productivity,<br />
such as using rain guards in rubber extents, was also<br />
continued.<br />
Overall, the Company’s revenue for the period was recorded at<br />
Rs. 2.99 billion, a 35% rise from the previous year. The largest<br />
contributor to revenue was rubber, with a 65% share, while<br />
tea contributed to 30.3%. A 4% contribution was received from<br />
other crops and the sale of rubber trees. Revenue from rubber<br />
recorded a handsome 54% increase, while revenue from tea<br />
improved by 5%.<br />
NAMUNUKULA PLANTATIONS PLC<br />
Namunukula Plantations PLC is the most diversified plantation<br />
company in the group, with interests in more than 5 main<br />
crops. The year <strong>2010</strong>/<strong>2011</strong> is recorded as the best performing<br />
year in its history, where growth in both revenue and profits<br />
was witnessed despite the adverse impact of weather on all<br />
its crops. Such an outcome is largely attributable to the high<br />
prices obtained in the market for its three main crops, namely<br />
tea, rubber and oil palm. Company profits were recorded at<br />
its highest ever of Rs. 409.3 mn, more than 179% higher than<br />
profits recorded in the preceding year. Revenue was recorded<br />
at Rs. 2.1 billion.<br />
Bought tea leaf operations, on which depends approximately<br />
82% of the Company’s tea production, continued to be<br />
challenging due to the operation of private estates in<br />
surrounding areas. Nevertheless, in comparison to the previous<br />
year, a nominal increase was observed in bought tea leaf<br />
operations.<br />
While low grown tea continued to stabilize at existing NSA’s,<br />
rubber and oil palm NSA’s were recorded at an all time high.<br />
Rubber prices were recorded at Rs. 491.26, which is an 85%<br />
increase from the previous year. Yatadola Estate fetched a price<br />
of Rs. 630.00 per kg of Latex Crepe Grade 1X, the highest<br />
recorded in the history of the plantation sector. Oil palm prices<br />
too remained vibrant, recording an all-time high of Rs. 28.82<br />
per fresh fruit bunch in February. This trend is expected to<br />
continue in the coming year as well, due to low production<br />
levels both locally and internationally.<br />
During the year the Company replanted 2.5 hectares of tea<br />
and 104 hectares of oil palm at a total investment of Rs. 47.5<br />
mn. Maintenance expenditure on immature fields was recorded<br />
at Rs. 48.3 mn. The Company is currently involved with the<br />
development of a tea factory at the Baddegama Estate at a<br />
total investment of Rs. 56 mn. Upon completion, the factory will<br />
increase the processing capacity of the Company to 1.20 mn kg<br />
per annum.<br />
MASKELIYA PLANTATIONS PLC<br />
The year ended with Maskeliya Plantations recording both crop<br />
and price gains in its high grown tea production. Out of the total<br />
tea production of 9.13 mn kg, 8.45 mn kg was from estate leaf,<br />
which is approximately 7% higher than the production of the<br />
same in the previous year. Bought leaf quantities increased by<br />
150% in comparison to the previous year. Cultivation has also<br />
improved, with the yield per hectare increasing by 8% to 1525<br />
kg.<br />
By recording 130 top prices for six of its estates, the Company<br />
was able to secure its supremacy in the high grown tea<br />
segment. Some garden marks topped by recording prices as<br />
high as Rs. 510 per kg during the year. The Western High NSA<br />
was recorded at Rs. 368.52 per kg, with Elevation average at<br />
Rs. 353.64. In the Uva High Category, the Company’s average<br />
was recorded at Rs. 316.85, while the Elevation average was<br />
Rs. 312.28 per kg.<br />
The Company invested Rs. 162 mn on replanting 55 hectares,<br />
while a further Rs. 7 mn was spent on maintenance of<br />
immature plants. It successfully established a 7 hectare<br />
rubber plantation in the lower sections of the Poonagalla<br />
Estate, and plans are underway to expand this venture further.<br />
Furthermore, a rambutan and duriyan cultivation of 2 hectares<br />
was also undertaken in the Ampittiakande Estate. In order to<br />
accommodate market preferences via enhanced manufacturing<br />
flexibility, the Company has commenced factory developments<br />
in Poonagalla, Ampittiakande, Craig, St. Clair and Talawakelle<br />
with an investment worth Rs. 66 mn.<br />
All fourteen factories of the Company were certified under<br />
‘Ethical Tea Partnership UK’ whose members include some of<br />
UK’s leading buyers. Moreover, twelve factories have obtained<br />
the ISO 22000 (Food and Safety System Certification),<br />
while four have continued to maintain the Fair trade Labeling<br />
19<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Plantations<br />
Organization certificate. These achievements form ample<br />
indication of the Company’s commitment to maintain the<br />
highest standards of quality.<br />
Overall, the Company recorded a profit of Rs. 42.4 mn, which<br />
is a considerable improvement from the loss of Rs. 34.6 mn<br />
recorded in the preceding year. Total revenue also improved<br />
from Rs. 3.1 billion to Rs. 3.2 billion in the current year.<br />
Profitability was achieved despite high labour costs, mainly<br />
due to the low finance costs achieved via efficient working<br />
capital management and low interest rates that prevailed in the<br />
economy. Impressively, the borrowings of the Company were<br />
also reduced from Rs. 537 mn in the previous year to Rs. 502<br />
mn in the current year.<br />
MASKELIYA TEA GARDENS CEYLON LTD<br />
Maskeliya Tea Gardens markets top quality pure Ceylon tea<br />
both locally and globally under the brand ‘St. Clair’s’. Equipped<br />
with a wide range, from orthodox black leafy tea to flavoured<br />
tea in tea bags and gift items, St. Clair’s tea is renowned for<br />
their outstanding quality, offering a supreme cuppa to the<br />
discerning tea drinker. The supreme quality of the produce<br />
of Maskeliya Tea Gardens was recognized for the second<br />
consecutive year at the ProdExpo <strong>2011</strong> Moscow Fair, where<br />
it bagged the ‘Grand Prix Award’ for excellence in product<br />
innovation and design.<br />
The brand continued its vibrant progress in the local market<br />
with the introduction of attractive St. Clair’s loose-leaf tea pack.<br />
The resultant immediate increase in sales at the Company’s<br />
Super Centers has prompted the Company to consider<br />
expanding the product range to other shopping centers as well.<br />
During the year, Maskeliya Tea Gardens continued to ship<br />
produce to Australia, Nigeria and Chile. Attention was also<br />
placed on expanding the Russian market, which has continued<br />
to pay dividends via increased orders. Further, the Company<br />
is entertaining plans to enter the Middle-Eastern market in the<br />
coming year.<br />
The St. Clair’s Tea Center at Thalawakelle continues to attract<br />
a wide range of local and foreign tourists, offering a refreshing<br />
stop-over and a tantalizing product range of tea items, bundled<br />
with service par-excellence and old-world charm.<br />
Maskeliya Tea Gardens will focus on expanding its client base<br />
and increasing its turnover in the coming year.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 20
Sector Review - Tyre<br />
Tyre<br />
Richard Pieris Tyre Company is the established market leader<br />
having the largest tyre distribution network in the Country.<br />
The Product Portfolio: Retreaded Tyres for Light and Heavy Commercial Vehicles,<br />
Re-Manufactured Radial Tyres, Tubes and Flaps, trading in tubes, flaps and new<br />
tyres<br />
Sector Review - Tyre<br />
21<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Tyre<br />
The Tyre Sector of Richard Pieris Group which facilitates the<br />
entire tyre retreading value chain is the pioneer and market<br />
leader of tyre retreading in Sri Lanka. The tyres being re<br />
used has indirectly contributed to the Country’s economy by<br />
decreased transport costs and outflow of foreign exchange<br />
on imported tyres. This also immensely helps the reduction in<br />
damage to the environment. The tyre sector comprises three<br />
companies, Richard Peiris Tyre Co, Ltd, Arpidag International<br />
(Pvt) Ltd and Richard Peiris Rubber Compounds Ltd.<br />
Richard Pieris Tyre Company is the established market leader<br />
having the largest tyre distribution network in the Country.<br />
Arpidag International (Pvt.) Ltd and Richard Pieris Rubber<br />
Compounds Ltd are the supportive companies supplying<br />
pre-cured tread, bonding gum, cement other related materials<br />
and customized mixing facilities to the Tyre Company. Arpidag<br />
International also has extended its services by supplying treads<br />
and consumables to mini plants in the industry.<br />
The whole rubber based industry in the Country including<br />
our Company went through a challenging year due to<br />
the fluctuations of rubber prices. The first half of the year<br />
experienced comparatively low commodity prices compared<br />
to the rubber prices in the second half which had a sharp<br />
increase adversely affecting the entire rubber based industry.<br />
However even though the entire tyre industry was affected by<br />
a negative performance, Richard Pieris Tyre Company was<br />
able to maintain a substantial profit for the year due to the<br />
production and energy efficiencies minimizing overhead costs<br />
and eliminating unproductive practices. The Sector also was<br />
benefitted by the process consolidation which reduced the<br />
production cost. The Company being more vigilant about the<br />
future has helped to gain competitive advantage on the buying<br />
process which contributed in sustaining the performance even<br />
during a challenging period faced by the entire industry.<br />
Tyre Sector Performances<br />
Rs. Mn.<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
5,00<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Net Turnover<br />
Operating Profit<br />
Rs. Mn.<br />
350<br />
Richard Pieris Tyre Company<br />
Richard Peiris Tyre Company, the largest tyre retreader<br />
in Asia, having a large dealer network with 1300 Dealers<br />
Island wide, rebuilds more than 600,000 tyres per annum.<br />
Its operations entail the retreading of tyres, in which it holds<br />
a larger share of the local market, and trading, a business it<br />
entered into a few years ago. Retreading still forms over 80%<br />
of the company’s turnover. During the year under review it<br />
increased its manufacturing capacity and enhanced its product<br />
range, both in the retreading and trading product in order to<br />
meet increased customer demand. The company’s retreading<br />
turnover increased by 23% and trading turnover increased by<br />
21%, increasing its share of the market.<br />
The production capacity in the Kandy factory was increased<br />
to cater the increased demand in the Central province.<br />
Kurunagale factory capacity was also increased to meet the<br />
demands from the Northern and Eastern markets. The overall<br />
production capacity was enhanced in order to further increase<br />
the market share.<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 22
Sector Review - Tyre<br />
The conventional capacity in the Agricultural segment, which<br />
is the fastest growing segment, was enhanced in order to meet<br />
the increased seasonal demands.<br />
The sale of “Arpiradial”, which was introduced few years ago,<br />
has performed well. The process facilitates the retreading of<br />
radial tyre casings, giving strength and retread ability to the<br />
casings and uses specially designed radial tread designs. The<br />
Company intends in introducing a larger product range in the<br />
radial tyres since the customer base is moving to radial tyres<br />
from the bias tyres, increasing the demand for more radial tyres<br />
in the future.<br />
The Company has consolidated its position in the trading<br />
business and has successfully completed the year under review<br />
with a substantial turnover growth. At present the Company is<br />
the sole agent for Birla tyres India, and also represents Corsa<br />
tyres in Indonesia. Birla Tyres are the manufacturers of truck,<br />
light truck and agricultural vehicles. Corsa tyres specialize<br />
in supplying tyres for passenger cars and vans. In addition<br />
to this, sales of tubes, flaps and three-wheeler tyres have<br />
also increased. The wide dealer network has proved to be a<br />
significant competitive advantage which has enabled the timely<br />
delivery of imported tyres island wide within a day.<br />
The Company introduced radial truck tyres with the Birla<br />
Company, further the Company also intends in increasing the<br />
product portfolio by introducing automotive batteries to the<br />
market.<br />
The Company’s profitability was affected by the high price of<br />
raw material during the year. Efficient management of costs<br />
however enabled the company to maintain profitability.<br />
The capacity is fully utilized by providing services to outside<br />
customers with higher energy and labour efficiencies. The<br />
production efficiency will be increased further in the coming<br />
year to enhance the quality of the products.<br />
Arpidag International entered the international market by<br />
exporting tread in small quantities to Europe and also the<br />
Company plans to further increase exports in the coming year.<br />
Richard Pieris Rubber Compounds Ltd.<br />
Richard Pieris Rubber Compounds provides mixing services to<br />
Richard Pieris Tyre Company, several other companies within<br />
the Group, and various external customers. The company has<br />
state-of-the-art machinery in its factory which provides a high<br />
level of quality. The company now also sells chemicals to local<br />
manufacturers.<br />
The Company is continuing its efforts to find potential<br />
customers for milling services and help the other two<br />
companies in the sector to achieve a higher market share by<br />
providing an excellent mixing service.<br />
The right product portfolio and dynamic service levels has<br />
been the key to the sector’s success. The location of plants and<br />
island wide distribution network enables quick delivery. A “One<br />
day service” was introduced in designated areas with tyres in<br />
these areas are being delivered within a day enabling dealers<br />
to control their working capital requirements.<br />
The sharp increase in the raw material prices proved to be a<br />
considerable challenge during the year under review. Rubber<br />
prices have doubled during the last twelve months and there<br />
is no indication that these prices will come down in the near<br />
future. Steps have been taken to increase efficiency and<br />
maintain production at the optimum level for each plant. The<br />
Company continuously invests in the work force and believes<br />
that efficient human resources is vital to its growth.<br />
Arpidag International (Pvt.) Ltd<br />
Arpidag International is a pioneer in supplying the pre- cured<br />
treads to the tyre industry. It supplies pre-cured tread mainly<br />
to the Richard Pieris Tyre Company while it also supplies to<br />
external customers through the ATM brand. The Company has<br />
been awarded with the process quality certification of “ISO :<br />
9001”<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Plastics<br />
Plastics<br />
The year under review was both challenging and rewarding with<br />
an exceptional increase in turnover and profits.<br />
The Product Portfolio: Water Tanks, Polyurethane Foam Mattresses, Water<br />
Pumps, CFL Bulbs, Moulded Plastic & Expandable Rigid Polystyrene Products<br />
Sector Review - Plastics<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 24
Sector Review - Plastics<br />
The Plastics Sector manufactures and markets a wide range<br />
of products made of polyurethane foam, rotational moulded<br />
plastics, expanded rigid polystyrene, PVC, domestic and<br />
industrial based rubber products, and other categories such as<br />
water pumps, PVC doors and CFL bulbs. It also manufactures<br />
& distributes furniture.<br />
The year under review was both challenging and rewarding<br />
with an exceptional increase in turnover and profits.<br />
Plastic Sector Performances<br />
Rs. Mn.<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
Rs. Mn.<br />
600<br />
450<br />
300<br />
150<br />
Sales revenue increased by 33% compared to the prior year.<br />
Volumes in the Polyurethane, Rigifoam and water tanks<br />
divisions grew extensively.<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Net Turnover Operating Profit<br />
0<br />
Manufacturing was well planned resulting in increased<br />
productivity, and catered to market demand in terms of both<br />
quantity and quality, while keeping in view the need for effective<br />
controls on inventory levels. Continued focus on quality control<br />
at all stages of the production process and the introduction<br />
of innovative processes further strengthened the quality of<br />
products.<br />
Expanded rigid Polystyrene<br />
RPC Polymers manufactures expanded rigid polystyrene<br />
products, commonly known as “Rigifoam”. The products include<br />
containers, sheets and other products primarily for the fishing<br />
industry.<br />
The company maintains its position as the market leader with a<br />
market share of 50%.<br />
The company also exports containers to the Maldives for<br />
packaging purposes.<br />
The Polyurethane Operation<br />
The Polyurethane operation manufactures a range of products<br />
which include mattresses, cushions, sheets and other<br />
specialized products such as sports goods, bedding for hotel<br />
industry etc.<br />
Market share of mattresses improved to approximately 45%<br />
despite intense competition. The company continued to<br />
maintain its profitable record and market leadership position.<br />
Value addition to mattresses continued in response to identified<br />
customer demand. The company has also ventured into the<br />
manufacture of sofas for the local market.<br />
Inventory has been carefully monitored and overhead costs<br />
were managed effectively. Arpico Flexifoam - which is an ISO<br />
9001:2000 standard company, also possesses the SLS 893<br />
standard.<br />
Rotational Mouldings<br />
The company has achieved a dominant position in the local<br />
moulded water tank market, with the Arpico branded water<br />
tanks commanding 46% of the market share.<br />
Products are manufactured at the factories in Horana,<br />
Pallakalle, Koggala and Dambulla which give easy access to<br />
island wide distribution. The wide range of products include<br />
water tanks of different capacities, sump tanks, septic tanks<br />
and utility products including garbage bins, compost bins and<br />
25<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Plastics<br />
traffic control cones, a recent addition being the introduction of<br />
a eco friendly “Green gas tank”.<br />
The increased demand in the Northern and Eastern Provinces<br />
was aggressively pursued and significant increase in volumes<br />
were reported. The factory in Dambulla is fully geared to cater<br />
to these markets.<br />
PVC Operation<br />
Arpitech (Pvt) Ltd manufactures a range of pipes and fittings<br />
under the brand name “Arpico PVC”, and has received the Sri<br />
Lanka Standards (SLS) certification for its range of pipes.<br />
The company’s sales volumes grew strongly during the year<br />
under review, with increased brand acceptance and market<br />
penetration. The company at present is in the process of<br />
increasing its production capacity at its plant in Mattegoda.<br />
Re-Distribution Division<br />
The Re-Distribution Division distributes products island-wide<br />
through a network of distributors and dealers. The group is<br />
proud of this distribution channel, which is one of the largest<br />
in the country, catering to over five thousand Hardware &<br />
Furniture outlets island- wide.<br />
The Re-Distribution division achieved a credible level of growth<br />
during the year under review. Turnover grew by over 25%<br />
compared to prior year with growth in profits being over 17%.<br />
Turnover in most categories of products grew; the Company<br />
reported a significant growth level in the sales volumes of<br />
mattresses and water tanks during the year under review<br />
compared to the previous year.<br />
Sales of the “Arpilight” CFL bulb, made steady progress during<br />
the year and it is expected that the product will soon become a<br />
household name.<br />
“Arpitech” water pump is another product which has captured<br />
the market, and is a dominant player with a market share of<br />
35%. Product innovation and enhanced customer service<br />
enabled this achievement of becoming a market leader in<br />
short period of time. The management is also planning to<br />
aggressively diversify into the Agricultural product categories<br />
during the next financial year.<br />
The division is projecting a growth on the strength of continued<br />
diversification into new areas of business, with the goal of being<br />
a dominant player in the hardware and furniture sectors.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 26
Sector Review - Rubber<br />
Rubber<br />
The Operation and business processes were improved with the<br />
aim of achieving cost reductions and quality enhancements.<br />
The Product Portfolio: Natural Latex Foam Mattresses, Pillows, Rubber Mats for<br />
Industrial and Domestic Use, Jar Sealing Rings, Small mould Products and other<br />
Specialized Rubber Products<br />
Sector Review - Rubber<br />
27<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Rubber<br />
The Group’s Rubber Sector provides a wide range of value<br />
added rubber products for the local and export markets.<br />
This sector has traditionally played a large role in the<br />
Group’s reputation for providing products of high quality and<br />
dependability.<br />
This sector is comprised of Richard Pieris Exports, Richard<br />
Pieris Natural Foams Ltd, Arpico Natural Latex Foams,<br />
Arpitalian Compact Soles, Micro Minerals, and Richard Pieris<br />
Rubber Products.<br />
Rubber Sector Performance<br />
Rs. Mn.<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
5,00<br />
Rs. Mn.<br />
100<br />
50<br />
0<br />
(50)<br />
(100)<br />
Research and development continues to be a key area for<br />
the entire sector, and Richard Pieris Exports, Richard Pieris<br />
Natural Foams, and Arpitalian have experienced research<br />
personnel who are of international standard.<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Net Turnover Operating Profit<br />
(150)<br />
The Operation and business processes were improved with the<br />
aim of achieving cost reductions and quality enhancements<br />
which enables the companies in this sector to become stronger<br />
and more competitive in the near future.<br />
The sector has been operating under several challenges which<br />
will also be experienced in the future. Rubber prices were<br />
increased due to the higher global demand. The cost of furnace<br />
oil is also of some concern; due to international oil prices being<br />
high. Cost of electricity is also an impediment to the Sector.<br />
Richard Pieris Exports PLC.<br />
Richard Pieris Exports produces and exports rubber mats to<br />
the Europe, USA and Asia Pacific regions from its factory in<br />
Ekala since 1984. In addition to the mats it also produces jar<br />
sealing rings and crutch tips for European markets.<br />
The company’s range of mats include specialized products for<br />
industrial use, entrance, agriculture, playgrounds, gymnasiums<br />
and specialty items such as fire retardant mats, electricity<br />
resistant mats and anti static mats. Every year the company<br />
does innovations with new products with the help of the<br />
Research & Development division. Many new products such<br />
as rubber based fabric mats were introduced to the agricultural<br />
and industrial markets during the year under review.<br />
During the year, the sales volume of jar sealing rings increased<br />
by 30%. Along with the demand the production capacity<br />
increased in the extruder section and washing section in order<br />
to have a smooth production.<br />
In January <strong>2011</strong>, the Company participated in the Dometex<br />
exhibition in Germany where there was a good response for<br />
our products with many sales inquiries. Our presence in Europe<br />
is growing well whereas in USA and Asia Pacific regions the<br />
presence is as expected.<br />
The dramatic and unprecedented increase in rubber prices had<br />
a severe impact on the profitability especially in the low end<br />
products. Even though the prices were increased the margins<br />
were not met. With the intense competition being experienced<br />
in the low-end product market, the company is now focusing<br />
more on investing in the latest technology measures to improve<br />
its product quality and yield, in order to maintain its competitive<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 28
Sector Review - Rubber<br />
advantage. Further new moulds will be made in order to suit the<br />
current demands for new products by the customers.<br />
Richard Pieris Natural Foams Ltd.<br />
Richard Pieris Natural Foams Limited (RPNF) manufactures<br />
and market all natural latex foam blocks, sheets and pillows for<br />
international market from the factory located in free trade zone,<br />
Biyagama.<br />
The company’s focus on sales growth, operational excellence<br />
and quality improvements showed commendable results in the<br />
financial year under review.<br />
Sales picked up from the second quarter due to aggressive<br />
sales campaign carried out in multiple markets. RPNF achieved<br />
the highest export volume since year 2006 in the 3rd quarter of<br />
the year.<br />
The value added products launched to the local market have<br />
shown positive results showing the program’s potential to<br />
become a significant contributor to the profitability of the<br />
company in the medium and long run.<br />
Strategic investments on continuous waste reduction<br />
and quality improvements have made the business more<br />
competitive whilst enhancing customer satisfaction during the<br />
year. Focus on maintaining and reducing the cost of energy<br />
despite the challenges faced by the company has made us<br />
achieve commendable results during the year.<br />
Natural latex prices were considerably high throughout the<br />
year and were at the peak in the fourth quarter of the year.<br />
This unexpected increase in critical raw material together with<br />
the increases of other raw material prices had a significant<br />
negative impact on the profitability of the business.<br />
US dollar devaluation and raw material price increase have<br />
compelled the business to raise the market prices of products<br />
significantly, destabilizing the narrow market segment “all<br />
natural latex mattresses”<br />
Arpitalian Compact Soles ( Pvt) Limited<br />
Arpitalian Compact Soles manufactures shoes soling sheets for<br />
the International shoe manufacturers. The Company is a joint<br />
venture with Davos SPA, a globally reputed manufacturer for<br />
shoe soles.<br />
During the year a Director of Davos Spa-Italy took over the<br />
responsibility to manage the operations of the Company as<br />
the CEO in June <strong>2010</strong> which enables the sharing of Italian<br />
technology and market knowledge to improve the productivity<br />
and profitability of the Company.<br />
During the year the Company took over the control of the<br />
rubber mixing plant which is a critical component of the<br />
manufacturing process which enables the Company to directly<br />
control the compound manufacturing process.<br />
The Company implemented several cost reduction measures<br />
during the year under review, which assisted in mitigating the<br />
challenges posed with the rising prices of synthetic rubber<br />
which is a major component in its production process.<br />
The Company’s emphasis on research and development<br />
enabled the Company to experience continuous cost reductions<br />
throughout the year, with the introduction of new formulas.<br />
The Company is now targeting to enter new markets in<br />
Bangladesh and Vietnam. Even though the demand from the<br />
European markets is decreasing to some extent, the Company<br />
managed to increase the total sales volumes by 8% during<br />
the year under review mainly due to higher sales to the Asian<br />
market.<br />
With the imminent turnaround of the Italian market and the<br />
emergence of new markets within the South East Asia and<br />
South Asian regions a significant improvement in Company<br />
performance is expected in the upcoming financial year.<br />
Micro Minerals (Pvt.) Ltd<br />
Micro Minerals (Pvt.) Ltd produces mineral products which<br />
are essential as fillers for rubber compounds. This company<br />
mainly supplies Arpitalian compact soles and Richard Pieris<br />
Exports. The production plant of the Company is located in<br />
Bandaragama.<br />
Due to the scarcity of raw materials for calcite and ball clay, the<br />
Company was unable to have a significant sales growth in the<br />
current financial year. The Company had to increase the selling<br />
prices in order to recover the increase in purchase price of the<br />
raw material.<br />
Richard Pieris Rubber Products Ltd.<br />
The main activity of Richard Pieris Rubber Products is the<br />
manufacturing of rubber garden hoses, vehicle floor mats,<br />
specialized Industrial Products and re-rubberized printing<br />
rollers.<br />
With the intense competition being experienced in the product<br />
market, the Company focused to improve its product quality<br />
and yield, in order to maintain its competitive advantage.<br />
Competitive prices along with timely and appropriate<br />
promotions helped maintain market share for garden hoses and<br />
vehicle floor mats, where the Company has being established<br />
as the market leader.<br />
29<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Service and Other<br />
Services and Other<br />
The Group re-entered the financial services industry with the<br />
formation of its fully owned subsidiary RP Securities (Pvt) Ltd.<br />
The Product Portfolio: Real Estate, Insurance, Freight Forwarding and Financial<br />
Services<br />
Sector Review - Service and Other<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 30
Sector Review - Service and Other<br />
This sector includes the Group’s holding company, Richard<br />
Pieris and Company PLC, and subsidiary companies in various<br />
businesses outside of the Group’s main sectors of Plantations,<br />
Rubber, Tyre, Retailing and Plastics. It includes companies<br />
involved in Logistics, Insurance, Real Estate and Financial<br />
Services.<br />
Richard Pieris and Company PLC<br />
Richard Pieris and Company PLC is the holding company of<br />
the Group and is responsible for the overall corporate policy<br />
and direction of the Group. Richard Pieris and Company PLC<br />
generates a proportion of its income by way of dividends from<br />
its subsidiaries. It also owns and rents real estate, including<br />
the Hyde Park corner retailing complex and the Nawinna<br />
complex which houses the tyre factory, the head office and a<br />
Super Centre. The company’s various divisions provide support<br />
services to all companies in the Group. This includes services<br />
relating to information and communication technology, human<br />
resources and procurement.<br />
The IT Division provides systems integration, managed<br />
services and “end-to-end” services and solutions. This<br />
has enabled the Group to generate more value through an<br />
innovative approach to business processes, well-integrated<br />
supporting technologies and strategic investments. The<br />
technical staff have an in-depth understanding of company’s<br />
technological needs and businesses and a proven track record<br />
of delivering results in many industrial sectors. The division<br />
manages the data center, disaster recovery center and central<br />
PABX. During the year under review, the internally developed<br />
ERP solution, Marksys was rolled out to business sectors of the<br />
Group. Within the Marksys system several manual processes in<br />
the traditional plantation businesses were automated during the<br />
year. The retailing sector was deployed with new Point of Sales<br />
software on a Linux platform.<br />
The Group Human Resource Division is responsible for the<br />
overall HR policy of the Group. It deals with the administrative<br />
Services Sector Performance<br />
Rs. Mn.<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Net Turnover<br />
Operating Profit<br />
Rs. Mn.<br />
600<br />
work relating to employees and coordinates training and staff<br />
development. More details on its activities are to be found in the<br />
report “Our People” on page 45.<br />
The Central Commercial Division handles the procurement of<br />
raw materials and consumables, both domestic and imports.<br />
It has been successful in passing on the low costs to our<br />
SBUs by maintaining sound supplier relations and maximizing<br />
economies of scale.<br />
The Group Treasury supports funding requirements of all the<br />
businesses. It is also involved in negotiating bank facilities<br />
to the Group and manages the Group’s foreign exchange<br />
exposure and interest rate risks.<br />
The Group Corporate Planning Unit coordinates the Group’s<br />
overall strategic planning process. It provides expertise to all<br />
SBUs to develop and monitor Key Performance Indicators.<br />
This unit also analyses all new business ventures, develops<br />
business plans and continuously monitors existing businesses<br />
in order to ensure optimal allocation of resources. This unit was<br />
restructured towards the end of the year.<br />
450<br />
300<br />
150<br />
0<br />
31<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Sector Review - Service and Other<br />
The internal audit function which is centralized ensures that<br />
internal control systems are adequate; procedures are up- todate<br />
and are adhered to by all group companies. Its activities<br />
are based on the risks faced by the group in the different<br />
industries.<br />
R P C Logistics Ltd.<br />
R P C Logistics is primarily engaged in international freight<br />
forwarding and customs broking. At present, two thirds of the<br />
Company’s revenue is generated from its freight forwarding<br />
activities. The Company’s portfolio of services includes<br />
airfreight, sea freight, sea freight consolidation, customs<br />
brokerage and transshipment. The Company’s services<br />
include door-to-door cargo services with the assistance of the<br />
Company’s overseas agents and a variety of other connected<br />
services.<br />
The main focus of the Company was to service the needs of<br />
other entities with the Richard Pieris Group. However with the<br />
turnaround of the economy it would pursue other opportunities<br />
into the future.<br />
Asian Alliance Insurance PLC<br />
Asian Alliance Insurance is a comprehensive insurer that<br />
is rapidly gaining a reputation for its superior products and<br />
excellent service. The Company offers both life and general<br />
insurance services to corporate clients as well as individuals.<br />
Its client portfolio includes many of the largest trade and<br />
industrial conglomerates in Sri Lanka.<br />
The Asian Alliance Insurance Company completed yet another<br />
successful year with a growth in turnover of 28% over the<br />
previous year. Profitability improved remarkably during the year<br />
where the company recorded a Profit after tax of Rs. 368 mn,<br />
reporting a growth of 154% when compared with the profit after<br />
tax of Rs.145 mn reported last year. Shareholder equity has<br />
increased by Rs.1,043mn from last year to Rs. 1,560 mn as at<br />
31st December <strong>2010</strong>.<br />
RP Securities (Pvt.) Ltd.<br />
The Group re-entered the financial services industry with the<br />
formation of its fully owned subsidiary RP Securities (Pvt)<br />
Ltd. With a modern office with all facilities the company which<br />
commenced operations in January <strong>2011</strong> has attracted the<br />
best of professionals in the industry to form the nucleus of<br />
this operation. From the outset the performance has been<br />
good with a decent client base and positive results. The Group<br />
intends to be a dominant player in the financial services<br />
market domain by taking full advantage of its brand equity and<br />
infrastructure throughout the country.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 32
Corporate Social Responsibility<br />
The Richard Pieris Group is one of the largest diversified<br />
companies in Sri Lanka with a large number of stakeholders<br />
which actively engages in a number of economic, social and<br />
environmental support initiatives thus contributing towards its<br />
responsibilities to all stakeholders.<br />
We aim to engage positively with all stakeholders, responding<br />
to them swiftly and efficiently while continuing to welcome their<br />
views.<br />
The Group has structured its Corporate Social Responsibility<br />
objectives to protect the interests of its stakeholders. It has<br />
instituted a policy that requires each of its Sectors to plan and<br />
execute sustainable and wide-ranging programmes in all areas<br />
in which it carries out its business.<br />
Customers<br />
Richard Pieris which is a highly customer oriented group of<br />
companies, mobilises its competence, energy and resources to<br />
build a high performing service to its customers, treating their<br />
needs and wants as high priority.<br />
All companies in the Group guarantee the highest quality<br />
of their products and services. Many companies have<br />
international and national certifications and strive to provide the<br />
maximum level of convenience, service and value for money to<br />
its customers.<br />
Food Safety<br />
Being a leading retail chain in Sri Lanka one of our key<br />
priorities is food safety. We are excelling in providing the<br />
best products to the customers with the theme “fresh ideas<br />
everyday”. The Arpico Supercentres maintain stringent policies<br />
on food safety and quality. Arpico employees define and verify<br />
quality standards for every product the Group sells. Enabling<br />
our customers to eat healthily and ensuring a wide choice<br />
of high quality, fresh and affordable food is our main focus.<br />
The company offers essential items at low prices but with no<br />
compromise on quality, with the “Super Saver” range.<br />
The loyal and positive relationships with the shoppers and the<br />
suppliers entirely support the community to ensure the long<br />
term sustainability of the business while we continue in local<br />
and sustainable sourcing.<br />
Food safety is ensured in the Plantation Sector by most our tea<br />
factories having obtained certification from Fair-trade Labeling<br />
Organisation and the Ethical Tea Partnership, whose members<br />
are leading retailers in the U.K.<br />
Fair and Competitive Trading Practices<br />
Our policy is to be fair and honest, being accessible and<br />
straightforward in our dealings and to always deliver what we<br />
promise.<br />
Employees<br />
Employee Health and Safety<br />
The Richard Pieris Group is one of the largest private sector<br />
employers in the country considering the employees as key<br />
stakeholders whose contribution is vital for the continued<br />
success of the Company.<br />
The health and safety of our employees is a key priority which<br />
is ensured in all factories and other workplaces by providing the<br />
equipment required to maintain high safety standards. Training<br />
programmes are conducted to educate employees on health<br />
and safety matters in the workplace. Medical facilities are<br />
provided to all employees.<br />
Further details of the Group’s commitment to its employees are<br />
to be found in other sections of this <strong>Annual</strong> <strong>Report</strong>.<br />
Community & Country<br />
The Richard Pieris Group being one of the largest diversified<br />
companies in the Country carries out a wide range of diverse<br />
activities across all provinces in Sri Lanka contributing to the<br />
goodwill of the entire Country which has enabled us to have<br />
a long held reputation of being a responsible corporate body.<br />
Its initiatives reach out across the Island from small villages to<br />
urban centres.<br />
CSR Initiatives<br />
Social welfare<br />
The Plastic Sector of the Group carried out many projects<br />
which contributed to the social welfare in many ways, such<br />
as donating mattresses to flood victims in the North and East<br />
area in collaboration with Sri Lanka Rupavahini. Also more<br />
donations of mattresses were made to Dalada Maligawa and<br />
Sithulpahuwa Temple.<br />
The Company provided water tanks for drinking water for<br />
the pilgrims at the Kandy perahera / Kataragama season /<br />
Sinigama festival and all key seasons of selected places of<br />
religious activities and also to the disabled soldier homes at the<br />
Police Sevavanitha Unit.<br />
Maskeliya Tea Gardens donated a container of tea bags to<br />
Japan when the devastating Tsunami was hit in March <strong>2011</strong>.<br />
The Estates carried out skill development programs for their<br />
harvesters in order to improve worker productivity and their<br />
personal development.<br />
Supporting healthcare<br />
A CSR project was carried out by Richard Pieris Distributors<br />
under the Privilege cards CSR gifting - “Sound of Silence” in<br />
collaboration with the Deaf School in Ratmalana to provide<br />
hearing aids for deaf which started in January <strong>2011</strong>. For every<br />
point the customer earns we contribute one point to add up to<br />
value.<br />
Corporate Social Responsibility<br />
33<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Corporate Social Responsibility<br />
A Contribution was made to the Cancer Walk which was<br />
organized by the Sri Lanka Cancer Society by means of a<br />
sponsorship.<br />
Donations in terms of stationery, toys and gifts were made to<br />
the children’s ward at the Cancer Hospital, Maharagama.<br />
The Plantation sector continued to work towards the<br />
improvement of medical facilities on its estates. Many health<br />
camps, including eye camps with replacement of spectacles,<br />
health camps for diabetes and mobile health camps were<br />
conducted.<br />
Assisting education<br />
The Group supported children’s education by donating books,<br />
sport equipment and other educational aids to underprivileged<br />
youngsters. School Bags with a set of books/stationery were<br />
gifted to children who started their school carrier.<br />
Financial Assistance was given to all estate employees’ children<br />
who were qualified for University education as done in the<br />
previous years.<br />
Building infrastructure<br />
During the year under review, renovations were made in the<br />
Line Rooms and Drains, Re-roofing was under-taken in several<br />
estates and Road Development work were undertaken with the<br />
assistance of PHDT.<br />
An 18 passenger bus was purchased for the use of estate<br />
workers to enhance their logistical requirement.<br />
Suppliers<br />
Building lasting partnerships with our suppliers<br />
Our commitment for working in partnership with our suppliers<br />
ensures the best possible service to our customers. We are a<br />
loyal customer to our suppliers, as a good relationship with our<br />
suppliers is vital for our success. Arpico has a large number of<br />
suppliers from different parts of the world. Year after year, the<br />
Group strives to develop partnerships with Small and Mediumsized<br />
Enterprises (SMEs) in Sri Lanka and supports small<br />
producers in Sri Lanka by providing them with guidance in the<br />
use of appropriate technology for manufacture and channels to<br />
market which ultimately contributes to the economic welfare of<br />
the People and Country.<br />
The new supercenters are opened with the concept of “Go<br />
Green” by using energy conserving initiatives such as sky<br />
lighting and water treatment plants which have immensely<br />
contributed to a high energy saving by recycling the energy.<br />
For the first time in the Sri Lankan retail market Arpico<br />
introduced a degradable loyalty card, “Eco Privilege” as an<br />
initiative to protect the environment. Arpico supercenters also<br />
encourage environmentally friendly shopping by promoting the<br />
use of recyclable bags.<br />
The Group plays a key role in the Agricultural Sector and<br />
recognizes that this carries with it many responsibilities in<br />
respect of the environment. The Group obtains environmental<br />
certifications from global and local environmental authorities,<br />
wherever applicable. This includes certifications from the Forest<br />
Stewardship Council, the Central Environmental Authority<br />
and ISO 2000 certificate. The Group focuses on forestry<br />
conservation systems in all its estates and has formulated<br />
and implemented a long term forest management plan for the<br />
sustainable management of forest blocks and harvestable<br />
timber extents.<br />
The Group also encourages individual employees to inculcate<br />
environment-friendly practices in their work habits and their<br />
personal lives. This includes energy conservation and recycling<br />
of waste and by-products. Also colored outdoor bins were<br />
introduced to segregate garbage for recycling purposes.<br />
As a “Go Green” project in order to make a greener future a<br />
green gas unit was developed. This addresses the perennial<br />
problem of disposing garbage (organic waste) and also<br />
provides a clean pure organic fertilizer for every home<br />
Environment<br />
The Group has been committed for environment protection<br />
throughout the operations, particularly by reducing carbon<br />
footprint, saving energy, increasing transport efficiency,<br />
preventing waste and increasing recycling.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 34
Financial Review<br />
Overall Group Performances<br />
It was a historical year for the Richard Pieris Group which<br />
recorded the highest ever turnover and profits since its<br />
inception. The escalated rubber prices, aggressive expansion<br />
in the retail supermarket chain together with the enhanced<br />
demand for local manufacturing sector products contributed<br />
immensely for the Group to make this remarkable achievement.<br />
During the year under review, the Group Turnover grew<br />
significantly by 22% to Rs. 27,242 mn compared to Rs. 22,339<br />
mn in the last financial year. However, Cost of Sales increased<br />
only by 17% from Rs. 17,654 mn to Rs. 20,631 mn which<br />
enabled the Group to make an impressive growth of 41% in<br />
Gross Profit and 75% in Profit from Operations during the same<br />
period. Gross Profits and Profits from Operations stood at Rs.<br />
6,610 mn and 3,450 mn respectively. Group Finance Cost<br />
declined by 18% to Rs. 795 mn from Rs. 969 mn of the previous<br />
financial year. Due to the significant growth in Gross Profit and<br />
the declined Finance Cost, the Group’s Profit before Tax rose<br />
by 161% to Rs. 2,769 mn. A healthy level of Profits before Tax<br />
lead to an escalation of Group Tax Expenses by 87% which<br />
recorded at Rs. 617 mn. Discontinued Operations made a loss<br />
of Rs. 12 mn during the year as compared to a loss of Rs. 18<br />
mn in the previous year. The Group has completed the financial<br />
year with a Profit after Tax of Rs. 2,141 mn which is three times<br />
more than the profit achieved in the last financial year. Rs. 460<br />
mn of current year profits is attributable to Minority Interest<br />
while the remaining Rs. 1,681 mn is attributable to the Equity<br />
holders of the Parent Company. During the year, Minority<br />
Interest grew by 250% while Profits attributable to Equity<br />
holders of the Parent Company grew by 190%.<br />
Turnover Analysis<br />
Despite numerous challenges experienced as a result of<br />
macroeconomic forces and the high level of competitiveness<br />
from other conglomerates, the Group achieved a satisfactory<br />
growth of 22% in Turnover. During the period under review,<br />
Group Turnover increased from Rs. 22,339 mn to Rs. 27,242<br />
mn.<br />
Retail sector’s contribution of Rs. 10,926 mn which accounts<br />
for 40% of the Group Turnover managed to ensure its dominant<br />
position in the Group Turnover as in previous financial years.<br />
Retail Turnover grew by 21%, mainly due to aggressive<br />
expansion in super market outlets, including the Wattala Super<br />
Center which raised the overall standard for the supermarket<br />
outlets in the country. Growth in the Sri Lanka economy by<br />
8% which boosted the consumer confidence and disposable<br />
income also contributed to the Retail Sector performing strongly<br />
during the period.<br />
Rubber industry experienced the highest ever prices in this<br />
era which caused the Rubber Plantations companies to record<br />
strong Turnover. Further, prices of low grown tea and high<br />
grown tea remained at steady levels as in the previous year.<br />
Palm Oil prices also improved due to increased demand with<br />
escalating petroleum prices. However, Plantation sector crops,<br />
hampered by adverse weather conditions, prevailed throughout<br />
the country during the financial year. Consequently, Plantations<br />
Sector turnover grew only by 18% to Rs. 7,700 mn as compared<br />
to Rs. 6,519 mn in the previous period. Plantation sector<br />
turnover is 28% of the Group Turnover.<br />
Plastic Sector has recorded the highest growth rate in turnover<br />
by recording 33% growth. The sector turnover grew from Rs.<br />
2,858 mn to Rs. 3,809 mn which accounts for 14% in the Group<br />
turnover. Sales volumes of Polyurethene, Rigifoam and Water<br />
Tanks increased due to enhanced demand from the Northern<br />
and Eastern parts of the country which helped the Plastic<br />
sector to register a remarkable turnaround. Further, the sector<br />
made their entrance into the Maldivian market during the year<br />
under review, which also helped to enhance its volume.<br />
Volume growth of 6% in re-trading and 16% growth in trading<br />
resulted in an overall growth of 20% in Tyre Sector Turnover<br />
during the period. Tyre sector turnover grew from Rs. 2,101<br />
mn to Rs. 2,530 mn and contributed to Group Turnover by 9%<br />
which is the same as the last financial year.<br />
Despite the local currency being stronger against major foreign<br />
currencies and economic recovery in the western countries<br />
being slower, the Rubber sector recorded a growth of 25%<br />
in the period under review with a turnover of Rs. 2,215 mn.<br />
Upward price revisions due to escalated raw material prices<br />
coupled with marginal growth in volumes have helped the<br />
sector to maintain an 8% contribution to the Group turnover as<br />
in the previous period.<br />
Service sector turnover also grew by 23% mainly with<br />
commencement of operation in the <strong>Stock</strong> Broking arm being<br />
the latest addition to the Group business portfolio.<br />
Segmental Turnover Composition<br />
%<br />
45<br />
40<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
8<br />
8<br />
9<br />
9<br />
13<br />
14<br />
40<br />
40<br />
Rubber Tyre Plastic Retail Services Plantations<br />
2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong><br />
1<br />
1<br />
29<br />
28<br />
Financial Review<br />
35<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Financial Review<br />
Geographical Turnover Composition of Exports<br />
%<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
45<br />
48<br />
42<br />
39<br />
13<br />
13<br />
09/10 10/11<br />
USA Europe Other<br />
Expenses Analysis <strong>2010</strong>/<strong>2011</strong><br />
Cost of Sales 76%<br />
Operational Expenses 12%<br />
Finance Cost 3%<br />
Tax 2%<br />
Expenses Analysis 2009/<strong>2010</strong><br />
Cost of Sales 79%<br />
Operational Expenses 12%<br />
Finance Cost 4%<br />
Tax 1%<br />
Group’s Export turnover grew by 47% to US$ 22 mn compared<br />
to US$ 15 mn in the previous year. With the reposition of the<br />
Group’s export marketing strategy, Asia Pacific region has<br />
become the largest export market of the group which accounts<br />
for 48% of the total export turnover. European market accounts<br />
for 39% of the export turnover while USA market accounts for<br />
only 13%.<br />
Cost of Sales and Operating Expenses Analysis<br />
World commodity prices escalated during the year which<br />
resulted in a higher cost of raw material for all companies<br />
except for Plantation companies. Hence, the Group Cost of<br />
Sales increased by 17% from Rs. 17,654 mn to Rs. 20,631<br />
mn. Rubber, Tyre and Plastic sectors experienced very high<br />
raw material cost during the period. Cost of Sales accounted<br />
for 76% of turnover compared to 79% in the previous period.<br />
Group Administration expenses and Distribution cost increased<br />
by 12% and 29% respectively during the period under review.<br />
However, the total operating expenses, inclusive of Cost of<br />
Sales, decreased from 91% to 87% as a percentage of turnover<br />
due to continuation of strict overheads-controlling strategies<br />
implemented by the management in the previous years.<br />
Profit from Operations<br />
The Group has made an outstanding improvement in<br />
operational profits by recording 75% growth in a single period.<br />
Group Operational profit stood at Rs. 3,450 mn as compared to<br />
Rs. 1,970 mn in the previous year. Plantations, Retail, Service<br />
and Plastic sectors achieved an impressive positive growth rate<br />
while Tyre and Rubber sectors recorded negative growth rates.<br />
Plantation sector continued to be the biggest contributor to the<br />
Group’s operating profits, accounting for 51% of Group total<br />
operational profits. Sector profits increased from Rs. 823 mn to<br />
Rs. 2,032 mn with an impressive growth of 147% due to a steep<br />
increase in rubber prices, steady tea and palm oil prices.<br />
Enhanced volume due to expansion in supermarket outlets<br />
together with increased income from other sources enabled the<br />
Retail sector to record 61% growth in operational profits. Retail<br />
sector operational profits increased from Rs. 515 mn to Rs. 828<br />
mn., which accounts for 21% of the Group’s operating profits.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 36
Financial Review<br />
Plastic sector recorded a growth of 43% in operational<br />
profits during the year, which accounts for 12% of the group<br />
operational profit. Plastic sector profits increased by Rs. 140 mn<br />
to Rs. 460 mn., mainly due to an improvement in productivity,<br />
and efficient controls in inventory levels.<br />
Segmental Profit Composition<br />
%<br />
60<br />
50<br />
51<br />
Despite the growth in volumes, Tyre sector’s contribution to<br />
the Group operational profits declined from 14% to 7%, giving<br />
rise to a negative growth of 12% during the year. Operational<br />
profits reduced from Rs. 300 mn to Rs. 264 mn., mainly due to<br />
escalating rubber prices.<br />
Rubber sector has suffered in many ways during the year. High<br />
rubber prices, lower demand from Western countries due to<br />
slower economic growth together with an appreciation of local<br />
currency has resulted in complete erosion of the profitability of<br />
the Rubber sector. The sector has made a negative of Rs. 25<br />
mn contribution to Group’s operational profit, compared to a<br />
profit of Rs. 65 mn in the previous period.<br />
40<br />
30<br />
20<br />
10<br />
0<br />
3<br />
(1)<br />
14<br />
7<br />
15<br />
11<br />
23<br />
21<br />
Rubber Tyre Plastic Retail Services Plantations<br />
2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong><br />
8<br />
11<br />
37<br />
Finance Cost<br />
Market interest rates continued their downward trend during<br />
the current financial year. Average Weighted Prime Lending<br />
Rate which is the most appropriate indicator for corporate<br />
borrowing rate has declined by 3.79% to 9.83% under the<br />
same period which resulted in a significant decline in Group<br />
average borrowing cost. Group debt further reduced by Rs. 913<br />
mn during the year. As a result, finance cost reduced by Rs.<br />
175 mn to Rs. 795 mn., and consequently the interest cover<br />
ratios, too, improved to 4 times compared to 2 times in the last<br />
financial year.<br />
Share of results from Associates<br />
RPC group owns 25% stake in Asian Alliance Insurance PLC<br />
and 19% of AEN Oil Palm Limited which make up the associate<br />
investments of the Group. Enhanced profitability of these two<br />
institutions resulted in a growth of 90% in share of associates<br />
profits which recorded at Rs. 113 mn during the current financial<br />
year.<br />
Profit/Loss on Discontinued Operations<br />
Discontinued operations of Arpico Homes Ltd, RPC Global<br />
Travels (Pvt) Ltd and Hameefa Kegalle (Pvt) Ltd showed a<br />
marginal decline in losses from Rs. 18 mn to Rs. 12 mn as<br />
compared to last year.<br />
Finance Cost vs. Interest Cover Ratio<br />
Rs. Mn.<br />
1,600<br />
1,200<br />
800<br />
400<br />
0<br />
2 880<br />
1,473<br />
1,436<br />
2 969<br />
795 4<br />
1<br />
1<br />
06/07 07/08 08/09 09/10 10/11<br />
Finance Cost (Rs. Mn.) Interest Cover Ratio<br />
Losses on Discontinued Operations<br />
Rs. Mn.<br />
250<br />
200<br />
150<br />
100<br />
166<br />
203<br />
108<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
50<br />
18<br />
12<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
37<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Financial Review<br />
Minority Interest vs. Plantations Profitability<br />
Rs. Mn.<br />
2,400<br />
2,000<br />
1,600<br />
1,200<br />
800<br />
400<br />
0<br />
(400)<br />
06/07 07/08 08/09 09/10 10/11<br />
Plantations Operating Profit Minority Interest<br />
Working Capital Investment vs. Liquid Ratio<br />
Rs. Mn. %<br />
10,000<br />
1.25<br />
1.00<br />
7,500<br />
0.75<br />
5,000<br />
0.50<br />
2,500<br />
0.25<br />
0<br />
0<br />
06/07 07/08 08/09 09/10 10/11<br />
Current Assets<br />
Current Ratio<br />
Current Liabilities<br />
Quick Assets Ratio<br />
Net Operational Cash Flow Classifications<br />
Rs. Mn.<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
(500)<br />
(1,000)<br />
(1,500)<br />
06/07 07/08 08/09 09/10 10/11<br />
Cash Profit before Working Capital Change<br />
Working Capital Change<br />
Net Operating Cash Flow<br />
Minority Interest<br />
Minority Interest of the RPC Group mainly comprises of<br />
minority shareholdings of the Group’s Plantation Sector. As<br />
Plantation Sector operational profit increased from Rs. 823 mn<br />
to Rs. 2,032 mn during the year , Minority interest of the Group<br />
increased from Rs. 131 mn to Rs. 460 mn which was a growth<br />
of a 251%.<br />
Investments / Acquisitions and Disposals<br />
Strong profitability coupled with a healthy level of cash<br />
surpluses generated during the previous financial years<br />
encouraged the Group to expand its core businesses to exploit<br />
the new opportunities which have emerged as a result of the<br />
boosted macro economy. The Group has made an investment<br />
of Rs. 1,192 mn in property, plant, machinery and replanting<br />
during the year. During the year, Retail sector aggressively<br />
expanded its supermarket chain by investing approximately<br />
Rs. 500 mn on the newly established Wattala and Kadawatha<br />
Super Centers. Further, the Group has subscribed for the rights<br />
issue of Asian Alliance Insurance PLC by making an additional<br />
investment of Rs. 203 mn. This enabled the Group to maintain<br />
its associate status of its insurance arm. In addition, Plantation<br />
sector has also incurred Rs. 644mn on new replanting during<br />
the year. The Group made an investment of Rs. 100 mn in<br />
Richard Pieris Securities (Pvt) Limited and Richard Pieris<br />
Financial Services (Pvt) Limited to carry out the stock broking<br />
and margin trading operations.<br />
Group Financial Position and Liquidity<br />
Non-Current Assets<br />
Due to the capital expenditure incurred by the Group, the total<br />
noncurrent assets increased by 7%, from Rs. 10,804 mn to<br />
Rs.11,585 mn during the year under review. Property Plant<br />
& Equipment amounted to Rs. 10,001 mn as at 31st March<br />
<strong>2011</strong>. Investments in Associates increased by Rs. 275 mn.,<br />
mainly due to the investment of Rs. 203 mn. in Asian Alliance<br />
Insurance PLC. During the year, real estate investments of the<br />
Group were valued and total market value stood at Rs. 9,718<br />
mn compared to Rs. 8,930 mn in the previous year, details of<br />
which are given in the Group Real Estate Portfolio Statement<br />
on page 108.<br />
Working Capital<br />
The Group’s Total Current Assets increased by Rs. 2,494 mn to<br />
Rs. 9,055 mn while Total Current Liabilities increased only by<br />
Rs. 1,514 mn to Rs. 8,869 mn. During the year, the Plastic and<br />
Tyre sectors continued to build extra stocks to benefit from price<br />
discounts, and, also, to avoid sudden hikes in world commodity<br />
prices that were pressurized by the supply side, mainly due to<br />
the uncertainties that prevailed in the Gulf countries. Hence,<br />
Group inventory grew from Rs. 2,464 mn to Rs. 3,342 mn.<br />
Enhanced turnover in all sectors resulted in the Trade and<br />
Other Receivables increasing from Rs. 2,550 mn to Rs. 2,909<br />
mn during the year. Cash at Bank and Cash in Hand also<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 38
Financial Review<br />
strengthened by Rs. 1,241 mn during the year due to healthy<br />
cash profits generated by the Group. Trade Creditors and Other<br />
Payables balances in total increased from Rs. 2,633 mn to Rs.<br />
3,653 mn.<br />
The Working Capital investment of the Group has significantly<br />
improved during the year, mainly due to an improvement in the<br />
Cash and the Trade Receivable balances of the Group. The<br />
Group recorded a positive net Working Capital investment of<br />
Rs. 186 mn compared to a negative Working Capital investment<br />
of Rs. 794 mn recorded in the previous year. Hence, the<br />
Current Ratio improved from 0.89 to 1.02 while the Quick<br />
Assets Ratio improved from 0.56 to 0.64.<br />
Cash Flows<br />
The Group has made a cash profit of Rs. 4,555 mn with an<br />
impressive growth of 37% compared to the previous financial<br />
year. However, an increase in Inventory and Trade Debtor<br />
balances resulted in a negative Working Capital change of Rs.<br />
371 mn during the year compared to a positive change of Rs.<br />
124 mn in the previous period. Group Finance Cost declined by<br />
Rs. 174 mn to Rs. 795 mn while both Group tax payments and<br />
the gratuity payment increased by Rs. 233 mn and Rs. 19 mn,<br />
respectively. Plantations, Services and Plastic sectors remained<br />
the best cash generating units, and helped the Group to record a<br />
net operating cash flow of Rs. 2,819 mn with the growth of 31%.<br />
Investment in new super centers, continuous investment in<br />
replanting agricultural crops, and subscription for the rights<br />
shares of Asian Alliance Insurance PLC resulted in a negative<br />
cash flow of Rs. 1,389 mn from investing activities compared to<br />
Rs. 542 mn in the previous financial year.<br />
The repayment of loans amounted to Rs. 1,248 mn, exceeding<br />
the proceeds of new loans amounting to Rs. 1,134 mn which<br />
resulted in a net loan repayment of Rs. 114 mn. In addition,<br />
the Group has distributed Rs. 572 mn as Dividends to its<br />
shareholders during the year, and recorded net cash outflow of<br />
Rs. 645 mn from financing activities which has increased by Rs.<br />
396 mn compared to previous financial year.<br />
Despite the negative cash flow from investing and financing<br />
activities, a strong cash flow from operating activities has<br />
created a positive net cash flow of Rs. 784 mn to the Group,<br />
compared to Rs. 1,365 mn in the previous period.<br />
Capital Structure<br />
Total Assets of the Group grew by 19% during the year to<br />
Rs. 20,639 mn while Total Liabilities increased by 14% to Rs.<br />
13,776 mn. Total Shareholders Fund was enhanced by Rs.<br />
1,210 mn to Rs. 5,003 mn by Retained Profits after distributing<br />
Rs. 516 mn as Dividends to its shareholders of parent company.<br />
Total Assets were funded by Shareholders’ Funds (24%),<br />
Minority Interest (9%), Long Term Liabilities (24%) and Short<br />
Term Liabilities (43%). During the year the significance of<br />
the Shareholders’ fund increased from 22% to 24% while the<br />
relative prominence of long term liabilities dropped from 27%<br />
to 24%. Minority Interest and short term liabilities were at the<br />
same level of importance as in the previous year.<br />
Equity<br />
During the year, Richard Pieris and Company PLC made<br />
a share split of 1 to 15 and this has increased the number<br />
of Ordinary Shares from 128,251,023 to 1,937,241,535.<br />
Subsequent to exercising of the Employee Shares Option<br />
Scheme by the employees of the Parent company, the Stated<br />
Capital of the Group increased by Rs. 49 mn to Rs. 1,628 mn.<br />
Following a distribution of Dividends amounting to Rs. 516 mn,<br />
Total Shareholders Fund increased by Rs. 1,210 mn to Rs.<br />
5,003 mn. In view of the significant increase in profitability of<br />
Plantation Sector, Minority Interest also increased by 24% from<br />
Rs. 1,503 mn to Rs. 1,861 mn during the period under review.<br />
Debt<br />
Group Debt continued to further decrease by Rs. 912 mn<br />
during the year and stood at Rs. 4,318 mn at the end of the<br />
year.<br />
As a result of strong profitability, Plantation sector debt reduced<br />
significantly by Rs. 1,221 mn, and Plastic Sector also showed<br />
an improvement of Rs. 274 mn. Aggressive expansion in super<br />
markets resulted in the retail sector debt increasing by Rs.<br />
155 mn during the period under review. In order to facilitate<br />
its future capital expenditure, Retail sector raised over Rs.<br />
1,014 mn through the first ever credit card securitization loan<br />
transaction in the country. Due to the escalated raw material<br />
prices coupled with the increase in working capital investments,<br />
both Rubber and Tyre Sector debt increased by Rs. 239 mn<br />
and Rs. 90 mn, respectively, during the period under review.<br />
Investment in Asian Alliance Insurance PLC, <strong>Stock</strong> Broking and<br />
Margin Trading business resulted in an increase of Rs. 99 mn in<br />
the Service sector debt.<br />
With the addition of Credit Card Securitization loan, the Group’s<br />
long term debt increased from 37% to 47% while short term<br />
debt decreased from 63% to 53% as percentage of total<br />
Group debt. 53% of the total debt is secured and 47% is on<br />
clean basis. 7% of Total Group Debts is in foreign currency<br />
compared to 10% in the previous financial year. Export turnover<br />
represents only 9% of the total Group turnover for the period<br />
under review.<br />
39<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Financial Review<br />
Capital Structure<br />
%<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
21 7 44 28<br />
20 8 45 27<br />
06/07 07/08 08/09 09/10 10/11<br />
Total Shareholders Fund<br />
Minority Interest<br />
Total Debt Vs Gearing Ratio<br />
Short Term Funds<br />
Long Term Funds<br />
Rs. Mn. %<br />
10,000<br />
100<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
8,532<br />
63%<br />
7,860<br />
61%<br />
19 8 46 27<br />
6,834<br />
60%<br />
22 9 42 27<br />
24 9 43 24<br />
06/07 07/08 08/09 09/10 10/11<br />
Total Borrowings (Rs. Mn.)<br />
5,231<br />
50%<br />
4,318<br />
39%<br />
Gearing Ratio<br />
80<br />
60<br />
40<br />
20<br />
0<br />
The Gearing Ratio has improved from 50% to 39% as at the<br />
year end. This could be attributed to the generation of healthy<br />
cash profits by the business units. The repayment profile and<br />
security offered on the long term debt is listed out in Note 13 in<br />
financial accounts on page 88. Information relating to the short<br />
term borrowings is given in Note 19 to the financial statements<br />
on page 92.<br />
Shareholders’ Return / Return on Equity (ROE) / Earnings<br />
per Share (EPS)<br />
Profit attributable to shareholders of the parent company<br />
improved significantly by 190% during the year, increasing from<br />
Rs. 580 mn to Rs. 1,681 mn. Earnings per Share improved from<br />
30 cents per share to 87 cents per share with an impressive<br />
growth of 190% during the year. Earnings yield recorded at<br />
9%, and Dividend Yield at 3% on average share price which<br />
prevailed during the period under review.<br />
Market Capitalization<br />
<strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong> had some mixed results during<br />
the period. However, All Share Price Index grew by 94% and<br />
Milanka Price Index grew by 61% during the year and both<br />
indexes closed at 7226.10 and 6874.70, respectively.<br />
Strong performance and enhanced market depth in the share<br />
resulted from the 1:15 share split. Richard Pieris & Company<br />
PLC has performed well during the period. The Company<br />
share price closed at Rs. 13.60 compared to Rs. 3.67 as at<br />
the end of the previous financial year. Market capitalization of<br />
the Company has been boosted by 273% to Rs. 26,346 mn<br />
as compared to Rs. 7,054 mn in the previous financial year.<br />
The total return which accounts for the price appreciation<br />
and dividend received stood at 304% for the current period,<br />
compared to 120% return on the Company share in the last<br />
year.<br />
The highest traded price was Rs. 16 while the lowest was Rs.<br />
3.65 and 498 mn shares were traded at the <strong>Colombo</strong> Bourse<br />
during the year. The share turnover of the Company was Rs.<br />
12,317 mn, compared to Rs. 1,904 mn in previous period.<br />
Distribution<br />
During the year Company declared an interim dividend of<br />
Rs. 0.20 per share. The directors also recommended a final<br />
dividend of Rs. 0.10 per share.<br />
Financial Risks<br />
Financial risks associated with the operations of the Group and<br />
its risk management processes are discussed in detail in the<br />
risk management report on page 41.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 40
Risk Management<br />
Managing business and financial risks is of fundamental importance in maintaining sustainable growth and making steady<br />
progress towards the achievement of corporate goals and objectives. “Risk” being a factor which is not possible to “eliminate”<br />
completely, the Group ensures the “minimization” of risks by adopting various strategies for continuous reviewing of the Group<br />
operations. Various strategies are developed and implemented to achieve this goal.<br />
Risk Exposure Group Objectives Risk Minimization Strategies<br />
Financial Risk Management<br />
1. Liquidity and Cash<br />
Management<br />
• To ensure faster response to market<br />
opportunities by ensuring instant<br />
funding ability.<br />
• To maintain a ‘sufficient’ liquidity<br />
position at all times<br />
2. Interest Rate Risk • To minimize adverse effects of<br />
interest rate volatility.<br />
• To ensure cost of borrowing is at<br />
minimum level.<br />
3. Currency Risk • To minimize risk associated with the<br />
fluctuation in foreign currency rates<br />
in relation to export proceeds, import<br />
payments and foreign currency debt<br />
transactions.<br />
Business Risk Management<br />
1. Credit Risk • To minimize risks associated with<br />
debtor defaults.<br />
• Funding of long term assets through Equity and Long<br />
Term Loans.<br />
• Availability of short term borrowing facilities to the<br />
Group at all times.<br />
• Funding of inventory by short term creditors.<br />
• The Group owns land and buildings with market<br />
values significantly in excess of its book values<br />
that can be offered as collateral for future funding<br />
requirements.<br />
• Sourcing of funding requirements through many<br />
financial institutions.<br />
• Structuring the loan portfolio to combine foreign<br />
currency and local currency denominated borrowings.<br />
Continuous monitoring is being done to match the mix<br />
of foreign and local denominated borrowings to the<br />
mix of export and local turnover of the group.<br />
• Using fixed and variable rate borrowings to strike a<br />
balance.<br />
• Centralized Treasury that coordinates Group funding<br />
requirements thus ensuring more effective borrowing<br />
terms.<br />
• Practicing effective hedging techniques such as<br />
interest rate swaps.<br />
• Export proceeds exceeding the import payments<br />
and foreign currency debt payments act as a natural<br />
hedge.<br />
• Ensuring effective Treasury operations through<br />
various hedging techniques such as forward<br />
bookings, forward sales, swap and options contracts<br />
etc.<br />
• Obtaining insurance cover for export debtors.<br />
• Developing and implementing Credit Policies<br />
• Measuring the credit risk and maintaining risk rating<br />
system.<br />
• Obtaining bank guarantees, deposits and collateral for<br />
all major local customers.<br />
• Following stringent assessment procedures to<br />
ensure credit worthiness of the customers prior to the<br />
granting of credit.<br />
• Demarcating the local areas and appointing new<br />
distributors thus increasing the number of customers<br />
with the objective of reducing credit exposure due to<br />
the reliance of a few customers.<br />
Risk Management<br />
41<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Risk Management<br />
Risk Exposure Group Objectives Risk Minimization Strategies<br />
2. Asset Risk • To minimize risk from fire, theft<br />
and machinery and equipment<br />
breakdown.<br />
3. Internal Controls • To maintain a sound system<br />
of internal control to safeguard<br />
shareholders’ wealth and Group<br />
assets.<br />
4. Reputation Risk • To prevent the causes that damage<br />
our reputation.<br />
• To minimize the impact if, despite<br />
our best endeavors, a reputation<br />
crisis should occur.<br />
5. Human Capital and<br />
Labour Risk<br />
• To ensure a smooth flow of<br />
operations without any undue<br />
disruptions.<br />
• To project our self as a human<br />
employer, successful in motivating,<br />
developing, retaining and attracting<br />
the best of human capital.<br />
6. Technological Risk • To keep pace with the current<br />
technological developments and<br />
safeguard against obsolescence<br />
• Obtaining comprehensive insurance covers for all<br />
tangible assets.<br />
• Adoption of stringent procedures with regards to the<br />
moving of assets from one location to another.<br />
• Carrying out mandatory preventive maintenance<br />
programs.<br />
• Carrying out frequent employee training programs in<br />
areas such as fire prevention.<br />
• Carrying out of system audits and other control<br />
mechanisms such as inventory and cash counts<br />
throughout the Group by our central Internal Audit<br />
Department.<br />
• Having in place a budgetary process and a budgetary<br />
control mechanism on a monthly basis to ensure that<br />
the Group’s performance is in line with its targets.<br />
• Adopting stringent quality assurance policies with<br />
regard to goods bought out from third parties as well<br />
as the inputs, processes and outputs of own brand<br />
and in-house manufactured products.<br />
• Ensuring effective communication with various<br />
stakeholders including employees, bankers, media,<br />
regulators, customers, suppliers, shareholders and<br />
the community at large.<br />
• Providing the front line managers and the sales<br />
staff with adequate training in order to improve<br />
service standards as well as to educate staff on the<br />
importance of customer service.<br />
• Maintaining healthy relationships with trade unions<br />
through regular dialogue.<br />
• Entering into collective agreements with trade unions.<br />
• Improving employee benefits by way of financial<br />
incentives and welfare activities.<br />
• Improving the Human Resource function of the Group<br />
with regards to employee recruitment, performance<br />
appraisals and in-house as well as external training<br />
programs.<br />
• Continuous investment in new machines.<br />
• Investing in Research and Development activities<br />
throughout the year.<br />
• Investing in hardware and developing software inhouse.<br />
• Continuous improvement on safeguarding IT and<br />
related assets.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 42
Risk Management<br />
Risk Exposure Group Objectives Risk Minimization Strategies<br />
7. Procurement Risk • To minimize risk associated with<br />
price and availability.<br />
8. Inventory • To reduce stock obsolescence and<br />
manage stock holding costs.<br />
• Reducing the risk associated with<br />
theft and shrinkage<br />
9. Risk of Competition • To maximize our market share and<br />
maintain market leadership in the<br />
respective industries.<br />
10. Intellectual Capital<br />
Risk<br />
11. Capital Investments<br />
Risk<br />
• To protect ourselves against possible<br />
violations, fraudulent usage and<br />
infringements on the Group’s<br />
copyrights.<br />
• To minimize risk of not meeting profit<br />
expectations.<br />
• Developing new products to improve quality and<br />
manage costs.<br />
• Establishing relationships with many global and local<br />
suppliers for raw materials and commodities in order<br />
to reduce over-dependency on a single supplier/<br />
brand.<br />
• Ensuring effective category management to reduce<br />
the risk of non-availability of goods at our retail<br />
outlets.<br />
• Adoption of backward integration strategies.<br />
• Centralized purchasing division which has enabled us<br />
to create a reliable network of global suppliers.<br />
• Entering into forward contracts for raw material<br />
purchases.<br />
• Adopting a monthly declaration policy.<br />
• Identifying slow-moving stocks and effectively laying<br />
out a channel for these to be sold off.<br />
• Adopting security systems at the Retail outlets such<br />
as security tags with alarm systems, surveillance<br />
cameras and deployment of security to manage theft.<br />
• Ensuring high standards of quality in the eyes of the<br />
customer.<br />
• Increasing productivity and efficiency in order<br />
to ensure our prices remain competitive despite<br />
increasing wage, energy and transportation costs.<br />
• Carrying out Research and Development activities to<br />
identify needs.<br />
• Further strengthening our Arpico brand through<br />
aggressive advertising campaigns and target<br />
marketing.<br />
• Introducing pioneering products.<br />
• The introduction of a CRM program in our retail chain.<br />
• The provision of various value added services at our<br />
key retailing outlets.<br />
• Registering our brands and trade marks.<br />
• Successfully obtaining patents for manufactured radial<br />
tyres.<br />
• Furthering our Arpico brand image through<br />
promotions and advertising.<br />
• Adopting a stringent approval procedure for Capital<br />
expenditure based on the level of investment and the<br />
expected pay back.<br />
• Carrying out extensive feasibility studies for large<br />
scale investments. External expertise is obtained<br />
wherever required.<br />
43<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Risk Management<br />
Risk Exposure Group Objectives Risk Minimization Strategies<br />
12. Information Systems<br />
Risk<br />
13. Environmental,<br />
Political and<br />
Regulatory Risk<br />
• To minimize risk associated with<br />
Data Security, Hardware and<br />
Communication and Software<br />
• To minimize the negative impact<br />
from the changes in the external<br />
environment which are beyond our<br />
control.<br />
• Maintaining of spare servers.<br />
• Mirroring of hard disks with critical data.<br />
• Data back-ups stored in off-site locations.<br />
• Vendor agreements for support service and<br />
maintenance.<br />
• Regular upgrading of Virus Scanners, Firewalls etc.<br />
• Compliance with statutory requirements for<br />
environmental preservations.<br />
• Carrying out Application Control Audits.<br />
• Compliance with statutory requirements for all tax and<br />
other payments.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 44
Our People<br />
Richard Pieris Group embraces the goodwill by carrying the<br />
pride in its own strength of 28,403 employees together with<br />
their attributes, expertise, innovative thoughts, challenging<br />
perspectives and collective experience. The Group Human<br />
Resources Division takes the responsibility in appreciating<br />
and valuing its employees by providing a robust structure in<br />
attracting, retaining, training and developing its talents at the<br />
most in further delighting and motivating the staff.<br />
On Boarding<br />
The structured On-Boarding Process within the Group which<br />
is centralised is carried out in a manner that each executive<br />
joining the organisation gathers an induction with the exposure<br />
to all sectors within the Group. The Corporate HR Department<br />
plans and designs the induction programme for each executive<br />
as per the importance of the role of the individual towards<br />
the respective sector and the Group. This process enables<br />
and ensures that a new arrival to the big family will be made<br />
comfortable by way of eliminating the thoughts of unfamiliarity<br />
within the Group to perform his/her tasks at his/her highest<br />
potential. The employee would feel welcomed, valued and<br />
connected to the members of the Group through this structured<br />
induction programme.<br />
Training & Development<br />
The Group believes in training and developing their staff is the<br />
key attribute in retaining of their talent. It possesses a planned,<br />
methodical structure in training & developing its staff across<br />
the sectors. Predominantly it focuses on delivering the training<br />
sector wise, based on the essential needs of its employees<br />
at different levels. The training would focus on developing<br />
technical skills, soft skills, personal development and leadership<br />
qualities of staff. We do carry out common programmes<br />
focusing fundamental attributes across sectors with a mixed<br />
representation of companies to enlighten and encourage the<br />
interaction among staff.<br />
Training provides a base to facilitate the internal promotions<br />
with a structured succession plan and it is considered as<br />
the cornerstone of our human resources policy. The Group<br />
advocates a number of widely recognized development<br />
programs both locally and in overseas for its dedicated long<br />
standing employees who have demonstrated leadership<br />
commitment and executive participation. Group Human<br />
Resources Division strives to build an exclusive work<br />
environment in which all employees regardless of their<br />
nationality, race, religion, gender, age can achieve their<br />
professional and personal commitments towards the betterment<br />
of the Group.<br />
Statement of Value Added<br />
<strong>2010</strong>/<strong>2011</strong> % 2009/<strong>2010</strong> %<br />
Rs .000 Rs .000<br />
Turnover (Gross) 27,541,404 22,564,356<br />
Cost of material & services purchased (18,149,161) (15,367,346)<br />
9,392,243 7,197,010<br />
Other Income 497,275 360,159<br />
9,889,518 7,557,169<br />
Distribution of value added<br />
To employees<br />
- Remuneration 4,576,864 46% 4,420,596 58%<br />
To government<br />
- Duties & taxes 1,769,112 18% 847,506 11%<br />
To providers of capital<br />
- Interest on loan capital 794,617 8% 969,147 13%<br />
- Minority interest 459,898 131,490<br />
- Dividend to shareholders<br />
Retained in the business<br />
- Depreciation 608,343 6% 608,226 8%<br />
- Profit/(loss) retained 1,680,684 17% 580,204 8%<br />
9,889,518 7,557,169<br />
Our People<br />
45<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Our People<br />
Another key factor in the training aspect is the RPC Training<br />
School which primarily focuses on the training of the retail<br />
sector staff. It continuously carries out skills and leadership<br />
training to front liners and the operational staff of the business.<br />
Performance Based Rewards<br />
Richard Pieris believes in recognising, appreciating and valuing<br />
employees for their sincere contribution and this is made<br />
possible with the transparent, comprehensive Performance<br />
Management System which is in existence in the Group for<br />
all executive staff together with detailed customized score<br />
cards carried out for non executive staff. The objective of the<br />
evaluations will be carried out biannually and the outcome<br />
is used as a base for employee bonus payouts and the<br />
increments.<br />
Further to the above our team enjoys facilities such as<br />
subsidized lunch, discounts on Super Centre purchases,<br />
holiday bungalow facilities, enrolment in a 24 hour medical<br />
service, in-house medical centre, reimbursement of medical<br />
expenses, surgical and hospitalization schemes, vehicle loans<br />
at concessionary rates etc. for being members of the big family.<br />
The PMS is carried out with a top down approach across<br />
the group and we truly believe that it increases performance,<br />
productivity, quality, innovations, decision making process<br />
which in return enables Richard Pieris Group to succeed in its<br />
endeavors on a day to day basis. We as a Group continuously<br />
thrive towards building and maintaining a high-performance<br />
culture in all aspects whilst encouraging a work life balance<br />
to employees through its integrated rewards and recognition<br />
scheme applied for different sectors to appreciate the<br />
contribution of the employees at different levels. The Process<br />
begins with a predetermined set of Goals and objectives<br />
between the leader and the team member (Appraiser and the<br />
Appraisee) beginning of each financial year with subsequent<br />
evaluations agreed at the beginning of the year.<br />
Employees Recreational Activities<br />
We believe that all in the ARPICO family should posses and<br />
advocate a work life balance within the Group. This induces<br />
us at Group HR to plan, organize and carry out recreational<br />
activities in every possible way not disturbing the on going<br />
operations but facilitating an increase in the employees<br />
satisfaction and delighting them with opportunities and benefits<br />
whilst extending the same to their immediate families too.<br />
The corporate Human Resources Division of the Group takes<br />
initiatives in organizing monthly movie nights, employee’s trade<br />
exhibitions, employees eye clinics, sports festivals, providing<br />
club memberships, organising staff health camps etc as<br />
ongoing projects to sustain the staff momentum of belonging to<br />
a balanced culture.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 46
Group Structure<br />
1. RUBBER SECTOR<br />
RICHARD PIERIS EXPORTS PLC<br />
Business Activity<br />
Manufacture and Export of rubber mats and sealing<br />
rings<br />
Dr. Sena Yaddehige Chairman/CEO<br />
Shaminda Yaddehige Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke Director<br />
S S G Liyanage Director<br />
Renton De Alwis Director<br />
Viville P Perera Director<br />
W R Abeysirigunawardena Director appointed w.e.f. 01.03.<strong>2011</strong><br />
Stated Capital<br />
Rs. 220,262,000/00 Represented by 11,163,745 shares<br />
Group Holding 80.26%<br />
ARPITALIAN COMPACT SOLES (PRIVATE) LIMITED<br />
Business Activity<br />
Manufacture and export of resin rubber shoe soling<br />
sheets<br />
Dr Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Fabio Piccolo<br />
Director<br />
Lino Piccolo<br />
Director<br />
J H P Ratnayeke Director<br />
Stated Capital<br />
Rs. 415,983,350/00 Represented by 35,193,835<br />
ordinary shares 6,404,500 preferential shares<br />
Group Holding 51.62%<br />
RICHARD PIERIS NATURAL FOAMS LIMITED<br />
Business Activity Manufacture and export of foam rubber products<br />
Dr. Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke Director<br />
Shaminda Yaddehige Director<br />
S S Poholiyadde Director<br />
Stated Capital<br />
Rs. 640,822,600/00 Represented by 64,082,260 shares<br />
Group Holding 80.30%<br />
ARPICO NATURAL LATEXFOAMS (PRIVATE) LIMITED<br />
Business Activity Manufacture and export of foam rubber products<br />
Dr. Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Shaminda Yaddehige Director<br />
Stated Capital<br />
Rs. 90,000,000/00 Represented by 9,000,000 shares<br />
Group Holding 80.28%<br />
RICHARD PIERIS RUBBER PRODUCTS LIMITED<br />
Business Activity Manufacture of rubber products<br />
Dr. Sena Yaddehige Chairman<br />
S S G Liyanage Director<br />
W Abeysirigunawardene Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke Director<br />
Stated Capital<br />
Rs. 27,000,000/00 Represented by 2,700,000 shares<br />
Group Holding 100%<br />
MICRO MINERALS (PRIVATE) LIMITED<br />
Business Activity Manufacture of rubber fillers<br />
Dr. Sena Yaddehige<br />
W Abeysirigunawardene<br />
Chairman<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
B L P Jayawardana<br />
Stated Capital<br />
Director<br />
Group Holding 55.18%<br />
Rs. 9,126,000/00 Represented by 912,600 shares<br />
PLAYCRAFT LANKA (PRIVATE) LIMITED<br />
Business Activity<br />
Cessation of business w. e. f. 31/08/2000 – Under<br />
liquidation<br />
W Abeysirigunawardene Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 5,900,000/00 Represented by 590,000 shares<br />
Group Holding 65.29%<br />
2. TYRE SECTOR<br />
RICHARD PIERIS TYRE COMPANY LIMITED<br />
Business Activity Tyre retreading, Re-manufacturing & trading<br />
Dr Sena Yaddehige Chairman<br />
J H P Ratnayeke Director<br />
P J Janadheera Resigned w.e.f. 15.03.<strong>2011</strong><br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Wasantha<br />
Abeysirigunawardena<br />
Director appointed w.e.f. 17.03.<strong>2011</strong><br />
Stated Capital<br />
Rs. 40,000,000/00 Represented by 4,000,000 shares<br />
Group Holding 100%<br />
ARPIDAG INTERNATIONAL (PRIVATE) LIMITED<br />
Business Activity Manufacture of precured tyre retreading material<br />
Dr Sena Yaddehige Chairman<br />
M A Tirona<br />
Director<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 45,999,800/00 Represented by 459,998 shares<br />
Group Holding 51%<br />
RICHARD PIERIS RUBBER COMPOUNDS LIMITED<br />
Business Activity Mixing rubber compounds<br />
Dr. Sena Yaddehige Chairman<br />
W Abeysirigunawardene Director<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 17,000,000/00 Represented by 1,700,000 shares<br />
Group Holding 100%<br />
3. PLASTICS SECTOR<br />
ARPICO FLEXIFOAM (PRIVATE) LIMITED<br />
Business Activity Manufacture of polyurethane foam products<br />
Dr. Sena Yaddehige Chairman<br />
J H P Ratnayeke Director<br />
S S G Liyanage Managing Director<br />
E A Senanayake Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
L Wijeyesinghe Director<br />
Dr. K Weerapperuma Director<br />
Prof. U Liyanage Director<br />
Stated Capital<br />
Rs. 250,000,210/00 Represented by 25,000,021 shares<br />
Group Holding 100%<br />
Group Structure<br />
47<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Group Structure<br />
PLASTISHELLS LIMITED<br />
Business Activity Manufacture of rotational moulded products<br />
Dr. Sena Yaddehige<br />
J H P Ratnayeke<br />
S S G Liyanage<br />
E A Senanayake<br />
Director<br />
Director<br />
Managing Director<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Dr. K Weerapperuma<br />
Prof. U Liyanage<br />
Stated Capital<br />
Director<br />
Director<br />
Group Holding 98.39%<br />
Rs. 34,160,030/00 Represented by 3,416,003 shares<br />
ARPICO PLASTICS LIMITED<br />
Business Activity Manufacture of plastic products<br />
Dr. Sena Yaddehige<br />
S S G Liyanage<br />
E A Senanayake<br />
Chairman<br />
Managing Director<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke<br />
P A S Kularatne<br />
Dr. K Weerapperuma<br />
Prof. U Liyanage<br />
Stated Capital<br />
Director<br />
Director<br />
Director<br />
Director<br />
Group Holding 100%<br />
Rs. 29,000,000/00 Represented by 2,900,000 shares<br />
ARPITECH (PRIVATE) LIMITED<br />
Business Activity Manufacture of PVC pipes & fittings<br />
Dr. Sena Yaddehige<br />
S S G Liyanage<br />
Chairman<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke<br />
Dr. K Weerapperuma<br />
Prof. U Liyanage<br />
Director<br />
Director<br />
Director<br />
E S Senanayake Director appointed w.e.f. 10.01.<strong>2011</strong><br />
L C Wijeyesinghe Director appointed w.e.f. 10.01.<strong>2011</strong><br />
Stated Capital<br />
Group Holding 100%<br />
Rs. 35,000,020/00 Represented by 3,500,002 shares<br />
4.RETAIL SECTOR<br />
RICHARD PIERIS DISTRIBUTORS LIMITED<br />
Business Activity Managing & operating a chain of retail network<br />
Dr. Sena Yaddehige<br />
Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke<br />
S S G Liyanage<br />
Dr. Harsha Cabral<br />
Director<br />
Director<br />
Director<br />
AndrewJ. Dalby Director appointed w.e.f. 01.03.<strong>2011</strong><br />
P D A S Kularatne Director appointed w.e.f. 01.03.<strong>2011</strong><br />
Stated Capital<br />
Rs. 1,096,760,960/00 Represented by 106,676,096<br />
shares<br />
Group Holding 100%<br />
ARPICO INTERIORS (PRIVATE) LIMITED<br />
Business Activity Interior decorating<br />
Dr. Sena Yaddehige Chairman<br />
F N Vithanage<br />
Director<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 30,000,020/00 Represented by 3,000,002 shares<br />
Group Holding 100%<br />
ARPICO FURNITURE LIMITED<br />
Business Activity Cessation of business w.e.f 31.03.2004<br />
J H P Ratnayeke<br />
Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Group Holding 100%<br />
Rs. 40,000,000/00 Represented by 4,000,000 shares<br />
ARPIMALLS DEVELOPMENT COMPANY (PRIVATE)<br />
LIMITED<br />
Business Activity Operates retailing centres<br />
Dr. Sena Yaddehige Chairman<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Company RPD RPC<br />
No. of shares Ord. 16,000,001 5,000,001<br />
Pref. 22,000,000<br />
Stated Capital<br />
Rs. 430,000,020/00 Represented by 43,000,002<br />
shares<br />
Group Holding 100%<br />
5. PLANTATION SECTOR<br />
RICHARD PIERIS PLANTATIONS (PVT.) LTD<br />
Business Activity Managing agents of plantations<br />
Dr. Sena Yaddehige Chairman<br />
J H P Ratnayeke Director<br />
Viville P. Perera Director appointed w.e.f. 15.03.<strong>2011</strong><br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 70/00 represented by 07 shares<br />
Group Holding 100%<br />
RPC MANAGEMENT SERVICES (PRIVATE) LIMITED<br />
Business Activity<br />
Investment & management of the plantation<br />
companies<br />
Dr. Sena Yaddehige Director<br />
J H P Ratnayeke Deputy Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J M A Ratnayeke Director<br />
R L Kumararatne Vacated the office w.e.f. 25.02.<strong>2011</strong><br />
Prof. K Goonesekera Director<br />
Stated Capital<br />
Rs. 75,000,000 Represented by 7,500,000 shares<br />
Group Holding 100 %<br />
MASKELIYA PLANTATIONS PLC<br />
Business Activity Tea Plantations<br />
Dr. Sena Yaddehige Chairman<br />
J H P Ratnayeke Deputy Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
R L Kumararatne Vacated the office w.e.f. 25.02.<strong>2011</strong><br />
S P Jayakoddy Director<br />
Dr. S A B Ekanayake Director<br />
Dr. H S D Soysa Director<br />
Stated Capital<br />
Rs. 350,000,000/00 Represented by 26,976,745 shares<br />
Group Holding 71.07%<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 48
Group Structure<br />
KEGALLE PLANTATIONS PLC<br />
Business Activity Rubber, Tea and Coconut Plantations<br />
Dr. Sena Yaddehige<br />
J H P Ratnayeke<br />
Chairman<br />
Deputy Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
S. S Poholiyadde Director<br />
R L Kumararatne Vacated the office w.e.f. 08.02.<strong>2011</strong><br />
Dr. Nugawela<br />
Director<br />
L N de S Wijeyeratne Resigned w.e.f. 01.07.<strong>2010</strong><br />
Dr. S S G Jayawardena Director appointed w.e.f. 16.08.<strong>2010</strong><br />
Stated Capital<br />
Group Holding 68.06%<br />
EXOTIC HORTICULTURE (PVT.) LTD<br />
Business Activity Cultivation of fruits<br />
Dr. Sena Yaddehige<br />
J H P Ratnayeke<br />
S S Poholiyadde<br />
Rs. 250,000,010/00 Represented by 25,000,001 shares<br />
Chairman<br />
Director<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Group Holding 100%<br />
Rs. 10,000,000/00 Represented by 1,000,000 shares<br />
HAMEFA KEGALLE (PRIVATE) LTD<br />
Business Activity Manufacture & Export of furniture<br />
Dr. Sena Yaddehige<br />
Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayke<br />
Stated Capital<br />
Director<br />
Group Holding 68.06%<br />
Rs. 28,000,020/00 Represented by 2,800,002 shares<br />
NAMUNUKULA PLANTATIONS PLC<br />
Business Activity Rubber, Tea, Cinnamon & Coconut Plantations<br />
Dr. Sena Yaddehige<br />
J H P Ratnayeke<br />
Chairman<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
R L Kumararatne Vacated the office w.e.f. 10.02.<strong>2011</strong><br />
V K J Thalpawila Vacated the office w.e.f. 10.02.<strong>2011</strong><br />
A Dias Vacated the office w.e.f. 28.09.<strong>2010</strong><br />
N C Pieris<br />
Director<br />
S S Poholiyadde Director appointed w.e.f. 03.01.<strong>2011</strong><br />
Mrs. L D Senanayake Director appointed w.e.f. 10.02.<strong>2011</strong><br />
Stated Capital<br />
Group Holding 58.74%<br />
Rs. 350,000,010/00 Represented by 23,750,001 shares<br />
RPC PLANTATION MANAGEMENT SERVICES (PVT) LTD<br />
Business Activity Investment & management of plantations<br />
Dr. Sena Yaddehige<br />
J H P Ratnayeke<br />
Chairman<br />
Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
R L Kumararatne Vacated the office w.e.f. 25.02.<strong>2011</strong><br />
J M A Ratnayeke<br />
Stated Capital<br />
Director<br />
Group Holding 100%<br />
Rs.241,062,500/00 Represented by 24,106,250 shares<br />
MASKELIYA TEA GARDENS (CEYLON) LIMITED<br />
Business Activity Trading &, marketing of value added tea<br />
Dr. Sena Yaddehige<br />
Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
R L Kumararatne Vacated the office w.e.f. 07.03.<strong>2011</strong><br />
J H P Ratnayeke<br />
Director<br />
Lilanthi C. Herath Director appointed w.e.f. 24.02 .<strong>2011</strong><br />
Stated Capital<br />
Group Holding 100%<br />
Rs. 15,000,070 Represented by 1,500,007 shares<br />
6. SERVICES<br />
RICHARD PIERIS GROUP SERVICES (PRIVATE) LIMITED<br />
Business Activity Provides Company Secretarial Services<br />
Dr. Sena Yaddehige<br />
J H P Ratnayeke<br />
Mrs. R J Siriweera<br />
Stated Capital<br />
Chairman<br />
Director<br />
Director<br />
Group Holding 100%<br />
Rs. 20/00 Represented by 02 shares<br />
ARPICO INDUSTRIAL DEVELOPMENT COMPANY<br />
(PRIVATE) LIMITED<br />
Business Activity Operates industrial estates<br />
Dr. Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Andrew J. Dalby Director appointed w.e.f. 15.03.<strong>2011</strong><br />
Stated Capital<br />
Rs. 106,400,000/00 Represented by 10,640,000<br />
shares<br />
Group Holding 100%<br />
RPC REAL ESTATE DEVELOPMENT COMPANY (PRIVATE)<br />
LIMITED<br />
Business Activity<br />
Property & Real Estate Development Projects<br />
Dr. Sena Yaddehige Chairman<br />
Andrew J. Dalby Director appointed w.e.f. 02.08.<strong>2010</strong><br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital – Rs.667,000,020/00 Rpresented by 66,700,002 shares<br />
Group Holding 100%<br />
RPC RETAIL DEVELOPMENTS (PRIVATE) LIMITED<br />
Business Activity Construction, Property and Real Estate Development<br />
Dr. Sena Yaddehige Chairman<br />
Andrew J. Dalby Director appointed w.e.f. 02.08.<strong>2010</strong><br />
Viville Perera Director appointed w.e.f. 15.03.<strong>2011</strong><br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 387,000,020/00 Represented by 38,700,002<br />
shares<br />
Group Holding 100%<br />
RPC LOGISTICS LIMITED<br />
Business Activity Freight forwarding and allied services<br />
Dr. Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
J H P Ratnayeke Director<br />
Stated Capital<br />
Rs 20, 000,070/00 Represented by 2,000,007 shares<br />
Group Holding 100%<br />
49<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Group Structure<br />
ASIAN ALLIANCE INSURANCE COMPANY PLC<br />
Business Activity Insurance<br />
J H P Ratnayeke<br />
H L L M Nanayakkara<br />
R G Jasinghe<br />
R J Wickremasinghe<br />
Chairman<br />
Deputy Chairman<br />
Director<br />
Director<br />
Prof. Lakshman R.<br />
Watawala<br />
Director<br />
C D Silva<br />
Director<br />
S.A. Abeyesinghe Director<br />
V. Silva JR Director<br />
D. Muthukumarana Director<br />
Ms. D.P. Pieris<br />
Alternate Director to H.L.L.M. Nanayakkara<br />
Stated Capital<br />
Rs. 1,062,500,000/00 Represented by 37, 500,000<br />
shares<br />
Group Holding 25%<br />
RPGS are not company secretaries to this company<br />
ARPICO EXOTICA ASIANA (PRIVATE) LIMITED<br />
Business Activity Leisure<br />
Dr. Sena Yaddehige Chairman<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 20/00 represented by 02 shares<br />
Group Holding 100%<br />
RPE GLOBAL TRADING (PRIVATE) LIMITED<br />
Business Activity Export Trading<br />
Dr. Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 20/00 represented by 02 shares<br />
Group Holding 100%<br />
RPC CONSTRUCTION (PRIVATE) LIMITED<br />
Business Activity Business of construction nationally and internationally<br />
Dr. Sena Yaddehige Director<br />
J H P Ratnayeke Deputy Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs.20, 000,070/00 represented by 2,000,007 shares<br />
Group Holding - 100%<br />
ARPICO HOMES LIMITED<br />
Business Activity Property & Real Estate Development<br />
Dr. Sena Yaddehige Director<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 70/00 represented by 07 shares<br />
Group Holding 100%<br />
R P C GLOBAL TRAVELS (PRIVATE) LIMITED<br />
Business of national and international airline travel<br />
Business Activity and trade<br />
Cessation of Business w e f 31.03.2009<br />
Dr. Sena Yaddehige Director<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
M M Udeshi<br />
Director<br />
Stated Capital<br />
Rs.6,000,020/00 Represented by 600,002 shares<br />
Group Holding 100%<br />
R P C POLYMERS (PRIVATE) LIMITED<br />
Business Activity<br />
Manufacturers, exporters and importers of all plastic<br />
products<br />
Dr Sena Yaddehige Chairman<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
S S G Liyanage Director<br />
Dr. K Weerapperuma Director<br />
Prof. U Liyanage Director<br />
Stated Capital<br />
Rs. 187,000,020/00 represented by 18,700,002 shares<br />
Group Holding 100%<br />
MARKRAY SYSTEMS (PRIVATE) LIMITED<br />
Business Activity<br />
Dr. Sena Yaddehige Chairman<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
S Kalugala<br />
Director<br />
Stated Capital<br />
Rs. 20/00 represented by 02 shares<br />
Group Holding 100%<br />
FERHAM ORGANICS (PRIVATE) LIMITED<br />
Business Activity Engage in agri-business<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Wasantha<br />
Abeysirigunawardena<br />
Director appointed w.e.f. 28.03.<strong>2011</strong><br />
S S Poholiyadde Director appointed w.e.f. 28.03.<strong>2011</strong><br />
Stated Capital<br />
Rs. 20/00 represented by 02 shares<br />
Group Holding 85.54%<br />
RPC SOUTHERN INDUSTRIAL PARK (PRIVATE) LIMITED<br />
Business Activity Development of township and industrial estates<br />
J H P Ratnayeke Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 20/00 represented by 02 shares<br />
Group Holding 79.37%<br />
RICHARD PIERIS SECURITIES (PRIVATE) LIMITED<br />
Business Activity Carrying on the business of a stock-broker<br />
Dr Sena Yaddehige Chairman<br />
Prof. Lakshman R.<br />
Watawala<br />
Director<br />
Andrew J. Dalby Director<br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
H J C Perera Director appointed w.e.f. 23.02.<strong>2011</strong><br />
Stated Capital<br />
Rs. 50,000,000/00 Represented by 5,000,000 shares<br />
Group Holding 100%<br />
RICHARD PIERIS FINANCIAL SERVICES (PRIVATE)<br />
LIMITED<br />
Business Activity Acting as margin providers<br />
Dr Sena Yaddehige Chairman<br />
Andrew J. Dlaby Director appointed w.e.f. 01.03.<strong>2011</strong><br />
P D Samarasinghe Resigned w.e.f. 15.02.<strong>2011</strong><br />
Viville P. Perera Director appointed w.e.f. 01.03.<strong>2011</strong><br />
Stated Capital Rs. 35,000,000/00<br />
Represented by 3,500,000 shares<br />
Group Holding 100%<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong><br />
50
52 <strong>Annual</strong> <strong>Report</strong> of the Board of Directors<br />
56 Corporate Governance<br />
58 <strong>Report</strong> of the Remuneration Committee<br />
59 <strong>Report</strong> of the Audit Committee<br />
60 Statement of Directors’ Responsibility<br />
61 Auditor’s <strong>Report</strong><br />
62 Balance Sheet<br />
63 Income Statement<br />
64 Cash Flow Statement<br />
66 Statement of Changes in Equity<br />
67 Notes to the Financial Statements<br />
Financial Information<br />
51<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
<strong>Annual</strong> <strong>Report</strong> of the Board of Directors<br />
The Directors of Richard Pieris and Company PLC are pleased<br />
to present to their members the <strong>Annual</strong> <strong>Report</strong> together with<br />
the audited financial statements of its Group and the Company,<br />
for the year ended 31 March <strong>2011</strong>.<br />
The Directors approved the financial statements on 27th May<br />
<strong>2011</strong>.<br />
Principal Activities & Operational Review<br />
Richard Pieris and Company PLC is the holding company<br />
that owns, directly and indirectly, investments in a number of<br />
companies constituting the Richard Pieris Group. The principal<br />
activities of the Group are described under the Group Structure<br />
on pages 47 - 50 of the report.<br />
A review of the Group’s business and its performance<br />
during the year, with comments on financial results and<br />
future developments, is contained in the Chairman and<br />
CEO’s Review, Sector Reviews and the Financial Review of<br />
this <strong>Annual</strong> <strong>Report</strong>. The measures taken by the Company<br />
to manage its risks are detailed in the report titled Risk<br />
Management on pages 41 - 44 of this report.<br />
Future Developments<br />
The Group intends to continue to pursue a strategy of focusing<br />
on its core business activities. In order to achieve this, the<br />
Group will concentrate on enhancing the performance of it’s<br />
retail, plantation, tyre, rubber and plastics business sectors.<br />
Further information on future developments is provided in the<br />
Chairman and CEO’s Review and Sector Review of this report.<br />
Group Revenue<br />
The turnover of the Group was Rs. 27.2 bn. A detailed analysis<br />
of the Group’s turnover identifying the contributions from<br />
different sectors is given in Note 21 to the Financial Statements.<br />
The Group’s exports from Sri Lanka were Rs. 2.4 bn. Trade<br />
between Group companies is conducted at fair market prices.<br />
Results & Dividends<br />
Details relating to the Group profits are given in the table on<br />
Page 53. The Group reported a Profit after tax amounting to Rs.<br />
2.1 bn.<br />
The Directors recommend a cash dividend amounting to Rs.<br />
194 mn to all shareholders at the rate of Rs. 0.10 per ordinary<br />
share and subject to approval of the shareholders payable on<br />
or before 8th July <strong>2011</strong>. The dividends represent a redistribution<br />
of dividends received by the company and therefore will not be<br />
subject to the 10% withholding tax otherwise applicable.<br />
Group Investments<br />
The Group did not incur any expenditure on investments other<br />
than investments in subsidiary companies during the year.<br />
Details of this are given in Note 5 to Financial Statements.<br />
Property, Plant & Equipment<br />
Capital expenditure on property, plant, equipment and workin-progress<br />
incurred during the year under review amounted<br />
to Rs. 1.2 bn. Information relating to this is given in Note 3<br />
to the Financial Statements. Land is included as described<br />
in Accounting Policies in the Financial Statements. Capital<br />
expenditure approved and contracted for after the year-end<br />
is given in Note 32 to the Financial Statements. The value of<br />
property stated in the Financial Statements is not in excess of<br />
its current market values.<br />
Freehold Property<br />
A description of the property owned by the Group is shown<br />
under the Group Real Estate portfolio on page 108.<br />
Stated Capital<br />
The stated capital of the Company as at 31 March <strong>2011</strong> was<br />
Rs. 1.62 bn. The details of the stated capital is given in Note 9<br />
to the Financial Statements.<br />
Reserves<br />
Total Group Reserves as at 31st March, <strong>2011</strong> amount to Rs. 3.4<br />
bn. (Rs. 2.2 bn as at 31 March <strong>2010</strong>). The details of which are<br />
given in Notes 10, 11 and 12 to the Financial Statements.<br />
Corporate Donations<br />
Donations made by the Company and Group to charitable<br />
organisations amounted to Rs. 0.22 mn and Rs. 4.1 mn<br />
respectively.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 52
Taxation<br />
The general corporate income tax rate in effect during the year<br />
was 35%. The rate of tax on qualified export profits was 15%.<br />
Agricultural profits were exempted from Income Tax. Companies<br />
that enjoy tax holiday status and other concessionary rates are<br />
listed in Note 27 to the Financial Statements.<br />
In computing the Group’s tax liability, the maximum relief<br />
available to investors under the provisions of the Inland<br />
Revenue Act has been claimed.<br />
It is the Group’s policy to provide for deferred taxation on all<br />
known temporary differences, on the liability method.<br />
Directors<br />
The names of Directors who served during the year are given<br />
on pages 5, 12 and 13 of this report, under the caption of<br />
‘Board of Directors’. Mr. Pravir Samarasinghe resigned from the<br />
Board with effect from 15th February <strong>2011</strong>.<br />
Mr. Moraji M. Udeshi shall vacate at the conclusion of the<br />
<strong>Annual</strong> General Meeting in terms of Section 210 of the<br />
Companies Act and will not be re-appointed.<br />
Prof Susantha Pathirana retires by rotation in terms of Article 85<br />
of the Articles of Association of the Company and being eligible<br />
offers himself for re-election at the <strong>Annual</strong> General Meeting.<br />
Details on the Group’s exposure to taxation are disclosed in<br />
Note 27 to the Financial Statements.<br />
Share Information<br />
Information relating to earnings, dividend, net assets and<br />
market value per share is given in the Ten Year Summary on<br />
pages 104 - 105 of this report.<br />
Substantial Shareholdings<br />
The twenty major shareholders and the percentage held by<br />
each one of them as at 31st March, <strong>2011</strong> are given in pages<br />
106 and 107 under Shareholder Information.<br />
<strong>2010</strong>/11 2009/10<br />
Group Profits Rs.’000 Rs.’000<br />
The net profit earned by the Group after providing for all expenses, known liabilities<br />
and depreciation on property, plant and equipment was 2,768,757 1,060,159<br />
From which the deduction of income tax and transfer to the deferred taxation account was (616,566) (330,592)<br />
Leaving the Group with a profit after tax from continuing operations of 2,152,191 729,567<br />
From which the loss after tax from discontinued operations deducted was (11,609) (17,873)<br />
Leaving the Group with a profit for the year of 2,140,582 711,694<br />
From which Minority Interest deducted was (459,898) (131,490)<br />
Leaving a profit attributable to the equity holders of the parent was 1,680,684 580,204<br />
To which the retained profit brought forward form the previous year added was 1,876,921 1,296,717<br />
Leaving a profit available for appropriation of 3,557,605 1,876,921<br />
Appropriations<br />
The amount available has been appropriated as follows<br />
Final Dividend 2009-10 (128,850) -<br />
Interim Dividend <strong>2010</strong>-11 (387,096) -<br />
Leaving a retained profit to be carried forward amounting to 3,041,659 1,876,921<br />
53<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
<strong>Annual</strong> <strong>Report</strong> of the Board of Directors Contd.<br />
Directors’ Interest in Contracts with the Company and the Interest Register<br />
Directors’ interests in contracts or proposed contracts with the Company both direct and indirect are disclosed on page 54, 102 and<br />
103. These interests have been declared at the meetings of directors. The directors have no direct or indirect interest in any other<br />
contract or proposed contract of the Company. The Company maintains an interest register as required by the Companies’ Act No.<br />
07 of 2007. Information pertaining to directors’ interest in contracts, their remuneration and their share ownership are disclosed in<br />
the interest register.<br />
Transactions with related undertakings<br />
Name of Position Transaction <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Director Details Rs.Mn Rs.Mn<br />
Group<br />
Asia Siyaka Commodities (Pvt) Ltd Mr. J.H.P. Ratnayeke Director Packing Materials 11.76 30.20<br />
Brokerage 0.03 26.54<br />
Store rent 4.04 7.12<br />
Others - 5.31<br />
National Development Bank PLC Dr. Sena Yaddehige Director Loans 1,117.88 1,019.69<br />
Prof. Lakshman R. Watawala Interest paid 67.53 130.28<br />
(Alternate Director to Dr. Sena Yaddehige) Letter of credit facility 555.00 352.00<br />
(Note 1)<br />
Swadeshi Marketing Limited Mr. P.D. Samarasinghe Director Purchase of goods for resale 12.72 14.73<br />
(Note 2) Rent received 1.12 0.92<br />
Mouldex Ltd Mr. M.M. Udeshi Director Purchase of goods for resale 2.07 1.89<br />
1. Dr Sena Yaddehige resigned from the Board of Directors of NDB PLC w.e.f. 11.11.<strong>2010</strong> and <strong>2010</strong>/<strong>2011</strong> amounts disclosed above<br />
related to the period up to the date of his resignation.<br />
2. Mr. P.D. Samarasinghe resigned from the Board of Directors of the Company w.e.f.15.02.<strong>2011</strong> and <strong>2010</strong>/<strong>2011</strong> amounts<br />
disclosed above related to the period up to the date of his resignation.<br />
The list of Directors at each of the subsidiary and associate Companies have been disclosed in the group structure on page 47 to 50.<br />
Directors’ Shareholding<br />
Directors’ Shareholding in Richard Pieris and Company PLC is stated in page 107.<br />
Directors’ Interest in Contracts<br />
Directors’ Interest in Contracts in relation to transactions with<br />
related entities, transactions with Key Management Personnel<br />
and other related disclosures are stated in Note 35 (Related<br />
party disclosures) to the financial statements. In addition,<br />
the Company carried out transactions in the ordinary course<br />
of business with the following entities having one or more<br />
directors in common which is summarised above.<br />
Directors’ Remuneration<br />
Directors’ fees and emoluments, in respect of the Group and<br />
the Company for the financial year ended 31st March <strong>2011</strong> are<br />
disclosed in note 35.2 to the Financial Statements.<br />
Vision & Long Term Goals<br />
The Group’s Vision and Long Term Goals are given in page 1<br />
of this report.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 54
Environmental Protection<br />
The Company has not engaged in any activities detrimental<br />
to the environment. The Group’s efforts in relation to<br />
environmental protection are set out in the Corporate Social<br />
Responsibility <strong>Report</strong> in pages 33 - 34.<br />
Employment Policies<br />
Group employment policies are based on recruiting the<br />
best people, providing them training to enhance their skills,<br />
recognition of innate skills and competencies of each individual<br />
while offering equal career opportunities regardless of gender,<br />
race or religion and to retain them with the Group as long<br />
as possible. Health and safety of the employees has always<br />
received priority in the HR agenda. The number of persons<br />
employed by the company and its subsidiaries at the year end<br />
was 28,403.<br />
Compliance with Other Laws & Regulations<br />
The Directors, to the best of their knowledge and belief,<br />
confirm that the Group has not engaged in any activities that<br />
contravene the laws and regulations applicable in Sri Lanka.<br />
Financial Statements are published quarterly in line with the<br />
listing rules of the <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong>.<br />
<strong>Annual</strong> General Meeting<br />
The <strong>Annual</strong> General Meeting will be held at the Registered<br />
Office of the Company, No. 310, High Level Road, Nawinna,<br />
Maharagama, on 30th June <strong>2011</strong>. The Notice of the <strong>Annual</strong><br />
General Meeting is on page 114 of this report.<br />
Auditors<br />
The Financial Statements for the year have been audited by<br />
Messrs. Ernst & Young, Chartered Accountants.<br />
Statutory Payments<br />
The Directors, to the best of their knowledge and belief are<br />
satisfied that all statutory payments due to the Government and<br />
in relation to employees have been made up to date.<br />
Events Subsequent To the Balance Sheet Date<br />
There have not been any material events that occurred<br />
subsequent to the Balance Sheet Date that require disclosure<br />
or adjustments to the Financial Statements, other than those<br />
disclosed if any, in Note 34 to the Financial Statements.<br />
In accordance with the Companies Act No. 7 of 2007, a<br />
resolution proposing the re-appointment of Messrs. Ernst &<br />
Young, Chartered Accountants, as Auditors to the Company<br />
and authorizing the Directors to fix their remuneration will be<br />
proposed at the <strong>Annual</strong> General Meeting.<br />
By Order of the Board<br />
Board Committees<br />
The Board has appointed two sub-committees namely, the<br />
Audit Committee and the Remuneration Committee. Their<br />
compositions and functions are given in pages 58 - 59 of the<br />
report.<br />
W J Viville Perera<br />
Director<br />
J H P Ratnayeke<br />
Director<br />
Corporate Governance / Internal Control<br />
The Directors acknowledge their responsibility for the Group’s<br />
corporate governance and the system of internal control. The<br />
practices carried out by the Company in relation to corporate<br />
governance and internal controls are explained in pages 56 -<br />
57 of this report. The Board is satisfied with the effectiveness<br />
of the system of internal control for the period up to the date of<br />
signing the Financial Statements.<br />
Richard Pieris Group Services (Pvt) Limited<br />
Secretaries<br />
No. 310, High Level Road,<br />
Nawinna, Maharagama.<br />
Directors’ Responsibility for Financial <strong>Report</strong>ing<br />
The Statement of Directors’ Responsibility for financial reporting<br />
of the Company and the Group is set out in page 60 of this<br />
report.<br />
27th May <strong>2011</strong><br />
55<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Corporate Governance<br />
The Board of Directors of Richard Pieris and Company PLC<br />
is committed and takes responsibility to maintain the highest<br />
standards of Corporate Governance.<br />
Richard Pieris’ has designed its Corporate Governance policies<br />
and practices to ensure that the Company is focused on its<br />
responsibilities to its stakeholders and on creating long term<br />
shareholder value. The Company recognizes the interests of all<br />
its stakeholders including shareholders, employees, customers,<br />
suppliers, consumers and the other communities in which it<br />
operates. The Group complies with the rules on Corporate<br />
Governance, included in the Listing Rules of the <strong>Colombo</strong><br />
<strong>Stock</strong> <strong>Exchange</strong>, and is guided by the principles included in<br />
the Code of Best Practice on Corporate Governance issued<br />
jointly by the Securities and <strong>Exchange</strong> Commission of Sri<br />
Lanka and the Institute of Chartered Accountants of Sri Lanka.<br />
This statement sets out the Corporate Governance policies,<br />
practices and processes adopted by the Board.<br />
The Board and its Operations<br />
The Company is governed by its Board of Directors, who<br />
directs and supervises the business and affairs of the Company<br />
on behalf of the shareholders.<br />
The Board comprises six Directors, of which two are Executive<br />
Directors whilst four are Non-Executive Directors of which three<br />
are Independent, ensuring an independent outlook to temper<br />
the expediency of the experts. Brief profiles of the Directors<br />
are set out on pages 12 and 13. The Board has assessed the<br />
independence of the Non-Executive Directors.<br />
During the year the Board met on 7 occasions. Prior to<br />
each meeting, the Directors are provided with all relevant<br />
management information and background material relevant to<br />
the agenda to enable informed decisions. Board Papers are<br />
submitted in advance on group performance, new investments,<br />
capital projects and other issues which require specific Board<br />
approval. A separate information memorandum is provided on<br />
statutory payments at each Board Meeting.<br />
The Chairman, who is also the Chief Executive Officer, is<br />
responsible for matters relating to policy, maintaining regular<br />
contact with the other Directors, shareholders and external<br />
stakeholders of the Company. He is responsible for all aspects<br />
of the Group’s overall commercial, operational and strategic<br />
development and assisted by the Chief Operating Officer and<br />
an Executive Management Committee comprising Executive<br />
Directors and Heads of Companies of the Strategic Business<br />
Units (SBU). The Finance function devolves on the Group Chief<br />
Financial Officer, who is present by invitation at board meetings<br />
when financial matters are discussed. The Board of Directors<br />
has access to independent professional advice as and when<br />
deemed necessary for decision making.<br />
The main functions of the board are to:<br />
• Direct the business and affairs of the company.<br />
• Formulate short and long term strategies, as a basis<br />
for the operational plans of the company and monitor<br />
implementation.<br />
• <strong>Report</strong> on their stewardship to shareholders.<br />
• Identify the principal risks of the business and ensure<br />
adequate risk management systems in place.<br />
• Ensure internal controls are adequate and effective.<br />
• Approve the annual capital and operating budgets and<br />
review performance against budgets.<br />
• Approve the interim and final financial statements of the<br />
group.<br />
• Determine and recommend interim and final dividends for<br />
the approval of shareholders.<br />
• Ensure compliance with laws and regulations.<br />
• Sanction all material contracts, acquisitions or disposal of<br />
assets and approve capital projects.<br />
All Non-Executive Directors are independent with no direct<br />
or indirect material relationship with the Company. Their wide<br />
range of expertise and significant experience in commercial,<br />
corporate and financial activities bring an independent view<br />
and judgment to the Board.<br />
Sub Committees of the Board<br />
The Board is responsible for the establishment and functioning<br />
of all Board Committees, the appointment of members to these<br />
committees and their compensation. The Board has delegated<br />
responsibilities to two Board Sub Committees which operate<br />
within clearly defined terms of reference.<br />
Audit Committee<br />
The Audit Committee is composed of two Independent Non-<br />
Executive Directors namely Prof. Lakshman R. Watawala,<br />
Chairman and Prof. Susantha Pathirana. The Chief Executive<br />
Officer, Chief Operating Officer, Group Chief Financial Officer,<br />
Internal Audit Manager and functional heads of subsidiaries<br />
attend meetings by invitation.<br />
The Audit Committee <strong>Report</strong> on page 59 describes the<br />
activities carried out by the Committee during the financial year.<br />
Remuneration Committee<br />
The Remuneration Committee is composed of two Independent<br />
Non-Executive Directors - its Chairman, Prof. Lakshman R.<br />
Watawala and Prof. Susantha Pathirana.<br />
The <strong>Report</strong> of the Remuneration Committee on page 58<br />
highlights its main activities.<br />
Appointment of Directors<br />
The Company does not have a Nomination Committee<br />
to recommend additions to the Board. The Board as a<br />
whole decides on the appointments of new members. Mr.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 56
P.D.Samarasinghe resigned from the Board with effect from<br />
15th February <strong>2011</strong>.<br />
Relationship with Shareholders<br />
The Board maintains healthy relationships with its key<br />
shareholders (individual and institutional) while maintaining<br />
a dialogue with potential shareholders as well. The <strong>Annual</strong><br />
General Meetings are held to communicate with the<br />
shareholders and their participation is encouraged. Apart<br />
from this, its principal methods of communication include<br />
the corporate website, the annual report, quarterly financial<br />
statements and press releases.<br />
Internal Controls<br />
The Board is responsible for instituting on effective internal<br />
control system to safeguard the assets of the Company and<br />
ensure that accurate and complete records are maintained from<br />
which reliable information is generated. The system includes all<br />
controls including financial, operational and risk management.<br />
Strategies adopted by the Company to manage its risk are set<br />
out in its report on Risk Management on pages 41 - 44.<br />
Apart from the strategic plans covering a three year time<br />
horizon, a comprehensive budgetary process is in place, where<br />
annual budgets, identifying the critical success factors and<br />
functional objectives, prepared by all subsidiaries are, approved<br />
by the Board, at the commencement of a financial year, and<br />
its achievement monitored monthly, through a comprehensive<br />
monthly management reporting system. Clear criteria and<br />
benchmarks have also been set out for the evaluation of capital<br />
projects and new investments.<br />
The Internal Audit Division reporting to the Chairman, regularly<br />
evaluates the internal control system across the organization<br />
and its findings are reviewed first by the Audit Committee and<br />
significant issues are thereafter reported to the Board. The<br />
Board reviewed the internal control procedures in existence and<br />
are satisfied with its effectiveness.<br />
Relationship with Other Stakeholders<br />
The Board identifies the importance of maintaining a healthy<br />
relationship with its key stakeholders and ensures the Group<br />
as a whole inculcates this practice. Internal communication is<br />
mainly conducted through the quarterly newsletter, e-mails,<br />
memos and circulars.<br />
The Board also ensures that the Group policies and<br />
practices are in line with the Company’s values and its<br />
social responsibilities. The group promotes protection of the<br />
environment, health and safety standards of its employees and<br />
others within the organization. The relevant measures taken are<br />
given in detail in the Corporate Social Responsibility report on<br />
pages 33 - 34.<br />
Compliance<br />
The Board places significant emphasis on strong internal<br />
compliance procedures. The Financial Statements of the Group<br />
are prepared in strict compliance with the guidelines of the Sri<br />
Lanka Accounting Standards and other statutory regulations.<br />
Financial statements are published quarterly in line with the<br />
Listing Rules of the <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong> through which all<br />
significant developments are reported to shareholders quarterly.<br />
The Board of Directors, to the best of their knowledge and<br />
belief, are satisfied that all statutory payments have been made<br />
to date.<br />
Going Concern<br />
The Directors have continued to use the ‘Going Concern’<br />
basis in the preparation of the Financial Statements, after<br />
careful review of the financial position and cash flow status<br />
of the Group. The Board of Directors believes that the Group<br />
has adequate resources to continue its operation for the<br />
foreseeable future.<br />
Name of Director Executive Non- Executive Independent<br />
Dr S Yaddehige<br />
<br />
Mr. J H P Ratnayeke<br />
<br />
Mr. W J V P Perera<br />
<br />
Prof. Lakshman R Watawala <br />
Prof. Susantha Pathirana <br />
Mr. M M Udeshi <br />
Corporate Governance Requirements under Section 7 of the Listing Rules issued by the <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong>.<br />
<strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong><br />
Status of Richard Pieris and Company PLC<br />
Non Executive Directors<br />
In Compliance<br />
Independent Directors<br />
In Compliance<br />
Disclosures relating to Directors<br />
In Compliance<br />
Remuneration Committee<br />
In Compliance<br />
Audit Committee<br />
In Compliance<br />
57<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
<strong>Report</strong> of the Remuneration Committee<br />
The Remuneration Committee, appointed by and responsible<br />
to the Board of Directors, consists of two independent Non<br />
Executive Directors Prof. Lakshman R Watawala and Prof.<br />
Susantha Pathirana. The Committee is chaired by Prof.<br />
Lakshman R Watawala.The Committee met on several<br />
occasions during the financial year.<br />
The Remuneration Committee has reviewed and recommended<br />
the following to the Board of Directors:<br />
1. Policy on remuneration of the Executive Staff<br />
2. Specific remuneration package for the Executive Directors<br />
In a highly competitive environment attracting and retaining<br />
high caliber executives is a key challenge faced by the Group.<br />
In this context, the Committee took into account, competition,<br />
market information and business performance in declaring the<br />
overall remuneration policy of the Group.<br />
Prof. Lakshman R Watawala<br />
Chairman<br />
27th May <strong>2011</strong><br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 58
<strong>Report</strong> of the Audit Committee<br />
The Audit Committee Charter, approved by the Board of<br />
Directors defines the purpose, authority, composition, meeting,<br />
and responsibilities of the Committee.<br />
The purpose of the Audit Committee is to:<br />
1. Assist the Board of Directors in fulfilling its overall<br />
responsibilities for the financial reporting process<br />
2. Review the system of internal control and risk management<br />
3. Monitor the effectiveness of the internal audit function<br />
4. Review the Company’s process for monitoring compliance<br />
with laws and regulations.<br />
5. Review the independence and performance of the external<br />
auditors<br />
6. To make recommendations to the board on the<br />
appointment of external auditors and recommend their<br />
remuneration and terms of engagement<br />
The Audit Committee consisted of two independent and Non<br />
Executive Directors, namely Prof. Lakshman R. Watawala and<br />
Prof. Susantha Pathirana. The Chairman of the Committee<br />
is a Senior Chartered Accountant. The Company Secretary<br />
functions as Secretary to the Audit Committee.<br />
The principal activities of the Committee are detailed below.<br />
Meetings<br />
The Audit Committee held eight meetings during the year under<br />
review.<br />
The Group Chief Financial Officer, Group Internal Audit<br />
Manager and functional heads of the Strategic Business Units<br />
(SBUs) were invited if deemed necessary for audit committee<br />
meetings.<br />
Meetings were held with the external auditors regarding the<br />
scope and the conduct of the annual audits.<br />
Internal Audit and Risk Management<br />
The Internal Audit Programme was reviewed by the Committee<br />
to ensure that it covered the major business units of the Group.<br />
The Chief Internal Auditor was invited to be present at all Audit<br />
Committee deliberations. He presented a summary of the<br />
salient findings of all internal audits and investigations carried<br />
out by his department for the period. The responses from the<br />
Managing Directors of the SBUs to the internal audit findings<br />
were reviewed and where necessary corrective action was<br />
recommended and implementation monitored.<br />
The Committee also had the responsibility to review the loss<br />
making SBU’s of the Group and strategies for turning round<br />
these Companies and recommending suitable corrective action.<br />
Internal Controls<br />
During its meetings, the Committee reviewed the adequacy<br />
and effectiveness of the internal control systems and the<br />
Group’s approach to its exposure to the business and financial<br />
risks. Processes are in place to safeguard the assets of the<br />
organisation and to ensure that the financial reporting system<br />
can be relied upon in the preparation and presentation of<br />
financial statements. A comprehensive Management <strong>Report</strong><br />
and Accounts are produced at month end highlighting all key<br />
performance criteria pertaining to the Company’s SBUs which<br />
is reviewed by the Senior Management on a monthly basis.<br />
SBU Boards review performance on a quarterly basis.<br />
Financial Statements<br />
The Committee reviewed the Group’s Quarterly Financial<br />
Statements, the <strong>Annual</strong> <strong>Report</strong> and Accounts for reliability,<br />
consistency and compliance with the Sri Lanka Accounting<br />
Standards and other statutory requirements, including the<br />
Companies Act, No 7 of 2007, prior to issuance. It also reviewed<br />
the adequacy of disclosure in published financial statements.<br />
External Auditors<br />
The Audit Committee has reviewed the other services<br />
provided by the External Auditors to the group to ensure their<br />
independence as Auditors has not been compromised.<br />
The Committee reviewed the Management Letters issued by<br />
the External Auditors, the Management response thereto and<br />
also attended to matters specifically addressed to them. The<br />
external auditors kept the audit committee informed on an<br />
ongoing basis of all matters of significance. The committee met<br />
with the auditors and discussed issues arising from the audit<br />
and corrective action taken where necessary.<br />
The Audit Committee has recommended to the Board of<br />
Directors that Messrs Ernst & Young be re-appointed as<br />
Auditors for the financial year ending 31st March, 2012 subject<br />
to the approval of the shareholders at the next <strong>Annual</strong> General<br />
Meeting.<br />
Conclusion<br />
The Audit Committee is satisfied that the control environment<br />
prevailing in the organisation provides reasonable assurance<br />
regarding the reliability of the financial reporting of the Group,<br />
the assets are safeguarded and that the Listing Rules of the<br />
<strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong> have been met.<br />
Prof. Lakshman R Watawala<br />
Chairman<br />
27th May <strong>2011</strong><br />
59<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Statement of Directors’ Responsibility<br />
In keeping with the provisions under the Companies Act<br />
No. 7 of 2007, the Directors of Richard Pieris and Company<br />
PLC, acknowledge their responsibility in relation to financial<br />
reporting of both, the Company and that of its Group. These<br />
responsibilities differ from those of its Auditors, M/s. Ernst &<br />
Young, which are set out in their report, appearing on page 61<br />
of this report.<br />
The financial statements of the Company and its subsidiaries<br />
for the year ended 31st March <strong>2011</strong> included in this report,<br />
have been prepared and presented in accordance with the Sri<br />
Lanka Accounting Standards, and they provide the information<br />
as required by the Companies Act No. 7 of 2007, Sri Lanka<br />
Accounting Standards and the Listing Rules of the <strong>Colombo</strong><br />
<strong>Stock</strong> <strong>Exchange</strong>. The Directors confirm that suitable accounting<br />
policies have been used and applied consistently, and that all<br />
applicable accounting standards have been followed in the<br />
preparation of the financial statements exhibited on pages from<br />
62 to 103 inclusive. All material deviations from these standards<br />
if any have been disclosed and explained. The judgments and<br />
estimates made in the preparation of these financial statements<br />
are reasonable and prudent.<br />
The Directors’ have provided the Auditors M/s. Ernst & Young<br />
Chartered Accountants with every opportunity to carry out<br />
reviews and tests that they consider appropriate and necessary<br />
for the performance of their responsibilities. The Auditors have<br />
examined the financial statements together with all financial<br />
records and related data and express their opinion which<br />
appears as reported by them on page 61 of this report.<br />
By Order of the Board,<br />
Richard Pieris Group Services (Pvt) Limited<br />
Secretaries<br />
310, High Level Road, Nawinna, Maharagama<br />
27th May <strong>2011</strong><br />
The Directors confirm their responsibility for ensuring that all<br />
companies within the Group maintain accounting records,<br />
which are sufficient to prepare financial statements that<br />
disclose with reasonable accuracy, the financial position of the<br />
Company and its Group. They also confirm their responsibility<br />
towards ensuring that the financial statements presented in the<br />
<strong>Annual</strong> <strong>Report</strong> give a true and fair view of the state of affairs of<br />
the Company and its Group as at 31st March <strong>2011</strong>, and that of<br />
the profit for the year then ended.<br />
The overall responsibility for the Company’s internal control<br />
systems lies with the Directors. Whilst recognizing the fact that<br />
there is no single system of internal control that could provide<br />
absolute assurance against material misstatements and fraud,<br />
the Directors confirm that the prevalent internal control systems<br />
instituted by them and which comprise internal checks, internal<br />
audit and financial and other controls are so designed that,<br />
there is reasonable assurance that all assets are safeguarded<br />
and transactions properly authorized and recorded, so that<br />
material misstatements and irregularities are either prevented<br />
or detected within a reasonable period of time.<br />
The Directors’ are of the view that the Company and its<br />
Group have adequate resources to continue operations in<br />
the foreseeable future and have continued to use the goingconcern<br />
basis in the preparation of these financial statements.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 60
Auditor’s <strong>Report</strong><br />
INDEPENDENT AUDITOR’S REPORT<br />
TO THE SHAREHOLDERS OF RICHARD PIERIS AND<br />
COMPANY PLC<br />
<strong>Report</strong> on the Financial Statements<br />
We have audited the accompanying financial statements<br />
of Richard Pieris and Company PLC (“Company”), the<br />
consolidated financial statements of the Company and its<br />
subsidiaries (together “Group”) as at 31March <strong>2011</strong> which<br />
comprise the balance sheets as at 31 March <strong>2011</strong>, and the<br />
Income Statements, statements of changes in equity and cash<br />
flow statements for the year then ended, and a summary of<br />
significant accounting policies and other explanatory notes.<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 />
Our responsibility is to express an opinion on these financial<br />
statements based on our audit. We conducted our audit<br />
in accordance with Sri Lanka Auditing Standards. Those<br />
standards require that we plan and perform the audit to obtain<br />
reasonable assurance whether the financial statements are free<br />
from material misstatement.<br />
We have obtained all the information and explanations which<br />
to the best of our knowledge and belief were necessary for<br />
the purposes of our audit. We therefore believe that our audit<br />
provides a reasonable basis for our opinion.<br />
Opinion<br />
In our opinion, so far as appears from our examination,<br />
Company maintained proper accounting records for the year<br />
ended 31 March <strong>2011</strong> and the financial statements give a true<br />
and fair view of the Company’s state of affairs as at 31 March<br />
<strong>2011</strong> and its profit and cash flows for the year then ended in<br />
accordance with Sri Lanka Accounting Standards.<br />
In our opinion, the consolidated financial statements give a true<br />
and fair view of the state of affairs as at 31 March <strong>2011</strong> and the<br />
profit and cash flows for the year then ended, in accordance<br />
with Sri Lanka Accounting Standards, of the Company and<br />
its subsidiaries dealt with thereby, so far as concerns the<br />
shareholders of the Company.<br />
<strong>Report</strong> on Other Legal and Regulatory Requirements<br />
In our opinion, these financial statements also comply with the<br />
requirements of Sections 151(2) and 153(2) to 153(7) of the<br />
Companies Act No. 07 of 2007.<br />
30 May <strong>2011</strong><br />
<strong>Colombo</strong>.<br />
An audit includes examining, on a test basis, evidence<br />
supporting the amounts and disclosures in the Financial<br />
Statements. An audit also includes assessing the accounting<br />
principles used and significant estimates made by<br />
management, as well as evaluating the overall financial<br />
statement presentation.<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Balance Sheet<br />
Group<br />
Company<br />
As at March 31 <strong>2011</strong> <strong>2010</strong> <strong>2011</strong> <strong>2010</strong><br />
Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Assets<br />
Non-current assets<br />
Property, plant and equipment 3 10,001,325 9,512,842 46,404 61,480<br />
Leasehold property 3 605,934 629,919 - -<br />
Investment property 3 - - 691,393 699,207<br />
Intangible assets 4 497,279 480,177 - -<br />
Investments in subsidiaries 5 - - 2,560,917 2,447,584<br />
Investments in associates 5 456,186 180,919 159,756 37,500<br />
Other investments 5 24,000 - 89,750 95,750<br />
Deferred tax assets 16 - - 36,953 36,953<br />
11,584,724 10,803,857 3,585,173 3,378,474<br />
Current assets<br />
Inventories 6 3,341,884 2,464,038 - -<br />
Trade and other receivables 7 2,908,800 2,550,148 52,706 67,039<br />
Taxation receivable 180,650 181,874 - 6,957<br />
Amounts due from subsidiaries - - 984,541 1,629,758<br />
Short term investments 8 59,540 42,057 59,540 42,057<br />
Cash at bank and in hand 2,563,859 1,322,843 63,349 266,271<br />
9,054,733 6,560,960 1,160,136 2,012,082<br />
Total assets 20,639,457 17,364,817 4,745,309 5,390,556<br />
Equity and liabilities<br />
Equity attributable to equity holders of the parent<br />
Stated capital 9 1,627,612 1,578,475 1,627,612 1,578,475<br />
Capital reserves 10 126,901 126,901 10,574 10,574<br />
Revenue reserves 11 3,221,102 2,056,364 617,905 654,962<br />
Foreign currency translation 12 27,314 31,152 - -<br />
5,002,929 3,792,892 2,256,091 2,244,011<br />
Minority interest 1,860,693 1,503,071 - -<br />
Total equity 6,863,622 5,295,963 2,256,091 2,244,011<br />
Non-current liabilities<br />
Interest bearing borrowings 13 1,998,291 1,957,680 149,084 428,469<br />
Net liability to the lessor payable 14 650,980 672,158 - -<br />
Deferred income 15 584,763 528,898 - -<br />
Deferred tax liabilities 16 10,589 24,981 - -<br />
Employee benefit liabilities 17 1,662,131 1,529,685 48,578 50,141<br />
4,906,754 4,713,402 197,662 478,610<br />
Current liabilities<br />
Trade and other payables 18 3,653,146 2,632,913 258,991 232,239<br />
Current portion of interest bearing borrowings 13 1,075,241 1,239,549 275,000 605,000<br />
Current portion of net liability to the lessor 14 21,978 25,394 - -<br />
Deposits 2,838 7,746 2,838 7,745<br />
Amounts due to subsidiaries - - 177,515 148,167<br />
Current tax liabilities 309,944 100,559 5,880 -<br />
Short term borrowings 19 3,805,934 3,349,291 1,571,332 1,674,784<br />
8,869,081 7,355,452 2,291,556 2,667,935<br />
Total liabilities 13,775,835 12,068,854 2,489,218 3,146,545<br />
Total equity and liabilities 20,639,457 17,364,817 4,745,309 5,390,556<br />
I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007<br />
Jagath Dissanayake<br />
Group Chief Financial Officer<br />
The Board of Directors is responsible for the preparation and presentation of these financial statements.<br />
W J Viville Perera<br />
J H P Ratnayeke<br />
Director<br />
Director<br />
The accounting policies and notes from pages 67 to 103 form an integral part of these financial statements.<br />
27th May <strong>2011</strong><br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 62
Income Statement<br />
Group<br />
Company<br />
<strong>2011</strong> <strong>2010</strong> <strong>2011</strong> <strong>2010</strong><br />
For the year ended March 31 Note Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Continuing operations<br />
Revenue 21 27,241,577 22,339,288 968,388 533,684<br />
Cost of sales (20,631,178) (17,654,136) - -<br />
Gross profit 6,610,399 4,685,152 968,388 533,684<br />
Other operating income 22 492,906 355,879 17,483 38,597<br />
Distribution costs (849,644) (658,359) - -<br />
Administrative expenses (2,638,251) (2,354,806) (303,251) (237,916)<br />
Other operating expenses 23 (165,044) (58,169) - -<br />
Profit from operations 24 3,450,366 1,969,697 682,620 334,365<br />
Finance cost 25 (794,617) (969,147) (178,317) (199,776)<br />
Profit from operations after finance cost 2,655,749 1,000,550 504,303 134,589<br />
Share of results of associates 26 113,008 59,609 - -<br />
Profit before tax 2,768,757 1,060,159 504,303 134,589<br />
Income tax expense 27 (616,566) (330,592) (25,414) -<br />
Profit for the year from continuing operations 2,152,191 729,567 478,889 134,589<br />
Discontinued Operations<br />
Loss after tax for the year from<br />
Discontinued operations 28 (11,609) (17,873) - -<br />
Profit for the year 2,140,582 711,694 478,889 134,589<br />
Attributable to:<br />
Equity holders of the parent 1,680,684 580,204<br />
Minority interest 459,898 131,490<br />
2,140,582 711,694<br />
Rs.<br />
Rs.<br />
Earnings/(loss) per share<br />
Basic 29 0.87 0.30<br />
Diluted 29 0.84 0.30<br />
Earning per share from continuing operations<br />
Basic 29 0.88 0.31<br />
Diluted 29 0.84 0.31<br />
Dividend per share 30 0.30 1.00<br />
Figures in brackets indicate deductions.<br />
The accounting policies and notes from pages 67 to 103 form an integral part of these financial statements.<br />
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Cash Flow Statement<br />
Group<br />
Company<br />
<strong>2011</strong> <strong>2010</strong> <strong>2011</strong> <strong>2010</strong><br />
For the year ended March 31 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Cash flows from / (used in) operating activities<br />
Profit before tax from continuing operations 2,768,757 1,060,159 504,303 134,589<br />
Loss before tax from discontinued operation (11,609) (17,873) - -<br />
Adjustments for<br />
Depreciation 584,916 584,008 25,393 25,878<br />
Impairment of property, plant and equipment 62,019 29,093 - -<br />
Amortisation of leasehold property 23,427 24,217 - -<br />
Interest charges 794,617 969,147 178,317 199,776<br />
Provision for defined benefit plans 282,843 557,486 3,103 9,799<br />
Profit/(loss) on sales of property, plant and equipment 477 (1,038) - -<br />
Change in the value of short term Investment (17,483) (34,082) (17,483) (34,082)<br />
Share of net profit of associates (113,008) (44,161) - -<br />
<strong>Exchange</strong> differences on translation of foreign currency (4,019) (881) - -<br />
Amortisation of grants and subsidies (22,303) (23,508) - -<br />
Allowances for bad debt and bad debts written off 114,909 147,073 79,249 53,749<br />
Allowances for obsolete and slow moving inventories 56,680 48,048 - -<br />
Amortisation and impairment of intangible assets 45,208 10,725 - -<br />
Allowances for unrealised profit (4,939) 10,673 - -<br />
Negative goodwill in investment in subsidiary (16,200) - - -<br />
Loss on disposal of subsidiary 10,319 - - -<br />
Operating profit before working capital changes 4,554,611 3,319,086 772,882 389,709<br />
Increase in inventories (938,263) (219,721) - -<br />
(Increase) / decrease in trade and other receivables (470,952) (145,812) 586,426 458,563<br />
Increase / (decrease) in trade and other payables 1,038,229 489,352 51,190 (219,534)<br />
Cash generated from operations 4,183,625 3,442,905 1,410,498 628,738<br />
Interest paid (794,617) (969,147) (178,317) (199,776)<br />
Income tax paid (419,729) (186,900) (12,577) -<br />
Defined benefit plan costs paid (150,397) (131,022) (4,788) (4,772)<br />
Net cash from operating activities 2,818,882 2,155,836 1,214,816 424,190<br />
Cash Flows from / (used in) investing activities<br />
Increase in holding in a subsidiary (56,908) - - -<br />
Purchase of investment in associate and other investment (203,527) - (235,589) (240,000)<br />
Disposal of subsidiary 5,337 - - -<br />
Purchase and construction of property plant and equipment (1,191,977) (618,858) (2,503) (7,410)<br />
Proceeds from sale of property, plant and equipment 2,533 2,851 - -<br />
Intangible assets acquired (63,349) - - -<br />
Grants received 78,167 74,259 - -<br />
Dividend received from associate 40,647 - - -<br />
Net cash flows used in investing activities (1,389,077) (541,748) (238,092) (247,410)<br />
Net cash inflow before financing 1,429,805 1,614,088 976,724 176,780<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 64
Group<br />
Company<br />
<strong>2011</strong> <strong>2010</strong> <strong>2011</strong> <strong>2010</strong><br />
For the year ended March 31 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Cash Flows from (Used in) Financing Activities<br />
Increase in minority shareholding 16,264 - - -<br />
Proceeds from issue of ordinary shares 49,137 - 49,137 -<br />
Proceeds from interest bearing loans and borrowings 1,133,979 1,445,223 - -<br />
Repayment of interest bearing loans and borrowings (1,248,156) (1,661,459) (609,385) (477,795)<br />
Principal payment under finance lease liabilities (24,593) (24,828) - -<br />
Dividend paid to equity holders of parent (515,946) - (515,946) -<br />
Dividend paid by subsidiary companies to outside shareholders (56,117) (8,128) - -<br />
Net cash flows used in financing activities (645,432) (249,192) (1,076,194) (477,795)<br />
Net increase / (decrease) in cash and cash equivalents 784,373 1,364,896 (99,470) (301,015)<br />
Cash and cash equivalents at the beginning of the year (2,026,448) (3,391,344) (1,408,513) (1,107,498)<br />
Cash and cash equivalents at the end of the year (1,242,075) (2,026,448) (1,507,983) (1,408,513)<br />
Analysis of cash and cash equivalents at the end of the year<br />
Bank and cash balances 20 2,563,859 1,322,843 63,349 266,271<br />
Short term borrowings 20 (3,805,934) (3,349,291) (1,571,332) (1,674,784)<br />
(1,242,075) (2,026,448) (1,507,983) (1,408,513)<br />
The accounting policies and notes from pages 67 to 103 form an integral part of these financial statements.<br />
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Statement of Changes in Equity<br />
Attributable to equity holders of the parent<br />
Stated Capital Revenue Retained Foreign Total Minority Total<br />
capital reserves reserves profit currency interest equity<br />
translation<br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Group<br />
Balance as at 31st March 2009 1,578,475 126,901 179,443 1,296,717 32,371 3,213,907 1,380,908 4,594,815<br />
Net profit / (loss) for the period - - - 580,204 - 580,204 131,490 711,694<br />
Subsidiary dividend to minority shareholders - - - - - - (8,128) (8,128)<br />
Effect of foreign currency translation - - - - (1,219) (1,219) (1,199) (2,418)<br />
Balance as at 31st March <strong>2010</strong> 1,578,475 126,901 179,443 1,876,921 31,152 3,792,892 1,503,071 5,295,963<br />
Balance as at 31st March <strong>2010</strong> 1,578,475 126,901 179,443 1,876,921 31,152 3,792,892 1,503,071 5,295,963<br />
Net profit / (loss) for the period - - - 1,680,684 - 1,680,684 459,898 2,140,582<br />
Dividends - - - (515,946) - (515,946) - (515,946)<br />
Issue of share capital 49,137 - - - - 49,137 - 49,137<br />
Adjustment due to changes in holding - - - - - - 12,217 12,217<br />
Acquisition of minority interest - - - - - - (56,908) (56,908)<br />
Subsidiary Dividend to Minority Shareholders - - - - - - (56,117) (56,117)<br />
Effect of foreign currency translation - - - - (3,838) (3,838) (1,468) (5,306)<br />
Balance as at 31st March <strong>2011</strong> 1,627,612 126,901 179,443 3,041,659 27,314 5,002,929 1,860,693 6,863,622<br />
Company<br />
Balance as at 1st April 2009 1,578,475 10,574 - 520,373 - 2,109,422 - 2,109,422<br />
Net profit for the period - - - 134,589 - 134,589 - 134,589<br />
Balance as at 31st March <strong>2010</strong> 1,578,475 10,574 - 654,962 - 2,244,011 - 2,244,011<br />
Balance as at 31st March <strong>2010</strong> 1,578,475 10,574 - 654,962 - 2,244,011 - 2,244,011<br />
Net profit for the period - - - 478,889 - 478,889 - 478,889<br />
Issue of share capital 49,137 - - - - 49,137 - 49,137<br />
Dividends - - - (515,946) - (515,946) - (515,946)<br />
Balance as at 31st March <strong>2011</strong> 1,627,612 10,574 - 617,905 - 2,256,091 - 2,256,091<br />
The accounting policies and notes from pages 67 to 103 form an integral part of these financial statements.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 66
Notes to the Financial Statements<br />
1. CORPORATE INFORMATION<br />
Richard Pieris and Company PLC is a public limited liability<br />
company incorporated and domiciled in Sri Lanka and listed<br />
on the <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong>. The registered office and<br />
principal place of business of the company is located at 310,<br />
High Level Road, Nawinna, Maharagama.<br />
In the <strong>Annual</strong> <strong>Report</strong> of the Board of Directors and in the<br />
financial statements, “the company” refers to Richard Pieris and<br />
Company PLC. as the holding company and “the group” refers<br />
to the companies whose accounts have been consolidated<br />
therein. The financial statements for the year ended 31st March<br />
<strong>2011</strong> were authorized for issue by the Directors on 27th May<br />
<strong>2011</strong>.<br />
The principal activities of the group are stated in the <strong>Annual</strong><br />
<strong>Report</strong> of the Board of Directors.<br />
All values presented in the financial statements are in Sri Lanka<br />
rupees thousands (Rs.’000s) unless otherwise indicated. The<br />
significant accounting policies are discussed below.<br />
1.1 GENERAL POLICIES<br />
1.1.1 Statement of compliance<br />
The Balance Sheet, Income Statement, Statement of Changes<br />
in Equity and the Cash Flow Statement, together with the<br />
accounting policies and notes (the “financial statements”) have<br />
been prepared in compliance with the Sri Lanka Accounting<br />
Standards (SLAS) issued by the Institute of Chartered<br />
Accountants of Sri Lanka.<br />
1.1.2 Basis of preparation<br />
The financial statements, presented in Sri Lanka rupees, have<br />
been prepared on an accrual basis and under the historical<br />
cost convention unless stated otherwise. The preparation and<br />
presentation of these financial statements is in compliance with<br />
the Companies Act No. 07 of 2007.<br />
1.1.3 Changes in accounting policies<br />
The accounting policies adopted are consistent with those of<br />
the previous financial year.<br />
1.1.4 Comparative information<br />
The accounting policies applied by the group are consistent<br />
with those used in the previous year. Previous year’s figures<br />
and phrases have been re-arranged, wherever necessary, to<br />
conform to the current year’s presentation.<br />
1.1.5 Events after the balance sheet date<br />
All material post balance sheet events have been considered<br />
and appropriate adjustments or disclosures have been made in<br />
the respective notes to the financial statements.<br />
1.2 CONSOLIDATION POLICY<br />
1.2.1 Basis of consolidation<br />
The consolidated financial statements include the financial<br />
statements of the company, its subsidiaries and other<br />
companies over which it has control.<br />
The Group’s Financial Statements comprise the consolidated<br />
financial statements of the company and the group which have<br />
been prepared in compliance with the group’s accounting<br />
policies.<br />
All intra group balances, income and expenses and profits and<br />
losses resulting from intra group transactions are eliminated in<br />
full.<br />
1.2.2 Acquisitions and divestments<br />
Acquisitions of subsidiaries are accounted for using the<br />
purchase method of accounting. The results of subsidiaries,<br />
joint ventures and associates acquired or incorporated during<br />
the year have been included from the date of acquisition, or<br />
incorporation while results of subsidiaries, joint ventures and<br />
associates disposed have been included up to the date of<br />
disposal.<br />
1.2.3 Subsidiaries<br />
Subsidiaries are those enterprises controlled by the parent.<br />
Control exists when the parent holds more than 50% of the<br />
voting rights or otherwise has a controlling interest.<br />
Subsidiaries are consolidated from the date the parent obtains<br />
control until the date that control ceases.<br />
Subsidiaries consolidated have been listed in the Group<br />
Structure.<br />
The total profits and losses for the period, of the Company and<br />
of its subsidiaries included in consolidation and all assets and<br />
liabilities of the Company and of its subsidiaries included in<br />
consolidation are shown in the Consolidated Income Statement<br />
and Balance Sheet respectively.<br />
Minority interests, which represents the portion of profit or<br />
loss and net assets not held by the group, are shown as a<br />
component of profit for the period in the Income Statement and<br />
as a component of equity in the Consolidated Balance Sheet,<br />
separately from parent shareholders’ equity.<br />
The Consolidated Cash Flow Statement includes the cash<br />
flows of the Company and its subsidiaries.<br />
1.2.4 Associates<br />
Associates are those investments over which the group has<br />
significant influence and holds 20% to 50% of the equity and<br />
which are neither subsidiaries nor joint ventures of the group.<br />
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Notes to the Financial Statements Contd.<br />
All associates are incorporated in Sri Lanka.<br />
The investments in associates are carried in the Balance Sheet<br />
at cost plus post acquisition changes in the group’s share of<br />
net assets of the associates. Goodwill relating to an associate<br />
is included in the carrying amount of the investment. After<br />
application of the equity method, the group determines whether<br />
it is necessary to recognize any additional impairment loss<br />
with respect to the group’s net investment in the associate. The<br />
Income Statement reflects the share of the results of operations<br />
of the associate. Where there has been a change recognized<br />
directly in the equity of the associate, the group recognizes its<br />
share of any changes in the Statement of Changes in Equity.<br />
When the group’s share of losses in an associate equals or<br />
exceeds the interest in the undertaking, the group does not<br />
recognize further losses unless it has incurred obligations or<br />
made payments on behalf of the entity.<br />
The group ceases to use the equity method of accounting on<br />
the date from which it no longer has significant influence in the<br />
associate.<br />
The accounting policies of associate companies conform to<br />
those used for similar transactions of the group. Accounting<br />
policies that are specific to the business of associate<br />
companies are discussed in note 2.7.<br />
1.2.5 Goodwill<br />
Goodwill acquired in a business combination is initially<br />
measured at cost being the excess of the cost of the business<br />
combination over the group’s interest in the net fair value of<br />
the identifiable assets, liabilities and contingent liabilities.<br />
Following initial recognition, goodwill is measured at cost less<br />
any accumulated impairment losses. Goodwill is reviewed for<br />
impairment, annually or more frequently if events or changes in<br />
circumstances indicate that the carrying value may be impaired.<br />
For the purpose of impairment testing, goodwill acquired in a<br />
business combination is, from the acquisition date, allocated<br />
to groups of cash-generating units that are expected to benefit<br />
from the synergies of the combination.<br />
Impairment is determined by assessing the recoverable amount<br />
of the cash-generating unit to which goodwill relates. Where<br />
the recoverable amount of the cash generating unit is less than<br />
the carrying amount, an impairment loss is recognized. The<br />
impairment loss is allocated first to reduce the carrying amount<br />
of any goodwill allocated to the unit and then to the other<br />
assets pro-rata to the carrying amount of each asset in the unit.<br />
Goodwill and fair value adjustments arising on the acquisition<br />
of a foreign operation are treated as assets and liabilities of the<br />
foreign operation and translated at the closing rate.<br />
Where goodwill forms part of a cash-generating unit and part<br />
of the operation within that unit is disposed of, the goodwill<br />
associated with the operation disposed of is included in the<br />
carrying amount of the operation when determining the gain or<br />
loss on disposal of the operation.<br />
1.2.6 Financial year<br />
Results of all subsidiaries and associates (except for Asian<br />
Alliance Insurance PLC) are drawn for the twelve months<br />
period up to 31st March, which is their year end.<br />
The results of Asian Alliance Insurance PLC is drawn for the<br />
twelve month period up to 31st December, which is their year<br />
end.<br />
2.1 SIGNIFICANT ACCOUNTING JUDGMENTS,<br />
ESTIMATES AND ASSUMPTIONS<br />
2.1.1 Judgments<br />
In the process of applying the Group’s accounting policies,<br />
management has made the following judgments, apart from<br />
those involving estimations, which has the most significant<br />
effect on the amounts recognized in the Financial Statements.<br />
Going Concern<br />
When preparing financial statements, management has made<br />
assessment of the ability of the constituents of the Group to<br />
continue as a going concern, taking into account all available<br />
information about the future, including intentions of curtailment<br />
of businesses, as decided by the Board, as disclosed in Note<br />
28 to the Financial Statements.<br />
Deferred tax assets<br />
Deferred tax assets are recognized for all unused tax losses<br />
to the extent that it is probable that taxable profit will be<br />
available against which the losses can be utilized. Significant<br />
management judgment is required to determine the amount<br />
of deferred tax assets that can be recognized, based upon<br />
the likely timing and level of future taxable profits together with<br />
future tax planning strategies. Further details are given in Note<br />
16.<br />
Allowance for doubtful debts<br />
The Group reviews at each balance sheet date all receivables<br />
to assess whether an allowance should be recorded in<br />
the Income Statement. The management uses judgment<br />
in estimating such amounts in the light of the duration of,<br />
outstanding and any other factors management is aware of that<br />
indicates uncertainty in recovery.<br />
2.1.2 Estimates and assumptions<br />
The key assumptions concerning the future and other key<br />
sources of estimation uncertainty at the Balance Sheet date,<br />
that have a significant risk of causing material adjustments to<br />
the carrying amounts of assets and liabilities within the next<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 68
financial year are discussed below. The respective carrying<br />
amounts of assets and liabilities are given in related notes to<br />
the financial statements.<br />
Defined benefit plans<br />
The cost of defined benefit plans- gratuity is determined using<br />
actuarial valuations. The actuarial valuation involves making<br />
assumptions about discount rates, expected rates of return<br />
on assets, future salary increases, mortality rates and future<br />
pension increases. Due to the long term nature of these plans,<br />
such estimates are subject to significant uncertainty. Further<br />
details are given in Note 17.<br />
Intangible assets<br />
For the purposes of impairment testing, goodwill is allocated<br />
to cash generating units when cash generating units to which<br />
goodwill has been allocated are tested for impairment annually,<br />
using Value in Use method. The calculation of value in use for<br />
the cash generating unit is most sensitive to the assumptions of<br />
sales growth, discount rates and cost increases due to inflation.<br />
Further details are given in Note 4.<br />
Inventory valuation - Produce inventory<br />
The Group has valued part of unsold produce inventory at<br />
since realized prices. The balance unsold inventory remained<br />
as at the balance sheet date valued at an estimated selling<br />
price based on most recent selling prices available subsequent<br />
to the year end.<br />
2.2 FOREIGN CURRENCY TRANSLATION<br />
2.2.1 Foreign currency transactions<br />
The consolidated financial statements are presented in<br />
Sri Lanka rupees, which is the company’s functional and<br />
presentation currency.<br />
The functional currency is the currency of the primary<br />
economic environment in which the entities of the group<br />
operate.<br />
All foreign exchange transactions are converted to Sri Lanka<br />
rupees, at the rates of exchange prevailing at the time the<br />
transactions are effected.<br />
Monetary assets and liabilities denominated in foreign currency<br />
are retranslated to Sri Lanka rupee equivalents at the exchange<br />
rate prevailing at the Balance Sheet date. Non-monetary assets<br />
and liabilities are translated using exchange rates that existed<br />
when the values were determined. The resulting gains and<br />
losses are accounted for in the Income Statement.<br />
2.2.2 Foreign operations<br />
The Balance Sheet and Income Statement of subsidiaries<br />
which are deemed to be foreign operations are translated<br />
to Sri Lanka rupees at the rate of exchange prevailing as at<br />
the Balance Sheet date and at the average annual rate of<br />
exchange for the period respectively.<br />
Arpitalian Compact Soles (Private) Limited use US dollars<br />
as its functional currency as it conducts the majority of its<br />
business in US dollars and is entitled to the benefits provided to<br />
companies approved by the Board of Investment of Sri Lanka.<br />
Arpitalian Compact Soles (Private) Limited adopted US dollars<br />
as its measurement and functional currency in line with SLAS<br />
21 which deals with “Effects of Changes in Foreign <strong>Exchange</strong><br />
Rates” and has been translated to the presentation currency of<br />
the group, Sri Lankan Rupees, for consolidation purpose.<br />
The exchange differences arising on the translation are taken<br />
directly to a separate component of equity. On disposal of a<br />
foreign entity, the deferred cumulative amount recognized in<br />
equity relating to that particular foreign operation is recognized<br />
in the Income Statement.<br />
2.3 TAX<br />
2.3.1 Current tax<br />
Provision for income tax is based on the elements of income<br />
and expenditure as reported in the financial statements and is<br />
computed in accordance with the provisions of the relevant tax<br />
statutes.<br />
2.3.2 Deferred tax<br />
Deferred taxation is the tax attributable to the temporary<br />
differences that arise when taxation authorities recognize and<br />
measure assets and liabilities with rules, that differ from those<br />
of the consolidated financial statements.<br />
Deferred tax is provided using the liability method on temporary<br />
differences at the balance sheet date between the tax bases<br />
of assets and liabilities and their carrying amounts for financial<br />
reporting purposes.<br />
Deferred tax assets are recognized for all deductible temporary<br />
differences, carry-forward of unused tax credits and unused tax<br />
losses, to the extent that it is probable that taxable profit will be<br />
available against which the deductible temporary differences,<br />
and the carry-forward of unused tax credits and unused tax<br />
losses can be utilized.<br />
The carrying amount of deferred tax assets is reviewed at<br />
each Balance Sheet date and reduced to the extent that it is<br />
no longer probable that sufficient taxable profit will be available<br />
to allow all or part of the deferred tax asset to be utilized.<br />
Unrecognized deferred tax assets are reassessed at each<br />
balance sheet date and are recognized to the extent that it<br />
has become probable that future taxable profit will allow the<br />
deferred tax asset to be recovered.<br />
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Notes to the Financial Statements Contd.<br />
Deferred tax assets and liabilities are measured at tax rates<br />
that are expected to apply to the year when the asset is<br />
realized or liability is settled, based on the tax rates and tax<br />
laws that have been enacted or substantively enacted as at the<br />
balance sheet date.<br />
Deferred tax assets and deferred tax liabilities are offset, if<br />
a legally enforceable right exists to set off current tax assets<br />
against current tax liabilities and when the deferred taxes relate<br />
to the same taxable entity and the same taxation authority.<br />
Deferred tax relating to items recognized directly in equity is<br />
recognized in equity.<br />
2.4 VALUATION OF ASSETS AND THEIR BASES OF<br />
MEASUREMENT<br />
2.4.1 Property, plant and equipment<br />
a) Cost and valuation<br />
Property, plant and equipment is stated at cost or fair value less<br />
accumulated depreciation and any accumulated impairment in<br />
value.<br />
The carrying values of property plant and equipment<br />
are reviewed for impairment when events or changes in<br />
circumstances indicate that the carrying value may not be<br />
recoverable. All items of property, plant and equipment are<br />
initially recorded at cost. Where items of property, plant and<br />
equipment are subsequently revalued, the entire class of such<br />
assets are revalued at fair value.<br />
When an asset is revalued, any increase in the carrying<br />
amount is credited directly to a revaluation reserve, except to<br />
the extent that it reverses a revaluation decrease of the same<br />
asset previously recognized in the Income Statement, in which<br />
case the increase is recognized in the Income Statement. Any<br />
revaluation deficit that offsets a previous surplus in the same<br />
asset is directly offset against the surplus in the revaluation<br />
reserve and any excess recognized as an expense. Upon<br />
disposal, any revaluation reserve relating to the asset sold is<br />
transferred to retained earnings.<br />
Items of property, plant and equipment are derecognised upon<br />
replacement, disposal or when no future economic benefits are<br />
expected from its use. Any gain or loss arising on derecognition<br />
of the asset is included in the Income Statement in the year the<br />
asset is derecognised.<br />
Immature and mature plantations<br />
The cost of replanting and new planting are classified as<br />
immature plantations up to the time of harvesting the crop.<br />
Further the general charges incurred on the plantation are<br />
apportioned based on the labour days spent on respective<br />
replanting and new planting, and capitalized on the immature<br />
areas. The remaining portion of the general charges is<br />
expensed in the accounting period in which it is incurred. The<br />
cost of areas coming in to bearing are transferred to mature<br />
plantations and depreciated over their useful life period.<br />
Infilling cost<br />
Where infilling results in an increase in the economic life of<br />
the relevant field beyond its previously assessed standard of<br />
performance, the costs are capitalized in accordance with Sri<br />
Lanka Accounting Standard 32 “Plantations” and depreciated<br />
over the useful life as rates applicable to mature plantations.<br />
Infilling costs that are not capitalized have been charged to the<br />
Income Statement in the year in which they are incurred.<br />
b) Depreciation<br />
Provision for depreciation is calculated by using a straight<br />
line method on the cost or valuation of all property, plant and<br />
equipment, other than freehold land, in order to write off such<br />
amounts over the estimated useful economic life of such<br />
assets.<br />
The estimated useful life of assets are as follows:<br />
Buildings<br />
20-60 years<br />
Plant, machinery tools and electrical installations 5-10 years<br />
Furniture, fixtures and fittings<br />
4-10 years<br />
Office and other equipment<br />
5-10 years<br />
Computers<br />
3-10 years<br />
Motor vehicles<br />
4-10 years<br />
Land improvements<br />
20 years<br />
Replanting and new planting<br />
- Tea 33 years<br />
- Rubber 20 years<br />
- Coconut 50 years<br />
The useful life and residual value of assets are reviewed, and<br />
adjusted if required, at the end of each financial year.<br />
c) Finance leases<br />
Property, plant and equipment on finance leases, which<br />
effectively transfer to the group substantially all the risk and<br />
benefits incidental to ownership of the leased items, are<br />
capitalized and disclosed as finance leases at their cash price<br />
and depreciated over the period the group is expected to<br />
benefit from the use of the leased assets.<br />
The corresponding principal amount payable to the lessor is<br />
shown as a liability. Lease payments are apportioned between<br />
the finance charges and reduction of the lease liability so as to<br />
achieve a constant rate of interest on the outstanding balance<br />
of the liability. The interest payable over the period of the lease<br />
is transferred to an interest in suspense account. The interest<br />
element of the rental obligations pertaining to each financial<br />
year is charged to the Income Statement over the period of<br />
lease.<br />
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The cost of improvements to leasehold property is capitalized,<br />
disclosed as leasehold improvements, and depreciated over<br />
the unexpired period of the lease or the estimated useful life of<br />
the improvements, whichever is shorter.<br />
d) Operating leases<br />
Leases, where the lessor effectively retains substantially all of<br />
the risks and benefits of ownership over the term of the lease,<br />
are classified as operating leases.<br />
Lease payments are recognized as an expense in the Income<br />
Statement over the term of the lease.<br />
2.4.2 Leasehold property<br />
Leasehold property is stated at recorded carrying values as at<br />
the effective date - Sri Lanka Accounting Standard 19 - Leases<br />
in accordance with Sri Lanka Accounting Standard Application<br />
Guidance 1:Accounting for Leasehold Land. Such carrying<br />
amounts are amortized over the remaining lease term or useful<br />
life of the leased property whichever in shorter. No further<br />
revaluations of these leasehold property will be carried out.<br />
The leasehold rights are amortized in equal amounts over the<br />
following periods:<br />
Bare land<br />
Mature plantations<br />
Leasehold buildings<br />
Machinery<br />
Land improvements<br />
71<br />
53 years<br />
30 years<br />
25 years<br />
15 years<br />
30 years<br />
2.4.3 Investment property<br />
Properties held to earn rental income, and properties held<br />
for capital appreciation have been classified as investment<br />
property, together with other assets that are integral to such<br />
investment properties.<br />
Investment properties are measured initially at cost, including<br />
transaction costs. The carrying amount includes the cost of<br />
replacing part of an existing investment property at the time<br />
that cost is incurred if the recognition criteria are met; and<br />
excludes the costs of day to day servicing of an investment<br />
property.<br />
After initial recognition the company measure all of its<br />
investment property using the cost model in accordance with<br />
the requirements in SLAS 18 (Revised 2005) Property, Plant<br />
and Equipment other than those that meet the criteria to be<br />
classified as held for sale.<br />
Investment properties are derecognised when disposed, or<br />
permanently withdrawn from use because no future economic<br />
benefits are expected. Any gains or losses on retirement or<br />
disposal are recognized in the Income Statement in the year of<br />
retirement or disposal.<br />
Transfers are made to investment property, when there is a<br />
change in use, evidenced by ending of owner occupation,<br />
commencement of an operating lease to another party<br />
or ending of construction or development. Transfers are<br />
made from investment property, when there is a change in<br />
use, evidenced by commencement of owner-occupation or<br />
commencement of development with a view to sale.<br />
Where group companies occupy a significant portion of<br />
the investment property of a subsidiary, such investment<br />
properties are treated as property, plant and equipment in the<br />
consolidated financial statements, and accounted for as per<br />
SLAS 18 (revised 2005) Property, Plant and Equipment.<br />
2.4.4 Intangible assets<br />
An intangible asset is initially recognized at cost, if it is probable<br />
that future economic benefit will flow to the enterprise, and the<br />
cost of the asset can be measured reliably.<br />
Following initial recognition, intangible assets are carried at<br />
cost less any accumulated amortization and any accumulated<br />
impairment losses.<br />
Intangible assets with finite lives are amortized over the useful<br />
economic life and assessed for impairment whenever there<br />
is an indication that the intangible asset may be impaired.<br />
The amortization period and the amortization method for an<br />
intangible asset with a finite useful life is reviewed at least at<br />
each financial year-end.<br />
Intangible assets with indefinite useful lives are tested<br />
for impairment annually either individually or at the cash<br />
generating unit level.<br />
2.4.5 Investments<br />
All quoted and unquoted securities, which are held as noncurrent<br />
investments, are valued at cost. The cost of the<br />
investment is the cost of acquisition inclusive of brokerage<br />
and costs of transaction. The carrying amounts of long term<br />
investments are reduced to recognize a decline which is<br />
considered other than temporary, in the value of investments,<br />
determined on an individual investment basis.<br />
In the company’s financial statements, investments in<br />
subsidiaries and associate companies have been accounted<br />
for at cost, net of any impairment losses which are charged<br />
to the Income Statement. Income from these investments are<br />
recognized only to the extent of dividends received.<br />
Short term investments are carried at market value.<br />
2.4.6 Impairment of assets<br />
The group assesses at each reporting date whether there<br />
is an indication that an asset may be impaired. If any such<br />
indication exists, or when annual impairment testing for an<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
asset is required, the Group makes an estimate of the asset’s<br />
recoverable amount. An asset’s recoverable amount is the<br />
higher of an asset’s or cash generating unit’s fair value less<br />
costs to sell and its value in use and is determined for an<br />
individual asset, unless the asset does not generate cash<br />
inflows that are largely independent of those from other assets<br />
or groups of assets. Where the carrying amount of an asset<br />
exceeds its recoverable amount, the asset is considered<br />
impaired and is written down to its recoverable amount. In<br />
assessing value in use, the estimated future cash flows are<br />
discounted to their present value using a pre-tax discount rate<br />
that reflects current market assessments of the time value of<br />
money and the risks specific to the asset.<br />
Impairment losses are recognized in the income statement<br />
except for impairment losses in respect of property, plant<br />
and equipment which are recognized against the revaluation<br />
reserve to the extent that it reverses a previous revaluation<br />
surplus.<br />
An assessment is made at each reporting date as to whether<br />
there is any indication that previously recognized impairment<br />
losses may no longer exist or may have decreased. Previously<br />
recognized impairment losses other than in respect of<br />
goodwill, are reversed only if there has been an increase in the<br />
recoverable amount of the asset. Such increase is recognized<br />
to the extent of the carrying amount had no impairment losses<br />
been recognized previously.<br />
2.4.7 Inventories<br />
Inventories other than produce inventories are valued at<br />
the lower of cost and net realizable value after making due<br />
allowances for obsolete and slow moving items. Net realizable<br />
value is the estimated selling price less estimated costs of<br />
completion and the estimated costs necessary to make the sale.<br />
The costs incurred in bringing inventories to its present location<br />
and condition, are accounted for as follows:<br />
a) Raw materials<br />
At actual cost on first-in first-out basis and weighted average<br />
cost<br />
b) Work-in- progress<br />
At the cost of direct materials, direct labour and an appropriate<br />
proportion of production overheads based on normal operating<br />
capacity.<br />
c) Finished goods<br />
At purchase cost and /or cost of direct materials, direct labour<br />
and an appropriate proportion of production overheads based<br />
on normal operating capacity.<br />
d) Goods in transit<br />
At actual cost<br />
e) Produce inventories<br />
At since realized price<br />
2.4.8 Trade and other receivables<br />
Trade and other receivables are stated at the amounts they are<br />
estimated to realize, net of allowances for bad and doubtful<br />
receivables.<br />
Allowances have been made for bad and doubtful debts. Bad<br />
debts are written off when identified.<br />
2.4.9 Cash and cash equivalents<br />
Cash and cash equivalents in the cash flow statement<br />
comprise cash at bank and in hand and short term deposits<br />
with a maturity of 3 months or less, net of outstanding bank<br />
overdrafts and short term borrowings.<br />
2.5 LIABILITIES AND PROVISIONS<br />
2.5.1 Employee Benefit Liabilities<br />
a) Defined benefit plan – Gratuity<br />
The Group measures the present value of the promised<br />
retirement benefits of gratuity, which is a defined benefit plan<br />
using Projected Unit Credit method (PUC).<br />
The services of a qualified actuary is obtained to determine the<br />
valuation once in every 2 years for plantation companies and<br />
every 3 years for other companies in the group.<br />
Actuarial gains and losses are recognized as income or<br />
expenses immediately.<br />
This item is stated under Employee Benefit Liabilities in the<br />
Balance Sheet.<br />
The basis of payment of retiring gratuity as follows:<br />
Length of<br />
service<br />
(years)<br />
No. of months<br />
salary for each<br />
completed year<br />
of service<br />
00-04 0<br />
05-10 ½<br />
11-20 ¾<br />
21-30 1<br />
Over 30<br />
1 ¼<br />
b) Defined contribution plans - Employees’ Provident<br />
Fund and Employees’ Trust Fund<br />
Employees are eligible for Arpico Employees’ Provident Fund<br />
Contributions / Employees’ Provident Fund Contributions and<br />
Employees’ Trust Fund Contributions in line with the respective<br />
Statutes and Regulations. The Companies contribute 12%<br />
and 3% of gross emoluments of employees to the Arpico<br />
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Employees’ Provident Fund / Employees’ Provident Fund and<br />
Employees’ Trust Fund respectively.<br />
2.5.2 Grants and subsidies<br />
Grants are recognized where there is reasonable assurance<br />
that the grant will be received and all attaching conditions<br />
will be complied with. When the grant relates to an expense<br />
item, it is recognized as income over the period necessary to<br />
match the grant on a systematic basis to the costs that it is<br />
intended to compensate. Where the grant relates to an asset,<br />
it is set up as deferred income. Where the group receives<br />
non-monetary grants, the asset and that grant are recorded at<br />
nominal amounts and is released to the Income Statement over<br />
the expected useful life of the relevant asset by equal annual<br />
installments.<br />
2.5.3 Provisions, contingent assets and contingent<br />
liabilities<br />
Provisions are made for all obligations existing as at the<br />
Balance Sheet date when it is probable that such an obligation<br />
will result in an outflow of resources and a reliable estimate can<br />
be made of the quantum of the outflow.<br />
All contingent liabilities are disclosed as a note to the financial<br />
statements unless the outflow of resources is remote.<br />
Contingent assets are disclosed, where inflow of economic<br />
benefit is probable.<br />
2.6 INCOME STATEMENT<br />
2.6.1 Revenue recognition<br />
Revenue is recognized to the extent that it is probable that<br />
the economic benefits will flow to the group, and the revenue<br />
and associated costs incurred or to be incurred can be reliably<br />
measured. Revenue is measured at the fair value of the<br />
consideration received or receivable, net of trade discounts and<br />
value added taxes, after eliminating sales within the group.<br />
The following specific criteria are used for recognition of<br />
revenue:<br />
a) Sale of goods<br />
Revenue from the sale of goods is recognized when the<br />
significant risk and rewards of ownership of the goods<br />
have passed to the buyer with the group retaining neither<br />
a continuing managerial involvement to the degree usually<br />
associated with ownership, nor an effective control over the<br />
goods sold.<br />
b) Rendering of services<br />
Revenue from rendering of services is recognized in the<br />
accounting period in which the services are rendered or<br />
performed.<br />
c) Construction revenue<br />
Construction revenue is recognized by reference to the stage<br />
of completion, determined by taking into accounts the labour<br />
hours incurred to date as a percentage of total estimated labour<br />
hours for each contract. Where the contract outcome cannot be<br />
measured reliably, revenue is recognized only to the extent of<br />
expenses incurred that are recoverable.<br />
d) Plantation companies<br />
In keeping with the practice in the Plantation Industry revenue<br />
or profit or loss on Perennial Crops are recognized in the<br />
financial period of harvesting. Revenue is recorded at invoice<br />
value net of brokerage, public sale expenses and other levies<br />
related to turnover.<br />
e) Turnover based taxes<br />
Turnover based taxes include Value Added Tax, Economic<br />
Service Charge, Turnover Tax and Nation Building Tax.<br />
Companies in the group pay such taxes in accordance with the<br />
respective statutes.<br />
2.6.2 Dividend<br />
Dividend income is recognized when the shareholders’ right to<br />
receive the payment is established.<br />
2.6.3 Rental income<br />
Rental income is recognized on an accrual basis over the term<br />
of the lease.<br />
2.6.4 Royalties<br />
Royalties are recognized on an accrual basis in accordance<br />
with the substance of the relevant agreement.<br />
2.6.5 Interest income<br />
Interest income is recognized as and when the interest accrues.<br />
2.6.6 Gains and losses<br />
Net gains and losses of a revenue nature arising from the<br />
disposal of property, plant and equipment and other noncurrent<br />
assets, including investments, are accounted for in<br />
the Income Statement, after deducting from the proceeds on<br />
disposal, the carrying amount of such assets and the related<br />
selling expenses.<br />
Gains and losses arising from activities incidental to the main<br />
revenue generating activities and those arising from a group<br />
of similar transactions which are not material, are aggregated,<br />
reported and presented on a net basis.<br />
2.6.7 Other income<br />
Other income is recognized on an accrual basis.<br />
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Notes to the Financial Statements Contd.<br />
2.6.8 Borrowing costs<br />
Borrowing costs are recognized as an expense in the<br />
period in which they are incurred except to the extent where<br />
borrowing costs that are directly attributable to the acquisition,<br />
construction or production of assets that takes a substantial<br />
period of time to get ready for its intended use or sale, is<br />
capitalized.<br />
2.7 SIGNIFICANT ACCOUNTING POLICIES THAT ARE<br />
SPECIFIC TO THE BUSINESS OF ASSOCIATE COMPANIES<br />
2.7.1 Asian Alliance Insurance PLC<br />
a) Non - Life (General) Insurance Business - Gross<br />
Written Premiums<br />
Gross Written Premium is generally recognized as written upon<br />
inception of the policy. Upon inception of the contract, premia<br />
are recorded as written and are earned primarily on a pro-rata<br />
basis over the term of the related policy coverage. However, for<br />
those contracts for which the period of risk differs significantly<br />
from the contract period, premia are earned over the period<br />
of risk in proportion to the amount of insurance protection<br />
provided. Earned premia are calculated on the 24th basis<br />
except for marine business, which is computed on a 60-40<br />
basis.<br />
b) Life Insurance Business – Gross Written Premium<br />
Premia from traditional long term insurance contacts,<br />
including participating contacts and annuity policies with<br />
life contingencies, are recognized as revenue when cash is<br />
received from the policyholder.<br />
2.9 Effect of Sri Lanka Accounting Standards issued but<br />
not yet effective<br />
a) The following standards have been issued by the Institute<br />
of Chartered Accountants of Sri Lanka.<br />
- Sri Lanka Accounting Standard 44 Financial Instruments;<br />
Presentation (SLAS 44)<br />
- Sri Lanka Accounting Standard 45 Financial Instruments;<br />
Recognition and Measurement (SLAS 45)<br />
- Sri Lanka Accounting Standard 39 Share Based Payments<br />
(SLAS 39)<br />
The effective date of SLAS 44, 45 and 39 was changed<br />
during the year to be effective for financial periods<br />
beginning on or after 01 January 2012. These three<br />
standards have been amended and forms a part of the<br />
new set of financial reporting standards mentioned under<br />
note (b) below.<br />
b) Following the convergence of Sri Lanka Accounting<br />
Standards with the International Financial <strong>Report</strong>ing<br />
Standards, the Council of the Institute of Chartered<br />
Accountants of Sri Lanka has adopted a new set of<br />
financial reporting standards that would apply for<br />
financial periods beginning on or after 01 January 2012.<br />
The application of these financial reporting standards is<br />
substantially different to the prevailing standards.<br />
2.8 SEGMENT INFORMATION<br />
2.8.1 <strong>Report</strong>ing segments<br />
The activities of the segments are described in the Segmental<br />
Review of Operations. Segmentation has been determined<br />
based on primary format and secondary format. Primary format<br />
represents the business segments, identified based on the<br />
differences in the products and services produced which has a<br />
similar nature of process, risk and return while the secondary<br />
format is on the basis of geographical areas in which the<br />
products or services are sold. The operating results of the<br />
segments are described in Note 21 to the financial statements.<br />
The geographical analysis is by the location of the customer.<br />
Since the manufacturing and marketing service as well as the<br />
assets and liabilities are located in Sri Lanka, only the turnover<br />
has been analyzed into the geographical location.<br />
2.8.2 Segment information<br />
Segment information has been prepared in conformity with the<br />
accounting policies adopted for preparing and presenting the<br />
consolidated financial statements of the group.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 74
3. Property plant & equipment<br />
A. Group<br />
As at Additions Impairment Disposals/ Effect of As at<br />
01.04.<strong>2010</strong> transfers foreign 31.03.<strong>2011</strong><br />
currency<br />
translation<br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Cost / valuation<br />
Land / Land Improvements 1,754,805 120,789 - - - 1,875,594<br />
Buildings/Buildings improvements 2,320,801 146,331 - (23,065) (2,440) 2,441,627<br />
Immature / mature plantations 3,920,727 441,204 - - - 4,361,931<br />
Plant, machinery, tools &<br />
electrical installations 3,475,953 219,570 - (45,079) (14,888) 3,635,556<br />
Office & other equipment 430,882 101,251 - (3,087) - 529,046<br />
Furniture, fixtures & fittings 389,390 32,784 - (847) (324) 421,003<br />
Motor vehicles 500,412 22,919 - (1,240) (970) 521,121<br />
Computers 312,306 26,305 - (1,676) - 336,935<br />
Capital work in progress 183,906 140,804 - (50,739) - 273,971<br />
13,289,182 1,251,957 - (125,733) (18,622) 14,396,784<br />
As at Charge Impairment Disposals Effect of As at<br />
01.04.<strong>2010</strong> for the foreign 31.03.<strong>2011</strong><br />
year<br />
currency<br />
translation<br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Depreciation / amortisation<br />
Land Improvements 38,927 7,779 - - - 46,706<br />
Buildings 422,400 70,970 1,609 (1,538) (643) 492,798<br />
Immature / mature plantations 501,279 98,129 - - - 599,408<br />
Plant, machinery, tools &<br />
electrical installations 1,955,805 239,126 60,410 (12,494) (8,027) 2,234,820<br />
Office & other equipment 310,630 39,317 - (1,120) - 348,827<br />
Furniture, fixtures & fittings 233,323 32,749 - (251) (300) 265,521<br />
Motor vehicles 432,532 32,362 - (1,240) (970) 462,684<br />
Computers 273,457 22,494 - (1,233) - 294,718<br />
4,168,353 542,926 62,019 (17,876) (9,940) 4,745,482<br />
75<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
3. Property plant & equipment contd.<br />
<strong>2011</strong> <strong>2010</strong><br />
Rs.’000 Rs.’000<br />
Net Book Values<br />
Land / Land Improvements 1,828,888 1,715,878<br />
Buildings/Buildings improvements 1,948,829 1,898,401<br />
Immature / mature plantations 3,762,523 3,419,448<br />
Plant, machinery, tools & electrical installations 1,400,736 1,520,148<br />
Office & other equipment 180,219 120,252<br />
Furniture, fixtures & fittings 155,482 156,067<br />
Motor vehicles 58,437 67,880<br />
Computers 42,217 38,849<br />
Capital work in progress 273,971 183,906<br />
9,651,302 9,120,829<br />
As at Additions Impairment Disposals/ Effect of As at<br />
01.04.<strong>2010</strong> transfers foreign 31.03.<strong>2011</strong><br />
currency<br />
translation<br />
Assets acquired on finance leases Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Cost / valuation<br />
Immature / mature plantations 758,385 - - - - 758,385<br />
Plant & machinery 134,286 - - - - 134,286<br />
Office & other equipment 836 - - - - 836<br />
Motor vehicles 4,630 - - (633) - 3,997<br />
898,137 - - (633) - 897,504<br />
As at Charge Impairment On Effect of As at<br />
01.04.<strong>2010</strong> for the disposals foreign 31.03.<strong>2011</strong><br />
year<br />
currency<br />
translation<br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Depreciation / amortisation<br />
Immature / mature plantations 389,930 26,027 - - - 415,957<br />
Plant & machinery 111,251 15,907 - - - 127,158<br />
Office & other equipment 313 56 - - - 369<br />
Motor vehicles 4,630 - - (633) - 3,997<br />
506,124 41,990 - (633) - 547,481<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 76
3. Property plant & equipment contd.<br />
<strong>2011</strong> <strong>2010</strong><br />
Rs.’000 Rs.’000<br />
Net Book Values<br />
Immature / mature plantations 342,428 368,455<br />
Plant & machinery 7,128 23,035<br />
Office & other equipment 467 523<br />
350,023 392,013<br />
Total carrying amount of property, plant and equipment 10,001,325 9,512,842<br />
B. Leasehold Property<br />
As at Additions Disposals/ As at<br />
01.04.<strong>2010</strong> transfers 31.03.<strong>2011</strong><br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Cost / valuation<br />
Land 828,468 - (605) 827,863<br />
Buildings 201,281 - - 201,281<br />
1,029,749 - (605) 1,029,144<br />
As at Charge On As at<br />
01.04.<strong>2010</strong> for the disposals 31.03.<strong>2011</strong><br />
year<br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Amortisation<br />
Land 256,273 16,305 (47) 272,531<br />
Buildings 143,556 7,122 - 150,680<br />
399,830 23,427 (47) 423,210<br />
<strong>2011</strong> <strong>2010</strong><br />
Rs.’000 Rs.’000<br />
Land 555,332 572,195<br />
Buildings 50,602 57,724<br />
Total carrying amount of leasehold property 605,934 629,919<br />
77<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
3. Property plant & equipment contd.<br />
Of the 42 JEDB / SLSPC estates handed over to the Kegalle Plantations PLC and Maskeliya Plantations PLC, all estate leases<br />
except for that of Ambanpitiya Estate has been executed as at the balance sheet date. With regard to Namunukula Plantations,<br />
lease agreements for 10 estates have been executed and memorandum of record has been signed for the balance 10 estates.<br />
All of these leases will be retroactive to June 22, 1992 the date of formation of the companies. In terms of the ruling obtained<br />
from Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka the leasehold right to bare land and<br />
all immovable assets under finance lease in these estates have been taken into the books of the companies retroactive to June<br />
22, 1992. While the bare land has been accounted for based on a value established just prior to the formation of the companies<br />
upon a revaluation carried out by a valuation specialist, Mr. D.R. Wickremasinghe, all other immovable assets under finance leases<br />
have been taken into the books of the companies at their book values as they appeared in the books of JEDB /SLSPC, on the<br />
day immediately preceding the date of formation of the companies. Subsequent to the withdrawal of UITF Abstract 11 and 23, the<br />
Sri Lanka Accounting Standard Application Guidance 1; Accounting for Leasehold Lands was issued. Accordingly, lease rentals<br />
prepaid to acquire land use rights, which was previously shown under property plant and equipment have now been re-classified<br />
under leasehold property. Prepaid lease rentals paid to acquire land rights are amortised over the lease term in accordance with<br />
the pattern of benefits provided.<br />
The assets are amortised on a straight-line basis over their estimated useful lives.<br />
Land and buildings and certain movable assets and liabilities of the Sri Lanka State Plantations Corporation at Glencroft Office<br />
situated at Norwood Estate have not been incorporated in the financial statements of Maskeliya Plantations PLC.<br />
The other assets of the two companies included under Property, plant and equipment represents all other movable assets vested<br />
in the company by gazette notification at the date of formation of the company.<br />
The unexpired period of the lease as at the balance sheet date was 34 years.<br />
Property (excluding leasehold property) with a carrying amount of Rs. 3,057 mn(<strong>2010</strong> - Rs. 2,579 mn) are pledged as security for<br />
loans obtained.<br />
Borrowing costs amounting to Rs. 26.6mn ( <strong>2010</strong> Rs. 28.76mn) have been capitalised which was incurred on long term loans<br />
related to immature plantations in the plantation sector using a capitalisation rate of 11% - 12% (<strong>2010</strong> 11.77%).<br />
Impairment of property, plant and equipment<br />
The recoverable amount for certain items of plant and machinery was estimated and impairment losses were recognized to reduce<br />
the carrying amounts as follows:<br />
Richard Pieris Natural Foams Ltd - Rs. 55 mn (<strong>2010</strong> Rs.16 mn)<br />
Hamefa Kegalle (Pvt) Ltd - Rs. 7 mn (<strong>2010</strong> Rs. 13 mn)<br />
C. Company<br />
As at Additions Disposals/ As at<br />
01.04.<strong>2010</strong> transfers 31.03.<strong>2011</strong><br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Cost / valuation<br />
Plant, machinery, tools & electrical installations 59,069 199 - 59,268<br />
Office & other equipment 25,917 129 - 26,046<br />
Furniture, fixtures & fittings 16,489 221 - 16,710<br />
Motor vehicles 66,776 - - 66,776<br />
Computers 25,859 1,761 - 27,620<br />
194,110 2,310 - 196,420<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 78
3. Property plant & equipment contd.<br />
As at Charge On As at<br />
01.04.<strong>2010</strong> for the disposals 31.03.<strong>2011</strong><br />
year<br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Depreciation / amortization<br />
Plant, machinery, tools & electrical installations 43,948 2,863 - 46,811<br />
Office & other equipment 19,815 1,172 - 20,987<br />
Furniture, fixtures & fittings 8,958 1,295 - 10,253<br />
Motor vehicles 41,724 8,842 - 50,566<br />
Computers 18,185 3,214 - 21,399<br />
132,630 17,386 - 150,016<br />
<strong>2011</strong> <strong>2010</strong><br />
Rs.’000 Rs.’000<br />
Net book value<br />
Plant, machinery, tools & electrical installations 12,457 15,121<br />
Office & other equipment 5,059 6,102<br />
Furniture, fixtures & fittings 6,457 7,531<br />
Motor vehicles 16,210 25,052<br />
Computers 6,221 7,674<br />
46,404 61,480<br />
Investment property<br />
D. Company<br />
As at Additions Disposals/ As at<br />
01.04.<strong>2010</strong> transfers 31.03.<strong>2011</strong><br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Gross carrying amounts<br />
Freehold land 474,423 - - 474,423<br />
Buildings and Building integrals 285,607 192 - 285,799<br />
760,030 192 - 760,222<br />
As at Charge On As at<br />
01.04.<strong>2010</strong> for the Disposals 31.03.<strong>2011</strong><br />
Year<br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Depreciation<br />
Buildings and Building integrals 60,823 8,007 - 68,830<br />
60,823 8,007 - 68,830<br />
79<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
3. Property plant & equipment contd.<br />
<strong>2011</strong> <strong>2010</strong><br />
Rs 000 Rs 000<br />
Net Book Values<br />
Freehold land 474,423 474,423<br />
Buildings and Building integrals 216,970 224,784<br />
Total carrying amount of investment property 691,393 699,207<br />
Rental income earned from investment property by the company amounted to Rs128.mn (Rs.128mn in 2009/<strong>2010</strong>). Direct<br />
operating expenses incurred in respect of investment property by the company amounted to Rs. 1.37 mn (Rs. 3.3 mn in<br />
2009/<strong>2010</strong>).<br />
Fair value of Investment property as at 31 March <strong>2011</strong> amounted to Rs. 5,407 mn (<strong>2010</strong> Rs. 4,945 mn).<br />
4 Intangible Assets<br />
Other<br />
Goodwill Licences intangibles Total<br />
Rs.000 Rs.000 Rs.000 Rs.000<br />
Cost/Carrying value<br />
As at 1 April <strong>2010</strong> 445,807 16,708 70,082 532,597<br />
Acquired / Incurred during the period 34,400 28,949 - 63,349<br />
As at 31 March <strong>2011</strong> 480,207 45,657 70,082 595,946<br />
Accumulated amortisation/impairment<br />
As at 1 April <strong>2010</strong> 8,725 10,025 33,670 52,421<br />
Amortisation for the year - 3,703 7,105 10,808<br />
Impairment Loss Recognised 34,400 - - 34,400<br />
<strong>Exchange</strong> translation difference - - 1,038 1,038<br />
As at 31 March <strong>2011</strong> 43,125 13,728 41,813 98,667<br />
Net book value<br />
As at 1 April <strong>2010</strong> 437,082 6,683 36,412 480,177<br />
As at 31 March <strong>2011</strong> 437,082 31,929 28,269 497,279<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 80
(a) Goodwill<br />
Goodwill represents the excess of an acquisition over the Group interest in the net fair value of the identifiable assets, liabilities and<br />
contingent liabilities at the date of acquisition, and is carried at cost less accumulated impairment losses. The group Goodwill has<br />
been allocated to four cash-generating units for impairment testing, as follows:<br />
1. Kegalle Plantations PLC<br />
2. Namunukula Plantations PLC<br />
3. Maskeliya Plantations PLC<br />
4. Arpico Super Centre in Kandy (which is under the purview of Richard Pieris Distributors Ltd)<br />
Goodwill is not amortised, but is reviewed for impairment annually and for the purpose of testing goodwill for impairment, goodwill<br />
is allocated to the operating entity level, which is the lowest level at which the goodwill is monitored for internal management<br />
purpose.<br />
During the year Richard Pieris Distributors Ltd ,a fully owned subsidiary of the group took over the identified assets and liabilities of<br />
five mini stores located in the central province. The goodwill resulting on such acquisition amounted to Rs. 34.4mn and was written<br />
off during the year.<br />
The recoverable amount of the goodwill is determined based on a value in use calculation using cash flow projections based on<br />
financial budgets approved by senior management for one year, and forecast for the four years thereafter, covering a five year<br />
period.<br />
(b) Licenses<br />
Licenses include separately acquired four operating licenses stated at cost less accumulated amortizations and impairment losses.<br />
Licences acquired have been amortized evenly over a period of five years.<br />
During the year Richard Pieris Securities (Pvt) Ltd, a fully owned subsidiary of the group acquired a licence to operate stock<br />
broking activities at <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong> at a cost of Rs. 28.9 mn.<br />
(c) Other intangible assets<br />
Other intangible assets represents the value of services provided by the foreign collaborator on engineering assembly know-how<br />
training, technological assistance and works management to Arpitalian Compact Soles (Private) Limited. This is amortized over a<br />
period of fifteen years and commencing from the financial year 2000/2001.<br />
The recoverable amount of the know how is determined based on a value in use calculation using cash flow projections based<br />
on financial budgets approved by senior management for one year, and forecast for the four years thereafter, covering a five year<br />
period.<br />
Key assumptions used in Value in Use calculations<br />
Volume growth - Volume growth is based on past performance, the approved budget and expected performance of such Cash<br />
Generation Unit (CGU) based on the actual performance and to evaluate future investment proposals.<br />
Discount rates - Discount rates reflect management’s estimate of the risk specific to the unit. This is the benchmark used by<br />
management to assess operating performance and to evaluate future investment proposals.<br />
Cost increase due to inflation - Expected inflationary levels over the next five years based on management judgment were used to<br />
estimate the increase in costs over similar periods.<br />
81<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
5 Investments<br />
A Company investment in subsidiaries<br />
% Holding No of shares Value Rs.000<br />
31.03.<strong>2011</strong> 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> Movement 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> Movement 31.03.<strong>2010</strong><br />
Quoted investments<br />
Richard Pieris Exports PLC (Rs 251mn) * 81 81 8,959,997 - 8,959,997 200,555 - 200,555<br />
Unquoted investments<br />
Richard Pieris Distributors Ltd. 100 100 106,673,960 - 106,673,960 812,130 - 812,130<br />
Arpidag International (Pvt) Ltd. 51 51 234,598 - 234,598 27,110 - 27,110<br />
Richard Pieris Tyre Co. Ltd. 100 100 4,000,000 - 4,000,000 50,000 - 50,000<br />
Richard Pieris Rubber Products Ltd. 100 100 2,700,000 - 2,700,000 27,000 - 27,000<br />
Richard Pieris Rubber Compounds Ltd. 100 100 1,700,000 - 1,700,000 17,000 - 17,000<br />
Arpico Furniture Ltd. 100 100 4,000,000 - 4,000,000 40,000 - 40,000<br />
Arpico Plastics Ltd. 100 100 2,900,000 - 2,900,000 29,000 - 29,000<br />
Arpico Industrial Development Co. Ltd.<br />
Ordinary Shares 100 100 1,500,000 - 1,500,000 15,000 - 15,000<br />
12% Redeemable Cumulative preference shares 9,140,000 - 9,140,000 91,400 - 91,400<br />
Plastishells Ltd. 98 98 3,361,000 - 3,361,000 35,615 - 35,615<br />
Richard Pieris Natural Foams Ltd. 22 22 14,022,253 - 14,022,253 143,479 - 143,479<br />
Arpico Flexifoam (Pvt) Ltd. 100 100 25,000,018 - 25,000,018 250,000 - 250,000<br />
Arpitalian Compact Soles (Pvt) Ltd.<br />
Ordinary Shares 15 16 5,333,333 1,333,333 4,000,000 53,333 13,333 40,000<br />
10% Redeemable Cumulative Preference Shares 6,404,500 - 6,404,500 64,045 - 64,045<br />
RPC Management Services (Pvt) Ltd. 100 100 7,500,000 - 7,500,000 550,250 - 550,250<br />
Richard Pieris Group Services (Pvt) Ltd. 100 100 2 - 2 - - -<br />
Arp-Eco (Pvt) Ltd. 100 100 2 - 2 - - -<br />
RPC Logistics (Pvt) Ltd. 100 100 2,000,002 - 2,000,002 20,000 - 20,000<br />
Richard Pieris Plantations (Pvt) Ltd. 100 100 7 - 7 - - -<br />
R P C Real Estate Development Co. (Pvt) Ltd. 100 100 2 - 2 - - -<br />
Arpico Homes (Pvt) Ltd. 100 100 2 - 2 - - -<br />
Arpico Exotica Asiana (Pvt) Ltd. 100 100 2 - 2 - - -<br />
RPC Globe Travel (Pvt) Ltd. 100 100 600,000 - 600,000 6,000 - 6,000<br />
RPC Construction (Pvt) Ltd. 100 100 2,000,000 - 2,000,000 20,000 - 20,000<br />
Arpitech Ltd. 100 100 3,500,000 - 3,500,000 35,000 - 35,000<br />
Arpimall Development Co (Pvt) Ltd. 24 24 5,000,000 - 5,000,000 50,000 - 50,000<br />
Arpico Interiors (Pvt) Ltd. 83 83 2,500,000 - 2,500,000 25,000 - 25,000<br />
Richard Pieris Securities (Pvt) Ltd 100 - 6,499,999 6,499,999 - 65,000 65,000 -<br />
Richard Pieris Financial Services (Pvt)Ltd 100 - 3,499,999 3,499,999 - 35,000 35,000 -<br />
2,661,917 113,333 2,548,584<br />
Provision for fall in value of the investments in<br />
Arpico Furniture Ltd. (40,000) - (40,000)<br />
RPC Globe Travels (Pvt) Ltd. (6,000) - (6,000)<br />
RPC Construction (Pvt) Ltd. (20,000) - (20,000)<br />
Arpitech Ltd. (35,000) - (35,000)<br />
Company investments in subsidiaries 2,560,917 113,333 2,447,584<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 82
B<br />
Group investments in subsidiaries<br />
% Holding No of shares Value Rs.000<br />
31.03.<strong>2011</strong> 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong><br />
Investor<br />
Richard Pieris Distributors Ltd.<br />
Investee<br />
Playcraft Lanka (Pvt) Ltd. 36 36 213,756 - 213,756 2,138 - 2,138<br />
Arpimalls Development Co (Pvt) Ltd.<br />
Ordinary shares 76 76 16,000,000 - 16,000,000 160,000 - 160,000<br />
6% redeemable cumulative preference shares 2,200,000 - 2,200,000 220,000 - 220,000<br />
Arpico Interiors (Pvt) Ltd. 17 17 500,000 - 500,000 5,000 - 5,000<br />
RPC Real Estate Development (Pvt) Ltd.<br />
6% redeemable cumulative preference shares - - 66,700,000 - 66,700,000 667,000 - 667,000<br />
RPC Retail Development (Pvt) Ltd.<br />
6% redeemable cumulative preference shares - - 38,700,000 20,000,000 18,700,000 387,000 200,000 187,000<br />
Investor<br />
Arpico Industrial Development Company (Pvt) Ltd<br />
Investee<br />
R P C Polymers (Pvt) Ltd 31 31 5,700,000 - 5,700,000 57,000 - 57,000<br />
Investor<br />
Richard Pieris Exports PLC<br />
Investee<br />
Richard Pieris Natural Foams Ltd 43 43 27,560,000 - 27,560,000 284,820 - 284,820<br />
Playcraft Lanka (Pvt) Ltd. 36 36 217,750 - 217,750 2,138 - 2,138<br />
Micro Minerals (Pvt) Ltd. 69 69 627,400 - 627,400 6,274 - 6,274<br />
Arpitalian Compact Soles (Pvt) Ltd. 45 44 15,993,334 3,998,333 11,995,001 159,933 39,983 119,950<br />
Arpico Natural Latex Foams (Pvt) Ltd. 44 44 4,000,000 - 4,000,000 40,000 - 40,000<br />
Investor<br />
Richard Pieris Natural Foams Ltd.<br />
Investee<br />
Arpico Natural Latex Foams (Pvt) Ltd. 56 56 5,000,000 - 5,000,000 50,000 - 50,000<br />
Investor<br />
Plastishells Ltd.<br />
Investee<br />
R P C Polymers (Pvt) Ltd 69 69 13,000,000 - 13,000,000 130,000 - 130,000<br />
Investor<br />
Richard Pieris Plantations (Pvt) Ltd.<br />
Investee<br />
Exotic Horticulture (Pvt) Ltd. 100 100 1,000,000 - 1,000,000 10,000 - 10,000<br />
Maskeliya Tea Garden Ltd. 100 100 499 - 499 14,999 - 14,999<br />
RPC Timberline (Pvt) Ltd. - 75 - (2,000,000) 2,000,000 - (20,000) 20,000<br />
RPC Plantation Management Services (Pvt) Ltd. 100 100 24,106,249 - 24,106,249 330,000 - 330,000<br />
Investor<br />
RPC Management Services (Pvt) Ltd.<br />
Investee<br />
Maskeliya Plantations PLC (Rs 539mn) * 71 64 19,172,144 1,995,400 17,176,744 457,457 56,908 400,549<br />
83<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
B<br />
Group investments in subsidiaries contd.<br />
% Holding No of shares Value Rs.000<br />
31.03.<strong>2011</strong> 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong><br />
Investor<br />
RPC Plantation Management Services (Pvt) Ltd.<br />
Investee<br />
Namunukula Plantations PLC (Rs 1,599 mn) * 59 59 13,950,000 - 13,950,000 397,163 - 397,163<br />
Kegalle Plantations PLC (Rs 3,531 mn) * 68 68 17,015,000 - 17,015,000 190,974 - 190,974<br />
Investor<br />
Kegalle Plantations PLC<br />
Investee<br />
Richard Pieris Natural Foams Ltd. 35 35 22,500,000 - 22,500,000 225,000 - 225,000<br />
Hamefa Kegalle (Pvt) Ltd. 100 100 2,800,000 - 2,800,000 14,000 - 14,000<br />
3,810,896 276,891 3,534,005<br />
Allowances for fall in value of investments in;<br />
Playcarft Lanka (Pvt) Ltd. (4,276) - (4,276)<br />
Namunukula Plantations PLC (29,167) - (29,167)<br />
RPC Timberline (Pvt) Ltd. - 20,000 (20,000)<br />
Arpico Natural Latex Foams (Pvt) Ltd. (50,000) - (50,000)<br />
3,727,453 296,891 3,430,562<br />
C<br />
Company / Group investment in associates<br />
% Holding No of shares Value Rs.000<br />
31.03.<strong>2011</strong> 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong> 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong><br />
Company<br />
Quoted investments<br />
Asian Alliance Insurance PLC (Rs 884 mn) * 15 15 5,629,900 1,879,900 3,750,000 159,756 122,256 37,500<br />
Company investments in associates (at cost) 159,756 122,256 37,500<br />
Group investments in associates<br />
Quoted Investments<br />
Investor<br />
Richard Pieris Distributors Ltd.<br />
Investee<br />
Asian Alliance Insurance PLC (Rs 589mn)* 10 10 3,750,912 1,250,312 2,500,600 106,277 81,271 25,006<br />
Unquoted Investments<br />
Investor<br />
Namunukula Plantations PLC<br />
Investee<br />
AEN Palm Oil Processing (Pvt) Ltd. 33 33 2,696,012 - 2,696,012 29,960 - 29,960<br />
Group investment in associates (at cost) 295,993 203,527 92,466<br />
Group share of associate companies -<br />
Asian Alliance Insurance PLC 132,687 66,398 66,289<br />
AEN Palm Oil Processing (Pvt) Ltd. 27,506 5,342 22,164<br />
Group investment in associates (equity basis) 456,186 275,267 180,919<br />
* Amounts stated within brackets correspond to market values as at 31st March <strong>2011</strong>. In the opinion of the Directors any reduction in market value below cost is considered to be of<br />
temporary nature.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 84
D Other investements<br />
Value Rs.’000<br />
Investor Investment 31.03.<strong>2011</strong> movement 31.03.<strong>2010</strong><br />
Richard Pieris and Company PLC Unquoted investments<br />
Richard Pieris Plantations (Pvt) Ltd. - Debentures 65,750 - 65,750<br />
RPC Timberline (Pvt) Ltd - Debentures 55,000 - 55,000<br />
RPC Timberline (Pvt) Ltd - Equity Shares 12,985 12,985 -<br />
133,735 12,985 120,750<br />
Allowances for fall in value of investment in RPC Timberline (Pvt) Ltd (43,985) (18,985) (25,000)<br />
89,750 (6,000) 95,750<br />
Reversal of intra group debentures / adjustments (65,750) - (95,750)<br />
24,000 - -<br />
The value of unquoted investments based on net assets amounted to Rs. 5,000 mn (Rs. 4,221 mn in 2009/<strong>2010</strong>).<br />
6 Inventories<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Raw materials 722,599 560,514 - -<br />
Growing crop-nurseries 27,283 42,392 - -<br />
Work-in-progress 144,349 123,558 - -<br />
Finished goods 1,610,543 1,225,858 - -<br />
Produce inventories 798,321 478,019 - -<br />
Other inventories 46,074 48,068 - -<br />
Goods in transit 7,028 4,881 - -<br />
3,356,197 2,483,290 - -<br />
Elimination of unrealised profit (14,313) (19,252) - -<br />
3,341,884 2,464,038 - -<br />
Inventories are net of allowances for slow moving and obsolete inventories.<br />
The amount of write-down of inventories recognised as an expense is Rs.60mn (<strong>2010</strong> Rs. 42 mn) which is recognised under<br />
administration expenses.<br />
Inventories carried at net realisable value as at 31st March <strong>2011</strong> amounted Rs.886mn(<strong>2010</strong> Rs. 467 mn) which is recognised in<br />
cost of sales and administrative expenses.<br />
Inventories with a carrying amount of Rs. 1,250 mn (<strong>2010</strong> Rs. 896 mn ) are pledged as security for loans obtained, details of which<br />
are disclosed in Note 13 to the financial statements.<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
7 Trade and other receivables<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Trade Debtors 2,330,762 2,222,259 - -<br />
Less: Allowances for bad doubtful debts (421,008) (408,170) - -<br />
1,909,754 1,814,089 - -<br />
Advances, deposits and prepayments 370,638 270,904 - 18,627<br />
Loans to employees 10,189 6,765 1,472 909<br />
Other debtors 618,219 458,390 51,234 47,503<br />
2,908,800 2,550,148 52,706 67,039<br />
8 Short term investments<br />
Group / Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
No. of No. of Market value Cost Market value Cost<br />
Quoted investments shares shares Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
John Keells Holdings PLC 54 54 26 6 11 6<br />
Asian Hotel Properties PLC 319,700 319,700 59,399 17,721 41,968 17,721<br />
Dialog Telekom PLC 10,100 10,100 115 192 78 192<br />
59,540 17,919 42,057 17,919<br />
Appreciation / (provision)<br />
for fall in value of investment - 41,621 - 24,138<br />
59,540 59,540 42,057 42,057<br />
9 Stated capital<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Number of Value of Number of Value of<br />
shares shares shares shares<br />
in ‘000 Rs. ‘000 in ‘000 Rs. ‘000<br />
Fully paid ordinary shares at the beginning of the year 128,251 1,578,475 128,251 1,578,475<br />
Share options exercised prior to subdivision of shares (Note 33) 781 40,305 - -<br />
Sub division of shares during the year (Note 9.1) 1,806,448 - - -<br />
Share options exercised after subdivision of shares (Note 33) 1,761 8,832 - -<br />
Balance at the end of the year 1,937,241 1,627,612 128,251 1,578,475<br />
9.1 The Company exercised a sub division of shares in the proportion of 15 shares for every 1 share held on 4th October <strong>2010</strong>.<br />
10 Capital reserves<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Capital reserve 124,526 124,526 8,199 8,199<br />
Revaluation reserve 2,375 2,375 2,375 2,375<br />
126,901 126,901 10,574 10,574<br />
10.1 Capital Reserves Compromise surplus arising from revaluations and other statutory reserves.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 86
11 Revenue reserves<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
A. General reserve 179,443 179,443 - -<br />
179,443 179,443 - -<br />
B. Retained profit 3,041,659 1,876,921 617,905 654,962<br />
3,221,102 2,056,364 617,905 654,962<br />
11.1 General reserves represent amounts set aside from time to time by the directors for general application. These have been<br />
appropriated by the board complying with the articles of association which provides for such amounts being set aside for future<br />
use and utilized based on board approval.<br />
12 Foreign currency translation<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
At the beginning of the year 31,152 32,371 - -<br />
<strong>Exchange</strong> translation difference for the year (3,838) (1,219) - -<br />
At the end of the year 27,314 31,152 - -<br />
Foreign currency translation relates to the resulting exchange difference on translation of Arpitalian Compact Soles (Pvt.) Ltd.’s<br />
accounts maintained in US dollars, into Sri Lankan rupees.<br />
13 Interest bearing loans and borrowing<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs’000 Rs’000 Rs’000 Rs’000<br />
At beginning of the year 3,197,229 3,416,833 1,033,469 1,511,263<br />
Effect of foreign currency translation (8,433) (3,368) - -<br />
Disposal of subsidiary (1,087) - - -<br />
New Loans obtained 1,133,979 1,445,223 - -<br />
4,321,688 4,858,688 1,033,469 1,511,263<br />
Repayments (1,248,156) (1,661,459) (609,385) (477,794)<br />
3,073,532 3,197,229 424,084 1,033,469<br />
Transferred to current Liabilities (1,075,241) (1,239,549) (275,000) (605,000)<br />
At the end of the year 1,998,291 1,957,680 149,084 428,469<br />
Total Interest Bearing Loans & Borrowings<br />
Repayable within one year 1,075,241 1,239,549 275,000 605,000<br />
Repayable after one year 1,998,291 1,957,680 149,084 428,469<br />
3,073,532 3,197,229 424,084 1,033,469<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
B. Interest bearing loans and borrowings repayable after one year<br />
Company Lender <strong>2010</strong>/<strong>2011</strong><br />
31.03.<strong>2011</strong><br />
Rs.’000<br />
2009/<strong>2010</strong><br />
31.03.<strong>2010</strong><br />
Rs.’000<br />
Repayment<br />
Security<br />
Richard Pieris and Company PLC Commercial Bank PLC 234,800 412,000 Rs.42 mn per quarter Mortgage over Land and Building at Kandy & Battaramulla.<br />
Commercial Bank PLC 9,200 34,385 Rs.7.5 mn per quarter Mortgage over shares of Namunukula Plantations PLC<br />
DFCC Bank PLC 61,334 93,334 Rs. 2.67 mn per month Mortgage over Machinery<br />
National Savings Bank - 300,000 Bullet Repayment in September <strong>2010</strong> Mortgage over Land & Building at Dehiwala<br />
Indian Bank 118,750 193,750 Rs 6.25 mn per month Mortgage over Land & Building at Mattegoda<br />
Richard Pieris Distributors Limited Commercial Bank PLC - 42,830 Rs 2.86 mn per month Corporate Guarantee given by Richard Pieris and Company PLC and<br />
shares of Namunukula Plantations PLC<br />
Commercial Bank PLC 570,400 W.e.f. August <strong>2011</strong> Monthly Repayment<br />
State Bank of India 170,000 W.e.f. August <strong>2011</strong> Monthly Repayment<br />
NDB AVIVA Fund Management 14,979 W.e.f. August <strong>2011</strong> Monthly Repayment<br />
National Development Bank PLC 259,600 W.e.f February 2013<br />
National Development Bank PLC 195,000 255,000 Rs 15 mn per quarter Clean Basis<br />
Credit Card receivables at Hyde Park Corner & Battaramulla Super Center<br />
Arpitech (Pvt) Limited Pan Asia Bank PLC 28,498 45,577 Rs. 1.95 mn per month Mortgage over Land, Plant & Machinery at Mattegoda<br />
RPC Timberline (Pvt) Ltd Sampath Bank 1,087 Rs. 41,500 per month Land & Building at Homagama<br />
RPC Retail Development<br />
LOLC PLC 163,565 208,562 Rs 3.75 mn per month Mortgage over Land and Building at Negambo<br />
Company Limited<br />
Richard Pieris Exports PLC Hatton National Bank PLC 76,760 137,709 US $ 125,000 per quarter Mortgage over Land and Buildings at Union Place, <strong>Colombo</strong> 02<br />
State Bank of India 68,994 156,791 US $ 62,500 per month Mortgage over <strong>Stock</strong>s, Debtors, Plant & Machinery and Land & Building<br />
at Ekala.<br />
RPC Management Services (Pvt) DFCC Bank PLC 128,245 173,513 Rs 3.772 mn per month Mortgage over Shares of Maskeliya Plantations PLC<br />
Limited<br />
RPC Plantations Management Hatton National Bank PLC 27,076 39,580 Rs 1mn per month Promissory Note<br />
Services (Pvt) Limited<br />
Maskeliya Plantations PLC ADB/ National Development Bank PLC 1,942 5,270 Rs. 0.28mn per month<br />
ADB/ National Development Bank PLC 3,000 5,117 Rs. 0.18mn per month<br />
Primary mortgage over leasehold rights of Brunswick,Strathspey,Laxapana<br />
ADB/ National Development Bank PLC 1,738 3,129 Rs. 0.16mn per month<br />
and Moray Estates.<br />
ADB/ National Development Bank PLC 10,337 14,471 Rs. 0.35mn per month<br />
ADB/ National Development Bank PLC 13,786 18,955 Rs. 0.43mn per month<br />
ADB/ National Development Bank PLC 4,063 5,636 Rs. 0.13mn per month<br />
ADB/ National Development Bank PLC 16,427 22,401 Rs. 0.50mn per month<br />
ADB/ National Development Bank PLC 14,099 19,226 Rs. 0.43mn per month<br />
ADB/ National Development Bank PLC 4,612 6,290 Rs. 0.14mn per month<br />
Secondary mortgage over leasehold rights of<br />
Brunswick,Strathspey,Laxapana and Moray Estates.<br />
Primary mortgage over leasehold rights of Talawakelle Estate.<br />
Tertiary mortgage over leasehold rights of Brunswick, Strathspey,<br />
Laxapana and Moray Estates.<br />
Secondary mortgage over leasehold rights of Talawakelle Estate.<br />
ADB/Seylan Bank PLC 19,128 23,459 Rs. 0.36mn per month<br />
Primary mortgage over leasehold rights of Ampitittiakande, Craig &<br />
ADB/Seylan Bank PLC 17,954 22,019 Rs. 0.34mn per month<br />
Mousakelle Estates.<br />
ADB/Seylan Bank PLC 3,441 4,141 Rs. 0.06mn per month<br />
DFCC Bank PLC 9,190 13,274 Rs. 0.34mn per month<br />
Hatton National Bank PLC 4,313 8,063 Rs. 0.31mn per month<br />
Corporate Guarantee given by RPC Management Services (Pvt) Ltd<br />
National Development Bank PLC-<br />
E-Friend Loan<br />
23,128 32,383 Rs. 0.77mn per month<br />
National Development Bank PLC-<br />
Government Relief Package<br />
27,000 117,500 As per monthly Trust Papers Securitization of future tea receivables<br />
NDB Investment Bank 112,600 125,000 As per monthly Trust Papers Securitization of future tea receivables<br />
National Development Bank PLC 119,000 W.e.f. April 2012 Rs.1.4mn per month Primary mortgage over leasehold rights of Brunswick, Strathspy,<br />
Laxapana, Moray estates and Thalawakelle estate<br />
Kegalle Plantations PLC ADB/ National Development Bank PLC 4,133 9,644 Rs. 0.46mn per month<br />
ADB/ National Development Bank PLC 14,709 20,535 Rs. 0.49mn per month<br />
Corporate guarantee by Richard Pieris and Company PLC for Rs 33mn<br />
and primary and secondary mortgage over leasehold rights of Atale,<br />
Pallegama, Parambe, Weniwella and Yatederiya Estates<br />
ADB/ National Development Bank PLC 17,649 23,983 Rs. 0.53mn per month<br />
ADB/ Seylan Bank PLC 24,681 30,251 Rs 0.46mn per month Primary mortgage over leasehold rights of Eadella Estates<br />
Hatton National Bank PLC-USD Dollar<br />
Loan<br />
- 13,470 $19,930 per month<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 88
Company Lender <strong>2010</strong>/<strong>2011</strong><br />
31.03.<strong>2011</strong><br />
Rs.’000<br />
2009/<strong>2010</strong><br />
31.03.<strong>2010</strong><br />
Rs.’000<br />
Repayment<br />
Security<br />
Hatton National Bank PLC - E friend<br />
Loan<br />
10,540 13,696 Rs 0.26mn per month Primary floating mortgage over leased hold property at Luckyland Estate,<br />
Udupussellawa, Badulla Estates<br />
ADB/ National Development Bank PLC 56,313 56,312 Rs 0.63mn per month Primary Mortgage over leasehold rights of Atale, Etana, Doteloya, Kirkless<br />
ADB/ National Development Bank PLC 29,352 29,352<br />
and Secondary mortgage over Pallegama, Parambe, Weniwella and<br />
Yataderiya Estates.<br />
ADB/ National Development Bank PLC 173,000 173,000 Secondary Mortgage over leasehold rights of Atale, Etana, Doteloya,<br />
Kirkless, Pallegama, Parambe, Weniwella and Yataderiya Estates.<br />
ADB/ National Development Bank PLC 6,000 25,500 Rs.1.83mn per month Securitized Sales Proceeds<br />
LOLC PLC 7,193 8,707 Rs 0.13mn per month Mortgage over Plant & Machineries at Luskeyland Estate<br />
Namunukula Plantations PLC DFCC Bank PLC 56,064 80,402 Rs 2mn per month Primary mortgage over leasehold rights of Hulandawa,Pallegoda, Yatadola<br />
& Hallala estates and undertaking from RPC Plantations Management<br />
Services (Pvt) Ltd<br />
ADB/LOLC PLC 14,932 17,732 Rs.0.23mn per month<br />
ADB/LOLC PLC 7,830 9,100 Rs. 0.10mn per month<br />
Corporate Guarantee given by RPC Plantation Management Services<br />
(Pvt) Ltd<br />
ADB/LOLC PLC 7,088 8,164 Rs.0.08mn per month<br />
ADB/LOLC PLC 18,089 20,430 Rs.0.212mn per month<br />
NDB Investment Bank 93,000 116,500 As per monthly Trust Papers Promissory Note/ Securitization of future tea receivables<br />
Total Term Loans 3,073,532 3,197,230<br />
Transferred to Current Liabilities (1,075,241) (1,239,549)<br />
1,998,291 1,957,681<br />
14 Net liability to the lessor of SLSPC / JEDB estates and others<br />
Repayable Repayable Repayable Total Repayable Repayable Repayable Total<br />
within after 1 year after 5 years Repayable within after 1 year after 5 years Repayable<br />
1 year less than after 1 year 1 year less than after 1 year<br />
5 years as at 5 years as at<br />
31.03.<strong>2011</strong> 31.03.<strong>2010</strong><br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Group<br />
Gross liability (14.1) 35,674 142,699 1,043,277 1,221,650 35,674 142,699 1,078,948 1,257,321<br />
Less: finance charges (26,358) (101,548) (436,498) (564,404) (26,716) (103,132) (461,272) (591,120)<br />
Net liability 9,316 41,151 606,779 657,246 8,958 39,567 617,676 666,201<br />
Transferred to current liabilities (9,316) (8,958)<br />
Net liability to the lessor of SLSPC/JEDB 647,930 657,243<br />
Gross liability - other lease 14,025 3,137 - 17,162 20,075 16,390 - 36,465<br />
Less: finance charges (1,363) (87) - (1,450) (3,639) (1,475) - (5,114)<br />
Net liability to the other lessors 12,662 3,050 - 15,712 16,436 14,915 - 31,351<br />
Transferred to current liabilities (12,662) (16,436)<br />
3,050 14,915<br />
Total net liability to the lessor 21,978 650,980 25,394 672,158<br />
14.1 The leases of the estates have been amended with effect from 22nd June 1996 to an amount substantially higher than the<br />
previous lease rental of Rs. 500/- per estate per annum. The first rental payable under the revised basis was Rs. 6,744 mn and Rs.<br />
15,744 mn for Maskeliya Plantations PLC and Kegalle Plantations PLC respectively from 22nd June 1996 to 21st June 1997.<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
Rentals payable according to the original Lease agreement stipulated that the frozen Average GDP Deflator for the Calendar Years<br />
2002 to 2006 be used to calculate the lease rentals payable and to be reviewed at the time of the expiry of this agreement, in<br />
June 2008. The Regional Plantation Companies were at the negotiation table during the previous financial year as well as the year<br />
under review to continue the same basis for the ensuing periods. Subsequently in their communication with Regional Plantation<br />
Companies in May <strong>2010</strong>, Ministry of Plantation Industries stated that the Lease Rentals should be calculated on the GDP Deflator<br />
from 2008/9 as stipulated in the original lease agreement.<br />
This resulted in an arrears in Lease rental payments amounting to Rs. 37.3 mn and Rs. 32.2 mn for Kegalle and Namunukula<br />
Plantations respectively, payable in 12 equal installments<br />
15 Deferred income<br />
Group<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000<br />
Deferred grants and subsidies<br />
At beginning of the year 528,898 478,147<br />
Grants received during the year 78,167 74,259<br />
Amortised during the year (22,302) (23,508)<br />
At end of the year 584,763 528,898<br />
16 Deferred tax liability / (assets)<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
At beginning of the year 24,981 21,804 (36,953) (36,953)<br />
Transfer from / (to) income statement (14,392) 3,177 - -<br />
At end of the year 10,589 24,981 (36,953) (36,953)<br />
Deferred tax assets, liabilities related to the following: Group Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Deferred tax liabilities<br />
Accelerated depreciation for tax purposes 273,802 303,759 32,402 35,230<br />
273,802 303,759 (32,402) 35,230<br />
Deferred tax assets<br />
Retirement benefit obligations (119,337) (118,693) (13,602) (17,549)<br />
Benefits arising from tax losses (99,434) (114,961) (55,753) (54,634)<br />
Other provisions (44,442) (45,124) - -<br />
(263,213) (278,778) (69,355) (72,183)<br />
Net deferred tax liability / assets 10,589 24,981 (36,953) (36,953)<br />
Deferred tax assets amounting to Rs. 330 mn (<strong>2010</strong> Rs. 435 mn) for the group and Rs. 74 mn ( <strong>2010</strong> Rs. 124 mn) for the company<br />
has not recognized since the companies do not expect these assets to reverse in the foreseeable future.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 90
17 Employee benefit liabilities<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Provision for retiring gratuity<br />
At beginning of the year 1,529,685 1,103,222 50,141 45,114<br />
Provision for the year 282,843 557,485 3,103 9,799<br />
Payments (150,397) (131,022) (4,788) (4,772)<br />
Transfers - - 122 -<br />
At end of the year 1,662,131 1,529,685 48,578 50,141<br />
Actuarial valuation of the defined benefit plan / gratuity was carried out on 31st March <strong>2011</strong> by Messrs. Actuarial & Management<br />
Consultants (Pvt) Ltd, Actuaries for Companies in all segments other than for the plantation segment. In respect of plantation<br />
companies such valuation was carried by the same party as at 31st March <strong>2010</strong>. Appropriate and compatible assumptions were<br />
used in determining the cost of retirement benefits. The principal assumptions used are as follows:<br />
Assumptions <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
a) Demographic assumptions<br />
Retiring age:<br />
Executives 55-60 years 55-60 years<br />
Non Executives 55 years 55 years<br />
In respect of plantation companies,<br />
Retiring age:<br />
Workers (male and female) 60 years 60 years<br />
Other categories of staff (male and female) 55-58 years 55-58 years<br />
b) Financial assumptions<br />
Rate of interest net of tax per annum 10.5% 12%<br />
Rate of salary increment 9% 8.5%<br />
Rate of discount 10.5% 12%<br />
In respect of plantation companies,<br />
Rate of interest net of tax per annum 11% 11%<br />
Rate of salary increment:<br />
Workers 16% every two years 16% every two years<br />
Staff employees 10% per year 10% per year<br />
Rate of discount 11% 11%<br />
18 Trade and other payables<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Trade payables 1,925,213 1,406,537 - -<br />
Accrued expenses 945,938 627,081 - 232,239<br />
Others 781,995 599,295 258,991 -<br />
3,653,146 2,632,913 258,991 232,239<br />
91<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
19 Short term borrowings<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Commercial papers (a) 125,853 100,191 125,853 100,191<br />
Import loans (b) 78,611 94,447 - -<br />
Other short term borrowings ( c) 1,799,678 1,996,424 1,400,000 1,570,000<br />
Bank overdrafts (d) 1,801,792 1,158,229 45,479 4,593<br />
3,805,934 3,349,291 1,571,332 1,674,784<br />
(a) Repayment of commercial papers will be less than three months.<br />
(b) Import loans have been obtained for the purpose of operations and is repayable within thirty to ninety days.<br />
(c) Short term borrowings mainly consist of money market borrowings and will be repayable at maturity within seven to ninety<br />
days.<br />
(d) Bank overdrafts are repayable on demand.<br />
20 Cash and cash equivalents<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Cash at bank and in hand 1,274,365 602,850 63,349 266,271<br />
Treasury bills 1,289,494 719,993 - -<br />
2,563,859 1,322,843 63,349 266,271<br />
Short term borrowings (Note 19) (3,805,934) (3,349,291) (1,571,332) (1,674,784)<br />
(1,242,075) (2,026,448) (1,507,983) (1,408,513)<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 92
21 Group segmental reporting<br />
21.1 Group<br />
Business segment Rubber Tyre Plastics Retail Services Plantations Inter/Intra Group<br />
segment<br />
eliminations<br />
Year ended March 31 <strong>2011</strong> Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Turnover<br />
External sales 2,215,025 2,529,921 3,809,412 10,925,548 62,013 7,699,659 - 27,241,577<br />
Inter segment sales 202,149 58,742 373,271 119,855 1,128,256 810,090 (2,692,362) -<br />
Intra segment sales 36,849 1,268,640 1,774,328 76,135 - 413,498 (3,569,449) -<br />
Net turnover 2,454,023 3,857,303 5,957,011 11,121,538 1,190,269 8,923,247 (6,261,812) 27,241,577<br />
Results<br />
Segment results (24,643) 263,943 460,200 827,759 429,316 2,031,672 (537,880) 3,450,366<br />
3,450,366<br />
Finance costs (794,617)<br />
Share of associate company profits 113,008<br />
Profit before taxation 2,768,757<br />
Income tax expense (616,566)<br />
Profit for the year from continuing operations 2,152,191<br />
Profit / (loss) after tax from discontinued operations (11,609)<br />
2,140,582<br />
Minority interest (459,898)<br />
Profit / (loss) attributable to equity holders of parent 1,680,684<br />
Segmental assets<br />
Assets 2,284,492 1,757,046 2,924,522 5,960,404 5,375,493 11,674,794 (9,793,480) 20,183,271<br />
Investments in associates 159,933 - - 106,277 223,801 29,960 (63,785) 456,186<br />
Consolidated total assets 20,639,457<br />
Segmental liabilities<br />
Trade and other payables 153,058 154,937 582,143 1,462,247 370,898 1,602,821 - 4,326,104<br />
Non interest bearing liabilities 76,301 115,977 132,271 295,799 57,352 1,952,385 (62,658) 2,567,427<br />
Interest bearing liabilities 804,154 585,518 476,614 1,555,457 2,163,185 1,297,376 - 6,882,304<br />
13,775,835<br />
Other information<br />
Capital expenditure 30,395 18,870 11,601 483,569 12,910 643,872 - 1,201,218<br />
Depreciation 80,452 42,055 56,335 112,740 46,966 269,792 - 608,343<br />
Impairment of Property Plant & Equipment 55,000 - - - - 7,019 - 62,019<br />
Segmental cash flow<br />
Operating 16,227 (108,557) 168,161 (93,278) 1,096,808 2,076,871 (337,352) 2,818,882<br />
Investing (69,875) (18,341) 11,596 (622,892) (378,381) (634,853) 323,670 (1,389,077)<br />
Financing (142,898) (31,000) (82,080) 962,546 (1,092,809) (593,063) 333,873 (645,432)<br />
Geographical segment Sri Lanka USA Europe Other Inter/Intra Group<br />
segment<br />
eliminations<br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Net turnover 28,380,258 315,829 959,356 1,155,583 (3,569,449) 27,241,577<br />
93<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
21 Group segmental reporting contd.<br />
Business segment Rubber Tyre Plastics Retail Services Plantations Inter/Intra Group<br />
segment<br />
eliminations<br />
Year ended March 31 <strong>2010</strong> Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Turnover<br />
External sales 1,767,918 2,100,782 2,858,233 9,042,785 50,272 6,519,298 - 22,339,288<br />
Inter segment sales 132,102 84,836 221,519 19,498 654,040 638,677 (1,750,672) -<br />
Intra segment sales 43,789 926,289 1,400,293 160,576 - 130,432 (2,661,379) -<br />
Net turnover 1,943,809 3,111,907 4,480,045 9,222,859 704,312 7,288,407 (4,412,051) 22,339,288<br />
Results<br />
Segment results 64,758 299,640 320,743 515,318 177,840 822,697 (231,298) 1,969,697<br />
1,969,697<br />
Finance costs (969,147)<br />
Share of associate company profits 59,609<br />
Profit before taxation 1,060,159<br />
Income tax expense (330,592)<br />
Profit for the year from continuing operations 729,567<br />
Profit / (loss) after tax from discontinued operations (17,873)<br />
711,694<br />
Minority interest (131,490)<br />
Profit / (loss) attributable to equity holders of parent 580,204<br />
Segmental assets<br />
Assets 2,318,959 1,480,950 2,265,447 4,832,359 5,733,862 9,944,975 (9,392,654) 17,183,898<br />
Investments in associates 119,950 - - 25,006 101,545 29,960 (95,542) 180,919<br />
Consolidated total assets 17,364,817<br />
Segmental liabilities<br />
Trade and other payables 138,832 136,622 426,045 970,675 302,308 1,355,983 - 3,330,465<br />
Non interest bearing liabilities 90,330 139,203 39,560 119,087 50,104 1,804,005 (58,165) 2,184,124<br />
Interest bearing liabilities 691,374 403,699 559,561 723,066 2,653,977 1,522,588 - 6,554,265<br />
12,068,854<br />
Other information<br />
Capital expenditure 16,414 20,568 313 25,257 7,407 548,899 - 618,858<br />
Depreciation 80,206 40,059 57,586 113,071 50,661 266,643 - 608,225<br />
Impairment of Property Plant & Equipment 16,000 - - - - 13,093 - 29,094<br />
Segmental cash flow<br />
Operating (21,192) 375,619 130,677 553,642 676,561 1,028,229 (587,700) 2,155,836<br />
Investing (66,132) (20,512) (120,744) (20,829) (482,588) (709,975) 879,032 (541,748)<br />
Financing 228,981 (247,630) 398,969 81,892 (476,446) (16,102) (218,856) (249,192)<br />
Geographical segment Sri Lanka USA Europe Other Inter/Intra Group<br />
segment<br />
eliminations<br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Turnover 23,411,238 227,712 767,914 593,802 (2,661,378) 22,339,288<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 94
22 Other operating income<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Profit from sale of property, plant and equipment 1,627 1,038 - -<br />
Amortisation of capital grants and subsidies (Note 15) 22,303 23,508 - -<br />
<strong>Exchange</strong> gain 6,382 6,986 - -<br />
Interest income 134,078 61,710 - -<br />
Scrap sales 12,107 11,004 - -<br />
Rental income 132,851 98,520 - -<br />
Change in the value of short term Investments 17,483 34,082 17,483 34,082<br />
Negative goodwill 16,200 - - -<br />
Sundry income 149,875 119,031 - 4,515<br />
492,906 355,879 17,483 38,597<br />
23 Other operating expenses<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
VAT on management fees of plantation companies 47,609 36,865 - -<br />
Loss on disposal of subsidiary 10,319 - - -<br />
Amortisation and impairment of intangible assets 45,208 10,725 - -<br />
Others 61,908 10,579 - -<br />
165,044 58,169 - -<br />
23.1 During the year the Group disposed 706,500 shares of RPC Timberline (Pvt) Limited (a subsidiary of the group with a<br />
controlling interest of 75%) to Papoose International (Pvt) Ltd and thereby the termination of the joint venture between the<br />
Richard Pieris Group and Papoose. The Group’s interest after the disposal was reduced to 49% where the Group ceases to<br />
exercise any influence over the financial and operating policies of the entity.<br />
24 Profits from operations is stated after charging<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Directors’ remuneration & fees 39,472 44,488 17,683 15,496<br />
Auditors’ remuneration & fees 11,358 15,871 617 600<br />
Depreciation 584,916 584,008 25,393 25,878<br />
Amortisation of property, plant and equipment 23,427 24,217 - -<br />
Impairment losses (Included in administrative expenses) 62,019 29,093 - -<br />
Provision for retiring gratuity 282,843 557,486 3,103 9,799<br />
Staff costs including EPF/ETF contributions 4,254,549 3,817,863 41,975 30,696<br />
Legal fees 6,292 6,896 611 146<br />
Donations 4,123 1,969 219 201<br />
Allowance for bad and doubtful debts & bad debts written off 108,909 147,073 73,249 53,749<br />
Allowance for value of Investment 6,000 - 6,000 -<br />
Amortisation of Intangible Assets 10,808 10,725 - -<br />
95<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
25 Finance cost<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Interest on long term loans 363,835 591,758 80,243 89,899<br />
Interest on short term loans 430,782 377,389 98,074 109,877<br />
794,617 969,147 178,317 199,776<br />
26 Share of results of associates<br />
Group<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000<br />
Turnover 2,965,608 2,548,762<br />
Profit before tax 474,589 263,728<br />
Group’s share of profit before tax 113,008 59,609<br />
Total assets and total liabilities of the associates amounts to Rs. 4,707 mn (2009/<strong>2010</strong> Rs. 3,103 mn) and Rs.69mn (2009/<strong>2010</strong> Rs.<br />
2.354 mn) respectively.<br />
The Group can influence up to 33.33% of the voting rights of the AEN Palm Oil with an effective holding of 19.58%.<br />
27 Income tax expense<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
27.1 Taxation on current year profit<br />
Richard Pieris and Company PLC 25,415 - 25,414 -<br />
Subsidiaries 548,855 298,000 - -<br />
574,270 298,000 25,414 -<br />
Associates 620 613 - -<br />
Dividend tax 56,068 28,802 - -<br />
Deferred taxation (Note 27.3) (14,392) 3,177 - -<br />
616,566 330,592 25,414 -<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 96
27.2 Reconciliation of accounting profit to income tax expense of the company and its subsidiaries<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Profit before tax from continuing operations 2,768,757 1,060,159 504,303 134,589<br />
Profit before tax from discontinued operations (11,609) (17,873) - -<br />
Profit from associate companies (113,008) (59,609) - -<br />
2,644,140 982,677 504,303 134,589<br />
Disallowed items 1,691,542 1,773,235 205,837 121,216<br />
Allowable expenses (2,061,580) (1,392,471) (600,080) (300,464)<br />
Tax exempt income (1,247,464) (520,723) - -<br />
Losses of tax exempt companies - 31,025 - -<br />
1,026,638 873,743 110,060 (44,659)<br />
Tax loss brought forward (3,141,561) (3,392,906) (501,408) (458,943)<br />
Tax losses carried forward 2,989,665 3,184,767 462,887 503,602<br />
Taxable income 874,742 665,604 71,539 -<br />
Income tax @ 35% 516,092 258,593 25,039 -<br />
Income tax @ 20% - 13,725 - -<br />
Income tax @ 15% 44,981 20,282 - -<br />
Income tax at other rates 3,656 6,367 - -<br />
Social Responsibility Levy (1.5%) 8,820 4,394 375 -<br />
573,549 303,361 25,414 -<br />
(Over) / under provision in the previous year 721 (5,361)<br />
574,270 298,000 25,414 -<br />
Associates 620 613 - -<br />
Dividend tax 56,068 28,802 - -<br />
Deferred tax (14,392) 3,177 - -<br />
Total income tax expense/reversal 616,566 330,592 25,414 -<br />
27.3 Deferred tax expenses / (reversal)<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Accelerated depreciation for tax purpose (29,957) (7,532) 2,829 2,870<br />
Retirement benefit obligations (644) (12,679) (3,947) (1,759)<br />
Benefit arising from tax losses 15,527 38,018 1,118 (1,111)<br />
Others 682 (14,630) - -<br />
Total deferred tax (reversal) / charge (14,392) 3,177 - -<br />
The deferred tax effect on undistributed reserves of subsidiaries has not been recognised since the parent can control the timing of<br />
the reversal of these temporary differences.<br />
97<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
27.4 Income tax rates and details of tax holidays enjoyed by the group<br />
Tax liabilities of resident companies (quoted and unquoted) are computed at the standard rate of 35% (28 % <strong>2011</strong>/12 onwards)<br />
The export profits of Richard Pieris Exports PLC is liable to income tax at a concessionary rate of 15% for a period of twenty years<br />
commencing from the year of assessment 1995/1996, in terms of Section 52 of the Inland Revenue Act No. 10 of 2006. (12 %<br />
<strong>2011</strong>/12 onwards). The export profits of Richard Pieris Natural Foams Limited is also liable to income tax at 15% from the year of<br />
assessment 2005/2006. Other profit & income is liable to tax at 35%.<br />
Under the Board of Investment Law No. 04 of 1978, the profits of Arpitalian Compact Soles (Private) Limited is liable to income tax<br />
at 15% for ten years from the year of assessment 2008/09.Other profits and income is liable to tax at 35%.<br />
RPC Polymers has entered into an agreement with the Board of Investment of Sri Lanka under section 17 of the BOI law and<br />
accordingly its profit and income is exempt from income tax for a period of three years commencing from the year of assessment<br />
2008/09.The Company will be liable to tax at 10% for a period of 2 years immediately succeeding the last day of said exemption<br />
period and thereafter it will be liable at the reduced income tax rate of 20%.<br />
In terms of an agreement entered in to with the Board of Investments of Sri Lanka under the BOI Law NO.04 OF 1978, RPC<br />
Retail Development (Private) Limited will be exempt from tax for a period of three years commencing from the year of assessment<br />
2009/<strong>2010</strong> .After the expiry of the tax holiday the company will be liable to income tax at 10% for two years and at 20% thereafter.<br />
The profits of Arpico Industrial Development Company (Private) Limited is subject to a concessionary income tax rate of 2% on<br />
turnover for a period of fifteen years from the financial year 2002/2003 in terms of the agreement entered into with the Board of<br />
Investment of Sri Lanka.<br />
Micro Mineral (Private) Limited is taxed at a concessionary rate of 15%, in terms of an agreement entered into with the Board of<br />
Investment of Sri Lanka under the Board of Investment of Law No. 04 of 1978. It is entitled to this concessionary rate for a period of<br />
twenty years commencing 1st September 1996.<br />
Kegalle Plantations PLC, Maskeliya Plantations PLC and Namunukula Plantations PLC are liable for income tax at the rates of<br />
35% on manufacturing activities and profits from agriculture are exempt from income tax for five years which ended up 31st March<br />
<strong>2011</strong> & tax at 10 % commencing from 1st April <strong>2011</strong>.<br />
E. Social Responsibility Levy<br />
As per the provision of the Finance Act No. 08 of 2008, Social Responsibility Levy (SRL) is payable at the rate 1.5% on the income<br />
tax payable & this has removed with effect from 1st April <strong>2011</strong>.<br />
28 Discontinued operation<br />
The Group continued to focus on its core business operations and restructure or exit from marginal businesses with limited<br />
potential. Accordingly operations of three businesses with losses have been discontinued, namely, Arpico Homes Limited, R P C<br />
Global Travels (Private) Limited, Hamefa Kegalle (Private) Limited, Arpico Natural Latex Forms (Private) Limited.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 98
The results of discontinued operations are given below.<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000<br />
Revenue - -<br />
Cost of sales - (461)<br />
Gross Profit - (461)<br />
Other Income 4,369 4,280<br />
Expenses (15,978) (21,692)<br />
Loss from discontinued operations (11,609) (17,873)<br />
Earnings per share - Basic (0.01) (0.01)<br />
As a result of the above, the comparatives presented in the previous financial statements have been changed.<br />
Operating and Investing cash flows for the year are presented below:<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000<br />
Net cash outflows from operating activities (2,989) (81,142)<br />
Net cash inflows from investing activities - 550<br />
Assets and liabilities of entities that are not going concern<br />
The financial statements of the Companies stated above have been prepared on a basis other than on a going concern reflecting<br />
the closure of discontinued operations. The aggregated amount of assets and liabilities of such Companies as at 31March <strong>2011</strong> are<br />
as follows.<br />
Total assets Rs. 132mn<br />
Total liabilities Rs. 454mn<br />
(<strong>2010</strong> Rs. 149 mn)<br />
(<strong>2010</strong> Rs. 460 mn)<br />
Accordingly ,adjustments have been made for the diminution in value of all property, plant and equipment so as to reduce their<br />
carrying value to their estimated realisable amount, and for any further liabilities which could arise.<br />
99<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
29 Earnings per share<br />
Basic Earnings per share is calculated by dividing the net profit for the year attributable to equity holders of parent by the weighted<br />
average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding<br />
during the year and the previous year are adjusted for events, that have changed the number of ordinary shares outstanding,<br />
without a corresponding change in the resources such as a bonus issue.<br />
Diluted Earnings Per Share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average<br />
number of ordinary shares outstanding during the year adjusted for the effects of diluted potential ordinary shares.<br />
Group<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Profit attributable to equity holders of the parent from continuing operations 1,692,293 598,077<br />
Loss attributable to equity holders of the parent from a discontinued operation (11,609) (17,873)<br />
Net profit attributable to equity holders of the parent 1,680,684 580,204<br />
Weighted average number of ordinary shares applicable to basic earnings per share 1,933,017,932 1,923,765,345<br />
Adjusted Weighted average number of ordinary shares applicable to diluted earnings per share 2,009,454,318 1,923,765,345<br />
Basic earnings per share 0.87 0.30<br />
Diluted earnings per share 0.84 0.30<br />
Earning Per Share from continuing operations - Basic 0.88 0.31<br />
Earning Per Share from continuing operations - Diluted 0.84 0.31<br />
30 Dividend per share<br />
<strong>2011</strong> <strong>2010</strong><br />
Rs. ‘000 Rs. ‘000<br />
Interim paid Rs. 0.20 per share 387,096 -<br />
Final proposed Rs. 0.10 per share (2009/10 Rs.1 per share) 193,724 128,850<br />
580,820 128,850<br />
(i) The final dividend of Rs.1.00 per share for the financial year ended 31 March <strong>2010</strong> was paid on 8 July <strong>2010</strong>.<br />
(ii) The interim dividend of Rs. 0.20 per share for the financial year ended 31 March <strong>2011</strong> was declared on 29 November <strong>2010</strong> and<br />
was paid on 16 December <strong>2010</strong>.<br />
(iii) The Directors have recommended a Rs.0.10 per share as the final dividend payment for the year ended 31st March <strong>2011</strong> .<br />
31 Contingent liabilities<br />
The contingent liabilities as at 31st March <strong>2011</strong> on corporate guarantee issued by the Company on loans obtained by subsidiary<br />
companies has been decreased by Rs.121mn to Rs.113mn. Guarantees given by subsidiaries on loans obtained amounted to Rs.<br />
225 mn.<br />
Following a strike at Richard Pieris Exports PLC a subsidiary of the Group, which was considered as unjustifiable,160 workers<br />
were terminated on 28th December 2007. Since negotiations failed, the matter has been referred to arbitration by Minister of<br />
Labour and contested at the court of appeal at present. The maximum amount demanded by the union on behalf of the workers is<br />
Rs.136 mn, which demand the company has resisted/opposed.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 100
Namunukula Plantations PLC, a subsidiary of the Group sub leased six (6) estates to Tusker Bottling Ltd .Tusker Bottling Ltd is<br />
currently being wound up pursuant to a Court Order.<br />
In the event the sub lease agreement is cancelled and the company takes possession of the six sub leased estates, Namunukula<br />
Plantations PLC may be called upon to pay the arrears of statutory payments to the employees which the lessee; Tusker Bottling<br />
Ltd failed to pay which is estimated at Rs. 72 mn.<br />
There are more than 29 cases outstanding filed by the Commissioner of Labour (Badulla) against Tusker Bottling Ltd, Namunukula<br />
Plantations PLC and the superintendent of the Estate regarding the payment of employees statutory dues , which the Sub Lessee<br />
has failed to pay in respect of the said 6 estates. Namunukula Plantations PLC has filed objections that the company is not liable<br />
to pay such dues. The Court has directed the Commissioner of Labour to find out the correct respondent who is liable to pay such<br />
dues and institute fresh legal action against the party.<br />
32 Capital and lease commitments<br />
A. The capital commitments for property, plant and equipment incidental to the ordinary course of business as at 31st March<br />
<strong>2011</strong>, approved by the Board were as follows:<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Contracted but not provided for 105,061 - - -<br />
Approved but not contracted for 408,848 374,929 - -<br />
513,909 374,929 - -<br />
B. Lease Commitments<br />
Future minimum rentals payable under non cancellable operating leases as at 31 March are as follows:<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs’000 Rs’000 Rs. ‘000 Rs. ‘000<br />
Within one year 73,920 73,920 - -<br />
After one year but not more than five years 322,689 312,765 - -<br />
More than five years 535,646 619,489 - -<br />
932,255 1,006,174 - -<br />
33 Employee share option plan<br />
The Employee Share Option Plan (ESOP 1) was set up by a Special Resolution adopted by the shareholders at an Extraordinary<br />
General Meeting (EGM) of the Company held on 10th June 1998 by allocating 5% of the issued share capital of the company to<br />
this scheme.<br />
A second ESOP scheme was set up following a Special Resolution adopted by the shareholders at an EGM of the company held<br />
on 29th July 2005 by allocating and granting 5% of the issued share capital of the company.<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes to the Financial Statements Contd.<br />
Details of these schemes are presented in the table below.<br />
Number of Shares<br />
ESOP-1 ESOP-2<br />
Available as at 1.4.<strong>2010</strong> 3,462,333 6,310,876<br />
Options exercise before subdivision (ESOP1 at Rs. 78.46 and ESOP2 at Rs. 46.14) (131,866) (649,168)<br />
Share options issued under subdivision 46,626,538 79,263,912<br />
Options exercised after subdivision (ESOP1 at Rs. 5.23 and ESOP2 at Rs. 3.08) (1,585,675) (175,005)<br />
48,371,330 84,750,615<br />
The company does not provide any financial assistance to the employees to purchase shares under this scheme.<br />
34 Post balance sheet events<br />
There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the<br />
Financial Statements other than;<br />
(a) The Board of Directors of the company has declared a final dividend of Rs.0.10 per share for the financial year ended 31st<br />
March <strong>2011</strong>. As required by section 56 (2) of the Companies Act No 07 of 2007, the Board of Directors has confirmed that the<br />
company satisfies the solvency test in accordance with section 57 of the Companies Act No 07 of 2007, and has obtained<br />
a certificate from the auditors, prior to declaring the dividend which is to be paid on 8th July <strong>2011</strong>. In accordance with the<br />
Sri Lanka Accounting Standard 12 (revised 2005), Events after the Balance Sheet date, the final dividend has not been<br />
recognized as a liability in the financial statements as at 31st March <strong>2011</strong>.<br />
35 Related party disclosures<br />
35.1 Transaction with related entities<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Nature of transactions Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
35.1.1 Subsidiaries<br />
35.1.2 Associates<br />
Amounts receivable as at 31 March 984,541 1,629,758<br />
Amounts payable as at 31 March 177,515 148,167<br />
Allocation of common personnel and<br />
administration expenses 145,636 148,490<br />
Rendering of Services 63,877 67,946<br />
Net investments made 113,333 240,000<br />
Dividends received 537,881 231,300<br />
Rent income 128,432 128,184<br />
Royalty income 215,757 91,637<br />
Allowances for doubtful debt 48,739 49,182<br />
Amounts receivable as at 31 March 4,101 4,994 - -<br />
Amounts payable as at 31 March 1,783 1,300 - -<br />
Insurance premia paid/payable 52,596 72,462 19,653 14,545<br />
Sale of goods/services 282,041 313,164 - -<br />
Purchase of goods/services 9,185 11,067 - -<br />
35.1.3 Significant Investor<br />
Dividend paid 137,704 - 137,704 -<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 102
35.1.4 Terms and conditions<br />
Transactions with related parties are carried out in the ordinary course of business. Outstanding balances at the year end are<br />
unsecured.<br />
35.1.5 Off balance sheet items<br />
Guarantees given by the Company to Banks on behalf of related parties are disclosed in Note 13 to the financial statements.<br />
35.2 Transactions with key management personnel of the company or its parent<br />
The Key Management Personnel include members of the Board of Directors of Richard Pieris and Company PLC and its<br />
subsidiary companies.<br />
a) Key management personnel compensation<br />
Group<br />
Company<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> <strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
Rs.’000 Rs.’000 Rs.’000 Rs.’000<br />
Short-term employee benefits 39,472 44,488 17,683 15,496<br />
b) Other transactions with key management personnel<br />
Richard Pieris and Company carries out transactions with Key Management Personnel and their close family members on an arm’s<br />
length basis except any concessions which have been availed under concessionary schemes uniformly applicable to all staff. This<br />
is mainly evident in the Arpico sales outlets island wide.<br />
Post Employment Benefits to Key Management Personnel amounted to Rs.12 mn.<br />
c) Options granted to key management personnel<br />
The options granted and held by Key Management Personnel under the Employee Share Option Plan were as follows:<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong><br />
No. of Shares No. of Shares<br />
Options granted and obtained under ESOP-1 48,371,330 3,462,333<br />
Cumulative options granted and obtained under ESOP-2 84,750,615 6,310,876<br />
Value of options exercised by Key Management Personnel that resulted in increase in stated capital amounted to Rs. 48.4 mn.<br />
35.3 Other related party disclosures<br />
(a) Legal fees amounting to Rs. 5.7 mn (<strong>2010</strong> Rs. 3.6 mn) was paid by the Group to an entity in which a Key Management<br />
personnel was a Partner.<br />
(b) During the year the Group purchased goods amounting to Rs. 2 mn (<strong>2010</strong> Rs. 1.89 mn) from an entity controlled by a key<br />
management personnel.<br />
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Ten Year Summary<br />
Net Turnover<br />
Rs. mn.<br />
30,000<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
0<br />
07/08<br />
08/09<br />
09/10<br />
10/11<br />
<strong>2010</strong>/<strong>2011</strong> 2009/<strong>2010</strong> 2008/2009<br />
Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
TRADING RESULTS<br />
Net turnover 27,241,577 22,339,288 21,103,176<br />
Profit from operations 3,450,366 1,969,697 1,378,556<br />
Loss on disposal of investment<br />
Finance cost (794,617) (969,147) (1,436,225)<br />
Profit from operations after finance cost 2,655,749 1,000,550 (57,669)<br />
Income from associates before tax 113,008 59,609 41,015<br />
Profit/(loss) before tax from continuing operations 2,793,757 1,060,159 (16,654)<br />
Income tax expense (616,566) (330,592) (180,411)<br />
Profit/(loss) for the year from continuing operations 2,152,191 729,567 (197,065)<br />
Loss after tax from discontinued operations (11,609) (17,873) (107,963)<br />
Profit/(loss) for the year 2,140,582 711,694 (305,028)<br />
Minority interest 459,898 131,490 24,055<br />
Profit/(loss) attributable to equity holders of parent 1,680,684 580,204 (329,083)<br />
Gross dividend 515,946 - -<br />
Profit from operations<br />
Rs. mn.<br />
4,000<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
Total Assets<br />
07/08<br />
08/09<br />
09/10<br />
10/11<br />
BALANCE SHEET<br />
Assets<br />
Property, plant and equipment 10,607,259 10,142,761 10,167,170<br />
Intangible assets 497,279 480,177 491,491<br />
Investments in associates and other investments 480,186 180,919 136,757<br />
Current assets 9,054,733 6,560,960 6,128,679<br />
20,639,457 17,364,817 16,924,097<br />
Equity and liabilities<br />
Stated Capital 1,627,612 1,578,475 1,578,475<br />
Capital and revenue reserves 3,348,003 2,183,265 1,603,061<br />
Foreign currency translation 27,314 31,152 32,371<br />
Preliminary and pre-operating expenses - - -<br />
Minority interest 1,860,693 1,503,071 1,380,908<br />
Term loans payable after one year 1,998,291 1,957,680 2,354,617<br />
Deferred income and Deferred tax 595,352 553,879 499,951<br />
Provisions and other liabilities 1,662,131 1,529,685 1,103,222<br />
Net liability to the lessor payable after one year 650,980 672,158 697,432<br />
Current liabilities 8,869,081 7,355,452 7,674,060<br />
20,639,457 17,364,817 16,924,097<br />
Rs. mn.<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
0<br />
07/08<br />
08/09<br />
09/10<br />
10/11<br />
RATIOS & OTHER INFORMATION<br />
Earnings per share (Rs) 0.87 0.30 (2.57)<br />
Market value per share (Rs) 13.60 3.67 25.00<br />
Price earnings ratio (No. of Times) 15.63 12.23 -<br />
Net assets per share (Rs) 2.58 1.97 25.06<br />
Return on equity (%) 38.22 16.56 (9.76)<br />
Dividend per share (Rs) 0.30 1 -<br />
Dividend cover (No. of Times) 2.90 4.52 -<br />
Interest cover (No. of Times) 4.34 2.03 0.96<br />
Current ratio (No. of Times) 1.02 0.89 0.80<br />
Gearing ratio (%) 38.62 49.69 59.80<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 104
2007/2008 2006/2007 2005/2006 2004/2005 2003/2004 2002/2003 2001/2002<br />
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000<br />
Profit/(loss) for the year<br />
Rs. mn.<br />
2,500<br />
20,142,591 15,627,638 13,093,791 10,118,693 5,237,157 4,351,197 3,561,302<br />
2,045,930 1,640,288 1,256,820 1,316,639 498,085 260,807 309,386<br />
(277,000)<br />
(1,472,629) (879,601) (548,240) (313,895) (120,136) (171,343) (162,642)<br />
296,301 760,687 708,580 1,002,744 377,949 89,464 146,744<br />
27,969 11,646 4,593 101,455 193,647 97,149 101,239<br />
324,270 772,333 713,173 1,104,199 571,597 186,613 247,983<br />
(77,278) (92,231) (120,150) (151,567) (71,738) (29,728) (56,264)<br />
246,992 680,102 - - - - -<br />
(203,216) (165,527) - - - - -<br />
43,776 514,575 593,023 952,632 499,859 156,885 191,719<br />
(258,853) (208,180) (63,994) (82,229) (19,194) (31,095) (11,330)<br />
(215,077) 306,395 529,029 870,403 480,665 125,790 180,389<br />
- 59,193 177,578 207,174 177,403 47,111 58,338<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
(500)<br />
07/08<br />
08/09<br />
09/10<br />
10/11<br />
Shareholder’s Fund<br />
10,125,468 9,433,192 9,464,246 6,203,485 5,481,116 2,105,783 1,915,094<br />
500,857 500,816 520,058 272,053 286,989 74,655 80,279<br />
101,007 1,765,956 96,408 73,694 628,540 1,018,016 1,045,531<br />
7,079,997 5,983,116 5,801,373 4,143,522 2,543,878 1,408,965 1,338,614<br />
17,807,329 17,683,080 15,882,085 10,692,754 8,940,523 4,607,419 4,379,519<br />
Rs. mn.<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,578,475 1,183,856 1,183,856 591,928 590,540 235,556 233,352<br />
1,932,144 2,601,033 2,395,652 2,576,931 1,902,699 1,880,271 1,825,889<br />
21,599 23,363 17,162 13,878 12,315 11,765 10,416<br />
- - - - - - (38,793)<br />
1,390,232 1,197,663 1,022,198 805,191 760,230 220,763 196,476<br />
2,683,162 2,968,288 2,197,653 1,224,344 1,515,237 553,159 564,626<br />
386,143 353,751 521,598 435,731 434,425 106,790 116,284<br />
1,037,650 871,716 832,373 595,252 563,882 151,082 123,719<br />
722,234 713,740 691,219 441,632 446,411 - -<br />
8,055,690 7,769,670 7,020,374 4,007,867 2,714,783 1,448,033 1,308,757<br />
17,807,329 17,683,080 15,882,085 10,692,754 8,940,523 4,607,419 4,379,519<br />
1,000<br />
0<br />
07/08<br />
08/09<br />
Minority Interest<br />
09/10<br />
10/11<br />
(1.68) 2.39 4.47 7.36 4.07 1.07 1.53<br />
39.00 65.00 75.00 165.00 92.75 92.50 90.00<br />
- 27.20 16.78 11.28 11.39 17.29 11.63<br />
27.54 32.17 30.38 53.77 42.43 36.03 35.18<br />
(6.09) 8.05 15.61 30.60 20.75 5.99 8.93<br />
- 0.50 1.50 3.50 3.00 2.00 2.50<br />
- 4.78 2.98 4.20 2.71 2.67 3.09<br />
1.20 1.86 2.30 4.52 5.76 2.09 2.52<br />
0.88 0.77 0.83 1.03 0.94 0.97 1.02<br />
61.49 63.03 58.61 41.93 45.22 41.13 39.93<br />
Rs. mn.<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 />
0<br />
07/08<br />
08/09<br />
09/10<br />
10/11<br />
105<br />
<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Shareholder Information<br />
The Ordinary Shares of the Company are listed in the <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong>.<br />
The audited Income statement for the year ended March 31, <strong>2011</strong> and the audited Balance Sheet of the Company as at date will<br />
be submitted to the <strong>Colombo</strong> <strong>Stock</strong> <strong>Exchange</strong> within two months of the Balance Sheet Date.<br />
As at the financial year ended 31st March<br />
Distribution of Shareholders<br />
Range of shareholding No of share No of % of No of share No of % of<br />
holders as at shares Shareholding holders as at shares Shareholding<br />
31/03/<strong>2011</strong> 31/03/<strong>2010</strong><br />
1 500 2,116 514,654 0.03% 1,667 255,651 0.20%<br />
501 5,000 4,943 10,981,915 0.57% 1,475 2,691,638 2.10%<br />
5,001 10,000 1,275 10,489,700 0.54% 204 1,553,074 1.21%<br />
10,001 20,000 894 13,555,558 0.70% 121 1,768,977 1.38%<br />
20,001 30,000 387 9,985,942 0.52% 54 1,370,864 1.07%<br />
30,001 40,000 190 6,785,040 0.94% 35 1,213,331 0.94%<br />
40,001 50,000 175 8,259,876 0.43% 26 1,177,817 0.92%<br />
50,001 100,000 336 25,043,620 1.29% 55 3,759,960 2.93%<br />
100,001 1,000,000 430 129,452,380 6.68% 36 12,078,639 9.42%<br />
1,000,001 & above 77 1,722,172,850 88.90% 11 102,381,072 79.83%<br />
10,823 1,937,241,535 100.00% 3,684 128,251,023 100.00%<br />
As at the financial year ended 31st March<br />
Composition of Shareholders<br />
Category No of share No of % of No of share No of % of<br />
holders as at shares Shareholding holders as at shares Shareholding<br />
31/03/<strong>2011</strong> 31/03/<strong>2010</strong><br />
Institutional Investors 483 1,602,110,606 82.70% 247 103,214,977 80.48%<br />
Individual Investors 10,340 335,130,929 17.30% 3,437 25,036,046 19.52%<br />
Total 10,823 1,937,241,535 100.00% 3,684 128,251,023 100.00%<br />
Resident shareholders 10,624 551,702,825 28.48% 3,586 34,942,259 27.25%<br />
Non-resident shareholders 199 1,385,538,710 71.52% 98 93,308,764 72.75%<br />
Total 10,823 1,937,241,535 100.00% 3,684 128,251,023 100.00%<br />
Public share holding as at March 31, <strong>2011</strong> is 44.86% (31.03.<strong>2010</strong> Restated - 44.87%).<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 106
Market Activity<br />
<strong>2010</strong>/11 Date 2009/10 Date<br />
Highest Price (Rs.) 16.00 10-Feb-11 4.58 22-Feb-10<br />
Lowest Price (Rs.) 3.65 5-Apr-10 1.58 3-Apr-09<br />
Year End Price (Rs.) 13.60 31-Mar-11 3.67 31-Mar-10<br />
No of Transactions 83,296 18,738<br />
No of shares traded 498,981,700 40,975,300<br />
Share Turnover (Rs.) 12,317,878,175 1,904,569,725<br />
Comparative shareholding information have been adjusted for sub division of shares (Note 9).<br />
Major Shareholders as at 31st March<br />
Name of the Shareholder 3/31/<strong>2011</strong> % 3/31/<strong>2010</strong> %<br />
1 Skyworld Overseas Holdings Limited 516,274,590 26.65% 34,425,906 26.84%<br />
2 Camille Consulting Corp. 316,935,120 16.36% 21,129,008 16.47%<br />
3 HSBC International Nominee Ltd-SSBT- Deutsche Bank 225,375,570 11.63% 15,025,038 11.72%<br />
4 Sezeka Limited 174,447,000 9.00% 11,629,800 9.07%<br />
5 Rockport Limited 99,506,865 5.14% 6,633,791 5.17%<br />
6 Employees Provident Fund 99,186,140 5.12% N/A N/A<br />
7 Mr. D.W.R.Rutnam & Mr. J.L.G. Wilson<br />
(The Executors of the estate of Late Mr. M.D. Rutnam) 25,759,500 1.33% 1,717,300 1.34%<br />
8 Commercial Bank of Ceylon PLC / Mr. A.L. Devasurendra 22,879,000 1.18% 2,239,300 1.75%<br />
9 The Executor of the Estate of Late Mrs L.B. S. Pieris 22,782,045 1.18% 1,518,803 1.18%<br />
10 Mr. H.A. Pieris 20,458,015 1.06% 1,841,701 1.44%<br />
11 Mercantile Investments Limited 16,035,995 0.83% N/A N/A<br />
12 Kalday (Pvt) Ltd. 12,126,030 0.63% 841,867 0.66%<br />
13 Mrs. S. Wambeek 9,248,200 0.48% 726,275 0.57%<br />
14 Mr. K.R. Dharmendra 7,576,900 0.39% N/A N/A<br />
15 Mr. R.C. Peries 7,253,780 0.37% 494,752 0.39%<br />
16 Mr.C.M. Fernando 6,660,165 0.34% N/A N/A<br />
17 Lexinton Holdings (PVT) Limited 6,193,500 0.32% N/A N/A<br />
18 Mr. M.M. Udeshi 6,156,000 0.32% N/A N/A<br />
19 Seylan Bank PLC - Account No: 03 5,000,000 0.26% N/A N/A<br />
20 The Incorporated Trustees of the Church of England 4,868,795 0.25% N/A N/A<br />
1,604,723,210 82.84% 98,223,541 76.60%<br />
Directors Shareholding as at 31st March<br />
No. of shares<br />
No. of shares<br />
as at 31st March<br />
as at 31st March<br />
No. Name of Director <strong>2011</strong> <strong>2010</strong><br />
1 Dr. Sena Yaddehige - -<br />
2 Mr. J H Paul Ratnayeke 3,250,005 -<br />
3 Prof. Lakshman R Watawala 105,000 105,000<br />
4 Dr. Susantha Pathirana - -<br />
5 Mr. M M Udeshi 6,156,000 369,000<br />
6 Mr. Viville Perera 2,500 1,500<br />
Comparative shareholding information have been adjusted for sub division of shares (Note 9).<br />
107<br />
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Group Real Estate Portfolio<br />
Freehold Land & Buildings<br />
Owning Company Location Land Building Market Value Market Value<br />
in Perches in (Sq.Ft) <strong>2011</strong> <strong>2010</strong><br />
Rs.’mn Rs.’mn<br />
Richard Pieris & Co.Ltd. Hyde Park Corner 709 59,182 3,900 3,606<br />
Maharagama 1,739 347,217 1,557 1,370<br />
RPC Real Estate Co. Ltd Kandy 162 36,890 943 943<br />
Arpico Industrial Dev Co (Pvt) Ltd. Mattegoda 1,402 223,405 553 393<br />
Richard Pieris Distributors Ltd. Maharagama. 195 38,306 220 207<br />
Moratuwa. 85 - 100 100<br />
Mulleriyawa. 192 - 10 10<br />
RPC Retail Development (Pvt) Ltd. Negambo 226 43,000 380 396<br />
Kelaniya 102 - 93 88<br />
Wattala 100 - 126 122<br />
Arpimall Development (Pvt) Ltd. Dehiwala. 169 83,600 643 603<br />
Battaramulla. 116 40,757 459 369<br />
Plastishells Ltd. Mathegoda. 340 45,825 192 192<br />
Dambulla. 284 4,600 19 19<br />
Arpico Flexifoam (Pvt) Ltd Mattegoda 1,136 - 284 284<br />
Richard Pieris Exports Ltd Ja-Ela 640 36,300 120 120<br />
Micro Minerals (Pvt) Limited Bandaragama 320 16,500 15 15<br />
Richard Pieris Tyre Company Ltd Kurunagala 450 26,015 40 40<br />
Arpidag International (Pvt) Ltd Maharagama 80 17,946 64 53<br />
Total 9,718 8,930<br />
Leasehold Land & Buildings<br />
Owning Company Location Land Building<br />
in Hec in (Sq.Ft)<br />
(A) Leasehold Land of Plantations<br />
Maskeliya Plantations Ltd 10,561 7,112,890<br />
Kegalle Plantations Ltd 9,773 3,507,810<br />
Namunukula Plantations Limited 11,775 3,026,546<br />
Location Land Building<br />
in Per in (Sq.Ft)<br />
(B) Leasehold Land of other subsidiaries<br />
Plastishells Ltd Koggala 160 2,980<br />
Pallekale 160 2,980<br />
RPC Polymers (Pvt) Ltd Horana 1,392 60,000<br />
Arpitalian Compact Soles (Pvt) Ltd Biyagama 751 30,062<br />
Richard Pieris Natural Foams (Pvt) Ltd Biyagama 851 80,920<br />
Arpico Natural Latex Foams (Pvt) Ltd Seethawaka 758 4,917<br />
Richard Pieris Tyre Company Ltd Pallekale 252 27,530<br />
Weligama 432 28,347<br />
Polonnaruwa 540 30,690<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 108
Glossary of Financial Terms<br />
Associate Company<br />
A Company other than a subsidiary in which a holding<br />
company has a participating interest and exercises significant<br />
influence over its operating and financial policies.<br />
Current Ratio<br />
Current Assets divided by Current Liabilities. A measure of<br />
short term liquidity.<br />
Debt to Equity Ratio<br />
Long term Interest Bearing Borrowings divided by Net Assets.<br />
Deferred Taxation<br />
Sum set aside for tax in the Financial Statements that will<br />
become payable in a financial year other than the current<br />
financial year.<br />
Dividend Cover<br />
Profit attributable to Ordinary shareholders divided by Gross<br />
Dividend. Measures the number of times dividend is covered by<br />
distributable profit.<br />
Dividend per Share<br />
Gross Dividend divided by the number of Ordinary Shares in<br />
issue at the year end.<br />
Dividend Yield<br />
Gross Dividend per share as a percentage of the year end<br />
market price per share. A measure of return on shareholders’<br />
investment.<br />
Earnings Per Share (EPS)<br />
Profits attributable to Ordinary Shareholders divided by the<br />
weighted average number of Ordinary Shares in issue.<br />
Earnings Yield<br />
Earnings per Share as a percentage of the year end market<br />
price per share.<br />
Effective Tax Rate<br />
Income Tax expenses divided by profit before tax.<br />
Gearing Ratio<br />
Proportion of total interest bearing liabilities to total capital<br />
employed.<br />
Gross Dividend<br />
Portion of profits inclusive of tax withheld, distributed to<br />
shareholders during the year.<br />
Interest Cover<br />
Profit Before Tax (PBT) plus net finance cost divided by net<br />
finance cost. Measure of entity’s debt service ability.<br />
Investment Property<br />
A property that is not occupied by the owner, usually purchased<br />
specifically to generate profit through rental income and/or<br />
capital gains.<br />
Market Capitalization<br />
Number of shares in issue multiplied by the market value of a<br />
share at the reported date.<br />
Minority Interest<br />
An outside ownership interest in a subsidiary that is<br />
consolidated with the parent for financial reporting purposes.<br />
Net Assets per Share<br />
Shareholders’ fund divided by weighted average number of<br />
Ordinary Shares in issue. A basis of relative share valuation.<br />
Price Earnings Ratio<br />
Market Price of a share divided by Earnings per share as<br />
reported at that date.<br />
Price to Book Value<br />
Market price of a share divided by Net Assets per share.<br />
Public Shareholding<br />
Shares of a Listed Entity held by any person other than those<br />
directly or indirectly held by;<br />
a) its parent, subsidiary or associate companies or any<br />
subsidiaries or associates of its parent company; and,<br />
b) its directors who are holding office as directors of the Entity,<br />
their spouses and children under 18 years of age; and,<br />
c) Chief Executive Officer, his/her spouse and children under<br />
18 years of age; and,<br />
d) any single shareholder who holds 10% or more of the<br />
shares.<br />
Related Parties<br />
Parties who could control or significantly influence the financial<br />
and operating policies of the business.<br />
Return on Total Capital Employed<br />
Profit before Tax plus net finance cost divided by average total<br />
capital employed.<br />
Return on Equity<br />
Profit after Tax less Preference Share dividend if any, expressed<br />
as a percentage of Average Ordinary Shareholders’ Fund.<br />
Revenue Reserves<br />
Reserves considered as being available for distributions.<br />
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Glossary of Financial Terms Contd.<br />
Recession<br />
Reduction of a country’s GDP or negative real economic growth<br />
for at least two consecutive quarters<br />
Segmental Analysis<br />
Analysis of financial information to segments of an enterprise<br />
specifically, the different industries and the different<br />
geographical areas in which it operates.<br />
Shareholders’ Fund<br />
Stated Capital plus Revenue Reserves.<br />
Stated Capital<br />
The total of all amounts received by the entity or due and<br />
payable to the entity by shareholders in respect of the issue of<br />
shares and calls on shares.<br />
Subsidiary Company<br />
A company is a subsidiary of another company if the parent<br />
company holds more than 50% of the voting rights or controls<br />
the composition of its Board of Directors.<br />
Total Capital Employed<br />
Total Shareholders’ Fund plus Minority Interest plus total<br />
interest bearing borrowings.<br />
Value Addition<br />
The quantum of wealth generated by the activities of the Group<br />
measured as the differences between net revenue (including<br />
other income) and the cost of materials and services bought in.<br />
Working Capital Investment<br />
Capital required financing the day-to-day operations computed<br />
as the excess of current assets over current liabilities.<br />
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Notes<br />
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notes Contd.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 112
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<strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> | Richard Pieris and Company PLC
Notice of Meeting<br />
NOTICE IS HEREBY GIVEN that the Seventy Second <strong>Annual</strong><br />
General Meeting of Richard Pieris & Company PLC will be held<br />
at the Registered Office of the Company, No. 310, High Level<br />
Road, Nawinna, Maharagama on Thursday, 30th June <strong>2011</strong> at<br />
4.00.p.m. and the business to be brought before the meeting<br />
will be as follows;<br />
1. To consider the <strong>Report</strong> of the Directors and the Statement<br />
of Accounts for the year ended 31st March <strong>2011</strong> with the<br />
<strong>Report</strong> of the Auditors thereon.<br />
2. To declare a dividend as recommended by the Directors.<br />
Note:<br />
a) A member entitled to attend and vote at the meeting is<br />
entitled to appoint a proxy to attend and vote instead of<br />
him/her.<br />
b) A proxy need not be a member of the Company. The form<br />
of proxy will be found inserted in the <strong>Annual</strong> <strong>Report</strong>.<br />
c) The completed form of proxy should be deposited at the<br />
registered office of the Company No. 310, High Level Road,<br />
Nawinna, Maharagama., not less than 48 hours before the<br />
time appointed for the holding of the meeting.<br />
3. To re-elect Prof. Susantha Pathirana who retires by rotation<br />
in terms of Article 85 at the <strong>Annual</strong> General Meeting, a<br />
Director.<br />
4. To re -appoint M/s. Ernst & Young, Chartered Accountants<br />
as Auditors of the Company and to authorize the Directors<br />
to determine their remuneration.<br />
5. To authorize the Directors to determine contributions to<br />
charities.<br />
6. To consider any other business of which due notice has<br />
been given.<br />
To consider and if thought fit pass the following Special<br />
Resolution in order to amend the Articles of Association of the<br />
Company in the manner following;<br />
I<br />
That the following Article 80 (iii) be included immediately<br />
after the existing Article 80 (ii) to read as follows,<br />
(iii) The Directors who are holding any executive office in the<br />
Company will cease to be a director, consequent on the<br />
termination of his appointment in the Company.<br />
By Order of the Board<br />
Richard Pieris Group Services (Private) Limited<br />
Secretaries<br />
No. 310, High Level Road, Nawinna, Maharagama<br />
27th May <strong>2011</strong><br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 114
Form of Proxy<br />
I/We* (in block letters) ..................................................................................................................................................................... of<br />
................................................................................................................................................................................................. being a<br />
member / members of the RICHARD PIERIS & COMPANY PLC, hereby appoint ...............................................................................<br />
.......................................................................................................................................................................................................... of<br />
................................................................................................................................................................................................. whom<br />
failing DR. SENA YADDEHIGE whom failing JAMES HENRY PAUL RATNAYEKE whom failing PROF. LAKSHMAN RAVENDRA<br />
WATAWALA whom failing PROF. SUSANTHA DEDDUWA PATHIRANA whom failing MORARJI MEGHJI UDESHI whom failing<br />
VIVILLE PRAXIDUS PERERA * as my/our proxy to represent me/us and to vote on my/our behalf at the Seventy Second ANNUAL<br />
GENERAL MEETING of the Company to be held on 30th June <strong>2011</strong> and any adjournment thereof, and at every poll which may be<br />
taken in consequence thereof to vote:-<br />
In favour<br />
Against<br />
1. To consider the <strong>Report</strong> of the Directors and the Statement of Accounts for the year ended 31st<br />
March <strong>2011</strong> with the <strong>Report</strong> of the Auditors thereon.<br />
2 To declare a dividend as recommended by the Directors.<br />
3. To re-elect Prof. Susantha Pathirana , who retires by rotation in terms of Article 85 at the <strong>Annual</strong><br />
General Meeting, a Director<br />
4. To re-appoint M/s Ernst & Young, Chartered Accountants as Auditors of the Company and to<br />
authorise the Directors to determine their remuneration.<br />
5. To authorize the Directors to determine contributions to charities<br />
6. To consider any other business of which due notice has been given<br />
Special Resolution as set out in the Notice of Meeting<br />
Dated this ................................. day of ............................... <strong>2011</strong><br />
...........................................<br />
Signature of shareholder<br />
Notes:<br />
(i) Please delete the inappropriate words<br />
(ii) A proxy need not be a member of the Company.<br />
(iii) Instructions as to completion appear on the reverse of this form.<br />
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Form of Proxy Contd.<br />
INSTRUCTIONS AS TO COMPLETION OF PROXY FORM<br />
To be valid, this Form of Proxy must be deposited at the registered<br />
office of the Company No. 310, High Level Road, Nawinna,<br />
Maharagama., not later than 4.00 p. m. on Tuesday,<br />
28th June <strong>2011</strong>.<br />
In perfecting the Form of Proxy, please ensure that all details are<br />
legible.<br />
In the case of a Company/Corporation, the proxy must be under its<br />
Common Seal, which should be affixed and attested in the manner<br />
prescribed by its Articles of Association.<br />
Please indicate with an ‘X’ in the space provided how your proxy is to<br />
vote on each resolution. If no indication is given the proxy at his/her<br />
discretion will vote as he/she thinks fit.<br />
This Form of Proxy shall in the case of an individual be signed by<br />
the appointor or his/her Attorney. Where the Form of Proxy is signed<br />
under a Power of Attorney, which has not been registered with the<br />
Company, the original Power of Attorney together with a photocopy of<br />
same or a copy certified by a Notary Public must be lodged with the<br />
Company, along with the Form of Proxy.<br />
Richard Pieris and Company PLC | <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong>/<strong>2011</strong> 116
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Richard Pieris & Company PLC<br />
310, High Level Road, Nawinna, Maharagama,<br />
Sri Lanka.<br />
www.arpico.com