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ManageMent report
Working Capital
The group’s current ratio at the year-end was 1.28:1, which is a marginal
improvement from corresponding ratio of 1.25:1. Prudent management
of working capital continues to be a key focus area and receives focused
attention on a priority basis. Inventories as at the year-end marginally
decreased to Rs. 1.32 bn compared to the Rs. 1.33 bn previous year. Year end
Trade receivables increased to Rs. 1.99 bn from a corresponding figure of
Rs. 1.65 bn. The increase in Trade receivables can be mainly attributed to
higher level of Turnover in March 2010 compared to March 2009.
Borrowings
Borrowings consist of term loans, import loans, short term loans & overdrafts.
The total amount of term loans outstanding as at the year end amounted to
Rs. 663 mn (Rs. 899 mn -2008/09), indicating a reduction of approximately
26%. The term loans have been obtained for a five-year repayment period
except for the loan obtained to finance the acquisition of weliweriya property
which has a repayment period of ten years.
Group’s interest bearing loans decreased by 27% from Rs. 2,710 mn to
Rs. 1,967 mn during the year. Interest rates of overdrafts are reviewed
periodically and rates charged on short term/import loans are determined
based on money market rates.
Details of term loans are available in Note 27.1 to the Financial Statements.
Debt to Equity Ratio
The group’s debt to equity, which is calculated as a proportion of the total
interest bearing borrowings to equity has come down to 89% from 135%.
Reduction in the total Debt (from Rs. 2.7 bn to Rs. 1.97 bn) and the increase
in the Shareholders’ funds (from Rs. 2 bn to Rs. 2.2 bn) explain the reasons
for the reduction in the Debt to Equity Ratio.
Cash Flow
The group’s cash inflow from operating activities increased from the previous
year by 35% to Rs. 847 mn (Rs. 626 mn - 2008/09). The group’s ability to
generate sufficient cash flow from operations has resulted in a reduction of
borrowing to finance working capital.
The outflow on account of interest and dividend payments amounted to
Rs. 377 mn and Rs. 52 mn respectively. Outflow on account of Capital
Expenditure during the year was Rs. 36 mn. (Rs. 118 mn 2008/09).
The Group possesses the necessary banking facilities to support
its operations.
The Group’s cash and cash equivalents increased by Rs. 527 mn (increase of
Rs. 211 mn - 2008/09) during the year.
Shareholders’ Funds
The shareholders’ funds moved up from the previous year’s figure of
Rs. 2,005 mn to Rs. 2,201 mn. The details of the movement in shareholders’
funds are given in the statement of Changes in Equity on page 138.
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F i n a n C i a l r e v i e W
ANNUAL REPORT 2009/10 DIESEL & MOTOR ENGINEERING PLC
Financial highlights 05 Operational highlights 06 Chairman & CEO's Review 10 Board of Directors 14 Group Management Committee 18