Annual Report of the Board of Directors on the Affairs of the Company
The Board of Directors of Hayleys PLC have pleasure in presenting their Report on the affairs of the Company together with the audited Consolidated Financial Statements for the year ended 31st March 2013. The details set out herein provide the pertinent information required by the Companies Act No. 07 of 2007 and the Colombo Stock Exchange Listing Rules and are guided by recommended best reporting practices
Principal Activities
Hayleys PLC is a holding company that owns, directly or indirectly, investments in the numerous companies constituting the Hayleys Group and provides services to Group companies. The Group consists of a portfolio of diverse business operations. The main Subsidiaries and equity accounted investees of Hayleys PLC are listed Group Companies section.
The principal activities of the Group are categorised into different business groupings i.e. Global Markets and Manufacturing, Agriculture, Transportation and Logistics, Consumer Products, Power and Energy and Leisure and Aviation. Each grouping may consist of a number of sectors. The main activities of the sectors are described in the Management Review and Preview section of this Report.
Business Review/Future Developments
A review of the Group’s businesses and their performance during the year, with comments on financial results and future strategic developments, is contained in the Chairman & Chief Executive's Message, and Management Review and Preview sections of this Annual Report. These reports together with the Financial Statements reflect the state of affairs of the Company and the Group.
The financial statements are prepared in accordance with the new SLFRS/SLAS requirements and accordingly the previous year balances are also reflected in line with the present accounting standards.
The Group, in April 2012, increased its stake in Hayleys MGT Knitting Mills PLC from 60% to 82%. Hotel Ceylon Continental was reopened during the year under its new name, The Kingsbury, after a major development project.
The Directors, to the best of their knowledge and belief, confirm that the Group has not engaged in any activities that contravene laws and regulations.
Financial Statements
The Financial Statements of the Company and the Group are given in the Financial Reports.
Auditor’s Report
The Auditor’s Report on the Financial Statements of the Company and the Group is given on this Annual Report.
Accounting Policies
The accounting policies adopted in the preparation of the Financial Statements are given on Notes to the Financial Statesments. Changes in Group accounting policies made during the accounting period are described under Note 3.7 of the Accounting Policies.
Group Revenue/International Trade
The revenue of the Group was Rs. 74.3 bn (Rs. 65.8 bn) in the year under review. A detailed analysis of the Group’s turnover, profits and asset allocation relating to different segments of the Group’s business is given in Note to the Financial Statements.
The Group’s exports from Sri Lanka, amounted to Rs. 38.6 bn (Rs. 30 bn) at f.o.b. value in the year under review.
The Group’s revenue from International Trade, which includes the revenue of overseas subsidiaries in addition to exports from Sri Lanka, amounted to Rs. 47.2 bn (Rs. 40.4 bn) in the year under review.
Trade between Group Companies is conducted at fair market prices.
Results and Dividends
The Group’s profit before taxation amounted to Rs. 5.0 bn (Rs. 2.6 bn). After deducting Rs. 1.4 bn (Rs. 0.9 bn) for taxation the profit from continued operations was Rs. 3.6. bn (Rs. 1.74 bn). When an amount of Rs. 1.8 bn (Rs. 0.6 bn) for minority interests was deducted the Group profit attributable to equity holders of the company for the year was Rs. 1.9 bn ( Rs. 1.0 bn). A sum of Rs. 337.5 mn (Rs. 300 mn) has been set aside for proposed dividends.
The financial statements of the Company and the Group are given on the Financial Report section of this annual report.
The Directors have confirmed that the Company satisfies the solvency test requirement under section 56 of the Companies Act No. 07 of 2007 for the first & final dividend proposed. A solvency certificate has been sought in respect of the first & final dividend of Rs. 4.50 per share (Rs. 4.00) proposed to be paid to the holders of issued ordinary shares of the Company as at the close of business on 28th June, 2013. The dividends represent a redistribution of dividends received by the Company and therefore will not be subject to the 10% tax deduction otherwise applicable.
Group Investment
Group capital expenditure during the year on Property, Plant & Equipment and investments, other than investments in Subsidiaries, amounted to Rs. 5.4 bn (Rs. 5.2 bn).
Property, Plant & Equipment
Capital expenditure during the year, on Property, Plant & Equipment by the Group and by the Company amounted to Rs. 5.1 bn (Rs. 5 bn) and Rs. 0.46 mn (Rs. 109 mn) respectively.
Information relating to movements in Property, Plant & Equipment is given in Note 14 to the Financial Statements.
Market Value of Properties
The freehold land of the Group has in general been subjected to routine revaluation by independent qualified valuers. The most recent revaluations in respect of the Group were carried out as at 31st March, 2013. Small extents of freehold land are reflected at book values as their appreciation is insignificant.
Details of revaluations, carrying values and market values are provided in Note to the Financial Statements. The statement on Value of Real Estate gives details of freehold land held by the Group.
Stated Capital & Reserves
The stated capital of the Company, consisting of 75,000,000 Ordinary shares, amounts to Rs. 1,575 mn. There was no change in stated capital during the year.
Total Group Reserves at 31st March, 2013 amount to Rs. 22.4 bn (Rs. 18.3 bn) comprising Capital Reserves of Rs. 1.3 bn (Rs. 1.2 bn) other component of equity of Rs. 9 bn (Rs. 6.3 bn) and Revenue Reserves of Rs. 11.01 bn (Rs. 9.7 bn ). The composition of reserves is shown in the Statement of Changes in Equity in the Financial Statements.
Interests Register
The Company, in compliance with the Companies Act No. 07 of 2007, maintains an Interests Register. Particulars of entries in the Interests Register and in the Interests Registers of Subsidiaries that maintain such Registers are detailed below.
Directors’ interests in transactions: The Directors of the Company and its Subsidiaries have made the general disclosures provided for in section 192(2) of the Companies Act No. 07 of 2007. Note to the Financial Statements dealing with related party disclosures includes details of their interests in transactions.
Directors’ interests in shares: Directors of the Company and its Subsidiaries who have relevant interests in the shares of the respective Companies have disclosed their shareholdings and any acquisitions/disposals to their Boards, in compliance with section 200 of the Companies Act.
Details of Directors’ shareholdings in the Company are given later in this report. There were no changes in holdings during the period other than the following.
Hayleys PLC
- 283,200 shares were purchased during the year by Mr. K.D.D. Perera
- 370,000 shares were purchased by Vallibel One PLC*
- 370,000 shares were disposed by Royal Ceramics Lanka PLC*
* Mr. K.D.D. Perera has the controlling interest in Vallibel One PLC and Royal Ceramics Lanka PLC
Subsidiaries
There were no share transactions by the Directors, in terms of Section 200 of the Companies Act in respect of the subsidiaries other than the following.
Hunas Falls Hotels PLC
- 19,442 shares were purchased during the year by Mr. S.C. Ganegoda.
- Mr. V.K. Wickramasinghe who held 200 shares retired during the year.
Haycarb PLC
- 4,500 shares were purchased during the year by Mr. H.S.R. Kariyawasan.
Hotel Services (Ceylon) PLC
- 96,555 shares were purchased during the year by Vallibel One PLC*
* Mr. K.D.D. Perera has the controlling interest in Vallibel One PLC.
Amaya Leisure PLC
- 140,000 shares were disposed by Mr. S. Senaratne
- 28,529 shares were purchased during the year by Mr. D.E. Silva
Hayleys MGT Knitting Mills PLC
- Mr. S. Spezza who held 171,930 shares resigned during the year
- 2,500 shares were purchased by Mr. R.P. Pathirana
- 2,000 shares were purchased by Mr. K.D.D. Perera from the Rights issue
Dipped Products PLC
- Mr. J.A.G. Anandarajah who held 219,474 shares retired on 31st March, 2013.
Insurance & Indemnity: The Company has obtained a Corporate Guard insurance policy from Chartis Insurance Ltd. providing worldwide cover to indemnify all past, present and future Directors and Officers (D & O) of Hayleys PLC and its Subsidiaries at a premium of Rs. 5.8 mn. The limit on liability
of the cover is US$ 5 mn.
Payment of remuneration to Directors: Executive Directors’ remuneration is established within an established framework by the Board’s Remuneration Committee, to whom this task has been entrusted. The Directors are of the opinion that the framework assures appropriateness of remuneration and fairness for the Company. The total remuneration of Executive Directors for the year ended 31st March, 2013 is Rs. 135.6 which includes the value of perquisites granted to them as part of their terms of service. The total remuneration of Non-Executive Directors for the year ended 31st March, 2013 is Rs. 7.4 determined according to scales of payment decided upon by the Board previously. The Board is satisfied that the payment of remuneration is fair to the Company.
Directors’ Remuneration
Directors’ remuneration, in respect of the Company for the financial year 2012/13 is Rs. 143.1 (Rs. 125 mn) Directors’ remuneration in respect of the Company’s Subsidiaries for the financial year 2012/13 is Rs 446 (Rs. 436 mn.)
Corporate Donations
Donations by the Company amounted to Rs. 830,650. (Rs. 2,001,799) which includes a sum of Rs. 112,000 (Rs. 121,000) made to Government approved charities.
The total donation amount of Rs. 830,650 exceeds the amount of Rs. 300,000 approved by the shareholders at the last Annual General Meeting. Ratification of the additional amount of Rs. 530,650 will be sought at the Annual General Meeting.
Donations by the Subsidiaries amounted to Rs. 11.2 (Rs. 12.5 mn).
No donations were made for political purposes.
Directorate
The names of the Directors who held office at the end of the financial year are given below and their brief profiles appear on Stewardship section.
Executive Directors
Mr. A.M. Pandithage (Chairman & Chief Executive)
Mr. M.R. Zaheed
Mr. J.A.G.Anandarajah (Retired with effect from 31st March, 2013)
Mr. S.C. Ganegoda
Mr. H.S.R. Kariyawasan
Dr. K.I.M. Ranasoma
Mr. L.T. Samarawickrama
Non-Executive Directors
Mr. K.D.D. Perera (Deputy Chairman)
Mr. W.D.N.H. Perera
Non-Executive Independent Directors
Dr. H. Cabral, PC
Mr. M.D.S. Goonatilleke
Mr. R.P. Pathirana
The basis on which Directors are classified as Independent Non-Executive Directors is discussed in the Corporate Governance statement.
Mr. L.R.V. Waidyaratne was appointed to the Board since the last Annual General Meeting in terms of the Article 27 (2) of the Articles of Association of the Company. Shareholders will be requested to re-elect him at the Annual General Meeting.
Mr. J.A.G. Anandarajah retired with effect from 31st March, 2013.
Messrs H.S.R. Kariyawasan, M.R. Zaheed and Dr. H. Cabral retire by rotation and being eligible offer themselves for re-election.
The names of Directors holding office at the end of the financial year in respect of Subsidiaries, grouped under sectors, are given below. Names of Directors who ceased to hold office during the year are given within brackets.
Fiber |
||
| A.M. Pandithage | N. Udage | A.R.K. Jayawardena |
| S.C. Ganegoda | Dr. P.C. Vermunt | B.M.A. Senanayake |
| G.M.P. De Silva | Ms. M.C.A Holder - Vermunt | D. Molligoda |
| M.M.M. De Silva | A. Venugopal | G.S. De Silva |
| F.R. Alles | B.R.M. Mendis | A.R.K. Jayawardena |
| H.C.S Mendis | Ms. I. Weiland | (A.T.A Kuruppu) |
| Dr. S.A.B. Ekanayake | C.D. Weiland | (U. Prinz) |
| T. G. Thoradeniya | Ms. M. Hirai | (T. Doemling) |
| J.A.W.M. Jayasekera | Ms. M. Shiraishi | (A.A.N. Dias) |
| B.D.A. Perra | J.A.M.V.D. Hout |
Hand Protection |
||
| A.M. Pandithage | F. Mohideen | B.A. Mahipala |
| K.D.D. Perera | L.G.S. Gunawardena | R.M.T. Premarathna |
| Dr. K.I.M. Ranasoma | K.A.L.S. Fernando | T.G. Thoradeniya |
| S.C. Ganegoda | M. Bottino | (M.V. Fildier ) |
| G.K. Seneviratne | N. A.R.R.S. Nanayakkara | (J.A.G. Anandarajah) |
| N.Y. Fernando | M. Orlando | (D.B.K. Pathirage) |
| R. Seevaratnam | V. Rocchetti |
Purification Products |
||
| A.M. Pandithage | S. Rajapakse | M.S.P. Udaya Kumar |
| K.D.D. Perera | T. D. Naylor | B. Balartnarajah |
| H.S.R. Kariyawasan | D.J. Perera | Ms.S.S. Ragunathan |
| S.C. Ganegoda | P. Karnchanabatr | P. Rousseau |
| A. M. Senaratna | B. Karnchanabatr | F. Brocheet |
| R. Seevaratnam | K. Karnchanabatr | B. Dasgupta |
| Ms. M.J.A.S. Abeyratne | Y.P.A.S. Pathiratna | Ms. C. Karnchanabatr |
| D.E. Ranarajah | A.A.M. Caderbhoy | (R.P. Peris) |
| W.D.N.H. Perera | A.H. Djafar | |
| Dr. S.A.K. Abayawardana | S. Sopian |
Textiles |
||
| A.M. Pandithage | H. Somashantha | (S. Spezza) |
| S.C. Ganegoda | R.N. Somaratne | (Dr. E.M. Fernando) |
| K.D.D Perera | R.P. Pathirana | (J.A.G. Anandarajah) |
| E.R.P. Goonetilleke | J.A.S. Piyawardena | [S.D. Amalean (Alternate)] |
| R. Seevaratnam | (M.C.D. Amalean) |
Construction Materials |
||
| A.M. Pandithage | A.A. Akbarally | T. Akbarally(Alternate) |
| R.P. Peris | D.W.P.N. Dediwela | (J.A.G. Anandarajah) |
| S.C. Ganegoda | H.H. Abdulhusein | (K.D.D. Perera) |
| R.P. Pathirana | A.J. Hirdaramani (Alternate) |
Agriculture |
||
| A.M. Pandithage | S.M.Gamage | S. Kodama |
| M.R. Zaheed | R. Seevaratnam | A.C. Pathirage |
| S.C. Ganegoda | A.N.K. Perera | N.D. Shilling |
| L.K.B. Godamunne | K.R. Rajapakse | R.J. Taylor |
| M.M.M. De Silva | H.P. Lin | (N.D. Shilling) |
| U.E.R Gangoda | G. Olbrechts | (R.J. Taylor) |
| Ms. J. Dharmasena | M. Symons | |
| D. Nilaweera | S. Yamada |
Plantations |
||
| A.M. Pandithage | Merrill J Fernando | Dr. R.D. Bandaranaike |
| W.G.R. Rajadurai | Malik J Fernando | D.J. Ambani |
| G.K. Seneviratne | L.N.De S. Wijeyeratne | R J. Perera |
| J.A.G. Anandarajah | Dr. S.S.S.B.D.G. Jayawardena | N.R. Ranatunge |
| S.C. Ganegoda | Prof. U. Liyanage | R.M. Hanwella |
| Dr. K.I.M. Ranasoma | Ms. M.D.A. Perera | N.A.R.R.S. Nanayakkara |
| L.T. Samarawickrama | W.D.N.H. Perera | N. Weeraratne |
| R. Seevaratnam | N.Y. Fernando | C.V. Cabraal |
| F. Mohideen | M.M.M. De Silva | D.C. Fernando (Alternate) |
| S. Siriwardana | D.S. Seneviratne | (S.T. Gunatilleke) |
Industry Inputs |
||
| A.M. Pandithage | D. Hewageegana | D.D.W. Siriwardene |
| M.M.M. De Silva | M.D.S. Gonnetilleke | (M.H. Zainudeen) |
| S.C. Ganegoda | L.J.C. De Silva | |
| M.R. Zaheed | P.T.S. De Silva |
Power and Energy |
||
| A.M. Pandithage | D.D.W. Siriwardene | A.A. Akbarally |
| A.R. De Zilva | D.S. Arangala | M. Najmudeen |
| W.G.R. Rajadurai | R.A.A.W. Rajakaruna | (K.D.D. Perera) |
| H.S.R. Kariyawasan | Merill J Fernando | (R.P. Peris) |
| Y.P.A.S. Pathiratna | Malik J Fernando | (S.T. Gunatilleke) |
| B. Balaratnarajah | V.K. Hirdaramani | (J.A.G. Anandarajah) |
| M.M.M. De Silva | R.P. Pathirana | (N.Y. Fernando) |
Consumer Products |
||
| A.M. Pandithage | M.M.M. De Silva | M.D.S. Goonetilleke |
| S.C. Ganegoda | G.A.B.I. Silva | D.D.W. Siriwardena |
| M.R. Zaheed | H.J.O. Silva | |
| A.R. Zubair | R. Seevaratman |
Transportation and Logistics |
||
| A.M. Pandithage | S.I. Ramakrishnan | P. Jayanetti |
| L.R.V. Waidyaratne | L.B. Culas | J.C. Anandappa |
| S.C. Ganegoda | P.S. Gunawardena | O. Kubota |
| S.R. Sadanandan | S.N. Wickremesooriya | T. Aoyagi |
| T.U.K. Peiris | K.L.C. Fernando | P.D. Good |
| A.B. Ratnayake | R.W.P. Polonowita | F.S. Abeygoonnewardena |
| Ms. E.M.C.S. Gamage | S.J. Wijesinghe | M.R.S.M.S.R.C. Samaratunge |
| A.M. Senaratna | B.P.R. Liyanage | V.V.P. Daluwatte |
| R. Seevaratnam | Ms. Y.N. Perera | M. Saitoh |
| P.L. Cumaratunga | M.D.D. Pieris | L.D.E.A. De Silva |
| F.T. Salem | D.D.W. Siriwardene | (K. Amarasekera) |
| C.D. La Ferriere | C. Perera | (R. Samaratunga) |
| E. Silhol | M. Masri | (K. Balasundaram) |
| E. Zeenny | C.I.J. Charles | (Ms. M.R.P. Balendra) |
| I. Saleem | A.H. Kulasinghe | (K.P. Kalyan) |
| T. Nakai | J.R. Hill | (B.A.B. Goonetilleke) |
| S. Sugishima | K. Miyoshi | (T. Banno) |
| K. Wai Chak | N.P. Samarasinghe | |
| O. Novoru | A.M. Gahazali | |
| M.G. Gomez | M.I.S. Sabar |
Leisure and Aviation |
||
| A.M. Pandithage | W.D.N.H. Perera | S. Senaratne |
| S.C. Ganegoda | J.G. Victoria | S.H. Amarasekera |
| K.D.D. Perera | K.A.Y.P. Sumanapala | Ms. D.S.N. Weerasooriya |
| L.T. Samarawickrama | Ms.V.Jayasundera | E.J. Pietersz |
| S.P. Dissanayake | C.J. Wickramasingha | D.J.A. Wijesinghe |
| S.J. Wijesinghe | D.E. Silva | S.D.D.K. Senaratne |
| N.J. De S. Deva-Aditya | B.C.S.A.P. Gooneratne | (V.K. Wickremesinghe) |
| L.N. De S. Wijeyeratne | S.B. Rangamuwa | |
| Ms. R.N. Ponnambalam | J.P. Van Twest |
Investments and Services |
||
| A.M. Pandithage | D.D.W. Siriwardene | S. Balasubramaniam |
| S.C. Ganegoda | Ms. L.Y. Pararasasegaram | Ms. M.P. Abeyesekera |
| M.M.M De Silva | L.D.E.A. De Silva | Ms. S. Abeytunge |
| S.P. Dissanayake | Dr. A. Sivagananathan | Ms. D. Talpahewa |
Corporate Governance
The Company has complied with the Corporate Governance rules laid down under the listing rules of the Colombo Stock Exchange. The Corporate Governance section discusses this further.
Auditors
Messrs Ernst & Young, Chartered Accountants, are deemed reappointed, in terms of section 158 of the Companies Act No. 07 of 2007, as Auditors of the Company.
A resolution proposing the Directors be authorized to determine their remuneration will be submitted at the Annual General Meeting.
The Auditors, Messrs Ernst & Young were paid Rs. 1.5 mn(Rs. 1.0 mn), and Rs. 30.8 mn (Rs. 25.7 mn) as audit fees by the Company and its Subsidiaries respectively. In addition, they were paid Rs. 0.75 mn (Rs. 0.52 mn) and Rs. 16.9 mn (Rs. 6.7 mn), by the Company and its Subsidiaries respectively, for Non-audit related work, which consisted mainly of tax consultancy services.
In addition to the above, Group companies, both local and overseas, engage other audit firms. Audit fees and payments relating to Non-audit work in respect of these firms amount to Rs. 9.6 mn (Rs. 18.2 mn.) and Rs. 5.1 mn (Rs. 10.9 mn) respectively.
The Auditors of the Company and its Subsidiaries, have confirmed that they do not have any relationships (other than that of Auditor) with, or interests in, the Company or any of its Subsidiaries other than those disclosed above.
Share Information
Information relating to earnings, dividend, net assets, market value per share and share trading is given Highlights and Information of Shareholders sections of this annual report.
Events Occurring after the Reporting Date
No circumstances have arisen since the Balance Sheet date that would require adjustment, other than those disclosed in Note 35 to the Financial Statements.
Employment
The Group has a structure and a culture that recognizes the aspirations, competencies and commitment of its employees. Career growth and advancement within the Group is promoted.
Details of Group’s human resource practices and employee and industrial relationships are given in employees section of the sustainability report.
The number of persons employed by the Group at year-end was 35,373 (33,201).
The Group does not operate any share option schemes.
Shareholders
It is the Group’s policy to endeavour to ensure equitable treatment to its shareholders.
Details of major shareholders is given on Information of Shareholders section.
Statutory Payments
The declaration relating to statutory payments is made in the Statement of Directors’ Responsibilities.
Environmental Protection
The Group’s efforts to conserve scarce and non-renewable resources, as well as its environmental objectives and key initiatives, are described in the Environment Issues section of the Sustainability Report.
Enterprise Risk Management
The Group has a structured risk management process in place to support its operations. The Hayleys Board Audit Committee and the sector audit committees play a major role in this process. The Risk Management section of this report elaborates these practices and the Group’s risk factors.
Internal Controls
The Directors acknowledge their responsibility for the Group’s system of internal control. The system is designed to give assurance, inter alia, regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information generated. However, any system can only ensure reasonable and not absolute assurance that errors and irregularities are either prevented or detected within a reasonable time period.
The Board, having reviewed the system of internal controls, is satisfied with the Group’s adherence to and effectiveness of these controls for the period up to the date of signing the Financial Statements.
Going Concern
The Directors, after making necessary inquiries and reviews including reviews of the Group’s budget for the ensuing year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Therefore the going concern basis has been adopted in the preparation of the Financial Statements.
Directors’ Shareholdings
Details relating to shareholdings of Directors are given on Information of Shareholders section.
Annual General Meeting
The Annual General Meeting will be held at Winchester, The Kingsbury, No. 48, Janadhipathi Mawatha, Colombo 01, at 3.00 p.m. on Friday, 28th June, 2013.
For and on behalf of the Board
Mohan Pandithage
Chairman & Chief Executive
Sarath Ganegoda
Director
Hayleys Group Services (Pvt) Ltd.
Secretaries
20th May, 2013
Comparative figures are shown in brackets.
