People’s Leasing & Finance PLC

Annual Report 2019/20

Annual report of the Board of Directors on the affairs of the Company

Annual report of the Board of Directors on the affairs of the Company is presented as required by Section 168 of the Companies Act No. 07 of 2007. It also provides information required by the Finance Business Act No. 42 of 2011 and Directions issued thereunder, and the Listing Rules of the Colombo Stock Exchange.

1. General

The Board of Directors of People’s Leasing & Finance PLC has pleasure in presenting the Integrated Annual Report to the shareholders, together with the Audited Financial Statements of the Company and the Audited Consolidated Financial Statements of the Group for the year ended 31 March 2020 and the Auditor’s Report on these Financial Statements conforming to all statutory requirements. This Report was approved by the Board of Directors on 8 July 2020.

2. Nature of the business

[Section 168 (1) (a)]
Companies Act
No. 07 of 2007

2.1 Vision, mission and corporate conduct

The Company’s Vision and Mission are given on page 5 of this Annual Report. In achieving the Vision and Mission, all Directors and employees conduct their activities to the highest level of ethical standards and integrity, as set out in the Company’s Code of Business Conduct
and Ethics.

2.2 Principal business activities

The Company’s principal business activities comprise providing finance leases, term loans, Islamic finance, margin trading, factoring, gold loans, and issuance of debt instruments, and mobilisation of public deposits. The Company had six subsidiaries as at 31 March 2020 and the nature of business activities of these subsidiaries are described in accounting policies on page 155. The Company or its subsidiaries have not engaged in any activity, which contravened any law or regulation during the year under review.

2.3 Changes to the Group structure

There has been no change to the Group structure during the financial year under consideration.

Subsequent to the private placement and rights issue of People’s Merchant Finance PLC (PMF), the state of People’s Leasing in PMF reduced to 11.86%. Accordingly status of associate changed as financial investments – Fair value through comprehensive income (FVOCI).

2.4 Branch network

The total branch network of the Company as at 31 March 2020 comprised 103 fully-fledged branches and 101 service centres.

2.5 Review of operations

An overall assessment of the Company’s financial position and performance during the year 2019/20, with comments on financial results and special events that took place is contained in the Chairman’s Message on pages 10 and 11, the Chief Executive Officer’s Review on pages 12 to 14, and the Management Discussion and Analysis on pages 28 to 66 of this Annual Report. These reports form an integral part of the Annual Report of the Board of Directors on the Affairs of the Company. Segment-wise contribution to Group revenue, results, assets and liabilities is disclosed in Notes to the Financial Statements on pages 255 and 256 of this Annual Report.

2.6 Future outlook

The Company’s outlook based on the challenges, opportunities and developments in a global context as well as in the Sri Lankan economy is set out in each section of this Annual Report.

3. Financial Statements

168 (1) (b) and (2)]

The Financial Statements of the Company and the Group duly certified by the Chief Manager Finance and the Chief Executive Officer with the approval of the Chairman which have been prepared in accordance with the Sri Lanka Accounting Standards laid down by CA Sri Lanka and in compliance with the requirements of Companies Act No. 07 of 2007, are appearing on pages 149 to 288 of this Annual Report.

3.1 Financial results and appropriations

Interest income

The total interest income of the Company and the Group was Rs. 31,459.11 million (Rs. 30,836.30 million in 2018/19) and Rs. 33,282.88 million (Rs. 32,234.34 million in 2018/19) respectively for the year ended 31 March 2020. A more descriptive analysis of the interest income is given in Note 6.1 and 6.1.1 to the Financial Statements on page 165.

Performance and appropriations

The Company and the Group recorded a net profit of Rs. 2,942.51 million and Rs. 3,591.75 million respectively for the financial year 2019/20 (Rs. 4,416.12 million and Rs. 5,011.27 million in 2018/19). This represents an decline in the net profits of the Company and the Group by 33.37% and 28.33% respectively compared to the previous year.

Details of the Company’s performance and appropriation of profit are tabulated as follows:

Company 2019/20
Rs. million
Rs. million
Profit before income tax 4,551.83 6,585.26
Income tax expense (1,609.32) (2,169.14)
Profit for the year 2,942.51 4,416.12
Profit brought forward from previous year 13,361.81 11,502.16
Restatement of opening balances (755.91)
Profit available for appropriation 16,304.31 15,162.38
Dividend paid for previous/current year (1,929.32) (1,974.83)
Other comprehensive income 0.12 (4.94)
Transfers to reserves (147.12) (220.81)
Transfers form reserves 400.00
Total appropriations (2,076.32) (1,795.63)
Unappropriated profit carried forward 14,227.99 13,361.80

Provision of taxation

As per the notices issued by the Department of Inland Revenue, following changes have been implemented while formal amendments to the respective Act are pending:

  • Debt repayment levy (DRL)
    DRL was abolished with effect from 1 January 2020. DRL has been charged at 7% only for the first nine months of the financial year, on the value addition attributable to the supply of financial services. This had a positive impact over the profitability of the Company for the last quarter.
  • Value added tax (VAT)
    VAT rate was revised to 8% from 15% with effect from
    1 January 2020. This too had a positive impact for the Company, although its effect on the profitability was minimal.
  • Nation building tax (NBT)
    NBT was abolished with effect from 1 December 2019. It stood at 2% prior to the abolition. This has a positive impact over the earnings since the Company was bearing the tax expense on behalf of the customer.
  • Economic service charge (ESC)
    ESC, charged at 0.5% of the revenue of the Company was abolished with effect from 1 January 2020. Its impact on the earnings of the Company is minimal, since this was considered as an advanced income tax payment.
  • Income tax (IT)
    Income tax which stood at 28% for the first nine months of the financial year was revised to 24% effective from the last quarter of the financial year under review. This made a positive contribution to the profitability of the Company.

However, according to the provisions of LKAS 12 – “Income Taxes”, deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Further, since the new rate of 24% is applicable only for three months of the financial year and the rate has not yet been enacted, Company used 28% for the provisioning of income tax for the financial year. Accordingly, the positive impact of the rate reduction for the final quarter has not been taken into account. The reduced rate will be considered at the time of paying taxes.

The rate of VAT on Financial Services was at 15% for the year under review (15% in 2018/19).

Property, plant and equipment and intangible assets

The total capital expenditure incurred on property, plant and equipment (including capital work in progress) of the Company and the Group in the year ended 31 March 2020 amounted to Rs. 213.93 million and Rs. 284.22 million respectively (Rs. 147.67 million and Rs. 257.37 million in 2018/19).

In the year ended 31 March 2020, the Company and the Group invested Rs. 15.12 million to acquire intangible assets. (In 2018/19, the Company invested Rs. 8.62 million and the Group invested Rs. 12.19 million to acquire intangible assets).

The Directors confirm that there were no other significant changes in the Company’s or its subsidiaries’ fixed assets and market value of land which substantially differ from the book values thereof as disclosed in Note 32.4 on
page 224.

The details of property, plant and equipment and intangible assets are presented in Notes 32 and 33 on pages 220 to 227 to the Financial Statements.

Freehold land and building

Extents, locations, valuations and the number of buildings of the entity’s land holding are detailed in Note 32.4 on page 224 of this Annual Report and the net book values of freehold land and buildings owned by the Company and the Group as at 31 March 2020 as included in the Financial Statements was Rs. 571.08 million.


Details of investments held by the Company are disclosed in Notes 22, 23, 24, 27, 28, 29 and 30 on pages 189, 190, 212, 214 and 216 to the Financial Statements.

Stated capital

The stated capital of the Company and the Group as at 31 March 2020 amounted to Rs. 13,915,41 million, compared to Rs. 13,236,07 million as at 31 March 2019. Consequent to the final dividend for the financial year 2018/19 paid by way of a scrip dividend, the stated capital increased by Rs. 679.34 million.


The total reserves of the Company and the Group as at 31 March 2020 stood at Rs. 16,331.22 million and Rs. 19,038.00 million respectively. During the financial year under review, Rs. 147.12 million was transferred from retained earnings to the reserves. Information on the movement of reserves is given in the “Statement of Changes in Equity” on pages 152 and 153 and in Notes 46 to 48 to the Financial Statements.

Debt capital

The details of debt capital are given in Note 38 and a more comprehensive analysis of the Company’s debentures is set out in Note 38.2 to the Financial Statements.

Capital adequacy

Tier 1 capital ratio and total capital ratio of the Company computed as per the Finance Business Act Direction No. 03 of 2018 capital adequacy requirements issued by the Central Bank of Sri Lanka stood at 15.12% and 15.99% respectively as at 31 March 2020. The information on minimum capital requirements is given on page 32 of this Annual Report.

4. External auditor

[Section 168 (1) (c ) (i) & (j)]

4.1 Auditor and their independence

In accordance with the National Audit Act No. 19 of 2018 People’s Leasing & Finance PLC falls under the definition of “Auditee Entity” and the Auditor General or any person authorised by the Auditor General shall carry out the audit of the Company and their responsibilities in relation to the Financial Statements are set out in the “Independent Auditor’s Report” given on pages 145 to 147.

4.2 Auditor’s report

The Report of the Auditor on the Financial Statements of the Company and its Group is given on pages 145 to 147.

4.3 Auditor’s remuneration

Auditors were paid following sums by the Company and the Group for audit and related services as well as for non-audit services including tax related services:

Company Group
Fees 2019/20
Rs. million
Rs. million
Rs. million
Rs. million
Audit and related services 7.38 6.47 13.49 12.05
Non-audit services 1.64 1.49 4.91 3.85

5. Accounting policies and changes during the year

[Section 168 (1) (d)]

An alternative format has been used in presenting Accounting Policies to minimise the disclosure overload and clutter in the Financial Statements. These Financial Statements comply with the requirements of the Sri Lanka Accounting Standards – LKAS 1 on “Presentation of Financial Statements” and with Section 168 (1) (d) of the Companies Act No. 07 of 2007.

The significant accounting policies adopted in the preparation of the Financial Statements are given on pages 155 to 288 The significant changes to accounting policies adopted if any, in the preparation of the Financial Statements are given in Note 3.4 on pages 159 to 160.

6. Board of Directors

[Section 168 (1) (e), (f), (h)]

6.1 Profiles

Names of the members of the Board of Directors together with their profiles including skills and experience are set out on pages 68 to 71 of this Report.

6.2 Appraisal of Board performance

The method used to appraise the performance of the Board of Directors is presented in the “Corporate Governance” section on page 81.

6.3 Other Directorships/significant positions of Directors

Information of the other directorships/significant positions of the present Directors of the Company is given on pages 68 to 71.

6.4 Resignations and appointments

In terms of Section 5 (1) of the Finance Companies (Corporate Governance) Direction No. 03 of 2008, Mr Hemasiri Fernando, Non-Executive Non-Independent Director/Chairman of the Company retired from the said office with effect from 12 October 2019.

Mr Micheal Pradeep Amirthanayagam was appointed as the Non-Executive Independent Chairman of the Company with effect from 25 October 2019.

Mr Jehan Prasanna Amaratunga (Non-Executive, Non-Independent Director), Mr Mohamed Anise Mohamed Rizwan (Non-Executive Independent Director), Mr Johnson Anthony Fernando (Non-Executive, Non-Independent Director), Dr Kennedy Degaulle Gunawardana (Non-Executive Independent Director) and Mr Namugoda Wijesinghe Atapattu Mudiyanselage Udawatte Keerthi Kumara Edward Weerasinghe (Non-Executive Independent Director) resigned from the post of Director of the Company with effect from
30 December 2019.

Mr Mahawelage Anthony Bonniface Silva, Mr Ranjith Kodituwakku and Mr Azaam A Ahamat were appointed as Non-Executive Non-Independent Directors of the Company with effect from 30 December 2019.

Mr Micheal Pradeep Amirthanayagam (Non-Executive Independent Chairman/Director), Mr Ranjith Kodituwakku (Non-Executive Non-Independent Director) and Mr Mahawelage Anthony Bonniface Silva (Non-Executive Non-Independent Director) resigned from the post of Director of the Company with effect from 19 February 2020.

Mr Sujeewa Rajapakse (Non-Executive Non-Independent Director/Chairman), Mr Sudarshan Ahangama (Non-Executive Non-Independent Director),
Mr Kurukulasuriya Canicious Joachim Clive Fonseka (Non-Executive Non-Independent Director), Mr Chanura Jayanta Wijetillake (Non-Executive Independent Director) and Mr Upul Lakshman Asoka Wickramasinghe Bandara (Non-Executive Independent Director) have been appointed to the Board of the Company with effect from 19 February 2020.

Ms Miriam Coralie Pietersz was appointed as Non-Executive Independent Director of the Company with effect from 1 March 2020.

6.5 Directors’ remuneration

Directors’ fees and emoluments paid by the Company and the Group for the year ended 31 March 2020 was Rs. 6.69 million and Rs. 13.56 million respectively. Comparative figures are given in Note 15 to the Financial Statements.

6.6 Interests register/Directors’ interest in transactions

In compliance with the Companies Act No. 07 of 2007, the Company maintains an interests register, which is available for inspection. The Directors of the Company have made general declarations of their interests in transactions of the Company as per Section 192 (2) of the Companies Act No. 07 of 2007. Details of the transactions disclosed therein are given on pages 257 to 262 under related party transactions. Furthermore, the Chairman, the Board of Directors and the Chief Executive Officer of the Company have made general declarations that there is no financial, business, family or other material/relevant relationship(s) between themselves as required to be disclosed by the Finance Companies (Corporate Governance) Direction No. 03 of 2008.

6.7 Directors’ interest in shares

The Directors have disclosed to the Board of their shareholding in the Company and any acquisitions or disposals thereof in compliance with Section 200 of the Companies Act No. 07 of 2007. The Directors’ individual shareholdings along with the Chief Executive Officer’s individual shareholding in the Company are given in the section titled “Investor Relations” on pages 294 to 295 of this Annual Report.

6.8 Meetings

The details of Board meetings and Board Subcommittee meetings are presented in the Corporate governance report on pages 80 to 81 of this Annual Report.

7. Share information

Significant shareholder information along with substantial shareholder details and other share related information is presented in detail under the title “Investor Relations” on pages 290 to 296
of this Annual Report.

7.1 Equitable treatment to shareholders

The Company has at all times ensured that all shareholders are treated equitably.

7.2 Dividends on ordinary shares

An interim dividend of Rs. 0.70 per share was paid on 23 January 2020 to the ordinary shareholders. The Board of Directors ensured that the Company would meet the requirement of the solvency test in terms of Section 56 (3) of the Companies Act No. 07 of 2007 and the Listing Rules of the CSE, immediately after the payment of the said interim dividend as required by Section 56 (2), the Board of Directors has obtained a certificate from the Auditor on the Statement of Solvency in respect of dividend payment conforming to the above statutory provision.

8. Donations

[Section 168 (1) (g)]

During the financial year 2019/20, the Company made donations amounting to Rs. 58.85 million (Rs. 122.23 million in 2018/19) in terms of the resolution passed at the last Annual General Meeting. The Company’s Corporate Social Responsibility Department handles the Corporate Social Responsibility (CSR) initiatives and activities. The CSR initiatives of the Company are presented in the Community section of the Social and relationship capital and Natural capital on pages 54 to 59 and pages 60 to 66 respectively.

9. Corporate governance

[Code of best practice
D.6, D.6.1, D.2, D.1.4]

The Board of Directors is committed to develop the corporate governance principles of the Company and has adopted a Corporate Governance Charter including the procedures and processes governing the different participants in the Company – such as the Board, Managers, shareholders and other stakeholders to ensure that the highest principles of corporate governance is maintained across the Organisation.

In adopting the aforesaid Corporate Governance Charter, the Board has ensured that the Company is in compliance with the recommendations of the Code of Best Practices on Corporate Governance issued by CA Sri Lanka, the Listing Rules of the Colombo Stock Exchange (CSE) and the Finance Companies (Corporate Governance) Directions No. 03 of 2008, No. 04 of 2008 and
No. 06 of 2013.

The Directors declare that

  1. The Company has not engaged in any activity, which contravenes laws and regulations.
  2. The Company has made all endeavours to ensure the equitable treatment of shareholders.
  3. The business is a going concern.
  4. Effectiveness of and successful adherence to internal controls and risk management is practiced by the Company. The measures taken in this regard are set out in the Corporate Governance Report on pages 77 to 111 of this Annual Report.
  5. To the best of their knowledge, there has not been any violation of the Code of Business Conduct and Ethics of the Company.

9.1 Board subcommittees

Board Audit Committee, Board Integrated Risk Management Committee, Remuneration and Nomination Committee, and Related Party Transactions Review Committee function as Board subcommittees with Directors who possess the requisite qualifications and experience. The composition of the said committees is set out on respective committee reports given in this Annual Report.

9.2 Compliance with laws and regulations

To the best knowledge and belief of the Directors, the Company and the Group have not engaged in any activity contravening any laws and regulations.

9.3 Statutory payments

To the best of their knowledge and belief, the Directors are satisfied that all statutory payments due to the Government, other regulatory institutions and in relation to the employees have been made in time.

9.4 Environmental protection

The Directors confirm that to the best of their knowledge the Company and the Group, have not engaged in any activity, which is detriment to the environment.

9.5 ESG reporting

Environmental, social and governance considerations can affect a Company’s ability to execute its business strategy and create value. The Company’s Annual Report contains sufficient information on ESG risks and opportunities are recognised, managed, measured and reported as set out on page 95.

10. Acknowledgment

[Section 168 (1) (k)]

The Board of Directors has acknowledged the contents of this Annual Report as disclosed on page 117.

11. Outstanding litigation

In the opinion of the Directors formed in consultation with the Company’s lawyers, litigation currently pending against the Company will not have any material impact on the reported financial results or future operations of the Company. Details of litigation pending against the Company are given in Note 53 to the Financial Statements on pages 250 to 252.

12. Human resources

The Company has adopted an absolutely non-discriminatory employment policy which respects individuals and provides career opportunities irrespective of the gender, race or religion. As at 31 March 2020 – 2,401 persons were in employment (2,329 persons as at 31 March 2019) with
the Company.

13. Events after the reporting period

Details of events after the reporting period are disclosed in Note 61 on page 288 to the Financial Statements.

14. Compliance with requirements on the content of the Annual Report in terms of Rule 7.6 of the Listing Rules

Information required to be disclosed Status of
7.6 (i) Names of persons who were Directors of the Company during the financial year
7.6 (ii) Principal activities of the Company and its subsidiaries during the year
7.6 (iii) Information on 20 largest shareholders at the end of the year
7.6 (iv) The public holding percentage
7.6 (v) Directors’ and Chief Executive Officer’s holding in shares
7.6 (vi) Information pertaining to material foreseeable risk factors
7.6 (vii) Details of material issues pertaining to employees and industrial relations
7.6 (viii) Information on buildings/land holdings and investment properties as at the end of the year
7.6 (ix) Number of shares representing the stated capital as at the end of the year
7.6 (x) A distribution schedule of the number of holders in each class of equity securities and related information
7.6 (xi) Ratios and market price information on equity, debt, change in credit rating
7.6 (xii) Significant changes in the Company’s or Subsidiaries’ fixed assets
7.6 (xiii) Details of funds raised through a public issue, rights issue and a private placement during the year
7.6 (xiv) Information in respect of employee share ownership or stock option schemes
7.6 (xv) Disclosure pertaining to Corporate Governance practice in terms of Rules 7.10.0, 7.10.5 c and 7.10.6 c of Section 7 of the Listing Rules
7.6 (xvi) Related party transactions exceeding 10% of the equity or 5% of the total assets of the entity

Refer page 109 for more details.

15. Going concern

[Code of best practice D1.4]

The Group’s management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for a foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the going concern basis.

In determining the basis of preparing the financial statements for the year ended 31 March 2020, the management has assessed the existing and anticipated effects of COVID-19 on the Group Companies and the appropriateness of the use of the going concern basis, based on available information.

Group evaluated the resilience of its businesses considering a wide range of factors under multiple stress tested scenarios, relating to expected income, cost management, profitability, the ability to defer non-essential capital expenditure, unused credit lines and the ability to continue providing services to ensure businesses continue as least impacted as possible. Having presented the outlook for each industry of group to the holding Company’s Board and after evaluating the above by the Management, and after due consideration of the range and likelihood of outcomes, the Management is satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern basis in preparing and presenting these Financial Statements.

16. Annual General Meeting

The 24th Annual General Meeting will be held at the People’s Bank Staff Training College Auditorium, 11th Floor, People’s Leasing building, No. 07, Havelock Road, Colombo 5 on the 11 September 2020 at 3.00 p.m. Notice of meeting relating to the 24th Annual General Meeting is provided on page 301 of this Annual Report.

By order of the Board of Directors,


Coralie Pietersz


Sujeewa Rajapakse


Lakmini Kottegoda
Company Secretary

8 July 2020