Notes to the Financial Statements

1.1. Domicile and legal form

Sunshine Holdings PLC (the Company) is a public limited liability Company incorporated and domiciled in Sri Lanka. The ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka. The registered office and principle place of business of the Company is located at No. 60, Dharmapala Mawatha, Colombo 3.

Total staff strength of the Company and the Group on 31 March 2025 was as follow:

Group 1,909 (31 March 2024 – 1,703)

Company 73 (31 March 2024 – 29)

1.2 Consolidated and separate Financial Statements

The consolidated financial statements of Sunshine Holdings PLC as at and for the year ended 31 March 2025 comprise the financial information of Company and its subsidiaries (together referred to as “the Group” and encompass the Company and its subsidiaries (together referred to as the “Group”). The subsidiaries are listed in Note 24.

The financial statements of all Companies in the Group are prepared for a common financial year, which ends on 31 March.

1.3 Merger Accounting for Common Control Combination

The Group continues to apply the Statement of Recommended Practice (SORP) for Merger Accounting for Common Control Combinations, issued by the Institute of Chartered Accountants of Sri Lanka on 19 December 2012. This SORP is applicable for Consolidated Financial Statements and is effective for annual periods beginning on or after 1 April 2020.

In the absence of specific guidance on accounting for amalgamations in the Separate Financial Statements, the Group has elected to consistently apply the same SORP in the preparation of the Separate Financial Statements of the Company.

1.4 Parent entity and ultimate parent entity

The Ultimate parent of Sunshine Holdings PLC is Lamurep Investments Limited. The Company is the parent of the Group companies.

1.5 Principal business activities, nature of operations of the Group and ownership by the Company in its subsidiaries and associates

The Group structure is given on page 127.

There were no significant changes in the nature of the principal activities of the Group during the financial year under review.

Refer Note 24 for the changes in the group structure during the year.

2.1 Statement of compliance

These consolidated financial statements of the Group and the Separated Financial Statements of the Company have been prepared and presented in accordance with the Sri Lanka Accounting Standards (SLFRS’s and LKAS’s) laid down by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka).

2.2 Responsibiity for Financial Statements

The Board of Directors acknowledges this responsibility as set out in the ‘Statement of Directors’ Responsibility for Financial Statements’, ‘Annual Report of the Board of Directors’ and in the statement appearing with the Statement of Financial Position of this Annual Report on pages 119 and 120 respectively.

2.3 Approval of Financial Statements by Directors

The financial statements of the Group and the Company were authorised for issue by the Board of Directors in accordance with the resolution of the directors on 28 May 2025.

These financial statements include the following components:

• a Statement of Profit or Loss and Other Comprehensive Income providing information on the financial performance of the Group and the Company for the year under review; (Refer pages 117 and 118).
• a Statement of Financial Position providing information on the financial position of the Group and the Company as at the year end; (Refer pages 119 and 120).
• a Statement of Changes in Equity depicting all changes in shareholders’ funds during the year under review of the Group and Company; (Refer pages 121 and 122).
• a Statement of Cash Flows providing information to the users, on the ability of the Group and Company to generate cash and cash equivalents and the needs of the entity to utilise those cash flows; (Refer pages 123 to 126).
• Notes to the financial statements comprising materail accounting policies and other explanatory information. (Refer pages 128 to 231).

2.4 Materiality and aggregation

Each item which is similar in nature is presented separately if material. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard LKAS 1 – Presentation of financial statements.

2.5 Going concern

The Group’s financial statements have been prepared under the assumption of a going concern, as the Board of Directors is confident that the Group possesses sufficient resources to continue its operations into the foreseeable future. This confidence is based on directors’ comprehensive assessment, which takes into account the uncertainities associated with the prevailing economic conditions, and their possible effects on the Group’s business operations, profitability, liquidity and capital.

2.6 Rounding

All Financials information presented in Sri Lankan Rupees have been rounded to the nearest thousand (Rs '000) , except where otherwise indicated, as permitted by the Sri Lanka Accounting Standard – LKAS 1 on “Presentation of Financial Statements”.

2.8 Comparative information

Comparative information including quantitative, narrative and descriptive information is disclosed in respect of the previous period in the Financial Statements in order to enhance the understanding of the current period’s Financial Statements and to enhance the inter period comparability.

The presentation and classification of the Financial Statements of the previous year are amended, where relevant for better presentation and to be comparable with those of the current year. Accordingly, the comparative figures were restated to reflect following chnages;

1. With effect from 1 April 2023, the business model of SUN has changed from a Investment focused company to a shared service provider. Accordingly Company has reclassified the revenue stream to reflect the strategic focus, enhance transparency and to present the actual nature of operation. As a result, Rs. 723 Mn. (2023/24 – Rs. 453 Mn.) shared service charge has been identified as revenue of the Company. The dividend income of Rs. 2,395 Mn. (2023/24 – 2,070 Mn.) has been recognised under other income.
2. Effective 1 October 2024, SUN amalgamated with its wholly owned subsidiary, SPL, in accordance with the provisions of the Companies Act No. 07 of 2007. Following the amalgamation, SUN continues as the surviving entity, and the carrying value of SPL has been combined with that of SUN. This transaction has been accounted for as a Common Control Business Combination, in line with the Statement of Recommended Practice (SORP) on Merger Accounting for Common Control Business Combinations issued by CA Sri Lanka. Accordingly, the financial statements have been prepared as if the amalgamation had taken effect from 1 April 2023, the beginning of the current financial year. As a result, the comparative figures for the year ended 31 March 2024 have also been restated to reflect the amalgamation, ensuring consistency and comparability. (Refer Note 45 for further details.)

The financial statements of the group are presented in Sri Lankan Rupees (LKR), which is the Group’s functional currency.

The financial statements have been prepared on the historical cost basis and applied consistently which no adjustments being made for inflationary factors affecting the financial statements except for the following material items in the Statement of Financial Position.

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets, liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. In the process of applying the Group’s accounting policies, management has made the following judgements and assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Existing circumstances and assumptions about future developments may change due to circumstances beyond the Group’s control and are reflected in the assumptions if and when they occur. Estimates and underlining assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. Items with the most significant effect on the amounts recognised in these financial statements with substantial management judgement and/or estimates are collated below with respect to judgement/estimates involved.

The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses, fair value measurement, and the assessment of the recoverable amount of non-financial assets.

1. Judgements

   Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

   • Note 10 – revenue recognition: whether revenue is recognised over time or at a point in time;
   • Note 24 – consolidation: whether the Group has the control over an investee
   • Note 25 – equity-accounted investees: whether the Group has significant influence over an investee
   • Note 34.3 – lease term: whether the Group is reasonably certain to exercise extension options
2. Assumptions and estimation uncertainties

   Information about assumptions and estimation uncertainties at 31 March 2025 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes:

   • Note 35 – measurement of defined benefit obligations: key actuarial assumptions
   • Note 14 – recognition of current tax expense
   • Note 27 – recognition of deferred tax assets: availability of future taxable profit against which deductible temporary differences and tax losses carried forward can be utilised
   • Note 22 – determining the fair value of biological assets on the basis of significant unobservable inputs
   • Note 43 – recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources
   • Note 23 – determining the fair value of Investment Properties on the basis of significant unobservable inputs
   • Note 24 – assessment of recoverability of goodwill assigned to CGUs

Application of Accounting Policies
The Group has consistently applied the accounting policies for all periods presented in the financial statements, unless otherwise indicated.

Apart from the general accounting policies set out below, the specific accounting policies pertaining to each item in the financial statements have been presented within the respective notes to the financial statements. These significant accounting policies have been applied consistently to all periods presented in the financial statements of the Group, unless otherwise indicated. The accounting policies have been consistently applied by the Group entities where applicable and deviations if any have been disclosed accordingly.

6.1 Basis of consolidation

Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.

From 1 April 2020, in determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

Subsidiaries
Subsidiaries are entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Non-controlling interests
NCI are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Accounting period
The financial statements of all entities in the Group have a common financial year which ends on 31 March.

Consolidated Financial Statements/ Separate Financial Statements
The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling parties’ perspective. The assets and liabilities of the acquired entity or business should be recorded at the book values as stated in the financial statements of the controlling party.

No amount is recognised as consideration for goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party or parties’ interests; and

Comparative amounts in the financial statements are presented using the principles as set out above as if the entities or businesses had been combined at the previous balance sheet date unless the combining entities or businesses first came under common control at a later date.

The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented (i.e. including the comparative period) or since the date when the combining entities or businesses first came under the control of the controlling party or parties, where this is a shorter period, regardless of the date of the common control combination. The consolidated income statement also takes into account the profit or loss attributable to the minority interest recorded in the consolidated financial statements of the controlling party.

Expenditure incurred in relation to a common control combination that is to be accounted for by using merger accounting is recognised as an expense in the period in which it is incurred. Such expenditure includes professional fees, registration fees, costs of furnishing information to shareholders, and salaries and other expenses involved in achieving the common control combination.

Consolidation is performed in accordance with LKAS 27 and SLFRS 10. The principal consolidation entries are as follows:

1. the effects of all transactions between the combining entities or businesses, whether occurring before or after the common control combination, are eliminated; and
2. since the combined entity will present one set of consolidated financial statements, a uniform set of accounting policies is adopted which may result in adjustments to the assets, liabilities and equity of the combining entities or businesses.

6.2 Foreign currency

Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss and presented within finance costs.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates at the reporting date. The income and expenses of foreign operations are translated at the exchange rates at the dates of the transactions. Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

6.3 Impairment of Assets

6.3.1 Financial instruments and contract assets

The Group/Company recognises loss allowances for ECLs on financial assets measured at amortised cost.

Loss allowances for trade receivables is always measured at an amount equal to lifetime Expected Credit Loss (ECL).

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group 's historical experience and informed credit assessment and including forward-looking information.

The Group/Company assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

The Group/Company considers a financial asset to be in default when:

• the debtors is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any held); or
• the financial asset is more than 90 days past due.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-months ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets
At each reporting date, the Group/Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• significant financial difficulty of the borrower or issuer;
• a breach of contract;
• it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
• the disappearance of an active market for a security because of financial difficulties.

Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.

Write-off
For individual customers, the Group has a policy of writing off the gross carrying amount as approved by the Board of Directors based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. Evidence of impairment included a significant or prolonged decline in its fair value below its cost.

6.3.2 Non-financial assets

At each reporting date, the Group/Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

These financial statements have also been presented with the requirements of the Companies Act No. 07 of 2007 and provide appropriate disclosures as required by the listing rules of the Colombo Stock Exchange (CSE).

7.1 Classification of liabilities as current or non-current (Amendments to LKAS 1)

Amendments to LKAS 1 alter the classification of liabilities like convertible debt and introduce new disclosure requirements for liabilities subject to covenants. The Standard will become effective for the Group from 1 April 2024 . No material impact is expected on adoption.

7.2 Lease liability in a sale and leased back (Amendment to SLFRS 16)

The amendments specifically affect seller-lessee accounting in sale and leaseback transactions that qualify as a sale under SLFRS 15, especially those involving variable lease payments not based on an index or rate. They modify how a seller-lessee accounts for these leasebacks, preventing recognition of gains on retained rights of use due to lease term modifications or changes, which previously could occur when variable payments not defined as ‘lease payments’ were excluded. The Standard will become effective for the Group from 1 April 2024 . No material impact is expected on adoption .

7.3 Sri Lanka Accounting Standard – SLFRS 17 “Insurance Contracts”

SLFRS 17 Liability Recognition: Presents future cash flows as present value with risk adjustment and Contractual Service Margin (CSM), groups contracts by risk and profitability, and recognises losses directly in the income statement. New Insurance Revenue Measure: Shifts revenue measurement to service delivery, excluding investment-related premiums, and necessitates calculating deferred profit (CSM) at transition. The Standard will become effctive from 1 January 2026, however, it will not be applicable to the Group

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) has issued several new accounting standards and amendments/improvements to existing standards. These new standards are set to become effective in the coming years. Early application of these standards is allowed, but the Group has not early adopted any of the new or amended standards in the preparation of these financial statements.

8.1 Lack of exchangeability

(Amendments to LKAS 21)

The amendments will require companies to provide new disclosures to help users to the impact of using on estimated exchange rate on the financial statements.These disclosures might include,

• The nature and financial impacts of the currency not being exchanges
• The stop exchange rate usedThe stop estimation process
• Risk to company because the currency is not exchangeable

This standared became effective from 1 April 2025.

Amendments to LKAS 21 is not expected to have a significant impact on the Group’s Consolidated Financial Statements.

8.2 SLFRS S1 & S2 on Sustainability

SLFRS S1 General Requirements for Disclosure of Sustainability related Financial Information requires an entity to disclose information about its sustainability-related risks and opportunities that is useful to primary users of general purpose financial reports in making decisions relating to providing resources to the entity. SLFRS S2 Climate-related Disclosures is to requires an entity to disclose information about its climate-related risks and opportunities that is useful to primary users of generalpurpose financial reports in making decisions relating to providing resources to the entity. These standards will become effective for the Group from 1 April 2025. No financial impact is expected on the Group except for additional disclosures.

9.1 Basis for segmentation

Segment performance is evaluated based on operating profits or losses which are measured differently from operating profits or losses in the consolidated financial statements. Income taxes are managed on a group basis and are not allocated to operating segments.

Segment performance is evaluated based on operating profits or losses which are measured differently from operating profits or losses in the consolidated financial statements. Income taxes are managed on a group basis and are not allocated to operating segments.

The Group’s Management Committee reviews internal management reports from each division at least monthly.

Information about reportable segments

Information related to each reportable segment is set out below. Segment profit/(loss) before tax is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

9.2 Operating segments

Reconciliations of information on reportable segments to SLFRS measures

9.3 Geographic information

Consumer Goods segment is managed on a worldwide basis, but operate manufacturing facilities and sales offices primarily in Sri Lanka.

The geographic information analyses the Group’s revenue and assets by the Company’s country of domicile and other countries. In presenting the geographic information, segment revenue has been based on the geographic location of customers and segment assets were based on the geographic location of the assets.

A. Revenue streams
The Group generates revenue primarily from investment, healthcare, plantation, consumer goods and other sectors.

B. Disaggregation of revenue from contracts with customers
In the following table, revenue from contracts with customers is disaggregated by primary geographical market, major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group's reportable segments (see Note 9).

C. Contract balances
These refer to the Group's rights to consideration for work completed but not billed at the reporting date. There were no contract balances as at the reporting date.

D. Revenue of Other Streams
The Revenue of the Company has been presented to reflect the business model explained in Note 2.8.1.

E. Re-stated comparative information of the Company reflacets the amalagamation and business model change (Note 2.8.1 and Note 2.8.2)

F. Performance obligations and revenue recognition policies

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer, at a point in time or over the time as appropriate.

The following table provides information about the nature and timing of the satisfaction of performance obligation in contracts with customers, including significant payment terms and related revenue recognition policies.

11.1 Income from Telco Rebate of the Company, represents the rebate received from telecommunication institutes for the data usage.

11.2 The gain/(loss) on fair value of trees and live stock in Watawala Plantation PLC., a subsidiary of the Company, represents the unrealised gain from valuation of live stock and trees/timber at the reporting date.

11.3 Tender commission income mainly includes commission income received from foreign suppliers for securing contracts with the government to Sunshine Healthcare Lanka Limited amounting to Rs 60.9 Mn. (2024 – Rs. 129.6 Mn.).

11.4 As explained in Note 2.8.1, Service Income has been presented as Revenue with the business model change.

12.1 Staff costs

Directors' emoluments are included in compansation of Key Management Personnel note 41.1.A

14.1 Amount recognised in profit or loss

A. Current Taxes

Company
Tax liability of the Company and Group was calculated and accounted for at 30% for the year of assessment 2024/25. The applicable tax rate for LDL is 20%.

Lonach Dairy Ltd.
Lonach Dairy Limited enjoys a tax exemption period of five years from the year in which the enterprise commences to make profits or any year of assessment not later than two years reckoned from the date of commencement of commercial operations whichever is earlier, under Section 17 (2) of the Board of Investment of Sri Lanka Law No. 4 of 1978 and in accordance with the provisions of the Inland Revenue Act No. 10 of 2006.

With the enactment of the Inland Revenue Act No. 24 of 2017, which became effective from 1 April 2018, LDL commenced generating taxable income from the financial year ended 31 March 2020. Accordingly, LDL was entitled to utilise its accumulated tax losses brought forward against future taxable profits within a period of six years, in line with the provisions of the Act. The tax exemption period applicable to LDL expired prior financial year. Consequently, income derived from dairy operations will be subject to income tax at a rate of 20%.

14.2 Amount recognised in OCI

14.3 Amounts recognised directly in equity

There were no items recognised directly in equity during the year ended 31 March 2025.

14.4 Reconciliation between accounting profit and taxable profit

Group

Company

* N/M – Not meaningful

14.5 Tax losses carried forward

Management has presented the performance measure adjusted EBITDA because it monitors this performance measure at a consolidated level and it believes that this measure is relevant to an understanding of the Group's financial performance. Adjusted EBITDA is calculated by adjusting profit from continuing operations to exclude the impact of taxation, net finance costs, depreciation, amortization, impairment losses/reversals related to goodwill, intangible assets, property, plant and equipment and the premeasurement of disposal groups and share of profit of equity-accounted investees.

Adjusted EBITDA is not a defined performance measure in SLFRS. The Group’s definition of adjusted EBITDA may not be comparable with similarly titled performance measures and disclosers by other entities.

Reconciliation of adjusted EBITDA to profit from continuing operations – Group

16.1 Basic Earnings Per Share

The earnings per share is computed on the profit attributable to ordinary shareholders after tax and Non Controlling Interest divided by the weighted average number of ordinary shares during the year.

16.1.1 Number of shares

Compliance with section 56 and 57 of Companies Act No. 7 of 2007

As required by Section 56 of the Companies Act No. 07 of 2007, the Board of Directors of the company satisfied the solvency test in accordance with Section 57, prior to declaring the final dividend. A statement of solvency duly completed and signed by the Directors on May 28, 2025 has been audited by Messrs. KPMG.

17.1 Dividend paid during the year

Financial Assets

Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Classification and subsequent measurement of financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI (Fair value through OCI) – debt investment; FVOCI – equity investment; or FVTPL (Fair value through profit or loss).

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets – Business model assessment
The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group's continuing recognition of the assets.

Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument.

Financial assets – Subsequent measurement and gains and losses

Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial liabilities: trade and other payables and bank overdrafts.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

Derecognition

(a) Financial assets
The Group derecognised a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group entered into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets were not derecognised.

(b) Financial liabilities
The Group derecognised a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognised a financial liability when its terms are modified and the cash flows of the modified liability were substantially different, in which case a new financial liability based on the modified terms was recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) was recognised in profit or loss.

Classification of financial assets and financial liabilities
The following table provides a reconciliation between line item in the statement of financial position and categories of financial instruments.

19.1 Reconciliation of carrying amount

a. Group

Cost

Accumulated depreciation

• Assets in estates that are held under leasehold right to use have been taken into books of the Group retrospective from 18 June 1992. For this purpose, the Board of Directors of Watawala Plantation PLC is decided at its meeting on 8 March 1995 that those assets would be taken at their book value as they appeared in the books of the JEDB/SLSPC, on the date immediately preceding the date of formation of Watawala Plantation PLC.
• The assets shown above includes assets vested in the Watawala Plantation PLC by Gazetted notification on the date of formation of the subsidiary (18 June 1992) and all the investments made in the fixed assets by the subsidiary since its formation.
• Investment by the Group on mature and immature plantations are shown separately under biological assets – mature/immature plantations.
• The transfer of immature plantation to mature plantations commences at the time the plantation is ready for commercial harvesting.
• Land and building classified as investment properties in the respective entity level and classified as PPE at consolidated level are carried at revalued amounts.

b. Company

Cost

Accumulated depreciation

Carrying Value

19.2 Title restriction on property, plant and equipment

There are no restrictions that existed on the title of the property, plant and equipment of the Group as at the reporting date.

19.3 Acquisition of property, plant and equipment during the year

During the financial year, the Group acquired property, plant and equipment to the aggregate value of Rs. 1,269 Mn. (2024 – Rs. 735.9 Mn.).

19.4 Capitalisation of borrowing costs

There is no capitalisation of borrowing cost relating to the acquisition of property, plant and equipment by the Group during the year (2024 – Nil).

19.5 Amount of contractual commitments for the acquisition of property, plant and equipment

The commitments for the acquisition of property, plant and equipment as at the reporting date has been disclosed in Note 43. (2024 – Nil).

19.6 Impairment of property, plant and equipment

The Board of Directors has assessed the potential impairment loss of property, plant and equipment as at 31 March 2025. Based on the assessment, no impairment provision is required to be made in the financial statements as at the reporting date in respect of property, plant and equipment.

19.7 Property, plant and equipment pledged as security

Assets pledged as at 31 March 2025 are disclosed in note No 34.5.

19.8 Temporarily idle property, plant and equipment

There are no temporarily idle property, plant and equipment as at the reporting date.

19.9 Compensation from third parties for items of property, plant and equipment

There were no compensation received/receivable from third parties for items of property, plant and equipment that were impaired, lost or given up.

19.10 Fully depreciated assets

Fully depreciated assets value of 2,107 Mn. (2024-1,770 Mn.) is still in use.

Goodwill
Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of identifiable assets
and liabilities of acquired entity.

Goodwill arising from business combinations is included in intangible assets whereas goodwill on acquisition of associate is included in investment in associates and is tested for impairment as part of the overall balance.

The excess of the purchase price over the carrying amount of non-controlling interest, when the Group increases its interest in an existing subsidiary, is recognised in equity.

Goodwill is tested annually for impairment, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or Groups that are expected to benefit from the business combination which the goodwill arose.

Research and development costs
The costs on research activities undertaken with the prospect of gaining new scientific or technical knowledge is expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:

1. the technical feasibility of completing the intangible asset so that it will be available for use or sale.
2. its intention to complete the intangible asset and use or sell it.
3. its ability to use or sell the intangible asset.
4. how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.
5. the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
6. its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

Brand name
Brands acquired as part of a business combination, are capitalised as part of a Brand Name if the Brand meets the definition of an intangible asset and the recognition criteria are satisfied. Brand Names are reviewed for impairment, annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.

Computer software
Computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives and carried at its cost less accumulated amortisation and accumulated impairment losses. Costs associated with maintaining computer software programs are recognised as expense incurred.

Development costs that are directly attributable to the production of identifiable and unique software products controlled by the Group and that will probably generate economic benefits exceeding costs beyond one year are recognized as intangible assets and amortised over the useful lives.

Directly attributable costs, capitalised as part of the software product include the software development employee cost and an appropriate portion of relevant overheads. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. When the computer software is an integral part of the related hardware which cannot operate without the specific software is treated as property, plant and equipment.

Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in Statement of Profit or Loss as incurred.

Amortisation
Amortisation is recognised in Statement of Profit or Loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and brand name, from the date on which they are available for use. The estimated useful lives are as follows;

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

20.1 Reconciliation of carrying amount – Group

Group

20.1.1 Brand acquisition

The Group has recognised the brand "HEALTHGUARD" upon the acquisition of Healthguard Pharmacy Limited, on 19 December 2010 and the brand has been valued by an independent valuer, Quasar Capital Advisors (Pvt) Ltd. The value of the brand is tested for impairment on every reporting date. The Board of Directors has decided to amortize the brand for 20 years beginning from the year 2014/15.

20.1.2. Reconciliation of Carrying amount – Company

Company

Assessment of Impairment of Intangible Assets
The Board of Directors has assessed the potential impairment loss of intangible assets as at 31 March 2025. Based on the assessment, no impairment provision is required to be made in the financial statements as at the reporting date.

Title Restriction on Intangible Assets
There are no restrictions that existed on the title of the intangible assets of the Company/Group as at the reporting date.

Intangible Assets pledged as Security
None of the Intangible assets have been pledged as security as at the reporting date.

Acquisition of Intangible Assets During the Year
During the financial year, the Group acquired intangible assets to the aggregate value of Rs. 33 Mn. (2024 – Rs.75 Mn.).

Fully Amortised Intangible Assets in Use
Intangible assets include fully amortised computer software which are in use in the normal business activities to the gross carrying value of Rs. 153 Mn. (2024 – Rs. 16.5 Mn.).

Leasehold right to land of JEDB/SLSPC estates

The lease of JEDB/SLSPC estates handed over to the subsidiary, Watawala Plantation PLC for the period of 53 years are all executed. The leasehold rights to the land on all these estates are taken in to the books of the subsidiary as at 18 June 1992 immediately after formation of the subsidiary Watawla Plantation PLC in terms of a ruling obtained from the Urgent Issue Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. The bare land are revalued at the value established for this land by valuation specialists, DR Wickramasinghe, just prior to the formation of the subsidiary.

The leasehold rights to land is recorded in accordance with the Statement of Recommended Practice for the Right-to-Use of land on lease which was approved by the Council of the Institute of Chartered Accountants of Sri Lanka on 19 December 2012. Corresponding liability is shown as a lease payable
to JEDB/SLSPC.

22.1 Biological assets – Bearer

Investments in biological assets-plantations since the formation of the Company have been classified as shown above and includes bearer biological assets comprising mainly tea and palm plantations. Bearer biological assets together with any unmanaged biological assets are stated at cost.

The requirement of recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on 2 March 2012, by the Institute of Chartered Accountants of Sri Lanka. Accordingly, Watawala Plantations PLC, a subsidiary of the Company has elected to measure the bearer biological assets at cost using LKAS 16 – “Property, Plant and Equipment”.

22.2 Biological assets – Consumables

– Expected rate of return p.a 17.5% (2024 – 17.6%)

– Maturity for harvesting – 4 years (2024 – 4 years)

Immature consumer biological assets comprising trees under 5 years old are carried at cost less accumulated impairment losses.

22.2.1 Measurement of fair values

The valuation of consumable biological assets was carried by Mr Weerasinghe Chadrasena, an independent Incorporated Valuation Surveyor, using Discounted Cash Flows (DCF) methods. The Valuation Report dated 31 March 2025 has been prepared based on the physically verified timber statistics provided by the Group.

The future cash flows are determined by reference to current timber prices

(a) The fair value measurements for the timber have been categorised as Level 3 fair values based on the inputs to the valuation techniques used. The fair value measurements of livestock have been categorised as Level 2 fair values based on observable market sales data.

(b) Level 3 fair values

The following table shows a breakdown of the total gains (losses) recognised in respect of Level 3 fair values (Timber).

(c) Valuation techniques and significant unobservable inputs

Following table shows the valuation techniques used in measuring Level 3 fair value of consumable biological assets as well as the significant unobservable inputs used for the valuation as at 31 March 2025.

22.2.2 Sensitivity analysis

The financial impact on the value appearing in the Statement of Financial Position due to change of selling price and variation of discount rate is given below.

Sensitivity variation sales price (using 10% estimated variation)
Simulations made for the timber show that a rise or decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:

Sensitivity variation discount rate (using 1% variation)
Simulations made for the timber trees show that a rise or decrease by 1% of the discount rate has the following effect on the net present value of biological assets:

22.3 Biological assets – Livestock

22.3.1 Valuation techniques and significant unobservable inputs

22.3.2. Sensitivity analysis

The fair value measurements of livestock have been categorised as Level 3 fair value based on assumptions used.

Sensitivity variation sales price (using 10% estimated variation)
Simulations made for livestock show that an increase or decrease by 10% of the estimated future selling price has the following effect on the fair value of biological assets:

Sensitivity variation Cost (using 10% variation)
Simulations made for livestock show that an increase or decrease by 10% of the estimated future cost has the following effect on the fair value of biological assets:

Sensitivity variation discount rate (using 1.0% variation)
Simulations made for livestock show that an increase or decrease by 1% of the estimated future discount rate has the following effect on the fair value of biological assets:

Sensitivity Variation on yield (using 1.0% variation)

LKAS 41-Ammended-Valuation of growing crops on bearer plants
The amendment became effective for the period beginning on or after 1 January 2016.The growing crops on bearer plants should be fair valued and recognised in the Financial Statements.

The volume of produce growing on bearer plants are measured considering the estimated crop of the last harvesting cycle of the year as follows,

Tea – Three days crop (50% of 6 days cycle),

Oil palm – Five days crop(50% of 10 days cycle)

Produce that grows on mature bearer plantations are measured at fair value less cost to sell. The value of the unharvested green leaves is measured using the Tea commissioner’s formula for bought leaf and the value of unharvested fresh fruit bunches (FFB) of oil palm is measured using the actual price used to purchase FFB from out growers.

Risk management strategy related to agricultural activities

Regulatory and environmental risks
The Group is subject to laws and regulations in various countries in which it operates. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws.

Supply and demand risk
The Group is exposed to risks arising from fluctuations in the price and sales volume. When possible, the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analyses for projected harvest volumes and pricing.

Climate and other risks
The Group’s plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and industry pest and disease surveys.

23.1 Reconciliation of carrying amount

Group

Company

23.2 Details of land and building under Investment Property

Lands and buildings were revalued as at 31 March 2025, by Mr Lochana I Silva, a fellow member of the Royal Institute of chartered serveyors (UK), a professional valuer in Sri Lanka. The fair value is determined based on an open market value using existing use basis.

The Group policy is to fair value all the Investment Properties by an independent professional valuer every three (3) years period. However the Management carry out fair value assessment annualy.

23.3 Measurement of fair values

Fair value hierarchy
The fair value of investment property was determined by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued.

The fair value measurement of all of the investment properties has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.

Valuation techniques and significant unobservable inputs
The table below sets out the significant unobservable inputs used in measuring land and building categorized as Level 3 in the fair value hierarchy as at 31 March 2025.

Method of valuation

Re-valued using income approach
Following investment properties have been valued using the income approach, in accordance with SLFRS 13 – Fair Value Measurement and LKAS 40 – Investment Property, as these properties are currently rented out and generate regular rental income. The income approach involves discounting the estimated future net cash flows to their present value using market-derived discount rates.

Re-valued using direct comparision approach
When the rental value of a specific property is unavailable, but there is evidence of the sale price for comparable properties in the area, this approach can be applied. In such instances, the capitalised value of the property is determined by directly comparing it to the capitalised value of similar properties in the vicinity.

23.4 Income from Investment Property

Company

24.1 Group’s Indirect Holdings

Based on the assessment carried out, the Board is of the view that there was no impairment as at reporting date.

Changes to the group structure

24.2 Investment in Subsidiaries

24.2.1 Investment in a Subsidiary during FY 2023/24

The Board of directors of SUN at the meeting held on 18 January 2024 resolved to infuse a sum of Sri Lanka Rupees Five Hundred Million (Rs. 500,000,000/-) into the capital of it's subsidiary SST. SST accordingly capitalized such sum of Sri Lanka Rupees Five Hundred Million (Rs. 500,000,000/-) by the issue of fully paid ordinary shares to the Company.

24.2.2 Investment in a Subsidiary during FY 2024/25

On 6 February 2025, Healthguard Pharmacy Ltd issued 12,500,000 shares Sunshine Healthcare Lanka Ltd for Rs. 400 Mn.. Healthguard Pharmacy Ltd. is a fully owned subsidiary of Sunshine Healthcare Lanka Ltd.

24.3 Changes in NCI

24.3.1 Changes In NCI during FY 2023/24

On 3 August 2023, LMPL, which is a subsidiary of SHL, became a 100% ownership of Lina Spiro (Private) Limited (LSPL) with the acquisition of remaining Non-Controlling Interest of 49%. The consideration for this purchase was satisfied by the issuance of new ordinary (voting – removed) shares in LMPL to Celogen for a consideration of Rs. 307 Mn.. As a result of this transaction, the effective shareholding in LMPL held by the SHL diluted from 90.62% to 71.6%.

24.3.2 Change In NCI during FY 2024/25

24.3.2.1 Capital Infushion of International Finance Corporation (IFC)

On 6 May 2024, International Finance Corporation (IFC) invested a total of Rs. 3,269,999,800 in SHL. In consideration of this investment, SHL issued 1,905,239 ordinary voting shares to IFC on 3 October 2024. Following this transaction, SUN now holds 85.27% of the shareholding in SHL, while IFC holds the remaining 14.73%.

24.3.2.2 Changes in holding in Lina Manufacturing Pvt Ltd.

On February 6, 2025, Lina Manufacturing (Pvt) Ltd issued 34,253,355 shares to Sunshine Healthcare Lanka Ltd for Rs. 875 Mn. and 10,051,929 shares to Celegon Lanka (Pvt) Ltd for Rs. 257 Mn.. As a result of this transaction, Sunshine Healthcare Lanka Ltd.'s effective shareholding in LMPL increased from 71.6% to 74%.

Accordingly, SHL holding in Lina has increased by 2.4% . The carrying amount of Lina Manufacturing Ltd Net assets in the Group's consolidated financial statements on the date of the acquisition was Rs. 3,361,300,507.

The decrease in equity attributable to owners of the Company comprised of Rs. 16.4 Mn. increase in retained earnings.

24.4 Amalgamation of a Subsidiary

24.4.1 Amalgamation of Subsidiary during FY 2023/24

Gordon Frazer & Bosanquate Skrine company Ltd was amalgamated with SST a fully owned subsidiary of SST with effect from 27 September 2023. Accordingly, the book value of Gordon Frazer & Bosanquate Skrine company Ltd was amalgamated with SST and SST continues as the surviving entity.

24.4.2 Amalgamation of Subsidiary during FY 2024/25

SUN has amalgamated with SPL, a fully owned subsidiary of SUN effective from 1 October 2024. Accordingly, the book value of SPL was amalgamated with SUN and SUN continues as the surviving entity.

24.4.3 Group restructuring during FY 2024/25

On 31 December 2024, SUN has transfered its shareholding in SST, a wholly-owned subsidiary, to SCL, wholly-owned subsidiary of the Company. The transaction involves the transfer of 4,716,545 shares in SST, valued at a total consideration of Rs. 1,940,000,000. As consideration for the transfer, SCL issued 31,219,826 new shares amounting to Rs. 1,940,000,000 to SUN.

24.5 Assessment of Impairement of Subsidiary

The Board of Directors of the Company carried out an internal assessment of the potential implications of prevailing economic condition on its subsidiaries as at 31 March 2025 and are of the view that there is no additional provision for impairment needed against its investments in subsidiaries as at reporting date.

24.6 Goodwill

The aggregate effects of acquisition of subsidiaries are as follows:

24.6.1 Impairment of goodwill

The Company does not have any investment in equity accounted in Investee as of 31 March 2025.

Refer accounting policies in Note 18.

Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss.

The Group’s financial instruments are summarised as follows:

Information about the Group’s exposure to credit and market risk, and fair value measurement, is included in Note 39 and 40.

26.1 Fair Value through Profit or Loss – FVTPL

26.1.1 Investment in Quoted Shares

Group and Company

26.1.2 Investment in Unit Trusts

Group and Company

The Investment in Unit Trusts comprises investments made in Capital Alliance Investments Ltd. and NDB Wealth Management Ltd., a Hatton National Bank Custody Trustee Services. The average annual yield of the two investments are as follows;

26.1.3 Investment fund

26.2 Fair Value through Other Comprehensive Income – FVOCI

26.2.1 Investment in Unquoted Shares

26.2.2 Basis of Computation and Unobservable Input

The Free Cash flow to Firm method was used to determine the fair value of the unquoted share investments. The fair value measurement was categorised as a Level 3 fair value based on the inputs in the valuation technique used.

The key assumptions used in the estimation of the fair value are set out below. Key assumptions are determined based on management experience, expectation of future outcome taking into account past experience adjusted for anticipated growth, historical data and industry norms.

Sensitivity Analysis

Group and Company

Equity securities designated as at FVOCI*
As at 1 April 2018, the Group designated the investment shown below as equity securities at FVOCI because these equity securities represent investment that the Group intends to hold for the long term for strategic purposes.

26.3 Investments measured at Amortised Cost

26.3.a Debentures

Company/Group has invested Rs. 100 Mn. in listed rated unsecured redeemable Type A -5 years debentures issued by National Development Bank with fixed Interest Rate of 11.9% per annum payable semi-annually.

27.1 Composition of net and gross deferred tax asset/(liability)

27.2 Deferred tax asset (gross)

27.3 Deferred tax liability (gross)

27.4 Reconciliation of Deferred Tax Liabilities and Deferred Tax Assets

Group

Company

27.5 Reconciliation of Deferred Tax Liabilities and Deferred Tax Assets included under Asset Held for Sale and Liability held for sale

The deferred tax assets and liabilities are arrived by applying the relevant tax rate applicable for the sources of income of the Company and its subsidiaries.

With the introduction of the Inland Revenue Act No. 24 of 2017 which became effective from 1 April 2018, the Company will have taxable income from the year ended 31 March 2020. As such, the Company will be eligible to claim its brought forward tax losses against its future taxable income within a period of 6 years.

Accordingly, during the year ended 31 March 2025, the Group has not recognised a deferred tax asset in 2025 (2024 – Rs. 420 Mn.) arising from brought forward tax losses as at 31 March 2025 after assessing the availability of future taxable profits for utilisation based on the 5 year profit projection approved by the Board. The deferred tax asset recognised will be tested for impairment on an annual basis and deferred tax asset recognised may written off if required. Accordingly, unrecognised deferred tax asset as at reporting date was Nil. (2024 – Rs. 156 Mn.).

Deferred tax liability arising from revaluation gain
Due to uncertainties that exist on the interpretation of the new tax law relating to freehold land for tax purposes, significant judgement was exercised to determine the provision required for deferred taxes on capital gains applicable to freehold land.

28.1 Provision for impairment of inventories

The Board of Directors has assessed the potential impairment loss of inventory as at 31 March 2025 by considering the potential impact of current econimic condition on net realisable value based on the implications on subsequent selling prices and cost to complete in additional to the normal assessment process.

The accounting policy for trade and other receivables has been given in Note 18.

30.1 Provision for impairment of trade receivables

B. Credit and market risks, and impairment losses
Information about the Group’s exposure to credit and market risks, and impairment losses for trade receivables is included in Note 40.

The accounting policy for amount due from related parties has been given in Note 18.

All outstanding balances are short term in nature and there were no special terms and conditions pertaining to the outstanding balances.

Credit and market risks, and impairment losses
Information about the Group’s exposure to credit and market risks, and impairment losses for amount due from related parties is included in Note 41.

Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand with a maturity of three months or less.

Statement of Cash Flows
The Statement of Cash Flows has been prepared using the Indirect Method of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard (LKAS) 7, Statement of Cash Flows.

Cash and cash equivalents comprise short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. The cash and cash equivalents include cash in-hand, balances with banks and short term deposits with banks.

For cash flow purposes, cash and cash equivalents are presented net of bank overdrafts.

32.1 Bank Overdrafts