Professional Documents
Culture Documents
Contents
Cover Story Vision / Mission Financial Highlights CEOs Review Profile Board of Directors Kotmale, at a Glance Corporate Governance Report of the Directors Financial Information Statement of Directors Responsibility Auditors Report Income Statement Balance Sheet Statement of Changes In Equity Cash Flow Statement Notes to the Financial Statements Investors Information Five Year Financial Summary Notice of Meeting Form of Proxy 22 23 24 25 26 27 28 40 42 43 47 1 2 3 6 10 11 16 17
Vis Mis
Our Vision
To be the leading producer of food and beverage products for the local and international market.
Our Mission
Providing the nation with quality and affordable food and beverage products using state of the art technology and local expertise, continuously seeking opportunities for growth and creating an environment that develops, motivates and rewards all employees whilst providing consistent returns to all its stakeholders.
Kotmale Holdings PLC 2
Financial Highlights
Group
Operating Results Turnover Gross Profit Net Finance Cost Profit before taxation Balance Sheet Highlights Non - Current Assets Current Assets Current Liabilities Non - Current Liabilities Share Capital & Reserves Total Assets Market/Share Holders Information Market Price per Share-at the year end Earnings per Share Net Assets per Share Interest Cover Debt/ Equity Ratio Borrowings / Total assets Price Earnings Ratio
2009/10 Rs 000s
2008/09 Rs 000s
Gross Profit
180 203 258 289
Total Assets
562 685 598 763 740
86
01
30
11
76
Rs in million
Rs in million
Rs in million
87
Rs in million
07/08
07/08
07/08
08/09
08/09
08/09
07/08
09/10
09/10
09/10
08/09
2005
2006
2005
2006
2005
2006
2005
2006
Note - The figures stated for financial year 2007/08 reflect performance for a 15 month period, consequent to the Company changing its financial year from 31st December to 31st March.
3 3
Year
Year
Year
Year
09/10
87.1Mn Rs777Mn
Rs
profit before tax 2010
This also saw our consolidated gross profit record a growth of 12% to stand at Rs 289 Mn., although our consolidated operating profit declined 2% from Rs 99.2 Mn. to Rs 97.2 Mn. The latter is primarily due to increased investments in marketing and HR activities which in turn increased administration expenditure. Finance costs within the group saw a significant reduction of 57 % from Rs 23.6 Mn. the previous year to Rs 10.1 Mn. this year, attributed to prudent cash flow management, added focus on profit making areas of the business and less emphasis on powdered milk business. The positive results now allow us to pursue the long planned expansion of our operations and focus more diligently on accelerating our business performance. The Group recorded a ROE of 18.2% during the year, a decline once again reflective of the large Withholding tax component. However, the positive facet to this is that our shareholders were availed handsome returns this year with a dividend of Rs 2 per share for the first time in the history of the Company since it became Kotmale Holdings PLC. The directors have also made a further recommendation of Rs 2, for which shareholder approval is awaited. This will bring the total dividend for the year to Rs 4 per share. Business Sector Performance As mentioned previously, the dairy industry did have its challenges although Kotmale continued on the strategic plans we had already embarked on during the last two years. We recognise increasing competition in the market but are confident that the strategies we have employed in maintaining standards, continuous product development, focused expansion and operational improvements will be the USPs to strengthening and nurturing our business. One of the key focus areas this year was the expansion of our production facilities. Given increasing energy and other relevant costs, we are strong proponents of good cost management initiatives and based on analyses conducted, embarked on better usage of resources and facilities. With our machinery possessing the required capacity, one of the shortcomings we observed was the lack of support utilities to ensure we optimise on what we have. Common resources have been enhanced and boiler and generator capacities etc., have been increased. Our focus now will be in enhancing production capacity in anticipation of the envisaged future growth we foresee in the next few years. Liquid Milk Sector One of our best performing sectors during the year, the liquid milk sector was also primarily responsible for the good results we posted for the year, increasing turnover by 28% and offsetting the negative impacts we experienced in the
The positive results also display the value that the market places on our business and the potential future growth that can be envisaged tangibly in the current environment.
Profit Before Taxation
01
30
11
76
Rs in million
87
Year
2007/08 - Reflects 15 Month period
07/08
08/09
2005
2006
09/10
Mr. Jude Fernando Executive Director/CEO MBA, FCMA, Dip. M (UK), MCIM, Mr. Fernando brings to the Board over 17 years of experience in the fields of Supply Chain Management, Finance, Strategic Planning and International Marketing. Prior to joining the Group, Mr. Fernando held the position of Director Supply Chain, at Hemas Manufacturing (Private) Limited. He joined the Hemas Group following a career in Finance at Royal Ceramic PLC where he headed the finance operations as Finance Manager. Mr. Fernando is also a Director of Dunamis Capital PLC. He is a Fellow Member of the Chartered Institute of Management Accountants (UK), a member of the Chartered Institute of Marketing (UK) and holds a Masters Degree in Business Administration from the University of Wales.
Mr. Dinesh Schaffter Non-Executive Director ACMA, LLB Mr. Dinesh Schaffter counts over 20 years experience in the Financial Services and Manufacturing sectors. He also serves as a Director of Dunamis Capital PLC, and its subsidiaries. Mr. Schaffter is an Associate Member of the Chartered Institute of Management Accountants (UK), and holds a Bachelor of Law Honours Degree (LLB) from the United Kingdom.
Kotmale Holdings PLC 10
Kotmale, at a Glance
Built on an ethos of quality, wholesome products that form the foundation for a legendary reputation, Kotmale is now synonymous with dairy production in Sri Lanka, amply augmented with an extensive product portfolio developed over an expanse of over three decades. Kotmale was established in 1979, in the upcountry region of Patana, sitting serenely surrounded by picturesque mist covered hills within the Kotmale Valley. Creating a sustainable dairy industry The primary precept of Kotmale at its inception was the development of a dairy industry that would be founded on sustaining the thousands of dairy farmers around the country. These farmers most often eked meagre incomes from their produce which permeated to poverty ridden lifestyles, lack of knowledge and bad cash management. Kotmales intervention with these farmers since 1979, therefore has been a holistic one, constructed on a 360 degree platform that empowered and enabled the dairy farmer, while giving the company the required fresh milk to develop an extensive product portfolio, which in turn has seen a considerable development of the national dairy industry. Today, Kotmale is the third largest fresh milk collector in the country, purchasing over 12 million litres of milk annually with most of it sourced directly from more than 8,000 farmers across the central region of the country. The long term relationship that has been nurtured not only with the farmer but with his extended family has created a firm foundation of commitment and loyalty among the dairy farmers within our network due to the tangible development they have seen within their families and communities. Animal health and hygiene remains key to maintaining our stringent quality standards. Our technical teams therefore become an integral link in not only the imparting of knowledge, skills and technical know how, but also in forging a strong bond between the farmer and the company. Transforming raw milk into delightful experiences Pooling extensive resources within three manufacturing plants and a widespread milk collection centre network across the country, the three hundred strong team at Kotmale enjoy the challenges of creating tasteful masterpieces from the raw milk that is collected from our dairy farmers each day. Our entire range of ice-creams, pasteurised milk and UHT (Ultra Heat Treated) milk, yoghurts and curd are produced in the automated and semi-automated manufacturing plant, located in Colombo. The Cheese Factory manned by an efficient team of Cheese Masters is located in the picturesque town of Bogahawatte in close proximity to Talawakelle, with its rolling tea plantations and pure unpolluted environment, the ideal location for the production of cheese. The range manufactured here includes the entire Kotmale range of cheeses and fresh cream. Kotmale has been manufacturing cheese for over three decades, with an unmatched expertise that far surpasses those in existence within the local industry. Maintenance of rigorous
11
Today, Kotmale is the third largest fresh milk collector in the country, purchasing over 12 million litres of milk annually with most of it sourced directly from more than 8,000 farmers across the central region of the country.
hygienic standards including a scientific food safety assurance system are of paramount importance, although the age old traditions of cheese making, which imbues our cheese with its uniqueness, remains inherent in the manufacturing process. Quality and R&D Imperatives The quality control systems that encompass the A to Z of our manufacturing process, from raw milk collection to packaging are comprehensive with each stage of production being subjected to a rigorous testing and approval process, ensuring the end product exceeds food regulatory standards. In addition, Research and Development initiatives which
are spearheaded in Colombo has extensive investment into improvement of the existing product portfolio and in new product development aligned to evolving consumer trends, all of which aspire to eventually exceed changing customer expectations. Quality and efficiency in production Producing quality dairy products is not limited to good raw materials and stringent quality standards. What is also required is a significant emphasis on maintaining an efficient cold chain, which monitors storage facilities at production plants, delivery vehicle temperatures, hygienic standards, astute logistical planning and apt procedures for loading and unloading of these perishable products. Kotmales concentration therefore extends beyond the norm, focusing on managing quality across the board to ensure that the cold chain is maintained stringently and cohesively from manufacturing stage to selling point. This includes auditing and constant monitoring of distributor facilities in a network that spans the entire country as well as in supermarkets and retail outlets, with the necessary advice and technical know how imparted by our quality assurance team. Where People make the difference Ours is a product that has the proactive intervention of people from start to finish; collecting our raw material from people, our products being manufactured by people whose skills and talent come to the fore in creating the diverse range that
12
13
Products
UHT Milk & Pasteurised Milk One of the largest producers of both pasteurised and UHT milk in the country, Kotmale now enjoys market leadership in this category. Available in plain and flavoured variants, our flagship product portfolio encompasses the unique creamy flavour and natural goodness of the purity of upcountry milk in its chocolate and vanilla flavours.
Cheese Producing some of the finest cheeses available in Sri Lanka, Kotmales selection of cheeses in both Swiss and Processed cheeses, remain incomparable to any other producers range available in the market today. One of our considerable advantages is that Kotmale specialises in manufacturing cheese devoid of any preservatives. Supplying to both the retail and hospitality sectors, the Kotmale cheese board includes Swiss, Plain and Spiced Balls, Plain and Spiced Processed and Cheese Spread, as well as an expansive range of spiced cheeses. Added to this range is Feta, Cottage, Paneer and Mozzarella, available in both 100g packs and 3 kg bulk packs.
Fresh Cream The largest producer of fresh cream in Sri Lanka, Kotmale Fresh Cream is the purest form of pure fresh milk and is sought after by housewives and the hospitality industry alike for use as whipped cream in desserts, toppings and exotic recipes.
14
Ice Cream Multiple flavours collated in a diverse range of 100% dairy ice cream, Kotmales rich and creamy ice cream encompasses the natural goodness of pure fresh milk. Manufactured to an international recipe, the staple flavours of vanilla, chocolate, strawberry and mango present the rich and creamy flavour of farm fresh milk, while the Fresh Fruit range infuses pieces of fresh fruit into the ice cream. Making ice cream a truly exotic experience is synonymous with our Signature Range, a truly world class range of products renowned for its unsurpassed quality and taste with a smorgasbord of flavours including Wild Berry, to Richy Rich and Butter Pecan. We are also proud to be just one of the few dairy manufacturers in Sri Lanka to utilise fresh milk and fresh cream as primary ingredients in our ice cream, exampled amply by the natural creamy taste that is unique to our products.
Yoghurt Packaged distinctively in square cups and containers in a dual range of set yoghurt and non-fat yoghurt, the goodness of natural yoghurt is expertly contained within our product. Produced with pure fresh milk into which special cultures are added to give it the uniqueness that makes it a Kotmale product. Yoghurt is available islandwide with the nonfat variety increasingly capturing the health conscious market as well.
Curd Kotmale curd is abundant with rich dairy goodness. It is manufactured using home-grown fresh milk. The product has earned a name for its quality, amongst the reputed chefs in Sri Lanka. Owing to its rich dense texture and appealing flavour, the product is served as a dessert with treacle and it is also used for cooking and in the preparation of other desserts as well. Currently, Kotmale curd is distributed along the hotel and catering chain.
15
Corporate Governance
The Directors acknowledge their responsibility for the Companys corporate governance and the system of internal control. The directors are responsible to the stakeholder for providing strategic direction to the company and safeguarding the assets of the business. Currently the Board comprises of one independent non-executive director, one non-executive director and two executive directors all of whom possess a broad range of skills and experience. The Board reviews strategic and operational issues, approves interim and annual financial statements and annual budgets, assesses performance and ensures compliance with all statutory and regulatory obligations. Advice and guidance is provided to the senior management team at monthly performance review meetings. These meetings provide an opportunity to assess progress and ensure accountability of the senior management team. The Board is satisfied with the effectiveness of the system of internal control in the Company for the period up to the date of signing the Financial Statements. Kotmale Holdings PLC is in the process of regularising the composition of the Board of Directors to comply with the requirements of the CSE Listing Rules. Although the Company has two non-executive directors on its board and meets the requirements of Rule 7.10.1 (a), it is currently not in compliance with Rule 7.10.2 (b) which requires two or onethird of the non-executive directors (whichever is higher) to be independent. The independent non-executive director on the Board, Mr. Nihara Rodrigo has submitted a declaration of his independence. Mr. Rodrigo does not qualify as independent against the criteria set out in the listing rules because he is a director of other companies in which a majority of the other directors of the Company are employed or are directors. However the Board is of the opinion that this does not affect his independence as he does not have a business relationship or a significant shareholding in Kotmale Holdings PLC. The proper constitution of Remuneration and Audit committees that meet the requirements of the CSE listing rules have been hampered due to the lack of adequate independent directors within the Company. The Company is in the process of regularising the composition of the Board to comply with the requirements of the listing rules. The Remuneration Committee currently consists of two non-executive directors Mr. Nihara Rodrigo and Mr. Dinesh Schaffter with Mr. Rodrigo functioning as the Chairman. The committee therefore does not comply with the criteria of listing rule 7.10.5(a). The remuneration policy of the Company is to base remuneration on both individual and company performance whilst recognising the importance of attracting and retaining high caliber personnel. The recommendations of the Remuneration Committee on payments to executive directors were duly adopted by the Board of Directors. The Company currently does not meet the requirements of the listing rules with respect to an audit committee.
16
The financial statements of the Company are detailed in pages 24 to 39 of the Annual Report. Significant Accounting Policies The Accounting Policies adopted in preparation of the financial statements are presented on pages 28 to 31. There were no changes in the Accounting Policies adopted by the Company during the year under review. Dividends For the year ended 31st March 2010, in addition to the interim dividend of Rs.2/- per share paid on 5th November 2009, the Directors have recommended a payment of a final dividend of Rs. 2/- per share amounting to Rs.62,800,000/= on Ordinary Shares.
17
The profiles of the Directors are detailed on page 10 of the Annual Report. Retirement by Rotation and Re-Election Mr. Nihara E Rodrigo retires by rotation in terms of Article 100 and being eligible, offers himself for re-election. The continuing Directors recommend his re-election. Related Party Transactions Related party transactions have been declared at meetings of the Directors and are detailed on pages 38 and 39.
Name of Director Mrs. Manjula Mathews Mr. Dinesh Schaffter Mr. M S Jude Fernando Director Director Director
Position
Directors Shareholding The direct and indirect shareholdings of the Directors at the beginning of the year and as at end of the year are as follows:
No. of Shares 2010 Mrs. Manjula Mathews Mr. Dinesh Schaffter Mr. M S Jude Fernando Mr. Nihara E. Rodrigo 200,000 862,988 Nil Nil
18
19
Financial Information
Statement of Directors Responsibility Auditors Report Income Statement Balance Sheet Statement of Changes In Equity Cash Flow Statement Notes to the Financial Statements Investors Information Five Year Financial Summary
22 23 24 25 26 27 28 40 42
The Directors confirm that to the best of their knowledge, all statutory payments relating to employees and the Government that were due in respect of the Company and its subsidiaries as at the Balance Sheet date have been paid or where relevant, provided for. By order of the Board,
22
Auditors Report
INDEPENDENT AuDITORS REPORT TO THE SHAREHOLDERS OF KOTMALE HOLDINGS PLC. Report on the Financial Statements We have audited the accompanying financial statements of Kotmale Holdings PLC (Company), the consolidated financial statements of the Company and its subsidiaries which comprise the balance sheets as at 31st March 2010, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31st March, 2010 and the financial statements give a true and fair view of the Companys state of affairs as at 31st March, 2010 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. In our opinion, the consolidated financial statements give a true and fair view of the state of affaires as at 31st March, 2010 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company. Report on Other Legal and Regulatory Requirements In our opinion, these financial statements also comply with the requirements of Section 151 (2) and 153 (2) to 153 (7) of the Companies Act No. 07 of 2007.
23
Income Statement
Group For the, Notes Year ended 31.03.2010 Rs. 1,348,175,880 (1,059,270,478) 288,905,402 1,910,904 (04) 7,984,320 (130,749,669) (65,449,387) (5,368,501) (05) (06) (07) (10,172,075) 87,060,994 (21,555,452) 65,505,542 Year ended 31.03.2009 Rs. 1,352,959,089 (1,095,205,514) 257,753,575 1,910,904 10,636,297 (104,135,385) (59,737,431) (7,189,448) (23,681,810) 75,556,702 (12,034,736) 63,521,966 Year ended 31.03.2010 Rs. 136,216,924 (1,242,893) (1,382,670) 133,591,361 (721,203) 132,870,158 Company Year ended 31.03.2009 Rs. 5,630,492 (3,816,935) (5,835,812) (4,022,255) (1,314,651) (5,336,906)
Revenue Cost of sales Gross profit Amortisation of grant Other income Distribution expenses Administrative expenses Impairment of goodwill Finance expenses Profit / (Loss) before tax Taxation Net profit / (loss)
(03)
Earnings per share Basic earnings / (loss) per share (08) 2.09 2.02 4.23 (0.17)
Dividends per share Interim paid Final proposed 2.00 2.00 2.00 2.00 -
The accounting policies and notes from pages 28 to 39 form an integral part of these financial statements.
Kotmale Holdings PLC 24
Balance Sheet
As at, Notes 31.03.2010 Rs. Group 31.03.2009 Rs. 31.03.2010 Rs. Company 31.03.2009 Rs.
ASSETS Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries
215,400,060 215,400,060
215,400,000 215,400,000
Current assets Inventories Trade and other receivables Prepayments, deposits and advances Amounts due from related parties Short term investments Cash at banks and in hand Total assets EQuITY AND LIABILITIES Capital and reserves Stated capital Reserves
(16) (17)
Non-current liabilities Deferred liability Deferred tax Interest bearing borrowings Retirement benefit obligations Current liabilities Trade and other payables Amounts due to related parties Income tax payable Interest bearing borrowings Bank overdrafts Total liabilities Total equity and liabilities Net assets per share
4,299,504 4,829,801 32,533,537 10,524,508 52,187,350 141,654,299 7,046,611 3,928,877 609,327 153,239,114 205,426,464 739,585,815 17.01
6,210,408 5,687,263 28,292,501 8,054,002 48,244,174 138,700,806 8,684,295 14,545,161 2,138,989 19,597,007 183,666,258 231,910,432 763,364,241 16.93
I certify that these financial statements have been prepared in compliance with the requirements of the Companies Act No.07 of 2007. (Sgd.) Ranjith Thenuwara Head of Finance The Board of Directors is responsible for the preparation and presentation of these financial statements. Signed for and on behalf of the Board, (Sgd.) Jude Fernando Director / CEO July 05th 2010 (Sgd.) Manjula Mathews Director
The accounting policies and notes from pages 28 to 39 form an integral part of these financial statements.
25
Balance as at 1st April, 2008 Revaluation surplus Deferred tax attributable to revaluation Profit for the year Balance as at 31st March, 2009
Balance as at 1st April, 2009 Profit for the year Dividends paid Balance as at 31st March, 2010
314,000,000 314,000,000
130,522,781 130,522,781
3,054,017 3,054,017
Company
Balance as at 1st April, 2008 Loss for the year Balance as at 31st March, 2009 Balance as at 1st April, 2009 Profit for the year Dividends paid Balance as at 31st March, 2010
314,000,000
1,269,472
1,784,545
(62,800,000) 62,851,419
The accounting policies and notes from pages 28 to 39 form an integral part of these financial statements.
26
Cash flows from operating activities Profit / (loss) before tax Adjustments for : Amortisation of grant Impairment of goodwill Interest expenses Depreciation Provision for gratuity Profit on sale of property, plant & equipment Reversal of VAT Expenses charge on the revaluation Amortisation of share issue expenses Operating profit before working capital changes Decrease in inventories Decrese / (increase) in trade & other receivables Decrease / (increase) in prepayments, deposits Decrease / (increase) in amounts due from related parties (Decrease) / increase in trade & other payables (Decrease) / increase in amounts due to related parties Cash generated from operations Interest paid Gratuity paid Tax paid Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant & equipment Effect of property, plant & equipment transfers Proceeds from sale of property, plant & equipment Movement in investment Net cash used in investing activities Cash flows from financing activities Movement in Finance lease Dividends paid Movement in Long term borrowings Net cash used in financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Analysis of cash and cash equivalents Cash at banks Cash in hand Bank overdrafts Cash and cash equivalents at the end of the year
87,060,994 (1,910,904) 5,368,501 10,172,075 28,342,700 3,243,070 132,276,436 4,357,079 (36,284,058) 7,307,256 100,482,232 2,953,493 (8,684,295) 202,408,143 (10,172,075) (772,564) (29,911,464) 161,552,040
75,556,702 (1,910,904) 7,189,448 23,681,810 27,471,581 1,066,091 (150,675) 222,065 3,957,272 2,224,728 139,308,118 31,497,796 (55,105,289) (19,261,150) (16,610,782) 42,280,338 2,646,395 124,755,426 (23,681,810) (1,427,799) (11,891,616) 87,754,201
133,591,361 1,277,037 134,868,398 (64,637,732) 15,549,007 (785,440) 84,994,233 (1,277,037) (2,890,195) 80,827,001
(4,022,255) 5,835,812 2,224,728 4,038,285 3,778,667 4,463,548 219,500 12,500,000 (5,835,812) 6,664,188
(60) (60)
(2,239,199) (62,800,000) 8,270,123 (56,769,076) 51,545,995 19,364,870 70,910,865 71,295,126 225,066 (609,327) 70,910,865
(2,743,665) (45,269,228) (48,012,893) 35,602,922 (16,238,052) 19,364,870 38,762,885 198,992 (19,597,007) 19,364,870
The accounting policies and notes from pages 28 to 39 form an integral part of these financial statements.
28
29
(d) Leased assets Where assets are financed by an agreement under which substantially all the risk and rewards of the ownership are transferred to the lessee, such assets are recorded in the balance sheet as property, plant and equipment at their cash price. The total interest payable is accounted as interest in suspense, and the corresponding credit is recorded as an amount payable to the lessor, the installments paid are used to reduce this liability. An amount equal to the interest charges for the year is transferred from the interest in suspense account to the income statement. (e) Impairment of assets The Group assesses, at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are 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.
30
(b) Defined contribution plan Employees Provident Fund and Employees Trust Fund. All the employees who are eligible for Employees Provident Fund and Employees Trust Fund contributions are covered by relevant contribution funds in line with respective statutes and regulations. Contribution to provident fund and trust fund covering the employees are recognised as expenses in the income statement in the period in which it is incurred.
31
(03) REVENUE Liquid Milk based products Milk powder Less-Nation Building Tax
(04) OTHER INCOME Dividend income Interest income Over provision of bad debts Profit from sale of property, plant & equipment Sundry income
5,630,492 5,630,492
(05) FINANCE EXPENSES Bank charges Exchange Difference Gratuity interest Import Charges Interest on lease Interest on distributors deposit Loan interest Loss arising from change in assumption of gratuity Other financial costs Overdraft interest
2,752,198 (102,438) 733,477 529,552 688,178 91,467 2,490,927 767,435 639 ,087 1,582,192 10,172,075
(06) OPERATING PROFIT The operating profit has been arrived after charging / (crediting), all the expenses including the followings. Amortisation of grant Amortisation of share issue expenses Auditors remuneration Defined contribution plan cost EPF/ ETF Depreciation Impairment of goodwill Retirement benefit plan cost - gratuity Staff expenses (1,910,904) 720,933 9,656,844 28,342,700 5,368,501 1,130,388 63,333,402 (1,910,904) 2,224,728 890,067 8,567,166 27,260,673 7,189,448 827,894 64,471,566 199,500 2,224,728 227,000 -
32
Accounting profit / (loss) before tax Income not subject to tax Aggregate disallowed expenses Aggregate allowed expenses
Other income ( Excluding dividends income) Taxable profit (Excluding other income) Utilisation of tax losses
Current income tax expenses Under provision for previous year Social responsibility levy Deferred tax 10% Withholding tax on inter company dividends Total tax liability
(7.1) TAX LOSSES CARRIED FORWARD Tax losses brought forward Tax losses arising during the year Utilisation of tax losses
(08) BASIC EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders of the Company by weighted average number of ordinary shares in issue during the year. Group For the, Year ended 31.03.2010 Rs. Year ended 31.03.2009 Rs
65,505,542
63,521,966
Annual Report 2009/10 33
13.03.2010 31,400,000
(09) PROPERTY, PLANT AND EQUIPMENT Freehold property, plant & equipment (Note 9.1) Leasehold property, plant & equipment (Note 9.2)
267,861,169
271,111,317
21,517,301 289,378,470
23,754,806 294,866,123
Property, plant and equipment of the subsidiary Companies, Milife Foods Ltd., Swiss Cheese Co. (Pvt) Ltd., and Kotmale Milk Products Ltd.,were revalued by an independent professional valuer, Mr.G.Henry J.Perera in March 2009 and the values were incorporated as at 31st March 2009. 9.1. FREEHOLD PROPERTY, PLANT AND EQUIPMENT Land and Plant & buildings equipment GROUP Rs. Rs. COST / REVALuATION Balance as at 1st April, 2009 Additions Transfers Write off Adjustments Balance as at 31st March, 2010 DEPRECIATION Balance as at 1st April, 2009 Charge for the year Transfers Write off Adjustments Balance as at 31st March, 2010 WRITTEN DOWN VALuE Balance as at 31st March, 2010 Balance as at 31st March, 2009
Total Rs.
103,461,472 103,461,472
11,256,696 11,256,696
94,250,000 96,500,000
168,504,699 169,248,147
893,274 1,537,074
1,708,603 3,106,928
2,504,593 719,168
267,861,169 271,111,317
9.2. LEASEHOLD PROPERTY, PLANT AND EQUIPMENT Plant & equipment Rs. Motor vehicles Rs. Total Rs.
GROUP
Kotmale Holdings PLC
COST / REVALuATION Balance as at 1 April, 2009 Balance as at 31 March, 2010 DEPRECIATION Balance as at 1 April, 2009 Charge for the year Balance as at 31 March, 2010 WRITTEN DOWN VALuE Balance as at 31 March, 2010 Balance as at 31 March, 2009
36,267,553 36,267,553
4,258,369 4,258,369
40,525,922 40,525,922
34
21,096,847 22,414,682
420,454 1,340,124
21,517,301 23,754,806
(10) INTANGIBLE ASSETS Cost At the beginning of the year Accumulated amortisation / impairment At the beginning of the year Impairment At the end of the year Net carrying value
97,773,232
97,773,232
As from 1st January 2006, goodwill is no longer amortised but tested for impairment annually. Goodwill acquired through business combinations have been allocated to two cash generating units for impairment testing. Company 31.03.2010 31.03.2009 Rs. Rs.
Holding (%) (11) INVESTMENTS IN SUBSIDIARIES Kotmale Products Ltd. Milife Foods Ltd.
No. of shares
100 100
10,372,560 70
The Company has obtained consent from minority share holders of Milife Foods Ltd not to disclose their interest of the company separately in the financial statements. However the minority share holders have transferred their share ownership to Kotmale Holdings PLC during the year. Group 31.03.2009 Rs. Company 31.03.2009 Rs.
As at,
31.03.2010 Rs.
31.03.2010 Rs.
(12) INVENTORIES Finished goods Raw materials Packing materials Others Less:Provision for obsolete stocks
35
(13) TRADE AND OTHER RECEIVABLES Trade debtors Staff debtors (Note 13.1) Other receivables (Note 13.2) Janashakthi Ltd.
65,327,065 65,327,065
689,333 689,333
(13.1) STAFF DEBTORS Balance at the beginning of the year Festival advance Repayment during the year Balance at the end of the year (13.2) OTHER RECEIVABLES Advance to farmers Dividends receivable Other debtors
689,333 689,333
(14) PREPAYMENTS, DEPOSITS & ADVANCES Advances Deposits ESC prepayment NBT recoverable NSL recoverable Other prepayments Withholding tax
(15) AMOUNTS DUE FROM RELATED PARTIES Dunamis Capital PLC Kotmale Kiri (Pvt) Ltd. Kotmale Milk Products Ltd. Milife Foods Ltd. Swiss Cheese Co.(Pvt) Ltd.
100,482,232 100,482,232
(16) STATED CAPITAL 31,400,000 ordinary shares (17) RESERVES Capital reserves General reserves Retained earnings Revaluation reserves
314,000,000
314,000,000
314,000,000
314,000,000
36
(18) DEFERRED LIABILITY Grant received for the Tetra pack filling machine Amortisation for the year Balance at the beginning of the year Balance at the end of the year (19) DEFERRED TAX Balance at the beginning of the year Deferred tax attributable to revaluation Deferred tax expenses
(20) INTEREST BEARING BORROWINGS Lankaputhra Development Bank Lease creditors Peoples Leasing Tetra pack machinery loan
Kotmale Milk Products Ltd., received a Milk filling machine from Tetra Pak Singapore and Emerging Markets, a division of Tetra Pak South Asia Pte, Ltd., under a sales agreement in the year 2004. This agreement was amended in June 2005 citing a trial period ranging from July 2005 to June 2006. The amended agreement period has lapsed and Tetra Pak South East Asia Pte, Ltd., can reclaim the asset without any financial encumbrances on either side. Accordingly once the asset is reclaimed by the Company the loan amount of Rs.16,495,027 will no longer be payable by Kotmale Milk Products Ltd. The settlement of the above loan is based on the number of packing material imported by the company from Tetra pack, Singapore. (20.1) SECURITIES The following assets have been pledged as securities for liabilities. Company Bank Facility Limit (Rs.) Security Kotmale Holdings PLC. DFCC Vardhana - Colombo Overdraft 25 Mn Facility agreement for Rs.25 Mn Milife Foods Ltd. HSBC - Colombo Import loan 75 Mn Mortgage over stocks & receivables for Rs. 45 Mn Corporate guarantee of Rs.75 Mn and subordination agreement of Rs. 21 Mn from Kotmale Holdings PLC.
Annual Report 2009/10 37
(21) RETIREMENT BENEFIT OBLIGATIONS Balance at the beginning of the year Gain / loss arising from change in assumption Interest charge on gratuity Payments made during the year Provision for the year Balance at the end of the year (22) TRADE AND OTHER PAYABLES Accrued expenses GST & VAT payable NBT payable Sundry creditors Trade creditors
629,000 60 629,060
1,414,500 1,414,500
(23) AMOUNTS DUE TO RELATED PARTIES Dunamis Capital PLC. The Montessori Workshop (Pvt) Ltd.
3,928,877 3,928,877
2,138,989 2,138,989
(25) DIRECTORS INTEREST IN CONTRACTS & RELATED PARTY TRANSACTIONS (a) Details of Directorates are as follows; Mrs.Manjula Mathews Kotmale Holdings PLC. Kotmale Products Ltd. Kotmale Marketing (Pvt) Ltd. Swiss Cheese Company (Pvt) Ltd. Kotmale Milk Products Ltd. Kotmale Kiri (Pvt) Ltd. Milife Foods Ltd. Dunamis Capital PLC. (b)
Kotmale Holdings PLC
Mr.Dinesh Schaffter x x x x x x x x
x x x x x x x x
Kotmale Milk Products Ltd., Milife Foods Ltd., and Swiss Cheese Co. (Pvt) Ltd., have paid management fees amounting to Rs. 1,226,351, Rs. 1,226,351 and 1,379,351 respectively to Dunamis Capital PLC. Please refer notes 15 and 23 for outstanding balances with related parties as at 31st March 2010.
(c)
38
Mrs. Manjula Mathews Mrs. Manjula Mathews Mr. Jude Fernando Mr. Dinesh Schaffter
4,354,912 2,356,358
Construction
1,668,000
Investment
30,297,990
(26) CONTINGENT LIABILITIES There were no material contingent liabilities as at the balance sheet date. (27) CAPITAL COMMITMENTS There were no material capital commitments as at the balance sheet date (28) POST BALANCE SHEET EVENTS The Board of Directors have recommended a final dividend of Rs. 2.00 per share for the year ended 2009/10 amounting to Rs. 62,800,000 which is to be approved by shareholders at the annual genaral meeting to be held on 05th August 2010. In accordance with Sri Lanka Accounting Standard 12 (Revised 2005 ) events after the Balance Sheet date, the final dividend has not been recognised as a liability in the financial statements as at 31st March 2010. There were no other material events subsequent to the balance sheet date that require adjustments, or disclosure in the financial statements. ,
39
Investors Information
1. STOCk EXCHANGE LISTING The issued ordinary shares of Kotmale Holdings PLC are listed on the Colombo Stock Exchange. DISTRIBUTION OF SHAREHOLDING 31st March 2010 No. of shares held Shareholders Number 1 1,000 5,000 10,000 50,000 100,000 500,000 1,000,000 1,000,000 1,009 310 83 8 5 1,415 1,001 5,001 10,001 50,001 100,001500,001Over Total % 71.30 21.91 5.87 0.00 0.57 0.35 100.00 Holding Number 22,390,530 6,879,152 1,841,837 177,527 110,954 31,400,000 % 71.30 21.91 0.00 5.87 0.00 0.57 0.00 0.35 100.00 31st March 2009 Shareholders Number 998 261 68 78 7 9 3 5 1,429 % 69.84 18.26 4.76 5.46 0.49 0.63 0.21 0.35 100.00 Holding Number 364,233 771,077 565,181 1,967,007 494,300 1,422,900 1,804,850 24,010,452 31,400,000 % 1.16 2.46 1.80 6.26 1.57 4.53 5.75 76.47 100.00
2.
3.
ANALYSIS OF SHAREHOLDERS 31st March 2010 Shareholders Number 1,352 63 1,415 1,399 16 1,415 % 95.55 4.45 98.87 1.13 Holding Number 30,001,979 1,398,021 31,044,947 355,053 % 95.55 4.45 98.87 1.13 Number 1,362 67 1,429 1,414 15 1,429 31st March 2009 Shareholders % 95.31 4.69 99.30 0.70 Holding Number 7,375,436 24,024,564 31,181,820 218,180 % 23.49 76.51 100.00 99.31 0.69 100.00
100.00 31,400,000
100.00 31,400,000
4.
6,021,636 19.18
5.
Kotmale Holdings PLC
SHARE PRICE MOVEMENTS FOR THE PERIOD Rs. Highest Lowest Period-end
2009/10 Rs.
2008/09
40
No.
Names of shareholders
No. of shares as at 31st March 2010 9,877,038 9,400,000 2,378,738 1,959,600 1,243,500 862,938 700,000 300,000 200,000 158,000 140,000 140,000 120,400 100,000 80,700 67,000 59,700 57,500 57,400 55,400
Holding (%) 31.42 29.90 7.57 6.23 3.96 2.74 2.23 0.95 0.64 0.50 0.45 0.45 0.38 0.32 0.26 0.21 0.19 0.18 0.18 0.18
No. of shares as at 31st March 2009 9,877,038 2,378,738 2,959,600 5,562,938 700,000 150,000 200,000 158,000 14,000 -
Holding (%) 31.42 7.57 9.43 17.69 2.23 0.48 0.64 0.50 0.45 Annual Report 2009/10 41
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Dunamis Capital PLC First Capital Treasuries Limited Mr. Ramesh Schaffter Merchant Bank of Sri Lanka Limited / Mr. R. Schaffter HSBC International Nominees Ltd-SSBT-Deustche Bank AG Singapore Waldock Mackenzie Ltd./Mr. D. Schaffter Lanka Orix Finance Company Limited / Mr. R. Schaffter Seylan Bank Limited / Mr. Jayantha Dewage Mrs. Manjula Mathews National Development Bank PLC /Mouldex Limited Mrs. D F E S Ollegasegrem Bank Of Ceylon - No2 Macksons Holdings (Pvt) Ltd Mr.G. Mahinthan Mr.Fuad Credit Suisse Singapore Mr.G.G.R.Kariyawasam Mrs.I.S Jayasinghe Mr.P.S.R Casie Chitty Mr.M.M Mohamed Makeen
Financial Results Revenue Profit From Operating Activities Net Finance Cost Profit Before Taxation Income Tax Expenses 10% WHT on Inter Company Dividends Profit After Taxation
Financial Position Share Capital/Stated Capital Reserves Share Capital/Stated Capital & Reserves Current Assets Current Liabilities Working Capital Property, Plant and Equipment Intangible Assets / Biological Assets Non Current Liabilities Net Assets
314,000 16,799 330,799 234,982 (161,506) 73,476 240,500 86,908 (70,084) 330,799
314,000 35,767 349,767 375,832 (297,530) 78,302 230,529 78,908 (37,971) 349,767
314,000 44,406 358,406 319,278 (194,281) 124,997 210,079 68,421 (45,092) 358,406
314,000 217,454 531,454 407,266 (183,666) 223,600 294,866 61,232 (48,244) 531,454
314,000 220,159 534,159 394,344 (153,239) 241,105 289,378 55,863 (52,187) 534,159
42
Notice of Meeting
NOTICE IS HEREBY GIVEN that the 43rd Annual General Meeting of Kotmale Holdings PLC will be held on Thursday 5th August 2010 at 3.00 p.m. in the Auditorium of the Sasakawa Memorial Sri Lanka Japan cultural center, No 4, 22nd lane, Colombo 03., to transact the following business 3. ORDINARY BUSINESS 1. NOTICE To receive the notice convening the meeting. DIRECTORS REPORT AND AUDITED ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2010 To receive and consider the Directors Report and the Audited Financial Statements for the year ended 31st March 2010 together with the Report of the Auditors thereon. DECLARATION OF DIVIDENDS To approve the declaration of a final dividend of Rs.2.00 per share for the year ended 31st March 2010 as recommended by the Directors. RE-ELECTION OF DIRECTORS To re-elect Mr. Nihara E Rodrigo who retires by rotation in terms of Article 100 of the Articles of Association and offers himself for re-election. RE-APPOINTMENT OF AUDITORS To re-appoint Messrs. Nihal Hettiarachchi & Co, Chartered Accountants, as the Auditors of the Company for the ensuing year and to authorise the Directors to determine their remuneration. 164- Any member whose registered address is not within Sri Lanka may name an address within Sri Lanka which for the purpose of notice shall be considered as his registered address. To consider and if thought fit to pass the following Special Resolution Resolved that the existing Article 166 be deleted and the following substituted therefor 166- Where notice is given by an advertisement, such advertisement shall be published in Sinhala, Tamil and English national daily newspapers. 4. To consider and if thought fit to pass the following Special Resolution Resolved that the following clause be included immediately after existing clause 170 and be numbered as 171 (compliance with Rules) 171- Notwithstanding anything to the contrary contained in the Articles of Association of the Company, so long as the Company is listed on the Colombo Stock Exchange, the company shall comply with the Rules of the Colombo Stock Exchange and the Central Depository System, which shall be in force from time to time.
2.
3.
4.
5.
By order of the Board (Sgd.) K H L Corporate Services Limited Secretaries 15th July 2010
SPECIAL BUSINESS AMENDMENTS TO THE ARTICLES OF ASSOCIATION 1. To consider and if thought fit to pass the following Special Resolution Resolved that the proviso in paragraph 4 of Article No. 13 be amended to read as follows: Provided that the Company shall not register more than three persons as joint holders (including the principal holder) of any shares (except in the case of executors, administrators or heirs of a deceased member) 2. To consider and if thought fit to pass the following Special Resolution Resolved that the existing Article 164 be deleted and the following substituted therefor
A member entitled to attend and vote at the meeting is entitled to appoint a person to attend and vote on his/her behalf, such a person need not be a member of the Company.
43
44
Notes
Notes Continued
45
46
Notes Continued
as my/our Proxy to represent me/us and vote on my/our behalf at the Annual General Meeting of the Company to be held on 5th August 2010 at 3.00 p.m. at the Auditorium of the Sasakawa Memorial Sri Lanka Japan cultural center, No 4, 22nd lane, Colombo 03., and at any adjournment thereof and at every poll which may be taken in consequence thereof. Please indicate your preference by placing a X in the box of your choice against each Resolution. ORDINARY BUSINESS 1. Receiving of the Report of the Directors and the Audited Financial Statements of the Company for the year ended 31st March 2010 together with the Report of the Auditors thereon. 2. Declaration of the Final Dividend of Rs.2/- per share. 3. Re-election of Mr. Nihara E Rodrigo, who retires by rotation in terms of Article 100. 4. Re-appointment of Messrs Nihal Hettiarachchi & Co as Auditors of the Company for the ensuing year and authorising the Directors to determine their remuneration. SPECIAL BUSINESS 1. 2. 3. 4. Amendment to Article No.13 (Joint Shareholding) Amendment to Article No. 164 (Notices) Amendment to Article No. 166 (Notices) Inclusion of Article No. 171 (Compliance with Rules) FOR AGAINST
47
1.
Please perfect the Form of Proxy overleaf, after filling in legibly your full name and address, by signing in the space provided and fill in the date of signature and your National Identity Card Number.
2.
The completed Form of Proxy should be deposited at the Office of the Secretaries, K H L Corporate Services Limited of No.75, Arnold Ratnayake Mawatha, Colombo 10, 48 hours before the time appointed for the holding of the meeting.
3.
If an Attorney has signed the Form of Proxy, the relative Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.
4.
If the Shareholder is a company or a corporate body, the Proxy should be executed under its Common Seal in accordance with its Articles of Association or Constitution.
5.
If there is any doubt as to how the vote is to be exercised, by reason of the manner in which the Form of Proxy has been completed, no vote will be recorded by the Form of Proxy.
48
Corporate Information
Kotmale Holdings PLC Incorporated as a Public Company in 1967 under the provisions of the Companies Ordinance No.51 of 1938 and subsequently re-registered under the Companies Act No.7 of 2007 on 6th May 2008. In 1969 the Company was listed on the Colombo Stock Exchange. Mr. M S Jude Fernando Executive Director/CEO Mrs. Manjula Mathews - Executive Director Mr. Dinesh Schaffter - Non-Executive Director Mr. Nihara E Rodrigo - Indipendent Non-Executive Director 75, Arnold Ratnayake Mawatha, Colombo 10. Tel: 2639878 20, Sri Sumana Mawatha, New Town Mulleriyawa. Tel: 2578774 6 K H L Corporate Services Limited 75, Arnold Ratnayake Mawatha, Colombo 10. Tel: 2639807 SSP Corporate Services (Pvt) Ltd 101 Inner Flower Road, Colombo 03. Tel: 2573894 M/s Nihal Hettiarahchi & Co Chartered Accountants 622B, Kotte Road, Kotte. DFCC Vardhana Bank Hatton National Bank PLC The Hongkong & Shanghai Banking Corporation Pan Asia Banking Corporation Seylan Bank PLC
Board of Directors
Registered Office
Factory
Secretaries
Registrars
Auditors
Bankers