KELSEY - Colombo Stock Exchange · 2019-08-13 · Kelsey Developments PLC 2018/19 Annual Report 4 Chairman’s Statement Contd. to these changing circumstances we will continue to

KELSEY DEVELOPMENTSPLCANNUAL REPORT

2018/19

Kelsey Developments PLCAnnual Report 2018/19

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www.kelsey.lk

Kelsey D

evelopments PLC

| Annual R

eport 2018/19

Contents

OverviewVision and Mission 1Group Structure 2

Management ReportsChairman’s Statement 3Profile of the Board of Directors 5Annual Report of the Board of Directors 7Statement of Directors’ Responsibility 9Corporate Governance 10Audit Committee Report 15Related Party Transactions Review Committee Report 17Risk Management 18

Financial ReportsIndependent Auditor’s Report 23Statement of Financial Position 26Statement of Profit or Loss and other Comprehensive Income 27Statement of Changes in Equity 28Statement of Cash Flows 29Notes to the Financial Statements 30

Supplementary InformationInvestors’ Information 60Decade at a Glance 62Glossary of Financial and Business Terms 63Corporate Information 65Notice of Meeting 66Form of Proxy 67

Kelsey Developments PLCAnnual Report2018/19 1

Vision and Mission

VISIONTo be the Trusted LeaderCreating Better Built Environments

MISSIONTo convert our clients’ architectural needs and desires to conceptual designs and constructively develop them into reality, as a valuable return on investment, through a committed team, whilst ensuring optimal returns to shareholders

OUR VALUESIntegrityMutual respectAccountabilityPerformance driven cultureMeritocracyTeamwork

Who we areIncorporated in 1983, Kelsey Developments PLC (Kelsey or the Company) provides specialist operations in real estate development through two subsidiaries, Kelsey Homes (Pvt) Ltd, and Twid Capital (Pvt) Ltd (collectively the Group). The Company is listed on the Colombo Stock Exchange (CSE) since 1984 and trades under the ticker code KDL.

Pooled expertise and resources are integral to our offering which covers the full client service spectrum from land acquisition and sale to the design and development of gated communities and apartments.

The Kelsey signature is an iconic expression of modern spaces complete with security, comfort and convenience. We offer buyers a range of houses, villas, apartments and lands in highly desirable urban environments.

Active mainly in Colombo and selected rapidly modernising suburbs, Kelsey has completed over 200 projects serving 1,000 satisfied homeowners, creating a considerable portfolio of superior accommodation.

Kelsey Developments PLC Annual Report2018/19 2

Group Structure

100%Kelsey Homes (Pvt) Ltd

100% Twid Capital (Pvt) Ltd

Kelsey Developments PLC


Chairman’s Statement

Dear Shareholder,

On behalf of the Board of Directors, it is my pleasure to present the Annual Report and the Financial Statements of Kelsey Developments PLC for the year ended 31 March 2019. I would like to take this opportunity to recap the key financial highlights for 2018/19 as well as provide some insight into our strategy and focus for the year under review.

KEY FINANCIAL HIGHLIGHTSManaging an Inventory Portfolio of Rs. 1.52 Bn at 31 March 2019, Kelsey Developments PLC reported a Loss after tax of Rs. 223.5 Mn for the year under review, compared to a Net Loss of Rs.95.8Mn in 2017/18 which comprised a deferred tax asset of Rs. 46.4 Mn. The Loss before interest & tax is Rs. 17.9Mn compared to the Profit before interest & tax of Rs. 26.5Mn in the previous year. The Net Loss was mainly on account of slower than anticipated sales of properties.

BUSINESS ENVIRONMENTWith Sri Lanka reaching middle income economy status, the demand for housing has increased sharply over the past decade or so. In response, both the state as well as the private sector continue to invest significantly in the development of the Country’s housing and real estate sector. However, the bullish demand seen a few years ago appears to have receded somewhat as the Country’s economic woes continue to affect disposable incomes. The higher interest rates over the past year have also contributed towards the moderation in demand. Nonetheless a healthy demand for housing will likely remain as the proportion of middle income earners continues to grow.

BUSINESS STRATEGYHaving been in business for the past 35 years, our strategy continues to be driven by the desire to provide high quality affordable housing solutions for the mainstream market. Our approach has always been based on creating high functioning neighborhoods that include premium quality residential living spaces that can effectively contribute towards enhancing the lifestyle and wellbeing of its inhabitants. Bringing this vision to life yet again is our latest undertaking - Urban Gateway, Kottawa launched in February 2019 with a Townhouse concept. The project would see the construction of 30 exclusive Townhouses, each consisting of 4 - 5 bedrooms spread over an area of approximately 1,700 square feet of liveable space along with a further 600 square feet of rooftop space. Since being launched, the project has generated considerable interest in the market, with 11 units already sold out as of today. With construction work well under way, the project scheduled to be completed by December 2020.

Meanwhile with strong emphasis on maintaining our benchmarked ROA, we redirected our attention towards closing sales for our existing projects.

PROGRESS ON EXISTING PROJECTSI am happy to report that we made good progress in our project pipeline, in the year under review.

The last remaining unit of Templer’s Square, Mount-lavinia, was sold and handed over in September 2018, marking the successful completion of the project. Construction work on the Urban Heights apartment project in Wattala was almost

completed at the year end and now a total of 6 reservations have been secured.

Meanwhile Verdant Villas, Negombo, which was re-launched in the previous financial year, made progress in the year under review. After completing the model houses, we managed to complete the sale of 11 land plots with the transfer deeds for all being signed within the current financial year. Of the remaining 75 plots, we received another 8 confirmed reservations.

The strategic decision we took to repurpose the 1st Cross Street property has served us well as we were able to sell the property in the current financial year. This has greatly helped in reducing the Company’s gearing levels.

Encouraged by the success of the 1st Cross Street property sale, we were able to complete the sale of Riverside - Bollagela project as well in April 2019.

ETHICS AND INTEGRITYOver the past three decades, we have continued to embrace principles of good governance in fulfilling our business objectives. Our Board is responsible for business strategy, risk and oversight of the Executive Management Team who has the responsibility for the day-to-day management of the business, and for developing strategy for the Board’s input and approval.

FUTURE OUTLOOKAs we enter 2019/20, we will remain mindful of the challenges and evolving economic environment in the landscape in the country, that is likely to affect our business in the years ahead. In responding


Chairman’s Statement Contd.

to these changing circumstances we will continue to leverage on our core strengths.

We have set ourselves ambitious targets for the future. Our strategy for the next 3-5 years would be pivoted on projects that have the capacity to generate our benchmark minimum ROA. Accordingly, we will pursue opportunities to invest in both housing developments as well as condominium projects, mainly centered in and around the Western Province.

Moving forward with our plans we will also look to strengthen our risk framework especially given the fast evolving industry landscape and highly dynamic business environment. Our ultimate goal is to maximise shareholder value by enhancing our organisational capability, and driving innovation and excellence across all levels of our business in the years ahead.

BOARD CHANGESFollowing the change in our Group structure, Mr. Prakash Schaffter and Mr. Ramesh Schaffter, were appointed to the Kelsey Developments PLC Board with effect from 21 December 2018, where they function in the capacity of as Non-independent, Non-Executive Directors.

I look forward to working with both of them, as Kelsey Developments PLC moves forward under the new structure.

APPRECIATIONSI would like to take this opportunity to thank my colleagues on the Board for their participation and enthusiastic contribution towards all Board matters in the past year. I also wish to express my heartfelt thanks to the Management team and all the employees for their commitment and loyalty to the Company. My gratitude also goes out to our valued customers, bankers, and other business partners for their continued support. Finally, I express my appreciation to our shareholders for the trust and long standing support to the Company.

(Sgd)A. D. E. I. PereraChairman

02 August 2019


Profile of the Board of Directors

A. D. E. I. PereraChairman (Independent Non-Executive Director)

Eardley Perera serves as the chairman of Kelsey Developments PLC. He is a graduate of the Chartered Institute of Marketing, UK, with over 40 years of experience in management. He has undergone management training in UK, Sweden, South Korea, India, Philippines and Singapore. He is a member on the Board of study of the Postgraduate Institute of Management (PIM), University of Sri Jayewardenepura and has been engaged in management education and consultancy.

Other principal appointmentsDirector: First Capital Holdings PLC and subsidiaries, Dunamis Capital PLC and subsidiaries, Janashakthi PLC, Janashakthi Insurance PLC, Sting Consultants (Pvt) Ltd and Brand Finance Lanka (Pvt) Ltd.

Dinesh SchaffterManaging Director (Non-Independent Non-Executive Director)

Dinesh Schaffter serves as the Managing Director of Kelsey Developments PLC and its subsidiaries. He has a finance background with managerial, investment and deal- making expertise of over 25 years. He has executed a range of transactions focused on change of control, capital formation and capital market strategy. These includes M & A, debt and equity offerings, restructuring and business valuations.

He is an Associate Member of The Chartered Institute of Management Accountants of UK. He also holds a Bachelor of Laws (Honours) Degree from UK and an Executive Master of Business Administration Degree from INSEAD, France.

Other principal appointmentsManaging Director: First Capital Holdings PLC and subsidiaries, Director: Dunamis Capital PLC and subsidiaries.

Chandana L. de SilvaIndependent Non-Executive Director

Chandana de Silva has 25 years of managerial, financial experience and strategic acumen acquired in Sri Lanka and the United Kingdom. He held several senior management positions including that of Chief Financial Officer of a Nas-daq quoted telecom services company during his twenty-three years of work experience in the UK. Since moving back to Sri Lanka in 2002 he worked for MAS Holdings in a variety of roles and established its Supply Chain Management function, set up the MAS training center and was the Chief Executive Officer of the MAS Investment Division when he left in 2011. He currently serves as a management consultant and as a mentor to individuals in senior management roles.

Chandana is a Fellow Member of the Institute of Chartered Accountants in England and Wales and in Sri Lanka. He holds a Bachelor of Science in Mathematics and Management from the University of London, UK.

Other principal appointmentsDirector: First Capital Holdings PLC and subsidiaries, Dunamis Capital PLC, Eureka Technologies (Pvt) Ltd, 24/7 Techies (Pvt) Ltd, Sea-Change Partners Lanka (Pvt) Ltd and Bairaha Farms PLC.


Ramesh SchaffterNon-Independent Non-Executive Director(Appointed w.e.f. 21 December 2018)

Counting over three decades of experience in Finance & Marketing, he is a Fellow Member and former Council Member of the Chartered Institute of Management Accountants, Sri Lanka, and an Associate Member of the Chartered Institute of Marketing. He has served on the Boards of several public listed and unlisted companies.

A social entrepreneur and life coach, he is an accomplished public speaker and a multiple award winner at national and international level Toastmasters’ contests. He is the former President of Habitat for Humanity Sri Lanka and a former Board Member of World Vision for Sri Lanka. He is a Co-Founder of cable television channel Swarga TV, as well as the Christian Arts Foundation (Chraft), an organisation that promotes music and drama in Sri Lanka.

Ramesh also serves on the Council of the Colombo Theological Seminary, a graduate and postgraduate educational institute, and is the present Chairman of the Incorporated trustees of the Church of Ceylon.

Other principal appointmentsDirector: Janashakthi Insurance PLC, Janashakthi PLC, First Capital Holdings PLC , Orient Finance PLC, Serendib Land PLC, K H L Corporate Services Limited, Premier Synthetic Leather Manufacturers (Pvt) Limited, Sri Lanka Technology Incubator (Pvt) Limited.

Prakash SchaffterNon-Independent Non-Executive Director(Appointed w.e.f. 21 December 2018)

Prakash Schaffter is a leading Insurance personality In Sri Lanka, currently serves as the Executive Chairman of Janashakthi. He has three decades of experience in the Insurance industry in both Sri Lanka and the United Kingdom. He led Janashakthi as Managing Director since 2006, through a growth phase that saw Janashakthi become the third largest Non-Life Insurer, acquire the Non-Life segment of AIA Insurance Lanka and most recently engaged in divestment of Janashakthi’s Non-Life segment.

Prakash who serves as a Non-Executive Director on the Board of Bank of Ceylon and several Listed and non-listed entities. He is a former President of the Insurance Association of Sri Lanka and the Young President’s Organisation of Sri Lanka. He continues to impact the business sector through his membership on the council of the Sri Lanka Institute of Directors (SLID). He has been amongst the youngest Fellow Members of the Chartered Insurance Institute.

A former first class cricketer, he represented both the University of Cambridge and London University during his cricketing career. He has also served as President and Secretary of the Tamil Union Cricket and Athletic Club. He is a former Secretary of Sri Lanka Cricket, having served on three separate occasions on Interim Committees appointed by the Government.

Other principal appointmentsDirector: Janashakthi Insurance PLC, Janashakthi PLC, First Capital Holdings

Profile of the Board of Directors Contd.

PLC, Bank of Ceylon, Orient Finance PLC, Serendib Land PLC, K H L Corporate Services Limited, Premier Synthetic Leather Manufacturers (Pvt) Limited


Annual Report of the Board of Directors

The Directors hereby present to the members their 36th Annual Report together with the Audited Financial Statements of the Company and the Group for the year ended 31 March 2019.

LEGAL STATUSKelsey Developments PLC was incorporated in 1983 under the provisions of the Companies Act No.17 of 1982 and re-registered under the Companies Act No. 7 of 2007 on 05 September 2007. In 1984, the Company was listed on the Colombo Stock Exchange.

PRINCIPAL ACTIVITIESThe principal activities of the Group are the construction, development and sale of quality residential houses and apartments and the development and sale of land plots.

REVIEW OF OPERATIONSA review of the operations of the Company during the financial year and the results of those operations are contained in the Chairman’s review on page 03 to 04 of the Annual Report. This report forms an integral part of the Directors’ Report.

FINANCIAL RESULTSThe Group’s net loss after tax was Rs. 223Mn compared with a net loss after tax of Rs. 96Mn in the previous year. The Financial Statements of the company are set out in pages 26 to 57 of the Annual Report.

REMUNERATION AND FEESDetails of Directors’ remuneration and fees are set out in Note 32.3 to the Financial Statements. All fees and remuneration have been duly approved by the Board of Directors of the Company.

RISK AND INTERNAL CONTROLThe Board of Directors is satisfied of the effective and comprehensive system of internal controls to monitor, control and manage the risks to which the Company is exposed to carry on its business in an orderly manner, to safeguard the assets and to secure as far as possible the reliability and accuracy of the records. A Risk Management report is included on page 18 to 21.

CORPORATE GOVERNANCEThe Directors of the Company are responsible for the application of corporate governance principles as detailed on pages 10 to 14 of this report.

SIGNIFICANT ACCOUNTING POLICIESThe accounting policies adopted in preparation of the Financial Statements are given on pages 30 to 40. There were no changes in the accounting policies adopted during the year under review.

DIRECTORATEThe following were the Directors of the Company as at 31 March 2019.

1. Mr. A.D.E.I. Perera2. Mr. Dinesh Schaffter3. Mr. Chandana L. de Silva4. Mr. Prakash Schaffter5. Mr. Ramesh Schaffter

The profiles of the Directors are given on pages 05 to 06 of the Annual Report and Directors shareholding as at 31 March 2019 and 2018 were as follows:

No of shares 2019 No of shares 2018

1. Mr. A. D. E. I Perera Nil Nil

2. Mr. Dinesh Schaffter Nil Nil

3. Mr. Chandana L. de Silva Nil Nil

4. Mr. Prakash Schaffter Nil Nil

5. Mr. Ramesh Schaffter Nil Nil

DIRECTORS INTERESTSDuring the accounting period under review, an Interests Register was maintained by the Company as required by the Companies Act No. 7 of 2007. All Directors have made declarations as provided for in Section 192 of the said Act.

INCOME TAX EXPENSESIncome tax expenses have been computed at the rates given in Note 27 to the Financial Statements.


CAPITAL EXPENDITUREDetails of property, plant & equipment and their movements during the year are given in Note 09 to the Financial Statements.

RESERVESThere were no material transfers to or from reserves during the financial year as disclosed in Note 15 and 16 to the Financial Statements.

STATED CAPITALThe stated capital of the Company as at 31 March 2019 was Rs. 232,390,325 consisting of 17,429,274 ordinary shares. The movements in profits and reserves are given in the Statement of Changes in Equity on page 28 to the Financial Statements.

SHARE INFORMATION & SUBSTANTIAL SHAREHOLDERSAs at 31 March 2019, there were 1,070 registered shareholders. Share information and the twenty largest shareholders as at 31 March 2019 are given on pages 60 to 61 of the Annual Report. Information relating to earnings, dividends, net assets per share and market value of a share are given under “Decade at a Glance” on page 62. Information on share trading is stated under “Investors’ Information” on page 60 of the Annual Report.

RELATED PARTY TRANSACTIONSRelated party transactions are reviewed by the Related Party Transaction Committee and are detailed in Note 32 to the Financial Statements.

The Directors declare that the Company is in compliance with Section 9 of the Listing Rules of the Colombo Stock Exchange pertaining to Related Party Transactions during the financial year ended 31 March 2019.

CORPORATE DONATIONSDuring the year, the Group did not make any donations to charity.

STATUTORY PAYMENTS AND COMPLIANCE WITH LAWS AND REGULATIONSThe Directors to the best of their knowledge and belief are satisfied that all statutory payments due to the Government and in relation to employees have been made and the Group has not engaged in any activities contravening laws and regulations.

HUMAN RESOURCESThe Group is committed to provide equal opportunities to all employees. It is the company’s policy to give full and fair consideration to persons with respect to applications for employment, continued employment, training, career development and promotion, having regard to each individual’s particular aptitude and abilities.

There were no material issues pertaining to employees and industrial relations pertaining to the company that occurred during the year under review which need to be disclosed.

The Chairman’s statement provides further information with regard to Human Resources.

GOING CONCERNThe application and non-application of the going concern basis is more-fully described in Note 2.5 on page 31.

EVENTS AFTER THE BALANCE SHEET DATEEvents after the balance sheet date have been disclosed in Note 29 on page 51 of the Financial Statements.

INDEPENDENT AUDITORSThe Company’s Auditors during the period under review were Messrs Ernst & Young, Chartered Accountants. The fees paid to Auditors are disclosed in Note 26 to the Financial Statements.

Based on the declaration from Messrs Ernst & Young, and as far as the Directors are aware, the Auditors do not have any relationship or interest in the Company or its subsidiaries other than those disclosed in the above paragraph. Messrs Ernst & Young, Chartered Accountants, have expressed their willingness to continue in office as auditors of the Company for the ensuing year.

INDEPENDENT AUDITOR’S REPORTThe Independent Auditor’s Report on the Financial Statements is given on pages 23 to 25 of the Annual Report.

(Sgd.) Mr. A.D.E.I. Perera Chairman

(Sgd.)Mr. Dinesh SchaffterManaging Director

(Sgd.)K H L Corporate Services LtdSecretaries

02 August 2019

Annual Report of the Board of Directors Contd.


Statement of Directors’ Responsibility

Set out below are the responsibilities of the Directors in relation to the Financial Statements of the Company.

The Directors are responsible for ensuring that the Company and its subsidiaries maintain proper accounting records of all the transactions, and prepare financial statements that give a true and fair view of the state of affairs of the Company at reporting date and of the profit or loss for the year ended on that reporting date in accordance with the Companies Act No. 07 of 2007. The Directors are required to prepare these accounts on a Going Concern basis unless it is not appropriate.

The Financial Statements of the Company and the Group have been certified by the Manager - Finance of the Company who is responsible for the preparation of Financial Statements as required by the Act. The Financial Statements have been signed by two Directors on 02 August 2019 in accordance with Section 150 and 152 of the Companies Act.

Directors are also responsible for ensuring that proper accounting records which correctly record and explain the Company’s transactions and also determine the Company’s financial position with reasonable accuracy at any time are maintained by the Company enabling the preparation of Financial Statements and further enabling the Financial Statements to be readily and

properly audited, in accordance with the Section 148 (1) of the Act. The Directors have therefore caused the Company and its subsidiaries to maintain proper books of accounts and regularly review financial reports at their meetings. The Board also reviews and approves all interim Financial Statements prior to their release.

The Board of Directors accepts the responsibility for the integrity and objectivity of the Financial Statements presented. The Directors confirm that the Financial Statements have been prepared using appropriate accounting policies on a consistent basis and appropriate estimates and judgments have been made to reflect the true substance and form of transactions.

The Financial Statements of the Company for the year ended 31 March 2019 are in conformity with the requirements of Sri Lanka Accounting Standards (LKAS/SLFRS) laid down by the Institute of Chartered Accountants of Sri Lanka (ICASL). Directors have taken reasonable measures to safeguard the assets of the Company and its subsidiaries and to prevent and detect frauds and other irregularities. In this regard, the Directors have laid down effective and comprehensive internal control systems.

The Directors further confirm that after considering the financial position, operating conditions and regulatory

and other factors, the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operation for the foreseeable future and that the Going Concern basis is the most appropriate in the preparation of these Financial Statements.

(Sgd.)K H L Corporate Services LimitedSecretaries

02 August 2019


Corporate Governance

The Directors acknowledge their responsibility for the Company’s corporate governance and the need to ensure the highest standards of accountability to all stakeholders.

Kelsey Developments PLC is fully committed to the principles of good governance and recognises that good corporate governance is the corner-stone of a successful organisation.

The Company is committed to act with integrity, transparency and fairness in all of its dealings, and considerable emphasis is placed by the Board on the development of systems, processes and procedures to ensure the maintenance of high standards throughout the organisation.

BOARD COMPOSITION AND INDEPENDENCE The Board comprises of two Non-Executive Independent Directors, two Non-Executive Non-Independent Directors and one Executive Director all of whom possess a broad range of skills and experience across a range of industries and functional areas. Detailed profiles of each member of the Board are provided in a separate section of this Annual Report. (pages 05 to 06)

The Independence of the Directors are measured in accordance with the Colombo Stock Exchange Rules and the Independent Non- Executive Directors have submitted signed confirmation of their Independence.

The Board meets frequently in order to ensure the effective discharge of its duties. Formal board meetings were held four times during the year and performance

review meetings were held monthly at which a majority of directors were present. Attendance of the Directors for the board meeting are as follows,

Name of Director Attendance in 2018/19

1. Mr. Dinesh Schaffter 4/4

2. Mr. A. D. E. I Perera 4/4

3. Mr. Chandana L. de Silva 3/4

4. Mr. Prakash Schaffter 1/1

5. Mr. Ramesh Schaffter 0/1

BOARD RESPONSIBILITIESThe Directors are responsible for the formulation of the Company’s business strategy and in ensuring the existence of an adequate risk management framework. The Non-Executive Directors bring independent judgment to bear on issues of strategy and performance. 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.

The Board carries responsibility for ensuring that the senior management team possesses the relevant skills and expertise required in the management of the Company and that a suitable succession planning strategy is in place. Directors also ensure adherence to laws and regulations pertaining to the functioning of the organisation. The Senior Manager - Finance functions as the Compliance Officer to ensure compliance with all regulatory and statutory requirements and proper reporting of all compliance matters to the Board.

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. Members of the Board are expected to attend the Annual General Meeting of shareholders, board and review meetings. Material is provided to members of the Board well in advance of scheduled meetings to allow adequate time for review and familiarisation and to facilitate decision making at meetings.

Necessary advice and guidance is provided to the senior management team at monthly performance review meetings which provide an opportunity to evaluate progress and ensure accountability of the senior management team.

A strong focus on training and career development has created a committed and empowered workforce who continue to generate value and drive the company towards high standards of achievement.


BOARD BALANCEThe balance of Executive, Non-Executive and Independent Non-Executive Directors on the Board who are professionals / academics / business leaders holding senior positions in their respective fields ensures a right balance between executive expediency and independent judgement as no individual Director or small group of Directors dominate the Board discussion and decision making.

Directors are provided with monthly reports of performance and minutes of the Boards Meetings and are given the specific documentation necessary, in advance of such meetings.

There is a distinct and clear division of responsibilities between the Chairman and the Management to ensure that there is a balance of power and authority. The roles of the Chairman and the management are separated and clearly defined. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the Management has overall responsibilities over the operating units, organizational effectiveness and implementation of Board policies and decisions

APPOINTMENT AND RE-ELECTION OF DIRECTORSThe Company’s Articles of Association call for one third of the Non-Executive Directors retire at each Annual General Meeting and the Director who retires are those who have served for the longest period after their appointment / re-appointment.

BOARD COMMITTEES To assist the Board in discharging its duties various Board Committees are established. The functions and terms of

references of the Board Committee are clearly defined and where applicable, comply with the recommendation of the Code of Best Practice on Corporate Governance.

AUDIT COMMITTEEThe Report of the Audit Committee is presented on pages 15 to 16 and the duties of the Committee are included therein.

RELATED PARTY TRANSACTION REVIEW COMMITTEE The Report of the Related Party Transaction Review Committee is presented on page 17 and the duties of the Committee are included therein.

REMUNERATION COMMITTEEThe composition of the Committee, mandate of the Committee, other details are shown on Page 13.

RELATIONSHIP WITH SHAREHOLDERSThe Board considers the Annual General Meeting as a prime opportunity to communicate with shareholders. The Shareholders are given the opportunity of exercising their rights at the Annual General Meeting. The notice of the Annual General Meeting and the relevant documents required are published and sent to the shareholders within the statutory period. The Company circulates the agenda for the meeting and shareholders vote on each issue separately.

All shareholders are invited and encourage participating at the Annual General Meeting. The Annual General Meeting provides an opportunity for shareholders to seek and obtain clarifications and information on the performance of the

Company and to informally meet the Directors. The external Auditors are also present at the Annual General Meeting to render any professional assistance that may be required. Shareholders who are not in a position to attend the Annual General Meeting in person are entitled to have their voting rights exercised by a proxy of their choice.

The Company published quarterly accounts in a timely manner as its principle communication with shareholders and others. This enables stakeholders to make a rational judgment of the Company.

INTERNAL AUDIT AND CONTROLThe Board is responsible for the Company’s internal control and its effectiveness. Internal control is established with emphasis placed on safeguarding assets, making available accurate and timely information and imposing great discipline on decision making. It covers all controls, including financial, operational and compliance control and risk management. It is important to state, that any system can ensure only reasonable and not absolute assurance that errors and irregularities are prevented or detected within a reasonable time.

The selected subsidiaries of the group obtain the services of an independent, a leading professional accounting firm other than the statutory auditors to carryout internal audits and reviews. These reports along with management comments discuss with Audit Committee and with the Board. Further at each meeting follow up issues from previous meeting also discuss in order to make sure implementation of appropriate policies and procedures as prevention mechanism.


EXTERNAL AUDITThe Company engages the services of independent external auditors to conduct an audit and obtain reasonable assurance on whether the financial statements and relevant disclosures are free from material misstatements. The independent auditors directly report their findings to the Audit Committee which has the oversight responsibility of financial statement integrity and the reporting process.

Ernst & Young (EY) is the External Auditor of the Company. In addition to the normal audit services, EY also provided certain non-audit services as well. However, External Auditor would not engage in any services which may compromise the independence of the Auditor. All such services have been provided with the full knowledge of the Audit Committee and are assessed to ensure that there is no compromise on the independence of the External Auditor.

The Company conducts a performance appraisal of the External Auditors on an

annual basis. Based on the evaluation results, the Committee proposes the appointment of the External auditors to the Board for endorsement and approval of the shareholders. The endorsement is submitted to the shareholders for approval at the Annual General Meeting (AGM). The representatives of the independent auditors are expected to be present at the AGM and have the opportunity to make a statement on the Company's financial statements and results of operations if they desire to do so. The auditors are also expected to be available to respond to appropriate questions during the meeting.

There were no disagreements with the Company's independent auditors on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures in the period under review.

COMPANY SECRETARIESMessrs KHL Corporate Services Ltd serve as the Company Secretaries for Kelsey Developments PLC. The Company

Secretaries ensure compliance with Board procedures, the Companies Act, Regulations of the Securities and Exchange Commission of Sri Lanka and the Colombo Stock Exchange. The Company Secretaries keep the Board informed of relevant new regulations and requirements.

GOING CONCERNThe Directors, upon making necessary inquiries and reviews including reviews of the Group budget for the following year, capital available financing facilities, have a reasonable expectation of the Company’s existence in the foreseeable future. Therefore, the going concern basis is adopted in the preparation of the Financial Statements.

The Company’s commitment with respect to the Listing Rules issued by the Colombo Stock Exchange following directions, code and rules are summarised below;

Company’s adherence to the Corporate Governance Rules as required by Section 7.10 of the Listing Rules of the Colombo Stock Exchange:

CSE Rule Status of

Compliance

Details/Reference

7.10.1 Non-Executive Director (NED)

a./b./c.

At least 2 members or one third of the Board, whichever is higher should be NEDs as at the conclusion of immediately preceding AGM. Any change to this ratio should be rectified within 90 days.

Complied four out of five Directors are NEDs

7.10.2 Independent Directors

a. At least 2 or one third of the NEDs, whichever is higher shall be independent.

Complied two out of four Non-Executive directors are determined to be independent

Corporate Governance Contd.


CSE Rule Status of

Compliance

Details/Reference

b. Each NED should submit annually a signed and dated declaration of his/her independence or non-independence.

Complied All NEDs have submitted their confirmations on independence as per the criteria laid down in the listing rules

7.10.3 Disclosures Relating to Directors

a./b. The Board should determine the independence or otherwise of the NEDs and disclose in the annual report the names of the NEDs determined to be ‘independent”

Complied

Profile of Directors in page 05 to 06 of the Annual Reportc. A brief resume of each Director with information on his/

her area of expertise should be included in the annual report

Complied

d. Upon appointment to the Board, a brief resume of the new director should be provided to the exchange for dissemination to the public.

Complied Brief profile of the new directors appointed with effect from 21 December 2018 is published under CSE announcements to the public.

7.10.5 Remuneration Committee

a.1 Remuneration committee should comprise at least 2 independent NEDs or more than 2 NDEs majority of whom shall be independent.

Complied The Remuneration Committee consists of two Non-Executive Directors namely, Mr. Eardley Perera and Mr. Chandana L. de Silva. Mr. A.D.E.I. Perera functions as the Chairman of the committee.

The committee functions with delegated authority from the Board and is responsible for setting the Company’s remuneration policy and ensuring its continued ability to attract and retain high caliber candidates.

The Company bases remuneration on both individual and company performance whilst paying due regard to staff retention.

The aggregate remuneration paid to the Directors is given in the Note 32.3 to the Financial Statements.

a.2 One NED shall be appointed as chairman of the committee by the Board of Directors

Complied


CSE Rule Status of

Compliance

Details/Reference

b. Remuneration committee shall recommend the remuneration of the CEO and Executive Directors to the Board

Complied

c. The Annual Report should include the names of the Remuneration committee members, a statement of remuneration policy and the aggregate remuneration paid to Executive and Non-Executive Directors

Complied

7.10.6 Audit Committee

a.1 Audit Committee should comprise at least 2 independent NEDs or more than 2 NEDs majority of whom shall be independent.

Complied Audit Committee Report on page 15 of the Annual Report.

a.2 One NED shall be appointed as chairman of the committee by the Board of Directors

Complied

a.3 CEO and the CFO shall attend the AC meetings Complied

a.4 The chairman of the AC or one member should be a member of a recognized professional accounting body

Complied

B Functions of the AC

b.1 Overseeing the preparation, presentation of the Financial Statements and adequacy of disclosures in accordance with SLFRS/LKAS

Complied

b.2 Overseeing the compliance with financial reporting requirements and information requirements as per laws and regulations

Complied

b.3 Overseeing the processes to ensure internal controls and risk management functions are adequate to meet the requirements of Sri Lanka Auditing Standards

Complied

b.4 Assessing the independence and performance of the external auditors

Complied

b.5 Making recommends to the Board pertaining to appointment or reappointment or removal of external auditors and to approve their remuneration and terms of engagement.

Complied

C The annual report should include the names of the audit committee members, the basis for the determination of the independence of the external auditors and a report of the AC setting out the manner of compliance with the above requirements during the specified period

Complied

Corporate Governance Contd.


Audit Committee Report

COMPOSITIONThe Audit Committee of the parent, Dunamis Capital PLC functions as the Audit Committee of Kelsey Developments PLC. It is comprised of three Independent Non-Executive Directors of the Parent Company and is chaired by Mr. Chandana L. de Silva. The other members of the Board appointed Audit Committee is Mr. A. D. E. I Perera and Mr. Piranavan Sivagananthan.

MEETINGSBesides the Committee members, the Managing Director, the Senior Manager – Risk and Compliance, the Senior Manager – Finance, External Auditors and Internal Auditors of the selected subsidiaries attended the meetings by invitation. The proceedings of the Audit Committee meetings are reported to the Board of Directors at the Board meeting following the Audit Committee meeting.

Five Audit Committee Meetings were held during the year under review.

FUNCTIONSThe primary function of the Committee is to assist the Board in fulfilling its oversight responsibilities, primarily through:

• Overseeing management’s conduct of the Group’s financial reporting process and systems of internal accounting and financial controls;

• Monitoring the independence and performance of the Group’s external auditors; and

• Providing an avenue of communication among the external auditors, internal auditors, management and the Board.

FINANCIAL REPORTING SYSTEMThe Committee reviewed the financial reporting system adopted by the company with particular reference to the following;

• The preparation, presentation and adequacy of the disclosures in the Company’s annual and interim financial statements in accordance with the Sri Lanka Accounting Standards, the Companies Act No. 7 of 2007 and other applicable statutes.

• The underlying rationale and basis for the significant estimates and judgements to the Financial Statements.

INTERNAL AUDITThe Committee monitors the effectiveness of the Internal Audit function of the group and is responsible for approving their appointment or removal and for ensuring they have adequate access to information required to conduct their audits.

The internal audit function has been outsourced to Messrs. B R De Silva & Company, a firm of Chartered Accountants.

The Audit Committee has agreed with the Internal Auditors as to the frequency of audits to be carried out, the scope of the audit and the areas to be covered and the fee to be paid for their services.

During the year under review, the audit committee has met the Internal Auditors to consider their reports, management responses and matters requiring follow up on the effectiveness of internal controls and audit recommendations.

EXTERNAL AUDITExternal Auditors’ management letters pertaining to the previous year’s audit and the Management’s response thereto were discussed during the year. Follow up action taken by the management to ensure that the recommendations contained in the management letter were implemented was reviewed. The fees payable to the auditors have been recommended by the committee to the Board for approval.

Based on the declaration from Messrs Ernst & Young, and as far as the Directors are aware, the Auditors do not have any relationship or interest in the Company or its subsidiaries.


The Audit Committee also recommended to the Board of Directors that Messrs Ernst & Young be reappointed as Auditors for the financial year ending 31 March 2020, subject to the approval of the shareholders at the Annual General Meeting.

CONCLUSIONThe Audit Committee is of the view that adequate controls are in place to safeguard the Company’s assets and to ensure that the financial position and the results disclosed in the Audited Accounts are free from any material misstatements.

(Sgd.)Mr. Chandana L. de SilvaChairman –Audit Committee

02 August 2019Colombo

Audit Committee Report Contd.


Related Party Transactions Review Committee Report

COMPOSITION OF THE COMMITTEEAs permitted under Section 9.2.3 of the of the Listing Rules of the Colombo Stock Exchange, the Related Party Transactions Review Committee of Dunamis Capital PLC functions as the Related Party Transactions Review Committee of Kelsey Developments PLC. Related Party Transactions Review Committee was appointed by the Board of Directors of the Company and reports directly to the Board. The Committee consists of Three (3) members with a combination of two Independent Non-Executive Directors and an Executive Director. The members of the committee as at 31 March 2019 are:

Mr. A.D.E.I. Perera – Independent Non-Executive Director (Chairman)Mr. Chandana L. de Silva – Independent Non-Executive DirectorMr. Dinesh Schaffter – Managing Director

The Company Secretary acts as the Secretary to the Committee

SCOPEThe Related Party Transactions Review Committee (RPTRC) was formed by the Board to assist the Board in reviewing all Related Party Transactions (RPT) carried out by the Company.

The mandate of the Committee includes inter-alia the assurance of the following:

• Developing and recommending for adoption by the Board of Directors of the Company and its listed subsidiaries, a RPT Policy consistent with that proposed by the CSE.

• Making immediate market disclosures on applicable RPT, as required by Section 9 of the Continuing Listing Requirements of the CSE.

• Making appropriate disclosures on RPT in the Annual Report, as required by Section 9 of the Continuing Listing Requirements of the CSE.

POLICIES AND PROCEDURESThe Company has adopted a Related Party Transactions (RPTs) Policy in view of structuring the Company’s policies and procedures to uphold good governance and in the best interests of the Company.

The Committee adopted policies and procedures for (a) reviewing the Related Party Transactions at each quarterly meeting, (b) identifying & reporting on recurrent & non-recurrent transactions to be in line with the applicable CSE Rules.

The Committee ensures that all transactions with related parties are in the best interests of all stakeholders, adequate transparency is maintained and are in compliance with the Listing Rules. The Committee reviewed related party transactions during the year and communicated its observations to the Board.

MEETINGSThe Committee held four meetings on a quarterly basis during the year under review. Proceedings of the committee meetings are regularly reported to the Board of Directors.

DURING THE YEAR UNDER REVIEW:During the financial year under review, the recurrent and non recurrent related party transactions that exceeded the immediate disclosure thresholds as stipulated by Listing Rules of the Colombo Stock Exchange are given on page 59.

Details of other Related Party Transactions are given in Note No. 32 to the Financial Statements on pages 53 to 54.

(sgd.)A.D.E.I. PereraChairman – Related PartyTransactions Review Committee



Risk Management

Kelsey Developments PLC and its subsidiaries operate in the real estate industry segment of the economy transferring land to aesthetically pleasing and environment friendly living spaces. Considering the risk factors associate with managing this unique asset class, Board of Directors have embedded the risk management process to the corporate strategy of the company/ Group.

The types of risks encounter by the company in managing highly complex, dynamic, and multi-disciplinary activities of real estate development are varied and broadly categorized as Strategic, Operational, Financial and Regulatory.

Kelsey Developments PLC derives its corporate culture and values from parent company Dunamis Capital PLC to manage risks associated through an Enterprise Risk Management process with an oversight of the Board of Directors. The Risk appetite, the degree of uncertainty that company is willing accept has been determined by the Board and reflect in company strategy and corporate goals in order to shareholder value enhancement.

RISK MANAGEMENT PROCESSThe Real Estate developments are projects with several phases namely Land Acquisition, Design, and Costing, Regulatory and Local Authority Permissions, Execution and Implementation and finally disposing the developed property. At each of above phase different risks are identified and measured with the probably of event and impact of loss or gain.

Our approach to risk management is designed to provide reasonable, but not absolute, assurance that our assets are safeguarded, the risks impacting the business are continuously assessed and mitigated and all information required to be disclosed is reported to the senior management.

Based on the types of the risks we encounter, the lessons learned we have created a Risk Matrix appear below.

RISK MATRIX

Type of Risk Mitigation Measure

1. Strategic RiskStrategic risk refers to the losses resulting from uncertainties such as unknown future demand, failure to capitalize on untapped opportunities and inabilities to execute strategies and objectives.

Real Estate Development is high growth Industry segment in the economy, the strategies to win customers and ahead of the competition is vital. whilst been alert on bubble been formed.

The Structured risk management approach in developing strategies at every phase of the development cycle has paid off in value creation.

The Bi- monthly meetings with management and monthly performance and review meeting of the Board of Directors have entrenched strategic intent couple with Risk Management Measures.

Risk Reporting

Risk Mitigation

Risk Acceptance

Risk Evaluation

Risk Identification



1.1 Macro-Economic RiskThe dynamics of Macroeconomic indicators such as GDP Growth, Per Capita Income, Interest Rate, Inflation, Foreign Reserves, Rate of Exchange and Commodity prices influence the demand for real estate and achieving the strategic objectives.

Early identification of economic, social and political factors affecting industry through research on the industry segment has enable the company to counter and mitigate the risk emanating from changes of Macro Economic Indicators.

1.2 Project RiskThe uncertainties during the tenure of project will result in failure of strategies and finally project failure.

Project failure may occur due to operational and legal issues.

To mitigate the project risk company carryout expert investigations on possible risk factors in land acquisition, regulatory permissions, and Method of execution prior to committing on the investment. We acquire and develop lands that meet our hurdle returns in locations where prospective buyers looking for contemporary living solutions.

2. Operational RiskOperational Risk is the loss resulting from inadequate or failed processes, systems, people and external events.Operational Risks are categorized under internal and external frauds, Process and system failures, Delivery and execution shortcomings and damage to fixed assets.

The process driven operations and people with different skill sets has enable to minimize the losses arising from operational risks. The procedure manual and Internal controls are properly documented and well explained to all employees through Knowledge sharing. Where the probability is low but impact is high, such operational risks are transferred by obtaining adequate insurance covers.

Furthermore, Operational Risks are being monitored through the internal audit function which is being outsourced to improve the independency. Such reports are being tabled to the Board Audit Committee meetings chaired by a Non-Executive Director.

2.1 People and RetentionAn ability to attract, develop, motivate, and retain talented employees could have an impact in operational risk free environment.

The group HR policies and values are in line with self-development of all employees and meeting their expectation of a great place to work.

The remuneration committee approves salaries and financial benefits at prevailing market rates.

Human safety at work is another priority further strengthen by several insurance covers.

2.2 Legal RiskLegal risks are inherited to Real-estate industry due to the nature of the business. From the time of Land acquisition, signing Sales and Purchase agreement to handing over of completed project, it goes through a process of preparation and review of Legal documentation.

The Group’s legal department comprise of specialized legal officers who are thorough in handling Legal documents related to real-estate business. They engage and review the whole process from the outset.

All contracts with stakeholders are carefully drawn to avoid unforeseen legal battles.



2.3 System and Information RiskOur operations are increasingly dependent on IT systems and the management of information and consequently a greater emphasis is placed on the need for secure and reliable IT systems and infrastructure and careful management of the information that is in our possession.

Disruption of our IT systems could inhibit our business operations in a number of ways, including through disruption of sales, production and cash flows, ultimately impacting our results.

The Group’s IT policy has been updated to reflect the dynamic changes that are taking place in the global technological environment.

We have policies covering the protection of both business and personal information, as well as the use of IT systems and applications by our employees. Our employees are trained to understand and observe these requirements.

A comprehensively documented Business Continuity Plan is in place and our staff is fully trained in its operation in the event of a disaster.

Bi-annual Disaster Recovery drills are conducted to further enhance the Group’s preparedness to face a potential business disruption caused by a disaster to our primary business and data centers.

2.4 Reputational Risk The Risk of potential earnings due to stake holders taking a negative view of the group due to its action.

As a real estate developer, we always endeavor to deliver value proposition to our stake holders. Our teams work closely with local authorities, and the neighborhood residents of our project sites.

We have a Whistle Blower Policy in place where the employees could report any incident that could ultimately damage Company’s reputation. Investigations of such incidents will be carried out by a Non-Executive director.

3. Financial RiskFinancial risk arises in funding projects with sources profitable to the company. Further Market Risk (Interest rate, Exchange rate and commodity prices), Credit Risk (Receivables) and Liquidity Risk (Availability of funds to meet Obligations) are part of the financial risk profile.

Finance department with expertise in costing and fund management recommend the source of funding, either equity or debt based on profitability. Further used supplier’s credit and prepayments from prospective buyers to fund the construction.

Risk Management Contd.



3.1 Market RiskInterest Rate and the exchange rate are factors that affect our cost of funding as well as influence purchase decisions potential customer.

Land been a scarce commodity price of which can be enhanced based on the location and value addition.

The prices of building materials move upwards due to inflation as well as demand.

Inability factor above in above in costing and pricing our product affect profitable sales.

Project finance debt is predominantly fixed rate. Where we have exposure to floating rate debt or investments sensitive to interest rates, we utilise financial models enabling simulation and to support informed decisions on the impact of interest rate movements. To manage rate related cost variations, potential interest rate impact is accommodated in the form of a contingency in our cost estimates/pricing.

Our experienced land teams have strong market knowledge in the Group’s areas of focus.

Our strategy is to acquire land opportunistically, where internal criteria for purchase are met. Each land acquisition is subject to formal internal appraisal and approval processes. Land acquisition is focused on core geographies in Colombo and rapidly urbanising suburbs where the demand fundamentals in the client niche is strong and hence stands the best chance of securing viable planning consent.

The Group keeps financial risk low and maintains liquidity to enable competitively when bidding for new land.

3.2 Credit RiskCredit Risk arises from counterparties defaulting on their contractual obligations. The Groups credit exposure comprised of trade receivables.

The Sale and Purchase agreement entered into with customers, expressly sets out aspects including payment schedule, point of title transfer and actions to be taken in view of default. The credit risk on cash and cash equivalents is limited due to counterparties being reputed, approved commercial banks.

3.3 Liquidity RiskLiquidity Risk refers to the non-availability of funding or funding at unfavorable price to meet financial obligation.

Levels of committed expenditure are carefully monitored against forward sales secured and liquidity facilities available.Overall, a conservative cash administration and funding strategy is in place to mitigate liquidity risk.

4. Regulatory and compliance RiskChanges and new Government, Local Authority Policies, Environmental Certifications,

Corporate Taxation on property development may hinder current operation and expected profitability. Failure to comply with new and existing regulation expose us regulatory and compliance risk resulting penalties and cancellation of licenses.

The effects of changes to Government policies at all levels are closely monitored via a process list driven approach. Representations are made to the Board where appropriate.

Our experienced teams are well placed to interpret and implement new regulation at the appropriate time through direct communication across the Group.

Detailed policies and procedures are in place in respect of compliance and these are communicated to all staff.




Independent Auditor’s Report

TO THE SHAREHOLDERS OF KELSEY DEVELOPMENTS PLC

Report on the audit of the Financial Statements

Opinion We have audited the Financial Statements of Kelsey Developments PLC (“the Company”) and the consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at 31 March 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the Financial Statements, including a summary of significant accounting policies.

In our opinion, the accompanying Financial Statements of the Company and the Group give a true and fair view of the financial position of the Company and the

Group as at 31 March 2019, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinion We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most

significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Financial Statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Financial Statements.

Key audit matter How our audit addressed the key audit matter

Valuation of InventoriesAs at 31 March 2019, the carrying amount of inventories was Rs.1,520,473,503/-. These inventories include costs incurred towards the acquisition of land for sale and development, of which an amount of Rs.930,442,230/- has been carried forward for a period in excess of two years. Further, as described in Note 30.3,several contingencies exist in relation to such properties held by the Group.

In determining the carrying value of inventories at the lower of cost or net realisable value, management applies judgements related to the future marketability and sale of individual housing units, apartments and land plots, together with estimates relating to the values that can be recovered.

The significance of the balance coupled with management’s judgements and estimates in determining net realizable value has resulted in the valuation of inventories being considered a key audit matter.

Our audit procedures focused on the valuation of inventories and included the following testing which were carried out:

• We discussed and understood management’s estimates for the determination of net realisable value which has taken into account, the estimated realisable sales prices and forecasted costs to complete each project.

• On a sample basis, we compared the estimated selling prices of individual land plots and housing units to sales values realised through similar sales by the Group.

• We checked costs to complete considered by management for the determination of net realisable value verified to relevant supporting documents; costs recorded in construction work in progress as at 31 March 2019 as to whether such costs have been appropriately attributed to the relevant project.

• We also assessed the adequacy of disclosures made in the Financial Statement.


Key audit matter How our audit addressed the key audit matter

Revenue recognitionDuring the year, the Group adopted SLFRS 15 - Revenue from Contracts with Customers (SLFRS 15) which specifies how and when to recognise revenue as well as requiring such entities to provide users of Financial Statements with more informative, relevant disclosures.

The group’s operations consists of sales contracts relating to real estate including sales of residential housing units, and freehold land. As part of the group’s adoption of SLFRS 15, considerations needed to be made on the specific terms and conditions attached to sales contracts in determining whether performance obligations are carried out at a point in time or over period of time, according to the fulfillment of performance obligations described in Note 5.1.1 and 5.1.2The above process was significant to the audit as it related to the evaluation of revenue recognition principles, and accordingly has been identified as a key audit matter.

Our audit procedures focused on the Group’s adoption of SLFRS 15 and included, amongst others, the following:

• We assessed the process followed by the Group to establish whether all revenues are considered in its assessment and whether contracts assessed are representative of all types of revenue.

• We checked contract on a sample basis to determine the appropriateness of conclusions reached by management on matters such as separate performance obligation included in contracts, the amount of revenue to be recognized and the determination of whether revenue is to be recorded at a point in time or over a period of time.

• We also assessed the adequacy of corresponding disclosures made in the Financial Statements

Other Information included in the 2019 Annual Report Other information consists of the information included in the Annual Report, other than the Financial Statements and our auditor’s report thereon. Management is responsible for the other information.

Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the management and those charged with governance for the Financial Statements Management is responsible for the preparation of Financial Statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Independent Auditors’ Report Contd.


• Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal controls of the Company and the Group.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,

we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements As required by section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 1420.



Statement of Financial Position

Group CompanyAs at 31 March 2019 2018 2019 2018 Note Rs. Rs. Rs. Rs.

ASSETSNon-Current AssetsProperty, plant and equipment 9 18,946,949 25,676,701 - -Investments in subsidiaries 10 - - 194,946,070 299,951,988Goodwill 10.3 - 8,693,809 - -Deferred tax assets 27.3 25,961,421 45,516,378 - -Total non-current assets 44,908,370 79,886,888 194,946,070 299,951,988

Current assetsInventories 11 1,520,473,503 1,498,774,715 31,536,363 31,536,363Other receivables 12 9,850,542 22,527,006 112,498 26,339Amounts due from related parties 13 81,219,924 194,468 80,005,919 2,642,835Income tax receivables 6,772,823 15,327,793 497,928 18,550Cash and cash equivalents 1,845,690 18,063,109 123,288 476,322Total current assets 1,620,162,482 1,554,887,091 112,275,996 34,700,409Total Assets 1,665,070,852 1,634,773,979 307,222,066 334,652,397

EQUITY AND LIABILITIESCapital and reservesStated capital 14 232,390,325 232,390,325 232,390,325 232,390,325Other reserves 15 7,500,000 7,500,000 7,500,000 7,500,000Capital reserves 16 15,000,000 15,000,000 - -Retained earnings/(losses) (362,117,602) (139,945,303) 951,274 (7,379,624)Equity attributable to owners of the company (107,227,277) 114,945,022 240,841,599 232,510,701Non controlling interests 17 300,000,000 - - -Total Equity 192,772,723 114,945,022 240,841,599 232,510,701

Non-current liabilitiesInterest bearing loans and borrowings 21.1 267,730,360 375,106,411 - -Defined benefit obligations 18 4,842,328 7,241,519 4,842,327 6,016,081Total non-current liabilities 272,572,688 382,347,930 4,842,327 6,016,081

Current liabilitiesOther payables 19 280,992,508 103,918,078 540,000 5,583,685Unclaimed dividends 516,912 517,193 516,912 517,193Amounts due to related parties 20 510,322,734 599,459,352 60,481,228 90,024,737Interest bearing loans and borrowings 21.1 382,836,078 427,583,275 - -Bank overdrafts 25,057,209 6,003,129 - -Total current liabilities 1,199,725,441 1,137,481,027 61,538,140 96,125,615Total Equity and Liabilities 1,665,070,852 1,634,773,979 307,222,066 334,652,397

Net assets per share (6.15) 6.59 13.82 13.34

Figures in bracket indicate deductions.The Accounting Policies and Notes on pages 30 through 57 form an integral part of these Financial Statements.

The Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

Amila WaddeniyaFinance Manager

The Board of Directors is responsible for these Financial Statements.Approved and signed on behalf of the Board,

A.D.E.I. Perera Dinesh SchaffterChairman Managing Director



Statement of Profit or Loss and Other Comprehensive Income

Group CompanyFor the year ended 31 March 2019 2018 2019 2018 Note Rs. Rs. Rs. Rs.

Revenue 22 252,012,178 768,955,497 - 922,500

Cost of sales (191,214,214) (613,153,104) - -

Gross profit 60,797,964 155,802,393 - 922,500

Other income 23 49,327,593 2,927,973 - 20,000

Selling and distribution expenses (41,769,429) (9,779,628) - -

Administrative expenses (84,671,284) (116,231,013) (1,256,660) (1,599,290)

Other expenses 24 (1,500,700) (6,234,140) - (16,500,000)

Operating profit/(loss) (17,815,856) 26,485,585 (1,256,660) (17,156,790)

Finance expenses (213,281,585) (169,039,657) - -

Finance income 25 11,666,186 1,133,403 9,587,558 -

Profit/(loss) before taxation 26 (219,431,255) (141,420,669) 8,330,898 (17,156,790)

Income tax expenses 27 (4,021,800) 45,661,556 - -

Profit/(loss) for the year (223,453,055) (95,759,113) 8,330,898 (17,156,790)

Other comprehensive incomeItems that will never be reclassified to profit or lossActuarial gain/(loss)on defined benefit plans 18 1,280,756 1,570,500 - -Related taxes on Other comprehensive income 27.3 - (76,336) - -

Other comprehensive income for the year, net of tax 1,280,756 1,494,164 - -Total comprehensive income for the year (222,172,299) (94,264,949) 8,330,898 (17,156,790)

Profit/(loss) attributable to :Equity holders of the parent (223,453,055) (92,665,677) - -Non-controlling interests - (3,093,436) - - (223,453,055) (95,759,113) - -

Total comprehensive income attributable to:Equity holders of the parent (222,172,299) (91,171,513) - -Non-controlling interests - (3,093,436) - - (222,172,299) (94,264,949) - -

Earnings per share Basic earnings/(loss) per share 28 (12.82) (5.32) 0.48 (0.98)



Statement of Changes in Equity

Attributable to owners of the CompanyGroup Stated

Capital

Capital

Reserve

Other

Reserve

Retained

Earnings/

(Losses)

Total Non-

Controlling

Interests

Total

Equity

Rs. Rs. Rs. Rs. Rs. Rs. Rs

Balance as at 1 April 2017 (Restated) 232,390,325 15,000,000 7,500,000 (36,721,014) 218,169,311 23,469,935 241,639,246

Total comprehensive income for the year

Loss for the period - - - (92,665,677) (92,665,677) (3,093,436) (95,759,113)

Other comprehensive income, net of tax - - - 1,494,164 1,494,164 - 1,494,164

Total comprehensive income - - - (91,171,513) (91,171,513) (3,093,436) (94,264,949)

Transactions with owners of the company

Contributions and distributions

Dividend paid - - - (17,429,274) (17,429,274) - (17,429,274)

Total Contributions and distributions - - - (17,429,274) (17,429,274) - (17,429,274)

Changes in ownership interests

Acquisition of non controlling interest - - - 5,376,500 5,376,500 (20,376,500) (15,000,000)

Change in ownership interest - - - 5,376,500 5,376,500 (20,376,500) (15,000,000)

Total transactions with owners of the Company - - - (12,052,774) (12,052,774) (20,376,500) (32,429,274)

Balance as at 31 March 2018 232,390,325 15,000,000 7,500,000 (139,945,303) 114,945,022 - 114,945,022

Balance as at 1 April 2018 232,390,325 15,000,000 7,500,000 (139,945,303) 114,945,022 - 114,945,022

Total comprehensive income for the year

Loss for the year - - - (223,453,055) (223,453,055) - (223,453,055)

Other comprehensive income, net of tax - - - 1,280,756 1,280,756 - 1,280,756

Total comprehensive income - - - (222,172,299) (222,172,299) - (222,172,299)

Transactions with equity holders

Issue of Preference shares (Note 17) - - - - - 300,000,000 300,000,000

Total transactions with equity holders - - - - - 300,000,000 300,000,000

Total transactions with owners of the Company - - - - - 300,000,000 300,000,000

Balance as at 31 March 2019 232,390,325 15,000,000 7,500,000 (362,117,602) (107,227,277) 300,000,000 192,772,723

Company Stated

capital

Other

reserves

Retained

earnings

Total

Rs. Rs. Rs. Rs.

Balance as at 1 April 2017 232,390,325 7,500,000 27,206,440 267,096,765

Total comprehensive income for the period

Loss for the year - - (17,156,790) (17,156,790)

Total comprehensive income - - (17,156,790) (17,156,790)

Transactions with equity holders

Dividend paid - - (17,429,274) (17,429,274)

Total transactions with equity holders - - (17,429,274) (17,429,274)

Balance as at 31 March 2018 232,390,325 7,500,000 (7,379,624) 232,510,701

Balance as at 1 April 2018 232,390,325 7,500,000 (7,379,624) 232,510,701

Total comprehensive income/ (expense) for the year

Profit for the year - - 8,330,898 8,330,898

Total comprehensive income - - 8,330,898 8,330,898

Balance as at 31 March 2019 232,390,325 7,500,000 951,274 240,841,599



Group CompanyFor the year ended 31 March 2019 2018 2019 2018 Notes Rs. Rs. Rs. Rs.

Cash flows from operating activitiesProfit/(loss) before income tax expenses (219,431,255) (141,420,669) 8,330,898 (17,156,790)

Adjustments forDepreciation on property, plant and equipment 9.1 6,010,666 11,321,872 - -Provision for defined benefit obligations 18 1,279,582 1,670,389 - -Gain on disposal of subsidiary (7,501,636) - - (20,000)(Gain)/loss on sale of property, plant & equipment - 4,506,726 - -Finance income 25 (11,666,186) (1,133,403) (9,587,558) -Finance expenses 213,281,585 169,039,657 - -Impairment provision for Twid Capital (Pvt) Ltd - - - 16,500,000Operating profit/ (loss) before working capital changes (18,027,244) 43,984,572 (1,256,660) (676,790)

Changes in inventories (31,257,461) 266,496,369 - (2,351)Changes in trade and other receivables 9,200,216 (5,207,051) (86,159) 256,434Changes in amounts due from related parties (38,944,407) 3,804,792 2,642,834 8,675,242Changes in amounts due to related parties 210,202,758 103,502,649 (5,248,014) 35,425,296Changes in trade and other payables 183,156,624 (347,426,915) (5,043,685) (10,062,415)Cash generated from/ (used in) operations 314,330,486 65,154,416 (8,991,684) 33,615,416

Finance expenses paid (211,239,979) (167,388,585) - -Income tax paid (2,508,185) (14,987,453) (479,378) (3,855,286)Gratuity paid 18 (829,250) (111,824) (469,250) -Net cash from/ (used in) operating activities 99,753,068 (117,333,446) (9,940,312) 29,760,130

Cash flows from investing activitiesAcquisition of property, plant and equipment (785,545) (18,496,008) - -Proceeds from disposal of property, plant and equipment - 102,489,598 - 20,000Proceeds from disposal of investment in subsidiaries-net of cash disposed 4,962,120 - - -Finance income received 11,666,186 1,133,403 9,587,558 -Net cash from/ (used in) investing activities 15,842,761 85,126,993 9,587,558 20,000

Cash flows from financing activitiesProceeds from interest bearing loans and borrowings 331,000,000 400,000,000 - -Repayment of interest bearing loans and borrowings (481,767,105) (222,356,338) - -Repayment of finance lease (100,225) (282,269) - -Dividend paid - (17,429,274) (281) (17,429,274)Acquisition of non controlling interest - (15,000,000) - (15,000,000)Net cash flows from/ (used in) financing activities (150,867,330) 144,932,119 (281) (32,429,274)

Net Increase / (decrease) in cash and cash equivalents (35,271,499) 112,725,666 (353,034) (2,649,145)

Cash and cash equivalents at the beginning of the year (Note A) 12,059,980 (100,665,686) 476,322 3,125,467Cash and cash equivalents at the end of the year (Note B) (23,211,519) 12,059,980 123,288 476,322

Note ACash at bank and in hand 18,063,109 7,673,782 476,322 3,125,467Bank overdrafts (6,003,129) (108,339,468) - -Cash and cash equivalents as at 31 March 12,059,980 (100,665,686) 476,322 3,125,467

Note BCash at bank and in hand 1,845,690 18,063,109 123,288 476,322Bank overdrafts (25,057,209) (6,003,129) - -Cash and cash equivalents as at 31 March (23,211,519) 12,059,980 123,288 476,322


Statement of Cash Flows


Notes to the Financial Statements

1. REPORTING ENTITYKelsey Developments PLC (“Company”) is a public limited liability company incorporated and domiciled in Sri Lanka. The registered office and place of business of the Company is No. 2, Deal Place, Colombo 03. The Company was re-registered under the Companies Act No. 07 of 2007. The shares of the Company have a primary listing on the Colombo Stock Exchange.

The Consolidated Financial Statements of the Company as at and for the year ended 31 March 2019 include the Company and its Subsidiaries (together referred to as the “Group” and individually as “Group entities”).

The Financial Statements of all companies in the Group have a common fnancial year which ends on 31 March.

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

1.1 Principal Activities1.1.1 CompanyThe principal activity of the Company is investing in and management of subsidiaries, construction, development and sale of lands.

1.1.2 Subsidiary

Name of Subsidiary Principal Activities

Kelsey Homes (Pvt) Ltd Engages in construction, development and sale of lands, Quality residential houses and apartments

Twid Capital (Pvt) Ltd Engages in construction, development and sale of lands, Quality residential houses and apartments

During the year Thornton Engineering (Pvt) Ltd (Formerly known as Pre Fab Engineering Projects (Pvt) Ltd) which was a subsidiary of the Company was disposed to Nextventures Ltd as more-fully described in Note 10.3.

2. BASIS OF PREPARATION

2.1 Statement of ComplianceThe Consolidated Financial Statements of the Group and the Financial Statements of the Company which comprise the Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows and Notes thereto have been prepared in accordance with the Sri Lanka Accounting Standards (SLFRSs and LKASs) laid down by the Institute of Chartered Accountants of Sri Lanka, and in compliance with the requirements of Companies Act No. 7 of 2007 and provide appropriate disclosures as required by the Listing Rules of the Colombo Stock Exchange.

These Financial Statements, except for information on cash flows have been prepared following the accrual basis of accounting.

2.2 Responsibility for Financial StatementsThe Board of Directors of the Company is responsible for these Financial Statements of the Group and the Company as per the provisions of the Companies Act No. 07 of 2007 and Sri Lanka Accounting Standards (SLFRSs and LKASs).

The Board of Directors acknowledges their responsibility for Financial Statements as set out in the ‘Annual Report of the Board of Directors’ and ‘Statement of Directors’ Responsibility’. These Financial Statements include the following components:

• a Statement of Profit or Loss and Other Comprehensive Income providing the information on the financial performance of the Group and the Company for the year under review.

• a Statement of Financial Position providing the information on the financial position of the Group and the Company as at the year end.

• a Statement of Changes in Equity depicting all changes in shareholders’ funds during the year under review of the Group and the Company.

• a Statement of Cash Flows providing the information to the users, on the ability of the Group and the Company to generate cash and cash equivalents and utilisation of those cash flows.

• Notes to the Financial Statements comprising Significant Accounting Policies and other explanatory information.

2.3 Approval of Financial Statements by the Board of DirectorsThe Financial Statements of the Group and the Company for the year ended 31 March 2019 (including comparatives for 2018), were approved and authorised for issue by the Board of Directors in accordance with Resolution of the Directors on 02 August 2019.


2.4 Basis of MeasurementThe Financial Statements have been prepared on the historical cost basis and applied consistently with no adjustments being made for inflationary factors affecting the Financial Statements, except for the following,• Retirement benefit obligations -

present value of the defined benefit obligations.

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

2.6 Functional and Presentation CurrencyThe Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the Group’s functional currency. Financial information presented in Sri Lankan Rupees has been rounded to the nearest Rupee unless indicated otherwise.

2.7 Materiality and AggregationEach material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial.

Assets and liabilities are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern.

2.8 OffsettingAssets and liabilities are offset and the net amount reported in the Statement of Financial Position only where there is:• a current enforceable legal right to

offset the asset and liability; and• an intention to settle on a net basis,

or to realise the asset and settle the liability simultaneously.

Income and expenses are not offset unless required or permitted by Sri Lanka Accounting Standards.

2.9 Comparative InformationComparative information is re-classified wherever necessary to conform with the current year’s classification in order to provide a better presentation. The details of such re-classifications have been provided in Notes to the Financial Statements. As well as, Comparative information have not been restated due to the adoption of SLFRS 15 and SLFRS 9.

2.10 Use of Judgments and EstimatesThe preparation of Consolidated Financial Statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Consolidated Financial Statements is set out below.

3. ASSUMPTIONS AND ESTIMATION UNCERTAINTIESInformation about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments for the year ended 31 March 2019 are included in the following Notes.

3.1 Defined Benefit ObligationsThe Group annually measures the present value of the promised retirement benefits for gratuity, which is a Defined Benefit Plan. The cost of providing benefits under the defined benefits plans is determined using the projected unit credit method.

This involves making assumptions on discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. See Note 18 for the assumptions used.

3.2 Deferred Tax AssetsDeferred tax assets are recognised in respect of tax losses to the extent that it is probable that future taxable profit will be available and can be utilised against such tax losses. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits, together with future tax-planning strategies.

3.3 Provisions for Liabilities, Commitments and ContingenciesManagement has made judgments as to the likelihood of any claim succeeding in making provisions. The time of concluding legal claims is uncertain, as is the amount of possible outflow of economic benefits. Timing and cost ultimately depends on the due processes in respective legal jurisdictions.

3.4 Valuation of InventoriesInventories of the Group includes land and related developments which are reflected at the lower of cost or Net Realisable value. The determination of Net Realisable value require judgement specially relating to the marketability of the properties and other contingent liabilities / litigations which are described in Note 30.3 in the Financial Statements.


SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, except for the change in accounting policy as explained below.

The Group has initially adopted SLFRS 15 Revenue from contracts with customers and SLFRS 09 Financial Instruments from 01 April 2018.

a) SLFRS 15 Revenue from Contracts with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaced LKAS 18 Revenue, LKAS 11 Construction Contracts and related interpretations. Under SLFRS 15 revenue from contracts with customers, an entity should recognize as revenue the amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services excluding amounts collected on behalf of third parties. The Company recognizes revenue when it transfers control over a product or service to a customer. Determining the timing of the transfer of control, at a point in time or over time requires judgment.

The Group has applied SLFRS 15 using the cumulative transition effect method of an adoption. Based on the assessment performed, the Group concluded that SLFRS 15 does not have a material impact on the Group’s Financial Statements.

b) SLFRS 9 Financial InstrumentsSLFRS 9 Financial Instruments replaces LKAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 01 April 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The nature of these adjustments are described below:

Classification and measurementThe changes in the classification of the Group’s financial assets is mainly on the loans and receivables as presented in accordance with LKAS 39 have been reclassified as financial assets at amortised cost. Further on Financial liabilities classification, the other liabilities as presented in accordance with LKAS 39 have been reclassified as financial liabilities at amortised cost.

ImpairmentThe adoption of SLFRS 9 has fundamentally changed the Group’s accounting for impairment losses for financial assets by replacing LKAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. SLFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss and contract assets. Group has performed the assessment and conclude that SLFRS 09 do not have a material impact on the Group Financial Statement.

Set out below is an index of Significant Accounting Policies, the details of which are available on the pages that follow;

Significant Accounting Policies Page No.

4. Basis of consolidation 33

4.1 General 33

5 Significant Accounting Policies - Recognition of Income & Expenses 34

5.1 Revenue and expenses 34

5.2 Leases 34

5.3 Income tax expense 34

5.4 Deferred tax 35

5.5 Tax exposures 35

6 Significant Accounting Policies – Recognition of Assets & Liabilities. 36

6.1 Financial Instruments 36

6.2 Property, plant & equipment 37

6.3 Goodwill 38

6.4 Inventories 38

6.5 Impairment of non-financial assets 38

6.6 Dividend payables 39

6.7 Share capital 39

6.8 Other liabilities 39

6.9 Provisions 39

6.10 Commitments and contingencies 39

6.11 Employee benefits 39

6.12 Earnings per share 39

6.13 Subsequent Events 39

7. Statement of Cash Flows 40

8. New Standards Issued but Not yet Effective as at Reporting Date 40

Notes to the Financial Statements Contd.


4. BASIS OF CONSOLIDATION4.1 GeneralThe Group’s Financial Statements comprise, consolidated Financial Statements of the company and its subsidiaries in terms of the Sri Lanka Accounting Standard – SLFRS 10 on ‘Consolidated Financial Statements.

Thus the consolidation Financial Statements present financial information about the Group as a single economic entity distinguishing the equity attributable to the parent (controlling interest) and attributable to minority shareholders with non-controlling interests.

4.1.1 Business CombinationsBusiness combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:• the fair value of the consideration

transferred; plus• the recognised amount of any non-

controlling interests in the acquiree; plus

• if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

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

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

4.1.2 SubsidiariesSubsidiaries are entities controlled by the Group. The Group controls an entity if 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 entities. Details of the Company’s Subsidiaries are set out in notes 1.1.2 and 10.

The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control effectively commences until the date that control effectively ceases.

The Consolidated Financial Statements are prepared to common financial year end of 31 March.

Where Subsidiaries have been sold or acquired during the year, their operating results have been included to the date of disposal or from the date of acquisition. Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interest and the other components of equity related to the subsidiary.

In the separate Financial Statements of the company, Investment in subsidiaries are accounted at cost less accumulated depreciation.

4.1.3 Non-Controlling InterestsNon-Controlling Interests are measured at their proportionate share of the acquiree’s

identifiable net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

For each business combination, the Group elects to measure any non-controlling interests in the acquiree either:• at fair value; or• at their proportionate share of the

acquiree’s identifiable net assets, which are generally at fair value.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

4.1.4 Acquisitions of Non-Controlling InterestAcquisition of non-controlling interest is accounted for as transactions with equity holders. Therefore, no goodwill is recognised as a result of such transactions.

4.1.5 Goodwill and Gain from a Bargain Purchase arising on the Acquisition of SubsidiariesGoodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired. When the excess is negative (bargain purchase), it is recognised immediately in profit or loss. Goodwill on the acquisition of subsidiaries is presented as intangible assets and stated at cost less accumulated impairment loss. Goodwill is tested for impairment as described in LKAS 36 – Impairment of Assets.

4.1.6 Loss of ControlOn the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any


surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost.

Subsequently that retained interest is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for financial instruments depending on the level of influence retained.

4.1.7 Transactions Eliminated on ConsolidationIntra-group balances, and income and expenses arising from intra- Group transactions are eliminated in preparing the Consolidated Financial Statements.

4.1.8 Material Gains or Losses, Provisional Values or Error CorrectionsThere were no material gains or losses, provisional values or error corrections recognised during the year in respect of business combinations that took place in previous periods.

5 SIGNIFICANT ACCOUNTING POLICIES - RECOGNITION OF INCOME & EXPENSES

5.1 Revenue RecognitionRevenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Revenue from Construction and selling of houses and the sale of land is recognised at the point in time when control of the asset is transferred to the customer as explained in note 5.1.1 and 5.1.2. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the

transaction price for the sale of goods, the Group considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any).

5.1.1 Construction and selling of housesRevenue from construction and selling of houses is recognized when construction is completed, 100% sales proceeds are collected and Certificate of Conformity is obtained.

5.1.2 Sale of LandRevenue from sale of Land is recognised only when 100% sales proceeds are collected and the control is transferred to the customers upon the transfer of property deed.

5.1.3 Interest Income and expensesInterest income and expense are recognised in profit or loss using the effective interest method. The ‘effective interest rate’ is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or financial liability.

5.1.4 DividendsDividend income is recognised in profit or loss on an accrual basis when the Company’s right to receive the dividend is established.

5.1.5 Other income and expensesOther income and expenses are recognised on an accrual basis.

5.1.6 Contract LiabilitiesA contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.If a customer pays consideration before the Group tranfers goods or services to the customer,a contract liability is

recognized when the payment is made or the payment is due (whichever is earlier).Contract liabilities are recognized as revenue when the Group executed performance obligation under the contract. The Customer deposits disclosed under note 19 is considered as contract liabilities.

5.2 Leases

5.2.1 Finance LeasesFinance leases that transfer substantially all risks and rewards incidental to ownership of the leased item to the Group are classified as finance leases and capitalized at the commencement of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

5.2.2 Rental Income and ExpensesRental income and expense are recognized in profit or loss on an accrual basis.

5.3 Income Tax Expense

5.3.1 Income TaxIncome tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in Other Comprehensive Income (OCI).Current tax assets and liabilities and deferred tax assets and liabilities are offset only to the extent that they relate to income taxes imposed by the same taxation authority, there is a legal right and intentions to settle on a net basis and it is allowed under the tax law of the relevant jurisdiction.



5.3.2 Current TaxIncome tax expense comprises of current and deferred tax. Income tax expense is recognised in the Statement of profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted on the reporting date, and any adjustment to tax payable in respect of previous years.

Provision for taxation is based on the profit for the year adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act, No. 24 of 2017 and the amendments thereto.

5.4 Deferred TaxDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:• temporary differences on the initial

recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised;

such reductions are reversed when the probability of future taxable profits improves.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

Deferred tax assets and liabilities are offset only if certain criteria are met.

5.5 Tax ExposuresIn determining the amount of current and deferred tax, the Group considers the impact of tax exposures, including whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change

its judgment regarding the adequacy of existing tax liabilities. Such changes to tax liabilities would impact tax expense in the period in which such a determination is made.

5.5.1 Withholding Tax on Dividends Distributed by the Company, Subsidiaries

5.5.1.1 Withholding Tax on Dividends Distributed by the CompanyWithholding tax that arises from the distribution of dividends by the Company is recognised at the time the liability to pay the related dividend is recognised.

5.5.1.2 Withholding Tax on Dividends Distributed by the SubsidiariesDividends received by the Company from its Subsidiaries, have attracted a 14% deduction at source.

5.5.2 Value Added Tax (VAT)The Fee and Commission income of the Group companies as defined in the VAT Act No. 14 of 2002 and subsequent amendments thereto is liable for Value Added Tax at 15%.

5.5.3 Economic Service Charge (ESC)As per the provisions of the Economic Service Charge Act No. 13 of 2006, ESC is payable on the liable turnover at specified rates. ESC paid is deductible from the income tax liability. Any unclaimed ESC payments can be carried forward and set- off against the income tax payable in the two subsequent years.

5.5.4 Nation Building Tax (NBT)In accordance with the provisions of the Nation Building Tax Act, No. 9 of 2009 and the subsequent amendments thereto, Nation Building Tax is payable at the rate of 2% with effect from 1 January 2011 on the liable turnover.


6. Significant Accounting Policies – Recognition of Assets & Liabilities.

6.1 Financial InstrumentsA financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.

6.1.1. Financial Assets Initial RecognitionFinancial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under SLFRS 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent MeasurementFor purposes of subsequent measurement, financial assets are classified in four categories;• Financial assets at amortised cost (debt

instruments) (previously classified as loans and receivables)

• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments) (previously classified as available for sale financial assets)

• Financial assets at fair value through profit or loss

However the financial assets of the group are limited to financial assets at amortized cost (Debt Instrument)

Financial assets at amortised cost (debt instruments)This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:• The financial asset is held within a

business model with the objective to hold financial assets in order to collect contractual cash flows, and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group’s financial assets at amortised cost includes trade receivables and amounts due from related parties.

De-recognition – Financial Assets.A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:• The rights to receive cash flows from

the asset have expired or;• The Group has transferred its rights

to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of Financial AssetsThe Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on



the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

6.1.2. Financial LiabilitiesInitial RecognitionFinancial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, and amounts due to related parties.

Subsequent MeasurementThe measurement of financial liabilities depends on their classification as described below;

Loans and borrowingsAfter initial recognition, interest bearing

loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the Statement of Profit or Loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of Profit or Loss.

De-recognition – Financial LiabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit or Loss.

6.1.3 Offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if;• There is a currently enforceable legal

right to offset the recognised amounts and

• there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

6.1.4 Fair Value of Financial InstrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.

Such techniques may include:• Using recent arm’s length market

transactions.• Reference to the current fair value of

another instrument that is substantially the same

• A discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 31.

6.2 Property, Plant and EquipmentThe Group applies the requirements of the Sri Lanka Accounting Standard– LKAS 16 on ‘Property, Plant & Equipment’ in accounting for assets (including buildings under operating leases where the Group is the lessor) which are held for use in the provision of services, for rental to others or for administrative purposes and are expected to be used for more than one year.

6.2.1 Recognition and MeasurementProperty, Plant & Equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the Group and cost of the asset can be reliably measured. The Group applies the Cost Model to all Property, Plant & Equipment and records at cost of purchase together with any incidental expenses thereon, less accumulated depreciation and any accumulated impairment losses.

An item of Property, Plant & Equipment that qualifies for recognition as an asset is initially measured at its cost. Cost includes expenditure that is directly attributable to the acquisition of the asset and subsequent costs (excluding the costs of day-to-day servicing). The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use


and the costs of dismantling and removing the items and restoring the site on which they are located and capitalized borrowing costs. Purchased software which is integral to the functionality of the related equipment is capitalised as part of Computer Equipment.

When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

6.2.2 Subsequent CostsSubsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.

6.2.3 DepreciationDepreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

The estimated useful lives of significant items of property and equipment are as follows:

Asset Type Life Time

(Years)

Office Equipment 6

Computer Equipment 5

Motor Vehicles 5

Lease hold Motor Vehicles 5

Plant and Machinery 5

Furniture , Fixtures & Fittings 8

The depreciation rates are determined separately for each significant part of

an item of Property, Plant & Equipment depreciation of asset begins when it is available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by the management. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or the date that the asset is de-recognised.

6.2.4 Change in Depreciation RateDepreciation methods, useful lives and residual values are reassessed at each Reporting date and adjusted, if required.

6.2.5 De-recognitionAn item of Property, Plant & Equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset), is recognised in ‘Other Operating Income’ in profit or loss in the year the asset is derecognised.

When replacement costs are recognised in the carrying amount of an item of Property, Plant & Equipment, the remaining carrying amount of the replaced part is derecognised as required by Sri Lanka Accounting Standard – LKAS 16 on ‘Property, Plant & Equipment’.

6.3 GoodwillGoodwill that arises on the acquisition of subsidiaries is presented with intangible assets. For the measurement of goodwill at initial recognition see Note 4.1.1 Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.

6.4 InventoriesInventories are valued at the lower of cost and net realisable value, after making due allowances for obsolete and slow moving items. Net realizable value is the estimated selling price at which inventories can be sold in the ordinary course of business less the estimated cost

of completion and the estimated cost necessary to make the sale.

The costs incurred in bringing inventories to its present location and condition, are accounted for as follows:

6.4.1 Contract work in progress- This cost represents for work performed on projects which are measured at actual costs incurred.

6.5 Impairment of Non-Financial AssetsAt each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than investment properties 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 is 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.

The Group’s corporate assets do not generate separate cash inflows and are used by more than one CGU. Corporate



assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGUs to which the corporate assets are allocated.

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.

6.6 Dividends PayableDividends on ordinary shares are recognised as a liability and deducted from equity when they are recommended and declared by the Board of Directors.

6.7 Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

6.8 Other LiabilitiesOther liabilities are recorded at amounts expected to be payable at the Reporting date.

6.9 ProvisionsA provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

6.10 Commitments and ContingenciesAll discernible risks are accounted for in determining the amount of all known liabilities. The Company’s share of any

contingencies and capital commitments of a Subsidiary for which the Company is also liable severally or otherwise are also included with appropriate disclosures.

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is not probable or cannot be reliably measured. Contingent liabilities are not recognised in the Statement of Financial Position but are disclosed unless they are remote.

6.11 Employee Benefits

6.11.1 Defined Benefit Plan - GratuityA defined benefit plan is a post employment benefit plan other than a defined contribution plan.

The liability recognised in the Statement of Financial Position in respect of a defined benefit plan is the present value of the defined benefit obligation at the reporting date. Benefit falling due more than 12 months after the reporting date are discounted to present value.

The defined benefits obligation is calculated annually using Projected Unit Credit Method (PUC) as recommended by LKAS-19, “Employee Benefits”.

Actuarial gains and losses in the period in which they occur have been recognized in the other Comprehensive income (OCI).

The assumptions based on which the results of actuarial valuation was determined, are included in notes to the financial statements.

Gratuity liability was computed from the first year of service for all employees in conformity with LKAS 19- “Employee Benefits”. However, under the payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five years of continual service. The company is liable to pay gratuity in

terms of the relevant statute. The gratuity liability is not externally funded.

The Gratuity liability is not externally funded. These items are grouped under Defined Benefit Liability in the Statement of Financial Position.

6.11.2 Employees’ Provident FundThe Group and employee contribute 12% - 15% and 8% - 10% respectively on the salary of each employee to an approved Provident Fund managed by the Central Bank of Sri Lanka.

6.11.3 Employees’ Trust FundThe Group contributes 3% of the salary of each employee to the Employees’ Trust Fund maintained by the Employees Trust Fund managed by the Central Bank of Sri Lanka.

6.11.4 Short-term Employee BenefitsShort-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

6.12 Earnings per Share (EPS)The Group presents Basic and Diluted Earnings per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to the ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

6.13 Subsequent EventsEvents after the reporting period are those events, favourable and unfavourable, that occur between the reporting date


and the date the Financial Statements are authorised for issue.

All material and important events that occurred after the reporting date have been considered and appropriate disclosures are made in Note 29 to the Financial Statements.

7. STATEMENT OF CASH FLOWSThe Statement of Cash Flows has been prepared using the “Indirect Method” of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard LKAS – 07 “Cash Flow Statements”. 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 equivalent include cash in hand and favorable balances with banks.

8. NEW STANDARDS ISSUED BUT NOT YET EFFECTIVE AS AT REPORTING DATEThe Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which will become applicable for financial periods beginning on or after 1st January 2019. Accordingly, this Standards has not been applied in preparing these Financial Statements.

8.1 Sri Lanka Accounting Standard - SLFRS 16 “Leases”SLFRS 16 eliminates the current dual accounting model for lessees which distinguishes between On-Balance Sheet finance leases and Off-Balance Sheet operating leases. Instead there will be

a single On-Balance Sheet accounting model that is similar to current finance lease accounting.

SLFRS 16 is effective for annual reporting periods beginning on or after January 01, 2019.

The Group is assessing the potential impact on its Financial Statements resulting from the application of SLFRS 16.



9 PROPERTY, PLANT AND EQUIPMENT9.1 Group

Motor Computer Furniture Office Plant and Leasehold Total Vehicles Equipment Fixtures and Equipment Machinery Motor Fittings Vehicles Rs. Rs. Rs. Rs. Rs. Rs. Rs.

CostBalance as at 1 April 2018 356,014 16,683,804 18,936,537 2,479,268 1,454,936 1,475,000 41,385,558Additions - 109,000 560,905 109,790 5,850 - 785,545Disposals of Subsidiary - (979,313) - (254,879) (1,122,586) (1,475,000) (3,831,778)Disposals - - - - - - -Balance as at 31 March 2019 356,014 15,813,491 19,497,442 2,334,179 338,200 - 38,339,325

Accumulated DepreciationBalance as at 1 April 2018 356,014 8,302,311 4,390,789 781,092 887,006 991,643 15,708,857Charge for the year - 2,965,596 2,386,730 399,633 160,454 98,253 6,010,666Disposals of Subsidiary - (317,659) - (69,414) (850,177) (1,089,896) (2,327,147)Disposals - - - - - - -Balance as at 31 March 2019 356,014 10,950,248 6,777,519 1,111,311 197,283 - 19,392,376

Carrying values as at 31 March 2019 - 4,863,243 12,719,923 1,222,868 140,917 - 18,946,949Carrying values as at 31 March 2018 - 8,381,493 14,545,748 1,698,176 567,930 483,357 25,676,701

9.1.1 Based on the assessment of potential impairment carried out internally by the management as at 31 March 2019, no provision was required to be made in the Financial statement.

9.1.2 Property, Plant & Equipment included fully depreciated assets having a gross amount of Rs.2,821,376/- as at 31 March 2019 (2017/18 Rs. 1,560,184/-)

9.1.3 There were no capitalised borrowing costs related to the acquisition of Property, plant & equipment during the year (2017/18 - nil ).

9.1.4 There were no items of Property, plant & equipment pledged as security as at 31 March 2019.

9.2 COMPANY

Computer Furniture Total Equipment Fixtures and Fittings Rs. Rs. Rs.

CostBalance as at 1 April 2018 578,500 57,475 635,975Additions - - -Disposals - - -Balance as at 31 March 2019 578,500 57,475 635,975

Accumulated DepreciationBalance as at 1 April 2018 578,500 57,475 635,975Charge for the year - - -Disposals - - -Balance as at 31 March 2019 578,500 57,475 635,975

Carrying values as at 31 March 2019 - - -Carrying values as at 31 March 2018 - - -


9.2.1 Based on the assessment of potential impairment carried out internally by the management as at 31 March 2019, no provision was required to be made in the Financial Statement.

9.2.2 Property, plant & equipment included fully depreciated assets having a gross amount of Rs.635,975/- as at 31 March 2019 (2017/18 Rs.635,975/-).

9.2.3 There were no capitalised borrowing costs related to the acquisition of Property, plant & equipment during the year ( 2017/18 - nil ).

10 INVESTMENT IN SUBSIDIARIES10.1 Direct Subsidiaries

Holding No. of Shares Company Note 2019 2018 2019 2018 2019 2018 Rs. Rs.

Kelsey Homes (Pvt) Ltd 100% 100% 1,250,000 1,250,000 149,317,710 149,317,710Thornton Engineering (Pvt) Ltd 10.3 - 100% - 1,204,828 - 105,005,918Twid Capital (Pvt) Ltd 100% 100% 6,212,836 6,212,836 62,128,360 62,128,360

Less: Impairment provision 10.1.1 (16,500,000) (16,500,000)

194,946,070 299,951,988

10.1.1 During the year 2017/18, the Company has recognised an impairment provision of Rs. 16.5 Mn for the investment in Twid Capital (Pvt) Ltd.Impairment provision was based on the uncertainty in recovering the investment value due to the recent performance of the Twid Capital (Pvt) Ltd.

10.2 Other Equity Investments

Non Quoted No. of Shares Group Company 2019 2018 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Keells Agro Products Ltd 145,000 145,000 1,450,000 1,450,000 1,450,000 1,450,000Less: Impairment provision (1,450,000) (1,450,000) (1,450,000) (1,450,000) - - - -

10.3 Disposal of subsidiary - Thornton Engineering (Pvt) Ltd (Formerly known as Pre Fab Engineering Projects (Pvt) Ltd)On 31 July 2018, the Company disposed its fully owned subsidiary, Thornton Engineering (Pvt) Ltd for a total consideration of Rs. 105 Mn to Nextventures Ltd. Nextventures Ltd has settled Rs.25 Mn upfront and the balance amount of Rs.80 Mn within a period of 3 years together with interest at the rate of 18% per annum on all outstanding balances.



(i) Identifiable assets and liabilities disposedThe following table summarises the assets and liabilities disposed at the date of disposal ;

Thornton Engineering (Pvt) Ltd Rs.

Property plant and equipment 1,504,631Investments/others 26,925,000Deferred tax assets 19,077,015Inventories 9,558,673Other receivable 3,476,248Amount due from related parties 36,203,929Receivable from inland revenue 7,519,297Cash and cash equivalents (4,962,120)Retirement benefit obligations (893,354)Trade and other payables (6,757,609)Amounts due to related parties (2,576,299)Interest bearing loans & borrowings (264,938)Total identifiable net assets disposed 88,810,473

(ii) Gain/(loss) on disposal of subsidiariesGain/(loss) arising from the disposal has been recognised as follows.

Consideration 105,005,918NCI, based on their proportionate interest in the recognised amounts of net assets -Value of identifiable net assets disposed (88,810,473)Goodwill (Note a ) (8,693,809)Gain/(loss) 7,501,636

(a) The Goodwill recognised at the time of acquisition of Thornton Engineering (Pvt) Ltd is disposed with the disposal of Thornton Engineering (Pvt) Ltd.

(iii) Net cash outflow on disposal of subsidiariesConsideration received in cash -Add : Bank overdraft balances disposed 4,962,120 4,962,120

11 INVENTORIES

Group Company 2019 2018 2019 2018 Rs. Rs. Rs. Rs.

Work in Progress 1,520,409,003 1,498,509,893 31,536,363 31,536,363Raw materials and components - 204,822 - -Consumables 64,500 60,000 - - 1,520,473,503 1,498,774,715 31,536,363 31,536,363

11.1 Work in progress in respect of ongoing projects includes borrowing cost of Rs.29,580,852/- (2017/18 Rs.48,342,050/-) capitalised during the year.

11.2 The contingent liabilities in relation to the inventories are more-fully described in the note 30.3.

11.3 There were no items of Inventory pledged as security as of 31 March 2019, except for disclosed in note 21.2.


12 OTHER RECEIVABLES


Advances and prepayments 8,174,551 17,643,941 102,498 26,339Other receivables 1,675,991 4,883,065 10,000 - 9,850,542 22,527,006 112,498 26,339

13 AMOUNTS DUE FROM RELATED PARTIES

Group Company 2019 2018 2019 2018 Relationship Rs. Rs. Rs. Rs.

Dunamis Capital PLC Parent 13,766 - - -Nextventures Ltd Affiliate 80,048,628 - 80,005,919 -Twid Capital (Pvt) Ltd Subsidiary - - - 2,642,835First Capital Ltd Affiliate - 91,551 - -KHL Coporate Services Ltd Affiliate 844,588 - -Thronton Engineering (Pvt) Ltd Affiliate 312,942 - - -Sprout (Pvt) Ltd Affiliate - 102,917 - - 81,219,924 194,468 80,005,919 2,642,835

14 STATED CAPITAL 2019 2019 2018 2018 Number Rs. Number Rs.

Fully paid ordinary shares 17,429,274 232,390,325 17,429,274 232,390,325

14.1 All shares rank equally with regard to the Company’s residual assets.

14.2 The holders of ordinary shares are entitled to receive dividends declared from time to time and are entitled to one vote per share at General Meetings of the Company.

14.3 The Company has not declared a dividend for the year ended 31 March 2019. (2017/18 Rs. Nil)

15 OTHER RESERVES


General reserve 6,705,000 6,705,000 6,705,000 6,705,000Repair expenses reserve 795,000 795,000 795,000 795,000 7,500,000 7,500,000 7,500,000 7,500,000

15.1 The General Reserve is a revenue reserve which represents the amounts set aside by Directors for general application.

15.2 The Repair Expense Reserve is a reserve set aside by the Directors to meet any major repair expenses in respect of houses built previously.



16 CAPITAL RESERVES


At the beginning of the year 15,000,000 15,000,000 - -At the end of the year 15,000,000 15,000,000 - -

16.1 This reserve was created during the year 2007 on the bonus issue made by Kelsey Property Developers (Pvt) Ltd. During the year 2017/18 Kelsey Property Developers (Pvt) Ltd amalgamated with Kelsey Homes (Pvt) Ltd under a single entity.

17 NON- CONTROLLING INTEREST 2019 2019 2018 2018 Number Rs. Number Rs.

Preference Shares 3,000,000 300,000,000 - - 3,000,000 300,000,000 - -

On 28 February 2019, Kelsey Homes (Pvt) Ltd issued Three Million (3,000,000), 16% Cumulative Preference Shares (based on the profitability) of Rs.100/- each, redeemable at the option of the issuer to Dunamis Capital PLC.

18 DEFINED BENEFIT OBLIGATIONS


Balance at the beginning of the year 7,241,519 7,253,454 6,016,081 5,025,693Disposal of Subsidiary (893,354) - - -Transferred (to)/from during the year (675,414) - (675,414) 853,582Interest charge for the year 431,551 608,313 403,634 485,808Current service cost for the year 848,032 1,062,076 848,032 948,869Paid during the year (829,250) (111,824) (469,250) -Actuarial (gains)/loss for the year (1,280,756) (1,570,500) (1,280,756) (1,297,871)Balance at the end of the year 4,842,328 7,241,519 4,842,327 6,016,081

18.1 The total amount charged to profit or loss in respect of Retirement Benefit Obligations:


Current service costs for the year 848,032 1,062,076 - -Interest charge for the year 431,551 608,313 - - 1,279,583 1,670,389 - -

18.2 The total amount charged to other comprehensive income in respect of Retirement Benefit Obligations:

Actuarial (gains)/loss for the year (1,280,756) (1,570,500) - - (1,280,756) (1,570,500) - -


18.3 The gratuity obligation is recognised in the Company's Financial Statement but as employees have been seconded to subsidiaries, gratuity expenses are recognised in the respective subsidiary company's Financial Statement.

18.4 As required by Sri Lanka Accounting Standard - LKAS 19 - "Employee Benefits", the Group has provided for gratuity liability based on the Projected Unit Credit Method (PUC).

The Key assumptions used in determining the cost of employee benefits were:

2019 2018

Rate of Interest: 11.5% 11%Rate of Salary Increase: 8.5% 7.5%Retirement Age: 55 years 55 years

18.5 Sensitivity Analysis of the assumptions usedThe following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the defined benefit obligation measurement.

Company/ Group Present Value Effect on of Defined benefit Defined benefit Obligations Obligations Rs. Rs.

Discount Rate 1% Less 5,053,352 211,0251% More 4,641,996 (200,331)

Salary Escalation Rate1% Less 4,634,740 (207,587)1% More 5,057,310 214,983

19 OTHER PAYABLES


Advances received on projects in progress 242,897,187 40,109,650 - -Retention payables 15,121,790 32,290,558 - -Project payables 3,627,655 6,818,736 - -Accrued expenses and sundry creditors 5,358,407 19,699,134 540,000 583,685Other payables 13,987,469 5,000,000 - 5,000,000 280,992,508 103,918,078 540,000 5,583,685



20 AMOUNTS DUE TO RELATED PARTIES

Group Company 2019 2018 2019 2018 Note Relationship Rs. Rs. Rs. Rs.

Dunamis Capital PLC 20.1 Parent 17,490,082 105,391,309 - -Kelsey Homes (Pvt) Ltd Subsidiary - - 14,603,145 17,252,958Twid Capital (Pvt) Ltd Subsidiary - - 45,831,076 -Thronton Engineering (Pvt) Ltd Affiliate - - - 72,771,779First Capital Ltd 20.1/20.3 Affiliate 492,756,624 494,068,043 - -Nextventures Ltd Affiliate - - - -KHL Coporate Services Ltd Affiliate 76,028 - 47,007 - 510,322,734 599,459,352 60,481,228 90,024,737

20.1 Loans from Related Parties

Group As at Loans Accrued Repayments Converted As at 01.04.2018 Obtained Interest to Preference 31.03.2019 Shares Relationship Rs. Rs. Rs. Rs. Rs. Rs.

Dunamis Capital PLC Parent 105,391,309 420,438,075 227,169 (208,566,469) (300,000,000) 17,490,082First Capital Limited Affiliate 494,068,043 98,737,094 808,058 (101,236,807) - 492,376,390 599,459,352 519,175,169 1,035,227 (309,803,276) (300,000,000) 509,866,472

20.2 The Facilities provided by Dunamis Capital PLC and First Capital Ltd will be settled on demand and interest rate applicable for the borrowings will be marginal cost of funds (Lender) + 2%.

20.3 Amount due to First Capital Ltd includes a loan balance of Rs. 492,376,390/- and other payables amounting to Rs. 380,234/-.

21 INTEREST BEARING LOANS AND BORROWINGS

Group 2019 2018 Rs. Rs.

Term loans 650,566,438 802,324,523Finance lease liabilities - 365,163 650,566,438 802,689,686

21.1 Payable within one year 382,836,078 427,583,275Payable after one year 267,730,360 375,106,411 650,566,438 802,689,686


21.2 Loans and borrowingsAs at

01.04.2018

Rs.

Facility Obtained

Rs.

Repayment

Rs.

Movement in accrued

interestRs.

Disposal of Subsidiary

Rs.

As at 31.03.2019

Rs.

Tenure of Loan

Security offered

Kelsey Homes (Pvt) LtdCommercial Bank of Ceylon PLC

396,370,921 - (164,200,000) (397,384) - 231,773,537 42 Months Land situated at Negambo. Carrying amount pledged - Rs. 487,000,000

Softlogic Finance PLC 70,574,063 - (70,574,063) - - - 18 Months Corporate guarantee of Dunamis Capital PLC.

Siyapatha Finance PLC 200,852,753 - (78,379,028) (430,568) - 122,043,157 36 Months Corporate guarantee of Dunamis Capital PLC.

Commercial Leasing & Finance PLC

26,324,397 - (26,324,397) - - - 12 Months

Sarvodaya Developments Finance Ltd

- 25,000,000 - 389,667 - 25,389,667 03 Months Dated cheque amounting to Rs. 25Mn.

Cargills Bank - 100,000,000 - 210,548 - 100,210,548 36 Months Corporate guarantee of Dunamis Capital PLC and Primary Floating mortgage bond for Rs.100 Mn over the condominium units of Urban Heights Project, Wattala.

Orient Finance PLC - I - 100,000,000 (28,926,893) 76,422 - 71,149,529 07 Months Corporate guarantee of Dunamis Capital PLC.

Orient Finance PLC -II - 100,000,000 - - - 100,000,000 18 Months Corporate guarantee of Dunamis Capital PLC.

Commercial Papers - 6,000,000 (6,252,986) 252,986 - - 03 MonthsTwid Capital (Pvt) LtdSampath Bank PLC 108,202,389 - (108,202,389) - - - 18 Months

Thornton Engineering (Pvt) LtdHatton National Bank PLC - Finance Lease

365,163 - (100,225) - (264,938) - 48 Months

Total - Group 802,689,686 331,000,000 (482,959,981) 101,671 (264,938) 650,566,438

22 REVENUE


Revenue from property sales 252,012,178 768,955,497 - -Dividend income - - - 922,500 252,012,178 768,955,497 - 922,500

22.1 Timing of revenue recognitionRevenue generated at the point in time 252,012,178 768,955,497 - 922,500

23 OTHER INCOME


Gain on Disposal of Subsidiary (Note 10.3) 7,501,636 - - -Profit on sale of property, plant & equipment - 1,174,569 - 20,000Other income projects (Note 23.1) 41,825,957 1,753,404 - - 49,327,593 2,927,973 - 20,000

23.1 The other income from the projects include the disposal profit amounting to Rs. 24.64 Mn gained from the disposal of land situated at First Cross Street - Mount Lavinia and the write back of retention payables amounting to Rs. 17.18 Mn.



24 OTHER EXPENSES


Loss on disposal of property, plant & equipment - 5,681,295 - -Miscellaneous expenses 1,500,700 552,845 - -Impairement provision for Twid Capital (Pvt) Ltd (Note 10.1) - - - 16,500,000 1,500,700 6,234,140 - 16,500,000

25 FINANCE INCOME


Interest income from related parties (Note 25.1) 9,587,558 - 9,587,558 -Interest income from projects 451,955 - - -Interest income from investments 1,626,673 1,133,403 - - 11,666,186 1,133,403 9,587,558 -

25.1 The interest income of the company includes the interest earned on the outstanding balance of disposal proceeds receivable from Nextventures Ltd which is more-fully described in Note 10.3 .

26 PROFIT/(LOSS) FROM OPERATING ACTIVITIESProfit/(loss) before taxation is stated after charging all expenses including the following:


Personnel costs 49,414,588 37,749,551 - -Defined contribution plan cost - EPF & ETF 5,193,577 6,913,284 - -Defined benefit plan costs-gratuity 1,279,583 1,670,389 - -Depreciation 6,010,666 11,321,872 - -Auditor's remuneration 837,690 935,000 461,685 379,000Legal fees 2,020,668 64,912 14,676 24,660

27 TAXATIONThe Company and its subsidiaries are liable for income tax at the rate of 28% on its taxable profits.


Current tax on ordinary activities for the Year - 399,145 - -Under/ (over) provision of tax - 287,846 - -Dividend tax - 102,500 - -Provision for ESC Receivable 3,543,858 - - - 3,543,858 789,491 - -

Deferred tax expenseDeferred tax expense/(reversal) (Note 27.3) 477,942 (46,451,047) - -Tax expenses/(reversal) for the year 4,021,800 (45,661,556) - -


27.1 Reconciliation between current tax expenses/income and the product of accounting profit/(loss)


Accounting profit/(loss) before tax (219,431,255) (141,420,669) 8,330,898 (17,156,796)Exempted profit -others - (922,500) - (942,500)Expenses disallowed for tax 12,873,145 14,452,345 - 16,500,000Allowed expenses and other sources of income (19,582,813) (12,550,738) (10,056,808) 20,000 (226,140,923) (140,441,562) (1,725,910) (1,579,290)Consolidation and other adjustments 245,316,076 141,501,266 - -Profit from trade or business 19,175,153 1,059,704 (1,725,910) -

Other sources of income 11,666,186 1,133,403 9,587,558 -Tax loss utilised (30,841,339) (767,587) (9,587,558) -Taxable income - 1,425,520 - -Tax expense for the year - 399,145 - -

27.2 Accumulated tax losses


Balance at the beginning of the year 406,106,497 287,187,284 11,825,340 10,246,050Loss incurred during the year 251,025,783 119,686,800 1,725,910 1,579,290Loss utilised during the year (30,841,339) (767,587) (9,587,558) -Disposal of Subsidiary (67,342,212) -Balance at the end of the year 558,948,729 406,106,497 3,963,692 11,825,340

27.3 Deferred tax assets/ (liabilities)


Balance at the beginning of the year 45,516,378 (858,333) - -Disposal of Subsidiary (19,077,015) - - -(Origination)/ reversal during the year - P/L (477,942) 46,451,047 - -(Origination)/ reversal during the year - OCI - (76,336) - -Balance at the end of the year 25,961,421 45,516,378 - -

27.4 Recognised deferred tax assets & liabilitiesDeferred tax assets and liabilities are attributable to the following originations of temporary differences; 2019 2018 Rs. Rs.

Property, plant & equipment (8,229,824) (7,448,035)Retirement benefit obligation - 1,225,437Carried forward tax losses 100,949,184 168,781,092Total taxable/(deductible) temporary differences (net) 92,719,360 162,558,493

Applicable tax rates 28% 28%Net deferred tax (liabilities) / assets 25,961,421 45,516,378



27.4.1 Deferred tax asset has been recognised by considering the brought forward tax losses of which, the amount in the opinion of the Directors, will be available to allow the benefit of the loss to be realised in accordance with LKAS 12 and provisions of Inland Revenue Act No.24 of 2017. The deferred tax asset has been computed on the basis of 28% (tax rate which is applicable for 2018/19).

27.4.2 Deferred tax asset has not been recognised in respect of the Group’s brought forward tax losses as at 31 March 2019 amounting to Rs. 457,999,545/-(Company –Rs. 3,963,682/-) since it is not probable that future taxable profit will be available against which the Group can use the benefits therein.

28 EARNINGS/(LOSS) PER SHARE28.1 Basic Earnings/(loss) per shareEarnings/(Loss) per share has been calculated by dividing the Profit/(loss) for the year attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.


Amounts used as numeratorProfit/(loss) attributable to equity holders of the parent (223,453,055) (92,665,677) 8,330,898 (17,156,790)Weighted average number of ordinary shares in issue 17,429,274 17,429,274 17,429,274 17,429,274Basic earnings/(loss) per share (Rs.) (12.82) (5.32) 0.48 (0.98)

28.2 Diluted Earnings/(loss) per shareThere were no potential dilutive ordinary shares outstanding at anytime during the year ended 31 March 2019. Therefore, Diluted earnings per share is the same as Basic earnings/(loss) per share.

29 EVENTS OCCURRING AFTER THE REPORTING DATEThere have been no material events subsequent to the reporting date which require disclosures/ adjustments in the Financial Statements.

30 COMMITMENT AND CONTINGENCIES

30.1 Capital expenditure commitmentsThere were no material capital commitments as at reporting date which require disclosure in the Financial Statements by the Group as at 31 March 2019.

30.2 Financial commitmentsThere were no material financial commitments as at reporting date which require disclosure in the Financial Statements by the Group as at 31 March 2019.

30.3 Contingent liabilities/ LitigationsKelsey Developments PLCa) Kelsey Developments PLC is one of the defendants in a Partition Case to establish title in respect of a property situated at Nawala

purchased at a cost of Rs.31.5 Mn. The said case has been laid by courts until further steps are being taken by the Plaintiff.


Kelsey Homes (Pvt) Ltdb) The Plaintiff has filed an action seeking to set aside the Deed of Transfer of the land situated at Katukurunduwatte, Mt.Lavinia

which was purchased at a cost of Rs. 94.6 Mn by Kelsey Homes (Pvt) Ltd. and an enjoining order has been issued by the Courts against Kelsey Homes (Pvt) Ltd. restricting alienation of the land. The said Plaintiff has previously obtained a prohibitory order over the land adjacent to the land purchased by the Kelsey Homes (Pvt) Ltd under another defamatory case. Kelsey Homes (Pvt) Ltd is to file the answer at present.

Further, Kelsey Homes (Pvt) Ltd filed a separate action through the summary procedure of the Civil Procedure Code seeking cancellation of the caveat unreasonably filed by the said Plaintiff (1st Defendant in this case) on the same land and claiming damages against the 1st Defendant. 1st Defendant is to file the objections.

c) A case has been filed against Kelsey Homes (Pvt) Ltd and Predecessors in title to set aside a Deed of Transfer No.1585 dated 31 March 2017 in relation to the property situated at Panadura purchased for a sum of Rs. 33 Mn. Presently the said case is to be settled by all parties.

Although , there can be no assurance, the directors believe, based on the information currently available, that the ultimate resolution of such legal procedures would not likely to have a material adverse effect on the results of operations, Financial position or liquidity of the Group. Accordingly no provision for any liability has been made in the Financial Statements, nor has any liability been determined by the ongoing legal cases, as at 31 March 2019.

There are no other contingent liabilities or litigations of a material nature.

30.4 Operating lease commitment Group/Company Payable with Payable with in 1 year in 2-5 years Total

Operating lease commitment on building 8,758,150 17,917,575 26,675,725

31 Financial instruments- Fair value

31.1 Accounting classifications

Group - As at 31 March 2019 Financial Assets Total carrying Fair value / Liabilities at amount Amortised Cost

Financial assets not measured at fair valueCash at banks and in hand 1,845,690 1,845,690 1,845,690Related party receivables 81,219,924 81,219,924 81,219,924Total financial assets 83,065,614 83,065,614 83,065,614

Financial liabilities not measured at fair valueBank overdrafts 25,057,209 25,057,209 25,057,209Related party payables 510,322,734 510,322,734 510,322,734Interest bearing borrowings 650,566,438 650,566,438 650,566,438Project Payables 3,627,655 3,627,655 3,627,655Total financial liabilities 1,189,574,036 1,189,574,036 1,189,574,036



31.2 Accounting classificationsGroup - As at 31 March 2018 Financial Assets Total carrying Fair value / Liabilities at amount Amortised Cost

Financial assets not measured at fair valueCash at banks and in hand 18,063,109 18,063,109 18,063,109Related party receivables 194,468 194,468 194,468Total financial assets 18,257,577 18,257,577 18,257,577

Financial liabilities not measured at fair valueBank overdrafts 6,003,129 6,003,129 6,003,129Related party payables 599,459,352 599,459,352 599,459,352Interest bearing borrowings 802,689,686 802,689,686 802,689,686Project Payables 6,818,736 6,818,736 6,818,736Total financial liabilities 1,414,970,903 1,414,970,903 1,414,970,903

32 RELATED PARTY DISCLOSURE32.1 The Company carries out transactions with parties who are defined as related parties in Sri Lanka Accounting Standard (LKAS 24), "Related Party Disclosure", in the ordinary course of its business. The details of such transactions are reported below. The pricing applicable to such transactions is based on the assessment of risk and pricing model of the company and is comparable with what is applied to transactions between the Company and its unrelated customers.

32.2 Transactions with the parent and related entities

Parent Company Subsidiaries 2019 2018 2019 2018 Company Rs. Rs. Rs. Rs.

As at 1 April - - (87,381,902) (44,271,752)Fund transfer made - - 30,100,000 192,006,069Fund transfer received - - (66,551,362) (235,116,219)Expenses incurred on behalf of the subsidiaries - - 27,195,115 -Net related party impact on disposal of subsidiary - - 36,203,929 -As at 31 March - - (60,434,220) (87,381,902)

Parent Company Subsidiaries of Parent Affiliates 2019 2018 2019 2018 2019 2018 Group Rs. Rs. Rs. Rs. Rs. Rs.

Short term loan obtained inclusive of interest 420,438,075 235,391,309 98,737,094 469,035,740 - -

Settlement of short term loans (208,566,469) (130,000,000) (101,236,807) (470,917,800) - -

Sales proceeds received on transfer of assignment of land - 346,771 - - - -

Fund transfer made - - (5,000,000) (75,800,000) - -

Fund transfer received - 4,346,031 5,000,000 65,000,000 - -

Short term loan converted to Preference Share 300,000,000 - - - - -

Interest received on receivable from Nextventures Ltd - - - - 9,587,558 -

Consideration on disposal of subsidiary - - - - 105,005,918 -

Gratuity transfer - - - - 675,414 -

Settlement of disposal proceeds - - - - (25,000,000) -

Expenses incurred on behalf of other companies - - 343,782 - (6,195,629) -


Ultimate Parent Company: - Janashakthi PLC.Parent Company: - Dunamis Capital PLC.Subsidiaries: - Kelsey Homes (Pvt) Ltd, Twid Capital (Pvt) Ltd.Subsidiary of the parent: - First Capital Ltd, KHL Corporate Services Ltd.Affiliate - Nextventures Ltd, Sprout (Pvt) Ltd, Thornton Engineering (Pvt) Ltd

32.2.1 There were no transaction took placed with Ultimate parent during the year.

32.2.2 Terms and conditions of transactions with related partiesTransactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at the year end are unsecured.

32.2.3 Amounts due from and due to related companies as at the year end have been disclosed under note 13 & 20 of these Financial Statements respectively.

32.3 Transactions with key management personnel (KMP)According to Sri Lanka Accounting Standard LKAS 24 "Related Party Disclosures", Key Management Personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Accordingly, the Board of Directors, Chief Executive Officer and their immediate family members have been classified as key management personnel of the entity.

Close Family Members of a Key Management Personnel are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the Entity. They may include;

a. The individual’s domestic partner and children;b. Children of the individual’s domestic partner; andc. Dependents of the Individual or the individual’s domestic partner

Close Family Members are related parties to the Entity.


Short term benefits 6,600,000 600,000 - -

No costs apportioned from Dunamis Capital PLC (Parent company) in relating to key management personnel of the company (2018 - Rs. 6,311,030) during the year ended 31 March 2019.

33 FINANCIAL RISK MANAGEMENTThe group has the exposure to the following financial risks through its subsidiaries.

Interest Rate RiskLiquidity RiskCredit Risk

This note presents information about the Group’s exposure to each of the above risks, the objectives, policies and processes for measuring and managing risk is vested with the Board of Directors.



33.1 Risk Management FrameworkRisk Management Framework of the Group has been adopted at both Group and subsidiary levels to enable scarce resources to generate maximum return whilst minimising the associated risk. The Board has overall responsibility for the management of risk and for reviewing the effectiveness of internal control processes. Risk Appetite is translated and cascaded to different business activities both quantitatively and qualitatively. We thus aim to deliver superior value to all our stakeholders while achieving an appropriate trade-off between risk and returns.

Our policy for risk management is to respond to risk pro-actively to ensure continued growth of our business in a highly competitive and uncertain environment while sustaining the value creation. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and products and services offered.

33.2 Interest Rate RiskIt is defined as the probability of income losses arising and increased cost of funding the options owing to a change in interest rates. Management of Interest Rate Risk included the following elements;

Interest rate risk is responded through establishing better relationship with financial institutions. Use of internal fund management models and techniques in order to make informed decisions.

Sensitivity Analysis

Interest Rate Impact to Profit and Equity Rs.

Increase/ (decrease) in Interest margin by 1% 2,348,003Increase/ (decrease) in Interest margin by (1)% (4,465,997)

33.3 Liquidity RiskLiquidity risk is the risk that the Group will not have adequate financial resources to meet its obligations as when they fall due.Management of Liquidity Risk includes the following elements;

Continuous reviewing of business models and working capital management.

a) Maturity Analysis of the Financial Liabilities

Group Carrying On Up to 3 3 Months 1-3 Amount Demand Months to 1 Year Years Rs. Rs. Rs. Rs. Rs.

LiabilitiesBank overdrafts 25,057,209 25,057,209 - - -Interest bearing borrowings 650,566,438 - 95,709,020 287,127,059 267,730,360Related party payables 510,322,734 510,322,734 - - -Project payables 3,627,655 - 3,627,655 - -Total As at 31 March 2019 1,189,574,036 535,379,943 99,336,675 287,127,059 265,730,360

As at 31 March 2018 1,414,970,903 605,462,481 60,095,910 360,909,074 388,503,437


33.3 Liquidity Risk (Continued)b) Maturity Analysis of the Financial Liabilities

Company Carrying On 1-3 Up to 3 Amount Demand Years Months Rs. Rs. Rs. Rs.

Financial liabilitiesRelated party payables 60,481,228 60,481,228 - -Total As at 31 March 2019 60,481,228 60,481,228 - -

As at 31 March 2018 90,024,737 90,024,737 - -

33.4 Credit RiskIt is the probability of the loss of income owing to default by the Company’s debtors. The Group conducts an in- depth analysis of debtors in each subsidiary on a regular basis.

Credit customers are subject to a credit analysis before establishing business relationships.Debtor concentration and overdue debtors of each subsidiary is also monitored constantly so as to minimise losses.The collection process and individual monitoring also takes place at subsidiary level as part of their day to day operational activities.

Credit Quality by Class of Financial Assets

a) Group - As at 31 March 2019 Neither Past Past due But Individually Total due Nor Not Impaired Impaired Impaired Rs. Rs. Rs. Rs.

AssetsCash at banks and in hand 1,845,690 - - 1,845,690Related party receivables 81,219,924 - - 81,219,924Total financial assets 83,065,614 - - 83,065,614

Group - As at 31 March 2018 Neither Past Past due But Individually Total due Nor Not Impaired Impaired Impaired Rs. Rs. Rs. Rs.

AssetsCash at banks and in hand 18,063,109 - - 18,063,109Related party receivables 194,468 - - 194,468Total financial assets 18,257,577 - - 18,257,577



b) Company - As at 31 March 2019 Neither Past Past due But Individually Total due Nor Not Impaired Impaired Impaired Rs. Rs. Rs. Rs.

AssetsCash at banks and in hand 123,288 - - 123,288Related party receivables 80,005,919 - - 80,005,919Total financial assets 80,129,207 - - 80,129,207

Company - As at 31 March 2018 Neither Past Past due But Individually Total due Nor Not Impaired Impaired Impaired Rs. Rs. Rs. Rs.

AssetsCash at banks and in hand 476,322 - - 476,322Related party receivables 2,642,835 - - 2,642,835Total financial assets 3,119,157 - - 3,119,157

33.5 Operational RiskThe Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the business reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall Group’s standards for the management of operational risk in the following areas:

- Requirements for appropriate segregation of duties, including the independent authorisation of transactions.- Requirements for the reconciliation and monitoring of the transaction.- Compliance with regulatory and other legal requirements.- Documentation of controls and procedures.- Development of business contingency plans.- Training and professional development.- Ethical and business standards.- Risk mitigation, including insurance where this is effective.

Compliance with Group’s internal controls and procedures is supported by a programme of periodic reviews undertaken by internal audit. The results of internal audit reviews are discussed with the management of the business units with summaries submitted to the Audit Committee.

34 ISSUES PERTAINING TO EMPLOYEES AND INDUSTRIAL RELATIONSDuring the year, there were no material issues pertaining to employees and industrial relation of the group.


DIRECTORSHIPS IN OTHER COMPANIESThe Directors of Kelsey Developments PLC are also Directors of the following companies.

Name of the companies Relationship Mr. A. D. E. I.

Perera

Mr. Dinesh

Schaffter

Mr.Chandana

L. De Silva

Mr. Ramesh

Schaffter*

Mr. Prakash

Schaffter*

Mr. Anushka

Dissanayake

Kelsey Homes (Pvt) Ltd Subsidiary Director Managing Director - - - -

Twid Capital (Pvt) Ltd Subsidiary - - - - - Director

Janashakthi PLC Ultimate Parent Director - - Director/ CEO Director

Dunamis Capital PLC Parent Chairman Director Director Managing Director Director -

First Capital Holdings PLC Subsidiary of Parent Director Managing Director Director Director Director -

First Capital Ltd Subsidiary of Parent Director Managing Director Director - - -

First Capital Asset Management Ltd Subsidiary of Parent Director Managing Director Director - - -

First Capital Treasuries PLC Subsidiary of Parent - Managing Director Director - - -

First Capital Markets Ltd Subsidiary of Parent Director Managing Director Director - - -

First Capital Equities (Pvt) Ltd Subsidiary of Parent Director Managing Director Director - - -

First Capital Trustee Services (Pvt)

Ltd

Subsidiary of Parent - Managing Director - - - -

KHL Corporate Services Ltd Subsidiary of Parent - Director - Director Director -

Thornton Engineering (Pvt) Ltd Affiliate - Director - - - -

Premier Synthetic Leather

Manufacturers (Pvt) Ltd

Affiliate - Director - Director Director -

Janashakthi Insurance PLC Affiliate (Subsidiary of

Janashakthi PLC)

Director - - Director Chairman -

Orient Finance PLC Affiliate (Subsidiary of

Janashakthi PLC)

- - - Director Director

Nextventures Ltd Affiliate - Director - - - -

Birnham Square (Pvt) Ltd Affiliate - - - - Director -

Sprout (Pvt) Ltd Affiliate - - - - - -

* Mr. Prakash Schaffter & Mr. Ramesh Schaffter have been appointed as Directors of Kelsey Developments PLC on 21 December 2018.


DISCLOSURES IN ACCORDANCE WITH CONTINUING LISTING REQUIREMENTSDisclosures in relation to Related Party Transactions in accordance with the continuing listing requirements of the Colombo Stock Exchange.

Recurrent Related Party transactions - Group

Name of the related

party

Relationship Nature of the

Transaction

Aggregate Value

of Related Party

Transactions entered

into during the

financial year

Aggregate Value of

the Related Party

Transactions as a % of

Net Revenue/ Income

Terms and conditions

of the Related Party

Transactions

Dunamis Capital PLC

Parent Short Term Loan 17,490,083/- 122.99% Interest at Market Rates

Corporate Guarantee facility

292,454,060/- Inter-company Guarantee facility at commercial terms.

First Capital Ltd Subsidiary of Parent

Short Term Loan 492,756,622/- 195.53% Interest at Market Rates

Non Recurrent Related Party transactions - Group

Name of the related

party

Relationship Value of the

Related Party

Transactions

Value of the Related

Party Transactions as

a % of Equity and as

% of total Assets

Terms and conditions

of the Related Party

Transactions

The rational for

entering in to the

Transactions

Nextventures Ltd Affiliate Rs. 105,005,918/- 6.3% of Assets54.47% of Equity

Rs. 80,005,918/- to be settled within a period of 3 years together with interest at the rate of 18%.

Disposal of Thornton Engineering (Pvt) Ltd to Nextventures Ltd is a part of the restructuring process of the Group.


1 STOCK EXCHANGE LISTINGThe issued ordinary shares of Kelsey Developments PLC are listed on the Colombo Stock Exchange.

2 DISTRIBUTION OF SHAREHOLDING

No. of Shares held 31 March 2019 31 March 2018

Shareholders Holding Shareholders Holding

Number % Number % Number % Number %

1 - 1,000 892 83.36 174,755 1.00 863 82.98 172,974 0.99

1,001 - 5,000 139 12.99 308,879 1.77 137 13.17 295,175 1.69

5,001 - 10,000 16 1.50 104,166 0.60 16 1.54 104,643 0.60

10,001 - 50,000 15 1.40 306,269 1.76 16 1.54 321,277 1.84

50,001 - 100,000 3 0.28 166,864 0.96 3 0.29 166,864 0.96

100,001 - 500,000 2 0.19 539,455 3.10 2 0.19 539,455 3.10

500,001 - 1,000,000 1 0.09 827,099 4.75 1 0.10 827,099 4.75

Over 1,000,000 2 0.19 15,001,787 86.07 2 0.19 15,001,787 86.07

Total 1,070 100.00 17,429,274 100.00 1,040 100 17,429,274 100.00

3. ANALYSIS OF SHAREHOLDERS

Category of

Shareholders

31 March 2019 31 March 2018

Shareholders Holding Shareholders Holding

Number % Number % Number % Number %

Joint & Individuals 1,012 94.58 1,527,490 8.76 984 94.62 1,519,342 8.73

Institutions 58 5.42 15,901,784 91.24 56 5.38 15,897,177 91.27

Total 1,070 100.00 17,429,274 100.00 1,040 100.00 17,416,519 100.00

Resident 1,058 98.88 17,062,535 97.90 1,029 98.94 17,065,007 97.92

Non-Resident 12 1.12 366,739 2.10 11 1.06 364,267 2.08

Total 1,070 100.00 17,429,274 100.00 1,040 100.00 17,429,274 100.00

4. PUBLIC HOLDING 2018/2019 2017/2018

Number of shares held by the public 1,598,888 3,503,204Percentage held by the public 9.17% 20.10%

5. SHARE PRICE MOVEMENTS FOR THE YEAR 2018/2019 2017/2018

Highest 43.00 60.90Lowest 20.00 33.00Year-end 25.10 33.00

6. INFORMATION ON SHARE TRADING AND MARKET CAPITALIZATION 2018/2019 2017/2018

Number of transactions 230 552Number of shares traded 23,540 698,965Value of shares traded (Rs.) 759,328 39,945,701Market capitalization (Rs.) 437,474,777 575,166,042

Investors’ Information


7. TOP TWENTY SHAREHOLDERS

Name of the Shareholder No. of Shares as at 31

March 2019

Holding %

1 Dunamis Capital PLC 13,925,990 79.90

2 Janashakthi PLC Account No. 1 1,075,797 6.17

3 Pan Asia Banking Corportion PLC/Mrs. M. Mathews 827,099 4.75

4 Mr. Teruaki Ono 321,055 1.84

5 Dr. Ramani Maryette Shanez Fernando 218,400 1.25

6 Mr. Kangasu Chelvadurai Vignarajah 58,538 0.34

7 Mr. Abeysiri Hemapala Munasinghe 58,325 0.33

8 Mr. Athula Ranaweera Ranaweera Kaluarachchige 50,001 0.29

9 Mr. Rex Joseph Srilal Jayamaha 50,000 0.29

10 Mrs. Manikku Badathuruge Hashani Hansani Karunawardana Silva 40,916 0.23

11 Mr. Kazuo Kondo 33,674 0.19

12 Dr. Srinath Daminda Rajamantri 25,492 0.15

13 Mrs. Sarathathevy Vignarajah 18,215 0.10

14 Mrs. Nanayakkara Hettige Mary Loretta Perera 16,875 0.10

15 Mr. Dinal Jayawantha Galhindarachchi 16,700 0.10

16 Mr. Warnakulasuriya Mahamandadige Luke Francis Sunil Fernando 16,000 0.09

17 Mr. Shenal Joseph Malinda Jayamaha 16,000 0.09

18 Mr. Ginige Cyril Walter De Silva (Deceased) 15,000 0.09

19 Mr. Errol Mark Anthony Weerasinghe 14,250 0.08

20 Mr. Mudalige Don Mangala Wijegoonewardena 11,500 0.07

16,809,827 96.45

8. SHAREHOLDINGS OF THE BOARD OF DIRECTORS

Name of the Director Designation No. of Sharesas at

31 March2019

Holding % No. of Sharesas at

31 March2018

Holding %

1 Mr. A.D.E.I. Perera Chairman Nil - Nil -

2 Mr. Dinesh Schaffter Managing Director Nil - Nil -

3 Mr. Chandana L. de Silva Director Nil - Nil -

4 Mr. Prakash Schaffter Director Nil - Nil -

5 Mr. Ramesh Schaffter Director Nil - Nil -

9. DISCLOSURE IN ACCORDANCE WITH THE SECTION 7.4 (B) (II) - APPENDIX 7B (A) (ITEM 4) OF CSE LISTING RULES (AS AT 31 MARCH 2019)

Float adjusted market capitalisation 40,116,437

Public holding percentage 9.17%

Number of public share holders 1,066

Company has not complied with the Minimum Public Holding requirement under option 5 of section 7. 13.1 (a) of CSE Listing rules. An exemption from CSE has been granted in terms of section 7.13.3 (iii) of the rules, to comply with the minimum public holding requirement up to 05 February 2020.


Group

Year Ended 31 March 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

(Restated) (Restated)

Trading Results

Revenue 252,012 768,955 949,016 1,016,319 102,742 95,612 231,485 164,656 169,367 114,378

Profit/(loss) before taxation (219,431) (141,421) 12,109 54,788 (31,227) 152,155 (55,040) (18,669) (7,964) (63,489)

Taxation (4,022) 45,662 (10,996) (431) (739) (16,018) (431) 498 (3,627) 903

Profit/(loss) after taxation (223,453) (95,759) 1,113 54,357 (31,965) 136,137 (55,471) (18,172) (11,591) (62,586)

Funds Employed

Stated capital 232,390 232,390 232,390 232,390 232,390 232,390 232,390 232,390 232,390 232,390

Cumulative preference shares - - - - - 600,000 - - - -

Revenue reserves (354,618) (132,445) (29,221) (33,712) (89,476) (64,350) (190,897) (135,425) (117,254) (105,429)

Capital reserves 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000

Non controlling interest 300,000 - 23,470 - - - - - - -

Assets Employed 192,773 114,945 241,639 213,679 157,915 783,041 56,493 111,964 130,136 141,961

Current assets 1,620,162 1,554,887 1,801,976 1,678,447 1,573,075 846,283 382,174 386,680 170,162 219,516

Current liabilities (1,199,725) (1,137,481) (1,310,453) (1,476,671) (1,311,329) (73,795) (329,857) (273,441) (38,586) (77,872)

Non current trade

& other receivables - - - - 3,814 10,000 5,355 - - -

Fixed assets, Goodwill

& investments 18,947 34,371 134,193 17,408 7,464 4,148 2,240 1,141 1,434 2,532

Non current Interest bearing

borrowings & deferred

tax liability (267,730) (375,106) (376,823) - (110,005) - - - - -

Defined benefit obligations (4,842) (7,242) (7,253) (5,505) (5,105) (3,597) (3,419) (2,415) (2,874) (2,215)

Key Indicators

Earnings/(loss) per share (Rs.) (12.82) (5.32) 0.25 3.12 (1.44) 7.41 (3.18) (1.04) (0.67) (3.59)

Net assets per share (Rs.) (6.15) 6.59 12.52 12.26 9.06 10.50 3.24 6.42 7.46 8.15

Market price per share (Rs.) 25.10 33.00 50.00 64.00 39.00 17.50 15.00 14.20 16.20 13.00

Interest cover (times) - 0.16 1.73 - - 15.69 - - - -

Current ratio 1.35 1.37 1.38 1.14 1.20 11.47 1.16 1.41 4.41 2.86

Liquidity ratio 0.08 0.05 0.03 0.13 0.03 2.83 (0.05) 0.06 1.58 1.13

Return on equity (%) (115.92) (82.99) 0.39 25.44 (20.24) 74.37 (98.18) (16.23) (8.90) (44.09)

Decade at a Glance


Glossary of Financial and Business Terms

• Accounting Policies: The specific principles, bases, conventions, rules and practices adopted by an entity in preparing and presenting Financial Statements.

• Accrual basis - the system of accounting wherein revenue is recognized at the time it is earned and expenses at the time they are incurred, regardless of whether cash has actually been received or paid out.

• Asset: is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

• Capital Reserves: The profits of a company that (for various reasons) are not regarded as distributable to shareholders as dividends. These include gains on the revaluation of capital assets and share premium.

• Cash equivalents - short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

• Consolidated Financial Statements Financial Statements of a holding company and its subsidiaries based on their combined assets, liabilities and operating results.

• Contingent Liabilities: Conditions or situations at the Balance Sheet date, the financial effects of which are to be determined by future events which may or may not occur.

• Corporate governance - process by which corporate entities are governed to promote stakeholder interest. Shareholders exert collective pressure on management to ensure equitable decision making on matters that may affect the value of their holdings and base their response on statutory requirements or on so called “Best Practices”.

• Contribution: Is the portion of sales not used up by variable costs of production, calculated as revenue minus variable costs of production.

• Current Ratio: A liquidity ratio that measures a company’s ability to pay off its short-term liabilities with its current assets.

• Depreciation: The systematic allocation of the depreciable amount of an asset over its useful life.

• Development Pipeline: The Group’s current programme of developments authorised or in the course of construction at the balance sheet date, together with potential schemes not yet commenced on land owned or controlled by the Group.

For the purpose of this Annual Report the Development Pipeline refers to the current programme of developments which are in the course of construction at the balance sheet date, while land owned or controlled by the Group which have potential for development is termed Strategic Land Portfolio or Land Holdings.

• Deferred Tax: Sum set aside in the Financial Statements that may become payable/receivable in a financial year other than the current financial year. It arises because of temporary differences between tax rules and accounting conventions.

• Earnings per Share: Post tax profit divided by the weighted average number of shares in issue during the year.

• Effective interest method - is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.

• Events occurring after the reporting date: Significant events that occur between the balance sheet date and the date on which Financial Statements are authorised for issue.

• Fair value - is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

• Guarantee: A promise made for a fee by a third party (Guarantor), who is not a party to the contract between two others, that the guarantor will be liable if one of the parties fails to fulfill the contractual obligations.

• Interest Cover: A ratio showing the number of times interest charges is covered by earnings before interest and tax.

• Liabilities: Debt or obligations of a business.

• Liquidity Ratio: For the purpose of this Annual Report Liquidity Ratio specifically refers to the Quick Ratio which measures a company’s ability to meet its short-term obligations with its most liquid assets and is calculated as (current assets – inventories) / current liabilities.

• Land Holdings: For the purpose of this report refers to the Group’s portfolio of land. See Strategic Land Portfolio and Development Pipeline.

• Market Value per Share: The price at which an ordinary share is transacted in the stock market.

• Market Capitalisation: The market value of a company at a given date obtained by multiplying the share price by the number of issued shares.

• Net Asset Value per Share: Net assets (total assets less total liabilities) divided by the number of shares issued.


• Non-controlling interest - portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent

• Portfolio: In relation to financial activities refers to income-generating assets such as loans, finance leases and investment securities etc. Portfolio: In relation to real estate development activities refers to income-generating assets including land and developments. See Strategic Land Portfolio.

• Pre-sales: An agreement by the buyer with a real estate developer to purchase a property today that is to be completed in the near future. The monies received in advance are utilised by the developer in completing the project.

• Price Earnings Ratio: Market price of a share divided by earnings per share.

• Real Estate Development : The process of building activities including the purchase of raw land, the sale of developed land and the renovation and re-lease of existing buildings. Also generally referred to as Property Development.

• Related parties - Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions

• Related party transactions - A transfer of resources, services or obligations between related parties, regardless of whether a price is charged or not.

• Residential Units: For the purpose of this Annual Report Residential Units refer to both land lots and accommodation units including apartments and houses.

• Return on Equity (ROE): Profit after tax less preference share dividends if any, expressed as a percentage of ordinary shareholders’ equity.

• Revenue Reserves: Reserves which may be distributed to shareholders as dividends.

• Revenue Recognition or Revenue Recognition norms: Refer to an accounting principle which determines the specific conditions under which income becomes realised as revenue. Generally, revenue is recognised only when a specific critical event has occurred and the amount of revenue is measurable.

• Shareholders’ Funds: Shareholders’ funds consist of issued and fully paid ordinary share capital plus capital and revenue reserves.

• Strategic Land Portfolio: Refers to the land acquired or controlled by the Group with potential for development activities in line with the Group’s strategy.

• Subsidiary: A subsidiary is an enterprise that is controlled by another enterprise (known as the parent company. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.

• Substance over form – the consideration that the accounting treatment and the presentation in Financial Statements of transactions and the events are governed by their financial reality and not merely by its legal form

• Ungeared: Refers to a company (or balance sheet) where its capital is solely constituted of shares (with no debt capital for example in the form of debentures).

• Value proposition: A business or marketing statement that a company uses to summarise why a consumer should buy a product or use a service.

• Projected Unit Credit Method: An actuarial valuation method that

sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.

• Expected Credit Losses (ECL): Expected credit losses are a probability

weighted estimate of credit losses over the expected life of the financial instrument.

Glossary of Financial and Business Terms Contd.


Corporate Information

Name of Company Kelsey Developments PLC

Company Registration NoPQ – 76

Name of Subsidiaries Kelsey Homes (Pvt) LtdTwid Capital (Pvt) Ltd Holding Company Dunamis Capital PLCNo 02, Deal Place, Colombo 03,Sri Lanka

Legal FormIncorporated as a Public company in 1983 under the provisions of the companies act No. 17 of 1982 and subsequently re- registered under the companies act No. 07 of 2007 on 5 September 2007. In 1984 the Company was listed on the Colombo Stock Exchange.

Board of Directors Mr. A. D. E. I. Perera - ChairmanMr. Dinesh Schaffter - Managing DirectorMr. Chandana L. de SilvaMr. Prakash SchaffterMr. Ramesh Schaffter

Registered OfficeNo 02, Deal Place, Colombo 03, Sri LankaTel : (94 11) 5 355255Fax : (94 11) 5 368216Email : [email protected]

SECRETARYK H L Corporate Services LtdNo 02, Deal Place, Colombo 03Tel : (94 11) 2145030

RegistrarsAccounting Systems Secretarial Services (Pvt) LtdLevel 3, No 11, Castle Lane, Colombo 04Tel : (94 11) 5444425

External AuditorsErnst & Young, Chartered AccountantsP.O Box 101,No 201, De Saram Place,Colombo 10

Principal BankersCommercial Bank of Ceylon PLC Hatton National Bank PLCSampath Bank PLCCargills Bank LtdSeylan Bank PLC


Notice of Meeting

Notice is hereby given that the 36th Annual General Meeting of Kelsey Developments PLC will be held at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No.30A, Malalasekera Mawatha, Colombo 07 on Wednesday, 04 September 2019 at 11.30 a.m. to transact the following businesses:

1. To receive the Report of the Board of Directors and the Audited Financial Statements of the Company for the year ended 31 March 2019 together with the report of the Auditors thereon.

2. To re-elect Mr. Chandana L. de Silva who retires by rotation in terms of Article 85 of the Articles of Association of the Company and offers himself for re-election.

3. To re-appoint Mr. A.D.E.I. Perera as a Director of the Company in terms of Section 211 of the Companies Act No. 07 of 2007, by passing the following resolution;

IT IS HEREBY RESOLVED that the age limit referred to in Section 210 of the Companies Act, No.7 of 2007 shall not apply in relation to Mr. A.D.E.I. Perera, who is over seventy years and that he be re-appointed as a Director of the Company.

4. To re-appoint Mr. Prakash Schaffter who was appointed to the Board on 21 December 2018 in terms of Article 91 of Article of Association of the Company.

5. To re-appoint Mr. Ramesh Schaffter who was appointed to the Board on 21 December 2018 in terms of Article 91 of Article of Association of the Company.

6. To re-appoint Messrs. Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and authorise the Directors to determine their remuneration.

7. To authorise the Directors to determine and make donations.

By order of the Board

(Sgd)K H L Corporate Services LtdSecretaries

At Colombo

09 August 2019

Note:1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote on behalf of him/her.

2. A proxy need not be a member of the Company.

3. A Form of Proxy is enclosed for this purpose.

4. The completed Form of Proxy must be deposited at the Office of the Company Secretaries, K H L Corporate Services Ltd, No. 15, Walukarama Road, Colombo 03 not less than 48 hours before the time fixed for the meeting.


Form of Proxy

I/We, ……………………………………………………………………………………………… of ……………………………………………………

……………………………………………... being a Member/s of the Company, hereby appoint Mr/Mrs/Miss ……….…………..……..……

…………............................... (holder of NIC No………………….) of …….…………………………..………………………………………

………….…………….. failing him/her,

1. A.D.E.I. Perera failing him2. Dinesh Schaffter failing him 3. Prakash Schaffter failing him4. Ramesh Schaffter failing him5. Chandana L. de Silva

as my/our Proxy to represent me/us and vote on my/our behalf at the 36th Annual General Meeting of the Company to be held on Wednesday, 04 September 2019 at the Auditorium of the Institute of Chartered Accountants of Sri Lanka, No.30A, Malalasekera Mawatha, Colombo 07 at 11.30 a.m. and at any adjournment thereof.

Please indicate your preference by placing a ‘X’ in the box of your choice against each Resolution.

Ordinary Business FOR AGAINST

1. Receive of the Report of the Board of Directors and the Audited Financial Statements of the Company for the year ended 31 March 2019 together with the report of the Auditors thereon.

2. Re-election of Mr. Chandana L. de Silva who retires by rotation in terms of Article 85 of the Articles of Association.

3. Re-appointment of Mr. A.D.E.I. Perera as a Director in terms of Section 211 of the Companies Act, No.7 of 2007.

4. Re-appointment of Mr. Prakash Schaffter who was appointed to the Board on 21 December 2018 in terms of Article 91 of Article of Association of the Company.

5. Re-appointment of Mr. Ramesh Schaffter who was appointed to the Board on 21 December 2018 in terms of Article 91 of Articles of Association of the Company.

6. Re-appointment of Messrs. Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and authorising the Directors to determine their remuneration.

7. Authorising Directors to determine and make donations.

Signed on this ………….. day of …………………………….. 2019.

Signature/s……………………………… ……………………………………………. Shareholder’s N.I.C./P.P./Co. Reg. No.


INSTRUCTIONS FOR THE COMPLETION OF THE FORM OF PROXY1. 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 Ltd of No.15, Walukarama Road, Colombo 03, 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.

Form of Proxy Contd.

Contents

OverviewVision and Mission 1Group Structure 2

Management ReportsChairman’s Statement 3Profile of the Board of Directors 5Annual Report of the Board of Directors 7Statement of Directors’ Responsibility 9Corporate Governance 10Audit Committee Report 15Related Party Transactions Review Committee Report 17Risk Management 18


Supplementary InformationInvestors’ Information 60Decade at a Glance 62Glossary of Financial and Business Terms 63Corporate Information 65Notice of Meeting 66Form of Proxy 67

KELSEY DEVELOPMENTSPLCANNUAL REPORT

2018/19

Kelsey Developments PLCAnnual Report 2018/19

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KELSEY - Colombo Stock Exchange · 2019-08-13 · Kelsey Developments PLC 2018/19 Annual Report 4 Chairman’s Statement Contd. to these changing circumstances we will continue to