Embed Size (px)
Citation preview
Begining of a new era...
Annual Report 2010 / 11Annual Report 2010 / 11Annual Report 2010 / 11
Begining of a new era Begining of a new era Sri Lanka emerged from three decades of conflict and the year 2010 can be best described as a year where the country saw a resurgence of economic activity amidst peace and tranquility. People’s Merchant PLC looks
forward to a new beginning in a new era of opportunities.
VisionBe the most preferred, socially
responsible and profi table merchantbanking insti tuti on in the country.
MissionTo provide an opti mum return to
shareholders by maximising the returnon equity.
To provide business soluti ons that addvalue to clients’ business ventures and
ensure their conti nuous growth in wealth.
To create a pleasant work environmentfor employees through training,
empowerment and recogniti on of goodperformance.
To be a socially responsible organizati onthat maintains high standards ofbusiness ethics and to have goodcorporate governance practi ses.
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Highlights
ContentsVision / Mission 2 | Highlights 3 | Financial Highlights 4 | Chairman’s Statement 5 | Chief Executi ve Offi cer’s Review 7 | Board of Directors 10 | Management 13 | Branch Management 14 | Business Review 15 | Financial Review 25 | Corporate Governance 30 | Risk Management and Internal Control 36 | Our Team 39 |
Financial Calender 42 | Annual Report of the Board 43 | Directors’ Responsibility For Financial Reporti ng 46 |
Report of the Audit Committ ee 47 | Independent Auditors’ Report 48 | Income Statement 49 |Balance Sheet 50 | Statement of changes in equity 51 | Cash Flow Statement 52 |Notes to the fi nancial statements 54 | Statement of Value Added 84| Graphical Review 85 | Ten Year Summary 86 | Investor Informati on 87 | Share Informati on 89 | Our Services 90 |Glossary of Financial Terms 91 | Noti ce of Meeti ng 93 | Form of Proxy 94 |Corporate Informati on Inner Back Cover
Financial Informati on
Income increased by Rs.43Mn, 8% increase over the previous year.
Total assets of the company increased by Rs.629Mn during the year, a 20% increase over last year.
Lease and HP new disbursements reached Rs.1.5Bn during the period, increased by Rs.630Mn or 72% over last year.
Raised Rs.1.8Bn funds on secured and unsecured basis.
Made a 100% provision of Rs.188Mn for receivables and investment in Credit Card Company during the year.
33
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Financial Highlights
Group Company
For the year ended 31 March 2011 2010 Change % 2011 2010 Change %
Income ( Rs.000’s) 666,691 648,225 2.85 586,830 543,749 7.92
Loss before taxati on ( Rs.000’s) (63,842) (124,288) 48.63 (215,320) (14,286) 1,407.21
Loss aft er taxati on ( Rs.000’s) (61,659) (136,004) (54.66) (202,500) (20,409) 892.21
Loss per share (Rs.) (1.66) (4.31) - (5.42) (0.66) -
Equity ( Rs.000’s) 484,019 546,278 (11.40) 470,553 673,653 (30.15)
Return on average equity (%) (11.97) (27.34) - (35.40) (3.60) -
Total assets ( Rs.000’s ) 3,883,706 3,495,554 11.10 3,707,831 3,079,051 20.42
Return on average total assets (%) (1.67) (7.78) - (5.97) (0.71) -
Equity
0
100
200
300
400
500
600
700
800
20112010200920082007
459
Mn
442
Mn
460
Mn
674
Mn
471
Mn
Total Assets
0
500
1000
1500
2000
2500
3000
3500
4000
20112010200920082007
1651
Mn
1877
Mn
2666
Mn
3079
Mn
3708
Mn
Income
0
100
200
300
400
500
600
303
Mn
376
Mn
541
Mn
544
Mn
587
Mn
20112010200920082007
44
Chairman’s Statement
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 - 2
011
4
Peo
Peo
PeoeoPP
ple
ple
ple
ple’
s’s’s M
erM
erM
erM
erch
ach
ach
ach
aaaant nt
nt P
LCPLCC
PLC|||
Ann
Ann
Ann
Ann
AAua
lua
lua
lua
Re Re
Rep
orpor
por
pot 2t 2t 22t2
010
010
010
010
0 - - -
201
201
2011111111
44444444
The Company is
strongly positioned to
move forward, taking
advantage of numerous
opportunities that are
available within a
unified and peaceful
Sri Lanka.
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
It gives me great pleasure to welcome you to the 28th Annual General Meeti ng of Peoples Merchant PLC, on behalf of the Board of Directors and present to you the Annual Report and the Audited Accounts of your company and its subsidiaries for the year under review.
Global Economic EnvironmentThe global economy rebounded in 2010 with most major economies showing positi ve growth in Gross Domesti c Product (GDP) following one of the worst recessions in decades. The recovery however was sluggish with low job growth in many advanced economies. Sovereign debt problems in some European countries created uncertainty in fi nancial markets. Although there was a modest recovery in the last half of 2009 and early 2010 it slowed down in subsequent quarters as an initi al boost from government spending following the recession, waned.
However it noteworthy to menti on that despite the uncertainty in many advanced economies, global economic growth conti nues and more importantly the Asia-Pacifi c region is driving the global recovery led by countries such as China and India.
Local Perspecti veThe Sri Lankan economy recorded a positi ve growth rate of 8% in 2010, refl ecti ng a fast recovery from the setback suff ered in 2009 and moved to a sustainable level. All key sectors of the economy demonstrated a commendable performance in 2010, amidst a peaceful environment in the country, improved investor confi dence and favourable macroeconomic conditi ons.
The stability of the fi nancial system further strengthened with the resurgence in economic growth. The soundness of fi nancial insti tuti ons was maintained with improvements in capital and liquidity. Overall asset quality and earnings also showed improvements during the year under review.
It is also noted that with declining infl ati on and easing of monetary policy there has been a reducti on of interest rates .
Specialised Leasing Companies (SLCs) conti nued to grow in terms of business in 2010 with improvements in credit quality and favourable provisioning for bad and doubtf ul accommodati ons. As at the end of 2010, the number of insti tuti ons registered under the Finance Leasing Act were 70 of which 15 were licensed banks, 34 were RFCs and 21 were SLCs. The SLC sector’s branch network further expanded to 224 with the opening of 44 branches, compared to 180 in 2009. Of the new branches, 15 were opened in the Northern and Eastern provinces.
Company PerformanceYour company has weathered a challenging period last year and has come through this period and is now poised for a turnaround. Your Board has made some strategic decisions which will augur well for the future of the company and assist in it returning to profi tability.
The company is strongly positi oned to move forward, taking advantage of numerous opportuniti es that are available within a unifi ed and peaceful Sri Lanka .
The leasing industry is positi ve about future gains and heading towards a rapid growth due to the post war resurgence in Sri Lanka and the opening of the North and Eastern areas for commercial purposes. The Government on its part has granted capital allowances on equipment for leasing companies as a budgetary concession for the industry .The grant will be eff ecti ve from 01 April 2011 which will enable leasing of equipment with a depreciati on of 33% over 3 years as against 12.5% over 8 years.
Undoubtedly Peoples Merchant will stand to gain from these initi ati ves.
I take this opportunity to thank the Chairman of Peoples Bank and our major shareholder Peoples Bank for their guidance and conti nued support. I also wish to place on record my sincere appreciati on to my fellow Directors for their valuable contributi on, advice and guidance. The Management and the Staff have worked with great commitment under challenging conditi ons and I thank the Chief Executi ve Offi cer, the Management and Staff of Peoples Merchant for their unti ring eff orts
Finally I wish to convey my appreciati on to all our shareholders for the confi dence and trust placed in us.
On behalf of the Board of Directors, I assure you that the Company will conti nue to steam ahead, overcoming whatever challenges faced through the executi on of carefully formulated strategies while upholding the highest standards of Corporate Governance.
P. A. Ajith PanditharatneChairman
23rd August 2011
66
Chief Executi ve Offi cer’s Review
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 - 2
011
6
This year has been a
year of consolidation
for the company. It is
with the combined effort
and support of many
stakeholders of
People’s Merchant that
the Company was able to
Successfully steer through
a challenging year.
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
The Financial year 2010/11 was a challenging year for the company. The company incurred an aft er tax loss of Rs. 202.5Mn and a group loss of Rs. 61.7Mn. However the company consolidated its positi on during the year. The loss this year can be att ributed mainly for the full provisioning of Rs.188Mn made for the investment and receivables from the credit card company, acquired in 2009.
However the company having made a strategic decision to make this provisioning can look forward to a much improved performance in the ensuing fi nancial year.
The Group recorded a modest increase in Interest income by Rs.53Mn (9.8%), from Rs. 544Mn to Rs. 598Mn over the previous year. Interest expenses declined from Rs.509Mn to Rs. 426Mn during this period due to certain prudent measures taken by the company. The operati ng profi t of the company before provisions was Rs.20.8Mn compared to last year of Rs.35Mn. Total assets of the company increased by Rs.629Mn during the year; a 20% increase over last year. This is mainly due to the transfer of a property from the credit card company and an increase in advances.
The company made another strategic decision during the year to dispose of the Peoples Merchant Finance co Ltd (PMF) which resulted in a capital gain of Rs.137Mn which is recorded as a post balance sheet event as the sale was completed in May 2011.
Shareholders of the company conti nued to have faith in the potenti al of the company judging by the fact that the share price remained stable throughout the year .The market price of a share stood at Rs. 21 on 01 April 2010 and the closing price on 31 March 2011 was Rs 23.50. It traded within a band of Rs.22 and Rs.24 during the period under review.
A high concentrati on of the leasing portf olio of Peoples Merchant is in vehicle fi nancing, which accounts for the bulk of the lease/HP portf olio. However, the risks associated with possible defaults are largely miti gated by the nature of fi nance leases, where the vehicle is considered as security and the company has absolute ownership of such vehicles. This concentrati on is not considered a major risk to the company as vehicles fi nanced are used for public transport, goods transport, and personal use by a large and loyal customer base who have been with the company for a long period of ti me.
Lease and Hire purchase business accounts for 87% of the Peoples Merchant portf olio. The Lease and HP portf olio grew by 23% during the year and new disbursements reached Rs.1.5Bn, a 72% increase over last year.
The company has decided to adopt a diversifi cati on strategy in order to reduce its dependency on Leasing and Hire Purchase. The company has introduced Pawning branded as Peoples Merchant Gold Loans. Already this product is being off ered from four of the branches and plans have been made to introduce this product in fi ve other branches including Colombo. The Corporate Finance business of the company which was largely dormant is to be reacti vated as a part of the diversifi cati on strategy.
Trade Finance services were consolidated during the year as the focus was more on collecti on of non performing loans in this sector. Trade fi nancing was mainly limited to bill discounti ng, short and medium term loans and issue of lett ers of guarantees.
The real estate business of the company was aff ected by the slow down in the real estate industry. However the company conti nued its real estate projects and this business sector made a revenue contributi on of Rs. 13.6Mn. The company is now focusing more on land development and sale as opposed to housing projects.
Peoples Merchant expanded its branch network with two new branches in Anuradhapura and Trincomalee during the year enabling the company to serve a wider customer base.
Credit RiskThe level of credit risk of the Specialized Leasing Company sector depends largely on the quality of assets, which is measured by the volume of NPLs and the NPL rati o.
An issue that the company is faced with is the relati vely high NPL portf olio and a provision for bad and doubtf ul debts of Rs. 50 Mn that was made for the year ended 31 March 2011. This is mainly due to non performing term loans faciliti es in the past. However credit quality during the last two years has been maintained for the lease/HP portf olio which forms the bulk of the portf olio and recent loan granti ng’s. It is also noteworthy to menti on that the overall NPL rati o decreased by 4% during the year. The company maintains provisions on a stricter basis than what is required under Central Bank regulati ons.
88
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Chief Executi ve Offi cer’s Review Contd...
Therefore a primary area of focus would be a sustained eff ort taken to reduce the past Non Performing Loan (NPL) portf olio. The company has recently established a separate Recoveries division for this purpose and already positi ve results are being shown in this area. The objecti ve is to signifi cantly reduce the NPL portf olio and to bring the company on par with industry standards.
Operati onal and other RisksSound operati ng systems, internal controls, and proper procedures are criti cally important to ensure the fi nancial soundness of our company .Peoples Merchant has fulfi lled all the requirements in this regard.
As a Specialized Leasing Company (SLC) Peoples Merchant like all other SLC’s are mainly dependent on bank borrowings made against asset-backed securiti es or funds obtained through the issue of debt securiti es.
The liquidity reserve requirement for leasing companies imposed by Central Bank will therefore pose a challenge in January 2012 when it comes into eff ect for specialized leasing companies .
An issue to all leasing companies is the lack of long term funding and the issue of the mismatch of funds. However this is not unusual for Leasing and Finance companies. In order to bett er address this issue the company has recently established a separate Treasury functi on which will focus on diversifying its funding, securing more long term funding and reti ring short term debt in order to prudently manage the maturity mismatch of its portf olio.
OutlookWe maintain a very positi ve outlook for our core leasing and HP business in the ensuing year as the sector has seen a record growth in recent ti mes. The reducti on of duti es has seen an infl ux of vehicles which has resulted in a demand for lease and HP faciliti es. This together with the North and Eastern areas opening up for commercial acti vity and the growth in the constructi on and transport sectors has spurred demand.
The Real Estate sector has good potenti al to contribute more meaningfully to the company’s earnings in the future as the proposed development plans of the government in the real estate sector parti cularly in Colombo and suburbs will create a demand for housing and real estate. Peoples Merchant is well poised to profi t from this sector.
Future StrategiesDiversifi cati on would be a key focus . Already the company has ventured into Gold Loans and will be looking to grow its portf olio in this area of business . Reacti vati on of fee based Corporate Finance business is another focus area. The company is also looking at serving the agricultural sector more meaningfully through its branch network.
The company has a well trained and experienced staff to deliver a superior customer service. We would be looking to leverage on this and improve our product off ering by introducing more effi cient processes enabling Peoples Merchant to further improve its services to its customers.
ConclusionThis year has been a year of consolidati on for the company. It is with the combined eff ort and support of many stakeholders of Peoples Merchant that the company was able to successfully steer through a challenging year.
The company is now poised to recover from its losses and return to profi tability. The support of shareholders will be important to achieve this result.
It is heartening to note that the company has been able to retain and grow its customer base whilst many new customers have sought the products and services off ered by the company. I thank our customers for their loyalty and support.
The Chairman and the Board has played a crucial guiding role for the company and has acted with much responsibility and taken some strategic decisions which has impacted the company positi vely. I thank the Chairman and the board for their advice and guidance in all matt ers.
The Management and Staff of Peoples Merchant have played a pivotal role in the aff airs of the company and have responded very well in the face of many challenges and have given their unsti nted support. I thank them.
Rajeeva BandaranaikeChief Executi ve Offi cer
23rd August 2011
99
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Board of Directors
Mr. P. A. Ajith Panditharatne
Mr. Panditharatne was appointed as Chairman with eff ect from 3rd June, 2010. He also serves as a Director of People’s Bank, People’s Leasing Property Development Ltd. and Consultant/Director (Special Projects) of the Globe/Monta Group of Companies.
He was the Nati onal Organizer and founder member in establishing, managing and guiding the Sri Lanka Commerce Student Foundati on. Mr. Panditharatne has served in number of state sector insti tuti ons as Working Director/Chairman of the Nati onal Paper Corporati on, Working Director of the Lanka Cement Limited, Chairman of the Paranthan Chemical Corporati on and Executi ve Director of the Sri Lanka Export Development Board.
Mr. Ahamed Sabry IbrahimB.Sc (Hons) FCIB
Mr.Ibrahim was appointed as a Director in June 2009. He has over 27 years of banking experience, both locally and internati onally, primarily in the management and risk management. He holds an Honors Degree (B.Sc) from the University of Colombo and is a Fellow of the Chartered Insti tute of Bankers UK (FCIB).
He is Senior Deputy General Manager-Risk and Compliance of People’s Bank.
Mr. B. S. YapaB.A. (Ceylon), B.Com (Ceylon), FCA and FSCMA
Mr.Yapa has been a Director since September 2004 and has over 31 years experience in Accounti ng and Finance. He has specialized training in Port Management, Finance & Planning at the University of Antwerp.
Mr. Yapa held the positi on of Deputy Chief Finance Manager and Chief Internal Auditor at the Sri Lanka Ports Authority. He is also a former member of the Accounti ng Standards Committ ee, Auditi ng Standards Committ ee and Taxati on Committ ee of ICASL.
1010
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Mr. M. P. HaradasaAtt orney-at-Law & Notary Public of Sri Lanka, Solicitor England & Wales
and New South Wales, Solicitor & Barrister - High Court of Australia.
Mr. Haradasa was appointed as Alternate Director to Mr.Johnston from July 2006. He is a Council member of the Inter-Pacifi c Bar Associati on (1997 - 2000 and 2004 - 2006) and is also a member of the Advisory Commission consti tuted under the Companies Act No.17 or 1982 (2002 - 2004). Mr. Haradasa is currently a Senior Partner of Varners, a fi rm of Lawyers, Notaries and Agents for Trademarks and Patents.
Mr. Haradasa resigned from the Board with eff ect from 5th July 2011.
Board of Directors Contd...
Mr. Anura R. WickramasingheBA, MBA (USA)
Mr. Wickramasinghe was appointed as MD/CEO in June 2009. He has over 27 years experience in the fi nancial sector of which 20 years has been at senior management level. His last positi on was Chief Representati ve / Executi ve Director for J.P.Morgon.
Mr. Wickramasinghe has a Bachelor degree in Computer Science and Philosophy and a MBA in Informati on Systems from USA. Mr. Wickramasinghe resigned with eff ect from 30th June 2011.
Mr. Jehan P. Amaratunga
Associate member of the Insti tute of Chartered Accountants of Sri
Lanka and was awarded First in Order of Merit Prize at the fi nal level
examinati on.
Mr. Amartunga was appointed as a Director on 29th October 2010. He has over 24 years of extensive experience in fi nance and management and has been a consultant and director to a large number of corporati ons and private enti ti es. He was also a member of the Governing Council of the Insti tute of Chartered Accountants of Sri Lanka. He is currently the country head of MTD Walkers PLC, Sri Lanka. He also serves as a Director of People’s Bank.
Mr. Kapila JayawardenaMBA in Finance Management, and an Associate of the Insti tute of Cost &
Executi ve Accountants and Fellow of the Insti tute of Bankers
Director since November 2007, Mr. Jayawardena is Group Managing Director/CEO of Lanka Orix Leasing Co.PLC and was the Country Head and CEO of Citi Group - Sri Lanka and Maldives. He has over 28 years experience in Banking and Finance.
Mr. Jayawardena resigned from the Board with eff ect from 10th June 2011.
Mr. R. Johnston(Bachelor of Economics -Sydney University)
Mr. Johnston is a Director since 2001, is the Managing Director of Rox Capital Pte. Ltd, a Singapore based Restructuring and Capital Markets Consultancy fi rm. He has served 35 years on 9 public company Boards in Australia and Asia. He was the Chairman of West Australian Metals Limited from 2005 to 2008.
Mr. Johnston has over 31 years of professional and commercial experience, having commenced his career as an insolvency specialist. He holds a Bachelor of economics from Sydney University.
Mr. Johnston resigned from the Board with eff ect from 5th July 2011.
Resigned Directors
1111
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Board of Directors Contd...
Mr. K. L. Hewage B.Sc. (University of Kelaniya), Masters Degree in Agricultural Extension
(University of Reading, England)
Mr. Hewage was appointed as Chairman in July 2009
while being a Director of People’s Bank. He has been the
Chairman of the Sri Lanka State Plantati ons Corporati on
and also the Chairman/CEO of State Printi ng Corporati on
and the Provincial Road Development Authority (Western
Province). Also served as the GM of Sri Lanka Insti tute of
Co-operati ve Management; Director of Janatha Estate
Development Board and Janatha Ferti lizer Enterprise
Limited.
Mr. Hewage has around 38 years working experience in
the spheres of Engineering, Management, Marketi ng,
Projects Implementati on, Rural Sector Development etc.
Mr. Hewage resigned with eff ect from 03rd June 2010.
Mr. P. V. PathiranaB.Sc (Business Administrati on) FIB (SL)
Mr. Pathirana was appointed as a Director in June 2009. He had over 38 years of experience at People’s Bank in various areas from Branch Manager to Senior Deputy General Manager level. He has specialized in Micro fi nance and Development Banking. He was the CEO/ GM of People’s Bank.
Mr. Pathirana resigned from the Board on 6th October 2010.
1212
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Management
1. Ms. Ayesha Thennakoon Senior Assistant Manager - Internal Audit
2. Mr. Rajinda Amarathunga Senior Assistant Manager - Micro Finance & Pawning
3. Mr. Manoneetha Ariyananda Senior Manager - Recoveries
4. Mr. Dileepa Assarapperuma Management Accountant
5. Mr. Suchith Premaratne Financial Accountant
6. Mr. Jeevana De. S. Karunasiri Senior Manager - Business Development
7. Mr. Rajeeva Bandaranaike Chief Executi ve Offi cer
8. Mr. Charith Gunaratne DGM - Credit & Asset Finance
9. Mr. L.V.R.Bandara Consultant - Micro Finance & Pawning
10. Mr. Anuranga Handaragama Head of IT
11. Mr. I.D. Weerasena Senior Consultant - Micro Finance & Pawning
12. Ms. Muditha Jayawickreme Senior Manager - Legal
7.
1
23
4
5 67 8 9 10 11 12
Not in picture
Mr. Anura Wickrematunge Chief Financial Offi cer
Mr. Anuradha Gamage DGM - Corporate Finance & Treasury
1313
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Branch Management
1 Mr. Nishad Salinga Branch Head - Negombo
2 Mr. Pathum Dassanayake Branch Head - Matugama
3 Mr. P.Mayadunna Area Manager 4 Mr. Buddhika Pothupiti ya Act. Branch Head - Anuradhapura
5 Mr. Nalin Rajakaruna Area Manager
6 Mr. Amal Geekiyanage Branch Head - Avissawella
7 Mr. Nalin Jayasekera Branch Head - Matara
8 Mr. Thushan Abeytunga Act. Branch Head - Elpiti ya
1 23 4 5 6 7
8
Mr. Prabash WickramasingheBranch Head - Gampaha
Not in picture
1414
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review
Overview
Sri Lanka economy recorded a growth rate of 8% in 2010,
a considerable increase from 3.5% recorded for the year
2009. The conditi ons were more conducive in the year
with gradual global recovery from the fi nancial crisis
in the recent past and the full year of peace aft er three
decades of war.
The business enti ti es expanded operati ons to North and
East by setti ng up branches due to the expected potenti al
growth in the regions. The Company also opened two
new branches in Anuradhapura and Trincomalee during
the year. Also the Company introduced pawning “PMB
Ran Naya” into its product line. However, the Company
conti nued to consolidate the eff ects of adverse conditi ons
that prevailed due to the take over of ABC Credit Card
Company Ltd, business in March 2009. The impact of high
leverage on funding credit card operati ons prevented in
rapid business expansions which also led to high interest
costs and operati onal losses.
During the year, the Company in consultati on with
the Central Bank of Sri Lankan decided to disconti nue
subsidiary Company credit card operati ons. Further,
all deposit liabiliti es / bank loans and the main asset
of property at Nawam Mawatha Colombo 02 were
transferred to the parent Company. In view of this the
name of the Subsidiary Company was changed from PMB
Credit Card Company Ltd to PMB Financial Services Ltd.
(PMBFS).
The merger of the Company and 99.99% owned subsidiary
People’s Merchant Finance Company Ltd (PMF) which
was under considerati on in the last fi nancial year was not
preceded due to technical matt ers of amalgamati on. PMF
conti nued independently and the Company divested the
enti re shareholding in May 2011.
The Company changed its name to People’s Merchant PLC
(PMP) from April 2011.
Leasing & Hire Purchase
Leasing and Hire Purchase business being the company’s
main line of business has performed well to be the main
income and profi t producer to the company. The step
taken to reduce duti es on motor vehicles during mid
year, had given opportunity to increase the portf olio for
unregistered vehicles amongst customers and increase in
leasing faciliti es where capital allowances are available.
The income generated from Lease and Hire Purchase
business amounts to Rs.510Mn and maintained a good
recovery rati o.
For the year under review, the total amount of leasing
& hire purchase disbursements amounted to Rs.1.5Bn,
numbering 1,642 approvals compared to Rs.857Mn,
numbering 1,093 approvals in previous year. Identi fying
the needs of the clients we introduced four new leasing
products namely, ‘PMB Jaya Mawatha’ for cars and vans,
‘PMB Yodha Saviya’ for lorries, buses and other heavy
vehicles, ‘PMB Diriyen Divunuwa’ for heavy equipment
and tractors and ‘PMB Maha Maga Navodhaya’ for three
wheelers and motor cycles.
The main income source of the Company is leasing and hire
purchase. It accounts for 87% of the total income of the
Company. Our present leasing and hire purchase portf olio
increased by 21% to Rs.2,244Mn from Rs. 1,858Mn as at
end of last fi nancial year.
The Company commenced purchasing three wheelers in
bulk form and granted lease faciliti es to release them in
the offi ce premises. This produced good results as it was
possible for customers to acquire three wheelers without
a waiti ng period. Under this scheme leases numbering 162
three wheelers were given through our branch network in
the year. The lease and hire purchase portf olios account
for major porti on of the assets of the company.
To further expand its service to the society we opened
two more new branches i.e. a branch in the largest city
in the North/East, Trincomalee and the other branch in
the historic city of Anuradhapura. The branch network
serving the outstati on had played an important role
to contribute towards the profi tability. The number of
branches increased to 10 during the year.
Net provisions for leasing & Hire Purchase bad and
doubtf ul debts increased during the year. A sum of
Rs.33.7Mn was provided during the year under review
1515
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
compared to Rs.28.4Mn in previous year. This is in view
of the increased portf olio and also a substanti al porti on
of bad & doubtf ul debts were in the arrears category of
3 - 6 months.
Leasing and hire purchase operati ons contributed a profi t
level of Rs.25Mn towards profi t before tax, compared to
Rs.24Mn contributi on in last year.
Trade Finance
Trade Finance services include Bill discounti ng faciliti es,
short and medium term loans and issue of lett ers of
Undertakings/Guarantees. The services are channeled
through mainly from head offi ce, and branch network is
also used to grant term loans and guarantee faciliti es.
During the Financial year the Company focused on
consolidati ng trade fi nance operati ons as a high percentage
of loans fell in to overdue category. The management is
taking various appropriate measures to improve the non
performing loans by recovering arrears and by providing
concessions, rescheduling and in some cases liquidati ng
collateral obtained for security in consultati on with the
client. The company also sought assistance of professional
third party debt recovery companies for recovery of long
outstanding faciliti es. The Company moved out from
conventi onal type of practi ces and focused on more
actual recoveries than bulk lending in order to reduce the
burden of nonperforming loans. This is in line with the
corporate strategy to consolidate and reduce the existi ng
exposure to this business segment and to make a quality
portf olio before initi ati ng growth in the sector.
Due to this, loan approvals during the year were restricted.
The total term loans numbering 29 faciliti es amounti ng
to Rs.43.6Mn were only approved in the year. A Credit
Committ ee was formed during the year comprising heads
of departments and relevant credit offi cers to evaluate
credit proposals. The suggesti ons brought new dimension
in to credit administrati on and was instrumental in
carefully selecti ng good business proposals for funding
which assisted to avoid probable delinquent advances.
The total loans and advances reduced by Rs.12Mn to Rs.426
at the end of the year from Rs.438Mn at end of previous
year. Trade bills portf olio also reduced to Rs.28Mn from
Rs.54Mn at end of previous year. Trade fi nance income
of Rs.42Mn accounted for 7 % of the total income of the
company compared to previous year income of Rs.67Mn.
This is due to reducti on in portf olio, reduced interest on
advances and suspension of interest income on overdue
faciliti es.
As per the Company strategy in identi fi cati on and recovery
of bad debts within a period of 2 years, Trade Finance has
been able to collect over Rs.100Mn during the year from
overdue loans towards recovery of capital and interest.
Provisions for Trade Finance loans and bills for the year
amounted to Rs.15Mn compared to the amount of Rs.7Mn
in the previous year. The increase is mostly due to some
of loan faciliti es turning in to arrears category requiring
additi onal provisions.
Trade Finance operati ons incurred a loss before tax of
Rs.38.8Mn in the year, compared to the loss of Rs.17.2Mn
in last year.
Corporate Finance & Capital Markets
The climate for investment banking services improved
during the year under review. Favourable macro economic
conditi ons helped all sectors to perform well during the
year. A lot of businesses expanded into north and east
to benefi t from the potenti al business growth in those
areas. The Company was not able to capitalize the market
opportuniti es due to high labour turnover in the Corporate
Finance Division. However, the division was involved
in restructuring work within the group of Companies. A
Factory of a Trade Finance client – Colour Products (Pvt) Ltd.
1616
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
considerable ti me was spent on intended merger between PMP and the subsidiary Company People’s Merchant Finance Co. Ltd. (PMF) and also disconti nuati on of credit card operati ons and transfer of assets and liabiliti es from PMB Financial Services Ltd. to PMP. Further, division was instrumental in developing a strategic plan for the group.
The All Share Price Index (ASPI) and the Milanka Price Index (MPI), increased by 96% and 83% respecti vely in 2010. The Colombo Stock Exchange became one of the top performing Stock Exchanges in the world. The market capitalizati on doubled during the year to Rs.2.2Trillion. The market price earnings rati o also reached a high of 25.2 compared to 16.6 in year 2009. During the year eight new Initi al public Off ers (IPOs) were announced and all the IPOs were oversubscribed. Further, 28 Companies raised Rs.24Bn through rights issues.
The capital market acti viti es of the division reaped the benefi ts from the excepti onal performance of the Colombo Stock Market. The Corporate Finance Division was entrusted to manage share portf olios of PMP and the subsidiary PMF. The ti mely investment and divestment decisions based on internal research played a vital role in achieving a gain of Rs.8.1Mn during the year compared to the loss of Rs.0.3Mn in FY 09/10 from its stock portf olio. However, a provision of Rs.1.1Mn was provided for decline in dealing portf olio (reversal of Rs.4.8Mn in FY 09/10) .The sector recorded marginal loss of Rs.0.9Mn for the year.
The investment banking operati ons are under close review and the division is under reorganizati on to capitalize on various market opportuniti es available to penetrate into investment banking arena.
Real EstateReal Estate sector undertakes land development and sale of land, development of land with constructi on of houses thereon and owner behalf sale properti es.
FY 2010/11 was a complex year with challenges and uncertainti es, but also a year of opportuniti es for the real estate industry. Price declines deterred prospecti ve investors in to the real estate sector. Also the decline could be att ributed to the insecure environment which aff ected the demand resulti ng in an oversupply scenario. The high interest rate scenario in 2007 and 2008 is likely to have contributed to the decline in property sector in 2010. During the year the division did not commence new projects in view of the above. However, some of the previous projects were completed in the year.
On account of these changes in the market, the company decided to focus mainly on land development and sale only for the present and not to engage in large and medium scale housing projects ti ll the market become conducive. Despite all these facts our real estate division
ASPI
People’s Merchant share performance with Stock Market ASPI and MPI during the year 2010
MPI PMP
20
25
30
35
40
DecNovOctSepAugJulJunMayAprMarFebJan3,000
4,000
5,000
6,000
7,000
8,000Rs
“Highway Terrace” real estate project at Ranala
1717
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
contributed an income of 13.6M for the year in review compared to Rs.24Mn in the previous year. Although the real estate market is not very encouraging in 2010, we are sti ll of the opinion that it would be viable to investment in real estate at current prices as it is expected to take off the market very early. Many Sri Lankans who are living abroad are investi ng their money in estate properti es in the country.
Projects such as “Summer Side Garden” in Athurugiriya and “Highway Terrace” in Ranala conti nued throughout the year. The carefully identi fi ed strategic locati ons and marketi ng concepts of the projects were harmonized well with our brand positi oning of convenience, privacy class and exclusive living conditi ons. The real estate stock decreased to Rs.56Mn at end of FY 10/11 from Rs.108Mn at end of previous year.
The post war set up has given Sri Lanka a great opportunity to enhance the per capita income levels and the country is well poised to enjoy a sustainable economic resurgence over the next fi ve years. The Urban Development Authority is likely to successfully implement the “Colombo Development Plan” over the next decade, which could att ract demand for high end residenti al and commercial property. This will increase the prices in the areas outside the Colombo Municipality too. The demand for property will rise amidst income growth via economic boom, low interest rate environment, foreigners seeking a reti rement desti nati on, return of expatriates and closeness to regional economic superpowers.
We believe that Sri Lanka real estate and housing market is resilient like its economy. We look forward to enhance our positi on further, both in terms of brand awareness and profi tability. Awareness of the brand, “People’s Merchant Real Estate” will be enhanced amongst existi ng and potenti al customers, through carefully targeted marketi ng and sales strategies. The division will conti nue its strategy of selecti ve expansion with the support of its branch network and provide more value to customers, whilst focusing on overhead and working capital.
In the future, the company will look at embarking more real estate and luxury housing projects in to its portf olio
featuring more aff ordable housing soluti ons to capitalize the opportuniti es for township development arising due to increasing urbanizati on.
The division ended up with a loss of Rs. 27Mn compared to Rs.11Mn loss in the previous year. Interest costs and other overhead costs as well as taking more ti me to complete projects resulted in a loss for the division. Further, our policy of charging all interest to income without capitalizing interest on real estate projects has a direct impact on profi tability.
Branch Operati onsBranches are equipped to handle Leasing, Hire Purchase, Term loans, guarantees and investments. In the year pawning services were added to four branches. All branches are connected with the Head Offi ce through an IPVPN network and all transacti ons are updated on line.
New branches at Trincomalee and AnuradhapuraAs per the 2010/11 branch expansion programme two branches were opened in Trincomalee and Anuradhapura
Opening of new Anuradhapura Branch.
Opening of new Trincomalee Branch by Hon. Basil Rajapakse, Minister of Economic Development.
1818
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
considering the expected accelerated economic growth in the north and east. These two branches are equipped to handle all business transacti ons carried out in other branches including recently introduced pawning.
Branch RefurbishmentThe Kandy branch was enti rely refurbished in the year and the head offi ce of the subsidiary Company, People’s Merchant Finance Company Ltd. was relocated at the same premises to maximize group returns. Further, Avissawella branch was also refurbished in the year. Pawning divisions were also set up at both these branches. The refurbished branches will off er bett er faciliti es to the target market of small and medium enterprises (SMEs) and other middle market customers.
Branch profi tabilityAll the branches recorded profi ts in the year except the two new branches that were opened in the current year as in the past fi nancial years. The Profi t before tax contributi on from all branches amounted to Rs. 61Mn compared to Rs. 59Mn in the previous year.
Human Resources
Introducti onThe the People’s Merchant has been conti nuing implementi ng good Human Resource policies and practi ces to develop its employees and insti ll quality to ensure their fi nest involvement in achieving desired goals.
The Company employment policy embodies the principle
of equal opportunity to the employees.
At People’s Merchant PLC, our goal is to create a pleasant
work environment place where our employees can
succeed and perform to the best of their ability. This is
achieved through training, empowerment and recognizing
and rewarding good performance.
Recruitment and retenti on
Selecti ng suitable people for the company is a very vital
area. The Company adverti ses through print and other
media for vacancies. Selecti on of employees is done
through an interview panel consisti ng CEO and Senior
Managers. Minimum requirements have been specifi ed
for various job functi ons at diff erent levels of the Company.
We have been able to select good talent in a competi ti ve
business environment. It has been the practi ce of the
bank to recruit employees for junior positi ons and provide
opportuniti es for existi ng staff for advancement wherever
possible.
Retaining people in a competi ti ve economic growth
situati on is a challenge. Despite the adverse results
recorded by the Company, reasonable salary adjustments
were made to majority of the employees to compensate for
increased infl ati on that prevailed in the last year. Further,
the employees conti nued to enjoy other benefi ts such
as medical insurance, leave encashment, Concessionary
lease faciliti es, etc. The employees who have performed
above the expected levels were promoted to higher grades
and positi ons. A number of initi ati ves were undertaken to
moti vate, reward, and recognize employees.
Performance Management
Aft er conducti ng a series of performance management
and evaluati on programmes, the company introduced
an updated performance management system and
EASTERN
1. Kurunegala2. Matara3. Matugama4. Gampaha5. Avissawella6. Elpi�ya7. Kandy8. Negombo9. Trincomalee10. Anuradhapura
Branch Loca�on
Kurunegala
Matara
Matugama
GampahaAvissawella
Elpi�ya
Kandy
Negombo
TrincomaleeAnuradhapura
Head office and Branch Income
20102011
Rs.341Mn
Branch income
Rs.202Mn
Head office income
Rs.400Mn
Rs.186Mn
1919
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
implemented from this fi nancial year. Key Performance
Indicators (KPI) were developed for each division. These
indicators were used to measure employee performance
as well as divisional performance so that it can be aligned
to company goals. The last employee rewards were based
on this system.
Training and DevelopmentThe Company focused on developing a learning culture based on a good primary qualifi cati on, knowledge and experience. The HR division conti nued training programmes initi ated in the previous year and completed those this year. Professional training specialists were invited to conduct these trainings sessions. This also provides opportunity for the head offi ce and branch employees to interact and also to unite. The internal training programmes are conducted at Company Training Centre at the head offi ce. Specialised training in various technical areas were provided by nominati ng employees to programmes conducted by outside insti tuti ons such as Central Bank of Sri Lanka, Professional bodies, etc.
Training strategy is intended to cover soft and technical skills across all functi ons of the organizati on. Some programmes focused on developing management, leadership, communicati on skills and customer relati onship. These have helped employees to perform bett er to achieve business aspirati ons as a team. Further, all staff members are encouraged to accept/perform various job functi ons within their divisions. This facilitates employees to have a wider area of job knowledge and also to cover up for various functi ons if the need arises. The necessary support is provided by the Managers and other senior staff .
Training sponsored by the Human Resources Department during the year 2010/2011
Internal Training
Name of the Training
Allocated No of Sessions
Completed sessions in FY 10/11
No of Parti cipants
Presentati on on Personnel Leadership
1 1 25
Sales & Marketi ng
10 7 28
Management Development
7 6 25
Strategic Performance Management
1 1 22
External Training
Name of the Training No of Parti cipants
Risk Management, Portf olio at Risk and Bank failure
2
Nati onal Law conference 2
Workshop on leasing 7
Taxati on Course for Professionals
1
MTI/IPO Forum 1
Practi cal aspects of the Title Registrati on Act
1
Training sessions in progress
0
2,000
4,000
6,000
8,000
10,000
12,000
exp.per employee
'07
'08
'09
'10
'11
Rs
Training and development expenditure per employee
Business Review Contd...
2020
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
Service Analysis of the staff as at March 31
Age Group(years)
Senior Managers& Managers
Asst Managers
Executi ves Non Executi ve
SupportStaff
2010/11Total
2009/10Total
16-20 - 2 1 - 2 05 04
11-15 2 2 2 - - 06 06
6-10 4 2 4 1 1 12 07
5 & below 8 10 31 51 - 100 57
Total 14 16 38 52 3 123 74
Average service of the employees as at March 31,2011 was 3.8 years ( FY 09/10 4.7 Years)
51-60 41-50
31-40 21-30
20 & below
Age Analysis of staff (years)2011/11
15-20 11-15
6-10 5 & below
Service Analysis of staff (years)2011/11
Age Analysis of the Staff as at March 31
Age Group(years)
Senior Managers& Managers
Asst Managers
Executi ves Non Executi ve
SupportStaff
2010/11Total
2009/10Total
51-60 2 1 - 4 - 07 03
41-50 5 5 4 1 - 15 12
31-40 7 10 21 13 - 51 21
21-30 - - 13 34 3 50 38
20 & below - - - - - - -
Total 14 16 38 52 3 123 74
Average age of the employees as at March 31,2011 was 34 years ( FY 09/10 33 Years)
2121
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
Corporate Social Responsibility (CSR)The Company is committ ed to meeti ng its obligati ons towards the nati on and community where the Company branches are in operati on. In the past the Company has assisted projects based on the urgency and signifi cance of the needs. The projects undertaken by the Company in the fi nancial year are given below. The total funds committ ed for donati ons amounted to Rs. 530,000/-
Donati on of Rs.100,000/- to construct a chaitya.• In keeping with its commitment and also to coincide with 2600 Buddha Jayanthi, People’s Merchant donated Rs.100,000/- to construct the chaitya of the Sri Bodhirukkaramaya Temple of Batuwana, Niyadurupola located in the Kegalle district to benefi t all worshippers and also to educate the younger generati on of the importance of safeguarding the country’s heritage.
Thus, we have focused and channeled our eff orts through our branch network as being the best presence on the ground to address chosen issues. This donati on took place at the Sri Bodhirukkarama Temple on 19th January, 2011 Poya Day.
Donati ons of spectacles • Soon aft er the opening of the branch in Trinco, the company in its duty to help and support the nati on and the people in that area, donated 200 pairs of spectacles to needy persons in Trincomalee through its CSR programme. This generous gesture was appreciated by the receiver. The total cost incurred was Rs.120,000/-
The other donati ons made during the year are:Rs.10,000/- to Karuna Samadhi Foundati on for • granti ng educati onal scholarships to innocent students.
Informati on TechnologyInformati on is the major asset in the business world
especially in the fi nancial industry. The Informati on
Technology department has been formed during this
fi nancial year with the view of streamlining the IT
operati ons of the company and also to facilitate eff ecti ve
and effi cient informati on environment with the expansion
of the company. The Informati on technology policy was
established in order to direct the company towards
implementi ng a process and procedures to establish
a secured and qualitati ve informati on technology
environment.
Soft ware EnvironmentThe company focused on improving its business
applicati ons to improve performance of business enti ti es
of the company. Newly introduced pawn brokering
product performed its fi rst transacti on using the on-line
real ti me system. We believe that the company should
have a lawful environment to play in the business world.
Company insists on legalized soft ware and in the view
of cost reducti on pays more att enti on towards the Free
and open source soft ware (FOSS). Company has been
conti nuly improving the users’ knowledge on informati on
technology by conducti ng frequent user trainings and
implementi ng the help-desk faciliti es.
Hardware and Network EnvironmentAll executi ve employees are being allocated with a
dedicated computer to perform their duty. All computer
users are interconnected including the branches through
the secured connecti on and informati on is shared
according to access levels. All informati on and business
applicati ons have been implemented in the centralized
secured Data Center. During the last fi nancial year the
Disaster Recovery Site re-implemented with on-line
real-ti me data replicati on to improve the informati on
availability. Informati on technology division focused
on research and development to fi nd cost eff ecti ve
soluti ons to improve the performance of hardware and
network infrastructure. Within the last fi nancial year we
experienced success stories in the same and conti nue
with the improvements.
Branch head distributi ng spectacles
2222
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Business Review Contd...
Group Business reviewThe Company has two subsidiary Companies PMB Financial Services Ltd. and People’s Merchant Finance Company Ltd. These two companies became part of PMP with the acquisiti on of ABC Credit Card Company Ltd, a company that was engaged in local credit card operati ons. For this acquisiti on, a new company with the name PMB Credit Card Company Ltd. was incorporated to take over business operati ons, and selected assets and liabiliti es of the business.
PMB Financial Services Ltd.(Formally PMB Credit Card Company Ltd.)This is a 100% owned subsidiary of People’s Merchant PLC. The Company was set up only in March 2009 to take over selected assets and liabiliti es of ABC Credit Card Company Ltd. During the year the Central Bank of Sri Lanka brought in new regulati ons covering the credit card industry. The Company was not able to meet the regulatory sti pulated requirements for credit card operati ons and was not registered. The board decided to disconti nue credit card operati ons in the year. Thereaft er, the name of the Company was changed to PMB Financial Services Ltd.
It is with humbleness that we wish to state that all the security deposit liabiliti es amounti ng to over Rs.700Mn were sett led along with interest due or transferred to the parent Company where pro notes were issued for funds borrowed. This is as our part of assistance to the government for supporti ng the stability of the fi nancial sector. This was possible only at a high cost to the parent Company.
At present only collecti on of amounts due from credit card holders are being carried out. The services of third party persons are obtained for collecti ons.
This business was reorganized in the year and in consultati on with the Central Bank of Sri Lanka, the Company’s main asset of property at Nawam Mawatha was transferred to the parent Company People’s Merchant PLC along with deposit liabiliti es and other loans. This property is one of the few large blocks of land available in Nawam Mawatha - Financial Hub. The property consists of a single storey building converted into a modern offi ce complex.
Rs.100,000/- to Annual Colombo Nawam Mawatha • PeraheraRs.200,000/- for a bakmaha ulela organized for the • staff and families of a government establishment.
Conducti ng A Pirith Ceremony for PresidentTo coincide with the President’s 2nd term swearing in ceremony, an all night Pirith Ceremony was held on 19th November, 2010 at People’s Merchant, Head Offi ce, amidst the parti cipati on of Mr. W. Karunajeewa - Chairman, People’s Bank, Mr. Ajith Panditharatne - Chairman, People’s Merchant PLC, Mr. Anura Wickremasinghe - Managing Director/CEO of PMP, Mr. Anura Siriwardena - Secretary to the Ministry of Trade and other disti nguished guests and the staff of People’s Merchant Bank to invoke blessing on HE the President.
The pirith was conducted by Gangarama Temple under the auspices of Ven. Galaboda Gnanissara Thero.
2323
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
The Company incurred a loss of Rs.52Mn for the year ended 31/03/2011. The total assets of the Company amounted to Rs.10Mn at end of FY2010/11.
People’s Merchant Finance Company Ltd (PMF)The company has been incorporated 29 years ago and is a fi nance Company registered with the Central Bank of Sri Lanka. The operati ons were carried out only from its head offi ce in Kandy, covering a wide cross secti on of the society in its fi nancial needs,. This Company was also acquired along with the PMB Credit Card Company. Initi ally a 44% controlling interest was acquired on 6th March 2009 and as at 31st March 2009 this was considered as an associate
Company. The remaining shares up to 99.9% were purchased in FY 2009/10.
The Company head offi ce was relocated on 20th January, 2011 at No.145, Kotugodella Veediya, Kandy with the purpose of serving the community bett er. Both PMP Kandy branch and PMF head offi ce are located at the same premises to take advantage of the available resources. The fi rst branch of the Company was set in Colombo in March 2011 at the PMP group head offi ce.
The fi nance companies main line of businesses includes leasing, hire purchase, trade fi nance and deposit mobilizati on. Aft er acquisiti on, the operati ons were streamlined and long outstanding non performing loans were provided in full and also cleared a large fl eet of repossessed vehicles which were lying in the Company yard for a long ti me. Despite Company having to absorb losses on these transacti ons it was possible to record a reasonable profi t for the year.
The Company profi t before tax increased to Rs.20.6Mn for the fi nancial year ended 31st March 2011. However due to high income tax charge of Rs.11.3Mn Profi t aft er tax amounted to Rs.9.3Mn. The total assets of the Company increased to Rs.379Mn.Opening of PMF fi rst branch offi ce in Colombo by Deputy Governor,
Mr. P.D.J. Fernando of Central Bank of Sri Lanka
Business Review Contd...
Certi fi cate of compliance received for company annual report FY 2009/10
2424
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Financial Review
Overview
The fi nancial year 2010/11 was a challenging year to
People’s Merchant PLC (PMP), as it had to deal with
raising funds for meeti ng expanding credit, to meet debt
maturiti es and also arranging obligati ons of the security
deposit holders of the subsidiary Company PMB Financial
Services Ltd. (PMBFS) which was set up in March 2009.
This was carried out when the Company was operati ng at
a loss. The non performing advances reduced at a slower
pace during the year aft er the impact of global economic
crises. The improvement was not up to expectati on, which
resulted in requiring to make more provisions and not
being able to recognize income due to transfer of interest
in to suspense accounts.
During the year the Company decided to make full
impairment provision for the investment/receivable
from the subsidiary Company PMBFS which amounted to
Rs.188Mn. Since full provisions have been made no further
losses are expected from the subsidiary operati ons. In
November 2010 in consultati on with Central Bank of Sri
Lanka the property belonging to PMBFS situated at Nawam
Mawatha with a value of Rs.452Mn was transferred
to PMP in considerati on of taking over security deposit
and other liabiliti es. In view of this, interest expenses on
this investment became a direct charge to the Company.
Further, all subsidiary investments were funded mainly
through borrowings which att ract fi nancial costs.
Mainly due to these reasons the Company incurred a loss
before tax for the year amounti ng to Rs.214Mn compared
to the loss of Rs.14Mn in the previous year.
The details of the operati ons are elaborated below:
Income & Profi tability
Income
Gross Income of the bank increased to Rs.587Mn from
Rs.544Mn in FY 09/10, a modest growth of 8%. Interest
income increased to Rs.550Mn from Rs.501Mn in FY
09/10, a growth of 10%. The interest income increase was
sati sfactory compared to reduced interest rates prevailed
in the year compared to previous years. During the year,
income from Finance leases increased marginally by 6% to
Rs.202Mn from Rs.191Mn in the previous year. However,
Hire Purchase income grew by 23% to Rs.300Mn from
Rs.243Mn in the previous year. The loan interest income
decreased to Rs.43Mn, by 26% from Rs.58Mn in the
previous year. This is due to high non performing loans.
Leasing and Hire Purchase income accounted for more
than 87% of the company revenue.
Other income reduced to Rs.37Mn from Rs.42Mn in the
previous year. The main reason is the reduced real estate
income of Rs.8Mn in the current fi nancial year compared
to 24Mn in the previous year. The income from stock
portf olio amounted to Rs.8Mn compared to a loss of
Rs.0.2Mn in the previous year.
The net interest margin for the year was 30% compared
to previous year margin of 23%. The total net income
increased by 29 % to Rs.203Mn from Rs.157Mn in FY
09/10. This is as a result of higher margins due to higher
lending rates of previously granted faciliti es and lower
current borrowing costs. Other income consisti ng non-
interest bearing income reduced to 18% of the total net
income compared to 27% in FY 09/10 as result of reducti on
in non interest income.
Expenses
Total operati ng expenses increased from Rs.171Mn in FY
09/10 to Rs.418Mn in FY 10/11, an increase of Rs.247Mn,
a phenomenal 146%. This is due to absorbing total losses
arising from the subsidiary Company PMB Financial
Services Ltd. (PMBFS) during the year. Full impairment/
provision was made for investment in PMBFS and the
%
Annual interest margin
0
10
20
30
40
50
60
‘11‘10‘09‘08‘07
2525
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Financial Review Contd...
receivable from PMBFS amounti ng to Rs.188Mn in the
year, which accounted for 75% of the total increase.
Further, provisions for total bad and doubtf ul debts
increased from Rs.35Mn to Rs.50Mn, by Rs.15Mn in the
current year. A provision of Rs.1.1Mn was made during
the year for the dealing portf olio against a reversal of
Rs.4.8Mn in the previous year.
Other operati ng expenses have increased by around 24%
over the previous year. Additi onal establishment expenses
amounti ng to Rs.11.6Mn was incurred in the year for
relocati on of branches, setti ng up two new branches,
modifi cati on and parti ti oning a secti on of the head offi ce
to accommodate new divisions. The personnel expenses
increased to Rs.64Mn from Rs.52Mn in FY 09/10, an
increase of 23%. The staff strength increased from 74 at
end FY 09/10 to 123 at end of FY 10/11 as more staff was
recruited due to reorganizati on, creati on of new divisions,
new product lines and setti ng up on new branches for
business expansions and reorganizati on.
The balance expenses have increased by less than 10%,
within the acceptable levels considering the normal
infl ati onary increases in costs and additi onal eff orts that
were required to manage the acquired Companies.
During the year although overall Non Performing Loans
(NPL) improved, the company had to provide for bad &
doubtf ul debts amounti ng to Rs.50Mn. This compares
adversely with the provisions amount made in FY 09/10
of Rs.35Mn, which is an increase of 44%. The quality of
companies lease and hire purchase portf olios are similar
with the leasing sector industry. The high non performing
faciliti es are mainly due to adverse situati on in term loan
faciliti es. During the year Company set up a separate
division to monitor recovery of all non performing
faciliti es. Total receivables are separated into diff erent
categories depending on the recoverability positi on
and appropriate strategies are put in place for recovery
by next fi nancial year. The Company is presently very
focused for recovery and control of high non performing
advances. The next fi nancial year will be a further year of
consolidati on especially bringing overall NPL in line with
industry levels.
The cost to income rati o, based on total expenses
excluding provisions and fi nancial VAT on total net income
increased to 83% in the year from 79% in the previous
year. This is due to reduced other income of non interest
bearing income and high interest charges as a result of
funding acquisiti ons through debts where no income was
recognized.
Profi tability
Loss before tax for the year under review was Rs.215.3Mn
compared to the loss of Rs.14.3Mn in FY 09/10. The loss is
mainly due to impairing/providing in full for investments in
the subsidiary Company PMBFS, higher interest expenses
due to using borrowed funds for fi nancing investments
in PMF and property which together totaled more than
Rs.750Mn, high NPL on loan faciliti es, reduced fee based
Composi�on of the expenses 2010 Rs Mn2011 Rs Mn
Personnel expenses
provision for bad & doub�ul debts
provision for other receivables
other overhead expenses
Premises, equipment & establishment expenses
64
35
50
186
8252
26
35
15
48
Rs Mn
0
50
100
150
200
250
Provision on NPLs Special Provision‘11‘10‘09‘08‘07
Annual provisions made
2626
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Financial Review Contd...
income, increase in operati ng expenses and increased
provisions for bad & doubtf ul debts. There was a reversal
of Income tax charge for the year amounti ng to Rs.12.8Mn
due to reversal of provision required for deferred taxati on.
The previous year tax charge was Rs.6.1Mn. Loss aft er tax
amounts to Rs. 202.5Mn against Rs.20.4Mn in FY 09/10.
Assets
The total assets of the company grew by Rs.629Mn (20%)
to Rs.3,708Mn from Rs.3,079Mn at end of FY 09/10. The
main reasons for the increase were the transfer of the
property belonging to the subsidiary Company PMBFS
amounti ng to Rs.470Mn to the Company and increase
in advances. The fi nance lease portf olio increased by
Rs.162Mn (20%) to Rs.991Mn at end of FY 10/11 from
Rs.829Mn at previous year end and hire purchase
portf olio increased by Rs.224Mn (22%) to Rs.1,253Mn
from Rs.1,028Mn at previous year end. The leasing and
hire purchase advances amounted to Rs.2,244Mn and
account for 61% of the total assets of the Company. The bill
discounti ng portf olio reduced from Rs.54Mn to Rs.28Mn
at end of FY10/11. This is in line with the Company policy
to reduce exposure to this sector. The term loan portf olio
marginally reduced to Rs.426Mn at end of the year from
Rs.438Mn at end of previous year.
When the group balance sheet is considered, the total
assets have increased to Rs.3,884Mn from Rs.3,495Mn,
an increase of Rs.389Mn (11%). The group assets include
the Subsidiary Companies - People’s Merchant Finance
Company Ltd and PMB Financial Services Ltd. The fi nance
company was disposed in FY 2011/12 in May 2011.
Borrowings
Borrowings from banks, corporate enti ti es and individuals
increased to Rs 3,067Mn at end of FY 10/11 from Rs.2,
255Mn as at end of previous year, an increase of Rs.812Mn
(36%). The total borrowings increased to 6.5 ti mes the
equity of the company as at 31.03.2011 from 3.3 ti mes at
end of the previous fi nancial year. The reason for increase
in multi ple is due to high losses incurred by the Company
due to charging all dues in respect of the subsidiary
Company PMBFS. The total equity of the Company reduced
to Rs.471Mn at end of the fi nancial year from Rs.674Mn
at end of previous year. It should also be noted that with
the disposal of the subsidiary Company PMF in May 2011
in FY 2011/12 a profi t of Rs.138Mn was made to off set a
major percentage of the loss in FY 2010/11.
The company raised Rs.1.8Bn during the fi nancial year to
augment expanding lending acti vates and for sett lement
of loan maturiti es/repayments. This is commendable
considering the high leverage, ti ght liquidity and
performance of the Company due to adverse eff ects of
the subsidiary Company PMBFS. The Company maturity
analysis shows a period mismatch with regard to assets
and liabiliti es. This is mainly due to uti lizing short term
borrowings for lending and investment purposes. The
company intends to recti fy this matt er by raising long term
funds to reduce period mismatches in funding structure.
Aft er disposal of the fi nance Company the positi on
improved in May 2011.
Rs. Mn
Lease and HP por�olio at the end of financial year
0
500
1,000
1,500
2,000
2,500
‘11‘10‘09‘08‘07
Rs Mn
Annual opera�ng profit before provisions
0
20
40
60
80
100
120
‘11‘10‘09‘08‘07
2727
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Financial Review Contd...
Provision for loan losses &
Non - Performing Loans (NPL’S)
The Companies Non-Performing advances marginally
decreased to Rs.668Mn at end of FY 10/11 from Rs.697Mn
at end of FY 09/10, a decrease of 4% during the year. The
Company policy on provisions is more stringent than the
minimum sti pulated by the Central Bank and provisions
commences when advances reach arrears of 3 months.
Non-Performing advances within the 3-6 months category
amounts to Rs.200Mn. We are confi dent that this
category can be regularized with closer supervision in the
current year. When this amount is excluded, NPL’s over 6
months amount to Rs.468Mn, which is 17.3% (FY 09/10
19.7%) over the total lending portf olio. The Company is
aggressively following up the enti re non performing loan
portf olio to bring NPL positi on within acceptable levels. A
special team has studied these and separated into various
categories depending on a case by case basis. More details
have been provided in Trade Finance acti viti es under the
business review.
The specifi c provisions made at the year-end
amountsRs.160Mn compared with Rs.110Mn at end of
the previous year, which is an increase of Rs.50Mn (44%).
Specifi c provisions for NPL’s amount to 24% at year-end,
compared to 16% at previous year end. Further, General
Provisions at fi nancial year-end amount to Rs.5Mn.
Group fi nancial review
PMB Financial Services Ltd. (PMBFS)
The Company was set up in March 2009 to take over
selected assets and liabiliti es of ABC Credit Card Company
Ltd. The Company did not carry out credit card operati ons
due to not being able to register the business under the
new credit card legislati on. It owned a prime property
situated at Nawam Mawatha, Colombo 02.
Operati ons
This Company had security deposits which originated
from the acquired Company. Since the Company did
not have approval from the Central Bank of Sri Lanka
(“CBSL”) for such business, the Board decided to cease
that part of the business of the Company with eff ect from
31st December 2010. During the year the Company was
restructured and some of the employees were absorbed
to the parent Company and others were compensated
with a reti rement scheme. At present there are no
employees in the Company. Further, the main asset of
property was transferred to the holding Company at a
value of Rs.452Mn in considerati on of taking over of
deposit liabiliti es of Rs.233.2Mn held by the Company,
bank loans payable of Rs.38.2Mn and to provide a credit
to PMBFS Current account for the amount of Rs. 180.6Mn
as part sett lement of money advanced by PMP to PMBFS
in the past.
Losses
The loss for the year amounted to Rs.52.6Mn compared
to the loss of Rs.130.3Mn in the previous year. The main
reason for the loss is the high fi nancial charges on account
of borrowings uti lized to fund assets of the Company,
mainly the property with a value of Rs.452Mn. The total
interest cost for the year amounted to Rs.48.6Mn. With
the transfer of the property to PMP in December 2010
along with all public liabiliti es, no fi nancial charges will
arise in future for current operati ons. Presently the
main focus of the business is collecti on of outstanding
credit card receivables. During FY 2010/11 the Company
Rs Mn
Borrowings at the end of the financial year
0
500
1,000
1,500
2,000
2,500
3,000
‘11‘10‘09‘08‘07
2828
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
collected Rs.22Mn from customers on account of credit
card outstanding - comprising credit used, interest and
other charges. In FY 2009/10 the Company was able to
collect Rs.66Mn. As these are long outstanding credit, the
Company has made full provision in fi nancial statements
for all receivables and all future collecti ons could be
recognized as income in fi nancial statements. No further
future losses are expected from this Company.
Balance Sheet
Total assets of the Company reduced from Rs.479Mn at
end of FY 2009/10 to Rs.10Mn. at end of FY 2010/11.
This is aft er the transfer of major assets and liabiliti es
to the parent Company. Further, the holding company
capitalized an amount of Rs.152Mn due from PMBFS
to stated capital during the year. The stated capital was
increased to Rs.175Mn aft er capitalizati on. The amount
due to the parent Company aft er capitalizati on amounts
to Rs.25Mn. The cumulati ve loss as at end of the year was
Rs.195Mn and the equity of Rs.175Mn is fully eroded. The
total equity as at 31st March 2011 is a negati ve fi gure of
Rs.20Mn.
People’s Merchant Finance Company Limited (PMF)
The Company is a registered fi nance Company with the
Central Bank of Sri Lanka. The principle acti viti es of the
Company are leasing, hire purchase, trade fi nance and
acceptance of deposits. The Company was renamed
as People’s Merchant Finance Company Limited aft er
obtaining the controlling interest (Formerly Silvereen
Finance Company Ltd.) PMP held 99.99% of shares in PMF.
This Company was disposed in May 2011 with a capital
gain to improve cash fl ows to the parent Company despite
losing the access to mobilize public deposits through the
subsidiary.
The summarized fi nancial informati on of the Company for
the FY 2010/11 is listed below.
Interest income - Rs.43Mn (FY 09/10 Rs.48Mn)
Interest expenses - Rs.10Mn (FY 09/10 Rs.14Mn)
Net interest income - Rs.33Mn (FY 09/10 Rs.34Mn)
Profi t before income tax - Rs.20.6Mn (FY 09/10 Rs.8.7Mn)
Profi t aft er income tax - Rs.9.4Mn (FY 09/10 Rs.3.1Mn)
Total assets - Rs.379Mn (FY 09/10 Rs.289Mn)
Deposits - Rs.137Mn (FY 09/10 Rs.63Mn)
Equity - Rs.217Mn (FY 09/10 Rs.208Mn)
Due to pursuing the intended merger of People’ Merchant
PLC and PMF, new management persons were not
appointed at the beginning of the fi nancial year to carry
out business acti viti es at PMF. As a result limited lending
operati ons were done with more focus on recovery and
consolidati on of operati ons. However, aft er deciding not
to merge the two enti ti es, in the second half of the year
a senior person was appointed to manage business aff airs
at head offi ce in Kandy. This resulted in reduced revenues
in the FY 10/11 compared to industry norms. Despite this
PMF Profi t before and aft er tax increased as indicated
above. This was possible due to making full provisions
for all doubtf ul debts in the previous year and disposing
a large fl eet of old repossessed vehicle stock through an
aucti on.
The total assets of the Company increased to Rs.379Mn.
The Company advances have reached Rs.220Mn at end
of FY 2010/11 from Rs.151Mn at end of FY 2009/10, an
increase of 45%. This is despite not maximizing the full
business potenti al as per explanati ons made above. The
Company liquidity positi on is very favorable, due to raising
funds through a deposit campaign carried out towards the
end of the year. PMF is in a good positi on to carry out an
accelerated growth strategy in the future. Deposits of the
Company more than doubled from Rs.63Mn at end of FY
2009/10 to Rs.137Mn at end of FY 2010/11.
The Company was disposed in May 2011 by divesti ng the
enti re shareholding.
Financial Review Contd...
2929
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Corporate Governance
The global fi nancial crisis in the recent years exposed the weaknesses in the fi nancial sector’s corporate governance system and in parti cular in the risk management policies and procedures. The Central Bank of Sri Lanka took several initi ati ves to prevent and miti gate future systemati c risk.
At People’s Merchant PLC we value the importance of a good corporate governance system for the eff ecti ve management and governance of the company - and understand that it should not be limited to compliance with Corporate Governance codes.
Peoples Merchant as a good corporate citi zen takes all initi ati ves in all its operati ons in an ethical and socially acceptable manner taking into account all the interests of its’ stake holders - as a priority. The company considers corporate governance as an essenti al tool to achieve the desired objecti ves of eff ecti ve market operati ons and the creati on of wealth for shareholders The Board provides corporate leadership to the management and provides the necessary directi on for bett er performance. People’s Merchant closely monitors the corporate governance guidelines issued by the Central Bank of Sri Lanka and
other regulatory bodies and takes ti mely steps to comply with those requirements.
Corporate governance can be defi ned as “the process by which corporate enti ti es are governed”. It is mainly concerned with the manner in which the authority is exercised over the management and directi on of enti ty and the supervision of executi ve acti ons and accountability to owners and others. The organizati ons management structure, internal controls, policies and procedures are in place in order to comply with the objecti ves of corporate governance. When ever necessary the company takes acti on to update those systems in order to comply with the changing requirements.
Recently the Central Bank of Sri Lanka issued a new directi on cited as the Finance Leasing (Corporate Governance) Directi on No.4 of 2009, which applies to every registered fi nance leasing establishment with eff ect from 01 January 2010. Given below are the corporate governance measures and the appropriate compliance initi ati ves taken by our company in order to comply with those requirements.
Corporate governance rule Company’s compliance of rule
01. Board of directors A single board is properly consti tuted of executi ve and non executi ve directors
02. Independent directors Two out of six non executi ve directors are independent
03. Disclosures relati ng to directors
- Compositi on Executi ve and non executi ve directors and their independence
- Functi ons Segregati on of functi ons of Chairman and CEO
- Disclosure in the annual report Directors aff airs disclosed as required
04. Audit Committ ee
- Compositi on Consist of 03 non executi ve directors as at 31st March 2011
- Functi ons Audit functi ons are sti pulated by board
- Disclosure in the annual report Functi ons disclosed under “Audit Committ ee”
05. Remunerati on Committ ee
- Compositi on Consist of 03 non executi ve directors as at 31st March 2011
- Functi ons Committ ee functi ons are sti pulated by board
- Disclosure in the annual report Functi ons disclosed under “Remunerati on Committ ee”
06. Rights of shareholders Board eff ecti vely communicates with the share holders
Corporate governance rules practi ced by the company and its compliances
3030
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
The Board of DirectorsA single board properly consti tuted of executi ve and non-executi ve directors provide guidance and leadership for the company. The board is appointed by its shareholders and is collecti vely responsible for the eff ecti ve business conti nuati on and performance of the company. Board provides entrepreneurial leadership, direct and controls the operati ons of the bank within a prudent and eff ecti ve
Table I - Compositi on of the Board
Director (name) Positi on held on the board
Nature of appointment(ex./non ex./
Nominee)
Date of appointment
Panditharatne Appuhamilage Ajith Panditharatne
Chairman Non-executi ve 3rd June 2010
Anura Ravindra Wickremasinghe MD/CEO Executi ve 1st July 2009, resigned w.e.f 30th June 2011
Roger Johnston Director Non-executi ve 05th January 2001, resigned w.e.f 5th July 2011
Mahinda Padmasiri Haradasa (alternate to Roger Johnston)
Director Non-executi ve,Independent
27th July 2006, resigned w.e.f 5th July 2011
Barana Seneviratne Yapa Director Non-executi ve,Independent
24th September 2004
Waduthantri Dharshan Kapila Jayawardena Director Non-executi ve 28th November 2007, resigned w.e.f 10th June 2011
Jehan P. Amaratunga Director Non-executi ve 29th October 2010
Ahamed Sabry Ibrahim Director Non-executi ve 25th June 2009
Table II - Directorship changes for the period 1st April 2010 to 31st March 2011
Director (name) Positi on held on the board(chairman/MD/director)
Nature of appointment(ex./non ex./Nominee)
Date of appointment
Karunadasa Lorensu Hewage Chairman Non-executi ve 10th August 2009,resigned w.e.f. 3rd June 2010
Pemasiri Vitana Pathirana Director Non-executi ve 25th June 2009,resigned w.e.f. 6th October 2010
Corporate Governance Contd...
The brief resumes of directors are given in the annual report under Board of Directors on pages 10 to 12. Appointments to the Board, names and their resumes are informed to the stock exchange in order to make this change available to shareholders. The same is provided to the Central bank of Sri Lanka as well.
internal control framework with conti nuous monitoring and feedback communicati on system.
The board consist of Chairman, MD/CEO and fi ve directors those who are all non-executi ve directors. The compositi on of the board and the directorship changes during the year are given in the table I and II.
3131
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Directors are appointed at the AGM and resignati ons that occur during the year are fi lled by the remaining directors collecti vely aft er taking in to considerati on all the directors views at the board meeti ngs. The board shall appoint the chairman and the CEO and defi ne and approve the functi ons and responsibiliti es for them.
Duti es of Chairman and CEOThe roles of Chairman and CEO shall be separated and People’s Merchant ensures that these roles are not performed by the same individual. There is a clear division of responsibiliti es, The chairman is a non- executi ve director.
The chairman is responsible for leadership of the board, and conduct of the board’s functi ons. Under this, the primary responsibility of the chairman is the preparati on of the agenda for each board meeti ng, and this functi on may be delegated to company secretary. The Chairman provides leadership to the board; ensures that the board works eff ecti vely and discharges its responsibiliti es and ensures that all key issues are discussed by the board in a ti mely manner. The Chairman takes the lead to ensure
Table III - Board Meeti ngs (with special meeti ng if any held during the period)
Date of Meeti ng
M.P.Haradasa (alternate to Roger Johnston)
B.S.Yapa W.D.K.Jayawardena
P.V.Pathirana
A.S. Ibrahim
A.R.Wickremasinghe
K. L. Hewage
P. A. A.Panditharatne
J. P.Amaratunga
22-4-10 A P P P P P P ND ND
30-4-10 A P P A A P P ND ND
4-5-10 A P P A P P P ND ND
4-6-10 A P P A P P CD P ND
11-6-10 A P P P P P CD P ND
16-6-10 P P P P P A CD P ND
2-7-10 P P P P P P CD P ND
27-7-10 A P P A P P CD P ND
30-8-10 P P P P P P CD P ND
30-9-10 P P P P P P CD P ND
29-10-10 A P P CD P P CD P P
26-11-10 A P P CD P P CD P P
30-12-10 P P A CD P P CD P A
27-1-11 A P P CD P P CD P P
24-2-11 P P P CD P P CD P P
21-3-11 A P P CD P P CD P P
28-3-11 P P P CD P P CD P P
P - Present A - Absent CD - Ceased to be a Director ND - Was not a director then
Corporate Governance Contd...
that the board acts in the best interests of the company and encourages them to make their full commitment to the board’s aff airs.
The chairman takes the initi ati ves to maintain acti ve and eff ecti ve communicati on with shareholders and that the views of shareholders are communicated to the board.
Board Meeti ngsThe People’s Merchant board conti nue to evaluate and monitor its performance on a monthly basis with more focus and emphasis on group performance as well. This ensures eff ecti ve discharge of duti es and responsibiliti es owed to the company. This complies with the Corporate Governance Directi on No.04 of 2009, issued by the Central bank of Sri Lanka. Informati on is provided to the board with suffi cient ti me for them to review and call for additi onal informati on. This enhances the performance measurement of operati ons and internal controls. These meeti ngs also focus on risk face by the bank and risk miti gati on strategies adapted on a regular basis.
The dates of the board meeti ngs held and the parti cipated directors are given in the table III,
3232
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Corporate Governance Contd...
Audit Committ eeAs a good corporate governance practi ce which required by the corporate governance rules, Peoples Merchant appointed an audit committ ee to review the performance and monitor the operati ons of the company on contenti ous basis. The audit committ ee was established by the board in a formal and transparent manner and the board ensures the maintenance of independence of the committ ee. It consist of three directors all of whom are non-executi ve. Two out of the three committ ee members are independent. The Chairman of the audit committ ee is a non executi ve, independent director appointed by the board, who possesses qualifi cati ons and experience over 30 years in accountancy.
During the year under review three audit committ ee meeti ngs were held to evaluate the operati ons of lease, hire purchase, loans, real estate and branch operati ons. They make their recommendati ons based on the audit fi ndings with the intenti on of improving internal controls, assessment of risk and review of the feed back and management response towards their recommendati ons.
The names of the members and the dates of meeti ng held during the year are given in table IV
Table IV - Audit Committ ee
Director (name) 30-9-2010 22-2-2011 30-3-2011
B.S. Yapa (Chairman)- Independent, non executi ve Present Present Present
M.P. Haradasa - Independent, non executi ve Present Present Present
A.S. Ibrahim - Non executi ve Absent Present Present
The main functi ons of the audit committ ee are;Review internal audits and maintain an appropriate • relati onship with external auditors
Keeping under review the scope and results of the • audit, its eff ecti veness and the independence and objecti vity of the auditors
Dealing clearly with its authority and duti es with • terms of reference
Assist board in•
- The Preparati on, presentati on and adequacy of disclosures in the fi nancial statements and review of compliance with related regulati ons
- To ensure that the company’s internal controls and risk management procedures are adequate to meet the standards
- Assessing the company’s ability to conti nue as a going concern in the foreseeable future
- Conti nue review of independence and perform-ance of company’s external auditors
To make recommendati ons to the board pertaining • to appointment, re-appointment and removal of external auditors and to approve the remunerati ons and terms of engagement of external auditors,
Discussion of the audit plan, key audit issues and • their resoluti ons and management response and the company annual audit
Remunerati on Committ eeThe Remunerati on Committ ee consists of three directors all of whom are non executi ve. Two out of the three committ ee members are independent. The Remunerati on Committ ee was established by the board on a formal and transparent manner and board ensures the maintenance of independence. The Chairman of the Committ ee is a non-executi ve director.
The names of the members and the date of meeti ng held in the fi nancial year are given in table V
Table V
Director (name) 15th February 2011
Mr. W.D.K. Jayawardena (Chairman) Non executi ve director
Present
Mr. B.S. Yapa - Non executi ve Independent director
Present
Mr. M.P. Haradasa - Non executi ve Independent director
Present
The main functi ons of Remunerati on Committ ee are;Developing policy on executi ve remunerati on and • packages for directors and to ensure that no director is involved in deciding his own remunerati on
3333
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Corporate Governance Contd...
Recommendati on to the board on the company’s • framework for remunerati on packages for executi ve directors and senior management
To seek appropriate professional advice as and when • it is required as authorized by the board
People’s Merchant Board consists of six Non Executi ve Directors and none of them were paid a monthly remunerati on. The committ ee met on one occasion during the fi nancial year, i.e. on February 15th 2011. Directors allowances paid during the period are disclosed under Note 14.
Rule No. Disclosures regarding Board of Directors Compliance status
Details
i. 7.10.1(a) The correct number of executi ve /non-executi ve directors
Compliant Six out of seven directors are non executi ve directors. The chairman is a non- executi ve director. MD/CEO is an executi ve director
ii. 7.10.2(a) The correct number of Independent Non-Executi ve Directors.
Compliant Two out of six non-executi ve directors are Independent directors
iii. 7.10.2(b) Whether the non-executi ve directors submitt ed a declarati on annually of his/her independence or non-independence to the Board of Directors
Compliant The board obtained declarati on from the non-executi ve directors
iv. 7.10.3(a) Confi rmed that the board of directors made an annual determinati on as to the independence or non-independence of each non-executi ve director based on the declarati on menti oned-above and other informati on available to the board and states the names of non-executi ve directors
Compliant
v. 7.10.3(b) If the Director does not qualify as ‘Independent’, but if the board taking into account all the circumstances is of their opinion that the non-executi ve director is ‘Independent’, the board has specifi ed, in the Annual Report, the qualifi cati on not met under Rule 7.10 of the CSE Listi ng Rules and the basis for determining the director to be ‘Independent’ - Rule 7.10.3 (b)
Compliant
vi. 7.10.3(c) Published a brief resume in the Annual Report, of each director of the board, which includes informati on on the nature of his/her experti se
Compliant Brief resume of each director are provided in pages 10 to 12
Table VI Compliance with Corporate Governance Rules - CSE requirements
In additi on to the new directi on issued by Central Bank of Sri Lanka as the Finance Leasing (Corporate Governance) Directi on No.4 of 2009, which applies to registered fi nance leasing establishment with eff ect from 01 January 2010, People’s Merchant has already followed and complied with the corporate governing rules issued by the CSE.
Table VI below provides the summary of PMP compliance with Central Bank of Sri Lanka / Securiti es and Exchange Control (SEC), Corporate Governance requirements.
3434
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Corporate Governance Contd...
Rule No. Disclosures regarding Remunerati on Committ ee Compliance status
Details
vii. 7.10.5(a) The number of Independent non-executi ve directors in the Remunerati on Committ ee
Compliant Refer page 33
viii. 7.10.5(a) Whether a separate Remunerati on Committ ee was formed or whether listed parent’s remunerati on committ ee used
Compliant Remunerati on committ ee was formed
ix. 7.10.5(a) Whether the Chairman of the Committ ee is a non-executi ve director
Compliant Chairman is a non-executi ve director
x. 7.10.5(b) Disclosed the functi ons of the Remunerati on Committ ee
Compliant Provided in page 33 under Remunerati on committ ee
xi. 7.10.5(c) Names of directors comprising the Remunerati on Committ ee (where the parent company’s Remunerati on Committ ee qualifi es to functi on as the listed company’s Remunerati on Committ ee, a statement in the Annual Report to this eff ect and disclosed the names of the directors
Compliant Refer page 33
xii. 7.10.5(c) The Annual Report contained a statement on the Remunerati on Policy
Compliant Refer page 33
xiii. 7.10.5(c) The aggregate remunerati on paid to executi ve and non-executi ve directors in the Annual Report
Compliant Provided in page 62 Note .14
Rule No. Contents under Audit Committ ee Report Compliance Status
Details
xiv. 7.10.6(a) The number of independent non-executi ve directors in the Audit committ ee
Compliant Two out of three non executi ve directors are independent
xv. 7.10.6(a) Whether the Chairman of the Audit Committ ee is a non-executi ve director
Compliant Chairman is a non executi ve and independent director
xvi. 7.10.6(a) Whether the Chairman or 1 member of the Audit Committ ee is a member of a recognized professional accounti ng body
Compliant Chairman is a member of a professional accounti ng body
xvii. 7.10.6(a) Whether the CEO and CFO att ended Audit Committ ee Meeti ngs, Unless otherwise determined by the Audit Committ ee
Compliant
xviii. 7.10.6(b) Confi rmed that the functi ons of the Audit Committ ee as being in accordance with Rule 7.10.6(b)
Compliant Audit committ ee functi ons are sti pulated in page 33
xix. 7.10.6(c) Whether a separate Audit Committ ee was formed or whether listed parent’s Audit Committ ee was used
Compliant Separate Audit Committ ee was formed
xx. 7.10.6(c) Names of directors comprising the Audit Committ ee (where the parent company’s Audit Committ ee qualifi es to functi on as the listed company’s Audit committ ee, a statement to this eff ect and disclosed the names of the director
Compliant Refer page 33
xxi. 7.10.6(c) The basis for determining external auditors as being independent
Compliant Disclosed in Independent Auditors Report on page 48
3535
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Risk Management and Internal Control
‘’Risk means being exposed to the possibility of a bad outcome . . . Risk management means taking deliberate acti on to shift the odds in your favour - increasing the odds of good outcomes and decreasing the odds of bad outcomes.’’
Risk management is about following a deliberate set of acti ons designed to identi fy, quanti fy, manage, and monitor events or acti ons that could lead to a fi nancial loss. This implies that risk management is an acti ve process requiring commitment and focus. But due to non availability of perfect informati on, risk management involves a large degree of judgment and assumpti ons about the future.
Today we live in highly uncertain ti mes. Competi ti ve markets, globalizati on, booms, busts, recessions, technological change, war, climati c change, and so on. All these present risks to a varying degree and all these have a direct or indirect impact our business . As a result Risk Management becomes an important area in today’s business.
Risk is associated with two factors - opportuniti es on the positi ve side and threats on the negati ve side. Peoples Merchant’s strategy is to convert all these business risks into opportuniti es and minimize the threats. Peoples Merchant believes that in order to increase its business portf olio it has to properly assess and control the risks associated with the business. Risk may be a driver of strategic directi on of the company but it can be a cause of uncertainty. But at Peoples Merchant, the overall level of risk is conti nuously assessed and the risk management process is embedded into the processes and acti viti es of the company. This enables compliance, and ti mely decision making.
Risk ManagementRisk management is a conti nuous process that is followed by a set of procedures and principles which have been identi fi ed as the most viable to the predictable situati ons of the company. Past experiences are documented and analysed and these are helpful in assessing risk for future business opportuniti es and bett er controls.
The Board of directors by giving a corporate leadership takes the initi ati ve to give eff ect to these risk management principles and controls at People’s Merchant. These are well supported by the structure of the company. Risk management is an integral part of the company which is supported at all levels of the company.
Risk management is a central part of the strategic management process of the company. In order to understand the risk, it needs to assess and document the risk. A step by step process is followed for this purpose by the company.
Step 01 - Identi fy and document the risk associated with business operati ons of the company. The associated risk of operati ons are measure in terms of the likelihood or probability and impact or consequence of occurrences using the risk matrix.
Step 02 - List the likelihood of the risk occurring and the impact it could cause to the company.
Step 03 - List what arrangements the company currently have in place to prevent or reduce the likelihood of the risk occurring.
Step 04 - List what arrangements that could be put in place to prevent or reduce the risk on the company.
Step 05 - Using the informati on gathered a likelihood score is assigned to each risk with the pre-determined measures and plot them in the risk matrix.
High ImpactLow Likelihood
High ImpactHigh Likelihood
Low ImpactLow Likelihood
Low ImpactHigh Likelihood
Increasing Likelihood Increasing LikelihoodStep 06 - Rank them accordingly to identi fy high impact and high likelihood to prioriti ze them in order to take immediate acti ons.
The Risk management strategy of the company is as follows; A top management commitment headed by the Board and the management, followed by internal audit committ ee and an asset and Liabiliti es committ ee. The risk culture associated with all acti viti es and operati ons of the company is being created. All members of the staff have recognized the importance of the risk culture and the level of risk the company is ready to accept. All key decisions are taken aft er analyzing the risk factors and wherever possible collecti ve decisions are taken.
Internal controlsThe company identi fi es the importance of having bett er internal controls to achieve desired objecti ves of the
Incr
easi
ng
impa
ct
3636
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Risk Management and Internal Control Contd...
company at minimal risk. The internal controls are part of the risk management strategy of the company and proper initi ati ves been taken where ever possible to place proper control mechanisms throughout the operati ons of the company. These controls are being reviewed at board meeti ngs and at management meeti ngs on a conti nuous basis by the Board and the senior management. Appropriate introducti ons, changes or amendments been taken to strengthen these internal controls as required regularly.
In order to comply with Corporate Governance require-ments of internal controls, the internal audit department and the audit committ ee plays a vital role. Internal audits are carried out during the year in order to review and ap-praise the adequacy adaptati ons and weaknesses of inter-nal operati onal controls of the company. The internal con-trol system of the company ensures that the total fi nancial controls of the company are eff ecti ve and the operati ons are in compliance with laws and regulati ons.
The company considers shareholder’s assets as a top priority of the board and the management. The Internal controls ensures the eff ecti ve adherence to internal policies of the company, safeguarding of assets, preventi on and detecti on of fraud and proper and ti mely preparati on of reliable fi nancial informati on to its stakeholders.
Risk categoriesRisk is categorized by identi fying the similariti es faced in the diff erent level of operati ons. The diff erent risk categories identi fi ed are; Financial, Market, Credit, Business or Operati onal, Interest rate, IT, Legal and Systemati c.
Each category of risk been addressed separately with the common framework for organizati on wide risk management using the risk matrix to assess and quanti fy associate risk. This gives the management more confi dence and easy framework to manage risk which is relevant to their scope of work and address them through separate directi ves.
Regulatory bodies have strict standards to measure, report and disclose risk exposures and the risk management strategies of the company. The following are the measures that the company has taken with regard to these requirements.
Business or operati onal riskThis is the risk that relates to the acti viti es carried out within the company arising from structure, systems, people, services or processes. Business or operati onal risk includes business interrupti on, errors or omissions by employees, failures of IT systems, frauds and loss of
key employees. Operati onal risks arise as a result of inadequate or failures in internal control processes, people and system within the control of the company as well as from exposures to unfavorable external environment which is beyond company’s control.
Business and operati onal risks of Peoples Merchant is reduced by introducing well defi ned internal controls. Peoples Merchant focuses on the existi ng customer base to enhance market share through their contacts by providing excellent customer oriented services. 2010 was a favorable year for business in general; however the company’s profi tability was aff ected by the operati ons of credit card company due to providing 100% provisions for receivables. But due to company’s proacti ve risk management strategy, the eff ect was minimized with sale of the subsidiary, People’s Merchant Finance Company Limited, in the fi rst quarter of FY 2011/12.
The company has laid down procedures with regard to safeguarding legal security documentati on with regard to lease, hire purchase and other trade fi nance faciliti es. These are fi led in fi re proof cabinets with restricted access to security rooms with a record of movements of fi les.
Peoples Merchant’s operati onal risk management strategy includes assessment of market changes on a monthly basis or more frequently if needed. The ALCO committ ee evaluates the company assets, liabiliti es and set company borrowing and lending rates to be in line with market rates. The Credit committ ee monitors and evaluates the procedures when granti ng advances on a conti nuous basis. Senior Management parti cipates and reports to the board for decision making and follow up purposes.
Financial riskThis relates to the fi nancial operati ons of the company. Credit risk, liquidity risk, currency risk, Interest rate risk, cash fl ow risk are some of fi nancial risks associated with Peoples Merchant.
As a risk miti gati on strategy, Peoples Merchant follows the matching of fi nancial risk through diff erent ways and methods such as fi xed interest rates against fl oati ng interest rates, short term borrowings against long term borrowings, Insurance policies, etc.
Liquidity riskThis risk occurs when the company is unable to meet its credit obligati ons in ti me without incurring unacceptable losses. Liquidity is managed by categorizing assets and liabiliti es of the company into various ti me bands of maturiti es and assessing any short falls, along with fund requirements as per forecast lending /investments. If there
3737
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Risk Management and Internal Control Contd...
are any gaps arrangements will be made with fi nancial insti tuti ons for such requirements well in advance. Also approved credit lines for short term use are reserved for uti lizati on in case of unforeseen requirements that may arise.
Credit riskThis arises due to borrowers not being able to sett le loan obligati ons either capital or interest as per the terms agreed with the lender on scheduled dates. The Company identi fi ed this as a high risk area especially in the uncertain and volati le economic conditi ons prevailed during the last fi nancial year. This was identi fi ed and an acti on plan was put into place to miti gate the risk.
Peoples Merchant believes that one of the reasons for borrower defaults was the adverse situati on that prevailed. The situati on has since improved during the latt er part of the fi nancial year.
The company has developed procedures which includes comprehensive credit appraisals for diff erent risk levels, higher approvals and assessment by a credit committ ee with increasing loan amounts, obtaining collateral where possible, setti ng exposure limits for borrowers and industry sectors, appraisals of clients through CRIB reporti ng system, regular review of clients fallen due in to the overdue category and closely following them up, updati ng staff on new requirements and directi ons issued by Central bank of Sri Lanka.
Interest rate riskThis can arise due to changes in the interest rates prevailing in the market. Adverse movements and volati le rate fl uctuati ons can aff ect the company’s funding and such movements always aff ect the company’s lending, borrowings and investments.
Peoples Merchant always uses natural hedging techniques to neutralize the worst eff ects and to maintain a balance in fi xed and variable interest rates. Fixed to variable terms of the borrowing of the company is about 65% to 35%. The Assets and Liabiliti es Committ ee (ALCO) monitors and controls market risks of interest rate and liquidity risk. The committ ee meets once a month and decides on borrowing/ lending rates by taking market conditi ons in to account. Also due considerati on is given to the maturity patt ern of assets and liabiliti es to reduce period mismatches.
IT riskThis encompasses the full spectrum of risks that may aff ect or result from IT operati ons, external natural disasters,
internal processing and loss of intellectual property, supervisory of legal controls.
The Company has taken steps to manage possible IT risks such as informati on security risk, availability of system risk performance risk and compliance risk. The Informati on Technology Policy has been implemented . A Disaster Recovery site have been implemented to enable the online real ti me informati on replicati on.
- Security risk This arises from the informati on being assessed,
manipulated or used by unauthorized parti es. This risk is controlled by a properly administrated user name and password administrated with audit check list to review the data entry. These controls avoid unauthorized personnel access to the data base, and fi rewall security and anti virus security to safeguard our IT system.
- Availability and Performance Risk This arises when informati on or applicati on are made
inaccessible by processes, people or system failures, natural disasters, and under performing systems and applicati ons which will diminish business producti vity or value. People’s Merchant has an agreement with SLT to provide a 24 hour network connecti on of IPVPN to connect branches with the head offi ce. Also an uninterrupted power supply is in place to avoid sudden power failures and data losses. The company has a business conti nuity plan to ensure data security and conti nuity of the business operati ons. These links are obtained by another communicati on provider to ensure conti nuity.
- Compliance Risk Compliance risk is the risk that informati on handling or
processing will fail to meet regulatory, IT or business policy requirements. This has been avoided by selecti ng the most suitable soft ware and partnering with reliable vendors in the market. New controls and procedure have been implemented in the business applicati on to ensure management of informati on accuracy.
Legal riskThis arises due to the potenti al loss from the uncertainty of legal proceedings, liti gati ons against the company, outcomes of potenti al legal proceedings for recovery of advances and any trends that may need to be considered in future agreements and contracts. Peoples Merchant has procedures in place for ensuring proper legal documentati on for all disbursements in order to ensure that the company can take appropriate legal acti on when necessary against defaluters. External consultati on is sought where and when necessary. The company ensures compliance with all legal requirements.
3838
Our
Tea
m -
Hea
d Offi
ce
Our
Tea
m -
Bran
ches
Financial Reports
Financial Calendar
Page No.Financial Calender 42Annual Report of the Board 43Director’s Responsibility for Financial Reporti ng 46Report of the Audit Committ ee 47Independent Auditor’s Report 48Income Statement 49Balance Sheet 50Statement of Changes in Equity 51Cash Flow Statement 52Notes to the Financial Statements 54
Interim Financial ReportsFirst Quarter to 30.06.2010 [Unaudited] 13th August 2010Second Quarter 30.09.2010 [Unaudited] 12th November 2010Third Quarter 31.12.2010 [Unaudited] 8th February 2011
Annual Report for the year ended 31.03.2011 23rd August 2011[Audited]
Meeti ngs27th Annual General Meeti ng 30th September 201028th Annual General Meeti ng 29th September 2011
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Annual Report of the Board
5. Taxati on Provision for taxati on has been computed at the
rates given in Note 17 to the Financial Statements.
6. Dividends The Directors have not recommended the
declarati on of divided for the fi nancial year ended 31st March 2011. (Nil per share for2009/10)
Group Company 2011 2010 2011 2010 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Loss before taxati on (63,842) (124,288) (215,320) (14,286) Income tax expenses 2,183 (11,716) 12,820 (6,123) Loss aft er taxati on (61,659) (136,004) (202,500) (20,409) Revenue reserve b/f (104,523) 42,234 23,005 54,014 Profi t/(Loss) available for appropriati on (166,182) (93,770) (179,495) 33,605 Appropriati ons Finance leasing reserve fund 685 153 - - 6% preference dividend 600 600 600 600 Ordinary dividend paid - 10,000 - 10,000 Revenue reserve c/f (167,467) (104,523) (180,095) 23,005
The Board of Directors have pleasure in presenti ng to the Shareholders their Report together with the audited fi nancial statements of People’s Merchant PLC (the Company) and the audited consolidated fi nancial statements of the Group for the year ended 31st March 2011.
People’s Merchant PLC is a public limited liability company incorporated in Sri Lanka on 26th January 1983, quoted in the Colombo Stock Exchange in July 1994, registered under Finance Leasing Act No. 56 of 2000 and re-registered as per the Companies Act No.07 of 2007 on 16th September 2008.
This Report was approved by the Directors at a meeti ng held on 23rd August 2011.
1. Principle Acti viti es The principal acti viti es of the Company are
Leasing, Hire Purchase, Trade Finance, Real Estate,
Investments, Pawning and Corporate Finance Services. There have been no signifi cant changes in business acti viti es of the Company or any of its subsidiaries during the year.
2. Review of operati ons The Chairman’s Statement and the Chief Executi ve
Offi cer’s Review of Operati ons on pages 5 to 9 in this Report, contain a detailed review of the operati ons which forms an integral part of this Report.
3. Financial Statements The Financial Statements of the Company comprises
the Balance Sheet, Statement of Income, Statement of Changes in Equity and Cash Flow statement together with the Accounti ng Policies and Notes to the Financial Statements for the year ended 31st March 2011 are set out in pages 49 to 83.
4. Summary of Financial Results For the year ended 31st March
4343
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Annual Report of the Board Contd...
7. Independent Auditor’s Report The Independent Auditor’s Report on the Financial
Statements is given on page 48.
8. Accounti ng Policies The accounti ng policies adopted in the preparati on
of the Financial Statements are given on pages 54 to 61 There have been no changes in the accounti ng policies adopted by the company or any of its subsidiaries during the year under review.
9. Statement of Directors’ Responsibiliti es The statement of Directors’ responsibility for the
Financial Statements is given in page 46.
10. Directorate The following were the directors of the Company
during the fi nancial year ended 31st March 2011:
Mr. P.A. Ajith Panditharatne - Chairman (appointed from 3rd June 2010)
Mr. Anura R. Wickramasinghe - MD/CEO (resigned w.e.f. 30th June 2011)
Mr. J. P. Amarathunga (appointed from 29th Oct. 2010)
Mr. A.S.Ibrahim Mr. W. D. K. Jayawardena (resigned w.e.f. 10th June
2011) Mr. B. S. Yapa Mr. R. Johnston (resigned w.e.f. 5th July 2011) Mr. M. P. Haradasa (Alternate to Mr. R.Johnston
resigned w.e.f. 5th July 2011) Mr. K.L Hewage (resigned w.e.f. 3rd June 2010) Mr. P.V. Pathirana (resigned w.e.f. 6th Oct. 2010)
Except for Mr. Anura R. Wickremasinghe, who was the Chief Executi ve Offi cer of the Company, the other six directors including the Chairman of the Company are Non-Executi ve Directors. Out of the said six Non-Executi ve Directors, two directors namely, Mr. B. S. Yapa and Mr. R. Johnston are Independent Directors.
Noti ce has been given pursuant to Secti on 211 of the Companies Act No. 07 of 2007 of the intenti on to propose an ordinary resoluti on, for re-appointment
of Mr. B.S. Yapa, notwithstanding the age limit of 70 years sti pulated by Secti on 210 of the Companies Act. Mr. B.S. Yapa is 70 years old.
11. Interest Register The Interest Register is maintained by the Company
as per the requirements in the Companies Act No.7 of 2007. All directors have made declarati ons as provided for in secti on 192 (2) of the Companies Act. The related entries were made during the year ended 31st March 2011.
11.1. Directors’ Emoluments The emoluments and other benefi ts made to
the Directors during the year are disclosed in Note 14 to the Financial Statements.
11.2. Director’s Interest in Contracts No Director has any material interest in any
transacti ons or proposed contract involving People’s Merchant PLC or any of its subsidiaries other than those disclosed in Note 48 to the fi nancial Statements.
11.3. Directors Interest in Shares Shareholding of Directors and their spouses and
dependent children are as follows:
No. of No. of Shares Shares as at as at 1st April 31st March 2010 2011Mr. P.A. Ajith Panditharatne - Chairman Nil NilMr. Anura R. Wickramasinghe 24,614 24,614Mr. J.P. Amarathunga Nil NilMr. W. D. K. Jayawardena Nil 100Mr. A.S.Ibrahim Nil NilMr. B. S. Yapa 8,324 8,324Mr. R. Johnston Nil NilMr. M. P. Haradasa Nil Nil
12. Donati ons Donati ons amounti ng Rs.530,000/- were made
during the year under review (Rs.239,000/- in 2009/10) by the company and Rs.740,000/- by the group (Rs.251,000/- in 2009/10)
4444
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Annual Report of the Board Contd...
13. Employees Number of employees as at 31st March 2011 was
123 (31st March 2010- 74)
14. Auditors Messrs. KPMG Ford, Rhodes, Thornton & Company
has expressed their willingness to conti nue in offi ce as Auditors of the Company. Accordingly, a resoluti on to re-appoint them as Auditors unti l the next Annual General Meeti ng at a remunerati on to be agreed upon with them by the Board and to audit the Financial Statements of the Company for the accounti ng period ending 31 March 2012 will be proposed at the Annual General Meeti ng.
The Audit Fee of Messrs. KPMG Ford, Rhodes, Thornton & Company was Rs.725,000/- for the year under review and they were paid Rs 477,000/- for other non-audit related services.
Based on the writt en representati on made by the Auditors to the Board, the Directors are sati sfi ed that the Auditors did not have any relati onship with or any interest in the Company or its subsidiaries other than that of an auditor.
15. Investments in Subsidiaries The details of investments made by the Company
are given in Note 30 to the Financial Statements.
16. Corporate Governance The Board of Directors of the Company in complying
with the Corporate Governance Directi on, No. 4 of 2009 issued to fi nance leasing companies by the Central Bank of Sri Lanka have placed great emphasis in conforming to the best corporate governance practi ces and procedures set out therein. The Board from ti me to ti me has introduced bett er systems and procedures for the internal controls and risk management of the Company and thereby improved accountability and transparency in the Company. The corporate governance report of the Company is given in pages 30 to 35.
17. There were no changes in the Company’s Stated Capital during the year under review. In terms of the Companies Act No. 07 of 2007, the Stated Capital of the Company was Rs. 644,399,000/- as at 31st March 2011. (Comprising of 37,500,000 ordinary shares and 1,000,000 preference shares)
18. Events subsequent to the Balance Sheet date There had not been any circumstances since
the Balance sheet date, which would require adjustments to or disclosed in the Notes to the Accounts, except those disclosed in Note 49 to the accounts.
For and on behalf of the Board of Directors
Mr. P.A. Ajith Panditharatne Mr. B.S.Yapa Chairman Director
Director Corporate Services (Private) Limited Secretaries
Colombo, Sri Lanka.23rd August 2011
4545
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Directors’ Responsibility For Financial Reporti ngFinancial statements for the year ended 31st March 2011 represented in this report are in conformity with Sri Lanka Accounti ng Standards and the Companies Act No. 07 of 2007. In preparing the above Financial Statements appropriate accounti ng policies have been selected and applied consistently. Where necessary, reasonable and prudent judgments and esti mates have been made in line with Accounti ng Standards.
The Directors are responsible for ensuring that the Company maintains suffi cient accounti ng records to disclose with reasonable accuracy the fi nancial positi on of the Company. They are also responsible for taking reasonable measures to safeguard the assets of the Company and in that context, to have proper regard to the establishment of appropriate systems of internal control with a view to preventi on and detecti on of fraud and other irregulariti es.
The Directors are of the opinion that Company has adequate resources to conti nue in operati on to adopt the going concern basis in preparing the Accounts.
The Company’s external Auditors KPMG Ford. Rhodes., Thornton & Company have examined the Financial statement made available by the Board of Directors together with all fi nancial records, related data, minutes of shareholders and Directors, meeti ngs and express their opinion in Auditors’ Report on page 48 of the Annual Report.
By order of the Board
People’s Merchant PLCCORPORATE SERVICES (PRIVATE) LIMITEDSecretaries
Colombo, Sri Lanka
23rd August 2011
4646
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Report of the Audit Committ ee
Compositi onThe Audit Committ ee appointed by and responsible to the Board of Directors comprise the following membersMr. B.S. Yapa - Chairman - Independent /Non Executi ve DirectorMr. M.P. Haradasa - Independent /Non Executi ve DirectorMr. A.S. Ibrahim - Non Executi ve DirectorThe Chairman Mr. B.S. Yapa is a fellow member of the Insti tute Of Chartered Accountants of Sri Lanka with over 31 years of experience in Accounti ng & Finance.
Meeti ngsThe Committ ee met three ti mes during the year under review. The CEO/ Group Managing Director, and the Chief Financial Offi cer att ended the meeti ngs by invitati on. Members of the management team were invited to parti cipate at the meeti ngs as and when required. Corporate Services Limited acted as secretaries to the Audit Committ ee. The proceedings of the Audit Committ ee were reported to the Board of Directors on a regular basis.
Role of the Committ eeThe main objecti ves of the Audit Committ ee is to assist the Board of Directors in fulfi lling its oversight responsibiliti es in the fi nancial reporti ng process, the system of internal controls and risk management , the independence and audit process of the external auditors ,and the process for monitoring compliance with laws and regulati ons .
Internal AuditAn In-house Internal Audit Department to carry out internal audit functi on was established, in additi on to the Internal Audit assignments carried out by Messrs Ernst & Young. The In-house Internal audit department mainly focuses on initi ati ng and improving policies and procedures of the business processes during the year under review, whilst outsourced internal auditors mainly focus with compliance with existi ng policies and procedures.
The internal auditors are responsible to review and report on the accuracy and integrity of the fi nancial statements, effi ciency of the internal control system and compliance with statutory and other regulati ons and the accounti ng and operati onal policies. Internal audit reports are regularly tabled at Audit committ ee meeti ngs. Control weaknesses highlighted in the internal audit reports are criti cally examined by the committ ee and follow up acti on taken by management on the audit recommendati ons are also reviewed. Internal Audit representati ves are present at audit committ ee meeti ngs during the discussion of their respecti ve reports.
External AuditDuring the year the Committ ee met with the Messrs KPMG Ford, Rhodes, Thomton & Co, External Auditors to discuss the Auditors management lett er pertaining to the previous year’s audit and Management’s response thereto. Discussions were also held in regard to the nature, scope and approach of the audit for 2010/11 prior to commencement of the audit. The Audit Committ ee has recommended to the Board of Directors that MessrsKPMG Ford, Rhodes, Thomton & Co is reappointed as Auditors for the fi nancial year ending 31st March 2011 subject to the approval of the shareholders at the Annual General Meeti ng.
ConclusionFinally, I would like to thank all the members who served on the audit committ ee during the year for their valuable contributi on to the deliberati ons of the committ ee.
B.S.YapaChairman AUDIT COMMITTEE
Colombo, Sri Lanka23rd August 2011
4747
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Independent Auditors’ Report
TO THE SHAREHOLDERS OF PEOPLE’S MERCHANT PLC (FORMERLY KNOWN AS PEOPLE’S MERCHANT BANK PLC)
Report on the Financial StatementsWe have audited the accompanying fi nancial statements of People’s Merchant PLC (“Company”), the consolidated fi nancial statements of the Company and its subsidiaries as at 31st March 2011 which comprise the balance sheet as at 31st March 2011, and the income statement, statement of changes in equity and cash fl ow statement for the year then ended, and a summary of signifi cant accounti ng policies and other explanatory notes as set out on pages 49 to 83 of this Annual Report.
Management’s Responsibility for the Financial StatementsManagement is responsible for the preparati on and fair presentati on of these fi nancial statements in accordance with Sri Lanka Accounti ng Standards. This responsibility includes: designing, implementi ng and maintaining internal control relevant to the preparati on and fair presentati on of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecti ng and applying appropriate accounti ng policies; and making accounti ng esti mates that are reasonable in the circumstances.
Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditi ng Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporti ng the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounti ng policies used and signifi cant esti mates made by management, as well as evaluati ng the overall fi nancial statement presentati on.
We have obtained all the informati on and explanati ons which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.
OpinionIn our opinion, so far as appears from our examinati on, the Company maintained proper accounti ng records for the year ended 31st March 2011 and the fi nancial statements give a true and fair view of the Company’s state of aff airs as at 31st March 2011 and its loss and cash fl ows for the year then ended in accordance with Sri Lanka Accounti ng Standards.
In our opinion, the consolidated fi nancial statements give a true and fair view of the state of aff airs as at 31st March 2011 and the loss and cash fl ows for the year then ended, in accordance with Sri Lanka Accounti ng Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.
Report on Other Legal and Regulatory RequirementsThese fi nancial statements also comply with the requirements of Secti ons 153(2) to 153(7) of the Companies Act No. 07 of 2007.
Chartered AccountantsColombo.23rd August 2011
4848
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Income Statement
For the year ended 31st March Group Company 2011 2010 2011 2010 Note Rs’000 Rs’000 Rs’000 Rs’000
Income 10 666,691 648,225 586,830 543,749
Interest income 11 597,767 544,336 550,215 501,796
Interest expense 12 (426,315) (508,622) (383,609) (387,053)
Net Interest Income 171,452 35,714 166,606 114,743
Other income 13 68,924 103,889 36,615 41,953
240,376 139,603 203,221 156,696
Less : Operati ng Expenses 14
Personnel expenses 77,069 74,595 63,789 50,874
Provision/(reversal) for staff reti rement benefi ts (798) 2,644 238 1,714
Premises, equipment & establishment expenses 46,471 53,634 34,965 25,796
Provision for bad & doubtf ul debts 15 65,015 33,549 49,727 34,506
Provision/(reversal) in change in value of
dealing securiti es 16 1,598 (4,730) 1,105 (4,824)
Provision for other receivable 13,719 2,715 186,386 14,715
Other overhead expenses 101,144 101,758 82,331 48,201
304,218 264,165 418,541 170,982
Loss from operati ons (63,842) (124,562) (215,320) (14,286)
Share of profi t of associates (net of income tax) - 274 - -
Loss before taxati on (63,842) (124,288) (215,320) (14,286)
Income tax expense 17 2,183 (11,716) 12,820 (6,123)
Loss for the year (61,659) (136,004) (202,500) (20,409)
Basic loss per share (Rs.) 18 (1.66) (4.31) (5.42) (0.66)
The notes to the Financial Statements from pages 54 to 83 form an integral part of these Financial Statements
4949
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Balance Sheet
Group CompanyAs at 31st March 2011 2010 2011 2010 Note Rs’000 Rs’000 Rs’000 Rs’000AssetsCash & short term funds 19 125,537 76,793 47,557 40,129Government securiti es 15,230 22,583 - -Dealing securiti es 20 21,446 26,935 8,274 4,821Investment securiti es 21 776 776 773 773Non current assets held for sale 22 - 451,577 - -Bills of exchange 23 28,286 54,375 28,286 54,375Loans & advances 24 457,809 478,022 425,946 437,917Finance leases 25 1,127,876 924,775 990,535 828,996Hire purchases 26 1,327,428 1,072,959 1,253,547 1,028,860Real estate inventories 27 58,738 110,790 56,168 108,220Deposits & receivables 28 121,286 138,077 112,128 122,431Related party receivables 29 - - 383 134,677Investment in subsidiary companies 30 - - 287,089 298,089Goodwill 31 82,595 82,595 - -Property, plant & equipment 32 513,426 50,621 494,182 16,911Intangible assets 33 3,273 4,676 2,963 2,852Total Assets 3,883,706 3,495,554 3,707,831 3,079,051
Liabiliti esBank overdraft 39,769 140,410 38,242 126,576Borrowings 34 3,065,813 2,110,129 2,929,063 2,028,679Interest accrued 35 129,934 99,081 126,758 85,069Debentures 36 100,000 100,000 100,000 100,000Dividends payable 37 1,276 805 1,276 805Reti rement benefi t obligati ons 38 8,026 9,344 7,096 6,932Deferred tax liabiliti es 39 13,710 27,653 7,712 26,896Other liabiliti es & provisions 40 41,159 461,854 27,131 30,441Total Liabiliti es 3,399,687 2,949,276 3,237,278 2,405,398
EquityStated capital 41 644,399 644,399 644,399 644,399Finance leasing reserve fund 7,087 6,402 6,249 6,249Revenue reserve (167,467) (104,523) (180,095) 23,005Total Equity 484,019 546,278 470,553 673,653Total Liabiliti es & Equity 3,883,706 3,495,554 3,707,831 3,079,051
The notes to the Financial Statements from pages 54 to 83 form an integral part of these Financial StatementsThe Financial Statements are in compliance with the requirements of Companies Act No. 7 of 2007
A. WickramatungeChief Financial Offi cer
Approved and signed for and on behalf of the Board of Directors
P.A. Ajith Panditharatne B.S.YapaChairman Director Colombo, Sri Lanka23rd August 2011
5050
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Statement of Changes in Equity
For the year ended 31st March 2011Group Stated Finance Leasing Revenue Total Capital Reserve Fund Reserves Rs’000 Rs’000 Rs’000 Rs’000Balance as at 01.04.2009 400,028 6,249 42,234 448,511Right Issue 250,000 - - 250,000Less : Right Issue expenses (5,629) - - (5,629)Loss for the year - - (136,004) (136,004)Preference dividend (6%) - - (600) (600)Ordinary dividend - - (10,000) (10,000)Transferred to fi nance leasing reserve fund - 153 (153) -
Balance as at 01.04.2010 644,399 6,402 (104,523) 546,278New share issues - - - -Less: Right issue expenses - - - -Loss for the year - - (61,659) (61,659)Preference dividend (6%) - - (600) (600)Ordinary dividends (Note 42) - - - -Transferred to fi nance leasing reserve fund - 685 (685) -Balance as at 31.03.2011 644,399 7,087 (167,467) 484,019
Company Stated Finance Leasing Revenue Total Capital Reserve Fund Reserves Rs’000 Rs’000 Rs’000 Rs’000Balance as at 01.04.2009 400,028 6,249 54,014 460,291Right Issue 250,000 - - 250,000Less : Right Issue expenses (5,629) - - (5,629)Loss for the year - - (20,409) (20,409)Preference dividend (6%) - - (600) (600)Ordinary dividend - - (10,000) (10,000)Transferred to fi nance leasing reserve fund - - - -
Balance as at 01.04.2010 644,399 6,249 23,005 673,653Right issue - - - -Less: Right issue expenses - - - -Loss for the year - - (202,500) (202,500)Preference dividend (6%) - - (600) (600)Ordinary dividends (Note 42) - - - -Transferred to fi nance leasing reserve fund - - - -Balance as at 31.03.2011 644,399 6,249 (180,095) 470,553
The notes to the Financial Statements from pages 54 to 83 form an integral part of these Financial Statements.
In accordance with Secti on 58 of Companies Act No 7of 2007, share capital, share Premium and preference share have been classifi ed as stated capital.
5151
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Cash Flow Statement
Group CompanyFor the year ended 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000Cash fl ows from operati ng acti viti esInterest income 535,865 540,119 498,969 490,953Interest payments (400,388) (449,396) (359,609) (410,808)Receipts from other operati ng acti viti es 42,842 76,917 19,727 16,170Cash payment to employees (73,080) (78,865) (59,354) (53,704)Payments on other operati ng acti viti es (109,954) (222,203) (98,800) (62,983)Operati ng profi t before changes in operati ng assets/liabiliti es ( Note A ) (4,715) (133,428) 933 (20,372)
Decrease/(Increase) in operati ng assetsLease rentals & deposits received 567,291 436,417 537,461 404,225Hire purchase rentals & deposits received 607,223 376,225 585,260 376,225Real Estate 80,329 30,359 80,329 30,359Assets Leased (710,222) (306,994) (697,359) (290,973)Assets Hire purchased (798,999) (649,472) (785,036) (649,472)Bills discounted 24,929 2,256 24,929 2,256Pawning advanced (11,879) - (11,879) -Receivables & prepaid expenses (109,377) 267,318 (312,764) (195,047)Loans (5,519) 30,222 11,503 (2,401) (360,939) 52,903 (566,623) (345,200)
Increase/(Decrease) in operati ng liabiliti esOther payables (46,517) (125,660) (38,941) (70,774)Net cash used in operati ng acti viti es before tax (407,456) (72,757) (605,564) (415,974)Income tax paid (9,340) (18,559) (4,132) (15,321)Net cash used in operati ng acti viti es aft er tax (416,796) (91,316) (609,696) (431,295)
Cash fl ows from investi ng acti viti esPurchase of Dealing securiti es (63,033) (36,326) (34,560) (6,714)Sale of Dealing securiti es 55,648 9,561 38,105 9,561Purchase of Property, Plant & Equipment (12,549) (14,461) (9,547) (7,177)Purchase of Intangible Assets (1,808) (949) (1,808) (240)Net cash eff ect on investment in subsidiary (Note B) - (159,561) - (160,770)Sale of Property, Plant & Equipment 6,102 4,806 3,290 400Dividend receipts 322 1,288 322 1,288Net cash used in investi ng acti viti es (15,318) (195,642) (4,198) (163,652)
Cash fl ows from fi nancing acti viti esSecuriti sati on loans / borrowings 9,293 747,523 52,545 666,073Payment for fi nance leases (1,637) (3,718) - -Debentures redeemed - (350,000) - (350,000)Debentures issued - 100,000 - 100,000Right issue (net of expenses) - 244,371 - 244,371Other borrowings 573,843 (337,848) 657,111 (60,472)Dividend paid - (10,395) - (10,395)Net cash generated from fi nancing acti viti es 581,499 389,933 709,656 589,577Net cash infl ow / (outf low) from all acti viti es 149,385 102,975 95,762 (5,370)Cash and cash equivalents at beginning of the year (63,617) (166,592) (86,447) (81,077)Cash and cash equivalents at end of the year 85,768 (63,617) 9,315 (86,447)
Cash and Cash Equivalents at end of the yearCash & short term funds as at 31st March ( Note 19 ) 125,537 76,793 47,557 40,129Bank overdraft as at 31st March (39,769) (140,410) (38,242) (126,576) 85,768 (63,617) 9,315 (86,447)
5252
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Cash Flow Statement Contd...
Group CompanyFor the year ended 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000Note AReconciliati on of Operati ng Profi t Profi t before taxati on (63,842) (124,288) (215,320) (14,286)Add / (Less) :Profi t on sale of shares (13,639) 227 (8,142) 298Profi t on Real Estate acti vites (8,424) (24,536) (8,424) (24,536)Profi t on sale of Property, Plant & Equipment 1,126 (548) (103) (256)Dividend income (322) (1,288) (322) (1,288)(Provision) / reversal of fall in value of dealing securiti es 1,598 (4,730) 1,105 (4,824)Net Provisions 66,672 4,917 225,112 15,614Depreciati on - Property plant and equipment 9,968 13,687 5,330 6,314Amorti zati on of Intangible Assets 2,148 3,131 1,697 2,592 (4,715) (133,428) 933 (20,372)
Note BNet Cash eff ect on investment in subsidiary company - People’s Merchant Finance Company Ltd 2010 Rs’000
Property plant & equipment 7,899Investments 6,764Cash & cash equivalents 1,209Other current assets 146,440Current liabiliti es (47,795)Net identi fi able assets and liabiliti es 114,517Good will on acquisti on 46,253Considerati on paid in cash 160,770Cash acquired (1,209)Net cash infl ow 159,561
The notes to the Financial Statements from pages 54 to 83 form an integral part of these Financial Statements5353
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Notes to the Financial Statements
1. Reporti ng enti ty People’s Merchant PLC (“Company”) is a public
quoted company incorporated on 26th January 1983 and domiciled in Sri Lanka. The registered offi ce of the Company is situated at No.21, Nawam Mawatha, Colombo 2.
The consolidated fi nancial statements of the Company for the year ended 31st March 2011 include the Company and its Subsidiaries (together referred to as the “Group” and individually as “Group enti ti es”)
The staff strength of the Company as at 31st March 2011 is 123 (2010 - 74).
1.1. Principle acti viti es.1.1.1. Company The principle acti viti es of the Company
conti nued to be Leasing, Hire Purchase, Trade Finance, Real Estate, Short-term investments and Corporate Finance services.
1.1.2. Subsidiaries The subsidiaries of the Company are;
PMB Financial Services Ltd Currently PMB Financial Services Limited is not
operati ve. Intend to engage in fi nancial services in the future.
People’s Merchant Finance Company Ltd Silvereen Finance Company Limited, was an
associate of the Company as at 31.03.2009 with a 44% share holdings. PMP acquired balance 56% of shares and it became a subsidiary from June 2009. The Company was then re named as People’s Merchant Finance Company Ltd. The principal acti viti es of the subsidiary are leasing, hire purchase, trade fi nance and deposits.
2. Basis of preparati on2.1. Statement of Compliance The Financial statements of the Company are
prepared in accordance with the Sri Lanka Accounti ng Standards laid down by the Insti tute of Chartered Accountants of Sri Lanka and comply with the requirements of Companies Act No 7 of 2007.
2.2. Approval of Financial Statements by Directors The Financial statements were authorized for
issue on 23rd August 2011.
2.3. Basis of measurement The fi nancial statements are prepared under the
historical cost conventi on. No adjustments have been made for infl ati onary factors aff ecti ng the fi nancial statements. These fi nancial statements are prepared in Sri Lanka rupees, rounded to the nearest thousand, unless otherwise stated. Where appropriate the accounti ng policies are disclosed in the succeeding notes.
2.4. Functi onal and Presentati on Currency The Financial Statements are presented in Sri
Lankan Rupees, which is the Company’s functi onal currency. Financial informati on presented in Sri Lankan Rupees has been rounded to the nearest thousand unless indicated otherwise.
2.5. Use of Esti mate and Judgment The preparati on of Financial Statements requires
management to make judgments, esti mates and assumpti ons that aff ect the applicati on of accounti ng policies and the reported amounts of assets, liabiliti es, income and expenses. Actual results may diff er from these esti mates.
Esti mates and underlying assumpti ons are reviewed on an ongoing basis. Revisions to accounti ng esti mates are recognized in the period in which the esti mate is revised and in any future periods aff ected.
3. Materiality and aggregati on Each material class of similar items is presented
separately in the Financial Statements. Items of a dissimilar nature or functi on are presented separately unless they are immaterial.
4. Singnifi cant accounti ng policies The accounti ng principles are applied consistently to
all periods with due regard to prudence, materiality and substance over form criteria as explained in Sri Lanka Accounti ng Standard No.3 on Presentati on of Financial Statements.
The accounti ng policies of the Company have been consistently applied by Group enti ti es where applicable and deviati ons if any have been disclosed accordingly.
4.1. Basis of Consolidati on4.1.1. Subsidiaries Subsidiaries are enti ti es that are controlled
by the Company. Control exists when the
5454
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Company has the power, directly or indirectly, to govern the fi nancial and operati ng policies of an enti ty so as to obtain benefi ts from its acti viti es. In assessing control, potenti al voti ng rights, that presently are exercisable, are taken into account. The fi nancial statements of Subsidiaries are included in the consolidated fi nancial statements from the date that control eff ecti vely commences unti l the date that control eff ecti vely ceases.
The Minority Interests are presented in the consolidated Balance Sheet within Equity, separately from the equity att ributable to the Equity Holders of the Company. Minority Interests in the profi t or loss of the Group are disclosed separately in the consolidated Income Statement.
The consolidated fi nancial statements are prepared to a common fi nancial year end of 31st March. The accounti ng policies of subsidiaries have been changed where ever necessary to align them with the policies adopted by the Group.
4.1.2. Associates Associates are enti ti es in which Company has
signifi cant infl uence, but no control over the fi nancial and operati ng policies. Signifi cant infl uence is presumed to exist when the Company holds between 20 and 50 percent of the voti ng power of another enti ty. The Associates are accounted for using the equity method and are recognised initi ally at cost. The Company’s investments include goodwill identi fi ed on acquisiti on, net of any accumulated impairment losses. The consolidated fi nancial statements include the Company’s share of the income and expenses and equity movements of the Associate, aft er adjustments being made to align the accounti ng policies with those of the Group from the date that signifi cant infl uence eff ecti vely commences unti l the date that signifi cant infl uence eff ecti vely ceases.
When Company’s share of losses exceeds its interest in the Associate, the carrying amount of that interest is reduced to nil and the recogniti on of further losses is disconti nued except to the extent that the Company has an obligati on or made payments on behalf of the Associate. If the associate subsequently reports
profi ts, the Company resumes recognising its share of those profi ts only aft er its share of the profi ts equals the share of losses not recognised.
The Company disconti nues the use of the equity method from the date that it ceases to have signifi cant infl uence over an Associate and re classifi es the investment as “Investment securiti es” in accordance with Sri Lanka Accounti ng Standard 22 “Accounti ng for Investments”.
4.1.3. Transacti ons Eliminated On Consolidati on Intra-group balances and transacti ons and
any unrealised gains arising from intra-group transacti ons, are eliminated in preparing the consolidated fi nancial statements. Unrealised gains arising from transacti ons with Associates are eliminated to the extent of the Group’s interest in the Associates against the investment in the Associate. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
4.1.4. Foreign Currency Transacti ons All transacti ons in foreign currencies are
converted at rates of exchange prevailing at the dates of the transacti ons are aff ected. Monetary assets and liabiliti es denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Exchange diff erences arising on the sett lement of monetary items, and on the translati on of monetary items, are included in loss for the period.
ASSETS AND BASES OF THEIR VALUATION
4.2. Lease Rentals, Trade Bills, Hire Purchase & Other receivables
Lease rentals receivables, trade bills, hire purchase and other receivables are stated in the Balance Sheet net of provision for doubtf ul debts, prepaid lease rentals and net of interest which is not accrued to revenue on non performing advances.
4.3. Provision for Bad & Doubtf ul Debts Specifi c and general provisions are made for
bad and doubtf ul debts on advances comprising
Notes to the Financial Statements Contd...
5555
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
loans, bills of exchange, fi nance leases and hire purchases. Only a general provision is made in respect of guarantees issued to recognize liabiliti es that may arise, as any claim made on and honoured by us on a guarantee is considered as a loan with 100% provision.
Specifi c provisions for doubtf ul debts are based on a conti nuous review of advances. These provisions relate to bad and doubtf ul debts identi fi ed in accordance with Sri Lanka Accounti ng Standard No.23 - “Revenue Recogniti on and Disclosures in the Financial Statements of Banks” and above the sti pulated guidelines issued by the Central Bank of Sri Lanka.
General provision is made on advances where no specifi c provisions have been made.
Provisions are applied to write off advances, in part or in whole, when loans are considered partly or wholly irrecoverable
4.4. Investment in Treasury Bills and Treasury Bonds Held for Dealing
Investments in treasury bills and treasury bonds in dealing portf olio are those investments that the Group acquires or incurs principally for the purpose of selling, or holds as part of a portf olio that is managed for short term profi t. These investments are initi ally recognised at cost and subsequently measured at market value in the Balance Sheet. Gains and losses on marked to market valuati on are dealt with through the Income Statement.
Provisions on advances are made as follows: Leases and Loans and Guarantees Period outstanding Classifi cati on Hire Bills of
purchases exchange Specifi c provision More than 3 months Less than 6 months 5% 10% 100% More than 6 months Sub-standard 20% 20% - Less than 12 months More than 12 months Doubtf ul 50% 50% - Less than 18 months More than 18 months Loss 100% 100% - General provision Less than 3 months Regular 0.25% 0.5% 0.25%
4.5. Investments4.5.1. Dealing Securiti es These are marketable securiti es acquired and
held with the intenti on of resale over a short period of ti me. Such securiti es are initi ally recognised at cost and subsequently measured at market value. Gains and losses on marked to market valuati ons are dealt with through the income statement.
4.5.2. Investment Securiti es These are acquired and held for yield or
capital growth in the medium or long term. Such securiti es are recorded at cost. Changes in market values of these securiti es are not taken into account unless there is considered to be a diminuti on in value, which is other than temporary.
Non-quoted investments are valued at cost.
4.5.3. Investments in Subsidiaries Investments in Subsidiaries are stated at cost in the Company’s fi nancial statements.
4.5.4. Investments in Associates Investments in Associates are accounted for at cost in the Company’s fi nancial statements and under the Equity method in the consolidated fi nancial statements. Under the Equity method, the Investments in Associates are initi ally accounted for at cost and the carrying amount is adjusted for post acquisiti on
changes in the Comapany’s share of net assets of the Associates, less any impairment in the Company’s net Investments in Associates.
4.5.5. Investment in Real Estate Real estate inventories are stated at cost or
market values which ever is lower. These costs include cost of purchase of the land and expenses on development that are capitalized.
Notes to the Financial Statements Contd...
5656
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
4.6. Assets Held for Sale Assets that are expected to be recovered
primarily through sale rather than through conti nuing use are classifi ed as “Held for Sale” once identi fi ed that the carrying amount will be recovered principally through a sale transacti on rather than through conti nuing use. These are assets which are available for immediate sale in their present conditi on, subject to only the terms that are usual and customary for sale of such assets and their sale is highly probable.
“Assets Held for Sale” are presented separately on the face of the Balance Sheet at the lower of its carrying amount and fair value less costs to sell.
Assets classifi ed as “Assets Held for Sale” are neither amorti sed nor depreciated.
Impairment losses on initi al classifi cati on as held for sale and subsequent gains and losses on remeasurement are recognised in the Income Statement.
4.7. Property, Plant and Equipment Property, plant and equipment are tangible items
that are held for servicing, or for administrati ve purposes and are expected to be used during more than one period.
4.7.1. Basis of recogniti on Property, plant and equipment are recognised
if it is probable that future economic benefi ts associated with the assets will fl ow to the Group and cost of the asset can be reliably measured.
4.7.2. Measurement An item of property, plant and equipment that
qualifi es for recogniti on as an asset is initi ally measured at its cost. Cost includes expenditure that is directly att ributable to the acquisiti on of the asset and cost incurred subsequently to add to, replace part of, or service it. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly att ributable to bringing the asset to
a working conditi on for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased soft ware that is integral to the functionality of the related equipment is capitalised as part of computer equipment.
4.7.3. Subsequent Costs The cost of replacing part of an item of
property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within that part will fl ow to the Group and its cost can be reliably measured. The costs of day to day servicing of property, plant and equipment are charged to the Income Statement as incurred.
4.7.4. Derecogniti on The carrying amount of an item of property,
plant and equipment is derecognised on disposal or when no future economic benefi ts are expected from its use or disposal. The gain or loss arising from the derecogniti on of an item of property, plant and equipment is included in Income Statement when the item is derecognised.
When replacement costs are recognised in the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is derecognised. Major inspecti on costs are capitalised. At each such capitalisati on, the remaining carrying amount of the previous cost of inspections is derecognised.
4.7.5. Depreciati on Group provides depreciati on on a straight-line
method over the esti mated life of the asset category. Depreciati on is provided on a pro rata basis on the assets purchased /disposed of during the year.
The depreciati on is provided at the following rates for each category:
Notes to the Financial Statements Contd...
5757
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Category Rate (per annum) Buildings 10% Motor vehicles 20% Computers 25% Offi ce equipment, furniture, fi tti ngs 15%
4.7.6. Impairment of Property, Plant & Equipment The carrying value of the property, plant &
equipment is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indicati on exists and where the carrying value exceed the esti mated recoverable amount the assets are writt en down to their recoverable amount. Impairment losses are recognized in the Income Statement unless it reverses a previous revaluati on surplus for the same asset.
4.7.7. Operati ng leased assets Operati ng lease assets are stated at cost
less accumulated depreciati on charged on a straight- line method at the rate of 25% per annum. The depreciati on commences in the month the asset is purchased and ceases in the month of disposal.
4.7.8. Intangible assets4.7.8.1. Basis of recogniti on An intangible asset is recognized if it is
probable that future economic benefi ts that are att ributable to the asset will fl ow to the enterprise and the cost of the asset can be measured reliably in accordance with the Sri Lanka Accounti ng Standard no. 37 - “Intangible assets”. Accordingly these assets are stated in the Balance Sheet at cost less accumulated amorti sati on, less accumulated impairment losses if any.
4.7.8.2. Goodwill Goodwill arising on the acquisiti on represents
the excess of the cost of acquisiti on over the Group’s interest in the net fair value of the acquiree’s identi fi able assets, liabiliti es and conti ngent liabiliti es at the date of acquisiti on. Upon transiti on to revised Sri Lanka Accounti ng Standard 25 “Business Combinati ons”, goodwill
is no longer amorti sed. Instead, goodwill is tested for impairment annually and assessed for any indicati on of impairment at each reporti ng date to ensure that its carrying amount does not exceed its recoverable amount. If an impairment loss is identi fi ed, it will be recognised immediately in the Income Statement.
The negati ve goodwill is recognised immediately in the Income Statement.
4.7.8.3. Computer soft ware Computer soft ware is stated at cost less
accumulated amorti sati on, less accumulated impairment losses. The rate of amorti sati on is 25% per annum.
4.7.8.4. Subsequent Expenditure Expenditure incurred on soft ware is capitalised
only when it increases the future economic benefi ts embodied in the specifi c asset to which it relates. All other expenditure is expensed as incurred.
4.7.8.5. Amorti sati on Intangible assets are amorti sed on a straight-
line basis over the esti mated life of the asset.Amorti sati on is provided on a pro rata basis on the assets purchased /disposed of during the year.
4.7.8.6. Reti rement and Disposal An intangible asset is derecognised on disposal
or when no future economic benefi ts are expected from its use and subsequent disposal.
4.7.8.7. Impairment of Assets As per Sri Lanka Accounti ng Standard 41 -
“Impairment of Asset”, impairment is required to be determined for identi fi able assets. Identi fi able assets of the Company are reviewed at each Balance Sheet date to determine whether there is any indicati on of impairment. If any such indicati on exists, the recoverable
Notes to the Financial Statements Contd...
5858
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
amount of the assets is esti mated and shown in the Balance Sheet. The impairment loss is charged to the Income Statement.
LIABILITIES AND PROVISIONS
4.8. Commitments and Conti ngencies All discernible risks are accounted for in
determining the amount of other liabiliti es.
4.9. Reti rement Benefi ts
4.9.1. Reti rement Benefi ts Plan-Gratuity The Group is liable to pay gratuity in terms of
the Payment of Gratuity Act No 12 of 1983.
Gratuity liability was computed from the fi rst year of service for all employees in conformity with Sri Lanka Accounti ng Standards 16 - Reti rement Benefi t Costs which was eff ecti ve ti ll 1 July 2007. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completi on of fi ve years of conti nual service.
Based on the revised Sri Lanka Accounti ng Standards 16 (Revised 2006) - Employee Benefi ts (“SLAS 16”) which became eff ecti ve from the fi nancial year commencing aft er 1 July 2007, the Company has adopted the actuarial valuati on method from 1st April 2008. The liability recognized in the balance sheet is the present value of the defi ned benefi t obligati on using the projected unit credit method at the balance sheet date based on an actuarial valuati on carried out by a professional actuary.
4.9.2. Employee’s Provident Fund and Employees’ Trust Fund
All employees who are eligible for Employees’ Provident Fund contributi ons and Employees’ Trust Fund contributi ons are covered by relevant contributi on funds in line with the respecti ve statutes.
4.10. Provisions for liabiliti es A provision is recognized in the balance sheet only
when the Company has a legal or constructi ve obligati on as a result of a past event and it is probable that an outf low of resources embodying economic benefi ts will be required to sett le the obligati on.
REVENUE AND EXPENSE RECOGNITION
4.11. Interest Income on advances Interest receivable on advances is recognized on
an accrual basis. Interest ceases to be taken to revenue when interest or principal is in arrears for three (3) months or more and thereaft er such income is recognized on a cash basis. Further in instances where interest is suspended, the interest accrued up to three months is also removed from the interest income and transferred to the interest in suspense account.
4.12. Lease Income
4.12.1. Finance leases Gross earnings from leases comprising the
excess of rentals receivable over the cost of leased assets are allocated over the term of the lease, commencing with the month in which the lease is granted in proporti on to the declining receivable balances.
Income of fi nance leases in respect of lease rentals due ceases to be taken to revenue when rentals are in arrears for three (3) months or more and thereaft er such income is recognized on a cash basis. Further in instances where interest is suspended, the interest accrued up to three months is also removed from the interest income and transferred to the interest in suspense account.
4.12.2. Operati ng leases Rental income is recognized as revenue on a
straight-line basis over the term of lease.
Notes to the Financial Statements Contd...
5959
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Income of operati ng leases in respect of lease rentals due ceases to be taken to revenue when rentals are in arrears for three (3) months or more and thereaft er such income is recognized on a cash basis. Further in instances where interest is suspended, the interest accrued up to three months is also removed from the interest income and transferred to the interest in suspense account.
4.13. Hire purchase income Gross earnings from hire purchases comprising
the excess of rentals receivable over the cost of hire purchase assets are allocated over the period of the hire purchase contract, commencing with the month in which the hire purchase is granted in proporti on to the declining receivable balances.
Income of hire purchases in respect of rentals due ceases to be taken to revenue when rentals are in arrears for three (3) months or more and thereaft er such income is recognized on a cash basis. Further in instances where interest is suspended, the interest accrued up to three months is also removed from the interest income and transferred to the interest in suspense account.
4.14. Pawning income Income on pawning is recognized proporti onately
on accrual basis over the period of the advance.
4.15. Bills of exchange Income on discounti ng of bills of exchange is
recognized proporti onately over the period of the instrument.
Interest income accrued on discounti ng of bills of exchange are reversed and transferred to the interest in suspense account, when bills are not sett led on due dates.
4.16. Overdue charges Overdue charges for late payment of lease rentals
and other advances, and for delayed redempti on of bills of exchange are recognized as income on a cash basis.
4.17. Dividend Income Dividend income from shares is recognized in the
period in which they are declared.
4.18. Interest Income from other sources Interest on treasury bills and commercial paper
is recognized proporti onately over the period of instrument.
4.19. Gain on Real Estate Sales Profi t on real estate sales are recognized as
follows:
4.19.1. The non-refundable deposits are recognized into income in the year of receipt, on signing the sales agreement and collecti on of non-refundable deposit.
4.19.2. The balance profi t is recognized as follows:
4.19.2.1. On sale of land, on receiving at least 25% of the selling price and granti ng of an internal loan facility for the balance amount.
4.19.2.2. On sale of houses constructed, only on completi on of the house and aft er receipt of the full payment or confi rmati on from a recognized insti tuti on for payment.
4.20. Gains or Losses on Disposal of Property, Plant and Equipment.
Gains and losses resulti ng from the disposal of property, plant and equipment have been accounted for in the income statement.
4.21. Fee based income Fee based income is recognized on cash basis.
4.22. Profi t or Loss on Sales of Marketable Securiti es Profi t or loss arising on sale of equity shares,
commercial papers and other marketable securiti es is accounted for on cash basis.
4.23. Interest expense Interest payable is recognized on accrual basis. All
interest expenses are charged to Income without capitalizing any amount.
Notes to the Financial Statements Contd...
6060
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
4.24. Income Tax expense Income tax expense comprise of current and
deferred tax. Income tax expense recognized in profi t or loss except to the extent that it relates to items recognized directly in equity in which case it is recognized in equity in which case it is recognized in equity.
4.24.1. Current tax Provision for Current tax on the profi t for
the year is computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and amendments there to, at the rates specifi ed in Note No.16 to the fi nancial statements.
4.24.2. Deferred Taxati on Deferred taxati on is provided using the
Balance sheet liability method providing for all temporary diff erences between the carrying amount of assets and liabiliti es for fi nancial reporti ng purpose and the amounts used for taxati on purposes. The amount of deferred tax provided is based on the expected manner of realizati on or sett lement of the carrying amount of assets and liabiliti es using tax rates enacted or substanti vely enacted by the reporti ng date.
Deferred tax assets, including those related to temporary tax eff ects of income tax losses and credits available to be carried forward are recognized only to the extent that it is probable that future taxable profi ts will be available against which the assets can be uti lized. Deferred tax assets are reviewed at each reporti ng date and are reduced to the extent that it is no longer probable that the future related tax benefi t will be realized.
5. Cash fl ow statement The cash fl ow statement has been prepared by using
the “Direct Method” of preparing Cash Flows in accordance with the Sri Lanka Accounti ng Standard No.9 “Cash Flow Statements”. Cash and cash equivalents comprise of cash balances and short-term funds.
6. Segmental reporti ng A segment is a disti nguishable component of an
enterprise that is engaged either in providing products and services (business segment), or in providing products or services within a parti cular economic environment (geographical segment), which is subject to risks and rewards that are diff erent from those of other segments.
Segmentati on has been determined based on the acti viti es of the Company.
7. Comparati ve fi gures Where ever necessary amounts shown for the
previous year have been reclassifi ed to facilitate comparison with the current year’s presentati on.
8. Events aft er the balance sheet date All the material post balance sheet events have been
considered and appropriate adjustments /disclosures have been made in the Financial Statements where necessary.
9. New accounti ng standards issued but not eff ecti ve as at balance sheet date
The Insti tute of Chartered Accountants of Sri Lanka (ICASL) has issued a new volume of Sri Lanka Accounti ng Standards - 2011, applicable for fi nancial periods beginning on or aft er 1st January 2012. These new Accounti ng Standards are prefi xed as both SLFRS and LKAS which correspond to the relevant Internati onal Financial Reporti ng Standards (IFRS) and Internati onal Accounti ng Standards (IAS).
Accordingly, these Standards have not been applied in preparing these fi nancial statements as they were not eff ecti ve for the year ended 31st March 2011.
The Company/ Group is currently in the process of evaluati ng the potenti al eff ects of these Standards on its fi nancial statements and the impact on the adopti on of these Standards have not been quanti fi ed as at Balance Sheet date.
Notes to the Financial Statements Contd...
6161
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Group Company For the year ended 31st March 2011 2010 2011 2010 Note Rs’000 Rs’000 Rs’000 Rs’00010. Income Interest income 11 597,767 544,336 550,215 501,796 Other income 13 68,924 103,889 36,615 41,953 666,691 648,225 586,830 543,749
11. Interest Income Bills of exchange 3,881 8,426 3,881 8,426 Finance & operati ng lease 222,384 207,742 202,054 191,008 Hire purchase 312,529 251,757 300,345 242,836 Short-term fi nance 53,473 71,311 43,146 58,538 Short-term investments 2,987 3,907 463 988 Pawning interest 326 - 326 - Other interest income (Interest income from PMBFS) 2,187 1,193 15,642 - Provision for other interest income - - (15,642) - 597,767 544,336 550,215 501,796
12. Interest Expense Bank overdraft 9,094 14,987 9,094 14,987 Other interest expenses 417,221 493,635 374,515 372,066 426,315 508,622 383,609 387,053
13. Other Income Profi t/(Loss) on sale of shares 13,639 (227) 8,142 (298) Profi t on real estate sales 8,424 24,536 8,424 24,536 Fee based income 8,029 6,753 8,029 5,782 Dividend income 322 1,288 322 1,288 Profi t/(loss) on disposal of fi xed assets (1,126) 548 103 256 Provision reversals 21,792 36,529 - - Sundry income 17,844 34,462 11,595 10,389 68,924 103,889 36,615 41,953
14. Operati ng Expenses Expenses among others include the following : Directors emoluments 6,346 5,781 6,105 4,619 Depreciati on 9,968 13,687 5,330 6,314 Amorti sati on of intangible assets 2,148 3,131 1,697 2,592 Auditors remunerati on - Audit fee and related expenses 1,230 850 725 625 - Fee for non audit services 598 283 477 108 - Fee for other auditors 310 728 310 372 Legal expenses 1,833 3,660 1,396 1,517 Financial & non refundable VAT 10,782 4,468 8,745 2,713 Salaries 50,426 57,664 39,602 37,448 Employer’s contributi on to Employees’ Provident Fund 5,777 5,852 4,503 3,869 Employer’s contributi on to Employees’ Trust Fund 1,404 1,553 1,126 967 Branch opening and relocati on expenses 11,805 2,804 11,682 887 Donati ons 740 251 530 239 Provision for staff reti rement benefi ts (798) 2,644 238 1,714 Impairment loss - investment on subsidiary - - 163,000 12,000 Provision for insurance receivables 8,777 - 8,777 - Provision for arbitrati on deposit 2,100 - 2,100 - Provision for advance corporati on tax receivables 2,794 - 2,794 -
Notes to the Financial Statements Contd...
6262
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
For the year ended 31st March Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’00015. Provision for Bad & Doubtf ul Debts Specifi c provision for bills of exchange 2,980 1,781 2,980 1,781 Specifi c provision for loans 16,866 5,385 12,021 5,627 Specifi c provision for lease 23,193 16,530 14,432 16,970 Specifi c provision for hire purchase 20,985 11,203 19,303 11,478 Total 64,024 34,899 48,736 35,856 General provision/(reversal) for bills of exchange (78) 115 (78) 115 General provision for guarantees 45 (21) 45 (21) General Provision/(reversal) for Loans 306 (1,437) 306 (1,437) General Provision/(reversal) for Lease (593) (437) (593) (437) General Provision for Hire purchase 1,311 430 1,311 430 Total 991 (1,350) 991 (1,350) Total provisions made during the year 65,015 33,549 49,727 34,506 Group Company For the year ended 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’00016. Provision for in changing Value of Dealing Securiti es Provision for fall in value of dealing securiti es at beginning of the period (191) (4,921) (97) (4,921) Provision for fall in value of dealing securiti es at end of the period - ( Note 20 ) (1,789) (191) (1,202) (97) Provision/(reversal) during the year 1,598 (4,730) 1,105 (4,824)
17. Income Tax Expense Current tax on profi ts of the Bank has been provided at 35% on the taxable income.
For the year ended 31st March Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000 Tax on current year profi t 11,803 4,879 6,407 43 Under/(over) provision (43) 1,603 (43) 1,603 Adjustment to deferred tax liability resulti ng from change in tax rate (3,595) - (1,928) - Deferred tax provision ( Note 39 ) (10,348) 5,234 (17,256) 4,477 (2,183) 11,716 (12,820) 6,123 For the year ended 31st March Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’00017.1. Reconciliati on of Eff ecti ve Tax Rate Accounti ng profi t/(loss) (63,842) (124,288) (215,320) (14,286) Tax at the domesti c rate of 35% (22,345) (43,500) (75,362) (5,000) Tax eff ect on exempted income 496 (3,592) 496 (3,592) Tax eff ect on disallowable expenses 105,595 26,302 85,097 13,302 Tax eff ect on capital allowances (152,858) (136,539) (139,341) (126,115) Tax eff ect on leasing acti viti es 144,221 159,145 135,422 121,447 Social responsibility levy 176 73 95 1 Eff ect of taxable losses of subsidiaries (63,482) 2,990 - - 11,803 4,879 6,407 43 Eff ecti ve Tax Rate (18.49%) 3.93% 2.98% 0.30%
Notes to the Financial Statements Contd...
6363
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
18. Basic Loss Per Share The calculati on of basic earning per share is based on the net profi t/(loss) att ributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding during the year, as per the requirement of the Sri Lanka Accounti ng Standard No. 34 - “Earning Per Share“.
Group Company For the year ended 31st March 2011 2010 2011 2010
Loss aft er taxati on (Rs.’000) (61,659) (136,004) (202,500) (20,409) Less : Dividends on cumulati ve preference shares (Rs.’000) 600 600 600 600 Loss att ributable to ordinary shareholders (Rs.’000) (62,259) (136,604) (203,100) (21,009) Weighted average number of ordinary shares (a) 37,500,000 31,687,500 37,500,000 31,687,500 Basic loss per share (Rs.) (1.66) (4.31) (5.42) (0.66)
( a ). Qualifying ordinary shares at the beginning of the year 37,500,000 25,000,000 37,500,000 25,000,000 Eff ect of rights issued (Note 41) - 6,687,500 - 6,687,500 Weighted average number of ordinary shares at the end of the year 37,500,000 31,687,500 37,500,000 31,687,500
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
19. Cash and Short Term Funds Cash in hand 2,561 3,010 1,556 138 Cash at Bank 122,976 73,783 46,001 39,991 125,537 76,793 47,557 40,129
20. Dealing Securiti es Cost of quoted dealing securiti es (Note 20.1) 15,905 6,956 9,476 4,918 Provision for fall in value of quoted dealing securiti es ( Note 16) (1,789) (191) (1,202) (97) Aggregate market value of the quoted dealing securiti es ( Note 20.1 ) 14,116 6,765 8,274 4,821 Fixed income securiti es/commercial papers First Capital Treasuries Ltd 7,330 20 ,170 - - 21,446 26,935 8,274 4,821
Notes to the Financial Statements Contd...
6464
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
As at 31 st March 2011 2010 No of Cost Market No of Cost Market Shares Value Shares Value Name of Company Rs’000 Rs’000 Rs’000 Rs’000
20.1. Quoted Dealing Securiti es held by the Bank BANKS, FINANCE & INSURANCE Hatt on Nati onal Bank PLC - - - 8,000 1,361 1,506 Vanik Incorporati on PLC 61 3 - 61 3 - Nati on Trust Bank PLC 6,000 428 458 16,100 615 564 DFCC Bank 5,400 1,210 928 - - - Nati onal Development Bank 3,900 1,468 1,328 - - - Sampath Bank PLC 1,000 268 288 - - - Union Bank PLC 200 5 7 - - - 3,382 3,009 1,979 2,070 Sectoral percentage 35.69% 40.24% BEVERAGE & FOOD Cargills (Ceylon) PLC - - - 600 38 42 - 38 42 Sectoral percentage 0.00% 0.77% DIVERSIFIED HOLDINGS John Keells Holdings PLC 300 78 86 6,300 1,171 1,159 Richared Pieris and Company PLC - - - 2,000 94 110 78 86 1,265 1,269 Sectoral percentage 0.82% 25.72% POWER & ENERGY Hemas Power PLC - - - 6,800 136 121 - - 136 121 Sectoral percentage 0.00% 2.77% PLANTATIONS Balangoda Plantati ons PLC 5,000 299 281 - - - 299 281 - - Sectoral percentage 3.16% 0.00% CONSTRUCTION & ENGINEERING Colombo Dockyard PLC - - - 12,000 335 339 - - 335 339 Sectoral percentage 0.00% 6.81% LAND & PROPERTY Overseas Realty (Ceylon) PLC - - - 15,000 226 233 - - 226 233 Sectoral percentage 0.00% 4.60% CHEMICALS Haycarb PLC 2,800 466 435 1,700 252 272 466 435 252 272 Sectoral percentage 4.92% 5.12%
Notes to the Financial Statements Contd...
6565
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
20.1. Quoted Dealing Securiti es held by the Bank Contd... As at 31st March 2011 2010 No of Cost Market No of Cost Market Shares Value Shares Value Name of Company Rs’000 Rs’000 Rs’000 Rs’000
MANUFACTURING Chevron Lubricant Lanka PLC 6,000 1,024 960 - - -
ACL Cables PLC 10,000 960 940 - - - 1,984 1,900 - - Sectoral percentage 20.94% 0.00% HOTEL & TRAVELS John Keels Hotels PLC - - - 16,400 509 303 Keels Hotels 73,785 1,564 1,269 - - - Hotel services Ceylon PLC 50,000 1,517 1,155 - - - 3,081 2,424 509 303 Sectoral percentage 32.51% 10.35% HEALTH CARE Nawaloka Hospitals PLC - - - 49,000 178 172 - - 178 172 Sectoral percentage 0.00% 3.62% INVESTMENT TRUST Environmental Resources Investment PLC 1,800 186 139 - - - 186 139 - - Sectoral percentage 1.96% 0.00% Total dealing securiti es 9,476 8,274 4,918 4,821
20.1. Quoted Dealing Securiti es held by the Subsidiary Companies As at 31st March 2011 2010 No of Cost Market No of Cost Market Shares Value Shares Value Name of Company Rs’000 Rs’000 Rs’000 Rs’000
John Keells Holdings PLC - - - 2,500 435 460 John Keels Hotels PLC 32,584 673 557 8,200 217 152 HNB Assurance PLC - - - 6,500 321 361 Malwatt a Valley Plantati ons PLC - - - 5,000 264 210 Nawaloka Hospitals PLC - - - 150,000 553 525 Dialog Telekom PLC - - - 35,000 248 236 ACL Cables PLC 5,800 552 538 - - - Balangoda Plantati ons PLC 22,100 1,478 1,225 - - - Hotel Corporati on PLC 4,500 177 140 - - - Hotel Services Ceylon PLC 15,000 437 342 - - - Richard Pieris & Company PLC 67,500 506 907 - - - Sunshine Holdings PLC 31,000 2,187 1,653 - - - Tokyo Cement Company (Lanka) PLC 8,000 419 480 - - - Total dealing securiti es held by the subsidiary company 6,429 5,842 2,038 1,944 Total dealing securiti es by the Group 15,905 14,116 6,956 6,765
Notes to the Financial Statements Contd...
6666
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
As at 31st March Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
21. Investment Securiti es Investments in shares ( Note. 21.2) 776 776 773 773 776 776 773 773
21.1. Investments in Debentures Vanik Incorporati on Ltd 48 48 48 48 Provision for fall in value of investments in debentures (48) (48) (48) (48) - - - -
21.2. Investments in Shares Unquoted Unquoted investments in shares ( Note 21.2.1) 776 776 773 773 776 776 773 773
21.2.1. Unquoted Investments in Shares As at 31st March 2011 31st March 2010 No of Cost Directors’ No of Cost Directors’ Shares of Valuati on Shares of Valuati on Name of company Rs.10 each Rs’000 Rs’000 Rs.10 each Rs’000 Rs’000a. Unquoted Investments in shares I.D.M. Holding Ltd. 75,000 750 750 75,000 750 750 Credit Informati on Bureau of Sri Lanka 100 23 23 100 23 23 Unquoted Investments in shares by company 773 773 773 773
b. Unquoted Investments in shares by the subsidiary company Credit Informati on Bureau of Sri Lanka 25 3 3 25 3 3
3 3 3 3 Unquoted Investments in shares by Group 776 776 776 776
22. Non Current Assets held for Sale Freehold property owned by the subsidiary company; PMB Financial Services Ltd (formerly known as PMB
Credit Card Company Ltd) had been classifi ed as a non current asset held for sale as it was expected that the recovery of the carrying value will be through a sales transacti on in 2010. This asset was transferred to holding company in exchange of credit card liabiliti es at cost in December 2010.
Extent Cost of Land (Perches) Rs.’000
Land at No. 21, Nawam Mawatha, Colombo 02. 108.40 451,577
Fair value of the property (land and Building) (108.40 perches) amounted to Rs.525 Mn as at 21st January 2010, as valued by Mr. N.M. Jayathilake, Dip. in Val, B,Sc Est.Mat & Val., N.C.T. a registered valuer.
Notes to the Financial Statements Contd...
6767
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’00023. Bills of Exchange Gross receivable 56,042 79,060 56,042 79,060 Interest to be earned (1,868) (1,863) (1,868) (1,863) Interest in suspense (1,644) (1,480) (1,644) (1,480) 52,530 75,717 52,530 75,717 Provision for doubtf ul debts
Specifi c (24,222) (21,242) (24,222) (21,242) General (22) (100) (22) (100)
28,286 54,375 28,286 54,375
24. Loans & Advances Term Loans 648,879 608,360 608,069 561,378 Interest in suspense (172,529) (116,938) (168,185) (109,820) 476,350 491,422 439,884 451,558 Provision for doubtf ul debts
Specifi c (30,146) (13,280) (25,543) (13,521) General (426) (120) (426) (120) 445,778 478,022 413,915 437,917 Pawning advances 12,031 - 12,031 - 457,809 478,022 425,946 437,917
25. Finance Leases Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000 Lease rentals receivable within one year Lease rentals receivable within one year from balance sheet date 711,164 666,046 605,933 587,566 Rental received in advance (4,423) (3,053) (2,138) (2,550) Interest in suspense (26,576) (25,358) (22,860) (22,170) Unearned lease income (141,392) (127,497) (132,262) (124,486) Provision for lease receivable Specifi c (64,814) (42,208) (61,221) (40,578) General (1,002) (1,595) (1,002) (1,595) Lease rentals receivable within one year 472,957 466,335 386,450 396,187 Lease rentals receivable from one to fi ve years Lease rentals receivable aft er one year from balance sheet date 819,094 605,359 732,344 548,165 Rental received in advance (2,187) (5,066) (1,587) (4,192) Unearned lease income (150,660) (131,112) (120,072) (98,353) Provision for lease receivable Specifi c (11,328) (10,741) (6,600) (12,811) Lease rentals receivable from one to fi ve years 654,919 458,440 604,085 432,809 Total lease rentals receivable 1,127,876 924,775 990,535 828,996
Notes to the Financial Statements Contd...
6868
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
26. Hire Purchases Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
Hire purchase rentals receivable within one year Hire purchase rentals receivable within one year from balance sheet date 793,962 658,797 750,499 616,719 Rental received in advance (492) (213) (275) (203) Interest in suspense (23,564) (19,293) (23,080) (18,932) Unearned hire purchase income (201,792) (196,400) (194,697) (194,406) Provision for hire purchase receivable Specifi c (32,156) (13,956) (31,787) (13,496) General (3,513) (2,202) (3,513) (2,202) Hire purchase rentals receivable within one year 532,445 426,733 497,147 387,480 Hire purchase rentals receivable from one to fi ve years Hire purchase rentals receivable aft er one year from balance sheet date 983,782 830,298 914,129 796,431 Rental received in advance (795) (619) (50) (254) Unearned hire purchase income (176,747) (174,981) (147,460) (145,590) Provision for hire purchase receivable Specifi c (11,257) (8,472) (10,219) (9,207) Hire purchase rentals receivable from one to fi ve years 794,983 646,226 756,400 641,380 Total hire purchases receivable 1,327,428 1,072,959 1,253,547 1,028,860 Group Company For the year ended 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
27. Real Estate Inventories As at beginning of the year 110,790 125,232 108,220 125,232 Additi ons for the year 14,081 89,303 14,081 86,733 Disposals during the year (64,063) (103,745) (64,063) (103,745) Provision for real estate inventories (2,070) - (2,070) - As at end of the year 58,738 110,790 56,168 108,220 Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
28. Deposits & Receivables Deposits 8,882 7,592 7,208 3,367 Real estate debtors 8,282 42,437 8,282 42,437 Staff debtors 380 993 329 864 Stati onary stock 655 623 555 408 Vehicle stock 13,113 - 13,113 - Other receivables 98,751 89,147 91,418 78,070 Less: Provisions for other receivables (8,777) (2,715) (8,777) (2,715) 121,286 138,077 112,128 122,431
Notes to the Financial Statements Contd...
6969
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
29. Related party receivables Related party receivables PMB Financial Services Limited - - 25,308 134,677 People’s Merchant Finance Company Limited - - 383 - Less: Provisions for related party receivables - - (25,308) - - - 383 134,677
30. Investments in subsidiary companies 2011 2010 Holding Cost of Directors Holding Cost of Directors investment Valuati on investment Valuati on
Rs’000 Rs’000 Rs’000 Rs’000 PMB Financial Services Ltd (Formerly known as PMB credit card company Ltd) 100% 175,000 - 100% 23,000 11,000 People’s Merchant Finance company Ltd 99.99% 287,089 287,089 99.99% 287,089 287,089 Provision for impairment of subsidiary (175,000) - - (12,000) -
287,089 287,089 298,089 298,089 PMB Financial Services Ltd (Formerly known as PMB credit card company Ltd)
PMB Credit Card Company Ltd was setup in March 2009, as a fully owned subsidiary company of People’s Merchant PLC (formerly known as People’s Merchant Bank PLC) for taking over credit card operati ons carried out by ABC Credit Card Company Ltd. PMP initi ally invested Rs.23Mn towards capital of this company. The investment was increased to Rs. 175Mn during the year. It was treated as a subsidiary company when group accounts are prepared under Sri Lanka Accounti ng Standards No.26. The Investment was fully impaired taking into account of decline in the value of investment due to losses in this company.
People’s Merchant Finance Company LtdThe company acquired 44% of shares of People’s Merchant Finance Company Ltd in March 2009. It became a subsidiary company in June 2009 with a acquisiti on of 55.99% balance shares. The fair value of the company of Rs.287Mn was established based on the valuati on carried out by a professional fi rm.
Acquisti on date - June 2009 Acquisti on cost Share Holding % March 2009 44.00% Rs. 126Mn June 2009 55.99% Rs. 161Mn Total cost of acquisti on Rs. 287Mn
31. Goodwill The cost of acquisti on of 99.99% share holding in People’s Merchant Finance Company Ltd amounted to Rs.287
Mn. Goodwill arising on consolidati on amounts to Rs.82.6Mn which is stated bellow
Rs’000 Purchase considerati on 287,089 Net asset value of the company 204,494 Good will 82,595
Notes to the Financial Statements Contd...
7070
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
32. Property, Plant & Equipment 32.1. Group Free hold Building Motor Operati ng Furniture Computers Offi ce Total Total Land Vehicles Lease & Fitti ngs Equipment 31.03.11 31.03.10 Assets Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Cost As at 1st April 8,313 3,662 20,913 2,741 11,203 21,990 19,885 88,707 518,157 Additi ons 455,902 13,754 2,819 - 4,407 2,756 5,105 484,743 14,461 Acquisti ons of subsidiary - - - - - - - - 18,135 Disposals - - (11,380) - - (544) (4,327) (16,251) (9,334) Write off - - - - - - (2,515) (2,515) - Transfer to asset held for sale - - - - - - - - (452,711) As at 31st March 464,215 17,416 12,352 2,741 15,610 24,202 18,148 554,684 88,708
Accumulated Depreciati on As at 1st April - 1,040 11,623 2,741 3,686 13,771 5,223 38,084 28,866 Charge during the year - 578 1,995 - 1,618 3,065 2,712 9,968 13,687 Acquisti ons of Subsidiary - - - - - - - - 4,008 Depreciati on on disposals during the year - - (4,863) - - (211) (1,068) (6,142) (7,340) Write off - - - - - - (652) (652) - Transfer to asset held for sale - - - - - - - - (1,134) As at 31st March - 1,618 8,755 2,741 5,304 16,625 6,215 41,258 38,087 Net book value as at March 2011 464,215 15,798 3,597 - 10,306 7,577 11,933 513,426 - Net book value as at March 2010 8,313 2,622 9,291 - 7,516 8,218 14,661 - 50,621
32.2. Company Free hold Building Motor Operati ng Furniture Computers Offi ce Total Total Land Vehicles Lease & Fitti ngs Equipment 31.03.11 31.03.10 Assets Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Cost As at 1st April - - 14,799 2,741 8,209 12,136 6,968 44,853 44,723 Additi ons 455,902 14,177 6,004 - 3,621 2,175 3,910 485,789 7,177 Disposals - - (6,500) - - - - (6,500) (7,047) As at 31st March 455,902 14,177 14,303 2,741 11,830 14,311 10,878 524,142 44,853 Accumulated Depreciati on As at 1st April - - 10,087 2,741 2,873 9,454 2,787 27,942 28,531 Charge during the year - 473 1,057 - 1,239 1,305 1,256 5,330 6,314 Depreciati on on disposals during the year - - (3,312) - - - - (3,312) (6,903) As at 31st March - 473 7,832 2,741 4,112 10,759 4,043 29,960 27,942 Net book value as at March 2011 455,902 13,704 6,471 - 7,718 3,552 6,835 494,182 - Net book value as at March 2010 - - 4,712 - 5,336 2,682 4,181 - 16,911
Notes to the Financial Statements Contd...
7171
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
33. Intangible Assets - Computer Soft ware Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000 Cost As at beginning of the year 13,803 12,854 11,415 11,175 Additi ons 1,808 949 1,808 240 Disposals/ write off (1,749) - - - As at end of the year 13,862 13,803 13,223 11,415 Accumulated Amorti sati on As at beginning of the year 9,128 5,996 8,563 5,971 Amorti sati on for the year 2,148 3,131 1,697 2,592 Disposals/ write off (687) - - - As at end of the year 10,589 9,127 10,260 8,563 Net book value as at 31st March 3,273 4,676 2,963 2,852
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’00034. Borrowings Unsecured borrowings 2,394,898 1,475,059 2,258,148 1,393,609 Securiti sed borrowings ( Note. 34.1 ) 670,915 635,070 670,915 635,070 3,065,813 2,110,129 2,929,063 2,028,679 Payable within one year 2,789,749 1,680,841 2,663,981 1,680,841 Payable aft er one year 276,064 429,288 265,082 347,838 3,065,813 2,110,129 2,929,063 2,028,679
34.1. This represent borrowings from People’s Bank, Nati onal Savings Bank, Hatt on Nati onal Bank PLC and Bank of Ceylon for which part of lease and hire purchase portf olio amounti ng to Rs.595Mn is securiti sed and company property at No.21, Nawam Mw, Colombo 02 are mortgaged for these faciliti es.
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’00035. Interest accrued Securiti sed loans 6,905 9,809 6,905 9,809 Unsecured loans 7,152 461 7,152 461 Commercial papers 80,426 54,051 80,426 54,051 Fixed deposits/promissory notes 35,451 34,760 32,275 20,748 129,934 99,081 126,758 85,069
36. Debentures ( Unsecured, redeemable ) Fixed interest, payable half-yearly 12% p.a , redempti on 2012 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Notes to the Financial Statements Contd...
7272
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
37. Dividends Payable Unclaimed ordinary dividends 76 205 76 205 Preference dividends 1,200 600 1,200 600 1,276 805 1,276 805
38. Reti rement Benefi t Obligati ons Balance brought forward 9,344 5,712 6,932 5,218 Acquisti on of subsidiary company - 988 - - Charge / (Reversal) for the year (798) 2,644 238 1,714 Payments made during the year (520) - (74) - Balance carried forward 8,026 9,344 7,096 6,932 Reti rement Benefi t Plan - Gratuity For People’s Merchant PLC (formerly known as People’s Merchant Bank PLC) and People’s Merchant Finance
Company Ltd, an actuarial valuati on of the gratuity liability was carried out as at 31st March 2011 by Mr. M. Poopalanathan , Messrs Actuarial and Management Consultant (Pvt) Ltd, a fi rm of professional actuaries. The valuati on method used by the actuaries to value the liability is the “Projected Unit Credit Method”, the method recommended by the Sri Lanka. Accounti ng Standard No.16(Revised 2006) “Employee Benefi ts”.
Discount rate used 10% Future salary increase 10%
Group Company As at 31st March 2011 2010 2011 2010 Rs’000 Rs’000 Rs’000 Rs’000
39. Deferred Tax Liabiliti es Balance brought forward 27,653 22,419 26,896 22,419 Impact on rate change reversed to income statement (3,595) - (1,928) - Charge/ (reversal) for the year (Note 17) (10,348) 5,234 (17,256) 4,477 Balance carried forward 13,710 27,653 7,712 26,896
40. Other Liabiliti es & Provisions General provision for Guarantees 82 37 82 37 Lease / hire purchase suppliers 24,729 14,915 20,652 14,330 Provisions for other receivables 4,895 - 4,895 - Current tax liability 3,201 (1,606) 2,233 (2,386) Other payables 8,252 448,508 (731) 18,460 41,159 461,854 27,131 30,441
40.1. Impact due to change in Corporate Income Tax Rate Commencing from year of assessment 2011/12, income tax rate has been changed from 35% to 28% as per
legislati on enacted in March 2011. The reducti on in deferred tax liability on rate change amounted to Rs.1.9Mn for the company and Rs.3.6Mn for the group.
Notes to the Financial Statements Contd...
7373
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
41. Stated Capital In accordance with secti on 58 of Companies Act No.7 of 2007 , which became eff ecti ve from 3rd May 2007
share capital, preference shares and share premium have been combined and reclassifi ed as Stated Capital. The comparati ve informati on has been reclassifi ed accordingly.
2011 2010 Rs.’000 Rs.’000 Ordinary Shares Opening balance - 25,000,000 ordinar shares 375,000 250,000 Rights issue of 12,500,000 Ordinary shares* - 125,000 Closing balance - 37,500,000 Ordinary shares 375,000 375,000 Share premium 259,399 259,399 Preference shares 1,000,000 - 6% Cumulati ve non redeemable Preference shares 10,000 10,000 Stated capital as at 31st March 644,399 644,399
* Right issue of one share for every two shares held was made in January 2010. A total of 12.5Mn shares were issued at a price of Rs. 20/- per share. The right issue funds were uti lised to sett le short term unsecured debt instruments.
Revenue Reserve This represents the undistributed earnings held by the Company to be used in the Company’s operati ons. This
could be used to absorb future probable losses or dividends payable.
Finance Leasing Reserved Fund This represent a reserve fund created in FY05/06, as per the directi ons issued by the Department of Non Banking
Financial insti tuti on of Central Bank of Sri Lanka, under the directi on no 06 of 2005 of Finance Leasing Act No 56 of 2000.
This requires a sum equivalent to not less than 5% of profi t aft er tax being transferred to the reserve fund unti l the amount of the reserve fund is equal to 50% of the issued and paid-up ordinary share capital of the Company, and thereaft er, a further sum equivalent to not less than 2% of profi t aft er tax unti l the amount of the reserve fund is equal to the issued and paid up ordinary share capital of the Company.
No transfer was made to the reserve account due to losses aft er tax for FY 2010/11 by the company. Total fi nancial leasing reserve fund as at 31st March 2011 remains at Rs.6.249Mn. An amount of Rs.0.68Mn was transferred to the statutory reserve on account of subsidiary company.
42. Ordinary dividends There were no interim dividends paid to the Ordinary Shareholders during the year. Directors have not
recommended a payment of a fi nal dividend for the year ended 31st March 2011.
Notes to the Financial Statements Contd...
7474
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
43. Non-performing advances and provisions In the case of earnings under loans, fi nance leases and other advances interest income ceases to be taken to
revenue when it is in arrears for three (03) months or more and thereaft er such income is recognized on cash basis. As at 31st March 2010 the balances on which interest is not accrued are as follows
As at 31st March Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs. ‘000 Rs. ‘000 Bills of exchange 27,585 26,012 27,585 26,012 Loans 395,891 388,523 361,839 381,128 Lease 171,303 192,355 145,572 179,441 Hire purchase 140,425 118,014 133,487 110,816 735,204 724,904 668,483 697,397 Less: Specifi c provisions made as at 31st March ( Note. 43.2 ) 173,923 109,899 159,592 110,856 561,281 615,005 508,891 586,541
Non-performing advances of Rs.735 Mn is secured by immovable assets, movable assets and other registered securiti es. The value of securiti es are discounted, if permitt ed, as per the directi ons of the Central Bank of Sri Lanka, when specifi c provisions are computed.
For the year ended 31st March Group Company 2011 2010 2011 2010 Rs’000 Rs’000 Rs. ‘000 Rs. ‘00043.1. Movement in Bad & Doubtf ul Debts provision Balance brought forward 113,953 80,404 114,910 80,404 Additi onal provision made - specifi c 64,024 34,899 48,736 35,856 Provision / (reversal) - general 991 (1,350) 991 (1,350) Balance carried forward ( Note. 43.2 ) 178,968 113,953 164,637 114,910
As at 31st March 2011 31st March 2010 Group Specifi c General Total Specifi c General Total Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 00043.2. Made up as follows: Bills of exchange ( Note. 23) 24,222 22 24,244 21,242 100 21,342 Loans ( Note. 24) 30,146 426 30,572 13,280 120 13,400 Lease ( Note. 25) 76,142 1,002 77,144 52,949 1,595 54,544 Hire purchase ( Note. 26) 43,413 3,513 46,926 22,428 2,202 24,630 Guarantees - 82 82 - 37 37 173,923 5,045 178,968 109,899 4,054 113,953
As at 31st March 2011 31st March 2010 Company Specifi c General Total Specifi c General Total Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 00043.3. Made up as follows: Bills of exchange ( Note. 23) 24,222 22 24,244 21,242 100 21,342 Loans ( Note. 24) 25,543 426 25,969 13,522 120 13,642 Lease ( Note. 25) 67,821 1,002 68,823 53,389 1,595 54,984 Hire purchase ( Note. 26) 42,006 3,513 45,519 22,703 2,202 24,905 Guarantees - 82 82 - 37 37 159,592 5,045 164,637 110,856 4,054 114,910
Notes to the Financial Statements Contd...
7575
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
44. Maturity Profi le of Assets and Liabiliti es Allocati on of Amounts Amounts were allocated to respecti ve maturity groupings based on installments falling due as per contract. The amounts therefore represent total amount receivable or payable in each maturity grouping.
44 (1). Group As at 31.03.2011 Up to 3 - 12 1 - 3 3 - 5 More than Total 3 Months Months Years Years 5 Years Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Interest bearing assets Cash & short term funds 125,537 - - - - 125,537 Government and dealing securiti es 37,426 3 - - 23 37,452 Bills of exchange 28,286 - - - - 28,286 Loans 208,968 105,593 121,918 21,330 - 457,809 Leases 150,824 303,502 489,643 164,133 19,774 1,127,876 Hire purchase 176,763 329,081 669,805 125,178 26,601 1,327,428 Real estate inventories 26,937 31,801 - - - 58,738 Total Interest bearing assets 754,741 769,980 1,281,366 310,641 46,398 3,163,126 Total Non - Interest bearing assets 202,997 884 - - 516,699 720,580 Total assets 957,738 770,864 1,281,366 310,641 563,097 3,883,706 Percentage 24.66% 19.85% 32.99% 8.00% 14.50% 100.00% Interest bearing liabiliti es Debentures - 100,000 - - - 100,000 Securiti sed borrowings 56,800 553,965 60,150 - - 670,915 Unsecured borrowings 705,664 1,473,319 214,804 1,111 - 2,394,898 Bank overdraft 39,769 - - - - 39,769 Total interest bearing liabiliti es 802,233 2,127,284 274,954 1,111 - 3,205,582 Total Non- Interest bearing Liabiliti es 145,589 40,490 - 8,026 - 194,105 Equity - - - - 484,019 484,019 Total liabiliti es & equity 947,822 2,167,774 274,954 9,137 484,019 3,883,706 Percentage 24.41% 55.83% 7.07% 0.24% 12.45% 100.00%
Group As at 31.03.2010 Up to 3 - 12 1 - 3 3 - 5 More than Total 3 Months Months Years Years 5 Years Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Interest bearing assets Cash & short term funds 76,793 - - - - 76,793 Government and dealing securiti es 22,582 27,685 - - 26 50,293 Bills of exchange 54,376 - - - - 54,376 Loans 119,368 86,518 193,616 78,520 - 478,022 Leases 206,194 248,483 363,796 104,920 1,383 924,776 Hire purchase 161,486 264,235 531,935 114,873 430 1,072,959 Real estate inventories 17,050 93,740 - - - 110,790 Total Interest bearing assets 657,849 720,661 1,089,347 298,313 1,839 2,768,009 Total Non - Interest bearing assets 106,304 483,349 19,762 - 118,130 727,545 Total assets 764,153 1,204,010 1,109,109 298,313 119,969 3,495,554 Percentage 21.86% 34.44% 31.73% 8.53% 3.43% 100.00% Interest bearing liabiliti es Debentures - 100,000 - - - 100,000 Securiti sed borrowings 177,988 380,457 76,625 - - 635,070 Unsecured borrowings 344,883 777,513 346,187 6,476 - 1,475,059 Bank overdraft 140,410 - - - - 140,410 Total interest bearing liabiliti es 663,281 1,257,970 422,812 6,476 - 2,350,539 Total Non- Interest bearing Liabiliti es 132,469 457,109 - 9,158 - 598,736 Equity - - - - 546,278 546,278 Total liabiliti es & equity 795,750 1,715,079 422,812 15,634 546,278 3,495,554 Percentage 22.76% 49.06% 12.09% 0.45% 15.63% 100.00%
Notes to the Financial Statements Contd...
7676
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
44. Maturity Profi le of Assets and Liabiliti es Contd...44(2). Company As at 31.03.2011 Up to 3 - 12 1 - 3 3 - 5 More than Total 3 Months Months Years Years 5 Years Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Interest bearing assets Cash & short term funds 47,557 - - - - 47,557 Dealing/Investment securiti es 9,024 - - - 23 9,047 Bills of exchange 28,286 - - - - 28,286 Loans 193,147 94,364 120,314 18,121 - 425,946 Leases 124,236 243,583 454,275 148,667 19,774 990,535 Hire purchase 155,301 315,245 648,175 108,225 26,601 1,253,547 Real estate inventories 26,937 29,231 - - - 56,168 Total Interest bearing assets 584,488 682,423 1,222,764 275,013 46,398 2,811,086 Total Non - Interest bearing assets 373,408 884 25,308 - 497,145 896,745 Total assets 957,896 683,307 1,248,072 275,013 543,543 3,707,831 Percentage 25.83% 18.43% 33.66% 7.42% 14.66% 100.00%
Interest bearing liabiliti es Debentures - 100,000 - - - 100,000 Securiti sed borrowings 56,800 553,965 60,150 - - 670,915 Unsecured borrowings 670,456 1,382,760 204,932 - - 2,258,148 Bank overdraft 38,242 - - - - 38,242 Total interest bearing liabiliti es 765,498 2,036,725 265,082 - - 3,067,305 Total Non- Interest bearing Liabiliti es 135,746 27,131 - 7,096 - 169,973 Equity - - - - 470,553 470,553 Total liabiliti es & equity 901,244 2,063,856 265,082 7,096 470,553 3,707,831 Percentage 24.31% 55.66% 7.14% 0.19% 12.70% 100.00%
Company
As at 31.03.2010 Up to 3 - 12 1 - 3 3 - 5 More than Total 3 Months Months Years Years 5 Years Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Interest bearing assets Cash & short term funds 40,129 - - - - 40,129 Dealing/Investment securiti es 5,571 - - - 23 5,594 Bills of exchange 54,376 - - - - 54,376 Loans 95,305 75,289 192,012 75,311 - 437,917 Leases 148,727 221,526 359,965 97,396 1,383 828,997 Hire purchase 135,027 251,888 530,171 111,344 431 1,028,861 Real estate inventories 17,050 91,170 - - - 108,220 Total Interest bearing assets 496,185 639,873 1,082,148 284,051 1,837 2,504,094 Total Non - Interest bearing assets 225,334 31,772 19,762 - 298,089 574,957 Total assets 721,519 671,645 1,101,910 284,051 299,926 3,079,051 Percentage 23.43% 21.81% 35.79% 9.23% 9.74% 100.00%
Interest bearing liabiliti es Debentures - 100,000 - - - 100,000 Securiti sed borrowings 177,988 281,530 175,552 - - 635,070 Unsecured borrowings 323,300 898,023 168,286 4,000 - 1,393,609 Bank overdraft 126,576 - - - - 126,576 Total interest bearing liabiliti es 627,864 1,279,553 343,838 4,000 - 2,255,255 Total Non- Interest bearing Liabiliti es 112,770 30,441 - 6,932 - 150,143 Equity - - - - 673,653 673,653 Total liabiliti es & equity 740,634 1,309,994 343,838 10,932 673,653 3,079,051 Percentage 24.05% 42.55% 11.16% 0.36% 21.88% 100.00%
Notes to the Financial Statements Contd...
7777
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
45. Concentrati on of Assets45.1. Concentrati ons in the Distributi on of Assets 45.1.1. In order to minimise potenti al risks inherent in the realisati on of the assets, the bank adheres to
prudent exposure limits on customer and industry groups.
45.1.2. Industrywise distributi on of main assets are given below:
Industry sector Group Company
2011 2010 2011 2010 % % % % 1. Agriculture 11.0 10.0 10.0 11.0 2. Industry 15.0 17.0 16.0 16.0 3. Trading 31.0 33.0 30.0 31.0 4. Transport 9.0 9.0 8.0 9.0 5. Constructi on 9.0 9.0 9.0 9.0 6. Service 25.0 21.0 27.0 24.0 7. Credirt Card - 1.0 - - 100.0 100.0 100.0 100.0
46. Segment Informati on-Business Segments46.1. Group Trade bills & Leasing & Real Corporate Credit card Total loans Hire purchase Estate Finance & other Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 For the year ended 31st March 2011 Income Interest income 52,180 534,913 5,174 - 5,500 597,767 Other income 520 32,969 8,424 14,161 12,850 68,924 Total income 52,700 567,882 13,598 14,161 18,350 666,691 Percentage 8.0% 85.0% 2.0% 2.1% 2.9% 100.0% Expenses Interest 55,358 319,209 16,565 2,238 32,945 426,315 Other expenses 38,116 207,656 24,010 7,271 27,165 304,218 Total expenses 93,474 526,865 40,575 9,509 60,110 730,533 Profi t before taxati on (40,774) 41,017 (26,977) 4,652 (41,760) (63,842) Income tax expense 2,183 Profi t for the period (61,659) Segment assets 608,895 3,075,574 73,577 27,836 97,825 3,883,706 Percentage 15.7% 79.2% 1.9% 0.7% 2.5% 100.0% Segment Liabiliti es 533,114 2,692,800 64,420 24,372 84,981 3,399,687 Informati on on Cash Flows (Group) for the year ended 31st March 2011 Cash fl ow from operati ng acti vites 77,086 (256,584) 80,329 - (317,627) (416,796) Cash fl ow from investi ng acti vites - - - (7,063) (8,255) (15,318) Cash fl ow from fi nancing acti vites 116,337 436,535 24,209 6,055 (1,637) 581,499
Notes to the Financial Statements Contd...
7878
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
46. Segment Informati on-Business Segments Contd... Group Trade bills & Leasing & Real Corporate Credit card Total loans Hire purchase Estate Finance & other Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 For the year ended 31st March 2010 Income Interest income 78,988 459,499 749 - 5,101 544,336 Other income 1,275 13,323 24,690 1,588 63,012 103,889 Total income 80,263 472,822 25,439 1,588 68,113 648,225 Percentage 12.4% 73.0% 3.9% 0.2% 10.5% 100.0%
Expenses Interest 74,391 308,416 20,223 1,060 104,532 508,622 Other expenses 19,554 143,759 15,966 530 84,356 264,165 Total expenses 93,945 452,175 36,189 1,590 188,888 772,787 Profi t before taxati on (13,682) 20,647 (10,750) (2) (120,775) (124,562) Share of profi t of associate 274 Profi t before taxati on (124,288) Income tax expense (11,716) Profi t for the period (136,004) Segment assets 532,399 1,997,735 110,790 27,710 826,920 3,495,554 Percentage 15.2% 57.1% 3.2% 0.8% 23.7% 100.0% Segment Liabiliti es 437,097 1,649,553 96,086 4,967 761,573 2,949,276
Informati on on Cash Flows (Group) for the year ended 31st March2010 Cash fl ow from operati ng acti vites 113,503 (132,838) 30,359 - (102,340) (91,316) Cash fl ow from investi ng acti vites - - - (25,477) (170,165) (195,642) Cash fl ow from fi nancing acti vites 86,180 298,438 24,416 642 (19,743) 389,933
46.2. Company Trade bills & Leasing & Real Corporate Other Total loans Hire purchase Estate Finance Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 For the year ended 31st March 2011 Income Interest income 41,853 502,399 5,174 - 789 550,215 Other income 520 7,309 8,424 8,664 11,698 36,615 Total income 42,373 509,708 13,598 8,664 12,487 586,830 Percentage 7.2% 86.9% 2.3% 1.5% 2.1% 100.0% Expenses Interest 52,104 312,702 16,565 2,238 - 383,609 Other expenses 29,085 171,695 24,010 7,365 186,386 418,541 Total expenses 81,189 484,397 40,575 9,603 186,386 802,150 Profi t before taxati on (38,816) 25,311 (26,977) (939) (173,899) (215,320) Income tax expense 12,820 Profi t for the period (202,500) Segment assets 560,513 2,769,152 79,530 11,164 287,472 3,707,831 Percentage 15.1% 74.8% 2.1% 0.3% 7.7% 100.0% Segment Liabiliti es 489,379 2,417,725 69,437 9,747 250,990 3,237,278 Informati on on Cash Flows for the year ended 31st March 2011 Cash fl ow from operati ng acti vites 83,459 (267,341) 80,329 - (506,143) (609,696) Cash fl ow from investi ng acti vites - - - 3,867 (8,065) (4,198) Cash fl ow from fi nancing acti vites 116,295 574,544 16,501 2,316 - 709,656
Notes to the Financial Statements Contd...
7979
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
46. Segment Informati on-Business Segments Contd...46.2. Company
Trade bills & Leasing & Real Corporate Other Total loans Hire purchase Estate Finance Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 For the year ended 31st March 2010 Income Interest income 66,215 433,844 749 - 988 501,796 Other income 1,275 11,170 24,690 1,530 3,288 41,953 Total income 67,490 445,014 25,439 1,530 4,276 543,749 Percentage 12.4% 81.8% 4.7% 0.3% 0.8% 100.0% Expenses Interest 70,927 295,050 20,016 1,060 - 387,053 Other expenses 13,770 125,798 16,171 530 14,713 170,982 Total expenses 84,697 420,848 36,187 1,590 14,713 558,035 Profi t before taxati on (17,207) 24,166 (10,748) (60) (10,437) (14,286) Income tax expense (6,123) Profi t for the period (20,409) Segment assets 492,294 1,857,857 108,220 5,594 615,086 3,079,051 Percentage 16.0% 60.3% 3.5% 0.2% 20.0% 100.0% Segment Liabiliti es 447,772 1,689,837 98,433 5,088 164,268 2,405,398 Informati on on Cash Flows for the year ended 31st March 2010 Cash fl ow from operati ng acti vites 66,819 (146,814) 30,359 - (381,659) (431,295) Cash fl ow from investi ng acti vites - - - 4,136 (167,788) (163,652) Cash fl ow from fi nancing acti vites 120,997 456,630 26,599 1,375 (16,024) 589,577
47. Conti ngent Liabiliti es and Commitments for Capital Expenditure as at 31st March 2011
47.1. The company had issued Lett ers of Guarantee to the value of Rs.32.94Mn.
47.2. Liti gati on against the company
H C (Civil) 198/2010/MR This case was fi led by Siththy Nehimiya Junaideen against us seeking an injuncti on to stop us from selling a land
she provided as security. This case was dismissed by Court.
DLM 000133/2009 This case was fi led by one Sunil Perera against the company since he says that the company has given a loan to a
third party on a security of an immovable property owned by Sunil Perera. The case was fi led in the District Court of Colombo and at present the case is proceeding with the trial and now the plainti ff is giving his evidence.
DLM 00026/2010 This case was fi led by S P Y D Lakmali against the company since she has given her immovable property to the
company as a security for the loan which was taken by her and her father and the case is pending in the District Court of Colombo and it is pending in the calling stage.
Notes to the Financial Statements Contd...
8080
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
47.2. Liti gati on against the company Contd...
H C (Civil) 502/2009/MR Yasunaga Residencies (Pvt) Ltd has fi led the above menti oned acti on in the Commercial High Court against the
company by asking a sum of Rs.26,500,000/- and the company has fi led the Answer claiming a mortgage Bond acti on against the Yasunaga Residencies (Pvt) Ltd and at present the case is pending in the calling stage.
N. Soysa Vs People’s Merchant PLC. The Ex CEO of the company, Mr. Naomal Soysa has fi led this suit against the company in the Labour Tribunal
seeking reinstatement in service and compensati on for terminati on of his services. The judgment was given in his favour but only compensati on was awarded to him in a sum of Rs 2.1 Mn. We have appealed against the judgment and Mr Soysa too has fi led an appeal asking to vary the judgment by setti ng aside the fi ndings of the Labour Tribunal that Mr Soysa had failed to maintain cordial relati ons with his subordinates, vary the judgment awarding re instatement with back wages or in the alternati ve, by awarding enhanced compensati on.
Dhammika Sumanasekara A case has been fi led by an employee whose services were terminated by us in the Labour Tribunal seeking re
instatement in service, back wages and gratuity withheld. Trial was commenced in May 2011. Anura Fernando A case has been fi led by an employee whose services were terminated by us in the Labour Tribunal seeking re
instatement in service and back wages in November 2010.
47.3. There were no commitments approved by the Board of Directors or contracted by the Company.
48. Related Party Transacti ons The company carried out transacti ons in the ordinary course of its business on normal commercial terms basis
with parti es who are defi ned as related parti es in Sri Lanka Accounti ng Standard 30 (Revised 2005) “Related Party Disclosures”, the details of which are reported below,
48.1. Transacti on with Subsidiaries
Name of Related Party Relati onship Name of Common Transacti on Limit / Amount paid Amount Director Type Value during as at year 31.03.11 Rs.000 Rs.000 Rs.000 PMB Financial Funds advanced Services Ltd Subsidiary to subsidiary - 208,076 25,308
Notes to the Financial Statements Contd...
8181
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
48. Related Party Transacti ons Contd ...
48.2. Transacti on with Other Related Parti es Name of Related Party Relati onship Name of Common Transacti on Limit / Amount paid Amount Director Type Value during as at year 31.03.11 Rs.000 Rs.000 Rs.000 Peoples Bank Major Shareholder Mr.P.A. Ajith Overdraft 120,000 9,094 38,242 Panditharatne / Interest Chairman Revolving loan 200,000 55,754 -
/ interest Mr.J.P. Amarathunga Preference shares 10,000 - 10,000 Director / Dividends Term loans (secured) 750,000 132,833 405,950 / interest Mr.Sabry Ibrehim Term loans (unsecured) 40,000 3,333 36,667 Director / interest Lanka Orix Leasing Shareholder Mr. Kapila Jayawardena Short term Loan 50,000 - 50,000 Company PLC Director Ceylon Strategic Holdings LTD Director Mr.Anura Investment in - 12,200 21,374 R. Wickramasinghe Commercial MD/CEO papers
48.3. Transacti ons with Key Management Personnel (KMP) Sri Lanka Accounti ng Standard 30 (Revised 2005) “Related Party Disclosures”, Key Management Personnel are those
having authority and responsibility for planning, directi ng and controlling the acti viti es of the enti ty.
Remunerati ons paid to key management personnel are disclosed in Note 14.
49. Post Balance Sheet Events No circumstances have arisen subsequent to the date of the balance sheet which would require adjustment to or
disclosure in the fi nancial statements, except for those disclosed below. Disposal of PMF The Company disposed its’ enti re holding of 99.99% in the subsidiary company, People’s Merchant Finance Company
Limited on 12th May 2011.
The details of this transacti on is given below; Rs.’000 Disposal value (Net of Expenses) 424,517 Less: cost of investment 287,089 Profi t on disposal 137,428
Notes to the Financial Statements Contd...
8282
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
50. Reclassifi cati on of Comparati ve Figures Where appropriate comparati ve informati ons have been reclassifi ed to conform to the classifi cati on of 31st
March 2011 fi nancial statements.
51. Directors’ Responsibility Statement The Board of Directors take the responsibility for the preparati on and presentati on of the fi nancial statement.
Please refer page 46 of the Annual Report for the Statement of Directors Responsibility for Financial Reporti ng.
Notes to the Financial Statements Contd...
8383
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Statement of Value Added
For the year ended 31st March Group Company 2011 2010 2011 2010 Rs’000’s % Rs’000’s % Rs’000’s % Rs’000’s %
Value Added Income 666,691 648,225 586,830 543,749 Less: Finance cost 426,315 508,622 383,609 387,053 Cost of other services 126,154 134,720 100,924 73,779 Provision for bad & doubtf ul debts 78,734 36,263 236,113 37,221 Diminuti on in value of investments 1,598 (4,730) 1,105 (4,824) 33,890 (26,650) (134,921) 50,520
Value Allocated
To employees Salaries, wages and other benefi ts 76,271 (225%) 77,240 (290%) 64,027 (48%) 52,589 104% To providers of capital Dividends to shareholders 600 (2%) 600 (2%) 600 0% 600 1%
To Government as taxes 7,231 (21%) 16,184 (61%) (4,075) 3% 8,836 17% To Expansion and growth Retained income and depreciati on (50,212) 148% (120,674) 453% (195,473) 145% (11,505) (22%) 33,890 100% (26,650) 100% (134,921) 100% 50,520 100%
Value added per employee ( Rs.000’s) 265 (201) (1,216) 683
8484
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Graphical Review
42%
14%
33%
1%
2%
Composi�on of Assetsas at 31.03.2011
Bills of exchange
Loans
Finance leases
Hire purchases
Real estate stock
Other
8%
Trade bill & Loans
Leasing &Hire Purchase
Real Estate
Corporate Finance
Other
2.1%
7.2%
86.9%
2.3%1.5%
Composi�on of Income for the year 2010/2011
Upt
o 3
Mon
ths
Mon
ths
1-3
Year
s
3-5
Year
s
Mor
e th
an
5
Year
s
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
Rs.M
n.
Maturity annalysis of interest bearingAssets and Liabili�es as at 31.03.2011
Liabili�es
3-12
Assets
0%
20%
40%
60%
80%
100%
120%
140%
‘07 ‘08 ‘09 ‘10 ‘11
Cost to income ra�o
Distribu�on of assets
Rs.M
n.
0
500
1,000
1,500
2,000
2,500
3,000
‘11‘10‘09‘08‘07
Securi�es
Real estate inventory
Hire purchae
Finance lease
Bills & loans
0%
3%
6%
9%
12%
15%
18%
21%
24%
27%
30%
33%
36%
39%
‘11Non performing advancesAffected percentage
Non Performing advancesand affected Percentage
‘07 ‘08 ‘09 ‘10
100
50
150
200
250
300
350
400
450
500
550
600
650
700
Rs.M
n.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
500
1,000
1,500
2,000
2,500
3,000
Provision % (on Advances)
Total advances and Bad & Doub�ul
Debt Provision percentage [on advances]
Total Por�olio
Rs.M
n.
‘11‘07 ‘08 ‘09 ‘10
050100150200250300350400450500550600
‘07 ‘08 ‘09 ‘10 ‘11
Rs.M
n.
Income,interest and other expenses
Other opera�ng expenses
Interest expenses
Income
8585
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Ten Year Summary
Year ended 31st March 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Rs. 000’s
OPERATING RESULTS
Income 586,830 543,749 540,922 376,090 303,306 220,744 166,064 146,414 134,206 136,909
Interest income 550,215 501,796 497,933 351,071 270,372 181,211 139,181 125,876 112,634 123,947
Interest expense 383,609 387,053 351,822 215,396 129,669 83,903 54,470 57,404 58,287 66,780
Profi t before taxati on (215,320) (14,286) 51,653 21,817 68,827 58,753 41,586 20,597 10,766 10,740
Profi t aft er taxati on (202,500) (20,409) 28,849 14,791 44,789 36,468 32,434 20,597 10,766 10,740
EQUITY 470,553 673,653 460,291 442,042 459,101 192,571 181,703 191,725 179,228 167,582
RATIOS
Return on equity (%) (35.40) (3.60) 6.39 3.28 13.75 19.49 17.37 11.10 6.21 6.51
Interest cover ( ti mes ) 0.47 0.95 1.08 1.07 1.35 1.43 1.60 1.36 1.18 1.16
SHARE INFORMATION
Net assets per share ( Rs.) 12.28 17.70 18.01 17.28 17.96 14.61 13.74 14.54 13.54 12.61
Earnings per share ( Rs. ) (5.42) (0.66) 0.95 0.57 2.38 2.33 2.55 1.60 0.81 0.81
Gross ordinary dividend - - 10,000 10,000 31,250 25,000 25,000 18,750 7,500 5,000
Dividend per share (Rs.) - - 0.40 0.40 1.25 2.00 2.00 1.50 0.60 0.40
Market value per share (Rs.) 23.50 23.50 29.75 56.50 23.00 33.00 20.50 11.75 12.25 6.50
Price Earnings rati o - - 31.3 99.1 9.7 14.2 8.0 7.3 15.1 8.0
Net assets per share
0
4
8
12
16
18
22
‘11‘10‘09‘08‘07
Rs.
Market value per share
0
10
20
30
40
50
60
‘11‘10‘09‘08‘07
Rs.
8686
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Investor Informati on
Distributi on of Shareholdings as at 31st March 2011 Residents Non- Reisdents Total Range of No. of No (%) of No. of No (%) of No. of No (%) of Shareholding Share of Share Share of Share Share of Share Holders Shares holdings Holders Shares holdings Holders Shares holdings
1 - 1,000 10,379 1,774,075 4.73 14 2,560 0.01 10,393 1,776,635 4.741,001 - 10,000 959 3,198,152 8.53 8 35,600 0.09 967 3,233,752 8.6210,001 - 100,000 127 4,010,248 10.69 5 179,600 0.48 132 4,189,848 11.17100,001 - 1,000,000 10 1,900,300 5.07 0 - - 10 1,900,300 5.07Over 1,000,000 4 24,524,465 65.40 1 1,875,000 5.00 5 26,399,465 70.40 11,479 35,407,240 94.42 28 2,092,760 5.58 11,507 37,500,000 100.00
Categories of Shareholders - Individuals / Insti tuti ons
31.03.2011 31.03.2010 No.of share No. of No.of share No. of Holders Shares % Holders Shares %
Individual 11,331 9,932,591 26.49% 10,893 6,552,124 17.47%Insti tuti ons 176 27,567,409 73.51% 143 30,947,876 82.53%Total 11,507 37,500,000 100.00% 11,036 37,500,000 100.00%
Categories of Shareholders - Residents / Non-Residents
31.03.2011 31.03.2010 No.of share No. of No.of share No. of Holders Shares % Holders Shares %
Resident 11,479 35,407,240 94.42% 11,017 34,186,540 91.16%Non-Resident 28 2,092,760 5.58% 19 3,313,460 8.84%Total 11,507 37,500,000 100.00% 11,036 37,500,000 100.00%
2011 2010
5.58% 8.84%
94.42% 91.16%
Resident Non-Resident
8787
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Investor Informati on Contd...
Twenty Major ShareholdresName of the Share Holder Shareholding % Shareholding % 31.03.2011 31.03.2010
People’s Bank 9,799,990 26.13 9,799,990 26.13
Lanka Orix Leasing Company PLC 7,380,179 19.68 7,568,279 20.18
People’s Leasing Company Ltd 4,899,996 13.07 4,899,996 13.07
Environmental Resources Investment PLC 2,444,300 6.52 2,444,300 6.52
South Bridge Capital Investments (Sri Lanka) Ltd 1,875,000 5.00 1,875,000 5.00
Mr Morarji Meghdi Udeshi 545,500 1.45 545,500 1.45
Mr.Dhansingani Gangaram Moolchand 243,400 0.65 - -
Mr.Gunasekara Vishramal Sanjiv 181,800 0.48 - -
Mr.Amirudeen Mohammed Khozema 175,700 0.47 - -
Mr.Anandawansa Wanniachchige Lal Thilaksiri 154,200 0.41 - -
Dr.De Silva Ruwanpura Rohitha 142,900 0.38 - -
Mr.Ranga Kati pe Arachchige 135,000 0.36 - -
Mr.Weerasinghe Amarakoon Mudiyanselage 110,000 0.29 - -
Mr.Karunanayake Oviti galage Don Jayaratne 109,700 0.29 - -
Mr.Kundanmal Bhagwan Wassiamal 102,100 0.27 - -
The Bishop of Galle 100,000 0.27 - -
Mr.Kiyabdeen Mohamed Mohideen 100,000 0.27 - -
Mrs.Sri Rayen Nageswary 100,000 0.27 - -
Mr.Biswas Pradeep Kumar 100,000 0.27 - -
Mr. N.A.Rathnayaka 93,500 0.25 - -
Other Share Hodlers who have either sold their
Shares or present holding has fallen below top 20 - - 4,658,548 12.42
28,793,265 76.78 31,791,613 84.77
As per rule No. 8.7 (h) of the Colombo Stock Exchange percentage of public holding as at 31.03.2011 was 15,386,797 (15,231,735 as at 31st March 2010). Public holding as a % of shares issued was 41.03% (40.53% as at 31st March 2010)
Public Holding Non Public Holding
59 % 41 %
2011
59 % 41 %
2010
8888
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Share Informati on
Market value of shares 31.03.2011 31.03.2010 31.03.2009 31.03.2008 31.03.2007
Highest price during the Year (Rs.) 35.90 61.75 59.00 93.50 38.25
Lowest Price during the Year (Rs.) 19.90 23.50 23.75 18.50 20.00
Closing Price (Rs.) 23.50 23.50 29.25 56.50 23.00
Investor Rati os
Price Earnigs Rati os - - 31.3 99.1 9.7
Net assest value per share(Rs.) 12.28 17.70 18.01 17.28 17.96
Debt Equity Rati o 86 : 14 75 : 25 83 : 17 74 :26 69 : 31
Interest cover (Times) 1.07 1.07 1.08 1.07 1.35
Share Trading
Number of Trnascti ons 18,631 6,106 1,387 10,305 1,500
Number of Shares traded 33,394,800 7,648,900 641,800 18,779,753 588,800
Value of shares traded (Rs.’000) 934,953 288,451 27,996 770,707 16,146
Market Capitalisati on (Rs.’000) 881,250 881,250 743,750 1,412,500 575,000
0
10
20
30
40
50
60
‘07 ‘08 ‘09 ‘10 ‘11
70
80
Rs.
People’s Merchant share price movementwith market performance
PMP share price
1,000
2,000
3,000
4,000
5,000
6,000
7,000
MPI ASPI
8989
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Our Services
Corporate Finance Project/Term Loans Structuring of Debt/Equity
Syndicati on of Loans Financial /Corporate Restructuring Mergers, Acquisiti ons and Buyouts Privati zati on & Infrastructure Projects Consultancy Services Business valuati on Independent Opinions Feasibility Studies/Reports Fund Management Investment Advisory Services Company Formati on Listi ng of Equity/Debt
Management of Mandatory/Voluntary Off ers Placement of Equity/Debt Underwriti ng Securiti sati on Employee Share Ownership Plans (ESOPS)
Contact: Anuradha - 011-2300191/4
Trade Finance Bills Discounti ng
Short/Medium - Term Loans Bank Guarantees
Import Financing
Contact: Anuradha - 011-2300191/4
Leasing Leasing of Vehicles and Equipments
Operati ng Leases Hire Purchase
Contact: Charith - 0777-873515, 011-2300191/4
Real Estate Housing Projects
Sale of Properti es Property development
Owner behalf sale
Contact: Jeevana - 0772-61424, 011-2300191/4
Short -Term Investments
Contact: Anura - 011-2300191/4
BranchesKurunegala183C, 2nd Floor, Colombo RoadKurunegala
Contact: Nalin Rajakaruna : 0777-811125, 037-7389091-2
Matara213, Anagarika Dharmapala Maw. Nupe, Matara-
Contact: Nalin Jayasekera : 0777-238078 04122200600/700
Matugama74B, Naboda Road, Matugama
Contact: PathumDassanayake : 077-3648691 034-2243828 034-2243869
Gampaha64, Queen Mary’s Road,Gampaha
Contact: Prabash Wickramasinghe : 077-3587900, 033-2233633
Awissawella75, Yati yanthota Road,Avissawella
Contact: Amal Geekiyanage : 0714-848177 036-2233520 036-2233790
Elpiti ya10A, Pituwala Road, Elpiti ya
Contact: Thushan Abeytunga : 0773-408043 091-2290498-9
Kandy145, Kotugodella Street,Kandy
Contact: P. Mayadunne : 0777-274701 0812200798-9
Negombo51/A, Thammita Road, Negombo
Contact: Nishad Hendalage : 0777-308571 031-2228577
Trincomalee118 NC Road, Trincomalee
Contact: P. Mayadunne : 026-7389090-3
Anuradhapura 09, Maithripala Senanayake Mw, Anuradhapura
Contact: Buddhika Pothupiti ya : 077-3914332 025-7389090-2
9090
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Guarantees
Primarily represent irrevocable assurance that a Bank
will make payments in the event that its applicant cannot
meet its fi nancial obligati ons to third parti es.
Interest Margin
Net interest income divided by average interest earning
assets, expressed as a percentage.
Interest Spread
Represent the diff erence between the average interest
rate earned and the average rate paid on funds.
Market Capitalizati on
Number of ordinary shares in issue multi plied by the
market value of each share.
Net Asset Value per Share
Equity, less preference share capital divided by the
number ordinary shares in issue.
Net Interest Income
The diff erence between income earned from interest
bearing assets and cost incurred on fi nancial instrument/
faciliti es used for funding the interest bearing assets.
Non-performing Advances
Leases, loans and other advances that are in arrears for
3 months or more area classifi ed as non-performing
advances. Interest income is recognized on these loans
only on a cash Basis.
Price Earning Rati o (P/E Rati o)
Market Price of an ordinary share divided by Earning per
Share (EPS).
Provision for Bad and Doubtf ul Debts
A charge to income, on account of probable losses on
advances granted. Specifi c provisions are established
to reduce the book value of specifi c assets to esti mated
realizable values. General provisions are made for
possible future losses.
Return on Average Assets (ROA)
Net profi t aft er tax expressed as a percentage of average
total assets. Used along with ROE, as a measure of
profi tability and as basis of intra-industry performance
comparison.
Return on Average Equity (ROE)
Net profi t aft er tax, less preference share dividend
if any, expressed as percentage of average ordinary
shareholders’ equity.
Shareholders’ Funds / Equity
Shareholders’ funds / Equity consist of issued and fully
paid share capital plus revenue and other reserves.
Value Added
Value added is the wealth created by providing services
less the cost of providing such services. The value added
is allocated among the employees, the providers of
capital, to government by way of taxes and retained for
expansion and growth.
Financial Leases
A lease that transfers substanti ally the enti re risks
and rewards incident to ownership of an asset, to the
Lessee.
Operati ng Lease
A lease where the substanti al ownership lies with the
Lessor and Lessee pays a rental for the use of asset.
Syndicati on of Loans
This is the process by which the corporate fi nance
department breaks through several diff erent lenders in
order to facilitate various porti ons of a loan.
Promissory Note
It is an agreement between investor & the issuer,
promising that the relevant amount will be paid on the
given date.
Glossary of Financial Terms
9191
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Glossary of Financial Terms Contd...
Related Parti es
Parti es who could control or signifi cantly infl uence the
fi nancial and operati ng policies of the business.
Subsidiary Company
An enterprise that is controlled by another enterprise
(known as the parent)
Associate Company
An enterprise in which an investor has signifi cant
infl uence and which is neither a subsidiary nor a joint
venture of the investor
Bill of exchange
It is a signed, writt en, unconditi onal order by one person
to pay another a specifi c sum on a specifi c date in the
future
Commercial Paper
A debt instrument issued by a corporate body for
borrowing funds which undertake to meet obligati ons
on maturity date. It is a lower cost source of fi nance for
companies to meet short-term fi nancial needs.
Conti ngent Liabiliti es
Conditi ons or situati ons at the balance sheet date, the
fi nancial eff ect of which to be determining by future
events which may or may not occur not wholly within
the control of the enterprise
Conti ngent Asset
A possible asset that arise from past events and whose
existence will be confi rmed only by the occurrence of
one or more uncertain future events not wholly within
the control of the enterprise
Segmental Analysis
Analysis of fi nancial informati on by segments of an
enterprise specifi cally, the diff erent industries and the
diff erent geographical areas in which it operates.
Non - Current Assets
An asset which is not easily converti ble to cash or not
expected to become cash within the next year.
9292
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Noti ce of Meeti ng
NOTICE IS HEREBY GIVEN that the 28th Annual General Meeti ng of PEOPLE’S MERCHANT PLC will be held at the company Group Offi ce complex at No. 21, Nawam Mawatha, Colombo 02 on 29th September 2011 at 2.00 p.m. for the following purposes.
1. To Receive and consider the Annual report of the Board of Directors on the Aff airs of the Company and the Financial Statements for the year ended 31st March 2011 together with report of the Auditors thereon.
2. To reappoint Messrs KPMG Ford Rhodes, Thornton & Company, Chartered Accounts, as the Auditors of the Company unti l the next Annual General Meeti ng at a remunerati on to be agreed upon with them by the Board of Directors and to audit the Financial Statements of the Company for the accounti ng period ending 31st March 2012.
3. To consider, and if thought fi t, pass the following resoluti on as an ordinary resoluti on for the re-appointment of Mr. B.S. Yapa who has reached 70 years of age.
Ordinary Resoluti on - IT IS HEREBY RESOLVED that Mr. B.S. Yapa who has reached the age of 70 years prior to this Annual General
Meeti ng be appointed as a Director of the Company in terms of secti on 211 of the Companies Act No. 7 of 2007, for a term that ends on the earlier of a date that is one year from the date of appointment or at the conclusion of the Annual General Meeti ng following this 28th Annual General Meeti ng at which the appointment if any, takes place and it is further resolved that the age limit referred to in secti on 210 of the said Companies Act shall not apply to Mr. B.S. Yapa.
4. To approve the donati on and contributi ons made by the Directors during the year under review and to authorize the Board to determine donati ons and contributi ons for the ensuing year.
By order of the Board
CORPORATE SERVICES (PRIVATE) LIMITED
SecretariesPEOPLE’S MERCHANT PLC
Colombo, on this 23rd day of August, 2011.
Note: A Shareholder enti tled to att end and vote at this meeti ng is enti tled to appoint a proxy to att end and vote/ speak in his/her stead and a form of proxy is sent herewith for this purpose. A proxy need not be a shareholder of the company.
The completed form of proxy must be deposited at the Head offi ce of the Company, No: 21 Nawam Mawatha, Colombo 2, not later than 48 hours prior to the ti me appointed for the holding of the meeti ng.
9393
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Proxy Form
I/We ……………………………………………………………………………………. of ……………………………………………………………………………………………… being a shareholder/shareholders of People’s Merchant PLC, hereby appoint …………………………………………………………………………….………………… of ……………………………………………………………………………………………… or failing him/her Mr. P.A.A. Panditharatne or failing him Mr. B. S. Yapa or failing him Mr. A. S. Ibrahim or failing him Mr. J.P. Amaratunga as my/our proxy to att end and vote/speak at the 28th Annual General Meeti ng of the Company to be held on the 29th day of September 2011 and at any adjournment thereof.
For Against
(1) To Receive and consider the Annual Report of the Board of Directors on the Aff airs of the Company and the Financial Statements for the year ended 31st March 2011 together with report of the Auditors thereon.
(2) To reappoint Messrs KPMG Ford Rhodes, Thornton & Company, Chartered Accounts, as the Auditors of the Company unti l the next Annual General Meeti ng at a remunerati on to be agreed upon with them by the Board of Directors and to audit the Financial Statements of the Company for the accounti ng period ending 31st March 2012.
(3) To consider, and if thought fi t, pass the following resoluti on as an ordinary resoluti on for the re-appointment of Mr. B.S. Yapa who has reached the age of 70 years.
(4) To approve the donati ons and contributi ons made by the Directors during the year under review and to authorize the Board to determine donati ons and contributi ons for the ensuing year.
As witness my/our hand this …………….........................day of ………................................. Two Thousand and Eleven.
……………………………………………… Signature
Note: Delete what is inapplicable Please see overleaf for instructi ons as to completi on.
9494
Peop
le’s
Mer
chan
t PLC|
Ann
ual R
epor
t 201
0 /
11
Proxy Form Contd...
INSTRUCTIONS AS TO COMPLETION
1. In order to appoint a proxy, this form duly completed, together with any power of att orney under which it is signed, must be deposited at the Registered Offi ce of the Company, No.21, Nawam Mawatha, Colombo 2, not later than 48 hours prior to the ti me appointed for the holding of the meeti ng.
2. The proxy appointed need not be a shareholder of the Company.
3. You are kindly requested to bring with you, your Nati onal Identi ty Card or other valid source of identi fi cati on (eg. Passport, Driving License).
9595
Corporate Information
Begining of a new era
Name of CompanyPeople's Merchant PLC
Legal formPublic quoted company registered under the Companies Act No.17 of 1982 and re-registered under the Companies Act No.7 of 2007.
Company Incorporation & Registration No.Incorporated in Sri Lanka on 26th January 1983 bearing Registration No. N (PBS)22.
New Registration No. PQ200
VAT Registration No.134000228 7000
Stock Exchange ListingThe ordinary shares of the company were listed with Colombo Stock Exchange in July 1994 Ordinary shares listed - 37,500,000
Registered OfficeNo.21, Nawam MawathaColombo 02.Tel.011 2300191Fax.011 2300190E-mail. [email protected]. www.peoplesmerchant.lk
Board of DirectorsMr. P.A. Ajith Panditharatne - ChairmanMr. Jehan P. AmaratungaMr. Ahamed Sabry IbrahimMr. B. S. Yapa (as at 23rd August 2011)
AuditorsKPMG Ford Rhodes, Thornton & CompanyChartered Accountants32A, Sir Mohamed Macan Makar MawathaColombo 03
SecretariesCorporate Services (Private) LimitedNo.216, de Saram PlaceColombo 10
LawyersF.J. & G. de SaramAttorneys - at - LawNo.216, de Saram PlaceColombo 10
BankersPeople's BankBank of CeylonHatton National Bank
ManagementRajeeva Bandaranaike - Chief Executive OfficerAnura Wickramatunge - Chief Financial OfficerCharith Gunaratne - DGM (Credit & Asset Finance)Anuradha Gamage - DGM (Corporate Finance & Treasury)I.D.Weerasena - Snr. Consultant (Pawning)J.De.S.Karunasiri - Snr. Manager (Business Development)Muditha Jayawickrema - Snr. Manager (Legal)Manoneetha Ariyananda - Snr. Manager (Revoveries)Dileepa Assarapperuma - Management AccountantSuchith Premaratne - Financial AccountantAnuranga Handaragame - Head of ITP. Mayadunna - Area ManagerNalin Rajakaruna - Area ManagerAyesha Thennakoon - Snr. Asst Manager (Internal Audit)Rajinda Amarathunga - Snr. Asst Manager (Pawning)
Credit RatingBB+(lka) stable outlook - credit rating from Fitch Ratings Lanka Ltd
No.21, Nawam MawathaColombo 02.
Tel.011 2300191 Fax.011 2300190E-mail. [email protected]
Web. www.peoplesmerchant.lk
Annual Report 2010 / 11
