SOFTLOGIC HOLDINGS PLC | ANNUAL REPORT 2018-194 SOFTLOGIC HOLDINGS PLC / ANNUAL REPORT 2018-19 FINANCIAL HIGHLIGHTS For the year ended 31 March 2019 2018 2017 2016 2015 2014 2013 2012

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Annual Report 2018-19

SOFTLOGIC HOLDINGS STARTED AS A RELATIVELY SMALL SOFTWARE COMPANY

EMPLOYING JUST 12 PEOPLE. TODAY, THE COMPANY POSTS A CONSOLIDATED

TURNOVER OF RS. 75 BN AND REMAINS ONE OF SRI LANKA’S FASTEST GROWING

CONGLOMERATES, BENCHMARKED FOR ITS STEADY GROWTH TRAJECTORY AND

FAST APPRECIATING CORPORATE VALUE. WE BELIEVE WE OWE OUR SUCCESS TO

OUR FEARLESS BUSINESS SPIRIT AND OUR WILLINGNESS TO TAKE A CALCULATED

APPROACH IN OUR RELENTLESS QUEST FOR SUSTAINABLE STAKEHOLDER VALUE.

WE HAVE NEVER BEEN SATISFIED WITH THE STATUS QUO. INSTEAD, WE HAVE

CONSTANTLY SOUGHT NEW AND INNOVATIVE WAYS TO GROW YOUR COMPANY,

BECAUSE WE KNOW THAT BY CONSTANTLY STRIVING TO BE BIGGER AND BETTER, BY

ENCOURAGING CURIOSITY AND FORWARD THINKING IN OUR PEOPLE, WE CAN DELIVER

EXTRAORDINARY EXPERIENCES TO THE THOUSANDS OF CUSTOMERS WE SERVE.

IN PARTICULAR, THIS REPORT SALUTES OUR FRONTLINE STAFF; THE HUNDREDS

OF MEN AND WOMEN WHO ACT AS BRAND AMBASSADORS FOR YOUR COMPANY

EVERY DAY. THEIR PASSION, CREATIVITY AND HARD WORK MAKE EVERY CUSTOMER

INTERACTION MEMORABLE IN A MYRIAD INDEFINABLE WAYS, ATTRACTING PEOPLE

BACK TO OUR STORES TIME AFTER TIME.

THIS REPORT DESCRIBES ANOTHER EXCITING YEAR WHERE YOUR COMPANY RETURNED

A REMARKABLE BALANCE SHEET, WON SEVERAL INDUSTRY AWARDS, OPENED NEW

OUTLETS AND EXPANDED OUR FOOTPRINT NATIONWIDE WITH NEW PRODUCTS AND

SERVICES. FURTHER INVESTMENTS INTO OUR CORE VERTICALS AND INTO THE GROUP

ARE ALSO PLANNED AND THESE ARE DETAILED IN THE PAGES THAT FOLLOW.

THESE CONSISTENTLY EXCELLENT RESULTS ARE A CONFIRMATION THAT OUR VISION

IS CLEAR AND OUR STRATEGY PRECISE. THE YEARS AHEAD WILL SEE YOUR COMPANY

KEEP ON GOING BEYOND THE USUAL LIMITS, CONFIDENTLY MOVING FORWARD AND

CRAFTING OUR FUTURE SUCCESS BY BEING INTREPID, ADVENTUROUS AND BOLD.

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CONTENTS

OVERVIEWAbout this Report 3Financial highlights 4Non-financial highlights 5About the Group 6Our Businesses 8Year at a Glance 12

Bold is Balanced

LEADERSHIP & GOVERNANCEChairman’s Message 16Board of Directors 20Sector Heads 26Functional Heads 28Corporate Governance 32

Bold isBoundless

OPERATING CONTEXT & STRATEGYLeveraging Group Synergies 38Value Creation Model 39How We Create Value 40Operating Environment 44Risk Management 46

COMMITTEE REPORTS

Annual Report of the Board of Directors on the Affairs of the Company 102Board Audit Committee Report 105Board Related Party Transactions Review Committee Report 106HR & Remuneration Committee Report 107

FINANCIAL STATEMENTS

Statement of Directors’ Responsibilities 110Independent Auditor’s Report 111Income Statement 116Statement of Comprehensive Income 117Statement of Financial Position 118Statement of Changes in Equity 120Cash Flow Statement 122Notes to The Financial Statements 124

SUPPLEMENTARY INFORMATIONInvestor Information 224Corporate Directory 226Notice of Meeting 230Form of Proxy 231

Bold isBest

Bold isBrisk

Bold isBullish

Bold isBrilliant

MANAGEMENT DISCUSSION & ANALYSIS

BUSINESS LINE REVIEWSRetail 52Healthcare Services 58Information Technology 62Financial Services 67Leisure and Property 72Automobile 76

CAPITAL MANAGEMENT REPORTSFinancial Capital 80Manufactured Capital 84Human Capital 86Social and Relationship Capital 91Intellectual Capital 96Natural Capital 98

A N N U A L R E P O R T 2 0 1 8 - 1 9 / S O F T L O G I C H O L D I N G S P L C 3

ABOUT THIS REPORT

FINANCIAL CAPITAL MANUFACTURED CAPITAL HUMAN CAPITAL

SOCIAL AND RELATIONSHIP CAPITAL INTELLECTUAL CAPITAL NATURAL CAPITAL

This Annual Report covers the operations of Softlogic Holdings PLC and its 57 subsidiaries and associate companies for the period from 01 April 2018 to 31 March 2019. The content included in this Report has been prioritised and structured to provide a concise and balanced review of the Group’s financial, social and environmental performance during the year. The Report is targeted primarily towards the Group’s shareholders and investors but includes information that is also relevant to the Group’s other stakeholders. In gradually transitioning towards an Integrated Annual Report, we have structured the narrative and disclosed information pertaining to the six capital inputs as defined by the Integrated Reporting Framework.

The Financial Statements included herein have been prepared in accordance with the Sri Lanka Financial Reporting Standards (SLFRS) and external assurance has been provided by Messrs. Ernst & Young. The Report also conforms to the requirements of the Companies Act No.7 of 2007, Listing Requirements of the Colombo Stock Exchange and the revised Code of Best Practice on Corporate Governance (2017) issued by the Institute of Chartered Accountants of Sri Lanka.

MATERIALITY

The content included in this Report has been selected through a basic process of materiality. Material matters are defined as the issues which could potentially impact the Group’s ability to create value over the short, medium and long-term. The process for determining material issues is detailed on page 42 of this Report.

NAVIGATING OUR REPORT

We have used the following icons across the Report to demonstrate connectivity between information;

WHAT’S IN OUR REPORT

CHAIRMAN’S REVIEW

(page 16)

HOW WE CREATE VALUE

(page 40)

OPERATING ENVIRONMENT

(page 44)

OUR TOP RISKS AND HOW THEY ARE MANAGED

(page 46)

HOW WE PERFORMED

(page 52)

HOW WE USED OUR CAPITALS

(page 80)

Visit Us Online

Scan the QR Code with your smart device to view this Report online

Scan the QR Codes to connect with us on social media

www.softlogic.lk

http://www.softlogic.lk/financial_report-3-1.html


FINANCIAL HIGHLIGHTS

For the year ended 31 March 2019 2018 2017 2016 2015 2014 2013 2012

Earnings Highlights

Group Revenue Rs.Mn 75,143 66,019 58,882 54,600 39,564 29,246 25,351 21,819

Gross Profi t Rs.Mn 27,636 23,673 19,579 18,559 14,117 11,012 8,983 7,330

Earnings Before Interest, Tax, Depreciation & Amortisation

Rs.Mn 11,721 11,695 8,451 7,897 6,398 5,025 4,227 4,486

Group Earnings Before Interest & Taxation Rs. Mn 8,859 9,052 6,391 6,082 4,959 3,918 3,208 3,608

Group Earnings Before Taxation Rs. Mn 1,743 3,092 1,581 2,836 2,266 1,258 453 1,601

Group Earnings After Taxation Rs. Mn 2,990 2,278 920 1,870 1,819 1,009 153 1,016

Total Comprehensive Income Net of Taxation Rs. Mn 3,127 2,827 1,793 2,859 2,160 1,237 2,077 856

Group Earnings Attributable to Equity Holders Rs. Mn 105 204 120 565 556 156 (371) 448

Group Comprehensive Income Attributable to Equity Holders

Rs. Mn 353 450 783 1,829 761 220 557 340

Gross Profi t Margin % 37 36 33 34 36 38 35 34

Net Profi t Margin % 3.98 3.45 1.56 3.43 5.00 3.50 1.00 4.70

Earnings Per Share Rs. 0.09 0.25 0.15 0.73 0.72 0.20 (0.44) 0.6

Dividends Rs. Mn 596 503 387 194 - 120 234 101

Return on Capital Employed * % 9.76 11.02 9.42 9.81 8.37 8.73 8.76 10.58

Balance Sheet Highlights

Total Assets Rs. Mn 130,821 118,823 100,915 93,152 87,324 65,863 53,836 44,688

Current Ratio No. of times 0.83 0.93 0.94 0.84 1.04 0.90 0.80 0.70

Asset Turnover No. of times 0.57 0.56 0.61 0.61 0.45 0.40 0.50 0.50

Total Interest Bearing Borrowings Rs. Mn 65,788 61,227 52,255 46,480 43,906 31,518 23,037 22,782

Shareholders' Funds Rs. Mn 14,423 11,591 8,547 8,159 7,336 6,802 7,288 7,202

Net Asset Value Per Share ** Rs. 12.30 14.05 11.04 10.54 9.47 8.7 9.4 9.2

Total Equity Rs. Mn 24,990 20,917 15,623 15,531 15,356 13,351 13,568 11,312

Debt : Equity *** No. of times 2.63 2.93 3.34 2.99 2.86 2.40 1.70 2.50

Debt : Total Assets No. of times 0.50 0.52 0.52 0.50 0.50 0.50 0.40 0.50

Operating Cash Flow Rs. Mn 1,555 (106) 2,331 3,432 426 1,775 1,777 157

Capital Expenditure Rs. Mn 5,743 4,524 6,311 5,252 4,438 3,604 2,271 1,138

Cash Earnings Per Share Rs. 1.33 (0.13) 3.01 4.43 0.50 2.30 2.30 0.20

Investor Information

Market Price as at 31 March Rs. 16.00 24.60 11.90 13.30 13.20 10.60 10.40 11.20

Shares in Issue Mn 1,193 962 779 779 779 779 779 779

Market Capitalisation as at 31 March Rs. Mn 19,081 23,659 9,270 10,205 10,283 8,257 8,102 8,725

52-Week Market Share Price High Rs. 25.80 26.20 15.50 18.00 20.40 12.70 13.30 28.00

52-Week Market Share Price Low Rs. 15.90 11.70 11.70 12.30 10.30 8.10 9.40 11.10

Price to Book Value No. of times 1.30 1.75 1.01 1.10 1.40 1.50 1.40 1.40

Enterprise Value Rs. Mn 81,672 78,733 58,730 53,677 52,263 38,014 29,816 30,593

Enterprise Value : EBITDA No. of times 6.97 6.73 7.19 6.60 8.20 7.60 7.10 6.80

Dividend Per Share Rs. 0.50 0.65 0.50 0.25 - 0.16 0.30 0.13

* Return on Capital Employed calculated as a percentage of EBIT to Total Capital Employed (Equity plus Interest Bearing Borrowings)** Net Asset Value Per Share calculated based on weighted number of shares as at 31.03.2019*** Debt to Equity calculated based on Total Equity Capital


NON-FINANCIAL HIGHLIGHTS

10PAYMENTS TO EMPLOYEES (Rs. Bn)

65TRAINING INVESTMENT (Rs. Mn)

59RETENTION RATE (%)

11,042EMPLOYEES(No.)

HUMAN CAPITAL

SOCIAL AND RELATIONSHIP CAPITAL

INTELLECTUAL CAPITAL MANUFACTURED CAPITAL

1,850+DISTRIBUTORS & OUTLETS

138PRINCIPAL RELATIONSHIPS

12AWARDS

140+INTERNATIONAL BRANDS

6CAPEX (Rs. Bn)

47PROPERTY, PLANT AND EQUIPMENT (Rs. Bn)

AT SOFTLOGIC HOLDINGS, OUR PERFORMANCE IS MULTI-PRONGED, MEASURED THROUGH KEY PERFORMANCE INDICATORS ACROSS DIVERSE SECTORS, SPANNING OUR PEOPLE AND RELATIONSHIPS, AND OUR TANGIBLE AND INTANGIBLE ASSETS. DURING THE YEAR WE CONTINUED TO FOCUS ON GROWING AND ENHANCING THESE INDICATORS, AS EVIDENCED BY THE RESULTS BELOW.


Sri Lanka’s leading private healthcare provider operating 6 hospitals under the Asiri Hospitals brand and the market leader in the diagnostics market

Fully fledged financial services provider with interests in insurance (through Softlogic Life-Sri Lanka’s 4th largest life insurance provider), financing (Softlogic Finance), asset management and stockbrokers.

A dominant player in mobile handsets and accessories, computers, software and hardware solutions

A leading retailer of consumer electronics and branded apparel including Departmental stores Odel and Cotton Collection

Mövenpick, a five-star city hotel in Colombo and Centara, a four-star resort in Bentota

ABOUT THE GROUP

Softlogic Holdings PLC is a dynamic, future-fit Sri Lankan conglomerate commanding strong market positions across its three core verticals of Retail, Healthcare and Financial Services. The Group’s value proposition is characterised by the relentless pursuit of innovation and service excellence. The Group also has a presence in the IT, Automobile, Leisure and Property Sectors under non-core verticals.

Softlogic is a consumer-focused business and the scope and depth of its operations gives it access to one of the country’s largest consumer bases. Value is delivered through a multi-brand, multi-channel approach which has enabled the Group to represent over 140 international brands while operating one of Sri Lanka’s most extensive distribution networks. The Group provides employment to 11,042 individuals across the island.

LEADING MARKET POSITIONS

OUR VISIONTo be the most preferred and trusted product and service

provider, enhancing enterprise value.

OUR CREDOTo make responsible investment decisions and

retain the best people so as to become the most admired corporate in Sri Lanka.

INTEGRITY

Nothing compromises what we do.

ACCOUNTABILITY

Every employee is responsible to do the right thing.

TRUST & LOYALTY

We build honest and rewarding relationships.

QUALITY

Raise standards as we progress.

PASSION

We passionately safeguard our reputation.

RESPECT

We respect the value of the individual.

OPENNESS

We encourage unrestrained constructive feedback.

LEADERSHIP

Our visionary and inspirational leadership leads by example.

INNOVATION

We make a difference.

SUCCESS

We promote the ‘can do’ attitude with disciplined thinking.


131ASSETS(Rs. Bn)

138INTERNATIONALPRINCIPALS

350+SUPPLIERS AND BUSINESS PARTNERS

140+INTERNATIONAL BRANDS

4LENDING TO MICRO AND SME (Rs. Bn)

1,850+CUSTOMER CONTACT POINTS

11PAYMENTS TO EMPLOYEES(Rs. Bn)

3PROFIT AFTER TAX(Rs. Bn)

75REVENUE(Rs. Bn)

11,042EMPLOYEES

10ROCE(%)

SOFTLOGIC IN NUMBERS

OUR BUSINESS PORTFOLIO - TURNOVER

OUR BRANDS AND RELATIONSHIPS

ECONOMIC IMPACT

RETAILLEISURE &PROPERTY

HEALTHCARESERVICES

AUTOMOBILES

FINANCIALSERVICES

INFORMATION TECHNOLOGY & OTHERS

50% 4%

18% 4%

18% 6%*Revenue Contribution


OUR BUSINESSES

CORE VERTICALS

RETAIL

100%SOFTLOGIC RETAIL HOLDINGS(PVT) LTD.

Softlogic Retail (Pvt) Ltd.

Suzuki Motors Lanka Ltd. SML Holdings (Pvt) Ltd. Dai-Nishi Securities (Pvt) Ltd.

Odel PLC

Softlogic Brands (Pvt) Ltd. Odel Lanka (Pvt) Ltd. Odel Apparels (Pvt) Ltd. BSL International (Pvt) Ltd. Greenfield Trading (Pvt) Ltd. Odel Properties (Pvt) Ltd. Odel Information Technology

Services (Pvt) Ltd. Odel Properties One (Pvt) Ltd. Odel Restaurants (Pvt) Ltd. Cotton Collection (Pvt) Ltd.

Softlogic Mobile Distribution (Pvt) Ltd.

Softlogic Communications (Pvt) Ltd.

Softlogic Communication Services (Pvt) Ltd.

Softlogic International (Pvt) Ltd.

Softlogic Restaurants (Pvt) Ltd.

Silk Route Foods (Pvt) Ltd.

Softlogic Retail One (Pvt) Ltd.

Softlogic Supermarkets (Pvt) Ltd.

Softlogic Rewards (Pvt) Ltd.

HEALTHCARE SERVICES

51%ASIRI HOSPITAL HOLDINGS PLC

Asiri Surgical Hospital PLC

Asiri AOI Cancer Centre (Pvt) Ltd.

Central Hospital Ltd.

Asiri Central Hospitals Ltd.

Asiri Diagnostics Services (Pvt) Ltd.

Asiri Hospital Matara (Pvt) Ltd.

Asiri Hospital Kandy (Pvt) Ltd.

Digital Health (Pvt) Ltd.

Asiri Laboratories (Pvt) Ltd

Asiri Hospital Galle (Pvt) Ltd

FINANCIAL SERVICES

75%SOFTLOGIC CAPITAL PLC

Softlogic Life Insurance PLC

Softlogic Finance PLC

Softlogic Stockbrokers (Pvt) Ltd.

Softlogic Asset Management (Pvt) Ltd.

SOFTLOGIC HOLDINGS PLC


NON-CORE VERTICALS

LEISURE & PROPERTY

100%SOFTLOGIC PROPERTIES (PVT) LTD.

Softlogic City Hotels (Pvt) Ltd.

Ceysand Resorts Ltd.

Softlogic Destination Management (Pvt) Ltd.

Sabre Travel Network Lanka (Pvt) Ltd.

AUTOMOBILES

100%

Future Automobiles (Pvt) Ltd.

Softlogic Automobiles (Pvt) Ltd.

INFORMATION TECHNOLOGY & OTHERS

100%

Softlogic Information Technologies (Pvt) Ltd.

Softlogic Computers (Pvt) Ltd.

Softlogic Australia (Pty) Ltd.

Softlogic Solar (Pvt) Ltd.

Nextage (Pvt) Ltd.

Softlogic Corporate Services (Pvt) Ltd.

Softlogic BPO Services (Pvt) Ltd.

Jendo Innovations (Pvt) Ltd.

Softlogic Healthcare Holdings (Pvt) Ltd.

S O F T L O G I C H O L D I N G S P L C / A N N U A L R E P O R T 2 0 1 8 - 1 91 0

A WORLD CLASS EXPERIENCE ATONE GALLE FACE MALLSoftlogic paves the way for a world class retail and dining experience at Shangri La’s One Galle Face Mall, representing over 30 recognised brands in 25 stores, some of which make their way for the first time to Sri Lanka’s shores.

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91,000

25 STORES 30+ BRANDS

SQFT


YEAR AT A GLANCE

AS A VIBRANT, DYNAMIC CONGLOMERATE, SOFTLOGIC HOLDINGS CONTINUES TO MAKE STRIDES IN EVERY INDUSTRY SECTOR WE OPERATE, SERVING OUR CUSTOMERS WITH PRIDE, AND BOLDLY VENTURING INTO NEW AREAS OF GROWTH.

JULY 2018Softlogic partnered with Samsung to officially open its first branded Experience Store in Sri Lanka. The 2,800-sq. ft. Samsung Experience Store revolutionizes customers’ brand experience under one roof with immersive ‘retail destinations’ or ‘zones’, providing a multi-sensorial brand experience and holistic lifestyle consultation.

SEPTEMBER 2018Mövenpick Hotel Colombo launched its first ever ‘Mövenpick Weddings‘, introducing a brand-new intimate concept to the city. Working alongside the theme of ‘Intimate. Precious. Extraordinary’, the event took place at the hotel premises with over 350 walk in guests.

AUGUST 2018Softlogic Life made its presence felt among the Asian Insurance giants, after making it to the top three insurance companies at the 22nd Asia Insurance Industry Awards 2018. Furthermore, Softlogic Life became the only Sri Lankan company to be shortlisted as the Best Life Insurer of Asia at the 22nd Asia Insurance Industry Awards 2018.

The Retail Awards were held at Eagles Lakeside, recognizing staff across our outlets for their contribution, including showroom managers and supervisors. 150 awards were distributed at the event.

Odel acquired iconic fashion brand Cotton Collection, in a move to diversify its product portfolio and expand its retail footprint.

The opening of the Swarovski store at the Colombo City Centre brought its heritage and craftsmanship in crystal to Sri Lanka’s first international shopping mall and offering a one-of-a-kind retail journey in the ‘Crystal Forest’ store concept. Among the 3,000 stores worldwide, the signature architecture designed by famous designer Tokujin Yoshioka creates the ultimate shopping experience for our customers.


OCTOBER 20182 Starred Michelin Chef Michel Roth celebrates a 5-year relationship with Delifrance Paris. Hailed as a ‘boundless source of inspiration for Delifrance’ Chef Roth was brought down to Sri Lanka by Delifrance and Softlogic Restaurants (Pvt.) Ltd, with the intention of ‘sharing the French way of life’ among local customers.

NOVEMBER 2018Asiri Hospital Galle - Acquisition of a 32 bed private hospital in Galle. The facility is being refurbished to increase capacity and enhance patient convenience, while the diagnostic capability of the hospital is being enhanced with modern technology.

With the opening of the first International Shopping Mall in the country, Odel launched a brand-new outlet and the first ever standalone Odel Sports store at the Colombo City Centre, spanning a collective 18,915 sq ft.

Mövenpick Hotel Colombo was awarded the titles “Sri Lanka’s Leading Hotel 2018” and the “Best Presidential Suite” at the recent World Travel Awards 2018, which acknowledge, reward and celebrate excellence across the global travel and tourism industry.

The Softlogic Group made its maiden foray into the world of Asian flavours and spice with its own restaurant brand, ‘Wangediya’, giving Sri Lankan foodies a literal cornucopia of gastronomic variety, offering a carefully selected range of signature “street food” dishes from eight Asian countries.

Launch of the Asiri AOI Cancer Centre, making Asiri Health the only institution in the private sector to offer a comprehensive range of services from diagnostics to treatment and palliative care in cancer care.

Sri Lanka’s first inspirational global market “Softlogic GLOMARK”, was launched on 16 November 2018 with its first outlet at Delkanda, marking the Group’s entry into the rapidly growing FMCG Modern Trade Retail industry.


NOVEMBER 2018 CONTD.A new Burger King outlet was launched on 30 November at Maharagama to cater to rising demand, spanning 2,000 sq ft, including dine-in, delivery, Baskin Robbins, and a children’s play area.

MARCH 2019Softlogic Restaurants (Pvt) Ltd was recognised as one of “Sri Lanka’s 25 Best Work Places”, winning the Bronze Award for “Medium Enterprise Category”. Furthermore, Softlogic Restaurants was also recognised at BK ASIAPAC, winning two prestigious awards - “Gold Crown Operator of the Year Asia Pacific” (under 30 restaurants) for 2018 & the Green Jacket.

FEBRUARY 2019The Thalawathugoda Odel store was revamped and expanded to cover a space of 14,670 sq. ft, offering the patrons a wider range of international fashion brands. The newly revamped store boasted collections from international watches, branded sunglasses and Luxe handbags as well as a parfumerie.

YEAR AT A GLANCE


BALANCEDLEADERSHIP & GOVERNANCE

Chairman’s Message 16Board of Directors 20

Sector Heads 26Functional Heads 28

Corporate Governance 32

BOLD IS


CHAIRMAN’S MESSAGE

WE CONTINUE TO HELP TRANSFORM THE COUNTRY’S SOCIO-ECONOMIC WITH OUR INVESTMENTS, MAKING SOFTLOGIC ONE OF THE MOST VISIBLE ENTITIES THROUGH ITS ISLAND-WIDE FOOTPRINT AND ITS RELEVANCE TO THE CURRENT NEEDS AND ASPIRATIONS OF THE MARKET. WE KNOW THAT BY CONSTANTLY STRIVING TO BE BIGGER AND BETTER, BY ENCOURAGING CURIOSITY AND FORWARD THINKING IN OUR PEOPLE, WE CAN DELIVER EXTRAORDINARY EXPERIENCES TO THE THOUSANDS OF CUSTOMERS WE SERVE.


3.0 PAT (Rs. Bn)

Dear Shareholder,

Softlogic Holdings PLC recorded strong consolidated top line growth of 14% in a year of moderating economic growth with positive contributions from all Sectors of the Group reflecting the grit and determination that is a hallmark of the Softlogic Group. We have restructured the Group to extend our presence along the value chain to drive Group synergies, leverage expertise and strengthen the customer value propositions in the Healthcare, Financial Services, IT, Retail, Leisure and Automobile Sectors. We continue to play the role of a catalyst for technology transformation of the country through investments in the Health sector, IT sector and by providing access to technology for millions of Sri Lankans through our electronic retail arm. The vibrancy of the Softlogic brand makes it one of the fastest growing in the country with high levels of visibility across the country’s landscape and an island-wide presence facilitating access to our services.

A STRONG VALUE PROPOSITION

We restructured the Group during the year to strengthen our customer value propositions while investing to drive growth in Sectors with high growth potential.

The Retail Sector now includes our telecommunication operations in addition to the fashion brands, restaurants and electronics. We expanded the scope of the Sector with the launch of GLOMARK which marks our foray in to modern trade which has significant growth potential with low rates of penetration. We also acquired the high profile fashion brand Cotton Collection to our portfolio while expanding the portfolio of global fashion brands with the launch of Swarovski’s Crystal Forest Store at the Colombo City Centre. Retail expanded its footprint with a number of stores at the same venue and elsewhere during the year, enhancing the number of customer touch-points. As guardians of several international brands and our own, we invest significant effort and resources to ensure that customers have the same experience in our stores that they would enjoy in more advanced countries, providing Sri Lankan consumers an unparalleled retail shopping experience.

We also enhanced the value chain of the IT Sector as we leveraged our expertise to provide a full suite of services ranging from end-user computing, data centres and solutions, advanced infrastructure, security, imaging and printing and managed services. This provides a one stop shop for all IT needs of our corporate clients as they look for outsourcing the high end expertise to compete effectively in a digital era.

Acquisition of the Hemas Southern Hospital in Galle expanded the footprint of the Healthcare Services Sector enhancing accessibility to high standards of healthcare synonymous with the Asiri Group of Hospitals.

DRIVING GROWTH Acquisition of Hemas

Southern Hospital for Rs. 450 Mn in Nov 2018

Launch of GLOMARK as we ventured in to modern trade

Launch of our own restaurant brand Wangediya

Acquisition of fashion brand Cotton Collection

Adding the global icon Swarovski to our portfolio of high end retail brands with the opening of the Crystal Forest Store at Colombo City Centre

Restructuring IT Sector encompassing:

- End-user computing

- Data centres and solutions

- Advanced infrastructure

- Security

- Imaging & Printing

- Managed services

Expansion of Retail Sector footprint

Expansion of Suzuki Motors operations


CHAIRMAN’S MESSAGE

DELIVERING PERFORMANCE

Softlogic Group recorded 14% revenue growth in a challenging year despite declining disposable incomes. Tightening fiscal policy combined with political and policy uncertainty necessitated bold strategies to deliver the results set out in this Report.

RETAIL

The Retail Sector recorded 6% top line growth despite declining disposable incomes contributing Rs. 37.7 Bn to Group revenue which amounts to 50% of the same as we strengthened the customer value proposition of this Sector. Comprising fashion brands, electronics, restaurants and more recently modern trade, this Sector has unparalleled bandwidth and is poised for growth as eager customers seek to enhance their lifestyles. This key Sector contributed Rs. 3.2 Bn (38%) to Group Operating Profit and Rs. 151 Mn (5%) to Group PAT in the reporting year reflecting pressure on margins and increased finance costs as growth was funded through debt.

HEALTHCARE

Healthcare recorded 12% revenue growth to Rs. 13.5 Bn despite increasing price regulation in the healthcare. Sector revenues were increased due to increased operational efforts and to a lesser extent by the acquisition of Hemas Southern Hospital in November 2018. The Asiri Hospitals Group continues to be the leading private sector healthcare brand synonymous with high quality of healthcare supported by state of the art facilities, equipment and treatments. The Group accounts for a 15% of the private sector healthcare capacity. Intense competition in the sector and price sensitivity exerted pressure on margins resulting in a decrease of 7% in operating profit which amounted to Rs. 3.2 Bn contributing 38% to Group Operating profits. The Sector contributed Rs. 1.8 Bn to Group Profit After Tax which is the second highest contribution equivalent to 61% of the same.

FINANCIAL SERVICES

Softlogic Capital PLC, the holding company of the Financial Services Sector in the Group, delivered a strong performance largely

attributable to the performance of Softlogic Insurance as gross written premiums grew by 30% outpacing industry growth of 13%. This supported Sector revenue growth of 23% as we expanded our distribution channels to enhance market penetration in Life Insurance with the pioneering micro insurance product with Dialog enabling daily payment of premiums which is a first in the country. Softlogic Finance PLC also made a positive contribution to the Sector despite declining fee and commission income and increased provision for credit losses. Softlogic Stockbrokers maintains its position as the market leader although financial performance deteriorated in line with the market as the benchmark ASPI and S&P indices fell sharply during the year. Operating margins in the Financial Sector declined as expenses increased due to expansion. PBT declined as prior year numbers included Rs. 798 Mn arising from changes in contract liability due to the transfer of one off surplus of the sale of the general insurance business in 2017/18 financial year. The increase in PBT excluding the impact of this one-off gain is 15%. PAT grew by 119% due to a sharp increase in origination of deferred tax assets of Rs. 2.4 Bn which resulted in an Income Tax Reversal of Rs. 2 Bn, supporting PAT growth of 42% to Rs. 3.2 Bn. The Financial Services Sector maintains its position as the highest contributor to Group cushioning losses in Leisure, Automobiles and Others Sectors as the Financial Sector PAT exceeds Group PAT.

INFORMATION TECHNOLOGY

The Group’s Information Technology Sector broadened its value proposition during the year as explained above which has positioned this Sector for strong growth. The Sector delivered 11% top line growth to Rs. 4.0 Bn although margins were under pressure during this period of transition to a new business model. Operating profit declined during the year due to falling GP margins. Increased finance costs resulted in PBT decreasing by 43% and PAT by 47% to Rs. 172 Mn and 135 Mn respectively. This was the first year of operations for this Sector without the mobile telecommunication retail business which has been transferred to the Retail Sector during

the year although Financial Statements have been adjusted to reflect the changes in the prior year as well.

AUTOMOBILES

The operating environment became more challenging as rupee depreciation, requirement for cash margins and enhanced emission standards for all motor vehicles exacerbated issues for an intensely competitive market. A large order for Ford ambulances supported performance of the automobiles business. Accordingly, the Sector recorded 147% growth in revenue to Rs. 3.1 Bn. It is noteworthy that the Sector delivered a positive operating profit of Rs. 170 Mn compared to an operating loss of Rs. 64 Mn in the previous year. Finance costs remain a concern due to the requirement for cash margins on letters of credit, exchange losses. The requirement for cash margins was subsequently removed. Losses after tax were reduced significantly to Rs. 35 Mn in the reporting year from Rs. 178 Mn in the previous year.

LEISURE & PROPERTY

Revenue of the Leisure & Property Sector recorded strong revenue growth of 21% as both Centara and Mövenpick increased occupancy supported by positive guest reviews and increased tourist arrivals. Both properties have excellent reviews on travel sites such as TripAdvisor giving impetus to enhanced occupancy. It is commendable that the Sector has turned in an operating profit of Rs. 66 Mn compared to a loss of Rs. 142 Mn

PLANNED / ONGOING INVESTMENTS

The Odel Mall

Mall Space @ Shangri La

Mall space at Colombo City Centre

Asiri Hospital Kandy

Quick Service Restaurant Expansion

Consumer Electronics store expansions

GLOMARK Supermarkets


in the previous year in a relatively short space of time after the launch of Mövenpick. Finance costs remain a burden on the performance of this Sector which recorded a pre-tax loss of Rs. 851 Mn after finance costs of Rs. 916 Mn in the reporting year as losses on revaluation of foreign currency loans increased sharply with the depreciation of the rupee exceeding the natural hedge from foreign currency earnings in this Sector. Losses after tax decreased from Rs. 865 Mn to Rs. 857 Mn for the year.

DELIVERING RESULTS

Revenue growth of 14% reflects the Group’s resilience and indomitable spirit as we recorded Rs. 75 Bn in revenue in a year of flat per capita income and moderating economic growth using a combination of acquisitions and business expansion. Operating profit margins remained flat with only a marginal increase due to elevated price sensitivity stemming from a challenging operating environment and intense competition. Encouragingly, volume growth supported a 17% increase in Gross Profit to Rs. 28 Bn affirming the growth strategy of the Group. A decrease in other income coupled with increases in Distribution and Administration expenses resulted in a relatively flat operating profit of Rs. 8.4 Bn. Finance expenses increased by 19% during the year as a result of increased borrowings and the impact of the sharp depreciation of the rupee resulting in Profit before tax declining by 44% to Rs. 1.7 Bn. Profit after tax increased by 31% to Rs. 3 Bn due to a sharp increase in origination of deferred tax assets of Rs. 2.4 Bn as described above in the Financial Services Sector.

POISED FOR GROWTH

Assets growth of 10% was mainly due to increased investments in the Retail and Heath Care Sectors due to our strategic acquisitions and expansion of our footprint.

Our Retail Sector represents a strong value proposition to our customers, our principals and the Softlogic Group as we become more relevant to the Sri Lankan consumer. We are zealous guardians of the brands we represent

and have maintained high standards of customer service with international standards providing unparalleled retail experiences for our customers. This extends to after sales support on where the Softlogic brand is synonymous with superior after sales service. Our vision is to maintain our position as Sri Lanka’s premier retail brand, taking customer experiences to the next level. We will drive Group synergies using Artificial Intelligence and the Group’s information assets to provide customers an unrivalled retail experience with customised offers leveraging our unparalleled bandwidth across the retail space.

Softlogic Group has delivered aggressive growth over the year, financing our acquisitions and expansion with debt, consistent with our bold outlook and strong belief in our ability to deliver on our vision. Higher levels of debt relative to peers has been part and parcel of our risk profile which has been proactively managed with forethought and foresight as evinced by managed exits to realise cash flow in the recent past. We are evaluating several options for reducing debt and are likely to deploy several strategies to achieve a satisfactory outcome to improve the financial gearing of the Group.

Our vision has expanded beyond our shores and we are likely to commence operations of our successful Sectors in Asian and African markets to replicate our success in Sri Lanka. There is significant scope for expanding our internationally certified healthcare services in to neighbouring countries with positive outcomes while African markets demonstrate potential for insurance products. Understandably we are excited by our next growth phase as we seek to position the Softlogic Group as a leading player in the region in selected Sectors.

THE SOFTLOGIC SPIRIT

An indomitable spirit, professionalism and agility characterises the Softlogic team who continue to defy the odds to deliver results that outpace industry growth. On a daily basis, they uphold our customer promise in accordance with international standards as we provide an enabling and empowering

environment for them to achieve their career goals as we recognise their achievements. We continue to grow, creating new career paths for people of talent and ability who are willing to work hard and work smart. This has been our mantra for success and we look to refine this further to deliver sustainable value to our employees, balancing interests of stakeholders.

APPRECIATIONS

Our achievements are the result of visionary entrepreneurship tempered by caution which is due to the strategic guidance and counsel extended by an experienced Board of Directors who are diligent in discharging their duties. I am deeply appreciative of their collective wisdom in guiding the affairs of the Group. I commend the leadership of the Corporate Management Team at Softlogic who continue to inspire their teams to make the impossible possible. I thank the Softlogic Team who delivered the performance set out in this Report. Our principals and franchise partners who entrust us to be their brand ambassadors in Sri Lanka are a vital part of our journey and I am grateful for their trust and confidence and look forward to sharing our journey. The Board joins me in thanking our shareholders for their confidence in our ability to deliver sustained growth and value as we set our sight further afield to new markets.

Ashok Pathirage

Chairman/Managing Director

04 July 2019

Colombo


BOARD OF DIRECTORS

1. ASHOK PATHIRAGE - Chairman/Managing Director

2. HEMANTHA GUNAWARDENA - Executive Director

3. HARESH KAIMAL - Executive Director

4. RANJAN PERERA - Executive Director

5. ROSHAN RASSOOL - Executive Director

6. DR. SIVA SELLIAH - Non-Executive Independent Director

1

5

3 4

2

6


7. PRASANTHA LAL DE ALWIS, PC - Non-Executive Independent Director

8. HARRIS PREMARATNE - Non-Executive Director

9. NIHAL KEKULAWELA - Non-Executive – Independent Director

10. AARON RUSSELL - DAVISON - Non-Executive Director

11. PROF. AJANTHA DHARMASIRI - Non Executive Independent Director

12. SHIRISH SARAF - Non-Executive Director

CHETAN GUPTA (Alternate to Mr. Shirish Saraf - not pictured)

RICHARD EBELL - Non-Executive Independent Director (Resigned December 2018 - not pictured)

7

11

9 10

8

12


ASHOK PATHIRAGEChairman/Managing Director

Mr. Ashok Pathirage, recognised as a visionary leader of Sri Lanka’s corporate world, is the founding member and Chairman/Managing Director of Softlogic Group, one of Sri Lanka’s leading conglomerates. He manages over 50 companies with a pragmatic vision providing employment to more than 11,000 employees. Mr. Pathirage gives strategic direction to the Group which has a leading market presence in six core and non-core vertical Sectors - Retail, Healthcare Services, Financial Services and IT, Leisure & Automobiles. The Asiri Hospital chain is the country’s leading private healthcare provider which has achieved technological milestones in medical innovation in Sri Lanka’s private healthcare. Softlogic Capital PLC, Softlogic Life Insurance PLC, Softlogic Finance PLC, Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Odel PLC where he serves as Chairman/Managing Director are listed on the Colombo Stock Exchange. He is also the Deputy Chairman of National Development Bank PLC and the Chairman of NDB Capital Holdings Ltd.

HEMANTHA GUNAWARDENAExecutive Director

Mr. Hemantha Gunawardena is one of the co-founders of the Softlogic Group and has served as a Director since inception. He has extensive experience in the field of IT, both front and back-end, and counts over 30 years in this field. He was a senior software manager at a leading Sri Lankan blue chip prior to joining Softlogic. He presently overlooks the software operations in Softlogic Australia (Pty) Ltd. and Automobile Sector, while serving as an Executive Director of Softlogic BPO Services (Pvt) Ltd.

MR. HARESH KAIMALExecutive Director

Mr. Haresh Kaimal is a co-founder of Softlogic Group and a Director since its inception. With over 3 decades of experience in IT and Operations, he currently heads the IT division of the Group. The Group has rolled out Oracle EBS and Oracle Retail along with Industry specific front end solutions to best suit the organisation.

He is an Executive Director of Softlogic BPO Services ( Pvt) Ltd and a Director of Odel PLC, Softlogic Finance PLC, Softlogic Life PLC and many other Group Companies.

RANJAN PERERAExecutive Director

Mr. Ranjan Perera is a co-founder of Softlogic Holdings, and a Director since inception. He is the Sector Head of the Group’s Mobile Phone Operations and the Managing Director of Softlogic International (Pvt) Ltd. With extensive knowledge gained from working in senior managerial positions and having over two decades of experience in the field of telecommunication, he is skilled in his current capacity of working with world-renowned brands in the mobile industry. Mr. Perera also heads the Softlogic Retail Service Operation and the Retail Dealer Division.

ROSHAN RASSOOLExecutive Director

Mr. Roshan Rassool joined Softlogic in 1995 and was appointed to the Board in 2009. He is the Director/CEO of the Computing Systems & Systems Integration Solutions Division of Softlogic Information Technologies (Pvt) Ltd., which has business partnerships with Dell Corporation, Apple Computers, Lenovo, CISCO, EMC storage systems, Microsoft, HP imaging products and VMware. He was appointed as a member of Dell South Asia Partner Advisory Council in 2011. He served as Chairman of Infotel Lanka in 2006/2007 and was President of the Sri Lanka Computer Vendors Association at the same time. He was also Chairman of the Federation of Information Technology Industries, Sri Lanka in 2007. He holds an MBA from the University of East London and is a doctoral student at the University of Kelaniya. He is also an Associate Member of the Association of Business Executives and a Member of the Cyprus Institute of Marketing. He has over 30 years of experience behind him in the ICT industry having worked at senior managerial positions in reputed companies.

BOARD OF DIRECTORS


DR. SIVA SELLIAHNon-Executive Independent Director

Dr. Sivakumar Selliah holds an MBBS degree and a Masters Degree (M.Phil). He joined the Board of Softlogic Holdings PLC in 2010. He has over two decades of experience in multiple fields. He is the Deputy Chairman of Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC, and Central Hospital Ltd. He is a Director of Odel PLC, HNB Assurance PLC, Lanka Walltiles PLC, Lanka Tiles PLC, ACL Cables PLC, Lanka Ceramics PLC, Swisstek (Ceylon) PLC and Swisstek Aluminium (Pvt) Ltd. He also serves as Chairman of JAT Holdings (Pvt) Ltd., Cleanco Lanka (Pvt) Ltd., and Vydexa Lanka Power Corporation (Pvt) Ltd. Dr. Selliah serves on the Human Resource & Remuneration, Audit, Investment, Related Party Transactions and Strategic Planning Committees of some of the companies on whose Boards he serves.

PRASANTHA LAL DE ALWIS, PCNon-Executive Independent Director

Mr. Prasantha Lal De Alwis joined the Softlogic Board as a Non-Executive Director in 2011. He obtained his LL.B (Bachelor of Law) and LL.M (Masters in Law) from the University of Colombo and was enrolled as an Attorney-at-Law in 1983. He started his career as a State Counsel at the Attorney General’s Department of Sri Lanka in 1983 and served in that capacity until 1990. He subsequently joined the private bar and since then has practised in both Appellate and Trial courts. He was appointed a President’s Counsel in 2012. He is a visiting lecturer at Law faculty, University of Colombo, Kothalawala Defence University (KDU) and APIIT Law School. He is a member of the Board of Management of the Centre for Studies of Human Rights, Faculty Board of Law of University of Colombo and Incorporated Council of Legal Education. Mr. De Alwis was a Director of Sampath Bank PLC from 2002 to 2011 and Chairman of its Human Resources, Remuneration and Risk Management Committees. He presently serves as a Director of Siyapatha Finance PLC, SC Securities (Pvt) Ltd., Coral Sands Hotel Ltd., and Alethea International School. Honorary Legal Advisor of CIM Sri Lanka and the Ayurveda Doctors (Gampaha Wickremarachchi) Association of Sri Lanka. He was a founder member of the Consumer Affairs Authority of Sri Lanka in 2002. He was appointed as Honorary Consul for Seychelles in Sri Lanka by the President of the Republic of Seychelles in October 2013. He is the Commander of St. John’s Ambulance Bridge.

HARRIS PREMARATNENon-Executive Director

Mr. Harris Premaratne joined the Softlogic Board in 2014. He has extensive banking experience, having held several top positions and gained many accolades in the banking industry. He is an Associate of the Chartered Institute of Bankers, London. Mr. Premaratne is a Past President of the Sri Lanka Banks’ Association. He currently serves on the Boards of Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC, Softlogic Capital PLC, Asiri Central Hospitals Ltd., and Central Hospital Ltd., and is Chairman of the Remuneration Committee and member of the Audit Committee of the above-mentioned hospitals. He was an Executive Director and the Deputy Chairman of Softlogic Finance PLC for the period 2015-2018.


BOARD OF DIRECTORS

NIHAL KEKULAWELANon-Executive – Independent Director

Mr. Kekulawala counts over thirty years in the banking profession and was appointed as a Director in January 2019. He has held senior positions at Hatton National Bank PLC and played a strategic role in the diversification of HNB from Commercial Banking to Investment Banking, venture capital, stock brokering and life/ general insurance. Mr. Kekulawala served as the lead consultant and was responsible for setting up a Commercial Banking Operation in the Solomon Islands. He functioned as the inaugural CEO of the bank. He presently serves on the Board of several public companies. Mr. Kekulawala is a Fellow of the Institute of Chartered Accountants England and Wales, and Sri Lanka, Fellow of the Chartered Institute of Bankers, England and has an MBA from the University of Manchester.

AARON RUSSELL-DAVISONNon-Executive Director

Mr. Aaron Russell-Davison joined the Board of Softlogic in 2016. With over twenty years of banking experience, he was most recently the Global Head of Debt Capital Markets for Standard Chartered Bank, Singapore. Mr. Russell-Davison has held a series of other senior investment banking positions in Hong Kong, Singapore and London during his career. He graduated from the University of Western Australia in 1991 with a Bachelor of Arts in Asian History and Politics. Mr. Russell-Davison serves as an Executive Director and Deputy Chairman at Softlogic Finance PLC. He also a Non Executive Independent Director at Amana Bank PLC.

PROF. AJANTHA DHARMASIRINon Executive Independent Director.

Prof. Ajantha Dharmasiri was appointed to the Board in 2016 as a Non Executive Independent Director.

Prof. Dharmasiri currently serves as the Chairman / Director of the Board of Management of the Postgraduate Institute of Management, University of Sri Jayewardenepura. He is the Immediate Past President of the Chartered Institute of Personnel Management (CIPM), Sri Lanka and was a Vice President of the Asia Pacific Federation of Human Resource Management (APFHRM). He also serves as an Adjunct Professor at the Price College of Business, University of Oklahoma, USA.

He holds a Ph.D. and an MBA from the Postgraduate Institute of Management and a B.Sc. in Electrical Engineering from the University of Moratuwa. He is a Chartered Electrical Engineer and a Fellow of the Chartered Institute of Management, UK.

He has three decades of both private and public sector experience including stints at Unilever and Nestle, and is a sought after conference speaker, corporate trainer, strategy consultant, acclaimed author and an accomplished academic.


SHIRISH SARAFNon-Executive Director

Mr. Shirish Saraf joined the Board of Softlogic in April 2018 as the nominee Director of Samena Ceylon Holdings Ltd. He is the Founder and Executive Vice Chairman of Samena Capital.

He has been a Director of various companies in different jurisdictions across Samena’s portfolio, including RAK Ceramics PSC, RAK Logistics LLC, Dynamatic Technologies Ltd and Tejas Networks Ltd. Mr. Saraf previously held Directorships in Aramex Holdings, Commercial Bank of Oman SADG, Abraaj Capital, EFG Hermes and Amwal Capital (Qatar).

In September 2013, Asian Investor listed him as one of Asia’s 25 most influential people in Private Equity.

Mr. Saraf has obtained a Bachelor of Science degree in Economics from the London School of Economics and Political Science.

CHETAN GUPTAAlternate to Mr. Shirish Saraf

Mr. Chetan Gupta is the Managing Director of Samena Capital Investments Ltd in Dubai, focusing on investments within the Special Situations Funds.

Mr. Gupta is a member of the Board of Directors of U-Gro Capital Ltd (India), Imperial Hotels (Pvt) Ltd (India), RAK Logistics (Singapore).

He is also a member of the Investment Committee of the Special Situations Funds. Prior to joining Samena Capital, Mr. Gupta was an equity research analyst at Tricolour India Funds and previously was a part of the General Atlantic Financial Management Leadership Program.

Mr. Gupta is a Chartered Financial Analyst (AIMR), Chartered Alternative Investment Analyst and holds a Masters in Management (Finance) from the University of Mumbai.

RICHARD EBELLNon-Executive Independent Director (resigned December 2018)

Mr. Richard Ebell was appointed to the Board of Softlogic Holdings PLC in 2014. A Fellow of the Institute of Chartered Accountants of Sri Lanka and the Chartered Institute of Management Accountants (CIMA), UK, he also holds a Diploma in Marketing from the Chartered Institute of Marketing (CIM), UK. Mr. Ebell serves on the Board of Cargills Bank Ltd, and from 01 January 2019, on the Board of Asiri Hospital Holdings PLC.


SECTOR HEADS

DR. MANJULA KARUNARATNEHealthcare Services

NASSER MAJEEDRetail

DR. STEPHAN ANTHONISZReal Estate

IFTIKAR AHAMEDFinancial Services

DR. UDAYA INDRARATHNALeisure


DR. MANJULA KARUNARATNEHealthcare ServicesMBBS, M.Sc (Trinity, Dublin),Dip. MS Med (Eng) MSOrth Med. (UK)

Dr. Karunaratne was appointed to the Board of Asiri Hospital Holdings PLC and Asiri Surgical Hospital PLC in 2006, and currently serves as the Chief Executive Officer of the Asiri Group. He also serves on the Boards of Central Hospital Ltd., Asiri Central Hospitals Ltd., Asiri Hospital Matara (Pvt) Ltd., Asiri Hospital Galle, Asiri Diagnostic Services (Pvt) Ltd. and Asiri Hospital Kandy (Pvt) Ltd., He previously held the positions of Medical Director, Asiri Hospital Holdings PLC (1996-2000) and was Chief Operating Officer, Asiri Hospitals Group during the period 2006-2014 .

He possesses over 30 years of experience in the field of healthcare, and is responsible for the overall medical policy of the Group. Under his guidance the Group has introduced over twenty new medical procedures and technologies to Sri Lanka amongst which are the country’s first Bone Marrow Transplant Unit, first Minimally Invasive cardiac surgery service, first fully fledged Stroke Unit with facilities for ‘clot retrieval’ and a high end Interventional Radiology service In addition a ‘live donor’ Liver Transplant service is currently being set up.

IFTIKAR AHAMEDFinancial Services

Mr. Iftikar Ahamed is the Managing Director of Softlogic Capital PLC, which is the Financial Services holding company of the Group that has interests in Insurance, Leasing & Finance and Stockbroking. He is also the Managing Director of Softlogic Life Insurance PLC and an Executive Director of Softlogic Stockbrokers (Pvt) Ltd. Mr. Ahamed counts over 30 years of experience in a wide range of métiers within the financial services industry. He has extensive banking experience both in Sri Lanka and overseas, having held senior management positions as Deputy Chief Executive Officer at Nations Trust Bank PLC and Senior Associate Director at Deutsche Bank AG. He holds an MBA from the University of Wales, UK.

NASSER MAJEEDRetail

Mr. Nasser Majeed joined Softlogic to serve as the CEO of the Retail Sector in 2013. He counts over 35 years of multidisciplinary business experience, starting his career at KPMG Ford Rhodes Thornton & Company in 1981 and moving to Singer Industries (Ceylon) Ltd., in 1984. He served the Singer Group in many areas including Cost Accounting, Product Management, Exports, Marketing and General Management. He was also Director/General Manager of PT Singer Indonesia Tbk., from 2005 to 2006 and thereafter served as Marketing Director of Singer Sri Lanka PLC from 2009 to 2013. He also served on the Boards of Regnis Appliances Ltd., and Singer Sri Lanka PLC as an Alternate Director. He served as Chairman of the judging panel of SLIM Brand Excellence in 2015 and 2016 and continues to serve on the Advisory panel for SLIM Brand Excellence.

DR. UDAYA INDRARATHNALeisure

Dr. Udaya Indrarathna joined Softlogic Holdings PLC in 2018 as the Chief Executive Officer of the Leisure Sector. He has 25 years of work experience in senior management positions across government and the private sector in the United Arab Emirates. Dr. Indrarathna held office as an Executive Director of Policy, Strategy and Tourism Affairs for the Government of Dubai at its Department of Tourism & Commerce Marketing (DTCM) during the period 2002-2012. He also served as a Senior Advisor to the Chairman’s office in the Abu Dhabi Tourism & Culture Authority (Government of Abu Dhabi) during 2012-2017.

Dr. Indrarathna is a Fellow and Chartered Marketer of the Chartered Institute of Marketing (CIM), UK. He holds a PhD in Applied Management & Decision Sciences. He acquired his MBA (Finance) from AMBA accredited University of Leicester, UK and an MA in Marketing from the University of Birmingham City, UK. He is also a Certified Operations Analyst from Cornell University, New York, USA.

DR. STEPHAN ANTHONISZReal Estate

Dr. Stephan Anthonisz has functioned as the CEO/Director of Softlogic Properties (Pvt) Ltd., since 2012. He oversaw the construction of the Group’s leisure projects Centara Ceysands Resort & Spa and Mövenpick Hotel Colombo, which are now successfully in operation. Most recently, he managed the construction and setting up of the Management Corporation Condominium Plan 13241 of Softlogic’s first Apartment project “The Everest”, where 60% of the units have been sold to date.

He holds an MBA and a Doctorate in Business Administration from the Australian Institute of Business Administration, Adelaide. Dr. Anthonisz is a justice of the peace and the author of the book ‘Marketing high rise luxury condos in a middle income country in Asia’. In the sporting arena he has represented Sri Lanka at Cricket at national level.

Dr. Anthonisz has held managerial positions with leading conglomerates covering diverse roles in Sri Lanka and overseas. He previously held the position of Head of Value Added Tea Exports at Unilever Ceylon Ltd., before taking on the role of CEO, John Keells Group Property Development.


FUNCTIONAL HEADS

AASHIQ LAFIRDAMITH VITHARANAGEHIRAN PERERA

INDRESH FERNANDO DESIREE KARUNARATNE


LINTON NELSON

CHINTHAKA RANASINGHE

NILOO JAYATILAKE

NATASHA FONSEKA


FUNCTIONAL HEADS

HIRAN PERERADirector Group Treasury

Mr. Hiran Perera joined Softlogic in 2013 to head its treasury function. Prior to this, he was Head of Wholesale Risk/ Acting Chief Risk Officer at HSBC, Sri Lanka and Maldives, and counts over 28 years of banking experience at HSBC which also includes cross-border exposure.

INDRESH PUVIMANASINGHE FERNANDOChief Process Officer

Ms. Indresh Fernando joined Softlogic in 2014 and was seconded to Softlogic Finance PLC as Chief Operating Officer. In 2018, she was appointed as Chief Process Officer of Softlogic Holdings PLC. She is a Fellow of the Chartered Institute of Management Accountants (CIMA), UK. She counts for over 25 years of experience in the Accountancy profession in diverse sectors such as Financial Services, Hospitality, Transportation, Inbound Travel and Telecommunications.

She served in the capacity of Sector Finance Director at both Hemas Transportation and Serendib Group prior to joining Softlogic.

DAMITH VITHARANAGEGroup Head of Risk and Internal Audit

Mr. Damith Vitharanage joined Softlogic to head the Group Risk and Internal Audit Divisions in 2013. He is responsible for Internal Audit, Risk and Compliance activities of the Group. Damith counts over 19 years of senior managerial experience in Audit, Investigations, Financial Management, Human Resource Management and Administration, Information Security, Risk Management and General Management in both the state and private sectors in Sri Lanka and the Middle East. Prior to joining Softlogic Holdings PLC, He worked as Deputy General Manager -Head of Audit and Investigations at Seylan Bank PLC. He is a Management Graduate from the University of Colombo (BBA), holds a Postgraduate Diploma in HR, Post Graduate Diploma in Integrated Waste & Energy Management and possesses a Management MBA specialised in Transformational Leadership. He has Associate Memberships from the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), the Chartered Institute of Management Accountants (CIMA), UK, and the Chartered Institute of Marketing (CIM), UK, and is a Certified Information System Auditor (CISA), USA and a Certified Project Manager (PMP) USA.

DESIREE KARUNARATNEGroup Director – Marketing

Ms. Desiree Karunaratne joined Softlogic in 2003 and serves as Group Director Marketing. She is responsible for Group marketing activities and crafting the long term marketing strategy of the Group. She has over 16 years of senior management experience across a diverse range of businesses in Retail, Fashion, Information Technology, Travel and Media. She holds an MBA from the University of Wales, UK. She serves on the Boards of Softlogic Restaurants (Pvt) Ltd., Softlogic Destinations Management (Pvt) Ltd., Silk Route Foods (Pvt) Ltd., Nextage (Pvt) Ltd., Softlogic Rewards Pvt Ltd., Softlogic Supermarkets Pvt Ltd. and Sabre Travel Network Lanka (Pvt) Ltd.

AASHIQ LAFIRGroup Finance Director

Mr. Aashiq Lafir joined Softlogic in 2018, and counts over 30 years of senior managerial experience in companies with diverse interests as a Finance and Operations specialist.

Mr. Lafir is a Fellow of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Chartered Institute of Management Accountants (CIMA), UK and is a Chartered Global Management Accountant (CGMA), US. He also holds a Masters Degree in Business Administration from the University of Sri Jayewardenepura. Mr. Lafir is also the Chairman of Skills International (Pvt) Ltd., and is the former Executive Director - Finance of United Motors Lanka PLC. He is the immediate past President of Sri Lanka-Malaysia Business Council.


NATASHA FONSEKAGroup Director – Human Capital & Taxation

Ms. Natasha Fonseka joined the Group in 2010 and is presently the Group Director, Human Capital & Taxation. She is responsible for Corporate Taxation and Human Capital activities of the Softlogic Group. She counts over 25 years of experience in senior managerial positions in Human Resources Management, Taxation, Financial Advisory Services and Finance in reputed international professional firms and the private sector. She is an Associate of the Chartered Institute of Management Accountants (CIMA), UK and a Chartered Global Management Accountant (CGMA), US.

CHINTHAKA RANASINGHEHead of Strategy and Business Development

Mr. Chinthaka Ranasinghe joined Softlogic in 2014 as the Head of Strategy and Business Development. He has over 17 years of senior managerial experience in equity research and investment banking in one of Sri Lanka’s leading conglomerates. He is a Management Graduate from the University of Colombo (BBA) and a Passed Finalist of the Chartered Institute of Management Accountants (CIMA), UK.

LINTON NELSONDirector – Logistics

Mr. Linton Nelson joined Softlogic in 2013 as Director – Logistics and is responsible for Group Shipping & Logistics (including Softlogic Main Distribution Centre, Odel’s & Cotton Collection Distribution Centres) and Group Security. He has over 37 years of experience in the Department of Customs of Sri Lanka, with 15 years of senior managerial experience as Head of Intelligence and Director Sea Cargo Clearance. He holds a Bachelor’s Degree in Law and a Higher National Certificate in Business Studies. He has had special offshore trainings on Border Controls, Supply Chain Security and Logistics Management in the US, UK, Japan, Australia and China.

NILOO JAYATILAKEHead of Investments

Ms. Niloo Jayatilake joined Softlogic in 2015 to head the Group Investments Division. Counting over 20 years of experience in the Investments and Portfolio Management field, she is responsible for the Group’s investment portfolio. Prior to joining Softlogic Holdings PLC, she worked as Head of Portfolio Management/Director of Guardian Fund Management Ltd., for 10 years, handling client funds and Ceylon Guardian promoters’ funds with assets under management of over Rs. 25 Bn. She is a Fellow of the Chartered Institute of Management Accountants (CIMA), UK and an Associate Member of the Institute of Chartered Secretaries and Administrators, UK.


CORPORATE GOVERNANCE

THE GROUP GOVERNANCE STRUCTURE

CORPORATE GOVERNANCE UNDERPINS PERFORMANCE OF OUR DIVERSE PORTFOLIO OF BUSINESSES AS WE LOOK TO DELIVER VALUE TO OUR KEY STAKEHOLDERS, FACILITATING LONG TERM SUSTAINABILITY AND GROWTH. THE GROUP HAS 07 LISTED ENTITIES WHICH PUBLISH THEIR OWN ANNUAL REPORTS AND HAVE THEIR OWN GOVERNANCE FRAMEWORKS WHICH COMPLY WITH THE REQUIREMENTS OF THE COLOMBO STOCK EXCHANGE. OUR GOVERNANCE MECHANISMS COMPRISE ORGANIZATION STRUCTURES, POLICIES AND PROCESSES WITH CLEARLY DEFINED ROLES AND REPORTING MECHANISMS, FACILITATING DIRECTION AND CONTROL OF THE BUSINESSES BY THE BOARD.

COMPOSITION OF THE BOARD

ADMINISTRATION OF THE BOARDSKILLS OF THE BOARD GOVERNANCE FRAMEWORK

Executive Chairman

Independent Directors

Non Independent, Non-Executive Directors

Executive Directors

Alternate Director

Administration of the Board is done by Softlogic Corporate

Services (Pvt) Ltd., a subsidiary of Softlogic Holdings PLC.

Shareholders

Board of DirectorsGroup

Managing Director

SectorHeads

Group Support Functions

Audit Committee

Board of Directors CEO Management

Team

HR & Remuneration Committee

Related Party Transactions

Review Committee


Sector

Subsidiary Companies

Entrepreneurship

Skills

Marketing

Medical

Legal & HR

Banking

Accounting& Finance

External

Companies Act No. 07 of 2007

Listing Rules of the Colombo Stock Exchange

Code of Best Practice on Corporate Governance issued by the SEC and ICASL

Internal

Articles of Association Code of Business Conduct Terms of References for

Board sub-committees Comprehensive framework

of policies, systems and procedures

Governance systems

Stakeholder engagement and management

Strategic planning Risk management Regulatory compliance People management Internal controls Internal and external audit


We have structured this Report in line with the Code of Best Practice on Corporate Governance to provide an overview of governance of the Softlogic Group.

CODE OF BEST PRACTICES ON CORPORATE GOVERNANCE

The Company Shareholders

A. DirectorsB. Directors’ RemunerationC. Relations with ShareholdersD. Accountability & Audit

E. Institutional InvestorsF. Other InvestorsG. Sustainability Reporting

The Board is reviewing the Code of Best Practice on Corporate Governance issued in December 2017 by the Institute of Chartered Accountants.

A. DIRECTORS

The Board of Directors is responsible for setting the strategic direction of the Group, safeguarding assets, managing risks and setting the tone at the top. They have set in place governance frameworks to facilitate achievement of strategic goals and compliance with regulatory frameworks while balancing stakeholder interests. Composition of the Board is set out graphically on the previous page while profiles of the Directors are given on pages 22 to 25. Directors provide annual declarations of independence in accordance with the stipulations of the Listing Rules of the CSE and the guidelines of the Code of Best Practice. Board balance is facilitated with seven Non-Executive Directors who are reputed leaders in their fields of whom four are Independent. A sufficiency of financial acumen within the Board is assured with the presence of four Directors who are experienced accounting and finance professionals. The skills, experience and standing of the individual Board members ensures sufficient deliberation on matters set before the Board and exercise of independent judgement. Directors can also seek independent professional advice when deemed necessary, for which the expenses are borne by the Group.

The role of the Board is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls facilitating effective risk management. They are collectively responsible for the following:

Providing strategic direction and establishing performance objectives to monitor the achievement of strategic goals

Establishing an effective management team

Establishing appropriate systems of corporate governance in the Group;

Ensuring the adequacy and effectiveness of internal controls, Code of Business Conduct and other policies to facilitate regulatory compliance and risk management.

A. DIRECTORS

A.1 The BoardA.2 Chairman and CEO A.3 Chairman’s RoleA.4 Financial AcumenA.5 Board BalanceA.6 Supply of InformationA.7 Appointments to the

BoardA.8 Re-electionA.9 Appraisal of Board

PerformanceA.10 Disclosure of

information in respect of Directors

A.11 Appraisal of Chief Executive Officer (CEO)



COMMITTEES OF THE BOARD

The Board is supported by the following committees which facilitate effective discharge of its responsibilities. Minutes of the sub-committee meetings are circulated to the Board at the following Board meeting ensuring awareness of the activities of the sub-committee by the other Board members.

CODE OF CORPORATE GOVERNANCE

Sub-Committee Composition Mandate

Audit Committee J D N Kekulawala - ChairmanDr S Selliah Prof A S DharmasiriW M P L De Alwis, PC

Responsible for ensuring the integrity of the Company’s and Group’s Financial Statements, appropriateness of accounting policies and effectiveness of internal control over financial reporting

Remuneration Committee Prof A S Dharmasiri - ChairmanW M P L De Alwis, PCG L H Premaratne

Responsible for determining remuneration policy and the terms of engagement and remuneration of the Chairman, the Board of Directors and the Executive Committees.

Related Party Transactions Committee

Dr S Selliah - ChairmanW M P L De Alwis, PCH K Kaimal

To assist the Board in reviewing all related party transactions carried out by the Company and its listed companies in the Group by early adopting of the Code of Best Practices on Related Party Transactions as issued by the Securities and Exchange Commission of Sri Lanka and CA Sri Lanka.

MEETINGS

The Board meets on a quarterly basis and dates for Board meetings are determined and communicated in advance at the beginning of the year with additional meetings are scheduled whenever deemed necessary. Meeting agenda and relevant papers are circulated to all Directors at least 7 days prior to the meeting providing sufficient time for review facilitating the conduct of an effective meeting. Attendance at Board meetings and Sub-Committee meetings during the year under review is given below;

Director Board Statutory Committees

Audit Committee HR & Remuneration

Committee

Related Party Transactions

Review Committee

A K Pathirage 3/3

Dr S Selliah 3/3 7/8 4/4

G L H Premaratne 3/3 1/1

G W D H U Gunawardena 3/3

H K Kaimal 3/3 3/4

M P R Rassool 2/3

Prof A S Dharmasiri 2/3 6/8 1/1

R A Ebell 1/1 6/6 1/1

R J Perera 2/3

W M P L De Alwis, PC 3/3 5/6 1/1 4/4

A Russell-Davison 2/3

S Saraf 0/3

J D N Kekulawala 2/2 2/2

C K Gupta (Alternate to S Saraf) 2/3


COMPANY SECRETARY

Softlogic Corporate Services (Pvt) Ltd provide Company Secretarial services and are responsible for advising the Board on all corporate governance matters and assists the Chairman in planning the agenda of the meetings. All Directors have access to the advice and services of the Company Secretary and their appointment and removal is determined by the Board as a whole.

APPOINTMENT & RE-ELECTION

Appointments to the Board are based on recommendations of the Chairman and other Directors who ensure that the Board has sufficient skills and experience for effective discharge of their responsibilities. The Articles of Association requires three Directors to retire at each Annual General Meeting (AGM) who may offer themselves for re-election. Directors appointed during the year are required to seek re-election at the next AGM. The following Directors thus retire and offer themselves for re-election;

M P R Rassool

W M P L De Alwis, PC

Prof A S Dharmasiri

J D N Kekulawala

BOARD INDUCTION AND TRAINING

All Directors are given an induction pack on appointment to the Board, which includes details on duties and responsibilities, the Company’s Articles of Association and Sub-Committee Terms of Reference. Directors receive regular briefings from Key Management Personnel and external resources on developments in the operating environment which includes regulatory changes and market dynamics. Non-Executive Directors also have access to the Chairman/Managing Director and the Company Secretary to present matters of concern or seek clarifications that may arise.

CHAIRMAN & CEO

The roles of the Chairman and the Managing Director are combined in one person due to the diversity of the Group’s business operations in line with a number of large diversified holding companies.

INVESTMENT APPRAISAL

The Group’s diverse business portfolio is reviewed periodically to determine their relevance to the Groups long term business goals, risks and opportunities for growth. Consequently, investment and divestment decisions, acquisitions are key areas of focus for the Board with proposals reviewed for commercial viability, strategic alignment, operational, funding and risk implications. Systematic processes are in place to ensure the involved of relevant persons when capital investment decisions are taken and numerous views are sought to ensure high quality decision making.

B. DIRECTORS’ REMUNERATION

The Remuneration Committee makes recommendations to the Board on remuneration policy and remuneration of Chairman & Managing Director, Executive Directors, Non-Executive Directors and Key Management Personnel in line with the business goals of the Company. Terms of Reference of this key sub-committee complies with the guidelines prescribed by the Code of Best Practice and other investor guidelines.

The Group’s Remuneration policy is designed to attract and retain talent and comprises fixed income and a variable income which is linked to performance. Non-Executive Directors’ remuneration comprises only a fixed fee and does not have any variable component. No Director is able to determine his own remuneration as Directors’ Remuneration is a matter reserved for the Board as a whole with due consideration given to the recommendations of the Remuneration Committee of the Board.

The Report of Board Remuneration Committee on page 107 provides further information. The aggregate remuneration paid to the Directors is disclosed in the Notes to the Financial Statements on page 159 of this Report.

C. SHAREHOLDER RELATIONS

Shareholder relations are managed through a structured process with multiple platforms facilitating shareholder engagement and timely dissemination of information. The Annual General Meeting is the key platform for engagement and notice of the AGM and all relevant documents are circulated among shareholders at least 15 working days prior to the AGM. The Chairmen of the Board Committees and External Auditors attend the Annual General Meetings to respond to queries that

Board Composition & Appointment

Risk Management

Funding Structure of Group

Business Expansion

Financial Reporting

Performance Management

B. DIRECTORS’ REMUNERATION

B1. Remuneration ProceduresB2. The Level & Makeup of RemunerationB3. Disclosure of Remuneration

C. RELATIONS WITH SHAREHOLDERS

C1. Constructive use of AGM and General MeetingsC2. Communication with shareholdersC3. Major and material transactions



may be raised by the shareholders. In addition to the AGM, shareholder engagement is also facilitated by the Group’s investor relations department which maintains a continuous dialogue with shareholders through dissemination of announcements on material developments and quarterly performance. They are also a point of clarification for shareholders.

D. ACCOUNTABILITY AND AUDIT

Board responsibilities include presenting a balanced assessment of the Group’s financial performance, position and prospects on a quarterly and annual basis. This Annual Report has been prepared in discharge of this responsibility and includes the following declarations/ further information required by regulatory requirements and voluntary codes:

Audited Financial Statements – pages 116 to 222

Statement of Director’s Responsibilities - page 110

Annual Report of the Board of Directors on the Affairs of the Company – pages 102 to 104

Management Discussion & Analysis – pages 51 to 100

The Audit Committee has oversight responsibility for monitoring and supervising financial processes to ensure integrity, accurate and timely financial reporting. It is also responsible for ensuring adequacy and effectiveness of the Internal Control and Risk Management processes and receives reports from Group Internal Audit and Group Risk Management in this regard. The Audit Committee comprises 4 Non-Executive Directors all of whom are Independent. The Chairman of the Audit Committee is a Finance professional with extensive experience in the relevant areas whose profile is given on page 24. The Terms of Reference of the Audit Committee complies with the recommendations of the Code of Best Practice on Board Audit Committees issued by ICASL and guidelines stipulated by the SEC.

The Audit Committee is responsible for approving the terms of engagement of the external auditors including audit fees. The principal auditor has not provided any services which are stipulated as restricted by the SEC and the audit fees and non-audit fees paid by the Company to its auditors are separately disclosed on page 159 of the Notes to the Financial Statements.

The Board holds overall responsibility for determining the Group’s risk appetite and implementing sound risk management and internal control systems to ensure that risk exposures are maintained within defined parameters. The Group’s internal control systems are aimed at safeguarding shareholders investments and effectively managing risks that may impact the achievement of its strategic objectives.

A discussion on the Company’s key risk exposures and mitigation mechanisms are given in the Risk Management Report on page 46 of this Report. The Audit Committee annually reviews the effectiveness of the Group’s risk and internal control systems.

A formalized whistle-blowing policy is in place enabling employees to raise concerns anonymously on unethical behaviour, breach of regulations and/or violations of the Group’s Code of Conduct. Such complaints are investigated and addressed through a formalised procedure and brought to the notice of the Board, serving as an overriding control mechanism.

The Board Related Party Transactions Review Committee has been set up in compliance with guidelines stipulated by the CSE. Directors individually declare their relevant transactions with the Company and its subsidiaries on a quarterly basis. A formalised process is in place for identifying related party transactions and avoiding conflicts of interest. All Related Party Transactions as defined by the applicable accounting standards are disclosed on Note 48 of the Financial Statements on page 204 of this Report.

E&F. SHAREHOLDERS

All shareholders are encouraged to attend the Annual General Meeting of the Company and vote on the resolutions which form part of the agenda in accordance with matters reserved for shareholders. Extraordinary General Meetings are also called to inform shareholders on material developments that impact their interests and their consent is obtained for the same in accordance with the provisions of the Companies Act.

G. SUSTAINABILITY REPORTING

The Group continues its efforts to embed Sustainability in to its operations and report on how the Group manages risks stemming from economic, environmental and social factors. The Group’s Annual Report is used as a platform to provide comprehensive sustainability communication to all stakeholders and this year we have enhanced the scope and coverage of our sustainability reporting by adopting a stakeholder value creation approach. Holistic sustainability reporting is a journey and we continue to improve the reports each year in discharge of our obligations.

D. ACCOUNTABILITY & AUDIT

D1. Financial ReportingD2. Internal ControlD3. Audit CommitteeD4. Code of Conduct & EthicsD5. Corporate Governance Disclosures

E&F. SHAREHOLDERS

Institutional InvestorsE.1 Shareholder votingE.2 Evaluation of Governance Disclosures

Other investorsF.1 Investing Divesting DecisionF.2 Shareholder voting


BOLD IS BOUNDLESSOPERATING CONTEXT & STRATEGY

Leveraging Group Synergies 38Value Creation Model 39How We Create Value 40Operating Environment 44Risk Management 46


LEVERAGING GROUP SYNERGIES

THE GROUP’S COMPLEMENTARY BUSINESSES PARTICULARLY IN THE CONSUMER SECTOR AND ITS ORGANISATIONAL STRUCTURE WHICH FACILITATES THE SHARING OF COMMON FUNCTIONS HAS PAVED WAY FOR CONSIDERABLE SYNERGIES, BOTH IN REVENUE GENERATION AND COST MANAGEMENT.

CROSS-SELL OPPORTUNITIES

Through its diverse operations the Group has access to a large base of customer related information. Pursuing cross sell opportunities through targeted promotions, loyalty schemes and combined housing of brands has enabled the Group to enhance its customer value proposition while driving customer acquisition, retention and reinforcing loyalty.

SHARING PHYSICAL INFRASTRUCTURE

Access to a vast distribution network across Sectors has allowed the Group to realise significant economies of scale which have contributed to the success of new business initiatives.

INTELLECTUAL CAPITAL

Our established track record and deep industry insights have enabled the Group to nurture a unique base of cross-sectoral intellectual knowledge. This expertise has contributed towards the success of new initiatives and ventures into new industries.

CENTRALISED FUNCTIONS

Support functions such as HR, Finance and Treasury Management are centralised, allowing for economies of scale, broader funding avenues at more favourable rates and cost efficiencies.

PEOPLE PROPOSITION

The Group’s human capital is represented by a diverse and committed team of young talent. The employee value proposition is strengthened through knowledge sharing, job rotation and inter-company transfers which contributes towards enhancing the quality of our people.


VALUE CREATION MODEL

CAPITAL INPUTS OUR VALUE CREATING ACTIVITIES

VALUE DRIVERS

OUTPUTS/OUTCOMES

FINANCIAL CAPITAL

Shareholders’ funds: Rs. 14.4 Bn(page 80)

MANUFACTURED CAPITAL

Property, plant and equipment: Rs. 50.8 Mn(page 84)

HUMAN CAPITAL

Skills and attitudes of 11,042 employees(page 86)


Customer relationship: Business partner relationship:Relationships with our communities(page 91)


Tacit knowledge Brands(page 96)

NATURAL CAPITAL

Raw material:Energy consumption(page 98)

SHAREHOLDERSSUSTAINABLE GROWTH IN EARNINGSProfit: Rs. 3 BnROCE: 9.8%Dividends paid: Rs. 596 Mn(page 191)

EMPLOYEESREWARDING AND CHALLENGING WORK ENVIRONMENTPayments to employees: Rs. 10.2 BnInvestment in training: Rs. 65 MnCareer and skill development

CUSTOMERS

Revenue: Rs. 75 Bn(page 116)

COMMUNITY

Investment in CSR

GOVERNMENT

Tax contribution

IMPACTS

Solid wasteEffluentsCarbon footprint

Retail (page 52)

IT (page 62)

Healthcare (page 58)

Automobiles (page 76)

Financial Services (page 67)

Leisure & Property(page 72)

CORE VERTICALS LEADING MARKET POSITIONS

Managing Business Partner Relationships

PeopleManagement

Innovation

FinancialManagement

StrategicPlanning

RISK MANAGEMENT (PAGE 46) AND CORPORATE GOVERNANCE (PAGE 32)


STAKEHOLDER ENGAGEMENTThe Group has nurtured relationships with a universe of diverse stakeholders and we engage with them through numerous formal and informal mechanisms which ensure that stakeholder concerns are identified in a timely manner. We engage with stakeholders who potentially have the most significant impact on our value creation process and those who are affected most by our activities. The following table lists the key methods of engagement, as well as the concerns raised by our stakeholders during the year under review; our response to the identified concerns is addressed throughout this Report.

IMPORTANCE OFENGAGEMENT

METHOD AND FREQUENCY OFENGAGEMENT

KEY TOPICS ARISING FROM ENGAGEMENT

Shar

ehol

ders

Providers of risk capital expect a commensurate reward. Consequently, our investors expect long term value creation through business growth, profitability and stability which will provide returns in the form of dividends and increased market capitalisation.

Quarterly publication of Financial Statements together with a comprehensive Chairman’s narrative.

Timely announcements of price sensitive information

Annual Report

Annual General Meetings

Meetings with investors and analysts upon request.

Financial returns

Stability of earnings

Reputation & Governance

Empl

oyee

s

Employees are key to driving our performance and growth. Their roles are multi-faceted varying from being the Group’s ambassadors at the front line to an increasingly strategic role at the centre. Corporate values and a strong performance culture link all the employees across the Group, inspiring them to reach higher goals.

Structured engagements with Chairman and Management of each Sector

Open door policy at Sector level

One-on-one sessions

Town-hall meetings with the HR Department

Continuous professional development

Human capital helpline

Commensurate remuneration/rewards

Recognition

Career progression

Training & Development

Income stability

Retention

Cust

omer

s

As a customer focused Group, their experiences determine our success. We seek to attract, retain and grow our customer base, both corporate and individuals, by increasing the value created for them through new services and product offerings. Our engagements are tailored to suit specific requirement.

Personalised service with island wide customer touch-points for individuals

Structured engagement with corporate customers to ensure satisfaction

Customer surveys and market research

Affordability

Availability

Ease of access

Product responsibility

Customer service

After sales services

Prin

cipa

ls/B

usin

ess Relationships with principals of global

repute enhance our ability to create value. Our Group has been founded on our ability to bring global brands to the local market, fuelling multiple growth effect.

A structured Relationship Management function is in place for our key principals facilitating deepening relationships and addressing of any concerns that may arise.

Business growth

Brand compliance

Trust

HOW WE CREATE VALUE


IMPORTANCE OFENGAGEMENT

METHOD AND FREQUENCY OFENGAGEMENT

KEY TOPICS ARISING FROM ENGAGEMENT

Supp

liers

Suppliers play a key role in driving our businesses as materials used by Sectors such as the Healthcare Sector must be of the best quality. We believe in mutually rewarding relationships with suppliers and choose those with the ability to provide a reliable service with high levels of accountability.

Centralised purchasing functions for Sectors drive a holistic engagement with suppliers whose relationship is annually reviewed. A high level of interaction is available on a needs basis.

Business growth

Timely settlements

Feedback and support for improvement

Gov

ernm

ent &

Reg

ulat

ory

Bodi

es

The Ministry of Health, Central Bank of Sri Lanka, Consumer Affairs Authority, Department of Inland Revenue, Sri Lanka Customs and Central Environment Authority are key regulators who recommend legislation and implement existing legislation, shaping the respective areas of economic activity.

Relationships with regulators are generally high level relationships at Corporate Management and Board levels with engagements happening on a needs basis at fairly frequent intervals.

Compliance

Revenue

Support for government initiatives

Com

mun

ities

As retailers, we seek to have high levels of engagement with the community, in line with the culture and needs.

Identifying community needs and supporting the same through a structured programme

Employment creation

Support for socio economic growth

Uphold cultural values


MATERIAL MATTERSMaterial topics are defined as those that could potentially have the most significant impact on the Group’s ability to create value. These topics are determined based on emerging risks and opportunities in the external environment, feedback received from stakeholder engagement and the Group’s strategic priorities. Material topics for 2018/19 are listed below;

Significance of Impact

Im

pact

on

our S

take

hold

ers

Hig

h

High

Med

ium

Medium

Low

Low

1 3

12

2 6

14

5

1115 16

4

131087 9

Material Topic Significance of Impact Impact on our Stakeholders

Low Medium High Low Medium High

1 Brand acquisition

2 Innovation

3 Managing principal relationships

4 Product responsibility

5 Product & service accessibility

6 Service quality

7 Geographical and capacity expansion

8 Talent management

9 Training and development

10 Fluctuations in exchange and interest rates

11 Competition

12 Government policy

13 Managing natural inputs (paper and energy)

14 Managing natural outputs (waste, effluents and carbon footprint)

15 Investment and funding

16 Employee retention

HOW WE CREATE VALUE

13


OPPORTUNITIES AND RISKSThe Group’s strategy has been centred on strengthening its position in key growth sectors of the economy. While these sectors present substantial upside potential, the changing economic landscape, intensifying competition and dynamic industry conditions also expose the Group to numerous risks. Key trends which could materially impact the Group, either in a positive or negative manner are presented below. Further details on these trends are presented in the Sector Reviews on pages 51 to 79 of this Report.


LEISURE AND PROPERTY

RETAIL

AUTOMOBILES

FINANCIAL SERVICES

HEALTHCARE

Growing digitisation aspirations of the corporate sector Government impetus towards IT enabled services Increasing demand for fin-tech services Increasing connectivity

Positive growth prospects in the long-term Concerted industry efforts towards promoting Sri Lanka as a

destination

Increasing disposable incomes Expansion of the middle class Increasing customer sophistication and preference for aspirational

goods

Modernisation of the country’s public transport system Increasing disposable incomes Expected long-term growth in the tourism sector

Increasing disposable incomes Government’s financial inclusion agenda Relatively low life insurance penetration in the country High mobile penetration and connectivity

Increasing disposable incomes Propensity to seek convenience and comfort in obtaining health

services Increasing prevalence of non-communicable diseases

Delays in Government projects Exchange rate fluctuations Shortage of skilled labour Intense competition from regional markets

Fall in tourist arrivals in the aftermath of the Easter attacks Difficulties in staff attraction and retention Competition from the informal sector

Exchange rate fluctuations Insufficient availability of retail space in Colombo Rapidly changing customer preferences

Policy instability on import duties Exchange rate fluctuations Loan to value restrictions

Government’s monetary policy direction and fiscal consolidation efforts

Over indebtedness among vulnerable groups Intensifying competitive pressures

Increasing competitive pressures Shortage of skilled labour Impact of exchange rate fluctuations



GLOBAL ECONOMY

Global economic growth slowed to 3.6% in 2018 reflecting a notable deceleration during the 2nd half of the year. Subdued conditions reflected escalating trade tensions between USA and its key trading partners, disruptions to the auto sector in Germany and weak investor and consumer sentiments in the European region. USA grew by 2.9% supported by robust consumption growth and a tight labour market, which in turn supported the growth of advanced economies by 2.2%. The Euro region lost momentum, expanding by just 1.8% during the year while the Emerging market and developing economies grew by 4.5%, as growth in China slowed reflecting regulatory tightening and focus on driving a more sustainable growth agenda.

SRI LANKAN ECONOMIC GROWTH

Sri Lanka’s economic growth also slowed to 3.2% in 2018 compared to 3.4% the previous year, due to rising commodity prices, cascading effects of global dynamics, subdued consumer sentiments and political instability towards the latter part of the year. Agriculture Sector posted recovery after several years of contraction to expand by 4.8% following favourable weather conditions and a particularly strong Yala season. Services Sector grew by 4.7% reflecting broad-based expansion of key sub sectors including Financial Services and Telecommunications. A weaker Construction Sector impacted the performance of the Industrial sector which grew by a mere 0.9% during the year.

CONSUMPTION EXPENDITURE

During the year Sri Lanka’s household consumption expenditure was subdued, growing marginally by 2.3% due to weak consumer confidence, higher interest rates for most part of the year and depreciation of the exchange rate. Expenditure on clothing and footwear and health grew at a moderate pace, while expenditure on restaurants and hotels increased by a relatively healthy 10% during the year under review. Sri Lanka continues to be a consumption driven economy and over the longer-term household consumption expenditure will be driven by a growing urban middle class, increasing customer sophistication and preference for premium goods and rising disposable incomes.

EXCHANGE RATE

The Sri Lankan rupee recorded sharp depreciation against the US Dollar, falling by 18% in 2018 to end the year at Rs. 180.1 as at end-December 2018. The depreciation reflects the broad-based strengthening of the US Dollar against regional currencies, resulting from several rate hikes in the USA. The Central Bank largely allowed demand and supply forces to determine the level and direction of the exchange rate of the rupee in the foreign exchange market, intervening only to prevent disorderly adjustments. Meanwhile, the Government’s efforts to curtail import expenditure, including the imposition of increased cash margin requirements resulted in the strengthening of the Rupee during the first quarter of 2019, to end at Rs. 174.9 on 31 March 2019.

GLOBAL ECONOMIC GROWTH(% /%)

0.00.51.01.52.02.53.03.54.0

Global growthAdvanced economiesUSAEuro regionEmerging markets and developing economies

0

1

2

3

4

5

2017 2018 2019F 2020F

SRI LANKA GDP GROWTH(% /%)

-6-4-2

02468

Agriculture Industrial Services Overall growth

2016 2017 2018

Source: IMF (World Economic Outlook)

Source: CBSL

INTEREST RATES

The tight monetary policy stance adopted by the regulator in previous years was relaxed somewhat during 2018 with the upper bounds being reduced in April 2018. Continued deficits of rupee liquidity in the domestic money market compelled the Central Bank to reduce the Statutory Reserve Ratio (SRR) applicable on all rupee deposits of commercial banks in November 2018, while increasing policy rates to neutralise the impact on interest rates. Amid the tight liquidity conditions that prevailed during the year, lending rates of commercial banks remained high during most part of 2018 with AWPR and AWLR gradually increasing during the year.


OUTLOOK

The Easter Sunday attacks in April 2019 have dampened prospects in the short-term, although a recovery is anticipated in the medium term as consumer spending and investor sentiments improve. Upcoming elections are likely to lead to some fiscal slippage during the 2nd half of the year, thereby inserting pressure on government finances. While the government projects growth to reach 5% by 2023, this would largely depend on the country’s political landscape, higher participation of the private sector and commitment to structural reforms.

EXCHANGE RATE(Rs. /USD)

135140145150155160165170175180185

Jan-

18Fe

b-18

Mar

-18

Apr-

18M

ay-1

8Ju

n-18

Jul-1

8Au

g-18

Sep-

18O

ct-1

8N

ov-1

8D

ec-1

8Ja

n-19

Feb-

19M

ar-1

9

AWPR(%)

10.0

10.5

11.0

11.5

12.0

12.5

13.0

Jan-

18Fe

b-18

Mar

-18

Apr-

18M

ay-1

8Ju

n-18

Jul-1

8Au

g-18

Sep-

18O

ct-1

8N

ov-1

8D

ec-1

8Ja

n-19

Feb-

19M

ar-1

9

Source: CBSL

Source: CBSL


RISK MANAGEMENT

RISK GOVERNANCE

The Board of Directors hold ultimate responsibility for managing risks relating to the Group. The Board is assisted by the Audit Committee in this regard, who have oversight responsibility for the same. As a diversified Group, significant risks relating to the Group’s operations arise from its subsidiaries and business verticals. Several entities within the Group, mainly the regulated subsidiaries such as Softlogic Life and Softlogic Finance PLC have stringent risk management frameworks in place including their own internal audit functions, risk and compliance functions and dedicated Risk Management Committees. Multiple reporting lines are in place for escalating risks to the Group Audit Committee and Board of Softlogic Holdings PLC.

RISK MANAGEMENT FRAMEWORK

The Group adopts the globally accepted Three Lines of Defence model for risk management which clearly defines responsibilities in the identification, measurement and monitoring of risks. The primary responsibility for identification of risks lies at the business unit level, which is the first line of defence. Risk Management Committees act as the second line of defence, independently assessing the material risks. Meanwhile, the third line of defence includes the internal and external audit functions.

AS A GROUP WITH DIVERSE INTERESTS ACROSS SEVERAL ECONOMIC SECTORS, THE GROUP IS EXPOSED TO A RANGE OF INTERNAL AND EXTERNAL RISK FACTORS. THE PROACTIVE AND ROBUST MANAGEMENT OF THESE RISKS IS VITAL IN DELIVERING SUSTAINABLE STAKEHOLDER VALUE. THE GROUP’S RISK MANAGEMENT FRAMEWORK IS DIRECTED TOWARDS ACHIEVING AN OPTIMUM BALANCE BETWEEN RISK AND RETURN DYNAMICS. THE GROUP’S RISK MANAGEMENT FRAMEWORK COMPRISES COMPREHENSIVE RISK POLICIES, CLEARLY DEFINED GOVERNANCE STRUCTURES AND AN ORGANISATION-WIDE RISK CULTURE WHICH EMBEDS RISK CONSIDERATIONS TO STRATEGIC AND BUSINESS DECISIONS.

1st Line of DefenceOPERATIONAL MANAGEMENT

BUSINESS LEVEL Operational Front Line

PROACTIVE MONITORING Risk Management Compliance Information Security & Risk Financial Control

OVERSIGHT Internal Audit External Audit

2nd Line of DefenceRISK MANAGEMENT AND COMPLIANCE

3rd Line of DefenceINTERNAL AUDIT & EXTERNAL AUDIT

Inte

rnal

Con

trol

Fra

mew

ork

Functional Management

Sector Management

Board Audit Committees and

Board of Directors


1

2

3

4

5

Fraud risk management

Budgeting, planning and reporting

Risk assessment and mitigation

Crisis and business continuity management

Transfer of risks

Map and anticipate main identifiable risks periodically

Prioritise them based on severity and probability

Develop risk appetite and assign risk ownership

Communicate key risks to business level

Develop and implement policies and mitigative action plans

Provide training, guidance and support

1

2

3

4

5

6

RISK MANAGEMENT PROCESS

The Group Risk Management Framework has been designed on the principles of the International Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework as described below;

1 BUDGETING, PLANNING AND REPORTING

A range of tools including annual budgeting, monthly operational and variance analysis reviews are adopted in the strategic planning process, along with ongoing review of markets and competition. The budgeting process delivers a detailed Group budget . The budget is reviewed and approved by the Board. Stress testing is also conducted in certain subsidiaries which are materially exposed to market variables, particularly in the Financial Services Sector.

2 RISK ASSESSMENT AND MITIGATION

The process we adopt for assessing and mitigating key risks is presented alongside. Risks are categorised into Strategic risks, Operational risks and Tactical risks and assigned to specific risk owners who are responsible for developing operational plans.

3 FRAUD RISK MANAGEMENT

A comprehensive anti-fraud framework is in place to prevent, detect, deter, report and respond to fraudulent activities. This is overseen by respective Heads of Internal Audit, Risk and Compliance who are in turn governed by respective Board Audit Committees. Whistle-blowing arrangements allow staff to report any suspicion of fraud or irregularities induction, as well as regular staff training, highlights anti-fraud and anti-bribery measures, and the importance of ethical behaviour.

4 CRISIS AND BUSINESS CONTINUITY MANAGEMENT

The Group’s crisis management processes include escalation and communication and assignment of roles and responsibilities.

5 TRANSFER OF RISKS

Our insurance programmes cover property damage, business interruption, public, product and professional liability, and employee health & safety. These aim to protect the Group against large or numerous claims, so any cost arising does not impair Group competitiveness.


RISK MANAGEMENT

RISK EXPOSURE RISK MITIGANTSNET RISK ASSESSMENT

2018-19 2017-18

CONSUMER SPENDING As a consumer-focused organisation, a weakening of consumer spending and curtailment of discretionary spending have a direct impact on the Group’s growth and profitability.

Diverse business profile with exposure to numerous segments

Strong market position in relatively defensive industries such as healthcare

Ongoing monitoring of macro-economic trends

High

Based on the moderation in disposable incomes and slowdown in private consumption expenditure.

Moderate

EXCHANGE RATE RISKThe Group is exposed to exchange rate risk through Retail, IT and Automobile Sectors which rely on imports.

Close monitoring of foreign currency exposures Risk limiting thresholds in place for exposures Hedging through forward contracts by Group

Treasury to limit exposures within specified thresholds

HighThe sharp depreciation of the Sri Lankan Rupee during the year resulted in an escalation of our import costs.

GOVERNMENT POLICYAll our verticals are directed impacted by the Government’s monetary and fiscal policy measures as well as regulations, particularly in the Financial Services and Healthcare Sectors.

Proactive monitoring of market trends and policy implications

Active participation in industry associations, facilitating industry-wide responses to current issues.

Moderate Moderate

CUSTOMER EXPERIENCE AND SATISFACTIONSatisfying and retaining customers is key to business growth, particularly given the increasing competitive intensity in the operating landscape

High levels of customer engagement facilitated through numerous platforms

Regular review of product portfolios and product launches to introduce new products to the market

High levels of product responsibility maintained throughout the entire Group

Monitoring customer rankings

Moderate Moderate

INTEREST RATE RISKThe Group is exposed to interest rate risk due to its exposure to borrowings as well as repricing of the Financial Sector’s advances and deposit portfolios.

A Centralised Treasury function monitors and manages market conditions and the potential impact of interest rate changes

Cap and floor agreements, fixed and floating rates and asset/liability maturity analyses are used to assess and mitigate risks

HighThe prevalent high interest rates impacted the Group’s profitability due to the escalation in finance cost.

Moderate

CREDIT RISKCredit risk exposure stems primarily from the Financial Services Sector engages in the provision of leasing, working capital and other loans.

Customer credit due diligence Increased focus on secured lending products Diversified credit portfolio (concentration and tail

risks) Credit approval is reviewed by respective authority

levels depending on the value involved Internal client ratings

Moderate Moderate

PRINCIPALS RISKS OF 2018/19


RISK EXPOSURE RISK MITIGANTSNET RISK ASSESSMENT

2018-19 2017-18

PEOPLE RELATED RISKSOur people drive the Group’s strategic aspirations and facilitate the customer experience and are therefore a vital in the creation of sustainable value.

Strong employee engagement mechanisms Attractive remuneration schemes Opportunities for training and skill development Culture of mentoring

Low Low

TECHNOLOGICAL OBSOLESCENCE As a Group with significant interests in technology, the rapid obsolescence of technology has an impact on the Group’s inventory management and earnings.

Strong partnerships facilitate introduction of new technology to the market

Proactive monitoring of consumer preferences and emerging technological trends

A tech savvy culture within the Group ensures that we embrace technology as a competitive edge for business growth

Moderate Moderate

RELATIONSHIPS WITH PRINCIPALSOur relationships with globally reputed principals is a key source of competitive edge.

High levels of engagement with principals at senior levels

Compliance with varying franchise requirements of principals for storage, marketing and distribution of their products and other administrative aspects

Consistent delivery of value to principals

Low Low

PRODUCT RESPONSIBILITYOffering high quality products which meet the emerging requirements of customers is vital in sustaining our competitive edge and maintaining our brand reputation.

Compliance with regulatory and certification requirements

Dedicated after-sales function for consumer durables and ICT

Dedicated customer service functions at all retail outlets

Monitoring of customer complaints Quality control processes Regularly calling customers

Low Low




BUSINESS LINE REVIEWSRetail 52Healthcare Services 58Information Technology 62Financial Services 67Leisure and Property 72Automobile 76

CAPITAL MANAGEMENT REPORTSFinancial Capital 80Manufactured Capital 84Human Capital 86Social and Relationship Capital 91Intellectual Capital 96Natural Capital 98

BOLD IS

BES



BUSINESS LINE REVIEWS

RETAIL

AS A CONSUMER-FOCUSED GROUP, THE RETAIL SECTOR IS VITAL TO SOFTLOGIC’S GROWTH ASPIRATIONS. THE SECTOR’S SCOPE HAS EXPANDED TO INCLUDE DIVERSE INTERESTS AND INDUSTRY-LEADING BRANDS ACROSS TELECOMMUNICATION, CONSUMER ELECTRONICS, BRANDED APPARELS, QUICK SERVICE RESTAURANTS (QSR) AND MODERN TRADE.


OPERATING ENVIRONMENT STRATEGY AND PERFORMANCE OUTLOOK

Moderating economic conditions and slowdown in consumption spending

Prevalent high interest rate scenario Sharp depreciation of Sri Lankan Rupee against the USD Positive long-term outlook supported by increasing

disposable incomes, customer sophistication and changing lifestyles

Network expansion Sharpening brand focus Leveraging on distribution

capabilities to drive penetration Sector revenue growth 6%

Positive long-term outlook given rising disposable incomes, increasing customer sophistication and a growing middle class.

SECTOR SNAPSHOT

In Telecommunications, the sector is Sri Lanka’s leading mobile phone distributor, holding distributor rights for world-leading brands such as Samsung, Nokia. The sector is also a leading retailer of consumer electronics and durables in Sri Lanka, representing an array of leading global brands such as Panasonic, Samsung, Dell and Apple. Branded apparels and fashion retail comprise of Odel, Cotton Collection and the representation of over 105 leading international fashion brands. In Quick Service Restaurants (QSR) the Group owns the franchise rights of Burger King, Baskin Robbins ice cream and Deli France. During the year, the Sector widened the scope of its operations through venturing into the modern trade industry with the launch of GLOMARK supermarkets. The Group is also the authorised dealer for Suzuki motorcycles in Sri Lanka.

SOFTLOGIC RETAIL (PVT) LTD Retailer of consumer durables and furniture

SOFTLOGIC RETAIL HOLDINGS (PVT) LTD

SUZUKI MOTORS LANKA LTD Authorised Dealer for Suzuki motorcycles

SML HOLDINGS (PVT) LTD Non-operational subsidiary

DAI-NISHI SECURITIES (PVT) LTD Non-operating subsidiary

SOFTLOGIC SUPERMARKETS (PVT) LTD Operator of Softlogic’s supermarket chain

SOFTLOGIC REWARDS (PVT) LTD Management of Group reward points system

SOFTLOGIC RESTAURANTS (PVT) LTD QSR chain operating BURGER KING® restaurants, the ice cream business

- Baskin-Robbins, the French bakery food franchise - Delifrance & the Group’s own branded Asian restaurant - Wangediya

SILK ROUTE FOODS (PVT) LTD Operates the BURGER KING® outlet at the Bandaranaike International Airport

SOFTLOGIC BRANDS (PVT) LTD Branded Apparel stores

ODEL PLC Chain of retail department stores

OTHER ODEL SUBSIDIARIES Manufacturing products and providing support services to Odel Group

COTTON COLLECTION (PVT) LTD Apparel stores

ODEL PROPERTIES ONE (PVT) LTD Developer of Odel Mall


SOFTLOGIC COMMUNICATION SERVICES (PVT) LTDService arm for the Mobile Sector

SOFTLOGIC MOBILE DISTRIBUTION (PVT) LTDNational Distributor for Samsung handsets

SOFTLOGIC INTERNATIONAL (PVT) LTDBusiness partner of Dialog Axiata PLC

SOFTLOGIC COMMUNICATIONS (PVT) LTDNational Distributor for Nokia handsets



BUSINESS LINE REVIEWSRETAIL

CUSTOMER CONTACT POINTS

189SOFTLOGIC SHOWROOMS

27ODELSTORES

04COTTON COLLECTION

01WANGEDIYA

20SOFTLOGIC MAX

20BURGER KING RESTAURANTS

02DELIFRANCE

33BRANDED APPAREL

07BASKING ROBBINS

01GLOMARK SUPERMARKET


The year under review was a challenging one for the country’s consumer sector, which was impacted by higher interest rates, sharp depreciation of the Sri Lankan Rupee, moderating economic conditions and weak consumer sentiments. Accordingly, the growth in household consumption expenditure slowed to 2.3% during the year, with expenditure on furnishing and household equipment remaining flat. The longer-term outlook, however, remains promising as economic growth stabilises, and disposable incomes rise particularly given that Sri Lanka continues to be a consumption-driven economy. There is also an increasing prevalence for premium products and increased customer sophistication.

RETAIL SECTOR- PERFORMANCE(Rs.Mn /Rs.Mn)

34,00034,50035,00035,50036,00036,50037,00037,50038,000

RevenueAssets

29,00030,00031,00032,00033,00034,00035,00036,00037,000

2018 2019

HUMAN CAPITAL

0500

1,0001,5002,0002,5003,0003,5004,000

Headcount20182017 2019

(No. Employees)


Sri Lanka’s modern grocery retail sector has also seen robust growth supported by improving incomes, rising urbanisation and changing lifestyles which has attracted more customers from traditional grocery channels. Modern trade penetration, however, remains low with only 12%-15% of FMCG sales generated by modern grocery retail, which compares relatively lower than regional peers (Nielsen’s). Currently, supermarkets are concentrated in urban areas, with large untapped potential in rural areas.

STRATEGY AND INTEGRATED PERFORMANCE REVIEW

The Retail Sector recorded a revenue and operating profit growth of 6% and 4% respectively, upheld by the broad based growth in the sub sectors. The Sector maintained its position as the top contributor to operating earnings and continues to leverage on a widening portfolio of products and services, new partnerships and international brands and an extensive distribution network. Overall profitability, however, continues to be affected by finance costs which increased by 40% during the year resulting in the Sector’s pre-tax profit declining by 77% to Rs. 215 Mn during the year.

TELECOMMUNICATION

The Group’s telecommunication arm consolidated its market position as the leading distributor of mobile phones, recording commendable top line growth during the year. Overall profitability was however impacted by the sharp depreciation of the Sri Lankan Rupee which affected margins. The Samsung smart phone range continued to achieve deeper market

KEY PERFORMANCE INDICATORS

Rs. Mn 2018-19 2017-18 % YoY

Revenue 37,723 35,437 6Operating Profit 3,220 3,096 4Pre-tax profit 215 946 (77)Profit after tax 151 766 (80)Assets 36,054 31,419 15Liabilities 31,309 25,900 21CAPEX 2,063 1,363 51

PRIVATE CONSUMPTION EXPENDITURE

02,000

4,000

6,000

8,000

10,000

12,000

Private consumption expenditureClothing and footwearHealthRestaurants and hotels

100

200

300

400

500

2014 2015 2016

(Rs. Mn/Rs. Mn)

2017 2018

penetration, supported by the Group’s extensive distribution network of 6 Branded outlets, more than 200 Softlogic outlets and over 1,700 dealers. We also provide the industry’s best after-care sales through four care centres across major cities, thereby providing convenient and accessible after-sales service. Meanwhile Nokia’s new range of Android phones also performed well with the phone’s market share as a percentage among the highest in the world. During the year under review, we further widened our product portfolio with the introduction of the Micromax brand targeting the value for money segment.

CONSUMER ELECTRONICS AND FURNITURE

The Group maintained it is market position as one of the top 3 retailers of consumers electronics and durables in Sri Lanka, representing an array of leading global brands such as Panasonic, Samsung, Dell and Apple. Despite subdued consumer sentiments, the segment achieved moderate top line growth as it leveraged on its extensive distribution network comprising more than 200 outlets. Profitability was however affected by rising interest rates and the effect of the exchange rate depreciation. Strategic focus was placed on consolidating our network and enhancing the ambience and overall customer experience at showrooms. In furniture, the Group commenced manufacturing a range of household furniture under its “Lifestyle” brand, which is expected to be a sizable contributor to Sector earnings over the medium to long-term.

Source: CBSL



BUSINESS LINE REVIEWSRETAIL

CONSUMER ELECTRONICS

INTERNATIONAL WATCHES

EYEWEAR

BRANDED APPAREL / FOOTWEAR / HANDBAGS

DEPARTMENTAL STORES

RESTAURANTS FURNITURE

ONLINE STORE / OTHERSSUPERMARKETS


BRANDED APPARELS AND FASHION RETAIL

Odel, Cotton Collection and the exclusive representation of a host of leading international fashion brands has enabled the Group to emerge as one of Sri Lanka’s largest retailers of branded apparels. The segment recorded commendable revenue and profit growth during the year supported by network expansion, ongoing investment in brand development and the introduction of several new international brands. In 2018/19, we added 17 new outlets in Colombo City Centre, and will establish a presence in Kurunegala through the launch of a Softlogic multi-brand department store, offering customers a unique shopping experience. Our product proposition centres on offering customers an array of choices ranging from home-grown brands to international brands and during the year we sought to revamp and refine our private label offerings by sharpening brand focus. We also widened our premium brand offering with the introduction of several luxury brands such as Michael Korrs, Jack and Jones and Longines watches targeting the upper income market segment. The Group’s unique ability to maintain the brand ethos of the international brands it represents has allowed it to nurture long-term relationships with its principals.

QUICK SERVICE RESTAURANTS

In this segment, the Group adopted a strategy of expanding its proposition to drive penetration across market segments. The performance of Burger King improved during the year, underpinned by competitive pricing, ongoing product development and cost rationalisation. During the year, we added 1 new BK outlets, bringing the total network to 20. We continue to invest in upskilling our young team with the objective of enhancing service quality and the overall customer experience. Ensuring compliance to stringent health, safety and food hygiene is a key priority for the segment, with frequent audits conducted to ensure the highest standards of product responsibility. Meanwhile, we also expanded the Baskin Robbins network by adding 1 new outlet during the year while focusing on improving the product proposition. The year under review, also saw the segment adding 2 Deli France outlets.

SUZUKI

Softlogic acquired the exclusive distributorship of Suzuki Motorcycles, spare parts and accessories in 2016/17 and since has sought to drive volume growth through expanding its dealer base and proactive customer engagement. The segment recorded strong revenue and profit growth (albeit a small base), gaining market share by 2% despite

GROUP SYNERGIES

Sharing physical infrastructure to drive increased footfall

Benefits accruing from sharing expertise and organisational intellectual capital

Use of data analytics across the Group to predict customer behaviour

a non-conducive environment which directly impacted the leasing market. The sharp depreciation of the Sri Lankan Rupee, government regulations on emission standards and the imposition of cash margins on imports also had a significant impact on the segment’s performance.

MODERN TRADE

The Group entered the modern grocery trade industry with the launch of Softlogic GLOMARK supermarkets during the year. We hope to adopt a niche strategy by offering a uniquely curated shopping experience to discerning customers thereby redefining the standards of modern trade in Sri Lanka. The Group launched GLOMARK supermarkets with the first supermarket being opened this year. We expect to add 6 new supermarkets and 4 mini supermarkets branded GLOMARK Essentials in 2019/20. In 2019/20 we have opened 1 supermarket and 3 GLOMARK Essentials outlets to date. Softlogic’s strong presence in Sri Lanka’s consumer-focused industries have afforded the Group a strong platform to drive synergies, and we hope to leverage on this to drive greater footfall to the supermarkets. Utilising data analytics to predict customer behaviour is also a key long-term priority, enabling us the opportunity to offer targeted promotions and customised service. We see strong potential for long-term growth in this segment, given Sri Lanka’s rising disposable incomes, urbanisation and propensity towards premium goods.

WAY FORWARD

Over the short-term the Sector’s performance is likely to be affected by the prevalent conditions in the country, although the medium to long-term outlook remains promising. The growth strategy for 2019/20 will include leveraging Group synergies using data analytics and the launch of a Group-wide loyalty scheme. Following the launch of supermarkets, the Group now has a presence across all key consumer value chains and is aptly positioned to capitalise on emerging growth opportunities in this space.




HEALTHCARE SERVICES

THE HEALTH CARE SERVICES SECTOR IS A KEY CONTRIBUTOR TO GROUP EARNINGS ACCOUNTING FOR 18% OF CONSOLIDATED REVENUE IN 2018/19. THE SECTOR IS REPRESENTED BY THE ASIRI GROUP OF HOSPITALS, THE LEADING PRIVATE HEALTHCARE PROVIDER IN SRI LANKA. INVESTMENTS IN EXPANDING ITS GEOGRAPHICAL REACH HAS POSITIONED THE SECTOR TO CAPTURE GROWTH OPPORTUNITIES AND THE SECTOR ACHIEVED A COMMENDABLE REVENUE GROWTH OF 12% DURING THE YEAR. PROFITABILITY, HOWEVER, WAS AFFECTED BY ESCALATING COSTS AS WELL AS NORMALISATION OF PROFITS FOLLOWING A ONE-OFF DISPOSAL GAIN LAST YEAR.



Growing demand for private medical services

Rising medical costs due the depreciation of the Rupee and impact on pharmaceutical and medical supplies prices

Expand geographical footprint and capacity

Continued investment in state-of-the-art medical and clinical technology

Increased focus on process improvements to gain cost efficiencies

Increased revenue 12%

Private healthcare is expected to play a greater role in Sri Lanka’s healthcare sector given the rapidly ageing population, increasing prevalence of non-communicable diseases, rising income levels and increasing insurance penetration.

SECTOR OVERVIEW

The Group’s Healthcare Sector is represented by the Asiri Group of Hospitals- Sri Lanka’s leading private healthcare provider with a total bed capacity of 763 across 6 hospitals and a network of 16 laboratories and 57 collection centres across the country. The Group in collaboration with several internationally accepted medical partners offer some of the country’s most advanced clinical and medical services in key areas such as Cardiac, Brain & Spine, Hernia, Oncology, Bone Marrow Transplant and Stroke Care.

ASIRI HOSPITAL HOLDINGS PLC 113-bed hospital in Colombo

ASIRI SURGICAL HOSPITAL PLC148-bed hospital offering specialised surgical care inclusive of a state-of-the-art heart centre, modern operating theatres and urology treatment facilities

ASIRI CENTRAL HOSPITALS LTDNon-operational

CENTRAL HOSPITAL LTD245-bed state-of-the-art technologically advanced, modern one stop medical centre that offers diagnostic, therapeutic and intensive care facilities.

ASIRI HOSPITAL MATARA (PVT) LTD63-bed hospital in Matara, offering a range of general and surgical care facilities

ASIRI DIAGNOSTICS SERVICES (PVT) LTDLaboratory services in the Central Province

ASIRI HOSPITAL KANDY (PVT) LTD162- bed multi-specialty hospital under construction in Kandy

DIGITAL HEALTH (PVT) LTDJoint Venture with Digital Holdings Lanka (Pvt) Ltd

ASIRI LABORATORIES (PVT) LTDIsland-wide laboratories and collection centers

ASIRI HOSPITAL GALLE (PVT) LTD32-bed hospital in Matara, offering a range of general and surgical care facilities

ASIRI AOI CANCER CENTRE (PVT) LTDJoint Venture with Cancer Treatment Services Hyderabad (Pvt) Ltd




BUSINESS LINE REVIEWSHEALTHCARE SERVICES


While the government sector still plays a dominant role in Sri Lanka’s healthcare sector, demand for private health services has been rising rapidly due to increasing urbanisation, rising income levels, the prevalence of non-communicable diseases and an aging population. Amongst the impediments for the growth in the private healthcare sector is insufficient healthcare insurance penetration, which makes private healthcare services less affordable for the general public. As a result, much of the private sector healthcare facilities continue to be concentrated in the urban areas with little penetration outside the major cities of Colombo, Kandy and Galle. By end 2018, there were 200 registered private hospitals with 5,120 beds that included 23 private Ayurvedic hospitals with 454 beds. The private sector plays a vital role in outpatient care, accounting for 65% of total outpatients treated; in inpatient care, the share is relatively low at 15%. Consistent capacity expansions by the private sector has enabled it to grow its bed capacity by a compound annual growth rate of 21% over the last 4 years, compared to 10% in the state sector.


The Healthcare Service Sector recorded revenue growth of 12% supported by steady growth in occupancy levels in all our hospitals and the continued expansion of our laboratory network. Continued emphasis on cost management and process improvement initiatives resulted in an 14% improvement in gross profits. Sector operating profit however, declined by 7% to Rs. 3,195 Mn reflecting a normalisation of earnings following a one-off disposal gain in 2017/18. Excluding this gain, the Sector’s operating profit has grown by 19%. During the year the Sector was also impacted by a higher income tax rate of 28% (compared to 12% in 2017). Consequently, Sector pre-tax profit decreased by 9% to Rs. 2,409 Mn during the year.

We continued to consolidate our position as Sri Lanka’s leading healthcare provider by expanding our bed capacity, geographical reach and scope of services offered. A key achievement during the year was having Asiri Hospital Kandy poised for launch in April 2019; this 162-bed tertiary hospital built at a total investment of Rs. 6.5 Bn is the first of

its kind in the Central Province and is equipped to carry out high-end cardiac surgeries in addition to offering the latest diagnostic and laboratory services. We also acquired a 32-bed private hospital in Galle at a total investment of Rs. 450 Mn. Refurbishments are currently being carried out to increase capacity and enhance the diagnostic technology of the hospital. The Sector continued to expand its laboratory network, opening 11 new collection centres during the year. Meanwhile we increased capacity at our Cardiac Centres at Asiri Central and Asiri Surgical by adding second Catheterisation Laboratories in order to accommodate the increasing demand for cardiac procedures.

We are at the forefront of Sri Lanka’s advances in medical technology, consistently introducing pioneering solutions and driving technology-led innovation throughout our operation. Our joint venture partnership with the American Oncology Institute (AOI), the ‘Asiri-AOI Cancer Centre’ was launched in November this year. The Cancer Centre, which is located at Asiri Surgical Hospital offers precision driven personalised cancer treatment based on collaborative protocols with University of Pittsburg Medical Centre, one of the most eminent providers of oncology treatment in the United States. We also expanded the range of services offered during the year with a new Hernia Centre that offers same day surgery and a new post-surgical stress management clinic. Meanwhile state-of-the-art MRI scanners were installed at both Asiri Hospital Galle (Pvt) Ltd and Asiri Hospital Kandy (Pvt) Ltd making them the only


Rs. Mn 2018-19 2017-18 % YoY

Revenue 13,475 12,025 12Operating Profit 3,195 3,426 (7)Pre-tax profit 2,409 2,635 (9)Profit after tax 1,831 1,938 (6)Assets 24,600 21,012 17Liabilities 14,709 11,851 24CAPEX 3,359 2,620 28Net profit per employee 0.37 0.47 (21)

HEALTHCARE SECTOR- PERFORMANCE

2018 201911,000

11,500

12,000

12,500

13,000

13,500

14,000

19,000

20,000

21,000

22,000

23,000

24,000

25,000(Rs. Mn) /(Rs. Mn)

RevenueAssets

EMPLOYEE PRODUCTIVITY

20182017 20190

1,000

2,000

3,000

4,000

5,000

0.2

0.3

0.4

0.5(No. of Employees/Rs Mn/ Employee)

Head count Net profit per employee

BED CAPACITY

20182017 20190

100200300400500600700800

(No. of Beds)


two hospitals outside of Colombo to offer world-class interventional radiology procedures.

Maintaining the highest quality standards in all areas of our operation is a critical aspect of our competitive edge and value proposition. Our relentless focus on quality and excellence is evident from the numerous local and international accreditations and certification we have obtained. Several of our hospitals are currently in the process of obtaining the Australian Council on Healthcare Standards International (ACHSI) certification. Meanwhile, Asiri Central Hospital which first obtained the prestigious JCI accreditation in 2016 is expected to secure re-accreditation by JCI in November 2019. Other quality certifications include ISO9001, ISO14001 and OHSAS 18001. Two of our Quality Circle teams won gold awards at the International Quality Circles Convention in Singapore, a reflection of the quality mindset of our staff. Attesting our international standards of care, Asiri Central’s Brain and Spine Centre was chosen as the first overseas venue for the prestigious International FRCS examination in Neurosurgery during February 2018. Meanwhile our Bone Marrow Transplant Centre was recognized for post-graduate studies for Hematologists by the College of Medicine in Colombo. This is the first time a private hospital in Sri Lanka has been bestowed such recognition.

Being in a service sector, staff development is a critical aspect of our overall strategy. Employee training programs are carried out at all levels to promote a culture of continuous improvement and service excellence. (Refer table alongside for details of training hours provided during the year.) Meanwhile our Nurse Training School continues to set the standards in nursing care in the country.

With cost management and efficiency gains becoming increasingly important, several process improvements were implemented during the year to drive efficiency and enhance service quality. A Group-wide integrated approach was adopted for operational improvements with a dedicated Chief Process Officer spearheading operational improvements across the Group. Key initiatives implemented during the year include digitizing and forward planning the discharge process to fast-track the process, implementation of a more effective inventory control system, introduction of digital tablets for patient feedback and the implementation of quality dashboards to identify and track clinical and non-clinical indicators.

WAY FORWARD

As margins continue to be impacted by rising medical costs and increasing competition, achieving cost efficiencies through process improvements and efficiency gains will remain a focus through 2019/20. We also remain committed to pushing the boundaries of the healthcare industry in Sri Lanka by introducing the most advanced medical technology throughout our operation. We are currently exploring several opportunities for cross border investments in the Healthcare Sector which we expect will come to fruition during the next year. We also see significant potential for preventive healthcare and are pro-actively exploring this space for future development.

EMPLOYEE TRAINING

Number of trainings sessions held

Clinical training 370Non-clinical training 829General training 1107Quality Related training 92Total 2398

HIGHLIGHTS OF 2018/19

Launch of Asiri Breast Care Centre - Asiri Central Hospital

Asiri Health ranked the leading Healthcare brand in Sri Lanka by Brand Finance

Asiri AOI Cancer Centre

Acquisition of 32-bed private hospital in Galle

Launch of Well Woman clinic in Asiri Medical

Launch of Hernia Centre in Asiri Medical





THE GROUP’S IT SECTOR IS A LEADING PROVIDER OF INTEGRATED, END-TO-END IT SOLUTIONS TO THE CORPORATE, SME AND GOVERNMENT SECTORS. OUR COMPETITIVE EDGE IS UNDERPINNED ON OUR LONG-STANDING RELATIONSHIPS WITH WORLD LEADING PRINCIPALS, WHICH HAVE ENABLED US TO INTRODUCE THE LATEST IT SOLUTIONS TO THE COUNTRY. THE SECTOR HAS PLACED STRATEGIC EMPHASIS ON CONSOLIDATING ITS MARKET POSITION BY EXPANDING ITS’ PRODUCT AND SERVICE RANGE ACROSS THE VALUE CHAIN WHILE FURTHER STRENGTHENING OUR PRE AND AFTER SALES SUPPORT SERVICES.



Increased demand for IT services from both private and government sector due to increased emphasis digitization

Government’s IT agenda in the education, defence and administrative sectors

Sharp depreciation of the Rupee Increasing interest rates

Focus on value-added IT solutions which facilitate the digital transformation of organisations

Strengthen Regional Support Centres to build brand value

Increased revenue 11%

Recommencement of Government projects

Sluggish economic conditions may impact IT budgets of companies during FY 2019/20

SECTOR OVERVIEW

The Group’s IT Sector is represented by four entities engaged in a range of services spanning the entire IT value chain from end-user computing, data centres & solutions, advanced infrastructure, IT security, imaging and printing to managed services. The Sector represents world-leading brands such as Dell EMC, Microsoft, Cisco, McAfee, Epson, NEC, Zebra, Honeywell, Riello, PartnerTech and Woosim among others. Following the restructure of the Group’s IT and Retail sectors last year, the telecommunications operations have been transferred to the Retail sector.

SOFTLOGIC INFORMATION TECHNOLOGIES (PVT) LTDProvider of software, hardware, infrastructure and security solutions to corporates, SMEs and the Government

SOFTLOGIC BPO SERVICES (PVT) LTDIT support services provider to the Group and customised IT solutions provider to corporates

SOFTLOGIC SOLAR (PVT) LTDNon-operational

SOFTLOGIC CORPORATE SERVICES (PVT) LTDGroup Company Secretarial function

SOFTLOGIC AUSTRALIA PTY. LTDSoftware solutions provider based in Australia whose services extend to the USA and the Middle East

Nextage (PVT) LTDNon-operational

SOFTLOGIC COMPUTERS (PVT) LTDSpecialised IT solutions provider to Financial Services, Retail and Hospitality Sectors

Information Technology

Others


JENDO INNOVATIONS (PVT) LTDAn Associate Company involved in bio-medical research and product development

SOFTLOGIC HEALTHCARE HOLDING (PVT) LTDNon-operational


End User Computing Desktops Notebooks Touch computers Hand held

computers


BUSINESS LINE REVIEWSINFORMATION TECHNOLOGY

OUR PRESENCE ALONG THE VALUE CHAIN

Data Centres & Solutions

Server infrastructure

Advanced Infrastructure

Disaster recovery solutions

Software defined storage and networking solutions

Software defined WAN and WAN optimisation

Security Cyber security

software Next Gen Firewall Advanced

persistence & vulnerability threat assessment

Security operating centres

Privileged access management

Imaging and Printing Multi-function Inkjet Colour-copiers Multi-media

projectors

Managed Services Power protection

solutions Retail solutions Hospitality and

Utility Solutions


IT programming consultancy and related activities grew at a rate of 10.8% in 2018, compared to the 4.2% growth recorded in 2017. Growing demand for IT services together with the digitalisation initiatives introduced in several sectors contributed to the expansion in IT related services. Export earnings from ICT services too continued its steady growth in 2018. Total earnings from the export of telecommunications, computer and information services grew by 7.5% to USD 995 Mn in 2018 with inflows from computer and information services growing from USD 786 Mn in 2017 to USD 848 Mn in 2018. The rapid expansion of Information Technology Enabled Services (ITES) together with a healthy growth in software development services contributed to this growth.

The government continues to focus on the ICT Sector as a key thrust and an enabler in developing other industries. During the year Sri Lanka unveiled the national brand for the Sri Lankan Information and Communication Technology and Business Process Management (ICT/BPM) Sector with a tagline, “Island of Ingenuity - Sri Lanka Knowledge

Solutions” aimed at attracting more investment into the Sector and positioning Sri Lanka as the “Digital Gateway to Asia”.


The IT Sector recorded a commendable top line growth, with revenue increasing by 11% to Rs. 4.0 Bn during the period under review. Growth was driven mainly by the Enterprise Solutions and Managed Services categories which continued to grow as the Sector expanded its scope beyond end-computing to include more value-added service offerings. Despite the growth in revenue, margins were impacted (particularly in the products segment) by the sharp depreciation of the Rupee, which resulted in an escalation of our import costs. Accordingly, the sector's operating profit margin narrowed to 7% from 11% the previous year. Meanwhile finance expenses during the year increased by almost 55% due to increased short term borrowings to fund working capital requirements. As a result, Sector PAT decreased to Rs. 135 Mn compared to Rs. 254 Mn recorded in FY 2017/18.

LENGTH OF PRINCIPAL RELATIONSHIPS

1-5 years

5-15 years

More than15 years

0

2

4

6

8

10

12

(No.)IT SECTOR- PERFORMANCE

2018 20193,400

3,500

3,600

3,700

3,800

3,900

4,000

4,100

2,1402,1602,1802,2002,2202,2402,2602,2802,3002,320

(Rs. Mn) /(Rs. Mn)

RevenueAssets


We continued to develop our value proposition of being the most trusted end to end IT solutions provider in the corporate sector by expanding our portfolio along the value chain through the provision of advanced solutions. During the year we introduced several state-of-the-art IT solutions such as smart signage display solutions, next generation data centre infrastructure , mobile computing solutions to the Retail Sector, virtual reality solutions, interactive smart project solutions for schools and mobile printing solutions thereby assisting our clients in their digital transformation journey. We also partnered with the Government of Sri Lanka to provide technology solutions such as facial recognition and identification software for several defence related projects. Meanwhile on the computer devises category we continue to closely monitor changing consumer trends that reflect a growing emphasis on mobility, and continue to re-align our product portfolio accordingly.

Our long-standing partnerships with some of the world’s leading technology vendors such as Microsoft, Lenovo, VMware, EMC, Molex, Cisco, Happy or Not, Glory continue to provide a significant competitive advantage. These strong partnerships enable us to consistently introduce new technologically advanced solutions to Sri Lanka whilst ensuring a high degree of knowledge sharing, pre and post-sale support. Our wide distribution network, service excellence and strong brand reputation in the Sri Lankan market continue to sustain these relationships while generating mutual value. We are the only Titanium Partner (highest partnership status) for Dell EMC in Sri Lanka and continue to be recognized as a key partner as indicated from the

number of awards we received at the Dell Partner Awards 2019. ( Refer table alongside for awards received during the year)

Our ability to retain our position as Sri Lanka’s leading B2B IT solutions partner is due to our unwavering commitment to innovation and service delivery. We continuously upgrade our offering with the latest technology whilst engaging customers through knowledge sharing sessions aimed raising awareness on the latest technologies and trends and how best they can transform their businesses in an increasingly digitized business environment. During the year several such customer engagement programs were carried ( Refer table alongside for programs carried out during the year) Meanwhile we provide continuous technical support through nine regional support centres across the island.


Rs. Mn 2018-19 2017-18 % YoY

Revenue 4,040 3,629 11Operating Profit 301 382 (21)Pre-tax profit 172 299 (42)Profit after tax 135 254 (47)Assets 2,301 2,194 5Liabilities 2,304 1,950 18CAPEX 143 127 13



As a catalyst for technological change in the Sri Lankan Corporate sector, we continue to explore how Industry 4.0 technologies such as cyber-physical systems, Internet of things, Cloud computing and cognitive computing can be adopted in a local context. Our “triple helix” approach to innovation which involves partnering with academia, industry and Government continues to drive digitization in the economy by commercializing innovation. During the year we collaborated on several software projects with the University of Kelaniya and University of Colombo.

Our employee base of 339 staff is a key strength; driving our service quality. Technical staff receive ongoing training by vendors and are certified for specific technologies by respective principles. During the year 9 of staff received training and were certified is various technologies.

WAY FORWARD

With the pace of digital transformation accelerating both in the private and public sector we see significant opportunities particularly in the Enterprise Solutions and managed services spaces . We will continue to focus on emerging technologies in order to transform the Sri Lankan IT landscape through state- of the art innovation and superior service quality. Meanwhile growing computer literacy in the country and increasing connectivity will continue to drive demand for personal computers.

CUSTOMER ENGAGEMENT INITIATIVES

The Future Enterprise

Digital Business Transformation in collaboration with VMware

AWARDS AND ACCOLADES

Server Business Partner for FY19- B2B Category

Client Solutions Group Business Partner FY19- B2B Category

Runner up for Sales Person of the year( Infrastructure Solutions- B2B Category)

Sales Person of the year(Client Solutions- B2B Category)







FINANCIAL SERVICES

THE FINANCIAL SERVICES SECTOR CONSISTS OF SOFTLOGIC LIFE PLC (LIFE INSURER) SOFTLOGIC FINANCE PLC (LICENSED FINANCE COMPANY) AND SOFTLOGIC STOCKBROKERS. THE SECTOR RETAINED ITS POSITION AS THE LARGEST CONTRIBUTOR TO CONSOLIDATED EARNINGS, AND GROUP PROFIT AFTER TAX DURING THE YEAR. THROUGH THE SECTOR, SOFTLOGIC HAS ESTABLISHED A STRONG PRESENCE IN SRI LANKA’S GROWING FINANCIAL SERVICES SECTOR WHICH PRESENTS SIGNIFICANT UPSIDE POTENTIAL AS THE COUNTRY TRANSITIONS TOWARDS AN UPPER-MIDDLE INCOME EARNING ECONOMY



STRATEGY AND PERFORMANCE

OUTLOOK

Macro-prudential and fiscal policy measures to curtail vehicle imports

Industry-wide deterioration in portfolio quality

Consistent growth in the life insurance sector

Subdued stock market conditions

Insurance: Innovation, Multi-channel distribution, Digitalisation, Customer Services

Finance: Emphasis on growing secured lending portfolio, Upgrading IT infrastructure, Optimising risk-return dynamics

Sector revenue growth: 23%

Sector profit growth: 42%

Potential for growth in life insurance

Capitalisation of Softlogic Finance

Preservation of portfolio quality

SECTOR SNAPSHOT

The Group’s insurance arm, Softlogic Life has rapidly captured market share to emerge as the 4th largest player in the competitive life insurance industry. Softlogic Finance is a medium-sized finance company, engaged in vehicle financing, business loans, personal loans and deposit mobilisation. Softlogic Stockbrokers is one of Sri Lanka’s leading stockbroking companies, consistently ranking among the top 3 stockbrokers based on volume.

SOFTLOGIC CAPITAL PLCHolding Company of the Group’s Financial Services Sector companies and Licensed Investment Manager regulated by the Securities & Exchange Commission (SEC)

SOFTLOGIC FINANCE PLCLicensed Finance Company regulated by the Central Bank of Sri Lanka – Department of Supervision of NBFIs

SOFTLOGIC LIFE INSURANCE PLCLife Insurer regulated by the Insurance Regulatory Commission of Sri Lanka

SOFTLOGIC STOCKBROKERS (PVT) LTDStockbroker regulated by the SEC

SOFTLOGIC ASSET MANAGEMENT (PVT) LTDNon-operational subsidiary



BUSINESS LINE REVIEWSFINANCIAL SERVICES

FINANCAL SERVICES- PERFORMANCE

2018 20190

3,000

6,000

9,000

12,000

15,000

35,000

36,000

37,000

38,000

39,000

40,000(Rs. Mn) /(Rs. Mn)

RevenueAssets


2018 20190

300

600

900

1200

1500

0

1

2

3(No./Rs. Mn/employee)

HeadcountNet profit per employee (Rs.Mn)

SOFTLOGIC LIFE- MARKET SHARE

2014 2015 2016 2017 20186

9

12

15(%)



Life Insurance: The life insurance industry recorded a Gross Written Premium (GWP) growth of 12% during 2018, contributing 46% to the overall industry premiums. By end-December 2018, 12 companies offered exclusive life insurance solutions while three companies were involved in the provision of both life and general insurance services. The sector’s profitability however demonstrated a decline in comparison to 2017, reflecting a 37.5% YoY in claims as well as normalisation of extraordinary profits recorded in the previous year arising from one-off surplus transfers. Accordingly, the life insurance sector’s profits fell sharply by 48.5% in 2018. Sri Lanka’s life insurance industry presents significant potential for growth, given its relatively low penetration of 0.54% as at end-December 2017.

NBFI Sector: The NBFI sector’s asset growth slowed to 6% in the year ending March 2019 (from 11% the previous year) mainly due to macro-prudential measures adopted by the Government to curtail vehicle imports which impacted the leasing industry, the NBFI sector’s core business. Credit growth slowed to 4% from 10% in 2017 and the sector sought diversification from vehicle financing to pursue growth in other lending products. While Net Interest Income increased by 22% supported by wider net interest margins, overall profitability was impacted by an escalation of loan loss provisions given the industry-wide deterioration of portfolio quality. The Sector’s impairment charges increased by 37% while the gross NPL ratio clocked in at 7.7% compared to 5.8% the previous year. Resultantly, profit after tax declined by 10% to Rs. 21.7 Bn during the year.

Stockbroking: The Colombo Stock Exchange recorded a subdued performance during the year, reflecting moderating economic conditions and cascading effects of global headwinds. The All Share Price Index declined by 14% to close to the year at 5,557.2 points while the S&P SL20 Index fell by 25% during the FY2019. Meanwhile, average daily turnover levels and market capitalisation also declined, reflecting lower market activity and subdued investor sentiments.


Rs. Mn 2018-19 2017-18 % YoY

Revenue 13,630 11,061 23Operating Profit 1,717 1,788 (4)Pre-tax profit 1,225 1,858 (34)Profit after tax 3,244 2,283 42Assets 36,794 35,094 5Liabilities 32,635 29,733 10Net profit per employee 2.35 1.69 39

LIFE INSURANCE INDUSTRY PERFORMANCE

0

20,000

40,000

60,000

80,000

100,000

Life Insurance-GWPGrowth (y-o-y)

5

10

15

20

25

2014 2015 2016 2017 2018

(GWP (Rs. Mn)/%)

NBFI-SECTOR PERFORMANCE

0

300,000

600,000

900,000

1,200,000

1,500,000

NBFI-AssetsReturn on assets (%)

0.00.51.01.52.02.53.03.54.04.5

2014 2015 2016 2017 2018

(Rs.Bn /%)

Source: CBSL

Source: CBSL



BUSINESS LINE REVIEWSFINANCIAL SERVICES


The Sector delivered a year of strong performance with revenue and profit after tax growing by a respective 23% and 42% enabling the Sector to retain its position as the largest contributor to consolidated earnings. Top line growth was driven by the insurance arm, whereas Softlogic Finance recorded modest growth in view of the unfavourable operating conditions. The Sector’s operating profit was relatively unchanged at Rs. 1.7 Bn while the sharper increase in profit after tax to Rs. 3.2 Bn was due to a deferred tax gain of Rs. 2.0 Bn stemming from Softlogic Life. The gain reflects the materialisation of an unrecognised deferred tax asset arising from a change in the Company’s taxable position with effect from 01 April 2018.

SOFTLOGIC LIFE

The Group’s insurance arm has recorded consistent growth supported by an innovative product strategy, multi-channel sales model and excellence in customer service which has enabled it to rapidly gain market share. The insurer marked a key milestone during the year, crossing the Rs. 10 Bn mark in revenue, the fastest company to achieve this feat in the Sri Lankan insurance industry. The Company’s GWP has expanded at a CAGR of around 35% over the 5 years to December 2018, far surpassing the industry average of 16% attesting to the relevance of its customer value proposition and effectiveness of its distribution strategy.

The Company has placed strategic emphasis on offering innovative and diverse product propositions catering to different segments of the market. In 2018, the Company launched 5 new products and 2 rider covers which included multiple features such as protection, health care, savings and retirement aimed to fulfil customer requirements throughout their lifecycle. During the year the Company launched the Softlogic Life Good Health series and Corporate Pension solutions allowing it to penetrate new customer segments. The Company has also launched a unique micro-insurance product offering daily payment options by partnering with a telecommunications provider.

The Company’s multi-channel distribution has been a key success factor facilitating above industry growth. In addition to the Agency channel, the Company operates the Alternate channel (focusing mainly

on bancassurance/corporate life insurance) and the Micro and Mobile channel focusing on the micro insurance segment of the industry. Digitalisation of our distribution channels was also a key priority during the year, with the digital proposal system introduced to the sales force achieving a 90% success rate in 2018. Meanwhile 64% of policies were underwritten without manual intervention, allowing for increased accuracy and faster turnaround times.

GROUP SYNERGIES

1-day claim settlement in partnership with Asiri Hospitals

Leasing facilities for Suzuki motor bicycles through Softlogic Finance

AWARDS AND ACCOLADES-SOFTLOGIC LIFE

Best Service Provider of the year- Emerging Asia Insurance Awards

Shortlisted as one of Top 3 Life Insurers in the Asian region by Asian Insurance Review

Leasing and HPGroup personal loans and pawningSME, factoring and othersOthers

SOFTLOGIC FINANCE- PORTFOLIO COMPOSITION

11%

15%

7%

67%


Although recording an increase, the Company’s net claims ratio (without maturity and surrenders) remained relatively low at 14.6%. The Company has redefined industry standards in claims settlement through innovative offerings such as one-day death claims and extended cashless claim settlement. During the year, the Company settled over 85% of its claims within one day and is the only insurer to disclose real-time claim settlement statistics on its website. Meanwhile astute investment decisions and proactive portfolio management enabled the Company to increase its investment income by 28% during the year. Overall, the insurer recorded a 44% increase in profit after tax to Rs. 3.4 Bn during the year under review.

SOFTLOGIC FINANCE

While operating performance moderated in line with the challenging operating landscape, the Company’s overall profitability was upheld by an income tax reversal during the year, which led to a post-tax profit of Rs. 204 Mn. Net Interest Income grew by 23%, supported by a loan growth of 5.6% as the Company sought diversification of its loan portfolio through expanding its business loans, pawning and factoring products. It is noteworthy that the Company achieved an expansion of its credit portfolio following 2 consecutive years of portfolio contraction. As a strategy, the Company sought to increase contributions from secured lending products thereby achieving better risk-return dynamics.

During the year, strategic emphasis was also placed on enhancing our IT infrastructure through investments in a new system which facilitated the effective integration of systems to one core platform. This has led to increased efficiencies, a reduction in staff costs, access to better information and stronger customer engagement. For instance, total personnel costs declined by 4% during the year under review. Meanwhile portfolio quality weakened in line with moderating economic conditions resulting in the Company’s impairment charges increasing by 75% during the year. In addressing this challenge, we took proactive efforts to rebalance our portfolio with increased focus on secured loans including mortgage, gold, vehicle and factoring facilities. Overall the Company’s pre-tax profit declined by 67% to Rs. 63.1 Mn while the drop in profit after tax was contained at 7% due to an income tax reversal of Rs. 115.2 Mn during the year.

SOFTLOGIC STOCKBROKERS

The fortunes of the Group’s stockbroking arm mirrored that of the broader market and the subdued market conditions understandably had an adverse impact on the Company’s performance. Softlogic Stockbrokers’ is centred on its best-in-class research capabilities, access to foreign clientele and excellent client servicing which has enabled it to develop sustainable relationships with a diverse pool of customers. The Company consistently ranks among the top 3 stockbrokers in Sri Lanka based on volumes traded.

WAY FORWARD

We see strong potential for growth in Sri Lanka’s life insurance industry and will focus on driving increased penetration through innovative products while leveraging on our extensive distribution network. The Company anticipates another year of strong GWP growth as we continue to fortify our market position in untapped segments. In Finance, we will focus on growing our secured lending portfolio in achieving better risk-return dynamics; the Group is also currently exploring capital infusion options given regulatory requirements to enhance the Company’s total equity base to Rs. 2.0 Bn by 2020.




LEISURE AND PROPERTY

THE LEISURE SECTOR COMPRISES OF OUR TWO HOTEL PROPERTIES; CENTARA CEYSANDS RESORT AND SPA IN BENTOTA AND THE 5-STAR CITY HOTEL MÖVENPICK AS WELL AS SABRE, AN ONLINE TICKETING PLATFORM AND SOFTLOGIC DESTINATION MANAGEMENT FOR OUTBOUND TRAVEL. THE SECTOR POSTED RECOVERY AT OPERATING LEVEL, UPHELD BY THE STRONGER CORE PERFORMANCE OF THE HOTELS ALTHOUGH OVERALL PERFORMANCE WAS IMPACTED BY AN INCREASE IN INTEREST EXPENSES ON THE SECTOR'S DOLLAR-DENOMINATED BORROWINGS AS A RESULT OF THE STEEP DEPRECIATION OF THE RUPEE DURING THE YEAR.


OPERATING ENVIRONMENT STRATEGY AND PERFORMANCE

OUTLOOK

Growth in tourist arrivals due to a recovery in key tourism markets such as UK, India and China

Increasing competition from formal and informal sectors as a result of continued capacity expansions in the Sector.

Depreciation of the Rupee

Build brand value through innovative offerings and excellent customer service

Continued focus on staff development and engagement

Revenue growth of 21%

Although we expect occupancy levels and ARR to be impacted in the short run we are optimistic about our medium to long term prospects considering the concerted effort by stakeholders to restore the industry’s image.

SECTOR OVERVIEW

Our interests in the Leisure Sector include Centara Ceysands Resort and Spa in Bentota, the five-star city hotel Mövenpick Hotel in Colombo 3 and Sabre, an online ticketing platform and Softlogic Destination Management for outbound travel. Strategic partnerships with globally renowned hotel chains such as Centara Hotels & Resorts Thailand and Mövenpick (recently acquired by AccorHotels) have enabled us to offer international standards in service quality and rapidly gain ground in the Sri Lankan Leisure Sector.


SOFTLOGIC PROPERTIES (PVT) LTDHolding Company of the Leisure Sector and developer of Everest Apartments

SOFTLOGIC CITY HOTELS (PVT) LTDMövenpick - 5-star, 219-room city hotel in Colombo

SOFTLOGIC DESTINATION MANAGEMENT (PVT) LTDTotal outbound travel solutions provider

CEYSAND RESORTS LTDCentare - 4-star plus, 165-room resort in Bentota

SABRE TRAVEL NETWORK LANKA (PVT) LTDTechnology provider for travel and tourism - Global Distribution System

OCCUPANCY LEVELS

2017 2018 201940

60

80

100(%)

Centara Movenpick

LEISURE SECTOR- PERFORMANCE

2018 20190

5,000

10,000

15,000

20,000

(Rs. Mn)

Assets (Rs. Mn) Revenue (Rs. Mn)

HUMAN CAPITAL

2017 2018 20190

100200300400500600700800

(No. of Employees)

Head Count



BUSINESS LINE REVIEWSLEISURE AND PROPERTY


Tourist arrivals increased by 10.3% in 2018, compared to a growth of only 3.2% in 2017. The general upswing in the global economy, targeted tourist promotion campaigns as well as the low base for tourist arrivals in the previous year contributed to the higher growth. Top source markets for Sri Lanka in 2018 were India, China, the United Kingdom, and Germany.

The industry continued to attract investments in 2018 and the rapid increase in the country’s room inventory leading to intense competition among operators. Traditional hotel sector operators have seen increased competition from the informal sector which has increased its room capacity by around 35% over the last five years. In 2018 the graded establishment’s occupancy rate amounted to 72.8%, compared to 73.3% in 2017

The industry has experienced a sharp downturn in the aftermath of the Easter Sunday terrorist attacks given heightened security concerns and travel advisories issued by several source markets. However, as conditions gradually return to normalcy, we remain confident of the medium to long-term prospects for the Sector.


The Leisure and Property Sector recorded a top line growth of 21% to achieve a revenue of Rs. 3,128 Mn during the year. Revenue growth was driven primarily by the Centara property which recorded a 18% growth in revenue supported by higher occupancy levels and an increase in average room rates (ARR) during the year. Consequently, despite rising cost pressures and price competition, the Sector recorded an operating profit of Rs. 66 Mn compared to the operating loss of Rs. 142 Mn during the previous financial year. Despite the commendable performance at operating level, performance of the Sector was impacted by a significant increase in interest expenses on Mövenpick’s dollar-denominated borrowings due to the steep depreciation of the Rupee. As a result, net loss during the year amounted to Rs. 857 Mn compared to last year’s loss of Rs. 865 Mn.

Centara Ceysands our 165 roomed beach-side resort located in Bentota continued to enjoy strong occupancy levels and above-average ARR


Rs. Mn 2018-19 2017-18 % YoY

Revenue 3,128 2,585 21Operating Profit 66 (142) 146Pre-tax profit (851) (672) (27)Profit after tax (857) (865) (1)Assets 16,556 15,606 6Liabilities 10,615 8,802 21

TOURIST ARRIVALS AND ROOM INVENTORY

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Tourist ArrivalsRoom Inventory

05,00010,00015,00020,00025,00030,00035,00040,000

2015 2016 2017 2018

(Arrivals/Room Inventory)

Source: CBSL


during due to a recovery in key tourism markets such as UK, India and China. Occupancy levels averaged around 83% during the year compared to 78% during the previous year. The high level of occupancy countered the impacts of cost escalations during the year, enabling the Sector to preserve its operating profit margins. With ongoing focus on driving operational efficiencies, we continue to derive benefits from our strategic partnership with Centara Hotels & Resorts Thailand in terms of marketing support from the Centara regional offices and knowledge sharing on global standards in service quality.

Currently in its second year of operation, our five-star City hotel property Mövenpick continued to build brand value through innovative product offerings and excellent customer service. The 24 storied five-star property includes 219 luxury rooms and suites, 2 restaurants, a rooftop bar and nightclub in addition to a range of facilities such as a rooftop infinity pool, fitness centre and spa. Catering to the fast-growing corporate market, the property offers the largest executive lounge and rooms in the city, as well as a dedicated business traveller reception and banquet facilities which include meeting rooms and a boardroom. Occupancy levels improved supported by the increased activity in the MICE market although ARR remained lower than expected due to the intense price competition among city hotels. We continue to introduce innovative concepts in order to attract different market segments and diversify our revenue streams. The first ever “Mövenpick Weddings” fair was held during the year introducing a new intimate wedding concept to city hotels while a brand new meetings and events concept was introduced with ‘Eiger’, our new inspiration hub that provides creative space for business meetings. The Hotel continued to be recognized both locally and international and was a recipient for several awards during the year. (refer table alongside for full list of awards). During the year Mövenpick was acquired internationally by AccorHotels, a French multinational operating more than 4,000 hotels across the world.

Staff development is not only a key element of our employee proposition, it is also a critical success factor in achieving the service excellence we strive for. Our Leisure Sector employees are offered ongoing training opportunities and are motivated to achieve personal and professional goals in a dynamic and supportive environment. We proudly note that several of our employees received local and international recognition during the year.

WAY FORWARD

Whilst we expect occupancy rates to be severely impacted in the short-run due to the tragic events of Easter Sunday, we are confident that the tourism industry will bounce back if the right measures are implemented to restore the industry’s image as a safe tourist destination. We are actively engaging our strategic partners Centara Hotels & Resorts Thailand and AccorHotels to promote our hotel and enhance Sri Lanka’s image globally. Meanwhile we will continue to develop multiple revenue channels such as food and beverage, weddings, Corporate and incentive travel ,MICE etc to further diversify our revenue channels.

AWARDS AND ACCOLADES

Leading Meeting & Conference Hotel in Sri Lanka at the South Asian Travel Awarded

“Sri Lanka’s Leading Hotel 2018” - World Travel Awards 2018

“Best Presidential Suite” -World Travel Awards 2018

EMPLOYEE AWARDS

Winner of the Classic Masters at the 26th National Bartenders Competition

Sri Lanka Women Leadership Award- 2018

Les Clefs d’Or (Keys of Gold) membership for a key staff member




AUTOMOBILE

THE SOFTLOGIC AUTOMOBILE SECTOR HOLDS EXCLUSIVE AUTHORIZED DEALERSHIPS FOR ALL FORD VEHICLES AND KING LONG BUSES IN SRI LANKA. DESPITE CHALLENGING MARKET CONDITIONS, THE SECTOR RECORDED AN IMPROVEMENT IN PERFORMANCE SUPPORTED BY PENETRATION INTO TARGETED MARKET SEGMENTS, PARTICULARLY IN THE GOVERNMENT SECTOR. ACCESS TO 2 GLOBAL BRANDS AND EXCELLENT AFTER SALES SERVICE HAS APTLY POSITIONED THE SECTOR TO BE A CATALYST IN TRANSFORMING SRI LANKA’S PUBLIC TRANSPORTATION INDUSTRY THROUGH THE SUPPLY OF SUPERIOR VEHICLES.



STRATEGY AND PERFORMANCE

OUTLOOK

Fiscal and macro-prudential measures implemented at curtailing vehicle imports adversely impacted operations

Increase in import duties and other fiscal levies

Depreciation of the Rupee and the resultant escalation in import costs

Government emphasis on transforming the national public transport service

Strengthened our market position particularly in the Government tender market

Leveraged Group synergies to expand distribution channels and strengthen brand name in targeted segments.

Revenue growth of 147% Trimmed losses after tax to

Rs. 35 Mn from Rs. 178 Mn the previous year

Demand for low engine capacity vehicles and luxury vehicles is expected to be subdued as a result of tariff increases introduced by the 2019 Budget Proposals. However, several fleet modernization projects in the health, public transportation and tourism sector are expected to provide opportunities to further consolidate our market position.

SECTOR OVERVIEW

Softlogic Automobile Sector is represented by Future Automobiles which is the authorised dealer for all Ford vehicles in Sri Lanka and Softlogic Automobiles which is the authorised dealer for King Long buses in Sri Lanka. The Sector also operates a state-of-the-art collision repair centre.


SOFTLOGIC AUTOMOBILES (PVT) LTDAuthorised Dealer for King Long Service Partner of DaihatsuCollision Repair Centre

FUTURE AUTOMOBILES (PVT) LTDAuthorised Dealer for Ford

AUTOMOBILE SECTOR- PERFORMANCE

2018 20190

500

1,000

1,500

2,000

2,500

1,000

1,500

2,000

2,500(Rs. Mn) /(Rs. Mn)

Assets (Rs. Mn) Revenue (Rs. Mn)

HUMAN CAPITAL

20182017 20190

50

100

150

200

(No. of Employees)

Employees


AUTOMOBILE




The year under review was a challenging for Sri Lanka’s motor vehicle industry, which was impacted by macro-prudential measures aimed at curtailing imports, volatile interest rates and the depreciation of the Rupee. Although vehicle imports increased during the first eight months of 2018 in response to the favourable duty structure applicable to small engine capacity vehicles in the 2018 Budget, subsequent measures introduced by the Government to curtail vehicle imports including the imposition of a 200% cash margin resulted in a sharp decrease in vehicle imports during the last quarter of 2018 and first quarter of 2019.


The Sectors’ strategy of targeting specific market segments continued to pay dividends with revenue increasing by 147% to Rs. 3,136 Mn during the year. Key factors underpinning this growth included the successful bid to supply 250 Ford ambulances to the Ministry of Health and strengthening market position of King Long buses. Consequently, despite increasing pressure on margins due to the sharp depreciation of the Rupee, the Sector recorded an operating profit of Rs. 170 Mn compared to an operating loss of Rs. 64 Mn in FY 2017/18. Finance cost increased by 62% during the year due to increased exposure to borrowings to fund working capital requirements and rising interest rates. Despite this the Sector reduced its losses to Rs. 35 Mn in FY 2018/19 compared to the loss of Rs. 178 Mn the year before.

During the year we continued to focus on strengthening our market position in the Government tender market. In addition to supplying the government healthcare sector with 250 luxury Ford ambulances customized to local requirements we were also able to secure a contract to supply approximately 400 double cabs for district hospitals. We also made in-roads into the public transportation sector, with a contract to supply 46 buses for Sri Lanka Transport Board ( SLTB). Additionally, we are working closely with the Air Force and Special Task Force (STF) to import customized special purpose vehicles. The Sector’s ability to successfully enter the government tender market attests to the superior quality of its vehicles as well as its reputation for excellent customer service.


Rs. Mn 2018-19 2017-18 % YoY

Revenue 3,136 1,270 147Operating Profit 170 (64) 366Pre-tax profit (35) (190) 82Profit after tax (35) (178) 80Assets 2,266 1,183 92Liabilities 1,438 722 99CAPEX 15 24 (38)

NEW REGISTRATIONS

430,000440,000450,000460,000470,000480,000490,000500,000

2016 2017 2018

(No. of Vehicles)


We also continue to focus on strengthening our service infrastructure across brands. During the year we shifted our collision repair centre in Rajagiriya to a larger facility in Kaduwela in order to expand our services. Our aim is to develop this centre as a multi- brand service centre in close proximity to highway routes in order drive increased footfall and better customer service.

We remain committed to maintaining the highest environmental standards in the vehicles we procure and all our current vehicle imports comply with Euro 4 emission standards while our King Long range of passenger vehicles have a lower passenger energy intensity due to its relatively larger size. We ensure that all our service stations adhere to the highest environmental standards and carry our regular audits to ensure compliance.

WAY FORWARD

We aspire to be a catalyst in modernising Sri Lanka’s public transport sector through offering a range of advanced vehicles which provide comfort, safety, value-added features and better emission standards. With a greater emphasis by the Government on environmentally friendly transportation solutions, a key area of focus for us is the electric vehicles such as electric buses. Meanwhile, we will continue to leverage the Softlogic franchise to expand our distribution network and drive brand Value.


FINANCIAL PERFORMANCE

REVENUE

Group revenue grew by 13.8% to Rs. 75 Bn during the year supported by a strong top line growth of 23% in the Financial Services Sector, with GWPs on life insurance increasing by 33%. Healthcare Services Sector grew by 12% with the existing hospitals increasing revenue and with the acquisition of a healthcare facility in Galle while the Automobiles Sector recorded top line growth of 147%, due to the sale of 250 ambulances to the government sector. Retail recorded a top line growth of 6% and remained a significant contributor to consolidated revenue. The Retail Sector contributed 50.2% to Group revenue with Financial Services and Healthcare Services Sectors contributing 18.1% and 17.9% respectively. Revenue growth was seen across all Sectors as the Group continued to drive market penetration across its business verticals through introduction of new brands, geographical expansion and product/service development.

OPERATING COSTS

Cost of sales increased at a slower pace than revenue growing by 12.2%, with the result that Group gross profit margins improved to 36.8% (2017/18 - 35.9%). With the significant impact of a depreciating rupee on Group operations together with limited price increases on products/services, this was indeed a commendable achievement.

Distribution and administrative expenses increased by 13.1% and 19.2% respectively due to business acquisitions in Healthcare Services and Retail Sectors and organic growth.

EARNINGS BEFORE INTEREST AND TAX

The Group results from operating activities was positive with a slight growth in operating profits of 0.6% to reach Rs. 8.4 Bn. EBIT margins narrowed to 11.1% from 12.6% the previous year. All Sectors posted operating profits with the exception of the ‘Others’ sub-sector. The Leisure & Property and Automobiles Sectors posted recovery at operating level, to generate profits, compared to losses in the previous year. The Retail Sector operating profits also grew 4%. The 'Others' sub-sector operating profits were marginally lower than the previous year.

Rs. 3.0 BnPROFIT AFTER TAX(2018: Rs. 2.3 Bn)

Rs. 25.0 BnNET ASSETS(2018: Rs. 20.9 Bn)

Rs. 0.09EARNINGS PER SHARE(2018: Rs. 0.25)

2.5 TimesDEBT:EQUITY(2018: Rs. 2.6 Times)

Rs.11.2 BnEBITDA(2018: Rs. 10.9 Bn)

Rs.75.1 BnREVENUE(2018: Rs. 66.0 Bn)

31.3

%19

.5%

63.9

%4.

9%2.

6%13

.8%

AN AGGRESSIVE GROWTH PLAN THAT INCLUDED BUSINESS ACQUISITIONS, COMMENCEMENT OF OPERATIONS OF A STATE OF THE ART TERTIARY HEALTHCARE FACILITY, RETAIL OUTLET EXPANSION INCLUDING SUPERMARKETS, RESULTED IN GROUP REVENUE INCREASING BY 13.8% TO RS. 75.1 BN. ALTHOUGH OPERATING PROFITS INCREASED MARGINALLY TO RS. 8.4 BN. NET FINANCE COSTS OF RS. 5.7 BN GREW 17.7% RESULTED IN GROUP PROFIT BEFORE TAX DECREASING BY 43.6% TO RS. 1.7 BN. A DEFERRED TAX ASSET THAT AROSE IN THE FINANCIAL SERVICES SECTOR OF RS. 2.4 BN INCREASED GROUP PROFIT FOR THE YEAR BY 31.3% TO RS. 3.0 BN.


CAPITAL MANAGEMENT REPORTS

FINANCIAL CAPITAL


NET FINANCE COST

Increasing by 17.7% the net finance cost of the Group stood at Rs. 5.7 Bn. Finance income grew by 26.7% to Rs. 1.4 Bn while finance expenses increased by 19.4% to Rs. 7.1 Bn. An increase in interest rates during the year coupled with increased borrowings utilized to fund acquisitions, working capital needs and cash margin requirements for specific imports affected businesses across the Group and contributed to increase finance expenses.

PROFIT FOR THE YEAR

With the impact of the net finance cost, all Sectors of the Group recorded a decline in PBT from the previous year. Group profit before tax decreased by 43.6% to Rs. 1.7 Bn. A tax credit of Rs. 2.0 Bn arising from the Financial Services Sector due to a deferred tax asset on brought forward tax losses as at 31 March 2018 helped the Group to end the year with a profit after tax of Rs. 3.0 Bn, a growth of 31.3%.

OTHER COMPREHENSIVE INCOME

Losses on changes in the value of derivative financial instruments used in the Leisure & Property Sector to hedge USD denominated foreign currency borrowings, losses on available for sale financial assets and a lower revaluation surplus compared to the previous year resulted in other comprehensive income declining by 75.1% to Rs. 137 Mn. Total comprehensive income for the period, net of tax increased 10.6% to Rs. 3.1 Bn.

CASHFLOWS

In Rs. Mn 2018/19 2017/18 % Change

Net cash flows from/(used in) Operating Activities 1,555 (106) 1,565.7

Profit before tax from continuing operations 1,743 3,092 (43.6)

Profit before working capital changes 10,819 10,715 1.0

Cash generated from operations 7,820 6,086 28.5

Net cash flows used in Investing Activities (10,617) (4,797) (121.3)

Net cash flows from Financing activities 2,162 9,926 (78.2)

Net increase/(decrease) in Cash & Cash Equivalents (6,848) 5,023 (236.3)

Cash & Cash Equivalents at the end of the Year (959) 5,889 (116.3)

Cash generated from operations increased 28.5% to Rs. 7.8 Bn during the year. A decrease in inventories, increases in trade & other payables, public deposits and insurance contract liabilities negated by increases in trade & other receivables and other current assets were the reasons for the increase in positive cashflows from operations. The Group generated net positive cashflows of Rs. 1.6 Bn from its operating activities during the year.

Increases in the purchase & construction of PP&E, other non-current assets, purchases of non-current financial assets and the acquisition of Cotton Collection (Pvt) Ltd and Hemas Southern Hospitals (Pvt) Ltd contributed to cashflows used in investing activities growing by more than 100% to Rs. 11.1 Bn.

The net cashflows from financing activities decreased substantially during the year. Proceeds from a Rs. 3.9 Bn rights issue was utilised to settle part of the long-term debt and a short-term loan. However, proceeds from long term borrowings increased by 101% to Rs. 7.6 Bn as the Group continued to pursue inorganic growth and expansion that resulted in significant capital outlay.

GROUP REVENUE AND GROWTH

010,00020,00030,00040,00050,00060,00070,00080,000

RevenueRevenue Growth

0510152025303540

2015 2016 2017 2018 2019

(Rs. Mn/%)CONSOLIDATED EBIT TRENDS

0

2,000

4,000

6,000

8,000

10,000

EBITEBIT margin (%)

02468101214

2015 2016 2017 2018 2019

(Rs. Mn/%)

CONSOLIDATED PROFIT AFTER TAX

0500

1,000

1,500

2,000

2,500

3,000

2015 2016 2017 2018 2019

(Rs. Mn)


Cash & cash equivalents at the end of the year decreased by 117% mainly as a result of cash used in the Group’s investing activities.

FINANCIAL POSITION

ASSETS

Ongoing capital expenditure and acquisitions in the Retail and Healthcare Services Sectors, supported growth in assets with Group total assets expanding 10.1% to reach Rs. 131 Bn.

PPE which comprises 35.6% of total assets grew by 12.7%. Expansion of retail outlets, opening of the supermarket chain GLOMARK and the acquisition of Cotton Collection were the main reasons for asset growth in the Retail Sector. Capital expenditure incurred for Asiri Kandy, Asiri AOI cancer centre, laboratory expansion and the acquisition of a healthcare facility in Galle were the significant contributors to asset growth in the Healthcare Services Sector. Non-current financial assets representing 10% of total assets increased by 24.6% due to increase in the long-term portion of lending by Softlogic Finance and growth in the investment portfolio of Softlogic Life.

ASSET GROWTH

020,00040,00060,00080,000

100,000120,000140,000

Total assetsCAPEX

01,0002,0003,0004,0005,0006,0007,000

2015 2016 2017 2018 2019

(Rs. Mn/%)

Information TechnologyLeisure & PropertyRetailAutomobilesFinancial ServicesHealthcare ServicesOthers

BORROWINGS

22%26%

27%10%

16%

19%

16%

10%25%

18%

2018/192017/18

PPEOther Non Current AssetsWorking CapitalNon Current Financial AssetsLoans and AdvancesCash BalancesOther Current Assets

ASSET COMPOSITION

36%

2018/192017/18

9%2%

9%

10%

19%14%

35%

11%18%11%5%

9%11%

Trade and other receivables grew by 21.2% mainly due to business growth in Softlogic Life, the Automobile Sector and Softlogic Brands. Loans and advances decreased by 11% as Softlogic Finance reduced its SME portfolio during the year concentrating on lending for longer term.

Acquisitions, capital expansions and ongoing investments in key growth sectors have resulted in the Group’s total asset base nearly doubling over the last six years, positioning it for sustainable earnings growth.

LIABILITIES

The current and non-current portion of interest-bearing borrowings together with bank overdrafts accounted for 40.3% of total liabilities and increased 13.4% from the previous year. Interest bearing borrowings were utilised during the year to fund working capital needs, acquisitions of Cotton Collection & a healthcare facility in Galle and for completion of the fully-fledged tertiary healthcare facility, Asiri Kandy. Borrowings in the Healthcare Services, Leisure & Property, Retail and Others Sectors which comprised 90% of total Group borrowings increased by 21.1%, 26.7%, 8.4% and 3.4% respectively. Public deposits are deposits mobilized by the Financial Services Sector and represented 16.1% of Group liabilities with a growth of 4.2%. Other current financial liabilities that represented 21.9% of Group liabilities mainly comprised of money market loan payables and import loans. Total liabilities increased 8.1% to Rs. 105.8 Bn as at year end.

MANAGEMENT DISCUSSION & ANALYSISCAPITAL MANAGEMENT REPORTS

FINANCIAL CAPITAL


EQUITY

An equity infusion of Rs. 3.9 Bn by way of rights issue, to retire both short & long term debt, helped to increase Group equity to Rs. 25.0 Bn, an increase of 19.5%. Although the Group’s net debt increased by 13.6% to Rs. 62.6 Bn, the net debt to equity ratio improved to 2.5x compared to 2.6x the year before.

VALUE CREATED FOR SHAREHOLDERS

Softlogic Holdings PLC maintains ongoing dialogue with its majority and minority shareholders, facilitated through numerous engagement platforms including the AGM, publication of the Annual Report, quarterly performance updates as well as announcements to the CSE. These engagement platforms are designed to provide timely, relevant and meaningful information to shareholders, ensuring transparency and informed decision making.

Dividend policy is formulated taking into consideration overall performance, growth aspirations and market dynamics. Key investor return ratios are given below.

MOVING FORWARD

The rights issue during the year was a much needed boost to improve the Group gearing position. However, our aggressive growth plans have resulted in increased borrowings, although the Group debt to equity ratio had improved from 2.6x to 2.5x this year. To further pair down debt , we are aiming at reducing inventories and trade receivables by 25%. Tighter credit control and inventory management through process efficiencies and utilizing the Group inventory management system effectively are planned for the near term.

Financial year end 31 March 2019 2018

Closing share price (Rs.) 16.00 24.60

Earnings per share (Rs.) 0.09 0.25

Dividends per share (Rs.) 0.50 0.65

Net asset value per share (Rs.) 12.30 14.05

Market capitalisation (Rs. Mn) 19,081 23,659

Price to book value (times) 1.30 1.75


OVERVIEW

Manufactured capital constitutes property, plant & equipment (PPE), investment property and WIP on the Odel Mall, together forming 37% of the Group total assets. As at 31 March 2019 the Group’s investment in PPE was Rs. 47 Bn, an increase of 12.7% from 2017/18. The most capital-intensive sectors were the Healthcare Sector 44.5%, the Leisure & Property Sector 26.4% and the Retail Sector 23.3%.

Investment property was valued at Rs. 1.7 Bn, an increase of 37.0% from 2017/18 due to a revaluation carried out during the year.

Group profitability was affected by a depreciation charge of Rs. 2.5 Bn and a revaluation gain on land & buildings amounting to Rs. 1.5 Bn during the year. WIP relating to the ongoing construction of the Odel mall amounted to Rs. 2.6 Bn as at year end (2017/18 - Rs. 0.6 Bn).

EXPANDING OUR EXISTING BUSINESSES AND ACQUIRING NEW ONES SUPPORTED GROWTH OF MANUFACTURED CAPITAL BY 16.5% TO REACH RS. 50.8 BN. OPENING OF NEW OUTLETS IN THE RETAIL SECTOR, THE START OF OPERATIONS OF A FULLY-FLEDGED TERTIARY CARE HOSPITAL IN KANDY AND THE ACQUISITION OF A HEALTHCARE FACILITY IN GALLE WERE THE MAIN INVESTMENTS DURING THE YEAR, FURTHER CEMENTING OUR PRESENCE TO OUR DISCERNING CUSTOMERS ISLAND WIDE. IN THE RETAIL SECTOR, NEW OUTLETS WERE OPENED, GLOMARK SUPERMARKETS MADE ITS DEBUT AND ASSETS WERE ADDED DUE TO THE ACQUISITION OF COTTON COLLECTION AND HEMAS SOUTHERN HOSPITALS.

GROUP MANUFACTURED CAPITALRs. Bn 2018-19 2017-18

Land & buildings 25.9 24.0Buildings on leasehold land 6.3 5.6Plant & machinery 3.7 3.5Computer equipment, furniture & fittings 5.4 5.1Motor vehicles 0.5 0.5Capital WIP 4.7 2.7Total PPE 46.6 41.3Investment Property 1.7 1.2Odel Mall – WIP 2.6 0.6Total Manufactured Capital 50.8 43.6

Rs.46.6 BnPPE NBV(2018: Rs. 41 Bn)

Rs.1.7 BnINVESTMENTPROPERTY(2018: Rs. 1.2 Bn)

Rs.1.5 BnREVALUATION GAIN(2018: Rs. 2.6 Bn)

Rs.9.1 BnCAPITAL COMMITMENTS(2018: Rs. 9.4 Bn)

Rs.5.7 BnADDITIONS(2018: Rs. 4.5 Bn)

Rs.2.5 BnDEPRECIATION(2018: Rs. 2.3 Bn)

12.7

%36

.9%

40.3

%3.

1%27

%10

.3%


MANUFACTURED CAPITAL


PURCHASE & CONSTRUCTION OF PPE

Purchase and construction of PPE increased by 27% to Rs. 5.7 Bn. Significant investments were made during the year in the Healthcare Services and Retail Sectors that together accounted for more than 90% of additions.

DEPRECIATION OF PPE

The Group depreciation charge on its PPE was Rs. 2.5 Bn, a 10.3% increase over the previous year. The highest contributors to depreciation was computer equipment & furniture and fittings of Rs. 1.2 Bn followed by plant & machinery of Rs. 0.6 Bn and buildings on leasehold land of Rs. 0.4 Bn. Capital intensive sectors such as Healthcare Services Rs. 0.9 Bn, Retail Rs. 0.7 Bn and Leisure & Property Rs. 0.6 Bn had the highest deprecation charges.

MOVING FORWARD

Investment in manufactured capital underpins the Group’s growth plans. Capital expenditure in the short to medium term is anticipated for the following projects.

The construction of the Odel Mall, a 640,000 sq.ft. mixed development project, is expected to be completed in 2021. This will house the world’s leading retail brands while also offering 39 exclusive apartments and two floors of multiplex cinema screens

Total retail space of 91,000 sq.ft. will be taken in the One Galle Face Mall by Shangri La, Colombo

Retail space of 52,387 sq.ft. to be taken up in Mount Lavinia

Softlogic supermarkets expects to open 10-12 outlets during the next financial year

The Automobile Sector service centre in Rajagiriya will move to a much larger location in Kaduwela offering a full range of services catering to all brands

SIGNIFICANT PPE INVESTMENTS IN 2018/19

HEALTHCARE SERVICES SECTOR

Asiri Kandy - a fully equipped tertiary care hospital - Rs. 2 Bn

Asiri Galle - acquisition of a hospital in Galle - Rs. 791 Mn

Medical equipment - Rs. 589 Mn

Asiri AOI cancer centre - Rs. 194 Mn

RETAIL SECTOR

New retail outlets at Colombo City Centre - Rs. 523 Mn

GLOMARK supermarkets - Rs. 190 Mn

Burger King outlets and other restaurants - Rs. 107 Mn

Information TechnologyLeisure & PropertyAutomobileRetailFinancial ServicesHealthcareOthers

PPE - COST (RS. MN)

83

20,793

10,555

6,743

2951,158

CONSOLIDATED PPE GROWTH

0

10,000

20,000

30,000

40,000

50,000

2014/15 2015/16 2016/17 2017/18 2018/19

Rs. Mn


THE SOFTLOGIC TEAM

Our dynamic team of 11,042 employees drive our businesses, surmounting challenging times and thriving when the outlook is good. Females comprise 45% of our team, while almost all employees were based in Sri Lanka.

SOFTLOGIC’S DYNAMISM AND INNOVATIVENESS IS UNDERPINNED BY OUR YOUNG AND AGILE TEAM. WE ENABLE OUR EMPLOYEES TO GROW WITH US, OFFERING COMPETITIVE REMUNERATION, NUMEROUS BENEFITS, OPPORTUNITIES FOR LEARNING AND DEVELOPMENT AND A CONDUCIVE WORKING ENVIRONMENT.

11,042EMPLOYEES(2018: 9,681)

4,974FEMALES(2018: 4,162)

65 MnINVESTMENT IN LEARNING & DEVELOPMENT(2018: 0.06 Bn)

10.2 BnPAYMENTS TO EMPLOYEES(2018: 9.1 Bn)

6.8 MnREVENUE PER EMPLOYEE(2018: 6.8 Mn)

14%

19.5

%16

.7%

12%

EMPLOYEES BY SECTOR

Male Female

Information Technology 271 68Leisure & Property 541 70Retail & Telecommunication 2,435 938Automobiles 131 15Financial Services 877 504Healthcare Services 1,661 3,331Others 152 48Group Total 6,068 4,974

EMPLOYEES BY AGEBelow 20 years 20-30 years 30-40 years >40 years

Information Technology 5 124 134 76Leisure & Property 1 217 224 169Retail & Telecommunication 184 1,643 1,063 483Automobiles 2 72 35 37Financial Services 3 549 679 150Healthcare Services 106 2,160 1,394 1,332Others 1 80 58 61Group Total 302 4,845 3,587 2,308

Information TechnologyLeisure & PropertyRetailAutomobilesFinancial ServicesHealthcare ServicesOthers

TRAINING EXPENDITURE

6.9%1.5%

3.6%3.3%12.5%

0.6%

71.6%


HUMAN CAPITAL


MANAGEMENT APPROACH AND GOVERNANCE

Most operating Sectors of the Group have independent HR functions in order to cater to the diversity of the sectors and the large number of employees. At a Group level, these departments are supported by centralised HR personnel, which ensures implementation of Board approved policy frameworks. Streamlining HR policies and procedures across have been formulated to ensure compliance with all relevant legal requirements including the prohibition of child labour and providing equal opportunities.

TALENT ATTRACTION

As one of the most dynamic and reputed conglomerates in Sri Lanka, the Softlogic Group aims to attract potential employees that are drawn to its energy, creativity, agility and innovativeness, underpinned by an organizational culture that embraces diversity.

NEW RECRUITS BY SECTOR

Sector Recruitments 2018/19

Information Technology 43Leisure & Property 165Retail & Telecommunication 1,092Automobiles 23Financial Services 402Healthcare Services 2,012Others 40Group Total 3,777

CAREER CONVERSATIONS – A ONE ON ONE SESSION WITH HRRegular open day sessions are held between the HR Department and employees. HR visits each Group Company and conducts a one to one discussion with employees relating to their career & personal growth or any other concern they want addressed within the boundaries of employment.

Employees discuss the development of their careers and the challenges they need to overcome when moving forward. They also bring out training and development needs.

The key objective of these conversations is to bring out our employees Voice and act on it. We implemented the “Employee of the Month Programme“ at Softlogic Ware House based on such a suggestion made by an employees.

NEW RECRUITS - GENDER WISE

Male Female0

1,0002,0003,0004,0005,0006,0007,0008,000

(Rs. Mn)

With its emphasis on a performance driven culture with multiple opportunities for career progression & development in diverse sectors, Softlogic attracts the country’s top talent. We also conduct/participate in job fairs in various parts of the country to gain visibility and attract talented individuals from those areas.

NEW RECRUITS - AGE WISE

Below20 years

20-30 years

30-40 years

>40 years

0

1,000

2,000

3,000

4,000

5,000

(No. of Employees)


All new recruits attend a mandatory induction program which includes an introduction to the Softlogic Group, policies and procedures, information security and training on the human resources information system. The program also focuses on brand awareness and creating new brand ambassadors for the Group. A guest speaker, a ‘success story’ of Softlogic is also invited to speak and motivate the new recruits and who in turn is considered a brand icon of Softlogic. A buddy is also allocated to the new recruit from the same department till the completion of six months to ensure seamless integration into the Group.

During the year, 3,777 number of employees were recruited, including replacements, to the Softlogic team. New recruits were directed primarily towards the Healthcare Services & Retail Sectors, to support the Group’s growth aspirations. The number of resignations were 4,494 with the attrition rate being 41%.

All Group employees receive a quarterly/semi-annual or annual performance appraisal. KPIs are set at the beginning of the year and are monitored throughout and graded quarterly/semi-annually/annually. Employees are able to discuss their grading and request for a review where differences are unresolved. The emphasis is on a "quality conversation".

REWARDS AND RECOGNITION

The Group’s remuneration schemes are competitive and have been designed to attract and retain the country’s top talent. Remuneration is determined on skills, qualifications and results of annual performance appraisals which are carried out for all employees. Exceptional performers are also recognized and duly rewarded through Spotlight, the Corporate Employee recognition program and Quarterly/Annual Performance rewards. Total remuneration paid to employees increased by 12% to Rs. 10.2 Bn during the year.

EMPLOYEE BENEFITS

Employees are entitled to a range of benefits including discounts for products and services of Group companies, medical insurance, mobile phone vouchers, Distress Loans to staff / Educational Loans to staff and re-imbursements of professional subscriptions. Some of the subsidiaries have introduced Pension Plans for the employees, lower interest rates on Hire Purchase transactions on purchase of products

from the Group, Paternity Leave, Half Day leave to celebrate one’s birthday which is not only benefits to staff but also encourages work life balance and employee welfare as well.

SUCCESSION PLANNING

Succession planning is used to build a strong pipeline of talent and develop future leaders at all levels. The Group has used succession planning to address the inevitable changes that occur upon an exit of an employee to ensure a smooth flow of operations and also to encourage novel ideas of new leaders.

Our Group Management Trainee Program identifies and train high potential employees for advancement into key roles. We filter and select the best performers through a comprehensive selection process,

CAREER GUIDANCE & INTERNSHIP PROGRAMS AT ASIRI HEALTHAsiri Health facilitates Internship programs for University students, a compulsory requirement to complete their degree program. During the FY 2018/19, more than 100 internships were granted in clinical and administrative functions. We have also facilitated medical undergraduates participation in clinical procedures as observers.

The Career Guidance Unit of University of Sri Jayawardenapura works towards enhancing the employability of the undergraduates to equip them with the necessary soft skills required in the current job market. These soft skills are not catered to during the academic lectures conducted by the University. Asiri Health, encouraged and extended support in achieving the objectives of the Career Skills Development Society of the University of Sri Jayawardenapura, and was the Gold Partner for the Employability Skills Awards 2018, organized by the Career Guidance Unit of the University.


HUMAN CAPITAL


SOFTLOGIC RESTAURANTS – EMPLOYEE ENGAGEMENT STRATEGY

monitor their performance for one year and decide on their suitability and role going forward.

LEARNING & DEVELOPMENT

The Group’s performance management framework enables us to effectively identify training needs, ensuring alignment of employee goals with corporate goals. All Sectors have in place comprehensive training and development programmes which include on the job-training, cross functional and structured training programs. We support employees’ lifelong learning in many ways; reimbursement of examination fees for certifications of technical staff that enhances our partnership status with principals such as CISCO and VM Ware, reimbursement of one professional subscription per year related to the field of work and sponsorship for national conferences held by professional bodies of which an employee is a member. The Group is also an approved training partner for professional bodies such as CA Sri Lanka. Our investment in learning & development was Rs. 65 Mn.

Key Training Programs Conducted During the Year Motivation and attitude development

Product training

Retail management

Showroom administration

Life Insurance technical training

Leadership development programme

Risk Management

Sales & customer care

In the healthcare sector, clinical and non-clinical training

Foreign exposure as per clinical requirements.

WORK-LIFE BALANCE

We consider work-life balance as important in ensuring the mental and physical well being of our employees. Encouraging employees to take annual leave, practice of flexible working hours where employees have the option of reporting to work between a given timeframe, ensuring the well-being of the employee’s family by extending health benefits to family members and feeding hours for female employees returning after maternity leave for a period of one year are some of the initiatives that we have implemented successfully.


Further, initiatives have been taken to encourage and foster team activities to bring about well-being of our employees in the nature of Bowling Tournaments, Cricket Matches, encouraging the employees to participate in sports activities, Employee outings organized by the companies of which some include the families as well, Staff Get-togethers, Foreign and local tours to name a few of the initiatives taken by Companies in the Group.

EMPLOYEE ENGAGEMENT

Maintaining staff morale and motivation through ongoing employee engagement is a key area of focus and numerous formal and informal engagement mechanisms are in place across the Group. A year-round event calendar including religious and cultural celebrations and community engagement initiatives ensure work-life balance and nurture a conducive work environment and team spirit.


Employees’ contribution towards the Group’s growth and profitability objectives are measured through assessing their productivity. While industry-specific indicators are used to monitor productivity at Sector-

level, at a Group level the standard measures of revenue per employee and net profit per employee are used. The net profit per employee ratio improved to Rs. 271 Mn from 235 Mn the year before.

HEALTH AND SAFETY

We are committed to providing a safe, hazard-free work environment for our employees, particularly in the Healthcare Sector where employees are exposed to various safety hazards. Targeted prevention efforts, training programmes and drills are conducted regularly to reduce the number of work-related injuries and illnesses. During the year, the Asiri Group conducted 186 such sessions covering 412 man-days. Fire drills, safety training and first aid are all carried out within the Group.

MOVING FORWARD

In the years ahead, our focus is on enhancing employee retention through the introduction of targeted initiatives across the Group.

Several of our companies were awarded the ’Great Place to Work’ for 2018.

Softlogic Life

Softlogic Restaurants


HUMAN CAPITAL


CUSTOMERS

Dealers, retailers and the end customer all form part of our customer base. The Group is represented island-wide through its diverse businesses.

Softlogic’s core business verticals cater primarily to the domestic customers while the Leisure & Property Sector targets both local and international markets. The Group’s Australian venture provides software solutions to the US and Middle-Eastern markets.

We have continued to create value to our customers by being more accessible through geographical expansion & digitalisation, development of new/existing products/services and introduction of new brands to the market underpinned by unwavering service excellence.

OUR CUSTOMER VALUE PROPOSITION

OUR DIVERSE CUSTOMER BASE RANGING FROM END CONSUMERS, TO DEALERS AND RETAILERS ARE OUR LIFEBLOOD. THE PRINCIPALS WHOM WE REPRESENT ENABLES US TO OFFER A WIDE RANGE OF GLOBALLY REPUTED PRODUCTS OF INTERNATIONAL STANDARDS. THROUGH OUR LOCAL SUPPLIERS WE OFFER UNIQUELY HOME-GROWN PRODUCTS OF EXEMPLARY QUALITY THAT SUPPORTS LOCAL LIVELIHOODS. WE ALSO WORK WITH COMMUNITIES AROUND THE COUNTRY THROUGH NUMEROUS CSR AND ENGAGEMENT INITIATIVES.

Our Stakeholder Relationships

Customers

Community

Distributors

Suppliers

Dealers

Principals

CUSTOMER ENGAGEMENT

We engage with our customers through many formal and informal platforms. Most Sectors track customer satisfaction through feedback forms, suggestion boxes and formal grievance mechanisms. Feedback is an important component in formulating the Group’s product and marketing strategies.

INNOVATION

Softlogic’s strong market positions in the diverse business sectors it operates owes much to innovation. Emerging customer needs are identified and met through innovative product and service solutions. The Group ventured into several new markets during the year expanding the product/service offerings to its customers. Highlights of new products/services launched during the year are as follows.

Engagement Innovation Service Quality Product Responsibility




SERVICE QUALITY

As a Group with significant interests in the Retail, Hospitality and Healthcare Sectors, we are committed to maintaining the highest standards of service quality. Customer feedback including complaints/grievances are received through formal channels and tracked and analysed on an ongoing basis. Some of the Group companies measure customer satisfaction actively and this has enabled these companies to learn from and respond to both positive and negative and achieve high customer satisfaction rates. Customers are also able to provide feedback on products and services through social media such as

SECTOR COMPANY HIGHLIGHTS

Financial Services

Softlogic Finance Introduction of factoring to its product portfolio Partnered with eZ cash and FriMi, offering customers the option of mobile payment solutions

Retail Softlogic Mobile Introduced the Micromax brand for the lower end of the market

Odel Launched brands such as Micheal Kors, Jack and Jones, Armani and Longines watches targeting the upper market segment

Expanding the product offering for home-grown brands with the acquisition of Cotton Collection

GLOMARK Entry into the modern trade segment with the launch of ‘Softlogic GLOMARK’ in November 2018 offering uniquely curated global experience with a wide selection of items backed by the best of technology, delivering freshness and high quality for a superlative customer experience

Odel/GLOMARK ‘Softlogic ONE’ Group loyalty rewards program – ability for customers to earn and redeem points across any Odel & Softlogic Brands stores and GLOMARK supermarkets.

Healthcare Services

Asiri Acquisition of a tertiary healthcare facility in Galle enhancing the Group’s footprint in private healthcare services outside the Western Province

Opening of a state of the art cancer centre with facilities that include a linear accelerator for radiotherapy – a first in Sri Lanka

Opening of Asiri Kandy, a fully equipped tertiary care facility in Kandy that expands quality private healthcare facilities to the Central Province

Only healthcare provider in the country to provide MRI scanning facilities outside Colombo at Asiri Kandy

Expansion of the laboratory network enabling patients to access accurate and dependable diagnostic services island-wide

ExcellentGoodAveragePoor

CUSTOMER SATISFACTION

84%

2% 1%13%

ExcellentGoodAveragePoor

PATIENT SATISFACTION - ASIRI HEALTH

54.01%

5.41% 0.60%

39.98%




PROMOTING FINANCIAL INCLUSION

Softlogic Finance PLC, the Group’s registered finance company, is engaged in the provision of loans and advances to individuals and enterprises as well as the mobilisation of deposits. The Company’s island-wide reach allows it to provide access to affordable finance to the country’s most under-served segments, thereby promoting financial inclusion and contributing towards rural development. For instance, the Company’s ‘Atha Hitha’ small business loans are targeted at encouraging small and regional entrepreneurs to develop their ventures.

BUSINESS PARTNERS

The Group’s business partners consist primarily of its international principals (particularly in the Retail, ICT and Automobile Sectors) and suppliers through which it procures products. We have nurtured long-term relationships with our international principals, with Nokia being the longest - a 25 year partnership. We have also placed strategic emphasis on widening our product portfolio through partnering with new principals. During the year under review Softlogic Retail partnered with several world renowned brands such as Armani, Micheal Kors and Longines watches. Softlogic Mobile was also appointed the agency for Micromax.

SUPPORTING LOCAL ENTREPRENEURS THROUGH ODEL

LUV SL’s supply partners comprise of local artisans whose craftsman ship has been passed on through generations of heritage and community builders who operate small and medium scale enterprises. By partnering with LUV SL, these local artisans have become local community leaders, supporting livelihoods of a broad community. These communities span across all regions in Sri Lanka, adding a unique flavour to the LUV SL brand through their authenticity and creativity. . With a supply base of over 200 products, LUV SL gives local

PRODUCT RESPONSIBILITY

As a distributor to some of the world’s leading retail brands, the Group is expected to comply with international standards in product responsibility. Measures in place within each Sector that ensures product responsibility are given below.

Retail

Consumer electronics - conform to CE European Standards. All refrigerators and air conditioners are certified with 3-star and above

Service support through warranties

Food products are sourced from vendors with USDA Organic, Fairtrade, ISO 22000, JAS, LK-BIO-149, HACCP, SLAB, GMP certification

Regular PHI inspections and certified for food establishment

Child safety tests through brands such as ELC and Mother Care


Adherence to principal's standards for after sales

Best practices through certifications and knowledge sharing with principals

Healthcare

Central Hospital: Joint Commission International Accreditation

ISO 9001:2008 Quality Management System

ISO 22000:2005 Food Safety Management System

Pre-survey for international hospital accreditation with Australian Council Health Standard International (ACHSI)** Excluding Asiri Central

Financial Services

Regular statutory reporting to the Central Bank of Sri Lanka (CBSL) and Insurance Regulatory Commission of Sri Lanka (IRCSL)

Responsible marketing communications

Transparent disclosure of all product related information

Leisure & Property

Annual health and safety checks by independent authority

Environmental impacts assessment

Automobiles

Emissions conforming to regulatory requirements

After-sales skill training is provided by the Principal to ensure minimum standard levels

WesternCentralNorth WesternNothernSouthernUvaNorth CentralSabaragamuwa

LENDING BY PROVINCE(Rs.Mn / No.)

45.44%8.39% 1.99%

1.96%

15.29%

4.07%

7.93%

14.94%


small scale players in the market an opportunity to build and grow their businesses.

OUR CONTRIBUTION TO THE COMMUNITY

The depth and diversity of our operations enables us to create meaningful change in the communities we operate in. Softlogic’s community engagement initiatives are governed by its CSR policy which identifies four specific areas for community investments; Health and wellness, youth empowerment, education and other donations. All Sectors engage in year-round community engagement projects which are broadly aligned to the said areas of community support. The initiatives are formulated, rolled out and monitored in a way that ensures optimum use and effective distribution of resources. Some of the more significant community programs conducted through the year are briefly enumerated below.

HEALTH AND WELLNESS

A WHOLE LOT OF HEART

Softlogic’s Healthcare Sector leverages on its specialised expertise in cardiac care for social benefit by providing free heart surgeries for underprivileged children. Asiri Surgical Hospital commenced performing free heart surgeries for under privileged children in 2011 and since then has conducted 193 such surgeries up to 31 March 2019. The patients are either identified at the free health camps organized by Asiri Heart Centre in remote areas or are referred by Lady Ridgeway Hospital. Currently, the hospital conducts three free heart surgeries per month.

HEART HEALTH CAMPS

Four Heart Health Camps were organized in Jaffna, Vavunia, Anuradhapura and Ratnapura with the Jaffna camp being conducted in collaboration with military forces. The objective of these camps was to perform basic investigations and to provide health education to the general community.

FREE CLINICS

Free clinics were held on a weekly basis by the Brain & Spine Centre and Asiri Breast Care Centre of Asiri Central Hospital. 50 neuro clinics and 69 breast care clinics were conducted during the year.

The Mother and Baby care unit of Asiri Health conducted 36 antenatal programmes for expecting mothers. 27 Well-Woman Clinics have also been conducted by Asiri Surgical Hospital.

Asiri AOI Cancer Centre organized similar sessions on palliative care for cancer patients at the cancer treatment centres in the Western and Eastern provinces.

FREE MEDICATIONS AND INVESTIGATIONS FOR UNDERPRIVILEGED PATIENTS

Asiri Surgical Hospital being the only specialized hospital in the country for surgeries, offer medication and investigations free of charge for selected underprivileged patients depending on their life-time illnesses.

A KILO OF KINDNESS

1,435 kilos of kindness, dry rations, were distributed among underprivileged pregnant women’s families in the Galenbindunuweva village on 29 September 2018 during the Manusath Derana medical camp. Mövenpick Hotel was second highest contributor in terms of kilos out of 46 participating hotels.

BLOOD DONATION CAMPAIGN

A Blood Donation Campaign was organized by the Softlogic Group HR division which had nearly 70 employees donating blood to the Piliyandala and Narahenpita blood bank.




YOUTH EMPOWERMENT/EDUCATION

WIN CSR

WIN CSR is a youth education program initiated by Softlogic Life that strives to increase the employability of rural students. This project was launched in 2014 to educate rural youth on the importance of education for employment. Since then it has evolved to a highly structured program backed by the Ministry of Education. Softlogic Life employees actively participate in this program by conducting training sessions, mock interviews and mentoring & coaching students.

ASIRI SISU DIRIYA

An internal CSR initiative which aimed at financially supporting staff members of the Asiri Group by providing a set of stationary for their children’s education. Over 1,100 packs were distributed and the initiative was well accepted by the beneficiaries.

EDUCATIONAL VISITS

Mövenpick Hotel facilitated educational visits for students from the University of Colombo - Faculty of Management & Finance, for research purposes, and students of the Anuradhapura Ceylon Hotel School to introduce students to its operations.

LENDING A HAND AND RECOGNISING THE IMPORTANCE OF EDUCATION @ SOFTLOGIC

"Charity begins at home" in order to create a culture for a better tomorrow for the children of our employees, at the commencement of the year all school going children of the minor and clerical staff were presented with vouchers from DSI and MD Gunasena to purchase their shoes, school bags, stationary and books.

We also recognized and appreciated children of our staff who passed the Year 5 Scholarship examination and 9 A’s in the O/L Examination by inviting the children to Softlogic and presenting them with Savings Account books and appreciating them personally in order to encourage them for their future education.

OTHER DONATIONS

‘RAY OF HOPE TEA PARTY’ AT THE SALVATION ARMY ELDER’S HOME

In commemoration of Mother’s Day, the CSR team of Mövenpick Hotel initiated a visit to the Salvation Army Elder’s Home where the team and a few colleagues spent an evening with the elders by arranging a tea party. It was an evening filled with joy and laughter for all those who took part including the elders.

NEW YEAR CELEBRATION WITH ST. MARY’S GIRLS SCHOOL

Staff of Mövenpick Hotel Colombo donated refreshments for the new year celebration for the Students of St. Mary’s Girls School.

WORKSHOPS CONDUCTED FOR THE KOTELAWALA DEFENCE UNIVERSITY HOSPITAL STAFF

A series of workshops were conducted by the Infection Control, Environment, Health & Safety Department and Housekeeping Department of Asiri Health on good housekeeping practices, chemical handling, laundry management, hand hygiene, infection control practices and emergency preparedness on fire and safety for the staff of Kotelawala Defence University Hospital.

OTHER INITIATIVES

As part of a leadership development program, Senior Management of Softlogic Life was grouped and assigned a CSR project for completion. The team was given the task of raising funds and completing a CSR project with a long term impact. Funds were raised voluntarily from staff members and several projects were completed such as building a library and classrooms for a rural school and renovating an orphanage.

MOVING FORWARD

‘Softlogic One’ the Group loyalty rewards program is to be widened to include Asiri hospitals, Softlogic Max and Softlogic Life Insurance. This will undoubtedly create immense value for Softlogic customers as they are able to earn and redeem loyalty points at any of the Group companies participating in the loyalty program. Our business partners will also benefit from the synergies the Group anticipates from centralizing its customer database and the expansion of the Softlogic loyalty program Group-wide.


sector during the year. This has enabled the Group to offer a loyalty card covering Odel and GLOMARK supermarkets. The Group vision is to offer an individual customer a Group-wide loyalty card covering all sectors. This will enable synergies across the Group enabling customer data to be used to determine a customer’s wants and preferences.

Centralising the customer database of the Group is expected to revolutionise the way we do business and drive Group synergy to realise our aspirations of becoming the largest retail Group in the country. Structured management of data available will be valuable not only to the individual businesses but also to the customer in terms of information on products and services available based on the customer’s profile and enable us to deliver enhanced customer experiences.

The Group’s information technology sector works on the Triple Helix model to enhance their service offerings to their customers as new technologies constantly emerge. By partnering with academics in universities, the Group provides the commercial support required for research, of which use will ultimately result in creating value for customers through provision of innovative services.

BRANDS

The Group represents an unmatched portfolio of leading international brands. World renowned fashion labels, electronic items, consumer durables, automobiles and hotel chains are a few examples (Please refer to the Sector Reviews on page 52 to 79 for a full list of the brands we represent). Additionally, the Group’s own brands have built a strong reputation for innovation, quality and customer service and rank among Sri Lanka’s most valuable brands.

THE USE OF INFORMATION TECHNOLOGY IN TODAY’S WORLD IS INTEGRAL TO ANY BUSINESS AND SOFTLOGIC HAS BEEN A TECHNOLOGY-ORIENTED COMPANY FROM INCEPTION. WE ARE NOW EMBARKING ON OUR JOURNEY TO SAFEGUARD AND OPTIMISE USE OF THE GROUP’S INFORMATION ASSETS TO ENHANCE CUSTOMER EXPERIENCES WITH ENTITIES WITHIN THE GROUP. A CENTRALIZED CUSTOMER DATABASE AND A GROUP WIDE LOYALTY PROGRAM IS EXPECTED TO REVOLUTIONISE THE WAY WE DO BUSINESS BRINGING WITH IT UNTHOUGHT OF SYNERGIES. OUR CUSTOMERS WILL ALSO BENEFIT WITH INFORMATION AND RECOMMENDATIONS ON PRODUCTS AND SERVICES BASED ON THE CUSTOMER’S PROFILE.

ORGANISATIONAL CAPITAL

SYSTEMS, STANDARDS & PROCESSES

Almost all our businesses represent renowned international brands. Our principals expect at a minimum, adherence to their own standards in both product and service quality. Across the Group, we have met and mostly exceeded the quality requirements expected by our principals, substantiated through periodical audits. The systems and processes that we have in place to meet high standards of product and service excellence, in some instances are certified by local and international bodies, which helps to provide third party assurance to our stakeholders (Please refer to pages 91 to 95 on Social and Relationship Capital for the main certifications of the Group).

TACIT KNOWLEDGE OF OUR EMPLOYEES

Our established track record in core business sectors is underpinned by the tacit knowledge base of our employees, which is a source of competitive edge, that allows the Group to maintain its market leadership position in several sectors. Our sectors are headed by experienced and skilled professionals with drive and determination who are able to execute strategy and deliver results while mentoring their teams, shaping the organisation culture.

INNOVATION

The Group uses the ORACLE Enterprise Unit for its back-end accounting which is centralized. This has brought with it many efficiencies in terms of cost and time. IT systems used in the front end of businesses change according to a business’s needs but has been centralized for the retail

Systems Standards Processes People Innovation Brands




MOVING FORWARD

Responsibly managing the information assets of the Group through centralizing our customer database across the Group is perhaps our most important project to differentiate ourselves from competition as it will enable us to leverage Group synergies within our wide portfolio of retail businesses. It will also enable us to enhance our customer experience with customized solutions and a centralised loyalty program that connects all our sectors which enables customers to earn and burn points throughout the Group. Management of intellectual capital has been a key strength of the Group enabling us to grow in the toughest times as we strengthen our market positioning across all sectors.

Index Group name Rank Brand Value (Rs. Mn)

Brand Annual 2019 - Conglomerate brands

Softlogic Holdings PLC

6 23,223

Brands Annual 2019-Most valuable brands of Sri Lanka

Odel 48 1,870Asiri Health 45 1,989Softlogic Finance 82 645Softlogic Life 43 2,136


MINIMISING OUR ENVIRONMENTAL FOOTPRINT

We adhere to best practices in the industries we operate as we endeavour to minimize our environmental footprint.

Energy: Usage of LED lighting solutions with timers, inverter technology and chiller management

Water: Usage of water treatment plants in the Healthcare Sector and supermarkets in the Retail Sector, usage of water regulators as appropriate in the Leisure Sector

Waste: Recycling of paper and cardboard, wet garbage sent to piggeries, hazardous waste such as clinical waste in the Healthcare Sector disposed through incineration, e-waste disposed via approved CEA recyclers, customers’ e-waste also disposed via approved CEA recyclers on request, trade-in/trade-up promotions of consumer durables that result in customers bringing in their used electronic items which are then partly utilized or disposed for recycling.

OUR COMMITMENT TO MINIMISE OUR ENVIRONMENTAL FOOTPRINT REMAINS A KEY PRIORITY AND IT IS EMBEDDED IN TO OUR OPERATIONS AS WE FIRMLY BELIEVE THAT REDUCING OUR ENVIRONMENTAL FOOTPRINT ALSO REDUCES OUR COSTS AND MAXIMISES VALUE DELIVERED TO STAKEHOLDER. ONE OF OUR MOST SIGNIFICANT CONTRIBUTIONS TO THE COUNTRY AND THE COMMUNITY IS MAKING AVAILABLE THE LATEST TECHNOLOGY TO SRI LANKANS THROUGH OUR RETAIL AND COMMUNICATIONS AND IT SECTORS WHICH ARE SUPPORTED BY GLOBAL GIANTS WHO ARE DEDICATED TO ENHANCING THE ENERGY EFFICIENCIES OF THE PRODUCTS WE RETAIL SUPPORTING DECREASED ENERGY USAGE INTENSITY RATIOS.

Our Commitment to the Environment

Minimising the environmental footprint

from our operations

Consumer durable brands representing

environmentally friendly products

Preserving our country’s natural

resources

OVERVIEW

Group companies registered with the Central Environmental Authority adheres to the standards imposed and quality inspections carried out by such regulatory authority. We are however cognizant of the responsibility we have towards the environment and have adopted concerted efforts to minimize the waste and emissions of our operations while initiatives are in place across the Group to reduce energy and water consumption. As a leading retailer of consumer durables, we represent leading brands that are constantly innovating its products to be more environmentally friendly and therefore are able to drive consumer preferences towards such products. We have also carried out several projects during the year as well as continuing ongoing projects that helps to preserve our country’s natural resources. There were no fines or penalties imposed due to con-compliance with any environmental laws or regulations during the year.


NATURAL CAPITAL


CLEAN ZONE INITIATIVE - SOFTLOGIC FINANCE

The Clean Zone initiative is our response to the national garbage crisis and is a carefully-planned, large-scale effort aimed at improving the cleanliness of a 2km roadside extent around each branch by mobilizing public support for waste segregation and recycling. The initiative ensures safer environments and better control of diseases such as dengue.

DISTRIBUTION OF WASTE BINS - ASIRI HEALTH

Parallel to the beach clean up carried out by Asiri Health in Preethipura, waste bins were distributed to an elders’ home in the area. The waste bins were colour coded and labelled so that the residents of the elders home are able to segregate waste to ensure correct disposal.

WORKSHOP ON CLINICAL WASTE MANAGEMENT - ASIRI CENTRAL HOSPITAL

Asiri Central Hospital conducted a workshop on Clinical Waste Management at the District Hospital – Maligawatta with the collaboration of the Sri Lanka Association for the Advancement of Sciences (SLASS) – Environment Committee. The consultant microbiologist, manager – environment, health & safety and infection control nursing officers were the resource personnel for this workshop.

ENVIRONMENTALLY FRIENDLY PRODUCTS AND SERVICES

As a leading retailer of consumer durables, we are cognisant of being able to drive the use of environmentally friendly products among our vast clientele. The Retail Sector carries many brands that continues

to evolve in terms of technology resulting in products with increased energy efficiency and helps to reduce the carbon footprint. The Automobiles Sector also offers products that meet with or exceed emission standards set by local regulatory authorities and is fuel efficient. Such products in our portfolio include:

PRESERVING OUR NATURAL RESOURCES

EARTH HOUR CELEBRATIONS- MÖVENPICK HOTEL

Earth Hour is fast becoming one of the world’s largest grassroots movements for the environment. Mövenpick Hotel Colombo teamed up with St Mary’s Girls School Kollupitiya, to not only celebrate this event, but to also carry out a long-term plan by planting trees.

The initial part of the programme was a lecture conducted by an Environmental specialist to the students on 14 March in preparation for Earth Hour. Over 75 students participated with the school principal. The tree planting programme was the second event conducted within the school premises together with the colleagues of Mövenpick Hotel Colombo, on 21 March. The Mövenpick team assisted the school in fixing a gate for the herbal garden, levelling the ground and together, planted 15 herbal trees with the students.

LUVSL- ODEL

LUVSL aims bringing in to light animal conservation and environmental protection each year, through thematic ensembles of products, made for World Animal Day and World Environment Day.

PAPER RECYCLING

Softlogic Holdings PLC engages in the responsible disposal of its paper waste by recycling used paper through an approved third-party recycler. During the year under review, this initiative is estimated to have resulted in the savings of;

Trees Oil Electricity Water Landfill Carbon Emissions

Product Energy efficient featureTV Low power system on-chip design

Samsung LED TV which is estimated to be around 35% more energy efficient compared to the LCD TV Bulbs Panasonic LED bulbs with unique Centre Mount Technology with energy efficiency estimated to be 84% higher than

incandescent light-bulbs Air Conditioners Panasonic air conditioners with inverter technology Printer Power consumption saving for sleeping mode PC Software for PC power saving mode using a chip set motion mode control WAP Power saving automation technology for user and scheduled-based wireless RAN King Long buses Adheres to EURO 4 emission standards and is fuel efficientSuzuki 2 wheelers Adheres to government emission standardsFord Ford has the eco-boost engine which has got the capability of delivering more power with less fuel consumption. Its small

size consumes less fuel and has the technology to deliver more power compared to the conventional engines which are bigger in size with more fuel consumption and provides less power.

S O F T L O G I C H O L D I N G S P L C / A N N U A L R E P O R T 2 0 1 8 - 1 91 0 0

MANNAR UNBOUND: A JOURNEY THROUGH HISTORY AND NATURE – SOFTLOGIC LIFE

Softlogic Life has supported the publication of ‘Mannar Unbound’—a photographic documentation and presentation of the biodiversity and natural landscape of Mannar authored by four Sri Lankan professionals— Dr. Thilak Jayaratne, Dr. Janaka Gallangoda, Tamara Fernando and Nadika Hapuarachchi— whose passion is wildlife photography and conserving Lanka’s flora and fauna. As a Sri Lankan corporate dedicated towards conserving natural resources, Softlogic Life has further strengthened its sustainability efforts by not only inspiring these authors to launch ‘Mannar Unbound’ but also re-emphasize the commitment towards conserving what is rare and beautiful for future generations in our country.

MOVING FORWARD

We plan to strengthen our environmental sustainability efforts going forward. A rain water harvesting system is in the offing in the Healthcare Sector while plans for moving into renewable energy is still being considered in the Leisure Sector once tourism sector picks up and stabilizes. We are also committed to supporting energy efficiencies in the homes and offices of our customer through our Retail Sector and the IT Sector by introducing the latest energy efficient products to Sri Lankans.


NATURAL CAPITAL

A N N U A L R E P O R T 2 0 1 8 - 1 9 / S O F T L O G I C H O L D I N G S P L C 1 0 1

COMMITTEE REPORTS

Annual Report of the Board of Directors on the Affairs of the Company 102

Board Audit Committee Report 105

Board Related Party Transactions Review Committee Report 106

HR & Remuneration Committee Report 107

BOLD IS

BRISK


ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANYThe Directors of Softlogic Holdings PLC have pleasure in presenting to the members their Annual Report together with the Audited Financial Statements of the Company and the Group for the year ended 31 March 2019.

GENERAL

Softlogic Holdings PLC is a Public Limited Company which was incorporated under the Companies Act No. 17 of 1982 as a Private Limited Company on 25 February 1998, re-registered under the Companies Act No. 7 of 2007 on 17 December 2007, converted to a Public Limited Liability Company on 10 December 2008, and listed on the Colombo Stock Exchange on 20 June 2011. The name of the Company was changed to Softlogic Holdings PLC on 25 August 2011.

PRINCIPAL ACTIVITIES

The principal activities of the Company are holding investments and providing management services and financial assistance to its subsidiaries. The Principal activities of the subsidiary companies are providing Healthcare, Financial, Insurance services, Hospitality and, Leisure services, Products & Services relating to Retail, Automobiles, Information Technology and the Communication.

FUTURE DEVELOPMENTS

An indication of likely future developments is set out in the Chairman’s Review on pages 16 to 19 In the ordinary course of business the Group develops new products and services in each of its business segments.

PERFORMANCE REVIEW

The Financial Statements reflect the state of affairs of the Company and the Group. This Report forms an integral part of the Annual Report of the Board of Directors.

FINANCIAL STATEMENTS

Section 168 (b) of the Companies Act require that the Annual Report of the Directors include Financial Statements of the Company, in accordance with Section 151 of the Act and Group Financial Statements for the accounting period, in accordance with section 152 of the Act. The requisite Financial Statements of the Company are given on pages 116 to 222 of the Annual Report.

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The Directors are responsible for the preparation of the Financial Statements of the Company to reflect a true and fair view of the state of affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Companies Act No. 07 of 2007 and the Sri Lanka Accounting Standards. A statement in this regard is given on page 110.

AUDITOR’S REPORT

The Auditor’s Report on the Financial Statements is given on pages 111 to 115 of the Annual Report.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the Financial Statements are given on pages 124 to 222 of the Annual Report. There was no change in the accounting policies adopted from the previous year except for the first time adoption of SLRFS 9; Financial Instruments and SLRFS 15; Revenue from Contracts with Customers.

PROPERTY, PLANT & EQUIPMENT

The details and movement of property, plant and equipment during the year under review is set out in Note 22 to the Financial Statements on pages 166 to 172.

CAPITAL EXPENDITURE

The total capital expenditure incurred on the acquisition of property, plant and equipment for the Company and the Group amounted to Rs. 2 Mn (2018 – Rs. 49 Mn) and Rs. 5,743 Mn (2018 – Rs. 4,524 Mn) respectively. Details of capital expenditure and their movements are given in Note 22 to the Financial Statements on pages 168 and 169 of the Annual Report.

In addition to the above, a sum of Rs. 1,977 Mn (2018 - Rs. 619 Mn) has been incurred by the Group in respect of the Odel Mall project.

RESTRUCTURING OF THE RETAIL SECTOR OF THE GROUP

Softlogic Retail Holdings (Pvt) Ltd (SRH) was incorporated to restructure the Retail Sector of the Softlogic Group in order to consolidate all retail operations under one arm.

The ownership of Odel PLC was transferred to SRH as part of the restructuring process during the year under review.

RESERVES

The reserves of the Company and the Group amounted to Rs. 3,871 Mn (2018 – Rs. 5,193 Mn) and Rs. 2,304 Mn (2018 – Rs. 3,396 Mn) respectively.

The movement and composition of the Capital and Revenue reserves is disclosed in the Statement of Changes in Equity.

DONATIONS

During the year, donations made by the Company and the Group amounted to Rs. 30,000 (2018 - Rs. 570,000) and Rs. 8.2 Mn (2018– Rs. 16.9 Mn) respectively.

DIVIDENDS

The Directors declared a final dividend of Rs. 0.50 (2017/18) per share (tax free) during the year under review which was paid on 17 September 2018.

STATED CAPITAL

The stated capital of the Company as at 31 March 2019 was Rs. 12,119,234,553 represented by 1,192,543,209 shares. The stated capital of the Company was increased from Rs. 8,195,382,715 representing


961,728,395 ordinary shares during the year under review, with the rights issue of 230,814,814 shares at Rs. 17.0 per share in May 2018.

EVENTS AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION

No circumstances have arisen and no material events have occurred after the date of Statement of Financial Position, which would require adjustments to, or disclosure in the accounts other than those disclosed in Note 53 to the Financial Statements.

UNLISTED DEBENTURES

Rs. 1 Bn was raised by issuing unlisted, unsecured debentures during the year with a maturity date on 7 February 2022. Interest is payable bi-annually at the rate of 16.75% per annum (Note 40).

TAXATION

The information relating to Income Tax and Deferred Taxation is given in Note 19 to the Financial Statements.

STATUTORY PAYMENTS

The Directors, to the best of their knowledge and belief are satisfied that all taxes, duties and levies payable by the Company and the Group, all contributions, levies and taxes payable on behalf of, and in respect of, the employees of the Company and the Group, and all other known statutory dues as were due and payable by the Company and the Group as at the date of the Statement of Financial Position have been paid or, where relevant provided for, except as specified in Note 50 to the Financial Statements, covering contingent liabilities.

RELATED PARTY TRANSACTIONS

The Company’s transactions with Related Parties, given in Note 48 to the Financial Statements have complied with the Listing Rules of the Colombo Stock Exchange.

DIRECTORATE

The following Directors held office during the year under review. The biographical details of the Board members are set out on pages 22 to 25.

Mr. A K Pathirage (Chairman/Managing Director)

Mr. G W D H U Gunawardena

Mr. R J Perera

Mr. H K Kaimal

Mr. M P R Rassool

Dr. S Selliah

Mr. W M P L De Alwis, PC

Mr. G L H Premaratne

Prof. A S Dharmasiri

Mr. A Russell-Davison

Mr. S Saraf

Mr. J D N Kekulawala (Appointed w.e.f. 09 January 2019)

Mr. C K Gupta (Alternate Director to Mr. S Saraf).

Mr. R A Ebell (Resigned w.e.f. 31 December 2018)

RETIREMENT AND RE-ELECTION OF DIRECTORS

In terms of Article 87 of the Articles of Association of the Company, Mr. M P R Rassool, Mr. W M P L De Alwis, PC and Prof. A S Dharmasiri retire by rotation and being eligible offer themselves for re-election.

In terms of Article 94 of the Articles of Association of the Company, Mr. J D N Kekulawala retires and being eligible offers himself for re-election.

The Directors have recommended the reappointment of Mr. G L H Premaratne who is 71 years of age, as a Director of the Company; and accordingly a resolution will be placed before the shareholders in terms of Section 211 of the Companies Act in regard to the reappointment of Mr. G L H Premaratne.

DIRECTORS’ SHAREHOLDING

Directors’ interest in the shares of the Company as at 31 March 2019 were as follows.

Name of Director As at 31 March 2018

No. of Shares

As at 31 March 2019

No. of Shares

Mr. A K Pathirage 384,181,775 477,843,941

Mr. G W D H U Gunawardena 57,527,300 71,333,852

Mr. R J Perera 60,836,700 75,437,508

Mr. H K Kaimal 64,870,800 80,439,792

Mr. M P R Rassool - -

Dr. S Selliah 2,000,000 2,480,000

Mr. W M P L De Alwis, PC - -

Mr. G L H Premaratne - -

Mr. R A Ebell - -

Prof. A S Dharmasiri - -

Mr. A Russell-Davison - -

Mr. S Saraf - -

Mr. C K Gupta (Alternate Director to Mr. S Saraf)

- -

Mr. J D N Kekulawala - -


ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

DIRECTORS’ REMUNERATION

Details of remuneration and other benefits received by the Directors are set out in Note 18 to the Financial Statements.

DIRECTORS’ INTERESTS IN CONTRACTS AND PROPOSED CONTRACTS WITH THE COMPANY

Directors’ interests in contracts, both direct and indirect are referred to in Note 48 to the Financial Statements. The Directors have no direct or indirect interest in any other contract or proposed contract with the Company.

INTERESTS REGISTER

The Interests Register is maintained by the Company as per the Companies Act No. 07 of 2007. All Directors have disclosed their interests pursuant to Section 192(2) of the said Act.

SHAREHOLDERS’ INFORMATION

The distribution of shareholders is indicated on page 224 of the Annual Report. There were 10,676 registered shareholders as at 31 March 2019 (31 March 2018 – 11,032).

SHARE INFORMATION

Information on share trading is given on page of the Annual Report.

INTERNAL CONTROL

The Directors are responsible for the governance of the Company including the establishment and maintenance of the Company’s system of internal control. Internal control systems are designed to meet the particular needs of the organisation concerned and the risk to which it is exposed, and by their nature can provide reasonable but not absolute assurance against material misstatement or loss. The Directors are satisfied that a strong control environment is prevalent within the Company and that the internal control systems referred to above are effective.

RISK MANAGEMENT

The Group’s risk management objectives and policies and the exposure to risks, are set out in pages 46 to 49 of the Annual Report.


The Report on Corporate Governance is given on pages 32 to 36 of the Annual Report.

THE AUDITORS

The Board Audit Committee reviews the appointment of the external auditors, as well as their relationship with the Group, including monitoring the Group’s use of the auditors for non-audit services and the balance of audit and non-audit fees paid to the auditors.

The Auditors of the Company, Messrs Ernst & Young, Chartered Accountants were paid Rs. 2.8 Mn as audit fees for the financial year

ended 31 March 2019 (2018 – Rs. 2.5 Mn) by the Company. Details of which are given in Note 18 to the Financial Statements.

As far as the Directors are aware, the Auditors do not have any relationship (other than that of an auditor) with the Company that would have an impact on their independence. The Auditors also do not have any interest in the Company.

Having reviewed the independence and effectiveness of the external auditors, the Audit Committee has recommended to the Board that the existing auditors, Messrs Ernst & Young, Chartered Accountants be reappointed. Ernst & Young have expressed their willingness to continue in office and an ordinary resolution reappointing them as auditors and authorising the Directors to determine their remuneration will be proposed at the forthcoming AGM.

GOING CONCERN

The Directors having assessed the environment within which it operates, the Board is satisfied that the Company and the Group have adequate resources to continue its operations in the foreseeable future. Therefore, the Directors have adopted the going-concern basis in preparing the Financial Statements.

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at the Auditorium of Central Hospital Ltd (4th Floor), No. 114, Norris Canal Road, Colombo 10 on Wednesday, the 31 July 2019 at 10.00 a.m. The Notice of the Annual General Meeting is on page 230 of the Annual Report.

For and on behalf of the Board

A K Pathirage H K Kaimal

Chairman/Managing Director Director

Softlogic Corporate Services (Pvt) Ltd

Secretaries

04 July 2019

Colombo


BOARD AUDIT COMMITTEE REPORT

SCOPE

The Board Audit Committee supports the Board of Directors in discharging its oversight responsibilities of financial reporting, compliance with laws & regulations, internal audit function, risk management and internal controls and reviews the performance and independence of external auditors.

The Committee does not engage directly with Group companies covered by other audit committees, established under regulatory requirements; instead, reviews the minutes of those committees’ meetings and receives appropriate briefings on matters arising from those.

COMPOSITION

The Committee consisted of the following members, who are all Independent Non-Executive Directors. Their profiles appear in the Board of Directors section elsewhere in this Annual Report.

Mr. J D N Kekulawala (Chairman)*

Mr. R A Ebell **

Dr. S Selliah

Prof. A Dharmasiri

Mr. A Russell-Davison#

Mr. W M P L De Alwis, PC##* Mr. J D N Kekulawala was appointed as a Director on 09 January 2019 and

was appointed as the Chairman of the Audit committee on the same date.

** Mr. R A Ebell ceased to be a Director of Softlogic Holdings PLC from 31 December 2018

# Mr. Russell-Davison subsequently resigned from the Committee on 20 April 2018 on assuming executive responsibilities in Softlogic Finance PLC.

## Mr. W M P L De Alwis, PC was appointed on 26 July 2018

Mr. D Vitharanage, Chief Internal Auditor/Chief Risk Officer served as the Committee’s Secretary

The composition of the Committee enables a blend of finance & accounting knowledge and wide business experience to guide its deliberations and actions.

MEETINGS

The Committee met quarterly to review and make recommendations on the quarterly and annual financial statements before they were considered and approved by the Board. It met at several other times also, to consider matters referred to in the rest of this Report.

The Committee met eight times during the year. Attendance at these meetings was as follows:Mr. J D N Kekulawala 2/2Mr. R A Ebell 6/6Dr. S Selliah 7/8Prof. A Dharmasiri 6/8Mr. A Russell-Davison NilMr. W M P L De Alwis 5/6

The Group Finance Director attended the Committee’s meetings by invitation, and other members of the Senior Management attend meetings by invitation when necessary. The External Auditors attended meetings when their presence was necessary; they attended four of the meetings held during the year. The Committee meets with the External Auditors, with

no members of Management present, to cover matters they wish to discuss in confidence.

ACTIVITY & FOCUS, AND REPORTING

The Committee has continued to focus its attention mainly on the following during the year:

1. The integrity of the Company’s and Group’s Financial Statements, including the reasonableness of assertions made, the appropriateness of accounting policies used, the adequacy of presentation and disclosures made, and the effectiveness of internal control over financial reporting. This has continued to be a major thrust of the Committee;

a. Interactions with the External Auditors of the Holding Company, and the Group companies not covered by separate Board Audit Committees, on their audit plans, observations and key findings;

b. Review and follow-up of observations in Management Letters presented by these auditors post-audit, with the relevant Group companies and;

c. Discussion with property valuers and actuaries entrusted with valuation of retirement gratuities.

2. Procedures in place to examine the Company’s ability to continue as a going concern.

3. The work and performance of the Internal Auditors.

4. The Group’s implementation of ERP software, so far as it impacted on financial accounting and reporting.

5. Review of procedures in place to monitor compliance with applicable Laws & Regulations.

6. Review of steps focused on IT Security.

7. Greater formalisation of processes enabling whistle-blowing.

The Committee makes written reports to the Group Chairman/Managing Director, for dissemination to the Board, following each quarterly meeting at which Financial Statements are reviewed. These draw attention to matters needing consideration and action. The Committee also briefs the Group Chairman/Managing Director from time to time on matters of importance, generally at meetings scheduled by him periodically with the Non-Executive Directors.

REAPPOINTMENT OF EXTERNAL AUDITORS

The Audit Committee has proposed to the Board of Directors, having considered their independence and performance, that the incumbent auditors Ernst & Young, Chartered Accountants be re-appointed for the year ending 31 March 2020 at the Annual General Meeting.

Mr. J D N KekulawalaChairman

Audit Committee

04 July 2019

Colombo


BOARD RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORTPURPOSE

The purpose of the Related Party Transactions Review Committee is to conduct an appropriate review of Softlogic Group’s related party transactions and to ensure that interests of shareholders and other stakeholders are considered when engaging in related party dealings, hence preventing Directors, Key Management Personnel or substantial shareholders taking advantage of their positions. The Committee ensures adherence to the rules set in the Code of Best Practices on related party transactions issued by the Securities & Exchange Commission of Sri Lanka (SEC) and CA Sri Lanka. The Committee states opinions in accordance with the charter of the Related Party Transaction Review Committee. It reviews the charter and policies while making recommendations to the Board as and when deemed necessary.

COMPOSITION

The Related Party Transactions Review Committee comprises two Non-Executive Independent Directors, including the Chairman, and one Executive Director.

Dr. S Selliah Non-Executive Independent Director

Chairman

Mr. W M P L De Alwis, PC Non-Executive Independent Director

Member

Mr. H K Kaimal Executive Director Member

MEETINGS

Name Attendance

Dr. S Selliah 4/4

Mr. W M P L De Alwis, PC 4/4

Mr. H K Kaimal 3/4

Softlogic Corporate Services (Pvt) Ltd., serves as secretary to the Committee. The Group Finance Director attends the meetings by invitation.

REVIEW OF RELATED PARTY TRANSACTIONS FOR THE PERIOD

The Committee reviewed all proposed Related Party Transactions of Softlogic Holdings PLC and scrutinised such transactions to ensure that they are no less favourable to the Group than those generally available to an unaffiliated third party in a similar circumstance. The activities of the Committee have been communicated to the Board quarterly through tabling minutes of the meeting of the Committee at Board Meetings.

Relevant disclosures have been made to the Colombo Stock Exchange in compliance with regulations. Details of Related Party Transactions entered by the Group during the above period are disclosed in Note 48 to the Financial Statements.

Dr. S Selliah

ChairmanRelated Party Transactions Review Committee

04 July 2019

Colombo


HR & REMUNERATION COMMITTEE REPORTPURPOSE

The principal purpose of the Committee is to consider, agree and recommend to the Board a remuneration policy that is aligned with its long term business strategy, objectives, risk appetite, values and the long term interests of the Group whilst also recognising the interests of stakeholders.

The responsibilities of the Committee are laid out in its written Terms of Reference (TOR).

COMMITTEE COMPOSITION AND MEETING

The Remuneration Committee comprises of three Non-Executive Directors (two of whom, including the Chairman, are Independent Directors). Decisions of the Committee are taken at meetings or by circular resolutions. Softlogic Corporate Services (Pvt) Ltd., serves as secretaries to this Committee. Group Director Human Capital attends the Committee Meetings by invitation. During the year under review, one Remuneration Committee meeting was held. The composition of the Remuneration Committee and the attendance at the meeting held is as below:

Name Category Attendance

Prof. Ajantha Dharmasiri Chairman 01/01

Mr. Prasantha Lal De Alwis, PC Member 01/01

Mr. Harris Premaratne Member 01/01

Mr. R A Ebell Member 01/01** - Ceased to be a member w.e.f. 31 December 2018.

The Chairman of the Group, who is also Managing Director, attends meetings by invitation. No Director of the Company is involved in determining his own remuneration. The Chairman of the Committee reports to the Board on its activities.

ACTIVITIES OF THE YEAR

We continued to ensure that our remuneration policies were consistent with our strategic objectives, and were designed with the long term success of the Group in mind. This was particularly so when considering how our remuneration schemes can drive behaviour in line with our chosen objectives and in line with industry best practices.

Our investment in a renowned HR platform, will continue to strengthen the effectiveness and efficiency of the system and processes.

OUR REWARD FRAMEWORK

The Committee focused on delivering a reward framework that is transparent, tailored to individual roles and provide a clear link to Softlogic’s strategic objectives. The objective is to drive performance to the highest standards while rewarding both performance and value behaviours. It seeks to be sufficiently competitive in order to attract, retain and motivate employees of the highest calibre.

The Committee spent time understanding the interaction of remuneration and culture of the organisation and how our remuneration structures influence our chosen strategic behaviours. We performed a comprehensive review of our executive remuneration offering in order to optimise the structure of our package to enhance competitiveness.

SUMMARY

The Remuneration Committee will continue to monitor the remuneration policy to ensure that it is correctly aligned with the Group’s strategy. The Committee’s policy aims to properly reward performance in line with the Company’s business objectives and growth to enrich shareholder value.

Prof. Ajantha S. Dharmasiri

ChairmanBoard Remuneration Committee

04 July 2019

Colombo



F INANCIAL STATEMENTS

Statement of Directors’ Responsibilities 110Independent Auditor’s Report 111Income Statement 116Statement of Comprehensive Income 117Statement of Financial Position 118Statement of Changes In Equity 120Cash Flow Statement 122Notes to The Financial Statements 124

BOLD IS


STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The responsibilities of the Directors, in relation to the Financial Statements of the Company differ from the responsibilities of the Auditors, which are set out in the Report of the Auditors on Pages 111 to 115.

The Companies Act No. 07 of 2007 stipulates that the Directors are responsible for preparing the Annual Report and the Financial Statements. Company law requires the Directors to prepare Financial Statements for each financial year, giving a true and fair view of the state of affairs of the Company at the end of the financial year, and of the Statement of Comprehensive Income of the Company and the Group for the financial year, which comply with the requirements of the Companies Act.

The Directors consider that, in preparing Financial Statements set out on Pages 116 to 222 of the Annual Report, appropriate accounting policies have been selected and applied in a consistent manner and supported by reasonable and prudent judgments and estimates, and that all applicable accounting standards have been followed. The Directors confirm that they are justified in adopting the going concern basis in preparing the Financial Statements since adequate resources are available to continue operations in the foreseeable future.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to ensure the Financial Statements comply with the Companies Act No. 07 of 2007 and are prepared in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS).

They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. In this regard the Directors have instituted an effective and comprehensive system of internal control. The Directors are required to prepare Financial Statements and to provide the external auditors with every opportunity to take whatever steps and

undertake whatever inspections they may consider to be appropriate to enable them to give their independent audit opinion.

The Directors are of the view that they have discharged their responsibilities as set out in this statement.

COMPLIANCE REPORT

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and other known statutory dues as were due and payable by the Company as at the date of the Statement of Financial Position have been paid or, where relevant provided for, in arriving at the financial results for the year under review except as specified in Note 50 to the Financial Statements covering contingent liabilities.

For and on behalf of the Board of


SOFTLOGIC CORPORATE SERVICES (PVT) LTD

Secretaries

04 July 2019

Colombo


INDEPENDENT AUDITOR’S REPORT


TO THE SHAREHOLDERS OF SOFTLOGIC HOLDINGS PLC

Report on the audit of the Financial Statements

Opinion

We have audited the Financial Statements of Softlogic Holdings PLC (“the Company”), and the consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the statement of fi nancial position as at 31 March 2019, income statement and the statement of comprehensive income, statement of changes in equity and statement of cash fl ows for the year then ended, and notes to the Financial Statements, including a summary of signifi cant accounting policies.

In our opinion, the accompanying Financial Statements of the Company and the Group give a true and fair view of the fi nancial position of the Company and the Group as at 31 March 2019, and of their fi nancial performance and cash fl ows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for opinion

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

Key audit matters

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

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



Key audit matter How our audit addressed the key audit matter

Valuation of land and buildings of the Group

As at reporting date 31 March 2019, land and buildings (including buildings on leasehold land) carried at fair value, classified as Property, Plant & Equipment and Investment Property amounting to Rs. 32.2 Bn and Rs. 1.7 Bn respectively were carried at fair value. The fair value of those assets such property was determined by external valuers engaged by the Group. The valuation of them land and buildings was significant to our audit due to the use of significant estimates such as per perch price and value per square foot disclosed in notes 22.3 and 24.2 to the Financial Statements.

Our audit procedures focused on the valuations performed by external valuers engaged by the Group, and included the following;

• We assessed the competency, capability and objectivity of the external valuers engaged by the Group.

• Read the external valuer’s report and understood the key estimates made and the approach taken by the valuers in determining the valuation of each property.

• We engaged our internal specialised resources to assist us in assessing the appropriateness of the valuation technique/s and reasonableness of the per perch price used.

We have also assessed the adequacy of the disclosures made in notes 22.3 and 24.2 to the Financial Statements relating to the valuation technique and estimates used by the external valuers.

Impairment of Loans and Advances in a subsidiary from Finance Activities.

As at 31 March 2019, Loans and advances in a subsidiary amounted to Rs. 17.3 Bn. This contributed 13.2% to the Group Company’s total assets. The impairment of loans and advances to customers from finance activities is estimated by the management through the application of judgment and use of subjective assumptions and estimations of the expected credit losses within the loan portfolios at the reporting date. Due to the significance of loans and advances adoption of SLFRS 09 and related estimation uncertainty, this is considered as a key audit matter.

The related estimates used for the provision of impairment of loans and advances from finance activities is disclosed under note 33.1 and 29.3 to the Financial Statements.

To assess the reasonableness of the allowance for impairment, we performed the following key procedure, among others:

• We evaluated the design, effectiveness of key internal controls over estimation of impairment for Loans, Advances and Lease receivables, which included assessing the level of oversight, review and approval of impairment policies by the Board Audit Committee and management.

• We test-checked the underlying calculations and data used in such calculations on a sample basis;

For those collectively assessed for impairment:

• We tested the completeness of the underlying information used in the impairment calculations by agreeing details to the source documents and information in IT systems.

• We also considered reasonableness of macro-economic and other factors used by management in their judgmental overlays, by comparing them with relevant publicly available data and information sources.


Key audit matter How our audit addressed the key audit matter

Interest bearing loans and borrowings of the Group.

As disclosed in note 40 and note 46 the Group’s total interest- bearing loans and borrowings amounted to Rs. 58.0 Bn. The maturities of such interest-bearing loans and borrowings are disclosed in note 9.3.3

The management’s assessment of Group’s ability to continue to meet its financial covenants and liquidity risk aspects were largely based on expectations and informed estimates. Therefore, we considered compliance with financial covenants and Group’s liquidity risk aspects as a key audit matter.

Our audit procedures included the following;

• We obtained an understanding of the covenants attached to external borrowings, by reading the loan agreements.

• We evaluated the statement prepared by the management and tabled at a board meeting on the Group’s compliance with applicable financial covenants as at 31 March 2019.

• We obtained confirmations from external lending institutions about compliance by the Group with covenants.

We assessed the adequacy of the disclosures made in note 40, note 46 and note 9.3 to the Financial Statements relating to the interest-bearing loans and borrowings and liquidity risk aspects.

Insurance contract liabilities in a subsidiary

The Group has significant insurance contract liabilities amounting to of Rs. 8.3 Bn which represents 7.8% of the Group’s total liabilities.

The valuation of the insurance contract liabilities in relation to the life business required the application of significant assumptions such as mortality, morbidity, lapses and surrenders, loss ratios, bonus and expenses and assessing the completeness and accuracy of the information used in the underlying valuations. Changes in such significant assumptions used in the valuation of the insurance contract liabilities directly impacts the income statement.

Our audit procedures focused on the valuations performed by the external actuary engaged by the subsidiary company of the Group and included the following;

• We involved the component auditor of the subsidiary company to perform the audit procedures to assess the responsibility of the assumptions and test the key controls on a sample basis over the process of estimating the insurance contract liabilities.

• We engaged our internal expert to assess the reasonableness of the assumptions used in the valuations of the insurance contract liabilities.

We have also evaluated the adequacy of the disclosures and the movement in the insurance contract liabilities in note 39.

Revenue recognition

The Group adopted SLFRS 15 Revenue from Contracts with Customers (New Revenue Standard) with effect from 01 April 2018 and management was required to evaluate compliance of existing revenue recognition policies with the new Revenue Standard.

The determination of the appropriate accounting policies and disclosures required significant judgment especially considering the diversified nature of business in the Group.

Due to the Group’s involvement in diversified industries and wide spectrum of business such as Retail, Information Communication Technology and Health Care Services, the Group was required to consider relevant clarifications and guidance specially relating to point of revenue recognition i.e. at a point in time over the period, agent vs principal relationships in adoption of the new revenue standard.

Our audit procedures focused on the Group’s adoption of the New Revenue Standard and included, amongst others, the following:

• We assessed the considerations made by the Group in the implementation of SLFRS 15, especially in relation to whether all revenue streams have been considered.

• We obtained management’s impact assessment and examined a sample of customer contracts to assess whether relevant contractual terms together with customary practices have been considered and whether conclusions reached are in line with SLFRS 15.

• We also assessed the adequacy of enhanced disclosures made in note 13 to the Financial Statements.


Other information included in the 2018/19 Annual Report

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

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

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

Responsibilities of the management and those charged with governance

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

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

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

Auditor’s responsibilities for the audit of the Financial Statements

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

expected to infl uence the economic decisions of users taken on the basis of these Financial Statements.

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

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

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

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

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

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

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



We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit.

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

From the matters communicated with those charged with governance, we determine those matters that were of most signifi cance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefi ts of such communication.

Report on other legal and regulatory requirements

As required by section 163 (2) of the Companies Act No.7 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor`s report is 1697.

4 July 2019Colombo


INCOME STATEMENT

In Rs. ‘000 Note Group Company

For the year ended 31 March 2019 2018 2019 2018

Continuing operationsRevenue from contract with customers 61,635,079 55,127,380 645,766 649,823 Revenue from insurance contracts 9,833,075 7,368,671 - - Interest income 3,674,450 3,522,864 - - Total revenue 13 75,142,604 66,018,915 645,766 649,823

Cost of sales (47,506,880) (42,346,048) (240,599) (216,633)Gross profi t 27,635,724 23,672,867 405,167 433,190

Dividend income 14 - - 514,513 893,013 Other operating income 15 954,483 1,761,747 28,618 4,634,942 Distribution expenses (3,521,670) (3,114,739) - - Administrative expenses (16,708,267) (14,013,166) (442,305) (523,053)Results from operating activities 8,360,270 8,306,709 505,993 5,438,092

Finance income 16 1,398,974 1,103,805 1,502,906 1,122,857 Finance costs 17 (7,116,287) (5,959,866) (2,626,433) (2,695,998)Net fi nance cost (5,717,313) (4,856,061) (1,123,527) (1,573,141)

Change in insurance contract liabilities 39.2 (1,152,037) (1,374,037) - - Change in contract liability due to transfer of one off surplus 39.7.1 - 798,004 - - Change in fair value of investment property 24 245,000 198,000 40,000 92,475 Share of profi t of equity accounted investees 27.2 7,080 19,787 - - Profi t before tax 18 1,743,000 3,092,402 (577,534) 3,957,426

Tax expense 19.1.1 1,247,284 (814,359) (90,593) (258,757)Profi t for the year 2,990,284 2,278,043 (668,127) 3,698,669

Attributable to:Equity holders of the parent 104,669 204,200 Non-controlling interests 2,885,615 2,073,843

2,990,284 2,278,043

Earnings per shareBasic 20 0.09 0.25

Dividend per share 21 0.50 0.65

Figures in brackets indicate deductions.

The accounting policies and notes as set out in pages 124 to 222 form an integral part of these Financial Statements.


STATEMENT OF COMPREHENSIVE INCOME



Profi t for the year 2,990,284 2,278,043 (668,127) 3,698,669

Other comprehensive income

Continuing operations

Other comprehensive income to be reclassifi ed to income statement in subsequent periodsCurrency translation of foreign operations (5,447) (3,063) - - Net change in fair value on derivative fi nancial instruments 40.3 (481,700) (34,266) - - Net gain/(loss) on fi nancial instruments at fair value through other comprehensive income / available-for-sale (110,386) 553,351 - -

Net other comprehensive income/ (loss) to be reclassifi ed to income statement in subsequent periods (597,533) 516,022 - -

Other comprehensive income not to be reclassifi ed to income statement in subsequent periodsRevaluation of land and buildings 22.1 1,541,245 2,580,861 - - Re-measurement gain/ (loss) on employee benefi t liabilities 42 65,512 (74,103) (3,474) (10,219)Share of other comprehensive income of equity accounted investments (net of tax) 27.2 34 (80) - - Net loss on equity instruments at fair value through other comprehensive income / available-for-sale (519,221) (72,539) - - Tax on other comprehensive income not to be reclassifi ed to income statement in subsequent periods 19.2.1 (353,223) (2,401,415) 973 2,861

Net other comprehensive income/ (loss) not to be reclassifi ed to income statement in subsequent periods 734,347 32,724 (2,501) (7,358)

Other comprehensive income/ (loss) for the year, net of tax 136,814 548,746 (2,501) (7,358)Total comprehensive income/ (loss) for the year, net of tax 3,127,098 2,826,789 (670,628) 3,691,311

Attributable to:Equity holders of the parent 352,881 450,413 Non-controlling interests 2,774,217 2,376,376

3,127,098 2,826,789




STATEMENT OF FINANCIAL POSITION


As at 31 March 2019 2018 2019 2018

Assets

Non-current assets

Property, plant and equipment 22 46,594,012 41,337,923 170,963 208,459

Lease rentals paid in advance 23 789,095 805,601 - -

Investment property 24 1,695,261 1,238,300 744,000 704,000

Intangible assets 25 8,764,534 8,610,364 686 593

Investments in subsidiaries 26 - - 20,028,700 19,856,700

Investments in equity accounted investees 27 78,249 111,885 11,000 11,000

Non-current fi nancial assets 28 13,157,132 10,564,380 1,465,042 828,355

Rental receivable on lease assets and hire purchase 29.1 1,135,517 1,042,759 - -

Other non-current assets 30 3,215,787 928,503 - -

Deferred tax assets 19.2.2 3,247,950 749,406 - -

78,677,537 65,389,121 22,420,391 21,609,107

Current assets

Inventories 31 10,689,021 11,250,539 - -

Trade and other receivables 32 14,351,620 11,838,130 912,093 362,930

Loans and advances 33 11,664,401 13,098,641 - -

Rental receivable on lease assets and hire purchase 29.2 835,051 523,777 - -

Amounts due from related parties 48.1 13,692 807 14,176,360 8,588,380

Other current assets 34 5,343,713 3,449,051 28,273 16,709

Short term investments 35 6,049,396 7,120,608 130,625 1,719,676

Cash in hand and at bank 36 3,196,350 6,151,833 18,294 2,916,160

52,143,244 53,433,386 15,265,645 13,603,855

Total assets 130,820,781 118,822,507 37,686,036 35,212,962

Equity and Liabilities

Equity attributable to equity holders of the parent

Stated capital 37 12,119,235 8,195,383 12,119,235 8,195,383

Revenue reserves (1,716,945) (577,403) 3,870,883 5,193,136

Other components of equity 38 4,020,858 3,973,279 - -

14,423,148 11,591,259 15,990,118 13,388,519

Non-controlling interests 10,566,762 9,325,667 - -

Total equity 24,989,910 20,916,926 15,990,118 13,388,519



As at 31 March 2019 2018 2019 2018

Non-current liabilities

Insurance contract liabilities 39 8,309,628 7,192,591 - -

Interest bearing borrowings 40 25,115,045 25,729,331 6,817,719 7,453,907

Public deposits 41 4,601,829 3,237,633 - -

Deferred tax liabilities 19.2.2 3,306,076 2,829,959 173,435 157,916

Employee benefi t liabilities 42 1,081,320 1,012,888 81,109 68,252

Other deferred liabilities 43 148,841 127,635 75,676 111,712

Other non-current fi nancial liabilities 44 115,205 122,502 186,200 186,200

42,677,944 40,252,539 7,334,139 7,977,987

Current liabilities

Trade and other payables 45 8,428,255 7,268,577 108,894 44,415

Amounts due to related parties 48.2 2,731 7,566 16,671 17,877

Income tax liabilities 19.1.4 351,689 348,372 16,910 33,309

Other current fi nancial liabilities 46 23,128,625 23,607,505 10,003,875 10,526,355

Current portion of interest bearing borrowings 40 9,782,952 7,244,641 3,958,498 2,984,531

Other current liabilities 47 1,312,392 1,467,326 82,229 86,221

Public deposits 41 12,385,059 13,063,838 - -

Bank overdrafts 36 7,761,224 4,645,217 174,702 153,748

63,152,927 57,653,042 14,361,779 13,846,456

Total liabilities 105,830,871 97,905,581 21,695,918 21,824,443

Total equity and liabilities 130,820,781 118,822,507 37,686,036 35,212,962

I certify that the Financial Statements comply with the requirements of the Companies Act No. 7 of 2007.

A C M LafirGroup Finance Director

The Board of Directors is responsible for these Financial Statements.

Signed for and on behalf of the Board.

A K Pathirage H K KaimalChairman Director

4 July 2019

Colombo




STATEMENT OF CHANGES IN EQUITY

GROUP

In Rs. ‘000 Attributable to equity holders of parent Stated capital Treasury

shares Restricted regulatory

reserve

Revaluation reserve

As at 01 April 2017 5,089,000 (55,921) - 4,628,655 Profi t for the year - - - - Other comprehensive income - - - 146,010 Total comprehensive income - - - 146,010

Issue of shares 3,106,383 - - - Transfer to reserve fund - - - - Transfer of one-off surplus - - 309,613 - Acquisitions and disposals of treasury shares - 55,921 - - Acquisition of subsidiary - - - - Changes in ownership interest in subsidiaries - - - - Dividend paid - - - - Subsidiary dividend to non-controlling interest - - - - As at 31 March 2018 8,195,383 - 309,613 4,774,665

Impact of adopting SLFRS 9 (Note 11.3) - - - - Restated balance under SLFRS 9 as at 01 April 2018 8,195,383 - 309,613 4,774,665

Profi t for the year - - - - Other comprehensive income - - - 949,433 Total comprehensive income - - - 949,433

Issue of shares 3,923,852 - - - Transfer to reserve fund - - - - Acquisition of subsidiary - - - - Changes in ownership interest in subsidiaries - - - - Dividend paid - - - - Subsidiary dividend to non-controlling interest - - - -

As at 31 March 2019 12,119,235 - 309,613 5,724,098

COMPANY

In Rs. ‘000 Stated capital Revenue reserve

Total equity

As at 01 April 2017 5,089,000 2,008,175 7,097,175

Profi t for the year - 3,698,669 3,698,669 Other comprehensive loss - (7,358) (7,358)Total comprehensive income - 3,691,311 3,691,311

Issue of shares 3,106,383 - 3,106,383 Dividend paid - (506,350) (506,350)As at 31 March 2018 8,195,383 5,193,136 13,388,519 Impact of adopting SLFRS 9 (Note 11.3) - (55,353) (55,353)Restated balance under SLFRS 9 as at 01 April 2018 8,195,383 5,137,783 13,333,166

Loss for the year - (668,127) (668,127)Other comprehensive loss - (2,501) (2,501)Total comprehensive income - (670,628) (670,628)

Issue of shares 3,923,852 - 3,923,852 Dividend paid - (596,272) (596,272)

As at 31 March 2019 12,119,235 3,870,883 15,990,118

Figures in brackets indicate deductions.The accounting policies and notes as set out in pages 124 to 222 form an integral part of these Financial Statements.


Attributable to equity holders of parent Total Non-controlling

interests

Total equity Foreign

currency translation

reserves

Fair value reserve of

fi nancial assets at

FVOCI

Statutory reserve fund

Other reserves

Cash fl ow hedge

reserve

Revenue reserve

(43,262) (718,502) 175,022 (491,235) (144,727) 108,357 8,547,387 7,075,208 15,622,595 - - - - - 204,200 204,200 2,073,843 2,278,043

(3,063) 187,615 - - (34,239) (50,110) 246,213 302,533 548,746 (3,063) 187,615 - - (34,239) 154,090 450,413 2,376,376 2,826,789

- - - - - - 3,106,383 - 3,106,383 - - 40,041 - - (40,041) - - - - - - - - (309,613) - - - - - - - - 13,169 69,090 20,773 89,863 - - - - - - - 11,211 11,211 - - - (78,649) - - (78,649) 457,747 379,098 - - - - - (503,365) (503,365) - (503,365) - - - - - - - (615,648) (615,648)

(46,325) (530,887) 215,063 (569,884) (178,966) (577,403) 11,591,259 9,325,667 20,916,926

- - - - - (637,466) (637,466) (273,427) (910,893) (46,325) (530,887) 215,063 (569,884) (178,966) (1,214,869) 10,953,793 9,052,240 20,006,033

- - - - - 104,669 104,669 2,885,615 2,990,284 (5,447) (252,386) - - (481,288) 37,900 248,212 (111,398) 136,814 (5,447) (252,386) - - (481,288) 142,569 352,881 2,774,217 3,127,098

- - - - - - 3,923,852 - 3,923,852 - - 48,373 - - (48,373) - - - - - - - - - - (37,538) (37,538) - - - (211,106) - - (211,106) (393,724) (604,830) - - - - - (596,272) (596,272) - (596,272) - - - - - - - (828,433) (828,433)

(51,772) (783,273) 263,436 (780,990) (660,254) (1,716,945) 14,423,148 10,566,762 24,989,910


CASH FLOW STATEMENT



Cash fl ows from/ (used in) operating activitiesProfi t/ (loss) before tax from continuing operations 1,743,000 3,092,402 (577,534) 3,957,426

Adjustments for:Finance income 16 (1,398,975) (1,103,805) (1,502,906) (1,122,857)Dividend income 14 - - (514,513) (893,013)Finance cost 17 7,116,286 5,959,866 2,626,434 2,695,998 Change in fair value of investment property 24 (245,000) (198,000) (40,000) (92,475)Share of results of equity accounted investees 27.2 (7,080) (19,787) - - Gratuity provision and related cost 42 221,936 218,953 13,759 13,222 Provisions for / write-off of impaired receivables 32.2.1 353,623 252,445 2,472 64,000 Provisions for / write-off of inventories 31.1 75,137 108,930 - - Provisions for / write-off of impaired investments - - - 24,900 Provisions for / write-off of loans and advances 9.1.8.2 110,757 102,829 - - Provisions for / write-off of investments in lease and hire purchase 9.1.14.2 61,500 (18,091) - - Depreciation of property, plant and equipment 22 2,520,118 2,284,583 36,051 36,039 Profi t on sale of property, plant and equipment 15 (7,589) (19,558) (2,140) (10,100)Profi t on sale of investments 15 377 (335,499) 10,575 (4,588,114)Unrealised (gain) / loss on foreign exchange 23,873 19,271 - - Amortisation / impairment of intangible assets 25 341,578 358,068 7,079 5,738 Amortisation of prepaid lease rentals 16,506 1,116 - - Increase in deferred income (63,360) (7,483) (36,036) (36,036)Impairment & derecognition of property, plant & equipment 21,318 18,705 - -

Profi t before working capital changes 10,884,005 10,714,945 23,241 54,728

(Increase) / decrease in inventories 661,206 (2,255,849) - - (Increase) / decrease in trade and other receivables (3,573,802) (3,125,663) (144,382) 90,394 (Increase) / decrease in loans and advances (224,169) 1,092,599 - - (Increase) / decrease in investments in lease and hire purchase (465,530) (720,680) - - (Increase) / decrease in other current assets (2,036,868) (735,564) (21,074) 120 (Increase) / decrease in amounts due from related parties (12,885) (474) (5,587,037) (3,495,009)Increase / (decrease) in trade and other payables 861,518 295,561 64,481 20,282 Increase / (decrease) in amounts due to related parties (4,835) (10,000) (1,207) (50,186)Increase / (decrease) in other current liabilities (70,370) (11,009) (3,992) 12,872 Increase / (decrease) in public deposits 685,416 265,973 - - Increase / (decrease) in insurance contract liabilities 39.2 1,117,037 576,033 - -

Cash generated from/ (used in) operations 7,820,723 6,085,872 (5,669,970) (3,366,799)

Finance income received 1,261,411 947,843 1,531,157 1,067,003 Finance expenses paid (6,500,079) (5,789,818) (2,499,773) (2,689,213)Dividend received 35,045 3,015 50,965 893,013 Tax paid (953,375) (1,265,120) (80,989) (136,584)Gratuity paid 42 (108,089) (87,901) (4,375) (4,319)

Net cash fl ow from/ (used in) operating activities 1,555,636 (106,109) (6,672,985) (4,236,899)




Cash fl ows from / (used in) investing activitiesPurchase and construction of property, plant and equipment (5,728,410) (4,510,011) (1,870) (49,384)Addition to investment property 24 (18,237) (3,300) - (2,140)Addition to intangible assets 25 (141,234) (256,485) (2,635) (2,377)(Increase)/ decrease in other non-current assets (2,245,759) (691,957) - - (Purchase) / disposal of short term investments (net) 115,631 (1,125,217) 1,550,225 1,208 Dividends received 124,551 68,279 - - (Purchase) / disposal of non-current fi nancial assets (1,825,340) 991,812 (636,686) (341,522)Proceeds from disposal of controlling interest - 794,836 - - Acqusition of business, net of cash acquired 8.1 (952,452) (214,050) - - Proceeds from sale of treasury shares (net) - 89,863 - - Proceeds from sale of property, plant and equipment 54,075 59,385 5,455 16,241

Net cash fl ow from / (used in) investing activities (10,617,175) (4,796,845) 914,489 (377,974)

Cash fl ows from / (used in) fi nancing activitiesProceeds from issue of shares 37 3,923,852 3,106,383 3,923,852 3,106,383 Dividend paid to non-controlling interest (828,433) (615,648) - - Increase in interest in subsidiaries (561,897) (513,932) (172,000) (179,381)Proceeds from long term borrowings 40 7,585,232 3,768,754 2,500,000 1,866,930 Repayment of long term borrowings (6,874,434) (6,697,977) (2,307,649) (2,530,612)(Increase) / decrease in other non-current fi nancial liabilities (7,297) 84,339 - - Proceeds from / (repayment of) other current fi nancial liabilities (net) (478,880) 11,297,002 (508,255) 6,078,358 Dividend paid to equity holders of parent (596,272) (503,365) (596,272) (506,350)

Net cash fl ow from / (used in) fi nancing activities 2,161,871 9,925,556 2,839,676 7,835,328

Net increase / (decrease) in cash and cash equivalents (6,899,668) 5,022,602 (2,918,820) 3,220,455

Cash and cash equivalents at the beginning 5,888,960 866,428 2,762,412 (458,043)Effect of exchange rate changes 34 (70) - -

Cash and cash equivalents at the end (1,010,674) 5,888,960 (156,408) 2,762,412

Analysis of cash and cash equivalents

Favourable balancesCash in hand and at Bank 2,596,037 6,151,833 18,294 2,916,160 Restricted cash at bank 600,313 - - - Short term investments 3,554,200 4,382,344 - -

Unfavourable balancesBank overdrafts (7,761,224) (4,645,217) (174,702) (153,748)

Cash and cash equivalents (1,010,674) 5,888,960 (156,408) 2,762,412




1 CORPORATE AND GROUP INFORMATION

Reporting entity

Softlogic Holdings PLC is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered offi ce and principal place of business of the company is located at No. 14, De Fonseka Place, Colombo 5.

Softlogic Holdings PLC became the holding company of the Group during the fi nancial year ended 31 March 2003.

Consolidated Financial Statements

The Financial Statements for the year ended 31 March 2019, comprise “the Company” referring to Softlogic Holdings PLC as the holding company and “the Group” referring to the companies that have been consolidated therein.

Approval of Financial Statements

The Financial Statements for the year ended 31 March 2019 were authorised for issue by the Board of Directors on 04 July 2019.

Responsibility for Financial Statements

The responsibility of the Board of Directors in relation to the Financial Statements is set out in the “Statement of Directors’ Responsibilities” report in the Annual Report.

Statement of compliance

The Financial Statements which comprise the income statement, statement of comprehensive income, statement of fi nancial position, statement of changes in equity and the statement of cash fl ows, together with the accounting policies and notes (the “Financial Statements”) have been prepared in accordance with Sri Lanka Accounting Standards (herein referred to as SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of the Companies Act No. 7 of 2007.

2 PRINCIPAL ACTIVITIES AND NATURE OF OPERATIONS

Holding Company

Softlogic Holdings PLC, the Group’s holding company, provides management services and warehouse management facilities to Group companies, facilitates funding requirements of these companies and provides other value added services.

Subsidiaries and associates

The business activities of other companies within the Group are information & communication technology, automobile sales and after sales, consumer electronic retailing, garment manufacturing & fashion retailing, hoteliering, quick service restaurant operations, development of apartments, provision of fi nancial services, life insurance services, stock brokering services, healthcare services, management consultancy and fi nancial advisory services.

There were no signifi cant changes in the nature of the principal activities of the Company and the Group during the fi nancial year under review other than the acquisition of Cotton Collection (Pvt) Ltd and Asiri Hospital Galle (Pvt) Ltd (previously known as Hemas Southern Hospitals (Pvt) Ltd) as explained in note 08.

3 BASIS OF PREPARATION AND OTHER SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The consolidated Financial Statements have been prepared on an accrual basis and under the historical cost convention except for investment properties, land and buildings, fair valued through profi t or loss fi nancial assets, derivative fi nancial instruments and fair valued through other comprehensive income fi nancial assets, which have been measured at fair value.

Each material class of similar items is presented cumulatively in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard - LKAS 1 ‘Presentation of Financial Statements’.

Presentation and functional currency

The consolidated Financial Statements are presented in Sri Lankan Rupees (Rs.) the Group’s functional and presentation currency, which is the currency of the primary economic environment in which the holding company operates. Each entity in the Group uses this currency of the primary economic environment in which they operate as their functional currency except for entities incorporated outside Sri Lanka.

The following subsidiary is uses a functional currency other than the Sri Lankan Rupee (Rs.).

Name of the subsidiary Country of incorporation

Functional currency

Softlogic Australia (Pty) Ltd Australia Australian Dollar (AUD)

Comparative information

The presentation and classifi cation of the Financial Statements of the previous years have been amended, where relevant for better presentation and to be comparable with the statements of the current year.

The Group applied SLFRS 15 and SLFRS 9 with effect from 01 April 2018. Due to the transition method chosen in applying these standards, comparative information throughout these fi nancial statements have not been restated to refl ect the requirements of the new standard.

Therefore, the comparative information for 2018 is reported under LKAS 39 and LKAS 18 which is not comparable to the information presented for 2019. Information on the adoption of SLFRS 9 and SLFRS 15 are disclosed in Note 11.3.

All values are rounded to the nearest Sri Lankan Rupees thousand (LKR. ’000) except when otherwise indicated.

NOTES TO THE FINANCIAL STATEMENTS


4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of signifi cant accounting policies has been disclosed along with relevant individual notes in the subsequent pages.

The accounting policies presented with each note, have been applied consistently by the Group.

Other significant accounting policies not covered with individual notes

The following accounting policies, which have been applied consistently by the Group, are considered signifi cant and are not covered in any other sections.

Current versus non-current classification

The Group presents assets and liabilities in the statement of fi nancial position based on a current/ non-current classifi cation.

An asset is current when it is:

• expected to be realised or intended to be sold or consumed in the normal operating cycle,

• held primarily for the purpose of trading,

• expected to be realised within twelve months from the reporting date, or

• a cash or cash equivalent unless restricted from exchange or use to settle a liability for at least twelve months after the reporting date.

All other assets are classifi ed as non-current.

A liability is current when it is:

• expected to be settled in the normal operating cycle,

• incurred primarily for the purpose of trading,

• due to be settled within twelve months after the reporting date, and

• not affected by any unconditional right to defer settlement for at least twelve months after the reporting date.

The Group classifi es all other liabilities as non-current.

Deferred tax assets and liabilities are classifi ed as non-current assets and liabilities.

5 FOREIGN CURRENCY TRANSLATION, FOREIGN CURRENCY TRANSACTIONS AND BALANCES

The consolidated fi nancial statements are presented in Sri Lanka Rupees (Rs.), which is the holding company’s functional and presentation currency. This functional currency is the currency of the primary economic environment in which virtually all the entities of the Group operate. All foreign exchange transactions are converted to the functional currency, at the rates of exchange prevailing at the time the transactions are effected. Monetary assets and liabilities denominated in foreign currency are retranslated to functional currency equivalents at the spot exchange rate prevailing at the reporting date.

Non-monetary items measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. The gain or loss arising on non- monetary items

subsequently valued at fair value is in keeping with the recognition of gains or losses on other fair valued items.

Foreign operations

The statement of fi nancial position and income statement of overseas subsidiaries and associates are deemed to be foreign operations are translated to Sri Lanka Rupees (Rs.) at the rate of exchange prevailing as at the reporting date and at the average annual rate of exchange for the period respectively.

The exchange differences arising on the translation are taken directly to the statement of other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in the statement of other comprehensive income relating to that particular foreign operation is recognised in the income statement.

The Group treated goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition as assets and liabilities of the parent. Therefore, those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur.

The exchange rates applicable during the period were as follows:

Statement of fi nancialposition 31-03-2019

Income statement31-03-2019

Australian Dollar 124.87 123.17

6 SUMMARY OF SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In preparing these Financial Statements of the Group/ Company, the management has made judgements, estimates and assumptions that affect the application of Group’s accounting policies and the reported amounts of assets, liabilities, income, expenses and its disclosure of contingent liabilities. Judgements and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence, actual results may differ from these judgements and estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised prospectively.

The management considered the following items, where signifi cant judgements, estimates and assumptions have been used in preparing these Financial Statements.

Going concern

The Directors have assessed, and are confi dent that the Company will be able to continue in operation for the foreseeable future. In addition, the Directors are not aware of any material uncertainties that may cast signifi cant doubt upon the Group’s/ Company’s ability to continue as a going concern. Accordingly, these Financial Statements have been prepared on a going concern basis.



• Valuation of property, plant & equipment• Valuation of investment property• Valuation of intangible assets• Deferred taxation and taxes• Employee benefi t liability• Valuation of insurance contract liabilities

• Provisions and contingent liabilities• Valuation of fi nancial liabilities at fair value through profi t or loss • Valuation of derivative fi nancial instruments• Provision for Expected Credit Loss of loans & advances and rental

receivable on lease assets and hire purchases• Provision for Expected Credit Loss of trade receivables and

contract asset

7 BASIS OF CONSOLIDATION AND MATERIAL PARTLY OWNED SUBSIDIARIES

ACCOUNTING POLICY

Basis of consolidation

The consolidated Financial Statements comprise the Financial Statements of the Company and its subsidiaries as at 31 March 2019. The Financial Statements of the subsidiaries are prepared in compliance with the Group’s accounting policies unless otherwise stated. Control over an investee is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee and when it has the ability to affect those returns through its power over the investee.

Control over an investee

Specifi cally, the Group controls an investee if, and only if, the Group has:

• power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

• exposure, or rights, to variable returns from its involvement with the investee

• the ability to use its power over the investee to affect its returns

Subsidiaries that are consolidated have been listed in note 26.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed during the year are included in the consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profi t or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a defi cit balance. The Financial Statements of the subsidiaries are prepared for the same reporting period as the parent Company, which is 12 months ending 31 March, using consistent accounting policies unless otherwise stated.

Transactions eliminated on consolidation

All intra-group assets, liabilities, equity, income, expenses and cash fl ows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

Loss of control

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in the income statement. Any investment retained is recognised at fair value.

The total profi ts and losses for the year of the Company and of its subsidiaries included in consolidation are shown in the consolidated income statement and consolidated statement of comprehensive income and all assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the consolidated statement of fi nancial position.

Non-controlling interest (NCI)

Non-controlling interests, which represents the portion of profi t or loss and net assets not held by the Group, are shown as a component of profi t for the year in the consolidated income statement and statement of comprehensive income and as a component of equity in the consolidated statement of fi nancial position separately from equity attributable to the shareholders of the parent.

Signifi cant areas of critical judgements, assumptions and estimation uncertainties, in applying accounting policies that have signifi cant effects on the amounts recognised in the Financial Statements of the Group are detailed in the following notes.


7.1 Names and financial information of material partly-owned subsidiaries

Financial information of subsidiaries that have material non-controlling interests (NCI) are provided below:

In Rs. ‘000 Financial Services

Softlogic Finance PLC

Softlogic Life Insurance PLC

2019 2018 2019 2018

Summarised income statement for the year ended 31 MarchRevenue 3,674,450 3,523,556 9,833,075 7,368,671 Other income 344,443 520,504 3,370 220,192 Operating expenses (3,933,744) (3,825,851) (8,005,077) (5,839,732)Change in insurance contract liabilities - - (1,152,037) (1,374,037)Change in contract liability due to transfer of one off surplus - - - 798,004 Finance income - - 1,174,986 920,684 Finance expenses (22,033) (25,130) (301,293) (36,597)

Profi t before tax 63,116 193,079 1,553,024 2,057,185 Tax expense 140,854 25,686 1,888,878 420,000

Profi t for the year 203,970 218,765 3,441,902 2,477,185 Other comprehensive income/ (loss) (30,749) 5,626 (611,481) 531,236

Total comprehensive income 173,221 224,391 2,830,421 3,008,421

Profi t attributable to material NCI 94,250 98,594 1,921,454 1,385,901

Dividend paid to NCI - 46,066 238,418 -

Summarised statement of fi nancial position as at 31 MarchCurrent assets 16,763,200 16,952,387 6,101,173 5,405,635 Non-current assets 5,791,853 4,727,829 11,115,576 7,673,327

Total assets 22,555,053 21,680,216 17,216,749 13,078,962

Current liabilities 15,921,888 14,737,286 1,559,680 950,498 Non-current liabilities 4,726,016 4,662,481 8,901,274 7,627,621


Accumulated balance of material NCI 886,356 1,234,636 4,134,654 2,754,588

Summarised cash fl ow information for the year ended 31 MarchCash fl ows from/ (used in) operating activities (623,408) 1,037,305 2,788,708 2,187,602 Cash fl ows used in investing activities (37,601) (41,901) (2,202,948) (1,437,767)Cash fl ows from/ (used in) fi nancing activities 49,720 (649,680) (546,398) (160,000)

Net increase/ (decrease) in cash and cash equivalents (611,289) 345,724 39,362 589,835



In Rs. ‘000 Healthcare Service

Asiri HospitalHoldings PLC

Asiri Surgical Hospital PLC

Central Hospitals Ltd

2019 2018 2019 2018 2019 2018

Summarised income statement for the year ended 31 MarchRevenue 4,194,654 3,731,903 3,475,047 3,275,349 5,026,990 4,494,980 Other income 1,115,086 1,397,120 68,524 238,151 33,806 33,021 Operating expenses (2,878,557) (2,691,510) (2,985,620) (2,809,477) (4,055,251) (3,647,239)Finance income 106,264 42,164 (54,952) 93,759 (219,846) 11,650 Finance expenses (1,090,977) (921,127) 107,223 (45,472) 99,993 (218,431)

Profi t before tax 1,446,470 1,558,550 610,222 752,310 885,692 673,981 Tax expense (7,322) (300,414) (243,707) (205,707) (27,133) (1,605)

Profi t for the year 1,439,148 1,258,136 366,515 546,603 858,559 672,376 Other comprehensive income/ (loss) 243,232 (26,387) (69,431) (167,921) 216,789 196,060

Total comprehensive income 1,682,380 1,231,749 297,084 378,682 1,075,348 868,436

Profi t attributable to material NCI 203,751 226,680 208,106 317,654 410,873 317,447

Dividend paid to NCI 441,519 333,783 157,597 268,910 366,369 158,283

Summarised statement of fi nancial position as at 31 MarchCurrent assets 4,654,034 1,638,754 888,635 803,837 1,690,483 691,093 Non-current assets 16,719,970 15,847,487 4,975,946 4,095,292 7,871,672 6,865,180

Total assets 21,374,004 17,486,241 5,864,581 4,899,129 9,562,155 7,556,273

Current liabilities 7,736,150 5,992,404 1,353,300 421,692 2,674,688 738,854 Non-current liabilities 5,336,552 3,964,887 914,845 909,685 1,326,494 1,581,727

Total liabilities 13,072,702 9,957,291 2,268,145 1,331,377 4,001,182 2,320,581

Accumulated balance of material NCI 4,027,555 3,675,293 2,145,057 2,136,293 2,705,854 2,563,156

Summarised cash fl ow information for the year ended 31 MarchCash fl ows from/ (used in) operating activities (2,696,390) 59,709 917,206 884,135 1,213,277 1,211,135 Cash fl ows from/ (used in) investing activities 358,234 115,446 (1,252,845) (119,506) (295,034) (258,955)Cash fl ows from/ (used in) fi nancing activities 957,608 (1,003,319) (332,236) (517,197) (1,837,576) (602,875)

Net increase/ (decrease) in cash and cash equivalents (1,380,548) (828,164) (667,875) 247,432 (919,333) 349,305

The above information is based on amounts before intercompany eliminations.


8 BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTEREST

ACCOUNTING POLICY

Business combination & goodwill

Business combinations are accounted for using the acquisition method of accounting. The Group measures goodwill at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised amount (generally fair value) of the identifi able assets acquired and liabilities assumed, all measured as of the acquisition date.

When the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree is lower than the fair value of net assets acquired, a gain is recognised immediately in the income statement.

The Group elects on a transaction by transaction basis whether to measure non-controlling interests at fair value, or at their proportionate share of the recognised amount of the identifi able net assets, at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

When the Group acquires a business, it assesses the fi nancial assets and liabilities assumed for appropriate classifi cation and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is re measured to fair value at the acquisition date through the income statement.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classifi ed as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classifi ed as an asset or liability that is a fi nancial instrument and within the scope of SLFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profi t or loss in accordance with SLFRS 9. Other contingent consideration that is not within the scope of SLFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profi t or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if the events or changes in the circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefi t from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. The impairment loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro- rata to the carrying amount of each asset in the unit.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment of goodwill

Goodwill is tested for impairment annually (as at 31 March) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

8.1 Obtaining control of subsidiaries

FY 1819

In August 2018, Odel PLC, a subsidiary of Softlogic Holdings PLC acquired 100.00% ordinary shares of Cotton Collection (Pvt) Ltd and it became a subsidiary of the Group.

Further in November 2018, Asiri Hospital Holdings PLC, a subsidiary of Softlogic Holdings PLC acquired 100.00% ordinary shares of Asiri Hospital Galle (Pvt) Ltd (previously known as Hemas Southern Hospitals (Pvt) Ltd) and it became a subsidiary of the Group.

FY 1718

In July 2017, Softlogic Retail (Pvt) Ltd, a subsidiary of Softlogic Holdings PLC acquired 66.51% ordinary shares of Suzuki Motors Lanka Ltd and it became a subsidiary of the Group.



The acquisition had the following effect on the Group’s assets and liabilities.

In Rs. ‘000 Note GroupAs at 31 March 2019 2018

Property, plant & equipment 22.1 734,556 106,629 Lease rentals paid in advance - 3,884 Intangible assets 25 1,971 - Non-current fi nancial assets - 26,655 Other non current assets 41,525 - Inventories 180,992 123,655 Trade and other receivables 178,614 89,482 Other fi nancial assets - 30,552 Income tax refund 7,589 7,309 Cash in hand and at bank 38,524 19,514

Retirement benefi t liability 42 (20,490) (5,803)Deferred tax liabilities 19.2.2 (59,689) - Other non-current fi nancial liabilities - (9,313)Interest bearing borrowings 40 (240,164) (10,975)Trade and other payables (256,025) - Amounts Due to Related Parties (18,259) - Other current fi nancial liabilities - (254,265)Other current liabilities - (25,229)Bank overdrafts (240,532) (68,562)Net identifi able assets 348,612 33,533 Non controlling interest holding 226,421 353 Intangible recognised on acquisition 25 364,294 142,680

939,327 176,566 Investment by Non controlling interest (188,883) (11,564)

750,444 165,002

Total purchase price paid Cash consideration 750,444 165,002 Cash at bank and in hand acquired 202,008 49,048

952,452 214,050

8.2 Gain on share restructure transaction - Softlogic Holdings PLC

In January 2019, Softlogic Holdings PLC transferred its stake in Odel PLC to Softlogic Retail Holdings (Pvt) Ltd, which is a fully owned subsidiary of Softlogic Holdings PLC.

In comparative period relating to restructure, Softlogic Holdings PLC transferred its ownership in Softlogic Communication Services (Pvt) Ltd, Softlogic Mobile Distribution (Pvt) Ltd, Softlogic International (Pvt) Ltd and Softlogic Retail (Pvt) Ltd to Softlogic Retail Holdings (Pvt) Ltd, which is a fully owned subsidiary of Softlogic Holdings PLC.

The gains/ (loss) resulting from these transactions have been accounted for as ‘Other Operating Income’ of the company.

For the year ended 31 March 2019 2018 In Rs. ‘000 Transaction

value Loss Transaction

value Gain

Shares disposed Odel PLC 1,550,225 10,575 - - Softlogic Communication Services (Pvt) Ltd - - 1 - Softlogic International (Pvt) Ltd - - 456,749 450,050 Softlogic Mobile Distribution (Pvt) Ltd - - 1,633,500 1,623,500 Softlogic Retail (Pvt) Ltd - - 4,181,143 2,514,564

10,575 4,588,114


9 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal fi nancial liabilities consist of public deposits, borrowings, trade & other payables, and fi nancial guarantee contracts. The main purpose of these fi nancial liabilities is to fi nance Group’s operations. The Group fi nancial assets comprise of loans and advances, rental receivable on lease assets & hire purchase, trade & other receivables, cash and short-term deposits that fl ow directly from its operations. The Group also holds other fi nancial instruments such as investments in equity instruments.

The Group is exposed to market risk including currency risk, interest rate risk & price risk, credit risk and liquidity risk. Risk management is carried out under policies approved by the Board of Directors of the Group. The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s fi nancial and non-fi nancial performance.

Risk management framework

The Board of Directors of Softlogic Holdings PLC and its Group companies have overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify, assess and take action of the risks faced by the Group falling within their risk appetite. Risk management policies and systems are reviewed regularly along with the risk register to refl ect changes in market conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees clearly understand their roles and obligations.

The Group’s Integrated Risk Management Committee (IRMC) is being designated to oversee how management monitors compliance with the Group’s risk management policies and procedures, and to review the adequacy of the risk management framework in relation to the risks faced by the Group. The committee will be assisted in its oversight by Group’s Risk Management Department and cluster risk units. Internal Audit undertakes regular reviews of risk management practices. The results of this are reported to the Audit Committee, which supports the Risk Management process through their fi ndings and other deliberations.

9.1 Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a fi nancial instrument or customer contract, leading to a fi nancial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables and customer lending) and from its investing activities, including deposits with banks and fi nancial institutions, foreign exchange transactions and other fi nancial instruments.

The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all clients who wish to trade on credit terms are subject to credit evaluation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debt is not signifi cant.

The hire purchase and lease portfolio is broad based, accounting for 149,551 (2018 - 144,033 customers) contracts, and the risk of non- payment is mitigated by credit approval processes. There is no concentration risk on any single region, customer or sector in particular; collection of dues from customers are robust with the delinquency rate being better than the fi nancial industry average.

With respect to credit risk arising from other fi nancial assets of the Group, such as cash and cash equivalents, available-for-sale fi nancial investments and short term investments, the Group’s exposure to credit risks arises from default of the counterparty. The Group manages its operations to avoid any excessive concentration of counterparty risk.

9.1.1 Credit Risk - Default risk

Default risk is the risk that one party to a fi nancial instrument will fail to discharge an obligation and cause the other party to incur fi nancial loss. It arises from lending, trade fi nance, treasury and other activities undertaken by the Group. The Group has in place standards, policies and procedures for the control and monitoring of all such risks.

9.1.2 Credit Risk - Concentration risk

The Group seeks to manage its credit concentration risk exposure through diversifi cation of its lending, investing and fi nancing activities to avoid undue concentrations of risks with individuals or groups of customers in specifi c businesses. It also obtains security when appropriate. The types of collateral obtained include cash margins, mortgages over properties and pledges over equity instruments.

The prospect of an impairment is analysed at each reporting date on an individual basis for major clients. Less signifi cant receivables are grouped into homogeneous groups and assessed for impairment collectively. The calculation is based on actual historical data.



9.1.3 Risk exposure

The tables below show the maximum exposure to credit risk for the various components, shown gross before the effect of mitigation through the use of collateral arrangements.

Risk Exposure - Group

In Rs. ‘000

As at 31 March 2019

Note Non-current fi nancial

assets

Loans and advances

Rental receivable on leased assets &

hire purchases

Government securities 9.1.4 3,316,389 - - Corporate debt securities 9.1.5 2,683,462 - - Deposits with banks and Unit Trusts 9.1.6 25,419 - - Loans to executives 9.1.7 550 - - Loans and advances 9.1.8 - 15,353,560 - Policyholders loans 9.1.9 - 173,312 - Trade receivables 9.1.10 1,252,299 - - Other receivables 9.1.11 - - - Reinsurance receivables 9.1.12 - - - Amounts due from related parties 9.1.13 - - - Rental receivable on leased assets & hire purchase 9.1.14 - - 1,970,568 Cash in hand and at bank 9.1.15 - - -

Total credit risk exposure 7,278,119 15,526,872 1,970,568

Financial assets at fair value through profi t or loss 9.2.3.1 - - - Financial assets at fair value through OCI 9.2.3.1 2,016,542 - -

Total equity risk exposure 2,016,542 - -

Total 9,294,661 15,526,872 1,970,568

Risk Exposure - Group

In Rs. ‘000

As at 31 March 2018

Note Non-current fi nancial

assets

Loans and advances

Rental receivable on

leased assets & hire purchases

Government securities 9.1.4 3,171,984 - - Corporate debt securities 9.1.5 1,612,624 - - Deposits with banks and Unit Trusts 9.1.6 20,418 - - Loans to executives 9.1.7 3,790 - - Loans and advances 9.1.8 - 15,811,256 - Policyholders loans 9.1.9 - 148,722 - Trade receivables 9.1.10 773,040 - - Other receivables 9.1.11 - - - Reinsurance receivables 9.1.12 - - - Amounts due from related parties 9.1.13 - - - Rental receivable on leased assets & hire purchase 9.1.14 - - 1,566,536 Cash in hand and at bank 9.1.15 - - -

Total credit risk exposure 5,581,856 15,959,978 1,566,536

Financial assets at fair value through profi t or loss 9.2.3.1 - - - Financial assets at fair value through OCI 9.2.3.1 2,121,187 - -

Total equity risk exposure 2,121,187 - -

Total 7,703,043 15,959,978 1,566,536


Cash in hand and at bank

Trade and other receivables

Short term investments

Amounts due from related parties

Total % of allocation

- - 1,969,419 - 5,285,808 11.08 - - 1,030,166 - 3,713,628 7.79 - - 2,356,296 - 2,381,715 4.99 - 43,272 - - 43,822 0.09 - - - - 15,353,560 32.19 - - - - 173,312 0.36 - 10,868,292 - - 12,120,591 25.41 - 3,145,762 - - 3,145,762 6.60 - 294,294 - - 294,294 0.62 - - - 13,692 13,692 0.03 - - - - 1,970,568 4.13

3,196,350 - - - 3,196,350 6.71

3,196,350 14,351,620 5,355,881 13,692 47,693,102 100.00

- - 568,515 - 568,515 20.98 - - 125,000 - 2,141,542 79.02

- - 693,515 - 2,710,057 100.00

3,196,350 14,351,620 6,049,396 13,692 50,403,159

Cash in hand and at bank



Amounts due from related

parties


950,000 - 3,065,527 - 7,187,511 15.14 - - 493,048 - 2,105,672 4.44 - - 2,818,009 - 2,838,427 5.98 - 34,029 - - 37,819 0.08 - - - - 15,811,256 33.30 - - - - 148,722 0.31 - 9,238,284 - - 10,011,324 21.09 - 2,441,266 - - 2,441,266 5.14 - 124,551 - - 124,551 0.26 - - - 807 807 - - - - - 1,566,536 3.30

5,201,833 - - - 5,201,833 10.96

6,151,833 11,838,130 6,376,584 807 47,475,724 100.00

- - 619,024 - 619,024 21.60 - - 125,000 - 2,246,187 78.40

- - 744,024 - 2,865,211 100.00

6,151,833 11,838,130 7,120,608 807 50,340,935



Risk Exposure - Company

Rs. ‘000

As at 31 March 2019

Note Non-current

fi nancial assets

Cash inhand andat banks

Trade and other

receivable


Amountsdue from

related parties


Loans to executives 9.1.7 - - 4,218 - - 4,218 0.03 Trade receivables 9.1.10 - - 398,263 - - 398,263 2.40 Other receivables 9.1.11 - - 509,612 - - 509,612 3.08 Amounts due from related parties 9.1.13 1,465,042 - - - 14,176,360 15,641,402 94.39 Cash in hand and at bank 9.1.15 - 18,294 - - - 18,294 0.10

Total credit risk exposure 1,465,042 18,294 912,093 - 14,176,360 16,571,789 100.00

Financial assets at fair value through profi t or loss 9.2.3.1 - - - 5,625 - 5,625 4.31 Financial assets at fair value through OCI 9.2.3.1 - - - 125,000 - 125,000 95.69

Total equity risk exposure - - - 130,625 - 130,625 100.00

Total 1,465,042 18,294 912,093 130,625 14,176,360 16,702,414

Risk Exposure - Company

Rs. ‘000

As at 31 March 2018

Note Non-current

fi nancial assets

Cash inhand andat banks

Trade and other

receivable


Amountsdue from

related parties


Government securities 9.1.5 - 950,000 - - - 950,000 7.48 Loans to executives 9.1.7 - - 2,624 - - 2,624 0.02 Trade receivables 9.1.10 - - 276,358 - - 276,358 2.18 Other receivables 9.1.11 - - 83,948 - - 83,948 0.66 Amounts due from related parties 9.1.13 828,355 - - - 8,588,380 9,416,735 74.17 Cash in hand and at bank 9.1.15 - 1,966,160 - - - 1,966,160 15.49

Total credit risk exposure 828,355 2,916,160 362,930 - 8,588,380 12,695,825 100.00

Financial assets at fair value through profi t or loss 9.2.3.1 - - - 1,594,676 - 1,594,676 92.73 Financial assets at fair value through OCI 9.2.3.1 - - - 125,000 - 125,000 7.27

Total equity risk exposure - - - 1,719,676 - 1,719,676 100.00

Total 828,355 2,916,160 362,930 1,719,676 8,588,380 14,415,501

9.1.4 Government securities

As at 31 March 2019 as shown in the table above, 11.08% (2018 - 15.14%) of Group debt securities comprise investments in government securities which consist of treasury bonds, bills and reverse repo investments. Government securities are usually considered to as risk free due to the sovereign nature of the instrument.


9.1.5 Corporate debt securities

As at 31 March 2019, corporate debt securities comprise 88.24% (2018 - 70.53%) of the total investments for the Group were rated “A-” or better.

Group As at 31 March 2019 2018Fitch/ ICRA rating Rs. ‘000 % Rs.’000 %

AA+ 421,578 11.35 - - AA - - 63,196 3.00 AA- 819,801 22.08 588,424 27.94 A+ 378,732 10.20 333,499 15.84 A 1,087,842 29.29 125,429 5.96 A- 568,936 15.32 374,546 17.79 BBB+ 125,406 3.38 234,164 11.12 BBB 63,006 1.70 164,969 7.83 BBB- 102,985 2.77 - - CC 145,342 3.91 193,017 9.17 Not rated - - 28,428 1.35

Total 3,713,628 100.00 2,105,672 100.00

9.1.6 Deposits with banks and Unit Trusts

Deposits with banks consist mainly of fi xed and call deposits.

As at 31 March 2019, 99.99% (2018 - 84.46%) of the fi xed and call deposits and investments in Unit Trusts were rated “BBB” or better for the Group.

Group As at 31 March 2019 2018Fitch rating Rs. ‘000 % Rs.’000 %

AA+ 161,439 6.78 26 - AA 25,179 1.06 20,361 0.72 AA- 344,517 14.47 451,281 15.90 A+ 444,395 18.66 280,587 9.89 A 144,676 6.07 10,291 0.36 A- 659,973 27.71 15,578 0.55 BBB- - - 441,140 15.53 BB+ 182 0.01 182 0.01 Unit trust 601,323 25.24 1,618,950 57.04 Not rated 31 - 31 -

Total 2,381,715 100.00 2,838,427 100.00

9.1.7 Loans to executives

The Loans to Executives portfolio consists largely of short term distress loans granted to executive staff. The respective business units have taken necessary powers of attorney/ promissory notes as collateral for the loans granted.



9.1.8 Loans and advances

As a part of the overall risk management strategy, the Boards of Directors of the respective companies in the Financial Services cluster, have delegated responsibility for the oversight of credit risk to their ‘Credit Committee’ and ‘Integrated Risk Management Committee’. Their ‘Credit Risk Monitoring Unit’ reports to the ‘Risk Committee’ through the ‘Chief Risk Offi cer’ who is responsible for managing the company’s credit risk. Steps taken to manage credit risk include:

• introduction of a comprehensive credit policy as the guideline in lending, which has strengthened the credit evaluation process

• regular evaluation of the concentration risk of credit, with the credit policy amended appropriately to ensure the credit granting process responds

• implementation of delegated authority levels, to strengthen credit screening and evaluation

• implementation of a customer rating system as a way of building a data base within the company for effi cient and effective credit evaluation

• regular discussions by both ‘Credit Committee’ and ‘Integrated Risk Management Committee’ in relation to credit risk and actions to be implemented.

The table below shows the maximum exposure to credit risk for components of the Statement of Financial Position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

Loans and advances excluding loans to life policyholder

In Rs. ‘000

As at 31 March

Note Personal loans

Pawning Revolving loans

Consumer loans

SME & mortgage

loans

Total 2019

Total 2018

Assets at amortised cost

Individually impaired- gross amount 3,462 - 523,121 - 1,448,288 1,974,871 3,089,038 - unearned income (579) - - - (234,946) (235,525) (76,527)

Gross carrying amount 2,883 - 523,121 - 1,213,342 1,739,346 3,012,511 - allowance for impairment 9.1.8.2 (229) - (10,258) - (33,556) (44,043) (190,052)

Net carrying amount 2,654 - 512,863 - 1,179,786 1,695,303 2,822,459

For the rest of portfolio where collective impairment is applicable- gross amount 1,625,952 2,014,921 1,322,801 33,493 11,363,269 16,360,436 15,221,608 - unearned income (51,802) - - (1,204) (1,697,166) (1,750,172) (1,671,233)

Gross carrying amount 9.1.8.1 1,574,150 2,014,921 1,322,801 32,289 9,666,103 14,610,264 13,550,375 - allowance for impairment 9.1.8.2 (266,893) (5,204) (39,452) (7,605) (632,853) (952,007) (561,578)

Net carrying amount 1,307,257 2,009,717 1,283,349 24,684 9,033,250 13,658,257 12,988,797

Total net carrying amount 1,309,911 2,009,717 1,796,212 24,684 10,213,036 15,353,560 15,811,256

9.1.8.1 Age analysis of facilities considered for collective impairment

In Rs. ‘000

As at 31 March

Personal loans

Pawning Revolving loans

Consumer loans

SME & mortgage

loans

Total 2019

Total 2018

Category - - Not due/ current 793,569 866,832 1,040,368 10,674 4,199,402 6,910,845 9,535,233 Less than 30 days 31,488 406,165 145,417 1,035 2,108,834 2,692,939 908,620 31 - 60 days 13,237 305,567 91,003 734 920,032 1,330,573 489,373 61 - 90 days 18,612 291,816 15,601 468 407,297 733,794 241,486 91 - 120 days 18,135 91,759 9,865 378 314,600 434,737 198,729 121 - 150 days 16,057 34,138 5,058 393 201,528 257,174 231,817 151 - 180 days 35,414 2,174 15,489 138 269,585 322,800 363,521 above 180 days 647,638 16,470 - 18,469 1,244,825 1,927,402 1,581,596

Total 1,574,150 2,014,921 1,322,801 32,289 9,666,103 14,610,264 13,550,375


9.1.8.2 Movement in impairment allowance for loans advances

In Rs. ‘000 Movement in specific impairment allowance

Movement in collective impairment allowance

Movement in impairment allowance

As at 31 March 2019 2018 2019 2018 2019 2018

At the beginning of the year 190,052 212,187 561,578 463,189 751,630 675,376 Impact of adopting SLFRS 9 - - 594,064 - 594,064 - Net impairment charge for the year (95,009) (1,202) 205,766 134,031 110,757 132,829 Transfers during the year - 31,150 - (30,000) - 1,150 Set-offs during the year (1,605) - (70,000) - (71,605) - Write-offs during the year (49,395) (52,083) (339,401) (5,642) (388,796) (57,725)

At the end of the year 44,043 190,052 952,007 561,578 996,050 751,630

9.1.8.3 Maximum exposure to credit risk

The table below shows the maximum exposure to credit risk for the components of statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

As at 31 March 2019 2018In Rs. ‘000 Maximum

exposure to credit risk

Net exposure

Maximum exposure to

credit risk

Net exposure

Loans and receivables 17,208,835 11,306,176 16,562,887 10,283,418

9.1.9 Loans to life policyholders

Softlogic Life Insurance PLC issued loans to life policyholders of the company considering the surrender value of their life policies as collateral. As at the reporting date, the value of policy loans granted amounted to Rs. 173.31 Mn (2018 – Rs. 148.72 Mn) and their related surrender value is more than carrying value.



9.1.10 Trade receivables

Customer credit risk is managed by each business unit according to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on a credit rating scorecard and individual credit limits are defi ned in accordance with this assessment. Outstanding customer receivables are regularly monitored and outstandings of major customers are, where feasible, covered by bank guarantees or other forms of credit insurance.

In Rs. ‘000 Group Company As at 31 March 2019 2018 2019 2018

Non hire purchase

debtors

Hire purchase

debtors

Total Non hire purchase

debtors

Hire purchase

debtors Restated

Total Restated

Total Total

Trade receivable settlement profi leCurrent/ 0 - 30 days 4,186,131 3,042,415 7,228,546 3,843,762 3,576,176 7,419,938 99,398 77,060 31 - 60 days 2,969,021 59,446 3,028,467 1,403,468 61,615 1,465,083 51,920 33,194 61 - 90 days 658,556 61,233 719,789 317,060 30,864 347,924 72,251 32,412 91 - 120 days 150,223 30,137 180,360 356,747 23,993 380,740 25,455 57,548 > 121 days 1,062,883 29,779 1,092,662 712,653 15,203 727,856 149,239 76,145 Impaired 590,983 758,666 1,349,649 202,055 374,088 576,143 136,621 77,853

Gross amount 9,617,797 3,981,676 13,599,473 6,835,745 4,081,939 10,917,684 534,884 354,212 Less : Unearned income - (155,722) (155,722) - (330,215) (330,215) - -

Gross carrying value 9,617,797 3,825,954 13,443,751 6,835,745 3,751,724 10,587,469 534,884 354,212 Less : Impairment provisionIndividually assessed impairment provision (313,268) - (313,268) (22,760) - (22,760) (77,853) (77,853)Collectively assessed impairment provision (277,715) (732,177) (1,009,892) (179,297) (374,088) (553,385) (58,768) -

Total 9,026,814 3,093,777 12,120,591 6,633,688 3,377,636 10,011,324 398,263 276,359

The requirement for impairment is analysed at each reporting date on an individual basis for major clients. Less signifi cant receivables are grouped into homogeneous groups and assessed for impairment collectively. The calculation is based on actual historical data.


9.1.11 Other receivables

The Group’s other receivables consists mainly of dues receivables from foreign suppliers. At the each reporting period end management assess the recoverability of these receivable balances and make necessary provisioning for the dough full balances.

The Company’s other receivables consists mainly of dues receivable on intercompany dividend which company established right to receive the payment.

9.1.12 Reinsurance receivable

As a part of overall risk management strategy, the Group cedes insurance risk through proportional, non-proportional and specifi c risk reinsurance treaties. While these mitigate insurance risk, the recoverables from reinsurers and receivables arising from ceded reinsurance expose the company to credit risk. Following are the steps taken to manage reinsurance risk:

• Policy guidelines are approved by the Board of Directors annually, in line with the guidelines issued by the Insurance Board of Sri Lanka

• Counterparties’ limits are set each year and are subjected to regular reviews with management assessing the creditworthiness of reinsurers to update the reinsurance strategy and ascertain the allowance for impairment of reinsurance assets

• Outstanding reinsurance receivables are reviewed monthly to ensure that all dues are collected or set off against payables

• Close professional relationship are maintained with reinsurers

• No cover is issued without confi rmation of reinsurance, except for non-reinsurance business.

As at the reporting date reinsurance receivables amounted to Rs. 294.29 Mn at 31 March 2019 (2018 - Rs. 124.55 Mn). This consists mainly of reinsurance receivables on paid claims amounting to Rs. 225.57 Mn (2018 - Rs. 89.63 Mn) and the reinsurance share of claim reserve (receivables on outstanding claims) of Rs. 68.72 Mn as at 31 March 2019 (2018 - Rs. 34.92 Mn).

9.1.13 Amounts due from related parties

The Group’s dues from related parties consists mainly of dues from associate companies and receivables from KMPs.

The Company balance consists mainly of balances due from affi liate companies.

9.1.14 Rental receivable on lease assets & hire purchase

As a part of overall risk management strategy, the Board of Directors of the company concerned has delegated responsibility for the oversight of credit risk to its ‘Board Credit Committee’. Its ‘Independent Credit Risk Monitoring Unit’ reports to the ‘Risk Committee’ through the ‘Head of Credit Risk’ who is responsible for managing the company’s credit risk. Following are the steps taken to manage credit risk:

• introduction of a comprehensive credit policy as the guideline in lending, which has strengthened the credit evaluation process

• formulation of that policy considering current market conditions and evaluating it quarterly to keep it in line with the market conditions

• determining the levels of service and quality of the evaluators involved in the credit evaluation process

• regular discussion in both the Credit Committee and Integrated Risk Management Committee on credit risk, with necessary actions being implemented



The table below shows the maximum exposure to credit risk for the components of the statement of fi nancial position. This is shown gross, before the effect of mitigation through the use of collateral agreements.

In Rs. ‘000 Note Rental receivable

on lease assets

Rental receivable

on hire purchase

Total Rental receivable

on lease assets

Rental receivable

on hire purchase

Total

As at 31 March 2019 2018

Assets at amortised cost

Individually impaired- gross amount 49,620 25,490 75,110 182,684 41,402 224,086 - unearned income (4,488) (4,535) (9,023) (43,717) (9,161) (52,878)

Gross carrying amount 45,132 20,955 66,087 138,967 32,241 171,208 - allowance for impairment 9.1.14.2 (3,582) (5,882) (9,464) (3,582) (1,936) (5,518)

Net carrying amount 41,550 15,073 56,623 135,385 30,305 165,690

For the rest of portfolio, where collective impairment applies- gross amount 2,652,410 96,060 2,748,470 1,762,484 164,022 1,926,506 - unearned income (738,994) (5) (738,999) (401,597) (2,183) (403,780)

Gross carrying amount 9.1.14.1 1,913,416 96,055 2,009,471 1,360,887 161,839 1,522,726 - allowance for impairment 9.1.14.2 (78,097) (17,429) (95,526) (55,906) (65,974) (121,880)

Net carrying amount 1,835,319 78,626 1,913,945 1,304,981 95,865 1,400,846

Total Net carrying amount 1,876,869 93,699 1,970,568 1,440,366 126,170 1,566,536

9.1.14.1 Age analysis of facilities considered for collective impairment

In Rs. ‘000 Rental receivable

on lease assets

Rental receivable

on hire purchase

Total Rental receivable

on lease assets

Rental receivable

on hire purchase

Total

As at 31 March 2019 2018

CategoryNot due/ current 752,598 239 752,837 714,306 4,498 718,804

Overdue:Less than 30 days 380,256 - 380,256 269,378 1,268 270,646 31 - 60 days 266,712 236 266,948 43,600 1,844 45,444 61 - 90 days 158,261 - 158,261 20,215 1,130 21,345 91 - 120 days 98,815 603 99,418 1,844 2,389 4,233 121 - 150 days 48,373 90 48,463 1,482 - 1,482 151 - 180 days 31,946 - 31,946 64 - 64 above 180 days 176,455 94,887 271,342 309,998 150,710 460,708

Total 1,913,416 96,055 2,009,471 1,360,887 161,839 1,522,726

9.1.14.2 Movement in impairment allowance

In Rs. ‘000 Movement in specifi c impairment allowance

Movement in collective impairment allowance

Movement in impairment allowance

As at 31 March 2019 2018 2019 2018 2019 2018

At the beginning of the year 5,518 41,710 121,880 170,117 127,398 211,827 Impact of adopting SLFRS 9 - - (1,864) - (1,864) - Net impairment charge for the year 3,946 30,146 57,554 (48,237) 61,500 (18,091)Transfers during the year - (31,150) - - - (31,150)Write offs during the year - (35,188) (82,044) - (82,044) (35,188)

At the end of the year 9,464 5,518 95,526 121,880 104,990 127,398


9.1.14.3 Maximum exposure to credit risk

The table below shows the maximum exposure to credit risk for the components of statement of fi nancial position. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements.

As at 31 March 2019 2018In Rs. ‘000 Maximum

exposure to credit risk

Net exposure

Maximum exposure to

credit risk

Net exposure

Lease and hire purchase receivables 2,075,558 - 1,693,935 -

9.1.15 Cash in hand and at bank

Deposits with banks consist mainly of fi xed and call deposits. Credit risk from balances with banks and fi nancial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed annually, and may be updated during the year subject to appropriate approval. The limits are set to minimise the concentration of risks and therefore mitigate fi nancial loss through the counterparty’s failure to make payments. The Group’s maximum exposure to credit risk for the components of the statement of fi nancial position are the carrying amounts as shown.

9.2 Market risk

Market risk is the risk that the fair value of future cash fl ows of a fi nancial instrument will adversely deviate because of changes in market movements.

Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include: borrowings, trade payables, short term investments and available-for-sale investments.

9.2.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market interest rates. The Group’s exposure to changes in market interest rates relates signifi cantly to the Group’s long-term debt obligations.

9.2.1.1 Exposure to interest rate risk

The interest rate profi le of the Group’s interest bearing fi nancial instruments as reported to Group management is as follows:

In Rs. ‘000 Group Nominal amount

CompanyNominal amount

As at 31 March 2019 2018 2019 2018

Fixed rate instrumentFinancial assets 31,280,131 29,437,496 - - Financial liabilities (42,368,861) (40,701,971) (3,273,536) (5,573,808)

(11,088,730) (11,264,475) (3,273,536) (5,573,808)

Variable rate instrumentsFinancial assets 2,596,037 6,112,772 14,013,567 7,896,628 Financial liabilities (40,396,514) (36,812,240) (17,867,456) (15,730,933)

(37,800,477) (30,699,468) (3,853,889) (7,834,305)



9.2.1.2 Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings that may be affected. Provided all other variables are held constant, the Group’s profi t before tax is affected through the impact on fl oating rate borrowings, as follows:

In Rs. ‘000 Increase in basis points Effect on profi t before tax

Rupeeborrowings

Other currencies

Group Company

2019 + 100 b.p + 30 b.p (339,446) (248,492)- 100 b.p - 30 b.p 339,446 248,492

2018 + 100 b.p + 25 b.p (296,197) (114,007)- 100 b.p - 25 b.p 296,197 114,007

The spread of basis points used for the interest rate sensitivity analysis is based on the currently observable market environment.

9.2.2 Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of adverse fl uctuations in foreign exchange rates. The Group’s exposure to the risk of fl uctuations in foreign exchange rates relates primarily to the Group’s operating activities and foreign currency borrowings.

Management has set up a policy that requires the company and its subsidiaries to manage their foreign exchange risk with limits on maximum exposure.

9.2.2.1 Foreign currency sensitivity

The following table demonstrates the sensitivity to possible changes in the USD/RS exchange rate, provided that all other variables are held constant.

The Group’s exposure to foreign currencies other than USD is not material.

In Rs. ‘000 Increase in exchange rate USD

Effect on profi t before tax

Effect on equity

2019 + 10% (367,062) (444,325)- 10% 367,062 444,325

2018 + 4% (130,692) (196,504)- 4% 130,692 196,504

The Group manages its foreign currency risk using a balanced approach involving forward contracts on exposures expected to occur within a maximum 24 month period.

Where the nature of the hedging is not economic, it is the Group’s policy to negotiate with counterparties or banks to obtain most advantage position for the Group.

9.2.2.2 Foreign exchange risk in operating activities

The exposure is mainly from foreign currency obligations arising out of operating activities where fl uctuation of foreign exchange rate may occur during a credit period of 3 - 6 months.

9.2.3 Equity price risk

9.2.3.1 Listed equity investments

The Group holds listed and unlisted equity securities which are susceptible to market-price risk arising from uncertainties about future values of these securities.

The Group manages the equity price risk through diversifi cation and by placing limits on individual and total equity instruments. Periodic reports on equity investment portfolios are submitted to the senior management of individual business segments. The respective Boards of Directors review and approve all equity investment decisions.


GroupIn Rs. ‘000 Financial assets at fair value through profi t or loss Financial assets at fair value through OCIAs at 31 March 2019 2018 2019 2018

Rs. ‘000 % Rs. '000 % Rs. ‘000 % Rs. '000 %

Bank, fi nance and insurance 357,445 62.88 294,524 47.58 1,547,305 100.00 1,651,953 100.00 Beverage, food and tobacco - - - - - - - - Diversifi ed holdings 147,882 26.01 169,549 27.39 - - - - Healthcare - - 3,780 0.61 - - - - Hotels and travels 13 - 13 - - - - - Manufacturing 17,172 3.02 125,453 20.27 20 - 17 - Power and energy 13,436 2.36 25,705 4.15 - - - - Telecommunications 32,567 5.73 - - - - - -

568,515 100.00 619,024 100.00 1,547,325 100.00 1,651,970 100.00

CompanyIn Rs. ‘000 Financial assets at fair value through profi t or lossAs at 31 March 2019 2018

Rs. ‘000 % Rs. '000 %

Bank, fi nance and insurance 4,525 80.44 6,871 0.43 Footware and textile - - 1,585,903 99.45 Power and energy 1,100 19.56 1,902 0.12

5,625 100.00 1,594,676 100.00

9.2.3.2 Unquoted equity investments

Investments in unquoted investments are made with the board approval.

9.2.3.3 Sensitivity analysis

The following table demonstrate the sensitivity of cumulative changes in fair value to reasonably possible changes in equity prices provided all other variables are held constant. The effect of a decrease in equity prices is expected to be equal and opposite to the effect of the increase shown.

This table consider only quoted equity shares classifi ed as short term and long term fi nancial assets.

In Rs. ‘000 Group Company

Change inequity price

Effect on profi t

before tax

Effect on equity

Effect on profi t

before tax

Effect on equity

2019Quoted equity investments listed on the Colombo Stock Exchange + 15% 85,277 232,099 844 Nil

- 15% (85,277) (232,099) (844) Nil2018 Quoted equity investments listed on the Colombo Stock Exchange + 7% 43,332 115,638 111,627 Nil

- 7% (43,332) (115,638) (111,627) Nil



9.3 Liquidity risk

Liquidity risk is the risk that the Group will encounter diffi culty in meeting the obligations associated with its fi nancial liabilities that are settled by delivering cash or another fi nancial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have suffi cient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group’s objective is to maintain a balance between continuity of funding and fl exibility through the use of bank overdrafts, bank loans, debentures, fi nance leases and hire purchase contracts that will always have suffi cient liquidity to meet its liabilities when due under normal and stressed conditions. The Group assessed the concentration of risk with respect to refi nancing its debt and concluded it to be low. Access to sources of funding is suffi cient and debt maturing within 12 months can be rolled over with existing lenders.

9.3.1 Net debt / (cash)

In Rs. ‘000 Group CompanyAs at 31 March 2019 2018 2019 2018

Short term investments 6,049,396 7,120,608 130,625 1,719,676 Cash in hand and at bank 3,196,350 6,151,833 18,294 2,916,160

Total liquid assets 9,245,746 13,272,441 148,919 4,635,836

Other current fi nancial liabilities 23,128,625 23,607,505 10,003,875 10,526,355 Current portion of interest bearing borrowings 9,782,952 7,244,641 3,958,498 2,984,531 Bank overdrafts 7,761,224 4,645,217 174,702 153,748


Net debt 31,427,055 22,224,922 13,988,156 9,028,798 Adjustments for;Short term investments with maturity less than 3 months 3,554,200 4,382,344 - - Unutilised approved banking facilities 757,908 1,671,138 6,521 133,868 Unutilised funds raised through private placement and rights issue of shares - 5,307,289 - 5,307,289

27,114,947 10,864,151 13,981,635 3,587,641

Further the Group will utilise excess liquidity through operating cycle, restructuring of short term fi nancial commitments, funds available through commercial papers and revolving loan facilities as positive cash fl ows to the manage the liquidity position of the Group.

9.3.2 Liquidity risk managementAn optional combination of positive and negative cash flows along with investment returns and contractual obligation maturing is collated through an intra-day cash reporting system for all business segments. High value contractual outflows are processed through various control filters. The Group is in the process of building a “Liquidity Dashboard” with the implementation of its ERP program. This would help further accelerate the review and identification of debt maturities relating to net liquidity position on a daily basis and thus enable proactive funding mobilisation and reinvestment of cash surpluses, and re-scheduling maturity profiles to de-stress cash flows and align them with actual investment tenors. This would engender optimal liquidity positioning, reduce borrowing cost and enhance reinvestment income.


9.3.3 Maturity analysis

The table below summarises the maturity profile of the Group’s financial liabilities at 31 March 2019 based on contractual undiscounted payments.

In Rs. ‘000 Within 1 year

Between1-2 years

Between2-3 years

Between 3-4 years

Between 4-5 years

More than5 years

Total

Interest bearing loans and borrowings 12,907,941 9,581,274 9,421,147 4,522,075 3,476,983 4,166,077 44,075,497 Other non-current fi nancial liabilities - 4,426 110,779 - - - 115,205 Trade and other payables 8,428,255 - - - - - 8,428,255 Amounts due to related parties 2,731 - - - - - 2,731 Other current fi nancial liabilities 23,128,625 - - - - - 23,128,625 Public deposits 13,252,446 2,394,223 1,438,383 565,690 665,482 - 18,316,224 Bank overdrafts 7,761,224 - - - - - 7,761,224

65,481,222 11,979,923 10,970,309 5,087,765 4,142,465 4,166,077 101,827,761

Contingent gross commitment on put option 1,812,828 - - - - - 1,812,828

The table below summarises the maturity profi le of the Company’s fi nancial liabilities at 31 March 2019 based on contractual undiscounted payments.


Between1-2 years

Between2-3 years

Between 3-4 years

Between 4-5 years

More than5 years

Total

Interest bearing loans and borrowings 5,055,253 3,749,841 1,952,454 721,485 387,357 86,424 11,952,814 Other non-current fi nancial liabilities 34,633 63,358 57,517 51,677 45,836 71,937 324,958 Trade and other payables 108,894 - - - - - 108,894 Amounts due to related parties 16,671 - - - - - 16,671 Other current fi nancial liabilities 10,003,875 - - - - - 10,003,875 Bank overdrafts 174,702 - - - - - 174,702

15,394,028 3,813,199 2,009,971 773,162 433,193 158,361 22,581,914

The table below summarises the maturity profi le of the Group’s fi nancial liabilities at 31 March 2018 based on contractual undiscounted payments.


Between1-2 years

Between2-3 years

Between 3-4 years

Between 4-5 years

More than5 years

Total

Interest bearing loans and borrowings 10,170,594 10,820,747 7,664,548 6,416,415 2,727,665 4,641,730 42,441,699 Other non-current fi nancial liabilities - 6,600 115,902 - - - 122,502 Trade and other payables 7,268,577 - - - - - 7,268,577 Amounts due to related parties 7,566 - - - - - 7,566 Other current fi nancial liabilities 23,607,505 - - - - - 23,607,505 Public deposits 14,142,178 1,607,026 1,768,634 242,387 368,243 - 18,128,468 Bank overdrafts 4,645,217 - - - - - 4,645,217

59,841,637 12,434,373 9,549,084 6,658,802 3,095,908 4,641,730 96,221,534 Contingent gross commitment on put option 1,812,828 - - - - - 1,812,828

The table below summarises the maturity profi le of the Company’s fi nancial liabilities at 31 March 2018 based on contractual undiscounted payments.


Between1-2 years

Between2-3 years

Between 3-4 years

Between 4-5 years

More than5 years

Total

Interest bearing loans and borrowings 4,111,328 3,778,565 3,233,853 1,836,939 324,923 49,202 13,334,810 Other non-current fi nancial liabilities 23,617 53,378 49,360 45,344 41,328 68,394 281,421 Trade and other payables 44,415 - - - - - 44,415 Amounts due to related parties 17,877 - - - - - 17,877 Other current fi nancial liabilities 10,526,355 - - - - - 10,526,355 Bank overdrafts 153,748 - - - - - 153,748

14,877,340 3,831,943 3,283,213 1,882,283 366,251 117,596 24,358,626



9.3.4 Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital during the year ended 31 March 2019.

The Group monitors capital using a gearing ratio for the company and subsidiaries, net debt divided by total capital plus net debt, which is monitored closely by senior management. Net debt of the Group includes, interest bearing loans and borrowings, trade and other payables less cash and cash equivalents (excluding discontinued operations).


Net debt 62,591,496 55,074,861 21,122,700 18,388,581 Equity 24,989,910 20,916,926 15,990,118 13,388,519

Capital and total net debt 87,581,406 75,991,787 37,112,818 31,777,100

Gearing ratio (X) 0.71 0.72 0.57 0.58

10 FAIR VALUE MEASUREMENT AND RELATED FAIR VALUE DISCLOSURE

Fair value measurement

Fair value related disclosures for fi nancial instruments and non- fi nancial assets that are measured at fair value are disclosed in this note. Apart from this note, additional fair value related disclosures, including the valuation methods, signifi cant estimates and assumptions are also provided in:

Note

Property, plant and equipment under revaluation model 22.3Investment properties 24.2Investment in unquoted equity shares 26.3Financial instruments 11

ACCOUNTING POLICY

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• in the principal market for the asset or liability, or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-fi nancial asset takes into account a market participant’s ability to generate economic benefi ts by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which suffi cient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is signifi cant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is signifi cant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is signifi cant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the Financial Statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is signifi cant to the fair value measurement as a whole) at the end of each reporting period.

The Group determines the policies and procedures for both recurring fair value measurement, such as investment properties and unquoted AFS fi nancial assets, and for non-recurring measurement, such as assets held-for-sale in discontinued operations.

External valuers are involved for valuation of signifi cant assets, such as land and building and investment properties, and signifi cant liabilities, such as insurance contracts. Selection criteria for external valuers include market knowledge, reputation, independence and whether professional standards are maintained. The Group decides, after


discussions with the external valuers, which valuation techniques and inputs to use for each case.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

10.1 Financial assets and liabilities by fair value hierarchy - Group

The Group held the following fi nancial instruments carried at fair value in the statement of fi nancial position:

Financial assets

In Rs. ‘000 Level 1 Level 2 Level 3 As at 31 March 2019 2018 2019 2018 2019 2018

Financial assets

Financial assets at fair value through OCIQuoted equity instruments 1,547,325 1,651,970 - - - - Unquoted equity instruments - - - - 469,217 -Quoted debt instruments 2,780,090 2,574,953 - - - -

Financial assets at fair value through P&LQuoted equity instruments 568,515 619,024 - - - - Unquoted equity instruments - - - - 125,000 -Quoted debt instruments 293,477 360,663 - - - - Unit Trust - - 601,323 1,618,950 - -

Total 5,189,407 5,206,610 601,323 1,618,950 594,217 -

Liabilities measured at fair value Financial liabilities at fair value through P&LOther current fi nancial liabilities - - 9,357 9,357 - -

Total - - 9,357 9,357 - -

During the reporting period ended 31 March 2019, there were no transfers between Level 1 and Level 2 fair value measurements.

Non-financial assets


Non assets measured at fair valueLand and buildings - - - - 25,954,359 24,008,256 Buildings on leasehold land - - - - 4,736,385 4,774,770 Investment property - - - - 1,695,261 1,238,300

Total - - - - 32,386,005 30,021,326



10.2 Financial assets and liabilities by fair value hierarchy - Company

The Company held the following fi nancial instruments carried at fair value in the statement of fi nancial position:

Financial assets


Financial assets

Financial assets at fair value through OCIQuoted equity instruments 5,625 1,594,676 - - - - Unquoted equity instruments - - - - 125,000 -

Total 5,625 1,594,676 - - 125,000 -

During the reporting period ended 31 March 2019, there were no transfers between Level 1 and Level 2 fair value measurements.

Non-financial assets

In Rs. ‘000 Level 1 Level 2 Level 3

As at 31 March 2019 2018 2019 2018 2019 2018

Assets measured at fair valueInvestment property - - - - 744,000 704,000

Total - - - - 744,000 704,000

In determining the fair value, highest and best use of the property including the current condition of the properties, future usability and associated redevelopment requirements have been considered. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.

Valuation of level 3 : unquoted equity instruments

The fair valuation of level 3 : unquoted equity instruments is measured using price to book value methodology. Fair value would not signifi cantly vary if one or more of the inputs were changed.

This table consider only unquoted equity shares classifi ed level 3 fi nancial assets.

In Rs. ‘000 Change in equity price

Effect on equity

Group Company

2019Unquoted equity investments classifi ed as level 3 within the fair value hierarchy + 10% 62,775 23,500

- 10% (62,775) (3,500)


11 FINANCIAL INSTRUMENTS

11.1 Financial assets

ACCOUNTING POLICY

Initial recognition and subsequent measurement

Initial recognition and measurement

Financial assets within the scope of SLFRS 9 are classifi ed as amortised cost, fair value through other comprehensive income (OCI), and fair value through profi t or loss.

The classifi cation of fi nancial assets at initial recognition depends on the fi nancial asset’s contractual cash fl ow characteristics and the Group’s business model for managing them. This assessment is referred to as the SPPI test and is performed at an instrument level. The business model determines whether cash fl ows will result from collecting contractual cash fl ows, selling the fi nancial assets, or both. With the exception of trade receivables that do not contain a signifi cant fi nancing component or for which the Group has applied the practical expedient are measured at the transaction price.

At initial recognition, the Group measures a fi nancial asset at its fair value plus, in the case of a fi nancial asset not at fair value through profi t or loss (FVPL), transaction costs that are directly attributable to the acquisition of the fi nancial asset. Transaction costs of fi nancial assets carried at FVPL are expensed in profi t or loss.

The Group’s fi nancial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted fi nancial instruments and derivative fi nancial instruments.

Subsequent measurement

The subsequent measurement of fi nancial assets depends on their classifi cation. For the purpose of subsequent measurement fi nancial assets are classifi ed in four categories.

• Financial assets at amortised cost

• Financial assets at fair value through OCI with recycling of cumulative gains and losses

• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition

• Financial assets at fair value through profi t or loss

Debt instruments

Financial assets at amortised cost

Assets that are held for collection of contractual cash fl ows where those cash fl ows represent solely payments of principal and interest are measured at amortised cost. The Group measures fi nancial assets at amortised cost if both of the following conditions are met:

• The fi nancial asset is held within a business model with the objective to hold fi nancial assets in order to collect contractual cash fl ows: and

• The contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding.

The Group’s fi nancial assets at amortised cost includes trade receivables and short term investments.

Financial assets at fair value through OCI

Assets that are held for collection of contractual cash fl ows and for selling the fi nancial assets, where the assets’ cash fl ows represent solely payments of principal and interest, are measured at FVOCI. The Group measures debt instruments at fair value through OCI if both of the following conditions are met:

• The fi nancial asset is held within a business model with the objective of both holding to collect contractual cash fl ows and selling: and

• The contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding.

Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profi t or loss. When the fi nancial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassifi ed from equity to profi t or loss and recognised in other gains/ (losses). Interest income from these fi nancial assets is included in fi nance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the income statement.

Equity instruments

Financial assets designated at fair value through OCI

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the defi nition of equity under LKAS 32 Financial Instruments: Presentation and are not held for trading. The classifi cation is determined on an instrument-by-instrument basis.

Gains and losses on these fi nancial assets are never recycled to profi t or loss. Dividends are recognised as other income in the statement of profi t or loss when the right of payment has been established, except when the Group benefi ts from such proceeds as a recovery of part of the cost of the fi nancial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.



Financial assets at fair value through profit or loss

Financial assets at fair value through profi t or loss include fi nancial assets held for trading, fi nancial assets designated upon initial recognition at fair value through profi t or loss, or fi nancial assets mandatorily required to be measured at fair value. Financial assets are classifi ed as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classifi ed as held for trading unless they are designated as effective hedging instruments. Financial assets with cash fl ows that are not solely payments of principal and interest are classifi ed and measured at fair value through profi t or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classifi ed at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profi t or loss on initial recognition if doing so eliminates, or signifi cantly reduces, an accounting mismatch.

Financial assets at fair value through profi t or loss are carried in the statement of fi nancial position at fair value with net changes in fair value recognised in the statement of profi t or loss.

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at

fair value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profi t or loss when the right of payment has been established

Derecognition

Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Impairment of financial assets

From 01 April 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a signifi cant increase in credit risk.

For trade receivables, the Group applies the simplifi ed approach permitted by SLFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specifi c to the debtors and the economic environment.

11.2 Financial liabilities

ACCOUNTING POLICY


Financial liabilities are classifi ed, at initial recognition, as fi nancial liabilities at fair value through profi t or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

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

The Group’s fi nancial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative fi nancial instruments.

Subsequent measurement

The measurement of fi nancial liabilities depends on their classifi cation, as described below:

Financial liabilities at fair value through profi t or loss Financial liabilities at fair value through profi t or loss include fi nancial liabilities held for trading and fi nancial liabilities designated upon initial recognition as at fair value through profi t or loss.

Financial liabilities are classifi ed as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative fi nancial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defi ned by SLFRS 9. Separated embedded derivatives are also classifi ed as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognised in the statement of profi t or loss.

Loans and borrowings

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profi t or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as fi nance costs in the statement of profi t or loss.

Derecognition

A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profi t or loss.

Off-setting of financial instruments

Financial assets and fi nancial liabilities are offset and the net amount is reported in the consolidated statement of fi nancial position if there is a


currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Derivative fi nancial instruments and hedge accounting - Initial recognition and subsequent measurement The Group uses derivative fi nancial instruments, such as forward currency contracts, interest rate swaps and forward commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative fi nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as fi nancial assets when the fair value is positive and as fi nancial liabilities when the fair value is negative.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges is recognised in the other comprehensive income statement (OCI). The gain or loss in relation to ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are reclassifi ed to profi t or loss in the periods when the hedged item affects profi t or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When the forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Fair value of financial instruments

Where the fair value of fi nancial assets and fi nancial liabilities recorded in the statement of fi nancial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash fl ow model. The inputs to these models are taken from observable markets where possible.

Where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors that could affect the reported fair value of fi nancial instruments, are further explained in note 11.

Derivative financial instruments

Initial recognition and subsequent measurement

The Group uses derivative fi nancial instruments such as forward currency contracts, interest rate swaps and forward commodity contracts to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative fi nancial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as fi nancial assets when the fair value is positive and as fi nancial liabilities when the fair value is negative. Any

gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement.

Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives either as,

• hedges of the fair value of recognised assets or liabilities or a fi rm commitment (fair value hedge)

• hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash fl ow hedge)

• hedges of a net investment in a foreign operation (net investment hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking various hedging transactions. The company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash fl ows of hedged items.

The fair values of various derivative instruments used for hedging purposes are disclosed in note 39.4. Movements on the hedging reserve on the other comprehensive income statement (OCI) are shown in the same note. The fair value of a hedging derivative is classifi ed as a non-current asset or liability when the remaining hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classifi ed as a current asset or liability.



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the

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spl

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with

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3



The fair value of the fi nancial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

• Fair value of quoted equities, debentures and bonds is based on price quotations in an active market at the reporting date.

• The fair value of unquoted instruments, loans from banks and other fi nancial liabilities, obligations under fi nance leases, as well as other non-current fi nancial liabilities is estimated by discounting future

cash fl ows using rates currently available for debt on similar terms, credit risk and remaining maturities.

• Fair value of unquoted ordinary shares has been estimated using a Discounted Cash Flow (DCF) model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash fl ows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted equity investments.

• Approximately 70% of loans and advances, rental receivable on lease assets and hire purchase have a remaining maturity of less than one year. Therefore, fair value of the lending portfolio approximates to the carrying value at the reporting date. All loans and advances are granted with fi xed interest rate terms.

11.3 Transition disclosures

The following set out the impact of adopting SLFRS 9 on the Statement of Financial Position of Group/ Company including the effect of replacing LKAS 39’s incurred loss calculations with SLFRS 9’s expected credit losses.

A reconciliation between the carrying amounts under LKAS 39 to the balances reported under SLFRS 9 as of 01 April 2018 is,as follows.

In Rs. ‘000 As at 31 March

Group 2018

Company2018

LKAS 39 measurement

Remeasurement SLFRS 9 measurement

LKAS 39 measurement

Remeasurement SLFRS 9 measurement

Assets

Non-current assetsDeferred tax assets 749,406 73,833 823,239 - - -

65,389,121 73,833 65,462,954 - - -

Current assetsTrade and other receivables 11,838,130 (406,489) 11,431,641 362,930 (55,353) 307,577 Loans and advances 13,098,641 (594,064) 12,504,577 - - - Rental receivable on lease assets and hire purchase 523,777 1,864 525,641 - - - Other current assets 3,449,051 46,131 3,495,182 - - - Short term investments 7,120,608 (32,168) 7,088,440 - - -

53,433,386 (984,726) 52,448,660 13,603,855 (55,353) 13,548,502

Total assets 118,822,507 (910,893) 117,911,614 35,212,962 (55,353) 35,157,609

Equity and Liabilities

Equity attributable to equity holders of the parentRevenue reserves (577,403) (637,466) (1,214,869) 5,193,136 (55,353) 5,137,783 Equity attributable to equity holders 11,591,259 (637,466) 10,953,793 13,388,519 (55,353) 13,333,166 Non-controlling interests 9,325,667 (273,427) 9,052,240 - - - Total equity 20,916,926 (910,893) 20,006,033 13,388,519 (55,353) 13,333,166

Total liabilities 97,905,581 (910,893) 96,994,688 21,824,443 (55,353) 21,769,090

Total equity and liabilities 118,822,507 (910,893) 117,911,614 35,212,962 (55,353) 35,157,609


12 SRI LANKA ACCOUNTING STANDARDS (SLFRS) ISSUED BUT NOT YET EFFECTIVE

SLFRS - 16 Leases

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

SLFRS 16 provides a single lessee accounting model, requiring leases to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value even though lessor accounting remains similar to current practice.

This supersedes: LKAS 17 leases, IFRIC 4 determining whether an arrangement contains a lease, SIC 15 operating leases - incentives; and SIC 27 evaluating the substance of transactions involving the legal form of a lease. Earlier application is permitted for entities that apply SLFRS 15 Revenue from Contracts with customers.

The Group will apply the standard from its mandatory adoption date which fi nancial reporting period starting from 01 April 2019.

The Group intends to apply the simplifi ed transition approach and will not restate comparative amounts for the year prior to fi rst adoption. The standard will affect primarily the accounting for the Group’s operating leases and lease commitments. The Group will elect to apply the standard to contracts that were previously identifi ed as leases applying LKAS 17. The Group will elect to use the exemptions applicable to the standard on lease contracts for which the lease terms end within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value. The Group has rent agreements with several parties where the lease term ends within 12 months.

The following amendments and improvements are not expected to have a signifi cant impact on the Group’s Financial Statements

• Income Taxes (Amendments to LKAS 12)

• Long-term Interests in Associates (Amendments to LKAS 28)

• Prepayment Features with Negative Compensation (Amendments to SLFRS 9 )

• Insurance Contracts (Amendments to SLFRS 4 )

• Disclosure of Interests in Other Entities (Amendments to SLFRS 12)



13 REVENUE

ACCOUNTING POLICY


Revenue recognition

Revenue from contracts with customers

Under SLFRS 15 - Revenue from contracts with customers with effected from 01 April 2018, revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that refl ects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Sale of goods

Under SLFRS 15 - Revenue from contracts with customers, revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of goods.

Rendering of services

Under SLFRS 15 - Revenue from contracts with customers, revenue from service performance obligation over time or at a point in time. For each performance obligation satisfi ed over time, the Group recognises the revenue over time by measuring the progress towards complete satisfaction of that performance obligation because the customer simultaneously receives and consumes the benefi ts provided by the Group.

The Group has several operating segments which are described in Note 49 to these Financial Statements.

Performance obligations

The Group’s uses following specifi c criteria in recognising the revenue.

Financial Services

Life insurance business - Gross Written Premiums (GWP)

Gross written premiums comprise the total premiums received/ receivable for the whole period of cover provided by contracts entered into during the accounting period. Gross written premium is generally recognised in full at the inception of the policy.

Gross recurring premiums on life insurance contracts are recognised as revenue when payable by the policyholder (policies within the 30 day grace period are considered as due). Premiums received in advance are not recorded as revenue and recorded as a liability until the premium is due unless the relevant policy conditions require such premiums to be recognised as income. Benefi ts and expenses are provided against such revenue to recognise profi ts over the estimated life of the policies. For single premium business, revenue is recognised on the date on which the policy is effective.

Income from leases, hire purchases, loans and advances

Under both SLFRS 9 and LKAS 39, interest income and interest expense is recorded using the effective interest rate (EIR) method for all fi nancial instruments measured at amortised cost. Interest income on interest bearing fi nancial assets measured at FVOCI under SLFRS 9, similarly to interest bearing fi nancial assets classifi ed as available-for-sale or held to maturity under LKAS 39 is also recorded by using the EIR method. The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the fi nancial instrument or, when appropriate, a shorter period, to the net carrying amount of the fi nancial asset or fi nancial liability.

When a fi nancial asset becomes credit-impaired and is, therefore, regarded as ‘Stage 3’, the Group calculates interest income by applying the effective interest rate to the net amortised cost of the fi nancial asset. If the fi nancial assets cures and is no longer credit-impaired, the Group reverts to calculating interest income on a gross basis.

Interest Income on Overdue Rentals

Overdue charges of leasing, loans and hire purchases have been accounted when the receipt in established.

Healthcare Services

Healthcare sector revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be measured, regardless of when the payment is being made after considering discounts, offers given to the customers, consultations, and services provided under packages.

Retail sector

Retail sector revenue is recognised upon satisfaction of a performance obligation. The revenue recognition occurs at a point in time when control of the asset is transferred to the customer, which is generally upon delivery of the goods. The output method will provide a faithful depiction in recognising revenue.


Contract balances

Contract assets

Contract assets are the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer, with rights that are conditional on some criteria other than the passage of time. Upon satisfaction of the conditions, the amounts recognised as contract assets are reclassifi ed to trade receivables.

Contract liabilities

Contract liabilities are the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or the amount is due) from the customer. Contract liabilities include long-term advances received to deliver goods and services, short-term advances received to render certain services.

In Rs. ‘000 Group CompanyFor the year ended 31 March 2019 2018 2019 2018

Goods transferred at a point in time 44,547,507 39,629,431 - - Services transferred at a point in time 17,087,572 15,497,949 645,766 649,823 Total revenue from contracts with customers 61,635,079 55,127,380 645,766 649,823 Revenue from insurance contracts 9,833,075 7,368,671 - -Interest income 3,674,450 3,522,864 - -

75,142,604 66,018,915 645,766 649,823

13.1 Business segment analysis

In Rs. ‘000 GroupFor the year ended 31 March 2019 2018

Automobile 3,136,176 1,270,416 Financial Services 13,628,719 11,060,913 Healthcare Services 13,474,682 12,025,178 Information Technology 4,039,509 3,628,936 Leisure 3,128,298 2,585,423 Other 12,667 11,256 Retail 37,722,553 35,436,793

75,142,604 66,018,915

14 DIVIDEND INCOME

ACCOUNTING POLICY

Dividend income is recognised when the Company’s right to receive the payment is established.

In Rs. ‘000 CompanyFor the year ended 31 March 2019 2018

Dividend income from investments in subsidiaries and equity accounted investees 514,513 893,013 514,513 893,013



15 OTHER OPERATING INCOME

ACCOUNTING POLICY

Gains and losses

Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.

Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions which are not material are aggregated, reported and presented on a net basis.

Fee and commission income

Fee and commission income from services includes mainly documentation and processing fees for the service provided in processing loan facilities for customers.

Profit on disposal of investments

On derecognition of an investment classifi ed as fi nancial assets at fair value through P&L and OCI, the cumulative gain or loss previously recognised in other comprehensive income statement is transferred to the income statement.

Other income

Other income is recognised on an accrual basis.


Commission income 115,048 69,605 36,036 36,036 Fees received 306,541 475,344 - - Net exchange gain 55,520 51,977 - - Other laboratory income 79,003 89,716 - - Proceeds from investment disposal gain of Asiri share trust 49,049 558,894 - - Profi t/ (loss) on disposal of investments (377) 335,499 (10,575) - Profi t/ (loss) on disposal of investments in subsidiaries - - - 4,588,114 Profi t on sale of property, plant & equipment 7,589 19,558 2,140 10,100 Sundry income 342,110 161,154 1,017 692

954,483 1,761,747 28,618 4,634,942

16 FINANCE INCOME

ACCOUNTING POLICY

Finance income comprises interest income on funds invested, dividend income, fair value gains on fi nancial assets at fair value through profi t or loss and gains on the re-measurement to fair value of any pre-existing interest in an acquiree recognised in the income statement.

Interest income is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash receipts through the expected life of the fi nancial instrument or a shorter period where appropriate, to the net carrying amount of the fi nancial asset. Interest income is included in fi nance income on the income statement.


Interest income 1,011,079 887,733 1,364,767 882,835 Dividend income on

- fi nancial assets at fair value through OCI 105,612 103,187 - - - fi nancial assets at fair value through P&L 18,939 23,537 - -

Net change in fair value of fi nancial instruments at fair value through profi t or loss 13,013 29,238 (28,251) 55,854 Finance income on other fi nancial instruments 250,331 60,110 166,390 184,168

1,398,974 1,103,805 1,502,906 1,122,857


17 FINANCE COSTS

ACCOUNTING POLICY

Finance costs comprise interest expenses on borrowings, unwinding of the discount on provisions, fair value losses on fi nancial assets at fair value through profi t or loss and impairment losses recognised on fi nancial assets (other than trade receivables).

Interest expense is recorded as it accrues using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments through the expected life of the fi nancial instrument or a shorter period where appropriate, to the net carrying amount of the fi nancial liability.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds.


Interest expense on borrowings 5,857,772 4,662,922 1,902,029 1,516,380 Finance cost on other fi nancial instruments 568,178 1,104,072 649,862 1,145,858Fair value loss on fi nancial assets at fair value through profi t or loss 140,075 - - - Other fi nance expenses 550,262 192,872 74,542 33,760

7,116,287 5,959,866 2,626,433 2,695,998

18 PROFIT BEFORE TAX

ACCOUNTING POLICY

Expenditure recognition

Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specifi c items of income. All expenditure incurred in the running of the business

and in maintaining the property, plant and equipment in a state of effi ciency has been charged to the income statement.

For the purpose of presentation of the income statement, the “function of expenses” method has been adopted, on the basis that it presents fairly the elements of the Company and Group’s performance.

Profi t before tax is stated after charging all expenses including the following:


Remuneration to Executive and Non-Executive Directors 402,470 288,693 54,010 42,225 Auditors' remuneration

- Audit 27,817 27,230 2,800 2,506 - Non audit 24,100 13,922 605 2,168

Cost of defi ned employee benefi t- Defi ned benefi t plan cost 221,936 218,953 13,852 13,222 - Defi ned contribution plan cost - EPF/ETF 878,022 764,930 42,046 38,387

Staff expenses 8,662,886 7,812,532 348,040 301,506 Depreciation of property, plant and equipment 2,520,118 2,284,557 36,051 36,039 Amortisation of intangible assets 262,143 279,494 2,542 2,824 Amortisation of lease rentals paid in advance 1,156 1,116 - - Donations 8,194 16,910 30 570 Provisions for/ write off of impaired receivables 353,623 252,445 2,472 64,000 Provision for impairment of inventories 75,137 108,930 - - Provisions for/ write off of impaired investments - - - 24,900 Profi t on sale of property, plant and equipment (7,589) (19,558) (2,140) (10,100)Impairment and derecognition of property, plant and equipment 21,318 18,705 - - Impairment/ derecognition of intangible assets 79,435 78,574 - -



19 TAXATION

19.1 Income tax

ACCOUNTING POLICY

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and for items recognised in other comprehensive income is recognised in other comprehensive income and not in the

income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Management has used its judgment on the application of tax laws including transfer pricing regulations involving identifi cation of associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanisms.

19.1.1 Tax expense

In Rs. ‘000 Group CompanyFor the year ended 31 March Note 2019 2018 2019 2018

Current income taxCurrent tax charge 788,440 882,320 37,614 42,315 Under provision of income tax of previous years (11,224) 39,150 36,487 79,361 Impairment/ written-off of tax receivables 151,923 - - - 14% withholding tax on intercompany dividends 185,181 163,878 - -

Total income tax expense 19.1.3 1,114,320 1,085,348 74,101 121,676

Deferred income taxRelating to origination and reversal of temporary differences 19.2.1 (2,361,604) (270,989) 16,492 137,081

(1,247,284) 814,359 90,593 258,757

19.1.2 Reconciliation between accounting profit and taxable profit


Profi t before tax 1,743,000 3,092,402 (577,534) 3,957,426 Dividend income from Group companies 1,884,085 1,877,396 - - Share of results of equity accounted investees (7,080) (19,787) - - Other consolidation adjustments 227,792 5,606,421 - -

Profi t after adjustment 3,847,797 10,556,432 (577,534) 3,957,426 Exempt profi ts (868,858) (652,129) - - Profi ts not liable for income tax (255,826) (7,597,128) - (4,656,789)Resident dividend (2,007,736) (2,004,119) (514,497) (893,198)

Adjusted accounting profi t chargeable to income taxes 715,377 303,056 (1,092,031) (1,592,561)Deductible expenses (4,345,261) (3,447,181) (145,014) (54,612)Non deductible expenses 5,700,523 5,032,398 1,371,381 1,794,516 Other source of income 352,312 73,974 - 3,783 Set off against tax losses (2,301,203) (248,610) - - Other reductions - (14,997) - - Taxable income 121,748 1,698,640 134,336 151,126


19.1.3 Reconciliation between tax based on accounting profit and tax expense


Tax effect on chargeable profi ts 736,766 327,459 (305,769) (444,858)Tax effect on deductible expenses (469,874) (380,405) (40,604) (15,291)Tax effect on non deductible expenses 521,548 935,266 383,987 502,464 Under/ (over) provision for previous years (11,224) 39,150 36,487 79,361

Other income based taxes14% withholding on intercompany dividends 185,181 163,878 - -

Total income tax expense 962,397 1,085,348 74,101 121,676

Income tax charged atStandard rate - 28% 788,440 768,492 37,614 42,315 Other concessionary rates - 113,828 - -

Under/ (over) provision for previous year (11,224) 39,150 36,487 79,361

Charge for the year 777,216 921,470 74,101 121,676

Other tax expensesImpairment/ written-off of tax receivables 151,923 - - -

Other income based taxes14% withholding on intercompany dividends 185,181 163,878 - -

Total income tax expense 1,114,320 1,085,348 74,101 121,676

Group tax expense is based on the taxable profi t of individual companies within the Group. At present the tax laws of Sri Lanka do not provide for Group taxation.

19.1.4 Income tax liabilities


At the beginning of the year 348,372 535,788 33,309 56,555 Charge for the year 962,397 1,085,348 74,101 121,676 Acquisition of subsidiary - (7,309) - - Payments and set off against refunds (959,080) (1,265,455) (90,500) (144,922)

At the end of the year 351,689 348,372 16,910 33,309

19.2 Deferred tax

ACCOUNTING POLICY

Deferred tax is provided, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences except:

• where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences can be controlled, and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised except:



• where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor the taxable profi t or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profi t will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profi ts will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the reporting date.

Deferred tax relating to items recognised outside the income statement is recognised outside the income statement, either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

No deferred tax asset or liability has been recognised in the companies enjoying Board of Investment (BOI) Tax Holidays’ if no qualifying assets or liabilities continue beyond the BOI period.

19.2.1 Deferred tax charge / (release)


Income statement

Deferred tax expense arising from;Accelerated depreciation for tax purposes 105,624 302,197 733 (536)Revaluation of investment property to fair value 24,500 9,450 15,483 108,683 Employee benefi t liabilities (26,915) (126,730) (2,628) (2,493)Benefi t arising from tax losses (1,990,017) (284,699) - - Others (474,796) (171,207) 2,904 31,427

(2,361,604) (270,989) 16,492 137,081

Other comprehensive income

Deferred tax expense arising from;Revaluation of land and building to fair value 338,027 2,420,819 - - Actuarial gains/ (loss) on employee benefi t liabilities 15,196 (19,404) (973) (2,861)

353,223 2,401,415 (973) (2,861)

Deferred tax has been computed at 28% for all standard rate companies (including listed companies), at 14% for leisure sector companies and at 15% for Central Hospital Ltd.

19.2.2 Deferred tax - Group

In Rs. ‘000 Assets LiabilitiesAs at 31 March 2019 2018 2019 2018

At the beginning of the year 749,406 508,968 2,829,959 459,096 Day 01 Impact of Deferred tax 73,833 - - - Charge and release 2,424,711 240,438 416,428 2,370,863 Acquisition of subsidiary - - 59,689 -

At the end of the year 3,247,950 749,406 3,306,076 2,829,959


The closing deferred tax asset and liability balance relates to the following:

In Rs. ‘000 Asset Liability As at 31 March 2019 2018 2019 2018

Revaluation of land and building to fair value (78,349) (46,861) 2,920,028 2,613,489 Revaluation of investment property to fair value (1,550) (450) 32,400 9,000 Accelerated depreciation for tax purposes (259,045) (177,306) 935,706 822,668 Employee benefi t liabilities 56,456 98,125 (180,570) (175,661)Losses available for offset against future taxable income 2,833,704 615,698 (394,437) (473,616)Provision for bad debts 303,341 135,471 - - Lease capital balance (50,134) - - 61,190 Unclaimed impairment provisions 153,026 56,093 - - Others 290,501 68,636 (7,051) (27,111)

3,247,950 749,406 3,306,076 2,829,959

19.2.2 Deferred tax - Company

In Rs. ‘000 Liability As at 31 March 2019 2018

At the beginning of the year 157,916 23,696 Charge and release 15,519 134,220

At the end of the year 173,435 157,916

The closing deferred tax liability balance of the company relates to the following:

In Rs. ‘000 Liability As at 31 March 2019 2018

Revaluation of investment property to fair value 165,006 149,523 Accelerated depreciation for tax purposes 13,145 12,412 Employee benefi t liabilities (22,711) (19,110)Others 17,995 15,091

173,435 157,916

19.3 Sales tax

Revenues, expenses, assets and liabilities are recognised net of the amount of sales tax except:

• where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• where receivables and payables are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of fi nancial position.

19.4 Tax on dividend income

Tax on dividend income from subsidiaries is recognised as an expense in the consolidated income statement.

19.5 VAT on Financial Services

VAT on Financial Services is calculated in accordance with the amended VAT Act No. 07 of 2013. The base for the computation of Value Added Tax on Financial Services is the accounting profi t before tax adjusted for the economic depreciation and emolument of employees computed on prescribed rate.

19.6 Debt Repayment Levy

As per the Finance Act No. 35 of 2018, with effect from 01 October 2018, Debt Repayment Levy (DRL) of 7% was introduced on the value addition attributable to the supply of fi nancial services by each institution. DRL is chargeable on the same base used for calculation of VAT on Financial Services as explained above.



Accounting judgements, estimates and assumptions

The Group is subject to income tax and other taxes including VAT. Significant judgment was required to determine the total provision for current, deferred and other taxes due to the uncertainties that exist with respect to the interpretation of applicability of tax laws at the time of the preparation of these Financial Statements.

Uncertainties also exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and assumptions made or future changes

to such assumptions may require future adjustments to tax income and expense already recorded. Where the final tax outcome of such matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

The Group has tax losses in subsidiaries that have a history of losses that do not expire and may not be used to offset other tax liabilities, where the subsidiaries have no avenues available that could partly support the recognition of these losses as deferred tax assets.

19.7 Applicable rates of income tax

The tax liability of resident companies are computed at the standard rate of 28% except for the following companies which enjoy full or partial exemptions and concessions.

19.7.1 Exemptions/ concessions granted under the Board of Investment Law/ Inland Revenue Act

Company Basis Exemption or concessions

Period concessions

Central Hospital Ltd Providing healthcare services

Exempt 8 years from 1st year of profi t or 2 years from commencement of operation whichever is earlier (from FY 2012/13 onwards)

Softlogic City Hotels (Pvt) Ltd

Construction of tourist hotel

Exempt 7 Years from 1st year of profi t or 2 years from commencement of operation whichever is earlier (from FY 2018/19 onwards)

Ceysand Resorts Ltd Promotion of tourism

14% Open ended

Softlogic Destination Management (Pvt) Ltd

Promotion of tourism

14% Open ended

Softlogic B P O Services (Pvt) Ltd

BPO service Exempt 6 years commencing from year in which the company make profi ts or any year of assessment not less than 2 years reckoned from the date of commencement of commercial operations whichever is earlier (from FY 2015/16 onwards)

19.7.2 Income tax rates of off-shore subsidiaries

Company Country of incorporation Rate

Softlogic Australia (Pty) Ltd Australia 33.3%


19.8 Tax losses carried forward

In Rs. ‘000 Group As at 31 March 2019 2018

Tax losses brought forward 19,452,631 14,919,394 Adjustments on fi nalisation of liability 356,036 (255,809)Acquisition/ (disposal) of subsidiary 9,329 10,113 Tax losses arising during the year 2,718,741 5,027,543 Utilisation of tax losses (2,301,203) (248,610)

20,235,534 19,452,631

The Group has tax losses amounting to Rs. 8.706.00 Mn (2018 - Rs. 15,562.00 Mn) available to offset against future taxable profi ts but not utilised for recognition of theses losses as deferred tax assets.

With the introduction of the Inland Revenue Act no. 24 of 2017, which is effective from 01 April 2018, signifi cant changes have been introduced to the income tax law of Sri Lanka. Further the Department of Inland Revenue has issued a Gazette notifi cation no. 2064/53 on the transitional provisions that would be applicable in implementing the above Act.

As per the gazette notifi cation issued in relation to the transitional provisions, any unclaimed loss as at 31 March 2018 is deemed to be a loss incurred for the year of assessment commencing on or after 01 April 2018 and shall be carried forward up to 6 years.

20 EARNINGS PER SHARE

ACCOUNTING POLICY

Basic EPS is calculated by dividing the profi t for the year attributable to ordinary equity holders of the parent by the weighted number of ordinary shares outstanding during the year.

20.1 Basic earnings per share

In Rs. ‘000 GroupFor the year ended 31 March Note 2019 2018

Profi t attributable to equity holders of the parent - continuing operations 104,669 204,200

Weighted average number of ordinary shares 20.2 1,172,482,493 824,983,503

Basic earnings per share - continuing operations 0.09 0.25

20.2 Amount used as denominator

GroupFor the year ended 31 March 2019 2018

Ordinary shares at the beginning of the year 961,728,395 779,000,000 Effect of purchase of treasury shares - (4,280,404)Effect of issue of private placement shares - 2,503,129 Effect of issue of rights issue shares 210,754,098 47,760,778 Adjusted weighted average number of ordinary shares 1,172,482,493 824,983,503



21 DIVIDEND PER SHARE

Equity dividend on ordinary shares declared and paid during the year

GroupFor the year ended 31 March 2019 2018

Rs. Rs.’000 Rs. Rs.’000

Interim dividend 0.50 596,272 0.65 503,365

22 PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICY

Basis of recognition

Property, plant and equipment are recognised if it is probable that future economic benefi ts associated with the asset will fl ow to the Group and the cost of the asset can be reliably measured.

Basis of measurement

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss. Such cost includes the cost of replacing component parts of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When signifi cant parts of plant and equipment are required to be replaced at intervals, the Group derecognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfi ed. All other repair and maintenance costs are recognised in the income statement as incurred.

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment charged subsequent to the date of the revaluation.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Any revaluation surplus is recognised in the statement of other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation defi cit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Where land and buildings are subsequently revalued, the entire class of such assets is revalued at

fair value on the date of revaluation. The Group has adopted a policy of revaluing land and buildings by professional valuers at least every 3 years except for properties held for rental and occupied mainly by Group companies.

Derecognition

An item of property, plant and equipment is derecognised upon replacement, disposal or when no future economic benefi ts are expected from its use. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.

Depreciation

Depreciation is calculated by using a straight-line method on the cost or valuation of all property, plant and equipment, other than freehold land, in order to write off such amounts over the estimated useful economic life of such assets.

The estimated useful life of assets is as follows:

Assets Years

Buildings 40 - 75Buildings on leasehold land 40 - 60 or over the

period of leasePlant & machinery 4 - 10Computer equipment, furniture & fi ttings 2 - 10Motor vehicles 4 - 8

The useful life and residual values of assets are reviewed, and adjusted if required, at the end of each fi nancial year.

Capital work-in-progress

Capital work in progress consists of the cost of assets, labour and other direct costs associated with property, plant and equipment being constructed by the Group. Once the assets become operational, the related costs are transferred from construction in progress to the appropriate asset category and are depreciated together with the related asset.


Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefi ts incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in fi nance costs in the income statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

Impairment of property plant and equipment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable

amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Impairment losses are recognised in the income statement, except that impairment losses in respect of property, plant and equipment previously revalued are recognised against the revaluation reserve through the statement of other comprehensive income to the extent that they reverse a previous revaluation surplus.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.



22.1 Group

In Rs. ‘000As at 31 March

Land and buildings

Buildings on leasehold

land

Plant and machinery

Computer,Equipment,

furniture and fi ttings

Motorvehicles

Capitalwork-in-

progress

Total2019

Total 2018

Freehold assets Cost or ValuationAt the beginning of the year 23,963,862 6,205,282 6,628,255 9,637,697 576,172 2,708,157 49,719,425 43,183,658Additions 86,556 672,912 732,164 1,063,673 58,462 3,114,643 5,728,410 4,510,010Acquisition of subsidiary 626,895 - 257,089 74,010 13,990 - 971,984 116,615Disposals - - (265,464) (62,161) (32,422) - (360,047) (364,471)Transfers* (193,813) 259,094 20,155 470,702 25,697 (1,108,329) (526,494) (288,871)Impairment/ derecognition (8,525) (16,539) (8,999) (3,794) - - (37,857) (18,705)Revaluations 1,500,641 40,604 - - - - 1,541,245 2,580,861Effect of movements in exchange rates - 32 - 145 - - 177 328At the end of the year 25,975,616 7,161,385 7,363,200 11,180,272 641,899 4,714,471 57,036,843 49,719,425

Leasehold assets CostAt the beginning of the year - - 179,594 4,297 305,038 - 488,929 508,182Additions - - - - 14,795 - 14,795 13,850Acquisition of subsidiary - - - - 2,574 - 2,574 6,236Disposals - - - - - - - (15,870)Transfers - - - - (31,206) - (31,206) (23,469)Effect of movements in exchange rates - - - - 464 - 464 -At the end of the year - - 179,594 4,297 291,665 - 475,556 488,929Total value of assets 25,975,616 7,161,385 7,542,794 11,184,569 933,564 4,714,471 57,512,399 50,208,354

Freehold assets Accumulated depreciation At the beginning of the year 2,614 638,613 3,247,585 4,552,122 256,090 - 8,697,024 7,195,391Charge for the year 275,605 363,410 582,949 1,187,714 53,874 - 2,463,552 2,225,098Acquisition of subsidiary 6,150 - 163,925 54,769 13,278 - 238,122 13,969Disposals - - (246,767) (39,882) (28,171) - (314,820) (275,945)Transfers* (258,224) (116,797) 1,771 (1,864) 20,216 - (354,898) (461,465)Impairment/ derecognition - (16,539) - - - - (16,539) -Effect of movements in exchange rates - 19 - 45 - - 64 (24)At the end of the year 26,145 868,706 3,749,463 5,752,904 315,287 - 10,712,505 8,697,024

Leasehold assets Accumulated depreciation At the beginning of the year - - 66,110 4,297 103,000 - 173,407 145,592Charge for the year - - 17,644 - 38,922 - 56,566 59,485Acquisition of subsidiary - - - - 1,880 - 1,880 2,253Disposals - - - - - - - (11,608)Transfers - - - - (26,076) - (26,076) (22,315)Effect of movements in exchange rates - - - - 105 - 105 -At the end of the year - - 83,754 4,297 117,831 - 205,882 173,407Total accumulated depreciation 26,145 868,706 3,833,217 5,757,201 433,118 - 10,918,387 8,870,431

Carrying valueAs at 31 March 2019 25,949,471 6,292,679 3,709,577 5,427,368 500,446 4,714,471 46,594,012As at 31 March 2018 23,961,248 5,566,669 3,494,154 5,085,575 522,120 2,708,157 41,337,923

* Transfers include the accumulated depreciation amounting to Rs. 375.02 Mn (2018 - Rs. 467.22 Mn) as at revaluation date that was eliminated against the gross carrying amount of the revalued assets.


22.2 Company


Furniture and fi ttings

Computer and offi ce

Equipment

Motor vehicles

Total2019

Total 2018

Freehold assetsCostAt the beginning of the year 36,925 44,638 124,115 205,678 167,547 Additions 355 1,515 - 1,870 49,385 Disposals (48) (717) (9,046) (9,811) (11,169)Transfers - - 25,893 25,893 (85)At the end of the year 37,232 45,436 140,962 223,630 205,678

Leasehold assetsAt the beginning of the year - - 135,836 135,836 147,806 Disposals - - - - (11,970)Transfers - - (25,893) (25,893) - At the end of the year - - 109,943 109,943 135,836 Total value of assets 37,232 45,436 250,905 333,573 341,514

Freehold assetsAccumulated depreciationAt the beginning of the year 15,024 20,217 53,718 88,959 75,464 Charge for the year 4,561 5,904 14,558 25,023 20,970 Disposals (15) (465) (6,016) (6,496) (7,420)Transfers - - 20,714 20,714 (55)At the end of the year 19,570 25,656 82,974 128,200 88,959

Leasehold assetsAccumulated depreciationAt the beginning of the year - - 44,096 44,096 38,603 Charge for the year - - 11,028 11,028 15,069 Disposal - - - - (9,576)Transfers - - (20,714) (20,714) - At the end of the year - - 34,410 34,410 44,096 Total accumulated depreciation 19,570 25,656 117,384 162,610 133,055

Carrying valueAs at 31 March 2019 17,662 19,780 133,521 170,963 As at 31 March 2018 21,901 24,421 162,137 208,459

22.3 Revaluation of land and buildings


The Group uses the revaluation model of measurement of land and buildings. The Group engaged independent expert valuers, to determine the fair value of its land and buildings. Fair value is determined by reference to market-based evidence of transaction prices for similar properties.

Valuations are based on open market prices, adjusted for any difference in the nature, location or condition of the specifi c property. The valuation techniques used are appropriate in the circumstances, for which suffi cient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The date of the most recent revaluation was on

31 March 2019 except revaluation of land and building of Softlogic Life Insurance PLC.

The changes in fair value are recognised in other comprehensive income and in the statement of equity. As a result of the valuations of land and buildings the surplus arising from the change in fair value was Rs. 1,541.25 Mn (2018 - Rs. 2,580.86 Mn) which has been credited to the revaluation reserve. Further during the reporting period, defi cit arising from the change in fair value of revalued land and buildings were Rs. Nil (2018 - 1.12 Mn).



Details of Group’s land and buildings stated at valuations are indicated below:

Company Property Method of valuation

Extent Range of estimates for signifi cant unobservable inputs

Correlationto fair value

Per perch value - Rs. Mn.

Per square foot value - Rs.

2019 2018 2019 2018

Property valuations by Mr. G W G Abeygunawardene (Chartered Valuation Surveyor)

Land of

Softlogic Holdings PLC 14, De FonsekaPlace, Colombo 05 OMV 21.89 P

15.50 - 16.50

14.50 - 15.50 - - Positive

Softlogic Properties (Pvt) Ltd

24, Dharmapala Mw., Kollupitiya, Colombo 03 OMV 2 R 11.68 P 19.00 18.00 - - Positive

Suzuki Motors Lanka Ltd 371, New Nuge Road, Peliyagoda OMV 28.39 P 1.85 1.50 - - Positive

Building of

Softlogic Information Technologies (Pvt) Ltd

14, De FonsekaPlace, Colombo 05 DCC - - -

6,250 - 7,550

6,250 - 7,550 Positive

Suzuki Motors Lanka Ltd 371, New Nuge Road, Peliyagoda DCC - - -

4,400 - 5,650

4,500 - 6,000 Positive


24, Dharmapala Mw., Kollupitiya, Colombo 03 DCC - - - 18,880 18,880 Positive

Future Automobiles (Pvt) Ltd*

1124/5, Parliament Rd., Battaramulla DCC - - -

3,000 - 8,500

4,000 - 8,000 Positive

Land and building of

Softlogic Holdings PLC 262, Gagarama Road, Piliyandala OMV/ DCC

1 A 2 R 21 P 0.75 00.65 600 - 6,000 700 - 6,000 Positive

Softlogic Retail (Pvt) Ltd 402, Galle Road, Colombo 03 OMV/ DCC 17.3 P 18.00 16.50

4,500 - 6,250

4,500 - 6,250 Positive

Odel PLC Dr. C W W. Kannangara Mw., Colombo 07 OMV/ DCC

1 A 3 R 27.58 P

16.00 - 17.00

15.00 - 15.50

4,000 - 4,250

4,000 - 4,250 Positive

29 A, Jayatilake Mw., Panadura OMV/ DCC 1 R 2.16 P 2.60 1.90

2,450 - 4,850

2,540 - 4,950 Positive

18 & 20, Sama Mw., Boralesgomuwa OMV/ DCC 20 P 1.80 1.40

4,250 - 4,750

4,450 - 4,950 Positive

Odel Properties (Pvt) Ltd 475/32, Kotte Road, Rajagiriya OMV/ DCC 1 R 7.42 P 7.00 6.00

4,800 - 6,100

5,000 - 6,250 Positive

Softlogic Finance PLC 13, De Fonseka Place, Colombo 04 OMV/ DCC 12.62 P 16.50 15.50

6,500 - 8,250

6,500 - 8,250 Positive

* Previous Property valuation carried out by Mr. P B Kalugalgedara (Chartered Valuation Surveyor)




Correlationto fair value



2019 2018 2019 2018

Property valuations by Mr. P B Kalugalgedara (Chartered Valuation Surveyor)

Building of Asiri Surgical Hospital PLC

21, KirimandalaMw., Colombo 05 DCC - - -

3,000 - 8,400

3,000 - 8,250 Positive

Ceysand Resorts Ltd Centara Ceysand Resort & Spa, Bentota DCC - - -

3,000 - 12,500

3,000 - 12,500 Positive

Land and building ofAsiri Hospital Holdings PLC

181,Kirula Road, Colombo 05 OMV/ DCC

1 A 2 R 13.98 P 11.00 10.00

2,500 - 16,000

2,000 - 16,000 Positive

Central Hospital Ltd 114, Norris Canal Road, Colombo 10 OMV/ DCC

1 A 21.03 P 15.50 11.00

2,000 - 10,000

2,000 - 10,000 Positive

Asiri Hospital Matara (Pvt) Ltd

15 Dharmapala Mw., Uyanwatta, Matara26, Esplande Road, Uyanwatta, Matara OMV/ DCC

1 A 2 R 1.5 P 0.77 - 1.10 0.70 - 1.00

600 - 8,000

600 - 8,000 Positive

Asiri Hospital Galle (Pvt) Ltd (Previously known as Hemas Southern Hospitals (Pvt) Ltd)

59, Wackwella Road, Galle

OMV/ DCC 2 R

24.83 P 3.00 - 8,000 - PositiveSoftlogic Life Insurance PLC

283, R A De Mel Mw., Kollupitiya, Colombo 03 OMV/ DCC 12 P 15.00 15.00 9,750 9,750 Positive

Summary description of valuation methodologies:

The valuer has used valuation techniques such as market values and discounted cash fl ow methods where there was lack of comparable market data available based on the nature of the property.

Open market value method

Open market value method uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets and liabilities, such as a business.

Direct capital comparison method

This method may be adopted when the rental value is not available from the property concerned, but there are evidence of sale price of properties as a whole. In such cases, the capitalised value of the property is fi xed by direct comparison with the capitalised value of similar property in the locality.

22.4 Land and buildings

In Rs. ‘000 GroupAs at 31 March 2019 2018

At cost 1,551,406 774,891 At valuation 30,690,744 28,783,026

32,242,150 29,557,917

22.5 Carrying value


At cost 15,633,594 12,239,375 95,430 116,719 At valuation 30,690,744 28,783,026 - - On fi nance lease 269,674 315,522 75,533 91,740

46,594,012 41,337,923 170,963 208,459



22.6 The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows:

In Rs. ‘000 GroupAs at 31 March Land and

buildings Buildings on

leasehold land

2019 Total

2018 Total

Cost 16,040,963 3,440,052 19,481,015 18,856,280 Accumulated depreciation (1,260,809) (569,853) (1,830,662) (1,436,644)

Carrying value 14,780,154 2,870,199 17,650,353 17,419,636

22.7 Property, plant and equipment pledged as securities

Group land and buildings with a carrying value of Rs. 12,853.56 Mn (2018 - Rs. 8,957.32 Mn) have been pledged as security for term loans obtained, details of which are disclosed in note 53.

Further property plant & equipment with a carrying value of Rs. 269.67 Mn (2018 - Rs. 315.52 Mn) and Rs. 75.53 Mn (2018 - Rs. 91.74 Mn) for the Group and Company respectively have been pledged as securities for the lease facilities obtained.

22.8 Fully depreciated but still in use

Group property, plant and equipment with a cost of Rs. 3,791.65 Mn (2018 - Rs. 3,241.68 Mn) have been fully depreciated and continue to be in use by the Group. The cost of fully depreciated assets in the Company amounts to Rs. 43.34 Mn (2018 - Rs. 47.54 Mn).

22.9 Permanent fall in value of property, plant and equipment

There is no permanent fall in the value of property, plant and equipment which requires a provision for impairment other than the details disclosed under note 18 and note 22.1 to the Financial Statements.

22.10 Title restriction on property, plant and equipment

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

22.11 Capital work-in-progress - Group

Group Capital work-in-progress mainly consists the cost of 180 beds multi-disciplined hospital under construction in Kandy by Asiri Hospital Kandy (Pvt) Ltd which is a fully own subsidiary of Asiri Hospital Holdings PLC.

23 LEASE RENTALS PAID IN ADVANCE

ACCOUNTING POLICY

Prepaid lease rentals paid to acquire land use rights are amortised over the lease term in accordance with the pattern of benefi ts provided.


At the beginning of the year 805,601 852,722 Acquisition through business combinations - 3,884 Amortisation for the year (16,506) (51,005)


Prepaid lease rentals paid to acquire land use rights have been classifi ed as lease rentals paid in advance and are amortised over the lease term in accordance with the pattern of benefi ts provided.

23.1 Details of prepaid lease rentals

In Rs. GroupAs at 31 March Extent Lease period 2019 2018

Asiri Surgical Hospital PLC, Colombo 05 2 A 1 R 11.6 P 99 years from 29 March 2000 83,128 84,164 Asiri Hospital Kandy (Pvt) Ltd, Mulgampala 2 A 1 R 13.84 P 50 years from 01 January 2015 702,281 717,632 Suzuki Motors Lanka Ltd, Peliyagoda 21.40 P 50 years from 02 December 1999 3,686 3,805

789,095 805,601


24 INVESTMENT PROPERTY

ACCOUNTING POLICY

Properties held to earn rental income and properties held for capital appreciation have been classifi ed as investment property.

Investment properties are measured initially at cost, including transaction costs. The carrying value of an investment property includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day-to-day servicing of the investment property. Subsequent to initial recognition, the investment properties are stated at fair values, which refl ect market conditions at the reporting date.

Gains or losses arising from changes in fair value are included in the income statement in the year in which they arise. Fair values are evaluated at frequent intervals by an accredited external, independent valuer.

Investment properties are derecognised when disposed, or permanently withdrawn from use because no future economic benefi ts

are expected. Any gains or losses on derecognition or disposal are recognised in the income statement in the year of derecognition or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property or inventory (WIP), the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property or inventory (WIP), the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. Where Group companies occupy a signifi cant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the consolidated Financial Statements, and accounted using the Group accounting policy for property, plant and equipment.


At the beginning of the year 1,238,300 1,037,000 704,000 609,385 Additions during the year 18,237 3,300 - 2,140 Change in fair value during the year 245,000 198,000 40,000 92,475 Transfer from property, plant and equipment 193,724 - - -

At the end of the year 1,695,261 1,238,300 744,000 704,000

24.1 Amounts recognised in income statement relating to investment property


Amounts recognised in income statement

Revenue - - 77,189 76,589

Direct operating expenses 15 940 23,741 20,714

24.2 Accounting judgements, estimates and assumptions

The fair value of investment property is ascertained by independent valuations carried out by Chartered Valuation Surveyors, who have recent experience in valuing properties of a similar category in a similar location. Investment property is appraised by the independent valuers in accordance with LKAS 40, SLFRS 13 and the 8th edition of International Valuation Standards published by the International Valuation Standards Committee (IVSC). In determining the fair value, the current condition of the properties, future usability and associated re-development requirements have been considered. Also, the valuers have made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are rounded within a range of values.

Changes in fair value of lands and buildings which are recognised as investment property are recognised in the income statement. The valuer has used the open market approach in determining the fair value of the land. Further details on fair value of investment property are disclosed in the below note.



Valuation details of investment property

Group



Correlation to fair value


2019 2018


Land ofSoftlogic Retail (Pvt) Ltd Dekatana, Gampaha OMV 20 A 2 R 27 P 0.03 0.03 PositiveOdel Lanka (Pvt) Ltd 271 & 271F, Kaduwela Road,

Thalangama & 197/C, Kalapaluwawa Road, Thalangama OMV 1 A 2 R 25.7 P 5.80 4.80 Positive

Properties purchased during the FY 1819

Land ofSoftlogic Communications (Pvt) Ltd

Siyabalagahyaya, Hambanthota OMV 14.7 P 0.07 - PositiveRanna, Hambanthota OMV 30 P 0.08 - PositiveJayabima Road, Godagama OMV 15.6 P 0.60 - PositiveUdaya Mw., Kadawatha OMV 14 P 0.30 - PositiveBogamuwa, Agunakolapalassa OMV 2 R 2.2 P 0.03 - Positive


Range of estimates for signifi cant unobservable inputs

Correlation to fair value


2019 2018

Property valuations by Mr. P B Kalugalgedara (Chartered Valuation Surveyor)

Building of

Asiri Surgical Hospital PLC - New Cancer Care Unit

21, KirimandalaMw., Colombo 05 DCC 41,171 - Positive

Company


Extent Range of estimates for signifi cant unobservable inputs Correlation to fair valuePer perch value - Rs. Mn. Per square foot value - Rs.

2019 2018 2019 2018


Land ofSoftlogic Holdings PLC 14, De Fonseka

Place, Colombo 05 OMV 21.89 P 15.50 - 16.50 14.50 - 15.50 - - Positive

Land and building ofSoftlogic Holdings PLC 262, Gagarama

Road, Piliyandala OMV/ DCC 1 A 2 R 21 P 0.75 00.65 600 - 6,000 700 - 6,000 Positive

Effective date of valuation of group’s / company’s investment properties was 31 March 2019 except lands purchased during the fi nancial year 2018/19.

Summary description of valuation methodologies are disclosed under property, plant & equipments and note no. 22.3 to the Financial Statements.


25 INTANGIBLE ASSETS

ACCOUNTING POLICY

Basis of recognition

An intangible asset is recognised if it is probable that future economic benefi ts associated with the asset will fl ow to the Group and the cost of the asset can be reliably measured.

Basis of measurement

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Internally generated intangible assets, excluding capitalised development costs, are not capitalised, and expenditure is charged against income in the year in which the expenditure is incurred.

Useful economic lives, amortisation and impairment

The useful lives of intangible assets are assessed as either fi nite or infi nite. Intangible assets with fi nite lives are amortised over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortisation period and the amortisation method for an intangible asset with a fi nite useful life is reviewed at least at each fi nancial year-end and such changes are treated as accounting estimates. The amortisation expense on intangible assets with fi nite lives is recognised in the income statement.

Intangible assets with infi nite useful lives are not amortised but tested for impairment annually, or more frequently when an indication of impairment exists either individually or at the cash- generating unit level. The useful life of an intangible asset with an infi nite life is reviewed annually to determine whether infi nite life assessment continues to be supportable. If not, the change in the useful life assessment from infi nite to fi nite is made on a prospective basis.

Goodwill

Goodwill is initially measured at the acquisition date as the fair value of the consideration transferred including the recognised amount of any non-controlling interests in the acquiree, less the net recognised

amount (generally fair value) of the identifi able assets acquired and liabilities assumed, all measured as of the acquisition date.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Lease rights

Lease rights acquired as part of a business combination, are capitalised if they meet the defi nition of an intangible asset and the recognition criteria are satisfi ed. Leased rights are amortised on a straight-line basis over their estimated useful life.

Present Value of acquired In-force Business (PVIB)

The present value of future profi ts on a portfolio of long term life insurance contracts as at the acquisition date is recognised as an intangible asset based on a valuation carried out by an independent actuary. Subsequent to initial recognition, the intangible asset is carried at cost less accumulated amortisation and accumulated impairment losses.

The PVIB is amortised over the average useful life of the related contracts in the portfolio. The amortisation charge and any impairment losses would be recognised in the consolidated income statement as an expense.

Purchased software

Purchased software is recognised as an intangible asset and is amortised on a straight line basis over its useful life.

Software licenses

Software license costs are recognised as an intangible asset and amortised over the period of the related license.

Brand name

Brands acquired as part of a business combination, are capitalised as Brands if they meet the defi nition of an intangible asset and are tested for impairment annually or more frequently if events or changes in the circumstances indicate that the carrying value may be impaired.



A summary of the policies applied to the Group’s intangible assets is as follows:

Intangible Useful life Acquired/ internally generated

Impairment testing

Goodwill Infi nite Acquired annually or when an indication of impairment existsLease rights Over the remaining lease period Acquired when an indication of impairment exists

Purchased software 3 - 5 years Acquired when an indication of impairment arises

Present Value of acquired In-force Business (PVIB) 16 years Acquired when an indication of impairment existsBrand name Infi nite Acquired annually or when an indication of impairment exists

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

In Rs. ‘000 Goodwill Lease right

PVIB Brand name

Others* Group CompanyComputer Software

As at 31 March Total 2019

Total 2018 2019 2018

Cost / carrying value

At the beginning of the year 4,240,503 892,406 1,980,620 1,587,660 1,431,620 10,132,809 9,812,180 14,326 11,949

Additions - - - - 141,234 141,234 256,485 2,635 2,377 Acquisition of subsidiary 364,294 - - - 26,908 391,202 142,680 - - Transfers (12,094) (12,094) - - - Impairment/ derecognition - - - (78,575) (19,403) (97,978) (78,574) (10,147) - Exchange translation difference - - - - 434 434 38 - -

At the end of the year 4,604,797 892,406 1,980,620 1,509,085 1,568,699 10,555,607 10,132,809 6,814 14,326

Accumulated amortisation and impairment

At the beginning of the year - 155,578 814,943 - 551,924 1,522,445 1,242,943 13,733 10,909

Amortisation - 22,484 123,789 - 115,870 262,143 279,494 2,542 2,824 Acquisition of subsidiary - - - - 24,937 24,937 - - - Impairment/ derecognition - - - - (18,543) (18,543) - (10,147) - Exchange translation difference - - - - 91 91 8 - - At the end of the year - 178,062 938,732 - 674,279 1,791,073 1,522,445 6,128 13,733

Carrying valueAs at 31 March 2019 4,604,797 714,344 1,041,888 1,509,085 894,420 8,764,534 686 As at 31 March 2018 4,240,503 736,828 1,165,677 1,587,660 879,696 8,610,364 593

* Other intangible assets include purchased software and software licenses, other license fee, brand development cost and franchise fee paid on acquiring operational rights.


Goodwill & brand names

Goodwill and brand names acquired through business combinations have been allocated to six cash generating units (CGU’s) for impairment testing as follows:

In Rs. ‘000 Goodwill Brand name As at 31 March 2019 2018 2019 2018

Information Technology 14,087 14,087 - - Retail 1,200,377 867,296 998,180 998,180 Travel and Leisure 182,207 182,207 4,169 4,169 Financial Services 817,742 817,742 - 78,575 Healthcare Services 2,358,921 2,327,710 506,736 506,736 Others 31,463 31,461 - -

4,604,797 4,240,503 1,509,085 1,587,660

Present Value of acquired-In -force Business (PVIB)

Upon acquiring a controlling stake in Softlogic Life Insurance PLC (previously known as Asian Alliance Insurance PLC), the Group recognised in the consolidated Financial Statements an intangible assets representing the present value of future profi ts on SLI’s portfolio of long term life insurance contracts at the acquisition date, known as the present value of acquired in-force business (PVIB). PVIB recognised at the acquisition date is being amortised over the life of the business acquired and reviewed annually for any impairment in value.

25.1 Impairment of goodwill


Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active market in an arm’s length transaction of similar assets, or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash fl ow model. The cash fl ows are derived from the budget for the next fi ve years and do not include restructuring activities that the Group is not yet committed to or signifi cant future investments that will enhance the performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash fl ow model as well as the expected future cash infl ows and the growth rate used for extrapolation purposes.

The recoverable amount of all CGUs have been determined based on the higher of fair value less costs to sell and its Value in Use (VIU) calculation. VIU is determined by discounting the future cash fl ows generated from continuing use of the unit. The recoverability of quoted

entities determined based on share price existed as at reporting date. The key assumptions used are given below:

Business growth - volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to fi ve years immediately subsequent to the budgeted year, based on industry growth rates. Cash fl ows beyond a fi ve year period are extrapolated using zero growth rate."

Infl ation - budgeted cost infl ation is the infl ation rate, based on projected economic conditions.

Discount rate - the discounting rate used is the risk free rate increased by an appropriate risk premium.

Margin - budgeted gross margins are the gross margins achieved in the year preceding, adjusted for projected market conditions and business plans.



26 INVESTMENT IN SUBSIDIARIES

ACCOUNTING POLICY

Investments in subsidiaries are initially recognised at cost in the Financial Statements of the Company. Any transaction cost relating to acquisition of investment in subsidiaries is immediately recognised in the income statement. Following initial recognition, investments in subsidiaries are carried at cost less any accumulated impairment losses.

In Rs. ‘000 Note Company As at 31 March 2019 2018

Quoted investments 26.1 8,260,396 8,260,396 Unquoted investments 26.2 11,768,304 11,596,304

20,028,700 19,856,700

26.1 Group quoted investments

In Rs. ‘000 Group CompanyAs at 31 March No of shares Effective

holding % No of shares holding % 2019 2018

CostAsiri Hospital Holdings PLC 594,858,799 51.48 579,434,088 50.94 5,563,998 5,563,998 Asiri Surgical Hospital PLC 414,243,632 40.36 - - - - Odel PLC 265,920,868 97.72 - - - - Softlogic Capital PLC 515,952,743 74.98 515,952,743 74.98 2,670,061 2,670,061 Softlogic Finance PLC 50,146,446 53.52 779,969 1.15 24,777 24,777 Softlogic Life Insurance PLC 193,996,310 38.80 175,550 0.05 1,560 1,560

8,260,396 8,260,396

Group quoted investments


Market ValueAsiri Hospital Holdings PLC 12,016,148 16,138,617 11,704,569 15,934,437 Asiri Surgical Hospital PLC 3,935,315 4,225,285 - - Odel PLC 6,940,535 6,886,301 - - Softlogic Capital PLC 2,837,740 2,837,740 2,837,740 2,837,740 Softlogic Finance PLC 1,083,163 1,445,117 16,847 27,299 Softlogic Life Insurance PLC 6,110,884 4,403,716 5,530 3,985

32,923,785 35,936,776 14,564,686 18,803,461


26.2 Group unquoted investments

In Rs. ‘000 Group CompanyAs at 31 March Number of

shares Effective holding %

Number of shares

holding % 2019 2018

Asiri Central Hospitals Ltd 10,313,429 48.59 - - - - Asiri Diagnostics Services (Pvt) Ltd 273,221 34.26 - - - - Asiri Hospital Galle (Pvt) Ltd (previously known as Hemas Southern Hospitals (Pvt) Ltd) 44,000,002 51.48 - - - - Asiri Hospital Kandy (Pvt) Ltd 4,000,000 51.48 - - - - Asiri Hospital Matara (Pvt) Ltd 25,999,999 51.48 - - - - Asiri Laboratories (Pvt) Ltd 100,000 51.48 - - - - BSL International (Pvt) Ltd 298,400 97.72 - - - - Central Hospital Ltd 214,539,804 51.34 - - - - Ceysand Resorts Ltd - Voting 17,087,669 99.90 - - - - - Non Voting 134,250 96.58 - - - - Cotton Collections (Pvt) Ltd 600,100 97.72 - - - - Dai-Nishi Securities (Pvt) Ltd 49,999,998 99.99 - - - - Future Automobiles (Pvt) Ltd 19,300,000 100.00 19,300,000 100.00 195,675 195,675 Greenfi eld Trading (Pvt) Ltd 1 97.72 - - - - Odel Apparels (Pvt) Ltd 2 97.72 - - - - Odel Information Technology Services (Pvt) Ltd 1 97.72 - - - - Odel Lanka (Pvt) Ltd 27,000,002 97.72 - - - - Odel Properties (Pvt) Ltd 1,081,002 97.72 - - - - Odel Properties One (Pvt) Ltd 39,925,383 97.72 - - - - Odel Restaurants (Pvt) Ltd 100,000 97.72 - - - - Silk Route Foods (Pvt) Ltd 5,100 51.00 - - - - SML Holdings (Pvt) Ltd 99,999 86.17 - - - - Softlogic Australia (Pty) Ltd - Ordinary Shares 1,900,002 100.00 1,900,002 100.00 162,256 162,256 - Preference Shares 256,578 100.00 256,578 100.00 31,687 31,687 Softlogic Asset Management (Pvt) Ltd(previously known as Capital Reach Portfolio Management (Pvt) Ltd) 750,002 74.98 - - - - Softlogic Automobiles (Pvt) Ltd 5,000,000 100.00 5,000,000 100.00 50,000 50,000 Softlogic B P O Services (Pvt) Ltd 5,100,000 100.00 5,100,000 100.00 51,000 51,000 Softlogic Brands (Pvt) Ltd 716,368 97.72 - - - - Softlogic City Hotels (Pvt) Ltd 230,569,836 99.92 - - - - Softlogic Communication Services (Pvt) Ltd 100 100.00 - - - - Softlogic Communications (Pvt) Ltd 442,153 100.00 - - - - Softlogic Computers (Pvt) Ltd 200,000 100.00 200,000 100.00 2,354 2,354 Softlogic Corporate Services (Pvt) Ltd 2,725,002 100.00 2,725,002 100.00 10,394 10,394 Softlogic Destination Management (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000 1,000 Softlogic Healthcare Holdings Ltd 100,000 100.00 100,000 100.00 1,000 - Softlogic Information Technologies (Pvt) Ltd 436,496 100.00 436,496 100.00 4,906 4,906 Softlogic International (Pvt) Ltd 669,808 100.00 - - - - Softlogic Mobile Distribution (Pvt) Ltd 1,000,000 100.00 - - - - Softlogic Properties (Pvt) Ltd 483,421,208 99.92 483,421,208 99.92 4,438,214 4,438,214 Softlogic Restaurants (Pvt) Ltd 59,500,000 100.00 59,500,000 100.00 595,000 595,000 Softlogic Retail (Pvt) Ltd 169,345,616 99.99 - - - - Softlogic Retail Holdings (Pvt) Ltd 627,239,302 100.00 627,239,302 100.00 6,272,393 6,272,393 Softlogic Retail One (Pvt) Ltd 100,000 100.00 100,000 100.00 1,000 1,000 Softlogic Rewards (Pvt)Ltd 100,000 100.00 100,000 100.00 1,000 - Softlogic Solar (Pvt) Ltd 100 100.00 100 100.00 1 1 Softlogic Stockbrokers (Pvt) Ltd 19,700,000 74.98 - - - - Softlogic Supermarkets (Pvt) Ltd 17,100,000 100.00 17,100,000 100.00 171,000 1,000 Suzuki Motors Lanka Ltd 12,031,051 86.17 - - - -

11,988,880 11,816,880 Less - Impairment of investments (Note 26.3) (220,576) (220,576)

11,768,304 11,596,304



26.3 Impairment of investments


An impairment assessment was carried out as at 31 March 2019 and it was concluded that the net realisable value of all investments included under quoted and unquoted investments exceed their carrying value except for the investments made in Future Automobiles (Pvt) Ltd, Softlogic Solar (Pvt) Ltd and Softlogic Australia (Pty) Ltd.

Movement in provision for impairment of investments in subsidiaries

In Rs. ‘000 Company As at 31 March 2019 2018

At the beginning of the year 220,576 195,676 Provision for impairment - 24,900


27 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES

ACCOUNTING POLICY

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

Associate companies of the Group which have been accounted for under the equity method of accounting are:

Name of the company Country of incorporation

Digital Health (Pvt) Ltd Sri LankaGerry’s Softlogic (Pvt) Ltd PakistanNextage (Pvt) Ltd Sri LankaSabre Travel Network Lanka (Pvt) Ltd Sri Lanka

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Joint venture company of the Group which have been accounted for under the equity method of accounting is:

Name of the company Country of incorporation

Asiri A O I Cancer Centre (Pvt) Ltd Sri Lanka

The considerations assessed in determining signifi cant infl uence a similar to those in determining control over subsidiaries.

The Group’s investments in its associates and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at

cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The income statement refl ects the Group’s share of the results of operations of associates or joint venture. OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s shares of profi t or loss of associates and joint venture is shown on the face of the income statement outside operating profi t and represents profi t or loss after tax and non-controlling interests in the subsidiaries of the associate and joint venture.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of results of equity accounted investees’ in the income statement.


Upon loss of signifi cant infl uence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of signifi cant infl uence and the fair value of the retained investment and proceeds from disposal is recognised in the income statement.

The accounting policies of associate and joint venture companies conform to those of the Group.

The equity method of accounting has been applied for associates and joint venture using their Financial Statements for the corresponding fi nancial period or a matching 12 month period. In the case of associates whose reporting dates are different to the Group reporting dates, adjustments are made for signifi cant transactions or events up to 31 March.

In Rs. ‘000 Note Group CompanyAs at 31 March 2019 2018 2019 2018

Investments in equity accounted investees 27.1 78,249 111,885 11,000 11,000 78,249 111,885 11,000 11,000

27.1 Group investments in equity accounted investees


Investments in joint ventures

UnquotedAsiri A O I Cancer Centre (Pvt) Ltd 29,368 27,000 - -

29,368 27,000 - -

Investments in associates

UnquotedDigital Health (Pvt) Ltd 10,080 18,944 - - Gerry's Softlogic (Pvt) Ltd - - 2,700 2,700 Nextage (Pvt) Ltd 6,885 6,056 1,250 1,250 Sabre Travel Network Lanka (Pvt) Ltd 65,552 43,528 9,750 9,750

82,517 68,528 13,700 13,700 Less: impairment of investment in Gerry's Softlogic (Pvt) Ltd - - (2,700) (2,700)

82,517 68,528 11,000 11,000

Share of profi t accruing to the Group 27.2 7,080 19,787 - - Share of associate companies dividend (40,750) (3,350) - - Share of OCI accruing to the Group 27.2 34 (80) - -

78,249 111,885 11,000 11,000



27.2 Summarised financial information of equity accounted investees

In Rs. ‘000 GroupAs at 31 March Associates Joint venture 2019

Total 2018Total

Group share of:Revenue 157,062 30,390 187,452 152,846 Operating expenses (163,354) (30,631) (193,985) (133,439)Other income 13,258 355 13,613 380

Share of profi t for the year 6,966 114 7,080 19,787

Group share of:Share of other comprehensive income/ (loss) of equity accounted investees 37 (3) 34 (80)

Net share of other comprehensive income/ (loss) for the year 37 (3) 34 (80)

Group share of:Total assets 157,827 85,436 243,263 159,034 Total liability (117,818) (72,123) (189,941) (72,004)

Net assets 40,009 13,313 53,322 87,030 Unrealised profi ts (130) - (130) (202)Deferred tax on undistributable profi ts (5,917) - (5,917) (5,917)Goodwill 14,808 16,166 30,974 30,974

48,770 29,479 78,249 111,885

Contingent liabilities Nil Nil Nil Nil Capital commitments Nil Nil Nil Nil

28 NON - CURRENT FINANCIAL ASSETS


Quoted equity investments 28.1 1,547,325 1,651,970 - - Unquoted equity investments 28.2 469,217 469,217 - - Non equity investments 28.3 11,140,590 8,443,193 1,465,042 828,355

13,157,132 10,564,380 1,465,042 828,355

28.1 Other quoted equity investments

In Rs. ‘000 Note GroupAs at 31 March Number of

shares 2019 2018

ACL Cables PLC 28.1.1 616 20 17 National Development Bank PLC 16,414,027 1,546,201 1,650,326 Seylan Bank PLC - Non voting 30,752 1,104 1,627

1,547,325 1,651,970


28.1.1 Reclassification of financial assets at fair value through profit or loss (FVTPL) to Available for Sale (AFS)

Softlogic Life Insurance PLC and Softlogic Finance PLC reclassifi ed their investments in National Development Bank PLC (NDB) equity shares into Available for Sale (AFS) from fi nancial assets at Fair Value Through Profi t or Loss (FVTPL) category on 31 July 2015 as approved by the respective Boards of Directors, who had resolved to reclassify the investments as the Group would no longer hold the investments for the purpose of being sold in the near term. This decision was taken after considering the potential synergies that could be developed between the NDB and companies within the Softlogic Group, and taking in to account the strategic intent in the holding.

Details of amounts reclassifi ed from fi nancial assets at Fair Value Through Profi t or Loss (FVTPL) to Available for Sale (AFS) as at 31 July 2015 are as follows:

Rs. ‘000

Softlogic Finance PLC 131,175 Softlogic Life Insurance PLC 2,241,718

Total value of reclassifi cation 2,372,893

The fair value gains / (losses) recorded in the Group income statement and the Group other comprehensive income statement at the beginning of the fi nancial period, at the date of the reclassifi cation and at the end of each fi nancial period ended is given below:

In Rs. ‘000 Fair value/carrying value

Impact on Group income

statement

Impact on Group other

comprehensive income

As at 01 April 2015 2,139,918 - - As at 31 July 2015 2,372,893 232,975 - As at 31 March 2016 1,456,525 - (916,368)As at 31 March 2017 1,204,567 - (251,958)As at 31 March 2018 1,148,480 - (56,087)

With the adoption of SLFRS 9, investments in National Development Bank PLC (NDB) equity shares classifi ed as fair value through other comprehensive income (OCI).

28.2 Unquoted equity investments

In Rs. ‘000 GroupAs at 31 March Number of

shares 2019 2018

Voyages Jean Mermoz Ltd 10 10 Ceylon Lexcon Services Ltd 207 207 Cargills Bank Ltd 34,000,000 469,000 469,000

469,217 469,217

28.3 Non equity investments

In Rs. ‘000 Group CompanyAs at 31 March Note 2019 2018 2019 2018

Placement with banks and fi nancial institutions 31 31 - - Debentures 2,683,462 1,612,624 - - Government securities 3,316,389 3,171,984 - - Fixed deposits 25,388 20,387 - - Loans to executives 550 3,790 - - Loans to subsidiaries - - 1,465,042 828,355 Hire purchase trade debtors 32.1 1,252,299 773,040 - - Loans and advances 33 3,862,471 2,861,337 - -

11,140,590 8,443,193 1,465,042 828,355



29 RENTAL RECEIVABLE ON LEASE ASSETS AND HIRE PURCHASE

ACCOUNTING POLICY


When the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of the asset to the lessee, the arrangement is classifi ed as a fi nance lease and a receivable equal to the net investment in the lease is recognised.

Amounts receivable under fi nance leases are included under “Rentals receivable on leased assets”. Leasing balances are stated in the statement of fi nancial position after deduction of initial rentals received, unearned lease income and the provision for impairment losses.

29.1 Receivable from one to five years


Rental receivable on lease assets

Rental receivable on hire purchase

Total Rental receivable on lease assets


Total

Rental receivables 1,467,071 25,010 1,492,081 1,516,697 - 1,516,697 Rentals received in advance - - - (873) - (873)Unearned income (352,029) (4,535) (356,564) (413,578) - (413,578)Impairment - - - (59,487) - (59,487)

1,115,042 20,475 1,135,517 1,042,759 - 1,042,759

29.2 Receivable within one year

In Rs. ‘000

As at 31 March

Group 2019 2018

Rental receivable on lease assets


Total Rental receivable on lease assets


Total

Rental receivables 1,234,959 96,540 1,331,499 428,471 205,424 633,895 Rentals received in advance - - - (950) - (950)Unearned income (391,453) (5) (391,458) (29,914) (11,343) (41,257)Impairment (81,679) (23,311) (104,990) - (67,911) (67,911)

761,827 73,224 835,051 397,607 126,170 523,777 1,876,869 93,699 1,970,568 1,440,366 126,170 1,566,536

29.3 Impairment of rental receivables


For rental receivables on lease assets and hire purchases, the Group fi rst assesses whether objective evidence of impairment exists individually for fi nancial assets that are individually signifi cant, or collectively for fi nancial assets that are not individually signifi cant. If the Group determines that no objective evidence of impairment exists

for an individually assessed fi nancial asset, whether signifi cant or not, it includes the asset in a Group of fi nancial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

30 OTHER NON-CURRENT ASSETS

In Rs. ‘000 GroupAs at 31 March Note 2019 2018

Rent advances 538,817 307,694 Deferred expenditure 35,900 1,402 Work-in-progress - Odel Mall project 30.1 2,641,070 619,407

3,215,787 928,503


30.1 Work-in-progress - Odel Mall project

Odel Properties One (Pvt) Ltd, a fully own subsidiary of Odel PLC is engaged in the development and construction of an integrated complex with an approximate area of 645,000 sq. ft., comprising of retail and associate facilities, residential units, cinemas and a car park.

Work-in-progress - Odel Mall project includes advances paid to contractors, directly attributable cost incurred on the project and borrowing cost capitalised at the rate of AWPLR + 2%.

31 INVENTORIES

ACCOUNTING POLICY

Inventories are valued at the lower of cost and net realisable value.

Net realisable value is the estimated selling price less estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories is:

• Finished goods - cost of direct materials and direct labour and an appropriate proportion of fi xed overheads based on normal operating capacity

• Other stock - actual cost


Finished goods 8,815,937 9,303,125 Other stocks 2,309,686 2,343,640

11,125,623 11,646,765 Less - provision for write-down of inventories 31.1 (436,602) (396,226)

10,689,021 11,250,539

31.1 Movement in provision for write-down of inventoriesIn Rs. ‘000 GroupAs at 31 March 2019 2018

At the beginning of the year 396,226 357,517 Acquisition of subsidiary 6,691 - Provision for write-down of inventories 75,137 108,930 Written off during the year (41,452) (70,221)


32 TRADE AND OTHER RECEIVABLES

ACCOUNTING POLICY


Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Other fi nancial receivables are recognised as other receivables. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classifi ed as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Reinsurance receivables

The Group cedes insurance risk in the normal course of business for all of its businesses. Reinsurance receivables represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract.




Trade and other receivables 32.1 10,868,292 9,238,284 398,263 276,358 Reinsurance receivables 294,294 124,551 - - Loans to executives 43,272 34,029 4,218 2,624 Other receivables 3,145,762 2,441,266 509,612 83,948

14,351,620 11,838,130 912,093 362,930

32.1 Trade and other receivables

In Rs. ‘000 Group CompanyAs at 31 March Note Gross Unearned

income 2019 2018 2019 2018

Hire purchase debtors 3,997,200 (155,722) 3,841,478 3,751,724 - - Trade receivables 9,602,273 - 9,602,273 6,835,745 534,884 354,211

13,599,473 (155,722) 13,443,751 10,587,469 534,884 354,211 Less - provision for impairment of trade

and other receivables 32.2.1 (1,323,160) (576,145) (136,621) (77,853) 13,599,473 (155,722) 12,120,591 10,011,324 398,263 276,358

Trade and other receivablesReceivable within one year 10,868,292 9,238,284 398,263 276,358 Receivable after one year 1,252,299 773,040 - -

12,120,591 10,011,324 398,263 276,358

32.2 Impairment of receivables


The Group assesses the evidence of impairment of receivables at both an individual asset and at a collective level. All individually signifi cant receivables are individually assessed for impairment by considering objective evidence i.e. signifi cant fi nancial diffi culties or default in payments of a customer. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identifi ed. Receivables that are not individually signifi cant are collectively assessed for impairment. Collective

assessment is carried out by grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical information on the probability of default, the timing of recoveries, and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested historical trends.

32.2.1 Movement in provision for trade and other receivables


At the beginning of the year 576,145 363,847 77,853 77,853 Impact of adopting SLFRS 9 406,489 - 55,353 - Acquisition of subsidiary (1,031) 8,460 - - Provision for impairment of trade and other receivables 353,623 252,445 3,415 - Written off during the year (12,066) (48,607) - -

At the end of the year 1,323,160 576,145 136,621 77,853


33 LOANS AND ADVANCES

ACCOUNTING POLICY


Loans and advances are fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.

Policyholders loans are granted up to 90% of the surrender value of a life insurance policy at a rate equivalent to the market rate.

Subsequent measurement (applicable with effect from 01 April 2018)

Loans and advances are initially recognised at fair value, which is the cash consideration to originate or purchase the loan including any transaction costs and measured subsequently at amortised cost using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in ‘interest income’ in the Statement of profi t or loss. The losses arising from impairment are recognised in ‘impairment charge for loans and advances’ in the Statement of profi t or loss.

In Rs. ‘000 GroupAs at 31 March Gross Unearned

income 2019 2018

Personal loans 1,629,414 (52,381) 1,577,033 1,465,450 Pawning receivables 2,014,921 - 2,014,921 1,257,551 Policyholders loans 173,312 - 173,312 148,722 Revolving loans 1,845,922 - 1,845,922 1,053,913 Consumer loans 33,493 (1,204) 32,289 73,649 SME & other loans 12,811,557 (1,932,112) 10,879,445 12,712,323 Allowance for impairment (996,050) (751,630)

18,508,619 (1,985,697) 15,526,872 15,959,978

Loans and advancesReceivable within one year 11,664,401 13,098,641 Receivable after one year 3,862,471 2,861,337

15,526,872 15,959,978

33.1 Accounting judgements, estimates and assumptions

Impairment of loans and advances

Analysis of loan receivables on maximum exposure to credit risk


Stage 1 Stage 2 Stage 3 Total 2019

Gross loan receivables - subject to collective impairment(excluding policyholders loans) 8,785,089 4,093,362 3,471,159 16,349,610 Allowance for expected credit losses (ECL) (121,625) (142,489) (731,936) (996,050)

8,663,464 3,950,873 2,739,223 15,353,560

Overview of the expected credit loss (ECL) principles

The Group established a policy to perform as assessment, at the end of each reporting period, of whether a fi nancial instrument’s credit risk has increased signifi cantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the fi nancial instrument.

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless

there has been no signifi cant increase in credit risk since origination, in which case, the allowance is based on the 12 months’ expected credit loss (12mECL).

The 12mECL is the portion of LTECLs that represent the ECLs that result from default events on a fi nancial instrument that are possible within the 12 months after the reporting date.



Both LTECLs and 12mECLs are calculated on either an individual basis or collective basis, depending on the nature of the underlying portfolio of fi nancial instruments.

Based on the above process, the Company groups its loans into Stage 1, Stage 2, Stage 3 and POCI, as described below.

Stage 1 When loans are fi rst recognised, the Group recognises an allowance based on 12mECLs. Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassifi ed from Stage 2.

Stage 2 When a loan has shown a signifi cant increase in credit risk since origination, the Group records an allowance for the LTECLs. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassifi ed from Stage 3.

Stage 3 Loans considered credit-impaired. The Group records an allowance for the LTECLs.

POCI Purchased or originated credit impaired (POCI) assets are fi nancial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognised based on a credit-adjusted EIR. ECLs are only recognised or released to the extent that there is a subsequent change in the expected credit losses.

For fi nancial assets for which the Company has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the fi nancial asset is reduced. This is considered a (partial) derecognition of the fi nancial asset.

The Calculation of Expected Credit Loss (ECL)

The Group calculates ECLs based on a four probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash fl ows that are due to an entity in accordance with the contract and the cash fl ows that the entity expects to receive.

The mechanics of the ECL calculations are outlined below and the key elements are, as follows.

Probability of Default (PD):

The probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

Exposure at Default (EAD)

The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected draw downs on committed facilities, and accrued interest from missed payments.

Loss Given Default (LGD)

The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash fl ows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.

The mechanism of the ECL method are summarised below.

Stage 1 The 12mECL is calculated as the portion of LTECLs that represent the ECLs that represent the ECLs that result from default events on a fi nancial instrument that are possible with in the 12 months after the reporting date. The Group calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation of the original EIR.

Stage 2 When a loan has shown a signifi cant increase in credit risk since origination, the Group records an allowance for the LTECLs. The mechanics are similar to those explained above, including the use of multiple scenarios, but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR.

Stage 3 For loans considered credit-impaired, the Group recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.

Loan Commitments

When estimating LTECLs for undrawn loan commitments, the Group estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash fl ows if the loan is drawn down, based on a probability weighting of the four scenarios. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan.

For factoring receivables and revolving loans that include both a loan and an undrawn commitment. ECLs are calculated and presented with the loan.

Financial Guarantee contracts

The Group’s liability under each guarantee is measured at the higher of the initially recognised less cumulative amortisation recognised in the income statement, and the ECL provision. For this purpose, the Group estimates ECLs based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs. The shortfalls are discounted by the risk-adjusted interest rate relevant to the exposure. The calculation is made using a probability - weighting of the four scenarios. The ECLs related to fi nancial guarantee contracts are recognised within provisions.


34 OTHER CURRENT ASSETS

ACCOUNTING POLICY

The Group classifi es all non-fi nancial current assets under Other current assets. Other current assets comprise mainly advances, deposits, prepayments and tax refunds and receivables.

Advances and deposits are carried at historical value less a provision for impairment. Prepayments are amortised over the period during which they are utilised and are carried at historical value less amortisation and impairments if any.


Prepayments, advances & non-cash receivables 2,958,382 2,174,453 6,134 5,876 Tax refunds & receivables 1,014,726 721,515 22,139 10,833 Other receivables 1,370,605 553,083 - -

5,343,713 3,449,051 28,273 16,709

35 SHORT TERM INVESTMENTS


Quoted equities at market value 35.1 568,515 619,024 5,625 1,594,676 Unquoted equity investments 35.2 125,000 125,000 125,000 125,000 Other investments (more than 3 months and less than 1 year) 35.3 1,801,681 1,994,240 - -

2,495,196 2,738,264 130,625 1,719,676

Other investments (less than 3 months)Government securities 1,969,419 3,065,527 - - Commercial papers 446,647 204,938 - - Fixed deposits 1,138,134 1,111,879 - -

3,554,200 4,382,344 - - 6,049,396 7,120,608 130,625 1,719,676



35.1 Quoted equities at market value


shares 2019 2018 Number of

shares 2019 2018

ACL Cables PLC 264 9 11 - - - B P P L Holdings PLC 33,488 332 1,188 - - - Ceylinco Insurance PLC 89 189 160 - - - Chevron Lubricants Lanka PLC - - 14,630 - - - Commercial Bank of Ceylon PLC 915,872 90,397 95,982 - - - DFCC Bank 296 21 35 - - - Dialog Axiata PLC 3,578,630 32,566 - - - - Dunamis Capital PLC 305 9 7 - - - Hatton National Bank PLC 499,710 87,449 97,204 - - - Hemas Holdings PLC - - 18,654 - - - John Keells Holdings PLC 947,887 147,870 132,132 - - - Lanka IOC PLC 63,200 1,100 1,902 63,200 1,100 1,902 Lanka Tiles PLC 997 70 99 - - - LVL Energy Fund PLC 1,561,600 12,337 15,460 - - - National Development Bank PLC 911 92 92 - - - Odel PLC - - - - - 1,585,903 Panasian Power PLC - - 8,343 - - - Piramal Glass Ceylon PLC - - 5,776 - - - Renuka City Hotels PLC 50 13 13 - - - Richard Pieris & Co PLC 210 2 3 - - - Richard Pieris Exports PLC 200 42 34 - - - Royal Ceramics Lanka PLC - - 468 - - - Sampath Bank PLC 490,549 88,348 4,184 18,031 3,247 4,184 Sampath Bank PLC - Share Application Money - - 804 - - 804 Seylan Bank PLC 140 9 12 140 9 12 Seylan Bank PLC - Non voting 358,033 12,853 18,952 35,349 1,269 1,871 Teejay Lanka PLC 550,000 16,720 33,495 - - - The Lanka Hospitals Corporation PLC - - 3,780 - - - Tokyo Cement Company (Lanka) PLC - - 69,752 - - - Union Bank of Colombo PLC 6,023,317 66,256 77,098 - - - Vallibel One PLC 827,345 11,831 18,754 - - -

568,515 619,024 5,625 1,594,676

35.2 Unquoted equity investments


shares 2019 2018 Number of

shares 2019 2018

Cargills Bank Ltd 10,000,000 125,000 125,000 10,000,000 125,000 125,000

125,000 125,000 125,000 125,000

35.3 Other investmentsIn Rs. ‘000 GroupAs at 31 March 2019 2018

More than 3 months and less than 1 yearInvestments in commercial papers 308,374 - Fixed deposits 616,839 87,180 Debentures maturing within a year 275,145 288,110 Investment in Unit Trust 601,323 1,618,950

1,801,681 1,994,240


36 CASH AND CASH EQUIVALENTS


Favourable balancesCash in hand and at bank 2,596,037 6,151,833 18,294 2,916,160 Restricted cash at bank

Cash margin receivables 600,313 - - - 3,196,350 6,151,833 18,294 2,916,160

Unfavourable balancesBank overdrafts 7,761,224 4,645,217 174,702 153,748

7,761,224 4,645,217 174,702 153,748

37 STATED CAPITAL

As at 31 March 2019 2018 Note Number of

shares Value of shares in

Rs. ‘000

Number of shares

Value of shares in

Rs. ‘000

Fully Paid Ordinary SharesAt the beginning of the year 961,728,395 8,195,383 779,000,000 5,089,000 Shares issued during the period 37.1 230,814,814 3,923,852 182,728,395 3,106,383

1,192,543,209 12,119,235 961,728,395 8,195,383

37.1 The Directors of Softlogic Holdings PLC resolved on 24 January 2018 to issue 230,814,814 ordinary shares of the company by way of a Rights Issue at a price of Rs. 17.00 per share amounting to a total consideration of Rs. 3,923.85 Mn. This was subsequently approved by shareholders at an EGM held on 26 March 2018. On 10 May 2018, Rights Issue shares were listed on the Main Board of Colombo Stock Exchange.

38 OTHER COMPONENTS OF EQUITY


Restricted regulatory reserve 38.1 309,613 309,613 Revaluation reserve 38.2 5,724,098 4,774,665 Foreign currency translation reserve 38.3 (51,772) (46,325)Fair value reserve of fi nancial assets at FVOCI/ AFS 38.4 (783,273) (530,887)Statutory reserve fund 38.5 263,436 215,063 Other reserves 38.6 (780,990) (569,884)Cash fl ow hedge reserve 38.7 (660,254) (178,966)

4,020,858 3,973,279

38.1 Restricted regulatory reserve refl ects the equity holders’ share of the one-off surplus attributable to policyholder non-participating fund. This reserve has been made as per the direction no. 16 on 20 March 2018 issued by the ‘Insurance Regulatory Commission of Sri Lanka (IRCSL) on ‘Identifi cation and Treatment of one-off surplus’.

38.2 Revaluation reserve consists of the net surplus on the revaluation of properties.

38.3 Foreign currency translation reserve comprises the net exchange movement arising on the currency translation of foreign operations and net equity investments of other currency denominated associates into Sri Lankan Rupees (Rs.).

38.4 Fair value reserve of fi nancial assets at FVOCI/ AFS includes changes on fair value of fi nancial instruments designated as fi nancial assets at FVOCI/ AFS.

38.5 Statutory reserve fund refl ects the profi t transfer made by Softlogic Finance PLC in compliance with the Central Bank direction no. 01 of 2003.

38.6 Other reserve is used to recognise goodwill or gains from purchases on subsequent acquisitions of further equity interests in subsidiaries and gains or losses arising from partial and deemed acquisitions/disposals in its subsidiaries.

38.7 Cash fl ow hedge reserve refl ects the effective portion of the gain or loss on the hedging instrument.



39 INSURANCE CONTRACT LIABILITIES

ACCOUNTING POLICY

The Directors agree to the long term insurance business provisions on the recommendation of the actuary following annual valuation of the life insurance business. The actuarial valuation takes into account all

liabilities including contingent liabilities, and is based on assumptions recommended by the Appointed actuary.


Provision - life 39.1 8,309,628 7,192,591 8,309,628 7,192,591

39.1 Movement in life insurance fund


At the beginning of the year 7,192,591 6,616,558

Increase in life fund 2,546,037 2,536,037 Transfer to shareholders 39.3 (1,394,000) (1,162,000)Increase in insurance contract liabilities 39.2 1,152,037 1,374,037

Change in contract liability due to transfer of one off surplus 39.7.1 - (798,004)Tax on policyholder bonus (35,000) -

At the end of the year 8,309,628 7,192,591

39.2 Change in life insurance contract liabilities

The results of Softlogic Life Insurance PLC is life business segment is consolidated line by line into the Group’s consolidated income statement.

The increase in insurance contract liabilities represents the transfer to the Life Fund of the difference between all income and expenditure attributable to life policyholders during the year.


Revenue 9,833,075 7,368,671 Cost of sales (4,752,746) (3,342,789)

Gross profi t 5,080,329 4,025,882 Operating expenses including distribution and administration expenses (3,153,291) (2,167,502)Net fi nance income 618,999 677,657 Profi t attributable to shareholders (1,394,000) (1,162,000)

Change in insurance contract liabilities 1,152,037 1,374,037

39.3 Recommendation of surplus transfer

The valuation of the life insurance fund as at 31 March 2019 was made by Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI, Messrs. Towers Watson India (Pvt) Limited, who recommended:

• no transfer to shareholders from the participating life fund

• transfer of a sum of Rs. 1,394.00 Mn to non-participating life insurance fund / insurance contract liabilities to the shareholders’ fund (2018 - Rs. 1,162.00 Mn) : (transfer of the amount of Rs. 928.00 Mn (2018 - Rs. 585.00 Mn) declared as surplus for the quarter ended 31 March 2019, as recommended by the Appointed Actuary was permitted by the Insurance Regulatory Commission of Sri Lanka (IRCSL).


39.4 Valuation of life insurance fund

Long duration contract liabilities included in the life insurance fund result primarily from traditional participating and non-participating life insurance products. The actuarial reserves have been established by Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI, Messrs. Willis Towers Watson India (Pvt) Limited as at 31 March 2019.

Details of the calculation of policy liabilities and net cash fl ows are provided in the following table for each class of products.

Details of product category Basis of determining policy liability Basis of calculating net cash fl ows

Individual traditional non-participating products

Discounting “net cash fl ows” at the risk free interest rate curve

Future premium income (-) death benefi t outgo (+) rider benefi t outgo (+) surrender benefi t outgo (+) maturity benefi t outgo (+) commission expenses outgo (+) policy expenses outgo (+) reinsurance recoveries (-) reinsurance premium outgo (+) reinsurance commissions (-)

Individual traditional participating products

Maximum (guaranteed benefi t liability, total benefi t liability)

Same as above

Individual universal non- participating products

Discounting “net cash fl ows” at the risk free interest rate curve

Future premium income (-) death benefi t outgo inclusive of dividend accumulations (+) rider benefi t outgo (+) surrender benefi t outgo inclusive of dividend accumulations (+) maturity benefi t outgo inclusive of dividend accumulations (+) commission expense outgo (+) policy expense outgo (+) reinsurance recoveries (-) reinsurance premium outgo (+) reinsurance commission (-)

Group traditional non-participating products - Group term (life)

Net cash fl ow Death benefi t outgo (+) policy expense outgo (+) reinsurance recoveries (-)

Group traditional non-participating products - Group hospitalisation cover

Policy liability has been set equal to Unearned Premium Reserve (UPR)

Not applicable

39.4.1 Measurement

Life insurance liabilities are recognised when contracts are entered into and premiums are charged. These liabilities are measured on a market consistent basis in accordance with the Solvency Margin (Risk Based Capital) Rules 2015 issued under Sections 105 and 26 (1) of the Regulation of Insurance Industry Act No. 43 of 2000, with effect from 01 January 2016. For periods up to 31 December 2015, the Company used the Net Premium Valuation (NPV) methodology to calculate insurance liabilities in accordance with the Solvency Margin (Long Term Insurance) Rules 2002.

The value of the life insurance liabilities are determined as follows:

Life insurance liabilities = Best Estimate Long term Liability (BEL) + Risk Margin for adverse deviation (RM)

The best estimate liability is the measured sum of the present value of all future best estimate cash fl ows calculated using the risk free interest rate yield curve issued by the Insurance Regulatory Commission of Sri Lanka (IRCSL). A discounted cash fl ow approach, using the Gross Premium Valuation (GPV) valuation methodology has been used to calculate liabilities as at 31 March 2019.

Measurement is usually based on the prospective method by determining the difference between the present value of future benefi ts and future premiums. The actuarial assumptions used for the calculation include, in particular, assumptions relating to:

• Mortality rates

• Morbidity rates

• Expense assumptions

• Expense infl ation

• Lapse ratios

• Dividend rates

• Participating fund yield

• Bonus rates

Assumptions are estimated on a realistic basis at the time the insurance contracts are concluded and they include adequate provision for adverse deviations to make allowance for the risks of change and random fl uctuations. In valuing the policy liability, provisions for reinsurance have been allowed for according to the applicable reinsurance terms as per current reinsurance arrangements.



39.4.2 Details of key assumptions used and the bases of arriving at them are summarised the following table:

Assumption Basis of estimation

Risk free rate Based on Sri Lankan government bond yields issued by IRCSL for the industry as at 31 March 2019

Mortality rates Based on the Mortality investigation carried out as at 30 November 2018

• Individual life - 65% of A67/70 (ultimate)

• Group term products - 50% of A67/70 (ultimate)

• Single premium mortgage protection plan products - 45% of A67/70 (ultimate)

• Per day insurance products - 20% of A67/70 (ultimate)

Morbidity rates Based on the loss ratios (loss ration is calculated as the ratio of settled and pending claims to earned premiums)

Expenses Based on the expense investigation carried out as at 31 December 2018 on expenses incurred during 2018.

For the purpose of the expense study, a functional split of expenses between acquisition or maintenance costs has been made on the basis of inputs from various departments/ heads of each cost centre to determine a reasonable activity based split of expenses. These have been further identifi ed as either being premium or policy-count driven base on the nature of expenses to determine a unit cost loading for use in the valuation.

Expense infl ation The best estimate expense infl ation has been assumed to be 5% p.a. The expense infl ation assumption has remained unchanged since the previous valuation. The assumption is also in line with the long term infl ation target of Central Bank of Sri Lanka which is in the range of 4 % to 6%.

Persistency ratio Discontinuance assumptions are based on the experience investigation. The discontinuance assumptions are set with reference to actual experience and vary by policy duration.

Bonus rate Bonus rate scale assumed has been arrived at based on bonus declared as at 31 December 2018, based on the Company management’s views on policyholders’ reasonable expectations. This assumes maintenance of the current bonus levels into the future and is unchanged from the previous valuation.

Participating fund yield Based on the weighted average of projected asset mix on expected yields for various asset types

39.5 Solvency Margin

In the opinion of the appointed actuary, the Company maintains a Capital Adequacy Ratio (CAR) of 172% and Total Available Capital (TAC) of Rs. 7,436.00 Mn as at 31 March 2019, which exceed the minimum requirement of 120% and Rs. 500.00 Mn respectively as

per the Solvency Margin (Risk Based Capital) Rules 2015 requirement prescribed under section 26 (1) of the Regulation of Insurance Industry Act No. 43 of 2000.

39.6 Liability Adequacy Test (LAT)

ACCOUNTING POLICY

Measurement

At each reporting date, an assessment is made of whether the recognised life insurance liabilities are adequate by using an existing liability adequate test as laid out under SLFRS 4 – Insurance Contracts. The liability value is adjusted to the extent that it is insuffi cient to meet future benefi ts and expenses.

In performing the adequacy test, current best estimates of future contractual cash fl ows, including related cash fl ows such as claim handling and policy administration expenses, policyholder options and guarantees, as well as investment income from assets backing such liabilities, are used. A number of valuation methods are applied, including discounted cash fl ows to the extent that the test involves discounting of cash fl ows, the interest rate applied being based on management’s prudent expectation of current market interest rates.

Any defi ciency shall be recognised in the income statement by setting up a provision for liability adequacy.

Valuation

Liability Adequacy Test for life insurance contract liability was carried out by Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI, Messrs. Towers Watson India (Pvt) Limited as at 31 December 2018. When performing the LAT, the Company discounted all contractual cash fl ows and compared this amount with the carrying value of the liability.

Based on the actuarial assessment assets are adequate as compared to the discounted cash fl ows reserves and in contrast to the reserves as at 31 March 2019.

No additional provision was required against the LAT as at 31 March 2019.


39.7 Surplus created due to change in valuation method - one off surplus zeroed at product level

ACCOUNTING POLICY

Insurance contract liabilities are measured on a market consistent basis in accordance with the Solvency Margin (Risk Based Capital) Rules 2015 with effect from 01 January 2016. In the period up to 31 December 2015, the Company used the Net Premium Valuation (NPV) methodology to calculate insurance liability in accordance with Solvency Margin (Long Term Insurance) Rules 2002.

A one off unallocated surplus was created with the migration to the new regime effective 01 January 2016.

Measurement

The Insurance Regulatory Commission of Sri Lanka (IRCSL) has directed insurance companies to maintain this one off surplus arising

from change in the policy liability valuation within the long term insurance fund/ insurance contract liabilities separately as “Surplus created due to change in valuation method from NPV to GPV” and not transfer/ distribute any part until specifi c instructions are issued in this regard. Therefore up to 31 March 2017, one off surplus has been presented in the Financial Statements as a separate item within the insurance contract liability.

The surplus created due to the change in the valuation method of policy liabilities from Net Premium Valuation (NPV) to Gross Premium Valuation (GPV) is measured based on the difference in the policy liability valuation by the Independent Actuary based on NPV and GPV based valuation as at 31 December 2015 as directed by IRCSL through a letter dated 02 February 2017.

Valuation

Details of one off adjustment as at 01 January 2016 are as follows:

In Rs. ‘000 Description

Participating fund

Non-Participating

fund

Total

Value of Insurance contract liability based on Independent Actuary- NPV as at 31 December 2015 3,866,780 2,472,575 6,339,355 Value of Insurance contract liability based on Independent Actuary- GPV 31 December 2015 2,810,245 1,674,571 4,484,816 Surplus created due to Change in Valuation Method - One off Surplus as at 01 January 2016 1,056,535 798,004 1,854,539 Transfer of one off surplus from long term fund to Restricted Regulatory Reserve as at 31 December 2017 - (798,004) (798,004)Surplus created due to change in valuation method from NPV to GPV One off surplus as at 31 March 2019 1,056,535 - 1,056,535

39.7.1 Transfer of one-off surplus from policy holder fund to shareholder fund

The Insurance Regulatory Commission of Sri Lanka (IRCSL) has issued a Direction No 16 on 20 March 2018 on “Guidelines/ directions for Identifi cation and Treatment of One-off Surplus” and has instructed all life insurance companies to comply with the new direction. Based on the new guidelines life insurance companies are directed to transfer one off surplus attributable to policyholder non-participating fund to shareholder fund in the reporting year ended 31 March 2019. The transfer has been presented as a separate line item in the Income Statement as “change in contract liability due to transfer of one off surplus” and as a separate reserve in the Statement of Financial Position as “Restricted Regulatory Reserve” under equity in accordance with the above Direction. As required by the said direction, the company received the approval for this transfer on 29 March 2018.

Further distribution of one off surplus to shareholders, held as part of the “Restricted Regulatory Reserve”, is subject to meeting governance

requirements stipulated by the IRCSL and can only be released as dividends upon receiving approval from the IRCSL. The one off surplus in the shareholder fund will remain invested in government debt securities and deposits as disclosed in Note 39.7.2 as per the directions of the IRCSL

One-off surplus in respect of participating business is held within the participating fund as part of the unallocated valuation surplus and may only be transferred to the Shareholder fund by means of bonuses to policyholders in line with Section 38 of the “Regulation of Insurance Industry, Act No. 43 of 2000”. Please refer Note 34.8.3 for details of assets supporting the restricted regulatory reserve as at 31 March 2019.



In Rs. ‘000 Participatingfund

Non- Participating fund

Total

Value of Insurance Contract Liability based on Independent Actuary- NPV as at 31 December 2015 3,866,780 2,472,575 6,339,355 Value of Insurance Contract Liability based on Independent Actuary- GPV as at 31 December 2015 2,810,245 1,674,571 4,484,816 Surplus Created due to Change in Valuation method from NPV to GPV One-off Surplus as at 01 January 2016 1,056,535 798,004 1,854,539 Transfer of One-off Surplus from long term fund to Restricted Regulatory Reserve as at 31 December 2017 - (798,004) (798,004)Surplus Created due to Change in Valuation method from NPV to GPV - One off Surplus as at 31 March 2019 1,056,535 - 1,056,535

Distribution of one off surplus

The distribution of one off surplus to shareholders as dividends shall remain restricted until the company develops appropriate policies and procedures for effective management of its business, as listed below.

• expense allocation policy setting out basis of allocation of expenses between the shareholder fund and the policyholder fund as well as between different lines of business within the policyholder fund, particularly participating and non-participating

• dividend declaration policy for universal life business

• bonus policy for the participating business, which should include treatment of one off surplus for the purpose of bonus declaration

• assets and liability management policy

• policy on internal target Capital Adequacy Ratio

• Considerations for transfer of funds from policyholder fund to shareholder fund.

These policies should be approved by the Board of Directors of the Softlogic Life Insurance PLC and must also comply with any relevant guidance issued by IRCSL from time to time. Further IRCSL will reconsider the distribution of one off surplus when the Risk Based Capital rules are revised.

39.7.2 Composition of investments supporting the Restricted Regulatory Reserve as at 31 March 2019

In Rs. ‘000 Face Value Market Value as at 31 March

2019

Government SecuritiesTreasury Bonds 100,000,000 117,193

DepositsSeylan Bank PLC 175,000,000 186,380 Sampath Bank PLC 263,618,836 287,599 Sampath Bank PLC 125,000,000 133,129 Hatton National Bank PLC 110,658,219 120,522

Total market value of the assets 844,823

39.8 Direction 16 - Unclaimed benefits of Long Term Insurance Business

There was no transfer of any unclaimed benefi t to shareholders and recorded in the life as unclaimed benefi ts if any.

39.9 Taxation on surplus distributed to the life insurance policyholder who shares the profits

With the introduction of the Inland Revenue Act no. 24 of 2017, which is effective from 01 April 2018, surplus distributed to the life insurance policyholders who shares the profits of a person engaged in the business of life insurance in a given year, as provided in the “Regulation of Insurance Industry Act no. 43 of 2000”, shall be deemed as gains and profits of that person from the business and subject to tax at a concessionary rate of 14% for three years of assessment after the commencement of the Act.

As recommended by the Appointed Actuary Mr. Kunj Behari Maheshwari, FIA, FIAI of Messrs. Towers Watson India (Pvt) Ltd, Softlogic Life Insurance PLC has declared a bonus of Rs. 250.00 Mn to life insurance policyholders who participating in the profit of life insurance business. Accordingly, there is Rs. 35.00 Mn tax amount is arising from policyholder who shares the profits of a person engaged in the business of life insurance. As at the reporting date, Softlogic Life Insurance PLC has utilised the tax credits to set off this tax liability hence no income tax liability has recorded as at 31 December 2018.


39.10 Sensitivity to assumptions used

Change in key assumptions used in valuing change of the insurance contract liability would have the following effect to the Group fi nancials:

In Rs. ‘000As at 31 March 2019

Effect on the change of the insurance contract liability Increase by 10% in mortality rate 96,797 Decrease by 10% in mortality rate (183,463)

Effect on the change of the insurance contract liabilityIncrease by 10% in morbidity rate 10,554 Decrease by 10% in morbidity rate (9,520)

Effect on the change of the insurance contract liabilityIncrease by 50 basis point in discount rate (46,952)Decrease by 50 basis point in discount rate 48,691

Effect on the change of the insurance contract liabilityIncrease by 10% in expense ratio 346,611 Decrease by 10% in expense ratio (346,611)

40 INTEREST BEARING BORROWINGS


Finance leases

Debentures Loans Total Finance leases

Debentures Loans Total

At the beginning of the year 207,844 1,324,970 31,373,435 32,906,249 301,069 1,483,628 34,261,503 36,046,200 Additions 15,406 1,000,000 6,585,232 7,600,638 17,387 - 3,768,754 3,786,141 Acquisition of subsidiary 693 - 239,471 240,164 2,419 - 8,556 10,975Repayments (107,515) (565,880) (6,201,039) (6,874,434) (113,313) (158,658) (6,426,011) (6,697,982)Transfers/discontinuation - - - - - - (309,655) (309,655)Unamortised loan processing cost - (5,456) (14,120) (19,576) - - (16,207) (16,207)Finance charges (12,658) 21,795 281,632 290,769 (25,735) - 109,665 83,930 Exchange translation difference 436 - 753,751 754,187 282 - 70,288 70,570

At the end of the year 104,206 1,775,429 33,018,362 34,897,997 182,109 1,324,970 31,466,893 32,973,972

Repayable within one year 63,747 780,885 8,938,320 9,782,952 69,915 65,000 7,109,726 7,244,641 Repayable after one year 40,459 994,544 24,080,042 25,115,045 112,194 1,259,970 24,357,167 25,729,331

104,206 1,775,429 33,018,362 34,897,997 182,109 1,324,970 31,466,893 32,973,972



In Rs. ‘000 CompanyAs at 31 March 2019 2018

Finance leases

Debentures Loans Total Finance leases

Loans Total

At the beginning of the year 49,859 - 10,345,141 10,395,000 85,594 10,973,091 11,058,685 Additions - 1,000,000 1,500,000 2,500,000 - 1,866,930 1,866,930 Repayments (28,096) - (2,279,552) (2,307,648) (35,735) (2,494,880) (2,530,615)Processing fee - (5,456) (9,618) (15,074) - (10,805) (10,805)Finance charges/ accrued interest (1,427) 14,226 191,140 203,939 (5,159) 59,402 54,243

At the end of the year 20,336 1,008,770 9,747,111 10,776,217 44,700 10,393,738 10,438,438

Repayable within one year 17,087 14,226 3,927,185 3,958,498 23,973 2,960,558 2,984,531 Repayable after one year 3,249 994,544 5,819,926 6,817,719 20,727 7,433,180 7,453,907

20,336 1,008,770 9,747,111 10,776,217 44,700 10,393,738 10,438,438

Security pledged and interest rates pertaining to interest bearing borrowings are disclosed in note 53 to the Financial Statements.

40.1 Present value of minimum lease payments

In Rs. ‘000 Group Company

Finance lease obligations repayable within

one year

Finance lease obligations repayable between one and fi ve years

Finance lease obligations repayable within

one year

Finance lease obligations repayable between one and fi ve years

As at 31 March 2019 2018 2019 2018 2019 2018 2019 2018

Minimum lease payments 71,583 82,944 45,281 124,899 18,445 27,705 3,318 22,154 Finance charges (7,836) (13,029) (4,822) (12,705) (1,358) (3,732) (69) (1,427)

Present value of minimum lease payments 63,747 69,915 40,459 112,194 17,087 23,973 3,249 20,727

40.2 Details regarding the debentures are as follows;

In Rs. ‘000 Annualinterest rate

Interest payment

frequency

Allotment date

Maturity date

Face value Amortised cost

As at 31 March 2019 2018

Group

Listed debentures

Softlogic Finance PLCListed, secured,Type "A" debentures* 10.00% Quarterly 29-08-2014 28-08-2019 949,870 413,038 859,840 Listed, secured,Type "B" debentures*

3 month TB net + 1.50% Quarterly 29-08-2014 28-08-2019 450,130 353,621 400,130

766,659 1,259,970

Unlisted debentures

Softlogic Holdings PLCUnlisted, unsecured debentures 16.75% Bi annually 08-02-2019 07-02-2022 1,000,000 1,008,770 -

Softlogic Finance PLCUnlisted, unsecured, subordinated debentures 15.50% Quarterly 29-11-2013 28-11-2018 65,000 - 65,000

1,008,770 65,000 1,775,429 1,324,970


In Rs. ‘000 Annualinterest rate

Interest payment frequency

Allotment date

Maturity date

Face value Amortised cost

As at 31 March 2019 2018

Company

Softlogic Holdings PLCUnlisted, unsecured debentures 16.75% Bi annually 08-02-2019 07-02-2022 1,000,000 1,008,770 -

1,008,770 -

* Secured by a 100% guarantee provided by “GuarantCo” amounting to Rs. 766.66 Mn.

40.3 Derivative financial instruments

GroupIn Rs. ‘000 2019 2018As at 31 March Asset Liability Asset Liability

Foreign currency cash fl ow hedges 660,992 - 179,293 -

Cash flow hedge

The risk management objective of the cash fl ow hedge is to hedge the risk of variation in the foreign currency exchange rates associated with USD denominated forecast sales.

The risk management strategy is to use the foreign currency variability (gains /losses) arising from revaluation of the foreign currency loan attributable to change in the spot foreign exchange on LKR conversion of USD denominated forecast sales. The effective portion of the gain or loss on the hedging instrument is recognised in the Other Comprehensive Income Statement (OCI) and any ineffective portion is recognised immediately in the Income Statement.

The amount recognised in Other Comprehensive Income is transferred to the Income Statement when the hedge transaction occurs (when the forecasted revenue is realised). If the forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognised in Other Comprehensive Income is transferred to the Income Statement.

Ceysand Resorts Ltd

Hedging instrument - Foreign currency borrowing of USD 7.50 Mn in February 2013, maturing in March 2024, and foreign currency borrowing of USD 2.50 Mn in October 2013, maturing in March 2024

Hedged item - USD denominated sales expected to occur in March and September of 2016 to 2024

The cash fl ow hedge has a notional amount of USD 10.00 Mn and cash fl ows are expected to occur as 17 equal semi-annual installments at 15 March and 15 September of 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 in USD 588,235 capital and interest repayments at 15 March and 15 September of each year.


Hedging instrument - Foreign currency borrowing of USD 36.40 Mn in May 2015, maturing in June 2025

Hedged item - USD denominated sales expected to occur in each month of April 2017 to June 2025

The cash fl ow hedge has a notional amount of USD 35.39 Mn and cash fl ows are expected to occur as 101 monthly installments of 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 and 2025 in USD 35.39 Mn capital and interest repayments on the 25 of each month till May 2025.

In respect of the cash fl ow hedge instrument, the following balance has been recognised in the Other Comprehensive Income Statement (OCI) as the fair value loss on the hedging instrument.


Net change in fair value on derivative fi nancial instruments (481,700) (34,266)



On the hedged instrument the following attributable to the hedged risk has been recognised in the Group Income Statement.


Under Finance expenses Realised exchange loss on foreign currency borrowings 47,976 39,930 Unrealised exchange loss on foreign currency borrowings 239,050 2,511

287,026 42,441

41 PUBLIC DEPOSITS


Deposits maturing after one year 4,601,829 3,237,633 Deposits maturing within one year 12,385,059 13,063,838

16,986,888 16,301,471

42 EMPLOYEE BENEFIT LIABILITIES

ACCOUNTING POLICY

Defined benefit plan - Gratuity

The liability recognised in the statement of fi nancial position is the present value of the defi ned benefi t obligation at the reporting date using the projected unit credit method. Any actuarial gains or losses arising are recognised immediately in other comprehensive income.

As per the payment of Gratuity Act No. 12 of 1983, this liability only arises upon completion of 5 years of continued service.

The gratuity liability is not externally funded.


At the beginning of the year 1,012,888 801,930 68,252 49,130 Current service cost 118,976 118,939 7,174 7,057 Interest cost on benefi t obligation 102,960 100,014 6,584 6,165 (Gain) / loss arising from changes in assumptions (65,512) 74,103 3,474 10,219 Acquisition of subsidiary 20,490 5,803 - - Transfers to related companies (393) - - - Payments (108,089) (87,901) (4,375) (4,319)

At the end of the year 1,081,320 1,012,888 81,109 68,252

The employee benefi t liability of the Group is based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd, Messrs. Smiles Global (Pvt) Ltd and Mr. Piyal Goonatilleke, actuaries.

Defined contribution plan - Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund benefi ts in line with respective statutes and regulations. The companies contribute the defi ned percentages of gross emoluments of employees to an approved Employees’ Provident Fund and to the Employees’ Trust Fund respectively, which are externally funded.


The employee benefi t liability of the Group is based on the actuarial valuation carried out by an independent actuarial specialist. The actuarial valuations involve making assumptions about discount rates and future salary increases. Given the complexity of the valuation, the underlying assumptions and the long term nature of the liability, the defi ned benefi t obligation is highly sensitive to changes in these assumptions.

All assumptions are reviewed at each reporting date.


The principal assumptions used in determining the cost of employee benefi ts were as bellow:

2019 2018

Discount rate (%) 10.00 - 11.60 8.10 - 12.00 Future salary increases (%) 5.00 - 8.10 7.50 - 10.00

42.1 Sensitivity to assumptions used

If there is a one percentage point changes in the assumptions, it would have the following effect:


Effect on the defi ned benefi t obligation liability:Increase by one percentage point in discount rate (36,413) (36,271) (4,784) (2,801)Decrease by one percentage point in discount rate 41,017 39,389 1,199 2,993

Effect on the defi ned benefi t obligation liability:Increase by one percentage point in salary increment rate 46,191 43,577 1,573 3,226 Decrease by one percentage point in salary increment rate (41,639) (40,985) (5,129) (3,070)

42.2 Maturity analysis of the payments

The following payments are expected on account of employees benefi t liabilities in future years.


- within the next 12 months 273,872 250,575 10,219 9,070 - between 1 and 2 years 297,940 272,791 13,288 11,926 - between 3 and 5 years 324,412 316,217 51,383 39,321 - between 6 and 10 years 143,886 133,255 5,387 6,028 - beyond 10 years 41,210 40,050 832 1,907

Total expected payments 1,081,320 1,012,888 81,109 68,252

42.3 Weighted average durations of service

The Group’s and the company’s weighted average durations of service in is 4.56 years (2018 - 6.37 years) and 3.95 years (2018 - 4.47 years) respectively.



43 OTHER DEFERRED LIABILITIES

ACCOUNTING POLICY

Deferred revenue

Deferred revenue is the money received for goods or services which have not yet been delivered. According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted to revenue.

Warranty

Provisions for warranty related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on historical experience and revised annually.


Within one yearDeferred revenue 100,984 189,671 36,036 36,036 Warranty provision 41,716 37,594 - -

142,700 227,265 36,036 36,036

After one yearDeferred revenue 147,459 127,635 75,676 111,712 Warranty provision 1,382 - - -

148,841 127,635 75,676 111,712

Total other deferred liabilities 291,541 354,900 111,712 147,748

44 OTHER NON-CURRENT FINANCIAL LIABILITIES


Security deposits 4,426 11,723 - - Advances received 110,779 110,779 - - Payable to related party - - 186,200 186,200

115,205 122,502 186,200 186,200

45 TRADE AND OTHER PAYABLES

ACCOUNTING POLICY

Trade payables are the aggregate amount of obligations to pay for goods or services that have been acquired in the ordinary course of business. Trade payable are classifi ed as current liabilities if payment is due within one year.


Trade and other payables 5,281,526 5,203,971 108,894 44,415 Reinsurance payables 444,231 181,006 - - Dividend payable 634,417 71,845 - - Sundry creditors including accrued expenses 2,068,081 1,811,755 - -

8,428,255 7,268,577 108,894 44,415


46 OTHER CURRENT FINANCIAL LIABILITIES


Loans* 20,732,979 17,913,513 7,759,444 4,997,247 Commercial papers 2,386,289 5,684,635 2,244,431 5,529,108 Financial liabilities at fair value through profi t or loss 46.1 9,357 9,357 - -

23,128,625 23,607,505 10,003,875 10,526,355

* Group loan outstanding balance reflects money market loan payables and import loans.

46.1 Financial liabilities at fair value through profit or loss

Softlogic Holdings PLC (“SH”), Softlogic Capital PLC (“SC”) and Softlogic Life Insurance PLC (“SLI”) entered into a “Shareholders Agreement” and “Share Purchase Agreement” dated 20 December 2012 as amended 13 February 2013 with Deutsche Investitions - Und Entwicklungsgesellschaft MBH (“DEG”) and Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (“FMO”) to sell 19% of the ordinary shares of SLI, held by SH to FMO and 19% of the SLI ordinary shares held by SC to DEG. As per the above agreements, SC has granted a ‘Put Option’ to FMO and DEG which will be valid for a three year period with effect from 7 March 2017 to repurchase 38% of the shares held by DEG and FMO based on a ‘Put Option’ price as specifi ed in the amended agreements.

On 20 December 2018, FMO sold its 19% ownership in ordinary shares in SLI to Dalvik Inclusion (Pvt) Ltd (LeapFrog) and Put Option attached to initial “Shareholders Agreement” and “Share Purchase Agreement” dated 20 December 2012 as amended 13 February 2013 granted by SC will remain as valid.

Subsequent to the evaluation of ownership interests on the shares transferred to non-controlling interests (NCI) based on pricing, voting rights, decision making and dividend rights, management determines that SH & SC have transferred full ownership interests to the NCI. Therefore, the investment in SLI shares were derecognised and any liability arising from the put option is recognised based on the option valuation methodology in line with SLFRS - 9 Financial Instruments.

As at 31 March, 2019, the Group had pledged 52,368,036 shares (2018 – 52,368,036 shares) of Asiri Hospital Holdings PLC owned by Softlogic Holdings PLC and 20,000 shares (2018 – 20,000 shares) of Softlogic Life Insurance PLC owned by Softlogic Capital PLC as collateral on the said transaction.

46.1.1 Valuation of obligation on the put option liability

The obligation on the put option liability of the Group is based on the binomial method of valuation carried out by the management of Softlogic Capital PLC. The principal inputs used in determining the liability were:

GroupAs at 31 March 2019 2018

Continuous compounded risk free rate (%) 10.40 10.34 Annualised volatility (%) 37.00 42.63 Appraisal value (Rs.) 39.73 36.82 Probability to move up (Pu) of the option value (%) 90.00 90.00 Probability to move down (Pd) of the option value (%) 10.00 10.00 Upward movement of the appraisal value (%) 1.30 1.35 Downward movement of the appraisal value (%) 0.77 0.74

Risk free rate - Rate of return of an investment with no risk of fi nancial lossAppraisal value - Based on a valuation performed by an independent valuer



46.1.2 Sensitivity of assumptions used

A one percentage point change in the assumptions would have the following effect:


Effect on the put option obligation liability:Increase by one percentage point in risk free rate (53) (119)Decrease by one percentage point in risk free rate 53 122

Effect on the put option obligation liability:Increase by one percentage point in appraisal value (350) (273)Decrease by one percentage point in appraisal value 350 273

Effect on the put option obligation liability:Increase by one percentage point in probability to move up of the option value (1,913) (1,840)Decrease by one percentage point in probability to move up of the option value 2,093 2,174

47 OTHER CURRENT LIABILITIES

ACCOUNTING POLICY

The Group classifies all non-financial current liabilities under other current liabilities. These include non-refundable deposits and other tax payables. These liabilities are recorded at amounts expected to be set-off at the reporting date.


Advances received 405,275 435,488 - - Taxes payables 298,243 184,939 26,482 32,015 Other liabilities 466,174 619,634 19,711 18,170 Other deferred liabilities 43 142,700 227,265 36,036 36,036

1,312,392 1,467,326 82,229 86,221

48 RELATED PARTY TRANSACTIONS

The Companies within the Group disclosed under the Corporate Directory engage in trading transactions under relevant commercial terms and conditions.

Outstanding current account balances at year end are unsecured an interest free and settlement occurs in cash. Interest bearing borrowings are on predetermined interest rates and terms.

48.1 Amounts due from related parties


Subsidiaries 48.3 - - 14,174,694 8,588,380 Equity accounted investees 48.4 13,494 609 1,666 - Key Management Personnel 198 198 - -

13,692 807 14,176,360 8,588,380


48.2 Amounts due to related parties


Subsidiaries 48.3 - - 14,679 15,885 Equity accounted investees 48.5 - 5,074 - - Key Management Personnel 2,731 2,492 1,992 1,992

2,731 7,566 16,671 17,877

48.3 Subsidiaries

CompanyIn Rs. ‘000 Amount due to Amount due from As at 31 March 2019 2018 2019 2018

Ceysand Resorts Ltd 114 - - 2,833 Future Automobiles (Pvt) Ltd - - 62,630 62,302 Softlogic Australia (Pty) Ltd - - 10,483 3,974 Softlogic Automobiles (Pvt) Ltd - - 7,417 8,635 Softlogic B P O Services (Pvt) Ltd - - 133,774 119,501 Softlogic Brands (Pvt) Ltd - - 241 189 Softlogic City Hotels (Pvt) Ltd - - 973,442 973,444 Softlogic Communication Services (Pvt) Ltd - - 5,789 7,585 Softlogic Communications (Pvt) Ltd - - 645 - Softlogic Computers (Pvt) Ltd - 2 - - Softlogic Corporate Services (Pvt) Ltd 912 877 - - Softlogic Destination Management (Pvt) Ltd - - 6,696 6,702 Softlogic Healthcare Holdings Ltd - - 25,022 - Softlogic Information Technologies (Pvt) Ltd 12,640 13,146 - - Softlogic International (Pvt) Ltd 13 - - - Softlogic Mobile Distribution (Pvt) Ltd - - 6,501 - Softlogic Properties (Pvt) Ltd - - 342,311 357,297 Softlogic Restaurants (Pvt) Ltd - - 1,179 212 Softlogic Retail (Pvt) Ltd - - 169 39,734 Softlogic Retail Holdings (Pvt) Ltd 1,000 - - - Softlogic Retail One (Pvt) Ltd - 1,000 - - Softlogic Rewards (Pvt)Ltd - - 943 - Softlogic Solar (Pvt) Ltd - - 34,613 34,613 Softlogic Supermarkets (Pvt) Ltd - 860 135,554 -

14,679 15,885 1,747,409 1,617,021 Less - Provision for impairment - - (101,281) (96,914)

14,679 15,885 1,646,128 1,520,107



48.3 Subsidiaries

CompanyIn Rs. ‘000 Loans received Loans given As at 31 March 2019 2018 2019 2018

Ceysand Resorts Ltd - - - 144,246 Cotton Collections (Pvt) Ltd - - 4,917 - Future Automobiles (Pvt) Ltd - - 1,059,646 683,108 Odel PLC - - 491,170 76,443 Softlogic Automobiles (Pvt) Ltd - - 134,489 119,359 Softlogic Brands (Pvt) Ltd - - 124,089 98,828 Softlogic City Hotels (Pvt) Ltd - - 174,936 68,451 Softlogic Communications (Pvt) Ltd - - 4,730 - Softlogic Destination Management (Pvt) Ltd - - 39,719 31,657 Softlogic Properties (Pvt) Ltd - - 68,639 68,639 Softlogic Restaurants (Pvt) Ltd - - 658,732 476,812 Softlogic Retail (Pvt) Ltd - - 3,265,632 5,628,599 Softlogic Retail Holdings (Pvt) Ltd - - 6,829,736 -

- - 12,856,435 7,396,142 Less - Provision for impairment - - (327,869) (327,869)

- - 12,528,566 7,068,273 14,679 15,885 14,174,694 8,588,380

48.4 Amounts due from related parties


Equity accounted investeesJendo Innovations (Pvt) Ltd 1,666 - 1,666 - Asiri A O I Cancer Centre (Pvt) Ltd 9,683 - - - Sabre Travel Network Lanka (Pvt) Ltd 2,145 609 - -

13,494 609 1,666 -

48.5 Amounts due to related parties


Equity accounted investeesGerry's Softlogic Pakistan - 5,074

- 5,074


48.6 Transactions with related parties


Subsidiaries(Purchases)/ sales of goods - - (19,378) (14,301)(Receiving) / rendering of services - - 559,546 623,478 (Purchases) / sale of property plant & equipment - - (1,378) (37,733)Loans given/ (obtained) - - 2,580,671 3,024,616 Interest received / (paid) - - 1,148,937 829,547 Rent received / (paid) - - 55,303 56,900 Dividend received - - 479,712 889,998 Profi t on disposal of shares - - (10,575) 4,588,114 Guarantee charges received - - 140,393 181,887 Guarantees given/ received - - 23,282,722 22,611,617

Equity Accounted Investees(Purchases) / sale of property plant & equipment 16,651 11,296 - - (Receiving) / rendering of services 22,365 698 12,153 10,898 Interest received / (paid) 116 - 116 - Dividend received - - 35,045 3,015

Key Management PersonnelLoans given/ (received) (2,533) (2,294) (1,992) (1,992)Guarantees given/ (obtained) (410,000) (510,000) - (100,000)Loans given/ (customer deposits received) (47,617) (44,853) - - Advances given/ (received) (251,720) (160,455) - - (Purchases)/ sales of goods 22,401 - - - (Receiving)/ rendering of services 4,756 1,257 - - Interest paid on customer deposits 7,868 3,579 - -

Close family Members of KMP(Receiving)/rendering of services - - - -

48.7 Compensation of Key Management Personnel

Key management personnel include members of the Board of Directors of Softlogic Holdings PLC and its subsidiary companies.


Short term employee benefi ts 402,470 288,693 54,010 42,225 Post-employment benefi ts 60,457 44,413 14,187 12,750

462,927 333,106 68,197 54,975



49 OPERATING SEGMENT INFORMATION

ACCOUNTING POLICY

The Group’s internal organisation and management is structured based on individual products and services which are similar in nature and process and where the risks and returns are similar. The operating segments represent this business structure.

The Group is thus organised into business units based on their products and services and has seven operating business segments as follows:


The information Technology operating segment comprises the areas of software development, hardware and system software solutions, market specific ICT solutions and office automation solutions.

Leisure and Property

The leisure and Property operating segment comprises one five star hotel, one four star hotel, destination management and development/sale of residential apartments.

Retail

The Retail operating segment comprises consumer electronics and durables, branded apparels & fashion, telecommunication and quick service restaurants.

49.1 Revenue and profit

In Rs. ‘000 Information Technology Leisure & Property RetailFor the year ended 31 March 2019 2018 2019 2018 2019 2018


Revenue

Total revenue 4,730,418 4,147,724 3,298,678 2,718,660 39,839,827 37,574,985

Inter Group (690,909) (518,788) (170,380) (133,237) (2,117,274) (2,138,192)

Total external revenue 4,039,509 3,628,936 3,128,298 2,585,423 37,722,553 35,436,793

Results from operating activities 300,821 381,825 65,564 (141,980) 3,219,874 3,096,034

Finance income 318 567 (721) 18,499 135,898 76,927

Finance expenses (129,531) (83,675) (916,317) (548,155) (3,385,791) (2,425,020)

Change in insurance contract liabilities - - - - - -

Change in contract liability due to transfer of one off surplus - - - - - -

Change in fair value of investment property - - - - 245,000 198,000

Share of profi t of equity accounted investees - - - - - -

Profi t/ (loss) before taxation 171,608 298,717 (851,474) (671,636) 214,981 945,941

Taxation (36,603) (44,946) (5,560) (193,752) (63,524) (179,506)

Profi t/ (loss) for the year 135,005 253,771 (857,034) (865,388) 151,457 766,435

Depreciation of property, plant & equipment (PPE) 60,578 72,905 606,076 589,423 716,504 498,172

Amortisation of lease rentals paid in advance - - - - 119 79

Amortisation / impairment of intangible assets 16,748 29,820 21,760 20,683 77,794 70,680

Retirement benefi t obligations and related cost 18,868 20,403 8,827 10,006 41,563 44,418

Purchase and construction of PPE 42,084 29,111 110,097 359,009 2,027,758 1,224,592

Additions to intangible assets 100,427 98,343 2,962 17,421 35,209 138,152


Automobiles

The Automobile operating segment deals in branded motor vehicles and ancillary services.

Financial Services

The Financial Services operating segment offers a complete range of financial solutions including some banking related services, insurance, stock broking, debt trading, fund management and leasing.

Healthcare Services

The Healthcare Services operating segment comprises a leading private hospital chain providing private healthcare and laboratory services.

Others

This sector consists of Softlogic Holdings PLC, which provides ancillary services to Group companies.

Segment information has been prepared in conformity with the accounting policies adopted for preparing and presenting the consolidated Financial Statements of the Group.

The Board of Directors monitors the operating results of its business units separately for the purpose of making decisions about resource allocations and performance assessments.

Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the consolidated Financial Statements.

Automobiles Financial Services Healthcare Services Others Group 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

3,203,701 1,336,977 13,690,752 11,068,797 13,884,945 12,412,747 678,287 677,335 79,326,608 69,937,225

(67,525) (66,561) (62,033) (7,884) (410,263) (387,569) (665,620) (666,079) (4,184,004) (3,918,310)

3,136,176 1,270,416 13,628,719 11,060,913 13,474,682 12,025,178 12,667 11,256 75,142,604 66,018,915

169,680 (64,256) 1,716,874 1,787,616 3,195,072 3,425,945 (307,615) (178,475) 8,360,270 8,306,709

164 176 1,182,443 912,225 43,655 85,020 37,217 10,391 1,398,974 1,103,805

(204,852) (126,187) (522,736) (265,351) (825,400) (869,483) (1,131,660) (1,641,995) (7,116,287) (5,959,866)

- - (1,152,037) (1,374,037) - - - - (1,152,037) (1,374,037)

- - - 798,004 - - - - - 798,004

- - - - - - - - 245,000 198,000

- - - - (4,213) (6,496) 11,293 26,283 7,080 19,787

(35,008) (190,267) 1,224,544 1,858,457 2,409,114 2,634,986 (1,390,765) (1,783,796) 1,743,000 3,092,402

452 12,619 2,019,845 424,083 (578,326) (696,506) (89,000) (136,351) 1,247,284 (814,359)

(34,556) (177,648) 3,244,389 2,282,540 1,830,788 1,938,480 (1,479,765) (1,920,147) 2,990,284 2,278,043

35,940 40,141 189,755 174,536 876,413 872,062 34,852 37,318 2,520,118 2,284,557

- - - - 16,387 1,037 - - 16,506 1,116

- - 213,599 225,538 9,135 8,522 2,542 2,825 341,578 358,068

1,660 2,349 43,244 30,726 93,706 97,692 14,068 13,359 221,936 218,953

14,665 23,644 187,567 231,150 3,358,730 2,619,809 2,304 36,545 5,743,205 4,523,860

- - - 191 - - 2,636 2,378 141,234 256,485



49.2 Segment assets and liabilities

Information Technology Leisure & Property RetailAs at 31 March 2019 2018 2019 2018 2019 2018

Property, plant and equipment 83,811 98,000 10,554,530 11,011,804 6,743,496 5,223,131 Lease rentals paid in advance - - - 212,621 3,686 3,804 Investment property 204,000 204,266 1,791,640 1,612,440 5,640,537 5,013,300 Intangible assets 411,055 327,033 24,541 29,940 374,596 415,426 Non-current fi nancial assets - - - - 1,278,448 797,426 Rental receivable on lease assets and hire purchase - - - - - - Other non-current assets 3,925 2,160 2,649,527 627,863 547,115 287,010 Segment non-current assets 702,791 631,459 15,020,238 13,494,668 14,587,878 11,740,097

Investments in equity accounted investees Goodwill Intangible assets through business combinations Deferred tax assets Eliminations/ adjustmentTotal non-current assets 702,791 631,459 15,020,238 13,494,668 14,587,878 11,740,097

Inventories 531,063 456,171 971,622 1,164,933 8,203,800 8,223,095 Trade and other receivables 974,822 991,428 316,809 297,216 9,210,141 8,921,436 Loans and advances - - - - - - Rental receivable on lease assets and hire purchase - - - - - - Other current assets 52,258 52,398 146,693 231,342 2,532,751 1,520,605 Short term investments 100 103 371 342 22,770 30,960 Cash in hand and at bank 39,858 62,553 100,246 417,660 1,496,718 983,373 Segment current assets 1,598,101 1,562,653 1,535,741 2,111,493 21,466,180 19,679,469 Amounts due from related partiesTotal current assets 1,598,101 1,562,653 1,535,741 2,111,493 21,466,180 19,679,469 Total assets

Insurance contract liabilities - - - - - - Interest bearing borrowings 47,588 70,342 7,476,587 5,873,172 3,357,662 3,095,615 Public deposits - - - - - - Employee benefi t liabilities 109,866 109,068 26,950 23,410 216,982 212,367 Other deferred liabilities 19,641 9,664 - - 53,524 6,260 Other non-current fi nancial liabilities - - 110,779 115,902 4,426 - Segment non-current liabilities 177,095 189,074 7,614,316 6,012,484 3,632,594 3,314,242 Deferred tax liabilitiesTotal non-current liabilities 177,095 189,074 7,614,316 6,012,484 3,632,594 3,314,242

Trade and other payables 1,166,476 954,136 795,956 790,782 2,821,000 3,332,880 Other current fi nancial liabilities 725,960 602,661 28,273 231,832 21,222,784 15,751,436 Current portion of interest bearing borrowings 26,840 25,232 1,185,341 857,084 1,653,817 1,604,285 Other current liabilities 109,471 121,490 376,304 318,077 325,095 449,194 Public deposits - - - - - - Bank overdrafts 98,280 57,607 615,122 591,452 1,654,093 1,448,274 Segment current liabilities 2,127,027 1,761,126 3,000,996 2,789,227 27,676,789 22,586,069 Income tax liabilities Amounts due to related parties Eliminations/ adjustmentTotal current liabilities 2,127,027 1,761,126 3,000,996 2,789,227 27,676,789 22,586,069 Total liabilities

Total segment assets 2,300,892 2,194,112 16,555,979 15,606,161 36,054,058 31,419,566

Total segment liabilities 2,304,122 1,950,200 10,615,312 8,801,711 31,309,383 25,900,311


Automobiles Financial Services Healthcare Services Others Group

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

295,231 316,546 1,158,622 1,133,101 20,792,877 17,130,704 171,800 209,100 39,800,367 35,122,386 - - - - 785,409 801,796 - - 789,095 1,018,221 - - - - 193,724 - 744,000 704,000 8,573,901 7,534,006 - - 83,376 106,706 165 - 686 593 894,419 879,698 - - 11,554,738 9,421,192 323,946 345,762 - - 13,157,132 10,564,380 - - 1,135,517 1,042,759 - - - - 1,135,517 1,042,759

9,387 4,637 3,500 3,500 2,333 3,333 - - 3,215,787 928,503 304,618 321,183 13,935,753 11,707,258 22,098,454 18,281,595 916,486 913,693 67,566,216 57,089,953

78,249 111,885 4,604,797 4,240,503 3,265,318 3,490,163 3,247,950 749,406

(84,995) (292,789) 304,618 321,183 13,935,753 11,707,258 22,098,454 18,281,595 916,486 913,693 78,677,537 65,389,121

355,773 751,257 174,243 131,743 452,520 523,340 - - 10,689,021 11,250,539 1,292,189 60,709 1,846,788 1,011,716 684,894 539,401 25,977 16,224 14,351,620 11,838,130

- - 11,664,401 13,098,641 - - - - 11,664,401 13,098,641 - - 835,051 523,777 - - - - 835,051 523,777

305,572 41,808 1,157,262 1,217,730 1,120,891 368,135 28,286 17,033 5,343,713 3,449,051 1,500 1,500 5,893,821 6,234,216 - 719,470 130,834 134,017 6,049,396 7,120,608 6,706 6,799 1,286,337 1,169,241 242,986 580,189 23,499 2,932,018 3,196,350 6,151,833

1,961,740 862,073 22,857,903 23,387,064 2,501,291 2,730,535 208,596 3,099,292 52,129,552 53,432,579 13,692 807

1,961,740 862,073 22,857,903 23,387,064 2,501,291 2,730,535 208,596 3,099,292 52,143,244 53,433,386 130,820,781 118,822,507

- - 8,309,628 7,192,591 - - - - 8,309,628 7,192,591 13,693 38,710 1,507,385 2,647,702 5,894,411 6,549,883 6,817,719 7,453,907 25,115,045 25,729,331

- - 4,601,829 3,237,633 - - - - 4,601,829 3,237,633 6,369 7,694 154,017 125,400 484,451 465,672 82,685 69,277 1,081,320 1,012,888

- - - - - - 75,676 111,711 148,841 127,635 - 6,600 - - - - - - 115,205 122,502

20,062 53,004 14,572,859 13,203,326 6,378,862 7,015,555 6,976,080 7,634,895 39,371,868 37,422,580 3,306,076 2,829,959

20,062 53,004 14,572,859 13,203,326 6,378,862 7,015,555 6,976,080 7,634,895 42,677,944 40,252,539

68,482 34,192 1,588,348 1,259,578 1,952,559 854,982 35,434 42,027 8,428,255 7,268,577 1,282,132 569,580 1,134,357 559,357 803,609 1,054,533 10,003,875 10,526,355 35,200,990 29,295,754

26,361 28,408 1,269,778 519,991 1,662,317 1,225,111 3,958,498 2,984,530 9,782,952 7,244,641 880 709 397,166 491,039 20,833 18,404 82,643 68,413 1,312,392 1,467,326

- - 12,385,059 13,063,838 - - - - 12,385,059 13,063,838 40,062 36,144 1,287,746 675,885 3,891,219 1,682,107 174,702 153,748 7,761,224 4,645,217

1,417,917 669,033 18,062,454 16,569,688 8,330,537 4,835,137 14,255,152 13,775,073 74,870,872 62,985,353 351,689 348,372

2,731 7,566 (12,072,365) (5,688,249)

1,417,917 669,033 18,062,454 16,569,688 8,330,537 4,835,137 14,255,152 13,775,073 63,152,927 57,653,042 105,830,871 97,905,581

2,266,358 1,183,256 36,793,654 35,094,322 24,599,745 21,012,130 1,125,082 4,012,985 119,695,768 110,522,532

1,437,979 722,037 32,635,313 29,773,014 14,709,399 11,850,692 21,231,232 21,409,968 114,242,740 100,407,933



50 CONTINGENT LIABILITIES

ACCOUNTING POLICY

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only if it is virtually certain.

The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects, where appropriate, the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

All contingent liabilities are disclosed as a note to the Financial Statements unless the outfl ow of resources is remote. A contingent liability recognised in a business combination is initially measured at its fair value.

Subsequently, it is measured at the higher of:

• the amount that would be recognised in accordance with the general guidance for provisions above (LKAS 37) or

• the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the guidance for revenue recognition

Contingent assets are disclosed where infl ow of economic benefi t is probable.

As at reporting date, there were no signifi cant contingent liabilities at the date of the statement of fi nancial position which require adjustment to or disclosure in the Financial Statements, other than disclosed below.

No provision has been made in respect of the contingent liabilities stated below for the reasons given.

50.1 Asiri Surgical Hospital PLC

A dispute has arisen with the Department of Inland Revenue on the tax exemption applicable as per the agreement between Asiri Surgical Hospital PLC and the Board of Investment (BOI) in 2000.

Since there is litigation in the Court of Appeal in CA (Writ) 386/2016 with regard to this matter, in accordance with Paragraph 92 of LKAS 37, the Group is unable to provide further information on this and associated risks, in order not to impair the outcome and/ or prejudice the subsidiary’s position in this matter. The aforesaid matter is coming up for argument on 31 October 2019 at the Court of Appeal.

50.2 Asiri Hospital Holdings PLC, Asiri Surgical Hospital PLC and Central Hospital Ltd

Pending litigations against Asiri Hospital Holdings PLC , Asiri Surgical Hospital PLC and Central Hospital Ltd with a maximum liability of Rs. 41.20 Mn, Rs. 105.00 Mn and Rs. 100.00 Mn respectively exist as at 31 March 2019 (2018 - Asiri Hospital Holdings PLC : Rs. 41.20 Mn, Asiri Surgical Hospital PLC : Rs. 100.00 Mn and Central Hospital Ltd - Rs. 100.00 Mn).

Although there can be no assurance, the Directors believe, based on the information currently available, that the resolution of such legal processes are not likely to have a material adverse effect on the companies or the Group.

50.3 Asiri Central Hospitals Ltd

H.C. (Civil) 417/2015/MR - Krishnan Thangaraj Vs. Asiri Central Hospitals Ltd, Oraz International Property Developers and Construction (Pvt) Ltd and H.G. Shalika Perera relating to a permanent injunction restraining the payment of any commission on the sale of the land and premises bearing assessment no. 37, Horton Place, Colombo 07 to P.P.M. Edwards.

An enjoining order was issued restraining above at the fi rst instance.

50.4 Softlogic Life Insurance PLC (SLI)

Value Added Tax (VAT)

VAT Assessments were received by Softlogic Life Insurance PLC in April 2013 and March 2016 for the taxable periods ended 31 December 2010 and 31 March 2014, amounting to Rs. 45.90 Mn and Rs. 57.40 Mn respectively.

The Company has fi led an appeal in July 2015 on the basis that the underlying computation includes items which are exempt/ out of scope of the Value Added Tax Act. The Commissioner General of Inland Revenue has determined the assessment and the Company has appealed to the Tax Appeals Commission and awaits the fi nal decision. For the VAT assessment issued for the quarter ended 31 March 2014, the Company has fi led an appeal in April 2016 on the basis that the underlying computation includes items which are exempt/ out of scope of the Value Added Tax Act. The Company is awaiting the CGIR determination.

Value Added Tax on Financial Services

The Company has received a tax assessment on Value Added Tax on Financial Services in July 2018 for the taxable period ended 31 December 2014, amounting to Rs. 68.70 Mn. The Company has fi led an appeal in August 2018 on the basis that the underlying computation includes items which are out of scope of the Value Added Tax Act. The Company is awaiting the CGIR determination.


Life Insurance Taxation

The Commissioner General of Inland Revenue has issued its determination notices on appeals fi led for Life Insurance taxation for the year of assessment 2010/11, 2011/12 and 2012/13 amounting to Rs. 60.33 Mn. The Company has appealed to the Tax Appeals Commission and awaits the fi nal decision.

Further the SLI has received tax assessment for Life Insurance taxation for the year of assessment 2013/14, 2014/15, 2015/16 and 2016/17 amounting to Rs. 579.53 Mn with a penalty of Rs. 714.53 Mn. The Company has lodged a valid appeal against the said assessment.

Based on the information available and the advice of the tax consultants, the Directors are confi dent that the resolution of this contingency is unlikely to have a material adverse effect on the company or the Group.

51 CAPITAL AND OTHER COMMITMENTS

51.1 Capital commitments


Capital commitments approved but not provided for 9,080,052 9,370,995 Capital commitments approved but not contracted 8,310,000 8,310,000

51.2 Lease commitments


Lease rentals due on non cancellable operating lease- within one year 1,651,123 758,056 - between one and fi ve years 5,713,964 2,318,961 - after fi ve year 1,928,541 1,555,201

51.3 Guarantees issued and in-force, and commitments for unutilised facilities


Guarantees issued and in-force 1,952,507 1,948,065 23,282,722 22,611,617 Commitment for unutilised facilities 161,016 13,637 - -



52 UTILISATION OF FUNDS RAISED THROUGH PRIVATE PLACEMENT AND RIGHTS ISSUE OF SHARES

Total Funds raised through private placement in FY 1718 and rights issue in FY 1819 amounting to Rs. 3,106.38 Mn and Rs. 3,924.85 Mn respectively was fully utilised for the objectives stated in the circular to shareholders issued on respect of the above.

Objective number

Objective as per circular

Amount allocated as per circular in Rs.

Proposed date of utilisation as per circular

Amount allocated from proceeds in Rs. (A)

% of total proceeds

Amount utilised in Rs. (B)

% of utilised against

allocation [(B)/(A)]

Clarifi cation if not fully utilised including if not utilised where are the funds invested (e.g. whether lent to related parties)

Utilisation of funds raised through private placement of sharesSettlement of commercial paper 3,106,382,715

Within two months 3,106,382,715 - 3,106,382,715 100.00 NA

Utilisation of funds raised through rights issue of shares1 Settlement of

commercial paper

"Maximum of 3,923,851,838"

Within three months

Maximum of 3,923,851,838 - 3,173,851,838 80.89 NA

2 Short term loan settlement - Seylan Bank

"Maximum of 3,923,851,838"

Within three months

Maximum of 3,923,851,838 - 750,000,000 19.11 NA

53 POST BALANCE SHEET EVENTS

There were no signifi cant events subsequent to the date of the statement of fi nancial position, which require disclosure in the Financial Statements.


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2.00

%58

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om D

ecem

ber

2016

15,

593

20,

639

Term

loan

AWPL

R +

2.00

%59

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om D

ecem

ber

2017

21,

968

27,

959

Term

loan

AWPL

R +

2.00

%57

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om M

arch

20

18

22,

681

28,

351

Hat

ton

Nat

iona

l Ba

nk P

LCTe

rm lo

anAW

PLR

+ 1.

75%

60 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om A

pril 2

017

72,

000

96,

000

-

Corp

orat

e gu

aran

tee

from

Sof

tlogi

c Ho

ldin

gs P

LC

for R

s. 1

20.0

0 M

nTe

rm lo

anAW

PLR

+ 2.

00%

48 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om S

epte

mbe

r 20

17

2,7

19

3,8

44

-

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

AWPL

R +

2.00

%54

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter a

gra

ce

perio

d of

6 m

onth

s fro

m

Dece

mbe

r 201

6

118

,600

1

63,0

00

200

.00

M

ortg

age

bond

for R

s. 2

00.0

0 M

n ov

er c

redi

t and

de

bit c

ard

sale

s re

ceiva

bles

of a

ll out

lets

of t

he

Softl

ogic

Res

taur

ants

(Pvt

) Ltd

Bank

of C

eylo

nTe

rm lo

anAW

PLR

+ 1.

50%

48 m

onth

ly in

stal

lmen

ts

com

men

cing

afte

r a g

race

pe

riod

of 1

2 m

onth

s fro

m

Febr

uary

201

8

297

,997

8

5,22

7 -

Co

rpor

ate

guar

ante

e fro

m S

oftlo

gic

Hold

ings

PLC

fo

r Rs.

500

.00

Mn

Softl

ogic

Pr

oper

ties

(Pvt

) Lt

d

Unio

n Ba

nk o

f Co

lom

bo P

LCTe

rm lo

anAW

PLR

+ 3.

00%

2 eq

ual q

uarte

rly in

stal

lmen

ts

com

men

cing

afte

r 31

mon

ths

of g

race

per

iod

from

Jan

uary

20

17

307

,396

3

00,0

00

600

.00

a)

Prim

ary m

ortg

age

over

apa

rtmen

t pro

ject

ass

ets

cons

truct

ed b

y Sof

tlogi

c Pr

oper

ties

(Pvt

) Ltd

. for

Rs

. 600

Mn

b)

Corp

orat

e gu

aran

tee

from

Sof

tlogi

c Ho

ldin

gs P

LC

for R

s. 6

00.0

0 M

nTe

rm lo

an -

243

,534

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ogic

B P

O

Serv

ices

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d

Sam

path

Ban

k PL

CTe

rm lo

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PLR

+ 2.

50%

60 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om D

ecem

ber

2016

64,

105

88,

000

-

Corp

orat

e gu

aran

tee

from

Sof

tlogi

c Ho

ldin

gs P

LC

for R

s. 1

20.0

0 M

n


Com

pany

Le

ndin

g In

stitu

tion

Nat

ure

of

faci

lity

Inte

rest

Ra

teRe

paym

ent T

erm

Out

stan

ding

Bal

ance

C

arry

ing

valu

e of

tang

ible

co

llate

rals

Secu

rity

201

9 2

018

Rs.

'000

R

s. '0

00

Rs.

Mn.

Softl

ogic

Su

perm

arke

ts

(Pvt

) Ltd

Bank

of C

eylo

nTe

rm lo

anAW

PLR

+ 1.

75%

60 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng a

fter a

gra

ce

perio

d of

12

mon

ths

com

men

cing

from

Oct

ober

20

18

395

,096

-

271

.96

a)

10,4

20,0

00 s

hare

s of

Ode

l PLC

ow

ned

by S

oftlo

gic

Reta

il Hol

ding

s (P

vt) L

td

b)

Corp

orat

e gu

aran

tee

from

Sof

tlogi

c Ho

ldin

gs P

LC

for R

s. 5

00.0

0 M

nSo

ftlog

ic

Capi

tal P

LCSa

mpa

th B

ank

PLC

Term

loan

AWPL

R +

2.75

%5

annu

al in

stal

lmen

ts

com

men

cing

afte

r a g

race

pe

riod

of 1

2 m

onth

s co

mm

encin

g fro

m M

arch

201

7

912

,000

9

32,0

00

3,7

62.4

9

110,

361,

920

shar

es o

f Sof

tlogi

c Li

fe In

sura

nce

PLC

and

13,2

44,9

81 s

hare

s of

Sof

tlogi

c Fi

nanc

e PL

C ow

ned

by S

oftlo

gic

Capi

tal P

LC

Term

loan

AWPL

R +

2.75

%4

annu

al in

stal

lmen

ts

com

men

cing

from

Apr

il 201

8 4

8,00

0 -

Nat

ions

Tru

st

Bank

PLC

Term

loan

AWPL

R +

2.75

%Bu

llet p

aym

ent a

t the

mat

urity

af

ter a

gra

ce p

erio

d of

60

mon

ths

com

men

cing

from

M

arch

201

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340

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3

40,0

00

1,1

08.4

5

35,1

88,8

40 s

hare

s of

Sof

tlogi

c Li

fe In

sura

nce

PLC

owne

d by

Sof

tlogi

c Ca

pita

l PLC

Softl

ogic

Fi

nanc

e PL

CCo

mm

erci

al

Bank

of C

eylo

n PL

C

Term

loan

AWPL

R +

2.50

%48

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om O

ctob

er

2015

32,

301

93,

700

-

Seyl

an B

ank

PLC

Term

loan

AWPL

R +

2.00

%48

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om M

arch

20

16

58,

300

119

,788

3

00.0

0

Mor

tgag

e bo

nd fo

r Rs.

300

.00

Mn

over

per

form

ing

leas

e an

d hi

re p

urch

ase

rece

ivabl

es o

f Sof

tlogi

c Fi

nanc

e PL

CPe

ople

s Ba

nkTe

rm lo

anAW

PLR

+ 3.

50%

24 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Aug

ust

2017

30,

310

132

,000

2

50.0

0

Mor

tgag

e ov

er le

ase

and

hire

pur

chas

e re

ceiva

bles

fo

r Rs.

250

.00

Mn

of S

oftlo

gic

Fina

nce

PLC

Unio

n Ba

nk P

LCTe

rm lo

anAW

PLR

+ 3.

75%

(fl

oor r

ate

- 15

.50%

)

48 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Jun

e 20

18 2

00,6

34

- 2

48.0

0

Mor

tgag

e ov

er lo

ans

rece

ivabl

es o

f Sof

tlogi

c Fi

nanc

e PL

C

Bank

of C

eylo

n- T

rust

1Se

curiti

satio

n13

.75%

36 m

onth

ly in

stal

lmen

ts

com

men

cing

afte

r a g

race

per

iod

of 6

m

onth

s co

mm

enci

ng fr

om

June

201

6

16,

441

214

,843

21

.50

M

ortg

age

over

per

sona

l loan

s re

ceiva

bles

of

Softl

ogic

Fin

ance

PLC

Nat

iona

l Sa

ving

s Ba

nkSe

curiti

satio

n15

.00%

31 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Nov

embe

r 20

18

180

,338

-

220.

00

Mor

tgag

e ov

er le

ase

rece

ivabl

es o

f Sof

tlogi

c Fi

nanc

e PL

C

Hat

ton

Nat

iona

l Ba

nk P

LC -

Trus

t

Secu

ritisa

tion

16.5

4%13

mon

thly

inst

allm

ents

co

mm

enci

ngaf

ter a

gra

ce p

erio

d of

6

mon

ths

com

men

cing

from

M

arch

201

9

186

,293

-

261.

30

Mor

tgag

e ov

er le

ase

rece

ivabl

es o

f Sof

tlogi

c Fi

nanc

e PL

C



Com

pany

Le

ndin

g In

stitu

tion

Nat

ure

of

faci

lity

Inte

rest

Ra

teRe

paym

ent T

erm

Out

stan

ding

Bal

ance

C

arry

ing

valu

e of

tang

ible

co

llate

rals

Secu

rity

201

9 2

018

Rs.

'000

R

s. '0

00

Rs.

Mn.

Asiri

Hos

pita

l H

oldi

ngs

PLC

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

AWPL

R +

0.50

%96

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om A

pril 2

015

1,2

03,7

30

1,5

04,4

40

1,9

24.6

1

74,4

54,0

26 s

hare

s of

Cen

tral H

ospi

tal L

td h

eld

by

Asiri

Hos

pita

l Hol

ding

s PL

CTe

rm lo

anAW

PLR

+ 0.

50%

96 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Apr

il 201

5 2

68,6

29

335

,729

-

Co

rpor

ate

guar

ante

e fro

m A

siri S

urgi

cal H

ospi

tal

PLC

for R

s. 5

50.0

0 M

nTe

rm lo

anAW

PLR

+ 0.

50%

72 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Jul

y 201

4 7

6,77

2 1

38,1

77

375.

00a)

Pr

imar

y con

curre

nt m

ortg

age

bond

for R

s.

100.

00 M

n ov

er p

rope

rty a

t No.

181

, Kiru

la R

oad,

Na

rahe

npita

ow

ned

by A

siri H

ospi

tal H

oldi

ngs

PLC

b)

Seco

ndar

y mor

tgag

e fo

r Rs.

275

.00

Mn

over

pr

oper

ty a

t No.

181

, Kiru

la R

oad,

Nar

ahen

pita

ow

ned

by A

siri H

ospi

tal H

oldi

ngs

PLC

Hat

ton

Nat

iona

l Ba

nk P

LCTe

rm lo

anAW

PLR

+ 1.

25%

48 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om M

arch

20

17

360

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5

48,5

26

-

Sam

path

Ban

k PL

CTe

rm lo

anAW

PLR

+ 0.

50%

60 e

qual

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om D

ecem

ber

2015

72,

754

145

,480

-

Co

rpor

ate

guar

ante

e fro

m A

siri S

urgi

cal H

ospi

tal

PLC

for R

s. 3

63.0

0 M

n

Term

loan

AWPL

R +

0.25

%12

0 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Dec

embe

r 20

15

452

,537

5

19,7

78

452

.54

Se

curit

isatio

n of

all f

utur

e cr

edit/

deb

it ca

rd

rece

ivabl

es o

f Asir

i Hos

pita

l Hol

ding

s PL

C

Term

loan

AWPL

R +

2.00

%10

8 m

onth

ly in

stal

lmen

ts

com

men

cing

afte

r 12

mon

ths

of g

race

per

iod

from

Mar

ch

2019

451

,063

-

884

.54

a)

Third

par

ty p

rimar

y mor

tgag

e bo

nd fo

r Rs.

450

.00

Mn

over

hos

pita

l pro

perty

at N

o. 1

0, W

ackw

ella

Ro

ad, G

alle

ow

ned

by A

siri H

ospi

tal G

alle

(Pvt

) Ltd

(P

revio

usly

know

n as

Hem

as S

outh

ern

Hosp

itals

(P

vt) L

td)

b)

Addi

tiona

l sec

urity

ove

r 100

.0%

of o

rdin

ary s

hare

s of

As

iri H

ospi

tal G

alle

(Pvt

) Ltd

ow

ned

by A

siri H

ospi

tal

Hold

ings

PLC

Asiri

Sur

gica

l H

ospi

tal P

LCCo

mm

erci

al

Bank

of C

eylo

n PL

C

Term

loan

AWPL

R +

0.50

%96

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om A

pril 2

015

255

,958

3

19,6

18

125.

00a)

Pr

imar

y con

curre

nt m

ortg

age

bond

for R

s. 1

25.0

0 M

n ov

er h

ospi

tal p

rope

rty a

t No.

181

, Kiru

la R

oad,

Na

rahe

npita

ow

ned

by A

siri H

ospi

tal H

oldi

ngs

PLC

b)

Corp

orat

e gu

aran

tee

from

Asir

i Hos

pita

l Hol

ding

s PL

C fo

r Rs.

148

.40

Mn

Boar

d of

In

vest

men

tLe

ase

25 ye

ars

com

men

cing

from

FY

200

0/01

22,

057

26,

129

-

Cent

ral H

ospi

tal

Ltd

Bank

of C

eylo

nTe

rm L

oan

AWPL

R +

0.75

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equ

al m

onth

ly in

stal

lmen

ts

com

men

cing

afte

r 24

mon

ths

of g

race

per

iod

from

Jul

y 201

4

391

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5

13,6

02

391

.84

Pr

imar

y con

curre

nt m

ortg

age

over

the

prem

ises

at

No. 1

14, N

orris

Can

al R

oad,

Col

ombo

- 10

ow

ned

by

Cent

ral H

ospi

tal L

tdSa

mpa

th B

ank

PLC

Term

Loa

nAW

PLR

+ 0.

50%

96 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Dec

embe

r 20

15

162

,992

2

03,7

44

-

Corp

orat

e gu

aran

tee

from

Asir

i Hos

pita

l Hol

ding

s PL

C fo

r Rs.

326

.00

Mn

Term

Loa

nAW

PLR

+ 0.

25%

120

mon

thly

inst

allm

ents

co

mm

enci

ng fr

om D

ecem

ber

2015

775

,600

8

90,8

00

775

.60

Se

curit

isatio

n of

all f

utur

e cr

edit/

deb

it ca

rd

rece

ivabl

es o

f Cen

tral H

ospi

tal L

td


Com

pany

Le

ndin

g In

stitu

tion

Nat

ure

of

faci

lity

Inte

rest

Ra

teRe

paym

ent T

erm

Out

stan

ding

Bal

ance

C

arry

ing

valu

e of

tang

ible

co

llate

rals

Secu

rity

201

9 2

018

Rs.

'000

R

s. '0

00

Rs.

Mn.

Asiri

Hos

pita

l M

atar

a (P

vt)

Ltd

Nat

ions

Tru

st

Bank

PLC

Term

loan

AW

PLR

+ 1.

75%

60 m

onth

ly in

stal

lmen

ts

com

men

cing

from

Oct

ober

20

16

49,

860

67,

552

49.

86

As

signm

ent o

ver A

MEX

rece

ivabl

es

Asiri

Hos

pita

l Ka

ndy

(Pvt

) Ltd

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

AWPL

R +

0.50

%90

mon

thly

inst

allm

ents

afte

r a

grac

e pe

riod

of 4

0 m

onth

s fro

m D

ecem

ber 2

015

630

,600

6

30,6

00

-

Corp

orat

e gu

aran

tee

from

Asir

i Hos

pita

l Hol

ding

s PL

C fo

r Rs.

630

.60

Mn

Term

loan

AW

PLR

+ 1.

50%

96 m

onth

ly in

stal

lmen

ts a

fter

a gr

ace

perio

d of

24

mon

ths

from

Sep

tem

ber 2

016

2,1

20,0

00

1,8

87,7

04

-

Corp

orat

e gu

aran

tee

from

Asir

i Hos

pita

l Hol

ding

s PL

C fo

r Rs.

2,1

20.0

0 M

n

Asiri

Hos

pita

l Ga

lle (P

vt) L

td

(pre

viou

sly

know

n as

H

emas

So

uthe

rn

Hos

pita

l (Pv

t) Lt

d)

Sam

path

Ban

k PL

CTe

rm L

oan

AWPL

R +

2.00

%10

8 m

onth

ly in

stal

lmen

ts

com

men

cing

afte

r 12

mon

ths

of g

race

per

iod

from

Mar

ch

2019

200

,000

-

200

.00

a)

Addi

tiona

l mor

tgag

e fo

r Rs.

200

.00

Mn

over

the

prem

ises

at N

o. 1

0, W

ackw

ella

Roa

d, G

alle

ow

ned

by A

siri H

ospi

tal G

alle

(Pvt

) Ltd

(Pre

vious

ly kn

own

as

Hem

as S

outh

ern

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itals

(Pvt

) Ltd

)b)

Ad

ditio

nal s

ecur

ity o

ver 1

00.0

% o

f ord

inar

y sha

res

of A

siri H

ospi

tal G

alle

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(Pre

vious

ly kn

own

as

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as S

outh

ern

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itals

(Pvt

) Ltd

) ow

ned

by A

siri

Hosp

ital H

oldi

ngs

PLC

Hat

ton

Nat

iona

l Ba

nk P

LCTe

rm L

oan

AWPL

R +

0.50

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mon

thly

inst

allm

ents

co

mm

enci

ng a

fter 2

4 m

onth

s of

gra

ce p

erio

d fro

m A

ugus

t 20

13

34,

870

- -

Odel

PLC

Com

mer

cial

Ba

nk o

f Cey

lon

PLC

Term

loan

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SUPPLEMENTARY INFORMATION

Investor Information 224Corporate Directory 226Notice of Meeting 230Form of Proxy 231


INVESTOR INFORMATION

1 GENERAL

Stated Capital as at 31 March 2019 was Rs. 12,119,234,553.00.

2 STOCK EXCHANGE LISTING

The ordinary shares of Softlogic Holdings PLC were listed in the Colombo Stock Exchange of Sri Lanka on 20 June 2011 and the trading commenced on 12 July 2011.

3 PUBLIC SHAREHOLDING

Shares held by the public was 13.72% as at 31 March 2019.The number of public shareholders as at 31 March 2019 was 10,660.Float adjusted market capitalisation as at 31 March 2019 was Rs. 2,618 MnMinimum public holding percentage - The Company is in compliance with this under Option 4 of Listing Rule 7.13.1(a).

4 DISTRIBUTION OF SHAREHOLDING AS AT 31 MARCH 2019

There were 10,676 registered shareholders as at 31 March 2019.

No. of Shares held No. of Shareholders

% of Shareholders

Total Holding

% of Total Holding

1 - 1,000 7,003 65.60 4,229,422 0.36 1,001 - 10,000 3,173 29.72 10,440,128 0.88

10,001 - 100,000 409 3.83 11,486,852 0.96 100,001 - 1,000,000 60 0.56 17,100,753 1.43

Over 1,000,000 31 0.29 1,149,286,054 96.37Total 10,676 100.00 1,192,543,209 100.00

5 ANALYSIS REPORT OF SHAREHOLDERS AS AT 31 MARCH 2019

Category No. of Shareholders

% of Shareholders

Total Holding

% of Total Holding

Individual 10,478 98.15 533,262,864 44.72Institutional 198 1.85 659,280,345 55.28Total 10,676 100.00 1,192,543,209 100.00

Resident 10,632 99.59 809,262,173 67.86 Non-resident 44 0.41 383,281,036 32.14 Total 10,676 100.00 1,192,543,209 100.00


6 TWENTY MAJOR SHAREHOLDERS AS AT 31 MARCH 2019

Shareholder Number of shares 31-03-2019

%

1 Mr. A K Pathirage 477,843,941 40.07 2 Samena Ceylon Holdings Ltd 247,432,455 20.75 3 Mr. H K Kaimal 80,439,792 6.75 4 Mr. R J Perera 75,437,508 6.33 5 Mr. G W D H U Gunawardena 71,333,852 5.98 6 Pemberton Asian Opportunities Fund 57,040,000 4.78 7 Samena Special Situations Fund III L.P. 53,653,654 4.50 8 Samena Special Situations Fund II L.P. 15,000,000 1.26 9 J. B. Cocoshell (Pvt) Ltd 8,068,054 0.68 10 Employees Provident Fund 7,230,500 0.61 11 Mrs. A Selliah 5,252,640 0.44 12 Mr. S J Fancy 4,960,000 0.42 13 Arunodhaya Industries (Private) Limited 4,757,864 0.40 14 Miss. S Subramaniam 4,712,000 0.40 15 Dr. K M P Karunaratne 4,649,968 0.39 16 Mrs. A Kailasapillai 4,512,000 0.38 17 Arunodhaya (Private) Limited 4,400,000 0.37

Arunodhaya Investments (Private) Limited 4,400,000 0.37 18 Mellon Bank N.A-Acadian Frontier Markets Equity Fund 3,837,906 0.32 19 Mr. K Aravinthan 3,801,018 0.32 20 Dr. S Selliah 2,480,000 0.21

7 SHARE TRADING INFORMATION

2018/2019 2017/2018

Highest (Rs.) 25.80 26.20 Lowest (Rs.) 15.90 11.70 Closing (Rs.) 16.00 24.60 Turnover (Rs.) 994,409,695 2,662,901,881 No. of shares Traded 46,917,043 151,984,230 No. of Trades 6,803 12,947

8 EQUITY INFORMATION

2018/2019 2017/2018

Earnings per share (Rs.) 0.09 0.25Dividend per share (Rs.) 0.50 0.65Net Asset Value per share (Rs.) 12.30 14.05


CORPORATE DIRECTORY

Name of the Company Date of Registration

Registered office

Softlogic Holdings PLC 25/02/1998 No. 14, De Fonseka Place, Colombo 05

1 Asiri A O I Cancer Centre (Private) Limited 17/03/2017 No. 21, Kirimandala Mawatha, Colombo 05

2 Asiri Central Hospitals Ltd 07/09/1992 No. 114, Norris Canal Road, Colombo 10

3 Asiri Diagnostics Services (Pvt) Ltd 19/09/1995 No. 181, Kirula Road, Colombo 05

4 Asiri Hospital Holdings PLC 29/09/1980 No. 181, Kirula Road, Colombo 05

5 Asiri Hospital Galle (Private) Limited (Formerly known as Hemas Southern Hospitals (Pvt) Ltd)

29/05/2007 No. 181, Kirula Road, Colombo 05

6 Asiri Hospital Kandy (Pvt) Ltd 16/03/2007 No. 21, Kirimandala Mawatha, Colombo 05

7 Asiri Hospital Matara (Pvt) Ltd 17/04/2007 No. 26, Esplanade Road, Uyanwatta, Matara

8 Asiri Laboratories (Pvt) Ltd 08/03/2016 No. 181, Kirula Road, Colombo 05

9 Asiri Surgical Hospital PLC 30/03/2000 No. 21, Kirimandala Mawatha, Colombo 05

10 BSL International (Pvt) Ltd 22/07/2009 No. 475/32, Kotte Road, Rajagiriya

11 Softlogic Asset Management (Pvt) Ltd 24/05/2006 No. 14, De Fonseka Place, Colombo 05

12 Central Hospital Ltd 14/09/2006 No. 114, Norris Canal Road, Colombo 10

13 Ceysand Resorts Ltd 06/03/1973 No. 14, De Fonseka Place, Colombo 05

14 Cotton Collection (Pvt) Ltd 29/04/1993 No. 475/32, Kotte Road, Rajagiriya

15 Dai-Nishi Securities (Pvt) Ltd 26/07/1993 No. 14, De Fonseka Place, Colombo 05

16 Digital Health (Private) Limited 14/08/2015 No. 475, Union Place, Colombo 02

17 Future Automobiles (Pvt) Ltd 06/12/2010 No. 14, De Fonseka Place, Colombo 05

18 Greenfield Trading (Pvt) Ltd 23/03/2012 No. 475/32, Kotte Road, Rajagiriya

19 Jendo Innovations (Pvt) Ltd 22/06/2015 No. 14, De Fonseka Place, Colombo 05

20 Nextage (Pvt) Ltd 11/04/2012 No. 79, C W W Kannangara Mawatha, Colombo 07

21 Odel Apparels (Pvt) Ltd 10/10/1991 No. 475/32, Kotte Road, Rajagiriya

22 Odel Information Technology Services (Pvt) Ltd 30/11/2007 No. 475/32, Kotte Road, Rajagiriya

23 Odel Lanka (Pvt) Ltd 04/07/2006 No. 475/32, Kotte Road, Rajagiriya

24 Odel PLC 31/10/1990 No. 475/32, Kotte Road, Rajagiriya

25 Odel Properties (Pvt) Ltd 10/10/1991 No. 475/32, Kotte Road, Rajagiriya

26 Odel Properties One (Pvt) Ltd 10/06/2016 No. 475/32, Kotte Road, Rajagiriya

27 Odel Restaurants (Private) Limited 19/02/2018 No. 475/32, Kotte Road, Rajagiriya

28 Sabre Travel Network Lanka (Pvt) Ltd 21/01/1999 No. 14, De Fonseka Place, Colombo 05

29 Silk Route Foods (Private) Limited 10/10/2014 No. 14, De Fonseka Place, Colombo 05

30 SML Holdings (Private) Limited 27/04/2000 No. 371, New Nuge Road, Peliyagoda


Name of the Company Date of Registration

Registered office

31 Softlogic Australia (Pty) Ltd 05/01/2000 Unit 2, Building B, 18-24 Ricketts Road, Mount Waverley, Vic 3149

32 Softlogic Automobiles (Pvt) Ltd 02/04/2012 No. 14, De Fonseka Place, Colombo 05

33 Softlogic B P O Services (Private) Limited 13/12/2013 No. 14, De Fonseka Place, Colombo 05

34 Softlogic Brands (Pvt) Ltd 08/11/1993 No. 14, De Fonseka Place, Colombo 05

35 Softlogic Capital PLC 21/04/2005 No. 14, De Fonseka Place, Colombo 05

36 Softlogic City Hotels (Pvt) Ltd 30/06/2011 No. 14, De Fonseka Place, Colombo 05

37 Softlogic Communication Services (Pvt) Ltd 16/09/2009 No. 14, De Fonseka Place, Colombo 05

38 Softlogic Communications (Pvt) Ltd 30/10/2000 No. 14, De Fonseka Place, Colombo 05

39 Softlogic Computers (Pvt) Ltd 13/09/1995 No. 14, De Fonseka Place, Colombo 05

40 Softlogic Corporate Services (Pvt) Ltd 24/06/2005 No. 14, De Fonseka Place, Colombo 05

41 Softlogic Destination Management (Pvt) Ltd 22/03/2012 No. 14, De Fonseka Place, Colombo 05

42 Softlogic Finance PLC 24/08/1999 No. 13, De Fonseka Place, Colombo 04

43 Softlogic Healthcare Holdings Ltd 28/08/2018 No. 181, Kirula Road, Colombo 05

44 Softlogic Information Technologies (Pvt) Ltd 02/09/1992 No. 14, De Fonseka Place, Colombo 05

45 Softlogic International (Pvt) Ltd 09/01/1997 No. 14, De Fonseka Place, Colombo 05

46 Softlogic Life Insurance PLC 21/04/1999 No. 283, R A De Mel Mawatha, Colombo 03

47 Softlogic Mobile Distribution (Private) Limited 30/09/2014 No. 14, De Fonseka Place, Colombo 05

48 Softlogic Properties (Pvt) Ltd 04/01/2005 No. 14, De Fonseka Place, Colombo 05

49 Softlogic Restaurants (Private) Limited 05/08/2013 No. 14, De Fonseka Place, Colombo 05

50 Softlogic Retail (Private) Limited 06/09/1969 No. 14, De Fonseka Place, Colombo 05

51 Softlogic Retail Holdings (Private) Limited 09/03/2018 No. 14, De Fonseka Place, Colombo 05

52 Softlogic Retail One (Private) Limited 04/07/2014 No. 14, De Fonseka Place, Colombo 05

53 Softlogic Rewards (Private) Limited 05/11/2018 No. 14, De Fonseka Place, Colombo 05

54 Softlogic Solar (Pvt) Ltd 14/11/2002 No. 14, De Fonseka Place, Colombo 05

55 Softlogic Stockbrokers (Pvt) Ltd 26/11/2010 No. 6, 37th Lane, Queens Road, Colombo 03

56 Softlogic Supermarkets (Pvt) Ltd 27/08/2014 No. 14, De Fonseka Place, Colombo 05

57 Suzuki Motors Lanka Limited 12/09/1985 No. 371, New Nuge Road, Peliyagoda


NOTES



NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Softlogic Holdings PLC will be held at the Auditorium of Central Hospital Limited (4th Floor), No. 114, Norris Canal Road, Colombo 10 on Wednesday the 31st day of July 2019 at 10.00 a.m. for the following purposes:

1. To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company and of the Group for the year ended 31 March 2019 together with the Report of the Auditors thereon.

2. To re-elect Mr. M P R Rassool who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director.

3. To re-elect Mr. W M P L De Alwis, PC who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director.

4. To re-elect Prof. A S Dharmasiri who retires by rotation in terms of Article 87 of the Articles of Association of the Company, as a Director.

5. To re-elect Mr. J D N Kekulawala who retires in terms of Article 94 of the Articles of Association of the Company, as a Director.

6. To pass the ordinary resolution set out below to re- appoint Mr. G L H Premaratne who is 71 years of age, as a Director of the Company.

“IT IS HEREBY RESOLVED THAT the age limit stipulated in Section 210 of the Companies Act No. 07 of 2007 shall not apply to Mr. G L H Premaratne who is 71 years of age and that he be and is hereby re-appointed as a Director of the Company in terms of Section 211 of the Companies Act No. 07 of 2007”.

7. To re-appoint the retiring Auditors, Messrs Ernst & Young as Auditors of the Company for the ensuing year and to authorise the Directors to determine their remuneration.

8. To authorise the Directors to determine and make donations for the year ending 31 March 2020 and up to the date of the next Annual General Meeting.

By Order of the Board

SOFTLOGIC CORPORATE SERVICES (PVT) LTD

SECRETARIES

4 July 2019

Colombo

Note:

A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to attend on behalf of him/her.

The Form of Proxy is enclosed in this Report.

The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 14, De Fonseka Place, Colombo 05 by 10.00 a.m. on Monday the 29th day of July 2019 being forty eight (48) hours before the time appointed for the holding of the meeting.


FORM OF PROXY

*I/We .............................................................................................................................................................................................................................................................. of

..............................................................................................................................................................................................................................................................................

being *a member/ members of SOFTLOGIC HOLDINGS PLC, do hereby appoint .............................................................................................................................

..............................................................................................................................................................................................................................................................................

(holder of N.I.C. No. ..............................................................................................) of ....................................................................................................................................

.............................................................................................................................................................................................................................................. or (whom failing)

Mr A K Pathirage of Colombo (whom failing)Mr G W D H U Gunawardena of Colombo (whom failing)Mr R J Perera of Colombo (whom failing)Mr H K Kaimal of Colombo (whom failing)Mr M P R Rassool of Colombo (whom failing)Dr S Selliah of Colombo (whom failing)Mr W M P L De Alwis, PC of Colombo (whom failing)Mr G L H Premaratne of Colombo (whom failing)Mr J D N Kekulawala of Colombo (whom failing)Prof A S Dharmasiri of Colombo (whom failing)Mr A Russell-Davison of Colombo (whom failing)Mr S Saraf of India

as *my/our Proxy to represent *me/us and to speak and vote for *me/us on *my/our behalf at the ANNUAL GENERAL MEETING OF THE COMPANY to be held at the Auditorium of Central Hospital Limited (4th Floor), No. 114, Norris Canal Road, Colombo 10 at 10.00 a.m. on the 31st day of July 2019 and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

FOR AGAINST

1. To receive and consider the Annual Report of the Board of Directors and the Financial Statements of the Company and of the Group for the year ended 31 March 2019 together with the Report of the Auditors thereon.

2. To re-elect Mr. M P R Rassool who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company.

3. To re-elect Mr. W M P L De Alwis, PC who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company.

4. To re-elect Prof. A S Dharmasiri who retires by rotation in terms of Article 87 of the Articles of Association, as a Director of the Company.

5. To re-elect Mr J D N Kekulawala who retires in terms of Article 94 of the Articles of Association, as a Director of the Company.

6. To pass the ordinary resolution set out below to re-appoint Mr. G L H Premaratne who is 71 years of age, as a Director Company.

“IT IS HEREBY RESOLVED THAT the age limit stipulated in Section 210 of the Companies Act No. 07 of 2007 shall not apply to Mr. G L H Premaratne who is 71 years of age and that he be and is hereby re-appointed as a Director of the Company in terms of Section 211 of the Companies Act No. 07 of 2007”.

7. To re-appoint Messrs Ernst & Young, as Auditors and to authorise the Directors to determine their remuneration.

8. To authorise the Directors to determine and make Donations

..................................................................... ..................................................................... *Signature/s Date

Note:

* Please delete the inappropriate words.

Instructions as to completion are noted on the reverse hereof.


INSTRUCTIONS AS TO COMPLETION

1. Kindly perfect the Form of Proxy after filling in legibly your full name, address and the National Identity Card number and signing in the space provided and filling in the date of signature.

2. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to attend and vote on behalf of him. Please indicate with an “X” in the boxes provided how your Proxy is to vote on each resolution. If no indication is given, the Proxy in his discretion will vote as he thinks fit.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company.

4. In the case of a Corporate Member, the Form of Proxy must be executed in the manner prescribed by the Articles of Association/Statute.

5. The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 14, De Fonseka Place, Colombo 05 by 10.00 a.m. on Monday the 29th day of July 2019 being forty eight (48) hours before the time appointed for the holding of the meeting.

Please provide the following details:

Shareholder’s N.I.C./ Passport/ Company Registration No. .......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

Shareholder’s Folio No........................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

Number of shares held.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

Proxy Holder’s N.I.C. No. (if not a Director) .......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

.......................................................................................................................................................................................

Designed & produced by

Softwave Printing and Publishing (Pvt) Ltd Photography by Danush De Costa

Name of CompanySoftlogic Holdings PLC

Legal FormCompany was incorporated on 25th February 1998 under the name of Softlogic Holdings (Private) Limited and re-registered on 17th December 2007 under the Companies Act No. 7 of 2007. Changed to a Public Limited Liability Company on 10th December 2008. The shares of the Company were listed on the Colombo Stock Exchange on 20th June 2011 and the name of the Company was changed to Softlogic Holdings PLC on 25th August 2011.

Company Registration NoPV 1536 PB/PQ

Registered Office of the Company14, De Fonseka Place,Colombo 05Sri Lanka

Contact Details14, De Fonseka Place,Colombo 05Sri Lanka

Tel : +94 11 5575 000Fax : +94 11 2508 291E-mail : [email protected] : www.softlogic.lk

DirectorsA K Pathirage - Chairman/ Managing DirectorG W D H U GunawardenaR J PereraH K KaimalM P R RasoolDr. S SelliahW M P L De Alwis, PCG L H PremaratneProf. A S DharmasiriA Russell-DavisonS SarafJ D N KekulawalaC K Gupta (Alternate Director)R A Ebell (Resigned December 2018)

Audit CommitteeJ D N Kekulawala - ChairmanDr. S SelliahProf A S Dharmasiri W M P L De Alwis, PC

HR and Remuneration CommitteeProf. A S Dharmasiri - ChairmanW M P L De Alwis, PC G L H Premaratne

Related Party Transactions Review Committee Dr. S Selliah - ChairmanW M P L De Alwis, PC H K Kaimal

Secretaries and RegistrarsSoftlogic Corporate Services (Pvt) Ltd 14, De Fonseka Place,Colombo 05 Sri Lanka

Tel : +94 11 5575 000Fax : +94 11 2508 291

Investor RelationsSoftlogic Holdings PLC14, De Fonseka Place,Colombo 05Sri Lanka

Tel : +94 11 5575 000 Ext: 5305Fax : +94 11 2595 441

Contact for MediaSoftlogic Holdings PLC14, De Fonseka Place,Colombo 05Sri Lanka

Tel : +94 11 5575 000 Ext: 5305Fax : +94 11 2595 441

BankersBank of CeylonCommercial Bank of Ceylon PLCDFCC Bank PLCHatton National Bank PLCNations Trust Bank PLCPan Asia Banking Corporation PLCPeople’s BankSampath Bank PLCSeylan Bank PLCUnion Bank of Colombo PLC

AuditorsErnst & Young Chartered AccountantsNo. 201, De Saram PlaceColombo 10Sri Lanka

LawyersNithya Partners, Attorneys-at- LawNo. 97 A, Galle RoadColombo 03Sri Lanka

CORPORATE INFORMATION

Softlogic Holdings PLC14, De Fonseka Place, Colombo 05, Sri Lanka

Tel : +94 (11) 557 5000, Fax : +94 (11) 250 8291 E-mail : [email protected], [email protected]

www.softlogic.lk

SOFTLO

GIC

HO

LDIN

GS P

LC | A

NN

UA

L REP

ORT 2018-19

Documents

SOFTLOGIC HOLDINGS PLC | ANNUAL REPORT 2018-194 SOFTLOGIC HOLDINGS PLC / ANNUAL REPORT 2018-19 FINANCIAL HIGHLIGHTS For the year ended 31 March 2019 2018 2017 2016 2015 2014 2013 2012