our corporate philosophy · it is a cliché of management to say, “what gets measured gets...

Our COrpOrate philOsOphy

Our Visionis to be the leading agribusiness plantation Company in sri lanka.

Our Missionis to be at the forefront by enhancing shareholder value by productively

utilising our resources through diversity and innovation and continuously

improving the unique quality of our products to attract and increase our

customer base.

Our ValuesMaintaining the highest ethical standards and discharging our corporate

social responsibilities by supporting initiatives to uplift health, education

and the environment, in the communities in which we operate.

Building an exciting, team-based working environment that will develop

and sustain employees at all levels.

ensuring sustainable socio-economic development by protecting and

developing our natural environment.

1uDapussellaWa plaNtatiONs plC / annual report 2017

CONteNts

2 uDapussellaWa plaNtatiONs plC / annual report 2017

FiNaNCial CaleNDar

Interim Financial Reports 2017 2018

On or Before

First Quarter ended 31st March 12.05.2017 15.05.2018

(unaudited)

second Quarter ended 30th June 11.08.2017 15.08.2018

(unaudited)

third Quarter ended 30th september 08.11.2017 15.11.2018

(unaudited)

Fourth Quarter ended 31st December 22.02.2018 28.02.2019

(unaudited)

annual report for the year ended 31st December 15.03.2018 31.03.2019

(audited)

Meetings

21st annual General Meeting 20.06.2014

22nd annual General Meeting 28.05.2015

23rd annual General Meeting 20.05.2016

24th annual General Meeting 27.04.2017

25th annual General Meeting 27.04.2018


2017 2016 Variance - %

Performance - year ended 31st December (in Rs. ’000)

revenue 2,226,762 1,620,095 37.45

profit/(loss) before interest & tax 334,271 (168,433) 298.46

profit/(loss) after tax 267,821 (181,801) 247.32

total Comprehensive income 323,301 (112,477) 387.44

Financial Position - as at 31st December (in Rs. ’000)

Non-Current assets 1,948,688 1,883,986 3.43

Current assets 411,370 378,147 8.79

total assets 2,360,058 2,262,133 4.33

Current liabilities 794,506 921,027 (13.74)

shareholders’ Fund 813,798 490,497 65.91

stated Capital 340,000 340,000 -

Capital employed 1,982,685 1,935,286 2.45

Key Financial Indicators

earnings per share (rs.) 13.81 (9.37) 247.32

Net assets per share (rs.) 41.95 25.28 65.91

Market price of a share (rs.) 42.50 19.40 119.07

Market capitalisation (rs. ’000) 824,449 376,337 119.07

rOCe (%) 16.86 (8.70) 293.71

Current ratio (times) 0.52 0.41 26.11

FiNaNCial hiGhliGhtsyear ended 31st December


ChairMaN’s MessaGe

the economythe sri lankan economy has felt the impact of the depressed

agriculture sector due to drought and floods in the first and

second quarters of the year with a lower GDp growth of 4%. the

economic growth in 2018 is forecast at 5%; the turnaround is

expected in the wake of a stronger global economy.

inflation has increased and is estimated to be around 6% in 2017,

compared to 4% in 2016,and is expected to decline in 2018. severe

drought and flooding in the first half of the year combined with

higher goods and services tax rates and currency depreciation

have pushed inflation higher in 2017, but a high base effect and

firmer credit policy are expected to reverse this trend in 2018.

the sri lankan rupee depreciated 2.9% against the us Dollar

with the Dollar ending at lKr 153.15 in December 2017. the

Central Bank has kept policy interest rates unchanged since the

last rise in March 2017.

industry grew by 5.8% and the service sector expanded by 4%

in the first half. an increase in financial services, including

insurance and government services, offset slippage in wholesale

and retail trade and in hospitality. as global trade growth augurs

well for the industry sector in 2017, the higher forecast for GDp

growth in 2018 is maintained as sri lanka pursues economic

adjustment as highlighted in the National Budget, and changes in

the income tax and foreign exchange control arenas.

tea industry retrospective the year 2017 will go down in history as one of the better years

for the tea industry particularly in terms of prices, a fitting

tribute to the 150th year of the tea industry in sri lanka.

the sri lankan tea industry witnessed a better year in 2017

with an increase in production and average prices reaching all-

time high levels, which were very significant to the industry.

Despite the mentioned positivity, the industry continued to be

troubled by the political tension in the Middle eastern countries,

policy decisions, and temperature variability which affected

the production of tea during the year and may have lagged the

industry growth.

the total tea production of sri lanka for the year 2017 recorded

a growth of 14.51 million kg to reach 307.08 million kg in

comparison to 292.57 million kg in 2016. although the tea

production increased by close to 5% (14.5 million kg), exports

have only increased by 0.21 million kg compared to 2016.

the total National average of teas prices for the year 2017 was

lKr 618.14 (usD 4.04) per kg compared to lKr 468.61 (usD 3.14)

in 2016. the 2017 national average tea price recorded was the

highest-ever yearly auction rate, surpassing the recorded price

in 2016.

turkey remained the largest importer of sri lanka tea for 2017,

followed by iraq and russia. More importantly, tea exports

to Vietnam, taiwan, turkey, China and uK have increased

significantly whilst tea exports to syria, Kuwait, iran, ukraine

and u.a.e. have shown a notable decline as against 2016. this is

attributed to the shortfall, mainly of orthodox black tea, from the

major producer-exporting countries in 2016, and the shortfall of

tea from Kenya in the first quarter of 2017 cumulated with the

strengthening of oil prices, which had influence on some key

importing countries of sri lankan teas.

Companythe Company has seen a shortfall in our total tea production

over the years. Firstly, it had to contend with the change in

climatic conditions, then with the ban on glyphosates without

a cost-effective alternative, which has not been resolved to date.

this is a serious concern to all tea growers and is bound to have

serious repercussions on our estates from the perspective of

production, productivity and the discipline of good agricultural

practice.

it is of the utmost importance that the authorities take serious

note of the gravity of the situation, give a hearing to the

stakeholders/organisations that represent the tea growers

and find a solution, failing which the farmers/growers may,

through desperation to sustain their livelihood and business,

find alternatives that could have an impact on the quality of

our product at the marketplace. sri lankan teas then could be

discounted or banned due to exceeding maximum residue levels,

which we are made to understand has already become an issue.

availability of Workersless hands-on harvesting due to shortfall of workers too

brings out the importance of retaining available workers on the

estates. this factor, if not arrested early, could have an impact

on production in the future and is already being seen on some

estates.

timber harvestinganother negative aspect of the business is that once again a

change in policy imposing further restrictions on harvesting of

trees on estates has deprived the Company of over rs 40 million


ChairMaN’s MessaGe (CONt.)

during the year under review. the Company has invested large

sums, planting timber/fuelwood for our own requirements and

for Commercial purposes, diversifying the land unsuitable on

estates for planting in tea or rubber. here again the authorities

that matter have not been able to find solutions or persuade the

decision makers to see reality.

Corporate performanceprofit for the year as determined by the total Comprehensive

income for the year of lKr 323 million represents a 387%

increase over the previous year, and was driven by the strong

tea prices. this together with continuous increase in the returns

from the investments from our strategic diversified business

units have contributed to the profitability.

the revenue records a growth of 37% whilst costs have been

effectively controlled. the estate tea crop increased by 6% in

2017.

acknowledgementDuring the year Messrs Jayampathy Molligoda, Meyan Vamadevan

and Nishantha Wickremasinghe resigned from the Company’s

Board of Directors and Messers D. soosaipillai, Gotabaya

Dasanayaka and Gihan Jayasinghe were appointed to the Board

in april 2017. We thank the former for their long and dedicated

contribution to the Company and welcome Messrs soosaipillai,

Dasanayaka and Jayasinghe to the Board.

i express my thanks to my colleagues on the Board, and to all

our employees, led by the Corporate Management team, who

continue to execute our vision, in accordance with our values to

turn in award-winning results. Our appreciation extends to our

shareholders, who place their confidence in us to grow together,

creating value in mutually beneficial relationships.

Naresh ratwatteChairman


Dear shareholder,

i am certainly delighted to address you at the exiting of another

financial year managing the agribusiness of your udapussellawa

plantations plC with the utmost resilience and sustainability.

“We focus on the adventure and not merely on the destination and journey. Our passion is engaging in Agribusiness, and it is a continuous process”

in my message for 2016 to the stakeholders of the Company, i

stated that if the tea and rubber prices remained at low ebb,

and political uncertainty, disconcerted peace and harmony

in the overseas market destinations continued to occur, then

compensating the additional cash outlay due to wage increases

must be looked at with a fresh and reinvigorated mind-set.

as we all have experienced, there were many problems, both

locally and globally, in facets of the political and socio-economic

environments which, through world trade, have had knock-on

effects all over the world, including sri lanka.

With the conclusion of yet another year, what attracts the most

attention is, quite evidently, the fact that your Company has

been able to orchestrate a combination of positive financial and

operational results during the year 2017.

i will not bombard the readers with volumes of data and technical

jargon to complicate the matter when we need primarily to

understand the principles and dynamics behind what took place

on the plantations in your Company.

the drought that prevailed in the planting districts, the weather

shocks by way of unprecedented floods in the month of May and

the overall operational risks were all contributory factors to the

narrowing down of your Company’s successful efforts against

key vulnerabilities.

“Planters then need to be able to contemplate how quickly they convert investments into liquid cash by managing plant life”

it is a cliché of management to say, “what gets measured gets

managed”, the phrase belonging to management thinker peter F.

Drucker. the tea crop from our estates during the year was 3.29

million kg made tea. the intake of out-grower green leaf declined

to 493k kg of made tea, averting our stance for maximising

capacity utilisation. We however exited the year with an overall

ChieF exeCutiVe OFFiCer’s reVieW

output of 3.78 million kg made tea, similar to last year’s results.

yatawatte, the only Coconut estate of the Company, produced

merely 653,636 nuts during the year, significantly lower than

the expected pick as experienced elsewhere in the country, and

signposted by the upwardly spiraling demand for the product in

the retail market and the resultant increase in retail prices.

the revenue-earning potential of export crops such as pepper

with Coconut and rubber in the product portfolio makes a

substantial contribution to the overall performance of the

Company. the total Comprehensive income collectively from

tea, rubber, Coconut and ancillary crops is rs. 323 million at the

closure of the year.

With the world population rising and production declining due

to a multiplicity of reasons, an “age of scarcity” where demand

exceeded supply was predictable. We should now take it for

granted that market forces led to the rising tea prices, giving an

improved aspect to 2017.

the food system, comprising agriculture, processing, distribution

and waste disposal, is a huge global industry and a source of

economic growth in which the sri lanka tea industry also has

a role to play. the changes which took place in the overseas

market destinations during the second half of 2016 have exerted

pressure on the food system, both from population growth and

from reliance on healthy non-alcoholic beverages such as tea,

and sowed the seeds of greener pastures, as reflected in the

auction prices.

“We do not strive to fully eliminate the business risks as that eliminates the rewards as well. Rather, Risk and Reward must be kept in the proper proportion”

the Western high Grown price of rs. 496.12 recorded in 2016

rose to rs. 616.74 in the year 2017. Despite the external and

internal factors directly affecting the business, the average

tea price of the Company rose to rs. 566.27 from rs. 406.57

recorded in 2016.

During the year, 280 invoices of various agro-climatic regions

were acknowledged as top prices in appreciation of our

concerted efforts in managing your Company. We are also

pleased to mention that 26 invoices topped the list as all-time

record prices during the year.


ChieF exeCutiVe OFFiCer’s reVieW (CONt.)

“How to deal with inflation is a key question for any business, and needs to be tackled as quickly as possible”

We all agree that at the fall of the checkered flag for the year

2017, the total Comprehensive income from all the streams of

revenue stood at rs. 323 million.

Due to the high degree of stewardship exerted by the Directors,

the Company was on the fast track to plough the hard-earned

cash back into the business in an appropriate manner for capital

development.

the total cash outlay in respect of field, factory and infrastructure

development for the year concerned was rs. 52 million.

the performance orchestrated by the upward trend in the tea

prices does not mean that our enthusiasm for the day-to-day

strategy of laser-like focus on managing your Company with

the utmost resilience and sustainability, has been dampened by

complacency.

producing a kilogram of made tea has cost us rs. 506.00 in the

year and the financial performance has not fully absolved us

from borrowing during the year, where we have incurred a sum

of rs. 43 million as interest. a sum of rs. 5 million was paid

to the Government of sri lanka in taxes and rs. 59 million in

settlement of loans.

“Udapussellawa Plantations PLC is committed to creating a sustainable future. It’s the only future we have”

this concept is based on the three connected dimensions of

“environment”, “society” and “economy”. We as a Company take

a holistic approach to sustainability. in addition to the universal

indicators of Carbon, Waste, energy, Water, and health and safety

we prioritise objectives materially relevant to our operations.

We are trying to continue what we did yesterday with a view to

building a better world. sustainability objectives are aligned with

the business objectives and owned by the relevant function with

clear responsibilities and measurable targets. this is backed up

by accountability and transparency through public reporting of

performance.

the Company was able to retain the certification status of

the rainforest alliance even with the stringent compliance

standards which were imposed subsequently by the Certification

Body. the universal indicators, such as total carbon to decline

by 3.1%, total waste generation to decline by 40.5%, and total

energy consumption to decline by 16.5% yOy, are worthwhile

achievements.

“Zero Harm strategy is not the start of a journey but the start of an Adventure, and Always Safe applies to everybody, everywhere, every day, in everything we do, at work and at home”

Our estates received awards for social Dialogue and Workplace

Cooperation from the Government labour secretariat, driving us

to a high rostrum in creating a healthier business environment.

the total cash outlay for sustainability and health and safety

initiatives for the year was rs. 9.5 million.

the total workforce contingent with whom we are concerned is

4,937 people of all categories and is still the most-treasured off-

balance sheet asset of the Company.

the health and safety strategy engages and empowers all

employees in creating a culture of safety that will deliver its

vision of achieving “Zero harm”, whereby none of its employees

suffer injuries or ill health as a result of their work or workplace.

this is a long-term strategic initiative based on engagement,

inclusivity and empowerment that builds on the seven roots

for success: leadership, engagement, learning, Competence,

Community Culture, risk Management and standards. the

dashboard view shows zero major injuries, with, however, one

fatality at yatawatte estate increasing the lost time by 7% yOy.

the increase of Near Misses reporting by 75% yOy is a positive

sign and affirms the right direction of our adventurous journey.

the total spending for compassionate well-being of the workforce

at the exiting of the year 2017 was rs. 2.9 million.

“All the employees are having to engage with an ever-greater number of day-to-day challenges while coming under increasing demand for quality of performance and multi-tasking”

performance evaluation and training and development

receive high priority on the corporate to-Do list. the training

and development for building a high-performance team is a

continuous process.

the training and development schedule of the Company

has three concepts: Motivation, life skills Development and

technical skills Development. During the year we have provided

training opportunities to our employees at higher education and

research institutions and local training houses, as well as in-


ChieF exeCutiVe OFFiCer’s reVieW (CONt.)

house training within the conceptual framework of Motivation-

life skills Development-technical skills Development.

“In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to the environment” - Charles Darwin

the commercial cultivation of tea in sri lanka commenced in 1867

and in the 150 years since then Ceylon tea has been a buzzword

as the most common non-alcoholic beverage worldwide. We all

are certainly delighted to be in this industry as it celebrates its

sesquicentennial anniversary whilst your Company celebrates its

25th milepost.

your Company is a subsidiary of a multinational conglomerate.

the scale, geography and diversity of the Group naturally

present significant management challenges. the operating unit

management teams and group functions add further potential

for complexity. in order to leverage the size of the group as a

strength rather than a weakness, we are missioned to creating

a global entity termed “One Finlays”, bringing in a range of

economies of scale, unity and strength.

“All the businesses depend on a number of people, often unnoticed and unthanked, without whom nothing really gets done. They all deserve respect and gratitude”

Messrs Jayampathy Molligoda, Meyan Vamadevan and Nishantha

Wickremasinghe resigned from the Company in the month

of March 2017, having served the Company in the capacity

of independent Non-executive Directors. On behalf of the

Board of Directors, i thank Messrs Molligoda, Vamadevan and

Wickremasinghe for the understanding, knowledge and expertise

lavishly extended to us and for being instrumental in bringing

this Company to its present state of existence.

My wholehearted welcome goes to Messrs D. soosaipillai,

Gotabaya Dasanayaka and Gihan Jayasinghe, on board since

april 2017, and who are becoming a great source of strength in

steering this business into the future.

i wish to express my sincere gratitude to the Chairman and the

members of the Board for their active and unstinted cooperation

exerted during the year.

i also wish to place on record my appreciation for the first-rate

cooperation extended by the management, staff, workmen,

shareholders and all other stakeholders.

the impact of adverse weather in 2017 reduced GDp growth to

4.3% from the 4.8% predicted. as the adverse weather recedes,

expert opinion is that GDp growth will pick up to 5% in 2018. the

likely implementation of the inland revenue act in april 2018 is

expected to formalise tax rules, helping companies to make long-

term investment decisions.

the regulatory restrictions on the use of weedicides has a

substanitial negative impact on large scale cultivations of this

nature, especially in the backdrop of lack of fitting alternatives.

the Company however look forward in strengthening the existing

tea by infilling whilst maintaining the replanting cycle with a

view to derive a steady income from tea and manufacturing

rubber.

the plantation Workers Wage Collective agreement was signed in

the year 2016 and due to be renewed in the year 2018, envisage a

Win-Win productivity based wage structure.

i look forward to your unblemished cooperation along with a

high sense of team spirit in the years to come.

Dushanth ratwatteDirector/Chief executive Officer


sustaiNaBility perFOrMaNCe reVieW

sustainability strategy “Finlays is committed to creating a sustainable future. it’s the only future we have”.

the Finlays sustainability strategy was formulated in the year 2009. the Group sustainability Committee reviewed the strategy in the year 2017. the objective was to update and align the strategy with Finlays’ new Global Business strategy of bringing the best from “Bush to Cup” whilst pursuing the vision of creating a sustainable future.

since the year 2017, udapussellawa plantations plC has adopted the Finlays sustainability strategy and the set Objectives are given below.

at Finlays our tea estates are dependent on the people, communities and natural resources in the wider, external landscape. to sustain our operations and licence to operate, we will work towards an integrated landscape approach.

at Finlays we recognise that good land management is essential if we are to be economically and environmentally sustainable. We will practise and demonstrate outstanding land management.

Our employees are at the heart of our business Finlays is committed to being an employer that demonstrates opportunity, fairness and equality, thus providing an inspiring, fulfilling and adaptable workplace.

at Finlays we recognize that effective and efficient management of resources is not only good for the environment but is also good business practice. We will reduce impact by decarbonising and minimising water usage, waste and pollutants.

We recognise and rely on community collaboration across all our regions of operation. We commit to empowering local communities by acting as a catalyst for positive change We aim to be responsible members within the communities in which we operate and, where possible, to generate a positive impact on society.

Finlays recognises the increasing demand to be transparent and responsible. We commit to providing a responsible and traceable supply of all raw materials and to influencing our supply chains through sharing best practice.

udapussellawa plantations plC will be setting up specific targets towards achieving each of the objectives. this is a long-term Vision-Mission-strategy leading up to the year 2022.

During the year 2017 your Company was engaged in the following projects:

Village empowerment as a responsible Company we extend our good work beyond the boundaries of the estates to the surrounding villages. the estates in the ragala Zone have commenced village empowerment activities such as water and waste management programmes, provision of sanitary facilities, the organising of “shramadana” campaigns and the conducting of health camps.

the estate residents of the Company benefitted greatly from self-help housing schemes. this is a leap forward in the Community empowerment of our people.

rainforest allianceWe are pleased to mention that all the estates of udapussellawa plantations plC were awarded rainforest alliance certification status in the month of December 2017. the recent version


sustaiNaBility perFOrMaNCe reVieW (CONt.)

of the standard has a higher number of critical criteria to be complied with. the new standard focuses on four principles: effective planning and Farm Management systems, Biodiversity Conservation, Natural resource Conservation, and improved livelihood and human Well-being.

Field innovation Group pilot projects were conducted by the Field innovation Group. these pilot projects focus on weed management, experimental block plucking, shear harvesting, forward infilling and manpower contract models. their aim was to find the most appropriate solutions to shortage of workers and carry out research into agro-chemical applications. the learning outcomes were endorsed by the operational management of the Company and were communicated to the estates as policies of best agricultural practices to be adhered to.

Biodiversity survey yatawatte, Madulkelle and Duckwari estates have formulated their management plans in accordance with the ecological survey conducted in the previous years. the priority was to protect the catchment areas and watersheds within the boundaries of the estates. as a prerequisite for rainforest alliance certification, the estates in ragala have developed the baseline identification of fauna and flora. this exercise was conducted by a team of estate junior management.

energy projects We all agree that burning fossil fuel and haphazard felling of trees as a source of fuel is certainly detrimental to the environment and thereby to society at large. Our efforts to find the most appropriate sustainable energy solutions whilst managing the Cost-Benefit equation is a continuous process.

apparently sawdust was identified as a threat to the environment, is wasted and has no economic benefit. trials were conducted at the estates using briquettes made of sawdust as a source of alternate renewable energy for firewood. the usage of briquettes during the year is equivalent to saving 179 trees.

Estate Trees

Gordon 22

Duckwari 58

Madulkelle 99

total trees saved for the earth in 2017 179

Occupational health and safety a novel concept termed “Zero harm” was introduced by Finlays with a view to inculcating the “always safe” culture. all the employees are committed to follow the directions towards achieving “Zero harm”. the awareness sessions were conducted on the estates introducing the new concept. awareness sessions on safe practices and identification of hazards were conducted throughout the year. extensive training was provided to improve the skills and knowledge of both external and internal managers.

Medical checkups and communication programmes on safe driving were conducted at the estates during road safety Week in the month of November 2017 to highlight the importance of safe behaviour whilst engaged in road transportation.

awards and recognition the all-island competition held by the Department of labour on social Dialogue and Workplace Co-operation took place on 14th December 2017 and the silver award was fetched by Concordia estate whilst Courtlodge estate received a Merit award.

a competition on always safe-Zero harm was conducted in the month of November amongst the businesses of Finlays Group in various countries. this competition was led by James Finlay limited in the uK. Delmar, Concordia and Blairlomond estates were awarded Certificates of participation.

Global reporting initiatives (Gri)the measurement and performance of Gri during the last three years are shown in the table 01.


sustaiNaBility perFOrMaNCe reVieW (CONt.)

Table 1

Global Reporting % Index (GRI) Unit 2015 2016 2017 Change Comments

Carbon total carbon tonnes CO2e 2,452 1,952 1,894 -3.0 Overall decrease due to decreased production of tea

total scope tonnes CO2e 544 464 482 3.9 increase due to use of fuel for immovable machinery1 emissions

total scope 2 tonnes CO2e 1,747 1,325 1,278 -3.6 Decrease of electricity consumption due to decreasedemissions production of tea

total scope 3 tonnes CO2e 161 163 135 -17.2 Decrease of emissions due to reduced transportation emissions of tea

Energy total energy GJ 144,682 143,589 123,275 -14.1 Overall decrease of energy use due to decreased

production of tea manufacturedDirect kWh 36,298,408 37,005,835 31,465,322 -15.0 Decrease due to low manufacturing of teaindirect kWh 3,890,899 2,879,888 2,777,780 -3.5 Decrease due to low manufacturing of tea Direct non-renewable kWh 2,217,519 1,889,422 1,961,161 3.8 increase due to use of fuel for immovable machineryDirect renewable kWh 34,080,889 35,116,413 29,504,161 -10.0 Decrease of use of firewood due to lower production

of tea indirect non-renewable kWh 1,766,162 1,478,271 1,583,335 7.1 increase due to use of higher percentage of non-

renewable component of electricity from the national grid

indirect renewable kWh 2,124,737 1,401,617 1,194,446 -14.8 Decrease due to lower production of tea total renewable GJ 130,340 131,465 110,515 -15.9 Decrease due to lower usage of firewood and lower

percentage of renewable energy procured from the national grid

Waste total waste kg 489,419 430,916 306,648 -28.8 Overall decrease of total waste due to decreased

production total landfill kg 136,777 190,105 81,196 -57.3 Decrease due to lower production of tea total waste recovered kg 333,243 204,627 213,724 4.4 increase due to use of dryer ash of paddy husk for

vegetable gardens to enrich the soil total waste recycled kg 7,439 121 2,698 2130.0 increased recycling due to safe disposal of chemical

cans and metallic wastetotal waste reused kg 11,960 36,064 9,031 -75.0 Decrease due to reduced generation of recoverable

waste

Watertotal water use m3 8,261 9,350 8,221 -12.1 Decrease due to decreased production of teaBlue Water m3 8,261 9,350 8,221 -12.1 Decrease due to decreased production of tea Green Water m3 2,286 1,852 1,870 1.0 increase due to harvesting of more rainwater


FiNaNCial reVieW

Companythe Company recorded a profit of rs. 268 million after tax against the loss of rs. 182 million recorded in the previous year. total comprehensive income also improved, recording a profit of rs 323 million against the loss of rs 112 million the previous year.

summary of key financial performance indicators:

Aspect Performance Measure 2013 2014 2015 2016 2017

revenue turnover (rs. million) 1,612 1,550 1,718 1,620 2,227

revenue Growth revenue Growth (%) 22.76 (3.86) 10.81 (5.67) 37.45

profitability Gross profit ratio (%) 7.88 2.27 (3.55) (1.75) 16.30

eBit ratio (%) 4.04 9.03 (7.64) (10.40) 15.01

Comprehensive income ratio (%) 3.29 6.33 (9.07) (6.94) 14.52

Working Capital Current ratio (times) 0.43 0.47 0.40 0.41 0.52

liquidity Cash flow from operations (rs. million) 75.56 (81.12) 43.34 (134.57) 167.93

investments Capital expenditure (rs. million) (40.78) (43.15) (111.03) (31.66) (52.14)

Financing Debt/equity ratio (%) 27.95 23.72 62.55 84.60 58.07

interest Cover (times) 2.56 9.92 (4.75) (4.04) 7.11

turnoverDespite the adverse weather conditions that prevailed during the first half of the year, the annual turnover increased to rs. 2,227 million compared to rs. 1,620 million in the previous year, an increase of 37%. turnover attributable to tea amounted to rs. 2,162 million and to coconut rs. 47 million. Other crops contributed rs. 18 million to turnover. the increase in revenue was attributable to the increase in tea prices. Despite the marginal decrease in tea production, which declined by 2% against 2016, from 3,844Mt to 3,780Mt, the gross sale average increased by 39% from rs. 407 to rs. 566, resulting in an increase in revenue. revenue from coconut increased from rs. 26 million to rs 47 million by 79% due to the increase in coconut sales average.

profitabilityGross profit increased to rs 363 million compared to rs 28 million loss in 2016. this is mainly due to the increase in the average tea sales price (Nsa).

Gross profit margin from tea increased to 15% from negative 3% last year, while coconut increased to 29% from 6%, recording gross profit of rs. 335 million and 14 million respectively. Gross profit from other sources declined marginally from rs. 15 million to 14 million.

earningsearnings before interest and tax (eBit) increased 3 times from rs. 168 million loss in the previous year to rs 334 million profit.

Segmental Revenue

Rs. Million n

-

500

1,000

1,500

2,000

2,500

2013 2014 2015 2016 2017

Others Coconut Tea

Rs. Million

Segmental Gross Profit

Others Coconut Tea

on

(100)

-

100

200

300

400

2013 2014 2015 2016 2017


FiNaNCial reVieW (CONt.)

total comprehensive income increased by rs. 436 million compared to rs. 112 million loss in the previous year, the main component being the actuarial gain on re-measurement of retirement benefit obligations.

earnings per share (eps) was rs 13.81 compared to a loss of rs. 9.37 per share at the previous year, as a result of the increased profitability.

Finance CostFinance cost has increased by 13% compared to the previous year. Monthly average Weighted prime lending rate (aWplr) has increased from 9.5% in the year 2016 to 11.6% in 2017, an increase of over 22%. however, the Company maintained its cost of borrowings below market rates by close monitoring of the borrowings and prompt response to changes in the market rates.

interest cover for the year is 7 times, a significant improvement over the previous year.

taxationincome tax expenditure for the year under review was rs. 19 million, of which rs. 6 million represents deferred tax expenses. a reconciliation of accounting profit and taxable profit and a summarised computation of income tax and deferred tax are set out in notes 8.2 and 8.3 to the Financial statements on pages 52 and 53 of the Financial statements.

liquidity and Working Capital Free cash flow (cash flow from operations) increased from negative rs. 135 million in the previous year to rs. 173 million, in line with the increase in profitability.

investment in working capital increased, recording a current ratio of 0.52 compared to 0.41 in the previous year. Current ratio, excluding amounts due to and due from related parties, stood at 0.76 compared to 0.57 in the previous year.

assetstotal assets increased by rs. 98 million, attributable to capital expenditure incurred and gain on valuation of consumable biological assets.

Biological assetsBiological assets consist of tea, coconut, cinnamon, ancillary crops and timber plantations, representing 47% of the Company’s total assets. total biological assets increased by rs. 121 million, after depreciation, on account of investment in field development amounting to rs. 22 million and gain on valuation of consumable biological assets (timber)amounting to rs. 120 million.

Earnings Per Share (EPS) RRss..

EPS (15)

(10)

(5)

-

5

10

15

2013 2014 2015 2016 2017

Times

Interest Cover

Interest (5)

-

5

10

15

2013 2014 2015 2016 2017

Rs. Mn.

Cash Flows From Operations

Cash Flows -150

-100

-50

0

50

100

150

200

2013 2014 2015 2016 2017

Times

Current Rato

Current

-

0.10

0.20

0.30

0.40

0.50

0.60

2013 2014 2015 2016 2017

Rs. Million

EBIT and EBIT Ratio

EBIT EBIT Ratio (%)

%

(15)

(10)

(5)

-

5

10

15

20

-200

-100

0

100

200

300

400

2013 2014 2015 2016 2017


FiNaNCial reVieW (CONt.)

Capital expenditureinvestments in property, plant and equipment increased to rs. 30 million from rs. 15 million the previous year. this related mainly to the installation of new machinery in tea factories.

Capital structurethe Company’s long-term borrowings have increased in order to meet capital expenditure. this related mainly to investments on field development. however, 2017 saw an improvement in the debt-to-equity ratio from 85% in the previous year to 58%, due to repayment of external borrowings and improved equity. long-term external borrowings have declined 12%, from rs. 177 million to rs. 155 million.

shareholder returnsNett assets per share were rs. 42 at the end of 2017 compared to rs. 25 at the end of the previous year. Closing market price of the Company’s share was rs. 42.50 compared with rs. 19.40 in the previous year.

return on capital employed (rOCe), which indicates the return on total invested capital, was 16.86% compared to negative 8.70% in the previous year.

Rs. Million %

Debt / Equity Ratio

Debt Equity Debt/Equity Ratio (%)

-

10

20

30

40

50

60

70

80

90

0

200

400

600

800

1000

1200

1400

2013 2014 2015 2016 2017

Rs. Million

Capital Expenditure

Non - Field Field

-

20

40

60

80

100

120

2013 2014 2015 2016 2017

Return on Capital Employed (ROCE)

ROCE

%%

(10)

(5)

-

5

10

15

20

2013 2014 2015 2016 2017


this is the structure and processes in place to manage likely

future events and challenges to the Company’s business

model, and respond to challenges to the Company’s internal

control framework and processes caused by internal or

external factors.

the objective of the Company’s risk management process is

not necessarily to fully eliminate the risk, but to accurately

identify all risks and manage them in the context of the risk-

reward trade-off at that time.

the risk management process of the Company includes the

following:

• Ownership by the management of the risk management

system

• risk profiling through the risk register and assigning

risk ratings

• periodic review of the risk register

• Formulating and implementing risk management and

mitigation initiatives

• Compliance and control

• internal and external audit review and reporting

• Oversight review and reporting by the Board audit

Committee

headline risks along with their Component risks have been

separately identified, and rated for likelihood of occurrence

and severity of impact on the Company, based on a unified

rating scale across the group. the risk rating is a product

of the severity rating and the likelihood rating reflected in

a point rating recognising the respective ranking of a risk –

both headline and component.

the Company’s audit supervisory Committee and the Board

audit Committee, through the internal audit function review

and the external auditors’ reporting, report to the Board on

the effectiveness and completeness of the Company’s internal

controls with a view to effectively managing the business and

operational risks.

the Company’s established 20/20 vision is viewed through

the prism of its headline risks, Component risks and action

taken to mitigate and manage these risks, which are set out

below. the review of the risk register twice a year is an

important facet of the Company’s boardroom governance.

eNterprise risK MaNaGeMeNt

political risksthe risks related to changes in the Government, public policy,

management of Government relations, terrorist activities and

global risks relating to political instability are considered.

the Company is not politically aligned to any specific political

party or campaign. all the Company executives are guided by

the Group Code of Conduct in this regard. however, political

intervention in wage negotiations is a risk associated with the

industry.

economic riskrisks related to macro-economic policies, economic cycles,

competitive positioning, industry profit margins, market

structure, credit and interest rates, currency and collaterals

are looked at under economic risk.

stock market behaviour, perception of the Company by

the media and general public that could impact liquidity,

perception of the organisation by stakeholders and capital or

credit rating are some of the external factors.

Focus on crop diversification that contributes early returns

and high land productivity (i.e. Coffee, pepper and timber)

and diversification into new products that capture new

markets with higher returns (i.e. Green tea and Oolong tea)

are some risk-mitigation actions introduced to manage the

identified risks.

legal and regulatory riskthe risks relating to meeting legal and regulatory requirements

with respect to corporate governance, labour relations,

industry standards and environment are also considered.

the Company with the active involvement of its Company

secretaries, Messrs ssp Corporate services (pvt) ltd, legal

advisers Messrs Julius & Creasy, external auditors Messrs

KpMG and internal auditors ensures compliance with all

legislative and regulatory requirements.

human resource riskrisks related to demographic changes and social mores,

adequacy and execution of human resource standards,

policies and practices, organisational liability and personal

liability of Directors and managers are also monitored and

managed.


eNterprise risK MaNaGeMeNt (CONt.)

employees of all operational levels, including estate workmen,

are appropriately trained based on needs assessment by the

human resource development function of the Company.

significant and sustained labour inflation in the plantation

sector in sri lanka is one of the major concerns and the

Company has taken measures to mitigate this risk by

reducing the number of people through factory automation,

mechanisation of field preparation in tea estates and

improving shear harvesting. Moreover, as a long-term strategy,

the Company has extended its product portfolio, introducing

new rubber, timber, Cinnamon and pepper plantations that

are less labour intensive.

the Company’s workforce is unionised. the collective

agreement between the trade unions and employers’

Federation of Ceylon, of which the Company is a member,

and other human resource development initiatives by the

Company have led to industrial harmony and thereby the

Company has been able to maintain a reliable supply chain.

Operational riskthe Company strives to produce true-to-type teas, high

quality rubber latex and other agricultural products in the

right quantity at the right time and thereby retain competitive

positioning in the market whilst maintaining well-controlled

and well-managed product costs for maximum economic

viability. Management time is devoted to uplifting estates

identified as business units of low land-labour productivity.

however, price fluctuations of the products and competition

from lower-cost production countries are industry risks

that the Company is concerned about. Crop diversification,

rainforest alliance Certification and new product

development are strategies that the Company adopts to

mitigate the associated risks.

Good agricultural practices, improving land-labour ratio

and tea infilling adopted by the Company ensure a healthy

plantation crop and minimise the risk of potential loss

due to pests and diseases. the Company is keen to explore

alternative energy sources to mitigate the risk of shortage

of firewood. Well-organised forestry management is being

followed to mitigate the risk of forest fires.

the manufacturing facilities of the Company are maintained

according to industry standards with requisite financial

inputs, along with obtaining and retaining international

quality accreditations. a phased-out five-year investment plan

has been formulated to address the issue of ageing factories.

the internal control system serves as the main mechanism of

identifying and mitigating the organisational risk.

all manufacturing plants are under constant review to

identify and eliminate any potential threat that could result

in damage to buildings, restricted access to raw materials or

loss of human capital. all vulnerable locations are sufficiently

equipped with firefighting equipment and provide appropriate

training to personnel based on expert advice.

the Company strives to maintain a healthy financial

structure at all times whilst obtaining to concessionary

and advantageous borrowing rates, and maintaining a good

relationship with banks and lending institutions.

all the subsidiary projects are subject to stringent preplanning,

technical evaluations and scientific investment appraisals,

thus addressing the risks related to technical difficulties and

commercial obstacles. the post-completion audits serve as

an important tool in managing this aspect of business risk.

every endeavour is made to sustain the rainforest alliance

certificate while working closely with the certification body.

the risk related to employee health and safety in the

workplace receives the foremost attention and the Company

policy is to gain “Zero harm”. safety precautions have been

taken with regard to all the machinery and equipment with

a potential for injury with trained personnel working at each

location and periodic h&s audits. the Company is conscious

of landslide-prone areas and appropriate action is being

taken in consultation with the National Building research

Organisation. personnel protective equipment has been

provided as appropriate with proper training. the Company

is conscious of the declining trend in the availability of

potable water.

all the assets are adequately safeguarded with appropriate

controls for inventory protection against spoilage or theft.

adequate insurance cover is in place as the most effective

risk transfer mechanism. the Company in its Corporate Code

of Conduct has formulated and introduced a whistle-blowing

policy as an anti-fraud mechanism.

the Company is concerned with the risks related to the

perception of the organisation by its stakeholders, the


media, and the general public that could impact liquidity,

capital or credit rating. the Company strives to safeguard

the international standardisation accreditations such as

international Organization for standardization (isO), hazard

analysis and Critical Control point system (haCCp), ethical

tea partnership (etp), Fair trade Certifications, and the

rainforest alliance (ra) certifications held at present by our

factories and estates.

the Company is able to produce quality information,

fulfilling appropriate requirements of each stakeholder

with the aid of the erp system. Keeping pace with the rapid

changes in information technology, the erp system has been

upgraded to the latest software solution to be the source

of business information for the Board of Directors and the

senior management. a well-designed information back-up

procedure is in place along with a Disaster recovery plan to

resume business with the least possible delay. the computer

hardware will be used until vendor support expires.

the Company ensures a sound system of internal controls

maintained to safeguard shareholders’ investments and

Company assets and also to manage business-related risks.

the internal control system is designed, and periodically

reviewed and modified as appropriate, with a view to

achieving data integrity, data and system availability, and

eliminating malpractices by employees or outsiders, such as

theft, deception, forgery or false accounting.

the Board of Directors discharge their stewardship function

effectively for the Company. the Board collectively decide on

the appointment of Directors. the retirement and re-election

of Directors takes place as set out in the articles of association

of the Company. Managers with appropriate qualifications and

experience are recruited through a screening and selection

process and remunerated as recommended by the Company’s

remuneration Committee.

the Company does not foresee any potential risk of

misrepresentation, defamation or corporate insolvency.

eNterprise risK MaNaGeMeNt (CONt.)


stateMeNt OF COrpOrate GOVerNaNCe

the Board of Directors of the Company have adopted

transparent, ethical and good governance practices during the

year whilst being in compliance with the corporate governance

rules and practices as specified by regulatory bodies and

legislation such as the institute of Chartered accountants of

sri lanka, the securities & exchange Commission of sri lanka

and the Companies act No. 7 of 2007.

Chairman & Chief executive Officerthe balance of power is ensured by segregation of

responsibilities and authority in a distinctive manner between

the Chairman and the Chief executive Officer.

Mr N. K. h. ratwatte functioned as Chairman/NeD of the

Company during the year while Mr D. J. ratwatte served as an

executive Director and the Chief executive Officer.

the Board Balance

Non-executive Directors & independent Non-executive Directorsat the beginning of the year the Board of Directors

contained altogether nine members; seven are Non-

executive Directors and three of the seven Non-executive

Directors are independent. the composition of the Board of

Directors changed during the year with resignations and new

appointments.

at the end of the year the Board of Directors contained nine

members; seven are Non-executive Directors and two of the

seven Non-executive Directors are independent.

all the members of the Board devote their time and effort

to fulfilling their stewardship function, and are available for

consultation and advice in person or via communication

channels whenever necessary.

the Board meet every quarter or more frequently as required

to approve strategic initiatives, provide entrepreneurial and

strategic guidance and to review operational and financial

performance.

the attendance of Directors at the Board meetings during the

year, resignations and new appointments are as follows:

Mr N. K. h. ratwatte NeD/Chairman 4/4

Mr D. J. ratwatte eD/CeO 4/4

Ms M. C. pietersz eD/FD 4/4

Mr h. a. s. Crawford NeD 4/4

Mr G. r. Chambers NeD 4/4

Mr J. M. rutherford NeD 2/4

Mr N. h. G. s. Jayasinghe NeD 3/3

[appointed w. e. f. april 1, 2017]

Mr a. N. Wickremasinghe iNeD 1/1

[resigned w. e. f. March 31, 2017]

Mr J. Molligoda iNeD 1/1


Mr M. Vamadevan iNeD 1/1


Mr e. D. p. soosaipillai iNeD 3/3


Mr G. K. B. Dasanayaka iNeD 3/3


eD: executive Director

NeD: Non-executive Director

iNeD: independent Non-executive Director

CeO: Chief executive Officer

FD: Finance Director

appointments to the BoardWe consider that the combined knowledge and expertise

of the Board of Directors would be capable of meeting the

strategic objectives of the Company whilst adhering to the

best governance practices. the existing Board of Directors

collectively decide with the full consent relating to new

appointments of Directors in accordance with the articles of

association of the Company.

the Board of Directors, by setting criteria, procedure,

qualifications and any special attributes, collectively decide

the appointments to senior managerial positions of the

Company.

re-election of Directorsthe notice of the annual General Meeting provides sufficient

information for the shareholders to make informed decisions

in re-electing the Directors.

remuneration Committeethe Company has its own remuneration Committee. this

remuneration Committee held its meeting for the year on

February 22, 2017.

the remuneration Committee bases its recommendations on

remuneration of Directors and senior/executive Management


broadly on prevailing market rates and individual performance

and competition.

Major transactions, dialogue with shareholders and annual reportDetails of all major transactions have been disclosed in this

report.

the Company website (www.finlays.net) is updated and

maintained with Company information for the benefit of any

stakeholder.

Ms M. C. pietersz, Finance Director, acts as the designated

officer of the Company to clarify any matters relating to the

annual report.

the Company has made arrangements to notify the convening

of the annual General Meeting and distributed the Financial

statements to all the shareholders well in time as determined

by the relevant statute, and encourages all the shareholders

to attend the annual General Meeting and exercise their

voting rights.

sustainability reportingthe Company uses the Global reporting initiative (Gri)

guidelines in sustainability reporting in respect of all the

estates certified under the rainforest alliance principles.

Compliance with Gri guidelines adequately covers the

National Green reporting system of sri lanka. the Company

uses the Credit 360 reporting mechanism for health and

safety and sustainability reporting.

a separate report on sustainability is provided in this report

for the benefit of all the stakeholders.

Board audit Committeethe Company has its own Board audit Committee separate

from the parent Company’s audit Committee.

a more detailed report by the Chairman of the Board audit

Committee appears on pages 29 and 30 of this annual report.

related party transactions review committeethe Company has its own related party transactions review

Committee. the Committee held four meetings during the

year 2017 to review the related party transactions and the

minutes of the meetings were circulated to the Committee

and to the Board of Directors.

the related party transactions of the Company during

the financial year have been reviewed by the related party

transactions review Committee of the Company and are

in compliance with section 09 of the Cse listing rules.

the related party transactions during the year either non-

recurrent or recurrent were below the threshold specified

under rule 9.1 necessitating approval of the shareholders by

way of special resolution.

a more detailed account of the Committee appears on page

23 of this annual report.

internal controlinternal and management audit function continues to be

outsourced and is being carried out by Messrs B r De silva &

Co., Chartered accountants. the service provided by the firm

of accountants is subject to annual evaluation as an external

service provider and governed by a service level agreement.

periodic reviews of the internal controls covering financial,

operational and compliance requirements and risk exposure

have obtained reasonable assurance of their effectiveness and

adherence.

Group Corporate Code of Conductthe Company adheres to the Group Corporate Code of Conduct.

the Code summarises Finlays standards, expectations and

commitments in those areas which the Company deems key

to its commitments to corporate responsibility and is subject

to review and revision annually. Version 7 for the year 2017

was introduced in the month of January.

the internal whistle-blowing policy and procedure introduced

in the year 2010 as a suggestion scheme and an anti-fraud

mechanism works well, with communication channels open

to any user.

Corporate policy manualthe Company is broadly guided by the Corporate policy

Manual as a governance tool, including the integrated policy

Document.

Directors’ report & statement of Directors’ responsibility in relation to Financial statementsthe Company has not engaged in any activity which

contravenes laws and regulations. all material interests

involving the Company have been properly disclosed in note

28 to the Financial statements on page 67.

stateMeNt OF COrpOrate GOVerNaNCe (CONt.)


Financial reportingthe Company has disclosed financial and non-financial

information in the form of quarterly financial statements and

the annual report. the quarterly financial statements are

subject to review by the Board audit Committee.

the overall reporting integrity is exhibited by the statement

of Directors’ responsibility in relation to Financial statements

on page 28.

Minimum public holdingthe Company has maintained a public shareholding of 10%

since 30th June 2017 in compliance with the Cse listing rule

7.13.1.

Management Discussion and analytical reportthe reports by the Chairman and the Chief executive Officer

deal with industry structure and developments, opportunities

and threats, risks and concerns, social and environmental


protection activities, financial performance, material

developments in human resources, industrial relations,

prospects for the future and related topics in great detail.

information to the Board of Directorsthe Company’s erp system provides complete, timely,

adequate and relevant information to the Board and senior

management, enabling them to make informed decisions. the

Board meet quarterly as mentioned above and are supplied

with all relevant information prior to the scheduled meetings.

Company secretarya body corporate, Messrs ssp Corporate services (private)

limited, acts as the Company secretary.

Declaration by the Directorsthe Directors of the Company declare that the Cse regulations

on Corporate Governance are complied with as given in table

1.

Table 1—Compliance with CSE regulations on Corporate Governance

Rule Corporate Governance Rules regarding the Board of Directors Status of compliance

7.10 a publishing a statement in the annual report for the financial year confirming Complied

compliance with the Corporate Governance rules

7.10 b Giving an affirmative statement in the annual report with regard to complying with Complied

Corporate Governance rules or vice versa

7.10 c exemption to comply with Corporate Governance rules Not applicable

7.10.1 a presence of Non-executive Directors Complied

7.10.1 b Basis of calculating the total number of Directors Complied

7.10.1 c rectification of changes to the ratio between total and Non-executive Directors Not applicable

7.10.2 a presence of independent Non-executive Directors and the ratio Complied

7.10.2 b Declaration by Non-executive Directors with regard to independence or otherwise Complied

7.10.3 a annual determination of independence or non-independence of Non-executive Directors, Complied

by the Board of Directors and setting out in the annual report the names of Directors

determined to be independent

7.10.3 b Disclosure in the annual report with regard to determination of independence of Not applicable

a Director who does not meet the criteria for being independent

7.10.3 c publishing in the annual report a brief resume of each Director including the nature Complied

of expertise in the relevant functional areas

7.10.3 d providing a brief resume of each Director to the exchange upon appointment Complied

7.10.4 a-h Criteria for defining independence Complied



Rule Corporate Governance Rules regarding the Remuneration Committee Status of compliance

7.10.5 a Composition of the remuneration Committee Complied

7.10.5 b Functions of the remuneration Committee Complied

7.10.5 c Disclosure in the annual report of the names of the Directors on the remuneration Complied

Committee, remuneration policy and setting out the aggregate remuneration paid to

executive and Non-executive Directors

Rule Corporate Governance Rules regarding the Audit Committee Status of compliance

7.10.6 a presence of Non-executive and independent Non-executive Directors on the Complied

audit Committee, parent-subsidiary relationship, Chairmanship of the Committee

and attendance of executive Management at the meetings

7.10.6 b Functions of the audit Committee Complied

7.10.6 c Disclosure in the annual report Complied

7.10.7 a-k Failure to comply with rule 7.10 and resultant regulatory procedures Not applicable


the remuneration Committee of the Company appointed

and responsible to the Board of Directors consists of two

independent Non-executive Directors and one Non-executive

Director.

the Company has its own remuneration Committee separate

from the parent company’s remuneration Committee.

Compositionthe Committee comprises a combination of independent Non-

executive Directors and a Non-executive Director. the names

of the Directors, appointments and resignations during the

year, their status of independence and positions occupied in

the Committee are as follows:

Mr J. Molligoda — iNeD-Chairman

[resigned w.e.f. March 31, 2017]

Mr a. N. Wickremasinghe — iNeD-Member


Mr G. r. Chambers — NeD-Chairman

[appointed w.e.f. september 7, 2017]

Mr G. K. B. Dasanayaka — iNeD-Member


Mr e. D. p. soosaipillai — iNeD-Member


iNeD: independent Non-executive Director

NeD: Non-executive Director

role of the Committeethe remuneration Committee has reviewed and recommended

to the Board of Directors the policy on remuneration for the

Directors and the executive staff. the aggregate remuneration

to the Directors appears in note 28.2 on page 68.

repOrt OF the reMuNeratiON COMMittee

Committee meetingsthe Committee held its meeting for the year on February 22,

2017

remuneration policythe Committee took into account the market information, as

well as competition and performance evaluation criteria in

deciding the overall remuneration policy of the Company and

thereby the remuneration of Directors and the executive staff.

G. r. ChambersChairman

remuneration Committee

Colombo

15th March 2018


the Company, as a responsible corporate citizen, complies with

relevant legislation and regulations pertaining to related party

transactions. a related party transactions review Committee

has been set up to ensure that the interests of all stakeholders

are taken into account when engaging in transactions with

related parties.

Compositionthe Committee comprises a combination of independent

Non-executive Directors and a Non-executive Director, in

accordance with Cse listing rule 9.2.2. the names of the

Directors, their status of independence, dates of appointments

and resignations, positions occupied in the Committee and

attendance at the meetings are as follows:

Mr J. Molligoda—iNeD-Chairman 0/0[resigned w.e.f. March 31, 2017]

Mr M. Vamadevan—iNeD-Member 0/0[resigned w.e.f. March 31, 2017]

Mr a. N. Wickremasinghe—iNeD-Member 0/0 [resigned w.e.f. March 31, 2017]

Mr G. K. B. Dasanayake—iNeD-Chairman 4/4[appointed w.e.f. april 5, 2017]

Mr e. D. p. soosaipillai—iNeD-Member 4/4[appointed w.e.f. april 5, 2017]

Mr N. K. h. ratwatte NeD-Member 3/4[appointed w.e.f. april 5, 2017]

iNeD: independent Non-executive DirectorNeD: Non-executive Director

all Non-executive Directors have duly declared their

independence by the annual declaration and the Board

of Directors have determined their independence or non-

independence.

the Chief executive Officer, Finance Director and Financial

Controller attend the meetings to update the Committee and

to provide all the necessary information with regard to related

party transactions. the Committee reviewed the related party

transactions during the financial year at its meetings. the

minutes of the meetings were duly recorded and disseminated

to the Committee and to the Board of Directors. there were no

related party transactions, non-recurrent or recurrent, during

the period under review requiring immediate announcement

to the Cse and/or shareholder approval.

repOrt OF the relateD party traNsaCtiONs reVieW COMMittee

Committee meetingsthe Committee held four meetings during the year for the

purpose of reviewing related party transactions.

information to the Board of Directors and to the Committeethe Company’s erp system provides complete, timely,

adequate and relevant information to the Board and senior

management, through which the related party transactions

review Committee is briefed.

policy & procedurethe Committee is constituted and functions as per Cse listing

rules section 9 and lKas 24. the details of related party

transactions were circulated to the Committee in advance.

all transactions with related parties were computed having

regard to the arm’s length price. the calculation of the arm’s

length price is based on any one of the most appropriate

methods as follows:

• Comparable uncontrolled price Method [Cup]

• re-sale price Method [rpM]

• Cost plus Method [CplM]

• profit split Method [psM]

• transactional Net Margin Method [tNMr]

the Committee takes into account the following in selecting

the mosts appropriate method:

• the availability, coverage and reliability of data necessary for the application of the method

• the extent to which reliable and accurate adjustments can be made to account for differences, if any, between the international transaction and the comparable uncontrolled transaction or between the enterprises entering into such transactions

• the nature, extent and reliability of assumptions required to be made in application of a method

the related party transactions entered during the year are

shown in note 28 on page 67.

G. K. B. DasanayakeChairmanrelated party transactions review Committee

15th March 2018


aNNual repOrt OF the BOarD OF DireCtOrs ON the aFFairs OF the COMpaNy

the details set out herein provide the pertinent information

required by the Companies act No. 7 of 2007 and the Colombo

stock exchange listing rules and are guided by recommended

best accounting practices.

principal activities and Business review/Future Developmentsthe Company is engaged mainly in the cultivation, manufacture

and marketing of tea, rubber, coconut and forestry products,

operating in the Central province.

a review of the business of the Company and its performance

during the year, with comments on financial results and future

strategic developments, is contained in the Chairman’s Message

(pages 4 to 5), Chief executive Officer’s review (pages 6 to 8)

and Financial review (pages 12 to 14). these reports together

with the Financial statements reflect the state of affairs of the

Company.

the Directors, to the best of their knowledge and belief, confirm

that the Company has not engaged in any activities that

contravene laws and regulations.

Financial statementsthe Financial statements of the Company are given on pages

32 to 73 of this annual report.

auditors’ reportthe auditors’ report on the Financial statements is given on

page 31.

accounting policies the accounting policies adopted in the preparation of the

Financial statements are given on pages 36 to 50 there were

no changes in the accounting policies adopted.

Directors’ remunerationDirectors’ remuneration, in respect of the Company for the

financial year ended 31st December 2017, is given in note 28.2

to the Financial statements, on page 68.

Corporate DonationsCorporate Donations by the Company amounted to rs. 8,600.

No donations were made for political purposes.

Directoratethe names of the Directors who held office during the financial

year are given below and their brief profiles appear on page

27.

executive DirectorsMr D. J. ratwatte

Ms M. C. pietersz

Non-executive DirectorsMr N. K. h. ratwatte (Chairman)

Mr J. M. rutherford

Mr h. a. s. Crawford

Mr G. r. Chambers

Mr N. h. G. s. Jayasinghe

Mr e. D. p. soosaipillai

Mr G. K .B. Dasanayaka

Messrs J. M. rutherford and G. r. Chambers retire by rotation

in terms of articles 86 and 87 of the articles of association

and being eligible offer themselves for re-election.

Directors’ interestsDirectors’ interests in contracts of the Company are disclosed

in note 28.4 to the Financial statements on page 68.

the Directors, at their meetings, have declared all material

interest in contracts involving the Company and have refrained

from voting on matters in which they were materially interested.

related party transactionsrelated party transactions are disclosed in note 28 to the

Financial statements on page 67.

the Board of Directors related party transactions review

Committee reviewed the Company’s related party transactions

in compliance with section 9 of the listing rules of the

Colombo stock exchange. More details in this regard is shown

in the report of the related party transactions review

Committee appearing on page 23 of this annual report.


auditorsin accordance with the Companies act No. 7 of 2007, a

resolution proposing the re-appointment of Messrs. KpMG,

Chartered accountants, as auditors to the Company will be

submitted at the annual General Meeting.

the auditors, Messrs. KpMG, were paid rs.2.5 million (2016:

rs. 2.5 million) as audit fees by the Company.

as far as the Directors are aware, the auditors do not have any

relationships (other than that of an auditor) with the Company.

the auditors also do not have any interest in the Company.

turnoverthe total turnover of the Company for the year is rs. 2,227

million (2016: rs. 1,620 million). an analysis of the turnover

is given in note 4 to the Financial statements. the Company’s

turnover has increased by 37% compared to the previous year.

Financial results & appropriationsa pre-tax profit of rs. 287 million was recorded during the

year. profit for the year increased by 237% compared to the

previous year due to favourable trading conditions, mainly the

tea prices, as explained in the Chief executive Officer’s review

on pages 6 to 8 and in the Financial review on pages 12 to 14.

DividendNo dividend is recommended for the year under review.

taxation and statutory paymentsaccording to the inland revenue act, No. 10 of 2006, the

Company is liable for income tax at the rate of 10% on its

agricultural profits. profit other than ‘agricultural profits’ is

liable for income tax at the corporate tax rate of 28%.

all other statutory payments such as epF, etF and other taxes

have been made up to date.

Fixed assetsinformation relating to the movements of fixed assets is given

in notes 10 to 14 to the Financial statements.

property, plant and equipmentthe total capital expenditure incurred during the year

amounted to rs. 52 million compared to rs. 32 million incurred

in the previous year. Further information relating to movement

in property, plant and equipment is given under notes 12, 13

and 14 to the Financial statements.

share Capitalthe stated capital as at the end of the year is rs. 340 million;

there was no change in the stated capital during the year.

Golden sharethe secretary to the treasury has been issued with one golden

share on behalf of the government of sri lanka, carrying special

rights in accordance with the articles of association of the

Company as more fully explained in note 19.1 to the Financial

statements.

Capital reserves the revaluation reserve of rs. 199 million (2016: rs. 206

million) represents reserves arising from the revaluation of

bare land carried out in May 1998.

the movement in the revaluation reserve is disclosed in note

20 to the Financial statements.

Managing agentthe Company is managed by Finlays tea estates lanka (pvt)

ltd. and no management fee is charged.

employment policythe Company’s employment policy is totally non-discriminatory,

which respects individuals and provides career opportunities

irrespective of gender, race or religion. regular performance

appraisal and evaluation schemes are in place and training,

development and promotion opportunities are available to all

employees who qualify.

the total number of employees of the Company is 4,937 (2016:

5,251) persons.

aNNual repOrt OF the BOarD OF DireCtOrs ON the aFFairs OF the COMpaNy (CONt.)


employees’ health & safetyMore attention has been given to employees’ health and safety

and several training programmes have been conducted to

educate, improve awareness and encourage good practices of

safety and health employees at all levels. a comprehensive

evaluation of health and fire hazards was undertaken in all the

factories by the Company’s engineering division during the

year under review and their recommendations have been

implemented in full.

industrial relationsthe Collective agreement between the Workers trade unions

and the representatives from the regional plantation

Companies was signed with effect from 15th October 2016.

Other matters pertaining to employees and industrial relations

are contained in the Chief executive Officer’s review on pages

6 to 8.

environmental protectionit is the Company’s policy to minimise the adverse effects on

the environment which may result from the Company’s

operations, and to co-operate and comply with the relevant

authorities and regulations. More details in this regard are

shown on pages 9 to 11 of this report under sustainability

performance review.

Corporate Governancethe Directors are responsible for the formulation and

implementation of overall business strategies and policies, and

for setting standards in the short-, medium- and long-term

basis, adopting good governance in managing the affairs of

the Company.

events Occurring after reporting DateNo circumstances have arisen since the balance sheet date that

would require adjustment, or disclosure in the Financial

statements.

Going Concernthe Directors consider that the Company has adequate

resources to adopt a going concern basis in preparing the

Financial statements.

Directors’ shareholdingsthe Directors’ holdings of ordinary shares in the Company are

as follows:

As at As at

31.12.2017 31.12.2016

Mr N. K. h. ratwatte 500 500

Mr J. M. rutherford Nil Nil

Mr D. J. ratwatte Nil Nil

Mr h. a. s. Crawford Nil Nil

Mr G. r. Chambers Nil Nil

Ms M. C. pietersz Nil Nil

Mr N. h. G. s. Jayasinghe Nil Nil

Mr e. D. p. soosaipillai Nil Nil

Mr G. K. B. Dasanayaka Nil Nil

By Order of the Board of Directors of

udapussellawa plantations plC

D. J. ratwatte M. C. pieterszDirector Director

s s p Corporate services (private) limited

secretaries

Colombo

15th March 2018

aNNual repOrt OF the BOarD OF DireCtOrs ON the aFFairs OF the COMpaNy (CONt.)


N. K. h. ratwatte having Joined James Finlay & Company (Colombo) in 1991 and

appointed as an executive Director in 1997, he was also appointed

as an executive Director of hapugastenne plantations plC and

udapussellawa plantations plC in 1998 and its Chairman/ Managing

Director since 1st april 2006. Mr ratwatte continues as a Non-

executive Director of Finlays Colombo plC since 2007 and in several

other companies within and outside the group. he is a Fellow of

the National institute of plantation Management (FipM). age 63.

r. a. D. r. ramanayake executive Director appointed to the Board in June 2010. Joined

the Company as head of Finance in 1992. Counts over 25 years of

experience in the field of finance in the plantation industry. Fellow

member of the institute of Chartered accountants of sri lanka

and the institute of Certified public accountants of sri lanka. he

is also a Director of hapugastenne plantations plC, James Finlay

plantation holdings (lanka) ltd., Finlays tea estates (lanka) limited.,

Newburgh Green teas (pvt) ltd. age 60.

D. J. ratwatte Director/Chief executive Officer of hapugastenne plantations plC

and udapussellawa plantations plC since January, 2015. Joined

the Company in 2013. he counts over 25 years experience in the

plantations industry. age 50.

J. Molligoda independent Non-executive Director appointed to the Board in

December 2007. Director, Chief executive Officer of Bogawantalawa

tea estates plC. Counts over 27 years of experience in the fields

of human resource development, financial management and

strategic planning/projects in the plantation sector. Fellow of the

institute of Chartered accountants of sri lanka, Master of Business

administration (piM), Fellow of the society of Certified Management

accountants of sri lanka. life member of the Organisation of

professional associations of sri lanka, Founder Member of

the institute of Directors of sri lanka, Founder member of the

association of hr professionals. age 60.

M. Vamadevan independent Non-executive Director appointed to the Board in

December 2001. presently advisor to the hon. Minister of plantation

infrastructure Development. holds a Mphil in applied economics

and Ma in Development economics. previously worked for 35 years

in the Ministries of planning, and Finance and planning in various

capacities. age 71.

BOarD OF DireCtOrs

e. r. Croos Moraes Director since November 1998 and Non-executive Director since

2003. executive Director of Finlays Colombo plC since October

1991. an associate Member of the Chartered institute of Marketing

uK (aCiM), a Chartered Marketer. age 59.

a. N. Wickramasinghe appointed to the Board as a non-executive Director in July 2012 upon

his retirement as General Manager – estates. Mr. Wickremasinghe

counts over 39 years experience in the tea industry. age 67.

J. M. rutherford appointed as a Non-executive Director on 1st February 2013 on

becoming Finance Director of James Finlay ltd., london. he is

a qualified Chartered accountant (iCaeW) and holds a Bachelor

of science (Bsc) degree in economics from the university of

southampton. previously he spent 15 years with associated British

Foods, a uK listed company, where he held a variety of senior finance

and other related posts. age 45

h. a. s. Crawford Mr. Crawford joined the swire Group in 1978 and has held a number

of senior positions in the Group including as executive Director of

the trading and industrial Division of swire pacific in hong Kong.

he has worked in australia, papua New Guinea, Japan, the u.s., the

u.K., taiwan and hong Kong. he holds a Ba (honours) Degree in

Modern history from the university of Oxford. Mr. Crawford was

appointed as Managing Director of Finlays Colombo plC with effect

from the 1st of september 2015. age 60.

G. r. Chambers Mr. Chambers became Managing Director of James Finlay limited

in september 2015. since joining John swire & sons in 1993, he has

worked in China, hong Kong and taiwan for swire, most recently

as COO of Damin (the world’s largest tea extract manufacturer) and

COO of swire Beverages (the largest Coca-Cola franchise bottler

in China).

in april 2014, Mr. Chambers was appointed to the hong Kong

Committee for pacific economic Cooperation to advise the hong

Kong secretary for Commerce, economic and Development on

matters relating to the participation of hong Kong in the pacific

economic Cooperation Council. Mr. Chambers has also served as an

advisor to Chatham house, the uK think-tank, on matters relating

to Greater China. age 45.

N. K. h. ratwatte having joined James Finlay & Company (Colombo) in 1991 and appointed as an executive Director in 1997, he was also appointed as an executive Director of udapussellawa plantations plC and hapugastenne plantations plC in 1998, and as its Chairman/Managing Director on 1st april 2006. Mr. ratwatte retired from executive service on 31st December 2015, and was appointed Non-executive Chairman on 1st January 2016. Mr ratwatte has continued as a Non-executive Director of Finlays Colombo limited since 2007, and in several other companies within and outside the group. he is a Fellow of the National institute of plantation Management (FipM). D. J. ratwatte Director/Chief executive Officer of hapugastenne plantations plC and udapussellawa plantations plC since January 2015. Joining the Company in 2013, he was also appointed as a Non-executive Director of Finlays Colombo limited in May 2017. Counts over 30 years of experience in the plantations industry. he is an Ordinary Member of the sri lanka institute of Directors (sliD) and a Graduate of sliD and an Ordinary Member of the institute of Management of sri lanka.

Ms. M. C. pietersz executive Director appointed to the Board in July 2016, Ms. pietersz is an associate member of the institute of Chartered accountants of england and Wales and a fellow member of the institute of Chartered accountants of sri lanka. she holds a Bsc (honours) degree in physics from the university of sussex and an MBa from heriot-Watt university, edinburgh. an executive Director of Finlays Colombo limited since November 2011, she also serves on the Boards of Bogala Graphite lanka plC and seylan Bank plC as an independent Non-executive Director.

J. M. rutherford appointed as a Non-executive Director on 1st February 2013 on becoming Finance Director of James Finlay ltd., london. he is a qualified Chartered accountant (iCaeW) and holds a Bachelor of science (Bsc) degree in economics from the university of southampton. previously he spent 15 years with associated British Foods, a uK listed company, where he held a variety of senior finance and other related posts.

h. a. s. Crawford Non-executive Director appointed to the Board in september 2015. Mr. Crawford joined the swire Group in 1978 and has held a number of senior positions in the Group, including executive Director of the trading and industrial Division of swire pacific in hong Kong. he has worked in australia, papua New Guinea, Japan, the u.s., the u.K., taiwan and hong Kong. he holds a Ba (honours) Degree in Modern history from the university of Oxford. Mr. Crawford was appointed as Managing Director of Finlays Colombo limited with effect from the 1st of september 2015.

G. r. Chambers Non-executive Director appointed to the Board in september 2015 on becoming Managing Director of James Finlay limited

in september 2015. since joining John swire & sons in 1993, he has worked in China, hong Kong and taiwan, most recently as COO of Damin (the world’s largest tea extract manufacturer) and COO of swire Beverages (the largest Coca-Cola franchise bottler in China).

in april 2014, Mr. Chambers was appointed to the hong Kong Committee for pacific economic Cooperation to advise the hong Kong secretary for Commerce, economic and Development on matters relating to the participation of hong Kong in the pacific economic Cooperation Council. Mr. Chambers has also served as an advisor to Chatham house, the uK think tank on matters relating to Greater China.

N. h. G. s. Jayasinghe Non-executive Director appointed to the Board in april 2017. Mr. Jayasinghe joined Finlays in February 2006, as the Chief executive Officer of Finlay Cold storage (pvt) limited and was appointed a Director of the subsidiary in February 2008. Mr. Jayasinghe was appointed an executive Director of Finlays Colombo limited in November 2014. he holds a Masters degree in Business administration (MBa), is a Fellow of the Chartered Management institute – u.K. and a Member of the Chartered institute of logistics and transport – u.K. he also serves on the executive Committee and Council of the sri lanka Branch of the Chartered Management institute and Chartered institute of logistics and transport respectively, and is a member of the Ceylon Chamber of Commerce sector steering committee for ports, shipping, aviation and logistics.

e. D. p. soosaipillai independent-Non-executive Director appointed to the Board in april 2017. Mr. soosaipillai is a fellow of the institute of the Chartered accountants of sri lanka and a fellow of the institute of Certified Management accountants of sri lanka. he is an independent Non-executive Director of hatton National Bank plC and Commercial Credit and Finance plC, where he functions as Chairman and member of many board sub-committees. Mr soosaipillai has over 30 years of experience in Credit, Corporate Governance, risk Management and Compliance, both at the operational and strategic levels.

G. K. B. Dasanayaka independent-Non-executive Director appointed to the Board in april 2017. Mr. Dasanayaka is an attorney-at-law by profession. he is an independent Non- executive Director of aCMe printing and packaging plC. he worked for the international labour Organization (ilO) as the senior specialist, employers’ activities for the south asian region from 2007 to February 2015. prior to joining the ilO he worked with the employer Federation of Ceylon (eFC) from 1979 and was the Director General/CeO from 2000 to 2006. While at the eFC he specialised in employment law and relations and had firsthand experience in dealing with key stakeholders on major labour issues, at operational and policy levels. since his retirement from the ilO he provides consultancy service in employment law and employee relations.


stateMeNt OF DireCtOrs’ respONsiBility iN relatiON tO FiNaNCial stateMeNts

the following statement, which should be read in conjunction

with the auditors’ statement of their responsibilities, as set

out in their report, is made with a view to distinguishing the

respective responsibilities of the Directors and the auditors,

in relation to the Financial statements.

the Directors are required by the Companies act No. 07 of

2007, to prepare and present the Financial statements for each

financial year, which give a true and fair view of the state of

affairs of the Company as at the end of the financial year and

of the profit and loss for the financial year. the Directors are

required to prepare these Financial statements on the going

concern basis, unless it is not appropriate.

since the Directors are satisfied that the Company has the

resources to continue in business for the foreseeable future,

the Financial statements continue to be prepared on the said

basis.

the Directors consider that in preparing the Financial

statements on pages 32 to 73, the Company has used

appropriate accounting policies, consistently applied, and

supported by reasonable and prudent judgements and

estimates, and that all accounting standards which they

consider to be applicable have been followed.

the Directors have responsibility for ensuring that the

Company keeps accounting records which disclose with

reasonable accuracy the financial position of the Company,

and which enable them to ensure that the Financial statements

comply with the Companies act No. 07 of 2007. the Directors

have general responsibility for taking such steps as necessary

to safeguard the assets of the Company and to prevent and

detect fraud and other irregularities.

the Directors confirm that to the best of their knowledge all

taxes, duties and levies payable by the Company and all

contributions, levies and taxes payable on behalf of and in

respect of the employees of the Company and all other known

statutory dues as were due and payable by the Company as at

the Balance sheet date have been paid, or where relevant,

provided for.

On behalf of the Board of Directors


Colombo

15th March 2018


role of the audit Committeethe Board audit Committee of the Company is formed

in compliance with the Cse listing rules, section 7 of the

Continuing listing requirements.

Functionsthe functions of the Board audit Committee include the

following:

(a) Overseeing of the preparation, presentation and

adequacy of disclosures in the Financial statements of

the Company in accordance with sri lanka accounting

standards

(b) Overseeing of compliance with financial reporting

requirements, information requirements of the

Companies act and other relevant financial reporting

related to regulations and requirements

(c) Overseeing the processes to ensure that the internal

controls and risk management are adequate to meet the

requirements of the sri lanka auditing standards

(d) assessment of independence and performance of

external auditors

(e) to make recommendations to the Board pertaining to the

appointment, re-appointment and removal of external

auditors and to approve the remuneration and terms of

engagement of the external auditors

the Board of Directors have mandated explicit terms of

reference for the effective functioning of the Board audit

Committee and are thus duly empowered by the Board.

the performance of the Committee is subject to annual self-

evaluation.

Compositionthe Board audit Committee comprises two independent Non-

executive Directors and a Non-executive Director.

Mr J. Molligoda – iNeD-Chairman


Mr M. Vamadevan – iNeD-Member


Mr a. N. Wickremasinghe – iNeD-Member


repOrt OF the BOarD auDit COMMittee

Mr e. D. p. soosaipillai – iNeD-Chairman

[appointed w.e.f. april 1, 2017]

Mr G. K. B. Dasanayake – iNeD-Member


Mr. N. K. h. ratwatte – NeD-Member


[iNeD: independent Non-executive Director, NeD: Non-

executive Director]

the Chairman and his predecessor on the Board audit

Committee are fellow members of the institute of Chartered

accountants of sri lanka.

the Board of Directors, based on the annual declaration, have

determined the independence or non-independence of each

Non-executive Director in accordance with Cse listing rule

No. 7.10.3.

internal audit Functionthe internal audit function of the Company continues to be

outsourced to Messrs B r De silva & Company, Chartered

accountants. the terms of reference are governed by a service

level agreement.

the Board audit Committee ensures that the internal audit

function is free from conditions that threaten the ability to

carry out the internal audit activities in an unbiased manner.

the main focus of internal audit function is to independently

and objectively evaluate and report on the adequacy, integrity

and effectiveness on the overall system of internal control, risk

management and governance for assurance.

the risk-based internal audit plan is developed to cover key

compliance, and financial and operational matters that are

significant to the overall performance of the Company. During

the year the internal audit has carried out eight routine audits.

the Board audit Committee of the Company is supported by

a functional sub-committee, namely the audit supervisory

Committee (asC), as appointed and empowered by the Board

of Directors with specific terms of reference and a reporting

requirement to the Group audit Committee in the uK via the


repOrt OF the BOarD auDit COMMittee (CONt.)

Group head of internal audit (ia). the Board audit Committee

exercises oversight of the asC by reviewing the asC minutes as

to actions taken on ia findings. the asC, chaired by the Finance

Director, comprises the Chief executive Officer, Financial

Controller, Operational Directors and the internal auditors.

the audit supervisory Committee has held six meetings during

the year 2017 to review the processes, methodology and reports

of the internal audit.

audit Committee Meetingsthe Board audit Committee has held six meetings for the

year 2017.

the annual report for the year 2016 was reviewed at the audit

committee meeting held on March 14, 2017 and was attended

by the engagement partner of KpMG.

the attendance of the Board audit Committee at the meetings

for the year 2017 was as follows:

Mr J. Molligoda 2/2

Mr M. Vamadevan 2/2

Mr a. N. Wickremasinghe 2/2

Mr e. D. p. soosaipillai 4/4

Mr G. K. B. Dasanayake 4/4

Mr N. K. h. ratwatte 4/4

the Chairman, Chief executive Officer, Finance Director,

Financial Controller, external auditors and internal auditors

attended the meetings on invitation.

a meeting was held on september 22, 2017 with the external

and internal auditors without the presence of the executive

management as required by the terms of reference of the Board

audit Committee and the regulatory corporate governance

requirements.

principle activitiesthe Board audit Committee is a sub-committee of the Board

of Directors and reports to the Board at its quarterly meetings.

the Company has compiled a risk register based on a detailed

risk assessment and a risk-profiling exercise and is subject to

review and revision twice a year. the Company’s risk register

forms a part of the group risk register of the parent company

and is subject to oversight by the Director-Corporate affairs

based in the uK.

the Board audit Committee and the audit supervisory

Committee reviewed the risk register of the Company at the

meetings for the year under review and recommendations were

made for improvement.

By their review of the asC minutes, the Board audit Committee

exercises oversight of internal and external audit findings and

the corresponding management action taken, and weighs in on

internal control issues of the Company.

the Board audit Committee additionally reviews the external

audit findings with a view to initiating corrective action on

systemic operational risk issues and also gives oversight to

compliance with legal and regulatory requirements.

the Board audit Committee at its meetings paid special

attention to compliance with the sri lanka Financial reporting

standards (slFrs).

external auditMessrs KpMG, the external auditors, are considered to be

independent as there is no evidence of any interest on their

part in the results published in the financial statements of the

Company other than as external auditors nor is there reason

to believe that such independence has been impaired during

the year.

the Board audit Committee recommend to the Board of

Directors that Messrs KpMG, Chartered accountants, be re-

appointed as external auditors for the financial year ending

December 31, 2018 subject to the approval of the shareholders.

e. D. p. soosaipillaiChairman

Board audit Committee

15th March 2018


iNDepeNDeNt auDitOrs’ repOrt

report on the Financial statementsWe have audited the accompanying Financial statements of

udapussellawa plantations plC, (“the Company”), which

comprise the statement of financial position as at December

31, 2017, and the statement of profit or loss and other

comprehensive income, statement of changes in equity,

statement of cash flows for the year then ended, and a summary

of significant accounting policies and other explanatory

information, set out on pages 32 to 73 of the annual report.

Board’s responsibility for the Financial statements the Board of Directors (“Board”) is responsible for the

preparation of these Financial statements that give a true and

fair view in accordance with sri lanka accounting standards,

and for such internal control as the Board determines is

necessary to enable the preparation of Financial statements

that are free from material misstatement, whether due to fraud

or error.

auditors’ responsibilityOur responsibility is to express an opinion on these Financial

statements based on our audit. We conducted our audit in

accordance with sri lanka auditing standards. those standards

require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about

whether the Financial statements are free from material

misstatement.

an audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the Financial

statements. the procedures selected depend on the auditors’

judgement, including the assessment of the risks of material

misstatement of the Financial statements, whether due to fraud

or error. in making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation

of the Financial statements that give a true and fair view 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 entity’s internal control.

an audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting

estimates made by Board, as well as evaluating the overall

presentation of the Financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinionin our opinion, the Financial statements give a true and fair

view of the financial position of the Company as at December

31, 2017, and of its financial performance and cash flows for

the year then ended in accordance with sri lanka accounting

standards.

report on Other legal and regulatory requirementsas required by section 163 (2) of the Companies act No. 07 of

2007, we state the following:

a) the basis of opinion and scope and limitations of the

audit are as stated above.

b) in our opinion 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, and the

Financial statements of the Company comply with the

requirements of section 151 of the Companies act.

CHARTERED ACCOUNTANTSColombo

15th March 2018

TO THE SHAREHOLDERS OF UDAPUSSELLAWA PLANTATIONS PLC


stateMeNt OF prOFit Or lOss aND Other COMpreheNsiVe iNCOMe

2017 2016 Note Rs. Rs.

revenue 4 2,226,762,355 1,620,095,251

Cost of sales (1,863,714,500) (1,648,409,853)

Gross Profit/( Loss ) 363,047,855 (28,314,602)

Other income 5 27,471,875 27,999,854

Change in Fair Value of Biological assets 14.4 120,405,262 (36,638,569)

administrative expenses (176,654,016) (131,480,138)

Net Finance Cost 6 (47,023,845) (41,711,453)

Profit/(Loss) before Taxation 7 287,247,131 (210,144,908)

income tax expense 8 (19,425,924) 28,344,494

Profit/(Loss) 267,821,207 (181,800,414)

Other Comprehensive Income

items that will never be classified to profit or loss:

remeasurement of retirement Benefit Obligation 77,054,855 82,343,123

Deferred tax on remeasurement of retirement Benefit Obligation (21,575,359) (13,019,586)

Other comprehensive income/(loss) for the year, net of income tax 55,479,496 69,323,537

Total Comprehensive Income/(Loss) for the Year 323,300,703 (112,476,877)

Earnings per share 9 13.81 (9.37)

Figures in brackets indicate deductions.

the accounting policies and notes from pages 36 to 73 form an integral part of the Financial statements.

For the year ended 31st December


stateMeNt OF FiNaNCial pOsitiON

2017 2016 Note Rs. Rs.

ASSETS Non-Current Assets right to use of land 10 296,545,629 307,330,132 immovable estate assets on finance lease 11 35,627,035 40,769,255 tangible assets other than biological assets 12 461,890,935 475,905,846 intangible assets 13 14,225,829 12,800,418 Bearer biological assets 14.1 448,523,325 452,654,631Consumable biological assets 14.2 662,911,219 537,502,967 Deferred tax asset 8.3 28,964,438 57,022,845 Total Non-Current Assets 1,948,688,410 1,883,986,094 Current Assets produce on bearer biological assets 14.3 3,975,069 5,004,874 inventories 15 235,493,853 256,607,568 trade and other receivables 16 52,769,867 59,726,201 Other financial assets 2,305,000 - amounts due from related companies 17 108,999,245 52,480,069 Cash and cash equivalents 18.1 7,826,669 4,327,975 Total Current Assets 411,369,703 378,146,687 Total Assets 2,360,058,113 2,262,132,781 EQUITY AND LIABILITIES stated capital 19 340,000,010 340,000,010 revaluation reserve 20 198,653,544 205,810,005 General reserve 21 152,230,438 145,073,977 accumulated profit/(loss) 122,913,888 (200,386,815)Total Equity 813,797,880 490,497,177 Non-Current Liabilities interest-bearing borrowings - payable after one year 22 100,422,239 125,308,654 Deferred income 23 103,482,909 107,646,148 retirement benefit obligations 24 547,727,072 617,530,120 Net liability to the lessor - payable after one year 25 121,632 124,090 Total Non-Current Liabilities 751,753,852 850,609,012 Current Liabilities interest-bearing borrowings - payable within one year 22 54,115,223 51,656,658 Net liability to the lessor - payable within one year 25 2,018 2,018 amounts due to related companies 26 396,429,063 349,552,530 trade and other payables 27 254,266,862 265,034,310 income tax payable 12,942,887 5,473,606 Bank overdraft 18.2 76,750,328 249,307,470 Total Current Liabilities 794,506,381 921,026,592 Total Equity and Liabilities 2,360,058,113 2,262,132,781

Figures in brackets indicate deductions. the accounting policies and notes on pages 36 to 73 form an integral part of the Financial statements these Financial statements have been prepared in compliance with the requirements of the Companies act No. 07 of 2007.

D. s. heenatigalage Financial Controller the Board of Directors is responsible for the preparation and fair presentation of these Financial statements. approved and signed for and on behalf of the Board of Directors of udapussellawa plantations plC.


Colombo15th March 2018

As at 31st December


stateMeNt OF ChaNGes iN eQuity

Stated Revaluation General Accumulated Total Capital Reserve Reserve Profit/(Loss)

Rs. Rs. Rs. Rs. Rs.

Balances as at 01st January 2016 340,000,010 212,966,466 137,917,516 (87,909,938) 602,974,054

loss for the year - - - (181,800,414) (181,800,414)

Other Comprehensive income - - - 69,323,537 69,323,537

transferred to General reserve - (7,156,461) 7,156,461 - -

Balance as at 31st December 2016 340,000,010 205,810,005 145,073,977 (200,386,815) 490,497,177

Profit for the year - - - 267,821,207 267,821,207

Other Comprehensive Income - - - 55,479,496 55,479,496

Transferred to General Reserve - (7,156,461) 7,156,461 - -

Balance as at 31st December 2017 340,000,010 198,653,544 152,230,438 122,913,888 813,797,880



Attributable to equity holders of the Company

For the year ended 31st December 2017


stateMeNt OF Cash FlOWs

2017 2016 Note Rs. Rs.

CASH FLOWS FROM OPERATING ACTIVITIES

profit/(loss) before taxation 287,247,131 (210,144,908)

ADJUSTMENTS FOR

Finance Costs 47,023,845 45,013,931

retirement Benefit Obligations provision 97,076,271 102,206,496

Depreciation and amortisation 72,890,145 71,434,989

provision for impairment 3,092,334 -

amortisation of Capital Grants (4,163,239) (4,163,239)

(profit)/loss on sale of property, plant & equipment (679,250) (435,000)

Gain/(loss) on fair value of Biological assets (120,405,262) 36,638,569

Change in consumable biological assets due to harvest - 5,077,671

provision for bad and doubtful debts 1,010,000 4,108,798

provision/(reversal) for slow-moving and obsolete stocks 1,203,000 (1,237,050)

Operating Profit before Working Capital changes 384,294,975 48,500,257

(increase)/Decrease in inventories 19,910,715 (41,021,308)

(increase)/Decrease in trade and Other receivables (304,988) (691,959)

increase/(Decrease) in trade and Other payables (10,767,448) (30,584,515)

increase/(Decrease) in amounts Due from/to related Companies (81,173,760) (4,415,819)

Cash Generated from Operations 311,959,494 (28,213,344)

retirement Benefit Obligation payments (89,824,464) (69,738,275)

tax paid (5,473,630) (4,386,031)

Finance Costs paid (43,417,562) (32,236,715)

Net Cash from Operating Activities 173,243,838 (134,574,365)

CASH FLOWS FROM INVESTING ACTIVITIES

proceeds from sale of property, plant & equipment 679,250 435,000

Field Development expenditure (22,444,420) (16,992,385)

purchase of property, plant & equipment (29,697,524) (14,665,946)

Net Cash used in Investing Activities (51,462,694) (31,223,331)

CASH FLOWS FROM FINANCING ACTIVITIES

proceeds from external loans 36,974,000 91,045,000

repayment of long term-loans (59,404,308) (66,039,620)

Net proceeds from loan from the parent Company 76,705,000 4,036,848

Government grants received - 304,976

Net Cash from Financing Activities 54,274,692 29,347,204

Net Increase / (Decrease) in Cash & Cash Equivalents 176,055,836 (136,450,491)

Cash & Cash equivalents at the beginning of the year (244,979,495) (108,529,004)

Cash & Cash equivalents at the end of the year 18 (68,923,659) (244,979,495)



For the year ended 31st December


1. REPORTING ENTITY udapussellawa plantations plC is a public limited

liability Company incorporated and domiciled in sri lanka, under the Companies act No. 17 of 1982 in terms of the provisions of the Conversion of public Corporations or Government-Owned Business undertaking into public Companies act No. 23 of 1987 and re-registered under the Companies act No. 07 of 2007. the registered office of the Company is located at 95a, Nambapana, ingiriya and plantations are situated in the planting districts of Nuwara eliya and Matale.

the ordinary shares of the Company are listed on the Colombo stock exchange of sri lanka.

the Company’s parent undertaking is James Finlay plantation holdings (lanka) limited. in the opinion of the Directors, the Company’s ultimate parent undertaking and controlling party is John swire and sons limited, which is incorporated in england.

1.1 Primary activities and nature of operations the Company primarily is involved in the

cultivation, manufacturing and sale of tea, rubber, Coconut and other agriculture produce.

2. BASIS OF PREPARATION

2.1. Statement of Compliance the Financial statements of the Company such

comprise statement of profit or loss and Other Comprehensive income, statement of Financial position, statement of Changes in equity and statement of Cash Flows together with the significant accounting policies and notes to the Financial statements which have been prepared in accordance with sri lanka accounting standards (lKass) promulgated by the institute of Chartered accountants of sri lanka (Ca sri lanka) and with the requirements of the Companies act No. 07 of 2007 and sri lanka accounting and auditing standards act No. 15 of 1995. these Financial statements except information on Cash Flows have been prepared following the accrual basis of accounting.

2.2 Approval of Financial Statements by Directors the Financial statements were authorised for

issue by the Board of Directors on 15th March 2018.

NOtes tO the FiNaNCial stateMeNts

2.3 Basis of Measurement these Financial statements have been prepared

in accordance with the historical cost convention basis except for the following material items in the statement of Financial position.

- leasehold right to Bare land of JeDB/slspC estates has been revalued as described in note 10: right to use of land

- Consumable Mature Biological assets are measured at fair value less costs to sell.(lKas 41)

- retirement Benefit Obligation recognised based on actuarial valuation (lKas 19)

- agriculture produce harvested from biological assets are measured at fair value. (lKas 41)

2.4 Functional and Presentation Currency these Financial statements are presented in sri

lankan rupees (rs.) which is the Company’s functional and presentation currency. all financial information presented in sri lankan rupees has been given to the nearest rupee, unless stated otherwise.

2.5 Going Concern the Directors have made an assessment of

the Company’s ability to continue as a going concern in the foreseeable future and they do not foresee a need for liquidation or cessation of trading.

2.6 Use of Estimates and Judgements the preparation of Financial statements

in conformity with sri lanka accounting standards (lKass) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. hence, actual experience and results may differ from

these judgements and estimates.

estimates and underlying assumption are

reviewed on a ongoing basis. revision to

accounting estimates are recongnised in the



period in which the estimates are revised and in any future period affected.

information about critical estimates and judgements in applying accounting policies that have the most significant effect on the amounts recognised in the Financial statements is included in the following notes:

Note 12 - tangible assets other than immature and Mature

information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

Note 14.2 - Consumable Biological assets Note 24 - retirement Benefit Obligation Note 8.3 - Deferred tax assets

3. SIGNIFICANT ACCOUNTING POLICIES the accounting policies set out below have been

applied consistently to all periods presented in these Financial statements.

3.1 Foreign Currency

3.1.1 Foreign Currency Transactions transactions in currencies other than the

entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions.

at each reporting date, monetary items denominated in foreign currencies are translated at the closing rate. Non-monetary items measured at fair value are translated at the rates prevailing on the date when the fair value was determined.

Non-monetary items measured at historical cost are translated at the rates prevailing on the date of transaction.

exchange differences arising on the settlement of monetary items and on the translation of monetary items are included in profit or loss

for the period

exchange differences arising on the translation

of non-monetary items carried at fair value are

included in profit or loss for the period except

for the differences which are recognised in

other comprehensive income.

3.1.2 Foreign exchange forward contracts Foreign exchange forward contracts are

fair valued at each reporting date. Gain and

loss arising from changes in fair value are

recognised in the income statement under the

finance income or finance expense respectively.

3.2 Assets and Basis of their Valuation assets classified as Current assets in the

statement of Financial position are Cash, Bank

balances and those which are expected to be

realised in cash during, the normal operating

cycle of the Company’s business, or within

one year from the reporting date, whichever

is shorter. assets other than current assets

are those which the Company intends to hold

beyond a period of one year from the reporting

date.

3.2.1 Property, Plant and Equipment

3.2.1.1 Recognition and Measurement property, plant and equipment are measured

at cost less accumulated depreciation and

accumulated impairment losses, except for

Bare land on lease which is stated at revalued

amount on 31st May 1998 less subsequent

accumulated depreciation and accumulated

impairment losses.

When parts of an item of property, plant and

equipment have different useful lives, they

are accounted for as separate items (major

components) of property, plant and equipment.

3.2.1.2 Owned Assets the cost of an item of property, plant and

equipment comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. the cost of self-constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to the working condition for its intended use.

NOtes tO the FiNaNCial stateMeNts (CONt.)For the year ended 31st December 2017


this also includes cost of dismantling and removing the items and restoring at the site on which they are located and borrowing costs on qualifying assets.

Capital Work-in-progress is transferred to the respective asset accounts at the time of first utilisation or at the time the asset is commissioned.

3.2.1.3 Leased Assets assets obtained under the finance lease,

which effectively transfer to the Company substantially, all risks and benefits incidental to the ownership of the leased assets, are treated as if they have been purchased outright and are capitalised at their cash price. assets acquired by way of a finance lease are measured at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception, less accumulated depreciation and accumulated impairment losses. the principal/capital elements payable to the lessor are shown as liability/obligation.

assets held under the finance lease are amortised over the shorter of the lease period or the useful life of equivalent owned assets, unless ownership is not transferred at the end of the leased period.

leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases. lease payments (excluding costs for services such as insurance and maintenance) paid under operating leases are recognised as an expense in the statement of profit or loss and Other Comprehensive income on a straight-line basis over the lease term.

3.2.1.4 Subsequent Expenditure the Cost of replacing part of an item of

property, plant and equipment is recognised in

the carrying amount of the item if it is probable

that the future economic benefits embodied

within the part will flow to the Company and

its cost can be measured reliably. the carrying

amount of the replaced part is derecognised.

the cost of the day-to-day servicing of

property, plant and equipment are recognised

in the statement of profit or loss and other

comprehensive income as incurred.

3.2.1.5 Borrowing Costs Borrowing costs that are directly attributable

to acquisition, construction or production of

a qualifying asset which takes a substantial

period of time to get ready for its intended use

or sale, are capitalised as a part of the asset.

Borrowing costs that are not capitalised are

recognised as expenses in the period in which

they are incurred and charged to the statement

of profit or loss and Other Comprehensive

income.

the amounts of the borrowing costs which are

eligible for capitalisation are determined in

accordance with lKas 23 - Borrowing Costs.

3.2.1.6 Depreciation / Amortisation Depreciation is calculated over the depreciable

amount, which is the cost of an asset, or other

amount substituted for cost, less its residual

value.

Depreciation is recognised in statement of

profit or loss on a straight-line basis over the

estimated useful life of each part of an item

of property, plant and equipment, since this

most closely reflects the expected pattern of

consumption of the future economic benefits

embodied in the asset.

leased assets are depreciated over the shorter

of the lease term and their useful lives unless

it is reasonably certain that the Company will

obtain ownership by the end of the lease term.

land is not depreciated.

the estimated useful lives for the current and comparative periods are as follows:

Buildings Over 40 years Motor Vehicles Over 05 years plant and Machinery Over 13 years Furniture and Fittings Over 10 years equipment Over 08 years



Water, sanitation and electricity Over 20 years Computer equipment Over 05 years Farm road Over 40 years latrines Over 10 years Workers’ housing Over 40 years

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.

Depreciation method, useful lives and residual values are reviewed at each financial year end and adjusted, if appropriate.

immovable assets on Finance lease from JeDB/slspC are being amortised in equal amounts over the following periods:

Bare land Over 53 years improvements to land Over 30 years Mature plantations Over 30 years Buildings Over 25 years Machinery Over 15 years Other vested assets Over 25 years 3.2.1.7 Derecognition the carrying amount of an item of property,

plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss and the revalued assets are disposed, the amount included in revaluation surplus reserve is transferred to retained earnings.

When revalued assets are disposed, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

3.2.1.8 Impairment of Non-Financial Assets the Company 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 Company makes an estimate of the asset’s recoverable amount. an asset’s recoverable amount is the higher of an asset’s value in use and its fair value less cost to sell and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

in assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rates that reflect current market assessments of the time value of money and the risk specific to the asset. in determining fair value less cost to sell, recent market transactions are taken into account, if available. if no such transaction can be identified, an appropriate valuation model is used.

impairment loss of continuing operations is recognised in the statement of profit or loss and Other Comprehensive income in those expenses categories consistent with the function of the impaired asset.

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, 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 statement of profit or loss and Other Comprehensive income.

3.2.2 Intangible Assets an intangible asset is recognised if it is

probable that economic benefits attributable to the assets will flow to the entity and cost of the assets can be measured reliably and carried at cost less accumulated amortisation and accumulated impairment losses.



3.2.2.1 Software purchased software is recognised as an

intangible asset and is amortised on a straight-

line basis over its useful life.

the estimated useful life is as follows:

Asset Category Useful life enterprise resource planning system 8 years

3.2.3 Biological Assets Biological assets are classified as Bearer

Biological assets and Consumable Biological

assets. Bearer Biological assets include tea and

rubber trees, those that are not intended to be

sold or harvested, but are however used to grow

for harvesting agricultural produce from such

Biological assets. Consumable Biological assets

include managed timber trees (those that are to

be sold as Biological assets).

Biological assets are further classified into

Mature Biological assets and immature

Biological assets. Mature Biological assets

are those that have attained harvestable

specifications or are able to sustain regular

harvests. immature Biological assets are

those that have not yet attained harvestable

specifications.

3.2.3.1 Recognition and Measurement the entity recognises the Biological assets

when, and only when, the entity controls the

assets as a result of past events, it is probable

that future economic benefits associated with

the assets will flow to the entity and the fair

value or cost of the assets can be measured

reliably.

the Bearer Biological assets are measured

at cost less accumulated depreciation and

accumulated impairment losses, if any, in terms

of lKas 16 - property, plant and equipment.

the managed timber trees are measured on

initial recognition and at the end of each

reporting period at fair value less cost to sell

in terms of lKas 41. the cost is treated as

approximation to fair value of young plants

(age below 4 years) as the impact on biological

transformation of such plants to price during

this period is immaterial.

3.2.3.2 Bearer Biological Assets the costs of land preparation, rehabilitation,

new planting, replanting, crop diversification,

inter-planting, fertilising etc., incurred

between the time of planting and harvesting

(when the planted area attains maturity), are

classified as immature plantations. these

immature plantations are shown at direct

costs plus attributable overheads including

interest attributable to long-term loans used

for financing immature plantations. the

expenditure incurred on Bearer Biological

assets (tea, rubber and Coconut fields) which

come into bearing during the year is transferred

to mature plantations.

permanent impairments to Bearer Biological

assets are charged to the statement of profit

or loss and Other Comprehensive income in

full and reduce the net carrying amounts of

such assets in the year of occurrence after

ascertaining the loss.

3.2.3.3 Infilling cost on Bearer Biological Assets the land development costs incurred in the

form of infilling are capitalised when infilling

results in an increase in the economic life of the

relevant field beyond its previously assessed

standard of performance and infilling costs

so capitalised are depreciated over the newly

assessed remaining useful economic life of the

relevant mature plantation or unexpired lease

period, whichever is lower.

infilling costs that are not capitalised are

charged to the statement of profit or loss and

Other Comprehensive income in the year in

which they are incurred.

3.2.3.4 Consumable Biological Assets the fair value of timber trees is measured using

Discounted Cash Flow (DCF) method taking

into consideration the current market prices of

timber applied to expected timber content of a

tree at maturity.



the gain or loss arising on initial recognition

of Consumable Biological assets at fair value

less cost to sell and from a change in fair value

less cost to sell of Consumable Biological assets

are included in profit or loss for the period in

which it arises.

3.2.3.5 Produce on Bearer Biological Assets the Company recognises its agricultural

produce prior to harvest separately from its

bearer plant. such agricultural produce prior to

harvest continues to be in the scope of lKas 41

and is measured at fair value less costs to sell.

Changes in the fair value of such agricultural

produce is recognised in profit or loss at the

end of each reporting period.

When deriving the estimated quantity the

Company limits it to one harvesting cycle and

the quantity is ascertained based on the last

day of the harvest in the immediately preceding

cycle. in order to ascertain the fair value of

produce growing on trees, 50% of the estimated

crop in that harvesting cycle is considered.

For the valuation of the produce, the Company

uses the bought leaf rate (current month) less

cost of harvesting and transport.

3.2.3.6 Depreciation Mature plantations (replanting and New

planting) are depreciated on a straight-

line basis over the expected period of their

commercial harvesting or unexpired lease

period, whichever is less.

the expected periods of commercial harvesting

for each category of crops are as follows:

tea Over 33 years

rubber Over 20 years

Coconut Over 50 years

Cinnamon Over 20 years

pepper Over 20 years

No depreciation is provided for immature

plantations.

3.2.4 Financial Instruments

3.2.4.1 Financial Assets

3.2.4.1.1 Initial Recognition and Measurement Financial assets within the scope of lKas 39

are classified as financial assets at fair value

through profit or loss, loans and receivables,

held-to-maturity investments or available-

for-sale financial assets, as appropriate. the

Company determines the classification of its

financial assets at initial recognition.

the classification of financial instruments

at initial recognition is dependent on

their purpose and characteristics and the

management intention in acquiring them.

Financial instruments are initially measured at

fair value. transaction costs that are directly

attributable to the acquisition of financial assets

other than financial instruments recognised at

fair value through profit or loss are added to the

fair value of financial instruments. transaction


the main variables in the DCF model are:

Variable Comment

timber content estimated based on physical verification of girth and height and considering the growth of each species, factoring all the prevailing statutory regulations enforced against harvesting of timber coupled with the Forestry plan of the Company.

economic useful life estimated based on the normal life span of each species by factoring in the forestry plan of the Company.

selling price three year annual rolling average selling prices of managed timber fields of the respective region/group of the Company.

Discount rate Discount rate reflects the possible variations in the Cash flows and the risk related to the biological assets.

Currency rs.


costs that are insignificant are expensed

immediately to the income statement.

3.2.4.1.2 Subsequent Measurement the subsequent measurement of financial

assets depends on their classification as

follows:

Financial assets at fair value through profit or loss

a financial asset at fair value through profit or

loss includes financial assets held for trading

and financial assets designated upon initial

recognition at fair value through profit or loss.

Financial assets are classified 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 classified as held for trading unless they are

designated as effective hedging instruments.

Financial assets at fair value through profit and

loss are carried in the statement of Financial

position at fair value with changes in fair value

recognised in finance income or finance costs

in the statement of profit or loss and Other

Comprehensive income.

the Company has not classified any financial

asset designated as financial asset at fair value

through profit or loss as of the reporting date

and during the reporting period.

Loans and receivables loans and receivables are non-derivative

financial assets with fixed or determinable

payments that are not quoted in an active

market. after initial measurement, such

financial assets are subsequently measured

at amortised cost using the effective interest

rate method (eir), less impairment. amortised

cost is calculated by taking into account any

discount or premium on acquisition and fees

or costs that are an integral part of the eir. the

eir amortisation is included in finance income


Comprehensive income. the losses arising

from impairment are recognised in finance

costs in the statement of profit or loss and

Other Comprehensive income.

loans and receivables held by the Company

comprise trade receivables, amounts due from

related parties, deposits, advances and other

receivables and cash and cash equivalents.

Held-to-maturity investments Non-derivative financial assets with fixed or

determinable payments and fixed maturities

are classified as held-to-maturity when the

Company has the positive intention and

ability to hold them to maturity. after initial

measurement, held-to-maturity investments

are measured at amortised cost using the eir

method, less impairment. amortised cost is

calculated by taking into account any discount

or premium on acquisition and fees or costs

that are an integral part of the eir. the eir

amortisation is included in finance income


Comprehensive income. the losses arising

from impairment are recognised in finance

costs in the statement of profit or loss and

Other Comprehensive income.

the Company has not classified any financial

assets as held to maturity for the reporting

date or during the reporting period.

Available-for-sale financial investments available-for-sale financial investments include

equity and debt securities. equity investments

classified as available-for-sale are those which

are neither classified as held for trading nor

designated at fair value through profit or loss.

Debt securities in this category are those which

are intended to be held for an indefinite period

of time and which may be sold in response to

needs for liquidity or in response to changes in

the market conditions.

after initial measurement, available-for-

sale financial investments are subsequently

measured at fair value with unrealized gains

or losses recognised as other comprehensive

income in the available-for-sale reserve until

the investment is derecognised, at which time

the cumulative gain or loss is recognised in

other operating income, or determined to be

impaired, at which time the cumulative loss is

reclassified to the finance costs in the statement




income and removed from the available-for-sale

reserve. interest income on available-for-sale

debt securities is calculated using the eir and

is recognised in profit or loss.

3.2.4.1.3 Derecognition a financial asset (or, where applicable a part of

a financial asset or part of a group of similar

financial assets) is derecognised when:

- the rights to receive cash flows from the

asset has expired.

- the Company has transferred its rights to

receive cash flows from the asset or has

assumed an obligation to pay the received

cash flows in full without material delay

to a third party under a ‘pass through’

arrangement; and either (a) the Company

has transferred substantially all the risks

and rewards of the asset, or (b) the Company

has neither transferred nor retained

substantially all the risks and rewards of

the asset, but has transferred control of the

asset.

3.2.4.1.4 Impairment of Financial Assets a financial asset not carried at fair value

through profit or loss is assessed at each

reporting date to determine whether there is

objective evidence that is impaired. a financial

asset is impaired if there it is objective evidence

as a result of one or more events that have

occurred after the initial recognition of the

financial asset (an incurred ‘loss event’) and the

estimated future cash flows of the investment

have been affected.

Loans & Receivables the objective evidence of impairment could

include significant financial difficulty of the

issuer or counterparty, breach of contract such

as default in interest or principal payments,

or it becomes probable that the borrower will

enter bankruptcy or financial reorganisation.

the Company considers impairment of trade

receivables at both a specific significant

individual debtor level and collectively. any

Company which has any individually significant

debtors assesses them for specific impairment.

all individually insignificant debtors that are

not specifically impaired are then collectively

assessed for any impairment that has been

incurred but not yet identified by grouping

together based on similar risk characteristics. in

assessing collective impairment, the Company

uses historical trends of the probability of

default, the timing of recoveries and the

amount of loss incurred and adjusted for the

management’s judgement. the carrying amount

of the trade receivables is reduced through the

use of the bad debt provision account and the

amount of the loss is recognised in the income

statement. if there is no realistic prospect of

future recovery of a debt, the amount is written

off.

an impairment loss in respect of other financial

assets measured at amortised cost is calculated

as the difference between its carrying amount

and the present value of the estimated future

cash flows discounted at the current market

rate of return for a similar financial asset.

When a subsequent event causes the amount

of impairment loss to decrease, the decrease in

impairment loss is reversed through the income

statement to the extent that the carrying

amount of the financial asset at the date the

impairment is reversed, does not exceed what

the amortised cost would have been had the

impairment not been recognised.

Available-for-sale For equity instruments classified as available-

for-sale financial assets, a significant or

prolonged decline in the fair value of the

investment below its cost is considered to be

objective evidence of impairment. impairment

losses of an available-for-sale security

investment are recognised by transferring the

cumulative loss that has been recognised in

other comprehensive income to the income

statement as a reclassification adjustment. the

cumulative loss that is reclassified from other

comprehensive income to the income statement

is the difference between the acquisition

cost, net of any principal repayment and

amortisation, and the current fair value, less



any impairment loss previously recognised in

the income statement. Changes in impairment

provisions attributable to time value are

reflected as a component of interest income.

if, in a subsequent period, the fair value of

an impaired available-for-sale debt security

increases and the increase can be objectively

related to an event occurring after the

impairment loss was recognised in the income

statement, the impairment loss is reversed,

with the amount of the reversal recognised in

the income statement. however, any subsequent

recovery in the fair value of an impaired

available-for-sale equity security is recognised

in Other Comprehensive income

3.2.4.2 Financial Liabilities

3.2.4.2.1 Initial Recognition and Measurement Financial liabilities within the scope of lKas

39 are classified as financial liabilities at fair

value through profit or loss or other financial

liabilities, as appropriate. the Company

determines the classification of its financial

liabilities at initial recognition.

all financial liabilities are recognised initially

at fair value plus other financial liabilities, and

transaction costs that are directly attributable

to the acquisition or issue of such financial

liability.

the Company’s financial liabilities include

trade and other payables, bank overdrafts,

loans and borrowings.

3.2.4.2.2 Subsequent Measurement Financial liabilities at fair value through profit

or loss

Financial liabilities at fair value through profit

or loss include financial liabilities held for

trading and financial liabilities designated

upon initial recognition as at fair value through

profit or loss. Financial liabilities are classified

as held for trading if they are acquired for

the purpose of selling in the near term. Gains

or losses on liabilities held for trading are

recognised in the statement of profit or loss and Other Comprehensive income.

the Company has not designated any financial liabilities upon initial recognition as at fair value through profit or loss.

Other Financial Liabilities after initial recognition, other financial

liabilities and borrowings are subsequently measured at amortised cost using the eir method. Gains and losses are recognised in the statement of profit or loss and Other Comprehensive income when the liabilities are derecognised as well as through the eir method amortisation process.

amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the eir. the eir amortisation is included in finance costs in the statement of profit or loss and Other Comprehensive income.

3.2.4.2.3 Derecognition a financial liability is derecognised when the

obligation under the liability is discharged or cancelled or expired.

3.2.4.3 Offsetting of Financial Instruments Financial assets and financial liabilities are

offset and the net amount reported in the Consolidated statement of Financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

3.2.5 Inventories

3.2.5.1 Agricultural Produce harvested from Biological Assets

agricultural produce harvested from Biological assets is measured at its fair value less cost to sell at the point of harvest. the finished and semi-finished inventories from agricultural produce are valued by adding the cost of conversion to the fair value of agricultural produce.




3.2.5.2 Agricultural Produce after further processing Further processed output of agricultural

produce is valued at the lower of cost and estimated net realisable value, after making due allowances for obsolete and slow-moving items. Net realisable value is the estimated selling price at which stocks can be sold in the ordinary course of business less the estimated cost of completion and estimated cost necessary to make the sale.

3.2.5.3 Input Material, Consumables and Spares Valued at actual cost on weighted average basis

3.2.5.4 Growing Crop Nurseries Nursery cost includes the cost of direct

materials, direct labour and an appropriate proportion of directly attributable overheads, less provision for overgrown plants.

3.3.6 Trade and Other Receivables trade receivables are stated at the amounts

they are estimated to realise inclusive of provisions for bad and doubtful debts. Other receivables and dues from related parties are recognised at cost less provision for bad and doubtful receivables.

3.2.7 Cash & Cash Equivalents Cash and cash equivalents comprise cash

balances, call deposits, demand deposits and short-term highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value net of bank overdrafts that are repayable on demand for the purpose of the statement of Cash Flows.

3.3 Liabilities and Provisions liabilities classified as current liabilities on the

statement of Financial position are those which fall due for payment on demand or within one year from statement of Financial position date. Non-current liabilities are those balances that fall due for payment after one year from statement of Financial position date. all known liabilities have been accounted for in preparing

these Financial statements.

a provision is recognised if, as a result of a

past event, the Company has a present legal or

constructive obligation that can be estimated

reliably, and it is probable that an outflow of

economic benefit will be required to settle the

obligation.

3.3.1 Employee Benefits a) Defined Contribution Plans - Employees’

Provident Fund and Employees’ Trust Fund a Defined Contribution plan is a post-

employment benefit plan under which an entity

pays fixed contributions into a separate entity

and will have no legal or constructive obligation

to pay further amounts. Obligations for

contributions to Defined Contribution pension

plans are recognised as an employee benefit

expense in profit or loss in the periods during

which services are rendered by employees.

the Company contributes 12% of gross

emoluments of the employees to the employees’

provident Fund, (epF)/estate staff provident

society (esps).

all of the employees are eligible for the

employees’ trust Fund to which the Company

contributes 3% of gross emoluments of such

employees.

b) Defined Benefit Plans - Gratuity a Defined Benefit plan is a post-employment

benefit plan other than a Defined Contribution

plan. the Company’s net obligation in respect

of Defined Benefit pension plans is calculated

annually using the projected unit Credit

(puC) Method. the liability recognised in the

statement of Financial position is the present

value of the Defined Benefit Obligation at the

reporting date in accordance with the advice of

an actuary. actuarial gains or losses arising are

recognised as Other Comprehensive income in

the period in which they arise. past service costs

are recognised immediately in the statement


income.

the provision has been made for retirement

gratuities from the first year of service for

all employees, in conformity with lKas 19 -

employee Benefits. however, under the payment

of Gratuity act No. 12 of 1983, the liability to an


employee arises only on completion of 5 years

of continued service.

the key assumptions used in determining the

retirement Benefit Obligations are given in note

24.

3.3.2 Capital Commitments and Contingencies Contingencies are possible assets or obligations

that arise from a past event and would be

confirmed only on the occurrence or non-

occurrence of uncertain future events, which

are beyond the Company’s control.

all material Capital Commitments and

Contingent liabilities are disclosed in notes 29

and 31.

3.3.3 Deferred Income

3.3.3.1 Government Grants and Subsidies Government grants are recognised where there

is a reasonable assurance that the grant will

be received and all attached conditions will

be complied with. Where the grant relates to

an asset, it is recognised as deferred income

and released to income in equal amounts over

the expected useful life of the related assets.

When the grants relate to an expense item, it is

recognized as income over the period necessary

to match the grant on a systematic basis to the

costs that are intended to compensate.

Grants related to property, plant and equipment

other than grants received for forestry are

initially deferred and allocated to income on

a systematic basis over the useful life of the

related property, plant and equipment. Grants

received for forestry are initially deferred and

credited to statement of profit or loss and

Other Comprehensive income at once when the

related blocks of trees are harvested.

3.3.4 Trade and Other Payables trade and other payables are obligations to pay

for goods or services that have been acquired

in ordinary course of business from suppliers.

trade and other payables are stated at cost.

3.4 Statement of Profit or Loss and Other Comprehensive Income

For the purpose of presentation of the statement


income the Directors are of the opinion that

function of expenses method presents fairly

the elements of the Company’s performance,

and hence such presentation method is

adopted in line with the provisions of lKas 1

in presentation of Financial statements.

3.4.1 Revenue Recognition revenue is recognised to the extent that it is

probable that the economic benefits will flow

to the Company and the revenue and the

associated costs incurred or to be incurred can

be reliably measured. revenue is measured at

the fair value of the consideration received or

receivable, net of trade discounts and sales

taxes. the following specific criteria are used

for the purpose of recognition of revenue.

3.4.1.1 Sale of Goods revenue from the sale of goods in the course

of ordinary activities is measured at invoice

value net of brokerage, sale expenses and other

levies related to revenue. revenue from sale of

goods is recognised when persuasive evidence

exists, usually in the form of an executed

sales agreement, that the significant risks and

rewards of ownership have been transferred

to the buyer, recovery of the consideration is

probable, the associated costs and possible

return of goods can be estimated reliably, there

is no continuing management involvement

with the goods, and the amount of revenue

can be measured reliably. if it is probable that

discounts will be granted and the amount can

be measured reliably, then the discount is

recognised as a reduction of revenue as the

sales are recognised.

3.4.1.2 Interest Income interest income is recognised as the interest

accrued (taking into account the effective yield

on the asset) unless collectability is in doubt.

3.4.1.3 Rental income rental income arising from operating leases is

recognised on an accrual basis.



3.4.1.4 Gain and Losses on Disposal Gains and losses on disposal of an item of

property, plant and equipment are determined by comparing the net sales proceeds with the carrying amounts of property, plant and equipment and are recognised within other operating income in the statement of profit or loss.

3.4.2 Expenditure Recognition

3.4.2.1 Operating Expenses all expenses incurred in the day-to-day

operations of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the statement of profit or loss and Other Comprehensive income in arriving at the profit/(loss) for the year. provision has also been made for impairment of non-financial assets, slow-moving stocks, overgrown nurseries, all known liabilities and depreciation on property, plant and equipment.

3.4.2.2 Finance Cost Finance costs comprise interest expense

on external borrowings and related party loans and payments made under operating leases. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. lease incentives received may be recognised as an integral part of the total lease expense, over the term of the lease.

3.4.2.3 Income Tax Expense income tax expense comprising current and

deferred tax. income tax expense is recognised in statement of profit or loss and Other Comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

3.4.2.3.1 Current Taxes Current tax expenses for the current and

comparative periods are measured at the amount paid or expected to be payable to the Commissioner General of inland revenue

on taxable income for the respective year of assessment computed in accordance with the provisions of the inland revenue act. No. 10 of 2006 as amended by subsequent legislation enacted or substantively enacted by the reporting date.

3.4.2.3.2 Deferred Taxation Deferred taxation is recognised using the

Balance sheet liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. in addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

a deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and deferred tax liabilities are offset, if 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.



3.5 Statement of Cash Flows the statement of Cash Flows has been prepared

using the ‘indirect Method’. interest paid is

classified as operating cash flows, interest

received and dividends received are classified

as investing cash flows, while dividend paid

and Government grants received are classified

as financing cash flows for the purpose of

presentation of the statement of Cash Flows.

3.6 Segment Reporting segmental information is provided for the

different business segments of the Company.

Business segmentation has been determined

based on the nature of goods provided by

the Company after considering the risk and

rewards of each type of product.

revenue and expenditure directly attributable

to each segment are allocated to the respective

segments. revenue and expenditure not directly

attributable to a segment are allocated on the

basis of their resource utilisation, wherever

possible. unallocated items comprise mainly

income accrued and expenses incurred at head

office level.

assets and liabilities directly attributable to

each segment are allocated to the respective

segments. assets and liabilities which are not

directly attributable to a segment are allocated

on a reasonable basis wherever possible.

the activities of the segments are described

on page 69 in the notes to the Financial

statements.

3.7 Related Party Transactions Disclosure has been made in respect of the

transactions in which one party has the ability

to control or exercise significant influence over

the financial and operating policies/decisions

of the other, irrespective of whether or not a

price is being charged.

a detailed related party transaction analysis is

presented in note 28.

3.8 Earnings per share the Company presents Basic earnings per

share (eps) data for its ordinary shares. Basic

eps is calculated by dividing the profit or loss

attributable to ordinary shareholders of the

Company by the weighted average number of

ordinary shares outstanding during the period,

adjusted for own shares held.

3.9 Events Occurring After the Balance Sheet Date

events after the reporting period are those

events favourable and unfavorable occuring

between the end of the reporting period and

the date when the Financial statements are

authorised for issue. the materiality of the

events occurring after the reporting period

is considered and appropriate adjustments

or disclosures are made in the Financial

statements, where necessary.

3.10 Determination of fair values a number of the Company’s accounting policies

and disclosures require the determination of

fair values, for both financial and non-financial

assets and liabilities.

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.

When measuring fair value of an asset or

liability, the Company uses observable

market data as far as possible. Fair values are

categorised into different levels in a fair value

hierarchy based on the inputs used in the

valuation techniques.

level 1 inputs are unadjusted quoted prices in active

markets for identical assets or liabilities.

level 2 inputs are inputs other than quoted prices

included within level 1 that are observable

for the asset or liability either directly (i.e. as

prices) or indirectly (i.e. derived from prices).

level 3 inputs are inputs that are not based on

observable market data (unobservable inputs).

if inputs used to measure the fair value of an

asset or liability fall into different levels of

the fair value hierarchy, then the fair value

measurement is categorised in its entirety in

the same level of the fair value hierarchy as



the lowest level input that is significant to the

entire measurement.

Fair values have been determined for

measurement and disclosure purposes based

on the following methods. Where applicable,

further information about the assumptions

made in determining fair value is disclosed in

the notes specific to that asset or liability.

Fair value of non-financial assets the fair value used by the Company in the

measurement of non-financial assets 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 that

is accessible by the Company for the asset or

liability.

the fair value of an asset or a liability is

measured using the assumptions that market

participants would act in their economic best

interest when pricing the asset or liability.

a fair value measurement of a non-financial

asset takes into account a market participant’s

ability to generate economic benefits 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 Company uses valuation techniques that

are appropriate in the circumstances and for

which sufficient data are available to measure

fair value, maximising the use of relevant

observable inputs and minimising the use of

unobservable inputs.

3.11 Standards issued but not yet effective

SLFRS 9 - Financial Instruments slFrs 9 brings together all three aspects of the

accounting for the financial instruments, i.e.

classification and measurement, impairment,

and hedge accounting. slFrs 9 is effective for

annual periods beginning on or after 1st January

2018, with early application being permitted.

except for hedge accounting, retrospective

application is required, but providing

comparative information is not compulsory.

For hedge accounting the requirements are

generally applied prospectively, with some

limited exceptions.

the Directors of the Company anticipate that

the application of slFrs 9 in the future may have

no major impact on the amounts reported and

disclosures made in these Financial statements.

this assessment is based on currently available

information and may be subject to changes

arising from further analysis.

the Company plans to adopt the new standard

on the required effective date.

SLFRS 15 - Revenue from Contracts with Customers

slFrs 15 establishes a single comprehensive

model for entities to use in accounting for

revenue arising from contracts with customers.

the standard will supersede the current

revenue recognition guidance including

lKas 18 revenue and lKas 11 Construction

Contracts and the related interpretations when

it becomes effective.

the core principle of slFrs 15 is that an entity

should recognise revenue to depict the transfer

of promised goods or services to customers

in an amount that reflects the consideration

to which the entity expects to be entitled

in exchange for those goods or services.

specifically, the standard introduces a 5-step

approach to revenue recognition.

• step 1: identify the contract(s) with a

customer.

• step 2: identify the performance

obligations in the contract.

• step 3: Determine the transaction price.

• step 4: allocate the transaction price to the

performance obligations in the contract.

• step 5: recognise revenue when (or as) the

entity satisfies a performance obligation.

under slFrs 15, an entity recognises revenue

when (or as) a performance obligation is

satisfied, i.e. when ‘control’ of the goods or




services underlying the particular performance

obligation is transferred to the customer. Far

more prescriptive guidance has been added

in slFrs 15 to deal with specific scenarios.

Furthermore, extensive disclosures are

required by slFrs 15.

the Directors of the Company anticipate

that the application of slFrs 15 in the future

may not have a major impact on the amounts

reported and disclosures made in these

Financial statements. this assessment is based

on currently available information and may

be subject to changes arising from further

analysis.

SLFRS 16 – Leases slFrs 16 replaces lKas 17 leases and related

interpretations (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).

slFrs 16 sets out the principles for the

recognition, measurement, presentation and

disclosure of leases and requires lessees to

account for all leases under a single on-balance

sheet model similar to the accounting for

finance leases under lKas 17. the standard

includes two recognition exemptions for

lessees – leases of ’low-value’ assets (e.g.

personal computers) and short-term leases

(i.e. leases with a lease term of 12 months or

less). at the commencement date of a lease, a

lessee will recognize a liability to make lease

payments (i.e. the lease liability) and an asset

representing the right to use the underlying

asset during the lease term (i.e. the right-of-use

asset). lessees will be required to separately

recognise the interest expense on the lease

liability and the depreciation expense on the

right-of-use asset.

lessees will be also required to remeasure the

lease liability upon the occurrence of certain

events (e.g. a change in the lease term, or a

change in future lease payments resulting from

a change in an index or rate used to determine

those payments). the lessee will generally

recognise the amount of the remeasurement of

the lease liability as an adjustment to the right-

of-use asset.

lessor accounting under slFrs 16 is

substantially unchanged from the current

requirements under lKas 17. lessors will

continue to classify all leases using the same

classification principle as in lKas 17 and

distinguish between two types of leases:

operating and finance leases.

slFrs 16 also requires lessees and lessors to

make more extensive disclosures than under

lKas 17.

slFrs 16 is effective for annual periods

beginning on or after 1st January 2019. a lessee

can choose to apply the standard using either

a full retrospective or a modified retrospective

approach. the standard’s transition provisions

permit certain reliefs.

in 2018, the Company plans to assess the

potential effect of slFrs 16 on its consolidated

financial statements.


2017 2016

Rs. Rs.

4. REVENUE

Sale of Produce tea 2,161,613,911 1,574,349,568 Coconut/rubber 47,495,771 26,482,364 Others (note 4.1) 17,652,673 19,263,319 2,226,762,355 1,620,095,251

4.1. revenue classified as ‘Others’ above, mainly comprises revenue generated from timber sales, Firewood sales, intercrop sales and sales of Nursery and timber plants during the year.

2017 2016 Rs. Rs. 5. OTHER INCOME amortisation of Capital Grants 4,163,239 4,163,239 Gain on sale of property, plant & equipment 679,250 435,000 rent income 22,236,725 23,118,425 Others 392,661 283,190 27,471,875 27,999,854

2017 2016 6. NET FINANCE COST Rs. Rs. Finance Income interest income (80,193) (34,797) Finance Cost Overdraft interest 18,557,856 22,862,379 interest on related party loans 8,780,166 9,409,133 interest on term loans 16,159,733 12,777,216 exchange (Gain)/loss 3,606,283 (3,302,478) Net Finance Cost 47,023,845 41,711,453

7. PROFIT/(LOSS) BEFORE TAX 2017 2016 is stated after charging all expenses including the following: Rs. Rs. statutory audit Fees 2,555,454 2,555,454 Depreciation and amortisation right to use of land 10,784,503 10,784,503 immovable estate assets on Finance lease 5,142,220 6,201,967 tangible assets 39,060,605 37,072,316 intangible assets 2,338,532 2,232,626 Bearer Biological assets 15,564,285 15,143,577 total Depreciation and amortisation 72,890,145 71,434,989 provision for impairment of property, plant and equipment 3,092,334 - provision for doubtful debts 1,010,000 4,108,798 provision for slow-moving and obsolete stocks 1,203,000 (1,237,050) provision for retiring Gratuity - staff 11,685,350 11,028,294 - Workers 85,390,921 91,178,202 Defined Contribution plans - provident Funds & etF 107,809,550 91,938,817 Wages & salaries 771,452,470 686,017,687

Corporate Donation 8,600 9,281



8. INCOME TAX EXPENSE 2017 2016

Rs. Rs.

Current tax expense (note 8.2) 12,942,887 5,473,606

Deferred taxation (note 8.3) 6,483,037 (33,818,100)

19,425,924 (28,344,494)

8.1 Current Tax Expense

in terms of section 16 (1) of the inland revenue act No. 10 of 2006, “specified profits” from cultivation is exempted from

income tax for a period of 5 years commencing from the year of assessment 2006/07. accordingly, the tax exemption period

of the Company has expired in the year of assessment 2010/11. after the exempt period, the Company became liable for

income tax at the rate of 10% on its agricultural profits and 28% on manufacturing profits and other income earned during

the year of assessment.

8.2 Reconciliation Between Accounting Profit 2017 2016

and Taxable Profit Rs. Rs.

accounting profit/(loss) Before tax 287,247,131 (210,144,908)

Fair value gain/(loss) (120,405,262) 36,638,569

aggregate allowable items (176,214,137) (189,068,709)

aggregate disallowable items 149,118,057 185,530,719

adjusted profit/(loss) 139,745,789 (177,044,329)

profit From agriculture taxable at 10% - -

profit/(loss) from Manufacturing 139,745,789 (177,044,329)

Other sources of income 22,709,580 30,074,760

total statutory income 162,455,369 30,074,760

tax losses claimed during the year (56,859,379) (10,526,166)

taxable income 105,595,990 19,548,594

income tax @ 28% 3,707,336 5,473,606

income tax @ 10% 9,235,551 -

tax expense charged in the statement of profit or loss 12,942,887 5,473,606

2017 2016

8.2.1 Tax Losses Rs. Rs.

tax loss Brought Forward 1,028,345,843 861,813,801

adjustment to tax loss brought forward - 13,879

loss incured during the year 9,559,340 177,044,329

tax loss claimed (56,859,379) (10,526,166)

Tax Loss carried forwared 981,045,804 1,028,345,843

8.3 Deferred Tax Asset

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

2017 2016

Rs. Rs.

at the beginning of the year 57,022,845 36,224,331

Charge/(reversal) recognised in profit or loss (6,483,037) 33,818,100

Charge/(reversal) recognised in Other Comprehensive income (21,575,359) (13,019,586)

at the end of the year 28,964,438 57,022,845



NOtes tO the FiNaNCial stateMeNts (CONt.)

8.3 Deferred Tax Asset (Contd.)

Deferred tax asset as at the year end is made up as follows:

2017.12.31 2016.12.31

Temporary Tax effect on Temporary Tax effect on

difference temporary difference temporary

difference difference

Rs Rs Rs Rs

Biological assets (662,911,219) (185,615,141) (535,728,387) (84,706,065)

property, plant and equipment (762,417,238) (213,476,827) (749,503,306) (118,506,835)

retirement Benefit Obligations 624,781,927 174,938,940 699,873,243 110,659,636

Carried Forward tax losses 981,045,804 274,692,825 1,028,345,843 162,595,695

180,499,274 50,539,797 442,987,393 70,042,431

On remeasurement of retirement Benefit Obligation (77,054,855) (21,575,359) (82,343,123) (13,019,586) 103,444,419 28,964,438 360,644,270 57,022,845

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax asset has been computed taking into consideration the effective tax rate, which is 28% (2016: 15.81%) for the Company.

9. EARNINGS PER SHARE

Basic Earnings per Share earnings per share is computed based on the profit attributable to ordinary shareholders divided by the weighted average

number of ordinary shares outstanding during the year as follows: 2017 2016 profit/(loss) attributable to the Ordinary shareholders of the Company (rs.) 267,821,207 (181,800,414) Weighted average number of ordinary shares outstanding during the year 19,398,851 19,398,851 earnings/(loss) per share (rs.) 13.81 (9.37)



NOtes tO the FiNaNCial stateMeNts (CONt.)as at 31st December 2017

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11. IMMOVABLE ESTATE ASSETS ON FINANCE LEASE in terms of the ruling of the uitF of the institute of Chartered accountants of sri lanka all immovable assets in these

estates under finance leases have been taken into the books of the Company retroactive to 22nd June 1992. For this purpose the Board decided at its meeting on 8th March 1995 that these assets would be taken at their book values as they appear in the books of the JeDB/slspC, on the day immediately preceding the date of formation of the Company. these assets are taken into the 22nd June 1992 statement of Financial position and depreciated as follows:

Improvement Other to Vested Mature Plant & Land Assets Plantations Buildings Machinery Total Rs. Rs. Rs. Rs. Rs. Rs.

Revaluation as at 22nd June 1992 5,364,193 154,829 126,710,854 46,165,014 14,829,250 193,224,140 Balance as at 31st December 2017 5,364,193 154,829 126,710,854 46,165,014 14,829,250 193,224,140 Amortisation

Balance as at 1st January 2017 4,510,725 154,829 87,617,838 45,342,243 14,829,250 152,454,885 Charge for the year 235,281 - 4,121,379 785,560 - 5,142,220 Balance as at 31st December 2017 4,746,006 154,829 91,739,217 46,127,803 14,829,250 157,597,105 Written-Down Value

as at 31st December 2017 618,187 - 34,971,637 37,211 - 35,627,035

as at 31st December 2016 853,468 - 39,093,016 822,771 - 40,769,255

investment in plantation assets which were immature at the time of handing over to the Company by way of estate leases are shown under immature plantation (revalued as at 22nd June 1992). Furthermore, investment in such immature plantations to bring them to maturity are shown under note 14.

as at 31st December 2017



12. TANGIBLE ASSETS (Other than Biological Assets) Freehold Assets Buildings Motor Plant and Furniture & Equipment Computer Vehicles Machinery Fittings Hardware Rs. Rs. Rs. Rs. Rs. Rs.

Cost

as at 1st January 2017 225,460,779 84,603,153 398,951,219 6,676,354 47,069,560 26,117,696

additions 1,665,373 196,000 2,828,301 412,241 750,331 2,184,147

transfers (1,204,227) - 4,830,872 - (193,500) -

Disposals/Write-off (1,850,462) (66,352) - - (71,501) -

As at 31st December 2017 224,071,463 84,732,801 406,610,392 7,088,595 47,554,890 28,301,843

Depreciation and Impairment Loss

as at 1st January 2017 51,450,755 81,146,869 218,780,981 5,893,757 43,562,431 21,186,599

Depreciation charge for the year 3,954,137 1,087,903 24,560,326 194,597 719,346 2,638,401

transfers - - - - - -

Disposals/Write-off (1,850,462) - - - - -

impairment provision - - - - - -

As at 31st December 2017 53,554,430 82,234,772 243,341,307 6,088,354 44,281,777 23,825,000

Written-Down Value

As at 31st December 2017 170,517,033 2,498,029 163,269,085 1,000,241 3,273,113 4,476,843

as at 31st December 2016 174,010,024 3,456,284 180,170,238 782,597 3,507,129 4,931,097

property, plant and equipment with a cost of rs. 288,761,408/- (2016: rs. 211,042,642/-) have been fully depreciated and continue to be in use by the Company. the assets shown above are those movable and immovable assets vested in the Company by gazette notification at the date of formation of the Company (22nd June 1992) and all investment in tangible assets by the Company since its formation. the assets taken over by way of estate leases are set out in notes 10 & 11.





Grant-Funded Assets Workers’ Water, Sanitation Farm Latrines Total Capital work Total Housing & Electricity Roads in progress

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

34,936,338 17,050,939 13,802,391 91,839,877 946,508,306 8,882,802 955,391,108

- - - - 8,036,393 20,395,383 28,431,776

76,617,616 - 100,761 (74,321,207) 5,830,315 (8,062,686) (2,232,371)

- - - - (1,988,315) (1,144,629) (3,132,944)

111,553,954 17,050,939 13,903,152 17,518,670 958,386,699 20,070,870 978,457,569

18,893,041 11,340,240 2,216,282 24,885,936 479,356,891 128,371 479,485,262

4,134,347 672,350 338,410 760,788 39,060,605 - 39,060,605

13,627,745 - - (13,627,745) - - -

- - - - (1,850,462) (128,371) (1,978,833)

- - - (400) (400) - (400)

36,655,133 12,012,590 2,554,692 12,018,579 516,566,634 - 516,566,634

74,898,821 5,038,349 11,348,460 5,500,091 441,820,065 20,070,870 461,890,935

16,043,297 5,710,699 11,586,109 66,953,941 467,151,415 8,754,431 475,905,846


12. TANGIBLE ASSETS

(Other than Biological Assets) (Cont.)

12.1 Leasehold land:

Company Estate name Location No. of Ha. Revaluation (Rs.)

udapussellawa plantations plC Blairlomond udapussellawa 589.75 55,628,499

alnwick udapussellawa 374.00 37,565,501

Delmar udapussellawa 628.82 64,441,500

Gordon udapussellawa 398.75 34,722,499

Waldemar udapussellawa 368.50 36,580,000

Concordia Nuwara eliya 426.80 41,215,036

Courtlodge Nuwara eliya 407.16 39,157,000

park Nuwara eliya 402.15 43,734,459

Duckwari Matale 637.86 53,768,000

Madulkelle Matale 854.14 72,437,500

yatawatte Matale 442.11 28,314,500

507,564,494

12.2 Freehold buildings:

Company Estate name Location No. of buildings Cost (Rs.)

udapussellawa plantations plC Blairlomond udapussellawa 3 9,365,275

alnwick udapussellawa 2 3,584,049

Delmar udapussellawa 3 10,975,056

Gordon udapussellawa 4 8,939,183

Waldemar udapussellawa 3 26,615,385

Concordia Nuwara eliya 36 27,653,684

Courtlodge Nuwara eliya 38 10,884,642

park Nuwara eliya 6 12,877,341

Duckwari Matale 5 10,718,459

Madulkelle Matale 18 97,309,218

yatawatte Matale 16 5,149,171

224,071,463

12.3 Leasehold buildings:

Company Estate name Location No. of buildings Revaluation (Rs.)

udapussellawa plantations plC Blairlomond udapussellawa 227 4,955,119

alnwick udapussellawa 233 4,108,628

Delmar udapussellawa 76 4,286,783

Gordon udapussellawa 212 6,211,078

Waldemar udapussellawa 149 3,253,584

Concordia Nuwara eliya 344 4,818,012

Courtlodge Nuwara eliya 217 3,553,439

park Nuwara eliya 359 5,097,361

Duckwari Matale 138 4,604,896

Madulkelle Matale 205 2,825,818

yatawatte Matale 39 2,450,296

46,165,014



13. INTANGIBLE ASSETS

13.1 Computer Software 2017 2016

Cost Rs. Rs.


additions during the year 3,763,943 905,672


Accumulated Amortisation


Charge for the year 2,338,532 2,232,626


Written-Down Value 14,225,829 12,800,418


14. BIOLOGICAL ASSETS 14.1 Bearer Biological Assets IMMATURE BEARER BIOLOGICAL ASSETS Total Total Tea Rubber Coconut Others as at as at 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Cost at the beginning of the year 23,113,864 19,743,882 - 12,419,329 55,277,075 64,785,321 additions during the year 13,620,057 3,600,794 - 3,763,819 20,984,670 16,969,034 transfers to Mature Bearer Biological assets (8,263,796) - - (1,951,609) (10,215,405) (26,477,280) impairment/Write-off (4,747,968) (1,378,527) - (911,761) (7,038,256) - at the end of the year 23,722,157 21,966,149 - 13,319,778 59,008,084 55,277,075

MATURE BEARER BIOLOGICAL ASSETS Total Total Tea Rubber Coconut Others as at as at 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs. Cost

at the beginning of the year 464,127,043 2,458,114 57,083,179 4,550,041 528,218,377 501,741,097 transfers from immature Bearer Biological assets 8,263,796 - - 1,951,609 10,215,405 26,477,280 transfer to Mature Consumable Biological assets (3,150,302) - - 636,867 (2,513,435) - at the end of the year 469,240,537 2,458,114 57,083,179 7,138,517 535,920,347 528,218,377

Amortisation at the beginning of the year 120,971,312 338,979 9,019,384 511,146 130,840,821 115,697,244

Charge for the year 14,027,466 122,906 1,141,663 272,250 15,564,285 15,143,577 at the end of the year 134,998,778 461,885 10,161,047 783,396 146,405,106 130,840,821

Written-Down Value 334,241,759 1,996,229 46,922,132 6,355,121 389,515,241 397,377,556

TOTAL BEARER BIOLOGICAL ASSETS 357,963,916 23,962,378 46,922,132 19,674,899 448,523,325 452,654,631

these are investments in immature/mature plantations since the formation of the Company. the assets (including plantation assets) taken over by way of estate leases are set out in Notes 10 and 11. Further investments in immature plantations taken over by way of these leases are shown in the above note.



14.2 Consumable Biological Assets 2017 2016

Immature Consumable Biological Assets Rs. Rs.

Cost


additions 1,459,750 23,351

transfers to Mature - (286,524)


Mature Consumable Biological Assets


increase due to transfer from immature - 286,524

increase due to transfer from immature Bearer Biological assets 2,513,435 -

Change in fair value less cost to sell:

Due to price changes 74,888,243 (83,650,078)

Due to physical changes 46,546,824 42,763,708

Decrease due to harvest - (5,077,671)


total Consumable Biological assets 662,911,219 537,502,967

as per lKas 41 the Company has valued its managed timber plantations at fair value less cost to sell. Managed timber plantation as at 31st December 2017 comprised approximately 302.39 hectares (2016: 310.89 hectares), which are in the range of newly established plantation to plantation that are more than 24 years old.

Managed trees which are less than four years old considered to be immature Consumable Biological assets amounting to rs. 9.5 million as at 31st December 2017 (2016: 6.2 million). the cost of immature trees is treated as approximate fair value particularly on the grounds that little biological transformation has taken place and the impact of the biological transformation on price is not material. When such plantations are mature, the additional investments to bring them to maturity are transferred from immature to mature.

increase of 6,457 m3 in natural growth of the consumable biological assets has contributed to the significant increase in fair value less cost to sell due to physical changes for the year 2017.

Furthermore, a significant number of trees have been subject to a lower discount rate compared to the previous year due to change in the age category, resulting in an increase of rs. 36.9 million included in the changes to fair value due to price changes.

14.2.1 Measurement of Fair value the mature consumable biological assets were valued using Discounted Cash Flow (DFC) method. in ascertaining the fair

value of timber, sample physical verification was carried out covering all the estates.

(i) Fair value hierarchy the fair value measurement of biological assets has been categorised as level 3 fair value based on the inputs to the

valuation technique used.




(ii) Level 3 fair values the following table shows a breakdown of the total gain / (losses) recognised in repect of level 3 fair value.

2017 2016

Rs. Rs.

Change in Fair Value of Biological assets 121,435,067 (40,886,370)

Key assumptions used in the valuation are:

1. the harvesting is approved by the plantation Management and Monitoring Division and Forestry Department in accordance with the forestry management plan.

2. the prices adopted are net of expenditure

3. risk-adjusted discount rates used in the range of 12% to 17% (2016: 12% to 17% ). Fair value would increase if the discount rate was low and fair value would decrease if the discount rate was high.

4. three-year annual rolling average selling prices of managed timber fields of the Company. Fair value would increase if timber prices were high and fair value would decrease if timber prices were low. the valuation, as presented in the valuation model based on the net present value, take into account the long-term exploitation of the timber plantation. Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the volatility of the variables, their carrying value may differ from their realisation value. the Board of Directors retains their view that commodity markets are inherently volatile and their long-term price projections are highly unpredictable. hence, the sensitivity analysis regarding selling price and discount rate variation as included in this note allows every investor to reasonably challenge the financial impact of the assumptions used in the lKas 41 against his own assumptions.

the biological assets of the company are mainly cultivated in leased lands. When measuring the fair value of the biological assets it was assumed that these concessions can and will be renewed at normal circumstances. timber content expects to be realised in the future and is included in the calculation of the fair value that takes into account the age of the timber plants and not the expiration date of the lease.

the Company is exposed to the following risks relating to its timber plantations: Regulatory and environmental risks the Company is subject to laws and regulations in sri lanka. the Company has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.

Supply and demand risk the Company is exposed to risks arising from fluctuations in the price and sales volume of timber. When possible

the Company manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Company’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand. Climate change and other risks

the Company’s timber plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. the Company has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and industry pest and disease surveys. the Company also insures itself against natural disasters such as floods, landslides and hurricanes.




14.2.1 Sensitivity Analysis Sensitivity Variation on Sales Price Values appearing in the statement of Financial position are very sensitive to price changes with regard to the average

sales prices applied. simulations made for timber prices show that an increase or decrease of 10% of the future selling prices has the following effect on the net present value of the Mature Consumable Biological assets:

-1000 Basis Point - +1000 Basis Point as at 31st December 2017 588,090,683 653,434,092 718,777,502 as at 31st December 2016 476,537,031 529,485,590 582,434,149 Sensitivity Variation on Discount Rate Values appearing in the statement of Financial position are very sensitive to changes of discount rate applied. simulations

made for discount rate show that an increase or decrease by 1% of the future discounting rate has the following effect on the net present value of the Mature Consumable Biological assets:

-100 Basis Point - +100 Basis Point as at 31st December 2017 702,227,007 653,434,092 609,174,480 as at 31st December 2016 573,180,190 529,485,590 490,111,513

2017 201614.3 Produce on Bearer Biological Assets Rs. Rs. at the beginning of the year 5,004,874 757,073 Change in fair value less cost to sell (1,029,805) 4,247,801 at the end of the year 3,975,069 5,004,874 14.4 Change in Fair Value of Biological Assets Change in fair value of consumable biological assets less cost to sell 121,435,067 (40,886,370) Change in fair value of produce on bearer biological assets less cost to sell (1,029,805) 4,247,801 total change in fair value of biological assets 120,405,262 (36,638,569)

2017 201615. INVENTORY Rs. Rs. Nursery stock 4,002,732 9,282,906 produce stock - tea 199,031,253 205,869,432 produce stock - Others 790,458 3,235,979 Consumables and spares 32,878,899 40,158,475 236,703,342 258,546,792 less: provision for obsolete and slow-moving stock (1,209,489) (1,939,224) 235,493,853 256,607,568

2017 201616. TRADE AND OTHER RECEIVABLES Rs. Rs.

trade debtors 555,302 908,265 economic service Charge (esC) receivable 13,857,191 8,933,692 advances and prepayments 30,764,411 44,497,230 Other debtors 30,054,755 22,641,707 75,231,659 76,980,894 less: provision for bad and doubtful debts (22,461,792) (17,254,693) 52,769,867 59,726,201

the Company’s exposure to credit risk and impairment loss related to trade and other receivables is disclosed in note 33.

2017 201617. AMOUNT DUE FROM RELATED COMPANIES Rs. Rs.

hapugastenne plantations plC (interest 6% p.a.) 108,999,245 52,480,069 108,999,245 52,480,069

amount due from related Company stated above is unsecured and the settlement occurs in cash on demand.




2017 2016 18. CASH AND CASH EQUIVALENT Rs. Rs.18.1 Favourable balances

Cash at bank and Cash in hand 7,826,669 4,327,975 7,826,669 4,327,975 18.2 Unfavourable balances

Bank overdraft (76,750,328) (249,307,470) Cash and Cash equivalent in accordance with the statement of Cash Flows (68,923,659) (244,979,495)

the securities pledged have been disclosed in note 22 to the Financial statements.

19. STATED CAPITAL 2017 2016 Rs. Rs. 19,398,850 Ordinary shares 340,000,000 340,000,000 Golden share held by the secretary to the treasury (note 19.1) 10 10 340,000,010 340,000,010

19.1 The Golden Shareholder the Golden share is currently held by the secretary to the treasury and should be owned either directly by the Government

of sri lanka or by a 100% Government-owned public Company. in addition to the right of a normal ordinary shareholder, in terms of the articles of association of the Company, the following special rights are vested with the Golden shareholder.

(a) the Company shall obtain the written consent of the Golden shareholder prior to sub-leasing, ceding or assigning its rights in part or all of the lands leased/to be leased to the Company by the JeDB/slspC.

(b) the Golden shareholder shall be entitled to call upon the Board of Directors meeting once in three months to meet him or his nominee to discuss matters of the Company of interest to the state of the Government.

(c) the Golden shareholder and/or his nominee shall be entitled to inspect the books of accounts of the Company after giving two weeks’ written notice to the Company.

(d) the Company shall submit to the Golden shareholder, within 60 days of the end of each quarter, a quarterly report relating to the performance of the Company during the said quarter in a pre-specified format agreed to by the Golden shareholder and the Company.

(e) the Company shall submit to the Golden shareholder, within 90 days of the end of each fiscal year, information related to the Company in a pre-specified format agreed to by Golden shareholder and the Company.

20. REVALUATION RESERVE 2017 2016 Rs. Rs. at the beginning of the year 205,810,005 212,966,466 transfers to general reserve (7,156,461) (7,156,461) at the end of the year 198,653,544 205,810,005

20.1 the leasehold right to bare land has been revalued on 31st May 1998 as per the valuation undertaken by Messrs p. B. Kalugalagedera and s. N. Wijepala, Chartered Valuers. the excess over the book value, amounting to rs 376,234,165/-, has been treated as a revaluation reserve.

20.2 since the bare lands were used by the Company, the revaluation surplus is transferred to the general reserve, which is consistent with the amortisation of leasehold right to bare lands as recommended by lKas 16- property, plant and equipment.

21. GENERAL RESERVE 2017 2016 Rs. Rs. at the beginning of the year 145,073,977 137,917,516 transfers from revaluation reserve 7,156,461 7,156,461 at the end of the year 152,230,438 145,073,977



22. INTEREST-BEARING BORROWINGS 2017 2016

Repayable Repayable Total Repayable Repayable Total

within after as at within after as at

1 year 1 year 31.12.2017 1 year 1 year 31.12.2016


22.A Sri Lanka Tea Board Loan 21,111,215 31,367,593 52,478,808 18,652,650 23,250,000 41,902,650

22.B Term Loans 33,004,008 69,054,646 102,058,654 33,004,008 102,058,654 135,062,662

54,115,223 100,422,239 154,537,462 51,656,658 125,308,654 176,965,312

Repayable

Repayable after Total Total Effective Terms

within 1 year and less as at as at Rate of of

1 year than 05 years 31.12.17 31.12.16 Interest Repayment

Rs. Rs. Rs. Rs.22.A Sri Lanka Tea Board Loan loan i - - - - 14,902,650 interest Free repayable in 10 equal monthly installments of rs. 1,655,850/- each commencing from 15.12.2016. loan ii - 9,000,000 14,250,000 23,250,000 27,000,000 aWplr+1% repayable in 36 equal monthly installments of rs. 750,000/- each commencing from 31.08.2017. loan iii - 12,111,215 17,117,593 29,228,808 5.00% repayable in 36 equal monthly installments with the interest of rs. 1,108,134/- each commencing from 28.05.2017. 21,111,215 31,367,593 52,478,808 41,902,650 22.B Term Loans DFCC Vardhana Bank 13,000,008 31,416,646 44,416,654 57,416,662 aWplr + 4.75% repayable in 60 equal monthly installments of rs. 1,083,333/- each commencing from 30.09.2016. Commercial Bank of Ceylon plC 20,004,000 37,638,000 57,642,000 77,646,000 1-2 years: 7.5% repayable in 59 equal monthly installments 3-5 years: of rs. 1,667,000/- each and a final aWplr+2% installment of rs.1,647,000 commencing from 25.01.2016. 33,004,008 69,054,646 102,058,654 135,062,662

22.C Securities Pledged the following assets have been pledged as security for liabilities: Nature of liability Facility Outstanding Security Rs. Million Rs. Million Bank Overdraft DFCC Vardhana Bank 100 37 Corporate Guarantee from hapugastenne plantations plC for rs. 100 Mn. Term Loan DFCC Vardhana Bank 65 44 Corporate Guarantee from hapugastenne plantations plC for rs. 65 Mn.



2017 2016

23. DEFERRED INCOME Rs. Rs


Grants received - 304,976

amortisation (4,163,239) (4,163,239)


the Company has received funding from the plantation housing and social Welfare trust, tea Board subsidy Fund, plantation

reform project, estate infrastructure Development programme and from the plantation Development support project for

the development of workers’ welfare facilities such as re-roofing of line rooms, latrines, water supply and sanitation. the

amounts spent are included under the relevant classification of property, plant & equipment and the grant received for such

is reflected under Deferred income. When the company complies with the condition attached to the grants and subsidies,

the grants will be credited to the statement of profit or loss and Other Comprehensive income over the useful life of the

respective assets. 2017 201624. RETIREMENT BENEFIT OBLIGATION Rs. Rs.


provision made 20,021,416 19,863,373

payments made (89,824,464) (69,738,275)


The Movement in the present value of Defined Benefit Obligation


interest Cost 67,928,314 70,410,154

Current service Cost 29,147,957 31,796,342

Benefit paid (89,824,464) (69,738,275)

remeasurement of retirement Benefit Obligation (77,054,855) (82,343,123)


Expenses recognised in the Statements of Profit or Loss

Current service Cost 29,147,957 31,796,342

interest Cost 67,928,314 70,410,154

Expenses recognised in the Statement of Other Comprehensive Income

remeasurement of retirement Benefit Obligation (77,054,855) (82,343,123)

Provision made 20,021,416 19,863,373 the actuarial valuation has been carried out by acturial & Management Consultants (pvt) ltd as at 31st December 2017.




The key assumptions used by the actuary include the following:

Company 2017 2016

i) rate of interest 11% 11% per annum

ii) rate of salary increase

- Workers 18% 18% every two years

- staff & executives 7.50% 7.50% per annum

iii) retirement age 60 60 years

iv) Daily wage rate

- tea (rs.) 500 500 per day

- rubber (rs.) 500 500 per day

the actuarial present value of the accrued benefits as at 31st December 2017 is rs. 547,727,072/- (2016: rs.617,530,120/-).

this item is grouped under retirement Benefit Obligation in the statement of Financial position. the liability is not externally

funded.

Sensitivity of Assumptions Used a quantitative sensitivity analysis for significant assumptions used by the Company as at 31st December 2016 is as shown below:

Effect on the Employee Benefit Obligation Discount Rate Salary Escalation Attrition Rate Rate increase by one percentage point 513,590,474 580,904,669 560,533,321 Decerease by one precentage point 602,741,273 531,025,331 549,319,752

the sensitivity analysis above has been determined on a method that extrapolates the impact on employee benefit obliga-tion as a result of reasonable changes in key assumptions occurring at the end of reporting period.

the following payments are expected contributions to the employee benefit obligation in future years:

2017 2016

Rs Rs

Within one year 53,806,753 28,046,882

Between 2 to 5 years 224,581,085 111,647,338

More than 5 years 313,526,982 187,188,562 25. NET LIABILITY TO THE LESSOR OF JEDB / SLSPC ESTATES

Repayable Repayable more than one year Total Total

within After one year After Total as at as at

1 year less than 5 years 5 years 31.12.17 31.12.16


Gross liability 7,500 30,000 168,534 198,534 206,034 213,534

less: Finance charges (5,482) (21,086) (55,816) (76,902) (82,384) (87,426)

Net liability 2,018 8,914 112,718 121,632 123,650 126,108

the leases of the estates are executed at a rental of rs. 500/- per estate per annum without any contingent rental.




2017 2016

Rs Rs

26. AMOUNTS DUE TO RELATED COMPANIES

amount due to related Companies - interest bearing (note 26.1) 386,331,613 296,337,925

amount due to related Companies - Non-interest bearing (note 26.2) 10,097,450 53,214,605

396,429,063 349,552,530

26.1 Amounts Due to Related Companies - Interest bearing Interest Rate p.a.

James Finlay limited, uK 3.5% 143,905,483 61,885,170

James Finlay plantation holdings (lanka) ltd 5% 207,000,000 198,000,000

Finlay instant teas (pvt) ltd 6% 35,426,130 36,452,755

386,331,613 296,337,925

related company loans stated above are unsecured and the settlement occurs in cash on the date of maturity.

26.2 Amounts Due to Related Companies - Non-interest bearing

James Finlay limited, uK 10,097,450 53,214,605

above amount is unsecured, free of interest and the settlement occurs in cash on demand.

2017 2016

Rs Rs

27. TRADE AND OTHER PAYABLES

trade Creditors 41,819,731 81,839,101

accrued expenses 4,469,208 3,419,050

payable to employees 116,574,627 108,180,914

Other Creditors 91,403,296 71,595,245

254,266,862 265,034,310 28. RELATED PARTY TRANSACTIONS28.1 the Company carries out transactions in the ordinary course of business with parties who are defined as related parties

in accordance sri lanka accounting standard (lKas) 24 related party Disclosure, the details of which are reported below.

Company Relationship Details of Transactions Amount Received/ (Paid) 2017 2016 Rs. Rs.

hapugastenne plantations plC Common Directors interest income 6,351,864 3,817,238

James Finlay plantation holdings (lanka) ltd intermediary parent interest expenditure (9,000,000) (9,000,000)

Finlay properties (pvt) ltd. Common Directors Warehouse Charges (3,397,678) (3,569,184)

Finlay instant teas (pvt) ltd Common Directors interest expenditure (2,140,246) (2,189,490)

reimbursement of expenditure 1,113,621 1,676,699

James Finlay ltd, uK intermediary parent reimbursement of expenditure (9,675,000) (9,675,000)

Net proceeds on loan 76,705,000 -

interest expenditure (3,991,784) (2,036,880)

Finlay Colombo limited Common Directors reimbursement of expenditure (2,014,800) (931,500)

private sales -tea 10,657,419 4,205,972

Finlay rentokil Ceylon (pvt) ltd Common Directors Maintenance Charges (110,013) (67,959)



the Company obtained Motor (comprehensive) insurance cover from union assurance General ltd and Motor (third party), Fire all risk, Fire Commercial, Fire & theft Dwelling house, Money in transit, Goods in transit, Boiler & pressure Vessel insurance, electronic equipment, personal accident, Workmen’s Compensation and Fire Consequential loss insurance cov-ers from Janashakthi General insurance ltd in 2017 and in 2016 through Finlays insurance Brokers (private) limited.

this note should be read in conjunction with notes 6, 17 and 26 to the Financial statements.

28.2 Transactions with key management personnel according to sri lanka accounting standard 24 related party Disclosures, key management personnel are those having

authority and responsibility for planning, directing and controlling the activities of the entity. accordingly, the Board of Directors (including executive and Non-executive) have been classified as key management personnel of the Company and during the year the Company paid rs. 7.1 Mn (2016: rs. 6.2 Mn) as remuneration.

28.3 Pricing Policies purchase of goods and services from related parties was made at normal trading terms under arm’s length basis.

28.4 Directors Interest in contracts Ms M. C. pietersz, who is a Director of the Company, is also a Director at seylan Bank plC.

Company Details of Transactions Balance as at 31.12.2017 31.12.2016 Rs. Rs.

seylan Bank plC Demand deposits 564,082 554,000

29. CAPITAL COMMITMENTS there are no capital commitments at the date of the statement of Financial position.

30. EVENTS OCCURING AFTER REPORTING DATE there have been no material events occuring after date of the Financial position that requre adjustments or disclosure in

the Financial statements. 31. CONTINGENT LIABILITIES

1. the Company instituted arbitration proceedings against anglo Ceylon estate (pvt) limited (aCe) in relation to the ter-mination of Management agreement between the Company and aCe. however the matter has not progressed and the Company’s lawyers are not in a position to ascertain the outcome of the case as at the date of the statement of Financial position.

2. udapussellawa plantations plC has issued Corporate Guarantee on behalf of hapugastenne plantations plC amounting to rs. 100,000,000/-.

32. COMPARATIVE INFORMATION to facilitate comparison and where relevant, balances pertaining to the previous year have been reclassified.



33

. S

EGM

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AN

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SIS

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1



the Company has the following three strategic divisions, which are its reportable segments. these sectors offer different products and services.

Reportable Segments Operations

tea Cultivation, processing and sale of tea leaves.

Coconut / rubber Cultivation, processing, sale of coconut and rubber.

Other Cultivation and sale of diversified crops such as cultivation and sale of timber trees, shared hydropower revenue, sale of nursery and timber plants.

there are varying levels of integration between each segment.

34. Financial Instruments

34.1 Accounting classification and fair values

Financial assets and financial liabilities are measured on an ongoing basis at either fair value or amortised cost. the fol-

lowing table analyses the carrying amount of financial assets and financial liabilities by category as defined by lKas 39

- Financial instruments:

recognition and measurement under headings reported in the Financial statements.

2017 2016

Financial Assets - Loans & Receivables Rs. Rs.

amount due from related companies 108,999,245 52,480,069

trade and Other receivables 37,685,591 49,539,938

Other financial assets 2,305,000 -

Cash and Cash equivalent 7,826,669 4,327,975

Total Financial assets 156,816,505 106,347,982

Financial Liabilities - Other Financial Liabilities

interest-bearing loans & borrowings 154,537,462 176,965,312

Net liability to the lessor 123,650 126,108

amounts due to related companies 396,429,063 349,552,530

trade and other payables 254,266,862 265,034,310

Bank Overdraft 76,750,328 249,307,470

Total Financial liabilities 882,107,365 1,040,985,730

34.2 Measurement of fair values

the Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used

in making the measurements.

level i: Quoted market price (unadjusted) in an active market for an identical instrument.

level ii: Valuation techniques based on observable inputs, either directly – i.e. as prices - or indirectly – i.e. derived

from prices. this category includes instruments valued using: quoted market prices in active markets for

similar instruments; quoted prices for identical or similar instruments in markets that are considered less

than active; or other valuation techniques where all significant inputs are directly or indirectly observable

from market data.




level iii: Valuation techniques using significant unobservable inputs. this category includes all instruments where

the valuation technique includes inputs not based on observable data and the unobservable inputs have a

significant effect on the instrument’s valuation. this category includes instruments that are valued based

on quoted prices for similar instruments where significant unobservable adjustments or assumptions are

required to reflect differences between the instruments.

Level I Level II Level III

2017 2016 2017 2016 2017 2016


Foreign exchange Forward Contract - - 2,305,000 - - -

34.3 Financial Risk Management

Overview

the Company has exposure to the following risks from its use of financial instruments:

* Credit risk

* liquidity risk

* Market risks (including currency risk and interest rate risk)

this note presents qualitative and quantitative information about the Company’s exposure to each of the above risks, the

Company’s objectives, policies and procedures for measuring and managing those risks.

Risk Management Framework

the Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management

framework. the Company’s risk management policies are established to identify and analyse the risk faced by the Com-

pany, to set appropriate risk limits and controls, and to monitor risk and adherence to limits. risk management policies

and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

Credit Risk

Credit risk is the risk of financial loss to the Company, if a customer or counterparty to a financial instrument fails to

meet its contractual obligation, and arises principally from the Company’s receivables from customers and investment

securities.

the carrying amount of financial assets represents the maximum credit exposure. the maximum exposure to credit risk

at the reporting date was as follows:

2017 2016

Loans and Receivables Rs. Rs.

amount due from related Companies 108,999,245 52,480,069

trade and Other receivables 37,685,541 49,539,938

Other financial assets 2,305,000 -

Cash and Cash equivalent 7,826,669 4,327,975

156,816,505 106,347,982




Impairment Loss 2017 2016

Gross Impairment Net Gross Impairment Net


trade and Other receivables 75,231,659 (22,461,792) 52,769,867 76,980,894 (17,254,693) 59,926,201

75,231,659 (22,461,792) 52,769,867 76,980,894 (17,254,693) 59,926,201

the movement in the allowance for impairment in respect of loans and receivables during the year was as follows:

2017 2016

Rs. Rs.

Balance as at 1st January 17,254,693 13,145,895

impairment loss recognised during the year 1,010,000 4,108,798

Written off / transfers 4,197,099 -

Balance as at 31st December 22,461,792 17,254,693

Liquidity Risk

liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its finan-

cial liabilities that are settled by delivering cash or another financial asset. the Company’s approach to managing this

exposure is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under

normal or stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

to measure and mitigate liquidity risk, the Company closely monitors its net operating cash flow, maintained at a level of

cash and cash equivalents, and secured committed funding facilities from financial institutions.

Non-derivative financial liabilities 2017 2016

Rs. Rs.

interest-bearing & borrowings 154,537,462 176,965,312

Net liability to the lessor 123,650 126,108

amounts due to related companies 396,429,063 349,552,530

trade and other payables 254,266,862 265,034,310

Bank overdraft 76,750,328 249,307,470

882,107,365 1,040,985,730

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the

Company’s income or the value of its holdings of financial instruments. the objective of the market risk management is

to manage and control market risk exposures within acceptable parameters while optimising the returns.

Interest Rate Risk

interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in market interest rates.

the Company has borrowings with aWplr interest rate and would affect the Company’s cash flow/profit as the amount

of interest paid would change depending on market interest rate.

the Company’s exposure to interest rate risk as at 31st December 2017 and sensitivity analysis to profit & loss if the inter-

est rate increased/decreased by 100 basis points is summarised below.


Increase/decrease

in basis points Rs.

increase +100 (2,709,465)

Decrease -100 2,709,465

the above table demonstrates the sensitivity to a reasonable change in interest rates on loans where floating rates are

applicable with all other variables held constant.

Foreign exchange risk

the Company is exposed to foreign exchange risk arising from its borrowings in foreign currency.

For the purpose of disclosure the exposure to currency risk is only provided for the Company’s foreign currency denomi-

nated financial instruments. the Company’s exposure to foreign currency risk as at 31st December 2017 and a sensitivity

analysis of profit and loss and equity, if the exchange rate increased/(decreased) by rs.1/- is summarised below;

Rs.

Foreign currency denominated loans-usD 900,000

Closing conversion rate rate used 153.41

Net exposure in rupees 138,069,000

Sensitivity analysis

Closing conversion rate used with rs. 1.00 increase 154.41

Closing conversion rate used with rs. 1.00 decrease 152.41

Net exposure - in slr with rs. 1.00 increase in closing conversion rate 138,969,000

Net exposure - in slr with rs. 1.00 decrease in closing conversion rate 137,169,000

Impact to Profit and Loss

With rs. 1.00 increase in the closing conversion rate (900,000)

With rs. 1.00 decrease in the closing conversion rate 900,000



teN--year suMMary

Performance 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 revenue 1,046,095 1,146,844 1,390,746 1,179,279 1,313,248 1,612,181 1,549,968 1,717,498 1,620,095 2,226,762

Gross profit 97,791 130,871 252,812 21,068 129,367 126,989 35,188 (61,025) (28,314) 363,048

pBit 44,482 80,833 188,729 (38,149) 27,520 65,067 139,974 (131,186) (168,433) 334,271

interest 37,701 41,217 38,732 26,498 28,382 25,376 14,112 27,600 41,711 47,024

pBt 6,781 39,616 149,997 (64,647) (862) 39,691 125,862 (158,786) (210,145) 287,247

taxation 447 8,873 11,053 (34,489) 25,711 7,310 26,285 (17,041) (28,344) 19,426

Net profit 6,334 30,743 138,944 (30,158) (26,573) 32,381 99,577 (141,744) (181,801) 267,821

Other comprehensive income - - - (92,497) 82,652 20,665 (1,456) (13,997) 69,324 55,479

total comprehensive

income for the year - - - (122,655) 56,079 53,046 98,121 (155,742) (112,477) 323,301

Assets & LiabilitiesNon-Current assets 1,258,984 1,233,688 1,388,287 1,436,534 1,520,343 1,526,458 1,872,642 1,948,928 1,883,986 1,948,688

Current assets 185,528 339,859 404,926 237,863 286,954 252,789 339,926 322,779 378,147 411,370

total assets 1,444,512 1,573,547 1,793,213 1,674,397 1,807,297 1,779,247 2,212,568 2,271,707 2,262,133 2,360,058

Current liabilities 252,445 265,408 690,765 589,843 655,682 583,196 728,152 809,697 921,027 794,506

Non-Current liabilities 907,258 992,587 528,384 633,145 545,538 536,927 725,699 859,036 850,609 751,754

long-term Borrowings 501,985 509,761 35,662 19,943 4,225 - - 79,996 125,309 100,422

retirement Benefit Obligations 288,333 362,683 373,707 498,203 429,913 429,815 610,243 667,405 617,530 547,727

Other Non-Current liabilities 116,940 120,143 119,015 114,999 111,400 107,112 115,456 111,635 107,770 103,605

Share Capital & Reserves

stated Capital 340,000 340,000 340,000 340,000 340,000 340,000 340,000 340,000 340,000 340,000

revaluation reserve 266,314 258,324 250,333 242,342 234,351 227,214 220,075 212,966 205,810 198,654

General reserve (321,505) (282,772) (16,269) (130,933) 31,726 91,910 198,641 50,008 (55,313) 275,144

total shareholders’ fund 284,809 315,552 574,064 451,409 606,077 659,124 758,716 602,974 490,497 813,798

Financial RatiosrOCe - % 3.73 6.18 17.12 (3.52) 2.39 4.04 7.31 (6.80) (8.70) 8.6

Current ratio - times 0.73 1.28 0.59 0.40 0.44 0.43 0.47 0.40 0.41 0.52

Debt-equity ratio - times 2.39 2.19 0.38 0.48 0.33 0.28 0.24 0.63 0.85 0.58

interest Cover - times 1.18 1.96 4.87 (1.44) 0.97 2.56 9.92 (4.75) (4.04) 7.11

total assets to Current liabilities - % 17.48 16.87 38.52 35.23 36.28 32.78 32.91 35.64 40.71 33.66

Investors’ Ratios

earnings per share - rs 0.33 1.58 7.16 (1.55) (1.37) 1.67 5.13 (7.31) (9.37) 13.81

price earnings ratio 36.75 19.25 6.56 (20.58) (21.24) 15.40 7.71 (3.82) (2.07) 3.08

Market price of a share - rs 12.00 30.50 47.00 32.00 29.10 25.70 39.60 27.90 19.40 42.50

Market Capitalisation - rs ’000 232,786 591,663 911,744 620,762 564,505 498,549 768,192 541,227 376,337 824,449

Net assets per share - rs 14.68 16.27 29.59 23.27 31.24 33.98 39.11 31.08 25.28 41.95

Operating Ratios

annual turnover Growth - % 11.02 9.63 21.27 (15.21) 11.36 22.76 (3.86) 10.81 (5.67) 37.45

No. of employees 4,847 4,569 4,405 4,290 4,070 3,944 5,849 5,578 5,251 4,937

turnover per employee - rs’000 215.82 251.01 315.72 274.89 322.67 408.77 265.00 307.91 308.53 451.04

Fixed-assets turnover ratio - % 0.83 0.93 1.00 0.82 0.86 1.06 0.83 0.88 0.86 1.14


iNVestOr iNFOrMatiON

1. Stock Exchange

the issued Ordinary shares of udapussellawa plantations plC are listed with the Colombo stock exchange of sri lanka.

2. Distribution of Shares 2017 2016

No. of No. of % No. of No. of % Shareholders Shares Shareholders Shares

1 - 1,000 11,952 1,036,258 5.34 11,966 1,041,976 5.37

1,001 - 10,000 97 326,298 1.68 85 264,297 1.36

10,001 - 100,000 17 419,779 2.17 12 267,176 1.38

100,001 - 1,000,000 1 157,550 0.81 - - -

over 1,000,000 3 17,458,966 90.00 3 17,825,402 91.89

total 12,070 19,398,851 100.00 12,066 19,398,851 100.00

3. Distribution of Shareholders 2017 2016

No. of No. of % No. of No. of % Shareholders Shares Shareholders Shares

Non-residents 9 3,780,299 19.49 9 3,805,949 19.62

residents 12,061 15,618,552 80.51 12,057 15,592,902 80.38

total 12,070 19,398,851 100.00 12,066 19,398,851 100.00

individuals 12,000 1,598,816 8.24 12,010 1,526,775 7.87

institutions 70 17,800,035 91.76 56 17,872,076 92.13

total 12,070 19,398,851 100.00 12,066 19,398,851 100.00

4. Golden Shareholder

the Golden share of rs. 10/- is currently held by the secretary to the treasury and should be owned either directly by the Government

or by a 100% Government-owned Company.

5. Investor Information

2017 2016 2015 2014 2013

highest during the year rs. 54.90 27.90 43.50 57.00 32.50

Date (09/10/2017) (04/01/2016) (02/01/2015) (17/10/2014) (02/07/2013)

lowest during the year rs. 16.90 15.50 23.30 21.00 21.10

Date (22/03/2017) (04/04/2016) (02/12/2015) (17/03/2014) (06/09/2013)

Closing price rs. 42.50 19.40 27.90 39.60 25.70

trade Volume No’s 3800 638 790 2,407 1,141

share Volume No’s 2,560,834 196,286 401,229 1,326,659 589,669

turnover rs. 92,626,490 3,973,563 14,474,122 47,548,058 16,919,541


Value--aDDeD stateMeNt

iNVestOr iNFOrMatiON (CONt)

Twenty Major Shareholders 2017 2016 Name of Shareholder No. of Shares % No. of Shares %JaMes FiNlay plaNtatiON hOlDiNGs (laNKa) liMiteD 11,208,550 57.78 11,208,550 57.78

JaMes FiNlay liMiteD, uK (“JFl”) 3,689,762 19.02 3,689,762 19.02

JaCey trust serViCes (priVate) liMiteD (helD FOr the BeNeFit OF JFl) 2,560,654 13.20 2,927,090 15.09

Capital trust hOlDiNGs ltD 157,550 0.81 - -

Mr. K. M. a. r. K. alMuhairi 66,530 0.34 92,080 0.47

Dr. D. raJaKaNthaN 39,500 0.20 - -

First Capital MarKets liMiteD / Mr. l. K. N. K. KulaWarDeNa 37,885 0.20 - -

Mr. M. Z. rasheeD 37,005 0.19 - -

aDl eQuities liMiteD / Mr. M. Z. rasheeD 36,721 0.19 - -

assetliNe leasiNG COMpaNy ltD / Mr. l. K. N. KKulaWarDeNa 31,553 0.16 - -

Mr. K. G. a. N WiJesiNGhe 22,763 0.12 22,763 0.12

Mr. r. C. WiJeseNa 22,000 0.11 - -

Mr. W. G. preMaratNa (DeCeaseD) 18,600 0.10 18,600 0.10

Mr. M. F. asraFF 16,000 0.08 - -

Mrs. l. s. a. seresiNhe 14,916 0.08 19,916 0.10

Mr. B. M. MiChael 14,600 0.08 14,600 0.08

Mr. e. F. B. u. FerNaNDO 14,397 0.07 - -

Mr. r. e. raMBuKWelle 13,780 0.07 - -

seylaN BaNK plC / Mr. M. M. FuaD 12,259 0.06 - -

Mr. l. M. seNaNayaKe 11,000 0.06 11,000 0.06

Total 18,026,025 92.92 18,004,361 92.82

Other Shareholders 1,372,826 7.08 1,394,490 7.18

Issued Share capital 19,398,851 100.00 19,398,851 100.00

Of the issued ordinary share capital, 10% (2016: 8.11%) is held by the public, representing 12,066 share holders (2016: 12,060).

2017 2016 Rs. ’000 % Rs. ’000 % turnover 2,226,762 1,611,456 Other income 147,877 (8,639) total revenue 2,374,639 100 1,611,456 100 Cost of Materials and services Bought 947,033 40 722,629 45 1,427,606 60 888,827 55Distribution of Value Added a to employees as remuneration 976,338 68 880,163 99 B to Government 17,922 1 7,995 1 C to lenders of Capital 47,024 3 41,711 5 D retained in the Business D1 provision for Depreciation 72,890 5 71,435 8 D2 profit retained 323,301 22 (112,477) (13) 1,437,475 100 888,827 100


seGMeNtal iNFOrMatiON

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue Extent - Hectares

tea 2,017.95 2,006.49 2,023.03 2,013.69 2,055.57 2,054.17 2,005.66 3,273.06 3,251.62 3,263.96

rubber 83.04 75.54 75.54 75.54 75.54 55.12 40.12 38.50 38.50 30.50

Coconut 91.50 114.50 131.50 136.50 136.50 141.50 153.50 164.50 164.50 164.50

total 2,192.49 2,196.53 2,230.07 2,225.73 2,267.61 2,250.79 2,199.28 3,476.06 3,454.62 3,458.96

Production - Kg ’000

tea - Kg’000 3,982 3,343 4,079 3,746 3,669 3,892 3,430 4,670 3,844 3,780

rubber - Kg’000 60 51 46 41 32 30 17 14 17 21

Coconut-Nuts’000 436 539 600 536 719 362 641 804 834 654

GSA - Rs

tea 263.20 321.68 338.57 314.22 356.02 387.94 420.34 375.00 406.57 566.27

rubber 246.91 195.26 348.01 460.62 375.48 342.66 251.36 208.43 207.53 299.09

Coconut 21.88 30.59 32.08 34.84 29.67 59.70

Revenue - Rs’ 000

tea 999,159 1,103,736 1,345,981 1,123,629 1,253,047 1,569,271 1,515,117 1,665,731 1,574,350 2,161,614

Coconut 14,298 9,345 16,008 18,130 21,615 21,058 21,488 30,591 26,482 47,496

Others 32,638 33,763 28,757 37,520 38,586 21,852 13,363 21,176 19,263 17,652

total 1,046,095 1,146,844 1,390,746 1,179,279 1,313,248 1,612,181 1,549,968 1,717,498 1,620,095 2,226,762

Gross Profit - Rs’ 000

tea 90,679 134,140 255,000 15,222 114,456 134,342 35,874 (75,878) (44,967) 334,665

Coconut 3,101 (2,229) 3,438 3,849 1,333 (3,354) (664) 6,269 1,487 13,960

Others 4,011 (1,040) (5,626) 1,997 13,578 (3,999) (22) 8,584 15,166 14,423

total 97,791 130,871 252,812 21,068 129,367 126,989 35,188 (61,025) (28,314) 363,048


GlOssary

GsaGross sale average. average sale price obtained (over a

period of time, for a kilo of produce) before any deductions

such as Brokerage fees.

NsaNet sale average. average sale price obtained (over a period

of time) after deducting Brokerage fees, etc.

COpCost of production. Generally refers to the cost of producing

one kilo/nut of produce (tea/rubber/Coconut).

earnings per shareprofit attributable to ordinary shareholders divided by the

number of ordinary shares in issue and ranking for divi-

dend.

price earnings ratioMarket price of a share divided by earnings per share.

Market CapitalisationNumber of shares issued multiplied by the market value of

each share.

MnMillion

Net assetssum of Fixed assets and Current assets less total liabilities.

Net assets per shareNet assets divided by the number of Ordinary shares in

issue.

return on equityattributable profits divided by average shareholders’ funds.

interest Coverprofit before Gross interest and tax divided by net interest

cost.

Dividend Coverprofit attributable to shareholders divided by gross dividend.

Current ratioCurrent assets divided by current liabilities.

extent in bearingthe extent of land from which crop is being harvested.

Cropthe total produce harvested.

Mature plantationthe extent of plantation from which crop is being harvested.

immature plantationthe extent of plantation which is under development and is

not being harvested.

infillinga method of field development whereby planting of indi-

vidual plants is done in order to fill the vacancies of existing

revenue fields.

Vp teaVegetatively propagated tea.

yield (yph)the average crop per unit extent of land over a given period

of time (usually kgs. per hectare per year).

isOinternational Organization for standardization.

haCCphazard analysis and Critical Control point system. interna-

tionally accepted food safety standard.

yOyyear over year.


NOtiCe OF MeetiNG

NOtiCe is hereBy GiVeN that the 25th annual General Meeting of udapussellawa plantations plC will be held at the sri lanka

Foundation institute, No. 100, padanam Mawatha, independence square, Colombo 07 on Friday, 27th april 2018 at 11.00 a.m.

and the business to be brought before the meeting will be:

AGENDA

1. to consider and adopt the annual report of the Board of Directors on the affairs of the Company and the statements of accounts for the year ended 31st December 2017 with the report of the auditors thereon.

2. to re-elect Mr. J. M. rutherford who, in terms of articles 86 and 87 of the articles of association of the Company, retires by rotation at the annual General Meeting as a Director.

3. to re-elect Mr. G. r. Chambers who, in terms of articles 86 and 87 of the articles of association of the Company, retires

by rotation at the annual General Meeting as a Director.

4. to authorise the Directors to determine contributions to charities up to a limit of rs. 100,000/- for the financial year ending 31st December 2018.

5. to re-appoint Messrs KpMG as auditors and authorise the Directors to determine their remuneration.

By order of the Board of Directors

s s p Corporate services (private) limitedsecretaries

No. 101, inner Flower road,Colombo 0315th March 2018

Note:-a member is entitled to appoint a proxy to attend and vote instead of himself/herself and a proxy need not be a member of the Company. a Form of proxy is enclosed for this purpose. the instrument appointing a proxy must be deposited at the registered Office of the secretaries, 101, inner Flower road, Colombo 03.

Security Check:-We shall be obliged if the shareholders/proxies attending the annual General Meeting present their National identity Card to the security personnel stationed at the entrance.


Notes

uDapussellaWa plaNtatiONs plC / annual report 2017

FOrM OF prOxy

i/We........…………………………………………………………………………………………………….. (NiC No....................................................)

of …………………………………………………………………………………………………………….…………………………………….…………

being a member/members of udapussellawa plantations plC hereby appoint

(i) ………………………………………………………………………………………………………………(NiC No....................................................)

of………………………………………………………………………..........................……..............................................…………..failing him/her,

(ii) Naresh KuMar huBert ratWatte, Chairman of udapussellawa plantations plC, or failing him any one of the Directors

of the Company as *my/our proxy to vote as indicated hereunder for *me/us and on *my/our behalf at the 25th annual General

Meeting of the Company to be held on 27th april 2018 at 11.00 a.m. at the sri lanka Foundation institute, No. 100, padanam

Mawatha, independence square, Colombo 07 and at every poll which may be taken in consequence of the aforesaid meeting

and at any adjournment thereof. FOR AGAINST1. to consider and adopt the annual report of the Board of Directors on the affairs of the

Company and the statements of accounts for the year ended 31st December 2017 with the report of the auditors thereon.

2. to re-elect Mr. J. M. rutherford who, in terms of articles 86 and 87 of the articles of association of the Company, retires by rotation at the annual General Meeting as a Director.

3. to re-elect Mr. G. r. Chambers who, in terms of articles 86 and 87 of the articles of association of the Company, retires by rotation at the annual General Meeting as a Director.

4. to authorise the Directors to determine contributions to charities up to a limit of rs. 100,000/- for the financial year ending 31st December 2018.

5. to re-appoint Messrs KpMG as auditors and authorise the Directors to determine their remuneration.

signed this ......................................... day of ...........................two thousand and eighteen.

signature: …………………………….

Note :

(a) *please delete the inappropriate words.

(b) instructions are noted on the reverse hereof.

INSTRUCTIONS AS TO COMPLETION

1. in terms of article 69 of the articles of association of the Company; an instrument appointing a proxy shall be in writing and in the case of an individual shall be signed by the appointor or

by his attorney; or in the case of a corporation shall be either under the common seal or signed by its attorney or by an officer authorised to do so on behalf of the corporation. the Company may, but shall not, be bound to require evidence of the authority of any such attorney or officer. a proxy need not be a Member of the Company.

2. in terms of article 70 of the articles of association of the Company; a non-resident shareholder may appoint and revoke proxies by cable or facsimile provided such cable or facsimile is

received not less than forty-eight (48) hours before the commencement of the Meeting at which it is to be used.

2. in terms of article 71 of the articles of association of the Company; the instrument appointing a proxy shall be lodged and the power of attorney (if any) under which it is signed, or a

notarially certified copy of such power shall, if required, be deposited for inspection at the Office, in each case not less than forty-eight hours before the time appointed for holding the Meeting or adjourned Meeting, or in the case of a poll before the time appointed for the taking of the poll at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.

3. in terms of article 75 of the articles of association of the Company; any corporation which is a Member of the Company, may by resolution of its Directors or other governing body

authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual Member of the Company.

4. in terms of article 64 of the articles of association of the Company; in the case of joint-holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be

accepted to the exclusion of the votes of the other joint-holders, and for this purpose seniority shall be determined by the order in which the name stands in the register of Members in respect of the joint-holding.

5. Kindly indicate with an x in the space provided how your proxy is to vote on each resolution. if no indication is given, the proxy in his/her discretion will vote as he/she thinks fit. every alteration or addition to the Form of proxy must be duly authenticated by the full signature of the shareholder signing the Form of proxy. such signature should as far as possible be placed in proximity to the alteration or addition intended to be authenticated.

6. to be valid, this Form of proxy must be deposited at the registered Office of the secretaries, 101, inner Flower road, Colombo 03 by Wednesday, 25th april 2018, being forty-eight hours before the holding of the Meeting.

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